The U.S, however, declared that the change wouldn’t be applied to dumping lawsuits already decided or currently in consideration.

Zeroing is a controversial method. The U.S Department of Commerce picks a number of products in the product group suspected of dumping, and measures their prices against a “standard” price. If a product’s price is lower than the “standard” price, the dumping amplitude will be marked “positive.” But if other products have higher prices than the “standard” one, their amplitudes won’t be “negative” but “0”. The overall score of the product group is an average number between “positive” and “0.”

Because of its apparent unfairness, not only does zeroing put defendants at a great disadvantage but it also encourages American businesses to initiate dumping lawsuits. According to WTO statistics, the U.S is the country most enthusiastically pursuing dumping cases, with 352 cases in the last 10 years.

Since June, 2003, the European Union EU has complained about zeroing with the WTO. Other WTO members including Argentina, Brazil, China, Taiwan, Hong Kong, India, the Republic of Korea, Japan, Mexico, Norway, and Turkey have also jointly sued the U.S.

After many debates, the WTO’s Dispute Settlement Body (DSB) reached a final conclusion in May 2006: The use of zeroing violates WTO principles.

On January 9, 2007, the WTO made another decision as set down on Japan’s complaint: The American zeroing is illegal.

Concerning Vietnam

As a WTO member, what kind of damage will Vietnam avoid? VietNamNet discussed this question with Ms. Dinh Thi My Loan, PhD and Head of the Department of Competition Management at the Ministry of Trade.

Can you explain a little bit about Zeroing as used by the U.S to calculate dumping amplitudes?

As we all know, in Announcement No. WT/DS294 issued on October 31, 2005 concerning zeroing regulations and amplitude calculation methods in the American anti-dumping investigation documents, the DSB concluded that the American Department of Commerce DOC didn’t balance when using average comparison method, which violated Clause 2.4.2 in the WTO’s anti-dumping treaty.

Let me give you an example to show to the complete differences between the two methods of calculating dumping amplitudes.

Suppose an EU company sells two products, A and B, on both EU and U.S markets.

According to the WTO’s anti-dumping treaty, investigation authorities have to calculate the average of all the prices of the products. If this method is used, the company in our example has a total difference of 0, which means it doesn’t dump products on the American market.

The U.S, however, has been using its own way of calculation, zeroing. A “negative” difference in prices is automatically converted into an “O” , which means that in our example, the price of Product A on the American market is the same as on the EU market. So, Americans make the calculation “2 + 0 = 2” rather than “2 + -2 = 0” and conclude that the total difference in prices is 2, and apply an anti-dumping tariff rate of 10% (equivalent to 2/20).

What damage did Vietnam suffer in the previous fish and shrimp dumping case to which the U.S applied zeroing?

Before exporting to America, Vietnamese businesses consulted American lawyers who said that if the DOC didn’t use zeroing, shrimp exports from Vietnam to America wouldn’t be considered dumping products. The dumping amplitude was even -9% without zeroing.
Unfortunately, because of zeroing, anti-dumping tariff rates ranging from 4.13 to 25.76% are currently levied on Vietnamese shrimp imports. Thus, every year, our businesses have to pay millions of dollars in tariff.

With the elimination of zeroing, what advantage will we have when facing dumping lawsuits in the U.S?

Eliminating zeroing, the U.S will have to use a fair method to calculate dumping amplitudes. And without high tariff, imports may be more competitive on the American market.

Source: VietnamNet