The EU and US agreed on 6 February 2012 to bring excessive American anti-dumping duties down to World Trade Organization (WTO) levels. Henrietta Clarke outlines the implications of this change.

Introduction

This decision resolves one of the most long-standing WTO disputes — over the US calculation practice of so-called zeroing in anti-dumping investigations. The roadmap which has now been agreed sets out the steps the US will take to comply with WTO rulings in the future calculation of duties when the US authorities find that imported products from a particular exporter enter the US market below the normal market price. The US has now committed itself to complying with the main elements of the WTO ruling, by removing zeroing in all ongoing and future cases — so no EU exporter should be subject to an anti-dumping duty affected by zeroing in the future.

Zeroing

A country has the right to impose anti-dumping duties on foreign products that enter its market at prices lower than the normal value of the product on the foreign market. Zeroing is a methodology used by the US in the calculation of dumping margins. WTO rulings have confirmed that this method increases, often substantially, the exporter’s margin of dumping and thus the amount of anti-dumping duty that the exporter has to pay.

When applying zeroing, the US compares the price of a product on the EU market with the price of the product on the US market during a certain investigation period. However, it disregards (by setting at zero) all transactions in which the price of the product on the EU market is smaller than the price on the US market. EU practice would compare the average home market price with the average export price to determine the dumping margin. The practice of applying zeroing has an impact in most US anti-dumping cases and it has led to higher duties for EU exporters. The WTO Appellate Body has consistently condemned this methodology over the past decade as unfair.

WTO disputes

In 2004 and 2007, the EU launched WTO disputes against the US for the use of zeroing in the calculation of anti-dumping duty rates. A number of other countries lodged similar cases. Two WTO Appellate Body reports confirmed that the US must change its methodology for dumping calculations with zeroing, both in new cases and in review investigations. However, the US only partially complied and did not address zeroing in reviews of the anti-dumping rates so that EU exporters had to pay increased anti-dumping duties in all ongoing cases.

In 2010 the EU requested the WTO for authorisation to impose sanctions to induce compliance, and the US then offered to take the first step to compliance. The sanction arbitration proceeding was suspended and will remain suspended while the US takes the steps outlined in the roadmap. The EU will closely monitor the US application of the new practice.

The roadmap

Following the signing of the roadmap, the US has now committed itself to applying a new methodology to calculate anti-dumping duty rates in all new review anti-dumping investigations launched as of mid-February 2012. In addition, the anti-dumping duty rates on goods imported into the US after May 2010 will also be determined under the new methodology without zeroing.

About 30 EU exporters who are currently affected by ongoing US anti-dumping administrative reviews for 10 different products will benefit as a result. A further 35 EU exporters in anti-dumping cases for eight different products, some of which are currently not taking part in US anti-dumping administrative reviews but are affected by zeroing, will have their anti-dumping duty rates determined without zeroing. Therefore, as of June 2012 no EU exporter should be subject to an anti-dumping duty affected by zeroing. This could save EU exporters approximately $15 million a year.

Last reviewed 4 May 2012