The World Trade Organization has ruled that the European Union's trade retaliation request against the United States will go to arbitration.

For several years, Japan, the EU, and other countries have complained that the United States continues to use the "zeroing" method for calculating antidumping duties on all types of products in violation of the WTO Antidumping Agreement.

When the U.S. receives a dumping complaint about a product, it calculates the weighted average sales of individual items within that product line in the U.S. and again in the home country. Items selling for less in the U.S. are added to the dumping margin, while items selling for more in the U.S. are subtracted from the dumping margin. If the grand total is negative, then dumping has not occurred. If the grand total is positive, then dumping has occurred and that total is averaged to give the antidumping duty for that product.

Zeroing is an alternative way of calculating that grand total. Zeroing keeps all the positive dumping numbers, but all the negative dumping numbers are changed to zero. Using zeroing, the only possibility is a positive dumping number, and then an antidumping tariff penalty is applied, based on that positive number.

Zeroing was used by a number of countries, but has been abandoned by all but the U.S. after numerous WTO complaints and successful challenges; WTO rules do not allow the use of zeroing. The U.S. remains the only country still using zeroing and still fighting complaints about it through the WTO. DS322 is the WTO's Dispute Settlement action on U.S. use of zeroing in violation of WTO and GATT rules.

Dumping duties applied to ball bearings and tapered roller bearings have been singled out by both the EU and Japan as having particularly significant impacts on their trade.

As the U.S. has continued to use the zeroing method, particularly in reviews of existing antidumping rulings, it has become an increasingly sore point as the U.S. uses what the EU considers procedural stalling techniques.

The most recent EU retaliation request was filed with the WTO in January 2009. The U.S. missed its December 2009 filing deadline, taking until February 2010 to respond and file a procedural complaint against the EU's request, claiming the retaliatory duties are either too high or are in improper categories 5251R9N7. The WTO has now referred it to 60-day arbitration.

The WTO Dispute Settlement Body
DS322 main page
At issue is the EU's request to impose retaliatory duties on a range of U.S. products, up to the WTO approved maximum of USD $311 million. The short list of products targeted includes ball and roller bearings.

The EU said, "Since the entry into force of the WTO Agreements, the United States has collected hundreds of millions of dollars in excess anti-dumping duties, not to mention the far greater economic harm that such measures have been causing in terms of lost trade."

On top of zeroing, the Continued Dumping and Subsidy Offset Act was particularly irksome to the EU and Japan. Under the CDSOA, antidumping duties collected by the U.S. no longer went into the general fund, but were accumulated and then awarded to U.S. manufacturers of those goods. The biggest winners in that process were U.S. bearing manufacturers, collecting hundreds of millions of dollars in CDSOA-awarded antidumping duties.

The U.S. has regularly slapped antidumping duties on ball and roller bearings from EU countries in the range of 1% to 16%, which the EU shown would have been zero or negative if "zeroing" had not been used. EU calculations, without zeroing, show that the U.S. should not have found dumping, and not have levied antidumping duties on any bearings from the EU.

Japan, in separate filings against U.S. zeroing, has showed the same result -- no antidumping duties should ever have been applied to ball or roller bearings. Out of 15 trade complaints filed against the U.S. by Japan, 13 relate to bearings.

After several years of fighting and losing all WTO appeals since 2004, the U.S. did in fact agree to stop using zeroing -- back in February 2007. That it continued formed the basis of Japan's original complaint, which was joined a number of years ago by the European Communities, China, Hong Kong, Norway, Chinese Taipei, Korea, Mexico, and Thailand.