Wednesday, March 3, 2010

History of Zeroing

Last blog entry I explained what "zeroing" was. I also knew, "zeroing" had been contested for a long time, but I was surprised to see how far back it went.

The earliest case I could find contesting the method of zeroing was, Serampore Indust. v. Dep't of Commerce. 11CIT 866 (1987). After that there was Bowe Passat Reinigungs-und Waschereitechnik Gmbh v. United States 20 CIT 558 (1996). In both these cases the use of "Zeroing" (explained in my previous blog entry) was considered a permissible interpretation of the statute. Both of these cases are too old for me to find online for free, so I would have to run down to my alma mater's law library, or pay to read them.

The standard of review on this is based on the reasonable interpretation statute know by many as the Chevron Doctrine. If the use of "zeroing" was a "finding" then the standard of review would have upheld Commerce's finding unless "unsupported by substantial evidence."   However, the us of zeroing was considered an "interpretation" of the statute. Under the Chevron Doctrine the courts will up hold the agency "interpretation" of an ambiguous statute if it is a "reasonable" interpretation.

The statute everyone is arguing about reads as follows: the "dumping margin is ... the amount by which the normal value exceeds the export price..." 19 U.S.C 1677. (emphasis added)  So the Commerce Department read that to mean that there weren't supposed to use any negative margins, i.e. only margins where the normal value "exceeds" the export price are written into the statute. See Timken Slip Op. 02-106. Now that might be fine if they weren't calculating margins using average prices over periods of a year. Because it just disregards the rules of math. The difference of one average between another average is the difference between the whole. The difference between one average and a construct is not the difference of the whole. It is apples and oranges being added together.

The first time the practice of zeroing was found inconsistent with WTO obligations, it was the European Union not the Untied States who was doing it. In 1998 India charged European Union was improperly calculating dumping margins by using zeroing in their calculations of bed linens from India. WT/DS141/AB/R. The WTO dispute settlement body, of course, has a different standard of review. It can look at the treaty and decide whether or not a practice is consistent or inconsistent with the treaty.It does not have to provide any deference to one side or the other.

But when applying the treaty to domestic law, the WTO treaty is not what they call "self executing." This means that after the executive branch negotiates the treaty, then they have to bring it back for United States for the Congress to write it into law domestic law. Some treaties negotiated and ratified by the Senate become US Law automatically and are on par with every other Federal law. U.S Const. art. II sect. 2 and U.S. Const. art.IV. But for the purposes of law, the much unjustly maligned WTO treaty, is actually more aspirational then it is binding on the United States.

Immediately after the WTO decision against the European Union, United States plaintiffs began trying to use it in U.S. Courts. See Timken (2002). Corus Staal (2003). The argument being the old "Charming Betsy Doctrine" that when interpreting U.S. law, courts will find that Congress intended the law to comport with accepted international law. See Murray v. Schooner Charming Betsy. 6 U.S. 64 (1804) (citing a U.S. Supreme Court case from 1804 is also pretty impressive.) Therefore an interpretation that is consistent with international law is reasonable and one that does not is not reasonable. If the WTO ruled that the interpretation of the statue is inconsistent with our treaty obligations then Congress must not have intended that and zeroing would not be a reasonable interpretation of the statute.

But the CIT for in both cases 1) the treaty doesn't specifically prohibit zeroing, 2) the Bed Linen case was not a reason enough to strike Commerce's interpretation, 3) WTO DSB decision are not binding on U.S. Courts and 4) WTO DSB decisions are not "self executing," they require Congress to change the law for them to have effect. Corus Staal Slip Op 03-25

So then the United States was challenged directly on it's use of zeroing this time by the European Union. WT/DS294/R. (2003) The EU hot off being called out on it's questionable antidumping practices immediately points its fingers elsewhere. The WTO DSB found U.S. zeroing practices specifically inconstant. End of the story right? Not quite. The DSB decision for all their worth only suggest other member to change their ways or face possible sanctions. They ndo not have the power to reach in and change any countries domestic law.

Plaintiffs again challenged zeroing  in court after the panel report in 2005 to no avail. See NSK Bearings v. Untied States Slip Op 05-1 . and then Corus Staal BV v. United States. Slip Op. 05-85. The same result that the court backed up Commerce's interpretation. The court was uhelp in both cases on appeal.

The U.S. appealed the WTO decision, and finally lost in the WTO appellate body, on April 18th 2006. So on March 6th 2006 commerce announced it would stop using the method of zeroing on new investigations. See 71 FR 11189. and then the final decision 73 FR 74932, Dec. 10, 2008. Commerce would start using average to average price comparison when calculating dumping margins in investigations. But it maintained it would continue to use zeroing on closed investigations under administrative review or sunset review.

Then not using Zeroing was challenged. In Searing Industries the court ruling that Commerce could refrain from using zeroing. Zeroing in initial investigations is no longer used and the Court has ruled that not using zeroing in initial investigations is also a reasonable interpretation if the statute. CIT. Slip Op -09-129.

But Commerce still uses zeroing in administrative reviews. These are dumping cases that have already had a final investigation and once a year they receive an annual administrative review if any of the parties request it. The use of zeroing in the administrative reviews was upheld by the court as well. See SKF v. United States. Slip-Op. 09-121

So the state of zeroing is that it is no longer used in the U.S. for investigations, but is still used in sunset reviews, new shipper reviews, and annual administrative reviews. 19 CFR 351.218, 19 CFR 351.214 , 19 CFR 351.213 and read with 19 CFR 351.414 (c) 1 and 2.

And that is were it stands. Zeroing may continue for much longer in the future. The last DSB ruling is a mixed bag and complicated the matter. It found certain measures the US took complied with the WTO finding and certain did not. Further, the appellate body previously allowed zeroing in context of reviews, while zeroing in investigations where "inconsistent." WTO DS294.