Japan is stepping up pressure against the United States in a dispute about the way the U.S. sets duties on imports it views as unfairly priced, by reviving a request for sanctions at the World Trade Organization.

The Japanese move is a further blow against the controversial U.S. method of setting duties on goods that are dumped—sold for less than they cost at home—in a way that critics says inflates the tariffs, a practice which has been repeatedly condemned by WTO judges.

The United States is the only one of the WTO’s 153 members to use zeroing, and U.S. officials have acknowledged that they will have to modify their practice to comply with WTO rules.

But with U.S. Trade Representative Ron Kirk emphasising the importance of enforcing trade deals and fair trade in America’s commerce policy, President Barack Obama’s administration will not want to appear to weaken its armoury against unfair imports.

The United States is already facing a demand for over $300 million in sanctions from the European Union in another dispute over zeroing lost by Washington.

In a document posted on the WTO website, Japan said it was requesting a WTO arbitrator to resume arbitration in the case now that the WTO had ruled definitively that the United States was breaking international trade rules.

Japan is seeking $248 million in annual retaliation against the United States in the case which originally involved anti-dumping duties on imports of Japanese ball bearings.

Both Japan and the United States agreed to suspend arbitration in the case in 2008, soon after it was set up, to allow the WTO to decide definitively on whether the United States had complied with earlier rulings in the case which was launched in 2004.

In August 2009, the WTO adopted a compliance ruling after the United States lost an appeal, clearing the way for Japan to resume the sanctions process.

Not Just Ball Bearings
“Now we’re ready so we started it again,” a Japanese trade diplomat told Reuters.

Japan has said it may target goods other than ball bearings in its retaliation.

WTO guidelines say arbitration should take up to 60 days, but in practice it can last several months while WTO experts calculate retaliation equivalent to the damage suffered by the complainant.

WTO rules allow members to impose duties on imported goods that are dumped. Calculating such anti-dumping duties often involves comparisons of goods.

Zeroing ignores cases where the imports actually cost more than they do at home, unfairly inflating the duty by exaggerating the gap, according to critics.

Japan is spearheading efforts at the WTO to have zeroing banned altogether.

U.S. Commerce Under-Secretary for International Trade Francisco Sanchez said last month the administration was trying to find a way to comply with the WTO rulings without damaging its ability to curb unfairly priced imports.

U.S. law firm Miller and Chevalier said this could lead to “seismic changes” in the U.S. trade remedy regime. (Reuters)