Mexico launches appeal challenge to US import rule

GENEVA, Feb 6 (Reuters) - Mexico is launching an appeal at the World Trade Organisation in a case involving a controversial method used by Washington to calculate duties on unfairly priced imports, a Mexican diplomat said on Wednesday.

Mexico's move is the latest challenge to a system known as "zeroing" which has pitted the United States against the rest of the WTO's 151 members, and created confusion in the WTO's own system for resolving trade disputes.

Mexico said in a filing with the WTO, dated Jan. 31, that it intended to appeal against a decision by a WTO dispute settlement panel in a case involving U.S. anti-dumping measures on imports of stainless steel from Mexico.

Carlos Vejar Borrego, a counsellor at Mexico's WTO mission specialising in disputes, told Reuters that Mexico would submit the appeal on Thursday, taking the case to the WTO's top court, the Appellate Body.

The panel ruled in December against some but not all uses of zeroing by the United States in the case, surprising trade law experts as the Appellate Body has always found against zeroing.

VICTORY CLAIMS

Both Mexico and the United States claimed victory in the case, with U.S. Trade Representative Susan Schwab saying it showed WTO rules did not prohibit zeroing and that Appellate Body findings to the contrary had overreached themselves.

"We're confident that we have a strong case and the Appellate Body should stand by its previous reasoning," said Vejar Borrego.

There was no immediate comment from the U.S. mission.

Under WTO rules, a country can impose compensating duties on imports if they are "dumped" or sold more cheaply in its market than in the exporter's market, and if they hurt local industry.

To calculate these anti-dumping duties, regulators compare prices at home and in the exporting country.

Sometimes the comparison will show that prices in some cases are in fact lower in the exporting country, and most countries use that to offset the anti-dumping margin they calculate.

But the United States is now the only country to ignore, or "zero" these cases.

Whether to allow zeroing under trade rules has become a particularly contentious issue in the long-running Doha round to open up trade.

Washington insists that any Doha deal must clarify the rules and allow zeroing in anti-dumping remedies.

A recent proposal by the chairman of the WTO's negotiations on trade rules, Uruguay's ambassador Guillermo Valles Galmes, met Washington's concerns by allowing zeroing in some cases.

But it prompted objections from all the other WTO's members, rich and poor, who demand zeroing must be dropped completely.

A group of 21 countries, including Brazil, China, Singapore and Switzerland, circulated a paper at the WTO on Jan. 31 calling for zeroing to be prohibited at all stages.

"Zeroing is a biased and partial method for calculating the margin of dumping and inflates anti-dumping duties. If the use of such practice prevails in the future, it could nullify the results of trade liberalisation efforts," it said.

In the original case, the dispute panel found against Washington's use of zeroing in initial investigations into dumping, and the United States did not contest this.

But the panel, contradicting previous Appellate Body rulings, found zeroing could be used in reviews of existing anti-dumping measures when the U.S. Commerce Department is aggregating multiple price comparisons. (Editing by Robert Evans)