Zeroing refers to a controversial methodology used for calculating margins of dumping and anti-dumping duties. Generally speaking, while calculating margins of dumping and anti-dumping duties against an allegedly dumped good, the investigative authority makes multiple comparisons of the export price and normal value (i.e., the home market price) of this good, and then aggregates the results of those comparisons, whether positive or negative, to calculate a dumping margin for the product as a whole. However, under zeroing, the authority does not offset positive differences with negative ones (where the product is being sold for more abroad than in the home market) and sets negative comparisons as zero instead. Therefore, since negative amounts are ignored under zeroing, this leads to the calculation of a dumping margin and an antidumping duty in excess of the actual dumping level of the alleged product, making it highly possible for the authority to make an affirmative determination of dumping, thereby imposing a higher anti-dumping duty.

Traditionally, the United States was the main user of zeroing methodology in its anti-dumping investigations and reviews. Thus, since 2004, the European Union and Japan had separately called for the establishment of several World Trade Organization (WTO) dispute settlement panels to rule on the U.S. practices of zeroing. Although the WTO's Appellate Body has consistently ruled that zeroing is illegal, whether used in original investigations, administrative reviews, new shipper reviews or sunset reviews, [1] the U.S. Department of Commerce (USDOC) only completed its modification for original investigations in 2007 and announced it would stop using zeroing to calculate margins of dumping starting then. Modification for reviews was suspended due to opposition from U.S. domestic industries and the Congress.

Since the U.S. failed to implement the WTO rulings condemning zeroing by the deadlines, the EU and Japan submitted their requests to the WTO seeking the WTO's approval to impose hundreds of millions of U.S. dollars in retaliatory duties on U.S. goods (US$311~477 million dollars for the EU, US$248.5 million dollars for Japan). To avoid being subject to massive trade retaliations, the United States continued to negotiate with the EU and Japan and reached agreements on February 6, 2012.

According to these agreements, the USDOC will issue a long-awaited “final rule” implementing changes drafted in December 2010 that will end zeroing for the calculation dumping margin and antidumping duty assessment rate in antidumping duty reviews. The United States also promised that the DOC would initiate proceedings which would be completed in four months to recalculate antidumping duty deposits without zeroing for certain individual antidumping cases involving the EU and Japan. On the other hand, the EU and Japan, in return, agreed to withdraw their existing retaliation requests.

Meanwhile, the United States issued its modification for anti-dumping review on February 14, 2012 and completed the final results for recalculating antidumping duty deposits for those existing antidumping cases involving the EU and Japan before July 2012. Accordingly, following these actions taken by the United States, the EU and Japan withdrew their requests for retaliatory authorization in June and August 2012, respectively, to formally end the longstanding WTO dispute proceedings against the United States.
The zeroing practice was first challenged by India in a WTO complaint initiated in 1998 against EU antidumping duties on Indian bed linen. Since then, over 30 WTO panel and Appellate Body rulings have been issued targeting the continued U.S. use of zeroing. Since the modifications in methodology, which took effect on Feb. 14, will not only affect products from the EU and Japan, but also those of all countries in the world, it may be prudent to dissuade other countries (including Brazil, Mexico, and Vietnam, who, like the EU and Japan, successfully challenged the DOC’s use of zeroing in administrative reviews) from submitting requests in the future for retaliation against the United States for its lack of compliance with the WTO’s rulings on zeroing.





[1] Relevant Appellate Body rulings of zeroing:
(1) DS294 (EU-US)：http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds294_e.htm。
(2) DS350 (EU-US): http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds350_e.htm。
(3) DS322(Japan-US): http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds322_e.htm。