WHY IS DOC STILL ZEROING IN ADMINISTRATIVE REVIEWS? THERE IS NO EXPLANATION AND THE COURTS ORDER COMMERCE TO EXPLAIN WHY

The Federal Circuit on June 29, 2011, overturned a ruling that affirmed anti-dumping duties on Japanese ball bearing imports, saying the U.S. Department of Commerce must explain why it continues to use zeroing in administrative reviews but not in investigations.  Japanese companies JTEKT Corp. and NTN Bearing Corp. appealed to the Federal Circuit after the U.S. Court of International Trade upheld Commerce’s administrative review of the anti-dumping duty orders on ball bearings from France, Germany, Italy, Japan and the United Kingdom.

One of the core issues in the appeal was the subject of “zeroing” or in more common terms – the disregarding of negative dumping margins to offset the overall dumping margin calculation.  Zeroing is the practice where the values of positive dumping margins are used in calculating the overall margin, but negative dumping margins are included in the sum of margins as zeroes.  What this means is that a company can be found to have been dumping even though the majority of its sales were not dumped simply because the Department of Commerce has decided that the non-dumped sales must be disregarded in the overall margin calculation. Dongbu Steel Co. Ltd. v. United States, 635 F.3d 1363, 1366 (Fed. Cir. 2011).  Historically, Commerce used zeroing in both the initial investigation to determine whether dumping occurred, and in the subsequent administrative reviews of its dumping determination. But this practice has changed. In response to pressure from the World Trade Organization (WTO), Commerce changed its practice with respect to investigations and no longer zeroes in investigations, but still continues to zero in administrative reviews.

Antidumping investigations and administrative reviews are two very different types of proceedings with different purposes. Specifically, in antidumping investigations, the statute  specifies particular types of sale comparisons and Commerce generally uses average-to-average comparisons whereas in administrative reviews Commerce generally uses average-to-transaction comparisons (which means that individual transactions which are not dumped or have negative margins are more easily identifiable).  Furthermore, the purpose of the dumping-margin calculation also varies significantly between antidumping investigations and reviews. In antidumping investigations, the primary function of the dumping margin is to determine whether an antidumping duty order will be imposed on the subject imports. In administrative reviews, in contrast, the dumping margin is the basis for the assessment of antidumping duties on entries of subject merchandise subject to the antidumping duty order.

While Commerce continues to point to differences between investigations and administrative reviews, it has repeatedly continued to fail to address the relevant question— which is why is it a reasonable interpretation of the statute to zero in administrative reviews, but not in investiga-tions?   The Federal Circuit did not buy Commerce’s very simplistic argument that during an investigation “uses average-to-average comparisons” while administrative reviews “uses average-to-transaction comparisons”.  The question still remains why these (or other) differences between the two phases make it reasonable to continue zeroing in one phase, but not the other.    As a result, the court found that because Commerce continued to stall and not provide any justification for using zeroing in administrative reviews and not in investigations, the court determined that Commerce’s continuing practice of zeroing in administrative reviews, but not in investigations, is unreasonable.  The court has not ordered Commerce to provide an explanation as to why they continue to practice this dichotomous methodology.

By Nithya Nagarajan