US gives up on Zeroing of Anti-dumping Investigations, Signs Pact with Brussels and Tokyo

The United States, on 6 February, signed roadmap agreements with the European Union and Japan on ending its controversial “zeroing” method to calculate anti-dumping duties. The deal was announced only days before WTO arbitrators were scheduled to examine the EU’s and Japan’s request on retaliating against Washington for its failure to comply with WTO rulings that had deemed the use of zeroing illegal (DS294, DS322). Though the US’ agreements are formally limited to the two trading giants, the changes are also set to affect other countries.

With the bilateral understandings, the US commits itself to forego the use of zeroing in future administrative reviews of anti-dumping investigations. The US Department of Commerce will begin applying the new methodology later this month.

In addition, the agreements foresee a recalculation of certain anti-dumping duties currently being applied against European and Japanese producers. “In certain individual anti-dumping cases involving the EU and Japan, the United States will be conducting proceedings to recalculate anti-dumping duty cash deposits without zeroing,” a United States Trade Representative (USTR) official explained. ”These case-specific proceedings will be completed in four months.”

WTO rules allow governments to levy extra duties against countries that export a product at a price lower than that charged in its home market - a practice known as ‘dumping’ - if the ‘dumped’ product is found to be causing, or threatening to cause, material injury to the competing domestic industry.

Under the practice of zeroing, the US ignores certain data when calculating anti-dumping duties. Specifically, it ‘zeroes out’, or ignores, instances where the good in question is actually being sold at a higher price in the US than in its home market.

Zeroing has been subject to a large number of WTO disputes, which temporarily culminated with the WTO Appellate Body rejecting the use of zeroing in administrative reviews in early 2010. Following the ruling, the EU and Japan requested authorisation to retaliate hundreds of millions of dollars in trade against the US to induce compliance with the rulings.

However, these separate arbitration requests were put on hold after Washington signalled interest in negotiating a non-adjudicative solution. Arbitration was scheduled to resume on 6 January and 1 February 2012.

With this week’s agreement, Brussels and Tokyo forego this right to seek retaliation, thereby putting a definite end to the dispute.

New methodology to affect all countries

Other countries affected by Washington’s new policy were not prepared to voice their reaction to the changes in US zeroing policy.

Importantly, the new methodology announced on Monday will impact goods from all countries, not only those of Japan and the EU. Brazil, Mexico, and Vietnam - who have all also won cases over the use of zeroing in administrative reviews but who had not yet reached the retaliation stage - are thus to benefit from the tri-lateral mutually agreed solution.

However, Washington’s offer to recalculate existing anti-dumping duty cash deposits have not been extended to Brasilia, Mexico City, and Hanoi - this privilege is only due to Brussels and Tokyo.