Zeroing Under the WTO Anti-Dumping Agreement: Where Do We Stand?

Sixty of the 357 disputes notified to the Dispute Settlement Body (DSB) of the World Trade Organization (WTO) in its 12-year history have involved antidumping issues. That figure places anti-dumping at the top in terms of issues most often requiring formal dispute resolution. The dumping margin calculation technique known as ‘zeroing’ has been an issue in several of those 60 disputes. On 9 January 2007, the Appellate Body (AB) issued its report in United States – Measures Relating to Zeroing and Sunset Reviews (Japan), which was the fifth AB report in which some aspect of zeroing was adjudicated. Thus, zeroing is among the most litigated issues of the most contentious subject under the WTO’s purview. Zeroing refers to the practice, conducted in some jurisdictions, of replacing the actual amount of dumping calculated for model or sales comparisons that yield negative dumping margins (i.e., models or export transactions for which the export price exceeds the calculated normal value) with a value of zero prior to the final calculation of a weighted-average margin of dumping for the product under investigation. Zeroing, thus, has the effect of overstating dumping margins by denying the full impact of non-dumped or negatively dumped models/export sales on the dumping margin for the product as a whole. Dispute settlement panels and the AB have ruled often – but remarkably, not exhaustively – on the question of whether or not zeroing is a permissible practice. Despite AB rulings that zeroing in conjunction with certain comparison methodologies violates provisions of the WTO Anti-Dumping Agreement (ADA), ambiguity still prevails with respect to zeroing in conjunction with other comparison methodologies. Technically, from a legal standpoint, each of the various comparison methodologies expressly or implicitly sanctioned under the ADA carries its own arguments regarding the propriety or impropriety of zeroing. And each may require its day in court, so to speak, to achieve finality on this issue. Edwin Vermulst presents a framework for contemplating the propriety and impact of zeroing, as well as summaries of findings of the critical GATT/WTO decisions (through May 2005) on the subject. Since that publication, new panel decisions and AB reports have been issued, which clarify (and some may say complicate) understanding of the jurisprudence surrounding the issue. This article borrows from Vermulst, updates the state of play regarding zeroing, and asks whether zeroing can ever be deemed permissible in light of the obligations under the ADA.