The United States last week entered separate deals with the European Union and Japan to settle their successful World Trade Organization (WTO) legal challenges to the U.S. antidumping duty (AD) practice known as "zeroing." Zeroing is a methodology that the U.S. Department of Commerce (Commerce) has frequently applied in its AD margin calculations to compare the U.S. price of an allegedly dumped import to the "normal value" (or the appropriate price in the exporting country) of that import. In a February 14, 2012 Federal Register notice, Commerce announced changes in its regulations that largely eliminate the use of zeroing in AD administrative reviews, new shipper reviews, five-year "sunset" reviews and expedited reviews (collectively, reviews). These changes may lower AD margins for respondents in many pending and future reviews but will not affect already completed reviews. In response to similar earlier WTO challenges, the United States already eliminated Commerce's application of the zeroing methodology in AD original investigations.
In practice, the zeroing methodology would be applied as follows: When the normal value is higher than the U.S. price, the difference is treated as the dumping amount for that sale or that comparison; when the U.S. price is higher, the dumping amount is set to zero rather than its calculated negative value. All dumping amounts are then added and divided by the aggregate export sales amount to yield the company's overall dumping margin. The zeroing methodology eliminates "negative dumping margins" from the dumping calculation, leading to higher dumping margins. The elimination of zeroing means that the negative dumping margins "offset" positive dumping margins.
In its modified regulations, Commerce hinted that there may be instances in which it could use the zeroing methodology if it "determines that application of a different comparison method is more appropriate." The use of zeroing in "targeted dumping" cases, for example, has not yet been found to violate WTO rules. Commerce may use a targeted dumping analysis if a foreign exporter is dumping products in a particular region or during a particular time span to gain advantages while hiding its dumping behavior through other non-dumped sales. Domestic industry petitioners in the future may push Commerce to undertake more targeted dumping cases so it can continue to use the zeroing practice, which favors domestic industries seeking higher dumping margins on competing imports.
Those involved in, subject to or contemplating AD proceedings may wish to seek legal counsel regarding these changes and how they may affect their companies.