A WTO Panel has ruled that anti-dumping measures taken by the United States on shrimp from Viet Nam violated US obligations under the WTO Anti-Dumping Agreement. The Panel ruled in favour of Viet Nam on most – although not all – of the claims arising from the administrative reviews of the anti-dumping order by the United States Department of Commerce (USDOC).

Significance of Decision/Commentary:

The WTO-inconsistency of “zeroing” is nothing new, and this Panel Report is the most recent addition to the considerable corpus of jurisprudence ruling against this practice. The WTO Appellate Body has ruled against the use of zeroing both in original investigations and reviews, and the Panel in this case reviewed and applied that case law.

In a Concurring Opinion in its 2009 decision in US – Continued Zeroing, one Member of the Appellate Body pleaded for an end to the litigation on zeroing: “The Appellate Body has decided the matter. At a point in every debate, there comes a time when it is more important for the system of dispute resolution to have a definitive outcome, than further to pick over the entrails of battles past. With respect to zeroing, that time has come.” The Panel in the present case agreed: “[O]n the question of zeroing, the Appellate Body has spoken definitively, the Appellate Body’s decisions have been adopted by the DSB, and the membership of the WTO is entitled to rely upon these outcomes.”

The Panel addressed a number of highly technical – yet very important – issues related to the establishment of margins of dumping in administrative reviews, as described in this document. The Panel resolved these technical claims in a purposeful manner, insisting that investigating authorities adhere to core principles established by the Appellate Body.


Background: The challenged measures

The USDOC imposed anti-dumping duties on certain warmwater shrimp from Viet Nam in 2004, prior to Viet Nam’s 2007 accession to the WTO.

This case involved not the original antidumping investigation, but rather the administrative reviews of the order. Virtually every country in the world other than the United States maintains a prospective system for collecting anti-dumping duties, i.e., the duties are assessed at the time of entry of the goods. By contrast, under the US retrospective duty assessment system, a cash deposit is required upon entry, and the definitive duties are determined during the annual administrative reviews of the order conducted by the USDOC. In the present case, Viet Nam challenged two administrative reviews of the order on shrimp.

Zeroing: “The Appellate Body has spoken definitively”

Zeroing refers to the practice whereby an investigating authority discounts so-called “negative dumping margins” to zero. Where the export price of a product is lower than the price in the exporting country, this creates a positive dumping margin. However, when zeroing is used, investigating authorities do not give any credit for negative dumping margins, i.e., when the export price of the product is higher than the price in the exporting country. The investigating authority does not average positive and negative dumping margins together – instead, it considers all negative dumping margins to be zero. This has the effect of inflating the overall average dumping margin, and can lead to the imposition or maintenance of antidumping duties which may not otherwise apply at all.

Article 2.4 of the Anti-Dumping Agreement requires that when an investigating authority calculates dumping margins, a “fair comparison” must be made between the export price and the normal value. Viet Nam argued that the application by the USDOC of “simple zeroing” in the administrative reviews at issue violated this provision.

The United States did not contest that it used simple zeroing in the administrative reviews for shrimp from Viet Nam. However, it noted that the margins of dumping resulting from the reviews were either zero or de minimis. The United States argued, among other things, that where the margins of dumping were zero or de minimis, “they cannot be characterized as ‘artificially inflated’ or ‘inherently unfair.’” The Panel rejected this US position, reasoning that “[e]ven in cases where no anti-dumping duties are assessed, the application of zeroing distorts the prices of certain export transactions, because export transactions made at prices above normal value are not considered at their real value.” The Panel therefore ruled that the United States breached Article 2.4 by using zeroing in the reviews.

Viet Nam also successfully claimed against the WTO-consistency of zeroing “as such.” The Panel recalled that the Appellate Body had already ruled against the use of simple zeroing in reviews. While the Panel assessed the US arguments to the contrary in the current case, it noted that “the Appellate Body has considered, and rejected, these very same arguments in prior dispute settlement proceedings.”

The Panel therefore ruled that the use of simple zeroing in reviews violated US obligations under both GATT Article VI and Article 9.3 of the Anti-Dumping Agreement, which provides that the amount of the anti‑dumping duty cannot exceed the margin of dumping.

Panel rejects Viet Nam’s claims on limitations on the number of selected respondents

Article 6.10 of the Anti-Dumping Agreement requires investigating authorities to “determine an individual margin of dumping for each known exporter or producer concerned of the product under investigation.” However, it also sets out an important exception: “[i]n cases where the number of exporters, producers, importers or types of products involved is so large as to make such a determination impracticable”, the authorities can “limit their examination either to a reasonable number of interested parties or products by using samples….”

In the present case, the USDOC considered it “impracticable to examine all respondents for which an administrative review had been requested” and therefore limited the number of respondents selected for individual review.

Viet Nam’s claims on this point were very narrow. As the Panel noted, “Viet Nam is not challenging the USDOC’s decision to conduct limited examinations” as impracticable. Nor did it challenge the number of exporters or producers which the USDOC included in its sample. Instead, Viet Nam claimed that “the USDOC’s repeated use of limited examination…caused the USDOC to undermine the rights of exporters and producers provided for in other provisions of the Anti-Dumping Agreement that are dependent on each exporter or producer having individual margins of dumping.”

The Panel rejected this argument, reasoning that it would render “meaningless” the exception provided for in Article 6.10. It stated that “despite the general preference for individual margins, investigating authorities need not determine individual margins for all known exporters and producers in all cases.” Related claims made by Viet Nam regarding the use of selected exporters were also rejected.

“All Others” rate based on zeroing: investigating authority’s discretion is “not unlimited”

Article 9.4 of the Anti-Dumping Agreement imposes certain disciplines on investigating authorities in their selection of the so-called “all others” rate, i.e, the anti‑dumping duty applied to imports from exporters or producers not included in the examination. As the Panel noted, “Article 9.4 states the general rule that this maximum allowable ‘all others’ rate is equal to the weighted average of the margins of dumping established with respect to individually-examined exporters.” However, this general rule is qualified. The provision goes on to state in part that “authorities shall disregard for the purpose of this paragraph any zero and de minimis margins….”

In the present case, all the respondents selected for individual examination in the reviews received a zero or a de minimis margin of dumping. It was unclear how the “all others” rate should be applied in this situation. In an earlier case, the Appellate Body referred to this as a “lacuna” in the Agreement, because “while Article 9.4 prohibits the use of certain margins in the calculation of the ceiling for the ‘all others’ rate, it does not expressly address the issue of how that ceiling should be calculated in the event that all margins are to be excluded from the calculation, under [these] prohibitions [original emphasis].”

Yet despite this “lacuna”, the Panel considered that prior Appellate Body authority stood for “a more general proposition that any ‘margin of dumping’ calculated or relied upon by an investigating authority in the context of the application of the disciplines of the Agreement must be calculated consistently with Article 2”, which sets out the rules for a determination of dumping. The Panel thus considered that “any individual margin of dumping which the investigating authority relies upon in determining the maximum allowable ‘all others’ rate must of necessity have been calculated in conformity with the provisions of Article 2”. The Panel added that “[t]his is true irrespective of whether or not all individual margins are zero, de minimis or based on facts available.”

The Panel thus stressed that “if an investigating authority limits its investigation and applies an ‘all others’ rate to non-selected exporters, its discretion in doing so is not unlimited.” Thus, the “the margins of dumping which are used to establish the maximum allowable ‘all others’ rate must be ones which, at the time the ‘all others’ rate is applied, conform to the disciplines of the Agreement.”

Applying these principles to the case before it, the Panel ruled that “an investigating authority that determines the maximum allowable ‘all others’ rate on the basis of dumping margins calculated with the use of zeroing” acts inconsistently with the Agreement, specifically Article 9.4.

The Panel also rejected a temporal argument raised by the United States. As noted above, the original investigation took place prior to Viet Nam’s accession to the WTO. The United States argued that “the USDOC merely continued to apply the ‘all others’ rate initially applied in the original investigation during the… reviews [original emphasis].” The Panel dismissed this argument, saying that the “USDOC made a new and distinct ‘all others’ rate determination in each of the administrative reviews which are before us.” In the view of the Panel, the “facts squarely contradict the suggestion by the United States that the USDOC merely continued to apply the ‘all others’ rate from the original investigation in the two reviews at issue.”

Thus, the Panel concluded that the United States breached Article 9.4 “as a result of the USDOC’s imposition, in the… administrative reviews, of an ‘all others’ rate determined on the basis of margins of dumping calculated with zeroing[.]”

Rate assigned to Vietnam-wide entity: an “all others” rate cannot be “conditional on the fulfilment of some additional requirement”

Viet Nam also successfully challenged the USDOC decision to assign a high anti-dumping margins to the so-called “Vietnamwide” entity.

This claim arose from the fact that the USDOC treated Viet Nam as a non-market economy. The Department “applied a rebuttable presumption that all shrimp exporting companies are controlled by the Government of Viet Nam, such that they may be treated as operating units of a single, government-controlled, Vietnam-wide entity, rather than individual exporters in their own right.” Exporting companies that were considered part of the “Vietnam-wide entity” were assigned neither their own, individual margins, nor the residual “all others” rate, but rather a distinct – and much higher – rate.

The Panel stated that “the text of Article 9.4 seems clear in requiring that…any rate assigned to non-selected respondents should not exceed the maximum allowable amount provided for in that provision.” The Panel added that “[t]here is nothing in the text of Article 9.4 suggesting that authorities are entitled to render application of an ‘all others’ rate conditional on the fulfilment of some additional requirement.” According to the Panel, Article 9.4 “provides no legal basis for the USDOC not to have applied an ‘all others’ rate to the Vietnam-wide entity.”

The Panel similarly ruled against the USDOC decision to have recourse to “facts available” (i.e., information provided other than by the interested parties). Article 6.8 allows an investigating authority to use “facts available” in cases where “any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation[.]” However, as the Panel noted, “the USDOC had decided not to apply an ‘all others’ rate to the Vietnam-wide entity before any question of non-cooperation could have arisen[.]” The Panel therefore concluded that the USDOC violated Articles 9.4 and 6.8 of the Anti-Dumping Agreement.