In a break with a years-long series of rulings, a World Trade Organization dispute settlement panel has upheld a U.S. use of zeroing, a controversial methodology used in trade remedy cases that generally results in higher antidumping and countervailing duties. The decision will be appealed by Canada, which brought the case to challenge U.S. AD/CV duties on softwood lumber imported from that country.

A press release from the Office of the U.S. Trade Representative states that when the Department of Commerce calculates a weighted average dumping margin for a given company it typically takes into account numerous comparisons between sales in the U.S. and sales in the home market or third-country market. When a comparison reveals no dumping the DOC assigns a zero to that comparison rather than a negative number equal to the amount by which the U.S. price exceeds the home market price. This approach is commonly referred to as zeroing, the use of which the WTO has struck down in original AD/CV duty investigations as well as administrative, new shipper, and sunset reviews.

According to USTR, the WTO panel found that the use of zeroing in connection with a WTO-approved alternative methodology to unmask targeted dumping, “which can be hidden when high-priced sales are averaged together with low-priced sales,” is not inconsistent with WTO rules. The panel “reasoned that nothing in the text of the Antidumping Agreement directly addresses the use of ‘zeroing,’” USTR states, and agreed that prohibiting the use of zeroing in connection with the alternative methodology would render it useless.

The panel’s determination, which contrasts with an October 2016 decision against the use of zeroing in cases involving targeted dumping, earned praise from USTR Robert Lighthizer. He said previous WTO rulings on this issue “reflect overreaching by that body” and commended the most recent panel for “doing its own interpretive analysis, and for having the courage to stand up to the undue pressure that the Appellate Body has been putting on panels for many years.”

However, USTR states, the panel also found that the DOC’s aggregation of differences in export prices across categories (i.e., purchasers, regions, and time periods) to find a single pattern of export prices that differed significantly among those categories was inconsistent with the requirements of the WTO Antidumping Agreement. Compliance with this aspect of the ruling could result in a change in AD/CV duties on softwood lumber from Canada.

For more information on zeroing and other trade remedy issues, please contact Kristen Smith at (202) 730-4965.

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