UNITED STATES – MEASURES RELATING TO ZEROING AND SUNSET REVIEWS
Document: Communication from the United States
Date: 26 February 2007
Document codes: WT/DS322/16; WT/DS322/AB/R
Complainant: Japan
Respondent: U.S.
Third parties: Argentina, China, EU, Hong Kong, India, South Korea, Mexico, New Zealand, Norway, Taiwan, Thailand
Dispute stage: Implementation & Compliance
Agreements cited: Art. 2.1, 2.4, 2.4.2, 9.1, 9.2, 9.3, 5.8, 3, 9.5, 11.1, 11.2, 11.3, 1  Anti-dumpingArt. VI  GATT 1994Art. 18.4  Anti-dumpingArt. XVI:4  Agreement Establishing the World Trade Organization

UNITED STATES – MEASURES RELATING TO ZEROING
AND SUNSET REVIEWS

Communication from the United States

 The following communication, dated 20 February 2007, is circulated at the request of the
delegation of the United States.

United States wishes to provide these additional comments.
2. The United States continues to be deeply troubl ed by the Appellate Body Report's evaluation
of the issue of "zeroing". The Report's reasoning presents serious problems both from the perspective
of treaty interpretation and from the practical perspective of WTO Members endeavouring to
administer their anti-dumping regimes consistently with their WTO obligations.
Flawed interpretive approach not based on the agreed text

3. The question before the Appellate Body was not whether zeroing is good or bad from a policy
perspective and should be prohibited, but whether the Members agreed to prohibit zeroing as part of
their WTO obligations. Any such agreement could on ly be manifest in the text of the Anti-Dumping
Agreement. However, the text of the Anti-Dumpi ng Agreement is silent on the issue of zeroing.
Faced with agreement language that does not addr ess zeroing at all, let alone include a broad
prohibition on zeroing, the Appellate Body has appare ntly attempted to infer from the text what it is
that Members intended with respect to zeroing. Th e difficulties and problems of such an inferential
approach are illustrated by the Appellate Body re ports on the issue. Over several reports, the
Appellate Body modified its analysis in mutually contradictory ways. The Appellate Body's most
recent effort is no less flawed. In particular , the Appellate Body Report largely assumes its
conclusion, relying not on the text of the Ag reement but on language from its previous reports
removed from its context.
At odds with how anti-dumping systems actually work

4. The Report also suffers from a fundamental misapprehension of how anti-dumping systems
work, resulting in interpretations of Agreement provi sions that, if applied, would fundamentally alter
the anti-dumping practices of numerous Members using this remedy and render many of these
systems difficult, if not impossible, to administer. Many of these flaws stem from the Appellate Body
Report's conclusion, necessary to its findings on a broad prohibition on zeroing, that dumping cannot
be calculated for a particular transaction, but must instead be calculated based on "all" transactions for

a given exporter or producer. Leaving aside the practical difficulty of how one determines "all"
transactions (all on a given day, a given month, a gi ven year), this analysis simply ignores basic
business realities.
5. While dumping involves differential pricing behaviou r of an exporter or producer between its
export market and its normal value, dumping's injurious impact can be felt at the level of an individual
transaction. An importer of a low-priced export sale will be in a position to pass along that low price,
and take sales from its competitors, in the absence of an anti-dumping duty. To the extent prices will
often vary from transaction to transaction, and importer to importer, the competitive position of each
importer may differ. In the absence of anti-dumping duties, the importer of the lower priced
merchandise that will contribute most, if not entirel y, to a finding of dumping will have an advantage
over its competitors importing at higher prices, in addition to its advantage over domestic
competitors.
1
6. Members have addressed this problem in part by calculating and assessing anti-dumping
duties on a transaction specific basis. Thus, in the US retrospective duty system, dumping is
calculated for each entry over a preceding period of time, and the amount owed by an importer will
depend on the prices of the merchandise it enters. A very similar result is obtained in prospective
normal value systems, in which dumping duties are assessed at the time of entry, based on a
comparison of the price for the particular entry as compared to a normal value. Often this normal
value is calculated based on an average of prices in the home market, an approach similar to the way
the United States calculates normal value in assessment proceedings. Another approach to dealing
with the problem is to compare prices of indivi dual export transactions to individual transactions in
the market used to establish normal value. I ndeed, GATT anti-dumping experts in 1960 concluded
that the ideal way of calculating anti-dumping would be on a transaction-by-transaction basis.
7. Through a transaction-specific approach, dumping duties ultimately assessed for a given
import and importer will relate to the prices paid by that importer, and any di fferences, incidental or
otherwise, in pricing to other importers are address ed directly in the assessments of duties for those
importers. No importer will gain a competitive advantage from having received merchandise which
contributes more to the dumping margin than the merchandise imported by others, and the resulting
injury will be fully taken into account.
Renders prospective normal value systems retrospective

8. The Anti-Dumping Agreement explicitly provi des for both retrospective and prospective
normal value duty assessment systems, as well as for transaction-to-transaction comparisons, and this
became an important part of the context for the anal ysis in this dispute. If, as the Appellate Body
Report ultimately concludes, dumping must be based on all of the transactions of an exporter, it
appears to have several consequences, in particular for prospective normal value systems.
9. First, notwithstanding the fact that prospectiv e normal value systems are by their very terms
"prospective", it will be necessary for such systems to include reviews of multiple entries, so that
dumping margins can take into account "all" of the exporter's transactions. In effect, prospective
normal value systems will become retrospective, a conclusion also reached in a Canadian

1 See Panel Report, para. 7.199 (the Panel concluded that, where a margin of dumping can only be
determined at the level of the exporter or producer, "a Member may be precluded from collecting anti-dumping
duties in respect of particular export tr ansactions at prices less than normal value to a particular importer at a
particular point of time because of pr ices of export transactions to other im porters at a different point in time
that exceed normal value. We find it significant, in this respect, that Article 9.3 contains no language requiring
such an aggregate examination of export transactions in determining final liability for payment of anti-dumping
duties under Article 9.3.1 or in determining the amount, if any, of refund under Article 9.3.2.").

parliamentary report on potential changes to its prospective normal value system. In that report and at
its trade policy review, Canada expressed its view that in a prospective normal value system, each
entry provides a margin of dumping. All of this was brought to the Appella te Body's attention,
including the fact that the Panel, in its report, car efully laid out this analysis. Nevertheless, the
Appellate Body Report dismisses these issues. In so doing, the Appellate Body Report creates further
difficulties with the text of the Agreement. If, in fact, Members had intended prospective normal
value systems to have such reviews, one would have expected Members to have provided for this in
explicit agreement language, just as one would have expected a broad prohibition on zeroing to be
reflected in explicit agreement text.
Creates perverse incentives to dump and injure another Member's industry

10. A second implication of the Appellate Body Report's conclusion that dumping margins must
be calculated based on all the transactions of an exporter relates to how a Member might implement
such a finding. If dumping is determined on the basi s of all of an exporter's transactions, then one
way to implement would involve assessing the same duty rate on all import transactions, regardless of
whether the transaction was below normal value or not. This would create a perverse incentive to
dump, as importers of higher priced, non-dumped me rchandise would not wish to be disadvantaged
both by higher prices and a dumping duty, and sin ce importers of lower pr iced, dumped merchandise
would know that others would be paying at least pa rt of the duties attributable to the low prices from
which it already benefitted. Even if one were not to impose duties on importers whose entries were
not responsible for the finding of dumping, such importers would still be disadvantaged, since
reducing the duties paid by the importer of the lo wer priced merchandise would mean that that
importer still has a cost advantage. Yet these are th e real world implications of the Appellate Body
Report's approach.
Unprecedented view of how to do targeted dumping analysis

11. A third implication of the Appellate Body Re port's conclusion that dumping margins must be
calculated based on all the transactions of an expor ter relates to the targeted dumping methodology of
Article 2.4.2. Under that methodology, the pri ce of an export transaction may be compared to a
normal value based on an average of prices where there is a pattern of export prices differing
significantly among purchasers, regions or time peri ods, and the differences cannot be taken into
account through the use of average-to-average or transaction-to-transaction comparisons. However, if
there were a broad prohibition on zeroing, such that offsets must be granted for non-dumped
transactions, then the result of the targeted dumping calculation would be mathematically the same as
that for the average-to-average calculation. This is because the normal values and the universe of
export transactions in average-to-average and aver age-to-transaction comparisons are the same. The
EC took this same position before its domestic tribunal in arguing that it is necessary to use zeroing
with the targeted dumping methodology,
2 and three panels have found th is to be true as a factual
matter.3
12. The Appellate Body Report indicates that it is possible to avoid this mathematical fact by
interpreting the targeted dumping methodology to pe rmit it to be applied to a subset of export
transactions. The Appellate Body Report's suggestion is novel. No Member has ever done this, nor

2 US Appellee Submission in US – Zeroing (Japan), para. 44 and Attachment 1 (citing Case T-274/02,
Ritek Corp. v. Council of the European Union, 24 October 2006, para. 94.)
3 Panel Report, United States – Laws, Regulations and Methodology for Calculating Dumping Margins
(Zeroing) (US – Zeroing (EC)) , WT/DS294/R, para. 7.266; Panel Report, United States – Final Dumping
Determination on Softwood Lumber from Canada: Recourse to Article 21.5 of the DSU by Canada (US –
Softwood Lumber Anti-Dumping Article 21.5), WT/DS264/RW, para. 5.52; Panel Report, US – Zeroing (Japan),
para. 7.127.

has any Member ever suggested that it was permissible to do this. The language of the Anti-Dumping
Agreement says nothing about selecting a subset of transactions when conducting a targeted dumping
analysis. Further, it is difficult to reconcile the use of a sub-group of merchandise when using a
targeted dumping comparison with the Appellate Body Report's conclusion that "all" export
transactions must be included when performing av erage-to-average or transaction-to-transaction
comparisons.
No textual basis, as 8 experts have concluded

13. Given all of the implications of the Report' s reasoning, one would expect the Uruguay Round
negotiators to have addressed these various issues in the text of the Anti-Dumping Agreement. In
particular, one would expect the text to be clear that zeroing is not permitted or, at the least, that
margins of dumping must be calculated on the basis of "all" sales by an exporter or producer (except
in the case of targeted dumping). However, the text is silent on the use of "zeroing," and the only
reference to comparing "all" export transactions co mes in Article 2.4.2 language relating exclusively
to average-to-average comparisons. Indeed, it was on this basis that the Appellate Body originally
concluded that zeroing was not permitted when conducting this type of comparison.
4 It was the
absence of such language in the context of other types of comparisons that led eight of nine dumping
experts serving on panels to conclude that any prohibition on dumping in the Anti-Dumping
Agreement is limited to the average-to-average context.
14. In overruling these panels, the Appellate Body Re port has not identified any agreement text
which those panels overlooked. Rather, the A ppellate Body Report assumes its conclusion, draws
questionable inferences from the text, and relies on language not from the Agreement, but from its
prior reports interpreting the Agreement.
15. The Appellate Body Report begins its analysis by assuming its conclusion. According to the
Report, to "assess properly the pricing behaviour of an individual exporter or foreign producer, and to
determine whether the exporter or foreign producer is in fact dumping the product under investigation,
and if so, by which margin, it is obviously necessary to take into account the prices of all the export
transactions of the exporter or foreign producer."
5 However, as already noted, what the Appellate
Body Report considers "obviously necessary" is nowhe re stated in the Anti-Dumping Agreement and
was considered neither obvious nor necessary by eight of nine trade remedy experts that have served
on panels in these disputes – or to the numerous Members who both before and after 1995 calculated
and assessed margins for individual entries. In th is regard, it is worth recalling once again that
Article 17.6(ii) of the Anti-Dumping Agreement pr ovides that where a provision of the Agreement
admits of more than one permissible interpretation, a measure resting on one such interpretation must
be found in conformity with the provision.
16. The Appellate Body Report also purports to fi nd in the use of the word "product" in GATT
Article VI:1 and AD Agreement Article 2.1 support for its conclusion that a margin of dumping must
be calculated for all export transacti ons, and not on a transaction basis. However, an individual entry
is no less a "product" than all entries aggregated. As the Panel stated, the "ordinary meaning of the
words 'product' and 'products' ... provide[] no support for the view that these words ... requir[e] an
examination of export transactions at an aggregate level. We note, in this respect, that the record of

4 Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-type
Bed Linen from India ("EC – Bed Linen") , WT/DS141/AB/R, para. 55; Panel Report, United States – Final
Dumping Determination on Softwood Lumber from Canada ("US – Softwood Lumber Anti-Dumping") ,
WT/DS264/R, para. 7.215-7.216.
5 Appellate Body Report, para. 111 (emphasis added).

past discussions in the framework of the GATT show s that historically the concept of dumping has
been understood to be applicable at the level of individual export transactions."6
Shifting rationales

17. In successive zeroing reports, the Appellate Body's rationale for prohibiting zeroing has
shifted. In US – Softwood Lumber Anti-Dumping , the Appellate Body interp reted the term "margins
of dumping" in the first sentence of Article 2. 4.2 in an integrated manner with the phrase "all
comparable export transactions" to derive a concep t of the "product as a whole" as distinguished from
sub-groups or models of a product. The phrase "all comparable export transactions" appears only in
connection with average-to-average comparisons, but Article 2.4.2 also provides for the calculation of
a margin of dumping on a transaction-to-transacti on or average-to-transaction basis. Thus, in US –
Softwood Lumber Anti-Dumping the Appellate Body had conclude d that zeroing was not permitted in
the context of "multiple averaging", but did no t explain how zeroing could be prohibited in the
context of "multiple comparisons" generally. Ind eed, it specifically refrained from making a finding
concerning the other two methods of comparison.
18. However, in contrast to US – Softwood Lumber Anti-Dumping , in US – Zeroing (EC) the
Appellate Body appeared to embrace a new interpre tation, such that a new concept of the "product as
a whole" led to the conclusion that zeroing is prohi bited whenever "multiple comparisons" are made.
Again, these phrases do not appear in the Anti-Dumping Agreement, but were derived from
interpretations based on the phrase "all comparable export transactions", which appears only in
connection with average-to-average comparisons in i nvestigations. In considering this, the Panel in
this dispute found that the Appellate Body had provided:
no explanation of this shift from the use of the 'product as a whole' concept as context
to interpret the term "margins of dumping" in the first sentence of Article 2.4.2 of the
AD Agreement in connection with multiple av eraging, on the one hand, to the use of
this concept as an autonomous legal basis fo r a general prohibition of zeroing, on the
other. In this regard, we note, in partic ular, that the Appellate Body does not discuss
why the fact that in the context of multiple averaging the terms 'dumping' and
'margins of dumping' cannot apply to a sub-group of a product logically leads to the
broader conclusion that Members may not distinguish between transactions in which
export prices are less than normal value and transactions in which export prices
exceed normal value. (Panel Report, para. 7.101)
19. Subsequent to the Panel report, the Appellate Body's report in Softwood Lumber
Anti-Dumping (Article 21.5) relied on a similar leap of logic to find a zeroing prohibition relating to
"multiple comparisons" without relying on the phrase "product as a whole", but instead finding the
term "product", in effect, cannot have a meaning other than "product as a whole".
20. The Appellate Body's rationales shift on occasion to the point of contradicting earlier ones.
As explained above, in Softwood Lumber, the Appellate Body interpreted "margins of dumping" and
"all comparable export transactions" in an integrated manner such that in calculating the margin of
dumping the results of all model-specific comparisons must be accounted for. Thus, the phrase "all
comparable export transactions" necessarily refers to all transactions across all models of the product
under investigation. In contrast, in the interpreta tion offered in this report, the Appellate Body has
reinterpreted "all comparable export transactions" to re late solely to all transactions within a model,
and not across models of the product under investigation.
7 Before, the Appellate Body relied on the
word "all" in "all comparable export transactions" as the textual basis for requiring the results of all

6 Panel Report, para. 7.107.
7 Appellate Body Report, para. 124.

model-average-to-model-average comparisons to be included in the margin of dumping in the
average-to-average context. Now, with regard to transaction-to-transaction comparisons, the
Appellate Body Report insists that the word "all" is not necessary to its finding that a single overall
margin of dumping must be calculated and must in clude the results of all transaction-to-transaction
comparisons. Because the Appellate Body has c oncluded that there is a single permissible
interpretation of these provisions of the Anti-Dump ing Agreement, then the term "all" is either
relevant, or it is not. Because the Appellate Body has rendered contradictory interpretations with
regard to the same issue, it should, at a minimu m, have recognized that the phrase is subject to
multiple permissible interpretations.
21. According to the Appellate Body Report's reasoning, zeroing is always definitively prohibited
in whatever context it has been presented. It seems, however, that in various disputes that have arisen,
the various opponents of zeroing cannot agree on just how zeroing is prohibited. Indeed, even the
Appellate Body's reasoning varies from one disput e to the next. Yet now, somehow, as with each
prior Appellate Body report espousing a (different) rationale for prohibiting zeroing, the interpretation
of the relevant provisions of the Anti-Dumping Ag reement has been concluded to be so clear and
conclusive that no other interpre tation is permissible. Considering the text of the Anti-Dumping
Agreement and the various contradictory interpretati ons offered on the issue of zeroing, the Panel in
this case quite reasonably and correctly concluded that the Appellate Body's interpretation in
Softwood Lumber Anti-Dumping was appropriate and that, consistent with that interpretation, it was
not possible to extend the zeroing prohibition to other contexts without creating new obligations.
22. In this report, the Appellate Body also disagrees with the Panel (and two prior panels) when it
concluded that zeroing was inconsistent with the ob ligation in Article 2.4 to make a fair comparison
between export price and normal value. As with the issue of zeroing more generally, the Appellate
Body Report simply dismisses the analysis and reas oning of the Panel, relying instead on language in
its prior reports. In so doing, however, the Appe llate Body Report limits its consideration of the
matter to what it considered "fair". without considering it in the context of the comparison between
export price and normal value. Moreover, by di sregarding the context of the comparison between
export price and normal value, the Appellate Body Report adopts a one-sided view of the issue,
considering only what is fair to the exporter engaged in dumping and disregarding any notion of
fairness to the industry found to have been injured by that dumping.
A measure need no longer be attributable to a Member

23. In addition to the Appellate Body Report's fl awed zeroing analysis, the United States also
wishes to comment on the Report's apparent abandonment of the requirement that, in order to find that
an act or instrument is a measure subject to di spute settlement, the instrument or act must be
attributable to the Member in question.
8 In this dispute, the United States has now been found to have
acted inconsistently with respect to a comparis on type – transaction-to-transaction – that the
United States had never undertaken in any proceed ing at the time Japan requested consultations, and
which the United States has never at any time undertaken in any proceeding involving Japan. 9

8 See Appellate Body Report, para. 87 ("The fact that consistency of zeroing may be challenged in
relation to a specific comparison me thodology, or a specific type of anti-dumping proceeding, does not
necessarily mean that the existence of a general rule or norm directing its use must be established through
evidence of the actual application of those procedures in all possible situations, as long as they were applied
every time the occasion arose."). The Appellate Body found that it is not necessary to establish "the existence of
general rule or norm directing [a procedure's] use ... through evidence of the actual application of those
procedures" with respect to the specific context in which it is challenged and to which the findings pertain.
9 The Appellate Body concluded that Japan's request for consultations "should, in our view, have
sufficiently alerted the United States to the fact that Japan wished to consult on zeroing in the context of all
comparison methodologies, including T-T [transaction-to-transaction] and W-T [weighted average-to-
transaction] comparisons in original investigations." Appellate Body Report, para. 95. Japan failed to mention

Nevertheless, the Appellate Body Report indicates th at it is possible to define a "measure" to be
"zeroing" in the abstract. Although the Appellate Body has said that a measure must involve an act
attributable to the Member, and the United Stat es made its non-application of this methodology
known to the Appellate Body, this issue is not a ddressed in the Report. The Appellate Body Report
simply fails to confront squarely the problem that Japan had sought to challenge a measure "as such"
when that "measure" existed only in the abstract a nd there had been nothing attributable to the United
States.
24. The Appellate Body Report's finding that zeroing in any form or context is a measure that can
be challenged "as such" cannot be reconcile d with the Appellate Body's reasoning in US – Zeroing
(EC). In that dispute, the Appellate Body conc luded that "zeroing" in average-to-average
comparisons in investigations was inconsistent with the Anti-Dumping Agreement "as such". In spite
of its finding in the context of investigations, th e Appellate Body nevertheless found that it could not
complete the analysis to determine whether zeroing in assessment reviews breached the
Anti-Dumping Agreement "as such". In that dispute, the Appellate Body clearly found that the text of
the Agreement permitted an interpretation under which zeroing is to be treated differently with respect
to the type of proceeding or comparison involved.
25. However, under the Appellate Body Report's approach, there is no longer a requirement that a
"measure" be anything more than a "rule or principle" that can be described in the abstract; there is no
requirement to establish a nexus between that abstract "rule or principle" and a particular Member
such that it can be established that the "measure" is one "taken" by a Member. Under the Appellate
Body Report's approach, panels and the Appellate Body are free to render advisory opinions on
whether particular interpretations, approaches or theoretical acts would be WTO consistent. The
Appellate Body Report's approach is inconsistent w ith the text of the DSU, including Articles 3.3 and
4.2. This approach has very troubling implications for not only the WTO dispute settlement system,
but also for the relationship between the Members' ex clusive authority to issue interpretations and the
limited role assigned to the dispute settlement system of helping resolve specific disputes.

T-T or W-T in its consultation request, although it proved itself capable of doing so in its panel request. The
approach taken by the Appellate Body would, it seems, tend to promote, rather than discourage, the very
litigation tactics the Appellate Body has counselled against in dispute settlement proceedings.