Time to End “Zeroing” in Trade Dumping Calculations

(Daniella Markheim — Heritage Foundation)

Brazil and Thailand are the latest to join the list of countries that have filed disputes against the U.S. within the World Trade Organization (WTO) in response to America’s practice of “zeroing” in anti-dumping investigations. Even though the WTO has ruled that zeroing — the tactic of zeroing out dumping calculations when a producer in another country charges a higher price in the U.S. market than in its home market or above its production costs — is not compliant with international trade rules, America refuses to change its dumping methodology. America’s refusal to comply with WTO rulings and eliminate this unfair trade practice erodes U.S. credibility and influence in multilateral trade negotiations and leaves America open to retaliation from affected trade partners. With the new year should come a new commitment to cleaning up U.S. dumping practices.

“Zeroing” is used by the U.S. Department of Commerce (DOC) in its calculation of dumping margins. The DOC first determines a product's “normal value,” which can be based on the product's price in the exporter's home market, the price charged by the exporter in another country, or on the exporter's production costs. The DOC then compares the normal price of the good to the price charged in the U.S. for each sale and calculates the dumping margin--the average of the differences between the two prices. When the normal value of the good is more than the price charged in the U.S., the difference contributes to the dumping margin. However, when the normal value is less than the price charged in the U.S., the DOC assigns a zero value to the transaction rather than deduct the difference from the final dumping margin. This practice of “zeroing” artificially inflates dumping margins, increasing both the likelihood that the DOC will find injury and the value of punitive duties that can be assessed on “dumped” products.

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