Joint Statement of Ad Hoc Shrimp Trade Action Committee and Southern Shrimp Alliance

On behalf of the Ad Hoc Shrimp Trade Action Committee (“AHSTAC”) and the Southern Shrimp Alliance (“SSA”), we submit these comments in response to the Advisory from the Committee on Ways and Means, dated January 31, 2007, requesting public comment on what action, if any, the Committee should take with respect to the modification the Department of Commerce (“Commerce”) has proposed to its calculation of weighted average dumping margins in antidumping investigations.[1]

AHSTAC is an ad hoc committee of U.S. shrimp fishermen and processors committed to ensuring that imported warmwater shrimp are not unfairly priced in contravention of U.S. law.  The SSA is a non-profit alliance of members of the shrimp industry in eight states committed to preventing the continued deterioration of America’s domestic shrimp industry and to ensuring the industry’s future viability.  AHSTAC, supported by SSA, filed antidumping petitions against imports of warmwater shrimp in December 2003, which led to findings by Commerce and the U.S. International Trade Commission that the U.S. shrimp industry was materially injured by reason of unfairly priced imports, and resulted in the imposition of antidumping duties against those imports.  Consequently, AHSTAC knows firsthand the importance of ensuring that U.S. trade laws remain strong, and are not weakened.

On December 27, 2006, Commerce notified Congress that it would implement the ruling of the World Trade Organization’s Appellate Body (“AB”) in United States ‑‑ Laws, Regulations and Methodology for Calculating Dumping Margins (“U.S. ‑ Zeroing (EC)”).[2]  Specifically, Commerce stated that, in calculating the weighted-average dumping margin in antidumping investigations when using the weighted average-to-weighted average comparison methodology, it would abandon its longstanding practice of “zeroing,”[3] which is the shorthand name given to Commerce’s practice of not offsetting the total amount of unfair pricing (i.e., dumping) of certain merchandise with the amount of fair pricing of other merchandise.[4]

AHSTAC believes strongly that Congress must vigorously oppose Commerce’s proposed modification.  Under no circumstances should Commerce countenance the abandonment of its established practice of “zeroing.”  “Zeroing” is one of the sinews of U.S. antidumping law.  Abandonment of “zeroing” would not be, as some have suggested, a methodological tweak of Commerce’s dumping methodology or a minor concession by the United States to mollify the WTO.  To the contrary, it would in fact be an illegitimate assault on one of the cornerstones of U.S. antidumping law ‑‑ which is itself one of the principal tools available to U.S. workers, farmers, fishermen and manufacturers to combat unfair trade practices.  The elimination of “zeroing” would be devastating to AHSTAC, SSA and their members, as well as to all other domestic industries facing unfair competition from dumped imports.

Proponents of this misguided so-called “modification” of Commerce’s antidumping practice argue that infractions of dumping represented by positive dumping margins can and should be offset by sales with so-called “negative dumping margins.”  This is as illogical as arguing that speeding while driving home from work is permissible and legal as long as one drives under the speed limit on the way to work.  A person’s failure to break the law on occasions cannot excuse ‑‑ nor offset ‑‑ the breaking of the law at other times.  Moreover, a product is either sold at a dumped price which is a certain percentage below the product’s normal value, or it is not dumped at all.  In transactions where a product’s export price exceeds its normal value, there is an absence of dumping ‑‑ not “negative dumping.”

Moreover, contrary to the assertions of opponents of strong and effective U.S. trade laws, the practice of “zeroing” does not ignore sales which are not dumped, and it does not posit that such sales are dumped.  Instead, “zeroing” simply provides an effective means of determining the weighted-average dumping margin associated with all of the merchandise under investigation, so that the U.S. Government can collect dumping duties on a uniform ad valorem basis on all imports of the subject merchandise.  Non-dumped sales are certainly taken into account in determining that uniform ad valorem dumping margin.

For example, assume that a foreign producer sold four different types of widgets (or frozen warmwater shrimp products) into the United States, and those four products had the following pricing patterns:

Under Commerce’s current “zeroing” practice, the sales volume of merchandise that was not dumped will be taken into account in determining the overall weighted-average dumping margin ‑‑ which in this example would be 10 percent (as half of the volume has a dumping margin of 20 percent and half of the volume was not dumped).  Multiplying that overall weighted-average margin percentage by the total sales value would result in a full representation of the level of dumping that occurred.

In stark contrast, if “zeroing” were abandoned and the degree to which fairly-traded imports were priced above normal value was permitted to reduce the calculated amount of dumping, then the overall weighted-average dumping margin in the example above would drop to 0.8 percent, because the sum of the normal values is only 0.8 percent above the sum of the U.S. prices ‑‑ and all of the actual dumping that occurred would go unaddressed (as that margin is below the one percent de minimis level in investigations).

Were Congress to permit foreign producers to sell significant volumes of merchandise in the U.S. market at dumped prices simply because the producers also sold some of their other merchandise at non-dumped prices, it would undercut the very essence of the antidumping law ‑‑ which is to fully address unfair pricing of goods in the U.S. market.  Yet, that is precisely what would occur if “zeroing” were abolished.  The weighted-average dumping margins in the vast majority of cases would drop dramatically.  More importantly, pernicious dumping involving even the majority of U.S. sales under investigation would not be fully addressed and could even go unaddressed altogether.  Indeed, as indicated in the example above, if “zeroing” were abolished, it would be quite possible for 50 percent of the U.S. sales volume under investigation to have a weighted-average dumping margin of 10 percent, yet for the overall dumping margin found by Commerce to be de minimis, with the result that no antidumping duties would be imposed on any of the merchandise.

These are not theoretical or semantic concerns.  They are very real.  The calculation methodology currently applied by Commerce reflects the longstanding policy of U.S. antidumping law that one hundred percent of injurious dumping is to be identified and remedied.  This policy is fully consistent with the provisions of the GATT and the WTO Antidumping (“AD”) Agreement.[5]  In contrast, the offsets that the WTO Appellate Body has ruled Commerce must provide in the dumping calculation will far more often than not result in capturing less than one hundred percent of the dumping that is harming U.S. industries.

Moreover, the proposed offsets mandated by the WTO Appellate Body are in no way required by the WTO AD Agreement, and, in fact, fly in the face of the negotiating history of that Agreement.  Under the GATT Antidumping Agreement, the United States, Canada, and the EU all employed the dumping margin calculation methodology known as “zeroing.”  During the Uruguay Round of trade negotiations, the AD Agreement was renegotiated.  In the course of those negotiations, at least one WTO Member attempted to expressly prohibit “zeroing” in the text of the new AD Agreement.[6]  That effort at prohibition was unsuccessful.

During enactment of changes to U.S. antidumping law as a result of the Uruguay Round negotiations, the Administration and Congress reviewed the new AD Agreement and made all changes considered necessary to make U.S. law consistent with the new AD Agreement.  No reference was made in the enacting legislation, the Statement of Administrative Action,[7] or any other related document to concerns about the consistency of the practice of “zeroing” with the terms of the AD Agreement.

It was only after entry into force of the WTO agreements, including the AD Agreement, and after enactment of necessary revisions to U.S. antidumping law, that a series of WTO Dispute Settlement Body decisions found a heretofore non-existent prohibition against “zeroing” in the AD Agreement.  Those decisions, using a variety of different and often conflicting analyses, and unlawfully reading into the AD Agreement requirements that do not exist, determined that zeroing was inconsistent with the AD Agreement.

There are myriad problems with the WTO’s “zeroing” decisions:

• First, the decisions against zeroing misinterpret the AD Agreement.  It is simply not credible to assert that U.S. negotiators and legislators agreed to prohibit zeroing without realizing that they were doing so.  Furthermore, if that were the case, then it has very serious implications for all future multilateral negotiations.
• Second, the decisions make clear that neither the negotiators of our international agreements nor the Members of Congress that enact their contents into U.S. law can rely on the plain text and reasonable interpretations when evaluating the obligations and prohibitions adopted in the agreements.
• Third, the decisions are evidence of activist panelists and Appellate Body members exceeding the proper standard of review to undercut a trade remedy which they apparently do not support and oppose on ideological grounds.  In the Trade Act of 2002, Congress identified WTO overreaching as a serious concern, recognizing that “{s}upport for continued trade expansion requires that dispute settlement procedures under international trade agreements not add to or diminish the rights and obligations provided in such agreements.”[8]  The reason for concern at that time was “the recent pattern of decisions by dispute settlement panels of the WTO and the Appellate Body to impose obligations and restrictions on the use of antidumping, countervailing, and safeguard measures by WTO members ….”[9]  Indeed, the Senate Report accompanying the Trade Act highlighted a dispute on the issue of “zeroing.”[10]  The reasons for concern have multiplied in the intervening years.  Instead of exercising restraint, the WTO Appellate Body has pushed further and further, imposing greater obligations on the U.S. with each new decision ‑‑ obligations that are in no way grounded in the AD Agreement.

Individually, each of these problems is serious.  Collectively, they call into question the legitimacy of the WTO dispute settlement system.

The Administration has been highly critical of the flawed “zeroing” decisions by WTO panels and the Appellate Body.  With respect to the decision in US – Zeroing (EC), the decision which Commerce proposes to now implement, the Administration argued forcefully that the Appellate Body’s report “did not result from the negotiated text of the agreement, nor could it be expected to result from subsequent negotiation among the Members.  The perception that the dispute settlement system is operating so as to add to or diminish rights and obligations actually agreed to by Members . . . is highly corrosive to the credibility {of} the {WTO} dispute settlement system . . . .”[11]  Yet, inexplicably, the Administration now proposes to implement this “fatally flawed” decision,[12] even though it imposes newfound “obligations” to which the United States never agreed.  This is not an instance where the United States made a “bad bargain” in the WTO negotiations, and is now balking at the consequences of that bargain.  On the contrary.  What has happened is that the bargain which the United States made ‑‑ a bargain that recognized “zeroing” as an existing and legitimate practice ‑‑ is undergoing systemic, post hoc revision by WTO panels and the WTO Appellate Body, in the guise of dispute settlement resolution.

Regrettably, the Administration appears to have taken the position that while it strongly disagrees with the WTO decisions on zeroing and believes they are fundamentally incorrect, the United States will nonetheless comply with them.  This approach sets a particularly troubling precedent.  What will the United States’ policy be on the next and subsequent occasions when WTO Appellate Body decisions are plainly wrong?  Will the United States acquiesce to avoid disagreement?  One of the basic principles on which the United States is founded is respect for the rule of law.  This precept would be flagrantly violated by implementation of an erroneous decision produced by WTO dispute settlement that flies in the face of the applicable standard of review, the text of the relevant agreement, and the underlying negotiating history.

It is imperative that Congress instruct Commerce to maintain its current practice of “zeroing.”  The United States cannot allow an unelected body in Geneva to destroy a fundamental and critical element of U.S. antidumping practice that has been in place for decades, that has been upheld repeatedly by U.S. courts, and that is consistent with the WTO AD Agreement that the United States negotiated.  Congress, not Commerce, is the proper body for making laws.

For all of the foregoing reasons, we urge the Committee to vote, pursuant to Section 123(g)(3) of the Uruguay Round Agreements Act (19 U.S.C. § 3533(g)(3)), to indicate the disagreement of the Committee with the proposed contents of the announced modification, and to take whatever other action may be necessary to ensure that U.S. antidumping law is not weakened through the implementation of erroneous and overreaching decisions of WTO dispute settlement panels and the WTO Appellate Body.

The Ad Hoc Shrimp Trade Action Committee and the Southern Shrimp Alliance are appreciative of the opportunity to provide the Committee with these comments, and appreciate the Committee’s attention to this important matter.

[1]           Committee on Ways and Means, Full Committee Advisory No. FC‑7 (Jan. 31, 2007).

[2]           Appellate Body Report, United States - Laws, Regulations and Methodology for Calculating Dumping Margins, WT/DS294/AB/R (Apr. 18, 2006).

[3]           See Antidumping Proceedings:  Calculation of the Weighted-Average Dumping Margin During an Antidumping Investigation; Final Modification, 71 Fed. Reg. 77,722 (Dec. 27, 2006).

[4]           See id.

[5]           Agreement on Implementation of Article VI (Anti-Dumping) (1994) (“AD Agreement”).

[6]           See, e.g., Proposed Elements for a Framework for Negotiations; Principles and Objectives for Antidumping Rules, Communication from the Delegation of Singapore, MTN.GNG/NG8/W/55 at II.E.(d) (Oct. 13, 1989).

[7]           Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. 103-316 (1994).

[8]           19 U.S.C. § 3801(b)(3) (2006).

[9]           Id.

[10]          See S. Rep. No. 107-139, at 7, n.1 (2002).

[11]          Communication of the United States Regarding the Report of the Appellate Body in U.S. ‑ Zeroing (EC), at ¶ 29, WT/DS294/16 (May 17, 2006).

[12]          Communication of the United States Regarding the Report of the Appellate Body in U.S. ‑ Zeroing (EC), at ¶ 3, WT/DS294/18 (June 19, 2006).