As mentioned a little while ago, a NAFTA Chapter 19 panel recently found that zeroing violates U.S. law. Here's a brief rundown of the majority opinion, and a little bit about the dissent.
The issue addressed by the panel majority was: "Whether Commerce’s Application of Zeroing is Not Supported by Substantial Evidence and/or is Not in Accordance with Law."
The foreign company requesting a review of the the DOC decision argued as follows:
Mexinox argues that Commerce’s (hereinafter also referred to as “DOC”) application of zeroing is not in accordance with American law. Its position is grounded on two assertions. Initially it maintains that no provision of US law directs the DOC to apply zeroing in calculating dumping margins. Furthermore, Mexinox argues that if the law were to be interpreted that there was a question on zeroing, the Charming Betsy doctrine compels an interpretation of the relevant statute, which is consistent with international obligations, where it is possible to do so.
The panel then explained its task this way:
In reviewing the DOC’s interpretation of the statute, this Panel is mindful of its duties pursuant to the NAFTA. Article 1904(2) obliges this Panel “to determine whether such determination was in accordance with the antidumping or countervailing duty law of the importing Party”. As such, this Panel is tasked with determining whether the DOC's interpretation of 19 U.S.C. § 1677(35) is permissible under American antidumping duty law.
In its analysis, the panel began by examining zeroing in relation to the U.S. statute. It first explained:
The zeroing methodology is not mandated by, included in, or referred to by the statute. Rather, the DOC has applied a purported zeroing methodology based on its construction of the statute. Under this construction, the DOC determines a dumping margin for sales to the United States of a product by obtaining the percentage transaction prices of the entire shipment. It then determines the monthly weighted average or normal value of the product. The DOC then aggregates the dumping margin for below normal value sales, ignoring reference to positive value sales.
It then said:
the question is whether the weighted dumping margin called for in 19 U.S.C. § 1677 (35) has been reached. A plain reading of the statute directs that all sales should be included in the analysis. Notwithstanding, this ostensibly clear direction, the DOC has interpreted this provision so as to choose to ignore, or zero, certain sales, which are not dumped. In so doing, it ignores its obligation to determine the total aggregated values of the subject merchandise. The justification claimed by the DOC’s interpretation of the word “exceeds” to exclude non-dumped sales, is best understood in the context of the statute as a whole.
Furthermore:
A plain reading of the statute requires that all sales be analyzed in the dumping analysis as dumping refers to an aggregate concept. In directing the DOC to analyze aggregate amounts and compare average sales, the statute does not countenance a methodology, which permits the DOC to select some sales over others in the calculation of dumping margins. The wording of the statute requires that the DOC employ a methodology which analyzes all sales. Simply stated, the exclusion of positive value sales cannot be supported by the definition of aggregated amounts.
In a nutshell, the panel majority took the view that the statute requires that all sales be considered, and thus zeroing is not permitted.
The panel then got into the role of Chevron and Charming Betsy. In this regard, it said:
Several WTO decisions have now held that the use of zeroing is inconsistent with US obligations under the WTO Agreement. While not binding on American courts, these decisions serve as authoritative interpretations available to clarify the obligations of members under the Agreement. As such, they serve as useful tools in fashioning interpretations of domestic statutes which would not contravene the international obligations.
It further noted:
The DOC has raised other arguments, which go directly to this Panel’s jurisdiction to decide the issue. These arguments are premised on the inapplicability of the Charming Betsy canon of statutory construction. As such, this Panel shall, as preliminary matters, address the DOC’s assertions that Chevron usurps the Charming Betsy doctrine, that the Uruguay Round Agreements Act precludes reliance on WTO Appellate Body Reports and that the Federal Circuit has spoken to the issue of zeroing in a way that binds this Panel from remanding to the DOC.
In response to these DOC arguments, the panel majority made the following points:
"Chevron and Charming Betsy are not mutually exclusive" (pp. 11-15) ("Established jurisprudence reads Chevron and Charming Betsy in a complementary fashion. This jurisprudence not only requires that the DOC’s interpretation be permissible under the standard of deference articulated in Chevron, but it also requires that the interpretation be sustainable under the Charming Betsy canon of statutory construction.")
"US legislation does not prevent the application of Charming Betsy" (pp. 16-19)
"Timken And Corus Do Not Preclude A Remand" (pp. 20-24) On this point, it stated:
The issue regarding the relevance of international decisions on American judicial review is not novel. In fact, it appears to be at the heart of two competing lines of cases at the Court of International Trade and at the Federal Circuit. In one line of cases, the Court of International Trade recognized the relevance of WTO jurisprudence to judicial review.
...
A competing line of cases, at the Court of International Trade and the Federal Circuit, have also evolved. These cases appear to have signaled a retrenchment on the part of these courts to rely on the reasoning of international tribunals in the process of judicial review.
...
It is open to this Panel to follow either of the competing line of authorities. Having reviewed these cases, this Panel finds that the broader question of whether international jurisprudence is relevant, in American judicial review, is not presently reconciled at the Federal Circuit. As this Panel is, therefore, not precluded from looking to international jurisprudence for guidance, this Panel will look at WTO determinations and consider any reasoning, which it may find persuasive.
Based on the above reasoning, it concluded:
Having reviewed the wording of the statute, applied Chevron and the Charming Betsy in a complementary fashion, finding that sections 123 and 129 are inapplicable in the circumstances and finding that the jurisprudence does not preclude a remand, this Panel remands this matter back to the DOC to recalculate Mexinox’s dumping margins without zeroing.
The dissent is a bit harder to summarize, as a good deal of it is responses to the panel majority. So, I don't think I can go through it in the same way. One part that I thought worth mentioning, though, was a reference to the Supreme Court's Medellin decision:
Following the Medellin reasoning, which is binding upon this Panel because by definition, the Anti-Dumping Agreement and the other Uruguay Round agreements are non-self-executing treaties, dispute resolution reports under the DSU interpreting the treaties do not have domestic legal effect and do not constitute international obligations subject to the Charming Betsy canon. While such reports do indeed set out what the international obligations of the United States are in respect of the particular case before the WTO Panel or Appellate Body, the reports are not only not binding on U.S. courts, they can in domestic law be no more than interpretative guides to uphold the decisions of the agency charged under the “executing” statutes with applying and interpreting those statutes.
So that's the summary. Now one quick point from me. Whenever U.S. courts (and NAFTA Chapter 19 panels applying U.S. law) address Charming Betsy in the context of WTO law, the issue I want to hear them talk about is the following. It is generally accepted by these courts that the WTO agreements, including the AD Agreement, are "international obligations" of the United States. By contrast, decisions of panels and the Appellate Body are often found by these courts not to constitute such obligations. But the DSU is a WTO agreement, and thus constitutes an "international obligation" under this approach, and the DSU provides for panel and Appellate Body reports to "clarify" (that is, interpret) the WTO agreements. As a result, shouldn't the "clarifications" by panels and the Appellate Body constitute "international obligations," by virtue of the DSU having explicitly giving them this interpretive role? Isn't it also an "international obligation" to accept the clarifications offered by panels and the Appellate Body?
It's possible this is the point the panel had in mind when it said this:
Several WTO decisions have now held that the use of zeroing is inconsistent with US obligations under the WTO Agreement. While not binding on American courts, these decisions serve as authoritative interpretations available to clarify the obligations of members under the Agreement. As such, they serve as useful tools in fashioning interpretations of domestic statutes which would not contravene the international obligations.
(p. 11) A footnote after the second sentence of this quote cites to DSU Article 3.2, which contains the reference to the DSU "clarify[ing] the existing provisions of those agreements in accordance with customary rules of interpretation of public international law." Does the panel have in mind here that WTO panel/Appellate Body clarifications constitute "international obligations"? I think maybe it did, but I'm not absolutely sure.
I can see why this is a sensitive issue. Domestic courts looking to international law is pretty controversial these days. Thus, it is not surprising that U.S. courts tend to find that WTO panel and Appellate Body clarifications are not "international obligations." I'm just not sure how the court decisions that do so get around the point about DSU Article 3.2.
Let me add a caveat here, which is that deeming panel and Appellate Body clarifications to be "international obligations" may not necessarily mean all that much in terms of interpreting U.S. law. It all depends on how Charming Betsy is applied, and it seems to me there is room under Charming Betsy to avoid having international obligations (of whatever sort) have a big impact. Here's the relevant quote from Charming Betsy: "An act of Congress ought never to be construed to violate the law of nations if any other possible construction remains, and consequently can never be construed to violate neutral rights or to affect neutral commerce further than is warranted by the law of nations as understood in this country." (Another formulation uses the following language: “[w]here fairly possible, a United States statute is to be construed as not to conflict with international law or with an international agreement with the U.S.”) There are a number of ways a U.S. court could avoid an unwanted impact from Charming Betsy. For example, it could say that based on the language of the statute, it simply was not possible to avoid the confict with international law, so it couldn't help but adopt the constuction that violates the international obligation. As a result, even if WTO panel and Appellate Body reports are considered to be "international obligations," their impact in U.S. domestic law through Charming Betsy might not be all that great.
