Japan has asked the World Trade Organization to approve approximately $250 million in retaliatory duties on U.S.-made goods, in response to the United States continued use of "zeroing" in reviewing existing antidumping duties and tariffs.

About zeroing

When the U.S. Commerce Department investigates a dumping complaint, it determines whether dumping has occurred by calculating a transaction-by-transaction value for all less-than-fair-value sales it finds. But the U.S. method simply ignores (or "zeros") every transaction where a proper sale occurred above fair value.

By ignoring all sales that occur at or above fair market prices ("negative dumping"), the method violates WTO rules and "inevitably" leads to a dumping finding when none has actually occurred. And duties calculated via this method are far above what would be levied if all sales were considered on a weighted-average basis.

Japan argues that in the case of large tapered roller bearings, U.S. zeroing wipes out a heavily weighted average -231.23% negative dumping margin. Similarly, the U.S. zeroed a number of heavily weighted average -177.47% negative dumping margins on small tapered roller bearings.

If Commerce had not simply ignored all of the proper sales above fair market value, METI argues those bearings would not be subject to duties.

Ball and roller bearings are a particularly important issue for Japan in this complaint. Japan's formal complaint to the WTO cites 15 examples of faulty U.S. dumping calculations -- 13 of the 15 are related to ball and roller bearings.

Years ago, a number of countries had been using zeroing, but all have abandoned it in the face of WTO rulings the practice is illegal, violating a wide range of trade laws. For the past several years, of the 153 WTO nations, only the U.S. has continued to use zeroing -- despite never successfully appealing any of the numerous WTO and GATT trade violation rulings against it.

The EU and Japan have been complaining to the WTO about U.S. use of zeroing since 2004, and specifically with Japan, its impact on the domestic ball and roller bearing industry:

2004 article: WTO investigates U.S. dumping calculations
2005 article: Japan files WTO complaint over U.S. use of zeroing method
The WTO Dispute Settlement Body documentation on this complaint, DS322, is here: WTO DS322 web page
Since 2004, the EU, Japan, several other countries, and the U.S. have had repeated rounds of requests for review and rulings, appeals, and other issues pending. The U.S. has exhausted its response and appeals process, along the way losing every argument and request for action it brought up to the WTO. For a time, Japan suspended its trade retaliation request, because the U.S. had promised to stop using zeroing. However, the U.S. then said it would only stop using zeroing for new antidumping reviews; when Japan and the EU heard that, they responded by requesting these retaliatory duties.

The use of zeroing in periodic and sunset reviews is the more serious problem because there are many, many more older cases than new. If the original calculations were wrong in finding dumping where in fact it had not happened, simply reusing the same flawed data and/or calculation method will continue to find dumping where none occurred.

A few weeks ago, EU responded to the U.S. inaction by requested retaliatory duties.

article: EU requests WTO approval for retaliatory duties over U.S. zeroing
The EU is requesting 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.

Japan is now requesting the WTO approve retaliatory duties which would be nearly $250 million, and would also include ball and roller bearings.

The WTO's decision is expected by the end of August.