Document: WT/DS344/R Page B-1 ANNEX B THIRD PARTIES WRITTEN SUBMISSIONS OR EXECUTIVE SUMMARIES THEREOF Contents Page Annex B-1 Third Party Written Submission of Chile B-2 Annex B-2 Executive Summary of the Third Party Written Submission of the
Document codes: WT/DS344/R
Complainant: Mexico
Respondent: U.S.
Third parties: Brazil, Chile, China, EU, Japan, South Korea, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 1, 2.1, 2.4, 2.4.2, 9, 18.4  Anti-dumpingArt. VI:1, VI:2  GATT 1994Art. XVI:4  Agreement Establishing the World Trade Organization

ANNEX B

THIRD PARTIES WRITTEN SUBMISSIONS OR
EXECUTIVE SUMMARIES THEREOF

Contents Page
Annex B-1 Third Party Written Submission of Chile B-2
Annex B-2 Executive Summary of the Third Party Written Submission of the
European Communities B-4
Annex B-3 Executive Summary of the Third Party Written Submission of
Japan B-9

ANNEX B-1

THIRD PARTY WRITTEN SUBMISSION
OF CHILE

1. Chile would like to thank the Panel for the oppor tunity to present its views in this dispute, in
which it reserves its third party rights owing to its sy stemic interest in the application of the so-called
zeroing methodology in its various forms.
2. Mexico questions the zeroing procedures " as such" as well as their application by the
United States Department of Commerce (USDOC) in the specific case of Stainless Steel from Mexico,
both in the original investigation and in five peri odic reviews. We shall be commenting only on the
application "as such" of the zeroing procedures, both in original investigations and in reviews, as we
are not familiar enough with the factual details of the specific case to comment on the practical
application of the procedures.
3. Bearing this in mind, Chile would like to note that prior Appellate Body rulings have
confirmed that this methodology, used both in dumping investigations and in subsequent
administrative reviews, is inconsistent with mu ltilateral disciplines. Chile agrees with those
conclusions. Moreover, in US – Zeroing (Japan) , the Appellate Body made two determinations:
firstly, that the zeroing methodology was inconsistent "as such" with the Agreement on
Implementation of Article VI of the General Ag reement on Tariffs and Trade 1994 ("Anti-Dumping
Agreement") and with Article VI of the Genera l Agreement on Tariffs and Trade 1994 (GATT 1994);
and secondly, that the zeroing methodology was incons istent with the WTO both in the calculation of
dumping (on a transaction-to-transaction basis) in original investigations as well as in periodic
reviews.
4. The application of the zeroing methodology carries with it a defi nite possibility of
exacerbating dumping margins or even fabricating them where they do not exist.
5. We welcome the USDOC's decision to terminat e this practice in the calculation of dumping
on a weighted average basis in original investigations . However, we regret that this decision is not
comprehensive, and although the United States ha s yet to comply with the recommendations and
rulings of the DSB in the above -mentioned dispute, Chile hopes th at a definitive solution will be
reached - which clearly calls for a reform that ex cludes the use of the methodology at issue at all
stages of anti-dumping investigations.
6. As long as there is no comprehensive and defi nitive solution to this practice which violates
the Anti-Dumping Agreement and the GATT 1947, ther e will be new challenges like the one raised
by Mexico, and probably new decisions condemning its u se. It is not very helpful to insist on using a
methodology which has been identified as contrary to international rules.
7. Without prejudice to the above, Chile considers a bilateral solution to be limited by its very
scope, and it involves costs for the parties and for the system. To initiate proceedings in the WTO
knowing full well from repeated precedents what the result will be is a tiresome and costly process.
Consequently, any definitive solution will have to be multilateral, involving an express confirmation
in the Anti-Dumping Agreement of the prohibition of the use of this methodology both in
investigations and in subsequent reviews under all types of price comparison.

8. In conclusion, Chile respectfull y requests the Panel to give full consideration to the Panel and
the Appellate Body conclusions in this respect, and in particular to the logic behind those conclusions.
This would necessarily lead this Panel to concl ude that the zeroing procedures as such, as challenged
by Mexico, are contrary to Article VI:1 and VI:2 of the GATT 1994 and Articles 2.1, 2.4 and 9.3 of
the Anti-Dumping Agreement. Chile hopes that this will happen, but also hopes that the United States
will comply with the relevant prior recommenda tions and rulings, since only prompt and full
compliance will ensure the predictability and certainty of the WTO dispute settlement system. Not to
mention – as former US Trade Representative R obert Zoellick once pointed out – that such
compliance would place the United States in a better position to request the other countries to respect
trade rules.

ANNEX B-2

EXECUTIVE SUMMARY OF THE THIRD PARTY WRITTEN
SUBMISSION OF THE EUROPEAN COMMUNITIES

I. INTRODUCTION

1. The dispute brought by Mexico against the US is the latest in a long series of complaints
regarding "zeroing" practices and methodology in anti-dumping cases. The EC's written submission
starts from Mexico's assertion that the issues raised in this particular panel proceeding have been
brought up frequently before, and that Mexico's cl aims are supported by a consistent body of WTO
case law, including in particular by Appellate Body reports. The EC has not been in a position to
comment in writing on the US' position on these assertions, as for scheduling reasons it drafted its
written submission before receipt of the US' first written submission. The EC reserves its right to
comment further in its oral statement, taking into account the US' first written submission.

2. Assuming however, that Mexico is correct in its assertions, there is an important systemic
question that arises in the EC's view: are panels obliged to follow previous decisions rendered on
identical questions, in particular those contained in adopted Appellate Body reports? In its written
submission the EC, based on a summary of Mexico's case, proceeds with a review of the previous
case law of the WTO on "zeroing", paying particular a ttention to the reasoning and findings contained
in the relevant Appellate Body reports. The EC then looks into the pr ecedential value of these
previous decisions, through a two-pronged analysis . First, it analyses the policy and practices
observed by other adjudicatory bodies, both at the na tional and international level. This is followed
by an examination of the functions of the WTO di spute settlement system, the role of the Appellate
Body therein and a discussion of the WTO case law on the value of precedent.

3. The EC concludes that the reasoning and findings of the Appellate Body are to be regarded as
the correct position in law and that in the inter est of ensuring security and predictability of the
multilateral trading system, this Panel should foll ow the reasoning and findings contained in the
relevant Appellate Body reports.

II. SUMMARY OF MEXICO'S CASE

4. Mexico argues that the "zeroing procedures" used by the US in an original anti-dumping
investigation of Stainless Steel from Mexico are "as such" and "as applied" inconsistent with several
provisions of the GATT and the Anti-Dumping Agreemen t. Mexico further argues that the "zeroing
procedures" used by the US in five periodic review s are "as such" and "as applied" inconsistent with
the GATT and the Anti-Dumping Agreement.

III. OVERVIEW OF RELEVANT APPELLATE BODY FINDINGS IN PREVIOUS
ZEROING CASES

5. The EC agrees with Mexico that "zeroing" h as been contested several times in WTO dispute
settlement proceedings, and addressed in a series of adopted panel and Appellate Body reports. In its
written submission the EC reviews in some detail th e salient reasoning and findings of the Appellate
Body ("AB") in each of these reports.

6. In EC - Bed Linen the AB found the EC's use of "model zer oing" in original investigations to
be inconsistent with several provisions of the Anti-Dumping Agreement. It held, inter alia , that
Art. 2.1 read in the light of Art. 2.4.2 of the Anti-Dumping Agreement makes clear that the margins of
dumping to which Art. 2.4.2 refers are the margins of dumping for the product as a whole; that in
determining a dumping margin for a product, Art. 2.4. 2 refers to a comparison of "all" comparable
transactions and that a comparison between export prices and normal value that does not take into
account all transactions does not constitute a "fai r comparison" between export price and normal
value, as required by Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement.

7. In US - Softwood Lumber V the US appealed the finding that by not taking into account all
comparable export transactions in its zeroing practi ce in the original anti-dumping investigation at
issue, it violated Article 2.4.2 of the Anti-Dumpi ng Agreement. On appeal , the AB confirmed its
earlier ruling in EC - Bed Linen emphasizing that under Article 2.4.2. of the Anti-Dumping
Agreement "dumping" and "margins of dumping" can only be established for the product under
investigation as a whole. The AB also considered and explicitly rejected a number of arguments that
have been made since by the US in other zeroing cases on a recurrent basis: that other dumping
margin methodologies provided for in Article 2.4.2 ( e.g., the transaction-to-transaction comparison)
provide "important context" for the permissib ility of "zeroing" under the average-to-average
methodology in the original investig ation at issue; the alleged historical background of Art. 2.4.2;
that the AB need not follow its findings in other cases, in particular EC – Bed Linen, and the standard
of review set out in Art. 17.6(ii) of the Anti-Dumping Agreement.

8. In US – Zeroing (EC1) the AB was asked to review the panel's findings on the application by
the US of "zeroing" methodology in anti-dumping proceedings, including original investigations, and
assessment or review proceedings. The EC had challenged US legal instruments, procedures,
methodologies and practice related to these types of "zeroing," on both an "as such" and "as applied"
basis. On appeal the AB confirmed that the zer oing methodology employed by the US in original
antidumping investigations ("model zeroing" using average-to-average comparison) was inconsistent
Art. 2.4.2 of the Anti-Dumping Agreement. In addition, the AB held that the zeroing methodology
applied by the US in the administrative review process ("simple zeroing" using the average-to-
transaction method) was inconsistent with Artic le 9.3 of the Antidumping Agreement and GATT
Article VI:2. The AB referred e xplicitly to its prior rulings in EC – Bed Linen and US – Softwood
Lumber V. It held that the margin of dumping established for an exporter or foreign producer operates
as "a ceiling" for the total amount of anti-dumping duties that can be levied on the entries of the
subject product (from that exporter) covered by the duty assessment proceeding. At the same time,
the AB addressed and rejected again the US argumen t of the standard of review set out in Anti-
Dumping Agreement Article 17.6(ii).

9. The US also appealed the panel's conclusi on that the zeroing methodology at issue could be
challenged as a "measure" "as such". The AB cons idered this matter in some detail, referring to
earlier case law on the concept of "measure". As for zeroing methodology as a measure, it noted that
there is no threshold requirement. It set out a particular standard for such challenges against a "rule or
norm" constituting a measure of gene ral and prospective application. On this basis it concluded that
the zeroing methodology, as it relates to original i nvestigations, in which the average-to-average
comparison method is used, can be challenged, as such.

10. In US – Softwood Lumber V (Art. 21.5-Canada), the AB was asked to review a revised anti-
dumping duty determination by the US ("Section 129 Dete rmination"). In this determination, instead
of the average-to-average method, the US based the revised duty rates on a comparison of normal
value and export prices on a transaction-to-transaction basis, again adopting zeroing methodology.

11. The AB rejected the panel's finding that th e US determination in the Section 129 proceeding
was not inconsistent with Article s 2.4.2 and 2.4 of the Anti-Dumping Agreement. It analysed

Article 2.4.2 in detail, concluding that zeroing in the transaction-to-transaction methodology does not
conform to the requirement of Article 2.4.2. It not ed explicitly that this interpretation was consistent
with its previous rulings on "zeroing" related to the average-to- average comparison methodology
under this provision. The AB also rejected ar guments based on the "mathematical equivalence"
argument, for a number of reasons, considering inter alia, the concerns of the panel and the US over
the weighted average-to-transaction methodology to be overstated.

12. The AB then considered and rejected again contextual arguments made by the US based on
other provisions of the Anti-Dumping Agreement and GATT; US arguments based on historical
materials and the US argument on the standard of review of Article 17.6(ii) of the Anti-Dumping
Agreement. Finally, the AB stated that the use of zeroing under the transaction-to-transaction
methodology in the Section 129 Determination, was also inconsistent with the "fair comparison"
requirement in Article 2.4.

13. In US – Zeroing (Japan) , Japan challenged zeroing methodologies and procedures applied by
the US in original investigations, periodic revi ews, new shipper reviews, changed circumstances
reviews and sunset reviews as a "measure" "as such". Japan also challenged these measures on an "as
applied" basis in a number of anti-dumping pr oceedings with respect to products from Japan,
specifically, in one original investigation, various periodic reviews, and two sunset reviews. The
panel concluded that the "zeroing procedures" are a "measure" that can be challenged "as such" and
found that, in maintaining model zeroing procedures in the context of original investigations, the US
acted inconsistently with Article 2.4.2 of the Anti- Dumping Agreement. However, the panel rejected
all other challenges by Japan.

14. On appeal the Appellate Body comprehensively reversed the panel's report to the extent that
the latter had rejected Japan's claims. Firstly, the AB confirmed its earlier findings that the "zeroing
procedures" at issue constitute a measure which can be challenged as such under different comparison
methodologies and in different stages of anti-dumping pr ocedures. It reversed the panel's finding that
the US does not violate Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement by maintaining the
zeroing procedures when calculating dumping margin s on the basis of transaction-to-transaction
comparisons in original investigations. The AB referred to "fundamental principles" involved in the
concepts of "dumping" and "margins of dumping"; confirmed its earlier case law on these concepts as
well as its earlier rulings on "zeroing" as such in or iginal investigations involving the transaction-to-
transaction and average-to-average methods. Th e Appellate Body again rejected contextual
arguments made by the US. The AB also took firm exception to the fact that the panel had come to
conclusions on the basis of reasoning relating to Art. 2.4.2 of the Anti-Dumping Agreement, which
the Appellate had rejected earlier. Moreover, the AB again rejected arguments and findings that went
counter to its earlier rulings that zeroing procedur es in original investigations violate the fair
comparison requirement.

15. The AB also reversed the panel's finding that the US does not violate Articles 9.3 and 9.5 of
the Anti-Dumping Agreement and GATT Article VI :2 by maintaining the zeroing procedures in
periodic reviews and new shipper reviews, referring to its earlier case law. Further, the AB reversed
the panel's finding that zeroing in the context of pe riodic reviews and new shipper reviews is not, as
such, inconsistent with Article 2.4. Also in re lation to these investigations, it held that the fair
comparison requirement was breached. Further, the Appellate Body reversed the panel's finding that
zeroing as applied by the US in the 11 periodic review s at issue in this appeal was not inconsistent
with Articles 2.1, 2.4, 9.1, and 9.3 of th e Anti-Dumping Agreement and GATT Articles VI:1
and VI:2. Also on this point the AB referred to earli er rulings. Finally, the AB reversed the panel's
finding that the US acted consistently with Artic les 2 and 11 of the Anti- Dumping Agreement when,
in the sunset reviews at issue, it relied on margin s of dumping that had been calculated using zeroing
in previous anti-dumping proceedings. It found instead that the US violated Article 11.3 of the Anti-
Dumping Agreement. Again, the AB referred to its earlier decisions in relation to this point.

IV. PRECEDENTIAL VALUE OF THESE APPELLATE BODY FINDINGS

16. The conventional wisdom is that there is no stare decisis in the WTO dispute settlement
system, and that panel and Appellate Body reports are considered binding only on the immediate
parties to the dispute. Stare decisis is characteristic for national legal systems of the common law
tradition. In international law generally, this doc trine of binding precedent is not formally accepted.
Consequently, insofar as it does not formally acknowledge stare decisis, the WTO dispute settlement
system is not unique among international adjudicatory bodies.

17. However, there are important considerations that qualify th e principles outlined above. All
legal systems, whether national or internati onal, and regardless of formal adherence to stare decisis,
have an interest in ensuring continuity of the juri sprudence. Further, in all legal systems decisions
rendered by hierarchically superior courts or tribunals are generally followed by subsidiary bodies.

18. As to the first consideration, whether as a matter of doctrine or practice, all legal systems
place a high value on consistency, certainty and predictability of the jurisprudence of their
adjudicatory bodies, particularly as regards decisions rendered by the highest courts. In common law
systems change of precedent is done relatively rarely and with great aforethought and discussion. The
highest courts in civil law systems, despite forma lly rejecting the doctrine of binding precedent, also
follow their previous decisions as a matter of judicial policy and practice. Further, the policy and
practice of international courts and tribunals dem onstrate that the need for ensuring consistency and
predictability of the jurisprudence also prevails in the international arena.

19. Consequently, formal rejection of the doctrine of stare decisis should not be confused with
the interest that adjudicatory systems have in maintaining continuity in the case law. Departures from
previous decisions are carefully considered and re quire the identification of cogent reasons for doing
so. Even where adjudicatory bodies are not formal ly bound by their previous decisions, they will
nevertheless consider themselves bound by the la w as authoritatively expressed in a decision.
Further, the general rule that a judicial or arb itral decision only binds the immediate parties does not
prevent that decision from being treated in a later case as the correct legal position.

20. The second consideration relates to whether lower courts or tribunals need to follow decisions
rendered by hierarchically superior bodies. Also on this question the practice and principles observed
in other dispute settlement systems is noteworthy. In common law jurisdictions the primary function
of an appellate court is to give pr edictability and stability to the field of law it judges. This is done in
large part by stare decisis which obliges subsidiary bodies to follow the rulings of higher courts in
their jurisdiction. But in civil law jurisdictions as well, lower courts tend to follow decisions of higher
courts, even in the absence of an explicit legal ru le to that effect. In the international arena
adjudicatory systems with a hierarchical structure are less common. However, where there is an
appellate structure, the prevailing rule seems to be again that decisions of the hierarchically higher
body are followed by the subsidiary body, at the ve ry least insofar as points of law are concerned.
This does not mean that there would be no scope wh atsoever for subsidiary bodies to develop the case
law. It does mean however, that departure from d ecisions taken by higher courts on issues of law
must be carefully considered and based on cogent reasons.

21. The EC submits that the a bove considerations also apply in the WTO dispute settlement
system. A paramount function of this system is to create and maintain a uniform body of rules. This
is clearly reflected in Art. 3(2) DSU, according to which, inter alia , the dispute settlement system
aims at providing "security and predictability to th e multilateral trading system". The Appellate Body
occupies a superior position in the hierarchy of th is system (Art. 17.4; 17.6 and 17.13 DSU). The
primary function of the Appellate Body is to pr ovide predictability and stability to the multilateral
trading system through its decisions on issues of law covered in panel reports and legal interpretations
developed by panels.

22. It is not disputed that Appellate Body repor ts do not have precedential effect or automatic
applicability, qua reports, beyond the immediate par ties. However, it is unquestionable that when
interpreting the covered agreements , the Appellate Body aims at ensuring consistency in its case law
(see: AB's reasoning and findings in US – Softwood Lumber V (paras. 109-112) referring to AB's
previous reasoning and findings in Japan – Alcoholic Beverages II (at 108) and US – Shrimp
(Article 21.5 – Malaysia ) (para.109)).

23. Are WTO panels obliged to follow Appellate Body decisions? The Appellate Body itself has
stated that a panel that takes account of the reas oning in an adopted Appellate Body report commits
no "error" ( US – Shrimp (Article 21.5 – Malaysia) (para. 109)). But it does not follow, a contrario,
that panels would be free to depart from Appe llate Body reports on issues of law and legal
interpretations. The Appellate Body has explic itly stated panel reports – and equally adopted
Appellate Body reports − "create legitimate expectations among WTO Members, and, therefore,
should be taken into account where they are relevant to any dispute" ( Japan – Alcoholic Beverages II
(at 108-109)). Further, the Appellate Body has ex plicitly ruled that panels are bound by the legal
analysis of the Appellate Body "especi ally where the issues are the same" ( US – Oil Country Tubular
Goods Sunset Reviews (para.188)). The EC submits that as th e Appellate Body is the hierarchically
superior body, tasked with deciding on issues of law and legal interpretations, its rulings must be
regarded as commanding particular authority for panels as authoritative pronouncements on the law.

V. CONCLUSIONS

24. Mexico asserts that none of the issues raised in this panel proceeding are new. The EC agrees
that Mexico's claims appear to be supported in law by a consistent body of reasoning and findings,
contained in all reports issued by the Appellate Body since the EC - Bed Linen case on zeroing in anti-
dumping cases. The reasoning and findings of the A ppellate Body are, in the EC's view, to be
regarded as the correct position in law. In the inte rest of ensuring security and predictability of the
multilateral trading system, the EC submits that this Panel should follow the reasoning and findings
contained in these Appellate Body reports.

ANNEX B-3

EXECUTIVE SUMMARY OF THE THIRD PARTY WRITTEN
SUBMISSION OF JAPAN

I. INTRODUCTION

1. The Appellate Body ruled clearly in the past disputes that zeroing procedures may be
challenged "as such" and are incompatible with Articles VI:2 of the GATT 1994 and Articles 2.4,
2.4.2, 9.3, 9.5 and 11.3 of the AD Agreement. Particularly, it found that zeroing is prohibited in all
circumstances whenever calculating the "margins of dumping", that is, regardless of the specific
phase or comparison methods. For the security and predictability of the multilateral trading system,
Japan urges the Panel to follow the prior rulings of the Appellate Body and approve Mexico's claims
that the zeroing measures are inconsistent "as such" with Articles 2.1, 2.4, 2.4.2 and 9.3 of the
AD Agreement.

II. ZEROING PROCEDURES ARE A MEASURE "WHICH CAN BE CHALLENGED
AS SUCH"

2. In recent anti-dumping disputes, the Appellate Body held that the word "measure" has a broad
meaning; an alleged "measure" will be assessed in WTO law irrespective of its legal character in
domestic law; and, significantly, a "measure" need not be binding or mandatory in domestic law. In
US – Corrosion-Resistant Steel , the Appellate Body noted that th e measures examined by the past
GATT/WTO panels include those consisting of " acts setting forth rules or norms that are intended to
have general and prospective application".

3. The USDOC, in calculating overall margins of dumping, always disregards and treats as zero
the result of intermediate price comparisons wher e the export price exceeds the normal value in all
anti-dumping procedures regardless of the types of comparison (a weighted average- to–weighted
average ("W-W"), a transaction–to–transaction ("T-T") or a weighted average–to–transaction ("W-
T") comparison) that it adopts. Such methodology of margin calculation is exactly what is called
"zeroing" which should be regarded as a single m easure that can be challenged "as such" under the
WTO law.

III. ZEROING USED IN INVESTIGATIONS IS INCONSISTENT "AS SUCH" WITH
ARTICLES 2.1, 2.4.2 AND 2.4 OF THE AD AGREEMENT

A. T
HE CONCEPT OF "DUMPING" AND "MARGINS OF DUMPING"

4. Japan supports the Mexico's contention that zer oing is prohibited "as such" in investigations
using a T-T comparison. The Appellate Body held, in US – Softwood Lumber V (Article 21.5 –
Canada), that zeroing is prohibited on the "as applied" basis by Articles 2.1, 2.4.2 and 2.4 in original
investigations using a T-T comparison.

5. Article 2 of the AD Agreement sets forth the "agreed disciplines" for determining "dumping"
and "margins of dumping". Japan further notes that Article 2.1 defines "dumping" as follows: "For
the purpose of this Agreement, a product is to be considered as being dumped" (emphasis added.)
This definition reiterates the definition of "dumping" in Article VI:1 of the GATT 1994. Article VI:2

also defines the term "margin of dumping" by re ference to the "product". Based on the texts of
Articles 2.1 and VI, "dumping" and "margins of du mping" must be established for the product under
investigation as a whole. This definition of "dum ping" and "margins of dum ping" applies throughout
the AD Agreement for purposes of all anti-dumping proceedings. Based on this analysis, in US –
Zeroing (EC) and US – Softwood Lumber V , the Appellate Body held that " dumping is defined in
relation to a product as a whole".

6. On the basis of this interpretation of Article 2.1 and Article VI:1, the Appellate Body further
found that "if the investigating authority establishe s the margin of dumping on the basis of multiple
comparisons made at an intermediate stage, it is re quired to aggregate the results of all of the multiple
comparisons, including those where the export price exceeds the normal value". This requirement
under Article 2.1 to aggregate multiple comparison r esults in calculating a margin of dumping for the
"product" as a whole should be followed, when an authority conducts multiple model-specific W-W
comparisons, multiple transactions-specific W-T co mparisons and multiple transaction-specific T-T
comparisons.

B. D
ETERMINATION OF MARGINS OF DUMPING BASED ON T-TO-T COMPARISONS IN ORIGINAL
INVESTIGATIONS

7. The United states rebuts that "all comparable export transactions" language in the text of
Article 2.4.2 of the AD Agreement is the textual basis for an obligation to provide offsets and
therefore this language in Article 2.4.2 applies only to antidumping investigations and only when
authorities use the W-W comparison pursuant to Article 2.4.2. This interpretation is apparently false.

8. As clarified in US – Softwood Lumber V (Article 21.5 – Canada) , the reference in the first
sentence of Article 2.4.2 to "a comparison" in the singular and to "export prices" in the plural suggests
the need for an overall calculation exercise involving aggregation of multiple transactions. The text
of Article 2.4.2 indicates that the calculation of a dumping margin using the T-T comparison
methodology is a multi-step exercise in which the results of transaction-specific comparisons are
inputs that are to be aggregated in order to establish the dumping margin of the product under
investigation for each exporter or producer.

9. Japan does not consider that the absence of the phrase "all comparable export transactions" in
the context of the T-T comparison suggests that zeroing should be permissible under that
methodology. Under T-T comparison, unlike W-W, all export transactions are taken into account
individually and matched with the most appropriate transactions in the domestic market.

C. C
ONTEXTUAL ARGUMENTS RELATING TO THE SECOND SENTENCE OF ARTICLE 2.4.2 OF THE
AD AGREEMENT

10. The United States further rebuts that the gene ral zeroing prohibition would, yielding identical
results between the W-W and W-T comparison, render the targeted dumping exception in
Article 2.4.2 a complete nullity (the "mathematical equivalence" argument).

11. However, in US - Softwood Lumber
Ⅴ(Article 21.5-Canada), the Appellate Body decisively
rejected this argument, by noting that, without actua l application ever by the Unites States of the W-T
comparison method, the "mathematical equivalence" argument "rests on untested hypothesis". It also
noted that, given the exceptional nature of th e method authorized in the second sentence of
Article 2.4.2, that sentence "alone cannot determ ine the interpretation of the two methodologies
provided in the first sentence…", and that "there is considerable uncertainty regarding how precisely
the third methodology should be applied", because it has never been invoked. Finally, the Appellate

Body affirmed that "mathematical equivalence" does not necessarily arise when using W-T and W-W
comparisons without zeroing.

12. Accordingly, the second sentence of Article 2.4.2 does not provide contextual support for a
finding that zeroing is permissible under T-T comparison methodology.

D. A
RTICLE 2.4 OF THE AD AGREEMENT

13. The use of zeroing under T-T comparison methodology artificially inflates the magnitude of
dumping, resulting in higher margins of dumpi ng and making a positive determination of dumping
more likely. Therefore the United States acts inconsistently with Article 2.4 of the AD Agreement.

IV. THE ZEROING PROCEDURES IN PERIODIC REVIEWS

14. The United States contends that in periodic reviews, the term "margins of dumping" in
Article 9.3 of the AD Agreement can be interprete d to apply on a transaction–specific basis and that
therefore the provision of this Article permits th e determination of transaction specific margins in
periodic reviews.

15. The chapeau of Article 9.3 of the AD Agreement, which governs periodic reviews, states
"[t]he amount of the anti-dumping duty shall not exceed the margin of dumping as established under
Article 2". Based on this requirement as well as the ones under Article VI:2 of the GATT 1994 and
Article 9.1 of the AD Agreement, the margin of dumping established for an exporter or foreign
producer operates as a ceiling for the total amount of anti-dumping duties that can be levied on the
entries of the subject product (from that exporter) covered by the duty assessment proceeding.

16. The express reference to Article 2 in the chapeau of Article 9.3 includes, among others,
Article 2.1, which defines "dumping" for purposes of the entire AD Agreement in relation to the
"product" under investigation as a whole. In US – Zeroing (EC), the Appellate Body made an explicit
interpretive connection between th e "product as a whole" requirement of Article 2.1 and dumping
determinations under Article 9.3. Based on the in terpretation of Article 2.1 mentioned earlier, for
purposes of periodic reviews as well, the inves tigating authority must aggregate all multiple
comparison results to establish a margin of dumping for the "product" under investigation as a whole.

17. The Appellate Body clearly rejected the Unite d States' argument that, in a periodic review,
"dumping" and "margins of dumping" can be determin ed on an importer- or an import-specific basis.
The Appellate Body explained in US – Zeroing (EC) that "[e]stablishing margins of dumping for
exporters or foreign producers is consistent w ith the notion of dumping, which is designed to
counteract the foreign producer's or exporter's pricing behavior. Under Article 9.3 of the Anti-
Dumping Agreement and Article VI:2 of the GATT 1994, margins of dumping are established for
foreign producers or exporters".

18. The Appellate Body also recognized that neither the AD Agreement nor the GATT 1994
prevents Members from assessing duties on an import - or importer-specific basis, provided that the
total amount of duties levied does not exceed the margin of dumping for the "product", for the
exporter or foreign producer.

19. In periodic reviews, the United Stat es calculates: (1) a margin for each exporter that becomes
the duty deposit rate for all entries of the product e xported to the United States by that exporter until
the next review; and (2) an importer-specific assessment rate based on the total amount of dumping
attributable to each importer, which determines that importer's liability for the review period.

20. In light of its interpretation of Articles 9. 3 and VI:2, in conjuncti on with other relevant
provisions including Articles 2.1 and VI:1, the Appellate Body in US – Zeroing (EC) found that "the
methodology applied by the USDOC in the administ rative reviews at issue resulted in amounts of
assessed anti-dumping duties that exceeded the forei gn producers' or exporters' margins of dumping
with which the anti-dumping duties had to be compared". Accordingly, the zeroing methodology is
inconsistent with Article 9.3 of the AD Agreement and Article VI:2 of the GATT 1994.

21. The United States criticizes this conclusion on the grounds that if a Member is unable to
calculate and assess the duties on a transaction-specifi c basis, importers of the merchandise for which
the amount of dumping is greatest will actually have an advantage over their competitors who import
at fair value prices because they will enjoy the bene fit of offsets that result from their competitors'
fairly priced imports.

22. However, anti-dumping duties are designed to counteract an exporter's pricing, and not an
importer's, and because it is exporters that creat e a situation of dumping, the maximum amount of
duties must be assessed in relation to exporter's ma rgin of dumping. Furthermore, if duties are
imposed on importers, it must be ensured that the total amount of duties does not exceed the exporter's
margins of dumping. The above-mentioned situatio n on which the United Stat es bases its criticism is
consistent with the exporter-associated nature of the notion of dumping, not importer.