American Iron and Steel Institute
February 7, 2007

Hon. Charles B. Rangel - Chairman
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Rangel:

The American Iron and Steel Institute (AISI) submits these comments in response to the January 31, 2007 Advisory from the Ways and Means Committee soliciting comments on the Department of Commerce’s (DOC’s) proposed modification to its calculation of weighted-average dumping margins in antidumping (AD) investigations.  These comments are on behalf of AISI’s U.S. member companies, which together account for approximately three-fourths of the raw steel produced annually in the United States.

AISI urges Congress to oppose firmly the DOC’s proposed modification of its dumping calculation.  The DOC’s proposed modification -- which is in response to incorrect and overreaching rulings by the World Trade Organization (WTO) – would

• Weaken severely U.S. AD law;
• Be impermissible under current law;
• Be inconsistent with key Congressional negotiating objectives and concerns.

A Severe Weakening of Antidumping Law

On December 27, 2006, Commerce notified Congress that it would implement the World Trade Organization’s (WTO’s) Appellate Body ruling in United States – Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”) (WT/DS294) (“US – Zeroing (EC)”). To implement a WTO decision that the Administration has called “deeply flawed,” the DOC has said that, effective February 22, 2007, it would begin to offset “positive” dumping margins (non-dumped sales) against sales with “negative” dumping margins (dumped sales), when calculating the weighted-average dumping margin in AD investigations. 

The calculation methodology that the DOC currently applies, which is consistent with the WTO Antidumping Agreement, reflects the longstanding policy of U.S. AD law that 100 percent of injurious dumping be identified and remedied.  The illogical WTO ruling in “US – Zeroing (EC)” would result in capturing less than 100 percent of the dumping causing harm to U.S. industry.  

If the DOC were to comply with this erroneous WTO ruling and end its longstanding practice of setting positive dumping margins at “zero” when calculating overall dumping margins, the effect would be to reduce or eliminate dumping margins and to mask or eliminate dumped sales by foreign firms.  It would weaken severely our antidumping law, which is one of the most important tools available to steel and other U.S. producers to fight foreign market-distorting practices.

Not Allowed Under Current Law

The governing statute, 19 U.S.C. § 1677f-1(d), requires the current “zeroing” practice, and the DOC may not change this practice without Congressional action. 

The law requires the exclusion of offsets for non-dumped sales when calculating margins based on average-to-average comparison.  It does so because, if offsets were to be used, a respondent’s dumping margin would always be the same regardless of whether weighted average or individual U.S. transaction prices are compared to a weighted average normal value.  Because the purpose of 19 U.S.C. § 1677f-1(d) is to specify when weighted average or individual U.S. transaction prices are to be used, this provision would have no meaning if the result is always the same regardless of the method used. 

Even if the DOC had the discretion to change its practice without an amendment to the statute, it should not be providing offsets for non-dumped sales.  The DOC’s longstanding practice of excluding offsets in the calculation of dumping margins promotes the remedial purpose of the statute by fully capturing all dumping within the dumping margin.  To allow for offsetting in the calculation of dumping margins would go against both the letter and the spirit of U.S. antidumping law.

Contrary to Congress’ Negotiating Objectives and Concerns

The Congress, in the Trade Act of 2002, identified “overreaching” by WTO panels and the WTO Appellate Body as a serious concern.  The concern then, and even more today, is the use of the WTO dispute settlement process to impose unwarranted restrictions on the use of U.S. trade laws -- and obligations on the United States -- that our country never agreed to in trade negotiations.

Given the critical importance of zeroing to the effective enforcement of U.S. antidumping law, we urge the Congress to draw the line with this ill-considered ruling in “US – Zeroing (EC),” and oppose the DOC’s inappropriate concession to the WTO on this issue.   First, the Congress has stated that it is a “principal” trade negotiating objective to preserve U.S. ability to “enforce rigorously” our trade laws.  Second, the Congress has explicitly instructed the Administration, in the context of the ongoing WTO Doha Round negotiations, to defend the practice of zeroing.  Third, the Congress, not the DOC, remains the proper body for making laws. 

The Congress should urge the Administration to seek a negotiated, satisfactory solution in this matter in the Doha Round, and not allow the DOC to change longstanding practice because of an adverse WTO ruling that: (1) fails to address significant evidentiary findings by the lower panel’; (2) relies on novel findings by reference to evidence not before the Appellate Body; and (2) exceeds the Appellate Body’s authority.   

In May 9, 2006 comments filed at the WTO, the Administration recognized that, among the “disturbing” aspects of the US – Zeroing (EC) decision: (1) this ruling reverses 47 years of WTO jurisprudence, finding that dumping should be measured “in respect of each single importation of the product”; and (2) the banning of zeroing was never agreed to by Member States in the Uruguay Round or any previous trade negotiations. 

The proper response to a “deeply flawed” WTO ruling is not to cave in to it.   It is to stand firm, negotiate a solution and insist that U.S. rights under the WTO be respected.

Conclusion

For the reasons cited above, the Congress should require the DOC to continue its longstanding practice of zeroing when calculating AD margins in investigations.  AISI urges that the Committee:  

• Vote, pursuant to Section 123(g)(3), to express its disagreement with the proposed DOC modification of current practice;
• Take whatever other action may be necessary to ensure that U.S. AD law is not further weakened through implementation of WTO dispute settlement decisions that are erroneous, overreaching and contrary to U.S. law.

The AISI and its U.S. member companies appreciate the opportunity to comment on this issue, which is vital to effective trade law enforcement.

Sincerely,

Barry D. Solarz
Senior Vice President, Trade and Economic Policy