The European Commission and the US solved one of their most longstanding WTO disputes concerning the US calculation practice of so-called "zeroing" in anti-dumping investigations on 6 February 2012.
What is 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 calculation device used by the United States to establish this anti-dumping duty. 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. To illustrate how zeroing works, let's take the example of an EU firm which makes three sales on its home market and three export sales to the US during a certain investigation period. A comparison of such sales is made to determine the dumping margin.
They signed a roadmap which 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 some imported products from a particular exporter enter the US market below the normal market price. As a result, no EU exporter should be subject to an anti-dumping duty affected by zeroing in the future. The EU will closely monitor the US application of this new practice.
"This understanding solves this longstanding dispute", said EU Trade Commissioner Karel De Gucht. "It will bring immediate relief to EU exporters who will no longer have to pay excessive anti-dumping duties; some of them will not pay any anti-dumping duties at all". Referring to intensive negotiations over the past months, he welcomed that the EU and US were able to find a way forward. "We have now re-established a level playing field for our companies", he added.
"Zeroing" is a calculation method the US authorities used when calculating duty rates for products that entered its market at dumped prices in review investigations (MEMO/12/73). Anti-dumping duties are additional duties which are imposed on top of the normal customs duty to offset dumping. Until now, the current US calculation practice led to higher duties for EU exporters, despite the fact that this methodology was found to be WTO-inconsistent in a series of dispute settlement cases.
With the roadmap signed today, the US committed itself to apply 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. This will benefit about 30 EU exporters who are currently affected by ongoing US anti-dumping administrative reviews for 10 different products.
Furthermore, 35 EU exporters in anti-dumping cases for 8 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. At a very rough estimate, this could save EU exporters about USD 15 million a year.