Japan Appealing WTO Zeroing Ruling

Japan's Ministry of Economy, Trade and Industry ( website) today announced its vow to appeal the recent World Trade Organization ruling, partially in favor of U.S. use of "zeroing" in dumping determination calculations. In a September 20 ruling, the WTO's Dispute Settlement Body (DSB) found that "zeroing" cannot be used in the original investigations which may find dumping has occurred. However, subsequent administrative reviews may use zeroing. The DSB's decision, however, seems to contradict an April decision in which the WTO ruled against the U.S. and in favor of a European Union complaint over the U.S. use of zeroing. In that decision, the WTO determined zeroing cannot be used and violates WTO rules regarding dumping calculations. Some background may help explain the arguments. In order to determine if dumping (sales at less than fair value) has occurred, individual product selling prices are compared: home country vs. the U.S. If the selling price is lower in the U.S. than in the home country, the U.S. determines dumping is likely to have occurred. Samples are calculated across a high volume of individual items, and a weighted average selling price is calculated. Normally, these calculations would also include items where the selling price in the U.S. is found to be higher than the selling price in the originating country. Higher selling prices would normally be offset against lower selling prices, for a grand total weighted average. But when "zeroing" is employed, prices that are found to be higher in the U.S. are removed from the calculation and changed to zero. Critics have argued for many years that the zeroing method -- used and since abandoned by all but the U.S. -- is an obvious mathematical artifice to inflate the differences, find dumping where none exists, and calculate unfairly high punitive antidumping duties. In an earlier complaint to the WTO, METI cited 13 specific sections of WTO and international trade law which are violated by U.S. use of zeroing. Their claim is that zeroing has repeatedly been found to violate WTO, GATT and Marrakesh Agreement trade provisions. U.S. antidumping duties levied on Japanese bearings are a particularly difficult issue. Of the 15 examples of faulty U.S. dumping calculations claimed by Japan, only two relate to the expected steel products; 13 relate to bearings. Zeroing calculations are built into two key software systems used by the U.S. to comb data and perform a wide variety of trade-related determinations. The U.S. has alternatively pledged to abandon zeroing, as the EU and other key trade partners have done, then reversed itself and refused to abandon zeroing. An METI official said: "We will appeal to the WTO's Appellate Body on Wednesday, protesting against the report that zeroing, a U.S. antidumping measure, is not against the WTO rules. Over the past five years, the Japanese steel industry has been badly hurt by zeroing, particularly in exports of bearings."