Document: WT/DS264/RW Page D-1 ANNEX D ORAL STATEMENTS, 1ST/2ND MEETINGS Contents Page D-1 Oral Statement of Canada D-2 D-2 Opening Statement of the United States at the Substantive Meeting of the
Document codes: WT/DS264/RW
Complainant: Canada
Respondent: U.S.
Third parties: China, EU, India, Japan, New Zealand, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 1, 2, 4, 5, 9  Anti-dumpingArt. VI  GATT 1994Art. 18  Anti-dumping

ANNEX D

ORAL STATEMENTS, 1ST/2ND MEETINGS

Contents Page
D-1 Oral Statement of Canada D-2
D-2 Opening Statement of the United States at the Substantive Meeting of the
 Panel
D-8
D-3 Oral Statement of the People's Republic of China D-16
D-4 Third Party Oral Submission by the European Communities D-18
D-5 Oral Statement by India D-26
D-6 Oral Statement of Japan at the Third Party Session D-28
D-7 New Zealand's Oral Statement D-36
D-8 Oral Statement of Thailand D-39
D-9 Closing Statement of Canada D-42
D-10 Closing Statement of the United States at the Substantive Meeting D-45

ANNEX D-1

ORAL STATEMENT OF CANADA

I. INTRODUCTION

1. Mr. Chairman, distinguished members of the Pa nel, on behalf of Canada I thank you for your
continued efforts to help resolve this dispute. Ca nada and the United States are here before you again
because the United States, in the Section 129 Determin ation, continued to zero. Consequently, this
measure suffers from the same flaws as the Final Determination, and is inconsistent with
Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement.

2. Article VI of the GATT and Article 2.1 of the Anti-Dumping Agreement define "dumping" and
"margins of dumping" in relation to the product under investigation as a whole . "Margins of
dumping" calculated under Article 2.4.2 are for the entire product, as a whole, rather than for the
intermediate results of sub-groups, or transaction- to-transaction comparisons. As zeroing sub-groups
or transaction-to-transaction comparisons requires an investigating authority to accord less weight to
some export transactions, a dumping margin that is calculated using zeroing cannot be representative
of the product as a whole. The Appellate Body found that zeroing violated Article 2.4.2 on this basis.
Article 2.4 requires a "fair comparison", one that takes into account the full difference between each
comparison made under the transaction-to-transaction methodology.

3. The United States asserts that zeroing is permitted under the transaction-to-transaction
methodology. However, the US argument that such comparisons can themselves constitute "margins
of dumping" is nothing more than an attempt to revive its failed argument from the original
proceedings, that sub-groups results constitute "m argins of dumping". Article 2.4.2 requires the
aggregation of intermediate comparisons to arrive at "margins of dumping" for the whole product –
whether these comparisons are sub-groups unde r the weighted-average-to-weighted-average
methodology or transaction-specific comparisons under the transaction-to-transaction methodology.
The Appellate Body’s straightforward reasoning applies with equal force to both of these
methodologies.

4. In the balance of this presentation, Cana da will demonstrate how the reasoning of the
Appellate Body applies equally to the use of zeroi ng in the transaction-to-transaction methodology.
Canada will then respond to US assertions concerning th e meaning of the term "margins of dumping".
Finally, Canada will turn to the most recent US arguments concerning the Article 2.4 "fair
comparison" requirement, including its argument about mathematical equivalence.

II. LEGAL ARGUMENT

A. THE APPELLATE BODY’S INTERPRETATION OF "DUMPING" AND "MARGINS OF
DUMPING"

5. Consistent with Article VI of the GATT and Article 2.1 of the Anti-Dumping Agreement ,
Article 2.4.2 requires investigating authorities to establish "margins of dumping" for the product
under investigation as a whole. An investigating authority does not treat the product as a whole when
it zeros non-dumped transaction-to-transaction co mparisons and places greater weight on dumped
comparisons. The Appellate Body, in both EC – Bed Linen and in its decision in this dispute, ruled

that "margins of dumping" are to be measured fo r the product as a whole and that zeroing violates
Article 2.4.2 of the Anti-Dumping Agreement.1

6. The United States wrongly asserts that the Appellate Body report turned on the phrase "all
comparable export transactions". It claims that th is Panel must find that zeroing is permitted because
this phrase does not appear in the final clause of the first sentence of Article 2.4.2.

7. The Appellate Body began its analysis by summarizing the arguments of the participants
concerning the interpretation of "a ll comparable export transactions" and "margins of dumping". It is
these summaries, and not any other analysis, wh ich the United States relies on to support its
contention that the Appellate Body decisi on hinged on the phrase "all comparable export
transactions".

8. After summarizing the arguments of the par ticipants, the Appellate Body observed that
Canada and the United States agreed that "all comp arable export transactions" should be taken into
consideration, and that this consideration occurred within th e aggregation of the sub-group
comparisons. The Appellate Body then found that the actual disagreement between the participants
related to differing interpretations of the terms "dumping" and "margins of dumping".
2 The Appellate
Body thus based its analysis on the definitions of "dumping" and "margins of dumping", and not, as
the United States insists, on the phrase "all comparable export transactions".

9. The Appellate Body began its analysis of "dumping" and "margins of dumping" by examining
the meaning of these terms under Article VI of the GATT and Article 2.1 of the Anti-Dumping
Agreement. It interpreted these terms in paragraphs 91 to 100 of its report. It was only after
 this
analysis and interpretation of "dumping" and "margi ns of dumping" that the Appellate Body applied
its legal interpretation of these terms to the use of zeroing under the weight ed-average-to-weighted-
average methodology in the Final Determination. As a consequence, and contrary to US assertions,
the Appellate Body did not limit its analysis of " dumping" and "margins of dumping" to the meaning
of these terms under the weighted-average-to-weighted-average methodology.

10. The Appellate Body has also made clear that its findings as to zeroing were based on the
impact of zeroing on margins of dumping, regardless of the calculation methodology used by an
investigating authority. In both Corrosion-Resistant Steel and its report in this case, the Appellate
Body has emphasized that zeroing fails to fully consider some export transactions.
3 The Appellate
Body recognized that this failure leads to an "inherent bias" through the inflation of "margins of
dumping".
4 This bias exists whether applied in the weighted-average-to-weighted-average
methodology or otherwise.

11. An investigating authority distorts the margin of dumping when it manipulates some
"intermediate values" by setting them to zero. It makes no difference whether the "intermediate
values" in question come from transaction-to-tran saction comparisons as in this proceeding, or sub-
groups of the product under investigation as in the or iginal proceeding. In both cases the intermediate
values have not been properly aggregated into the margin of dumping for the product under

1 United States – Final Dumping Determination on Softwood Lumber from Canada, Report of the
Appellate Body, WT/DS264/AB/R, adopted 31 August 2004, at paras. 93-96, 183(a). [“Appellate Body
Report”] European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India ,
Report of the Appellate Body, WT/DS141/AB/R, adopted 12 March 2001, at para. 53, 86(a). [“ EC – Bed
Linen”]
3 Ibid., at para. 101; United States – Sunset Review of Anti-Dumping Duties on Corrosion-Resistant
Carbon Steel Flat Products from Japan , Report of the Appellate Body, WT/DS244/AB/R, adopted
9 January 2004, at para. 135. [“US – Corrosion-Resistant Steel”]
4 Ibid.

investigation as Article 2.4.2 contains no express la nguage that permits an investigating authority to
disregard the results of multiple comparisons at the aggregation stage.
5 As a consequence,
Article 2.4.2 prohibits zeroing under both of these calculation methodologies.

B. THE UNITED STATES DISTORTS THE DE FINITION OF "MARGINS OF DUMPING"

12. The United States argues that zeroing is perm itted because "margins of dumping" refers to
transaction-specific comparisons, rather than "margi ns of dumping" for the product as a whole. The
United States advances four arguments to suppo rt its assertion that individual transaction-to-
transaction comparisons constitute separate "margins of dumping".

13. The United States first asserts that the meani ng of "margins of dumping" changes depending
on the calculation methodology selected under Article 2.4.2.
6 The US argument assumes that the
Appellate Body established the meaning of "margins of dumping" only in the context of the weighted-
average-to-weighted-average methodology. The Appellate Body’s reasoning, however, is not so
limited. Rather, the Appellate Body interpreted "mar gins of dumping" in the context of Article VI of
the GATT and Article 2.1 of the Anti-Dumping Agreement – provisions that apply to the entire Anti-
Dumping Agreement.7

14. The term "margins of dumping" also appears, without modification, in a single sentence that
applies to both the weighted-average-to-weight ed-average and the transaction-to-transaction
methodologies.
8 It is not possible, as a matter of gramma tical construction, for "margins of dumping"
to have one meaning for one methodology and another meaning for the other, in this sentence.

15. In addition, the United States fails to recognise that the Appellate Body relied on Article VI:2,
which includes a reference to price difference, in su pport of its finding that dumping margins must be
calculated for the product as a whole.
9 Therefore, the term "price difference" refers to the product as a
whole and Article VI:2 does not envisage a "mar gin of dumping" being established for individual
transactions.10

16. The US interpretation of "margins of dumping" is also inconsistent with its treatment of
transaction-to-transaction comparisons in its S ection 129 Determination. If these transaction
comparisons were to constitute "margins of dumping" (and they do not), Commerce would have had
to assess whether each of these supposed "margins of dumping" was de minimis in accordance with
Article 5.8 of the Anti-Dumping Agreement. Commerce has done nothing of the sort.

17. The United States derives significance in a separate argument from the use of "margins of
dumping" in the plural in Article 2.4.2.
11 The Appellate Body has already rejected this argument. 12
Article 2.4.2 refers to "margins" in the plural because investigating authorities are required to
calculate a dumping margin for each producer or exporter of the product under investigation.
Article 2.4.2 does not refer to "margins of dumping" to sanction the existence of separate "margins of
dumping" for tens of thousands of transaction-to-transaction comparisons.

5 Appellate Body Report, at 100.
6 Rebuttal Submission of the United States, at para. 37.
7 See e.g., Appellate Body Report, at paras. 91-96.
8 United States – Final Dumping Determination on Softwood Lumber from Canada, Report of the
Panel, WT/DS264/R, adopted 31 August 2004, at para. 7.119, footnote 361. [“Panel Report”]
10 Rebuttal Submission of the United States, at para. 31.
11 Ibid., at para. 36.
12 Appellate Body Report, at footnote 158 and para. 115; and United States – Anti-Dumping Measures
on Certain Hot-Rolled Steel Products from Japan , Report of the Appellate Body, WT/DS184/AB/R, adopted
23 August 2001, at para. 118.

18. Third, the United States relies on AD Article VI:1 in support of its assertion that specific
transaction-to-transaction comparisons may constitute "margins of dumping". 13 The US reliance on
this AD Article is misplaced. AD Article VI:1 prov ides that a resale price may be used to replace the
export price where a related importer and exporter ra ise export prices to avoid the application of anti-
dumping duties. This AD Article does not have the re levance that the United States ascribes to it. It
affects how export prices are calculated in a particul ar circumstance, not how they are compared to
normal values to calculate "margins of dumping" for the product as a whole.

19. AD Article VI:1 also provides that where hidden dumping exists, the margin of dumping may
be calculated on the basis of the price at which the goods are resold by the importer. AD Article VI:1
and Article 2.4.2 both use the phrase "on the basis of" in the same manner to refer to "the underlying
support for a process".
14 Thus, investigating authorities may make a comparison "on the basis of" – in
other words, by using – the resale export prices, rather than by using the export prices found on an
invoice. Nowhere does this article, or any other, say that a transaction-to-transaction comparison
constitutes a "margin of dumping".

20. Fourth, the United States argues that Article 9.3 of the Anti-Dumping Agreement
demonstrates that "margins of dumping" are transaction-specific comparisons. 15 However, as the
Appellate Body has observed, pursuant to Article 9.2, the anti-dumping duties described in Article 9.3
are "to be imposed in respect of the product under investigation."16 The US claim that the reference to
"anti-dumping duties" in Article 9.3 is transaction-sp ecific is thus at odds with the Appellate Body’s
analysis.

C. THE APPELLATE BODY ALREADY HAS REJECTED US ARGUMENTS CONCERNING
"NEGATIVE MARGINS OF DUMPING"

21. The United States attempts to repeat its cl aim that there is no such concept as a negative
margin of dumping under the GATT or the Anti-Dumping Agreement .17 The Appellate Body has
already rejected this argument.

22. The United States asserted in the original pro ceedings that the results of multiple comparisons
in which the weighted-average export price exc eeds the weighted-average normal value may be
excluded because they do not involve "dumping". The Appellate Body rejected this argument,
finding that Commerce’s exclusion of these "non-dumped" or negative intermediate comparisons was
not in accordance with Article 2.4.2.
18 Moreover, as we have just discussed, the results of transaction-
to-transaction comparisons, whether they are positive or negative, are not "margins of dumping", but
rather are intermediate comparisons that must be taken into consideration for the product as a whole.
My colleague, Mr. Owen, will now continue our presentation.

13 Rebuttal Submission of the United States, at paras. 32-33.
15 Rebuttal Submission of the United States, at para. 38.
17 Rebuttal Submission of the United States, at paras. 40-43.

D. ARTICLE 2.4 REQUIRES A FAIR COMPAR ISON BETWEEN THE NORMAL VALUE AND THE
EXPORT PRICE

23. Mr. Chairman, Members of the Panel, the view of the Appellate Body on the obligations
imposed by Article 2.4 of the Anti-Dumping Agreement is unambiguous. According to the Appellate
Body, this provision sets out a general obligation to make a "fair comparison" between an export price
and a normal value.19 Moreover, the Appellate Body has found that this general obligation informs all
of Article 2, and applies, in particular, to Article 2.4.2.20

24. Despite the unambiguous view of the Appella te Body, the United States continues to assert
that Article 2.4 addresses only adjustments that are made prior to a comparison.21 In support of this
assertion, the United States cites only excerpts that speak to the obligation to make the appropriate
adjustments to ensure price comparability. The United St ates ignores all other findings that
demonstrate that the "fair comparison" requirement extends beyond price comparability 22, and, in
particular, to the substantive rules and concepts relevant to calculating a margin of dumping. 23

25. A comparison that does not take into account the entirety of prices of some export
transactions reflected in the sub-groups is not a fair comparison under Article 2.4. Likewise, an
investigating authority fails to make a "fair co mparison" when it does not take into account the
entirety of all export prices in transaction-to-transaction comparisons.

26. Commerce failed in precisely this manner in the Section 129 Determination. Faced with
comparisons where the export price was greater th an the normal value, Commerce changed the actual
price difference of these comparisons. The results of these manipulations do not take into account the
full difference between the export price and normal value, and are not a "fair comparison".

27. The United States is also incorrect when it asserts that Article 2.4 cannot prohibit zeroing
because such a prohibition would lead to mathem atical "equivalence" in the outcomes of the
weighted-average-to-weighted-average and weighted-avera ge-to-transaction methodologies.
24 T h i s
assertion raises questions about the operation of the th ird methodology in Article 2.4.2 – the targeted
dumping methodology.

28. The targeted dumping provision has never been applied by Canada or the United States, and it
is not clear exactly how the provision should wo rk in practice. The only way mathematical
equivalence would be achieved between the third me thodology and another woul d be if both were to
examine the exact same data set. But, examining th e same data set would defeat the entire purpose of
the third methodology and effectively read it out of Article 2.4.2.

29. The third methodology is designed to address the problem of targeted dumping. When an
investigating authority determines that a pattern of export prices differs significantly among different
purchasers, regions or time periods it is permitt ed to use the third methodology, comparing the
weighted-average normal value to the targeted transactions. The targeted dumping methodology,
therefore, by definition, would not be applied to all export transactions.

20 Ibid.
21 Rebuttal Submission of the United States, at para. 11.
22 EC – Bed Linen , at para. 55; US – Corrosion-Resistant Steel , at para. 134; Egypt – Definitive Anti-
Dumping Measures on Steel Rebar from Turkey, Report of the Panel, WT/DS211/R, adopted October 1, 2002, at
paras. 7.333-7.334; United States – Laws, Regulations and Methodology for Calculating Dumping Margins
(Zeroing), Report of the Panel, WT/DS294/R, circulated October 31, 2005, at para. 7.256. [“US – Zeroing”]
23 US –Zeroing, at para. 7.262.
24 Rebuttal Submission of the United States, at paras. 19-25.

30. The US assumption that applying this methodol ogy to all transactions would also fail to
address the problem of targeted dumping. If the targeted export transactions were dumped at a
hypothetical margin of 20% (as, for example are the transactions labelled with a letter "A" in US
Exhibit 4), calculating an 8.79% margin on all tr ansactions will not address the targeted dumping.
Rather, a 20% margin should be calculated for the exports fitting the pattern, and other exports should
be analysed and treated appropriately.

31. Once an investigating authority has identifie d certain export transactions as different under
the last sentence of Article 2.4.2, it is fair to analyze them separately. Because the problem of
targeted dumping can be addressed by application of the third methodology the use of zeroing in that
methodology is not required.

32. Although Commerce has never applied the th ird methodology, US anti-dumping regulations
concerning the targeted dumping methodology appear to support this view. They provide that
Commerce will normally limit the application of th e weighted-average-to-transaction methodology to
those sales that relate to targeted dumping.
25

33. The United States claims th at Canada accepted zeroing under the third methodology under
Article 2.4.2. As the United States well knows, Ca nada clarified with the Appellate Body that it did
not take the position that zeroing is permitted under this methodology.
26

III. CONCLUSION

34. To conclude, the Appellate Bo dy ruled against zeroing in an investigation. The United States,
claiming to conform, continued to zero by changing methodologies. Canada has shown that the use of
zeroing under the transaction-to-transaction methodolog y results in investigating authorities treating
some export transactions as if they were less than they actually are. Zeroing under the transaction-to-
transaction methodology fails to establish "margins of dumping" for the product as a whole. Zeroing
in this methodology suffers from the same deficienci es that led the original panel and the Appellate
Body to find the use of zeroing inconsistent with Article 2.4.2 of the Anti-Dumping Agreement .
Moreover, a margin of dumping calculated using zero ing cannot, by its very nature, satisfy the "fair
comparison" requirement of Article 2.4 of the Anti-Dumping Agreement.

35. Canada requests that this Panel find that Co mmerce’s use of zeroing under the transaction-to-
transaction methodology in the Section 129 Determinati on is inconsistent with Articles 2.4.2 and 2.4
of the Anti-Dumping Agreement ; and that, as a consequence, the United States has not brought its
measures into conformity with the recommendations and rulings of the DSB.

36. Mr. Chairman, Members of the Panel, we would like to thank you for your attention and, we
will, of course, answer any questions you might have.

25 19 C.F.R. Section 351.414(f)(2). (Exhibit CDA-6)
26 Letter from R. Behboodi, First Secretary of the Mission of Canada to V. Hughes, Director, Appellate
Body Secretariat (28 September 2004). (Exhibit CDA-7)

ANNEX D-2

OPENING STATEMENT OF THE UNITED STATES
AT THE SUBSTANTIVE MEETING OF THE PANEL

15 November 2005

1. Mr. Chairman and members of the Panel, the United States welcomes this opportunity to meet
with you to discuss the issues raised in this dispute.

2. The issues before the Panel are straightfo rward. In the Section 129 Determination,
Commerce took into consideration every export transaction by each of the exporting companies
analyzed. For each transaction, Commerce compared the transaction to the most appropriate normal
value transaction to determine whether it was dumpe d, and so has fulfilled the US obligations under
the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
("AD Agreement"). For each company, the total amount of dumping found was based on the results
of these transactions. Canada would have us go further and use any non-dumped transactions to
reduce or offset the total amount of dumping found with respect to the dumped transactions.
However, as we have explained in our submissions, there is no textual basis for such an obligation.

3. Following adoption of the Dispute Settlement Body’s ("DSB") recommendations and rulings
in this dispute
1, the United States Department of Comme rce ("Commerce") revised its methodology
for establishing the existence of marg ins of dumping in its softwood lumb er investigation. Instead of
using the average-to-average methodology, it u sed a transaction-to-transaction methodology, as
provided for in Article 2.4.2 of the AD Agreem ent. Based on the transaction-to-transaction
comparisons, some transactions were sold at less than normal value while others were not. Commerce
aggregated the results of those comparisons for which the export price was below normal value (that
is, sales for which there was dumping). It did not use non-dumped sales to offset that aggregation by
the amount that the export price for those non-dum ped transactions exceeded the respective normal
values. The results of Commerce’s revised approach were set forth in a new determination, known as
the "Section 129 Determination."
2

4. The issues for this Panel are whether, pursuan t to Article 2.4.2 or 2.4 of the AD Agreement,
any dumping that Commerce found in transaction-to -transaction comparisons was required to be
offset by the results of non-dumped comparisons. Ca nada has failed to establish the existence of such
an obligation. No such obliga tion exists in Article 2.4.2 because the transaction-to-transaction
comparison provision differs significantly from the average-to-average comparison provision. The
phrase "all comparable export transactions," which was the basis for requiring an offset when using
the average-to-average comparison methodology in the underlying dispute, is absent from the
provision at issue in the present dispute.

1 Panel Report, United States – Final Dumping Determination on Softwood Lumber from Canada ,
(WT/DS64/R)(“US - Softwood Lumber (Panel) ” adopted along with the Appellate Body Report
(WT/DS64/AB/R)(“US - Softwood Lumber (AB)”) on 31 August 2004.
2 Notice of Determination Under Section 129 of th e Uruguay Round Agreements Act; Anti-Dumping
Measures Concerning Certain Softwood Lumber Products From Canada , 70 Fed. Reg. 22,636 at 22,645 to
22,646 (Dep’t Commerce 2 May 2005) (“Section 129 Determination”) (Exhibit CDA-1).

5. Moreover, the "fair comparison" provision in Ar ticle 2.4 of the AD Agreement did not require
Commerce to apply the results of non-dumped comp arisons as an offset to dumped comparisons.
Article 2.4 prescribes adjustments to be made before transactions are compared, in order to ensure that
those comparisons are fair. It does not speak to the aggregation of results after transactions are
compared.

6. Indeed, if Article 2.4 were construed as a ge neral requirement to provide an offset when
aggregating the results of multiple comparisons, it would render the results of the targeted dumping
comparison methodology, in the second sentence of Ar ticle 2.4.2, mathematically identical to the
average-to-average comparison methodology. Under the customary rules of interpretation of public
international law, a treaty interpreter is to a void reading a provision in a way that would render
another provision without effect. Accordingly, Artic le 2.4 is not a basis for requiring an offset for
non-dumped transactions.

Standard of Review

7. Before we discuss in more detail the argumen ts supporting the consistency of the Section 129
Determination with Articles 2.4.2 and 2.4, it is important to take a moment to discuss the standard of
review applicable to this proceeding. The relevant standard of review for these issues is set forth in
Article 17.6(ii) of the AD Agreement. As we have explained, applying customary rules of
interpretation, neither Article 2.4.2 nor 2.4 contains the obligation claimed by Canada.

8. As the party asserting that the United States is in breach of Articles 2.4.2 and 2.4, Canada
bears the burden of demonstrating that the Sectio n 129 Determination is in consistent with those
provisions. For the reasons set forth in our written submissions, and as we will elaborate in a
moment, it has not met that burden.

9. Canada does not dispute that it bears the burden of proof, and it recognizes that
Article 17.6(ii) provides the applicable standard of review.
3 However, it construes that standard in a
way that is not supported by the text. In particular, Canada states that "the second sentence of
[Article 17.6(ii)] provides that panels may dete rmine in exceptional circumstances that a measure
rests upon a provision that has more than one ‘permissible’ interpretation."4

10. We do not see this dispute as one where the Pa nel would find that either provision "admits of
more than one permissible interpreta tion". Rather, there is no textual basis to read either provision as
including the obligation urged by Canada. But even aside from that error by Canada, Canada further
errs by arguing for reading a reference to "exceptio nal circumstances" into Article 17.6(ii). Quite to
the contrary, it is not only in "e xceptional circumstances" that a panel "may determine . . . that a
measure rests upon a provision that has more than on e ‘permissible’ interpretation". Rather, in any
case in which a panel finds that a relevant provision admits of more than one permissible
interpretation it must uphold a measure that rests on one of those permissible interpretations. Indeed,
the panel in the dispute Argentina - Definitive Anti-Dumping Duties on Poultry from Brazil
5 did not
find "exceptional circumstances" when it applied Ar ticle 17.6(ii) and found that one permissible
reading of the provision at issue meant that Brazil’s claim failed.

11. Canada goes on to argue that the Panel may fi nd that a provision admits of more than one
permissible interpretation only if "it could not discern the ordinary meaning of the provision". 6

3 Canada Second Written Submission, paras. 5-7.
5 Panel Report, Argentina - Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R,
para. 7.341 (adopted 19 May 2003).

Again, this dispute does not involve a situation where Canada’s proposed reading is "permissible", but
even aside from this, Canada’s construction finds no support in the text. Canada seems to suggest that
the first and second sentences of Article 17.6(ii) relate to each other in a hierarchical way, and that the
second sentence applies only if the Panel is not able to discern a provision’s interpretation under the
rule prescribed by the first sentence. But this simp ly is not so. The second sentence plainly envisions
that a finding that a provision admits of more than one permissible interpretation will be the result of
the application of customary rules of interpretati on of public international law. The statement from
the Appellate Body report in US - Hot-Rolled Steel that Canada quotes is not to the contrary.
7

12. Canada concludes its discussion of the standard of review by denying that it "has departed
from a ‘textual basis’ for its interpretation of Article 2.4.2 in this case". 8 Yet, as we will see,
Canada’s argument is not based on the text of Article 2.4.2, but instead rests primarily on an attempt
to extend the conclusions of the panel and Appellate Body reports in the underlying dispute while
ignoring that the conclusions were based on language – specifically, the phrase "all comparable export
transactions" – that is absent from the provision now at issue. Significantly, it was Canada’s own
arguments that urged the panel a nd Appellate Body to base its orig inal conclusions on that language.
9
Now it has abandoned those text-based arguments in favour of a more vaguely defined construction of
Article 2.4.2 that has no basis in text.

13. In short, Canada has urged on the Panel an erroneous construction of the applicable standard
of review under which a panel may find an interpreta tion of Article 2.4.2 or 2.4 to be permissible only
in the "exceptional circumstance" in which th e customary rules of interpretation of public
international law do not permit the panel to discern th e meaning of those provisions. Not only is this
argument unsupported by the text, but it simply mak es no sense. It suggests inexplicably that the
Panel may find a permissible interpretation of AD Ag reement provisions not by applying customary
rules of interpretation of public in ternational law, but rather, by ap plying some other, unidentified set
of rules. Accordingly, the Panel should reject Canada’s proposed construction of Article 17.6(ii). We
turn now to Canada’s particular arguments concerning Articles 2.4.2 and 2.4.

The Reasoning of the Appellate Body Concerni ng the Average-to-Average Methodology Does Not
Extend to the Transaction-to-Transaction Methodology

14. Canada’s principal Article 2. 4.2 argument is that "[t]he reas oning of the Appellate Body [in
the underlying dispute] applies to the transaction-to-transaction methodology". 10 Canada starts with
the premise that, in its original determination, Commerce made average-to-average comparisons
based on sub-groups, which resulted in "intermediat e values". According to Canada, the Appellate
Body found that when Commerce aggregated the "intermediate values", it could not exclude any
"intermediate values". Canada then asserts that tr ansaction-to-transaction comparisons also result in
"intermediate values". Therefore, Canada concludes, when aggregating the "intermediate values"
from transaction-to-transaction comparisons, Co mmerce must include all such "intermediate
values".
11

15. Canada is wrong. The fatal flaw in Cana da’s argument is that it completely ignores
distinctions between the average-to-average comparison methodology and the transaction-to-

7 Canada Second Written Submission, para. 6 ( quoting Appellate Body Report, United States - Anti-
Dumping Measures on Certain Hot-Rolled Steel Products from Japan , WT/DS184/AB/R, para. 60 (adopted
23 August 2001)).
9 See US First Written Submission, para. 14 ( citing Canada Appellee’s Submission (Exhibit US-1),
11 See Canada Second Written Submission, paras. 11-13.

transaction comparison methodology. Canada incorrec tly assumes that, except for the identity of the
things being compared (i.e., individual transacti ons rather than weighted averages of groups of
transactions), the methodologies are the same and, therefore, any AD Agreement obligations found to
apply to the first must apply to the second. That assumption is wrong for the following reasons. It
ignores a key textual difference between the two methodologies as provided in Article 2.4.2.
Additionally, it ignores the fact that the term "mar gins of dumping" has a different meaning in the
context of transaction-to-transaction comparisons th an it does in the context of average-to-average
comparisons.

 Canada ignores a key textual difference between the average-to-average methodology and the
transaction-to-transaction methodology

16. Article 2.4.2 provides for three alternative comparison methodologies in an investigation.
The drafters used different language to descr ibe each different methodology. Consequently, an
interpretation applicable to one methodology cannot be presumed applicable to the other
methodologies.

17. Under the first methodology, "the existence of margins of dumping during the investigation
phase" may be established "on the basis of a compar ison of a weighted average normal value with a
weighted average of all comparable export tran sactions". Under the second methodology, "the
existence of margins of dumping during the investigation phase" may be established "by a comparison
of normal value and export prices on a transaction-to-t ransaction basis". Notably, the latter provision
makes no reference to "all comparable export transactions".

18. In this dispute, Canada dismisses that textual difference as irrelevant. In fact, it even goes so
far as to claim that, in the underlying dispute, "[ t]he phrase ‘all comparable export transactions’ was
not central to the Appellate Body’s findings that in termediate comparisons must be aggregated to
arrive at margins of dumping".
12 But, that statement ignores the Appellate Body’s own language. As
we already have noted, the Appellate Body em phasized that the terms "all comparable export
transactions" and "margins of dumping" "should be interpreted in an integrated manner".13

19. Canada would have this Pane l believe that the Appellate Body’s conclusion in the underlying
dispute turned entirely on its interpretation of the term "margins of dumping", separate from the term
"all comparable export transactions" and that, accord ingly, the Appellate Body’s reasoning can be
applied automatically to this dispute. However, as the Appellate Body made clear, it did not examine
the term "margins of dumping" in isolation. It examined that te rm to understand what it means to
establish margins of dumping "on the basis of a co mparison of a weighted average normal value with
a weighted average of all comparable export transactions".
14

20. In focusing its analysis this way, the Appella te Body followed the path originally suggested
by Canada’s own argument. Ca nada had not argued that the unde rlying panel report should be
affirmed on the theory that "margins of dumping" can be established only when all of the results of
comparisons – both dumped and non-dumped – under any of the Article 2.4.2 methodologies are
aggregated. Rather, Canada specifically argued that the original panel’s conclusion was "consistent
with the ordinary meaning of the requirement in Article 2.4.2 that ‘all comparable export transactions’
be included in a weighted-average to weighted-average dumping calculation".
15

14 See US - Softwood Lumber (AB), para. 86.
15 Canada Appellee’s Submission (Exhibit US-1), para. 22; see also Canada Second Written
Submission (Original) (Exhibit US-3), paras. 141-42.

21. Moreover, the Appellate Body made quite cl ear that it was avoiding interpreting the term
"margins of dumping" with reference to any cont ext other than the average-to-average comparison
methodology. Indeed, the Appellate Body explicitly declined to consider the other two methodologies
in Article 2.4.2 as relevant context for the interpretive question in the underlying dispute.
16 In short,
given the clear focus of the Appellate Body’s analysis on the average-to-average comparison
methodology, the Panel should reject Canada’s suggestion that it mechanically apply that analysis to
the textually different transaction-to-transaction comparison methodology.

22. Canada also asserts that Commerce must pr ovide offsets for non-dumped transactions because
no AD Agreement provision expressly permits it not to do so.
17 In Canada’s view, offsetting is
required absent any text explicitly allowing an inv estigating authority not to offset. But as with
Canada’s main Article 2.4.2 argument, this variation ignores a critical aspect of the analysis that led to
the Appellate Body’s conclusion in the underlying dispute.

23. Under the Appellate Body’s analysis in the underlying dispute, it is not the case that the
absence of language prohibited Commerce from declining to provide an offset when aggregating the
results of average-to-average comparisons. Rather, under the Appellate Body’s reasoning, the
presence of particular language – the phrase "all comparable export transactions" – required
Commerce to provide an offset. Since that language is not present in the provision now at issue,
Commerce was not required to provide an offset in aggregating the results of transaction-to-
transaction comparisons.

 Canada incorrectly assumes that "margins of dum ping" means the same thing in the context
of the average-to-average methodology as it does in the context of the transaction-to-
transaction methodology

24. Additionally, without any basis, Canada assumes that the term "margins of dumping" means
the same thing in the context of average-to-a verage comparisons as it does in the context of
transaction-to-transaction comparisons. As we explained in our second written submission, that
assumption is manifestly incorrect.
18

25. The term "margin of dumping" may refer to the result of a transaction-to-transaction
comparison. This is evident from Article VI:2 of the GATT 1994, which refers to a "margin of
dumping" as a "price difference". As the term "price " is a transaction-specific concept, it must be the
case that the difference in price between two part icular transactions may constitute a "margin of
dumping". Put another way, it is not the case that a margin of dumping is established only when the
price differences resulting from multiple transaction- to-transaction comparisons for a given product
are aggregated.

26. Canada relies heavily on the fact that in th e context of average-to-average comparisons, the
Appellate Body found that "margin of dumping" is a concept pertaining to "the product under
investigation as a whole".
19 But that finding was specific to that context and cannot be generalized to
other contexts. In particular, it does not follow logically from the Appellate Body’s finding that a
"price difference" – that is, the result of a comp arison between two transaction-specific facts – cannot
be a "margin of dumping". The fact that "margin of dumping" means something different in the
transaction-to-transaction context than in the aver age-to-average context is a further reason for
rejecting Canada’s suggestion that the Appellate Body’s reasoning simply be applied automatically to
the present dispute.

16 US - Softwood Lumber (AB), paras. 104-05.
18 See US Second Written Submission, paras. 29-39.
19 See Canada Second Written Submission, paras. 9-10.

 Canada’s argument is not supported by "concerns" allegedly expressed by the Appellate Body

27. Finally, Canada attempts to support its Ar ticle 2.4.2 argument with vague reference to
"concerns" supposedly expressed by the Appellate Body in a dispute that did not address the
permissibility of declining to provide offsets in aggregating the results of transaction-to-transaction
comparisons in the investigation phase of an anti-dumping proceeding. 20 Of course, generally stated
"concerns" that the Appellate Body may have expressed in another dispute have absolutely nothing to
do with the question before this Panel and, ind eed, were peripheral to the question before the
Appellate Body in the dispute at issue. As such, they were dicta and should not be relied upon by the
Panel.

28. The Appellate Body report on wh ich Canada relies is the report in US - Corrosion-Resistant
Steel Sunset Review .
21 At issue there was use of an aver age-to-transaction comparison methodology
in an assessment proceeding, as opposed to us e of the transaction-to-transaction comparison
methodology in an investigation, which is at issue here. Since that dispute concerned an assessment
proceeding, it did not involve Article 2.4.2 at all, as that article pertains only to investigations. Thus,
it is difficult for us to see how Canada can rely on the report in that dispute to support its suggested
interpretation of Article 2.4.2.

29. Because the Appellate Body in US - Corrosion-Resistant Steel Sunset Review was examining
an entirely different issue in an entirely different context, dicta from that dispute have no relevance to
the dispute at hand. Accordingly, the Panel should re ject Canada’s attempt to rely on such statements
to support its Article 2.4.2 argument.

The Section 129 Determination is Consistent With Article 2.4

 Canada fails to satisfy its burden of proving its Article 2.4 claim.

30. We turn now to Canada’s Article 2.4 argum ent, an argument that it makes in a mere six
paragraphs in its two written submissions. In its first written submission, Canada simply quoted two
fragments from the Appellate Body reports in EC – Bed Linen and US – Corrosion-Resistant Steel
Sunset Review , providing no actual analysis whatsoever. 22 As we discussed in our first written
submission, neither of the fragments quoted is rele vant to the present dispute. As Canada made no
other argument, it failed to meet its burden of proof.23

31. Remarkably, Canada’s second written subm ission added no argument to support its
Article 2.4 claim. Instead, Canada simply repeated quotes from the EC – Bed Linen and US –
Corrosion-Resistant Steel Sunset Review reports.
24 With respect to US – Corrosion-Resistant Steel
Sunset Review , Canada even went so far as to effec tively acknowledge that the Appellate Body
statements on which it relies amount to dicta. Thus, it stated that " regardless whether the
United States actually zeroed in US – Corrosion-Resistant Steel Sunset Review , the Appellate Body’s
statement that zeroing introduces an ‘inherent bias’ remains valid". 25 In other words, Canada
concedes that the Appellate Body statement was not based on a measure before the Appellate Body
but was instead dicta.

20 Canada Second Written Submission, paras. 25-26.
21 See Canada Second Written Submission, para. 26.
22 Canada First Written Submission, paras. 28-29
23 US First Written Submission, paras. 23-26.
24 Canada Second Written Submission, paras. 29-31.
25 Canada Second Written Submission, para. 30 n.35 (emphasis added).

32. In effect, Canada is taking selected Appe llate Body statements, separating them from the
contexts in which they were made, disregarding wh ether they pertained to conduct found "actually" to
have occurred, and asking this Panel to treat those statements as determinative of the question now in
dispute. Such use of Appellate Body dicta is improper. Apart from the fact that there is no stare
decisis in WTO dispute settlement, and so such stat ements cannot themselves determine the question
in this dispute
26, such out-of-context quotation of dicta from a previous report does not contribute
reasoning that provides useful guidance to this Panel.

 Canada’s suggested interpretation of Article 2. 4 is erroneous, as it w ould render provisions
of Article 2.4.2 redundant of one another.

33. Simply stated, Canada’s Artic le 2.4 argument is that "by definition, zeroing cannot yield a fair
comparison".
27 This proposition does not distinguish among the three alternative comparison
methodologies set forth in Article 2.4.2. Canada does not state that "zeroing cannot yield a fair
comparison" under the average-to-average and transac tion-to-transaction methodologies. It just states
that "by definition, zeroing cannot yield a fair co mparison". On its face, this absolute proposition
applies to all three methodologies in Article 2.4.2, including the average-to-transaction methodology –
even though, in the underlying proceeding, Canada conceded that "zeroing is permitted under the third
methodology".
28

34. It is precisely because Canada’s "fair comp arison" proposition applies indiscriminately to all
three Article 2.4.2 comparison methodologies that it must be incorrect. Under that proposition, it
would be impermissible not to provide offsets when aggregating the results of average-to-transaction
comparisons pursuant to the targeted dumping comparison methodology in the second sentence of
Article 2.4.2. But providing offsets in that situa tion would lead to the same mathematical result as
from applying the average-to-average methodology, as illustrated in Exhibit US-4. This is not the
outcome expected under the customary rules of interpretation of public international law. A provision
of the AD Agreement should not be construed in a manner that would render another provision
without effect.
29

35. Moreover, Canada’s assertion that the Appellate Body has interpreted the "fair comparison"
requirement in Article 2.4 to require offsets in aggregating results under each of the Article 2.4.2
comparison methodologies is flatly contradicted by the Appellate Body’s approach in the underlying
dispute. In its appeal from the original panel re port, the United States asked the Appellate Body to
consider the transaction-to-transaction and average- to-transaction provisions of Article 2.4.2 as
context for interpreting the average-to-average provi sion. The Appellate Body declined to do so on
the ground that this would require it to "exami n[e] first whether zeroing is permitted under those
methodologies".
30 In other words, the Appellate Body did not take it to be a foregone conclusion that
"by definition, zeroing cannot yield a fair comparison".

26 Appellate Body Report, United States - Anti-Dumping Measures on Oil Country Tubular Goods
(OCTG) from Mexico , WT/DS282/AB/R, para. 129 (adopted 2 Nov. 2005) (“We observe, first, that the DSB
rulings in US – Oil Country Tubular Goods Sunset Reviews cannot, in and of themselves, ‘establish’ that there
was no WTO-consistent basis for the USITC’s likelihood-of-injury determination in the case before us now,
even though there may be factual similarities between the two cases.”)
28 US – Softwood Lumber (AB), para. 105 n.164.
29 See United States - Laws, Regulations and Methodology for Calculating Dumping Margins
(“Zeroing”) (“US - Zeroing (Complaint by EC) ”), para. 7.266 (circulated 31 Oct. 2005); see also Appellate
Body Report, United States – Standards for Reformulated and Conventional Gasoline , WT/DS2/AB/R, p. 23
(adopted 20 May 1996); Appellate Body Report, Japan – Taxes on Alcoholic Beverages , WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, p. 12 (adopted 1 Nov. 1996); Panel Report, Egypt – Definitive Anti-
Dumping Measures on Steel Rebar from Turkey, WT/DS211/R, para. 7.277 (adopted 1 Oct. 2002).

36. Finally, as the panel discussed in the recently circulated report in US – Zeroing (Complaint by
EC), with respect to the so-called issue of "zeroing" in assessment proceedings, any analysis of the
"fairness" of a methodology should be discerned from a "standard of appropriateness or rightness
within the four corners of the Anti-Dumping Ag reement which would provide a basis for reliably
judging that there has been an unfair departure from that standard".31 To this end, the panel found that
the fact that one assessment methodology may result in a higher margin than another may only be
deemed "unfair" if the other methodology could be determined to be the only "correct" methodology
pursuant to the text of the AD Agreement.32

37. The text of Article 2.4.2 explicitly permits the use of transaction-to-transaction comparisons
to determine the existence of margins of dumping. Article 2.4.2, however, contains no language
requiring the aggregation of the results of transac tion-to-transaction comparisons, nor does it contain
language addressing the manner in which such results ma y be aggregated. To that extent, it is clear
that there is no "standard of appropriateness or ri ghtness within the four co rners of the Anti-Dumping
Agreement" which would provide a basis for this Pa nel to consider the fairness of denying offsets
without engaging in the creation of rights or obligat ions in a manner inconsiste nt with Article 3.2 of
the DSU.

Conclusion

38. In conclusion, we want to thank the Panel ag ain for this opportunity to address the issues in
this dispute, and we look forward to responding to any questions that the Panel may have.

31 US - Zeroing (Complaint by EC), para. 7.260.
32 US - Zeroing (Complaint by EC), para. 7.260.

ANNEX D-3

ORAL STATEMENT OF THE
PEOPLE'S REPUBLIC OF CHINA

16 November 2006

 Mr. Chairman, distinguished members of the Pa nel, it is my great honour to appear before
you today to present the views of the People’s Republic of China as a third party to this dispute. I do
not intend to restate all the comments contained in our written submission. Rather, considering that
China has systemic interests in the correct interpretation on the Anti-Dumping Agreement, in this
third party session, I would like to focus on the clarif ication of Article 2.4.2 and Article 2.4 of the AD
Agreement as well as their application in this dispute.

 First, with respect to 2.4.2 of the AD Agreem ent, China believes that the determination of
dumping margin shall be based on the product at issue as a whole, rather than certain individual
transactions that are conducted at a particular pri ce level. However, in the underlying proceeding, the
US DOC’s practice of zeroing in transaction-to-transaction comparisons, in fact, excludes those
transactions in which the export prices are higher th an the normal value. For the purpose of a fair
comparison under Article 2.4.2, China believes that the investigation authority should take into
account "all comparable export transactions" in the entire process of determining the existence of
dumping of the product, and should not be limited only to the weighted average-to-weighted average
comparisons.

 Further, China believes that since the AD Agreement contains no preference of one
methodology over the other in Article 2.4.2 in rela tion to the weighted-average-to-weighted-average
methodology and transaction-to-transaction methodology, it should be interpreted to mean that those
two methodologies shall follow the same reasoned prin ciple in an anti-dumping investigation, and it
should also be reasonable to assume that adopting either of those methodology should not lead to
materially different results. Therefore, the zeroing practice prohibited in weighted-average-to-
weighted-average methodology should not be used in the transaction-to-transaction methodology.

 Second, with respect to 2.4 of the AD Agreem ent, China believes that Article 2.4 imposes on
Members a general obligation of making a fair co mparison between export pr ice and normal value in
determining the existence of dumping and calculating dumping margin. It is clear that the zeroing
methodology with the "inherent bias" will certainly violate the requirement of "fair comparison"
provided in Article 2.4 of the AD Agreement.

 By adopting zeroing, the US DOC failed to ta ke into account all the export transactions, as we
have mentioned and analyzed in our written submission. As a result, it essentially distorted the fair
basis for comparison. China recalls that the Appe llate Body stated in the EU- Bed Linen that " 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 pr actice 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."

 In conclusion, China is of the view that, th e U.S. DOC’s practice of zeroing in transaction-to-
transaction comparisons in 129 Determination is inconsistent with Article 2.4.2 of the AD Agreement.

Besides, as the zeroing is formulated with an i nherent bias that distorts the comparison of normal
value and export price, it is inconsistent with the "fair comparison" requirement in Article 2.4 of the
AD Agreement.

 Mr. Chairman, this concludes the third party st atement of the People’s Republic of China. I
hope China’s view in this dispute would prove to be helpful. Thank you very much for your attention.

I. INTRODUCTION

1. Mr. Chairman, Members of the Panel, in this oral statement the European Communities
would first like to explain why it does not agree with certain aspects of the written third party
submission of New Zealand. We would then lik e to comment on the second written submissions of
the parties. Finally, we would like to conclude by offering you a brief overview of what we see as the
key issue in this case.

II. INDIVIDUAL TRANSACTIONS ARE NOT NORMAL VALUES AND RESULTS OF
INTERMEDIATE JUXTAPOSITIONS ARE NOT MARGINS OF DUMPING

2. New Zealand appears to consider
1 that an investigating authority is entitled to take one
transaction in the domestic market, in isolation, a nd, without further explanation, assume that the
price at which that transaction is concluded is a "normal value"; and that when the transaction-to-
transaction method is used there are multiple nor mal values, and therefor e multiple margins of
dumping. The European Communities disagrees, for th e reasons set out in its written submission. In
particular, New Zealand does not give any meaning to th e word "basis", as it is twice used in the first
sentence of Article 2.4.2; New Zealand uses the pl ural ("transactions" or "n ormal values"), when the
Anti-Dumping Agreement uses the singular; and New Zealand seeks to insert the words "normal
value" before the word "transaction" in the final phrase of the first sentence of Article 2.4.2, when
those words do not in fact appear in the text of that provision.

III. CONSISTENCY BETWEEN ARTICLES 2 AND 3

3. One of the objections (but not the only objection) raised against zeroing in the EC-Bed Linen
and US-Softwood Lumber V cases was an internal inconsistency in the reasoning of the investigating
authority : considering some exports to be "non-dumped" for the purposes of Article 2 (concerning the
determination of dumping); yet part of the volume of "dumped" imports for the purposes of Article 3
(concerning determination of injury). New Zealand attempts to respond to this objection by proposing
what it refers to as a "symmetrical"
2 approach : if an export is considered non-dumped in the context
of Article 2, it should also be considered non-dumped in the context of Article 3.

4. New Zealand’s reasoning, however, does not hold good.

5. First, New Zealand’s proposition addresses only one
 of the objections to zeroing raised in the
previous cases (consistency between the analysis under Articles 2 and 3). It does not address the
arguments derived from the text of Articles 2.4 a nd 2.4.2, having regard to context, object and
purpose, as set out in the written third party submission of the European Communities.

6. Second, New Zealand’s proposition is interna lly inconsistent, and inconsistent with the Anti-
Dumping Agreement, as we will now explain. Before doing so, however, the European Communities
would recall that New Zealand refers to three "s ub-methods" in the context of the transaction-to-
transaction method. We will refer to these as the first, second and third T-T sub-methods – to avoid
confusion with the three methods set out in Article 2.4.2 (weighted average-to-weighted average;
transaction-to-transaction; and weighted average-to-transaction).

1 See, for example, New Zealand written third part y submission, para 3.04: “The purpose of the
transaction-to-transaction methodology is to compare export prices in each transaction with the prices in
comparable normal value transactions”. (emphasis added)
2 New Zealand written third party submission, para 3.08.

7. Let us consider the "first T-T s ub-method" referred to by New Zealand
3. We assume a
situation where we have one domestic transaction of 1 tonne at 100; 1 tonne of exports at 90, with a
positive "dumping amount" of 10; and 1 tonne of exports at 105 with a negative "dumping amount"
of 5. In the context of Article 2, in New Zeala nd’s "first T-T sub-method", any negative intermediate
results will "offset" any positive intermediate results - in our example leading to a final "margin of
dumping" of 2.56 % (5 expressed as a percentage of 195). However, in the context of Article 3, in the
injury analysis, New Zealand would appear to be suggesting that there should be a volume of
"dumped" imports of 1 tonne; and the "magnitude of the margin of dumping" for those "dumped"
imports will therefore be 11.11 % (10 expressed as a percentage of 90). 4 In short, according to
New Zealand, there are going to be two "margins of dumping" – one for the analysis under Article 2;
and a different one for the injury analysis under Article 3. The European Communities does not agree
that this is a legally perm issible interpretation of the Anti-Dumping Agreement . Absent targeted
dumping, for a given exporter there is one margin of dumping, which is the same for both Article 2
and Article 3.

8. New Zealand cannot save its analysis by asserting, with respect to the above example, that the
"margin of dumping" in the injury analysis will in fact also be 2.56 %, because in order to achieve that
result, New Zealand would have to bring into the calculation the volume of what it calls "non-
dumped" transactions – which is precisely what it has said must be excluded from the injury analysis.
In any event, if this is what New Zealand means, it is simply agreeing with the position of Canada and
the European Communities.

9. In short, New Zealand’s attempt to de -couple the volume of dumped imports from the
magnitude of any margin of dumping must fail, b ecause these two concepts are, by definition,
inseparable, since they both depend on the threshol d question of what is meant by "dumping" and
"margin of dumping" – terms defined in Article VI of the GATT 1994, which definitions are further
elaborated in Article 2 of the Anti-Dumping Agreement.

10. The correct answer in the above example is much simpler, and the same under both Articles 2
and 3. The margin of dumping is 2.56 % and the volume of dumped imports is 2 tonnes.

11. The "second T-T sub-method" referred to by New Zealand
5 is inconsistent with Articles 2.4
and 2.4.2 for the reasons set out in the European Communities written third party submission. The
European Communities would point out that this "s econd method" is likely to inflate the margin of
dumping (in the example it would be 11.11% (10 expressed as a percentage of 90)) even more than
the "zeroing" used in the "third T-T sub-method" referred to by New Zealand.

12. The "third T-T sub-method" referred to by Ne w Zealand is vitiated for the same reason as the
"first T-T method". It would result, under Article 2, in a margin of dumping of 5.13 % (10 expressed
as a percentage of 195); and under Article 3 in a different
 margin of dumping of 11.11 % (10
expressed as a percentage of 90). That does not constitute a permissible interpretation of the Anti-
Dumping Agreement.

13. Finally, if, at the end of the day, all that Ne w Zealand is saying is that the margin of dumping
for both dumping and injury purposes will be 2.56 %, 11.11 % or 5.13 % depending on which method
is selected by the investigating au thority, then it is not saying very much at all. The issue of

3 New Zealand written third party submission, para 3.04.
4 New Zealand written third party submission, footnote 12 : “Where all transactions are included in the
calculation [we take this to refer to the first T-T sub-method], the volumes of the goods with negative or de
minimis dumping margins are incorporated into the volume of non-dumped goods for the purposes of assessing
other causes of injury to the domestic industry.”
5 New Zealand written third party submission, para 3.04.

symmetry between Articles 2 and 3 is only one part of the discussion. Achieving such symmetry is a
necessary, but not sufficient requirement, when calcu lating a lawful margin of dumping. In fact,
given that a margin of dumping is an objective concept, and cannot depend on the arbitrary or
capricious selection of one methodology or anothe r by an investigating authority, all that
New Zealand’s submissions illustrate is that its a pproach to zeroing in the context of the transaction-
to-transaction method cannot be correct.

IV. TARGETED DUMPING

14. New Zealand repeatedly refers to the con cept of "targeted dumping" in support of its
proposition that, in the context of the transac tion-to-transaction method, individual export
transactions, taken in isolation, may be consid ered to have been "dumped" and "targeted". 6 T h e
European Communities does not agree.

15. First, this assertion does not address the argu ments derived from the text, context and object
and purpose, as set out in the European Communities written third party submission.

16. Second, in the view of the European Comm unities, it is the second sentence of Article 2.4.2
that addresses the problem of so-called "targete d dumping". That provision may be invoked when
there is a "pattern" of export prices which diffe r significantly among different purchasers, regions or
time periods, and the necessary explanation is provided. A single transaction, taken in isolation, is not
a "pattern".

V. SINGLE TRANSACTION ALLEGEDLY CAUSING INJURY

17. New Zealand asserts that a single "dumped" export transaction can cause injury. There are
two serious objections to that proposition.

18. The first objection is essentially a legal one. The concept of dumping is defined in the Anti-
Dumping Agreement entirely independently of the concept of injury. If there is no dumping, the fact
that there is one export transaction made at a low price and which penetrates the domestic market of
the importing Member is entirely irrelevant: if there is no dumping, there can be no dumping causing
injury, and that is an end of the matter. Just because an exporter competes successfully on price once
in the domestic market of the importing Member, that fact is irrelevant to the question of what is
meant by "dumping" under the Anti-Dumping Agreement.

19. The second objection is essentially an economic one. The European Communities agrees
with New Zealand that the Anti-Dumping Agreement is aimed at unfair competition, but not at fair
competition
7; and that "fair competition" includes (by definition) some competition on price. It
necessarily follows that some basic appreciation of wh at is supposed to be competing with what is an
essential part of any objective and even-handed analys is. The Appellate Body has indicated that a
"market" is "an area of economic activity in which buyers and sellers come together and the forces of
supply and demand affect prices". 8 It follows that once an investigating authority has defined the
parameters of its investigation, particularly in terms of product, region and time, it has essentially
taken as a premise that the same forces of supply and demand affect all prices within those
parameters. Absent good reason (namely, a pattern of targeted export transactions, as provided for in
the second sentence of Article 2.4.2), there is no basi s for departing from that premise only for certain
aspects of the analysis. In these circumstances, to speak of one export tran saction causing "injury" to
the domestic industry of the importing Member ma kes no more sense than to speak of that same

6 For example, New Zealand written third party submission, paras 1.03, 3.12, 3.13, 3.14, 3.21.
7 New Zealand written third party submission, para 3.01.
8 Appellate Body Report, US-Upland Cotton, para 404.

transaction causing injury to the exporter itself. Just as the concept of dumping must be assessed by
reference to the reasonable market parameters est ablished by the investigating authority, so the
concept of something causing injury by unfair comp etition can only be assessed by reference to all
relevant events within those same parameters.
9

VI. NEGOTIATING HISTORY

20. With regard to New Zealand’s invocation of "preparatory work" within the meaning of
Article 32 of the Vienna Convention, the European Communities would point out that the meaning of
Articles 2.4 and 2.4.2 of the Anti-Dumping Agreement – as outlined in the European Communities
written third party submission, results from Article 31 of the Vienna Convention, and particularly
from the ordinary meaning of the text, having regard to context and object and purpose. New Zealand
is invoking the negotiating history not to "confirm" this meaning, but to contradict it. The application
of Article 31 of the Vienna Convention does not leave the meaning "ambiguous or obscure" and does
not lead "to a result which is manifestly absurd or unreasonable", within the meaning of Article 32 of
the Vienna Convention. For this reason alone, New Zealand’s submission’s regard the negotiating
history should be rejected.

21. With regard to Exhibit NZ-1, the European Communities would point out that this document
is not part of "the preparatory work of the treat y" within the meaning of Article 32 of the Vienna
Convention – "the treaty" in this case being the Anti-Dumping Agreement. It is not therefore a lawful
basis for interpretation by this Panel. In fact, ba sed on the terms of referen ce in Annex B of Exhibit
NZ-1, the document would not even appear to be part of the negotiating history of the Kennedy
Round Code – the group being primarily "convene d for the purpose of exchanging information
regarding the technical requirements of existing le gislation on dumping and countervailing duties in
their respective countries".

22. In any event, in substance, the document does not support New Zealand’s analysis. It does
not refer to a "transaction-to-transaction" method. And the reference to "genuine dumping" may
simply be taken as a reference to the type of targeted dumping for which provision has now been
made in the second sentence of Article 2.4.2. This document therefore requires no further
consideration by this Panel.

23. With regard to Exhibit NZ-2, the European Communities would also point out that this
document is not part of "the preparatory work of the treaty" within the meaning of Article 32 of the
Vienna Convention, but merely an extract fro m a book expressing certain opinions, and published
after the conclusion of the treaty. It is not a lawful tool for interpretation by this Panel, in support of
the arguments contained in paras 2.03 to 2.05 of New Zealand’s written third party submission.

24. In any event, in truth, the negotiating history of the Anti-Dumping Agreement fully confirms
the analysis set out in the Eur opean Communities written third party submission. It is summarised
with tolerable accuracy for the purposes of the present discussion at page 1540 and footnote 951 of
Exhibit NZ-2. During the negotiations, concerns about the methods of co mparison between export
price and normal value were driven by a desire to catch "targeted dumping" (precisely the alleged
problem invoked by New Zealand in its written third party submission); and the eventual compromise
consisted of the targeted dumping rules, based on purchasers, regions and time periods, contained in
the second sentence of Article 2.4.2. There is th erefore no basis for New Zealand’s assertion that the
transaction-to-transaction method was intended by th e Members to systematically address allegedly
"targeted" export transactions, considered in isolation

9 Appellate Body Report, US-Softwood Lumber V, paras 93 and 96 : dumping and margins of dumping
“can be found only for the product unde r investigation as a whole, and cann ot be found to ex ist for a product
type, model, or category of that product.”

VII. COMMENTS ON THE SECOND WRITTEN SUBMISSIONS

25. Mr. Chairman, Members of the Panel, we now turn to the second written submissions of the
parties, and particularly that of the United States.

26. We think it is clear from the rebuttal submissi on of the United States that one of the issues
that this Panel will need to carefully consider is wh ether or not an investigating authority is entitled to
assume that the result of each transaction-to-tra nsaction juxtaposition is always a "margin of
dumping"; the second aggregation stage of the calculation falling outside the scope of the Anti-
Dumping Agreement. We think that we have demonstrated th at this point of view – analogous to that
defended by the European Communities in the Bed Linen case but dismissed by the Appellate Body -
is erroneous: particularly by po inting to the term "normal value"; and the word "basis"; and by
explaining the utility of the transaction-to-transaction method, without zeroing. The results of
transaction-to-transaction comparisons are intermediate results , and it is only when they are
aggregated, in a second stage of the calculation, that the margin of dumping for that exporter is
calculated.

27. One of the highly significant consequences is that Canada is not asking for an "offset" or
adjustment after the calculation of a margin of dumping.
10 Rather, Canada is asking the United States
to stop making a zeroing adjustment during the calculation of the margin of dumping; an adjustment
that is not made for a difference affecting price comparability, and which is therefore, self-evidently,
inconsistent with the third to fifth sentences of Article 2.4.

28. Mr. Chairman, we do not agree w ith the United States that price is necessarily "a transaction-
specific fact".
11 First, it is perfectly possible that one transaction (or one invoice) incorporates more
than one price, perhaps in relation to different m odels. Second, it is perfectly possible, and indeed
quite common, for exporters and importers to c onclude framework contracts, expressly or by
implication, indicating an export price that will remain more or less unchanged over time, unless one
of the parties seeks to re-negotiate the commercial relationship. Third, we do not agree that an
investigating authority is entitled to assume that, in a given market, price variations from one instant
(region or purchaser) to the next are always disconnected, in the sense th at they do not together
constitute the forces of supply and demand that define that very market.

29. Rather, if an exporter suddenly increases price from one day to the next an importer will
certainly question that and, absent good reason, may seek supplies elsewhere. Similarly, if an
importer is aware that the same product is being sold to another purchaser at a lower price, it may be
expected to question that and, absent good reason, se ek supplies elsewhere. Similarly, if an importer
is aware that the same product is being sold into an other region at a lower price, it may be expected to
question that and, absent good reason, seek supplies elsewhere. Furthermore, from the supply side
point of view, an exporter’s decision on whether or not to continue to make the necessary investment
in order to sell into a given export market will not be made on the basis of one transaction, but rather
on the basis of general performance over time. In short, price is not "transaction specific", but market
specific; and the whole sense of Article 2.4 of the Anti-Dumping Agreement is that, if – and only if -
the export market in reality consists of a number of sub-markets (by purchaser, region or time), then –
and only then – is an investigating authority en titled to calculate margins of dumping for each sub-
market.

30. That brings us, logically, to the second pillar of the United States defence : the repeated and
erroneous assertion that Canada’s arguments necessarily generate an "anomaly" that "cannot be

10 United States rebuttal, para 11.
11 United States rebuttal, para 31

reconciled" with the targeted dumping provis ions, because targeted dumping without zeroing
necessarily always produces the same result as the weighted average-to-weighted average method.
12

31. The first and most obvious reason why this argument fails is the words "[s]ubject to the
provisions governing fair comparison" in the firs t sentence of Article 2.4.2. These include the
provisions in the third to fifth sentences of Article 2. 4. If one provision (Article 2.4.2) is "subject to"
another provision (the third to fifth sentences of Ar ticle 2.4), it means that, in case of conflict, the
latter provision (the third to fifth sentences of Article 2.4) must prevail.
13 Consequently, it follows
that the provisions of Article 2.4.2 cannot be interpre ted in such a way as to gi ve rise to a result that
conflicts with the third to fifth sentences of Article 2.4. Any such conflict must be "reconciled" in
favour of the third to fifth sentences of Article 2.4. This being so, the United States errs when it bases
its reasoning on the assertion (erroneous in any event) that Canada’s interpretation of Article 2.4
cannot be "reconciled" with Article 2.4.2, given that the Anti-Dumping Agreement itself contains a
rule reconciling any such conflict in favour of the third to fifth sentences of Article 2.4.

32. This is confirmed by the preparatory work. The New Zealand I and II texts were not qualified
by the words "[s]ubject to the provisions governing fair comparison in paragraph 2.4", thus leaving
some ambiguity about the relationship between these provisions. In the New Zealand III, Ramsauer
text and in the final
 Dunkel Draft the Members decided to eliminate this ambiguity, by inserting the
words "[s]ubject to the provisions governing fair comparison in paragraph 2.4", thus making it clear
that, in case of conflict, the former provisions ar e to prevail. This change marked a significant
difference, and must be respected.

33. The second reason why the United States argume nt must fail is because it is based on the
erroneous assumption that what an investigating authority must necessarily do in a targeted dumping
analysis is the same as the zeroing adjustment under discussion in the present case. But this is not so.
Article 2.4.2, second sentence, does not specify in every detail how an investigating authority might
conduct its targeted dumping analysis. For exampl e, an investigating authority faced with an
allegation of targeted dumping (perhaps by region) might first perform an intermediate disaggregated
asymmetrical analysis in order to see whether or not there is, in fact, a pattern of export transactions at
different prices into two different regions (A and B). If there is a pattern of below normal value
transactions to region A, but not B, the investiga ting authority might simply proceed to calculate a
margin of dumping that takes that fact into consideration, but without necessarily making the kind of
zeroing adjustment made by the US. In other wo rds, it cannot be excluded that there might be
different tools available, ranging from the calculatio n of the margin of dumping exclusively on the
basis of the targeted sales (resulting in the complete exclusion of the high priced export transactions
from the calculation (including from the denominator)), to methods such as "zeroing". This is, in fact,
precisely what is foreseen in US municipal anti-du mping law. Once again, this observation is, in
itself, sufficient to settle the matter.

34. Third, in any event, even if the investig ating authority would combine the results of its
analysis for regions A and B and impose an anti-dumping duty on all imports, having first "adjusted"
the export price of region B, it is perfectly possible to reconcile this with Article 2.4. Such adjustment
would be made for a difference (between markets A and B) that affected price comparability (between
markets A and B; and between AB and the exporter’s home market, C).

35. Finally, Mr. Chairman, distinguished Memb ers of the Panel, the European Communities
considers that the United States argument based on Article 9 of the Anti-Dumping Agreement is
circular and without merit. We take the view that when an anti-dumping duty is levied, an

12 United States rebuttal, paras 3, 8 and 19 to 25.
13 Vienna Convention, Article 30(2) : “When a treaty speci fies that it is subject to … an earlier or later
treaty, the provisions of that other treaty prevail.”

investigating authority is still required to comply with the basic rules for calculating a margin of
dumping, including those in Article 2.4. We have a specific systemic interest in this matter, it being
the subject of other DSU proceedings, which have not yet terminated.

VIII. CONCLUSION

36. Mr. Chairman, distinguished Members of the Panel. The arguments in this case are becoming
increasingly complicated. So much so that, dare I say it, one can hardly "see the wood for the trees".
However, as is so often the case, the truth is both complex and simple at the same time; and to see that
it is sometimes helpful to go back to first principles.

37. As Jacob Viner, the father of the anti-dumping rules, observed:

… sufficient justification is to be found in the usage of the most authoritative writers
and in the considerations of economy and precision of terminology for confining the
term dumping to price-discrimination between national markets. This definition, I
venture to assert, will meet all reasonable requirements.
… The one essential characteristic of dumping, I contend, is price-discrimination
between purchasers in different national markets.
14
38. And this is confirmed by the rep eated references to "markets" in the Anti-Dumping
Agreement, notably in Article 2.

39. The Anti-Dumping Agreement is a framework agreement, a nd in interpreting it one has to
think both economically and legally : to do one to the exclusion of the other is simply not to do justice
to the Members’ objectives when they concluded it.

40. Zeroing, in all its various forms, is essentia lly about market definition, and particularly about
consistency, as the Appellate Body has made clear in the model zeroing cases. The United States
position in the present case is economic nonsense and legally contrived in the extreme. Canada’s
position reflects the true economic and legal compromise agreed by the Members.

 Mr. Chairman, Members of the Panel, thank you for your attention.

14 Jacob Viner, Dumping, A Problem in International Trade , First Edition 1923, Reprinted 1991,
Chapter I, The Definition of Dumping, pages 3 and 4 (original emphasis, footnote omitted).

ANNEX D-5

ORAL STATEMENT BY INDIA

16 November 2005

 Mr. Chairman, Members of the Panel,

 I thank you for having provided India an opportunity to present its views in this dispute.
Mr. Chairman, the central issue before the Panel is the interpretation of Article 2:4:2 regarding
determination of dumping margin when using th e methodology of comparison of normal value and
export prices on a transaction to transaction basis. Our statement would therefore be limited to the
issue of the legal interpretation of Article 2:4:2 an d its interplay with Article 2:4 of the Anti-Dumping
Agreement.

 The US has asserted that there is no textual basis to support Canada’s argument that zeroing
cannot be applied in the transaction to transaction methodology. The US asserts that Canada ignores
the textual difference between the provision at issu e in the earlier determination using weighted
average to weighted average (W to W) methodolog y and the provision now at issue in the transaction
to transaction (T to T) comparison. Secondly, the US notes that Canada assumes, without
explanation, that when it comes to the aggregati on of multiple values, there is no difference between
the average to average methodology and the transaction to transaction comparison.

 In India’s view, there is no support for the US assertions in the text of Article 2.4.2. The text
does not support the US stand that the transactions giving negative values of dumping margin are to
be ignored or treated as zero while aggregating du mping margins of intermediate transactions for
determining a single dumping margin for the product under consideration.

 Article 2.4 mandates that a fair comparison sh all be made between the export price and the
normal value. This is an overa rching obligation for determining dumping margin and the comparison
methodology to be used under Article 2.4.2. Fa ir comparison between export price and the normal
value embodies comparison of all transactions unless the text states otherwise.

 In EC-Bed linen dispute case , the Appellate Body held that by not taking into account all
comparisons, the practice of zeroing does not provide a fair comparison between export prices and
normal value and is therefore inconsistent with Article 2:4 of the AD Agreement. In this dispute, the
Appellate Body also held that "whatever the method used to calculate the margins of dumping… these
margins must be, and can only be established for the product under investigation as a whole".

 In the light of the above, the interpretation of the US to ignore those transactions that give
negative value of dumping margin appears flawed as this does not lead to fair comparison as per the
obligation under the first sentence of Article 2:4, which requires that, "A fair comparison shall be
made between the export price and the normal value…".

 In a situation, where on comparison of individual transactions at intervening stage, it is found
that all the transactions show the export price to be higher than the normal value, the result would be a
negative dumping margin. This dete rmination however will take into account all the transactions that
were giving negative dumping margin at the interveni ng stage. In this process, thus, the investigating
authority would have taken into consideration all the transactions. In another situation, by extending

the same logic, where some transactions may give positive margins and some transactions may give
negative margins at intervening stage, the overall aggregation of dumping margins for determining a
dumping margin for the product as a whole, shall take into account the results of all the comparisons
and not only of those that give positive dumping margins.

 The US determination in ignoring the margins of those transactions that give negative values
in the intermediate comparisons is incorrect and is not supported by the text of Articles 2:4 and 2:4:2.

ANNEX D-6

ORAL STATEMENT OF JAPAN
AT THE THIRD PARTY SESSION

16 November 2005

I. INTRODUCTION

1. Mr. Chairman, Members of the Panel, Japan w ould like to thank you, and the Secretariat, for
your efforts in preparing for this hearing. Mr. Chairman, may I also join previous speakers by
congratulating on your assuming the chairmanship of this panel.

2. In its Opening Statement this morning, Japan will summarize for you, briefly, why the
United States’ Section 129 Determination is inconsistent with its obligations under the Anti-Dumping
Agreement. Japan will also respond to certain arguments advanced by the United States and
New Zealand in their written submissions.

II. DUMPING DETERMINATIONS ARE FOR THE PRODUCT UNDER
INVESTIGATION AS A WHOLE

3. In its Third Party Submission, Japan outlined that the Anti-Dumping Agreement and the
GATT 1994 require authorities to calculate the existe nce and amount of "dumping" for the "product"
under investigation. This obligation derives from the text of both Article 2.1 of the Anti-Dumping
Agreement and from Article VI:1 of the GATT 1994, each of which refers to the dumping of a
product.
1 In turn, because dumping is determined for a product, under Article 2.4.2, the margin or
amount of that dumping must also be determined for the product as a whole.

4. This text-based obligation is in keeping with the fact that the authorities themselves determine
the product scope of the investigation. Having done so, the Agreement requires that they be consistent
throughout the investigation and, indeed, also in imposing duties. The product under investigation, as
a whole, remains the central focus of the process. The Appellate Body put it in these terms:

Our 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 authority must treat that product as a
whole for, inter alia, the following purposes: determination of the volume of dumped
imports, injury determination, causal li nk between dumped imports and injury to
domestic industry, and calculation of the margin of dumping. Moreover, according to
Article VI:2 of the GATT 1994 and Article 9.2 of the Anti-Dumping Agreement, an
antidumping duty can be levied only on a dumped product. For all these purposes, the
product under investigation is treated as a whole …
2

1 Appellate Body Report, US – Softwood Lumber V , para. 93. See also paras. 96, 97, 98, 99 and 102;
Appellate Body Report, EC – Bed Linen, para. 53, following Panel Report, EC – Bed Linen, para. 6.118.
2 Appellate Body Report, US – Softwood Lumber V, para. 99.

5. Ignoring the Appellate Body’s interpretation, the United States contends that, for purposes of
the T-to-T comparison, there is no obligation to calculate a margin for the product as a whole. 3 This
is plainly wrong and, in substance, invites the Panel to reverse panel a nd Appellate Body reports
adopted by the DSB. The United States’ argument also seeks to destroy the consistency between the
product scope of dumping determ inations and the resulting anti-dumping duties. On the
United States’ view, dumping determinations deliber ately confined to a sub-grouping of a product –
even a single transaction4 – could justify the imposition of duties on the product as a whole.

6. The United States advances four argum ents in support of its position. First, relying on the
word "price" in Article VI:2, the United States argues that margins of dumping may be transaction-
specific because they involve a comparison of "price s" that are fixed on a transaction-specific basis.
5
Mr. Chairman, this is an absurd argument. The fact that prices are usually determined in the
marketplace on a transaction-specific basis does not dictate that the words "product", "dumping" and
"margin of dumping" have a transaction-specific ordinary meaning under the Vienna Convention.

7. To the contrary, the text of Article VI demons trates that "the price difference" in question is
that for the "product", not for individual transactions. Article VI:2 defines the margin of dumping as
the price difference that must be "determined in accordance with the provisions of paragraph 1".
Article VI:1, in turn, provides that "[f]or the purpo se of this Article", "a product" is dumped "if the
[export] price of the product" is less than the comp arable domestic price "for the like product" or less
than "the cost of production of the product". This definition of "dumping" in relations to "a product"
shows that the dumping determination is based on a comparison of prices for the product. This
interpretation is further confirmed by the imme diate context provided in the first sentence of
Article VI:2, which states that "a n anti-dumping duty" levi ed on "any product" shall not exceed "the
margin of dumping in respect of such product ". This provision, therefore, defines the "margin of
dumping" in terms of the product, not individual transactions.

8. Second, the United States’ argument on Ad Article VI:1 suffers from the same misconception.
Ad Article VI:1 does not indicate that margins of dumping are calculated for sub-groupings of a
product; rather, it addresses the price that may be used for certain export transactions in calculating
the margin of dumping for the product. Specifically, the provision addresses the situation where the
import prices for certain export transactions are unr eliable because of an association between the
exporter and the importer; for these transactions, th e authorities are permitted to use downstream
resale prices, in the importing Member, in calculating the export price. The Ad Article does not
purport to alter the requirement in Article VI:1 that dumping, and margins of dumping, are determined
for a product.

9. The rule in Ad Article VI:1 is now reflected in Article 2.3 of the Anti-Dumping Agreement.
As the drafters did in the Ad Article, they have, again, incorporated the rule into the treaty without
disturbing the requirements in Article 2.1 of the Agreement and Article VI of the GATT 1994 that a
margin of dumping must be determined for the product under investigation as a whole.

10. Third, the United States asserts that the use of the plural "margins of dumping" in
Article 2.4.2 means that there can be multiple margins for each T-to-T comparison result. The
United States is simply recycling an argument it has advanced, and lost, in the original proceedings in
this dispute
6.

3 United States’ Rebuttal Submission, paras. 26 and 27.
4 See, for example, United States’ Rebuttal Submission, paras. 31 and 35.
6 Rejecting this interpretation, the Appellate Body held: “‘margins of dumping’ is in the plural because
a single investigation may involve establishing margins of dumping for a number of exporters or producers, and
may relate to more than one country.” Appellate Body Report, Softwood Lumber V, para. 115.

11. In fact, nothing in the text of Article 2. 4.2 supports the United States’ view. The term
"margins of dumping" in that provision refers to the "magnitude of dumping".
7 Because Article 2.1
states that "dumping" exists only for the "product" as whole, the measurement of the amount of that
"dumping" can also be calculated only for the "pr oduct" as a whole. Furthermore, as the opening
clause of Article 2.1 indicates, the definitions of margin of dumping set forth in Article 2.1, and the
"margin of dumping", apply "to the entire Agreemen t, which includes, of course, Article 2.4.2".
8 The
United States also argues that Article 9.3 confirms its views that the "margin of dumping" can be
determined, for purpose of duty assessment, for a single export transaction. However, Article 9.3
refers to "margins of dumping" and expressly stat es that margins calculated for purposes of reviews
must be established consistently with Article 2. Thus, the definition of "dumping" in Article 2.1
governs the determination of dumping margins in reviews in Article 9.3.

12. The United States argues incorrectly that th e Appellate Body’s interpretation of the term
"margins of dumping" in the underlying proceeding is limited to situations involving the W-to-W
comparison under the first sentence of Article 2.4.2 of the Agreement.
9 However, the structure of the
Appellate Body’s analysis involved separate cons ideration of the phrase "all comparable export
transactions" in Article 2.4.2, and of the terms " dumping" and "margins of dumping". The Appellate
Body noted that there was "no basic disagreement among the participants" 10 regarding the phrase "all
comparable export transactions". It therefore shifted its analysis to the terms "dumping" and "margins
of dumping" in Article VI:1 of the GATT 1994 and Articles 2.1 and 2.4.2 of the Anti-Dumping
Agreement. It relied primarily on the definition of the term "dumping" in Article 2.1 and Article VI,
that "applies to the entire" 11 Anti-Dumping Agreement. Moreover, in concluding that "dumping" and
"margins of dumping" are determined for the product, the Appellate Body never referred to the phrase
"all comparable export transactions". Thus, the United States ignores entirely the detailed structure of
the Appellate Body’s reasoning in order to reach a conclusion not supported by that reasoning.

13. Fourth, and finally, contrary to the United Stat es’ contention, there was no "subsequent
practice" under the GATT 1947 indicating that the GA TT Contracting Parties agreed that the term
"margin of dumping" referred to transaction-specific margins.
12 As the Appellate Body stated, "[t]he
purpose of treaty interpretation is to establish the common intention of the parties to the treaty". 13 The
practices of some of the Contracting Parties to the GATT 1947, or their action or inaction that the
United States claims to be th e "circumstance of the conclusions of the GATT 1994 and the Anti-
Dumping Agreement" 14 cannot qualify as such, because they hardly "help[] to discern what the
common intentions of the parties were at the time of the conclusion with respect to the treaty or
specific provision"15, in this case, the meaning of the term "margin of dumping". The United States’
arguments regarding a dopted GATT panel reports 16 are also misplaced because they do not establish
"subsequent practice" under the GATT 1947 and they are not binding in WTO law.17

7 Appellate Body Report, US – Softwood Lumber V, para. 96.
8 Appellate Body Report, US – Softwood Lumber V, para.93..
10 Appellate Body Report, US – Softwood Lumber V, para. 90.
11 Appellate Body Report, US – Softwood Lumber V, para. 93.
12 The exacting legal standard for establishing th e existence of subsequent practice under the WTO
agreements and the GATT 1947 is set forth in Appellate Body Report, US – Gambling Services, paras. 191 and
192. See also Appellate Body Report, EC-Chicken Classification, paras. 256 – 258.
13 Appellate Body Report, EC – Computer Equipment, para. 93 (emphasis original).
14 See United States Rebuttal Submission, para. 34.
15 Appellate Body Report, EC – Chicken Classification, para. 289.
17 Appellate Body Report, Japan – Alcoholic Beverages II, page 13.

14. Mr. Chairman, Japan will now turn to New Z ealand’s arguments on this issue. New Zealand
appears to recognize that dumping margins must be de termined for the product as a whole. Indeed, it
states explicitly that the T-to-T methodology must involve a selection of transactions "which are
representative of the ‘product as a whole’."
18

15. However, New Zealand does not accept the l ogic of its own arguments. Elsewhere in the
submission, it sets forth three alternative methods of conducting a T-to-T comparison, two of which
involve the systematic disregard of all negativ e T-to-T comparison results. Specifically, under
New Zealand’s second T-to-T method, it says, " only dumped transactions are included in the
determination". And, under the third method, zeroi ng is used to eliminate negative results from the
calculation of the total amount of dumping.19

16. New Zealand’s approach is tantamount to a determination that the excluded export
transactions do not form part of the "product". However, the export transactions producing negative
and positive comparison results are all part of th e "product" and all comparison results must be
included in the overall determination.

17. New Zealand also argues that the way a dumpi ng margin is calculated must be understood in
light of the way an injury determination is conducted.
20 For New Zealand, in an injury determination,
"only those transactions found to be dumped are taken into account ".21 In consequence, it says, "to
preserve symmetry, the determination of the marg in of dumping may be based only on those dumped
transactions so taken into account".22

18. However, contrary to these argu ments, injury determinations are not based solely on
transactions found to be dumped. As noted above, in US – Softwood Lumber V , the Appellate Body
ruled that the "determination of the volume of dum ped imports, injury determination, causal link
between dumped imports and injury to domestic i ndustry, and calculation of the margin of dumping"
all relate to the product as a whole.
23

19. New Zealand also argues that "there should be a symmetry" between the determination of
dumping, injury, the causal relationship, and th e imposition of anti-dumping duties. However,
without making a product-wide determination, it is not clear how New Zealand’s approach could
ensure symmetry or consistency because du ties are applied to the product as a whole.
24
New Zealand’s approach effectively severs the link between subjects of the determination of dumping
and the imposition of anti-dumping duties. 25 However, the Anti-Dumping Agreement requires that a
product-wide margin determination provide the basis for the product-wide imposition of duties.

20. The United States’ Section 129 Determination fa ils to meet the requirement to determine a
margin for the product because negative comparison r esults were excluded from the calculation of the
total amount of dumping. The Determination is, theref ore, inconsistent with Articles 2.1 and 2.4.2 of
the Anti-Dumping Agreement, as well as with Article VI of the GATT 1994.

18 New Zealand’s Third Party Submission, para. 3.22.
19 New Zealand’s Third Party Submission, para. 3.04.
20 New Zealand’s Third Party Submission, para. 3.03.
21 New Zealand’s Third Party Submission, para. 3.09.
22 New Zealand’s Third Party Submission, para. 3.09.
23 Appellate Body Report, U.S. – Softwood Lumber V, para. 99.
24 Appellate Body Report, U.S. – Softwood Lumber V, para. 94.
25 The Appellate Body found that “import transactions attributable to a particular producer or exporter
need not be separated into two categories – dumped and non-dumped transactions.” Appellate Body Report, EC
– Bed Linen (Article 21.5), footnote 177.

III. A MARGIN OF DUMPING MUST BE BASED ON A FAIR COMPARISON OF
NORMAL VALUE AND EXPORT PRICE

21. Mr. Chairman, Japan has set forth, in detail, in its Third Party Submission that Article 2.4
imposes a general obligation for the investigating authorities to conduct a fair comparison of normal
value and export price. Rather than repeat t hose submissions, Japan will address certain arguments
made by the United States and New Zealand.

22. It is worth recalling at the outset that the A ppellate Body has twice ruled that zeroing does not
meet the requirements of a fair comparison.
26 It held that zeroing is "inherently biased" because it
"inflates" the margin of dumping by the value of the excluded negative intermediate comparison
results. And zeroing may even create a margin of du mping that would not otherwise exist. Because
the United States disagrees with these findings, it inv ites the Panel to pretend that they were never
made.

23. The United States contends that zeroing occurs after the comparison of normal value and
export has happened, whereas Article 2.4 a pplies solely to price adjustments made before the
comparison is performed.
27 The Unites States is wrong that Article 2.4 applies only to pre-
comparison price adjustments. The word "compariso n" refers to the process by which the authorities
calculate the margin of dumping for the product. That process necessarily in cludes the way that the
authorities aggregate and disaggregate the product for purposes of the comparison. 28 The authorities
cannot structure that comparison in a manner that systematically prejudices the interests of foreign
producers and exporters.

24. Further, the United States’ argument that the fi rst sentence of Article 2.4 refers only to a duty
to make price adjustments renders that sentence redundant, because the duty to make adjustments is
already set forth in the remainder of Article 2.4. The first sentence of the provision would, therefore,
add nothing to the rest.

25. The United States’ interpretation would also nu llify the disciplines in Articles 2.2, 2.3 and 6.6
of the Agreement on calculation and verification of normal value and export price. After carefully
calculating and confirming these values, authorities w ould be permitted to structure the comparison
process in such a way that, irrespective of the normal value and export price, dumping is found.

26. The United States interpretation produces ab surd results. On the United States’ view,
Article 2.4, on the one hand, requires authorities to make "pre-comparison" adjustments that promote
fairness and, on the other hand, permits them to make any "post-comparison" adjustments they see fit.
Nothing in the text supports the view that the Artic le requires the authorities to give with one hand to
ensure fairness that which they can simply remove with the other to deny it.

27. New Zealand suggests a "fair" me thodology is one that targets the " dumped goods" through
the exclusion of negative comparison results.
29 Mr. Chairman, New Zealand turns the idea of fairness
on its head. The purpose of the comparison is to ascertain whether or not there is dumping . Yet,
because only the positive comparison results are a ggregated on New Zealand’s approach, dumping
will almost certainly be found. As a result, as shown by New Zealand’s reference to a methodology
that targets "dumped goods", an objective inquiry becomes a self-fulfilling prophecy. But as the

26 Appellate Body Report, EC – Bed Linen, paras. 55 and 59; Appellate Body Report, US – Corrosion-
Resistant Steel Sunset Reviews, paras. 134 and 135.
28 See Japan’s Third Party Submission, para. 16.
29 New Zealand’s Third Party Submission, paras. 3.12 and 3.14.

Appellate Body said in EC – Bed Linen (Article 21.5 – India) , the "result" of the authorities’
investigation cannot be "predetermined by the methodology itself".30

28. Mr. Chairman, the Section 129 Determination involves just such an unfair comparison. By
systematically excluding all negative comparis on results, the United States made a finding of
dumping considerably more likely and it also inflated the amount of the margin. The unfair
comparison involves bias that operates exclusively to benefit the United States’ own lumber industry
and systematically to the detriment of Canadian producers and exports. This constitutes a violation of
Article 2.4.

IV PROHIBITION OF ZEROING UNDER ARTICLE 2.4 DOES NOT NULLIFY THE
THIRD COMPARISON METHOD IN ARTICLE 2.4.2 OF THE ANTI-DUMPING
AGREEMENT

29. The United States argues that a prohibition of zeroing would nullify the W-to-T comparison
in the second sentence of Article 2.4.2 of the Anti-Dumping Agreement.
31

30. It asserts that in mathematical terms, th e W-to-W and W-to-T comparisons would produce
identical results, absent zeroing. However, this assumes wrongly that all other things are treated
equally. In particular, the argument presupposes th at the same basis for calculating the weighted
average normal value must always be used for the W-to-W and W-to-T comparison method.
However, nothing in the text of Article 2.4.2 or any other provisions precludes the Member from
using a different calculation basis for normal value. Even in US domestic law, there are differences in
the ways that the USDOC conducts W-to-W and W-to-T comparisons that ensure that the results of
the two comparisons would not be the same. For example, the US statute itself prescribes that the
weighted average normal value is to be calculate d using different time peri ods (and hence different
pools of transactions) in W-to-W comparisons in original investigations and in W-to-T comparisons in
periodic reviews.
32 As a result, the weighted average norma l values will differ in the two situations,
and the comparisons of those different normal values with export prices mathematically will not
collapse into the same outcome.

31. Second, and more importantly, the text of th e second sentence of Article 2.4.2 suggests that a
W-to-T comparison can be conducted in a way that would not produce the same result as a W-to-W
comparison. Article 2.4.2 provides for three methods of comparison. The first two are "symmetrical"
methods that compare normal value and export price on the same basis, either on a W-to-W or a T-to-
T basis. Article 2.4.2 does not provide restrictions or conditions for using either symmetrical
comparison method.

32. The third method of comparison is the "asymmetrical" W-to-T method of comparison set
forth in the second sentence of Article 2.4.2. Un like the symmetrical comparisons, the investigating
authorities are entitled to use this method of comparison exclusively in exceptional circumstances.

33. According to the text, the circumstances jus tifying the use of the exception arise where the
investigating authorities find that there is "a pattern" of " export prices which differ significantly "
among purchasers, regions or time periods. Accordi ng to its ordinary meaning, a pricing "pattern"

30 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 132.
31 United States’ Rebuttal Submission, paras. 19–25.
32 Compare Section 777A(d)(1)(A) of the Act, which, in original investigations, authorizes the
calculation of a weighted average of the normal values (impliedly over the entire period investigated) with
Section 777A(d)(2), which, in periodic reviews, provides for the calculation of weighted average normal value
over “a period not exceeding the calendar month that corresponds most closely to the calendar month of the
individual export sale.”

exists where, among all export transactions, there is discernible configuration of prices by purchasers,
time periods or regions.

34. The second requirement for recourse to the third methodology is that the authorities must
explain why the significant pricing differences could not be "taken into account appropriately" by use
of either of the symmetrical methods of comparis on. Thus, although Article 2.4.2 does not indicate
exactly how the W-to-T comparison is different from the other two methods of comparison, the
distinguishing features of the third method must be rooted in the exceptional circumstances that
justify its use. In consequence, the third methodology must enable authorities to focus the comparison
on the export transactions making up the pricing "pattern". If the authorities do not focus on those
transactions, they would fail to take "appropriate account" of the pricing differences discernible in
those transactions.

35. To enable the authorities to focus on the tran sactions in the "pattern", the text supports a
methodology that includes the targeted selection of particular export transactions (i.e. those in the
pattern) for comparison with normal value. By selecting certain transactions for comparison, and
excluding others, authorities can focus on the transactions making up the pricing pattern. This
targeted selection of export transactions enables the authorities to address properly targeted dumping.

36. Conversely, if the comparison under the third methodology were to include all export
transactions (or a fully representative sample), the methodology would not address the transactions in
the pricing pattern and would, therefore, not "take into account appropriately" the significant pricing
differences in that pattern, as required by the text of Article 2.4.2.

37. When a pricing pattern has been identified, the authorities must conduct a fair comparison
that takes into account all transactions making up th e pattern. The existence of an export pricing
"pattern" does not mean that there is dumping, ta rgeted or otherwise. Instead, like the other
methodologies, the third methodology under second senten ce of Article 2.4.2 is intended to enable
authorities to determine whether there is dumping and to calculate the dumping margin.

38. Because the universe of transactions used in a W-to-T comparison comprises only the
transactions in the pricing pattern, the results of this comparison will be different from comparisons
under the symmetrical methods in the first sentence of Article 2.4.2. There is, therefore, no basis for
the United States concerns that a prohibition on zeroing would nullify the W-to-T comparison in the
second sentence of Article 2.4.2.

V. THE NEGOTIATING HISTORY DOES NOT SUPPORT THE UNITED STATES

39. New Zealand argues that, although not entirely clear, the negotiating history of the Anti-
Dumping Agreement indicates that zeroing is permitted.
33 Because the ordinary meaning of the
Agreement under Article 31 of the Vienna Convention is neither ambiguous nor absurd, it is not
necessary for the Panel to examine the negotiating history.

40. In any event, in the original proceedings in this dispute, the Appellate Body examined the
negotiating history of the Anti-Dumping Agreement and concluded that it did not support the view that
zeroing is permissible.
34 It added that, when the drafters intended to permit Members to exclude
certain elements from their determinations, they did so expressly. It noted, though, that there is no

33 New Zealand’s Third Party Submission, paras. 2.01–2.05.
34 Appellate Body Report, U.S. – Softwood Lumber V, paras. 107 and 108.

express authority to exclude negative comparison results. 35 The documents that New Zealand has
submitted, purportedly as negotiating history, do not alter these conclusions.36

VI. CONCLUSION

41. Mr. Chairman, by continuing to apply its zeroing procedures in the Section 129
Determination, the United States disregards the fi ndings of this Panel and the Appellate Body. The
Section 129 Determination is tainted by the same flaws as the original determination in this dispute.
In making both determinations, the United States fa iled to reach conclusions for the "product" under
investigation and it failed to conduct a fair comp arison. These failures result in violations of
Articles 2.1, 2.4 and 2.4.2 of the Anti-Dumping Agreement and Article VI of the GATT 1994. And
the consequence is that the advantages the United States’ industry derives from zeroing are prolonged,
as is the prejudice to Canadian producers and exporters.

42. Mr. Chairman, members of the Panel, staff of the Secretariat, Japan thanks you for your
attention.

35 Appellate Body Report, US – Softwood Lumber V, para. 100.
36 Exhibits NZ-1 and NZ-2.

ANNEX D-7

NEW ZEALAND'S ORAL STATEMENT

16 November 2005

1. Mr Chairman, Members of the Panel, New Zealand welcomes this opportunity to present its
views to the Panel in this dispute. New Zealand h as joined this dispute not only for systemic reasons,
but also because we have an inte rest in the use of the transaction-to-transaction methodology in the
calculation of dumping margins. Our submission is based on what we see as a permissible
interpretation of the Anti-Dumping Agreement which is specifically preserved under Article 17.6 of
that Agreement.

2. At the heart of this dispute is whether the pr actice of ‘zeroing’ is inconsistent with the WTO
Agreement when used in conjunction with th e transaction-to-transaction methodology in anti-
dumping investigations. New Zealand not es that while the Appellate Body in US-Softwood Lumber
has considered that the practice of zeroing is precl uded in the weighted av erage-to-weighted average
methodology, the question of whether zeroing is permissible when using the transaction-to-transaction
methodology has not been addressed by the Appellate Body. In fact, the Appellate Body was very
careful to note that its analysis applied to th e weighted average-to-wei ghted average methodology
only.

3. The purpose of the transaction-to-transacti on methodology is to compare actual export prices
for each shipment with the prices of comparable normal value transactions in the exporter’s domestic
market. New Zealand prefers to use this met hodology due to the relatively small number of
shipments entering the New Zealand domestic market. Consistent with the approach of the experts
who worked on the development of the Tokyo Anti- Dumping Code, New Zealand considers that this
is a fair methodology which targets more precisely the dumping taking place.

4. In considering the use of the transaction-to -transaction methodology, it is important to note
that the determination of dumping cannot be seen in isolation from the other elements of the Anti-
Dumping Agreement. Aside from a determination as to whether dumping has occurred, there must
also be an analysis of whether there is material in jury to the domestic industry. If these elements are
met, there must be a causal analysis of the effect of the dumped imports, and the effect of other
factors, including the volume and prices of imports not sold at dumping prices, on the domestic
industry. This process has relevance when assessing the validity of certain actions taken by a Member
in applying a remedy to redress dumping. How dumping margins are calculated must be considered
alongside the determination of material injury, the causation analysis, and the remedy that may or may
not be applied – in other words, a holistic approach must be taken.

5. Article 2 of the Anti-Dumping Agreement provides the framework for the determination of the
existence of dumping. Under Article 2.4.2 thr ee methodologies may be used to calculate dumping
margins: weighted average-to-weighted average; transaction-to-transaction; and weighted average-to-
transaction. While curbs were placed on the situations in which the latter methodology might be used,
these were not applied to the other two methodologies.

6. New Zealand has indicated in its submission that in using the transaction-to-transaction
methodology, there are three primary methods of determining margins of dumping, one of which
involves zeroing. The Anti-Dumping Agreement does not necessarily dictate that any one of the three

methods be used. In all three ways of using the transaction-to-transaction methodology, the non-
dumped transactions are considered when comp leting the injury and causation analysis under
Article 3.5 of the Agreement.

7. In New Zealand’s view there should be symme try between the manner in which the existence
of dumping is established, the injury analysis un der Article 3, the causal relationship between the
dumping and material injury or threat thereof, and how the anti-dumping remedy is applied.
Symmetry preserves fairness in the anti-dumping investigation as a whole. There is support for a
symmetrical approach in the context of the Anti-Dumping Agreement. For example, Article 3 makes
a distinction between the effect of dumped impor ts on prices, and the impact of non-dumped imports
on producers. Article 9 makes it plain that an ti-dumping duties are to be applied only to dumped
imports, and at a level no greater than the margin of dumping.

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

9. New Zealand wishes to highlight two aspects rela ted to the determination of the existence of
dumping: "fair comparison" under Article 2.4; and the interpretation of "product" under Article 2.1.

10. The calculation of dumping margins must m eet the "fair comparison" requirement of
Article 2.4. This requirement should be interpreted in a way which h as regard to the context in which
it is used. This context includ es the specific rules relating to anti-dumping investigations and the
nature of the methodologies used to determine the existence of dumping margins that are expressly
allowed by the Agreement.

11. The calculation of dumping margins using the transaction-to-transaction methodology is
inherently a "fair comparison" as it targets the dumping that is occurring while still taking into
account the impact of dumped and non-dumped imports on the domestic industry. This is the case
irrespective of the particular method used to calculate dumping margins under the transaction-to-
transaction methodology. By contrast, the weighted average-to-weighted average methodology is not
as targeted, may not reflect the range of dumping ma rgins in an investigation, and may not fully
address the material injury being caused or threatened by the dumped imports.

12. Turning to the interpretation of the term "pr oduct" in Article 2.1 - the Appellate Body in the
EC-Bed Linen case took into account this term when inte rpreting the margins of dumping referred to
in Article 2.4.2. It considered that margins of dumping should be established for the "product as a
whole". In comparing the normal value and the export price on a transaction-to-transaction basis, the
individual transactions where dumping has been found to exist are compared to determine whether
dumping is considered to exist for the product under investigation. In this way the transaction-to-
transaction methodology targets the importation of th e product that is being dumped. It does not
attempt to calculate dumping on the basis of the averaging of transactions for all
 sales of the product.

13. The interpretation of "pro duct" in Article 2.1 of the Anti-Dumping Agreement has to be seen
in light of the context of Article 2.4.2. The term "product", when used in relation to the transaction-
to-transaction methodology, must reflect the nature of that methodology. That methodology selects
individual transactions for analysis which are repres entative of the "product as a whole". Therefore,
in relation to the transaction-to-transaction methodol ogy, the "dumping of a product" referred to in

Article 2.1 means the dumping established through the selection of comparable individual transactions
representing the product which is the subject of the anti-dumping investigation. Comparisons must be
made at the same level of trade and at as nearly as possible the same time, with due allowance being
made for differences affecting price comparability. Any of the three methods which may be used to
calculate the dumping margins using a transacti on-to-transaction methodology can be used to
establish that dumping exists.

14. In conclusion, New Zealand considers that there is no textual support in the Anti-Dumping
Agreement for an obligation
 to take non-dumped transactions into account in establishing the
existence of dumping margins under Article 2.4. 2 when using the transaction-to-transaction
methodology. Indeed, it is permissible to interpre t Article 2.4.2 as permitting a Member to take into
account only dumped imports in establishing the existe nce of dumping margins under Article 2. Such
permissible interpretations are specifically preserved under Article 17.6(ii) of the Anti-Dumping
Agreement.

ANNEX D-8

ORAL STATEMENT OF THAILAND

16 November 2005

I. INTRODUCTION

1. Mr. Chairman and Members of the Panel: Th ailand appreciates the opportunity to present its
views on this matter to the Panel today. In genera l, Thailand supports the arguments made by Canada
in its first written submission. 1 Accordingly, Thailand will provide just a few additional views in
today’s proceeding.

II. THE ZEROING METHODOLOGY IS IN CONSISTENT WITH ARTICLES 2.4 AND
2.4.2 OF THE ANTI-DUMPING AGREEMENT

2. Thailand submits that the zeroing methodology is inconsistent with Articles 2.4 and 2.4.2 of
the Anti-Dumping Agreement, regardless of what me thod is initially used to compare export prices to
normal values. The fair comparison requirement of Article 2.4 imposes a fundamental obligation on
the investigating authority to avoid biased and inac curate determinations of dumping margins. The
Appellate Body has confirmed that this obligation "informs all of Article 2,"
2 and hence includes
Article 2.4.2 of the ADA.

3. Moreover, the Appellate Body has stated that "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". ADA Article 2.4 thus prohib its the use of such an inherently distorted
methodology to make a comparison between export price and normal value.

4. In addition, the Appellate Body has found th at the reference to "margins of dumping" in
Article 2.4.2 refers to the calculation of overall du mping margins for the produ ct as a whole, rather
than transaction- or model-specific comparisons. In the words of the Appellate Body in US –
Softwood Lumber V , "the results of the multiple comparis ons at the sub-group level are . . . not
"margins of dumping" within the meaning of Article 2.4.2. . . . it is only on the basis of aggregating
all these 'intermediate values' that an investigating authority can establish margins of dumping for the
product under investigation as a whole."
3 The Appellate Body went on to find that the United States
acted inconsistently with ADA Article 2.4.2 by "d etermining the existence of margins of dumping on
the basis of a methodology incorporating the practice of zeroing". 4 In Thailand's view, the Appellate
Body's finding neither differentiated between types of zeroing, nor suggested that the permissibility of
zeroing was dependent on which methodology the Unite d States used under Article 2.4.2 to make
multiple comparisons at the sub-group level. Thus, the Appellate Body's reasoning applies equally in
situations in which aggregate dumping margins ar e determined using the transaction-to-transaction
comparison method.

1 First Written Submission of Canada, 22 June 2005.
2 Appellate Body Report, EC – Bed Linen, para. 59.
3 Appellate Body Report, US – Softwood Lumber V, para. 97 (emphasis in original).
4 Ibid., para. 117.

5. The United States attempts to portray Canada as seeking an "offset" to the results of
individual comparisons "when a ggregating the results of multiple transaction-to-transaction
comparisons".
5 However, it is the United States, not Ca nada, that seeks to make such an offset by
asserting the right to include the results of only some of the multiple comparisons in its aggregation.
For other comparisons, the United States asserts the ri ght to adjust the results of these comparisons so
that the export price is no longer greater than the normal value for those comparisons. Therefore, the
US practice constitutes an adjustme nt that is neither permitted under Article 2.4 of the ADA nor, by
any definition of the term, can be considered fair.

6. The United States in effect argues th at because the phrase "all comparable export
transactions" in Article 2.4.2 does not refer to transaction-to-transaction comparisons, there is no
prohibition on using the zeroing methodology in a ggregating the results of such comparisons.
However, it presumably would not be a fair comparison to make transaction-to-transaction
comparisons and, in aggregating the results, simply to omit some of those results. If it would not be
permissible simply to exclude these results, then a fortiori it is not permissible to exclude or adjust
some of those results for the sole reason that the results of those comparisons are favourable to the
exporters.

7. The text of Article VI of the GATT and of the ADA supports this position. First, the fair
comparison requirement of Article 2.4 prohibits the use of zeroing following a transaction-to-
transaction comparison.

8. Second, Article VI of the GATT defines dumping as the process by which " products of one
country are introduced into the commerce of anothe r country at less than the normal value of the
products".
6 Article VI: and Article VI:2 consistently emphasize dumping is to be determined on the
basis of a product, not selected transactions in a product.

9. Third, Article 2.1 of the ADA refers to a "product" and notes that a product is said to be
dumped when "the export price of the product" is less than the comparable price "for the like
product".

10. Thus, Article VI of the GATT 1994 and Artic le 2.1 of the ADA envisage the eventual
determination of the margin of dumping for the product at issue by comparing an aggregate export
price for that product with an aggregate normal va lue. This can be achieved by using different
methodologies to determine margins at a sub-group le vel, be it an average-to-average or transaction-
to-transaction methodology. But it cannot be achieve d if some of the transactions at issue are not
properly reflected in the determination of the overa ll export price and normal value. As the Appellate
Body has stated, the investiga ting authority must aggregate all these 'intermediate values' in order to
"establish margins of dumping for the product under investigation as a whole".
7

11. By not fully taking into account all transacti on-to-transaction comparisons in determining the
aggregate dumping margin "in respect of such product", the United States imposes an anti-dumping
duty greater in amount than the actual margin of dumping in respect of such product, calculated on the
basis of all relevant transactions in that product.

5 First Written Submission of the United States, 7 July 2005 ("US First Submission"), para. 2.
6 GATT 1994, Article VI:1 (emphasis added).
7 Appellate Body Report, US – Softwood Lumber V, para. 97 (emphasis in original).

III. CONCLUSION

12. Thailand trusts that these views will assist th e Panel in its consideration of these issues.
Thailand will be happy to respond to any questions the Panel may have. Again, we thank you for this
opportunity to present our views.

ANNEX D-9

CLOSING STATEMENT OF CANADA

17 November 2005

1. Mr. Chairman, Members of the Panel, Canada takes this opportunity to thank you once again
for your time and diligent work on this case.

2. We also take this opportunity to revisit with you the one issue that is in dispute here: zeroing
under the transaction-to-transaction methodology.

3. We are here because the United States, con fronted with the need to bring itself into
compliance, chose to zero again in the Section 129 Determination. This choice resulted in the United
States acting in a manner inconsistent with Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement.

4. I would first like to set out what is meant by " zeroing" in the context of this dispute. I will
then briefly comment on the discussion we have ha d surrounding Article 2.4 and finally turn to our
arguments regarding Article 2.4.2.

5. So what is "zeroing"? In the original inv estigation, the United States calculated "margins of
dumping" using a weighted-average-to-weighted-a verage methodology. The United States made
multiple separate comparisons for various product s ub-groups. It then aggregated the intermediate
results of these multiple comparisons. However, before it did so, the United States changed to zero all
negative results. This manipulation of the negative r esults – that is, the action of "zeroing" – inflated
the "margins of dumping". And the United States w as found to have acted inconsistently with its
WTO obligations on this basis.

6. The United States did the same thing in its new transaction-to-transaction methodology. It
made multiple comparisons on a transaction-to-tra nsaction basis. And this method too produced
intermediate values. The United States then aggreg ated these intermediate results – something that is
no different from what it was required to do in its weighted-average-to-weighted-average
methodology. Again, however, in doing so, the United States changed all negative results to zero.

7. With respect to the question of whether Ar ticle 2.4 prohibits zeroing under the transaction-to-
transaction methodology, the United States claims, in re buttal, that the fair comparison requirement in
Article 2.4 is limited to adjustments affecting pr ice comparability. However, the fair comparison
requirement in the first sentence of Article 2.4 is a separate and distinct obligation from the
requirement to ensure price comparability in th e second sentence of the Article. As we have
demonstrated, the US interpretation of the firs t sentence would render it redundant. And it also
contradicts the Appellate Body’s clear statements on this issue.

8. The United States also argues that zeroing must be permissible because, otherwise the
targeted dumping methodology would produce a mathem atically equivalent r esult to the result that
would be obtained in the weighted-average-to-weig hted-average methodology. The burden is on the
United States to show that the targeted dumping pr ovision could not have meaning or utility without
zeroing. It has failed to satisfy this burden. It is not enough to say that US municipal law does not
permit a different application. Canada, as well as the EC, Japan and Thailand have all provided
hypothetical examples of how the targeted dumping provision could be applied in particular cases,

without zeroing.1 Nothing the United States has said changes the fact that zeroing causes an "inherent
bias" in the calculation of "margins of dumping," a nd is therefore prohibited by the "fair comparison"
requirement of Article 2.4.

9. Turning now to Article 2.4.2., as you have heard, the United State dislikes the term "zeroing".
Instead of acknowledging that some intermediate va lues are negative, the United States persists in
referring to those negative values as "offsets" and argues it has no obligation to recognize these
negative values and offset positive values. But this is just plainly wrong. An investigating authority
has an obligation to determine a "margin of dumping" for the product as a whole. And that obligation
includes respecting all the results, not changing the results of intermediate values to zero when they
are aggregated.

10. I want to take you back to the text that is at issue in this dispute – Article 2.4.2, first sentence.
This provision requires the United States to ensure th at the results of its comparisons reflect the full
value of the transactions analyzed (that is, the "p roduct as a whole"). This obligation results from a
textual interpretation of the provision, which we have set out in our submissions to you.
2

11. The Appellate Body, when it
 interpreted the very same provision, upheld the original panel’s
findings on zeroing through the fo llowing reasoning. It first a ddressed the phrase "all comparable
export transactions", which the United States sugg ested was the key to the Appellate Body’s
reasoning. The Appellate Body determined that the "zeroing" issue did not turn on this phrase.3 Next,
the Appellate Body interpreted the term "margins of dumping" and "dumping" in the first sentence of
Article 2.4.2. The Appellate Body found that:4

• These terms relate to the product under inves tigation as a whole – not a type, model or
category of that product;

• The requirement to calculate "margins of dum ping" means that multiple comparisons at the
sub-group level are only intermediate values – not "margins of dumping"; and

• The calculation of "margins of dumping" requir es the aggregation of intermediate values at
the sub-group level to arrive at a margin of dumping for the product as a whole.

12. The Appellate Body concluded that when aggregating these intermediate values, the
United States was not permitted to change negative values to zero. The Appellate Body also found
that Article 2.4.2 contains no express language th at permits disregarding the true value of a
comparison result when such values are aggregated to arrive at the "margin of dumping" for the
product as a whole.
5 And the United States can point to no language in the text of Article 2.4.2, first
sentence, that permits them to disregard the negative results of intermediate comparisons.

13. Let’s come back again to what is before you in these implementation proceedings. The only
question is whether, in the light of this legal reasoning and the recommendations and rulings of the
DSB, did the United States bring its measure into conformity when it continued to zero under the
transaction-to-transaction methodology. When an i nvestigating authority aggregates the results of
multiple comparisons it must fully reflect those re sults in coming to a "margin of dumping"? The
United States did not do what it was required to do, when it treated negative results as zero.

1 See Exhibit CDA-8.
2 First Written Submission of Canada, at paras. 21-27. Second Written Submission of Canada, at
paras 8-15.
3 Appellate Body Report, at paras. 86-90.
4 Ibid., at paras. 97-98.
5 Ibid. at para. 100.

Therefore, its use of zeroing under the transacti on-to-transaction methodology must be found to be
inconsistent with Article 2.4.2.

14. The United States argues that nothing in the text of Article 2.4.2 prohibited it from doing so.
Specifically, the United States argues that it may change the meaning of "dumping" and "margins of
dumping" in the first sentence of Article 2.4.2 an d ignore the Appellate Body’s reasoning. Why?
Because, according to the United States, the meani ng of "margins of dumping" has now changed and
has become the result of any of the tens of thousa nds of comparisons in its transaction-to-transaction
methodology. The United States also claims that the Appellate Body’s prior reasoning does not apply
in this case because the reasoning is the result of the phrase "all comparable export transactions" and
that phrase does not attach to the transaction-to-transaction methodology.

15. However, the meaning of the term "margins of dumping" – and that of "dumping" – cannot
change in this single sentence. That is, th ese terms prohibit the United States from changing the
underlying facts of a case. Negative intermediate comparison results are negative intermediate
comparison results. They are not "margins of dumping". Negative results are not
 positive results, nor
are they zero. To establish "margins of dumpi ng" within the meaning of Article 2.4.2, the
intermediate results of those multiple transaction- specific comparisons must be aggregated for the
product as a whole. And the term "margins of dumpi ng", as confirmed by the Appellate Body in this
very case, prohibits the United States from changing negative values to "zero".

16. For all these reasons, there is no question that the United States has failed to comply with the
DSB’s rulings, and its recommendation to bring its measures into conformity with its WTO
obligations. Canada therefore requests that this Panel find that the use of zeroing by the United States
under the transaction-to-transaction methodology in the Section 129 Determination is inconsistent
with Articles 2.4.2 and 2.4 of the Anti-Dumping Agreement

17. Mr. Chair, members of the Panel, we are appreciative of your continued attention and hard
work on this dispute. And Canada thanks you.

ANNEX D-10

CLOSING STATEMENT OF THE UNITED STATES
AT THE SUBSTANTIVE MEETING OF THE PANEL

17 November 2005

1. Mr. Chairman, Members of the Panel, in cl osing, the United States would like to thank you
again for agreeing to serve on this Panel. We a ppreciate the time you have taken out of your busy
schedules to address this important matter. We would also like to thank the members of the
Secretariat for all of their hard work on this matter.

2. Our closing statement is very brief. In many respects, the comments that we offered after the
third party session and in the further questions a nd answers this morning captured the two most
important legal issues before you: the interpretati on of "margins of dumping" and the nullification of
the targeted dumping methodology.

3. With respect to the term "margins of dumping," you will recall that the United States’
argument is that the term must be interpreted in its relevant context. That is precisely what the
Appellate Body did in the underlying proceeding, in terpreting it in an integrated manner with "all
comparable export transactions." It is neither illogi cal nor surprising that, when interpreting that term
in the context of comparisons between normal va lue and export price on a transaction-to-transaction
basis, we arrive at a different interpretation. As we discussed yesterday, it is Canada’s position that
margins of dumping must be interpreted in th e same way throughout the Anti-Dumping Agreement
that does not withstand scrutiny – whether in the c ontext of Article 9.3, where Canada’s approach
would offset one importer’s dumping duties with a nother importer’s non-dumped prices, Article 2.2
which we discussed this morning, or elsewhere in the AD Agreement.

4. With respect to the nullification of the targeted dumping methodology, we had a very
interesting discussion of hypotheticals – with Chri stmas turkeys passing through, and Canada even
suggesting that, in order to prevail, the United St ates must rebut "unstated assumptions" that Canada
had not even thought of. If we can move from hypotheticals to reality for a moment, we should return
to the text of the second sentence of Article 2.4.2. As mentioned earlier, that text, in a narrative form,
is a classic "if – then" provision. It simply provides that if certain conditions exist, then authorities
may make comparisons between normal value and expor t price on an average-to-transaction basis. It
provides no exception to any other provision of th e AD Agreement, nor does any other provision of
the AD Agreement suggest that, when the conditions of the second sentence of Article 2.4.2 exist, the
requirements of that other provision do not apply. Mr. Chairman, that is the reality of the agreement.
The targeted dumping comparison methodology is just an exception to the average-to-average or
transaction-to-transaction comparison methodologies. As the United States demonstrated in its
Exhibit US-4, Canada’s approach would nullify that exception by mathematically requiring the same
result as from the average-to-average comparison methodology.

5. Because the United States has brought its m easure into conformity with its Anti-Dumping
Agreement obligations, the Panel should dismiss Canada’s complaint.

6. Mr. Chairman, Members of the Panel, this concludes our closing statement. Thank you.