After explaining what zeroing is here. Then explaining the legal background here. I now conclude with my personal critic of practice.
The idea that a dumping margin should be calculated by subtracting one average price by another not so average price is a little perverse. It breaks the rules of math. The amount the normal price exceeds the export price should equate to the amount the normal average price exceeds the export average price. Adding, subtracting or multiplying the same number or effect to each side of the calculation is the basis of algebra. The export price can not equate to the average export price, where not all prices are averaged but are altered to make some equal to the normal values, and the rest averaged. It breaks the rules of math, it makes apples oranges and grapes peaches. If the these rules were applied to everyday purposes planes would fall out of the sky and building would collapse.
The fact that this is somehow fine is linked the the permissible statutory interpretation doctrine from Chevron. Basically, there are words here, and they say something, but it is possible to read them differently. The two step process is, ask first if the words of the statute are ambiguous, then ask if the interpretation is permissible? Well the statute is almost always ambiguous. Otherwise why would it be challenged in court? Then the interpretation is almost always permissible. It is much easier to find an interpretation permissive, than not permissive. This is the deference given by the courts to the executive branch in interpreting statutes. Theory behind the deference to the executive branch in interpretation the statute is that if the executive branch interprets that differs from Congresses intent, Congress is in a much better place to correct them than the court politically and the executive is also more accountable as a political branch to the people than the court.
But in this case law of dumping duties is derived from a non-self executing treaty. Which means a treaty was negotiated, and instead of being adopted as law, Congress passes it into law as a US domestic law. Then the executive branch interprets the law. But usually, the executive and Congress, would prefer to interpret a treaty that benefits their domestic political base. If the executive chooses to interpret in a way the that penalizes unfairly foreign companies on behalf of U.S, domestic parties Congress is not about to pass a law to rectify it. So both the executive branch and the Congress have no, or limited interest, in trying to interpret a trade treaty fairly. The only branch left to interpret a statute based on a treaty fairly is the judicial branch. But if the judicial branch decides it best to leave the question to the political branches, as it does with other domestic law, then the only recourse left is external.
So faced with the inability to get a fair hearing in the United States system, the foreign companies must challenge the practice zeroing in the WTO dispute settlement body (DSB). But, WTO rulings are not binding on the US courts, nor are they binding on the executive branch. The court defers again the the executive to uphold, or squirm around, WTO rulings, whichever it prefers. If the executive does nothing, or not enough, then the recourse, of the foreign interests is trade barrier retaliation. That sets off a trade barrier retaliation that is calibrated to cause enough damage to domestic industries, to get the domestic industries to pressure the executive the change the offensive policy. Is this anyway to run a railroad?
Obviously its no way to run a railroad. The zeroing interpretation should not have been held permissible in the first place. But like a kid who can not back down from a fight, when the WTO ruling against the practice came down, the US courts could not back down. There are plenty of reasons why a WTO DSB ruling should not be binding on a US court. Maybe using the Charming Betsy doctrine in conjunction with WTO ruling to change the executive interpretation of a treaty, also would set a bad precedent. But if all three branches of government have no interest in upholding trade treaty obligations then the only course will always be the WTO DSB and trade retaliation. Even in clear cut poorly interpreted statutes like this one.
The Court of International Trade prides itself, and rightly so, as one of the few courts in the world where foreign and domestic companies can come and challenge the enforcement of trade policy. It is better than most nations offer their trading parties. Many rulings are a testament to fairness. But it still would be better for the court to decide cases such zeroing in light that it is the last chance of fairness before the convoluted remedies WTO DSB are used.
Friday, March 26, 2010
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.
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.
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