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Legal Update

WTO Rejects US Department of Commerce’s Antidumping Methodology for Non-Market Economies

25 November 2014
Mayer Brown Legal Update

Since its inception in 1995, the World Trade Organization (“WTO”) has addressed 83 disputes involving the imposition of antidumping duties to imported goods. This is the most, by far, of any subject litigated at the WTO. Most recently, a WTO panel ruled on a challenge to the United States’ application of antidumping duties in United States – Anti-Dumping Measures on Certain Shrimp from Viet Nam (DS429). In its decision, the panel held that the United States’ violated several aspects of the WTO Antidumping Agreement and the GATT 1994.

The United States Department of Commerce (“USDOC”) initiated an investigation into allegations of Vietnamese producers/exporters dumping shrimp on the US market in January 2004; it issued an order to impose antidumping duties on those products in February 2005. In the original investigation and subsequent administrative reviews, USDOC applied a special methodology based on Vietnam’s designation as a non-market economy (“NME”). This is the same methodology USDOC applies to imports from China. For antidumping investigations involving NMEs, USDOC applies a rebuttable presumption that all companies within Vietnam are essentially part of a single, government-controlled entity that should be subject to a single antidumping duty rate (i.e., a “Vietnam-wide entity rate”). In order to receive an individual rate, Vietnamese producers/exporters are required to pass a “separate rate test.” Additionally, in the original investigation and subsequent reviews, USDOC employed a practice called “zeroing,” in which it assigned a “zero” value to non-dumped sales in calculating any particular company’s weighted average dumping margin.

Vietnam challenged several aspects of the United States’ antidumping measures. First, it argued that USDOC’s zeroing methodology violates several provisions of the WTO Antidumping Agreement and the GATT 1994. Second, it argued that USDOC’s practice of assigning a “Vietnam-wide entity rate” to Vietnamese producers/exporters based on a presumption is inconsistent with the Antidumping Agreement “as such.” Vietnam also challenged Section 129(c)(1) of the Uruguay Round Agreements Act (“URAA”), a US statutory provision that directs USDOC’s implementation of adverse WTO rulings.

Finally, Vietnam challenged USDOC’s calculations in the “sunset” review of the antidumping order on Vietnamese shrimp, and USDOC’s failure to revoke the order with respect to companies that demonstrated an absence of dumping. In both of these claims, Vietnam argued that USDOC relied on WTO-inconsistent calculations and that its conclusions are, therefore, WTO-inconsistent.

The panel found, with regard to USDOC’s practice of zeroing, that the United States acted inconsistently with its obligations under Article 9.3 of the Antidumping Agreement and Article VI:2 of the GATT 1994. The panel noted that the United States made the same arguments in other disputes involving its zeroing practice and that the Appellate Body rejected them each time. While there is no formal “precedence” in WTO jurisprudence, the panel echoed the Appellate Body’s statement that “following the Appellate Body’s conclusions in earlier disputes is not only appropriate, but it is what would be expected from panels, especially where the issues are the same.”1

With regard to USDOC’s presumption that NME producers/exporters are part of a single, country-wide entity, the panel found that Vietnam successfully established that the practice amounts to a measure of general application that can be challenged “as such,” meaning the panel’s ruling would apply to the measure itself rather than specific applications of the measure.

Addressing the merits of Vietnam’s claim, the panel found that USDOC’s presumption that all exporters and producers within an NME are not independent from the State conflicts with the United States’ obligation under Articles 6.10 and 9.2 of the Antidumping Agreement to calculate individual dumping margins for each known exporter or producer of the subject merchandise. While this obligation is subject to an exception for cases involving too many producers and exporters (in which Members may select a statistically relevant sample of respondents instead), the panel found that USDOC’s single-entity presumption is not related to the number of individual exporters and producers. Further, the panel noted that the USDOC fails to make any affirmative determination as to the precise number of known producers and exporters in NME investigations, but rather begins with a presumption that there is only one producer in the form of an NME-wide entity.

The panel then turned to Vietnam’s challenge of Section 129 of the URAA, which sets out the procedure by which the United States implements the recommendations and rulings of the WTO Dispute Settlement Body (“DSB”) with respect to antidumping and countervailing duty actions. The statute provides that rulings under Section 129 will only apply to entries made on or after the date on which USDOC is ordered to implement a Section 129 determination. The panel found that, because Section 129(c)(1) does not preclude implementation with respect to prior unliquidated entries, Vietnam failed to establish that it is “as such” inconsistent with the Antidumping Agreement.

Next, the panel reviewed Vietnam’s claims with respect to the sunset review of the antidumping order on shrimp from Vietnam. Because USDOC relied upon dumping margins that are WTO-inconsistent, based on the panel’s previous findings, the panel held that USDOC’s likelihood-of-dumping calculation in the first sunset review is also inconsistent with the United States’ obligations under Article 11.3 of the Antidumping Agreement.

Finally, the panel found that, with respect to USDOC’s failure to revoke the antidumping order as to specific companies, USDOC again relied upon WTO-inconsistent dumping margins in its determination. Thus, the panel found that USDOC acted inconsistently with the United States’ obligations under Article 11.2 of the Antidumping Agreement. 

1 Panel Report, US – AD Measures on Shrimp from Vietnam, WT/DS429/R, para. 7.80 (quoting Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews, WT/DS268/AB/R, para. 188).


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