[I]t looks like (i) all of the pending WTO disputes unrelated to the EU/Japan agreements will continue unabated; and (ii) foreign exporters, US importers and/or foreign governments will have to bring additional WTO challenges in order to force USTR to recalculate all the duties that were illegally calculated and collected pursuant to the zeroing methodology. And, even though WTO rules (or at least the Appellate Body's interpretation of them) are abundantly clear on the illegality of zeroing, point (ii) could, of course, cost plenty of time and money before it actually produces results. (Sorry, poor developing countries with tiny trade budgets, but you're gonna have to pay a lot and threaten us before we correct our errors!)Since that time, DOC issued its Final Rule on zeroing. It has confirmed my initial concerns... and raised a few more, as noted in a recent Law360[$] article on the subject:
Despite a recent announcement by the U.S. Department of Commerce that it will stop using zeroing in administrative reviews of anti-dumping duties, the years-long battle over the controversial methodology is far from over, attorneys say....So what are those "unresolved issues"? Well, first, the new Commerce zeroing rule only applies on a prospective basis:
[T]he notice by Commerce leaves several issues unresolved and does not completely foreclose the use of zeroing in all future cases, meaning that litigation and acrimony over the practice will continue for the foreseeable future, attorneys said.
[T]he announcement by Commerce to exclude zeroing in administrative cases applied only on a prospective basis, meaning it would have no effect on duties that have already been collected based on the zeroing methodology.Second, the rule doesn't actually kill off zeroing entirely because it leaves open the possibility Commerce applying the methodology in an investigation where "targeted dumping" is alleged:
“There's no possibility via the Department of Commerce for a recalculation or a refund of those duties, despite the fact that this is an admission by Commerce that what they've been doing for years and years is inconsistent with [WTO] Appellate Body decisions”....
Despite what the announcement says, it's also quite possible that Commerce will continue to use zeroing in some cases, attorneys said, because the U.S. has taken the position that the use of zeroing is acceptable in cases of so-called “targeted dumping.”I first discussed Commerce's newfound love of targeted dumping back in 2010, and attorneys surveyed by Law360 earlier this week (including me) noted that, because this little loophole still exists (and because zeroing leads to higher anti-dumping duties), it's extremely likely that domestic petitioners will allege targeted dumping in most future AD cases. It's also extremely likely that new domestic and WTO litigation will emerge as US importers and foreign exporters/countries challenge the zeroing methodology in targeted dumping cases (neither a WTO panel nor the Appellate Body has ruled on zeroing and targeted dumping... yet). The outcome of such challenges isn't clear, but if past WTO rulings on zeroing in other contexts are any indication, the US will likely lose here too. Eventually.
Targeted dumping is when a company is not dumping its products in the U.S. overall, but is instead dumping its products in a specific region or during specific time periods. For instance, if a company were selling its products at less than fair value in the southwest U.S., but at more than fair value in the northeast, it would be engaged in targeted dumping....
Third, and as I noted a couple weeks ago, Commerce's Final Rule doesn't end several WTO disputes and US court cases on zeroing that are already in progress, and it also doesn't foreclose additional disputes for anti-dumping reviews not covered by the rule (e.g., reviews just recently concluded or still in progress):
The new rule applies to all future dumping cases, but other countries that have challenged the use of zeroing could still impose retaliatory measures on the U.S. if they prevail at the WTO. While the U.S. has said it hopes the new rule will assuage the concerns those countries have about zeroing, it remains to be seen how they will respond, attorneys said....Well, it no longer "remains to be seen" how countries will respond to the new zeroing rule, as well as the US-Japan and US-EU Agreements. They are going to fight, despite USTR's "hopes" that they'll just pipe down, accept the fact their companies paid millions of dollars in additional (illegal) anti-dumping duties in "old" reviews where zeroing was used, and be happy about Commerce's much-delayed (and coerced!) change of heart. (Shocking, I know.) Two very recent examples make this fact very clear.
The new rule also has no effect on the numerous cases pending in U.S. courts over the use of zeroing in past reviews, [attorney Lew] Leibowitz said.
“There are a lot of cases over duties that are tied up in litigation, and the rule doesn't speak to those,” he said. “It's up to the courts to decide if the U.S. violated U.S. laws.”
Last year, the Federal Circuit ruled in two cases that Commerce had failed to adequately explain its rationale for using zeroing in administrative reviews, but not in original investigations.
Those cases, which are still pending, and others at the U.S. Court of International Trade each apply only to the individual investigation at issue, so litigation over the past use of zeroing is likely to go on for some time.
First, the WTO announced on Tuesday that its Dispute Settlement Body established a panel to address Korea's January 2012 complaint against the United States' use of zeroing in anti-dumping reviews of certain Korean steel products. The announcement shows that Commerce's Final Rule was insufficient to address Korea's concerns (emphasis mine):
Korea explained that consultations with the US, requested on 31 January 2011, allowed for a better understanding of the parties’ positions but failed to resolve the dispute. Korea noted that the US announced it would no longer use zeroing in annual reviews and welcomed the US efforts (see also disputes DS322, DS350 and DS294 below). Korea regretted that the US plans did not go far enough to fully address its concerns. Korea noted that zeroing in administrative reviews had repeatedly been found inconsistent with the WTO Anti-dumping Agreement and that the US was expected to amend the methodology accordingly.Right, "no purpose"... other than to push the United States into recalculating "zeroed" anti-dumping duties on Korean imports that would not otherwise be recalculated pursuant to Commerce's new rule. And if you're a Korean exporter or US importer who paid those extra duties, that's a pretty big purpose, I'd say.
The US said that its Department of Commerce published on 14 February 2012 a modification to its procedure regarding the use of zeroing in anti-dumping reviews. The US said that this modification would address the matter covered in Korea’s panel request. The US added that the process of modifying its methodologies to respond to DSB rulings on zeroing had been completed and, therefore, moving forward with this dispute served no purpose.
(The same WTO announcement also noted that Brazil is still weighing its options with respect to its complaint against the US for zeroing in reviews of Brazilian orange juice imports. Wanna bet on what they decide to do?)
Second, the WTO separately announced that Vietnam has filed a brand new complaint against the United States related to US anti-dumping reviews of Vietnamese shrimp. The text of the complaint isn't out yet, but reports indicate that it's a follow-up to Vietnam's successful 2010-2011 complaint against - surprise! - the United States' zeroing methodology. The timing of Vietnam's new complaint - about a week after the publication of Commerce's Final Rule - makes clear that they, like Korea, are not going to stop litigating past US infractions just because the United States has now promised not to commit new ones.
Well, unless targeted dumping's involved, of course.