Pridgeon & Clay, Inc.
Grand Rapids, Michigan 49507
February 2007

 The Honorable Charles B. Rangel, Chairman
Committee on Ways and Means
1102 Longworth House Office Building
Washington, D.C.  20515

 Dear Mr. Chairman:

On behalf of steel consuming industries, I am writing to encourage support for implementing the Department of Commerce’s recent decision to abandon the WTO-illegal practice of zeroing, in which negative price comparisons are inaccurately treated as though they were zero.  Abandoning zeroing will result in significant benefits to U.S. manufacturers and the economy as a whole.

In antidumping proceedings the Commerce Department compares all U.S. sales of an imported product to a normal value (usually the home market selling price) to determine whether, and the extent to which, dumping (sales at less than normal value of the product as a whole) has taken place.  Zeroing refers to the practice employed by the Commerce Department of considering only those U.S. sales where normal value is greater than the U.S. price, and ignoring transactions where the reverse occurs, instead setting such negative comparison transactions equal to zero.

Under this practice, the weighted average margin of dumping is calculated without taking into account negative comparison sales.  Zeroing is currently used in investigations and administrative reviews, as well as other proceedings under the antidumping law.  The Department’s current practice of zeroing has been ruled inconsistent with U.S. WTO obligations several times.

The effect of zeroing is not only contrary to WTO agreements that the United States has signed, but it also runs contrary to the best interest of the United States.  The appropriate measure of the effect of dumping on the U.S. economy is to treat all sales equally.  A sale in the United States of an imported product at a price greater than its home market selling prices is not accurately assessed by zeroing.  Rather, the law must recognize that it counterbalances sales at less than the normal value for that product.

U.S. manufacturers need and deserve an accurate calculation of dumping duties.  Both consumers and producers are entitled to it.  Manufacturers rely on vigorous competition in securing their supplies of raw materials and components, and face tremendous competition from global suppliers of their products.  Zeroing inflates the duty (tax) paid by importers raising costs of U.S. manufacturers, including industrial consumers of steel and other industrial products used in the manufacture of component parts and end products making it that much harder to compete in the United States.  The unintended consequence of zeroing is that it encourages manufacturers to look to other countries as a base for manufacturing the entire product. 

The WTO decisions on zeroing are in keeping with the letter of the WTO Antidumping Agreement, properly concluding that a product “as a whole” under investigation or review is the subject of a dumping margin calculation, and not the individual sales transactions.  These decisions represent the law of the WTO, and PMA urges the U.S. authorities not to defy the law established in these cases, but rather seek changes—if indeed such changes are in the national interest—through the established processes of the WTO.

The time has come for zeroing to be abandoned.  Zeroing imposes a tax higher than permitted by international rules and harms U.S. manufacturers that rely on competitive international markets for their raw materials and other production input.

Sincerely,

Robert E. Clay
       CEO, Co-Chrmn., Bd. of Dir.

Pridgeon & Clay, Inc. is a metal stamping and fabricating company employing 800 people in Grand Rapids, MI. and 150 in Franklin, IN. It is the largest supplier of stamped automotive exhaust components in North America and the third largest consumer of ferritic stainless steels.