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United States – Use of Zeroing in Anti-Dumping Measures Involving Products from Korea: It's déjà vu all over again

  • THOMAS J. PRUSA (a1) and LUCA RUBINI (a2)
Abstract
Abstract

This paper analyzes the dispute between Korea and the United States regarding the method of calculating anti-dumping duties. The case mirrors other recent WTO disputes involving zeroing. Even though it ceased zeroing in original investigations in December 2006, the United States implemented the policy change only prospectively. As a result, the margins applied to the products in this dispute remained unchanged because they had been calculated prior to the policy change. The United States did not contest Korea's claims. The Panel confirmed that zeroing was used and, following the long line of Panel and Appellate Body rulings, found the practice inconsistent with the Anti-Dumping Agreement. After the Panel Report was adopted, the United States recalculated the margins without zeroing. It, however, refused to refund unliquidated cash deposits that were based on zeroing, highlighting the United States's continued lukewarm compliance with WTO rulings on zeroing. This dispute offers an opportunity to ponder on weaknesses of the WTO Dispute Settlement and the ability of one Member to take advantage of it. Since the facts and their legal assessment were undisputed, why was litigation necessary? Can compliance with WTO law be improved with broader findings and more incisive remedies?

Copyright
Corresponding author
*Email: prusa@econ.rutgers.edu.
**Email: l.rubini@bham.ac.uk.
References
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1 Hudec Robert E. (1987), ‘“Transcending the Ostensible”: Some Reflections on the Nature of Litigation Between Governments’, 72 Minnesota Law Review, 211, 212213.

2 United States – Use of Zeroing in Anti-Dumping Measures Involving Products from Korea, WT/DS402/R, adopted 24 February 2011 (hereafter, US–Zeroing (Korea)).

3 Over the past decade, the WTO Appellate Body has heard at least 20 disputes involving various types of zeroing and each time has found that the practice violates the WTO Anti-Dumping Agreement. All but two of the cases have involved the United States as respondent. For a review of WTO cases involving zeroing, see Bown Chad P. and Prusa Thomas J. (2011), ‘US Anti-Dumping: Much Ado about Zeroing’, in Martin William J. and Mattoo Aaditya (eds.), Unfinished Business? The WTO's Doha Agenda, London: CEPR and the World Bank, pp. 355392.

4 USZeroing (Korea), para. 2.1.

5 ‘Anti-Dumping Proceedings: Calculation of the Weighted-Average Dumping Margin During an Anti-Dumping Investigation, Final Modification’, Federal Register, 71: 248 (27 December 2006), pp. 77722–77725 (hereafter, ‘2006 Modification’). The effective date of this final modification was 16 January 2007.

6 To be more precise, the 2006 Modification reads: ‘The Department will apply this final modification in all current and future antidumping investigations as of the effective date.’ All three cases in this dispute had their OI margins calculated prior to this date and hence were not subject to the new rules.

7 Panel Report, United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand, WT/DS383/R, adopted 18 February 2010, DSR 2010:IV, 1841 (hereafter, US–PET Bags (Thailand)). For an analysis of that dispute, see Prusa Thomas J. and Vermulst Edwin (2012), ‘United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand: A Cat in the Bag’, 11:2World Trade Review, 257271.

8 Two issues make this dispute somewhat more complicated. First, unlike US–PET Bags (Thailand) there was not a pre-dispute agreement as to how the Panel's decision would be implemented. Second, this dispute involves three cases rather than just a single claim.

9 Bown and Prusa, ‘US Anti-Dumping’, Table 14.2, supra at note 3.

10 Legal and economic summaries of previous zeroing disputes include Janow Merit E. and Staiger Robert W. (2003), ‘European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India’, in Horn Henrik and Mavroidis Petros C. (eds.), The WTO Case Law of 2001, Cambridge: Cambridge University Press; Grossman Gene M. and Sykes Alan O. (2006), ‘European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India: Recourse to Article 21.5 of the DSU by India’, in Horn Henrik and Mavroidis Petros C. (eds.), The WTO Case Law of 2003, Cambridge: Cambridge University Press; Bown Chad P. and Sykes Alan O. (2008), ‘The Zeroing Issue: A Critical Analysis of Softwood V’, 7:1World Trade Review, 121142; Prusa Thomas J. and Vermulst Edwin (2009), ‘A One-Two Punch on Zeroing: US–Zeroing (EC) and US – Zeroing (Japan)’, 8:1 World Trade Review, 187241; Crowley Meredith and Howse Robert (2010), ‘US–Stainless Steel (Mexico)’, 9:1World Trade Review, 117150; Hoekman Bernard and Wauters Jasper (2011), ‘US Compliance with WTO Rulings on Zeroing in Anti-Dumping’, 10:1 World Trade Review, 543; Prusa Thomas J. and Vermulst Edwin (2011), ‘United States – Continued Existence and Application of Zeroing Methodology: The End of Zeroing?’, 10:1World Trade Review, 4561; Prusa and Vermulst, ‘United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand’, supra at note 7.

11 Prusa and Vermulst, ‘A One-Two Punch on Zeroing’, supra at note 10, provide an extended discussion of how zeroing affects the calculated margin.

12 See, e.g., ibid.; Vermulst Edwin and Ikenson Daniel (2007), ‘Zeroing under the WTO Anti-Dumping Agreement: Where Do We Stand?’, 2:6Global Trade and Customs Journal, 231242.

13 US–Zeroing (Korea), paras. 2.2–2.7.

14 Ibid., para. 7.3.

15 Appellate Body Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/AB/R, adopted 31 August 2004, DSR 2004:V, 1875 (hereafter, USSoftwood Lumber V).

16 US–Zeroing (Korea), para. 3.2.

17 Panel Report, United States – Anti-Dumping Measure on Shrimp from Ecuador, WT/DS335/R, adopted on 20 February 2007, DSR 2007:II, 425 (hereafter, US–Shrimp (Ecuador)).

18 Panel Report, United States – Measures Relating to Shrimp from Thailand, WT/DS343/R, adopted 1 August 2008, as modified by Appellate Body Report WT/DS343/AB/R, WT/DS345/AB/R, DSR 2008:VII, 2539 (hereafter, US–Shrimp (Thailand)).

19 US–Zeroing (Korea), para. 7.17.

20 Ibid., para. 7.8.

21 US–Shrimp (Ecuador), paras. 7.7–7.11.

22 USZeroing (Korea), para. 7.19.

23 Ibid., para. 7.22.

24 Ibid., paras. 7.23–7.26.

25 Ibid., para. 7.27.

26 Since ‘there is not a system of precedent within the WTO dispute settlement system’, US–Zeroing (Korea), para. 7.31.

27 Ibid., para. 7.30.

28 USShrimp (Ecuador), paras. 7.38–7.39.

29 US–Zeroing (Korea), para. 7.34.

30 Ibid., paras. 8.1–8.2.

31 US–Zeroing (Korea), WT/DS402/6, 22 June 2011.

32 US–Zeroing (Korea), WT/DS402/7, 9 December 2011.

33 The fact that Korea accepted and agreed to this time frame as ‘reasonable’ suggests that it could not do anything to force the US to implement more promptly. Nor, arguably, could the WTO DSU. Although obviously from a legal standpoint nothing prevents immediate implementation, the ‘reasonable period of time’ to implement DSU obligations is the recognition of the political and practical adjustment required by compliance.

34 Bown and Prusa, ‘US Anti-Dumping’, supra at note 3.

35 Including Janow and Staiger, ‘European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India’; Grossman and Sykes, ‘European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India’; Bown and Sykes, ‘The Zeroing Issue’; Prusa and Vermulst, ‘A One-Two Punch on Zeroing’; Prusa and Vermulst, ‘United States – Continued Existence and Application of Zeroing Methodology’; Crowley and Howse, ‘US–Stainless Steel (Mexico)’; and Hoekman and Wauters, ‘US Compliance with WTO Rulings on Zeroing in Anti-Dumping’ − see supra at note 10; Prusa and Vermulst, ‘United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand’ – see supra at note 7.

36 Article 2.4.2, Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.

37 Prusa and Vermulst, ‘A One-Two Punch on Zeroing’, p. 188, supra at note 10.

38 Prusa and Vermulst, ‘United States – Continued Existence and Application of Zeroing Methodology’, pp. 46–47, supra at note 10.

39 US–Shrimp (Ecuador); US–Shrimp (Thailand). Compare Palmeter David and Mavroidis Petros C. (2004), Dispute Settlement in the World Trade Organization (second edn), Cambridge, UK: Cambridge University Press, p. 145.

40 US–Zeroing (Korea), para. 7.15.

41 US–Zeroing (Korea), para. 7.10.

42 Although the simplicity of the case certainly meant that the time requested for the proceedings was shorter than would otherwise have been. For example, after consulting the parties, the Panel decided not to hold a second substantive meeting with the parties. See para. 1.6 of the Panel Report. The Panel stage thus lasted eight months rather than the usual average of 14.7 months. See Horn Henrik, Johannesson Louise, and Mavroidis Petros C. (2011), ‘The WTO Dispute Settlement System (1995–2010): Some Descriptive Statistics’, 45:6 Journal of World Trade, 11071138.

43 Petros C. Mavroidis (2012), ‘A Little Bit Less Conversation and a Little More Action (Property and Liability Rules in the DSU Review of the WTO)’, draft on file with the author.

44 Hudec, ‘Transcending the Ostensible’, p. 218, supra at note 1.

45 Prusa and Vermulst, ‘United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand’, supra at note 7; and Bown and Prusa, ‘US Anti-Dumping’, supra at note 3, argue that only cases where removing zeroing will result in de minimis margins are suitable WTO disputes.

46 For an extensive discussion, see Mavroidis Petros C. (2000), ‘Remedies in the WTO Legal System: Between a Rock and a Hard Place’, 11:4 European Journal of International Law, 763813; Eeckhout Piet (2009), ‘Remedies and Compliance’, in Bethlehem Daniel, McRae Donald, Neufeld Rodney, and Damme Isabelle Van (eds.), The Oxford Handbook of International Trade Law, Oxford, UK: Oxford University Press, pp. 437459.

47 A good example is the reaction to the Panel Report in Australia – Subsidies Provided to Producers and Exporters of Automotive Leather – Recourse to Article 21.5 of the DSU by the United States, WT/DS126/RW and Corr.1, adopted 11 February 2000, DSR 2000:III, 1189. See the DSB's discussion on the adoption of the Panel Report, WT/DSB/M/75.

48 The first case was New Zealand v. Finland (the Transformers case). On these GATT cases see Petersmann Ernst-Ulrich (1993), ‘International Competition Rules for the GATT/WTO World Trade and Legal System’, 27:6Journal of World Trade, 3586; Komuro Norio and Vermulst Edwin (1997), ‘Anti-Dumping Disputes in the GATT/WTO: Navigating Dire Straits’, 31:1Journal of World Trade, 543. The political difficulties ensuing a finding that a retroactive repayment of illegally imposed duties can impose clearly come out from the Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 5295, paras. 9.6–9.7. See Mavroidis Petros C., Messerlin Patrick A., and Wauters Jasper M. (2008), The Law and Economics of Contingent Protection in the WTO, Cheltenham, UK and Northampton, MA: Edward Elgar Publishing, pp. 258260.

49 Mavroidis, ‘A Little Bit Less Conversation and a Little More Action’, supra at note 43.

50 Prusa and Vermulst, ‘United States – Anti-Dumping Measures on Polyethylene Retail Carrier Bags from Thailand’, supra at note 7.

51 See the negotiating proposal of Canada, TN/RL/GEN/37, which inter alia suggests that, in case of an anti-dumping or countervailing-duty measure found WTO law-inconsistent, the relevant Member ‘should be obliged to apply the compliant measure to all past entries and, where application of the compliant measure yields lower duty liability, to refund all excess anti-dumping and/or countervailing duties collected pursuant to the original (WTO-inconsistent) measure’.

52 Article 14 of the International Law Commission's Articles on State Responsibility. See Crawford James (2002), The International Law Commission's Articles on State Responsibility Introduction, Text and Commentaries, Cambridge, UK: Cambridge University Press, pp. 135140.

53 Bown and Sykes, ‘The Zeroing Issue’, supra at note 10.

54 United States – Continued Existence and Application of Zeroing Methodology, WT/DS350.

55 United States – Measures Relating to Zeroing and Sunset Reviews, WT/DS322.

56 United States – Laws, Regulations and Methodology for Calculating Dumping Margins (‘Zeroing’), WT/DS 294.

57 This discussion is based on Bown and Prusa, ‘US Anti-Dumping’, supra at note 3.

58 ‘Antidumping Proceedings: Calculation of the Weighted-Average Dumping Margin and Assessment Rate in Certain Antidumping Duty Proceedings; Final Modification’, Federal Register, 77:30 (14 February 2012), pp. 8101–8114.

59 The only difference is that the margins are calculated for different periods of time. A recalculated OI margin would be based on a different (earlier) set of transactions than an administrative-review margin calculation. This timing difference is unlikely to generate a WTO dispute.

60 Bown and Prusa, ‘US Anti-Dumping’, pp. 373–374, supra at note 3. This would depend on the fact that the retrospective system may amplify the effect of zeroing on dumping margins thus possibly explaining the US's resistance to implement WTO rulings.

The views expressed in this paper are those of the authors and all omissions and errors are also of the authors. We would like to thank Dukgeun Ahn, Sungioon Cho, Jim Durling, Gary Horlick, Rob Howse and Seong-Joong Kim for helpful discussions.

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