Despite the well-established AB case law invalidating zeroing, a recent panel in U.S. – Stainless Steel explicitly rejected the AB’s established anti-zeroing position, in particular that expressed in U.S. – Zeroing (EC) and U.S. – Zeroing (Japan), both of which addressed the same issue as the panel faced, i.e., a “simple zeroing” in the administrative (periodic) review. (paras. 7. 106, 7. 115) The panel acknowledged that the AB “de facto expects” the panel to follow adopted AB reports “to the extent that the legal issues are similar.” (para. 7.105) However, it emphasized that panels “are not, strictly speaking, bound by previous Appellate Body or panel decisions that have addressed the same issue.” (para. 7.107) Interestingly, it found support for its position in Article 19.2 of the Dispute Settlement Understanding (DSU) which prohibits the panel and the AB from “adding or diminishing” WTO members’ rights and obligations. (para. 7.107) It also viewed that its reversal of the AB’s position in this issue is in pursuit of its obligation of an “objective examination” under Article 11 of the DSU.
The panel followed the same line of reasoning that was employed in the two previous panels (U.S. – Zeroing (EC) and U.S. – Zeroing (Japan)) but ultimately rejected by the AB in both cases, although it emphasized that its analysis was “not simply an unthinking repetition of these past panel decisions.” (para. 7.115) The fundamental difference between the panel and the AB on this issue centers on how to define “dumping” or “dumping margins” under the Antidumping Agreement and GATT Article VI. According to the AB, dumping and dumping margins must be defined in terms of the “product as a whole” under investigation. Therefore, all intermediate, individual calculations (normal value minus export price) as to various sub-product categories must be “aggregated” to obtain the final dumping margin. (paras. 7.113, 7.117) In stark contrast, the panel viewed that dumping and dumping margin could be defined in terms of “a particular export sale” and that antidumping authorities need “not necessarily require an examination of different export sales at an aggregate level.” (para. 7.117) The panel viewed that the AB’s interpretation was not based on a “solid textual basis” and that it should adopt a “permissible interpretation” which accommodates a certain type of zeroing (simple zeroing) in this case. (para. 7.119)
The panel’s unusual behavior raises many interesting legal questions. As it admitted itself, the AB expects panels to follow its jurisprudence, even in the absence of formal binding force. More importantly, such jurisprudence creates “legitimate expectations” among WTO members. (para. 7.103) It seems controversial whether a panel could reject the AB’s established case law on the same issues in the presence of Article 3.2 of the DSU which underscores the “stability and predictability” of the multilateral trading system. As a practical matter, it is likely that the complainant in this case (Mexico) will appeal the panel ruling, in which situation the AB is likely to reject the panel ruling and adhere to its previous position. However, if Mexico chose not to appeal and the panel decision was adopted, two conflicting case laws would co-exist in this area.