UNITED STATES – LAWS, REGULATIONS AND METHODOLOGY FOR CALCULATING DUMPING MARGINS ("ZEROING")
Document: Report of the Panel
Date: 31 October 2005
Document codes: WT/DS294/R
Complainant: EU
Respondent: U.S.
Third parties: Argentina, Brazil, China, Taiwan, Hong Kong, India, Japan, South Korea, Mexico, Norway, Thailand, Turkey
Dispute stage: Implementation & Compliance
Agreements cited: Art. 1, 2.1, 2.4, 5.8, 9.1, 9.3, 9.5, 11  Anti-dumpingArt. VI  GATT 1994Art. 18.4  Anti-dumpingArt. XVI:4  Agreement Establishing the World Trade OrganizationArt. 3  Anti-dumping

UNITED STATES – LAWS, REGULATIONS AND
METHODOLOGY FOR CALCULATING
 DUMPING MARGINS ("ZEROING")

Report of the Panel

I. INTRODUCTION
A. COMPLAINT OF THE EUROPEAN COMMUNITIES
1.1 On 12 June 2003 and 8 September 2003, the Eur opean Communities requested consultations
with the United States of America (the "United States") under Article 4 of the Understanding on Rules
and Procedures Governing the Settlement of Disput es (the "DSU"); Article XXII:1 of the General
Agreement on Tariffs and Trade 1994 (the "GA TT 1994"); and Articles 17.2 and 17.3 of the
Agreement on implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the
"AD Agreement") with regard to certain laws, regula tions and methodologies for calculating dumping
margins including so-called zeroing. 1 Consultations were held on 17 July 2003 and 6 October 2003,
but failed to result in a mutually satisfactory resolution of the matter.
1.2 On 5 February 2004, the European Communities requested the establishment of a Panel to
examine the matter.2 This request was revised on 16 February 2004.3
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL
1.3 At its meeting on 19 March 2004, the Dispute Settlement Body ("DSB") established a Panel
pursuant to the request of the European Communities in document , in accordance
with Article 6 of the DSU.
1.4 At that meeting, the parties to the dispute al so agreed that the Panel should have standard
terms of reference. The terms of reference are, therefore, the following:
"To examine, in the light of the relevant provisions of the covered agreements cited
by the European Communities in document , the matter referred
to the DSB by the European Communities in that document, and to make such
findings as will assist the DSB in making the recommendations or in giving the
rulings provided for in those agreements."
1.5 On 27 October 2004, the parties agreed to the following composition of the Panel:
Chairman: Mr. Crawford Falconer
Members: Mr. Hans-Friedrich Beseler
 Mr. William Davey

1.6 Argentina; Brazil; China; Hong Kong, China; In dia; Japan; Korea, Rep. of; Mexico;
Norway; Chinese Taipei; and Turkey reserved their third-party rights.
C. P
ANEL PROCEEDINGS
1.7 On 7 February 2005, the Panel received an amicus curiae brief from the Committee to
Support US Trade Laws ("CSUSTL"). Recalling the st atement of the Appellate Body that a panel has
"the discretionary authority either to accept and consider or to reject information and advice submitted
to it, whether requested by a panel or not", 4 the Panel invited the parties and third parties to express
their views on how it should handle CSUSTL's brief. After reviewing the comments of the parties
and third parties, the Panel decided that it would not further consider the arguments in the CSUSTL

1 WT/DS294/1 of 19 June 2003 and WT/DS294/1/Add.1 of 15 September 2003.
2 WT/DS294/7.
3 WT/DS294/7/Rev.1.
4 Appellate Body Report, US – Shrimp, para. 108.

brief except to the extent that the parties reflected those arguments in their written submissions and/or
oral statements.
5
1.8 The Panel met with the parties on 16-17 Ma rch 2005 and on 26-27 April 2005. The Panel
met with the third parties on 17 March 2005.
1.9 The Panel submitted the Interim Report to the parties on 4 August 2005. The Panel submitted
the Final Report to the parties on 28 September 2005.
II. FACTUAL ASPECTS
2.1 This dispute concerns the application by the United States of the so-called zeroing
methodology when determining dumping margins in anti-dumping proceedings, including
proceedings resulting in the imposition of anti-du mping measures and proceedings relating to the
collection of anti-dumping duties.
2.2 The imposition and collection of anti-dumping duties in the United States can be broadly
described in the following terms. In order to determine whether the imposition of anti-dumping
measures on known exporters of a product under consid eration may be justified, the United States
examines whether dumping existed during a given pe riod of investigation. This determination is
made by the United States Department of Comme rce ("USDOC") and is published in a Notice of
Final Determination of Sales at Less Than Fair Valu e. The Notice of Final Determination of Sales at
Less Than Fair Value sets out USDOC's assessment of the existence and level of dumping. The
United States International Trade Commission ("USIT C") will then determine whether the relevant
United States industry was injured by reason of the dumped imports. When USDOC finds dumping
and USITC finds that such dumping caused injury to the domestic industry, USDOC issues a Notice
of Antidumping Duty Order imposing final measures, including a cash-deposit rate equivalent to the
margin of dumping found to exist for each known exporter.
2.3 When calculating the magnitude of any margin of dumping in order to determine whether the
imposition of anti-dumping measures on known export ers of a product under consideration may be
justified, the United States uses a method that the European Communiti es refers to as model zeroing.
The investigating authority, as well as determini ng the overall product scope of the proceeding (also
referred to as subject prod uct or subject merchandise)
6, will, in applying the weighted average-to-
weighted average comparison method, identify those sales of sub-products in the United States
considered "comparable", and will include such sales in an "averaging group".
7 An averaging group
consists of merchandise that is identical or vi rtually identical in all physical characteristics. 8 E a c h
category of sub-product within the subject merc handise is assigned a control number, or CONNUM. 9
The weighted-average-to-weighted-average comp arison between normal value and export price is
made within each averaging group. 10 The amount by which normal value exceeds export price is
considered by the United States to be a "dumping margin" 11 or dumped amount – referred to by the

5 A similar approach of considering arguments in amicus curiae briefs to the extent that such
arguments were adopted by the parties to the dispute was taken by the panels in EC – Asbestos; US – Softwood
Lumber IV ; and US – Softwood Lumber VI .
6 Tariff Act, Section 771(25).
7 Regulations, Section 351.414(d)(1).
8 Regulations, Section 351.414(d)(2).
9 Manual, Chapter 4, pp. 8 and 9 ; Chapter 5, page 9, second paragraph; Chapter 9, pp. 23 and 27.
10 Regulations, Section 351.414(d)(1); Manual, Chapter 7, pp. 27 and 28; Chapter 9, pp. 23 and 27.
11 The European Communities considers that this concept does not correspond to the term "margin of
dumping" as used in, for example, Articles 2.4.2 and 9.3 of the AD Agreement (see infra.).

United States as the Potential Unco llectible Dumping Duties, or PUDD. 12 If export price exceeds
normal value (the margin is negative), the "dumpi ng margin" or dumped amount or PUDD for that
averaging group is considered to be zero. The margin of dumping for the overall product is calculated
by combining the averaging group results. The total of the dumped amounts or PUDDs (excluding
the negative amounts or treating them as zero) is expr essed as a percentage of the total export prices
(including all averaging groups). An averaging gr oup, as well as consisting of merchandise that is
identical or virtually identical in all physical characteristics, also consists of merchandise that is sold
at the same level of trade. In identifying sales to be included in an averaging group, the United States
also takes into account, where appropriate, the region of the United States in which the merchandise is
sold, and such other factors as are considered relevant.13
2.4 Subsequently, the United States will assess th e liability for anti-dumping duties on specific
entries of the subject product by individual importe rs. The United States system of duty assessment
operates on a retrospective basis. Under this sy stem, an anti-dumping duty liability attaches at the
time of entry, but duties are not actually assessed at that time. Rather, the United States collects
security in the form of a cash deposit at the time of entry, and determines the amount of duties due on
the entry at a later date. Specifically, once a year (during the anniversary month of the orders)
interested parties may request a review to dete rmine the amount of duties owed on entries made
during the previous year.14 The amount of anti-dumping duties owed by each individual importer (the
assessment rate) is calculated on the basis of a comparison of each individual import to a
contemporaneous average normal value. The tota l amount of dumping associated with each importer
is then aggregated and expressed as a percentage of that importer's United States imports. This
assessment rate is then applied to imports durin g the period reviewed. The amount of dumping found
on all imports from a given exporter (regardless of th e importer) is also used to derive a cash-deposit
rate that will apply on future entries from that e xporter. If no review is requested, the cash deposits
made on the entries during the previous year are automatically assessed as the final duties. The final
anti-dumping duty liability for past entries and the new cash-deposit rate for future entries is
calculated by USDOC and published in a Notice of Final Results of Antidumping Duty
Administrative Reviews.
2.5 When calculating the magnitude of any margin of dumping for the purpose of assessing an
importer's final liability for paying anti-dumping duties and any future cash-deposit rate, the
United States normally uses the average-to-transaction method
15 and applies, what the
European Communities refers to as, simple zeroi ng. When comparing a weighted-average normal
value with an individual export transaction, the amount by which normal value exceeds export price is
considered to be the "dumping margin" 16 or "dumped" amount for that export transaction. 17 If export

12 Manual, Chapter 6, p. 9: "The PUDD is the amount of dumping duties that would have been
collected from the U.S. sales under investigated [sic] had an antidumping duty order been in effect during the
period investigation [sic] (i.e., before the investigatio n began). The PUDD is used to establish a dumping
margin which will remain in effect until the annual revi ews established [sic] rates based upon the entries for
which liquidation was suspended pursuant to the preliminary determination and for the year following the
Antidumping Duty Order. … The calculation of the PUDD is, in effect, a two-step process. First, PUDD is
determined for each U.S. sale by multiplying the per unit dollar margin for that sale by the total number of items
sold. Second, the PUDD for each of the U.S. sales are su mmed to arrive at a total PUDD. The total PUDD is
then used to calculate a weighted-average margin for the investigation …"
13 Regulations, Section 351.414 (d)(2).
14 The period of time covered by United States duty assessment proceedings is normally twelve months.
However, in the case of the first assessment proceedin g following the issuance of the Notice of Antidumping
Duty Order, the period of time may extend to a period of up to 18 months in order to cover all entries that may
have been subject to provisional measures.
15 Regulations, Section 351.414 (c)(2); Manual, Chapter 6, p. 7.
16 The European Communities considers that this concept does not correspond to the term "margin of
dumping" as used in, for example, Articles 2.4.2 and 9.3 of the AD Agreement (see infra.).

price exceeds normal value (the margin is negativ e), the "dumping margin" or "dumped" amount for
that export transaction is considered to be zero. The overall margin of dumping is calculated by
combining the results of each comparison. Th e total dumping amount (excluding the negative
amounts or treating them as zero) is expressed as a pe rcentage of the total export price (including all
export transactions). The importer is liable to pay the final anti-dumping duty. USDOC sends
appraisement instructions to the US Bureau of Customs and Border Protection ("USCBP"),
determining "an assessment rate" and thus the final anti-dumping duty to be paid.
18 When USDOC
gives percentage instructions, it calculates an assess ment rate, to be applied by USCBP to all entries
during the relevant period. 19 For the purpose of calculating an assessment rate, USDOC divides the
total margin or amount of dumping calculated during the period of review, by the entered values of
the products sold.20
2.6 The European Communities challenges certain Un ited States legal instruments, procedures,
methodologies and practice, "as such" and "as applied". In the 15 "as applied" cases, referred to by
the European Communities as "origina l investigations", the challenge d measures are: the 15 Notices
of Final Determinations of Sales at Less Than Fair Value, including any amendments, and including
all the Issues and Decision Memoranda to which they refer, and all the Final Margin Program Logs
and Outputs to which they in turn refer, for a ll the firms investigated; each of the 15 Anti-dumping
Duty Orders; each of the assessment instructions i ssued pursuant to any of the 15 Anti-dumping Duty
Orders; and each of the USITC final injury determinations.21 In the 16 "as applied" cases, referred to
by the European Communities as "periodic reviews" , the challenged measures are: the 16 Notices of
Final Results of Antidumping Duty Administra tive Reviews, including any amendments, and
including all the Issues and Decision Memoranda to which they refer, and all the Final Margin
Program Logs and Outputs to which they in turn re fer, for all the firms investigated; and each of the
assessment instructions issued pursuant to any of the 16 Notices of Final Results. 22 The legal
instruments, procedures, methodologies and prac tice challenged by the European Communities "as
such" are the following:
(a) Sections 731, 751(a)(2)(A)(i) and (ii), 771(35 )(A) and (B), and 777A(d) of the Tariff
Act of 1930, as amended;
(b) Section 351.414(c)(2) of the United States Department of Commerce Regulations;
(c) certain provisions of the "1997 edition of the Import Administration Anti-Dumping
Manual";
(d) the "Standard AD Margin Program", which includes the "Standard Zeroing
Procedures"; and
(e) the United States practice or methodology of zeroing.23

17 Tariff Act, Section 751(a)(2)(A); Section 777A(d)(2).
18 Regulations, Section 351.212(b)(1).
19 Manual, Chapter 18, pp. 11 and 12; Regulations, Section 351.212(b)(1).
20 Regulations, Section 351.212(b)(1).
21 Exhibits EC-1 to EC-15; EC-First Written Subm ission, paras. 48-56, 63 and 102; EC-Rebuttal
Submission, para. 55.
22 Exhibits EC-16 to EC-31; EC-First Written Submission, paras. 57-61, 148 and 211.; EC-Rebuttal
Submission, para. 91.
23 In response to a question from the Panel, the European Communities indicated that it was not
challenging the United States' Statement of Administrative Action as a separate measure. EC-Response to Panel
Question 50.

2.7 The European Communities considers the above legal instruments, procedures,
methodologies and practice, as well as each of the id entified measures at issue in the 31 "as applied"
cases, to be inconsistent with th e United States' obligations under the AD Agreement, the GATT 1994
and the WTO Agreement.
2.8 The European Communities sets out its claims and arguments with respect to the 31 "as
applied" cases by first presenting certain general facts and evidence of relevance to each case.
Secondly, the European Communities presents its clai ms and arguments with respect to the specific
facts of two sample "as applied" cases. It then a lleges that the same claims and arguments apply,
mutatis mutandis , with respect to the measures at issu e in the 29 other determinations it is
challenging.
2.9 The first sample case presented by the European Communities is with respect to the Notice of
Final Determination of Sales at Less Than Fair Va lue regarding stainless steel bar from Italy, issued
by the USDOC on 23 January 2002 24, including the related Notice of Antidumping Duty Order issued
by USDOC on 7 March 2002. 25 The rates of ad valorem anti-dumping duty applied in this case were
2.50 per cent for Acciaierie Valbruna Srl/Acciai erie Bolzano D.p.A, 7.07 per cent for Acciaiera
Foroni SpA, 3.83 per cent for Rodacciai S.p.A, 33 per cent for Cogne Acciai Speciali Srl and 3.81 per
cent for all others.26
2.10 In calculating the dumping margins applied in th is case, the USDOC identified sub-groups of
products within the product under investigation ("aver aging groups") on a per model basis. Within
each of the averaging groups, a weighted average export price was established and compared to the
corresponding weighted average normal value. Th e results of these comparisons on an "averaging
group" basis were added up to establish the dumping margin of the product under investigation as a
whole for each individual exporter. In this pr ocess, any negative margins or negative amounts of
"dumping" resulting from the comparison of weighted average normal values with weighted average
export prices on an "averaging group" basis were , through application of the "Standard Zeroing
Procedures", equated with zero. The European Communities describes this methodology as model
zeroing.27 Exhibits EC-2 to EC-15 include the final de terminations and facts with respect to 14 other
Notices of Final Determinations of Sales at Less Than Fair Value and Notices of Antidumping Duty
Orders made between 24 July 199 6 and 24 April 2003 where the same methodology described above,
including the "Standard Zeroing Procedures", was applied.
28
2.11 The second sample case presented by the European Communities is with respect to the Notice
of Final Results of Antidumping Duty Administrati ve Reviews regarding ball bearings from Italy,
issued by the USDOC on 30 August 2002. 29 The dumping margin calculated by USDOC in these
proceedings was 3.70 per cent for SKF Industrie SpA and 1.42 per cent for FAG Italia SpA.
2.12 In calculating the relevant dumping margins in this case, the USDOC identified sub-groups of
products of normal vale sales based on physical char acteristics and level of trade. Within each of the
sub-groups, a weighted average normal value was compared to individual export prices. When
adding up the results of the comparisons to determ ine the total amount or margin of dumping of the
product under investigation, any negative amounts of "dumping" were, through application of the

24 Exhibits EC-1.1.1-1.1.2, USDOC case number A-475-829, 67 Fed. Reg. 3159 of 23 January 2002
(amended: 67 Fed. Reg. 8228, 22 February 2002).
25 Exhibits EC-1.2.1-1.2.2, USDOC case number A-475-829, 67 Fed. Reg. 10384 of 7 March 2002
(amended: 68 Fed. Reg. 58660, 10 October 2003).
26 Ibid.
27 EC-First Written Submission, paras. 21-24, 48-55; EC-Request for the Establishment of a Panel,
p. 1.
29 Exhibit EC-16, USDOC case number A-475-801, 67 Fed. Reg. 55780, 30 August 2002.

"Standard Zeroing Procedures", counted as zero. The European Comm unities describes this
methodology as simple zeroing.
30 Exhibits EC-17 to EC-31 include the final determinations and facts
with respect to 15 other Notices of Final Results of Antidumping Duty Administrative Reviews issued
between 26 October 2001 and 24 March 2003 wher e the same methodology described above,
including the "Standard Zeroing Procedures", was applied.31
III. REQUESTS FOR FINDINGS AND RECOMMENDATIONS
A. THE EUROPEAN COMMUNITIES
3.1 The European Communities requests the Panel to make the following findings:32
(a) As a consequence of the use of model zeroing in the original investigations identified
in Exhibits EC-1 to EC-15, the United St ates acted inconsistently with Articles 2.4
and 2.4.2 of the AD Agreement and Articles 3.1, 3.2, 3.5 and 5.8 and Articles 9.3, 1
and 18.4 of the AD Agreement ; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement. Th e European Communities states that the
Panel need make no findings with regard to Articles 3.1, 3.2 and 3.5 of the
AD Agreement where the corrected margin of dumping for individual exporters is not
less than 2 per cent; and Article 5.8 of the AD Agreement in cases where the
corrected margin of dumping for the exporting country is not less than 2 per cent.
(b) The "Standard Zeroing Procedures" used in original investigations (or the
United States practice or methodology of zeroing) and Sections 771(35)(A) and (B),
731 and 777A(d) of the Tariff Act are "as su ch" inconsistent w ith Articles 2.4 and
2.4.2 of the AD Agreement and Articles 5.8, 9.3, 1 and 18.4 of the AD Agreement;
Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.
(c) As a consequence of comparing a weight ed average normal value with individual
export transactions, without explanation or justification, and the use of simple zeroing
in the periodic reviews listed in Exhibits EC-16 to EC-31, the United States acted
inconsistently with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement and Articles 11.1,
11.2, 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement.
(d) The "Standard Zeroing Procedures" used in periodic reviews (or the United States
practice or methodology of zeroing) and S ections 771(35)(A) and (B), 731, 777A(d)
and 751(a)(2)(A)(i) and (ii) of the Tariff Act and Section 351.414(c)(2) of the
Regulations are "as such" inconsistent w ith Articles 2.4, 2.4.2 and 9.3 of the
AD Agreement and Articles 11.1, 11.2, 1 and 18.4 of the AD Agreement; Articles VI:1
and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.
(e) The "Standard Zeroing Procedures" used or relied upon in new shipper, changed
circumstances reviews and sunset review s (or the United States practice or
methodology of zeroing) and Sections 771(35 )(A) and (B), 731, 777A(d) and 751(a)
(2)(A)(i) and (ii) of the Tariff Act and S ection 351.414(c)(2) of the Regulations are

30 EC-First Written Submission, paras. 37-38, 57-60; EC-Request for the Establishment of a Panel,
pp. 1-2.
31 EC-First Written Submission, para. 61. The European Communities asserts that this same
methodology is systematically applied by the United States "in all reviews including so-called newcomer review
investigations, changed circumstances review investigations and sunset review investigations". EC-Request for
the Establishment of a Panel, p. 2.

"as such" inconsistent with Articles 2.4, 2. 4.2, 9.3, 9.5, 11.1, 11.2 and 11.3 of the
AD Agreement and Articles 1 and 18.4 of the AD Agreement; Articles VI:1 and VI:2
of GATT 1994; and Article XVI:4 of the WTO Agreement.
B. UNITED STATES
3.2 The United States requests that the Panel reject the claims of the European Communities in
their entirety.33
IV. ARGUMENTS OF THE PARTIES
A. BURDEN OF PROOF AND STANDARD OF REVIEW
1. Burden of Proof
(a) The United States34
4.1 The United States submits that the AD Agreement imposes obligations on investigating
authorities that they must satisfy, but the burden of proving that those obligations have not been
satisfied is on the complaining party. Accordingly, in this dispute, the burden is on the European
Communities to prove that the United States acted in a WTO-inconsistent manner with respect to both
its "as applied" and its "as such" claims. The burden is not on the United States to prove that it acted
in a WTO-consistent manner.
(b) The European Communities
35

4.2 The European Communities argues that it has presented facts and evidence more than
sufficient to make out a prima facie case, in relation to both its "as applied" and "as such" claims, and
has fully explained what specific obligations in the AD Agreement it considers the United States has
failed to comply with, and why. In the light of these circumstances, the European Communities
argues that it is incumbent on the United States to subs tantiate its defence, failing which the claims of
the European Communities must pr evail. In particular, the Euro pean Communities submits that,
where the United States has not contested the facts and adduced evidence, the Panel must base itself
on the facts and evidence presented by the European Communities. The Euro pean Communities also
notes that the United States' first written submission did not contest claims nor respond to arguments
presented by the European Communities in relation to the "as applied" cases in original investigations.
The European Communities further argues that th e burden of establishing that the phrase "the
existence of margins of dumping during the inves tigation phase" has the special meaning asserted by
the United States, as provided for in Article 31(4) of the Vienna Convention , falls on or has been
shifted to the United States, and has not been discharged by the United States.
2. Standard of Review
(a) The United States
36
4.3 The United States recalls that the standard of review with respect to a panel's task of assessing
an investigating authority's establishment and eval uation of facts, and its interpretation of the

33 US-First Written Submission, paras. 25-28; US-Second Written Submission, para. 97.
34 US-First Written Submission, paras. 16-17.
35 EC-Oral Statement at the First Substantive Meeting of the Panel, paras. 12 to 14; EC-Rebuttal
Submission, paras. 11-19, 42-44, 56-63 and 65-66; EC-Oral Statement at the Second Substantive Meeting of the
Panel with Parties, paras. 2-5; EC-Response to Panel Question 2.
36 US-First Written Submission, paras. 18-19; US-Second Written Submission, paras. 38-39.

provisions of the AD Agreement, is set forth in Articles 17.6(i) and 17.6(ii) of the AD Agreement. The
United States highlights that the standard of review described in Article 17.6(i) has been interpreted
by several panels as prohibiting a panel from engaging in de novo review. As regards the standard of
review expressed in Article 17.6(ii), the United Stat es asserts that the question it poses is whether an
investigating authority's interpretation of the AD Agreement is a permissible interpretation.
According to the United State, Article 17.6(ii) acknowledges that there may be provisions of the
AD Agreement that "admit[] of more than one permissibl e interpretation." Where that is the case, and
where the investigating authority has relied upon one such interpretation, a panel is to find that
interpretation to be in conformity with the AD Agreement.
4.4 For the reasons discussed elsewhere, interpre ting "during the investigation phase" under
Article 2.4.2 as referring to an investigation under Ar ticle 5 is a permissible interpretation. Likewise,
interpreting Article 2.4 as containing no independent and overarching requirements with respect to
offsetting and symmetry is a permissible interpreta tion. Therefore, because the challenged measures
rest on permissible interpretations, Article 17.6(ii) of the AD Agreement requires the Panel to find that
those measures are in conformity with the AD Agreement . As found by the panel in Argentina –
Poultry, "[I]n accordance with Article 17.6(ii) of the AD Agreement , if an interpretation is
"permissible", then we are compelled to accept it."
37
(b) The European Communities38
4.5 The European Communities argues that the submissions of the United States on the question
of the standard of review for facts do not appear to serve any useful purpose. In particular, the
European Communities argues that it has presented facts and evidence more than sufficient to make
out a prima facie case, which facts and evidence have not fo r the most part been contested by the
United States. Furthermore, the submissions of the United States are irrelevant to the "as such"
claims, with respect to which the facts concern Un ited States municipal anti-dumping law "as such",
and have not been "established" by an investigating authority.
4.6 Second, on the questions of law, the Eu ropean Communities argues that it is highly
significant that the United States refers, in its fi rst written submission, to "the possibility that
customary rules of interpretation would not always yi eld definitive meanings of particular provisions
of the AD Agreement."39 The European Communities agrees with this statement of the United States,
and ascribes to it particular relevance in the contex t of its claims with respect to Article 2.4.2.
In particular, the European Communities argues that the statement effectively amounts to an
admission from the United States that, after applying cu stomary rules of interpretation of international
law to the interpretation of the word "investigation" in Article 2.4.2, the conclusion must be that that
word does not have the limited or defined meani ng argued for by the United States in these panel
proceedings. This being so, for a Member to give that word such a limited or defined meaning, and
apply the AD Agreement accordingly, would not be a permissible interpretation of Article 2.4.2.

37 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.341, footnote 223.
38 EC-Rebuttal Submission, paras. 45-54.

B. "AS APPLIED" CLAIMS
1. Claims with respect to Article 2.4 of the AD Agreement
(a) The European Communities40
4.7 The European Communities argues that, because of the use of model zeroing, each of the
measures at issue in the cases identified in Exhibi ts EC-1 to EC-15 (described by the European
Communities as "original investigations"), violated United States' obligations under Article 2.4 of the
AD Agreement; and that because of the use of simple zer oing, each of the measures at issue in the
cases identified in Exhibits EC-16 to EC-31 (descr ibed by the European Communities as "periodic
reviews"), similarly violated United Stat es' obligations under Article 2.4 of the AD Agreement. The
European Communities presents essentially the same claims and arguments, mutatis mutandis, with
respect to both "original investigations" and "per iodic reviews", namely, that, in each of the "as
applied" cases, the United States violated (first clai m) the first sentence of Article 2.4 because model
zeroing and simple zeroing (absent targeted dumping) are unfair; and (second claim) the third to fifth
sentences of Article 2.4 because model zeroing and simple zeroing (absent targeted dumping)
effectively result in an impermissible adjustment to export price.
4.8 The European Communities conte nds that Article 2.4 of the AD Agreement establishes an
overarching and independent obligation to make a fair comparison between export price and normal
value. In contrast with the Tokyo Round Anti-Dumping Code, in the Uruguay Round AD Agreement,
the words "fair comparison … between the export price and the normal value" were lifted up and
placed on their own in a new first sentence of Article 2.4. According to the European Communities,
the drafters would not have done this without a pur pose. Thus, the change introduced in the Uruguay
Round confirms that Article 2.4 contains an overa rching and independent oblig ation to make a fair
comparison that goes beyond the obligations to make due adjustment described in Article 2.4.
4.9 The European Communities does not consider th at the meaning of the first sentence of
Article 2.4 is limited by the second sentence of Article 2.4. In other words, the European
Communities does not consider that the fair comparis on referred to in the first sentence of Article 2.4
is only what is contemplated in the second sente nce of Article 2.4. Rather, the European
Communities considers that the first sentence of Article 2.4 contains an obligation that is overarching
– in the sense that it is further elaborated in the other provisions of Article 2.4, including Articles
2.4.1 and 2.4.2; and independent – in the sense th at the other provisions of Article 2.4, including
Articles 2.4.1 and 2.4.2, do not exhaust the fair comparison requirement in the first sentence of Article
2.4.
4.10 The third sentence of Article 2.4 is a developm ent of the first and second sentences of Article
2.4. Read in isolation, the third sentence w ould make little sense. The words "price comparability"
that appear twice in the third sentence relate to the "fair comparison" between export price and normal
value referred to in the first a nd second sentences. The third sentence, like the second sentence, refers
expressly to "level[s] of trade". The word "allowan ces" in the fourth sentence refers back to "due
allowance" in the second sentence. The fifth senten ce also refers to "price comparability" and "level
of trade" (twice), and to the making of a "due allowance as warranted under this paragraph". The
words "this paragraph" refer to all of Article 2.4. The fifth sentence, as well as the third sentence,
contain obligations regarding a llowances or "adjustments" (to use the vocabulary of footnote 7),
whether made to normal value or export price. The final sentence of Article 2.4 expressly refers again

40 EC-First Written Submission, paras. 64-74, 149-160 ; EC-Rebuttal Submission, paras. 92-106; EC-
Oral Statement at the First Substantiv e Meeting of the Panel, paras. 10-11; EC-Oral Statement at the Second
Substantive Meeting of the Panel, paras. 44-47; EC-Responses to Panel Questions 23-25, 27, 33, 35, 37-38, 42
and 47; and EC-Responses to Questions Posed by the Panel at the Second Substantive Meeting paras. 1.27.

to the "fair comparison" obligation in the first sente nce of Article 2.4; and the procedural rules it
contains regulate all of the substantive obligations set out in the first to final sentences of Article 2.4.
4.11 If the meaning of the first sentence of Article 2. 4 would be considered to be limited by the
second sentence of Article 2.4, or for that matter the remainder of Article 2.4, or Article 2.4 including
Articles 2.4.1 and 2.4.2, then the first sentence wo uld serve no purpose. It could just as well be
deleted without changing the obligations of Members. That would be to render the first sentence of
Article 2.4 a nullity – which would not be a permissible interpretation.
4.12 The European Communities argues that model zeroing and simple zeroing (absent targeted
dumping) fail to fully and duly account for actual prices of export transactions that take place during a
period of investigation and thereby result in an infl ated dumping margin. To the extent that they
inflate the margin of dumping or convert a nega tive dumping margin into a positive dumping margin,
such methodologies are inherently biased and therefore unfair within the meaning of Article 2.4 of the
AD Agreement. The European Communities finds support for this conclusion in the findings of the
Appellate Body in EC-Bed Linen
41, US – Corrosion Resistant Steel Sunset Review 42, and US –
Softwood Lumber V.43
4.13 Given the common and ordinary meaning of the word "fair", the European Communities
argues that the obligation to make a fair comp arison under Article 2.4 must necessarily normally
involve a fairly balanced comparison, being one based on equivalent methodologies – that is, a
symmetrical comparison. A symmetrical comparison for the purposes of calculating a margin of
dumping and eventually imposing a duty, in relation to a given product or time, is necessarily one that
precludes model zeroing and simple zeroing. Thus , the European Communiti es contends that the
obligation imposed by Article 2.4 to conduct a fair comparison precluded the model zeroing and
simple zeroing methodologies applied by the United States in the cases in dispute.
4.14 In this context, the European Communities re fers to the language of Article VI of the
GATT 1994, the preamble to the AD Agreement, and various provisions of the AD Agreement, such as
Articles 2.1, 2.6 and 4, supporting the view that the various parameters by which markets are
generally defined, namely, physical characteristics, geography and time, play a central role in the
AD Agreement. This also reflects a general requirement that permeates the entire AD Agreement ,
according to which investigating authorities must apply basic economic concepts in a consistent
manner. The method used by the United States is ac tually incapable of measuring international price
discrimination, because it is internally inconsistent, and thus unfair.
4.15 In addition, the European Communities also argues that the practice of zeroing involves
effectively making an adjustment to export price that is impermissible under Article 2.4, third to fifth
sentences, and thus also Article 2.4, first sentence. Such an adjustment is not allowed because it is
based on a factor which does not affect price comparab ility. Indeed, the fact that the "export price" is
above the comparable "normal value" is not a di fference which affects price comparability. It is
actually part of the very price difference that the investigating authorities have to establish.
The practice of zeroing involves an adjustment for "non-dumping", which Article 2.4 does not, in
general, permit.
4.16 The European Communities does not consider that it is possible to read the second to fifth
sentences of Article 2.4 as only imposing obligations on Members to make allowance or adjustment
for differences that affect price comparability. These provisions also impose an obligation not to
make an allowance or adjustment when there is no such difference. Otherwise, faced with differences

41 Appellate Body Report, EC – Bed Linen.
42 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review.
43 Appellate Body Report, US – Softwood Lumber V .

affecting price comparability, a Member would first be required to make a series of due allowances or
adjustments, in order to render normal value and export price comparable; but having done that, the
Member would then be free to make further allowa nces or adjustments, even if not for differences
affecting price comparability, and even if reversing the effects of the first set of allowances or
adjustments – without acting inconsistently with Ar ticle 2.4. That would introduce a distortion or
inherent bias in the comparison and would be to render the provisions of Article 2.4 a nullity.
4.17 This is exactly what the United States practice of zeroing at issue in these proceedings does.
After making adjustments for differences affecting price comparability, the investigating authority
makes certain intermediate comparisons between ex port transactions and a "normal value"; and then
makes further adjustments if the value of the expor t transaction exceeds that of the normal value.
Thus, to the extent that the United States applied model zeroing or simple zeroing in the cases in
dispute, the United States effectively made an impr oper adjustment to export price and violated its
obligations under Article 2.4.
4.18 In response to the United States invocation of the second sentence of Article 2.4.2 as
context – a provision that, in the view of the Eu ropean Communities, the United States has never
claimed that it was applying in the cases before th e Panel – the European Communities considers that
an adjustment or allowance in the context of targ eted 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. According to the European Communi ties, if two distinct patterns of export prices are
identified, in accordance with the second sentence of Article 2.4.2, then there is a difference.
Article 2.4.2 refers expressly to "a pattern of e xport prices which differ"; and to "differences" that
cannot otherwise be taken into account. Such diffe rences may affect price comparability. It is self-
evident that prices in what has been identified as distinct market A cannot – without some further
consideration and explanation - necessarily simply be directly compared with prices in what has been
identified as distinct market B; and that an investig ating authority would be justified if it decided that
the data from markets A and B could not be simply lumped together and compared with market C.
An adjustment in such circumstances would be made for a difference (between markets A and B) that
affected price comparability (between markets A and B; and between A, B and C). This is also clear
from Article 2.4.2, which uses the words "compare d" and "comparison". Thus, according to the
European Communities, to the extent that the United States applied simple zeroing in the cases at
issue, without justifying resort to an asymme trical comparison methodology, the United States
effectively made an improper adjustment to export price and violated Article 2.4, third to fifth
sentences, and thus also Article 2.4, first sentence.
4.19 The European Communities does not agr ee that its interpretation of the AD Agreement
renders the words: "Subject to the provision s governing fair comparison in paragraph 4" in
Article 2.4.2 redundant. The "provisions governi ng fair comparison" are sentences 2 to 6 of
paragraph 4 of Article 2. The first sentence of Article 2.4 sets forth the fair comparison obligation
itself – it does not contain provisions governing that comparison. The words "subject to" simply
indicate that the rules in Article 2.4.2 are subject to sentences 2 to 6 of Article 2.4. In other words, in
case of conflict, the provisions of sentences 2 to 6 of Article 2.4 prevail over those of Article 2.4.2.
To put matters another way, the rules in Article 2.4.2 cannot be applied in such a way as to frustrate or
compromise the fair comparison required by Article 2.4.
4.20 In addition, the European Communities argues that Articles 2.4 and 9.3 require that the total
amount of duty collected with respect to exports made by one specific exporter during the assessment
period must not exceed the relevant margin of dum ping of the same exporter. The only relevant
margin of dumping permitted to be calculated under the AD Agreement , whether in an original
investigation or a periodic review, is that pertaini ng to the exporter, not that pertaining to individual
importers.

4.21 The European Communities rejects the contenti on of the United States that importer-specific
final assessment on a transaction by transaction basi s involving zeroing is contemplated under the
AD Agreement by virtue of Article 9.4(ii). First, the European Communities notes that the
prospective normal value or variable duty methodology recognised in Article 9.4(ii) is not in fact what
was applied in any of the periodic reviews at issue. Secondly, Article 9.4 is not concerned directly
with the concept of "a prospective normal value and variable duty". Rather, it sets out specific
obligations concerning imposition and collection wher e the authorities have limited their examination
in accordance with the second sentence of paragraph 10 of Article 6 – that is, when sampling has been
used. Article 9.4(ii) mentions in passing the situ ation where the liability for payment of anti-dumping
duties has been calculated on the basis of a prosp ective normal value – but that is not what the
provision is directly concerned with. As such, al l that Article 9.4(ii) does is to confirm that a
prospective normal value and variable duty is possible.
4.22 In any event, the collection of anti-dumping duti es on the basis of prospective normal values
is only one possible intermediate stage of the pros pective system since it is subject to "a prompt
refund, upon request" under Article 9.3.2 of the AD Agreement , which is itself subject to the full
disciplines of Article 2. Thus, it is legally erroneous to rely on one possible intermediate stage of the
prospective system, to justify the final result reac hed by the United States in the application of its
retrospective system. There is nothing in Article 9. 4 that releases authorities from the obligations in
Article 9.3, including Articles 9.3.1 or 9.3.2. Thus, Members must ensure that the obligations in
Article 9.3.2 are complied with whenever the "amount of the anti-dumping duty is assessed on a
prospective basis". Provision must be made for a prompt refund; and in any re-calculation of the
exporter specific margin of dumping the authorities must ensure that the amount of the anti-dumping
duty does not exceed the margin of dumping as established under Article 2, including Article 2.4.2.
4.23 The reason why Article 9.3.2 provides for the possi bility of refund in a prospective system is
simply that the initial anti-dumping duty is based on the margin of dumping or normal value
established during the original investigation. Ther efore, there will be excess collection whenever the
amount of duty collected exceeds the actual margin of dumping. The possibility of excess collection
arises for all forms of duty ( ad valorem, variable or other) and for a num ber of reasons. This is why
Article 9.3.2 obliges Members applying the prospective system to put in place a mechanism of prompt
refund. The mechanism is available i rrespective of the form of the duty ( ad valorem , variable or
other). If the amount of duty collected is higher th an the new dumping margin, the difference will be
repaid.
4.24 Viewed in this light, the prospective system is no different from the retrospective system.
The retrospective system also requires the calcu lation of a new margin of dumping in order to
establish the final duty liability on the basis of current data.
4.25 There are, however, some important differen ces between the prospective system and the
retrospective system operated by the United States. The prospective refund system can only result in
a reduction of the total duty paid. On the other hand , the retrospective system, at least as applied by
the United States, may lead to either a decrease or an increase in the margin of dumping, resulting in a
decrease or increase of the total duty payable. Anot her difference is that a request for refund in the
prospective system will, as a matter of logic, only ever be made by the exporter/importers, whereas, in
the United States retrospective system, a revised determination of the dumping margin may also be
requested by the domestic industry.
4.26 The type of duty has no bearing on the requirement to provide for a prompt refund
mechanism. As a previous Panel stated: "
(…), a properly designed variable duty system would
include a refund mechanism consistent with Article 9.3.2, (…) ".44 The European Communities agrees.

44 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.362.

The European Communities does not see how the choice of a specific form of duty could in any way
alter a Member's obligation under Article 9.3 of the AD Agreement not to collect in excess of the
actual exporter specific margin of dumping. Thus, the obligation appli es with equal force to variable
duties. To decide otherwise would imply that the choice of a particular form of duty entitles Members
to collect anti-dumping duties irrespective of the actual margin of dumping and even in cases where
the exporter has eliminated its margin of dumping.
4.27 Finally, the European Communities argues that if simple zeroing is allowed in periodic
reviews conducted under Article 9.3.1, it would ef fectively open up a gross distortion between
prospective and retrospective systems of duty assessment. The position being advocated by the
European Communities, on the other hand, would ma intain the situation in which the two systems
lead to an equal amount of duty collected in identical situations. The European Communities does not
agree with the United States that it would be possi ble for the European Co mmunities to achieve the
same result as the United States in an assessment proceeding by conducting a changed circumstances
review where, according to the United States, the prohibition of zeroing would not apply.
The European Communities disagrees, first, with th e assertion that the prohibition of zeroing does not
apply in a changed circumstances review – the entire di scipline of Article 2 is applicable in all margin
of dumping calculations. Second, the European Communities notes that, in any event, a changed
circumstances review would only cover future ship ments whereas an assessment proceeding covers
past sales.
(b) The United States45
4.28 The United States argues that the "fair comparis on" language of Article 2.4 refers to price
adjustments and does not create an "overarching a nd independent" obligation that applies beyond the
content of Article 2.4 itself. The text of Article 2.4 establishes the obligation that a fair comparison be
made between normal value and e xport price and provides detailed guidance as to how that fair
comparison is to be made. The focus of Article 2.4 is on how the authorities are to select transactions
for comparison and make the appropriate adjustment s for differences that affect price comparability.
As the panel in Egypt – Steel Rebar explained: "[A]rticle 2.4 in its entirety, including its burden of
proof requirement, has to do with ensuring a fa ir comparison, through various adjustments as
appropriate, of export price and normal value."
46 Thus, the United States contests the suggestion of
the European Communities that the fi rst sentence of Article 2.4 creates an obligation – the extent of
which is unstated in the AD Agreement – that is independent of the remainder of Article 2.4, that
applies after the comparisons between normal value and export price are made, and that is results-
oriented.
4.29 The United States argues that the "fair comparison" referred to in Article 2.4, first sentence, is
informed by the second sentence of Article 2.4, which provides that "[t]his comparison shall be
made ...". In this way, the second sentence of Articl e 2.4 describes the basic framework by which fair
comparisons between export price and normal va lue must be made. However, the remaining
sentences of Article 2.4 also inform the meaning of the first sentence of Article 2.4. Those remaining
sentences of Article 2.4 (dealing, inter alia, with terms of sale, taxation, and physical characteristics)
provide additional, relevant discussion of allowances that may be due in order that the comparison to
be made between export price and normal value will be fair. Thus , the second sentence, along with
the remaining sentences, "limit" the first sentence.

45 US-First Written Submission, paras. 59-69; US -Second Written Submission, paras. 18-29; US-
Opening Statement at the First Substantive Meeting of the Panel, paras. 8-9, 11 and 13; US-Opening Statement
at the Second Substantive Meeting of the Panel, paras. 66-7; US-Responses to Panel Questions 22, 26, 29-30,
34, 36-37 and 39-40; US-Responses to Questions Posed by the Panel at the Second Substantive Meeting,
paras. 1-4.
46 Panel Report, Egypt – Steel Rebar, para. 7.335.

4.30 The United States argues that its interpretation of Article 2.4 is supported by the rationale
underlying the introduction of the provision following the Uruguay Round. Article 2.6 of the Tokyo
Round Antidumping Code ("AD Code") stated, "In order to effect a fair comparison ... ." While the
United States agrees that Article 2.6 of the AD Code addressed how to make a fair comparison,
according to the United States, the language was ambiguous as to whether a fair comparison was
required. Thus, all of Article 2.6 of the AD Code could have been read as non-mandatory.
4.31 The ambiguity contained in Article 2.6 of the AD Code was eliminated in the AD Agreement
by separating and revising the first sentence of Article 2.4 of the AD Agreement so as to make explicit
the requirement to make a fair comparison. However, the remainder of Article 2.4 of the
AD Agreement, like its predecessor, defines the elements of a fair comparison. Thus, Article 2.4 of
the AD Agreement is clearly mandatory – it requires Members to make a fair comparison and instructs
them how to do so.
4.32 This interpretation of Article 2.4 is consistent with its drafting history. In what is known as
the "Dunkel Draft", Article 2.4 read as follows:
"A fair comparison shall be made between the export price and the normal value.
The two prices shall be compared at the same level of trade ... ."
Arguably, that formulation was ambiguous as to the elements that make up a fair comparison. That
ambiguity was eliminated in the final draft, however, by revising the text to read as follows:
"A fair comparison shall be made between the export price and the normal value.
This comparison shall be made at the same level of trade ... ." (Emphasis added).
Substitution of the phrase "this comparison" establishes a reference back to the subject of the prior
sentence – i.e., a fair comparison – which is what is being defined.
4.33 Further support for this reading of Article 2.4 is found in the first sentence of Article 2.4.2 of
the AD Agreement which refers to "the provisions governi ng fair comparison in paragraph 4." The
plural term "provisions," as well as the reference to "paragraph 4," rather than a particular portion of
paragraph 4, clarify that the entirety of Artic le 2.4 constitutes the provisions "governing fair
comparison."
4.34 To the extent that the European Commun ities argues that a requirement to make
"symmetrical" comparisons between normal values and export prices can be found in the fair
comparison language of Article 2.4, the United St ates contends that such an argument cannot be
reconciled with the text of Article 2.4.2. The first sentence of Article 2.4.2 provides that those
"symmetrical" comparisons are "subj ect to" the provisions governing "fair comparison." In the view
of the United States, the drafters never intended "f air comparison" to cover symmetrical comparisons,
because such coverage would have rendered this language superfluous. Furthermore, according to the
United States, the AD Agreement explicitly provides for the use of asymmetrical comparisons in at
least two places, neither of which is identified as an exception to the "fair comparison" requirement of
Article 2.4. First, asymmetrical comparisons ar e expressly provided for in the targeted dumping
provision – the second sentence of Article 2.4.2. While this provision is an express exception to the
symmetry requirements of the first sentence of Article 2.4.2, there is no basis for interpreting it to be
an exception to the fair comparison requirements of Article 2.4. Second, in the application of
antidumping duties to imports from producers for which an individual dumping margin has not been
separately calculated, Article 9.4(ii) of the AD Agreement expressly provides for the use of
asymmetric comparisons by Members with prospective normal value systems. Nothing in Article 9.4
suggests that this methodology was provided as an exception to the fair comparison requirement of
Article 2.4 or the criteria for using the targeted dumping methodology of Article 2.4.2.

4.35 The United States argues that the European Communities' claim that zeroing is permissible,
when the conditions under Article 2.4.2 for conduc ting a targeted dumping analysis are fulfilled,
cannot be squared with the European Communities' contention that zeroing is prohibited under
Article 2.4 because it amounts to "an arbitrary and artificial reduction" of the export price and that "an
adjustment to export price, normal value or othe rwise for differences that do not affect price
comparability is inconsistent with Article 2.4." Th e United States contends that the targeted dumping
methodology is not an exception to the "fair comparison" requirement of Article 2.4; it is an exception
to the symmetrical comparison requirements for inv estigations set forth in the first sentence of
Article 2.4.2. According to the United States, having asserted that zeroing is an "impermissible
adjustment to export price" not related to a diffe rence that affects price comparability as provided in
Article 2.4, the European Communities has failed to explain how this "adjustment" becomes
"permissible" when the targeted dumping methodology is used. In any case, the United States is of
the view that the so-called zeroing does not constitute an adjustment to price within the meaning of
Article 2.4.
2. Claims with respect to Article 2.4.2 of the AD Agreement
(a) The European Communities
47
4.36 The European Communities argues that, because of the use of model zeroing, each of the
measures at issue in the cases identified in Exhibi ts EC-1 to EC-15 (described by the European
Communities as "original investigations"), violated United States' obligations under Article 2.4.2 of
the AD Agreement; and that because of the use of simple zer oing, each of the measures at issue in the
cases identified in Exhibits EC-16 to EC-31 (descr ibed by the European Communities as "periodic
reviews"), similarly violated United States' obligations under Article 2.4.2 of the AD Agreement.
(i) Article 2.4.2 prohibits model zeroing
4.37 The European Communities argues that the wording of Article 2.1 of the AD Agreement
implies that an anti-dumping proceeding concerns a product (the subject product), and that, therefore,
the margin of dumping to which Article 2.4.2 refers must be the margin of dumping for the subject
product. According to the European Communities, this means that "dumping" for the purposes of the
AD Agreement can be found to exist only for the product under investigation as a whole, and cannot
be found to exist only for a type, model or category of that product.
4.38 In the original investigations at issue, th e United States established "averaging groups" and
made a separate calculation of "dumping" for each one. While the use of averaging groups is
permissible under Article 2.4.2 of the AD Agreement, it is not a requirement. Article 2.4 of the
AD Agreement requires only that due allowance and a fair comparison be made. Due allowance could
have been made by adjusting the relevant prices to take account of differences in physical
characteristics affecting price comparability, before making the (single) comparison referred to in
Article 2.4 of the AD Agreement, and thus before calculating a (single) margin of dumping.
4.39 Having decided to establish averaging groups in the original investigations at issue, the
United States considered itself under an obligation to compare weighted-average "normal value" with
a weighted-average of prices of all comparable export transactions, for each averaging group. For this
purpose, the United States considered that the we ighted-average "normal value" was that for the
relevant averaging group . The "comparable export transactions" were those relating to the same

47 EC-First Written Submission, paras. 75-89, 1 61-182; EC-Second Written Submission, paras. 112-
218; EC-Responses to Panel Questions 4, 6, 9, 11-12, 14-18, 20 and 21; EC-Closing Statement at the First
Substantive Meeting of the Panel, paras. 2-7; EC-Opening Oral Statement at the Second Substantive Meeting of
the Panel, paras. 1-40; EC-Closing Oral Statement at the Second Substantive Meeting of the Panel, paras. 1-21.

averaging group , country and exporter. The "weighted-average of prices of all comparable export
transactions" was calculated in respect of all export transactions, including export transactions that
exceeded the "normal value" used for that averaging group . There was no zeroing within an
averaging group. Export prices in excess of norma l value were fully incorporated, before the
comparison between "normal value" and export pri ce, mathematically, in the calculation of the
weighted-average export price.
4.40 The United States then combined the margins calculated for each averaging group, in order to
calculate the margin of dumping for the subject product. In this second stage of the calculation the
weighted-average normal value was that for the subject product. The comparable export transactions
must, by definition, necessarily have been those that related to the same subject product, country and
exporter. The "prices" of those export transactions we re reflected in the total value of exports, which
total value was incorporated, mathematically, in the margins calculated for each averaging group,
whether positive or negative. Just as in the first stage, in the second stage "nega tive margins" for
averaging groups should have been incorporated, ma thematically, in the calculation of the weighted-
average of prices of all comparable export transactions for the subject product before
 the comparison
between normal value and export price.
4.41 Further support for this view may be found in a c onsideration of the ordinary meanings of the
words "comparison" and "margin" in Article 2.4.2 of the AD Agreement – at least to the extent that the
United States asserts that the results of intermediate comparisons are "margins" within the meaning of
that provision. Article 2.4.2 requires a simple comparison between normal value and export price. If
there is a difference, according to the text, that difference is a margin. A margin is the amount by
which one thing differs from another. Normal va lue may exceed export price. Or export price may
exceed normal value. In both cases there is a margin. It is not possible to conclude in either case that
there is no margin, or that the margin is zero. Th at would only be the case if normal value and export
price were equal. Article 2.4.2 does not prejudge how the two elements to be compared are
juxtaposed, nor, thus, whether each one of a series of intermediate "margins" is expressed as positive
or negative.
4.42 Nor is it possible to prematurely conclude, befo re the final calculation is complete, that, in
relation to some discrete model or type or categor y of exports, when "export price" exceeds "normal
value", there is no or a zero margin of dumping, because Article 2.4.2 of the AD Agreement is
precisely concerned with determining whether or not there is a margin of dumping for the subject
product.
4.43 In summary, the European Comm unities submits that, in the seco nd stage of the calculation,
the United States was bound by the obligations contained in Article 2.4.2 of the AD Agreement, and
particularly the obligation to make a fair comparison between a weighted-average normal value and a
weighted-average of prices of all comparable export transactions . The European Communities
argues that in the EC – Bed Linen
48 and US – Softwood Lumber V49 cases, the Appellate Body rejected
the notion that, in circumstances where there is mo re than one averaging group based on differences
in physical characteristics, and two stages to the calculation, the second stage falls outside Article 2 of
the AD Agreement and indeed outside the AD Agreement altogether. The precise and detailed rules
set out in the AD Agreement would be pointless if, in the final step of the calculation, the importing
Member would be free to make an unfair comparison.
4.44 The European Communities considers that the u se of the plural "margins of dumping" in
Article 2.4.2 reflects the possibility of different ma rgins for different countries and exporters. The
European Communities further considers that an i nvestigating authority is not entitled to consider

48 Appellate Body Report, EC – Bed Linen.
49 Appellate Body Report, US – Softwood Lumber V.

certain transactions to have become "non-comp arable" simply because the results of certain
intermediate comparisons are negative. There ar e other types of non-comparable transactions, such
as : transactions in relation to merchandise outside the scope of the proceedings; transactions made at
a time outside the investigation period; transacti ons in relation to anothe r geographical region;
transactions that relate to another exporting country; etc.
4.45 The European Communities considers that the view that "dumping" and "margins of
dumping" can only be established for the product under investigation as a whole is in consonance with
the need for consistent treatment of a product in an anti-dumping investigation. Thus, having defined
the product under investigation, the investigating au thority must treat that product as a whole for,
inter alia, the following purposes: determination of the volume of dumped imports, injury
determination, causal link between dumped imports and injury to domestic industry, and calculation
of the margin of dumping. Furthermore, according to Article VI:2 of the GATT 1994 and Articles 9.2
and 9.3 of the AD Agreement, an anti-dumping duty can be levied only on a dumped product. For all
these purposes, the product under investigation is treated as a whole, and so-called "non-dumped"
export transactions should not be excluded. There is no basis in the AD Agreement for treating a
transaction as "non-dumped" for one purpose and "dumped" for other purposes, as the United States
did in the cases subject to this dispute.
4.46 The European Communities considers that, unlike other provisions of the AD Agreement that
are explicit regarding the permissibility of disr egarding certain matters (such as Article 2.2.1;
Article 9.4; Article 2.7 and A nnex II, paragraph 5) Article 2. 4.2 contains no express language
permitting an investigating authority to disregard certain results of multiple comparisons at the
aggregation stage.
4.47 For all of these reasons, the European Communities concludes that, having defined the subject
product in the original investigations at issue, the United States was not entitled to set at zero the
negative margins calculated for certain averagi ng groups based on differences in physical
characteristics. The United States had become bound by its own logic. The use of such a method by
the United States in this case was not in conformity with obligations imposed on the United States by
Article 2.4.2 of the AD Agreement.
(ii) Article 2.4.2 is not limited to original investigations
4.48 The European Communities argues that Article 2. 4.2 applies to all types of investigations
undertaken pursuant to Article VI of the GATT 1994 and the AD Agreement in which margins of
dumping are calculated or relied upon, including, or iginal investigations, periodic reviews, new
shipper reviews, changed circumstances reviews and sunset reviews. The European Communities
argues that the United States has fa iled to establish that the word "investigation" or the phrase
"existence of margins of dumping during the investigation phase" in Article 2.4.2 is limited to original
investigations.
4.49 The European Communities observes that the term "margin of dumping" is defined in
Article VI:2 of the GATT 1994, which definition is im plemented and further elaborated in Article 2.
The same defined term, "margin of dumpi ng", is also used in Article 9.3, which cross-refers to all
 of
Article 2. It also appears in Articles 9.1 and 9.5.
4.50 Article 2.4.2 states what it applies to, not what it does not apply to. Unlike the United States
Statement of Administrative Action ("SAA"), it does not contain the words "(not reviews)". The
United States is therefore using a contrario reasoning in an attempt to defeat the definition of "margin
of dumping" and the cross-reference in Article 9.3. If the Members had really wanted to achieve what
the United States asserts, it would have been a simple matter for them to have used express

exclusionary language, such as that in Article 2.2.1; Article 2.7; Article 9.4(ii); or Annex II,
paragraph 5. The Members did not do that.
4.51 The GATT 1994 and the AD Agreement define eight terms, but do not define the word
"investigation". Its meaning in Article 2.4.2 must be determined in accordance with the rules of treaty
interpretation found in customary international la w. According to the European Communities, the
ordinary meaning of the word "investigation", referring to The New Shorter Oxford English
Dictionary, indicates a systematic examination or i nquiry or a careful study of or research into a
particular subject. The European Communities be lieves that what makes an "investigation" an
"investigation" is the nature of the activity carried out by the investigating authority, not the material
scope of what is examined. For example, a cursor y glance is not an investigation. The random or
capricious fabrication of a margin of dumping would not be based on an investigation. On the other
hand, an "objective examination" of "positiv e evidence", involving the "considerations",
"assessments", "evaluations", "demonstrations", "d eterminations" and "special care", as for example,
expressly referred to and required by Article 3 of the AD Agreement, does involve an "investigation".
The European Communities is of the view that th is type of activity takes place not only during an
original investigation, but also in a periodic re view, a new shipper review, a changed circumstances
review and a sunset review.
4.52 The European Communities contests the United St ates assertion that the term "investigation"
has a particular meaning – namely original investigation - throughout the AD Agreement.
50 Rather,
the European Communities considers that the word "investigation" is used in different senses (such
as: review investigation; injury investigation; country specific investigation; company specific
investigation; on-the-spot investigation; preliminary investigation; etc.) in the AD Agreement and in
past panel, Appellate Body and GATT panel reports, as well as by USDOC, the ITC and in
United States municipal anti-dumping law.
4.53 The European Communities contests the United St ates assertion that the meaning of the word
"investigation" or the phrase "existence of marg ins of dumping during the investigation phase" in
Article 2.4.2 is limited by the context of Article 5. 1. To this end, the European Communities argues
that the obligations set out in Article 5.1 of the AD Agreement apply only to an investigation to
determine the existence, degree and effect of any alle ged dumping – that is, an original investigation.
The European Communities is of the view that it is precisely the presence of the words "to determine
the existence, degree and effect of any allege d dumping" that limit the meaning of the word
"investigation" in Article 5.1 of the AD Agreement and in the other paragraphs of that article. The
absence of these words in Article 2.4.2 confirms that the word "investigation" or the phrase "existence
of margins of dumping during the investigation phase" in Article 2.4.2 does not have the limited or
defined meaning that the United States asserts. The European Communities contends that if the
United States would be correct in its assertions, the words "to determine the existence, degree and
effect of any alleged dumping" in Article 5.1 would be redundant and without meaning.
4.54 The European Communities considers that Article 2.2, which is also part of Article 2, and
thus also part of the implementation of the defin ition of "margin of dumping", is more immediate and
relevant context. It points to the use – eight times – of the word "investigation" in Article 2.2. It
notes that these are provisions in respect of whic h implementation in the United States also for
retrospective assessments was, according to the SAA, "r equired or appropriate". It particularly notes
the use of the phrases "in the course of the inv estigation" in Article 2.2.1.1 and "during the
investigation" in footnote 6. The European Comm unities also cites as relevant context the repeated
use of the word "investigation" in Article 6.

50 US-First Written Submission, footnote 31.

4.55 Similarly, the European Communities contests the United States assertion that Article 1 of the
AD Agreement means that the word "investigation" in Article 2.4.2 refers to an "original
investigation" only. First, acco rding to the European Communities Article 1 does not exhibit the
characteristics of a definition. Secondly, the word "o riginal" does not appear in Article 1. Likewise,
the European Communities also contests that footnote 1 of Article 1 defines th e term "investigation"
for the purpose of the entire AD Agreement , including Article 2.4.2. Rather, it defines the word
"initiated" – other types of investigation, such as sunset reviews, changed circumstances reviews, new
shipper reviews and periodic reviews also being "ini tiated". Footnote 1 refers to Article 5.1 only for
the purposes of determining what is "the procedural action by which a Member formally commences
an investigation".
4.56 With respect to the word "phase" in Article 2.4.2, and considering its ordinary meaning,
especially in conjunction with the word "during" , referring to the New Shorter Oxford English
Dictionary, as indicating a stage in the passage of time, the European Comm unities argues that it has
no incidence on the meaning of the word "investigation" in Article 2.4.2. The European Communities
points to several other words th at are used only once in the AD Agreement without that having any
legal significance. It also points to several other concepts that are referred to in the AD Agreement in
different ways (as in "period" and "phase") w ithout that having any legal significance. Thus,
according to the European Commun ities, the word "phase" cannot, as a matter of law, lead to the
conclusion that the term "investiga tion" is defined in Article 5.1 or elsewhere for the purposes of the
entire AD Agreement, including Article 2.4.2. Finally, the European Communities points out that the
word "phase" does not appear in Article 2.4.1 – wh ich is treated the same way by the United States,
simply on the basis of an erroneous assumption that "investigation" always means "not reviews".
4.57 The European Communities makes similar argument s with respect to the word "existence".
The European Communities contends that it is simply not possible to entirely dissociate the
"existence" of dumping and the "degree" of dumping. The ordinary meaning of "exist" being "having
objective reality", it does not, when used in conjunction with the phrase "dumping margin",
encompass the concept of an amount or margin somewh ere between zero and infinity. In this respect,
the European Communities points to the references in Article 7 to the "amount" of dumping; and in
Article 9.1 to the "amount" and "full margin of dumpi ng"; and in Article 3.4 to the "magnitude of the
margin of dumping". The AD Agreement uses the word "existence" in other provisions, without that
being of any legal consequence, as does the SCM Agreement, including in the provisions relating to
imposition and collection. The proposition that this one word in Article 2.4.2 could have as a
consequence that the basic principles for calculati ng a margin of dumping should be rendered entirely
worthless in a system applying retrospective assessmen t is tenuous and implausible. In any event, the
European Communities argues that the United State is wrong to assert that the only time that the
"existence" of a margin of dumping is determined is in an original investigation. Issues relating to the
"existence" of dumping may also arise, for exampl e, in the context of a changed circumstances
review, or in a sunset review. The European Co mmunities requests the Panel not to base itself on the
esoteric mathematical and philosophical combination
 dictionary meanings referred to by the
United States. The European Communities also invit es the Panel to pay due regard to the French and
Spanish texts of the AD Agreement , the titles of which make it clear that all of the provisions of
Article 2 – including those that the United States admits apply in a retrospective assessment – are
concerned with the "existence" of dumping. Fina lly, the European Commun ities points out that the
word "existence" does not appear in Article 2.4. 1 – which is treated the same way by the United
States, simply on the basis of an erroneous assumption that "investigation" always means "not
reviews".
4.58 The European Communities points to the object and purpose of retrospective assessment, as it
appears from the AD Agreement, and as set out in the Manual and confirmed by the United States in
these proceedings: it is just a temporal up-date. The European Communities also points to the object
and purpose of the AD Agreement, which at the very least requires basic consistency in the application

of economic concepts. The European Communities considers that the United States has failed to
articulate any alleged object or purpose to explain why, at the moment of final payment, the basic
method for calculating a margin of dumping should suddenly change, and be substantially unregulated
by the AD Agreement.
4.59 The European Communities considers that since the United States has failed to establish that
the word "investigation" or the phrase "existence of margins of dumping during the investigation
phase" has the limited meaning argued for by the Unit ed States – and that since a consideration of the
ordinary meaning, context, and object and purpose c onfirms that there is no such limited meaning –
there is no need to have recourse to the prepar atory work. In these circumstances, the preparatory
work could only ever be used to confirm the meaning resulting from Article 31 of the
Vienna Convention. That is precisely what it does. The negotiators were acutely aware of and
sensitive to the issue of definitions: it really matters whether or not something is defined; and the fact
that some terms are defined and others not must be given meaning. There was general consensus on
the need for a consistent, balanced and fair app lication of anti-dumping measures. There was broad
consensus on both sides of the debate that intern ational markets and business had evolved, and that
the AD Agreement should be up-dated accordingly. At no point in the debate was it ever suggested
that there should be different treatment for origin al investigations and retrospective assessments on
the fundamental question of how to calculate a margin of dumping. This is so notwithstanding the fact
that assessment and refund issues were repeatedly disc ussed in detail and at length, with regard to the
"duty as a cost" and "lesser duty" issues. There is a clear and strong indication of consensus that the
interests of both parties in the asymmetry and zeroi ng debate could be accomm odated in the targeted
dumping provisions that eventually became the second sentence of Article 2.4.2 of the AD Agreement.
There is an overwhelming indication of consensus th at the presence of the wo rd "investigation", used
repeatedly in what was to become Article 2.2 of the AD Agreement , did not mean that those
provisions were to be irrelevant when a marg in of dumping was calculated in retrospective
assessments. Right from the start, there was a "strong convergence of views" on the need to
strengthen the rules applicable to the pre-i nvestigation phase, without, however, placing an
unreasonable burden on complainants or authorities.
4.60 The European Communities considers that the negotiating history of Article 2.4.2 does not
record which Member or Members – if any – prop osed the particular form of words "during the
investigation phase" or why. However, had the United States actually put to the other Members,
during the negotiations, an express provision excluding the disciplines of Article 2.4.2 from
retrospective assessments – the European Communities contends that there is no doubt at all, based on
a fair consideration of the negotiations, that the ot her Members would never have agreed to it. This
was confirmed by each of the 11 third parties in response to a question posed by the European
Communities during the meeting with the third parties: none of them thought that the AD Agreement
means that investigating authorities are free to cal culate margins of dumping in all reviews and all
retrospective assessments as they wish, and fre e from the disciplines of Article 2, including
Article 2.4.2. Furthermore, the European Co mmunities argues that subsequent practice of the
Members with respect to the implementation of Article 2.4.2 is supportive of its case. In this regard,
the European Communities notes that its review of the notifications of the anti-dumping legislation
of 105 Members indicates that no Members take the view being advocated by the United States in the
present dispute. The European Communities cites th is in support of its case as "subsequent practice"
within the meaning of Article 31(3)(b) of the Vienna Convention on the Law of Treaties ; and also as
evidence of the intention of the Members, w ithin the meaning of Article 31(4) of the
Vienna Convention.
4.61 The European Communities does not consider that its interpretation of the word
"investigation" in Article 2.4.2 renders the words "during the investigation phase" in Article 2.4.2
meaningless. In this regard, the European Commun ities suggests four different alternative, but not
necessarily mutually exclusive, possible meanings of these terms: during the investigation period;

during the period in which the particular type of in vestigation must be conc luded; not during the pre-
investigation phase; or that the words are merely descriptive, in the sense that the United States
considers the words "to determine the existence, degree and effect of any alleged dumping" in
Article 5.1 to be merely descriptive.
4.62 With regard to the first meaning, if, referri ng to a dictionary, "phase" indicates a distinct
period in a process of change or development, and "during" indicates a temporal connotation, then an
investigation phase is something that spans a period of time, such as the "investigation period". The
word "phase" and the word "period" have very simi lar meanings, especially when the word "phase" is
associated with the word "during", giving it a temporal connotation. The two words may be
considered synonymous in the context of Article 2 of the AD Agreement, referring to a "stage" in the
passage of time.
4.63 The most natural reading of Article 2.4.2, and the reading that is grammatically correct, is that
the words "during the investigation phase" are associat ed with the word "existence" rather than with
the word "established". In other words, the provision does not refer to something that has to happen
(the "establishment" of the margins of dumping) dur ing the period of time in which an investigating
authority must normally make its determination (gen erally 12 to 18 months). Rather, it refers to
something that has to be established (whether or not there is dumping, and if so, what the margin of
dumping is) by reference to a certain period of tim e: the investigation period. If the drafters had
intended to associate the phrase "during the investig ation phase" with the word "established", the
provision could have been drafted differently. For ex ample, it could have read "… the existence of
margins of dumping shall normally be established during the investigation phase …".
4.64 Contextual support for such an approach ma y be found in various other provisions of
Article 2 of the AD Agreement . Article 2 provides valuable and persuasive context, because
Article 2.4.2 is part of Article 2, and because Ar ticle 2 implements the de finitions of dumping and
margin of dumping set out in Article VI of th e GATT 1994. Article 2.2.1 imposes obligations on
investigating authorities concerning the circumst ances in which sales of the like product in the
domestic market "may be disregarded
" as below cost. As such, it is of double interest as context,
given that the practice of zeroing with which th ese proceedings are concerned also involves the
investigating authority disregarding or adjusting, at least in part, certain export sales or other data.
The object and purpose of this rule is clear. By requiring an investigating authority to consistently use
data arising during the investigation period, the AD Agreement is imposing basic obligations of
consistency, objectivity and fairness. Precisely the same is true of Article 2.4.2 of the AD Agreement.
If the data used to establish normal value arose during the investigation period, but, in the final step of
comparison, the existence of margins of dumping we re permitted to be established by reference to
another period, there would clearly be a rupture in the basic structure and continuity of the method for
establishing whether or not there is dumping, and if so what the margin of dumping is, in conformity
with the definitions set out in Article VI of the GATT 1994, as implemented in Article 2 of the AD
Agreement. It is thus entirely consistent with the object and purpose of Article 2.4.2 of the AD
Agreement that it should continue to require at the comparison stage
, just as at the normal value stage,
that the margins of dumping must be es tablished by reference to data arising during the investigation
period (or phase). Precisely the same observations may be made with respect to the references to the
investigation period in Article 2.2.1.1, final sen tence; footnote 6, second phrase; and Article 2.4.1,
final phrase of the AD Agreement.
4.65 Other references in Article 2 to the investigation period are references to the methodology for
establishing normal value. The provision that primarily relates to export price – Article 2.3 of the
AD Agreement – contains no reference to da ta arising during the investigation period. Thus, aside
from Article 2.4.2 of the AD Agreement, there is no other express textual provision that would oblige
an investigating authority to use export price data arising during the investigation period (or phase).
The phrase "at as nearly as possible the same time" in Article 2.4 is qualified, and in any event does

not relate to the exclusion of transactions outside the chosen period. Thus, absent the words "during
the investigation phase" in Article 2.4.2, an inves tigating authority might, fo r one reason or another,
seek to draw on export price data arising outside th e investigation period. Viewed in this light, the
phrase during the investigation phase (or period) in Article 2.4.2 of the AD Agreement has an
important – even vital – role to play.
4.66 Further contextual support for this view may be found in the reference to "the period of
investigation" in Article 9.5 of the AD Agreement. What happens in a new shipper review is that an
unrelated exporter that did not export during the or iginal investigation period can, on request, obtain
"a determination of dumping". In the opinion of th e European Communities, that "determination of
dumping" must be consistent with all of the disciplines set out in Article 2 of the AD Agreement –
including Article 2.4.2. What makes an unrelated "n ew shipper" new is precisely the fact that, during
the original investigation period (or phase) it did not export. That is why, in the original investigation,
no specific margin of dumping could have been calculated in relation to such new shipper. Viewed in
this light, it is clear that the phrase "during the period of investigation" in Article 9.5 refers back to the
phrase "during the investigation phase" in Article 2. 4.2, and confirms that the word "phase" in
Article 2.4.2 is in fact synonymous with the word "period".
4.67 The European Communities does not consider it re markable that, in some instances, different
language is used to refer to concepts that are the same, such as a stage in th e passage of time (that is,
in this case, "period" and "phase"). Where the drafte rs sought a particularly high level of consistency,
they defined the relevant terms (there are ei ght such definitions in the GATT 1994 and the
AD Agreement). There are many other examples in the AD Agreement of different words or phrases
being used to refer to the same thing. All of these terms fall to be interpreted according to the Vienna
Convention, being given their ordinary meaning and havi ng regard to context and object and purpose.
There is nothing in the Vienna Convention that excl udes the possibility that such different terms in
fact have the same meaning. In such circumstances, the mere fact that the terms are different is of no
further legal consequence.
4.68 The European Communities observes that, if the dr afters had intended to take a step of such
great importance as jettisoning, in retrospectiv e assessments, the basic principles governing the
determination of dumping margins, as defined in Article VI of the GATT 1994 and elaborated in
Article 2 and particularly Article 2. 4.2, thus rendering the results of original investigations worthless,
they would not have chosen to: a) rely on an over subtle distinction between the words "during …
period" and the words "during … phase", neither the word "period" nor "phase" being defined, and
those phrases bearing the same ordinary meaning, if reference is made to a dictionary; b) in
circumstances where the use of one word or the other logically had no incidence whatsoever on the
meaning of the word "investigation" in Article 2.4. 2 – investigation itself not being a defined term:
c) by associating the phrase with the word "existence" as opposed to "established", in a manner that is
grammatically incorrect given their alleged objective; and d) whilst at the same time including the
directly contradictory cross-reference in Article 9. 3 to the whole of Article 2. Rather, given the
importance of the step the drafters were allegedl y taking, they would rather have simply expressly
stated that the rules in Article 2.4.2 could be disr egarded in retrospective assessments. Just as they
did in Article 2.2.1 with regard to sales not in the ordinary course of trade. Just as they did in
Article 9.4 with regard to zero, de minimis and facts available margins. Just as they did in Article 2.7
with regard to non-market economies. That, at l east, is what the third parties in this case seem to
think.
4.69 A second possible meaning of the words "during th e investigation phase" in Article 2.4.2 is
that the investigating authority must make the de termination within the 12 to 18 month period during
which investigations must generally be concluded.

4.70 In the context of an original investigation, Article 5.10 of the AD Agreement contains the
procedural rule that: "Investigations shall, except in special circumstances, be concluded within one
year, and in no case more than 18 months, after their initiation." Article 2.4.2 takes this procedural
rule one step further, and makes it a substantive rule , clearly of application to investigations of all
types. It provides that the "margins of dumpi ng" must be established during the 12 to 18 month
original investigation phase. Thus, if a margin of dumping resulting from an original investigation
were determined 2 years after the initiation of th e original investigation, the Member responsible
would act inconsistently with the AD Agreement. The same would be true if a Member purported to
alter the margin of dumping determined during the original investigation, after the end of the
18 month period, without conducting a new investigation. It should not be forgotten that, with a new
investigation, there comes, in principle, a new inv estigation period (or review period) – that is, fresh
data (see further below) – and a new obliga tion to make any necessary margin of dumping
determinations required by Article 2 within the new investigation phase.
4.71 The reasons for this rule are self-evident. Fi rst, it would be Kafkaesque if a producer or
exporter were to find itself forever "under investiga tion" without ever being subject to a measure (or
having the investigation terminated). That would be inconsistent with the basic requirements of
certainty and predictability in international trade, which the Appellate Body has so clearly stated lie at
the heart of the WTO Agreements. Second, although the AD Agreement contains no rule concerning
the establishment of periods of investigation, it is well established that an investigating authority is
not entirely unfettered in this matter. In principl e, the period of investigation must end as close as
reasonably possible to the date on which the investig ation is initiated. There are very good reasons
for this. Anti-dumping measures can only reasonably be imposed on the basis of sufficiently fresh
data. Absent some special justification, it would not be reasonable or acceptable under the
AD Agreement for an investigating authority to impose anti-dumping measures today, based on data
from 10 years ago. Requiring the dumping margin dete rmination to be made within the investigation
phase is an essential part of this "fresh data" rule: there would be no point in requiring the
investigation to be initiated shortly after the end of the investigation period, if the dumping margin
determination could be delayed until several years later. Third, given the importance of this rule, it is
entirely appropriate that it should be expressed not only in the essentially procedural terms of
Article 5.10 of the AD Agreement, which relates to original investigations, but that it should also be
recalled, or expressed in more substantive term s, in the context of Article 2.4.2 of the AD Agreement,
and in relation to all types of investigation. This makes it clear that failure to respect the rule would
result not merely in a procedural inconsistency with the AD Agreement, but would vitiate the very
core of the determination – the establishment of the margin of dumping. And it makes it clear that the
rule applies in all types of investigation.
4.72 In the context of changed circumstances reviews, Article 11.4 of the AD Agreement provides
that the review should be carried out expeditiously and normally concluded within 12 months of the
date of initiation. The reasoning is analogous. If the review involves reliance on or determination of
a new "margin of dumping", that determination must comply with the requirements of Article 2 of the
AD Agreement , and must be made during the 12 month review investigation phase. The same
reasoning applies, mutatis mutandis, to sunset reviews under Article 11. 3. Similarly, Article 9.5 of
the AD Agreement provides that new shipper reviews must be initiated and carried out on an
accelerated basis, compared to normal duty assessme nt and review proceedings. In the same vein,
both Articles 9.3.1 and 9.3.2 of the AD Agreement expressly provide for an investigation phase of
normally 12 months and in no case less than 18 months. Thus, this is the period or phase during
which the investigating authority must make any "margin of dumping" calculations required by
Article 2 of the AD Agreement . That is what the words "dur ing the investigation phase" in
Article 2.4.2 of the AD Agreement mean.
4.73 A third meaning is that Article 2.4.2 does not a pply in the pre-investigation phase. The first
step in anti-dumping proceedings is not the initiation of an original investigation. The first step is

normally the written application by the domestic industry, pursuant to Article 5.1 of the
AD Agreement. There are several provisions of the AD Agreement regulating the period prior to the
initiation of an original investigation. These provisions impose obligations on Members. For
example, Article 5.2 sets out the minimum content of an application. If an application does not meet
these requirements, a Member cannot initiate an orig inal investigation without acting inconsistently
with the AD Agreement. According to Article 5.3 of the AD Agreement, the authorities must examine
the accuracy and adequacy of the evidence provided in the application to determine whether there is
sufficient evidence to justify the initiation of an investigation. Article 5.4 of the AD Agreement
requires the authorities to determine that the application is supported by a sufficient proportion of the
domestic industry – otherwise "An investigation sh all not be initiated …". Article 5.5 of the
AD Agreement prohibits the authorities from publicising the application prior to initiation of an
investigation, and requires pre-notification to the government of the exporting Member. Article 5.7 of
the AD Agreement contains rules regarding the consideration of dumping and injury, both in the pre-
investigation phase, and "thereafter". Article 5.8 of the AD Agreement sets out circumstances in
which an application must be rejected, and de minimis rules.
4.74 There is therefore, incontestably, a period of time before a decision is taken on whether or not
to initiate an original investigation during which: (1) facts material to a possible final determination
arise or are placed on the record; (2) procedural steps are taken both by "interested parties" (the
domestic industry) and by the authorities; and (3) AD Agreement rules apply and impose obligations
on Members. This period of time may be termed the pre-investigation phase.
4.75 Thus, the rule in Article 2.4.2 of the AD Agreement would not apply, for example, during the
pre-investigation phase. That is common sense a nd consistent with the other provisions of the
AD Agreement. Article 5.2 of the AD Agreement requires the applicant to provide "such information
as is reasonably available to the applicant". Article 5.2 (iii) of the AD Agreement refers to
"information on prices" in the domestic market a nd "information on export prices". That might, for
example, include published price lists. In the opini on of the European Co mmunities, the threshold
established by Article 5.2(iii) can be met by inform ation that falls short, very far short, of the
information necessary to make a full anti-dumping dete rmination. In fact, this will normally be the
case. That is because the very detailed and complete information concerning like product, model
types, costs of production, domestic export transacti ons and export transacti ons, and all information
necessary to make a fair comparison pursuant to Article 2.4 of the AD Agreement, will simply not be
available, or reasonably available, to the applicant. Complaints are not required to contain precise and
accurate dumping margin calculations. So the AD Agreement provides that the rules of Article 2.4.2
apply in the investigation phase, and thus not in the pre-investigation phase.
4.76 In the opinion of the European Co mmunities, Article 5.2(iii) of the AD Agreement, viewed in
isolation, would not achieve this result. It simply requires information about prices in the domestic
and export markets. That is not in itself enough. Ar ticle 5.2 requires that the application must contain
sufficient evidence of "dumping" and Article 5.3 re quires an authority to determine whether or not
there is sufficient evidence to justify initiation. Quite apart from Article 5.2(iii), the authority will
therefore have to make some kind of rudimentary comp arison. And that is the point at which the rule
in Article 2.4.2, on the basis of this interpretati on, would have value added, because it would release
the authority from the unreasonable burden of applying the rules set out in Article 2.4.2, which
essentially pre-suppose that the questionnaire respon ses, with all the detailed data on domestic and
export prices, have already been filed.
4.77 Furthermore, the European Communities emphasize s that its view is consistent with the
position that there is a clear distinction between each type of investig ation conducted under the
AD Agreement. Original investigations, new shipper revi ews, changed circumstances reviews, sunset
reviews and duty assessment proceedings each have a di fferent purpose and are subject to a different
set of provisions under the AD Agreement – although they are all subject to Article VI of the GATT

1994 and must be conducted in a ma nner consistent with the object and purpose of anti-dumping
measures. On the other hand, some provisions of the AD Agreement apply to more than one or all
such investigations, and Article 2.4.2 is one such provision.
(iii) Article 2.4.2 prohibits simple zeroing
4.78 The European Communities argues that the reasoning of the Appellate Body in the EC – Bed
Linen51 and US – Softwood Lumber V52 cases in relation to model zeroing applies equally whenever an
investigating authority decides to fix the parameters of its investigation, whether in relation to a
subject product, time period, level of trade, region, or any other parameter. Once such parameters are
defined, an investigating authority becomes bound by its own logic, and must complete its analysis on
the basis of the same logic.
4.79 The European Communities finds contextual s upport for this position in the second sentence
of Article 2.4.2 of the AD Agreement , which refers expressly to certain parameters of relevance to a
determination of the existence of dumping, includi ng "time periods". In the light of the periodic
reviews at issue, the European Communities argue s that these words imply that, having fixed the
temporal parameters of the relevant proceeding, the United States had become bound by its own logic,
unless the exceptional situation described in the second sentence of Article 2.4.2 of the AD Agreement
were present (which was not the case).
4.80 More generally, the same is true with respect to any other parameters of an investigation that
are fixed by an investigating authority, notably the purchasers and regions concerned, these also being
matters referred to in the second sentence of Article 2.4.2. Accord ing to the European Communities,
the simple zeroing method used by the United States is, at least potentially, offensive to any one of
these parameters, because it is performed at the most disaggregated level, that is, at the level of
individual transactions. In other words, instead of treating all the relevant export transactions as a
whole, the United States methodology results in tr eating each export transaction individually in the
same manner as model zeroing results in treati ng each model separately. Thus, the European
Communities challenges the United States practice, in each of the periodic reviews at issue, of
considering each export transaction in isolation.
4.81 In addition, the European Communities argues that Articles 2.4, 2.4.2 a nd 9.3 require that the
total amount of duty collected with respect to exports made by one specific exporter during the
assessment period must not exceed the relevant margin of dumping of the same exporter. The only
relevant margin of dumping perm itted to be calculated under the AD Agreement , whether in an
original investigation or a periodic review, is that pertaining to the exporter, not one or more entries
made by individual importers.
4.82 As explained above in the section concerning Ar ticle 2.4, the European Communities rejects
the contention of the United States that importer-specific final assessment on a transaction-by-
transaction basis involving zeroing is contemplated under the AD Agreement by virtue of
Article 9.4(ii). The arguments presented by the Eu ropean Communities on this issue are detailed in
paragraphs 4.21 to 4.26 above.
(iv) Conditions for the Application of the Asymmetrical Comparison Methodology
4.83 The European Communities considers that the main purpose of Article 2.4.2 of the
AD Agreement is to provide for an exception (asymmetri cal comparison in the case of targeted
dumping) to the normal methods of comparison (symme trical comparison) in order to ensure a fair

51 Appellate Body Report, EC – Bed Linen.
52 Appellate Body Report, US – Softwood Lumber V.

comparison within the meaning of Article 2.4. An asymmetrical comparison can only be used if the
circumstances defined in the second sentence of Article 2.4.2 of the AD Agreement are met. Thus, it
transformed a comparison method (weighted-average -to-transaction) commonly used before the
Uruguay Round AD Agreement was adopted into an exception subject to strict conditions.
4.84 In the periodic reviews at issue in the present dis pute, in order to establish the existence of a
margin of dumping for the subject product during the period of review, the United States did not use
either of the normal methods of comparison provided for in the first sentence of Article 2.4.2 of the
AD Agreement (weighted-average-to-weighted-average or transaction-to-transaction). Rather, the
United States compared a normal value established on a weighted-average basis to prices of
individual export transactions. That corresponds to the asymmetrical method described in the second
sentence of Article 2.4.2.
4.85 Further to the second sentence of Article 2.4.2, the asymmetrical method may only be used if
the authorities find a pattern of export prices which differ significantly among different purchasers,
regions or time periods, and if an explanation is provided as to why such differences cannot be taken
into account appropriately by the use of a weighted -average-to-weighted-average or transaction-to-
transaction comparison. Thus, in order for the United States to use the asymmetrical method, the
conditions laid out in Article 2.4.2 of the AD Agreement should have been met. Furthermore, to the
extent that the asymmetrical method was not availa ble, the United States was under an obligation to
use one of the normally applicable methods provided for in the first sentence of Article 2.4.2 of the
AD Agreement . Thus, in this case, on this point, the United States acted inconsistently with the
AD Agreement because it used the asymmetrical method when none of the conditions were fulfilled;
and failed to use a symmetrical method when that was the only lawful option.
4.86 As explained above in the section concerning Ar ticle 2.4, the European Communities rejects
the contention of the United States that importer-specific final assessment on a transaction by
transaction basis involving zeroing is contemplated under the AD Agreement by virtue of
Article 9.4(ii). The arguments presented by the Eu ropean Communities on this issue are detailed in
paragraphs 4.21 to 4.26 above.
(b) The United States
53
(i) Article 2.4.2 does not prohibit model zeroing
4.87 The United States submits that in US – Softwood Lumber V , the Appellate Body erred in
finding that the AD Agreement requires Members, in the investigation phase, to give credit for
weighted average comparisons when the export price exceeds the normal value.
4.88 With respect to the investigation phase, the "as applied" and "as such" claims of the
European Communities are based on its assertion that the AD Agreement requires an offset for non-
dumped sales. However, according to the United States, neither the text of the AD Agreement nor its
negotiating history recognizes the concept of "negative dumping margins," and the AD Agreement
does not contain any obligations with respect to them . An offset requirement – if one existed – would
apply to the results of comparisons, and would not pertai n to the comparisons themselves.
Article 2.4.2 limits the use of average-to-tran saction comparisons in the investigation phase, a
common practice before the Uruguay Round. Neither the text of the AD Agreement nor its

53 US-First Written Submission, paras. 29-58; US-S econd Written Submission, paras. 5-17 and 79-96;
US-Opening Statement at the First Substantive Meeting of the Panel, paras. 10-19, 22-24; US-Closing
Statement at the First Substantive M eeting of the Panel, para. 112; US-Opening Statement at the Second
Substantive Meeting of the Panel, paras. 4-7; US-Clo sing Statement at the Second Substantive Meeting of the
Panel, para. 18; US-Responses to Panel Questions 5, 8-9, 10-11, 13-14, 16-17 and 19.

negotiating history suggest that the drafters agreed to require a credit for sales made at above normal
value. Because such a requirement is antitheti cal to the historic manner in which antidumping
investigations have been conducted by many Memb ers, both before and after the completion of the
Uruguay Round, and there is no indication in the text of an agreement to change this historic
approach, such an obligation should not be created through the dispute settlement process on the basis
of tenuous inferences.
4.89 The United States contests the assertion of the European Communities that it "excludes" non-
dumped transactions from its calculation of an overa ll margin of dumping in the investigation phase
and that such exclusions are "unfair." When applying the average-to-average method, the United
States calculates multiple weighted average normal va lues, and compares each to a distinct set of
weighted average export prices. Each average-to-average pairing is distinguished by a common set of
variables establishing their comparability ( e.g., model, level of trade). Taken together, these groups
of export transactions contain "all comparable export transactions." No export transaction is
excluded.
4.90 For each comparison group, the United States compares the weighted average of all the
normal values to the weighted average of all the ex port prices. However, the United States does not
determine whether dumping "exists" so as to warr ant the imposition of an anti-dumping measure. It
simply calculates an amount of dumping for each comparison group. Consistent with the language in
Article VI, paragraphs 1 and 2, of GATT 1994, when the weighted average export price for a group of
transactions is less than its weighted average normal value, this difference is an amount of dumping.
The summation of these dumping amounts occurs sub sequently, in order to determine whether the
dumping margin for the product is above or below the de minimis standard. In this exercise, all export
transactions are considered, because they are includ ed in the figure by which the aggregate of the
dumping amounts is divided. The result of this calculation is the percentage dumping margin against
which the de minimis standard is applied.
4.91 The Appellate Body's ultimate finding in US – Softwood Lumber V turned on a subsidiary
finding that the United States practice of calculating intermediate "margins of dumping", while setting
the results of those intermediate comparisons that resulted in "negative margins" to zero, was contrary
to the requirements of Article 2.4.2. However, it is inaccurate to state that USDOC's intermediate
stage calculations constitute a determination of wh ether dumping margins "exist" within the meaning
of the AD Agreement. The calculation of an overall percen tage dumping margin (i.e. expressing the
overall amount of dumping found during the inves tigation phase as a percentage of overall export
sales), and using this percentage to determine whether dumping "exists" such that the imposition of an
antidumping measure is justified, is only done in a separate step in order to satisfy the requirements of
Article 5.8 of the AD Agreement.
4.92 The Appellate Body's understanding of the facts may have resulted from the use of
terminology in United States law that has been interpreted as having a different meaning in the
context of the AD Agreement . The Appellate Body effectively interpreted the term "margin of
dumping" for AD Agreement purposes as applying only to the per centage margin for the product as a
whole, against which the de minimis standard is measured. In the context of this dispute, the "margin
of dumping" for AD Agreement purposes is equivalent to the "weighted average dumping margin"
defined in Section 771(35)(B) of the Act. Unite d States law separately defines "dumping margin" in
Section 771(35)(A) as "the amount by which the normal value exceeds the export price or constructed
export price of the subject merchandise." Nevert heless, the reference in United States law to the
intermediate dumping amounts as "dumping margins" does not alter the fact that those intermediate
dumping amounts were treated in a manner consistent with the AD Agreement and Article VI:1 and 2
of GATT 1994.

4.93 The United States disagrees with the position of the European Comm unities on the meaning
of the word "margin" in Article 2.4.2. In the AD Agreement, the word "margin" is modified by the
word "dumping," giving it a special meaning. Pa ragraph 2 of Article VI of GATT 1994 provides that
"[f]or the purposes of this Article, the margin of dumping is the price difference determined in
accordance with the provisions of paragraph 1." When read with the provisions of paragraph 1, the
"margin of dumping" is the price difference when a product has been "introduced into the commerce
of an importing country at less than its normal valu e"; i.e., the price difference when the product has
been dumped.
4.94 The provisions of the AD Agreement must be read in conjunction with Article VI of GATT
1994. While the AD Agreement does not provide a definition of "margin of dumping," Article 2.1
does define "dumping" in a manner consistent with the definition provided in Article VI. The express
terms of Article VI provide that the margin of dumping is the amount by which normal value
"exceeds" export price, or alternatively the amount by which export price "falls short" of normal
value. Consequently, there is no textua l support in Article VI of the GATT or the AD Agreement for
the concept of "negative dumping."
4.95 Similarly, there is nothing in the text to su ggest that the prevailing meaning of the term
"dumping" is suspended for purposes of Article 2. 4.2. Article 2.4.2 sets forth three comparison
methods for establishing "the existence of margins of dumping" in an investigation. There is no
reference in Article 2.4.2 to "negative margins," "negative dumping," or any other modification to the
term "margin of dumping." Article 2.4.2 establishes an obligation for the administering authority to
determine whether dumping "exists" based on certain methodological constraints. Nothing in
Article 2.4.2 requires the expression of the margin of dumping as a percentage. Article 5.8 is the only
place in the AD Agreement where the amount of dumping must be expressed as a percentage margin
so that it may be measured against the de minimis standard.
4.96 In the absence of any obligation in Article 2.4.2 to calculate an overall margin of dumping, let
alone any obligations detailing the manner in which such a calculation must be performed,
Article 2.4.2 cannot serve as the basis for finding a requirement to offset negative dumping.
4.97 According to the United States, the negotiating history confirms that Article 2.4.2 does not
require an offset for negative dumping. Prior to the entry into force of the WTO Agreement, many
users of the antidumping remedy, including the United States and the European Communities,
determined the existence of dumping margins by using the average-to-transaction comparison
method. Several delegations sough t to negotiate a change in this practice in the Uruguay Round
negotiations. The negotiations over this "asymme try" issue were protracted and difficult.
Article 2.4.2 of the AD Agreement was ultimately agreed upon specifically to address this
"asymmetry" issue.
4.98 Separately, a number of signatories to the Tokyo Round Anti-Dumping Code, including the
United States and the European Communities, utiliz ed a methodology whereby they calculated the
final overall margin of dumping for a company by aggregating the positive dumping amounts for
comparisons where normal value exceeded export pri ce and dividing that number by the aggregate of
all export prices. So-called "negative margins" we re not taken into account in aggregating the overall
amount of dumping. This practice was well-know n by the Uruguay Round negotiators and was
referred to as "zeroing." Concurrent with the ne gotiations, the practice of zeroing was reviewed by
two dispute settlement panels and was found to be consistent with the Anti-dumping Code. In the
Uruguay Round negotiations, several delegations sought to prohibit zeroing and to require an offset
for "negative dumping." No provision to require su ch offsetting was agreed to by the negotiators.
While agreement was reached to address the "asymme try" issue through, and to the extent provided
for in, the language of Article 2.4.2 of the AD Agreement, the Agreement ultimately did not address
the zeroing issue.

(ii) Scope of Article 2.4.2 is Limited to Original Investigations
4.99 The United States argues that the express terms of Article 2.4.2 limit its application to the
original investigation phase of an antidumping procee ding. Moreover, nothing in the text of Article 9
contradicts or invalidates the express limitation found in Ar ticle 2.4.2. On this basis, the claims of the
European Communities with respect to Article 2. 4.2 and phases of an anti-dumping proceeding other
than the original investigation, must fail.
4.100 The express terms of Article 2.4.2 limit its a pplication to the "investigation phase" of a
proceeding. The United States asserts that to requ ire the application of Article 2.4.2 to Article 9
assessment proceedings would read out of the AD Agreement Article 2.4.2's express limitation to
investigations, and would be inconsistent with the principle of effectiveness.
4.101 Other provisions of the AD Agreement also expressly limit their application to the
investigation phase of an antidumping proceeding, an d do not apply elsewhere. For instance, panels
have consistently found that the references to "investigation" in Ar ticle 5 only refer to the original
investigation and not to subsequent phases of an antidumping proceeding.
4.102 According to the United States, the limited appli cability of Article 2.4.2 could not be plainer.
The text leaves no doubt that the Members did not intend to extend these obligations to any phase
beyond the investigation phase. As the panel in Argentina – Poultry Anti-Dumping Duties found:
"Article 2.4.2, uniquely among the provisions of Artic le 2, relates to the establishment of the margin
of dumping "during the investigation phase."54
4.103 The limited application of Article 2.4.2 to th e investigation phase is consistent with the
divergent functions of investigati ons and other proceedings under the AD Agreement . The
United States asserts that in arguing that Article 2.4.2 applies to phases of an anti-dumping proceeding
beyond original investigations, the Eur opean Communities has argued that the AD Agreement does
not distinguish between the rules governing inves tigations, assessment proceedings, and the various
proceedings that constitute Article 11 reviews. However, according to the United States,
investigations and assessment proceedings constitu te distinct phases of an anti-dumping proceeding
and have different purposes.
4.104 Article 18.3 of the AD Agreement explicitly recognizes the difference between investigations,
which may lead to the imposition of a measure, and "reviews" of existing measures. The consistency
with which the Appellate Body a nd panels have recognized the dis tinctions between investigations
and other segments of an antidumping proceeding is consistent with the distinct purpose of the
investigation phase, which is to establish as a threshold matter whether the imposition of an
antidumping measure is warranted. Other phases (such as Article 9 assessment proceedings or
Article 11 sunset reviews) have different purposes. Whereas the purpose of an investigation is to
determine whether a remedy against dumping shou ld be provided, the purpose of an assessment
proceeding is to determine the precise amount of that remedy. As mentioned above, the Appellate
Body has already recognized that investigations and other proceedings serve different purposes and
have different functions, and therefore are subject to different obligations under the Agreement. The
AD Agreement does not require Members to examine whether margins of dumping "exist" in the
assessment phase. Article 9 assessment proceedings are not concerned with the existential question of
whether injurious dumping "exists" above a de minimis level such that the imposition of antidumping
measures is warranted. Instead, Article 9 focuses on the amount of duty to be assessed on particular
entries, an exercise that is sep arate and apart from the calculation of an overall dumping margin
during the threshold investigation phase.

54 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357.

4.105 The express limitation in Article 2.4.2 to the inv estigation phase is also consistent with the
fact that the antidumping systems of Members are different for purposes of the assessment phase. The
different methods used by Members pursuant to Article 9 include the use of prospective normal
values, retrospective normal values, and prospective ad valorem assessment. If the requirements of
Article 2.4.2 regarding comparison methods applied to the assessment of antidumping duties, this
divergence of assessment systems would not be possibl e. For example, it is not possible to reconcile
the prospective normal value system used by some Members with a requirement to use either the
average-to-average or transaction-to-transaction method, because such systems compare weighted
average normal values to individual export prices to assess dumping duties on individual transactions.
Furthermore, anti-dumping duties, like other duties, ar e levied on individual imports, consistent with
the circumstances associated with each particular im port transaction. Individual importers pay such
duties. To the extent that an au thority may use weighted average to weighted average comparisons in
an investigation to determine whether margins of dumping exist sufficient to justify the imposition of
an antidumping measure, once that measure is imposed , it is the importers that will incur liability for
duties. Consequently, it is appropriate to dete rmine that liability on an importer- and transaction-
specific basis. Thus, to retain the flexibility in assessment systems reflected in Article 9, it was not
only appropriate, but necessary, to limit the requirements of Article 2.4.2 to the investigation phase.
4.106 The United States contends that Article 9 does not incorporate the requirements of
Article 2.4.2. The general reference to Article 2 in Article 9.3 necessarily includes any limitations
found in the text of Article 2. As discussed above, Article 2.4.2 by its own te rms is explicitly limited
to the investigation phase. The reference in Article 9.3 to Article 2 means that the amount of
antidumping duty assessed may not exceed the amount of antidumping duty calculated in accordance
with the general requirements of Article 2, such as making the various adjustments set forth in
Article 2.4 necessary to provide a fair comparison. Furthermore, Article 9 contains certain procedural
obligations applicable in assessment reviews. However, Article 9 does not prescribe methodologies
for assessment proceedings such as those established in Article 2.4.2 for the investigation phase.
Instead, Article 9 establishes time limits for conducting assessment proceedings, ensuring that
respondent companies may obtain timely refund of any excess antidumping duties collected by a
Member. The United States finds support for its interp retation of Article 9 in the panel's findings in
Argentina – Poultry Anti-Dumping Duties.
55
4.107 The United States argues that the phrase "the existence of margins of dumping during the
investigation phase", when considered in its en tirety, makes it clear that the obligations in
Article 2.4.2 do not extend beyond an investigation within the meaning of Article 5. The use of the
terms "investigation," "existence," and "initiated" creates a linkage that ties Articles 1, 2.4.2 and 5
together in such a way that confirms that the drafte rs were referring to Article 5 investigations when
they provided that the Article 2.4.2 comparison methodologies are to be used to establish "the
existence of margins of dumping during the investigation phase."
4.108 Thus, Article 1 defines the "initiation" of the investigation phase that leads to an anti-dumping
measure as "the procedural action by which a Me mber formally commences an investigation as
provided in Article 5." Article 5.1, in turn, prov ides that investigations are initiated upon a written
application, or pursuant to other specified conditi ons, to determine the "existence, degree and effect"
of alleged dumping. Consequently, there is no am biguity as to the nature of the "investigations
initiated and conducted" pursuant to Article 1. B ecause there is only one type of investigation
provided for in Article 5, and footnote 1 to Article 1 explicitly links Article 1 to "an investigation as
provided in Article 5," Article 1 can only be referring to Article 5 investigations.
4.109 To complete the linkage between Articles 1, 2.4.2, and 5, the term "existence" as it is used in
Article 5.1 of the AD Agreement must be considered. The word existence is used in connection with

55 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357.

the term dumping in only one other place in the AD Agreement besides Article 5.1: Article 2.4.2. The
ordinary meaning of the word "existence" according to The New Shorter Oxford English Dictionary is
"the fact or state of existing; actual possession of be ing; a mode or kind of existing; dealing with the
existence of a mathematical or philosophical entit y." The word "existence" before the phrase "of
margins of dumping" indicates that Members are to de termine the "existence of [the] mathematical or
philosophical entity" referred to as "margins of dumpi ng." This "existence" is a necessary part of an
Article 5 investigation which may lead to applying an antidumping measure consistent with Article 1.
4.110 The drafters' intent to limit Article 2.4.2 exclus ively to Article 5 investigations is further
demonstrated by the use of the definite article "the " before the term "investigation phase", rather than
the indefinite article "an". According to The Ne w Shorter Oxford English Dictionary, the ordinary
meaning of the article "the" is "designating one or more persons or things already mentioned or
known, particularized by context, or circumstan ces, inherently unique, familiar or otherwise
sufficiently identified." If, as th e European Communities contends, th e term "investigation" in the
context of Article 2.4.2 may be interpreted in generi c terms, rather than as a term of art referring to
the Article 5 phase, then the use of the indefin ite article "an" would have been much more
appropriate. However, according to the United States, that is not what the AD Agreement states.
(iii) Conditions for the Application of the Asymmetrical Comparison Methodology
4.111 According to the United States, not only are the Article 2.4.2 restrictions on the investigation
phase irrelevant in assessment proceedings, but Arti cle 9 expressly provides for comparisons between
weighted average normal values and individual export transactions in assessment proceedings.
Article 9.4(ii) explicitly provides for the calcula tion of antidumping duties, in the assessment phase,
on the basis of a comparison of weighted average normal values and individual export prices. This
provision plainly indicates that there is nothing exceptional about assessing antidumping duties on the
basis of comparisons of weighted average normal values with individual export prices.
4.112 A panel recently found the calculation of transaction-specific antidumping duties in
assessment reviews to be entirely consistent with the AD Agreement. In Argentina – Poultry Anti-
Dumping Duties, the panel found the Argentine prospective normal value assessment system to be
fully consistent with the AD Agreement.
4.113 Thus, the United States contends that the cl aim of the European Communities that, with
respect to the assessment proceedings at issue in this dispute, USDOC erred in not applying either the
average-to-average or transaction-to-transaction methods must fail. There is no textual basis in the
AD Agreement for the assertion that Article 9.3 requires the application of Article 2.4.2 in assessment
proceedings. On the contrary, as the panel in Argentina – Poultry correctly found, the reference in
Article 9.3 to Article 2 does not overcome the lim iting language in Article 2.4.2 which, by its own
terms, limits its obligations to "the investigation phase."
3. Consequential Claims with respect to Articles 3.1, 3.2 and 3.5 of the AD Agreement
(a) The European Communities
56
4.114 The European Communities considers that, as a consequence of the unlawful zeroing methods
applied by USDOC in the original investigations identified in Exhibits EC-1 to EC-15, the
United States acted in a manner inconsistent with obligations imposed on it by Articles 3.1, 3.2
and 3.5 of the AD Agreement . The European Communities argues, inter alia , that because
investigating authorities used the unlawful zeroing met hod in the original investigations at issue, the
volume of imports determined to be dumped in each case was inflated. Accordingly, it is the

56 EC-First Written Submission, paras 90-93; EC-Rebuttal Submission, para. 64.

European Communities' position that the United States therefore acted inconsistently with Article 3.1
of the AD Agreement because it did not base its injury determ ination on an objective examination of
the volume of dumped imports.
4.115 The United States also acted inconsistently with Article 3.2 of the AD Agreement, because it
failed to properly consider whether or not there ha d been a significant increase in dumped imports;
and because when considering whether or not th ere was significant price undercutting or price
depression it based its assessment also on non-dumped imports, when it was only entitled to take into
account dumped imports.
4.116 The United States similarly acted inconsisten tly with Articles 3.1, 3.2 and 3.5 of the
AD Agreement, because it examined the impact of non-dumped imports on domestic producers, when
it was only entitled to examine the impact of dumped imports; and because it established a causal
relationship between injury and non- dumped imports, when it was only entitled to do so in relation to
dumped imports. The United States thus unlawfully attributed injury to a factor other than dumped
imports, in particular a volume of imports not sold at dumping prices.
4.117 The European Communities does not claim any co nsequential inconsiste ncy with Article 3
where the correction for unlawful zeroing does not ta ke the margin of dumping below 2 per cent for
individual exporters. However, it notes that it necessarily follows, from the fact that it has
demonstrated that a determina tion is inconsistent with the AD Agreement , that all subsequent
determinations that depend on that earlier determin ation are similarly vitiated or unsound, necessarily
requiring re-consideration, and thus necessarily being inconsistent w ith the relevant provision(s) of
the AD Agreement.
(b) The United States
57
4.118 The United States asserts that the Panel s hould dismiss the claims of the European
Communities concerning injury because even if the methodology used by USDOC in the cited
investigations were inconsistent with the AD Agreement , the assertion that the margins calculated
pursuant to that methodology caused the USITC to act in a manner inconsistent with Articles 3.1, 3.2
and 3.5 is speculative and unfounded.
4.119 The European Communities cannot establish that USDOC necess arily would have calculated
zero or de minimis dumping margins in the cited cases, or that the USITC treated certain non-dumped
imports as dumped. In the absence of such showi ngs, the United States contends that the European
Communities has failed to meet its burden to demonstr ate that any of the cited determinations by the
USITC is inconsistent with Articles 3.1, 3.2, and 3.5.
4.120 The United States notes that the European Communities, in response to the Panel's
Question 32, does not deny that its claims as to such measures are merely speculative, given that the
European Communities cannot presume the results of an alternative margin calculation methodology
permitted by the AD Agreement. According to the United States, the European Communities instead
adopts the new position that the use of so-called zer oing somehow renders the injury determinations
necessarily "unsound". 58 The European Communities does not explain, however, how the use of
zeroing necessarily caused the volume of dumped imports to be inflated, or how zeroing otherwise
gives rise to an Article 3 claim.

57 US-First Written Submission, paras. 108-110; US-Second Written Submission, footnote 70.
58 EC-Response to Panel Question 32.

4. Consequential Claim with respect to Article 5.8 of the AD Agreement
(a) The European Communities59
4.121 The European Communities considers that, as a consequence of the unlawful zeroing methods
applied by USDOC in the original investigations identified in Exhibits EC-1 to EC-15, the
United States acted in a manner inc onsistent with Article 5.8 of the AD Agreement. The European
Communities argues that there is a breach of Article 5.8 where the correction for unlawful zeroing
would take the margin of dumping below 2 per cent for the exporting country. 60 The European
Communities does not claim any consequen tial inconsistency with Article 5.8 where the correction
for unlawful zeroing does not take the margin of dumping below 2 per cent for the exporting country.
5. Consequential Claims with respect to Articles 11.1 and 11.2 of the AD Agreement
(a) The European Communities61
4.122 The European Communities argu es that, as a consequence of the unlawful zeroing methods
applied by USDOC in the periodic reviews identified in Exhibits EC-16 to EC-31, the United States
acted in a manner inconsistent with Articles 11.1 and 11.2 of the AD Agreement . However, these
claims are conditional, and may be considered withdrawn if the European Communities' claims
relating to the periodic reviews at issue succeed under Articles 2.4, 2.4.2 and 9.3.
4.123 The Article 11 claim is based on the assumption that part of the measures at issue (the
decision in each of the periodic reviews to apply a revised estimated anti-dumping duty deposit rate
for the future) constituted a "review" with in the meaning of Article 11.2 of the AD Agreement. The
dumping determination made by the United States in each such review was used as the basis for
determining whether or not the continued impositi on of the duty was "necessary to offset dumping",
within the meaning of Article 11.2 of the AD Agreement. That determination was made pursuant to
the right expressly conferred on interested parties by Article 11.2 of the AD Agreement , second
sentence.
4.124 The European Communities considers that if an investigating authority makes or relies on a
dumping determination for the purposes of Article 11.2 of the AD Agreement, it is bound to establish
any such dumping margin in conformity with the pr ovisions of Article 2.4, including Article 2.4.2 of
the AD Agreement . Article 11.2 must be read in conj unction with the other provisions of the
AD Agreement, including, necessarily, those that contain rele vant definitions, such as Article 2, which
defines dumping.
(b) The United States62
4.125 The United States asserts that in its response to the Panel regarding the basis for its claim
under Articles 11.1 and 11.2, the European Commun ities provided a non-response. According to the
United States, the European Communities simply asserts that "the conduct of retrospective
assessments in the United States must be consistent bo th with the provisions of Articles 2.4, 2.4.2 and
9.3, and with the provisions of Article 11." The European Communities fails, however, to provide the
requested explanation, despite the latter's own recogn ition that "United States 'periodic reviews' of the
amount of duty correspond to and fit within Article 9.3 of the AD Agreement".

60 EC-First Written Submission, para. 102, p. 37.
61 EC-First Written Submission, paras 187-199; EC-Rebuttal Submission, para. 219; EC-Response to
Panel Question 69; EC-Closing Oral Statement at the Second Substantive Meeting of the Panel, paras. 48-51.

6. Other Consequential Claims
(a) The European Communities
63
4.126 The European Communities considers that, as a c onsequence of applying unlawful zeroing in
the original investigations and periodic review s in question, the United States acted in a manner
inconsistent with the obligations imposed on it by Articles 9.3, 1 and 18.4 of the AD Agreement ;
Articles VI:1 and VI:2 of GATT 1994; and Article XVI.4 of the WTO Agreement.
4.127 Article 9.3 of the AD Agreement provides, inter alia that the amount of the anti-dumping duty
shall not exceed the margin of dumping as establis hed under Article 2. The European Communities
does not agree with the United States suggestion that Article 9 contains only "procedural obligations".
Nor does the European Communities ag ree with the United States suggestion that Article 9 contains
only "time limits". According to the European Co mmunities, there is nothing in Article 9 to support
such views. Article 9 contains substantive obliga tions, as does Article 2, to which Article 9 expressly
refers. Thus, to the extent that the dumping duties imposed and assessed in the original investigations
and periodic reviews at issue were greater than th ey should have been because of zeroing, the United
States violated its obligations under Article 9.3.
4.128 The European Communities consid ers that the United States act ed in this case in a manner
inconsistent with the obligations imposed on it by Article 1 of the AD Agreement and Articles VI:1
and VI:2 of GATT 1994. As a result of the unl awful zeroing method applied in the original
investigations and periodic reviews at issue, the United States applied an anti-dumping measure under
circumstances other than those provided for in Artic le VI of GATT 1994 and other than pursuant to
investigations initiated and conducted in accordance with the provisions of the AD Agreement . In
taking action under its domestic anti-dumping legisla tion, the United States failed to respect the
provisions of the AD Agreement , which provisions govern such action, and which provisions the
United States should have respected. Accordingly, the United States acted in a manner inconsistent
with the obligations imposed on it by Article 1 of the AD Agreement.
4.129 The United States condemned the sales of th e products subject to investigation in
circumstances where such products were not introduced into the commerce of the United States at less
than the normal value of those products. The United States levied anti-dumping duties on products
that were not dumped. The United States levied an ti-dumping duties, allegedly in order to offset or
prevent dumping, but in an amount greater than the ma rgin of dumping. The United States thus also
acted in a manner inconsistent with the obligations imposed on it by Articles VI:1 and VI:2 of GATT
1994.
4.130 As a consequence of applying unlawful zeroing in the original investigations and periodic
reviews at issue, the United States also failed to en sure the conformity of its laws, regulations and
administrative procedures with the provisions of the AD Agreement , and has thus acted in a manner
inconsistent with obligations imposed on it by Article 18.4 of the AD Agreement and Article XVI:4 of
the WTO Agreement.
(b) The United States
64
4.131 As regards the European Communities' consequen tial claims with respect to Article 9.3, the
United States asserts that Article 2.4.2 does not apply to assessment proceedings pursuant to
Article 9.3. According to the United States, th e general reference to Article 2 in Article 9.3

63 EC-First Written Submission, paras. 94-101, 200-210; EC-Rebuttal Submission, paras. 65 and 222-
232.
64 US-First Written Submission, paras. 49-54 and footnote 47.

necessarily includes any limitations found in the text of Article 2. Article 2.4.2 by its own terms is
explicitly limited to the investigation phase.
4.132 Citing to the Panel report in Argentina – Poultry Anti-Dumping Duties 65, the United States
argues that the reference in Article 9.3 to Ar ticle 2 means that the amount of antidumping duty
assessed may not exceed the amount of antidumping duty calculated in accordance with the general
requirements of Article 2, such as making the various adjustments set forth in Article 2.4 necessary to
provide a fair comparison. There is no basis in Article 9 to overcome the explicit language in
Article 2.4.2, limiting its reach to investigations.
4.133 In other words, the United States argues, Articl e 9 contains certain procedural obligations
applicable in assessment reviews, but does not prescribe methodologies for assessment proceedings,
such as those established in Article2.4.2 for the investigation phase. Instead, the United States asserts,
Article 9 establishes time limits for conducting assessment proceedings, ensuring that respondent
companies may obtain timely refund of any excess antidumping duties collected by a Member.
4.134 With respect to the European Communities' "as applied" claims under Article 18.4 of the
AD Agreement and Article XVI:4 of the WTO Agreement, the United States asserts that, assuming for
purposes of argument that the European Communities' positions regarding "symmetry" and offsets for
"negative dumping" are valid, the European Communities fails to explain how the obligations of these
provisions relate to determinations made in specific antidumping proceedings. Accordingly, the Panel
should reject the European Communities' claims.
C. "AS SUCH" CLAIMS
1. The "Standard Zeroing Procedures" (or The United States Practice or Methodology of
Zeroing) Used in Original Investigations and Periodic, New Shipper, Changed
Circumstance and Sunset Reviews
4.135 The European Communities charact erises this complaint as being comprised of two possible
challenges: First, to the "Standard AD Margin Program ", to the extent that it contains the "Standard
Zeroing Procedures"; and secondly, to the extent necessary, the "Import Administration Anti-
Dumping Manual" ("the Manual") and the United States practice or methodology of zeroing.
(i) The "Standard Zeroing Procedures" (or th e United States practice or methodology of
zeroing) are a "measure" or part of a "measure" that can be subject to WTO challenge
(a) The European Communities66
4.136 The European Communities contends that the "Standard Zeroing Procedures" and the Manual
to the extent the latter refers to the "Standard Co mputer Programs", or the United States practice or
methodology of zeroing, are a "measure" or are part of a "measure" that can be challenged "as such".
4.137 Referring particularly to the Appellate Body Reports in US-Corrosion Resistant Steel Sunset
Review, paragraphs 73 to 101 and US – Oil Country Tubular Goods Sunset Reviews, paragraphs 177 to
189, the European Communities argues that there are no limitations on the type of "measures" that
may, "as such", be the subject of dispute settlement under the DSU or the AD Agreement. According
to the European Communities, this is consistent with the comprehensive nature of the right of

65 Panel Report, Argentina – Poultry Anti-Dumping Duties, paras. 7.355-7.357.
66 EC-First Written Submission, paras. 103-125 and 212 ; EC-Rebuttal Submission, paras. 67-79; EC-
Responses to Panel Questions 51-53; EC-Opening Statem ent at the Second Substantive Meeting of the Panel,
paras. 40-44; EC-Closing Statement at Second Meeting with the Panel, paras. 55-59.

Members to resort to dispute settlement to "pr eserve [their] rights and obligations … under the
covered agreements, and to clarify the existing provisions of those agreements."
67 Furthermore, it is
compatible with the line of reasoning devel oped by the Appellate Body based on the GATT acquis
and the language of the AD Agreement , in particular Articles 17.3 and 18.4. 68 Thus, provided
Members respect the principles set forth in Articles 3.7 and 3.10 of the DSU, namely, to exercise their
"judgment as to whether action under these procedur es would be fruitful" and to engage in dispute
settlement in good faith, then those Members are entitle d to request a panel to examine measures that
the Member considers nullify or impair its benefi ts. In keeping with this view, the European
Communities argues that if, as in the present case, it can find language to adequately explain and
delineate its concerns in abstract terms, particular ly if that language is contained in a document or
documents drawn up by the United States itself; a nd if the European Communities is prepared to
expend the time and resources required for a dispute settlement procedure on the point, that is enough.
4.138 The European Communities argues that instruments of a Member containing rules or norms
may constitute a "measure", irrespective of how or whether those rules or norms are applied in a
particular instance. This is so because the disciplines of the GATT and the WTO, as well as the
dispute settlement system, are intended to protect not only existing trade but also the security and
predictability needed to conduct future trade. This objective would be frustrated if instruments setting
out rules or norms inconsistent with a Member's ob ligations could not be brought before a panel once
they have been adopted, irrespective of any particular instance of application of such rules or norms.
4.139 The European Communities identifies the "Sta ndard Zeroing Procedures" as the lines of
computer code in the United States' "Standard AD Margin Program". According to the European
Communities, the "Standard AD Margin Program" is a part of the United States current and standard
anti-dumping margin calculation methodology. The c ode used as the "Standard Zeroing Procedures"
varies depending upon whether it is applied in origin al investigations or periodic reviews. The
European Communities describes it as a code that is the same or has substantially the same structure
or effect as the following:
(for original investigations)

PROC MEANS NOPRINT DATA = MARGIN;
WHERE EMARGIN GT 0;
VAR EMARGIN &MUSQTY USVALUE;
OUTPUT OUT = ALLPUDD (DROP =
_FREQ_ _TYPE_ )
SUM = TOTPUDD MARGQTY MARGVAL
(for periodic reviews)

PROC MEANS NOPRINT DATA = MARGIN;
BY &USCLASS
WHERE EMARGIN GT 0;
VAR WTDMRG WTDQTY WTDVAL;
OUTPUT OUT = ALLPUDD (DROP =
_FREQ_ _TYPE_ )
SUM = TOTPUDD MARGQTY MARGVAL

4.140 The European Communities argues that the "Sta ndard Zeroing Procedures" are part of the
overall framework within which anti-dumping investigations are conducted in the United States. This
framework includes the "Standard AD Margin Program" and the Manual. Both the "Standard Zeroing
Procedures" and the "Standard AD Margin Program" are referred to and described in the Manual and
are part of the "Standard Computer Programs" applied by the USDOC in anti-dumping proceedings.
The "Standard Computer Programs" are also referre d to in the Regulations. Furthermore, USDOC

67 DSU, Article 3.2.
68 In particular, the European Communities refers to: Appellate Body Report, Guatemala – Cement I,
para. 69, footnote 47; GATT Panel Report, Japan – Semi-Conductors, para. 107; GATT Panel Report, Japan –
Agricultural Products I .

has disclosed these programs to hundreds and thousands of companies in the context of the very large
number of determinations that USDOC makes. Thus, according to the European Communities, the
"Standard Zeroing Procedures" are a matter of public knowledge. They cannot fall into some kind of
"loophole" or "twilight zone" or "no-man's land", outside the law me rely because their content is not
published like a notice of findings and reasons in an anti-dumping proceeding. It is not by placing
such findings and reasoning in the Manual and "Sta ndard Computer Programs", rather than in the
Final Determinations or Orders or Results or the Tariff Act or Regulations, that the United States can
escape the scrutiny of the panel in the present dispute. According to the European Communities, such
a result would not constitute a good faith interpretation of the WTO Agreement, the AD Agreement
and the DSU.
4.141 Moreover, the European Communities believ es it is not because the "Standard Zeroing
Procedures" may be abstract; or because they are not published in the Federal Register or at all; or
because they do not bear the title "law" or "regulation"; or because they are adopted by USDOC rather
than Congress; or because USDOC is entitled, subject to certain procedures, to change or withdraw
them for the purposes of future determinations, that they may escape the pane l's scrutiny. In this
regard, the European Communities notes that the Manual and "Standard Computer Programs" can
only be correctly described as having, at least potentially, some legal effects. Indeed, like
United States anti-dumping laws, regulations an d administrative procedures, including Policy
Bulletins, which the European Communities argues ar e also measures, the Manual is published by the
USDOC on the internet. The Manual and the "Sta ndard Computer Programs" might not have the
same force of law as the Tariff Act, but to assert th at they are worthless in United States courts would
be to overstate the point. In reality, USDOC treat s the "Standard Zeroing Procedures" as binding, at
least until changed.
4.142 The European Communities argues that a comput er program and the procedures it contains
are perhaps the paradigm example of normative rules that apply mechanistically and automatically to
a given set of facts, without further human intervention. There is no room for administrative or
judicial interpretation. The effect of the "Standa rd Zeroing Procedures" in future cases is utterly
predictable. The "Standard Zeroing Procedures" provide certainty and security (at least for
United States industry) for the conduct of future trade. They represent a degree of purity in normative
terms that makes them ideally suited as the vehicle by which the problem or matter can best be
apprehended and dealt with at its root. To this end, the European Comm unities considers that the
"Standard AD Margin Program" does "set out … norms". The program is repeatedly referred to as the
"standard", which the European Communities contends for the purposes of this dispute equates to the
"norm" or what is "normal". The relevant norms ar e "set out" in the sense that they are expressed in
the particular computer language used by the Unite d States, and recorded both electronically and on
paper, for all to see. The European Communities further considers that the program "establishes
rules", not least because, like the Manual, which re fers to it, it is published or issued under the
authority of USDOC, and provides guidance for USDOC officials.
4.143 According to the European Communities, th ere is no reason why a "piece of computer
software" should be considered incapable of "se tting out rules or norms". Computer programming
language is just that – a language, like any other. Understanding it might require special knowledge
or translation – that does not mean it is not a measure. A Member might choose to render its entire
municipal anti-dumping law in computerised format – even to the exclusion of any other format – that
would not mean that it would escape from the disciplines of the AD Agreement
. If an investigating
authority establishes a rule, especi ally one such as the "Standard Zeroing Procedures", the purpose
and effect of which is that equi valent situations are automatically and consistently treated equally,
then that rule must by definition be capable of affecting the operation of the AD Agreement . It

therefore necessarily falls within the phrase "any matter affecting the operation of the Agreement"
69,
and may consequently be referred to this Panel.
4.144 With respect to the claims regarding United States practice or methodology of zeroing, the
European Communities describes what it is challenging as consisting of using the particular type of
methodology (asymmetry, model zeroing or simple zeroing) repeatedly in a series of specific
determinations, in one specific anti-dumping proceeding after another. According to the European
Communities, the particular factual circumstances of this case, in which the practice has been lifted up
into an abstract document that exists on paper, a nd applies automatically, are sufficient for the Panel
to find that the practice being challenged constitutes a "measure".
(b) The United States70
4.145 The United States rejects the claim that the "S tandard AD Margin Program" can be regarded
as a "measure" for purposes of WTO dispute settlement . The United States notes that the Appellate
Body has indicated that instruments setting out ru les or norms can be challenged "as such" in a WTO
dispute. However, according to the United Stat es, the "Standard AD Margin Program" does not set
out or establish rules or norms. The United States c ontends that it is a piece of computer software
that, at most, implements rules or norms adopted by a decision-maker in some other instrument, such
as a regulation or a determination in a specific an ti-dumping proceeding. To the extent that the
European Communities argues that the legal status of lines of computer code are the same as
USDOC's regulations, the United States contends th at the European Communities is incorrect. Under
United States law, validly promulgated regulations are binding on USDOC, the public, and the courts.
USDOC's computer programs are not binding on anyone. Finally, the United States points to footnote
6 of the memorandum of Ms. Owenby, submitted by the European Communities as exhibit EC-46,
where according to the United States, Ms. Owenby acknowledges that the variables used in USDOC's
"AD Margin Program" depend upon the USDOC progra mmer. The United States contends that this
further undermines the claim that there is a "s tandard" USDOC computer program, and emphasizes
that the computer program used in any particul ar proceeding reflects policy choices, rather than
mandating them.
4.146 The United States does not contest the asserti on of the European Communities that the
Manual is a "measure" for purposes of this WTO dispute.
4.147 On the question of whether the "practice" identified by the Eur opean Communities can
amount to a "measure", the United States argues that repeated application of a particular measure –
such as a statute – in the same manner, does not somehow create a new and separate "autonomous
measure." Rather, it is just what the definition implies – it is a repeated application of a measure. The
United States asserts that when panels have been asked to find that a "pr actice" of the type described
by the European Communities cons titutes a measure that can be challenged as such, they have
uniformly declined. According to the United States, the panel in US – India Steel Plate correctly
noted:
"That a particular response to a particular set of circumstances has been repeated, and
may be predicted to be repeated in the futu re, does not, in our view transform it into a
measure. Such a conclusion would leave the question of what is a measure vague and
subject to dispute itself, which we consider an unacceptable outcome. Moreover, we

69 Article 17.2 of the AD Agreement.
70 US-First Written Submission, paras. 81-83 and 90-97; US-Second Written Submission, paras. 47-49
and 60-64; US-Closing Statement at the Second Meeting, paras. 3-7; US-Responses to Panel Questions 59-61
and 63.

do not consider that merely by repetition, a Member becomes obligated to follow its
past practice."71
4.148 Thus, according to the United States, the European Communities has failed to explain how
the repeated application of one measure – such as a statute – in the same manner gives rise to a
separate and autonomous "measure." Moreover, th e United States notes, when the Panel, in its
Question 74, asked the European Communities to dis tinguish the situation in this dispute from that
confronting the panel in US – India Steel Plate , the European Communities gave a non-answer,
referring to its answer to Panel Question 51. Howe ver, the United States argues that the European
Communities' answer to Question 51 simply contai ns the European Communities' explanation as to
why the "Standard AD Margin Program" is a "measure" distinct from "practice." It does not address
the issue of whether "practice" can be considered a measure that can be subject to an "as such"
challenge in WTO dispute settlement.
(i) The "Standard Zeroing Procedures" (or th e United States practice or methodology of
zeroing) are inconsistent with the AD Agreement, the GATT 1994 and the WTO Agreement
(a) The European Communities72
4.149 The European Communities refutes the applicati on of the "mandatory/discretionary" doctrine
as a mechanistic rule for determining when "as su ch" measures can be WTO-inconsistent. According
to the European Communities, the relevant standard for determining the consistency of an "as such"
measure with the AD Agreement is whether or not the measure is in conformity with the relevant
provision of the AD Agreement. The European Communities ar gues that this is clear from
Article 18.4 of the AD Agreement and Article XVI:4 of the WTO Agreement. Thus, the test is not
whether the measure is "mandatory" as opposed to "d iscretionary", or whether or not it is "binding" 73,
or whether or not it obliges a Member to act in a WTO inconsistent manner in all cases.74 To find an
"as such" measure in violation of a WTO obligat ion, it would suffice that it result in a WTO-
inconsistent outcome only in some cases.
4.150 Whether legislation is mandatory or discretiona ry is one question that must be considered
along with a multitude of others – including, importantly , an inquiry into the nature and content of the
relevant WTO provision, and whether it permits th e kind of discretion that is allowed by the
legislation at issue – in assessing the compatibility of a measure with a WTO obligation. One major
reason why the "mandatory/discretionary" doctrine cannot be a mechanistic rule is that State measures
are always, by definition, mandatory in some sense and very often leave some element of discretion.
There are always some exceptions possible to any mandatory rule.
4.151 In any event, whichever test that might be a pplied in the present case, the "Standard Zeroing
Procedures", and the "Standard AD Margin Progr am", are "as such" inconsistent with the
AD Agreement. Article 2.4.2 of the AD Agreement mandates that Members must have a normal or
standard rule as described in that provision. Th e "Standard AD Margin Program" contains a different
standard or normal rule. The "Standard AD Margin Program" and its "Standa rd Zeroing Procedures"
are not therefore in conformity with the AD Agreement. As they stand, without any modification of
the relevant lines of computer code, the "Standa rd AD Margin Program" and the "Standard Zeroing

71 Panel Report, US – Steel Plate, para. 7.22.
72 EC-First Written Submission, paras. 103, 126-129, 146-147, 212-214 and 224-225; EC-Rebuttal
Submission, paras. 80-82; EC-Opening Statement at the Second Substantive Meeting of the Panel, paras. 52-59;
EC-Responses to Panel Questions 54, 62, 67 and 71.
73 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 187.
74 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 247 and paras. 265-
269.

Procedures" do preclude consistency with the AD Agreement . The fact that they can in theory be
changed, just like the Regulations or the Tariff Act, is irrelevant. Furthermore, the mathematical
character of a computer program makes this findi ng inevitable, once it is established that model
zeroing, zeroing with respect to other averaging groups, simple zeroing and zeroing within the context
of importer-specific assessment rates, are inconsistent with the AD Agreement
75, and that these
zeroing methodologies are incorporated into the "Sta ndard Computer Programs", and particularly the
"Standard Zeroing Procedures", as expressly stated in the Manual.
4.152 To the extent that the "Standard Zeroing Pro cedures" used to automatically effect model
zeroing or zeroing with respect to other averaging groups in original investigations are considered to
be "as such" inconsistent with Articles 2.4 and/or 2.4.2, the European Communities argues that it
follows that they must also be "as such" inconsis tent with Articles 1, 5.8, 9.3 and 18.4 of the
AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO
Agreement.
76
4.153 Likewise the European Communities argues that to the extent that the "Standard Zeroing
Procedures" used in periodic reviews to unconditiona lly effect simple zeroing, for the purpose of
calculating both an assessment rate and a cash-deposit ra te, are as such inconsistent with Articles 2.4
and/or 2.4.2, it follows that they must also be as su ch inconsistent with Articles 1, 9.3, 11.1, 11.2 and
18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO
Agreement.77 Furthermore, the European Communities argues that to the extent that the zeroing
methodology is operative under the "Standard Zero ing Procedures" whenever importer-specific
assessment rates are calculated in a periodic review, the "Standard Zeroing Procedures" must also, for
this reason, be "as such" inconsistent with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement.
4.154 Finally, the European Communities submits that the same conclusions should be reached for
new shipper, changed circumstances and sunset revi ews. To the extent that the "Standard Zeroing
Procedures" are used in these review proceedings to automatically effect model zeroing, simple
zeroing or zeroing with respect to other averag ing groups, they must be considered as such
inconsistent with Articles 2.4 and/or 2.4.2, and conse quently, also Articles 1, 9.3, 9.5, 11.1, 11.2, 11.3
and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO
Agreement.78
(b) The United States79
4.155 The United States asserts that it is well establis hed pursuant to the "mandatory/discretionary"
test, that if a measure mandates WTO-inconsistent action or precludes WTO-consistent action, the
measure is WTO-inconsistent "as such." According to the United States, the

75 The European Communities' arguments with respect to its claim that model zeroing, zeroing with
respect to other averaging groups, simple zeroing and zeroing within the context of importer-specific assessment
rates are inconsistent with the AD Agreement are summarised above at paragraphs 4.7-4.27 and 4.36-4.86.
76 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 5.8, 9.3 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4
of the WTO Agreement are summarised above at paragraphs 4.121, 4.126-4.130.
77 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement , and Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement are summarised above at paragraphs 4.122, 4.126-4.130.
78 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 9.3, 9.5, 11.1, 11.2 and 18.4 of the AD Agreement ; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement are summarised above at paragraphs 4.122, 4.126-4.130.
79 US-First Written Submission, Executive Summary, paras. 35-37, 44-46, 48, 51 and 57-58; US-
Second Written Submission, paras. 40-64 , paras. 51-58.; US-Opening Statement at the First Substantive
Meeting of the Panel, paras. 20-21; US-Responses of 7 April 2005 to questions 55-56, 64-65.

"mandatory/discretionary" test has been consiste ntly applied in GATT and WTO dispute settlement
proceedings. The test reflects the fact that, as th e Appellate Body has noted, panels may not presume
bad faith on the part of Members. Thus, if a measu re provides a Member with the discretion to act in
a WTO-consistent manner, it may not be presumed th at the Member will exer cise that discretion in
bad faith. The United States submits that in the absence of the "mandatory/discretionary" test, the
assessments of Members over many years on how to judge whether their measures are consistent with
GATT and then WTO rules would be severely undermined.
4.156 According to the United States, the panel in Korea – Commercial Vessels 80 rejected the very
interpretation of the "mandatory/discretionary" test advocated by the Europ ean Communities in this
dispute. In this regard, the United States contends that it is significant that the European Communities
has been unable to cite a single panel or Appellate Body report that has followed its interpretation in
assessing the WTO-consistency of "as such" measures.
4.157 The United States argues that the European Comm unities has failed to show that its claims
satisfy the "mandatory/discretionary" test. The United States contends that, for some of the
"measures" at issue, the Eur opean Communities has not demonstrated that the "measures" are
mandatory within the meaning of the test. In ot her cases, the United States alleges that the European
Communities has failed to make even a prima facie case that the "measure" in question is mandatory.
4.158 With respect to the Manual, the United States contends that the European Communities has
neither demonstrated that it mandates any WTO-inconsistent conduct nor established a prima facie
case of WTO-inconsistency.
4.159 According to the United States, the Manual does not preclude the d ecision-maker in USDOC
from offsetting negative margins nor does it manda te that the decision-maker in USDOC ignore
negative margins. The United States argues that the Manual does not mandate that the decision-
maker in USDOC do anything, nor does it precl ude the decision-maker in USDOC from doing
anything. This is because the Manual is nothing more than a source of guidance and training for
USDOC personnel. As set forth on page one of the "Introduction" section of the Manual: "This
manual is for the internal guidance of Import Administration (IA) personnel only, and the practices set
out are subject to change without notice."
4.160 The United States contends that the Europ ean Communities provides no evidence to support
the assertion that the "USDOC" considers itself to be bound by the Manual. Indeed, what little
evidence the European Communities does provide on th is point contradicts its own assertion. The
European Communities cites United States court decisi ons that expressly state that the Manual is "not
a binding legal document ... ." If USDOC were to treat the Manual as binding, it would be in
violation of the United States Administrative Procedure Act.
4.161 The United States submits that by referring to the "USDOC", the European Communities
obscures the fact that the United States anti-dumping law is administered by human beings, and that in
the case of USDOC there are two categories of human beings: (1) the decision-maker; and (2) the
staff that implement the decision-maker's decision s. Here, the relevant decision-maker is the
Assistant Secretary of Commerce for Import Administration. For purposes of the
mandatory/discretionary test, the question is whether the Assistant Secretary is obligated to follow the
Manual. Clearly he is not; as indicated above, the Ma nual states that he can change the practices set
out in the Manual "without notice." Thus, if the Assistant Secretary decided in a particular case to
offset negative margins, the Manual could not preclude him from doing so.

80 Panel Report, Korea – Commercial Vessels, paras. 7.60-7.67.

4.162 An even more fundamental flaw, the United St ates argues, is that the European Communities
has failed to identify the specific portions of the Ma nual that allegedly mandate the WTO-inconsistent
behaviour about which the European Communities co mplains. By failing to do so, the European
Communities has failed to make its prima facie case.
4.163 In US – Gambling, the United States notes, the Appellate Body emphasized the importance of
the requirement that a complaining party make its prima facie case. According to the Appellate Body:
"… it is incumbent upon a party to identify in its submissions the relevance of the
provisions of legislation – the evidence – on which it relies to support its arguments.
It is not sufficient merely to file an entire piece of legislation and expect a panel to
discover, on its own, what relevance the various provisions may or may not have for a
party's legal position."
81
4.164 The United States asserts that the European Communities has failed to demonstrate how or
why each portion of the Manual that it is challe nging is inconsistent with United States' WTO
obligations. According to the United States, in its Question 53, the Panel essentially asked the
European Communities to identify the portions of th e Manual that it is challenging. The European
Communities replied that it "is challenging each part of the Manual referenced in the factual part of its
first written submission, considered both in isolation and together, including the instruction to use the
Standard AD Margin Program." However, the United States notes, the cited portions of the European
Communities' first submission identify the entir e Manual as a measure that the European
Communities is challenging. Thus, if the European Communities is to be taken at its word, it is
challenging the entire Manual because the entire Manual is referenced in its first written submission.
4.165 The United States asserts that the European Communities has not explained how the entire
Manual runs afoul of United States' WTO obligations. The United States notes that most of the
Manual has nothing to do with the subject of this dispute. Even where the European Communities
cites to more specific portions of the Manual in th e referenced portion of its first submission, the
United States argues, these portions would appear to have nothing to do with this dispute, and the
European Communities has failed to explain how these specific portions are WTO-inconsistent.
4.166 In short, the United States argues, to paraphrase the Appellate Body, the European
Communities has filed the entire Manual and expect s the Panel to discover, on its own, what
relevance the various provisions of the Manual may or may not have for the European Communities'
legal position. While the European Communities keeps referring to its desire to "cover all the bases,"
the United States does not see this as any different from Antigua's approach in US – Gambling . As
the Appellate Body has indicated, such an approach is neither sufficient nor acceptable.
4.167 With respect to the "Standard AD Margin Program", even assuming that it could be a
"measure," the United States argues that it do es not preclude the USDOC decision-maker from
offsetting negative dumping margins nor does it require the USDOC decision-maker to ignore
negative dumping margins. If the USDOC decision-maker decided to offset negative dumping
margins in a particular case, his decision would be implemented simply by using a different set of
computer instructions.
4.168 As regards the claims of the European Comm unities with respect to United States' alleged
zeroing practice and methodology, the United States argues that even if past instances of not
offsetting by USDOC were deemed to constitute a "measure", the European Communities' claims
would have to be rejected because this allege d "measure" does not mandate anything, let alone

81 Appellate Body Report, US – Gambling , para. 140, footnote 152, quoting from Appellate Body

anything inconsistent with a WTO obligation unde r the "mandatory/discretionary" test. Under
United States law, there is no principle of administrative stare decisis, and administrative agencies,
such as USDOC, may depart from prior practice as long as they provide a reasoned explanation for
doing so. According to the United States, the Eu ropean Communities has failed to argue, let alone
demonstrate, that USDOC "practice" mandates a breach within the meaning of the
"mandatory/discretionary" distinction.
4.169 Finally, the United States argues that the claims of the European Communities with respect to
new shipper, changed circumstances and sunset reviews, are unfounded. The United States argues
that the European Communities do es not offer any independent arguments concerning these types of
reviews. The United States contends that it has demonstrated that the Panel should reject the
European Communities' claims insofar as original i nvestigations and periodic reviews are concerned;
and for the same reasons, the Panel should reject the claims of the Eu ropean Communities with
respect to new shipper, changed circumstances and sunset reviews.
2. Sections 771(35)(A) and (B), 731 and 777A(d) of The Tariff Act
(a) The European Communities82
4.170 The European Communities considers that Sec tions 771(35)(A) and (B), 731 and 777A(d) of
the Tariff Act, as they operate in original inv estigations and periodic, new shipper, changed
circumstance and sunset reviews, are "as such" inconsistent with Article s 2.4 and 2.4.2 of the
AD Agreement. In setting out these claims, the European Communities emphasises that the relevant
standard in an "as such" case is not whether the municipal measure in all cases leads to a WTO
inconsistent result, but whether or not the municipal measure is in conformity with the
AD Agreement – that is, whether or not it is a sound im plementation. If a municipal law provision
contributes forcefully to the adoption of a series of "as applied" measures that are inconsistent with
the AD Agreement, then there is every reason to suppose that the root of the problem lies, at least in
part, with the relevant provision of municipal law.
(i) Section 771(35)(A) and (B)
4.171 The European Communities argues that a margin is the amount by which one thing differs
from another. Normal value may exceed export pr ice. Or export price may exceed normal value.
In both cases there is a margin. It is not possible to conclude in either case that there is no margin, or
that the margin is zero. Nor is it possible to c onclude that, when export price exceeds normal value,
there is no or a zero margin of dumping, because Article 2.4.2 of the AD Agreement is precisely
concerned with determining whether or not there is a margin of dumping for the subject product. It is
not possible to use in an analysis in progress a premise that, by definition, cannot yet have been
substantiated, being one of the possible conclusions of that analysis in prog ress. The first sentence of
Article 2.4.2 of the AD Agreement and particularly the word "margin", requires a simple and complete
comparison between normal value and e xport price, being one that does not prejudge how the two
elements to be compared are juxtaposed, nor, t hus, whether each one of a series of margins is
expressed as positive or negative. According to the European Communities, Section 771(35)(A) of
the Tariff Act prejudges these matters, for three reasons.
4.172 First, instead of providing for a simple or complete comparison, as it should, it expressly
provides only for the measurement of the amount by which normal value exceeds export price. It
does not provide for the measurement of the amount by which export price exceeds normal value.
Thus, it provides only for a limited or modified or conditional comparison. The European

82 EC-First Written Submission, paras. 130-147, 215 and 225-226; EC-Rebuttal Submission, paras. 83-
90; EC-Response to Panel Question 67.

Communities contends that this is the interpreta tion that has been adopted by USDOC, and defended
by USDOC before the United States municipal courts.
4.173 Second, the use of the word "amount" in the text of Section 771(35)(A), which does not
appear in the first sentence of Article 2.4.2 of the AD Agreement, requires or at the very least strongly
suggests a positive result.
4.174 Third, Section 771(35)(A) defines the amount resulting from this limited or modified or
conditional comparison as a "dumping margin" – a term almost indistinguishable from the term used
in Article 2.4.2 AD Agreement ("margins of dumping") – but, according to USDOC, with a different
meaning ascribed to it – obfuscating the proper application of the AD Agreement to such an extent as
to render Section 771(35)(A) of the Tariff Act not in conformity with Article 2.4.2. Thus, according
to the European Communities, the action of the United States in maintaining in force
Section 771(35)(A) of the Tariff Act is not consistent with its obligations under Articles 2.4 and 2.4.2.
4.175 With respect to Section 771(35)(B), the European Communities focuses on the "aggregate
dumping margin", which is defined therein. Article 2.4.2 of the AD Agreement uses the word
average, rather than the word a ggregate. The word "average" esse ntially has the mathematical sense
of an arithmetic mean: the result obtained by ad ding the numbers in a set (whether negative or
positive) and dividing the total by the number of me mbers in the set. The word "aggregate" has a
different, less mathematical nuance. It rather sugg ests the grouping together of separate "units", each
being an "undivided whole". That suggests something that is positive, rather than negative.
4.176 Furthermore, the use of the plural "dumping margins" in Section 771(35)(B) in relation to a
specific exporter is also inconsistent with Article 2.4.2. According to the European Communities, the
Appellate Body has made it clear that intermediate calculation results are not "margins of dumping",
and that "dumping" for the purposes of the AD Agreement can be found to exist only for the product
under investigation as a whole, and cannot be found to exist only for a type, model or category of that
product.
83 Thus, the European Communities consider s that the action of the United States in
maintaining in force Section 771(35)(B) of the Tariff Act is also not consistent with its obligations
under Articles 2.4 and 2.4.2.
4.177 In response to the evidence submitted by the United States showing that its municipal courts
have found that Section 771(35)(A) and (B) does not require USDOC to "zero", the European
Communities argues that it is not asking the Panel to substitute its judgment on matters of fact for that
of the United States Court of Appeals. However, the European Communities argues that in order to
properly understand these judgements, it may be rele vant for the Panel to consider: (a) whether
United States municipal law requires authorities to interpret municipal law in conformity with
international law; and (b) whether United States municipal law requires municipal courts to show
deference to determinations by investigating authorities. It is a fact that, in the United States, under
the so-called Chevron doctrine, United States courts show considerable deference to USDOC's
interpretations; and that the so-called Charming Betsey doctrine does not, apparently, operate, in such
a way as to cause USDOC to make its determinations in conformity with the international obligations
of the United States.
4.178 Thus, the European Communities argues that all it is asking the Panel to determine is whether
or not the relevant provisions of the Tariff Act are in conformity with the AD Agreement . The
European Communities contends that the United States is relying solely on a "mechanistic"
application of the so-called "mandatory/discretionary" doctrine – an approach that the Appellate Body
has made clear is incapable, in itself, of resolving the matter.

83 Appellate Body Report, EC–Bed Linen , para. 51, final sentence, Panel Report, para. 6.114;
Appellate Body Report, US-Softwood Lumber V, paras. 91 to 94 and para. 97.

(ii) Section 731
4.179 Section 731 of the Tariff Act provides that, "if the administering authority determines that a
class or kind of foreign merchandise is being, or is li kely to be, sold in the United States at less than
its fair value" and if there is injury, "the n there shall be imposed upon such merchandise an
antidumping duty … in an amount equal to the amount by which the normal value exceeds the export
price …". Insofar as this provision is vitiated by the same language as Se ction 771(35)(A) and (B),
the European Communities submits that it is also, "as such", inconsistent with the AD Agreement for
the same reasons.
(iii) Section 777A(d)
4.180 The European Communities contends that Section 777A(d) of the Tariff Act refers only to the
possibility of determining that the subject merchandise is being sold in the United States at less than
fair value, instead of providing for a simple comparison, as in Article 2.4 of the AD Agreement .
Second, it uses the word "comparable", when it should use the words "all comparable", as in
Article 2.4 of the AD Agreement.
4.181 Furthermore, the European Communities claims that that Section 777A(d) of the Tariff Act is
inconsistent with Article 9.3 of the AD Agreement because it envisages that the provisions of
Section 777A(d)(1) may be abandoned during review s, including during periodic reviews of the
amount of duty. That is, the European Communities argues that Section 777A(d) precludes the
investigating authority, in normal circumstances, from establishing the existence of a margin of
dumping for the subject product on the basis of a comparison of a weighted average normal value
with a weighted average of prices of all comp arable export transactions, including throughout the
investigation period. The European Communities conte nds that this provision of the Tariff Act is not
in conformity with Article 9.3 of the AD Agreement, which expressly provides that: "[t]he amount of
the anti-dumping duty shall not exceed the margin of dumping as established under Article 2".
4.182 To the extent that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act, as they
operate in original investigations, are considered to be "as such" inconsistent with Articles 2.4 and/or
2.4.2, the European Communities argu es that it follows that they must also be "as such" inconsistent
with Articles 1, 9.3 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement.
84
4.183 Likewise the European Communities argues that to the extent that Sections 771(35)(A)
and (B), 731 and 777A(d) of the Tariff Act, as they operate in periodic reviews, are "as such"
inconsistent with Articles 2.4 and/or 2.4.2, it follows that they must also be "as such" inconsistent
with Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement , and Articles VI:1 and VI:2 of
GATT 1994; and Article XVI:4 of the WTO Agreement.85
4.184 Finally, the European Communities submits that the same conclusions should be reached for
new shipper, changed circumstances and sunset revi ews. To the extent that Sections 771(35)(A)
and (B), 731 and 777A(d) of the Tariff Act are used in order to automatically effect model zeroing,
simple zeroing or zeroing with respect to other av eraging groups, they must be considered "as such"
inconsistent with Articles 2.4 and/or 2.4.2, and conse quently, also Articles 1, 9.3, 9.5, 11.1, 11.2, 11.3

84 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 5.8, 9.3 and 18.4 of the AD Agreement, and Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4
of the WTO Agreement are summarised above at paras. 4.121, 4.126-4.130.
85 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement , and Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement are summarised above at paras. 4.122, 4.126-4.130.

and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO
Agreement.
86
(b) The United States87
(i) Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff Act
4.185 The United States argues that the claims of th e European Communities fail because they do
not satisfy the "mandatory/discretionary" test. Acco rding to the United States, in order for the claims
relating to Sections 771(35)(A) and (B) and 731 of the Tariff Act to succeed, the European
Communities must demonstrate that these statutory provisions prohibit USDOC from providing an
offset for non-dumped transactions. In the US – Corrosion-Resistant Steel Sunset Review case, the
Appellate Body explained, "[t]he party asserting th at another party's municipal law, as such, is
inconsistent with relevant treaty obligations bear s the burden of introducing evidence as to the scope
and meaning of such law to substantiate that assertion."
88 The United States submits that the relevant
evidence must, of necessity, demonstrate the measure's meaning under municipal law if it is to yield
an objectively correct result.
4.186 The United States contends that the Eur opean Communities cannot make the necessary
demonstration, because the United States Court of App eals for the Federal Circuit has held twice that
the Tariff Act – including Section 771(35)(A) and (B ) in particular – does not require the use of
zeroing. The first case was Timken, which involved a duty assessment proceeding. In Timken Co. v.
United States
89 USDOC argued that the Tariff Act precl uded it from reducing the amount of dumping
duties to be assessed based on non-dumped sales. Th e Federal Circuit disagreed, finding that "the
statute does not directly speak to the issue of negative-value dumping margins ... ." The court went on
to hold that while offsetting was not prohibited by the statute, not offsetting represented one
permissible interpretation of the statute.
4.187 The second case was Corus Staal BV v. United States 90 which involved an antidumping
investigation. In Corus, the Federal Circuit again held that not offsetting reflected a permissible
interpretation of the statute, citing its earlier decision in Timken.
4.188 Although in principle the United States Supreme Court can review decisions of the Federal
Circuit involving antidumping matters, in practice it does not. Therefore, according to the
United States, for practical purposes, Timken and Corus constitute the last word on the interpretation
of the Tariff Act insofar this issue is concerned. According to the United States, as a factual matter,
the claims of the European Communities must fail.
4.189 Finally, in response to the claims of th e European Communities regarding USDOC's own
interpretation of the provisions in question, the United States notes that USDOC stopped arguing that
the statute required it to "zero" after the Timken decision. In any ev ent, according to the
United States, for the purposes of determining what United States law means, greater weight cannot

86 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 9.3, 9.5, 11.1, 11.2, and 18.4 of the AD Agreement; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement are summarised above at paras. 4.122, 4.126-4.130.
87 US-First Written Submission, paras 74-80, 98-105 ; US-Second Written Submission, paras. 65-72;
US-Response of 7 April 2005 to question 66.
88 Appellate Body Report, US – Carbon Steel, para. 157.
89 Timken Co. v. United States , 354. F.3d 1334 (Fed. Cir. 2004), rehearing denied , 2004 US App.
LEXIS 6741 (17 March 2004), cert. denied, 160 L.Ed.2d 352, 125 S.Ct. 412, 2004 US LEXIS 7382, 73 USLW
3273 (US 2004)
90 Corus Staal BV v. United States , No. 04-1107, 2005 US App. LEXIS 1077 (Federal Circuit,
21 January 2005)

be accorded to the historical views of USDOC – an administrative agency – than to the current
holdings of the Federal Circuit, the institution that has the final say as to what the United States
antidumping statute means.
4.190 As regards Section 777A(d)(2), the United Stat es argues that the Eur opean Communities has
failed to make a prima facie case. According to the United Stat es, the European Communities merely
asserts that the section is as such inconsistent w ith various WTO obligations "if it means" that a
symmetrical comparison is normally precluded or an asymmetrical comparison is normally required.
4.191 The United States notes that in US – Carbon Steel, paragraphs 156-157, the Appellate Body
explained that the complaining party has the burden of proof with respect to "as such" claims, and that
"[t]he party asserting that another party's municipal la w, as such, is inconsistent with relevant treaty
obligations bears the burden of introducing evidence as to the scope and meaning of such law to
substantiate that assertion." Here, the United States argues, while the European Communities has
submitted the text of the statutory sections at issue as exhibits, it has not offe red any explanation, let
alone demonstrated, why or how those sections preclude "symmetry" or require "asymmetry."
Instead, through its use of the phrase "if it mean s," the European Communities simply poses a
question as to whether the statutory sections might preclude "symmetry" or compel "asymmetry."
According to the United States, th e European Communities seems to be unsure of the answer to the
question, and apparently hopes that the United States or the Panel will make the European
Communities' case for it.
4.192 However, the United States notes, that is not the way WTO dispute settlement works. It is the
European Communities' burden to prove that the stat utory sections are WTO-inc onsistent. It is not
the task of the United States to prove that they are WTO-consistent. Likewise, the United States
notes, it is well-established that a panel may not 'make the case for a complaining party.'
4.193 The United States notes that in its Question 70, the Panel asked the European Communities to
comment on the US argument that the European Communities had failed to make a prima facie case
with respect to section 777A(d)(2). The United St ates observes that while the European Communities
denied that it had failed to make a prima facie case, with respect to its challenge to
Section 777A(d)(2), the European Communities did modify paragraph 217, line2, of its first
submission so that the words "given that" replace the word "if".
4.194 With respect to the European Communities' denial of its failure to make a prima facie case,
the United States refers the Panel to the discussion of US – Gambling , in connection with the
European Communities' failure to make a prima facie case regarding the Manual. With respect to
Section 777A(d)(2), the European Communities has not explained, let alone demonstrated, how the
provision operates in a WTO-inconsistent manner.
4.195 With respect to section 777A(d)(2), the Unite d States notes that the European Communities
does not even quote the provision, which reads as follows:
"In a review under section 751, when compar ing export prices (or constructed export
prices) of individual transactions to the wei ghted average price of sales of the foreign
like product, the administering authority shall limit its averaging of prices to a period
not exceeding the calendar month that co rresponds most closely to the calendar
month of the individual export sale."
4.196 On its face, the United States explains, Section 777A(d)(2) provides that "when" the average-
to-transaction method is used in reviews under sec tion 751, the USDOC must use monthly weighted
average prices to determine normal value. Acco rding to the United States, Section 777A(d) does not
address the question of whether or when the averag e-to-transaction method must be used. Thus, the

United States argues, the European Communities h as failed to explain how the plain text of
section 777A(d)(2) mandates WTO-inconsistent action. Put differently, the European Communities
has failed to make its prima facie case."
3. Section 751(a)(2)(A)(i) and (ii) of the Tariff Act
(a) The European Communities
91
4.197 The European Communities considers that this provision is not in conformity with
Articles 2.4, 2.4.2 and 9.3 of the AD Agreement because: (i) it precludes the investigating authority,
in normal circumstances, from establishing the exis tence of a margin of dumping for the subject
product on the basis of a comparison of a weighted average normal value with a weighted average of
prices of all comparable export transactions; and (ii) it requires an investigating authority, in all cases
or normally, to make an asymmetrical comparison.
4.198 To the extent that Section 751(a)(2)(A)(i) and (ii) of the Tariff Act, as it operates in periodic
reviews, is found to be "as such" inconsistent with Articles 2.4 and/or 2.4.2, it follows that it must also
be "as such" inconsistent with Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement , and
Articles VI:1 and VI:2 of GATT 1994; and Article XVI:4 of the WTO Agreement.92
4.199 Furthermore, the European Communities submits that the same conclusions should be
reached for new shipper, changed circumstances and sunset reviews. To the extent that
Section 751(a)(2)(A)(i) and (ii) of the Tariff Act is used in these reviews to automatically effect
simple zeroing or zeroing with respect to other averaging groups, it must be considered "as such"
inconsistent with Articles 2.4 and/or 2.4.2, and consequently, also in violation of Articles 1, 9.3, 9.5,
11.1, 11.2, 11.3 and 18.4 of the AD Agreement ; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement.
93
(b) The United States94
4.200 As regards Section 751(a)(2)(A)(i) and (ii), th e United States argues that the European
Communities has failed to make a prima facie case. According to the United States, the European
Communities merely asserts that the section is "as such" inconsistent with various WTO obligations
"if it means" that a symmetrical comparison is normally precluded or an asymmetrical comparison is
normally required.
4.201 As the United States noted in connection with Section 777A(d)(2), the Appellate Body has
explained that the complaining party has the burden of proof with respect to "as such" claims, and that
"[t]he party asserting that another party's municipal la w, as such, is inconsistent with relevant treaty
obligations bears the burden of introducing evidence as to the scope and meaning of such law to
substantiate that assertion." Here, the United States argues, while the European Communities has
submitted the text of the statutory sections at issue as exhibits, it has not offe red any explanation, let
alone demonstrated, why or how those sections preclude "symmetry" or require "asymmetry."
Instead, through its use of the phrase "if it mean s," the European Communities simply poses a
question as to whether the statutory sections might preclude "symmetry" or compel "asymmetry."

91 EC-First Written Submission, paras. 218-219 and 223; EC-Rebuttal Submission, para. 237.
92 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 9.3, 11.1, 11.2 and 18.4 of the AD Agreement , and Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement are summarised above at paras. 4.122, 4.126-4.130.
93 The European Communities' arguments with respect to the alleged consequential violations of
Articles 1, 9.3, 9.5, 11.1, 11.2 and 18.4 of the AD Agreement ; Articles VI:1 and VI:2 of GATT 1994; and
Article XVI:4 of the WTO Agreement are summarised above at paras. 4.122, 4.126-4.130.
94 US-First Written Submission, paras 98-101; US-Second Written Submission, paras. 69-72.

According to the United States, th e European Communities seems to be unsure of the answer to the
question, and apparently hopes that the United States or the Panel will make the European
Communities' case for it.
4.202 Again, the United States notes, that is not the way WTO dispute settlement works. It is the
European Communities' burden to prove that the stat utory sections are WTO-inc onsistent. It is not
the task of the United States to prove that they are WTO-consistent. Likewise, the United States
notes, it is well-established that a panel may not "make the case for a complaining party."
4.203 The United States notes that in its Question 70, the Panel asked the European Communities to
comment on the US argument that the European Communities had failed to make a prima facie case
with respect to Section 751(a)(2)(A)(i) and (ii). The United States observes that while the European
Communities denied that it had failed to make a prim a facie case, with respect to its challenge to
Section 751(a)(2)(A)(i) and (ii), the European Communities continued to use the phrase "if it means".
4.204 With respect to the European Communities' denial of its failure to make a prima facie case,
the United States again refers the Panel to the discussion of US – Gambling , in connection with the
European Communities' failure to make a prima facie case regarding the Manual. With respect to
sections 751(a)(2)(A)(i) and (ii), the United Stat es emphasizes that the European Communities
continues to assert that these provision are WTO-in consistent "if they mean" that asymmetry is
required, so the original problem noted by the Un ited States remains. However, the United States
argues, even if the European Communities substituted "given that", this would not suffice to make its
case. According to the United States, the European Communities has to explain why the statute that it
quotes mandates the outcome to which it objects. Th e United States asserts that it has not done so,
notwithstanding that the European Communities, as th e complaining party, bears the burden of proof.
The European Communities has not explained, let alone demonstrated, how the provision operates in
a WTO-inconsistent manner.
4. Section 351.414(c)(2) of the Regulations
(a) The European Communities95
4.205 The European Communities subm its that Section 351.414(c)(2) of the Regulations is "as
such" inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement because it is inconsistent with the
fair comparison requirement established by th e Appellate Body. According to the European
Communities, the fair comparison requirement pr ecludes a national measure providing that the
average-to-transaction method is the norm. Sect ion 351.414(c)(2) does not conform with this
standard. First, it permits the use of an asymme trical method of comparison without any of the
cumulative conditions set out in Article 2.4.2 having been met. Second, it provides that the normal
rule is asymmetry, when Article 2.4.2 of the AD Agreement recalls that the normal rule is symmetry.
The provision also fails to provid e for a fair comparison within the meaning of Article 2.4 of the
AD Agreement.
(b) The United States96
4.206 The United States argues that Section 351.414(c)(2) of the Regulations does not mandate any
WTO-inconsistent conduct nor does it preclude WTO-consistent action. The heading to paragraph (c)
of section 351.414 is entitled "Preferences." Subpara graph (c)(2) provides as follows: "In a review,
the Secretary will normally use the average-to-transaction method." According to the United State, as
previously recognized by the Appellate Body, the wo rd "normally" is an indicator of discretion.

95 EC-First Written Submission, paras. 220-223; EC-Rebuttal Submission, para. 238.
96 US-First Written Submission, paras. 102-105.

Thus, section 351.414(c)(2), on its face, provides disc retion to use something other than the average-
to-transaction method. Given that the European Communities relies solely on the text of the
regulation, there is no basis for finding that the regulation mandates asymmetry or precludes
symmetry. Accordingly, there is no basis for finding that the regulation is inconsistent "as such" with
United States WTO obligations.
V. ARGUMENTS OF THE THIRD PARTIES
A. A
RGENTINA
5.1 Argentina argues that the question for the Panel in this dispute is whether zeroing is a practice
consistent with the obligations set out in Articles 2.4 and 2.4.2 of the AD Agreement. If it is not, then
Argentina shares the view of the European Co mmunities that, since calculation of the dumping
margin is central and fundamental to an anti-dumpi ng proceeding, any defect in the determination of
the margin of dumping will inevitably adversely affect the consistency of the investigation as a whole
by generating inconsistencies with other provisions of the AD Agreement.
1. Arguments with respect to Articles 2.4 of the AD Agreement
5.2 Argentina contends that Article 2.4 lays down a general obligation requiring Members to
ensure a fair comparison between export price a nd the normal value when establishing the existence
of dumping. Such a comparison is the only means provided for in the AD Agreement for determining
the existence of dumping. Argentina argues that the Appellate Body has stated that this general
obligation informs all of Article 2.97
5.3 Although the AD Agreement makes no reference to zeroing, it does mention that certain types
of adjustments may be made to prices in order to facilitate comparison. Argentina asserts that it
would be difficult to find justification for zeroin g in such adjustments. Since any comparison
between products not ordinarily comparable is de emed to be unfair and adjustments are provided for
to remedy such a situation, there is no doubt that zeroing, because it inflates dumping margins, is
inconsistent with the obligation to conduct a fa ir comparison between norma l value and export price
laid down in Article 2.4. Thus, zeroing breaches Article 2.4 of the AD Agreement.
2. Arguments with respect to Article 2.4.2 of the AD Agreement
5.4 Argentina argues that previous Panels and th e Appellate Body have found zeroing to be
inconsistent with Article 2.4.2 of the AD Agreement .98 Argentina asserts that Article 2.4.2 requires
that once the transactions that are to serve as the basis for the determination of dumping are identified,
they must all be taken into account. Under the AD Agreement , it is not possible to select the
transactions that can be used for the final determination of dumping precisely on the basis of what one
is seeking to determine, namely whether or not dumping exists, and in what amount.
5.5 Argentina does not share the view of the European Communities on the applicability of
Article 2.4.2 to the imposition phase and review ph ase of an anti-dumping proceeding. According to
Argentina, the interpretation of the European Commun ities is contrived and has no basis in the text of
the AD Agreement or in interpretations given in earlier cases. However, Argentina argues that if the
United States calculates a new dumping margin in pe riodic reviews or sunset reviews, that margin
must meet the requirements of Article 2.4 of the AD Agreement.

97 Appellate Body Report, EC – Bed Linen, para. 59.
98 EC – Bed Linen and US – Softwood Lumber V.

3. Arguments with respect to Articles 3.1, 3.3, 3.4 and 3.5 of the AD Agreement
5.6 Argentina asserts that zeroing results in inconsis tencies with Articles 3.1, 3.3, 3.4 and 3.5 of
the AD Agreement . According to Argentina, the Appellate Body has ruled that both dumping and
margins of dumping can be established only on the basis of all the transactions involved, once the
product under investigation has been defined, in or der to maintain the necessary consistency in the
treatment of that product for the purpose of dete rmining the volume of dumped imports, causal link
between dumped imports and injury to domestic industry, and calculation of the margin of dumping.
5.7 It is precisely for the sake of this consistenc y, which should prevail from beginning to end of
anti-dumping investigations, that the consequence of zeroing cannot be ignored. In Argentina's view,
the use of zeroing gives rise to artificially inflated margins of dumping, which according to Article 3.4
should then be taken into account as one of the releva nt factors for determining injury to the domestic
industry. An artificially inflated margin of dumping cannot be a proper basis for an analysis of this
kind, as it generates inconsistency with Article 3. 1 (by tainting the determination of injury, which
must be based on positive evidence and an objec tive examination of the evidence), Article 3.3
(because of the presumption that the de minimis threshold could have been violated) and Article 3.5
(because it is not a proper basis for establishing the causal relationship required by the
AD Agreement).
4. Arguments with respect to Articles 9.3 of the AD Agreement
5.8 Argentina argues that to impose anti-dumping duties on the basis of a determination of
dumping that fails to meet the fair comparison require ment of Article 2.4 and is based on a margin of
dumping calculated without taking all the transac tions into account, cannot be consistent with
Article 9.3. This is so because the duties imposed are inconsistent with Article 2. Thus, zeroing leads
to the imposition of duties at a higher level than the margin of dumping that would have prevailed had
the calculation not been made with this methodology, in violation of Article 9.3.
B. B
RAZIL
5.9 Brazil argues that it sees no reason for this Panel to depart from the well established
understanding that zeroing is impermissible under the AD Agreement. In view of the findings of the
Appellate Body in previous disputes involving the same subject matter, namely EC – Bed Linen and
US – Softwood Lumber, Brazil argues that the United States should avoid protracted litigation and
agree to change its zeroing practice in all future anti-dumping proceedings, including investigations
and reviews, regardless of the type of comparison that is used.
1. Zeroing is WTO-Inconsistent in all Contexts
5.10 According to Brazil, the fundamental issue before the Panel in this dispute is whether zeroing
distorts the calculation of a dumpi ng margin. The Appellate Body in US – Softwood Lumber V made
clear that such a distortion exists. Yet, the Unite d States would have the Panel believe that as long as
an administering authority uses a comparison methodology other than the average-to-average
methodology normally applied in United States inv estigations, then the prohibition against zeroing
does not apply. This cannot be permitted, not merely under Article 2.4.2 of the AD Agreement, but
also under Article 2.1 of the AD Agreement.
5.11 Based on the Appellate Body's understanding of the meaning of the term "dumping" in US –
Softwood Lumber V, it does not matter how comparisons are ma de. All comparisons must ensure that
all products are taken into account. The overriding ru le is that an administering authority cannot
simply ignore some transactions, but must instead incorporate the results of the comparison of all
transactions into its dumping calculation conducted under Ar ticle 2.1. It is with this in mind that the

Appellate Body concluded in EC – Bed Linen that zeroing was not merely a violation of Article 2.4.2,
but also of the "fair comparison" requirement in Article 2.4. Although it agrees with the positions
taken by the European Communities in the present di spute, Brazil believes it is largely academic to
discuss whether Article 2.4.2 applies to reviews, or whether "reviews" are considered part of
"investigations", or whether transaction-to-transaction average comparisons are permitted. The fact is
that zeroing reflects an unfair comparison. The fair comparison requirement in Article 2.4 is not
limited to certain types of proceedings or certain types of comparisons; it applies whenever dumping
margins are calculated. Therefore, zeroing shou ld be deemed to violate Article 2.4 of the
AD Agreement in all contexts.
5.12 Brazil asserts that the Panel should pay careful attention to the intrinsically interlocking
nature of provisions and concepts governing the calculation of dumping margins, both in the so-called
"original investigations" and "reviews". Referri ng to the definition of "dumping" contained in
Article 2.1 of the AD Agreement , it is undisputable that such de finition is the only one applicable
throughout the Agreement, regardless of the stag e of any antidumping proceedings where "dumping"
is examined. Article 2.1 determines that a compar ison between export prices and normal values of the
product concerned is inherent to the definition of du mping. Article 2.4, in turn, stipulates that the
comparison between the very same terms incorporated into the comparison required by Article 2.1 –
"export prices" and "normal value" – must be "fair". In reading both provisions harmoniously, a treaty
interpreter must necessarily arrive at the conclusi on that, whenever a calculation of a dumping margin
is called for, a fair comparison between export prices and normal values is obligatory.
2. United States' Policy of Zeroing
5.13 As the United States admits, the Appellate Body indicated in the US – Corrosion Resistant
Steel Sunset Review case that instruments or actions setting out rules or norms can be challenged "as
such" in a WTO dispute. In the present di spute, the measure at issue is USDOC's policy of zeroing,
which clearly falls within the scope of rules, norms or standards to which the Appellate Body referred
in the US – Corrosion Resistant Steel Sunset Review case. The question of whether or not these
measures mandate application of zer oing could be deemed irrelevant in this instance, where the
practice of zeroing is applied consistently from case to case.
5.14 Brazil argues that zeroing is no different fro m the kinds of tests or methodologies the
United States has agreed to change in the past as a result of dis pute settlement, such as the USDOC's
99.5 per cent "arm's length test" in issue in the US – Hot Rolled Steel case and the "same person"
methodology used by USDOC in countervailing duty cases involving privatization, for example, in
the US – Countervailing Measures on Certain EC Products
 case. According to Brazil, zeroing is a
policy that USDOC uses in every case. This policy is reflected in a combination of, at least: (a) the
consistent application of the policy in every case in which there is negative dumping; and (b) the
USDOC Antidumping Manual. These, in combination, set forth a rule/norm/standard for applying the
zeroing methodology in United States anti-dumping proceedings, which the Appellate Body has
determined may be challenged in acc ordance with Article 18.4 of the AD Agreement, and should be
found to violate Article 2.4 of that Agreement.
5.15 Whether these measures mandate application of the zeroing methodology could be deemed
irrelevant in this instance, where the practice of zeroing is applied consistently from case to case.
Brazil submits that repeated use of the zeroing me thodology is a measure that the Panel should find
inconsistent with the AD Agreement, and that its report should ensure that the United States eliminate
the zeroing policy in all future cases.
5.16 Brazil submits that, if the Panel and, if necessar y, the Appellate Body do not take action that
prevents the United States from continuing its disregar d of basic fairness in the application of its anti-
dumping laws, the WTO and its Members will suffer. Brazil encourages the Panel to find that the use

of zeroing, whether in investigations or reviews, and regardless of the type of comparison employed,
is inconsistent with Article 2.4 of the AD Agreement and should be eliminated once and for all.
C. CHINA
1. Measures that can be Challenged "As Such"
5.17 China contends that whether a measure can be challenged for the purpose of WTO dispute
settlement is governed by the substance of the measure at issue, not its form. According to China, any
kind of measures taken by a Member, no matter whethe r legislative or executive, may be the subject
of dispute settlement under the DSU or other app licable covered agreements, as long as another
Member considers that benefits accruing to it unde r the covered agreements are being impaired by
such "measures". To this end, China contends that four elements must be present in order to
challenge measures "as such" under the AD Agreement : (i) the measure must be of general
application; (ii) the measure must be a rule, norm or a standard; (iii) the measure must be adopted by
a Member, no matter by whether by its legislative or executive branches; and (iv) the measure must
be connected with the conduct of anti-dumping proceedings.
5.18 China also argues that the "mandatory/discretiona ry" distinction is not decisive as to whether
a measure is WTO-inconsistent. In China's vi ew, discretionary legislation can also be WTO-
inconsistent.
2. Arguments with respect to Article 2.4.2 of the AD Agreement
5.19 China submits that the obligations in Article 2. 4.2 are not limited to original investigations.
China notes that the AD Agreement does not define the word "investigation", and that within WTO
jurisprudence, there are no precedents disti nguishing assessment proceedings from original
investigation.
5.20 China considers that duty assessment proceedings must be based on the calculation of a
dumping margin according to Article 2 of the AD Agreement . If duty assessment proceedings were
independent of any dumping margin, the chapeau of Ar ticle 9.3 would be redundant. It follows that,
when calculating a dumping margin, investigating authorities must abide by Article 2, which naturally
includes Article 2.4 and Article 2.4.2.
5.21 Finally, China submits that Ar ticle 2.4.2 expressly restricts th e use of the third comparison
methodology in Article 2.4.2 to situations of "targe ted dumping". China considers that recourse to an
asymmetrical methodology pursuant to Article 9.4 does not absolve Members of this obligation.
D. HONG KONG, CHINA
1. Arguments with respect to Articles 2.4 and 2.4.2 of the AD Agreement
5.22 Hong Kong, China argues that insofar as the Panel finds that the United States applies zeroing
in effecting a "weighted-average-to-weighted-a verage" comparison, it must find such practice
inconsistent with Article s 2.4 and 2.4.2 of the AD Agreement for the same reasons given by the
Appellate Body in EC – Bed Linen99 and US – Softwood Lumber V100 cases.
5.23 Hong Kong, China further submits that the use of zeroing in effecting the other two types of
price comparison in Article 2.4.2 (namely, "tra nsaction-to-transaction" and "weighted-average-to-

99 Appellate Body Report, EC – Bed Linen, paras. 53-65.
100 Appellate Body Report, US – Softwood Lumber V, paras. 97-103.

transaction" comparisons), is also in consistent with Article 2.4 of the AD Agreement . Noting the
difference between the current wording of Article 2.4 and the earlier version (Article 2.6) contained in
the Tokyo Round Anti-dumping Code, Hong Kong, China asserts that Article 2.6 of the Tokyo Round
Code was specifically re-cast so that the current Article 2.4 of the AD Agreement contains a new,
separate sentence on fair comparison at the beginning of the Article. This new drafting highlights the
overarching nature of the obligation to make fair comparison, and the fact that it constitutes a
substantive obligation in itself independent of the substantive obligations set out in other parts of
Article 2.4, including Article 2.4.2.
5.24 Hong Kong, China submits that "fair comparis on" requires that the way the comparison is
conducted must be objectively "fair" in the sense of being equitable and balanced. The use of zeroing
when establishing an overall level of dumping is, per se, unfair, regardless of which method of price
comparison under Article 2.4.2 is used. By disr egarding some of the transactions used in the
intermediate comparisons, the resultant overall marg in of dumping is established based on incomplete
price information and as such, the calculation of the overall margin of dumping is inherently
unreliable. Moreover, zeroing has an inherent bias which may inflate and distort not only the
magnitude of the margin of dumping, but also a finding of the very existence of dumping. A price
comparison which uses zeroing is therefore inherently inequitable and unfair, and inconsistent with
the requirement to make "fair comparison" in Article 2.4.
5.25 Hong Kong, China further submits that, even though the words "all comparable export
transactions" in Article 2.4.2 are not expressly stated in relation to the "transaction-to-transaction"
comparison methodology, by its nature, such met hodology requires an overall margin of dumping for
the product under investigation to be calculated based on a comparison of each export transaction with
a corresponding domestic transaction sales transacti on, and the zeroing is therefore inherently
inconsistent with the "transaction-to-transaction" comparison methodology in Article 2.4.2.
5.26 Hong Kong, China further asserts that the term "investigation" as used in the AD Agreement is
not necessarily limited to an "original" or "initial" investigation. The term has been used in other
parts of the AD Agreement in a general sense to refer to other anti-dumping proceedings. With respect
to the contention of the United States that Artic le 18.3 explicitly recognises the difference between
"investigations" that may lead to the imposition of a measure, and "reviews" of existing measures,
Hong Kong, China submits that wh ile Article 18.3 covers all t ypes of anti-dumping proceedings
between the two terms "investigation" and "reviews of existing measures", the purpose of Article 18.3
is not to, nor does Article 18.3, clearly define which proceedings fall within the meaning of
"investigations" and "reviews" as used in the AD Agreement or draw a clear distinction between the
two. Article 18.3 does not provide specific guidance on how the word "investigation" is to be
interpreted elsewhere in the AD Agreement . In Hong Kong, China's view, the meaning of
"investigation" in the AD Agreement should be read and construed in the specific context in which it
appears.
5.27 With respect to the contention of the United States that Article 2.4.2 does not apply to
retrospective assessment of anti-dumping duty under Article 9.3.1, Hong Kong, China states that
Article 2.4.2 refers to the establishment of th e existence of margins of dumping "during the
investigation phase", but draws no apparent distinctio n between different types of "investigation", nor
does it ascribe any special meaning to the term "inves tigation". Consistent with the customary rules
of treaty interpretation under public international la w, Hong Kong, China submits that in the context
of Article 2.4.2, "investigation" should be construed as referring to any procedure undertaken by an
investigating authority which conforms to the ordina ry meaning of an "investigation" and which leads
to the establishment of the existe nce of margins of dumping for the subject product. "Investigation
phase" should be construed accordingly.

5.28 Referring to dictionary definition of "inves tigation", Hong Kong, China notes that in a
retrospective assessment, an investigating authority has to examine or inquire into transactions that
actually took place in the relevant period in order to verify the existence of dumping and the margin
of dumping for the subject product during that peri od, so as to determine the final liability for
payment of anti-dumping duties. These procedural steps carried out by an investigating authority
conform objectively to the ordinary meaning of the word "investigation", and lead to the
establishment of margins of dumping as referred to in Article 2.4.2. Therefore, they constitute an
"investigation" for the purpose of Article 2.4.2.
5.29 With respect to the contention of the United St ates that Article 9 does not incorporate the
requirements of Article 2.4.2, Hong Kong, China subm its, with specific reference to paragraphs 7.357
and 7.361 of the Panel report of Argentina – Poultry Anti-Dumping Duties , that "margin of dumping"
in Article 9.3 refers in the case of retrospective ass essment to the margin of dumping established for
the purpose of final duty assessment, that Article 2 sets forth a definition of dumping "for the purpose
of this Agreement", that it would not be possible to establish a margin of dumping without reference
to the various elements of Article 2, and that had the Panel in Argentina – Poultry Anti-Dumping
Duties been specifically asked to consider the true meaning and scope of "investigation phase" in
Article 2.4.2, the natural conclusi on would have been that the provi sions of Article 2.4.2 apply to
Article 9.3 assessments.
2. Arguments with respect to Whether the Practice of Zeroing is a Measure which can be
Submitted as such to Dispute Settlement
5.30 Hong Kong, China submits that the object and purpose of the WTO Agreement, and in
particular, the object and purpose of the DSU, points to a broad interpretation of the term "measure".
Any act of a Member, whether or not legally binding, could be submitted "as such" to dispute
settlement, including even "non-binding administra tive guidance by a government" and "acts setting
forth rules and norms that are intended to have gene ral and prospective application". The AD Margin
Program (a computer programme designed for marg in calculations, which is generally used by the
United States Department of Co mmerce in anti-dumping investigations and through operation of
which zeroing is applied), and the computer instructi ons comprised in it, are of the nature of "norms
or rules of general and prospective application" a nd can be challenged "as such" in dispute settlement
proceedings.
5.31 Hong Kong, China further asserts that, in any event, just as instruments "setting forth" rules or
norms of general and prospective application ma y be brought "as such" to dispute settlement,
unwritten rules or norms may also be submitted "as such" to dispute settlement: if a particular act
(e.g. zeroing) is repeated to such consistency as to give rise to a "repeated pattern of similar responses
to a set of circumstances", then such "repeated pattern of similar responses", or "practice", must be
regarded as clear evidence as to the existence of rules or norms wh ich are of general and prospective
application.
5.32 Were this not the case, a Member would be fre e to formulate "unwritten" or vague rules or
norms and apply them consistently in a particular manner so as to impair the benefits accruing to
another Member under the covered agreements, severely reducing transparency in the rules and norms
adopted by a Member to implement the covered agre ement, crippling the protection of the security
and predictability of trade and seriously underm ining the purpose of the WTO dispute settlement
system.

E. I
NDIA
1. Model Zeroing and Simple Zeroing are "as such" Measures
5.33 India submits that one of the key issues in this dispute is whether model zeroing and simple
zeroing, are "as such" measures that may be ch allenged. According to India, in both the US –
Corrosion-Resistant Steel Sunset Review and US – Oil Country Tubular Goods Sunset Reviews cases,
the Appellate Body emphasized that the scope of Article 18.4 of the AD Agreement is broad, covering
"the entire body of generally applicable rules, norms and standards adopted by Members in
connection with the conduct of anti-dumping proceedings ." This interpretation of Article 18.4 of the
AD Agreement indicates that the scope of dispute settlement under the AD Agreement for an "as such"
claim is not meaningfully different from the genera l scope of dispute settlement under Article 6.2 of
the DSU. In each case, the dispute may concern an y rules, norms or standards with general and
prospective application.
5.34 India asserts that the United States zeroing methodol ogy is incorporated in the United States'
standard anti-dumping computer programs. Certain procedures in these programs result in zeroing
through model zeroing or simple zeroing. The standard programs, inclusive of the zeroing
procedures, "have been designed to cover as many situations as possible". Each and every program
that is applied by the United States in a particular anti-dumping proceeding must use "the same
standard calculation methodology," and that methodology must "conform" to the Administration's
current methodological requirements. In other words, the standard programs constitute a pre-
determined set of procedural rules and are relied upon by the United States for calculating the
dumping margins in all anti-dumping proceedings. Thus, the United States' standard anti-dumping
computer programs, including the procedures that r esult in zeroing through model zeroing or simple
zeroing, can be characterized as being norms or rules that are applied on a generalized and prospective
basis in anti-dumping proceedings. Consequently, model zeroing or simple zeroing are measures that
may be challenged "as such" within the WTO system.
2. "Mandatory – Discretionary" Distinction
5.35 India argues that on the basis of the mandatory – discretionary doctrine, the United States has
urged the Panel to reject the "as such" claims of th e European Communities. According to India, this
position is contrary to the findings of the Appellate Body in U.S. – Corrosion-Resistant Steel Sunset
Review, where the Appellate Body saw no reason for concluding that "in principle, non-mandatory
measures cannot be challenged "as such". It is I ndia's position that in order to determine whether
model zeroing and simple zeroing are "as such" WTO-inconsistent, the nature and character of these
procedures must be examined.
3. Model Zeroing and Simple Zeroing are as such inconsistent with the AD Agreement
5.36 India asserts that existing case law on the issue of zeroing confirms that model zeroing and
simple zeroing are "as such" inconsiste nt with Article 2.4 and 2.4.2 of the AD Agreement. According
to the Appellate Body, "when investigating authorities use a zeroing methodology … to calculate a
dumping margin, whether in an original investiga tion or otherwise, that methodology will tend to
inflate the margins calculated. Ap art from inflating the margins, such a methodology could, in some
instances, turn a negative margin of dumping into a positive margin of dumping. … The inherent bias
in a zeroing methodology … may distort not only the magnitude of a dumping margin, but also a
finding of the very existence of dumping."
101 Furthermore, in the EC – Bed Linen case, the Appellate
Body was of the view that "a comparison between export price and normal value that does not fully
take into account the prices of all comparable export transactions – such as the practice of zeroing at

101 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 135.

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." 102 According to India, these findings on zeroing are applicable
with equal force to model zeroing and simple zeroi ng resorted to by the United States in its anti-
dumping investigation procedures.
5.37 Furthermore, India argues that it is also clear from the ruling of the Appellate Body in the
US – Corrosion-Resistant Steel Sunset Review case that the requirements of a "fair comparison" in
Article 2.4 apply equally to a dumping margin calcu lated or used for purposes of Article 9.3. Thus,
the resort by the United States, to simple zeroing as a normative rule in sunset reviews and reviews for
the purpose of Article 9.3 is "as such" inconsistent with the provisions of Article 2.4.
F. JAPAN
1. Model Zeroing and Simple Zeroing are Measures that can be Challenged as such
5.38 Japan argues that nothing in the AD Agreement limits the types of measure that may, as such,
be the subject of dispute settlement. To this end, Japan notes that the Appellate Body has clarified
that "any act or omission attributable to a WTO Member can be a measure of that Member" and that
measures "consisting of acts setting forth rules or norms that are intended to have general and
prospective application" or "instruments of a Member containing rules or norms" can be challenged as
such.
5.39 The Appellate Body explained that the discip lines and rules of the WTO "are intended to
protect not only existing trade but also the security and predictability needed to conduct future trade"
and "allowing claims against measures, as such, ser ves the purpose of preventing future disputes by
allowing the root of WTO-inconsistent behaviour to be eliminated" There are a growing number of
disputes concerning the United States' use of zeroing procedures and, to avoid "future disputes," the
European Communities challeng es "as such" the administrative procedures embodying the
United States' zeroing norms, as envisaged by the rulings of the Appellate Body.
5.40 According to Japan, the characterization of an act in domestic law is not determinative of its
character as a "measure" in WTO law. The issu e does not depend on "the label given" to an
instrument in domestic law, nor upon its "form or nomenclature," but on the "substance and content of
the instrument." Accordingly, the fact that the measures at issue are, in part, in the "form" of a
computer program is therefore of no importance to their character in WTO law.
5.41 Contrary to the United States' assertion, the me re possibility of change alone does not deprive
the acts in question of their character as measures covered by Article 18.4 of the AD Agreement. Nor
does the nature of the domestic procedures by whic h the measure in question is "changed" affect its
character in WTO law. Furthermore, the question whether or not an act is binding under municipal
law is also irrelevant to its characterization as a measure in WTO law.
5.42 Contrary to the United States' argument, the or dinary meaning of the word "procedure" in
Article 18.4 encompasses a system, method or mode of proceeding, which may include a
methodology. Japan also confirms the view of the European Communities that the dictionary
meaning of "procedure" includes "computers: a set of instructions for performing a specific task."
Thus, an "administrative procedure," in Article 18.4, is a system or method that directs the
administering authority's conduct or management of anti-dumping proceedings. It can include
computer procedures that provide a set of instructions for executing tasks.

102 Appellate Body Report, EC – Bed Linen, para 55.

5.43 In determining that the Sunset Polic y Bulletin ("SPB") is a "measure" in US – Oil Country
Tubular Goods Sunset Reviews , the Appellate Body addressed three separate issues: first, the
normative character of the alleged measure; second, th e generality of its application; and, third, the
prospective quality of its application. Notably, the Appellate Body found that the normative character
of the SPB stemmed from the fact that it provides "g uidance" to the administrative authority and that
this guidance creates "expectations" among users that the authority will act in a particular way.
5.44 Model zeroing and simple zeroing are "as such" measures because they are rules, norms or
standards applied by the United States in anti-dum ping proceedings on a gene ralized and prospective
basis. In all anti-dumping proceedings, the United States relies on standard computer programs to
calculate dumping margins, the nature and purposes of which are described in the publicly available
Manual. The Manual sets forth published pre-de termined rules and procedures that provide
"administrative guidance" to USDOC personnel, public and private users. Accordingly, as long as the
rules and procedures in the Manual continue to apply, they can be the subject of WTO dispute
settlement proceedings as measures, irrespective of their characterization in United States law. As
Chapter 9 of the Manual states explicitly that th ere are "procedures" to be used for calculating
dumping margins and that these are contained in standard computer programs. The Manual indicates
that the "standard programs" are "procedures" that direct the administrativ e authority in executing
dumping determinations.
5.45 The United States itself, in its first written s ubmission, accepts that the standard AD Margin
Program "implements rules or norms adopted by a decision-maker." The AD Margin Program is,
therefore, no different from any other "measure," in that it reflects or "implements rules or norms"
adopted by a decision-maker. According to Article 18.4 of the AD Agreement , decisions adopted
regarding the administration of anti-dumping proceedings are implemented through "laws, regulations
and administrative procedures." That Program is, in and of itself , an "instrument" for purposes of
Article 18.4. As stated above, the standard AD Margin Program constitutes an "administrative
procedure" because it provides a system or method that directs the Administration's execution of
dumping determinations.
5.46 In accordance with the Manual, each and every program that is applied by the United States in
a particular proceeding must use "the same sta ndard calculation methodology," and that methodology
must "conform" to the Administration's current methodological requirements. This systematized
manner of proceeding constitutes a "procedure." The calculation procedures are, therefore, not
established on an " ad hoc" basis in particular investigations or reviews; they are pre-determined for
application on a generalized and prospective basis.
5.47 The standard program for the calculation process referred to in the Manual relevant to this
case is the AD Margin Calculation Program. The ke y line of this computer program is the code
"WHERE EMARGIN GT 0;". Through this line, the standard AD Margin Calculation Program
includes, in the calculation of the numerator for the overall dumping margin fraction, only the margins
calculated for models (in the case of model zeroing) or for individual export transactions (in the case
of simple zeroing) that are greater than zero . Negative (and zero) margins are excluded from the
numerator. Such model and simple zeroing rules are to be used prospectively in every specific
program, consistent with their normative character.
5.48 In addition, the evidence of copies of co mputer programs submitted by the European
Communities confirms that the zeroing procedures are applied on a normative and generalized basis
as indicated by the Manual. They are, in short, administrative procedures. Further, according to the
testimony attached with Japan's submission, sin ce 1993, "the procedure for calculating the overall
weighted-average percentage dumping margin, including the 'zeroing' procedure, has never changed."

5.49 Japan submits that, in light of: (1) the standa rd AD Margin Calculation Program: (2) the
many specific margin calculation programs provided by the European Communities: (3) the Manual;
and (4) the attached testimony by an expert, model zeroing and simple zeroing are norms or rules that
are applied by the United States on a generalized and prospective basis. The very purpose of the AD
Margin Calculation Program is to establish st andard "programming procedures" that operate
mechanistically to ensure that a particular – "proper" – calculation methodology is applied universally
and predictably.
2. Model Zeroing and Simple Zeroing are as such WTO-Inconsistent
5.50 The Appellate Body has held that the Article 2.1 of the AD Agreement "applies to the entire
Anti-Dumping Agreement " and Article 2 sets forth the "agreed disciplines" for determining the
existence and amount of the margin of dumping.
5.51 As part of these "agreed disciplines," the first sentence of Article 2.4 of the AD Agreement
states "[A] fair comparison shall be made between the export price and the normal value". The
Appellate Body ruled that this provision "sets forth a general obligation" that "informs all of
Article 2." The ordinary meaning of the word "fair" in Article 2.4 requires a comparison of normal
value and export price that is "unbiased," "imparti al," and "offer[s] an equal chance of success" to
both domestic parties and exporters. This suggests that a "fair comp arison" is one that is "even-
handed," a meaning that is reminiscent of the Appella te Body's interpretation of Articles 2.1 and 2.2.1
in United States – Hot-Rolled Steel , in which it made an explicit link between "fairness" and "even-
handedness" in Article 2. The Appellate Body also held that there was a "lack of even-handedness"
because the "combined application of [the measures] operated systematically to raise normal value ,
through the automatic exclusion of marginally low- priced sales, coupled with the automatic inclusion
of all high priced sales, except proved, upon re quest, to be aberrationally high priced" which
"disadvantaged exporters."
5.52 Japan believes that the same interpretive pr inciples guide the "fair comparison" under
Article 2.4. Thus, it would not be "fair" unde r that provision to conduct a comparison between
normal value and export price in an arbitrary way which is " more likely" to result in a determination
of dumping or is " more likely " to increase the margin of dumping. Any procedure which either
excludes high-priced export tran sactions, reduces export price, or raises normal value, make a
dumping determination more likely a nd improperly inflate any margin that is found to exist. All of
these procedures, therefore, create bias because they disadvantage exporters. None of these
procedures, therefore, is consistent with the requi rements of a "fair comparison" under Article 2.4 of
the AD Agreement.
5.53 As the AD Agreement requires, "all comparable export transactions" for "a product" are to be
compared in calculating a dumping margin. The Appe llate Body indicated, in this regard, that the
investigating authority must take fully into account the entirety of the prices of all comparable export
transactions of the subject product in the price compar ison, and this, in turn, constitutes the fair, even-
handed way to compare transactions. The model and simple zeroing, however, result in precisely the
types of unfairness outlined above because they operate systematically to disadvantage and prejudice
exporters. The operation of the zeroing procedures: (1) excludes from the numerator in the
calculation of the weighted-average dum ping margin the negative margins for higher-priced
comparable export transactions or models; and (2) interferes with the comparison of normal value
and export price to generate a "zero" – instead of a negative – outcome by, in effect, improperly
reducing the true export price for the excluded export transactions.
5.54 It is noteworthy that, although the United Stat es disregards or interferes with the value of
certain "comparable" export transactions, it does not provide any equivalent, counter-balancing
compensation for these actions in the overall compar ison of normal value and export price. The

zeroing procedures are designed and structured to opera te entirely and exclusively to the detriment of
exporters. Thus, notwithstanding the obligations assumed by the United States under Article 2 to
compare fairly all comparable transactions, its zeroing procedure for selecting from among the
comparable transactions systematically prejudices exporters.
5.55 The Appellate Body has consistently held that model zeroing – which operates in the same
manner and produces the same effects as simple zeroing, other than that simple zeroing inflates
margins more – is inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement. As observed by the
Appellate Body, there is an "inherent bias in a zer oing methodology." This "bias" "could, in some
instances, turn a negative margin into a positive marg in of dumping" and may, therefore, "distort not
only the magnitude of a dumping margin, but also [result in] a finding of the very existence of
dumping." In other words, through the zeroing procedures, a finding of dumping becomes "more
likely" and the magnitude of any dumping margin is systematically "inflated." The Appellate Body
has also highlighted that there is no express la nguage permitting authorities to disregard negative
margins and, therefore, no justification for the "inherent bias" and unfairness in a zeroing procedure.
5.56 In light of these observations, the Appellate B ody "emphasized that a [zeroing] comparison
such as that undertaken by the European Communities [in EC – Bed Linen ] is not a 'fair comparison'
between export price and normal value as required by Articles 2.4 and 2.4.2." The same reasoning
applies to this case. Both model and simple zeroi ng involve an "inherent bias" against exporters that
cannot be regarded as "fair."
3. Arguments with respect to Articles 3 and 5.8 of the AD Agreement
5.57 Japan submits that model zeroing systematically leads to a flawed injury determination under
Article 3 of the AD Agreement. In terms of Articles 3.1, 3.2, 3.3, 3.4 and 3.5 of the AD Agreement,
authorities must examine the volume of dumped imports, the volume of non-dumped imports, the
magnitude of the dumping margin, and the impact of the dumped imports on the domestic industry.
However, zeroing overstates the volume of dumpe d imports, understates the volume of non-dumped
imports, systematically inflates the dumping margin and the volume of dumped imports, and also
distorts the injury determination. Because the inv estigating authorities rely on such inaccurate data,
zeroing distorts the determination to be made with respect to each of these elements. Furthermore, as
a result of relying on such inaccurate data, in vestigative authorities also fail to terminate
investigations in circumstances where, under Article 5.8, they are required to do so.
4. Additional Arguments on Simple Zeroing
5.58 The simple zeroing operates in the context of periodic reviews, conducted pursuant to
Article 9.3 of the AD Agreement. The express treaty text states that any dumping margin used for
purposes of Article 9.3 must be calculated consistently with Article 2. The Appellate Body has ruled
that dumping margins used for purposes of sunset reviews under Article 11.3 must be calculated
consistently with Article 2.4 of the AD Agreement , including with the requirement to make a "fair
comparison." It added that if dumping margins us ed for purposes of a sunset review "were legally
flawed because they were calculated in manner inconsis tent with Article 2.4, this could give rise to an
inconsistency not only with Article 2.4, but also with Article 11.3 of the AD Agreement."
5.59 This Appellate Body's ruling must apply a fort iori to dumping margins calculated and used in
reviews under Article 9.3. This is particularly so because, unlike Article 11.3, Article 9.3 specifically
refers to Article 2. A comparison that does not meet all of the requirements of "fairness" is not
consistent with the "general obligation" in Article 2.4. The requirement in Article 2.4.2 for the
comparison of normal value and export price to in clude "all comparable export transactions" is an
expression of the "general obligation" in Article 2.4 to ensure a "fair comparison" for the product as a
whole. If certain export transactions are excluded from the comparison, the margin ceases to be for

the product as a whole and is instead for a particul ar part or category of that product. Such a
comparison does not provide a "fair" basis for concluding that the product as a whole is dumped.
5.60 Furthermore, the disregard of, or interference with, export transactions under the simple
zeroing rule operates systematically to the disa dvantage and prejudice of exporters, without any
compensating set-off for this disadvantage in the comparison. The United States is obliged by
Article 2.4 to ensure that any selection that it undertakes among comparable transactions is "fair,"
treating domestic parties and exporters "even-handedly." Th e "inherent bias" in zeroing is
inconsistent with these requirements and is, therefore, inconsistent with Article 2.4. In consequence,
simple zeroing is "as such" inconsistent with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement.
5. "Mandatory – Discretionary" Distinction
5.61 The United States places considerable emphasis throughout its first written submission on the
so-called mandatory – discretionary "doctrine." Contrary to the United States' view, the case-law
indicates that measures involving discretion may we ll be WTO-inconsistent. The Appellate Body
indicated that there would be no clear dividing line which distinguishes mandatory measures from
discretionary measures, and discretion to violate WTO obligations could be WTO-inconsistent.
5.62 As a result, the United States is incorrect to as sert that the mere existence of discretion to
comply with WTO law precludes a finding of WTO-inc onsistency. In this dispute, the Panel must
examine the nature and character of the measure at issue, including the evidence of the general
application of the zeroing procedure, to dete rmine whether the measures are "as such" WTO-
inconsistent. As outlined above, that evidence shows prima facie that the United States generally
applies the zeroing procedures, according to their own terms, in a WTO-inconsistent manner and has
done so, at least, since 1993. The mere fact that the United States could alter this rule does not
eliminate the on-going WTO-inconsistency of the rule.
5.63 Furthermore, even assuming, for the sake of ar guments, a mandatory – discretionary analysis
were required in this case, the model and simple zeroing at issue, by their own terms, require WTO-
inconsistent action. First, the zeroing procedur e is included in the USDO C standard AD Margin
Calculation Program. The standard "programming procedures" instruct a mechanistic selection and
summing of data that, in terms of the procedures, afford no possibility to depart from "zeroing."
Second, the evidence submitted by the European Communities of many specific computer programs
supports the conclusion that the United States treat s the zeroing procedures a mandatory part of its
administrative procedure because the zeroing proce dure has been included in specific computer
programs with the utmost consistency. Third, th e expert testimony submitted by Japan demonstrates
that the United States has used the zeroing procedur es, without change, for at least the past twelve
years.
6. Conclusion
5.64 Japan submits that the model zeroing measure, us ed in original investigations, is "as such"
inconsistent with, inter alia, Articles 2.4, 2.4.2, 3.1, 3.2, 3.3, 3.4 and 5.8 of the AD Agreement. The
simple zeroing measure, used in periodic reviews and duty assessments, is "as such" inconsistent with,
inter alia, Articles 2.4, 2.4.2 and 9.3 of the AD Agreement.
G.
REPUBLIC OF KOREA
5.65 Korea agues that as the Appellate Body has c onsistently found zeroing to be prohibited in all
anti-dumping proceedings. Indeed, according to Korea, the Appellate Body has consistently held that
zeroing should be condemned as unfair and prohibited in the original investigation well as reviews

and consequently has found that zeroing is inconsis tent with the "fair comparison" requirements of
Articles 2.4 and 2.4.2.
103
1. Arguments with respect to Article 2.4
5.66 Korea submits that the "fair comparison" requi rement of Article 2.4 is an overarching and
independent obligation which applies to all dumpi ng calculations. Korea is of the view that a
comparison of the text of the current AD Agreement to the corresponding provision of the Tokyo
Round Antidumping Code suggests that the "fair co mparison" requirement of the first sentence of
Article 2.4 was intended to be independent of the provisions in the subsequent sentences of
Article 2.4.
5.67 Contrary to the Tokyo Round Code, which sets out the "fair comparison" requirement as an
introductory clause, the Uruguay Round Agreement c ontains a separate and explicit command that a
"fair comparison shall be made," as an independent new first sentence of Article 2.4. In addition, the
position that the "fair comparison" requirement is an independent and overarching obligation is
clearly supported by the language of Article 2.4 si nce the "fair comparison" requirement is set forth
independently, in the first sentence of Article 2. 4, in language that is not conditioned on the
requirements of the following sentences.
5.68 For these reasons, Korea submits that the "fair comparison" requirement of Article 2.4 -
which applies to all dumping calculations - provid es an independent ground for finding zeroing to be
inconsistent with the AD Agreement.
2. Article 9.3 Proceedings are Part of "the investigation phase" under Article 2.4.2
5.69 Korea asserts that the periodic review under Artic le 9.3 is part of "the investigation phase"
under Article 2.4.2. According to Korea, in the US – Corrosion-Resistant Steel Sunset Review case,
the Appellate Body explained that review s under Article 11 "envision a process combining both
investigatory and adjudicatory aspects." 104 Furthermore, the Appellate Body noted that although it
was not necessary for investigating authorities to calcu late dumping margins in sunset reviews, if they
chose to do so, their calculation must be consistent with the requirements of Article 2. Korea submits
that the same logic should apply to periodic review s for duty assessment under Article 9.3. Thus, in a
periodic review, where the United States chooses to calculate a new dumping margin for the duty
assessment, the calculation should be done without zeroing, consistent with the requirements of
Article 2, including the requirements of Articles 2.4 and 2.4.2.
3. Articles 2.4 and 2.4.2 Apply to Article 9.3 Proceedings
5.70 Korea submits that the text of Article 9.3 explicitly indicates that the requirements of
Articles 2.4 and 2.4.2 must apply to periodic revi ews under Article 9.3. Noting that Article 9.3
explicitly refers to margin of dumping "as establishe d under Article 2," Korea is of the view that in a
periodic review, a new dumping margin for the du ty assessment should be calculated pursuant to
Article 2, including Articles 2.4 and 2.4.2. In addition, Korea argues that Article 9.3 establishes a
basic requirement that "the amount of anti-dumping duty shall not exceed the margin of dumping as
established under Article 2." If zeroing is permitte d in the periodic review for the duty assessment,
then duties would be imposed in excess of "the margin of the dumping as established under Article 2"
due to the use of a methodology that Article 2.4.2 does not permit.

103 Appellate Body Report, EC – Bed Linen ; Appellate Body Report, US – Corrosion-Resistant Steel
Sunset Review; and Appellate Body Report, US – Softwood Lumber V.
104 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 111.

H. MEXICO
1. Zeroing is Prohibited by Article 2.4
5.71 Mexico argues that Article 2.4 of the AD Agreement establishes the fundamental principle
that: "A fair comparison shall be made between th e export price and the normal value". This entails
an independent obligation to determine the rele vant dumping margin by using a fair method of
comparison that takes into account sales of all th e products under investigation, which necessarily
means that "negative margins" should not be zeroed.
5.72 The United States zeroing practice is not objective and impartial and therefore this practice is
as such unfair under Article 2.4. Consequently, zeroi ng is inconsistent with the obligations of the
United States established under Article 2.4.
2. Zeroing is Prohibited by Article 2.4.2
5.73 The United States model zeroing and simple zeroing comparison methodologies are
inconsistent with Article 2.4.2 because they do not involve a weighted-average comparison of the
prices of all comparable export transactions. Pursua nt to paragraph 55 of Ap pellate Body's report in
the EC – Bed Linen, case an investigating authority must include in the comparison of prices it
undertakes when calculating a dumping margin all comparable export transactions, otherwise it would
not be making a "fair comparison", something which would be contrary to the terms of Articles 2.4
and 2.4.2.
3. Article 2.4.2 Applies to Duty Assessment Proceedings
5.74 Article 9 of the AD Agreement provides that the obligations contained in Article 2 apply to
the duty assessment proceedings. According to Article 9.3 of the AD Agreement, the amount of the
antidumping duty shall not exceed the margin of th e dumping as established under Article 2. That is,
Article 9 refers to the whole Article 2, without any restrictions. It therefore obliges an investigating
authority to apply Article 2.4.2 when determ ining the amount of anti-dumping duties in the
corresponding duty assessment proceedings. In this c onnection, Mexico is of the view that all the
obligations contained in Article 2 are directly applicable in the context of United States duty
assessment proceedings, since, as est ablished in Article 9.3, the requirement to determine the amount
of an anti-dumping duty (if one is imposed) at a leve l that does not exceed the margin of dumping as
established under Article 2 applies equally to retrospective and prospective systems.
4. Weighted-Average Normal Value to Indivi dual Export Transaction Comparison is
Permitted only in Specific Circumstances
5.75 The obligation to make a fair comparison must necessarily and normally be based on
equivalent methodologies, that is to say, on a symmetrical comparison, a principle set out in
Article 2.4, which establishes that "A fair compar ison shall be made between the export price and the
normal value". According to this principle, the AD Agreement establishes that the methodology
involving a comparison of weighted-average normal values with individual export transactions (i.e. an
asymmetrical comparison) is permitted only if particular conditions, set out in Article 2.4.2 (known as
"selective dumping"), are present.
5.76 Contrary to the arguments of the United States, the obligation of making a "fair comparison"
(that is, a symmetrical comparison) applies to the antidumping duty assessment proceedings, given
that as previously described, Article 2 of the AD Agreement is applicable to those proceedings.

5.77 The text of AD Agreement Article 9.4, as in original investigations, expressly restricts the
situations in which an asymmetrical comparison can be made – namely when the investigating
authority uses samples in its investigations and, particularly significantly, when the amount of anti-
dumping duties is determined prospectively, a situat ion that does not apply in any circumstance to the
United States, given its current laws and regulations.
5.78 The main aim of the provisions contained in Artic les 2 and 9 is to ensure a "fair comparison"
consistent with the AD Agreement, and the exceptions for an asymmetrical comparison methodology
are confined to the circumstances specifically enumerated in the Agreement.
5. The "Standard Zeroing Procedures" are a Measure that can be Challenged as such
5.79 Pursuant to a dispute settlement proceeding, ev ery act or omission of a WTO Member can be
considered as a "measure". Therefore, there is no limit about the kind of measures of the
United States related to the zeroing practice that can be subject to a dispute settlement proceeding
under the DSU or the AD Agreement in which its conformity as such with those Agreements is
challenged.
5.80 Mexico considers that the United States rules on anti-dumping, specifically sections
771(35)(A) and (B) and 777A(d) of the 1930 Tari ff Act and section 351.414(c)(2) of the USDOC
regulations, are inconsistent as such with Ar ticles 2.4, 2.4.2, 9.3, 11 and 18.4 of the AD Agreement,
with Articles VI:1 and VI:2 of the GATT 1994 and with Article XVI:4 of the WTO Agreement.
5.81 The Import Administration Antidumping Manual, the standard computer programs and the
standard anti-dumping margin program are component s of standard zeroing procedures and constitute
a part of the overall structure in which anti- dumping investigations are conducted by the
United States. The United States' investigating au thority systematically applies standard zeroing
procedures in all calculations of dumping margins in original investigations as well as in anti-
dumping duty assessment procedures. Accordingly, th e standard zeroing procedures, in practice, are
deemed compulsory. In this light, it is appropriate to review the standard zeroing procedures, as part
of the "measures" challenged in this dispute.
I. N
ORWAY
1. Zeroing is Prohibited in "Retrospective Assessment Reviews" under Article 9.3 of the
AD Agreement and in "New Shipper Reviews" under Article 9.5
5.82 Norway submits that the pivotal question, in this case, is whether Article 2.4, including
Article 2.4.2, of the AD Agreement applies to "retrospective assessm ent reviews" and "new shipper
reviews".
5.83 According to Norway, the Appellate Body has cl early stated that there is only one method of
calculating dumping margins in the AD Agreement and that is in accordance with the provisions of
Article 2.4 – which includes Article 2.4.2. This was most recently stated in the US – Corrosion
Resistant Steel Sunset Review case in connection with the interpretation of Article 11.3 of the
Agreement concerning "sunset reviews". 105 In this case, the Appellate Body recalled its findings in
the EC – Bed Linen case, and stated that:

105 Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 127

"When investigating authorities use a zeroing methodology such as that examined in
EC – Bed Linen to calculate a dumping margin, whether in an original investigation
or otherwise, that methodology will tend to inflate the margins calculated."106
5.84 Norway contends that the word "otherwise" mak es it particularly clear that the findings of the
Appellate Body in this case are just as valid whenev er a margin of dumping is calculated, and not just
in original investigations. This is, furthermore, abundantly clear from the chapeau to paragraph 3 of
Article 9, which states that "[T]he amount of th e anti-dumping duty shall not exceed the margin of
dumping as established under Article 2." This cr eates a clear and unambiguous link between the
dumping duty imposed, reassessed or collected a nd the disciplines in Article 2 governing the
calculation of dumping margins.
5.85 Norway rejects the argument of the United States that Article 2.4 applies to periodic reviews,
but not to sub-paragraph 4.2, because of the existen ce of the word "investigation" in Article 2.4.2.
First, the United States' arguments fail because there is nothing in paragraph 3 of Article 9 that bars
the application of Article 2.4.2. To the contrary, there is a clear reference to calculations of dumping
margins, an issue squarely within Article 2.4. 2. Secondly, because the Appellate Body in the EC –
Bed Linen case has interpreted the prohibition on zeroing based not on Article 2.4.2 as such but on the
requirement of a "fair comparison" in Article 2.4. Thirdly, because what the United States is doing in
its duty "reassessment reviews" and "new shipper reviews" is similar to what it does in original
investigations and in "sunset reviews". For all practical purposes it is a new investigation. If the
reach of Article 2.4.2 is excluded from all but original investigations there would be no disciplines left
to ensure fairly computed dumping margins. This would be contrary not only to the "fair comparison"
requirement, but also to the Appellate Body's explicit findings in the US – Corrosion Resistant Steel
Sunset Review case.
2. Measures that can be Challenged "as such"
5.86 Norway argues that there are no limitations on the types of measures that can be challenged as
such before a WTO panel. Norway asserts that gui dance on the measures, and types of measures, that
can be challenged before a WTO panel in a case concerning the AD Agreement can be found in many
provisions. For instance, Norway contends that th e interpretation of Article 3.3 of the DSU by the
Appellate Body in the US – Corrosion Resistant Steel Sunset Review case indicates that, in principle,
any act or omission attributable to a WTO Member can be assumed to be a measure by that Member
for the purposes of dispute settlement proceedings.
5.87 The wide reach of the notion of "measure" is also evident from Article 18.4 of the
AD Agreement, which refers not only to laws or regulations, but also to "administrative procedures" as
measures subject to the disciplines of the AD Agreement . Furthermore, Article 17.3 of the
AD Agreement, which concerns disputes relating to the Agreement , only makes reference to the
"effects" of any action by another Member, and not to specific types of measures. Indeed, the
Appellate Body stated in the US – Corrosion Resistant Steel Sunset Review case that there is no
threshold requirement in Article 17.3 of the AD Agreement that the measure in question be of a certain
type. In the same ruling the Appellate Body also held that the provisions of Article 18.4 of the
AD Agreement have a certain relevance in relation to the question of what type of measure may be
submitted to dispute settlement under the agreement. The phrase "laws, regulations and
administrative procedures" in Article 18.4 has been interpreted very broadly to encompass all
generally applicable rules, norms and standards adopted by Members in connection with anti-dumping
proceedings.

106 Appellate Body Report, US - Corrosion Resistant Steel Sunset Review, para. 135.

3. The Anti-Dumping Margin Program is a Challengeable "as such" Measure
5.88 Norway is of the view that the anti-dumping ma rgin program is a norm or standard adopted
by the United States in connection with the conduct of anti-dumping proceedings. The fact that the
zeroing procedures in the anti-dumping margin program are abstract; that they not published in the
Federal Register; that they do not bear the title "law " or "regulation"; that they are not adopted by
Congress but by the US Department of Commerce; that the Department is entitled to change or
withdraw them for the purposes of future determinati ons; and that they are not relevant in US courts,
cannot be decisive for whether these procedures are a "measure" for the purpose of anti-dumping
proceedings.
5.89 Norway believes that the anti-dumping margin program and the procedures it contains may be
a set of normative rules that apply mechanistically and automatically to a given set of facts without
further human intervention. There is no room for ad ministrative or judicial interpretation. The effect
of the standard zeroing procedures in future cases is utterly predictable. The "Standard Zeroing
Procedures" in the anti-dumping margin program provide certainty and security (at least for US
industry) for the conduct of future trade. They mandate zeroing in all cases, and continue to do so
until changed.
5.90 Even if one were to accept the contention of the United States that the anti-dumping margin
program is not a measure in itself but only the implementation of "rules or norms adopted by a
decision-maker in some other instrument, such as a regulation or a dete rmination in a specific
antidumping proceeding", they would still be cha llengeable. This is because an implementing
measure is as challengeable as the law or regulation from which it is derived.
5.91 For the above reasons, the anti-dumping margin program containing the standard zeroing
procedures is a "challengeable" measure under WTO law as such.
4. The Anti-Dumping Margin Program is inconsistent with the AD Agreement
5.92 The Appellate Body has clearly stated that there is only one method of calculating dumping
margins in the AD Agreement and that is in accordance with the provisions of Article 2.4 of the
Agreement. By virtue of the fact that Article 2 is also applicable to assessment reviews under
Article 9.3 and to "new shipper reviews" under Article 9.5, it follows that zeroing is prohibited.
5.93 The anti-dumping margin program is a measure that can be challenged "as such" in a WTO
dispute. Thus the anti-dumping margin program c ontaining the standard zeroing procedures is in
violation of Article 2.4 of the AD Agreement and in particular Article 2.4.2, as well as all other
articles concerning the calculation of dumping margins.
5.94 The calculation of dumping margins has a bearing on the assessment that must be made under
a number of the provisions of the AD Agreement, including Articles 3.1, 3.2, 3.5, 11.1, 11.2, 11.3, 9.3,
1, 18.4. When the United States "Standard Zeroi ng Procedures" in the anti-dumping margin program
are in violation of Article 2.4, this will theref ore, in turn, lead to a number of consequential
inconsistencies.
J. T
URKEY
1. Model Zeroing is Inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement
5.95 Turkey asserts that the model zeroing method used by the United States in determining the
dumping margin in original investigations leads to an unfair comparison of normal value and export
price within the meaning of Articles 2.4 and 2.4.2 of the AD Agreement. This contention is supported

by the Panel and Appellate Body decisions in the EC – Bed Linen case. In that dispute, the Panel
decided that establishing the existence of margin s of dumping on the basis of a methodology, which
included zeroing negative price differences, calculated for some models (model zeroing methodology)
was inconsistent with Article 2.4.2 of the AD Agreement . Furthermore, the Panel noted that, in
arriving at a conclusion whether the product as a w hole is being dumped, Article 2.4.2 obligates an
investigating authority to make its determination in a way which fully accounts for the export prices
on all comparable transactions. Thus, the Panel found the methodology, which focuses on those
models that are dumped, and takes less than fu ll account of those models where the comparison
results in a negative margin, to be inconsistent w ith Article 2.4.2 of the Agreement. The Appellate
Body in the EC – Bed Linen case, further stated that, regardless of the method used to calculate the
margins of dumping, these margins must be, a nd can only be, established for the product under
investigation as a whole.
2. Recourse to Simple Zeroing Should Be an Exception
5.96 The text of Article 2.4.2 recognizes three different methodologies for dumping margin
calculations. The comparison of a weighted average normal value with a weighted average of prices
of all comparable export transactions and the co mparison of normal value and export prices on a
transaction-to-transaction basis are both identifie d as the normal way of calculation, whereas the
comparison of weighted average normal value with prices of individual export transactions is
identified as an exception. Thus, at the outset, it is clear that simple zeroing is not expressly
prohibited in the text of the said Article. Furtherm ore, if simple zeroing was prohibited then it would
render meaningless the inclusion of the exceptional cal culation method in the Article since the result
of both comparisons, that is the weighted av erage normal value to weighted average export
transactions comparison and the weighted averag e normal value to prices of individual export
transactions comparison, would lead to the same result.
5.97 On the other hand, the main purpose of Article 2.4.2 of the AD Agreement is to provide for an
exception (asymmetrical comparison in the case of targeted dumping) to the normal methods of
comparison (symmetrical comparison) in order to ensure a fair comparison within the meaning of
Article 2.4 of the AD Agreement . Yet, the application of this exception is expressly tied to the
existence of certain conditions. If the investigati ng authority is to calculate a dumping margin in a
way other than the two normal methods, then, pursuant to Article 2.4.2, it should perform a targeted
dumping analysis. Should the authority find such ta rgeting; it should explain why such differences
could not be taken into account appropriately by the use of a weighted average-to-weighted average or
transaction-to-transaction comparison.
5.98 In this respect, although the AD Agreement does not prohibit simple zeroing, recourse to such
application should be an exception, not a standard procedure and the conditions that call for it should
be clearly examined and explained. Thus, the standard zeroing methodology as applied in periodic
reviews by the United States is inconsistent with th e provisions of Articles 1, 2.4, 2.4.2, 9.3, 11.1,
11.2 and 18.4 of the AD Agreement.
3. Dumping Determinations for the Purposes of Article 11.2 of the AD Agreement
5.99 Article 2 defines dumping along with the methodol ogies to be used in the determination of
dumping margin. Turkey contends that the provisi ons covered by this Artic le should apply to all
types of investigations, including reviews, where a dumping margin is to be calculated. Thus, in view
of the fact that there exists no other provisi on on how to calculate the dumping margin for the
purposes of Article 11.2 reviews, the investigating au thorities should also abide by the provisions of
Article 2.

4. Consistency with Provisions of the AD Agreement
5.100 In Turkey's view, where dumping margin calcu lation in an investigation or review is
established under a methodology that leads to the violation of the relevant provisions of the
AD Agreement, the Regulation that establishes the basis for implementing such methodology should
also be found to be inconsistent with the AD Agreement.
5.101 It is without doubt that the signatory Memb ers to the Agreement Establishing the WTO
commit themselves to abide by th e rules and procedures of the WTO Agreements. The presence of
such commitment provides security and predictab ility for the proper functioning of the multilateral
trading system. In this respect, domestic laws of the Members that implement the WTO Agreements
must be compatible with the requirements of the relevant Agreements. Otherwise, the WTO
Agreements and the multilateral trade system w ould prove unnecessary since Members might adopt
legislation with completely different obligatio ns. This would inevitably result in chaos and
unpredictability in the international environment. However, this should not be interpreted as to say
that Members are precluded of having domestic legi slations. On the contrary, the WTO Agreements
put forward general principles of application and in most instances they do not describe the
procedures to be followed to act consistently with those principles. Thus, domestic legislation is
essential in those instances where th ey help to describe procedures and rules that should be followed
in order to be compatible with the Agreements. Yet, the balance should be well established. The
provisions of the domestic legislations should no t contradict with the provisions of the WTO
Agreements nor nullify the benefits accruing to the Members under the WTO Agreements.
VI. INTERIM REVIEW
6.1 The Panel submitted its Interim Report to th e parties on 4 August 2005 . On 26 August 2005,
both parties requested that the Panel revise precise aspects of the Interim Report. Neither party
requested an interim review meeting. On 12 September 2005, both parties submitted comments on
the other party's request for interim review. The Panel has carefully addressed the arguments made by
the parties in their requests for interim review and addresses them below, in accordance with Article
15.3 of the DSU.
107
A. COMMENTS BY THE EUROPEAN COMMUNITIES
1. Request for explanation of the legal reasoning of the Appellate Body in EC – Bed Linen
and US – Softwood Lumber V
6.2 Regarding the finding of the Panel in para graph 7.32 of the Report that USDOC acted
inconsistently with Article 2.4.2 of the AD Agreement in the anti-dumping investigations at issue, the
European Communities considers that the Report s hould "faithfully explain" the legal reasoning
underlying the findings in the two Appellate Body reports referred to by the Panel ( EC – Bed Linen
and US – Softwood Lumber V). The United States opposes this request.
6.3 Bearing in mind that the precise issue addressed in this part of the Report – the application of
model zeroing when using an average-to-average co mparison in original investigations- has already
been the subject of detailed analys is and findings in two previous dispute settlement proceedings, we
remain of the view that paragraphs 7.26-7.31 provide a sufficient explanation of our finding in
paragraph 7.32 that USDOC acted incons istently with Article 2.4.2 of the AD Agreement. We note
that footnote 127 of the Report refers to the precise sections of the Appellate Body reports that contain
the reasoning of the Appellate Body. The European Communities argues that an explanation by this

107 Section VI of this report, entitled "Interim Review" therefore forms part of the final findings of the
panel report, in accordance with Article 15.3 of the DSU.

Panel of the legal reasoning of the Appellate Body in EC – Bed Linen and US – Softwood Lumber V
"might... help the reader of the report to properly un derstand the full implications of those findings".
In our view, the kind of explanation suggested by the European Communities would go beyond what
is necessary to decide the issue raised by this particular claim of the European Communities regarding
the application of model zeroing in certain anti- dumping investigations. We therefore see no reason
to amend our Report as suggested by the European Communities.
2. Request for a finding with respect to the cl aim of the European Communities regarding
"automatic assessment"
6.4 The European Communities argues that not all its "as applied" claims relating to original
investigations under provisions other than Articles 2.4.2 and 2.4 of the AD Agreement are
consequential, and refers in partic ular to its claim that the "automatic assessment" of liability in the
sample case is inconsistent with Article 9.3. The European Communities al so considers that the
United States has not contested this claim. Thus, in the view of the European Communities, the Panel
"has no legal alternative but to find that model zeroing in an assessment is inconsistent with"
Article 9.3. The United States opposes this request.
6.5 As we understand it, the issue raised by th e European Communities regarding "automatic
assessment" pertains to a claim under Article 9.3 of the AD Agreement concerning situations in which,
as a result of the absence of a requ est for administrative review, USDOC assessed the amount of anti-
dumping duty in an amount corresponding to the marg in of dumping determined in the original
investigation.
108 As explained in paragraph 7.12 of th e Report, we have treated this claim as a
dependent claim on the grounds that it alleges a breac h of a provision as a consequence of the alleged
violations of Articles 2.4 and 2.4.2 of the AD Agreement . This characterization is based on the
express language used by the European Communities in paragraph 94 of its First Submission, where it
states that the United States acted inconsistently with Article 9.3 "as a consequence of the unlawful
zeroing method described in this submission". It is clear from paragraph 95-96 that the key argument
in support of this claim is that as a result of the u se of an "inflated" margin of dumping as the basis of
the assessment of the amount of anti-dumping duty, the amount of anti-dumping duty exceeded the
margin of dumping as established under Article 2. There is no argumentation that Article 9.3 is
violated other than as a result of a violation of other provisions of the AD Agreement. Against this
background, we see nothing in the request by th e European Communities for interim review that
substantiates the assertion that its "as applied" claim under Article 9.3 is not consequential.
6.6 We consider that paragra ph 7.34 of the Report and the accompanying footnote 134
sufficiently explain why we do not consider it n ecessary to make findings on the dependent claims
raised by the European Communities, including its claim under Article 9.3 of the AD Agreement. The
key consideration, as stated in that paragraph, is that deciding dependent claims will not provide
additional guidance as to the steps to be undertaken by the United States in order to implement the
Panel's recommendation regarding the violation on which the recommendation is dependent. The
interim review request of the European Communi ties contains no argumentation that calls into
question the logic of that reasoning. We also note that in footnote 134 we have drawn attention to
recent panel reports that have adopted the same appr oach with respect to the treatment of dependant
claims. Particularly noteworthy in this context is the panel report in US – Softwood Lumber V . After
finding that model zeroing in an original investig ation is inconsistent w ith Article 2.4.2 of the
AD Agreement, that panel declined to make a finding on a cl aim that zeroing is also inconsistent with
Article 9.3 of the AD Agreement based on the reasoning articulated in paragraph 7.34 of our Report.
In light of these considerations, we have decided not change our Report as proposed by the European
Communities.

108 EC- First Written Submission, paras. 28, 54, 94-96 and Exhibit EC-1.7.1.

3. Request for a revision of the Panel's reasoning regarding zeroing as a methodology
6.7 The European Communities disagre es with what it characterizes as the conclusion of the
Panel that the standard zeroing procedures "do not exist in written form". The United States opposes
this request.
6.8 Although the European Communities does not make re ference to a particular paragraph of the
Report, we believe that this comment pertains to paragraph 7.104 where we state that there is a
zeroing methodology which is manifested in the St andard Zeroing Procedures and which represents a
well-established and well-defined norm but which "is not expressed in writing". Thus, strictly
speaking, we have not stated that the "Standard Zeroing Procedures do not exist in written form" but
that the zeroing methodology itself "is not expressed in writing". The European Communities does
not submit any factual or legal arguments to explain why it considers that the Panel erred in making
this statement. We therefore have not changed the Report in this respect.
4. Request for a finding by the Panel on th e claim of the European Communities under
Article 2.4 of the AD Agreement
6.9 In its interim review comments, the Europ ean Communities requests the Panel to make a
finding on its claims that the use of zeroing in original investigations is inconsistent with Article 2.4
of the AD Agreement.
109 The European Communities considers that a decision on whether and to what
extent the zeroing practice is violating Article 2. 4, in particular the i ndependent and overarching
obligation contained in the first sentence thereof, in the context of original investigations, is essential
to give the United States the guidance it needs in or der to bring its measures into conformity with the
AD Agreement. The United States opposes this suggestion.
6.10 We have explained in paragra ph 7.33 of the Report why, having found that the use of model
zeroing in the investigations at issue is inconsistent with Article 2.4.2 of the AD Agreement, we do not
consider it necessary to examine whether the use of model zeroing in these investigations is also
inconsistent with Article 2.4. We consider that this approach is within our discretion to exercise
judicial economy. The fundamental consideration regarding the appropriateness of the exercise of
judicial economy in WTO dispute settlement is that a panel only needs "to address those claims on
which a finding is necessary in order to enable the DSB to make sufficiently precise recommendations
and rulings so as to allow for prompt complia nce by a Member with those recommendations and
rulings".110 In our view, in determining whether or not to exercise judicial economy, we must
determine whether a finding requested by a party is necessary to decide those specific claims that are
actually before us. In the present case, the Eur opean Communities has raised the same issue under
Articles 2.4.2 and 2.4 of the AD Agreement, namely the lawfulness of model zeroing in the context of
average-to-average comparisons between export pri ce and normal value in original investigations.
While the interim review request of the Europ ean Communities asserts that a finding by the Panel
under Article 2.4 is essential, it does not advance any argument demonstrating that action by the
United States to remove the inconsistency with Article 2.4.2 would not at the same time also remove
the alleged inconsistency with Article 2.4 of the AD Agreement. Thus, it remains our view that a DSB
recommendation based on our finding of inconsistency of the application of zeroing with Article 2.4.2
is sufficiently precise. We also note that, as descr ibed in footnote 133 of the Report, other panel
reports have also refrained from making findings on wh ether zeroing is inconsistent with Article 2.4
after finding that zeroing is inconsistent with Artic le 2.4.2. In sum, th e European Communities has
not provided any cogent argument to demonstrate th at we erred in deciding to exercise judicial

109 It is not entirely clear whether th is request pertains only to the "as applied" claims of the European
Communities under Article 2.4 or to both the "as applied" and "as such" claims. In any event, our analysis
applies to both.
110 Appellate Body Report, Australia – Salmon, para. 223.

economy with respect to its claims under Article 2.4, and we disagree with the European
Communities that in the present case a decision on Ar ticle 2.4 is somehow essential. Thus, we have
not made any changes to the Report in this respect.
B. COMMENTS BY THE UNITED STATES
1. Request for changes to paragraph 2.5 of the Report
6.11 The United States requests that we insert the wo rd "dumped" before "amount" in the second
and third sentences of paragraph 2.5 of the Report. The United States further requests that we replace
"customs" with "US Bureau of Customs and Border Protection ('USCBP')" in the seventh sentence of
paragraph 2.5 and that we substitu te "USCBP" for "customs" in the next sentence. The European
Communities agrees. We have decided to accept thes e changes, which we regard as being of a purely
editorial nature.
2. Request for changes to paragraph 2.6 of the Report
6.12 The United States requests the Panel to replace paragraph 2.6 of the Report with paragraph
2.4 of the original draft descriptive part of the Repor t. The United States objects in particular to the
inclusion in this paragraph of re ferences to three kinds of "measures": (1) the Issues and Decision
Memoranda; the (2) Final Margin Program Logs an d Outputs; and (3) assessment instructions. The
United States considers that these three measures ar e not part of the request for establishment of a
panel. The European Communities objects to the amendments suggested by the United States.
6.13 When read in light of the relevant paragraphs of the First Written Submission of the European
Communities, as referred to in footnotes 21 and 22 of th e Report, it is clear to us that paragraph 2.6 of
the Report does not treat the Issues and Decision Memoranda, the Final Margin Program Logs and
Outputs, and the assessment instructions as three separ ate categories of measures but as aspects of the
measures at issue. 111 Thus, paragraph 2.6 of our Report does not imply that we are presented with a
request for separate findings on the Issues and Deci sion Memoranda, the Final Margin Program Logs
and Outputs and the assessment instructions. Whil e it is certainly true that there is no express
mention of these "measures" in the request for the estab lishment of a panel, they clearly form part of
the measures mentioned in that document. 112 Therefore, we have not made the change requested by
the United States.
3. Request for changes to paragraph 7.67 of the Report
6.14 The United States requests that the Panel delete the second sentence and the first part of the
third sentence of paragraph 7.67 of the Report. The United States considers that the second sentence
can be read to imply that Appellate Body reports constitute sources of WTO law and that the Panel's
statement in footnote 167 of the Interim Report on the Sunset Policy Bulletin is unclear. The

111 For example, paragraph 63 of the First Submission of the European Communities states that the
"measures at issue in the sample 'a s applied' case include the Final Determination and any amendments to the
Final Determination. The Final Determination refers to the Issues and Decision Memorandum, which in turn
refers to the 'Margin Calculations', that is the Calculation Memoranda and the Final Margin Program Log and
Outputs for all the firms investigated". (footnotes omitted)
112 The request for the establishment of a panel (WT/DS294/7/Rev.1, paragraph 3.2) mentions
"determinations of dumping by DOC, the determinations of injury by the United States International Trade
Commission, the imposition of definitive duties in the original investigations and the outcome of the
administrative review investigations as detailed in the an nexes". The same paragraph refers to paragraph 3.1,
which describes a number of violations of WTO obligations by the United States with respect to the manner in
which the United States "calculates a margin and amount of dumping" and "calculates a margin of dumping and
collects an amount of anti-dumping duty".

European Communities objects to these changes pro posed by the United States but suggests that the
issue raised by the United States regarding th e second sentence of paragraph 7.67 can perhaps be
addressed by substituting "understood" for "interpreted".
6.15 To accommodate the concern of the United States regarding the possible implications of the
statement in the second sentence of paragraph 7.67, we have slightly redrafted that sentence and have
deleted footnote 167 of the Interim Report. Howeve r, we see no reason to delete or amend the first
part of the third sentence of paragraph 7.67.
6.16 Finally, in addition to the above-mentioned changes, we have corrected a number of
typographical errors in the Interim Report.
VII. FINDINGS
A. I
NTRODUCTION
7.1 The European Communities requests the Panel to find that:113
(a) In the cases and measures listed in Exhibits EC-1 to EC-15, the United States acted
inconsistently with (1) Articles 2.4 and 2.4.2; 3.1, 3.2 and 3.5; 5.8; 9.3; 1 and 18.4 of
the AD Agreement , (2) Articles VI:1 and VI:2 of the GATT 1994 and (3)
Article XVI:4 of the WTO Agreement by setting at zero negative margins when
aggregating the intermediate results of comparisons between averaging groups for the
purposes of calculating the margin for the subject product.
(b) The "Standard Zeroing Procedures" used by the United States in original
investigations (or the US practice or methodology of zeroing) and
Sections 771(35)(A) and (B), 731 and 777(A(d) of the Tariff Act are as such
inconsistent with: (1) Articles 2.4 and 2.4.2; 5.8; 9.3; 1 and 18.4 of the
AD Agreement; (2) Articles VI:1 and VI:2 of the GATT 1994; and (3) Article XVI:4
of the WTO Agreement.
(c) In the cases and measures listed in Exhibits EC-16 to EC-31, the United States acted
inconsistently with: (1) Articles 2.4 and 2. 4.2; 9.3; 11.1 and 11.2; 1 and 18.4 of the
AD Agreement; (2) Articles VI:1 and VI:2 of GATT 1994; and (3) Article XVI:4 of
the WTO Agreement by comparing a weight ed average normal value with individual
export transactions, without explanation or justification, and by setting at zero
negative margins when aggregating the interm ediate results of such comparisons for
the purposes of calculating the margin of dumping for the subject product.
(d) The "Standard Zeroing Procedur es" used by the United St ates in periodic reviews (or
the US practice or methodology of zeroing), Sections 771(35)(A) and (B), 731,
777A(d) and 751(a)(2)(A)(i) and (ii) of th e Tariff Act and Section 351.414(c)(2) of
USDOC's Regulations are as such inconsistent with (1) Articles 2.4; 2.4.2; 9.3; 11.1
and 11.2; 1 and 18.4 of the AD Agreement, (2) Articles VI:1 and VI:2 of the GATT
1994 and (3) Article XVI:4 of the WTO Agreement.
(e) The "Standard Zeroing Procedures" used by the United States in new shipper reviews,
changed circumstances reviews and sunset reviews (or the US practice or
methodology of zeroing), Sections 771(35)(A) and (B), 731, 777A(d) and
751(a)(2)(A)(i) and (ii) of the Tariff Ac t and Section 351.414(c)(2) of USDOC's

Regulations are as such inconsistent with (1 ) Articles 2.4 and 2.4.2; 9.3 and 9.5; 11.1,
11.2 and 11.3; 1 and 18.4 of the AD Agreement ; (2) Articles VI:1 and VI:2 of the
GATT 1994 and (3) Article XVI:4 of the WTO Agreement.
7.2 The European Communities requests that the Panel recommend that the United States take the
steps necessary to bring its measures into conformity with the cited WTO provisions.
7.3 The United States requests that the Panel reject the claims of the European Communities.
B. RELEVANT PRINCIPLES REGARDING STANDARD OF REVIEW, TREATY INTERPRETATION AND
BURDEN OF PROOF
1. Standard of Review
7.4 Article 11 of the DSU provides the standard of review for WTO panels in general. Article 11
imposes upon panels a comprehensive obligation to ma ke an "objective assessment of the matter", an
obligation which embraces all aspec ts of a panel's examination of the "matter", both factual and
legal.114
7.5 Article 17.6 of the AD Agreement sets forth the special standard of review applicable to
disputes under the AD Agreement:
 (i) in its assessment of the facts of the matter, the panel shall determine whether
the authorities' establishment of the facts was proper and whether their
evaluation of those facts was unbiased and objective. If the establishment of
the facts was proper and the evaluation was unbiased and objective, even
though the panel might have reached a different conclusion, the evaluation
shall not be overturned;
 (ii) the panel shall interpret the re levant provisions of the Agreement in
accordance with customary rules of interpretation of public international law.
Where the panel finds that a relevant provision of the Agreement admits of
more than one permissible interpretati on, the panel shall find the authorities'
measure to be in conformity with the Agreement if it rests upon one of those
permissible interpretations.
Thus, taken together Article 11 of the DSU and Article 17.6 of the AD Agreement establish the
standard of review this Panel must apply with resp ect to both the factual and the legal aspects of the
present dispute.

2. Rules of Treaty Interpretation
7.6 Article 3.2 of the DSU provides that the dispute settlement system serves to clarify the
provisions of the covered agreements "in accordance with customary rules of interpretation of public
international law". It is generally accepted that these customary rules are reflected in Articles 31-32
of the Vienna Convention on the Law of Treaties. Article 31(1) of the Vienna Convention provides:

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

"A treaty shall be interpreted in good faith in accordance with the ordinary meaning
to be given to the terms of the treaty in their context and in the light of its object and
purpose".

7.7 In the context of disputes under the AD Agreement, the Appellate Body has stated that:
"The first sentence of Article 17.6(ii), echoing closely Article 3.2 of the DSU, states
that panels 'shall' interpret the provisions of the AD Agreement 'in accordance with
customary rules of interpretation of public international law.' Such customary rules
are embodied in Articles 31 and 32 of the Vienna Convention on the Law of Treaties
 ('Vienna Convention' ). Clearly, this aspect of Article 17.6(ii) involves no 'conflict'
with the DSU but, rather, confirms that th e usual rules of treaty interpretation under
the DSU also apply to the AD Agreement. …
The second sentence of Article 17.6(ii) … presupposes that application of the rules
of treaty interpretation in Articles 31 and 32 of the Vienna Convention could give
rise to, at least, two interpretations of some provisions of the AD Agreement, which,
under that Convention, would both be ' permissible interpretations.' In that event, a
measure is deemed to be in conformity with the AD Agreement 'if it rests upon one of
those permissible interpretations."115
Thus, it is clear that under the AD Agreement, we are to follow the same rules of treaty interpretation
as in any other dispute. The difference is that if we find more than one permissible interpretation of a
provision of the AD Agreement, we may uphold a measure that rests on one of those interpretations.
3. Burden of Proof
7.8 The general principles applicable to burden of proof in WTO dispute settlement require that a
party claiming a violation of a provision of the WT O Agreement by another Member assert and prove
its claim.116 The European Communities as the comp laining party must therefore make a prima facie
case of violation of the relevant provisions of the relevant WTO agreements, which the respondent
must refute. We also note, however, that it is generally for each party asserting a fact, whether
complainant or respondent, to provide proof thereof. 117 In this respect, therefore, it is also for the
United States to provide evidence for the fact s which it asserts. We also recall that a prima facie case
is one which, in the absence of effective refutation by the other party, requires a panel, as a matter of
law, to rule in favour of the party presenting the prima facie case.
C. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ORIGINAL
INVESTIGATIONS118
1. Measures at issue
7.9 The European Communities claims that the Unite d States has acted inconsistently with its
WTO obligations in 15 anti-dumping investiga tions listed in Exhibits EC-1 to EC-15 119 because

115 Appellate Body Report, US – Hot-Rolled Steel, paras. 57 and 59 (emphasis in original).
116 Appellate Body Report, US – Wool Shirts and Blouses, p. 337.
117 Appellate Body Report, US – Wool Shirts and Blouses, p. 337.
118 The European Communities uses the term "original investigations" to refer to investigations within
the meaning of Article 5 of the AD Agreement as distinguished from what it considers to be "other types of
investigations" such as duty assessment proceedings u nder Article 9.3 and reviews under Article 11 of the AD
Agreement. In light of the fact that the meaning of the term "investigations" is the subject of dispute between
the parties, we have for the sake of clarity used the term "original investigations". The use of this phrase in this
Report is without prejudice to our view on the legal status of that term under the AD Agreement.

USDOC, when calculating the weighted average dump ing margin for exporters/manufacturers of the
product subject to investigation on the basis of mu ltiple comparisons between average export prices
and average normal values within "averaging groups" 120 consisting of merchandise that was identical
or virtually identical in all physical characteristi cs, included in the numerator used to calculate the
weighted average dumping margin only the results of those comparisons in which average export
prices were below average normal values. The Eu ropean Communities uses the term model zeroing
to refer to this exclusion from the numerator of the weighted average dumping margin of any amounts
by which average export prices within indivi dual averaging groups based upon physical
characteristics exceeded average normal values.
7.10 In the latter regard, we note that the parti es to this dispute disagree on the appropriate
terminology to describe this aspect of the dumping margin calculation methodology of USDOC. The
United States rejects the term model zeroing used by the European Communities as being without any
textual basis in the AD Agreement or in the anti-dumping laws and regulations of the United States.
On the other hand, the European Communities contests that, as argued by the United States, the issue
before the Panel is properly characterized in terms of whether or not an investigating authority must
"grant" an "offset" or "credit" for "negative dumping". It is important to emphasize in this respect that
where this Report uses the terms employed by the parties, this should not necessarily be seen as an
acknowledgement by the Panel of the legal relevance of those terms under the AD Agreement.
7.11 As explained by the European Communities, USDOC's Regulations also provide for the
possibility to establish averaging groups based on other f actors, e.g. level of trade. While the claims
of the European Communities regarding the original investigations at issue pertain specifically to
model zeroing i.e. zeroing in the context of averaging groups established on the basis of physical

119 Notice of Final Determination of Sales at Less T han Fair Value: Stainless Steel Bar From Italy ,
67 Fed. Reg. 3155 (23 January 2002); Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Bar From France, 67 Fed. Reg. 3143 (23 January 2002); Notice of Final Determination of Sales
at Less Than Fair Value: Stainless Steel Bar from Germany , 67 Fed. Reg. 3159 (23 January 2002); Notice of
Final Determination of Sales at Less Than Fair Value: Stainless Steel Bar From the United Kingdom , 67 Fed.
Reg. 3146 (23 January 2002); Notice of Final Determination of Sales at Less Than Fair Value; Certain Hot-
Rolled Carbon Steel Flat Products From The Netherlands , 66 Fed. Reg. 50408 (3 October 2001); Notice of
Final Determination of Sales at Less Than Fair Value: Stainless Steel Wire Rod From Sweden , 63 Fed.
Reg. 40449 (29 Jul y 1998); Notice of Final Determination of Sales at Less Than Fair Value : Stainless Steel
Wire Rod From Italy, 63 Fed. Reg. 40422 (29 July 1998); Notice of Final Determination of Sales at Less Than
Fair Value: Stainless Steel Plate in Coils From Belgium, 64 Fed. Reg.15476 (31 March 1999); Notice of Final
Determination of Sales at Less Than Fair Value: Stainless Steel Sheet and Strip in Coils From France , 64 Fed.
Reg. 30820 (8 June 1999); Notice of Final Determination of Sales at Less Than Fair Value: Stainless Steel
Sheet and Strip in Coils From Italy , 64 Fed. Reg. 30750 (8 June 1999); Notice of Final Determination of Sales
at Less Than Fair Value; Stainless Steel Sheet and Strip in Coils From The United Kingdom , 64 Fed.
Reg. 30688 (8 June 1999); Notice of Final Determination of Sales At Less Than Fair Value: Certain Cut-To-
Length Carbon-Quality Steel Plate Products From France , 64 Fed. Reg. 73143 (29 December 1999); Notice of
Final Determination of Sales At Less Than Fair Valu e: Certain Cut-To-Length Carbon-Quality Steel Plate
Products From Italy, 64 Fed. Reg. 73234 (29 December 1999); Notice of Final Determination of Sales At Less
Than Fair Value: Certain Cut-To-Length Car bon-Quality Steel Plate Products From Italy , 64 Fed. Reg. 73234
(29 December 1999); Notice of Final Determination of Sales at Less Than Fair Value: Certain Pasta From
Italy, 61 Fed. Reg. 30326 (14 June 1996); Notice of Final Determination of Sales at Less Than Fair Value:
Stainless Steel Wire Rod From Spain , 63 Fed. Reg. 40391 (29 July 1998). The European Communities treats
Stainless Steel Bar From Italy as a sample case and indicates that the measures at issue in this sample case
include the Final Determination of Sales at Less than Fair Value and any amendments thereto . The Final
Determination refers to the Issues and Decision Memorandum, whic h in turn refers to the Margin Calculations,
i.e. the Calculation Memoranda and the Final Margin Program Log and Outputs for all the firms investigated.
The measures at issue also include the anti-dumping duty order and any amendments, including the assessment
instructions, and the USITC injury determination. EC-First Written Submission, para. 63.
120 See supra, para. 2.3 for an explanation of the concept of "averaging groups".

characteristics, the claims of the European Co mmunities that "Standard Zeroing Procedures" and
certain provisions of the United States' anti-dumping legislation are WTO-inconsistent as such are
broader in scope in this respect and concern the use of zeroing in the context of any type of averaging
group. We consider that the specific criterion u sed in establishing an averaging group is of no
particular relevance to our legal analysis and that our reasoning with respect to model zeroing is
equally applicable to the use of zeroing in rela tion to averaging groups established on the basis of
factors other than physical characteristics.
2. Order of analysis
7.12 The European Communities presents claims regarding the WTO-inconsistency of the
application of model zeroing in the subject anti-dumpi ng investigations under: (1) Articles 1, 2.4 and
2.4.2, 3.1, 3.2, 3.5, 5.8, 9.3 and 18.4 of the AD Agreement; (2) Articles VI:1 and VI:2 of the GATT
1994; and (3) Article XVI:4 of the WTO Agreement. There is a clear distinction between the claims
of the European Communities under Articles 2.4 and 2.4.2 of the AD Agreement and the claims under
the other WTO provisions invoked by the European Communities in that the alleged breach of these
other provisions is a consequence of the allege d violation of Articles 2.4 and 2.4.2 of the
AD Agreement.
121 Because of this difference betwee n "independent" claims under Articles 2.4
and 2.4.2 and "dependent" claims under other WTO provisions, we commence our analysis with the
claims of the European Communities under Articles 2.4 and 2.4.2 of the AD Agreement.
7.13 Regarding the order in which we should take up the claims of the European Communities
under Articles 2.4 and 2.4.2 of the AD Agreement, we consider that a panel is entitled to structure its
analysis in a manner most appropriate to facilitate the analysis of the issues presented to it. In this
respect, we note that Article 2.4.2 expressly deal s with the question of how export price and normal
value must be compared for purposes of establishing the existence of margins of dumping during the
investigation phase. Article 2.4 requires Members to make a fair comparison between export price
and normal value and contains rul es on allowances that must be made to this end but does not
expressly address the issue of the establishment of margins of dumping. In contrast, Article 2.4.2
addresses the issue of the establishment of margins of dumping specifically. Moreover, several panel
and Appellate Body reports have ma de findings under Article 2.4.2 with respect to claims concerning
the methodology for calculating margins of dumping. While the Appellate Body has in some cases
expressed views on the implications of the "fai r comparison" language in Article 2.4 for the
calculation of margins of dumping, to date no pane l or Appellate Body report has actually made
findings under Article 2.4 with respect to a claim concerning the calculation of margins of dumping.
For these reasons, we decide to examine first the claim of the European Co mmunities that the model
zeroing methodology employed by USDOC in the subject investigations is in breach of Article 2.4.2
of the AD Agreement.
3. Claim of the European Communities under Article 2.4.2 of the AD Agreement
(a) Arguments of the parties
7.14 The European Communities, referring to the Appellate Body report in EC – Bed Linen and
the panel and Appellate Body reports in US – Softwood Lumber V , submits that since Article 2.1 of
the AD Agreement defines "dumping" in relation to a produc t, the term "margins of dumping” in
Article 2.4.2 applies to the product subject to i nvestigation as a whole and not to models, types or
categories of a product. Intermediate margins cal culated by the USDOC in respect of particular
models are not margins of dumping within the mean ing of Article 2.4.2. Having defined the product
subject to investigation, USDOC was bound by its ow n logic and should have determined a margin of
dumping in conformity with Article 2.4.2 for the product as a whole. Thus, USDOC, which correctly

121 EC-First Written Submission, paras, 90, 94, 98, 100, 101, 198, 200, 205, 209 and 210.

compared a weighted average normal value to a we ighted average export price of all transactions
within individual averaging groups, including expor t prices above normal value, should also have
incorporated "negative margins" of particular averaging groups when it calculated a margin of
dumping for the product as a whole. The European Communities asserts that this interpretation is
supported by the fact that Article 2.4.2 requires a simple comparison between export price and normal
value, and that any difference between export price and normal value, whether positive or negative, is
a "margin" for purposes of Article 2.4.2. The Euro pean Communities also reca lls that the Appellate
Body reports in EC – Bed Linen and US – Softwood Lumber V reject the view that where a margin of
dumping is calculated on the basis of comparison s between export price and normal value in
individual averaging groups, Article 2.4.2 only applies to the comparisons within these groups and not
to the subsequent aggregation of these results into an overall margin.122
7.15 The United States disagrees that the term "margins of dumping" in Article 2.4.2 of the
AD Agreement can only apply to the product under investigation as a whole, and not to a product type,
model or category. The GATT 1994 and the AD Agreement demonstrate that the drafters used the
term "margin of dumping" to refer both to the r esults of particular comparisons between normal value
and export price and to the overall results of those comparisons. 123 The United States considers that
the Appellate Body erred in finding, in US – Softwood Lumber V, that the AD Agreement requires
Members, in the investigation phase, to calculate and give credit for weighted average comparisons
when the export price exceeds the normal value. First, it is factually incorrect to contend that USDOC
"excludes" non-dumped transactions from the calcu lation of an overall margin of dumping under the
average-to-average comparison method used in th e investigation phase because, taken together, the
averaging groups comprise all comparable export transactions and because all export transactions are
included in the figure by which the aggregate amount of dumping is divided. Second, Article 2.4.2
restricts the use of the average-to-transaction co mparison method in the investigation phase but does
not address the offsetting of negative dumping. The negotiating history of Article 2.4.2 demonstrates
that negotiators were only able to reach a limited agreement on the issue of "asymmetry" and that the
issue of zeroing was raised but ultimately not addr essed. Moreover, the concept of negative margins
is without textual support in Ar ticle VI of the GATT 1994 or the AD Agreement. In the context of
Article VI of the GATT 1994 and the AD Agreement , the term "margin of dumping" refers to the
amount by which normal value exceeds the export price. Article 2.4.2 does not in any way modify
this meaning of "margin of dumping" and contains no reference to the concept of negative margins of
dumping. Since Article 2.4.2 contains no obligatio n to calculate an overall margin of dumping, let
alone any obligations detailing the manner in which such a calculation must be performed, it cannot
serve as the basis for finding a requirement to offset negative dumping.
124
(b) Arguments of third parties
7.16 Argentina agrees with the European Communities that the use of model zeroing by USDOC
in original investigations is in consistent with Article 2.4.2 becau se, as the Appellate Body found in
EC – Bed Linen and US – Softwood Lumber V , zeroing fails to take into account all transactions used
to serve as the basis for the determination of the existence dumping.
7.17 Hong Kong, China submits that the Appellate Body has already held in EC – Bed Linen and
US – Softwood Lumber V that the use of the model zeroing methodology in the context of a weighted-
average-to weighted average comparison between e xport price and normal value is inconsistent with
Article 2.4.2 because by using such a methodology an authority fails to establish an overall margin of
dumping for the product under investigation on the basis of all comparable export transactions.

122 EC-First Written Submission, paras. 75-89.
123 US-Closing Statement at the First Substantive Meeting of the Panel, paras. 9-12.
124 US-Second Written Submission, paras. 81-96.

7.18 Japan submits that, as held by the Appellate Body in EC – Bed Linen and US – Corrosion-
Resistant Steel Sunset Review , both model zeroing and simple zeroing are inconsistent with the "fair
comparison" requirement contained in Articles 2. 4 and 2.4.2. Specifically with regard to
Article 2.4.2, Japan notes in this connection that zeroing amounts to a failure to take into account
prices of all comparable export transactions.
7.19 India submits that, as found by the Appellate Body in EC – Bed Linen , model zeroing is
inconsistent with the "fair comparison" required by Articles 2.4 and 2.4.2 because it means that an
authority does not fully take into account the prices of all comparable export transactions.
7.20 Korea submits that the decisions of the Appellate Body in EC – Bed Linen, US – Corrosion-
Resistant Steel Sunset Review and US – Softwood Lumber V make it clear that zeroing is inconsistent
with Articles 2.4 and 2.4.2 of the AD Agreement because it involves a failure to take into account all
comparable export transactions.
7.21 Mexico argues that model zeroing as used by USDOC in original investigations is
inconsistent with Article 2.4.2 of the AD Agreement because USDOC failed to fully take account of
prices of all comparable export transactions. USDOC thereby also failed to make a fair comparison,
as required by Article 2.4.
7.22 Norway submits that the prohibition against zeroing in original investigations (and in reviews
under Article 11.3 of the AD Agreement) has already been established by the Appellate Body in EC –
Bed Linen, US – Corrosion-Resistant Steel Sunset Review and US – Softwood Lumber V.
7.23 Turkey argues that the model zeroing method used by the United States in determining the
dumping margin in original investigations leads to an unfair comparison of export price and normal
value within the meaning of Articles 2.4 and 2.4.2 of the AD Agreement. Turkey refers in this regard
to the panel and Appellate Body ruling in EC – Bed Linen that Article 2.4.2 requires authorities to
take full account of prices of all comparable export transactions and that margins of dumping can only
be established for the product under investigation as a whole.
(c) Evaluation by the Panel
7.24 In the anti-dumping investigations at issue in the present dispute
125 USDOC first compared
normal values and export prices for individual mode ls of the subject product. For each model, a
weighted average normal value was compared to a weighted average of prices of all export
transactions, which, by definition, included export prices of individual transactions that were above
normal value. USDOC then aggregated the resu lts of these model-specific weighted-average-to-
weighted average comparisons into an overall dum ping margin for the product under investigation for
each exporter/manufacturer. In so doing, USDOC did not include in the numerator used to calculate
the overall dumping margin the results of those comp arisons where the weighted-average export price
of a model exceeded its weighted-average normal value. It is not in dispute that USDOC included all
export transactions in the denominator of this overall dumping margin calculation.
7.25 The European Communities does not cha llenge the use of multiple averaging per se i.e. the
making of separate comparisons between export prices and normal values for individual models.
126
Nor does it contest any aspect of the manner in which the model-specific comparisons of export prices
and normal value were made. Rather, the Eur opean Communities challenges the manner in which

125 Supra, footnote 119.
126 The Appellate Body has affirmed in US – Softwood Lumber V that "multiple averaging" is permitted
under Article 2.4.2 to establish the existence of marg ins of dumping for the product under investigation.
Appellate Body Report, US – Softwood Lumber V, para. 81.

USDOC aggregated the results of those comparisons for purposes of determining an overall margin
of dumping for the product subject to investigation. Specifically, the European Communities claims
that "the setting at zero" or zeroing of the results of comparisons in whic h weighted-average export
prices were above weighted-average normal values is inco nsistent with Article 2.4.2 of the
AD Agreement.
7.26 Article 2.4.2 of the AD Agreement provides:
"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. A normal value
established on a weighted average basis may be compared to prices of individual
export transactions if the authorities find a pattern of export prices which differ
significantly among different purchasers, regions or time periods, and if an
explanation is provided as to why such differences cannot be taken into account
appropriately by the use of a weighted av erage-to-weighted average or transaction-to-
transaction comparison."
The legal issue presented by the claim of the Eur opean Communities under Article 2.4.2 concerns the
interpretation of the first of the two methods set out in the first sentence of Article 2.4.2. In particular,
the question is whether establishing "the existen ce of margins of dumping during the investigation
phase...on the basis of a comparison of a weighted average normal value with a weighted average of
prices of all comparable export transactions" means that, if multiple comparisons are made between
export price and normal value for individual models, all differences between weighted average export
prices and weighted average normal values resultin g from such comparisons, positive or negative,
must be fully reflected in the computation of the overall margin of dumping for the product in
question.

7.27 We recall that in EC – Bed Linen and US – Softwood Lumber V, which both involved original
investigations, the panels and the Appellate Body found that, if an authority divides a product into
different models, compares the weighted average of prices of all comparable export transactions and
weighted average normal value for each of those models and aggregates the results of those model-by-
model comparisons to arrive at a margin of dumping for the product as a whole, it is inconsistent with
Article 2.4.2 not to include in the numerator the r esults of comparisons where the weighted average of
prices of all comparable export transactions is above the weighted average normal value.
127
7.28 The information before us shows that in the anti-dumping investigations at issue in this
dispute128 USDOC calculated aggregate margins of dumping in a manner that, with respect to the
treatment of weighted-average export prices that we re above normal value, was identical in relevant
respects to the zeroing methodology considered by the panels and Appellate Body in EC – Bed Linen
and US – Softwood Lumber V. 129

127 Appellate Body Report, EC – Bed Linen , paras. 46-66; Appellate Body Report, US – Softwood
Lumber V, paras. 76-117. In US – Softwood Lumber V , the Appellate Body emphasized that its analysis was
limited to the use of zeroing in the context of the weighted-average-to-weighted-average comparison
methodology provided for in the first sentence of Article 2.4.2. Appellate Body Report, US – Softwood
Lumber V, paras. 63, 104-105 and 108.
128 Supra, footnote 119.
129 E.g., Issues and Decision Memo for the Antidumping Duty Investigation of Stainless Steel Bar from
Italy; Final Determination , pp. 3-5, Comment 1: Treatment of Sales Above Normal Value, Exhibit EC-1.3.

7.29 The Panel has carefully considered the arguments advanced by the United States with respect
to what the United States considers to be flaws in the reasoning of the Appellate Body in US –
Softwood Lumber V. In this respect, we are mindful of our obligations under Article 11 of the DSU.
At the same time, we note that the issues raised by the United States regarding the meaning of the
term "margin of dumping" and the relevance of th e historical background of Article 2.4.2 of the AD
Agreement were addressed by the Appellate Body in US – Softwood Lumber V.
7.30 Although previous Appellate Body decisions are not strictly speaking binding on panels, there
clearly is an expectation that panels will follow su ch decisions in subsequent cases raising issues that
the Appellate Body has expressly addressed. The A ppellate Body has stated that adopted Appellate
Body reports should be taken into account where they are relevant to any dispute.
130 I n US – Oil
Country Tubular Goods Sunset Reviews, the Appellate Body specifically stated that:
"... following the Appellate Body's conc lusions in earlier disputes is not only
appropriate, but is what would be expected from panels, especially where the issues
are the same".
131
We also note that Article 3.2 of the DSU refers to the DSU as "a central element in providing security
and predictability to the multilateral trading system".
7.31 Therefore, we do not believe that it would be a ppropriate for us to depart from the Appellate
Body's conclusion that when a margin of dumping is calculated on the basis of multiple averaging by
model type, the margin of dumping for the product in question must reflect the results of all such
comparisons, including weighted average export pri ces that are above the normal value for individual
models.
7.32 In light of the foregoing considerations, the Panel finds that the United States has acted in
breach of Article 2.4.2 of the AD Agreement when in the anti-dumping investigations at issue 132
USDOC did not include in the numerator used to calculate weighted average dumping margins any
amounts by which average export prices in individu al averaging groups exceeded the average normal
value for such groups.
4. Claim of the European Communities under Article 2.4 of the AD Agreement
7.33 In light of its finding with respect to the claim of the European Communities under
Article 2.4.2 of the AD Agreement, the Panel considers that it is not necessary to address the claim of
the European Communities that the application of the model zeroing method in these investigations
was also inconsistent with Article 2.4 of the AD Agreement.133
5. Claims of the European Communities under other provisions of the AD Agreement ,
Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement.
7.34 The Panel also perceives no need to pronounce on the dependent claims raised by the
European Communities under Articles 1; 3.1, 3.2 and 3.5; 5.8; 9.3; and 18.4 of the AD Agreement,

See Panel Report, EC – Bed Linen , para. 6.102 and Panel Report , US – Softwood Lumber V , para. 7.185 for a
description of the zeroing methodology at issue in those cases.
130 Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para. 109.
131 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 188.
132 Supra, footnote 119.
133 We note that the panels in EC – Tube or Pipe Fittings and in US – Softwood Lumber V likewise
declined to make a finding on whether zeroing is inconsistent with the "fair comparison" language of Article 2.4
once they had found this zeroing method to be inconsistent with Article 2.4.2 of the AD Agreement . Panel
Report, EC – Tube or Pipe Fittings, para. 7.219; Panel Report, US – Softwood Lumber V, para. 7.226.

Articles VI:1 and VI:2 of the GATT 1994 and Article XVI: 4 of the WTO Agreement. Deciding such
dependent claims would provide no additional guidance as to the steps to be undertaken by the United
States in order to implement our recommendation regarding the violation on which it is dependent.134
D. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF "STANDARD ZEROING
PROCEDURES" AND CERTAIN PROVISIONS OF THE TARIFF ACT IN RELATION TO ORIGINAL
INVESTIGATIONS
7.35 The European Communities claims that, with respect to the use of a zeroing 135 methodology
in the calculation of margins of dumping in orig inal investigations, USDOC's "Standard Zeroing
Procedures" and certain provisions of the Tariff Ac t of 1930, as amended ("Tariff Act") are as such
inconsistent with Articles 2.4 and 2.4.2, 5.8, 9.3, 1 and 18.4 of the AD Agreement, Articles VI:1 and
VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement.
7.36 It is not in dispute that the provisions of the Tariff Act, as such, can be challenged as
measures. By contrast, the parties disagree on wh ether what has been described for the purposes of
this dispute by the European Communities as "S tandard Zeroing Procedures", as such, constitute
measures that can be challenged in WTO dispute settlement. Because it is possible that a finding with
respect to the merits of the claims of the Europ ean Communities regarding the provisions of the Tariff
Act may obviate the need to address the issue of the status of the "Standard Zeroing Procedures", we
examine first the "as such" claims of the European Communities regarding the Tariff Act.
1. The "as such" claims of the European Communities with respect to the Tariff Act
(a) Relevant provisions
7.37 The provisions of the Tariff Act challenged by the European Communities are: (i)
Sections 771(35)(A) and (B); (ii) Section 731; and (iii) Section 777A(d).136
7.38 Section 771(35) of the Tariff Act137 provides:
 "DUMPING MARGIN; WEIGHTED AVERAGE DUMPING MARGIN

(A) Dumping margin. The term "dumping margin" means the amount by which the
normal value exceeds the export price or constructed export price of the subject
merchandise.
(B) Weighted average dumping margin. The term "weighted average dumping
margin" is the percentage determined by dividing the aggregate dumping margins

134 Our decision not to make findings on dependent claims is consistent with the approach followed in
recent panel reports, including, for example, Panel Report, US – Softwood Lumber V, para. 7.378; Panel Report,
Argentina –Poultry Anti-Dumping Duties, para. 7.369; Panel Report, US – Softwood Lumber VI, para. 8.4.
135 It is our understanding, particularly in light of the discussion in paragraphs 146-147 of the EC-First
Written Submission of "other averaging groups", that the European Communities challenges the provisions of
the Tariff Act and the "Standard Zeroing Procedures" with respect to both model zeroing i.e. zeroing when
multiple comparisons are made using averaging groups ba sed on physical characteris tics and zeroing involving
the use of averaging groups established on the basis of other criteria.
136 Although the first written submission of the European Communities includes the Statement of
Administrative Action ("SAA") among the measures at issue, it is our understanding that the European
Communities does not request us to make a separate finding on the SAA as a measure which is as such WTO-
inconsistent. EC-Response to Panel Question 50; EC-Rebuttal Submission, para. 68.
137 Section 771 ("Definitions; Special Rules") is the fi rst provision in Subtitle D ("General Provisions")
in Title VII of the Tariff Act ("Countervailing and Antidumping Duties").

determined for a specific exporter or producer by the aggregate export prices and
constructed export prices of such exporter or producer."
7.39 Section 731 of the Tariff Act
138 provides:
 "ANTIDUMPING DUTIES IMPOSED

 If :

(1) The administering authority determines th at a class or kind of foreign merchandise is
being, or is likely to be, sold in the United States at less than its fair value; and
(2) The Commission determines that:
(A) An industry in the United States:
 (i) is materially injured, or
 (ii) is threatened with material injury, or
(B) the establishment of an industry in the United States is materially retarded, by
reason of imports of that merchandise or by reason of sales (or the likelihood of sales)
of that merchandise for importation, then there shall be imposed upon such
merchandise an antidumping duty, in addition to any other duty imposed, in an
amount equal to the amount by which the normal value exceeds the export price (or
the constructed export price) for the merc handise. For purposes of this subsection
and Section 735(b)(1), a reference to the sale of foreign merchandise includes the
entering into of any leasing arrangement rega rding the merchandise that is equivalent
to the age sale of the merchandise."
7.40 Section 777A(d) of the Tariff Act
139 provides:
"(d) Determination of Less Than Fair Value.

 (1) Investigations.

(A) In general. In an investigation un der subtitle B, the administering authority
shall determine whether the subject merchandi se is being sold in the United States at
less than fair value
(i) by comparing the weighted av erage of the normal values to the
weighted average of the export prices (and constructed export prices)
for comparable merchandise, or
(ii) by comparing the normal values of individual transactions to the
export prices (or constructed export prices) of individual transactions
for comparable merchandise.

138 Section 731 is the first provision in Subtitle B ("Imposition of Antidumping Duties") in Title VII of
the Tariff Act.
139 Section 777A ("Sampling and averaging; determination of weighted average dumping margin and
countervailable subsidy rate") is contained in Subtitle D ("General Provisions") of Title VII of the Tariff Act.

(B) Exception. The administering authority may determine whether the subject
merchandise is being sold in the United States at less than fair value by comparing the
weighted average of the normal values to the export prices (or constructed export
prices) of individual transactions for comparable merchandise, if
(i) there is a pattern of export prices (or constructed export prices) for
comparable merchandise that differ significantly among purchasers,
regions, or periods of time, and
(ii) the administering authority explains why such differences cannot be
taken into account using a method described in paragraph (1)(A)(i)
or (ii).
 (2) Reviews. In a review under Secti on 751, when comparing export prices (or
constructed export prices) of individual transactions to the weighted average price of
sales of the foreign like product, the admini stering authority shall limit its averaging
of prices to a period not exceeding the calendar month that corresponds most closely
to the calendar month of the individual export sale."

(b) Arguments of the parties
7.41 The European Communities submits that Section 771(35)(A) of the Tariff Act is
inconsistent with the requirement of Articles 2.4 and 2.4.2 of the AD Agreement that any difference
between export price and normal value be treated as a margin of dumping because (a) it expressly
provides only for the measurement of the amount by which the normal value exceeds the export price,
(b) it uses the word "amount", which requires or at the very least strongly suggests a positive result
and (c) it uses the concept of "dumping margin" which is almost indistinguishable from the concept of
"margins of dumping" in Article 2.4.2 but which h as a different meaning, thus obfuscating the proper
application of the AD Agreement.
140
7.42 Regarding Section 771(35)(B) of the Tariff Act, the European Communiti es asserts that this
provision is inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement because the use of the word
"aggregate" rather than "average" suggests something that is positive and because the use of the plural
"dumping margins" for an individual exporter is inconsistent with Article 2.4.2 as dumping and
margins of dumping can only be established in relation to the subject product as a whole.141
7.43 The European Communities submits that Section 731 of the Tariff Act, which provides for the
imposition of an anti-dumping duty "in an amount equal to the amount by which the normal value
exceeds the export price" is in consistent as such with the AD Agreement because it is vitiated by the
same language as Section 771(35)(A) and (B).142
7.44 The European Communities submits that Section 777A of the Tariff Act only provides for the
possibility of determining that the subject merchandi se is sold at less than fair value, rather than
providing for the simple comparison required by Article 2.4 of the AD Agreement. Second, instead of
the words "all comparable" used in Article 2.4 of the AD Agreement, it uses the word "comparable".143

140 EC-First Written Submission, paras. 132-136.
141 EC-First Written Submission, paras. 139-141.
143 EC-First Written Submission, para. 145. The European Communities also argues that the
juxtaposition between investigations and reviews indicates that the requirement contained in Section 777A(d)(1)
of a symmetrical comparison method may be abandoned during reviews, including periodic reviews of the
amount of the duty, and that this is inconsistent with Article 9.3 of the AD Agreement, which requires that the

7.45 The European Communities asserts that the relevant standard with respect to "as such" claims
is whether a measure is in conformity with the AD Agreement , i.e. whether or not it is a sound
implementation. If a domestic law contributes forceful ly to the adoption of a series of measures that
are inconsistent with the AD Agreement, this means that the root of the problem lies at least in part
with the relevant provision of that law. That the provisions of the Tariff Act are at least in part the
source of the inconsistency is evident from the fact that USDOC has repeatedly asserted that zeroing
is required by these provisions.
144
7.46 The European Communities considers that whethe r legislation is mandatory or discretionary
is only one of the questions to be examined in determining its compatibility with WTO provisions. If
a measure is discretionary, its effects must also be taken into account. In determining whether
legislation is WTO-inconsistent as such, one must weigh and assess all relevant factual evidence to
determine whether it is possible to determine wh ether the law, or more generally the document
containing the general rule or norm for prospective a pplication is the root of the problem. Under this
approach, legislation that is open to interpretation and is in fact consistently interpreted and applied by
the investigating authority as permitting WTO-inconsis tent conduct could be fou nd to be inconsistent
as such.145
7.47 The United States submits that Sections 771(35)(A) and (B) and 777A(d) of the Tariff Act
are not inconsistent as such with the WTO provi sions cited by the European Communities because
they do not prohibit USDOC from providing an offset for non-dumped transactions. The European
Communities cannot demonstrate that these provisions prohibit USDOC from providing an offset for
non-dumped transactions because the United States Cour t of Appeals for the Federal Circuit has held
twice that the Tariff Act, including these provisi ons in particular, does not require the use of
zeroing.
146
7.48 The United States submits in this connection that a measure is WTO-inconsistent as such if it
mandates WTO-inconsistent action or precludes WTO-consistent action. 147 Numerous panel reports
have applied this mandatory/discretionary distinc tion and there has been no instance in which a panel
or the Appellate Body has found a measure WTO-in consistent as such if the measure was found to
neither mandate WTO-inconsistent action nor preclude WTO-consistent action. The United States
rejects the argument of certain third parties that recent Appellate Body d ecisions have called into
question the mandatory/discretionary test and re fers in this respect to the panel report in Korea –
Commercial Vessels. The United States asserts that the Eu ropean Communities has not been able to
cite any panel or Appellate Body report that supports its approach to determining when legislation is
WTO-inconsistent as such.148

amount of the anti-dumping duty shall no t exceed the margin of dumping as established under Article 2. We
consider that this argument concerning the alleged non-application to administrative reviews of the requirement
of a symmetrical comparison method in Section 777A(d)(1) logically cannot be a basis for a finding that this
provision is WTO-inconsistent as such in relation to investigations.
145 EC-Response to Panel Question 54.
146 US-First Written Submission, paras. 77-80. The two decisions referred to by the United States are:
Timken Co. v. United States , 354 F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 U.S. App. LEXIS 6741
(March 17, 2004), cert. denied, 160 L. Ed.2d 352, 125 S. Ct. 412 (U.S. 2004) and Corus Staal BV v.
United States, No. 04-1107, 2005 U.S. App. LEXIS 1077 (Fed. Cir., 21 January 2005). Exhibits US-1 and 2.
147 US-First Written Submission paras. 71-73.
148 US-Response to Panel Question 55; US-Second Written Submission, paras. 40-45.

(c) Arguments of third parties
7.49 Third parties have not submitted arguments specifi cally in respect of the particular provisions
of the Tariff Act challenged by the European Communities in this dispute.149 150
(d) Evaluation by the Panel
7.50 It is well-established in GATT and WTO dis pute settlement practice that a Member may
bring a complaint under the DSU with respect to another Member's legislation as such 151
i.e. "independently from the application of that legislation in specific instances". 152 Thus, legislation
as such can be a "measure" as that term is used in the DSU.153
7.51 The Appellate Body has on several occasions pr onounced on the burden of proof and relevant
evidence to sustain an "as such" claim with respect to legislation:
"... a responding Member's law will be tr eated as WTO-consistent until proven
otherwise. The party asserting that another party's municipal law, as such, is
inconsistent with relevant treaty obligati ons bears the burden of introducing evidence
as to the scope and meaning of such law to s ubstantiate that assertion. Such evidence
will typically be produced in the form of th e text of the relevant legislation or legal
instruments, which may be supported, as appr opriate, by evidence of the consistent
application of such laws, the pronouncemen ts of domestic courts on the meaning of
such laws, the opinions of legal experts a nd the writings of recognized scholars. The
nature and extent of the evidence required to satisfy the burden of proof will vary
from case to case."
154
7.52 The Appellate Body has also emphasized that:
"[w]hen a measure is challenged 'as such', th e starting point for an analysis must be
the measure on its face. If the meaning and content of the measure are clear on its
face, then the consistency of the measure as such can be assessed on that basis alone.

149 While Mexico argues that the United States' legal rules on anti-dumping, specifically
sections 771(35)(A) and (B) and Section 777A(d) of the Tariff Act are inconsistent as such with Articles 2.4,
2.4.2, 9.3, 11 and 18.4 of the AD Agreement, Article VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the
WTO Agreement, Mexico has not elabor ated this argument through a textual analysis of the provisions in
question.
150 We note that in connection with the issue of wh ether "Standard Zeroing Procedures" are measures
that can be challenged as such, some third parties have presented arguments that are also relevant to the question
of how to determine whether legislation is WTO-inconsistent as such, notably regarding the
mandatory/discretionary distinction.
151 E.g., Appellate Body Report, Dominican Republic – Import and Sale of Cigarettes , para. 107;
Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 165; Appellate Body Report,
US – Corrosion-Resistant Steel Sunset Review , paras. 82 and 85; Appellate Body Report, US – Carbon Steel,
para. 156; Appellate Body Report, US - 1916 Act, paras. 60-68. In the case of the AD Agreement, Article 18.1
and 18.4 provide additional support for the view that legislation can be challenged as such. Appellate Body
Report, US – 1916 Act, paras. 77-82
152 Appellate Body Report, US – 1916 Act, paras. 60-61.
153 E.g., DSU Arts. 3.3 and 4.2. The DSU focuses on "measures" as the subject of challenge in WTO
dispute settlement. Appellate Body Report, US – Gambling, para. 123.
154 Appellate Body Report, US – Carbon Steel , para. 157 (footnote omitted); Appellate Body Report,
Dominican Republic – Import and Sale of Cigarettes , para. 111 and Appellate Body Report, US – Gambling ,
para. 138.

If, however, the meaning or content of the measure is not evident on its face, further
examination is required …"
155
7.53 WTO panels and the Appellate B ody have applied the principle, articulated by the Permanent
Court of International Justice, that municipal laws are facts before international tribunals. 156 O n e
aspect of this is the need for an international tri bunal to take account of decisions of domestic courts
on the meaning of municipal law. 157
7.54 While there is no disagreement between the parti es to the present dispute that legislation can
be challenged as such in WTO dispute settlemen t, they have expressed divergent views on the
substantive criterion for determining whether legislation is WTO-incons istent as such. In particular,
they disagree on the significance to be attached in this respect to whether legislation is "mandatory" or
"discretionary" with respect to the allegedly WTO-inconsistent conduct in question.
7.55 We note that a considerable number of WTO pa nel reports have applied the principle that
domestic legislation is WTO-inconsistent as such if it mandates WTO-inconsistent conduct but not if
it merely provides the executive branch with th e discretion to act inconsistently with WTO
obligations.158 Although the Appellate Body has in several cases found that legislation that provided
the executive with sufficient discretion to avoid ac ting inconsistently with WTO-obligations was not
WTO-inconsistent as such 159, it has also made it clear in US – Corrosion Resistant Steel Sunset
Review that it has not "pronounce[d] generally upon the continuing relevance or significance" of the
mandatory/discretionary distinction".160 The Appellate Body went on to observe that:
"... Nor do we consider that this appeal calls for us to undertake a comprehensive
examination of this distinction. We do, ne vertheless, wish to observe that, as with
any such analytical tool, the import of the 'mandatory/discretionary distinction' may

155 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 168; Appellate Body
Report, Dominican Republic – Import and Sale of Cigarettes, para. 112.
156 E.g., Appellate Body Report, India – Patents (US), paras. 65-67.
157 "Interpretation of their own laws by national courts is binding on an international tribunal". Ian
Brownlie, Principles of Public International Law, 5th Ed. (1998) p. 40.
158 E.g., Argentina – Textiles and Apparel , paras. 6.45-6.47; US – DRAMS , paras. 6.51 and 6.53;
Canada – Aircraft , paras. 9.127-9.129; Turkey – Textiles, para. 9.37 ; US – 1916 Act (EC ), paras. 6.168-6.169;
US - Hot-Rolled Steel , para. 7.90; US – Export Restraints , paras. 8.4-8.9; Brazil – Aircraft (Article 21.5 –
Canada II), paras. 5.9-5.12; Canada – Aircraft Credits and Guarantees , paras. 7.56-7.59; US - Carbon Steel ,
para. 8.102; US – Section 211 Appropriations Act , paras. 8.136-8.137; US – Countervailing Measures on
Certain EC Products , paras. 7.120-7.123; US – Steel Plate , paras. 7.88-7.90; US – Section 129(c)(1) URAA ,
159 E.g., Appellate Body Report, US – Countervailing Measures on Certain EC Products, para. 159.
160 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93. A footnote to this
sentence explains that: "In our Report in US – 1916 Act, we examined the challenged legislation and found that
the alleged 'discretionary' elements of that legislation were not of a type that , even under the
mandatory/discretionary distinction , would have led to the measure bei ng classified as 'discretionary' and
therefore consistent with the AD Agreement. In other words, we assumed that the distinction could be applied
because it did not, in any event, affect the outcome of our analysis. We specifically indicated that it was not
necessary, in that appeal, for us to answer 'the question of the continuing relevance of the distinction between
mandatory and discretionary legislation for claims brought under the AD Agreement'. (Appellate Body Report,
US – 1916 Act, para. 99) We also expressly declined to answer this question in footnote 334 to para. 159 of our
Report in US – Countervailing Measures on Certain EC Products. Furthermore, the appeal in US – Section 211
Appropriations Act presented a unique set of circumstances. In that case, in defending the measure challenged
by the European Communities, the United States unsuccessfully argued that discretionary regulations, issued
under a separate law, cured the discriminatory aspect s of the measure at issue." Appellate Body Report, US –
Corrosion-Resistant Steel Sunset Review, para. 93, footnote 94 (emphasis original).

vary from case to case. For this reason, we also wish to caution against the
application of this distinction in a mechanistic fashion."161
7.56 The parties and third parties have expressed sh arply divergent views with respect to the
question of whether the mandatory/discretiona ry distinction continues to be relevant. 162 We consider,
however, that it is neither necessary nor appropriate for us to articulate a comprehensive view on this
question in the abstract. Instead, we will address this issue only to the extent necessary in light of our
analysis of the provisions challenged by the European Communities in this proceeding.
7.57 In this regard, we recall that the issue before us is the alleged WTO-in consistency of certain
provisions of the Tariff Act with regard to the manner in which export prices that are above the
normal value are treated if an overall margin of dumping for a product is calculated based on the
results of average-to-average comparisons betw een export price and normal value for individual
averaging groups. As explained below, in our view, the text of these provisions simply does not
address this particular aspect of the methodology for calculating a dumping margin.
7.58 We recall that the textual basis of the claim of the European Communities with respect to
Section 771(35)(A) and (B) is the use of the word "amount", the phrase "amount by which the normal
value exceeds the export price or constructed expor t price...", the use of the concept of "dumping
margin", the use of the plural "dumping margins" in relation to individual exporters and the use of the
word "aggregate" rather than "average".
7.59 We consider that the word "amount" and th e phrase "the amount by which the normal value
exceeds the export price or constructed export price" in Section 771 (35)(A) reflect the fact that this
provision addresses the magnitude and not just the existence of dumping per se. In this regard, we
note that Article VI:2 of the GATT 1994, read toge ther with Article VI:1, defines the margin of
dumping as "the price difference" when products of one country are introduced into the commerce of
another country at less than their normal value. A product is introduced into the commerce of another
country at less than its normal value if its export pr ice is less than the comparable price for the like
product in the domestic market of the exporting countr y or in the absence of such a domestic price, is
less than a comparable price at which the product is exported to a third country or the constructed
value of the product. Thus, the concept of "margi n of dumping" in GATT Article VI is defined in
terms of a price difference in a situation in which a product is introduced into the commerce of
another country at less than its normal value i.e. when the export price of the product is less than the
normal value of the product. We fail to see how the word "amount" and the phrase "the amount by
which the normal value exceeds the export price or constructed export price..." are qualitatively
different from, and less neutral, than the notion of a price difference that exists when the export price
is less than the normal value. We consider that it is not possible to draw any conclusion from the use
of terminology that can be seen as simply paraphr asing the language of Article VI of the GATT 1994
as to the approach envisioned with respect to the specific issue of whether or not export prices above
normal value will be taken into account when an average dumping margin is calculated on the basis of
multiple comparisons.
7.60 Regarding the term "dumping margin(s)" in Sec tion 771(35)(A) and (B), we note that the use
of the plural "dumping margins" logically implies that there can be more than one "dumping margin"

161 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 93.
162 We also note that this matter has been discussed in recent panel reports. At least two recent panel
reports have relied on the mandatory/discretionary distinction in analyzing whether legislation is WTO-
inconsistent as such. Panel Report, US – Upland Cotton , paras. 7.333-7.336, 7.748 and 7.1092 and Panel
Report, Korea - Commercial Vessels , paras. 7.60-7.67. The latter panel report explicitly rejected the argument
of the European Communities that in US – Corrosion-Resistant Steel Sunset Review the Appellate Body had
ruled against the application of the traditional mandatory/discretionary distinction.

for a specific exporter or producer, which is in cont radiction with the interpretation of "margins of
dumping" by the Appellate Body. The term "dumping margin" as used in Section 771(35)(A) and (B)
would appear to refer to what the Appellate Body has termed "intermediate calculations" and
"intermediate values".
163 At the same time, a finding on whethe r legislation is WTO-inconsistent as
such should be based on the substantive content of th e legislation rather than on its terminology. The
issue before us is not whether Section 771(35) uses terminology that is different from the terminology
of relevant WTO provisions but whether it provides for a methodology that is substantively
inconsistent with the requirements of the AD Agreement regarding the calculation of "margins of
dumping". Since the use of "dumping margin" and the plural "dumping margins" do not indicate
whether in the aggregation phase account will be ta ken of average export prices that are above the
average normal values for particular averaging gr oups, we consider the difference in terminology
between these provisions and the relevant WTO provisi ons to be of no relevance to the issue before
us.
7.61 The use of the word "aggregate" in Section 771(35)(B) in our view reflects a necessary
feature of a method that calculates a margin of dumping on the basis of multiple comparisons between
export price and normal value because the results of those comparisons must be "combined". We note
in this regard that the Appellate Body has used th e same term "aggregate" in referring to the process
of combining the results of multiple comparisons.
164 The word "aggregate" in and of itself does not
indicate whether in the process of combining results of multiple comparisons results of comparisons
in averaging groups in which the average export price is higher than the normal value will be included
in the numerator of the average dumping margin.165
7.62 Thus, our analysis of the specific textual ar guments of the European Communities in support
of its claim that certain provisions of the Tariff Ac t are as such WTO-inconsistent with regard to the
use of model zeroing in original investigations l eads to the conclusion that those provisions do not
speak to that issue.
7.63 In any event, even if we had come to a different understanding of the meaning of these
provisions of the Tariff Act, we note that while USDOC has interpreted Section 771(35)(A) and (B)
of the Tariff Act as precluding it from taking into account "negative dumping margins" 166, the United
States Court of Appeals for the Federal Circuit has recently rejected the view that these provisions in
and of themselves require USDOC to disreg ard negative dumping margins. Thus, in Timken Co. v.
United States , the Court held that the word "exceeds " "could arguably allow for negative dumping
margins" and that, as a consequence, the definiti on of "dumping margin" as "the amount by which the
normal value exceeds the export price" " ...does not unambiguously require that dumping margins be

163 E.g., Appellate Body Report, US – Softwood Lumber V, para. 97.
164 Appellate Body Report, US – Softwood Lumber V, paras. 97-98.
165 The argument of the European Communities with respect to Section 731 of the Tariff Act is based
on the use of the phrase "the amount by which the normal value exceeds the export price...". We have already
analyzed this language above in connec tion with Section 771(35) (A) and (B). That analysis also applies to the
issue raised by the European Communities in respect of the reference in Section 777A(d) to merchandise "being
sold in the United States at less than fair value". Finally, we note the argument of the European Communities
related to the fact that Section 777A(d) uses the word "comparable" rather than "all comparable". We see
nothing in the text or context of Section 777A(d) to warrant the conclusion that this provision envisages or
permits a comparison between a weighted average normal value and a weighted average export price that does
not reflect all export transactions. As noted above, a finding that a domestic law is WTO-inconsistent as such
cannot be based upon a mere difference in terminology between that law and the relevant WTO provision. We
note that it is not contested in this dispute that when USDOC computes an average dumping margin based on
multiple comparisons, it includes the values of all expo rt transactions in the denominator of that dumping
margin.
166 E.g., the Issues and Decision Memo for the Antidumping Duty Investigation of Stainless Steel Bar
from Italy; Final Determination , 23 January 2002, p. 4.

positive numbers". In fact, the Court further explaine d that "the statute does not directly speak to the
issue of negative-value dumping margins". 167 In light of this finding, the Court examined whether
USDOC's interpretation was "based on a permissible statutory construction". The Court held that
USDOC "reasonably interpreted §1677(35)(A) to al low for zeroing" and that "Commerce based its
zeroing practice on a reasonable interpretation of the statute".
168 Moreover, most recently, in Corus
Staal BV v. United States , the Court observed that "Section 1677(35) presented Commerce with a
choice as to how it calculates weighted-average dumping margins". 169 We conclude therefore that the
Court has established that the Tariff Act does no t require, albeit that it does not preclude, USDOC
from zeroing.
7.64 The meaning of municipal law in a WTO dis pute settlement proceeding is a fact to be
established by relevant evidence. Although relevant evidence of the meaning of a law may take
various forms, including evidence of th e consistent application of the law 170 we must accord greater
weight to the interpretation of the meaning of domestic law by the competent domestic tribunal than
to the interpretation by the agency administering that law. We note in this respect the statement of the
United States that "the Federal Circuit has the final say as to what the U.S. antidumping statute
means".171
7.65 We recall that the Court found that the provisions of the Tariff Act at issue "do not directly
speak to the issue" of (model) zeroing, that th e law "presents Commerce with a choice" and that
"Commerce reasonably interpreted" the statute "to allow for zeroing". Therefore, we conclude from
our own analysis of the text of the provisions of the Tariff Act challenged by the European
Communities and from the decisions of the United States Court of Appeals for the Federal Circuit that
these provisions do not specifically address the issue of zeroing.
7.66 It is clear to us that under the "mandatory/d iscretionary" approach as applied in many GATT
and WTO panel reports, the provisions of the Tari ff Act challenged by the European Communities
cannot be found to be WTO-inconsistent as such sinc e they cannot be considered to be "mandatory"
within the meaning of that distinction. We also note, however, that while the Appellate Body has not
rejected the validity of the mandatory/discretionary distinction as an "analytical tool", it has also
indicated that it had not yet pronounced on the continuing relevance or significance of this distinction
and has cautioned against its mechanistic application.
172
7.67 In that connection, we have found in the present case that the provisions of law that are being
challenged as WTO-inconsistent as such do not specifi cally address the issue in respect of which it is
claimed that they are WTO-inconsistent. If we had found that the relevant provisions of the
Tariff Act, while not requiring the use of a zeroing methodology, at least specifically addressed that, it
might perhaps have been necessary to reach the question whether recent Appellate Body decisions 173
should perhaps be understood to mean that a provis ion of a law can be WTO-inconsistent if it
envisions WTO-inconsistent conduct without necessarily requiring such conduct. However, while we
are cognizant of the need for caution with respect to the application of what after all is nothing more

167 Timken Co. v. United States , 354 F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 U.S. App.
LEXIS 6741 (17 March 2004), cert. denied, 160 L. Ed.2d 352, 125 S. Ct. 412 (U.S. 2004), US Exhibit 1, p. 4.
168 Timken Co. v. United States , 354 F.3d 1334 (Fed. Cir. 2004), rehearing denied, 2004 U.S. App.
LEXIS 6741 (17 March 2004), cert. denied, 160 L. Ed.2d 352, 125 S. Ct. 412 (U.S. 2004), US Exhibit 1, pp. 4-
6.
169 Corus Staal BV v. United States , No. 04-1107, 2005 U.S. App. LEXIS 1077 (Fed. Cir.,
21 January 2005), US Exhibit 2, p. 5 (emphasis added).
170 Supra, para. 7.51
171 US-First Written Submission, para. 80. Review by the United States Supreme Court is possible in
theory but it would appear that this has never occurred in practice.
172 Supra, para. 7.55.
173 For example, Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review.

than an "analytical tool", we cannot see any su pport in GATT and WTO dispute settlement practice,
including recent Appellate Body decisions, for th e proposition that a law can be found to be WTO-
inconsistent as such with respect to an issue that it does not specifically address. In our view, the very
notion of a law as being WTO-inconsistent necessarily entails that the law must address that issue
with a certain degree of specificity. In this case such specificity does not exist. While the law at issue
envisions the calculation of dumping margins, the rele vant United States court has made clear that as
the provisions of the law "do not directly speak to the issue", USDOC retains the freedom in making
those calculations as to whether to zero or not.
7.68 We note, in this respect, the argument of the European Communities that an "as such" finding
should be possible where it can be determined that a provision of a law contributes forcefully to the
adoption of a series of WTO-inconsistent measures a nd is thereby "the root of the problem" and the
"source" of the inconsistency.
174 While we are not entirely sure what the European Communities
means by this, if it means that a law can be found to be WTO-inconsistent as such even where it does
not address the issue, we reject that position. 175
7.69 The Panel therefore finds that Sections 771(35)(A) and (B), 731 and 777A(d) of the Tariff
Act are not as such inconsistent with Articl es 2.4, 2.4.2, 5.8, 9.3, 1 and 18.4 of the AD Agreement,
Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement with respect to
the use of a zeroing methodology in the calculation of margins of dumping in original investigations.
2. The "as such" claims of the European Commu nities with respect to "standard zeroing
procedures"
(a) Measures at issue
7.70 The European Communities uses the term "Standa rd Zeroing Procedures" in this proceeding
to refer to specific lines of computer code cont ained in the AD Margin Programme, one of the
computer programmes that incorporate USDOC's current calculation methodology, which separate
sales with "positive margins" and sales with "n egative margins" and subtotal only the dumping
amounts for sales with "positive margins". The Europ ean Communities refers in particular to the line
WHERE EMARGIN GT 0.176
7.71 The term "Standard Zeroing Procedures" is not used in United States anti-dumping laws and
regulations.
7.72 Since the claim of the European Communities is with respect to the "'standard zeroing
procedures' (or the United States practice or methodology of zeroing)", the Panel has sought
clarification from the European Communities of whet her it is challenging a practice or methodology

175 With respect to the argument of the European Communities that the relevant criterion to apply in
case of an "as such" claim is whether a measure is "i n conformity" with WTO obligations, we note that the
Panel in US – 1916 Act (Japan) expressed the view that because of the "in conformity" language of Article 18.4
of the AD Agreement, the notion of mandatory/discretionary legislation was no longer relevant. However, the
Appellate Body in that case specifically stated that it did not find it necessa ry to consider whether Article 18.4
had supplanted or modified the distinction between manda tory and discretionary legislation and that the Panel
did not need to opine on this issue. With respect to the reasoning of the Panel in US - 1916 Act (Japan), we note
that a provision identical to Article 18.4 already existed in various Tokyo Round Agreements. No other WTO
panel has adopted the view that the mandatory/discreti onary distinction has lost its relevance because of
Article 18.4 of the AD Agreement (or Article 32.5 of the SCM Agreement).
176 EC-First Written Submission, paras. 16, 21-22, 37-38; EC-Response to Question from the
United States following the First Meeting, para. 5; EC-Response to Panel Question 51 (para. 166) and EC-
Rebuttal Submission, para. 69.

as a measure distinct from the standard zeroing pro cedures. In response, the European Communities
has stated that, although the computer programme is "the root of the problem", in order " to cover all
the bases", it is also challenging the "consistent prac tice" as such of the Unite d States with regard to
zeroing.
177 It is therefore our understanding that th e European Communities claims that both the
"Standard Zeroing Procedures" and the United States' practice or methodology of zeroing are WTO-
inconsistent as such.
(b) Arguments of the parties
7.73 The European Communities submits that the measure that consists of or includes the
Standard Zeroing Procedures (and the [Anti-Dumping Procedures] Manual to the extent it refers to the
Standard Computer Programmes), or the United States practice or methodology of zeroing 178 is as
such inconsistent with Articles 2.4, 2.4.2, 5.8, 9.3, 1 and 18.4 of the AD Agreement; Articles VI:1 and
VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement.
7.74 The European Communities argues that any act or omission attributable to a WTO Member
can be a measure that can be challenged in WTO di spute settlement, including not only particular acts
applied to a specific situation but also acts setting forth rules or norms that are intended to have
general and prospective application. There is no basis in the practice of the GATT and WTO
generally or in the provisions of the AD Agreement for finding that only certain types of measure can
be challenged as such under the AD Agreement. In order to demonstrate that the "Standard Zeroing
Procedures" are a "measure" the European Communities submits inter alia that the Anti-Dumping
Procedures Manual and the "Standard Zeroing Procedur es" are "administrative procedures" within the
meaning of Article 18.4 of the AD Agreement; that they have at least potentially some legal effects;
that in practice USDOC treats the "Standard Zeroing Procedures" as binding, at least until changed;
and that the purpose and effect of the "Standard Ze roing Procedures" is to ensure that equivalent
situations are automatically and consistently treated equally.179
7.75 The European Communities argues that, in light of Article 18.4 of the AD Agreement and
Article XVI:4 of the WTO Agreement, the correct legal test to apply to "as such" claims is whether or
not a measure that is being challenged as such is "i n conformity" with the relevant provisions of the
AD Agreement, and not whether the measure is mandatory or discretionary, whether it is binding or
whether it requires a Member to act in a WTO-inc onsistent manner in all cases. In any event,
whichever test is used, the mathematical character of the "Standard Zeroing Procedures" necessarily
means that they are WTO-inconsiste nt as such because they provide fo r the application of a standard
that differs from the standard set out in Article 2.4.2 of the AD Agreement.180
7.76 The European Communities states that it is ch allenging, first and foremost the Standard
AD Margin Programme but that to the extent necessar y, and in order to "cover all the bases" it is
challenging each part of the Anti-Dumping Procedures Manual referenced in the factual part of its
first written submission, including the instruction to use the Standard AD Margin Programme.181
7.77 The European Communities submits that it is not necessary for a measure to set out or
establish rules or norms in order for the measure to be reviewable under the DSU. In any event, the
Standard Anti-Dumping Margin Program does set out or establish rules or norms because it is
repeatedly referred to as a standard, is publishe d or issued under the authority of USDOC and
provides guidance to USDOC officials. The fact that the "Standard Zeroing Procedures" are

177 EC-Response to Panel Question 51.
179 EC-First Written Submission, paras. 104-124.
180 EC-First Written Submission, paras. 126-129.
181 EC-Response to Panel Question 53.

contained in a computer programme and that they can be seen as implementing something else does
not mean that they cannot be challenged as a meas ure. That the Standard Anti-Dumping Margin
Programme can be changed is irreleva nt; what matters is that, as it stands, it contains a standard rule
different from the rule prescribed by Article 2.4.2 of the AD Agreement.
182
7.78 The European Communities points out that while the standard computer programmes used by
USDOC may have undergone various changes, they have never been changed with respect to the
zeroing procedures at issue in this dispute.183
7.79 Regarding the issue of whether "practice" can be a "measure", the European Communities
submits that whatever panels may or may not have said on this point in past cases, the particular
factual circumstances of the present case justify an "as such" finding of inconsistency because the
practice has been lifted up by the investigating authority itself into the Standard AD Margin
Programme and the Anti-Dumping Procedures Manual. That USDOC cannot depart from the
"Standard Zeroing Procedures" without providing a reasoned explanation confirms that these
procedures have a legal effect.
 184
7.80 The United States submits that the measures referred to by the European Communities in its
claims regarding "Standard Zeroing Procedures" eith er are not measures at all or are not mandatory
measures within the meaning of the mandatory/discretionary test. 185 First, with respect to the Anti-
Dumping Procedures Manual, even if this Manual is considered a measure, it does not preclude the
USDOC decision maker from offsetting negative marg ins nor does it mandate that the decision maker
ignore negative margins. The Manual is nothing more than a source of guidance and training for
USDOC personnel. The European Communities pr ovides no evidence to support its assertion that
USDOC considers itself bound by the Manual, and the court decisions cited by the European
Communities expressly state that the Manual is not legally binding. For purposes of the
mandatory/discretionary test, the relevant decision maker is the Assistant Secretary of Commerce for
Import Administration, not the staff that implemen t the decision maker's decisions. The Assistant
Secretary clearly is not obligated to follow the Manua l and can decide in a particular case to offset
negative margins. Second, the Anti-Dumping Margin Program is not a measure for purposes of WTO
dispute settlement. It does not set out or establish rules or norms but is a piece of computer software
that, at most, implements rules or norms contained in some other instrument. Even assuming that the
Anti-Dumping Margin Program is a measure, it does not preclude the USDOC decision maker from
offsetting negative dumping margins nor does it require the USDOC decision maker to ignore
negative dumping margins.
186
7.81 The United States further submits that, to the extent that the claims of the European
Communities regarding the "Standard Zeroing Procedur es" pertain to the "practice or methodology of
zeroing", they must be rejected because "practice" is not a "measure" and, even if it were, it would not
be a mandatory measure within the meaning of th e mandatory/discretionary test. The European
Communities fails to explain how "practice" - the repeated application of a particular measure –
creates a new and separate "autono mous measure". The Panel in US – Steel Plate specifically
rejected the view that a practice can be challenge d as a measure. Even if past instances of not
offsetting negative margins were deemed to be a measure, it would not be WTO-inconsistent under

182 EC-Rebuttal Submission, paras. 71-82; EC-Response to Panel Question 72.
183 EC-Response to Question from the United States following the First Meeting.
184 EC-Second Oral Statement, paras. 55-56.
185 In its First Submission (paras. 82-83), the United States notes in this respect the lack of precision of
the European Communities as to what it means by the term "Standard Zeroing Procedures" and assumes that the
European Communities means the Anti-Dumping Manual and the Anti-dumping Margin Programme.
186 US-First Written Submission, paras. 81-92.

the mandatory/discretionary test because there is no principle of administrative stare decisis under
United States' law.187
7.82 The United States submits that the argument of the European Communities and Japan that the
lines of computer programming code at issue in th is dispute are covered by Article 18.4 of the
AD Agreement as "administrative procedures" is contrary to the Vienna Convention rules on treaty
interpretation because it is inconsistent with th e ordinary meaning of the term "administrative
procedures". The United States also submits that no Member has ever notified a computer
programme to the Committee on Anti-Dumping Prac tices. The Standard Anti-Dumping Margin
Programme has often been changed, and is revised in each case in which a margin calculation is
performed. The Assistant-Secretary of Import Admi nistration is not obligated to follow either the
Standard Anti-Dumping Margin Programme or the Anti-Dumping Procedures Manual, and there is no
evidence that the United States treats zeroing as binding or mandatory.
188
7.83 The United States submits that the position of the European Communities on the Standard
Anti-Dumping Margin Program as a measure that can be found to be WTO-inconsistent as such is
based on a flawed approach to the mandatory/discreti onary distinction that has never been applied in
any WTO panel or Appellate Body report. The United States also asserts that the European
Communities is incorrect in arguing that it is not necessary for a measure challenged as such to
prescribe a result and in suggesting that the status of the Standard Anti-Dumping Margin Program is
similar to that of the USDOC Regulations.189
(c) Arguments of third parties
7.84 Brazil argues that the measure that is the s ubject of the present dispute is zeroing as a
"policy". As such, it clearly falls within the scope of the expression "rules, norms and standards" used
by the Appellate Body in US – Corrosion-Resistant Steel Sunset Review. This policy is reflected in a
combination of the consistent application of th e policy in every case in which there is negative
dumping and the USDOC Antidumping Manual. These, in combination, set forth a rule, norm or
standard for applying the zeroing methodology in US anti-dumping proceedings, which the Appellate
Body has determined may be challenged in accordance with Article 18.4 of the AD Agreement, and
should be found to violate Article 2.4 of that Agre ement. In view of the practice of consistent
application of zeroing, it is irrelevant whether these measures mandate application of zeroing.
7.85 China submits that the notion of "measures" that can be submitted to dispute settlement must
be interpreted broadly and refers in this r espect to the Appellate Body's analysis in US – Corrosion-
Resistant Steel Sunset Review . In light of the Appellate Body's findings on this issue, a measure can
be challenged as such if it is a generally applicable rule, norm or standard adopted by a Member in
connection with the conduct of anti-dumping proceedings. The panel reports in US – Section 301 and
US – 1916 Act (Japan) and the Appellate Body reports in US – 1916 Act and US – Corrosion-
Resistant Steel Sunset Review indicate that the mandatory nature of a measure is not the decisive
factor in deciding whether legislation is inconsistent as such with WTO obligations.
7.86 Hong Kong, China submits that, in light of the objectiv es of the DSU, the term "measures"
in Article 3.3 of the DSU must be interpreted broadl y. Since the Appellate Body has affirmed that in
principle any act or omission attributable to a Member can be a measure of that Member for purposes
of WTO dispute settlement, USDOC's AD Margin Programme, and more generally its practice of
zeroing, constitutes a measure. In order to cha llenge a measure as such, it is not necessary for that
measure to be mandatory. The consistent use by USDOC of the computer instructions in the AD

187 US-First Written Submission, paras. 93-97.
188 US-Response to Panel Questions 57, 59-60, 61, 63-65 and 73.
189 US-Second Written Submission, paras. 60-64.

Margin Programme demonstrates that they are in the nature of norms or rules of general and
prospective application. That they can be changed is irrelevant because all norms and rules, including
mandatory rules, can be changed. Even if practice in and of itself cannot be considered to be setting
forth rules or norms that are intended to have gene ral and prospective application, a repeated pattern
of similar responses to a set of circumstances must be regarded as clear evidence of the existence of
rules or norms which are of general and prospective application.
7.87 India argues that it follows from the rulings of the Appellate Body in US – Corrosion-
Resistant Steel Sunset Review and US – Oil Country Tubular Goods Sunset Reviews that the model
zeroing and simple zeroing procedures of USDOC can be challenged as such because the standard
computer programmes, which include the procedur es that result in zeroing through model or simple
zeroing, can be characterized as norms or rules that are applied on a gene ralized and prospective
basis. India recalls that the Appellate Body has held that in principle non-mandatory measures can be
challenged as such in WTO dispute settlement.
7.88 Japan submits that in considering the issue of th e measures that can be challenged as such,
the Appellate Body has held that the word "measure" has a broad mean ing, that an alleged "measure"
will be assessed in WTO law irrespective of its legal character in domestic law, and that a "measure"
need not be binding or mandatory in domestic law. Model and simple zeroing are measures that can
be challenged as such because they are rules, norms or standards applied by the United States in anti-
dumping proceedings on a generalized and prospective basis.
7.89 Mexico argues that in principle, for the purposes of a dispute settlement proceeding any act or
omission attributable to a WTO Member may be deemed to be a measure. The Anti-Dumping
Procedures Manual, the standard computer progra mmes and the Standard AD Margin Programme are
components of "Standard Zeroing Procedures" and ar e built into the overall structure in which anti-
dumping proceedings are conducted in the United States. Furthermore, USDOC applies the "Standard
Zeroing Procedures" in all investigations and duty assessment proceedings. Thus, in practice they are
compulsory.
7.90 Norway argues that, as stated by the Appellate Body, there are no limitations on the types of
measures that can be challenged as such in WTO dispute settlement and that even non-mandatory
measures can be the subject of dispute settlement. The AD Margin Programme is a norm or standard
adopted by the United States in connection with the conduct of anti-dumping proceedings. The
programme is a set of normative rules that apply m echanistically and the effect of which is utterly
predictable. The fact that the Assistant Secret ary of Commerce for Import Administration can change
the Anti-Dumping Procedures Manual and the Anti- Dumping Margin Programme without notice is
irrelevant because all measures are subject to cha nges. The Manual and the AD Margin Programme
are prescriptive for a certain WTO-inconsistent result until they are changed.
(d) Evaluation by the Panel
7.91 The European Communities claims that "Standa rd Zeroing Procedures", by which it means
certain lines of computer programming code c ontained in what it terms standard computer
programmes used by USDOC in the calculation of dumping margins, are WTO-inconsistent as such,
i.e. independently from their application in specific cases.
7.92 As a starting point for our analysis of this claim, we briefly recapitulate the main points
emerging from recent Appellate Body decisions regard ing measures that can be challenged as such in
WTO dispute settlement.
7.93 In US – Corrosion-Resistant Steel Sunset Review,
the Appellate Body discussed the issue of
"the type of measures that can, as such, be the subject of dispute settlement proceedings" under the

AD Agreement. The Appellate Body held that "in principle any act or omission attributable to a WTO
Member can be a measure of that Member for purposes of dispute se ttlement", and that, in addition,
GATT and WTO dispute settlement practice confirme d that the term "measure" also comprised " acts
setting forth rules or norms that are intende d to have general and prospective application " or, in
other words, "instruments of a Member containing rules or norms ", irrespective of their application in
particular instances. Specifically with respect to the AD Agreement, the Appellate Body held that the
phrase "laws, regulations and administrative proce dures" used in Article 18.4 of that Agreement
implies that "the entire body of generally applicab le rules, norms and standards adopted by Members
in connection with the conduct of anti-dumpi ng proceedings" can be challenged as such. 190 T h e
Appellate Body concluded that:
"..there is no basis either in the practice of the GATT and the WTO generally or in the
provisions of the AD Agreement, for finding that only certain types of measures can,
as such, be challenged in dispute settlement proceedings under the AD Agreement".191
7.94 With regard to the particular measure at issu e in that case, USDOC's Sunset Policy Bulletin
("SPB"), the Appellate Body found that certain provi sions of the SPB were not as such inconsistent
with Articles 6.10 and 11.3 of the AD Agreement , and that it was unable to rule on the claim that
certain other provisions of the SPB were as such inc onsistent with Article 11.3 because of "the lack of
relevant actual findings by the Panel or uncontested facts on the Panel record".192
7.95 The Appellate Body confirmed that the SPB is a measure that can be challenged as such in
US — Oil Country Tubular Goods Sunset Reviews, when it held that the SPB was covered by the
concept of "acts setting forth rules or norms that are intended to have general and prospective
application":
"In our view, the SPB has normative value, as it provides administrative guidance and
creates expectations among th e public and among private actors. It is intended to
have general application, as it is to apply to all the sunset reviews conducted in the
United States. It is also intended to have prospective application, as it is intended to
apply to sunset reviews taking place after its issuance. Thus, we confirm—once
again—that the SPB, as such, is s ubject to WTO dispute settlement. "193
In this connection, the Appellate Body rejected as irrelevant the arguments of the United States that
the SPB is not a legal instrument under United St ates law, that the SPB does not bind USDOC and
that USDOC is entirely free to depart from the SPB at any time.194
7.96 It can thus be inferred from the Appellate B ody's reasoning with regard to the SPB as a
measure that can be challenged as such in WTO disp ute settlement that it is possible for a measure to
be challenged as an act or instrument that "sets fort h rules or norms that are intended to have general
and prospective application" even where the measure in question is not "a legal instrument" under the
law of a Member and does not bind an administering agency.195

190 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 81-87. (Italics added)
191 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, para. 88.
192 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 158 and 190.
193 Appellate Body Report, US – Oil Country Tubular Goods Sunset Review, para. 187.
194 Appellate Body Report, US – Oil Country Tubular Goods Sunset Review, para.187.
195 We also note that the Appellate Body has explicitly stated in a recent case that it "... has not, to date,
pronounced upon the issue of whether "practice" may be challenged as such, as a measure in WTO dispute
settlement." Appellate Body Report, US – Gambling, para. 132. See also Appellate Body Report, Oil Country
Tubular Goods Sunset Reviews, para. 220 ("Therefore, even assuming ar gued that a practice may be challenged
as a measure in WTO dispute settlement- an issue on which we express no view here...").

7.97 We note that a prominent theme in the arguments of the parties (and third parties) on the
"Standard Zeroing Procedures" as a measure has been whether these procedures are an act or
instrument that sets forth rules or norms intended to have general and prospective application. In this
regard, we consider that to characterize the "Standard Zeroing Procedures" as an act or instrument that
sets forth rules or norms intended to have general a nd prospective application is somewhat difficult to
reconcile with the fact that the "Standard Zeroing Procedures" are only applicable in a particular anti-
dumping proceeding as a result of their inclusion in th e computer programme used in that particular
proceeding. The need to incor porate these lines of computer code into each individual programme
indicates that it is not the "Standard Zeroing Procedures" per se that set forth rules or norms of
general and prospective application. For this reason, we also question whether these "Standard
Zeroing Procedures" are "administrative procedures" within the ordinary meaning of that term as used
in Article 18.4 of the AD Agreement. The "Standard Zeroing Procedures" by themselves do not create
anything and are simply a reflection of something else.
7.98 We note in this regard, however, that the Eur opean Communities has not limited its claim to
the "Standard Zeroing Procedures" in and of themse lves but has also challenged what it describes as
"the United States practice or methodology of zeroing". We will therefore proceed to consider
whether there exists what the European Co mmunities terms methodology and whether this
methodology can be found to be WTO-inconsistent.
7.99 In the latter regard, we note that the SPB, which the Appellate Body has found to be a
measure challengeable as such, notwithstanding that it has no legally binding status under
United States law, embodies a norm to act in a given way in a given situation. That is precisely what
the Appellate Body focuses on when it refers to the SPB as an instrument with normative value that
contains rules or norms of general and prospective application. If, as confirmed by the Appellate
Body, a non-legally binding policy instrument such as the SPB is a measure that can be challenged as
such, it must logically also be possible to challenge as a measure a norm that is not expressed in the
particular form of an official written statement but the existence of which is made manifest on the
basis of other evidence.
7.100 We find support for this approach in the re asoning of the Appella te Body regarding the
rationale for allowing "as such" claims. We note in particular the following statement in paragraph 82
of the Appellate Body Report in US – Corrosion-Resistant Steel Sunset Review:
"... the disciplines of the GATT and the WTO, as well as the dispute settlement
system, are intended to protect not only existing trade but also the security and
predictability needed to conduct future trad e. This objective would be frustrated if
instruments setting out rules or norms incons istent with a Member's obligations could
not be brought before a panel once they ha ve been adopted and irrespective of any
particular instance of application of such rules or norms. It would also lead to a
multiplicity of litigation if instruments embodying rules or norms could not be
challenged as such, but only in the instances of their application. Thus, allowing
claims against measures, as such, serves the purpose of preventing future disputes by
allowing the root of WTO-inconsistent behaviour to be eliminated."
196
In our view, the objective of protecting the security and predictability needed to conduct future trade
can just as readily be frustrated if well-established norms that systematically and predictably lead to
WTO-inconsistent actions cannot be challenged or if they can be challenged only if they are embodied
in a particular type of instrument. Similarly, not allowing "as such" claims against such norms that
are "the root of WTO-inconsistent behaviour" might well entail a multiplicity of litigation. While an
agency probably can in most cases more easily de part from its own established norm than from a law

196 Appellate Body Report, US – Corrosion-Resistant-Steel Sunset Review, para. 82.

or regulation, the argument that there cannot be WTO-inconsistency as such if an agency has
discretion to make a change strikes us as artificial, at the very least in the case of a norm that has been
applied invariably for a considerable period of tim e. In such a case, WTO-inconsistent conduct may
be as predictable as when WTO-inconsistent conduct is envisaged in a law or regulation. We also
consider that to accord decisive weight to the na ture of a particular instrument in which a norm
manifests itself creates a risk of addressing symptoms rather than causes.
7.101 In light of these considerations, we must determine whether in the present case what is
challenged by the European Communities as methodology constitutes a norm that is WTO-
inconsistent as such. We note that the idea that methodology can be challenged as such is not new.197
7.102 We realize that "as such" challenges are "serious challenges" in that they "seek to prevent
Members ex ante from engaging in certain conduct". 198 In this regard, we consider that a finding that
a norm is as such WTO-inconsistent must rest on solid evidence that enables a panel to determine the
precise content of that norm and the conduct to which that norm will necessarily give rise in future.
We are cognizant that norms are not always susceptible of such a clear definition. In the case of the
SPB, the necessary precision and predictability resulte d from the availability of an official policy
statement that set out with a considerable degr ee of detail the methodology the USDOC intended to
apply in certain situations. There are, however, ot her types of evidence that can be used to establish
with the necessary degree of precision the content of a norm and the future conduct it will generate.
While we do not focus on the "Standard Zeroing Procedures" as a measure per se, we consider that
they can be relevant evidence to ascertain the existence of a methodology.199
7.103 Thus, in the present case, the instruction not to include comparison results with negative
margins in the numerator of the dumping margin is re flected in certain lines of computer code that are
always included in the computer programmes used by USDOC in anti-dumping proceedings.
Although the United States has emphasized that what the European Communities refers to as
standard computer programme has frequently been revised, the United States does not contest that the
lines of computer code identified by the European Communities as "Standard Zeroing Procedures" are
a constant feature of the computer programmes used by USDOC to perform dumping margin
calculations. The evidence before the Panel also indicates that this exclusion of comparison results
with negative margins has been inva riably performed by USDOC for an extended period of time. In
response to a panel question whether there have been cases in which the Anti-Dumping Margin
Program has been applied without zeroing, the Unite d States states that, wh ether calculations have
been done by hand or by computer, it is unable to identify any instance where USDOC had given a
credit for non-dumped sales.
200 The United States has not contested in this proceeding that USDOC's
zeroing methodology reflects a deliberate policy.
7.104 We thus consider that the evidence before us indicates that the zeroing methodology
manifested in the "Standard Zeroing Procedures" represents a well-established and well-defined norm
followed by USDOC and that it is possible based on this evidence to identify with precision the

197 In US – Countervailing Measures on Certain EC Products , the Panel and the Appellate Body
examined and made findings with re spect to the "same person method" applied by USDOC for the purposes of
determining the continued existence of a "benefit" within the meaning of the SCM Agreement following a
change in ownership.
198 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 172.
199 We note more generally that GATT and WTO panels have sometimes relied on evidence of an
informal nature to establish the existence of a measure or policy. We find instructive in this regard the
discussion by the Panel in Japan – Film of the term "measures" as it applies to "administrative guidance". Panel
Report, Japan – Film, paras. 10.43-10.51.
200 US-Response to Panel Question 73. We also note, in this respect, the argument of the United States
that it was well known by Uruguay Round negotiators that zeroing was utilised by the United States and other
signatories to the Tokyo Round Anti-Dumping Code. US-Second Written Submission, para. 89.

specific content of that norm and the future conduct that it will entail.
201 In our view, the situation is
the same as in the case of the S unset Policy Bulletin, except that the zeroing methodology is not
expressed in writing.
7.105 We recall our finding that the use of model zeroing in the anti-dumping investigations at issue
in this dispute is inconsistent with Article 2.4.2 of the AD Agreement . Therefore, in light of the
considerations in the preceding paragraphs, we find that USDOC maintains a norm that will
necessarily produce WTO-inconsistent actions.
7.106 In light of all the foregoing considerations, the Panel finds that the United States' zeroing
methodology, as it relates to original investigations , is a norm which, as such, is inconsistent with
Article 2.4.2 of the AD Agreement.
7.107 The Panel considers that it is not necessary to make a finding on whether the Anti-Dumping
Procedures Manual is WTO inconsistent as such. Th e Manual has been referred to by the European
Communities principally as evidence to confirm th e "standard" character of the "Standard Zeroing
Procedures".
7.108 In light of its finding that the United States ' zeroing methodology, as it relates to original
investigations, is a norm which, as such, is inconsistent with Article 2.4.2 of the AD Agreement, the
Panel considers that it is not necessary to address the claim of the European Communities that this
methodology is also inconsistent as such with Article 2.4 of the AD Agreement.
7.109 The Panel also perceives no need to pronounce on the dependent claims raised by the
European Communities under Articles 1; 3.1, 3.2 and 3.5; 5.8; 9.3; and 18.4 of the AD Agreement,
Articles VI:1 and VI:2 of the GATT 1994 and Article XVI: 4 of the WTO Agreement. Deciding such
dependent claims would provide no additional guidance as to the steps to be undertaken by the
United States in order to implement our reco mmendation regarding the violation on which it is
dependent.
E. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF CERTAIN ADMINISTRATIVE REVIEWS
1. Measures at issue
7.110 The European Communities requests the Panel to find that the United States has acted
inconsistently with its WTO obligations in 16 "a nti-dumping duty administrative review" proceedings
listed in Exhibits EC-16 to EC-31 202 because: (a) USDOC compared export price and normal value

201 In this context, we note that the United States has argued that USDOC has the discretion to zero or
not and that, under the mandatory/discretionary distinction and "WTO/GATT" practice, a WTO Member must
be presumed to implement its WTO obligations in good faith. This rationale, however, only applies where a
Member's legislation provides discretion to the executiv e branch to avoid acting WTO-inconsistently and it is
unknown how that discretion will be used. (E.g., GATT Panel report, US – Superfund, para. 5.2.9 and GATT
Panel Report, US – Tobacco, para. 123) In such a situation, the rationale for applying a mandatory/discretionary
distinction is that it should not be presumed that th e Member will not act in go od faith and implement its
legislation in a WTO-inconsistent manner. The same rationale, based on an assumption of implementation in
good faith, cannot apply when a Member has adopted a norm that systematically leads to WTO-inconsistent
conduct.
202 Ball Bearings and Parts Thereof from France, Germany, Italy, Japan, and the United Kingdom;
Final Results of Antidumping Duty Administrative Reviews , 67 Fed. Reg. 55780 (30 August 2002) (the
European Communities challenges this determination with respect to France, Italy and the United Kingdom);
Stainless Steel Plate in Coils from Belgium; Final Results of Antidumping Duty Administrative Review , 67 Fed.
Reg. 64352 (18 October 2002); Stainless Steel Sheet and Strip in Coils From Italy; Final Results of
Antidumping Duty Administrative Review, 67 Fed. Reg. 1715 (14 January 2002); Stainless Steel Sheet and Strip

on an asymmetrical, average-to-transaction basis; and (b) in calculating a weighted average dumping
margin based on these average-to-transaction comp arisons, USDOC did not take into account any
amounts by which individual export transactions ex ceeded average normal value. The European
Communities uses the term simple zeroing to refer to this second aspect of the calculation
methodology used by USDOC. The United States re jects the simple zeroing terminology employed
by the European Communities but does not contest that the European Communities has accurately
described the comparison methodology used by USDOC in these administrative reviews.
2. Order of analysis
7.111 The claims of the European Communities with r espect to the administrative reviews at issue
are based on: (1) Articles 2.4, 2.4.2, 11.1, 11.2, 9.3, 1 and 18.4 of the AD Agreement ; (2)
Articles VI:1 and VI:2 of GATT 1994; and (3) Article XVI:4 of the WTO Agreement.
7.112 As in the case of the claims of the Europ ean Communities with regard to the model zeroing
methodology used by the USDOC in original investiga tions, we consider that it is logical to address
first the claim of the European Communities under Article 2.4.2 of the AD Agreement.
3. Claim of the European Communities under Article 2.4.2 of the AD Agreement
(a) Arguments of the parties
7.113 The European Communities submits that the United States acted inconsistently with
Article 2.4.2 of the AD Agreement because USDOC used the asymme trical, average-to-transaction
comparison referred to in the second sentence of Article 2.4.2 when the conditions for the use of that
exceptional method were not met and because it failed to use one of the two symmetrical methods set
out in the first sentence of Article 2.4.2. With respect to simple zeroing, the European Communities
submits that the reasoning of the Appellate Body in EC – Bed Linen and US – Softwood Lumber V
with regard to model zeroing applies to any parameter used to define th e scope of an investigation, be
it product, time, level of trade or region. T hus, the simple zeroing methodology employed by
USDOC is inconsistent with Article 2.4.2 becau se instead of treating all export transactions as a

in Coils from Italy: Final Results of Antidumping Administrative Review , 68 Fed. Reg. 6719
(10 February 2003); Notice of Final Results of Antidumping Duty Administrative Review: Stainless Steel Sheet
and Strip in Coils from France, 67 Fed. Reg. 6493 (12 February 2002); Notice of Final Results of Antidumping
Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from France , 67 Fed. Reg. 78773
(26 December 2002); Stainless Steel Sheet and Strip in Coils From Germany; Notice of Final Results of
Antidumping Duty Administrative Review , 67 Fed. Reg. 7668 (20 February 2002); Notice of Final Results of
Antidumping Duty Administrative Review: Stainless Steel Sheet and Strip in Coils from Germany , 68 Fed. Reg.
6716 (10 February 2003); Notice of Final Results of Antidumping Duty Administrative Review and
Determination Not to Revoke in Part: Certain Pasta from Italy , 68 Fed. Reg. 6882 (11 February 2003); Notice
of Final Results of Antidumping Duty Administrative Review: Granular Polytetrafluoroethylene Resin from
Italy, 67 Fed. Reg. 1960 (15 January 2002); Notice of Final Results of Antidumping Duty Administrative
Review: Granular Polytetrafluoroethylene Resin from Italy , 68 Fed. Reg. 2007 (15 January 2003); Notice of
Final Results of Antidumping Duty Administrative Review, Partial Rescission of Antidumping Duty
Administrative Review and Revocation of Antidumping Duty Order in Part: Certain Pasta From Italy , 67 Fed.
Reg. 300 (3 January 2002); Industrial Nitrocellulose From France: Final Results of Antidumping Duty
Administrative Review , 66 Fed. Reg. 54213 (26 October 2001); Industrial Nitrocellulose From the
United Kingdom; Final Results of Antidumping Duty Administrative Review , 67 Fed. Reg. 77747
(19 December 2002). The Eu ropean Communities treats the administrative review in Ball Bearings from Italy
as a sample case. The European Communities indicates that in addition to the Final Results of the
administrative review, the measures at issue include the amendments to these Fi nal Results and that the Final
Results of the administrative review refers to the accompanying Issues and Decision Memorandum , which in
turn refers to the Margin Calculations, i.e. the Final Margin Program Log and Outputs for the firms investigated,
and to the assessment instructions. EC-First Written Submission, para. 148.

whole, it treats each transaction individually. The European Communities also refers to its arguments
presented in connection with its claims regarding model zeroing.
203
7.114 The European Communities rejects the argument of the United States that since Article 2.4.2
is expressly limited to the investigation phase of an anti-dumping proceeding it does not contain any
obligations with respect to admi nistrative reviews. Since the AD Agreement does not contain a
definition of the word "investigation" the ordinary m eaning of "investigation" in Article 2.4.2 must be
determined on the basis of dictionary definitions , which indicate that "investigation" means "a
systematic examination or inquiry or a careful study of or research into a particular subject". While
the text of a provision may limit the particular subject of such an examination or study, as is the case
in Article 5, the meaning of the word "investigatio n" by itself is not limited to investigations "to
determine, the existence, degree and effect of any alleged dumping" referred to in Article 5. In the
view of the European Communities, Articles 9.3.1, 9.5, 11.2 and 11.3 of the AD Agreement require an
authority to conduct "investigations".
204 The European Communities asserts that the AD Agreement
generally uses "investigation" in acco rdance with the dictionary defin ition but that, having regard to
text, context, object and purpose, the word "investiga tion(s)" in Articles 3.3, 5, 7, 9.5 and 10 of the
Agreement has the more limited meaning of "an inv estigation to determine the existence, degree and
effect of any alleged dumping".205
7.115 The European Communities submits various possibl e alternative interpretations of the phrase
"during the investigation phase" in Article 2.4.2 in order to demonstrate that this phrase can be given
meaning without interpreting it as restricting the application of the obligations contained in
Article 2.4.2 to original investigations. First, th e most natural reading of "during the investigation
phase", given its placement in the sentence, is that it is associated with "the existence of margins of
dumping". Linked to the words "the existence of margins of dumping", the phrase "during the
investigation phase" can be interpreted to refer to the investigation period and to prohibit authorities
from relying on data arising outside that period. This would apply to any kind of investigation
conducted under the Agreement, not just an original investigation. 206 Second, if "during the
investigation phase" is associated with the word "est ablished", it can be inte rpreted to refer to the
period of time during which the investigating author ity must make its determination. This would
again apply not only to an original investigation but to any type of investigation under the Agreement.
Under this interpretation, the phrase "during the investigation phase" requires authorities to make their
determination within the time span id entified in the relevant provision. 207 Third, "during the
investigation phase" can also be interpreted to mean that in the pre-initiation phase applicants are not
require to apply the technical rules of Article 2.4. 2. Fourth, it is possible to interpret the words
"during the investigation phase" as being descriptive, in the same way in which the United States
considers the words "the existence, degree and effe ct of any alleged dumping" in Article 5.1 to be
descriptive.
7.116 The European Communities considers that the wo rd "the" in "during th e investigation phase"
does not support the view of the United States that this phrase refers to investigations within the
meaning of Article 2.4.2. If the word "the" suggest s something that already "known ... or ... familiar"
this would rather support the view that "investiga tion phase" in Article 2.4.2 means the "period of
investigation", an expression frequently used in Article 2.208

203 EC-First Written Submission, paras. 164-170.
204 EC- Oral Statement at the First Substantive Meeting of the Panel, paras. 24 and 31-37.
205 EC-Response to Panel Question 14.
206 EC-Response to Panel Question 52, paras. 55-71.
207 See also EC-Response to Panel Question 52, paras. 72-82

7.117 The European Communities rejects the argumen t of the United States that Article 2.4.2
focuses upon the "existence" of dumping rather than on the "amount" of dumping. In an original
investigation, it is impossible to determine the ex istence of dumping without calculating the degree of
dumping. In an assessment proceeding, in calculating the degree of dumping, an authority is
necessarily also determining whether dumping existe d during the period under review. A margin of
dumping can only exist if it has a defined magnitude . The word "existence" is used in various
provisions of the AD Agreement without that being of any legal consequence. The European
Communities also draws attention to the fact that the United States does not apply certain provisions
of Article 2.4.1 to administrative reviews, notwithstanding that Article 2.4.1 does not include the word
"existence" of dumping. The fact that the French and Spanish titles of Article 2 of the AD Agreement
refer to the "existence" of dumping shows that Article 2 as a whole addresses the "existence" of
dumping and that the connection between "existence" and dumping in Article 2.4.2 is not unique.
209
7.118 Regarding the word "phase" in "during the investigation phase", the European Communities
considers that while there can be phases other than an investigation phase, such as a pre-investigation
phase or post-investigation phase, this applies to any type of investigation, original or otherwise.
Therefore, the word "phase" in Article 2.4.2 does not support the conclusion that the word
"investigation" is defined in Artic le 5.1 for the purposes of the entire AD Agreement , including
Article 2.4.2. In any event, the fact that the United States has excluded certain provisions of
Article 2.4.1 from administrative reviews because of the phrase "in an investigation" shows that the
word "phase" in Article 2.4.2 cannot explain the position of the United States that Article 2.4.2 does
not apply to such reviews. Panel and Appellate Body reports have u sed the word "phase" in different
ways indicating that the word "phase" in Article 2. 4.2 does not have the speci al or limited or defined
meaning suggested by the United States. 210
7.119 The European Communities rejects as irrelevant the reference made by the United States to
Article 9.4(ii) of the AD Agreement because none of the measures at issu e in this dispute involved the
application of a prospective normal value system within the meaning of that provision and because a
prospective normal value system is in any event su bject to the refund provisions of Article 9.3.2,
which in turn is subject to Article 2, including Article 2.4.2.211
7.120 The European Communities asserts that the United States has not b een able to substantiate its
view that the word "investigation" in Article 2.4. 2 has a limited meaning and that the United States
ignores the plain language of Article 2.4.2 by not inte rpreting the word "investigation" in its ordinary
meaning. The interpretation of "investigation" ad vanced by the United States in this dispute is
contradicted by the fact that in the retrospec tive assessment proceedings at issue in this case the
USDOC used the term "investigation" and by th e use of the terms "Five-Year Review(Sunset)
Investigations" and "review investigation" by the USITC. 212 The interpretation advanced by the
United States is also inconsistent with the Vienna Convention because it ignores the relevant context,
such as Articles 2.2 and 6, and the object and purpose of the AD Agreement and of retrospective
assessment proceedings.213
7.121 The European Communities finds support for its in terpretation of "investigation" in panel and
Appellate Body reports that characterize investiga tions under Article 5.1 as "original investigations"

209 EC-Second Written Submission, paras. 118 and 156-160; EC-Oral Statement at the Second
Substantive Meeting of the Panel, paras. 19-27; EC-Closi ng Oral Statement at the Second Substantive Meeting
of the Panel, para. 11.
210 EC-Second Written Submission, paras. 154-155; EC-Closing Oral Statement at the Second
Substantive Meeting of the Panel, para. 12.
212 EC-Second Written Submission, paras. 123-136.
213 EC-Oral Statement at the Second Substantive Meeting of the Panel, paras. 8-9; EC-Closing Oral
Statement at the Second Substantive Meeting of the Panel, paras. 9 and 15-16.

and in panel reports that have used the words "i nvestigated" and "investigation" in connection with
annual administrative reviews and sunset reviews carried out by the United States.
214
7.122 The European Communities rejects what it ch aracterizes as a monolithic conception of the
term "investigation" according to which an investig ation exists only when a careful examination is
undertaken of all the three matters referred to in Article 5.1 (existence, degree and effect of any
alleged dumping). With reference to Article 3, the European Communities ar gues that a careful and
systematic examination of injury (the effect of any alleged dumping) is nevertheless an
"investigation". Thus, it is the nature of the activit y carried out by an authority, not the scope of the
inquiry, that determines whether that activity is an investigation. Consequently, an assessment
proceeding under Article 9.3.1, which involves a careful and systematic examination of the "degree"
of dumping is an "investigation".215 The European Communities finds further support for its view that
an investigation under the AD Agreement is not necessarily an investigation to determine the existence
degree and effect of any alleged dumping in Ar ticle 5.8 and in the provisions on on-the-spot
investigations in Annex I.216
7.123 The European Communities refers to the negotiating history of the AD Agreement as support
for its position that the applicability of Article 2.4.2 is not limited to investigations within the meaning
of Article 5 of the AD Agreement.217 The European Communities asserts that there is "subsequent
practice" within the meaning of Article 31(3)(b) of the Vienna Convention that supports its
interpretation of Article 2.4.2 because a review of domestic anti-dumping legislation notified by
105 Members indicates that no other Member has adopted the position that Article 2.4.2 is limited to
original investigations.218
7.124 The European Communities submits that the term "margin of dumping" is defined in
Article VI:2 of the GATT 1994, which definition is im plemented and further elaborated in Article 2.
The same defined term "margin of dumping" is also u sed in Articles 9.3, which cross-refers to all of
Article 2, and in Articles 9.1 and 9.5. Article 2.4. 2 states what it applies to, not what it does not apply
to. Article 2.4.2 unlike the SAA, does not contain the words "(not reviews)". The United States is
therefore using an a contrario reasoning in an attempt to defeat the definition of "margin of dumping"
and the cross-reference to Article 2 in Article 9.3. If Members had really wanted to achieve what the
United States asserts, it would have been a simple matter for them to have used express exclusionary
language. 219
7.125 The European Communities submits that not a pplying Article 2.4.2 to duty assessment under
Article 9.3.1 would entail unequal treatment betw een prospective and retrospective duty assessment
systems. In a prospective system, the amount of anti-dumping duty collected is based on the margin
of dumping established in the original investigatio n in which context zeroing is prohibited. By
contrast, in a retrospective assessment system the re sult of the initial investigation, in which dumping
is established without zeroing, would be eclipsed by the use of the zeroing methodology to determine
the final amount of anti-dumping duty in a periodic administrative review. In the case of the
United States, the results of such a review woul d apply retrospectively from the date provisional
duties were first applied. The European Communiti es points out that this will necessarily imply that
under the retrospective assessment method a higher amount of anti-dumping duties will be collected
than under the prospective system and that, while in the prospective system it will be sufficient for the

214 EC-Second Written Submission, paras. 168-170.
215 EC-Second Written Submission, paras. 179-187.
216 EC-Second Written Submission, paras. 188-197.
217 EC-Second Written Submission, paras. 199-217.
218 EC-Second Written Submission, para. 218; EC-Ora l Statement at the Second Substantive Meeting
of the Panel, para. 37.
219 EC-Closing Oral Statement at the Second Substantive Meeting of the Panel, paras. 5-6.

exporter to increase the export price by the margin of dumping to obtain a refund of all duties paid, in
the retrospective system such an increase will not suffice to remove duty liability. The European
Communities submits that retrospective and prospe ctive duty assessment systems must lead to the
same level of protection against dumped imports, which must correspond to the actual margin of
dumping of the exporter.220
7.126 The European Communities points out that accepta nce of its claims would mean that there
would be only one margin of dumping, for each exporter, in all cases of retrospective duty
assessment. Thus the practice of considering each export transaction would be prohibited at the final
assessment stage when authorities must ensure that the total amount of duty collected with respect to
exports made by one specific exporter during the assessment period does not exceed the relevant
margin of dumping of the same exporter.
221
7.127 The United States argues that the text of the AD Agreement expressly limits the obligations
of Article 2.4.2 to the investigation phase of an anti-dumping proceeding. Investigations and
assessment proceedings constitute di stinct phases of an AD proceeding and have different purposes.
The distinction made between investiga tions and reviews in Article 18.3 of the AD Agreement
mirrors the distinction between these terms in the s ubstantive provisions of the Agreement. Panel and
Appellate Body reports have recogni zed this distinction, consistent ly finding that provisions in the
AD Agreement with express limitations to investigations ar e in fact limited to the investigation phase
of a proceeding. 222 The argument of the European Comm unities that Article 2.4.2 applies to
assessment proceedings under Article 9 ignores the clear distinctions made in the text of the
AD Agreement between investigations and other proceedings. The Appellate Body has recognized, in
US – Corrosion Resistant Steel Sunset Review , that investigations a nd other proceedings serve
different purposes and have different functions and are therefore subject to different obligations.
Article 9 assessment proceedings are not concerned with the question of whether injurious dumping
"exists" above a de minimis level such that the imposition of an ti-dumping measures is warranted but
with the amount of duty to be assessed on particular entries, which is a separate exercise from the
calculation of an overall margin of dumping durin g the threshold investigation phase of an anti-
dumping proceeding.223
7.128 The United States submits that it is clear from the phrase "the existence of margins of
dumping during the investigation phase" that Article 2.4.2 only applies in an Article 5 investigation.
Articles 1 and 5.1 of the AD Agreement provide for the existence of a discrete investigation phase.
The first sentence of Article 1 cross-references Artic le 5 to define "investig ations initiated" under the
AD Agreement . Only investigations under Article 5 are initiated under the AD Agreement .
Article 5.1, in turn defines the scope of such investigations as "to determine the existence , degree and
effect of any alleged dumping". An investigation under Article 5 is the only investigation phase under
the AD Agreement that requires a determination of the "existence" of dumping. Article 2.4.2
establishes how the "existence" of dumping is to be determined. Thus Article 2.4.2 is expressly
limited to an Article 5 investigation in that it refe rs to the "investigation phase" and in that it provides
that its purpose is to establish the existence of dumping. The Appellate Body in EC – Bed Linen and
the panel in Argentina – Poultry Anti-Dumping Duties have confirmed that the application of
Article 2.4.2 is limited to the investigation phase.224

220 EC-Rebuttal Submission, paras. 30-37; EC-Oral Statement at the Second Substantive Meeting of
the Panel, paras. 65-66.
221 EC-Response to Panel Question 39.
222 US-First Written Submission, paras. 36-39.
223 US-First Written Submission, paras. 44-46.
224 US-Response to Panel Questions 10, 13 and 14; US-Second Written Submission, paras. 5-13.

7.129 The United States argues that Article 9 does not incorporate the requirements of Article 2.4.2
of the AD Agreement . The general reference in Article 9.3 to Article 2 necessarily includes any
limitations found in the text of Article 2. Theref ore, the explicit limitation of Article 2.4.2 to the
investigation phase means that Article 2.4.2 does not apply to Article 9.3.
225
7.130 The United States submits that the limited applic ation of Article 2.4.2 to the investigation
phase is also consistent with the fact that the AD Agreement allows for the use of different assessment
systems. Application of Article 2.4.2 to assessme nt proceedings would render this divergence of
assessment systems impossible.226 Article 9.4(ii) explicitly allows for the calculation of anti-dumping
duties on the basis of a comparison of a prospective normal value and individual export prices. 227
There is no basis in the AD Agreement for a requirement that Members with prospective normal value
systems provide credits for non-dumped entries when assessing duties on subsequent entries that are
dumped.228 Prospective normal value systems inherently operate on an entry-by-entry basis. The
assessment system used by the United States functi ons on a retrospective basis but in substance it
operates much like a prospective normal value system, albeit with contemporaneous normal values.229
7.131 The United States considers that the concern of the European Communities that limiting the
application of Article 2.4.2 to the investigati on phase would place retrospective anti-dumping systems
at a relative disadvantage as compared to prospec tive systems is misplaced because Article 9.3 places
prospective and retrospective systems on th e same footing. Under both systems, the AD Agreement
permits the investigating authority to attach liab ility for antidumping duties on imports as they cross
the border. The AD Agreement then provides for the Member, no matter what the system, to
determine whether any refund is due. A prosp ective system does not inherently require the
application of Article 2.4.2 to refund proceedings . Nothing in Article 9.3 requires Members to
conduct such assessment proceedings so as to cover all imports from a particular exporter over any
period of time. The AD Agreement permits Members to apply their duty assessment systems so as to
focus any Article 9.3 proceedings on particular imports , particular importers or particular exporters as
they deem most appropriate.230 The United States further asserts that the spectre of unequal treatment
conjured up by the European Communities has no legal or factual basis because, first, the argument of
the European Communities erroneously assumes that Article 5 investigation phase margins are the
basis for duty collections in all prospective systems. In a prospective normal value system duties need
not be limited by the margins of dumping calculated during the Article 5 investigation phase. Second,
even Members with prospective ad valorem systems may conduct Article 11.2 reviews at any time to
update those margins so that the amount of dut y collected corresponds to the actual margin of
dumping of the exporter. Article 2.4.2 is no more app licable to such Article 11.2 reviews than it is to
Article 9.3 assessment proceedings.231
7.132 The United States submits that while inv estigations determine whether anti-dumping
measures may be applied by determining the existen ce, degree and effect of any alleged dumping, the
collection and assessment of anti-dumping duties is a sep arate and distinct phase that occurs after an
anti-dumping measure is imposed. Because importers will incur liability for duties, it is appropriate to
determine that liability on an importer- and transaction-specific basis. 232 The United States further
argues that the European Communities proposes an approach that divorces the amount of anti-
dumping duty assessed with respect to an import fr om the dumping margin associated with that

225 US-First Written Submission, paras. 50-54.
227 US-First Written Submission, paras. 55-57.
229 US-Opening Statement at the First Substantive Meeting of the Panel, para. 18.
230 US-Opening Statement at the First Substantive Meeting of the Panel, paras. 8-10.
231 US-Closing Statement at the Second Substantive Meeting of the Panel, paras. 16-17.
232 US-Response to Panel Question 11.

import transaction. The argument of the European Communities ignores the distinction between the
Article 5 investigation phase referred to in Article 2. 4.2 with its focus on the existence of margins of
dumping and the assessment proceeding under Article 9.3.1 with its focus on duty liability, and is
inconsistent with the Appellate Body finding in EC – Bed Linen. Moreover, there is no support in the
text or context of Article 9.3.1 for the prop osition that a Member must apply an assessment
methodology whereby importers that pay relativel y high non-dumped export prices could also be
liable for anti-dumping duties because of low, dumpe d prices paid by other, unrelated importers.
233
There is a basic logic and fairness that supports impo rter-specific assessment in that an importer will
pay no anti-dumping duties when none of its imports are dumped. By contrast, the exporter-oriented
assessment process required by the European Communities' interpre tation would under any of the
margin methodologies, even without, zeroing require some assessment of anti-dumping duties on the
non-dumped imports of such an importer.234
(b) Arguments of third parties
7.133 Argentina submits that Article 2.4.2 of the AD Agreement does not apply outside the
investigation phase and therefore disagrees with the assertion of the European Communities that
insofar as the United States uses a retrospective dut y assessment system for calculating anti-dumping
duties to be collected, the authorities should calcu late those duties in a manner consistent with
Article 2.4.2. Article 2.4.2 is expressly limited to the investigation phase. The AD Agreement makes
a clear distinction between the investigation phase and the imposition and co llection of anti-dumping
duties. Therefore, the requirement in Article 9. 3 that anti-dumping duties shall not exceed the margin
of dumping established pursuant to Article 2 does not mean that authorities conduct an on the spot
recalculation of the margin of dumping in accordance w ith Article 2.4.2. As stated by the Panel in
Argentina – Poultry Anti-Dumping Duties , Article 9.3 refers to the margin of dumping established in
accordance with Article 2 as a whole.
7.134 Brazil submits that while it agrees with the positi ons taken by the European Communities in
this dispute, it is largely academic to discuss whethe r Article 2.4.2 applies to the reviews, or whether
reviews are considered to be part of investigati ons or whether average-to-transaction comparisons are
permitted because zeroing is inconsistent with the "fair comparison" requirement of Article 2.4, which
is not limited to certain types of proceedings or certain types of comparisons.
7.135 China submits that "during the investigation phase" does not limit Article 2.4.2 to original
investigations because there exists no definition of the word "investigation" and there is no precedent
in WTO dispute settlement practice for distinguis hing between assessment proceedings and original
investigations. While there may be differences between reviews and original investigations,
assessment proceedings are closely related to original investigations in that they both pertain to the
imposition of anti-dumping duties. Moreover, Article 2 of the AD Agreement applies for the entire
purpose of the Agreement and Article 9.3 specifically refers to "the margin of dumping as established
under Article 2", which includes Articles 2.4 and 2.4.2.
7.136 Hong Kong, China submits that Article 18.3 of the AD Agreement and the panel and
Appellate Body reports cited by the United States do not provide any guidance with respect to how
the term "investigation" is generally used in the AD Agreement . The word "investigation" in the
AD Agreement does not necessarily mean original or initia l investigation. In the context of
Article 2.4.2, "investigation" and "investigation phase" should be interpreted to refer to any procedure
undertaken by an investigating authority which conforms to the ordinary meaning of an
"investigation" ("action or process of investigating", i.e. search[ing] or inquir[ing] into; examining (a

233 US-Second Written Submission, paras. 31-35.
234 US-Closing Statement at the Second Substantive Meeting of the Panel, paras. 12-14 and Exhibit
US-3.

matter) systematically or in detail") and which lead s to the establishment of the existence of margins
of dumping for the subject product. The steps ta ken by USDOC in a retrospective duty assessment
proceeding conform to this meaning of "investig ation". Article 9.3 is further support for the
proposition that Article 2.4.2 applies to the calcu lation of margins of dumping in duty assessment
proceedings. Hong Kong, China rejects the argument of the United States that Article 9 4(ii) of the
AD Agreement provides for an average-to-transaction compar ison method. Article 9.4 is applicable
only in the special situation where authorities have used sampling to limit their examination and does
not permit the calculation of a margin of dumping on the basis of an average-to-transaction
comparison as such. Instead, it refers to the use of variable duties. In any case, the United States does
not use the prospective normal value system envisaged in Article 9.4 (ii).
7.137 Japan submits that the use by USDOC of simple zeroing in duty assessment proceedings is
inconsistent with Articles 2.4, 2.4.2 and 9.3 of the AD Agreement. The ruling of the Appellate Body
in US – Corrosion-Resistant Steel Sunset Review that Article 2 of the AD Agreement applies to
dumping margins used in a sunset review under Article 11.3 must apply a fortiori to dumping margins
calculated and used in periodic reviews under Article 9. 3, which specifically refers to Article 2. It
follows from this ruling that the "fair comparison" requirements in Article 2.4 apply equally to a
dumping margin calculated or used for purposes of Article 9.3. The requirement in Article 2.4.2 for
the comparison of normal value and export price to include "all comparable export transactions" is
one of such "fair comparison" requirements. In an y event, leaving aside whether Article 2.4.2 applies
to margins of dumping calculated pursuant to Arti cle 9.3, the use of simple zeroing in periodic
reviews is inconsistent with Article 2.4, which plainly does apply.
7.138 Korea argues that a periodic review under Article 9.3 is part of the investigation phase under
Article 2.4.2. The Appellate Body stated in US – Corrosion-Resistant Steel Sunset Review that
reviews under Article 11 of the AD Agreement involve both investigatory and adjudicatory aspects
and therefore concluded that the prohibition of zer oing implicit in Article 2.4.2 also applied to
dumping margin calculations under Article 11.3. This suggests that "investigation phase" is properly
understood in the context of Article 2.4.2 to mean the portion of the proceeding (original investigation
or review) in which an authority "investigates" whether dumping has occurred. Korea submits that
the same logic should apply to duty assessment under Article 9.3 of the AD Agreement. The reference
in Article 9.3 to "the margin of dumping as estab lished under Article 2" explicitly indicates that the
requirements of Articles 2.4 and 2.4.2 must be applied to periodic reviews under Article 9.3.
7.139 Mexico submits that the use of simple zeroing in duty assessment proceedings is inconsistent
with Article 2.4.2 of the AD Agreement because it fails to take into account all sales of the product
under investigation. The argument that Article 2. 4.2 only applies to original investigations is
untenable because Article 9.3 refers to, and incor porates, Article 2 as a whole without limitation and
therefore requires authorities to apply Articles 2.4 and 2.4.2 in assessment proceedings. In addition,
the definition of dumping in Article 2.1 applies throughout the AD Agreement. Article 9.4 does not
support the position of the United States because it applies only where authorities use sampling to
limit the scope of their examination and where liability for payment of anti-dumping duties is
calculated on a prospective basis, which is not the case of the United States.
7.140 Norway submits that the argument of the United States that the word "investigation" in
Article 2.4.2 prevents application of Article 2.4. 2 to periodic reviews and new shipper reviews is
without merit because Article 9.3 explicitly refers to the calculation of dumping margin, an issue that
falls squarely within the scope of Article 2.4.2. Second, the Appellate Body has based its conclusion
that zeroing is prohibited also on Article 2.4, which includes Article 2.4.2. Third, the steps taken by
USDOC in duty assessment proceedings and new sh ipper reviews effectively amount to a new
investigation.

7.141 Turkey submits that Article 2.4.2 does not prohibi t simple zeroing in all circumstances but
that it may only be applied in connection with the exceptional, average-to-transaction method
provided for in the second sentence of Article 2.4.2. By systematically applying in the periodic
reviews at issue in this dispute a method that is permitted only in exceptional circumstances, the
United States has violated Article 2.4.2. Turkey di sagrees with the United States that Article 2.4.2 is
not applicable to the duty assessment phase and refers in this regard to the Appellate Body ruling in
US – Corrosion-Resistant Steel Sunset Review that whenever a Member calculates a margin of
dumping it must abide by Article 2, and 2.4 in particular.
(c) Evaluation by the Panel
7.142 The measures at issue 235 are certain administrative reviews 236 of anti-dumping duty orders, in
which USDOC determined percentage weighted average dumping margins and cash deposit rates for
individual exporters/producers and assessment rates for individual importers.237
7.143 It is not disputed that these administrative reviews of existing anti-dumping duty orders fall
within the scope of Article 9 of the AD Agreement ("Imposition and Collection of Anti-Dumping
Duties") which provides:
"9.3 The amount of the anti-dumping duty shall not exceed the margin of dumping
as established under Article 2.
9.3.1 When the amount of the anti-dumping duty is assessed on a
retrospective basis, the determination of the final liability for payment
of anti-dumping duties shall take place as soon as possible, normally
within 12 months, and in no case more than 18 months, after the date
on which a request for a final assessment of the amount of the anti-
dumping duty has been made. Any refund shall be made promptly and
normally in not more than 90 days following the determination of
final liability made pursuant to this sub-paragraph. In any case, where
a refund is not made within 90 days, the authorities shall provide an
explanation if so requested.

9.3.2 When the amount of the anti-dumping duty is assessed on a
prospective basis, provision shall be made for a prompt refund, upon

235 Supra, footnote 202.
236 The term "administrative review" in this context means "periodic review of the amount of
antidumping duty" as required by Section 751(a) of the Tariff Act. This provision requires the administering
authority to review and determine the amount of any anti-dumping duty at least once during each 12-month
period beginning on the anniversary of the date of publication of an anti-dumping duty order if a request for
such a review has been received. The United States uses a retrospective assessment system under which final
liability for anti-dumping duties is determined afte r merchandise is imported. USDOC's Regulations
(§351.414(c)(2) and (e)) provide that in such a periodic review of the amount of anti-dumping duty USDOC will
normally use the average-to-transaction method and that, in applying that method, when normal value is based
on the weighted average of sales of the foreign like product, the USDOC will limit the averaging of such prices
to sales incurred during the contemporaneous month.
237 §351.212 of USDOC's Regulations provide that if the Secretary has condu cted an administrative
review, a new shipper review or an expedited antidumpi ng review, "the Secretary normally will calculate an
assessment rate for each importer of subject merchandis e covered by the review. The Secretary normally will
calculate the assessment rate by dividing the dumping ma rgin found on the subject merchandise examined by
the entered value of such merchandise for normal custom s duty purposes. The Secretary then will instruct the
Customs Service to assess antidumping duties by applying the assessment rate to the entered value of the
merchandise."

request, of any duty paid in excess of the margin of dumping. A
refund of any such duty paid in excess of the actual margin of
dumping shall normally take place within 12 months, and in no case
more than 18 months, after the date on which a request for a refund,
duly supported by evidence, has been made by an importer of the
product subject to the anti-dumping duty. The refund authorized
should normally be made within 90 days of the above-noted decision.

9.3.3 In determining whether and to what extent a reimbursement should be
made when the export price is co nstructed in accordance with
paragraph 3 of Article 2, aut horities should take account of any
change in normal value, any ch ange in costs incurred between
importation and resale, and any movement in the resale price which is
duly reflected in subsequent selling prices, and should calculate the
export price with no deduction for the amount of anti-dumping duties
paid when conclusive evidence of the above is provided."

Sub-paragraph 3.1 specifically addresses retrospective duty assessment procedures such as the
administrative reviews at issue in this dispute.
7.144 In these administrative reviews, USDOC determ ined margins of dumping on the basis of
"asymmetrical" comparisons between (monthly) weighted-average normal values and individual
export transactions without regard to whether the conditions expressly set out in the second sentence
of Article 2.4.2 of the AD Agreement were fulfilled. In aggregating the results of these comparisons
to calculate an overall margin of dumping for each exporter, USDOC did not include in the numerator
of that overall margin any amounts by which export prices exceeded normal value.
238 The European
Communities asserts that in these respects USDOC acted inconsistently with Article 2.4.2 of the
AD Agreement. The United States submits that Article 2.4.2 does not apply in the context of these
administrative reviews.
7.145 Therefore, the threshold legal question before us is whether the obligations contained in
Article 2.4.2 apply to duty assessment proceedings provided for in Article 9.3.
7.146 As noted above, Article 9.3 provides that "[t] he amount of the anti-dumping duty shall not
exceed the margin of dumping as established under Article 2." 239 Thus, it is clear that as a general
matter "Article 2" is relevant to duty assessment procedures 240, and there is nothing in Article 9.3
itself that suggests that Article 2.4.2 specifically do es not apply in the context of Article 9.3. That,
however, is not the end of the matter. If Article 2 itself provides that Article 2.4.2 does not apply in
the case of reviews under Article 9.3, that is not overri dden by the fact that "Article 2" is specifically
referred to in Article 9.3. Absent anything explicitly to the contrary, that reference to "Article 2" in
Article 9.3 must be read as including any limitation that is expressed in Article 2 itself. We
commence therefore with Article 2.4.2.
7.147 Article 2.4.2 of the AD Agreement provides that:

238 It is not in dispute that USDOC included the values of all export transactions in the denominator of
the aggregate margin calculation.
239 In addition, Article 2.1 contains a definition of dumping that applies to the entire AD Agreement.
Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, paras. 109 and 126.
240 We emphasize that the issue before us is limited to whether Article 2.4.2 applies to duty assessment
proceedings under Article 9.3. The ap plicability of other provisions of Artic le 2 to such proceedings is not at
issue in this dispute.

"Subject to the provisions governing fair comparison in paragraph 4, the existence of
margins of dumping during the investigation phase shall normally be established on
the basis of a comparison of a weighted average normal value with a weighted
average of prices of all comparable export transactions or by a comparison of normal
value and export prices on a transaction-to-transaction basis. A normal value
established on a weighted average basis may be compared to prices of individual
export transactions if the authorities find a pattern of export prices which differ
significantly among different purchasers, regions or time periods, and if an
explanation is provided as to why such differences cannot be taken into account
appropriately by the use of a weight ed average-to-weighted average or
transaction-to-transaction comparison." (emphasis added).
7.148 The interpretive question raised by the disagreement between the parties is whether, as argued
by the European Communities, Article 2. 4.2 applies to any proceeding under the AD Agreement in
which authorities determine margins of dumping or whether, as argued by the United States,
Article 2.4.2 only applies to determinations of dum ping in the context of investigations within the
meaning of Article 5 of the AD Agreement.
241
7.149 In analyzing this issue we examine successive ly: (i) the interpretation of the phrase "the
existence of margins of dumping during the investig ation phase" in context; (ii) relevant panel and
Appellate Body reports; (iii) the alternative in terpretations of "during the investigation phase"
suggested by the European Communities; (iv) arguments of the European Communities regarding
object and purpose of Article 9.3 and the AD Agreement ; (v) arguments of the European
Communities regarding subsequent practice; a nd (vi) arguments of the European Communities
regarding supplementary means of treaty interpretation.
(i) Interpretation of "the existence of margins of dumping during the investigation phase" in
context
7.150 The disciplines of Article 2.4.2 apply in the cont ext of the establishment of "the existence of
margins of dumping during the investigation phase". We therefore consider that our analysis should
focus on the meaning of the expression "the existen ce of margins of dumping during the investigation
phase..." as a whole and not on the word "investigation" taken in isolation. Consistent with basic
principles of treaty interpretation 242, we must proceed on the basis that this phrase – which is unique

241 We note in this regard that the argument of the European Communities that the word "investigation"
in Article 2.4.2 applies to any provision of the AD Agreement that obligates an authority to conduct "a
systematic examination or inquiry or a careful study" logically im plies that all proceedings under the
AD Agreement – e.g., duty assessment proceedings under Article 9. 3, new shipper reviews under Article 9.5,
"interim" or "changed circumstances" reviews under Article 11.2 and sunset reviews under Article 11.3 – would
be "during the investigation phase" and thus be subject to Article 2.4.2. Thus, while the issue before us with
respect to this "as applied" claim is limited to the application of Article 2.4.2 to duty assessment proceedings,
we must arrive at a more general understanding of the sc ope of application of Article 2.4.2, both in order to
reach a reasoned conclusion regarding this claim, and in or der to resolve this dispute in respect of the other as
such claims. We also note that the European Communities has indicated that the implication of its position that
Article 2.4.2 applies to duty assessment proceed ings under Article 9.3 is that both the " import-specific" and the
"importer-specific" aspects of the United States' duty assessment system are inconsistent with the
AD Agreement. Thus, whether the AD Agreement must be interpreted to proscribe import-specific and importer-
specific methods of assessment of anti-dumping duties is an unavoidable and central aspect of our analysis of
the claim of the European Communities under Article 2.4.2. We discuss the issue of whether duty assessment
must be based on the overall behaviour of an exporter or whether it is permissible to focus on individual
transactions and individual importers below in paras. 7.203-7.207.
242 "One of the corollaries of the 'general rule of interpretation' in the Vienna Convention is that
interpretation must give meaning and effect to all the term s of the treaty. An interpreter is not free to adopt a

in Article 2 and in fact in the AD Agreement as a whole – has a meaning and function. Our task is to
determine whether, as argued by the United States, that function is to limit the application of
Article 2.4.2 to the "investigation phase" in the sen se of the "original investigation" as opposed to
subsequent phases of an anti-dumping proceeding such as duty assessment. Since the relevant
"context" for purposes of treaty interpretation in prin ciple comprises the text of the entire treaty, the
requirement to interpret the terms of the treaty "i n their context", means that we must not only
consider the word "investigation" as part of th e phrase "the existence of margins of dumping during
the investigation phase" but that we must also consider whether other provisions of the AD Agreement
illuminate the meaning of the phrase "the existen ce of margins of dumping during the investigation
phase" in Article 2.4.2.
7.151 In light of these considerations, we disagree w ith the view of the European Communities that
the decisive element regarding the interpretati on of the scope of Article 2.4.2 is the word
"investigation” which has not been defined in the AD Agreement and which must therefore be
interpreted strictly by reference to a dictionary definition.
243 Rather, we must determine the meaning
of the entire phrase "the existence of margins of dumping during the investigation phase" in the
context of the AD Agreement as a whole. The dictionary definition of "investigation" is only one
element in this analysis and is not necessarily dispositive.244
7.152 In interpreting the phrase "the existence of margins of dumping during the investigation
phase" in context we consider the following textual and contextual elements, taken together, to be
particularly significant: (a) the reference to "the investigation phase"; (b) the textual similarity
between the phrase "the existence of margins of dumping during the investigation phase" and the
language of Article 5.1 of the AD Agreement; (c) the fact that where the terms "investigation" and
"investigations" are used in the AD Agreement to refer to particular proceedings, it is in most cases
clear from the substantive context that such pro ceedings are investigations within the meaning of

reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility".
Appellate Body Report, US –- Gasoline, p. 23.
243 The position of the European Communities that Article 2.4.2 of the AD Agreement applies to the
assessment of the amount of an anti-dumping duty under Article 9.3 is based essentially on the following
propositions: (1) The key interpretive issue before the Panel is the meaning of the word "investigation". (2) In
the absence of a generic definition limiting the meaning of "investigation", its ordinary meaning must be
established on the basis of dictionary definitions. (3) The dictionary definition of "investigation" is "a
systematic examination or inquiry or a careful study of a particular subject ". (4) The word "investigation" in
Article 2.4.2 therefore applie s to any provision of the AD Agreement that obligates an authority to conduct "a
systematic examination or inquiry or a careful study". (5) A duty assessment proceeding under Article 9.3 is an
investigation in this sense.
244 The fundamental rule of treaty interpretation that governs our analysis is that: A treaty shall be
interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their
context and in the light of its object and purpose ( Vienna Convention , Art. 31(1)) In our view, it is not
consistent with this rule to interpret Article 2.4.2 by focusing on the word "investigation" in isolation as
determinative and to equate the ordinary meaning of this word with its dictionary definition. We note in the
latter regard that the Appellate Body has on several o ccasions cautioned against placing too much emphasis on
dictionary definitions. In US – Gambling, the Appellate Body observed that: "In order to identify the ordinary
meaning, a panel may start with the dictionary definition of the terms to be interpreted. But dictionaries, alone,
are not necessarily capable of resolving complex questions of interpretation, as they typically aim to catalogue
all meanings of words– be those meanings common or rare, universal or specialized". Appellate Body Report,
US- Gambling, para. 164 (footnotes omitted, emphasis in original). In the same Report, the Appellate Body
stated that: "... to the extent that the Panel's reasoning simply equates th e 'ordinary meaning' with the meaning
of words as defined in dictionaries, this is, in our view, too mechanical an approach". Appellate Body Report,
US – Gambling, para. 166. In US – Offset Act (Byrd Amendment), the Appellate Body observed that: "It should
be remembered that dictionaries are important guides to, not dispositive statements of, definitions of words
appearing in agreements and legal documents". Appellate Body Report, US – Offset Act (Byrd Amendment)
para. 248.

Article 5 and that the AD Agreement does not use "investigation" and "investigations" in relation to
proceedings that take place once an anti-dumping measu re has been taken; (d) the fact that certain
provisions governing investigati ons apply to provisions governi ng different proceedings only by
virtue of express cross-references; and (e) th e express distinction betw een "investigations" and
"reviews" in Article 18 of the AD Agreement.
- Investigation phase
7.153 First, we consider that a key element in resolving the issue of the scope of Article 2.4.2 is the
use of the phrase " the investigation phase". This phrase, in our view , reflects the notion that there
exists in the AD Agreement a particular phase, characterized by the word "investigation" used as an
adjective, that is distinct from other "phases". The yoking of these two words together must be given
effect. It would be inherently flawed to act as if this word "phase" did not ex ist. The meaning of the
term "investigation" in any abstract or general sense is not the issue. Rather the issue is the phrase
"investigation phase", to wit, a determinate stage in a process of longer duration and can only be
interpreted in that way. Therefore, what we must be concerned with is investigation as a particular
stage in a process. We note in this connec tion that, as held by the Appellate Body in US – Softwood
Lumber V , the phrase "during the investigation phase" operates to limit the applicability of
Article 2.4.2.245
7.154 In considering how to distinguish this "i nvestigation phase" from other phases, we see
significance in the fact that Article 5 ("Initiation a nd Subsequent Investigation") is the only provision
in the entire AD Agreement that uses the word "investigation" to define its subject matter. As the
provision that is the most specific in the AD Agreement with respect to the concept of "investigation",
it would be most natural in the context to read "the investigation phase" in Article 2.4.2 as referring to
the concept of "investigation" as used in Article 5. To interpret "the investigation phase" as
corresponding to an investigation within the mean ing of Article 5 makes it possible to maintain a
meaningful distinction within the AD Agreement between "the investigation phase" and subsequent
phases: the "investigation phase" referred to in Ar ticle 2.4.2 is the phase that begins when an
investigation is initiated under Article 5 and that ends when that inv estigation is concluded, which,
under Article 5.10, must occur within one year, and in no case more than 18 months after the initiation
of the investigation. This interpretation of "the investigation phase" in Article 2.4.2 is, moreover,
consistent with the distinction drawn by the A ppellate Body between "i nvestigations" and other
phases of countervailing duty and anti-dumping duty pr oceeding subsequent to the application of
countervailing or anti-dumping measures.246
7.155 In contrast, according to the interpretation a dvanced by the European Communities, "the
investigation phase" within the meaning of Article 2.4.2 would effectivel y include any kind of
"systematic examination or inquiry or careful study" , be it in the context of an investigation under

245 "Article 2.4.2 of the AD Agreement permits the use of three methodologies, applicable during the
investigation phase , for establishing the existence of 'margins of dumping'". Appellate Body Report, US –
Softwood Lumber V , para. 76 (footnote omitted, emphasis added). It is implied by this statement that "during
the investigation phase" must be read to be associated with the word "established" in the first sentence of
Article 2.4.2 rather than with "the existence of margins of dumping". Contrary to what is suggested in the
dissenting opinion, we do not believe that any clear grammar rules compel the result the dissenting opinion
argues for in any of the three authentic languages, namely that "investigation phase" must be linked to the
existence of margins of dumping. We also note in this regard that to read 'investigation phase' as qualifying "the
existence of margins of dumping" would effectively amount to equating "investigation phase" with "period of
investigation" as used elsewhere in Article 2. However, as discussed infra in paras. 7.190-7.194, "period of
investigation" is clearly a concept different from "investigation phase". This difference in meaning between
"investigation phase" and "period of investigation" thus supports a reading of "investigation phase" as being
associated with the word "established".
246 Infra, Section VII.E.3(c)(ii).

Article 5, an assessment proceeding under Article 9. 3, a review under Article 9.5 or a review under
Articles 11.2 and 11.3. But this has the inevitable consequence of eroding any meaningful distinction
between "the investigation phase" and subsequent ph ases. In fact, by the approach of the European
Communities each and every phase of an anti-dumping proceeding is "the investigation phase". This
would effectively read the word "phase" out of the text.
- Textual similarity between Article 2.4.2 and Article 5.1 of the AD Agreement
7.156 Second, we note the textual similarity between establishing "the existence of margins of
dumping during the investigation phase" in Article 2.4.2 and "an investigation to determine the
existence of ...any alleged dumping" in Article 5.1 While there are various provisions of the AD
Agreement requiring authorities to determine a margin of dumping, it is only in Article 5 that the
"existence... of dumping " must be determined in the context of an " investigation". This textual
similarity between "the existence of margin s of dumping during the investigation phase" in
Article 2.4.2 and the language used in Article 5 of the AD Agreement stands in clear contrast to the
terminology used in other provisions of the AD Agreement that may require authorities to determine
margins of dumping and which the European Commun ities considers to be "investigations” based on
the dictionary definition of the meaning of "investigation". The AD Agreement characterizes the
nature and purpose of proceedings under Article 9 and 11 in terms that are very different from
establishing "the existence of margins dumping during the investigation phase".
247
7.157 The European Communities has su bmitted various arguments in support of its view that the
word "existence" in the first sentence of Article 2.4.2 cannot support the interpretation of Article 2.4.2
as not applicable to administrative reviews. 248 We recall our view that the issue before us is the
meaning of "the existence of margins of dumping dur ing the investigation phase" in its entirety rather
than the individual words used in this phrase isolat ed from their context. Contrary to what the

247 Thus, Article 9.3 is part of an article on "I mposition and Collection of Anti-Dumping Duties".
Article 9.3.1, the provision that applies to the measures at issue, addresses the " determination of the final
liability for payment of anti-dumping duties" "when the amount of the anti-dumping duty is assessed on a
retrospective basis. " Footnote 21 refers to "[a] de termination of final liability for payment of anti-dumping
duties, as provided for in paragraph 3 of Article 9". Article 18 refers to "refund procedures" under Article 9.3.
If in a proceeding under Article 9.3 it is found that the margin of dumping in a particular period is zero, this
does not amount to a finding, resulting from an "investigation", that dumping did not "exist". Footnote 22 of the
AD Agreement provides that "[w]hen the amount of the anti-dumping duty is assessed on a retrospective basis, a
finding in the most recent assessment proceeding under subparagraph 3.1 of Article 9 that no duty is to be levied
shall not by itself require the authorities to terminate the defi nitive duty." This footnote refers to "a finding that
no duty is to be levied" and not to "a finding that du mping does not exist". Similarly, Article 9.5 of the
AD Agreement provides for "a review for the purpose of determining individual margins of dumping for any
exporters or producers in the exporting country in question who have not exported the product to the importing
Member during the period of investigation..." and does not use the wo rds "investigation" or "investigate" to
characterize the nature of this proceed ing. A review under this provision is to be carried out on accelerated
basis "compared to normal duty assessment and review proceedings " of the importing Member. Article 11 of
the AD Agreement ("Duration and Review of Anti-Dumping Duties and Price Undertakings") uses the words
"review" and "determine" rather than "investigate". Articles 9.5 and 11 also contain no references to "the
existence of margins of dumping".
248 The European Communities argues that it is not possible to dissociate the "existence" of dumping
from the "degree" of dumping; the existence of du mping must be established not only in an original
investigation but also in other proceedings such as changed circumstances reviews or sunset reviews; the word
"existence" is used in other provisions in the AD Agreement without having the meaning attributed to it by the
United States; the word "existence" is also part of the title of Article 2 of the French and Spanish texts of the AD
Agreement; and the United States does not apply certain prov isions of Article 2.4.1 in administrative reviews,
even though Article 2.4.1 does not contain the word "existence". EC-Rebuttal Submission, paras. 118 and 156-
160; Oral Statement at the Second Substantive Meeting of the Panel by the European Communities, paras. 19-
26.

European Communities suggests, proceedings other than investigations under Article 5 are not
concerned with determining "the existence of marg ins of dumping during the investigation phase". In
this respect, whether or not it is possible as an empirical matter to determine the "existence" of
dumping without at the same time determining its "magn itude", this is not the legally relevant issue.
Rather, what matters is that the AD Agreement does not express textually the nature and purpose of
proceedings under provisions other than Article 5 in terms of establishing "the existence of margins of
dumping during the investigation phase".249 Similarly, while it is true that the word "existence" in and
of itself is not unique and is used in other provisions of the AD Agreement as well as in the SCM
Agreement, none of the provisions cited by the European Communities 250 refers to the establishment
of the existence of dumping (or a subsidy) in the context of an investigation.251
- Use of the term "investigation" in the AD Agreement to refer to (phases of)
proceedings
7.158 Third, in order to interpret the phrase "the existence of margins of dumping during the
investigation phase" in Article 2.4.2, it is also help ful to examine the general pattern of the usage of
the term "investigation" in the AD Agreement.252 That term is used both: (i) in a general sense (on-
the-spot investigation, period of investigation); and (ii) to refer to a proceeding or phase of
proceeding.253 Since in the context of Article 2.4.2 the word "investigation" in "the investigation
phase" is used to refer to a particular phase of an anti-dumping proceeding, its use in the general sense
is not germane to the issue at hand. If, however, an examination of the use of the term to refer to a
(phase of a) proceeding consistently refers to Artic le 5 proceedings, that fact would strongly buttress
the interpretation of "investigation phase" that we reach ed above. It is instructive in this respect to
review the reference made to "inv estigations" in Article 1 of the AD Agreement as a prerequisite for
the application of an anti-dumping measure and th e usage of "investigation" in the provisions of
Articles 3, 6, 7, 8 and 10 and 12 on evidence, pr ovisional measures, price undertakings, retroactive
application of anti-dumping measures and public notice and explanation of determinations.

249 We note, in this regard, that the Appellate Body has expressly relied on the phrase "the existence of
(margins of) dumping" to distinguish original investigations under the AD Agreement from proceedings under
Articles 9 and 11. Infra, paras. 7.177-7.179.
250 The European Communities refers to the word "existence" or "existing" in Articles 3.7, 8.4, 4.1(ii),
18.3, 18.3.2 of the AD Agreement and in Articles 1.1, 2.1(b), 4.2, 6.1, 6.5, 6.7(d), 6.8, 7.2, 7.9, 8.2(c), 9.4, 15.7,
16.2, 17.1(b), 18.4, 19.1 and 19.4, 22.4, 24.3, 27.6, 27.9, 32.3 Annex III, paras. 1-2 and 4, Annex IV, para. 4 and
Annex V, para. 2 of the SCM Agreement. Oral Statement at the Second Substantive Meeting of the Panel by the
European Communities, paras. 22-23. We do not need to express a view on whether, as argued by the European
Communities, all these provisions are in fact relevant to the imposition and collection of anti-dumping and
countervailing duties.
251 With regard to the argument that the French and Spanish texts of the AD Agreement refer to
"existence" of dumping in the title of Article 2 ("Determination de l'existence d'un dumping" and
"determinación de la existencia de dumping"), we consider that this does not alter the fact that Article 2.4.2 is
the only provision in Article 2 that expressly relates "the existence of margins of dumping" to "the investigation
phase". Since the issue of the application of Article 2.4. 1 is not before us, we need not express a view on the
scope of application of that provision.
252 As noted above, we consider that the entire AD Agreement can be relevant context for the
interpretation of Article 2.4.2.
253 To illustrate this concept: we consider that the word "investigation" is used to refer to (a phase of a)
proceeding when, for instance, a provision defines rules that apply to "an investigation" "an anti-dumping
investigation" or "the investigation". The question before us is whether in such cases the proceedings referred to
are only proceedings under Article 5 or wh ether these terms are also used in the AD Agreement in connection
with proceedings under Articles 9 and 11. Therefore, in our view the relevant question is narrower in scope than
whether the word "investigation" per se is always used in the AD Agreement to refer to investigations in the
sense of Article 5 of the AD Agreement.

7.159 Article 1 of the AD Agreement ("Principles") provides that the initiation and conduct of
"investigations" in accordance with the Agreement is one of the two fundamental prerequisites for the
application of an anti-dumping measure. The fact that anti-dumping measures may only be applied
"pursuant to" "investigations" and the express link made to Article 5 in footnote 1 indicate that
"investigations" within the meaning of Article 1 necessarily precede the application of an anti-
dumping measure. This is also apparent from the fa ct that an "investigation" within the meaning of
Article 1 is initiated by the procedural acti on by which a Member formally commences an
investigation as provided in Article 5.
254
7.160 With respect to Article 3 of the AD Agreement ("Determination of Injury"), we note that the
Appellate Body has affirmed in US – Oil Country Tubular Goods Sunset Reviews that "anti-dumping
investigations" in the first sentence of Article 3.3 refers to investigations within the meaning of
Article 5 and thus not to sunset reviews under Article 11 of the AD Agreement .255 The European
Communities does not contest that it refers to "investigations" within the meaning of Article 5.
7.161 The European Communities argues that Article 6 of the AD Agreement ("Evidence") employs
the word "investigation" in a generi c sense that corresponds to its dictionary definition and that this is
important contextual support for the view that "i nvestigation" in "investigation phase" has a generic
meaning. We disagree. First, Article 6 begins with the phrase "[a]ll interested parties in an anti-
dumping investigation....". The fact that Article 6 immediately follows the provisions on "Initiation
and Subsequent Investigation" in Article 5 w ould more naturally imply that "an anti-dumping
investigation" in the first sentence of Article 6.1 has the same meaning as the word "investigation" in
Article 5. Second, Article 6.1.3 provides that as soon as "an investigation" has been initiated, the
authorities shall provide the text of the applica tion received under Article 5.1 to the known exporters,
the authorities of the exporting Member and, upon request, to other interested parties. The direct link
made in this sentence between "an investigation" and the application received under Article 5.1
confirms that "an investigation" within the meaning of this sub-paragraph is an investigation initiated
under Article 5 i.e. an investigation "to determine the existence, degree and effect of any alleged
dumping". This link between "anti-dumping investiga tion" and "investigation" in Article 6.1 and the
word "investigation" as used in Article 5 logically implies that references to "the anti-dumping
investigation", "an anti-dumping investigation" or "a n investigation" in other provisions of Article 6
must be construed in the same manner. More gene rally, the fact that Article 6 is placed between an
Article on "Initiation and Subsequent Investigation" and an Article on "Provisional Measures" gives
further contextual support to the reading that this Ar ticle lays down rules applicable to investigations
initiated under Article 5 to determine whether or no t the conditions for the application of an anti-
dumping measure are fulfilled.
256 257

254 We note the argument of the European Communities that footnote 1 does not limit the meaning of
"investigations" but explains the meaning of "initiated" in the context of investigations, both under Article 5 and
in the context of other types of investigation. However, "investigations" within the meaning of the first sentence
of Article 1 are "initiated" by "the procedural action by which a Member formally commences an investigation
as provided in Article 5." Theref ore, the only "investigations initiated" referred to in Article 1 of the
AD Agreement are investigations within the meaning of Article 5.
255 Infra, para. 7.183.
256 The relationship between investigation and the applica tion of measures is also explicit in the text of
Articles 6.9 and 6.14. Thus, Article 6.9 provides: "The authorities shall, before a final determination is made,
inform all interested parties of the essential facts under consideration which form the basis for the decision
whether to apply definitive measures . Such disclosure should take place in sufficient time for the parties to
defend their interests". Article 6.14 provides: "The procedures set out above are not intended to prevent the
authorities of a Member from pro ceeding expeditiously with regard to initiating an investigation, reaching
preliminary or final determinations, whether affirmative or negative, or from applying provisional or final
measures, in accordance with relevant provisions of this Agreement."

7.162 Article 7 of the AD Agreement ("Provisional Measures") expressly refers in sub-
paragraph 1(i) to an investigation initiated in acco rdance with Article 5. Given this express cross-
reference to Article 5, the terms "the investigation" in Article 7.1(iii) and 7.3 and "an investigation" in
Article 7.4 must also be understood to refer to investigations within the meaning of Article 5.
7.163 In Article 8 of the AD Agreement ("Price Undertakings") the phrase "the investigation of
dumping and injury" in paragraph 4, read together with "a negative dete rmination of dumping or
injury" in the second sentence and with "an affirmat ive determination of dumping and injury" in the
last sentence clearly means an investigation to determine whether dumping and injury exist i.e. an
investigation within the meaning of Article 5.
7.164 In Article 10 of the AD Agreement ("Retroactivity"), the phrases "after initiating an
investigation" in Article 10.7 and "the date of initiation of the investigation" read in their context must
necessarily be interpreted to refer to investiga tions within the meaning of Article 5 of the
AD Agreement.
7.165 In Article 12 of the AD Agreement ("Public Notice and Explanation of Determinations"), it
logically follows from the reference to Article 5 in pa ragraph 1 that "initiation of an investigation" in
Article 12.1.1 and 12.1.1(ii) means initiation of an inv estigation pursuant to Article 5. The concept of
an investigation as the investigatory phase culminating in the decision whether or not to apply an anti-
dumping measure is also apparent from the context in which the word "investigation” appears in the
first sentence of Article 12.2.2 and in Article 12.2.3.258
7.166 Thus, our review of the use of "investigation" a nd "investigations" in Articles 1, 3, 6, 7, 8, 10
and 12 of the AD Agreement reveals that, where these words refe r to a proceeding or a phase of a
proceeding, they are limited to investigations within the meaning of Article 5.1 of the AD Agreement,
i.e. investigations that aim to determine whether the conditions for the application of an anti-dumping
measures are present. By contrast, the AD Agreement typically does not use the words "investigation"
and "investigations" in relation to proceedings that take place after an anti-dumping measure has been
imposed. In particular, as discussed above 259, there is nothing in the text of Articles 9 and 11 of the
AD Agreement to suggest that proceedings under tho se provisions are "investigations". The
AD Agreement does not distinguish between "original investigations" and other types of
"investigations" but between "investigations" and other types of "proceedings".
7.167 Given our view that we need to focus on how the word "investigation" is used in the
AD Agreement in relation to (phases of) proceedings, we see no merit in the argument of the European
Communities that the fact that other provisions in Article 2 use the word "investigation" in the general
sense of "a systematic examination or inquiry or a careful study of a particular subject" 260 because in
these provisions 261 "investigation" is generally not used to refer to a particular (phase of a)

257 Article 6.7 provides for "investigations" in the territo ries of other Members. The fact that in this
provision investigation clearly does not refer to an investigation within the meaning of Article 5 is of no
particular relevance because it is evident that this provision uses "investigation" to refer to a particular aspect of
the data gathering process and not to investigation as a "proceeding".
258 Article 12.2.2 sets forth certain requirements regarding "[a] public notice of conclusion or
suspension of an investigation in the case of an affirmative determination providing for the imposition of a
definitive duty or the acceptance of a price undertaking". Article 12.2.3 deals with "[a] public notice of the
termination or suspension of an investigation following the acceptance of an undertaking."
259 Supra, para. 7.156 and footnote 247.
260 E.g. EC-First Written Submission, para. 178 and Exhibit EC-45.
261 "...exporter or producer under investigation" (Artic le 2.2.11, first sentence and Article 2.2.2, first
sentence); "in the course of the investigation" (Article 2.2.1.1, second sentence); "during the investigation"
(footnote 6); "exporters or producers subject to investiga tion" (Article 2.2.2(ii)) and "period of investigation"
(Article 2.2.1, last sentence, Article 2.2.1.1, last sentence, footnote 6 and Article 2.4.1).

proceeding. We also recall that the issue before us is whether the phrase "the existence of margins of
dumping during the investigation phase" as a whole, a nd not the word "investigation" by itself, limits
the scope of Article 2.4.2. That a provision in Article 2 that refers to "period of investigation" or to
"exporters or producers under investigation" is not li mited in its applicability to investigations within
the meaning of Article 5 is of little relevance to wh ether Article 2.4.2 is so limited as a result of the
phrase "the existence of margins of dumping during the investigation phase".
- Cross-references in Articles 11 and 12 of the AD Agreement
7.168 Fourth, the idea that "investiga tion", when used to refer to a (phase of a) proceeding, is
generally used in the AD Agreement in relation to the formal process of inquiry that precedes the
possible application of an anti-dumping measure finds further support in the fact that certain
provisions governing proceedings that take place after the imposition of an anti-dumping measure
contain express cross-references to provisions applicab le to investigations. Article 11.4 provides that
"[t]he provisions of Article 6 regarding evidence an d procedure shall apply to any review carried out
under this Article". Article 12.3 states that "the provisions of this Article shall apply mutatis mutandis
to the initiation and completion of reviews pursuan t to Article 11 ..." The need for such cross-
references can only be explained by the fact that pr ovisions applicable to "investigations" (Articles 6
and 12.1-2) are not automatically applicable to pr ovisions dealing with other types of proceedings
such as duty assessment proceedings and reviews.
262 That such provisions applicable to investigations
do not ipso facto also apply to other kinds of proceedings c onfirms that the concept of "investigation"
as used in the AD Agreement in relation to proceedings is limited to particular kinds of proceedings
and that the mere fact that an authority engages in an intellectual activity that can be described as
"investigation" within the dictionary meaning of that term is not determinative.
- Distinction between investigations and reviews in Article 18 of the
AD Agreement
7.169 Finally, we note, in this respect, the distinction drawn in Article 18.3 of the AD Agreement
between "investigations" and "reviews of existing measures". The juxtaposition of these two concepts
in the same sentence makes it unambiguous ly clear that the drafters of the AD Agreement were aware
of the difference between these two concepts. The c oncept of a "review investigation" used by the
European Communities263 is in direct contradiction with this distinction and has no textual basis in the
AD Agreement.
7.170 Based on our analysis of the textual and c ontextual elements discussed in the preceding
paragraphs – the use of "investigation phase", the textual similarity between "the existence of margins
of dumping during the investigation phase" in Article 2.4.2 and the wording in Article 5.1; the fact
that the AD Agreement consistently uses the word "investiga tion" in relation to proceedings under
Article 5 and uses different terminology in rela tion to proceedings unde r Articles 9 and 11; the

262 The European Communities appears to argue that th e reference to Article 6 in Article 11.4 of the
AD Agreement means that a "review" within the meaning of that provision necessarily entails an "investigation".
The more logical conclusion, however, is that the fact that it was necessary to make express reference in
Article 11 to Article 6 to make it applicable within the context of Article 11 confirms that a provision applicable
to investigations is not per se applicable to reviews. We note that unlike Article 11, Article 9 does not contain a
cross-reference to Article 6. We consider that th is absence of a cross-reference may well reflect an
understanding among negotiators that, in view of the particular nature of duty assessment proceedings, Article 6
cannot apply in its entirety to Article 9. It is not cl ear, for example that negotiators would necessarily have
envisaged that, if an individual importer requests a refund of anti-dumping duties under Article 9.3.2, all
"interested parties", as defined in Article 6.11, should be able to participate in the ensuing refund procedure and
exercise the procedural rights provided for in the various provisions of Article 6.
263EC-First Written Submission, para. 176; EC-Closi ng Oral Statement at the Second Substantive

express cross-references in Articles 11 and 12; and th e express distinction between investigations and
reviews in Article 18 – we concl ude that Article 2.4.2 of the AD Agreement must be interpreted to
apply only to determinations of dumping in the cont ext of investigations pursuant to Article 5 of the
AD Agreement.
(ii) Panel and Appellate Body Reports
7.171 Panel and Appellate Body reports support our interpretation that "the existence of margins of
dumping during the investigation phase" in Article 2.4. 2 restricts the applicability of that provision to
investigations within the meaning of Article 5 of the AD Agreement. First, the Appellate Body has
confirmed that the SCM Agreement and the AD Agreement distinguish between investigations and
other "phases" or "stages" of countervaili ng duty and anti-dumping proceedings, such as duty
assessment and review proceedings. Second, the A ppellate Body has highlighted the difference in
purpose and nature of the determination to be ma de between "investigations " and other proceedings
under the SCM Agreement and the AD Agreement. Third, WTO dispute settlement practice has also
made clear that provisions that apply to investigations are not ipso facto applicable to other
proceedings under the SCM Agreement and the AD Agreement.
- Investigations and other "phases" or "stages" of countervailing duty and anti-
dumping proceedings
7.172 The Appellate Body has made it clear that ther e are distinct phases or stages discernible in a
countervailing duty or anti-dumping action and that the investigation phase, which precedes the
imposition of a countervailing or anti-dumping duty, is distinct from phases or stages that follow the
imposition of such a duty.
7.173 In US – Carbon Steel , the Appellate Body reversed the finding of the Panel in that case that
the de minimis standard in Article 11.9 of the SCM Agreement also applies to sunset reviews under
Article 21.3 of that Agreement.
264 The Appellate Body noted in this connection that Article 11.9 of
the SCM Agreement sets forth a de minimis standard "for original investigations" and that all of its
provisions relate to the authorities' initiation and conduct of a countervailing duty investigation. 265
According to the Appellate Body:
"Although the terms of Article 11.9 are detailed as regards the obligations imposed on
authorities hereunder, none of the words in Article 11.9 suggests that the de minimis
standard that it contains is applicable beyond the investigation phase of a
countervailing duty proceeding. In particular, Article 11.9 does not refer to Article
21.3, nor to reviews that may follow the imposition of a countervailing duty."266
In this respect, the Appellate Body rejected an argu ment of Japan that the use of the word "cases" in
the second sentence of Article 11.9 means that the de minimis provision must be applied "to all phases
of countervailing duty proceedings not only in invest igations". According to the Appellate Body, "[t]
he use of the word 'cases' does not alter the fact that the terms of Article 11.9 apply the de minimis
standard only to the investigation phase."267 The Appellate Body also observed later in its Report that:

264 Appellate Body Report, US – Carbon Steel, paras. 58-97.
265 Appellate Body Report, US – Carbon Steel, paras. 66-67.
266 Appellate Body Report, US – Carbon Steel, para. 68 (footnote omitted, emphasis in original)
267 Appellate Body Report, US – Carbon Steel, footnote 58.

"... the non-application of an express de minimis standard at the review stage, and
limiting the application of such a standard to the investigation phase alone, does not
lead to irrational or absurd results".
268
Thus, the Appellate Body clearly used the term "the investigation phase" in the context of a
countervailing duty proceeding to refer to an "investig ation" within the meaning of Article 11 of the
SCM Agreement 269, as distinguished from other phases of countervailing duty proceedings, such as
"the review stage".
7.174 The notion that the process of inquiry that culminates in the imposition of a countervailing
duty or anti-dumping duty is a phase distinct from other proceedings that follow the imposition of
such a duty is also apparent from the remark by the Appellate Body in EC – Bed Linen (Article 21.5)
that:
"... the imposition and collection of anti-dum ping duties under Article 9 is a separate
and distinct phase of an anti-dumping action that necessarily occurs after the
determination of dumping, injury, and causation under Articles 2 and 3 has been
made".270
- The difference in purpose of the determination to be made between
"investigations" and other proceedings
7.175 In connection with the temporal distinction be tween investigations and other phases or stages
of countervailing duty and anti- dumping proceedings, the Appella te Body has pointed to the
differences in purpose between these distinct phases or stages.
7.176 In US – Carbon Steel, the Appellate Body underlined the fact that under the SCM Agreement:
"...original investigations a nd sunset reviews are distinct processes with different
purposes. The nature of the determination to be made in sunset review differs in
certain essential respects from the nature of the determination to be made in an
original investigation."271
7.177 In US – Corrosion-Resistant Steel Sunset Review , the Appellate Body indicated that this
observation also applies to the AD Agreement:
"In an original anti-dumping investigation, investigating authorities must determine
whether dumping exists during the period of investigation. In contrast, in a sunset
review of an antidumping duty, investigating authorities must determine whether the
expiry of the duty that was imposed at the conclusion of an original investigation
would be likely to lead to continuation or recurrence of dumping."
272
7.178 In US – Oil Country Tubular Goods Sunset Reviews , the Appellate Body discussed this
distinction as follows:

268 Appellate Body Report, US – Carbon Steel, para. 89.
269 Article 11 of the SCM Agreement corresponds to Article 5 of the AD Agreement.
270 Appellate Body Report, EC – Bed Linen (Article 21.5), para. 123 (italics in original).
271 Appellate Body Report, US – Carbon Steel, para. 87.
272 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 107 (emphasis in
original). See also para. 124. The Panel in US – Anti-Dumping Measures on Oil Country Tubular Goods
considered that the Appellate Body's reasoning rega rding the differences in purpose between original
investigations and sunset reviews "applies with equal force to the question of injury". Panel Report, US – Anti-
Dumping Measures on Oil Country Tubular Goods, paras. 7.116-7.117.

"Original investigations require an i nvestigating authority, in order to impose an anti-
dumping duty, to make a determination of the existence of dumping in accordance
with Article 2, and subsequently, to determ ine, in accordance with Article 3, whether
the domestic industry is facing injury or a threat thereof at the time of the original
investigation. In contrast, Article 11.3 requi res an investigating authority, in order to
maintain an anti-dumping duty, to review an anti-dumping duty order that has already
been established-following the prerequisite determinations of dumping and injury-so
as to determine whether that order should be continued or revoked."
273
7.179 In EC - Bed Linen, the Appellate Body distinguished be tween the determination to be made
under Article 2.4.2 and the imposition and collection of duties under Article 9:
"... Article 2.4.2 is not concerned with the collection of anti-dumping duties, but
rather with the determination of 'the existence of margins of dumping'. Rules relating
to the 'prospective and 'retrospective' collection of anti-dumping duties are set forth in
Article 9 of the AD Agreement. The European Communities has not shown how and
to what extent these rules on the 'prospective' and 'retro spective' collection of anti-
dumping duties bear on the issue of the establishment of 'the existence of dumping
margins' under Article 2.4.2."274275
7.180 We also note in this connection th e discussion in the panel reports in US - DRAMS and
Mexico – Anti-Dumping Measures on Rice on the difference in purpose between Article 5.8 and
Article 9.3 of the AD Agreement.276
- Provisions that apply to investigations are not ipso facto applicable to other
proceedings under the SCM Agreement and the AD Agreement.
7.181 The Appellate Body has held that a provision that applies to a countervailing duty or anti-
dumping investigation is not automatically applicable to provisions of the SCM Agreement and the
AD Agreement that deal with proceedings that take place following the imposition of a countervailing
or anti-dumping duty.
7.182 As affirmed by the Appellate Body in US – Carbon Steel and US – Corrosion-Resistant Steel
Sunset Review, rules relating to due process aspects of inv estigations contained in Article 12 of the
SCM Agreement and Article 6 of the AD Agreement apply to reviews under Article 21 of the
SCM Agreement and Article 11 of the AD Agreement only because they are expressly referred to in
those provisions.277
7.183 Similarly, in US – Oil Country Tubular Goods Sunset Reviews, the Appellate Body found that
Article 3.3 of the AD Agreement, which allows for a cumulative assessment of the effects of imports
where imports from more than one country "a re simultaneously subject to anti-dumping
investigations", does not apply in the contex t of sunset reviews under Article 11.3 of the
AD Agreement:
"This provision plainly speaks to the situation '[w]here imports of a product from
more than one country are simultaneously subject to anti-dumping investigations '

273 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 279.
274 Appellate Body Report, EC – Bed Linen, para. 62, footnote 30.
275 See also Appellate Body Report, EC – Bed Linen (Article 21.5), para. 124.
276 Panel Report, US – DRAMS , para. 6.90; Panel Report, Mexico – Anti-Dumping Measures on Rice ,
para. 7.144.
277 Appellate Body Report, US – Carbon Steel , para. 72; Appellate Body Report, US – Corrosion

(emphasis added) It makes no mention of injury analyses undertaken in any
proceeding other than original investigations; nor do we find a cross-reference to
Article 11, the provision governing review of anti-dumping duties, which itself makes
no reference to cumulation. We therefore find Articles 3.3 and 11.3, on their own,
not to be instructive on the question of th e permissibility of cumulation in sunset
reviews..."
278
7.184 The Appellate Body thus made it clear that the expression "anti-dumping investigations" in
Article 3.3 by itself has the effect of limiting the applicability of that provision to "original
investigations". We note the argument of the Eu ropean Communities that Article 3.3 has no bearing
on the meaning of "investigation" in Article 2.4.2 b ecause the reference in Article 3.3 to Article 5.8
implies that Article 3.3. is limited to investigati ons within the meaning of Article 5. However, we
note that the Appellate Body's conclusion that Article 3.3 makes no mention of injury analyses "in any
proceeding other than original investigations" imme diately follows its reference to the phrase "anti-
dumping investigations". There is nothing in this passage to suggest that th e Appellate Body based
this conclusion on the fact that Article 3.3 contains a textual link to Article 5. On the contrary, in a
subsequent passage the Appellate Body expressly stated that "the opening text of Article 3.3 plainly
limits its applicability to original investigations".
279
7.185 The European Communities argues that the Appe llate Body's use of the term "original
investigation" supports its position because the word "original" would be redundant if an investigation
were always an investigation within the meaning of Article 5. In our view, however, the above
passage indicates that the Appellate Body treats "i nvestigation" and "original investigation" as
synonymous. We note that the Appellate Body very fr equently refers to "investigation" as used in the
SCM Agreement and AD Agreement as "original investigation". In many instances in which the
Appellate Body uses "original inves tigation" in these reports it is clear from the context that the word
"original" is used simply for the sake of clarity to highlight the distinction between "investigation"
and "review".280 We see nothing in these reports to suggest that the Appellate Body's use of "original"
before "investigation" should be interpreted to mean that apart from "original investigations" there are
"other types of investigations" under the AD Agreement , such as reviews and duty assessment
proceedings.
7.186 To conclude, relevant Appellate Body and panel reports reveal a clear pattern: the concept of
an "investigation" in countervailing duty and an ti-dumping proceedings, when used to refer to a
proceeding or phase of a proceeding, has been c onsistently distinguished from duty assessment and
reviews as a unique phase with a distinct purpose, and, as a consequence, rules applicable to
investigations have been found not to be ipso facto applicable to other phases of countervailing duty
and anti-dumping proceedings. No Appellate Body or panel repor t has found that the dictionary
definition of the word "investigation" is determina tive of the interpretation of that concept in the
AD Agreement and that, as a consequence, the con cept of "investigation" in the SCM Agreement and
AD Agreement applies to any provision, includi ng Articles 19 and 21 of the SCM Agreement and
Articles 9 and 11 of the AD Agreement, that can be characterized as contemplating a systematic
examination, inquiry or careful study.281

278 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews , para. 294 (emphasis in
original).
279 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, para. 301.
280 E.g., Appellate Body Report, US – Carbon Steel, paras. 66, 83 and 86-87; US – Corrosion Resistant
Steel Sunset Review , paras107, 112, 124, 135 and 154; Appellate Body Report, US – Oil Country Tubular
Goods Sunset Reviews, paras. 279, 284, 287-288, 290, 294, 296-301, 327-328 and 359.
281 In this respect, the fact that a number of WTO panel and Appellate Body reports and GATT panel
reports have used the words "investig ation", "investigatory" and "investiga te" in connection with proceedings
under Article 9.3 and Article 11 (EC-Rebuttal Submission, paras. 168-170; EC-Second Oral Statement,

7.187 Finally, we note specifically with respect to Article 2.4.2 of the AD Agreement, that the Panel
in Argentina – Poultry Anti-Dumping Duties observed:
"We consider that Brazil's principal argumen t misinterprets the reference to "margin
of dumping" in Article 9.3. Based on that language, Brazil focuses entirely on Article
2.4.2, and the reference to the "investiga tion phase" in that provision. However,
Article 9.3 does not refer to the margin of dumping established "under Article 2.4.2",
but to the margin of dumping established "under Article 2". In our view, this means
simply that, when ensuring that the amount of the duty does not exceed the margin of
dumping, a Member should have reference to the methodology set out in Article 2.
This is entirely consistent with the introduc tory clause of Article 2, which sets forth a
definition of dumping "for the purpose of this Agreement …". In fact, it would not be
possible to establish a margin of dumping w ithout reference to the various elements
of Article 2. For example, it would not be possible to establish a margin of dumping
without determining normal value, as provi ded in Article 2.2, or without making
relevant adjustments to ensure a fair comp arison, as provided in Article 2.4. Thus,
the fact that Article 2.4.2, uniquely among the provisions of Article 2, relates to the
establishment of the margin of dumping "during the investigation phase" is not
determinative of the issue before us, since other provisions of Article 2 do not contain
that limitation."
 282
7.188 That "during the investigation phase" cons titutes a unique limitation of the scope of
Article 2.4.2 contradicts the view that "during th e investigation phase" has the general meaning that
the European Communities ascribes to that phrase.
(iii) The Alternative Interpretations of "during the investigation phase" suggested by the European
Communities
7.189 It is of course well accepted in public internati onal law that a treaty must be interpreted in a
manner that gives meaning to all its terms. If, as argued by the European Communities the word
"investigation" in Article 2.4.2 must be interpreted in line with its dictionary definition, the inclusion
of the phrase "the existence of margins of du mping during the investigation phase" means that
Article 2.4.2 applies to the establishment of "the existence of margins of dumping during the phase in
which authorities carry out a systematic examination or inquiry or a careful study of or research".
Such an interpretation of "investigation" as simply referring to the conduct of an examination, inquiry
or study would seem to render the phrase "the inv estigation phase" redundant given that the need to
conduct an examination, inquiry or study is alrea dy implied by the words "established" in the same
sentence of Article 2.4.2 and by the word "determination" in the title of Article 2.
7.190 The European Communities proposes three possible interpretations of "during the
investigation phase" in an attempt to demonstrate that this provision can be given meaning without
limiting its applicability to investigations within the meaning of Article 5.
7.191 The first of these interpretations is that "duri ng the investigation phase", if associated with
"the existence of margins of dumping" rather than with "establishment", means "during the

para. 36) is of no particular significance. The mere fact that a panel or the Appellate Body characterizes a
review under Article 11 as a "review investigation" does not imply that it ther eby expresses a view that
provisions in the AD Agreement that apply to "investigations" are also applicable to "reviews". Similarly, we
fail to see the relevance of the documents submitted by the European Communities that show that USDOC and
USITC have sometimes characterized reviews as "investig ations". (EC-Rebuttal Submission, paras. 132-133)
The issue before us is how certain terms are used in the AD Agreement.
282 Panel Report, Argentina – Poultry Anti-Dumping Duties, para. 7.357 (emphasis added)

investigation period." Specifically, the European Communities suggests that references to the "period
of investigation" in Article 2.2.1, footnote 6 to Ar ticle 2.2.1.1 and Article 2.4.1, serve to ensure that
investigating authorities rely only on data from the pe riod of investigation, particularly in respect of
normal value; the reference in Article 2.4.2 to the establishment of margins of dumping "during the
investigation phase" ensures a similar limitation on the use of data from outside the "period of
investigation" in respect of the comparison phase generally and in respect of export prices in
particular, since there is not otherwise any restriction in regard to them.
283 We note, however, the
striking difference in this regard between, on the one hand, the repeated use of "period of
investigation" in Articles 2.2.1, 2.2.1.1, footnote 6 and Article 2.4.1
284 and, on the other, the use of
"investigation phase" which appears only in Ar ticle 2.4.2. Although not defined in the
AD Agreement, the meaning of the concept of a "period of investigation" in anti-dumping proceedings
is well understood.285 We note that a Recommendation Concerning the Periods of Data Collection for
Anti-Dumping Investigations adopted by the Committee on Anti-Dumping Practices in May 2000
states that the AD Agreement:
"refers to the period for data collection fo r dumping investigations when it refers to
the period of investigation".286
If the drafters of the AD Agreement had intended to refer in Article 2.4.2 to "the period of data
collection" used by investigating authorities as the basis for their findings, they could have used the
concept of "period of investigation", which they c onsistently used in four other places in the same
Article, including in the last sentence of Article 2.4.1, which immediately precedes the sentence in
Article 2.4.2 that contains the phr ase "during the investigation phase". 287 We note in this respect the
very clear difference in the French and Spanish texts of the AD Agreement between "la période
couverte par l'enquête" and "la phase d'enquête" and between "el período objeto de investigación" and
"la etapa de investigación". The argument that "t he investigation phase" can be understood to mean
"the period of investigation" therefore lacks support in the text of the AD Agreement.
7.192 Further, the overall characterization by the European Communities of how Article 2 addresses
the issue of "period of investigation" and the ro le played by Article 2.4.2 in that regard is
unconvincing. The provisions in Article 2 that employ the term "period of investigation" do not set
out a general rule restricting data collection in the context of normal value to the period of
investigation such that a counterpart in the contex t of comparison and export prices is required, but
rather address very specific issues relating to the period of investigation in particular contexts. 288
Thus, the proposition that Article 2.4.2's reference to "during the investigation phase" was intended to
ensure that such a data limitation requirement ex tended to the comparison phase and to export prices
is difficult to sustain. The question thus rema ins why Article 2.4.2 would contain an explicit

283 EC-Response to Panel Question 15, paras. 55-64.
284 The concept of "period of investigation" also appears in Article 9.5 of the AD Agreement.
285 See Panel Report, EC – Tube or Pipe Fittings , paras. 7.100-7.101; Panel Report, Mexico – Anti-
Dumping Measures on Rice , paras. 7.50-7.65; Panel Report, Argentina – Poultry Anti-Dumping Duties ,
para. 7.287.
286 G/ADP/6 (16 May 2000).
287 The fact that drafts of the second sentence of what is now Article 2.4.2 used the concept of "period
of investigation" when the first sentence already used "the investigation phase" confirms that the drafters
understood these concepts to have different meanings. See e.g. Draft Working Paper on AD dated
26 November 1991, referred to as "New Zealand III, Ramsauer Text" in Exhibit EC-51.
288 The first three uses of the term (Article 2.2.1, and 2.2.1.1 and its footnote 6) relate specifically and
exclusively to the determination of cost of production. Article 2.2.1 provides that prices that are below cost at
the time of sale still allow for recovery of costs with in a reasonable period of time if above weighted average
unit costs for the POI. Footnote 6 to Article 2.2.1.1 may actually require reference to data subsequent to and
thus outside the POI. The fourth use of the term relates to the issue of exchange rate movements in the context
of export prices.

limitation on the use of data outside the period of investigation in one particular context while no
general requirement to that effect may be identified in Article 2.
7.193 More generally, it is hard to imagine that if th e drafters had wanted to express the rule that
data collection must be restricted to a period of investigation they would have chosen to express
themselves in the manner in which Article 2.4.2 is written. While we acknowledge that the WTO
Agreement is not always drafted in the clearest terms, we would have expected that a general rule to
that effect would have been expressed as a distinct thought somewhere in Article 2, and would have in
some manner indicated that as a general rule Me mbers should only rely on data from within that
period of investigation.
7.194 That "investigation phase" in Article 2.4.2 cannot be equated with "period of investigation" as
used elsewhere in Article 2 (and in Article 9.5) is confirmed by the statement of the Appellate Body
that:
"Article 2.4.2 of the Anti-Dumping Agreement permits the use of three
methodologies, applicable during the investigation phase , for establishing the
existence of 'margins of dumping'."
289
Therefore, it is clear that the Appellate Body interp rets "during the investigation phase" as pertaining
to the issue of when the three methodologies contained in Article 2.4.2 are applicable, rather than to
the period of time with respect to which the existence of margins of dumping is established.
7.195 The second possible interpretation advanced by the European Communities is that "during the
investigation phase" in Article 2.4.2 refers to the period during which investigating authorities have to
make their determination. 290 However, Article 2 deals with the methodology for determining the
existence of dumping and does not address procedural aspects, such as the timing of determinations.
Articles 5.10, 9.3 and 11 contain specific require ments regarding the time-limits applicable to
investigations, assessment proceedings and reviews. Thus, to read into "during the investigation
phase" in Article 2.4.2 a requirement that investig ating authorities abide by the time-limits specified
in Articles 5, 9 and 11 of the Agreement would render this phrase redundant. Moreover, it is not clear
why the need to state expressly th at authorities must abide by those time-limits arises only with
respect to this particular aspect of a determination, and not with respect to others such as the injury
determination.
7.196 The third possible interpretation advanced by the European Communities of the meaning
"during the investigation phase" is that it clarifies that Article 2.4.2 does not apply to the pre-initiation
phase. This interpretation poses the same kind of interpretive problems as the other two suggested
interpretations. The issue of the requirement to be met by an application for initiation of an anti-
dumping investigation are dealt with in some detail in Ar ticle 5.2. It is clear from Article 5.2(iii) that
an applicant is required to simply provide info rmation on domestic and export prices and not to
perform the calculations foreseen in Article 2.4.2. Therefore, there was no need for the drafters of the
Agreement to clarify that Article 2.4.2 does not appl y to the pre-establishment stage. Moreover, there
is no logical explanation why the drafters would have considered it necessary to provide such a
clarification specifically with respect to Article 2.4.2.
7.197 In sum, the possible interpretations offered by the European Communities in an attempt to
demonstrate that "during the investigation phase" does not limit the applicability of the requirements

289 Appellate Body Report, US – Softwood Lumber V, para. 76, (footnote omitted, emphasis added).
290 See, e.g. EC-Response to Panel Question 15, paras. 72-82.

of Article 2.4.2 to investigations within the meani ng of Article 5 are not persuasive. We note that the
European Communities itself does not actually endorse any of these interpretations.
291
(iv) Arguments of the European Communities regardi ng object and purpose of Article 9.3 and the
AD Agreement
7.198 Based on an analysis of text and context of Article 2.4.2 of the AD Agreement we have found
that the application of this provision is limited to investigations within the meaning of Article 5.
However, the European Communities argues that an interpretation of Article 2.4.2 as being limited to
original investigations cannot be correct because it would be contrary to the object and purpose of
Article 9.3 and the AD Agreement . While we are not convinced that these arguments are properly
characterized in terms of "object and purpose" 292, we consider them important and therefore consider
them on their merits.
7.199 The European Communities asserts that since the purpose of a duty assessment proceeding
under Article 9.3.1 is simply to update the temporal frame for the normal value, there is no rational
justification for differentiating between the comp arison method applied in an assessment proceeding
and the comparison method applied in an investiga tion. The European Comm unities also argues that
the effect of an interpretation that restricts the applic ation of Article 2.4.2 to investigations is that in
the same factual situation a greater amount of duties will be collected in a retrospective system than in
a prospective system. By contrast, the Unite d States argues that because the purpose of a duty
assessment proceeding is fundamentally different fr om the purpose of an investigation to determine
whether dumping exists and given the explicit recognition in Artic le 9 of various duty assessment
systems, the application of the comparison methods set out in Article 2.4.2 necessarily had to be
limited to investigations within the meaning of Article 5.

291 We note, in particular, the statement of the European Communities, in response to Panel
Question 15, at para. 54: "Furthermore, before entering into a discussion of what the meaning of the words
'during the investigation phase' in Article 2.4.2 of the Anti-Dumping Agreement might be, the European
Communities would like to stress that it has no particularly strong views on this matter in these proceedings, and
that the outcome of these proceedings does not depend in any way whatsoever on the meaning that might
eventually be attributed to those words. On the contrary, since it is the United States that has repeatedly asserted
that the word 'investigation' in Article 2.4.2 has a special and limited or defined meaning, namely 'an
investigation to determine the existence, degree and ef fect of any alleged dumping' within the meaning of
Article 5.1 of the Anti-Dumping Agreement, it is for the Unite d States to substantiate that assertion. Insofar as
the United States has failed to substantiate that assertion – and the European Communities believes that to be
incontrovertibly what has happened in these proceedings – that is an end of the matter. The European
Communities claim under Article 9.3 and 2.4.2 must pr evail. The meaning of the phrase 'during the
investigation phase' does not need to be decided by this Panel." (Emphasis added).
292 We note that Article 31 of the Vienna Convention provides that the object and purpose of a treaty
must be taken into account in establishing the ordinary meaning of the terms used therein. Since Article 31
refers to "the object and purpose" of the treaty and not of its individual provisions, the argument of the
European Communities regarding Article 9.3 might be better characterized as a further contextual argument
rather than an argument relating to object a nd purpose. We further note that since the AD Agreement contains
no discrete statement of objectives, one can only derive or deduce its objectives from the operational provisions
of the Agreement. While it is perhaps possible at a very high level of generality to deduce from the operational
provisions of the AD Agreement as a whole that for instance, one of the "objectives" of the AD Agreement is to
provide a multilaterally agreed framework of rules govern ing actions against injurious dumping, claims of more
specific objectives are difficult to discern with any facility or compelling force due to the lack of anything that
could properly be described as constituting a clear statement of the objectives of the AD Agreement. In this
regard, we note that the European Communities refers to "the object and purpose of the AD Agreement
regarding the consistent application of basic economic concepts" in the measurement of international price
discrimination between two markets. The precise meaning the European Communities ascribes to these
concepts and the manner in which the European Communities derived them from the text of the AD Agreement
are unclear.

7.200 We recall that in US – Carbon Steel the Appellate Body found, with respect to the lack of an
explicit reference in Article 21.3 of the SCM Agreement to a de minimis standard, that the non-
application of the de minimis standard to sunset reviews was not an irrational or absurd result because
of the "qualitative differences" between the pur pose of investigations under Article 11 of the SCM
Agreement and the purpose of sunset reviews under Article 21.3. It follows from the reasoning of the
Appellate Body in that case that it is perfectly possi ble that the fact that a particular aspect of the
methodology provided for in Article 2 of the AD Agreement only applies in the context of an
investigation within the meaning of Article 5 may be explained by qualitative differences between the
purpose of an investigation under Article 5 and the purposes of subsequent phases of an anti-dumping
proceeding.
7.201 In this regard, we note that Article 9 of the AD Agreement is concerned with the "Imposition
and Collection of Anti-Dumping Duties" and that, as stated by the Appellate Body, rules on the
determination of the margin of dumping are "dis tinct and separate" from rules on the imposition and
collection of anti-dumping duties. It follows from Article 9.2, which provides that anti-dumping
duties are collected on imports of the product in respect of which an anti-dumping duty has been
imposed, that the amount of duty to be assessed in a proceeding under Article 9.3 is the amount of
duty payable on imports of the subject product. In our view, the fact that in an assessment proceeding
in Article 9.3 the margin of dumping must be relate d to the liability incurred in respect of particular
import transactions is an important element that distinguishes Article 9.3 proceedings from
investigations within the meaning of Article 5. In the context of Article 5, when the question is
whether dumping "exists" so as to determine whether or not the imposition of an anti-dumping
measure is justified, the focus is on the overall pric ing behaviour of the expor ter under investigation.
By contrast, in an Article 9.3 context the extent of dumping found with respect to a particular exporter
must be translated into an amount of liability for payment of anti-dumping duties by importers in
respect of specific import transactions. Considerations that are relevant to determining the design of
an appropriate comparison methodology in the cont ext of investigations to determine whether
dumping exists may not apply with equal force to the design of a methodology for determining the
final liability for payment of anti-dumping duties. Therefore, we do not agree with the view of the
European Communities that there could be no rational basis for differentiating between the
comparison method applied in an assessment proceed ing and the comparison method applied in an
investigation.
7.202 Similarly, the qualitative differences between determining the existence of margins of
dumping in an investigation and determining margins of dumping as part of the imposition and
collection of an anti-dumping duty mean that the resu lts of an administrative review cannot "eclipse"
the results of the "original investigation". The comparison methodology used in the investigation is
one element in establishing whether or not the impositi on of an anti-dumping duty is justified. To the
extent that the methodology used in the investiga tion has established the legal basis for the imposition
of an anti-dumping duty, it cannot be superseded by the methodology subsequently used to determine
the amount of duty to be collected. In light of this difference in purpose between the collection of
anti-dumping duties and the determination of the ex istence of margins of dumping, it does not follow
that the fact that a particular provision of Article 2 is not applicable to Article 9.3 is necessarily
illogical.
7.203 We must now proceed to consider whether the non-application to Article 9.3 of Article 2.4.2
in particular is comprehensible in terms of the differences in purpose or function between
investigations and duty assessment. We note the argument of the European Communities that
Article 9.3 must be interpreted in light of Artic le 2.4.2 and therefore prohibits duty assessment on a
transaction-specific and importer-specific basis. The European Communities submits that all export
transactions that fall within the time period covered by a review must be treated as a whole rather than
being treated individually. Accordingly, the positio n of the European Communities is that in normal
circumstances, if an authority establishes an aver age normal value based on a particular time period,

the amount of anti-dumping duty must be established by comparing that average normal value with
the average price of all export transactions that have occurred during the same period. In this
situation an importer will incur liability for paym ent of anti-dumping duties on an individual import
transaction if the exporter's average export price is below the averag e normal value, regardless of the
export price of that particular transaction. The assessment of liability based on a comparison of an
average normal value with individual export prices would be permitted only in the circumstances set
out in the second sentence of Article 2.4.2.
7.204 We see no textual support in Article 9.3 for the view that the AD Agreement requires an
exporter-oriented assessment of anti-dumping duties, whereby, if an average normal value is
calculated for a particular review period, the am ount of anti-dumping duty payable on a particular
transaction is determined by whether the overall av erage of the export prices of all sales made by an
exporter during that period is below the average normal value. While the present AD Agreement is
more detailed in its provisions on duty assessment than the Tokyo Round Anti-Dumping Code in that
it explicitly reflects the existence of retrosp ective and prospective duty assessment systems,
Articles 9.3 and 9.4 provide little detail as regards th e substantive methodology to be followed by an
authority to determine the basis for attributing liability in respect of a particular transaction.
293 In our
view, if the drafters of the AD Agreement had wanted to impose a uniform requirement to adopt an
exporter oriented-method of duty assessment, which w ould have entailed a significant change to the
practice and legislation of some participants in th e negotiations, they might have been expected to
have indicated this more clearly.
7.205 If anything, the plain text of Article 9 contradicts the view that the AD Agreement requires an
exporter-oriented approach to duty assessment based on the application of the comparison methods set
out in Article 2.4.2. Article 9.4 provides inter alia that an anti-dumping duty applied to imports of
exporters or producers who have not been included in an examination that has been limited in
accordance with Article 6.10, shall not exceed:
"... where the liability for payment of anti-dumping duties is calculated on the basis of
a prospective normal value, the difference between the weighted average normal
value of the selected exporters or producers and the export prices of exporters or
producers not individually examined."
7.206 This provision necessarily means that duty assessment based upon a prospective normal value
is compatible with Article 9.3. To calculate liability on the basis of a prospective normal value means
that prices of individual export transactions are compared with a minimum reference price. As
discussed in the panel report in Argentina – Poultry Anti-Dumping Duties , Article 9.4(ii) thus clearly
envisions that a Member may operate a system of variable duties.
294 We see nothing in Article 9.4 to
suggest that if duty is initially collected on the b asis of the extent by which the export price in a
particular transaction is below the prospective normal value, a Member must subsequently, in a refund
procedure under Article 9.3.2, determine the en titlement to a refund of anti-dumping duties by
comparing an average normal value with an averag e export price charged by a given exporter to all
importers. We can see no textual support for such an interpretation.

293 We note in this respect the discussion of Article 9.3 in para. 7.355 of the panel report in Argentina –
Poultry Anti-Dumping Duties.
294 Panel Report, Argentina - Poultry Anti-Dumping Duties, para. 7.359: "In our view, Article 9.4(ii) is
describing the use of variable anti-dumping duties, which are calculated by comparing actual (i.e., at the time of
collection) export price with a pros pective normal value. Since Artic le 9.4(ii) expressly envisages the
imposition of variable AD duties, there is no basis for us to find that Argentina's recourse to variable duties
(calculated on the basis of "minimum export prices" us ed as prospective normal values) is necessarily
inconsistent with Article 9.3 of the AD Agreement." The European Communities has explicitly recognized the
permissibility of such a system of variable anti-dumping duties . E.g., EC-Response to Panel Question 4,
para. 29 ("Variable duties are foreseen in Article 9.4.")

7.207 In addition, we consider that the Europ ean Communities has not presented a convincing
explanation as to why as a matter of logic or fairness Article 2.4.2 must be interpreted as applying to
duty assessment under Article 9.3. In particular, we fail to see why the AD Agreement must be
interpreted to require that when an authority calcu lates an average normal value for a review period,
an importer can be liable to pay anti-dumping duti es on an import of the subject product even where
the export price in that transaction actually exceeds the average normal value. While we are of course
aware that the Appellate Body has ruled that dumping can be found to exist only for the product under
investigation as a whole, we note that the Appe llate Body expressed that view in cases involving
investigations within the meaning of Article 5 and that the Appellate Body has not yet had the
occasion to consider in detail the question of how the amount of anti-dumping duty must be assessed
for purposes of Article 9.3. Given that the Appellate Body has also repeated ly stressed the need to
have regard to distinct purposes of provisions of the AD Agreement and the SCM Agreement, and has
in particular pointed to the distinction between rules on the existence of margins of dumping and rules
on the imposition and collection of anti-dumping duties, we do not believe that the general notion that
dumping can be found only for a product can sustain the view that Article 9.3 must be read to require
an exporter-oriented approach to duty assessment.
7.208 We next turn to the argument of the European Communities that the non-application of
Article 2.4.2 to assessment proceedings under Ar ticle 9.3 would entail unequal treatment of
prospective and retrospective duty assessment systems. The essence of this argument is that while in
a prospective system the amount of duty collected cannot exceed the margin of dumping established
without the use of the zeroing methodology in the initia l investigation, in a retrospective system, such
as the one applied by the United States, the amount of duty that is ultimately collected can exceed the
original margin of dumping because it will be determined in periodic reviews in which a zeroing
methodology will be used.
7.209 First, we note that it is not necessarily the case that in a prospective duty assessment system
the amount of duty collected is always limited by the magnitude of the margin of dumping found in
the initial investigation If a duty is collected based on a prospective normal value, the amount of that
duty is determined by the extent to which the export price is below the prospective normal value.
7.210 Second, our interpretation of Article 2.4.2 as not applicable beyond "the investigation phase"
in Article 5 applies to any type of duty assessment system, whether retrospective or prospective. Thus
the consequence of our interpretation is that a Member applying a prospective duty assessment system
is not required to apply Article 2.4.2 when it decides whether or not to grant a refund under
Article 9.3.2. As discussed above , we see no support in Article 9.3 for a view that the average price
behaviour of an exporter must dete rmine the amount of liability incurred in relation to a particular
import transaction. Consequently, we reject the view that the AD Agreement should be interpreted in
such a manner as to ensure that both prospectiv e and retrospective duty assessment systems provide
an identical level of protection against dumped imports corresponding to the actual margin of
dumping of the exporter in question.
7.211 We realize of course that in a prospective duty system the amount by which the duty exceeds
the actual margin of dumping will be reimbursed in a refund procedure but that there is no possibility
to collect the amount by which the duty is less than the actual margin of dumping. By contrast, in a
retrospective system it is possible to collect the difference between the actual margin of dumping and
the deposit paid. Thus, regardless of whether or not Article 2.4.2 applies to duty assessment
proceedings, there is an inherent difference be tween retrospective and prospective duty assessment
systems which, in this respect at least, constitutes an "advantage" for users of retrospective systems.
The European Communities does not appear to dispute that the AD Agreement , in explicitly
recognizing the appropriateness of both retrospec tive and prospective duty assessment systems,
enshrines this advantage. We do not think that this "inequality" in the amount of duty collected is of
any legal relevance to the interpretation of Article 2.4.2 of the AD Agreement. A variety of factors

determine the choice by a Member of an appropriate duty assessment system. The fact that a
prospective system may not in a given situation lead to the same amount of duty that it would be
possible to collect in a retrospective system may we ll be outweighed by other considerations. Thus, a
prospective system can be considered to have certain advantages over a retrospective system, for
example in terms of predictability and ease of administration.
295 Therefore, we disagree with the
assumption underlying the argument of the European Communities that the AD Agreement must be
interpreted to mean that in an identical situ ation retrospective and pr ospective duty assessment
systems must necessarily lead to the same level of protection against dumped imports.
7.212 Grosso modo, the "object and purpose" arguments of the European Communities amount to
the assertion that it would not make sense to interp ret Article 2.4.2 to be limited to original
investigations. In light of the foregoing elements , however, we do not think that it would have been
irrational for negotiators to agree to limit Article 2. 4.2 to the investigation phase. In any event, we
cannot preclude that the explanation for such a differentiation might be the result of negotiating
dynamics. Specifically, it could reflect a compromise bridging different interests, even if it was not
the initial negotiating position of any pa rty. From the perspective of those seeking to limit the use of
antidumping duties, the limitation would make it more difficult to impose an anti-dumping duty in the
first instance, while from the perspective of those defending the use of anti-dumping duties, it would
have allowed them to continue their then-current practices once a measure was imposed.
7.213 In light of the foregoing considerations, we c onclude that the European Communities has not
advanced any arguments with respect to what it characterizes as object and purpose of Article 9.3 that
would cause us to conclude that negotiators cannot ha ve intended to limit the scope of Article 2.4.2 to
investigations within the meaning of Article 5.
296
(v) Arguments of the European Communities regarding subsequent practice
7.214 The European Communities asserts that its interpretation of Article 2.4.2 of the
AD Agreement is supported by the fact that a review of notifications provided by 105 Members 297
reveals that none of these Members has in its do mestic legislation limited the application of
Article 2.4.2 to investigations under Article 5. The European Communities claims that this is
"subsequent practice" within the meaning of Article 31(3)(b) of the Vienna Convention.298
7.215 Article 31(3)(b) of the Vienna Convention provides, as one element of the general rule of
interpretation, that:
"there shall be taken into account, together with the context, ... any subsequent
practice in the application of the treaty wh ich establishes the agreement of the parties
regarding its interpretation."
7.216 The Appellate Body has interpreted the term "subsequent practice" as used in this provision to
mean:
"...a 'concordant, common a nd consistent' sequence of acts or pronouncements which
is sufficient to establish a discernible pattern implying the agreement of the parties [to
a treaty] regarding its interpretation.

295 One aspect of this is that refund procedures in prospective duty assessment systems often occur
much less frequently than administrative reviews in retrospective systems.
296 We are not thereby suggesting that it would necessarily have been illogical, in light of the object and
purpose of Article 9.3, for the negotiators of the AD Agreement to have decided to extend the application of
Article 2.4.2 to duty assessment proceedings under Article 9.3.
297 Exhibit EC-55.
298 EC-Rebuttal Submission, para. 218.

...a discernible pattern of acts or pronouncements implying an agreement among
WTO Members on the interpretation of [the relevant provision]".299
7.217 We note that the argument of the European Co mmunities with respect to subsequent practice
is based on the fact that the particular provisions in domestic laws and/or regulations that have been
notified to the Committee on Anti-Dumping Practices 300 that in the view of the European
Communities correspond to Article 2.4.2 of the AD Agreement either do not include the phrase
"during the investigation phase" or use the phrase "during the investigation period." 301 In our view,
this is simply not a sufficient basis to draw a conc lusion as to whether or not it is the practice of a
particular Member to apply Article 2.4.2 to the assessment of the amount of anti-dumping duties
within the meaning of Article 9.3. Many Member s have notified legislation that predates the WTO
Agreement. We also note that in many cases, the legislation identified by the European Communities
makes no or little mention of duty assessment at a ll, and it is therefore difficult to draw any
conclusion regarding the specific methodology appl ied. We note, however, that many Members
provide in their domestic anti-dumping legislation for the collection of anti-dumping duties through a
system of variable duties. The transaction-specifi c character of such a duty assessment system would
appear to suggest that those Members do not appl y the symmetrical comparison methods foreseen in
Article 2.4.2 to determine the amount of liability for payment of anti-dumping duties.
7.218 In any event, even if it were established conclu sively that all the 76 Members referred to by
the European Communities have adopted a practice of applying Article 2.4.2 to duty assessment, this
would only mean that a considerab le number of WTO Members have adopted an approach different
from that of the United States. We fail to see how on e can conclude on this basis that there exists "a
discernible pattern of acts or pronouncements implying an agreement among WTO Members on the
interpretation of" Article 2.4.2. We note that one third party in this proceeding submitted arguments
contesting the view of the European Communities that Article 2.4.2 applies to the imposition and
collection of anti-dumping duties. Therefore, we conclude that even if the documentation provided by
the European Communities were relevant as evid ence of "practice" within the meaning of
Article 31(3)(b) of the Vienna Convention, that practice is not a practice "which establishes the
agreement between the parties regarding the interp retation" of Article 2.4.2. Consequently, the
reference by the European Commun ities to "subsequent practice" do es not undermine the conclusion
we have reached based on an interpretation of Artic le 2.4.2 in accordance with Article 31(1) of the
Vienna Convention.
(vi) Reference made by the European Commun ities to supplementary means of treaty
interpretation
7.219 We do not consider that an interp retation of Article 2.4.2 of the AD Agreement in accordance
with Article 31 of the Vienna Convention leaves the meaning of that provision "ambiguous or

299 Appellate Body Report, US – Gambling, para. 191-192.
300 Of the 105 Members that have made notifications under Article 18.5 of the AD Agreement ,
29 Members have indicated that they have no anti-dumping legislation. Report (2004) of the Committee on
AD Practices, G/L/707 (4 November 2004), Annex A.
301 EC-Rebuttal Submission, para. 218. The Europ ean Communities argues that "if the words 'during
the investigation phase' are not simply omitted from such implementing legislation, there are numerous
instances where they are rendered as 'during the investigation period.'" We note that legislation notified by
India and Tunisia does use "during the investigation phase". G/ADP/N/1/IND/1, p. 22 and G/ADP/N/1/TUN/2,
p. 20. We also note that in some of the cases in respect of which Exhibit EC-55 notes that no reference is made
to "during the investigation phase", the provision in question is of a rather general character. For example the
European Communities notes that Article 4 of Indonesia' s' Law Number 10, 1995 does not contain the phrase
"during the investigation phase". Article 4 simply states that "(1) the amount of anti-dumping duties referred to
in Article 2 shall be as high as that of dumping margins". G/ADP/N/1/IDN/2, p. 12.

obscure" or "leads to a result which is manifestly absurd or unreasonable".
302 Therefore, we see no
need to have recourse to any of the supplementary means of treaty interpre tation within the meaning
of Article 32 of the Vienna Convention. In any event, the documentation submitted by the European
Communities relating to the negotia ting history of the Uruguay Round AD Agreement 303 does not
support its argument on the interpre tation of Article 2.4.2 of the AD Agreement. First, none of the
documents provided by the European Communities indicates that there was an understanding among
negotiators that rules in the draft AD Agreement referring to "investigations" should apply generally to
any provision that requires a process of systematic examination, inquiry or careful study. Second, we
note that the European Communities relies on this negotiating history inter alia for the proposition
that there never was a suggestion that a distinct ion should be made between investigations and
retrospective assessment proceedings as regards the application of Article 2.4.2.
304 However, most of
the documents submitted by the European Commun ities pertain to a period of the Uruguay Round
negotiations prior to the intense phase of work that led to the release in November 1990 of a draft
("New Zealand I") that introduced the phrase "whe n establishing the existence of dumping margins
during the investigation phase" in what is now Articl e 2.4.2. It is therefore not surprising that the
documentation provided by the European Communities is silent on the background to the insertion of
this phrase. What is clear is that the insertion of this phrase marked a significant difference with the
corresponding provisions in two previous draft texts (Ar ticle 2.4.3 in "Carlisle I" and "Carlisle II"). It
is also clear from the fact that the second sentence of Article 2.4.2 of the "New Zealand I" text used
"period of investigation" that "investigation phase" in the first sentence must have been understood to
have a different meaning.
(vii) General Conclusion
7.220 We recapitulate the conclusions of our analysis. First, the phrase "the existence of margins of
dumping during the investigation phase" in Article 2.4.2 read in its ordinary meaning in context of the
AD Agreement as a whole means that Article 2.4.2 applies to the phase of the "original investigation"
i.e. the investigation within the meaning of Article 5 of the AD Agreement, as opposed to subsequent
phases of duty assessment and review. Second, our in terpretation of the meaning of this phrase as
limiting the applicability of Article 2.4.2 to investig ations within the meaning of Article 5 is also
consistent with the distinction made between inv estigations and subsequent proceedings in various
Appellate Body decisions. Third, alternative m eanings suggested by the European Communities are
implausible at best and deny this phrase any real function, in contradict ion with principles of
interpretation. Fourth, this interpretation is entirel y consistent with the different functions played by
"original investigations" and duty assessments proceed ings. Finally, the references made by the
European Communities to subsequent practice and preparatory work do not undermine this
interpretation.
7.221 We recall that the standard that we must apply in interpreting the AD Agreement is set forth in
Article 17.6(ii) of the AD Agreement:
"the panel shall interpret the relevant provisions of the Agreement in accordance with
customary rules of interpretation of public international law. Where the panel finds
that a relevant provision of the Agreemen t admits of more than one permissible

302 Vienna Convention, Article 32(a) and (b).
303 The documentation contained in Exhibits EC-48-50 consists mainly of formal documents circulated
in the Uruguay Round Negotiating Group on MTN Agreements and Arrangements in the period 1987-
July 1990, including proposals by delegations, Secretariat notes, notes on meetings and the first draft Chairman's
text circulated in July 1990. Exhibit EC-51 reproduces the successive versions of what is now Article 2.4.2 in
what the European Communities refers to as" Carlisle I Text" , "Carlisle II Text", "New Zealand I Text",
"New Zealand II Text", "New Zealand III Ramsauer Text" and "Dunkel Draft".
304 EC-Rebuttal Submission, para. 209.

interpretation, the panel shall find the author ities' measure to be in conformity with
the Agreement if it rests upon one of those permissible interpretations."
7.222 Based on an analysis in accordance with customar y rules of treaty interpretation, we conclude
that the scope of Article 2.4.2 of the AD Agreement is limited to the establishm ent of the existence of
margins of dumping in the context of investigations under Article 5 of the AD Agreement. In any
event, we cannot find that an interpretation that r estricts the scope of application of Article 2.4.2 to
investigations within the meaning of Article 5, ther eby excluding its application to Article 9.3, is not
permissible within the meaning of Article 17.6(ii).
7.223 The Panel therefore finds that the United States did not act inconsistently with Article 2.4.2 of
the AD Agreement when, in the administrative reviews listed in Exhibits EC-16 to EC-31 305, USDOC
used a methodology that involved asymmetrical co mparisons between export price and normal value
and in which no account was taken of any amount by which export prices exceeded normal value.
4. Article 2.4 of the AD Agreement
7.224 Having rejected the claim of the European Communities that the United States acted
inconsistently with Article 2.4.2 of the AD Agreement by reason of the method of calculating dumping
margins in the administ rative reviews at issue 306, we now proceed to examine the claim of the
European Communities that the calculation of dumpi ng margins in these cases was inconsistent with
Article 2.4 of the AD Agreement.
(a) Arguments of the Parties
7.225 The European Communities claims that the United States acted inconsistently with
Article 2.4 of the AD Agreement because in the administrative reviews at issue USDOC calculated
dumping margins by using an asymmetrical compar ison between export price and normal value and
by not taking into account any amounts by which ex port prices exceed the (monthly) average normal
values. The European Communiti es argues that the first sentence of Article 2.4 of the AD Agreement
contains an obligation to make a fair comparis on between the export price and the normal value,
which obligation is "overarching" in the sense that it is further elaborated in the other provisions of
Article 2.4, including Articles 2.4.1 and 2.4.2, and "independent" in the sense that it is not exhausted
by the other provisions of Article 2.4, including Ar ticles 2.4.1 and 2.4.2. This interpretation of the
"fair comparison" language in Article 2.4 as crea ting an overarching and in dependent obligation is
supported by many Appellate B ody and panel reports. The European Communities emphasizes the
fact that the "fair comparison" language is containe d in a separate first senten ce in Article 2.4, which
is an important difference with the corresponding provision in the Tokyo Round Anti-Dumping Code.
The first sentence of Article 2.4 would serve no usef ul purpose if interpreted as being limited in scope
to the remainder of Article 2.4.
307 It follows from the ordinary meaning of "fair" that a fair
comparison is a symmetrical comparison, which necessarily precludes zeroing. 308 Fairness, in the
context of a comparison between domestic sales and export sales, requires that under normal
circumstances the same treatment be applied to domestic and export sales, i.e. that such sales be
treated in a symmetrical way. Zeroing is incons istent with this symmetry requirement because it
involves an artificial reduction of prices that is only applied to export sales. 309 This interpretation of
fairness as requiring symmetrical treatment of e xport sales and domestic sales is supported by the

305 Supra, footnote 202.
306 Supra, footnote 202.
307 EC-First Written Submission, paras. 149-150; EC -Response to Panel Question 25; EC-Response to
Questions Posed by the Panel at Second Substantive Meeting, paras. 2-8.
309 EC-Response to Panel Question 27.

context and object and purpose of the AD Agreement because a methodology that is inconsistent in the
treatment of domestic sales and export sales cannot est ablish effectively the existence of international
price discrimination.
310
7.226 The European Communities also submits that zeroing is inherently unfair because it inflates
dumping margins. One aspect of this inherent unfairness in the context of the retrospective duty
assessment system of the United States is that exporte rs need to increase their prices by more than the
margin of dumping in order to avoid payment of anti-dumping duties. 311 That zeroing is unfair within
the meaning of Article 2.4 has been conf irmed by the Appellate Body reports in EC –- Bed Linen and
US – Corrosion-Resistant Steel Sunset Review and by the Panel and A ppellate Body reports in US –
Softwood Lumber V.312
7.227 The European Communities also asserts that zeroing is inconsistent with the first and the third
to fifth sentences of Article 2.4 because it amounts to an allowance or adjustment to export price,
normal value or otherwise, so as to effectively re duce the export price for a difference other than a
difference affecting price comparability. The diffe rence for which zeroing makes an allowance or
adjustment by reducing the export price is not a di fference affecting price comparability but a part of
the very price comparison that the investigating auth ority is obliged to carry out. An allowance or
adjustment reflecting a difference that does not aff ect price comparability is not a "due allowance"
within the meaning of the third sentence of Article 2.4. Thus, the European Communities submits that
it is not asking the United States to grant an offset or credit for negative dumping but to stop adjusting
the export price or normal value or certain intermed iate values, or to stop making an allowance or
adjustment for something which does not affect price comparability.313
7.228 Regarding the relationship between Articles 2.4 and 2.4.2 of the AD Agreement, the European
Communities argues that the first sentence of Article 2.4.2 explains that in normal circumstances the
"fair comparison" required by Article 2.4 implies equal and symmetrical treatment while the second
sentence of Article 2.4.2 clarifies that a Member may depart from the requirement of symmetrical
treatment in case of targeted dumping.
314 In this connection, the European Communities considers
that zeroing is unfair within the meaning of Artic le 2.4 when dumping margins are established under
the transaction-to-transaction methodology because it c onflicts with the requirement of symmetrical
treatment of export prices and normal values.315 On the other hand, zeroing is not unfair when used in
connection with the average-to-transaction comparis on method if the conditions for the use of that
method are fulfilled.316 The existence of a distinct pattern of export prices of the type contemplated in
the second sentence of Article 2.4.2 can be a diffe rence affecting price comparability for which due
allowance may have to be made.317 Similarly, the European Communities considers that the use of an
average-to-transaction comparison is not unfair within the meaning of Article 2.4 if the conditions for
a targeted dumping analysis are fulfilled.318

310 EC-Response to Panel Question 27.
311 EC-First Written Submission, paras. 152-153.
312 EC-First Written Submission, paras. 155-159.
313 EC-Oral Statement at the First Substantive Meeti ng of the Panel, para. 10; EC-Response to Panel
Questions 28, 33, 38 and 45; EC-Rebuttal Submission, paras.7, 95, 101-104; EC-Oral Statement at the Second
Substantive Meeting of the Panel, paras. 44-47; EC-Response to Questions Posed by the Panel at Second
Substantive Meeting, paras. 16-27.
314 EC-Responses to Panel Questions 41, 43 and 48. EC-Oral Statement at the Second Substantive
Meeting of the Panel, paras. 38-39.
315 EC-Response to Panel Question 47.
316 EC-Response to Panel Question 47 (para. 157).
317 EC-Oral Statement at the Second Substantive M eeting of the Panel, para. 47; EC-Response to
Questions Posed by the Panel at Second Substantive Meeting, paras. 28-34.
318 EC-Response to Panel Question 48.

7.229 The European Communities considers that the first sentence of Article 2.4.2 does not exhaust
the "fair comparison requirement". Thus, for example, a weighted-average-to-weighted average
comparison in which an allowance or adjustment has been made that does not correspond to a
difference affecting price comparability is inconsistent with Article 2.4.
319
7.230 The European Communities interprets the e xpression "subject to the provisions governing
'fair comparison' in paragraph 4" in the first sentence of Article 2.4.2 to mean that, in case of conflict,
the provisions in the second to final sentences of Article 2.4 must prevail over Article 2.4.2. 320 This
implies that the rules in Article 2.4.2 cannot be a pplied in such a way as to frustrate or compromise
the fair comparison required by Article 2.4.321
7.231 The European Communities submits that Article 9.4(ii) of the AD Agreement does not support
the position of the United States that asymmetrical comparison methods must be permitted in the duty
assessment phase because in a prospective system the collection of anti-dumping duties is subject to a
refund procedure in which the full disciplines of Article 2.4.2 apply.
322
7.232 The United States submits that Article 2.4 of the AD Agreement establishes the obligation
that a fair comparison be made between normal value and export price and provides detailed guidance
as to how that fair comparison is to be made. The focus of Article 2.4 is on how the authorities are to
select transactions for comparison and make the appropriate adjustments for differences that affect
price comparability.
323 While the first sentence of Article 2. 4 creates a general, mandatory obligation
to make a fair comparison, it cannot be divorced fro m the provisions in the remainder of Article 2.4
regarding allowances for differences affecting pri ce comparability. The words "this comparison" at
the beginning of the seconds sentence of Article 2. 4 and the reference in Article 2.4.2 to "the
provisions" governing fair comparison in "paragraph 4" confirm this close relationship between the
concept of fair comparison and the provisi ons on allowances to ensure price comparability. 324 The
United States asserts that numerous Appellate Body and panel reports support its position on the
scope of the "fair comparison" language in Article 2.4. 325 The panel and Appellate Body reports cited
by the European Communities do not demonstrate that the first sentence of Article 2.4 contains an
independent obligation extending beyond the remainder of Article 2.4.326
7.233 The United States asserts that the issue of sy mmetrical comparisons between export price and
normal value is only dealt with in Article 2.4.2 of the AD Agreement and that the phrase "subject to
the provisions governing fair comparison in paragr aph 4" would have been redundant if the "fair
comparison" requirement in Article 2.4 already in cluded a requirement to make such symmetrical
comparisons.327
7.234 With regard to the argument of the European Communities that the zeroing method used by
the United States inflates the margins of dumping, the United States asserts that a methodology cannot
be designated as fair or unfair within the meaning of Article 2.4 solely on the basis of whether it
makes dumping margins go up or down. Moreover, it is factually incorrect that the average-to-

319 EC-Response to Panel Question 45.
320 EC-Response to Panel Question 42.
321 EC-Rebuttal Submission, paras. 97 and 102.
322 EC-Rebuttal Submission, para. 100.
323 US-First Written Submission, paras. 61-62 and 69. US-Responses to Panel Questions 26 and 30.
324 US-Response to Panel Question 40.
325 US-First Written Submission, para. 62. US-Response to Panel Question 26.
327 US-First Written Submission, para. 63; US-Respon ses to Panel Questions 44 and 48; US-Second
Written Submission, paras 22-23.

transaction comparison used by the United States in assessment proceedings necessarily results in
higher AD duties than a symmetrical comparison.
328
7.235 The United States considers that the st atement by the Appellate Body in EC – Bed Linen and
US – Corrosion-Resistant Steel Sunset Review that zeroing is inherently biased towards inflating the
margin of dumping lacked any textual analysis or reasoning and is obiter dictum .329 T h e
United States considers, in this respect, that the l ack of a reference to Article 2.4 in the Appellate
Body's analysis of zeroing in US – Softwood Lumber V reflects a development in the Appellate Body's
consideration of this issue because the Appellate Body was faced with substantive arguments and
analysis as to the interpretative problem with its dicta in EC – Bed Linen and US – Corrosion-
Resistant Steel Sunset Review.330
7.236 The United States submits that the argument that Article 2.4 requires that an offset be granted
for sales at export prices above the normal valu e is predicated on the assumption that the
AD Agreement requires symmetrical comparison methods in assessment proceedings. This
assumption is in contradiction with the fact that the Agreement permits several types of assessment
systems some of which inherently operate on an entr y-specific basis, and that Article 9.4(ii) of the
Agreement expressly provides for a comparison be tween a weighted average normal value and
individual export transactions for purposes of assessment. 331 Moreover, the European Communities
has not offered any argument as to how an offset to antidumping duties assessable on one entry as a
result of a distinct entry having been sold at abov e normal value would be considered an adjustment
or other comparison criterion that falls under the rubric of Article 2.4.332
7.237 The United States asserts that an interpretation of Article 2.4 to include an offset requirement
for non-dumped sales would be inconsistent with the principle that interpretation must give meaning
and effect to all the terms of a treaty because it would render the targeted dumping exception in
Article 2.4.2 a nullity as a simple matter of mathem atics. If non-dumped transactions are allowed to
offset dumped transactions, an average-to-transaction comparison will yield exactly the same result as
an average-to-average comparison. Because the targeted dumping provision is only an exception to
the provisions of the first sentence of Article 2.4.2 and not to the "fair comparison" requirement of
Article 2.4, to interpret Article 2.4 as imposing an offset requirement would necessarily make the
targeted dumping provision redundant. 333 The United States notes that in its responses to Panel
Questions the European Communities appears to have accepted that zeroing must be possible in an
average-to-transaction comparison. However, th e recognition by the European Communities that
zeroing is permissible in the context of the aver age-to-transaction method cannot be reconciled with
the argument that zeroing is an impermissible allo wance or adjustment to the export price because
there is nothing in Article 2.4.2 to suggest that th e targeted dumping provision is an exception to the
"fair comparison" requirement.334

328 US-First Written Submission, paras. 65-67. The United States illustrates this point with a numerical
example in which a transaction-to transaction comparison method leads to a higher amount of AD duties than an
average-to-transaction comparison.
329 US-Response to Panel Questions 29 and 37.
330 US-Response to Panel Question 36.
333 US-Opening Statement at the First Substantive M eeting of the Panel, paras. 10-14; US-Responses
to Panel Questions 22 and 46; US-Second Written Submission, para. 26.
334 US-Second Written Submission, paras. 28-29; US -Opening Statement at the Second Substantive
Meeting of the Panel, para. 6; US-Closing Statement at the Second Substantive Meeting of the Panel, paras. 8-
11.

7.238 The United States rejects the argument of the European Communities that differences
between export prices referred to in the second sente nce of Article 2.4.2 can constitute a difference
affecting price comparability.
(b) Arguments of Third Parties
7.239 Argentina submits that Article 2.4 of the AD Agreement prohibits zeroing independently of
the particular method used to compare export pr ice and normal value. The "fair comparison"
requirement is a general obligation that informs the whole of Article 2 but applies in particular to
Article 2.4.2. The zeroing methodology fails to ta ke into account the entirety of the prices of some
export transactions and artificially distorts the margin of dumping by inflating it in a way inconsistent
with the "fair comparison" obligation under Articles 2.4 and 2.4.2. An asymmetrical comparison
method is not in itself inconsistent with the "fair comparison" requirement if the conditions set out in
Article 2.4.2 are met. However, no transaction may be excluded from the calculation of an overall
margin of dumping based on such an asymmetrical comparison.
7.240 Brazil submits that zeroing is prohibited by Article 2.4 of the AD Agreement regardless of the
method of comparison used and regardless of whet her it occurs in an investigation or review
proceeding. Zeroing is inherently unfair to res pondents because it distorts the calculation of the
margin of dumping by effectively ignoring the pr ices of some export transactions. Dumping and
margins of dumping can be established only for a product as a whole and all comparisons must be
taken into account. It is with this in mind that the Appellate Body concluded in EC – Bed Linen that
zeroing was inconsistent not only with Article 2.4.2 but also with Article 2.4. In response to a Panel
Question, Brazil submits that the reasoning of the Appellate Body in US – Softwood Lumber V clearly
suggests that the use of zeroing in the context of the transaction-to-transaction or average-to-
transaction comparison methods is inconsistent with Ar ticle 2.4. Brazil considers that the use of an
asymmetrical comparison is not in itself inconsistent with Article 2.4.
7.241 Hong Kong, China submits that the first sentence of Article 2.4 of the AD Agreement creates
an overarching obligation to make a fair comparison th at is independent of the substantive obligations
set out in the remainder of Article 2.4, including Article 2.4.2. This is reinforced by the phrase
"subject to the provisions governing fair comparison in paragraph 4" at the beginning of Article 2.4.2.
Therefore, dumping margins for a product must be calculated in accordance with both Article 2.4.2
and the "fair comparison" requirement of Article 2.4. In order to be fair, the comparison of export
price and normal value must be symmetrical but also objectively fair in the sense of being equitable
and balanced. The use of zeroing when establishing an overall margin of dumping for the product
under investigation is per se unfair, regardless of which method of comparison under Article 2.4.2 is
used because it involves disregarding some or all of the intermediate comparisons. Thus, zeroing
results in an overall margin of dumping established on the basis of incomplete price information and
is inherently biased towards inflating the margin of dumping. While Article 2.4.2 allows a Member to
use an asymmetrical, average-to-transaction compar ison method, the use of zeroing in connection
with this method is inconsistent with the "fair comparison" requirement of Article 2.4.
7.242 India
submits that model zeroing and simple zeroing are inconsistent with Article 2.4 of the
AD Agreement. India refers to the statements of the Appellate Body that a zeroing methodology is
inherently biased and that a comparison of export price and normal value that does not fully take into
account the prices of all comparable export transactions is not a fair comparison. India further recalls
that the Appellate Body has ruled that the first sen tence of Article 2.4 sets forth a general obligation
that informs all of Article 2. Zeroing is inheren tly inconsistent with the overarching and independent
"fair comparison" requirement contained in Article 2.4 because it selectively disregards or alters the
results of price comparisons and thereby inflates th e margin of dumping. India therefore considers
that Article 2.4 proscribes zeroing when a Me mber establishes dumping on the basis of the
transaction-to-transaction or on the basis of the av erage-to-transaction comparison method. The use

of an asymmetrical comparison method is not in itself necessarily unfair because Article 2.4.2
specifically authorizes the use of one type of asymmetrical comparison method. However, even when
such an asymmetrical comparison method is permitted, an authority may not disregard or alter the
results of any individual comparisons when aggr egating the results of individual comparisons to
determine an overall margin of dumping.
7.243 Japan notes that the Appellate Body has characterized the first sentence of Article 2.4 of the
AD Agreement as a general obligation that informs all of Article 2. The ordinary meaning of the word
"fair" suggests that a fair comparison must be "even-handed". The Appella te Body has explicitly
linked the concepts of "fairness" and "even- handedness" in Article 2 in its report in US – Hot–Rolled
Steel. Model zeroing and simple zeroing operate systematically to disadvantage and prejudice
exporters by excluding from the numerator in the calculation of the weighted average dumping
margin the negative margins for comparable export transactions or models priced higher than normal
value, and by interfering with the comparison of no rmal value and export price to generate a zero
instead of a negative outcome by, in effect, imprope rly reducing the true export price for the excluded
export transactions or increasing the correspondi ng normal value. The Appellate Body has
consistently held in EC – Bed Linen and US – Corrosion -Resistant Steel Sunset Review that a zeroing
methodology is unfair within the meaning of Article 2. 4 because of its inherent bias. Because of this
inherent bias zeroing is inconsistent with Article 2.4 regardless of whether export price and normal
value are compared on a weighted-average-to-weighted-average basis, transaction-to-transaction basis
or average-to- transaction basis.
7.244 Korea submits that, as stated by the Appellate Body in EC – Bed Linen and reaffirmed in
US – Corrosion-Resistant Steel Sunset Review , zeroing is inconsistent with the "fair comparison"
requirement of Article 2.4. The first sentenc e of Article 2.4 establishes an overarching and
independent obligation that author ities must observe whenever they calculate margins of dumping.
Thus the "fair comparison" requirement in Article 2.4 constitutes an independe nt ground for finding
zeroing to be inconsistent with the AD Agreement. Zeroing is inconsistent with the "fair comparison"
requirement in Article 2.4 irrespective of the partic ular comparison method used. While the use of an
average-to-transaction comparison method is specifi cally permitted under Article 2.4.2, zeroing is not
permitted when this method is used.
7.245 Mexico argues that Article 2.4 proscribes zeroing because the "fair comparison" language
creates an independent obligation to use an equ itable comparison methodology that takes into account
all sales of the products under investigation. Article 2.4 prohibits zeroing regardless of which of the
three comparison methodologies set out in Article 2. 4.2 is applied. A comparison methodology that
selectively disregards or alters the results of price comparisons that may be made at a level below that
of the entire product as a whole is inherently distorted and not fair. In particular, zeroing, by inflating
the margin of dumping above what it would have been had the results of all comparisons been
properly considered and treated equally, actually biases and skews the result in the direction of
inflating dumping margins.
7.246 Norway submits that, as explained by the Appellate Body in EC – Bed Linen, zeroing is
inconsistent with the "fair comparison" requirement contained in Article 2.4 because it does not take
into account prices of all export transactions. Norway also refers to the statements of the Appellate
Body in US – Corrosion-Resistant Steel Sunset Review on the inherent bias of a zeroing methodology.
Norway considers that zeroing is inconsistent with the "fair comparison" requirement of Article 2.4
regardless of the comparison method used because of its inherent bias and distorting effect. An
average-to-transaction comparison method referred to in Article 2.4.2 is permitted as an exception to
the general "fair comparison" principle if the conditions set out in the Article 2.4.2 are fulfilled.
7.247 Turkey submits that the model zeroing method used by the United States leads to an unfair
comparison of export price and normal value within the meaning of Articles 2.4 and 2.4.2 of the

AD Agreement. Turkey refers to the finding of the Panel in EC – Bed Linen that zeroing is
inconsistent with the requirement of Article 2.4.2 to take into account export prices of all comparable
transactions and to the statement of the Appellate Body in EC – Bed Linen that, regardless of the
method used to calculate margins of dumping, these margins must be established for the product
under investigation as a whole. In response to a Qu estion of the Panel, Turkey states that the "fair
comparison" requirement of Article 2.4 is not dir ectly related to the issue of whether zeroing is
prohibited or allowed for purposes of Article 2.4.2. Adjustments under Article 2.4 take place at a
stage prior to the computation of the dumping marg in. For the same reason, Turkey submits that the
use of an asymmetrical comparison method is not inconsistent with Article 2.4.
(c) Evaluation by the Panel
7.248 The European Communities challenges as inconsistent with Article 2.4 of the AD Agreement
the fact that USDOC in certain administrative reviews 335 compared (monthly) average normal values
with prices of individual export transactions ("asymmetry") and that in calculating dumping margins
based on the comparisons between these normal values and individual export transactions, USDOC
did not include in the numerator of the dumping margin any amounts by which prices of individual
export transactions exceed the normal values (simple zeroing).
7.249 Article 2.4 of the AD Agreement provides:
"A fair comparison shall be made between the export price and the normal value.
This comparison shall be made at the same level of trade, normally at the ex-factory
level, and in respect of sales made at as nearly as possible the same time. Due
allowance shall be made in each case, on its merits, for differences which affect price
comparability, including differences in conditi ons and terms of sale, taxation, levels
of trade, quantities, physical characteristi cs, and any other differences which are also
demonstrated to affect price comparability. In the cases referred to in paragraph 3,
allowances for costs, including duties a nd taxes, incurred be tween importation and
resale, and for profits accruing, should also be made. If in these cases price
comparability has been affect ed, the authorities shall establish the normal value at a
level of trade equivalent to the level of tr ade of the constructed export price, or shall
make due allowance as warranted under this paragraph. The authorities shall indicate
to the parties in question what information is necessary to ensure a fair comparison
and shall not impose an unreasonable burden of proof on those parties."
7.250 The European Communities asserts that the "fair comparison" language in the first sentence
prohibits the zeroing of export prices above normal va lue and the use of an asymmetrical, average-to-
transaction comparison where the requirements of th e second sentence of Article 2.4.2 are not met,
and that zeroing is also prohibited by the provisions on due allowances in the third to fifth sentences
of Article 2.4. The United States argues that Ar ticle 2.4 only contains obligations regarding the
selection of comparable transactions and the making of appropriate adjustments to those transactions
so as to render them comparable before calcula ting margins of dumping and contains no obligations
with respect to the issues of symmetry and zeroing. The United States rejects the characterization of
zeroing as amounting to an adjustment to export price.
7.251 We will first analyze the issues that arise from th e arguments of the parties with respect to the
"fair comparison” language in the first sentence of Article 2.4 of the AD Agreement.

335 Supra, footnote 202.

(i) The "fair comparison" language in the first sentence of Article 2.4
7.252 The disagreement between the parties with resp ect to whether the "fair comparison" language
in Article 2.4 gives rise to obligations with regard to the manner in which a margin of dumping is
determined raises three principal questions. The fi rst question is whether the legal obligation created
by the "fair comparison" language in the first sentence of Article 2.4
336 can only be violated as a result
of a violation of the specific requirements set out in the remainder of paragraph 4 regarding steps to
be taken by authorities to ensure price comparability or whether it is an independent obligation, i.e. an
obligation that can be violated by an action that is not inconsistent with other requirements of
paragraph 4. A second question, which necessarily ar ises only if the answer to the first question is
affirmative, is whether the scope of applica tion of the "fair comparison" requirement as an
independent obligation is limited to the general subject matter expressly addressed by paragraph 4, i.e.
price comparability, or whether its reach extends beyond this paragraph.337 The third question, which
arises only if it is established that the "fair compar ison” requirement is an independent obligation that
is not limited in scope to the general subject matter of paragraph 4 but also applies to the calculation
of margins of dumping, concerns the substantive meaning of "fair comparison", particularly in
relation to the determination of margins of dumping.
7.253 With respect to the first ques tion, i.e. whether the "fair comparison" language creates an
independent obligation or whether it contains an oblig ation that can be violated only if a Member acts
inconsistently with other requirements of paragra ph 4, we note that although there exists a close link
between this first sentence and the remainder of the paragraph, we find no language in Article 2.4 that
suggests that this "fair comparison" requirement is defined exhaustively by the specific requirements
set out in the remainder of the paragraph regarding the steps to be taken to ensure price comparability.
Indeed, to read the "fair comparison" requirement as doing no more than repeating the requirements
that follow would render this provision inutile. In this regard, we consider that our reading is
confirmed by the decision in the Uruguay Round ne gotiations to place the "fair comparison" language
in a separate sentence at the beginning of Article 2. 4, rather than continuing with the Tokyo Round
text, in which the "fair comparison" language w as contained in an introductory clause to the
counterpart provision to Article 2.4, where its meaning was ambiguous.338
7.254 We now turn to the second question, i.e. whether the "fair comparison" requirement, as an
independent obligation, is limited in scope of application to the genera l subject matter of paragraph 4.
In this regard, we note first that the narrow interp retation of the scope of application of the "fair
comparison" requirement as being limited to the issue of steps to be taken to ensure price
comparability is difficult to reconcile with the structure of Article 2.4. The fact that provisions on
currency conversions and the establishment of marg ins of dumping during the investigation phase are
not contained in separate paragraphs of Article 2 but are indented as sub-paragraphs of Article 2.4
means that these provisions and the provisions in the chapeau of Article 2.4 are part of a whole. We
see nothing in the text of these provisions to suggest that they should not be read as a whole. On the
contrary, the text of Articles 2.4.1 and 2.4.2 contains an express substantive link with Article 2.4. As

336 There is no disagreement betwee n the parties on the fact that the first sentence of Article 2.4
establishes a legally binding obligation.
337 If the first sentence creates an obligation that is independent relative to the obligations contained in
the remainder of the paragraph, this simply means that a violation of that obligation is not dependant upon a
violation of one of the other requirements contained in paragraph 4. However, this does not necessarily imply
that the obligation applies to issues other than the issue of price comparability. Thus, the issue of the
independent character of the "fair comparison" obligation vis-à-vis other obligations in paragraph 4 is an issue
distinct from the scope of application of the obligation.
338 Article 2.6 of the Tokyo Round Anti-Dumping Code provided: "In order to effect a fair comparison
between the export price and the domestic price in the ex porting country ... the two pri ces shall be compared at
the same level of trade, normally at the ex-factory level, and in respect of sales made at as nearly as possible the
same time." The same language appeared in Article 2(f) of the Kennedy Round Anti-Dumping Code.

discussed in the panel report in Egypt – Steel Rebar 339, the "comparison" referred to in Articles 2.4.1
and 2.4.2 is the "comparison" under Article 2.4. Si nce the subject matter of Article 2.4.2 in particular
is different from price comparability, the inclusi on of paragraph 2.4 and s ub-paragraphs 2.4.1 and
2.4.2 in a single provision supports the interpreta tion that "fair comparison" in Article 2.4 is not
limited to price comparability.
7.255 Second, the expression "subject to the provisions governing fair comparison in paragraph 4"
in Article 2.4.2 in our view clearly supports an in terpretation that the "fair comparison" requirement is
of broader application than the issue of price comparability. We note in this regard the analysis by the
Appellate Body in EC – Bed Linen:
"Article 2.4 sets forth a general obligation to make a fair comparison between export
price and normal value. This is a general obligation that, in our view, informs all of
Article 2, but applies, in particular, to Article 2.4.2 which is specifically made 'subject
to the provisions governing fair comparison in [Article 2.4]'."340
The Appellate Body's characterization of the "fai r comparison" language as a "general obligation"
which "informs all of Article 2" but which "applies in particular to Article 2.4.2" by virtue of the
phrase "subject to the provisions governing fair co mparison in paragraph 4" entails that the "fair
comparison" requirement in the first sentence of Article 2.4 is not limited in its scope of application to
the issue of price comparability within the meaning of Article 2.4 but at a minimum also encompasses
the calculation of margins of dumping under Article 2.4.2 of the AD Agreement.341
7.256 In this connection, we note that the panel report in Egypt – Steel Rebar, which the
United States cites as support for its position that the fair comparison requirement only applies to the
issue of price comparability, discusses Article 2.4 and its context as follows:
"Article 2.4, on its face, refers to the comparison of export price and normal value,
i.e., the calculation of the dumping margin, and in particular, requires that such a
comparison shall be 'fair'.
The immediate context of this provision, namely Articles 2.4.1 and 2.4.2 confirms
that Article 2.4 and in particular its bur den of proof requirement, applies to the
comparison of export price and normal value, that is, the calculation of the dumping
margin. Article 2.4.1 contains the releva nt provisions for the situation where 'the
comparison under paragraph 4 requires a conversi on of currencies' (emphasis added).
Article 2.4.2 specifically refers to Artic le 2.4 as "the provisions governing fair
comparison", and then goes on to establish cer tain rules for the method by which that
comparison is made (i.e., the calculation of dumping margins on a weighted-average
to weighted-average or other basis)".342
Thus, the Panel explicitly equated "comparison of ex port price and normal value", which is subject to
the "fair comparison" requirement, with "calculation of the dumping margin" and considered that this
calculation of the dumping margin is subject not only to the "fair comparison" requirement but also to
the burden of proof requirement of Article 2.4. It would also appear that the Panel interpreted the

339 Infra, para. 7.256.
340 Appellate Body Report, EC - Bed Linen, para. 59.
341 In order to resolve the interpretive issue before us in this dispute we do not need to express a view
on whether the "fair comparison" requirement in Article 2. 4 applies to any aspect of Article 2 other than the
calculation of margins of dumping.
342 Panel Report, Egypt – Steel Rebar, paras. 7.333-7.334 (emphasis in original).

reference made in Article 2.4.2 to "the provisi ons governing fair comparison" to mean that the
provisions in Article 2.4.2 lay down rules for the method by which a "fair comparison" is to be made.
7.257 Third, we note that the dispute settlement re ports cited by the parties in support of their
respective positions on the interpretation of the fi rst sentence of Article 2.4 generally contain little
detailed analysis of the specific question of whether the "fair comparison" requirement is limited in its
scope of application to the issue of price comparability within the meaning of Article 2.4. It is true
that panel reports that have made findings on cl aims raised under Article 2.4 have in most cases
focused their discussion of the meaning of Article 2.4 on the requirement to make allowance for
differences affecting price comparability.
343 In most of these cases, however, the question presented
to the panel was whether or not an allowance should be made for a particular f actor claimed to affect
price comparability, and it has not been necessary fo r panels to pronounce on the broader issue of
whether the "fair comparison" requirement can apply to issues other than price comparability. 344
Therefore, these panel reports do not support the pr oposition that the scope of the "fair comparison"
requirement in the first sentence of Article 2.4 does not extend beyond the question of price
comparability. As discussed above, the panel report in Egypt- Steel Rebar , which is one of the few
reports to have discussed this issue, appears to refl ect a view that the "fair comparison" requirement is
broader in scope than Article 2.4 and applies to the calculation of margins of dumping. The Appellate
Body report in EC – Bed Linen also appears to reject a narrow in terpretation of the scope of this
requirement.
7.258 In sum, while Article 2.4 could ideally have been expressed more clearly, we conclude that
the obligation to make a fair comparison is not limited to the issue of how to ensure price
comparability by selecting comparable transactions or making appropriate adjustments but also
applies to the issue of the calculation of margins of dumping within the meaning of Article 2.4.2 of
the AD Agreement.
7.259 Accordingly, we must now proceed to consider the substantive meaning of the term "fair
comparison" in this context.
7.260 We have carefully considered the arguments of the European Communities and some of the
third parties regarding the ordinary meaning of the word "fair" in light of dictionary definitions. 345
We recall that we have already expressed our reserva tions earlier in this Report with respect to an
approach to treaty interpretation that focuses on pa rticular words divorced from their context in the
AD Agreement and that equates "ordinary meaning" as used in the Vienna Convention with dictionary

343 Panel Report, Guatemala – Cement I, paras. 7.65-7.66; Panel Report, US - Stainless Steel ,
paras. 6.71-6.80 and 6.102-6.104; Panel Report, Argentina - Ceramic Tiles , paras. 6.110-6.116; Panel Report,
Egypt – Steel Rebar, paras. 7.330-7.337 and 7.347-7.388; Panel Report, EC - Tube or Pipe Fittings, paras.
7.154-7.193; Panel Report, Argentina – Poultry Anti-Dumping Duties , paras. 7.234-7.260; Panel Report, US –
Softwood Lumber V, paras. 7.163-7.184 and 7.349-7.365.
344 We note in this respect that the issue of the relationship between the first sentence of Article 2.4 and
the requirements in the remainder of Article 2.4 was debated by the parties in US – Stainless Steel . After
finding that USDOC had acted inconsistently with Article 2.4.1 in respect of the conversion of currency and had
acted inconsistently with the third and fourth sentences of Article 2.4 in respect of its treatment of bad debt, the
Panel decided that it was not necessary to examine the claims of Korea that the United States had also breached
a more general "fair comparison" requirement under Article 2.4 of the AD Agreement . Panel Report, US –
Stainless Steel, paras. 6.45 and 6.104.
345 E.g., the European Communities states in response to Panel Question 27 that "[t]he ordinary
meaning of the word 'fair' i ndicates a comparison that is 'just, unbiased , equitable, impartial'; 'offering an equal
chance of success'; conducted 'honestly, impartially'; and 'evenly, on a level'". Japan argues that the word "fair"
in its ordinary meaning requires a comparison of normal value and export price that is "unbiased", "impartial"
and "offer[s] an equal chance of success" to both domestic parties and exporters. Japan argues that this means
that a "fair comparison" must be "even-handed". Third Party Submission of Japan, para. 33.

definitions of words. We consider that caution with respect to such an approach is especially
warranted where, as in the case of the first sentence of Article 2.4, a legal rule is expressed in terms of
a standard that by its very nature is more abstra ct and less determinate than most other rules in the
AD Agreement. The meaning of "fair" in a legal rule must necessarily be determined having regard to
the particular context within whic h that rule operates. Whereas word s like "fair" are also frequently
used in connection with obligations of a procedural nature, in Article 2.4 of the AD Agreement "fair"
is used in a substantive obligation relating to th e determination of dumping. Thus, a claim that a
particular methodology is not "fair" within the mean ing of Article 2.4 is a claim that the methodology
is not a fair method of determining dumping. The fairness of the methodology logically cannot be
divorced from the underlying conception of what dumping means. To determine whether an approach
is unfair there must be a discernible standard of appropriateness or rightness within the four corners of
the AD Agreement which would provide a basis for reliably judging that there has been an unfair
departure from that standard. 346 The brute fact that methodolo gy A produces a higher margin of
dumping than methodology B can be a basis for assessing the fairness of methodology A only if
methodology B can be equated with such a discernable standard. In other words, when comparing the
results of the two methodologies, one would be entitled to regard methodology A as unfair only if it
could be established that methodology B was the only "correct" methodology for determining the
margin of dumping.
7.261 The "fair comparison" requirement in Article 2.4 exists as part of a provision that contains
other rules that are more determinate in their substantive content, reflecting the outcome of
negotiations on specific aspects of the determination of dumping. In our view, this means that this
requirement must be interpreted in harmony with such rules. The "fair comparison" requirement
cannot have been intended to enable a dispute settl ement panel to review a measure in light of a
necessarily somewhat subjective or in effect arb itrary judgement of what fairness means in the
abstract and in complete isolation from the s ubstantive context and thereby effectively create
obligations additional to and perhaps even inconsistent with the express requirements of Article 2.
7.262 In light of these considerations, we are of the vi ew that in order to determine what is "fair"
under the AD Agreement in relation to the calculation of margins of dumping, we must take into
account substantive rules and concepts in the AD Agreement relevant to the issue of the determination
of margins of dumping. In particular, our analys is must take into account Article 2.4.2 of the
AD Agreement, which is the only provision of the AD Agreement that specifically addresses the
subject of methods of determining margins of dumpi ng. Furthermore, given that we are considering
the applicability of the "fair comparison" standard in the determination of margins of dumping for
purposes of assessing the amount of anti-dumping duties, our interpretation of the meaning of "fair"
must also take into account relevant rules and concepts in Article 9 regarding the imposition and
collection of anti-dumping duties.
7.263 The fact that Article 2.4.2 expressly permits the use of an asymmetrical, average-to-
transaction comparison method of export price and nor mal value as an exception to the symmetrical
comparison methods in the first sentence of Article 2.4.2 and that, as discussed in the previous section
of this Report, negotiators did not extend the appli cation of Article 2.4.2 beyond investigations within
the meaning of Article 5 of the AD Agreement indicates that the negotiators did not treat asymmetry
as a practice to be banned in all circumstances. Similarly, while zeroing effectively is prohibited
under the average-to-average method in the first se ntence of Article 2.4.2, the non-application of
Article 2.4.2 outside the "the investigation phase" shows that zeroing was not treated as a practice to
be banned in all circumstances. Conceptually, it is difficult to understand why one provision of the

346 In saying this, we are not of course saying that such a standard can only be discerned from some
succinct and express formulation within the AD Agreement. However, such a standard must at least be reliably
and specifically grounded in the AD Agreement's concepts and principles such that it is based upon a convincing
rationale.

AD Agreement specifically dealing with a particular s ubject would prohibit a practice in certain
circumstances and specifically permit or not address the same practice in other circumstances, if
another provision of the AD Agreement already prohibited that practice as inherently unfair in all
circumstances. In fact, the very rationale for the existence of Article 2.4.2 is undermined if
asymmetry and zeroing are already proscribed in a ll circumstances as practices that are inherently
unfair by Article 2.4. Therefore, the treatment of asymmetry and zeroing as necessarily unfair is
contradicted by the manner in which Article 2.4.2 treats these practices.
7.264 Similarly, as discussed above
347, Article 9 of the AD Agreement clearly permits the use of an
asymmetrical method of comparing normal value and individual export prices in the context of a
system of variable anti-dumping duties, which necessar ily involves zeroing. The principle that treaty
provisions must be presumed not to be in conflict en tails that Article 2.4 cannot be read to ban this
methodology in all circumstances by treating it as unfair within the meaning of Article 2.4 of the
AD Agreement.
7.265 The conceptual difficulty discu ssed in the preceding paragraphs translates into a specific
problem in terms of the principle of effective treaty interpretation.
348 This principle means that the
"fair comparison" requirement can only be interpreted to entail a prohibition of asymmetry and
zeroing insofar as this would not deprive other provisions of the AD Agreement of their useful effect.
7.266 This problem arises, first, in respect of the sec ond sentence of Article 2.4.2. This sentence of
Article 2.4.2 addresses the issue of "targeted du mping". This provision acknowledges that an
examination, in an original investigation, of average behaviour for a product and exporter through the
symmetrical comparison methodologies in the first se ntence may in some cases mask the existence of
targeted dumping with respect to specific purchasers, regions or time periods. 349 In other words, it
recognizes that a pattern of export prices below nor mal value may need to be addressed even in cases
where based on average exporter behaviour that pattern might be offset by other export prices in
excess of normal value. It therefore permits an alternative, asymmetrical, comparison methodology in
such cases. An interpretation of zeroing as by defini tion unfair in all circumstances, such that even in
these circumstances a Member would be required to o ffset the (pattern of) below-normal-value export
prices by others above normal value, would deny the second sentence the very function for which it
was created. In fact, under such an interpre tation the alternative asymmetrical comparison
methodology would as a matter of mathematics produce a result that was identical to that of the first,
average-to-average, methodology.
 350 We cannot interpret the Agreement in a manner that denies a

347 Supra, paras.7.204-7.206.
348 "One of the corollaries of the 'general rule of interpretation' in the Vienna Convention is that
interpretation must give meaning and effect to all the term s of the treaty. An interpreter is not free to adopt a
reading that would result in reducing whole clauses or paragraphs of a treaty to redundancy or inutility".
Appellate Body Report, US – Gasoline, p. 23.
349 The European Communities, which itself refers to the second sentence as relating to "targeted
dumping" (e.g., EC-Responses to Panel Questions 41, 43, 47-49), shares this view as to the purpose of that
sentence.
350 At the First Substantive Meeting of the Panel, the European Communities asserted that the use of an
average-to-average methodology and an average-to-transaction methodology both without zeroing, would not
necessarily produce the same result. We asked the European Communities to elaborate on this statement. From
the response to Panel Question 49, we conclude that the European Communities no longer contests that, without
zeroing, these two methods will produce the same result. ("By the use of the "weight ed average to individual
methodology", the European Communities referred to the legitimate use of such method in cases of targeted
dumping as defined in the second sentence of Article 2.4.2. The fact that the two methods may lead to different
results is provided for in the text of this sentence itself when it says that the "differences [among purchasers,
time period or regions] cannot be taken into account appropriately by the use of a weighted average-to-weighted
average or transaction-to-transaction comparison." Evidently, this means that the two methods give different
margins as a result of zeroing or some other method considered appropriate to address targeting. The

provision the role for which it was created and in fact renders that provision without effect.
Accordingly, we must conclude that Article 2.4 does not c onsider zeroing to be unfair and thus
prohibited in all circumstances, but rather recognizes that in some cases zeroing may be appropriate in
order to accurately reflect the existence of dumping by an exporter.351
7.267 The same problem arises in respect of our finding regarding the scope of application of
Article 2.4.2 of the AD Agreement. The European Communities alleg es that there are two aspects of
the unfairness of the methodology applied by US DOC: the use of an asymmetrical, average-to-
transaction comparison and the use of simple zeroing. Article 2.4.2 explicitly addresses the issue of
the use of symmetrical and asymmetrical comparis on methods and the Appellate Body has confirmed
that it also addresses the issue of zeroing. We have found, however, that Article 2.4.2 is limited in its
application to investigations within the meaning of Article 5 of the AD Agreement by virtue of the
phrase "the existence of margins of dumping during the investigation phase". 352 To interpret Article
2.4 as prohibiting asymmetry and zeroing not only in i nvestigations within the meaning of Article 5
but also in duty assessment proceedings under Artic le 9 (and reviews under Article 11), would render
ineffective the language in Article 2.4.2 that limits its scope of application to investigations.
7.268 Our analysis above 353of the merit of the argument that the AD Agreement requires an
exporter-oriented method of duty assessment is also re levant here. Interpreting the "fair comparison"
standard of Article 2.4 to prohibit zeroing and as ymmetrical comparisons between export price and
normal value would be inconsistent with the sp ecific provisions on duty assessment in Article 9,
which clearly envision that a Member may operate a sy stem of variable duties. Since there is nothing
in the text of Articles 2.4 and 9 to indicate that what is unfair under the general "fair comparison"
standard of Article 2.4 is not unf air if permitted by Article 9, an interpretation of Article 2.4 as
prohibiting the practice of zeroing and making of asymmetrical comparisons necessarily deprives
some of the provisions of Article 9 of their useful effect.
7.269 We note that the European Communities argu es that asymmetry and zeroing are not unfair
when the conditions set out in the sec ond sentence of Article 2.4.2 are met. 354 According to the
European Communities, "Article 2.4.2 clarifies wh at fairness means when establishing the margin of
dumping in normal circumstances and in the ex ceptional circumstances of targeted dumping".355 This
approach effectively attempts to resolve the te nsion between, on the one hand, the proposition that
asymmetry and zeroing are unfair within the meaning of Article 2.4 and, on the other, the need to give
effect to the second sentence of Article 2.4.2 with regard to the average-to-transaction comparison
methodology by construing Article 2.4.2 as a clarif ication of the meaning of the "fair comparison"
obligation. We note that the logic und erlying this approach is that what is fair or unfair in relation to
the calculation of margins of dumping is driven by th e specific provisions of Article 2.4.2. If this is
true, then the logical implication of the express limita tion of Article 2.4.2 to original investigations is
that asymmetry and zeroing when used in the duty assessment ph ase cannot be found to be unfair
within the meaning of Article 2.4. More gene rally, the argument of the European Communities
amounts to an implicit admission that with respect to the calculation of margins of dumping the
specific provisions of Article 2.4.2 prevail over the "fair comparison" requirement.

European Communities notes however that the United States does not claim that in assessment proceedings it
applies the third method of comparison in conformity with the second sentence of Article 2.4.2.")
351 The European Communities itself does not, as discussed below, deny that zeroing is permitted in the
context of the alternative comparison methodology set forth in the third sentence.
352 Supra Section VI.E.3.
353 Supra, paras. 7.204-7.206
354 EC-Responses to Panel Questions 47-48.
355 EC-Response to Panel Question 41.

7.270 We note that the Appellate Body has not actually made any legal findings that zeroing is
inconsistent with Article 2.4 of the AD Agreement. Nevertheless, we recognize that, as emphasized
by the European Communities and many third parti es to this proceeding, the Appellate Body has
twice expressed the view that the practice of zeroing is unfair within the meaning of Article 2.4.
Under Article 11 of the DSU our task is to make an objective assessment of the matter before us. In
this respect, we consider that the matter before us is different from the matter considered by the
Appellate Body in the decisions referred to by the European Communities and third parties. In
particular, in making an objective assessment of this matter, we have had to rule on different claims
and to address directly a multiplicity of argumen ts not addressed by the Appellate Body in these
decisions. We must, of course, carefully consider the reasoning contained in relevant Appellate Body
reports.
 356
7.271 In EC – Bed Linen , the Appellate Body discussed the implications of the "fair comparison"
requirement of Article 2.4 for the use of a zeroing methodology in the context of the weighted-
average-to-weighted-average comparison method in the first sentence of Article 2.4.2:
"Under this method, the investigating authorities are required to compare the
weighted average normal value with the weighted average of prices of all
comparable export transactions. Here, we emphasize that Article 2.4.2 speaks of 'all'
comparable export transactions. As explai ned above, when zeroing, the European
Communities counted as zero the 'dumping margins' for those models where the
'dumping margin' was 'negative'. As the Pa nel correctly noted, for those models, the
European Communities counted 'the weighted average export price to be equal to the
weighted average normal value … despite the fact that it was, in reality, higher than
the weighted average normal value.' By ' zeroing' the 'negative dumping margins', the
European Communities, therefore, did not take fully into account the entirety of the
prices of some export transactions, namely, tho se export transactions involving
models of cotton-type bed linen where 'negative dumping margins' were found.
Instead, the European Communities treated those export prices as if they were less
than what they were. This, in turn, in flated the result from the calculation of the
margin of dumping. Thus, the European Communities did not establish 'the
existence of margins of dumping' for co tton-type bed linen on the basis of a
comparison of the weighted average norma l value with the weighted average of
prices of all comparable export transactions – that is, for all transactions involving
 all models or types of the product under inves tigation. Furthermore, we are also of
the view that a comparison between e xport price and normal value that does not take
fully into account the prices of all comparable export transactions – such as the
practice of zeroing at issue in this dispute – is not a 'fair comparison' between export
price and normal value, as required by Article 2.4 and by Article 2.4.2."
357
When read as a whole, it is clear that the main theme in this passage is the inconsistency of zeroing
with the "all comparable export transactions" language in the first sentence of Article 2.4.2 of the AD
Agreement. It is only in the last sentence that the Appellate Body mentions Article 2.4 for the first
time. Other than the statement that zeroing does no t take into account the prices of all comparable
export transactions, the last sentence does not analyze the text of Article 2.4 and provides no
explanation of the conclusion that zeroing is un fair. However, this statement is virtually
indistinguishable from the explanation of the finding of inconsistency with Ar ticle 2.4.2. The "all
comparable export transactions" language used by the Appellate Body thus suggests that the
Appellate Body may have derived its substantive benchmark for qualifying zeroing as unfair from its
interpretation of the average-to-average comparis on method in the sentence of Article 2.4.2. We

356 Supra, paras. 7.30-7.31
357 Appellate Body Report, EC – Bed Linen, para. 55 (footnotes omitted, emphasis in original)

therefore question whether the Appellate Body shou ld be understood to have meant to imply that
zeroing is necessarily unfair when used in the context of any other comparison methods set out in
Article 2.4.2. Moreover, it is surely significant th at the Appellate Body made this statement that
zeroing is unfair in the context of a dispute involving an investigation within the meaning of Article 5.
As discussed above, Article 2.4.2 does not apply to proceedings other than investigations within the
meaning of Article 5. We therefore see no basis for the view that the reasoning of the Appellate Body
in EC – Bed Linen can be interpreted to sustain the prop osition that the use of zeroing outside the
context of average-to-average comparisons in origin al investigations is necessarily inconsistent with
the "fair comparison" obligation of Article 2.4. Where zeroing is not permitted by Article 2.4.2 of the
AD Agreement , it can understandably be considered to be unfair. However, where zeroing is
effectively permitted by Article 2.4.2, to character ize it as unfair and inconsistent with Article 2.4
raises the issues of effective treaty interpretation discussed above.
7.272 In US – Corrosion-Resistant Steel Sunset Review , the Appellate Body ruled that Article 11.3
of the AD Agreement does not obligate investigating authorities to calculate or rely on margins of
dumping in determining the likelihood of continua tion or recurrence of dumping but that, if they
choose to rely upon dumping margins in making this determination, those margins must be calculated
in a manner consistent with Article 2.4.of the AD Agreement.
358 The Appellate Body observed in this
respect:
"In EC – Bed Linen , we upheld the finding of the panel that the European
Communities acted inconsistently with Article 2.4.2 of the AD Agreement by using a
'zeroing' methodology in the anti-dumping inv estigation at issue in that case. We
held that the European Communities' use of this methodology 'inflated the result from
the calculation of the margin of dumping.' We also emphasized that a comparison
such as that undertaken by the European Communities in that case is not a 'fair
comparison' between export price and norma l value as required by Articles 2.4 and
2.4.2.
When investigating authorities use a zeroing methodology such as that examined in
EC – Bed Linen to calculate a dumping margin, whet her in an original investigation
or otherwise, that methodology will tend to inflate the margins calculated. Apart
from inflating the margins, such a methodol ogy could, in some instances, turn a
negative margin of dumping into a positive margin of dumping. As the Panel itself
recognized in the present dispute, 'zeroing ... may lead to an affirmative determination
that dumping exists where no dumping would ha ve been established in the absence of
zeroing.' Thus, the inherent bias in a zeroing methodology of this kind may distort
not only the magnitude of a dumping margin, but also a finding of the very existence
of dumping."
359
While this case involved a review under Article 11 of the AD Agreement and the Appellate Body
specifically discussed the use of a zeroing methodolog y "whether in an original investigation or
otherwise", the Appellate Body made no findings on Article 2.4. Indeed, on the zeroing issue, the
Appellate Body was not in a position to complete the analysis as the panel report did not contain
sufficient factual findings on the precise methodology used by USDOC in the administrative reviews
on which USDOC had relied in its sunset review.
360 The Appellate Body did not expand the
reasoning in EC – Bed Linen as to why zeroing is unfair beyond its indication that a zeroing
methodology will tend to inflate margins of dumping and may lead to a finding of dumping where no

358 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 127-130.
359 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , paras. 134-135 (footnotes
omitted)
360 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review, paras. 137-138

dumping would have been found in the absence of zer oing. We recall in this respect our observation
that an assessment of whether a particular methodology is fair cannot be simply based on a
comparison of the results of that methodology with the results produced by another methodology
361,
but requires at a minimum knowing that the latter methodology somehow reflects a discernable
standard or norm of "fairness". We see no indicatio n that the Appellate Body considered this issue in
this case. Indeed, as noted, because of the state of the record and the absence of panel findings, the
Appellate Body was unable to complete the analysis of the underlying claim. Thus, we are of the
view that the reasoning of the Appellate Body in EC – Bed Linen and US - Corrosion-Resistant Steel
Sunset Review does not necessarily provide a basis to conclude that zeroing is unfair in a context other
than the use of the average-to-average comparison methodology in the first sentence of Article 2.4.2.
7.273 That the Appellate Body Reports in EC - Bed Linen and US – Corrosion-Resistant Steel
Sunset Review must necessarily be interpreted to support th e proposition that zeroing is always unfair
within the meaning of Article 2.4 is also difficult to square with the Appellate Body's decision in US –
Softwood Lumber V . The Appellate Body made it very clear in US – Softwood Lumber V that the
issue before it was limited to the use of zeroing in the context of the average-to-average comparison
methodology in the first sentence of Article 2.4.2
362, which provision, it specifically noted, is
"applicable during the investigation phase". 363 We recognize that in US – Softwood Lumber V the
Appellate Body did not have a pane l finding under Article 2.4 before it and that it was therefore not
strictly necessary for it to discuss Article 2.4 but neither did it in EC – Bed Linen, in which case it did
pronounce on the inconsistency of zeroing with the "f air comparison" requirement. The lack of any
reference in US – Softwood Lumber V to Article 2.4 and to the reasoning in EC – Bed Linen and US –
Corrosion-Resistant Steel Sunset Review calls into question the idea that those cases have firmly
established the principle that zeroing is always un fair within the meaning of Article 2.4 of the
AD Agreement. In this regard, we see considerable si gnificance in the fact that the Appellate Body
declined to address the issue of zeroing in the context of the transaction-to-transaction comparison
method set out in the first sentence of Article 2.4. 2 even though the United States had referred to this
method as a core contextual argument in support of its position that zeroing is not proscribed by
Article 2.4.2.364 It is very difficult to reconcile this fact with the idea that previous Appellate Body
decisions had already confirmed the existence of a general prohibition of zeroing under Article 2.4 of
the AD Agreement , particularly in light of the explanati on provided by the Appellate Body of its
decision not to examine this issue:
"We fail to see how we could find that th e transaction-to-transaction and average-to-
individual methodologies could provide contextual support for the United States'
interpretation of Article 2.4.2 without examining first whether zeroing is permitted
under those methodologies . Indeed the United States faulted the Panel for making
observations in this regard . [footnote omitted] As we have observed, the
United States acknowledged at the oral hearing that the issue before us is confined to
determining whether zeroing is prohi bited under the average-to-average
methodology."365
This passage in our view clearly indicates that th e Appellate Body treated the issue of "whether
zeroing is permitted under those methodologies" as an open question.
7.274 In this regard, we recall that the Appellate B ody has consistently emphasized the distinctions
between the purposes of investigations and other proceedings under the AD Agreement, notably duty

361 Supra, para. 7.260.
362 Appellate Body Report, US - Softwood Lumber V, paras. 63, 77 and 104-105.
363 Appellate Body Report, US - Softwood Lumber V, para. 76.
364 Appellate Body Report, US – Softwood Lumber V, paras. 104-105.
365 Appellate Body Report, US – Softwood Lumber V, para. 105 (emphasis added).

assessment under Article 9 and reviews under Articles 11. 366 Considerations that are pertinent to
determining whether zeroing is unfair in an original investigation, the purpose of which is to analyze
whether application of an anti-dumping measure is appropriate, may not be e qually relevant to the
duty assessment phase, the purpose of which is to a ssess the amount of anti-dumping duty to be paid
by an importer in respect of a particular import tran saction. We recall our conclusion above that there
exists no compelling rationale to interpret the AD Agreement to mean that duty liability must
necessarily be established on an exporter-oriented b asis, which would result in the payment of anti-
dumping duties by importers in respect of imports w hose prices were above the normal value. In this
respect, we do not see the logic of an approach that interprets the "fair comparison" standard of
Article 2.4 in a way that compels such a result.
7.275 In sum, we consider that while Article 2.4 gi ves rise to a "fair comparison" obligation that
also applies to the calculation of margins of dumpi ng, to interpret Article 2.4 as prohibiting zeroing
and asymmetrical comparisons, zeroing and importer-s pecific assessment of anti-dumping duties in
proceedings other than original investigations cannot be reconciled with the fact that the negotiators
of the AD Agreement specifically permitted and/or decided not to address these practices in certain
circumstances and would undermine the useful effect of Article 2.4.2 and of provisions of Article 9
that permit the collection and assessment of anti- dumping duties on a transaction-specific basis. 367 In
light of the foregoing analysis, we do not cons ider that the Appellate Body reports in EC – Bed Linen
and US – Corrosion-Resistant Steel Sunset Review , when read together with the Appellate Body's
subsequent decision in US – Softwood Lumber V, lead us to a different conclusion.

(ii) Zeroing as an impermissible allowance or adj ustment for a difference that does not affect
price comparability
7.276 We now turn to the second main argument raised by the European Communities in support of
its claim under Article 2.4 of the AD Agreement with respect to the methodology applied by USDOC
in the administrative reviews at issue. According to the Europ ean Communities, zeroing amounts to
"an allowance or adjustment to export price, normal va lue or otherwise, so as to effectively reduce the
(true) export price, for a difference other than a difference affecting price comparability" and is
thereby inconsistent with the third to fifth sentences of Article 2.4.368
7.277 In our view, the argument that zeroing is an impermissible allowance or adjustment for a
difference not affecting price comparability cannot be reconciled with the fact that Article 2.4.2
specifically does not deal with zeroing other than in th e context of original investigations and that the

366 Supra, paras. 7.177-7.179.
367 Contrary to what is alleged in the dissenting opin ion, our approach to the interpretation of the "fair
comparison" requirement in no way negates the legal effect of this provision as an independent legal obligation.
In particular, we have not suggested that a violation of the "fair comparison" requirement can only be the result
of a violation of Article 2.4.2 of the AD Agreement. Rather, our approach is that the meaning of the "fair
comparison" requirement must be rooted in the concept of dumping and that in determining what fair
comparison means with respect to the determination of margins of dumping, it is necessary to take into account
the manner in which specific rules contained in the AD Agreement address that particular issue. Thus, for
example, if in a transaction-to-transaction comparison between export price and normal value an authority
deliberately selects only those domestic transactions with the highest prices , this may well be inconsistent with
the "fair comparison" requirement even though it is not prohibited by Article 2.4.2. By contrast, if a particular
methodological approach is specifically permitted by Article 2.4.2, it can in our view not be found to be unfair.
In this respect, we note that the dissenting opinion posits that the "fair comparison" requirement must, in case of
conflict, prevail over Article 2.4.2. We consider that the correct approach, consiste nt with the principle of a
presumption against conflict in the interpretation of treaty provisions, is to interpret fair comparison in a manner
that avoids conflict with other provisions of the AD Agreement.
368 E.g., EC-Rebuttal Submission, para. 95.

second sentence of Article 2.4.2 specifically permits an asymmetrical comparison method that would
be without any useful effect if zeroing were prohibited. If zeroing is characterized as an
impermissible allowance or adjustment, there is no rational basis to explain why an allowance or
adjustment that is prohibite d because it does not correspond to a difference affecting price
comparability is no longer prohibited in the context of the asymmetrical comparison method provided
for in the second sentence of Article 2.4.2 or in the context of a duty assessment proceeding under
Article 9.
7.278 We note that the European Communities acknow ledges that zeroing may be necessary in the
situation envisaged in the second sen tence of Article 2.4.2, and that in order to reconcile the possible
need for zeroing in this context with its characteriz ation of zeroing as an impermissible allowance or
adjustment, the European Communities submits that th e existence of a "pattern of export prices which
differ significantly among different purchasers, re gions or time periods" envisaged in the second
sentence of Article 2.4.2 can be a factor affecti ng price comparability. A ccording to the European
Communities, where there exists such a pattern of "t argeted dumping", "[i]t is self-evident that prices
in what has been identified as distinct market A cannot-without some further consideration and
explanation-necessarily simply be directly compar ed with prices in what has been identified as
distinct market B".
369 In turn if prices in the two export markets A and B cannot be compared, it
follows that by definition they cannot together be compared with prices in the home market.370
7.279 This argument reflects a misinterpretation of the very concept of price comparability as used
in Article 2.4 of the AD Agreement. Differences in price comparability in Article 2.4 for which an
adjustment or allowance may have to be are di fferences between the product as sold in the export
market and the product as sold in th e domestic market with respect to factors such as level of trade,
taxation, quantities, etc. The existence of differenc es in prices in the export market between regions,
purchasers and time-periods is conceptually wholly ir relevant to, and outside the scope of, Article 2.4
because such differences have nothing to with wh ether or not export sales and domestic sales are
comparable with regard to factors such as level of trade, taxation, quantities, etc. Therefore, if zeroing
is inconsistent with Article 2.4 on the ground that it is an impermissible adjustment or allowance, the
existence of a "pattern of export prices which di ffer significantly among different purchasers, regions
or time periods" 371 cannot justify what is otherwise an adjustment or allowance prohibited by
Article 2.4.
7.280 In light of these considerations we reject th e argument of the European Communities that
zeroing is inconsistent with Article 2.4 of the AD Agreement as an allowance or adjustment for a
difference other than a difference affecting price comparability.
(iii) General conclusion
7.281 We have found that the two main arguments of the European Communities in support of its
claim that the use of a methodology involving zeroi ng and asymmetry in the administrative reviews at
issue was inconsistent with Article 2.4 cannot be r econciled with the fact that the negotiators of the
AD Agreement specifically permitted and/or decided not to address these practices in certain
circumstances and is inconsistent with the principle of effective treaty interpretation.
7.282 We recall that the standard that we must apply in interpreting the AD Agreement is set forth in
Article 17.6(ii) of the AD Agreement:

370 EC-Response to Questions Posed by the Panel at the Second Meeting, para. 33.
371 We note that while the European Communities in discussing the second sentence of Article 2.4.2
uses the term "distinct markets", the text of this provision does not make any mention of that concept.

"the panel shall interpret the relevant provisions of the Agreement in accordance with
customary rules of interpretation of public international law. Where the panel finds
that a relevant provision of the Agreemen t admits of more than one permissible
interpretation, the panel shall find the author ities' measure to be in conformity with
the Agreement if it rests upon one of those permissible interpretations."
7.283 In light of our analysis in the preceding sections , we find that it is permissible to interpret
Article 2.4 of the AD Agreement as not proscribing a method of calculating dumping margins for
purposes of duty assessment under Article 9.3 in which an asymmetrical comparison is made between
normal value and export price and in which the numerator of the dumping margin does not reflect the
amount by which individual export prices exceed the normal value.
7.284 The Panel therefore finds that the United States did not act inconsistently with Article 2.4 of
the AD Agreement when in the administrative review pro ceedings challenged by the European
Communities in this dispute
372 USDOC calculated dumping margins by comparing average monthly
normal value with prices of individual export transacti ons and did not include in the numerator of the
dumping margins any amounts by which export prices of individual transactions exceeded the normal
value.
7.285 One Member of the Panel offers the follo wing additional observations: Aside from the
considerations set out above, the view that the AD Agreement cannot be interpreted to prohibit the use
of zeroing and an asymmetrical comparison between export price and normal value in the collection
and assessment of anti-dumping duties is suppor ted by the text of Article 2.1 of the AD Agreement,
which defines dumping as a situation in which a pr oduct is "introduced into the commerce of another
country at less than its normal value". Because it clearly connotes real world business transactions,
the phrase "a product...introduced into the comme rce of another country" can reasonably be
interpreted to permit an authority to focus on pa rticular import transactions and does not require a
consideration of dumping in terms of an aggregate or average of export transactions over a period of
time.
373 While the Appellate Body has relied on Article 2.1 of the AD Agreement as textual support
for the view that dumping and margins of dumping can be found to exist only for the product as a
whole, it is important to emphasize that the A ppellate Body articulated this interpretation of
Article 2.1 as context for its analysis of Article 2.4.2 374, which is applicable only to the investigation
phase. The notion that dumping can be found only fo r the product as a whole is particularly relevant
to an original investigation, one of the main pur poses is to determine whether dumping exists above a
de minimis level so as to justify the imposition of an anti-dumping measure. A focus on average
conduct may well be appropriate in that regard. However, to transpose this notion to the duty

372 Supra, footnote 202.
373 It might also usefully be observed that the concept of dumping, as defined in Article VI: of the
GATT and Article 2.1 of the AD Agreement in terms of a product that is being introduced into the commerce of
another country has not historically been understood as referring exclusively to average conduct. Thus, for
example, the second report of the group of experts on anti-dumping and countervailing duties adopted in
May 1960 observed that "the ideal method" to ensure that anti-dumping duties are not used for ordinary
protective purposes and are applied only when a product is dumped and found to be causing injury "was to make
a determination in respect of both dumping and materi al injury in respect of each single importation of the
product concerned" BISD 9S/195.
374 In EC – Bed Linen , the Appellate Body observed that Article 2.4.2 explains how authorities must
proceed in establishing that there is dumping and that Artic le 2.1 made it clear in this regard that the margins of
dumping to which Article 2.4.2 refers are margins of dumping for a product. Appellate Body report, EC – Bed
Linen, para. 51. Similarly, in US – Softwood Lumber V , the Appellate Body's ruling that dumping and margins
of dumping can be found only for the product under investigation as a whole was part of an analysis of the
meaning of the terms "dumping" and "margins of dumping" in Article 2.4.2 of the AD Agreement. Appellate
Body Report, US – Softwood Lumber V , paras. 90, 93 and 96. The relevant section of the Appellate Body's
Report is entitled "Interpretation of Article 2.4.2".

collection and assessment phase is difficult to reconcile with the particular purpose of such a phase to
determine liability for payment of anti-dumping duties on particular imports and with the meaning of
the concept of introduced into the commerce of another country.
5. Claims of the European Communities under other provisions of the AD Agreement ,
Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement
7.286 The European Communities claims that in the administrative reviews at issue
375 USDOC also
acted inconsistently with Articles 9. 3, 11.1 and 11.2, 1 and 18.4 of the AD Agreement, Articles VI:1
and VI:2 of GATT 1994 and Article XVI:4 of the WTO Agreement as a consequence of the unlawful
zeroing method used in the calculation of margins of dumping.376
7.287 These claims of the European Communities are dependant in that they presuppose that the
zeroing method used by USDOC in these administrative reviews is inconsistent with Articles 2.4
and/or Article 2.4.2 of the AD Agreement. However, we have found in our analysis in Section E that
USDOC did not act inconsistently with Articles 2.4 and 2.4.2 in this respect.377
7.288 We therefore reject the claims of the Eur opean Communities that in the administrative
reviews at issue USDOC acted inconsistently with Articles 9.3, 11.1 and 11.2, 1 and 18.4 of the
AD Agreement, Articles VI:1 and VI:2 of GATT 1994 and Article XVI:4 of the WTO Agreement.
F. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF THE STANDARD ZEROING
PROCEDURES, THE TARIFF ACT AND THE USDOC'S REGULATIONS IN RELATION TO PERIODIC
ADMINISTRATIVE REVIEWS
7.289 The European Communities claims that "Sta ndard Zeroing Procedures" used by the
United States in administrative reviews or the United States practice or methodology of zeroing and
Sections 771(35)(A) and (B), 731, 777A(d) and 751( a)(2)(i) and (ii) of the Tariff Act and
Section 351.414(c)(2) of the USDOC Regulations are as such inconsistent with Articles 2.4, 2.4.2,9.3,
11.1 and 11.2, 1 and 18.4 of the AD Agreement , Articles VI:1 and VI:2 of the GATT 1994 and
Article XVI:4 of the WTO Agreement.378
7.290 We note that these claims are dependent upon a viol ation of Articles 2.4 and/or 2.4.2 and that
the claim of a violation of Articles 2.4 and/or 2.4. 2 is based on an interpretation of these provisions as
prohibiting zeroing and the use of asymmetrical comparison of export price and normal value in
periodic administrative reviews. We have rejected that interpretation in our analysis in Section E. In
addition, we recall that we have found that Sections 771(35)(A) and (B),731 and 777A(d) of the Tariff
Act are not WTO-inconsistent as such because they do not specifically address the issue of zeroing.379
7.291 We therefore reject the claims of the Eu ropean Communities that "Standard Zeroing
Procedures” used by the United States in admini strative reviews or the United States practice or
methodology of zeroing and Sections 771(35)(A) and (B), 731, 777A(d) and 751(a)(2)(i) and (ii) of
the Tariff Act and Section 351.414(c)(2) of the US DOC Regulations are as such inconsistent with
Articles 2.4, 2.4.2,9.3, 11.1 and 11.2, 1 and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the
GATT 1994 and Article XVI:4 of the WTO Agreement.

375 Supra, footnote 202.
376 EC-First Written Submission, paras. 183-210.
377 Supra, paras. 7.223 and 7.284.
378 EC-First Written Submission, paras. 212-224. As part of these "as such" claims, the European
Communities challenges the use of importer-specific assessment rates. EC-First Written Submission, para. 224.
379 Supra, para. 7.69.

G. CLAIMS OF THE EUROPEAN COMMUNITIES IN RESPECT OF THE STANDARD ZEROING
PROCEDURES, THE TARIFF ACT AND THE USDOC'S REGULATIONS IN RELATION TO NEW
SHIPPER REVIEWS, CHANGED CIRCUMSTANCES REVIEWS AND SUNSET REVIEWS
7.292 The European Communities claims that "Standa rd Zeroing Procedures" used or relied upon
by the United States in new shipper reviews, cha nged circumstances reviews and sunset reviews and
Sections 771(35)(A) and (B), 731, 777A(d) and 751( a)(2)(i) and (ii) of the Tariff Act and Section
351.414(c)(2) of the USDOC Regulations are as such in consistent with Articles 2.4, 2.4.2, 9.3, 9.5,
11.1,11.2, 11.3, 1 and 18.4 of the AD Agreement , Articles VI:1 and VI:2 of the GATT 1994 and
Article XVI:4 of the WTO Agreement.380
7.293 We note that these claims are dependent upon a viol ation of Articles 2.4 and/or 2.4.2 and that
the claim of a violation of Articles 2.4 and/or 2.4. 2 is based on an interpretation of these provisions as
prohibiting zeroing and the use of asymmetrical comparison of export price and normal value in
proceedings under Articles 9.5, 11.2 a nd 11.3. In light of our analysis in Section E, we reject that
interpretation. In addition, we recall that we have found that Sections 771(35)(A) and (B),731 and
777A(d) of the Tariff Act are not WTO-inconsistent as such because they do not specifically address
the issue of zeroing.381
7.294 We therefore reject the claims of the Eu ropean Communities that "Standard Zeroing
Procedures" used or relied upon by the United States in new shipper reviews, changed circumstances
reviews and sunset reviews and Sections 771(35)(A) and (B), 731, 777A(d) and 751(a)(2)(i) and (ii)
of the Tariff Act and Section 351.414(c)(2) of the USDOC Regulations are as such inconsistent with
Articles 2.4, 2.4.2, 9.3, 9.5, 11.1,11.2, 11.3, 1 and 18.4 of the AD Agreement, Articles VI:1 and VI:2
of the GATT 1994 and Article XVI:4 of the WTO Agreement.
VIII. CONCLUSIONS AND RECOMMENDATION
8.1 In light of our findings above, we conclude that:
(a) The United States acted inconsistently with Article 2.4.2 of the AD Agreement when
in the anti-dumping investigations listed in Exhibits EC-1 to EC-15 USDOC did not
include in the numerator used to calcula te weighted average dumping margins any
amounts by which average export prices in individual averaging groups exceeded the
average normal value for such groups.382
(b) Sections 771(35)(A) and (B), 731 and 777(A)(d ) of the Tariff Act are not as such
inconsistent with Article s 2.4, 2.4.2, 5.8, 9.3, 1 and 18.4 of the AD Agreement ,
Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement
with respect to the use of a zeroing methodology in the calculation of margins of
dumping in original investigations.383
(c) The United States' zeroing methodology, as it relates to original investigations, is a
norm which, as such, is inconsistent with Article 2.42 of the AD Agreement.384
(d) The United States did not act inconsistently with Article 2.4.2 of the AD Agreement
when, in the administrative reviews listed in Exhibits EC-16 to EC-31, USDOC used

381 Supra, para. 7.69.
382 Supra, para. 7.32.
383 Supra, para. 7.69.
384 Supra, para. 7.106.

a methodology that involved asymmetrical comparisons between export price and
normal value and in which no account was taken of any amount by which export
prices exceeded normal value.
385
(e) The United States did not act inconsistently with Article 2.4 of the AD Agreement
when in the administrative reviews list ed in Exhibits EC-16 to EC-31 USDOC
calculated dumping margins by comparing average monthly normal value with prices
of individual export transactions and did not include in the numerator of the dumping
margins any amounts by which export prices of individual transactions exceeded the
normal value.
386
(f) The United States did not act inconsistently with Articles 9.3, 11.1 and 11.2, 1 and
18.4 of the AD Agreement, Articles VI:1 and VI:2 of GATT 1994 and Article XVI:4
of the WTO Agreement in the administrative reviews listed in Exhibits EC-16 to EC-
31.
387
(g) The Standard Zeroing Procedures used by the United States in administrative reviews
or the United States practice or methodology of zeroing and Sections 771(35)(A) and
(B), 731, 777A(d) and 751(a)(2)(i) and (ii) of the Tariff Act and Section
351.414(c)(2) of the USDOC Regulations are not as such inconsistent with Articles
2.4, 2.4.2,9.3, 11.1 and 11.2, 1 and 18.4 of the AD Agreement, Articles VI:1 and VI:2
of the GATT 1994 and Article XVI:4 of the WTO Agreement.388
(h) The Standard Zeroing Procedures used or relied upon by the United States in new
shipper reviews, changed circumstances reviews and sunset reviews and Sections
771(35)(A) and (B), 731, 777A(d) and 715(a )(2)(i) and (ii) of the Tariff Act and
Section 351.414(c)(2) of the USDOC Regulati ons are not as such inconsistent with
Articles 2.4, 2.4.2, 9.3, 9.5, 11.1,11.2, 11.3, 1 and 18.4 of the AD Agreement, Articles
VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO Agreement.389
8.2 We have also concluded that it is not necessary for us to make findings on the claim of the
European Communities that the application of the model zeroing method in the investigations listed in
Exhibits EC-1 to EC -15 was inconsistent with Ar ticles 1, 2.4, 3.1,3.2,3.5,5.8,9.3 and 18.4 of the
AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4 of the WTO
Agreement390, and on the claim of the European Communiti es that the Standard Zeroing Procedures
used by USDOC in original investigations are inconsis tent as such with Articles 1, 2.4 3.1, 3.2, 3.5,
5.8, 9.3 and 18.4 of the AD Agreement, Articles VI:1 and VI:2 of the GATT 1994 and Article XVI:4
of the WTO Agreement.391
8.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed
under a covered agreement, the action is considered prima facie to constitute a case of nullification or
impairment of benefits under that agreement. Ac cordingly, we conclude that to the extent the
United States acted inconsistently with the provisions of the AD Agreement , it has nullified or
impaired benefits accruing to the European Communities under the AD Agreement.

385 Supra, para. 7.223.
386 Supra, para. 7.284.
387 Supra, para. 7.288.
388 Supra, para. 7.291.
389 Supra, para. 7.294.
390 Supra, paras. 7.33 and 7.34.
391 Supra, paras. 7.108 and 7.109.

8.4 We therefore recommend that the Dispute Settleme nt Body request the United States to bring
its measures into conformity with its obligations under the AD Agreement.
IX. DISSENTING OPINION BY ONE MEMBER OF THE PANEL WITH RESPECT TO
CERTAIN CLAIMS OF THE EUROPEAN COMMUNITIES RELATING TO
ZEROING
9.1 The Panel has given long and careful consider ation to the arguments advanced by both
parties. I agree with three of the Panel's findings which have been made unanimously by all three
Panel members:
(a) The "as applied" claims of the European Communities -
(i) that model zeroing in original investig ations is prohibited by Article 2.4.2 of
the AD Agreement
(b) The "as such" claims of the European Communities -
(ii) that Sections 771(35)(A) and (B), 731 and 777(A)(d) of the United States
Tariff Act are not as such inconsistent with the provisions of the
AD Agreement, the GATT 1994 and the WTO Agreement invoked by the
European Communities, since they do not speak to the issue of zeroing; and
(iii) that the United States' zeroing me thodology, as it relates to original
investigations, is a norm which, as such, is inconsistent with Article 2.4.2 of
the AD Agreement.
However, I must respectfully disagree with all other findings of the Panel. My disagreement is based
essentially on a different interpretation of the term " during the investigation phase" in Article 2.4.2 of
the AD Agreement and of the "fair comparison" principle in the first sentence of Article 2.4 of the
AD Agreement and its importance in the context of Article 2.4.2.

9.2 The European Communities, in its fi rst written submission to the Panel
392, has stressed that
the dispute, even if technically addressing symmetry too, is essentially about a single issue: "zeroing",
i.e. the counting as zero of the results of price comparisons in those cases where export prices exceed
normal value.
9.3 Panels have noted that the practice of zeroing arises in situations where an investigating
authority makes multiple comparisons of export pr ice and normal value, and then aggregates the
results of individual comparisons to calculate a dumping margin for the product as a whole. 393
Zeroing in its most common form is practiced eith er for a certain series of transactions ("simple
zeroing") or per model ("model zeroing").
9.4 The effect of zeroing is best illustrated by the following example: Suppose the home market
price for a certain product is 100. If there is one sh ipment of the product made at an export price of
100 there is no dumping. If, however, the same quan tity is exported in two shipments, one at a price
of 70, the other at 130, the dumping margin est ablished will be 30 ("positive" dumping) plus 0
("negative" margin of 30 counted as zero) divided by 2 = 15. With zeroing, the size of the dumping
margin therefore depends on the size and the frequenc y of shipments. The result of comparisons is
influenced by the calculation method used.

392 EC-First Written Submission, p. 1.
393 Panel Report, EC – Bed Linen, para. 6.102; cf. Panel Report, US – Softwood Lumber V, para. 7.213.

9.5 Zeroing is also related to "symmetry". Where price comparisons are symmetrical, simple and
model zeroing cannot occur, at least not so long as there is no aggregation of any intermediate result
obtained. This is the reason why Article 2.4.2 of the AD Agreement , without mentioning zeroing,
prescribes symmetry, under certain conditions. In order to simplify discussions, I shall therefore
address both issues together as "zeroing".
9.6 Whether zeroing should be permitted under the AD Agreement has been the subject of
intensive discussions between the negotiators of the Uruguay Round AD Agreement. Those basing
themselves on a more economically inspired concept of average price behaviour of an exporter over
time confronted those defending a literal inte rpretation of Article VI of the GATT 1994
394 implying
that dumping margins either exist (positive) or do not exist (zero), but can neither be negative nor give
any credit to compensate operations below normal value.
9.7 The result has been a compromise laid down in Articles 2.4 to 2.4.2. of the AD Agreement 395,
which can be summarized as follows:

- A general "fair comparison" principle enshrined in Article 2.4;
- An elaboration of this principle through a series of detailed prescriptions on adjustments
and comparison of prices in Article 2.4, sec ond to sixth sentence, and on conversion of
currencies in Article 2.4.1; and
- A provision in Article 2.4.2 that, "subject to the provisions governing fair comparison in
paragraph 4, the existence of margins of dumping during the investigation phase shall

394 Art VI:1 GATT: "…dumping by which products of one country are introduced into the commerce
of another country at less than the normal value of the products” (emphasis added).
395 "2.4 A fair comparison shall be made between the export price and the normal value. This
comparison shall be made at the same level of trade, no rmally at the ex-factory level, and in respect of sales
made at as nearly as possible the same time. Due a llowance shall be made in each case, on its merits, for
differences which affect price comp arability, including differences in conditions and terms of sale, taxation,
levels of trade, quantities, physical characteristics, and any other diffe rences which are also demonstrated to
affect price comparability. In the cases referred to in paragraph 3, allowances for costs, including duties and
taxes, incurred between importation an d resale, and for profits accruing, should also be made. If in these cases
price comparability has been affected, the authorities shall establish the normal value at a level of trade
equivalent to the level of trade of the constructed export price, or shall make due allowance as warranted under
this paragraph. The authorities shall indicate to the parties in question what information is necessary to ensure a
fair comparison and shall not impose an unreasonable burden of proof on those parties.

2.4.1 When the comparison under paragraph 4 requires a conversion of currencies, such conversion
should be made using the rate of exchange on the date of sale, provided that when a sale of foreign
currency on forward markets is directly linked to the export sale involved, the rate of exchange in the
forward sale shall be used. Fluctuations in exchange rates shall be ignored and in an investigation the
authorities shall allow exporters at least 60 days to have adjusted their export prices to reflect sustained
movements in exchange rates during the period of investigation. (footnote omitted)

2.4.2 Subject to the provisions governing fair comparison in paragraph 4, the existence of margins
of dumping during the investigation phase shall norma lly be established on the basis of a comparison
of a weighted average normal valu e with a weighted average of pr ices of all comparable export
transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis.
A normal value established on a weighted average basis may be compared to prices of individual
export transactions if the authorities find a pattern of export prices which differ significantly among
different purchasers, regions or time periods, and if an explanation is provided as to why such
differences cannot be taken into account appropriat ely by the use of a weig hted average-to-weighted
average or transaction-to-transaction comparison."

normally be established" in a symmetrical way, i.e. without zeroing, except where there is
evidence of targeted dumping.
9.8 While the "fair comparison" principle and the prohibition of zeroing, except for situations of
targeted dumping, undoubtedly constitu ted major progress, the need and effect of the insertion of the
words "during the investigation phase" remained unclear.
9.9 The Panel argues that the limitation of the ban on zeroing to original investigations only,
which in its opinion resulted from the insertion of the words "during the investigation phase" "could
reflect a compromise bridging different interests". 396 However, the reality was more complex. The
text of Article 2.4.2 AD Agreement changed several times in the course of the negotiations and it was
adopted as part of an overall compromise. But w ho understood when what it was really intended to
mean?397
9.10 The natural reading and literal similarity of "investigation phase" and "investigation period"
assimilated the text to the usual kind of reference to the existence of dumping during the investigation
period occurring several times in Article 2. 398 Why therefore should the inexperienced among the
approximately 140 delegati ons, unfamiliar with the particularities of original investigations and
assessment and review proceedings under United Stat es municipal law, discover that that text was
intended to mean the at that time unthinkable, i. e. that the prohibition of zeroing should apply to
original investigations only and become irreleva nt in the assessment and review phase? Who could
imagine that the more precise dumping calculations, those without zeroing, should be done in the
original investigation and the more rudimentary ones, those with zeroing, in the assessment and
review stage
399, with the result that inflated duties would be finally assessed in the later stages of the
proceedings? The situation would have been differe nt of course if the text had been unambiguous,
clearly spelling out the term "original investigation". But this was not the case, and I have the greatest
of doubts whether such a text would ever have had a chance of being adopted.
9.11 For the more initiated negotiators discovering the intended meaning, certain in the final stage
of the discussions, they were confronted with the de licate choice either to refuse the text with all the
incalculable consequences on the AD Agreement and the entire Uruguay Round or to accept it on the
grounds that its ambiguity and the lack of an y similar precedent in the anti-dumping area would
inevitably lead to litigation where its drafting and context, and the dramatic consequences of its
restrictive interpretation, would lead to a different reading.
9.12 Thus, as in so many international negotiations, am biguity and the need to conclude finally the
Uruguay Round allowed the text to be adopted.
9.13 It is illustrative of this situation that the European Communities in its Regulation (EC) No
384/96400 implementing the Uruguay Round AD Agreement , interpreted the term "during the
investigation phase" as not restricting the prohibition of zeroing by Article 2.4.2 of the AD
Agreement401 to original investigations. 402 The United States, on the other hand, in the Statement of

396 Supra, para. 7.212.
397 Even the United States admini stration, when implementing the AD Agreement into United States
law, felt the need, in the SAA, to comment on the te rm "investigations" with the explanatory addition "not
reviews". See EC-Rebuttal Submission, para. 217.
398 Articles 2.2.1, 2.2.2 and 2.4.1 of the AD Agreement.
399 Normally reserved for refinement of calculations.
400 Article 2, para. 11, OJ No L 56 of 6.3.1996, p.1.
401 Except for cases of targeted dumping.
402 Thus, Reg. 384/96 refers to the existence of dumping during the "investigation period".

Administrative Action interpreting the URAA, opted for a narrow interpretation, expressly excluding
reviews from the scope of Article 2.4.2 of the AD Agreement as transposed into United States law.
403
9.14 This Panel, by a majority of its members, has now confirmed this limited interpretation and
has concluded that zeroing is permitted in Un ited States duty assessment proceedings, as well as
regular and newcomer reviews, since it is condemned by Article 2.4.2 of the AD Agreement for
original investigations only. The term "during the investigation phase" in Article 2.4.2 of the AD
Agreement is interpreted narrowly, assimilating it to the phrase "during the original investigation" and
is considered decisive for the interpretation of th e fairness principle established by Article 2.4 of the
AD Agreement.
9.15 The Panel's interpretation raises four major questions:
1. Whether the meaning of the term "duri ng the investigation phase" in the first
sentence of Article 2.4.2 of the AD Agreement lies in reading it in conjunction
with the preceding part of the sentence (e xistence of dumping) rather than with
the subsequent part (establishment of the dumping margin).
2. What is the meaning of the terms "inves tigation"/"investigation phase" used in
Article 2.4.2 of the AD Agreement when compared to other instances where
similar words are used in the AD Agreement?
3. What is the relationship between Article 2.4.2 of the AD Agreement and the
general "fair comparison" principle established by the first sentence of Article 2.4
of the AD Agreement?
4. What is the relationship between Articles 2.4 and 2.4.2 of the AD Agreement and
Article 9.3 of the AD Agreement?
1. Meaning of the term "during the investigation phase" if linked to the preceding or the
subsequent part of Article 2.4.2
9.16 The Marrakesh Agreement establishing the WTO and its annexes have been established in
three languages: English, French and Spanish, each text being authentic.404
9.17 The English version of the first sentence of Article 2.4.2 of the AD Agreement reads as
follows:
"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 … "
The most natural reading of this provision, and the only one which is grammatically correct, is to link
the term "during the investigation phase" to the preced ing words, i.e. to the existence of margins of
dumping. It would be otherwise only if the negotiators had opted for a different drafting, such as:

"Subject to the provisions governing fair comp arison in paragraph 4, the existence of
margins of dumping shall, during the investigation phase, normally be established on
the basis of a comparison of … "

403 See discussion of this problem in EC-Response to Panel Question 50, para 163.
404 WTO Agreement, Art XVI:6.

9.18 The French text reads as follows:
paragraphe 4, l'existence de marges de dumping pendant la phase d'enquête sera
Here the situation is even clearer: a link with the second half of the sentence, i.e. the establishment of
dumping margins, would not only be not natural and grammatically incorrect but simply impossible.
It would be otherwise only if the sentence would have been drafted as:

paragraphe 4, l'existence de marges de dumping sera, pendant la phase d'enquête,
or
paragraphe 4, l'existence de marges de dumping sera normalement établi pendant la
9.19 The Spanish text reads as follows
existencia de márgenes de dumping durante la etapa de investigación se establecerá
As to its interpretation, similar considerations apply as above in French.

9.20 There is therefore only one plausible and correct reading of the term "during the investigation
phase": to link it to the existence of margins of dumping and interpreti ng it as synonymous with
"during the period of investigation", the time span re levant for the existence of dumping. This is the
terminology used two lines above
405 and in many other places in the AD Agreement406, which neither
defines the phrase "during the investigation phase" nor uses it in any other place.407
9.21 I realize that the words "inves tigation phase" and "investigation period" are not identical, no
more than "investigation phase" and "origina l investigation" assimilated by the Panel 408, but in my
opinion the difference between "investigation peri od" and "investigation phase" is not such as to
justify the radical conclusions which are drawn from this difference by the Panel. I therefore do not
share the Panel's interpretation that Article 2.4.2 of the AD Agreement applies to original
investigations only.

405 At the end of Article 2.4.1 of the AD Agreement
406 E.g., Articles 2.2.1; 2.2.1.1; 9.5.
407 Contrary to what the Panel posits (supra, para. 7.192) such a reading would be perfectly reasonable.
Under the AD Agreement , dumping must necessarily exist during a certain period "of investigation". This
period varies from one phase of the proceeding to the other, but dumping outside an investigation period cannot
justify the imposition of measures.
408 Supra, paras. 7.142 et seq.

9.22 The Panel's reading is different.
409 I shall therefore now examine if the term "during the
investigation phase" would have to be interpreted narrowly, even if one were to follow the Panel's
opinion that it has to be understood as related to the establishment, and not the existence, of dumping.
2. Meaning of the terms "investigation"/"investigation phase" throughout the AD
Agreement
9.23 The term "investigation" is not defined in the AD Agreement. Negotiators realized this but,
given differences between prospec tive and retrospective assessment systems, they renounced to
further clarification.410
9.24 I agree with the Panel that, in Articles 3.3; 5.10; 7; 10.7 and 18.3 of the AD Agreement, the
words have to be interpreted narrowly, referring to the original investigation only, as suggested by the
United States for Article 2.4.2.411
9.25 A broader meaning, covering original inves tigations as well as assessment and review
proceedings - which all, even if pursuing different purposes, involve the same type of investigations
into prices or costs 412 and into the existence and the amount of dumping – is, however, implied by
rules such as:
• Article 1: "An anti-dumping measure shall be applied only under the circumstances
provided for in Article VI of GATT 1994 and pursuant to investigations initiated and
conducted an accordance with the provisions of this Agreement". "Initiated" of
course refers to the original investigation. The further conduct of these investigations
must however include the assessment and review stage. Otherwise these parts of the
proceedings would fall outside the disciplines of the AD Agreement.

• Articles 2.2.1, 2.2.1, last sentence; 2.4.1: "period of investigation" is applicable not
only to original investigations but also to new shipper reviews, changed
circumstances reviews and assessment proceedings.

• Article. 2.2.1.1, first sentence; Article 2.2.2, first sentence: "Producer under
investigation" of general application throughout all stages of the proceedings.

• Article 2.2.1.1, second sentence: cost allocation data supplied by the producer "in the
course of the investigation" - same comment.

409 Supra, paras. 7.156 et seq . It is however interesting to note that, when examining the textual
similarity between Articles 2.4.2 and 5.1 of the AD Agreement, the Panel systematically refers to "the existence
of dumping during the investigation phase".
410 The term "proceedings” used in Artic le 8.1 is a souvenir left in the AD Agreement of the futile
efforts of negotiators to agree on a more precise definition.
411 I note however that the terminology used by the United States administration under United States
law varies and that, under EC law, reviews and refund procedures are "investigations". See for the United States
practice supra, para. 7.120 and quotations made in paras. 123-126 of the EC-Second Written Submission; and
for the EC’s legislation, see Article 11.9 of Reg. No 384/96 of 22. 12. 1995, OJ No L 56 of 6.3.1996, p.1.
412 Cf. Appellate Body Report , US – Corrosion-Resistant Steel Sunset Review , para 111: "Art. 11.3"
(concerning reviews) "makes it clear that it envisages a process combining both investigatory and adjudicatory
aspects. In other words, Art. 11.3 assigns an active rather than a passive decision-making role to the authorities."
The Appellate Body therefore concluded that the prohibitio n of zeroing in Article 2.4.2 also applies to sunset
reviews, cf. para. 127.

• Article 3.2: examination of the volume and effect of dumped imports by the
"investigating authorities" not limited to orig inal investigations but also valid for
reviews.

• Article 8.4: completion of "investigations" in case of undertakings - same comment.

This confirms that the meaning of the term "investig ation" is not limited to original investigations
throughout the AD Agreement413 but varies, depending on the context.

9.26 Opinions expressed by Panels and the Appellate Body also vary:
• The European Communities points, in favor of a broad interpretation, to e.g. the panel
report on US – DRAMS and to the panel report on US – Countervailing Measures on
Certain EC Products
414 which have used the words "i nvestigated" and "investigation"
in connection with annual and sunset reviews carried out by the United States.

• The Panel, for its part 415, considers that the Appellate Body reports in US – Carbon
Steel416, US – Corrosion Resistant Steel Sunset Review 417 and US – Oil Country
Tubular goods Sunset Reviews 418 support its interpretation. These Appellate Body
reports in fact differentiate between investigations and reviews or the imposition and
collection of duties, which indeed c onstitute different phases of antidumping
proceedings. The key question, however, is another one: whether the term
"investigation" in Article 2.4.2 of the AD Agreement has to be interpreted broadly or
narrowly. This is an issue on which neither panels nor the Appe llate Body have had
an occasion to pronounce themselves. The reports, important as they are, therefore
do not necessarily support the Panel's conclusions.

9.27 In the Panel's opinion
419, the analysis should focus on the meaning of the phrase "existence of
margins of dumping during the investigation phase" as a whole and not on the word "investigation"
taken in isolation. I do not see how this could ju stify the Panel's assimilation between "investigation
phase" and "original investigation". First, if the term "investigation phase" is read in conjunction with
the existence of dumping, it can only be assimilated with the term "investigation period" which under
Article 2 of the AD Agreement is the time span relevant for the ex istence of dumping. Second, if the
words "investigation phase" are read as related to the establishment of dumping, the word "phase"
does not solve the problem either. For those inte rpreting the term "investigation" narrowly it might
refer to the original investigation. For those, however, reading the term broadly it would simply
distinguish the formal overall proceedings from the more informal pre-initiation stage of Article 5.3 of
the AD Agreement where a more summary examination of dumping than prescribed by Article 2 of

413 I note that the same view has been expressed by China (Oral Statement of 17.3.2005, para. 14);
Hong Kong, China ( supra, para. 7.136); Korea (Oral Statement of 17.3.2005, para. 11 et seq.); Mexico (Oral
Statement of 17.3.2005); Norw ay (Oral Statement of 17.3 .2005, paras. 5 and 6) and Turkey (Oral Statement of
17.3.2005, paras. 10 et seq).
414 EC-Second Written Submission, paras. 168-170.
415 Paras. 7.173 et seq.
416 Paras. 58-97.
417 Para. 107.
418 Para. 279.
419 Supra, paras. 7.153 et seq.

the AD Agreement is sufficient.
420 Thus I do not see any reason whatsoever for imposing the
conclusion that the term "phase" used in Article 2.4.2 designates the original investigation only.421
9.28 The Panel422 makes this step because it notes a textua l similarity between the phrase "… the
existence of margins of dumping during the inves tigation phase shall normally be established …" in
Article 2.4.2 and the term "an investigation to de termine the existence … of any alleged dumping" in
Article 5.1 of the AD Agreement . But the existence of dumping is not only examined in original
investigations. Assessment and review proceedings require the same kind of investigation into the
existence of dumping. Also, Article 5.1 of the AD Agreement expressly underlines that investigations
must determine not only the existence but also the degree of dumping, a task which, in the Panel's
opinion, is typical for the assessment stage. 423 There may be a "similarity" of expressions used in
Article 2.4.2 and 5.1 AD Agreement but it does not prove that the term "investigation", occurring
more than 30 times in the AD Agreement , is used as synonymous to "original investigation" in
Article 2.4.2 of the AD Agreement.
9.29 Article 9 of the AD Agreement is also highlighted by the Panel 424 in order to demonstrate the
qualitative differences between investigations an d reviews justifying a narrow interpretation of
Article 2.4.2. But paragraph 4 of this Article 9 concerning sampling uses the term "investigation"
irrespective of the fact that this may relate to an original investigation or to a later review. Similar
considerations apply to Article 9.5 and its newcomer reviews, which refers to "period of
investigation".
9.30 As to the cross-references in Article 11 and 12 of the AD Agreement, I am also not convinced
by the Panel's argument 425 that they can only be explained by the fact that provisions applicable to
"investigations" are not automatically applicable to review proceedings. For me they, on the contrary,
confirm that original investigations and reviews involve the same kind of investigation into the
existence and the amount of dumping.
9.31 Under those conditions, I consider that the te rm "investigation" in Article 2.4.2 of the AD
Agreement, when compared to the other instances where the AD Agreement uses similar terms, does
not present itself as limited to original investigations only.

420 The Panel, supra, para. 7.196, argues that, in a pre-initiation investigation, no margin calculations
have to be made and that, therefore there was no need to highlight in Article 2.4.2 AD Agreement that this
proviso should refer to post-initiation form al proceedings only. The Panel errs: no prima facie case can be
established without comparing normal value and export prices in the pre-initiation phase, and zeroing can have a
significant effect on the outcome of even summary investigations.
421 This is confirmed by the following reflection: Article 2.4.2 of the AD Agreement second sentence
admits asymmetry, i.e. zeroing, where there is targeted dumping. There is no reference to any "investigation
phase" in this sentence. Therefore, if the first sentence were to be interpreted na rrowly, prescribing symmetry
and thus prohibiting zeroing for the investigation period only, which would then be the regime applicable after
the original investigation? Since the second sentence entitles authorities to use zeroing in the presence of
targeted dumping only, and this in all phases of the pr oceeding, it seems logical that , absent targeted dumping,
symmetry and no zeroing should be pr escribed in all phases of the proceedings too. This excludes a narrow
interpretation of the first sentence limiting its validity to original investigations only. The term "during the
investigation phase” must have another meaning.
422 Supra, para. 7.156.
423 Supra, para. 7.200.
424 Supra, para. 7.201.
425 Supra, para. 7.168.

3. Relationship between Article 2.4.2 and the "fair comparison" requirement in the first
sentence of Article 2.4
9.32 Article 2.4 of the AD Agreement starts with a "Leitmotiv” placed at its very beginning: "A
fair comparison shall be made between export price and normal va lue". The corresponding text
resulting from the Tokyo Round was constructed differently 426: what is now a separate first sentence
of Article 2.4 of the AD Agreement was part of the present second sente nce, worded in terms of an
explanatory introduction to the more substantive rules which followed. By singling it out and placing
it into a separate sentence the Uruguay Round has st rengthened this "Leitmotiv”, elevating it to a
general principle governing all of Article 2.4 and its subparagraphs.
427
9.33 The second to sixth sentences of Article 2.4 and its subparagraphs 2.4. 1 and 2.4.2 elaborate
this general and "overarching" principle, with however an exception for targeted dumping. According
to the rules of interpretation of the Vienna Convention , they cannot exhaust it since otherwise they
would deprive it of its meaning so that the first sentence would become a nullity, serving no
purpose.428 The first sentence thus constitutes an indepe ndent obligation which can be violated by an
action that is not inconsistent with the other requirements of paragraph 4.
9.34 As to its scope, i.e. whether this is limited to price comparability, "the general subject matter
expressly addressed in paragraph 4, ... or whet her its reach extends beyond this paragraph", 429 the
Panel concludes430 that the provisions of Article 2.4.1 on curre ncy conversion, of Article. 2.4.2 on the
establishment of dumping margins and the provisions of the "chapeau" of Article 2.4 are part of a
whole. "Since the subject matter of Article 2.4.2 in particular is different from price comparability,
the inclusion of paragraph 2.4 a nd sub-paragraphs 2.4.1 and 2.4.2 in a single provision supports the
interpretation that "fair comparison" in Article 2.4 is not limited to price comparability" 431 "by
selecting comparable transactions or making adjust ments but also applies to the issue of the
calculation of margins of dumping." 432 The Panel thus follows the A ppellate Body which had chosen
as formulation: "Article 2.4 '... informs all of Article 2, but applies, in particular, to Article 2.4.2
which is specifically made "subject to the provisions governing fair comparison in [Article 2.4]'”.433
9.35 I agree with all these conclusions. My disagre ement with the Panel starts where it measures
zeroing against what it considers to be the "substa ntive meaning" of the term "fair comparison". 434
The Appellate Body has several times taken position on this issue:
"Furthermore, we are also of the view that a comparison between export price and
normal value that does not take fully into account the prices of all comparable
export transactions – such as the practice of ' zeroing' at issue in this dispute – is not
a 'fair comparison' between export price and normal value, as required by
Article 2.4 and by Article 2.4.2."
435

426 "In order to effect a fair comparison between the export price and the domestic price in the
exporting country (or the country of origin) or, if applicable, the price established pursuant to Art. VI:1(b) of the
General Agreement, the two prices shall be compared at the same level of trade….”
427 Appellate Body Report, EC – Bed Linen, para 59.
428 Supra, para. 7.253.
429 Supra, para. 7.252.
430 Supra, para. 7.254.
431 Supra, para. 7.254.
432 Supra, para. 7.258.
433 Appellate Body Report, EC – Bed Linen, para. 59.
434 Supra, para. 7.259.
435 Appellate Body report, EC – Bed Linen, para. 55, emphasis added.

"When investigating authorities use a zeroing methodology such as that examined in
EC – Bed Linen to calculate a dumping margin , whether in original investigations
or otherwise, that methodology will tend to inflate the margins calculated . Apart.
from inflating the margins, such a methodology could, in some instances, turn a
negative margin of dumping into a positive margin of dumping. As the Panel
itself recognized in the present dispute, 'Zeroing' … may lead to a affirmative
determination that dumping exists where no dumping would have been established in
the absence of zeroing. Thus the inherent bias in a zeroing methodology of this
kind may distort not only the magnitude of a dumping margin, but also a finding
of the very existence of dumping."
436 (footnote omitted)
"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."
437
(footnote omitted).
9.36 These decisions clearly support the suggestion that zeroing is unfair and in consistent with the
"fair comparison" requirement in Article 2.4 of the AD Agreement.438
9.37 The Panel argues, however, that the importance a nd value of these decisions is limited by the
fact that the Appellate Body "has not actually made any legal findings that zeroing is inconsistent with
Article 2.4 of the AD Agreement ".439 This may be correct, but I nevertheless consider that the
Appellate Body's statements are more than obiter dicta . For me they are too well reasoned, too
consistent to be considered as unsupported statements.
9.38 Also, the Appellate Body, in EC – Bed Linen 440 specifically refers to the "fair comparison"
required by Article 2.4 and by Article 2.4.2 of the AD Agreement.
9.39 In US – Corrosion Resistant Steel Sunset Review , the Appellate Body upholds that decision,
stressing that in EC – Bed Linen it "emphasized that a comparison such as that undertaken by the
European Communities in that case is not a 'fair comparison' between export price and normal value
as required by Articles 2.4 and 2.4.2 of the AD Agreement ".441 It is true that, in this case, the
Appellate Body was not in a position to complete its analysis because the panel report did not contain
sufficient factual findings. 442 The Appellate Body's statements are however legal, not factual, and
there was no reason for the Appellate Body to make them if it was not convinced that they were
justified.
9.40 The most interesting aspect of this Appellate Body's decision is however the fact that it is
made in the context of a case which involved a review and that the Appellate Body underlined that its
evaluation of the zeroing methodology as unfair applied irrespective of whether zeroing took place "in
an original investigation or otherwise". 443 Since its factual information was insufficient, the Appellate

436 Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 135, emphasis added.
437 Appellate Body Report, US – Softwood Lumber V, para. 101, emphasis added.
438 This position is also taken also by the following third parties in this dispute: Argentina, Brazil; Hong
Kong, China; India; Japan; Korea; Mexico and Norway.
439 Supra, para. 7.270.
440 Appellate Body Report, EC – Bed linen, para. 55.
441 Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, paras. 134 and 135.
442 Supra. para. 7.273.
443 Appellate Body Report, US – Corrosion Resistant Steel Sunset Review, para. 135.

Body was not obliged to make this statement, but it made it, thus pronouncing itself on the crucial
issue in the present dispute of whether there should be any differentiation between original
investigations and later stages of the proceedings.
444
9.41 As to the US – Softwood Lumber V case, it is true, as the Panel states 445, that the Appellate
Body has examined zeroing only in the context of weighted average-to weighted-average
comparisons, finally condemning it because, inter alia, it does not take full account of the prices of all
export transactions and "thus inflates the margin of dumping for the product ...". 446 But zeroing
presupposes averaging and, even if there would be no reference to weighted averages in Article 2.4.2,
would it be fair within the meaning of Article 2.4 of the AD Agreement to apply arithmetical averages
to dumping calculations or not to take full account of all transactions?
9.42 This leads me to the key element in the Panel's decision, the argument 447 that "to determine
whether an approach is unfair there must be a discernible standard of appropriateness or rightness
within the four corners of the AD Agreement which would provide a basis for reliably judging that
there has been an unfair departure from the standard". Since Article 2.4.2 of the AD Agreement" is
the only provision of the AD Agreement that specifically addresses the subject methods of
determining margins of dumping", the Panel, interp reting Article 2.4.2 narrowly as limited to original
investigations, then concludes that zeroing is not unfair within the meaning of Article 2.4 and
inconsistent with Article 2.4.2 in original investigations only.
9.43 With all respect to the Panel and its thoroug h examination of the dispute, I find this
argumentation inconceivable because of the results to which it leads, contradictory because in conflict
with the independent nature of the fair ness requirement under Article 2.4 of the AD Agreement
recognized by the Panel 448 449 and artificial because it seeks interpretation of the basic principle
"informing all of Article 2" 450 in one of its most enigmatic subparagraphs. But even more important,
the Panel's decision ignores a very important aspect, th at Article 2.4.2 is preceded by the "subject to
the provisions governing fair comparison in para graph 4" requirement. This double security,
additional to the independent principle established in the first sentence of Article 2.4, clearly
subordinates Article 2.4.2 to the "fair comparison" ru le of Article 2.4 with the consequence that, in
case of conflict, the fairness principle prevails.
9.44 Therefore, the Panel's decision has made of Article 2.4 of the AD Agreement with its fairness
principle "informing all of Article 2.4" 451 and of the "subject to" requirement heading Article 2.4.2 a
nullity serving no purpose, thus also bypassing the Vienna Convention.
9.45 As to the "discernible standard of appropriaten ess or rightness within the four corners of the
agreement which would provide a basis for reliably judging that there has been an unfair departure

444 A possibility which the Appellate Body denies.
445 Supra, para. 7.273.
446 Appellate Body Report, US – Softwood Lumber V, para. 101.
447 Supra, paras. 7.260 et seq.
448 Supra, para. 7.253.
449 The Panel, in its rebuttal comments on my dissentin g opinion posits that its interpretation of the
"fair comparison" requirement in no way negates the legal effect of this provision as an independent obligation
and that "the meaning of the 'fair comparison' requirement must be rooted in the concept of dumping and that …
it is necessary to take into account the manner in which specific rules contained in the AD Agreement address
that particular issue". This again ignores the fact that, due to the "subject to" provision, Article 2.4.2 is
subordinated to the fairness principle in Article 2.4 first sentence. This clearly establishes a predominance and
requires that, in order to avoid conflict, Article 2.4.2 is applied and interpreted in a manner compatible with
Article 2.4.
450 Appellate Body Report, EC – Bed Linen, para. 59.
451 Appellate Body Report, EC – Bed Linen, para. 59.

from the standard"
452 of fairness, I am convinced that there at least four, either specifically related to
the comparison exercise or more general in nature, permeating the entire AD Agreement , but also
relevant in the context of price comparisons.
9.46 First: the requirement of consistency. The AD Agreement is based on the principle of a
unique definition of dumping applying throughout all anti-dumping proceedings. 453 Nowhere in the
AD Agreement is there any provision foreseeing different calculation methods for different stages of
the proceedings:
• Article 2.1 defines the conditions under which sales below cost may be treated as not
being in the ordinary course of trade;

• Article 2.4 prescribes in great detail which adjustments have to made under which
circumstances;

• Article 2.4.1 does the same for exchange rates;

• Article 2.5 does this for indirect dumping.

9.47 It has never been argued that any of these rules should not apply at the assessment and the
review stage. Depending on the circumstances, the effect of zeroing can be much more dramatic than
many of the adjustments or calculations made under the above Articles. Is it possible, under these
circumstances, to admit that zeroing is the only pract ice for which it would be fair to take a different
line in the different stages of a proceeding?
9.48 All substantive definitions on injury and causality
454 apply to all stages of anti-dumping
proceedings, from initiation to review and refund. Procedural requirements for initial investigations
are, at least mutatis mutandis, equally valid for reviews455 and price undertakings.456 Is it fair, in these
circumstances that the results of the original inv estigations, moderated by the absence of zeroing, are
eclipsed by higher duties fixed in the assessment or revi ew stage? In other words, is it possible that
what is an unfair comparison for one stage of the proceeding becomes fair at another stage, that the
concept of fairness varies with the context?
9.49 The argument now advanced by the Panel 457 in favour of such a contextual concept justifying
the differentiation between original investigations and assessment and review proceedings is that a
narrow interpretation of Article 2.4.2 would have a protective effect for exporters since "the limitation
would make it more difficult to impose an anti-dump ing duty in the first instance". Unfortunately,
reality does not confirm this. The most rece nt Semi-Annual Report under Article 16.4 of the
United States, covering the period 1 July to 31 December 2004 458, shows that anti-dumping activities
undertaken by the United States during that peri od involved 248 cases. Not a single one of these
cases has been terminated because of a No Dumping finding in the period under consideration!
Margins may have been lower in the original inv estigations but expectati ons founded on this by
exporters and importers must have been deceived in many or most of the cases by the heavier results
in the assessment and review stage.

452 Supra, para. 7.260.
453 Articles 1 and 2.1 of the AD Agreement.
454 Articles 1, 2 and 3 of the AD Agreement.
455 Articles 11.4 and 12.3 of the AD Agreement.
456 Articles 11.5 of the AD Agreement.
457 Supra, para. 7.212.
458 WTO doc. No ADP/N/126/USA, dated 8 March 2005.

9.50 Second: fairness of aggregation. Article 2.4. 2 specifically calls for weighting of averages
when establishing dumping margins. The Panel ar gues that the requirements of Article 2.4.2 are
limited to original investigations. But even if this were the case, would it be possible to qualify as fair
within the meaning of Article 2.4, creating obliga tions independent from Article 2.4.2, aggregations
not taking full account of all comparable transactions?
9.51 Third: legal security and predictability of administrative action. Importers and exporters have
to be informed of intended action 459 and provisional measures must indicate the estimated amount of
duty460 and, if the duty is higher than the provisional du ty paid or payable, the difference shall not be
collected. Therefore, can it be fair that exporte rs which have increased their export prices by the
amount of the original dumping margin have to realize in the assessment or review phase that this was
not enough to avoid further collection of duties?
9.52 Fourth: non-discrimination: the principle is specifically referred to in Article 9.2 of the
AD Agreement but is of general importance for all anti- dumping and trade policy activity. Can it be
fair therefore within the meaning of Article 2.4 of the AD Agreement that, in review proceedings,
newcomers are subject to another, more radical me thod of calculation than exporters subject to the
original investigation?
My answer to all these questions is negative.

9.53 The Panel argues
461 that "the fairness of the methodology logically cannot be divorced from
the underlying conception of what dumping means". This leads back to the traditional dispute
between the two schools on dumping. But the Appe llate Body has consistently condemned zeroing
as unfair in cases involving original investigations a nd this Panel follows the Appellate Body on this,
thus adhering to the average concept of dumping for original investigations. Is it conceivable, under
those circumstances, that there is now a new formation between the schools of dumping: one for the
original stage and a different school for assessment and review proceedings?
4. Relationship between Articles 2.4. and 2.4.2 and Article 9.3 of the AD Agreement
9.54 Article 9.3 of the AD Agreement provides that the amount of the anti-dumping duty shall not
exceed the margin of dumping as established under Ar ticle 2. It thus refers back to Article 2
enshrining the fairness principle, independent from Article 2.4 but "informing all of Article 2", and
where the answers to the key question of this dis pute are found. My disagreement with the Panel on
the interpretation of this provision is not affected by Article 9.3 of the AD Agreement.
9.55 For clarity's sake, I would however like to note that I am not convinced by the Panel's
argument that the qualitative differences betwee n assessment proceedings under Article 9.3 and
original investigations "could" be a rational basi s for differentiating between the comparison methods
applied for these operations.
462 Of course, there are differences of purpose, not of nature, between
original investigations and sunset reviews 463 or assessment proceedings. This however by no means
proves that there is a rational justification for applying different methods of comparison for the
different stages of one and the same proceeding. Duties collected in the final instance are higher but it
is difficult to conceive that this could be qualified as a rationale for such a differentiation.

459 Articles 6.9 and 12.1 of the AD Agreement.
460 Article 7.2 of the AD Agreement.
461 Supra, para 7.260.
462 Supra, para. 7.201, double negative turned into the positive.
463 Appellate Body Report, US –Carbon Steel, para. 58 - 97

9.56 As to whether administrations should follow an "exporter-oriented" or an "importer-oriented"
assessment and refund system, the Panel argues
464 that "while the present AD Agreement … explicitly
reflects the existence of retrospective and prosp ective duty assessment systems, Articles 9.3 and 9.4
provide little detail as regards the substantive me thodology to be followed by an authority to
determine the basis for attributing lia bility in respect of any particular transaction". This may be the
case. Nevertheless, there can be no doubt that, from the point of view of fairness towards those
subject to anti–dumping proceedings, an exporter–oriented approach, such as applied by the European
Communities, has the advantage to take full account , via refund procedures, of "negative" dumping
margins established for certain importers, while retros pective systems, such as utilized by the United
States and certain other countries, achieve an eff ect equivalent to that of the now generally
condemned model zeroing, insofar as they limit themselves to collecting "zero" from importers with
negative margins without any compensation in an overall assessment of the exporter concerned.
9.57 Finally, retrospective and prospective assessment systems are both recognized by the AD
Agreement.465 Great care is taken by the AD Agreement to ensure immediate re funds if there has been
excessive collection of duties under any of those sy stems. I cannot see any textual support in the AD
Agreement for the assertion that the methods of compar ison used for calculating such refunds should
differ from one system to the other. I ther efore disagree with the Panel when it posits 466 that there is
no requirement that in identical situations retr ospective and prospective duty assessment systems
should lead to the same level of protection against dumped imports. In order to avoid that users of
retrospective systems are advantaged the level of protection obtained, if not identical, should be at
least comparable.
5. Conclusion
9.58 For all these reasons, I am not in a position to admit that the disciplines established for
zeroing by Articles 2.4 and 2.4.2 are limited to original investigations.
9.59 Remains one last and final question: whether, under Article 17.6 of the AD Agreement, the
United States is entitled to opt for a narrow interpretation of Article 2.4.2 of the AD Agreement
because there is more than one permissible interpretation of this Article.
9.60 I would certainly have been tempted by such an approach in the early years after Marrakech.
Since the year 2000 however, there has been a substa ntial and consistent body of Panel and Appellate
Body jurisprudence with regard to zeroing, its nature and effects. WTO Members which were
condemned have aligned their le gislation or practice, without differentiating between original
investigations and assessment and review proceedings.
9.61 This has created a new situation where the di fference between the traditional two schools of
thought on dumping 467 has become a moot issue. In fact, at least for original investigations, it is
generally admitted by Panels and the Appellate Body now that:
• Article 2.4.2 of the AD Agreement prescribes symmetry and thus rules out simple
zeroing, except where there is targeted dumping; and

• Model zeroing is incompatible with Article 2.4 and/or Article 2.4.2 of the AD Agreement,
as this Panel has just confirmed.

464 Supra, para. 7.204
465 Article 9.
466 Supra, paras. 7.208 et seq.
467 It should be noted also that Article 2.2.1 re garding sales below cost is based on the average
behaviour over time concept of dumping.

"De facto" the overall price behavior concept of dumping, generally supported by modern economists,
has therefore prevailed, and it would be unconceiva ble to have different "schools" on dumping for
different stages of anti-dumping proceedings.

9.62 Under these circumstances, I do not think th at there is more than one permissible
interpretation of Articles 2.4 and 2.4.2 of the AD Agreement any longer and I would accept the claims
of the European Communities:
(a) that simple and model zeroing are inconsis tent with Articles 2.4 and 2.4.2 of the
AD Agreement in assessment proceedings
468, except where there is targeted dumping;
(b) that § 351.414 (c)(2) of the United States Anti-Dumping Regulations 469, which
foresees simple zeroing in review proceedings , is inconsistent with Articles 2.4 and
2.4.2 of the AD Agreement; and
(c) that the United States zeroing methodology used in assessment and review
proceedings is inconsistent with Articles 2.4 and 2.4.2 of the AD Agreement.