2mm in thickness. The least\nrefined steel sheet product.\nThinner and weaker than plate, but\nheavier and less smooth than cold-\nrolled. Lower quality than both cold\n-\nrolled and coated.\nSixteen distinct HTS headings:\n7208.10, 7208.25, 7208.26,\n7208.27, 7208.36, 7208.37,\n7208.38, 7208.39, 7208.40,\n7208.53, 7208.54, 7211.14,\n7211.19, 7225.30, 7225.40, and\n7226.91\nHot-rolled in hot-strip mill or Steckel\nmil l.\nFor cold-rolling/galvanizing /coatin g;\nFormed and welded to make pipe;\nCut to length for sheet; HR sheet is\nsold for uses where surface finish\nand light weight are not crucial,\nsuch as structural and in ternal parts\nof autos and appliances.\n60% to end users, 40% to\ndistributors\nCold-Rolled 25-90 % reduction in thickness of\nhot-rolled to under 2mm ; Special\nmechanical properties or surface\ntexture. Thin-gauge, smooth\nsurface and high strength to weight\nratio, created by the cold-rolling\nprocess.\nSixteen distinct HTS headings:\n7209.15, 7209.16, 7209.17,\n7209.18, 7209.25, 7209.26,\n7209.27, 7209.28, 7209.90,\n7211.23, 7211.29, 7211.90,\n7225.19, 7225.50, 7226.19 and\n7226.92\nAfter being hot-rolled on strip mill\nand undergoing other processing\nsimilar to hot-rolled, it is finished on\na cold-reduction mill.\nFeedstock for corrosion-resistant\nsteel, tin mill, and GOES. CR sheet\nsold for applications where surface\nfinish and light weight are important\nconsideration (panels in electrical\nequipment and appliances, utensils,\ncutting tools, cutlery, seat belt\ncomponents). Also sold for\nunexposed auto body parts such as\nautomotive transmission\ncomponents.\n71.3% to end users and 28.7% to\ndistributors\nCoated Has metallic or non-metallic\ncoating; coated, clad or plated with\nmetals and alloys for corrosion-\nresistance and improved\naesthetics.\nNineteen distinct HTS headings:\n7210.20, 7210.30, 7210.41,\n7210.49, 7210.61, 7210.69,\n7210.70, 7210.90, 7212.20,\n7212.30, 7212.40, 7212.50,\n7212.60, 7225.91, 7225.92,\n7225.99, 7226.93, 7226.94 and\n7226.99\nElectro-galvanizing or hot-dip\ngalvanizing. There are seven\nalternative processes fo applying\ncoatings.\nUsed mostly in applications\nrequiring protection against the\nweather and other corroding agents\n(Auto parts such as mufflers and\ntrunk lids, construction uses such\nas roofing and siding, garbage\ncans, storage tanks and building\nproducts, gasoline tanks, chemical\ncontainers, oil filters, television\nc hassis, highway equipment and\nagricultural buildings and\nequipment.)\n64.3% to end-users and 35.7% to\ndistributors\n* Identified by the ITC as a distinguishing factor the it takes into account when determining what constitutes the \"like product .\" ITC Determination, Views on Injury of the Commission, Vol. I, p. 30. ( Exhibit CC-6)\nNote: HTS classifications in bold font indicate the only 5 HTS classifications that are shared among the 55 distinct HTS classifica tions.\nSources: ITC cites are all found in Exhibit CC-6.\nSlab: ITC at 39 and at FLAT-1 (physical characteristics), at FLAT-1 (customs treatment), at 40 (manufacturing processes) at 40 and OVERVIEW-13 (end uses); and at 44 (marketing channels).\n Also, First Submission of Japan, at 41 (physical characteristics and end uses).\nPlate: ITC at 41 and at FLAT-1 (physical characteristics), at FLAT-1 (customs treatment), at 40-41(manufacturing processes), at FLAT-I (end-uses) and at 44 (marketing c hannels).\n Also, First Submission of Japan at 40 (physical characteristics).\nHot-Rolled: ITC at 44 (physical characteristics), at FLAT-2 (customs treatment), at 40 (manufacturing processes) at 38 and FLAT -2 (end uses); and at 44 (marketing channels).\n Also First Submission of Japan at 39 (physical characteristics and end uses), at 40 (manufacturing process) and Exhibit CC-55 (Exhibit 2) (physical characteristics and end uses).\nCold-Rolled: ITC at 41and 44 (physical characteristics), at FLAT-3 (customs treatment), at 41, OVERVIEW -13 and FLAT-2 (manufact uring process and end-uses), and at 44 (marketing channels).\nAlso, First Submission of Japan at 39 (phsycial characteristics and end uses) and Exhibit CC-55 (Exhibit 2) (end uses).\nCoated: ITC at 42 and FLAT-3 (physical characteristics and manufacturing process); at FLAT-3 (end uses); and at 44 (marketing c hannels).\n Also, First Submission of Japan at 37 (physical characteristics) and at 39 (physical characteristics and end uses) and Exhibit CC -5 5 ( Exh ib it 2 ) (m an ufacturi ng pr o ces s).\nDistinguishing Characteristics in Defining \"Like Product\"\nFlat-Rolled Products\nPhysical properties\n7.367 The European Communities and China submit that the USITC's finding that all five CCFRS\nproducts share \"certain basic physical properties and are interrelated to a certain degree\" 1025 is\n\n1023 United States' second written submission, para. 86.\n1024 Korea's second written submission, para. 68.\n1025 European Communities' second written submission, para. 275; USITC Report, Vol. I, p. 37.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nuntenable. It is only based on the commonplace of \"a common metallurgical base\". 1026 However, the\nbasic chemical combination of carbon and iron is not sufficient to demonstrate that these products\nshare the same physical properties and may therefore be regarded as one specific product: indeed, the\nvery same chemical mix in metallurgy can also be found in other steel product categories that have\nbeen classified as separate products (e.g., carbon and alloy long steel products or stainless steel).\n1027\nIn order to establish common physical properties, the USITC would have needed, in accordance with\nits own stated methodology and the general definition of physical properties under WTO law\n1028, to\nlook at size, shape and texture of the five flat products. The USITC itself acknowledged significant\ndifference in \"thickness\" (slabs are 4 inches while cold-rolled steel is reduced to size to below 2 mm)\nand other qualities (corrosion resistance and surface texture).\n1029 1030\n7.368 New Zealand adds that a proper comparison of physical properties cannot stop at the\nconclusion that CCFRS has a \"common metallurgical base\", a finding that the United States merely\nnotes rather than tries to defend. 1031 The fact that ice cream and cheese share certain compositional\ncharacteristics which mean they have more in common with each other than with a banana does not\nmean they are \"like\". Nor are sawn pine logs, planks, fence posts and furniture all \"like\" because they\nall started life as trees.\n1032\n7.369 The European Communities and China argue that the mere generalization that the five\nCCFRS share certain chemical characteristics that are also common to other steel product categories\nidentified by the USITC was certainly not an adequate and reasoned explanation to dismiss the\ncontradicting information in its own Report.\n1033\n7.370 Japan and Brazil insist that the products each have different physical properties. The USITC\nfound, for instance, that cold-rolled steel differs from hot-rolled steel in terms of thickness,\nmechanical properties, and surface texture, while coated steel differs from cold-rolled steel in terms of\nits coating of zinc or other materials. 1034 Further, New Zealand also stresses that each of the discrete\nproducts has very different properties in terms of their shape, thickness, degree of finishing and\nphysical performance1035, and that these physical differences are fundamental. Clearly, slab is thicker\nand less refined than hot-rolled steel. 1036 According to the European Communities and China, the\nUSITC Report also explicitly concedes a lack of interchangeability between the five products where it\nholds that the \"vertical nature of the relationship between CCFRS at different stages limits\ninterchangeability between products\". 1037 In other words, these parties contend, the USITC admits\n\n1026 USITC Report, Vol. I, pp. 37 and 38.\n1027 European Communities' first written submission, para. 237; China's first written submission,\npara. 184.\n1028 The USITC Report, Vol. I, p. 29 refers to \"appearance, quality and texture\". The Appellate Body in\nEC – Asbestos, para. 92 considered \"composition, size, shape, texture, and possibly taste and smell\" as relevant\nphysical properties.\n1029 USITC Report, Vol. I, pp. 38-42 with detailed descriptions.\n1030 European Communities' first written submission, para. 238-239; China's first written submission,\npara. 185-186.\n1031 United States first written submission, para 119.\n1032 New Zealand's second written submission, para. 3.46.\n1033 European Communities' first written submission, para. 241; China's first written submission,\npara. 193.\n1034 Japan's first written submission, para. 117; Brazil's first written submission, para. 106.\n1035 The USITC highlights some such differences in \"Appendix A\" at pp. 9-10 of the USITC Report,\nVol I.\n1036 New Zealand's first written submission, para. 4.59-4.60.\n1037 USITC Report, Vol. I, p. 44.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat part of the producers it wanted to group in a single domestic industry did not produce products\ninterchangeable with the imported ones. 1038 China submits that through the process of coating, cold-\nrolled steel becomes a different product that cannot meet the definition of a \"like product\". Indeed, the\ncoating process is likely to alter the physical \"properties\" of the raw product (cold-rolled steel),\nthrough the addition of a new substance (metal or non-metallic substance). The new \"properties\" of\nthe product are, in particular, illustrated by th e fact that the coated product becomes corrosion-\nresistant.1039\n7.371 In the United States' view, the USITC found that imported and domestic CCFRS share the\nsame basic physical attributes and are generally interchangeable, have similar uses with the same\nmetallurgic composition, thickness, width, and amount of processing, generally do not employ\nsignificantly different production processes, and have an overlap in the marketing channels for\ndomestic and imported CCFRS. The USITC found that the domestic article, CCFRS, is like the\nimported CCFRS. The USITC then applied its long established factors\n1040 in considering whether to\nanalyse specific types of CCFRS separately or as a whole. 1041 The USITC found that CCFRS at\ndifferent stages of processing share certain basic physical properties and are interrelated to a certain\ndegree.1042 Specifically, the USITC found that this steel has a common metallurgical base, with\ndesired properties and essential characteristics embodied in the steel prior to the casting or\nsemifinished stage.1043 The mix in metallurgy depends on the requirements of the end-use, whether\nthe end-use is at the same or different stages of processing. Thus, the chemical content of such steel\nessentially is determined at the melt stage of processing with some reductions in carbon content\npossible through subsequent hydrogen annealing.\n1044\n7.372 The United States stresses that it is clear from the USITC's determination that it did not ignore\nevidence of differences in physical properties and end-uses and in fact generally acknowledged such\nevidence in its analysis. Rather, it is the complainants who ignore the evidence of the\ninterrelationship of CCFRS at different stages of processing. The complainants fail to acknowledge,\nalthough they do not dispute, the fact that CCFRS at one stage of processing generally is feedstock for\nthe next stage of processing, which tends to blur product distinctions until the processing reaches its\nfinal stages since earlier stages simply are feedstock for the next stage. This interrelationship between\n\n1038 European Communities' first written submission, para. 240; China's first written submission,\npara. 187.\n1039 China's first written submission, para. 192.\n1040 The USITC traditionally has taken into account such factors as the physical properties of the\nproduct, its customs treatment, its manufacturing process ( i.e., where and how it is made), its uses, and the\nmarketing channels through which the product is sold in determining what constitutes the like product in a\nsafeguards investigation. These are not statutory criteria and do not limit what factors the USITC may consider\nin making its determination. Appellate Body Report, EC – Asbestos , para. 102 (general criteria \"are neither a\ntreaty-mandated nor a closed list of criteria that will determine the legal characterization of products.\"). No\nsingle factor is dispositive and the weight given to each individual factor (and other relevant factors) will depend\nupon the facts in the particular case. The decision rega rding the like or directly competitive article is a factual\ndetermination. The USITC traditionally has looked for clear dividing lines among possible products and has\ndisregarded minor variations. USITC Report, p. 30.\n1041 USITC Report, pp. 36-45.\n1042 USITC Report, pp. 37-38.\n1043 The USITC found that all certain carbon flat-rolle d steel originally is made of raw materials that\ninclude carbon and iron.\n1044 United States' second written submission, paras. 78-79.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCCFRS at different stages is \"product-oriented\" rather than \"producer-oriented\" and clearly was an\nimportant factor in the USITC's analysis and finding.1045 1046\n7.373 The European Communities submits that the United States nowhere rebuts the European\nCommunities' argument concerning the different length, width and other qualities of the five different\nCCFRS products1047, but merely insists on the \"same common metallurgical base\". This analysis fails\nto take account of the significant physical differences between the five CCFRS products1048 and is also\ninconsistent with the investigation of the same criteria with respect to stainless steel products, where\nthe USITC found that the sole metallurgical composition was not a sufficient element to define one\nsingle industry producing stainless steel products.1049 1050\nEnd-use\n7.374 Brazil submits that by making gross generalizations, the USITC found that \"the primary end-\nuse applications for commercial shipments of CCFRS are the automotive and construction\nindustries\".1051 1052 Japan and Brazil submit that, in fact, the products differ in terms of end-uses. For\nexample, the USITC found that while hot-rolled steel and coated steel are both used in automotive\napplications, they are almost always used for different applications.\n1053 The overlap at issue is not of a\ntype that may amount to the \"likeness\" of products under the Agreement on Safeguards. For example,\nthe USITC found that hot-rolled and corrosion-resistant steel products are subject to similar demand\ntrends in the automotive industry, but that they are not used for the same end-use. This finding\nindicates that the products are not substitutable with each other, but at most complementary. They\ntherefore might not even be directly competitive, much less \"like\" one another.\n1054\n7.375 According to the European Communities, the USITC did not show that the five products have\ncommon end-uses. Its finding that \"all types are used in the production of automobiles, albeit in\ndifferent applications\" and \"for end-use applications in the construction industry\" admits that the end-\nuses, i.e., application of each product, are very different. Some (e.g. coated cold rolled) is used for\nmaking certain car parts. Other products (e.g. slab) are used purely as an input good in the production\nof downstream steel products.\n7.376 The European Communities, Korea, China and New Zealand submit that, instead of showing\ncommon end-uses (e.g., body parts for automobiles), the USITC Report relies on common ultimate\nend-users of the various products in question (e.g., the automotive industry). This is not one of the\ncriteria acknowledged by the Appellate Body to establish likeness. Moreover, a focus on end-users\nleads to some nonsensical results as any range of diverse input goods used by particular industries\ncould be grafted into a single product category. Under the USITC's approach, also automotive leather\nand windscreen would also be like products to CC FRS and should have been analysed together.\n1055\n\n1045 Appellate Body Report, US – Cotton Yarn, para. 86.\n1046 United States' first written submission, para. 127.\n1047 European Communities' second written submission, para. 275.\n1048 European Communities' first written submission, paras. 238 to 239.\n1049 USITC Report, Vol. I, pp. 190-205.\n1050 European Communities' second written submission, para. 275.\n1051 USITC Report, p. 43.\n1052 Japan's first written submission, paras. 119-120; Brazil's first written submission, paras. 100, 102\n104, 105, 109.\n1053 Japan's first written submission, para. 117; Brazil's first written submission, para. 106.\n1054 Japan's first written submission, para. 120; Brazil's first written submission, para. 104.\n1055 European Communities' first written submission, para. 243; Korea first written submission,\npara. 54; China's first written submission, paras. 194-195; New Zealand's first written submission, para. 4.61.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe European Communities also argues that the US ITC does not consistently apply its criterion of\ncommon end-users: had it done so, also certain tubular products that are used in the automotive\nindustry (precision tubes to conduct forces) should have formed part of the CCFRS product category\nor vice versa, because they share common end-users.\n1056\n7.377 Korea further submits that the USITC record info rmation confirms that the correct analysis –\n\"end-use\" – demonstrates that each of the five CC FRS products had different uses, and thus, is a\nseparate like product. 1057 Slab is internally consumed for downstream products, such as sheet, strip,\nand plate; plate is used for bridgework, machine parts (e.g., the body of the machine or its frame),\ntransmission towers and light poles, buildings, self-propelled machinery such as cranes and\nbulldozers, railway cars, oceangoing ships, and floor plate or formed into pipe and oilwell rigs and\nplatforms; hot-rolled steel is internally consumed to make cold-rolled and/or galvanized or other\ncoated products, formed and welded to make pipe, or cut to length to produce discrete sheet, it is also\nused in the manufacture of structural parts of automobiles and appliances; cold-rolled steel is\ninternally consumed to produce coated or tin products, and it is also used to make panels in electrical\nequipment and appliances, body parts for automobiles, where surface finish or strength-to-weight\nratio is important but corrosion-resistance is not, auto transmission and seat belt components, utensils,\ncutting tools, cutlery. Coated steel is used for corrosion-resistant auto parts, garbage cans, storage\ntanks, building products, gas tanks, chemical containers, oil filters, television chassis, highway\nequipment, agricultural buildings, and equipment (guardrails, bridgedeck, signs).\n1058\n7.378 The United States submits that the USITC recognized that the interrelationship between the\nproduction processes and integration of the producers demonstrates that the market for each type of\nCCFRS is not isolated, but directly affected by the markets across the spectrum of types of CCFRS.\nThe primary end-use applications for commercial shipments of CCFRS are the automotive and\nconstruction industries. Thus, the USITC found that all types of CCFRS are substantially affected by\nthe collective demand of these two markets.\n1059 The USITC also found that the primary end-use\napplications for commercial shipments of CCFRS are the automotive and construction industries. 1060\nThe USITC found that all types of CCFRS are substantially affected by the collective demand of these\ntwo markets.\n1061 The USITC also recognized that the vertical nature of the relationship between\nCCFRS at different stages may result in differences in uses between stages of CCFRS. 1062\nNevertheless, the USITC found that the evidence demonstrated that in some situations, there may be\nsome substitution for use between products from one stage to another, e.g., coated steel can be\nadapted for use in applications that typically use cold-rolled steel and vice versa, and hot-rolled has\n\n1056 European Communities' first written submission, para. 243.\n1057 USITC Report, Vol. II , pp. FLAT-51-53 (Exhibit CC-6). See also Respondents' Joint Framework\nBrief, p. 22 (Exhibit CC-50).\n1058 Korea's first written submission, paras. 54, 57; source: Joint Respondents' Posthearing Brief, Flat-\nRolled Steel, Inv. No. TA-201-73, Exhibit 2: \"Application of Like Product Factors to Flat-Rolled Products\",\npp. 11-12 (Exhibit CC-55); see also USITC Report, Vol. II, pp. FLAT1-4 (Exhibit CC-6).\n1059 United States' first written submission, para. 122.\n1060 United States' first written submission, para. 122; USITC Report, pp. 43-44.\n1061 The USITC recognized that while hot-rolled steel ma y not be used in place of, or substituted for, a\ncoated sheet in a car fender, all certain carbon flat-r olled steel is directly affected by the demand for\nautomobiles, since all types are used in the production of automobiles, albeit in different applications. The\nUSITC also found that similarly, but to a lesser extent, all types of such steel are used for end-use applications\nin the construction industries. Thus, all types of certain carbon flat-rolled steel are substantially affected by the\ncollective demand of these two markets. USITC Report, pp. 43-44.\n1062 USITC Report, p. 44.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsome limited interchangeability with cold-rolled steel. 1063 1064 The United States also submitted that\nthe complainants fail to recognize that within almost every defined like product, and the\ncorresponding imported product, there exist a range of good of different sizes, grades, or stages of\nprocessing. While goods along the continuum share similar or like factors, individual items at the end\nof the continuum may not be as similar.\n1065\n7.379 Further, in the view of the United States, and contrary to the complainants' contentions, the\nUSITC was not required to consider whether each type of CCFRS was substitutable with each\nother.1066 The complainants fail to recognize that the substitutability or competitive relationship was\nfound to be relevant in the context of Article III of GATT 1994, as discussed by the Appellate Body\nin EC – Asbestos.\n1067 Protecting the competitive relationship between imports and domestic products\nis a purpose of Article III. However, it is not the purpose of the Agreement on Safeguards, whose\npurpose is to permit protection of a domestic industry under circumstances. 1068 Thus, the competitive\nrelationship or substitutability of domestic and imported products is not a necessary factor regarding\nthe like product definition in the context of the purpose of the Agreement on Safeguards. 1069 I n\nconsidering uses for the types of CCFRS, the USITC recognized that similarity or interchangeability\nin uses were limited for CCFRS, as would be expected for feedstock or input products. 1070 The\ncomplainants' attempts to construe this recognition regarding uses of feedstock as consideration of a\nsubstitutability factor by the USITC is misplaced.1071\n7.380 China responds by reaffirming that, in accord ance with the Appellate Body ruling in US –\nLamb, this fact is not relevant for the assessment of likeness. Moreover, China considers that this\nelement rather underlines the fact that the different products included in the category CCFRS cannot\nshare common end-uses.1072 The United States only acknowledges that there are no common end-uses\nfor the various CCFRS products, by referring to markets and industries in general as end-uses\napplications. In particular, the fact that all types of CCFRS could be substantially affected by the\ncollective demand of the automotive and construction industries does not demonstrate in any way that\n\n1063 USITC Report, p. 44. Specifically, several US companies produce hot-rolled sheet in thicknesses\n(i.e., light-weight gauges) that have been more typically characteristic of and competitive with cold-rolled sheet.\nAlthough the overlap between hot-rolled steel and cold-rolled steel has traditionally been considered to begin at\napproximately 2 mm and thinner, improvements in hot-rolling have allowed mills to hot-roll below 2 mm. In\naddition, while cold-rolled steel generally is used as th e feedstock for coated steel, coated hot-rolled sheet is a\ngrowing product niche. USITC Pub. 3446, p. I-8, and nn.18 and 19.\n1064 United States' second written submission, paras. 83-84.\n1065 United States' second written submission, paras. 72 and 86.\n1066 Japan's first written submission, paras. 79 and 101; Korea's first written submission, paras. 38-39\nand 58-59; European Communities' first written submission, para. 240.\n1067 Specifically, the Appellate Body in EC – Asbestos, para. 99, stated:\n. . . a determination of \"likeness\" under Article III:4 is, fundamentally, a determination about the nature\nand extent of a competitive relationship between and among products. In saying this, we are mindful that there\nis a spectrum of degrees of \"competitiveness\" or \"substitutability\" of products in the marketplace. . . .\n1068 Appellate Body Report, US – Line Pipe, para. 82.\n1069 Moreover, in this investigation the USITC made its definition on the basis of like product analyses\nand not on the basis of directly competitive analyses. Thus, while the consideration of substitutability may be\nrelevant to the directly competitive analysis, it is not germane to, and should not be transposed to, the like\nproduct analysis.\n1070 USITC Report, p. 44.\n1071 United States' first written submission, para. 136.\n1072 China's second written submission, para. 77.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nall types of CCFRS can be used for the same purposes and applications in these industries. Once\nagain, the market on which a product is finally sold cannot be considered as its \"end-use\".1073\n7.381 Korea and China also submit that substitutability is relevant in the assessment of \"likeness\"\nsince like products are necessarily also directly competitive and, therefore, substitutable. Contrary to\nwhat the United States asserts, substitutability is a necessary factor regarding the like product\ndefinition in the context of the purpose of the Agreement on Safeguards, since, if imported and\ndomestic products were not substitutable, they could in no way be considered as being \"like\".1074\n7.382 The United States responded that there clearl y is a competitive relationship between the\nimported and domestic products. The complainants have not disputed, and neither did the parties in\nthe underlying investigation, that the imported and domestic products generally consist of the same\ntypes of steel, are interchangeable, and thus compete with each other.\n1075\n7.383 The European Communities submits that the United States fails to respond to the\ncomplainants' argument that there is no similar end-use. The United States' rebuttal on this point only\nrepeats the error of equating end-uses and end-us ers but does not respond to any of the arguments\nattacking the validity of the substantial coincidence of economic interests argument. What is more,\nthe United States exclusively focused on the \"commercial market\". 1076 However, the European\nCommunities submits that the USITC itself admits that the main end-use for up-stream products is to\nbe a feedstock for down-stream products, out of the commercial market. How could the USITC\nconclude that coated products sold to the automotive industry have the same end-use as slabs, of\nwhich 99.4% of the United States' production is internally transferred? Second, the automotive and\nconstruction industry identified as the main end-user for CCFRS account respectively for only 20 and\n11% of the US shipments.\n1077\n7.384 Japan submits that the United States' argument that these products have common end-uses is\nnot credible. They may be sold to the same industries, but to suggest that steel products have\ncommon applications because they are used in a specific industry is to suggest that steel, plastic, and\nglass should be a single like product because they are all sold to the automotive industry. End use is\nnot the same as end-user. The fact is, no one woul d ever use slab to make a car; nor would hot-rolled\nsteel be used for the same car-part as corrosion resistant steel. They are simply different products,\nused for different purposes. Furthermore, they each have a base price, reflected in the companies'\nprice sheets and in the trade literature. There is no such thing as a price for \"CCFRS\" (as the USITC\ndefined it). This proves not only that the industry and customers recognize the distinctions, but also\nthat any analysis of this grouping performed by the USITC is meaningless because there is no\n\"CCFRS\" price that can be used to determine price effects in a causation analysis; rather each\nindividual product must be analysed and then somehow combined with the other individual\nproducts.\n1078 Such an analysis distorts the true competitive dynamics in the marketplace. 1079 The\nfinding that most finished CCFRS products are sold into the automotive and construction markets is\n\n1073 China's second written submission, para. 78.\n1074 China's second written submission, para. 80; Korea's second written submission, paras. 39-40, with\nreference to the Appellate Body Report, US – Cotton Yarn, paras. 91(d), 97.\n1075 United States' second written submission, para. 72.\n1076 United States' first written submission, para. 122.\n1077 USITC Report, Vol. I, p. 43, footnote 127.\n1078 USITC Report, Vol. I, pp. 61-62.\n1079 Japan's second written submission, para. 37.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nanalogous to its earlier finding of a \"coincidence of economic interests\" between producers of live\nlambs and lamb meat.1080\nConsumer perception\n7.385 According to China and the European Communities, if \"consumers\" are deemed to be the auto\nmanufacturers and construction sites that use finished products, then the five different products\ngrouped into the category \"CCFRS\" cannot be seen as substitutable. As the USITC acknowledged\nitself, \"hot-rolled steel may not be substituted for a coated sheet in a car fender\" 1081 and neither may a\nslab be substituted for a coated sheet in a car-fender.1082\n7.386 Brazil, Japan and New Zealand argue that if the USITC had considered the factor identified as\nimportant by the Appellate Body, consumer tastes and habits 1083, it would have found additional\ndistinguishing characteristics, such as: slab purchases are restricted to producers of downstream\nrolled products1084; consumers regard hot-rolled steel as ideal for applications where strength is more\nimportant than appearance – for example, in the use of automobile structural parts 1085; consumers\nview cold-rolled steel as ideal for applications where appearance and thinness take precedence over\nstrength, and exposure to corrosive elements is not an issue\n1086; consumers view galvanized steel as\nideal in exposed applications, where corrosion-resistance is important.1087 1088 New Zealand adds that\nthe very fact that import trends differ amongst the products making up the category of CCFRS\nindicates that consumer needs and preferences differ product by product.1089\n7.387 The United States points out th at while the Working Party in Border Tax Adjustment\nsuggested that consumers' tastes and habits may be a criterion to be considered in finding like\nproducts for purposes of border tax adjustments, contrary to complainants' arguments, this is not a\nrequired factor in a safeguard investigation. The Panel in Japan – Alcoholic Beverages recognized\nthat consumer habits were variable in time and discounted consumer views in considering whether\nvodka was \"like\" shochu and thus whether the like product should consist of vodka and shochu. 1090\nThe consideration of consumer tastes and habits seems to conflict with the purpose of a safeguard\ninvestigation.1091 Since the purpose of the Agreement on Safeguards is to permit protection of a\n\n1080 Japan's second written submission, para. 40.\n1081 USITC Report, Vol. I, p. 43.\n1082 European Communities' first written submission, para. 245; China's first written submission,\npara. 197.\n1083 In EC – Asbestos , the Appellate Body recognized the additional factor of \"consumer tastes and\nhabits\", as one of four general criteria in analysing the \"likeness\" of two products, the others being physical\ncharacteristics, end uses, and tariff classification. Appellate Body Report, EC – Asbestos, para. 101.\n1084 USITC Report Vol. II at FLAT-1 (Exh. CC-6).\n1085 Ibid., p. FLAT-2\n1086 Ibid.\n1087 Ibid., p. FLAT-3.\n1088 Japan's first written submission, para. 118; New Zealand's first written submission, para. 4.64;\nBrazil's first written submission, para. 107.\n1089 New Zealand's first written submission, para. 4.65.\n1090 Panel Report, Japan – Alcoholic Beverages I, para. 5.7 (\"Panel was of the view that the 'likeness' of\nproducts must be examined taking into account not only objective criteria (such as composition and\nmanufacturing processes of products) but also the more subjective consumers' viewpoint (such as consumption\nand use by consumers) \"but also recognized that \"consumer habits are variable in time\" and \"traditional\nJapanese consumer habits with regard to shochu provided no reason for not considering vodka to be a 'like'\nproduct\").\n1091 The Appellate Body cautioned in EC – Asbestos that it may be important to consider \" from whose\nperspective \"likeness\" should be judged. For instance, ultimate consumers may have a view about the \"likeness\"\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industry under certain circumstances 1092, a focus on the subjective consumers' views of the\nproduct or market rather than producers or both is one-sided and misplaced. The USITC instead\nfocused on such objective factors in its traditional analysis of like products such as the product's\nphysical properties, uses, marketing channels and manufacturing process.\n1093\n7.388 New Zealand responds that consumer perceptions must be a critical component in assessing\nthe \"highest degree of competitive relationship\" which the Appellate Body in US – Cotton Yarn has\nstressed as crucially important. It can and shou ld be supplemented by other factors, but how\npurchasers behave in a market cannot be ignored.1094\nTariff classification\n7.389 The European Communities, Japan, Korea, China and Brazil, submit that, while the USITC\nimpermissably discounted the customs treatment of the various products due to \"the large number of\nclassification categories\"1095 1096, this fact is no excuse for not considering them at all for the purpose\nof the like product determination. On the contrary, this suggests that the products concerned are not\nalike. Each CCFRS product is classified under a separate HS number, but the USITC expressly\ndiscounted this factor.\n1097 I n EC – Asbestos , the Appellate Body noted that \"tariff classification\nclearly reflects the physical properties of a product\" and provided important indications for the like-\nproduct determination which must be considered. 1098 The fact that so many HS classifications have\nbeen grouped into a single imported product and a single like product is just one more indication that\nthe USITC failed in its determination. In fact, contrary to the assertion of the USITC, HSUS\nclassifications of CCFRS at the four-digit level (depending on the width and thickness of the product)\ndo provide a break-out of the various like products: semi-finished (including slab), hot-rolled, cold-\nrolled, corrosion-resistant, and plate. Moreover, only five of the 55 distinct HSUS classifications at\nthe six-digit (international) level are shared between two CCFRS steel products. The European\nCommunities adds that a closer look at the 55 classifications for what the USITC calls CCFRS reveals\nthat even the HSUS classifications distinguish at the four-digit level (depending on the width and\nthickness of the product) between \"semi-finished products\" including slabs, hot-rolled, cold-rolled,\ncorrosion resistant and plate.\n1099 This is a high level of delineation and reflects fundamental product\ndistinctions recognized internationally for purposes of classifying imports.1100 1101\n7.390 The United States noted that in this case the numerous tariff classifications did not provide\nclear distinctions between products. For instance, each of the 33 data collection categories\nindividually have from 2 to 65 tariff classifications. The United States also noted that the facts did not\nprovide support for complainants' allegations that consideration of tariff classifications at the 4-digit\nlevel would have provided clear product distinctions. For example, at the 4-digit level, there are nine\n\nof two products that is very different from that of the inventors or producers of those products.\" Appellate Body\nReport, EC – Asbestos, para. 92.\n1092 Appellate Body Report, US – Line Pipe, para. 82; USITC Report, p. 9.\n1093 United States' first written submission, para. 137.\n1094 New Zealand's second written submission, para. 3.39.\n1095 USITC Report, Vol. I, p. 37, footnote 71.\n1096 Brazil's first written submission, para. 102; European Communities' first written submission,\npara. 246.\n1097 Japan's first written submission, para. 117; Brazil's first written submission, para. 106.\n1098 Appellate Body Report, EC – Asbestos, paras. 102, 109 and 124.\n1099 Presidential Proclamation Annex I, pp. 25 ff.\n1100 \"Chapter 72 Flat-Rolled HTS Descriptions at the Four and Six-Digit Level\", (Exhibit CC-83).\n1101 European Communities' first written submission, paras. 246-248; Korea first written submission,\nparas. 51-52; China's first written submission, paras. 198-200.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nseparate tariff classifications covering the like product defined by the USITC as CCFRS. Of the nine\n4-digit classifications, two classifications (7225 and 7226) apply to steel at four (hot-rolled steel, CTL\nplate, cold-rolled steel, and coated steel) of the five stages of processing defined as CCFRS; one\nclassification (7211) applies to three stages; two classifications (7208 and 7210) apply to two stages;\nand four classifications (7207, 7209, 7212, and 7224) apply to one stage of CCFRS. Thus, rather than\nprovide clear product category distinctions, tariff classifications at this level demonstrate an\ninterrelationship between the physical properties of steel at different stages of processing which led to\nthe USITC defining these types of steel collectively as CCFRS.\n1102\n7.391 Further, in New Zealand's view, the differences amongst the various uses to which the various\nCCFRS products are put are further reflected in the differing tariff classifications attributed to each of\nthem.1103 The role of tariff classification in like product determinations has been well accepted in the\njurisprudence. Tariff classifications reflect international consensus as to the degree of similarity and\ndifference between products. Clearly, it is not open to a competent authority simply to ignore tariff\nclassification.1104 Several of the five CCFRS products do not even share the same classification to four\ndigits, let alone eight or ten.1105 This simply reinforces the lack of likeness between them.1106\n7.392 The European Communities maintains that the HS clearly distinguished the different products\non the basis of the different stages of processing, as is demonstrated in the relevant paragraphs of\nChapter 72 of the HS in exhibits CC-105. The United States is wrong in asserting that the distinction\nbetween products, which are part of a different stage of the production process is not reflected at the\nfour digit level. As can be discerned from the tariff heading 72.07-72.09 even at the four-digit level\nthere is a distinction between slabs (semi-finished) hot-rolled, cold-rolled and coated.\n1107 T h e\ndifferentiation is even clearer when considering the internationally agreed tariff classifications at the\nsix-digit level.1108 1109\n7.393 According to Korea, the tariff numbers have aided the USITC's classification of \"like\" steel\nproducts in past anti-dumping and countervailing duty investigations for over 20 years. The USITC,\nboth in its determination and in its Staff Report , breaks the seven CCFRS products down into \"like\"\nproduct categories traditionally used in the various anti-dumping and countervailing duty\ninvestigations performed by the USITC: slabs, plat e (cut-to-length and clad), hot-rolled, cold-rolled,\ngrain-oriented silicon steel, coated steel and tin mill products.1110 1111\n\n1102 United States' first written submission, paras. 86 and 89.\n1103 New Zealand's first written submission, para. 4.66.\n1104 United States' first written submission, paras. 86-87.\n1105 USITC Report Vol I, pp. 9-10.\n1106 New Zealand's second written submission, para. 3.48.\n1107 For example, products under heading 72.07 which are referred to as semi-finished products of iron\nor non-alloy steel (slabs) are clearly distinguished from products under 72.08, which are referred to as flat-rolled\nproducts of iron or non-alloy steel, of a width of 600 mm or more, hot-rolled, not clad, plated or coated.\n1108 At the six digit level products are further defined and separated from one another. For example,\ntake products that fall under paragraph 72.11, which at the four-digit level are described as \"Flat-rolled products\nof iron or non-alloy steel, of a width of less than 600 mm, not clad, plated or coated\". At the six digit level, these\nproducts are further defined on the basis of whether they are not further worked than hot-rolled (721113,\n721114, 721119) or whether they are not further worked than cold-rolled (cold-reduced) (721123, 721129,\n721190).\n1109 European Communities' second written submission, paras. 272-274.\n1110 USITC Report, Vol. I: \"Appendix A\", pp. 9-10 and Vol. II, pp. FLAT-1-4 (Exhibit CC-6).\n1111 Korea's first written submission, para. 53."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.158066"}}},{"rowIdx":3484,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ04_Report_Of_Panel_03.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ04_Report_Of_Panel_03.pdf"},"doc_sequence":{"kind":"number","value":4,"string":"4"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 165 Production processes 7.394 The European Communities and China point out that the USITC's decisive argument for aggregating the five different products into one single category was the vertical integration of the industry and the common production processes.1112 The USITC, in this safeguard determination, was, again, required by its own stated methodology to use as criterion for determining a like product \"its manufacturing process (i.e., where and how it is made)\".1113 The USITC paid \"particular attention\" to the \"sharing of productive processes and facilities\" which \"is a fundamental concern in defining the scope of the domestic industry under Section 201\". 1114 Moreover, the USITC considered itself required \"to define like or directly competitive in a manner that reflects the realities of the market and at the same time accomplishes the fundamental purpose of Section 201, protection of the productive"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":3,"string":"3"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":73,"string":"73"},"clean_text":{"kind":"string","value":"Production processes\n7.394 The European Communities and China point out that the USITC's decisive argument for\naggregating the five different products into one single category was the vertical integration of the\nindustry and the common production processes.1112 The USITC, in this safeguard determination, was,\nagain, required by its own stated methodology to use as criterion for determining a like product \"its\nmanufacturing process (i.e., where and how it is made)\".1113 The USITC paid \"particular attention\" to\nthe \"sharing of productive processes and facilities\" which \"is a fundamental concern in defining the\nscope of the domestic industry under Section 201\". 1114 Moreover, the USITC considered itself\nrequired \"to define like or directly competitive in a manner that reflects the realities of the market and\nat the same time accomplishes the fundamental purpose of Section 201, protection of the productive\nresources of domestic producers\".\n1115 Thus, the USITC's general methodology calls for the artificial\naggregation of downstream products by directing the USITC to \"pay particular attention\" to a\ncommon integrated production base.1116\n7.395 According to the European Communities, Japan, China, and Brazil, this criterion, however,\nhas already been found to be at odds with the Agreement on Safeguards in US – Lamb well before the\nUSITC started the steel safeguard investigation. Japan and Brazil also argue that the USITC found\nthe \"vast majority\" of CCFRS to be produced by \"fir ms that are involved in a number of the stages of\nprocessing\".1117 Consequently, these complainants contend that the USITC's like product analysis of\nCCFRS products is no more consistent with the Agreement on Safeguards than its faulty analysis in\nUS – Lamb. As the Appellate Body held in that dispute: \"[i]f an input product and an end product are\nnot 'like or directly competitive', then it is irrelevant, under the Agreement on Safeguards, that there is\na continuous line of production between an input product and an end-product … or that there is a\nsubstantial coincidence of economic interests between the producers of these products\". 1118 Rather,\nthe focus must be on \"the identification of the products, and their 'like or directly competitive'\nrelationship, and not on the processes by which those products are produced\".\n1119 The cascading\nnature of the production processes for various CCFRS products is irrelevant to the question of \"like\"\nproducts under the Agreement, as interpreted by the Appellate Body. The complainants argue that the\nnature of the factors to be considered in determining the scope of the \"like\" products – i.e ., physical\nproperties, end-use, consumer tastes and habits, and customs treatment – also indicate that the overlap\nin the production, the element that drove the USITC analysis 1120, is irrelevant. What matters is the\ncompetitive relationship between the products, which helps to discern whether the products are \"like\"\none another and whether, in turn, it makes sense to collapse them together.\n1121 Japan considers that\n\n1112 USITC Report, Vol. I, pp. 30, 31, 37.\n1113 USITC Report, Vol. I, p. 30.\n1114 USITC Report, Vol. I, pp. 30 and 151.\n1115 USITC Report, Vol. I, p. 31.\n1116 European Communities' first written submission, paras. 249-251; China's first written submission,\nparas. 201-203.\n1117 USITC Report, Vol. I, pp. 37-39.\n1119 Ibid. at paras. 92-93.\n1120 USITC Report, Vol. I , pp. 36-45 (Exhibit CC-6). These complainants argue that this is apparent\nfrom the USITC's reliance on the statement that the like product determination should be driven by the\n\"fundamental purpose of Section 201, protection of the productive resources of domestic producers.\" USITC\nReport, Vol. I, p. 31 (Exhibit CC-6) (citing to Carbon and Certain Alloy Steel Products , Inv. No. TA-201-51,\nUSITC Publication 1553, Washington, D.C. (July 1984), pp. 12-13).\n1121 European Communities' first written submission, para. 252; Japan's first written submission, paras.\n121-122; China's first written submission, para. 204; Brazil's first written submission, paras. 100, 102, 105, 109,\n111.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe USITC finding that a large percentage of domestic CCFRS producers are vertically integrated,\nproducing four of the five flat-rolled steel products, is akin to its earlier finding of a \"continuous line\nof production\" from live lambs to lamb meat.\n1122\n7.396 Japan and Brazil also insist that the products undergo different production processes. The\nUSITC found, for example, that the production processes for hot-rolled steel and cold-rolled steel\ndiffer in that cold-rolled steel is further reduced by 25% to 90%, and is often annealed and temper\nrolled. Coated steel differs from cold-rolled steel in that it has been processed on an electro-\ngalvanizing or hot-dip galvanizing line.1123\n7.397 Japan submits that even the USITC admits that the processes that make the various CCFRS\nproducts are distinct and that distinct products come out of them. 1124 A slab caster is a process unto\nitself, entirely separate from the hot rolling and St eckel plate mills. These mills are in turn separate\nfrom cold rolling mills, as are the co ating lines that make corrosion resistant steel. Each process, in\nturn, makes a product that can either be used as feedstock for the next stage, or be sold as finished\nproducts for end-use purposes (except for slab, which is only used to make finished flat-rolled steel).\nThe processes which make these products may be located on the same general premises and be owned\nby the same company, but this doesn't make the processes' output \"like\" one another. The separate\nfacilities in which slab is made as compared with hot-rolled, cold rolled and corrosion resistant create\nseparate products used for distinctly different purposes.\n1125\n7.398 The European Communities and China finally argue that in essence, the USITC defined \"like\nproduct\" by reference to the \"domestic industry\". This turns on its head the requirement of\nArticles 2.1 and 4.1(c) of the Agreement on Safeguards which mandates the \"domestic industry\" to be\ndefined by reference to producers of the \"like product\": the \"identification of the products which are\n\"like or directly competitive with the imported product\" is the first step required by US – Lamb in\ndefining the domestic industry, not the other way round. This is not a product-focused approach as\nrequired by the Appellate Body. Rather, it is an approach driven by the aim to give the widest\npossible blanket of protection to the domestic industry. The United States cannot arbitrarily replace\nthe criteria upheld by the Appellate Body. The United States had to apply such criteria so as to ensure\nthat prejudice caused by one imported product is not unjustifiably attributed to another imported\nproduct.\n1126\n7.399 The United States insists that CCFRS includes steel at any of the following five stages of\nprocessing: slab, hot-rolled steel (sheet/strip/plate in coils), cut-to-length (\"CTL\") plate, cold-rolled\nsteel, and coated steel. 1127 An important factor in the USITC's analysis, which the complainants'\narguments ignore, was the fact that CCFRS at one stage of processing generally is feedstock for the\nnext stage of processing. For example, slab is fe edstock for hot-rolled steel (sheet, strip, and plate);\nhot-rolled steel is feedstock for cold-rolled steel and cut-to-length plate; and cold-rolled steel is\nfeedstock for coated steel. The USITC acknowledged that the interrelationship between the products\nis most prominent at the earlier stages.\n1128 Since earlier processed CCFRS is the feedstock for further\n\n1122 Japan's second written submission, para. 40.\n1123 Japan's first written submission, para. 117, footnote 183; Brazil's first written submission,\npara. 106.\n1124 USITC Report, pp. 40-41.\n1125 Japan's second written submission, para. 41.\n1126 European Communities' first written submission, para. 253; China's first written submission,\npara. 205.\n1127 USITC Report, p. 38.\n1128 For example, slab is dedicated for use in produ cing the next stage steel, hot-rolled steel, whether\nproduced as sheet, strip, or plate. The majority of hot-rolled steel is further processed into cold-rolled steel. The\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nprocessed steel, such steel is produced using essentially the same production processes at least at the\ninitial stages, with downstream steel merely employing later stages of processing. The USITC's\nanalysis provided a detailed discussion of the fi ve stages of processing CCFRS. The manufacturing\nprocesses for carbon steel involve three distinct stages that include: (1) melting or refining raw steel;\n(2) casting molten steel into semifinished form, su ch as slab; and (3) performing various stages of\nfinishing operations, including hot-rolling, cold-rolling, and/or coating.\n1129 All CCFRS is produced\nfrom slab, with the majority of such steel further processed into hot-rolled steel on hot strip or Steckel\nmills.1130 Substantial quantities of earlier processed steel are internally transferred for production of\nfurther processed steel.1131 This tends to blur product distinctions until the processing reaches its final\nstages since earlier stages simply are feedstock for the next stage. As part of its consideration of the\nmanufacturing process ( i.e., where and how it is made), the USITC also recognized that there is\ncommonality of facilities and substantial vertical integration in the industry.1132\n7.400 The United States notes that the complainants challenge the USITC's consideration of\nproduction processes in determining the \"like produc t\" on the basis that \"the Appellate Body in US –\nLamb had ruled out this criterion for the like product determination\". 1133 However, the United States\nmaintains that contrary to the complainants' contentions, the Appellate Body in US – Lamb\nrecognized that when confronted with the question of whether two articles are separate products, \"it\nmay be relevant to inquire into the production processes for those products\".1134\n7.401 The European Communities contends that the United States acknowledged the limited\nsimilarity and interchangeability and tried to defend it on the basis of a the \"important factor\"\n\"feedstock\" relationship, stating that a lack of similarity \"would be expected for feedstock\nproducts\".1135 However, this only admits the commonsensical reason why the Appellate Body clearly\n\nremaining hot-rolled steel is about equally divided between being further processed into CTL plate or pipe and\ntube, and used in the manufacture of structural parts of automobiles and appliances. The majority of cold-rolled\nsteel also is used as the feedstock for further processing into coated steel, with smaller amounts further\nprocessed into tin mill products or GOES.\n1129 USITC Report, p. OVERVIEW-7.\n1130 Moreover, the evidence shows that advances in technology have blurred the former differences in\nhot-rolled production processes for sheet/strip and plate. The Steckel mills permit rolling to thinner gauges than\na traditional reversing mill thus permitting a producer to switch production between sheet and plate. Steckel\nmills also allow steelmakers to coil the finished plate, as on a hot-strip mill. Moreover, the addition of temper\nmills to CTL lines has made heavy gauge hot-rolled interchangeable with discretely produced plate. Without\nthe temper mill process, coils cut into lengths tend to retain memory and \"snap back\" or bend after the initial\nflattening. While plate in coils can only be produced in thicknesses up to 3/4 inch and thus can only be\nsubstituted for CTL plate up to 3/4 inch thick, this portion of the CTL plate market is large. There is evidence\nthat some mills can produce plate in coils in gauges up to one inch. Thus, the share of the CTL plate market\nwhich can be, and is being, supplied with plates cut from coil is substantial. USITC Report, p. 40-41.\n1131 Virtually all US-produced slab is internally co nsumed by the domestic slab producers in their\nproduction of hot-rolled steel (sheet, strip, or plate), w ith large shares of hot-rolled and cold-rolled steel also\ninternally transferred. During the year 2000, 99.4% of the quantity of domestic producers' total US shipments of\nslab were internally transferred, as were 66% of the quantity of domestic producers' total US shipments of hot-\nrolled steel, and 58.7% of the quantity of total US shipments of domestically-produced cold-rolled steel. USITC\nReport, pp. FLAT-1 and 3, nn. 4 and 5.\n1132 United States' first written submission, paras. 121-122.\n1133 European Communities' first written submission, para 233; see also Korea's first written\nsubmission, paras. 32 and 35; Japan's first written submission, para. 103; China's first written submission,\nfirst written submission, para. 197.\n1134 Appellate Body Report, US – Lamb, para. 94, footnote 55.\n1135 United States' first written submission, paras. 136 and 140.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nruled out a feedstock relationship between products as criterion for establishing likeness, if the\nproducts are not otherwise found to be like. Had the USITC looked at the production process, i.e.,\nhow a product is made, as opposed to an irrelevant feedstock relationship, this would have only\nconfirmed the finding that all five products are different. The European Communities alleges that the\nUnited States itself described the production processes of all these four products and thereby admits\nthat they are different. 1136 As is readily apparent, the production processes differ considerably and\naccordingly, the texture and thickness of hot-rolled and cold-rolled steel is not similar. Similarly, the\nspecific characteristics of coated sheet are due to the specific production processes of hot-dip\ngalvanising or otherwise coating the cold-rolled shee ts to make it corrosion resistant or give it other\nspecific qualities.1137\n7.402 The United States stresses that cont rary to the complainants' allegations 1138, the USITC's\ndefinition of CCFRS as a single like product was not based solely on the vertical integration of the\ndomestic CCFRS producers. It is clear from the USITC's determination, that it considered the factors\nit has traditionally used to evaluate like products in safeguard cases, and based its decision on all of\nthe evidence before it. The complainants fail to acknowledge, although they do not dispute, the fact\nthat CCFRS at one stage of processing generally is feedstock for the next stage of processing, which\ntends to blur product distinctions until the processing reaches its final stages since steel at the earlier\nstages simply are feedstock for the next stage. This interrelationship between types of CCFRS at\ndifferent stages of processing clearly was an important factor in the USITC's analysis and finding, and\nis \"product-oriented\". The fact that the USITC recognized that substantial quantities of earlier\nprocessed steel are internally transferred for their production of further processed steel and that these\nsubstantial internal transfers of feedstock underscore the fact that domestic producers are highly\nintegrated does not negate the USITC's entire like product analysis.\n1139 These are facts about the\ninterrelationship of CCFRS and its manufacturing proc ess. Contrary to the complainants' statements,\nthe USITC appropriately considered relevant other factors 1140 including the vertical integration of the\ndomestic producers of CCFRS in its analysis.1141 1142\n\n1136 United States' first written submission, para. 121.\n1137 European Communities' second written submission, paras. 277-279.\n1138 Japan's first written submission, paras. 121-122; Brazil's first written submission, paras. 103-105;\nKorea's first written submission, paras. 45-47 and 60; European Communities' first writtensubmission,\nparas. 249-254; New Zealand's first written submission, paras. 4.54-4.55; China's first written submission,\nparas. 201-206; Brazil's first written submission, paras. 103-105 and 109.\n1139 The evidence shows that domestic producers of hot-rolled steel shipped 94.7% of US shipments of\ncold-rolled steel and 84.8% of coated steel in 2000. INV-Y-207 at Table X-1 (US-27). Conversely, domestic\nproducers of cold-rolled/coated steel shipped 89.1% of US shipments of hot-rolled steel in 2000. INV-Y-207 at\nTable X-2 (US-27).\n1140 Appellate Body Report, Japan – Alcoholic Beverages II , p. 20 (\"In applying the criteria cited in\nBorder Tax Adjustments to the facts of any particular case, and in considering other criteria that may also be\nrelevant in certain cases, panels can only apply their best judgement in determining whether in fact products are\n\"like\".).\n1141 As discussed above, contrary to complainants' misstatements, US – Lamb does not prohibit\nconsideration of production processes and vertical inte gration as part of the like product analysis. The\ncomplainants ignore the Appellate Body's explicit recognition that consideration of production processes may be\na relevant factor in defining like products. Specifically, the Appellate Body in US – Lamb added the following\nstatement in a footnote:\nWe can, however, envisage that in certain cases a question may arise as to whether two articles are\nseparate products. In that event, it may be relevant to inquire into the production processes for those products.\nAppellate Body Report, US – Lamb , para. 94, footnote 55; Panel Report, Japan – Alcoholic\nBeverages I, para. 5.7 (Panel thought it was important to assess \"likeness\", as much as possible, on the basis of\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.403 The European Communities notes that even if the USITC had consistently drawn the dividing\nlines between products on the basis of a feedstock relationship, such approach would be inconsistent\nwith Article 2.1 of the Agreement on Safeguards , as clarified by the Appellate Body in US – Lamb .\nThe European Communities submits that a mistake is not healed by repeating it.\n1143\nMarketing channels\n7.404 Brazil argues that the USITC found that there was overlap among the products in terms of\nchannels of distribution in that the products were generally internally consumed or sold to end-users,\nalthough neither plate nor corrosion resistant steel is internally consumed in most cases.1144 1145\n7.405 The United States agrees that the USITC also considered the marketing channels and uses for\nCCFRS. The majority of CCFRS overall, and specifically for feedstocks products – slab, hot-rolled,\nand cold-rolled – is internally transferred. Thus, when CCFRS enters the commercial market, the\nprimary marketing channel generally is directly to end-users.1146\n7.406 China considers that marketing channels are not relevant criteria.1147\nCompetition\n7.407 According to Japan, the USITC completely ignored the most basic principle that competition\nneeds to exist between products found to be like. The choice of an overly broad CCFRS category – in\nrespect of both imports and the domestic industry – made the USITC's analysis meaningless because\nit masked the true competitive dynamics in the mark et. Assume, for instance, that imports of semi-\nfinished slab sharply increase, and sales of domestically produced corrosion-resistant steel\nsimultaneously decline. This import increase cannot \"cause … injury to domestic producers … of\"\ncorrosion-resistant steel because there would be no competitive relationship between these products in\nlight of their wide differences in product properties and end-uses.\n1148\n7.408 Similarly, Korea argues that Articles 2.1 and 4.1(c) of the Agreement on Safeguards, read as a\nwhole, support the conclusion that an essential elem ent of the like product analysis should relate to\nwhether the products compete in the marketplace because this will determine the essential nature of\nthe impact of imports on the domestic industry and whether they are causing serious injury. This\nessential element of \"competitive effect\" should have guided the USITC's analysis of like product.\nAfter all, the more attenuated the competitive effect, the less likely a causal relationship exists\nbetween increased imports of that product and serious injury. In this case, imports of hot-rolled coil\ndo not have a comparable competitive effect on cold-rolled production and profitability, etc., as do\nimports of cold-rolled. This is because the two products have different physical characteristics and\ndifferent end-uses and thus do not compete against each other in end-use market. The effect is even\n\nobjective criteria, including, in particular, compositio n and manufacturing processes of the product, in addition\nto consumption habits.).\n1142 United States' first written submission, paras. 138, 140.\n1143 European Communities' written reply to Panel question No. 11 at the second substantive meeting,\nquoting the Appellate Body Report, US – Lamb, para. 90.\n1144 USITC Report, p. 44.\n1145 Brazil's first written submission, para. 102.\n1146 In 2000, the marketing channels for certain carbon flat-rolled steel, except for CTL plate, ranged\nfrom 60% to 99.6% to end-users. USITC Report, Tables FLAT 12-15 and FLAT-17. The marketing channels\nfor CTL plate were more evenly split with 45.2% to end-users and 54.8% to distributors. Ibid., Table FLAT-13.\n1147 China's second written submission, para. 78.\n1148 Japan's first written submission, para. 80.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmore attenuated between slab imports and galvanized products – i.e., one cannot make a car or any\nother finished product using slabs. Indeed, the actual competitive overlap of CCFRS products is\nmarginal.\n1149 New Zealand points out that the USITC acknowledged that slab \"is dedicated for use in\nproducing the next stage steel, hot-rolled steel\". 1150 Slab may not, therefore, be applied to any of\nthe uses for which other steel products may be used – it is exclusively an input good. 1151 The USITC\nanalysis thus falls well short of establishing th e \"highest degree of competition\" threshold for\n\"likeness\" that was spoken of in US – Cotton Yarn.1152\n7.409 The United States responded that substitutability is not one of the traditional factors\nconsidered by the USITC in conducting its analysis of whether there are clear dividing lines between\ndomestic products in order to define like product(s). The United States further added that there\nclearly is a competitive relationship between the imported and domestic products. The complainants\nhave not disputed, and neither did the parties in the underlying investigation, that the imported and\ndomestic products generally consist of the same types of steel, are interchangeable, and thus compete\nwith each other. Moreover, within any defined like product and the corresponding specific imported\nproduct there exists a range or continuum of goods of different sizes, grades, or stages of processing.\nWhile goods along the continuum share identical or similar factors, individual items at the extremes\nof the continuum may not be as similar or substitutable. For example, a size 36 skirt is like a size 44\nskirt, but are they substitutable? Or is size number 3 rebar substitutable for size number 18 rebar? Or\nare calves substitutable cattle at other stages of development (i.e., yearling or stocker cattle, feeder\ncattle, or fed cattle ready for slaughter)?\n1153\n(iii) Relevance of other like product definitions in this case\n7.410 Brazil argues that every one of the criteria used by the USITC to distinguish billets from\ndownstream long products can also be used to distinguish slab from downstream flat products. 1154\nThe sole distinction put forward by the USITC was that each of the long products (i.e. hot-rolled bar,\nrebar and heavy structural shapes) produced from billets is made at one stage removed from the billet\n(i.e. there is a single rolling stage for each of the products) while for slab there are multiple additional\nstages of production (i.e. hot rolling, cold rollin g, galvanizing) with each subsequent product also\nbeing an input into a downstream product until galvan izing. Thus, according to the United States,\nwhile hot-rolled flat products (plate and sheet) result from a single rolling stage with slab as an input,\nhot-rolled flat products are like slab because some hot-rolled products may also be an input into a\nsubsequent rolling stage, cold rolling. However, again according to the United States, hot-rolled bar\nwhich, like hot-rolled flat products, results from a single rolling stage with billet as an input is not like\nbillets because hot-rolled bar is not an input into a subsequent rolling stage. This logically leads to the\nanomalous result that CCFRS products one, two a nd three stages of processing removed from the\nsemifinished product are determined to be \"like\" the semifinished product whereas long products only\none stage removed from the semifinished product are not \"like\" the semifinished product. It also\nleaves unexplained why hot rolling of a billet creates a different like product when hot rolling of a\nslab does not. One might also ask why billets are not part of a like product category which includes\nwire rod (resulting from hot rolling of the billet), wire (which results from cold drawing of the wire\nrod) and galvanized wire (which involves application of a metallic coating to prevent corrosion). The\n\n1149 USITC Report, Vol. II , p. FLAT-53 (Exhibit CC-6); Respondents' Joint Framework Brief ,\npp. 22-24 (Exhibit CC-50).\n1150 USITC Report, Vol. I, p 38.\n1151 New Zealand's first written submission, para. 4.62.\n1152 New Zealand's second written submission, para. 3.47.\n1153 United States' second written submission, paras. 71-72.\n1154 Brazil's second written submission, paras. 15-20.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrelationships here are virtually identical in terms of one product being the feedstock for the next and\nthe similarity of the subsequent processing as the relationships among CCFRS products. In the end,\nthe only distinction that the United States can find to justify different treatment of CCFRS and carbon\nlong products is the only distinction which the Appell ate Body has specifically stated is irrelevant to\nthe determination of whether products are like each other, namely whether each product is made as\npart of a continuous line of production. Furthermore, even if this approach were acceptable, it does\nnot justify any distinction between the treatment of CCFRS and stainless flat-rolled steel products,\nwhere the input/output relationship between the dow nstream products is identical. Finally, this\napproach is also of limited validity in distinguishing billets from finished long products in that it is\ninapplicable to the billets-wire rod-wire-galvani zed wire grouping of products which have the same\ninput to end product relationship from billets through galvanized wire as does CCFRS from slab\nthrough galvanized sheet.\n1155\n7.411 Brazil further notes that the level of integration in both the production of stainless steel flat\nproducts (slab, plate, hot and cold rolled) and carbon long products (billets, hot-rolled bar, rebar,\nheavy structurals, and wire rod) is comparable to the level of integration in the production of CCFRS.\nThe only difference is that virtually all stainless and the overwhelming majority of carbon long\nproducts are produced from steel made in electric furnaces, while a majority of CCFRS products are\nmade from steel produced in blast furnaces and basic oxygen furnaces. This distinction on how the\nraw steel is made is not, however, relevant to the degree of vertical integration. Most producers of\nboth stainless flat products and carbon long products, like most producers of CCFRS, are vertically\nintegrated from the production of raw steel to the rolling of finished product.\n1156 The CCFRS industry\nas a whole is less vertically integrated than either the stainless or long products industries. At least\ntwo producers of a full range of CCFRS finished products do not produce any slab, but purchase all of\ntheir slab requirements, almost exclusively from foreign sources. 1157 Brazil is not aware of any\nproducers of stainless plate and sheet or of hot-rolled bars, rebars or heavy structurals that do not also\nproduce the semifinished input product. Furthermore, with imports of carbon slab ranging as high as\n7.4 million tons during the period investigated (compared to small quantities relative to domestic\nproduction of imported billets and stainless slab) 1158, it is evident that there is a substantial portion of\ntotal CCFRS production which is not vertically integrated. Nevertheless, there is no meaningful\ndistinction between the level of vertical integration of the producers of CCFRS, billets and finished\ncarbon long products, and stainless flat products, including stainless slab.1159\n7.412 The United States insists that the definitions are based on the application of the like product\ncriteria to the particular facts involved. Where the facts differ the definitions will differ. Thus, what\nBrazil contends are inconsistencies in where dividing lines were drawn, are differences in the\nunderlying facts.1160 There is a key difference between the relationship of carbon slabs with CCFRS\nand the relationship of carbon billets with carbon long products. CCFRS at different stages of\nprocessing has a sequential, or feedstock, relationship rather than the horizontal relationship between\ncarbon long products. For example, 100% of carbon slab is further processed into either plate or hot-\nrolled steel. The sequential relationship continues with other types of CCFRS; the majority of hot-\n\n1155 Brazil's written reply to Panel question No. 11 at the second substantive meeting.\n1156 Brazil notes that in making like product distinctions between wire and various wire products\n(rope/cable/cordage and nails/staples/cloth categories), the USITC did note the limited degree of vertical\nintegration between the producers of the upstream (wire) and downstream (various wire products) products.\nViews of the Commission – USITC Report, Vol.I, at 86-87.\n1157 Common Exhibit CC-52 from Brazil's first written submission, pp. 61-62.\n1158 Common Annex A and B from Brazil's first written submission.\n1159 Brazil's written reply to Panel question No. 12 at the second substantive meeting.\n1160 United States' written reply to Panel question No. 11 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrolled steel is further processed into cold-rolled st eel and the majority of cold-rolled steel is further\nprocessed into coated steel. Thus, carbon slab is dedicated for processing into hot-rolled steel\nwhereas carbon billets are not dedicated for use into a single type of long product. Instead, carbon\nbillets are used to produce five very different products – hot-rolled bar, rebar, heavy structural shapes,\nrails, and wire rod. Moreover, none of these five carbon long products produced from carbon billets\nis further processed into one of the other five carbon long products.\n1161 Therefore, carbon billets are\nnot dedicated for use for a single type of carbon long product as occurs for carbon slab; the horizontal\nrelationship also continues between the very different long products. There are other distinctions as\nwell in physical characteristics and manufacturing processes. For example, carbon slabs are typically\nmade from pig iron and not scrap metal whereas almost 100% of carbon billets are made from scrap\nand scrap substitutes. Thus, there is less variance in purity between slabs with greater variance\nbetween billets. All carbon slabs are refined and subject to extensive metallurgical testing. Carbon\nbillets, on the other hand, have a wide degree of variation in quality/purity depending on the type of\ncarbon long product that they will be used to produce. Carbon billets have less sophisticated\nrefinement generally, but may have more extensive testing for certain end-uses. For instance, billet\nused for rebar has limited metallurgical testing, whereas billet used for certain kinds of specialty bar\nmay have extensive metallurgical testing. This re sults in differences in the sophistication necessary\nfor the manufacturing processes. Many United States producers of carbon billets produce other\ncarbon long products. However, because of the horizontal relationship between carbon long products,\nbillets may be used to make hot-rolled bar, rebar, heavy structural shapes, rails, and wire rod, but none\nof these five products is used to make one of the other five. Thus, the integration of the production\nprocess is not in the same fashion as the production of CCFRS.\n1162\n(iv) Like product definitions used in the anti-dumping and countervailing duty contexts\n7.413 Korea recalls that the USITC has never determined that two or more CCFRS products should\nbe treated as a single like product in an anti-dumping or countervailing duty investigation, nor has the\nUSITC found that different CCFRS products are commercially interchangeable with other CCFRS.\nThe USITC, at least, should have explained why the extensive analyses which justified its like product\ndeterminations of flat products in past trade remedy cases did not apply to the instant case. 1163 It is\ninstructive that the USITC came to the opposite conclusion regarding the like product in the 1992\nCCFRS Products anti-dumping/countervailing duty case 1164 based specifically on the fact that they\n(hot-rolled, cold-rolled, corrosion-resistant, and plate) \"differ in physical characteristics and uses\" and\n\"the different physical properties of each like product dictate particular end-uses\".1165 1166\n7.414 New Zealand and Brazil also argue that the aggregation of slab, plate, hot-rolled steel, cold-\nrolled steel and coated steel into one \"like product\" group also represents a departure from the\nUSITC's own treatment of these products for the purposes of anti-dumping and countervailing duty\ninvestigations. In a number of instances since 1992, the USITC consistently dealt with the discrete\nsteel products comprising the CCFRS category as separate like products. Japan concurs in this\nargument. In each case the USITC has acknowledged fundamental differences amongst the products\n\n1161 Hot-rolled bar may be further processed into cold-finished bar, and wire rod may be further\nprocessed into wire and nails. However, these downstream products are distinct from each other and from the\nother products produced from billets (i.e., rebar is not used in the production of hot-rolled bar).\n1162 United States' written reply to Panel question No. 12 at the second substantive meeting.\n1163 Korea's first written submission, paras. 38-40.\n1164 1992 Certain Flat-Rolled Products , USITC Publication 2549, pp. 9-17 (Exhibit CC-32). (The\nUSITC established four categories of flat-rolled products for its purposes and included investigation numbers\n573-579, 581-592, 594-597, 599-609, 612-619. See id., p. 3.)\n1165 1992 Certain Flat-Rolled Products, USITC Publication 2549, pp. 12-15 (Exhibit CC-32).\n1166 Korea's first written submission, para. 50.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nin terms of physical properties, uses and interchangeability. In the present case the USITC seems to\naggregate or disaggregate products at will. For example, while the USITC considered both semi-\nfinished carbon steel (slab) and finished flat carbon steel products together in the same like product\ncategory, it decided to treat semi-finished long products (billets) and semi-finished stainless products\nas separate from finished products.\n1167\n7.415 According to the United States, the complain ants' arguments that the USITC should have\ndefined the like product the same as it has in certain prior anti-dumping and countervailing duty\ninvestigations fails to recognize that the definiti ons arrived at in those cases, as in safeguard\ninvestigations, are dependent on the imports subject to the particular investigation; thus the definitions\nhave varied.\n1168 The starting point for the USITC's like product analysis is the subject imports\nidentified as within the investigation. In the pr esent case, the USITC began with the subject imports\nwhich included a range of certain carbon and alloy flat steel and looked for clear dividing lines\nbetween the domestic steel that corresponded to these subject imports using well-established factors.\nMoreover, contrary to the complainants' allegations, the USITC was not required to begin with like\nproduct definitions found by the USITC in prior anti-dumping or countervailing duty cases, that may\nhave been appropriate definitions in different contexts based on particular statutes and record, and\nmake an array of comparisons. The anti-dumping and countervailing duty investigations generally\nbegin with a more narrow starting point for the scope of subject imports so the analysis frequently\ninvolves whether the domestic like product should be defined more broadly than the subject imports,\ni.e., it starts small and looks at whether to broaden rather than starts large and looks where to divide.\nThe complainants also fail to acknowledge that the anti-dumping and countervailing duty\ninvestigations have a purpose that is different from that in a safeguards investigation.\n1169\n7.416 Japan responds that one might argue that safeguards investigations permit a broader definition\nof the industry than anti-dumping and countervailing duty investigations, given that the Agreement on\nSafeguards contains both \"like\" and \"directly competitive\" whereas the Anti-Dumping and Subsidies\nAgreements contain only the word \"like\". However, in this case, the USITC relied only on \"like\" and\nthe concept of \"like\" is understood to be even more narrowly construed when it is juxtaposed against\ndirectly competitive. If anything, the USITC's d ecision should have been narrower. Furthermore,\ngiven the discussion above demonstrating that safeguards may be applied in only the most\nextraordinary of circumstances, Japan takes issue with the notion that the definition of like product\nmay be broader in the safeguards context than in the anti-dumping and countervailing duty context.\n1170\n7.417 According to Korea, the stated premise of th e USITC's discussion of the legal relevance of\nanti-dumping and countervailing duty like product de terminations is that the fundamental purpose of\nSection 201 is to protect domestic industries. Therefore, according to the USITC, it has more\ndiscretion in defining the like product more broadly than under countervailing and anti-dumping duty\nprovisions. The USITC's statement of the object and purpose of Section 201 is not consistent with the\nobject and purpose of the Agreement on Safeguards. The purpose of the Agreement on Safeguards,\nwhich is to be contrasted to the purpose of a corresponding domestic law (Section 201 in this case), is\nnot to protect the domestic industry, but to provide a framework within which a safeguard measure\n\n1167 New Zealand's first written submission, paras. 4.68-4.70; Brazil's second written submission,\npara. 12; Japan's first written submission, paras. 131-136.\n1168 United States' first written submission, para. 128, citing Japan's first written submission, para. 125-\n148; Korea's first written submission, paras. 34-44.\n1169 United States' first written submission, paras. 128-130.\n1170 Japan's second written submission, para. 38.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmay be applied. Hence, the USITC's like product decisions are seriously compromised.1171 1172 Korea\nalso argues that the USITC actually relied extensively and explicitly on its factual findings in prior\nanti-dumping and countervailing duty decisions re garding the products and production processes but\nthe USITC came to directly contrary conclusions based on the same factual findings.\n1173 The method\nof the like product analysis is actually substantially similar as well. In both cases the USITC is\nseeking \"clear dividing lines among possible like products\" and applying similar factors to the facts of\neach case. However, the result of like product determinations for the current Section 201 steel\ninvestigation was obviously different from those in other investigations: in the anti-dumping cases\nbeginning in 1992 and continuing through determinations made as recently as 2002 in the case of\ncold-rolled steel from Argentina, Belgium, Brazil, China, France, Germany, Korea, the Netherlands,\nNew Zealand, Russia, South Africa, Spain, Taiwan, Turkey, and Venezuela\n1174, the USITC has always\ndetermined that the \"clear dividing lines\" existe d between hot-rolled, cold-rolled, corrosion-resistant,\nand plate. 1175 Korea concludes that the complainants have established that there are significant\ninconsistencies between the United States' approach in the anti-dumping and countervailing duty\ncontext and this safeguards discussion. In fact, the ten years of consistent precedent was brought\nspecifically to the attention of the USITC. The USITC dismissed their relevance on grounds that are\nnot consistent with the Agreement on Safeguards. The United States also failed to offer the Panel a\nlegal basis to exclude the relevance of those findings.\n1176 Therefore, those determinations provide\nsignificant evidence of the proper like product in this case.1177\n(v) Relevance of like product definitions in previous safeguards investigations\n7.418 The United States argues that, while the complainants rely on like product definitions in\ncertain anti-dumping and countervailing duty investigations, they ignore the similar 1984 Steel\nsafeguards case, which involved carbon flat steel at various stages of processing similar to those in\nthis investigation.1178 The USITC defined like products in a manner similar in many respects to the\npresent safeguards case and different from contemporaneous anti-dumping and countervailing duty\ndecisions. Specifically, in 1984 Steel , the USITC defined nine like products, each as discrete\ncategories of closely-related products, that were like or directly competitive with the imported articles.\nThree of these categories involved carbon flat products: semi-finished, which included slabs as well\nas ingots, blooms, billets, and sheet bars; plate; and sheet and strip, which included hot-rolled, cold-\n\n1171 USITC Report, Vol. I, footnotes 69, 73-76, 80-82, 84-85, 95-102, 104, 109-117, 125, 127, 129-131,\n947, 949-952 (Exhibit CC-6).\n1172 Korea's second written submission, paras. 51-52.\n1173 See e.g. , USITC Report , footnotes 69, 73-76, 80-82, 84-85, 95-102, 104, 109-117, 125, 127, 129-\n131, 947, 949-952 (Exhibit CC-6).\n1174 Certain Cold-Rolled Steel Products from Argentina, Belgium, Brazil, China, France, Germany,\nKorea, the Netherlands, New Zealand, Russia, South Africa, Spain, Taiwan, Turkey, and Venezuela , Invs. Nos.\n701-TA-423-425 (Final) and 731-TA-964, 966-970, 973-978, 980, and 982-983 (Final), USITC Publication\n3551 (November 2002).\n1175 Korea's second written submission, paras. 54-57.\n1176 United States' first written submission, paras. 85-90. The distinction made between safeguards and\nanti-dumping is simply the US argument that the purposes of the Agreements are different, so \"like product\"\nmust be interpreted differently. See United States' first written submission, para. 108; USITC Report, Vol. I,\npp. 30-31 (Exhibit CC-6).\n1177 Korea's second written submission, para. 60.\n1178 The 1984 Steel investigation included such carbon fl at products as slab, hot-rolled, plate, as well as\nbillets/blooms, wire rod, wire, railway-type products, bars, structural shapes, and pipes and tubes. USITC\nPublication 1553 at 10 (US-24).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrolled and coated steel (each of which had been defined as separate domestic like products in anti-\ndumping and countervailing duty investigations).1179\n7.419 The USITC recognized in the present case that there had been a number of technological\nchanges in the steel industry since the 1984 Steel case. The advent of the continuous casting process\nfor the production of slab rather than the ingot te eming process had resulted in less similarity among\nthe semifinished products (slabs, ingots, blooms, and billets) and processes and more continuity in the\nproduction processes between slab and hot-rolled products. 1180 Moreover, the evidence demonstrated\nthat the distinction between the production of a semifinished and hot-rolled product had been further\nblurred due to the increased use of electric arc furnaces that produce \"thin slabs\" that continue\nimmediately into hot-rolled production. The USITC also recognized in this investigation that in\ndefining separate like products for plate and sheet/strip, the USITC in 1984 Steel focused in part on\ndifferences in production. However, the evidence in this investigation shows that the production of\nplate, similar to the production of sheet/strip, has become more continuous, as the same or similar hot-\nstrip or Steckel mills are often used to make both. Thus, the USITC found that the production\nprocesses and equipment for plate and sheet/strip products have become similar and slab production is\nless distinct with more continuity in the processing to the next hot-rolling stage than at the time of the\n1984 Steel safeguards case. Contrary to the complainants' proposals that the USITC should have\napplied certain like product definitions from anti-dumping and countervailing duty investigations, it is\nclear that if any other definitions should have been taken into account it would be those made for a\nsafeguards case under the same provisions that also had a similar diversity of products within the\ninvestigation.\n1181\n7.420 Korea responds that the United States' reasoning is circular. As the United States admits, the\ndefinition of like product utilized by the USITC in Section 201 is guided by the purpose of\nSection 201 – which is, according to the USITC, to protect domestic productive resources. 1182 Since\nthis \"purpose\" is found in the Trade Act of 1974, any \"guidance\" to be gained from the USITC's 1984\nsafeguards decision as to \"clear dividing lines\" would be circular. The object and purpose of the\nAgreement on Safeguards, as opposed to the Trade Act of 1974, provides no basis to \"move\" the clear\ndividing line between like products that has b een established in ten years of anti-dumping and\ncountervailing duty cases defining \"like\" product.1183\n(vi) Separate remedy for slab\n7.421 New Zealand argues that although both the USITC and the President grouped slab together\nwith a range of other steel products, a separate remedy recommendation and a separate remedy\ndetermination were made for slab: a tariff rate quota instead of a tariff. This rather novel approach of\ndifferentiating the remedy that it applied to what are supposedly \"like\" products represents an implicit\nacknowledgement that they are not really \"like\". 1184 Similarly, according to China and the European\nCommunities, a final demonstration of the unsoundness of the United States' approach is that the\n\n1179 USITC Publication 1553, pp. 10 and 15-23 (US-24).\n1180 USITC Report, pp. OVERVIEW-8-9. complainants' attempts to distinguish slab from CCFRS in\nother stages of processing fails to recognize that hot- rolled steel and cold-rolled steel also are primarily\nfeedstocks or \"semi-finished products\" and the fact that technological advances have resulted in less similarity\namong such \"semi-finished products\" as slab, billets, ingots, and blooms than at the time of 1984 Steel. Japan's\nfirst written submission, paras. 81 and 114; Brazil's first written submission, para. 81; New Zealand's first\nwritten submission, paras. 4.60-4.62.\n1181 United States' first written submission, paras. 131-135.\n1182 USITC Report, Vol. I, pp. 30, 31 (Exhibit CC-6).\n1183 Korea's second written submission, para. 46.\n1184 New Zealand's first written submission, para. 4.70.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC Report (and the Presidential Proclamation) determine a separate remedy for slab; one of the\nproducts aggregated into the CCFRS like product cat egory. The different remedy cannot be anything\nother than an acknowledgement that this product is both physically different from other products in\nthe category, and that it also faces vastly different competitive conditions.1185\n(b) Tin mill products\n(i) General\n7.422 Norway argues that the United States failed to correctly identify the domestic products which\nare \"like or directly competitive\" with the specific imported product in relation. Japan also challenged\nthe like product determination given that the USITC failed to agree on a definition, meaning the\nUnited States failed to correlate the injury determination, like product definition, and the safeguard\nmeasure.\n1186\n7.423 The United States insists that the USITC considered the facts, using long established factors\nand looked for clear dividing lines among the various types of certain carbon and alloy flat steel\ncorresponding to imports subject to this investigation. The methodology employed by the USITC is\nunbiased and objective. The USITC's like product definitions regarding tin mill products are\nconsistent with Articles 2.1 and 4.1 of the Agreement on Safeguards and should be upheld by the\nPanel.\n1187\n7.424 The United States recalls that the USITC started this analysis with the range of steel broadly\ncategorized as certain carbon and alloy flat products, all of which had been identified as imports\nsubject to this investigation in the President's request (as well as the Senate Committee on Finance's\nrequest). The USITC then applied its long established factors in considering whether to analyse\nspecific types of CCFRS separately or as a whole. After examining the evidence and conducting its\nanalysis regarding the corresponding domestic certain carbon and alloy flat products, four\nCommissioners subdivided this category into three separate like products, one of which was defined\nas tin mill products, and two Commissioners determin ed that the steel in this category, including\ntin mill, should be defined as a single like product.\n1188 1189\n7.425 According to the United States, tin mill products are cold-rolled steel that have been coated\nwith tin or chromium or chromium oxides.1190 In defining tin mill products as a separate like product,\nCommissioner Miller found that the cold-rolled feedstock used to make tin mill products generally\nwas further processed than was required to produce other finished products although she recognized\nthat tin mill products shared common manufacturing processes with CCFRS and GOES. 1191\n\n1185 European Communities' first written submission, para. 255; China's first written submission,\npara. 207.\n1186 Norway's first written submission, para. 216; Japan's first written submission, paras. 153-157.\n1187 United States' first written submission, para. 153.\n1188 Four Commissioners found clear dividing lines so as to define three separate like products within\nthis category, and two Commissioners determined that this entire category was a single like product.\nCommissioners Okun, Hillman, Miller, and Koplan defined the following three separate like products: 1)\ncertain carbon flat-rolled steel (\"CCFRS\"); 2) grain-oriented electrical steel (\"GOES\"); and 3) tin mill products.\nCommissioners Bragg and Devaney defined a single like product, consisting of carbon and alloy flat products\n(including slab, hot-rolled sheet and strip, cut-to-length plate, cold-rolled sheet and strip, corrosion resistant,\ngrain oriented electrical steel, and tin mill products).\n1189 United States' first written submission, para. 143.\n1190 USITC Report, p. FLAT-4.\n1191 USITC Report, pp. 48-49.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCommissioner Miller also found that tin mill products were overwhelmingly sold directly to end-\nusers, were sold almost exclusively by long-term contract to those end-users 1192, and were used in the\nproduction of containers, packaging and shipping materials.1193 She found that domestic and imported\ntin mill products shared the same physical attributes, generally were interchangeable, and were\nprimarily sold to end-users under contract for the same uses. 1194 In defining a single like product for\ncarbon and alloy flat products, including tin mill, Commissioner Bragg found that these carbon flat\nproducts share certain basic physical properties, possess a common metallurgical base, and travel\nthrough similar channels of distribution. 1195 She recognized that there was limited overlap in end-\nuses, but found that production was shifted among these products. In defining a single like product\nfor all flat products, including tin mill, Commissioner Devaney found that there was a continuous\nmanufacturing process for flat steel products. Regarding tin mill steel, he indicated that it was\ndedicated at the inception of production as tin mill steel and used cold-rolled steel as its feedstock.\n1196\n7.426 Norway argues that on the basis of WTO jurisprudence in other cases, it can be deduced that\nthe United States should at least have looked at the following elements: (i) the physical properties of\nthe products; (ii) the extent to which products are capable of serving the same or similar end-uses;\n(iii) the extent to which consumers perceive and treat the products as alternative means of performing\nparticular functions in order to satisfy a particular want or demand; and (iv) the international\nclassification of the products for tariff purposes.\n1197\n7.427 The United States contends that Norway's allegations regarding the USITC's like product\ndefinitions involving tin mill products are based on an erroneous interpretation of what factors the\nUSITC was either \"required or not permitted\" to consider in making its like product decisions. 1198\nNorway fails to recognize the factors suggested by the Working Party on Border Tax Adjustments ,\nwith respect to tax adjustments, were for a different purpose, and that \"[n]o one approach to\nexercising judgement will be appropriate for all cases\". 1199 Thus, the USITC was not required to\nconsider the four factors derived from the Working Party that are urged by Norway.1200\n(ii) Like product criteria\nPhysical properties\n7.428 Norway submits that the majority of the Commissioners defined the domestic industry as \"all\nproducers of tin mill products\"1201, thus making no distinctions between the various products included\nin this group. The two other Commissioners employed even broader groupings related to all sorts of\nflat products. In Norway's view, a flat product which is not coated with \"tin\" cannot be \"like\" another\nproduct which is so coated. The first minimum requirement is thus that the products be coated.\nAlso, thicknesses and surfaces vary greatly depending on the end-use of the product. 1202 This is well\n\n1192 USITC Report, p. 48; USITC Report, Table FLAT-18.\n1193 USITC Report, Table OVERVIEW-2 and p. FLAT-4.\n1194 USITC Report, p. 49.\n1195 USITC Report, pp. 272-273.\n1196 USITC Report, pp. 36, n.65, 38, n.83, 43, n.126, 45, nn. 137 and 139.\n1197 Appellate Body Report, EC – Asbestos, para. 101.\n1198 Norway's first written submission, paras. 222-232.\n1199 Appellate Body Report, EC – Asbestos, para. 101.\n1200 United States' first written submission, para. 146.\n1201 USITC Report, Vol. 1, footnote 367. (Exhibit CC-6)\n1202 Tin mill products is the description of mainly 6 different product categories with sub-divisions,\nmade in tin mills:\n1. Electrolytic coated tinplate – single reduced cold rolled, batch-annealed steel with a tin coating\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexemplified by the specific exclusions provid ed for in the initial request by the USTR 1203 where five\ncategories of tin mill products are excluded from the request based on their coating (chromium),\nthickness, width, length and chemical composition.\n1204 Further examples of the different products\ncomprised within this group of products may be found in the later exclusions provided by the USTR,\nwhere ten different tin mill products were excluded from the United States' measures on\n22 August 2002.1205 Were one to look at flat products globally, as two Commissioners did, one would\n\n1a. Electrolytic coated tinplate – single reduced cold rolled, continuos-annealed steel with a tin coating.\n2. Electrolytic coated tinplate – double reduced cold rolled, batch-annealed steel with a tin coating.\n2a. Electrolytic tinplate – double reduced cold rolled, continuos-annealed steel with a tin coating.\n3. Tin free steel (TFS) – single reduced cold rolled, batch-annealed steel with chromium coating.\n3a.Tin free steel (TFS) – single reduced cold rolled, continuos-annealed steel with chromium coating.\n4. Tin free steel (TFS) – double reduced cold rolled, batch-annealed steel with chromium coating.\n4a. Tin free steel (TFS) – double reduced cold rolled, continuos-annealed steel with chromium coating.\n5. Polymer coated steel – single reduced cold ro lled, batch-annealed steel with chromium coating,\ncovered with a polymer top coating.\n5a. Polymer coated steel – single reduced cold rolled, continuos-annealed steel with chromium coating,\ncovered with a polymer top coating.\n5b. Polymer coated steel – double reduced cold rolle d, batch-annealed steel with chromium coating,\ncovered with a polymer top coating.\n5c. Polymer coated steel – double reduced cold rolled, continuos-annealed steel with chromium\ncoating, covered with a polymer top coating.\n6. Black plate – single reduced cold rolled, batch-annealed steel, temper rolled with no coating.\nThickness – Gauge – of the Tin mill products is in following range:\nTinplate: 0.10 mm – 0.375 mm.\nFlat rolled tinplate: 0.375 mm – 0.90 mm.\nTempergrade – hardness – of the Tin mill products is in following range:\nBatch annealed: T1 – T 2 – T 3 – T 4.\nContinuos annealed: T 3 – T 4 – T 5 – T 6 – T 7.\nDimensions of the Tin mill products:\nPlate: Rolling width min. 600 mm – max. 1100 mm. y)\nCut length min. 485 mm – max. 1180 mm.\nCoil: Width min. 600 mm – max. 1180 mm.\nSlitted: Width min. 25 mm – max. 510 mm.\nDifferent surface structure.\nBright, Light stone, Stone, Matt, or Silver\nEnd use of Tin mill products:\nFood packaging.\nTechnical packaging. (Paint, lacquers, oil etc.)\nBeer and beverage cans.\nAerosol cans.\nClosures. (Jars for jam etc.)\nNon – packaging applications. (Trays, oil-filters, convenience goods etc.)\n1203 Exhibit CC-1.\n1204 United States Trade Representative's (USTR) request to the United States International Trade\nCommission (ITC) to initiate a safeguard investigation under Section 201 of the Trade Act of 1974, at Annex II.\n(Exhibit CC-1).\n1205 USTR, \"List of additional products to be excluded from the Section 201 safeguards measures, as\nestablished in Presidential Proclamation 7529 of March 5, 2002\", August 22, 2002, available at the USTR\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsee that there are stark differences in thicknesses, shape and finished stage between e.g. slabs and tin\nmill products.1206\n7.429 In the United States' view, Norway's challenge is directed not only at the definition of a single\nlike product for carbon flat products, but also to the definition of tin mill as a separate like product.\nNorway, on one hand, points out that tin mill products could be defined as 6 to 13 different like\nproduct categories and, on the other hand, refers to the different product exclusions requested and\ngranted to infer that each should have been defined as a separate like product. Thus, the issue for\nNorway goes beyond whether the flat product is coated with \"tin\". Moreover, contrary to Norway's\nallegations, the level of product distinction considered necessary for a product exclusion does not\nwarrant finding dozens of like products. The USITC looks for clear dividing lines in conducting its\nlike product analysis which is far from the narrow or microscopic lines that Norway urges. While\nNorway alleges that there are different products within the tin mill group, it is not clear how narrow\nNorway would have the USITC consider the uses for the product. Norway also seems to ignore the\nfact that the USITC has no authority to exclude imports from those identified in the request or petition\nas subject to investigation.\n1207\nEnd-use\n7.430 Norway argues that the major end-uses of tin plate are the manufacture of welded cans. There\nare, however, considerable differences between the end-uses depending on the thickness of the tin\nmill plates. Oil filters for cars and soft drink cans require different thicknesses. The type of\nproduction of the buyer will thus require different types of tin mill products. In this category, as\ndefined by the USITC and the President, chromium coated products are also included. The USITC\nexplains, in footnote 403 of its report, that chromium coated products have a different use from tin\ncoated products, due to differences in their surfaces. Tin-plate will be used for the can itself, because\nof its shinier surface (which also makes it more suitable for paint) while chromium coated plates are\nemployed for the bottoms of cans. The USITC, in its discussion of the domestic industry producing\ntin mill products, does not distinguish between the different products within the group. Its brief\ndiscussion is premised on an assumption that all imports are a single article that is \"like\" the\ndomestically produced products. End uses is only referred to in passing, stating that \"[T]in mill\nproducts are used almost exclusively in the pro duction of containers, such as beverage cans,\npackaging and shipping materials. They are unsuitable for other end-uses\".\n1208 Norway notes that it\nis, nevertheless, clear from this statement that tin mill products are not interchangeable with other flat\nproducts. Norway also points out that the procedures for exclusion request to be granted by the USTR\nas mandated in the Presidential Proclamation, details that the USTR will consider inter alia whether\nthe product is currently being produced in the United States, whether substitution is possible and\nwhether qualification requirements affect the requestor's ability to use domestic products.\n1209 In light\n\nwebsite (Exhibit CC-92). This list shows that 10 different tin mill products, with specific product specifications,\nare excluded.\n1206 Norway's first written submission, para. 223.\n1207 United States' first written submission, para. 148.\n1208 USITC Report, Vol. I, at pp. 48-49. The citation is from p. 48, with original footnotes omitted.\n(Exhibit CC-6)\n1209 \"Procedures for Further Consideration of Requests for Exclusions of Particular products from\nActions With Regard to Certain Steel products Under Section 203 of the Trade Act of 1974, as Established in\nthe Presidential Proclamation 7529 of March 5, 2002\", Federal Register/ Vol. 67, N° 75/ 18 April 2002,\np. 19307 (Exhibit CC-19).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof the exclusions granted ex post it would seem that the original determination of one single like\nproduct is flawed.1210\n7.431 In applying the traditional like product factors to the general category of carbon and alloy flat\nsteel, four Commissioners found a clear dividi ng line between CCFRS and tin mill products. 1211 In\nparticular, they found that cold-rolled feedstock used to make tin mill products was further processed\nthan required to make CCFRS steel. In addition, tin mill is used, for example, for the production of\ncontainers, packaging, and shipping materials. In contrast, CCFRS was used primarily in production\nfor the automotive and construction industries. Ti n mill steel was overwhelmingly sold directly to\nend users, almost exclusively under long-term c ontracts, whereas the majority of CCFRS was\ninternally transferred for use in later stages of processing CCFRS.1212\nConsumer perception\n7.432 Norway submits that consumers of tin mill products, here understood as end-users of the\nimported products and the like domestic products, should perceive that plates of different thicknesses\nand with different coatings have different uses. This is not discussed by the USITC in its report.1213\nTariff classification\n7.433 Norway submits that, in the United States, the tin mill products covered by the measure were\n(before the imposition of extra duties) divided into four broad customs categories (7210.11.0000;\n7210.12.0000; 7210.50.0000; and 7212.10.0000). 1214 This indicates that there could be several\ndifferent \"like\" products. The different customs classifications are not discussed by the USITC in its\nreport in respect of tin mill products. The only reference in passing can be found in footnote 176\n1215\nwhere reference is made to the fact that the USITC did not find consideration of customs treatment to\nbe a useful factor for the carbon and alloy flat products in this investigation. In Norway's view, the\nUnited States failed to identify the domestic products that are \"like or directly competitive\" to the\nspecific imported product or products, by not making comparisons – at a minimum – against the\ncriteria for establishing likeness acknowledged in WTO jurisprudence. The findings of the United\nStates thus fall short of the requirement imposed by Article 2.1 of the Agreement on Safeguards that\nthe competent authorities determine that the domestic articles, the producers of which they want to\ngroup into one domestic industry, are either a \"single like product\" or one or more directly\ncompetitive products compared with specific imports.\n1216\n7.434 In response, the United States recalls that, as the Appellate Body has stated, \"the adoption of a\nparticular framework to aid in the examination of evidence does not dissolve the duty or the need to\nexamine, in each case, all of the pertinent evidence\".1217 The tariff classifications are interrelated with\nthe physical properties/characteristics criterion which the USITC clearly considered and found to be\nan important factor in its like product definitions. The USITC exercised its discretionary judgement\nto determine which factors were useful, and which were not, in examining the particular facts of this\ninvestigation. While Norway seems to allege that the USITC should have defined its like products\nusing tariff classifications, the evidence does not co mport with Norway's suggestions for 6 to 13 or\n\n1210 Norway's first written submission, paras. 224-228.\n1211 United States' first written submission, paras. 143-144; USITC Report, pp. 48-49.\n1212 United States' written reply to Panel question No. 27 at the first substantive meeting.\n1213 Norway's first written submission, para. 229.\n1214 USITC Report, Vol. I, at p. 10 (Exhibit CC-6).\n1215 USITC Report, Vol. I, at p. 49 (Exhibit CC-6)\n1216 Norway's first written submission, paras. 230-232.\n1217 Appellate Body Report, EC – Asbestos, para. 102.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmore like products. There are four tariff classifications at the ten-digit level and two at the four-digit\nlevel covering tin mill products.1218\nProduction processes\n7.435 Norway submits that because Congress intended Section 201 to \"protect the productive\nresources of domestic producers\", rather than ameliorate unfair trade practices, the USITC has\nconsidered \"both the productive facilities and processes and the markets for these products\" in making\nits like products determination in the safeguards context, in addition to the like product factors. 1219\nAccording to Norway, this clearly goes beyond th e factors permitted by the Appellate Body is US –\nLamb as other products produced at the same facilities should not be included when defining the\ndomestic industry producing the like product. The six commissioners employed different groupings\nwhen considering tin mill products. Of the commissioners treating \"tin mill products\" as one \"like\nproduct category\", only one voted in favour of the measure. The two other commissioners voting in\nfavour of imposing a safeguards measure employed broader product categories. 1220 The President,\nwhen determining that measures should be imposed on a category he termed \"tin mill products\",\nbased himself on the views of three commissioners looking at a domestic industry producing: (i) tin\nmill products; (ii) carbon and alloy flat products; and (iii) all flat products respectively.\n1221\n7.436 The United States submits that contrary to Norway's contentions, the Appellate Body in US –\nLamb recognized that when confronted with the question of whether two articles are separate\nproducts, \"it may be relevant to inquire into the production processes for those products\".1222\n(iii) Identification of domestic producers\n7.437 Norway also argues that the United States failed to appropriately define the domestic industry\nof the like product and therefore acted inconsistently with its obligations under Articles 2.1 and 4 of\nthe Agreement on Safeguards and Article XIX:1(a) of the GATT 1994. 1223 The USITC Report does\nnot explain who are the producers of the like product. The tables are deleted from the report. 1224\nNorway requested the information of table FLAT-1 during the consultations, but no such information\nwas forthcoming. Norway is, thus, unable to ascertain whether there, indeed, are domestic United\nStates' producers of any specific tin mill products and is also unable to ascertain whether there indeed\nexists an industry injured by imports or the relevant ratios of imports to domestic production. This\nlack of information on the relevant domestic industry (companies and production) is a clear breach of\nArticle 4.1(c) of the Agreement on Safeguards. When all informative tables are excluded regarding\nthe domestic industry producing the like product, there is no way of ascertaining how the\ndeterminations are made, thus making it impossi ble to investigate a possible wrongdoing by the\nUnited States. As such, this is also a breach of Article 3.1 of the Agreement on Safeguards , and this\ninformation cannot be regarded as confidential information under Article 3.2. There is also a failure\nto ensure that only producers of domestic articles that are \"like or directly competitive\" to the specific\nimported product are grouped together in one domestic industry for the purpose of the investigation\nand determination. In respect of tin mill products, Norway refers to the USITC Report, Vol. 1 at\n\n1218 United States' first written submission, para. 149.\n1219 USITC Report, pp. 30-31.\n1220 Commissioner Bragg, employed a category of \" carbon and alloy flat products\" (USITC Report,\np. 272) and Commissioner Devaney employed a category of \"all flat products\", see USITC Report, Vol. I, p. 36,\nfootnote 65. (Exhibit CC-6)\n1221 Norway's first written submission, paras. 216, 219-221.\n1222 Appellate Body Report, US – Lamb, para. 94, footnote 55.\n1223 Norway's first written submission, para. 238.\n1224 See USITC Report, p. I-72 and the asterisk for table FLAT-1 in volume II.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\npage 72, where it is stated that an unspecified number of tin mill producers also produce a variety of\nother types of CCFRS, including slab, and also hot-rolled end products (slabs). There is no evidence\nthat operating results from these parts of the firms have been singled out when addressing the\ngrouping \"tin mill products\". There is, thus, a strong presumption that also for tin mill products,\nproducers and facilities producing products that are not \"like\" have been included in the \"domestic\nindustry\", contrary to the requirement of the Agreement on Safeguards.\n1225\n7.438 The United States responds that Norway's contentions that the USITC \"exclud[ed] all\ninformative tables regarding the domestic industry producing the like product\" 1226 is erroneous and\ngrossly misleading. The essence of Norway's allegation is that because the USITC did not release\nconfidential responses of individual producers of tin mill products, it must be assumed that the USITC\ndid not limit its analysis to producers of tin mill products. This allegation is only relevant to the\ndetermination of Commissioner Miller, since each of the definitions of like product and corresponding\ndomestic industry made by Commissioners Bragg and Devaney considered data for the carbon and\nalloy flat products and not the tin mill specific data. This complaint centres on one table (Table\nFLAT-1) in the USITC Report which lists individual domestic producers responding to the USITC\nquestionnaire and provides their individual production data by type of carbon and alloy flat steel that\nthey produce. Individual firm data provided in response to the USITC questionnaires and the firms\nresponding to the USITC questionnaires is considered confidential business information and not\npublicly released. Rather, the individual firm data generally is publicly released in aggregate form as\nit was here. Norway ignores the fact that individual tin mill production data was combined and\npublicly released in aggregate form in Table FLAT-18.\n1227 Contrary to Norway's allegations, the fact\nthat the USITC has not publicly released the identity of those responding to the questionnaires or the\nindividual producer data does not provide a \"strong presumption\" that products other than tin mill\nproducts were included in USITC's domestic industry analysis. 1228 Norway fails to show how release\nof the individual firm data would show anythi ng more than whether the USITC can simply add\ncorrectly. The Panel need not only have to rely on the USITC's representations alone concerning the\nproper aggregation of appropriate data on tin mill production. Parties to the underlying safeguards\ninvestigation did not challenge the USITC's aggregation of the tin mill data, including counsel to\nparties that had access to the contested table along with all other confidential business information,\nunder Administrative Protective Order.1229 1230\n7.439 Norway responds that the USITC Report states that an unspecified number of tin mill\nproducers also produce a variety of other types of CCFRS, including slab and also hot-end production\n(slabs).1231 The crucial importance of this integration is the failure of the United States to ensure\nseparation of operating costs and results for tin mill products as separate from CCFRS because of the\ndiverging \"like product analyses\" involved. 1232 There is no evidence that the operating results from\nthese parts of the firms have been separated out when establishing which firms are the \"producers of\nthe like product\".\n1233 When this is not done, one gets an incorrect assessment of injury to the tin mill\nindustry, as the alleged injury may be caused to other parts of the operations of these firms. This is\n\n1225 Norway's first written submission, paras. 233-237.\n1226 Norway's first written submission, para. 239.\n1227 USITC Report, Tables FLAT-10, FLAT-18, FLAT-26, FLAT-46, FLAT-57, FLAT-58, FLAT-59,\nFLAT-63, FLAT-75, FLAT-76, FLAT-78, FLAT-79, FLAT-80, and FLAT-C-8.\n1228 Norway's first written submission, para. 237.\n1229 Under US law, confidential business information is released to counsel for parties under\nadministrative protective order.\n1230 United States' first written submission, paras. 150-154.\n1231 USITC Report, Vol. I, p. 72.\n1232 Norway's written reply to Panel question No. 20 at the second substantive meeting.\n1233 Norway's first written submission, paragraph 236.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhat happened for the analyses by at least Commi ssioners Bragg and Devaney. Norway still cannot\nunderstand why the names of the tin mill producers (as the USITC defines the industry) are\nconfidential (and the United States has given no explanation of why this is necessary,) and does\nconsider that this in itself represents a breach of Article 4.1(c) of the Agreement on Safeguards.\nNorway also notes that whatever counsels to individual firms may or may not know\n1234 is irrelevant to\nthe United States' obligations under the Agreement on Safeguards towards other Member States to\nprovide a report that details all relevant issues of law and fact.1235\n7.440 Brazil adds that three of the principal producers of tin mill products – Bethlehem Steel,\nWeirton Steel, and US Steel are fully integrated mills producing a full range of CCFRS products,\nincluding slab.\n1236 The fourth producer, Ohio Coatings, is a joint venture and, in effect, the tin mill\nline of vertically integrated Wheeling-Pittsburgh Steel, which produces a full range of CCFRS\nproducts and is 50% owner of Ohio Coatings. 1237 The fifth producer, US Steel-Posco is a joint\nventure between United States Steel Corporation and Posco of Korea, both vertically integrated\nproducers of a full range of CCFRS products. However, US Steel-Posco is not vertically integrated.\nIt has no raw steel making capacity, no slab production and no hot strip mill. Rather, it purchases\ndomestic and imported CCFRS products and processes these products through cold rolling,\ngalvanizing and tin mill lines.\n1238 1239\n7.441 The United States responds that, indeed, a number of tin mill producers also produce types of\nCCFRS. However, the United States does not agree with Norway's assertions that data for production\nof other types of steel were included in the data for tin mill products. Norway's contentions are\nerroneous. The essence of Norway's allegation is that because the USITC did not release confidential\nresponses of individual producers of tin mill products, it must be assumed that the USITC did not\nlimit its analysis to producers of tin mill products. Norway fails to recognize that the reason why this\nissue is only relevant to the determination of Commissioner Miller is because Commissioners Bragg\nand Devaney did not define tin mill as a separate like product. Thus, the fact that Commissioners\nBragg and Devaney did not separate out tin mill data is because they did not find tin mill products to\nbe a separate like product/domestic industry. They defined carbon and alloy flat steel, including tin\nmill, as a single domestic like product and, appropriately, looked at data for carbon and alloy flat\nproducts and not the tin mill-specific data. Norway's allegation centres on one table (Table FLAT-1)\nin the USITC Report which lists individual domestic producers responding to the USITC\nquestionnaire and provides individual production data by type of carbon and alloy flat steel that each\nproduces. Individual firm data provided in response to USITC questionnaires and the firms\nresponding to the USITC questionnaires is considered confidential business information and not\npublicly released. Rather, the individual firm data generally is publicly released in aggregate form as\nit was here. The United States notes that it is not the only country that withholds the names of\nquestionnaire respondents. Norway ignores the fact that individual tin mill production data was\ncombined and publicly released in aggregate form in a number of tables, including Table FLAT-26,\nwhich includes financial data and operating results.\n1240 Contrary to Norway's allegations, the fact that\nthe USITC has not publicly released the identity of those responding to the questionnaires or the\n\n1234 United States' first written submission, paragraph 154\n1235 Norway's second written submission, paras. 73-75.\n1236 See Iron and Steel Works of the World (14th Edition), Metal Bulletin Books Ltd. (2001), pp. 647-48,\n714-715 and 717-718.\n1237 Ibid. at 693.\n1238 Ibid at 716.\n1239 Brazil's written reply to Panel question No. 20 at the second substantive meeting.\n1240 USITC Report, Tables FLAT-10, FLAT-18, FLAT-26, FLAT-46, FLAT-57, FLAT-58, FLAT-59,\nFLAT-63, FLAT-75, FLAT-76, FLAT-78, FLAT-79, FLAT-80, and FLAT-C-8.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindividual producer data does not provide a \"strong presumption\" that products other than tin mill\nproducts were included in the USITC's domestic industry analysis, nor may any presumption, strong\nor otherwise, be drawn.\n1241 The United States submits that this complainant fails to show how release\nof the individual firm data would show anything more than whether the USITC can correctly tally the\nindividual company information. In the USITC's questionnaire, domestic producers were clearly\ninstructed to provide separate data for tin mill. Each domestic producer was required to certify the\ntruthfulness of its questionnaire responses. The Panel need not rely solely on the USITC's\nrepresentations concerning the proper aggregation of appropriate data on tin mill production. Parties\nto the underlying safeguards investigation had access to all of the individual company data; this\nincluded counsel to parties that had access to the contested table along with all other confidential\nbusiness information, under administrative protective order.\n1242 None of them challenged the USITC's\naggregation of individual company data on tin mill material. The USITC is confident that the tin mill\ndata provided in the USITC Report does not include data for other types of steel.1243\n(c) Welded pipe\n(i) General\n7.442 Korea and Switzerland argue that for the category of welded pipe products, the USITC\nacknowledges that \"welded pipe encompasses a ra nge of products, including both commodity and\nspeciality products\" 1244, but analysed neither the various types of welded tubular products nor the\ndifferent end-uses of those where \"the various forms of welded pipe are made by the same process,\nlargely by the same firms, in the same facilities and on the same equipment and are used for the same\npurposes, namely the conveyance of steam, water, oil, gas and other fluid\".\n1245 It declined to identify\nspecific products by pointing to: (i) the common physical properties and characteristics of those\nproducts; (ii) their common end-use; (iii) the customs classification; and (d) consumer\nperceptions.1246\n7.443 The United States insists that the USITC consid ered the facts present in this investigation\nusing long established factors and looked for clear dividing lines among the various types of certain\ncarbon and alloy pipe and tube subject to this investigation. The methodology employed by the\nUSITC is unbiased and objective. The USITC's definition of certain welded pipe as a single like\nproduct is consistent with Articles 2.1 and 4.1 of the Agreement on Safeguards and should be upheld\nby the Panel.1247 The USITC started this analysis with the range of steel broadly categorized as certain\ncarbon and alloy pipe and tube, all of which had been identified as imports subject to this\ninvestigation in the President's request (as well as the Senate Committee on Finance's request). After\nexamining the evidence and conducting its analysis regarding the corresponding domestic certain\ncarbon and alloy pipe and tube, the USITC found clear dividing lines so as to delineate four separate\nlike products.\n1248 The USITC found that domestic certain welded pipe was like the corresponding\n\n1241 Norway's first written submission, para. 237.\n1242 Under US law, confidential business information is released to representatives for parties, usually\noutside counsel and economic consultants, under administrative protective order.\n1243 United States' written reply to Panel question 20 at the second substantive meeting.\n1244 USITC Report, Vol. I, p. 383.\n1245 USITC Report, Vol. I, pp. 154-155 (emphasis added) (Exhibit CC-6).\n1246 Korea's first written submission, paras. 61; Switzerland's first written submission, paras. 207-208.\n1247 United States' first written submission, para. 171.\n1248 Four Commissioners found clear dividing lines and defined four separate certain carbon and alloy\npipe and tube like products from this category, and two Commissioners divided this category into three separate\nlike products. Commissioners Okun, Hillman, Miller, and Koplan defined the following four separate like\nproducts: 1) welded pipe, other than OCTG (\"certain welded pipe\"); 2) seamless pipe, other than OCTG; 3)\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimported certain welded pipe. 1249 The USITC applied its long established factors in considering\nwhether there existed clear dividing lines between specific types of welded pipe. 1250 T h e U S I T C\nfound that certain welded pipe included tubular products that have a weld seam that runs either\nlongitudinally or spirally along the length of the product. Welded pipe is used in the conveyance of\nwater, petrochemicals, oil products, natural gas, and other substances in industrial piping systems.\nThe presence of a welded seam generally makes certain welded pipe slightly less reliable and durable\nthan seamless tubular products. Thus, it is used to transport liquids at or near atmospheric pressure\nrather than for high pressure containment. 1251 The various types of welded pipe in this investigation\ninclude standard pipe and pipe used primarily for mechanical, line, pressure, and structural\npurposes.\n1252 Welded pipe is generally produced on electric resistance weld (ERW) mills. The\nUSITC found that the various forms of welded pipe are made by the same process, largely by the\nsame firms, in the same facilities and on the same equipment and are used for the same purposes,\nnamely the conveyance of steam, water, oil, gas, and other fluids at or near atmospheric pressure.1253\n7.444 The European Communities submits that the United States has not adequately responded to\nthe specific arguments why the products grouped as certain tubular products were not like due to their\ndifferent physical properties and functions. On pages 147 and 148 of the USITC Report, the USITC\ndid not do more than asserting that \"there are four domestic industries producing articles like the\ncorresponding imported articles subject to investigation within the tubular products category\". The\nother reference, on page 158, after a discussion as to whether the domestic industry producing FFTJ\n(sic) should be defined as a separate industry, the USITC simply repeated its previous conclusion that\n\"there are four domestic industries producing articles like or directly competitive with the\ncorresponding imported articles subject to investigation within the tubular products category\",\nalthough with a puzzling extension to the broader concept of \"directly competitive\" products without\nany supportive analysis between pages 147 and 157. This is neither a sufficient like nor directly\ncompetitive product analysis, because it is not based on a reasoned consideration of all relevant\ncriteria as laid out above. Specifically, as can be learned from Chapter 73 of the HS, which is\ncontained in exhibit CC-105, internationally agreed customs classifications at the four and six-digit\nlevel separate welded pipe on the basis both of size and function.\n1254 This and all the arguments made\nby Korea and Switzerland in this respect, which the European Communities adopts, further\ncorroborates that the products bundled as welded pipe are not \"like or directly competitive\".1255\n7.445 The United States submits that no importance shou ld be attached to the reference to \"directly\ncompetitive\" with respect to the USITC's consid eration of welded tubular products. The USITC\nclearly made a finding for each of the four tubular products on the basis of a like product analysis and\nnot on the basis of a directly competitive product analysis. 1256 Moreover, there is a footnote to this\n\nOCTG, welded and seamless; and 4) fittings, flanges, and tool joints. Commissioners Bragg and Devaney\ndefined the following three separate like products: 1) carbon and alloy welded tubular products (including\nwelded tubular other than OCTG and welded OCTG); 2) carbon and alloy seamless tubular products (including\nseamless tubular other than OCTG and seamless OCTG); and 3) carbon and alloy fittings, flanges, and tool\njoints.\n1249 USITC Report, p. 147, footnote 893. This issue was not disputed in the underlying proceeding.\n1250 USITC Report, pp. 147-157.\n1251 USITC Report, p. TUBULAR-2.\n1252 Certain welded pipe used in the movement of o il and gas is produced to standards set by American\nPetroleum Institute (API), while many other forms of certain welded pipe are produced to standards set by the\nAmerican Society for Testing and Materials (ASTM) and the American Water Works Association (AWWA).\n1253 United States' first written submission, paras. 156-157\n1254 Paras. 73.05 and 73.06.\n1255 European Communities' second written submission, paras. 283-285.\n1256 USITC Report, p. 147.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsentence in which the USITC explicitly states that it did not make findings on the basis of a directly\ncompetitive product analysis.1257 The USITC's findings on the basis of a like product, and not directly\ncompetitive product, analysis for each of these four like products is clearly demonstrated in its\ndiscussion, its findings section and the noted footnote. The summation sentence which refers to\n\"domestic industr[ies] producing … article[s] like or directly competitive with … [the] imported\narticle[s]\"1258 merely recites the United States' statutory language. 1259 The United States believe that,\nin spite of the inadvertent inclusion of \"directly competitive\", that it is clear that the USITC's findings\nwere on the basis of a like product analysis.1260\n7.446 The European Communities, Japan, Korea and Norway also submit that no significance\nshould be attached to the mentioned reference. The European Communities notes that the assertion\non page 157 of the USITC Report that imported welded pipe, fittings and flanges and domestic ones\nare \"directly competitive\" has been explained as \"clerical error\".1261\n7.447 The United States submits that complainants who challenge the like product definition for\ncertain welded pipe do not agree on what the definition should have been; Korea seems to propose\ntwo like products based on size and Switzerland seems to propose three like products based on\nfunction.\n1262 1263\n(ii) Like product criteria\nGeneral\n7.448 Korea submits that the USITC rejected arguments that LDLP (16 inches or over) should be\ntreated as a separate like product. 1264 The USITC analysis failed to address the key product\ncharacteristics of LDLP versus other welded pipe and their different applications (end-uses). Instead,\njust as with CCFRS, the USITC focused on the common United States' production facilities and\n\"continuum\" of production by United States producers for its like product determination while\nrejecting the utility of Customs classification as well as the like product determination in the\nconcurrent anti-dumping and countervailing duty investigations of LDLP from Japan and Circular\nWelded Non-Alloy Pipe from China. The Appellate Body in US – Lamb rejected this \"continuum\" of\nproduction approach\n1265 where, as here, the products are fundamentally different.1266 1267\n\n1257 USITC Report, p. 147, footnote 893.\n1258 USITC Report, p. 157.\n1259 See Trade Act of 1974, § 202(c)(4), 19 USC. § 2252(c)(4).\n1260 United States' written reply to Panel question No. 22 at the second substantive meeting.\n1261 European Communities', Japan's, Korea's and Norway's written replies to Panel question No. 22 at\nthe second substantive meeting.\n1262 Korea's first written submission, paras. 41-44; Switzerland first written submission, paras. 209-225.\nSee the discussion in section VII.D.1(c).\n1263 United States' first written submission, para. 104.\n1264 While arguments could have been made that other products within the USITC's welded category\nwere also separate like products, these other products in the welded category were much smaller in quantity than\nLDLP and, in large part, appeared to follow similar demand patterns as the largest component, standard pipe.\n1265 Appellate Body Report, US – Lamb, para. 90.\n1266 Moreover, the record does not even support the conclusion that there was an overlap in production.\nAccording to the USITC, \"[o]f the seven firms that reported the capability to produce welded large diameter line\npipe in 2000, [only] three of those firms also indicated that they produced smaller sizes of welded pipe in 1998.\"\nUSITC Report, Vol. I, p. 155, footnote 952 (Exhibit CC-6).\n1267 Korea's first written submission, paras. 61-63.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.449 Switzerland contends that, if the USITC had actually applied its traditional methodology and\napplied, at least, the criteria of end-use, customs classification and physical properties, it would have\ncome to the conclusion that the category of welded tubular products as it was defined could not serve\nas a basis in order to identify like or directly competitive products because it bundled together too\nmany different products.\n1268\nPhysical properties\n7.450 The United States argues that the USITC considered arguments that it should find that large\ndiameter line pipe (pipe 16 inches or over in outside diameter) was a separate like product from other\nwelded pipe.1269 The evidence showed that while welded large diameter line pipe generally is made\non mills designed to make large pipe, these mills also are capable of producing other types of large\ndiameter pipe, such as pipe for water transmission, piling, and structural members. 1270 A substantial\nportion of welded large diameter line pipe is made by the ERW process 1271, which is the process used\nto make virtually all types of certain welded pipes. 1272 Moreover, many of the firms that produce\nwelded large diameter line pipe also produce other welded pipe that is less than 16 inches in outside\ndiameter. Large and small diameter welded pipe also share common physical characteristics,\nparticularly a weld seam that has an effect on its uses relative to other tubular products such as\nseamless pipe. Based on this evidence, the USITC found large and small welded pipe to be part of a\ncontinuum of certain welded pipe and saw no reason to define large diameter line pipe separately\nfrom other certain welded pipe.\n1273 An important factor in the USITC's finding of a clear dividing line\nbetween certain welded pipe and other tubular products was the physical characteristic of the welded\nseam. All welded pipe, large and small, share the common physical characteristic of a weld seam that\nruns either longitudinally or spirally along the length of the product and that has an effect on the pipe's\nuses relative to other tubular products such as seamless pipe. The presence of a welded seam\ngenerally makes certain welded pipe slightly less reliable and durable than seamless tubular products.\nThe USITC found that welded pipe ranging from small to large shared similarities in physical\ncharacteristics, uses, marketing channels, and production processes as discussed above to be part of a\ncontinuum of certain welded pipe and saw no clear dividing lines to define separate like products\nwithin this continuum.\n1274\n7.451 Switzerland submits that the USITC considered that all the pipes belonged to the same\ncategory. However, pipes are made out of very different and subtle chemical compositions of steel,\ndepending on the purpose of their use. The difference is due to the diversity of the alloys (aluminium,\nboron, etc.) added to the steel. There are approved norms indicating the tolerance of the various\nchemical components possibly entering into the composition of the steels. These various nuances in\ncomposition have precise consequences namely on the resistance, the elongation, the harden ability\n\n1268 Switzerland's second written submission, para. 55.\n1269 Prehearing Brief of European Steel Tube Association (September 12, 2001), pp. 3-6 (US-30).\n1270 USITC Report, p. 154, citing Certain Welded Large Diameter Line Pipe From Japan and Mexico ,\nUSITC Publication 3400, pp. I-5-6 (March 2001) (US-29).\n1271 In 2000, 45.6% of domestic welded large diameter line pipe was produced by the ERW process as\ncompared to 54.4% by the SAW process. Certain Welded Large Diameter Line Pipe From Japan and Mexico ,\nUSITC Publication 3400, Table 1-2, p. I-14 (March 2001) (US-29). ERW pipe is normally produced in sizes\nfrom 2 3/8 inches through 24 inches outside diameter. Id. at I-5.\n1272 Certain Pipe and Tube from Argentina, Brazil, Canada, India, Korea, Mexico, Singapore, Taiwan,\nThailand, Turkey, and Venezuela , Invs. Nos. 701-TA-253 (Review) and 731-TA-132, 252, 271, 273, 276, 277,\n296, 409, 410, 532-534, 536, and 537 (Review), USITC Publication 3316, p. CIRC-I-19 (July 2000) (US-31).\n1273 United States' second written submission, para. 90.\n1274 United States' second written submission, para. 91.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand the cold forming of steels. In other words, the different and very subtle compositions of steels are\ndeterminant in characterising their quality, and therefore the quality of the products made of them.1275\n7.452 Korea rejects the United States' argument that that welded non-OCTG pipe has a \"weld\" so it\nwas treated as a single like product. Korea submits that this is at best a perfunctory analysis. 1276 The\nother two products in the pipe and tube category, OCTG and pipe fittings, also have a weld but they\nwere treated as separate like products by the USITC in the same investigation. The United States\nrefers to this as a deciding factor but do not explain its lack of significance for \"welded\" OCTG which\nwas grouped with seamless OCTG as a single like product.1277 1278\n7.453 Switzerland recalls that the USITC Report only mentions that the physical differences begin\nwith the chemistry of the steel in the billet or hot-rolled strip, and continue through the forming and\nfinishing process. It also says that seamless pipes are more reliable, and that pipe used in OCTG\napplications must meet higher standards than pipe used in line pipe, which in turn must meet higher\nstandards than so-called standard pipe. 1279 Switzerland considers that this analysis is too vague and\nthat it does not reflect the importance that the United States claims the USITC did give to this factor.\nSwitzerland submits that the USITC did not analyse the common properties and physical\ncharacteristics of the products it compared in depth enough and therefore could not draw any\nconclusion in this respect.\n1280\nEnd-use\n7.454 Korea submits that the USITC itself said in the introductory section describing its like product\ndetermination that there were grounds to distinguish the five like products in the tubular category as\nfollows: \"Most pipe is made to standards that reflect its intended use, and this affects the physical\nproperties of the pipe.... Pipe used in OCTG applications must meet higher standards than pipe used in\nline pipe, which in turn must meet higher standards than so-called standard pipe. 1281 Yet, the USITC\ndid not reach the obvious conclusion that these major distinctions in end-use should have resulted in a\nseparate like product for LDLP as well.1282 1283\n7.455 Korea points out that LDLP is primarily used in the transmission of oil and gas so that\ndemand for LDLP correlates with changes in oil and gas prices and the level of activity in the energy\nsector more generally (i.e., investment in large-scale pipeline projects). 1284 In contrast, the remaining\nproducts in the non-OCTG welded pipe category (standard pipe being the largest component) tend to\ntrack general economic conditions.1285 As a consequence, demand trends for line pipe depend on the\nlevel of activity in the energy sector while the demand for other tubular products tends to move in line\n\n1275 Switzerland's first written submission, para. 209.\n1276 United States' first written submission , para. 157; United States' written reply to Panel question\nNo. 148 at the first substantive meeting.\n1277 United States' written reply to Panel question No. 148 at the first substantive meeting; United\nStates' written reply to Korea's question No. 1(d) at the first substantive meeting.\n1278 Korea's second written submission, paras. 75-76.\n1279 USITC Report, Vol. I, p. 151\n1280 Switzerland's second written submission, paras. 62-63.\n1281 USITC Report, Vol. I, p. 151 (Exhibit CC-6).\n1282 Korea's second written submission, paras. 71-72 and 84.\n1283 USITC Report, Vol. I, p. 149 (footnote omitted; emphasis added) (Exhibit CC-6).\n1284 Joint Respondents' Prehearing Brief for Welded Other , p. 33 (Exhibit CC-78); Joint Respondents'\nPosthearing Brief for Welded Other, Exhibit 1 – pp. 24-25, 29-30, 35-37, 40-45 (Exhibit CC-79).\n1285 USITC Report, Vol. II, p. TUBULAR-43 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwith general economic conditions. 1286 The USITC actually acknowledged the \"recent increase in\ndemand for large diameter line pipe\" and projected \"growth due to rising demand for pipeline\nprojects\" in the context of its threat of injury anal ysis but completely failed to address these separate\ndemand conditions and applications in the like product analysis.\n1287 In fact, demand was falling for\nstandard pipe at the end of the investigation period but increasing for large diameter line pipe. 1288\nCommissioner Okun, in her separate remedy recommendation specifically referenced \"the diverse\nnature of demand … in particular the divergent trends in demand for pipeline projects and for other\napplications\".\n1289 Therefore, the USITC was aware of these important distinctions between LDLP and\nother welded pipe. It simply ignored those differences for purposes of their like product analysis.1290\n7.456 Switzerland also argues that, contrary to what the USITC said, welded tubular products (other\nthan OCTG) can be divided into three large categories: the \"pipes\" whose finality is to conduct fluids\n(e.g. oil carried by pipelines); the mechanical tubes used for mechanical purposes (e.g. scaffoldings);\nand the precision tubes intended to conduct forces and used by the automotive industry (e.g.\nassembled camshafts, shock absorbers, etc.). In addition, precision tubes falling under the category of\nwelded tubular products (other than OCTG) are intended to conduct forces and used by the\nautomotive industry. They have a different end-use as other products falling in the above-mentioned\ncategories as their purpose is not to convey steam, water, oil, gas and other fluids. They are of high\nquality because of their chemical properties and because also of the precision of their manufacturing.\nThe consistency of that quality is determinant for security reasons.\n1291 Switzerland adds that some of\nthe tubes are indeed used to conduct fluids (e.g. oil carried by pipelines), while others are precision\ntubes intended to conduct forces and used by the automotive sector (e.g. camshafts used in internal\ncombustion engines to actuate valves at precise timi ng intervals). Although hydraulic fluids also go\nthrough precision tubes, this is just a mechanism to convey forces and not the end-use of such tubes,\nthe end-use being to make for instance a car work. On the contrary, tubes for the purpose of the\nconveyance of water, oil or gas have as their end-use the conveyance of such fluids for instance to\nconsumers.\n1292\n7.457 In the United States' view, Switzerland seems to contend that the USITC should have\nseparated certain welded pipe into at least three separate like products, primarily by function or use –\npipes used to conduct fluids, mechanical tubes used for mechanical purposes, and precision tubes\nintended to conduct forces and used by the automotive industry. 1293 However, it also seems to argue\nthat separate like products should have been defined by tariff classification (40 like products) 1294,\n\n1286 USITC Report, Vol. II , p. TUBULAR-43 (Exhibit CC-6) (\"Demand for tubular products will\ndepend on both general economic conditions, as increased production and construction spurs demand for\nseamless and welded, and conditions in the somewhat counter-cyclical oil and gas industry, as increased energy\nprices spur increased drilling, extraction, and refining (and thus demand for both OCTG and line pipe)\").\n1287 USITC Report, Vol. I, p. 166 (Exhibit CC-6).\n1288 USITC Report, Vol. I, p. 166 (Exhibit CC-6) (ITC acknowledging the increase in demand for large\ndiameter line pipe and the projections for continued growth but noting that overall demand for the category\nstabilized, when both standard and line pipe products are viewed together).\n1289 USITC Report, Vol. I, \"View of Vice Chairman Deanna Tanner Okun on Remedy\", p. 482\n(Exhibit CC-6).\n1290 Korea's first written submission, paras. 66-68.\n1291 Switzerland's first written submission, paras. 210-219.\n1292 Switzerland's second written submission, para. 56.\n1293 Switzerland's first written submission, para. 210.\n1294 Switzerland's first written submission, paras. 220-223.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndifferent physical properties such as different chemical composition1295, specific use in the automotive\nindustry, particularly for precision tubes (8)1296, and consumer perceptions (8).1297 1298\n7.458 Switzerland contends that the USITC considered that all welded tubular products (other than\nOCTG) are used in the conveyance of water, petrochemicals, oil products, natural gas, and other\nsubstances in industrial piping systems. In reality, however, the USITC grouped into this category\nalso products which are used as precision tubes to convey forces – e.g. in cars – which are products\nvery different from the ones mentioned by the USITC. If products so different are bundled together,\nthe standard of likeness becomes impossible to apply.1299\n7.459 The United States insists that the USITC found that certain welded pipe included tubular\nproducts that have a weld seam that runs either longitudinally or spirally along the length of the\nproduct. Certain welded pipe is used in the conveyance of water, petrochemicals, oil products, natural\ngas, and other substances in industrial piping systems. The presence of a welded seam generally\nmakes certain welded pipe slightly less reliable and durable than seamless tubular products. Thus, it\nis used to transport liquids at or near atmospheric pressure rather than for high pressure\ncontainment.\n1300 The various types of certain welded pipe in this investigation include standard pipe\nand pipe used primarily for mechanical, line, pressure, and structural purposes. 1301 Certain welded\npipe is generally produced on electric resistance weld (ERW) mills. The USITC found that the\nvarious forms of certain welded pipe are made by the same process, largely by the same firms, in the\nsame facilities and on the same equipment and are used for the same purposes, namely the\nconveyance of steam, water, oil, gas, and other fluids at or near atmospheric pressure.\n1302\n7.460 Korea notes that the end-use of LDLP determined that the demand was more similar to OCTG\n(oil and gas demand) than the other welded pipe (general economic trends). The USITC record\nconfirms that demand for LDLP was based on its distinct use for the movement of oil and gas and the\ndemand trends were distinct. 1303 1304 Korea submits that the United States does not deny that LDLP\ndoes not compete with other welded pipe due to differences in specifications and use. 1305 In fact, a\ncritical factor for finding welded and seamless OCTG as single like product was that they both\n\"compete with each other\" and are \"often used interchangeably\". 1306 Yet, this factor was ignored for\nLDLP. The United States seeks to avoid the question on competition by referring to the physical\n\n1295 Switzerland's first written submission, para. 209.\n1296 Switzerland's first written submission, paras. 211-219. For example, they discuss eight types of\nprecision tubes used in the automotive industry which they seem to imply should have been defined as separate\nlike products. Based on their descriptions, it is evident that many of these precision tubes contain hydraulic\nfluid; the carrying of fluids, however, was used as a fact or to allege that \"pipes\" could be distinguished as a\nseparate like product.\n1297 Switzerland's first written submission, paras. 224-225.\n1298 United States' first written submission, para. 169.\n1299 Switzerland's second written submission, para. 53.\n1300 USITC Report, p. TUBULAR-2.\n1301 Certain welded pipe used in the movement of o il and gas is produced to standards set by American\nPetroleum Institute (API), while many other forms of certain welded pipe are produced to standards set by the\nAmerican Society for Testing and Materials (ASTM) and the American Water Works Association (AWWA).\n1302 United States' second written submission, para. 89.\n1303 USITC Report, Vol. I, p. 166 (Exhibit CC-6). Accord Certain Welded Large Diameter Line Pipe\nFrom Japan, USITC Publication 3464, pp. 14-15 (Exhibit K-8).\n1304 Korea's second written submission, paras. 85-86.\n1305 United States' replies to questions from other Parties, para. 44.\n1306 USITC Report, Vol. I, p. 152 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncharacteristics – \"welded seam\" – as an important factor. As noted, welded-OCTG also has a welded\nseam, so Korea does not see that this can qualify as a \"clear dividing line\".1307\nConsumer perception\n7.461 Switzerland submits that having very different end-uses, consumers would perceive precision\ntubes intended to conduct forces and used by the automotive industry as different from tubes used for\nthe purpose of conveyance of steam, water, oil, gas and other fluids.1308\nTariff classification\n7.462 Korea argues that the USITC never analysed whether HS classifications could provide a\nuseful starting point for the analysis of whether LD LP should be considered a separate like product.\nIn fact, HTS categories 7305.11-7305.19 apply only to LDLP. 1309 This distinction between the HS\nclassifications of line pipe and the HS classifications of the other welded pipe confirms a significant\ndifference in the products themselves and should have been considered by the USITC. The USITC\nignored other significant evidence in the record and its own precedent which demonstrated that there\nare significant differences in the products. 1310 The USITC acknowledged that pipe used in line pipe\napplications must meet higher standards than \"so-called standard pipe\" 1311 and that the distinct\nphysical characteristics of each product reflect their distinct use. 1312 1313 Korea adds that the\ndifference in tariff classifications reflects the fact that the large diameter line pipe which is included in\nthis investigation (small diameter line pipe imports are subject to a separate safeguards case and thus\nare not subject to this investigation) is produced to completely different specifications.1314 1315\n7.463 Similarly, Switzerland argues that the USITC also rejected the use of the customs\nclassifications of tubular products as not \"useful\" because of the large number of HTS categories.\nWith respect to pipe and tube, the USITC correctly noted that \"the (non-OCTG) welded pipe in this\ninvestigation includes standard pipe and pipe used primarily for mechanical, line, pressure, and\n\n1307 Korea's second written submission, paras. 87-88.\n1308 Switzerland's first written submission, para. 224.\n1309 Small diameter line pipe was excluded from the case since safeguard measures already applied to\nthat product. (Exhibit CC-1, Annex II.)\n1310 Joint Respondents' Prehearing Brief for Welded Other, pp. 9-10 (Exhibit CC-78); Joint\nRespondents' Posthearing Brief for Welded Other, Exhibit 1 – pp. 29-30 (Exhibit CC-79) (suggesting in\nresponse to USITC questions that data should have been collected separately on at least two like products in\nCategory 20); USITC Report, Vol. II , p. TUBULAR-43 (Exhibit CC-6) (noting that \"[s]ome respondent welded\nimporters divide the welded market into large diameter welded for line pipe (which they estimate as 20-30% of\nthe US welded market) and other welded, generally standard pipe\").\n1311 USITC Report, Vol. I , p. 151 (Exhibit CC-6) (the USITC cited this same factor as a basis for\ntreating OCTG as a separate like product than other tubular products).\n1312 Standard pipe is pipe \"ordinarily used for low-pressure conveyance of air, steam, gas, water, oil, or\nother fluids used for mechanical applications. It is used primarily in machinery, buildings, sprinkler systems,\nirrigation systems, and water wells rather than in pipe lines or utility distribution systems. It may carry fluids at\nelevated temperatures which are not subject to external heat applications. It is usually produced in standard\ndiameters and wall thicknesses to ASTM . . . specifications.\" USITC Report, Vol. I , p. 149, n. 912\n(Exhibit CC-6) (quoting the American Iron and Steel Institute (AISI) definition of standard pipe) (emphasis\nadded). \"AISI defines line pipe as pipe 'used for the transportation of gas, oil, or water generally in a pipeline or\nutility distribution system. It is produced to API . . . and AWWA (American Water Works Association)\nspecifications.'\" USITC Report, Vol. I, p. 149, n. 912 (Exhibit CC-6).\n1313 Korea's first written submission, paras. 64-66.\n1314 USITC Report, Vol. I, p. 149 (footnote omitted; emphasis added) (Exhibit CC-6).\n1315 Korea's second written submission, para. 84.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nstructural purposes\".1316 As respondents in opposition to import relief further specified, the USITC's\nwelded pipe category included circular welded standard pipe 1317, LDLP, structural pipe, square and\nrectangular pipe, and piling pipe.1318 The category also included mechanical tubing and boiler tubing,\nwhich accounted for a small percentage of the imports. 1319 LDLP, the second largest single import\ncomponent of USITC Category 20, after circular welded standard pipe, accounted for approximately\n30% of world imports of Category 20 in interim 2001 and is easily identified.1320 The LDLP products\nwere easily segregated from the rest of the welded category based on the USITC's concurrent anti-\ndumping investigation of that industry. 1321 A breakdown of the HTS numbers covering LDLP\nproducts subject to the 201 investigation, and the correlating import statistics for LDLP, were placed\non the record early in the investigation by Joint Respondents in opposition to relief.\n1322 These figures\nformed the basis for a variety of separate analyses of the vastly different market forces affecting the\nlarge diameter line pipe industry. Yet, the USITC rejected the use of customs classification as\nrelevant to the segregation of LDLP from other circular welded pipe and tube. Switzerland submits\nthat the lack of any analysis of tariff classification runs counter the guidance provided by the\nAppellate Body in EC – Asbestos where it clarified that customs classifications provide important\nindications for the like-product determination which must be considered. The existence of many\ndifferent classifications is no excuse for not considering them at all for the purpose of the like product\ndetermination. To the contrary, this suggests that the products concerned are not alike.\n1323\n7.464 The United States submits that Korea and Switzerland mistakenly contend that the primary\nbasis for the USITC's like product definitions should have been tariff classification. They focus on\nthe products of interest to them in arguing that tariff classifications would have permitted the USITC\nto segregate these types of certain welded pipe. Under their approach, the USITC would arguably\nhave had to define separate like products for each of the 40 classifications using the ten-digit level,\ndespite similarities in physical characteristics, uses, marketing channels, and production processes for\nthe continuum of certain welded pipe.\n1324 The Appellate Body has stated, \"the adoption of a particular\nframework to aid in the examination of evidence does not dissolve the duty or the need to examine, in\neach case, all of the pertinent evidence\". 1325 In spite of the complainants' contentions, the USITC\nclearly considered all of the evidence pertinent to defining the appropriate like product. The tariff\nclassifications are interrelated with the physical properties/characteristics criterion which the USITC\nclearly considered and found to be an important factor in its like product definitions. In particular, the\nphysical characteristic of the welded seam was an important factor in the USITC's definition of\ncertain welded pipe as a single like product. The USITC exercised its discretionary judgement to\n\n1316 USITC Report, Vol. I, p. 149.\n1317 None of the tariff classifications within the we lded pipe group included welded line pipe of an\noutside diameter that does not exceed 406.7 millimeters (16 inches), which was covered by Section 201 relief on\nline pipe.\n1318 Joint Respondents' Prehearing Brief in Opposition to Import Relief for Welded Tubular Products\nOther than OCTG (Category 20) (11 September 2001), p. 9.\n1319 Joint Respondents' Prehearing Brief in Opposition to Import Relief for Welded Tubular Products\nOther than OCTG (Category 20) (11 September, 2001), p. 9.\n1320 Joint Respondents' Prehearing Brief in Opposition to Import Relief for Welded Tubular Products\nOther than OCTG (Category 20) (11 September 2001), p. 10.\n1321 Certain Welded Large Diameter Line Pipe from Japan, Inv. No. 731-TA-919 (Final), Publication\n3464 (November 2001).\n1322 Joint Respondents' Prehearing Brief in Opposition to Import Relief for Welded Tubular Products\nOther than OCTG (Category 20) (11 September 2001), Exhibit CC – 78.\n1323 Switzerland's first written submission, paras. 220-223.\n1324 The two tariff classifications using the 4-digit level – 7305 and 7306 – for certain welded pipe are\nalso used for seamless pipe and thus do not provide a clear dividing line.\n1325 Appellate Body Report, EC – Asbestos, para. 102.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndetermine which factors were the most pertinent in examining the particular facts of this investigation.\nThe USITC clearly found the physical characteristics factor to be useful but, given the large number\nof tariff classifications, found tariff classifications not to be useful because they provided no clear\ndividing lines between products.\n1326\n7.465 Switzerland responds that the cumbersomeness of a methodology, however, cannot be used as\nan argument for not applying it. If the United States chose to investigate on a very large number of\nsteel products, the fact that the investigation becomes very extensive because of the large number of\ndifferent products involved, is not a reason not to use a certain methodology. This is all the more so,\nas the criterion of customs classification is not only used by the USITC but is a fundamental criterion\nto be used according to the Appellate Body. The assertion that tariff classifications were not useful\nbecause they provided no clear dividing lines between the products 1327 is not correct as the customs\nclassification provides several dividing lines, for instance between products used for oil or gas\npipelines and other products. Such a customs classification supports the conclusion found using the\nend-use criteria, i.e. that products used to convey oil or gas are different from other tubular products.\nthe HS tariff classifications contained in Chapter 73 differentiates welded pipe at the four digit level\nand even more at the six digit level.\n1328 1329 It is clear therefore, that this product (welded pipe) is not\na single product but is further defined by size and/or use and thus the United States should have at\nleast followed the clear distinctive lines set by the HS.\n7.466 The European Communities notes that United States failed to rebut the Swiss and Korean\nargument that the primary basis for distinguishing the many different products bundled together\nshould have been tariff classifications by claiming that the ten-digit level contains too many different\nentries.1330 As can be learned from Chapter 73 of the HS 1331, internationally agreed customs\nclassifications at the four and six-digit level separate welded pipe on the basis both of size and\nfunction.1332 This further corroborates that the products bundled as welded pipe are not \"like or\ndirectly competitive\".1333\nProduction processes\n7.467 Switzerland submits that the USITC used the ve rtical integration of the industry and the\ncommon production processes to aggregate the five different products into one category. More\nparticularly, Switzerland contends that the USITC paid \"particular attention\" to the \"sharing of\nproductive processes and facilities\" which \"is a fundamental concern in defining the scope of the\ndomestic industry under Section 201\". 1334 Moreover, the USITC considered itself to be required \"to\ndefine like or directly competitive in a manner that reflects the realities of the market and at the same\ntime accomplishes the fundamental purpose of Section 201, protection of the productive resources of\ndomestic producers\".1335 Switzerland insists that the United States ignored the guidance given in US –\nLamb and, again, relied on \"productive facilities\" rather than on \"the product\" itself. 1336 According to\nSwitzerland, it is simply irrelevant, under the Agreement on Safeguards, that there is a continuous line\n\n1326 United States' first written submission, paras. 167-168.\n1327 United States' first written submission, para. 168\n1328 Exhibit CC-105 a\n1329 Switzerland's second written submission, paras. 58-60.\n1330 United States' first written submission, para. 167.\n1331 Exhibit CC-105\n1332 The European Communities refers to paras. 73.05-73.06.\n1333 European Communities' second written submission, paras. 283-285.\n1334 USITC Report, Vol. I, pp.30 and 151\n1335 USITC Report, Vol. I, p. 31\n1336 Switzerland's second written submission, paras. 66-69.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof production between the input product and the end-product … producers of these products, if it\ncannot be established otherwise that these input products are like products.1337\n7.468 Switzerland contends that the USITC explains that it traditionally establishes the \"likeness\"\non the basis of the five characteristics: physical properties of the product, its customs treatment, its\nmanufacturing process, its uses, and the marketing channels through which the product is sold. 1338\nHowever, for this specific case, the USITC used a different methodology, as it \"focused [its] analysis\nin this investigation primarily on the degree to which the products in question are produced in\ncommon production facilities and using similar production processes\"\n1339 1340 T h e U S I T C p a i d\n\"particular attention\" to the \"sharing of productive processes and facilities\" which \"is a fundamental\nconcern in defining the scope of the domestic industry under Section 201\".\n1341 Moreover, the USITC\nconsidered itself to be required \"to define like or directly competitive in a manner that reflects the\nrealities of the market and at the same time accomplishes the fundamental purpose of Section 201,\nprotection of the productive resources of domestic producers\". 1342 Switzerland insists that the United\nStates ignored the guidance given in US – Lamb and, again, relied on \"productive facilities\" rather\nthan on \"the product\" itself.1343 Korea further argues that the United States has failed to acknowledge\nthat OCTG is also made by the same producers who make standard pipe 1344, but it is no more \"like\"\nstandard pipe than line pipe is. The United States also does not explain how shared production\nfacilities was an important factor for treating LD LP as other welded but not for treating OCTG as a\nsingle like product with all other welded pipe made in the same production facilities in its answers to\nquestions.1345 1346\n7.469 In the United States' view, the complainants mistakenly challenge the USITC's consideration\nof production processes in determining \"like product\" on the basis of the Appellate Body Report in\nUS – Lamb. Contrary to the complainants' contentions the Appellate Body in US – Lamb recognized\nthat when confronted with the question of whether two articles are separate products, \"it may be\nrelevant to inquire into the production processes for those products\".\n1347\n7.470 The United States submits that the specific allegations raised by Korea and Switzerland\nregarding the USITC's certain welded pipe like product definition are based on their erroneous\ninterpretation of what factors the USITC was either \"required or not permitted\" to consider in making\nits like product definitions. 1348 The complainants can identify nothing in the Agreement on\nSafeguards addressing what factors may or may not be considered in determining like products. They\ninstead assert that the USITC was bound to use the four factors suggested by the Working Party on\nBorder Tax Adjustments. These factors, which were suggested for use in border tax adjustments, were\nfor a different purpose, and the Appellate Body has recognized that \"[n]o one approach to exercising\n\n1337 Switzerland's first written submission, para. 226-233.\n1338 USITC Report Vol. I p. 30.\n1339 USITC Report, Vol. I, p. 151\n1340 Switzerland's second written submission, paras. 54, 65.\n1341 USITC Report, Vol. I, pp. 30 and 151\n1342 USITC Report, Vol. I, p. 31\n1343 Switzerland's second written submission, paras. 66-69.\n1344 Korea's written reply to the Panel question No.148 at the first substantive meeting, noting that five\nto eight producers of \"welded other\" pipe also make welded-OCTG in contrast to only three of the seven\nproducers of LDLP which manufacture \"welded other;\"; United States' replies to questions from other Parties,\npara. 47, referring to \"many\" producers of LDLP which also produce other welded.\n1345 United States' replies to questions from other Parties, para. 44.\n1346 Korea's second written submission, paras. 75-76.\n1347 Appellate Body Report, US – Lamb, para. 94, n.55.\n1348 Switzerland's first written submission, paras. 207-233.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\njudgement will be appropriate for all cases\". 1349 Thus, the USITC was not required to consider these\nfour factors.1350\n7.471 Korea reiterates that welded OCTG is just like all other pipe in the other welded category has\na weld and is produced by the same producers. The United States does not deny this. This is very\nsignificant because the USITC's principal and overriding considerations in treating LDLP as a single\nlike product with non-OCTG pipe is the common production facilities and the existence of a\n\"weld\".1351 Thus, clearly, these characteristics do not create a \"clear dividing line\" between OCTG,\nLDLP, or other welded pipe. Instead, the United States says that the USITC relied on the outside\n\"finishing operations\" which are sometimes used af ter the OCTG has been produced to distinguish\nOCTG. However, the USITC opinion is clear that the critical aspect of this distinction was the\nphysical attributes conferred by this additional processing and not the mere (separate) process\nitself.1352 1353\nMarketing channels\n7.472 Switzerland stresses that this factor is used by the USITC, although it is not used in the\ntraditional WTO approach regarding like products. The USITC, however, seems not to apply this\nfactor, even if it recognizes that the channel of distribution for the various pipe and tube products\ntends to be specialized depending on the market served. Some distributors specialize in certain forms\nof pipe, other in certain products sold primarily to the construction industry for use in HVAC\n(heating, ventilating, and air conditioning) and other piping systems that allow for the transmission of\nwater, steam, oil, gas, and chemicals in commercial and residential structures, including high-rise\nstructures.\n1354 In the case of welded pipe other than OCTG the USITC indicated that although large\npipe is more likely than small diameter pipe to be sold directly to end-users, there is substantial\noverlap in the channels of distribution of all welded pipe. The USITC said in its report that specialty\ntubes that require more heat-treatment or testing are often sold directly to end-users. 1355 I f t h e\nmarketing channels were to be part of the method ology used to determine likeness, in this case the\nproper application of this criterion would have suppo rted what has been shown thus far, namely that\nmany different products were unduly bundled and therefore no proper analysis of likeness could take\nplace.1356\nOther factors\n7.473 Korea also argues that the USITC's aggregation of large diameter line pipe and standard pipe\nis in direct conflict with its findings that OCTG should be a separate like product from the rest of the\ntubular category. The USITC specifically cited as one of the bases for its determination that OCTG is\na separate like product from other pipe and tube the fact that \"OCTG products and other pipe and tube\nproducts are sold into different markets and demand is driven by different economic factors \".\n1357 In\nparticular, the USITC explained, \"[d]emand for OCTG products is driven primarily by the level of oil\n\n1349 Appellate Body Report, EC – Asbestos, para. 101.\n1350 United States' first written submission, para. 159.\n1351 USITC Report, Vol. I, pp. 154-155.\n1352 It is also worth noting that the distinction the United States makes between \"production facilities\"\nand the \"finishing operations\" is a false distinction. The OCTG is produced before it goes to the finishing\noperations. USITC Report, Vol. I, p. 148.\n1353 Korea's second written submission, paras. 82-83.\n1354 USITC Report, Vol. I, p. 150.\n1355 USITC Report, Vol. II, TUBULAR-39\n1356 Switzerland's second written submission, para. 64.\n1357 USITC Report, Vol. I, p. 154 (emphasis added).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand gas exploration, while demand for other products is driven primarily by the overall level of\nactivity in the general economy, which do not necessarily coincide and can, in fact, move in\nopposition to one another\".\n1358 As demand for LDLP is similarly driven by activity in the oil and gas\nsector, and not by the level of activity in the general economy, it too should have been treated as a\nseparate like product in the USITC's analysis of injury and remedy. At the very least, the differences\nin applications and demand factors between LDLP and other welded pipe should have been\nconsidered by the USITC in determining whether LDLP should have been segregated from the other\ncarbon tubular products.1359\n(iii) Definitions proposed by the complainants\n7.474 The United States points out that both Korea and Switzerland challenge the USITC definition\nof certain welded pipe as a single like product, but that each complainant has different proposals for\nwhat the appropriate definitions should have been. Korea contends this single like product should\nhave been divided into at least two like products, primarily by diameter size, and Switzerland\ncontends it should have been divided into at least three like products, primarily by function.1360\n7.475 Switzerland responds that it argued that the precision tubes were incorrectly grouped in the\nsame category of products as large diameter welded pipe for the conveyance of steam, water, oil, gas\nand other fluids. In making this argument, Sw itzerland did not at all propose that the category of\nwelded pipe/tubular products be subdivided into three categories. Switzerland mentioned the three\ndifferent tubes as examples, in order to explain the differences of the products bundled together in the\ncategory of welded tubular products and to show that the United States grouped together products\nwhich are so different that they should not have been grouped together. Switzerland is of the view\nthat it is not its task to propose what the proper category should be and that the Panel need not decide\nwhich breakdown of categories presented in the complainants' submissions is most appropriate.\n1361\n7.476 Korea insists that it is not arguing for a like product division for welded pipe based on\ndiameter size, as the United States incorrectly asserts. 1362 This is a convenient but inaccurate\ncharacterization of Korea's like product argument for welded pipe. Korea maintains that LDLP\nshould have been considered a separate like product from other welded pipe. The basis for that like\nproduct distinction is not the size of the pipe but rather the distinct physical characteristics and the\ndistinct end-uses of the two products.1363\n(iv) Relevance of like product definitions used in the anti-dumping and countervailing duty\ncontexts\n7.477 The United States submits that the complainants' arguments 1364 fail to recognize that the like\nproduct definitions in anti-dumping and countervailing duty investigations, as in safeguard\ninvestigations, are dependent on the imports subject to that particular investigation and thus the\ndefinitions have varied. 1365 The starting point for the USITC's like product analysis is the imports\nidentified as within the investigation by the President's request. In the present case, the USITC began\nwith the subject imports which included a range of welded and tube and looked for clear dividing\n\n1358 USITC Report, Vol. I, p. 154 (Exhibit CC-6).\n1359 Korea's first written submission, paras. 69-70.\n1360 United States' first written submission, para. 158.\n1361 Switzerland's second written submission, paras. 46-47.\n1362 United States' first written submission, para. 104.\n1363 Korea's second written submission, para. 69.\n1364 See paras. 7.448 and 7.463 above.\n1365 Korea first written submission, paras. 41-44.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlines between the domestic steel pipe and tube products that corresponded to these subject imports,\nusing well-established factors. The anti-dumping and countervailing duty investigations generally\nbegin with a more narrow starting point for the scope of subject imports so the analysis frequently\ninvolves whether the like product definition should be defined more broadly than the subject imports,\ni.e., it starts small and looks at whether to broaden rather than starts large and looks where to divide.\nThe complainants also fail to acknowledge, as discussed above, that the anti-dumping and\ncountervailing duty investigations have a purpose that is different from that in a safeguards\ninvestigation.\n1366 The USITC considered and rejected the argument that should have defined at least\ntwo like products – certain welded large diameter pipe (16 inches or over) (\"LDLP\") and other welded\npipe in making its like product definition in this safeguard investigation. The USITC did not have\nbefore it in either of these anti-dumping investiga tions the issue of a scope of subject imports that\nincluded both of these types of certain welded pipe as it did in this safeguard investigation and thus\ndid not decide to treat them as separate domestic like products in a single investigation. Rather the\nUSITC defined separate domestic like products in two separate investigations; each like product\ndefinition was coextensive with the narrow scope of imports subject to investigation.\n1367 The USITC\ndid not consider whether it was appropriate to broaden the like product to include other types of\ncertain welded pipe that did not correspond to the subject imports in either of these anti-dumping\ncases. In this investigation, the USITC considered arguments that it should find that large diameter\nline pipe (pipe 16 inches or over in outside diameter) was a separate like product from other welded\npipe.\n1368 The evidence showed that while welded large diameter line pipe generally is made on mills\ndesigned to make large pipe, these mills also are capable of producing other types of large diameter\npipe, such as pipe for water transmission, piling, and structural members. 1369 A substantial portion of\nwelded large diameter line pipe is made by the ERW process 1370, which is the process used to make\nvirtually all types of certain welded pipes.1371 Moreover, many of the firms that produce welded large\ndiameter line pipe also produce other welded pipe that is less than 16 inches in outside diameter.\nLarge and small diameter welded pipe also share common physical characteristics, particularly a weld\nseam that has an effect on its uses relative to other tubular products such as seamless pipe. Based on\nthis evidence, the USITC found large and small welded pipe to be part of a continuum of certain\n\n1366 United States' first written submission, paras. 161-162\n1367 Contrary to Korea's allegations, the \"ITC did not treat LDLP as a like product with standard pipe\"\nin Certain Welded Non-Alloy Steel Pipe from China because it was not part of the scope of investigation in that\nanti-dumping case; the issue of whether to include LDLP in the domestic like product also was not raised by any\nparties to that investigation nor was it considered by the USITC. Circular Welded Non-Alloy Steel Pipe from\nChina, Indonesia, Malaysia, Romania, and South Africa , Investigation Nos. 731-TA-943-947 (Preliminary),\nUSITC Publication 3439, pp. 3-5 (July 2001) (US-28); Circular Welded Non-Alloy Steel Pipe from China ,\nInvestigation No. 731-TA-943 (Final), USITC Publication 3523, pp. 3-5 (July 2002) (CC-80); see also Certain\nWelded Large Diameter Line Pipe From Japan and Mexico , Inv. Nos. 731-TA-919-920 (Preliminary), USITC\nPublication 3400, pp. I-5-6 (March 2001) (US-29); Certain Welded Large Diameter Line Pipe From Japan , Inv.\nNo. 731-TA-919 (Final), USITC Publication 3464 (November 2001) (CC-81).\n1368 Prehearing Brief of European Steel Tube Association (September 12, 2001), pp. 3-6 (US-30).\n1369 USITC Report, p. 154, citing Certain Welded Large Diameter Line Pipe From Japan and Mexico ,\nUSITC Publication 3400, pp. I-5-6 (March 2001) (US-29).\n1370 In 2000, 45.6% of domestic welded large diameter line pipe was produced by the ERW process as\ncompared to 54.4% by the SAW process. Certain Welded Large Diameter Line Pipe From Japan and Mexico ,\nUSITC Publication 3400, Table 1-2, p. I-14 (March 2001) (US-29). ERW pipe is normally produced in sizes\nfrom 2 3/8 inches through 24 inches outside diameter. Id. at I-5.\n1371 Certain Pipe and Tube from Argentina, Brazil, Canada, India, Korea, Mexico, Singapore, Taiwan,\nThailand, Turkey, and Venezuela , Invs. Nos. 701-TA-253 (Review) and 731-TA-132, 252, 271, 273, 276, 277,\n296, 409, 410, 532-534, 536, and 537 (Review), USITC Publication 3316, p. CIRC-I-19 (July 2000) (US-31).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwelded pipe and saw no reason to define large diameter line pipe separately from other certain welded\npipe.1372\n(d) FFTJ\n7.478 In the view of the European Communities, the USITC did not show that imported flanges are\nlike domestically produced fittings, although the USITC explicitly recognized the heterogeneity of\nfittings, flanges and tool joints, and that this \"category contains a mix of products\".1373\n7.479 The United States submits that neither the European Communities nor any other complainant\nprovides further arguments to the Panel on this like product definition.1374\n7.480 The European Communities further submits that the USITC has not done what is its essential\nobligation under WTO law and its own self-set task: to compare the domestic products with the\nimported products and to determine whether these are like in accordance with Articles 2.1 and 4.1(c)\nof the Agreement on Safeguards. Instead, the USITC only attempts to explain why it groups together\ndifferent domestic products into a bundle that \"consists of about one-third flanges, one-third butt-weld\npipe fittings, and one-third other products\". 1375 However, it does not establish that all the elements it\nbundles together are like the imported products. Even in its irrelevant attempt to justify the bundling\nof a heterogeneous group of domestic products, the USITC misapplied its own self-set criteria. First,\nthe USITC did not even consider tariff classifications and concessions. However, fittings and flanges\nare subject to different customs treatment even at the six-digit level and subject to different\nconcessions. Second, the different classifications reflect well-known different physical properties of\nfittings and flanges, which were equally not mentioned by the USITC. As illustrated by the two\nphotos attached as Exhibit CC-104, fittings are made from pipes by cutting and forming them.\n1376\nThey do not contain holes as flanges do. These holes are necessary to disassemble flanges. This\ndirectly leads to the third point, the different uses of both products. The USITC essentially relied on\nsome \"common use\" argument by claiming that \"fittings, flanges, and tool joints are all used to join or\ncap pipe\". However, this broad statement fails to take account of different end-uses of fittings and\nflanges. The USITC itself acknowledged that flanges are used to join pipe in non-permanent\nconnections, and are designed to facilitate the disassembly of lengths of pipe.\n1377 Butt-weld-pipe\nfittings, by contrast, are used to create a permanent joint. 1378 Because of their different technical\nproperties (flanges contain holes and fittings do not), fittings and flanges are not even substitutable.\nFinally, if the USITC was entitled to look at common production processes ( quod non ), even the\nproduction processes for flanges and fittings only confirm the distinctions between these products.\nThe USITC itself had to acknowledge that flanges are produced by forging carbon steel billets.\nFittings, by contrast are made from pipes by cutting and forming them.\n1379 The USITC's assertion that\nthese processes are similar because they typically incorporate \"heat-treating, machining, beveling, and\nwashing\"1380 raises the question why it then has not included also knives and forks in its product\nmix.1381\n\n1372 United States' first written submission, paras. 163-166.\n1373 USITC Report, Vol. I, pp. 175 and 179.\n1374 United States' first written submission, para. 114, footnote 139.\n1375 USITC Report, Vol. I, pp. 156 and 157.\n1376 USITC Report, Vol. I, p. 148.\n1377 USITC Report, Vol. I, p. 150.\n1378 USITC Report, Vol. I, p. 150.\n1379 USITC Report, Vol. I, p. 148.\n1380 USITC Report, Vol. I, p. 157.\n1381 European Communities' written reply to Panel question No. 146 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.481 The European Communities submits that the United States does not attempt to rebut the\nEuropean Communities' specific claims that the bundling of FFTJ was not justified. 1382 The USITC's\ndetermination is the conclusion made before the reasoning (and unsupported by the subsequent\nreasoning) that \"there are four domestic industries producing articles like the corresponding articles\nsubject to investigation within the tubular products category … (fittings, flanges, and tool joints)\". 1383\nThe second reference provided by the USITC then directly contradicts this statement by stating that\n\"purchasers of fittings and flanges reported that imported and domestically produced fittings and\nflanges produced to the same grade and specification are used in the same applications\" 1384, thereby\nconfirming the acknowledgement given by the USITC elsewhere that this is a heterogeneous product\nmix.\n1385 The United States also concedes that there are even separate markets for fitting and\nflanges.1386 1387\n7.482 The European Communities notes that the United States did not respond to the specific claim\nthat the products bundled as \"FFTJ\" were not even \"like\" each other. Thus, all determinations based\non such imported product \"FFTJ\" and the domesti c industry producing \"FFTJ\" should be found\nincompatible with the Agreement on Safeguards.1388\nF. INCREASED IMPORTS\n1. Introduction\n7.483 Brazil and Japan argue that the United States failed to meet the threshold requirement of\nincreased imports under Articles 2.1 and 4.2(a) of the Agreement on Safeguards and Article XIX(a) of\nthe GATT 1994.\n1389 Similarly, China and Switzerland believe that the condition of increased imports\nwas not fulfilled.1390 Korea affirms that the USITC's analysis of increased imports for flat-rolled and\ntin mill products was not consistent with Articles 2, 3 and 4 of the Agreement on Safeguards as well\nas Article XIX of the GATT 1994. 1391 New Zealand claims that the United States has failed to\ncomply with the requirement of Article 2.1 of the Agreement on Safeguards that there be an increase\nin imports before a safeguard measure is imposed.\n1392\n7.484 The European Communities submits that the United States has not demonstrated that the steel\nproducts covered by its safeguard measures are \"being imported … in such increased quantities\" as\nrequired by Article 2.1 of the Agreement on Safeguards. The USITC applied a methodology that\nplainly ignores the conditions set by Article 2.1 of the Agreement on Safeguards, as clarified by the\nAppellate Body. The USITC has committed essentially three methodological errors rendering all its\nconclusions on the existence of increased imports for each individual product flawed and inconsistent\n\n1382 United States' first written submission, para. 114, which does not respond to the specific claims in\nthe European Communities' first written submission, paras. 218, 230 and European Communities' reply to Panel\nquestion 146.\n1383 USITC Report, Vol. I, p. 147.\n1384 USITC Report, Vol. I, p. 175.\n1385 See references in European Communities' first writtensubmission, paras. 218 and 230.\n1386 United States' written reply to Panel question No. 149 at the first substantive meeting.\n1387 European Communities' second written submission, para. 286.\n1388 European Communities' second written submission, para. 286; European Communities' written\nreply to Panel question 22 at the second substantive meeting.\n1389 Brazil's first written submission, para. 117; Japan's first written submission, para. 175.\n1390 China's first written submission, para. 210; Switzerland's first written submission, para. 244;\nNorway's first written submission, para. 250; Norway's second written submission, para. 81.\n1391 Korea's first written submission, para. 71.\n1392 New Zealand's first written submission, para. 4.93.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwith Article 2.1 of the Agreement on Safeguards. Th us, it (i) fails to cons ider intervening downward\ntrends, in particular at the sensitive end-point of the investigation as reflected in the most recent data\navailable for 2001, (ii) it generally fails to calculate and consider the trends in imports over the entire\nperiod of investigation, and (iii) it only aims at finding a \"simple increase\" without considering and\nestablishing through a reasoned and adequate explanation that such increase was sufficiently recent,\nsudden, sharp and significant. The European Communities therefore considers that the United States\nhas not demonstrated that the steel products covered by its safeguard measures are \"being imported …\nin such increased quantities … as to cause or threaten to cause serious injury\" to its domestic industry,\nas required by Article 2.1 of the Agreement on Safeguards.\n1393\n7.485 In Japan's view, perhaps the most glaring deficiency of the United States' safeguard measures\nis that they were imposed even though steel import volumes were declining. Imports of all subject\nflat-rolled steel products (whether aggregated or separated, and including tin mill products) have\ndeclined since 1998 or 1999, depending on the product, both absolutely and as a percentage of\ndomestic production. These declines are even more pronounced for steel imports from countries\nactually subject to the safeguard measures. Because the Government of the United States did not\ndemonstrate a \"recent\", \"sudden\", \"sharp\", and \"s ignificant\" increase in import volume for these\nproducts, its steel safeguard measures on flat-rolled products – grouped or separated – are inconsistent\nwith Articles 2.1 and 4.2(a) of the Agreement on Safeguards and Article XIX:1:1(a) of the GATT\n1994. The same is true for other products subject to the relief.\n1394\n7.486 In response, the United States asserts that the requirement of \"increased imports\" of the\nAgreement on Safeguards was satisfied.\n2. The Legal Standard\n(a) Recent increase\n7.487 The European Communities submits that a safeguard measure may only be taken if there is an\nextraordinary surge in imports (\"such increased quantities and under such conditions\"). Moreover, a\nsafeguard measure may only be taken if that product continues \"being imported\" in such increased\nquantities.1395\n7.488 The European Communities, Japan, Korea, Switzerland and Norway emphasize that, as the\nAppellate Body has clarified in Argentina – Footwear (EC)1396, the use of the present tense \"is being\nimported\" in Article 2.1 of the Agreement on Safeguards means that competent authorities must show\na sharp and significant increase in imports which continues until the very recent past. 1397 I n\ninterpreting this requirement, WTO panels have focused on the last one to three years. 1398 Norway\nand Switzerland add that allowing a WTO Member to take a decision on whether to adopt safeguards\nmeasures by ignoring available data from the most recent past would disregard the extraordinary\nnature of safeguard measures, which must be taken into account when \"construing the prerequisites\n\n1393 European Communities' first written submission, paras. 282-290; European Communities' second\nwritten submission, paras. 142-147.\n1394 Japan's first written submission, para. 176.\n1395 European Communities' first written submission, para. 143.\n1396 Appellate Body Report, Argentina – Footwear (EC), para. 130.\n1397 European Communities' first written submission, para. 271; Japan's first written submission, paras.\n184-185; Korea's first written submission, para. 71; Norway's first written submission, para. 256; Norway's\n1398 Panel Report, Argentina – Footwear (EC) , paras. 8.160 and 8.162; Panel Report, US – Wheat\nGluten, paras. 8.32 and 8.33; Panel Report, US – Line Pipe, para. 7.204.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfor such actions\". 1399 Similarly, Brazil and Japan argue that the present tense in Article 2.1 of the\nAgreement on Safeguards – \"such product is being imported \" (emphasis added) – indicates that the\nincrease in import volume must be in the present, th at is to say, as of the time of the safeguards\ninvestigation, and not in the past.1400\n7.489 The United States argues that the Agreement on Safeguards does not specify how long the\nperiod of investigation in a safeguards investigation should be, or whether or how that period should\nbe segmented for purposes of analysis.1401\n7.490 As regards the question of how \"recent\" the increase in imports must be, the United States\nargues that the Appellate Body's statement that the investigation period must be the recent past must\nbe read in the light of other findings. The Appellate Body Report in US – Lamb made clear that, in\nconducting their evaluation under Article 4.2(a), competent authorities cannot rely exclusively on data\nfrom the most recent past, but must assess that data in the context of the data for the entire\ninvestigative period.\n1402 US – Lamb involved a determination of threat of serious injury, which by\ndefinition is future oriented, and 21 months as the length of the investigation period was deemed too\nshort. Presumably, therefore, the Appellate Body would accept a considerably longer period of\ninvestigation for a serious injury determination. The United States submits that the complainants also\nattempt to downplay the panel report in US – Line Pipe\n1403, which states that it is not necessary to find\nthat imports are still increasing in the period immediately preceding the competent authority's\ndetermination, or up to the very end of the period of investigation.1404 If the Agreement on Safeguards\nprevented the application of a safeguard measure any time that imports abated, however slightly, after\nan increase, Members would have to commence safeguard proceedings immediately after detecting an\nincrease in imports. This likelihood would create a major disincentive against waiting to see whether\nthe domestic industry could cope on its own.1405\n7.491 In response, China submits that the United States is trying to create confusion between the\nrequirement, on the one hand, to give specific attention to the most recent imports and, on the other\nhand, the requirement to consider trends in imports rather than making an end-point comparison. 1406\nJapan, Korea, China, New Zealand and Brazil contend that reliance on US – Lamb is misplaced. In\nthat case, the Appellate Body was not examining increased imports, but the appropriate period for\nassessing the state of the domestic industry with regard to threat of serious injury.1407 1408\n7.492 The United States responds that the complainants draw an artificial distinction. Import data\nare part of the overall data to be assessed by competent authorities. If the question of the temporal\nfocus of data evaluation did not encompass import data, the Appellate Body would not have referred\nin the US – Lamb Report to its discussion of increased imports in Argentina – Footwear (EC).\n1409 1410\n\n1399 Norway's first written submission, para. 256; Switzerland's first written submission, para. 246.\n1400 Brazil's first written submission, para. 121; Japan's first written submission, para. 180.\n1401 United States' first written submission, para. 174.\n1402 Appellate Body Report, US – Lamb, para. 137.\n1403 Panel Report, US – Line Pipe, para. 7.207.\n1404 United States' first written submission, paras. 182-190.\n1405 United States' written reply to Panel question No. 40 at the first substantive meeting, para. 82.\n1406 China's second written submission, para 92.\n1407 Appellate Body Report, US – Lamb, paras. 137-138.\n1408 Japan's second written submission, para. 84; Korea's first written submission, para. 96; China's\nsecond written submission, para. 96; New Zealand's second written submission, para. 3.63; European\n1409 Appellate Body Report, US – Lamb, para. 138, footnote 88.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.493 The European Communities, Japan, Korea, Norway, New Zealand and Brazil further argue\nthat in US – Line Pipe, the Panel was confronted with a slight and brief decrease in the absolute level\nof imports at the very end of the investigation period, imports which remained at high levels and\ncontinued to increase in relative terms.1411 1412 Thus, US – Line Pipe does not in anyway diminish the\nAppellate Body's interpretation of the timing of the increased imports – i.e., that they must be recent.\nRather, US – Line Pipe stands for the proposition that a modest and short decline in imports at the end\nof the period of investigation, that started in the last half year of the five and a half year period, does\nnot exclude a finding that imports \"remain\" at \"such increased quantities\" if such finding is based on\nan explicit analysis of intervening decreasing trends and supported by a reasoned and adequate\nexplanation.\n1413 This does not mean, as the United States implies, that any increase in imports at any\ntime during the period of investigation, no matter how remote in time and even if followed by a\nsignificant and continuing decline, satisfies the requirement of increased imports. 1414 The increase in\nimports was fully 30 months in the past by the time the United States initiated its safeguard\ninvestigation, hardly what one would term \"immediately after detecting an increase in imports\".1415\n(b) Evaluation of trends\n7.494 The European Communities, Japan, Korea and China further point out that the Appellate\nBody has also made clear that there is an obligation to evaluate trends in imports over the entire\nperiod of investigation, rather than simply comparing end-points. Where imports have declined\n\"continuously and significantly\", a product is no longer \"being imported in such increased quantities\"\nand the purpose of the safeguard remedy to address an urgent situation is not met.\n1416 1417 Norway and\nSwitzerland submit in summary that an increase in imports should be evident both in an \"end-point-\nto-end-point comparison and in an analysis of the intervening trends over the period\".1418 1419\n7.495 According to the United States, the complainants also misconstrue the Appellate Body finding\nin Argentina – Footwear (EC) regarding trends in imports over the period of investigation. The\nAppellate Body addressed trends in order to s how that consideration of end points alone was\ninsufficient, and that an examination of intervening points must be made. The Appellate Body did not\nstate that a comparison of the end points of a period of investigation is entirely irrelevant or\nimpermissible. The United States also notes that Article 4.2(a) of the Agreement on Safeguards\nrequires an evaluation of \"the rate and amount of the increase in imports,\" and thus trends do not\ntrump the amount of imports. The Appellate Body also did not state that trends must show a constant\nincrease in imports or an increase that lasts for the entire period of investigation.1420\n\n1410 United States' second written submission, para. 104.\n1411 Panel Report, US – Line Pipe, paras. 7.210 and 7.213.\n1412 Norway's first written submission, para. 245; Norway's second written submission, para. 88.\n1413 European Communities' first written submission, paras. 175-180; Korea's first written submission,\n1414 Japan's second written submission, para. 85; Brazil's second written submission, paras. 48-50.\n1415 Brazil's second written submission, para. 60.\n1416 Panel Report, Argentina – Footwear (EC) , para. 8.162, confirmed in Appellate Body Report,\nArgentina – Footwear (EC), para 129.\n1417 European Communities' first written submission, paras. 272-274; Japan's first written submission,\npara. 186; Korea's first written submission, para. 72; China's first written submission, paras. 88-89.\n1418 Panel Report, Argentina – Footwear (EC), para. 8.157.\n1419 Norway's first written submission, para. 246; Norway's second written submission, para. 89;\nSwitzerland's first written submission, para. 239.\n1420 United States' first written submission, para. 178-180.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.496 Japan responds that there must be some examination of the relative trends in imports over the\nperiod of investigation in terms of their nature, extent, and magnitude vis-à-vis the recent imports. It\nis similar to the point the Appellate Body made in US – Lamb regarding serious injury – that the real\nsignificance of short term trends at one point in a period of investigation \"may only emerge when\nthese short term trends are assessed in the light of the longer-term trends in the data for the whole\nperiod of investigation\".\n1421 Japan and New Zealand submit that the point is to consider trends in\ncontext, in comparison with longer-term trends. Undertaking such an analysis is separate from the\nissue of causation, which concerns the \"effect\" of the increase.1422\n7.497 With regard to the relative importance of trends and of recent imports, the European\nCommunities argues that the most recent imports are part of an overall trend. However, as clarified\nby the Appellate Body, the most recent import trends should be the focus of safeguard determinations\non the increased imports requirement contained in Article 2.1 of the Agreement on Safeguards.\nOverall trends over a longer period of time are particularly important to determine whether the first\nprong of the increased imports analysis, i.e., \"such increased quantities\", is met. GATT and WTO\njurisprudence require an \"abnormal development in the imports of the product in question\"\n1423, or as\nthe Appellate Body has put it an \"unforeseen\" or \"unexpected\" or \"sudden, sharp and significant\"\nincrease in imports. 1424 As argued by the European Communities, to establish this, the competent\nauthorities are obliged to: (i) identify the rate and amount of imports over a longer period; and (ii) to\ncompare the recent developments to previous import developments and to show that an abnormal\nincrease took place. The USITC failed to consider these essential issues, but contended itself with\n\"any increase\" in imports. The European Communities submits that this has already been explicitly\nruled out by the Appellate Body in Argentina – Footwear (EC) .\n1425 Recent imports are decisive to\nestablish that a product continues \"being imported\" in such increased quantities. The Panel's report in\nUS – Line Pipe did not contradict the unambiguous obligation clarified by the Appellate Body to\nconsider any intervening trend and in particular th e sensitive end points of an investigation. The\nUSITC did not even do what was required by the Panel in US – Line Pipe, that is, to establish for all\nproducts through a reasoned and adequate explanation imports that have at least remained at recently,\nsharply and suddenly increased levels. Instead, the United States invoked a passage of the Panel's\nreport in Argentina – Footwear (EC), allegedly rejecting the argument of the European Communities\nthat only a \"sharply increasing trend in imports at the end of the investigation can satisfy this\nrequirement\" and adding that there might be a \"temporary downturn\", which would nevertheless not\ninvalidate a finding of increased imports.\n1426 According to the European Communities, the first\nreference is irrelevant, because the United States has (far from establishing that imports continue\nincreasing in the interim 2001 period) not even demonstrated that imports remained at sharply\nincreased levels although the most recent interim 2001 data confirmed a steady and significant\ndecline. Even if temporary and insignificant declines do not necessarily exclude a finding that a\nproduct is being imported at increased levels, the ex istence of more than a half-year downward trend\nrequires an explanation why such trend is only considered temporary and insignificant. The USITC\ndid not do so for any of the products. This is particularly glaring, since for many of those products\n\n1421 Appellate Body Report, US – Lamb, para. 138.\n1422 Japan's second written submission, para. 91; New Zealand's second written submission,\nparas. 3.61-3.62.\n1424 Appellate Body Report, Argentina – Footwear (EC), para. 131.\n1425 Appellate Body Report, Argentina – Footwear (EC), para. 131.\n1426 United States' second oral statement, para. 37, referring to Panel Report, Argentina – Footwear\n(EC), para. 8.165.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncountervailing duty and anti-dumping orders were in place, therefore making such trends\npredictable.1427 1428\n7.498 Japan submits that there are both a temporal element and a comparative element embodied in\nthe \"increased imports\" requirement. As interpreted by the Appellate Body in Argentina – Footwear\n(EC), the temporal element requires that increased imports must be \"sudden and recent\". 1429 T h e\ncomparative element requires a comparison: \"between recent import trends … and import trends over\nthe entire period of investigation\". 1430 This is why the Appellate Body emphasized that an authority\nmust examine recent imports and imports over the entire period of investigation. 1431 China submits\nthat, on the one hand, only the consideration of trends allows determinations as to whether the\nevolution of imports meets the requirements of Article 2.1 of the Agreement on Safeguards and\nArticle XIX of GATT 1994. In this regard, the requirement to consider trends is of a methodological\nnature. On the other hand, among the different trends, specific attention should be granted to the most\nrecent ones in order to determine whether they showed an increase in imports that was recent. In this\nregard, the requirement to consider recent imports is rather of a qualitative nature.\n1432 Norway asserts\nthat the trend confirming that there actually is a recent, sudden, sharp and significant increase in\nimports, of the magnitude required by the Agreement on Safeguards, must continue until the very\nrecent past. When the trend in the recent past is a decrease in imports, the condition for imposing a\nsafeguard measure no longer exists. As such, the importance of a confirming trend in the very recent\npast has a very high importance. 1433 New Zealand submits that both trends and recent imports have\nbeen recognized as important in Argentina – Footwear (EC) , which also confirmed that a simple\ncomparison of end-points will not suffice. 1434 In the present case, the requirement of a \"recent\"\nincrease in imports was not satisfied because in the most recent period (interim 2001), imports\nactually decreased by 40%. Moreover, this was simply an acceleration of the downward trend in\nimports since 1998.1435\n7.499 Korea argues that the primary focus must be recent imports. The Appellate Body in\nArgentina – Footwear (EC) stated in its report that \"it is necessary for the competent authorities to\nexamine recent imports, and not simply trends in imports\". 1436 It further stated that \"the investigation\nperiod should be the recent past\". 1437 Trends are relevant to the relationship between increased\nimports, on the one hand, and causation on the other, in accordance with Article 4.2 of the Agreement\non Safeguards. The United States refers to the Panel in Argentina – Footwear (EC) as authority for\nthe proposition that the Panel rejected the EC's argument that imports had to be \"sharply increasing\"\nat the end of the period. However, the United States is referring to the Panel analysis of increased\nimports in Argentina – Footwear (EC) where the Appellate Body specifically commented that \"the\nPanel's interpretation of [the increased imports] requirement [is] somewhat lacking\".\n1438 1439\n\n1427 USITC Report, Vol. II, Table OVERVIEW-3.\n1428 European Communities' written reply to Panel question No. 14 at the second substantive meeting.\n1429 Appellate Body Report, Argentina – Footwear (EC), para. 130.\n1430 Japan's second written submission, para. 82.\n1431 Appellate Body Report, Argentina – Footwear (EC), para. 130.\n1432 China's written reply to Panel question No.14 at the second substantive meeting.\n1433 Norway's written reply to Panel question No.14 at the second substantive meeting.\n1434 Appellate Body Report, Argentina – Footwear (EC), para. 129.\n1435 New Zealand's written reply to Panel question No.14 at the second substantive meeting.\n1436 Appellate Body Report, Argentina – Footwear (EC), para. 130.\n1437 Appellate Body Report, Argentina – Footwear (EC), footnote 130.\n1438 Appellate Body Report, Argentina – Footwear (EC), para. 130.\n1439 Korea's written reply to Panel question No. 14 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.500 Korea also notes that the United States relies heavily on the analysis of the increased imports\nrequirement in the Panel report in US – Line Pipe .1440 Korea fundamentally disagrees with the\nanalysis of the Panel in that case. Korea submits that it is important to recall that the Panel in US –\nLine Pipe interprets a fundamental modification of the Appellate Body's holding in Argentina –\nFootwear (EC). The Panel in that case concluded that the Appellate Body's reliance on the phrase \"is\nbeing imported\" had to be considered in light of the rest of the sentence, which referred to \"increased\"\n(as opposed to \"increasing\") imports ( i.e., \"in such increased quantities\"). To the Panel, this\n\"supported\" an interpretation that imports could have increased in the recent past rather than the\n\"present\" as long as they remained at high levels. First, Korea does not agree that the phrase \"is being\nimported\" can mean anything other than that the increase must be present. After all, the Appellate\nBody specifically found that \"it is necessary for th e competent authorities to examine recent imports,\nand not simply trends ... during any ... period of several years\". (emphasis added) The Appellate\nBody holding that the increase also had to be sudden, sharp, and significant bolsters this interpretation\nsince those terms conform to the emergency nature of safeguards. Nor does Korea read the use of the\nadjective \"increased\", which clearly modifies \"imports\" and denotes a greater quantity, as somehow\nmodifying the present tense of \"is being imported\". Finally, such a reading does not clarify what the\nadjective \"increased\" refers to (relative to what time period?) as opposed to the Appellate Body ruling\nthat makes clear that the increase must be recent ( i.e., the \"present tense\") and not in the past. It is\nalso significant that in US – Line Pipe, the Panel states that the temporary nature of the decrease was a\nfactor in its analysis of the imports in that case since \"a temporary change in the behaviour of the\nimports may not be sufficient to reverse an overall trend\".\n1441 In the present case of flat-rolled,\nhowever, there was solid evidence that these declines in imports were not temporary because they\nwere directly the result of the anti-dumping and countervailing duties margins at high levels on hot-\nrolled.1442 In fact, the six-month decline in imports in the interim period for line pipe contrasts with\nthe two and one-half-year decline in flat-rolled imports in the present case. One final comment on the\npanel in US – Line Pipe. That Panel cited to the Appellate Body in US – Lamb as authority.\nHowever, the Appellate Body was addressing a separate question in that case of relative importance\nof domestic industry threat data over the period. The Appellate Body properly concluded in that case\nthat, given the extraordinary nature of safeguard relief, the United States had to consider data during\nany time in the period that called into question whether the data actually demonstrated a threat of\nserious injury.1443 Korea submits that this finding is not at all inconsistent with the Appellate Body\nholding in Argentina – Footwear (EC) that the condition of \"increased imports\" must be \"present\".\nKorea argues that the United States' tactic is to try to diminish the significance of Argentina –\nFootwear (EC) , but that decision is consistent with each and every subsequent decision by the\nAppellate Body concerning the Agreement on Safeguards, including US – Lamb . In every case, the\nAppellate Body has interpreted strictly the provision of the Agreement on Safeguards in light of the\nextraordinary nature of these actions. It is fundamental that increased imports must exist and must be\npresent, or emergency action is no longer justified.\n1444 1445\n7.501 Finally, regarding trends and recent imports, in Korea's view, the United States implies that,\nfor the complainants, the existence of an inde pendent increased imports requirement excludes\nconsideration of the relationship between increased imports and causation and serious injury. Korea\nsubmits that, in fact, it does not and the complainants have not made such a claim. The Agreement on\nSafeguards requires both a separate quantitative and qualitative analysis of increased imports and, if\n\n1440 United States' second written submission, para. 92.\n1441 Panel Report, US – Line Pipe, footnote 182 (in para. 7.210).\n1442 Korea's first written submission, paras. 81, 89-93; Korea's second written submission, para. 120.\n1443 Appellate Body Report, US – Lamb, paras. 136-138.\n1444 Korea's written reply to Panel question No. 14 at the second substantive meeting.\n1445 Korea's written reply to Panel question No. 14 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports have increased, an analysis of the relationship between increased imports and causation and\nserious injury. The United States asserts that it is not possible or reasonable to analyse increased\nimports separate and apart from causation. 1446 Korea argues that that is contradicted by the language\nof Article 2.1 and by the Appellate Body precedents: In fact an analysis of \"recent\", \"sudden\", and\n\"significant enough\" explain the context, extent, and nature of the increase. In Argentina – Footwear\n(EC), the Appellate Body found no increased imports and questioned why the panel had bothered to\nanalyse causation.1447\n7.502 Brazil would not categorically state that trends are more important than recent imports in an\nanalysis of increased imports or vice-versa. Brazil submits that trends are obviously important\nbecause Article 2.1 specifies that imports must be increasing in order to impose safeguard measures\nand whether or not imports are increasing depends on the trend in imports. Trends are also important\nbecause they provide context for determining whether the increase in imports is sudden, sharp and\nsignificant. It is difficult, for example, to see how a uniform and gradual increase in imports over a\n66-month investigative period could be sudden or sharp, although it might be significant. Thus, the\nincrease must be viewed in the context of trends over the period of investigation. At the same time,\nrecent imports are necessarily important in light of the fact that Article 2.1 refers to increased imports\nin the present tense – \"is being imported\". Recent imports, of course, must also be looked at in the\nbroader context. Thus, in US – Line Pipe a brief decline in the absolute level of imports at the end of\nthe period of investigation was not important in the broader context because imports remained at high\nlevels and, even in the most recent period, continued to increase relative to domestic production.\n1448\nThe importance of the most recent period would also seem to depend on how long that period is\n(three months, six months, one year) and whether it continued a trend or reversed a trend and, if so,\nhow decisively. In other words, how important the most recent period is may depend on the particular\nfacts of the period in question and the context.\n1449\n7.503 The United States submits that the complainants' insistence on the importance of recent data,\nto the point of excluding trend analysis, is misplaced and overlooks a significant amount of Appellate\nBody and panel analysis indicating that both trends and recent imports must be considered.\nAccording to the United States, in Argentina – Footwear (EC) , the Appellate Body found that \"it is\nnecessary for the competent authorities to examine recent imports, and not simply trends in imports\nduring the last five years\".1450 In US – Lamb, the Appellate Body cited the language from Argentina –\nFootwear (EC) but then found that, \"although data from the most recent past has special importance,\ncompetent authorities should not consider such data in isolation from the data pertaining to the entire\nperiod of investigation ... . [I]n conducting their evaluation under Article 4.2(a), competent authorities\ncannot rely exclusively on data from the most recent past, but must assess that data in the context of\nthe data for the entire investigative period\". 1451 Finally, the Panel in US – Line Pipe found that \"the\nsame considerations apply when it comes to which part of the period of investigation is the most\nrelevant in a determination of increased imports\".\n1452 Both Appellate Body and panel reports endorse\nthe idea that a competent authority must consider both trends throughout the period of investigation\nand recent imports. The panel in US – Line Pipe went on to reject Korea's claim that the USITC's\nfinding of increased imports was inconsistent with Article 2.1. 1453 The USITC applied precisely the\n\n1446 United States' second oral statement, para. 38.\n1447 Appellate Body Report, Argentina – Footwear (EC), para. 145.\n1448 Brazil's first written submission, paras. 49-50.\n1449 Brazil's written reply to Panel question No.14 at the second substantive meeting.\n1450 Appellate Body Report, Argentina – Footwear (EC), para. 130.\n1451 Appellate Body Report, US – Lamb, para. 138.\n1452 Panel Report, US – Line Pipe, para. 7.208.\n1453 Panel Report, US – Line Pipe, para. 7.214.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsame analysis in its steel determinations as in its line pipe determination, namely, considering both\ntrends and recent imports in its analysis.1454 1455\n(c) Rate and amount of the increase\n7.504 Brazil and Japan claim that the competent authorities are required, under Article 4.2(a), to\nevaluate \"the rate and amount of the increase in imports in absolute and relative terms\". In order to be\nmeaningful, this provision by necessity requires that imports have a positive rate of increase – that is,\nan acceleration. 1456 If the rate at which imports have increased has declined, either absolutely or\nrelatively, there cannot possibly be serious injury as envisioned by Article 4.2(a).1457\n7.505 The United States objects to Japan's and Brazil's assertion that imports must be increasing at\nan accelerating pace.1458 The dictionary definition of \"rate\" adduced by Japan as \"speed of movement,\nchange, etc.; rapidity with which something takes place\" does not necessarily require an acceleration\nin the amount by which imports increase. 1459 The \"rate\" of an increase in imports can be stated by\nobserving that imports increased by a certain percentage from one year to the next. 1460 The United\nStates submits that, more importantly, Article 4.2(a) does not require an accelerating rate of\nincrease.\n1461\n(d) \"Sharp\" and \"significant\" increase\n7.506 The European Communities argues that in addition to the above qualitative requirements for\n\"increased imports\", the Appellate Body has made clear that there is a quantitative criterion: the\nincrease must be \"sharp\" and \"significant\". Ac cording to the European Communities, Japan and\nNorway, this requirement is derived from the expression \"in such increased quantities\" where \"such\"\nclarifies that not any increase is sufficient. 1462 The Agreement on Safeguards does not specify which\nparticular rate of increase is sufficient to meet the requirement of a sharp and significant increase, but\nit obliges the competent authorities to correctly evaluate the trends in imports over a longer period.\nOn the basis of a proper evaluation of such trends, panels can review whether import surges are\nsufficiently sharp and significant.\n1463 China adds that the WTO standard is much higher than the\nsimple demonstration of imports in increased quantities required by United States law.1464\n7.507 China and Switzerland recall that safeguard measures are measures of extraordinary nature.\nThese \"emergency measures\" do not allow a finding on increased imports where there has been such a\n\n1454 Contrary to Korea's assertion at the second panel meeting, the panel in US – Line Pipe specifically\nendorsed the USITC's finding that subject imports had increased absolutely despite a recent decline in import\nvolume. Panel Report, US – Line Pipe, para. 7.210.\n1455 United States' written reply to Panel question No.14 at the second substantive meeting.\n1456 New Shorter Oxford English Dictionary at 2481 (1993) (defines \"rate\" as \"speed of movement,\nchange, etc.; rapidity with which something takes place\").\n1457 Brazil's first written submission, para. 123; Japan's first written submission, para. 182.\n1458 Japan's first written submission, para. 182\n1459 United States' first written submission, para. 181.\n1460 The word \"rate\" is defined as \"a fixed relation (as of quantity, amount, or degree) between two\nthings.\" Webster's Third New International Dictionary, p. 1884.\n1461 United States' first written submission, para. 218.\n1462 European Communities' written reply to Panel question No. 37 at the first substantive meeting;\nJapans' written reply to Panel question No. 37 at the first substantive meeting; Norway's first written\nsubmission, para. 83.\n1463 European Communities' first written submission, paras. 275-277.\n1464 China's first written submission, para. 223.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsteady and gradual increase of imports over a longer period that the domestic industry could have\nadjusted to.1465 New Zealand and Norway add that a \"steady increase\" could very well be the natural\nand foreseeable consequence of tariff concessions.1466\n7.508 Brazil and Japan add that the increase in import volume must be \"such\" as – i.e., sufficient –\nto cause or threaten serious injury to the domestic industry producing the like or directly competitive\nproduct. It would therefore be insufficient to find a minor increase in imports even if there were a\ncausal link between imports and the industry's injury (e.g., a price-related impact with no concomitant\nvolume-related impact). Rather, the increase itself must be big enough to cause the damage.1467\n7.509 New Zealand affirms that a Member wishing to impose safeguard measures thus faces a high\nthreshold when making determinations with respect to increased imports. A competent authority must\nanalyse the trend in imports over the period of investigation to establish that there is a sharp and\nsudden increase. It must also examine the direction of the most recent imports – any sharp sudden\nincrease needs to have occurred in the \"very recent past\". Finally, it must consider the significance of\nany increase – both in quantitative and qualitative terms.1468\n7.510 China and Japan also point out that the panel must asses whether the USITC explicitly\ndemonstrated that increases in imports have been recent enough, sudden enough, sharp enough, and\nsignificant enough, both quantitatively and qualitatively, to cause or threaten to cause \"serious\ninjury\".1469\n7.511 According to the United States, the Agreement on Safeguards does not set out absolute\nstandards for how recent, sudden, sharp or significant an increase in imports must be. Indeed, the\nAgreement on Safeguards contains none of those descriptive terms. The Appellate Body's use of\nthose terms can only have been intended to provide a shorthand exposition of the requirement that\nincreased imports must ultimately be found to be enough to cause serious injury or threat to the\nrelevant domestic industry.1470\n7.512 New Zealand submits that the United States seems determined to divert attention from the\n\"recent\", \"sudden\", \"sharp\" and \"significant\" references of the Appellate Body. These references\nseem to disappear in the United States argumentation, replaced with an emphasis that imports must\nsimply be \"enough\" with none of the adjectives em ployed by the Appellate Body to describe what\nreally informs the test. The United States casts no real light on how the USITC could, on any\nreasonable basis, have arrived at a determination of increased imports. It is clear from the rapidity\nwith which the United States follows its statement that there is no absolute standard 1471 to determine\nincreased imports, with a statement that \"an increase in either absolute or relative import levels alone\"\nmay suffice1472, that the United States continues to be attached to the notion that \"any increase\" meets\nthe standard.1473\n\n1465 China's first written submission, para. 216; Switzerland's first written submission, para. 249.\n1466 New Zealand's written reply to Panel question No. 42 at the first substantive meeting; Norway's\nwritten reply to Panel question No. 42 at the first substantive meeting.\n1467 Brazil's first written submission, para. 122; Japan's first written submission, para. 181..\n1468 New Zealand's first written submission, para. 4.76.\n1469 China's first written submission, para. 220; Japan's first written submission, para. 185.\n1470 United States' first written submission, para. 216.\n1471 United States first written submission, para 216.\n1472 Ibid, para. 217.\n1473 New Zealand's first written submission, para. 3.70.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.513 The United States argues that the complainants misconstrue or ignore the Appellate Body and\npanel reports addressing the \"increased imports\" requirement of the Agreement on Safeguards. They\nmisconstrue the Appellate Body's report in Argentina – Footwear (EC) by arguing that an increase in\nimports must be recent, sudden, sharp, and significant, according to some absolute standard. It is\nclear that there are no such absolute standards for how recent, sudden, sharp or significant the increase\nin imports must be. As the Appellate Body said, it is not a \"mathematical or technical\ndetermination\".\n1474 The Appellate Body was very clear – the imports must be recent enough, sudden\nenough, sharp enough, and significant enough to cause or threaten serious injury. These are questions\nthat are answered as competent authorities proceed with the remainder of their analysis (i.e., with their\nconsideration of serious injury/threat and causation). These analyses need not form a part of the\nevaluation of the threshold issue of whether the imports have increased either absolutely or relative to\nthe domestic industry. 1475 The United States notes that Article 4.2(a) of the Safeguards Agreement\n(which the Appellate Body was interpreting when it spoke of \"recent enough, sudden enough, sharp\nenough, and significant enough\") encompasses the entire investigative responsibility of competent\nauthorities under the Safeguards Agreement. The United States adds that the fact that the drafters of\nthe Agreement on Safeguards did not intend to impose a specific \"increased imports\" standard is\nreinforced by a comparison with Article 5 of the Agreement on Agriculture, in which the drafters laid\nout specific numeric standards for measuring increased imports and setting specific measures for each\nlevel of imports.\n1476\n7.514 The European Communities and Japan respond that they have not argued that a quantitative\nanalysis is a purely mathematical or technical determination according to some absolute numerical\nstandard. Rather, such determination should be made on a case-by-case-basis, by carefully analysing\nimport trends in the most recent period and by contrasting them with trends in earlier parts of the\ninvestigation period.1477 Japan adds that a competent authority must not declare that increased imports\nexist, for example, simply because imports have increased by some negligible amount over the period\nof investigation. There are quantitative and qualitative judgments to be made regarding the existence,\nas opposed to the effect, of increased imports.1478 New Zealand adds that a \"mathematical or technical\ndetermination\" is in fact at the heart of the United States approach to \"increased imports\". Behind the\nUnited States position that \"there is no minimum quantity by which imports must have increased; a\nsimple increase is sufficient\" is the notion that \"any increase\" can suffice.1479\n7.515 Japan and Brazil respond that the qualitative and quantitative requirements concerning\nincreased imports should be viewed within the context of the purposes of safeguard measures – that is\n\"emergency action\" against a product. The word \"emergency\" is defined as \"a situation, especially of\ndanger or conflict, that arises unexpectedly and requires urgent action; a condition requiring\nimmediate treatment\"1480, implying something that has happened quickly or suddenly. 1481 Since the\nincrease in imports is supposed to be causing serious injury, this would seem to imply more than an\ninsignificant or small increase. While this aspect ultimately relates to the issue of causation, Korea\nand Brazil argue that it remains a threshold issue separate from the issue of causation; it concerns the\nextent of the increase rather than the effect of the increase.\n1482 In contrast, the United States attempts\n\n1474 Appellate Body Report, Argentina – Footwear (EC), para. 131.\n1475 United States' first written submission, para. 177.\n1476 United States' second written submission, para. 96.\n1477 European Communities' first written submission, para. 149; Japan's second written submission,\npara. 90.\n1478 Japan's first written submission, para. 90.\n1479 New Zealand's second written submission, para. 3.67.\n1480 The New Shorter Oxford English Dictionary (1993) at 806.\n1481 Japan's second written submission, para. 87.\n1482 Korea's first written submission, para. 91; Brazil's first written submission, paras. 52-53.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto collapse the \"increased imports\" requirement with the separate \"causation test\". 1483 According to\nNew Zealand, the United States in effect says that the increased import requirement simply forms part\nof the causation analysis required under Article 4.2(b) of the Agreement on Safeguards. But there is\nno support to be found for this assertion in the law.\n1484\n7.516 The United States responds that, on the contrary, the United States recognizes that the\nAgreement on Safeguards contains a separate \"increased imports\" requirement. However, unlike the\ncomplainants, the United States does not invest this requirement with more significance than is\nwarranted by the text of the Agreement on Safeguards. This separate \"increased imports\" requirement\nis satisfied, in the first instance, by any incr ease in imports, absolute or relative to domestic\nproduction. However, this does not mean that ultimately \"any increase will do\". As competent\nauthorities consider the other conditions necessary for imposition of a safeguard, they determine as\ndirected by the Appellate Body in Argentina – Footwear (EC) , whether the increase in imports was\nrecent enough, sudden enough, sharp enough, and significant enough to cause or threaten serious\ninjury.1485 The United States submits that for each of the products for which the United States applied\na safeguard measure, the USITC found that the pertinent domestic industry was seriously injured or\nthreatened with serious injury and found the requisite causal link between the increased imports and\nthat injury or threat. This analysis, taken as a whole, established that the increases in imports were\n\"recent enough, sudden enough, sharp enough, and significant enough\" 1486 to cause serious injury or\nthe threat of serious injury.1487\n7.517 The United States also argues that the complainants seek to support their position that the\nincreased imports requirement encompasses temporal, quantitative and qualitative conditions that are\nindependent of the causation analysis by pointing to the fact that the Appellate Body addressed the\nquestion of increased imports as \"a stand-alone issue\" in Argentina – Footwear (EC).1488 The fact that\nthe Appellate Body organized its Report in Argentina – Footwear (EC) in a certain way (i.e., with\nsubheadings entitled \"Increased Imports\", \"Serious Injury\", and \"Causation\" – all under the heading of\n\"Interpretation and Application of Articles 2 and 4 of the Agreement on Safeguards\") does not detract\nfrom the fact that the Appellate Body was interp reting Article 2.1, which encompasses the entire\ninvestigative responsibility of competent authorities under the Agreement on Safeguards.1489\n7.518 Korea submits that the reason emergency action is permitted under the Agreement on\nSafeguards is that the unforeseen and sudden increase in imports is still occurring – i.e., the need for\nemergency action is still present.1490 Korea also argues that high volume imports having a significant\npresence in the market, if they are not suddenly and sharply increasing, either absolutely or relatively,\ncannot serve as a basis for concluding that an \"emergency\" exists caused by the imports. There is\nnothing extraordinary about import levels per se.1491\n7.519 The European Communities submits that the term \"in such quantities\" read contextually with\n\"as a result of unforeseen developments\" and \"eme rgency action\", requires some extraordinary and\nunexpected increase in import volumes which must be established by comparing recent import\n\n1483 Korea's first written submission, para. 90.\n1484 New Zealand's second written submission, paras. 3.60-61.\n1485 United States' second written submission, para. 93.\n1486 Appellate Body Report, Argentina – Footwear (EC), para. 131.\n1487 United States' second written submission, para. 94.\n1488 Japan's written reply to Panel question No. 36 at the first substantive meeting.\n1489 United States' second written submission, para. 97.\n1490 Korea's first written submission, para. 93.\n1491 Korea's first written submission, para. 110.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nvolumes against those in earlier parts of the investigation period. 1492 China argues that the United\nStates attempts to create confusion between the requirement that a product is being imported in\nincreased quantities, on the one hand, and the requirement that the increased imports cause or threaten\nto cause serious injury, on the other. According to the European Communities, China and Norway,\nthe Appellate Body has clearly stated, in Argentina – Footwear (EC) , that there are three separate\nconditions to be met for the application of safeguard measures\n1493, hence the increased imports\nrequirement should be subject to separate analysis and determination.1494 The European Communities\nadds that the analysis of whether there is a substantial and genuine link between increased imports and\nserious injury is qualitatively something different than showing an abnormal import development.1495\n7.520 Japan adds that a comparison is required, not so much to determine the effect of increased\nimports in a causal sense, but to determine the existence of increased imports in light of the relative\ntrends in imports. The comparison is made between recent import trends, which are at the heart of the\nincreased imports inquiry, and import trends over the entire period of investigation. It serves as a\nlitmus test to determine if an emergency exists and, therefore, if emergency action is required.1496\n7.521 The European Communities and Switzerland further argue that the more gradual and steady\nor otherwise \"normal\" and foreseeable an increase in imports becomes, the higher is the burden for a\nWTO Member wishing to take a safeguard measure to analyse import volumes and explain to its\ntrading partners why it considers that their exports have increased more than expected.1497\n3. Requirement of reasoned and adequate explanation\n7.522 Korea adds that, at a minimum, Articles 2.1 and 4.2(a) of the Agreement on Safeguards\nrequired the USITC to explain and reconcile its conclusion that imports had increased with the fact\nthat imports were declining.1498\n4. Case-specific arguments\n(a) Consideration of 2001 data\n(i) Full-Year 2001 data\n7.523 The European Communities, China 1499, Norway1500 and Switzerland1501 further argue that the\nUSITC ignored import trends in the most recent past, i.e. 2001. The import data for the full year of\n2001 were available when the USITC updated its Report and completed its determination in February\n2002, but there is no explanation why the USITC did not use this information about crucial\ndevelopments, i.e. import decreases, in the \"very recent past\". These data are relevant for determining\n\n1492 European Communities' first written submission, para. 156; European Communities' written reply\nto Panel question No. 4 at the second substantive meeting.\n1493 Appellate Body Report, Argentina – Footwear (EC), para.92.\n1494 European Communities' first written submission, paras. 157-160; China's first written submission,\nparas. 83-85; Norway's second written submission, paras. 81-82.\n1495 European Communities' first written submission, para. 160.\n1496 Japan's second written submission, para. 82.\n1497 European Communities' first written submission, para. 166; Switzerland's first written submission,\npara. 76.\n1498 Korea's first written submission, para. 73.\n1499 China's first written submission, para. 231.\n1500 Norway's first written submission, para. 255-256.\n1501 Switzerland's first written submission, para. 247.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhether a product still \"is being imported …\". 1502 In any event, according to the European\nCommunities and Japan1503, the full year data for 2001 were available to the President when he took\nthe decision to impose the safeguard measures.1504 They had to be taken into account even if they had\nnot been available to the USITC 1505 and, according to Brazil, the European Communities and New\nZealand1506, they confirmed the decreases already present in interim 2001 1507, and showed that they\nwere no temporary phenomenon.1508\n7.524 According to the United States, fundamental legal and practical considerations should lead the\nPanel to reject the complainants' attempts to expand the period of investigation to encompass full-year\n2001 data that are not on the record of the USITC's investigation that began in early July 2001. The\nUnited States submits, first, that to the extent th at the complainants are suggesting that the USITC\nshould have relied on full-year 2001 data without giving interested parties an opportunity to comment\non those updated data, the complainants' position is directly at odds with Article 3.1 of the Agreement\non Safeguards.\n1509\n7.525 The United States points out that if the USITC had updated the import data to include full-\nyear 2001 figures, it would also have had to update all the data in the record, including data\nconcerning injury and causation because increased imports must be examined in the context of their\neffects on the domestic industry. By the time that this could have been accomplished, full-year 2001\ndata would no longer be the most current. Thus, the complainants' proposed use of full-year 2001\ndata would have required an endless process of updating data that would preclude any final decision\nin a safeguards investigation. The United States submits that it is obvious that competent authorities\nmust be permitted to set the end of a period of investigation at a point that will permit them to gather,\ncompile and analyse not only import data but also information concerning the condition of the\ndomestic industry and the overall market environment. It is also clear that in setting the end of the\nperiod of investigation at 30 June 2001, the USITC was gathering the most recent information it\ncould.\n1510\n7.526 The United States adds that the complainants are also wrong in suggesting that, even if the\nUSITC could not, the President should have taken into account full-year 2001 data. Such an approach\nwould sever the connection between the investigation by a Member's competent authorities and the\nMember's decision to take a safeguard measure. This would be inconsistent with the fundamental\npremise of the Agreement on Safeguards that a measure should only be taken following a proper\ninvestigation by a Member's competent authorities.1511\n(ii) Interim 2001 data\n7.527 New Zealand sees no need to rely on 2001 full-year data to make its case. Annualized 2001\nimport volume data based on the interim 2001 data 1512 recorded in the USITC Report should have\n\n1502 European Communities' written reply to Panel question No. 38 at the first substantive meeting;\nNorway's written reply to Panel question No. 38 at the first substantive meeting.\n1503 Japan's written reply to Panel question No. 38 at the first substantive meeting.\n1504 European Communities' first written submission, para. 284-286.\n1505 Japan's written reply to Panel question No. 39 at the first substantive meeting.\n1506 New Zealand's written reply to Panel question No. 38 at the first substantive meeting.\n1507 European Communities' written reply to Panel question No. 39 at the first substantive meeting.\n1508 Brazil's written reply to Panel question No. 38 at the first substantive meeting.\n1509 United States' first written submission, para. 202-204.\n1510 United States' first written submission, paras. 205-206.\n1511 United States' first written submission, para. 207.\n1512 Interim 2001 data divided by first half interim 2000 data multiplied by full year 2000 data.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindicated to the USITC by the middle of 2001 the sharply decreasing trend in import volumes and\nmarket share.1513 These annualized trends were, as it turned out, almost exactly matched by the full\nyear 2001 data which was available at the time the two Supplementary Reports were made by the\nUSITC.1514 1515\n7.528 Similarly, the European Communities notes that the United States accepts that full year 2001\ndata was available to the USITC when it considered for the first time whether non-FTA imports had\nincreased, i.e., in February 2002. However, the United States denies that the Second Supplementary\nReport was a \"determination\" within the meaning of Article 2.1 of the Agreement on Safeguards and\nsubmits that the USITC's determination for the purpose of the Panel's review were the determinations\non pages 1, 17 and 18 of the original USITC Report issued on 22 October.\n1516 The European\nCommunities submits that even if the Panel agreed with the United States that full year 2001 data was\nnot available when the USITC made its \"determination\", the use of \"full year 2001\" data is not\n\"critical\" to the complainant's case. The European Communities built its case on the lack of proper\nconsideration of the most recent import data available, be it interim 2001 or full year 2001. Upon\n\"clarification\" by the United States that only the USITC Report from October 2001 forms the relevant\ndetermination, the graphs illustrating the import trends provided by the complainants in common\nAnnex A to the first written submission were revised so as to strictly reflect only annualized interim\n2001 data that was available to the USITC at the time of the original report in October 2001. The\nEuropean Communities explains that annualizing the interim 2001 data does not mean to \"double\"\nthem.\n1517 The European Communities annualized the interim 2001 data according to the following\nformula: annualized interim 2001 = (interim 2001/interim 2000) x full year 2000. The European\nCommunities submits that this approach fully preserves the USITC's assumption of seasonal\nfluctuations and essentially compares interim 2001 data with interim 2000 data, as was done by the\nUSITC during the investigation, while allowing to fit the resulting trend onto a yearly graph and\ntherefore to discern an overall trend.1518\n7.529 Brazil submits that the 2001 data points can be represented in various ways. Given that the\nUnited States had full 2001 data while it was both still considering whether to impose safeguard\nmeasures and obtaining additional information from the USITC, one could rely on actual 2001 data.\nIn the alternative, one could construct a surrogate for full year 2001 data in various ways, including\nderiving the second half of 2001 based on actual first half 2001 data adjusted by the ratio of first and\nsecond half 2000 data. Brazil submits that what is important is not how it is done, but why. The\nobjective is to determine how import levels during the first half of 2001, the interim period, compared\nwith import levels during the entire period of investigation. Because import levels for 1996, 1997,\n1998 and 1999 are only provided based on annual levels, in order to measure the magnitude of interim\n2001 imports, it is necessary to convert these imports into a full year equivalent basis in order to put\ninterim 2001 import levels in the proper context.\n1519\n\n1513 New Zealand's first written submission, Figures 2 and 3 (p. 50).\n1514 Compare New Zealand's first written submission, Figure 2 (p. 50) with the European Communities'\n1515 New Zealand's first written submission, para. 3.71.\n1516 The European Communities disagrees with the United States and submits that because the October\n2001 USITC Report only analyzed imports from all sources, the determination violates the parallelism principle.\nSee European Communities' second written submission, paras. 40-51, 186.\n1517 United States' oral statement at the second substantive meeting, para. 41; European Communities's\nsecond written submission, para. 188; European Communities's written reply to Panel question No. 16 at the\nsecond substantive meeting.\n1518 European Communities' written reply to Panel question No. 16 at the second substantive meeting.\n1519 Brazil's written reply to Panel question No. 16 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.530 According to the United States, interim data was available to the USITC in the course of the\ninvestigation, and interim data was used by the USITC. The United States submits that no\ncomplainant has been able to show that a competent authority is required to do more than the USITC\ndid in gathering or using the most recent and complete data set available at the time the\ndeterminations were made. Interim data for 2001 should be compared to interim data for 2000, while\ninterim data should be segregated from full-year data. With regard to the argument by the European\nCommunities that \"annualizing\" interim data would preserve the proportionate relationship between\ninterim 2000 data and interim 2001 data while allowing them to be placed on the same chart as annual\ndata, the graphic representation would suggest that the \"annualized\" 2001 data were comparable to\nfull year 1996, 1997, 1998, 1999, and 2000 data, the United States submits that that is simply not the\ncase.\n1520\n7.531 While the USITC gathered data for the first half of 2001 (interim 2001), in the European\nCommunities' and Switzerland's view, it did not properly consider them. 1521 Whenever the interim\n2001 data showed a decrease, the weight was given to the 1996-2000 development. This general\napproach could not, in itself, demonstrate that imports are \"being imported\" in increased quantities.\n1522\n7.532 The United States argues that the complainan ts' criticism that the USITC failed to give\nenough weight to interim 2001 import data when these showed a decrease in imports is unfounded.\nAn exclusive focus on import data in interim 2001 would disregard the annual data in preceding years,\nand the trends examined must cover the entire period of investigation.1523\n7.533 The European Communities further submits that the USITC's approach does not explicitly\nanalyse the intervening decreasing trends discernible from 2001 data and does not give an adequate\nand reasoned explanation why such development would still justify a determination that imports\nremain at \"such increased quantities\". Instead, the USITC did nothing more than describing the 2001\ninterim data or stating that despite the decrease in the interim data, the statutory criterion was still\nsatisfied.\n1524\n7.534 China contends that it was not possible for the USITC to consider the very last portion of the\nperiod of investigation when determining trends in imports because the amount of imports for a half-\nyear period cannot be compared to the amount of imports for a full-year period. It would also be false\nto assume that a trend in imports can be determined for the very last portion of the period of\ninvestigation by comparing interim 2001 with interim 2000. China submits that this comparison can\nonly reveal whether the amount of imports during the first half of 2001 was more or less important\nthan the amount of imports 12 months earlier, bu t not what happened between the two periods and\nhow imports fluctuated over the period of the last 18 months, which would be necessary in order to\ndetermine a trend. Hence, the USITC did not give most recent imports all the importance that they\ndeserved.1525 China notes that it is not suggesting that the United States should have disregarded the\n2001 data. Indeed, the 2001 data constitute the most recent data and China is of the opinion that the\nUSITC should have given proper attention to the mo st recent trends which, for most of the products,\nas for instance CCFRS, show a clear declining trend. However, China is of the view that the United\n\n1520 United States' written reply to Panel question No. 16 at the second substantive meeting.\n1521 United States' written reply to Panel question No. 16 at the second substantive meeting.\n1522 European Communities' first written submission, para. 280, 287; Switzerland's first written\nsubmission, para. 247.\n1523 United States' first written submission, para. 196.\n1524 European Communities' first written submission, para. 182; European Communities's second\nwritten submission, paras. 169-182.\n1525 China's first written submission, para. 227-231.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nStates should have considered the full year data for 2001, since the final determinations were made\nafter the end of 2001 at a time were full-year data for 2001 were available. In doing so, the United\nStates would have allowed to analyse the overall trend and to verify the USITC's assumption of\nseasonal fluctuations, which is used to justify the comparison between interim 2000 and 2001 data.\n1526\n7.535 The European Communities also argues that the 2001 data (full year or interim) constitute the\nmost recent data and are decisive to determine whether products \"are being imported\" at increased\nquantities. The European Communities considers that the USITC failed to give proper weight to the\ninterim 2001 data. 1527 Brazil submits that the interim 2001 data is extremely important for two\nreasons. First, it confirms that the downward tr end in CCFRS imports begun in 1999 continued and,\nin fact, accelerated, toward the end of the period of investigation. Second, it confirms that CCFRS\nimports at the end of the period of investigation had reached the lowest level of the entire\ninvestigation period. Given that interim 2001 was the most recent period investigated by the USITC,\nBrazil sees no basis for ignoring the import levels during this period. Furthermore, since the period\nencompassed a full six months and the declines during the period followed declines in imports during\nthe immediately preceding semi-annual period, the sharp decline shown in CCFRS imports during the\ninterim period cannot be considered either temporary or an aberration.\n1528 Korea notes that the fact\nthat 2001 is \"interim\" does not prevent a direct comparison of imports relative to production – the\npercentages are directly comparable. Moreover, the fact that the period is six months in length does\nnot prevent a meaningful analysis of the import data per se. In the case of flat-rolled, the interim data\nis particularly telling.\n(b) Period of investigation\n7.536 The European Communities and Norway 1529 argue that the choice of 1996 as a base year\napparently served the purpose of disguising significant and steady decreases in imports for eight of the\nten product groups since a peak in 1998 or later. With very few exceptions, the USITC does not rely\non the trends over the years between 1996 and 2001.\n1530 1531 New Zealand argues that the USITC\nmanifestly failed to consider trends throughout the period of investigation. 1532 China adds that the\nUSITC's approach, in line with its tradition, of considering import trends over the most recent five and\na half-year period prevented the USITC from considering fully the most recent imports.1533\n7.537 The United States argues that the complainants' assertion that the USITC selected 1996 as a\nbase year in order to achieve a particular result has no merit. The USITC followed its established\npractice in safeguards investigations of using a period of investigation of five years plus whatever\ninterim period is available.\n1534 The United States also rejects China's assertion that the USITC's\nperiod of investigation prevented the USITC from \"considering fully the most recent imports\"1535 The\n\n1526 China's written reply to Panel question No. 15 at the second substantive meeting.\n1527 European Communities's first written submission, para. 284 and 287; European Communities'\nwritten reply to Panel question No. 15 at the second substantive meeting.\n1528 Brazil's written reply to Panel question No. 15 at the second substantive meeting.\n1529 Norway's first written submission, para. 254.\n1530 The only two exceptions are the findings on certain tubular products, and certain carbon alloy\nfittings and flanges, the only products for which the 2001 data did not reveal a manifest decrease in imports and\ntherefore supported the predetermined conclusion. USITC Report, Vol. I, pp. 157 and 171.\n1531 European Communities' first written submission, paras. 280 and 283.\n1532 New Zealand's first written submission, para. 4.78.\n1533 China's first written submission, paras. 224 and 226.\n1534 United States' first written submission, para. 194.\n1535 China's first written submission, para. 226.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nperiod of investigation must be long enough to draw appropriate conclusions regarding the state of the\ndomestic industry.1536\n7.538 China responds that the methodology of investigating the last five and a half years does not\nallow meaningful conclusions to be drawn as far as the assessment of increased imports is\nconcerned.1537\n7.539 The United States objects to the view that the USITC's practice of reviewing imports over a\nfive-year period precludes the USITC from considering trends within that period, including recent\ntrends in imports, as directed by the Appellate Body in Argentina – Footwear (EC).1538 As an initial\nmatter, the panel in US – Line Pipe has already upheld the USITC's use of a five-year period of\ninvestigation because it allows an analysis of recent trends in imports, consistent with the Appellate\nBody's rulings.1539 Moreover, the record demonstrates that for each of the ten measures at issue in this\nproceeding, the USITC in fact examined trends within the five-year period, including recent trends in\nimports.1540\n7.540 The complainants respond that the United States has misunderstood them. The complainants\ncontest the failure to properly consider interven ing trends and the failure to show that where,\nunusually, imports did increase, this was extraordinary and unexpected.1541\n(c) Method of analysis of increased imports\n(i) Quantitative analysis required?\n7.541 The European Communities claims that the United States was not entitled to content itself\nwith finding a \"simple increase\" in imports as opposed to a sudden, sharp and significant or otherwise\nextraordinary surge in imports. The complete lack of a quantitative analysis particularly affects the\ntwo exceptional cases where imports had increased (tubular products and fittings and flanges). The\nUSITC should have explained why imports should have been considered to have increased sharply\nand significantly enough, as opposed to merely gradually, so as to cause or threaten to cause serious\ninjury to the domestic industry.\n 1542 New Zealand argues that the USITC manifestly failed to place\nany weight on the extent to which increased imports have been \"recent enough, sudden enough, sharp\nenough, or significant enough both quantitatively and qualitatively\" to justify a positive\ndetermination.1543 Norway and Switzerland also point to a flaw in the USITC's methodology affecting\nthe findings concerning all products resulting from the lack of a quantitative analysis. Nowhere has\nthe USITC demonstrated that an alleged increase of imports was sharp and substantial.1544\n7.542 The United States argues that the complainants' position that the USITC failed to engage in an\nadequate \"quantitative analysis\" of the import data is unfounded. Competent authorities are not\nrequired to analyse the import data in every possible permutation when the data speak for themselves.\n\n1536 United States' first written submission, para. 195.\n1537 China's second written submission, para. 100.\n1538 Appellate Body Report, Argentina – Footwear (EC).\n1539 Panel Report, US – Line Pipe, para. 7201.\n1540 United States' second written submission, para. 25.\n1541 European Communities' second oral statement \"Scope and Standard of Review\" on behalf of the\ncomplainants, para. 16.\n1542 European Communities' first written submission, paras. 288-289.\n1543 New Zealand's first written submission, para. 4.78.\n1544 Norway's first written submission, paras. 252, 259; Switzerland's first written submission,\npara. 249.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe USITC described the import data in a clear and straightforward manner and, accordingly, acted in\nconformity with the Agreement on Safeguards. The United States submits that the complainants\nerroneously support their arguments by focusing only on the \"Increased Imports\" section for each\nproduct in the USITC Report. This section, however, must be read together with the \"Serious Injury\"\nand \"Substantial Cause\" sections, to evaluate the USITC's determination that a product is \"being\nimported … in such increased quantities, absolute or relative to domestic production, and under such\nconditions as to cause or threaten to cause serious injury to the domestic industry\".\n1545\n7.543 In counter-response, Korea submits that the USITC completely failed to conduct a\nquantitative and qualitative analysis showing that import surge was of such a nature as to cause\nserious injury or threat thereof. 1546 For the counter-responses of the European Communities, see\nsections F.2.(b) and (d).\n(ii) End-point analysis\n7.544 The European Communities, Norway1547 and Switzerland1548 contend that the USITC applied\nan erroneous methodology for evaluating increased imports, rendering all findings on increased\nimports inconsistent with Article 2.1 of the Agreement on Safeguards. The USITC's methodology as\napplied in this case only aimed at finding a \"simple increase\" in imports at some point during the\ninvestigation period without considering whether such increase was sufficiently recent, sudden, sharp\nand significant.\n1549 Korea argues that this basically turns the \"increased import\" requirement into a\nmere \"import\" requirement.1550 The European Communities, New Zealand, Norway and Switzerland\nargue that the USITC failed to focus on the most recent past and to find a sudden and recent increase,\nbut rather based its determinations on an end-point-to-end-point comparison of import data from 1996\nand 2000.1551 1552\n7.545 The United States claims that for each of the ten steel products with respect to which it has\ntaken a safeguard measure, the USITC Report contains an adequate, reasoned and reasonable\nexplanation of how the facts in the record support the USITC's determination that there were imports\nin such increased quantities, and under such conditions, as to cause or threaten serious injury to the\ndomestic industry.\n1553\n7.546 According to the United States, the complainants' claims that the United States made\nmethodological errors are without merit. First, the USITC did not engage in a simple-end point\nanalysis of comparing import data in 1996 with import data in 2000, and it did not fail to consider\nintervening movements or trends in imports over the entire period of investigation. The USITC\nconsidered trends in imports over the entire period of investigation for each product, often stating the\n\n1545 United States' first written submission, para. 198-199.\n1546 Korea's first written submission, para. 106.\n1547 Norway's first written submission, para. 250.\n1548 Switzerland's first written submission, para. 250.\n1549 European Communities' first written submission, para. 143.\n1550 Korea's first written submission, para. 98.\n1551 USITC Report, Vol. I, pp. 49, 71, 91, 101, 109, 157, 171, 205, 213, and 234.\n1552 European Communities' first written submission, paras. 280, 282-283; New Zealand's first written\nsubmission, para. 4.78; Norway's first written submission, paras. 252-254; Switzerland's first written\nsubmission, paras. 243, 245.\n1553 United States' first written submission, paras. 221, 232, 246, 255, 266, 276, 288, 302, 317.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nabsolute and relative imports for each year of the period of investigation and for the interim\nperiods.1554\n7.547 The European Communities responds that the United States misconstrues its claim as\nattacking the end-point-to-end-point analysis as opposed to the USITC's failure to systematically\nconsider import trends. The United States has not indicated where the USITC has systematically\ncalculated and compared the rate and amount of annual developments in accordance with the Articles\n2.1 and 4.2 of the Agreement on Safeguards as interpreted by the Appellate Body. Such analysis is the\nbasis for adequately considering intervening trends at the sensitive end points of the period of\ninvestigation and whether import volumes are abnormal.1555\n(d) Consideration of decline in imports\n7.548 Norway adds that the investigation period in Argentina – Footwear (EC) was 1991-1995, and\nthe Appellate Body rejected the analysis presented by Argentina, as it did not adequately consider the\nsteady and significant decline in imports beginning in 1994. 1556 Norway submits that this is the same\nsituation as that in the present case, with increases for most product groupings from 1996-1998, and\nsteady and significant declines in 1999, 2000 and interim 2001.\n1557 Korea adds that the Appellate\nBody in Argentina – Footwear (EC) clarified that an increase in imports at one point in the\ninvestigation period cannot justify a safeguard measure if there has been a steady and significant\ndecline ever since.1558 1559\n(e) Aggregation of products\n7.549 The European Communities and Norway criticize the USITC's findings on increased imports\nbecause the safeguard measures applied by the United States are based on data relating to broader\ncategories of products than those to which safeguard measures apply.1560\n5. Measure-specific argumentation\n(a) CCFRS\n7.550 The European Communities considers that the United States violated its obligations under\nArticles 2.1, and 3.1 of the Agreement on Safeguards by imposing safeguard measures on plate, hot-\nrolled steel, cold-rolled steel, coated steel and sl abs despite a recent, sharp and significant decrease in\nimports both as a single bundle, or \"Certain Flat Steel, other than Slabs\", or with respect to each\nseparate product.1561\n7.551 The United States argues in response that the USITC Report contains an adequate, reasoned\nand reasonable explanation of how the facts in the record support the USITC's determination that\n\n1554 United States' first written submission, para. 193.\n1555 European Communities' first written submission, paras. 272-274 and 289; European Communities'\nsecond written submission, paras. 190-192.\n1556 Appellate Body Report, Argentina – Footwear (EC), para. 129.\n1557 Norway's second written submission, para. 93.\n1558 Appellate Body Report, Argentina – Footwear (EC), paras. 128-129.\n1559 Korea's first written submission, para. 101.\n1560 European Communities' first written submission, para. 290; Norway's first written submission,\npara. 260.\n1561 European Communities' first written submission, para. 293.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthere were imports of CCFRS in such increased quantities, and under such conditions, as to cause\nserious injury to the domestic industry.1562\n(i) Aggregation\n7.552 The European Communities submits that the United States has not explained why the\nevidence underlying the increased import determination has been provided on the basis of the\n\"imported product\" entitled \"Carbon & Alloy Flat Products\" as identified by President Bush 1563,\nalthough data was collected for seven different sub-groupings. Equally contradictory is the fact that\nthe analysis and findings concerning increased imports in the USITC Report were based on one\nCCFRS product, while the increased imports determination by contrast, was based on five different\nproduct groupings.\n1564 1565 Brazil, China, the European Communities and New Zealand argue that no\nmatter how the USITC aggregates the five different flat products, under no circumstances has it\ndemonstrated a recent, sudden, sharp and significant increase in imports for the five products plate,\nhot-rolled steel, cold-rolled steel, coated steel and slabs neither as a single bundle, nor for \"Certain\nFlat Steel, other than Slabs\", nor for each separate product.1566\n7.553 Similarly, Korea argues that the USITC's analysis of increased imports is flawed because it is\nnot based on the proper like product for the fi ve flat-rolled products. The USITC should have\nanalysed imports of (1) slabs, (2) ho t-rolled steel, (3) cold-rolled stee l, (4) coated steel, and (5) plate\nas individual like products. However, even if \"flat-rolled\" products are analysed as a single like\nproduct, imports of flat-rolled steel have not increased suddenly, sharply, or recently. 1567 According\nto Korea, the USITC's erroneous like product analysis obscured the fact that cold-rolled, coated, and\nplate – even an end-point-to-end- point analysis – showed no absolute or relative increase in imports\nwithin the meaning of the Agreement on Safeguards . The entire increase in the end-to-end point\ncomparison for certain flat-rolled was due to a modera te increase, over five years, of hot-rolled and\nslab, but both had declined significantly in the period preceding the USITC's decision. 1568 N e w\nZealand argues that products falling within the certain carbon flat-rolled category were not, either\nseparately or in aggregate, being imported in the increased quantities contemplated by the Agreement\non Safeguards as a condition for the application of a safeguard measure. The USITC's determination\nin this matter is manifestly flawed. 1569 China adheres to the arguments made by other complainants\nwith regard to the product included in the category of certain flat steel, taken separately.1570\n7.554 In addition, the European Communities points out th at it is not for the complainants or the\nPanel to analyse increased imports separately in respect of the individual product groups for which the\ntwo safeguard measures applying to \"Certain Flat Steel\" are imposed. Nevertheless, according to the\nEuropean Communities, Brazil and New Zealand, it can be demonstrated that even when considered\nseparately, there is no basis for concluding that imports of these product groups have increased\n\n1562 United States' first written submission, para. 221.\n1563 USITC Report, Vol. II, Table Flat 3.\n1564 USITC Report, Vol. I, p. 1\n1565 European Communities' first written submission, para. 196.\n1566 China's first written submission, paras. 245-246.; European Communities' first written submission,\n1567 Korea's first written submission, para. 74.\n1568 Korea's first written submission, paras. 88-89.\n1569 New Zealand's first written submission, para. 4.77.\n1570 China's first written submission, para. 250.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrecently, suddenly, sharply and significantly. Instead, both in absolute and in relative terms, they\nshowed a sharp decrease.1571\n7.555 New Zealand points out that total import volumes for plate decreased 52% between 1996 and\n2001 and the ratio of imports to domestic production dropped 20% during the same period. Imports\nof cold-rolled steel increased slightly in absolute terms during the period of investigation, but there\nhas been a significant and sustained downward trend since 1998. The quantities of imports relative to\ndomestic production remained almost constant between 1996 and 2000, but decreased by\napproximately 30% between 1998 and 2000. Imports of coated steel have declined steadily and\nsignificantly since 1999, and the 2001 data reveals an overall decrease in imports in both absolute and\nrelative terms since 1996. Import trends for slab show that although there was an increase in imports\nin 1999 and 2000, in 2001 imports decreased by 25% as compared with those two previous years and\nby 10% if compared to 1996.\n1572\n7.556 Brazil adds that on the basis of full-year 2001 data, each of the individual flat-rolled products\nalso continued to decline. 1573 Cold-rolled products were the only exception, due to an anti-dumping\ninvestigation in 2000 which artificially drove imports down.1574\n7.557 The United States responds that the complainants raise arguments about the import data for\nitems for which a separate injury determination was not made. 1575 Given the USITC's like product\ndeterminations, the USITC was not required to make separate increased import determinations for\nslab or corrosion-resistant steel, and the trends for those products are not relevant to whether the\nUSITC's analysis of the increase in imports for cer tain carbon flat-rolled steel was consistent with\nArticle 2.1.\n1576\n7.558 Korea also claims that the USITC's investigation of increased imports for flat-rolled products\nfalls far short of the reasoned and adequate explanation of how the underlying facts support its\ndetermination as required by Articles 2.1 and 4.2(a) of the Agreement on Safeguards. The USITC had\nan obligation to explain its conclusion that imports increased in light of the data which directly\nconflicts with that conclusion.\n1577\n(ii) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.559 Japan and New Zealand argue that the USITC acknowledged, but ignored, the fact that import\nvolume declined 40% between the first half of 2000 and the first half of 2001. 1578 1579 China, the\nEuropean Communities and Korea 1580 point out that, at the time the President of the United States\ntook his decision, the full year 2001 data were available and confirmed that imports had even fallen to\nlevels below 1996.\n1581 Since the most important increase occurred in 1998, three years before the\n\n1571 European Communities' first written submission, paras. 305-308; Brazil's first written submission,\nparas. 134-135; New Zealand's first written submission, para. 4.87.\n1572 New Zealand's first written submission, paras. 4.88–4.92\n1573 Brazil's first written submission, paras. 139-143.\n1574 Brazil's first written submission, para. 144.\n1575 Brazil's written reply to Panel question No. 41 at the first substantive meeting.\n1576 United States' second written submission, para. 107.\n1577 Korea's first written submission, para. 87.\n1578 Korea's first written submission, paras. 49-50.\n1579 Japan's first written submission, para. 190; New Zealand's first written submission, para. 4.83.\n1580 Korea's first written submission, para. 82.\n1581 China's first written submission, para. 241; European Communities' first written submission,\npara. 298.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimposition of the safeguard measures, and was immediately followed by an important decline, China\nand Korea believe that increased imports were certainly not recent enough. They also were not sharp\nand significant enough.\n1582\n7.560 Korea submits that imports of flat-rolled declined by roughly 18% between 1998 and 1999.\nImports then remained at 1999 levels in 2000, showing a statistically insignificant increase (0.3%).\nImports then proceeded to decline to their lowest point in the period in the first six months of 2001.\nKorea submits that it is the complainants' position that a statistically insignificant increase in imports\nin 2000 is not an \"increase\" for purposes of the Agreement on Safeguards when analysed both\nquantitatively and qualitatively. Those imports were preceded by a deep decline and followed by a\ndeeper decline.\n1583\n7.561 The United States affirms that the USITC foun d that imports of CCFRS increased both on an\nabsolute and a relative basis. The USITC focused its analysis on the surge in imports of CCFRS in\n1998, the effects of that surge (which continued to reverberate throughout the remainder of the period\nof investigation) and on the continuation of imports at elevated levels in 1999 and 2000. In absolute\nterms, imports increased from 18.4 million short tons in 1996 to 20.9 million short tons in 2000. In\n1998 there was a rapid and dramatic increase, with imports rising to 25.3 million short tons, an\nincrease of 37.5% over 1996 levels. While the volume of imports declined in 1999 and 2000, it\nremained significantly higher in those years than at the beginning of the period of investigation.\n1584\nOn a relative basis, imports rose from the equivalent of 10.0% of domestic production in 1996 to\n10.5% in 2000.1585 1586\n7.562 The European Communities also argues that the relative import finding is as flawed as the\ndetermination for actual imports. 1587 The European Communities, China and Korea submit that in\naddition to ignoring the steady and significant decline since 1998, a 0.5% increase in the ratio in five\nyears is, also in Korea's and China's view 1588, simply not sharp and significant enough to cause or\nthreaten to cause serious injury. 1589 According to Brazil, this increase is nominal at best. 1590 China\nasserts that the relative increase during 1998 wa s quickly compensated the following year when\nimports were back to normal. Ever since, imports in relative terms remained at levels which were\nvery close to those of 1996 and 1997.1591\n7.563 As regards the degree of the relative increase in imports, the United States points out that an\nincrease in either absolute or relative import levels alone may satisfy Article 2.1 of the Agreement on\nSafeguards.1592\n7.564 In counter-response, Korea submits that if the language in Argentina – Footwear (EC) is to\nmean something ( e.g., how much is \"enough?\") 1593, then absolute and relative increases must be put\n\n1582 China's first written submission, para. 247; Korea's first written submission, paras. 77-78.\n1583 Korea's written reply to Panel question No. 14 at the second substantive meeting.\n1584 USITC Report, pp. 49-50.\n1585 USITC Report, p. 50.\n1586 United States' first written submission, paras. 208-210.\n1587 European Communities' first written submission, paras. 300-302.\n1588 Korea's first written submission, paras. 84-85; China's second written submission, para. 107.\n1589 China's second written submission, para. 107; European Communities' first written submission,\nparas. 300-302; Korea's first written submission, paras. 84-85.\n1590 Brazil's first written submission, para. 132.\n1591 China's first written submission, paras. 242, 248.\n1592 United States' first written submission, para. 217.\n1593 United States' first written submission, para. 216.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninto context. The USITC, however, has not done so.1594 In fact imports as a percentage of production\nhave declined for the last two and a half years of the period of investigation and imports relative to\nproduction at the end of the period is the lowest of the entire period.\n1595\n(iii) The USITC's method of analysis\nTrends\n7.565 The European Communities recalls the USITC finding that imports increased \"from\n18.4 million short tons in 1996 to 20.9 million short tons in 2000, an increase of 13.7 percent\". 1596\nThe USITC also acknowledged that the \"volume of imports declined in 1999 and 2000\" from the peak\nin 1998\n1597, and that this decrease continued, given that imports \"declined from 11.5 million short tons\nin interim 2000 to 6.9 million short tons in interim 2001\".1598 The European Communities, Korea and\nJapan contend that the USITC ignored the general methodology of evaluating trends, suggested by the\nAppellate Body in Argentina – Footwear (EC) , and that the situation for flat steel products closely\nresembles the one already ruled out in that case as a sudden and recent increase in imports. 1599 China\nadds that if the USITC believed that the decreasing trend of imports did not prevent it from finding\nthat there were increased imports pursuant to Article 2.1 of the Agreement on Safeguards, it had to\ngive a reasoned and adequate explanation to support this finding and it did not do so by simply stating\nthat imports were still \"significantly\" higher in 1999 and 2000 than in 1996.\n1600\n7.566 The United States also rejects the assertion that the import trends in Argentina – Footwear\n(EC) were the same as those for CCFRS in this case. In Argentina – Footwear (EC) , there was a\nsteady decline in imports for two years, following an increase earlier in the period of investigation.1601\nThus, it was possible to discern a declining trend. In this case, by contrast, there was a three-year\nincrease in imports, with a dramatic surge in 1998, followed by a decline in imports from 1998 to\n1999, but then there was levelling off and even a slight increase in 2000, which is no clear declining\ntrend.\n1602 The United States submits that import levels in 1999 and 2000 remained well above pre-\nsurge levels and in fact rose slightly between 1999 and 2000. According to the United States, this\nhardly constitutes a steady decline; rather, this pattern meets the definition of \"is being imported in\nsuch increased quantities\" as that phrase was interpreted by the panel in US – Line Pipe.1603 1604\n\n1594 Korea's first written submission, para. 118.\n1595 Korea's first written submission, para. 119.\n1596 USITC Report, Vol. I, p. 49.\n1597 USITC Report, Vol. I, p. 50.\n1598 USITC Report, Vol. I, p. 49.\n1599 European Communities' first written submission, paras. 294-297; Korea's first written submission,\npara. 80; Japan's first written submission, paras. 195-196.\n1600 China's first written submission, para. 244.\n1601 The data in Argentina – Footwear (EC) were as follows:\n1991 1992 1993 1994 1995\nTotal imports (million pair) 8.86 16.63 21.78 19.84 15.07\nRelative Imports 12% 22% 33% 28% 25%\nSource: Panel Report, Argentina – Footwear (EC), paras. 8.151 and 8.273.\n1602 United States' first written submission, para. 215.\n1603 Panel Report, US – Line Pipe, para. 7.207.\n1604 United States' second written submission, para. 105.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.567 The European Communities, Japan, Korea and Brazil respond that there is no basis to\nconclude that imports had only temporarily and recently declined and remained at sharply increased\nlevels, the basis for the finding of increased imports endorsed by the Panel in US – Line Pipe. The\ndata show a sustained 30-month period of decline, en ding with imports at the lowest level during the\nentire five and a half year period investigated by the USITC.\n1605 While one can argue the nuances of\nArgentina – Footwear (EC), US – Line Pipe and US – Lamb, in fact there are no nuances in the import\ndata. The only increase in imports was a distant memory by the time the USITC initiated its\ninvestigation.1606 Brazil adds that the United States has determined that CCFRS is being imported\ninto the United States in increased quantities desp ite the fact that imports are not only at the lowest\nlevel during the entire period of investigation, but also substantially below the peak of 1998, and have\ndeclined sharply over the last three semi-annual periods. Put simply, there is no factual support for a\ndetermination of increased imports of CCFRS.1607\n7.568 Japan adds further that the declining trend in the most recent period is even more pronounced\nfor flat-rolled steel imports actually subject to the safeguard measure - i.e. without the free trade area\nand developing countries which were ultimately excluded from the measure. Japan argues that when\none removes excluded developing countries from the import trend analysis, it becomes even more\nclear how unjustifiable the USITC's increased imports decision really was. Flat-rolled steel imports\nremained constant, approximately 13.5 million tons in every year but 1998, before declining sharply\nin 2001. Even under the USITC's flawed comparison of 1996 to 2000, flat-rolled steel imports\nactually subject to the safeguard measure increased an insignificant 253,884 tons, or 1.9%, for\ncombined flat-rolled products, and declined as a share of US production. The same pattern holds true\nfor hot-rolled, cold-rolled, and plate. Slab and corrosion-resistant steel imports reached their peak in\n1999, before declining slightly in 2000 (corrosion-resistant steel imports declined from 1.43 million\ntons to 1.37 million tons), and then declining sharply in 2001. Obvious beginning-to-end decreases\nwere masked (such as with plate) by selection of the overly broad \"flat\" like product determination.\nMoreover, the decreases are all the more apparent once excluded countries are removed from the\nanalysis. Absent imports from Canada and Mexico – both countries which shipped significantly high\nvolumes of flat products in every year between 1996 and 2000, but were excluded from the remedy\n(in violation of the principle of parallelism, as shown below) – and imports from developing countries\n– whose shipments rose from nearly zero to signif icant numbers later in the period of investigation –\nmost perceivable increases no longer exist. Indeed, while imports actually subject to the safeguard\nmeasure show no trend of import increase to satisfy the requirement set forth under the Agreement on\nSafeguards and Article XIX:1 of GATT 1994, the absolute volume increase in flat-rolled imports\nfrom excluded developing countries over the 1996 to 2000 period was eight times the increase from\ncountries subject to the relief, yet they are not subject to the relief, because the United States excluded\nthem under Article 9.1 of the Agreement on Safeguards.\n 1608\nEnd-point analysis\n7.569 Brazil1609, China 1610, the European Communities, Japan 1611, Korea 1612 and New Zealand 1613\nassert that the USITC compared the end points of 1996 and 2000 and made its increased imports\n\n1605 Japan's second written submission, para. 97; Korea's first written submission, para. 114; Brazil's\nfirst written submission, paras. 54-55; European Communities' second written submission, para. 200.\n1606 Brazil's first written submission, para. 58.\n1607 Brazil's written reply to Panel question No. 14 at the second substantive meeting.\n1608 Japan's first written submission, paras. 205-206.\n1609 Brazil's first written submission, paras. 129, 132.\n1610 China's first written submission, paras. 243-244.\n1611 Japan's first written submission, paras. 190, 195.\n1612 Korea's first written submission, paras. 76, 78.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfinding although it had to recognize that the trends in the most recent period from 1998 to the first half\nof 2001 evidenced a steady and continuous fall in imports. The European Communities, Japan, Korea\nand New Zealand consider that even an end-point -to-end-point analysis for 1996-2000 only yields a\nvery modest increase of 13.7% over a five-year period, which is a not a \"sharp\", \"sudden\" or\n\"significant\" increase.\n1614 Moreover, the absolute increase of 2.66 million tons between 1996-2000\nwas entirely accounted for by the increase in imports of hot-rolled coil – 2.84 million tons – that were\nsubject to anti-dumping and countervailing duty investigations in 1998 and 2000. 1615 1616 Korea adds\nthat the USITC failed to properly note that hot-rolled accounted for the vast majority of the volume\nincrease in 1998 and the minor \"increase\" end-point to end-point was a function solely of hot-rolled\nand slab imports. In fact, if imports of hot-rolled coil and slab are separated out of total imports of\nflat-rolled, total imports were 6.8 million short tons in 1996, 6.9 million short tons in 1999, and 6.1\nmillion short tons in 2000. 1617 Japan adds that the increase could not have been \"significant\" when it\nrepresented a mere 0.5% increase in imports as a share of production, especially when 38% of the\nincrease consisted of slab imported by the domestic industry itself.1618\n7.570 In response to Japan's argument that the increase in CCFRS imports was not significant\nbecause 38% of it consisted of slab, much of which was imported by the domestic industry, the United\nStates stresses that this argument is based on a simple end-points comparison. Japan's argument also\nis premised on the erroneous assumption that imports by the domestic industry should not be\n\"counted\".1619 The United States also argues that it is patently untrue that the USITC relied only on an\nend-points analysis, comparing import levels in 1996 with those in 2000. It did not rely exclusively\non such observations to evaluate the increased imports. The USITC quite clearly considered\nintervening years, focusing on the surge in imports in 1998, and the continuation of imports at\nelevated levels in 1999 and 2000.1620\n(iv) Consideration of 2001 data\n7.571 The European Communities, Brazil, China 1621 and New Zealand argue that the USITC\nignored the most recent 6-month period in its investigation, the first half of 2001. If the first half of\n2001 is used as the end point, imports of flat-rolled products, both absolute and relative, are\nsignificantly below 1996 levels.1622 Brazil and China 1623 affirm that the data from the full year 2001\nconfirm that the sharp decline in flat-rolled imports continued in the second half of 2001. As a\npercentage of domestic production, imports in 2001 were lower than at any point during the 1996-\n2001 period, more than 2 percentage points below 2000 and almost two percentage points below\n1996. Remarkably, imports in 2001 were 10.5 million tons below peak 1998 levels and 3.5 million\ntons below 1996 levels.\n1624 New Zealand points out that the United States has itself recognized the\n\n1613 New Zealand's first written submission, paras. 4.81, 4.84.\n1614 European Communities' second written submission, para. 199; Japan's first written submission,\n1615 Respondents' Joint Prehearing Brief on Hot-Rolled Steel, Inv. No. TA-201-73 (11 September 2001)\n(\"Respondents' Joint Prehearing Brief on Hot-Rolled \"), Exhibit 4 (Exhibit CC-52) (\"subject\" hot-rolled imports\nincreased from 1.75 million tons in 1996 to 4.59 million tons in 2000).\n1616 Korea's first written submission, para. 76.\n1617 Korea's first written submission, para. 117.\n1618 Japan's first written submission, para. 195.\n1619 United States' first written submission, para. 219.\n1620 United States' first written submission, para. 214.\n1621 China's first written submission, paras. 240-241, 246.\n1622 Brazil's first written submission, para. 132; New Zealand's first written submission, para. 4.84.\n1623 China's first written submission, paras. 238-239.\n1624 Brazil's first written submission, paras. 137-138.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimportance of interim 2001 data, explaining that the USITC gathers data for the interim period \"so\nthat it will have information available to it on the most current period possible\". 1625 The problem is\nthat, having gathered the most recent available data, the USITC ignores its significance. Among other\nthings, this data showed that imports of CCFRS had declined by 40% and demand by 14.9%. Proper\nattention to this data should have indicated to the USITC that an increased imports finding could not\nbe made, and that increased imports could not have been the cause of alleged serious injury to the\ndomestic industry.1626\n(v) Consideration of decline in imports\n7.572 Korea asserts that the USITC's analysis ignored the reason why imports declined – prevailing\nanti-dumping and countervailing duty orders. In this case, the USITC was well aware of the reason\nthat imports declined and why that trend would continue for the foreseeable future.1627\n7.573 The United States rejects Korea's contention that the USITC ignored the reason for the\ndecline in imports of CCFRS after 1998, namely anti-dumping and countervailing duty cases, and\naffirms that the USITC addressed this in its analysis of causation.1628\n(b) Tin mill products\n(i) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.574 Brazil and, based on the import data relevant to the four commissioners who considered tin\nmill products separately, China, Japan and Norway assert that the requisite sharp, recent, sudden, and\nsignificant increase was not present, and the affirmative injury finding for tin mill products was\nunjustified.\n1629\n7.575 The United States insists that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the re cord support the determinations of three USITC\nCommissioners that there were increased imports of tin mill, or in the case of Commissioners Bragg\nand Devaney, of tin mill as part of a like product encompassing certain carbon and alloy flat\nproducts.\n1630\n7.576 Norway responds that, with regard to Commissioners Bragg and Devaney, according to the\nfigures presented by the United States, there is an increase from 1996 to a peak in 1998, but thereafter\na sharp decrease in 1999 which continues in 2000 – and with a new sharp decrease in interim 2001.\nNorway submits that this is clearly a \"steady and significant decline\" in the \"recent past\", with full\nyear 2001 ending even lower than 1996.1631\n7.577 The European Communities and Norway recall that the USITC made an increased imports\nfinding for tin mill products although it explicitly acknowledged that after a \"peak level of 698,543\nshort tons\" in 1999, imports \"declined to 580,196 short tons in 2000\" and were another \"11.1 percent\n\n1625 United States' first written submission, para 197; United States' written reply to Panel question No.\n50 at the first substantive meeting, para 95.\n1626 New Zealand's written reply to Panel question No. 15 at the second substantive meeting.\n1627 Korea's first written submission, para. 81.\n1628 United States' first written submission, paras. 209-220.\n1629 Brazil's first written submission, para. 257; China's first written submission, para. 289; Japan's first\nwritten submission, paras. 209-210; Norway's first written submission, paras. 263, 272, 273.\n1630 United States' first written submission, para. 232.\n1631 Norway's second written submission, para. 94.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlower\" in interim 2001 than in interim 2000. 1632 The USITC also recognized that the ratio of imports\nto domestic production had decreased from \"20.1 percent during the import volume peak in 1999\" to\n\"17.4 percent in 2000\".\n1633 The USITC finally disclosed that the official import data used in its\ndiscussion \"overstate the imports subject to this investigation\" due to prior product exclusions.1634 1635\n7.578 China and the European Communities argue that the only increase of imports during the\nreview period was a surge in 1999, which is not recent enough to justify a safeguard measure. 1636 In\naddition, China and Norway point out that, subsequently, anti-dumping measures have led to a\nsubstantial reduction of tin mill imports 1637, which the USITC completely ignored. 1638 Under no\ncircumstances can the United States claim that tin mill products continue being imported at increased\nquantities until the very recent past. On the contrary, since 1999, actual imports of tin mill products\nhave declined sharply – by over 20%.\n1639\n7.579 According to the European Communities, at the time the President of the United States took\nhis decision to impose safeguard measures, full 2001 year data was available and confirmed that\nimports of tin mill products had even receded back almost to pre-1998 levels. 1640 The European\nCommunities submits that, similarly, the ratio of imports to domestic production has seen a steady and\ncontinuous decline since 1999 through the year 2000 and into the interim 2001. 1641 Brazil and Japan\nconfirm this observation for the imports from sources covered by the measure, particularly non-\nNAFTA countries, which are the imports that matter given the requirement of parallelism between\ninjury and remedy. 1642 China, the European Communities and Norway assert that such a situation,\nthat is a significant and steady decrease in imports since a midterm high both in actual numbers as\nwell as in relation to domestic production, has already been ruled out in Argentina – Footwear\n(EC).1643\n7.580 The European Communities and Korea also argues that there was also no relative increase in\ntin mill imports. The ratio of imports to domestic production peaked at a record 20.1% in 1999\nreflecting Weirton's business decision.\n1644 This, however, can only be regarded as a temporary\noccurrence, mostly instigated by the US domestic industry's own business decisions. Imports relative\nto production sharply decreased to the 17% range in the year 2000 and in interim 2001. 1645 Ag ain,\nthis does not satisfy the \"qualitative\" increase requirement.1646\n\n1632 USITC Report, Vol., I, p. 71.\n1633 USITC Report, Vol.; I, p. 72.\n1634 USITC Report, Vol.; I, p. 71, footnote 370.\n1635 European Communities' first written submission, para. 359; Norway's first written submission,\npara. 265.\n1636 China's first written submission, para. 293.\n1637 China's first written submission, para. 288; Norway's first written submission, para. 267.\n1638 Norway's first written submission, para. 97.\n1639 European Communities' first written submission, para. 360.\n1640 European Communities' first written submission, para. 361.\n1641 European Communities' first written submission, para. 363.\n1642 Brazil's first written submission, para. 257; Japan's first written submission, para. 209.\n1643 European Communities' first written submission, para. 363; China's first written submission,\n1644 USITC Report, Vol. I, p. 72 (Exhibit CC-6).\n1645 Steel, Inv. No. TA-201-73, USITC Publication 3479 (December 2001), Volume II: Information\nObtained in the Investigation (Carbon and Alloy Steel Flat, Long and Tubular Products ) (USITC Report,\nVol. II), Table FLAT-10, p. FLAT-14 (Exhibit CC-6).\n1646 Korea's first written submission, para. 129.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.581 In response to the allegation that the USITC fail ed to show that the increase in imports that\ndid occur was sharp, recent, sudden and significant, the United States reiterates that the complainants\nare applying an incorrect standard because Ar ticle 2.1 of the Agreement on Safeguards speaks of\nwhether there were imports \"in such increased quantities … and under such conditions as to cause or\nthreaten to cause serious injury,\" and not whether imports were sharp, recent, sudden and significant\nin the abstract.\n1647\n(ii) The USITC's method of analysis\n7.582 China, Korea and Norway assert that the USITC's end points comparison and a comparison\nbetween the first year of the period of investigation with the 1999 peak demonstrate an increase in\nimports, but that such an analysis does not consider the trends in imports.\n1648\n7.583 The United States asserts that there is no merit to the argument that the USITC relied only on\nan end-points analysis, comparing import levels in 1996 with those in 2000. Commissioners Bragg\nand Miller discussed import levels during the period of investigation, and in the interim periods, and\nquite clearly focused on the increases in imports that occurred within the period of\ninvestigation.\n1649 1650\n7.584 Korea and China argue that the United States should not be able to rely on the analysis of\nCommissioners Bragg and Devaney, since their an alysis of increased imports was not based on tin\nmill products, but on \"certain carbon and alloy flat products including tin mill\". Grouping tin mill\nproducts with other products in a wide group of pr oducts (\"certain carbon and alloy flat products\")\nprevented those Commissioners from making any useful analysis as far as tin mill products alone are\nconcerned.1651 However, China also notes that the analysis of the import trends for tin mill \"as part of\na like product encompassing certain carbon and alloy flat products\" also shows a clear declining trend\nfrom 1999 to 2001.1652 1653\n(iii) Requirement of reasoned and adequate explanation\n7.585 China, the European Communities, Korea and Norway also argue that the temporary 1999\nsurge in imports was stimulated by a temporary business decision of the United States domestic\nindustry, more particularly, Weirton's decision to shut down a blast furnace and rely on imported\nslabs.1654 The European Communities argues that if a one-time high in import levels was caused by\nan exceptional business decision, the competent aut horities would need to explain how they can rely\non it although this condition is no longer given. 1655 Brazil and Korea add that it is relevant that the\nvery industry seeking import relief brought about, and benefitted from significant parts of the\n\n1647 United States' first written submission, para. 228.\n1648 China first written submission, paras. 288, 290; Korea's first written submission, paras. 95, 98;\nNorway's first written submission, para. 268.\n1649 USITC Report, pp. 71-72 (Commissioner Miller); and p. 279 (Commissioner Bragg).\n1650 United States' first written submission, para. 229.\n1651 Korea's second written submission, paras. 122-123; China's second written submission, para. 126.\n1652 United States' first written submission, para.223.\n1653 China's second written submission, para. 127.\n1654 European Communities' first written submission, para. 364; China's first written submission,\npara. 292; Korea's first written submission, para. 96; Norway's first written submission, paras. 269 and 271.\n1655 European Communities' written reply to Panel question No. 43 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincrease.1656 It would be ironic if a producer decided to increase imports and then turned around to\nuse that very increase as the basis for pursuing a safeguard action.1657\n7.586 With regard to the complainants' argument that the surge in tin mill imports in 1999 occurred\nin part because of Weirton's shutting down a blast furnace, the United States rejects the notion that\nimports by the domestic industry should not be \"counted\" as increased imports.1658 The Agreement on\nSafeguards does not treat imports that are attributable to domestic producers any differently than other\nimports. Moreover, safeguards proceedings involve decisions about entire industries, not about\nindividual producers; and industries do not make such business decisions.1659\n7.587 In response, Norway insists that if imports enter to replace a shortfall in domestic production,\nthis is a qualitative factor which is directly relevant to the issue of causation as well. Disregarding\nthese important elements in respect of the increase in imports, makes the whole increased import\nanalysis by the United States in breach of Article 2.1. 1660 Korea adds that given the import changes\nand the facts underlying such changes at issue, the competent authorities were under a particularly\nstrong obligation to make an assessment, both quanti tatively and qualitatively, as to the nature of the\nincrease in imports. The USITC did not conduct such an assessment. 1661 China submits that the\nincrease in imports ceased in 2000, i.e. 18 months before the measure was taken. An increase in\nimports that occurred 18 months ago and was followed by a decline in those imports cannot be\nconsidered as being \"recent enough\" and \"sudden enough\".1662\n7.588 The United States responds that the complainants do not divulge the reason for their certainty\nthat an increase which occurred 18 months ago is \"insignificant\". In fact, no such basis exists.\nNeither Article XIX nor the Agreement on Safeguards specifies a period beyond which an increase in\nimports is \"insignificant\". Certainly the Appellate Body in Argentina – Footwear (EC) did not\nattempt to draw a line beyond which an increase in imports would be per se insignificant.1663\n7.589 In the light of the intervening trends and other alternative explanations, the European\nCommunities and Norway assert that the USITC did not provide an adequate and reasoned\nexplanation why it could consider that imports continued being imported at sharply and recently\nincreased levels in the most recent past.1664\n7.590 According to the United States, the assertion that the USITC failed to give adequate weight to\nthe decline in imports since 1999 is irrelevant to the extent that it is based on the views of USITC\nCommissioners making negative determinations. Among the affirmative determinations, only\nCommissioner Miller relied on the import data which the complainants cite, that is import data for tin\nmill alone. She recognized that, after surging in 1999, import volumes declined between 1999 and\n\n1656 Korea's written reply to Panel question No. 43 at the first substantive meeting.\n1657 Brazil's written reply to Panel question No. 43 at the first substantive meeting.\n1658 United States' first written submission, para. 230.\n1659 United States' written reply to Panel question No. 43 at the first substantive meeting, para. 89.\n1660 Norway's second written submission, para. 97.\n1661 Korea's first written submission, para. 128.\n1662 China's second written submission, para. 125.\n1663 United States' second written submission, para. 99.\n1664 European Communities' first written submission, para. 365; Norway's first written submission,\npara. 273.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n2000, and between the interim periods, and she explained why these declines were not decisive in her\ncausation analysis.1665 1666\n7.591 Norway responds that the figures of Commissioner Miller (which are also a misrepresentation\nas her figures include increases in excluded products 1667) show an increase from 1996 to a peak in\n1999, with a sharp decrease in 2000 and further declines in interim 2001. Norway submits that there\nis also here clearly a \"steady and significant decline\" in the \"recent past\".1668\n(iv) Relevance of the like product definition\n7.592 Korea and Norway argue that the United States cannot lump together findings of increased\nimports with respect to distinct like product groupings – flat-rolled and tin mill – to support a finding\nof increased imports of the more narrow like product – tin mill. The requirement of like product is\nfundamental to a finding of increased imports. A mix and match approach as adopted by the United\nStates suggests that any combination of legal findings, even if they are inconsistent, is insufficient and\npresents a clear violation of the Agreement on Safeguards.\n1669 The Appellate Body made clear in US\n– Line Pipe that legally consistent decisions with resp ect to the requirements of the Agreement on\nSafeguards (serious injury and threat of serious injury) are permitted. 1670 However, legally\ninconsistent decisions based on different definitions of imported products are not.1671\n(c) Hot-rolled bar\n(i) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.593 China and the European Communities contend that the USITC failed to determine and justify\nthat the increase in imports was recent enough, sudden enough, sharp enough and significant\nenough.1672 In China's view, the USITC also addressed the wrong question when it stated that imports\nshowed a dramatic and rapid increase in 2000, sin ce \"rapid and dramatic\" is much less explicit than\n\"recent, sudden, sharp and significant enough\"1673 and was not the vocabulary chosen by the Appellate\nBody1674, who has the mandate of clarifying the provisions of the WTO Agreement.\n7.594 The United States insists that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the reco rd support the USITC's determination that there\nwere increased imports. The USITC noted that imports were higher, both in absolute terms and\nrelative to United States production, in 2000 than in any prior year of the period examined and\nshowed a rapid and dramatic increase from 1999. While imports declined in the interim period\ncomparison, the ratio of imports to United States production in interim 2001 was higher than that for\n\n1665 The European Communities claims that the ratio of imports to domestic production declined in\ninterim 2001. European Communities' first written submission, para. 362. In fact, relative import levels were\nhigher in interim 2001 (at 17.7%) than in interim 2000 (when they were 17.1%). USITC Report, p. 72\nfootnote 373.\n1666 United States' first written submission, para. 231.\n1667 See USITC Report, Vol. 1, at footnote 370 (Exhibit CC-6).\n1668 Norway's second written submission, para. 94.\n1669 Korea's first written submission, para. 123; Norway's second written submission, para. 94.\n1670 Appellate Body Report, US – Line Pipe, paras. 168-170.\n1671 Korea's first written submission, para. 124.\n1672 European Communities' first written submission, paras. 315-316; China's first written submission,\npara. 255.\n1673 China's written reply to Panel question No. 45 at the first substantive meeting.\n1674 China's first written submission, para. 255.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe first three years of the period examined, and was only three-tenths of a percentage point below the\n1999 level.1675 1676\n7.595 In response to China's and the European Communities' contention that there are neither facts\nnor explanations justifying a determination that hot-rolled bar is being imported at recently, sharply\nand significantly increased quantities, the United States points out that first, the import data which the\nUSITC analysed on a year-to-year basis show substantial increases. As the US – Line Pipe Panel\nexplained, it is not necessary to find that imports are still increasing up to the very end of the period of\ninvestigation.1677 Second, the appropriate consideration under the Agreement on Safeguards is not\nwhether imports have increased \"recently, sharply and significantly\" in the abstract. The USITC\nsatisfied the standard set out in Article 2.1 of the Agreement on Safeguards when it first focused on\nincreased imports and subsequently found injury and a causal link.\n1678\n7.596 The European Communities responds that the United States cannot rely on the ruling of the\nPanel in US – Line Pipe in its defence. The Panel in that case only upheld the increased imports\nfinding given that there was an explicit finding that import levels remained at increased levels which\nthe USITC has not demonstrated.1679\n7.597 China further argues that the increase in imports of hot-rolled bar was not recent because the\nsharpest increase, both in absolute and relative terms, occurred in 1998, and the USITC also failed to\nrecognize a decline in imports that started in 2000 and lasted until the end of the period of\ninvestigation.1680\n7.598 As regards China's argument regarding a decline in imports that \"started in 2000 and lasted\nuntil the end of the period of investigation\", the United States rejects this attempt to carve up the\ninvestigation period to achieve a desired result. The United States further submits that the Agreement\non Safeguards does not specify how the period of investigation should be broken down. 1681 With\nregard to the argument that increased imports were not recent, China overlooks the fact that imports\nwere at their highest level (both in absolute and relative terms) in 2000; and that there were significant\nincreases in the last year-to-year comparison from 1999 to 2000.\n1682\n7.599 China responds that a sharp increase that occurred in 1998 cannot be considered as being\n\"recent\" anymore and subsequent imports cannot be characterized as being \"sharp\".1683\n(ii) Consideration of 2001 data\n7.600 The European Communities asserts that the USITC acknowledged but disregarded a sharp\ndecrease both in absolute terms and relative to domestic production in the first half of 2001, that is the\nmost recent and decisive part of the investigation period.\n1684 By the time the President imposed the\nsafeguard measures, the available full 2001 year import data revealed a 32% decrease in imports\n\n1675 China's first written submission, para. 255.\n1676 United States' first written submission, paras. 235 and 246.\n1677 Panel Report, US – Line Pipe, para. 7.204.\n1678 United States' first written submission, paras. 239-241.\n1679 European Communities' second written submission, para. 203.\n1680 China's first written submission, paras. 258-262.\n1681 United States' first written submission, para. 244.\n1682 United States' first written submission, para. 245.\n1683 China's first written submission, para. 114.\n1684 USITC Report, Vol. I., p. 92.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncompared to 2000.1685 Even if the 2.6 percentage difference between 1999 and 2000 could be seen as\na recent increase, it was certainly neither sharp nor significant, but part of a slight and gradual\nincrease at steps between 1.1 and 2.6%, which was then compensated in interim 2001 when the ratio\nfell back to 24.6%.\n1686\n7.601 The United States rejects the European Communities' argument based on full-year 2001 data,\nbecause full-year 2001 data were not, and should not be, considered. 1687\n(iii) The USITC's method of analysis\n7.602 China argues that the USITC failed to evaluate the rate and amount of increased imports in\nabsolute and relative terms, and to consider trends, and that it was not enough for the USITC to\nsimply state the import data for each year of the period of investigation.\n1688\n7.603 The United States disagrees with China on the question whether it was not enough for the\nUSITC to \"simply state the import data for each year without evaluating the rate and amount of\nincreased imports in absolute and relative terms\". The USITC noted where the imports increased and\nwhere they decreased. The United States submits that the Agreement on Safeguards does not require\nthat competent authorities characterize the data in certain ways. It also does not require competent\nauthorities to intone specific terminology not contained in the Agreement.\n1689 Since under Article 3.2\nof the DSU, a dispute settlement report cannot add to a Member's obligations under the covered\nagreement, the Appellate Body's use of a particular phrase cannot obligate competent authorities to\nuse the same phrase.1690\n(d) Cold-finished bar\n(i) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.604 The European Communities notes that the alleged recent surge in imports was a one-year\nmicro-development immediately compensated for by a decrease in 2001. By the time the President of\nthe United States took his decision, the full 2001 data was available and demonstrated that the\ndeclining trend, that was already signalled by the interim 2001 data, proved to be a steady and\nsignificant decrease in imports back to levels even below 1998.\n1691\n7.605 The United States rejects the European Communities' characterization of the data on absolute\nimport levels as \"a one-year micro-development immediately compensated by a decrease in 2001\".\nFirst, full-year 2001 data were not, and should not be, considered, for reasons previously articulated\nby the United States. Second, it is simply not accurate to call a 33.6% increase in imports in one year,\nthat follows on the heels of increases in two out of the preceding three years, \"a one-year micro-\ndevelopment\".\n1692\n7.606 In relation to relative imports the European Communities considers that there is no\njustification why a mere 6% increase in the ratio between imports and domestic production could be\n\n1685 European Communities' first written submission, paras. 311-312.\n1686 European Communities' first written submission, para. 315.\n1687 United States' first written submission, paras. 239-241.\n1688 China's first written submission, paras. 253, 254 and 256.\n1689 United States' first written submission, para. 242.\n1690 United States' written reply to Panel question No. 45 at the first substantive meeting, para. 91.\n1691 United States' first written submission, paras. 319-320.\n1692 United States' first written submission, para. 252.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nseen as a sudden, sharp and significant surge in imports that is capable of causing injury to a domestic\nindustry, in particular, since actual imports already showed a manifest decrease.1693\n7.607 As regards relative import levels, the United States insists that the 6.7 percentage point\nincrease in relative import levels from 1999 to 2000 (from 17.0 to 23.7%) was, in fact, very\nsignificant. The United States submits that the European Communities' attempt to discount this\nincrease by pointing to a decline in absolute import levels is unpersuasive, given that an increase in\neither absolute or relative import levels alone may satisfy Article 2.1 of the Agreement on\nSafeguards.1694\n7.608 The European Communities responds that the United States has effectively admitted that the\nabsolute import levels were not sufficient and that it solely relies on the relative import developments.\nTherefore, the European Communities asks the Panel to find that imports did not increase in actual\nnumbers.1695 As to relative imports, the United States did not explain why the mere 6% increase in\nrelative imports in 2000 (out of a one-year dip in 1999) combined with the countertrend in actual\nimports in 2001 could still justify a finding of cold bar being imported in extra-ordinarily increased\nquantities; and the European Communities asks the Panel to dismiss the relative increased imports\nfinding for this product.\n1696\n(ii) Requirement of reasoned and adequate explanation\n7.609 The European Communities asserts that the facts and explanations provided by the United\nStates authorities do not justify a determination that cold-finished bar is being imported in recently,\nsharply and significantly increased quantities.\n1697\n7.610 The United States argues that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the reco rd support the USITC's determination that there\nwere increased imports of cold-finished bar.\n(e) Rebar\n(i) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.611 China and the European Communities argue that the facts and explanations provided by the\nUSITC do not justify a determination that rebar is being imported at recently, sharply and\nsignificantly increased quantities.1698\n7.612 The United States insists that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the record supported the USITC's determination with\nrespect to increased imports. The USITC analysed the surge in imports in 1999 and the continued\nhigh levels of imports in 2000 in the context of th eir ability to cause serious injury. China's argument\nthat the USITC failed to determine whether the increase in imports of rebar was \"recent enough,\nsudden enough, sharp enough and significant enough\" is premised on an incorrect standard.\n\n1693 European Communities' first written submission, para. 321.\n1694 United States' first written submission, para. 254.\n1695 European Communities' first written submission, para. 207.\n1696 European Communities' second written submission, para. 208.\n1697 European Communities' first written submission, para. 322.\n1698 China's first written submission, para. 268; European Communities' first written submission,\npara. 328.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.613 The United States further stresses that the USITC recognized that imports had declined\nbetween 1999 and 2000, and between the interim periods, and it explained why these declines were\nnot decisive to its analysis. Competent authorities are not required to articulate an intricate trends\nanalysis.\n1699\n7.614 In response, China insists that, under the Agreement on Safeguards, as interpreted by the\nAppellate Body in Argentina – Footwear (EC) , import data must be characterized in a certain way,\ni.e. as being \"sudden enough, sharp enough, recent enough and significant enough\".1700\n7.615 China and the European Communities argue that the USITC failed to take into account the\ndecline in rebar imports in 2000 and 2001. 1701 Taking a safeguard measure despite a significant\ndecrease in imports would be tantamount to claiming self defence when shooting at an aggressor who\nis already running away, i.e., where the danger is no longer imminent.1702\n7.616 With regard to the European Communities' conten tions, the United States reiterates that full-\nyear 2001 data were not, and should not be, cons idered. Furthermore, the USITC observed that,\ndespite the declines from 1999 to 2000, and between interim 2000 and interim 2001, imports in 2000\nand in interim 2001 were nonetheless at levels that were substantially higher than in earlier years of\nthe period of investigation before 1999.\n1703\n7.617 The European Communities counter-responds that the annualised interim 2001 data show that\nboth, actual and relative imports have decreased significantly in the first part of 2001. The United\nStates cannot rely on the ruling in US – Line Pipe because there are no facts and an adequate and\nreasoned explanations that imports \"remained\" at increased levels.1704\n(ii) The USITC's method of analysis\n7.618 China argues that the USITC did not satisfy the requirement that it consider the rate and\namount of the relative and absolute increase in imports and the trends by simply stating the import\ndata for each year of the period of investigations.1705\n7.619 The European Communities also argues that the observation that imports were higher in 2000\nthan in 1996 is irrelevant because it is merely based on an end-point-to-end-point comparison. The\nEuropean Communities submits that recent absolute import levels are irrelevant if the most recent\ntrend shows a decrease in imports.1706\n7.620 The United States also argues that the USITC's analysis was hardly based on a simple end-\npoints comparison. In this regard, the European Communities overlooks the fact that the USITC also:\n(i) compared 2000 import levels to those in 1998 (and found that 2000 imports were 35.8% higher);\n(ii) compared interim 2001 imports levels to 1996 and 1997 (and found that imports in the first six\nmonths of 2001 exceeded full-year levels in 1996 and 1997); and (iii) compared the relative import\n\n1699 United States' first written submission, para. 265.\n1700 China's first written submission, para. 116.\n1701 China's first written submission, para. 271; European Communities' first written submission,\nparas. 323-328.\n1702 European Communities' first written submission, para. 327.\n1703 United States' first written submission, para. 262.\n1704 European Communities' second written submission, paras. 210-211.\n1705 China's first written submission, paras. 266-267.\n1706 European Communities' first written submission, para. 327.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nratio in interim 2001 to 1996, 1997 and 1998 (and found that it was higher than in any of those prior\nyears).1707\n7.621 Finally, according to the United States, it is not true that recent absolute import levels are\nirrelevant if the most recent trend shows a decrease in imports, as the European Communities argues.\nArticle 4.2(a) does not focus on trends to the exclusion of the amount of imports and it is not\nnecessary that imports be increasing up to the very end of the period of investigation.1708\n(f) Welded pipe\n(i) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.622 The European Communities argues that, although imports have not decreased in the most\nrecent past, the USITC failed to show that the increases in imports of welded pipe were \"sudden,\nsharp and significant\". The USITC's consideration that the \"24.2 percent\" increase in quantity \"was\nthe largest annual percentage increase of the period examined\" and that imports \"continued at a very\nhigh level in interim 2001\" 1709 as well as the reference to a large increase in the ratio to domestic\nproduction at the end of the period examined 1710 is, submits the European Communities, not\nsufficient.1711\n7.623 The European Communities and Switzerland argue that because imports of welded pipe\nincreased steadily throughout the period of investigation, the increase was not \"sudden, sharp and\nsignificant\". A safeguard measure may not be used to protect the industry against a gradual and\ntherefore adjustable increase in imports.1712\n7.624 According to Switzerland, even if the Panel finds that the 24.2% increase in imports in 2000\nwas recent and sharp enough, the United States failed to provide an adequate and reasonable\nexplanation of how the facts in the report support it s findings and to demonstrate the relevance of the\nfactors examined.1713 The European Communities adds that absent such explanation, which cannot be\ncured in the dispute settlement proceedings, the Panel cannot and should not determine whether the\nexisting increase is sufficient to meet the WTO standard.\n1714\n7.625 Switzerland admits that imports of welded tubular products have increased during the period\nof investigation. However, there must be an extraordinary and abnormal surge in imports as stated in\nthe first safeguard measure adjudicated by the GATT in the US – Fur Felt Hats case. A gradual\nincrease in imports is the very purpose of trade liberalization between WTO members. A gradual\nincrease can, therefore, not be substantial enough to trigger an emergency action like the imposition of\na safeguard measure.1715 The United States omits to say that in 1999 the imports decreased by 6.4%\nthat the increase of almost 25% in 2000 is based on the comparison with 1999 figures, that is after\nthere had been a decrease, and not on the comparison with 1998 figures where the increase would\nhave been less important, for after a decrease, an increase to the previous level gives automatically a\n\n1707 United States' first written submission, para. 263.\n1708 United States' first written submission, para. 264.\n1709 USITC Report, Vol. I, p. 157.\n1710 USITC Report, Vol. I, p. 158.\n1711 European Communities' first written submission, para. 332.\n1712 European Communities' first written submission, para. 335; Switzerland's first written submission,\nparas. 253-254.\n1713 Switzerland's first written submission, para. 256.\n1714 European Communities' first written submission, para. 337.\n1715 Switzerland's first written submission, para. 71.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhigher percentage of increase. The higher percentage increase in 2000 is due to a statistical effect.\nAnother interesting development is that from 1996 to 1998 imports have increased by almost 44%\ncompared to an increase of only 16 per cent during the period 1998-2000. However, the United States\ndid not take any safeguard measure at the time wh en imports were more important that is during\n1996-1998.\n7.626 The United States claims that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the reco rd support the USITC's determination that there\nwere increased imports of welded pipe. The European Communities misstates the standard under\nArticle 2.1 of the Agreement on Safeguards when ar guing that the USITC failed to show that the\nincreases in imports of welded pipe were \"sudden and sharp\". For the same reasons, the United States\nrejects Switzerland's argument that because imports of welded pipe increased steadily throughout the\nperiod of investigation, the increase was not \"sudden, sharp and significant\". The United States also\ninsists that the import data, and their link to the threat of serious injury to the domestic industry, are\ndescribed in the USITC Report in a clear and straightforward manner.\n1716\n7.627 The European Communities responds that the United States does not indicate where in its\nReport the USITC has provided a quantitative analysis of import developments showing that there has\nbeen an abnormal and unexpected change in import levels as opposed to the continuation of a\nperfectly foreseen gradual and adjustable rise in imports.1717\n(ii) The USITC's method of analysis\n7.628 The European Communities submits that the USITC has also failed to provide annual\npercentage increases and to evaluate all the trends in actual and relative imports by comparing their\nincreases and decreases over the period of investigation.1718\n(g) FFTJ\n7.629 The European Communities argues that the USITC Report does not contain an adequate and\nreasoned explanation, based on a complete evaluation of import trends over the entire period of\nexamination for each of the specific products grouped into this broad category, of why the steady\ndevelopment described by the USITC fulfils the very high and exacting standard of import surges that\nare sharp and significant enough so as to cause serious injury or a threat thereof for each of the\nspecific products it grouped together in its mix of heterogeneous products.1719\n7.630 The United States contends that, in arguing th at the increase in imports was steady, rather\nthan sharp and significant, the European Communities again applies the wrong standard. The\nAgreement on Safeguards requires an evaluation of whether there were imports \"in such increased\nquantities … and under such conditions as to cause or threaten to cause serious injury\", and the\nUSITC satisfied this standard when it first focused on increased imports and subsequently found\ninjury and a causal link.\n1720\n7.631 For the counter-responses of the European Communities, see section F.4c(i).\n\n1716 United States' first written submission, paras. 276, 272-273, 274.\n1717 European Communities' first written submission, para. 214.\n1718 European Communities' first written submission, para. 334.\n1719 European Communities' first written submission, para. 344.\n1720 United States' first written submission, para. 282; United States' written reply to Panel question No.\n42 at the first substantive meeting, para. 85.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(h) Stainless steel bar\n7.632 The European Communities states that it fails to see a reasoned explanation of how the facts\ncan support a finding of a recent, sudden, sharp and significant surge. The European Communities\nchallenges the USITC's finding of increased imports because what might at first glance appear to be\nan upward trend between 1999 and 2000 was a mere blip, i.e., a one year peak in imports which\nimmediately returned to normal levels in 2001. The USITC itself acknowledged that absolute import\nnumbers decreased in the first half of 2001. At the time the US President took his decision, the full\nyear 2001 data confirmed the significant and enduring plunge in imports.1721\n7.633 The United States insists that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the reco rd support the USITC's determination that there\nwere increased imports of stainless steel bar. The United States submits that the Panel should not be\nmisled by the characterization by the European Communities of the rise in imports in 2000 as \"a mere\nblip\". As regards the decline in imports in 2001 to which the European Communities points, the\nUnited States reiterates that full-year 2001 data were not, and should not be, considered. According to\nthe United States, it is readily apparent from the data that the increase in imports in 2000 was sharp\nand substantial.\n 1722\n7.634 The European Communities responds that even on the basis of interim 2001 data, the sharp\ndecrease in actual imports compensating the earlier increase must have been obvious to the USITC\nand required a particularly convincing explanation why imports remained at increased volumes.1723\n(i) Stainless steel wire\n(i) \"Increased imports\" within the meaning of the Agreement on Safeguards?\n7.635 China and the European Communities contend that the USITC failed to determine whether\nthe absolute and relative increase in imports was recent enough, sudden enough, sharp enough and\nsignificant enough, and failed to correctly evaluate the rate and amount of the increase in imports and\nto correctly consider the trends in imports.\n1724\n7.636 In response to the contention that the USITC failed to determine whether the increase in\nimports was recent enough, sudden enough, sharp enough and significant enough, the United States\nreiterates that there are no absolute standards for how recent, sudden, sharp or significant an increase\nin imports must be.1725\n7.637 The European Communities also argues that the increase observed in the period 1999-2000\nwas merely the flip side of a sharp decrease in imports in 1999. 1726 Also in relative terms, the 2000\nincrease in imports was a \"blip development\" not resulting in abnormal import levels. There is also\nno adequate and reasoned explanation for how these facts support a conclusion that the micro-\n\n1721 European Communities' first written submission, paras. 348, 349, 351.\n1722 United States' first written submission, paras. 287-288.\n1723 European Communities' second written submission, para. 220.\n1724 China's first written submission, paras. 302-303; European Communities' first written submission,\npara. 372.\n1725 United States' first written submission, para. 316.\n1726 USITC Report, Vol. I, p. 235.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndevelopment between 1999 and 2000 was an abnormal, sudden and sharp increase in imports\nthreatening serious injury.1727\n7.638 According to the United States, the European Communities' characterization of the 2000\nincrease as a \"blip development\" is not borne out by the facts and overlooks the fact that two of the\nUSITC Commissioners making affirmative determinations found a threat of serious injury. In doing\nso, they focused not only on the increase in imports in 2000, but particularly on conditions in interim\n2001.1728 Chairman Koplan noted the rapid increase in relative import levels in interim 2001. 1729\nCommissioner Bragg noted the increase in absolute import levels in 2000, and the fact that these\ndeclined only slightly between interim 2000 and interim 2001.\n1730 Commissioner Devaney noted that\nthe quantity of imports increased in 2000, and remained steady between the interim periods.1731\n7.639 The European Communities responds that the references to extracts from the causation\nanalysis are irrelevant and do not contain the required quantitative analysis of the increase in imports.\nNowhere in the analysis of Chairman Koplan (who was the only one looking at stainless steel wire as\na separate product) is there any explanation why relative import levels can be seen as abnormal and\nthe Agreement on Safeguards does not permit safeguard measures to be taken against threat of\nimports, but only after imports have actually or relatively increased.\n1732\n(ii) The USITC's method of analysis and the requirement of a reasoned and adequate explanation\n7.640 China argues that the USITC failed to consider the rate and amount of increased imports in\nabsolute and relative terms and the trends.1733 China also asserts that the upward trend in imports was\nvery smooth and, thus, the USITC was wrong in considering the increase from 1999 to 2000 apart\nfrom the rest of the period of investigation. In any event, the USITC did not provide any reasoned\nand adequate explanation concerning the trends in imports.1734\n7.641 The United States insists that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the reco rd support the USITC's determination that there\nwere increased imports of stainless steel wire. 1735 China's assertion that the USITC's analysis of the\nimport trends was deficient because the upward trend in imports was \"smooth\", and the USITC failed\nto explain the trend in imports is without meri t. The USITC Commissioners making affirmative\ndeterminations described the import data in a deta iled and straightforward fashion. They noted the\nincreases in imports, especially over the interim periods. 1736 China's arguments regarding increased\nimports are based only on the data considered by Chairman Koplan who defined the like product as\nstainless steel wire, but do not address the analysis of increased imports performed by the other two\nCommissioners who made affirmative determinations based on broader product categories.\n\n1727 European Communities' first written submission, paras. 369-371; European Communities' written\nreply to Panel question No. 44 at the first substantive meeting.\n1728 As the Appellate Body recognized in US – Lamb, para. 137, because of the future-oriented analysis\ninvolved in a threat determination, it is especially important to focus on more recent data.\n1729 USITC Report, pp. 256-259.\n1730 USITC Report, p. 280.\n1731 USITC Report, p. 343.\n1732 European Communities' second written submission, paras. 230-233.\n1733 China's first written submission, para. 299.\n1734 China's first written submission, para. 301.\n1735 United States' first written submission, para. 317.\n1736 United States' first written submission, para. 315."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.210173"}}},{"rowIdx":3485,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ05_Report_Of_Panel_04.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ05_Report_Of_Panel_04.pdf"},"doc_sequence":{"kind":"number","value":5,"string":"5"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 238 7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737, since that data alone related to stainless steel wire as such. The analysis provided by Commissioners Bragg and Devaney could not provide any useful basis for the assessment of imports trends for stainless steel wire, since they focused on another product, i.e. \"stainless steel wire products, including stainless steel wire and rope\".1738 (j) Stainless steel rod 7.643 China claims that the USITC failed to determ ine whether the increase in imports was recent enough, sudden enough, sharp enough and significant enough. According to China, indeed, the USITC did not address the right question when it stated that imports showed a dramatic and rapid increase in 2000, since \"rapid and dramatic\" was not the vocabulary chosen by the Appellate Body."},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":4,"string":"4"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":69,"string":"69"},"clean_text":{"kind":"string","value":"7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737,\nsince that data alone related to stainless steel wire as such. The analysis provided by Commissioners\nBragg and Devaney could not provide any useful basis for the assessment of imports trends for\nstainless steel wire, since they focused on another product, i.e. \"stainless steel wire products,\nincluding stainless steel wire and rope\".1738\n(j) Stainless steel rod\n7.643 China claims that the USITC failed to determ ine whether the increase in imports was recent\nenough, sudden enough, sharp enough and significant enough. According to China, indeed, the\nUSITC did not address the right question when it stated that imports showed a dramatic and rapid\nincrease in 2000, since \"rapid and dramatic\" was not the vocabulary chosen by the Appellate Body.\nIn any event, there is a lack of explanation.\n1739\n7.644 China also argues that the USITC failed to consider the rate and amount of increased imports\nin absolute and relative terms and the trends. 1740 China and the European Communities further argue\nthat the USITC failed to consider trends in imports over the period of investigation. According to\nChina and the European Communities, these trends show that imports of stainless steel rod increased\ntwice during the period of investigation (by 29.4% in 1997 and by 25% in 2000), and that each surge\nwas followed by a decline in the following year. Being immediately compensated the following year,\nthese imports could not be considered as significant.\n1741 The European Communities adds that the\ndecline in actual import levels was already noti ceable during the first half of 2001 and acknowledged\nby the USITC as a decline by 31.3% between interim 2000 and interim 2001 and that there is no\nreasoned and adequate explanation of how this just another one-year high justifies a safeguard\nmeasure and there is also no explanation with regard to the relative import increase, given that the\nUSITC Report only shows asterisks.1742\n7.645 The United States maintains that the USITC Report contains an adequate, reasoned and\nreasonable explanation of how the facts in the reco rd support the USITC's determination that there\nwere increased imports of stainless steel rod. China's and the European Communities' contentions rest\non the use of full-year 2001 data, which were not, and should not be, considered. When viewed\nwithin the USITC's period of investigation, imports show a clear rising trend over the last two full\nyears, with the largest increase – of over 25% on an absolute basis – occurring in 2000. Moreover,\neven if imports followed a pattern of successive surging and receding, this could cause serious injury\nto the domestic industry, such as to warrant a safeguard measure.1743\n7.646 China points out that since a decline in imports in interim 2001 occurred, it was a clear signal\nfor the United States to look at the full data for 2001, in order to determine whether or not this new\ntrend was representative. In view of the fact that increased quantities in 1997 and 2000 had vanished\nby the following year, it was all the more necessary to look at data for the full year 2001.1744\n\n1737 United States' first written submission, para.314.\n1738 China's second written submission, para. 128.\n1739 China's first written submission, para. 278.\n1740 China's first written submission, para. 275.\n1741 China's first written submission, para. 281; European Communities' first written submission,\npara. 353.\n1742 European Communities' first written submission, paras. 355-357; European Communities' second\nwritten submission, paras. 219-221.\n1743 United States' first written submission, paras. 295-296, 300.\n1744 China's first written submission, paras. 119, 121.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.647 In response to China's argument that the USITC failed to evaluate the rate and amount of\nincreased imports, the United States points out that the USITC noted the amount of the increase in\nimports from the first full year to the last full year of the period of investigation; and it noted the\ntrends during the period of investigation (some fluctuation, with a sharp increase at the end). The\nAgreement on Safeguards does not require that competent authorities describe the data in certain\nways.\n1745\n7.648 The United States further argues that China misconstrues what is meant by \"recent\" when\narguing that the USITC failed to consider the most recent period, i.e. interim 2001. As the US – Line\nPipe Panel recognized, it is not necessary that imports be increasing up to the very end of the period\nof investigation. The Agreement on Safeguards also does not require a determination that the increase\nin imports was \"recent enough, sudden enough, sharp enough and significant enough\".\n7.649 China finally affirms that imports decreased from 45,647 short tons in the first half of 2000,\nto 36,697 short tons in the second half of 2000, and finally to 31,365 short tons in the first half of\n2001. China submits that this strong and lasting recent decline was not given any consideration.1746\n7.650 As regards China's argument about a decline in imports that started in 2000 and lasted until\nthe end of the period of investigation, the United States rejects this attempt to carve up the\ninvestigation period to achieve a desired result. Also, the Agreement on Safeguards does not specify\nhow the period of investigation should be br oken down. In the absence of any evidence of\nmanipulation or bias, the investigating authorities' methodology should be left undisturbed.1747\nG. SERIOUS INJURY OR THREAT OF SERIOUS INJURY\n1. Competent authorities' obligations under the Agreement on Safeguards in making\ninjury determinations\n7.651 Relying upon the Appellate Body decision in US – Lamb, China asserts that, in determining\nwhether the domestic industry has suffered serious injury, that is \"significant overall impairment\" of\nits position in the industry, competent authorities must evaluate all relevant factors and conduct a\nsubstantive evaluation of the \"bearing\", \"influence\", \"effect\" or \"impact\" that the relevant factors have\non the situation of [the] domestic industry.\n1748 China and the European Communities also rely upon\nthat decision to argue that the competent authorities' explanation must fully address the nature, and,\nespecially, the complexities of the data, and respond to other plausible interpretations of that data.1749\n7.652 The European Communities argues that it follows from Articles 2.1 and 4.2 of the Agreement\non Safeguards, that a competent authority is under an obligation to justify its decision to impose\nsafeguard measures. That is, in the words of the Appellate Body, it must provide a \"reasoned and\nadequate explanation\" of its determination that the necessary pre-conditions for the application of\nsafeguard measures have been fulfilled.\n1750\n7.653 The European Communities argues that, in addition, flowing from Articles 3.1 and 4.1(c) of\nthe Agreement on Safeguards, a competent authority must publish a report setting out its factual\n\n1745 United States' first written submission, para. 297.\n1746 China's first written submission, para. 283.\n1747 United States' first written submission, para. 301.\n1748 China's first written submission, paras. 305-307.\n1749 China's first written submission, paras. 305-307; European Communities' first written submission,\npara. 381.\n1750 European Communities' first written submission, para. 380.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfindings and providing justification for the conclusions which led to the imposition of safeguard\nmeasures. The European Communities argues that this is also a logical consequence of the domestic\ninvestigation process set out in Article 3, which is intended to give interested parties the opportunity\nto make any concerns known to the competent authority. The European Communities argues that a\ncompetent authority must also justify its decision in the light of the comments made before it during\nits investigation.\n1751 In the view of the European Communities, the competent authority's report must\nset out the pertinent facts on the basis of which a Member imposes a safeguard measure. Moreover,\nthe published report cannot leave the reader guessing about how the competent authority dealt with\ncomplexities arising from the data- examination process.1752\n2. \"Significant overall impairment\"\n(a) CCFRS\n7.654 With regard to the USITC's determination of whether there had been a \"significant overall\nimpairment in the position of the domestic i ndustry\" producing CCFRS, New Zealand argues that\nalthough the USITC referred to some factors to support its findings, it did not balance these factors in\nany objective way. New Zealand questions how, when the domestic industry's share of total domestic\nconsumption had remained stable (and increased significantly in the interim 2001 figures to 93.1%\nfrom 91% in 1996), when the domestic share of total commercial shipments had been stable (and\nincreased from 76% in 1996 to 81.5% in interim 2001), when domestic sales had been shown to have\nincreased by 10.9%, when domestic production had increased 8.4% and when productivity had\n\"increased sharply\" rising 13.2% there could still be a finding of \"serious injury\".\n1753 New Zealand\nasserts that the USITC chose to disregard these factors, focussing instead on the fact that capacity\nutilization had decreased from 91.0% to 85.1%, the fact that operating income had fallen from 4.3%\nof sales to –1.4% of sales and the fact that the number of workers had declined by 4.4% and the\nnumber of hours worked had declined by 3.5%. New Zealand argues that the USITC did not explain\nwhy these three negative factors should have outweighed the five positive factors.\n1754\n7.655 Further, New Zealand argues that the USITC failed to accord appropriate weight to the\nsignificant number of factors indicating gains rather than declines in the position of the domestic\nindustry, and it accorded disproportionate weight to the factors that indicated declines. New Zealand\nasserts that the USITC frequently rejected factors that did not support a predetermined conclusion of\n\"serious injury\" and that nowhere did the USITC show how the factors it had relied upon adequately\ndemonstrate the \"very high\" standard of \"significant overall impairment\" in the position of the\nindustry.\n1755 Similarly, China notes that the USITC made reference to the industry's financial\nproblems in its report. However, China argues that at no point did the USITC explain how the\nimportance of this factor outweighed the other positive factors and leads to the conclusion that there is\nan overall impairment of the situation of the industry.1756\n7.656 In response, the United States asserts that the USITC acknowledged that not every single\nfactor it examined pertinent to the industry's conditio n was in decline. The United States argues that\nthere need not be a decline in each Article 4.2(a) factor for there to be a finding of serious injury. The\nUnited States notes that the USITC specifically found, however, that improvements in certain factors\n\n1751 European Communities' first written submission, para. 382.\n1752 European Communities' first written submission, para. 383.\n1753 New Zealand's first written submission, para. 4.101.\n1754 New Zealand's first written submission, para. 4.102.\n1755 New Zealand's first written submission, para. 4.103.\n1756 China's first written submission, para. 315.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"do not offset the significant declines exhibited by other indicia of the industry's condition with\nrespect to the issue of whether the industry is suff ering serious injury\". In this regard, the United\nStates makes reference to declines, which it claims have not been disputed by any party, including\nsignificant idling of productive capacity, sharp deterioration in financial performance, and significant\nunemployment.1757\n7.657 The United States also asserts that the USITC specifically discussed and acknowledged\nincreases in capacity, production and productivity 1758 and examined the implications of the increases.\nThe USITC fulfilled its obligation under Articles 2.1 and 4.2(a) by concluding that these isolated\nincreases did not detract from its finding of serious injury in light of all pertinent factors having a\nbearing on the state of the industry.\n1759\n7.658 In particular, the United States argues that the USITC Report provided several reasons why\nincreases in production and capacity were consistent with a finding of serious injury. First, according\nto the United States, the USITC explained that increases from 1996 to 2000 occurred at a time when\napparent domestic consumption of CCFRS was increasing. The United States asserts that one would\nnormally expect production and capacity to increase in a growing market. However, according to the\nUnited States, the increase in production from 1996 to 2000 was only incrementally greater than the\nincrease in United States apparent consumption of CCFRS during the same period.\n1760 Second, the\nUSITC emphasized that the increased capacity was not being utilized. Instead, capacity utilization for\nthe domestic industry had declined steadily from 1996 to 2000 and fell sharply between interim 2000\nand interim 2001. The United States asserts that the USITC emphasized that declines in capacity\nutilization were apparent in each of the particular product categories within the industry, as well as in\nthe industry as a whole.\n1761 In any event, the United States argues that Article 4.2(a) does not\nexpressly mention changes in capacity as a factor that an investigating authority must consider in\nevaluating whether there is serious injury. Instead, it references changes in \"capacity utilization\". 1762\nThird, according to the United States, the overall picture in the industry was not one of steady\nexpansion. The United States asserts that, as had been found by the USITC, ten United States\nproducers of CCFRS declared bankruptcy during the period of its investigation and several shut down\nand ceased production altogether. 1763 The United States argues that, in light of the foregoing, the\nUSITC thoroughly explained why the positive trends with respect to capacity and production did not\noutweigh other negative trends concerning idling productive resources in the industry.1764\n7.659 According to the United States, the USITC also acknowledged that productivity in the\nCCFRS industry increased from 1996 to 2000. The United States asserts that the USITC considered\nthe effect of this increase on employment levels in the industry and concluded that the increase in\nproductivity \"may have offset to some degree the declines in employment\". 1765 The United States\nargues that, therefore, it is clear that the USITC considered the increase in productivity but concluded\nthat it did not outweigh or entirely explain the declines in employment. According to the United\nStates, the annual trends in productivity do not correl ate with the trends in employment. Productivity\nfor the CCFRS industry increased during every full year during the period of investigation. This\n\n1757 United States' first written submission, para. 338.\n1758 United States' first written submission, paras. 339 and 349.\n1759 United States' first written submission, para. 349.\n1760 United States' first written submission, paras. 340-341.\n1761 United States' first written submission, para. 342.\n1762 United States' first written submission, para. 344.\n1763 United States' first written submission, para. 343.\n1764 United States' first written submission, para. 344.\n1765 United States' first written submission, para. 345.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincluded years in which employment was relatively stable as well as those in which it declined. 1766\nThe United States argues that, moreover, increased productivity could only explain declining\nemployment at a particular facility where produc tion continued on an ongoing basis. It could not\nexplain declines in employment attributable to the shutting down of operations at production facilities.\nAccording to the United States, the decline in employment for the CCFRS industry occurred at a time\nwhen several productive facilities closed entirely. Thus, there were losses of employment at facilities\nwhere productivity essentially declined to zero. 1767 The United States also argues that increases in\nproductivity, which would generally be expected to lead to improved financial results, did not track\nproductivity given that the financial results of the CCFRS industry declined sharply after 1997, and\nthe industry recorded overall operating losses in 1999, 2000, and interim 2001.\n1768\n7.660 In counter-response, New Zealand asserts that a simple unreasoned assertion that\nimprovements in the range of performance factors described in detail by the USITC itself \"do not\noffset the significant declines exhibited by other indicia\" 1769, can never hope to meet these\nrequirements.1770\n7.661 New Zealand further argues that the United States provides no substantiation for the key\npropositions it asserts. New Zealand questions why it is necessarily \"consistent with a finding of\nserious injury\" that production increases from 1996 to 2000 of 8.4% \"occurred at a time when\napparent consumption of certain flat steel was increasing\"? According to New Zealand, an increase in\nproduction is a positive indicator in its own right, to be weighed and balanced with other factors,\npositive and negative, when coming to an overall determination on serious injury. So, for that matter,\nis an increase in consumption, which offers strong evidence of a healthy market. New Zealand asserts\nthat, what is more, there is no logical or legal basis in Article 4.2(a) – and the United States offers\nnone – for ignoring a positive industry condition indicator just because it correlates (or does not\ncorrelate) with movements in another of the listed factors.\n1771\n7.662 With regard to the reasons advanced by the United States as to why the industry's increase in\ncapacity is irrelevant and not to be taken into account as a positive factor 1772, New Zealand submits\nthat none is credible. According to New Zealand, the mere fact that this factor is not included in the\nArticle 4.2(a) list is neither here nor there, given that the text requires an evaluation of all relevant\nfactors, \"in particular\" (i.e. not limited to) those factors then listed. Capacity increases could well be\nevidence of an industry in good health and therefore need to be assessed and weighed against other\nfactors in the course of reaching an overall evaluation of serious injury. In this connection, the United\nStates argument that certain producers declared bankruptcy so there is no overall industry picture of\nexpansion is belied by the USITC's own figures, which showed an increase in capacity of 15.9%.\n1773\nNor should capacity increases be discounted just because they correlate, or do not correlate, with\nmovements in other factors such as capacity utilization.\n1774 Accordingly, it should be regarded as a\npotential positive factor in its own right.1775\n\n1766 United States' first written submission, para. 346.\n1767 United States' first written submission, para. 347.\n1768 United States' first written submission, para. 348.\n1769 USITC Report, Vol. I, p. 55, quoted in United States' first written submission, para 338.\n1770 New Zealand's second written submission, para. 3.74.\n1771 New Zealand's second written submission, para. 3.78.\n1772 United States first written submission, paras. 342-344.\n1773 USITC Report, Vol. I, p. 54.\n1774 As claimed by the United States; United States first written submission, para 342.\n1775 New Zealand's second written submission, para. 3.79.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.663 In relation to the sharp productivity increase of 13.2%, New Zealand submits that the United\nStates considers this can apparently be discounted because \"annual trends in productivity do not\ncorrelate with the trends in employment\"\n1776 and the increase \"cannot explain the financial results of\nthe certain flat steel industry\". According to New Zealand, nothing in Article 4.2(a) suggests that a\nproductivity increase has to correlate with employment trends 1777 or a certain type of financial result\nbefore it qualifies to be weighed and balanced with the whole range of negative and positive factors in\nmaking an overall assessment of serious injury.1778\n7.664 In the context of its arguments regarding causation, the United States argues that the\nAgreement on Safeguards \"requires not a focus on one or two selected criteria but on all of the\nrelevant criteria bearing on the condition of the industry\".\n1779 New Zealand argues in response that\nthe United States then fails to draw the obvious co nclusions: that the USITC's serious injury analysis\ndoes not meet the relevant requirements of the Agreement on Safeguards as interpreted by the\nAppellate Body. According to New Zealand, to a large extent the United States submissions comprise\nmere repetition of the USITC's findings and \"reasoning\" and fail to provide any credible defence of\nwhy what the USITC did could in fact comply with the Agreement on Safeguards provisions and the\nrelevant Appellate Body decisions in this area.\n1780\n7.665 With respect to the USITC's conclusion that th ere had been a \"significant idling\" in the\ndomestic industry's productive facilities, New Zealand asserts that the USITC placed great weight on\nthe decline between 1996 and 2000 but argues that the 6% overall decline in capacity utilization was\ndwarfed by the much more significant capacity, production, and productivity increases that occurred\nduring the same period. In particular, New Zealand argues that during that period, capacity increased\n15.9%, production 8.2%, and productivity \"sharply increased\" by 13.2%.\n1781 New Zealand argues that\nthe USITC simply brushed these factors aside without any adequate or reasoned explanation,\nobserving simply that \"despite increases in capacity and production, there was significant idling of the\ndomestic industry's productive facilities during the period, given the numerous bankruptcies and the\nshut down of some facilities, as well as decreased capacity utilization\". In making this statement,\nNew Zealand argues that the USITC also failed to explain that the bankruptcies referred to did not\nnecessarily equate with an idling of productive facilities; the USITC itself conceded that only \"some\"\nbankrupt companies \"ceased operations altogether\".\n1782 With regard to the issue of capacity\nutilization, see arguments made by the United States in paragraph 7.658.\n7.666 New Zealand also argues that the USITC's finding that there was \"significant unemployment\nor underemployment in the domestic industry\" was based on a reduction over the period of\ninvestigation in the number of workers and the number of hours worked. According to New Zealand,\nthe USITC did not consider the role of increased productivity in reducing labour requirements; nor did\nit consider the role of newer, less labour intensive, technology upon this indicator. New Zealand\nasserts that this failure is particularly noteworthy given the USITC's recognition that the period of\ninvestigation witnessed the \"first large-scale production of cold-rolled and coated steel by minimills\".\nNew Zealand argues that the fact that the number of workers and hours worked had reduced should\n\n1776 New Zealand's second written submission, paras. 346-348.\n1777 In fact, the 1996-2000 figures throws doubt on the United States factual assertion also – a\nproductivity increase of 13.2% corresponds over this period with a decline of 4.4% in the number of workers\nand of 3.5% of hours worked.\n1778 New Zealand's second written submission, para. 3.80.\n1779 United States' first written submission, para. 450.\n1780 New Zealand's second written submission, para. 3.76.\n1781 New Zealand's first written submission, para. 4.104.\n1782 New Zealand's first written submission, para. 4.105.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnot be presumed to indicate injury given the labour advantages enjoyed by minimills. 1783 With regard\nto the issue of productivity, see arguments made by the United States in paragraph 7.659.\n7.667 New Zealand also argues that the USITC failed to investigate the extent to which the negative\neffects they perceived to be affecting the domestic industry differed as between integrated producers\nand more modern efficient minimills, which was necessary in order to arrive at an accurate\nassessment of significant \"overall\" impairment. According to New Zealand, while the former were\nutilizing increasingly obsolete production technolo gy, the latter were taking advantage of modern\ntechnologies and increasing their market share during the period of the investigation. The analysis\nthus failed to reckon with the fact that during th e period of investigation the United States steel\nindustry was an industry in transition – undergoing structural change – with modern minimill\nproducers displacing or taking market share away from obsolete integrated plants. 1784 New Zealand\nargues that the USITC failed to investigate properly the extent to which performance differed as\nbetween integrated mills and minimills.1785\n7.668 In response, the United States argues that under both Articles 2.1 and Article 4.2(a) of the\nAgreement on Safeguards, an investigating authority must determine whether \"a domestic industry\" is\nexperiencing serious injury or is threatened with serious injury. According to the United States,\nnothing in these provisions require an authority further to determine that each discrete segment that\nmay exist within a particular industry is seriously injured. Having determined that the pertinent\ndomestic industry was the one producing CCFRS, the United States asserts that the USITC's\nobligation was to assess serious injury on an industry-wide basis. This is precisely what it did.\n1786\nThe United States submits that an examination of the CCFRS industry could not have encompassed\nonly minimills, when the industry contained both minimill producers and the much larger integrated\nproducers. It adds that the obligation to evaluate the industry as a whole, however, does not require\nan investigating authority to obtain information concerning every producer, or on 100% of industry\nproduction. The Panel in US – Lamb observed that the \"as a whole\" and \"major proportion\" clauses in\nArticle 4.1(c) were grammatically linked and relate \"to the representativeness of the data pertaining to\nthe condition of the industry\". The United States submits that the USITC collected and used the most\ncomprehensive data possible concerning each of the ten domestic industries on which it made an\naffirmative finding of serious injury or threat of serious injury. The USITC collected questionnaire\ndata from United States producers representing a clear majority of production in each of these\nindustries.\n1787 In this regard, the United States notes that based on the data concerning CCFRS\nminimill production1788 and the data concerning total CCFRS production 1789, minimills account for\nless than 15% of total United States CCFRS production in 2000.1790\n7.669 The United States argues in this regard that minimills were part of the domestic CCFRS\nindustry, and the USITC found both that the CCFRS industry as a whole was seriously injured and\nthat minimills, as well as integrated producers, had been adversely affected by the increased imports.\nThe USITC acknowledged that minimills had cost advantages over integrated producers, and had\nsome effect on price levels. It concluded, however, that the imports, not the minimills, led to the price\npressure that typically drove prices downwards.\n1791 The United States argues that numerous\n\n1783 New Zealand's first written submission, para. 4.106.\n1784 New Zealand's first written submission, para. 4.107.\n1785 New Zealand's written reply to Panel question No. 70 at the first substantive meeting.\n1786 United States' first written submission, para. 351.\n1787 United States' written reply to Panel question No. 70 at the first substantive meeting.\n1788 United States' first written submission, footnote 668.\n1789 US Exhibit-33.\n1790 United States' written reply to Panel question No. 76(a) at the first substantive meeting.\n1791 United States' written reply to Panel question No. 76(c) at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmanifestations of serious injury to the CCFRS industry were applicable to minimill producers.\nMinimill producers' prices went down and their profitability declined during the period of\ninvestigation.\n1792\n7.670 The United States adds that even if a sectoral analysis of the CCFRS was required, the USITC\nengaged in such an analysis as well. In particular, the United States argues that the USITC's analysis\nwas conducted on the basis of the pertinent product categories (i.e, slab, plate, hot-rolled, cold-rolled,\nand galvanized) on which the producers and importers were requested to provide data. According to\nthe United States, the USITC found that its conclusions concerning declines in capacity utilization and\nfinancial performance were applicable for each product category as well as for the industry as a\nwhole.\n1793 The United States also submits that, in any event, the impact of minimills was pertinent, if\nat all, to the issue of causation rather than to th e issue of whether the entire CCFRS industry in which\nminimills were responsible for a much smaller share of production than were integrated producers\nwas incurring serious injury.1794\n7.671 In counter-response, New Zealand observes that the USITC focuses in an unbalanced and\nunobjective way on the poorly performing sectors of the industry while seemingly unaware that the\nindustry was already making the transition to efficiency and long-term viability, as evidenced by the\nincreasingly strong performance of minimill producers. 1795 This fact receives no mention in the\nUSITC serious injury analysis. According to New Zealand, the United States mischaracterizes this\nobservation as a claim by New Zealand that the US ITC was required to undertake separate sectoral\ninjury evaluations, whereas the Agreement on Safeguards requires an analysis of the whole industry.\nIn fact, New Zealand is saying the opposite – that the USITC needed to consider adequately the\ncondition of all sectors, not just the sector that was failin g, in order to carry out the industry-wide\nanalysis which the United States accepts was required.1796\n7.672 In conclusion, New Zealand submits that the Un ited States has failed to rebut New Zealand's\ncase that the USITC selectively and disproportionately accorded weight to some factors and not\nothers. Nor has the United States been able to demonstrate that adequate consideration was given to\nthe condition of all sectors of the domestic industry or that the high threshold of \"serious injury\" has\nbeen met. Accordingly, the United States has fail ed to demonstrate the existence of \"serious injury\"\nbeing suffered by the domestic industry as required by Articles 2.1 and 4.2(a) of the Agreement on\nSafeguards. It also follows that the United States has failed to provide a reasoned and adequate\nexplanation for its determination of \"serious injury\" as required by Article 3.1 of the Agreement on\nSafeguards.\n1797\n7.673 The United States submits that because a serious injury finding must focus on an entire\nindustry, an authority is not obliged to conduct an analysis that focuses only on one segment of an\nindustry in isolation. For this reason, the United States submits that the Panel must reject New\nZealand's claim that the USITC gave insufficient attention to minimill producers in determining that\nthe CCFRS industry was seriously injured.\n1798 The United States reiterates that minimill producers\n\n1792 United States' written reply to Panel question No. 76(b) at the first substantive meeting.\n1793 United States' first written submission, para. 352.\n1794 United States' first written submission, para. 353.\n1795 New Zealand first written submission, paras. 2.27-2.32. The United States notes that minimills\naccounted for fully one-third of total CCFRS productio n in the United States; United States' first written\nsubmission, para. 353, footnote 381.\n1796 New Zealand's second written submission, para. 3.81.\n1797 New Zealand's second written submission, para. 3.82.\n1798 New Zealand's written reply to Panel question No. 70 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\naccounted for less than 15% of overall United States CCFRS production in 2000. 1799 T h e U S I T C\nacted appropriately, and consistently with United States obligations under the Agreement, by basing\nits serious injury finding for CCFRS on data relating to the entire industry, rather than to only the 15%\nof the industry which was represented by minimill production.\n1800\n(b) Rebar\n7.674 China argues that given that most of the injury factors were positive in the case of rebar, the\nUSITC had the obligation to explain how the negative factors outweighed the positive factors and\nwhy the overall situation of the industry was nevertheless severely impaired. China asserts that it was\nnot enough to merely state that positive factors reflected strong increases in United States apparent\nconsumption.\n1801\n7.675 In response, the United States argues that the USITC did exactly what China suggests it\nshould have done. In particular, the United Stat es contends that the USITC explained how the\nnegative factors outweighed the positive factors and why the overall situation of the industry was\nnevertheless considered to have been severely impaired. The USITC acknowledged that \"several\nindicators pertaining to the rebar industry, such as capacity, production, and employment, increased\nduring the period examined\". It found, however, th at these increases reflected strong increases in\nUnited States apparent consumption.\n1802 The United States asserts, however, that United States\nproducers' shipments did not increase commensura tely with apparent consumption notwithstanding\nincreases in the domestic industry's productive capacity. The United States argues that, consequently,\nas the USITC emphasized, the domestic industry lost substantial market share during the period of\ninvestigation. In the United States' view, relying on this consideration was clearly consistent with\nArticle 4.2(a), which specifically references \"the rate and amount of the increase in imports of the\nproducts concerned in absolute and relative terms\" as a pertinent factor in evaluating serious\ninjury.\n1803\n7.676 China disagrees that the USITC has provided sufficient explanation as how the negative\nfactors outweighed the positive factors. China reiterates that it was not admissible to disregard all the\npositive factors by simply stating that they reflected strong increases in United States apparent\nconsumption. According to China, the United Stat es' reply does not provide any further justification,\nbut rather only restates what already was to be found in the USITC Report.1804\n(c) Welded pipe\n7.677 Switzerland argues that the trends of several indicators referred to by the USITC do not testify\nto a threat of injury that was serious enough to fulfil the criteria of the Agreement on Safeguards.\nSwitzerland notes in this regard that the USITC mentions that \"the years 1996 to 1998 were a period\nof generally good health for the domestic industry producing welded tubular products\". Switzerland\nargues that, moreover, some of the indicators examined by the USITC were positive: the number of\nemployees as well as the hourly wages were higher in 2000 than in 1996; the same remarks can be\nmade in relation to United States shipments quantities, operative income and capital expenditures.\n1805\nSwitzerland also notes that the USITC mentioned that two United States firms closed down during the\n\n1799 United States', response to Panel question No. 76 at the first substantive meeting.\n1800 United States' second written submission, para. 114.\n1801 China's first written submission, para. 335.\n1802 United States' first written submission, para. 370.\n1803 United States' first written submission, para. 371.\n1804 China's second written submission, para. 150.\n1805 Switzerland's first written submission, para. 272.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexamined period. Switzerland argues, however, that the USITC failed to show why this fact was\nrelevant, since the importance of these bankruptcies was not clearly explained in the USITC Report.\nMoreover, according to Switzerland, bankruptcies of non-competitive firms were, in principle,\nconsidered to be normal phenomena in a market-based economy and must not necessarily be the\nconsequence of serious injury that has been suffered by a certain industry. 1806 With regard to the\nrelevance of bankruptcies, see arguments made by the United States in paragraph 7.681.\n7.678 In response to Switzerland's criticism of the USITC's determination on the basis that certain\nfactors, such as employment and United States shipment quantity, were higher in 2000 than in 1996,\nand that the operating income of the industry producing welded pipe products remained positive, the\nUnited States contends that this overlooks the fact that the USITC's determination was based on threat\nof serious injury rather than serious injury. The USITC acknowledged that the industry's condition\nwas not at the level of serious injury.\n1807 However, in the United States' view, the USITC found that\nthe industry's condition would imminently deteriorate to the level of serious injury. In so doing, the\nUSITC put particular emphasis on declines since 1998 in many factors, particularly production,\nshipments, capacity utilization, financial performa nce, and employment. The United States submits\nthat this is fully consistent with the statement of the Appellate Body that, for purposes of the\nAgreement on Safeguards, \"data relating to the most recent past will provide competent authorities\nwith an essential, and, usually, the most reliable, basis for a determination of a threat of serious\ninjury\".\n1808 The United States notes that the Appellate Body has also instructed that \"competent\nauthorities cannot rely exclusively on data from the most recent past, but must assess that data in the\ncontext of the data for the entire investigative period\". The United States contends that, consistent\nwith this instruction, the USITC did not rely solely on the fact that important indicators of industry\nperformance had declined during the latter portion of the period of investigation. Instead, it\nemphasized that, in 2000, several of these indicators were at their lowest full-year level during the\nperiod of investigation (i.e., capacity utilization, market share, operating income), or were only\nmarginally higher than the period lows (i.e., production, employment). The USITC thus fully\nexplained why the declines it observed during the latter portions of the period of investigation\ndemonstrated an imminent threat of serious injury.\n1809\n3. Obligation to evaluate all relevant factors\n7.679 New Zealand argues that in view of the disproportionate weight that the USITC accorded to\nsome factors in making its serious injury determination and its failure to accord appropriate weight to\nothers, the USITC failed to evaluate all relevant factors.\n1810\n7.680 The United States asserts that the USITC evaluated each of the factors specified in\nArticle 4.2(a).1811 The United States argues that while the factors expressly articulated in\nArticle 4.2(a) are \"of an objective and quantifiable nature\", the factors are not all quantifiable in the\nsame manner. For example, imports, sales, and production will be measured in units of output,\nemployment will be measured in numbers of workers, profits and losses will be measured in units of\ncurrency, and capacity utilization and productivity are ratios.\n1812 The United States argues that,\nconsequently, when conducting its analysis under Article 4.2(a), an investigating authority cannot\n\n1806 Switzerland's first written submission, para. 273.\n1807 United States' first written submission, para. 383.\n1808 United States' first written submission, para. 384.\n1809 United States' first written submission, para. 385.\n1810 New Zealand's first written submission, para. 4.108.\n1811 United States' first written submission, para. 322.\n1812 United States' first written submission, para. 323.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nderive a single injury \"measure\" and that there is no requirement that it do so. According to the\nUnited States, the evaluation must be based on the factors as a whole. Moreover, the authority may\nfind serious injury even if not every single factor it examines concerning the industry's condition is\ndeclining. The United States contends that, inst ead, \"it is the totality of the trends, and their\ninteraction, which must be taken into account in a serious injury determination\" and the \"overall\npicture\" of industry factors must demonstrate significant overall impairment.\n1813\n7.681 The United States argues that in conducting its analysis of serious injury an authority may\nexamine factors not expressly referenced in Article 4.2(a). More particularly, the United States argues\nthat an authority can and should examine additiona l \"factors of an objective and quantifiable nature\nhaving a bearing on the industry\" that it has concluded are relevant. For several industries, the USITC\nevaluated additional factors it deemed to be relevant, including bankruptcies that had been declared by\nproducers. The United States argues that while several complainants have questioned the relevance of\nthis factor, its significance is clear. According to the United States, firms that declare bankruptcy but\nremain in operation frequently restructure their operations as part of the bankruptcy process.\nConsequently, bankruptcies can indicate declines in productive facilities and employment levels.\nAdditionally, the United States argues that when a corporation lacks sufficient liquid assets to pay its\ncreditors, and consequently must seek protection, restructuring, or even liquidation from the United\nStates bankruptcy courts, this situation has obvious implications for the competitive viability of that\nproducer. According to the United States, a corporation will generally not make a bankruptcy filing\nunless its operations have been significantly impaired. Similarly, an entire industry's viability may be\nin question when several producers within that industry declare bankruptcy.\n1814 The United States\nalso questions the contention by China that the USITC's finding that hot-rolled bar producers had\ngone bankrupt \"is not supported by all the relevant and sufficient data\". It points in this regard to the\nfact that bankruptcies of United States firms are a matter of public record. It also notes that the public\nUSITC Report identified four hot-rolled bar producers that declared bankruptcy and indicated that\nthree of the four had shut down all or a portion of their production operations in 2001. The United\nStates asserts that the accuracy of this data cannot be challenged.\n1815\n7.682 China refers to the Appellate Body decision in US – Lamb. China states that, in that case, the\nAppellate Body stated that:\n\"[…] Under Article 4.2(a), competent authorities must, as a formal matter, evaluate\n'all relevant factors'. However, that evaluation is not simply a matter of form, and the\nlist of relevant factors to be evaluated is not a mere 'check-list'. Under Article 4.2(a),\ncompetent authorities must conduct a substantive evaluation of 'the 'bearing ', or the\n 'influence ' or 'effect ' \" or \"impact\" that the relevant factors have on the \"situation of\n[the] domestic industry\". (Emphasis added)\".1816\n7.683 China asserts that what the United States seems to be saying is that a competent authority has\nno obligation to make a separate evaluation of injury for all the relevant factors. According to China,\nthis is not true. Moreover, China does not agree with the United States that this evaluation \"must be\nbased on the factors as a whole\". It is true that the Appellate Body stated that competent authorities\nmust reach a determination in light of the evidence as a whole. 1817 However, according to China, this\nrequirement relates only to the final determination of injury and does not prevent the competent\n\n1813 United States' first written submission, para. 323.\n1814 United States' first written submission, para. 325.\n1815 United States' first written submission, para. 359.\n1816 China's second written submission, para. 133.\n1817 Appellate Body report, US – Lamb, para.144.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nauthority from conducting, prior to this final determ ination, an evaluation of injury from all relevant\nfactors.1818\n7.684 In support, the European Communities notes that in Argentina – Footwear (EC) the Appellate\nBody stated that:\n\"Article 4.2(a) of the Agreement on Safeguards requires a demonstration that the\ncompetent authorities evaluated, at a minimum, each of the factors listed in\nArticle 4.2(a) as well as all other factors that are relevant to the situation of the\nindustry concerned.\"1819\n7.685 The European Communities submits that this makes it clear that there must be an evaluation\nof each factor listed in Article 4.2(a). The European Communities submits that the competent\nauthority is then under an obligation to determine whether, on the basis of an evaluation of these and\nany other relevant factors, the domestic industry has suffered a \"significant overall impairment\" in the\nsense of Article 4.1(a). The European Communities refers to the following excerpt from the\nAppellate Body's report in Argentina – Footwear (EC):\n\"In our view it is only when the overall position of the domestic industry is evaluated,\nin light of all the relevant factors having a bearing on a situation of that industry, that\nit can be determined whether there is 'a significant overall impairment' in the position\nof that industry. Although Article 4.2(a) technically requires that certain listed\nfactors must be evaluated, and that all other relevant factors must be evaluated, that\nprovision does not specify what such an evaluation must demonstrate. [….] [I]n\naddition to a technical examination of whether the competent authorities in a\nparticular case have evaluated all the listed factors and any other relevant factors, we\nbelieve that it is essential for a panel to take the definition of 'serious injury' in\nArticle 4.1(a) of the Agreement on Safeguards into account in its review of any\ndetermination of 'serious injury'.\"\n1820 1821\n7.686 New Zealand also refers to the Appellate Body decision in US – Lamb where, New Zealand\nsays, the Appellate Body repeatedly emphasized that a competent authority must evaluate, in\nassessing serious injury, \" all relevant factors \" of an \"objective and quantifiable nature\" and their\n\"bearing\" on the domestic industry. This requires a separate evaluation of each factor.1822\n7.687 New Zealand also argues that the Panel's duty is to review whether the competent authority\nhas, \"as a formal matter\", evaluated all relevant factors, and second whether it has, \"as a substantive\nmatter, provided a reasoned and adequate explanation of how the facts support their determinations\".\nThe Appellate Body in US – Lamb found that the USITC failed this second requirement, though\nemphasized it was not making a factual determination as to whether or not there was a threat of\nserious injury. New Zealand submits that the present case is very similar. The USITC had as a\nformal matter identified a series of positive and negative factors but had as a substantive matter failed\nto provide a reasoned and adequate explanation of how the facts supported its serious injury\ndeterminations. For example it did not examine and weigh these factors together. Hence, whether or\n\n1818 China's second written submission, para. 134.\n1819 Appellate Body report, Argentina – Footwear (EC), para. 136.\n1820 Appellate Body report, Argentina – Footwear (EC), para. 139.\n1821 European Communities' written reply to Panel question No. 23 at the second substantive meeting.\n1822 New Zealand's written reply to Panel question No. 23 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnot serious injury actually existed, the USITC – to paraphrase the finding in US – Lamb – \"acted\ninconsistently with Article 4.2(a) and Article 2.1 of the Agreement on Safeguards\".1823\n7.688 China submits that the United States seems to consider that the competent authority\nconducting an investigation should have discretion in determining what other factors are relevant for\nits injury determination and that its evaluation should be limited to these other factors alone. 1824\nChina believes that such an interpretation does not meet the requirements of the Agreement on\nSafeguards, as clarified by the Appellate Body. The United States refers to the Appellate Body report\nin US – Wheat Gluten to assert that: \"An authority can and should examine additional 'factors of an\nobjective and quantifiable nature having a bearing on the industry' that it has concluded are relevant\".\nAccording to China, such an interpretation would restrict the obligations of the competent authority\nfar beyond the requirements of the Agreement on Safeguards as clarified by the Appellate Body.\n1825\nIn China's view, rather, it is clear that the first obli gation of the competent authority is to evaluate all\nthe relevant factors and that, therefore, the competent authorities \"must undertake additional\ninvestigative steps, when the circumstances so require, in order to fulfil their obligation to evaluate all\nrelevant factors\".1826\n7.689 In this regard, and as far as the bankruptcy factor is concerned, China asserts that the United\nStates may not provide in its written submission an explanation regarding the relevance of this factor.\nRather, the USITC should have provided, in its report, an adequate and reasoned explanation as why it\nwas relevant to analyse this factor in its injury determination and to what extent it was allowed to\ndemonstrate the existence of serious injury. According to China, the fact that the United States needs\nto provide such additional information in its writ ten submission is clear evidence that the USITC\nfailed to do so.1827\n4. Obligation to provide reasoned and adequate explanations\n7.690 China argues that, with respect to the USITC's interpretation of the investigation data on\ninjury for all ten products that are covered by the safeguard measures, the USITC failed to provide\nreasoned and adequate explanations.1828 Similarly, the European Communities argues that the United\nStates is in breach of its obligations under Articles 2.1 and 4.2 of the Agreement on Safeguards\nbecause it failed to provide reasoned and adequate explanations of its determination that serious\ninjury, or threat thereof existed. The European Communities also asserts that it is also in violation of\nArticles 3.1 and 4.2(c).1829\n7.691 In response, the United States contends that the USITC explained in some detail why there\nwas a significant overall impairment of the state of each industry that it concluded was seriously\ninjured. According to the United States, these industries uniformly reported poor financial\nperformance. Numerous firms, and often the entire industry, showed unprofitable operations. In\nseveral industries, producers had gone bankrupt. For most of the pertinent industries, there were also\n\n1823 New Zealand's written reply to Panel question No. 23 at the second substantive meeting, citing\nAppellate Body Report, US – Lamb, para. 161.\n1824 United States' first written submission, para. 325, referred to in China's second written submission,\npara. 135.\n1825 United States' first written submission, para. 325, referred to in China's second written submission,\npara. 136.\n1826 Appellate Body report, US – Wheat Gluten , para. 55, cited in China's second written submission,\npara. 137.\n1827 China's second written submission, para. 138.\n1828 China's first written submission, para. 308.\n1829 European Communities' first written submission, para. 429.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndeclines in capacity and production, with closures in productive facilities. Many also had declines in\ncapacity utilization and employment.1830 The United States also argues that for both welded pipe and\nstainless steel wire (the two industries on which it found threat of serious injury) the USITC provided\na detailed, fact-based explanation why a significant overall impairment in the state of the industry was\nclearly imminent.1831\n7.692 China disagrees that the USITC has sufficiently explained, in a reasoned and adequate\nmanner, \"why there was a significant overall impairment of the state of each industry that it concluded\nwas seriously injured\".1832\n(a) Alternative explanations of data\n7.693 On the basis of the Appellate Body decision in US – Lamb , China argues that the Panel\nshould determine whether the explanations given in the USITC Report fully addressed the nature and,\nespecially, the complexities of the data, and responded to the interpretations of that data by China. In\nother words, if the explanations given by the USITC do not rebut China's interpretation, or if\ncontradictions between the facts and the USITC's conclusions are not fully addressed, China asserts\nthat the Panel must find that the explanations are not reasoned and adequate.\n1833\n7.694 In response, the United States observes that China did not provide any interpretations of data\nto the USITC in its investigation and that Article 3.1 merely directs authorities to provide \"findings\nand reasoned conclusions reached on all pertinent issues of fact and law\"; it does not further require\nauthorities to respond directly to all arguments raised by parties to the investigation. The United\nStates indicates that the USITC report nevertheless contains sufficient reasoning to respond to the\ncriticisms of China.\n1834\n(i) CCFRS\n7.695 China argues that the determination that the domestic industry of CCFRS products was\nsuffering serious injury did not fulfil the requirements of Articles 2.1 and 4.2 of the Agreement on\nSafeguards.\n1835\n7.696 China refers 1836 to the statement contained in the USITC Report that \"In view of the\nsignificant idling of productive facilities, the sharp deterioration in the financial performance of the\ndomestic industry, and significant unemployment or underemployment within the domestic industry,\nwe find that the domestic industry producing CCFRS is seriously injured\". With regard to\nemployment, China argues that, contrary to the conclusion reached by the USITC, although\nemployment had decreased, this did not necessarily indicate the industry had been injured. Indeed,\nproductivity had increased by 13.2% between 1996 and 2000 and consumption had only increased by\n7.8%. China further argues that since the industry is capital-intensive rather than labour-intensive, it\nmay be that unemployment was mainly due to higher productivity.\n1837\n\n1830 United States' first written submission, para. 335.\n1831 United States' first written submission, para. 337.\n1832 China's second written submission, para. 139.\n1833 China's first written submission, para. 309.\n1834 United States' first written submission, para. 363.\n1835 China's first written submission, para. 317.\n1836 China's first written submission, para. 312.\n1837 China's first written submission, para. 313.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.697 China notes that the USITC also mentioned a decline in capacity utilization with respect to\nCCFRS in its report. China argues that the fact that the increase in productivity was well in excess of\ndomestic demand must also have had some impact on capacity utilization. China argues that,\ntherefore, although capacity utilization declined, this does not mean that the industry was in a difficult\nposition, especially given the fact that the domestic industry gained a larger market share of the\nUnited States market.\n1838\n7.698 China also notes that the USITC made reference to the industry's financial problems in its\nreport. However, China argues that at no point did the USITC explain how the importance of this\nfactor outweighed the other positive factors leading to the conclusion that there is an overall\nimpairment of the state of the industry.\n1839\n7.699 China argues that the USITC did not provide a reasoned and adequate explanation for its\ndetermination given that the USITC Report did not address the issues referred to by China nor did it\nexplain why the industry had been seriously injured, despite the existence of the positive factors that\nhad been raised by China.1840\n7.700 In response, the United States asserts that the USITC acknowledged that not every single\nfactor it examined, pertinent to the industry's condition, was in decline. The United States argues that\nthere need not be a decline in each Article 4.2(a) factor in order for there to be a finding of serious\ninjury. The United States notes that the USITC specifically found, however, that improvements in\ncertain factors \"do not offset the significant declines exhibited by other indicia of the industry's\ncondition with respect to the issue of whether the indust ry is suffering serious injury\". In this regard,\nthe United States makes reference to declines, which it claims have not been disputed by any party,\nincluding significant idling of productive capacity, sharp deterioration in financial performance and\nsignificant unemployment.\n1841\n7.701 The United States also asserts that the USITC specifically discussed and acknowledged\nincreases in capacity, production and productivity 1842 and examined the implications of the increases.\nThe USITC, it asserts, fulfilled its obligation under Articles 2.1 and 4.2(a) by concluding that these\nisolated increases did not detract from its finding of serious injury in light of all the pertinent factors\nhaving a bearing on the state of the industry.1843\n7.702 In particular, the United States argues that the USITC Report provided several reasons why\nincreases in production and capacity were consistent with a finding of serious injury. First, according\nto the United States, the USITC explained that increases from 1996 to 2000 occurred at a time when\napparent domestic consumption of CCFRS was increasing. The United States asserts that one would\nnormally expect production and capacity to increase in a growing market. However, according to the\nUnited States, the increase in production from 1996 to 2000 was only incrementally greater than the\nincrease in United States apparent consumption of CCFRS during the same period.\n1844 Second, the\nUSITC emphasized that the increased capacity was not being utilized. Instead, capacity utilization for\nthe domestic industry had declined steadily from 1996 to 2000 and fell sharply between interim 2000\nand interim 2001. The United States asserts that the USITC emphasized that declines in capacity\n\n1838 China's first written submission, para. 314.\n1839 China's first written submission, para. 315.\n1840 China's first written submission, para. 316.\n1841 United States' first written submission, para. 338.\n1842 United States' first written submission, paras. 339 and 349.\n1843 United States' first written submission, para. 349.\n1844 United States' first written submission, paras. 340-341.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nutilization were apparent in each of the particular product categories within the industry, as well as in\nthe industry as a whole. 1845 In any event, the United States argues that Article 4.2(a) does not\nexpressly mention changes in capacity as a factor that an investigating authority must consider in\nevaluating whether there is serious injury. Instead, it references changes in \"capacity utilization\". 1846\nThird, according to the United States, the overall picture in the industry was not one of steady\nexpansion. The United States asserts that, as had been found by the USITC, ten United States\nproducers of CCFRS declared bankruptcy during the period of its investigation and several shut down\nand ceased production altogether.\n1847 The United States argues that, in light of the foregoing, the\nUSITC thoroughly explained why the positive trends with respect to capacity and production did not\noutweigh other negative trends concerning idling productive resources in the industry.1848\n7.703 According to the United States, the USITC also acknowledged that productivity in the\nCCFRS industry increased from 1996 to 2000. The United States asserts that the USITC considered\nthe effect of this increase on employment levels in the industry and concluded that the increase in\nproductivity \"may have offset to some degree the declines in employment\". 1849 The United States\nargues that, therefore, it is clear that the USITC considered the increase in productivity but concluded\nthat it did not outweigh or entirely explain the declines in employment. According to the United\nStates, the annual trends in productivity did not correlate with the trends in employment. Productivity\nfor the CCFRS industry increased every full year during the period of investigation. This included\nyears in which employment was relatively stable as well as those in which it declined.1850 The United\nStates argues that, moreover, increased productivity could only explain declining employment at a\nparticular facility where production continued on an ongoing basis. It could not explain declines in\nemployment attributable to the shutting down of oper ations at production facilities. According to the\nUnited States, the decline in employment for the CCFRS industry occurred at a time when several\nproductive facilities closed down entirely. Thus, there were losses of employment at facilities where\nproductivity essentially declined to zero.\n1851 The United States also argues that increases in\nproductivity, which would generally be expected to lead to improved financial results, did not track\nproductivity given that the financial results of the CCFRS industry declined sharply after 1997, and\nthe industry recorded overall operating losses in 1999, 2000, and interim 2001.1852\n7.704 Despite explanations proffered by the United States, China submits that it still considers that\nthe USITC did not provide an adequate and reasoned explanation for its determination. Indeed, China\ndoes not consider that the USITC has furnished sufficient explanation as to how the negative factors\noutweighed the other positive factors. In China's view, a mere statement that \"the improvements in\nthese indicia do not offset the significant declines exhibited by other indicia\" is an insufficient\nexplanation.\n1853 Furthermore, China notes that the explanations given by the United States, which are\nto a large extent a re-statement of the USITC Report as far as capacity, production and productivity\nare concerned, are largely based on end-points comparison between 1996 and 2000. According to\nChina, reliance on such end-points comparison is insufficient to rebut the claim by China that the\nUSITC did not properly examine these three factors.\n1854\n\n1845 United States' first written submission, para. 342.\n1846 United States' first written submission, para. 344.\n1847 United States' first written submission, para. 343.\n1848 United States' first written submission, para. 344.\n1849 United States' first written submission, para. 345.\n1850 United States' first written submission, para. 346.\n1851 United States' first written submission, para. 347.\n1852 United States' first written submission, para. 348.\n1853 China's second written submission, para. 141.\n1854 China's second written submission, para. 142.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.705 China argues that the USITC did not provide a reasoned and adequate explanation for its\ndetermination given that the USITC Report did not address the issues referred to by China nor did it\nexplain why the industry had been seriously injured, despite the existence of positive factors that had\nbeen raised by China.\n1855\n(ii) Hot-rolled bar\n7.706 China argues that the determination that the domestic industry of hot-rolled bar was suffering\nserious injury did not fulfil the requirements of Articles 2.1 and 4.2 of the Agreement on\nSafeguards.1856 China believes that the USITC did not fully address the nature and the complexity of\nthe data. China argues, that, moreover, the USITC Report does not contain a response to the\ninterpretations of the data that have been put forwar d by China. On this basis, China argues that the\nUSITC failed to provide a reasoned and adequate explanation for its determination.\n1857\n7.707 In response, the United States argues that there is no basis for China's assertion that the\nUSITC did not fully address the nature and complexity of the data. The United States submits that, on\nthe contrary, the USITC's report fully explained both the nature of the data the USITC used in\nanalysing serious injury to the hot-rolled bar industry and why that data supported its conclusion of\nserious injury. That conclusion satisfies the obligations of Articles 2.1 and 4.2(a) of the Agreement\non Safeguards.\n1858\n7.708 More particularly, the United States argues that in determining that the hot-rolled bar industry\nwas seriously injured, the USITC cited a wide variety of data indicating that the industry was in a\nsignificantly impaired condition. It pointed to declining production, shipments, and capacity that had\noccurred in the industry since 1998; three United States producers declaring bankruptcy and shutting\ndown production in early 2001; idling productive facilities; the sharply declining financial\nperformance of the industry since 1998 and the overall operating losses in 2000 and interim 2001;\ndeclining employment during the latter portion of the period of investigation and capital expenditures\nand research and development expenditures declining throughout the period of investigation.\n1859 The\nUnited States asserts that China, ignoring these pe rvasive declines and the reasoning the USITC used\nto support its serious injury conclusion, instead chooses to direct a number of scattered criticisms\nconcerning the USITC's analysis. The United States argues that China's criticisms, in addition to\nbeing factually incorrect, do not demonstrate that the United States failed to comply with its\nobligations under Articles 2.1 and 4.2(a).1860\n7.709 China refers to the statement contained in the USITC Report that: \"In light of the poor\nfinancial performance of the hot-rolled bar industry, the declines in output and shipments, and the\nnumerous bankruptcies and plant closures that occurred during the latter portion of the period\nexamined, with the consequent unemployment due to these closures, we conclude that the industry is\nseriously injured\". 1861 China argues that the USITC's statement as far as it concerns \"declines in\noutput and shipments\" is not supported by the fact s of the investigation. Rather, in China's view,\nproduction and shipments increased between 1996 and 2000. China acknowledges that both factors\ndeclined towards the end of the period of investigation. However, China argues that the USITC failed\n\n1855 China's first written submission, para. 316.\n1856 China's first written submission, para. 326.\n1857 China's first written submission, para. 325.\n1858 United States' first written submission, para. 363.\n1859 United States' first written submission, para. 354.\n1860 United States' first written submission, para. 355.\n1861 China's first written submission, para. 318.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto explain why these declines indicated serious injury and were not just a normal reaction to the sharp\nincrease in these factors which had occurred at the beginning of the period of investigation. China\nargues that, in any case, the USITC failed to justify why only the last years of the period of\ninvestigation were considered relevant in examining these factors. In addition, China asserts that the\nUSITC failed in its argument that these factors declined between interims 2000 and 2001 because the\nindustry was injured rather than as a result of a decline in consumption.\n1862\n7.710 In response, the United States argues that the fact that production and shipments for the hot-\nrolled bar industry were each higher in 2000 than they were in 1996 cannot be dispositive. According\nto the United States, Article 4.2 does not permit an investigating authority to rely exclusively on an\nendpoint-to-endpoint analysis in assessing serious injury.\n1863 The United States asserts that the\nUSITC did not stop with an endpoint-to-endpoint analysis. It also examined trends within the period\nof investigation. The United States contends that this examination demonstrated that production,\nshipments, sales quantities and revenues pervasively declined over the latter portion of the period of\ninvestigation. Moreover, shipments and sales quantities declined, and production increased only\nminimally from 1999 to 2000, when United States apparent consumption of hot-rolled bar increased.\nConsequently, in the United States' view, this was not a situation where the rate of increase merely\nslowed during the period of investigation, as China a ppears to posit. According to the United States,\nthe USITC's thorough examination and explanation of trends within its period of investigation further\nindicates that the declines in output-related indicators were not merely functions of changes in United\nStates apparent consumption.\n1864 The United States also states that declines in production, shipments,\nand sales during the latter portion of the period of investigation were significant because, first, they\nwere based on the most recent data available and clearly probative of current impairment in the\nposition of the domestic industry and. secondly, they were coincident with other negative trends upon\nwhich the USITC relied – namely, the industry's deteriorating operating performance.1865\n7.711 China disagrees with the statement by the United States that China tried to rely on an end-\npoints comparison, as far as the analysis of production and shipments is concerned. In its submission,\nChina stated that: \"Production and shipments rather increased between 1996 and 2000\". Rather than\nrelying on a comparison between end-points, China emphasized that the general trend over the whole\ninvestigation period was somewhat upward, even if slight decreases could be noticed.1866\n7.712 China also states that special attention needs to be drawn to the \"numerous bankruptcies and\nplant closures\". Contrary to the USITC's view, China does not believe that this criterion should be\nused as grounds for a determination of serious injury since it was not supported by all the relevant and\nsufficient data.\n1867 In this respect, China asserts that all that was known about the hot-rolled bar\nindustry was that there were 32 domestic firms that responded to the questionnaire and which\nrepresented 70 to 78% of domestic production. No information had been provided on the total\nnumber of firms or the size of the different firms.1868 China also notes that the USITC stated that the 3\nfirms that declared bankruptcy in 2001 did not respond to the questionnaire.1869 China asserts that the\nonly information available was that these three firms accounted for approximately 1.5 million tons of\ncapacity. However, according to China, there wa s no information concerning the time during which\n\n1862 China's first written submission, para. 319.\n1863 United States' first written submission, para. 356.\n1864 United States' first written submission, para. 357.\n1865 United States' first written submission, para. 358.\n1866 China's second written submission, para. 143.\n1867 China's first written submission, para. 320.\n1868 China's first written submission, para. 321.\n1869 China's first written submission, para. 320.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsuch capacity was achieved, nor concerning productivity or any other criteria. Furthermore, there was\nno information concerning the health of these firms during and before the period of investigation.\nChina argues, in addition, that there was no information as to why this factor should be considered.\n1870\n7.713 With respect to the reference to bankruptcies by the USITC in making its serious injury\ndetermination, the United States argues that in conducting its analysis of serious injury an authority\nmay examine factors not expressly referenced in Article 4.2(a). More particularly, the United States\nargues that an authority can and should examine ad ditional \"factors of an objective and quantifiable\nnature having a bearing on the industry\" that it has concluded are relevant. For several industries, the\nUSITC evaluated additional factors it deemed to be relevant, including bankruptcies that had been\ndeclared by producers. The United States argues that while several complainants have questioned the\nrelevance of this factor, its significance is clear. According to the United States, firms that declare\nbankruptcy but remain in operation frequently restructure their operations as part of the bankruptcy\nprocess. Consequently, bankruptcies can indicate declines in productive facilities and employment\nlevels. Additionally, the United States argues that lacking sufficient liquid assets to pay its creditors,\nand consequently having to seek protection, restructuring, or even liquidation from the United States\nbankruptcy courts, has obvious implications for the competitive viability of a producer. According to\nthe United States, a corporation will generally not make a bankruptcy filing unless its operations have\nbeen significantly impaired. Similarly, an entire industry's viability may be in question when several\nproducers within that industry declare bankruptcy.\n1871 The United States also questions the contention\nby China that the USITC's finding that hot-rolled bar producers had gone bankrupt \"is not supported\nby all the relevant and sufficient data\". It points, in this regard, to the fact that bankruptcies of United\nStates firms are a matter of public record. It also notes that the public USITC Report identified four\nhot-rolled bar producers that declared bankruptcy and indicated that three of the four had shut down a\nportion or all of their production operations in 2001. The United States asserts that the accuracy of\nthis data cannot be challenged.\n1872\n7.714 As far as bankruptcies are concerned, China does not challenge the accuracy of the data, but\nrather would like to underline that, due to the lack of response to the questionnaire, there is\ninsufficient explanation as to how this criterion could be used in the assessment of whether the\nindustry has suffered a serious injury and whether this injury can be attributed to increased\nimports.1873 China reiterates that if some producers did not respond to the questionnaires, the\ninformation provided to the competent authority may not reflect completely, and may not be truly\nrepresentative of the industry's situation. The authority must therefore be particularly cautious when\nusing this information. In this case, the need for a reasoned and adequate explanation is of particular\nimportance.\n1874\n7.715 China notes that, according to the USITC, the data from the questionnaires showed a decline\nin employment. However, China is of the opinion that no such decline took place and that, rather,\nchanges in employment were a function of cycles during the period of investigation.\n1875 China notes,\nin this regard, that while the USITC stated that \"the lack of questionnaire responses from some\nproducers that have shut down facilities means that the questionnaire data do not fully reflect declines\nin employment that occurred at the conclusion of the period examined\" it went on to state that\nfollowing the closing down of th e three firms, which have not answered the questionnaire, 1,000\n\n1870 China's first written submission, para. 321.\n1871 United States' first written submission, para. 325.\n1872 United States' first written submission, para. 359.\n1873 China's second written submission, para. 144.\n1874 China's second written submission, para. 145.\n1875 China's first written submission, para. 322.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nemployees have lost their jobs.1876 China argues that if the answers to the questionnaires did not fully\nreflect the situation of the industry as regards unemployment, such information was not representative\nof the industry and the USITC's conclusion in respect of this criterion could not have been reasoned\nand adequate.\n1877\n7.716 China also argues that the treatment of the employment factor by the USITC was not\nobjective. In this regard, China points out that the USITC considered unemployment in all three firms\nthat declared bankruptcy, although these firms did not respond to the questionnaire. However, the\nUSITC did not consider employment in the remaining firms which were not bankrupt and which did\nnot answer the questionnaire either. China argues that the examination of the employment factor was\nnot objective, reasoned or adequate preventing the USITC from making an objective determination of\nthe overall situation of the industry.1878\n7.717 In response, the United States notes that, as stated in its report, because not all the bankrupt\nhot-rolled bar producers responded to its questionnaire, the USITC referred to public data concerning\nthese firms in its analysis of capacity and employment trends for the hot-rolled bar industry. 1879 The\nUnited States also asserts that China cites no provision of the Agreement on Safeguards to justify its\napparent belief that the USITC could only use information it obtained from the questionnaire\nresponses it received in its analysis of serious inju ry. The United States submits that, to the contrary,\nArticle 3.1 of the Agreement on Safeguards requires investigating authorities to provide \"public\nhearings or other appropriate means in which importers, exporters, and other interested parties could\npresent evidence and their views\" but that, presumably, it would not require investigating authorities\nto permit interested parties to submit evidence pe rtinent to the investigation if the investigating\nauthorities could not consider such evidence once it were submitted.\n1880 The United States notes that\ninterested parties that supported the imposition of safeguards remedies for hot-rolled bar presented\ninformation concerning certain hot-rolled bar producers that did not respond to the USITC's\nquestionnaire, including information on capacity of certain firms that had ceased operations and the\nnumber of employees affected by each shutdown. The United States argues that parties that opposed\nthe imposition of remedies had the opportunity to challenge the accuracy or reliability of this data.\nAccording to the United States, none did so before the USITC and China does not do so before the\nPanel. In the United States' view, the USITC found the data to be reliable and probative.\nConsequently, it acted in a manner fully consistent with the Agreement on Safeguards when relying\non the entirety of data in its record concerning the hot-rolled bar industry.\n1881\n7.718 As far as employment is concerned, China considers that, since the USITC acknowledged that\nthe questionnaire data did not fully reflect falls in employment, this data was not sufficiently reliable\nfor the USITC to draw conclusions from it. Since the data gathered by the USITC through the\nquestionnaires was clearly incomplete, it should have considered this data very carefully and there\nwas an increased need for an adequate and reas oned explanation as to how it was supporting the\nUSITC's conclusion that the industry was being seriously injured. 1882 China also submits that the\nUSITC should have addressed the issue of unemployment for the remaining firm that were not\n\n1876 China's first written submission, para. 323.\n1877 China's first written submission, para. 324.\n1878 China's first written submission, para. 324.\n1879 United States' first written submission, para. 360.\n1880 United States' first written submission, para. 361.\n1881 United States' first written submission, para. 362.\n1882 China's second written submission, para. 146.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbankrupt. According to China, there is no evidence indicating that the United States did so. On this\nbasis, China considers that the USITC did not fully address the nature and complexity of the data.1883\n(iii) Cold-finished bar\n7.719 China argues that the USITC determination that the domestic industry of cold-finished bar\nwas suffering serious injury did not fulfil the requirements of Articles 2.1 and 4.2 of the Agreement\non Safeguards.1884 China believes that the USITC did not fully address the nature and the complexity\nof the data. China argues, moreover, that the USITC Report does not contain a response to the\ninterpretations of the data that have been put forwar d by China. On this basis, China argues that the\nUSITC failed to provide a reasoned and adequate explanation for its determination.1885\n7.720 In response, the United States notes that in finding that the cold-finished bar industry was\nseriously injured, the USITC identified the industry's poor financial performance (such as drops in\noperating income, the existence of operating losses and declines in sales revenue) and loss of market\nshare as particularly pertinent. The United States contends that the USITC also cited declines in the\nindustry's capacity, shipments, and production during the last three full years of its period of\ninvestigation, and its low levels of capacity utilization.\n1886 The United States argues that the USITC\nobjectively examined all pertinent factors and prov ided a reasoned explanation for its conclusion that\nthe cold-finished bar industry was seriously injured. The United States, therefore, satisfied its\nobligations under Articles 2.1 and 4.2(a) of the Agreement on Safeguards.1887\n7.721 China notes that the concluding section on injury in respect of cold-finished bar in the USITC\nReport stated that: \"The most pertinent indicator of the industry's condition is the poor financial\nperformance. The industry's financial condition improved in 1997 and 1998 from the level in 1996,\nbut its operating performance declined sharply in 1999 and continued to be poor in 2000. During both\n1999 and 2000, the industry was only marginally profitable, with an increasing number of firms\nposting operating losses. Industry financial performance continued to deteriorate in interim 2001,\nwhen the industry sustained an operating loss. Although the cold finished-bar industry's shipments\nand production were higher in 2000 than in 1996, these indicators declined during the last three years\nof the period examined and there was significant unused capacity throughout the period. In light of\nthese considerations, we conclude that the cold-finished bar industry is seriously injured\".\n1888 China\nargues that this statement does not present an accurate picture of the situation of the industry. With\nregard to production, United States shipments, capacity and capacity utilization, increases between\n1996 to 1998 were significant. China argues that, accordingly, even if production and the other\nfactors subsequently declined in the period of investigation, levels in 2000 were significantly higher\nthan the 1996 levels. China also asserts that United States consumption significantly increased\nbetween 1996-2000. China argues that, therefore, a sound interpretation of the data should be that the\nposition of the industry was positive.\n1889\n7.722 According to China, the USITC could not ignore the positive factors that it itself\nacknowledged, by simply stating that the financial performance was the most pertinent indicator of\nthe industry's condition. In any case, it is China's vi ew that this is insuffic ient to explain how the\n\n1883 China's second written submission, para. 147.\n1884 China's first written submission, para. 331.\n1885 China's first written submission, para. 330.\n1886 United States' first written submission, para. 364.\n1887 United States' first written submission, para. 368.\n1888 USITC Pub. 3479, Vol. I at 104 cited in China's first written submission, para. 327.\n1889 China's first written submission, para. 328.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnegative factors outweighed the positive factors. Indeed, there is nothing in the Agreement on\nSafeguards that would allow the USITC to consider one indicator more important than the others.\nFurthermore, the USITC has given no explanation as to why the deterioration of the industry's\nfinancial performance was to be considered as the \"most pertinent indicator of the industry's\ncondition\".\n1890\n7.723 In response, the United States notes that the USITC expressly acknowledged that certain\noutput-related factors increased from 1996 to 2000 for cold-finished bar. The United States further\ncontends that the analysis of serious injury is not merely a question of endpoint-to-endpoint\ncomparisons.1891\n7.724 China also does not agree with the USITC's interpretation that emphasis should be placed on\nthe most recent period, given the sharp increase in most factors at the beginning of the period of\ninvestigation. More particularly, China argues that the recent decline in factors had to be evaluated in\nthe light of the unusual increase that had taken pl ace just before that period. In China's view, the\nrecent decline in some factors only demonstrates that factors were stabilizing and that, therefore, the\nindustry was not seriously injured.\n1892\n7.725 In response, the United States argues that China has not explained what was \"unusual\" about\nthe increases in shipments and production that the USITC acknowledged occurred between 1996 and\n1998. In the United States' view, these increases merely followed increases in domestic consumption.\nApparent consumption also increased from 1999 to 2000, yet the domestic industry's shipments and\nproduction declined during this period. The United States argues that the USITC appropriately\nconcluded that, although the United States cold-finished bar industry was able to increase its output to\nreflect changes in apparent consumption at the beginning of the period of investigation, it was not able\nto do so at the conclusion of the period.\n1893 The United States also argues that, contrary to a\nsubmission made by China, the cold-finished bar industry's financial condition was not \"stabilizing\" at\nthe conclusion of the period of investigation. Instead, financial indicators declined sharply after 1998.\nThe United States asserts that the deterioration of the industry's financial performance, which the\nUSITC explained was \"[t]he most pertinent indicato r of the industry's condition\" was simply ignored\nby China.\n1894\n7.726 As far as the word \"unusual\" is concerned, China states that it was used by China to underline\nthe clear contradiction between the USITC's conclu sion that the industry has been seriously injured\nand the clear positive trends shown by certain factors. However, the point of the sentence quoted by\nthe United States was to make clear that Chin a disagrees with the USITC's interpretation that\nconsiderable importance should be given to the most recent period. The state of the domestic industry\nshould have been assessed with a view of the trends over the whole investigation period, which are\nclearly positive for a certain number of indicators.\n1895\n(iv) Rebar\n7.727 China argues that the USITC failed to make a determination of injury with respect to rebar\nthat was consistent with the requirements of Articles 2.1 and 4.2(a) of the Agreement on\n\n1890 USITC Pub. 3479, Vol. I, p. 104, cited in China's second written submission, para. 148.\n1891 United States' first written submission, para. 365.\n1892 China's first written submission, para. 329.\n1893 United States' first written submission, para. 366.\n1894 United States' first written submission, para. 367.\n1895 China's second written submission, para. 149.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nSafeguards.1896 China believes that the USITC did not fully address the nature and the complexity of\nthe data and that, as a result, the USITC failed to provide a reasoned and adequate explanation for its\ndetermination.\n1897\n7.728 In response, the United States argues that the USITC objectively considered all the pertinent\ndata and provided a reasoned basis in finding that the rebar industry was seriously injured. According\nto the United States, that finding is consistent with Articles 2.1 and 4.2(a) of the Agreement on\nSafeguards.1898 More particularly, the United States notes that in finding that the rebar industry was\nseriously injured, the USITC emphasized the industry's poor financial performance during the latter\nportion of the period of investigation. Reference is made by the United States in particular to the\ndeterioration of the industry's financial condition between 1999 and 2000: the fact that the domestic\nindustry's capital expenditures declined during each year of the period of investigation, and the 2000\nexpenditures were less than half the 1996 level; and that the domestic industry's market share was\nconsiderably lower in 2000 than it was in 1996.\n1899\n7.729 China notes that the USITC stated in its report that: \"Although several indicators pertaining to\nthe rebar industry, such as capacity, production, and employment, increased during the period\nexamined, these increases reflect strong increases in United States apparent consumption.\nNotwithstanding these increases, however, the re bar industry showed poor financial performance\nduring the latter portion of the period examined. The industry's financial condition deteriorated\nsharply between 1999, when it had a positive operating margin of 5.0%, and 2000, when it had a\nnegative operating margin of 1.6%. Additionally, the domestic industry's market share declined\nduring the period examined and its capital expenses declined considerably. We consequently conclude\nthat the rebar industry is seriously injured\".\n1900 China believes that this statement does not present an\naccurate picture of the situation of the industry.1901 In particular, China argues that while the imports'\nshare of the domestic market was greater in 2000 as compared to the level in 1996, it remained low.\nFurthermore, domestic industry sales and capacity ut ilization increased. China further argues that\nlosses suffered by the industry were incurred towards the end of the period of investigation. China\npoints out that such losses were also suffered at the beginning of the period of investigation, which\ndid not prevent the industry from realizing important profits three years in a row. Thus, China posits\nthat the losses incurred by the industry towards the end of the period of investigation were just part of\na cycle. China argues that the USITC did not make any demonstration to the contrary.\n1902\n7.730 In response, the United States argues that the record did not show an industry with cyclical\npatterns. Rather, it showed one that had continued and sustained increases in demand for its product\nthroughout the period of investigation. According to the United States, rebar producers' inability to\noperate profitably during a time of record demand was a clear indication of serious injury. 1903 The\nUnited States notes that apparent United States consumption of rebar rose by 48.1% during 1996 to\n2000 and was also 2.0% higher in interim 2001 than in interim 2000. In light of these conditions of\ncompetition, the fact that the United States rebar industry expanded capacity and employment and was\nable to increase its output during the period of investigation was not surprising. The United States\nsubmits that, as the USITC observed the rebar industry was not able to benefit from increasing\n\n1896 China's first written submission, para. 337.\n1897 China's first written submission, para. 336.\n1898 United States' first written submission, para. 373.\n1899 United States' first written submission, para. 369.\n1900 USITC Pub. 3479, Vol. I at 111 cited in China's first written submission, para. 332.\n1901 China's first written submission, para. 333.\n1902 China's first written submission, para. 334.\n1903 United States' first written submission, para. 372.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndemand. Its share of the United States market fell significantly (10 percentage points) from 1996 to\n2000. Moreover, notwithstanding increases in f actors such as production and employment, its\nfinancial condition deteriorated sharply. The industry had an operating loss in 2000, and was only\nmarginally profitable during interim 2001. The USITC also noted that the industry's capital expenses\ndeclined over the period of investigation. The USITC properly evaluated both the industry's\nimprovements and declines with respect to each of the Article 4.2(a) factors, and fully explained why\nthe factors as a whole supported its conclusion of serious injury.1904\n7.731 China submits that its claim that the losses incurred by the industry towards the end of the\nperiod of investigation are just part of a cycle was an illustration of the lack of adequate explanation\nprovided by the USITC regarding the losses incurred by the industry with regard to only one specific\npart of the investigation period.\n1905\n7.732 The United States submits in response that the USITC explained that it was highly pertinent\nthat the domestic rebar industry had sharply deteriorating financial performance during the latter\nportion of the period of investigation, notwithstanding its increases in output. There was no evidence\nin the record for finding that the domestic industry's financial performance was a reflection of a\nbusiness cycle. The record did not show an industr y with cyclical patterns – it showed one that had\ncontinued and sustained increases in demand for its product throughout the period of investigation.\nRebar producers' inability to operate profitably during a time of record demand was a clear indication\nof serious injury.\n1906\n7.733 China notes that, in its reply, the United States responds that \"the USITC further explained\nthat it was highly pertinent that the domestic rebar industry had sharply deteriorating financial\nperformances during the latter portion of the period of investigation, notwithstanding its increases in\noutput\". However, there is no explanation as why this would be \"highly pertinent\".1907\n(v) Welded pipe\n7.734 Switzerland argues that the USITC failed to demonstrate for welded pipe products (other than\nOCTG), that there was a threat of \"serious injury\" in the sense of a \"significant overall impairment in\nthe position\" of the industry, as is required by Article 4.1(a) of the Agreement on Safeguards. 1908 In\nparticular, Switzerland argues that if the categorisation of welded pipe products had been done\ncorrectly, the USITC would have found that for precision tubes, there was until recently only one firm\namong the tubes producers in the United States that claimed to be able to produce similar products,\nalbeit not of the same quality. Accordingly, Switzerland argues that it fails to understand how the\nUnited States industry in the sector could face serious injury.\n1909\n7.735 By way of a general response, the United States argues that, in requesting establishment of a\nPanel, Switzerland did not include a claim that the United States findings of serious injury or threat of\nserious injury were inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards. The\nUnited States submits, therefore, that this claim is outside the Panel's terms of reference, and there is\n\n1904 United States' written reply to Panel question No. 79 at the first substantive meeting.\n1905 China's second written submission, para. 334.\n1906 United States' first written submission, para. 372.\n1907 China's second written submission, para. 152.\n1908 Switzerland's first written submission, para. 259.\n1909 Switzerland's first written submission, para. 268.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nno basis for the Panel to address it. It goes on to state, however, that if the Panel decides to address\nthis issue, it should find that Switzerland has failed to meet their burden of proof.1910\n7.736 In counter-response, Switzerland submits that it did not specifically mention the requirement\nof serious injury or the threat thereof in its request for establishment of a Panel. However, in its\nrequest for the establishment of a Panel, it invoked Articles 2.1 and 4.2(a) of the Agreement on\nSafeguards, which explicitly refer to increased imports, serious injury or threat thereof and causal\nlink. Switzerland, furthermore, specifically referred to increased imports and causal link. The\nargument of causal link (between increased imports and serious injury or threat thereof) inherently\ncovers the element of serious injury or threat thereof as no argument can be made regarding the causal\nlink if the argument of injury or threat thereof is excluded.\n1911\n7.737 China argues that the USITC failed to make a determination of threat of serious injury in\nrelation to certain pipe products that was consistent with the requirements of Articles 2.1 and 4.2(a) of\nthe Agreement on Safeguards.1912\n7.738 In response, the United States notes that the USITC's determination on welded pipe was based\non threat of serious injury. While the USITC found that the industry producing welded pipe was not\nseriously injured, it characterized its overall condition as \"weak\". It concluded that serious injury\nappeared imminent on the basis of the fact that production had declined since 1998 despite generally\nstable United States apparent consumption; cap acity utilization had fallen sharply in 1999 and 2000;\nUnited States producers' market share had fallen sharply in 2000 and declined further in interim 2001;\ndomestic producers' operating income was at its lowest full-year level in 2000; and employment in the\nindustry had fallen in 1999 and 2000, and was close to the lowest level of the period of investigation\nin 2000. Wages showed similar trends. Interi m 2001 employment levels were above those of 2000,\nbut wages and the number of hours worked were not.\n1913\n7.739 Switzerland does not dispute that the United States industry has suffered difficulties.\nHowever, it argues that the USITC has not demonstrated, for the welded pipe products (other than\nOCTG), the threat of \"serious injury\" in the sense of a threat of a \"significant overall impairment in\nthe position\" of the industry, as is required by Article 4.1(a) of the Agreement on Safeguards .1914 In\nthis regard, Switzerland points out that the USITC found that the domestic industry of welded pipe\nwas facing a threat of serious injury. The USITC came to this conclusion after having given\nparticular emphasis to the following declining factors since 1998: production, shipments, capacity\nutilization, financial performance and employment. However, the USITC itself recognized that\n\"during the period of investigation the domestic welded pipe capacity increased and was at its highest\nlevel in 2000. According to Switzerland, United States capacity growth largely tracked the increase in\napparent consumption of welded pipe. The recent decline in domestic production coupled with the\nincrease in domestic capacity resulted in a significant decline in capacity utilization beginning in 1999\nand continuing through 2000, and interim 2001\".\n 1915\n7.740 China argues that the USITC failed to explain, in a reasoned and adequate manner, why there\nwas a threat of serious injury to the certain pipe products industry, given that the market for large\n\n1910 United States' first written submission, para. 382.\n1911 Switzerland's second written submission, para. 78.\n1912 China's first written submission, para. 343.\n1913 United States' first written submission, para. 374.\n1914 Switzerland's second written submission, para. 80.\n1915 USITC Report, Vol. I, p.160, cited in China's second written submission, para. 81.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndiameter line pipe had begun to surge and would continue to expand in the immediate future. 1916\nChina asserts in this regard that the USITC agreed with the projections of continued growth due to\nrising demand for pipeline projects. According to China, the USITC also stated that domestic\nproduction increased between 1996 and 1998 in conjunction with rising levels of aggregate apparent\nUnited States consumption. China argues that, according to the USITC, since rising levels of\nconsumption resulted in an increase in production, one could expect the increase in demand for line\npipe to result in an increase in production, which would improve the situation of the industry.1917\n7.741 In response, the United States argues that the USITC acknowledged in its report that there had\nbeen a recent increase in demand for large diameter line pipe and that continued growth in this market\nsegment was likely. 1918 The United States notes that the USITC provided two reasons why this fact\ndid not detract from its conclusion of threat of serious injury. It first observed that large diameter line\npipe accounted for only 20 to 30% of the entire industry producing welded pipe. 1919 Contrary to\nChina's contention, the USITC was justified in concluding that it should not have been dispositive. In\nsupport, the United States asserts that the USITC was analysing serious injury on the basis of the\nindustry as a whole. In making an analysis for 100% of the industry, the USITC was not compelled to\nconclude that increased demand in 20% of the industry outweighed the remaining 80% facing\ndifferent conditions of competition.\n 1920 Secondly, the USITC did not find the increase in demand for\nlarge diameter line pipe to be dispositive. As the USITC noted, demand for this product had already\nbegun to increase. Consequently, whether the increa se in demand for large diameter line pipe would\naffect demand in the entire industry would be apparent in the data collected in the USITC\ninvestigation.1921 However, overall demand for welded pipe had not increased appreciably during the\nlatter portion of the period of investigation. Instead, as the USITC observed, it had remained\ngenerally stable since 1998. 1922 The United States argues that, although the increases in demand for\nlarge diameter line pipe observed at the conclusion of the period of investigation had been sufficient\nto stabilize overall United States demand for welded pipe, it had not been sufficient to prevent the\ndeclines in shipments, production and capacity utilization observed during these periods. Although\nthe USITC concluded that demand conditions for the imminent future would be the same as those\nobserved during the latter portion of the period of investigation, it was nevertheless justified in finding\nthat the unfavourable trends in output-related factors for the entire industry producing welded pipe,\nwhich it had observed during these periods would continue.\n1923\n7.742 China notes that, despite the foregoing, the USITC explained that large diameter line pipe\nonly represented a portion of the industry and that overall demand for welded pipe products remained\n\"relatively\" constant despite the recent rise in demand. On that basis, the USITC believed that the\nthreat of serious injury remains.1924 In China's opinion, this explanation was far from sufficient. First,\nChina argues that it was normal that overall demand increased only slightly in interim 2001 given that\ndemand was only starting to rise at that point. Moreover, China argues that in order to come to the\nconclusion that serious injury was still imminent, the USITC had to determine the impact in the near\nfuture of this increase in demand and then determine whether it could prevent serious injury or not.\n1925\nChina argues that the fact that 20-30% of the whole category of the product in question would be\n\n1916 China's first written submission, para. 338.\n1917 China's first written submission, para. 339.\n1918 United States' first written submission, para. 376.\n1919 United States' first written submission, para. 377.\n1920 United States' first written submission, para. 378.\n1921 United States' first written submission, para. 379.\n1922 United States' first written submission, para. 380.\n1923 United States' first written submission, para. 381.\n1924 China's first written submission, para. 340.\n1925 China's first written submission, para. 341.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\naffected by the increasing demand was a very important factor to be considered. China argues that the\nUSITC did not examine it closely enough and did not give reasoned and adequate explanations as to\nwhy injury was still imminent.\n1926\n7.743 Despite arguments of the United States, China notes that the USITC did not assess to what\nextent the demand for line pipe, that the USITC acknowledged should still be increasing in the future,\ncould have an impact in the on the demand for the overall welded product category. Indeed, this\nmight have confirmed the trend, underlined in the United States' reply, that consumption of welded\npipe has been increasing since 1999. 1927 Accordingly, China maintains that the USITC failed to\nprovide a reasoned and adequate explanation as to why injury was still imminent.1928\n7.744 Switzerland notes that the USITC, in its report, stated that: \"In view of the declining trends in\nmost of the industry's performance factors beginning in 1999 and continuing through 2000 and into\n2001, particularly the decline in industry production, capacity utilization, shipments, number of\nworkers, and profitability in 2000, we find that the domestic industry is approaching a state of serious\ninjury\".1929 Switzerland argues that rather than there being a threat of serious injury, the relevant\nUnited States domestic industry actually failed to adapt to the adjustment process of the steel industry\nworld-wide.1930\n7.745 In response, the United States argues that Switzerland does not explain why a more\ngeneralized discussion of the adjustment process of the steel industry world-wide is required under\nArticle 4.2(a). According to the United States, this topic clearly does not pertain to any factor\nexpressly listed under Article 4.2(a) nor is the topic analogous to any factor listed under Article 4.2(a).\nThe United States contends that the focus in that provision is on objective, empirical factors \"having a\nbearing on the situation\" of the pertinent domestic industry. These factors describe or indicate the\nstate of the industry, as opposed to considerations not subject to quantification that may have an effect\non the domestic industry. The United States submits that, in contrast, an analysis of the effects of\nworld-wide conditions of competi tion would appear more properly to relate to the evaluation of the\ncausal link between increased imports and serious injury required under Article 4.2(b). The United\nStates argues that the USITC's consideration of all the factors expressly listed in Article 4.2(a),\ntogether with several other empirical factors relevant to evaluation of the condition of the domestic\nindustry producing welded pipe, fully satisfies the requirements of that provision.\n1931\n7.746 Concerning the question of the adaptation of the United States domestic industry to the\nadjustment process world-wide, Switzerland, on the basis of the injury factors considered by the\nUSITC, is of the view that the United States industry of welded tubes increased its capacity to the\nextent that, already in 1996, the capacity exceeded the United States apparent consumption by\n855,809 tons.\n1932 Recognizing that Article 4.2(a) of the Agreement on Safeguards does not require an\nanalysis of the adjustment process of the steel industry world-wide, Switzerland does not claim that\nthe United States should have done so. Switzerland submits that it deduced from the figures cited in\nthe USITC Report and the developments in the steel industry worldwide that the United States\n\n1926 China's first written submission, para. 342.\n1927 China's second written submission, para. 153.\n1928 China's second written submission, para. 154.\n1929 USITC Report, Vol. I, p. 162 cited in Switzerland's first written submission, para. 267.\n1930 Switzerland's first written submission, para. 269.\n1931 United States first written submission, para. 388.\n1932 Switzerland's second written submission, para. 85.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry must not have adapted to the situation of the steel industry world-wide, suffering from\nchronic overcapacity of production, the way for instance Swiss steel industry did.1933\n7.747 As regards the indicator of capacity, Switzerland notes that United States domestic capacity\nincreased strongly (+22%) and constantly between 1996 and 2000, whereas United States domestic\ndemand increased to a lesser extent (+19%). In comparison, foreign capacity increased only slightly\n(+3%) during the same period. Switzerland states that during the period of investigation the share of\nthe United States industry in global capacity rose from about 25% to nearly 29%. With an increase in\ntheir capacity larger than the increase in United States demand, United States firms had either to gain\nmarket share in the United States, to produce for the stocks or not to use their capacity. 1934\nSwitzerland further argues that because the United States industry increased, between 1996 and 2000\nits production capacity (+22%) more than the United States demand increased (+19%), United States\nfirms had either to gain market share in the United States, to produce for the stocks or not to use their\ncapacity. Switzerland submits that the decline in the factors examined by the USITC should not be a\nsurprise, because the United States capacity of the welded pipe industry was too great and still\nincreased while the situation of the United States industry started to deteriorate. The argument made\nby the United States that the decline of capacity utilization is an indication that the industry was\nfacing a threat of serious injury is not valid despite Article 4.2(a) of the Agreement on Safeguards\nbecause firms cannot simply assume that they can increase the capacity as they like and transform it\ninto increased production opportunities.\n1935\n7.748 Switzerland also notes that the import unit va lue continuously decreased (-9%) between 1996\nand 2000. Switzerland suggests that this could be explained by the fact that, abroad, investments were\nlargely made with the objective of reducing production costs. However, according to Switzerland, in\nthe United States, the average sales value in creased by 3% between 1996 (USD606) and 1998\n(USD622), before it started decreasing. Switzerland suggests that this could have been due to either\nenterprises' inadequate pricing policies or to a wrong investment policy, or to other reasons.1936\n7.749 Switzerland also notes that the USITC Report indicates that the United States producers'\nshipments increased through 1999, but then fell by 9.1% in 2000 and remained stable (at slightly\nlower levels) in the first half of 2001. Accordin g to the figures in the USITC Report, the United\nStates producers' shipments increased slightly in interim 2001 compared with interim 2000. 1937 Thus,\naccording to Switzerland, if the situation stabilized or even seemed to have improved recently, the\nthreat of serious injury is not really demonstrated.1938\n7.750 Finally, Switzerland submits that using the basis of only a one-year decline to conclude that\nthe United States industry is in a situation of threat of serious injury is using too short a period of\ntime. The threat could be demonstrated almost at will. In the present case, it is more important to\ntake into account a longer period, because certain indicators were increasing also in the short run.\nTaking, for instance, employment, the United States claims that serious injury appeared imminent\nbecause the employment in the industry fell in 1999 and 2000 and was close to the lowest level of the\nperiod of investigation in 2000.\n1939 In reality, the number of workers was relatively stable and\n\n1933 Switzerland's second written submission, para. 86.\n1934 Switzerland's first written submission, para. 270.\n1935 Switzerland's second written submission, para. 82.\n1936 Switzerland's first written submission, para. 271.\n1937 USITC Report, Vol. II, TUBULAR 15.\n1938 Switzerland's second written submission, para. 83.\n1939 United States first written submission, para. 374.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfluctuated just slightly during the period of investigation except in 1999 where it increased by 7%. 1940\nIt even increased in interim 2001 (1.2%) compared to interim 2000. Industries that consider they are\nfacing a threat of serious injury would not hire additional workforce. In addition, the number of\nproduction workers was higher at the end (6,736 in 2000) of the period of investigation than at the\nbeginning (6,539 in 1996).1941\n(vi) Stainless steel wire\n7.751 China argues that the determination that the domestic industry of stainless steel wire was\nsuffering serious injury or threat of serious injury did not fulfil the requirements of Articles 2.1 and\n4.2 of the Agreement on Safeguards. 1942 China believes that the USITC did not fully address the\nnature and complexity of the data. China argues, moreover, that the USITC Report does not contain a\nresponse to the interpretations of the data that have been put forward by China. On this basis, China\nargues that the USITC failed to provide a reasoned and adequate explanation for its determination.1943\n7.752 In response, the United States argues that each of the affirmative-voting Commissioners\nprovided a lengthy analysis of the Article 4.2(a) factors, and explained how these factors supported\ntheir affirmative conclusions.\n1944\n7.753 China argues that consideration of the relevant injury factors for stainless steel wire\ndemonstrate that there was no overall impairment of the situation of the industry.1945\n7.754 In response, the United States notes that Chairman Koplan made an affirmative determination\nof threat of serious injury based on a domestic industry producing stainless steel wire. He emphasized\npervasive declines in many industry indicators between interim 2000 and interim 2001, including\nshipments, production, market share, productivity , employment, wages and financial performance.\nThe United States submits that several of the other factors were already at low levels or well below\nperiod peaks before they declined in interim 2001, such as operating income, which declined rapidly\nbetween interim 2000 and interim 2001, employment indicia and capital expenditures. The United\nStates notes that Commissioner Bragg based her determination on a domestic industry producing both\nstainless steel wire and stainless steel wire rope. She likewise cited pervasive declines in industry\nperformance from interim 2000 to interim 2001. Commissioner Devaney also found that the pertinent\ndomestic industry produced both stainless steel wire and stainless steel wire rope. He found this\nindustry to be seriously injured, citing inadequate profitability and declines in market share,\nemployment, and capital expenditures.\n1946\n7.755 China argues that there was no threat of serious injury to the market for stainless steel wire.\nIn support, China argues that slight declines in employment, R&D and capital expenditure were not\nsignificant enough to offset the overall positive situation of the industry. Moreover, according to\nChina, there were no signs that competitive conditions would change in the immediate future so as to\nwarrant the conclusion that the industry would be impaired especially given that imports' market share\ndeclined during the first five full years of the period of investigation. China also argues that although\nimports consistently undersold domestic products, price movements did not clearly correlate with the\nunderselling of imports. Since imports had failed to injure the industry in the past, and since the\n\n1940 USITC Report, Vol. II, TUBULAR-15.\n1941 Switzerland's second written submission, para. 84.\n1942 China's first written submission, para. 349.\n1943 China's first written submission, para. 347.\n1944 United States first written submission, para. 391.\n1945 China's first written submission, para. 344.\n1946 United States' first written submission, para. 390.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncondition of the industry had improved over the period of investigation, China submits that the only\nsound conclusion that could be reached was that that there was no threat of serious injury.1947\n7.756 Similarly, the European Communities argues that the USITC's finding of threat of serious\ninjury for stainless steel wire was premised on the notion that imports would continue to increase and\nthe threat of serious injury would materialise into serious injury. However, according to the European\nCommunities, while the data before the USITC for interim 2001 showed a small increase in imports\nwhen compared to interim 2000, the data available before the President decided to impose safeguard\nmeasures showed that imports for full year 2001 had decreased slightly from full year 2000. The\nEuropean Communities asserts that this suggested that the trend of increase in interim 2001, on which\nthe USITC based its determination, did not continue in the second half of 2001. According to the\nEuropean Communities, given this change in tre nd, the competent authority, who should have been\naware of this data, was under a duty to reason its decision to impose safeguard measures based on the\nthreat of serious injury. The European Communitie s asserts that the President did no such thing and\nthat, therefore, the measures imposed on stainless steel wire were inadequately explained and\ninconsistent with Article 2.1 and 4.2.\n1948\n7.757 In response, the United States asserts that China's argument that affirmative threat\ndeterminations were not warranted in light of \"slight\" declines in indicators during the latter part of\nthe period of investigation and the \"overall positive\" condition of the industry, mischaracterizes and\nfails to address or acknowledge the findings that Commissioners Koplan and Bragg made. Neither\nCommissioner found the current condition of the industry to be positive overall. According to the\nUnited States, Chairman Koplan emphasized the low operating margins of the industry.\nCommissioner Bragg characterized industry performance as \"not strong\". Both Commissioners noted\nsignificant declines between the interim periods in production, capacity utilization, market share and\nemployment.\n1949 Consequently, both Commissioners Kopl an and Bragg evaluated the declines in\nindustry indicators during interim 2001 in the context of the industry's lacklustre performance overall\nduring the period of investigation as a whole. The United States argues that, as a consequence, both\ntheir analyses and explanations of threat of serious injury with respect to domestic industries\nproducing stainless steel wire satisfy the requirements of Articles 2.1 and 4.2(a).1950\n7.758 China also argues that three USITC Commissioners expressed in the USITC Report that there\nwas no serious injury or threat of serious injury in relation to stainless steel wire. In China's view,\ntheir conclusions were also supported by explanations concerning the facts of the investigation. China\nargues that, as a result, the remaining Commissioners had a duty to support their affirmative\ndeterminations with explanations that rebutted the interpretations and conclusions of the three\nCommissioners who voted in the negative. China submits that the absence of such a rebuttal resulted\nin contradictions. Furthermore, in China's view, there was no clear indication as to why serious injury\nor threat thereof was still present. Accordingly, China argues that there is a clear lack of reasoned and\nadequate explanation by the USITC.\n1951\n7.759 In response to a question from the Panel as to whether, in the event of a split vote within a\ncompetent national authority such as the USITC, there is a legal requirement to rebut the arguments of\nthe negative determinations, the European Commun ities and Norway answered in the affirmative\narguing that the negative or dissenting determinations constitute, or at least contain, plausible\n\n1947 China's first written submission, para. 345.\n1948 European Communities' first written submission, para. 420.\n1949 United States' first written submission, para. 392.\n1950 United States' first written submission, para. 393.\n1951 China's first written submission, para. 346.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nalternative explanations and the prevailing determination must therefore consider them and explain\nwhy they are not adopted or followed in the prevailing determination. 1952 Korea argues that since the\nconcept of a split vote does not exist in the context of the Agreement on Safeguards, the question is\nwhether the conditions for safeguard relief have been met. A finding that they have been met and a\nfinding that they have not been met in the same determination cannot be reconciled and, consequently,\nthe conditions for imposing safeguard relief have not been met. 1953 Japan, on the other hand, argues\nthat as long as there is a legitimate affirmative determination (in other words, a majority of\nCommissioners voting affirmative or negative on the basis of the same like product), there is no legal\nrequirement to rebut the arguments of Commissioners dissenting from the majority vote; nor does it\nmatter whether a dissenting Commissioner publishes a separate dissenting opinion.\n1954\n7.760 The United States answers in the negative. It submits that there is no requirement in the\nAgreement on Safeguards for members of the USITC voting in the affirmative to rebut the arguments\nraised by other members of the USITC who voted in the negative. As long as the official\ndetermination of the USITC includes the findings, reasoned conclusions, detailed analysis of the case\nand demonstration of the relevance of the factors examined as required by Articles 3 and 4 of the\nAgreement on Safeguards, then the determination is sufficient. The United States argues that this\nconclusion does not change depending on whether or not a Member publishes separate or dissenting\nvotes. A determination stands on its own, regardless of whether certain decision-makers disagree\nwith that determination. A contrary conclusion would lead to absurd results. It would mean, in effect,\nthat a determination might be consistent with the Agreement on Safeguards when the views of\ndissenting or concurring decision-makers are not published, but an identical determination would be\ninconsistent when such views are published. Such a rule would lead Members to avoid publishing\nseparate or dissenting votes, which would stifle a full discussion of the issues.\n1955\n7.761 For China, it remains clear that the fact th at the decision, by the President, that the\ndeterminations of those Commissioners who voted in the affirmative should be the determination of\nthe USITC, is not sufficient to resolve the contradictions between the views of the various\nCommissioners. In particular, China finds it surprising that the United States seems to consider the\nthree Commissioners, members of the USITC, even if they made negative findings related to the\nexistence of serious injury, as \"persons or entities who may participate in the investigation, but are not\npart of the authority that has made the serious injury determination\".1956\n7.762 Furthermore, according to China, even for the Commissioners who voted in the affirmative, it\nis clear that, in view of the numerous positive trends in certain factors, their determination is revealing\na lack of adequate and reasoned explanation. For instance, the fact that Chairman Koplan mainly\nrelied on interim data clearly provides insufficient justification for the findings.1957 In any case, China\nconsiders that, as for the analysis on increased imports, the analysis provided by Commissioners\nBragg and Devaney is of no relevance since it was based on an industry producing not stainless steel\nwire, but \"stainless steel wire products\", i.e. stainless steel wire and stainless steel wire rope.\nTherefore, these analyses cannot provide any useful indications as far as the state of the industry\nproducing stainless steel wire only is concerned, and cannot be compared with the results of the\n\n1952 European Communities' written reply to Panel question No. 131 at the first substantive meeting;\nNorway's written reply to Panel question No. 131 at the first substantive meeting.\n1953 Korea's written reply to Panel question No. 131 at the first substantive meeting.\n1954 Japan's written reply to Panel question No. 131 at the first substantive meeting.\n1955 United States' written reply to Panel question No. 131 at the first substantive meeting.\n1956 United States' first written submission, para. 391, footnote 431, cited in China's second written\nsubmission, para. 155.\n1957 China's second written submission, para. 156.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nanalysis provided by Chairman Koplan either. There is a clear lack of adequate and reasoned\nexplanation as to how the analyses of these tw o Commissioners can support final determinations\nregarding the state of the industry producing stainless steel wire. 1958 According to China, this is even\nmore evident in view of the fact that there was not even agreement between the three Commissioners\nvoting affirmatively about the state of these different domestic industries. Indeed, Chairman Koplan\nfound a domestic industry producing stainless steel wire to be threatened with serious injury. 1959\nWhile Commissioner Bragg found a domestic indus try producing both stainless steel wire and\nstainless steel wire rope to be threatened with serious injury. 1960, At the same time, Commissioner\nDevaney found the same industry producing stainless steel wire and stainless steel wire rope to have\nbeen seriously injured.\n1961\n7.763 China argues that, consequently, the decision by the President itself does not provide\nsufficient explanation as to the final determination by the USITC. Indeed, it is not clear whether the\nfinal determination of the USITC was that the i ndustry was suffering serious injury (opinion of\nCommissioner Devaney), or that serious injury was only threatened (opinion of Commissioners\nKoplan and Bragg). This reveals obvious contradictions in the assessment both of the domestic\nindustry and of the injury indicators that, in itself, sufficiently demonstrates the lack of adequate and\nreasoned explanation underlying the US measure on stainless steel wire. 1962 China states that it does\nnot intend to contest the right of WTO Members to establish their own decision-making processes for\nreaching determinations in applying safeguard measures. China merely argues that this does not\nexcuse the United States from satisfying the requirement of providing an \"adequate and reasoned\nexplanation\", in particular, from giving proper or adequate consideration to views, even minority\nones, that have been expressed in the USITC Report.\n1963\n(vii) Other products\n7.764 The United States notes that none of the complainants have made any challenge to the\nUSITC's determinations of serious injury to the industries producing tin mill, carbon and alloy fittings\nand flanges, stainless steel bar, or stainless steel rod. The United States argues that, consequently, the\ncomplainants have not satisfied their burden of presenting a prima facie case of a violation of section\n4.2(a) with respect to the findings concerning these industries.1964\n7.765 In response, China disagrees with the statement by the United States that \"no complainant has\nmade any challenge to the USITC's determinations of serious injury to the industries producing tin\nmill, FFTJ, stainless steel bar, or stainless steel rod\". In its second written submission, China states\nthat it did challenge the determinations of the USITC regarding serious injury for all ten products in\nthe following terms: \"China believes that for all ten products covered by the measures of safeguard,\nthe USITC failed to provide reasoned and adequate explanations\".\n1965 In addition, for six out of ten\nproducts, China presented some possible alternative interpretations of the facts.1966\n7.766 The European Communities asserts that the sugge stion by the United States that for four\nproduct bundles the complainants had not challenged the USITC's serious injury determination is\n\n1958 China's second written submission, para. 157.\n1959 USITC Pub. 3479, Vol. I, p. 255.\n1960 USITC Pub. 3479, Vol. I, p. 288.\n1961 USITC Pub. 3479, Vol. I, p. 344, cited in China's second written submission, para. 158.\n1962 China's second written submission, para. 159.\n1963 China's second written submission, para. 160.\n1964 United States' first written submission, para. 336.\n1965 China's first written submission, para. 308.\n1966 China's second written submission, para. 130.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninaccurate. While the European Communities has not entered into a discussion of the specifics of any\nproduct bundle determination, it has challenged the methodology applied in each of those\ndeterminations. Not only has the USITC employed a methodology which fails to meet the standards\nof the Agreement on Safeguards, it has also failed to provide a reasoned and adequate explanation of\ncertain findings where it has provided insufficient or no data at all.\n1967\n7.767 Norway also submits that Norway did challenge the USITC's determination of serious injury\nto the industry producing tin mill products, in the following manner:\n\"For the Tin Mill Products, the USITC claims that the domestic industry is\nexperiencing serious injury. While Norway will not dispute before this Panel that the\nUnited States steel industry in general has suffered difficulties, the United States has\nnot demonstrated, for the producers of inter alia Tin Mill Products, the existence of\n'serious injury' in the sense of a 'significant overall impairment in the position' of the\nindustry, that can be attributed to imports.\"\n1968\n7.768 Norway states that it did not expand further on this issue while it was so blatantly clear that\nno causal link whatsoever existed between any injury that might be suffered by the United States'\nindustry and imports.1969\n(b) Representativeness of data\n(i) Production destined for internal consumption\n7.769 The European Communities argues that in anal ysing financial performance only on the basis\nof commercial shipments, i.e. production which was not destined for further internal consumption, the\nUSITC failed to examine the industry as a whole and thus failed to arrive at an objective and reasoned\ndetermination of the existence of serious injury. 1970 The European Communities argues that this\nvitiates both the USITC's injury finding and also the causation finding given that causation is\nestablished by relating and comparing the trends between the injury indicators and increased\nimports.\n1971 The European Communities further argues that such a selective examination does not\npermit a competent authority to establish the existe nce of serious injury. By limiting its examination\nin such a manner, the competent authority does not determine the existence of \"serious injury\" as is\nrequired by Articles 2.1 and 4.2(a) of the Agreement on Safeguards and as a consequence does not\nprovide a reasoned and adequate explanation of its findings.1972\n7.770 In response, the United States argues that the data collected by the USITC purported to\nprovide, and did in fact provide, information pertaining to the entire industry. 1973 Consequently, the\nUSITC satisfied the obligation under Articles 4.1 and 4.2(a) of the Agreement on Safeguards to render\nits analysis of serious injury or threat of serious injury based on information pertaining to each\n\n1967 European Communities' second written submission, para. 290.\n1968 Norway's second written submission, para. 100, referring to para. 278 of Norway's first written\nsubmission.\n1969 Norway's second written submission, para. 101.\n1970 European Communities' first written submission, para. 378.\n1971 European Communities' first written submission, paras. 378 and 379.\n1972 European Communities' written reply to Panel question No. 71 at the first substantive meeting.\n1973 United States' first written submission, para. 334; United States' second written submission,\npara. 109.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industry at issue.1974 The United States submits that the USITC did not reduce the scope of\nits injury examination.1975\n7.771 The United States notes in this regard that th ere is an important distinction between transfers\nfor internal consumption, on the one hand, and transactions in the commercial or merchant market, on\nthe other. In the commercial market, a producer sells product to a purchaser in an arm's-length\ntransaction. By contrast, the internal transfers of an individual producer are not the result of such\ntransactions and, thus, should not be considered \"sales\". The United States submits that because\nproduct that is internally transferred is not sold, the USITC could not generate objective and\nconsistently-derived data concerning the valuation of such transfers that could be used in financial\nanalysis. Consequently, the USITC's financial analysis was based on the one type of objective\nindustry-wide data available in the record, namely that pertaining to commercial sales. The United\nStates further notes that the unreliability of transfer value data was a particular problem for the\ndomestic industry producing CCFRS. Including data on internal transfers would have resulted in\ndouble or triple counting of the same unit of production. This is because all internal transfers of hot-\nrolled steel are ultimately reported as cold-rolled or corrosion-resistant steel when sold in their final\nprocessed form. Thus, to have included in the CCFRS financial analysis data concerning both internal\ntransfers of hot-rolled steel and commercial sales of cold-rolled or coated steel would have counted\nthe same ton of steel twice. The United States submits that by using commercial sales value, the\nUSITC was able to avoid problems relating to double-counting of product. The United States submits\nthat, by contrast, the USITC could and did generate objective quantity-based information on internal\ntransfers. It used and relied on such data in its report in calculating the quantity of production, total\nUnited States shipments, and United States apparent consumption.\n1976\n7.772 The European Communities submits that the claim that the USITC could not \"generate\nobjective and consistently-derived data\" is not a sufficient defence. First, there is no examination of\nthe industry as a whole – as is clearly required by the Agreement on Safeguards. There can be little\ndoubt that the USITC is capable of obtaining such data at least for all productive activities of the\nindustry – that is exactly what it did in the determination which led to the US – Hot-Rolled Steel\ndispute.\n1977 The European Communities questions why this exercise is possible for an industry where\n60% of production is internally consumed but not possible for industries in which considerably less\nproduction is internally consumed. Second, even if the USITC was not in a position to gather the data\nwhich it considered necessary, the Appellate Body clearly required that an explanation be given why\nproduction for internal consumption was not examined.\n1978 The USITC never provided such an\n\n1974 United States' first written submission, para. 334.\n1975 United States' second written submission, para. 1090.\n1976 United States' written reply to Panel question No. 73 at the first substantive meeting.\n1977 The Panel in US – Hot-Rolled Steel quoted the USITC Report which stated:\n\"From 1997 to 1998, as apparent consumption increased significantly,\noperating income declined by more than half. On merchant market sales, the\nratio of operating income to net sales declined from 5.9 per cent in 1997 to\n0.6 per cent in 1998 and overall, the ratio declined from 5.5 per cent in 1997\nto 2.6 per cent in 1998.\"\nUSITC Report, quoted Panel Report, US – Hot-Rolled Steel, para. 7.209.\n1978 Appellate Body Report, US – Hot-Rolled Steel, para. 204, where the Appellate Body stated:\nIn our view, [an objective examination] means that, where investigating authorities undertake\nan examination of one part of a domestic industry, they should, in principle, examine, in like\nmanner, all other the other parts that make up the industry, as well as examine the industry as\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexplanation.1979 The European Communities submits that, as a result, the United States has, by failing\nto examine performance on production for internal consumption failed both to ensure an examination\nof the performance of the industry as a whole and to examine, where it has examined only one part of\nthe industry, other parts in an equivalent manner. Therefore, all the USITC's injury determinations\nshould be found to be inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards.1980\n7.773 The European Communities further argues that Article 4(1)(c) of the Agreement on\nSafeguards refers to \"producers as a whole\" and producers of a major proportion of \"total domestic\nproduction\" as the object of the serious injury examination. The European Communities argues that\nin making the serious injury examination, a competent authority cannot distinguish per se between\nproducers on the basis of the destination of their output. That is, a competent authority cannot define\nthe \"domestic industry\" as only those producers who sell their produce on the \"free\" or \"merchant\"\nmarket as opposed to those who produce for inte rnal consumption of an integrated downstream\nprocessor, or captively consumed products. In this regard, the European Communities points to the\nAppellate Body decision of US – Cotton Yarn. The European Communities asserts that, when faced\nwith a United States decision to exclude from the definition of \"domestic industry\" producers of\ncotton yarn who produced for integrated upstream pr ocessors, the Appellant Body found in that case\nthat the term \"producing\" in Article 6.2 of the Agreement on Textiles and Clothing \"cannot be given a\ndifferent or a qualified meaning on the basis of what a domestic producer chooses to do with a\nproduct\".1981 The European Communities argues that while it is not alleged that the USITC has\ndefined the domestic industry so as to exclude producers who produce only for internal consumption,\nthe USITC has, nevertheless, in its examination of profits and losses, neglected to examine the\npotential relevance of an industry's production for internal consumption, and in so doing has reduced\nthe scope of its injury examination.1982\n7.774 The European Communities also makes reference to the Appellate Body decision made in the\ncontext of an injury determination for an anti-d umping investigation. According to the European\nCommunities, in US – Hot-Rolled Steel , the Appellate Body found that the definition of \"domestic\nindustry\", and the use of the term in Article 3 of the Anti-Dumping Agreement, indicated that an\ninvestigating authority was not entitled to look only at \"one part, sector or segment of the domestic\nindustry\".1983 The European Communities also asserts that the Appellate Body found in that case that\ninvestigating authorities are not entitled to conduct their investigations in such a way that it becomes\nmore likely that, as a result of the fact finding or evaluation process, they will determine that the\ndomestic industry is injured.\n1984 The European Communities asserts that in US – Hot-Rolled Steel, the\nAppellate Body found that where free market sales are subject to a specific examination, it is not\nenough that captive sales be included in the overall assessment, they must be disaggregated and a\nseparate analysis must be carried out.1985 The European Communities asserts that the same reasoning\napplies to a safeguards investigation.1986\n\na whole. Or, in the alternative, the investigating authorities should provide a satisfactory\nexplanation as to why it was not necessary to examine directly or specifically the other parts\nof the domestic industry.\n1979 European Communities' second written submission, para. 299.\n1980 European Communities' second written submission, para. 300.\n1981 European Communities' first written submission, para. 391.\n1982 European Communities' written reply to Panel question No. 71 at the first substantive meeting.\n1983 European Communities' first written submission, para. 397.\n1984 European Communities' first written submission, para. 398.\n1985 European Communities' first written submission, para. 401.\n1986 European Communities' first written submission, para. 399.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.775 In response, the United States asserts that it does not dispute the general proposition that\nArticles 4.1(a), 4.1(c), and 4.2(a) of the Agreemen t on Safeguards require that an authority's finding\nof serious injury pertain to the entire domestic industry. It also acknowledges jurisprudence that an\ninvestigating authority cannot consider the factors referred to in Article 4.2(a) for only one segment of\nthe industry without explaining how the factor is significant for the industry as a whole. 1987 T h e\nUnited States argues that the USITC's analysis focused on each industry as a whole consistent with\nUnited States law and the mentioned jurisprudence. With one exception, the USITC did not engage in\na segmented analysis for any of the domestic industries it examined. In the case of the exception, the\nUnited States contends that the USITC used its analysis of the various segments to support its\nconclusions concerning serious injury to the industry as a whole.\n1988\n7.776 With respect to the reference by the European Communities to the Appellate Body decision in\nUS – Hot-Rolled Steel , the United States argues that, in that case, the Appellate Body addressed the\nconsistency with the AD Agreement of a provisi on of US anti-dumping and countervailing duty law\ndirecting the USITC to focus primarily on merchant market sales in certain circumstances. 1989 Th e\nUnited States argues that that particular provision of US law is not applicable to safeguards\ninvestigations and was never invoked by the USITC in the present case. The United States asserts\nthat the portions of the USITC Report that discussed serious injury did not refer to \"merchant market\"\nor \"captive consumption\" segments but, rather, were computed on the basis of the entire industry.1990\n7.777 The European Communities asserts that the United States contents itself with claiming that,\nbecause it was not possible to generate consistent data for internal production, it satisfied its\nobligations under the Agreement on Safeguards . The United States defends itself legally by arguing\nthat the report of the Appellate Body in US – Hot-Rolled Steel, which concerned the identical situation\nin the anti-dumping context, did not concern both a US statutory provision regulating captive\nproduction and its application, but only concerned the statutory provision.1991 However, the European\nCommunities asserts that the briefest examination of the Appellate Body's report in US – Hot-Rolled\nSteel shows that the Appellate Body considered that the lack of analysis of financial performance on\ninternal consumption when an analysis had been made of commercial sales vitiated the USITC's\ndetermination irrespective of the statutory provision at issue. This shows both that the United States'\nlegal defence fails to deal satisfactorily with the basic thrust of the Appellate Body's decision, and that\nthe United States' explanation that it could not derive consistent data for internal consumption is\nwholly inadequate.1992\n7.778 The European Communities states that in order to better understand the import of the\nAppellate Body's findings, it is useful to examine the nature of the investigation which the Appellate\nBody was asked to consider. The Appellate Body set out the situation as follows:\n\"[W]e observe that the USITC Report contains data for, firstly, the merchant market\nand, secondly, for the overall market. […] In particular, in its examination of market\nshare and of each of the financial performance indicators, the USITC mentioned data\npertaining to the merchant market and the overall market. However, while the USITC\nReport includes frequent reference to data for the merchant market, it does not\ncontain, describe, or otherwise refer to, data for the captive market. […] According to\n\n1987 United States' first written submission, para. 327.\n1988 United States' first written submission, para. 328.\n1989 United States' first written submission, para. 329.\n1990 United States' first written submission, para. 330.\n1991 European Communities' second written submission, para. 294.\n1992 European Communities' second written submission, para. 295.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe United States, the examination of the data for the captive market is subsumed\nwithin the examination of the domestic market as a whole, even though the merchant\nmarket is the subject of separate and express examination.\nIt is true [...] that the aggregate data for the industry as a whole includes data for\nevery part of the industry. However, without further analysis to disaggregate this\ndata, the data relating to the captive market remains unknown. Moreover, the mere\nfact that the aggregate data for the industry as a whole include data for every part of\nthe industry does not overcome the fact that the USITC Report discloses no analysis\nof the significance of the data for the captive market. Thus, there is no explanation by\nthe USITC of the state of the part of the domestic industry that is shielded from direct\ncompetition with imports, nor any explanation of the significance of that shielding for\nthe domestic industry as a whole. […] Yet, in the examination provided of the\nmerchant market, there is an explanation of the poor state of that part of the domestic\nindustry which is not shielded from the effects of imports.\nAs we have already explained, in the absence of a satisfactory explanation,\nArticle 3.1 of the Anti-Dumping Agreement does not entitle investigating authorities\nto conduct an selective examination of one part of a domestic industry. Rather, where\none part of an industry is the subject of separate examination, the other parts should\nalso be examined in like manner. Here, we find that the USITC examined the\nmerchant market, without also examining the captive market in like or comparable\nmanner, and the USITC provided no explanation for its failure to do so.\"\n1993\n(footnotes omitted, emphasis in original)1994\n7.779 The European Communities submits that, in other words, the Appellate Body found an\nexamination of financial performance which was divided into an examination of performance on the\nmerchant market (i.e. on commercial sales) and for all production, was inconsistent with the\nAD Agreement because there was no comparable focus on performance on captive consumption or no\nreasonable explanation why this was not necessary. In the present case, as is undisputed, the USITC\nanalysed the industry's financial performance only on commercial sales, and not for all productive\nactivities nor specifically for internal consumption.\n1995 According to the European Communities, the\nUnited States seeks to deny that US – Hot-Rolled Steel is relevant. The European Communities\nsubmits that, evidently it is relevant – it sets out a principle that the United States has failed to respect.\nIndeed, the United States has acted inconsistently with its obligations in two senses – it has failed to\nexamine all activities of the industry, and by examining only one part it has failed to examine all parts\nequally or explain why this was not necessary.\n1996\n7.780 The European Communities argues that where captive activities are excluded from the\nanalysis, a competent authority will not have made an objective assessment nor provided a reasoned\nand adequate explanation of its conclusions. More over, such an incomplete analysis will bring into\nquestion the objectivity and representativeness of the competent authority's investigation under\nArticle 4.2.\n1997 The European Communities argues that this, in turn, takes away the basis for\nconcluding that there is serious injury suffered by the domestic industry. 1998 It states that this is\n\n1993 Appellate Body Report, US – Hot-Rolled Steel, paras. 212-214.\n1994 European Communities' second written submission, para. 296.\n1995 European Communities' second written submission, para. 297.\n1996 European Communities' second written submission, para. 298.\n1997 European Communities' first written submission, para. 402.\n1998 European Communities' first written submission, para. 392.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconfirmed by Article 4.2(a) of the Agreement on Safeguards, which contains a non-exhaustive list of\ninjury indicators which an investigating authority must examine. 1999 It argues that the scope of the\nprovision is not qualified by reference to the use made of the products in question. Consequently,\naccording to the European Communities, a competen t authority must examine the state of all the\nproductive activities of the domestic industry. A competent authority cannot simply examine \"profit\nand losses\" made on non-internally consumed production and conclude that there is sufficient\nevidence of significant overall impairment in the position of a domestic industry. 2000 In this regard,\nthe European Communities points out that an integrated producer may forego profits on upstream\ninput products in order to maximise profit-taking on sales of more valuable downstream finished and\nhighly specialised products and may simply sell surplus production of the input product. Therefore, an\nanalysis of whether losses are made on sales of the upstream input product will only provide an\nincomplete picture of the state of such an industry.\n2001\n7.781 The European Communities further argues that the USITC's examination is not objective,\nbecause it does not examine all areas of activities, including those in which the domestic industry may\nbe performing well. \"Serious injury\" is defined in Article 4.1(a) as a \"significant overall impairment\nin the position of a domestic industry\". Article 4.2(a) requires an evaluation of \"all relevant factors\"\n\"having a bearing on the situation\" of the industry. The performance of an industry with respect to\nproduction for internal consumption must be a factor which may have a bearing on that industry and\nwhich therefore must be evaluated and cannot be ignored. The European Communities argues that\nconsequently, the United States has not evaluated all relevant factors, and has not, therefore,\nundertaken a proper serious injury examination. The total absence of any information on its treatment\nof production for internal consumption also raises serious questions as to how costs were allocated\nbetween production for commercial sale and that for internal consumption. If costs were\ndisproportionately allocated to commercial sales, this would evidently decrease the profitability of\nsuch sales. Since the United States admits that it did not ensure consistent treatment of internal\ntransfers (and therefore that profits and losses were not artificially shifted between products), it has\nfailed to conduct a proper investigation.\n2002 The European Communities argues that this\nmethodological flaw applies to all of the products concerned. For each product, at least some of the\nproduction is internally consumed and financial performance on these products was, therefore, not\nanalysed. Consequently, all findings are not based on an assessment of the situation of the domestic\nindustry as a whole.2003\n7.782 In response, the United States contends that the information concerning operating\nperformance and profit margins included in th e USITC's report was intended to represent the\nperformance of each industry as a whole, not merely a particular segment of that industry. 2004 Th e\nUnited States acknowledges that the data on operating income that appeared in the USITC Report\nwere based on the value of commercial sales. However, the United States explains that there were\nseveral reasons why the USITC used this measure. First, the USITC obtained financial performance\ndata principally through the questionnaires it issued. According to the United States, by requesting\nthat producers, for purposes of providing financial information, limited their reporting to revenues\nactually received for commercial sales, and costs re lating to those sales, the USITC assured that the\nfinancial data it received would be computed on a basis that was both consistent among different\n\n1999 European Communities' first written submission, para. 393.\n2000 European Communities' first written submission, para. 394.\n2001 European Communities' first written submission, para. 395.\n2002 European Communities' first written submission, paras. 423-452; European Communities' written\nreply to Panel question No. 71 at the first substantive meeting.\n2003 European Communities' first written submission, para. 424.\n2004 United States' first written submission, para. 331.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproducers for each particular product on which it collected data and consistent for a particular\nproducer across several products it produced. Therefore, according to the United States, the USITC\nassured that the financial data it received was \"objective\" and consistent with United States generally\naccepted accounting principles.\n2005 In contrast, presenting financial data based on many different\nschemes for computing transfer values for internal transfers of product could have seriously\ncompromised the objectivity of the data reported. 2006 The United States argues that, moreover, had\nthe USITC instructed the producers to attempt to determine values for internal transfers of product,\nthis presumably would have required producers to construct transfer values on the basis of\ncommercial sales values. Therefore, there would have been no difference or only minimal difference\nbetween those constructed transfer values and the reported concerning merchant sales values,\nparticularly for the numerous domestic industries where internal transfers constituted a very small\npercentage of overall production.\n2007\n7.783 The European Communities submits that, inevitably, if data for commercial sales is all that is\nanalysed, questions arise as to how costs are allocated between production for internal consumption\nand production for commercial sales. An improper analysis of costs would undermine both the\nanalysis of serious injury and the analysis of causation. This issue has already exercised the panel and\nAppellate Body in US – Wheat Gluten .\n2008 In that dispute, similarly to the instant dispute, three\nproducts, one of which was wheat gluten, were produced from the same raw material on the same\nproduction line. Indeed, in the present dispute, the product is in fact the same (stainless steel rod for\ninternal consumption is identical to stainless steel rod for commercial sale), only the immediate use is\ndifferent – either commercial sale or internal consumption. In US – Wheat Gluten the European\nCommunities raised a concern as to how the allocation of profits between the different products was\ncarried out. The Appellate Body reversed the panel's finding that the USITC had provided a reasoned\nand adequate explanation of the allocation methodologies applied to allocate profit among the three\ndifferent products, because the panel relied on statements made by the United States which were not\ncontained in the USITC Report.\n2009 2010\n7.784 The European Communities states that, in the present case, the European Communities asked\nthe United States to identify where in the USITC Report it had explained how it ensured that\nallocations of costs to commercial sales were consistent and objective. In its response to this\nquestion, the United States explained that USITC staff checked data reported by US producers against\naudited annual financial statements, referring to page 7 of the overview of the USITC Report.2011 The\nUSITC explained in page 7 of its overview, after describing how it distributed questionnaires:\n\"[A] careful review of the data submitted by questionnaire respondents was\nundertaken by the Commission staff. Certain basic analytical procedures were\nconducted on data in questionnaires from all sources, including US producers, foreign\nproducers, US purchasers, and US importers. Each firm's unit values for major items\nsuch as shipments, prices, sales values, and costs were scrutinized and compared to\npublic source data and to the aggregate unit values for all firms. Comments regarding\n\n2005 United States' first written submission, para. 332; United States' second written submission,\npara. 110.\n2006 United States' first written submission, para. 332.\n2007 United States' first written submission, para. 333.\n2008 Panel Report, US – Wheat Gluten , paras. 8.57 to 8.66 and, reversing the Panel's conclusions,\nAppellate Body Report, US – Wheat Gluten, paras. 156-163.\n2009 Appellate Body Report, US – Wheat Gluten, para. 163.\n2010 European Communities' second written submission, para. 301.\n2011 United States' written reply to European Communities' question No. 5, paras. 11 and 12.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndiscrepancies from all parties in the investigation were considered and material\nproblems with data submissions were resolved.\nAdditional procedures and reviews focused on US producer companies. Their\nreported data on sales, operating income, and capacity were reconciled with each\nfirm's financial statements to the fullest extent possible, and reported sales values\nwere compared with reported commercial sales values. A limited-scope verification\nwas also conducted on one of the largest US steel producers, Nucor Corp., wherein its\nquestionnaire data were reconciled with its corporate records.\"2012\n7.785 According to the European Communities, on its face, the USITC Report does not explain how\nthe USITC ensured the correct allocation of costs. Indeed, the latter paragraph on domestic producers\ndoes not refer to costs at all. There is no explanation of how the USITC ensured that the allocation of\ncosts was consistent across different companies. Reconciling data with annual financial accounts for\na company as a whole, based on income generated on all the products sold by the company, takes for\ngranted certain allocations of operating income and hence costs, which may be done by different\ncompanies on a different basis. Moreover, acco rding to the European Communities, there is no\nexplanation whatsoever as to how the USITC verified the accuracy of any data for interim 2001 since\nthe data for these periods could not logically be checked against annual audited accounts. Nor can it\nbe determined how the USITC verified the accuracy of the data for interim 2000 because no\nexplanation is provided of how the respondents allocated data within the year 2000.\n2013\n7.786 The European Communities notes that, in US – Wheat Gluten , the USITC had explicitly\ndiscussed the issue of allocation of profits. The USITC concluded:\n\"Based on a careful review of the allocation methodologies used by domestic wheat\ngluten producers in responding to the Co mmission's questionnaire, we find those\nallocations to be appropriate.\"2014\n7.787 According to the European Communities, the Appellate Body concluded that this statement\ndid not provide a reasoned and adequate explanati on of the USITC's treatment of the allocation of\nprofits. It found the panel's determination that the above-quoted statement did constitute a reasoned\nand adequate explanation on the basis of information provided during the panel proceedings to be\ninconsistent with the standard of review the panel was required to apply, and consequently reversed\nthe Panel's findings.2015\n7.788 The European Communities asserts that in the present case, the USITC did not even discuss\nthe allocation methodologies applied, did not explain whether it considered the allocation\nmethodologies were consistent between different producers and did not even claim that the allocations\nwere \"appropriate\". In the light of the Appella te Body's examination of this similar issue in US –\nWheat Gluten , the European Communities requests that th e Panel find that the USITC failed to\n\n2012 USITC Report, Vol. III., p. OVERVIEW-7, cited in European Communities' second written\nsubmission, para. 302.\n2013 European Communities' second written submission, para. 303.\n2014 USITC Report on imports of Wheat Gluten quoted in Appellate Body Report, US – Wheat Gluten,\n2015 Appellate Body Report, US – Wheat Gluten, paras. 162-163, cited in European Communities'\nsecond written submission, para. 305.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nprovide a reasoned and adequate explanation of how it ensured that costs were properly allocated\nbetween production for commercial sale and for internal consumption.2016\n7.789 In response, the United States submits that to the extent that there are \"serious questions as to\nhow costs were allocated between production for comme rcial sale and that for internal transfer\", as\nthe European Communities asserts 2017, it has fully responded to them and allayed any possible\nconcerns about the USITC's cost allocation methodology. The United States reiterates that USITC\naccounting staff reconciled the financial data United States producers reported in their questionnaire\nresponses with those producers' audited financial statements to ensure that cost data in its report were\nallocated to commercial sales in a manner consistent with United States generally accepted accounting\nprinciples. Indeed, because the audited financial statements contain information about commercial\nsales only, and do not encompass internal transfers, the USITC could not have performed an\nanalogous reconciliation process had it attempted to use data concerning such transfers for its\nfinancial analysis.\n2018 The United States submits that the nature of the reconciliation process ensured\nthat the financial data on which the USITC relied were objective. By contrast, a financial analysis\nbased on data relating to internal transfers, as the European Communities advocates, would have\nraised many difficulties with respect to double coun ting of product, particularly with respect to the\nCCFRS like product.\n2019\n7.790 The European Communities states that it is not in a position to assess the effect in this\nparticular case of the fact that internal consumption has not been taken into account. It submits that it\nis not for the European Communities, which does not have access to the same information which the\nUnited States authorities had, or should have had, to establish what would have been the difference in\nthis case had captive consumption been properly considered. However, the European Communities\nconsiders that it has made a prima facie case that the methodology used by the United States does not\npermit an evaluation of the existence of serious injury consistent with the Agreement on Safeguards.\nIt is not in a position to apply the correct methodology, and consequently determine the difference a\nproper examination would have made to the serious in jury determination. Needless to say, while the\nUSITC neglected to examine profits and losses on internal consumption for all product bundles, for\nthose product bundles with substantial proportion of in ternal consumption the effect of this exclusion\nmay well be significant.\n2020 In any event, the United States was obliged to explain why it did not\nexamine such production, even where only a small proportion of production was internally consumed,\nand why only examining the free market sales still allo wed, in its view, to have a reliable basis for a\nWTO consistent serious injury determination. Such a conclusion must be demonstrated by the\ncompetent authorities in their report and not ex post facto before the Panel.\n7.791 The United States submits that the European Communities has failed to establish that there is\nsome objective manner of measuring financial \"performance\" with respect to what is not an arm's-\nlength commercial transaction, but merely a single producer's internal transfer. The United States\nfurther argues that the European Communities has failed to rebut statements made by the United\n\n2016 European Communities' second written submission, para. 306.\n2017 European Communities' written replies to Panel questions Nos. 71 and 151 at the first substantive\nmeeting.\n2018 United States' second written submission, para. 112.\n2019 United States' second written submission, para. 113.\n2020 European Communities' first written submission, para. 424, Figure 30 and common annex B –\ntables 1-15.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nStates about the lack of objective data pertaining to financial performance concerning internal\ntransfers.2021\n7.792 The European Communities concludes that it is clear that the USITC has, by failing to\nexamine performance on production for internal consumption, failed both to ensure an examination of\nthe performance of the industry as a whole and to examine, where it has examined only a segment,\nother segments in an equivalent manner. The European Communities submits, therefore, that the\nUSITC's findings are not reasoned and adequate and should not be upheld. In addition, the USITC\nfailed to explain, in a reasoned and adequate manner, how it ensured that the allocation of costs\nbetween production for commercial sales and intern al consumption was verified and ensured to be\nconsistent across the various producers which responded. As a result of these two failings, the\nUSITC's injury determination is inconsistent with Articles 2.1, 4.2(a), 3.1 and 4.2(c) of the Agreement\non Safeguards.2022\n(ii) Confidential information\n7.793 The European Communities argues that, despite the numerous injunctions of the Appellate\nBody, the USITC failed to provide a reasoned and adequate explanation of the basis for its findings\nbecause it did not provide substantial data elements. 2023 More particularly, the European\nCommunities argues that the findings in the USITC Report fail to provide a reasoned and adequate\nexplanation of the determination because it kept confidential, or fails to provide, significant swathes\nof information which were necessary to properly assess the correctness of the USITC's findings with\nrespect to the existence of serious injury and that this also affected the determination of the existence\nof a causal link.\n2024 The European Communities argues that th is failing is particularly relevant with\nrespect to the product groups of CCFRS, stainless steel rod, stainless steel wire and stainless steel\nbar.2025 The European Communities argues that this v itiates both the USITC's injury finding and the\ncausation finding given that causation is established by relating and comparing the trends between the\ninjury indicators and increased imports.\n2026\n7.794 With regard to CCFRS, the European Commun ities argues that the overall tables for flat\nproducts, that is, the tables in which the USITC had aggregated slab, plate, hot-rolled, cold-rolled,\ncoated, grain oriented electrical steel and tin mill were regarded as confidential by the USITC. 2027\nWith respect to stainless steel rod, the USITC did not provide any data with respect to \"trade and\nemployment\" (i.e. capacity, production, shipments, inventories and employment), \"financial\nindicators\" (i.e. results of operations) and price comp arisons. Similarly, with regard to stainless steel\nbar and stainless steel wire, no data was provided on the financial performance of the industry. The\nEuropean Communities argues that none of these determinations are, therefore, consistent with\nArticles 4.2(a) and 4.2(b) of the Agreement on Safeguards.\n2028 The European Communities also\nargues that no or only partial data was provided with respect to undercutting or underselling for slabs;\ncoated; cold-finished bar; certain pipe products; carbon and alloy fittings and flanges; stainless steel\nbar; and stainless steel rod.\n2029\n\n2021 United States' second written submission, para. 111.\n2022 European Communities' second written submission, para. 307.\n2023 European Communities' first written submission, para. 378.\n2024 European Communities' first written submission, paras. 407-408.\n2025 European Communities' first written submission, para. 409.\n2026 European Communities' first written submission, paras. 378-379.\n2027 European Communities' first written submission, para. 413.\n2028 European Communities' first written submission, para. 416.\n2029 European Communities' first written submission, para. 417.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.795 According to the United States, other than to make a general claim that the United States\nacted inconsistently with its obligations by not publishing the confidential data, the European\nCommunities does not ask for the tables either in their confidential form or in an indexed form. Nor\ndoes the European Communities assert that any of the redacted information is necessary or\nappropriate to the Panel's evaluation of its claims, or ask the Panel to invoke Article 13.1 of the\nDSU.\n2030 The United States notes that the European Communities in particular claims that the USITC\nviolated Article 3.1 by failing to publish certain \"aggregated data\" regarding domestic flat-rolled steel\nproducers.2031 In this regard, the United States points out that in its report, the USITC published data\nregarding the \"results of operations of US producers\", and \"U.S. producers' capacity, production,\nshipments, inventories, and employment\" for each fl at-rolled product (i.e., slabs, plate, hot-rolled,\ncold-rolled, coated, and tin) except GOES. The reason data were not published for GOES was that,\nbecause there are only two domestic producers, such publication might reveal confidential company-\nspecific information. The USITC could not publish aggregate flat-rolled data because to do so would\nenable readers to determine GOES information simply by subtracting data for each of the other flat-\nproducts.\n2032\n7.796 The United States argues that the assertion by the European Communities that the USITC\nshould, at the very least, have published \"aggregated data\" to maintain confidentiality, while\ncomplying with the publication requirements of Article 3.1, was rejected by the US – Wheat Gluten\npanel.2033 The United States submits that the panel in US – Wheat Gluten concluded that in view of:\n\"[T]he fundamental importance of maintaining the confidentiality of sensitive\nbusiness information in order to ensure the effectiveness of domestic safeguards\ninvestigations; the discretion implied in Article 3.2 SA for the investigating\nauthorities to determine whether or not \" cause\" has been shown for information to be\ntreated as \"confidential\"; and the specific and mandatory prohibition in that provision\nagainst disclosure by them of such information without permission of the party\nsubmitting it, we cannot find that the United States has violated its obligations under\nArticles 2.1 and 4 SA, nor specifically under Article 4.2(c), by not disclosing, in the\npublished report of the USITC, information qualifying under the USITC policy as\ninformation 'which is by nature confidential or which is provided on a confidential\nbasis,' including aggregate data.\"\n2034\n7.797 The United States continues by stating that most recently, the Panel in US – Line Pipe\nconfirmed that the publication requirements of Article 3.1 must be construed so as not to impair the\nconfidentiality requirements of Article 3.2. In particular, the panel stated that:\n\"In respect of Korea's claim that a failure to include relevant confidential information\nin a published determination constitutes a violation of Articles 3.1 and 4.2(c), we note\nthat the panel in US – Wheat Gluten found that the requirement in Article 4.2(c) to\npublish a 'detailed analysis of the case under investigation' and 'demonstration of the\nrelevance of the factors examined' cannot entail the publication of 'information which\n\n2030 United States' first written submission, para. 1330.\n2031 United States' first written submission, para. 1331.\n2032 United States' first written submission, para. 1332.\n2033 United States' first written submission, para. 1336.\n2034 United States' first written submission, para. 1337.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nis by nature confidential or which is provided on a confidential basis' within the\nmeaning of Article 3.2.\"2035\n7.798 According to the United States, there is no reason why the Panel should not to be guided by\nthe US – Wheat Gluten Panel's finding in respect of the European Communities' Article 4.2(c) claim.\nSimilarly, and given the express reference in Article 4.2(c) to Article 3, the United States notes that it\nfails to see how the Article 3.1 (last sentence) requirement to \"publish a report setting forth their\nfindings and reasoned conclusions reached on all pertinent issues of fact and law\" could entail the\npublication of \"information which is by nature confidential or which is provided on a confidential\nbasis\" within the meaning of Article 3.2. The United States submits that, accordingly, it encourages\nthe Panel to reject the European Communities' clai m that failure to include relevant confidential\ninformation in a published determination is per se a violation of Articles 3.1 and 4.2(c). In the view\nof the United States, there was, therefore, no requirement that the United States publish confidential\ninformation, even in an \"aggregated\" format.\n2036\n7.799 The European Communities argues that Article 11 of the DSU directs panels to, inter alia,\nmake an objective assessment of the facts. The European Communities also relies upon the Appellate\nBody decision in US – Wheat Gluten where, according to the Euro pean Communities, the Appellate\nBody found that the Panel had failed in its duty under Article 11 when, in evaluating the soundness of\nthe USITC's analysis, it relied upon explanations furnished by the United States during the cause of\nproceedings which were not present in the USITC's Report. On the basis of that decision, the\nEuropean Communities argues that a Member applying a safeguard measure must provide all data and\nexplanations sufficient to justify the measure in the report it is required to provide. According to the\nEuropean Communities, this does not oblige a Member to divulge data which are confidential, release\nof which would harm individual enterprises. However, according to the European Communities, it\ndoes require that the Member provide aggregate data in which the data on individual enterprises are\nnot identifiable, or provide indexed data which illustrates the trends in the data. The European\nCommunities submits that such a requirement is, in some senses, the concomitant obligation to that\nimposed on individual enterprises to provide a non-confidential summary of the data, set out in\nArticle 3.2.\n2037\n7.800 The European Communities argues that data may legitimately be kept confidential where only\none company has provided a competent authority with the data which has been used to justify a\nsafeguard measure. In this respect, the European Communities notes that Article 4.1(c) of the\nAgreement on Safeguards defines the \"domestic industry\" as \"producers as a whole\", or \"those whose\ncollective output of the like or directly competitive product constitutes a major proportion of total\ndomestic production\". The European Communities argues that given that serious injury must be\nshown, at the very least, to a \"major proportion\" of production, it must be questioned whether the data\ncan be considered to prove that a \"major proportion\" of the domestic industry has suffered serious\ninjury if only one producer provides data.\n2038\n7.801 The European Communities argues that while it is understood that the USITC was under\ncertain confidentiality obligations under domestic law, this does not excuse the United States from its\nWTO obligations to provide an adequate and reasoned explanation of its factual findings and the legal\nconclusions drawn therefrom. In the European Communities' view, where two or more companies\nhad provided data, the aggregated data would have been sufficient to ensure that confidential\n\n2035 United States' first written submission, para. 1338.\n2036 United States' first written submission, para. 1340.\n2037 European Communities' first written submission, para. 384.\n2038 European Communities' first written submission, para. 387.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncompany-specific information would not come into the public domain. It argues, further, that even\nwhere data had been provided by only one company, such data could have been indexed in a manner\nwhich would be sufficient to demonstrate, in a reasoned and adequate manner, that the safeguard\naction taken was justifiable.\n2039\n7.802 The United States notes that the European Communities is the only complainant in this\nproceeding to raise a claim concerning confidential information. The United States asserts that,\ntherefore, all other complainants found the public USITC Report either to be adequate in this regard,\nor, at least, not a subject to be addressed by them in this dispute.2040\n7.803 The United States notes that the European Communities acknowledges that the United States\nhas certain confidentiality obligations under domestic law and does not ask the United States to\nviolate those obligations or for the United States to provide the confidential versions of the relevant\ndata tables. The United States notes that, indeed, the protections afforded to confidential information\nunder United States law are consistent with similar protections accorded by Article 3.2 of the\nAgreement on Safeguards. 2041 The United States also notes that the European Communities claims\nthat the United States \"could have\" indexed such information in its report, but it apparently now does\nnot seek indexed information either. The European Communities states that it is too late for the\nUnited States \"to cure its insufficient report by providing now the information\". 2042 In response, the\nUnited States argues that whether the United States \"could have\" developed a non-confidential\nsummary of the confidential data does not translate into a requirement that it must have done so. The\nAgreement on Safeguards does not require that a Member publish indexed information or other public\nsummaries as parts of its report, and the European Communities cites no provision in the Agreement\nor panel or Appellate Body findings in support of it s inference that it does. Under Article 3.1 of the\nAgreement, it is sufficient that \"competent authorities shall publish a report setting forth their findings\nand reasoned conclusions reached on all pertinent issues of fact and law\".\n2043\n7.804 The United States notes that the USITC published two versions of its report, a confidential\nversion and a public version. The confidential version was sent to the President and to authorized\npersons under the USITC's administrative protective order (including attorneys representing most of\nthe major EU steel producers). A redacted version was made available to the general public.\nNothing in Articles 3.1 and 4.2(c) of the Agreement on Safeguards requires the competent authorities\nto publish, in a public report, the confidential information that supports their findings and conclusions.\nIndeed, paragraph 2 of Article 3, the second paragraph of the very same article that requires the\ncompetent authorities to publish a report, acknowledges that the competent authorities are likely to\nhave received confidential information in the course of their investigation, and very unambiguously\nstates that \"Such information shall not be disclosed without permission of the party submitting it\".\n2044\n7.805 The United States also asserts that it is not only domestic law which precludes the\nCommission from disclosing confidential informa tion. Article 3.2 of the Agreement on Safeguards\nitself requires that such confidentiality be maintained. The United States refers to the panel in US –\nWheat Gluten which found that:\n\n2039 European Communities' first written submission, para. 418.\n2040 United States' first written submission, para. 1323.\n2041 United States' first written submission, para. 1324.\n2042 United States' first written submission, para. 1325.\n2043 United States' first written submission, para. 1326.\n2044 United States' first written submission, para. 1327.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"Article 3.2 SA places an obligation upon domestic investigating authorities not to\ndisclose – including in their published report setting forth their findings and reasoned\nconclusions reached on all pertinent issues of fact and law and demonstrating the\nrelevance of the factors examined – information which is \"by nature confidential or\nwhich is provided on a confidential basis\" without permission of the party submitting\nit.\"\n2045\n7.806 According to the United States, given that the very terms of Article 4.2(c) expressly\nincorporate the provisions of Article 3, and given the specific and mandatory language of Article 3.2\ndealing with the required treatment of information th at is by nature confidential or is submitted on a\nconfidential basis, the requirement in Article 4.2(c) to publish a \"detailed analysis of the case under\ninvestigation\" and \"demonstration of the relevance of the factors examined\" cannot entail the required\npublication of \"information which is by nature confidential or which is provided on a confidential\nbasis\" within the meaning of Article 3.2 of the Agreement on Safeguards.2046\n7.807 The European Communities argues in counter-response that the USITC, as an investigating\nauthority, was obliged to treat some of the inform ation it received as confidential. This meant that\nthose data could not be disclosed in its public report. The European Communities does not dispute\nthat the United States may refuse to provide specific data when confidential treatment is warranted.\nHowever, that the United States may withhold specific data does not excuse it from its obligation to\nprovide a reasoned and adequate explanation. Without such a reasoned and adequate explanation, the\nPanel cannot make an objective assessment of the matter before it and, with interested WTO\nMembers, cannot ensure that the conditions necessary for the application of safeguard measures have\nbeen satisfied.\n2047\n7.808 The European Communities further argues that much of the United States' argumentation on\nthis issue has been that it is not required to disclose confidential data. 2048 According to the European\nCommunities, this is besides the point. The Eu ropean Communities has argued that the USITC was\nunder an obligation to provide a reasoned and adequate explanation, and that this could be done in the\nform of the provision of, for example, indexed da ta, or aggregated data. The United States rejected\nthis, arguing that:\n\"[W]hether the United States \"could have\" developed a non-confidential summary of\nthe confidential data does not translate into a requirement that it must have done\nso.\"2049\n7.809 According to the European Communities2050, in so doing, it appeared to deny the obligation to\nprovide a reasoned and adequate explanation of its findings. However, in response to a question from\nthe Panel as to the relationship between the possibility to protect confidential information and the\nobligation to provide a reasoned and adequate explanation the United States opined:\n\"When an investigation involves substantial amounts of confidential information,\nthere are several means by which the authority can satisfy both its Article 3.1\n\n2045 Panel Report, US – Wheat Gluten , para. 8.19 cited in United States' first written submission,\npara. 1334.\n2046 United States' first written submission, para. 1335.\n2047 European Communities' second written submission, para. 308.\n2048 United States' first written submission, paras. 1322-1340.\n2049 European Communities' second written submission, para. 309.\n2050 European Communities' second written submission, para. 310.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nobligation to provide findings and reasoned conclusions, and its Article 3.2 obligation\nnot to disclose confidential information.\"2051\n7.810 The European Communities states that while it would not formulate the applicable law in\nquite the same manner, the European Communities does welcome the fact that the United States\nagrees that the claimed right not to disclose conf idential information coexists with the obligation to\nprovide a reasoned and adequate explanation to meet the \"serious injury\" test in Article 4 of the\nAgreement on Safeguards. The issue then becomes what is required of an investigating authority in\nthe light of the obligation to provide a reasoned and adequate explanation with respect to data that is\nentitled to confidential treatment ?2052\n7.811 The European Communities notes that in an effort to settle this dispute, the European\nCommunities requested the United States to provide information that had been withheld in the public\nversion of the USITC Report. The European Communities states that the United States never\nresponded to that request. It further argues that the United States cannot attempt to cure its\ninsufficient report by now providing the information which, in order to respect Articles 2.1, 4.2, and\n3.1 of the Agreement on Safeguards, should have appeared in the report.\n2053\n7.812 In response, the United States asserts that after meeting with the European Communities\nrepresentatives, USTR informally asked the USITC to review the public version of its report to\ndetermine whether any of the redacted data in the tables was improperly designated as confidential\nand should be disclosed. The USITC found that none of the data had been improperly designated as\nconfidential. Accordingly, there was nothing for the United States to report. The United States\ncomments that the Panel should be aware that the USITC Report contained nearly 400 tables, the\noverwhelming percentage of which were made available in their entirety in the public version of the\nUSITC Report. According to the United States, the European Communities is taking issue with data\nredacted from only 14 of those tables.\n2054\n7.813 In response to a question posed by the Panel, the United States argues that it does not believe\nthat the Article 3.1 requirement to provide a reasoned and adequate explanation and the Article 3.2\nrequirement to protect confidential information are in conflict. An authority's obligation to protect\nconfidential information under Article 3.2 is not conditioned in any way. The first sentence of\nArticle 3.2 states that confidential information \"shall, upon cause being shown, be treated as such by\ncompetent authorities\". Article 3.2 does not state that the authority may release such information if it\nis particularly central to its decision, or if its disclosure would aid in understanding the reasons for its\nfindings and conclusions. Instead, the authority's obligation not to disclose confidential information is\nabsolute. The United States argues that, consequently, the findings and reasoned conclusions that an\nauthority provides under Article 3.1 must be findings and conclusions that do not disclose confidential\ninformation. Indeed, because maintaining confidentiality is an obligation, a Panel cannot take an\nadverse inference against a Member because the Member's competent authority did not disclose\nconfidential information. Instead, the Panel must judge the adequacy of the authority's explanation on\nthe basis of the information the authority could properly disclose.\n2055\n7.814 The United States also argues that when an investigation involves substantial amounts of\nconfidential information, there are several means by which the authority can satisfy both its\n\n2051 United States' written reply to Panel question No. 77 at the first substantive meeting.\n2052 European Communities' second written submission, para. 311.\n2053 European Communities' first written submission, para. 419.\n2054 United States' first written submission, para. 1329.\n2055 United States' written reply to Panel question No. 77 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nArticle 3.1 obligation to provide findings and reasoned conclusions and its Article 3.2 obligation not\nto disclose confidential information. One is to provide a non-confidential narrative discussion of the\nconfidential information. The United States subm its that this is an approach the USITC repeatedly\ntook in its report. For example, in the discussion of price declines for cold-finished bar, the USITC\nhad to redact certain numbers quantifying price declines that appear on page 105 of its report.\nInstead, it characterized the declines as \"dramatic\". Consequently, the nature of its discussion is\nclearly discernible. Even for stainless steel rod, where virtually all data concerning the domestic\nindustry was confidential, the USITC still was able to discuss trends in the industry data in general,\nbut descriptive, terms that enable the Panel to discern the reasons for the USITC's conclusions. In this\nmanner the USITC provided findings and conclusions that did not disclose confidential\ninformation.\n2056\n7.815 In response, the European Communities states that the question is not whether the trend is\n\"discernible\" as a result of the use of the word dr amatic. The issue is whether, in the words of the\nAppellate Body, a competent authority has provided a \"reasoned and adequate explanation of how the\nfacts support its determination\". 2057 The use of the word \"dramatic\" says nothing about whether the\nfacts support the determination that the price decline was \"dramatic\". The European Communities\nstates that it is not suggesting that the United States disclose information which is confidential.\nIndexing pricing developments would be one way of allowing a Panel to determine whether a decline\nin prices was in fact \"dramatic\". Indeed, quoting the finding for which the United States considers\nthat the use of the word \"dramatic\" is sufficient illustrates that the notion of the \"non-confidential\nnarrative discussion\" of confidential information does not permit a competent authority to provide a\nreasoned and adequate explanation of its findings:\n\"[A]verage unit values of the imports trended downward from 1996 to 1998, and the\ndecline accelerated in 1999. [...] Additional evidence that import prices declined\ndramatically in 1999 is provided by data for one-inch round C12L14, the cold-\nfinished bar product for which the Commission obtained significant pricing data\nconcerning imports. Between the fourth quarter of 1998 and the first quarter of 1999,\nimport prices for this product declined by *** percent. They fell an addition ***\npercent between the first and second quarters of 1999, the largest quarterly decline to\nthat point in the period examined.\"\n2058\n7.816 According to the European Communities, there is no indication of how the facts support the\nUSITC's determination that the decline in imports prices was \"dramatic\". Had the data on import\npricing been indexed, the investigating authority, without providing the specific figures, could have\nshown that the decline in prices was of a sufficient magnitude to be qualified as \"dramatic\". Thus,\nproviding a \"non-confidential narrative discussion\" is not sufficient to provide a reasoned and\nadequate explanation of how the facts support the determination.2059\n7.817 With reference to the alleged failure to provide any data (other than import data) for stainless\nsteel rod and the failure to provide financial data for stainless steel bar and stainless steel rod, the\nEuropean Communities notes that for all three products, the European Communities has argued, and\nthe USITC acknowledged, that cost developments (m ostly related to nickel), in addition to energy\n\n2056 United States' written reply to Panel question No. 77 at the first substantive meeting.\n2057 Appellate Body Report, US – Lamb, para. 103.\n2058 USITC Report, Vol. I, p. 105-106, referred to in United States' written reply to Panel question\nNo. 77 at the first substantive meeting, and cited in European Communities' second written submission,\npara. 313.\n2059 European Communities' second written submission, para. 313.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncosts, had a substantial effect on the industry's performance. The European Communities notes that\nwith respect to stainless steel bar, the USITC found that:\n\"While the average unit value of the industry's net commercial sales increased in\n2000 and 2001, the industry's cost of goods sold rose from *** percent of its net sales\nrevenues to *** percent of its net commercial values in 1999, *** percent of net\ncommercial sales in 2000, and *** percent in interim 2001. As a result of these\ndecreasing margins between the industry's cost of goods sold and its net sales values,\nthe industry's operating income levels declined from a profit of *** percent in 1998 to\na loss of *** percent in 1999, recovered only slightly to a minimal profit of ***\npercent in 2000, and then fell to a loss of *** percent in interim 2001.\"\n2060\n7.818 According to the European Communities, increas ing costs may, in certain circumstances be\nan alternative cause of injury. Thus their analysis may be vital. However, because costs for these\nproducts have not been provided on an indexed basis, there is no means to determine whether the facts\nwhich the USITC found supported its determination. The same issue was dealt with in the same\nmanner for stainless steel rod\n2061 and for stainless steel wire.2062 The European Communities submits\nthat perhaps the most striking use of redaction is with respect to arguments of interested parties that\ncertain problems affecting one of the very few domestic producers impacted the overall situation of\nthe domestic industry. For stainless steel rod and bar the USITC noted:\n\"[I]n addition, we also have considered respondent's argument that the industry's\ncondition during the period was affected significantly by the poor operations of the\ndomestic producer AL Tech/Empire. However, ***.\"2063\n7.819 The European Communities asserts that having accepted, therefore, that a Member must\nprovide a reasoned and adequate explanation, even when certain data cannot be disclosed for reasons\nof confidentiality, there can be no doubt that providing only a \"non-confidential narrative discussion\"\nis insufficient to provide a reasoned and adequate explanation of how the facts support a\ndetermination of the existence of serious injury and a causal link. According to the European\nCommunities, the United States proved that it was perfectly capable of providing data in another\nformat which protected the confidentiality of the underlying data, and could potentially provide a\nreasoned and adequate explanation, in its discussion of the proportionality of the measure on Stainless\nSteel Rod.\n2064 The United States, has, therefore, for stainless steel rod, stainless steel bar and stainless\nsteel wire acted inconsistently with Articles 2.1, 4.2(a), 3.1 and 4.2(c) of the Agreement on\nSafeguards.\n2065\n(iii) Recent data\n7.820 The European Communities argues that a Memb er must take account of all information\navailable to it before taking a measure. It asserts that this is an essential element of the provision of\nan adequate and reasoned explanation, especially in relation to determinations of threat of serious\ninjury, which depend on extrapolations of trends. The European Communities argues that if recent\n\n2060 USITC Report, Vol. I, pp. 211-212 (footnotes omitted), cited in European Communities' second\nwritten submission, para. 315.\n2061 USITC Report, Vol. I, pp. 220-221.\n2062 USITC Report, Vol. I, p. 259.\n2063 USITC Report, Vol. I, p. 221, and for Stainless Steel Bar p. 212 where the USITC states, \"We note,\nhowever, that ***\", cited in European Communities' second written submission, para. 316.\n2064 United States' first written submission, paras. 1160-1161.\n2065 European Communities' second written submission, para. 317.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndata that is available before the competent authority decides to impose safeguard measures would\nbring a determination of threat of serious injury into doubt, the competent authority must justify its\ndetermination of threat of serious injury in light of those recent developments. According to the\nEuropean Communities, failing to do so means that the determination is not reasoned and adequate\nand, further, a conclusion by the competent authority that a measure is justified would be inconsistent\nwith Articles 2.1 and 4.2 of the Agreement on Safeguards.2066\n(iv) Analysis of trends\n7.821 The European Communities asserts that the USITC based a number of its determinations (on,\nfor example, capacity utilization, average unit values, cost of raw materials and productivity) on an\nend-to-end comparison (i.e. 1996 against 2000). In so doing, it provided no data that would have\nindicated the trends of the injury indicators over the period of investigation and would have\nconsequently permitted a proper causation analysis. The European Communities argues that the\nabsence of data showing the trends shows that bo th the injury and causation analysis had not been\nadequately reasoned or explained by the USITC.\n2067\n(c) Aggregation of data\n(i) CCFRS\n7.822 The European Communities argues that, as concerns CCFRS, the USITC Report failed to\nprovide a reasoned and adequate explanation of the determination. In particular, the European\nCommunities argues that while separate data sets existed for each of the products which the USITC\ncollapses into the single CCFRS group (that is, for slabs, plate, hot-rolled, cold-rolled and coated),\nthere were no tables that contained data for the five products as grouped together by the USITC.\nThus, the injury findings for the single product group of CCFRS were based on aggregated data from\nthe five individual products. The European Communities argues that there were no means to\ndetermine how the data for CCFRS as a whole had been calculated and, consequently, whether the\nconclusions reached by the USITC are justified.\n2068\n7.823 Further, the European Communities argues that aggregation involved substantial double-\ncounting issues which, it says, must be accommodated in order to avoid that the aggregated data\nbecome unreliable.2069 The European Communities submits that double counting arose as a result of\nthe fact, inter alia, that capacity for some products was also used to produce other products, and that a\nsubstantial proportion of products were consumed in the production of downstream products. The\nEuropean Communities asserts that the USITC was, therefore, aware of these issues as it conducted its\ninvestigation. However, it never provided, in the USITC Report (or elsewhere), a table showing and\nexplaining its adjustment of the data to take account of such double-counting.\n2070\n7.824 The European Communities submits that the United States cannot, at the same time, pretend\nto rely on an aggregated group CCFRS and fail to provide correct data for this artificial group which it\nitself created. According to the European Co mmunities, without such a demonstration, the\ndetermination is not reasoned and adequately explained.2071 The European Communities notes in this\n\n2066 European Communities' first written submission, para. 388.\n2067 European Communities' first written submission, para. 412.\n2068 European Communities' first written submission, para. 410.\n2069 European Communities' first written submission, para. 411.\n2070 European Communities' written reply to Panel question No. 72 at the first substantive meeting.\n2071 European Communities' first written submission, para. 411.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nregard that the overall tables for flat products were regarded as confidential by the USITC. 2072 The\nEuropean Communities states that, in any event, these tables would not have provided a fully accurate\npicture of the group of CCFRS because they also included data for GOES and tin mill products.\n2073\n7.825 In response, the United States submits that in conducting its investigation, the USITC\nrecognized that the internal consumption of ty pes of CCFRS to produce other such downstream\nproducts could lead to double-counting problems if the data for some injury factors (such as\nproduction and capacity) were merely aggregated for the five types of CCFRS. It sought the advice of\nthe parties to the investigation as to how these double-counting issues could be minimized. 2074 I n\nmaking its determinations, the USITC generally relied on combined data for the five types of CCFRS.\nHowever, to account for the double-counting problem, it also examined data for the separate types of\nCCFRS and considered a variety of different ways of measuring these factors, in accordance with\narguments made by representatives of domestic and foreign producers. It found that, in most cases,\nthese separate data showed trends that were sim ilar to the aggregated data for the industry as a\nwhole.\n2075 2076\n(ii) Tin mill products\n7.826 Norway submits that an unspecified number of tin mill producers also produce a variety of\nother types of CCFRS, including slab and also hot-end production (slabs). There is no evidence that\nthe operating results from these parts of the firms have been separated out when establishing which\nfirms are the \"producers of the like product\".2077 Norway submits that when this has not been done, an\nincorrect assessment of injury to the tin mill industry results, given that the alleged injury may be\ncaused to other parts of the operations of these firms.2078\n7.827 In response, the United States submits that Norway is mistaken. Its argument appears to\nassume that, if a United States producer produced several different types of steel, it would report its\ndata to the USITC on the basis of all the products it produced. In fact, the USITC's questionnaire\ninstructions required each domestic producer to report all data, including financial data, separately for\neach of the 33 categories of steel.\n2079 Since tin mill was a distinct category for data collection, a\nproducer that produced both tin mill and other types of steel covered by the investigation would have\nreported its tin mill data separately from data on other categories. Furthermore, the USITC staff\nexamined all domestic producer questionnaire responses to ascertain whether they contained data\ndiscrepancies on reported information on factors including shipments, sales, and capacity.2080 2081\n(d) Decision-making processes in the context of the USITC's injury determinations\n7.828 China argues that because of the tie-vote situation in relation to stainless steel wire, the\ninvestigation with respect to this product was not completed until the President decided, in his\nProclamation, which determination he was in favour of. China notes that at Article 4 of the\nPresidential Proclamation, the President decided to \"consider the determination of the groups of\n\n2072 European Communities' first written submission, para. 413.\n2073 European Communities' first written submission, para. 413.\n2074 USITC Report, p. FLAT-15 n. 11, p. FLAT-30 footnote 13, and FLAT-44 footnote 14.\n2075 USITC Report, p. 51 footnote 193, and p. 56 footnote 232.\n2076 United States' written reply to Panel question No. 24 at the second substantive meeting.\n2077 Norway's first written submission, para. 236.\n2078 Norway's second written submission, para. 73.\n2079 Exhibit US-22 (questionnaire instructions); United States' first written submission, para. 319.\n2080 USITC Report, p. OVERVIEW-7.\n2081 United States' written reply to Panel question No. 25 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncommissioners voting in the affirmative\" with regard to stainless steel wire. China asserts, however,\nthat the Commissioners voting in the affirmative did not agree upon a single and common\ndetermination and the President did not state precisely according to which views he decided to vote in\nfavour of a safeguard measure. China argues that, accordingly, the decision of the President was not\nsupported by clear explanations of why he found that the stainless steel wire industry was suffering\ninjury or threat of serious injury. On the basis of the foregoing, China submits that it is very difficult\nto determine whether injury factors were properly examined and whether sufficient and sound\nexplanations were given for the Presidential determination.\n2082\n7.829 In response to a question posed by the Panel, the United States notes that Chairman Koplan\nfound threat of serious injury based on a like product of stainless steel wire, Commissioner Bragg\nfound threat of serious injury based on a like product of \"stainless steel wire products\" (including both\nstainless steel wire and stainless steel wire rope ), Commissioner Devaney found serious injury based\non a like product of stainless steel wire produc ts, and the other three USITC Commissioners made\nnegative determinations with respect to stainless steel wire. The United States argues that for\npurposes of determining whether increased imports are causing serious injury to a domestic industry,\nthe \"determination of the competent authorities\" is a matter of the Member's domestic law. There is a\nwell-established practice under United States law that when USITC Commissioners disagree with\nrespect to the like product definition, the USITC determination is based on the overlap of the\ndeterminations of the individual Commissioners. The United States submits that, here, the six\nCommissioners produced three affirmative and three negative individual determinations concerning\nstainless steel wire. Under United States domestic law, the President may treat the USITC's equally\ndivided determination as an affirmative determination. An overlap of decisions is acceptable as long\nas each decision-maker addressed the goods in question and found that the increased imports caused\nserious injury or threat of serious injury.\n 2083\n7.830 The United States notes that there is also the separate question of whether the competent\nauthority has presented the \"findings and reasoned conclusions reached on all pertinent issues of fact\nand law\" for its determination required by Article 3.1. The United States submits that United States\nlaw differentiates between the determination, which is the USITC's conclusion, and the explanation of\nthe determination. When an authority such as the USITC has multiple members and these members\ndo not issue a collective opinion in support of their determination, the Panel should refer to the\nopinion for each individual member of the authority whose vote was necessary for the authority to\nreach its determination. The United States argues that the Article 3.1 requirement is satisfied when\neach member has provided findings and reasoned conclusions that support the ultimate conclusion he\nor she reached with respect to the goods in question.\n2084\nH. CAUSATION\n1. Definition and establishment of \"causal link\"\n7.831 Norway, Brazil and other complainants argue that Articles 2.1 and 4.2(b) of the Agreement on\nSafeguards mean that Members must demonstrate an explicit \"causal link\" between the increase in\nimports and any serious injury suffered by the domestic industry.2085\n\n2082 China's first written submission, para. 348.\n2083 United States' written reply to Panel question No. 78 at the first substantive meeting.\n2084 United States' written reply to Panel question No. 78 at the first substantive meeting.\n2085 Norway's first written submission, para. 285; Brazil's first written submission, para. 147.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.832 China and New Zealand submit that, on the basis of Appellate Body jurisprudence, a\ncompetent authority's task in determining whethe r the causal link between increased imports and\nserious injury exists \"involves a genuine and substantial relationship of cause and effect\".2086 In doing\nthis, the competent authority must establish the coincidence between increased imports and serious\ninjury, it must not attribute to increased imports injury caused by other factors, and it must establish\nnon-attribution explicitly and expressly through a reasoned, clear, unambiguous and straightforward\nexplanation.2087 Switzerland and Norway consider that the determination of the existence of a genuine\nand substantial relationship of cause and effect usually involves two elements: first, there is typically\na coincidence in trends between serious injury and increased imports and second, the transmission of\nserious injury by increased imports must be shown, in the light of the coincidence (or lack of)\nbetween trends.\n2088\n7.833 New Zealand adds that Articles 4.2(a) and (b) in combination underline the importance of\nensuring that the competent authorities substantia te their determination that increased imports have\ncaused, or threaten to cause serious injury through a proper and objective assessment of all relevant\nfactors bearing on the industry. In New Zealand's view, only in this way can the requisite \"causal\nlink\", as specifically referred to in Article 4.2(b), be demonstrated.\n2089\n7.834 The United States notes that the Appellate Body has described the basic requirements\napplicable to a causation analysis under the Agreement on Safeguards on several occasions. 2090 As a\ngeneral matter, the Appellate Body has stated that Article 4.2(b) of the Agreement on Safeguards\ncontains \"two distinct legal requirements\" that must be satisfied for a safeguard action to comply with\nthe Agreement. First, as indicated in the first sentence of Article 4.2(b), the authority must\ndemonstrate the \"'existence of the causal link between increased imports of the product concerned and\nserious injury or threat thereof.'\" Second, as set forth in the second sentence of Article 4.2(b), the\ncompetent authority must ensure that the \"injury caused by factors other than the increased imports\n[is] … not … attributed to increased imports.\"\n2091\n2. Correlation\n7.835 The European Communities, Japan, Korea, Switzerland, Norway, New Zealand and Brazil\nargue that the Appellate Body in Argentina – Footwear (EC) stated that if causation is present,\nincreased imports \"normally should coincide\" w ith a decline in the relevant injury factors. 2092 New\nZealand further argues that a coincidence between increased imports and injury factors will provide\nan important initial indication of a causal link 2093 and that a competent authority should demonstrate\nsuch coincidence. 2094 According to the European Co mmunities and Brazil, the facts must\n\n2086 China's first written submission, para. 352; New Zealand's first written submission, para. 4.111.\n2087 New Zealand's first written submission, para. 4.111; China's first written submission, para. 352.\n2088 Switzerland's first written submission, para. 292; Norway's first written submission, para. 293.\n2089 New Zealand's first written submission, para. 4.110.\n2090 The United States cites the Appellate Body Reports, US – Line Pipe , paras. 200-222; US – Lamb\nMeat, paras. 162-188; US – Wheat Gluten, paras. 60-92; Argentina – Footwear (EC), paras. 140-47.\n2091 United States' first written submission, para. 401.\n2092 European Communities' written reply to Panel question No. 81 at the first substantive meeting;\nJapan's written reply to Panel question No. 81 at the first substantive meeting; Japan's second written\nsubmission, para. 113; Korea's first written submission, para. 103; Switzerland's written reply to Panel question\nNo. 81 at the first substantive meeting; Norway's first written submission, para. 283; New Zealand's written\nreply Panel question No. 81 at the first substantive meeting; Brazil's second written submission, para. 63;\nBrazil's written reply to Panel question No. 81 at the first substantive meeting.\n2093 New Zealand's first written submission, para. 4.113.\n2094 New Zealand's first written submission, para. 4.112.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndemonstrate, at a minimum, a correlation in time between the increased imports and the decline in\nindustry performance.2095\n7.836 New Zealand notes that the Appellate Body has not set out abstract mathematical parameters\nfor how close a degree of coincidence is required. 2096 Similarly, the European Communities and\nNorway argue that there is no mathematical formula which dictates the applicable time-frame for\nestablishing causal link. 2097 Likewise, Japan and Brazil argue that it is impossible to put forward a\nprecise standard.2098 Nevertheless, the European Communities, Switzerland and Norway argue that\nthe degree of coincidence between the increased imports and the serious injury suffered should be\nsignificant.2099\n7.837 Japan, Switzerland and Brazil submit that the term \"coincide\" implies a very tight correlation\nbetween increased imports and injury within a narr ow period of time. Indeed, the Oxford English\nDictionary defines \"coincide\" as, to \"[o]ccupy the same portion of space ... [o]ccur at or during the\nsame time\".2100 Korea argues that the relevance of the coincidence of time between increased imports\nand materialization of injury is that there logically should be a close connection.2101\n7.838 The European Communities and Brazil argue that absent this correlation, the increase in\nimports cannot be said to have caused the serious injury. 2102 More particularly, Brazil submits that in\nthe absence of a correlation between increased imports and serious injury, there can be no causal link,\nand no measure applied. 2103 Similarly, Norway argues that if there is no correlation between the\nincrease in imports and the serious injury suffered, it is highly doubtful that a causal link exists.2104\n7.839 The European Communities, Japan and Brazil argue that if there is no coincidence, it is still\npossible that there is a causal link, but a competent authority must provide a \"very compelling\nanalysis\" of this causal link. 2105 Switzerland and Norway also submit that in the absence of\ncoincidence, a \"compelling analysis\" is needed that establishes the existence of a genuine and\nsubstantial relationship of cause and effect between increased imports and the serious injury allegedly\nsuffered, in the light of the coincidence of trends, and the means by which such injury is transmitted\n\n2095 European Communities first written submission, para. 438; Brazil's first written submission,\npara. 149.\n2096 New Zealand's written reply to Panel question No. 81 at the first substantive meeting.\n2097 European Communities' written reply to Panel question No. 81at the first substantive meeting;\nNorway's written reply to Panel question No. 86 at the first substantive meeting.\n2098 Japan's written reply to Panel question No. 81 at the first substantive meeting; Brazil's written\nreply to Panel question No. 81 at the first substantive meeting.\n2099 European Communities' first written submission, para. 451; Switzerland's first written submission,\n2100 Japan's written reply to Panel question No. 81 at the first substantive meeting; Japan's second\nwritten submission, para. 113; Switzerland's written reply to Panel question No. 81 at the first substantive\nmeeting; Brazil's second written submission, para. 63; Brazil's written reply to Panel question No. 81 at the\nfirst substantive meeting.\n2101 Korea's written reply to Panel question No. 81 at the first substantive meeting\n2102 European Communities' first written submission, para. 438; Brazil's first written submission,\npara. 149.\n2103 Brazil's second written submission, para. 62.\n2104 Norway's first written submission, para. 283.\n2105 European Communities first written submission, paras. 450 and 453; Japan's second written\nsubmission, para. 114; Brazil's written reply to Panel question No. 81 at the first substantive meeting; Japan's\nwritten reply Panel question No. 81 at the first substantive meeting. Reference is made in this regard to\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nby increased imports. 2106 Japan and Brazil say that, at a minimum, some level of demonstrable,\nrelevant and \"very compelling\" correlation between increased imports and serious injury must\nexist.\n2107\n7.840 The United States argues that the Appellate Body has consistently stated that the \"primary\nobjective\" of a Member when conducting a safeguards investigation is to \"determine whether there is\n'a genuine and substantial relationship of cause and effect' between increased imports and serious\ninjury and threat thereof.\" Accordingly, the Unit ed States asserts that, when interpreting Article\n4.2(a) and 4.2(b), first sentence, of the Agreement, the Appellate Body has stated that the \"central\"\nconsideration in a causation analysis is assessing whether there is a \"relationship between the\nmovements in imports (volume and market share) and the movement in injury factors.\" The United\nStates adds that, the Appellate Body has indicated that, even in the absence of a \"coincidence between\nan increase in imports and a decline in the rele vant injury factors,\" a competent authority is not\nprecluded from finding that there is the requisite causal link between increased imports and serious\ninjury; instead, the competent authority may still find the causal link needed to justify a safeguard\naction if the authority provides a \"compelling analysis of why causation is still present.\"\n2108\n7.841 The United States adds that, for the ten steel products for which the President imposed a\nsafeguard remedy, the USITC considered all of the record evidence and concluded that there was a\nclear correlation between the volume and price trends of imports and declines in the overall condition\nof the industry. Moreover, for each product, the USITC also conducted a detailed and well-reasoned\ndiscussion of the ample record evidence showing that there was a genuine and substantial correlation\nbetween increased imports and serious injury.\n2109\n7.842 The United States argues that although th e complainants correctly recognize that the\nAppellate Body has indicated that there should \"n ormally\" be a \"relationship between the movements\nin imports (volume and market share) and the movement in injury factors\", their arguments in this\nregard generally focus almost exclusively on an analysis of correlations in import and industry trends\nwithin the same calendar year. This approach fails to appreciate that the full impact of an increase in\nimport volumes or a decline in import prices in one calendar year may not be fully reflected in the\ncondition of the industry until the next calendar year, or even the year after.\n2110 The United States\nalso argues that, in many instances, the complainants improperly focus solely on year-to-year\ncorrelations between changes in import volumes and changes in industry injury indicia without\nrecognizing that changes in an industry's condition can be the result of both volume and price-based\nimport competition.\n2111 The United States argues that the sort of analysis urged by the complainants –\nthat is, an examination only of the correlations between trends in import volume and industry\nprofitability levels – would reflect an imprecise and demonstrably incomplete assessment of whether\nincreased imports, and their pricing patterns, had seriously injured the domestic industry.2112\n7.843 Korea argues that a lag or disconnect between the increased imports and the serious injury\nshows the high likelihood that the impact identified is caused by other external factors and not the\nincreased imports. Furthermore, in such a case, the competent authorities should provide an\n\n2106 Switzerland's first written submission, para. 294; Norway's first written submission, para. 296.\n2107 Japan's second written submission, para. 114; Japan's written reply to Panel question No. 81 at the\nfirst substantive meeting; Brazil's written reply to Panel question No. 81 at the first substantive meeting.\n2108 United States' first written submission, paras. 402-403.\n2109 United States' first written submission, para. 425; United States' second oral statement, para. 63.\n2110 United States' first written submission, para. 446.\n2111 United States' first written submission, para. 448.\n2112 United States' first written submission, para. 449.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexplanation why and how they still found a causation between the increased imports and the serious\ninjury despite a lack of coincidence.2113 Similarly, Japan and Brazil concede that it might be possible\nto find a correlation between increased imports and injury in situations where the effect is lagged.\nHowever, they argue that it would be for the \"com pelling analysis\" to explain why such a lag exists\nand how it operates. In this respect, they assert that the existence of a causal lag is industry and\nmarket specific.2114 The European Communities, Japan, Korea, New Zealand and Brazil argue that\nthe more attenuated the occurrence of serious injury is from the increase in imports (that is, the greater\nthe lapse of time) the more likely that the injury found is due to factors other than the increased\nimports.2115 The authorities, therefore, have a higher burden to establish by compelling evidence that\nthe relationship nonetheless exists in such circumstances.2116\n7.844 In response, the United States argues that these complainants appear to agree with the United\nStates that imports can have a direct, albeit lagged, impact on certain indicia of an industry's\ncondition. In response to questions from the Panel, the United States notes that the complainants have\nconceded the Agreement on Safeguards does not require increased imports to have a direct and\nimmediate impact on all indicia of an industry's condition in the same year when an import surge\noccurs. As recognized by the European Communities, under the Agreement on Safeguards, \"there is\nno mathematical formula which dictates the applicable time frame for establishing [a] causal link\"\nbetween imports and declines in the condition of the industry during the period of investigation.\nSimilarly, Japan agrees that there is \"no test for determining when the effect of increased imports on\nthe domestic industry must materialize.\" In other words, like several other complainants, Japan and\nthe European Communities clearly recognize that the nature of the temporal \"correlation\" between\nimport increases and changes in an industry's condition is dependant upon the performance factors\nbeing examined and the manner in which imports affect those factors.\n2117\n7.845 As a result, the United States argues that the complainants are mistaken when they argue that\na competent authority must provide a \"more compelling\" causation analysis if there is a time lag\nbetween an increase in imports and declines in certain performance factors of the industry. According\nto the United States, it is simply not the case that a temporal lag between import increases and\ndeclines in industry performance factors indicates a lack of \"correlation\" or coincidence between the\nimport increase and the performance declines. Natural business cycles or other external factors may\ncause imports to have a direct but delayed impact on one or more of an industry's performance\nindicia.2118\n7.846 The United States argues that an import increase can have an immediate and direct impact on\nmany performance factors for an industry, such as market share, production levels, or shipment\n\n2113 Korea's written reply to Panel question No. 81 at the first substantive meeting; Korea's second\nwritten submission, para. 135; New Zealand's written reply to Panel question No. 81 at the first substantive\nmeeting.\n2114 Japan's written reply to Panel question No. 81 at the first substantive meeting; Brazil's written reply\nto Panel question No. 81 at the first substantive meeting.\n2115 European Communities' written reply to Panel question No. 81 at the first substantive meeting;\nJapan's written reply to Panel question No. 86 at the first substantive meeting; Korea's written reply to Panel\nquestion No. 86 at the first substantive meeting; Korea's second written submission, para. 140; New Zealand's\nwritten reply to Panel question No.86 at the first substantive meeting; Brazil's written reply to Panel question\nNo. 86 at the first substantive meeting.\n2116 Korea's written reply to Panel question No. 86 at the first substantive meeting; Norway's written\nreply to Panel question No. 86 at the first substantive meeting.\n2117 United States' second written submission at paras. 117-18.\n2118 United States' second written submission, para. 125.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlevels.2119 Notwithstanding this, an increase in imports can also have a direct but delayed impact on\ncertain performance factors for an industry, such as the industry's employment levels, capital\ninvestment levels, or its research and development expenses. For example, a company affected by a\nsubstantial surge of imports in one year will not necessarily immediately go into bankruptcy.\n2120 On\nthe contrary, most companies will take every action possible to avoid entering bankruptcy because\nentering bankruptcy will have a substantial negative impact on their commercial reputation and their\naccess to capital. Accordingly, companies may delay entering bankruptcy for a number of years, even\nafter their business has been seriously harmed by a major event such as a sudden and serious surge in\nimports.2121 The United States submits that similarly, a company may not immediately cut its\nworkforce when imports first surge into a market. Instead, the company might reasonably take some\ntime to assess whether import increases appeared to reduce its shipment or pricing levels over an\nextended period, which might indicate that a long-term reduction in the company's work force was\nnecessary to reduce its costs. 2122 Indeed, it is possible that an increase in imports can have both an\nimmediate and a delayed impact on one of the industry's performance factors.2123\n7.847 In response to this particular argument, Japan argues that the United States offers the\nsimplistic argument that bankruptcies and labour reductions are inherently delayed reactions to\nmarket-driven events. Japan argues that, however, this argument misses the point. The question is\nwhat caused the bankruptcies and labor reductions. The answer is a decline in sales revenue and\nprofits, which was caused by a decline in prices, as the domestic industry argued and the USITC\nfound.\n2124 The USITC considered this as evidence of the industry's injury, but failed to correlate the\ndeclining domestic prices to increased imports, which, in fact, stopped increasing in 1998. The\nquestion that should have been asked, therefore, is what caused domestic prices to decline. As\nargued, price effects are far more immediate than ba nkruptcies and labour reductions, assuming there\nis no inventory overhang. As there was no inventory overhang in this case, the lack of correlation\nbetween import increases and domestic price declines shows that something other than the two-year-\nold increase in imports was affecting the industry. In proceedings before the USITC, respondents\ndemonstrated the effects of other causes, with which there was a clear correlation with industry\nperformance, but the USITC ignored these proven effects.\n2125\n7.848 The United States notes that in the anti-dumping context, an adopted panel report has\nspecifically found that there need not be an immediate temporal link between import trends and\ndeclines in an industry's condition to establish a causal link between imports and those declines. 2126\nIn Egypt – Steel Rebar , the Panel rejected Turkey's contention that there must be a strict temporal\nconnection between the dumped imports and any injury being suffered by the industry, noting that this\nargument:\n\"… rest[ed] on the artificial assumption that the market instantly absorbs, and reacts\nto, imports the moment they enter the territory of the importing country. Such an\nassumption implicitly rests on the existence of so-called \"perfect information\" in the\n\n2119 United States' second written submission, para. 119.\n2121 United States' second written submission, para. 120.\n2122 United States' second written submission, para. 121.\n2123 United States' second written submission, para. 122; See also United States' written reply to Panel\nquestion No. 28 at the second substantive meeting\n2124 USITC Report at 62 and 63.\n2125 Japan's written reply to Panel question No. 28 at the second substantive meeting.\n2126 United States' second written submission, para. 123.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmarket (i.e., that all actors in the market are instantly aware of all market\nsignals.)\" 2127\n7.849 According to the United States, in other wo rds, the Panel concluded that a competent\nauthority need not be expected to find that there is a direct and immediate causal link between imports\nand downward trends in an industry's condition, as the complainants consistently urge.\n7.850 Accordingly, the United States contends, the complainants are mistaken when they argue that\na competent authority must provide a \"more compelling\" causation analysis if there is a time lag\nbetween an increase in imports and declines in certain performance factors of the industry. It is\nsimply not the case – as the complainants assume – that a temporal lag between import increases and\ndeclines in industry performance factors indicates a lack of \"correlation\" or coincidence between the\nimport increase and the performance declines. Natural business cycles or other external factors may\ncause imports to have a direct but delayed impact on one or more of an industry's performance\nindicia.\n2128\n7.851 In light of the foregoing, the United States submits that the Panel need not apply a heightened\nstandard of scrutiny to the USITC's analysis simply because there is a temporal lag between an import\nincrease and declines in certain of the performance factors for an industry. Instead, the sole inquiry\nfor the Panel should be whether the USITC's explanation of the causal link between imports and the\ndeclines in the industry's condition is \"reasoned\", \"adequate\", and \"clear\" as established in US Line –\nPipe.2129\n7.852 Japan and Brazil also submit that in the case of the steel industry, there are active spot\nmarkets. In other words, they submit that sales are made on a \"spot\" basis rather than a contract basis.\nThey argue that this is particularly true for CCFRS products. Thus, if imports themselves are having\nan effect on domestic prices, that effect will be seen quickly in changes in domestic industry spot\nmarket prices. For the same reason, volume effects also can be seen quickly. Japan and Brazil argue\nthat while inventory is an important consideration, the inventory levels in this case do not suggest\nextended lingering effects. The inventory levels were approximately one month or less. Thus,\naccording to the European Communities, Japan, Korea, New Zealand and Brazil, the United States\nargument that imports in 1998 could have lingerin g adverse effects at the end of 1999 is extremely\nremote and was certainly not proven by the USITC.\n2130 Brazil argues that the data relied upon and\narguments made by the United States, whether based on volume or price, do not support the \"lingering\neffects\" theory, and certainly not in a \"compelling\" way. Brazil submits that this is clear from a brief\nreview of the volume and pricing information that was before the USITC and from the simplistic\nassumptions made by the USITC that are never substantiated.\n2131\n7.853 The United States submits that while there is a substantial volume of spot sales in the CCFRS\nmarket, the market is characterised by a more substantial volume of sales. The United States submits\n\n2127 Panel Report, Egypt – Steel Rebar, para. 7.129.\n2128 United States' second written submission, para. 124.\n2129 United States' second written submission, para. 125.\n2130 European Communities' written reply to Panel question No. 28 at the second substantive meeting;\nJapan's written reply to Panel question No. 86 at the first substantive meeting referring to USITC Report Vol. II\nat Table FLAT-49; Japan's written reply to Panel question No. 28 at the second substantive meeting; Korea's\nwritten reply to Panel question No. 28 at the second substantive meeting; New Zealand's written reply to Panel\nquestion No. 28 at the second substantive meeting; Brazil's written reply to Panel question No. 86 at the first\nsubstantive meeting; Brazil's written reply to Panel question No. 28 at the second substantive meeting\n2131 Japan's second written submission, para. 12; Brazil's second written submission, para. 69; Brazil's\nwritten reply to Panel question No. 27 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat, more specifically, of the 233 purchasers who reported making all or nearly all of their purchases\non a spot or contract basis, 128 (or 54%) reported making all or nearly all of their purchases on a\ncontract basis. Moreover, of the 73 purchasers who reported making substantial amounts of both\ncontract and spot purchases, more than twice as many purchasers reported making the larger\npercentage of their purchases on a contract basis.\n2132 In other words, the carbon flat-rolled market\ncannot be described as merely a spot market; indeed, the majority of purchase decisions in the market\nare made on a contract basis. Moreover, given the importance of contract sales in the market, it is\nincorrect for Brazil to suggest that spot prices are the main determinant of pricing levels in the market.\nQuite clearly, contractual pricing had an important role in market pricing as well.2133\n7.854 Brazil further submits that the United States seemingly understands and appreciates the\nsignificance of the need to find a causal link between increased imports and serious injury to the\ndomestic industry before a measure may be imposed. 2134 However, according to Brazil, the United\nStates never meets its burden of showing how the USITC actually demonstrated a causal link in this\ncase, nor does the attempt by the United States at rehabilitation of the USITC's \"analysis\" suffice.\nBrazil submits that increased imports did not \"coincide\" with a decline in the relevant injury factors of\nthe domestic industry, and the USITC did not provide a \"very compelling analysis\" of why causation\nwas still present (i.e., some correlation between increased imports and serious injury).\n2135\n7.855 In addition, Japan, Switzerland and Brazil argue, that as a matter of law, there is a limit on\nany time-frame given the threshold requirement under Article 2.1 and Article XIX of the GATT 1947\nthat increased imports be recent.\n2136 Japan, Korea and Brazil argue that a two-year lag, which they\ncontend existed in this case, fails this requirement. 2137 Korea, Norway and Brazil submit that there\nwas no compelling analysis supporting a lag effect and that, rather, the facts support the opposite\nconclusion. Similarly, Norway argues that the lag effect that has been put forward by the United\nStates is not substantiated – product by product – by the \"compelling analysis of why causation is still\npresent\" required by the Appellate Body.\n2138 Brazil submits further that the United States authorities\nhave provided what, at most, is only a theoretically possible explanation and that that explanation\nignores other crucial evidence. 2139 Similarly, Korea argues that the United States has not\ndemonstrated the \"vehicle\" or means by which the mu ch earlier increase in imports resulted in the\nserious injury that occurred much later and the USITC certainly did not document that causal link. 2140\nKorea adds that the required \"compelling analysis\" must be found in the USITC Report itself and\ncannot be offered by the United States via ex post facto justifications.\n2141\n7.856 The United States also argues that the complainants routinely present causation arguments\nthat are based primarily on comparisons of imports trends with a limited number of selectively chosen\n\n2132 USITC Report, Vol. II, p. FLAT-61.\n2133 United States' written reply to Panel question No. 27 at the second substantive meeting.\n2134 Brazil's second written submission, para. 62.\n2135 Brazil's second written submission, para. 62.\n2136 Japan's written reply to Panel question No. 86 at the first substantive meeting; Switzerland's\nwritten reply to Panel question No. 86 at the first substantive meeting; Brazil's written reply to Panel question\nNo. 86 at the first substantive meeting.\n2137 Japan's written reply to Panel question No. 86 at the first substantive meeting; Japan's second\nwritten submission, para. 115; Korea's second written submission, para. 141; Brazil's written reply to Panel\nquestion No. 86 at the first substantive meeting.\n2138 Korea's second written submission, para. 141; Norway's second written submission, para. 134;\nBrazil's written reply to Panel question No. 81 at the first substantive meeting.\n2139 Brazil's written reply to Panel question No. 86 at the first substantive meeting.\n2140 Korea's written reply to Panel question No. 86 at the first substantive meeting.\n2141 Korea's second written submission, para. 142.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry performance factors. The United States submits that these arguments are flawed because the\nAgreement on Safeguards requires not a focus on one or two selected criteria but on all of the relevant\ncriteria bearing on the condition of the industry. The United States submits that, in fact, the failures of\nthese arguments become even more evident when one recognizes that the complainants routinely\nchange the indicia used in their causation arguments from product to product. For example, the\nUnited States submits that although the European Communities bases its \"causal link\" argument for\nCCFRS on an analysis of such injury factors as the industry's capacity, production, scrap costs, and\nprofitability levels, it bases its \"causal link\" argument for tin mill products almost exclusively on a\ncomparison of the AUV of imports and domestic merchandise. The United States submits that under\nthe Agreement on Safeguards, it is the totality of industry trends, and their interaction, that must be\ntaken into account when a competent authority performs its analysis in a safeguards action.\n2142\n7.857 In counter-response, Brazil argues that for all of the complaints from the United States about\nthe complaining party's use of too narrow a time frame or misleading \"selected data\" to refute the\nexistence of a causal link, Brazil and the other parties have merely de-constructed the USITC's own\nanalysis. Brazil and Korea submit that they have, in fact, examined the entire period of investigation\nin making their arguments. It was the USITC that focused on selective data and a narrow period.\nBrazil argues that, moreover, despite its talk about the need for a broader assessment of the industry\nand imports, the defence by the United States of the USITC Report focuses on the same few factors as\nthe USITC Report itself: import volume, import price, and domestic industry profits.\n2143 Similarly,\nNew Zealand argues that the USITC itself focused on the effect of increased import volumes on\ndomestic prices to the exclusion of other factors. Accordingly, it was this analysis which New\nZealand took issue with.2144\n(a) CCFRS\n(i) Coincidence in time\n7.858 According to Brazil, the USITC's finding of a \"causal link\" was inconsistent with the facts\nand, therefore, violated the requirements of Article 4.2(b) first sentence. Brazil argues that the trends\nin imports and the industry's performance do not provide the correlation demanded by Article 4.2.2145\n7.859 Brazil and Japan argue that while the USITC alleges that the increase in imports and the\ndecline in the domestic CCFRS industry performance occurred at the same time, the facts show that\nany injury by the domestic industry occurred only after imports already began to decline. 2146 More\nparticularly, Brazil and Japan argue that the USITC's crucial assertion that in 1998 a surge in imports\ncaused injury to the domestic industry is unsupported by its own data. According to Japan, Korea and\nBrazil, the evidence shows that when imports were increasing early in the period, the United States\nindustry was not injured; later in the period, when the United States industry arguably was injured,\nimports were decreasing.\n2147 Japan and Brazil argue that, therefore, there was a complete absence of\nany correlation in time between the increased imports and injury to the domestic industry. According\n\n2142 United States' first written submission, para. 450.\n2143 Brazil's second written submission, para. 68; Korea's second written submission, para. 133.\n2144 New Zealand's second written submission, para. 3.100.\n2145 Brazil's first written submission, para. 174.\n2146 Brazil's first written submission, para. 161: Japan's first written submission, para. 231.\n2147 Japan's first written submission, para. 232; Korea's first written submission, paras. 105-108;\nBrazil's first written submission, para. 162;\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto the Appellate Body's jurisprudence, this fails the minimum requirement for establishing a causal\nlink.2148\n7.860 The European Communities, Korea and New Zealand argue that the USITC Report does not\ndemonstrate in any plausible way, a coincidence of trends between increased imports and serious\ninjury2149 and that this calls into question whether there was a substantial relationship between serious\ninjury and imports. 2150 The European Communities asserts that in the absence of a coincidence of\ntrends, the Appellate Body has required \"very compelling\" evidence to demonstrate the existence of a\ncausal link. The European Communities and New Zealand argue that the USITC has provided no\nsuch compelling evidence.2151 In Korea's view, a proper analysis of trends would have revealed that\nimports declined for more than two and a half years, a decline that accelerated during the most recent\n18-month period.2152\n7.861 New Zealand argues that contrary to the Appellate Body's decision in Argentina – Footwear\n(EC), which recognized that trends in both the injury factors and imports matter as much as absolute\nlevels, and that it is the relationship between the movements in imports (volume and market share)\nand the movements in injury factors that are central to a causation analysis and determination, the\nUSITC did not make any serious comparison between the alleged serious injury factor of the inability\nof domestic production operations to function at a reasonable level of profit and trends in either\nvolume or market share of imports. According to New Zealand, a proper comparison of these factors\nwith the domestic operating margin shows no rela tionship between them. Indeed, according to New\nZealand, they prove the opposite of what the USITC assumed.\n2153\n7.862 New Zealand asserts in this regard that there is no relationship between import volumes and\nany injury resulting from declines in domestic ope rating margins. New Zealand submits that a 5%\nrise in import volume of CCFRS, from 1996-1997, coincided with a nearly 2% increase in\ndomestic operating margin in 1997, a 31% rise in imports between 1997 and 1998 coincided with a\n4% operating margin in 1998, and an 18% fall in imports between 1998 and 1999, which then stayed\nat the 1999 level through 2000, coincided with a decline, not an improvement, in the operating margin\nfor 1999 and 2000.\n2154 According to New Zealand, the interim (first half year) figures for 2000 and\n2001 should have indicated to the USITC a trend showing the same lack of coincidence at the end of\nthe period of investigation – a 40% decrease in imports between interim 2000 and interim 2001\ncoincided with a decline in operating margin to – 11.5% for the first half of 2001. The same trend\nindicated that the final 2001 import volume total would be over 30% lower than the 1996 total, when\nthe domestic industry enjoyed an operating margin of 4.3%.\n2155 According to New Zealand, an\nanalysis of each individual product within the CC FRS category would produce essentially the same\nresult. Thus, according to New Zealand, the USITC claim that increases in imports were linked to\ndeclines in domestic operating margins simply cannot be supported.2156\n\n2148 Brazil's first written submission, para. 161: Japan's first written submission, para. 231.\n2149 European Communities' first written submission, para. 471; Korea's first written submission,\npara. 104; New Zealand's first written submission, para. 4.123; New Zealand's written reply to Panel question\nNo. 81 at the first substantive meeting.\n2150 Korea's first written submission, para. 104.\n2151 European Communities' first written submission, para. 471; New Zealand's first written\nsubmission, para. 4.123.\n2152 Korea's first written submission, para. 105.\n2153 New Zealand' first written submission, para. 4.125.\n2154 New Zealand's first written submission, para. 4.126.\n2155 New Zealand's first written submission, para. 4.127.\n2156 New Zealand's first written submission, para. 4.128.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.863 Similarly, Brazil argues that imports of CC FRS increased from 10.0% of production in 1996\nto only 13.2% of production in 1998, before dropping back to 10.5% of production in 2000, and\ndeclining even further in interim 2001. The same trend appears when imports are measured either as\na percentage of the open market or as a percentage of apparent domestic consumption. Moreover, the\nUSITC itself characterized 1996 operating income of 4.3% as \"reasonable operating profits\".\nOperating income in 1998 was virtually the same at 4.0%. Under the circumstances, it would be\ndifficult to conclude that 1998 performance somehow constituted unreasonable operating profits, let\nalone serious injury. Perhaps appreciating the point, Brazil submits that the USITC sought to\nmaximize its \"sharp decline\" theory by focusing on 1997 operating income, which was modestly\nbetter than 1996 or 1998 and constituted a record peak performance for the industry.\n2157 Other indicia\nof industry performance can also be used to make the point. Moreover, the import and industry\nperformance trends for the distinct CCFRS products – hot-rolled, plate, cold-rolled, and corrosion\nresistant – all share the same basic relationship.2158\n7.864 New Zealand adds that the USITC's analysis of movements in import market share of\ndomestic consumption is limited and misleadingly selective in that it highlights certain periodic\nincreases rather than the overall decreasing trend in import market share. It also fails to examine any\ncoincidence between movements in import market share and alleged injury factors.2159\n7.865 The United States argues that the USITC established that there was a clear correlation\nbetween import trends and declines in the industry's condition. The United States notes that the\nUSITC explicitly took into account factors that affected the competitiveness of domestic and imported\nmerchandise in the US market, the trends in import volumes and market share during the period, the\npricing effects of imports, and correlations between these trends and changes in the various indicia of\nthe industry's condition.\n2160 After conducting this examination, the USITC correctly found that there\nwas a clear correlation between increases in low-priced imports and the substantial declines in the\nindustry's condition during the period. In particular, after noting that the volume levels of imports\nremained essentially stable in 1996 and 1997\n2161, the USITC found that a \"dramatic increase in the\nvolume of imports in 1998 – at the midpoint of th e period examined – coincided with sharp declines\nin the domestic industry's performance and condition, which occurred despite growing US demand.\"\nMoreover, the USITC noted that this surge of imports in 1998 entered the market at prices that were\n\"generally significantly lower-priced\" than during the first two years of the period and that imports\nwere priced significantly below domestic merchandise, thus leading to declines in domestic prices.2162\n7.866 The United States argues that, as the USITC correctly noted in its analysis, the record showed\nthat there was a direct correlation between changes in both the volumes and pricing patterns of\nimports during 1998, 1999 and 2000 and declines in the industry's operating margins in those\nyears.2163 According to the United States, the 1998 surg e in import volume did indeed have a clear\nand adverse impact on the overall condition of the industry. In 1998 when import volumes increased\nby 31.3% and import sales values dropped by 8.4% the industry's share of the overall market fell by\n2.5 percentage points, its share of the commercial market fell by more than 5 percentage points, its\naggregate net sales value dropped by 3.0% (despite an increase in its overall net sales quantity of\n0.5%), its average unit sales prices fell by 3.1%, its aggregate gross profits fell by 19.8%, its\n\n2157 USITC Report, Vol. I, p. 62.\n2158 Brazil's second written submission, para. 65.\n2159 New Zealand's first written submission, para. 4.129.\n2160 USITC Report, pp. 60-62.\n2161 USITC Report, pp. 59-60.\n2162 United States' first written submission, paras. 459-63.\n2163 United States' first written submission, paras. 449, 461-464.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\naggregate operating income levels dropped by 36.9%, and its operating income margins fell by 2.1\npercentage points from the previous year's level. These declines, argues the United States, occurred in\na market in which demand grew by 3.2%.\n2164 The United States argues that, moreover, there was a\ndistinct correlation between the volume and price trends of imports and the continuing declines in the\nindustry's condition that occurred in 1999 and 2000. In this regard, even though import volumes\n\"slackened somewhat\" in 1999 and 2000 from their 1998 surge level, import volumes in both years\nremained substantially above 1996 and 1997 levels. Indeed, in the year 2000, import volumes were\n13.7% higher than in 1996. Moreover, these elevated levels of imports continued to be sold at prices\nthat were substantially lower than domestic prices, and were, in fact, lower than their 1996 and 1997\nlevels. As a result of this continued and substantial underselling, imports depressed and suppressed\ndomestic prices in both 1999 and 2000, and caused continued declines in the industry's net unit sales\nvalues, gross profits, operating income, and operating income margins.\n2165 The United States submits\nthat the USITC record supported these findings. The record showed and the USITC correctly found\nthat there was a direct coincidence between the surge in low-priced imports and declines in the\nindustry's condition in 1998.\n2166\n7.867 In counter-response, the European Communities submits that the argument by the United\nStates that it is sufficient to show \"a direct correlation between changes in both the volume and\npricing patterns of imports during 1998, 1999 and 2000 and declines in the industry's operating\nmargins in those years\" implies that it cannot establ ish increased imports for those years and thus has\nto rely on pricing patterns. 2167 The European Communities submits that it is quite clear in the\nAgreement on Safeguards that a competent authority is obliged to establish the existence of a genuine\nand causal link between increased imports and serious injury. 2168 According to the European\nCommunities, pricing levels may be one of the mechanisms by which such increased imports transmit\nor cause injury. However, those pricing levels must be linked to increased imports which satisfy the\nrequirements of the Agreement on Safeguards. Pricing levels existing two years after imports have\npeaked cannot be considered as being linked to the import peak.\n2169\n7.868 New Zealand further argues that the United States' argument that the required coincidence can\nbe established between the import increase from 1997-1998 and injury can be easily disposed of. The\nAgreement on Safeguards requires there to be a coincidence between increased imports and serious\ninjury, not between increased imports and a decline in the industry's condition. There was no\nevidence of injury in 1998, only a slight drop in operating margins to a still healthy 4%. 2170 Finally,\nNew Zealand argues that the argument that injurious effects from that increase in imports (i.e.\nbetween 1997 and 1998) was still occurring in 1999 and some years after that (if accepted as a valid\nbasis for a finding of causation under the Agreement on Safeguards) would denude the coincidence in\ntime requirement of any content. This coincidence did not exist, so the USITC was required to\nprovide a \"very compelling analysis\" of why causation was still present. It could not and did not, and\n\n2164 United States' first written submission, para. 470; United States' second written submission,\npara. 126.\n2165 United States' first written submission, para. 271; United States' second written submission,\npara. 127.\n2166 United States' first written submission, para. 462.\n2167 European Communities' second written submission, para. 370.\n2168 Article 2.1 refers to imports \"in such increased quantities\" as to \"cause or threaten to cause serious\ninjury\" while Article 4.2(a) refers to \"increased impor ts\" which have \"caused or threatened to cause serious\ninjury\" and Article 4.2(b) refers to \"the existence of a causal link between increased imports of the product\nconcerned and serious injury or threat thereof\".\n2169 European Communities' second written submission, para. 371.\n2170 New Zealand's second written submission, para. 3.98.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindeed provided no evidence whatsoever either of delayed ongoing price effects or of the alleged\ninjury this supposedly led to.2171\n7.869 The United States illustrates its arguments regarding lag effects in paragraph 7.840 by stating\nthat a number of CCFRS companies entered bankruptcy in 2000 and 2001 2172 even though imports\nfirst surged into the market in 1998. 2173 Similarly, the United States argues that the CCFRS industry\ndid not immediately reduce the size of its work fo rce in 1998, when CCFRS imports first surged into\nthe United States market, even though the surge caused substantial market share losses, reduced\nprices, and reduced profits for the industry. 2174 Instead, the industry first substantially reduced the\nsize of its work-force in 1999, when it became clear that imports would remain at elevated levels in\nthe market and would continue to cause price declines in the market.\n2175 2176\n7.870 Brazil notes2177 that the USITC stated that:\n\"After the initial import surges in 1998, as noted, the volume of imports slackened\nsomewhat but remained above the levels seen in 1996-1997. One way in which the\nimpact of the massive import volume continued to reverberate beyond 1998 was\nthrough increased inventories. End-of-period inventories held by importers increased\nsubstantially in 1998, as did inventories held by service centers.\"\n2178\n7.871 In light of the foregoing, Korea argues that the USITC's analysis that increased imports in\n1998 had lingering effects hinges on the finding, inter alia , that importers maintained increased\ninventories.2179 Korea argues that the data cited with respect to inventories does not support the\nUSITC's conclusion. Inventory levels turned over rapidly. By way of example, Korea submits that\nthe USITC Report shows inventory levels for all CCFRS inventories held by importers at year-end to\nrange from 7% to 15% of total shipments between 1996 and 20002180 – between 0.6 and 1.2 months of\ninventory over the period. (For many individua l CCFRSproducts, inventory levels never exceeded\none month.) Thus, according to Korea, in less than three months, the volume effects of imports from\nthe previous or ending quarter would have been depleted. Korea submits that since import volumes\nafter 1998 declined\n2181, those import volumes could not have lingering effects at the end of 1999,\nmuch less in 2000 or 2001 as suggested by the United States.2182\n7.872 Similarly, Brazil notes that in 1999, with domestic shipments of CCFRS remaining basically\nstable compared to 1998, in virtually every product category the mills increased their shipments to\n\n2171 New Zealand's second written submission, para. 3.99.\n2172 USITC Report, Table OVERVIEW-11.\n2173 INV-Y-209, Table FLAT-ALT7 (US-33).\n2174 INV-Y-209, Table FLAT-ALT7 (US-33).\n2175 The industry reduced its work force by 4.2% (a total of approximately 4.5 thousand workers) in\n1999. INV-Y-209, Table FLAT-ALT7 (US-33). The industry kept its work force at essentially this level in\n2000. Ibid.\n2176 United States' second written submission, para. 121.\n2177 Brazil's written reply to Panel question No. 28 at the second substantive meeting.\n2178 Views of the Commission – USITC Report, Vol. I at 60.\n2179 Korea's second written submission, para. 142; see also Japan's second written submission,\npara. 116.\n2180 USITC Report, Vol. II, Table FLAT-49 at FLAT -43 (Exhibit CC-6).\n2181 Ibid., The bulk, in absolute terms, of the CCFRS inventories held by importers are composed of\nslab, and slab inventories experienced the greatest growth after 1998 when other flat product inventories\ndeclined or stabilized. The \"importers\" of slab are domestic producers of other flat-rolled products.\n2182 Korea's second written submission, para. 143.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndistributors both absolutely and relative to total shipments, indicating that the distributors were not\ncarrying excess inventory as a result of the 1998 surge in imports and liquidating that inventory rather\nthan buying from United States' mills. In addition, the mills themselves were not carrying\naberrational levels of inventories as a result of the effect of the import surge in 1998 on the market.\nAs a ratio to shipments, mill inventories of hot-rolled and cold-rolled products at the end of 1999 were\nbelow 1997 levels, inventories of slab were almost identical to pre-surge levels both absolutely and\nrelative to shipments, imports of plate were up half a percentage point relative to shipments (because\nof a decline in consumption), and inventories of coated (corrosion resistant) CCFRS products were up\nslightly relative to shipments primarily because the industry increased production by over 3.3 million\ntons while shipments increased only 3.1 million tons. In short, according to Brazil, there is no\nevidence from distributors that the 1998 surge in CCFRS imports created an inventory problem either\nat the mills or at those customers that would be mo st affected by high inventory levels and decrease\npurchases as a result. In discussing inventories, the USITC also failed to note that the end of period\ninventories of the domestic CCFRS producers ac tually declined between 1998 and 1999, going from\n10.5 million tons to 9.8 million tons.\n2183 2184\n7.873 Brazil also notes that the importer inventory data which appears in the USITC Report does\nnot support a finding that the 1998 surge in CCFRS imports created a build-up of inventory at the\nimporter level which hung over the market into 1999, 2000 and interim 2001. First, the CCFRS\ninventory levels of importers at the end of 1998 had only increased from 27 days to 32 days of\nshipments. By the end of 1999, the inventory leve ls of finished CCFRS products held by importers\nwas only slightly above the level of 1997 and comparable relative to shipments to 1997 levels. The\nonly apparent lingering inventory problem was a significant increase in inventories of slabs held by\nimporters.\n2185 Brazil submits that the only inventory information in the USITC Report or the Views of\nthe Commission on Injury relating to a lingering effect of the 1998 import surge does not support the\nconclusion that the 1998 surge in imports led to inventory levels that continued to adversely affect the\nmarket into 1999 and beyond. While the United States may attempt in response to this question to\nrehabilitate the lack of facts and reasoning behind the USITC's claim, there is nothing in the record\nwhich supports the claim. There is a dearth of information on distributor inventory levels and, as\nindicated above, what there is does not support the USITC theory. The same is true for producer\ninventories. As for importer inventories, it is difficult to see how a five day increase in importer\ninventory levels in the aggregate could continue to have effects into 1999, 2000 and 2001.\nFurthermore, given that the inventory levels for finished CCFRS products had returned to 1997 levels\nby the end of 1999, the only possible lingering inventory effect could be from continued high levels of\nslab inventories. However, the United States has nowhere explained how slab imported and used\nexclusively to benefit United States producers of CCFRS products could injure those producers\nimporting slabs, much less explained how increased inventories of slabs could adversely affect\nproducers of CCFRS as a whole. Thus, in order to \"buy into\" the USITC lingering effects theory, the\nPanel would have to accept that a meager five day increase in inventories reverberated through the\nmarket for 30 months and caused serious injury, or that inventories of imported slabs used by the very\nindustry that is claiming to be injured reverberated through the market for 30 months and caused\nserious injury.\n2186\n7.874 The United States argues that the record clearly showed there was, in fact, a substantial\nincrease in the inventory levels of importers during the period. Importer inventories of CCFRS grew\nfrom 788 thousand tons in 1997 to 1.322 million tons in 1998, for an increase of nearly 67.7% in that\n\n2183 Brazil's first written submission, Common Annex B.\n2184 Brazil's written reply to Panel question No. 28 at the second substantive meeting.\n2185 USITC Report, Vol. II at Table FLAT-49.\n2186 Brazil's written reply to Panel question No. 29 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\none year. Similarly, in 1999, importer inventories increased by an additional 8.5% (to 1.434 million\ntons) from their 1998 levels, and then by an additional 19.2% in 2000 (to 1.709 million tons).\nInventory levels increased between interim 2000 and interim 2001 as well. Moreover, the ratio of\nimporters' inventories to their shipment levels also increased significantly during this period.\nBetween 1997 and interim 2001, the ratio of importer inventories of CCFRS to importer shipments\nincreased from 7.3% to 17.5%, more than doubling during this period.\n2187 Indeed, the ratio increased\nduring each year of this period, growing from 7.3% in 1997 to 8.6% in 1998, 11.0% in 1999, 15.1% in\n2000, and 17.5 percent in 2001. In other words, the United States argues, the level of importers'\ninventories grew considerably, both on an absolu te and a relative level, between 1998 and 2001,\nthereby placing substantial pressure on importers to reduce their pricing levels to move this\nmerchandise out of inventory.2188\n7.875 The United States also notes that the USITC did not rely upon importer inventories as a\ncritical aspect of its causation analysis. Although the USITC did clearly note that the increased levels\nof inventories during the last three years of the period were an indication that imports were having\nsubstantial negative effects in the market during the last half of the period of investigation, the USITC\ndid not rely on this fact as the sole, or even the most critical aspect, of its causation analysis for\nCCFRS products. Second, aside from ignoring completely the service center inventory data cited by\nthe USITC, Brazil has also performed a series of calculations to support its arguments that result in a\nsignificant manipulation of the inventory data. Fo r example, Brazil has removed slab inventory data\nfrom its calculations – something wholly without basis given that slab was an integral part of the\nCCFRS product and industry. When these numbers are included, the number of days on hand of\ninventory held by importers more than doubles from 1997 through 2000, from 27 days on hand to 55\ndays on hand. In other words, Brazil has reduced the number of days on hand for importer inventories\nby taking out that part of the inventory data that most directly contributed to the increase in importer\ninventories during the period, thus resulting in a calculation that would obviously and clearly reduce\nthe number of days on hand. Third, Brazil's arguments only reference the importer inventory data\nfrom the USITC's report. The United States argues that Brazil completely ignores the fact that the\nUSITC also relied upon the substantial increase in inventories of CCFRS at service centers in its\ncausation discussion. In this regard, the USITC co rrectly recognized that inventories at service\ncenters showed steady and significant increases throughout the period, going from 2.7 months of\nsupply on hand in 1996, to 3.0 months in 1997, to 3.2 months in 1998 and 1999, to 3.7 months in\n2000, to 3.8 months in interim 2001. In absolute terms, these inventories increased by 50 percent over\nthe period of investigation, as shown in the following table:\n2189\nService center inventories of CCFRS (net tons)\n1996 1997 1998 1999 2000\n2.6 million 3.0 million 3.3 million 3.4 million 3.9 million\n\n2187 USITC Report, Vol. II, Table FLAT-49 (p. FLAT-43). For ease of reference, the United States is\nrelying on the percentages set forth for importer inventories for all carbon flat-rolled products during these\nperiods, which include small volumes of GOES and tin mill products. As can be seen, these percentages would\nnot change more than minimally if the inventories of tin mill and GOES products were excluded.\n2188 United States' written reply to Panel question No. 71 at the second substantive meeting.\n2189 United States' written reply to Panel question No. 71 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.876 Brazil and Japan argue that the USITC's difficulty with the timing of events also permeates its\ndiscussion of bankruptcies. According to Brazil and Japan, the data shows that the problems facing\nthe domestic steel industry occurred much later in the period when imports were already declining,\nnot during 1998. In particular, according to Brazil and Japan, a causation analysis demands\nassessment of when the relevant companies declared bankruptcy. Japan and Brazil assert that eight of\nthe ten CCFRS producers declared bankruptcy afte r 1998. Most declared bankruptcy in 2000 and\n2001, including the companies that were the larger of those producers that declared bankruptcy. On a\ntonnage basis, the firms declaring bankruptcy in 2000 and 2001 constituted nearly 83% of total\ntonnage of all the CCFRS mills declaring bankruptcy over the period.\n2190\n7.877 The United States argues in response that companies who begin experiencing financial\ndifficulties as a result, for example, of lost market share and lowered prices due to import competition\nwould not be expected to immediately seek bankruptcy protection in the first year in which those\ndifficulties occurred. Instead, due to the negative ramifications associated with bankruptcy (e.g.,\ninability to obtain credit, imposition of higher credit costs, reluctance of suppliers to provide\nmaterials, and inability to attract other forms of capital), most companies spend several years\nstruggling to regain their compe titive footing before eventually entering the bankruptcy process.\nIndeed, because of the lag between initial declines in financial performance and a company's entry\ninto bankruptcy, the fact that eight of ten companies entered bankruptcy in 2000 and 2001, rather than\n1998, shows that there was, indeed, a likely correlation between the surge in low-priced imports that\noccurred in 1998 and thereafter and these bankruptcies.\n2191\n7.878 In illustrating its argument in paragraph 7.846 that an increase in imports can have both an\nimmediate and a delayed impact on one of the industry's performance factors contained , the United\nStates submits that, as the USITC noted in its report, the massive surge in CCFRS imports in\n1998 directly caused significant declines in the price of domestic and imported merchandise in that\nyear, with AUV of imports falling by 8.4% and those of domestic commercial sales falling by\n3.2%.\n2192 Although there was a clear and direct impact of this surge on prices in 1998, the surge also\nhad a lagged negative effect on domestic pricing levels in 1999 and 2000, in that elevated levels of\nlow-priced imports were able to continue depressi ng prices from their already depressed 1998 levels.\nIn this regard, the 1998 imports surge permitted elevated levels of imports in 1999 and 2000 to drive\nprices down to lower levels than would have occurred in the absence of the 1998 surge.2193\n(ii) Relevance of volume and price effects of imports\n7.879 New Zealand notes that central to the USITC's finding of causation is the claim that increased\nvolumes of imports entered the market \"at prices that undercut and depressed and suppressed\ndomestic prices\". This allegedly caused serious injury. 2194 Brazil further submits that the USITC\nused underselling, in part, as a proxy for the pr oposition that imports led pricing downward in the\nUnited States market.2195 According to New Zealand, the USITC concluded that as a result of the fall\nin domestic prices from 1998, industry profits turned to losses in 1999, 2000 and the first six months\nof 2001.2196 However, New Zealand asserts that the chain of causation is simply not there. Similarly,\n\n2190 Japan's first written submission, para. 237; Brazil's first written submission, para. 168; see also\npara. 7.847 , which provides Japan's written reply to Panel question No. 28 at the second substantive meeting.\n2191 United States' first written submission, para. 447.\n2192 INV-Y-209, Table FLAT-ALT7 (US-33) and USITC Report, p. 61.\n2193 United States' second written submission, para. 122.\n2194 New Zealand's first written submission, para. 4.132.\n2195 Brazil's second written submission, para. 72.\n2196 New Zealand's first written submission, para. 4.132.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe European Communities submits that an examination of the data suggests this assertion is barely\ncredible.2197\n7.880 According to New Zealand, in order to establish that imports drove down domestic prices, it\nwould be necessary to show that imports led dome stic prices down and that domestic products lost\nmarket share. However, New Zealand submits that neither of these things happened. In fact, what the\ndata shows is that during the relevant period there was an increase in domestic product market share\nas domestic product prices decreased more sharply than import prices. 2198 New Zealand argues that\nclose attention to the relationship between movements in market share, operating margins, and prices\nof a kind not found in the USITC's brief analysis – reveals that from interim 2000 – interim 2001,\nCCFRS domestic prices decreased more sharply than import prices in both percentage terms and\nabsolute terms. New Zealand argues that the same trend is true for the period investigated as a\nwhole.\n2199\n7.881 In response, the United States argues that the above argument is premised on a mistaken\nreading of the record. During the period of in vestigation, imports of CCFRS undersold domestic\nmerchandise by substantial margins in a substantial majority of possible price comparisons, even\nduring the last year and a half of the period of investigation. More specifically, the public versions of\nthe USITC's quarterly price comparisons for the slab, plate, hot-rolled and one cold-rolled price\ncomparison products all show imports underselling domestic merchandise by substantial margins on\nthe large majority of price comparisons through 2000. Moreover, on one of the two cold-rolled price\ncomparison products, imports routinely undersold the domestic product through the first quarter of\n2001. While the domestic product did undersell imports on these products in a majority of instances\nin interim 2001, this underselling only occurred after the domestic merchandise had pursued the\nimports downward on prices through the three years prior to that time.\n2200 The United States\nacknowledges that for the remaining cold-rolled price comparison product, the industry undersold\nimports during 2000 and in interim 2001, usually by small margins. However, it argues that the\nrecord also shows that imports of this cold-rolled product nonetheless consistently undersold the\ndomestic industry by substantial margins during 1998 and 1999, when the industry experienced\nsubstantial declines in its profitability levels.\n2201\n7.882 Moreover, the United States argues that there was a clear correlation between the persistent\nunderselling by imports and declines in the prices and profitability levels of the domestic industry. 2202\nThe United States argues that the record established that (1) the elasticity of substitution between\nimports and domestic merchandise was moderate to high; (2) imports routinely undersold the\ndomestic merchandise throughout the period of investigation; (3) import prices fell substantially as\nimports surged in 1998 in response to the Asian crisis and the acceleration in the financial\ndeterioration of the former republics of the Soviet Union, and generally continued to decline\nthroughout the remainder of the period; (4) even though there was an improvement in import and\ndomestic prices in 2000, imports continued to undersell domestic merchandise by substantial margins\non most price comparisons during 2000; (5) domestic price declines followed decreases in import\nprices during the period; and (6) the moderate to high level of substitutability between imports and\n\n2197 European Communities' first written submission, para. 472.\n2198 New Zealand's first written submission, para. 4.133; See also Brazil's first written submission,\nparas. 74, 210-211.\n2199 New Zealand's first written submission, para. 4.134.\n2200 United States' first written submission, para. 475.\n2201 United States' first written submission, para. 476.\n2202 European Communities' first written submission, paras. 472 & 475; New Zealand's first written\nsubmission, para. 4.133.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic merchandise showed that domestic price declines were due, to a significant degree, to\naggressive import underselling. As a result, the industry's revenues and profitability levels declined\nsubstantially from 1998 to 2000.\n2203\n7.883 With respect to the argument that domestic prices were falling more quickly than import\nprices during the latter half of the period, the United States argues that this ignores the conditions of\ncompetition in the marketplace. According to th e United States, it should not be surprising that\ndomestic prices were falling faster than import prices, during a period when domestic producers were\nattempting to maintain market share by eliminatin g the substantial price undercutting that imports\nwere engaged in throughout the period of investigation. In such a situation, the United States argues,\ndomestic producers will be forced to cut their prices at a more rapid rate than imports to avoid a loss\nof additional market share. Given that domestic prices were routinely higher than imports throughout\nthe period, such a decline does not indicate that it was domestic producers who were leading prices\ndownward.\n2204\n7.884 With respect to New Zealand's argument that the USITC's price suppression and depression\nfindings are flawed because, \"[t]o establish that imports drove down domestic prices, it would be\nnecessary to show that imports led down domestic prices and the domestic product lost market share\",\nthe United States argues that that argument ignores basic economic reality. Although it is true that a\ncombination of import and domestic price declines and a loss of domestic market share might be a\ngood indication that imports have suppressed or depressed domestic prices, it is not the case that\nprice-suppression or depression will necessarily be accompanied by market share losses. Instead,\naccording to the United States, significant price-suppression or depression can occur without market\nshare losses if the domestic producers choose to compete closely on price with imports rather than\nlose market share. In this situation, the domestic producers may maintain a relatively stable market\nshare in the face of aggressive import pricing competition but experience significant pricing and\nprofitability declines. Indeed, this is exactly what occurred in the CCFRS market in 1999 and 2000,\nafter domestic producers realized that they had lost substantial market share in 1998 due to a massive\ninflux of lower-priced imports. By lowering their prices in response to import price declines, the\nindustry was able to limit their loss of market share.\n2205\n7.885 In counter-response, New Zealand argues that what the relevant data reveals is domestic\nproducers wresting market share from imports at the same time as domestic prices decreased more\nsharply than import prices. 2206 The United States' attempt at rebuttal conveniently ignores the facts.\nFor example, by interim 2001 – the most recent period – domestic producers had increased their\nmarket share by a full 2.9% compared with interim 2000 2207 – a period when domestic prices fell by\n13% as contrasted with 4% for imports. Put another way, by interim 2001 imports held a mere 6.9%\nof the market, compared with 9.3% in 1997 an d 11.8% in 1998 – when no-one is claiming serious\ninjury existed. Also, this interim 2000 – interim 2001 2.9% gain in domestic market share coincided\nwith a sharp (14.9%) decline in domestic demand and a precipitous (40%) fall in imports. According\nto New Zealand, all of this points to price pressure coming from domestic producers, not imports.\n2208\n\n2203 United States' first written submission, para. 472.\n2204 United States' first written submission, para. 477.\n2205 United States' first written submission, para. 479.\n2206 New Zealand first written submission, paras. 4.132-4.136.\n2207 The United States cannot rationally discount the significance of a decrease of this magnitude in\nimport market share while constantly stressing the significance of the 2.5% increase in market share from 1997\nto 1998.\n2208 New Zealand's second written submission, para. 3.104."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.257447"}}},{"rowIdx":3486,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ06_Report_Of_Panel_05.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ06_Report_Of_Panel_05.pdf"},"doc_sequence":{"kind":"number","value":6,"string":"6"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 307 7.886 Even assuming prices of imports to be lower than prices of domestically produced steel, the European Communities submits that low priced imports could only force down prices if imports had a role in setting prices on the United States market. However, other than an increase to 11.8% in 1998, imports did not have, during the investigation period, more than 10% of market share. Market share in 1999 and 2000, when the domestic industry allegedly suffered serious injury, was very close to that in 1996 and 1997 (9.04%, 9.32%, 9.57% and 9.54%). However, according to the European Communities, there is no suggestion that imports had a significant effect on domestic prices in 1996 and 1997. The European Communities further argues that the USITC does not explain how pricing on 10% of the products comprising the United States domestic market of CCFRS could have had more than a marginal effect on pricing on the overall market."},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":5,"string":"5"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":65,"string":"65"},"clean_text":{"kind":"string","value":"7.886 Even assuming prices of imports to be lower than prices of domestically produced steel, the\nEuropean Communities submits that low priced imports could only force down prices if imports had a\nrole in setting prices on the United States market. However, other than an increase to 11.8% in 1998,\nimports did not have, during the investigation period, more than 10% of market share. Market share\nin 1999 and 2000, when the domestic industry allegedly suffered serious injury, was very close to that\nin 1996 and 1997 (9.04%, 9.32%, 9.57% and 9.54%). However, according to the European\nCommunities, there is no suggestion that imports had a significant effect on domestic prices in 1996\nand 1997. The European Communities further argues that the USITC does not explain how pricing on\n10% of the products comprising the United States domestic market of CCFRS could have had more\nthan a marginal effect on pricing on the overall market.\n2209\n7.887 In response, the United States argues that in a relatively price-sensitive market like the\nCCFRS market, even a relatively small volume of low-priced merchandise can have a dramatic\nimpact on pricing throughout the market. Accordingly, the fact that imports did not occupy a\npredominant share of the market during the period of investigation does not, by itself, indicate that\nimports could not have a significant effect on domestic prices.\n2210 The United States argues that the\ncomplainants appear to recognize that a relatively small volume of merchandise can have a significant\neffect on prices in the CCFRS market since they argue that the domestic minimills were primarily\nresponsible for price declines in the CCFRS market. 2211 The United States argues that, on a year-to-\nyear basis, minimills shipped a substantially smaller volume of CCFRS to the commercial market than\nis accounted for by imports.\n2212\n7.888 The United States also argues that a small volume of imports could have a substantial impact\non prices in a market if the imports are substitutable for domestic merchandise, if they enter the\nmarket in increasing volumes, if they begin underselling the domestic merchandise to gain market\nshare, and if they continue to maintain underselling margins in comparison domestic prices as\ndomestic prices decline to meet import price competition. A similar set of circumstances occurred in\nthe domestic CCFRS market between 1998 and 2001 and resulted in price declines in the market\nduring those years. However, the volumes of imports of each of the ten products subject to the steel\nsafeguards measures, including imports of CCFRS, cannot be termed \"relatively low\".\n2213\n7.889 Korea states that it does not agree that imports can drive down prices through underselling\nper se. According to Korea, it is incorrect to presume that underselling, standing alone, demonstrates\nthat imports drove down domestic prices. First, underselling only measures relative prices and\ndemonstrates nothing per se about any effects on other prices. Second, changes in market prices are\nproduced by price leaders. Therefore, the question of how imports drive down prices depends on\nmore than just relative prices levels. Korea assert s that it is also noteworthy that the USITC relies\nonly on hot-rolled prices and cold-rolled prices to show that imports drove down prices. However,\nthe USITC staff specifically found that the economic model showed that cold-rolled imports did not\nhave any effect on domestic cold-rolled prices. Moreover, the USITC does not establish that these\nprices are even representative of trends for slab, plate, or corrosion-resistant steel.\n2214 Similarly, Japan\n\n2209 European Communities' first written submission, para. 472.\n2210 United States' first written submission, para. 473.\n2211 The United States refers in this regard to the European Communities first written submission,\nparas. 473-475.\n2212 United States' first written submission, para. 474.\n2213 United States' written reply to Panel Question 43 at the second substantive meeting.\n2214 Korea's written reply to Panel question No. 84 at the first substantive meeting\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand Brazil argue that the United States methodology places far too much emphasis on underselling\nalone. They argue that the fact of underselling or overselling alone is of limited relevance.2215\n7.890 In response, the United States argues that the United States does not agree with complainants\nthat the USITC places too much emphasis on the existence of underselling when assessing whether\nimports have had an impact on domestic prices during the period of investigation. According to the\nUnited States, like the laws of supply and demand, it is an elementary concept of economic theory that\npurchasers are more likely to shift purchases between suppliers on the basis of price, if the products\noffered by those suppliers have similar characteristics and share similar conditions of sale. 2216 I n\nother words, as an economist would say, when the elasticity of substitution between two products is\nreasonably high, a purchaser is likely to make his purchase decision on the basis of which supplier\noffers the lowest price. 2217 The United States submits that, accordingly, when there is a moderate to\nhigh elasticity of substitution between imports and domestic product (which is the case in the CCFRS\nmarket), the existence of underselling by imports is a strong indicator that purchasers are likely to\nshift purchases to imports from domestic producers, and that volume shifts are the result of low-priced\nimport competition. Or, if imports and domestic merchandise are reasonably interchangeable, the\nexistence of underselling is a good indicator that price declines in the market are the result of import\nprice competition. Given these basic economic principles, the United States believes that the USITC\nplaces an appropriate amount of weight on underselling in its analysis.\n2218\n7.891 Korea also submits that the USITC did not explain or justify its conclusion that imports led\nprice declines.2219 In this regard, Korea argues 2220 that a review of the USITC evidence cited on this\nissue does not support the USITC's conclusions that imports led price declines. First, the USITC\nrefers to AUV data comparisons between imports and domestic prices. 2221 That data contains no\nvolumes for either imports or domestic sales. There is also no analysis of how the AUV data establish\nthat import prices led domestic prices down. In other words, the USITC does not describe the method\nby which lower import prices led domestic prices down. Finally, the USITC acknowledges the\nlimitations with AUV data and state that it does not place \"undue weight\" on this data because AUVs\nmay be affected by product mix.\n2222 Second, the USITC relies on pricing data for hot-rolled and cold-\nrolled steel only (no other flat products). The non-confidential data in the charts referred to show\ndomestic prices and volumes, but there is no import data whatsoever. 2223 It is not apparent, therefore,\nwhat the relationship is between imports and domestic prices during any particular quarter nor how\nthis data establishes that imports of hot-rolled or cold-rolled \"led down\" prices of hot-rolled or cold-\nrolled. The USITC also fails to explain at all how the comparisons of hot-rolled and cold-rolled\nprices have impacted on \"flat-rolled\" domestic pr ices. Third, in terms of cold-rolled prices, the\n\n2215 Japan's written reply to Panel question No. 84 at the first substantive meeting; Brazil's written\nreply to Panel question No. 84 at the first substantive meeting.\n2216 For instance, USITC Report, pp. FLAT-60, footnote 42.\n2217 United States' second written submission, para. 142.\n2218 United States' second written submission, para. 143.\n2219 Korea's second written submission, para. 148.\n2220 Korea's second written submission, para. 147.\n2221 USITC Report, Vol. I, p. 61 (Exhibit CC-6).\n2222 USITC Report, Vol. I, p. 61, footnote 279 (Exhibit CC-6).\n2223 USITC Report, Vol. I, pp. 61 and 62 (Exhibit CC-6), citing to INV-Y-212 at Tables FLAT-ALT-\n69-71 (Korea Exhibit 9, \"K-9\"). While the price comparisons for products referred to appear in the Staff Report,\nthat data is shown only for domestic and non-NAFTA imports. (USITC Report, Vol. II, Tables FLAT-68-71,\npp. FLAT-65-68 (Exhibit CC-6)). But the USITC did not perform its causation analysis on non-NAFTA\nimports alone (USITC Report, Vol. I, pp. 59-66 (Exhibit CC-6)), so this data cannot support the USITC's\nconclusions with respect to \"imports.\"\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC refers to \"dips\" in import prices 2224 (no references to the periods) and historically large sales\nvolumes2225 (no reference to the period) and states that these were \"followed by\" sharp cuts in\ndomestic prices2226 (again, no reference to any periods). The import data is treated confidentially so it\nis not available to fix these relevant time periods. In other words, the USITC relies on its own\nassertions as to the relationship between import prices and domestic prices, but offers no evidence of\nan actual causal relationship between import prices and domestic prices. Moreover, the economic\nmemoranda provided by both the petitioners and respondents to the USITC demonstrated that cold-\nrolled imports had no significant effect on domestic cold-rolled prices.2227\n7.892 For the United States' response to the arguments summarized in paragraph 7.891, see\nparagraphs 7.881-7.890 above.\n7.893 Korea also argues that in the case of CCFRS products, there was an alternative explanation of\nthe price declines which the USITC did not adequately consider. 2228 After all, imports of CCFRS\ndeclined both absolutely and relative to domestic production between 1998-2001, while expanded\nminimill capacity gained substantial market share at the expense of both integrated producers on the\none hand and imports on the other. This evidence suggests that price levels in the market declined as\na result of minimills pricing as minimills expanded capacity and shipments while taking advantage of\ntheir increasing cost advantage over integrated producers.\n2229 The \"price effects\" which impacted\ndomestic producers were the price effects caused by the increased capacity and shipments – i.e .,\nvolumes – of minimills.2230 2231\n7.894 Similarly, New Zealand submits that, in this case, the price of imports did not play a critical\nor important role in the decline of industry performa nce indicators. \"Other fa ctors\" internal to the\ndomestic market were at work. As the USITC acknowledged, intra-industry competition by\nminimills, greatly increased domestic capacity, and declining demand were all exerting downward\npressure on domestic prices. However, it failed to draw the obvious conclusion that there was,\ntherefore, no genuine and substantial relationship of cause and effect between increased imports and\nserious injury to the domestic industry.\n2232\n7.895 Japan and Brazil submit that, remarkably, given the emphasis placed by the USITC on price\nas an indicator of the industry's health 2233, it ignored the substantial amount of pricing data it was\nprovided that demonstrated the relationships between domestic and import prices. Brazil further\nsubmits that in a steel market where spot sales are a healthy portion of overall shipments, and\ncomprehensive data reflecting spot prices are readily available, the USITC did not pursue the obvious.\nDespite the fact that it had monthly spot transaction prices for plate, hot-rolled, cold-rolled and coated\nproducts, and actually graphed that data in its report\n2234, it saw no reason to compare that data with\n\n2224 USITC Report, Vol. I, p. 62 (Exhibit CC-6).\n2225 USITC Report, Vol. I, p. 62 (Exhibit CC-6).\n2226 USITC Report, Vol. I, p. 62 (Exhibit CC-6).\n2227 Assessment of Econometric Submissions on Flat-Rolled Steel, EC-Y-042 – Response to USTR\nRequest for Additional Information (22 October 2001), p. 1 (Exhibit CC-10).\n2228 Korea's second written submission, para. 157-184.\n2229 Korea's second written submission, paras. 169-176.\n2230 Korea's discussion of the definition of a \"marke t\" in its written reply to Panel question No. 141 at\nthe first substantive meeting with the parties, and, the discussion of price effects in Korea's second written\nsubmission.\n2231 Korea's written reply to Panel question No. 29 at the second substantive meeting.\n2232 New Zealand's written reply to Panel question No. 29 at the second substantive meeting.\n2233 USITC Report at 62.\n2234 USITC Report Vol. II at OVERVIEW-58.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimport unit values. According to Brazil, if anything, a comparison of that data refutes the USITC and\nUnited States arguments with respect to price. Based on this more comprehensive data, it is apparent\nthat domestic prices, not import prices, led the market.\n2235 2236 Instead, according to Japan and Brazil,\nthe USITC focused on quarterly price series and simplistic assessments of underselling, not all of\nwhich revealed underselling by imports. Both are poor determinants of causation, particularly in light\nof the extensive and demonstrably reliable monthl y pricing data available that showed how relative\nprices change over time, and whether domestic or import prices lead that trend.2237\n7.896 Japan relies upon the charts below to argue that there is clear evidence that domestic pricing\nled import pricing. Building in a three-month lag for import pricing to take into account shipment\ntime, domestic price decreases and increases tend to commence before similar movement in import\npricing. Japan submits that this data was corroborated and was before the USITC.\n2238 Japan argues\nthat, yet, the USITC largely ignored this data in lieu of its \"traditional\" and overly simplistic\napproach.2239\nHot-Rolled Steel: Domestic Price vs. Import AUV\n200\n240\n280\n320\n360\n400\nJan-95\nApr-95\nJul-95\nOct-95\nJan-96\nApr-96\nJul-96\nOct-96\nJan-97\nApr-97\nJul-97\nOct-97\nJan-98\nApr-98\nJul-98\nOct-98\nJan-99\nApr-99\nJul-99\nOct-99\nJan-00\nApr-00\nJul-00\nOct-00\nJan-01\nApr-01\nU.S. Dollars / Short Ton\nHot-Rolled Domestic Price Hot-Rolled Import AUV Hot-Rolled Import AUV -- 3 Mos. Lag\nDomestic Pricing Leads The Market\n\n2235 Japan's written reply to Panel question No. 84 at the first substantive meeting includes such a\ncomparison.\n2236 Brazil's second written submission, para. 73.\n2237 Japan's second written submission, para. 121; Brazil's second written submission, para. 72.\n2238 Exhibits. CC-52 and CC-53\n2239 Japan's written reply to Panel question No. 84 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCold-Rolled Steel: Domestic Price vs. Import AUV\n250\n300\n350\n400\n450\n500\n550\n600\nJan-95Ap\nr-95\nJul-95Oct-95\nJan-96\nApr-96Jul-\n96\nOct-96Jan-97\nApr\n-97\nJul-97\nOct\n-97\nJan-98\nApr\n-98\nJul-98Oct-98\nJan-99Apr-99Jul-\n99\nOct-99Jan-00\nApr-00Jul-00\nOct\n-00\nJan-01\nApr\n-01\nU.S. Dollars / Short Ton\nCold-Rolled Domestic Price Cold-Rolled Import AUV Cold-Rolled I m port AUV - 3 M os. Lag\nDomestic Pricing Leads The Market\n7.897 In response, the United States submits that Japan mistakenly tries to minimize the importance\nof consistent underselling by imports in the CCFRS market by asserting that domestic producers were\nthe price leaders in the CCFRS market. 2240 However, an examination of the charts used by Japan to\nsupport this argument shows that the argument has no foundation in fact. 2241 Those charts show\nclearly that domestic producers attempted to initiate price increases for cold-rolled and hot-rolled steel\nat three points in the period of investigation but that domestic prices collapsed on each occasion due\nto persistent underselling by imports throughout the period of investigation.\n2242 In sum, the charts\nrelied on by Japan actually show that import underselling, not alleged domestic price leadership,\ncaused the broad price declines in the CCFRS market during the period of investigation.2243\n7.898 Japan and Brazil argue that the greatest flaw in the USITC's pricing discussion is the fact that\nthe margins of underselling in 1997 were about the same as 1999 and 2000. 2244 In response, the\nUnited States asserts that Brazil appears to suggest that this indicates that imports were simply\nmaintaining an appropriate price level below dome stic producers in the market. The United States\nsubmits that what Brazil fails to acknowledge is that two critical developments occurred in the market\nin 1998 that dramatically affected conditions of competition in the market and resulted in the\ndepression of domestic CCFRS prices. First, there was a sudden and massive surge of imports in that\nyear as a result of the Asian financial crisis and the continued deterioration in the steel market in the\nformer Soviet Union. Second, as a result of this surge, import prices declined precipitously during\nthat year and continued to decline and remain at low levels through the end of June 2001. While it\nmay be true, as Brazil asserts, that imports ma intained a substantial and consistent margin of\nunderselling during the last four years of the period, the record also established that the significant\nincrease in the volume of increasingly low-pri ced imports in 1998 placed substantial downward\npressure on prices during the last three and a half years of the period of investigation.\n2245\n\n2240 Japan's written reply to Panel question No. 84 at the first substantive meeting.\n2241 Japan's written reply to Panel question No. 84 at the first substantive meeting.\n2242 Japan's written reply to Panel question No. 84 at the first substantive meeting.\n2243 United States' second written submission, para. 144.\n2244 Japan's second written submission, para. 134; Brazil's first written submission, para. 211.\n2245 United States' first written submission, para. 478.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.899 With respect to the volume effects of imports, Brazil submits that the United States repeats\nthe \"analysis\" of the USITC, which focuses first on the increase year of 1998, then claims that import\nvolumes in 1999 and 2000 \"remained substantially higher\" than in 1996 and 1997.\n2246 According to\nBrazil, this statement is misleading. For CCFRS, imports were higher in 1999 and 2000 than in 1996\nand 1997. The increase in absolute terms between the two periods was 11%.2247 However, in terms of\nimport volume relative to domestic production, over the 1996-1997 period, CCFRS imports averaged\n10.1% of domestic production. Over the 1999-2000 period, CCFRS imports average 10.6% of\ndomestic production.2248 Brazil submits that to term this 0.5% increase as \"substantially higher\" is\ndisingenuous. Indeed, when broken down into the distinct CCFRS products, the majority of products\nreflect no increase relative to domestic production.\n2249\n7.900 Brazil contends that when imports remain a stable part of the overall market, it makes little\nsense from a volume perspective to blame increased imports for the industry's injury. However,\nBrazil submits that this appears to be the USITC's analysis – a simple assumption that if imports\nincrease, they must be a cause of serious of injury to the domestic industry. According to Brazil, if\nthe USITC was truly after volume effects, however, those effects can be seen in the steel market\nrather easily using more appropriate data. For example, in response to the lingering effects theory,\nthere was no substantial build up in inventory levels that could have captured the increased import\nvolume in 1998 and delayed its effects on the market until 1999 and 2000. A review of importers'\ninventories for each of the distinct CCFRS products reflects levels that were approximately one month\nor less throughout the period of investigation. The USITC reported that for CCFRS, inventory levels\nat year end ranged from 7% to 15% of total shipments. This translates into between 0.6 and 1.2\nmonths of inventory.\n2250 For many individual products, the inventory levels never exceeded one\nmonth.2251 This means the increased imports in 1998 could not have lingering volume effects in 1999,\nmuch less 2000 or 2001.2252\n7.901 For a discussion of the United States' response to the arguments summarized in\nparagraphs 7.896-7.900, see paragraphs 7.874 and 7.875.\n7.902 Similarly to Brazil, Korea argues that it is axiomatic that the Agreement on Safeguards\nconcerns serious injury caused by increasing import volumes. The import volumes must be increasing\nand the volumes must be the cause of serious injury. However, the USITC did not rely on increasing\nvolumes of imports after 1998 as the cause of domestic price declines. On the contrary, the USITC\nacknowledged that import volumes were declining. The USITC cites the price differential itself and\nthe pricing trends of imports as the cause of the industry's injury and concluding that: 2253 \"Although\nthe volume of imports was lower in 1999 and 2000, prices of those imports continued to decline\". 2254\n\n2246 United States' first written submission at para. 463.\n2247 This is based on a combined import tonnage of CCFRS in 1996 and 1997 of 37.7 million tons,\nversus a combine import tonnage of CCFRS in 1999 and 2000 of 41.7 million tons. See also Brazil's first written\nsubmission, Common Annex A\n2248 USITC Report Vol. II at FLAT 8-11, 13, 16-19, 21; See also Common ANNEX A.\n2249 Brazil's second written submission, para. 70; see also Japan's second written submission,\npara. 117.\n2250 USITC Report Vol. II at Table FLAT-49.\n2251 Ibid.\n2252 Brazil's second written submission, para. 71.\n2253 The USITC also relied on increased inventory levels which is discussed infra.\n2254 USITC Report, Vol. I, p. 62 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nTherefore, the United States failed to demonstrate that increased volume of imports led to domestic\nprice declines.2255\n7.903 In response, the United States submits that basic economic pricing theory indicates that prices\ncan decline as a result of a number of different market conditions, even in the absence of\nunderselling.2256 For example, it is a basic principle of economic theory that prices can be affected by\nvariations in supply and demand. 2257 In this regard, prices can be driven down when there is\nincreased supply of the product in the market where demand is stable. Similarly, prices can be driven\ndown in a market of stable supply if demand declines. In essence, basic economic theory holds that,\nwhen supply of a product outpaces demand (such as a situation where the supply of imports increases\nsubstantially in a slowly growing market), prices are likely to be affected by that change in supply.\n2258\n7.904 According to the United States, the record showed that an increase in import supply had a\nsubstantial impact on pricing in the CCFRS market. Between 1996 and 2000, the market for CCFRS\nexhibited moderate but steady growth in demand on a year-to-year basis. 2259 On an overall level, the\ndomestic industry's production levels also grew at a moderate and consistent rate between 1996 and\n2000.\n2260 Accordingly, as a matter of basic economic theory, if imports had grown at a similar\nconsistent but moderate rate, prices in the market should have remained relatively stable during this\nperiod. The United States submits that, in fact, th at is what happened in the CCFRS market between\n1996 and 1997, when domestic production and imports both grew at rates that kept pace with the\ngrowth in demand, thus allowing the price of domestic and imported products to remain somewhat\nstable.\n2261 According to the United States, in 1998, how ever, the stability of this supply and demand\nequation was fractured by a massive surge of imports into the CCFRS market. In that year, although\ndomestic production grew at a slightly slower rate than demand in the United States market (which\nitself grew by 3.2%), import volume increased by an extraordinary 31.3%, thus outpacing the growth\nin demand in 1998 by 28.1 percentage points.2262 Needless to say, this import surge was accompanied\nby a decline in CCFRS prices, with the average unit value of imports declining by 8.4% in that one\nyear alone. 2263 At the same time, the AUV of domestic commercial sales fell by 3.1% 2264, even\nthough demand had grown in that year. In essence, in 1998, the massive increase in the supply of\nimports resulted in a clear and serious depression of prices in the market, a set of circumstances that is\nagain consistent with basic economic price theory.2265\n7.905 According to Japan, the problem is that the United States does not appear to grasp that various\nfactors cannot be analysed one by one, but must be viewed together to understand how they interact\nwith one another. This is particularly true in this case. In the United States steel market, from 1999 to\n2001, several factors converged: demand was stagnant or falling; domestic supply was increasing\nbecause of the dramatic increases in domestic capacity; and foreign supply was stable or falling. With\n\n2255 Korea's second written submission, para. 146.\n2256 For instance, the European Communities', Japan's and New Zealand's, written replies to Panel\nquestion No. 84 at the first substantive meeting.\n2257 New Zealand's written reply to Panel question No. 84 the first substantive meeting.\n2258 United States' second written submission, para. 138.\n2259 INV-Y-209, Table FLAT-ALT7 (US-33).\n2260 INV-Y-209, Table FLAT-ALT7 (US-33).\n2261 INV-Y-209, Table FLAT-ALT7 (US-33). United States' second written submission, para.140.\n2262 INV-Y-209, Table FLAT-ALT7 (US-33).\n2263 INV-Y-209, Table FLAT-ALT7 (US-33).\n2264 USITC Report, p. 61. Although these percentages are derived using aggregate annual values, the\nproduct-specific pricing charts show similar declines. USITC Report, Tables FLAT-66-FLAT-71 &\nFLAT-73-74.\n2265 United States' second written submission, para. 141.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic firms capturing more and more of a declining market, it simply makes no economic sense to\nexonerate the growing domestic capacity and blame the stable or declining imports. Yet, that is\nprecisely what the USITC did in this case.\n2266\n7.906 Japan submits that, indeed, appropriate analysis would consider capacity relative to demand\nparticularly in light of the already existing anti-dumping and countervailing duties orders or\ninvestigations that affected the competitive dynamics in the market for CCFRS steel products. The\nUSITC largely ignored the role of anti-dumping and countervailing duties orders and investigations\non hot-rolled and cold-rolled steel imports during this key period, and thereby failed to understand the\nrole of expanding domestic capacity.2267 According to Japan, given these economic forces, it is not at\nall surprising that domestic pricing generally led import pricing. The United States' claim to the\ncontrary is wrong2268, and relies on overly simplistic analysis of quarterly AUV, rather than monthly\nprices.2269\n7.907 Similarly, the European Communities recalls that a competent authority is obliged to\ndemonstrate, on the basis of objective evidence, a causal link between increased imports and serious\ninjury. According to the European Communities, it is not enough to find a link between imports at\nlow prices and serious injury. Nor is it enough to find a causal link between imports which have\nincreased over a five-year period and serious injury. A competent authority must demonstrate a\ncausal link between imports which have been sharp enough, sudden enough, recent enough and\nsubstantial enough and serious injury. Price will often be relevant to explain how the increased\nvolume of imports caused serious injury. The European Communities further submits that price\ndevelopments are indeed perhaps the most vital factor in determining the effect of increased imports\non the domestic industry. This is because one of the most important indicators of injury is financial\nperformance, which depends on the relationship between price and production costs. An analysis of\nprice developments is therefore always important or critical. Having looked at price developments, the\nmost vital issue is determining what is the cause of such developments.\n2270\n7.908 The European Communities further submits that all other things being equal, if imports are\nsold at a higher price than domestic products, it is unlikely that such imports are responsible for any\nserious injury. Even if import prices are below domestic prices, it must also be shown that imports\nare the price leader – thus, where imports are say 10% of the market, the question must be asked if\nimports are capable of setting prices. That is, did imports force the domestic price down, resulting in\na poor financial performance by the domestic industry? The USITC has generally failed to\ndemonstrate, on the basis of objective evidence, through an analysis of underselling and market\ndynamics, the existence of a causal link.\n2271\n7.909 Switzerland argues that, in making attacks on the pricing levels of imports that occurred in\n1998 and after, the United States forgets that the principal focus of the safeguards investigation are the\nincreased import quantities. While pricing is relevant to the overall analysis, it is not a surrogate for\nincreased import quantities. If there are no increased imports, there cannot be a correlation because\nthe Agreement on Safeguards, and even the United States' safeguards statute are volume driven\n\n2266 Japan's second written submission, para. 135.\n2267 Japan's second written submission, para. 136.\n2268 United States' first written submission, para. 494. Japan submits that the USITC had readily\navailable monthly data to better understand pricing dynamics, but instead ignored that data in favor of the much\nmore crude quarterly average unit value data that is us es in other cases. Japan's second written submission,\npara. 137.\n2269 Japan's second written submission, paras. 137 and 217.\n2270 European Communities' written reply to Panel Question 29 at the second substantive meeting.\n2271 European Communities' written reply to Panel Question 29 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmechanisms. Article 4.2 of the Agreement on Safeguards explicitly focuses on the quantity of\nimports, it does not mention anywhere the question of price.2272\n(iii) Increased imports and industry's performance\n7.910 Japan and Brazil argue with regard to CCFRS that there was no \"dramatic increase\" in\nimports in 1998. 2273 Japan and Brazil assert that although imports increased somewhat in 1998,\nimports fell in both 1999 and 2000. At the time of the alleged serious injury, imports were\ndecreasing, not increasing. 2274 Japan adds that by 1999 and 2000, however, imports were being\nincreasingly shut out of the United States market by anti-dumping and countervailing duty cases. 2275\nAccording to Brazil, the same trends in import levels and import share of production appeared in\nrelation to individual CCFRS steel products.2276 Brazil further argues that when the domestic industry\nbegan to experience difficulties in 1999 and 2000, there were no increasing imports to blame.2277\n7.911 Japan and Brazil also argue that the USITC's \"sharp decline\" in the domestic industry's\nperformance in 1998 when imports peaked is also a fallacy. According to Japan and Brazil, whether\nconsidered as a single aggregate like product in the case of the USITC's analysis, or as individual like\nproducts, the domestic industry's performance in 1998 was stable and did not reflect any serious\ninjury.\n2278 Japan and Brazil note in this regard that operating profits in 1996, described by the USITC\nas \"reasonable operating profits\", were at virtually the same level in 1998. Japan and Brazil surmise\nthat the USITC sought to maximize its \"sharp decline\" theory by focusing on 1997 operating income,\nwhich was modestly better than 1996 or 1998 and constituted a record peak performance for the\nindustry.\n2279 Japan and Brazil also argue that other indicia of domestic industry health, such as\nimproving production and capacity expansions, refute the USITC's rush to find a causal link and\nserious injury based on 1998 trends. 2280 Japan and Brazil argue that the same flaws in the USITC's\nlogic are demonstrated with respect to the individual CCFRS. In particular, Japan and Brazil argue\nthat the 1998 results were often better than 1996.2281\n7.912 Similarly, China argues that given that the market share of the domestic industry was 91% in\n1996 and 93.1% in interim 2001, that net sales increased by 10.9%, and that domestic shipments\nincreased by 7.2% from 1996 to 2000, it is questionable whether imports really caused injury. 2282\nChina argues that one would normally expect increased imports to cause injury by shaking the\ndomestic industry's position on the market, which results in diminishing sales and revenues for the\ndomestic industry. In China's view, it is, therefor e, difficult to confirm any coincidence between\nimports and the bad performance of the domestic industry.\n2283\n7.913 Japan argues that the only year in which imports had any material increase in market share\nwas 1998 and even then, the increase was a mere 3.0 percentage points. 2284 There simply was no\n\n2272 Switzerland's second written submission, para. 97.\n2273 Japan's first written submission, para. 233; Brazil's first written submission, para. 163;\n2274 Japan's first written submission, para. 240; Brazil's first written submission, para. 169.\n2275 Japan's first written submission, paras. 239 and 242.\n2276 Brazil's first written submission, paras. 170 and 171.\n2277 Brazil's first written submission, para. 172.\n2278 Japan's first written submission, para. 234; Brazils first written submission, para. 164.\n2279 Japan's first written submission, para. 235; Brazil's first written submission, para. 165.\n2280 Japan's first written submission, para. 236; Brazil's first written submission, para. 166.\n2281 Japan's first written submission, para. 238; Brazil's first written submission, para. 167.\n2282 China's first written submission, para. 378.\n2283 China's first written submission, para. 379.\n2284 USITC Report, Vol. II at Tables FLAT 8-11 and 13, and the complainants' Common ANNEX A.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"continued influx of import volumes\" to cause any serious injury. 2285 Import volumes were at stable,\nhistorical levels.2286 According to Japan, the United States highlights the fact that 1998 was a worse\nyear than 1997. 2287 Given that 1997 was a peak year, it is obvious that 1998 measures would be\ndown from 1997. Given the United States' insistence that Japan consider the whole period in context\n(which Japan does), the USITC should have, but did not, consider 1998 performance relative to 1996\n– the best measure of the \"pre-increase\" period. Japan submits that, moreover, the test is not whether\nsome indicia declined in 1998, but rather whether over the full period, the import increases correlate\nwith declines in industry performance. The comparison between any two years is incomplete. Over\nthe full period, the disconnect becomes quite apparent. In 1999 and 2000, imports levels were not\nsubstantially above prior years. Again, the United States argument is not about the volume and\nmarket share of imports, but rests squarely on its flawed conclusions with respect to import price\nlevels.\n2288\n7.914 Similarly, New Zealand argues that the United States makes no mention of changes in import\nmarket share throughout this period, and the only reference to 2001 – when, the United States says,\nimports from some years previously were still causing \"suppression of prices\" 2289 – conveniently\nomits any mention of the precipitous drop in impor t volumes at this point. According to New\nZealand, these were down 40% on interim 2000 levels and over 30% on 1996 levels, a year when the\nindustry nevertheless enjoyed an operating margin of 4.3%.2290 2291\n7.915 The United States notes that there was a demonstrable contemporaneous coincidence between\nincreases in CCFRS imports and any declines in th e industry's condition. The record clearly showed\nthat the import surge in 1998 had a direct and negative impact on the market share, pricing, and\nprofitability of the CCFRS industry in that same year. More specifically, when import volumes\nincreased by 31.3% and import unit sales values dropped by 8.4% in 1998, the industry's share of the\noverall market fell by 2.5 percentage points, its aggregate net sales value dropped by 3.0% (despite an\nincrease in its overall net sales quantity of 0.5%), its average unit sales prices fell by 3.2%, its\naggregate gross profits fell by 19.8%, its aggregate operating income levels dropped by 36.9%, and its\noperating income margins fell by 2.1 percentage points. These declines occurred in a market in which\ndemand grew by 3.2 percent. Given these trends, it is difficult to understand how the complainants\ncould now argue that there were no declines in the industry's overall condition that were directly\ncorrelated to the 1998 surge.\n2292\n7.916 The United States also argues that the record showed that there was also a clear correlation\nbetween the volume and price trends of imports and the continuing declines in the industry's condition\nin 1999 and 2000. Even though import volumes \"slackened somewhat\" in 1999 and 2000 from their\n1998 surge level, import volumes in both years remained higher than their 1996 and 1997 levels, with\nimport levels being 13.7 percent higher in 2000 than 1996. These elevated levels of imports in 1999\nand 2000 continued to be sold at prices that were substantially lower than domestic prices, and were,\nin fact, lower than their 1996 and 1997 levels. As a result of this continued and substantial\nunderselling, imports depressed and suppressed domestic prices in both 1999 and 2000, and caused\n\n2285 United States First Submission at para. 464.\n2286 Japan's second written submission, para. 119.\n2287 United States First Submission at para. 464.\n2288 Japan's second written submission, para. 120.\n2289 United States First Submission at para. 464.\n2290 New Zealand's first written submission, para. 4.127.\n2291 New Zealand's second written submission, para. 3.97.\n2292 United States' second written submission, para. 126.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncontinued declines in the industry's net unit sales values, gross profits, operating income, and\noperating income margins.2293\n7.917 In addition, the United States asserts that th e contention that the record showed that the\nindustry was not injured by imports between 1996 and 2000, citing the fact that the industry's net\ncommercial sales, domestic shipment, and production levels all grew during that period, is flawed in\ntwo respects. The United States submits, first, th at while it may be true that the industry's sales,\nshipment, and production levels did, in fact, increase during the period between 1996 and 2000, the\nrecord reflects that these increases essentially tracked the growth in demand for CCFRS during the\nperiod from 1996 to 2000. More importantly, the record shows that the industry was only able to\nmaintain its production, shipment and sales levels between 1999 and 2000 by cutting prices\ndramatically in response to the extraordinary declines in import pricing that began in 1998 and\ncontinued thereafter. As a result of this competitive strategy, the industry's pricing levels and\noperating income levels dropped precipitously during the period from 1996 to 2000. Accordingly, the\nindustry confronted the Hobson's choice of either maintaining its market share at the expense of lower\nprices and profit margins or sacrificing sales, reducing production, and closing facilities.\n2294\n(iv) Relevance of like product analysis for CCFRS\n7.918 Korea notes that the USITC seems to conclude that there was coincidence of trends between\nthe performance of the industry and the increase of imports and the decline of prices with respect to\neach type of CCFRS as well as for the CCFRS overall. However, in Korea's view, the analysis of\ntrends in imports, prices and industry performance for each of the CCFRSdoes not support this\nconclusion by the USITC.\n2295 According to Korea, in the latter part of the period of investigation,\nimports declined for each of the products.2296 Further, Korea submits that the United States could not\nhave shown a \"genuine and substantial\" causal relationship between imports and injury because the\nUnited States looked at an \"industry\" which was actually various industries in the case of CCFRS and\nwelded pipe.2297\n7.919 The United States argues that the Panel may not find that the USITC's causation analysis is\nflawed solely because the USITC's like product and industry analysis is flawed. 2298 F i r s t2299, the\nAppellate Body has stated that a reviewing Panel should assume that an authority's findings on like\nproduct and industry are proper when reviewing that authority's causation findings. 2300 I n its US –\nLamb report, the Appellate Body made clear that it will review the various aspects of the USITC's\nsafeguards decision (i.e., increased imports, injury, causation) as though the authority's decisions on\nearlier issues had been correct. More specifically, the Appellate Body noted that:\n\"[N]otwithstanding the findings we have made previously in this appeal [invalidating\nthe USITC's industry definition for example], we must assume in our examination:\n\n2293 United States' second written submission, para. 127.\n2294 United States' first written submission, para. 468.\n2295 Korea's first written submission, para. 109.\n2296 Korea's first written submission, para. 115.\n2297 The United States, for example, admits that increases in demand for LDLP \"stabilized\" overall\nUnited States demand for welded pipe. (United States first written submission, para. 381) However, if those\ndemand trends, which were admittedly distinct for LDLP due to different end uses, had been considered for\nLDLP alone, the result might have been very different in terms of its effect on the industry producing that \"like\"\nproduct. Also note USITC Report, Vol. I, p. 166 (Exhibit CC-6).\n2298 United States' second written submission, para. 152.\n2299 United States' second written submission, para. 153.\n2300 Appellate Body Report, US – Lamb, para. 172.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfirst, that the definition of the domestic industry given by the USITC is correct, and\nsecond, that the USITC correctly found that the domestic industry is threatened with\nserious injury. On this basis, we must examine whether the USITC properly\nestablished, in accordance with the Agreement on Safeguards, the existence of the\ncausal link between increased imports and threatened serious injury.\"\n2301\n7.920 The United States submits that, accordingly, ev en if the Panel were to conclude that the\nUSITC's definition of like product and industry were flawed, it would still need to examine whether\nthe USITC's existing causation analysis was proper under the Agreement; it could not declare the\nanalysis flawed on the grounds that the USITC's like product analysis was found to be flawed.\n(b) Tin mill products\n(i) Coincidence in time\n7.921 Japan and Brazil argue that the lone affirmative vote that found tin mill products to be a\nseparate like product failed to satisfy the standards of Article 4.2(b). More particularly, the vote, by\nCommissioner Miller, failed to identify a sufficient causal link between increased imports and serious\ninjury. While pointing to the modest increase in operating losses in 1999 when imports gained about\n4.9 percentage points of market share, Commissione r Miller ignored the fact that these operating\nlosses persisted in 2000 even when import market share decreased by 2.2 percentage points.\nMoreover, according to Japan and Brazil, she ignor ed the fact that the operating losses grew in 2001\neven as import market share remained stable. In Japan's and Brazil's view, taken as a whole, these\ntrends do not establish any correlation in time between the import increase and the allegedly injured\ncondition of the industry, and thus fails to establish any causal link.\n2302\n7.922 Norway argues that even if the President based his determination on Commissioners Miller,\nBragg and Devaney and not just Miller 2303, as has been argued by the United States, Bragg and\nDevaney make no compelling analyses whatsoever for tin mill products as a separate product; it is\nsimply not addressed.\n2304 Norway submits that with different trends in increases between the tin mill\nproducts as a separate product on the one hand and as part of the CCFRS groups of products on the\nother hand, this cannot in any way fulfil the requirement of a \"compelling analysis of why causation is\nstill present\", in 1999 or later for their part.2305\n7.923 In response, the United States argues that th e record showed a direct correlation between\nchanges in import volumes and changes in the industry's operating margins between 1998 and 2000.\nFor example, in 1998, when import market share increased by 2.8 percentage points, the industry's\noperating income margin dropped by 2.4 percentage points. Similarly, in 1999, when import volumes\nsurged dramatically (growing by 45% on an absolute level and by 4.9 percentage points in market\nshare terms), the industry's operating loss percentage nearly doubled, dropping from -3.7% in 1998 to\n-6.9% in 1999. In 2000, however, when import volumes and market share slackened somewhat\nbetween 1999 and 2000 (with import market share dec lining to a still elevated 15.5%), the relatively\nsmall improvement in import volumes relieved the pressure imposed by imports on the industry's\n\n2301 Appellate Body Report, US – Lamb, para. 172.\n2302 Brazil's first written submission, para. 260, Japan's first written submission, para. 295\n2303 See paragraph 7.1228 et seq for details of this debate.\n2304 That is why their analyses is not discussed in detail by Norway, simply because their analyses are\nirrelevant, contrary to the argument by the United States in their first written submission, para. 541.\n2305 Norway's second written submission, para. 137.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\noperating income levels somewhat, allowing the industry's operating margins to increase slightly, to -\n6.1%, from a level of -6.9% in 1999.2306\n7.924 Korea and China note that three USITC Commissioners found that: \"The domestic industry\nexperienced serious injury prior to the 1999 surge in imports and continues to experience such injury\nas imports have declined\". 2307 Korea and China argue on the basis of these three USITC\nCommissioners' conclusions, that since there was no coincidence between imports and injury, there\nwere serious doubts as to the existence of a causal link.2308\n7.925 Korea submits that, in the end, the United States can point to the opinion of only a single\nCommissioner who determined that there was a coincidence of trends between imports and the serious\nimpairment of the United States industry. According to Korea, that single Commissioner's evaluation\nis not supported by the evidence.\n2309 China notes that in her separate views, Commissioner Miller\nalso acknowledged that \"the industry was unprofitable before and throughout the period\". Yet, she\nstated that imports \"are a substantial cause of serious injury\" because the industry \"suffered a serious\ndownturn in 1999 as imports surged\". However, China believes that, although increased imports may\npartially explain the situation in 1999, Commissioner Miller failed to explain why causation was\npresent before 1999. Indeed, according to China, the industry was already injured in 1996 and 1997\nwhen operating losses were recorded. Thus, in China's view, a very compelling analysis of why\ncausation still is present was not provided although it should have been the case, since there was no\ncoincidence in time between the injury and the increased imports.\n2310\n7.926 In response, the United States argues that Commissioner Miller conducted a thorough and\nobjective examination of the trends for imports and the industry's injury factors and reasonably\nconcluded there was a clear correlation between increased import volume and declines in the overall\ncondition of the industry. In particular, the United States argues, she reasonably found that, while the\nvolume of imports increased overall, imports surged in 1999 when they increased by 45.0% from the\nprior year. She also correctly found that imports also showed their greatest market share gain in 1999,\nwith their market share growing by 4.9 percentage points from 12.8% in 1998 to 17.7% in 1999. She\nalso found that, while the industry had been unprofitable before 1999, it suffered a serious downturn\nin operating income in 1999 when imports surged into the market. In 1999, the industry's operating\nincome margin dropped by 3.2 percentage points from its level in 1998, to -6.9%. She further found\nthat the growth in imports, particularly the surge in 1999, placed downward pressure on the price of\ndomestic merchandise, with import pricing declined throughout the period but at a more rapid rate\nthan domestic pricing. Domestic prices declined through the period, and were at their lowest levels in\n1999, when the import surge occurred.\n2311\n7.927 The United States adds that she reasonably found that there was intense price competition\nbetween imports and domestic merchandise in contract negotiations during the period of investigation.\nThese facts indicated that the industry's downward trends in 1999 were due directly to the surge in\nimports in that year. Although import volumes slackened somewhat in 2000 and interim 2001, they\ncontinued to exert substantial pricing pressure in the market because of the intense price competition\nin annual contract negotiations. As a result, the condition of the industry continued to deteriorate\n\n2306 United States' first written submission, para. 546.\n2307 Korea's first written submission, para. 117; Korea's second written submission, para. 152; China's\nfirst written submission, para. 525.\n2308 Korea's first written submission, para. 117; China's first written submission, para. 525.\n2309 Korea's second written submission, para. 153.\n2310 China's first written submission, para. 526.\n2311 United States' first written submission, para. 544.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nduring the last year-and-a-half of the period, with the industry's operating margin remaining at -6.1%\nin 2000 and declining to -7.4% in interim 2001. In sum, Commissioner Miller established that there\nwas a genuine and substantial correlation between import trends and declines in the industry's\ncondition during the latter half of the period of investigation.\n2312\n7.928 In response to China's arguments, the United States argues that as the Appellate Body has\nstated, the appropriate consideration in a safeguards proceeding is whether imports have made a\ngenuine and substantial contribution to a significant overall impairment in the condition of the\nindustry during the period of investigation. A competent authority is not required to assess whether\nan industry's problems were first caused by imports or whether an industry was in a weakened state\nbefore an increase in import volumes during the period. Indeed, the fact that an industry is already in\na weakened state does not mean that imports ca nnot enter the market in such volumes that they\nseriously injure the already weakened industry. On the contrary, it is precisely in such a situation, that\nis, when an industry is vulnerable to import competition because it is in an otherwise poor condition,\nthat safeguard remedies are especially appropriate.\n2313\n7.929 In counter-response, China submits that its argument that the industry was in an injured state\nbefore the increase of imports underlines the absence of coincidence between imports and negative\nperformance of the industry. China argues that the absence of correlation is more obvious when one\nconsiders the declining imports towards the end of the period of investigation and notes that the\nindustry is not recovering from injury in spite of the absence of the \"substantial\" cause of injury.\nChina submits that it is, therefore, clear that there must be other factors responsible for the injury\nsuffered by the domestic industry.\n2314\n(ii) Relevance of prices of imports and domestic products\n7.930 The European Communities and Norway argue that Commissioner Miller's analysis is\npredicated on the existence of severe price competition between imports and domestic products.\nHowever, according to the European Communities and Norway, the USITC's data does not show that\nimports undersold domestic products. Rather, it demonstrates that prices of imports were consistently\nabove those of domestic products.\n2315 Norway argues that there is no evidence of underselling, which\nwould be necessary to show that in creased imports drove the price down. 2316 The European\nCommunities notes that Commissioner Miller states that the pricing data shows \"some underselling\"\nby imports on the specific data gathered by the USITC. While there is some underselling, none of it\noccurs in 1999, which is the period when the domestic industry is allegedly suffering.2317\n7.931 In response, the United States argues that the complainants mistakenly believe that downward\nprice pressure can only be exerted by means of underselling. The United States submits that, in fact,\nprice-depression can occur when a producer that has been selling its product at a higher price in a\nmarket chooses to reduce its prices significantly in th e market in order to gain market share. In this\nsituation, to the extent that the higher prices reflect a premium paid by purchasers for the producer's\nmerchandise, the producer's decision to sell its product at a lower price will exert a downward\npressure on substitutable products in that marketplace. Accordingly, while it may be true that imports\n\n2312 United States' first written submission, para. 545.\n2313 United States' first written submission, para. 552.\n2314 China's second written submission, para. 276.\n2315 European Communities' first written submission, para. 483; Norway's first written submission,\nparas. 333 and 335.\n2316 Norway's first written submission, para. 334.\n2317 European Communities' first written submission, para. 482.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof tin mill steel had not been routinely underselling domestically produced tin mill products during the\nperiod, this lack of underselling does not preclude a finding that higher-priced tin mill imports caused\nprice-depression in the market in 1999, 2000, and 2001, as they were sold at increasingly low\nprices.\n2318\n7.932 The United States submits that the record establishes that the surge of imports into the market\nin 1999 did, in fact, have just such a downward impact on domestic prices. The annual average unit\nprices of domestic and imported tin mill steel remained relatively stable throughout the period from\n1996 to 1998. In particular, the net AUV for domestic commercial sales of tin mill steel ranged\nbetween US$610 and US$616 per ton during this period, while the net AUV of imported tin mill steel\nranged between US$657 and US$669 per ton.\n2319 When imports of tin mill steel surged in 1999,\nhowever, the AUV of both domestic and imported merchandise dropped substantially from their\nlevels during 1996 to 1998, with the AUV of imports falling US$73 per ton to US$596 in 1999, and\nthe AUV of domestic merchandise falling by US$26 per ton to US$584 in 1999. In 2000, even\nthough imports slackened somewhat but remained at elevated levels, the AUV of imports and\ndomestic product both remained at depressed levels. Finally, in interim 2001, AUV of imports and\ndomestic merchandise increased somewhat (after the imposition of the anti-dumping duty order on\nJapanese goods) but remained at levels that were substantially below the pricing levels seen in 1998,\nbefore the surge in imports. However, throughout this period, as import pricing declined, domestic\npricing did as well, and caused substantial declines in the industry's operating loss levels.2320\n7.933 In counter-response, the European Communities notes that there is nothing in the USITC\nReport which explains how serious injury to the domestic industry was caused by increased imports\nwhich were not underselling domestic produce. Since the reasoned and adequate explanation must be\nfound in the USITC Report, and the United States has not cited to any such explanation, it must be\nconcluded that the USITC Report does not provide such a reasoned and adequate as required by the\nAgreement on Safeguards.\n2321\n(c) Hot-rolled bar\n7.934 The European Communities and China argue that there is no clear coincidence in trends\nbetween increased imports of hot-rolled bar and the worsening of the position of the domestic\nindustry.2322 The European Communities submits that imports of this product increased in 1997 and\n1998. However, the domestic industry made comfortable profits in both of those years. In 1999 when\nimports fell, the domestic industry's profits started also to decrease. According to the European\nCommunities, such a movement is not consistent with imports being the cause of the decline in\nprofits. The European Communities notes that although imports increased between 1999 and 2000,\nthat increase in imports was substantially less than the increase between 1997 and 1998. Moreover,\nthe domestic price fell massively in 1999, when imports were decreasing, and remained steady when\nimports moved upwards in 2000. Finally, according to the European Communities, United States\nproducers made a larger operating loss in the six months of interim 2001 than in any full year\nexamined, while imports fell massively. The European Communities submits that there is, thus, no\n\n2318 United States' first written submission, para. 547.\n2319 United States' first written submission, para. 548.\n2320 United States' first written submission, para. 549; United States' second written submission,\npara. 139.\n2321 European Communities' second written submission, para. 384.\n2322 European Communities' first written submission, para. 492; China's first written submission,\npara. 405.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nclear coincidence in trends between increased imports and serious injury. As already noted, the\nabsence of coincidence requires a \"very compelling\" explanation.2323\n7.935 In light of the absence of coincidence, China al so argues that \"a very compelling analysis of\nwhy causation still is present\" becomes necessary. China believes that the USITC failed to provide\nsuch an analysis.2324 In this regard, China points out that, in its report, the USITC explained at length\nthe \"strategy\" that domestic producers had recourse to, in order to compete with imports. China\nconsiders that this is not convincing. For example, the USITC states that in 1996, 1997 and 1998, the\nUnited States industry maintained its prices and thus lost market shares to imports, as imports\nundersold domestic production. China argues that if this were right, it would mean that price was a\nvery important factor for purchasers. China questions how it could, therefore, be explained that in\n1999, when prices of domestic production were lowe r than prices of imports, domestic producers did\nnot gain back market shares but instead continued to lose some. In China's view, the truth is that\npricing is not such an important factor after all a nd that if imports gained market shares during the\nperiod of investigation, independently of the prices of domestic products, imports cannot have played\nthe role that the USITC states it played. China concludes that the explanation of causation provided\nby the USITC is wrong, biased and not compelling\n2325\n7.936 In response, the United States submits that th e two complainants that challenge the USITC's\nfinding of causal link, do not address the USITC's analysis and findings. These complainants'\narguments are limited to the observation that specific import levels did not produce specific domestic-\nindustry operating income levels. However, the correlation between imports and domestic industry\nperformance is not simply a matter of stating that import level 'X' must produce operating income 'Y'.\nInstead, imports affect the domestic industry's financial performance through their effects on factors\nsuch as output and prices. The USITC's analysis recognized this. Instead of the simplistic\ncomparisons offered by China and the European Communities, the USITC provided a more\nsophisticated, and consequently, comprehensive, explanation of the correlation between the increased\nimports and the serious injury. It explained how the imports, and the domestic industry's competitive\nresponses to the imports, affected factors – namely sales revenues and prices – that critically\ninfluenced the level of operating income.\n2326\n7.937 With respect to the argument that the data do not indicate that there is any correlation between\nunderselling of the domestically produced product by the imports and the domestic industry's market\nshare, the United States submits that this is wrong. As the USITC found, the subject imports made\ntheir largest gains in market share during those portions of the period of investigation when there was\npervasive underselling by the imports.\n2327 Consequently, the United States submits that the arguments\nof China and the European Communities do not detract from the USITC's conclusion that there was a\ncausal link between the increased imports and the se rious injury suffered by the domestic hot-rolled\nbar industry.2328\n7.938 In counter-response, the European Communities argues that it is not for the United States to\nprovide an ex post facto explanation. The explanation should have been in the USITC Report but is\n\n2323 European Communities' first written submission, para. 493.\n2324 China's first written submission, para. 405.\n2325 China's first written submission, para. 406.\n2326 United States' first written submission, para. 575.\n2327 United States' first written submission, para. 576.\n2328 United States' first written submission, para. 577.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnot there. Consequently, the USITC has failed to provide a reasoned and adequate explanation of its\npurported establishment of a genuine and substantial causal link.2329\n(d) Cold-finished bar\n7.939 The European Communities submits that it is patently obvious that a comparison of the\nimport trends against financial performance, described by the USITC as the most \"pertinent indicator\nof the industry's condition\", shows that there is no correlation of trends which would indicate the\npresence of a causal link. According to the European Communities, there is a negative correlation.\nProfits increased as imports increased and decreased as imports decreased. 2330 T h e E u r o p e a n\nCommunities notes that in 2000, when imports were at their highest, the domestic industry improved\nits performance (operating income improved significantly), while in 1999, when imports were at their\nlowest level since 1996, the performance of the domestic industry was the worst in the whole period\nof investigation. 1997 had also seen an increase in imports. The European Communities reiterates\nthat in the absence of coincidence of trends a Member imposing a safeguard measure must provide a\nvery compelling explanation of the existence of a causal link.\n2331 In the European Communities' view,\nthere is again no very compelling explanation that establishes the causal link. A comparison of the\ntrends in demand and the industry's financial performance suggests a closer link between demand and\nprofits than exists between imports and profits.2332\n7.940 In response, the United States submits that the argument the record does not indicate that\nincreases in import volume were coincident in time with declines in industry financial performance\nignores the explanation the USITC provided concerning the prevalence of contracts among cold-\nfinished bar producers, which demonstrated why the effects of aggressive pricing by the imports were\nnot immediately reflected in the market. Moreover, the United States submits that the European\nCommunities' analysis is based on a mechanical year-by-year approach. By contrast, an examination\nof the final two full years of the period of investigation demonstrates that when import volume\nincreased sharply, domestic financial performance declined sharply – exactly the type of temporal\ncorrelation that the European Communities contends is lacking.\n2333\n7.941 In counter-response, the European Communities notes the United States uses the USITC's\nfinding that 40% of the market for cold-finished bar was based on 6 month to one year contracts to\nexplain the time lag between increased imports in 1998 and the poor performance of the industry in\n1999. However, the European Communities notes that when it argued that the development in\nfinancial performance in 1999 and 2000 (where financial performance improved as demand increased\nand imports increased) was due to changes in demand, and that the USITC should have ensured the\nnon-attribution of the injurious effects of changes in demand, the United States highlighted the USITC\nfinding that the poor performance in 1999 was \"…to a large extent attributable to declines in demand\nin that year…\".\n2334 Thus, the USITC did not consider, as the United States has argued, that the poor\nperformance in 1999 was caused by imports. It considered that the performance in 1999 was due to\ndemand declines. The USITC therefore, did not put any emphasis on the time lag effect.\n2335\n\n2329 European Communities' first written submission, para. 392.\n2330 European Communities' first written submission, para. 507.\n2331 European Communities' first written submission, para. 507.\n2332 European Communities' first written submission, para. 508.\n2333 United States' first written submission, para. 590.\n2334 United States first written submission, para. 596. USITC Report, Vol. I, p. 107.\n2335 The European Communites notes that the phrase which the United States quotes with respect to\nlong term buying does not support the United States conclusion that this explains the time lag between increased\nimports and poor financial performance. The sentences be fore state \"The market did not react immediately to\nthe price reductions by the imports. Indeed, neither the absolute volume of the imports nor their market share\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nTherefore, according to the European Communities, the United States cannot invent, ex post facto, the\ntime lag factor. This means that there is no reasoned and adequate explanation, indeed no very\ncompelling analysis, of how, when financial performance improved contemporaneously with\nincreased imports, increased imports could cause serious injury.\n2336\n7.942 With respect to the argument that \"a comparison of the trends in demand and the industry's\nfinancial performance suggests a closer link betw een demand and profits than exists between imports\nand profits\", the United States submits that this is wrong. For example, although demand increased\nbetween 1997 and 1998, profits declined. The enormous 82.3% decline in profits between 1998 and\n1999 does not track the far more modest 3.6% decline in demand between those years. By the same\ntoken, between 1998 and 2000, when demand declined by only 1.7%, operating income dropped by a\nvery substantial 58.5%. The European Communities' simplistic and incorrect year-by-year\ncomparisons of various indicators, which ignore conditions of competition indicating why certain\neffects of imports may be lagged, does not in any way demonstrate that the USITC's far more detailed\nand comprehensive analysis was defective or lacked objectivity.\n2337\n(e) Rebar\n7.943 China argues that there is an absence of coincidence between the increase in imports of rebar\nand the decline in the relevant injury factors. 2338 Indeed, according to China, imports mostly\nincreased in 1997, 1998 and 1999, yet, during these 3 years, the industry had a positive operating\nincome.2339 China argues that moreover, in 1996, before imports surged, the industry had an operating\nloss of US$76,000 and in 2000, as imports had decreased by 162,779 short tons, the industry had an\noperating loss of US$24,869,000. Also, prices only began to fall in the last quarter of 1998 and they\nstopped their fall in the middle of 1999. This means that prices have fallen during only 9 months over\na period of three years of increasing imports. 2340 China argues that not only did the industry\nexperience very important profits as imports were increasing and prices were falling, but the industry\nexperienced losses even before imports started to increase. Given the difficult situation of the\nindustry before the decline in prices, and given that the industry experienced its best financial results\nof the period of investigation as imports were increasing, there is clearly no coincidence between the\nincrease in imports and the alleged decline in the relevant injury factors.\n2341\n7.944 The European Communities and China further ar gue that given the absence of coincidence\nbetween the movements in imports and injury factors, the USITC had the obligation to provide a\ncompelling analysis of why causation is still present. Since the USITC did not correctly evaluate the\ncomplexity and roles of all relevant factors, China believes that such an analysis has not been\nprovided.\n2342 According to China, a 'very compelling analysis' is absent from the USITC Report.\nChina submits that this failure cannot be cured by the extensive and often speculative interpretation of\nthe United States in its submissions.2343\n\nincreased in 1999. The lack of immediate reaction by the market may reflect extensive contract sales […]\"\nUSITC Report, Vol. I, p. 106. (United States' first written submission, para. 586) .\n2336 European Communities' second written submission, para. 396.\n2337 United States' first written submission, para. 591.\n2338 China's first written submission, para. 433.\n2339 China's first written submission, para. 434.\n2340 China's second written submission, para. 240.\n2341 China's first written submission, para. 435.\n2342 European Communities' first written submission, para. 518; China's first written submission,\npara. 436.\n2343 China's second written submission, para. 244.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.945 According to the European Communities, the United States builds an argument of the\ndomestic industry lowering prices to recapture market share. Even if this were true (and it is not\nreflected in operating income in 1998 or 1999 which were the first years in which imports increased)\nit is not discussed in the USITC Report.\n2344 The European Communities also argues that while the\nUSITC notes a decline in prices in 1999 and 2000, operating losses only started to appear in 2000. 2345\nChina also submits that it does not agree with the USITC's conclusion that injury was being suffered\nby the industry because imports lead prices to decrease. According to the USITC, that decrease\nprevented the industry, on one hand from benefiting from cost reductions during some periods of the\nperiod of investigation and, on the other hand, from recovering from increases in costs during the\nother periods.\n2346\n7.946 The United States responds by stating, as the USITC explained, once imports surged in 1998,\nthe domestic industry's loss in market share was immediate. The domestic industry subsequently\nreduced its prices in an attempt to mitigate furt her losses in market share. Consequently, the\nindustry's declines in financial performance were more gradual than its declines in market share. An\nexamination of the industry over the final two full years of the period of investigation – 1998 to 2000\n– demonstrates that imports increased by 35.8% and the domestic industry's operating income\ndeteriorated from a US$88.2 million operating profit to a US$24.7 million operating loss. According\nto the United States, this is precisely the type of temporal correlation that is said to be lacking.\n2347\n7.947 China argues that the United States has failed to rebut China's argument that there is no\ncoincidence of trends between the increase in imports and the domestic industry decline. 2348 China\nargues that a coincidence of trends should be found on the basis of movements of injury factors during\nthe whole period of investigation. China contends that what the United States did was to choose a\nshort period of time within the period of investigation. China submits that this arbitrary choice of a\nperiod within the wider period of investigation cannot be a reasonably acceptable basis for the\nexamination of the correlation of trends.\n2349\n7.948 Also in counter-response, the European Communities argues that neither the USITC nor the\nUnited States satisfactorily explain how it can be the case that, after imports having increased each\nyear from 1996 to 1999, in each year gaining more market share, and the domestic industry's\noperating income also increasing every year over the same period, in 2000, when imports start to\ndecrease, and the domestic industry's market share increasing, the domestic industry crashes to\nsubstantial losses.2350\n7.949 In the absence of a direct correlation, the Appellate Body has required a \"very compelling\nanalysis\". According to the European Communitie s, no such analysis appears in the USITC Report.\nThe United States builds an argument of the domestic industry lowering prices to recapture market\n\n2344 United States' first written submission, para. 603 which does not contain any reference to the\nnarrative section of the USITC Report. Note USITC Repor t, Vol. I, p. 114, where the USITC discusses the\nindustry's performance in 2000 without suggesting that the industry lowered prices in order to obtain market\nshare.\n2345 European Communities' first written submission, para. 518.\n2346 China's first written submission, paras. 432 and 433.\n2347 United States' first written submission, para. 603.\n2348 China's second written submission, para. 238.\n2349 China's second written submission, para. 239.\n2350 European Communities' second written submission, para. 404.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nshare. Even if this were true (and it is not reflected in operating income in 1998 or 1999 which were\nthe first years in which imports increased) it is not discussed in the USITC Report.2351\n7.950 China submits that since argumentation by the United States is groundless and the data clearly\nshows that the coincidence between the movements in imports and injury factors was absent, the\nUSITC had the obligation to provide a compelling analysis of why causation is still present. 2352\nHowever, according to China, such a \"very compe lling analysis\" is absent from the USITC Report.\nChina submits that this failure cannot be cured by the extensive and often speculative interpretation of\nthe United States in its submissions.2353\n(f) FFTJ\n7.951 The European Communities argues that the United States has not made an adequate and\nreasoned determination of the existence of a causal link. 2354 In particular, the European Communities\nargues although the product group is characterised by a high degree of heterogeneity, most products\nare manufactured to conform to specific standards, and once such conformity is achieved price is the\nmajor competitive issue. The USITC's findings on price competition are, therefore, vital. Such\nfindings are, however, seriously lacking.\n2355\n7.952 In response, the United States submits that the USITC did not rely exclusively on the pricing\ndata for its conclusions on causal link, as the European Communities mistakenly represents. Instead,\nthe USITC explained that a wide variety of domestic industry's performance factors declined while\nimport penetration increased. The USITC's findings concerning the FFTJ industry's many declines in\nperformance were based on questionnaire data covering the entire industry that no complainant\ncontends was not representative.2356\n7.953 The United States further argues that the reco rd evidence showed that there was a clear and\ndirect correlation between increases in imports of FFTJ and declines in the FFTJ industry's overall\ncondition during the period of investigation. During the last three full years of the period, 1998\nthrough 2000, imports increased in absolute terms by 28.4% and increased their market share by 11.1\npercentage points to 45.6%.\n2357 During the same period, the industry experienced substantial and\nconsistent declines in its United States shipments, commercial sales values, employment levels and\nprofitability levels. For example, in 1998 – the mid-point of the period of investigation – the volume\nof imports increased on an absolute level by 11.2% from their 1997 levels, the ratio of imports to\ndomestic production increased by 7.6 percentage points, and import market share increased by 2.6\npercentage points. 2358 In that same year, the industry's condition declined. There was a similar\ncorrelation between import increases and declines in the industry's condition in 1999. In that year,\nimport volumes further increased their ratio to domestic production by 7.7 percentage points over\n\n2351 United States' first written submission, para. 603 which does not contain any reference to the\nnarrative section of the USITC Report. See, USITC Report, Vol. I, p. 114, where the USITC discusses the\nindustry's performance in 2000 without suggesting that the industry lowered prices in order to obtain market\nshare.\n2352 China's second written submission, paras. 242 and 243.\n2353 China's second written submission, para. 244.\n2354 European Communities' first written submission, para. 552.\n2355 European Communities' first written submission, para. 542.\n2356 United States' first written submission, para. 649.\n2357 USITC Report, Table TUBULAR-C-6.\n2358 USITC Report, Tables TUBULAR-8 (p. TUBULAR-10), TUBULAR-45 (p. TUBULAR-38) &\nTable TUBULAR-C-6. The ratio of FFTJ imports to domestic production increased from 47.7% in 1997 to\n55.3% in 1998 while import market share increased from 32.9% in 1997 to 35.5% in 1998.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ntheir 1998 levels and their share of the overall FFTJ market by 2.2 percentage points over their 1998\nlevels.2359 At the same time, the industry's condition further declined. Finally, in 2000 – the last full\nyear of the period – import volumes increased on an absolute level by a further 15.3% from their 1999\nlevels, saw their overall ratio to domestic production increase by 6.7 percentage points, and increased\ntheir share of the overall FFTJ market by a further 4.0 percentage points over their 1999 levels. 2360 In\nthat year, the industry's condition further declined.2361\n(g) Stainless steel bar\n7.954 The European Communities argues that there is no coincidence in trends between increased\nimports and serious injury. 2362 In particular, the European Communities asserts that the USITC\nclearly considered that it was the increase in imports in 2000 which met the standard for increased\nimports required by the Agreement on Safeguards. However, according to the European\nCommunities, the USITC itself admitted that until 2000 the level of imports fluctuated. A glance at\nthe data shows that imports decreased from 1997 levels in both 1998 and 1999. Yet, according to the\nEuropean Communities, it is precisely in this period when imports decreased that the domestic\nindustry registered its worse results.\n2363 In particular, imports decreased from 1997 to 1999, when the\ndomestic industry apparently suffered its worse results, and then moved upwards in 2000, when the\ndomestic industry regained profitability, before falling off in interim 2001, when the domestic\nindustry once more fell into loss. 2364 The European Communities argues that given that there is thus\nno coincidence of trends between increased imports and the serious injury allegedly suffered by the\ndomestic industry, the competent authority must present very compelling arguments to show that\nincreased imports are in fact responsible for the alleged serious injury. According to the European\nCommunities, the USITC did not present such data.\n2365 Further, the European Communities argues\nthat the USITC failed to provide a reasoned and adequate explanation of any causal link between\nincreased imports and serious injury suffered by the domestic industry.2366\n7.955 In response, the United States contends that the European Communities' argument is based on\na misleading reading of the record. As can be seen from the USITC's decision, it was true that the\nabsolute quantity of imports \"fluctuated somewhat (declining slightly in 1998 and 1999)\" as the\nEuropean Communities asserts. However, the record also showed that apparent United States\nconsumption of stainless steel bar fluctuated during the period although more significantly than\nimports. As a result, while import quantities on an absolute level may have fluctuated \"somewhat\"\nbetween 1997 and 1999, the market share of imports increased consistently and substantially\nthroughout the period of investigation, as did the ratio of imports to domestic production. Moreover,\nthe record showed that, while imports made these market share gains, they also continued to undersell\nthe domestic producers at significant margins throughout the period. Given this uncontroverted\nrecord evidence, the United States submits that it should not be surprising that the USITC found that\nthe substantial increases in import market share that were accompanied by substantial underselling\n\n2359 USITC Report, Tables TUBULAR-8 (p. TUBULAR-10), TUBULAR-45 (p. TUBULAR-38) &\nTable TUBULAR-C-6. The ratio of FFTJ imports to domestic production increased from 55.3% in 1998 to\n63.0% in 1999 while import market share increased from 35.5% in 1998 to 37.7% in 1999.\n2360 USITC Report, Tables TUBULAR-8 (p. TUBULAR-10), TUBULAR-45 (p. TUBULAR-38) &\nTable TUBULAR-C-6. The ratio of FFTJ imports to domestic production increased from 63.0% in 1999 to\n69.7% in 2000 while import market share increased from 37.7% in 1999 to 41.7% in 2000.\n2361 United States' written reply to Panel Question No. 39 at the second substantive meeting.\n2362 European Communities' first written submission, para. 562.\n2363 European Communities' first written submission, para. 564.\n2364 European Communities' first written submission, para. 564.\n2365 European Communities' first written submission, para. 567.\n2366 European Communities' first written submission, para. 562.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhad an increasingly injurious effect in the industry during the period of investigation. In essence, by\nfocusing on minor fluctuations on the absolute quantities in imports during a selected time during the\nperiod of investigation, the United States argues that the European Communities is simply hoping to\ndistract the Panel's attention from the larger picture: import market share grew substantially over the\nperiod of investigation as a result of underselling and, during that period, the industry's market share,\nproduction and shipment levels, and profitability levels went into a free-fall.\n2367\n7.956 The United States argues that, moreover, the European Communities' argument also\nmisconstrues the USITC's findings. The USITC did not find, as the European Communities asserts,\nimports only caused injury to the industry in the year 2000. While it is true that the USITC\nacknowledged that imports surged to their highest levels of the period of investigation in 2000 and\nthat they caused the industry's condition to deteriorate substantially in that year, the USITC also\nexplicitly found that imports had increased their market share throughout the period and that they had,\nthrough increased volumes and underselling, significantly and adversely impacted the industry's\ncondition during the years before 2000.\n2368\n7.957 The United States also argues that the European Communities makes much of the fact that the\nindustry managed to return to profitable operating income margins in 2000, despite the fact that\nimports made their largest surge into the market in that year. Their argument has two flaws. First,\neven aside from the industry's profitability levels, the industry's market share reached its lowest level\nof the period of investigation in the face of this import surge. Accordingly, even aside from the\ndeclines in the industry profitability levels, imports had a significant negative impact on the industry's\ncondition in that year.\n2369 The United States submits that, moreover, the European Communities'\nargument ignores the fact that the industry's operating income margin was substantially lower in 2000\nthan in 1996, 1997, and 1998, the first three years of the period of investigation. Although the exact\nnumbers are confidential, the USITC explicitly stated that the industry's operating margins declined\n\"consistently and significantly\" through the period of investigation, noting that operating margins fell\nin 1997 and in 1998, and then dropped to a loss in 1999. Although the industry's margins returned to\na profit in 2000, the USITC explicitly noted that this increase was only \"slight\" and that it was\nfollowed by a drop to the lowest margin of the period in interim 2001. Although the exact data is\nconfidential, the industry's operating income level remained substantially below its levels in 1996,\n1997 and 1998. Accordingly, the record clearly indicates that there was not a substantial\nimprovement in the industry's injured condition in 2000, as the European Communities suggests;\ninstead, the record shows that the industry's condition continued to remain poor in the face of import\ncompetition.\n2370\n7.958 In counter-response, the European Communities re-iterates that an increased imports finding\nrequired by the Agreement on Safeguards could only potentially be made for 2000. However, injury\nwas determined to exist during the entire period, and was not linked to the increase of imports in\n2000. According to the European Communities, the United States does no more than claim that it\nwas justified in finding that the injury suffered before the increase in imports was caused by imports,\nbecause imports increased their market share.\n2371 However, it is only if imports increased, not\nincreased their market share, that the conditions of the application of safeguard measure can be met.\nThe European Communities submits that the USITC was not charged with finding a causal link\nbetween changes in market share and serious injury, but rather between increased imports and serious\n\n2367 United States' first written submission, para. 667.\n2368 United States' first written submission, para. 668.\n2369 United States' first written submission, para. 669.\n2370 United States' first written submission, para. 670.\n2371 United States' first written submission, para. 667.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury. In the light of the foregoing, the European Communities submits that the United States has not\nshown that there was a correlation between import trends and serious injury and has not provided a\ncompelling analysis in the absence of such a correlation.\n2372\n(h) Stainless steel wire\n7.959 The European Communities argues that Comm issioner Koplan did not deal with the\ncorrelation of trends, even though three other Commissioners had found that despite consistent\nunderselling there was no correlation between pricing of imports and domestic products. The\nEuropean Communities notes2373 that Chairman Koplan's conclusions are directly contradicted by the\nopinion of the majority. With most relevance to his conclusion that increased imports are the cause of\na threat of serious injury, is the conclusion that:\n\"[W]e find that stainless wire imports have not had a clear adverse impact on the\nprice of domestic stainless wire during the period of investigation. Although the\nrecord indicates that imports consistently undersold domestic wire products the\nrecord also indicates that price movements for domestic stainless wire did not clearly\ncorrelate with the existence or significance of underselling by imported stainless\nwire.\"\n2374\n7.960 In order to provide a reasoned and adequate explanation of Chairman Koplan's findings there\nwould have to be a clear rebuttal of this finding. According to the European Communities there is\nnone, and this brings into question, therefore, the basis for the finding of a causal link between\nincreased imports and a threat of serious injury. For this reason, the European Communities submits,\nthe safeguard measures imposed on this basis are unjustified and are thus inconsistent with\nArticles 2.1 and 4.2(b) of the Agreement on Safeguards, and additionally Articles 3.1 and 4.2(c).\n7.961 In response, the United States submits that Commissioner Koplan established that there was a\ngenuine and substantial cause and effect relationship between increased imports and the threat of\nserious injury to the domestic industry. His analysis established a direct link between increases in the\nvolume of imports during interim 2001 and the significant declines in the overall condition of the\nstainless steel wire industry during the interim period. He also reasonably found that these trends\nindicated that there was an imminent threat of serious injury from imports. Finally, he conducted a\nthorough and objective examination of the effects of other factors and ensured that he did not attribute\nthe negative effects of these other factors to imports in his analysis.\n2375\n7.962 The United States also argues that Commissioner Koplan's findings of a correlation between\nimport trends and declines in the industry's condition are not \"directly contradicted\" by the finding of\nCommissioners Miller, Hillman, and Okun that st ainless steel wire imports had not had a clear\nadverse impact on domestic prices during the period. The United States notes that the Agreement on\nSafeguards does not require that all six individual decision-makers reach the same conclusion, or that\nthe individual Commissioners must rebut the finding s of others with different conclusions, but\nrequires that the determination, as the Appellate Body said in US – Line Pipe , meets the obligations\ncontained in the Agreement on Safeguards. The fa ct that Commissioners Miller, Hillman, and Okun\n\n2372 European Communities' second written submission, para. 422.\n2373 European Communities' first written submission, para. 580.\n2374 USITC Report, Vol. I, p. 238 (footnotes omitted).\n2375 United States' first written submission, para. 721.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndisagreed with Commissioner Koplan no more makes his analysis unreasonable than his disagreement\nwith them makes their analysis unreasonable.2376\n7.963 The United States also argues that Commissioner Koplan's pricing analysis is not inconsistent\nwith the pricing findings of Commissioners Miller, Hillman and Okun. Like these three\nCommissioners, Commissioner Koplan specifically found that imports had consistently undersold\ndomestic stainless steel wire during the period from 1996 to 2000, but that this consistent underselling\nhad not impacted domestic pricing adversely because the \"domestic industry had kept prices of the\ndomestic [wire] product in line with its costs\" during that five year period. However, unlike the other\nthree Commissioners, Commissioner Koplan focused his analysis on pricing data for imports and\ndomestic product in interim 2001 and noticed that lowered import pricing had begun interfering with\nthe ability of domestic industry to keep its prices in line with its costs. In particular, he found that, in\ncombination with declining demand, the increase in import volumes and market share caused the price\nof domestic wire to fall during a period of rising costs and led directly to a decline in the industry's\noperating income levels in interim 2001. As a result, he reasonably found, the increase in imports and\ntheir concurrent underselling had caused the substantial declines in the industry's condition in the final\nmonths of the period of investigation, thus s howing that imports thre atened the industry with\nimminent serious injury. In other words, Commissioner Koplan's findings about price competition in\nthe market during the first five years of the period were, in fact, consistent with the findings of the\nother three Commissioners. However, Commissioner Koplan simply placed more emphasis than the\nother Commissioners on the pricing effects of imports during the last six months of the period, which\nis a reasonable choice given his finding that imports threatened serious injury to the stainless steel\nwire industry.\n2377\n7.964 The United States claims that the finding of the other three commissioners did not cover\ninterim 2001, while Commissioner Koplan focussed on interim 2001. However, the European\nCommunities submits that the finding quoted by the European Communities in its first written\nsubmission was of a general nature and was not limited to a period excluding interim 2001.\nMoreover, Commissioner Koplan did not discuss unders elling at all in his discussion of interim 2001\ndevelopments, and thus did not explain in a reasoned and adequate manner, how there was a\ncorrelation between pricing for imports and domestic pricing sufficient to establish a causal link.\n2378\n(i) Stainless steel rod\n7.965 The European Communities argues that as a result of the blanket confidentialization of\ninformation, it is practically impossible to determine whether the USITC has provided a reasoned and\nadequate explanation of the existence of a genuine and substantial causal link. The European\nCommunities argues that the coincidence of trends cannot be assumed. The European Communities\nsubmits that imports were relatively close to 1996 levels in 1999. In 1996 the domestic industry made\nprofits. However, in 1999 operating margin \"dropp ed dramatically\". According to the European\nCommunities, operating margins were at their worst in interim 2001, a period in which imports had\ngreatly decreased, returning, on the basis of extrapolations, to 1996 levels. The European\nCommunities argues that this does not seem to indicate a coincidence of trends. Therefore, the\nEuropean Communities submits that the USITC has not provided a reasoned and adequate explanation\nof its determination of the existence of a causal link between increased imports and serious injury.2379\n\n2376 United States' first written submission, para. 732.\n2377 United States' first written submission, para. 733.\n2378 European Communities' second written submission, para. 434.\n2379 European Communities' first written submission, para. 574.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.966 According to the European Communities, theref ore the United States, in imposing safeguard\nmeasures, consequently acted inconsistently with Articles 2.1 and 4.2(b) of the Agreement on\nSafeguards as well as with Articles 3.1 and 4.2(c) of the Agreement on Safeguards.\n7.967 The United States argues that the USITC established that there was a clear correlation\nbetween the growing volumes of low-priced imports in the market and the substantial declines in the\nindustry's condition throughout the period of investig ation. In particular, the industry experienced\nsubstantial declines in its market share, operating income margins, operating income, production\nlevels, sales revenues, and shipments during the period of investigation, particularly during 1999 and\n2000, as import quantities and market share grew considerably from their levels in 1998 and as\nimports continued to undersell the domestic industry and lead domestic prices downward. The largest\ndeclines in the industry's condition during the period occurred in 2000, when the largest import\nincrease occurred. Given the very clear correlation of import volume and pricing trends and industry\ndeclines in these years, the United States asserts that the USITC correctly found there was a genuine\nand substantial correlation between import volume in creases and the serious injury being suffered by\nthe domestic industry during the period of investigation.\n2380\n7.968 In response, the United States argues that, despite the clear correlation between import\nvolume and pricing trends and declines in industry condition, the European Communities nonetheless\ncontends that the record failed to establish a substantial causal link between movements in import\nvolumes and declines in the stainless steel rod industry's condition. The United States submits that\nalthough the European Communities can perhaps be fo rgiven for basing their arguments on data that\nwas redacted from the opinion as confidential, it is nonetheless clear from the available data and the\nface of the opinion that their argument is factually mistaken.\n2381\n7.969 The United States submits that the argument w ith respect to the relationship of profits and\nimport levels in 1999 is flawed because imports were not \"relatively close\" to their 1996 levels in\n1999, as the European Communities suggests. Instead, import volumes and market share were both\nsubstantially higher in 1999 than 1996, with the absolute quantity of imports being 8.9% higher than\n1996 and their market share in 1999 being substantially higher than in 1996. In addition, as the\nUSITC clearly explained in its analysis (even wi th the redaction of confidential data), imports\nundersold domestic merchandise in every period of the period of investigation, including 1999, which\nresulted in the suppression and depression of domestic prices during the last two-and-a-half years of\nthe period of investigation, thus preventing the industry from keeping its prices at a level that would\nallow it to recoup its nickel costs during this period, including 1999. In other words, the USITC\ncorrectly found that, in 1999, the industry's operating income margins fell in direct correlation with\nthe substantial increase in the volume and market share of imports that occurred during that year, and\nas a direct result of the persistent underselling by imports that occurred throughout the period.\n2382 In\nfact, the USITC specifically noted that the \"record shows a clear and direct correlation between\nchanges in the volume of imports and the overall condition of the industry\", finding in particular that\nthe industry's operating income level declined in 1999 in conjunction with an increase in import\nvolumes. Given this direct statement on the matter, it is clear not only that the USITC considered the\nissue raised now by the European Communities but squarely rejected it because it was not consistent\nwith the record evidence.\n2383\n\n2380 United States' first written submission, para. 699.\n2381 United States' first written submission, para. 700.\n2382 United States' first written submission, para. 701.\n2383 United States' first written submission, para. 702.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.970 The United States argues that, similarly, the European Communities' argument that import\nvolumes fell back to their 1996 levels in interim 2001 is misleading. The record showed that the\ndecline in absolute import volumes in interim 2001 was related to the decline in demand in interim\n2001 and had little impact on the elevated market share of imports or their continued underselling of\ndomestic stainless steel rod. More specifically, while it is true that import volumes on an absolute\nlevel fell substantially in interim 2001 from the comparable period in 2000, the decline in import\nvolumes between those two periods was essentially similar to the decline in demand between interim\n2000 and 2001, resulting in a minimal decrease in import market share between interim 2000 and\n2001. Further, as the USITC noted, imports also undersold domestic merchandise in interim 2001,\nthus further suppressing and depressing United States prices in that period. Thus, imports retained\ntheir substantially increased market share even in the face of declining demand. Again, the record\nshowed, as the USITC found, that there was a clea r correlation between import volumes and pricing\nin interim 2001 and the declines in industry profitability in that year. The European Communities'\narguments to the contrary are simply wrong, and can be seen as such from the face of the USITC's\nopinion, even with certain confidential data redacted.\n2384\n7.971 In counter-response, the European Communities submits 2385 that the United States' response\nto the European Communities' argument that there was no correlation of trends is unpersuasive.\nAccording to the European Communities, imports developed as follows from 1996:\nTable 2: Stainless Steel Rod – Import Volumes (1996-2001)\n1996 1997 1998 1999 2000 2000 I 2001 I\nImports (vol.) 60,503 78,264 61,439 65,882 82,344 45,647 31,365\n7.972 The European Communities argues that losses were apparently \"dramatic\" in 1999, a year\nwhen imports did not particularly increase, and after a year in which imports fell substantially. The\nEuropean Communities submits that all the United States can do is claim that the level of imports in\n1999 could be considered as an increase in imports and that the USITC's statement that \"the record\nshows a clear and direct correlation between changes in the volume of imports and the overall\ncondition of the industry\" was sufficient to reject the European Communities arguments.\n2386\nAccording to the European Communities, such an assertion does nothing to explain how the\nunderlying facts, which clearly suggest that there is no correlation, can possibly be considered a \"clear\nand direct correlation\". There is, therefore, no reasoned and adequate explanation of the existence of\na correlation. The Panel should find the USITC's findings insufficient.\n2387\n3. Non-attribution\n(a) Definition and scope\n7.973 The European Communities, Switzerland, New Zealand, Japan and Brazil submit that the\nmere existence of a coincidence between the increased imports and the decline in industry\nperformance is not enough to establish the existence of a causal link. 2388 Brazil argues that while a\n\n2384 United States' first written submission, para. 703.\n2385 European Communities' second written submission, para. 429\n2386 United States' first written submission, paras. 701 and 702.\n2387 European Communities' second written submission, para. 430\n2388 European Communities' first written submission, para. 452; Japan's first written submission, para.\n217; Switzerland's first written submission para. 294; New Zealand's first written submission, para. 4.113;\nBrazil's first written submission, para. 151.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncorrelation between imports and serious injury is relevant and necessary, it is by itself insufficient\nevidence for imposing safeguards measures. 2389\n7.974 In Brazil's view, the second sentence of Article 4.2(b) appreciates that other factors may be\ncausing the decline in domestic industry performance. Thus, authorities must take the added step of\ninvestigating other possible causes, and the injury from those alternative causes \"shall not be\nattributed\" to imports.2390 Similarly, the European Communities, Switzerland and Norway argue that\nfor a causal link to exist, it must be shown that increased imports are responsible for the serious\ninjury. In other words, once the effect of alternative causes has been factored out, the nature of such\nincreased imports must be such as to transmit seri ous injury to the domestic industry. According to\nthe European Communities, this typically requires a demonstration that the conditions of competition\nare such that increased imports are responsible for injury suffered.2391\n(i) The obligation to \"separate\" and \"distinguish\"\n7.975 The complainants rely upon Appellate Body juri sprudence to argue that in order to comply\nwith the non-attribution requirement, an authority must \"separate\" and \"distinguish\" the injurious\neffects of factors other than increased imports to ensure they are not attributed to imports.\n2392 It has\nbeen argued that, moreover, a reasoned and adequate explanation must be offered, explicitly\nestablishing how this was accomplished.2393\n7.976 In this regard, the European Communities, Switzerland and Norway argue that a competent\nauthority must permit a demonstration, as a matter of substance, that: (i) the injurious effects of\nfactors considered to be causing injury have been distinguished from each other; (ii) these injurious\neffects have been attributed to the factors which are causing them; and (iii) the competent authority\nhas determined, after having attributed injury to all causal factors present, whether increased imports\nare a \"genuine and substantial\" cause of serious injury.\n2394 Similarly, according to Brazil and Japan,\nthe analytical framework established by the aforementioned cases requires, first, that authorities\nidentify the injurious effects of the known factors other than increased imports and, secondly, that\nauthorities explain satisfactorily the injurious effects of those other factors as distinguished from the\ninjurious effects of the increased imports.\n2395 Relying upon Appellate Body jurisprudence 2396, China\nargues, inter alia, that as a first step in the examination of causation, the injurious effects caused to the\ndomestic industry by increased imports must be distinguished from the injurious effects caused by\nother factors. Then, as a second step, the authorities must attribute to increased imports, on the one\nhand, and, by implication, to other relevant factors, on the other hand, \"injury\" caused by all of these\ndifferent factors. Any conclusion based exclusively on an assessment of only one of the causal factors\n– increased imports – rests on an uncertain foundation, because it assumes that the other causal factors\nare not causing the injury which has been ascribed to increased imports.\n\n2389 Brazil's first written submission, para. 151.\n2390 Brazil's first written submission, para. 151.\n2391 European Communities first written submission, para. 452; Switzerland's first written submission,\n2392 See, for example, European Communities' first written submission, para. 442; Brazil's first written\nsubmission para. 153.\n2393 Brazil's second written submission, para. 75.\n2394 European Communities' first written submission, para. 442; Switzerland's first written submission,\n2395 Brazil's first written submission, paras. 154-155; Japan's first written submission, paras. 218-227.\n2396 China's first written submission, para. 352.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(ii) Identification of the nature and extent of injurious factors\n7.977 The European Communities notes that the Appellate Body referred, in US – Line Pipe, to the\nneed to explain satisfactorily the \"nature and extent\" of injurious factors other than increased imports.\nThe European Communities submits that the Appellate Body did not explain further what was meant\nby this term. One understanding could be that, in order to ensure non-attribution and thus the\nexistence of a causal link, a competent authority must, at least approximately, estimate the effects of\nalternative factors on the domestic industry, and in so doing ensure that such injury is not attributed to\nincreased imports, such that a final determination of the existence of a causal link, on the basis of\nobjective evidence, can be made. This may be a comparatively simple operation where only one other\nfactor is determined to be causing injury at th e same time. This will inevitably become a more\ncomplex analysis, necessitating more sophisticated tools, in the event that two or more other factors\nare causing injury.\n2397 For further discussion of the meaning of nature and extent see paragraph 7.989\net seq.\n7.978 The United States notes that, under the second sentence of Article 4.2(b) of the Safeguards\nAgreement, a competent authority must also ensure that the \"injury caused by factors other than the\nincreased imports . . . [is] not . . . attributed to increased imports.\" 2398 The United States adds that,\nalthough the Appellate Body has explained this requirement in different ways in its prior safeguard\nreports2399 it made its clearest statement about the requirements of this provision in its US - Line Pipe\nreport.2400 In that report, the Appellate Body reiterated its prior statements that the second sentence of\nArticle 4.2(b) requires that:\n\"In a situation where several factors are causing injury \"at the same time,\" a final\ndetermination about the injurious effects caused by increased imports can only be\nmade if the injurious effects caused by all the different causal factors are\ndistinguished and separated . . . . The non-attribution language in Article 4.2(b) . . .\n[thus] requires that the competent authorities assess appropriately the injurious effects\nof the other factors, so that those effects may be disentangled from the injurious\neffects of the increased imports.\"\n2401\n7.979 The United States further notes that, in light of this, the Appellate Body has stated, the\ncompetent authorities should \"identify the nature and extent of the injurious effects of the known\nfactors other than increased imports,\" and \"explain satisfactorily\" how they have distinguished the\neffects of those factors from the effects of increased imports.2402 Accordingly:\n\"[T]o fulfill the requirement of Article 4.2(b), last sentence, the competent authorities\nmust established explicitly, through a reasoned and adequate explanation, that injury\ncaused by factors other than increased imports is not attributed to increased imports.\nThis explanation must be clear and unambiguous. It must not merely imply or\nsuggest an explanation. It must be a straightforward explanation in express\nterms.\"\n2403\n\n2397 European Communities' written reply to Panel question No. 31 at the second substantive meeting.\n2398 Appellate Body Report, US – Line Pipe, para. 208.\n2399 See, e.g., Appellate Body Report, US - Wheat Gluten, para. 70.\n2400 Appellate Body Report, US – Line Pipe, paras. 200-217.\n2401 United States first written submission, para. 404.\n2402 Appellate Body Report, US – Line Pipe , para. 213. The lack of textual basis for a requirement of\nan \"explicit\" finding is discussed in Section F.\n2403 Appellate Body Report, US – Line Pipe, para. 217.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Contribution\n7.980 The United States relies upon US – Line Pipe and US – Wheat Gluten to argue that the\nAppellate Body has consistently found that imports need not be the \"sole cause of serious injury\"\nunder Article 4.2(b). Instead, the Appellate Body has stated that the Agreement on Safeguard's\nrequirement of a \"genuine and substantial\" causal link between imports and serious injury is satisfied\nif imports simply \"contribute to 'bringing about,' 'producing' or 'inducing' the serious injury\" being\nsuffered by an industry. In other words, \"…the causation requirement of Article 4.2(b) can be met\nwhere the serious injury [suffered by an industry] is caused by the interplay of increased imports and\nother factors\". Thus, it is permissible under the Agreement on Safeguards for a competent authority\nto conclude that increased imports are causing serious injury to an industry, even if other factors are\nalso causing injury, so long as imports themselves contribute substantially to bringing about serious\ninjury.\n2404 Accordingly, the Appellate Body has clearly found no fault with the United States statute's\n\"substantial cause\" test insofar as it permits the USITC to make an affirmative causation finding if\nincreased imports have made an \"important\" contribution to serious injury, rather than requiring them\nto be the \"sole\" cause of serious injury.\n2405\n7.981 Korea and New Zealand agree that increased imports alone do not have to cause serious\ninjury, but they must have a \"genuine and substantial relationship\". 2406 While the Agreement on\nSafeguards does not require the demonstration that increased imports alone caused the serious injury,\nthe Agreement does obligate the United States to not attribute injury caused by other factors to\nimports. If that obligation is met, then there must be a genuine and substantial relationship between\nthe increased imports and the serious injury.\n2407 New Zealand adds that while the Appellate Body has\nsaid that increased imports do not need to be the sole factor causing serious injury 2408, it has not said\nthat increased imports need only be one cause among many. Article 4.2(b) refers to \"the\" causal link,\nnot \"a\" causal link, and the Appellate Body has repeatedly affirmed the requirement for a genuine and\nsubstantial relationship of cause and effect between increased imports and serious injury.\n2409 2410\n7.982 Japan and Brazil accept that it may be that a slight increase in imports only aggravates\ncircumstances in which an industry is already experiencing serious injury. While the increased\nimports did not help the industry, the domestic industry would have been suffering serious injury with\nor without the increased imports. They submit that in such a case, once the effect of other factors has\nbeen separated and distinguished, the connection between the imports and the serious injury is\nascertained and the imports cannot be blamed for the serious injury. However, Japan and Brazil argue\nthat the United States seems to be advocating a contributory cause standard. It appears to believe that\nas long as imports are having some impact no matter how negligible and the industry is suffering\nserious injury, then imports can be blamed. Japan and Brazil believe this is inconsistent with the\nobligation of Article 4.2(b) not to attribute other causes to imports. Article 4.2(b) does not allow\nimports to become the scapegoat for other factors. A competent authority must still find a \"genuine\n\n2404 United States' first written submission, paras. 407, 434 and 441.\n2405 United States' first written submission, paras. 434 and 441.\n2406 Korea's written reply to Panel question No. 87 at the first substantive meeting; New Zealand's\nwritten reply to Panel question No. 87 at the first substantive meeting.\n2407 Korea's written reply to Panel question No. 87 at the first substantive meeting.\n2408 Appellate Body Report, US – Wheat Gluten, para 67.\n2409 Appellate Body Report, US – Wheat Gluten, para 69 confirmed in US – Lamb, paras. 168, 177 and\n179 and in US – Line Pipe, para 211.\n2410 New Zealand's second written submission, para. 3.92.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand substantial\" causal link between increased imports and serious injury. According to Brazil, this is\ncertainly more than a contributing cause standard.2411\n7.983 In response, the United States submits that it does not believe that imports may be considered\nto be contributing in a \"genuine and substantial\" way to serious injury if they are having only a\n\"negligible\" impact on the industry. 2412 The United States statute itself requires that imports be an\n\"important\", that is, a \"substantial\", cause of the serious injury being suffered by the domestic\nindustry.2413 Accordingly, to the extent that imports were only contributing \"negligibly\" to serious\ninjury – that is, in a \"small\" or \"insignificant\" way 2414 – the USITC would not be permitted by the\nUnited States statute to find that imports are an \"important\" cause of injury.2415\n7.984 The United States argues that by requiring the USITC to find that increased imports are an\n\"important\" cause of injury and as important as any other cause, the United States statute ensures that\nthe USITC will find there is a \"genuine and substantial\" causal link between imports and serious\ninjury before issuing an affirmative safeguards finding, as the Appellate Body has stated. In this\nregard, the United States notes that the standard dictionary definitions of the words \"substantial\" and\n\"important\" show that the words have essentially the same meaning when used to defined the degree\nof weight that must be given a particular factor in a decision or analysis. The United States asserts\nthat given the ordinary meaning of these two words, it is clear that, by requiring imports to be an\n\"important\" cause of serious injury, the United States statute contemplates that the USITC will assess\nwhether there is at least a \"genuine and substantial\" causal relationship between imports and serious\ninjury in a safeguards proceeding, as required by the Agreement on Safeguards .\n2416 The United\nStates adds that, since the Appellate Body has found that the Agreement requires that increased\nimports \"contribute\" to \"bringing about\" or \"producing\" serious injury in a \"genuine and substantial\"\nway, which indicates that imports may be found to have the requisite link to serious injury even when\nthey are not the most important cause of such injury, the Agreement on Safeguards would, therefore,\npermit a competent authority to find imports are causing the requisite level of serious injury even\nwhen they are not the most important cause of such injury. The United States argues that,\naccordingly, it is clear that, in this respect, United States law contains a more rigorous causation\nstandard than the Agreement on Safeguards.\n2417\n7.985 The United States further argues that the requirement to conduct a detailed assessment of the\nnature and extent of the injury caused by both imports and other non-import factors is not applicable\nto a factor if that factor is not contributing to se rious injury. Accordingly, to the extent that the\nUSITC finds that a factor was not contributing significantly to serious injury, the sole issue for review\nis whether the USITC's conclusion in this regard was reasoned and supported by the record, not\n\n2411 Japan's written reply to Panel question No. 87 at the first substantive meeting; Brazil's written reply\nto Panel question No. 87 at the first substantive meeting.\n2412 Japan and Brazil written replies to Panel questions No. 87.\n2413 19 U.S.C. §2252(b)(1)(B).\n2414 In this regard, the word \"negligible\" is defined in the New Shorter Oxford English Dictionary as\n\"[a]ble to be neglected or disregarded; unworthy of notice or regard; so small and insignificant as to be\nignorable.\" The New Shorter Oxford English Dictionary, 1993 Edition, p. 1900 (US-86). This definition clearly\ncontrasts with the same Dictionary's definition of \"important\" as \"having great significance, carrying with it\ngreat weight or consequences, weighty, momentous....\" Ibid., p. 1324; United States' first written submission,\npara. 442.\n2415 United States' second written submission, para. 147.\n2416 United States' first written submission, para. 442.\n2417 United States' first written submission, para. 443.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhether the USITC performed the non-attribution analysis described by the Appellate Body in the US\n– Wheat Gluten case.2418\n7.986 In counter-response, Korea argues that the United States apparently misunderstands the non-\nattribution requirement. The Appellate Body has made clear that all factors causing injury must be\nexamined since the only means by which a causal relationship between imports and serious injury can\nbe established is by measuring that causal relationship independent of other factors. 2419 O th erw ise,\nthe causal relationship between serious injury and imports is merely assumed, not demonstrated.2420\n(iv) Quantification\n7.987 The European Communities and Brazil suggest that Article 3.5 of the AD Agreement imposes\nan identical obligation to that contained in the Agreement on Safeguards not to blame imports for\nother causes before imposing anti-dumping duties and that that Article entails a quantification\nrequirement.2421 Relying upon the Appellate Body decision in US – Hot-Rolled Steel which\ninterpreted that Article, the European Communities and Brazil argue that the USITC's analysis fails to\nmeet the standards set out in the Agreement on Safeguards because it is exclusively based on a\nrelative comparison between individual causes of serious injury and increased imports. It does not\ninvolve, therefore, a separation and distinction of the injurious effects of other factors. Nor does it\ninvolve the attribution of serious injury suffered by the domestic industry to the various causes of\ninjury individually, thus permitting a determination whether there is a \"genuine and substantial\"\nrelationship between increased imports and serious injury. The European Communities, Brazil and\nJapan argue that although the task of non-attribution may be a difficult one, it is the price paid to\njustify application of trade remedy measures and one to which Members of the WTO agreed.\n2422\n7.988 The United States argues that neither the Appellate Body nor previous panels have required\nthat a competent authority \"quantify\" the precise amount of injury attributed to imports or other\ninjurious factors as part of its non-attribution analysis under Article 4.2(b). To the contrary, the US –\nLamb and US – Wheat Gluten Panels have both stated specifically that a \"Member is not necessarily\nrequired to quantify on an individual basis, the precise extent of 'injury' caused by each other possible\n[injurious] factor\". Indeed, in its most recent discussions of the attribution issue, the Appellate Body\nhas explained that the Agreement on Safeguards requires only a \"reasoned and adequate explanation\"\nnot a \"quantitative\" valuation, of the effects attributable to imports and other factors. Thus, the\nAgreement plainly permits a qualitative, rather than quantitative, assessment of the \"nature and\nextent\" of the injury caused by both imports and other factors in its causation analysis.2423\n\n2418 United States' first written submission, para. 408.\n2419 See Appellate Body Report, US – Line Pipe , para. 211 (affirming Appellate Body Report, US –\nLamb, para. 179, footnote 38).\n2420 Korea's second written submission, para. 154.\n2421 European Communities' first written submission, para. 445; Brazil's first written submission, paras.\n156 and 157.\n2422 European Communities' first written submission, para. 445; Japan's second written submission,\npara. 150. Japan refers to Appellate Body Report, US – Hot Rolled Steel, para. 228; Brazil's first written\nsubmission, para. 157.\n2423 United States' first written submission, paras. 410 and 435.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.989 In counter-response, a number of complainants submit that quantification is, in fact, required.\nChina refers2424 to the following quote from the Appellat e Body Report in the recent dispute of US –\nLine Pipe:\n\"As ruled in US – Hot Rolled Steel with respect to the similar requirement in\nArticle 3.5 of the Anti-Dumping Agreement, so, too, we are of the view that, with\nrespect to Article 4.2(b), last sentence, competent authorities are required to identify\nthe nature and extent of the injurious effects of the known factors other than increased\nimports, as well as explain satisfactorily the nature and extent of the injurious effects\nof those other factors as distinguished from the injurious effects of the increased\nimports.\"2425\n7.990 China also notes that the New Shorter Oxford Dictionary defines the words 'nature' and\n\"extent\" as follows:2426: \"Nature: The inherent or essential quality or constitution of a thing, also, an\nindividual element of character, disposition etc. ; a kind, a sort, a class\". \"Extent: The amount of\nspace over which a thing extends, size, dimensions, amount\".2427 China submits that taking the literal\nmeaning of these terms, the word \"nature\" would obviously stand for the \"quality\" of a factor, and the\nword \"extent\" – synonymous with size, amount – then means the \"quantity\" of a factor.2428 Therefore,\nin China's view, if the Appellate Body requires the identification of the nature and extent of the\n\"other\" known factors, it means both the quality and quantity of the injurious effects of the \"other\"\nfactors. China does not consider, however, that the assessment of the extent to which \"other factors\"\nare causing injury necessarily requires a mathematical examination. However, the importance of\nincreased imports in the causation of injury compared to the importance of other factors must be\nexamined so that it can be ensured that there is no manifest error of appraisal. This, says China, has\nnot been done by the United Stataes.\n2429 Accordingly, and to that extent, China disagrees with the\nUnited States' statement that the prior Appellate Body reports did not require competent authorities to\n\"quantify\" the actual effects of the factors on the industry's overall condition, and that the Agreement\non Safeguards suggests a qualitative, rather than quantitative assessment of the effects causing injury\nto the domestic industry.\n2430\n7.991 In response, the United States submits that it does not agree with China's interpretation. The\nsubstantive Article 4.2(b) obligation with regard to other factors causing injury is a negative one,\nnamely, not to attribute injury caused by such factors to increased imports. Thus, analysis of these\nother causal factors is needed only to the extent necessary to establish that the injury they are causing\nhas not been attributed to increased imports. The Agreement on Safeguards does not require any\nparticular form of analysis, and if the competent authorities can comply with Article 4.2(b) without\nevaluating both the quality and quantity of injurious effects attributable to other factors, that analysis\nwould be sufficient.\n2431\n7.992 The United States also notes that China is using a dictionary to define terms set forth in an\nAppellate Body report, rather than a provision of the Agreement on Safeguards .2432 The findings and\nconclusions in those reports, however, are not treaty text, nor do they create obligations under the\n\n2424 China's second written submission, para. 174; Norway's second written submission, para. 120.\n2425 Appellate Body Report, US – Line-Pipe, para. 215 (emphasis added)\n2426 The New Shorter Oxford English Dictionary\n2427 China's second written submission, para. 175.\n2428 China's second written submission, para. 176.\n2429 China's second written submission, para. 177.\n2430 China's second written submission, para. 178.\n2431 United States' written reply to Panel question No. 31 at the second substantive meeting.\n2432 China's second written submission, paras. 173-179.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncovered agreements, and they should not be interpreted as if they were or did. China errs in\nattempting to apply to Appellate Body reports an analysis that appears to reflect customary rules of\ninternational law for the interpretation of treaties. Moreover, the United States notes that the\ndictionary definition of the term \"extent\" used by China in its discussion does not indicate that\n\"extent\" means \"quantity\", as China asserts. Instead, the dictionary definition cited by China indicates\nthat the word \"extent\" means \"[t]he amount of space over which a thing extends, size, dimensions,\namount\".\n2433 This definition simply indicates that \"extent\" can mean the general \"amount\" or \"size\" of\na factor; it does not indicate that the size or amount of a factor must be specifically quantified. As\nlong as the competent authorities examine the data relating to the \"extent\" of an other factor\nsufficiently to establish that they have not improperly attributed injury associated with that factor to\nincreased imports, they have properly considered the \"extent\" to which that factor has caused injury to\nthe industry. On the basis of the foregoing, the United States submits that it is not true, as China\nasserts, that the Appellate Body has, by using this word in its prior reports, suggested that a competent\nauthority must precisely \"quantify\" the effects of non-import factors in its causation analysis.\n2434\n7.993 The European Communities also argues that a co mpetent authority is required to \"quantify\"\nfactors. Specifically, Article 4.2(a) of the Agreement on Safeguards refers to \"factors of [a]\nquantifiable nature\". A competent authority cannot assess serious injury, for instance, without\nquantifying profit levels, or capacity utilization. An assessment of causal link must inevitably involve\nassessing such developments, contemporaneously, on a qualitative and quantitative basis. 2435\nHowever, the European Communities understands the United States as arguing that it is not subject to\nan obligation to accept econometric analyses which would allow it to quantify \"how much\" injury is\ncaused by increased imports. The European Communitie s is mildly surprised that the United States,\nwhen taking a safeguard measure of the scale of the present steel safeguard measure (with an effect on\nthe lives of many workers and consumers in the United States and all over the world) would not want\nto use and take advantage of any means offered to it which might permit a more accurate\ndetermination\n24362437\n7.994 Switzerland refers2438 to the Appellate Body' decision in US – Wheat Gluten where it said\nthat:\n\"Article 4.2(a) sets forth the factors which the competent authorities \" shall evaluate\"\nin \"determin[ing] whether increased imports have caused or are threatening to cause\nserious injury to a domestic industry…\". Under that provision, the competent\nauthorities must evaluate \"all relevant factors ... having a bearing on the situation of\n[the] industry\". In evaluating the relevance of a particular factor, the competent\nauthorities must, therefore, assess the \"bea ring\", or the \"influence\" or \"effect\" that\n\n2433 China's second written submission, para. 175 (citing The New Shorter Oxford English Dictionary).\n2434 United States' written reply to Panel Question No. 31 at the second substantive meeting.\n2435 European Communities' second written submission, para. 356.\n2436 In this context, the European Communities notes that neither the panel, nor the Appellate Body in\nUS – Line Pipe felt the need to discuss the issue of quantification in order to find that the USITC's causation\nanalysis was inconsistent with the Agreement on Safeguards. The Appellate Body did, however, state\n(para. 215) that the competent authority should:\n\"[I]dentify the nature and extent of the injurious effects of the known factors other than increased\nimports, as well as explain satisfactorily the nature and extent of the injurious effects of those other\nfactors as distinguished from the injurious effects of the increased imports.\"\n2437 European Communities' second written submission, para. 357.\n2438 Switzerland's second written submission, para. 92.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfactor has on the overall situation of the domestic industry, against the background of\nall the other relevant factors.\"2439\n7.995 Switzerland argues that even though the Appellate Body did not require a quantification of\nthe precise amount, it required the competent authorities to evaluate all relevant factors. Switzerland\nfurther argues that an evaluation implies a certain quantification.2440\n7.996 New Zealand notes that it has never argued for some kind of \"pure quantification\" standard,\nalthough it notes that the United States sensibly does not attempt to deny that quantification must\nplay, at a minimum, a major role in any non-attribution analysis. However, the problem is that the\nUSITC did not come close to meeting the minimum standards which the Appellate Body has\nestablished in a line of cases. In short, the United States approach fails in any substantive way to\nensure \"non-attribution\".\n2441\n7.997 The United States argues that there is a sound rationale for not requiring a competent\nauthority to \"quantify\" the effects of imports and other factors on the industry in a safeguards\nanalysis.2442 In particular, the United States argues that, given the significant number of industry and\nimport factors that must be considered under the Agreement on Safeguards and the United States\nstatute, it is clear that, to \"quantify\" the effects of imports and other factors, a competent authority\nwould need to develop an economic model to address – that is, \"quantify\" – the effects of imports and\nother factors on all factors required to be considered under the Agreement on Safeguards and the\nUnited States statute. 2443 The United States submits that the USITC is unaware of any existing\nindividual economic model and analytical structure that accurately and effectively quantifies the\neffects of imports and other factors on all of the industry indicia that must be analysed under the\nAgreement on Safeguards or the United States statute. Moreover, the United States argues that, to\ndate, no representative of any party has offered such a model to the USITC during the course of its\nsafeguards proceedings, or even during the course of proceedings before WTO panels. In other\nwords, no one has yet presented to the USITC a single economic model that would adequately and\naccurately address in a consistent fashion all of the individual industry factors that must be assessed\nunder the Agreement on Safeguards and the United States statute.\n2444\n7.998 The United States argues that, moreover, the conclusion that a competent authority must\nquantify the effects of imports and other factors for only one or two selected criteria of industry\ncondition, would not be consistent with the requirement under Article 4.2(a) that the competent\nauthority assess the effects of imports on all relevant factors having a bearing on the condition of the\nindustry, including its employment levels, productivity levels, or profitability levels. Indeed,\naccording to the United States, picking a criterion (like profits or revenues or production) as a \"proxy\"\nfor the overall injury being suffered by an industry simply places weight on that particular factor to\nthe exclusion of other important indicia of the industry's condition (such as employment, capacity\nutilization, or capital investments). The Agreement on Safeguards does not permit such a restricted\nanalysis. Given the foregoing, the United States asserts that it is clear that the Panel should not find\n\n2439 Appellate Body Report, US – Wheat Gluten, para. 71. (emphasis in original)\n2440 Switzerland's second written submission, para. 92.\n2441 New Zealand's second written submission, para. 3.109.\n2442 United States' first written submission, para. 411.\n2443 United States' first written submission, para. 413.\n2444 United States' first written submission, para. 415.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat the USITC is required to \"quantify\" the effects of imports on the industry because it would reflect\nonly an imprecise measurement of the overall level of injury suffered by an industry.2445\n7.999 Brazil submits that the United States' position that qualitative and quantitative analyses are\neffectively mutually exclusive undertakings, and that one need never inform the other, does harm to\nthe Appellate Body's findings in US – Wheat Gluten, US – Lamb, and US – Line Pipe with respect to\nnon-attribution. Switzerland agrees with Brazil that this case is a perfect exhibition of why\n\"qualitative\" analysis, alone, cannot always justify a causation finding under Article 4.2(b) given the\nmany counter-intuitive results that are evident in the USITC's \"qualitative\" findings.2446 Brazil further\nargues that the United States not surprisingly wants to avoid any serious consideration of econometric\nevidence in this case, since that evidence so completely undermines the simplistic conclusions\nreached by the USITC.\n2447 In effect, the United States contends that if one cannot simultaneously\nconsider every causal factor and every indicator of injury, quantitative analyses are unable to satisfy\nthe non-attribution requirement.2448 According to Brazil, the argument begs a question that the United\nStates seeks to obscure, namely why should econometric analyses be discredited if they can help\ninform the qualitative assessment of at least some of those causal factors?\n2449\n7.1000 With respect to the argument made by the United States that quantification exercises are\ninvalid unless such an approach quantifies the effects of imports and every conceivable other factor on\neach and every indicia of injury, Brazil submits that this is a transparent attempt to reduce the\nquantification requirement to an absurd exercise. Some injury indicia are more amenable to\neconometric methods (e.g., price, sales) while other injury indicia (e.g., employment) may only be\nable to be fully measured in conjunction with a large body of descriptive and other evidence.\n2450\nAccording to Brazil, the correct interpretation of the econometric approach is that one must\nincorporate all key relevant variables. 2451 Brazil submits that a reliable statistical regression analysis\nmust use the qualitative descriptions of the industry and product in order to include all important\nexplanatory factors. The fact that there may be other relatively unimportant factors not included in\nthe regression analysis does not make it invalid, it simply is a recognition that, qualitatively and\nintuitively, based on the evidence these factors had a marginal effect, if any, on industry\nperformance.\n2452\n7.1001 Similarly, Japan and Switzerland submit that econometeric studies need not simultaneously\nconsider all indicia of injury (e.g., price, profits, capacity utilization, etc.), to meaningfully contribute\nto the analysis. In fact, it is quite appropriate to use various approaches to shed light on various\nfactors. If an econometric model allows one to better understand the factors affecting domestic price\nlevels, for example, then it is perfectly acceptable and appropriate to isolate price and perform a\nregression analysis on those variables that affect price. No one has argued that such a model replaces\nother modes of analysis for the other factors. However it would be wrong to dismiss data that more\naccurately assesses particular industry injury indicia.\n2453\n\n2445 United States' first written submission, para. 416.\n2446 Brazil's second written submission, para. 81; Switzerland's second written submission, para. 94.\n2447 United States' first written submission, paras. 411, 413, 415-416; United States' written reply to\nPanel question No. 88 at the first substantive meeting.\n2448 United States' first written submission, paras. 413 and 416.\n2449 Brazil's second written submission, para. 82.\n2450 Brazil's second written submission, para. 91.\n2451 Brazil's second written submission, para. 93.\n2452 Brazil's second written submission, para. 94.\n2453 Japan's second written submission, para. 156; Switzerland's second written submission, para. 94.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1002 The United States submits that it has not stated that it was \"physically\" or \"theoretically\"\nimpossible to develop an economic model that would quantify the effects of imports in some\napproximate fashion. However, the United States notes that modelling exercises would have\nsignificant limitations from the perspective of the Agreement on Safeguards. The development and\nuse of a series of related models suffers from the flaw that the individual models would be generated\nusing different inputs, thus limiting the extent to which the models reflected the same set of factual\nassumptions. Similarly, a model that focused on one or two specific factors would, by definition, not\ntake account of all of the factors required under the Agreement on Safeguards. Thus, while such a\nmodel might accurately reflect the impact of imports on particular indicia of injury, it would only\nimperfectly reflect the complex economic relationships of factors required to be considered by the\nAgreement on Safeguards. The use of economic models, with their inherent imprecisions, are no\nmore precise, accurate or \"quantitative\" an assessment of the injurious effects of imports than the\nanalysis performed by the USITC.\n2454\n7.1003 Japan and Brazil argue that quantifying the economic effects of various factors has been\nundertaken by competition authorities in the United States for some time now, using tools developed\nby economists and statisticians over many decades. The econometric models are designed\nspecifically to achieve two important goals: (i) to disentangle the relative roles of different factors;\nand (ii) to quantify the relative importance of each factor. Brazil submits that, in this case, the\nexercise is less complex than in other settings. The argument made by the United States, both the\nUSITC's during its investigation and now before the Panel, is based primarily on price. According to\nthe United States, the effect of import volumes on pricing is a major source of injury. Thus, the\nrelevant question for the United States in this case concerns the role of increased imports and the\nextent to which they affected domestic price levels. Japan and Brazil argue that all of the econometric\nmodels presented to the United States authorities focused on explaining domestic price levels. The\nmodels measured the extent to which import prices and import quantities had any discernible effect on\ndomestic price levels. The models also measured other factors that might be affecting domestic\nprices, and indicated the relative magnitude of each factor, holding all other factors constant. These\nmodels established that domestic price decreases and increases, not import price decreases and\nincreases, were the dominant factor explaining domestic price levels.\n2455 Brazil notes that both the\ndomestic industry's model and the foreign producers' model agreed that with respect to two of the\nthree products modelled – hot-rolled, cold-rolled and corrosion resistant CCFRS products – there was\nno strong statistical evidence that imports had a major effect on price.2456\n7.1004 Brazil also notes that nowhere in the USITC Report or the Views of the Commission on\nInjury is there any discussion of: slab – whether and how slab imports could have or did have an\neffect on prices, given the lack of any market for domestically produced slab and any significant\nmerchant sales of domestic slab; plate – how, given the more than 50% decline in non-NAFTA\nimports between 1996 and 2000 (1.8 million tons to 0.8 million tons)\n2457, and the three million ton\nincrease in domestic capacity over the same period2458, plate imports can have had any adverse impact\non domestic plate prices in any recent period; and hot-rolled – how, given the fact that by interim\n\n2454 United States' written reply to Panel question No. 88 at the first substantive meeting.\n2455 Japan's written reply to Panel question No. 85 at the first substantive meeting; Brazil's second\nwritten submission, paras. 83 and 84; Brazil's written reply to Panel question No. 85 at the first substantive\nmeeting.\n2456 Brazil's written reply to Panel question No. 26 at the second substantive meeting\n2457 Brazil's first written submission, Common Annex A.\n2458 Brazil's first written submission, Common Annex B.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n2001 import volume was roughly one-eighth the volume seen in 1998, hot-rolled imports could have\nhad any adverse effect on prices.2459 2460\n7.1005 In response, the United States submits that it disagrees with Brazil's assertion that the record\nevidence in the steel investigation, including the models submitted by the foreign producers and the\ndomestic industry, established that imports were a minor or insignificant factor in explaining domestic\npricing levels for CCFRS. The United States reiterates that the record clearly established that imports\nof CCFRS had a serious and adverse impact on dom estic pricing during the period of investigation,\nand Brazil has not come forth with a fact-based prima facie case to the contrary. Second, the\neconomic model submitted by the foreign producers contained serious methodological flaws that\nrendered its results inconclusive from an economic perspective, which means that it did not\n\"establish\" that imports were a minor determinant of domestic pricing levels, as Brazil contends.\nThird, not all of the models submitted during the investigation claimed that imports had only a\nminimal or insignificant effect on domestic pricing, as Brazil has consistently and mistakenly asserted\nin this proceeding. On the contrary, the model submitted by the domestic industry claimed that\nimports were the most important determinant of pricing in the market.\n2461\n7.1006 Japan and Brazil do not argue that the Agreement on Safeguards requires econometric models\nin every case. They submit, however, that where the data is readily available, and particularly when\nmuch of that data is sourced from the industry itself, it is WTO-inconsistent for a competent authority\nto dismiss models based on that data and not use them in its assessment and decision-making. 2462\nBrazil argues that economic models can be used to evaluate and refine the qualitative conclusions and\nto measure the relative magnitude of various factors on the main problem of the domestic industry,\nprice. Particularly where a qualitative conclusion appears to have little support (i.e. it is\ncounterintuitive), one would expect quantitative analysis to justify this conclusion.2463\n7.1007 The European Communities argues that since the burden of demonstrating the existence of a\ncausal link, on the basis of objective evidence, lies with the Member imposing safeguard measures, it\nshould be expected that the causation analysis must become more sophisticated as the complexity of\nthe factual situation to be examined increases. Depending on the complexity of the factual situation,\nthe European Communities submits that it may be the case that only econometric studies, taken\ntogether with quantitative and qualitative analysis of the facts, will permit a competent authority to\nestablish, on the basis of objective evidence, the existence of a causal link. Remaining passive in the\nface of econometric studies which tend to show that there is no causal link must mean that a\ncompetent authority has failed to demonstrate, on the basis of objective evidence, the existence of a\ncausal link.\n2464 2465\n7.1008 The European Communities notes that the Appellate Body, in US – Wheat Gluten pointed to\none means of analysing a factual situation without the use of econometric modelling to estimate the\nquantification of injurious effects. In analysing the effect of capacity increases it posited two\ncounterfactuals. In one counterfactual, capacity was held constant and in the other imports were held\n\n2459 USITC Report, Vol. II at Table FLAT-6.\n2460 Brazil's written reply to Panel Question 38 at the second substantive meeting.\n2461 United States' written reply to Panel Question 38 at the second substantive meeting.\n2462 Japan's written reply to Panel question No. 85 at the first substantive meeting; Brazil's second\nwritten submission, paras. 83 and 84; Brazil's written reply to Panel question No. 85 at the first substantive\nmeeting.\n2463 Brazil's written reply to Panel question No. 85 at the first substantive meeting.\n2464 Appellate Body Report, US – Wheat Gluten, para. 55.\n2465 European Communities' written reply to Panel question No. 33 at the second substantive meeting\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconstant. In so doing the Appellate Body was able to isolate the effect of capacity increases. 2466 In\nthat investigation, as for many determinations before this Panel, rising input costs were recognized as\nan alternative cause In such a case, it is possible to hold costs constant, and analyse the profitability\nof the domestic industry if input costs had not increased. If one were to factor in a further adjustment\nin fixed costs to take account of increased costs resulting from over-capacity, one could start to isolate\nthe injurious effects of other factors and ensure that such effects are not attributed to increased\nimports. The European Communities submits that the table below provides an example of such an\nanalysis for increased factory costs, and shows clearly the inadequacies of the USITC's\ninvestigation.\n2467\nTable 3: Cold-Finished Bar – Unit Value of commercial sales and costs (1998-2001)2468\n1998\n(actual)\n1999\n(actual)\n1999\n(constant)\n2000\n(actual)\n2000\n(constant)\n2001\n(actual)\n2001\n(constant)\nNet. comm.\nsales\n711 667\n667 668 668 671 671\nRaw\nmaterials\n480 347 347 368 368 364 364\nDirect labor 45 51 51 54 54 58 58\nOther\nfactory\ncosts\n98 212 98 184 98 203 98\nCOGS total 623 609 496 605 520 625 520\nGross profit 88 57 171 63 148 47 151\nSG&A 44 49 49 44 44 48 48\nOperating\nincome\n(loss)\n44 8 122 19 104 (1) 103\n7.1009 The European Communities submits that if production had also decreased with a fall in\ndemand, one can determine if the decrease in production is due to decreased sales caused by increased\nimports or the fall in demand, by holding the market share constant and then determining the extent to\nwhich production decreased beyond what it would have been if its market share was constant.\n 2469\n7.1010 In the following table, Brazil presents the st atements that the United States makes underlying\nwhy econometric methods should not be relied upon. Brazil states that it concurs with these\nstatements, as they are basic lessons taught in introductory statistics and econometrics courses. Brazil\nsubmits that, however, they do not imply that quantification is impossible or unreliable nor do they\njustify the USITC's decision to disregard the evidence presented in this case. In the second column,\nBrazils submits that it contains a report of what was actually done in this case using recognized\neconometric tools to control for the areas of United States' concern.\n\n2466 Appellate Body Report, US – Wheat Gluten, paras. 81-91.\n2467 European Communities' written reply to Panel question No. 33 at the second substantive meeting.\n2468 European Communities' written reply to Panel question No. 33 at the second substantive meeting,\nThe table is based on USITC Report, Vol. II, p. LONG-34, table LONG-28. In the columns marked \"constant\"\nthe data for \"other factory costs\" has been kept constant. Figures which have been kept constant have been\nitalicised, and figures which change as a result of the simulation are put in bold.\n2469 European Communities' written reply to Panel question No. 33 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nStatements by United States as to why the\neconometric approach toward quantification are\nunreliable\nRelevance for the evidence presented in this case\nRegression studies need \"a large number of\nobservations\"2470 and that \"econometricians strive\nfor at least 30 data point.\"2471\nNone – Foreign respondents' studies contained 65\ndata points2472;\nModels must control for the fact that some of the\ncausal factors may be dependent on other\nvariables\n2473 (e.g., hot-rolled prices may influence\ncold-rolled prices, but one must incorporate the\nfact that hot-rolled prices depend on scrap prices).\nNone – Foreign respondents studies controlled\nfor the fact that certain factors are dependent on\nother factors by \"nesting\" a series of models\n2474;\nRegression studies must control for statistical\nissues such as serial correlation and\nstationarity.2475\nNone – Foreign respondents studies controlled\nfor stationarity and serial correlation by first\ndifferencing and AR1 adjustments.2476\n7.1011 Japan and Brazil contend that given that that foreign respondents' models used statistical\ntechniques that accounted for all of the United States' stated concerns there is no basis for the United\nStates' conclusion that \"…given these limitations, a regression model would be no more useful as a\nmeans of satisfying the requirements of the Agreement on Safeguards than any other economic\nmodel\".\n2477 Japan and Brazil submit that concerns expressed by the United States were controlled in\nthe model, making its results reliable.2478\n7.1012 The United States responds by noting that the foreign respondents model did not addresses\nthe issues associated with linear regression models outlined in the United States' written responses to\nthe Panel's first set of questions. As the Panel is aware, in its response to question No. 88 of the\nPanel's first set of written questions to the parties, the United States noted that linear regression\n\n2470 United States' written reply to Panel question No. 88 at the first substantive meeting.\n2471 United States' written reply to Panel question No. 88 at the first substantive meeting.\n2472 Brazil's first written submission, Common Exhibits CC-52, 53, 54.\n2473 United States' written reply to Panel question No. 88 at the first substantive meeting.\n2474 Brazil's first written submission, Common Exhibits CC-52, 53, 54. See pp. 227-229 in Orley\nAshenfelter, Phillip B. Levine, David J. Zimmerman, Statistics and Econometrics: Methods and Applications ,\n(New York, John Wiley and Sons, Inc.), 2003 for a discussion of the statistical basis for \"nesting\" the\nendogenous variables. In technical terms, this is referred to as using the \"fitted\" or \"predicted\" endogenous\nvariables. See also Chapter 15 in Jeffrey M. Wooldridge, Introductory Econometrics, (Stamford: Southwestern\nCollege Publishing) 2000; pp. 366-369 in G.S. Maddala, Introduction to Econometrics, 2\nnd edition, (New York:\nMacmillan Publishing),1992.\n2475 United States' written reply to Panel question No. 88 at the first substantive meeting.\n2476 Brazil's first written submission, Common Exhibits CC-52, 53, 54. A discussion of these\ntechniques can be found in many undergraduate textbooks and in nearly every introductory graduate textbook.\nSee W.H. Greene, Econometric Analysis, 4th edition , Prentice Hall, 2000; E.R. Berndt, The Practice of\nEconometrics, Addison-Wesley, 1991; W.E. Griffiths, R.C. Hill and G.G. Judge, Learning and Practicing\nEconometrics, John Wiley & Sons, 1993; Peter Kennedy, A Guide to Econometrics, 4th edition , MIT Press,\n1998.\n2477 Japan's second written submission, paras. 158 and 159; Brazil's second written submission,\npara. 86.\n2478 Japan's second written submission, paras. 158 and 159; Brazil's second written submission,\npara. 90.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmodels had inherent limitations that would complicate their use in a safeguards proceeding, including\nthe fact that linear regression models involving multiple variables are able to estimate the likely\neffects of individual independent variables in an equation only to the extent that those effects are\nattributable solely to the independent variable, that is, to the extent that they do not move in tandem\nwith the effects of other independent variables. According to the United States, Brazil appears to\nmisunderstand this problem. Brazil confuses the second limitation outlined by the United States –\nwhich is a limitation inherent in multiple variable linear regression models which cannot be\nspecifically controlled for – with the issue of \"endogeneity,\" which is a limitation that a properly\ndesigned linear regression models can control for. \"Endogeneity\" is a term used to describe the fact\nthat certain independent variables used in a linear regression may be dependent on other independent\nvariables in the equation. As Brazil appears to recognize, a linear regression model can be properly\ndesigned to resolve the endogeneity issue. However, endogeneity does not address the second\nlimitation described by the United States in its response to question No. 88. As that response showed,\nregression models involving multiple variables are only able to estimate the effects of these individual\nvariables to the extent that those effects are attr ibutable solely to that independent variable. A\nmultiple variable regression analysis would not include in this estimate the effects attributable to such\na variable to the extent those effects move in tandem with, and cannot be disentangled from, the\neffects of other independent variables. These movements in tandem can occur, whether or not the\nindependent variables are related . Thus, in a situation in which various factors combine to increase\n(or decrease) the injury suffered by the industry, a multiple variable regression model would\nunderestimate (or overestimate) the injurious effects of imports because it would not provide an\nestimate for the effects that imports have in common with other injury factors. Moreover, this\nlimitation of linear regression models is a limitation inherent in every multiple variable linear\nregression model and simply cannot be controlled for by designing the model in a particular way. The\nmodel submitted by the foreign producers simply does not control for this problem.\n2479\n7.1013 The United States argues that no complainant has actually provided the Panel with a technical\ndescription of an economic model that quantifies the overall level of injury caused by imports. 2480\nMoreover, complainants have not provided a technical explanation of the manner in which a\ncompetent authority can perform such a quantification. Instead, they have made bald assertions that\neconomists and statisticians have been developing models and techniques to answer these sorts of\nquestions \"for more than 100 years\".\n2481 After noting that the foreign steel producers provided the\nUSITC with an econometric model that quantified the effects of imports in the steel safeguards\ninvestigation, they contend that the USITC was required by the Agreement on Safeguards to use the\nmodel or develop its own econometric analysis to rebut it.2482 2483\n7.1014 In any event, the United States argues that th e complainants are mistaken when they imply\nthat the USITC failed to perform a quantitative analysis of the effects of imports on the industry. 2484\nThe USITC clearly performed a quantitative assessment of the manner in which imports and other\nfactors affected the condition of the industry during the period of investigation. According to the\nUnited States, the USITC collected extraordinary volumes of quantitative data concerning the prices\nand volume of imports, the prices of domestic merchandise, the trade and financial operations of the\n\n2479 United States' written reply to Panel question No. 38 at second substantive meeting.\n2480 United States' second written submission, para. 130.\n2481 Japan's written reply to Panel question No. 85 at the first substantive meeting; Brazil's written\nreply to Panel question No. 85 at the first substantive meeting.\n2482 Japan's written reply to Panel question No. 85 at the first substantive meeting; Brazil's written\nreply to Panel question 85 at the first substantive meeting.\n2483 United States' second written submission, para. 131.\n2484 Brazil's first oral statement, para. 34.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industry, the effect of imports and other factors on the industry's operations, and the\nconditions of competition in each of the markets in question. After collecting this data, the USITC\nexamined in detail the manner in which imports affected each of the industry's injury indicia and\nexamined the extent to which other factors adversely affected those data. According to the United\nStates, it is clear that this analysis was both detailed and based primarily on quantitative data.\n2485\n7.1015 Finally, the United States submits that it is not true that the United States is \"eager\" to avoid\nthe use of economic models in safeguards investigations. It notes in this regard that it has developed\nand used such models in its anti-dumping and safeguards investigations. The United States believes,\nhowever, that it is important to dispel the notion that the use of economic modeling lends any more\naccuracy or scientific certainty to the assessment of the amount of injury caused by imports or other\ninjury factors than that afforded by the USITC's current analysis. Economic models are subject to\nsubstantial ranges of error due to variations in the reliability, consistency, or amount of statistical data\nused in them. Moreover, many economic models rely on quantitative inputs (like elasticities of\nsupply or substitution) that are only, in essence, numerical assessments of qualitative judgments about\ncondition of competition in the market. In sum, economic models will generally only result in\nquantitative estimates of the likely effects of imports on particular indicators of an industry's\ncondition.\n2486 The United States points out that economic models are no more precise a method in\nassessing injury than the examination of hard, quantitative market data that the USITC now performs\nwhen conducting its causation analysis.2487\n7.1016 Japan and Brazil also argue that it is possible to quantify the effects of different factors given\nthat the United States undertook such a quantification exercise in relation to Article 5.1 of the\nAgreement on Safeguards. 2488 Korea argues that if it can be determined what level of relief is\nnecessary to repair injury caused by imports alone, surely it can be determined what level of injury\nwas caused by imports alone. Korea further submits that it is rather noteworthy that the United States\nhas been able to develop an ex post facto economic analysis to attempt to justify its remedy but cannot\nperform an economic analysis to identify the injury caused by various factors. This is particularly\nproblematic when, according to the Appellate Body in US – Line Pipe , the permissible extent of the\nmeasure should be found in the analysis of increased imports, causation, and serious injury.\n2489\n7.1017 The United States argues that in contrast to the type of quantification envisioned by some\ncomplainants, the numeric exercises in the United States' first written submission with respect to\nArticle 5.1 did not purport to measure injury as a whole, or even the actual effect of imports on a\nparticular factor or factors. The United States recognized that the calculations would reflect the\nunderlying qualitative assumptions or qualitative inputs and, as a result, would at best estimate the\nmagnitude of effects, rather than their actual va lues. However, within these confines, the United\nStates calculations provide a useful confirmation of the qualitative conclusion reached by the United\nStates that the steel safeguard measures were applied no more than the extent necessary to prevent or\nremedy the injury attributable to imports. The United States submits that only a qualitative\n\n2485 United States' second written submission, para. 135.\n2486 United States' second written submission, para. 136.\n2487 United States' second written submission, para. 137.\n2488 Japan's written reply to Panel question No. 88 at the first substantive meeting; Brazil's written\nreply to Panel question No. 88 at the first substantive meeting.\n2489 Korea's written reply to Panel question No. 88 at the first substantive meeting; Korea's second\nwritten submission, para. 156; see also Norway's second written submission, para. 159; Norway's first oral\nstatement on behalf of the complainants, paras. 18-20.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nevaluation of the effects of imports and other factors of the sort used by the USITC would provide the\nnecessary level of certainty. 2490\n(v) Consistency of the causation test applied by the USITC with WTO jurisprudence\n7.1018 Japan and Brazil note that, in this case, the USITC applied the \"substantial cause\" test\nprescribed by the United States' statute, which defines \"substantial cause\" as \"a cause which is\nimportant and not less than any other cause\". They assert that the USITC's limited and narrow\ncausation analysis in the instant case according to which the USITC found that increased imports must\nbe both an important cause of the serious injury or threat and a cause that is equal to or greater than\nany other cause is essentially the same as its causation analyses in US – Wheat Gluten , US – Lamb ,\nand US – Line Pipe .2491 The European Communities, Japan, China, Switzerland, Norway, New\nZealand and Brazil argue that the Appellate Body found that causation analysis insufficient to meet\nthe requirement of non-attribution under Article 4.2(b) in each of those cases.2492\n7.1019 Japan argues that, as a growing body of WTO jurisprudence demonstrates, mere compliance\nwith United States law most definitely does not ensure compliance with international obligations of\nthe United States under the WTO Agreement.\n2493 The European Communities, Switzerland and\nNorway note that while they are not challenging, in this dispute, the legislation on the basis of which\nthe United States applies safeguard measures but rather the application of this legislation in this\nparticular safeguard investigation, they cannot but point out that such application continues the\npractice criticised by the Appellate Body. 2494 Switzerland adds that there can be little doubt that the\nreason why the United States has been found in successive WTO disputes to have failed to properly\nensure the non-attribution of injury caused by other factors to increased imports is the fact that the\nUSITC applies standards which do not meet those of the Agreement on Safeguards.2495\n7.1020 The European Communities, Japan, Norway, New Zealand and Brazil assert that in each case,\nthe Appellate Body held that the analysis violated the non-attribution requirement because the USITC\nfailed both to \"separate\" and \"distinguish\" the injurious effects caused by factors other than\nimports.2496 Brazil submits that there is nothing in the US ITC's report in this case that distinguishes it\nfrom the USITC's prior three reports. The general framework is the same. The USITC employed its\n\"substantial cause\" test as it did in the prior three cases, setting forth other causal factors of injury\nother than increased imports and then individually \"examining\" their relative causal importance vis-à-\nvis increased imports to determine if increased imports are important and no less important than each\nof those causes. As the Appellate Body has state d, such an examination is not enough. According to\n\n2490 United States' written reply to Panel question No. 88 at the first substantive meeting.\n2491 Japan's first written submission, para. 249; Brazil's first written submission, para. 176.\n2492 European Communities first written submission, paras. 435 and 457; Japan's first written\nSwitzerland's first written submission, para. 278; Norway's first written submission, para. 301; New Zealand's\n2493 Japan's first written submission, para. 248.\n2494 European Communities first written submission, para. 454; Switzerland's first written submission,\n2495 Switzerland's first written submission, para. 297.\n2496 European Communities first written submission, paras. 435 and 457; Japan's first written\nsubmission, para. 249; Norway's second written submission, para. 115; New Zealand's second written\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nBrazil, Article 4.2(b) requires something more to establish a genuine and substantial relationship of\ncause and effect between increased imports and serious injury.2497 2498\n7.1021 Japan and Norway argue that although an examination of the relative causal importance of the\ndifferent causal factors may satisfy the requirements of United States law, such an examination does\nnot, for that reason, satisfy the requirements of the Agreement on Safeguards . Japan asserts that a\nreview of whether the United States complied with the non-attribution language in the second\nsentence of Article 4.2(b) can only be made in the light of the explanation given by the USITC for its\nconclusions on the relative causal importance of the increased imports, as distinguished from the\ninjurious effects of the other causal factors. 2499 Norway argues that since the methodology used to\nanalyse causation is itself flawed, it is not a surprise that the explanation by the USITC of its\nconclusions is also flawed. 2500 Norway further argues that the United States does not in its first\nwritten submission try to explain how they assessed the relative importance of the various factors that\nthey admit contributed to the alleged serious injury, to ensure that increased imports were not\nattributed the injury caused by other factors. 2501 China also argues that the USITC failed to explain\nadequately, as required by Article 4.2(b), that injury caused to the domestic industry by other factors\nhas not been attributed to increased imports, and, in consequence, the USITC could not establish the\nexistence of the causal link, as it Article 4.2(b) requires, between increased imports and serious\ninjury.2502\n7.1022 Japan, Korea, Norway and Brazil argue that in this case the USITC made no attempt to\nrigorously \"separate\" or \"distinguish\" the serious injury caused by factors other than imports or to\nevaluate the extent these factors injured the domestic industry. 2503 Rather, according to Japan and\nBrazil, the USITC merely speculated that imports were a \"substantial cause\" of serious injury, a cause\nno less important than any other cause. 2504 By way of illustration, New Zealand argues that it is\nsimply not enough to come to some vague and indeterminate conclusion that domestic capacity\nincreases \"were likely to have some effect on prices\" 2505 but then take the analysis no further. 2506\nKorea and Brazil submit that a \"mere assertion\" used to support a finding of a genuine and substantial\ncausal link \"does not establish explicitly, with a reasoned and adequate explanation, the injury caused\nby factors other than the increased imports was not attributed to increased imports\".2507 2508\n7.1023 The European Communities, Switzerland and Norway argue that the USITC's analysis also\nfails to meet the standards set out in the Agreement on Safeguards because it is exclusively based on a\nrelative comparison between individual causes of serious injury and increased imports. It, therefore,\ndoes not involve a separation and distinction of the injurious effects of other factors. Nor does it\ninvolve the attribution of serious injury suffered by the domestic industry to the various causes of\n\n2497 Appellate Body Report, US – Lamb, para. 184.\n2498 Brazil's second written submission, para. 76.\n2499 Japan's first written submission, para. 250; Norway's second written submission, para. 115.\nNorway refers in this regard to Appellate Body, US – Lamb, para. 184.\n2500 Norway's second written submission, para. 115.\n2501 Norway's second written submission, para. 119.\n2502 China's second written submission, para. 190.\n2503 Japan's first written submission, para. 249; Korea's first written submission, para. 121; Norway's\n2504 Japan's first written submission, para. 247; Brazil's first written submission, para. 175.\n2505 United States first written submission, para 494.\n2506 New Zealand's second written submission, para. 3.124.\n2507 Appellate Body Report, US – Line Pipe, para. 220 (emphasis in original).\n2508 Korea's first written submission, para. 119; Brazil's first written submission, para. 177; Brazil's\nsecond written submission, para. 77.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury individually, which would permit a determination whether there is a \"genuine and substantial\"\nrelationship between increased imports and serious injury. 2509 The European Communities submits\nfurther that this relative comparison does not permit the USITC to \"establish, explicitly, through a\nreasoned and adequate explanation, that injury caused by factors other than increased imports is not\nattributed to increased imports\".2510 2511\n7.1024 Similarly, Brazil argues that finding that increased imports are important and no less\nimportant than another cause is not the same as finding a genuine and substantial causal link.2512 New\nZealand argues that according to the USITC's approach, which requires a mere comparison between\nthe causal effect of imports and other factors, as long as no single factor is more important than\nincreased imports, the substantial cause test is met, even though collectively the other factors may be\nof far greater importance than increased imports. New Zealand submits that this does not require an\noverall evaluation of whether there is a genuine and substantial relationship between increased\nimports (as distinguished from other factors) and serious injury. In short, the USITC test allows a\nconclusion that causation exists even without proof of that genuine and substantial relationship.\n2513\nRelying upon the Appellate Body decision in US – Lamb, a mere \"relative causation\" assessment by\nitself does not comply with the requirement to assess the \"nature and extent\" of the \"injurious effects\"\ncaused by a non-import factor as distinguished and separated from increased imports.2514\n7.1025 More particularly, Korea argues that the United States still has not explained the method by\nwhich it \"disentangled\" the injurious effects of other factors from the injurious effects of imports 2515\nand it has not explained how it has distinguished the effects of those other factors from imports.\nMerely commenting on the significance of another factor relative to imports either by comparison\n(\"not less than any other cause\") or by degree (\"minor\") is not sufficient because it does not separately\nconsider or disentangle the effects of each factor in a straightforward and unambiguous manner.2516\n7.1026 China notes that, as was decided in the US – Lamb dispute, an examination of the relative\ncausal importance of the different factors does not satisfy the requirements of the Agreement on\nSafeguards. However, according to China, the in vestigating authority can nevertheless comply with\nArticle 4.2(b) of the Agreement on Safeguards by establishing explicitly, with a reasoned and\nadequate explanation, that injury caused by other factors was not attributed to increased imports. 2517\nChina argues that in order to do this, in cases where the investigating authority believes that an\nalleged factor is not causing injury, it must explicitly, clearly and unambiguously state it and explain\nthe reasons why. The explanation must be reasoned and adequate. To proceed otherwise would not\nensure that alleged factors have been examined closely enough to establish that they are not\ncontributing to the injury and as a result, there would be no guarantee that injury caused by other\nfactors has not been wrongfully attributed to increased imports. On the other hand, if the investigating\nauthority believes that an alleged factor is causing injury, it must assess that injury and not attribute it\nto increased imports.\n2518 Nevertheless, in China's and Norway's view, when the USITC placed\n\n2509 European Communities' first written submission, para. 457; Switzerland's first written submission,\n2510 Appellate Body Report, US – Line Pipe, para. 217.\n2511 European Communities' second written submission, para. 336.\n2512 Brazil's first written submission, para. 177; Brazil's second written submission, para. 77.\n2513 New Zealand's first written submission, para. 4.122.\n2514 New Zealand's second written submission, para. 3.124.\n2515 Appellate Body Report, US – Line Pipe , para. 211 (affirming Appellate Body Report, US – Lamb ,\npara. 179, footnote 38)\n2516 Korea's second written submission, para. 155.\n2517 China's first written submission, para. 425.\n2518 China's first written submission, para. 426.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nemphasis on the substantial cause methodology, it failed to fulfil the requirements of Article 4.2(b) of\nthe Agreement on Safeguards since its conclusions regarding the effect of imports as compared to\nother factors were not clear, unambiguous nor straig htforward and further, they did not establish that\nother factors did not cause injury and that injury caused by other factors was not attributed to\nincreased imports. Moreover, the explanations given by the USITC to support its conclusions were\nnot clear, straightforward, unambiguous. Further, according to China they were not reasoned and\nadequate.\n2519\n7.1027 In response, the United States notes that, to date, the Appellate Body has issued four reports\nwhich describe the general principles applicable to a causation analysis in a safeguards proceeding.\nNonetheless, the Appellate Body has specifically conceded that the standards it has announced in\nthese reports leave \"unanswered many methodological questions relating to the non-attribution\nrequirement found in the second sentence of Article 4.2(b)\". Thus, according to the United States, it\nis clear that the Appellate Body has left to the discretion of the competent authority the job of\ndeveloping the appropriate analytical methodologies needed to satisfy the requirements of\nArticle 4.2(b).\n2520\n7.1028 The United States also argues that, as can be seen from an examination of the explicit\nlanguage of the Appellate Body's three prior reports ( US – Lamb, US – Wheat Gluten and US – Line\nPipe), the Appellate Body has never stated, as the complainants argue, that the USITC's causation\nmethodology is inconsistent with the basic requirements of Article 4.2(b). Instead, on the three\noccasions that it addressed the USITC's causation analysis, the Appellate Body has faulted the USITC\nnot for its choice of a particular causation analysis or for applying the \"substantial cause\" standard set\nforth in the statute, but because the USITC did not perform a \"reasoned and adequate\" explanation of\nthe nature and extent of the injury caused by non-import factors in those particular cases, in the view\nof the Appellate Body. The United States submits that in these reports, the Appellate Body has\nsimply found that the USITC should have discussed in more detail its analysis of the causal nexus\nbetween imports and injury.\n2521\n7.1029 The United States argues that, in fact, the Appellate Body has actually approved the USITC's\ngeneral analytical approach in several significant respects. For example, in US- Lamb, the Appellate\nBody explicitly noted that, by \"examining the relative causal importance of different causal factors\" as\nrequired under the United States' statute, the USITC clearly engages in the sort of \"process to separate\nout, and identify, the effects of the different factors, including increased imports\" that has been\nrequired by the Appellate Body in US – Wheat Gluten. Although the Appellate Body went on to state\nthat it was, nonetheless, required to examine the USITC's reasoning in detail to assess whether it\ncomplied with the analytical guidelines announced in US – Wheat Gluten , the United States argues\nthat it is clear from this statement that the Appellate Body does not believe that the \"substantial cause\"\ntest set forth in the statute and applied by the USITC is inherently inconsistent with the Agreement on\nSafeguards .\n2522\n7.1030 In counter-response, New Zealand concedes that the Appellate Body has observed that the\nAgreement on Safeguards allows a competent authority appropriate discretion to craft its own\nmethodology. However the United States, in seizing on this point, ignores the fact that the Appellate\nBody has, nevertheless, gone on to find that the USITC violated the Agreement on Safeguards by\n\n2519 China's first written submission, paras. 374,464, 480, 497, 520; Norway's first written submission,\npara. 329.\n2520 United States' first written submission, paras. 417 and 436.\n2521 United States' first written submission, paras. 431, 432 and 437.\n2522 United States' first written submission, para. 433.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfailing to provide for a correct non-attribution. In other words, a competent authority has discretion to\ndevelop and apply an appropriate methodology – so long as it delivers a result which complies with\nthe Agreement on Safeguards.\n2523 2524\n7.1031 Similarly, the European Communities agrees that the Agreement on Safeguards does not\nexpressly proscribe certain methodologies. However, according to the European Communities, it\ndoes prescribe certain functions that any methodology must satisfactorily execute (e.g. ensure non-\nattribution). The European Communities states that its charge against the United States is not that it is\nrequired to apply one methodology or another. Ra ther, the charge is that the methodology applied by\nthe United States does not permit it to satisfactorily carry out the non-attribution analysis required by\nthe Agreement on Safeguards.\n2525 The European Communities requests the Panel to find that, in\nfailing to \"establish explicitly, through a reasoned and adequate explanation, that injury caused by\nfactors other than increased imports is not attributed to increased imports\", the United States has\nfailed to establish the existence of a genuine and substantial relationship of cause and effect between\nincreased imports and serious injury. Since the USITC applied the same methodology in each of its\ndeterminations, the European Communities submits that the methodological flaws that have been\nidentified, by necessity, vitiate each of the individual determinations.\n2526\n7.1032 Also in counter-response, the European Communities further argues that it is clear that while\npanels and the Appellate Body have found that the USITC did not provide a reasoned and adequate\nexplanation, the reason for such findings is that the relative comparison methodology used by the\nUSITC does not permit it to properly establish that the injurious effects of other factors are not\nattributed to increased imports.\n 2527 The European Communities states 2528 that it cannot fault the\nUnited States for referring to what must be the one remotely positive comment by the Appellate Body\nwith respect to its causation practice. However, the United States can only qualify the statement in\nUS – Lamb as \"approving\" the USITC's causation methodology by quoting very selectively from\nwhat the Appellate Body actually said. The European Communities submits that it sees nothing in the\nUSITC Report to indicate how the USITC complied with the obligation found in the second sentence\nof Article 4.2(b). According to the European Communities, the USITC Report, on its face, does not\nexplain the process by which the USITC separated the injurious effects of the different causal factors,\nnor does the USITC Report explain how the USITC ensured that the injurious effects of the other\ncausal factors were not included in the assessment of the injury ascribed to increased imports. The\nUSITC concluded only that each of four of the six \"other factors\" was, relatively, a less important\ncause of injury than increased imports.2529\n7.1033 The European Communities also argues2530 that the United States stretches the language of the\nAppellate Body in arguing that the Appellate Body actually \"approved\" the USITC's \"general\nanalytical approach\". The USITC's general analytical approach, based as it is on a relative\ncomparison, does not permit the USITC to make a reasoned and adequate explanation of how it\nseparated and distinguished the injurious effects of other factors from the injurious effects of\nincreased imports. Indeed, the Appellate Body quoted approvingly the Panel finding:\n\n2523 Appellate Body Report, US – Lamb, para. 181.\n2524 New Zealand's second written submission, para. 3.111.\n2525 European Communities' second written submission, para. 320.\n2526 European Communities' second written submission, para. 355.\n2527 European Communities' second written submission, para. 347.\n2528 European Communities' second written submission, para. 348.\n2529 Appellate Body Report, US – Lamb, paras. 184, 185. Footnotes omitted, italicisation in the original,\nunderlining shows the text the United States has quoted in United States' first written submission, para. 433.\n2530 European Communities' second written submission, para. 349.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"[T]hat the USITC's application of the 'substantial cause' test in the lamb meat\ninvestigation as reflected in the USITC Report did not ensure that threat of serious\ninjury caused by other factors has not been attributed to increased imports.\"\n2531\n7.1034 The European Communities submits 2532 that three panels have found the application of the\nrelative comparison methodology to be WTO inconsistent. While two of the panels were reversed on\nsome specific aspects of their reasoning with respect to causation, the Appellate Body did not reverse\ntheir ultimate conclusions that the USITC had failed to establish a causal relationship. 2533 T h e\nEuropean Communities notes that, in US – Line – Pipe, the Panel, with the benefit of the clarifications\noffered by the Appellate Body's reports in US – Wheat Gluten and US – Lamb, found:\n\"[I]t can be established that the methodology used in its analysis of the injury caused\nby the oil and gas industry decline has the objective (consistent with applicable\nUnited States law) of determining whether this factor is a more important cause of\ninjury than the increased imports. We are not convinced that such a determination is\nenough to satisfy the requirements of Article 4.2(b), which mandates that injury\ncaused by other factors not be attributed to the increased imports. Indeed, the USITC\nrecognizes that the decline in the oil and gas industry was having injurious effects on\nthe domestic line pipe industry. However, it is not apparent from this analysis how, if\nat all, the USITC separated the injurious effects of the decline in the oil and gas\nindustry from the injurious effects of the increased imports. The USITC's analysis\nprovides no insight into the nature and extent of the injury caused by the decline in\nthe oil and gas industry. Instead, as in the United States – Lamb Meat case, the\nUnited States effectively assumed that the decline in the oil and gas industry did not\ncause the injury attributed to increased imports. As found by the Appellate Body in\nUnited States – Lamb Meat , such an assumption is inconsistent with Article 4.2(b).\nThe same assumption was effectively made by the USITC in respect of the other\ncauses of injury identified above, since its analysis of those factors was also confined\n\n2531 Appellate Body Report, US – Lamb, para 187.\n2532 European Communities' second written submission, para. 351.\n2533 In the Panel Report US – Wheat Gluten, para. 8.154, the Panel found:\n\"[T]hat the USITC examination into whether increased imports were 'a cause that is important and not\nless than any other cause' of serious injury and the resulting conclusion of the USITC that increased\nimports are 'an important cause of serious injury and a cause that is greater than any other cause' are not\nconsistent with Article 4.2(b) SA as they do not ensure the non-attribution to imports of injury caused\nby other factors.\"\nIn the Panel Report, US – Lamb, para. 7.277 the panel concluded:\n\"That the determinations by the USITC in respect of four of the six \"other factors\" examined\ndo not constitute determinations that these factors made no appreciable contribution to the\nthreat of serious injury. Rather, the USITC found that these four factors were \"less important\"\ncauses than increased imports of the threat of serious injury, which in our view means that\nthey were contributing in a more than insignificant way to that threat. Therefore, we conclude\nthat the USITC's application of the \"substantial cause\" test in the lamb meat investigation as\nreflected in the USITC Report did not ensure that threat of serious injury caused by other\nfactors has not been attributed to increased imports.\"\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto a determination of whether the injury caused by the relevant factor was not a more\nimportant cause of serious injury than increased imports.\"2534\n7.1035 The European Communities argues 2535 that the Appellate Body upheld this analysis,\nexpressed in the conclusion of the panel that the USITC \"did not adequately explain\" how it ensured\nthat injury caused to the domestic industry by f actors other than increased imports was not attributed\nto increased imports. 2536 The Appellate Body specifically quoted the findings of the USITC in the\nUS – Line Pipe investigation, that:\n\"Respondents also argued that we may not attribute injury caused by these factors to\nthe imports. We have not done so. As required by the statute, after evaluating all\npossible causes of injury, we have determined that imports are an important cause of\ninjury and are not less than any other cause.\"\n2537\n7.1036 The European Communities submits2538 that this did not \"establish explicitly, with a reasoned\nand adequate explanation, that injury caused by factors other than the increased imports was not\nattributed to increased imports\".2539 In so doing, the Appellate Body considered the USITC's assertion\nthat it had not attributed injury caused by other factors to increased imports. The European\nCommunities submits that in the present case, the USITC does not even assert, in any of its product\nbundle determinations, that it has not attributed injury caused by other factors to imports. It simply\nstates, on an individual basis, that other causes are not as important a cause as increased imports.\nTaken together with the statement of the Appellate Body in US – Lamb quoted above, this finding of\nthe Appellate Body is a clear indication that the relative comparison carried out by the USITC does\nnot permit it to provide the reasoned and adequate explanation of separation, distinction, and non-\nattribution which the Appellate Body has found th at Article 4.2(b) of the Agreement on Safeguards\nrequires.\n7.1037 The United States points out that the \"substant ial cause\" test set forth in the United States\nstatute does not merely require the USITC to perform a \"relative comparison\" of injury caused by\nimports and non-import factors, as has been asserted by the complainants. Instead, the United States\nstatute requires the USITC to make two separate findings when analysing the nature and extent of the\ninjury caused by imports and other factors. First, the USITC must determine that increased imports\nare in and of themselves an \"important\" cause of serious injury to the domestic industry. Secondly,\nthe USITC must also determine that imports are as \"important\" or \"more important\" a cause of injury\nthan any other factor. Accordingly, it is clear that it is not sufficient under the United States statute\nfor the USITC to find simply that imports are caus ing more injury than other factors. Instead, the\nUnited States statute specifically requires that the USITC must find that imports are an \"important\"\ncause of serious injury as well.\n2540 The United States submits that, in light of these requirements, it is\nalso clear that the \"substantial cause\" test does, in fact, require the USITC to identify the nature and\nextent of the individual factors causing injury to the industry, including increased imports. The statute\nfirst requires the USITC to identify the nature and extent of the injury caused by imports by assessing\nwhether increased imports are an \"important\" cause of serious injury. The statute also requires the\n\n2534 Panel Report, US – Line Pipe, para. 7.288.\n2535 European Communities' second written submission, para. 352.\n2536 Panel Report, US – Line Pipe, para. 7.290; Appellate Body Report, US – Line Pipe, para. 222.\n2537 P. I-30 of the USITC Report in the Line Pipe investigation, quoted by the Appellate Body in\nAppellate Body Report, US – Line Pipe, para. 218.\n2538 European Communities' second written submission, para. 352.\n2539 Appellate Body Report, US – Line Pipe, para. 220 (emphasis in original).\n2540 United States' first written submission, para. 439.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC to \"examine factors other than imports\" that are causing injury and to compare the\n\"importance\" of that injury to that caused by imports.2541\n7.1038 In counter-response, the European Communities argues that two conclusions can be drawn\nfrom comments made by the United States in its submissions and in the USITC Report: the USITC\ndetermines the existence of a \"substantial\" causa l link between increased imports and serious injury\nand thereafter the USITC determines whether, on an individual basis, alternative factors cause injury\nwhich is \"equal to or greater than\" that caused by increased imports. 2542 According to the European\nCommunities, this is not consistent with Article 4.2(b) of the Agreement on Safeguards when the\nordinary meaning, viewed in the light of its object and purpose is examined.2543 More particularly, the\nEuropean Communities submits that such an approa ch renders the non-attribution analysis nugatory,\nand is clearly inconsistent with Article 4.2(b) of the Agreement on Safeguards. It is incorrect to\ndetermine that there is a causal link before carrying out the non-attribution analysis. Moreover, the\nnon-attribution analysis requires the separation and distinction of the injurious effects of, on the one\nhand, all alternative factors, and, on the other hand, increased imports.2544\n7.1039 The European Communities submits 2545 that the Appellate Body clearly considers that the\ncausal link determination can only be conclusively made after the non-attribution exercise has been\ncarried out. Japan, Korea, China, Norway and New Zealand agree. 2546 According to the European\nCommunities, the panel in US – Line Pipe recognized this failing in the United States' methodology:\n\"We further note that the USITC immediately determines whether there is a link\nbetween the increased imports and the serious injury, without first attempting to\nseparate out injury that is being caused by other factors […] We do not consider that\nsuch an analysis allows an investigating authority to determine whether there is \"a\ngenuine and substantial relationship of cause and effect\" between the serious injury\nand the increased imports.\"2547\n7.1040 In light of the foregoing, the European Co mmunities argues that the USITC, therefore,\nignored clear instructions from the Appellate Body, and the Panel's analysis in US – Line Pipe.2548 2549\n7.1041 In particular, the European Communities argues that in the following instances, the USITC\ndetermines that there is a causal link before purporting to examine the injurious effects of other\nfactors:\n\n2541 United States' first written submission, para. 440.\n2542 European Communities' second written submission, para. 326.\n2543 European Communities' second written submission, paras. 328-331.\n2544 European Communities' second written submission, paras. 327 and 328.\n2545 European Communities' second written submission, para. 332; The European Communities refers\nadditionally to Appellate Body Report, US – Wheat Gluten , para. 69 and Appellate Body Report, US – Lamb,\npara. 179.\n2546 Japan's written reply to Panel question No. 41 at the second substantive meeting; Korea's written\nreply to Panel question 41 at the second substantive meeting; China's first written submission, para. 352;\nChina's written reply to Panel question No. 41 at the second substantive meeting; Norway's written reply to\nPanel question No. 34 at the second substantive meeting; New Zealand's written reply to Panel question No. 34\nat the second substantive meeting.\n2547 Panel Report, US – Line Pipe, para. 7.289.\n2548 \"An interpreter is not free to adopt a reading that would result in reducing whole clauses or\nparagraphs of a treaty to redundancy or inutility.\" Appellate Body Report, US – Gasoline, page 23.\n2549 European Communities' second written submission, para. 333.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nHot rolled bar\n\"We consequently conclude that the increased imports were an important cause of the\nserious injury sustained by the domestic hot-rolled bar industry\".2550\nCold rolled bar\n\"Because the imports succeeded in increasing their share of the United States market\nin 2000, the domestic industry's production and shipments declined from 1999 levels\nnotwithstanding the increase in United States apparent consumption.\"2551\nCertain tubular products\n\"We find that imports have had a negative effect on the domestic industry over the\nperiod we have examined, particularly during the recent years of the period.\"2552\n\"We further find that increased imports ar e likely to cause serious injury to the\ndomestic industry in the imminent future.\" 2553\nCarbon and alloy fittings (FFTJ)\n\"We find that imports are a substantial cause of serious injury.\" 2554\nStainless steel bar\n\"In sum, we find that increased quantities of imports of stainless steel bar during the\nperiod were a substantial cause of the declines in the industry's trade and financial\ncondition during this period.\" 2555\nStainless steel rod\n\"In sum, we find that the increased quantities of imports of stainless rod during the\nperiod of investigation were an important cause of the declines in the industry's trade\nand financial conditions during this period.\" 2556\nTin mill products\n\"I also find that increased imports are a substantial cause of serious injury to the\ndomestic industry in that they are a cause which is important and not less than any\nother cause.\" 2557\n7.1042 According to the European Communities, a Member could not determine that there is a causal\nlink if it cannot determine that imports could have caused the injury which has been observed\n\n2550 USITC Report, Vol. I, p. 97\n2551 USITC Report, Vol. I, p. 106\n2552 USITC Report, Vol. I, p. 163\n2553 USITC Report, Vol. I, p. 164\n2554 USITC Report, Vol. I, p. 177\n2555 USITC Report, Vol. I, p. 212\n2556 USITC Report, Vol. I, p. 221\n2557 USITC Report, Vol. I, p. 308\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(necessitating the temporal correlation). Nor could it determine that a causal link exists if it only\ncompared the injurious effects which it hypothesised are caused by increased imports with one other\nfactor, because it may be the case that the observed injury is being caused by another factor.\n2558\nSimilarly, Norway argues that the USITC examination of relative causes on an individual basis\nrenders no determination of whether the aggregate effect of other causal factors is such that there is a\n\"genuine and substantial causal link\" between imports and injury.\n2559\n7.1043 The European Communities submits that it is on ly by determining whether all of the other\nfactors are, or are not, causing all of the observed injury, that a Member may appropriately ensure that\nit has not attributed injury caused by other factors to increased imports and thus ensured the existence\nof a genuine and substantial causal link between increased imports and the serious injury.\n2560 T h e\nEuropean Communities states that this approach, and the approach taken by the USITC, can be\nillustrated diagrammatically as follows (where A, B and C are alternative causes of injury):2561\nOverall situation\nUSITC examination\nGreater than or equal to ?\n7.1044 According to the European Communities, the in jurious effects of A are compared to the\ninjurious effects of increased imports while the injurious effects of B and C are ignored (while the\ninjurious effects of increased imports are assumed). Then the injurious effects of B are compared to\nthe injurious effects of increased imports while the injurious effects of A and C are ignored. Finally,\n\n2558 European Communities' second written submission, para. 338.\n2559 Norway's second written submission, para. 115.\n2560 European Communities' second written submission, para. 337.\n2561 European Communities' second written submission, para. 338.\nInjured domestic industry\nA B C Incr. Imports\nInjured domestic industry\nA, then B, then C\nB\nCIncr. Imports\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe injurious effects of C are compared to increased imports while the injurious effects of A and B are\nignored.2562\n7.1045 By way of example, New Zealand takes the case of a finding by the USITC that five factors\nare causing serious injury to the domestic industry, only one of which is increased imports. Proper\nanalysis of the relevant data suggests that three of these causes, including increased imports, are\nparticularly important and roughly equivalent to each other in causal effect. Yet, according to New\nZealand, the USITC would claim that increased imports, contributing by less than a third to serious\ninjury, met the \"genuine and substantial relationship of cause and effect\" standard under the\nAgreement on Safeguards.2563\nAnalysis required by the Agreement on Safeguards\n7.1046 The European Communities notes that in its final diagram (above), the combined effects of A,\nB and C are assessed together, and in this manner it can be determined whether, once the effects of\nthese other factors have been isolated, the hypothetical relationship of cause and effect between\nincreased imports and serious injury is, in fact, genuine and substantial.2564\n7.1047 The European Communities submits that it is quite clear that this is the analysis which is\nrequired by the Agreement on Safeguards. This follows from an interpretation of Article 4.2(b).\nArticle 4.2(b) refers to the situation \"when factors other than increased imports are causing injury [...]\nsuch injury shall not be attributed to increase d imports\". The phrase \"such injury\" is clearly a\nreference to the injury caused by \"factors other than increased imports\". A consideration of the object\nof Article 4.2(b), suggests that all factors must be considered collectively, otherwise it is not possible\nto determine with certainty the existence of a genuine and substantial relationship of cause and\neffect.\n2565 According to the European Communities 2566, this has also been established by the\nAppellate Body. In US – Wheat Gluten the Appellate Body held, after requiring that the injurious\neffects of increased imports be distinguished from the injurious effects of other factors that:\n\n2562 European Communities' second written submission, para. 339.\n2563 New Zealand's second written submission, para. 3.89.\n2564 European Communities' second written submission, para. 340.\n2565 European Communities' second written submission, para. 341.\n2566 European Communities' second written submission, para. 342.\nInjured domestic industry\nA\nB\nC\nIncr. Imports\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"[T]he competent authorities can then […] attribute to increased imports, on the one\nhand, and , by implication, to other relevant factors, on the other hand, \"injury\"\ncaused by all of these different factors, including increased imports.\"\n2567\n7.1048 The European Communities and Norway argue 2568 that, by analysing the injurious effects of\neach other factor individually against the injurious effects of increased imports, the USITC is acting\ninconsistently with Article 4.2(b) of the Agr eement on Safeguards. The European Communities and\nNorway refer to the Panel's decision in US – Line Pipe. It stated:\n\"[T]he USITC takes each of the other factors, one at a time, and examines its relative\ncausal importance with respect to the seriou s injury that it has previously determined\nto exist (i.e., injury that has been caused by increased imports and all other factors).\nWe note that the serious injury under examination remains \"polluted\" by the injurious\neffects, however, of the remaining other factors. Therefore, the United States is not\nassessing the relative causal importance of the injurious effects of the other factor at\nissue against the injurious effects of the increased imports. Rather, it assesses the\ninjurious effects of the other factor at issue against the injurious effects of increased\nimports and the remaining other factors. We do not consider that such an analysis\nallows an investigating authority to determine whether there is \"a genuine and\nsubstantial relationship of cause and effect\" between the serious injury and the\nincreased imports.\"2569\n7.1049 In response, the United States submits that the USITC simply does not find that there is a\ngenuine and substantial causal link between imports and serious injury before assuring that other non-\nimport factors are not being attributed to imports. Instead, the USITC first examines whether there is\na correlation of trends between increased imports and declines in the overall condition of the domestic\nindustry and then separates and distinguishes the effe cts of imports from those of other factors before\nconcluding whether there is a \"genuine and substantial\" causal link between increased imports and\nserious injury. In other words, the USITC performs both of these analytical steps before ultimately\nconcluding that imports have caused serious injury to the domestic industry.2570\n7.1050 The United States submits that the European Communities also appears to misunderstand the\nAppellate Body's guidance concerning a proper causation analysis in a safeguards proceeding. First,\nthe European Communities fails to recognize that the Appellate Body has stated that the \"central\"\nconsideration in a competent authority's causation analysis is an assessment whether there is a\n\"relationship between the movements in imports (volume and market share) and the movement in\ninjury factors\".\n2571 Indeed, the USITC examines whether there is such a correlation as the first step in\nits analysis because the existence of a correla tion between import trends and movements in the\nindustry's performance factors is generally a strong indication of a causal link between imports and\nserious injury. Second, the European Communities' argument also appears to be premised on a\nmistaken reading of the Appellate Body's discussi on of the principles that should guide a competent\nauthority's non-attribution obligation. Although the Appellate Body stated in its US – Wheat Gluten\nreport that \"Article 4.2(b) presupposes ... as a first step in the competent authority's examination of\ncausation that the injurious effects caused to the domestic industry by increased imports are\n\n2567 Appellate Body Report, US – Wheat Gluten, para. 69.\n2568 European Communities' second written submission, para. 343; Norway's second written\nsubmission, para. 118.\n2569 Panel Report, US – Line Pipe, para. 7.289. (emphasis added)\n2570 United States' written reply to Panel question No. 41 at the second substantive meeting.\n2571 Appellate Body Report, Argentina – Footwear (EC), para. 144.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndistinguished from the injurious effects caused by other factors\", the Appellate Body did not state that\nthis \"first step\" requires the competent authority to identify the nature and extent of non-import factors\nbefore assessing whether there was a correlation between increased imports and declines in the\ncondition of the industry. On the contrary, the Appellate Body has expressly stated that the analytical\nsteps satisfying the non-attribution obligation outlined in US – Wheat Gluten \"simply describe a\nlogical process for complying with the obligations relating to causation set forth in Article 4.2(b)\" and\nare not actually \"legal 'tests' mandated by the text of the Agreement on Safeguards\".\n2572 Moreover,\nthe Appellate Body has specifically stated that it is not \"imperative that each step be the subject of a\nseparate finding or a reasoned conclusion by the competent authorities\". 2573 In other words, the\nAppellate Body has not stated that the competent authorities must first isolate and distinguish the\neffects of non-import factors before assessing whether there is a correlation between import trends\nand declines in the industry's condition. Rather, the particular sequence of analytical steps does not\nmatter as long as the analysis as a whole complies with the obligations of the Agreement on\nSafeguards , in line with reports adopted by the Appellate Body.2574\n7.1051 China makes a similar argument to that put forward above by the European Communities.\nChina refers2575 to the Appellate Body's finding in US – Line Pipe that:\n\"The causation requirement in Article 4.2(b) can be met where the serious injury is\ncaused by the interplay of increased imports and other factors.\" 2576\n7.1052 China submits that the word \"interplay\" was appropriately chosen as there are several factors,\nbesides increased imports, contributing simultaneously to the situation of the domestic industry.\nInteraction of all the various factors influences the positive or negative developments in the domestic\nindustry. China submits that it would, therefore, be misleading to make a comparison between\nincreased imports and each of the factors only, instead of analysing the \"injurious imports\" and the\ninjury caused by the interplay of other factors.2577\n7.1053 China also refers2578 to the Appellate Body's finding in US – Wheat Gluten:\n\"Under Article 4.2(b) of the Agreement on Safeguards, it is essential for the\ncompetent authorities to examine whether factors other than increased imports are\nsimultaneously causing injury. If the competent authorities do not conduct this\nexamination, they cannot ensure that injury caused by other factors is not \"attributed\"\nto increased imports.\"2579\n7.1054 China submits that, accordingly, investigating authorities have to distinguish the effects of\nincreased imports from the effects of all the other relevant interacting factors in relation to the\ndetermination as to whether there is a genuine and substantial relationship of cause and effect between\nthe increased imports and serious injury.2580\n\n2572 Appellate Body Report, US – Lamb, para. 178.\n2573 Appellate Body Report, US – Lamb, para. 178.\n2574 United States' written reply to Panel question No. 41 at the second substantive meeting.\n2575 China's second written submission, para. 181.\n2576 Appellate Body Report, US – Line Pipe, para. 209 (emphasis added).\n2577 China's second written submission, para. 182.\n2578 China's second written submission, para. 182.\n2579 Appellate Body Report, US – Wheat Gluten, para.91 (emphasis added).\n2580 China's second written submission, para. 183.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1055 China notes that the USITC essentially determines whether the imports are as important or\nmore important cause of injury than any other fact or. According to China, the USITC basically takes\none factor from the group of \"other factors\" and compares individually their importance, one by one,\nwith the importance of the effects of imports. The United States based its determination on a mere\ncomparison between increased imports and each of the factors taken individually. Such an analysis\nallowed the United States to artificially identify the existence of a genuine and substantial causal link\nbetween imports and injury, without taking into account that the aggregated effect of other factors was\na greater cause of injury than increased imports. 2581\n7.1056 China argues, firstly, that the examination on a factor-by-factor basis does not reflect\ncompletely the interplay of the factors, and thus, does not show and distinguish the aggregate effect of\nother causes of the injury suffered by the domestic industry. 2582 Similarly, Norway argues that the\nUSITC looks at imports as one factor to be measured not against the collective weight of the other\nfactors causing injury, but only measured against the other factors one by one. 2583 2584 N o r w a y\nsubmits that whenever there are two or more other factors, the United States is bound to get it wrong.\nNorway argues that even where there is only one other factor, this other factor will still be discounted\nshould it be \"equal to but not greater cause than imports\". This is clearly explained by Commissioner\nMiller in the USITC Report, where she states that: \"I thus find that increased imports are a substantial\ncause of serious injury in that they are a cause which is important and not less than any other\ncause …\".\n2585 2586\n7.1057 Brazil believes that the interplay of various factors on the performance of the domestic\nindustry in the importing country should be analysed. 2587 Similarly, the European Communities\nsubmits that assessing the cumulated effects of alternative factors is necessary in order to determine if\na causal link exists. 2588 Japan states that separating and distinguishing causes should include\nconsideration of the interplay of factors in the sense that injury caused by the collective interaction of\nother factors on the one hand, and injury caused by increased imports on the other need to be\ndistinguished.\n2589 It would be highly artificial to solely examine each factor separately if it was found\nthat the interplay of various factors affected the industry. It may be that the combined effects of\nseveral factors is greater than any factor considered separately. For example, a fall in market demand\nat the same time that mini-mills added more capacity would produce a much more profound effect on\nsales and profits of the integrated sector than either single factor considered separately.2590\n7.1058 China argues, secondly, the factor-by-factor examination is limited to a comparison of the\ncausal importance of each of the factors. It is not a distinction of the mutually reinforcing effects of\nother relevant factors causing the injury from the imports factor. 2591 China submits that, therefore, by\nfailing to distinguish the injury caused by the collective interaction of other factors on the one hand,\nfrom the injurious effects of increased imports on the other, the USITC did not have a proper basis for\nthe determination of existence of a \"genuine and substantial causal link\" between imports and injury\n\n2581 China's second written submission, paras. 184 and 185; China's reply to Panel question No. 32 at\nthe second substantive meeting.\n2582 China's second written submission, para. 186.\n2583 United States' first written submission, para. 423.\n2584 Norway's second written submission, para. 116.\n2585 USITC Report, Vol. I, p. 308. (Exhibit CC-6)\n2586 Norway's second written submission, para. 117.\n2587 Brazil's written reply to Panel question No. 32 at the second substantive meeting.\n2588 European Communities' written reply to Panel question No. 32 at the second substantive meeting.\n2589 Japan's written reply to Panel question No. 32 at the second substantive meeting.\n2590 Korea's written reply to Panel question No. 32 at the second substantive meeting.\n2591 China's second written submission, para. 187.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsuffered by the domestic industry, and could not have come to the conclusion that imports contributed\n\"substantially\"2592 to the serious injury. 2593 China argues that, accordingly, this approach does not\nensure that the serious injury caused by other factors than increased imports that are causing injury to\nthe domestic industry at the same time – simultaneously – is not attributed to imports, as required by\nArticle 4.2(b) of the Agreement on Safeguards.2594\n7.1059 In response, the United States argues that a competent authority is not required to assess\nwhether imports are a more important cause of serious injury than all other possible factors before\nimposing a safeguards remedy. The Agreement on Safeguards simply does not contain a requirement\nthat a competent authority find that the injurious effects of imports are greater than the cumulated\neffects of all other injurious factors. In fact, the Agreement contains no language requiring a\ncompetent authority to weigh the importance of the injurious effects of increased imports against any\nfactor, either individually or collectively. Instead, as long as there is a \"genuine and substantial\"\ncausal relationship between increased imports and a significant overall impairment in the condition of\nthe industry, and as long as the competent authority does not attribute the effects of other factors\ncausing injury to imports, the requirements of the Agreement on Safeguards are satisfied. Indeed,\neven the Appellate Body has interpreted the Agreement as requiring a competent authority to\n\"separate and distinguish\" the injurious effects of individual factors causing injury from one another\nwhen performing its injury analysis. Even though this separation and distinction of individual injury\nfactors may be \"difficult,\" the Appellate Body has directed that it be done.\n2595\n7.1060 The United States also contends that, in its steel determination, the USITC has taken great\npains to identify the nature and scope of the injury caused by both imports and other individual\nfactors, to assess the extent of injury, if any, that each of these individual factors has caused to the\nindustry, and to ensure that it does not attribute the effects of non-import factors to imports in its\ncausation analysis. Indeed, even Japan appears to concede that the United States did actually \"isolate\"\nthe injurious effects of each of the factors by evaluating the importance of each factor in relation to\nincreased imports. The USITC's efforts in this re gard are in full compliance with the principles\noutlined by the Appellate Body in US -Wheat Gluten and other cases, i.e., that competent authorities\n\"separate\" and \"distinguish\" the effects of increased imports from those of all other individual injury\nfactors in safeguards investigations.\n2596\n7.1061 In response, the United States submits that a \"reasoned and adequate\" explanation of the\ninjurious effects of imports and non-import factors will properly take into account the manner in\nwhich the interplay of various factors (both import and non-import) have caused injury to an industry.\nThe United States also believes that the USITC's analysis of the injurious effects of imports and non-\nimport factors for all steel products covered by remedies appropriately identified the nature and extent\nof the injury attributable to all non-import factors, and therefore adequately assured that injury caused\nby other factors was not attributed to the imports.\n2597\n(vi) Treatment of imports from free-trade areas\n7.1062 The European Communities, Japan, China, Norway, New Zealand and Brazil argue that in the\nUS – Wheat Gluten and US – Line Pipe disputes, the Appellate Body held that in excluding NAFTA\n\n2592 United States' first written submission, para.407.\n2593 China's second written submission, para. 188.\n2594 China's second written submission, para. 189.\n2595 United States' first written submission, para. 533.\n2596 United States' first written submission, para. 534.\n2597 United States' written reply to Panel question No. 32 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncountries from a safeguard measure, the United States must offer a \"reasoned and adequate\nexplanation that establishes explicitly that imports from non-NAFTA sources 'satisfied the conditions\nfor the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the\nAgreement on Safeguards'.\"\n2598\n7.1063 According to the European Communities, China and Norway, since excluded imports may be\ncausing injury, the existence of a genuine and s ubstantial causal link between non-excluded imports\nand serious injury can only be determined if the injury caused by excluded imports is not attributed to\nnon-excluded imports. 2599 They argue that this requires two steps. First, it must be determined\nwhether excluded imports are causing injury. If it is found that such excluded imports are causing\ninjury then any such injury must not be at tributed to non-excluded imports. The European\nCommunities argues that irrespective of when or how a decision is taken to exclude certain imports, a\ndetermination must be made showing that the conditions for the application of a safeguard measure\nare met with respect to non-excluded imports.\n2600\n7.1064 Japan, Korea, China, Norway and Brazil argue that increased imports coming from sources\nthat are eventually excluded from the safeguard measure must be treated as an \"other\" factor in the\ncausation/non-attribution analysis. Norway argues that this requires that they be excluded \"up front\",\nand not even considered for \"increased imports\". 2601 More specifically, Japan and Brazil argue that\nimports are a causal factor with respect to the issu e of serious injury because they compete with the\ndomestic like product. It would undermine the causation analysis required by the Agreement on\nSafeguards if a competent authority could render some portion of those imports meaningless simply\nby excluding certain sources from a measure. Korea believes that under Article 2.2 of the Agreement\non Safeguards, imports which are not subject to a safeguard measure, cannot be used to satisfy the\nconditions contained in Article 2.2 and elaborated in Article 4.2 of the Agreement on Safeguards.\nBrazil submits that it is not enough that the competent authority separates and distinguishes all of the\nother causal factors other than the subject and excluded imports. If the competent authority does not\nseparate and distinguish the effect of imports from excluded sources, it is potentially sanctioning a\nmeasure against subject imports for which there may not be a genuine and substantial causal link to\nserious injury.\n2602 Further, China argues that if a certain portion of imports is not subject to a\nsafeguard measure, then such imports must logically be \"other factors\"; they do not fall in any \"third\"\ncategory, or a \"black hole\" of causation.2603\n7.1065 The European Communities argues that paralleli sm requires that all the conditions for the\napplication of a safeguard measure must exist with respect to the imports to which the measure is\n\n2598 For instance, European Communities' first written submission, para. 488 et seq.; Japan's written\nreply to Panel question No. 82 at the first substantive meeting; China's second written submission paras. 191-\n193; Norway's written reply to Panel question No. 82 at the first substantive meeting; New Zealand's written\nreply to Panel question no. 82 at the first substantive meeting; Brazil's second written submission, para. 102;\nBrazil's written reply to Panel question No. 82 at the first substantive meeting.\n2599 European Communities' written reply to Panel question No. 82 at the first substantive meeting;\nChina's second written submission, paras. 195-196; Norway's written reply to Panel question No. 82 at the first\nsubstantive meeting.\n2600 European Communities' written reply to Panel question No. 82 at the first substantive meeting;\nNorway's written reply to Panel question No. 82 at the first substantive meeting.\n2601 Norway's second written submission, para. 182.\n2602 Japan's written reply to Panel question No. 82 at the first substantive meeting; Korea's written\nreply to Panel question No. 82 at the first substantive meeting; China's second written submission, paras. 197\nand 198; Brazil's second written submission, para. 103; Brazil's written reply to Panel question No. 82 at the\nfirst substantive meeting.\n2603 China's second written submission, para. 198.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\napplied. If an investigating authority does not determine whether excluded imports are causing\nserious injury (as opposed to \"contributing important ly\" to serious injury), and does not then ensure\nthat injury caused by such excluded imports is not attributed to the non-excluded imports, the\ncausation analysis is automatically flawed.2604 Similarly, New Zealand and Brazil argue that absent a\nreasoned and adequate explanation for an exclusion that establishes explicitly that the subject imports\nsatisfied the conditions for the application of a safeguard measure, a violation of the parallelism\nrequirement does result in a WTO-inconsistent causation analysis.2605 Korea argues that if parallelism\nis violated, the measure is not limited to the extent necessary to remedy the serious injury caused by\nthe increase in imports subject to the measure. For the same reason, the causation analysis in such a\ncase is inconsistent with the requirement set out in the Agreement on Safeguards because serious\ninjury caused by sources excluded from the measure was not treated as an \"other factor\" and attributed\nto imports covered by the measure.\n2606 In contrast, Japan argues that a violation of the parallelism\nrequirement does not automatically result in a WTO-inconsistent causation analysis. The Appellate\nBody has stated that parallelism requires that \"the imports included in the determination made under\nArticles 2.1 and 4.2 should correspond to the imports included in the application of the measure,\nunder Article 2.2\". Through a reasoned and adequate explanation of an exclusion that establishes\nexplicitly that the subject imports satisfied the conditions for the application of a safeguard measure,\nthe competent authority can effectively cure the parallelism violation.\n2607\n7.1066 In response, the United States argues by way of general response that although the Appellate\nBody has stated that the United States must perform a parallel \"causation\" analysis with respect to the\ninjury caused by non-NAFTA imports when it excludes Canada and Mexico from a safeguards\nremedy, it has not stated that the United States must perform a separate non-attribution analysis for\nthese imports, either in its initial causation analysis covering all imports, or in the causation analysis\nperformed as a part of the required \"parallelism\" analysis discussed in the US – Wheat Gluten and\nUS – Line Pipe cases.2608\n7.1067 The United States argues, as an initial point, that there is nothing in the language of the\nAgreement on Safeguards or the findings of the Appellate Body that indicates that the USITC must\nconsider Canada and Mexican imports to be an other factor causing injury when performing its initial\nassessment of whether imports have caused serious injury to the industry. At this stage of the\nUSITC's analysis – that is, before the USITC considers whether Mexico and Canada should be\nexcluded from the remedy – the USITC is required by the United States statute and the Agreement on\nSafeguards to assess whether imports from all sources have been a substantial cause of serious injury\nto the domestic industry. In this regard, the United States notes that the United States statute and the\nAgreement on Safeguards both require the USITC to perform its general causation analysis by\nincluding \"imports\" – that is, all imports of the product concerned, not merely those eventually\nincluded in the measure – in its analysis. Moreover, according to the United States, the Appellate\nBody has not indicated in its prior findings that there is any reason for a competent authority to\nexclude any category of imports from its initial injury analysis. Accordingly, under the language of\nthe statute and the Agreement, there is simply no basis for the USITC to treat these products in its\ninitial injury analysis as though they were something other than imports.\n2609\n\n2604 European Communities' written reply to Panel question No. 83 at the first substantive meeting.\n2605 New Zealand's written reply to Panel question No. 83 at the first substantive meeting; Brazil's\nwritten reply to Panel question No. 83 at the first substantive meeting.\n2606 Korea's written reply to Panel question No. 83 at the first substantive meeting.\n2607 Japan's written reply to Panel question No. 83 at the first substantive meeting.\n2608 United States' first written submission, para. 452.\n2609 United States' first written submission, para. 453.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1068 The United States points out that the second sentence of Article 4.2(b) of the Agreement –\nwhich is the provision of the Agreement that requires a competent authority not to attribute to imports\nthe effects of other factors – specifically states that, \"when factors other than increased imports are\ncausing injury to the domestic industry at the same time, such injury shall not be attributed to\nincreased imports\".\n2610 Accordingly, the Agreement on Safeguards indicates that a non-attribution\nanalysis is only required for factors \"other than imports\" that may be causing injury to the domestic\nindustry, even when certain imports are excluded from the remedy.2611\n7.1069 The United States argues that, similarly, there is no reason that the USITC should be required\nto treat these imports as a \"non-import\" cause of injury in the context of its \"parallelism\" causation\nanalysis. The United States asserts that the Appellate Body in US – Wheat Gluten has found that the\nAgreement on Safeguards requires the United States to perform a second causation analysis that\nexcludes Canadian and Mexican imports from its assessment of the causal link between imports and\nthe condition of the industry, when the United States finds that Canadian and Mexican imports should\nbe excluded from the safeguards remedy under the NAFTA exclusion. However, the requirement that\nthe United States exclude these imports from its \"parallelism analysis\" in effect requires the United\nStates to treat these imports as an \"other\" cause of injury and to distinguish the price and volume\neffects of NAFTA imports from non-NAFTA imports.\n2612\n7.1070 In counter-response, Norway submits2613 that when describing the legal rule applicable under\nthe Agreement on Safeguards, the United States is agreeing that it has made a mistake, and that it is\nrequired after all to do a non-attribution analysis treating these imports as an \"other\" factor causing\ninjury. In the words of the United States:\n\"[T]he Appellate Body has found that the Safeguards Agreement requires the United\nStates to perform a second causation analysis that excludes Canadian and Mexican\nimports from its assessment of the causal link between imports and the condition of\nthe industry, when the United States finds that Canadian and Mexican imports should\nbe excluded from the safeguards remedy under the NAFTA exclusion.\n2614 However,\nthe requirement that the United States exclude these imports from its 'parallelism\nanalysis' in effect requires the United Stat es to treat these imports as an 'other' cause\nof injury and to distinguish the price and volume effects of NAFTA imports from\nnon-NAFTA imports.\"2615\n7.1071 China submits that, as the excluded NAFTA imports are to be seen as \"other factor\" within\nthe meaning of Article 4.2(b) of the Agreement on Safeguards, the United States is wrong in stating\nthat nothing in the Agreement on Safeguards, as construed by the Appellate Body reports requires the\nUnited States to conduct a non-attrib ution analysis of the NAFTA imports. 2616 The European\nCommunities argues2617 that it is undeniable that the Appellate Body has not said, in so many words,\nthat a competent authority must conduct a non-attribution analysis for excluded imports. However, the\nAppellate Body has said that in order to satisfy the requirement of parallelism:\n\n2610 Agreement of Safeguards, Article 4.2(b).\n2611 United States' second written submission, para. 150.\n2612 United States' first written submission, para. 454.\n2613 Norway's second written submission, para. 126.\n2614 Appellate Body Reports US – Wheat Gluten, para. 96; US – Line Pipe, para. 179 et seq.\n2615 United States' first written submission, para. 454. (emphasis added)\n2616 China's second written submission, paras. 198-199.\n2617 European Communities' second written submission, para. 362.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"[I]t would be necessary for the United States to demonstrate, consistent with our\nruling in US – Wheat Gluten , that the USITC provided a reasoned and adequate\nexplanation that establishes explicitly that imports from non-NAFTA sources\n'satisfied the conditions for the application of a safeguard measure, as set out in\nArticle 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.' \"2618\n7.1072 According to the European Communities, evidently, in order to ensure that non-FTA imports\nsatisfy the conditions for the application of a safeguard measure, a Member must show that all the\nelements of a determination justifying the imposition of a safeguard measure are present for the non-\nexcluded imports.2619 The European Communities submits that this is confirmed when Article 4.2(b)\nof the Agreement on Safeguards is read in light of the Appellate Body's findings on parallelism.\nArticle 4.2(b) provides that \"when factors other than increased imports are causing injury to the\ndomestic industry at the same time, such injury shall not be attributed to increased imports\".\n\"Increased imports\" in this phrase must be read as non-excluded imports, because a competent\nauthority must find a genuine and substantial relationship of cause and effect between such non-\nexcluded imports and serious injury. Consequently, \"factors other than increased imports\" must be\nunderstood as all non-import factors (e.g. increased capacity, declining demand etc.) and, if a Member\ndecides to exclude certain imports, also those excluded imports.\n2620\n7.1073 The complainants submit that the USITC did not conduct any specific evaluation of non-\nNAFTA imports. Rather, it evaluated NAFTA impor ts, concluding that the exclusion of NAFTA\nimports would not change its findings of injury and causation as to total imports. 2621 However,\naccording to China and Brazil, this finding does not meet the obligation to explain how the facts\nsupport a finding that non-NAFTA imports alone caused serious injury or threat of serious injury. As\nsuch, it does not reflect a proper non-attribution analysis of NAFTA imports. The USITC's analysis\nof non-NAFTA imports, therefore, did not meet th e Appellate Body's standard as set forth in US –\nLine Pipe, which requires a \"reasoned and adequate explanation that establishes explicitly\" that such\nimports alone caused serious injury to the domestic industry.2622\n7.1074 The United States submits that notwithstanding the lack of an explicit requirement in the\nAgreement on Safeguards , however, the USITC did, in fact, properly isolate the effects of NAFTA\nfrom non-NAFTA imports in its parallelism analysis. 2623 The United States submits that the USITC\nappropriately discussed the nature and extent of the injurious effects of non-NAFTA imports and\ndistinguished their effects from those of NAFTA imports. In fact, the USITC found that imports from\nCanada and/or Mexico did not constitute a substantial share of imports and did not contribute\nimportantly to injury for a number of the products covered by the President's remedies. For these\n\n2618 Appellate Body Report, US – Line Pipe, para. 188. (emphasis in the original)\n2619 European Communities' second written submission, para. 363.\n2620 European Communities' second written submission, para. 364.\n2621 See, for example, European Communities' written reply to Panel question No. 82 at the first\nsubstantive meeting; Norway's written reply to Panel question No. 82 at the first substantive meeting; Brazil's\nsecond written submission, para. 105. As noted in Brazil's first written submission, the USITC actually found\nin several cases that imports from NAFTA countries contributed importantly to the serious injuries of the\ndomestic industry! For example, in the USTC's CCFRS analysis, the USITC found that imports from NAFTA\naccounted for a substantial share of total imports and Mexican imports contributed importantly to the serious\ninjury caused by imports. USITC Report Vol. I at 66. Similarly, in its hot-rolled bar and cold-finished bar\nanalysis, the USITC found that Canadian imports represented a substantial share of total imports and contributed\nimportantly to serious injury caused by imports. Ibid., at 100, 107.\n2622 China's second written submission, paras. 204 and 205; Brazil's second written submission,\npara. 105.\n2623 United States' second written submission, para. 151.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproducts, the United States submits that it is clear that the USITC concluded that Canadian and\nMexican imports of these products were not a significant cause of injury to the domestic industry.\nMoreover, for the products for which the USITC did find that imports from Mexico and Canada\nwould contribute importantly to injury, the USITC nonetheless performed an analysis that isolated the\neffects of non-NAFTA imports from those of NAFTA imports and concluded that non-NAFTA\nimports were still a substantial cause of serious injury to the industry in question. Having done so, the\nUSITC clearly performed an analysis designed to id entify the nature and extent of the injury caused\nby both NAFTA and non-NAFTA imports and to distinguish the effects of both groups of imports\nfrom one another.\n2624\n7.1075 In counter-response, the European Communities and China note that surprisingly, on the one\nhand, the United States says that there is no obligation that the NAFTA imports be subject to a non-\nattribution analysis and, on the other hand, it argues that it conducted the non-attribution analysis as\nrequired under Article 4.2(b) when it segregated the Canadian and Mexican imports from the other\nimports whenever they were excluded from the safeguard measure, and separated and distinguished\nthe effects of the NAFTA imports from the non-NAFTA imports.\n2625\n7.1076 The European Communities notes that the USITC conducted a three-step analysis of excluded\nNAFTA imports pursuant to the United States statute. It determined, first, whether imports from\nNAFTA countries, considered individually, accounted for a substantial share of total imports and\nsecond, whether imports which accounted for a substantial share, contribute importantly to the serious\ninjury or threat thereof (i.e. they are an important cause, but not necessarily the most important\ncause).\n2626 Upon request from the USTR, the USITC Reported additional information concerning non-\nNAFTA imports in the Second Supplementary Report. In the Second Supplementary Report, the\nUSITC \"analysed\" whether excluding imports from Canada and Mexico would lead to the conclusion\nthat non-excluded imports are still a \"substantial cause of serious injury to the domestic industry\".\nThis was only done for those products for which the first and second steps required under the NAFTA\nImplementation Act were satisfied. No additional information or analysis was provided for Israel and\nJordan.\n2627\n7.1077 The European Communities argues that the required analysis under Article 4.2(b) is first to\nestablish whether the other factor (in this case the excluded imports) is a cause of injury to the\ndomestic industry and second to ensure that the injurious effects of such other factors are not\nattributed to non-excluded increased imports. According to the European Communities, none of the\nsteps of the USITC's analysis of NAFTA imports follows the analysis required under Article 4.2(b).\nWhether Canadian or Mexican imports were among the top five suppliers, and if so, whether they\ncontributed \"importantly\" to serious injury has no relevance for the simple question of whether such\nimports actually caused injury. The USITC's analysis of NAFTA imports does not provide for a\nreasoned and adequate explanation of how the facts support a finding that there was a genuine and\nsubstantial causal relationship between non-excluded imports and serious injury. Indeed, the simple\nconclusion that \"we [the USITC] would have reached the same result had we excluded imports from\nCanada and Mexico from our analysis\", coupled with an analysis of excluded imports, was judged by\nthe Appellate Body in US – Line Pipe not to be a \"reasoned and adequate explanation of how the\nfacts support the determination\" that non-excluded imports satisfy the conditions for application of a\n\n2624 United States' first written submission, para. 455.\n2625 European Communities' second written submission, para. 361; China's second written submission,\npara. 200.\n2626 These requirements of the NAFTA Implementation Act are explained in more detail at USITC\nReport, Vol. I. pp. 34 and 35.\n2627 European Communities' second written submission, para. 366.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsafeguard measure.2628 The European Communities argues that the United States has, in conducting\nsuch an analysis, failed to establish whether imports from Canada, Mexico, Israel or Jordan are\ncausing injury, has not separated and distinguished the injurious effects of such imports, and has not\nensured that the injurious effects of excluded imports, together with the effects of other non-import\nalternative causes of injury have not been attributed to non-excluded imports.\n2629\n(vii) Duty to provide a reasoned and adequate explanation in the context of the causation analysis\n7.1078 China argues that it must be explicitly established, through a reasoned and adequate\nexplanation, that injury caused by factors other than increased imports is not attributed to increased\nimports. This explanation must be clear and unambiguous.2630 China claims that the USITC failed to\nprovide a clear and unambiguous explanation that injury caused to the domestic industry by the other\nfactors was not attributed to imports. China submits that, indeed, a conclusion that increased imports\nof a particular product are an important cause and a cause no less important than any other cause of\nserious injury to the domestic industry in the USITC Report was only a relative comparison of the\neffect of increased imports as compared to the effects of other factors. China further argues that an\nextensive interpretation of the Commissioners' findings in the United States' submissions cannot\nreplace the lack of an explicit, reasoned and adequate explanation of \"non-attribution\" and an\nappropriate assessment of the injurious effects of other factors in the USITC Report in relation to\nCCFRS\n2631, tin mill products 2632, hot-rolled bar 2633, cold-finished bar 2634, rebar 2635, welded pipe 2636,\nFFTJ2637, stainless steel bar2638, stainless steel wire2639 and stainless steel rod.2640\n7.1079 The European Communities also relies upon Appellate Body jurisprudence to argue that the\nlast sentence of Article 4.2(b) obliges a competent authority, in separating and distinguishing the\ninjurious effects of the increased imports from the injurious effects of other factors, to identify the\nnature and extent of the injurious effects of the known factors other than increased imports, as well as\nto explain satisfactorily the nature and extent of the injurious effects of those other factors as\ndistinguished from the injurious effects of the increased imports. The European Communities argues\nthat this explanation must be clear and unambiguous. It must not merely imply or suggest an\nexplanation. It must be a straightforward explanation in express terms. In the European\nCommunities' view, only after making this analys is can the competent authorities determine the\nexistence of a genuine and substantial causal link.\n2641\n7.1080 In response, the United States argues that, for each of steel product covered by a remedy, the\nUSITC established explicitly, in a well-reasoned and detailed manner, that it did not attribute injury\ncaused by non-import factors to increased imports. Consistent with the conclusions of the Appellate\nBody, the USITC appropriately identified and distinguished the effects of imports from those of other\n\n2628 Appellate Body Report, US – Line Pipe, para. 195.\n2629 European Communities' second written submission, para. 367.\n2630 China's first written submission, para. 352.\n2631 China's second written submission, paras. 225 and 226.\n2632 China's second written submission, paras. 285 and 287.\n2633 China's second written submission, para. 231.\n2634 China's second written submission, para. 236.\n2635 China's second written submission, para. 244.\n2636 China's second written submission, paras. 249 and 251.\n2637 China's second written submission, paras. 254 and 260.\n2638 China's second written submission, paras. 262 and 264.\n2639 China's second written submission, para. 292.\n2640 China's second written submission, paras. 266, 268 and 270.\n2641 European Communities' first written submission, para. 444.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfactors when performing its causation analysis. By doing so, it ensured that it did not attribute the\ninjurious effects of those factors to imports when finding that there was a \"genuine and substantial\"\ncausal link between increased imports and the se rious injury being suffered by the industry.\nMoreover, its conclusions with respect to the nature and extent of injury attributable to these causes\nare supported by ample record evidence.\n2642\n(b) Measure-specific argumentation\n(i) CCFRS\nFactors considered by the USITC\nDeclining domestic demand\n7.1081 New Zealand and other complainants argue that declining demand, not imports, was a\nsignificant cause of the alleged injury to the domestic industry.2643\n7.1082 China notes2644 that, in dealing with the declining demand in the United States market, the\nUSITC found that:\n\"We thus find that the domestic industry was already injured by increased imports\nwhen demand began to decline, and declining demand, while not the cause of the\ninjury found here, contributed to the industry's continued deterioration at the end of\nthe period.\"2645\n7.1083 Brazil notes that the USITC reached the conclusion that demand did not matter.2646 Similarly,\nJapan and New Zealand argue that the USITC simply dismissed the decline in demand as a limited,\nend-of-the-period phenomenon.\n2647 New Zealand questions why such data should be discounted.New\nZealand points out that the USITC also rejected the relevance of a decline in demand because\n\"[i]njury was shown well before the latter portion of 2000, when demand began to decrease, and\ninjury was first shown in 1998, when demand was increasing (and when imports surged)\". According\nto New Zealand, while this may support an argument that decreased demand was not the sole cause of\ninjury for the entire period and in respect of all CCFRS, it does not establish that it was never a cause\nat all. Further, New Zealand argues that serious injury did not in fact occur in 1998.\n2648\n7.1084 New Zealand and China argue that, while the USITC dismissed decline in demand on the\nbasis that the industry was injured before the demand started to decline, it acknowledged that the\ndecline in demand contributed to the injury. Nevertheless, New Zealand argues that a review of the\navailable data shows the USITC analysis of decreased demand to be simplistic, cursory and\nflawed.2649\n7.1085 China argues that the USITC Report did not establish that decline in demand was not\nattributed to injury caused by increase in imports. According to China, it is limited only to description\n\n2642 United States' first written submission, para. 426.\n2643 New Zealand's first written submission, para. 4.144.\n2644 China's second written submission, para. 207.\n2645 USITC Report, p. 63.\n2646 Brazil's first written submission, para. 182.\n2647 Japan's first written submission, para. 256; New Zealand's first written submission, para. 4.142.\n2648 New Zealand's first written submission, para. 4.142.\n2649 New Zealand's first written submission, para. 4.145.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof demand developments, noting that the demand was higher in 1999 than in 1996, dropping in late\n2000.2650\n7.1086 Japan and Brazil argue that the USITC failed to separate and distinguish the injury to the\ndomestic industry attributed to declining demand from the entire injury experienced by the domestic\nindustry.2651 Japan argues that the evidence is both compelling and measurable and shows that\ndeclining domestic demand is a more important cause of the domestic industry's injury than imports.\nIn Japan's view, had the USITC separated and distinguished these alternative causes, it could not have\nconcluded that increased imports caused any serious injury.2652\n7.1087 Brazil argues that the evidence shows that operating margins correlated strongly with\ndemand – falling when demand falls – and did not correlate at all with import levels.2653 According to\nJapan and Brazil, even as imports fell, and even as the domestic firms captured more and more of the\nmarket, industry performance deteriorated. 2654 Brazil submits that the most logical conclusion is that\ntotal demand decreased too rapidly. 2655 Japan and Brazil argue that the same basic pattern found in\nthe aggregated data applies to all the individual finished CCFRS products. 2656 Similarly, China and\nNew Zealand argue that the United States ignored the correlation between demand declines and\ndeclining operating performance and it made no attempt to distinguish the effects of this factor from\nthe injury caused by the imports.2657\n7.1088 In addition, in the view of Japan and Brazil, the USITC ignored the fact that when demand for\nCCFRS products declined, imports declined even more sharply, suggesting that at least some\npurchasers of domestic steel were buying less steel, not switching to imports, thus impacting\nnegatively on the industry's financial performance.\n2658 According to Japan and Brazil, had the USITC\nproperly distinguished this factor, it would have realized this fundamental point. They submit that,\ninstead, the USITC misconstrued the relationships among demand shifts, changes in imports, and\nchanges in domestic industry operating performance, claiming demand was but an end of period event\nthat had no bearing on the issue of injury.\n2659\n7.1089 According to Korea, the USITC determined that demand declined significantly at the end of\nthe period, and that the declining demand \"contributed to the industry's continued deterioration at the\nend of the period\". 2660 Korea argues that, at the same time, very significant new (low-cost) capacity\nhad recently come on-stream. Korea argues that the industry, faced with greater United States\ncapacity, cut prices to maintain volume s in response to a shrinking market. 2661 Korea further argues\nthat imports also declined significantly during this period so that domestic industry market share\nincreased from 90.2% to 93.1% of the market over the 18-month period.\n2662 Korea submits that since\n\n2650 China's second written submission, para. 209.\n2651 Japan's first written submission, para. 256; Brazil's first written submission, para. 180.\n2652 Japan's first written submission, para. 255.\n2653 Brazil's first written submission, para. 180.\n2654 Japan's first written submission, para. 258; Brazil's first written submission, para. 182.\n2655 Brazil's first written submission, para. 182.\n2656 Japan's first written submission, para. 259; Brazil's first written submission, para. 183.\n2657 China's second written submission, para. 209; New Zealand's first written submission, para. 4.144.\n2658 Japan's first written submission, para. 256; Brazil's first written submission, para. 180.\n2659 Japan's first written submission, para. 257; Brazil's first written submission, para. 180.\n2660 Korea's first written submission, para. 134.\n2661 Korea's first written submission, para. 132.\n2662 Korea's first written submission, para. 133.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndemand declines clearly affected the industry's performance, the USITC should have identified and\nisolated those effects.2663\n7.1090 China and New Zealand also argue that the USITC wrongly dismissed this factor entirely as a\ncause of injury and as a consequence failed to consider the nature and extent of that injury, as\ndistinguished from the injury attributed to imports. It did so by means of a short generalised\ndiscussion which focused narrowly and exclusively on one part of the period of investigation, and\nfailed to analyse the available data fully and properly. 2664\n7.1091 Brazil asks what makes the USITC's treatment of declining demand, found invalid by the\nAppellate Body in US – Line Pipe, any different from the USITC's \"analysis\" of declining demand in\nthis case? Brazil submits that the USITC in this case begins with an assumption that serious injury\nwas already being caused by imports, noting that \"the domestic industry showed signs of injury . . .\nwell before the latter portion of 2000, when demand began to drop off\" and that \"the period of\nincreased demand was also when imports surged\".2665 It then concludes:\n\"We thus find that the domestic industry was already injured by increased imports\nwhen demand began to decline, and declining demand, while not a cause of injury\nfound here, contributed to the industry's continued deterioration at the end of the\nperiod. Indeed, the losses experienced by the industry in 1999 and 2000 as a result of\nimport left the industry in a much weakened position to face the slowdown in\ndemand.\"\n7.1092 Brazil argues that the only distinction that it sees is that the USITC was at least prepared to\nadmit that declining demand in the US – Line Pipe dispute was a causal factor, just that it was not as\nimportant as increased imports. 2666 Brazil submits that in this case, the USITC takes the more novel\napproach of injecting an assumption about increased imports into the analysis before it even considers\ndeclining demand, so as to render declining demand a non-issue. Yet, implicit in the USITC's\ndiscussion is the fact that declining demand did play a role in injury, whether it was only an\naggravating role, or a contributing role. The problem is there is no way to really tell based on the\nUSITC's discussion.\n2667\n7.1093 In response, the United States argues that the complainants' contention that the USITC\nimproperly discounted demand declines as a significant source of injury to the industry is factually\nwrong. According to the United States, the record clearly showed that the industry's operating income\nlevels did not fluctuate with demand. Although the industry's operating income margins did increase\nbetween 1996 and 1997 at the same time as a growth in demand, its operating margins declined in\neach of 1998, 1999 and 2000, even though demand grew in each of these years. The United States\nsubmits that the only distinction, in fact, between 1997 and the three subsequent years is a simple one:\nthere was a substantially higher volume of imports in the markets in these years than in 1997 levels\nand these imports were priced at substantially lower levels than in 1997.\n2668\n\n2663 Korea's first written submission, para. 134.\n2664 China's first written submission, para. 359; New Zealand's first written submission, para. 4.143.\n2665 USITC Report, Vol. I. at 63.\n2666 Appellate Body Report, US – Line Pipe, para. 207 (citing Circular Welded Carbon Quality Line\nPipe, Inv. No. TA-201-70, USITC Pub. 3261 (December 1999) at I-28).\n2667 Brazil's second written submission, para. 79.\n2668 United States' first written submission, para. 487."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.301790"}}},{"rowIdx":3487,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ07_Report_Of_Panel_06.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ07_Report_Of_Panel_06.pdf"},"doc_sequence":{"kind":"number","value":7,"string":"7"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"7.1097 According to Japan, the USITC analysis is also too static. The United States argues that demand in 2000 was higher than in 1996. 2674 This statement may be true, but it is largely irrelevant. In most markets, demand increases over time. The issue for understanding the competitive dynamics is not a mechanical comparison of 2000 to 1996, but an analysis of the trends from year to year within"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":6,"string":"6"},"case_title":{"kind":"string","value":"2H 2000 38.1 -6.9 1H 2001 36.7 -1.4"},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":68,"string":"68"},"clean_text":{"kind":"string","value":"7.1094 In counter-response, Japan argues 2669 that the United States analysis is based on incorrect\ndata. Japan submits that United States and the USITC rely on figures that merely add together\nshipments of each type of CCFRS, ignoring the fact that these figures reflect double and triple\ncounting of tons of steel as they go through the various stages of production – an ironic ploy, given\nthat the mills' vertical integration was the reason for conjoining these products into a single like\nproduct. A more proper measure of apparent domestic consumption – imports of each distinct\nfinished CCFRS like product plus domestic commercial shipments of those products – shows the clear\ndrop in demand as early as 1999:\nTable 4: Change In Apparent Domestic Consumption: 1996-2000\n2670\nYear Apparent Domestic Consumption Change\n1996 75.8 –\n1997 78.1 +2.3\n1998 84.1 +6.0\n1999 82.4 -1.7\n2000 83.1 +0.7\n7.1095 According to Japan, after strong growth in 1997 and 1998, demand fell noticeably in 1999\nand remained low in 2000 – the very period when the domestic industry operating profits began to\nfall.2671\n7.1096 Japan argues2672 that, in fact, during 2000, there were sharp changes in demand, as illustrated\nbelow:\nTable 5: Change In Apparent Domestic Consumption: Interim Periods 2000-20012673\nYear Apparent Domestic Consumption Change\n1H 2000 45.0\n2H 2000 38.1 -6.9\n1H 2001 36.7 -1.4\n7.1097 According to Japan, the USITC analysis is also too static. The United States argues that\ndemand in 2000 was higher than in 1996. 2674 This statement may be true, but it is largely irrelevant.\nIn most markets, demand increases over time. The issue for understanding the competitive dynamics\nis not a mechanical comparison of 2000 to 1996, but an analysis of the trends from year to year within\n\n2669 Japan's second written submission, para. 128.\n2670 Sum of total domestic commercial shipments reported in USITC Report Vol. II at Tables FLAT-12,\n13, 14, 15 and 17 plus, total imports reported in Tables FLAT- 3, 4, 5, 6, 7 and 9 (Exhibit CC-6.) The addition\nof the five flat-rolled products is provided in Japan First Submission ANNEX B. Tin mill and GOES are\nexcluded from this analysis. Note the figures here differ from those provided in Japan's first written submission\n(para. 257) because there exports were not excluded. The United States industry did not export commercially\nsignificant quantities, therefore the difference is immaterial.\n2671 According to Japan, the USITC makes another mistake: to consider only aggregate CCFRS demand\nis to ignore a key difference in trends between finished and semi-finished CCFRS. Increasing imports of semi-\nfinished steel at the end of the period mask the decline in demand for finished steel.\n2672 Japan's second written submission, para. 129.\n2673 USITC Report Vol. II at Tables FLAT-12, 13, 14, 15 and 17 plus, total imports reported in Tables\nFLAT- 3, 4, 5, 6, 7 and 9 (Exhibit CC-6), See also, Japan's first written submission, Annex B.\n2674 United States' first written submission, para. 485.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe overall period of investigation, and, if available, the trends within a year. Japan submits that it is\nludicrous for the United States to try to ignore the collapse in demand in the second half of 2000, and\nthe role that collapse had on prices and the condition of the domestic industry.\n2675\n7.1098 According to Japan, the United States tries to dismiss the correlation between declining\ndemand and declining operating performance. 2676 If one considers the trends in apparent domestic\nconsumption and imports from 1999 to 2001, the relative importance of the two factors is obvious.\nFrom 1999 to 2001, as imports retreated from the market and as the domestic industry captured more\nand more of the market, operating performance declined. Thus, the decline in domestic industry\noperating performance correlates with declining demand, not with increased levels of imports. In any\nevent, no effort at all was made to separate and distinguish the effects of demand from imports.\n2677\n7.1099 In response, the United States notes that, in its analysis, the USITC explicitly recognized that\ndemand for CCFRS had declined substantially during the last three quarters of the period of\ninvestigation. It specifically noted that this demand decline occurred only very late in the period,\nbeginning with the fourth quarter of 2000 and lasting through the first two quarters of 2001. It\ncorrectly noted, however, that demand had increased consistently during each of the five years before\ninterim 2001, and that the industry had been experiencing serious injury because of imports since at\nleast 1998, even though demand was still rising in th at year. Moreover, the USITC found that, as a\nresult of import competition, the industry's condition continued to deteriorate in 1999 and 2000, even\nthough demand continued to rise during these years. As a result, the USITC properly concluded that\nthe demand declines in interim 2001 had only exacerbated the industry's level of serious injury during\nthat period, and had not been the cause of injury during prior periods. It is clear then that the USITC\nproperly discounted these declines in demand as a significant cause of injury during the period.\n2678\n7.1100 In counter-response, New Zealand questions ho w can a factor \"exacerbate\" injury – or\n\"contribute to\" injury, to use the USITC's language, but not be a cause?2679 New Zealand also submits\nthat the data compiled by the USITC itself shows a very strong coincidence, in 2000-2001, between\nthe decrease in demand of 14.9%, and the deterioration in operating margins from –1.4% to –11.5%.\nDuring the same period, absolute import volumes decreased by 40% (over 30% down on 1996) and\nimport market share decreased by 2.9%. 2680 According to New Zealand, the United States does not\nrebut these figures because it cannot.2681 New Zealand submits further that there was no serious injury\nin 1998 contrary to the USITC's and United States oft repeated claims – here as elsewhere the USITC\nignored its own figures, which showed the domestic industry producing certain flat steel returning a\nhealthy profit margin of 4% in 1998.2682\nDomestic capacity increases\n7.1101 New Zealand notes that the USITC acknowledged that increase in domestic capacity explains\n\"in significant part\" the decline in the rate of domestic capacity utilization over the period of\ninvestigation2683, which it had earlier found to be an indicator of serious injury, and identified a\n\n2675 Japan's second written submission, para. 130.\n2676 United States' second written submission, para. 487.\n2677 Japan's second written submission, para. 131.\n2678 United States' first written submission, para. 485.\n2679 New Zealand's second written submission, para. 3.118.\n2680 New Zealand's second written submission, para. 3.119.\n2681 New Zealand's second written submission, para. 3.120.\n2682 New Zealand's second written submission, para. 3.121.\n2683 USITC Report Vol. I, p. 63.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nreduction in capacity as necessary for the industry's improvement. 2684 It also noted the arguments of\nrespondents that the presence of new capacity, combined with the failure of the industry to retire\nolder, less efficient capacity, put tremendous pressure on the domestic industry to cut costs in order to\ngenerate sales to fill the new capacity, and agreed that \"there is a significant incentive to maximize the\nuse of steelmaking assets\". \"Increased capacity\" the USITC concluded, \"while likely playing a role in\nthe price declines that helped cause injury, was not an important cause of serious injury to the\ndomestic industry equal to or greater than the injury caused by increased imports\".\n2685 2686\n7.1102 The European Communities, Japan, Korea, China and Brazil argue that the USITC\nacknowledged that domestic capacity increases caused injury. 2687 However, Japan, Korea and Brazil\nargue that the USITC made no effort to try to determine how much of the injury should be attributed\nto the capacity increases.2688 More particularly, New Zealand argues that the USITC made no serious\nattempt to assess the nature and extent of the injury which it acknowledged increased capacity\ncaused.2689\n7.1103 China reiterates that the Agreement on Safeguards as interpreted by the Appellate Body in\nUS – Line Pipe case requires the investigating authority to identify the nature and extent of the\nalternative factors.2690 China submits2691 that in order to identify the extent of an effect, it is necessary\nto evaluate its size, amount, volume. China argues that the USITC evaluated the effects qualitatively\nby comparing the \"importance\" of those factors, but refrained from providing such a \"quantitative\"\nevaluation:\n\"[B]y finding that capacity increases had some effect on domestic pricing but imports\nhad a far more substantial effect, the USITC appropriately made a qualitative finding\non the general level of injury that should be attributed to each factor.\"\n7.1104 According to China, as the USITC failed to evaluate the capacity increase in an adequate way,\nit was not able to establish that the effects of this factor were not attributed to the imports.2692\n7.1105 In China's view, the impact of capacity increase on the situation of the domestic industry was\nunder-rated. In this regard, China refers to the following chart, comparing net increases in capacity\nover demand and imports between 1996 and 2000.2693\n\n2684 Ibid., para. 358, footnote 22.\n2685 USITC Report Vol. I, p 64.\n2686 New Zealand's second written submission, paras. 3.122 and 3.123..\n2687 Japan's first written submission, para. 262; Korea's first written submission, para. 125; China's\nfirst written submission, paras. 359 and 361; Brazil's first written submission, para. 186; European\n2688 Japan's first written submission, para. 262; Korea's first written submission, para. 125; Brazil's first\nwritten submission, para. 186.\n2689 New Zealand's first written submission, para. 4.155; New Zealand's second written submission,\npara. 3.123.\n2690 China's second written submission, paras. 210 and 211.\n2691 China's second written submission, para. 212.\n2692 China's second written submission, para. 213.\n2693 Brazil's first oral statement, Annex-Figure 3, referred to in China's second written submission,\npara. 214; Brazil's first written submission, Figure 22; Japan's first written submission, para. 266.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n-2,000,000\n-1,000,000\n0\n1,000,000\n2,000,000\n3,000,000\n4,000,000\n5,000,000\n6,000,000\nTo\nns\nIncrease in Excess Capacity\nOver Demand\n5,066,262 3,859,821 3,168,027 2,041,785 2,319,790\nIncrease in Imports 962,409 -986,589 2,194,557 172,400 179,022\nSlab Plate Hot-Rolled Cold-Rolled Coated\n7.1106 On the basis of the foregoing, China argues that as to the alleged negative influence of\nimports on the pricing dynamics, given the capacity increase and dominant market share of the\ndomestic companies, it is clear that these companies would set the market prices and imports would\nreact to these prices.2694\n7.1107 Japan and Brazil argue that had the USITC engaged in a more careful analysis, it would have\nfound that domestic capacity increases prompted the domestic industry to lead prices downward. 2695\nJapan and Brazil submit that the domestic share of the total CCFRS steel market grew from 70% in\n1998 to 75% in 1999 and 2000 and then to 81.5% in 2001. This gain in domestic share resulted from\naggressive domestic pricing. In 2000 and 2001, when industry operating income declined\nsignificantly, the combination of excess domestic capacity and declining demand meant that domestic\nfirms were desperately competing for cash flow, all the time with more and more capacity to fill. 2696\nNew Zealand argues that imports lost substantial market share after 1998 and particularly sharply in\nthe period most recently preceding the USITC's investigation. During the same period, domestic\nprices decreased more sharply than import prices and, in some cases, undercut import prices by a\nsubstantial margin.2697 Japan argues that, ironically, the less imported steel in the market, the more\ndomestic prices fell. The only way to explain this phenomenon is that competition among domestic\nmills fuelled by growing excess capacity drove down the prices. In Japan's view, it is difficult to see\nhow declining import volumes, rather than increasing capacity and domestic shipments, could\nsomehow cause declines in prices and operating performance.\n2698\n7.1108 Korea argues that United States' producers captured virtually all of the increase in\nconsumption, maintained a market share of over 90%, and still suffered from significant overcapacity.\nKorea further argues that not coincidentally, domestic prices fell and the industry experienced losses.\nIn 2000, the year of the highest production during the period, the industry maintained 34 million tons\nof excess capacity as it produced 199.9 million tons of CCFRS with a capacity of 234.6 million tons.\nKorea submits that these numbers are staggering and place the 2.5 million ton increase in CCFRS\nimports over the entire period into proper perspective.\n2699\n\n2694 China's second written submission, para. 215.\n2695 Japan's first written submission, para. 263; Brazil's first written submission, para. 187.\n2696 Japan's first written submission, para. 264; Brazil's first written submission, para. 187.\n2697 New Zealand's first written submission, para. 4.152.\n2698 Japan's first written submission, para. 265.\n2699 Korea's first written submission, para. 126.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1109 In response, the United States argues that the record indicated that increased imports, not\ndomestic capacity increases, were primarily causing the price declines in the latter part of the period\nof investigation. In its analysis of this issue, the USITC discussed the nature and impact of these\ncapacity increases on domestic pricing behavior, noting that the industry had added capacity during\nthe period of investigation, and concluded that the capacity additions had outstripped increases in\ndemand during the same period. Although it found that these increases in capacity were generally\njustified because there had been consistent demand increases in the market, it also recognized that this\nincreased capacity provided the industry with \"a significant incentive to maximize the use of steel\nmaking assets,\" which would have an \"effect [on] producers' pricing behavior.\"\n2700\n7.1110 However, the United States argues, the USITC also examined the ample record data on\npricing to assess the nature and scope of the price effects of both imports and this increased capacity\nin the market. The record data on pricing – both the price comparison data and the data on average\nunit values – showed that imports consistently undersold the domestic industry (including minimill\nproducers) throughout the period of investigation 2701, that the large surge of lower-priced imports in\n1998 had caused a significant drop in prices in that year, and that imports continued to lead prices\ndown, or keep them suppressed, by consistent underselling through 1999 and 2000. Moreover, even\nthough minimills had added the large bulk of this additional capacity and this additional lower-cost\ncapacity had some effect on prices, the USITC also correctly found that imports of hot-rolled\nmerchandise had consistently undersold the merchandise sold by minimills during the period from\n1998 and 2000. Thus, the United States asserts, the USITC properly found that it was increased\nimports, not capacity increases, that were primarily causing the price declines that occurred during the\nperiod from 1998 to 2000.\n2702\n7.1111 In response, the United States argues that the complainants ignore the fact that the record\nclearly showed, as the USITC found, that imports led prices down and kept them suppressed during\nthe period from 1998 through 2000, not the domestic industry. Moreover, although the industry did\nmanage to regain some of its lost market sh are in 1999 and 2000 by ac tively following downward\nimport prices in those years, the record did not sh ow that the industry utilized its increasing capacity\nto wrest market share from imports that was held by imports at the beginning of the period. In other\nwords, by following import prices downward in 1998, 1999 and 2000, the industry was only able to\nregain some of its market share losses, but it was not able to increase its market share over the level it\nheld in 1996.2703\n7.1112 In counter-response, New Zealand argues that th e United States forgets that it is increased\nimports, not merely cheaper imports, which must cause serious injury. New Zealand submits that as\nhas been established, from 1999 onwards, imports were in sharp decline. New Zealand argues that the\nUnited States ignores data from 2001, by which time imports were down over 30% on 1996 figures,\nthere was a 15.1% increase in domestic capacity on 1996 figures, contrasting with an 8.3% decrease\nin consumption on 1996 figures.\n2704\n7.1113 Japan, New Zealand and Brazil also argue that the USITC refused to discuss the fact that the\ngrowth in excess domestic capacity dwarfed the modest increases in imports. 2705 Brazil notes that the\n\n2700 United States' first written submission, para. 491.\n2701 USITC Report, p. 63-64 and Tables FLAT-66 to FLAT-71.\n2702 United States' first written submission, para. 492-93.\n2703 United States' first written submission, para. 499.\n2704 New Zealand's second written submission, para. 3.126.\n2705 Japan's first written submission, para. 266; New Zealand's first written submission, para. 4.153;\nBrazil's first written submission, para. 189.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC acknowledged that it \"is true, as alleged by respondents, that capacity increases did exceed the\nincreases in domestic consumption\". However, according to Brazil, the USITC never related that\nexcess capacity to changes in import levels or the shrinking market, as if domestic mills cutting prices\nand trying to maintain volume in a shrinking market was beyond reasonable consideration.\n2706 Japan\nand New Zealand argue that with respect to all five CCFRS products, the excess capacity exceeded\nthe modest change in imports over the period. For four out of five products, the excess capacity\ndwarfs the modest change in imports. 2707 With so much excess capacity chasing a shrinking total\nmarket, Japan argues that it is no wonder that domestic mills were cutting prices and trying to\nmaintain volume. In Japan's view, it makes no sense to blame the modest and declining level of\nimports for this problem.\n2708\n7.1114 In response, the United States submits that the complainants' argument is premised on an\n\"apples\" to \"oranges\" comparison of factors that have differing price effect characteristics. More\nspecifically, instead of comparing the domestic industry's capacity increases during the period to the\nforeign industry's capacity increases, the compla inants simply compared the industry's capacity\nincreases to increases in import shipments. As a th eoretical matter, the distinction is critical, because\nactual shipments of merchandise, whether domestic or import, have a more direct effect on pricing\nbehavior in the market than capacity increases in that shipments reflect actual pricing and sales\ncompetition in the market place. The United States submits that, in essence, while the availability of\ncapacity might have some impact on pricing behavior in a market place, the actual price effects of\nincreased capacity are only directly and substantially transmitted to the market when that capacity is\nused to produce and ship merchandise.\n2709\n7.1115 The United States argues that, accordingly, the complainants should have compared the\ndomestic industry's capacity increases to the foreign industry's capacity increases during the period of\ninvestigation. If they had, they would have reco gnized that the foreign industry's capacity increase\nduring the period of investigation was substantially larger than the domestic industry's capacity\nincreases during this period. 2710 More specifically, foreign production capacity grew by 44 million\ntons during the period from 1996 to 2000, while the domestic industry's production capacity grew by\n32.2 million tons. In other words, during a period in which demand in the Asian and other markets\nwas significantly affected by the Asian financial crisis and the continuing deterioration of the steel\nmarkets in the former Soviet Union, foreign steel producers increased their aggregate capacity levels\nby an amount that was 37 percent larger than the domestic industry's capacity increases. The United\nStates argues that, moreover, if complainants had also compared the increase in import shipments\nduring the period with the increase in the indu stry's shipments between 1996 and 1998, they would\nhave recognized that the import increase during this period was 2.6 million tons, or 60%, larger than\nthe increase in domestic shipments during the same period. Given the substantial increase in import\nvolumes in 1998 and the significant reduction in their pricing levels, it should again not be surprising\nthat the USITC found that increasing import shipments at lower prices had a more substantial impact\non pricing levels in the market than did domestic capacity increases and domestic shipments.\n2711\n\n2706 Brazil's first written submission, para. 190.\n2707 Japan's first written submission, para. 267; New Zealand's first written submission, para. 4.154.\n2708 Japan's first written submission, para. 267.\n2709 United States' first written submission, para. 496.\n2710 United States' first written submission, para. 497.\n2711 United States' first written submission, para. 498.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1116 According to Japan, as a matter of economic theory, it is incorrect to argue that capacity only\nmatters when it is turned into actual shipments. 2712 2713 Japan submits that one needs to consider\ncapacity in light of barriers to entry facing that capacity. Domestic capacity has no barriers; domestic\nshipments can easily enter the market. Import capac ity has intrinsic disadvantages, due to the lead\ntimes and uncertainty. Japan argues that, in this case, uncertainty increased dramatically because of\nthe numerous anti-dumping and countervailing investigations that chased imports from the\nmarket.2714\n7.1117 According to Japan, the United States tries to shift the focus to the role of foreign capacity.2715\nJapan argues that this argument is fundamentally misleading, since so little of foreign capacity goes to\nthe United States market. The United States argues that 44 million tons of new foreign capacity is\nmore important than 32.2 million tons of domestic capacity. Yet over the five-year period of\ninvestigation, virtually all United States capacity was dedicated to the United States' market 2716, as\nreflected in the USITC's export statistics, while less than 4% of foreign capacity went to the United\nStates' market.2717 Japan submits that, by any reasonable measure, domestic capacity mattered much\nmore than foreign capacity, but the USITC did not even try to isolate its effects.2718\n7.1118 Japan submits that the United States also tries to shift the focus away from domestic capacity\nby focusing on shipment levels. 2719 This argument disingenuously concentrates only on 1998, which\nis fundamentally misleading. In 1999 and 2000 – the years when domestic industry performance\ndeteriorated – import shipments were down, but domestic shipments were up and domestic capacity\nwas up. In 1999 and 2000, import share of the market was stable at about 10.5% in both years, a level\nconsistent with 1996 and 1997.\nTable 6: Change in Import and Domestic Shipments,\nDomestic Operating Performance: 1997-20002720\nYear Change in Import\nShipments from Prior Year\nChange in Domestic\nShipments from Prior Year\nOperating Performance\nin that Year\n1997 902 1619 6.1\n1998 6031 -111 4.0\n1999 -4488 3119 -0.7\n2000 77 1190 -1.4\n7.1119 Japan says that in 1999 and 2000, when domestic industry operating performance declined,\nimports were retreating from the market, and domestic shipments were increasing. In both 1999 and\n2000, increasing domestic shipments dwarfed changes in the import levels. Japan argues that it is\nwrong to blame declining imports and to ignore the increasing domestic capacity that was fuelling\nincreasing domestic shipments. At the very least, the impact of domestic capacity increases should\n\n2712 See Joint Respondents' Posthearing Brief on Flat-Rolled Steel (1 Oct. 2001) (filed by the Law Firm\nof Willkie Farr & Gallagher) (responding to Commissioner Hillman's question how capacity, as opposed to\nactual shipments, can affect price.) at 93 (Exhibit CC-55).\n2713 Japan's second written submission, para. 139.\n2714 Japan's second written submission, para. 140.\n2715 United States' first written submission, para. 497.\n2716 USITC Report, Vol. II, at Tables FLAT-16-21.\n2717 Ibid., at Tables FLAT-30, 33, 36, 39 and 43.\n2718 Japan's second written submission, para. 141.\n2719 United States' first written submission, para. 498.\n2720 Japan's second written submission, para. 142, citing USITC Report, Vol. II, at Tables FLAT-12-17\nand FLAT- 20-25, and Japan's first written submission, ANNEX B.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhave been separated and distinguished from imports to test the USITC's theories and ensure that their\neffect was not mistakenly attributed to imports. 2721\n7.1120 New Zealand also argues that the United States does not seek to challenge the factual\nobservation that excess domestic capacity (i.e. the extent to which capacity exceeded demand, not\nmerely \"capacity increases\") was over six times greater than the modest increase in imports measured\nover the period 1996-2000.2722 The United States does not acknowledge the implications of this fact\nin terms of the relative effect on price of increased domestic capacity as opposed to imports. Instead,\nthe United States responds weakly that the proper comparison is between foreign capacity increases\n(not actual imports) and domestic capacity increases. 2723 2724 According to New Zealand, this has to\nbe wrong on two counts. First, Article 4.2(b) re quires the establishment of the causal link between\nincreased imports and serious injury to the domestic industry, as distinguished and separated from\nother factors causing injury to that industry (such as greatly increased excess domestic capacity).\nSecond, a reference to a mere increase in foreign capacity is also economically meaningless absent\nany consideration of the extent to which this exceeds demand and influences the level of imports into\nthe United States market.\n2725\n7.1121 Japan and Brazil also note that the USITC also pointed to low capacity utilization rates as\nevidence of injury caused by imports. Brazil and Japan make reference in this regard to the Appellate\nBody decision in US – Wheat Gluten , where the Appellate Body specifically discussed the need to\ncarefully consider increases in capacity and decreases in capacity utilization. However, according to\nJapan and Brazil, the USITC did not perform the analysis set forth in US – Wheat Gluten , including\nconsidering the capacity utilization rate, if capacity had remained stable over the period rather than\nincreasing. Japan and Brazil argue that had it performed the analysis, perhaps it would not have\nrushed to its conclusion.\n2726\n7.1122 In response, the United States argues that the USITC did assess whether capacity increases\nhad caused the industry's capacity utilization declines. The USITC recognized that the industry's\nproduction capacity had increased by 15.9% from 1996 to 2000 and that the industry's capacity had\nincreased at a rate that was higher than the increase in demand during that same period, given that\nconsumption had grown by 7.8%. It also correctly recognized that the industry's production levels,\nwhile growing, had not kept pace with the increases in the industry's capacity levels. Moreover, after\nconsidering the relationship of these two trends, the USITC correctly found that imports were not a\nsignificant cause of declines in the industry's capacity utilization rates. Instead, it found that these\ncapacity utilization declines were due \"in significant part\" to the increase in industry capacity over the\nperiod.\n2727 The United States also argues that, because the USITC did not ascribe any declines in the\nindustry's capacity utilization rates to im ports, the Appellate Body's holding in US - Wheat Gluten is\ninapposite to the USITC's CCFRS analys is. As the Appellate Body noted in Wheat Gluten , the\nUSITC explicitly found that declines in the industry's capacity utilization rates were the direct result\nof the increase in imports.\n2728 Here, the USITC has held the opposite.2729\n\n2721 Japan's second written submission, para. 142.\n2722 New Zealand's second written submission, para 3.127.\n2723 United States' first written submission, para 496.\n2724 New Zealand's second written submission, para. 3.127.\n2725 New Zealand's second written submission, para. 3.128.\n2726 Japan's first written submission, para. 267; Brazil's first written submission, para. 191.\n2727 United States' first written submission, paras. 489-90.\n2728 Appellate Body Report, US – Wheat Gluten, paras. 82-84.\n2729 United States' first written submission, para. 490, fn. 619.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1123 Japan and Brazil submit that in 1996, before any alleged import surges, the domestic industry\nhad utilization rates between 80% and 90%. The USITC found the domestic industry to have\nreasonable operating profits at those operating rates.\n2730 Japan and Brazil argue that but for the\nmassive increases in new domestic capacity, the industry could have been operating at full capacity\nand more profitably in 2000. According to Japan and Brazil, the USITC did not even contemplate this\nanalysis.2731\n7.1124 In response, the United States submits that the above argument is misplaced in two significant\nrespects. First, it ignores the fact, recognized by the USITC, that an industry can be expected to\nincrease its capacity in response to consistent growth in demand in a market, as occurred in the\nCCFRS market during 1996 through 2000. Second, and more importantly, they ignore the fact that,\neven if the industry had not increased its capacity levels, imports would still have surged into the\nmarket in 1998 at low-prices and led prices downw ard through the remainder of the period. Thus,\neven if these domestic capacity increases had not occurred, the record shows that imports would still\nhave caused the substantial price declines seen in the market during the period from 1998 through\n2000. In this regard, the record shows, for example, that the AUV of imports fell by 10.1% during\nthis period, with all of this decline being represented by lower prices in 1998, 1999 and 2000.\n2732\n7.1125 Korea notes that the United States says that the USITC \"distinguished and separated the price\ndeclines attributable to imports from the price declines attributable to capacity increases\". 2733 Korea\nstates that it agrees that this is what the USITC should have done but it is not what the USITC did. As\nthe United States explicitly admits, the USITC actually did not focus on separating out the effects\nattributable to each factor at all and, in fact, merely found that these capacity increases were\nsubstantial and therefore \"were likely\" to have \"some\" effect on prices but that imports were \"far more\nsignificant\" than capacity increases.\n2734\n7.1126 Korea and New Zealand submit that the USITC failed to establish explicitly, through a\nreasoned and adequate explanation, that injury caused by this factor was not attributed to increased\nimports.2735 More particularly, Korea argues that the USITC never explained how it determined that it\nwas imports, not excess domestic capacity, that led prices down. Since the US industry was suffering\nfrom low capacity utilization and the relative price of imports continued to rise into the latter part of\nthe period of investigation, it was \"plausible\" that the domestic industry led prices down in order to\nincrease the market share. Irrespective of all these facts, Korea argues that the USITC did not provide\na reasoned and adequate explanation for its conclusive statement that imports, not excess domestic\ncapacity, led prices downward.\n2736 Similarly, China argues that, while the USITC concluded by\nstating that this factor likely played a role in the pr ice declines that helped cause the injury, it did not\nexplain how it played this role, nor at which moment it played this role. Moreover, according to\nChina, the USITC did not explain to what extent this factor played a role on the overall situation of\nthe industry.2737\n\n2730 Japan's first written submission, para. 268; Brazil's first written submission, para. 191.\n2731 Japan's first written submission, para. 268; Brazil's first written submission, para. 192.\n2732 United States' first written submission, para. 500.\n2733 United States' first written submission, para. 494.\n2734 United States' first written submission, para. 494.\n2735 Korea's first written submission, para. 128; New Zealand's first written submission, paras. 4.146\nand 4.155.\n2736 Korea's first written submission, para. 128.\n2737 China's first written submission, para. 367.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1127 Korea submits that a more precise consideration of time periods, exact effects, and the means\nby which prices were affected, are obvious additional analytical tools that could have been\nemployed.\n2738 Korea submits that such an analytical approach would have revealed what the USITC\nignored. The obvious effect of capacity increases on producer performance was to stimulate\nproduction and increase sales in order to maximize the efficient use of capacity. In a capital-intensive\nindustry like the steel industry, capacity utilization rates are key. It is self-evident that excess capacity\nwould cause producers to lower prices to sell that additional production to maintain efficient\nutilization.2739\n7.1128 Brazil asks what makes the USITC conjecture on capacity that the Appellate Body found\ninvalid in US – Wheat Gluten 2740 any different from the USITC's \"analysis\" in this case regarding\ncapacity. In light of substantial domestic capacity increases in excess of demand, the USITC\nrecognized \"there is a significant incentive to maximize the use of steelmaking assets, which can\naffect producers' pricing behavior\". 2741 2742 Brazil submits that, nonetheless, it offers only a\nconclusory statement that:\n\"[I]f increased domestic capacity were in fact the source of the injury to the domestic\nindustry, we would have expected to see the domestic industry lead prices downward,\nand wrest market share from imports. Therefore, we find that increased production\ncapacity, while likely playing a role in the price declines that helped cause injury, was\nnot an important cause of serious injury equal to or greater than the injury caused by\nincreased imports.\"\n2743\n7.1129 Brazil questions wherethe USITC actually separates and distinguishes causes in this\nstatement; where the reasoned and adequate explanation to support the conclusion is; and where the\nUSITC's actual analysis of the injurious effects of increased excess capacity on the industry are.\nBecause imports are a more important cause of injury than capacity increases, Brazil further questions\nwhether the USITC actually found that there was a genuine and substantial causal link between\nincreased imports and serious injury.\n2744\nIntra-industry competition\n7.1130 New Zealand notes that cheap and rapidly increasing minimill production, which the United\nStates concedes accounted for a third of total CCFRS production in the United States 2745 and was\n\"pertinent\" to the issue of causation 2746, was a critical factor in the decline of domestic prices and\noperating margins.2747 2748\n\n2738 Korea's second written submission, para. 164.\n2739 Korea's second written submission, para. 165.\n2740 Appellate Body Report, US – Wheat Gluten, paras. 90-92.\n2741 USITC Report, Vol. I, at 63.\n2742 Brazil's second written submission, para. 77.\n2743 USITC Report, Vol.1, at 64.\n2744 Brazil's second written submission, para. 77.\n2745 United States first written submission, para 353, footnote 381.\n2746 Ibid., para 353.\n2747 New Zealand's first written submission, para 4.158.\n2748 New Zealand's second written submission, para. 3.136.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1131 The European Communities and New Zealand further note 2749 that the USITC acknowledged\nthe injurious effect of intra-industry competition – \"the addition of a greater volume of lower-cost\ncapacity would be expected to have an effect on prices, and we find that it did\" – but then, after\nnoting, without explanation, that \"imports, rather th an minimills, typically led prices downward\", the\nUSITC recited its standard mantra:\n\"[W]e find that minimills were not primarily responsible for the declines in domestic\nprices or an important cause of serious injury to the domestic industry … equal to or\ngreater than the injury caused by increased imports.\"\n2750\n7.1132 China and New Zealand argue that by statin g that intra-industry competition was not\n\"primarily\" responsible for serious injury to the industry, the USITC recognized that minimills were\nnevertheless responsible, although in a less significant way.2751\n7.1133 Japan argues that in relation to intra-industry competition, it is clear that the USITC decision\ndoes not satisfy the non-attribution requirement of Article 4.2(b). In particular, Japan argues that the\nevidence is both compelling and measurable and shows that each intra-industry competition is a more\nimportant cause of the domestic industry's injury than imports. In Japan's view, had the USITC\nseparated and distinguished these alternative causes, it could not have concluded that increased\nimports caused any serious injury. 2752 Similarly, New Zealand submits that while the USITC\nacknowledged that minimill competition had an injurious effect on the domestic industry, it did not\nexplain what these effects were, as distinguished and separated from the serious injury caused by\nincreased imports.\n2753\n7.1134 Japan and Brazil argue that dramatically expanding capacity and shipments by certain\nsegments of the domestic industry had given rise to deleterious competition among domestic\nproducers.2754 In this regard, Japan and Brazil argue that intra-industry competition in the CCFRS\nmarket was driven by changes in production technology. The emergence of minimills with\ndramatically lower cost structures placed less efficient integrated mills on their heels.\n2755 Japan and\nKorea argue that with an extremely competitive cost structure, minimills could charge lower prices\nand yet still earn attractive operating profits. Weaker integrated mills, using the more traditional blast\nfurnace technology, decided they had to sell CCFRS steel to generate cash flow regardless of the\nprice. Japan submits that competing largely with minimills in the commodity segment of the market,\nthe integrated firms had little choice but to compete with minimills that had much lower costs.2756\n7.1135 Confronted with tremendous evidence on this account, Japan and Brazil argue that the USITC\nmade no effort to separate and distinguish this alternative cause. 2757 Japan, Korea and Brazil argue\nthat the USITC recognized the competitive advantag e of minimills but failed to fully consider the\neffects on the rest of the industry because they were not \"primarily\" responsible for the injury. More\nspecifically, Japan and Brazil state that the USITC noted that minimills \"did typically enjoy cost\nadvantages over integrated producers\", and that \"a greater volume of lower-cost capacity would be\n\n2749 New Zealand's second written submission, para. 3.135; European Communities' first written\nsubmission, para 468.\n2750 USITC Report Vol I, p. 65.\n2751 China's first written submission, paras. 359 and 363.\n2752 Japan's first written submission, para. 255.\n2753 New Zealand's second written submission, para. 3.136.\n2754 Japan's first written submission, para. 269; Brazil's first written submission, para. 192.\n2755 Japan's first written submission, para. 270; Brazil's first written submission, para. 193.\n2756 Japan's first written submission, para. 270; Korea's first written submission, para. 136.\n2757 Japan's first written submission, para. 269; Brazil's first written submission, para. 192.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexpected to have an effect on prices, and we find that it did\". It then dismissed the factor by pointing\nto a quick and flawed examination of hot-rolled prices; import prices apparently were lower than\nminimill prices. This attempt to dismiss the role of intra-industry competition fails on several\ncounts.\n2758\n7.1136 Japan, Korea and Brazil submit that if the USITC had properly considered this factor, it\nwould have found that mini-mills had low-cost structures that allowed them to price below other\ndomestic producers, yet remain profitable.2759 Korea also argues that while the USITC acknowledged\nthat minimills maintain a cost advantage over integrated producers, it dismissed the significance of\nthis fact by observing that that cost advantage existed throughout the period, that is, before and after\ninjury.\n2760\n7.1137 New Zealand argues that nowhere in the USITC Report does the USITC segregate the\nproduction and pricing data of minimills and integrated producers so that it can assess the effects of\nminimill production on the industry as a whole. Nor does the USITC consider the obvious\ncompetitive disadvantage suffered by integrated mills as a result of legacy and other costs far higher\nthan those borne by minimills.\n2761\n7.1138 In response, the United States notes that USITC thoroughly discussed the nature and extent of\nminimill competition on domestic pricing for CCFRS. In particular, the USITC correctly recognized\nthat the record data showed that minimills \"did typically enjoy cost advantages over integrated\nproducers,\" noting that these advantages were due to minimill's lower raw materials costs and the\ndifferent product mixes of the two categories of producer. As a result of these cost advantages, the\nUSITC found that it was reasonable to expect that the addition of a greater volume of lower cost\ncapacity would have some indirect effect on prices. Based on its assessment of the record, therefore,\nit concluded that the addition of this lower-cost capacity had some effect on domestic pricing during\nthe period of investigation.\n2762\n7.1139 Moreover, the United States submits that the USITC did not simply assume that the pricing\ndecisions of minimill operators did not cause the substantial price declines that hit the CCFRS market\nbetween 1998 and interim 2001. The USITC appropriately examined the ample record evidence that\nwas available on the nature of price competition between minimills, imports and integrated\nproducers.2763 As the USITC noted in its discussion of the competitive effects of minimills, the data\nindicated that, even though minimills were lower-cost producers than integrated producers, imports,\nnot minimills, were the price leaders in the market place and led prices downward throughout the\n\n2758 Japan's first written submission, para. 271; Korea's first writen submission, para. 135; Brazil's first\nwritten submission, para. 194.\n2759 Japan's first written submission, para. 271; Korea's first written submission, para. 135; Brazil's first\nwritten submission, para. 193.\n2760 Korea's first written submission, para. 136.\n2761 New Zealand's first written submission, para. 4.160.\n2762 United States' first written submission, para. 507.\n2763 In this regard, the United States notes that, duri ng its investigation, the USITC prepared a series of\nspecific charts breaking out the financial and production operations for minimill and integrated producers,\nseparately, and a series of quarterly price comparison charts showing underselling/overselling patterns between\nminimills, imports and integrated producers. See, e.g ., INV-Y-215, pp. 3-11 (US-38); See also Minimill Trade\nData (US-60). While some of this material may not be released because it is confidential, the USITC did, in\nfact, prepare such data and examine it, as can be seen in US-38. Accordingly, New Zealand's assertion that the\nUSITC did not segregate data for these producers in its Report is highly misleading. New Zealand's first\nwritten submission, para. 4.160.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nperiod of investigation.2764 Indeed, as the USITC pointed out in its analysis, the price comparison data\nshowed that imports consistently undersold minimill producers throughout the entire period of\ninvestigation on its sales of hot-rolled merchandise, which accounted for the bulk of minimill\nshipments during the period.\n2765 Moreover, the record showed that imports undersold minimills\nconsistently on plate and cold-rolled as well during the period as well.2766 Given this record evidence,\nthe USITC properly concluded that it was not \"low-cost\" minimills, but imports, that led prices in the\nCCFRS market down so consistently during the period from 1998 to 2001. 2767 Thus, although the\nUSITC reasonably concluded that minimills had played some role in price declines in the market, it\nalso correctly found that it was increased imports, not the operations of minimills, that were the\nprimary cause of the price declines that occurred during the period from 1998 to 2000.\n2768\n7.1140 Further, the United States argues that although it was true that the USITC recognized in its\nanalysis that \"minimill producers may have been in a better position to withstand low-priced import\ncompetition than other domestic producers\" due to their cost advantages, the record does not show\nthat minimills were able to maintain a healthy profit margin throughout the period of investigation in\nthe face of lower prices. The United States submits that, instead, the unit operating income for\nminimills declined from a profit of approximately US$28 per ton in 1997 to a loss of approximately\nUS$4 per ton in 1998, when imports surged in the market. Moreover, even though minimills were\nable to improve their operating income to approximately US$7 and US$16 per ton in 1999 and 2000,\nrespectively, the returns obtained by minimills in these two years remained significantly below the\nstrong level obtained by minimills in 1997, that is, before the import surge occurred. Further,\nminimills' operating income declined to a loss again in interim 2001, as prices fell even further in the\nmarket. In other words, despite the complainant's arguments to the contrary, the record shows not that\nminimills were able to continue earning strong profits throughout the period of investigation, even as\nprices fell, but that minimills experienced the same operating income declines as integrated producers\nas a result of the surge of low-priced imports that occurred in 1998.\n2769\n7.1141 China notes 2770 that concerning the intra-industry competition and increased imports, the\nUSITC stated in its report that:\n\"[I]ndeed, the only way in which the USITC could have more specifically identified\nthe distinct amount of pricing effects caused by these factors would have been to\nplace a quantitative value on the effects caused by each. However, as we have\npreviously noted, the test of the Agreement on Safeguards does not require a\n\n2764 USITC Report, p. 65.\n2765 In this regard, the United States notes that it was entirely reasonable for the Commission to rely on\nits price comparison data for two hot-rolled products when assessing whether imports consistently undersold the\nmerchandise sold by minimills. In this regard, the r ecord indicated that hot-rolled steel accounted for the large\nmajority of minimill producers' commercial shipments. Compare, Table FLAT-1 (Minimill Trade Data for\nCarbon Flat-rolled Steel) with Table G03-1 (Table for Minimill Hot-rolled Steel Trade Date) (US-60).\nAccordingly, Brazil's assertion that the USITC improperly relied on this data to support its analysis is simply\nmisplaced. Brazil's first written submission, para. 197.\n2766 The United States notes that although the quarterly pricing comparisons are confidential, the record\nshows that imports undersold minimills on their sales of plate, hot-rolled and cold-rolled steel in the large\nmajority of possible price comparisons during the period, with imports underselling minimills in 64% of\npossible comparisons (70 of 110 comparisons), at margins ranging up to 30.6%. Ibid. Imports undersold\nminimills in 76% of possible comparisons (50 of 66) involving plate and hot-rolled merchandise. Ibid.\n2767 USITC Report, p. 65.\n2768 USITC Report, p. 65; United States' first written submission, para. 508.\n2769 United States' first written submission, para. 513.\n2770 China's second written submission, para. 217.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nquantitative valuation of the effects attributable to imports or no-imports factors,\nrespectively, nor has the Appellate Body or any panels construed the Agreement on\nSafeguards to do so.\"\n7.1142 China argues that the USITC did not perform a quantitative evaluation of the effects of\ncompetition between efficient, low cost minimill production and the integrated producers despite the\nfact that the Agreement on Safeguards as interpreted by the Appellate Body in US – Line Pipe case\nrequires the investigating authority to identify the nature and extent of the alternative factors.\n2771\nChina argues that the USITC found that the intra-industry competition between minimills and\nintegrated producers resulted in lowered sales for domestic products and subsequent price cuts. China\nsubmits that, obviously, the intra-industry competition had negative effects on the industry, which\nshould have been evaluated.\n2772\n7.1143 China points to 2773 the following data on minimill shipments and imports of CCFRS\nproducts:2774\nTable 7: Flat-Rolled Imports\nThousands of tons 1996 1997 1998 1999 2000 Interim\n2000\nInterim\n2001\nMinimills\nshipments\n17,951 27,206 31,197 34,516 37,838 17,845 19,322\nImports 18,372 19,274 25,305 20,816 20,893 11,483 6,930\n7.1144 China argues that the evidence at hand demonstrates that the intra-industry competition\nplayed a certain role in the developments of prices in the market. 2775 More particularly, New Zealand\nargues that data available to the USITC shows intra-industry competition to be a critical factor in the\ndecline of domestic prices and operating margins.\n2776 According to New Zealand, by 2001 minimill\nproduction of raw steel had reached 47.5% of to tal United States production. However, in New\nZealand's view, not only did the increase in dome stic capacity (which was largely from minimill\nproduction) far outstrip demand, but the cheap and efficient nature of this increased capacity\naccentuated its price-lowering effect. New Zealand submits that minimill production comprised a\nrapidly growing supply of steel at a time when the USITC itself acknowledged domestic prices were\nfalling. New Zealand argues that the USITC erroneously ascribed this fall in prices to imports,\nignoring the fact that it was the growing domestic supply of steel that exerted downward pressure on\nprices.\n2777 The European Communities states that there is no attempt to distinguish and separate the\neffect of downward pressure resulting from intra-industry competition from the downward pressure\nallegedly caused by increased imports. The European Communities submits that, therefore, there was\nno explicit establishment and no clear, unambig uous and straightforward explanation of how the\neffects of the other factors are not attributed to increased imports.2778\n\n2771 Appellate Body Report, US – Line Pipe, para. 215\n2772 China's second written submission, para. 219.\n2773 China's second written submission, para. 220.\n2774 USITC Report Vol. II, table FLAT-1, FLAT-3\n2775 China's second written submission, para. 221.\n2776 New Zealand's first written submission, para. 4.158.\n2777 New Zealand's first written submission, para. 4.159.\n2778 European Communities' first written submission, para. 468.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1145 Japan and Brazil argue that the USITC ignored evidence that as minimill pricing fell,\nminimills still had stronger financial performance. Minimills increased their shipments of all CCFRS\nand decreased their average unit sales values.\n2779 Japan argues that, remarkably, as minimill volumes\nincreased and prices fell, their profits still increased. According to Japan, the contrast between\nminimill and non-minimill operating results is dramatic. Minimills did much better in 1999 and 2000\nprecisely when the other mills began to experience financial difficulties.2780\n7.1146 Japan and Brazil argue that although the USITC decision applied to all CCFRS products, the\nUSITC analysis cites only an isolated example for a single product, hot-rolled steel. Minimills also\nmake and sell plate, cold-rolled, and even some coated steel. The USITC extrapolates to these other\nproducts without any factual basis.\n2781 Japan and Brazil also argue, that the USITC ignored\nsubstantial evidence to the contrary. The USITC never evaluated the role of minimill competition in\ndifferent segments of the CCFRS industry, or addressed arguments that minimill pricing was in fact\nleading integrated mill pricing.2782\n7.1147 Brazil argues further that the USITC acknowledged that minimills producing CCFRS\naccounted for most of the increase of capacity in the United States steel industry during the 1990s.\nBrazil further argues that there was not just a \"greater\" volume of lower-cost capacity entering market,\nit was an enormous volume. More importantly, the evidence revealed that minimills were not simply\nlocked into capacity expansion resulting from investment made prior to 1998. Rather, minimills were\nstill investing in capacity expansion during 1998, 1999 and 2000, when the USITC found the industry\nsituation to be drastically deteriorating.\n2783\n7.1148 In this regard, Korea notes that between 1996 and 2000, the domestic industry's CCFRS\ncapacity increased by 32 million tons. Most of the increase of capacity in the United States' steel\nindustry during the 1990s was accounted for by the minimills utilizing thin-slab technology.\nAccording to Korea, the small increase in imports of 2.5 million tons pales in comparison to the huge\nincrease in the low-cost minimill capacity. Still, the USITC brushed aside the impact of minimills'\ncompetition with the unsubstantiated conclusive statement that imports \"led\" prices down. 2784 Korea\nargues that even if it were true that the imports, not minimills, led prices down, the volume of low-\ncost capacity did have an effect on prices, as the USITC admits. Thus, the USITC had an obligation\nto identify, distinguish and separate the injury arising from low-cost minimill supplies.2785\n7.1149 Korea adds2786 that over the period 1996 through 2000, minimill CCFRS capacity increased\nby 19.9 million tons, with an additional 1.48 million tons added in interim 2001 vis-à-vis interim\n2000.\n2787 More to the point, 8.12 million tons of that mini-mill capacity was added between 1998\nthrough June 20012788, the period during which the United States industry was allegedly being injured\nby imports. During this same period of 1998 – 2001, however, imports were declining. Thus, at the\n\n2779 Japan's first written submission, para. 274; Brazil's first written submission, para. 197.\n2780 Japan's first written submission, para. 274.\n2781 Japan's first written submission, para. 272; Brazil's first written submission, para. 195.\n2782 Japan's first written submission, para. 273; Brazil's first written submission, para. 196.\n2783 Brazil's first written submission, para. 199.\n2784 Korea's first written submission, para. 137.\n2785 Korea's first written submission, para. 138.\n2786 Korea's second written submission, para. 169.\n2787 United States' first written submission, Minimill Trade Data, Table FLAT-1 (Exhibit US 60).\n2788 United States' first written submission, Minimill Trade Data, Table FLAT-1 (Exhibit US 60).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbeginning of the period, mini-mill CCFRS capacity was less than imports. By the end of the period,\nminimill CCFRS capacity was approximately three times imports.2789\nTable 8: Comparison of Minimill Capacity to Flat-Rolled Imports (in thousands of tons)\n1996 1997 1998 1999 2000 Jan-June\n2000\nJan-June\n2001\nMinimills 17,951 27,206 31,197 34,516 37,838 17,845 19,322\nImports 18,372 19,274 25,305 20,816 20,893 11,483 6,930\nSources: Minimill Capacity from Table FLAT-1 (Exhibit United States 60); Import Data from USITC\nMemorandum No. INV-Y-209, Table FLAT-ALT7 (Exhibit CC-90).\n7.1150 The United States submits that this argument is flawed in several respects. First, the\nargument fails because it is based on an \"apples\" to \"oranges\" comparison of non-comparable factors.\nIn particular, complainants' mistakenly compare the capacity increases of minimill producers to\nimport shipments during the period, when the more appropriate comparison is to compare the\nminimills' capacity increases to capacity increases of foreign producers. If the complainants had\nperformed this more appropriate comparison, they would have recognized that the foreign industry's\ncapacity increases during the period of investigation were substantially larger than the capacity\nincreases undertaken by minimills during this period. Given this substantial difference in the capacity\nincreases of the two sets of producers, it should not be surprising that the USITC concluded that\nimports were a more significant cause of price declines in the market than minimills.\n2790\n7.1151 The United States argues that, in this same vein, the record shows that there was a\nsubstantially larger volume of imports shipped into the market than there was of merchandise shipped\nby minimills. In particular, the volume of imports shipped into the US market ranged between\n18.3 million and 25.3 million tons on annual basis during the period from 1996 to 2000. By way of\ncomparison, the total volume of all carbon flat-rolled shipments (including GOES and tin mill steel)\nmade by minimill producers into the commercial market never exceeded more than 11.9 million tons\non an annual basis. 2791 Further, the United States argues that the record evidence established that\nimports routinely and consistently undersold domestic and minimill merchandise throughout the\nperiod of investigation, including the years 1998, 1999, and 2000. Accordingly, the record clearly\nconfirms that the USITC was correct when it found that imports had a more substantial impact on\nmarket pricing than minimills during the period from 1998 to 2000.\n2792\n7.1152 Korea argues2793 that a comparison of minimill shipments with both shipments by integrated\nproducers and imports demonstrates how the failure to analyse growth in the minimill sector masks\nthe events in the United States market affecting United States producers. Overall United States\nshipments of CCFRS steel showed an increase of 13.3 million tons between 1996-2000. However,\nthe data presented by the United States shows that virtually all of that growth was accounted for by\n\n2789 The United States argues (United States' first written submission, para. 497) that domestic industry\ncapacity should be compared to foreign capacity, not to imports. But, clearly, since at least 99% of United\nStates industry capacity is directed to the United States market (See USITC Memorandum INV-Y-209, Table\nFLAT-ALT-7 (Exhibit CC-90)), while roughly a maximum of 3% of foreign capacity is shipped to the United\nStates market (USITC Report, Vol. II, Table FLAT-27 at FLAT-30 (Exhibit CC-6)), the proper comparison is\nclearly between United States capacity and imports.\n2790 United States' first written submission, para. 511.\n2791 Table FLAT-1 (US-60).\n2792 United States' first written submission, para. 512.\n2793 Korea's second written submission, para. 170.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nminimills alone: shipments by integrated producers increased by only 1.1 million tons between 1996\n-2000 while minimill shipments increased by 12.2 million tons. Domestic shipments by integrated\nproducers in the interim period – when the greatest losses occurred – fell by 13.5 million tons (from\n91.2 million tons to 77.7 million tons). In contrast, mini-mill shipments increased by 588 thousand\ntons. In 1996, minimill shipments accounted for 8.5% of United States shipments. By 2001, minimill\nshipments had doubled their share of United States shipments.\nTable 9: United States Shipments of Flat-Rolled Steel by Minimills,\nIntegrated Mills, and Total (in thousands of tons)\n1996 1997 1998 1999 2000 Jan-June\n2000\nJan-June\n2001\nMinimills 15,749 19,549 21,874 26,040 27,306 14,778 15,366\nIntegrated* 169,058 168,898 167,269 170,573 170,163 91,221 77,689\nTotal 184,807 188,447 189,143 196,613 198,069 105,999 93,055\nMinimills as a\npercentage of\ntotal United\nStates\nshipments\n8.5% 10.4% 11.6% 13.2% 14.1% 13.9% 16.5%\n*Integrated is the difference between Total and Mini-Mill.\nSources: Mini-Mill Capacity from Table FLAT-1 (Exhibit United States 60); Total United States Shipments\nfrom USITC Memorandum No. INV-Y-209, Table FLAT-ALT7 (Exhibit CC-90).\n7.1153 Korea submits that in comparison to the impact of minimills, especially in the key period of\n1998-2001 (when imports are alleged to have caused injury), imports had a diminished role in the\nmarket. Comparing the increase in minimill shipment s to the increase in imports, it is clear that the\noverall growth in minimill shipments over the period dwarfed the growth in imports (12.2 million tons\nto 2.6 million tons). It is also clear that while mini-mill shipments grew by 6 million tons during the\nperiod in which the United States \"industry was allegedly injured by imports\", (1998-2000) imports\nwere falling by 4.4 million tons through 2000 and fell by an additional 4.6 million tons in the interim\nperiod. Thus, at the beginning of the period of investigation imports were greater than minimill\nshipments. By the end of the period, minimill shipments were over twice as large as imports.\n2794\n\n2794 Korea's second written submission, para. 171.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nTable 10: Comparison of Minimill United States Shipments\nto Imports of Flat-Rolled (in thousands of tons)\n1996 1997 1998 1999 2000 Jan-June\n2000\nJan-June\n2001\nMinimills 15,749 19,549 21,874 26,040 27,906 14,778 15,366\nImports 18,372 19,274 25,305 20,816 20,893 11,483 6,930\nMinimills and\nimport\nshipments 34,121 38,823 47,179 46,856 48,799 26,261 22,296\nMinimills as a\npercentage of\nminimill and\nimport\nshipments\n46.2% 50.4% 46.4% 55.6% 57.2% 56.3% 68.9%\nSources: Minimill Shipments from Table FLAT-1 (Exhibit United States 60); Imports from USITC\nMemorandum No. INV-Y-209, Table FLAT-ALT7 (Exhibit CC-90).\n7.1154 Korea submits that the impressive growth of minimill shipments both in relation to integrated\nproducers and in relation to imports throughout the period – and especially in the period between\n1998-2001 – raises serious doubts about the claim that imports \"led prices down\" during the\n1998-2001 period.\n2795 2796 According to Korea 2797, these doubts are confirmed by examining the\ndifference in per unit costs of minimills and integrated producers. A comparison of these unit costs\nshows that in 1996, unit costs of mini-mills were US$26/ton lower than those of integrated producers\nin 1996, a figure which grew to US$70/ton in 2000 before reaching a stunning US$100/ton in interim\n2001. This competitive advantage manifested itself in the market share gains described below.\nTable 11: Comparison of Minimills and Integrated Cost of Goods\nSold for Hot Rolled ($/ton)\n1996 1997 1998 1999 2000 Jan-June\n2000\nJan-June\n2001\nMinimills $311.21 301.77 293.67 250.23 257.24 266.91 232.61\nIntegrated $337.26 333.64 324.46 300.07 326.84 315.70 332.18\nMinimills\nbelow\nintegrated $26.05 31.87 30.79 49.84 69.60 48.79 99.58\nSource: Public Versions of Supplementary Material Cited in Views of Commissioners in Investigation No. TA-\n201-73, Steel, Memorandum No. INV-Y-215 (1 May 2002) (\"USITC Memorandum No. INV-Y-215\"), Tables\nSTL20H3I.WK4 (Flat: Hot-Rolled Integrated) and STL20H3M.WK4 (Flat: Hot-Rolled Minimill) (Korea\nExhibit 10, \"K-10\").\n7.1155 Korea further argues that not coincidentally, the cost advantage was used by minimills to\nlower prices and gain market share at the expense of both integrated producers and imports.\nMoreover, even when integrated producers were consistently selling hot-rolled steel at higher prices\nthan minimills, those prices of integrated producers were below their Cost of Goods Sold in 2000 and\n\n2795 United States' first written submission, para. 509.\n2796 Korea's second written submission, para. 172.\n2797 Korea's second written submission, para. 173.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n2001. In contrast, minimill prices were always above their Cost of Goods Sold throughout the period\nof investigation.2798\nTable 12: Unit Selling Price of Hot-Rolled/Comparison of Minimill\nand Integrated Prices (unit: US$/ton)\n1996 1997 1998 1999 2000 Jan-June\n2000\nJan-June\n2001\nMinimills prices $321.20 $328.62 $296.32 $271.12 $283.66 $316.81 $233.51\nIntegrated prices $353.24 $365.16 $350.00 $308.23 $320.14 $332.97 $269.07\nMinimills below\nintegrated\n$32.04 $36.54 $53.68 $37.11 $36.48 $16.16 $35.56\nSource: USITC Memorandum No. INV-Y-215, Tables STL20H3I.WK4 (Flat: Hot-Rolled Integrated) and\nSTL20H3M.WK4 (Flat: Hot-Rolled Mini-Mill) (Exhibit K-10).\n7.1156 According to Korea2799, a comparison of the difference in profitability between mini-mills and\nintegrated producers reveals that: between 1999-2001, the only period in which mini-mills had a\nnegative operating profit was in interim 2001, when imports had declined to their absolute low point\nin terms of both absolute and relative levels. Moreover, this was the period (first half of 2001) when\nthe negative effect of a major demand downturn was felt as the USITC and the United States\nadmit.\n2800 In fact, the United States uses 1996 as the base profit in its numerical analysis due to the\nsimilarity of demand in 1996 and the first half of 2001. Mini-mills also lost money in 1996.2801\nTable 13: Comparison of Mini-Mill and Integrated Mill\nOperating Profitability and Imports as a Percentage of United States Production\n1996 1997 1998 1999 2000 Jan-June\n2000\nJan-June\n2001\nMinimill operating\nprofitability\n-1.5% 4.1% -3.4% 2.8% 4.9% 11.7% -4.1%\nIntegrated mill\noperating profitability\n-0.7% 4.1% 1.6% -10.4% -8.1% -0.1% -30.1%\nImports relative to all\nflat-rolled production\n10.0% 10.2% 13.2% 10.6% 10.5% 10.8% 7.4%\nSources: USITC Memorandum No. INV-Y-215, Tables STL20H3I.WK4 (Flat: Hot-Rolled Integrated) and\nSTL20H3M.WK4 (Flat: Hot-Rolled Mini-Mill) (Exhibit K-10); Korea first written submission , para. 84,\nChart 3.\n7.1157 According to Korea, a proper analysis of the role of minimills calls into serious question the\nUSITC's causation analysis that declining imports \"led prices down\" when it was mini-mills alone that\ngained market share between 1998 through interim 2001. More importantly, an analysis of the\nminimill part of the industry shows that an analys is of integrated and minimills together masks the\nrelative movements in domestic industry indicators and the role of imports in the market. The USITC\n\n2798 Korea's second written submission, para. 174.\n2799 Korea's second written submission, para. 175.\n2800 United States' first written submission, para. 1094.\n2801 United States' first written submission, para 1094.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfailed to properly identify and separate these significant effects from intra-industry competition and\ninstead, attributed them to imports.2802\n7.1158 Further, New Zealand argues that alt hough the USITC acknowledged that minimill\nproduction had an effect on prices and that it contributed in some part to the alleged injury, it failed to\nassess the full impact of intra-industry competition or provide a reasoned and adequate explanation of\nthe relationship of injury caused by this factor to any injury allegedly caused by imports. 2803 China\nand New Zealand argue that the USITC failed to identify, and explain, the nature and extent of the\ninjurious effects of intra-industry competition as distinguished from the alleged injurious effects of\nincreased imports, and to establish explicitly through a reasoned and adequate explanation, that injury\ncaused by this factor has not been attributed to increased imports.\n2804\n7.1159 Brazil asks what makes the USITC's simplistic explanation that: \"…the loss of Wool Act\npayment hurt lamb growers and feeders and cause d some to withdraw from the industry\", found\ninvalid by the Appellate Body in US – Lamb 2805, any different from the USITC's \"analysis\" in this\ncase regarding intra-industry competition. Acknowledging the greater volume of lower-cost minimill\ncapacity in the market, and finding that this lower- cost capacity did have an effect on prices, the\nUSITC offers yet another conclusory statement:\n\"[W]e find that minimills were not primarily responsible for the declines in domestic\nprices or an important cause of serious injury to the domestic industry, which is equal\nto or greater than the injury caused by increased imports.\"2806\n7.1160 Again, Brazil questions where the USITC actually separates and distinguishes causes in this\nstatement; where the reasoned and adequate explanation to support the conclusion are; and where\nthe USITC's actual analysis of the injurious effects of increased excess capacity on the industry is.\nBecause imports are a more important cause of injury than capacity increases, Brazil further questions\nwhether the USITC actually found that there was a genuine and substantial causal link between\nincreased imports and serious injury.\n2807\n7.1161 Finally, the United States cautions the Panel not to rely on Korea's comparisons of the\nvolumes of minimill and import shipments. Accord ing to the United States, these comparisons are\nmisleading because they compare double-counted minimill shipments (and capacity and production)\ndata to import shipment data that is not double-counted. 2808 The minimill shipment numbers used by\nKorea all double-count shipments of slab, hot-rolled carbon steel, and cold-rolled steel that were\ninternally consumed by minimills in the production of downstream CCFRS products. For example,\nthe record indicates that, of the 27.9 million tons of CCFRS shipped by minimills overall in 2000,\n16.043 million tons (or more than 57%) was internally transferred for the production of downstream\nproducts, the vast majority of which consisted of plate, hot-rolled and cold-rolled carbon flat steel.\n2809\nIn other words, if double-counting of internal tran sfers is eliminated, the actual tonnage of CCFRS\nshipped by the minimills is overstated in Korea's charts by at least a factor of two. By way of\ncontrast, the import shipment data used in Korea's charts do not double-count import shipments\nbecause, when these shipments are imported and used to produce downstream merchandise, they are\n\n2802 Korea's second written submission, para. 176.\n2803 New Zealand's first written submission, para. 4.161.\n2804 China's first written submission, para. 369; New Zealand's first written submission, para. 4.156.\n2805 Appellate Body Report, US – Lamb, paras. 185 and 186.\n2806 USITC Report Vol. I at 65.\n2807 Brazil's second written submission, para. 77.\n2808 These comparisons are contained in Korea's second written submission, paras. 169-176\n2809 See Minimill Trade Data, p. 1 (Exhibit US-60).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthen considered domestic production and shipments. The United States submits that, in other words,\nKorea's analysis relies on comparisons of overstated volumes of minimill shipments against import\nshipment data that are not overstated. In order to properly compare minimill shipment volumes\nagainst import volumes, Korea should have comp ared commercial shipments by minimills against\nimport shipments (as the United States did in its first written submission) because these numbers do\nnot double-count the internal transfers of CCFRS products made by minimills. When the Panel does\nso, it will recognize that there was a substantially smaller volume of shipments of CCFRS for\nminimills than for imports during each year of the period of investigation, thus making clear that\nimports were more likely to have a serious and adverse impact on domestic pricing during the period\nthan minimills.\n2810\n7.1162 In counter-response, Korea notes that in the second substantive meeting the United States\nconceded that the mini-mill data cited by Korea in its first written submission is accurate. It limited\nits objections to whether it was proper to compare import volumes to mini-mill shipments that\nincluded both commercial and internal shipments (the so-called \"double count\"). As Korea noted in\nits response, the mini-mill shipments reported by Korea in paragraphs 170 and 171 are stated on the\nsame basis that those shipments were included in the total US shipments in USITC Memorandum No.\nINV-Y-209, Table FLAT-ALT-7.\n2811 It is apparent that imports are being compared to total US\nshipments reported in Table FLAT-ALT-7, so it is equally apparent that imports are properly\ncompared to the mini-mill component of that figure.2812\n7.1163 In counter-response, New Zealand notes that the United States seeks to retrospectively justify\nthe USITC's conclusions by relying on evidence that was deleted from its report, in particular price\ninformation that allegedly suggested imports were underselling minimill production 2813 and that\nimport volumes exceeded minimill production. 2814 This data can form no part of the record for the\npurposes of this case. The United States had to demonstrate non-attribution \"explicitly, through a\nreasoned and adequate explanation\" before applying the safeguard measure. As New Zealand has\npointed out, the data does not appear anywhere in th e USITC Report and it is too late to try to justify\nthe USITC finding now, by reference to data not included in the USITC Report.\n2815\n7.1164 Also in counter-response, Japan argues that the USITC ignored evidence that Nucor, a\ndomestic minimill, was the price leader for hot-rolled and cold rolled steel products, two of the most\nimportant categories of CCFRS steel. 2816 Thisblind eye says Japan, is quite surprising, since the\n\n2810 United States' written reply to Panel question No. 40 at the second substantive meeting.\n2811 Korea's second written submission, paras. 170-171; Table FLAT-1 (US Exhibit 60), and Public\nVersions of Supplemental Material Cited in Views of Commissioners in Investigation No. TA-201-73, Steel,\nMemorandum No. INV-Y-209 (1 May 2002) (\"USITC Memorandum No. INV-Y-209\") (Exhibit CC-90).\n2812 Korea also points out that, as noted at the Second Substantive Meeting, any \"double counting\" issue\nis the direct result of the overly broad definition of the flat-rolled like product. No Respondent at the ITC\nendorsed the \"flatrolled\" like product. Respondents clearly argued that slab, hot-rolled, cold-rolled, corrosion-\nresistant, and plate constituted five separate like products.\n2813 United States' first written submission, paras. 508, 473-474, relying on Table Flat-1 in the USITC\nReport Vol. II at Flat-4, which has been blanked out.\n2814 Ibid., para. 512, relying on Table Flat-1 in the USITC Report, Vol. II at Flat-4, which has been\nblanked out.\n2815 New Zealand's second written submission, para. 3.137.\n2816 Joint Respondents' Post Hearing Brief on Flat-Rolled Steel (1 Oct. 2001) (filed by the Law Firm\nWillkie Farr & Gallagher) at 94 (Exhibit CC-53) (At the USITC's hearings in the recent AD investigation of\nhot-rolled steel, Nucor's CEO testified, \"If our order book is weak in the present quarter, we will lower our\nprices to increase orders. What happened in 2000? A period of very strong demand for hot-rolled. By the end\nof the first quarter and through the year, our order book for hot-rolled was falling. We responded by reducing\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC had explicitly relied on this evidence in ot her recent trade proceedings involving cold rolled\nsteel.2817 2818\n7.1165 Japan also submits 2819 that the USITC ignored data showing that minimills gained market\nshare with lower prices, particularly in 2000 and 2001:\nTable 14: Minimill / Import / Integrated Market Shares2820\nPeriod Import Share Minimill Share Integrated Share\n1H00 26.7% 21.8% 51.5%\n2H00 22.2% 25.9% 51.9%\n1H01 13.1% 31.4% 55.5%\n7.1166 According to Japan, not surprisingly, given that in 2001 most import sources were shut out of\nthe market by anti-dumping and countervailing duties orders, minimills were disproportionately the\nbeneficiaries, gaining twice as much market share as integrated firms.\n7.1167 Japan submits that the United States again tries to shift the focus to foreign capacity. 2821\nJapan reiterates that this comparison of crude aggregate capacity is incorrect. Since virtually all\nUnited States capacity stays in the United States market, minimill capacity remains almost\nexclusively in the United States market. Moreover, the USITC knows that minimills historically have\npriced to fill their mills, and try to maintain high rates of capacity utilization.2822 With such a business\nmodel, new minimill capacity is much more likely to affect domestic price levels than foreign\ncapacity.2823\n7.1168 Japan also submits that the United States also tries to shift the focus to aggregate shipment\nlevels.2824 However, in doing so, the United States fails to acknowledge that minimills produce\npredominately plate, hot-rolled, and cold rolled steel, and produce only limited galvanized steel and\nno slab.2825 The United States also considers only the level of shipments, not the trends over time.\n\nour prices.\" Ibid., citing Certain Hot -Rolled Steel from Argentina and South Africa, USITC Pub. 3446, Inv.\nNos. 701-TA-404 (Final) and 731-TA-898 and 905 (Final) (Aug. 2001), Transcript at 57-58 (statement of Mr.\nDiMicco). He also stated, \"Based on our previous ex perience, we believe as a low-cost producer worldwide its\ncertainly better to run at high capacity utilization with low prices than at low capacity utilization with low\nprices.\").\n2817 See Exhibit CC-34, Certain Cold-Rolled Steel Products from Argentina, Brazil, Japan, Russia,\nSouth Africa and Thailand, Inv. Nos. 701-TA-393 and 731-TA-829-830, 833-8324, 836, and 838 (Final) USITC\nPub. 3283 (Mar. 2000) at 22-23.\n2818 Japan's second written submission, para. 145.\n2819 Japan's second written submission, para. 146.\n2820 United States' first written submission, Exhibit US-60.\n2821 United States' first written submission, para. 511.\n2822 Joint Respondents' Prehearing Brief on Cold Rolled Steel (11 Sept. 2001) (filed by the Law Firm of\nWillkie Farr & Gallagher) (discussing how the United States domestic industry has consistently created and\nfully utilized its production facilities as evidenced by increasing shipments throughout the period) at 20-23\n(Exhibit CC-53).\n2823 Japan's second written submission, para. 147.\n2824 United States' first written submission, para. 512.\n2825 USITC Report at 65 (\"Hot rolled steel is the primary commercial product for minimills.\").\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFrom 1999 to 2001, when the domestic industry began to experience problems, import shipments\nwere falling and minimill shipments were increasing.2826\nLegacy costs\n7.1169 Korea argues that there is no question that legacy costs were a significant factor explaining\nthe poor condition of the industry. Korea, China, New Zealand and Brazil argue that the USITC\nacknowledged that legacy costs were causing injury to the domestic industry at the same time as\nimports.2827\n7.1170 Korea and Brazil assert that, without question, the USITC appreciated the severity of the\nlegacy cost situation. Even with import relief, the USITC admitted that the future viability and health\nof the industry could only be ensured by addressing these costs.2828 New Zealand further notes that the\nUSITC found that the funding of legacy costs is a \"vexing problem for the domestic industry\"; that\nthese costs \"have prevented needed consolidation within the domestic industry\"; pointed to \"[t]he\ndifficulties in meeting these obligations\"; described them as a \"longstanding problem\"; and concluded\nthey \"may have left certain members of the domestic industry less able to compete with low-priced\nimports\".\n2829\n7.1171 However, according to Korea and Brazil, the USITC then rejected the importance of legacy\ncosts claiming that \"respondents have offered no reason why the industry's longstanding problems\nwould cause no injury in 1996 or 1997 but then begin to depress prices and strangle revenue in 1998-\n2000\". Brazil argues that this statement defies the record and ignores the dramatic distinctions\nbetween different segments of the industry on this issue.\n2830 Korea argues clearly, legacy costs\ncontinued to significantly impact the health of the industry and legacy costs were the reason that the\nintegrated sector performed more poorly than the minimill sector of the industry. Therefore,\naccording to Korea, the USITC should have identified, distinguished, and separated those injurious\neffects of legacy costs, which they so clearly understood, before concluding that there was a\nsubstantial relationship between imports and the serious injury to the industry.\n2831\n7.1172 Brazil argues that the USITC's cursory examination and explanation of the legacy cost issue\ndid not match what the USITC clearly saw as a significant problem for the industry. According to\nBrazil, implicit in its statements was the reality th at legacy costs were affecting the domestic industry\nat the same time as imports. However, Brazil argues that the USITC did not ensure that it was not\nimputing to imports injury caused by this other ad mittedly important factor and that, therefore, the\nUSITC's analysis was not sufficient to meet the standard of Article 4.2(b).2832\n7.1173 In response, the United States notes that in its analysis, the USITC acknowledged that the\nlegacy costs had been, and continued to be, a long term obstacle to the prospects of consolidation in\nthe industry.2833 It noted, however, the issue of the industry's legacy costs had predated the period of\ninvestigation and that these costs had not prevented the industry from earning a reasonable rate of\n\n2826 Japan's second written submission, para. 148.\n2827 Korea's second written submission, para. 177; China's first written submission, paras. 359 and 362;\nNew Zealand's first written submission, para. 4.163; Brazil's first written submission, para. 204.\n2828 Korea's first written submission, para. 129; Brazil's first written submission, para. 207.\n2829 New Zealand's second written submission, para. 3.130.\n2830 Korea's second written submission, para. 177; Brazil's first written submission, para. 204.\n2831 Korea's first written submission, para. 131.\n2832 Brazil's first written submission, para. 207.\n2833 USITC Report, p. 64. Indeed, the USITC's factual report sets forth a lengthy discussion of the\nimpact these costs have had on the industry's condition. USITC Report, p. OVERVIEW-31-35.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nreturn in 1996 and 1997, before the surge of imports in 1998. 2834 Moreover, although the USITC\nexplicitly recognized that the burden of legacy costs varied between producers and had left certain\nproducers more vulnerable to injury from imports, it found that there was no record evidence linking\nlegacy costs to the price declines that caused serious injury to the industry during the latter part of the\nperiod of investigation.\n2835 Accordingly, the USITC reasonably discounted these costs as an other\nfactor causing injury to the industry during the period of investigation.2836\n7.1174 In counter-response, New Zealand argues 2837 that despite the fact that the USITC clearly\nappreciated the severity of the legacy cost situation, the USITC still managed to conclude, against the\nweight of its own reasoning and the evidence, that legacy costs,\n\"[A]re not responsible for the low prices that have injured the industry. We therefore\nfind that legacy costs are not a source of injury to the domestic industry equal to or\ngreater than increased imports.\"2838\n7.1175 New Zealand argues that there is an obvious non-sequitur here – why was the USITC only\nprepared to take legacy costs seriously if they depressed domestic prices, having just listed a range of\nother negative impacts?\n2839\n7.1176 The United States argues further that the USITC's finding that legacy costs had not\ncontributed to the declines in the industry's condition during the period is fully supported by the\nrecord evidence. In this regard, the USITC prepared an analysis of the financial impact these costs\nhad on the financial results of the industry in its Report. 2840 That analysis shows not only that legacy\ncosts did not contribute to the declines in the industry's financial condition during the period from\n1996 to 2000 but that the change in these \"costs\" actua lly benefitted the industry with respect to its\noperating results during this period. 2841 In this regard, that analysis shows that the aggregate net\nperiod cost for steel producers who had either defined benefit or defined contribution plans actually\ndeclined over the period; more specifically, the aggregate net periodic cost of the post-employment\npension and non-pension benefits for both defined benefit and defined contribution employers fell by\nUS$447 million during the period from 1996 to 2000.\n2842 Since these are the costs that are reflected in\nthe operating results of the industry 2843, the industry's \"legacy costs\" did not increase the industry's\ncosts over the period, as complainants suggest; instead, the industry's legacy \"costs\" actually reduced\n\n2834 USITC Report, p. 64.\n2835 USITC Report, p. 64.\n2836 United States' first written submission, para. 503.\n2837 New Zealand's second written submission, para. 3.130.\n2838 USITC Report Vol. 1, p 64.\n2839 New Zealand's second written submission, para. 3.131.\n2840 USITC Report, Table OVERVIEW-9.\n2841 USITC Report, Table OVERVIEW-9.\n2842 USITC Report, Table OVERVIEW-9. In this regard, the aggregate net periodic cost for these firms\nfor legacy costs consistently declined during the period, from 1.123 billion dollars in 1996 to 834 million dollars\nin 1998 to 676 million dollars in 2000. Ibid. The aggregate net periodic cost of these expenses is calculated by\nadding the net periodic costs (or benefits) of post-employment pension and non-pension benefits for defined\nbenefit plan employers to the net pension plan expense and other post-employment benefits for defined\ncontribution plan employers. Ibid. These are th e amounts recognized in a company's operating income\nstatements. Ibid.\n2843 It is important to note that the items marked \"amounts recognized in financial statements\" in Table\nOVERVIEW-9 reflect liability or asset amounts that are included in a company's balance sheet, not its\nstatements of operating results. USITC Report, pp. 33 and 35.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe industry's aggregate COGS over the period, thus increasing the industry's operating income levels\nsomewhat during the period of investigation.2844\n7.1177 The United States argues that the USITC was therefore correct when it found that the\nindustry's legacy costs had not contributed to the serious injury being experienced by the industry\nduring the period of investigation. Although the complainants correctly note that the USITC\nrecognized that legacy costs represented a \"vexing problem\" for the industry, they ignore the fact that\nthe USITC clearly stated that the legacy cost issue was a problem predating the period of investigation\nthat would hinder the industry's future efforts to adjust, but did not contribute significantly to the\npricing or cost issues that caused the industry's injury during the period of investigation.2845\n7.1178 In counter-response, New Zealand submits that the USITC Report actually concluded the\nopposite. It conceded a range of injurious effects caused by legacy costs, but then sidelined them. As\na result, it made no attempt whatsoever to assess their nature and extent and their injurious effect as\nseparated and distinguished from increased imports.2846\n7.1179 Brazil argues that despite the fact that the USITC notes that \"the issue of legacy costs varies\ntremendously among domestic producers\", no effort was made by the USITC to distinguish between\nproducers with massive legacy cost burdens and producers with no such burdens. In the CCFRS\nindustry, it would have discovered that the dist inction falls along the type of technology used to\nproduce steel. Integrated mills shoulder an overwhelmingly disproportionate share of the legacy costs\nwithin the industry. Yet, according to Brazil, th e USITC's analysis was oblivious to the distinction,\nincluding what it meant for the integrated industry as massive increases in minimill capacity were\nbeing ramped up well into 2000.2847 In this regard, New Zealand argues that the fact that \"the burden\nof legacy costs varies tremendously among domestic producers\" is not a reason to dismiss legacy\ncosts as a cause of injury. In fact, according to New Zealand, it confirms the conclusion already\nreached that this simply served to intensify the al ready severe effects on integrated mills of domestic\nintra-industry competition.2848\n7.1180 In New Zealand's view, the fact that the problem of legacy costs may have predated the period\nof investigation and did not comprise a new issue for the industry, is irrelevant if, as they did, those\ncosts continued to erode competitiveness and profit during that period. New Zealand submits that in\nterms of Article 4.2(b), they \"are causing injury to the domestic industry at the same time [as\nincreased imports]\". New Zealand also argues that the fact that certain parts of the industry were able\nto operate profitably at one point in the period of investigation is also, by itself, irrelevant: The\nquestion is whether legacy costs nevertheless caused injury, at this or at other points.\n2849 N e w\nZealand submits that clearly, the fact that legacy costs have been present for some time is irrelevant so\nlong as legacy costs are still \"causing injury to the domestic industry at the same time as [increased\nimports]\", in terms of Article 4.2(b). 2850 2851\n7.1181 New Zealand notes costs of between US$30 and US$65 per ton of steel produced by\nintegrated mills existed, totalling across the industry between US$1.7 and US$3.6 billion. In terms of\ncurrent costs, integrated producers surveyed by the USITC had to cover US$742 million in post\n\n2844 United States' first written submission, para. 504.\n2845 United States' first written submission, para. 505.\n2846 New Zealand's second written submission, para. 3.133.\n2847 Brazil's first written submission, para. 206.\n2848 New Zealand's first written submission, para. 4.167.\n2849 New Zealand's first written submission, para. 4.166.\n2850 New Zealand's first written submission, para 4.166.\n2851 New Zealand's second written submission, para. 3.134.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nemployment benefits in 2000. Further, during the same year, the benefit obligations of steel\nproducers surveyed by the USITC exceeded fund assets by US$6.6 billion.2852\n7.1182 Korea notes2853 that the United States now cites tables in the Staff Report and data to suggest\nthat the short-term portion of legacy costs, which, says Korea, were enormous, declined somewhat\nduring the period. 2854 Korea submits that whether or not they declined, the absolute weight of such\nlegacy costs on the performance of the integrated producers in the industry is undeniable 2855 and was\nreaffirmed by the USITC in its remedy recommendation to the President. As Commissioner Okun\nobserved:\n\"[W]hile the Commission did not find these alternative causes [pension costs,\nhealthcare costs, environmental clean-up costs, and certain labor-related issues] to be\na more important cause of injury...than imports, this does not mean that these issues\nshould not be addressed as part of a remedy that will facilitate positive adjustment to\nimport competition by lowering costs and allowing the industry to restructure.\"2856\n7.1183 China and New Zealand argue that the USITC's analysis of legacy costs fails to identify and\nexplain the nature and extent of the injurious effects of legacy costs as distinguished from the alleged\ninjurious effects of increased imports, and to establish explicitly through a reasoned and adequate\nexplanation, that injury caused by this factor is not attributed to increased imports. 2857 In particular,\nChina argues that the USITC failed to explain why legacy costs were a problem, how this problem\nimpacted on the situation of the industry, how legacy costs had prevented needed consolidation and\nthe result that this had on the industry.\n2858\nBuyer consolidation\n7.1184 China argues that the USITC acknowledged buyer consolidation as a cause of injury. 2859\nChina further argues that the USITC failed to explain the nature and extent of that impact. According\nto China, it is not enough to merely state that a factor cannot, on its own, explain a substantial decline\nin prices. Rather, the requirements of the Agreement on Safeguards dictate that the injurious effects\nof all factors be identified.\n2860\n7.1185 In defence, the United States argues the USITC addressed the argument made by foreign\nrespondents that buyer consolidation had impacted the bargaining power and profits of the\nindustry.2861 After recognizing that there had been some consolidation of buying operations by\nautomotive manufacturers and other steel purchasing sectors, the USITC discounted this factor as a\ncause of injury, noting that it had been on-going for a number of years and that it pre-dated 1998, the\n\n2852 New Zealand's first written submission, paras. 4.164-4.165; New Zealand's second written\nsubmission, para. 3.133.\n2853 Korea's second written submission, para. 179.\n2854 United States' first written submission, para. 504.\n2855 The Chairman of Bethlehem Steel specifically testified as to the magnitude of these costs, as\nCommissioner Okun noted: \"We now have 13,000 active workers trying to support 74,000 dependent families\nwhich is over a hundred thousand actual people that small work base is trying to support.\" USITC Report, Vol.\nI, p. 442, n. 70 (Exhibit CC-6).\n2856 USITC Report, Vol. I, p. 442, n. 69 (emphasis added) (Exhibit CC-6).\n2857 China's first written submission, para. 368; New Zealand's first written submission, para. 4.162.\n2858 China's first written submission, para. 368.\n2859 China's first written submission, paras. 359 and 364.\n2860 China's first written submission, para. 370.\n2861 USITC Report, p. 65.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nyear of the import surge. 2862 Moreover, it stated that it found no evidence indicating that this\nconsolidation had an impact on domestic pricing or that it had been a cause of serious injury to the\nindustry.\n2863\n7.1186 The United States argues that given that China has not offered any substance to support its\narguments, it is clear that the USITC's findings in this regard are reasonable and that the USITC\nproperly discounted the argument that purchaser consolidation was a source of injury to the\nindustry.2864\n7.1187 China argues that purchaser consolidations are an on-going process covering the whole period\nof investigation. As they are able to reduce the bargaining power and the profit margins of domestic\nproducers, the USITC should have distinguished these effects from the impact of imports and nourish\nits findings with 'substance'. China submits that the USITC failed to do so.\n2865\nPoor management\n7.1188 China notes that the respondents argued before the USITC that bad corporate decisions\nincreased companies' debt load and were responsible for poor financial performance and bankruptcies.\nAccording to China, the USITC, in response, merely stated that since the financial position of the\nindustry \"weakened after imports surged\", it result ed from injury caused by increased imports and,\nthus, poor financial decisions cannot be a cause of injury, especially since increased debt load cannot\nexplain the price declines. China argues that this is not an answer. When the USITC states that a\nfactor is not a cause because another factor is the cause, it does not give the reasons why the former is\nnot a cause. In China's view no explanation whatsoever was provided.\n2866\n7.1189 In response, the United States notes that the USITC addressed the argument made by\nimporters and foreign producers that bad management decisions, such as the industry's capital\ninvestment decisions, had caused injury to the industry. 2867 The USITC found this argument\n\"unpersuasive\", noting that the increased debt load and other management decisions of the industry\ndid not explain the decline in prices that occurred during the period.\n2868 Moreover, the USITC stated\nthat the record showed that substantial declines in the industry's performance first began in 1998,\nwhen imports surged into the market and began driving prices downward. 2869 It noted that these\nimports prevented the industry from maintaining or achieving high levels of profitability and that the\nindustry's degree of debt was a result of that import competition, rather than being a cause of\ninjury.2870 In sum, the USITC properly identified the nature and extent of the injury caused by this\nother factor, found that there was no evidence that bad management decisions caused injury to the\nindustry, and reasonably dismissed this alleged \"injury\" factor as a possible source of injury.\n2871\n\n2862 USITC Report, p. 65.\n2863 USITC Report, p. 65.\n2864 United States' first written submission, para. 517.\n2865 China's second written submission, para. 222.\n2866 China's first written submission, para. 375.\n2867 USITC Report, p. 64.\n2868 Ibid.\n2869 Ibid.\n2870 Ibid.\n2871 United States' first written submission, paras. 515-517.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1190 The United States argues that given that China has not offered any substance to support its\narguments, it is clear that the USITC's findings in this regard are reasonable and that the USITC\nproperly discounted the argument that poor management was a source of injury to the industry.\n2872\nNAFTA imports\n7.1191 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic certain flat steel industry, which is found in the USITC\nReport was made on the grounds of data which included imports from NAFTA countries. However,\nChina believes that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports\" only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n2873\n7.1192 China further argues that in the Supplementary Report, the USITC was required to assess the\ninjury caused by imports from Mexico and Canada and to ensure that this injury would not be\nattributed to increased imports from non-NAFTA countries. China argues that it did not do so. China\nfurther argues that the USITC provided no explanation whatsoever that injury caused by imports from\nMexico and Canada was not attributed to increased imports and there is no reason to believe that\ninjury caused by imports from Mexico and Canada were not in fact attributed to increased imports.\n2874\n7.1193 In this regard, the European Communities notes that the USITC concluded that imports from\nMexico accounted for a substantial share of total imports and \"contributed importantly\" to injury. The\nEuropean Communities notes that the President later decided to exclude imports from Mexico from\nthe scope of the measure.\n2875 China notes that Canada and Mexico belonged to the five top suppliers\nof CCFRS products during the period of investigation. The rate of increase in imports from Mexico\nwas higher than the rate of increase in total imports, and the AUV for imports of the product\nconcerned from Mexico were consistently below average unit value of imports from other sources2876-\nable to undersell United States producers.2877\n7.1194 In light of the foregoing, the European Co mmunities, China New Zealand and Brazil submit\nthat, clearly, the NAFTA imports that were excluded from the measure were an \"other\" factor for the\npurposes of non-attribution. However, the United States failed to analyse this factor and to establish\nexplicitly that its effects were not attributed to non-NAFTA imports. 2878 More particularly, the\nEuropean Communities argues that despite finding that Canada was one of the top five importers and\nthat Mexican imports contributed importantly to the serious injury suffered by the domestic industry,\nthe USITC did not undertake a non-attribution analysis for the injurious effects of these excluded\nimports.\n\n2872 United States' first written submission, paras. 515-516.\n2873 China's first written submission, para. 380.\n2874 China's first written submission, para. 383.\n2875 European Communities' first written submission, para. 469.\n2876 USITC Report, Vol. I, p.66.\n2877 China's second written submission, para. 224.\n2878 European Communities' second written submission, para. 376; China's second written submission,\npara. 224; New Zealand's written reply to Panel question No. 82 at the first substantive meeting; Brazil's first\nwritten submission, para. 230;\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1195 The United States simply insists that it is not required to undertake such an analysis. For the\nUnited States' response, see paragraph 7.1066 et seq. 2879\n7.1196 Brazil argues that the USITC's treatment of injury and causation was perfunctory and\ninadequate with regard to NAFTA imports. The USITC only noted that \"…we would have reached\nthe same result had we excluded imports from Canada from our injury analysis.\" Yet, according to\nBrazil, the general discussion of causation and the role of alternative causes by the USITC never once\nmentioned the role of non-NAFTA imports as distinguished from all imports. Brazil argues that no\nattempt at factual analysis for non-NAFTA imports was ever attempted. 2880 Brazil argues that the\nUSITC's response to the USTR with regard to NAFTA imports was no better than its original\nanalysis. In Brazil's view, there was no factual analysis and only the simple statement\n that \"the same\nconsiderations that led us to conclude that increased imports of CCFRS are a substantial cause of\nserious injury to the domestic industry are also applicable to increased imports of CCFRS from all\nsources other than Canada and Mexico.\"2881\n7.1197 Relying upon the Appellate Body decisions in US – Wheat Gluten and US – Line Pipe, Brazil\nargues that a cursory USITC analysis of non-NAFTA imports does not meet the parallelism\nrequirement under the Agreement on Safeguards. In the instant case, Brazil argues that the USITC\ndid not conduct any specific evaluation of non-NAFTA imports as required by parallelism. Rather, it\nevaluated NAFTA imports, concluding that the ex clusion of NAFTA imports would not change its\nfindings of injury and causation as to total imports. Brazil submits that in doing do, it repeated the\nvery same mistakes previously highlighted by the Appellate Body.\n2882 Brazil argues that the USITC's\nunsupported conclusion that it \"would have reached the same result\" in justifying the exclusion\nNAFTA countries from the recommended measure was the very same language the Appellate Body\nfound to fail the parallelism requirement in US – Line Pipe. Brazil asserts that the statement does not\nmeet the obligation to explain how the facts support a finding that non-NAFTA imports alone caused\nserious injury or threat of serious injury.\n2883\n7.1198 Brazil further argues that the USITC failed to fulfil its obligation to provide a \"reasoned and\nadequate explanation that establishes explicitly\" that imports alone caused serious injury to the\ndomestic industry because it failed to establish that non-NAFTA imports alone caused serious injury;\nits conclusions about the causal link between non-NAFTA imports and serious injury were vague and\nmerely implied or suggested why non-NAFTA imports alone caused serious injury. The USITC's\nanalysis therefore did not satisfy the parallelism requirement.2884\nExisting anti-dumping and countervailing duty proceedings and orders\n7.1199 Korea and Brazil note that the USITC admitted that anti-dumping and countervailing duties\norders \"to some extent staunched the flow of imports after 1998\".2885 However, Korea argues that the\nUSITC failed to properly consider the effect of anti-dumping and countervailing duties, which\nsubstantially limited import volumes and repaired injury caused by unfairly traded imports. The vast\n\n2879 European Communities' second written submission, para. 376.\n2880 Brazil's first written submission, para. 230.\n2881 Brazil's first written submission, para. 230.\n2882 Brazil's first written submission, para. 231.\n2883 Brazil's first written submission, para. 232.\n2884 Brazil's first written submission, para. 233.\n2885 Korea's first written submission, para. 139; Brazil's first written submission, para. 208.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmajority of imports which had increased in the 1997-1998 period were hot-rolled products which\nwere subject to significant restrictions in the form of anti-dumping and countervailing duties.2886\n7.1200 Brazil argues that, in fact, overall, imports were down significantly from 1998 levels, and flat\nin 1999 and 2000. Individual imports subject to anti-dumping and countervailing duties orders and\ninvestigations were down sharply. For finished CCFRS products, the trend was also down sharply.\nAccording to Brazil, only slab imports increased, driven by the domestic industry's own demand for\nthat product.2887\n7.1201 Korea argues that the scope of the injury caused by unfairly traded imports and repaired by\nthe anti-dumping and countervailing duties orders should have been separately identified and\nseparated. Such an analysis, if performed, woul d have shown that the injury remaining was that\ncaused by the other factors discussed above.\n2888\n7.1202 In response, the United States argues that, as a legal matter, there is no provision in the\nAgreement on Safeguards that requires a competent authority to exclude imports subject to anti-\ndumping or countervailing duty orders from its calc ulus of assessing the contribution of imports to\ninjury. On the contrary, the basic provisions of the Agreement on Safeguards require a competent\nauthority to assess serious injury and causation by examining whether \"imports\" – that is, all imports,\nnot only \"fairly traded\" imports – have caused serious injury to the domestic industry producing the\nlike or directly competitive article. Indeed, unless a particular exception in the Agreement applies, the\nremedy imposed must apply to all imports of the product concerned \"irrespective of its source\",\nwithout regard to whether some imports are subjec t to anti-dumping or countervailing duty orders.\nThe Agreement does not suggest that a competent authority should treat imports subject to\nanti-dumping or countervailing duty orders as though they were a \"non-import\" injury factor.\n2889\n7.1203 The United States also submits that the premise of Brazil's and Korea's argument is that the\nimposition of anti-dumping or countervailing duties on imports from a particular country eliminates\nall of the injurious effects these imports have had, or could have, on an industry. Under the AD and\nSCM Agreements, an investigating authority may impose duties on imports if dumped or subsidized\nimports are causing \"material\" injury to a domestic industry producing the like product. As the\nAppellate Body has stated, the \"material\" injury standard contained in these Agreements requires a\nlower amount of injury than does the \"serious injury\" standard of the Agreement on Safeguards.\nThus, an investigating authority need only dete rmine in an anti-dumping or countervailing duty\ninvestigation whether there is the requisite amount of injury – i.e., \"material\" injury – needed to\nsatisfy the requirements of the AD and SCM Agreements; the authority has no need to assess whether\nthe industry is suffering a higher – i.e., \"serious\" – level of injury than the \"material\" level required\nunder the AD and SCM Agreements.\n2890 Accordingly, although anti-dumping duties and\ncountervailing duties are remedial duties intended to offset the level of subsidies or the amount of\n\"dumping\" found for imports from a country and, by doing so, to remedy the \"material\" injury caused\nby these dumped or subsidized imports, they do not, and indeed may not, offset all of the injury that\nan industry can suffer as a result of those imports. Indeed, oftentimes, the orders do not offset all of\nthe material injury caused by unfairly traded imports even after their imposition. In other words, even\nwith the imposition of duties to offset these \"unfair\" trade practices, imports subject to anti-dumping\n\n2886 Korea's first written submission, para. 139.\n2887 Brazil's first written submission, para. 209.\n2888 Korea's first written submission, para. 140.\n2889 United States' first written submission, para. 524.\n2890 United States' first written submission, para. 525.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nan countervailing duty orders can still cause addi tional injury to the industry that would qualify as\nserious injury under the Agreement on Safeguards .2891\n7.1204 The United States argues that indeed, the record did not show that the orders imposed on\nCCFRS products during the period of investigation had eliminated the injurious effects of these\nimports. The United States submits that, as the USITC correctly noted in its decision, although\nimposition of orders on hot-rolled carbon steel and plate stemmed the flow of these imports to some\nextent, the record data showed that reasonably substantial volumes of imports from the countries\ncovered by the orders still continued to enter the United States, as did much more substantial volumes\nof imports from countries not covered by the orders. For example, despite the fact that anti-dumping\nduty orders were imposed on carbon steel plate imports from China, Russia and the Ukraine in\nOctober 1997, China, Russia and the Ukraine remained the third, fourth and ninth largest exporters of\nplate to the United States in the year 2000.\n2892 Moreover, even with the imposition of anti-dumping\nduty orders on hot-rolled steel from Russia, Japan, a nd Brazil, prices for hot-rolled steel continued to\nbe depressed in the market after imposition of the orders. Although anti-dumping orders were\nimposed on these imports in June and July 1999, the USITC correctly noted, the \"corrosive effects\" of\nthese low-priced imports still continued to impact the industry's pricing levels, as evidenced by the\nfact that the pricing levels for hot-rolled did not come close to recovering to their 1997 levels, even\nafter imposition of the orders. On the contrary, after imposition of these orders, the record indicated\nthat hot-rolled prices continued declining through the end of June 2001, after a small initial boost in\nthe first two quarters of 2000.\n2893\n7.1205 In counter-response, Korea argues that the United States mischaracterizes Korea's argument\nregarding the required non-attribution analysis with respect to unfair trade practices remedied by anti-\ndumping and countervailing duties orders. 2894 Korea is not maintaining that the imposition of these\nduties on imports automatically eliminated \"all of the injurious effects\". Rather, Korea's position is\nthat the United States had to examine the extent to which the orders and duties had eliminated some or\nall of the injurious effects of imports. Clearly, the orders could have remedied the injury caused by\nunfairly traded imports entirely or to some extent.\n2895 According to Korea, the USITC did not\ninvestigate this and merely concluded that \"the orders had not fully eliminated the injurious\neffects\".2896 In Korea's view, this \"analysis\" does not establish the extent of injury caused by those\nunfairly traded imports and accordingly remedied by such orders, if any, and therefore, the United\nStates has not complied with its obligations under Article 4.2(b) of the Agreement on Safeguards.2897\n7.1206 Korea submits, however, that the United States failed to examine the anti-dumping and\ncountervailing duties orders and its remedial effects on the injury caused by unfairly traded imports to\nthe industry concerned in the current case. 2898\n\n2891 United States' first written submission, para. 526.\n2892 United States' first written submission, para. 528.\n2893 United States' first written submission, para. 529.\n2894 United States first written submission, para. 525.\n2895 Korea's second written submission, para. 182.\n2896 United States' first written submission, para. 528. It is interesting that the United States suggests\nthat imports of plate continued to enter at injurious levels when imports of plate had declined so low as the\nresult of anti-dumping and countervailing duties orders that even the domestic industry conceded that imports of\nplate were not causing injury to plate producers. See Korea's first written submission, para. 88 and\nfootnote 131.\n2897 Korea's second written submission, para. 183.\n2898 Korea's second written submission, para. 184.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nEconomic analyses submitted to the USITC\n7.1207 For a broader discussion on this issue see paragraph 7.997 et seq . In addition, Japan and\nBrazil argue that instead of attempting to separate and distinguish alternative causes as required by the\nAgreement, the USITC held steadfast to rudimentary (and often wrong) trends analysis as the sole\nmeans of assessing the effect of alternative causes on the performance of the domestic industry. The\nUSITC had at its disposal econometric studies containing evidence of the relative role of different\ncauses, which demonstrated qualitatively and quantitatively that several of these causes were\ndramatically more important than imports and that one could separate and distinguish the various\neconomic factors. However, the USITC dismissed these studies that had been prepared by\nrespondents with respect to the three most important CCFRS products – hot-rolled steel, cold-rolled\nsteel, and corrosion resistant steel.\n2899\n7.1208 Japan and Brazil argue that the USITC ignored these studies, although they were a prominent\npart of the respondents' written briefs and oral presentations at the hearing. In the final decision, the\nUSITC made little mention of them, relegating a reference to them to a footnote and, thus, provided\nscant recognition of what could have been the most relevant evidence for meeting the obligation to\nseparate and distinguish the role of alternative causes.\n2900\n7.1209 Japan and Brazil further argue that the USITC also seems to have ignored its own staff\nassessment of the studies. In a memo requested by Commissioner Bragg, USITC staff reported that\nboth the respondents' and the petitioners' econometric studies demonstrated that the imports of cold-\nrolled steel and corrosion resistant steel had no discernible impact on domestic price levels. The only\npoint of disagreement was with respect to hot-rolled steel. Brazil and Japan argue that this consensus\nevidence by all of the economists that cold-rolled and corrosion resistant imports had no effect on\ndomestic price levels was simply ignored by the USITC.\n2901\n7.1210 Japan and Brazil also argue that whereas the studies provided product-specific data, the\nUSITC seemed content to discard the more specific evidence in light of its single like product that\ncombined all CCFRS products. Brazil and Japan submit that the USITC did have to consider specific\nproduct pricing evidence as it was impossible to generate prices for \"CCFRS steel\". However, Brazil\nargues that when it came to considering product-specific economic studies which led to conclusions it\ndid not like, the USITC \"placed little weight\" on them, opting instead to rely on aggregate information\nfor its super generic – like product.2902\n7.1211 In response, the United States argues that the USITC properly dismissed the conclusions in\nthe econometric study and those in a similar study submitted by the domestic industry because both\nstudies had \"serious\" methodological limitations. The two studies in question both purported to be\ncomprehensive economic studies establishing the extent to which imports impacted pricing in the\nCCFRS market. Not surprisingly, the study submitted by the domestic industry purported to show\nthat \"imports were the most important determinant of the decline in domestic hot- and cold-rolled\nsteel products\", while the study submitted by foreign respondents purported to show that imports were\n\n2899 Japan's first written submission, para. 276; Brazil's first written submission, para. 212.\n2900 Japan's first written submission, para. 278; Brazil's first written submission, para. 213.\n2901 Japan's first written submission, para. 280; Brazil's first written submission, para. 214.\n2902 Japan's first written submission, para. 279; Brazil's first written submission, para. 215.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnot a particularly important factor in price declines for hot-rolled, cold-rolled and galvanized (i.e.,\ncorrosion-resistant) steel.2903\n7.1212 The United States submits that, as can be seen from the staff memorandum analysing the\nstudies, the USITC's economic staff found that the economic \"models\" in both studies contained\nsubstantial analytical flaws. The USITC staff found that the domestic industry's study was flawed\nbecause it assumed, without laying an evidentiary foundation, that integrated producers would make\nchanges in their production patterns due to changes in profitability levels. Moreover, the staff noted\nthat the domestic industry's study failed to make the necessary distinctions between factors reflecting\ndemand variations and variations in domestic and foreign competition in the market. As a result, the\nstaff concluded, the domestic study simply did not provide sufficient statistical evidence of its\nconclusions, that is, that the \"effect of import competition was significantly greater than the effect of\nother factors\". In other words, the USITC staff f ound that the author of the study had not proved his\nthesis.\n2904\n7.1213 According to the United States, the USITC staff found that the study submitted by the foreign\nrespondents had serious methodological flaws as well. Its most significant flaw, they noted, was that\nthe study was not actually a \"formal\" economic model but simply reflected an \"informal\" argument\nthat \"'massive' increases in domestic capacity, primarily by low-cost mills, [had] driven down prices\".\nThe staff noted, the study's \"main argument[,] that domestic competition was the biggest source of\ndomestic price decline[,] is only weakly supported by the empirical results\". In their final word on the\nmatter, the USITC economic staff stated that the author of the study \"did not provide evidence that the\neffect of import prices and volumes was significantly less than the other factors\". In other words, the\nUSITC staff found that the author of this study had not provided support for his basic argument.\n2905 In\nsum, the USITC reasonably chose to discount these studies because the USITC and staff both found\nthe two studies to be deeply flawed.2906\n7.1214 In counter-response, Japan argues that the Panel should read the main body of the USITC\nstaff memorandum, not just the summary conclusions to which the United States tries to direct\nattention. The main body makes clear two keys point s. First, the criticism of how the interested\nparties' study modeled intra-industry competition applies only to that factor – not to the other factors\nthat were studied. Thus, the USITC's own staff economists implicitly embraced the findings about the\nrelative roles of demand and imports, changing raw material prices and imports, and domestic\ncapacity and imports. Even if one were to discount interested parties' arguments about minimill\ncompetition, the other factors overwhelmingly matter more than imports in explaining price declines.\nThere is simply no basis in the body of the memorandum to support the overbroad conclusion that the\ninterested parties' studies should be rejected.\n2907 Japan submits that, the USITC staff memorandum\nnotes that the domestic industry study and the interested parties' study reached essentially identical\nconclusions on cold rolled steel and galvanized steel. Both studies found that imports of those two\nkey CCFRS products had no meaningful effect on price levels.\n2908 In Japan's view, the USITC\nignored this finding because it substantially undercut its decision to bundle various CCFRS products\ninto one like product. Having decided on such an over-broad like product grouping, the USITC\n\n2903 United States' first written submission, para. 519; United States' second written submission,\npara. 132.\n2904 United States' first written submission, para. 520.\n2905 United States' first written submission, para. 521.\n2906 United States' first written submission, para. 522.\n2907 Japan's second written submission, para. 153.\n2908 USITC Staff Memorandum (EC-Y-042) to Commissioner Bragg, Inv. No. TA-201-73 Steel\n(22 October 2001) (Exhibit CC-10).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproceeded to ignore any inconvenient evidence about the individual steel products that made up that\ngrouping. In the end, a single Commissioner requested an analysis from a staff economist to justify\nignoring the studies.\n2909 The resulting perfunctory memorandum contained a conclusion that only\nloosely connected to the discussion in the main body of the memorandum. The Commission then\nlargely ignored the studies, rather than giving them the careful attention they deserved.2910\n7.1215 The United States responds by noting that the models submitted by both the respondent and\ndomestic parties during the steel investigation did not indicate that imports of carbon flat-rolled\nmerchandise had a minimal impact on domestic cold-rolled and corrosion-resistant prices during the\nperiod of investigation. As Brazil should be aware, the econometric model provided by the domestic\nsteel industry to the USITC was intended to show that imports of carbon flat-rolled steel \"were the\nmost important factor for determining the price of flat steel products\" in the US market. In addition to\nclaiming that imports of plate and hot-rolled steel had important price effects on the domestic price of\nplate and hot-rolled steel products, the model also showed that imports of cold-rolled steel had\nimportant \"own price\" effects on domestic cold-rolled prices in the US market, while the price of all\ncarbon flat-rolled imports had important price effects on the price of galvanized (corrosion-resistant)\nproducts. Further, as the economic consultant for the domestic industry testified during the hearing,\nthe domestic industry's model also showed that demand and the price of factor inputs had only a\n\"secondary impact\" on domestic prices, while capacity utilization was not statistically significant and\nhad a small effect on domestic prices.\n2911\n7.1216 The United States also submits that the foreign respondents' economic model did not quantify\nthe overall level of injury caused by imports. As both Japan and Brazil concede 2912, the model only\npurported to estimate the effects of imports on domestic prices, which is only one of several factors\nthat should be considered by a competent authority under the Agreement on Safeguards. The model\ndid not \"quantify\" the effects of imports and other injury factors on the industry's production,\nshipment, or sales revenue levels, its productivity and employment levels, its capacity utilization rates,\nits profitability levels, or its capital investment levels.\n2913 In other words, neither Japan nor Brazil has\ncome close to describing a model that addresses all of the factors set forth in the Agreement on\nSafeguards.\n7.1217 The United States notes that although Japan and Brazil explicitly concede that the Agreement\non Safeguards does not require the use of econometric models, Japan and Brazil assert that a\ncompetent authority must, in fact, use an econometric analysis in its analysis if such an analysis is\nsubmitted by a party to the investigation and the data is available. 2914 The Agreement on Safeguards\nsimply does not contain language suggesting that parties have a right to dictate the analytical\nmethodology that should be used by a competent authority in its causation analysis, nor have Japan\nand Brazil pointed to any such language in the Agreement. 2915 While parties are clearly free to\nsuggest possible analytical approaches during the course of an investigation, the Agreement does not\nrequire the competent authority to respond to thes e suggestions by conducting a full-blown causation\nanalysis to account for every methodology offered by the parties. Moreover, as long as the United\nStates complies with its obligation to adequately and clearly explain why there is a \"genuine and\n\n2909 Ibid.\n2910 Japan's second written submission, para. 154.\n2911 United States' written reply to Panel question No. 38 at the second substantive meeting.\n2912 Japan's written reply to Panel question No. 85 at the first substantive meeting; Brazil's written\nreply to Panel question No. 85 at the first substantive meeting.\n2913 United States' second written submission, para. 133.\n2914 Japan's written reply to Panel question No. 85 at the first substantive meeting; Brazil's written\nreply to Panel question No. 85 at the first substantive meeting.\n2915 See Agreement on Safeguards, Article 3.1.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsubstantial\" causal link between imports and the serious injury being suffered by the industry, there is\nnothing in the Agreement that suggests that United St ates must \"test\" its conclusions by performing a\nseries of economic modelling exercises.2916\nFailure to provide a reasoned and adequate explanation\n7.1218 The European Communities, Japan and Brazil argue that the USITC Report fails to meet the\nstandard of \"an adequate explanation\" which \"addresses fully the nature and complexities of the data\".\n2917 In particular, Brazil notes that the USITC identifies in its report six \"alternate sources of injury\"\nthat were the source of exhaustive discussion during the USITC investigation. Japan and Brazil argue\nthat the USITC failed to meet its obligation in explaining the effects of these other factors. Japan\nargues in particular that with respect to the USITC's explanation of how it met the non-attribution\nobligation, the USITC discussion is disappointingly sparse. Although there had been extensive\nargumentation and data on each of the alternative causes, the USITC devotes only a paragraph or two\nto summarily dismissing these alternative causes.\n2918 The European Communities, Japan and New\nZealand and Brazil argue that what little explanation was offered did not meet the requirement to\n\"establish explicitly, with a reasoned and adequate explanation\" that injury caused by these factors\nwas not attributed to increased imports as most recently reiterated by the Appellate Body in US – Line\nPipe.\n2919\n7.1219 Japan argues that each of the factors discussed above was important and collectively they\nsevered any credible connection between imports and the condition of the domestic industry. If one\ncombines the impact of the other factors, and compares them to imports, a reasonable authority simply\ncould not conclude that imports caused the problems.\n2920 Japan further argues that the effects of these\nvarious factors are interrelated and mutually reinforcing, particularly at the end of the period of\ninvestigation, when the United States industry encountered its only significant decline in operating\nresults.2921 Yet, Japan argues that the USITC analysis provides no discussion of these interactions.\nInstead, the USITC superficially evaluated the importance of each other factor in isolation relative to\nincreased imports, and did not either separate or distinguish the injury attributable to such other\nfactors, thus failing to meet its obligation to address fully the complexities of the data.2922\n7.1220 In response, the United States submits that like Japan, the United States agrees that the effects\nof most injury factors, including increased imports, are oftentimes \"interrelated and mutually\nreinforcing\" and are therefore difficult to disentangle. Similarly, the United States agrees that, when\none of these factors intensifies its injurious effect over time, it is likely that it will also intensify the\ninjury experienced by the industry due to the interplay of that factor with other factors causing injury,\nsuch as increased imports. In fact, it is precisely for these reasons that the United States has\nconsistently taken the position in WTO disputes that it is not realistic as an economic matter to expect\na competent authority to precisely identify and separate the injury effects of individual factors in\ncomplex and sophisticated markets, such as the steel market.\n2923 Nonetheless, Japan is clearly\nmistaken in asserting that a competent authority must assess whether imports are a more important\n\n2916 United States' second written submission, para. 134.\n2917 European Communities' first written submission, para. 468; Japan's first written submission,\n2918 Japan's first written submission, para. 251; Brazil's first written submission, para. 178.\n2919 European Communities' first written submission, para. 476; Japan's first written submission,\n2920 Japan's first written submission, para. 282.\n2921 Japan's first written submission, para. 283.\n2922 Japan's first written submission, para. 285.\n2923 United States' first written submission, para. 532.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncause of serious injury than all other possible factors before imposing a safeguards remedy. The\nAgreement on Safeguards simply does not contain a requirement that a competent authority find that\nthe injurious effects of imports are greater than the cumulated effects of all other injurious factors. In\nfact, the Agreement contains no language requiring a competent authority to weigh the importance of\nthe injurious effects of increased imports against any factor, either individually or collectively, nor has\nJapan pointed to such a requirement in its argument . Instead, as long as there is a \"genuine and\nsubstantial\" causal relationship between increased imports and a significant overall impairment in the\ncondition of the industry, and as long as the competent authority does not attribute the effects of other\nfactors causing injury to imports, the requirements of the Agreement on Safeguards are satisfied.\nIndeed, even the Appellate Body has interpreted the Agreement as requiring a competent authority to\n\"separate and distinguish\" the injurious effects of individual factors causing injury from one another\nwhen performing its injury analysis. Even though this separation and distinction of individual injury\nfactors may be \"difficult\", the Appellate Body has directed that it be done.\n2924\n7.1221 The United States argues that accordingly, in its steel determination, the USITC has taken\ngreat pains to identify the nature and scope of the injury caused by both imports and other individual\nfactors, to assess the extent of injury, if any, th at each of these individual factors has caused to the\nindustry, and to ensure that it does not attribute the effects of non-import factors to imports in its\ncausation analysis. Indeed, even Japan appears to concede that the United States did actually \"isolate\"\nthe injurious effects of each of the factors by evaluating the importance of each factor in relation to\nincreased imports. The USITC's efforts in this re gard are in full compliance with the principles\noutlined by the Appellate Body in US – Wheat Gluten and other cases, i.e., that competent authorities\n\"separate\" and \"distinguish\" the effects of increased imports from those of all other individual injury\nfactors in safeguards investigations.\n2925\n7.1222 The United States argues that the USITC's cau sation analysis with respect to CCFRS is a\nwell-reasoned and cogent analytical discussion that takes into account the complexities of a large and\nsophisticated market for a raw material critical to any large economy. In its analysis, the USITC\nperformed a thorough and objective analysis of the record. It established that there was a genuine and\nsubstantial causal link between trends in the volume and market share of imports of CCFRS and the\nsignificant declines in the condition of the CCFRS industry during the latter half of the period of\ninvestigation. Moreover, the USITC analysed a number of other factors alleged to be causing injury\nto the industry (such as demand declines, increased domestic capacity, and intra-industry\ncompetition), identified the nature and scope of the injury caused by these factors, if any, and ensured\nthat it did not attribute the effects of these factors to imports. The USITC's analysis is fully consistent\nwith the requirements of the Agreement on Safeguards .\n2926\nRelevance of like product analysis for CCFRS\n7.1223 Japan and Brazil argue that the USITC's discussion of alternative causes illustrates the\ndifficulties, if not the error, in finding a single super-generic like product that combined all CCFRS\nsteel. According to Brazil and Japan, there was si mply no means of analysing such an abstraction.\nAll the pertinent data and underlying factors could only be assessed for specific products, reflecting\nthe vastly different producers, products and markets involved. Japan and Brazil refer in particular to\ndifferences in demand2927, excess capacity2928, intra-industry competition.2929 Yet, the USITC seemed\n\n2924 United States' first written submission, para. 533.\n2925 United States' first written submission, para. 534.\n2926 United States' first written submission, para. 536.\n2927 Japan's first written submission, para. 288; Brazil's first written submission, para. 217.\n2928 Japan's first written submission, para. 288; Brazil's first written submission, para. 217.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto believe it could measure such indicia as total combined demand or capacity in a coherent manner\nthat could support its causation findings. 2930 Japan and Brazil argue that these distinctions and the\ndegree to which the USITC ignored them, demonstrate the failure of the USITC to meet the standards\nset by Article 4.2(b) by distinguishing and evaluating different injurious effects caused by alternative\nfactors.2931 Brazil and Japan also argue that by its use of an overly broad single \"like\" product, itself a\nviolation of United States WTO obligations, the USITC compounded the depth of its errors by\nforcing itself into a flawed analytical approach to causation.2932\n7.1224 Japan, Korea and Brazil also argue that the USITC failed to satisfy the non-attribution\nrequirement under the second sentence of Article 4.2(b) of the Agreement on Safeguards because,\namongst other things, the USITC's flawed like-product meant that the USITC violated the non-\nattribution requirement under Article 4.2(b), second sentence, as interpreted by the Appellate Body.\nSpecifically, grouping \"unlike\" products and industries together makes it impossible to separate and\ndistinguish causal factors, since the \"other factors\" affecting each like product varied in relevance and\nscope depending on the like product analysed.\n2933\n7.1225 According to Korea, by incorrectly defini ng the like product, the USITC, in essence,\nattributed causation for all CCFRS products to increased imports of hot-rolled steel alone. 2934 T h e\nfailure to properly define the like product masked the actual effects of other factors on the industry.2935\nThe European Communities, Korea and Brazil also argue that when the domestic industry is\nimproperly defined, a competent authority cannot iden tify any distinction in the performance of the\nmerged industries.2936\n7.1226 New Zealand argues that an analysis of whether increased imports have caused serious injury\nto a domestic industry cannot be carried out if that industry is incorrectly identified. Assessing\ncausation in respect of the wrong domestic industry must also lead to a \"legal mistake as regards\ncausation itself\" because Article 2.1 requires, as a prerequisite to applying a safeguard measure, that\nincreased imports have caused serious injury \"to the domestic industry that produces like …\nproducts\".\n2937 The European Communities, Korea and Brazil argue that, likewise, when distinct like\nproducts are improperly merged, it is impossible to determine the causal importance of the individual\nlike products on the industry producing the merged products.2938 Korea elaborates that by improperly\ndefining the like product, the causation analysis cannot properly assess the weight and significance to\nbe given to a particular \"other factor\" of injury since each factor may affect each actual like product\ndifferently.2939 The European Communities submits that improperly combining like products and\n\n2929 Japan's first written submission, para. 289; Brazil's first written submission, para. 218.\n2930 Japan's first written submission, para. 286; Brazil's first written submission, para. 216.\n2931 Japan's first written submission, para. 290; Brazil's first written submission, para. 219.\n2932 Japan's first written submission, para. 291; Brazil's first written submission, para. 219.\n2933 Japan's written reply to Panel question No. 80 (a) at the first substantive meeting; Korea's first\nwritten submission, para. 122; Korea's second written submission, para. 131; Brazil's written reply to Panel\nquestion No. 80 (a) at the first substantive meeting.\n2934 Korea's first written submission, para. 104.\n2935 Korea's second written submission, para. 131.\n2936 European Communities' written reply to Panel question No. 80 at the first substantive meeting;\nKorea's written reply to Panel question No. 80 at the first substantive meeting; Brazil's written reply to Panel\nquestion No. 80 at the first substantive meeting.\n2937 New Zealand's written reply to Panel question No. 80 at the first substantive meeting.\n2938 European Communities' written reply to Panel question No. 80 at the first substantive meeting;\nKorea's written reply to Panel question No. 80(a) at the first substantive meeting; Brazil's written reply to Panel\nquestion No. 80 at the first substantive meeting.\n2939 Korea's written reply to Panel question No. 80(a) at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industries creates the possibility that increased imports which are not causing serious injury\nto the industry producing the like product may be found to have caused serious injury to another\nindustry which has been artificially included in the definition of industry.\n2940 2941\n(ii) Tin mill products\nDecision-making\n7.1227 China and Norway note that the only commissioner who voted in the affirmative concerning\ntin mill, and who defined tin mill as a separate like product, is Commissioner Miller. Consequently, it\nis the determination of Commissioner Miller which becomes relevant to examine, for she is the only\nCommissioner to have made a separate determination for a product on which the President imposed a\nseparate safeguard measure.\n2942 China argues that as the other two Commissioners, Bragg and\nDevaney, developed their analysis on a different like product' definition, their findings do not\nrepresent a correct basis for the examination of the tin mill products. If the basis of the findings is\nerroneous, it is logical that the result of th e analysis cannot lead to a correct determination. 2943\nSimilarly, the European Communities argues that it cannot see how the findings of the two\nCommissioners who found increased imports, serious injury and causation for CCFRS as a whole can\npurport to provide a reasoned and adequate explanation of a causal link between increased imports\nand serious injury for a product which they never disaggregated from the whole. While the United\nStates may wish to rely on these determinations, they cannot be regarded under the Agreement on\nSafeguards as even purporting to provide a reasoned and adequate explanation sufficient to\ndemonstrate the causal link required by Article 2.1 and Article 4.2 of the Agreement on Safeguard s.\nThus, it is only Commissioner Miller's analysis which can purport to provide such a reasoned and\nadequate explanation and thus only her analysis which requires examination.\n2944\n7.1228 The United States notes that several complainants mistakenly assert in their briefs that the\nPresident relied solely on Commissioner Miller's causation findings for tin mill products when\ndetermining to impose a safeguard remedy on tin mill steel. Three Commissioners found that tin mill\nsteel was causing serious injury to the domestic tin mill industry: Commissioners Miller, Bragg and\nDevaney. Commissioner Miller found tin mill steel to be a separate like product and made an\naffirmative injury finding for that product, while Commissioners Bragg and Devaney found tin mill\nsteel to be part of the same like product as other CCFRS and made an affirmative determination for\nthat like product.\n2945 Under the United States statute, the President cannot decide to treat an\naffirmative finding of one Commissioner as a basis for imposing a remedy, as the complainants\nallege. Instead, under the United States statute, the President may only impose a remedy if at least\none-half of the Commissioners then in office make an affirmative finding of injury and causation. In\nthis case, the President was only able to impose a remedy on tin mill products because three of the six\nsitting Commissioners had found that tin mill steel, whether or not treated as a separate like product,\nhad caused serious injury to a domestic industry. In fact, in his official announcement of the\nimposition of these remedies, the President specifically stated that he considered the \"determinations\nof the groups of Commissioners voting in the affirmative with regard to\" tin mill products to be the\ndetermination of the USITC. In other words, the President specifically and clearly identified the\n\n2940 European Communities' written reply to Panel question No. 80 at the first substantive meeting.\n2941 Brazil's written reply to Panel question No. 80 at the first substantive meeting.\n2942 China's first written submission, para. 509; China's second written submission, para. 272;\nNorway's first written submission, para. 315.\n2943 China's second written submission, para. 274.\n2944 European Communities' second written submission, para. 379.\n2945 United States' first written submission, para. 538.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\naffirmative determinations of Commissioners Miller, Bragg and Devaney as the decision of the\nCommission for tin mill steel. Accordingly, even though complainants argue otherwise, the\nPresident's remedy finding does not indicate that he adopted the like product decision or injury\nfinding of Commissioner Miller as his own.\n2946\n7.1229 On the basis of the foregoing, the United States asserts that it is incorrect both legally and\nfactually for the complainants to assert that the President adopted the injury and causation findings of\nCommissioner Miller as the sole grounds for his findings. Nonetheless, because the complainants\nfocus their arguments concerning tin mill products almost entirely on Commissioner Miller's\ncausation analysis for tin mill, the United States also focuses its discussion on Commissioner Miller's\nanalysis as well.\n2947 However, the United States does note that complainants have not seriously\nchallenged the affirmative findings of Commissioners Bragg and Devaney with respect to tin mill\nproducts and other CCFRS products. Accordingly, the complainants have failed to make a prima\nfacie case showing that Commissioners Bragg and Devaney's analysis with respect to these products\nviolated the causation requirements of the Agreement on Safeguards. The Panel should therefore\nshould find that the causation analysis of these Commissioners has not been placed at issue by\ncomplainants in this proceeding and should find that the determinations of these Commissioners are\nproper under the Agreement.\n2948\n7.1230 Further, the United States argues that the comp lainants' argument ignores the fact that there\nwas, in actuality, a substantial degree of agreement between Commissioner Miller and the other three\nCommissioners with respect to the basic legal issues in the case. In this regard, Commissioner Miller\nagreed with and joined the findings of the three other Commissioners that tin mill steel was the\nappropriate like product, that there had been increased imports of tin mill steel during the period of\ninvestigation, and that the industry had suffered serious injury during the period of investigation.\nMoreover, Commissioner Miller also identified similar conditions of competition as governing the\nmanner in which imports and domestic merchandise competed in the market and even identified the\nsame other factors that might be causing injury to the industry in her analysis. While she disagreed\nwith respect to whether imports were a substantial cause of the serious injury being suffered by the\nindustry, there was, nonetheless, a substantial agreement on the basic issues driving the case.\n2949 The\nUnited States argues, further, that the simple fact that three Commissioners disagreed with\nCommissioner Miller no more makes her decision unreasonable than does Commissioner Miller's\ndisagreement with those three Commissioners make their decision unreasonable. To put it another\nway, Commissioner Miller and the three other Commissioners all analysed a complex record,\nthoroughly discussed the record evidence relating to causation, and issued a decision that is cogent\nand reasonable. The issue for this Panel, therefore, is whether Commissioner Miller performed an\nadequate and thorough analysis of the record and established that there was a genuine and substantial\ncausal relationship between increased imports and the declines in the industry's condition.2950\n7.1231 In counter-response, Korea notes that according to the United States, the USITC relied on the\naffirmative determinations of Commissioners Bragg and Devaney as well as Miller's.2951 Nonetheless,\nthe United States only analyses the causation analysis of Commissioner Miller alone and fails to\nexplain how the affirmative determinations of Commissioners Bragg and Devaney support causation\n\n2946 United States' first written submission, para. 539.\n2947 United States' first written submission, para. 540.\n2948 United States' first written submission, para. 541.\n2949 United States' first written submission, para. 569.\n2950 United States' first written submission, para. 570.\n2951 United States' first written submission, paras. 538-541.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwith respect to tin mill products. 2952 Korea submits that, in fact, the failure by the United States to\nexplain how the affirmative determinations of Commissioners Bragg and Devaney support an\naffirmative finding of causation with respect to tin mill products is exactly the point. The United\nStates cannot explain it because those Commissioners did not perform that analysis. In the absence of\nsuch analysis of increased imports of tin mill or an analysis of the causes of injury to the domestic\nproducers of tin mill products alone, these Commissioners cannot show any coincidence of trends nor\ncausation.\n2953\nFactors considered by the USITC\nDeclining demand\n7.1232 The European Communities points out that Commissioner Miller noted that declining demand\n\"may account in part for the fact that the industry was already in a weakened state in 1996\". 2954 The\nother Commissioners who examined tin mill products as a separate product concluded that \"the\ndecline in consumption of tin mill products is an important cause of the injury suffered by the\nindustry\" which, together with purchaser consolidation and the fact that a substantial proportion of\nimported products were not available domestically, was such as to lead to the conclusion that\n\"increased imports is not a cause that is greater than any other cause\".\n2955 The European Communities,\nChina and Norway argue that it is quite clear that Commissioner Miller and the other Commissioners\nconsidered that declines in demand were a cause of the serious injury throughout the period of\ninvestigation. That the financial performance of the domestic industry worsened when demand\nincreased does not mean that demand declines are not a cause of the industry's injury.\n2956\n7.1233 The European Communities, Japan and Brazil submit that Commissioner Miller's conclusion\nthat \"declining demand is not a cause of serious injury to the domestic industry that is equal to or\ngreater than increased imports\" does not, as the Appellate Body has held in the past, purport to\nseparate and distinguish the injurious effects of other factors from imports, and ensure that such\neffects are not attributed to increased imports.\n2957 The United States cannot dress up this failure. 2958\nFurther, China and Norway argue that there is no information on the role that this factor played and to\nwhat extent it was responsible for the serious injury to the industry, although three other\ncommissioners stated that \"the evidence demonstrates that the decline in the consumption of tin mill\nproducts is an important cause of the injury suffered by the industry\".\n2959\n7.1234 According to Japan and Brazil, the other three Commissioners, finding a separate like\nproduct, found declining demand to be an important alternative cause. 2960 In contrast, according to\nJapan, Korea and Brazil, Commissioner Miller asserted that demand recovered in 1999, but ignored\nthe fact that the increase was modest, only 5%, and short-lived. 2961 In 2000, demand fell lower than\n\n2952 Korea's second written submission, para. 150.\n2953 Korea's second written submission, para. 151.\n2954 USITC Report, Vol. I, p. 309.\n2955 USITC Report, Vol. I, p. 76-77.\n2956 European Communities' second written submission, para. 381; China's first written submission,\n2957 USITC Report, Vol. I, p. 309.\n2958 European Communities' second written submission, para. 381; Japan's first written submission,\n2959 China's first written submission, para. 516; Norway's first written submission, para. 324.\n2960 Japan's first written submission, para. 297; Brazil's first written submission, para. 261.\n2961 Japan's first written submission, para. 297; Korea's first written submission, para. 145; Brazil's first\nwritten submission, para. 261.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n1998, and in 2001 demand was at record lows for the period. Japan and Brazil assert that such a\nnarrow focus on a single year simply cannot satisfy the demands of Article 4.2(b) for a careful review\nof the entire period.\n2962\n7.1235 The United States argues that Commissioner Miller thoroughly discussed the nature and the\nextent of the injury that was attributable to demand declines during the period. She noted that demand\nhad been declining generally in the tin mill market and that it had declined overall during the period.\nShe correctly noted, however, that the industry lost significant market share and suffered its heaviest\nlosses of the period in 1999, despite the fact that demand increased considerably in that year. In other\nwords, as she found, demand declines could not possibly have contributed to the serious declines in\nthe condition of the industry that occurred during 1999, when demand was, in fact, increasing.\n2963 By\nperforming an analysis that assessed whether imports caused injury to the industry during a period of\nincreasing demand, she was able to distinguish the effects of the demand declines later in the period\nfrom those attributable to imports in 1999. As a result, Commissioner Miller was able to ensure that it\ndid not attribute the injury caused by these later demand declines to imports.2964\n7.1236 The United States also argues that Commissioner Miller recognized that there was not a\ncorrelation between changes in demand and changes in the industry's prices and operating margins\nduring the period of investigation itself. Althoug h Commissioner Miller recognized that the long-\nterm decline in demand might have caused the industry to be in a weakened state prior to the period,\nshe also correctly noted that demand changes did not appear to correlate directly to changes in the\nindustry's condition. For example, in 1999, when demand increased to the same levels seen in 1996\nand 1997 (the beginning of the period), the industry's unit prices and operating income margins\ndropped dramatically. As Commissioner Miller re asonably noted, if changes in demand had been a\ncause of deterioration in the industry's condition during the period of investigation, the domestic\nindustry should have experienced some recovery in 1999 when demand increased considerably.\nHowever, the industry's condition did not improve. Instead, due to the massive surge of imports in\nthat year, the industry lost significant market share and experienced its heaviest losses of the entire\nperiod of investigation.\n2965\n7.1237 China further argues that given that Commissioner Miller identified decline in demand as an\nalternative source of the injury, decline in demands as an 'other' injurious factor should have been\nsubjected to a non-attribution analysis. 2966 China submits that for the purpose of the non-attribution\nanalysis, the competent authority is required to identify and separate the effect of the 'other' factor.\nInstead Commissioner Miller analysed imports only. According to China, moreover, she disregarded\nthe part of the period of investigation when demands were declining and instead, analysed the\nincreased imports in the absence of the \"other\" factor, i.e. when demands were increasing.\n2967 China\nargues that this seems to be a very weak argumentation and questions how one could perform\nidentification of nature and extent of a factor if the subject of the identification is not present. 2968\nChina submits that it is evident that the United St ates failed to rebut China's argument. According to\nChina, the injurious effects of this 'other' factor were not properly assessed and it was not established\n\n2962 Japan's first written submission, para. 297; Brazil's first written submission, para. 261.\n2963 USITC Report, p. 309.\n2964 United States' first written submission, para. 558.\n2965 United States' first written submission, para. 557.\n2966 China's second written submission, para. 277.\n2967 China's second written submission, para. 279.\n2968 China's second written submission, para. 280.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nin a clear and unambiguous way that the effects of the demand decline were not attributed to increased\nimports.2969\nPurchaser consolidation\n7.1238 China states that it believes that Commissioner Miller acknowledged that purchaser\nconsolidation was causing injury. 2970 In particular, China and Norway argue that Commissioner\nMiller's conclusions regarding purchaser consolidation indicate that she believed that purchaser\nconsolidation was a cause of serious injury, although this factor was not chiefly responsible for the\ninjury.2971 Similarly, the European Communities notes that Commissioner Miller found that imports\nwere \"chiefly responsible\" for the decline in industry performance in 1999, without separating and\ndistinguishing the injurious effect of purchaser consolidation, which, must be presumed to be partly\nresponsible for some of the injury suffered.\n2972 China and Norway argue that Commissioner Miller did\nnot give any information on the role of purchaser consolidation. 2973 The European Communities\nargues that there is nothing in the USITC Report which explains why such purchaser consolidation\nwould not, as the United States claims, have any effect in 1999. 2974 The mere assertion that it may\nhave taken place before 1999 does not prove this fact, nor does it prove that purchaser consolidation\nwas not having continuing effects in 1999.2975\n7.1239 In response, the United States notes that Commissioner Miller also examined whether\npurchaser consolidation was an \"other\" factor that had a negative effect on the tin mill industry during\nthe period of investigation.2976 In her analysis of this issue, she explained, in a reasoned and thorough\nmanner, the nature and extent of the injurious effects of purchaser consolidation during the period.\nAfter performing her analysis, she reasonably concluded that purchaser consolidation was not a factor\nthat contributed significantly to the decline in the industry's condition during the period of\ninvestigation. According to the United States, in her analysis, Commissioner Miller discussed the\nnature and extent of purchaser consolidation in detail. 2977 She first noted that the number of large tin\nmill purchasers declined from 49 in 1990 to 26 in 2000, with four to six manufacturers accounting for\n75-80% of all consumption in 2000.2978 She also recognized that this consolidation had enhanced the\nnegotiating power of purchasers in the tin mill market during this period. 2979 However, she also\ncorrectly noted that most of this consolidation occurred prior to the period of investigation, and found\ntherefore that purchaser consolidation was not a significant factor in the declines in the condition of\nthe industry during 1999, 2000, and 2001. 2980 In this regard, she found that price competition in the\nmarket was fiercest in 1999 when imports made their largest surge into the market, which showed that\nimports, not purchaser consolidation, were \"chiefly responsible\" for industry declines in 1999 and\nthereafter. Given her analysis of this issue, the United States argues that it is clear that Commissioner\nMiller thoroughly and adequately discussed the nature and extent of the injury caused by purchaser\n\n2969 China's second written submission, para. 281.\n2970 China's first written submission, para. 512.\n2971 China's first written submission, para. 514; Norway's first written submission, para. 322.\n2972 USITC Report, Vol. I, p. 309.\n2973 China's first written submission, para. 516; Norway's first written submission, para. 322.\n2974 United States' first written submission, paras. 560-562.\n2975 European Communities' second written submission, para. 382.\n2976 USITC Report, p. 309.\n2977 USITC Report, p. 307.\n2978 USITC Report, p. 307.\n2979 USITC Report, p. 307.\n2980 USITC Report, p. 309. Moreover, she added, that this consolidation process was an indication of\nthe intense pricing competition between domestic producers and imports that existed throughout the period.\nUSITC Report, p. 309.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconsolidation. She reasonably found that purchaser consolidation had not been a significant cause of\nthe injury the industry suffered during the latter half of the period of investigation. Commissioner\nMiller correctly acknowledged that the process of purchaser consolidation had generally predated the\nperiod of investigation and did not explain the massive declines in the industry's condition that\noccurred during 1999, 2000, and 2001. Accordingly, she correctly found that the weight of the record\nevidence established that imports were chiefly responsible for the declines in the industry's condition\nin 1999 and properly discounted purchaser consolidation as a source of injury to the industry.\n2981\n7.1240 In counter-response, China notes that the data in the USITC Report indicates that the\nconsolidation process starting in 1990 resulted in four to six manufacturers accounting for 75-80% of\nall consumption of tin mill products in the year 2000. China submits that this factor not only\npredated, but also was present during the entire period of investigation.\n2982 China concludes that the\nCommissioner wrongly identified the nature and extent of the purchaser consolidations and failed to\nestablish that the injurious effects of this factor were not attributed to increased imports. The United\nStates' counter-argument that the Commissioner addressed this issue adequately has no merit.2983\nDomestic overcapacity\n7.1241 Korea asserts that Commissioner Miller suggested that overcapacity was not a problem\nbecause the industry reduced capacity between 1998-2001 (after increasing capacity between\n1996-1998).2984 However, in 1996 the industry achieved its highest capacity utilization of 78.3% –\nand it increased capacity over the following two years.2985 Korea argues that in 1996, the industry had\n1 million tons of excess unused capacity and in 2000, that figure had grown to 1.2 million tons. 2986\nKorea argues that capacity utilization of 75% and lower simply does not support the proposition that\ndomestic excess capacity was not a more significant problem than imports.\n2987\n7.1242 In response, the United States argues that Commissioner Miller explained, in a reasoned and\nthorough manner, the nature and extent of the effects of \"excess\" capacity on the condition of the\nindustry. After noting that the industry had \"some excess capacity\" during the early part of the period,\nshe found that the domestic industry had reduced its capacity in this manner as a means of \"taking\nsteps to rationalize their production\" in the face of the demand declines in the tin mill market. Having\nnoted that the industry had reduced its capacity levels during the period, Commissioner Miller\ndiscounted this \"excess\" capacity as a significant source of injury to the industry. In particular, she\nnoted that the industry's \"excess\" capacity levels had not led to the declines in the industry's capacity\nutilization rates during the latter half of the period, noting that the industry had reduced their\naggregate capacity by 3.7 percent between 1996 and 2000, and reduced them even further in 2001.\n2988\nAnti-dumping orders\n7.1243 Korea argues that Commissioner Miller noted that an anti-dumping order was imposed on\nimports of tin mill products from Japan in the second half of 2000, but determined that imports from\nJapan continued to have a significant presence in the United States market. According to Korea, she\nfailed to note, however, that the reason for continued importation from Japan was that the United\n\n2981 United States' first written submission, paras.560-562.\n2982 China's second written submission, para. 283.\n2983 China's second written submission, para. 286.\n2984 USITC Report, Vol. I, p. 309 (Exhibit CC-6).\n2985 USITC Report, Vol. II, Table FLAT-18, p. FLAT-22 (Exhibit CC-6).\n2986 USITC Report, Vol. II, Table FLAT-18, p. FLAT-22 (Exhibit CC-6).\n2987 Korea's first written submission, para. 145.\n2988 United States' first written submission, para. 564.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nStates industry had explicitly agreed that a number of tin mill products should be excluded from the\nanti-dumping order because the United States industry did not produce those products.2989\nNAFTA imports\n7.1244 China argues that Commissioner Miller's determination of the existence of a causal link\nbetween the increased imports and serious injury to the domestic tin mill industry was made on the\ngrounds of data which included imports from NAFTA countries. However, China believes that, since\nimports from NAFTA countries were excluded from the application of the safeguard measure, what\nhad to be determined is in fact whether total increased imports, with the exception of imports from\nNAFTA-countries, have caused serious injury to the domestic industry. According to China, as a\nresult, since the determination of causality at hand required that \"increased imports\" only consisted of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"another factor\". Thus, in respect of Article 4.2(b) of the Agreement on\nSafeguards, this new determination also required that injury caused by movements in imports from\nCanada and Mexico not be attributed to increased imports (from non-NAFTA countries).\n2990 China\nargues that such a new determination was not done concerning this product. China argues that this is\nespecially surprising, given that it was acknowledged that \"imports of tin mill products from Canada\naccount for a substantial share of total imports a nd contribute importantly to the serious injury\". 2991\nKorea argues that since the USITC did not proceed to a new determination of causality between\nincreased imports from non-NAFTA countries and the serious injury to the domestic industry, there\nwas consequently a failure to assess the injury caused by imports from Mexico and Canada and a\nfailure to ensure that this injury would not be attributed to increased imports from non-NAFTA\ncountries. Therefore, the investigating authority did not comply with Articles 2(1) and 4.2(b) of the\nAgreement on Safeguards.\n2992\n7.1245 Norway notes that Commissioner Miller did consider imports from Canada to \"contribute\nimportantly\" to the serious injury suffered by th e domestic industry. However, according to Norway,\nshe did not single out these imports and recommended that the remedy apply also to these imports, a\nconclusion that the President did not follow. Here again, Norway argues, there is thus no finding at\nall that this recognized injury has not been at tributed by the President to imports from other\nsources.2993\n7.1246 The European Communities argues that in fail ing to analyse imports from Canada, Israel,\nJordan and Mexico as alternative causes of injury, the USITC also acted inconsistently with\nArticle 4.2(b).\n2994 The European Communities adds that Commissioner Miller found that Mexican\nimports accounted for a substantial share of imports and contributed importantly to the serious injury,\nbut did not subject the injurious effects of these imports to a non-attribution analysis.2995\n7.1247 For the United States' general response, see paragraph 7.1066 et seq.\n\n2989 Korea's first written submission, para. 145.\n2990 China's first written submission, para. 527.\n2991 China's first written submission, para. 528.\n2992 China's first written submission, para. 529; China's second written submission, para. 286.\n2993 Norway's first written submission, para. 325.\n2994 European Communities' first written submission, para. 480.\n2995 European Communities' second written submission, para. 385.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFactors not considered by the USITC\n7.1248 The European Communities, Japan, Korea, Norway and Brazil argue that the other three\nCommissioners who found a separate like product also found that a large portion of purchasers\ntestified that they imported specific products that the domestic industry simply did not make. 2996\nAccording to Japan and Brazil, this factual finding argues strongly that imports could not be the cause\nof serious injury. Yet Commissioner Miller did not address this finding at all.\n2997 The European\nCommunities also argues that Commissioner Miller fails to deal with the extent to which injury was\ncaused by the massive over-capacity in the United States industry.2998\n7.1249 In response, the United States argues that the complainants mistakenly assert that\nCommissioner Miller \"failed\" to take into account that a \"substantial portion\" of imports consisted of\ntin mill products that were not available domestically, a fact relied on by three other Commissioners\nwho made a negative determination for tin mill steel. In fact, Commissioner Miller did address this\nvery issue, although in a different manner than the other Commissioners, when she found that\npurchasers considered imported tin mill steel and domestic merchandise to be substitutable for one\nanother. Because the level of substitutability measures the degree to which products are considered\nsimilar to one another for pricing purposes, Commissioner Miller's finding indicates that she\nconcluded that the \"substantial\" difference in product mix between imports and domestic product did\nnot significantly affect the extent to which imports and domestic merchandise competed in the\nmarket.\n2999 The United States submits that, moreover, although the other three Commissioners found\nthe percentage of imports that were not available from the industry to be \"substantial\", the record\nshowed that this percentage (although confidential) was actually substantially lower than 33% of all\nimported tin mill steel. As a result, while it was clearly reasonable for the three other Commissioners\nto consider this percentage to account for a \"substantial\" percentage of imports, it was just as\nreasonable for Commissioner Miller to consider that percentage did not significantly reduce the\nsubstitutability of the imported and domestic merchandise.\n3000\n7.1250 China and Norway argue that given that the industry was already injured before imports\nincreased in 1998 and 1999 and given that the industry did not recover once imports were declining in\n2000 and interim 2001, there had to be other existing injury factors besides imports. According to\nChina and Norway, since, without any doubt, other factors existed, Commissioner Miller had the\nobligation to identify them, in order to ensure that injury would not be wrongly attributed to increased\nimports. She did not do so.3001\n7.1251 In response, the United States argues that Commissioner Miller performed a thorough and\nobjective analysis of the record. She established that there was a genuine and substantial causal link\nbetween trends in the volume and market share of imports of tin mill steel and the significant declines\nin the condition of the tin mill industry during the last two-and-a-half years of the period of\ninvestigation. Moreover, she thoroughly assessed the nature and extent of the injury caused by other\n\n2996 European Communities' first written submission, para. 484; Japan's first written submission,\npara. 298; Korea's first written submission, para. 145; Norway's first written submission, paras. 336 and 337;\nBrazil's first written submission, para. 262.\n2998 European Communities' first written submission, para. 484.\n2999 United States' first written submission, para. 550.\n3000 United States' first written submission, para. 551.\n3001 China's first written submission, para. 522; Norway's first written submission, para. 331.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfactors in the market and ensured that she did not attribute the effects of these factors, if any, to\nimports.3002\n7.1252 Moreover, the United States adds that the co mplainants fail to recognize that there was a\nsubstantial degree of agreement between Commissioner Miller and the other three Commissioners\nwith respect to the basic legal issues in the case. In this regard, Commissioner Miller agreed with --\nand joined – the findings of the three other Commissioners that tin mill steel was the appropriate like\nproduct, that there had been increased imports of tin mill steel during the period of investigation, and\nthat the industry had suffered serious injury during the period of investigation. Moreover,\nCommissioner Miller also identified similar conditions of competition as governing the manner in\nwhich imports and domestic merchandise competed in the market and even identified the same other\nfactors that might be causing injury to the industry in her analysis. While she disagreed with respect\nto whether imports were a substantial cause of the serious injury being suffered by the industry, there\nwas, nonetheless, a substantial agreement on the basic issues driving the case. Indeed, the United\nStates asserts, the simple fact that three Commissioners disagreed with Commissioner Miller no more\nmakes her decision unreasonable than does Commissioner Miller's disagreement with those three\nCommissioners make their decision unreasonable.\n3003\n7.1253 The European Communities also argues that Commissioner Miller also failed to take note of\nthe decision of Wierton (one of the major United States producers of tin mill products) to cease\nproduction during 1999, forcing consumers of tin mill products to source their requirements from\nimported products.\n3004 The three Commissioners who found there was no causal link between\nincreased imports and serious injury found that this decision accounted for at least part of the increase\nin imports, and consequently, the poor performance of the domestic industry in 1999. Commissioner\nMiller failed both to discuss this situation, and to en sure that the self-inflicted injury caused by this\ndecision was not attributed to increased imports. For these reasons, the USITC did not, and the United\nStates cannot pretend that it did, conduct the non-attribution analysis required by the Agreement on\nSafeguards.\n3005\nRelevance of \"like product\" analysis\n7.1254 The European Communities, Japan and Korea and Norway note that three of the four\nCommissioners who considered tin mill products as a separate product found that increased imports\nwere not a \"substantial cause\" of serious injury.3006 Japan argues that of the four Commissioners who\ntreated tin mill products as a separate and distinct like product, three specifically found that other\ncauses were more important than imports in explaining the problems in the domestic tin mill\nindustry.\n3007 These Commissioners found that decline in consumption of tin mill products (as\nconsumers turned to plastics), slow rationalisation of domestic capacity, increased consolidation of\npurchasers and the fact that a \"substantial portion\" of imports of tin mill products were not produced\nin the United States, meant that increased imports were not a \"substantial cause\" of serious injury.3008\n\n3002 United States' first written submission, para. 572.\n3003 United States' first written submission, paras. 569-570.\n3004 USITC Report, Vol. I, p. 76, footnote 418.\n3005 European Communities' second written submission, para. 383.\n3006 European Communities' first written submission, para. 478; Japan's first written submission,\n3007 Japan's first written submission, para. 293.\n3008 European Communities' first written submission, para. 478; Norway's first written submission,\npara. 317.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1255 Korea argues that the remaining Commissioners, Bragg and Devaney, had lumped tin mill\nproducts together in the \"CCFRS\" like product and found serious injury on that basis. They never\neven looked at other factors that were responsible for the condition of the tin mill products industry\nbecause their like product decision prevented such an analysis.\n3009 According to Korea, the majority\nof Commissioners who analysed tin mill produc ts correctly concluded that other causes were\nresponsible for the condition of the United States industry producing tin mill products. The other\nCommissioners who found serious injury, whose decisions were the basis for the safeguard measure\nimposed, failed to properly separate and identify the other causes of injury to the United States\nindustry.3010\n7.1256 The European Communities, Korea and Norway note that Commissioner Miller treated tin\nmill products as a separate like product and yet voted that imports of tin mill products were the\nsubstantial cause of serious injury. 3011 She considered that the domestic industry suffered its worst\nresults in 1999, which was also the period when imports increased. Commissioner Miller accepted\nthat decreasing demand may \"account in part\" for the weakened state of the industry. However, it was\nnot a cause of serious injury \"equal to or greater than increased imports\". Commissioner Miller also\nconcluded \"that increased imports, not purchaser consolidation (which existed throughout the period\nexamined), were chiefly responsible for the industry's serious decline in 1999\" and that purchaser\nconsolidation was not a cause of injury \"equal to or greater than increased imports\". According to the\nEuropean Communities, it is unclear whether the Commissioner also considered excess capacity to\nhave caused serious injury. The Commissioner simply states that domestic over-capacity was not a\ncause of injury \"equal to or greater than\" increa sed imports. The European Communities asserts that\nit isnevertheless clear that the Commissioner also considered imports from Canada to \"contribute\nimportantly\" to the serious injury suffered by the domestic industry.\n3012\nFailure to provide reasoned and adequate explanation\n7.1257 China and Norway state that they believe that the injurious effects of the other factors that\nhave caused the injury at the same time as the increased imports have not been properly assessed.\nThus, it is impossible to determine whether the injurious effects of these factors were properly\nseparated from the injurious effects of the increased imports. 3013 They argue that, as a result, it was\nnot established explicitly, with a reasoned and adequate explanation, that injury caused by other\nfactors was not attributed to increased imports. This conclusion would also remain the same, should\nthe Panel not agree with China that Commissioner Miller acknowledged that other factors are causing\ninjury to the domestic industry at the same time as increased imports. 3014 They further argue that,\nindeed, if the investigating authority believes that an alleged factor is not causing injury, it must,\nlikewise, explicitly, clearly and unambiguously, state that such a factor is not causing injury and\nexplain the reasons why. The explanation must be straightforward. To proceed otherwise would not\nensure that alleged factors have been examined closely enough to establish that they are not\ncontributing to the injury. As a result, there would be no guarantee that injury caused by other factors\nhas not been wrongfully attributed to increased imports.\n3015\n\n3009 Korea's first written submission, para. 146.\n3010 Korea's first written submission, para. 147.\n3011 European Communities' first written submission, para. 479; Korea's first written submission,\n3012 European Communities' first written submission, para. 479.\n3013 China's first written submission, para. 517; Norway's first written submission, para. 326.\n3014 China's first written submission, para. 518; Norway's first written submission, para. 327.\n3015 China's first written submission, para. 519; Norway's first written submission, para. 328.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1258 China and Norway also argue that when Commissioner Miller placed emphasis on the\nsubstantial cause methodology, she failed to fulfill the requirements of Article 4.2(b) of the\nAgreement on Safeguards. Indeed, a conclusion to the effect that \"increased imports are a substantial\ncause of serious injury to the domestic industry in that they are a cause which is important and not less\nthan any other cause\", is not clear, unambiguous nor straightforward, since it is not established that\nother factors did not cause injury and that injury caused by other factors was not attributed to\nincreased imports. Moreover, they argue that the explanations given by the Commissioner to support\nthis conclusion are not clear, straightforward, unambiguous; they certainly are not reasoned and\nadequate.\n3016 They submit, in particular, Commissioner Miller should have given great consideration\nto the explanations of the three commissioners who made a negative finding on the \"substantial cause\nof serious injury\". Indeed, these three commissioners found that long-term continuing decline in\ndemand, the consolidated market and the fact that a substantial portion of imports were reportedly not\ndomestically available caused serious injury to the domestic industry. Since half of the members of\nthe investigating authority had explicitly recogn ized that these factors were causing injury,\nCommissioner Miller had the obligation to explain, in her view, how injury caused by these factors\nwas not attributed to imports.3017\n7.1259 Japan similarly argues that Commissioner Miller failed to separate and distinguish alternative\ncauses and that given that three of her colleagues read the record very differently, one might expect\nCommissioner Miller to elaborate at some length why she reached a different conclusion. Instead, she\nprovided three short paragraphs. With respect to each alternative cause, she failed to meet the\nstandard required by Article 4.2(b).\n3018\n7.1260 The European Communities argues that having identified at least three alternative sources of\npossible serious injury, the USITC (Commissioner Miller) was under an obligation to separate out and\ndistinguish the effects of the different factors and ensure that no such effects were attributed to serious\ninjury allegedly caused by increased imports. The European Communities, Japan and Korea argue\nthat this was not done, and the United States is in breach, therefore, of its obligations under\nArticle 4.2(b).\n3019\n7.1261 The United States responds by arguing that Commissioner Miller established, through a\nthorough and objective assessment of the record evidence, a genuine and substantial cause and effect\nrelationship between increased imports and serious injury. Her analysis showed that there was a clear\ncorrelation between increases in the volume of increasingly low-priced imports of tin mill steel and\nthe significant declines in the overall condition of the tin mill steel industry that occurred during the\nlatter half of the period of investigation. She conducted a thorough and objective examination of the\nnature and extent of the effects of other factors and ensured that she did not attribute the effects, if\nany, of these factors to imports in her analysis.\n3020\n\n3016 China's first written submission, para. 520; Norway's first written submission, para. 329.\n3017 China's first written submission, para. 521; Norway's first written submission, para. 330.\n3018 Japan's first written submission, para. 296.\n3019 European Communities' first written submission, para. 480; Japan's first written submission,\n3020 United States' first written submission, para. 537.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Hot-rolled bar\nFactors considered by the USITC\nCompetition among domestic producers\n7.1262 China argues that the USITC acknowledged that this factor was causing injury at the same\ntime as increased imports. 3021 China further argues that concerning competition among domestic\nproducers, the USITC did not explain the nature and extent of the loss of market shares. Nor did it\nexplain on which domestic producers this had an impact. Moreover, although the USITC said that\nthis factor could not provide an explanation for cert ain indicia of injury, it did not say how it could\nprovide an explanation for the remaining indicia.3022\n7.1263 In response, the United States notes that the USITC found that this factor provided no\nexplanation for the domestic industry's serious inju ry. Intra-industry competition could not explain\nwhy the domestic industry overall lost market share to imports. Additionally, the pricing data\navailable to the Commission did not indicate that Nucor was a primary source of pricing declines or\nthat its pricing practices otherwise contributed to the industry's difficulties.3023\n7.1264 The United States argues that China's statements to the effect that the USITC recognized that\nintra-industry competition was an alternative source of injury blatantly misreads the USITC's opinion.\nAs the USITC explained, competition between domestic producers provides utterly no explanation for\nthe industry's overall decline in market share during the period of investigation.3024\nInefficient producers\n7.1265 The European Communities argues that with re spect to the inefficient producers, the USITC\narrives at a contradictory conclusion, stating first that their performance cannot explain the serious\ninjury and then that \"the alleged inefficiency of these two firms cannot be a more important cause of\ninjury than increased imports\".3025\n7.1266 The European Communities and China argue the USITC appears to conclude that inefficient\nproducers were a cause of the domestic industry's injury. 3026 More particularly, the European\nCommunities submits that if the USITC concluded that they did not cause injury, it would not have to\nexplain that this factor was not a cause which was less important than increased imports. At the very\nleast, the USITC did not establish explicitly, first, whether this factor was causing injury, and second,\nas a result, how it ensured that the injurious effects of this factor were not attributed to increased\nimports.3027\n7.1267 China further argues that the USITC did not explain the nature and extent of the injurious\neffect of this factor. All that had been said by the USITC was is that inefficient producers could not\n\n3021 China's first written submission, paras. 387 and 388.\n3022 China's first written submission, para. 393.\n3023 USITC Report, pp. 97-98; United States' first written submission, para. 578.\n3024 United States' first written submission, para. 579.\n3025 European Communities' second written submission, para. 387.\n3026 European Communities' second written submission, para. 388; China's first written submission,\nparas. 387 and 389.\n3027 European Communities' second written submission, para. 388.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbe held accountable for the overall situation of the domestic industry. According to China, this is far\nfrom being sufficient.3028\n7.1268 In response, the United States argues that th e USITC also found that this factor provided no\nexplanation for the domestic industry's serious injury. The United States producers identified as\n\"inefficient\", due to higher cost structures, did not lose market share to other, more \"efficient\"\ndomestic producers during the period of investigation. Moreover, the performance trends of the so-\ncalled \"inefficient\" firms did not differ from more \"efficient\" domestic producers.3029\nChanges in input costs\n7.1269 The European Communities notes that the USITC concludes:\n\"[B]ecause we cannot attribute the domestic industry's declines in operating\nperformance in 2000 to increased in COGS, we conclude that changes in input costs\ncannot be as important a cause of serious injury as increased imports.\"3030\n7.1270 The European Communities and China further argue the USITC appears to conclude that\nincreases in input costs were a cause of the domestic industry's injury. 3031 More particularly, the\nEuropean Communities submits that if the USITC concluded that they did not cause injury, it would\nnot have to explain that this factors was not a cause which was less important than increased imports.\nAt the very least, the USITC did not establish explicitly, first, whether this factor was causing injury,\nand second, as a result, how it ensured that the injurious effects of this factors was not attributed to\nincreased imports.3032\n7.1271 China argues that this factor should have received more attention from the investigating\nauthority, since it had to have had an impact on prices. Indeed, although demand was high, capacity\nalso remained high throughout the period of investigation and, thus, there was in no way a shortage of\nsupply which could have prevented prices from declining. Moreover, the market for hot-rolled bar is\nvery open and prices had to decline as costs declined, contrary to a monopoly situation in which\nprices would have remained high.\n3033 China also notes that the USITC states that changes in input\ncosts are in part responsible for price decline. Ho wever, according to China, there is no information\non the nature and extent of that decline.3034\n7.1272 In defence, the United States notes that the USITC found that unit raw materials costs\ndeclined throughout the period of investigation and that unit COGS decreased from 1996 to 1999\nbefore increasing from 1999 to 2000. It observed that, generally speaking, declines in input costs\ncannot be a \"cause\" of injury in and of themselves. At most, they may be an alternative explanation\nfor price declines. It found that the declines in input costs could not explain the much larger price\ndeclines that occurred from 1996 to 1999. Indeed, because demand increased during this period,\nprices should have declined less than input costs. From 1999 to 2000, unit COGS increased but prices\n\n3028 China's first written submission, para. 394.\n3029 USITC Report, p. 98; United States' first written submission, para. 578.\n3030 USITC Report, Vol. I, p. 99.\n3031 European Communities' second written submission, para. 388; China's first written submission,\nparas. 387 and 390.\n3032 European Communities' second written submission, para. 388.\n3033 China's first written submission, para. 400.\n3034 China's first written submission, para. 395.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndid not. Instead, domestic producers' attempts to increase prices during the first portion of 2000 could\nnot be sustained because of the import surge.3035\n7.1273 The United States argues that China's statement that the decline in costs from 1996 to 1999\n\"should have received more attention from the investigating authority,\" appears misguided. The\nUSITC's focus was on how cost levels in 2000, not 1999, correlated with price levels in 2000. In any\nevent, the USITC fully explained that declines in prices from 1996 to 1999 were much greater than\ndeclines in unit input costs, notwithstanding increasing demand. China appears to posit that this\ndivergence may have been a function of increased domestic supply. This explanation, however,\ncannot be reconciled with the record. The domestic industry's capacity utilization in 1999 was higher\nthan it was in 1996. If anything, tighter domestic supplies, as reflected by increasing capacity\nutilization, together with increasing domestic demand, should have resulted in domestic hot-rolled bar\nprices declining less than input costs did. There was, however, another source of increased supply in\nthe US market that China overlooks: the imports. Because of the increased imports, the decline in\nprices from 1996 to 1999 was in fact greater than the decline in unit input costs.\n3036\n7.1274 The European Communities submits3037 that the USITC's dismissal of the effect of increased\nCOGS in 2000 is not a reasoned and adequate explanation of its conclusions, supported by the facts.\nWhile raw material costs fell in 1999 and 2000, there was a substantial increase in costs associated\nwith direct labour and other factory costs, which negated the increased income the domestic industry\ncould have expected from the fall in raw material costs. The European Communities submits that,\nindeed, the USITC implicitly noted the diverging development of raw material costs and other costs\nwhere it stated:\n\"[U]nit COGS declined from US$399 in 1996 to US$362 in 1999 and then increased\ntoUS$380 in 2000; unit raw material costs declined throughout the period\nexamined.\"\n3038\n7.1275 The European Communities submits 3039 that the USITC thus recognized that the increase in\nCOGS in 2000 was not caused by increases in raw material costs, but rather by increases in other\ncosts forming part of COGS; i.e. direct labour a nd other factory costs. The USITC, however, never\ninvestigated further this factual situation, and slipped into a general assertion that when demand\nincreases producers \"normally need not cut their prices to reflect fully declines in COGS\". 3040 This\nassumes, however, that domestic producers can let othe r costs increase and still expect to have them\ncovered by their sales prices. In this case, other costs did increase substantially – had they not then\nthe domestic industry would have continued to make a comfortable profit – this is illustrated in the\ntable below.\n\n3035 USITC Report, p. 99; United States' first written submission, para. 578.\n3036 United States' first written submission, footnote 302.\n3037 European Communities' second written submission, para. 389.\n3038 USITC Report, Vol. I, p. 99.\n3039 European Communities' second written submission, para. 390.\n3040 USITC Report, Vol. I, p. 99.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nTable 15: Hot-Rolled Bar – Unit Value of Commercial Sales and Costs (1998-2001)3041\n1998\n(actual)\n1999\n(actual)\n1999\n(constant)\n2000\n(actual)\n2000\n(constant)\n2001\n(actual)\n2001\n(constant)\nNet. Comm.\nSales\n431 399 399 399 399 381 381\nRaw\nmaterials\n169 138 138 135 135 122 122\nDirect labor 55 52 52 61 52 61 52\nOther factory\ncosts\n162 172 162 184 162 199 162\nCOGS Total 387 362 352 380 349 381 336\nGross Profit 44 37 47 19 50 0 45\nSG&A 22 22 22 22 22 24 24\nOperating\nIncome (loss)\n22 15 25 (3) 28 (24) 21\n7.1276 According to the European Communities, while admitting this cost development, the USITC\ndoes not examine the reasons for it. Thus, even with prices falling between 1998 and 1999 and then\nremaining stable in 2000, had it not been for incr eased costs, the domestic industry would have\ncontinued to make a comfortable profit. Even in interim 2001, when prices fell from their 1999 levels,\ngiven continuing falls in raw material costs, had it not been for increases in other costs, the domestic\nindustry would have had an operating income per unit comparable to the levels of 1998.\nConsequently, the USITC did not provide a reasoned and adequate explanation of how its conclusions\nwere supported by the factual findings it had made.3042\n7.1277 In response, the United States argues that the European Communities and China misread the\nUSITC's opinion concerning the impact of changes in input costs. Because the USITC based its\nconclusion on serious injury principally on data concerning the domestic industry's condition during\nand after 2000, the most pertinent part of the USITC's discussion concerns input costs in 2000. Here,\nthe USITC found that while unit COGS increased from US$362 in 1999 to US$380 in 2000, neither\nunit sales values nor prices increased during this period. The USITC specifically stated that \"[i]f the\ndomestic industry could have increased its average unit sales values in 2000 to reflect increasing\nCOGS – a reasonable expectation during a year of increasing demand – the industry could have\nmaintained positive operating margins of at least the levels of 1999\". However, the industry could not\nraise its prices because of the increased imports during that year. Thus, the USITC expressly analysed\nthe nature and effect of the change in input costs from 1999 to 2000 and demonstrated that it was not\nincreased input costs, but the industry's inability to increase its prices to reflect those increased costs\nbecause of increased imports, that caused the industry's difficulties in 2000.\n3043\nNAFTA imports\n7.1278 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic hot-rolled bar industry, which is found in the USITC\n\n3041 European Communities' second written submission, para. 390, based on USITC Report, Vol. II, p.\nLONG-33, table LONG-27. In the columns marked \"const ant\" the data for \"other factory costs\" and \"direct\nlabor\" has been kept constant for 1999, 2000 and interim 2001. Figures which have been kept constant have\nbeen italicized, and figures which change as a result of the simulation are put in bold.\n3042 European Communities' second written submission, para. 391.\n3043 United States' first written submission, para. 580.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nReport, was made on the grounds of data which included imports from NAFTA countries. However,\nChina believes that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports' only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n3044\n7.1279 China further argues that in the Supplementary Report, the USITC was required to assess the\ninjury caused by imports from Mexico and Canada and to ensure that this injury would not be\nattributed to increased imports from non-NAFTA countries. China argues that it did not do so. China\nfurther argues that the USITC provided no explanation whatsoever that injury caused by imports from\nMexico and Canada was not attributed to increased imports and there is no reason to believe that\ninjury caused by imports from Mexico and Canada were not in fact attributed to increased imports. In\nthis regard, the European Communities notes that in its separate findings on NAFTA imports, the\nUSITC concluded that the sheer volume of the Canadian increase supported its finding that imports\nfrom Canada contributed importantly to the serious injury caused by imports.\n3045\n7.1280 The European Communities notes that the United States has not tried to explain how it\nensured that the injurious effects of excluded imports were not attributed to non-excluded imports,\ndespite the fact that in 2000 imports from Canada and Mexico alone accounted for 52% of all\nimports.3046 3047 The European Communities argues that the USITC failed to even consider Canadian\nimports as an alternative cause of injury and, thus, did not separate and distinguish the effects of\nCanadian imports nor did it ensure that such effects were not attributed to increased imports from\nnon-NAFTA sources.\n3048 On the basis of the foregoing, in the view of the European Communities and\nChina, the USITC failed to comply with Articles 2(1) and 4.2(b) of the Agreement on Safeguards.3049\n7.1281 For the United States' response, see paragraph 7.1066 et seq.\nFactors not considered by the USITC\n7.1282 The European Communities argues that there are a number of factors apparent in the data\nbefore the USITC which the USITC did not examine and which would tend to bring its conclusion\nthat imports were the cause of serious injury into doubt. 3050 In particular, the European Communities\nnotes that the domestic industry's \"interest expenses\" and \"other expenses\" leapt between 1998 and\n1999.3051 The European Communities argues that these quite noticeable developments occurred\nprecisely when the USITC notes operating margins and net incomes start to decline. Yet there is no\nexplanation of these developments.3052\n\n3044 China's first written submission, para. 407.\n3045 European Communities' first written submission, para. 488.\n3046 USITC Report, Vol. II, p. LONG-9, table LONG-5.\n3047 European Communities' second written submission, para. 393.\n3048 European Communities' first written submission, paras. 489 and 491.\n3049 China's first written submission, para. 410; China's second written submission, para. 230.\n3050 European Communities' first written submission, para. 494.\n3051 European Communities' first written submission, para. 495.\n3052 European Communities' first written submission, para. 496.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1283 The European Communities also argues that there was a substantial drop in domestic prices\nbetween 1998 and 1999, a period in which imports decreased, and in 1999 demand fell away to 1996\nlevels. According to the European Communities, th e decrease in domestic prices coincided with a\nsubstantial decrease in raw material costs in 1999. However, also between 1998 and 1999, there was\na sharp increase in \"other factory costs\" which continued into 2000. Further, between 1999 and 2000\nthere was a sharp increase in direct labour costs (these trends continued into interim 2001).\nAccording to the European Communities, no explana tion was provided in the USITC Report of the\neffect of these substantial changes on the financial performance of the industry.\n3053\n7.1284 In response, the United States submits that the European Communities fails to recognize that\nthe USITC's analysis of the poor financial condition of the domestic hot-rolled bar industry was based\non operating income and operating margin data. Interest expenses and \"other\" expenses were not a\ncomponent of operating income, as computed by the USITC. Instead, the USITC deducted interest\nexpenses and \"other\" expenses from operating income to derive net income. 3054 It argues that,\ntherefore, increases in interest expenses and \"other\" expenses could not provide any explanation for\nthe 2000 operating losses cited by the USITC. Consequently, there was no requirement under\nArticle 4.2 for the USITC to have engaged in a further non-attribution analysis concerning these\nexpenses.\n3055\nFailure to provide a reasoned and adequate explanation\n7.1285 The European Communities and China argue that the USITC failed to adequately evaluate the\ncomplexity of the alleged injury factors. It al so failed to provide a sound, clear and straightforward\nexplanation of how it ensured that injury caused by other factors was not attributed to increased\nimports.3056 China argues that the USITC did not explain the nature of the \"large extent\" of the\ndecline in operating performance in 1999 due to the decline in demand. Moreover, the USITC stated\nthat \"prices for cold finished bar have historically tracked demand conditions\", but it did not explain\nthe impact of demand on the overall situation of the industry.\n3057\n7.1286 In response, the United States argues that the USITC conducted a reasoned and adequate\nexamination of the injury purportedly caused by factors other than increased imports and ensured that\nany injury caused by these other factors was not attributed to imports. It notes that the USITC\nexamined four asserted causes of injury to the domestic hot-rolled bar industry other than increased\nimports and concluded that the \"alternative causes cannot individually or collectively explain the\nserious injury to the domestic industry, particularly the declining market share over the course of the\nperiod examined, and the deteriorating operating performance leading to negative operating margins\nfor the domestic industry in 2000\". Moreover, the USITC did consider demand conditions in the\nmarket, finding that US apparent consumption of hot-rolled bar increased by 11.7 percent from 1996\nto 2000, and that it increased on a year-to-year basis for every available comparison except that for\n1998 to 1999. The USITC observed that apparent U.S. consumption increased from 1999 to 2000, the\nyear that domestic industry performance reached injurious levels. Consequently, it concluded that\nchanges in demand could not explain the industry's condition in 2000.\n3058\n\n3053 European Communities' first written submission, para. 497.\n3054 United States' first written submission, para. 581.\n3055 United States' first written submission, para. 582.\n3056 European Communities' first written submission, para. 498; China's first written submission,\npara. 401.\n3057 China's first written submission, para. 415.\n3058 United States' first written submission, para. 578.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iv) Cold-finished bar\nFactors considered by the USITC\nDeclines in demand\n7.1287 The European Communities notes that the USITC found that: \"The domestic industry\nacknowledges that prices for cold-finished bar have historically tracked demand conditions. Indeed,\nthe domestic industry's decline in operating performance in 1999, a year when import volume and\nmarket penetration declined, appears to a large extent attributable to the declines in demand during\nthat year\". 3059 China and the European Communities argue that it is thus clear that the USITC\nconsidered that changes in demand were a cause of the serious injury.3060 China argues that the USITC\nrecognized that declines in domestic demand contributed to cause the injury to the domestic\nindustry.3061\n7.1288 China submits that the USITC firstly focused its analysis on the year 2000 – when declining\ndemand was not an issue. Then it demonstrated that the industry was seriously injured even during\nthis period, and that in this way the USITC fulfilled the requirements of the Article 4.2(b) of the\nAgreement on Safeguards.\n3062 According to China, such an approach clearly misses the assessment of\nthe nature and extent of the declines in demand. China questions how the USITC could have properly\nevaluated this factor by focusing on year 2000 when \"decline was not an issue\". In China's view, as a\nconsequence, the non-attribution analysis of the declines in demand in the domestic market could not\nhave been performed.3063\n7.1289 In response, the United States argues that the USITC concluded that the domestic industry's\nperformance in 1999, a year when import volume and market penetration declined, appeared largely\nattributable to declines in demand that year. The USITC emphasized, however, that US demand for\ncold-finished bar was higher in 2000 than it was in 1999. Nevertheless, prices were lower in 2000\nthan in 1999, and the per unit difference between average unit values and COGS was lower in 2000\nthan in any full year of the period of investigat ion other than 1999. Notwithstanding that 2000 was a\nyear in which demand increased, the industry's operating margin that year was less than half the levels\nof 1997 and 1998. 3064 In this regard, the United States argues that the USITC ensured that it did not\nattribute to imports any injury due to declining demand. It did this by focusing on the domestic\nindustry's condition during a period when declining demand was not an issue – 2000, which was not\nonly the most recent full year of the period of investigation, but one in which United States apparent\nconsumption increased from the level of the prior year. The USITC found that in 2000, the domestic\nindustry suffered from depressed pricing and poor financial performance. By demonstrating that the\ndomestic cold-finished bar industry was in a seriously injured condition even during a period where\ndemand was increasing, the United States submits that the USITC clearly satisfied its obligation under\nArticle 4.2(b) not to attribute to increased imports injury due to declines in demand.\n3065\n\n3059 European Communities' first written submission, para. 500.\n3060 European Communities' first written submission, para. 501; China's first written submission,\npara. 414.\n3061 China's first written submission, para. 414.\n3062 China's second written submission, para. 233.\n3063 China's second written submission, para. 234.\n3064 United States' first written submission, para. 594.\n3065 United States' first written submission, para. 596.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nNAFTA imports\n7.1290 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic cold-rolled bar industry, which is found in the USITC\nReport was made on the grounds of data which included imports from NAFTA countries. However,\nChina believes that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports' only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n3066\n7.1291 China further argues that in the Supplementary Report, the USITC was required to assess the\ninjury caused by imports from Mexico and Canada and to ensure that this injury would not be\nattributed to increased imports from non-NAFTA countries. China argues that it did not do so. China\nfurther argues that the USITC provided no explanation whatsoever that injury caused by imports from\nMexico and Canada was not attributed to increased imports and there is no reason to believe that\ninjury caused by imports from Mexico and Canada were not in fact attributed to increased imports.\n3067\n7.1292 The European Communities argues that the USITC identified declining demand and imports\nfrom Canada as other sources of serious injury to the domestic industry. However, according to the\nEuropean Communities, it did not attempt to separate and distinguish the effects of these other factors,\nand thus did not ensure that injury caused by these factors was not attributed to increased imports.\nThe European Communities and China argue that the United States, in imposing measures, has\ntherefore acted inconsistently with Article 4.2(b) of the Agreement on Safeguards. Moreover, the\nUnited States has not determined, through the provision of a reasoned and adequate explanation, that\nincreased imports have caused serious injury.\n3068 The European Communities further submits that the\nUnited States has not argued that it has ensured the non-attribution of the injurious effects of FTA\nimports. It has simply claimed that it is not required to. However, the European Communities notes\nthat it has explained why the United States was under an obligation to undertake such a non-\nattribution analysis.3069\n7.1293 For the United States' response, see paragraph 7.1066 et seq.\nFactors not considered by the USITC\n7.1294 The European Communities argues that the USITC did not consider in any detail the reasons\nfor the fall in profits in 1999, other than to note th at it was \"to a large extent attributable to the\ndeclines in demand during that year\". However, according to the European Communities, a close\nanalysis of the data in the USITC Report suggests a major fall in the price of raw materials in 1999\nwhich was accompanied by a substantial increase in other costs. According to the European\nCommunities, this evolution appears to have combin ed with developments in demand to explain the\n\n3066 China's first written submission, para. 418.\n3067 China's first written submission, para. 421; China's second written submission, para. 235.\n3068 European Communities' first written submission, para. 504; China's first written submission,\n3069 European Communities' first written submission, para. 399.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfinancial performance of the industry in 1999 and 2000. None of these developments are even\nmentioned in the USITC Report.3070\n7.1295 In response, the United States submits that the European Communities' argument that price\ndeclines for cold-finished bar were the function of declines in unit raw material costs overlooks the\nfact that the USITC placed particular emphasis on the price declines that occurred between 1999 and\n2000. The United States argues that, during this period, unit raw material costs increased.3071\n7.1296 The European Communities argues that, moreover, there were a whole series of expenses\nwhich were subject to a substantial leap in 1999 and 2000 which clearly had a significant effect on the\nindustry's financial performance. 3072 According to the European Communities, the USITC's Report\ndoes not even examine these developments, which coincide with the beginning of the serious injury\nallegedly suffered by the domestic industry. The European Communities states that it is quite clear\nthat the fall in raw material prices must have had an effect on prices on the market, and that the\nincrease in \"other factory costs\" must have had an effect on the profit margins which the domestic\nindustry could expect to obtain.3073\n7.1297 In response, the United States submits that with respect to the European Communities'\nargument that the declines in domestic industry performance in 1999 and 2000 appeared to be a\nfunction of increased interest and \"other\" expenses and depreciation, and that this fact was overlooked\nby the USITC, the European Communities fails to recognize that the USITC's analysis of the poor\nfinancial condition of the domestic cold-finished bar industry was based on operating income and\noperating margin data. Interest and \"other\" expenses and depreciation were not components of\noperating income, as computed by the USITC. Instead, the USITC deducted interest expenses and\n\"other\" expenses from operating income to derive net income. USITC then added depreciation and\namortization to net income to derive cash flow.\n3074 The United States argues that, accordingly,\nincreases in interest and \"other\" expenses and depreciation could not provide any explanation for the\npoor operating performance in 2000 cited by the USITC. Consequently, there was no requirement\nunder Article 4.2 for the USITC to have engaged in a further non-attribution analysis concerning these\nfactors.\n3075\n7.1298 In counter-response, the European Communities argues 3076 that the United States, like the\nUSITC, ignores an important issue previously raised by the European Communities, which purports to\nbe an alternative explanation of the changed financial performance of the industry in 1999 and 2000.\nThe European Communities submits that this shows that but for massive changes in \"other factory\ncosts\" in 1999 and 2000 the domestic cold-finished bar industry would have had a more than\ncomfortable operating income in those years, even in the face of allegedly declining prices. This is\nbecause huge potential savings brought about by a decrease in raw material costs were nullified by\nhuge increases in other costs. The European Communities submits that this is shown in the table\nbelow:\n\n3070 European Communities' first written submission, para. 509.\n3071 United States' first written submission, para. 592.\n3072 European Communities' first written submission, para. 510.\n3073 European Communities' first written submission, para. 511.\n3074 United States' first written submission, para. 597.\n3075 United States' first written submission, para. 598.\n3076 European Communities' second written submission, para. 397.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nTable 16: Cold-Finished Bar – Unit Value of Commercial Sales and Costs (1998-2001)3077\n1998\n(actual)\n1999\n(actual)\n1999\n(constant)\n2000\n(actual)\n2000\n(constant)\n2001\n(actual)\n2001\n(constant)\nNet. Comm.\nSales\n711 667 667 668 668 671 671\nRaw\nmaterials\n480 347 347 368 368 364 364\nDirect labor 45 51 51 54 54 58 58\nOther factory\ncosts\n98 212 98 184 98 203 98\nCOGS Total 623 609 496 605 520 625 520\nGross Profit 88 57 171 63 148 47 151\nSG&A 44 49 49 44 44 48 48\nOperating\nIncome (loss)\n44 8 122 19 104 (1) 103\n7.1299 According to the European Communities, such wa s the decline in raw material costs that if\nthe industry had managed to keep \"other factory costs\" stable, it would have made substantial profits\nin 1999, 2000 and interim 2001. The European Communities submits that a competent authority,\nseeing such a development, should first check whether this data was correct and second examine very\nclosely the reasons for such cost developments, in or der to make sure that it did not err in attributing\nthe injury seen in 1999 and 2000 to increased imports. Given that between 1998 and 1999 capacity\nutilization of the industry increased, and the volume of sales declined by only 10,000 tons, the\nEuropean Communities argues that these cost developments cannot be explained by effects on the\ndomestic industry caused by increased imports. In the absence of any discussion of this factor, the\nEuropean Communities argues that the USITC cannot be considered to have provided a reasoned and\nadequate explanation of its determination.\n3078 3079\n(v) Rebar\nFactors considered by the USITC\nDomestic capacity increases\n7.1300 China argues that the USITC did not address the question of whether capacity increases could\nhave caused injury at the same time as increased imports.3080\n7.1301 In response, the United States argues that the USITC did examine increases in domestic\ncapacity. According to the United States, the USITC concluded that this could not be an alternative\ncause of injury because the 26.6% increase in domestic productive capacity from 1996 to 2000 was\n\n3077 European Communities' second written submission, para. 347; USITC Report, Vol. II, p. LONG-\n34, table LONG-28. In the columns marked \"constant\" the data for \"other factory costs\" has been kept constant.\nFigures which have been kept constant have been italicized, and figures which change as a result of the\nsimulation are put in bold.\n3078 The United States misinterprets and dismisses th is argument of the European Communities; See\nUnited States' first written submission, para. 592.\n3079 European Communities' second written submission, para. 398.\n3080 China's first written submission, para. 428.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmuch smaller than the 48.1% increase in United States apparent consumption during that period.\nMoreover, capacity utilization generally increased during the period of investigation.3081\n7.1302 The United States submits that, therefore, contrary to China's argument, the USITC clearly\nand unambiguously stated that increased capacity was not a cause of injury. According to the United\nStates, China does not provide any basis for the Panel to conclude that the USITC did not objectively\nexamine the evidence concerning this factor and explain the basis for its conclusion.3082\nChanges in input costs\n7.1303 China argues that the USITC did not clearly indicate whether this factor contributed in\ncausing injury. Moreover, according to China, th e USITC failed to properly examine to what extent\nthis factor could have had an impact on prices. The USITC merely stated that the fall in costs was not\nas important as the decrease in prices and that, ther efore, falling costs were not responsible for falling\nprices. China argues that this explanation is obviously wrong. Falling costs must have had some\neffect on falling prices. Indeed, for prices to increase as demand increases, all other factors must\nremain unchanged. China asserts that this was not the case here. With increases in the United States'\nproduction and productivity, supply of rebar also increased. This had suppressed prices. Moreover, if\none can assume that falling production costs do not necessarily translate into falling prices in a\nmonopoly or oligopoly market, it would be false to assume the same thing in an open market.\nCompetition in an open market will necessarily put pressure on prices if production costs decrease.\n3083\n7.1304 The European Communities argues that because of the lack of clarity of the USITC Report on\nalternative causes of injury, the USITC failed to es tablish explicitly whether increased costs were an\nalternative cause of injury to the rebar industry. The European Communities argues either that the\nUSITC had found that increased costs were an alternative source of injury or, if the USITC had not\nmade such a finding, that the USITC had ignored and consequently failed to separate and distinguish\nand ensure non-attribution, of this alternative factor. 3084\n7.1305 The United States argues that the USITC examin ed changes in input costs in details for the\nperiod from 1998 to 2000. The USITC noted that unit COGS fell from 1998 to 1999. It stated that, in\nlight of the large increase in demand during this period, this decline in costs should not necessarily\nhave led to a decline in prices. However, there was a decline in unit sales values that exceeded the\ndecline in unit input values. The USITC thus reasonably concluded that the decline in prices was not\nmererly a function of input cost declines. Instead, it found that the increased imports prevented\ndomestic rebar producers from obtaining the full be nefits of declining input costs in a growing\nmarket. The USITC also performed a detailed examination of changes in input costs from 1999-2000.\nDuring this period, demand increased and per unit COGS increased, yet prices declined.\nConsequently, the United States argues, there was no possible causal nexus during this period\nbewteen price declines and changes in input costs.3085\n7.1306 The United States argues that the USITC's detailed and comprehensive examination of\nchanges in input costs contrasts markedly with th e cursory and inconsistent arguments advanced by\nthe European Communities in its submission. In one paragraph, the European Communities asserts\nthat the USITC should have concluded that the price decline from 1999 to 2000 was merely a function\n\n3081 United States' first written submission, para. 608.\n3082 United States' first written submission, para. 609.\n3083 China's first written submission, para. 429.\n3084 European Communities' second written submission, para. 402.\n3085 United States' first written submission, paras. 610-611\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof decline in raw material costs.3086 Just three paragraphs later, the European Communities states that\nthe USITC should have concluded that the domestic rebar industry's financial problems in 2000 were\ndue to an inability to increase prices commensurate ly with increases in costs such as other factory\ncosts.\n3087 What the European Communities appears to overlook is that both raw material costs and\nother factory costs are components of COGS. Changes in input costs from 1999 to 2000 would have\neither dictated an increase in prices or a decrease in prices in light of changes in other conditions of\ncompetition, such as demand. Input cost changes could not, as the European Communities seems to\nenvision, have dictated both price increases and declines simultaneously.3088\n7.1307 According to the United States, in marked cont rast to the European Communities, the USITC\nused a coherent and objective approach in assessing changes in input costs. The USITC properly\nexamined all components of COGS in determining th at input costs rose from 1999 to 2000. It is not\ndisputed that prices did not follow suit. 3089 This raises the question of why the domestic rebar\nindustry could not recover increasing input costs, as well as the increasing selling, general, and\nadministrative expenses cited by the European Communitites, from 1999 to 2000. As the European\nCommunitites notes, this period was \"when United States production and capacity utilization was at\nits highest;\"\n3090 moreover, demand was rising. In such a market, one would anticipate that prices\nwould follow costs.3091 The reason that prices for United States-produced rebar did not follow costs in\n2000 is the one overlooked by the European Communities: the imports.3092\nNAFTA imports\n7.1308 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic rebar industry, which is found in the USITC Report, was\nmade on the grounds of data which included imports from NAFTA countries. However, China\nbelieves that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports' only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n3093\n7.1309 China argues that such a new determination was not done concerning this product. This, it\nstates, is especially surprising, given that the USITC acknowledged that imports from Canada and\nMexico were causing injury by stating that \"im ports from Canada did not contribute importantly to\nthe serious injury\" and \"imports from Mexico did not contribute importantly to the serious injury\". In\nother words, imports from NAFTA countries contributed in causing the injury, although this\ncontribution was not substantial. 3094 China argues that since the USITC did not proceed to a new\n\n3086 European Communities' first written submission, para. 521.\n3087 European Communities' first written submission, para. 524.\n3088 United States' first written submission, para. 612.\n3089 United States' first written submission, para. 617.\n3090 European Communities' first written submission, para. 524.\n3091 Indeed, when it attempts to divorce \"relatively low prices\" from \"developments of costs\" in\npara. 524 of its first written submission, the European Communties appears to overlook that absent price\nsuppression or depression there normally will be a direct relationship between a company's costs and its prices.\n3092 United States' first written submission, para. 614.\n3093 China's first written submission, para. 437; China's second written submission, para. 245.\n3094 China's first written submission, para. 438.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndetermination of causality between increased imports from non-NAFTA countries and the serious\ninjury to the domestic industry, it failed to assess the injury caused by imports from Mexico and\nCanada and it failed to ensure that this injury would not be attributed to increased imports from non-\nNAFTA countries. Therefore, China argues that the USITC did not comply with Articles 2(1) and\n4.2(b) of the Agreement on Safeguards.\n3095\n7.1310 Similarly, the European Communities argues that, in failing to analyse imports from Canada,\nMexico, Israel and Jordan as alternative causes of injury the USITC also acted inconsistently with\nArticle 4.2(b).3096\n7.1311 For the United States' response, see paragraph 7.1066 et seq.\nFactors not considered by the USITC\n7.1312 The European Communities notes that the USITC considered that price declines in 1999,\nwhich continued into 2000 allegedly led by imports, were responsible for the poor performance of the\ndomestic industry in 2000. 3097 According to the European Comm unities, it is far from clear that\nimports can be regarded as price setters in what the USITC admitted is a commodity market. Imports\nachieved their highest level of market share in 1999 with 22% of the market. According to the\nEuropean Communities, it had not been demonstrated that price would be set by 22% of the market\ntaken up by imports, rather than the 78% taken up by domestic production. The USITC's purported\njustification of the price leadership of imports does not survive detailed examination.\n3098\n7.1313 With regard to the argument that it is \"far from clear that imports can be regarded as price\nsetters in what the USITC has admitted is a comm odity market\", the United States submits that this\nargument ignores two uncontested USITC findin gs. First, the USITC found that rebar was a\ncommodity product sold on the basis of price – a proposition no party has disputed. Second, the\nUSITC found that the imports undersold domestically produced rebar by margins over 20% since\n1998.3099 The United States further argues that in a commodity market where purchasing decisions\nare made on the basis of price, significant volumes of a low-priced product will drive all prices down.\nThe increased quantities of rebar imports were priced much lower than the domestically produced\nproduct. The United States submits that, as the USITC found, to meet this competition the domestic\nindustry was forced to cut prices to avoid losing even more market share to the imports than it\nactually did.3100\n7.1314 The European Communities argues that it would appear that the price declines in 1999 and\n2000 were closely linked to declines in the cost of raw materials. The declines in those two years\nclosely followed declines in raw material prices. However, as noted, in 1999 the domestic industry\ncontinued to make a comfortable operating income while in 2000 a substantial loss was suffered.\nClose analysis of the data in the report shows subs tantial increases in both \"other factory costs\" and\nSG&A expenses.3101 According to the European Communities, it was not the relatively low price\nobtaining on the United States domestic market which led the domestic industry to suffer injury, but\nit was the developments of costs, in particular \"other factory costs\" and SG&A expenses, which led to\nthe alleged serious injury. The European Communities argues that these costs increased when\n\n3095 China's first written submission, para. 439.\n3096 European Communities' first written submission, para. 517.\n3097 European Communities' first written submission, para. 519.\n3098 European Communities' first written submission, para. 520.\n3099 United States' first written submission, para. 604.\n3100 United States' first written submission, para. 605.\n3101 European Communities' first written submission, para. 521.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUnited States production and capacity utilization was at its highest. However, the European\nCommunities asserts that the USITC Report does not even mention these developments, nor assess\ntheir effect on the situation of the domestic industry.\n3102 The European Communities argues that the\nUSITC does not attempt to explain the striking fact that in 1996 the domestic industry made an\noperating loss of US$72,000, which was the year in which the domestic industry had its highest\nmarket share and was characterised by relatively high prices and a low level of imports. Demand,\nhowever, was lower in 1996 than in any other year during the investigation period. According to the\nEuropean Communities, evidently, this loss could not have been caused by increased imports. This\nfact, which is immediately obvious is never explained. This is probably because it suggests that\nsomething other than imports is responsible for the problems of the domestic industry.\n3103\n7.1315 In response, the United States argues that the USITC's detailed and comprehensive\nexamination of changes in input costs contrasts markedly with the cursory and inconsistent arguments\nadvanced by the European Communities in its submission. In one paragraph, the European\nCommunities asserts that the USITC should have concluded that the price decline from 1999 to 2000\nwas merely a function of decline in raw material co sts. Later, the European Communities states that\nthe USITC should have concluded that the domestic rebar industry's financial problems in 2000 were\ndue to an inability to increase prices commensurate ly with increases in costs such as other factory\ncosts. What the European Communities appears to overlook is that both raw material costs and other\nfactory costs are components of COGS. Changes in input costs from 1999 to 2000 would have either\ndictated an increase in prices or a decrease in prices in light of changes in other conditions of\ncompetition, such as demand. Input cost changes could not, as the European Communities seems to\nenvision, have dictated both price increases and declines simultaneously.\n3104 The United States\nsubmits that in marked contrast to the European Communities, the USITC used a coherent and\nobjective approach in assessing changes in input costs. The USITC properly examined all\ncomponents of COGS in determining that input cost s rose from 1999 to 2000. It is not disputed that\nprices did not follow suit.\n3105 This raises the question of why the domestic rebar industry could not\nrecover increasing input costs, as well as the increasing selling, general, and administrative expenses\ncited by the European Communities, from 1999 to 2000. As the European Communities notes, this\nperiod was \"when United States production and capacity utilization was at its highest\"; moreover,\ndemand was rising. In such a market, one would anticipate that prices would follow costs. The\nreason that prices for United States-produced rebar did not follow costs in 2000 is the one overlooked\nby the European Communities: the imports.\n3106\n7.1316 In counter-response, the European Communities argues that the USITC's discussion of input\ncosts is entirely phrased in terms of whether they caused prices to fall. According to the European\nCommunities, the USITC recognized that declines in the COGS in 1999 could not explain the\nmagnitude of price declines observed in that year (although such declines must have had an effect).\nHowever, the European Communities' argument was that increases in other factory costs and SG&A\nexpenses in 2000 (which form part of COGS), th e year in which operating income declined and thus\nserious injury was allegedly found\n3107, are a more probable cause of injury than price declines caused\nby increased imports.3108 Indeed, absent the increased costs, the domestic rebar industry would have\n\n3102 European Communities' first written submission, para. 524.\n3103 European Communities' first written submission, para, 514.\n3104 United States' first written submission, para. 612.\n3105 United States' first written submission, para. 613.\n3106 United States' first written submission, para. 614.\n3107 There was only a marginal decline in operating income in 1999, with operating income above 1996\nand 1997 levels.\n3108 European Communities' first written submission, paras. 521-525.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhad an operating income of US$68,368,692 rather than a loss of US$24,669,000, a respectable level\ngiven operating income in 1999 of US$74,412,000. 3109 The USITC Report contains no discussion of\nthis increase in costs, nor of the reasons be hind it. The European Communities notes that the\ndomestic industry increased its capacity utilization and its volume of sales in 2000. Increased costs do\nnot result from such developments. That it did not, suggests that other developments, which the\nUSITC did not explore but which it clearly should have explored, were a more probable cause of\ninjury than increased imports. The European Communities asserts that the United States has not\naddressed this issue. The European Communities argues that, consequently, the USITC's report does\nnot provide a reasoned and adequate explanation of its findings.3110\nFailure to provide reasoned and adequate explanation\n7.1317 China argues that the USITC neither assessed injury caused by other factors nor did it clearly\nstate that other factors were not causing injury and explained the reasons why. 3111 China argues that\nthe USITC failed to adequately evaluate the complexity of the alleged injury factors. It also failed to\nprovide a sound, clear and straightforward explanation of how it ensured that injury caused by other\nfactors was not attributed to increased imports. Therefore, China believes that the USITC acted\ninconsistently with Articles 2(1) and 4.2(b) of the Agreement on Safeguards.\n3112\n7.1318 The United States argues that the USITC conducted a reasoned and adequate examination of\nthe injury purportedly caused by factors other than increased imports and ensured that any injury\ncaused by these other factors was not attributed to imports. Consequently, the USITC's non-\nattribution analysis for rebar satisfied the requirements of Articles 2.1 and 4.2 of the Agreement on\nSafeguards. The USITC separated and distinguished from the serious injury caused by increased\nimports any injury attributable to other factors.\n3113\n(vi) Welded pipe\nFactors considered by the USITC\nDeclines in demand\n7.1319 Korea argues that the USITC's failure to properly define the like products in the other welded\npipe category prevented the USITC from properly considering declines in demand, an important\n\"other factor\" affecting the industry. According to Korea, the declines in demand were most\npronounced for other welded pipe (excluding LDLP).3114\n7.1320 Korea argues that the USITC's findings in the concurrent anti-dumping investigation of\nwelded pipe are instructive. As noted there, declines in domestic industry performance at the end of\nthe investigation period \"occurred in the context of a decline in the overall economy and total\n\n3109 The figure of US$68,368,692 is calculated by multiplying the operating income per unit which\nwould have been achieved if other factory costs and SG&A expenses are kept constant compared to 1999 (i.e.\nUS$12 per unit – see Figure 43, Rebar; Evolution of costs with 1999 values held constant, European\nCommunities' first written submission, para. 523.) by the volume of commercial sales in 2000 (i.e. 5,697,391\ntons – see USITC Report, Vol. II, p. LONG-35, Table LONG-29)).\n3110 European Communities' second written submission, para. 403.\n3111 China's first written submission, para. 427.\n3112 China's first written submission, para. 430.\n3113 United States' first written submission, paras. 607 and 616.\n3114 Korea's first written submission, para. 151.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\napparent domestic consumption of standard pipe\". 3115 Korea argues that, consequently, the USITC\nconcluded in that investigation that the United States welded pipe industry – during the same period\nof the investigation as used in the Section 201 investigation – was not materially injured or threatened\nwith material injury by reason of imports of standard pipe from China and that industry declines were\ndue to softening demand.\n3116 In Korea's view, if there was no \"material\" injury arising from imports,\nimports could not be responsible for \"serious\" injury. In view of these facts, strongly suggesting that\nserious injury was not due to imports, the USITC should have identified, distinguished, and separated\nthe serious injury arising from declines in demand.3117\n7.1321 Korea also argues that, conversely, as the USITC acknowledged, demand for LDLP was\nincreasing towards the end of the period. While the USITC agreed that \"rising demand tends to\nameliorate the impact of a given volume of imports\", it noted that \"even with a recent rise in LDLP\ndemand, overall demand for covered welded tubular products has been relatively constant on a full\nyear basis since 1998, as well as between interim periods. Thus, we do not consider the likely\nincrease in demand for LDLP as eliminating the threat to serious injury\". However, according to\nKorea, the true trends were masked by consider ing the two separate like products together so that\ndemand appeared \"stable\".\n3118\n7.1322 Korea further argues that, irrespective of the analytical flaws caused by the improper\ndefinition of like product, the USITC did not separate and distinguish the effects of this other factor\naffecting the United States industry's performance as required by Article 4.2 of the Agreement on\nSafeguards.\n3119\n7.1323 In response, the United States submits that the USITC noted that several parties had argued\nthat the welded pipe industry was not threatened with serious injury because of increasing demand in\nthe LDLP sector of the market but rejected this argument. The USITC stated that the record evidence\ndid, in fact, indicate that there had been a growth in demand for LDLP in the market and that the\ngrowth in demand for that product, which was expect ed to continue, might ameliorate the impact of\nthese imports on the welded pipe industry. However, it also noted that LDLP only accounted for 20\nto 30% of market demand for the overall welded pipe product category and that demand in the overall\nwelded pipe market had been constant between 1998 and interim 2001, even with the substantial\ngrowth in demand for LDLP. Accordingly, the USIT C reasonably rejected this factor as indicating\nthat the industry would not continue to deteriorate or that imports would not continue to increase their\npresence in the market.\n3120\n7.1324 The United States argues further that the USITC clearly did discuss this issue and properly\nconsidered it in the appropriate legal context, that is, in the context of how demand trends affected\ncompetition in the market for welded pipe, the relevant like product in this proceeding. The United\nStates submits that Korea's argument is simply wrong-headed because it suggests that the USITC\nshould have placed greater weight on demand trends for a sub-segment of the like product, LDLP,\nthan on demand trends for the like product, all certain welded pipe. For this reason, its argument\nshould be rejected.\n3121\n\n3115 Korea's first written submission, para. 151.\n3116 Korea's first written submission, para. 152.\n3117 Korea's first written submission, para. 153.\n3118 Korea's first written submission, para. 154.\n3119 Korea's first written submission, para. 155.\n3120 United States' first written submission, para. 637.\n3121 United States' first written submission, para. 638.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1325 In counter-response, Korea notes that the United States countered that demand in the overall\nwelded pipe market had been constant even with the substantial growth in demand for LDLP. Korea\nsubmits that this is exactly the complainants' point. The only reason that the overall growth in\ndemand for other welded pipe between 1998 and interim 2001 was able to remain constant was due to\nthe substantial growth in demand for LDLP, which stabilized the declining demand for other welded\npipe. Thus, the USITC failed to take into account and distinguish demand changes which affected\nthe performance of the other welded pipe producers.3122\nDomestic industry overcapacity\n7.1326 China and Switzerland note that the USITC stated in its report that increased domestic\ncapacity was not contributing in a more than minor way to the condition of the industry, yet it did not\nexplain the nature and extent of this contribution. 3123 The European Communities argues that it is\nclear from the USITC's statements that it considered that increased capacity had some effect on the\nsituation of the domestic industry.3124\n7.1327 China, the European Communities and Switzerland argue that the increase in capacity was not\nlooked at closely enough and given sufficient importance. The increase in domestic capacity over the\nperiod of investigation was 1.5 million short tons and the increase in consumption was 1.2 million\nshort tons. The USITC states that domestic capacity did not increase much more than consumption\nand thus it did not have an important impact on prices. The complainants argue that this is wrong.\nAccording to the European Communities, China and Switzerland, such a significant increase in\ncapacity must have had a greater impact on prices than the USITC recognized.\n3125 The European\nCommunities argues that it is insufficient just to compare capacity and consumption on an end-to-end\nbasis. There is a clear trend of increasing capacity while United States' apparent consumption\nflattens off. The effects of increases in over-capacity would have had a more serious effect in 1999\nand 2000, driving prices down, yet were not subjected to detailed examination.3126\n7.1328 Korea further argues that the record demonstrates that domestic capacity exceeded apparent\nUnited States consumption as early as 1996 and that the evidence demonstrates that the low capacity\nutilization was the direct result of capacity expansion beyond even the most favorable projections of\nmarket demand. 3127 Korea argues that these capacity increases and low capacity utilization rates\nraised costs and intensified competition among domestic producers which, in turn, reduced prices. 3128\nKorea argues that irrespective of such a clear dec line in the already low capacity utilization rate and\nits impact on the condition of the industry, the USITC failed to consider separately the effect of\nexcess capacity and low capacity utilization on the industry's performance at the end of the period to\nassure that such effects were not attributed to imports.\n3129\n7.1329 In response, the United States submits that th e USITC clearly did pay close attention to the\nrecord evidence concerning capacity increases and discussed in some detail whether the increases had\nan impact on domestic prices. 3130 The United States submits that the USITC correctly noted that\n\n3122 Korea's second written submission, para. 192.\n3123 China's first written submission, para. 444; Switzerland's first written submission, para. 302.\n3124 European Communities' first written submission, para. 527.\n3125 European Communities' first written submission, para. 527; China's first written submission,\n3126 European Communities' first written submission, para. 533.\n3127 Korea's first written submission, para. 158.\n3128 Korea's first written submission, para. 159.\n3129 Korea's first written submission, para. 160.\n3130 United States' first written submission, paras. 630-632.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic capacity had increased during the period but also noted that this increase had tracked the\ngrowth in demand during the period of investigation to a substantial degree so that capacity increases\nhad only a minimal impact on price levels in the market. Moreover, the USITC also correctly found\nthat, even with this increase in capacity, the domestic industry's production levels had actually\ndeclined during the last years of the period, which showed that the industry had not been able to take\nadvantage of its increased capacity as a result of import increases during these years.\n3131 The United\nStates concludes that since the production levels of the industry declined in 1999 and 2000, this\nadditional capacity could have, at best, only a minimal and indirect effect on market prices during\nthose two years. Instead, the addition of more than 360 thousand tons of import merchandise to the\nmarket on 1999 and 2000 – sold at consistently lower prices than domestic merchandise – clearly had\na much more substantial and direct impact on prices during that period, as the USITC reasonably\nfound.\n3132 The United States submits that, given these facts, it is clear that the USITC examined the\nrecord evidence concerning capacity in detail and correctly rejected the argument that this increased\ncapacity had had a significant impact on prices during the last two years of the period of\ninvestigation.\n3133\n7.1330 In counter-response, China submits that with respect to domestic capacity increases, the\nUSITC qualitatively evaluated effects of increased imports and the effects of capacity increases on the\nsituation of the industry. As a result of this approach, in China's view, the USITC neither could\nprovide an analysis which would properly identify the nature and extent of these factors nor could it\nestablish explicitly that the effects were distinguished from increased imports.\n3134 China submits that\nan extensive, and often speculative interpretation of the Commissioners' findings by the United States\nin its submissions cannot replace the lack of an explicit, reasoned and adequate explanation that the\neffects of 'other' factors were not attributed to imports, and the lack of an appropriate assessment of\nthe injurious effects of other factors in the USITC Report.3135\n7.1331 Also in counter-response, the European Communities argues that the mere finding that\nincreased capacity contributed in a \"minor way\" does not establish, in an explicit manner, how the\nUSITC separated and distinguished the injurious effects of increased capacity and ensured that those\neffects, along with the injurious effects of other factors, were not attributed to increased imports.\nMoreover, the European Communities reiterates that capacity increased substantially in 1999 and\n2000 while consumption remained stable thus showing that an end-to-end comparison of the increase\nin consumption was insufficient to properly ex amine the interrelationship between changes in\ncapacity and consumption.3136 3137\n7.1332 Korea notes that in the case of the welded pipe industry's capacity increases, the USITC\nignored the fact that the industry had too much absolute capacity even at the beginning of the period.\nAccording to Korea, capacity exceeded total United States demand at the beginning of the period of\ninvestigation.3138 Yet, the industry kept adding capacity.3139 3140 Korea submits that the full effects of\n\n3131 United States' first written submission, para. 625.\n3132 United States' first written submission, para. 632.\n3133 United States' first written submission, para. 625.\n3134 China's second written submission, para. 248.\n3135 China's second written submission, para. 249.\n3136 European Communities' first written submission, para. 532, 533 and figure 44.\n3137 European Communities' second written submission, para. 407.\n3138 See USITC Report, Vol. II, TUBULAR-15 and Table TUBULAR-43 at TUBULAR-37\n(Exhibit CC-6).\n3139 USITC Report, Vol. II, TUBULAR-15(Exhibit CC-6).\n3140 Korea's second written submission, para. 186.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat overcapacity really surfaced in its most problematic form when demand started to decline. 3141\nObviously, such overcapacity in a declining market would have led to severe declines in industry\nperformance, even if imports had been absent from the market. Certainly, such a significant factor\ncausing injury should have been carefully separated by the United States and the injurious effects of\nthose factors should have been examined.3142 Instead, the United States merely asserts that the USITC\nproperly assessed the effect and concluded that the increased capacity levels of the industry were not\nresponsible in more than a minor way for any declines in the industry's condition. 3143 According to\nKorea, such an assertion does not satisfy the non-attribution requirement under Article 4.2(b) of the\nAgreement on Safeguards. The nature and extent of the impact on the market caused by the increased\ncapacity should have been separated and distinguished from the effect caused by imports.\n3144\nAberrational performance of one member of the industry\n7.1333 The European Communities argues that the USITC's findings regarding the situation of the\nsignificant domestic producer suggest that factors other than imports were responsible for at least\nsome of the decline of the company's financial performance. 3145 However, the USITC does not\nseparate and distinguish the effects of these alternative causes, and thus does not ensure that the\neffects of these factors are not attributed to increased imports. The United States has, consequently,\nacted inconsistently with Article 4.2(b) of the Agreement on Safeguards.3146\n7.1334 China and Switzerland argue that as regard \"the events pertaining to a significant producer\",\nthe USITC merely briefly explained what the main factor for the decline in the financial performance\nwas, but it did not give any hint concerning the role that non-import related events have played.\nFurther, when the USITC concluded that the exclusion of this \"significant\" producer did not\nsubstantially alter the downward trend in industry profitability, it failed to specify the extent to which\nthis downward trend had nevertheless been altered.\n3147\n7.1335 Korea also argues that the USITC failed to properly segregate and consider the effects on the\nperformance of the United States' industry of one very unprofitable producer whose performance\ndeclines were caused by well-documented problems entirely unrelated to other welded pipe\nimports.3148 According to Korea, the USITC completely disregarded the evidence on the record that\ndemonstrated that this company's declines were not caused by imports. Moreover, the USITC's\nconclusion that this company's performance was caused by the drop in unit values (which, in turn, was\nsupposedly caused by increased imports) is equally unreliable as the USITC itself was admittedly\n\"cautious of placing undue weight on average unit value, as it is influenced by issues of product\nmix\".\n3149\n7.1336 In response, the United States argues that although the details of the producer's problems and\nits operating results are confidential, the USITC clearly examined the record evidence relating to these\nissues and discussed the nature and extent of this producer's performance in detail. 3150 It specifically\nnoted the arguments made on this issue by the foreign producers and rejected their assertions that the\n\n3141 USITC Report, Vol. I, p. 148 (Exhibit CC-6).\n3142 Korea's second written submission, para. 187.\n3143 United States' first written submission, para. 631.\n3144 Korea's second written submission, para. 188.\n3145 European Communities' first written submission, para. 527.\n3146 European Communities' first written submission, para. 528.\n3147 China's first written submission, para. 444; Switzerland's first written submission, para. 302.\n3148 Korea's first written submission, para. 161.\n3149 Korea's first written submission, para. 162.\n3150 USITC Report, p. 165.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry's operating results had been skewed by the non-import problems of the producer. 3151 I t\nconcluded that certain costs of the company appeared to have increased but that the main reason for\nthe decline in the industry's financial performance was the \"substantial drop in the unit values of the\ncompany's sales beginning in 1999\", which was due to the substantial increase in imports.\n3152\nMoreover, the USITC noted, the exclusion of the company from the industry data did not substantially\nalter the downward trends in the industry's condition in those years.\n3153 By conducting this analysis,\nthe USITC properly distinguished the effects attributable to this producer's operations from the effects\nof imports and found that the industry's problems were genuinely and substantially the result of\nincreased imports.3154 According to the United States, the complainants' assertions that the USITC did\nnot conduct such an analysis have no foundation.3155 3156\n7.1337 Korea notes that once again, the United States merely asserts that the USITC did assess the\nextent to which the difficulties experienced by one of the domestic producers caused declines in the\nindustry's performance. The United States concludes by simply saying that the USITC noted that the\nexclusion of the company from the industry data did not substantially alter the downward trends in the\nindustry's condition in those years. 3157 This statement confirms that the USITC found that this\ncompany at issue did alter the downward trends in the industry's condition. Nonetheless, the USITC\nfailed to analyse how and to what extent that was the case. Without such analysis, it cannot be shown\nthat the USITC properly distinguished the effects attributable to this producer's operations from the\neffects of imports.3158\nNAFTA imports\n7.1338 China notes that the determination of the existence of a causal link between the increased\nimports and the threat of serious injury to the domestic certain tubular products industry, which is\nfound in the USITC Report was made on the grounds of data which included imports from NAFTA\ncountries. However, China believes that, since imports from NAFTA countries were excluded from\nthe application of the safeguard measure, the USITC had to determine whether total increased\nimports, with the exception of imports from NAFTA-countries, threatened to cause serious injury to\nthe domestic industry. China argues that, as a result, since the determination of causality required that\n\"increased imports' only consist of imports originating from non-NAFTA countries, the movements in\nimports from Canada and Mexico had to be regarded as \"an other factor\". Article 4.2(b) of the\nAgreement on Safeguards also required that injury caused by movements in imports from Canada and\nMexico not be attributed to increased imports (from non-NAFTA countries).\n3159\n\n3151 USITC Report, p. 165.\n3152 USITC Report, p. 165.\n3153 USITC Report, p. 165.\n3154 In this regard, the United States notes that the complainants' argument is, in essence, an assertion\nthat the USITC should conduct its causation assessment for only a portion of the industry producing welded\npipe. As the complainants are aware, however, the USITC is required by the Agreement on Safeguards to assess\nwhether imports are causing serious injury to the industry as a whole, not subsegments of it. Thus, even if this\nproducer were affected to some effect by non-import factors, the USITC would nonetheless still need to include\nthis producer in the industry and assess whether the industry as a whole were injured by imports.\n3155 European Communities' first written submission, para. 527; Korea's first written submission,\n3156 United States' first written submission, para. 635.\n3157 United States' first written submission, para. 635.\n3158 Korea's second written submission, para. 189.\n3159 China's first written submission, para. 450. China's second written submission, para. 250."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.347924"}}},{"rowIdx":3488,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ08_Report_Of_Panel_07.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ08_Report_Of_Panel_07.pdf"},"doc_sequence":{"kind":"number","value":8,"string":"8"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 440 7.1339 China further argues that in the Supplementary Report, the USITC was required to assess the injury caused by imports from Mexico and Canada and to ensure that this injury would not be attributed to increased imports from non-NAFTA countries. China argues that it did not do so. China further argues that the USITC provided no explanation whatsoever that injury caused by imports from Mexico and Canada was not attributed to increased imports and there is no reason to believe that injury caused by imports from Mexico and Canada were not in fact attributed to increased imports. 3160 7.1340 In this regard, the European Communities argues that a proper analysis of imports from Canada and Mexico would have been important because imports from Canada and Mexico represented, taking 2000 as an example, 45.9% of all imports. However, the European Communities"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":7,"string":"7"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":76,"string":"76"},"clean_text":{"kind":"string","value":"7.1339 China further argues that in the Supplementary Report, the USITC was required to assess the\ninjury caused by imports from Mexico and Canada and to ensure that this injury would not be\nattributed to increased imports from non-NAFTA countries. China argues that it did not do so. China\nfurther argues that the USITC provided no explanation whatsoever that injury caused by imports from\nMexico and Canada was not attributed to increased imports and there is no reason to believe that\ninjury caused by imports from Mexico and Canada were not in fact attributed to increased imports.\n3160\n7.1340 In this regard, the European Communities argues that a proper analysis of imports from\nCanada and Mexico would have been important because imports from Canada and Mexico\nrepresented, taking 2000 as an example, 45.9% of all imports. However, the European Communities\nsubmits that the USITC analysis is unclear becau se two Commissioners concluded that Canadian and\nMexican imports \"contribute importantly\" to the threat of serious injury, two Commissioners\nconcluded that Canadian and Mexican imports did not \"contribute importantly\" to the threat, one\nCommissioner found serious injury for welded products (i.e. OCTG and non-OCTG welded tubular\nproducts) and that Canadian imports \"contributed importantly\", while the sixth Commissioner classed\nthe products in the same manner and found serious injury but that Canadian imports did not\n\"contribute importantly\". Since this was taken as a tie vote, the President decided that imports from\nCanada do not contribute importantly to the serious injury or threat thereof.\n3161 The European\nCommunities argues that, however, the mere fact that Canadian and Mexican imports were overall\nconsidered not to \"contribute importantly\" does not mean that they are not having an effect on the\ndomestic industry, and should not be factored into th e causal analysis which must also form part of a\nthreat determination. In order to find that NAF TA imports did not \"contribute importantly\", the\nUSITC must find that the growth rate in such imports is appreciably lower than that of other imports.\nThus, a simple finding that, according to United States law, NAFTA imports did not contribute\nimportantly does not mean that they had no effect on the domestic industry. Imports of the magnitude\ninvolved here evidently affect the domestic industry.\n3162\n7.1341 The European Communities argues that a compet ent authority is required to assess the effect\nof such excluded imports on the domestic industry, to separate and distinguish those effects, and to\nmake sure those effects are not attributed to increased imports from other sources. Consequently,\nChina and the European Communities submit that the United States has acted inconsistently with\nArticle 4.2(b) of the Agreement on Safeguards. It is hardly conceivable that 45.9% of imports (again\nbased on 2000), which, in the case of Mexican imports consistently undersold domestic products,\ncould have no effect on a domestic industry.\n3163 The European Communities further argues that a case\nwhere NAFTA imports represent 45.9% of all imports provides a very good example of why the non-\nattribution analysis in respect of excluded imports is necessary.3164\n7.1342 For the United States' response, see paragraph 7.1066 et seq.\nFactors not considered by the USITC\n7.1343 According to the European Communities, there are a number of other factors, some of which\nhave been ignored, which were having an effect on the domestic industry. Also, because these factors\nhave not been properly analysed, the USITC has failed to provide a reasoned and adequate\n\n3160 China's first written submission, para. 454.\n3161 European Communities' first written submission, para. 529.\n3162 European Communities' second written submission, para. 410.\n3163 European Communities' first written submission, para. 530; China's first written submission,\npara. 454.\n3164 European Communities' second written submission, para. 410.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexplanation of its findings. 3165 In particular, the European Communities argues that there were\nnotable increases in \"other factory costs\" and SG&A expenses in 1999 and 2000, and of raw materials\nin 2000 which also must have had an effect on the domestic industry but which are not explained.\n3166\n7.1344 In response, the United States submits that the European Communities' argument is not\npersuasive. It is true, as the European Communities contends, that the industry did experience some\nincrease in its unit other factory costs and unit SG&A expenses between the first three years of the\nperiod of investigation and the last two years of the period. However, as can be seen from the\nUSITC's Report, the increases in these costs were more than offset by declines in the industry's unit\nraw materials costs and its unit direct labour costs during this same period. As a result, the industry's\noverall unit costs of goods sold declined substantia lly between the first three years and the last two\nyears of the period of investigation, falling from a range of US$537 to US$545 per ton during the\nthree-year period from 1996 to 1998 to a range of US$502 to US$515 per ton in 1999 and 2000. Even\nwith the increases in its other factory and SG&A e xpenses, therefore, the industry's overall costs of\ngoods sold declined during the two years in which imports made their largest inroads into the market.\nThe United States submits that, given this, it is clear why the USITC placed little weight on the\nchanges in the industry's other factory and SG&A costs when assessing whether imports had caused\nthe declines in the industry's profitability levels in the latter part of the period of investigation.\n3167\n7.1345 In counter-response, the European Communities notes 3168 that, in fact, the unit values for the\nindividual items for COGS do not add up to total COGS on which the USITC based itself. This is\nillustrated below:\nTable 17: Welded Pipe Products – COGS Data 20003169\nAs recorded in USITC Report Consistent with reported\nunit values\nRaw materials 340 340\nDirect labor 51 51\nOther factory costs 106 106\nTotal COGS 515 497\nGross profit (unit) 76 94\nSG&A expenses 51 51\nOperating Income (unit) 25 43\nOperating income (total) 118,464,000 202,183,893\n7.1346 The European Communities submits that, thus, when correctly added up, the total COGS is\nUS$497 per unit rather than US$515. This means that the gross profit is US$94 per unit and not\nUS$76, and that operating income is US$43 per unit and not US$25 as is presently reported in the\nUSITC Report. Applying this to the volume of commercial sales, operating income almost doubles,\nand indicates a minor fall from the 1999 level of US$246,626,000 and not the fairly substantial fall\nwhich the data used in the USITC Report suggests (operating income per unit in 1999 was US$49 as\nagainst US$43 in 2000 if the USITC Report is corrected). Thus, either the USITC Report has failed\n\n3165 European Communities' first written submission, para. 531.\n3166 European Communities' first written submission, para. 534.\n3167 United States' first written submission, para. 626.\n3168 European Communities' second written submission, para. 408.\n3169 European Communities' second written submission, para. 408; USITC Report, Vol. II\np. TUBULAR-22, table TUBULAR 18. Figures in bold indicate differences with the data actually recorded in\nthe USITC Report.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto show some development in costs which might have a material bearing on any causation analysis, or\nits data on operating income is entirely inaccurate, meaning that the findings based on operating\nincome are not a reasoned and adequate explanation supported by the facts. The USITC's\ndetermination of the existence of a threat of serious injury is brought into question if there was only a\nminor fall in profits in 2000 compared to the substantial fall which the USITC alleges actually took\nplace.\n3170\nRelevance of like product analysis for welded pipe\n7.1347 Korea argues that in the case of welded pipe, the USITC failed to properly consider the effect\nof demand trends because they simply \"added togeth er\" increases for LDLP and declines for all other\nwelded pipe and concluded that the increases did not offset the decreases since LDLP was a small part\nof the overall category of other welded pipe. This led to incorrect conclusions regarding causation. If\nthe like product of LDLP had been examined then the decreases in imports in an expanding market\nmight have led to a different conclusion regarding causation.3171\n7.1348 For a summary of the United States' position on this issue, see paragraph 7.1324 above.\nFailure to provide a reasoned and adequate explanation\n7.1349 Switzerland submits that if the investigating authority believes that an alleged factor is not\nthreatening to cause injury, it must , likewise, explicitly, clearly, and unambiguously, state that such a\nfactor is not threatening to cause injury and explain the reasons why. The explanation must be\nstraightforward. To proceed otherwise would not ensure that alleged factors have been examined\nclosely enough to establish that they are not contributing to the threat of injury. As a result, there\nwould be no guarantee that threat of injury due to other factors has not been wrongfully attributed to\nincreased imports.\n3172\n7.1350 Switzerland argues that since the injurious effect s of the two factors that were threatening to\ncause injury at the same time as the increased imports had not been properly assessed by the USITC,\nit is impossible to determine whether the USITC properly separated the injurious effects of these\nfactors from the injurious effects of the increased imports.\n3173 China and Switzerland argue that as a\nresult, the the USITC failed to adequately evaluate the complexity of the alleged injury factors. It also\nfailed to provide a sound, clear and straightforward explanation of how it ensured that injury caused\nby other factors was not attributed to increased imports. Therefore, China and Switzerland believe\nthat the USITC acted inconsistently with Articles 2(1) and 4.2(b) of the Agreement on Safeguards.3174\n7.1351 The United States argues that the USITC performed a thorough and objective analysis of the\nrecord. It established that there was a genuine and substantial causal link between trends in the\nvolume and market share of imports of certain welded pipe and the significant declines in the\ncondition of the welded pipe industry during the last years of the period of investigation and how\nserious injury by such imports was imminent. Moreover, it thoroughly assessed the nature and scope\nof the effects of other factors and ensured that it did not attribute the effects of these factors to\nimports.\n3175 The United States also argues that, a \"reasoned and adequate\" explanation of the\n\n3170 European Communities' second written submission, para. 409.\n3171 Korea's written reply to Panel question No. 80 (a) at the first substantive meeting.\n3172 Switzerland's first written submission, para. 305.\n3173 Switzerland's first written submission, para. 303.\n3174 China's first written submission, para. 449; Switzerland's first written submission, paras. 304\nand 307.\n3175 United States' first written submission, para. 639.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjurious effects of imports and non-import factors will properly take into account the manner in\nwhich the interplay of various factors (both import and non-import) have caused injury to an industry.\nThe United States believes that the USITC's analysis of the injurious effects of imports and non-\nimport factors identified the nature and extent of the injury attributable to all non-import factors, and\ntherefore adequately assured that injury caused by other factors was not attributed to the imports.\n3176\n(vii) FFTJ\nFactors considered by the USITC\nIncreased capacity\n7.1352 China argues that the USITC acknowledged that the increase in capacity exercised some\npressure on prices.3177\n7.1353 In response, the United States argues that it is wrong to say that USITC acknowledged\ncapacity to be an alternative source of injury to the domestic industry. The USITC found that\nincreased capacity could not have been a source of injury to the domestic industry, because over the\nperiod of investigation capacity increased less than United States' apparent consumption. Moreover,\nfrom 1999 to 2000, when imports had their largest annual increase in volume and market share during\nthe period of investigation and the domestic industry ceased to operate profitably, United States\ncapacity actually declined to its lowest level since 1996. Having found that increased capacity was\nnot an alternative cause of the serious injury it observed, the USITC satisfied its non-attribution\nobligation under Article 4.2(b).\n3178\n7.1354 In counter-response, China contends its understanding of the USITC's wording is that: \"the\nincrease in capacity would not be expected to place substantial pressure on domestic prices\", because\nthe capacity increased at a rate less than the increase in apparent consumption. However, according to\nChina, the pressure is present even if it is not substantial. China argues that the capacity increase is to\nbe seen to be an alternative source of injury and it must be subject to a causality/non-attribution\nanalysis.\n3179 In light of the foregoing, China argues that the United States' arguments are without\nmerit. The capacity increases were to be treated as an alternative source of injury and non-attribution\nof this factor should have been explained clearly and unambiguously.3180\nPurchaser consolidation\n7.1355 China argues that it is possible to conclude from the USITC's comments that purchaser\nconsolidation put pressure on domestic prices.3181\n7.1356 In response, the United States argues that China misunderstands the USITC's discussion of\npurchaser consolidation. The USITC acknowledged that purchaser consolidation may have had some\nimpact on prices of the domestic FFTJ industry could charge, because fewer purchasers would have\nrelatively greater bargaining power vis-à-vis pr oducers. There was no basis, however, to conclude\nthat purchaser consolidation would reduce demand for FFTJ; to the contrary, United States apparent\nconsumption of the product was generally stable during the latter portion of the period of\n\n3176 United States' written reply to Panel question No. 32 at the second substantive meeting.\n3177 China's first written submission, para. 459.\n3178 United States' first written submission, paras. 656-657.\n3179 China's second written submission, para. 256.\n3180 China's second written submission, para. 258.\n3181 China's first written submission, para. 460.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninvestigation. Moreover, many of the indicators of serious injury which the USITC identified were\nnot price based. These included declines in market share, declines in shipments and sales quantities,\nand declines in employment. By explaining that the serious injury it observed for the FFTJ industry\nwas different in nature and broader in scope than the relatively limited price effects that could be\nattributed to purchaser consolidation, the USITC satisfied its obligation not to attribute to purchaser\nconsolidation serious injury caused by the increased imports.\n3182\n7.1357 China notes in counter-response that the USITC stated that the purchaser consolidations put\nsome pressure on the domestic prices. 3183 In light of the foregoing, China argues that the United\nStates' arguments are without merit. Purchaser consolidation was to be treated as an alternative\nsource of injury and non-attribution of this factor should have been explained clearly and\nunambiguously.\n3184\nNAFTA imports\n7.1358 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic FFTJ industry, which is found in the USITC Report was\nmade on the grounds of data which included imports from NAFTA countries. However, China\nbelieves that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports' only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n3185\n7.1359 The European Communities argues that while the USITC's position with respect to the\nalternative causes cited in the domestic investigation is unclear, its findings with respect to Canada\nand Mexico are unambiguous; imports from both countries caused serious injury. The European\nCommunities asserts that Mexican and Canadian imports were not analysed by the USITC as\nalternative causes of injury. This was not done either in the Second Supplementary Report. Thus, the\nUSITC did not separate and distinguish the effects of NAFTA imports, and did not make sure that\nsuch effects were not attributed to increased imports. The European Communities argues that this is\nall the more serious because of the importance of imports from these countries on the United States\nmarket. As a result, it is argued that the United States has acted inconsistently with Article 4.2(b) of\nthe Agreement on Safeguards.\n3186\n7.1360 For the United States' response, see paragraph 7.1066 et seq.\nFactors not considered by the USITC\n7.1361 The European Communities argues that data which the USITC gathered is far from\nconclusive in proving that any serious injury has been caused by low-priced imports. Indeed, while\nimports may have increased overall, such increased imports appear to have had little effect on prices.\n\n3182 United States' first written submission, para. 658.\n3183 China's second written submission, para. 257.\n3184 China's second written submission, para. 258.\n3185 China's first written submission, para. 466; China's second written submission, para. 259.\n3186 European Communities' first written submission, para. 539.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe COGS has, however, increased significantly, as have SG&A expenses. 3187 The European\nCommunities asserts that there is only a substantial increase in imports between 1999 and 2000.\nHowever, according to the European Communities, th e fall in profitability of the domestic industry\noccurred between 1997 and 1998 and cannot be explained, therefore, by any sudden, recent, increase\nin imports. The European Communities argues that the change in profitability would appear to be\nmore closely linked to changes in costs. However, despite the fact that the development in costs was\nreadily apparent on the basis of a simple examination of the data collected, the USITC did not analyse\nthis issue.\n3188\n7.1362 The United States submits that the USITC explained that lower production and shipments\nduring the period of investigation contributed to increases in unit costs. 3189 In particular, per unit\nincreases after 1997 in other factory costs and SG&A expenses, both of which are emphasized by the\nEuropean Communities, can be attributed to the fact that the industry had to spread its costs over a\nsmaller quantity of sales.3190\n7.1363 In counter-response, the European Communities submits that the claim by the United States\nthat the USITC did analyse these costs, because the USITC stated that increases in per unit costs\noccurred as sales fell, is not borne out by the USITC Report which shows that increases in raw\nmaterials cost and other factory costs occurred between 1997 and 1998. According to the European\nCommunities, commercial sales in 1998 were similar in volume to 1996, but higher in value, yet a\ncomparison of costs between 1996 and 1998 shows a substantial increase, the reasons for which are\nnever explained in the USITC Report.\n3191 Thus, increases in volume cannot explain the increases in\nper unit costs. The USITC, despite the United States best efforts, did not therefore provide a reasoned\nand adequate explanation of its findings on increased costs, and thus failed to properly ensure non-\nattribution.3192\nFailure to provide reasoned and adequate explanation\n7.1364 The European Communities notes that the USITC used the data it had gathered on sales of\nProduct 22, that is: \"Carbon steel butt-weld pipe fitting, 6 inch nominal diameter, 90 degree elbow,\nlong radius, standard weight, meeting ASTM A-234, grade WPB or equivalent specification …\". The\nUSITC explained, however, that for the specific products for which it had requested data in the\ntubular section, of which Product 22 was one, pricing data coverage tended to be very low (usually\nless than 5%) due to the wide heterogeneity among tubular products in all five categories. The\nEuropean Communities argues that given that the USITC found that imports were \"generally\" higher\npriced than domestic products, even though imports were always higher priced, it was forced to have\nrecourse to other data to show that imports were priced below domestic products, which must be, for a\ncommodity product group, the determinant issue.\n3193 The European Communities argues that the data\nfor Product 22 in terms of value, demonstrates that Product 22 is not representative. On the basis of a\nproduct representing 1.2% of domestic commercial sales on the whole product category the European\nCommunities argues that such a conclusion cannot be considered reasoned and adequate.\n3194\n\n3187 European Communities' first written submission, para. 548.\n3188 European Communities' first written submission, para. 550.\n3189 USITC Report, p. 176.\n3190 United States' first written submission, para. 654.\n3191 USITC Report, Vol. II, P. Tubular 24, table Tubular 20\n3192 European Communities' second written submission, para. 412.\n3193 European Communities' first written submission, para. 545.\n3194 European Communities' first written submission, para. 547.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1365 In response, the United States argues that by suggesting that the USITC staff chose to collect\ndata on very low volume products, the European Communities ignores and distorts information in the\nUSITC's report. The USITC staff did not seek pricin g data on a FFTJ product that it believed would\nyield low data coverage, as the European Communities implies. The staff stated instead that there\nwas no single FFTJ product on which it could obtain extensive coverage. Indeed, there was not even\na combination of products that could provide the type of coverage the European Communities asserts\nis necessary. In a portion of the report apparently overlooked by the European Communities, the staff\nexplained that \"it is difficult to find high-volume pricing products in a heterogenous market such as\nthe steel tubular market\". The report, read in context, indicated that the FFTJ product on which the\nUSITC obtained pricing data was a \"high volume\" product within the group of FFTJ products.\n3195 In\nthis regard, the United States submits that the A ppellate Body has observed that no provision of the\nAgreement on Safegaurds specifically addresses the extent to which an investigating authority must\ncollect data. In particular, no provision of the Agreement requires an authority to collect any specific\nquantum of data, or any data at all, pertaining to pricing. The USITC furthered the goal of conducting\na thorough investigation, and acted in an objective manner, by collecting pricing data for a particular\nFFTJ product that would provide data on a high volume of sales relative to other products on which\ndata could be collected. Such conduct cannot in any way contravene the obligations of the United\nStates under the Agreement on Safeguards.3196\n7.1366 In counter-response, the European Communities argues that given the importance of the\nexamination of pricing, and the lack of other pricing data showing underselling, pricing for the\nspecific product is evidently an important part of the USITC's finding. The United States defends\nitself by arguing that the USITC staff did not deliberately seek a low volume product for specific\ncomparison.3197 The European Communities has no reason to believe that the USITC staff would\nchoose a product deliberately because of its lack of representativeness. However, the European\nCommunities does consider, that if the USITC wanted to make a reasoned and adequate explanation,\nit might have requested data on several specific products, so that it had several sets of data on which\nto base its findings. The USITC did not provide a reasoned and adequate explanation of its\nfindings.\n3198\n7.1367 The United States submits that the USITC also explained the limited probative value of the\naverage unit value data on which the European Communities apparently believes the USITC should\nhave relied. Average unit value data may serve as a useful proxy for pricing data for some industries.\nHowever, in an industry such as the FFTJ industry that is characterized by a wide variety of products,\nvariance between AUV is often indicative of differences in product mix (i.e., the imports are\nconcentrated in higher-value items, while domestic production is concentrated in lower-value items)\nrather than differences in price. For this reason, while the USITC referred to the average unit value\ndata for the FFTJ industry, it stated that it was cautious of placing undue weight on the data because\nof concerns with product mix. The USITC thus had an objective basis, which it fully explained, for\nrelying principally on pricing data relating to an individual product, rather than on the average unit\nvalue data relating to a mix of products.\n3199\n7.1368 China argues that the USITC failed to assess the injurious effects of other factors such as\nincreased capacity and purchaser consolidation since not a word is written on the nature and extent of\nthe injury caused by these two factors. Thus, according to China, it is impossible to determine whether\n\n3195 United States' first written submission, para. 650.\n3196 United States' first written submission, para. 651.\n3197 United States' first written submission, para. 650.\n3198 European Communities' second written submission, para. 414.\n3199 United States' first written submission, para. 652.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe USITC properly separated the injurious effects of these factors from the injurious effects of the\nincreased imports. China agues, in sum, that the USITC failed to adequately evaluate the complexity\nof the alleged injury factors. It also failed to provide a sound, clear and straightforward explanation of\nhow it ensured that injury caused by other factors was not attributed to increased imports. Therefore,\nChina believes that the USITC acted inconsistently with Articles 2(1) and 4.2(b) of the Agreement on\nSafeguards.3200\n7.1369 The United States argues that the USITC conducted a reasoned and adequate examination of\nthe injury purportedly caused by these factors and ensured that any injury caused by these other\nfactors was not attributed to imports. In particular, the USITC found that increased capacity was not\nan explanation for the serious injury experienced by the domestic industry. It stated that capacity\nincreased during the period of investigation at a rate less than the increase in US apparent\nconsumption and thus should not have placed substantial pressure on domestic prices. The USITC\nalso acknowledged that purchaser consolidation would be expected to place some pressure on\ndomestic prices. The USITC found, however, that demand for FFTJ was generally stable to\nincreasing during the latter portion of its period of investigation. Moreover, the USITC did not rely\nsolely on price effects in finding that the domestic FFTJ industry was seriously injured but also cited\ndeclines in non-price indicators, such as market share, domestic production, shipments, and\nemployment. The USITC stated that purchaser consolidation could not explain the declines that\noccurred in these non-price indicators.\n3201\n(viii) Stainless steel bar\nFactors considered by the USITC\nDownturn in demand\n7.1370 China argues that the USITC acknowledged that the downturn in demand in late 2000 and\ninterim 2001 was causing injury at the same time as increased imports. China submits that if imports\nhad a greater impact than demand declines it was necessarily because this factor also had an impact on\nthe declines in the industry's conditions.\n3202 China argues that concerning declining demand in 2000\nand interim 2001, all that the USITC explained was that there had already been changes in the\nindustry's condition prior to 2000. It did not explain anything concerning 2000 and 2001. China\nargues that, clearly, this is insufficient.3203\n7.1371 The European Communities suggests that the USITC's conclusion that decreased demand was\na less important cause than imports is far from clear. In any event, it argues that the USITC does not\nattempt to distinguish the effect of decreased demand from the effects of imports and other factors\nand, thus, does not ensure that the effect of such developments was not attributed to increased\nimports.\n3204\n7.1372 The European Communities notes 3205 that for demand declines the USITC stated no more\nthan:\n\n3200 China's first written submission, para. 465.\n3201 United States' first written submission, para. 656.\n3202 China's first written submission, para. 475.\n3203 China's first written submission, para. 481\n3204 European Communities' first written submission, para. 556.\n3205 European Communities' second written submission, para. 426.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"Although the record does show a downturn in demand for stainless bar [sic] and an\nincrease in energy costs in late 2000 and interim 2001 there were substantial declines\nin the industry's production, sales and profitability levels during the years prior to\n2000 and interim 2001. In particular, the industry's market share, production volumes,\nemployment levels and profitability levels all declined during the period from 1996 to\n1999 in the face of increase import volumes, despite the fact that there were only\nsmall changes overall in the amount of stainless rod consumed in the United States\nmarket and despite the fact that there is little evidence that energy costs were\nincreasing substantially in these periods. Considering this, it is clear that imports had\na greater impact on the declines in the industry's condition in 2000 and interim 2001\nthan demand declines and energy cost increased, especially given the substantial\nincrease in import quantities and market share during the last year and a half of the\nperiod.\"\n3206\n7.1373 The European Communities and China argue that quite apart from the fact that the only\nincreased imports which could potentially satisfy the requirements of the Agreement on Safeguards\ntook place in 2000, and that therefore increased imports could not, even potentially, be held\nresponsible under the Agreement on Safeguards for the injury suffered by the industry up to 2000, this\nstatement of the USITC clearly recognizes that demand declines caused some injury. 3207 However,\nthe USITC goes no further in its analysis, and thus does not establish explicitly, in a reasoned and\nadequate manner, how it has separated and distinguished such injury and ensured it was not attributed\nto increased imports.\n3208\n7.1374 The United States argues that the USTIC properly ensured that that it did not attribute any\ninjury caused by late period demand declines to imports. It asserts that the ITC recognised that, after\ngrowing 1996 to late 2000, demand for stainless steel bar did decline in late 2000 and interim 2001.\nHowever, the USITC correctly noted that the industry had been experiencing serious declines in its\nmarket share, production volumes, sales levels, employment levels, and profitability levels during the\nyears prior to 2000 and 2001, when imports had been increasing as well. Indeed, it specfically found\nthat the industry's in ability to maintain its oper ating profits in the face of demand changes in late\n2000 and 2001 were the \"direct result of the increasing share of the market obtained by imports and\ntheir continued underselling of domestic merchandise during the period,\" not the result of demand\ndeclines.\n3209\n7.1375 The United States asserts that the USITC closely examined the effects that were attributable\nto demand declines during the period. In particular, the USITC properly noted that demand declines\nhad become evident only during the final three quarters of the period of investigation. However, it\nalso correctly noted that these late-period demand declines could not possibly have contributed to\nthes serious declines in the condition of the industry during the three years prior to this period, when\ndemand was, in fact, increasing. Moreover, given that demand actually increased, substantially on a\nfull year basis in 2000 as well, it is clear that demand declines were not a cause of injury to the\nindustry in that year as well. Given the foregoing, the USITC reasonably concluded that the declines\n\n3206 USITC Report, Vol. I, p. 221.\n3207 United States' first written submission, paras. 709 and 712 talks of injury being \"primarily caused\"\nby imports.\n3208 European Communities' second written submission, para. 427; China's first written submission,\nparas. 492 and 498.\n3209 United States' first written submission para. 679\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nin the industry's condition that occures during interim 2001 were primarily caused by imports, even\nwith the decline in demand in that period.3210\n7.1376 In counter-response, the European Communities argues that the USITC recognized that\ndemand declines had an effect on the domestic industry – by concluding that this cause is less\nimportant than increased imports, the USITC did not separate and distinguish the effects of alternative\ncauses and increased imports.3211\nIncreases in capacity\n7.1377 The European Communities argues that the USITC did not examine the effect of capacity\nincreases greater than increases in demand on the operations of the domestic industry. According to\nthe European Communities, it is immediately obvious that such capacity increases must have had an\neffect on the United States industry's performance.\n3212 In particular, the European Communities\nargues that substantial increases in capacity were made in a period during which demand for stainless\nbar dropped away. According to the European Communities, price developments mirrored\ndevelopments in demand and were obviously affected by developments in capacity. However, the\neffect of developments in demand allied to increased capacity were not assessed in the USITC Report\nand, thus, no effort was made to separate and distinguish the effect of these factors from the effect of\nimports.\n3213 The European Communities argues further that the domestic industry continued to\nincrease capacity well in excess of the rate of domestic demand during the investigation period.\nWhile the USITC did not deal with this issue, th e European Communities argues that this would tend\nto suggest that serious injury has not been caused by imports but, rather, by developments in the\ndomestic industry.3214\n7.1378 In response, the United States submits that it is factually wrong to argue that the USITC failed\nto consider that the industry's capacity \"continued to increase\" well in excess of the rate of domestic\ndemand during the period and it mischaracterizes the USITC's opinion. It is factually wrong because\nthe industry's capacity increases did not, in fact, exceed the growth in demand during the period.\nMore specifically, the industry's capacity levels only increased by 5.5% between 1996 and 2000.\nApparent US consumption grew by 17.2% between those years. In fact, because of this differential,\nthe industry's total capacity was slightly lower than total demand in 2000. Thus, although there were\nfluctuations in demand during the period, the record does not indicate that the industry's capacity\nincreases were in excess of the growth in market demand.\n3215\n7.1379 The United States argues further that the USITC clearly did discuss the industry's capacity\nincreases during the period, noting specifically that industry capacity had grown during the period and\nthat capacity utilization had declined. Moreover, the USITC directly addressed the relationship of\nthese capacity increases to demand changes in the market and their impact on the condition of the\nindustry. In particular, it found that the industry's capacity increases had not enabled the industry to\ntake advantage of the growth in the market during the period. Given this discussion, it is unclear how\nthe European Communities could possibly believe that the USITC ignored the relationship between\nthe industry's capacity increases and the growth in demand. The USITC clearly considered the\n\n3210 United States' first written submission, para. 680.\n3211 European Communities' second written submission, para. 420.\n3212 European Communities' first written submission, para. 558.\n3213 European Communities' first written submission, para. 559.\n3214 European Communities' first written submission, para. 568.\n3215 United States' first written submission, para. 671.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ngrowth in industry capacity in its analysis and reasonably explained why it was not a factor in the\ndecline in market prices or in the industry's condition.3216\n7.1380 In counter-response, the European Communities refers to the United States attempts to rebut\nthe European Communities' arguments by comparing capacity and consumption on an end to end\nbasis.3217 However, since the causation analysis is essentially about identifying trends, it is\ninsufficient to analyse this issue in such a superficial manner. Indeed, the coincidence of increases in\ncapacity, decreases in demand, and decreases in operating income should have alerted the USITC to\nthe possibility that capacity increases, allied with demand developments, might well have been\nresponsible for the situation of the industry. The USITC failed to examine this issue in the detail\nwhich it clearly merited, and in so failing, did not provide a reasoned and adequate explanation of\nhow the facts support its findings.\n3218\nIncreases in energy costs\n7.1381 China argues that the USITC acknowledged that the increase in energy costs in late 2000 and\ninterim 2001 was causing injury at the same time as increased imports. If imports had a greater\nimpact than energy costs increases, it was necessarily because this factor also had an impact on the\ndeclines in the industry's conditions.\n3219 China argues that concerning the increase in energy costs in\n2000 and interim 2001, all that the USITC explained was that there had already been changes in the\nindustry's condition prior to 2000. It did not explain anything concerning 2000 and 2001. China\nargues that, clearly, this is insufficient.3220\n7.1382 The European Communities suggests that the USITC's conclusion that increased energy costs\nwas a less important cause than imports is far from clear. In any event, it argues that the USITC does\nnot attempt to distinguish the effect of increased energy prices from the effects of imports and other\nfactors and, thus, does not ensure that the effect of such developments was not attributed to increased\nimports.3221\n7.1383 The European Communities notes 3222 that for increased energy costs, the USITC stated no\nmore than:\n\"Although the record does show a downturn in demand for stainless bar [sic] and an\nincrease in energy costs in late 2000 and interim 2001 there were substantial declines\nin the industry's production, sales and profitability levels during the years prior to\n2000 and interim 2001. In particular, the industry's market share, production volumes,\nemployment levels and profitability levels all declined during the period from 1996 to\n1999 in the face of increase import volumes, despite the fact that there were only\nsmall changes overall in the amount of stainless rod consumed in the United States\nmarket and despite the fact that there is little evidence that energy costs were\nincreasing substantially in these periods. Considering this, it is clear that imports had\na greater impact on the declines in the industry's condition in 2000 and interim 2001\nthan demand declines and energy cost increased, especially given the substantial\n\n3216 United States' first written submission, para. 672.\n3217 United States' first written submission, para. 671.\n3218 European Communities' second written submission, para. 421.\n3219 China's first written submission, para. 475.\n3220 China's first written submission, para. 481.\n3221 European Communities' first written submission, para. 556.\n3222 European Communities' second written submission, para. 426.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincrease in import quantities and market share during the last year and a half of the\nperiod.\"3223\n7.1384 The European Communities argues that quite ap art from the fact that the only increased\nimports which could potentially satisfy the requirements of the Agreement on Safeguard s took place\nin 2000, and that therefore increased imports could not, even potentially, be held responsible under\nthe Agreement on Safeguards for the injury suffered by the industry up to 2000, this statement of the\nUSITC clearly recognizes that increased energy costs caused some injury. 3224 However, the USITC\ngoes no further in its analysis, and thus does not establish explicitly, in a reasoned and adequate\nmanner, how it has separated and distinguished such injury and ensured it was not attributed to\nincreased imports.\n3225\n7.1385 The United States argues in response that the USITC closely examined the effects of energy\ncost increases on the industry during the period of investigation. In particular, the USITC properly\nnoted that energy cost issues had been become ev ident only during the final three quarters of the\nperiod of investigation.3226 It also correctly noted that these late-period energy cost increases did not\nsignificantly contribute to the decline in the condition of the industry during the three years prior to\nthis period, when there was no evidence of significant changes in energy costs. 3227 By performing an\nanalysis that assessed whether imports appeared to be causing injury to the industry during a period\nwithout substantial energy cost increases, the USITC was able to distinguish the effects of these\nincreases in the final three quarters of the period of investigation from those attributable to imports\nduring prior periods. As a result, the USITC was able to ensure that did not attribute any injury\ncaused by energy costs to imports. Moreover, even for the period 2000 and interim 2001, the USITC\nqualitatively assessed whether imports had a more substantial impact on the condition of the industry\nthan did energy cost increases. By doing so, and by concluding that even the injury suffered by the\nindustry in 2000 and interim 2001 was primarily caused by imports and not energy costs, the USITC\nappropriately assessed the extent of the injury attributable to imports even in those periods.\n3228 I n\nsum, the USITC properly separated and distinguished the effects of increases in energy costs from\nthose of imports in its analysis, despite the complainants' arguments to the contrary.3229\n7.1386 China notes in counter–response that the United States states that it qualitatively assessed\nthat imports had a more substantial impact than energy cost increase. The United States claims that\nby doing so it appropriately assessed the extent of the injury attributable to imports. 3230 C h i n a\nquestions how the United States was able to define the extent of the injury caused by imports by a\nmere comparison of two factors. China argues that the misleading interpretations in the submissions\nof the United States cannot prove that a proper assessment of the extent and nature of the injurious\nfactors, and their non-attribution to the imports effects took place.\n3231\n\n3223 USITC Report, Vol. I, p. 221.\n3224 United States' first written submission, paras. 709 and 712 talks of injury being \"primarily caused\"\nby imports.\n3225 European Communities' second written submission, para. 427; China's first written submission,\npara. 492.\n3226 USITC Report, p. 221.\n3227 USITC Report, p. 221.\n3228 It bears repeating that, since demand did not decline on an overall basis in 2000, there was clearly\nno injurious impact of a demand decline in that year on the industry on an overall basis.\n3229 United States' first written submission, para. 711.\n3230 China's second written submission, para. 267.\n3231 China's second written submission, para. 268.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1387 The United States responds by arguing that the USITC considered whether energy cost\nincreases during the last months of that period of investigation were a source of injury to the domestic\nindustry. In its analysis, the USITC recognized that there was an increase in energy costs during late\n2000 and interim 2001. However, the USITC correctly noted that there was no record evidence of\nspecific energy cost increases in the period prior to late 2000 and 2001, and that the industry had been\nexperiencing serious declines in its market share, production volumes, sales levels, employment\nlevels, and profitability levels as a result of increasing import volumes in the years prior to 2000 and\n2001 as well. Indeed, the USITC specifically found that the industry's inability to maintain its\noperating profits in the face of energy cost increases in late 2000 and 2001 were the \"direct result of\nthe increasing share of the market obtained by imports and their consistent underselling of domestic\nmerchandise during the period.\"\n3232\n7.1388 The United States also argues that the USITC closely examined the effects of energy cost\nincreases in the condition of the industry during the period of investigation. In particular, the USITC\nproperly noted that energy cost issues had become evident only during the final three quarters of the\nperiod of investigation. However, it is also correctly noted that these late-period energy cost increases\ncould not possibly have contributed to serious declines in the condition of the industry during the\nthree years prior to this period, when there was no evidence of significant changes in energy costs. As\na result, it reasonably concluded that the declines in the industry's condition that occurred during 2000\nand interim 2001 were substantially caused by imports, even though energy costs increased during the\nlatter months of 2000 and in interim 2001.\n3233\n7.1389 In counter-response, the European Communities argues that the USITC recognizes that\nenergy costs had an effect on the domestic industry – by concluding that this causes is less important\nthan increased imports, the USITC did not separate and distinguish the effects of alternative causes\nand increased imports.3234\nIncreases in nickel prices\n7.1390 The European Communities submits that the USITC acknowledged that stainless steel bar\nprices \"track the price of nickel\" and that nickel prices rose in 1999 and 2000. Yet, according to the\nEuropean Communities, it baldly concluded that price underselling by imports \"suppressed and\ndepressed prices to a serious degree\" without attempting to separate the effect of developments in the\nnickel price on prices and not to attribute it to increased imports. The European Communities submits\nthat, in fact, the industry's poor performance broadly coincides with decreases in the prices of\nnickel.\n3235 The European Communities further argues that given the close correlation in prices and the\ncollapse of the price of nickel from 1995 to 1998, it s eems likely that, with the price of nickel falling,\nforcing down the price of stainless bar, the United States domestic industry had difficulty covering its\nfixed costs.3236\n7.1391 In response, the United States notes that price is an important factor in purchasing decisions\nfor stainless steel bar. Price is directly affected by the price of nickel. Indeed, to account for\nfluctuations in the price of nickel, producers impose a surcharge on the price of stainless steel bar\n\n3232 United States' first written submission, para. 682\n3233 United States' first written submission, para. 683.\n3234 European Communities' second written submission, para. 420.\n3235 European Communities' first written submission, para. 555.\n3236 European Communities' first written submission, para. 568.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhen nickel prices increase to a specified level. Nickel prices fell through 1998 but then increased\nsignificantly in 1999 and the first half of 2000. Nickel prices then fell through interim 2001.3237\n7.1392 The United States also questions the European Communities' assertion that the USITC \"baldly\nconclude[d]\" that imports suppressed or depressed prices in the market \"without attempting to\nseparate the effects of developments in the nickel price\" on domestic prices in light of the fact that the\nUSITC discussed this issue at length in its opinion. 3238 In its analysis, the USITC examined the\nrelationship between nickel price movements and movements in the price of stainless steel bar in its\nopinion and concluded that nickel price movements had not caused the price suppression in the\nmarket. In particular, the USITC specifically found that market participants expect stainless prices to\nmove in tandem with nickel prices because of the importance of nickel in the production of stainless\nsteel bar. As a result, it specifically analysed wh ether movements in the industry's net unit prices for\nstainless steel bar and its costs had tracked the pr ice of nickel during the period. Although it found\nthat stainless bar prices had tracked nickel prices somewhat during the first years of the period, it also\nstated that the industry's net sales revenues and unit sales prices failed to keep pace with movements\nin nickel prices during the second half of the period of investigation, which resulted in decreasing unit\nprofitability margins for the industry during this period. Moreover, the USITC found, the decreasing\nspread between its unit costs and unit prices – the result of price declines exceeding declines in its\nCOGS, including nickel costs – directly caused declines in the industry's net sales values and its\noperating income margins during the last two-and-a-half years of the period of investigation, even as\nnickel prices increased.\n3239 The United States argues that clearly, then, the USITC did examine this\nissue in detail and correctly concluded that nickel prices had not caused the declines in the industry's\nprofitability levels during the period. The European Communities' argument concerning the USITC's\ndiscussion of nickel prices has no merit whatsoever.3240\n7.1393 The United States argues that by focusing on the change in spread between the industry's\ncosts (which included its nickel costs) and its sales values in its discussion of the impact of nickel\ncosts on domestic pricing, the USITC was clearly able to assess the extent to which the industry was\nunable to increase its prices to fully recover its nickel costs because of import competition.\nAccordingly, the USITC clearly separated and distinguished the effects of imports from the effects of\nnickel cost changes in its analysis.3241\nPoor operations of Al Tech/Empire and Republic\n7.1394 The European Communities argues that the USITC did not explain what it determined with\nrespect to arguments raised on the poor operations of Al Tech/Empire and Republic. This information\nwas kept confidential. However, the USITC implied that these operations were also a source of injury\nto the domestic industry since it claimed that the trends it had identified would have continued even if\nthe operations of those two companies were factored out of the data analysed.3242\n7.1395 The United States responds by arguing that the USITC considered whether the poor\nperformance of two particular domestic producers was a possible source of injury to the industry\nduring the period of investigation. Although the specific information on these producers' problems\nand their operating results are confidential, the USITC's discussion of the issue makes clear that it\n\n3237 USITC Report, p. 209; United States' first written submission, para. 663.\n3238 United States' first written submission, para. 673.\n3239 United States' first written submission, para. 674.\n3240 United States' first written submission, para. 675.\n3241 United States' first written submission, para. 688.\n3242 European Communities' first written submission, para. 557.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexamined the record evidence relating to these issues and discussed the nature and extent of these\nproducers' difficulties in detail. 3243 In this regard, it specifically noted that it took into account the\narguments made by the foreign producers and rejected their assertions that the industry's operating\nresults had been skewed by the non-import problems of the producers. Moreover, the USITC\nconsidered whether exclusion of the two companies from the industry data would substantially alter\nthe downward trends in the industry's condition in those years, and found that it did not. By engaging\nin this analysis, the USITC clearly separated and distinguished the impact of imports on the industry\nfrom the effects of these producers operations and found that the industry's problems were genuinely\nand substantially the result of increased imports.3244\nNAFTA imports\n7.1396 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic stainless steel bar industry, which is found in the USITC\nReport was made on the grounds of data which included imports from NAFTA countries. However,\nChina believes that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports' only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n3245\n7.1397 China further argues that in the Supplementary Report, the USITC was required to assess the\ninjury caused by imports from Mexico and Canada and to ensure that this injury would not be\nattributed to increased imports from non-NAFTA countries. China argues that it did not do so. China\nfurther argues that the USITC provided no explanation whatsoever that injury caused by imports from\nMexico and Canada was not attributed to increased imports and there is no reason to believe that\ninjury caused by imports from Mexico and Canada were not in fact attributed to increased imports.\n3246\n7.1398 In this regard, the European Communities notes that the USITC concluded that \"imports from\nCanada contributed importantly to the serious injury suffered by the domestic industry\". However,\nthe European Communities submits that this finding was made after the USITC had already\nconcluded that \"increased imports are a substantial cause of serious injury\" and the USITC did not\neven attempt to factor this element into its analysis of the alleged causal link between serious injury\nand increased imports. Indeed, according to the European Communities, it is quite obvious that the\nUSITC's initial analysis included imports from Canada in assessing whether increased imports have\ncaused serious injury. The European Communities argues that no effort is made to distinguish the\neffect of Canadian imports and to make sure that the such effects are not attributed to imports from\nother sources.\n3247 In light of the foregoing, it is China's view that the USITC failed to comply with\nArticle 4.2(b) of the Agreement on Safeguards.3248\n7.1399 For the United States' response, see paragraph 7.1066 et seq.\n\n3243 USITC Report, p. 212.\n3244 United States' first written submission, paras. 685-86.\n3245 China's first written submission, para. 483.\n3246 China's first written submission, para. 486; China's second written submission, para. 263\n3247 European Communities' first written submission, para. 560.\n3248 China's first written submission, para. 486; China's second written submission, para. 263\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFailure to provide reasoned and adequate explanation\n7.1400 China argues that to be certain that the injury caused by these other factors, downturn in\ndemand and increases in energy costs, whatever their magnitude, was not attributed to imports, the\nUSITC had to assess the injurious effects of these other factors. However, according to China, the\nUSITC failed to do so, as there is no information to that effect in the USITC Reports.3249 China states\nthat, in sum, China believes that the injurious effects of the other factors that have caused the injury at\nthe same time as the increased imports had not been properly assessed by the USITC. Thus, it is\nimpossible to determine whether the USITC properly separated the injurious effects of these factors\nfrom the injurious effects of the increased imports. 3250 China further argues that the USITC failed to\nadequately evaluate the complexity of the alle ged injury factors. According to the European\nCommunities and China, it also failed to provide a sound, clear and straightforward explanation of\nhow it ensured that injury caused by other factors was not attributed to increased imports. Therefore,\nChina believes that the USITC acted inconsistently with Articles 2(1) and 4.2(b) of the Agreement on\nSafeguards.3251\n7.1401 The United States argues that the USITC performed a thorough and objective analysis of the\nrecord. It thoroughly assessed the nature and scope of the effects of other factors and ensured that it\ndid not attribute the effects of these factors to imports.3252\n(ix) Stainless steel wire\nDecision-making\n7.1402 China notes that it is the determination of Chairman Koplan which becomes relevant to\nexamine in relation to stainless steel wire for he is the only Commissioner to have made his\ndetermination on the product on which the President imposed a safeguard measure.3253\n7.1403 In response, the United States submits as an initial matter, that China mistakenly asserts in its\nbrief that the President relied solely on Commissioner Koplan's causation findings for stainless steel\nwire products when determining to impose a safeguard remedy on stainless steel wire. Three\nCommissioners found that stainless steel wire was causing serious injury or threatening to cause such\ninjury to the domestic tin mill industry: Commissioners Koplan, Bragg and Devaney. Commissioner\nKoplan found stainless steel wire to be a separate like product and made an affirmative threat of injury\nfinding for that product; Commissioners Bragg and Devaney found stainless wire to be part of the\nsame like product as stainless steel wire rope and made an affirmative determination for that like\nproduct.\n3254\n7.1404 The United States further submits that under the United States statute, the President cannot\nsimply decide to treat an individual affirmative finding of one Commissioner as a basis for imposing a\nremedy, as the complainants allege. Instead, under the United States statute, the President may only\nimpose a remedy if at least half of the Commissioners then in office make an affirmative finding of\ncausation and injury. In this case, the President was able to impose a remedy on stainless steel wire\nonly because three of the six Commissioners had found that stainless steel wire, whether or not treated\n\n3249 China's first written submission, para. 476.\n3250 China's first written submission, para. 477.\n3251 European Communities' first written submission, para. 569; China's first written submission,\npara. 482.\n3252 United States' first written submission, para. 689.\n3253 China's first written submission, para. 534.\n3254 United States' first written submission, para. 723.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nas a separate like product, had caused or threatened to cause serious injury to the industry. Indeed, in\nhis official announcement of the imposition of these remedies, the President specifically stated that he\nconsidered the \"determinations of the groups of Co mmissioners voting in the affirmative with regard\nto\" stainless steel wire to be the determination of the USITC. In other words, the President\nspecifically and clearly stated that he relied on the affirmative determinations of Commissioners\nKoplan, Bragg, and Devaney as grounds for his stainless steel wire remedy. Accordingly, the\nPresident's remedy finding simply does not indicate that he adopted the like product decision or injury\nfinding of Commissioner Koplan as his own.\n3255\n7.1405 The United States argues that, therefore, it is legally and factually incorrect for China to assert\nthat the President adopted the injury and causation findings of Commissioner Koplan as the sole basis\nfor his remedy decision. Nonetheless, because China and the European Communities focus their\narguments concerning stainless steel wire entire ly on Commissioner Koplan's causation analysis for\nstainless steel wire, the United States also focuses its discussion on his analysis as well. 3256 However,\nthe United States notes that neither China nor the European Communities make any arguments\nchallenging the affirmative injury findings of Commissioners Bragg and Devaney on stainless steel\nwire and rope. Accordingly, they have failed to make a prima facie showing that Commissioners\nBragg and Devaney's analysis violated the causation requirements of the Agreement on Safeguards.\nThe United States argues that the panel should therefore find that the causation analyses of these\nCommissioners have not been placed at issue in these proceedings and should affirm them.\n3257\n7.1406 In counter-response, China argues that in its view, only Commissioner Koplan correctly\nidentified the like product – stainless steel wire – to be a separate like product, in contrast to\nCommissioners Bragg and Devaney w ho found stainless wire to be part of the \"stainless steel wire\nand rope\" product category. Therefore, according to China, only Commissioner's Koplan findings\ncould have been taken as the correct basis for imposing a remedy.3258\nFactors considered by the USITC\nDecline in consumption\n7.1407 China argues that although Chairman Koplan refers to the extent of the decline in\nconsumption, there is no information on his view concerning the extent of the contribution of the\ndecline in consumption and the increase in unit costs on the overall situation of the industry.\nSimilarly, Chairman Koplan did not state what portion of the decline in the industry's performance\nwas attributable to the decline in demand for stainless steel wire.3259\n7.1408 In response, the United States submits that Commissioner Koplan thoroughly examined the\nrecord evidence relating to the demand decline in interim 2001 and discussed the nature and extent of\nthat decline in detail. In this regard, he recognized that apparent consumption of stainless steel wire\ndeclined by 16.1% between interim 2000 and 2001 and noted that the decline was related to the\noverall decline in the United States economy in interim 2001. He specifically acknowledged that the\ndemand decline in interim 2001 had together with imports caused prices to fall in the market interim\n2001 and that therefore \"some portion of the observed declines in the industry's performance between\nthe interim periods is attributable to an apparent decline in demand\". Nonetheless, he also found that\n\n3255 United States' first written submission, para. 724.\n3256 United States' first written submission, para. 725.\n3257 United States' first written submission, para. 726.\n3258 China's second written submission, paras. 289 and 290.\n3259 China's first written submission, para. 538.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe decline in demand did not \"explain the rapid deterioration in the domestic industry's financial\nperformance\" in interim 2001, because the \"decline in United States production and shipments\nexceeded the total decline in apparent domestic consumption\". After noting that there had been a\n\"significant increase in imports\" and a \"rapid increase in the proportion of the domestic market\nsupplied by imports\" during interim 2001, he correctly concluded that imports had had a greater\nimpact on domestic price and profitability declines in interim 2001 than demand declines.\n3260\n7.1409 The United States submits that, given the foregoing, it is clear that Commissioner Koplan\nthoroughly and adequately discussed the nature and extent of the effects of the demand declines in\ninterim 2001 and distinguished the effects of this decline from that of imports during the period of\ninvestigation. In particular, he acknowledged that some of the price and profitability declines suffered\nby the industry were attributable to the demand decline in interim 2001, but he also found that the\nindustry's production and shipment levels had declined at a substantially faster rate than demand in\ninterim 2001, which was due to the substantial increase in import market share during interim\n2001.\n3261 The United States argues that given these trends, it was reasonable for Commissioner\nKoplan to conclude that imports had had a greater hand in price declines in interim 2001 than\ndemand. Moreover, by focusing on the fact that there was a faster rate of change for industry\nproduction levels than demand in interim 2001, he was able to separate and distinguish the effects of\nthe demand declines from those attributable to imports in interim 2001. In other words, by examining\nthe differences in the rates of decline between industry production and shipment levels and demand\ndeclines in interim 2001, he was able to conclude that the differential between these declines had been\ncaused by the substantial increases in import volumes and market share in interim 2001. As a result,\nhe was able to, and did, attribute to imports the bulk of the declines in the industry's pricing and\nprofitability levels that occurred in interim 2001. By performing this qualitative assessment of the\nextent of the effects attributable to imports, he was able to distinguish the effects of the two factors\nand ensure that he did not attribute to imports the effects of the demand decline.\n3262\nCOGS\n7.1410 The European Communities argues that whil e Chairman Koplan weighed the effect of\ndecrease in demand against increases in imports and found that domestic production had fallen further\nthan the decrease in demand, he did not consider the effect of increased COGS on the deteriorating\noperating margin of domestic producers. The European Communities submits that had he examined\nthis factor, he may have found that increased COGS had such an effect that increased imports did not\ncause the decline in operating margins registered in this period. In failing to do so, Chairman Koplan\nfailed to separate out and distinguish the effects of other factors and failed to ensure that the effects of\nthese factors were not attributed to increased imports, thus acting inconsistently with Article 4.2(b) of\nthe Agreement on Safeguards..\n3263\n7.1411 In response, the United States argues that Commissioner Koplan very clearly did \"consider\nthe effects of increased costs of goods sold on the deteriorating operating margin of the industry\". In\nparticular, he discussed in detail the nature and extent of the effects that cost increases had on the\ncondition of the industry. Although the industry's unit costs had increased in interim 2001,\nCommissioner Koplan correctly acknowledged that th e industry had not been able to maintain its\nprofitability margins in interim 2001 as it had earlier in the period, by keeping its prices in line with\nchanges in its unit costs. He also reasonably concluded that the price declines in interim 2001, which\n\n3260 United States' first written submission, para. 742\n3261 United States' first written submission, para. 743\n3262 United States' first written submission, para. 744\n3263 European Communities' first written submission, para. 579.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndirectly led to reduced industry profitability, had been caused by imports and demand changes, after\nnoting that the two major changes in the market in interim 2001 had been a substantial increase in\nimport market share and a decline in demand. 3264 The United States argues that by focusing on the\nchanges in unit margins that occurred during interim 2001, he was able to separate and distinguish the\neffects of increasing costs from those of imports and demand changes in his analysis. In this regard,\nhis examination of the unit profits of the industry, and the relationship between the industry's profits,\ncosts and prices, enabled him to establish that the decline in industry profitability in interim 2001 was\ncaused not by rising costs but by a decline in the prices related to price competition from imports\nduring a period of demand decline. Accordingly, it is clear that he properly assessed the amount of\neffect that these cost increases had had on declines in domestic operating income levels during interim\n2001 and reasonably concluded that these declines were more appropriately considered to be a result\nof falling prices, not increasing costs. By doing so, he ensured that he was able to distinguish the\neffects of the cost increases from those of imports on the declines in the industry's condition and\nensured that he did not attribute to imports the effects of these cost increases.\n3265\n7.1412 In counter-response, the European Communities argues that Commissioner Koplan's opinion\nrested on developments in interim 2001 which led him to consider that increased imports posed a\nthreat of serious injury. He identified three factors \"which contributed\" to the domestic industry's\ndecline.3266 The first two were imports and declining demand. Thirdly, \"unit costs of goods sold\nincreased by ***%\" (all financial data for Stainless Steel Wire is confidential). 3267 He noted that \"the\nfalling prices and rising costs led to a *** percentage point loss [sic] in the operating income to sales\nratio between interim 2000 and interim 2001\". 3268 That is all the discussion of rising costs in interim\n2001 that the USITC Report contains. The European Communities submits that the discussion in the\nUnited States' submissions cannot make up for this total lack of reasoned and adequate explanation.\nAs the financial data is confidential, there is no reasoned and adequate explanation of how the facts\nsupport the findings, especially in the absence of a non-confidential indexed version of the data.\nThere is no examination of the relevance or cause of increased costs, no separation and distinction,\nand thus no non-attribution.\n3269\nNAFTA imports\n7.1413 China argues that Chairman Koplan's determination of the existence of a causal link between\nthe increased imports and the threat of serious injury to the domestic stainless steel wire industry, was\nmade on the grounds of data which included imports from NAFTA countries. However, China\nbelieves that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, what had to be determined was in fact whether total increased imports, with the\nexception of imports from NAFTA-countries, threaten ed to cause serious injury to the domestic\nindustry. As a result, since the determination of causality at hand required that \"increased imports\"\nonly consist of imports originating from non-NAFTA countries, the movements in imports from\nCanada and Mexico had to be regarded as \"another factor\". Thus, in respect of Article 4.2(b) of the\nAgreement on Safeguards, this new determination also required that threat of injury due to\nmovements in imports from Canada and Mexico not be attributed to increased imports (from non-\nNAFTA countries).\n3270 China argues that such a new determination was not done concerning this\n\n3264 United States' first written submission, para. 738.\n3265 United States' first written submission, para. 739.\n3266 USITC Report, Vol. I, p. 259.\n3267 USITC Report, Vol. I, p. 259.\n3268 USITC Report, Vol. I, p. 259.\n3269 European Communities' second written submission, para. 433.\n3270 China's first written submission, para. 541.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproduct. According to China, this is especially surprising, given that the Chairman Koplan\nacknowledged that imports from Canada and Mexico were threatening to cause injury by stating that\n\"imports of stainless steel wire from Canada […] did not contribute importantly to the serious injury\"\nand \"imports of stainless steel wire from Mexico […] did not contribute importantly to the serious\ninjury\". In other words, imports from NAFTA c ountries contributed in threatening to cause the\ninjury, although this contribution was not substantial.3271 China asserts that since it did not proceed to\na new determination of causality between increased imports from non-NAFTA countries and the\nthreat of serious injury to the domestic industry , there was consequently a failure to assess the\ninjurious effects caused by imports from Mexico and Canada and a failure to ensure that they would\nnot be attributed to increased imports from non-NAFTA countries. Therefore, the investigating\nauthority did not comply with Articles 2(1) and 4.2(b) of the Agreement on Safeguards.\n3272\n7.1414 The European Communities also argues that in failing to analyse imports from Canada and\nMexico as alternative causes of injury, the USITC also acted inconsistently with Article 4.2(b). 3273\nThe European Communities argues that the USITC Report does not provide a reasoned and adequate\nexplanation of whether NAFTA imports were causing injury and how any such injury caused was not\nattributed to non-excluded imports. Chairman Koplan simply concludes that imports from neither\nMexico or Canada were in the top five suppliers during the period of investigation. He does not even\nattempt to analyse whether such imports caused any injury and does not, therefore, ensure that any\nsuch injury is not attributed to non-excluded imports.3274\n7.1415 For the United States' response, see paragraph 7.1066 et seq.\nFailure to provide reasoned and adequate explanation\n7.1416 The European Communities and China note, that in his separate views on injury, Chairman\nKoplan expressly stated that three other factors contributed to the threat of injury, i.e. a rapid decline\nin consumption, an increase in the unit costs of goods sold and declining demand. 3275 The European\nCommunities argues that Chairman Koplan's conclusions, upon which it asserts that the safeguard\nmeasure for stainless steel wire are based, are directly contradicted by the opinion of the majority. 3276\nThe European Communities argues that in order to provide a reasoned and adequate explanation of\nChairman Koplan's findings there would have to be a clear rebuttal of this finding. There is none, and\nthis brings into question, therefore, the basis for the finding of a causal link between increased imports\nand a threat of serious injury. For this reason, the European Communities argues that the safeguard\nmeasures imposed on this basis are unjustified and are thus inconsistent with Article 2.1 and 4.2(b) of\nthe Agreement on Safeguards, and additionally Articles 3.1 and 4.2(c).\n3277\n7.1417 In response, the United States submits that, as an initial matter, the Agreement on Safeguards\ndoes not require that all six individual decision-makers reach the same conclusion, or that the\nindividual Commissioners must rebut the findings of others with different conclusions, but requires\nthat the determination, as the Appellate Body said in US – Line Pipe, meets the obligations contained\nin the Agreement on Safeguards. The determination of Commissioner Koplan meets those\nrequirements. Indeed, the fact that Commi ssioners Miller, Hillman and Okun disagreed with\n\n3271 China's first written submission, para. 542.\n3272 China's first written submission, para. 543; China's second written submission, para. 293\n3273 European Communities' first written submission, para. 579.\n3274 European Communities' first written submission, para. 435.\n3275 European Communities' first written submission, para. 578.\n3276 European Communities' first written submission, para. 580; China's first written submission,\npara. 535.\n3277 European Communities' first written submission, para. 581.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCommissioner Koplan no more makes his analysis unreasonable than his disagreement with them\nmakes their analysis unreasonable.3278\n7.1418 The United States submits further that Commissioner Koplan's pricing analysis is actually not\ninconsistent with the pricing findings of Commi ssioners Miller, Hillman and Okun. Like these three\nCommissioners, Commissioner Koplan specifically found that imports had consistently undersold\ndomestic stainless steel wire during the period from 1996 to 2000, but that this consistent underselling\nhad not impacted domestic pricing adversely because the \"domestic industry had kept prices of the\ndomestic [wire] product in line with its costs\" during that five year period. However, unlike the other\nthree Commissioners, Commissioner Koplan also focused his analysis on pricing data for imports and\ndomestic product in interim 2001 and noticed that lowered import pricing had begun interfering with\nthe ability of domestic industry to keep its prices in line with its costs. In particular, he found that, in\ncombination with declining demand, the increase in import volumes and market share caused the price\nof domestic wire to fall during a period of rising costs and led directly to a decline in the industry's\noperating income levels in interim 2001. As a result, he reasonably found, the increase in imports and\ntheir concurrent underselling had caused the substantial declines in the industry's condition in the final\nmonths of the period of investigation, thus s howing that imports thre atened the industry with\nimminent serious injury. In other words, Commissioner Koplan's findings about price competition in\nthe market during the first five years of the period were, in fact, consistent with the findings of the\nother three Commissioners. However, Commissioner Koplan simply placed more emphasis than the\nother Commissioners on the pricing effects of imports during the last six months of the period, which\nis a reasonable choice given his finding that imports threatened serious injury to the stainless steel\nwire industry.\n3279\n7.1419 China argues that to be certain that the injury caused by these three other factors, that is a\nrapid decline in consumption, an increase in the unit costs of goods sold and declining demand\nwhatever their magnitude, was not attributed to imports, the USITC had to assess the injurious effects\nof these other factors. China believes that it failed to do so.\n3280 China states that, in sum, China\nbelieves that the injurious effects of the three other factors that were threatening to cause injury at the\nsame time as the increased imports were not properly assessed by Chairman Koplan. Thus, it is\nimpossible to determine whether he properly separated the injurious effects of these factors from the\ninjurious effects of the increased imports.3281 China argues that, as a result, the investigating authority\nalso failed to establish explicitly, with a reasoned and adequate explanation, that threat of injury due\nto other factors was not attributed to increased imports. Therefore, China believes that the \"substantial\ncause\" determination was inconsistent with Articles 2(1) and 4.2(b) of the Agreement on\nSafeguards.\n3282\n(x) Stainless steel rod\nFactors considered by the USITC\nDownturn in demand\n7.1420 The United States argues that the USITC explained, in a reasoned and thorough manner, the\nnature and extent of the injurious effect attributable to these demand declines, and distinguished that\n\n3278 United States' first written submission, para. 732\n3279 United States' first written submission, para. 733.\n3280 China's first written submission, para. 537.\n3281 China's first written submission, para. 539.\n3282 China's first written submission, para. 540.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\neffect from the effects of imports. More specifically, the USITC recognized that, after remaining\nstable through most of the period of investigation, demand for stainless steel rod did decline in late\n2000 and interim 2001. However, the USITC correctly noted that the industry had been experiencing\ndeclines in its market share, production volumes, sales levels, employment levels, and profitability\nlevels during the period from 1996 to 1999, when imports had exhibited increasing volumes as well.\nMoreover, it also specifically found that \"it is clear imports had a greater impact on the declines in the\nindustry's condition in 2000 and interim 2001 than demand declines\" because there had been a\n\"substantial increase in import quantities and market share during the last year-and-a-half of the\nperiod\" of investigation.\n3283\n7.1421 The United States argues that it is clear that the USITC closely examined the nature of the\ninjury that was attributable to demand declines during the period. In particular, the USITC properly\nnoted that demand declines had become evident only during the final three quarters of the period of\ninvestigation. However, it also correctly noted that these late-period demand declines could not\npossibly have contributed to the serious declines in the condition of the industry during the three years\nprior to this period, when demand remained stable. Indeed, given that demand not only remained\nstable but actually increased slightly in 2000 over 1999 and 1998, it is clear that demand declines had\nno impact at all on the condition of the industry during 2000 as well. By examining whether imports\ncaused injury to the industry during a period of increasing demand, the USITC was able to distinguish\nthe effects of the demand declines in the final quarters of the period of investigation from those\nattributable to imports during prior periods. Accordingly, the USITC properly separated and\ndistinguished the effects of demand declines from those of imports in its analysis.\n3284\nIncreases in capacity\n7.1422 The European Communities argues that the USITC Report indicates that substantial increases\nin capacity were made in 1998 to 2000 and 2001. However, according to the European Communities,\nthere is no analysis of the extent to which such increased capacity might have caused injury to the\ndomestic industry.\n3285\n7.1423 In response, the United States submits that none of the parties argued before the USITC that\nthe industry's increased capacity levels was a source of injury to the industry during the period of\ninvestigation. While Members are not barred from raising before panels issues that were not raised\nbefore the USITC during its investigation, it remains the case, however, that the European\nCommunities's arguments on this score, if valid, should have been significant enough for the\nEuropean rod producers to have raised this as an argument before the USITC. The fact that they did\nnot strongly suggests, as a matter of fact, that the European participants in the stainless steel rod\nmarket did not view industry capacity as an especially significant factor in the industry's declines\nduring the period of investigation.\n3286\n7.1424 The United States argues, secondly, that the USITC clearly did recognize the fact that the\nindustry had increased its aggregate capacity levels during the period and that the industry's capacity\nutilization rates declined during the period as well. However, even with this capacity increase, the\nrecord also showed as the USITC found that th e industry's actual production levels and shipments\nactually declined during the period from 1996 through 2000, primarily because imports increased\ntheir volumes and market share through price underselling during the period of investigation.\n\n3283 United States' first written submission, paras. 706-707.\n3284 United States' first written submission, paras. 708-709.\n3285 European Communities' first written submission, para. 573.\n3286 United States' first written submission, para. 717.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAccordingly, the USITC properly recognized that th e industry's capacity increases had little effect in\nthe market because the industry's production, shipment and market share levels would have declined\nby the same amounts even if the industry had not increased its capacity levels. Moreover, because the\nindustry's production and shipment levels declined substantially from 1996 through 2000 as a result of\nimport competition, it is also clear that the import increases had an effect on the industry's capacity\nutilization rates as well, as the USITC found.\n3287\n7.1425 The United States argues, in sum, that the USITC was aware of the industry's capacity\nincreases, discussed them in some detail, and correctly found that they had not had an impact on the\ndeclines in the industry's overall condition. The USITC properly considered their effects and\ndiscounted them as a source of serious injury.\n3288\n7.1426 In counter-response, the European Communities notes that capacity increases occurred\nbetween 1998 and 2000, and it has been established, that while imports only increased slightly\nbetween 1998 and 1999, the industry's operating income \"dropped dramatically to a loss of US$***\nmillion in 1999 and a loss of US$*** million in 2000\". 3289 The United States tried to explain this\naway by claiming that that the industry's produc tion levels and shipments declined between 1996 and\n2000.3290 However, a decline in production levels and shipments does not necessarily mean that an\nindustry makes losses – such events could also incur when an industry is profitable. Rather, an\nindustry makes losses when the value at which it sells does not cover its costs. Increasing capacity,\nespecially when demand is stable 3291, will only lead to increased costs, and must be an element\nexplaining the \"dramatic\" losses in 1999. However, the USITC does not provide a reasoned and\nadequate explanation of the effects such capacity increases had on the industry's performance, and it is\nimpossible to fully comprehend the underlying trends in the absence of data or on indexed summary\nof such data.3292\nNAFTA imports\n7.1427 China notes that the determination of the existence of a causal link between the increased\nimports and serious injury to the domestic stainless steel rod industry, which is found in the USITC\nReport was made on the grounds of data which included imports from NAFTA countries. However,\nChina believes that, since imports from NAFTA countries were excluded from the application of the\nsafeguard measure, the USITC had to determine whether total increased imports, with the exception\nof imports from NAFTA-countries, caused serious injury to the domestic industry. China argues that\nas a result, since the determination of causality required that \"increased imports' only consist of\nimports originating from non-NAFTA countries, the movements in imports from Canada and Mexico\nhad to be regarded as \"an other factor\". Article 4.2(b) of the Agreement on Safeguards also required\nthat injury caused by movements in imports from Canada and Mexico not be attributed to increased\nimports (from non-NAFTA countries).\n3293The European Communities also argues that in failing to\nanalyse imports from Canada and Mexico as alternative causes of injury, the USITC also acted\ninconsistently with Article 4.2(b).\n3294 The European Communities notes in this regard that the USITC\nconcluded, both for Canada and Mexico, that NAFTA imports did not \"contribute importantly\" to\n\n3287 United States' first written submission, para. 718.\n3288 United States' first written submission, para. 719.\n3289 USITC Report, Vol. I, pages 215 and 216.\n3290 United States' first written submission, para. 718.\n3291 USITC Report, Vol. I, p. 217.\n3292 European Communities' second written submission, para. 428.\n3293 China's first written submission, para. 500.\n3294 European Communities' first written submission, para. 572.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nserious injury. According to the European Communitie s, this does not suggest that such imports had\nno effect – the USITC failed to separate and distinguish this effect, and ensure that it was not\nattributed to non-excluded imports.\n3295\n7.1428 For the United States' response, see paragraph 7.1066 et seq.\nFailure to Provide Reasoned and Adequate Explanation\n7.1429 China argues that to be certain that the injury caused by these other factors, downturn in\ndemand and increases in energy costs, whatever their magnitude, was not attributed to imports, the\nUSITC had to assess the injurious effects of these other factors. However, the USITC failed to do so,\nas there is no information to that effect in the USITC Reports. 3296 China states that, in sum, China\nbelieves that the injurious effects of the other factors that have caused the injury at the same time as\nthe increased imports had not been properly assessed by the USITC. Thus, it is impossible to\ndetermine whether the USITC properly separated the injurious effects of these factors from the\ninjurious effects of the increased imports. 3297 China argues that, in sum, the USITC failed to\nadequately evaluate the complexity of the alleged in jury factors. It also failed to provide a sound,\nclear and straightforward explanation of how it ensured that injury caused by other factors was not\nattributed to increased imports. Therefore, China believes that the USITC acted inconsistently with\nArticles 2(1) and 4.2(b) of the Agreement on Safeguards.3298\n7.1430 The European Communities further argues that it is practically impossible to ascertain\nwhether the USITC's determination with respect to stainless steel rod is justified since all data other\nthan absolute imports has been kept confidential.\n3299\n7.1431 In response, the United States notes that the USITC has treated as confidential and therefore\nnot disclosed the bulk of the trade, employment, and financial data for the stainless steel rod industry.\nThe USITC redacted this data from its opinion because the stainless rod industry is dominated by the\nonly large domestic producer of stainless steel rod, Carpenter/Talley and Carpenter/Talley's operating\nand trade data essentially are the same as the aggregate industry data. Disclosing the aggregate\nconfidential competitive data of the industry would therefore actually reveal the specific details of\nCarpenter/Talley's operations. The USITC is barred by United States law – as well as Article 3.2 of\nthe Agreement on Safeguards – from disclosing such confidential company-specific competitive\ninformation without the consent of the provider. However, when the USITC is prohibited from\ndisclosing confidential competitive data for a company, the USITC treats only the specific numeric\ndata of the company as confidential; it may and does discuss trends in industry data (or other\nconfidential data) in general but descriptive terms.\n3300\n7.1432 The United States argues that, bearing this in mind, the European Communities' contention\nthat the USITC failed to provide an adequate statement of its rationale for stainless steel rod is\nmisplaced. First, as the United States had previously discussed, the Agreement on Safeguards not\nonly permits, but indeed requires, a competent authority not to disclose any information that is\nsubmitted to it on a confidential basis, unless the submitting party consents to the disclosure. In fact,\ntwo panels have stated that the Agreement on Safeguards authorizes the United States not to disclose\n\n3295 European Communities' second written submission, para. 431.\n3296 China's first written submission, para. 493.\n3297 China's first written submission, para. 494.\n3298 China's first written submission, para. 499.\n3299 European Communities' first written submission, para. 570.\n3300 United States' first written submission, para. 693.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconfidential data in its determination, even if that data is aggregated data. Moreover, these panels\nhave rejected the argument that the USITC's analysis does not constitute a \"reasoned and adequate\nexplanation\" of its findings simply because it has not disclosed confidential data in its analysis.\n3301\nSecond, even though a substantial amount of confidential industry data is redacted from the USITC's\nopinion, its analysis is still sufficiently detailed and clear that the Panel can read the analysis and\nassess whether it meets the causation requirements of the Agreement on Safeguards. The USITC's\ndecision, while deleting specific numeric data reflecting the operations of a company\nCarpenter/Talley, nonetheless describes in detail the trends in import and industry data, the clear\ncorrelations between those trends, and the extent to which other factors impacted the industry. It is\nclear that redaction of the data should not hamper the Panel's review of the USITC's analysis,\nespecially given that redaction of this data is fully consistent with the provisions of the Agreement on\nSafeguards .\n3302\n4. Effect of violations of other provisions of the Agreement on Safeguards\n7.1433 The European Communities and Switzerland argue that the USITC's causation analysis will\nautomatically be flawed if the Panel finds that the United States' determination of increased imports is\nflawed.3303 More particularly, the European Communities argues that the USITC's analysis of\nincreased imports which is based on an end-to-end comparison over the investigation period is\ninconsistent with the United States' obligation on ly to find increased imports where it determines the\nexistence of an increase of imports recent enough, sudden enough, sharp enough and significant\nenough qualify as increased imports in the sense of the Agreement on Safeguards. The European\nCommunities argues that this analytical error taints the USITC's causation analysis more generally,\nbecause the USITC only attempts to determine whether imports which have increased over the period\nof investigation have caused serious injury. It does not determine whether imports which have\nincreased recently enough, suddenly enough, sharply enough and significantly enough are causing\nserious injury. This has two operational consequences. First, injury which has manifested itself before\nsuch increased imports cannot be ascribed to these increased imports. Second, if the level of imports\nincreases and then drops away, injury which appears as imports drop away cannot be ascribed to such\nlower level imports even if they are low priced, because they are not recent enough, sudden enough,\nsharp enough or significant enough. Injury which appears after the level of imports has dropped away\nmust be shown to be caused by imports which were, as a matter of fact, recent enough, sudden\nenough, sharp enough and significant enough to meet the standards of the Agreement on Safeguards.\nThe further the lapse in time between such increased imports and the serious injury to the domestic\nindustry, the more compelling must be the analysis of causal link.\n3304 3305\n7.1434 Korea argues that Article 3.1 of the Agreement on Safeguards imposes an obligation on the\ncompetent authorities to publish \"their findings and reasoned conclusions\" regarding \"all pertinent\nissues of fact and law\". Article 4.2(c) of the Agreement on Safeguards requires the competent\nauthorities to \"publish promptly\" a detailed analysis of the results of the investigation, including \"the\nrelevance of the factors examined\". Finding causality between an increase in imports and the serious\ninjury is a \"pertinent issue of fact and law\". The United States did not provide any explanation on\n\n3301 United States' first written submission, para. 694.\n3302 United States' first written submission, para. 695.\n3303 European Communities' first written submission, para. 432; Switzerland's first written submission,\npara. 277.\n3304 Appellate Body Report, Argentina – Footwear (EC) para. 144.\n3305 European Communities' second written submission, para. 369.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhow the increase in import of tin mill caused the serious injury of the United States industry\nproducing the like product.3306\n7.1435 Korea also argues that there is only one reasoned explanation in the USITC Report regarding\ncausation for tin mill products. 3307 That reasoned explanation demonstrates why, in the view of the\nUSITC, the increase in imports of tin mill products is not a substantial cause of serious injury to the\ndomestic tin mill industry. The published report of the United States does not contain any findings or\nexplanation to dispute or contradict the cited r easoned explanation contained in the USITC Report.\nSince the United States reached a legal conclusion that imports were a substantial cause of serious\ninjury to the domestic industry without providing any explanation to support the conclusion, the\nUnited States is in violation of Articles 2, 3 and 4 of the Agreement on Safeguards.3308\nI. ARTICLE 5\n1. Requirements of Article 5.1\n(a) General\n7.1436 The remedy recommendations made by the USITC are listed in paragraph Error! Reference\nsource not found. . The safeguard measures finally imposed by the US President are listed in\nparagraph Error! Reference source not found..\n7.1437 The complainants claim that Article 5.1 of the Agreement on Safeguards imposes on\nMembers an obligation to ensure that the measure applied is proportionate, i.e. that it does not go\nbeyond what is necessary to prevent or remedy the serious injury. They refer to the Appellate Body in\nKorea – Dairy which stated that Members must ensure that the measure applied is commensurate with\nthe goals of preventing or remedying serious injury and of facilitating adjustment and that this\nobligation applies regardless of the particular form that a safeguard measure might take.\n3309 Norway,\non behalf of the complainants, argued that the United States has not fulfilled its obligations under the\nAgreement on Safeguards in determining whether safeguard measures could be imposed in the first\nplace. Therefore an infringement of these requirements automatically raises ipso facto or, at least,\nprima facie a presumption of violation of Article 5.1 of the Agreement on Safeguards. Should the\nPanel, however, reach a different conclusion on the preceding claims made by the complainants, the\ncomplainants are of the view that the United States, in any case, also violated the requirement laid\ndown in Articles 5.1 of the Agreement on Safeguards that the safeguard measures be applied only to\nthe extent necessary.\n3310 Finally, they claim that the remedy and the choice of measure needed to be\nexplained and justified before, or at the time, it was applied and that this was not done in this case.3311\n7.1438 The United States responds that its safeguard measures were imposed to a level and for a\nduration that complies with the requirements of Article 5 of the Agreement on Safeguards. It is\nevident, through both a qualitative and a quantitative assessment of the effects of imports on the\nrelevant domestic industries and of the measure taken, that the relief provided was only to the extent\nnecessary to prevent or remedy serious injury and to facilitate adjustment. It emphasizes that it is\n\n3306 Korea's first written submission, para. 167.\n3307 USITC Report, Vol. I, pp. 74-77 (Exhibit CC-6).\n3308 Korea's first written submission, para. 168.\n3309 Norway's first oral statement on behalf of all complainants, para. 6, citing Appellate Body Report,\nKorea – Dairy , para. 96; Norway's first written submission, paras. 347-348; Japan's first written submission,\nparas. 317-318.\n3310 Norway's second oral statement on behalf of the complainants, paras. 1-7 and Chapter III.\n3311 Norway's second oral statement on behalf of the complainants, paras. 8 and 22-27.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"impossible to determine in advance with any degr ee of precision the level of import duty necessary\nto enable the United States industry to compete with overseas suppliers in the current competitive\nconditions … \". 3312 The United States adds that any numerical analysis is, at best, an approximation\nthat might assist a Member or a panel in evaluating whether a measure is commensurate with the\ninjury caused by increased imports and the need for adjustment While numerical estimates are\nnecessarily limited in their ability to precisely quantify and isolate the full effect of imports and the\nappropriateness of remedial measures, they may be useful to test whether a measure is set at an order\nof magnitude consistent with Article 5.1. 3313 It also claims that it has rebutted all allegations of\ninconsistency of its safeguard measure with Articles 2 and 4 and, thus, the burden of proof that its\nsafeguard measures are inconsistent with Article 5.1 is on the complainants. Moreover, the United\nStates asserts that it was under no obligation to explain, justify or publish anything relating to its\nchoice of remedy until challenged in a WTO dispute settlement process.\n3314\n7.1439 The United States also contends that Member may apply a safeguard measure in any form and\nat any level that falls within the parameters of Article 5.1, which states that a safeguard measure may\nbe applied to \"to prevent or remedy serious injury and to facilitate adjustment.\" It also states that a\nMember may apply a safeguard measure \"only to the extent necessary\" for these purposes. Article 5.1\ndoes not restrict a Member's discretion to act within this limitation. The Member may choose any\nform for the measure – for example, a tariff, tariff_r ate quota, or quantitative restriction. Within this\nlimitation, the Member may also choose the level of the measure – an ad valorem duty rate, a specific\nduty amount, the volume subject to a quota, etc.\n3315\n(b) Extent and level of the safeguard measures\n(i) \"… to the extent necessary …\"\n7.1440 New Zealand argues3316 that the requirement to apply a safeguard measure only to the extent\nnecessary to remedy serious injury caused by imports and to facilitate adjustment by the domestic\nindustry also carries with it the consequence that the least trade restrictive measure must be chosen.\nFurthermore, as panels in US – Gasoline and Canada – Periodicals have pointed out, a measure must\nbe capable of achieving its objectives before it can be determined to be \"necessary\".\n3317\n7.1441 The United States disagrees with New Zealand's argument that the measure should be no\nmore restrictive than necessary. The United States argues that the Appellate Body did not state that\nArticle 5.1 requires that safeguard measures be \"no more restrictive than necessary\". Its actual\nstatement was that safeguard measures \"may be applied only to the extent necessary\" – a direct quote\nfrom Article 5.1.\n3318 3319 In the United States' view, New Zealand's interpretation conflicts with the\nordinary meaning of Article 5.1 and the object and purpose of the Agreement on Safeguards. It\nsuggests that the term \"necessary\" in Article 5.1 is linked to the words \"to prevent or remedy serious\ninjury and to facilitate adjustment\". Thus, \"necessary\" relates to the preventive, remedial, and\nfacilitative effect of the measure, and not to its trade restrictive effect. In short, the need for relief and\nadjustment defines what is \"necessary\". The final sentence of Article 5.1 advises that \"Members\nshould choose measures most suitable for the achievement of these objectives\". This admonition\n\n3313 United States' first written submission, paras. 1060-1062.\n3314 United States' second oral statement, paras. 114-121.\n3315 The United States' executive summary of its first written submission, para. 111.\n3316 New Zealand's first written submission, para. 4.196.\n3318 Appellate Body Report, US – Line Pipe, para. 260.\n3319 United States' first written submission, para. 1031.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nshows that many potential measures might satisfy the requirements of the first sentence of Article 5.1,\nand that Members have discretion in choosing which, among them, best meets the objectives of\npreventing or remedying serious injury and facilitating adjustment. The cited passages of US –\nGasoline and Canada – Periodicals did not equate necessity with the capability to achieve objectives.\nEven if \"necessary\" had been given the meaning attributed to it by New Zealand, the safeguard\nmeasures applied by the United States are capable of preventing or remedying serious injury and\nfacilitating the adjustment of the relevant domestic industries.\n3320\n7.1442 New Zealand responds that, in an effort to blunt the remedy standard to the point where it is\nimpossible to make an objective determination as to whether it has been met, the United States\nsuggests that what the standard really means is a measure can be applied \" as long as it is necessary to\nremedy (or prevent) the serious injury and to facilitate adjustment\"\n3321, thereby taking the\nemphasis away from the limitation inherent in \"extent\". According to New Zealand, in this way, the\nUnited States seeks to unjustifiably broaden the scope of Article 5.1 so that any measure a Member\nasserts as being for the purpose of remedying or preventing serious injury and facilitating adjustment\nwould be permitted. For this reason, the United States disputes\n3322 New Zealand's statement that, in\naccordance with US – Gasoline and Canada – Periodicals, a measure must be capable of achieving its\nobjectives before it can be determined to be \"necessary\". 3323 In doing so, New Zealand asks, is the\nUnited States seriously asking the Panel to conclude that a measure can be necessary to achieve an\nobjective, without actually being capable of achievi ng it? To do so would be to render meaningless\nthe concept of \"to the extent necessary\" as it appears in Article 5.1. New Zealand submits that the\nUnited States seeks to argue that the remedy standard in Article 5.1 implies a broad discretion, noting\nthat a Member has the discretion to apply a measure that is \"less than necessary\". 3324 Yet New\nZealand queries why a Member genuinely concerned with the effect of increased imports on its\ndomestic industry would consciously choose a remedy th at would be less than effective in remedying\nthe serious injury caused by those imports. According to New Zealand, the United States point goes\nnowhere. It is simply a device used by the United States to support the notion of a broad discretion in\nArticle 5.1 that disregards the actual standard contained in Article 5.1. As the Appellate Body has\nmade clear, Article 5.1 instructs WTO Members to focus on what is \"necessary\" to fulfil that limited\nobjective.3325 Therefore, the clear purpose of safeguard measures is to prevent or remedy serious\ninjury and facilitate adjustment. This was recognized by the Appellate Body in Korea – Dairy when\nit stated that a Member must ensure that the measure applied \"is commensurate with the goals of\npreventing or remedying serious injury and of facilitating adjustment\".3326\n7.1443 New Zealand submits that in a further attempt to negate the words of Article 5.1, the United\nStates also challenges New Zealand's statement that the requirement to apply a safeguard measure\nonly to the extent necessary to remedy a serious injury caused by imports and facilitate adjustment by\nthe domestic industry also carries with it the consequence that the least trade restrictive measure must\nbe chosen. The implication appears to be that the United States interprets Article 5.1 as allowing a\nMember to take a more trade restrictive measure to achieve the objective of remedying serious injury\ncaused by imports and facilitate adjustment when a less trade restrictive measure could achieve the\nsame objective. Such an interpretation ignores a ltogether the requirement that a measure be applied\n\n3320 United States' first written submission, paras. 1029-1031.\n3321 United States' first written submission, para. 1021 (emphasis added).\n3322 United States' first written submission, para. 1031.\n3323 New Zealand's first written submission, para. 4.196, citing Panel Report, US – Gasoline, and Panel\nReport, Canada – Periodicals.\n3324 United States' written reply to Panel question No. 100 at the first substantive meeting.\n3325 Appellate Body Report, US – Line Pipe, para. 246.\n3326 Appellate Body Report, Korea – Dairy, para. 96, (emphasis added).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"only to the extent necessary\" to achieve the specified objectives. It also ignores the requirement that\nMembers choose measures \"most suitable\" for the achievement of those objectives.\n7.1444 Japan adds that when Article 5.1 says \"only to the extent necessary\", the text imposes a strict\nstandard. The use of \"only\" means that the measure can be less restrictive than necessary, but cannot\nbe more restrictive than necessary. Thus, when there is doubt regarding the effect of a remedy, the\nauthorities must err on the side of a less restrictive measure. 3327 Japan puts forth the following simple\nexample. Suppose the authority concludes it needs to raise domestic prices by 10% to remedy the\ninjury. The economic studies show that a 12% tariff will raise prices by some amount between 8 and\n10%. The economic studies also show that a 14% tariff will raise prices by some amount between 10\nand 12%. It is common for such studies to provide reliable indications of ranges, but not precise\nfigures. In this situation, the authorities could impose a 12% tariff but not the 14% tariff. In each\ncase, Japan suggests, the tariff might completely eliminate the injury. However the possibility that the\n14% tariff might over compensate renders that tariff level WTO inconsistent.\n3328\n7.1445 The United States notes that Japan argues that when an economic model produces a range of\nestimated effects of imports, Article 5.1 allows the safeguard measure to address only the lowest\nestimated effect because \"the possibility that the 14% tariff might over compensate renders that tariff\nlevel WTO inconsistent\". 3329 The United States argues that this argument rests on three fallacies.\nFirst, it incorrectly views \"no more than the extent necessary\" in Article 5.1 as requiring a Member\nto ensure from the outset that a measure will never exceed the extent necessary. The GATT\nContracting Parties recognized in US – Fur Felt Hats that such certainty is impossible. Moreover, the\nchance that a safeguard measure consistent with Article 5.1 may need modification in the course of\nevents is built into the requirement under Article 7.4 for a Member to \"review the situation\" at the\nmid-term of a safeguard measure and \"if appropriate, withdraw it or increase the pace of\nliberalization\". This provision would be unnecessary if Article 5.1 required a Member to apply a\nsafeguard measure less than the lowest possible effect of increased imports. Second, Japan fails to\naccount for progressive liberalization of safeguard measures under Article 7.4. Automatic reductions\nin the extent of application of the measure lessen any uncertainty over whether the overall effect of\nthe measure over its lifetime is consistent with Article 5.1. In this regard, it is noteworthy that an\naggressive rate of liberalization is built into the steel safeguard measures – 6% per year for the 30%\ntariffs. Third, Japan mistakenly views the range of outputs of an economic model as actual effects of\na measure and actual effects of increased imports that can be compared with pinpoint accuracy. They\nare not. At most, they indicate the general magnitudes of injurious and remedial effects. The\nAppellate Body recognized the inherent uncertainty of such a comparison when it described\nArticle 5.1 as requiring that a safeguard measure be \"commensurate\" with – not equivalent or equal to\n– \"the goals of preventing or remedying serious injury and facilitating adjustment\".\n3330 The United\nStates argues that that is what it has done, and is the reason the Panel should find the measures to be\nconsistent with Article 5.1.\n3331\n(ii) \"… to prevent serious injury attributed to 'increased imports' \"\n7.1446 The complainants submit that only the effects of the increase in imports and not the totality of\nthe imports are to be remedied by a safeguard measure. Indeed, competition against imports is a\nnormal feature in an open free trade system and the objective of safeguard measures cannot be the\n\n3327 Japan's written reply to Panel question No. 115 at the first substantive meeting.\n3328 Japan's written reply to Panel question No. 112 at the first substantive meeting.\n3329 Japan's written reply to Panel question No. 155 at the first substantive meeting.\n3330 Appellate Body Report, Korea – Dairy, para. 96.\n3331 United States' second written submission, paras. 224-226.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\neradication of all imports. Safeguard measures cannot target adjustment to competition against\nimports as a whole and remain below the maximum permitted level under Article 5.1. The Appellate\nBody has interpreted the whole phrase \"only to the extent necessary to prevent or remedy serious\ninjury and to facilitate adjustment\" as requiring that safeguard measures apply only to the extent that\nthey address serious injury attributed to increased imports. This conclusion clearly rules out any\ninterpretation which would allow safeguard measures to address more than the injury caused by\nincreased imports on the basis that it would be nece ssary \"to facilitate adjustment\". In other words,\nthe objective of \"facilitating adjustment\" does not mean that safeguard measures can address\ncompetition against the totality of imports.\n3332\n7.1447 Switzerland submits that more particularly in US – Line Pipe 3333, the Appellate Body stated\nthat Article 5.1, first sentence does not permit a Member to apply a safeguard measure to prevent or\nremedy \"the entirety of the serious injury experienced by the domestic industry\". The Appellate Body\ngoes on to say that the words \"only to the extent necessary\" instruct WTO Members to focus on what\nis \"necessary\" to fulfil that limited objective, wh ich is to prevent or remedy serious injury and\nfacilitate adjustment\".3334 3335 The European Communities and Japan suggest that this interpretation is\nsupported by the second sentence of Article 5.1, which sets a limit to safeguard measures\nimplemented in the form of quantitative restrictions. Indeed, quantitative restrictions cannot reduce\nthe quantity of imports below the level of a recent period which shall be the average of imports in the\nlast three representative years for which statistics are available, unless clear justification is given that\na different level is necessary to prevent or remedy serious injury. Thus, the second sentence of\nArticle 5.1 prohibits, in principle, remedies which would have an impact on the totality of the imports\nand strongly suggests that safeguard measures can only address the increase in imports. The\nmaximum permitted level of the safeguard measures should, in practical terms, be lower if the remedy\ncan address only the increase in imports than if it is permissible to tackle the totality of the imports.\nIn particular, safeguard measures cannot aim at cutting back imports to below the non-injurious level\npreceding the increase.\n3336\n7.1448 Japan argues that the Agreement on Safeguards is meant to address changes in the\ncompetitive dynamic between imports and the domestic industry, whether it manifests itself as an\nabsolute increase in imports or an increase relative to domestic production. The issue is not the\neffects of imports per se, but the effects of the import increase. It is critical also that the measure not\nattempt to address the effects of other factors, and that it take into account the remedial effects already\nat work in the market, such as anti-dumping and countervailing duties measures imposed since the\nincrease in imports occurred.\n3337 Norway adds that competition against imports is a normal feature in\nan open rule based free trading system and the objective of safeguard measures cannot be the\neradication of all imports. It is only the sudden, recent and sharp increase which causes the serious\ninjury that the measure can address.3338\n7.1449 Korea submits that the difference between focussing on all imports and only on imports that\nhave increased can be important. First, the authorities could quantitatively determine the amount of\ninjury caused by increased imports alone (e.g ., imports caused a 20% decline in profitability).\n\n3332 Norway's second oral statement on behalf of all complainants, paras. 9, 13 and 14.\n3333 Appellate Body Report, US – Line Pipe, para. 243.\n3334 Appellate Body Report, US – Line Pipe, para. 246.\n3335 Switzerland's second written submission, paras. 109-110.\n3336 Complainants' written replies to Panel question No. 153 at the first substantive meeting.\n3337 Japan's written reply to Panel question No. 153 at the first substantive meeting.\n3338 Japan's written replies to Panel questions Nos. 112 and 115 at the fist substantive meeting;\nNorway's written reply to Panel question No. 153 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nTherefore, the remedy would be to return the indust ry to that level of profitability (20%). In this\nexample, only the increase in imports would be addressed. Second, if the authorities are unable to\nspecifically identify the exact amount of injury from increased imports, the measure should address\nthe volume of import increases by reducing the volume of the increase to the extent of increase and its\ninjurious effects. This is an alternative approach. Under either approach, if the entire amount of the\nimports rather than the increase is used, the result would be very different. In fact, it was only when\nthe imports reached a certain level that they became injurious.\n3339\n7.1450 Brazil adds that the entire safeguard mechanism is dependent on there being increased\nimports. This is what triggers an investigation and is a threshold condition under Article 2.1 for the\napplication of safeguard measures. It is clear that the central purpose of safeguard measures is to\naddress serious injury or the threat thereof from increased imports. Article 5.1 cannot be interpreted\nin a manner contrary to this purpose. In Brazil's view, Article 5.1 itself supports the notion that the\npurpose of the Agreement on Safeguards is to restore the status quo ante, specifically the condition of\nthe domestic industry before the effect of increased imports. The limitation of quantitative measures\nto the average of the last three representative years is indicative of restoring the status quo ante . In\neffect, it suggests a rollback to the pre-increase in imports level and puts the burden on the competent\nauthorities to justify quantitative restrictions which roll back imports below a representative former\nperiod.\n3340 The European Communities, Korea and Brazil add that they would distinguish between\nthe application of safeguard measures to imports as a whole and the application of safeguard measures\nto remedy the serious injury from increased imports. Because safeguard measures are on the face of\nthe Agreement on Safeguards about remedying serious injury from increased imports, this limitation\nis implicit in Article 5.1. However, in their opinion, Article 5.1 does not limit the application of\nsafeguard measures only to the increased imports, but rather permits competent authorities to apply\nsafeguard measures to all imports so long as the remedial effect is limited to remedying the serious\ninjury from increased imports.\n3341\n7.1451 The United States responds that, based on the reasoning leading up to paragraph 260 of the\nUS – Line Pipe Appellate Body Report, which relied heavily on Article 4.23342, \"increased imports\" in\nthat paragraph must be read as referring to \"i ncreased imports\" within the meaning the meaning of\nArticle 4.2. \"Increased\" is a past participle modifying imports, so the ordinary meaning of the\nexpression is imports that have \"become greater in size, amount, duration, or degree; enlarge[d],\nextend[ed], intensif[ied]\".3343 Since the imports that have increased are all imports, the expression is\nto be understood as referring to the totality of imports. The United States submits that this expression\nmust have a different meaning from the expression the \"increase in imports\". In that case, \"increase\"\nis a noun, and means \"[t]he result of increasing; the amount by which something is increased, an\naddition\".3344 Thus, \"increase in imports\" is equivalent to the expression \"only the increase\". The\ncontext of the expression \"increased imports\" and \"increase in imports\" in Article 4 confirms this\ninterpretation. Under Article 4.2(a), the \"rate and amount of the increase in imports\" and \"the share of\nthe domestic market taken by increased imports\" are both factors that the competent authorities must\nconsider in their analysis of whether increased imports have caused serious injury. Since a rate is\nrelevant only in evaluating a change, \"increase in imports\" would indicate the change in imports from\ntheir previous levels – that is, it would refer to \"o nly the imports\". In contrast, \"increased imports\" is\n\n3339 Korea's written reply to Panel question No. 154 at the first substantive meeting.\n3340 Brazil's written reply to Panel question No. 46 at the second substantive meeting.\n3341 The European Communities, Brazil's and Korea's written reply to Panel question No. 47 at the\nsecond substantive meeting.\n3342 Appellate Body Report, US – Line Pipe, paras. 249-252.\n3343 The New Shorter Oxford English Dictionary, p. 1342.\n3344 The New Shorter Oxford English Dictionary, p. 1342.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe one factor listed in Article 4.2(a) that is not characterized as a \"rate of increase\" or a \"change in\nthe level\". Thus, it must refer to \"the totality of imports, including the increase\".3345\n7.1452 The United States submits that Article 4.2(b) further confirms this understanding. It calls for\na finding of a causal link between \"increased imports\" and serious injury, and provides for non-\nattribution when \"factors other than increased imports are causing injury to the domestic industry at\nthe same time\". If \"increased imports\" meant only the increase in imports, then the causation analysis\nwould apply only to the increase, and would have to ignore pre-existing import levels. If the\nAgreement on Safeguards required such an artificial analysis, the United States argues that it would\nexpect it to say so in clearer terms. Practical considerations further support this conclusion. Unlike\nimports of a certain type of product, imports from a particular source, or products of a particular\ncompany, it is impossible to identify the \"increase in imports\" as a discrete presence in the market and\ndetermine its effect on the domestic industry. For example, if imports from all sources increase from\n100 units to 150 units between 1999 and 2000 there is clearly a 50 unit increase. However the\ncompetent authorities cannot identify any particular 50 of the 150 units imported in 2000 as \"the\nincrease\". It would, therefore, be impossible for them to perform an analysis of \"the increase\" by\nitself that would satisfy the requirements of the Agreement on Safeguards.\n3346\n7.1453 The United States also reiterates that nothing in Article 5.1 indicates that safeguard measures\nare limited to the increase in imports, as opposed to all of the imports that have increased, arguing that\nArticle 1 confirms this conclusion. Article 1 defines a safeguard measure as a \"measure[] provided for\nin Article XIX of GATT 1994\". That provision, in turn, provides that if:\n\"[A] product is being imported into the territory of [a Member] in such increased\nquantities and under such conditions as to cause or threaten serious injury to domestic\nproducers ... of like or directly competitive products, the [Member] shall be free, in\nrespect of such product ... to suspend the obligation in whole or in part or to withdraw\nor modify the concession.\"\n7.1454 The United States argues that, therefore, by definition, a safeguard measure may be applied to\na product as such, and not merely to the increase in imports of that product. Article 2.1 mirrors\nArticle XIX in specifying that a Member \"may apply a safeguard measure to a product\" only if it\ndetermines that \"such product is being imported in such increased quantities and under such\nconditions as to cause or threaten to cause serious injury\". Thus, the determination of serious injury\nalso applies to the entirety of the imported product. Article 4 lays out the requirements for making\nsuch a determination, which Article 4.2(a) describes as the determination \"whether increased imports\nhave caused or are threatening to cause serious injury ...\" Thus, the determination described in\nArticle 4.2 is the same as the determination described in Article 2.1.\n3347 Accordingly, \"increased\nimports\" in Article 4.2(a) – and elsewhere in that Article – refers to the \"product being imported in\nsuch increased quantities and under such conditions\" under Article 2.1. 3348 Thus, the determination\nunder Article 4.2 has the same scope as the determination described in Article 2.1 – increased imports\n\n3345 United States' written reply to Panel question No. 153 at the first substantive meeting.\n3346 United States' written reply to Panel question No. 153 at the first substantive meeting.\n3347 The Appellate Body has found that Article 2.1 \"as elaborated in Article 4 of the Agreement on\nSafeguards, sets forth the conditions for imposing a safeguard measure\". Appellate Body Report, US – Wheat\nGluten, para. 95.\n3348 As the Appellate Body noted in US – Wheat Gluten , \"[i]n the usual course, therefore, the imports\nincluded in the determinations made under Articles 2.1 and 4.2 should correspond to the imports included in the\napplication of the measure, under Article 2.2\". Appellate Body Report, US – Wheat Gluten, para. 96.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nas a whole. Article 4.2(a) uses the term \"increase in imports\" to refer to the change in imports, and\nthe term \"increased imports\" to refer to all imports.3349\n7.1455 For the United States, the above-mentioned provisions of the Agreement on Safeguards and\nArticle XIX indicate that the investigation of serious injury, determination of the competent\nauthorities, and resulting application of a safeguard measure are all with regard to increased imports\nas a whole, and not merely the increase in imports. The United States submits that it is clear that the\ninquiry under Article 5.1 is based on imports as a whole.3350\n(c) \"Facilitate adjustment\"\n7.1456 The United States submits that the ordinary meaning of the words in Article 5.1 indicates\nwhat effect a safeguard measure may have. \"Prevent\" means \"to forestall or thwart by previous or\nprecautionary measures;\" \"provide beforehand against the occurrence of (something); make\nimpracticable or impossible by anticipatory action; stop from happening\". 3351 \"Remedy\" means \"put\nright, reform, (a state of things); rectify, make good\". 3352 Thus, a safeguard measure is permissible if\nit rectifies existing injury attributed to increased imports or forestalls such injury in the future.\n\"Facilitate adjustment\" means to promote the adaptation to changed circumstances.3353 Practice under\nGATT 1947 indicates that the comparison between the remedial effect of a measure and the injury\ncaused by increased imports is not a matter of scientific precision and this was already recognized in\nthe US – Fur Felt Hats Working Party which stated that it is impossible to determine in advance with\nany degree of precision the level of import duty necessary to enable the United States industry to\ncompete with overseas suppliers in the current competitive conditions of the United States market,\nand that it would be desirable that the position be reviewed by the United States from time to time in\nthe light of experience of the actual effect of the higher import duties.\n3354 3355\n7.1457 The United States argues that \"facilitate adjustment\" means to promote the adaptation to\nchanged circumstances. 3356 In light of the other provisions of the Agreement on Safeguards, the\nUnited States considers that the changed circumstances in question are the continuation of imports in\nsuch increased quantities and under such conditions as to cause or threaten serious injury, which the\ndomestic industry will have to face after the termination of a safeguard measure. Serious injury is\ndefined in terms of the factors listed in Article 4.2(a). A remedy to \"facilitate adjustment\" could\naddress all of these factors. The United States submits that the reference to \"facilitate adjustment\" in\nArticle 5.1 means adjustment to a \"product ... being imported ... in such increased quantities, absolute\nor relative to domestic production, and under such conditions as to cause serious injury ...\" under\nArticle 2.1. A safeguard measure may facilitate adjustment to both the injurious effects of the\nincreased imports and also the \"conditions\" associated with those imports that cause serious injury,\nsuch as the prices of those imports. The United States further submits that Article 5.1 contains an\nadditive authorization – the measure may both prevent or remedy serious injury and facilitate\n\n3349 United States' written reply to Panel question No. 47 at the second substantive meeting.\n3350 Appellate Body Report, US – Line Pipe, para. 262.\n3351 New Shorter Oxford English Dictionary, p. 2348.\n3352 New Shorter Oxford English Dictionary, p. 2540.\n3353 New Shorter Oxford English Dictionary, pp. 27 and 903.\n3354 US – Fur Felt Hats , para. 35. The Appellate Body cited this report as part of the GATT 1947\nacquis. Appellate Body Report, US – Line Pipe, para. 174.\n3355 United States' first written submission, para. 1025.\n3356 United States' first written submission, para. 1025, citing The New Shorter Oxford English\nDictionary, pp. 27 and 903(defining facilitate as \"[m]ake easy or easier; promote, help forward (an action,\nresult, etc.)\" and adjustment as \"the process of adjusting\", which is defined in turn as \"[a]dapt oneself ( to); get\nused to changed circumstances, etc.\").\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nadjustment. Thus, if a measure that fully remedies serious injury does not fully facilitate adjustment\nto increased import competition, a Member may apply a measure to a greater extent. The United\nStates clarifies that \"facilitate adjustment\" means to promote the domestic industry's adaptation to\nincreased imports, not to other potential causes of injury. For example, if the competent authorities\ndetermine that factors other than increased imports – such as bad managerial decisions or decreased\ndemand – also caused injurious effects to the domestic industry, Article 5.1 would not authorize\napplication of a measure to facilitate adjustment with respect to those injurious effects. In the United\nStates' view, this is not an issue that the Panel n eed address in this dispute, since the United States\napplied the safeguard measure to the relevant product no more than the extent necessary to remedy the\ninjurious effects of imports. The level of the application of the measures was not increased to\nfacilitate adjustment.\n3357\n7.1458 The United States submits that any numerical approach focusing merely on remedying the\nlost profits suffered by a domestic industry during a period of investigation and returning it to a\nnormal level of profitability cannot adequately capture the full breadth of the need to \"facilitate\nadjustment\" to import competition pursuant to Article 5.1. To facilitate adjustment, the relief in\nquestion must, among other things, allow firms to make necessary new capital investments, consider\nrestructuring and consolidation measures, improve their ability to raise capital, and often take\nextraordinary steps to make up for lost ground during the period of injury caused by imports. To this\nextent, such numerical estimates are, of necessity, inadequate to fully account for both the injury\nsuffered by a domestic industry and the remedial measures necessary to facilitate adjustment.\n3358\n7.1459 For the complainants, the permitted maximum level of the remedy under Article 5.1, as\nregards the profitability of the domestic industry, should be an improvement of that profitability\nlimited to the extent that it has been depressed by increased imports. For instance, if increased\nimports have been found the cause of an X% decline in the profitability of the domestic industry, then\nthe remedy cannot aim at raising profitability by more than X%. This pre-supposes a determination of\nthe extent of the injury suffered by the domestic industry in terms of profitability decline as a result of\nincreased imports.\n3359\n7.1460 In the opinion of the United States, the complainants ignore the ordinary meaning of the\nwords. They argue that \"the permitted maximum level of the remedy ... should be an improvement of\nthat profitability limited to the extent that it has been depressed by increased imports\". 3360 However,\ntheir view ignores the accumulation of injurious effects caused by increased imports, which may be as\ngrave a problem as the ongoing injury. Their interpretation of \"remedy\" also ignores the immediate\ncontext of the Article 5.1 reference to \"facilitat[ing] adjustment\". A measure that only returned the\nstatus quo in prices or profitability might give the industry a three-year respite, but leave it in no\nbetter position to respond to increased imports than it was prior to the measure. The United States\nfurther submits that the complainants' view that the measure can only remedy injury attributed to\nincreased imports\n3361, disregards the Appellate Body's silence on the significance of \"and to facilitate\nadjustment\".3362 In any event, Article 3.2 of the DSU clearly prohibits the European Communities'\n\n3357 United States' written reply to question No. 56 at the second substantive meeting.\n3358 United States' first written submission, para. 1063.\n3359 See, for example, European Communities' written reply to Panel question no. 113 at the first\nsubstantive meeting.\n3360 European Communities' written reply to Panel question No. 112 at the first substantive meeting;\nKorea and Brazil make similar points in their written rep lies to Panel question No. 112 at the first substantive\nmeeting.\n3361 European Communities' written reply to Panel question No. 153 at the first substantive meeting;\nKorea adopts a similar position in its written reply to Panel question No. 115 at the first substantive meeting.\n3362 Appellate Body Report, US – Line Pipe, para. 243.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninterpretation, as it would effectively excise the words \"and to facilitate adjustment\" from Article 5.1.\nTherefore, for the United States, the Agreement on Safeguards establishes \"to prevent or remedy\nserious injury\" and \"to facilitate adjustment\" as additive objectives. The Appellate Body has\nrecognized that one of the objectives of Article 5.1 is to facilitate adjustment.\n3363 In fact, \"facilitating\nadjustment\" and preventing or remedying serious injury are equally important objectives. Absent\nadjustment, a safeguard measure would serve no purpose other than to provide a temporary respite,\nafter which the industry would be no better off than it was when the measure began. On the other\nhand, if the measure succeeded in promoting adjustment, the industry might emerge from the\nsafeguard measure better able to face import competition without the need of trade remedies.\nFurthermore, the preamble of the Agreement on Safeguards \"[r]ecogniz[es] the importance of\nstructural adjustment and the need to enhance rather than limit competition in international markets\".\nBy allowing a domestic industry to adjust to import competition, a safeguard measure may enhance\nthe competitiveness or efficiency of that industry, thereby bolstering the long-term degree of\ncompetition in international markets.\n7.1461 The complainants contest the notion advanced by the United States that it is entitled to\nremedy or, rather, \"compensate\" its industry for the accumulated effects of past increased imports.\n3364\nThey also argue that there is no authority in Articl e 5.1 to remedy injury other than serious injury,\nsuggesting that even if compensation for past serious injury were permitted, the competent authorities\nwould have to determine precisely when serious injury caused by increased imports occurred in order\nto determine the level of compensation permitted. The European Communities adds that it is strange\nthat the United States applies an accumulation theory to increased imports but refuses to \"accumulate\"\nthe effects of the various causes of injury other than increased imports in its non-attribution and\ncausation analysis. This should be especially tr ue for alternative causes of injury that are more\nsensitive to accumulated effects, such as legacy costs or over capacity, for which an analysis of the\ntrends is obviously not enough. Indeed, legacy costs and over capacity do not only have injurious\neffect if they increase over the period of investigation, but also and mostly because they\naccumulate.\n3365\n7.1462 The European Communities recalls the text of the Presidential Proclamation where it is said\nthat the measures were designed to facilitate efforts by the domestic industry to make a positive\nadjustment to import competition and provide greater economic and social benefits than costs.3366 The\nEuropean Communities' submits that, according to the United States, a domestic industry is entitled to\na further bonanza (going beyond the \"bonanza\" of protecting against all imports rather than just the\nincrease in imports) when it secures a safeguard measure since the United States considers that\n\"facilitate adjustment to import competition\" includes enabling firms to make necessary new capital\ninvestments and improve their ability to raise capital. For the United States, returning to a \"normal\nlevel of profitability\" would not be enough and it would be necessary to allow investment,\nrestructuring and capital raising. The European Communities disagrees and submits that the fact that\nthe United States designed its safeguard measures \"to facilitate efforts by the domestic industry to\nmake a positive adjustment to import competition and provide greater economic and social benefits\nthan costs\" demonstrates by itself that the safeguard measures go beyond the extent allowed by\nArticle 5.1 of the Agreement on Safeguards.\n3367\n\n3363 Appellate Body Report, Korea – Dairy, para. 96 (obligation \" to ensure that the measure applied is\ncommensurate with the goals of preventing or remedying serious injury and of facilitating adjustment\".).\n3364 Norway's second oral statement on behalf of the complainants, paras. 16-19.\n3365 Complainants' written replies to Panel question No. 46 at the second substantive meeting.\n3366 Presidential Proclamation No. 7529 of 5 March 2002, para. 14 (Exhibit CC-13).\n3367 European Communities' second written submission, paras. 508-512.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1463 The United States reiterates that Article 5.1 treats the two objectives of preventing or\nremedying serious injury and facilitating adjustment as additive. That is, if application of a measure\nnecessary to prevent or remedy injury attributed to increased imports would not fully facilitate\nadjustment to increased imports, a Member could apply the measure to a greater extent.\n3368 T h e\nUnited States submits that, however, even if the steel safeguard measures were judged solely on the\nbasis of their necessity to prevent or remedy serious injury, they would meet the requirements of\nArticle 5.1. The United States argues that the numerical analyses (explained below) demonstrate that\nthe safeguard measures did precisely that.3369\n7.1464 Japan and Korea challenge 3370 the United States' interpretation of Article 5.1 as being\n\"additive\". According to the United States, if a measure is sufficient to remedy serious injury but will\nnot facilitate adjustment, a more restrictive measure is allowed under Article 5.1. According to Japan\nand Korea, the United States asserts that adjustment is not limited to that adjustment which is required\nin response to increased imports. In sum, the United States appears to claim that it can impose\nmeasures sufficient to remedy serious injury from all sources and, if necessary, increase that remedy\nto facilitate adjustment from all sources of that injury. For Japan\n3371, this is inconsistent with the\nrationale in US – Line Pipe, which links the Article 4.2(b) non-attribution analysis to the extent of the\nmeasures under Article 5.1. It is also contrary to the limitations on quantitative measures under\nArticle 5.1, which imply restoration of the status quo ante as a limitation on measures in general. 3372\nKorea3373 notes that the United States is basically justifying its additional level of relief by arguing\nthat there are direct injurious effects from imports (which their base period corrects), but then\nsomehow there are additional injurious effects that have \"accumulated\" which justify doubling the\nprofit margin shortfall.3374\n7.1465 The complainants argue that the United States tries to justify its view by stating that an\nindustry that has suffered from import competition should not only be placed in the same position as\nbefore the increase in imports occur, but in an even better position through extra resources to perform\na structural adjustment.\n3375 In their opinion, the United States claims that the objective to \"facilitate\nadjustment\" is \"additive\" to remedying the serious injury. 3376 Article 5.1 of the Agreement on\nSafeguards imposes two cumulative limits on the extent of a safeguard measure. The first limit is \"the\nextent necessary to prevent or remedy serious injury\" and the second limit is \"the extent necessary ...\nto facilitate adjustment\". If the domestic industry already has some ability to adjust to the increase in\nimports then the relief provided cannot remove all the injury caused by the increased imports, but only\n\n3368 The United States writes that this formulation does not suggest that a Member may apply a measure\nto facilitate adjustment to injury attributable to factor s other than increased imports. Rather, this formulation\nrecognizes that remedying injury attributable to increased imports and facilitating adjustment to increased\nimports are both equally valid objectives of a safeguard measure under Article 5.1. For example, if a Member\nconsidered that a measure that remedied injury attributable to increased imports would not facilitate adjustment\nto those imports, it might apply the measure to a greater extent. However, if it considered that the same measure\ndid not facilitate adjustment to other factors – such as decreased demand – applying the measure to a greater\nextent would not be permitted.\n3369 United States' first written submission, para. 1079.\n3370 Japan's and Brazil's written replies to Panel question No. 112 at the first substantive meeting.\n3371 Japan's written reply to Panel question No. 112 at the first substantive meeting.\n3372 Japan's second written submission, para. 166, Brazil's second written submission, para 111.\n3373 Korea's written reply to Panel question No. 46 at the second substantive meeting.\n3374 United States' Step 2 in its \"Safeguard Measure Worksheets\" at US Exhibit 56.\n3375 United States' second written submission, paras. 184 and 187. United States' written reply to Panel\nquestion No. 112 at the first substantive meeting. Norway's second oral statement on behalf of all complainants,\nparas. 15-17.\n3376 United States' second written submission, para. 189.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat which the domestic industry cannot achieve itself. 3377 In this regard, Brazil 3378 argues that\n\"facilitate\" is defined by The New Shorter Oxford English Dictionary as: make easy or easier;\npromote, help forward (an action, result, etc.). Notably, Article 5.1 is not written in terms of \"ensure\nadjustment\", \"make certain of adjustment\", or \"accomplish adjustment\", all phrases which imply\nsomething more than simply facilitating or assistin g adjustment. Brazil believes that the \"facilitate\nadjustment\" language of Article 5.1 is intended to impose a limitation on safeguard measures beyond\n\"only to the extent necessary to prevent or remedy serious injury\". The additional limitation is that\nthe measures necessary to prevent or remedy serious injury must also facilitate adjustment. That is,\nmeasures which prevent or remedy serious injury may be excessive to the extent that those measures\ndo not facilitate adjustment. Put differently, measures may not be imposed unless: (i) they are limited\nto the extent necessary to prevent or remedy serious injury; and (ii) within this limitation, they\nfacilitate adjustment. This reading of Article 5.1 is consistent with the preamble of the Agreement on\nSafeguards which indicates the desire to balance \"the importance of structural adjustment\" with \"the\nneed to enhance rather than limit competition in international markets\". Consistent with these\nobjectives, a measure which prevents or remedies serious injury but does not facilitate adjustment is\nexcessive. In terms of the injury that is remedied and the adjustment that is facilitated, these are\nlimited to the effects of increased imports. The Appellate Body in US – Line Pipe makes this\nclear.\n3379 The objective of the Agreement on Safeguards is to provide a temporary period during\nwhich a domestic industry can adjust to import competition which has manifest itself in the form of\nincreased imports. The objective of the Agreement on Safeguards is not to prevent or remedy injury\nfrom non-import sources or to facilitate the ability of a domestic industry to cope with competitive\nfactors other than increased imports. Thus, the fact that the affected industry may be financially\nstronger after a period of protection is irrelevant unless it has made adjustments which will make it\nmore able to compete against imports, in view of the circumstances which led to the increased\nimports, after the relief expires.\n3380\n7.1466 Korea notes that the model used by the United States in its 5.1 analysis doubled operating\nmargins over that of the base period ostensibly to take account of the need to facilitate adjustment. 3381\nIf the United States did not intend to rely on this \"injury plus adjustment\" approach 3382 – and the\nUnited States cannot, as the Appellate Body has already stated in US – Line Pipe – then the entire\nUnited States justification is fatally flawed.3383\n7.1467 In response, the United States argues that increased imports may have immediate injurious\neffects on the domestic industry. For example, the mere fact of an increase may cause the domestic\nindustry to lose sales volume and market share, wh ich would translate into a loss in revenue. This\ndevelopment might impel the domestic industry to reduce its prices to regain volume or market share.\nThe circumstances of the increased imports – that is, the conditions under which they are being\nimported – may also have immediate injurious effects. In either case, the industry will immediately\n\n3377 Norway's second oral statement on behalf of the complainants, paras. 15-17.\n3378 Brazil's written reply to Panel question No. 56 at the second substantive meeting.\n3379 Appellate Body Report, US – Line Pipe, para. 260.\n3380 Brazil's written reply to Panel question No. 56 at the second substantive meeting.\n3381 United States' first written submission, para. 1074 states \"Any price increase would have to return\ndomestic prices at least to a level that would provide operating income equal to a level that does not reflect the\nprice effect of increased imports and then increase prices by a further amount to counteract the negative effects\nof imports from 1998 to 2000 and to facilitate adjustment \". (emphasis added). United States' first written\nsubmission, para. 1097 and Exhibit US-56, \"Safeguard Measures Worksheets\", calculations in Step 2 for each\nproduct. Korea's Exhibit 14 criticizing the necessity of this additional adjustment in the targeted operating\nincome.\n3382 United States' second written submission, para. 189.\n3383 Korea's written reply to Panel question No. 46 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsuffer a reduction in revenue and profits, and probably a reduction in its profit margin. The decrease\nin revenue is also likely to reduce the industry's cash flow. These immediate effects may also lead to\nlong-term effects. An industry suffering an import-related decrease in revenue, sales volume, prices,\nand/or profits will have fewer funds to spend on buying necessary new equipment or facilities,\nmaintaining existing equipment and facilities, improving employee training, or implementing cost\nreduction programs. The industry may have to release trained workers or cut spending on research\nand development necessary for its products to remain competitive. Losses may force the industry to\nspend cash reserves. Lenders faced with this deteriorated financial condition may charge higher\ninterest rates (to reflect the heightened risk of default) or refuse to lend at all. For publicly traded\nproducers, share prices will be likely to fall, reducing their ability to fund new projects through equity\nfinancing. According to the United States, in addition to the effects of imports on the price, volume,\nand revenue of the domestic industry, there will be effects on the industry's underlying condition – its\nasset base, cash reserves, trained workforce, and ability to raise capital. If the immediate effects of\nimports go unremedied, the underlying condition of the industry will progressively worsen. The\nUnited States refers to this as the accumulation of injurious effects, and argues that the USITC data\ndemonstrate how the injurious effects of imports can accumulate.\n 3384\n7.1468 By way of example, the United States notes that the state of the domestic CCFRS declined\nthroughout the investigation period, in marked contrast to the steady and significant increase in\ndemand that also characterized that period. 3385 In 1996 and 1997, the domestic industry earned\nreasonable operating profits and made substantial capital investments in a growing domestic market.\nIn the latter part of the investigation period, however, the condition of the industry substantially\ndeteriorated, to the point of significant losses at the very end of the period. 3386 These losses had\nsignificant adverse effects on the cash flow to the domestic industry. In 1996, the CCFRS industry\nsaw US$2.1 billion in cash flow, rising in 1997 to US$2.7 billion, and dipping to US$2.1 billion in\n1998. In 1999, cash flow had dropped to US$0.9 billion (just one-third of the 1997 level) and fell\nfurther in 2000 to US$0.7 billion. In the first six months of 2001, the domestic industry had a\nnegative cash flow of US$0.8 billion, compared to the US$1.2 billion positive cash flow in the first\nsix months of 2000.\n3387 The change from operating income to operating losses and the loss of cash\nflow accompanied the decline in AUV for commercial shipments of CCFRS. In 1996, the AUV for\nCCFRS was US$470. By 2000, this amount had declined by 11% to US$418. In the first six months\nof 2001, the AUV of CCFRS had fallen to US$373, representing a 20% decline in price since\n1996.\n3388 The number of production workers remained steady from 1996 to 1998, but then, between\n1998 and 1999, the number of production and related workers dropped by over 4,000 workers or over\n4.2%.3389 The number of hours worked followed the same pattern. Both the number of hours worked\nand the number of production and related workers was lower in the first half of 2001 than in the first\nhalf of 2000. As the financial performance of the industry declined, capital expenditures fell off as\n\n3384 United States' written reply to Panel question No. 46 at the second substantive meeting.\n3385 USITC Report, pp. 56 and 60.\n3386 The United States submits that in 1996 and 1997, the domestic industry had positive operating\nincome margins of 4.3 and 6.1% of sales respectively. The percentage dropped to 4.0 in 1998, and into a 0.7%\nloss in 1999 and a 1.4% loss in 2000. In the first half of 2001, operating losses plummeted to 11.5 percent.\nUSITC Report, p. 53. In dollar terms, the domestic industry posted an operating income of US$1.2 billion in\n1996, which rose to US$1.8 billion in 1997, and then fell to US$1.1 billion in 1998. After this point, operating\nincome turned to continually deepening losses – US$181 million loss in 1999 and a US$370 million loss in\n2000. In the first six months of 2001, operating lo sses reached US$1.3 billion, compared to an operating\nincome of US$538 million in the first six months of 2000. USITC Report, pp. FLAT-24 – FLAT-28, Tables\nFLAT-20 – FLAT-25.\n3387 Ibid.\n3388 USITC Report, p. 53.\n3389 USITC Report, p. 54.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwell. From 1996 to 1998, the domestic industry devoted US$2.3 billion, US$2.5 billion, and US$2.3\nbillion to capital expenditures respectively. By 1999, this amount had fallen to US$1.8 billion,\ndropping further to US$1.5 billion in 2000. A comparison of interim period data for 2000 and 2001\ndemonstrates a further decline, as US$478 million was spent in the first six months of 2000, compared\nto US$361 million in the same period for 2001.\n3390 3391\n7.1469 Similarly, for rebar, the United States explains how imports peaked in 1999, and remained at\nhigh levels afterward. However even when imports moderated somewhat in interim 2001, they\ncontinued to have injurious effects that combined with the accumulated and continuing injurious\neffects of imports in prior years. Specifically, imports of rebar (both including and excluding NAFTA\nimports) peaked in 1999, the second to last year of the investigation period. Total rebar imports\nreached 1.83 million tons in that year, an increase of more than 300% from 1996 import levels. Total\nimports then declined slightly to 1.67 million tons in 2000, before increasing to 852,000 tons in\ninterim 2001.\n3392 Although the peak of rebar imports occurred in 1999, import levels remained\nsubstantially higher in 2000 and interim 2001 than they were in 1996 through 1998. According to the\nUnited States, the result was to drive prices even lower in 2000 and interim 2001 than they were in\n1999. Unit values of domestic shipments fell from US$274/ton in 1999 to US$269/ton in 2000 and\nUS$265/ton in interim 2001, as domestic producers cut prices in response to sustained higher levels of\nimports. (Net commercial sales values also bottomed out in 2000 and interim 2001, at US$266/ton.\nSteel, vol. 2, at LONG-35.) Rebar unit values fell another US$9 per ton from 1999 to June 2001, as\nimport levels moderated slightly from their peak in 1999.\n3393 United States rebar producers reported\nmodest operating income of US$43.9 million in 1999, the year that imports peaked. However, the\ncontinued high levels of imports combined with lo wer selling prices resulted in an operating loss of\nUS$59.9 million by 2000.3394 As a percentage of net commercial sales, the industry's operating profit\nof 5.0% in 1999 became an operating loss of negative 1.6%. The decline in profitability resulted in\ncash flow, capital expenditures, and R&D expenses reaching their lowest levels in 2000. Capital\nexpenditures fell from US$108 million in 1996 to US$62.1 million in 1999, and fell again to US$49.4\nmillion in 2000.\n3395 Because major capital expenditures in the steel industry require advance\nplanning, the United States claims that it is to be expected that import surges from earlier in the\ninvestigation period would lead domestic producers to reduce their capital expenditures later in the\nperiod. (In fact, given the lead times for capital spending, an exact match in timing between an import\nsurge and declining expenditures could be purely coincidental.) 3396\n7.1470 For Japan and Korea 3397, the remedy must be limited to the increased imports because that is\nwhat \"proportionality\" means. The adjustment must be to increases in imports and not to other market\nconditions, etc. After all, the industry must be in a position to compete with imports after the relief\nends. This \"temporary breathing room\" provided by safeguards must be used to adjust to increased\nimport competition. Korea adds3398 that to suggest that the Agreement on Safeguards does not require\nthat the relief be tailored to the industry's ability to adjust to increased imports flies in the face of the\nentire object and purpose of the Agreement on Safeguards. First, Article 5.1 is quite clear – there are\ntwo mutual conditions to the imposition of relief – it must be limited to the extent necessary to\n\n3390 USITC Report, pp. FLAT-24 – FLAT-28, Tables FLAT-20 – FLAT-25. The United States derives\nthese figures by adding the reported capital expenditures.\n3391 United States' written reply to Panel question No. 46 at the second substantive meeting.\n3392 USITC Report, p. LONG-11.\n3393 USITC Report, p. LONG-23.\n3394 USITC Report, p. LONG-35.\n3395 USITC Report, p. LONG-35.\n3396 United States' written reply to Panel question No. 46 at the second substantive meeting.\n3397 Japan's and Korea's written replies to Panel question No. 56 at the second substantive meeting.\n3398 Korea's additional comments on Panel question No. 56 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nprevent or remedy serious injury and to facilitate adjustment to increased imports. Moreover, the\nentire object and purpose of the Agreement on Safeguards would be defeated if the relief were not\nlimited to the relief necessary to allow for adjustment to increased imports. Taking the most extreme\ncase, if an industry were incapable of adjusting to increased imports, there would be no purpose to any\nrelief; the need for \"emergency action\" would not be present. The Preamble to the Agreement on\nSafeguards reconfirms the \"importance of structural adjustment and the need to enhance rather than\nlimit competition\". (If an industry cannot adjust to import competition, structural adjustment should\noccur.) Article 7.2 of the Agreement on Safeguards repeats the dual conditions for extending relief\n(i.e., \"evidence\" that the industry is adjusting) and Article 7.4 makes clear that every effort should be\nmade to facilitate adjustment by progressively liberalizing the measure. In other words, taken as a\nwhole, the terms of the Agreement on Safeguards ma ke clear that facilitating adjustment to increased\nimports must be a key factor in establishing the level of relief, liberalizing the level of relief, or\nextending the relief. Logically, the adjustment of the industry to import competition must be the goal\nof the measure, and any remedy which exceeds the relief necessary to accomplish that goal would not\nbe limited to the permissible extent. Further evidence that such adjustment must be to import\ncompetition is found in Article 7.4, which states that the measure should be liberalized (i.e., lessen the\nrestrictions on imports) in order to \"facilitate adjustme nt\". Obviously, the relief is phased out so that\nthe adjustment is made to import competition. To comply, there should be a finding that the industry\nis able to adjust to import competition and that it has a plan for doing this, so that such a finding is\nadequately substantiated by facts. In some circumstances, an industry may be injured by imports but\nbe incapable of adjusting, so relief would not be justified. In other words, both requirements of\nArticle 5.1 limit the permissible extent of relief so either requirement could result in limiting or\nreducing the permissible extent of the measure. Ko rea submits that, in any event, there is no record\nevidence or even evidence presented to the Panel by the United States which explains how the relief\nwas necessary to allow for adjustment at all, let alone to adjust to increased imports alone. The\nUnited States has even denied that adjustment was a consideration in establishing the level of\nrelief.\n3399 3400\n7.1471 China submits that the reference to \"facilitate adjustments\" in Article 5.1 may mean to relieve\npressure of the increased imports on the domestic industry. As the measures may be applied only to\nthe extent necessary to remedy injury caused by the surge in imports, the adjustment should not cover\nthe imports below the trigger level for application of the safeguards measures.3401\n7.1472 The United States challenges Korea's assertions that \"[t]o comply, there should be a finding\nthat the industry is able to adjust to import competit ion and that it has a plan for doing this\". For the\nUnited States, nothing in the Agreement on Safeguards requires that an industry present an adjustment\nplan, or that the competent authorities (or the Memb er itself) determine that the industry is \"able to\nadjust\". Article 4.2(a) is specific about what the competent authorities must consider – \"all relevant\nfactors of an objective and quantifiable nature having a bearing on the situation of the industry\". The\nArticle establishes this obligation as part of the \"investigation to determine whether increased imports\nhave caused or are threatening to cause serious injury\". It does not mention the facilitation of\nadjustment. Thus, the \"relevant\" factors are those relating to injury or causation. The industry's\nability to adjust to import competition (or any industry adjustment plans) do not advance this inquiry\nand, therefore, are not \"relevant\" in the sense of Article 4.2(a). The United States submits that\nArticle 5.1 addresses imposition of safeguard measures, and does not require the consideration of\nspecific factors. Therefore, it does not obligate a Member to address the industry's ability to adjust, or\nto require an adjustment plan from the domestic industry. Indeed, reading the Agreement on\n\n3399 United States' second oral statement, para. 119.\n3400 Japan's and Korea's written reply to Panel question No. 56 at the second substantive meeting.\n3401 China's written reply to Panel question No. 56 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nSafeguards to require the industry as a whole to agree on what adjustment efforts to undertake would\nsuggest the existence of a requirement to create cartels or an endorsement of collusion among the\ndomestic producers. Nothing in the Agreement on Safeguards supports such a conclusion.\n3402\n7.1473 Also with regard to Korea's assertion, it is unclear exactly what provision Korea sees as\nrequiring such compliance. Korea also notes that Article 7.2 requires evidence that the industry \"is\nadjusting\", and Article 7.4 requires progressive liberalization of the measure \"in order to facilitate\nadjustment\"3403, the United States submits that Korea does not explain how either of these obligations\nis relevant to the initial decision whether and to what extent to apply a safeguard measure. Indeed,\nArticle 7.2 envisages an analysis of the effectiveness of the measure after it has been in place, which a\nMember surely cannot perform before applying the measure. Article 7.4, which is not subject to a\nclaim raised by any of the parties, addresses the reduction in the level of application of a measure after\nits initial application. It is difficult to imagine how this provision would be applicable to the decision\non the initial level of application of a measure, as opposed to any subsequent reductions in\napplication. In any event, an adjustment plan or pre-application findings regarding adjustment are not\nnecessary for a Member to determine at a later date whether adjustment has occurred. Thus, a\nMember is not obliged to seek an industry adjustme nt plan or to make a finding that the industry is\n\"able to adjust\" in order \"to comply\" with Articles 7.2 and 7.4.\n3404\n7.1474 The United States adds that Korea asserts that \"to facilitate adjustment\" in Article 5.1 means\nthat \"the industry must be in a position to compete with imports after the relief ends\" and that \"'the\ntemporary breathing room' provided by safeguards must be used to adjust to increased import\ncompetition\".\n3405 These statements mistake the objective of a safeguard measure – to facilitate the\ndomestic industry's adjustment to import competition – for an obligation. A Member cannot\nguarantee in advance that a safeguard measure will achieve a full adjustment to import competition.\nOther forces could frustrate the success of a measure. The United States submits that Korea's\ninterpretation would also disregard the word \"facilitate\". As the European Communities and Brazil\npoint out, \"facilitate\" means \"make easy or easier; promote, help forward (an action, result, etc.)\".\n3406\nFurther, according to the European Communities, \"it therefore implies a contribution to a result – not\nthe assurance of a result\".\n3407 Thus, Article 5.1 cannot be interpreted to require a Member to ensure\nbefore taking a safeguard measure that the industry will be able to compete with imports after\ntermination of a safeguard measure.3408\n\n3402 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3403 Korea's written reply to Panel question No. 56 at the second substantive meeting.\n3404 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3405 Korea's written reply to Panel question No. 56 at the second substantive meeting.\n3406 European Communities' written reply to Panel question No. 56 at the second substantive meeting,\nquoting the New Shorter Oxford English Dictionary (electronic version) (January 1997). Brazil raises a similar\npoint in its written reply to Panel question No. 56 at the second substantive meeting.\n3407 European Communities' written reply to Panel question No. 56 at the second substantive meeting;\nBrazil makes a similar point in its written reply to Panel question No. 56 at the second substantive meeting.\n\"The United States agrees with this interpretation of 'f acilitate'. (Indeed, para. 1025 of the United States' first\nwritten submission cited the definition.) However, the United States disagrees with the conclusion by the\nEuropean Communiteis and Brazil that this means that a Member's ability to facilitate the adjustment to import\ncompetition is delimited by the need to prevent or remedy serious injury. If \"making easier\" or \"promoting\"\nadjustment to the injurious effects of imports (as distinguished from the effects of other factors having injurious\neffects) requires application of a measure beyond the extent of remedying the injurious effects of imports,\nArticle 5.1 would permit such a measure\".\n3408 United States' additional comment on Panel question No. 56 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1475 The United States argues that, therefore, Article 5.1 does not support Korea's view that a\nMember should require the domestic industry to submit an adjustment plan, and make a finding that\nthe industry is able to adjust. Articles 5.1, 7.2, and 7.4 are the only provisions of the WTO covered\nagreements that appear in Korea's response. Si nce they do not support Korea's argument, the Panel\nshould reject it. Finally, although Article 5.1 does not require adjustment plans, or analysis of the\nindustry's ability to adjust, the United States safeguard statute envisages the submission of adjustment\nplans by domestic producers.\n3409 Many of the domestic producers of the ten products subject to steel\nsafeguard measures submitted plans. In addition, the USITC asked producers to indicate what actions\nthey would take to adjust to import competition. Producers provided this information primarily in the\nform of company-specific (and generally confidential) objectives.3410 3411\n7.1476 The United States also challenges Korea's assertion that \"there is no record evidence or even\nevidence presented to the Panel by the United States which explains how relief was necessary to allow\nfor adjustment at all, let alone to adjust to increased imports alone\". The United States notes rather\nthat, rather, the record does contain such eviden ce. For CCFRSS, hot-rolled bar, cold-finished bar,\nrebar, welded pipe, FFTJ, stainless steel bar, and stainless steel rod, the USITC majority found that\nimports undersold domestic products, and that this condition had a negative effect on domestic\nproducers' prices. 3412 The USITC found further that declining prices contributed to declining\nprofitability. Finally, the USITC found that the domestic industries' capital and research and\ndevelopment efforts were impaired. For each of the products, data on import volumes and values\nindicate that foreign producers were willing and able to increase greatly their sales of these low-priced\nproducts. For the United States, the mechanism for the suppression and depression of prices is\nobvious. When increased imports sell for prices lower than comparable domestic products,\npurchasers can switch to lower priced imports. The threat of losing sales can force domestic\nproducers to lower their prices. As long as imports remain in the market at prices lower than\ncomparable domestic products, it is difficult or impossible for domestic producers to improve their\nsituation by raising prices. By demonstrating that imports can increase dramatically, a recent surge\nwould give credibility to customers' threats to replace domestic sales with imports, and would\nincrease their ability to obtain pricing concessions. The effect on the industry's ability to adjust is\nequally obvious. An industry with low or negative profitability cannot attract the funds necessary to\npay for adjustment. Banks will not lend and investors will not contribute capital needed to\nrestructure, to buy more efficient equipment, to retrain workers, or to take any other steps that would\nfacilitate adjustment.\n3413\n7.1477 The United States argues that it is beyond dispute that application of the safeguard measures\nwould facilitate the industry's adjustment. An increase in the price for imports would lessen their\nnegative effect on domestic producers' prices, which would likely boost profitability. The data in the\nUSITC record demonstrate that, at least in the first half of 2001, market conditions were not such that\nimport prices would rise sufficiently by themselves. A safeguard measure would bolster import prices\n\n3409 Section 202(a)(4) of the Trade Act of 1974, 19 U.S.C. § 2252(a)(4) (\"A Petitioner under paragraph\n(1) may submit to the Commission and the United States Trade Representative . . . either with the petition, or at\nany time within 120 days after the date of filing of the petition, a plan to facilitate positive adjustment to import\ncompetition\"). Of course, the fact that the US statute – independent of the Agreement on Safeguards or\nArticle XIX of the General Agreement on Tariffs and Trade 1994 envisages adjustment plans does not elevate\nthem to the status of an international obligation.\n3410 A summary of these plans appears on pp. 361-362, 374, 382, 389, 396, 403, and 412 of the USITC\nReport. Tabulations of proposed adjustment efforts appear on pp. FLAT-78, LONG-102 – LONG-103,\nTUBULAR-66, and STAINLESS-91of the USITC Report.\n3411 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3412 USITC Report, pp. 61-62, 97, 106, 113, 163, 176, 211, and 220-221.\n3413 United States' additional comment on Panel question No. 56 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand relieve pressure on domestic producers' prices. No party suggested an alternative means to\nincrease domestic and import prices. Thus, the safeguard measures were necessary both to raising\ndomestic prices and thereby providing the funds that would facilitate adjustment. There should be no\nconcern that the tariff measures applied by the United States would also address the effects of other\ncauses that putatively had a negative effect on the various industries. For example, they would not\neliminate excess capacity, revive flagging demand, or address problems allegedly faced by particular\nproducers, among other things. Thus, it is clear that the steel safeguard measures will facilitate the\nindustry's adjustment to import competition.\n3414\n7.1478 Finally, the United States 3415 challenges Korea's assertion that \"[t]he United States has even\ndenied that adjustment was a consideration in establishing the level of relief\". For the United States,\nthis assertion represents something of a reversal, in that complainants had previously argued that the\nUnited States was focusing on the need to facilitate adjustment, and disregarding the prevention or\nremedy of serious injury.3416 The only support Korea cites for its exactly opposite characterization of\nthe United States position is paragraph 119 of the US second oral statement. 3417 That paragraph\nstates:\n\"As we noted in our first written submission, our numerical exercises are based solely\non remedying the injurious effects of increased imports as identified by the USITC,\nand do not assert that adjustment to import competition required application of a\nsafeguard measure beyond that extent.\" (emphasis added).\nHowever, Korea ignores the preceding paragraph, which states:\n\"It is also clear that the concepts of remedying serious injury and facilitating\nadjustment overlap to a degree. 'Rectifying' or 'making good' the injurious effects of\nincreased imports will provide the industry with resources that will enable it to\ncompete more successfully with imports upon termination of the safeguard measure.\nIndeed, that is the purpose of a safeguard measure – to provide temporary breathing\nspace so the industry can adjust.\"3418\n7.1479 These two paragraphs reflect that the United States did consider the need to facilitate\nadjustment to import competition in deciding to apply the steel safeguard measures. This has been\nclear from the outset. In Proclamation 7529, which established the measures, the President\n\"determined that these safeguard measures will facilitate efforts by the domestic industry to make a\npositive adjustment to import competition\".\n3419 These two paragraphs also reflect the point that the\nUnited States did not consider in this proceeding the need to facilitate adjustment as a factor\nindicating that any of the steel safeguard measures should be applied beyond the extent necessary to\nprevent or remedy the injurious effects attributable to increased imports. The United States insists\nthat it did show that under Article 5.1, preventing or remedying serious injury and facilitating\nadjustment are additive bases for a safeguard measure. Therefore, the discussion of Article 5.1 has\n\n3414 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3415 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3416 European Communities' second written submission, para. 509 (\"The only indication we had in the\nPresidential Proclamation of the purpose sought to be achieved by the US safeguard measures is that they were\ndesigned to facilitate efforts by the domestic industry to make a positive adjustment to import competition and\nprovide greater economic and social benefits than costs\"). The European Communities expands on this\nallegation in paragraphs 510 through 512 of that submission.\n3417 Korea's written reply to Panel question No. 56 at the second substantive meeting, footnote 86.\n3418 United States' second oral statement, para. 118.\n3419 Proclamation 7529 of 5 March 2002, 67 Federal Register 10553, 10555, recital 14 (7 March 2002).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfocused on confirming that the steel safeguard measures were applied no more than the extent\nnecessary to prevent or remedy serious injury. This was also the focus of the Appellate Body's\nanalysis in US – Line Pipe .\n3420 It is the United States' view that remedies applied within this\nlimitation, like each of the steel safeguard measures, will be equally necessary to facilitate adjustment.\nThus, there was no need for a further inquiry in this dispute into whether facilitating adjustment would\njustify applying one of the measures at a higher level. This in no way suggests that the steel safeguard\nmeasures, which were applied at or below the level necessary to prevent or remedy serious injury,\nwould not facilitate adjustment.3421\n7.1480 The United States concludes that in many cases, a safeguard measure that prevented or\nremedied serious injury would also provide all or most of the resources that the industry needed to\nfacilitate adjustment to increased imports under such conditions as to cause serious injury. In some\nsituations, the industry may need to make particular investments or reach a particular level of\ninvestment to adjust to the injurious effects of increased imports. If a measure that fully prevents or\nremedies the injurious effects of increased imports does not cover those needs, the level of the\nsafeguard measure could be increased to do so. According to the United States, it did not increase the\nlevels of the steel safeguard measures in this fashion.\n3422\n7.1481 The complainants 3423 argue that since \"facilitate adjustment\" is an additional requirement\nwhich is cumulative to the limitation of the remedy to the extent necessary to address the injury\ncaused by increased imports, the safeguard measures may not exceed the lesser of what is necessary to\nprevent injury from increased imports and what is necessary to facilitate adjustment. A domestic\nindustry will often be in a position to adjust to increased imports on its own without the need for\nsafeguard measures. In such cases, Article 5.1 makes clear that no safeguard measures are permitted.\nIndeed, the word \"facilitate\" means: make easy or easier; promote, help forward (an action, result,\netc.)\n3424 It therefore implies a contribution to a result – not the assurance of a result. Also, the\nPreamble of the Agreement on Safeguards recalls the need to balance \"the importance of structural\nadjustment\" with \"the need to enhance rather than limit competition in international markets\".\nConsistent with these objectives, a measure which prevents or remedies serious injury but is not\nnecessary to facilitate adjustment is excessive. Therefore, a justification of the level of a safeguard\nmeasure requires both a demonstration that it is necessary to remedy injury and that it is necessary to\n– and will – facilitate adjustment. The latter requirement presupposes an analysis of what adjustment\nis needed and possible.\n7.1482 The European Communities argues that by assuming that any measure needed to remedy\nserious injury will also be equally necessary for facilitating adjustment, the United States reveals that\nit takes no account of the industry's own capacity to adjust but imposes on imports the whole extent of\nwhat it considers necessary to remove the effect of increased imports (that is, in its view, the effect of\nimports that happen to have increased to some extent). Moreover, by presuming that \"an industry\n[benefiting from] a safeguard measure would use any improvement in its financial position to advance\npreparations for the imminent removal of temporary import relief\" and, therefore, that the protection\n\n3420 Appellate Body Report, US – Line Pipe , paras. 237-262. Indeed, Norway recognizes that the\nAppellate Body did not need to address the role of facilitating adjustment in the Article 5.1 analysis; Norway's\nwritten reply to Panel question No. 56 at the second substantive meeting; Norway's second oral statement on\nbehalf of the complainants, paras. 15-17.\n3421 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3422 United States' additional comment on Panel question No. 56 at the second substantive meeting.\n3423 Complainants' written replies to Panel question No. 56 at the second substantive meeting; Norway's\nsecond oral statement on behalf of the complainants, paras. 16-17.\n3424 New Shorter Oxford English Dictionary, (electronic version) January 1997.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nprovided will in fact be used to facilitate adjustment, the United States disregards the issue of whether\nthe extent of the protection may go beyond what is necessary to facilitate adjustment.3425\n7.1483 The European Communities and Korea further note that the United States repeatedly claims\nthat: \"The level of the application of the measures was not increased to facilitate adjustment. 3426\nHowever, justification for the level of the safeguard measures given by the President states that they\nwere designed to \"facilitate efforts by the domestic industry to make a positive adjustment to import\ncompetition and provide greater economic and social benefits than costs\".\n3427 3428\n7.1484 For New Zealand, Article 5.1 provides that measure can only be taken to the extent necessary\nto remedy or prevent serious injury and facilitate adjustment. Accordingly a measure is not permitted\nthat may be necessary to remedy or prevent serious injury, but which would not facilitate adjustment\nto the increase in imports resulting from the granting of the relevant tariff concession. Such an\ninterpretation is clear from the finding of the Appellate Body that Article 5.1 imposes an obligation on\na Member to ensure that the measure applied is \"commensurate with the goals of preventing or\nremedying serious injury and of facilitating adjustment\".\n3429 As noted above, this was recognized by\nthe USITC in relation to its recommendation of a tariff of 20% for certain flat steel products when it\nconcluded that some of the proposals for higher tariffs did not \"clearly anticipate the reduction in\ncapacity and closures, that, as discussed above, are necessary for the industry's improvement\". 3430 By\nimplication therefore the application of a higher tariff by the President of 30% is in fact not necessary\nfor facilitating adjustment, and would in fact have the opposite effect that the USITC warned of.\n7.1485 The United States argues that the view that \"a measure is not permitted that may be necessary\nto remedy or prevent serious injury, but which would not facilitate adjustment to the increase in\nimports resulting from the relevant tariff concession\"3431 would mean that a measure could be applied\nno more than the extent necessary to prevent or remedy serious or facilitate adjustment, whichever\nwas lower. As a practical point, it is difficult to see how a measure necessary to remedy serious injury\nwould not be equally necessary as an aspect of facilitating adjustment. If an industry continues to\nexperience serious injury from imports, presumably it has not adjusted to import competition.\nFurthermore, the United States would expect that an industry subject to a safeguard measure would\nuse any improvement in its financial position to advance preparations for the imminent removal of\ntemporary import relief. However, according to the United States, New Zealand suggests that the\nobjectives of remedying serious injury and facilitating adjustment were in conflict for flat-rolled steel.\nIt alleges that the USITC \"recognized\" that \"proposals for higher tariffs [than recommended by the\nUSITC] did not 'clearly anticipate the reduction in capacity and closures, that, as discussed above, are\nnecessary for the industry's improvement.'\"\n3432 For the United States, New Zealand misunderstands\nthe USITC's statement. First, the USITC recommendation and explanation have no legal significance.\nSecond, the agency raised this point with regard only to \"some of the domestic industries' proposals\"\nand placed it in a footnote to a section applicable to all of the products, rather than CCFRS.3433 In any\nevent, for each of the ten steel products, the President adopted a measure at a level lower than the\n\n3425 European Communities' additional comment on Panel question No. 56 at the second substantive\nmeeting.\n3426 United States written reply to Panel question No. 56 at the second substantive meeting.\n3427 Para. 14 of the Presidential Proclamation No. 7529 of 5 March 2002 (Exhibit CC-13).\n3428 European Communities' and Korea's additional comments on Panel question No. 56 at the second\nsubstantive meeting.\n3429 Appellate Body Report, Korea – Dairy, para. 96.\n3430 USITC Report, Vol. 1, p 358 and footnote 22.\n3431 New Zealand's second written submission, para. 3.180.\n3432 New Zealand's second written submission, para. 3.180.\n3433 USITC Report, p. 358.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmeasure proposed by the domestic industry. Therefore, the USITC's observation about some of\nproposals by domestic industries does not apply to the safeguard measures established by the\nPresident, including the measure on CCFRS. The United States also argues that, as a matter of\ninterpretation, New Zealand misreads the text of Article 5.1. Article 5.1 uses \"and\" to connect\n\"facilitate adjustment\" with \"prevent or remedy serious injury\", indicating that the two are additive. It\ndoes not suggest that they restrict each other. If that provision established two independent tests, and\nrequired a Member to choose the one that resulted in application of the measure at the lower level, it\nwould state something like \"a Member shall apply safeguard measures only to the extent necessary to\nprevent or remedy serious injury, but no more than necessary to facilitate adjustment\". As it does not,\nthe United States contends that New Zealand's understanding of Article 5.1 is plainly contrary to the\nestablished principle of interpretation that \"words must not be read into the Agreement that are not\nthere\".\n3434 3435\n(d) Time reference point for analysis\n7.1486 The United States argues that Article 5.1 requires only that a measure be applied no more than\nthe extent necessary to prevent or remedy serious injury and to facilitate adjustment, which has been\nread by the Appellate Body as re ferring only to injury caused by increased imports. Thus, the injury\nis caused by increased imports, and not by the imports themselves, and the need to adjust to imports is\nthe proper reference point for analysis of a safeguard measure. It may be that the negative effects of\nimports began at the same time as the increased imports. In these cases, a Member might find it\nappropriate to refer to the period during which imports increased to identify the injury caused by\nimports and devise a measure to prevent or remedy that injury and facilitate adjustment.\n3436 However,\nthe United States adds, two other scenarios are possible. It may be that at the time imports began\nincreasing, the conditions of competition were such that the imports did not initially have negative\neffects on the domestic industry, or that the negative effects began so slowly as to not yet constitute\nserious injury. In that case, the reference period for devising an appropriate measure to prevent or\nremedy serious injury and to facilitate adjustment may begin after imports began increasing.\n3437 It is\nalso possible that imports had negative effects on the domestic industry before they began increasing,\nand that the negative effects of imports and other factors matured into serious injury only after the\nincrease. In that case, the reference period for devising an appropriate measure to prevent or remedy\nserious injury and to facilitate adjustment may begin before imports began increasing. While this was\nnot the case for any of the ten steel safeguard measures, the Panel should recognize the theoretical\npossibility of this occurrence in its analysis of Articl e 5.1. In short, in requiring that the injury to the\ndomestic industry and its need for adjustment are the benchmark for the safeguard measure,\nArticle 5.1 requires a consideration of the facts of each case. It does not permit an automatic recourse\nto the period during which imports increased.\n3438\n7.1487 The European Communities submits that Article 5.1 imposes an obligation to tailor the\nremedy so as to address exclusively the portion of the entire injury suffered by the domestic industry\nwhich can be attributed to increased imports. This injury has to be measured in the period during\nwhich imports have increased. Accordingly, the period during which imports have increased is\nrelevant for the determination of the level of the remedy under Article 5.1. Brazil adds that the first\nsentence of Article 5.1 addressing non-excessive remedies, should be read in the context of the second\nsentence of Article 5.1 which, by limiting quantitative restrictions to historically representative levels,\n\n3434 Appellate Body Report, US – Line Pipe, para. 250.\n3435 United States' written reply to Panel question No. 56 at the second substantive meeting.\n3436 United States' written reply to Panel question No. 152 at the first substantive meeting.\n3437 United States' first written submission, para. 1121.\n3438 United States' written reply to Panel question No. 152 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimplies that the remedy is intended to restore the status quo ante, not compensate for past injury. For\nBrazil, as a general matter, since the objective of safeguard measures is to restore the status quo ante\nby eliminating the injurious effects of increased imports, one would expect that a parallel between the\nperiod during which increased imports are identified and the period to which reference is made for the\npurposes of Article 5.1 could and should be drawn. The problem in the instant case is that the\nincrease in imports is remote and unrelated to the situation in the market in any recent period. When\nthe period of increased imports is remote, it is difficult to see how it becomes relevant to addressing a\ncurrent import problem.3439\n7.1488 Japan argues that a parallel between the period during which increased imports are identified\nand the period to which reference is to be made in assessing the level of the safeguard measure might\nbe an appropriate benchmark depending on how recently imports increased relative to the time of the\ninvestigation. The question touches upon the practical reason why, under Article 2.1 as clarified by\nthe Appellate Body in Argentina – Footwear (EC) , increased imports must be recent. 3440 Where\nimports have been decreasing over a period of years, the issue of necessity becomes moot; drawing a\nparallel between the level of a measure and the now dated effect of increased imports would be\ninappropriate. This is consistent with the correlation requirement under Article 4.2(b), first sentence,\nincluding the understanding that increased imports normally shall coincide with declining industry\nperformance.\n3441 Brazil argues that the wider the disconnect between the two, the more difficult it is\nto establish a causal link. At some point, when increased imports are no longer a manifestation of the\nrecent past, the inquiry must become moot. For Korea, it is important to recall that the increase in\nimports must be recent. If it is not, then the threshold for a measure has not been met. If the\nauthorities determine that all the conditions for a measure have been met and that a measure should be\nimposed, then the \"benchmark\" for the measure must be found in the analysis by the authorities of\nincreased imports, serious injury, and causation so in that way they must be related. Furthermore, the\nmeasure could be designed to return the industry to its state prior to the increase in imports as long as\nany other factors that also contributed to injury are properly isolated and evaluated so that the measure\nis carefully tailored to address only those effects caused by increased imports.\n3442\n(e) Justification of the measure\n(i) Timing of justification\n7.1489 The complainants argue that the Appellate Body has made clear the obligation of explaining\nand justifying the extent of the measure. They refer, inter alia, to the statements by the Appellate\nBody in US – Line Pipe3443 it is stated that the parties are under an obligation to \"clearly explain [] and\njustify the extent of the application of the measure\" . Thus a Member must ensure that: (i) the chosen\nmeasure is proportional to the \"serious injury\" caused by the increase in imports alone, and not\nremedy the fact that there are imports at all; a proper non-attribution of the injury caused by other\nfactors must also be made; (ii) no additional relief over and above what is necessary to remedy the\n\"serious injury\" attributed to increased imports, to assist in further adjustments of the domestic\n\n3439 Complainants' written replies to Panel questions Nos. 153 and 156 at the first substantive meeting.\n3440 Appellate Body Report, Argentina—Footwear (EC) , para. 130.\n3441 Appellate Body Report, Argentina—Footwear (EC) , paras. 144-145.\n3442 European Communities', New Zealand's, Norway's, Korea's, Japan's and Brazil's written replies to\nPanel questions Nos. 152 and 153 at the first substantive meeting.\n3443 Appellate Body Report, US – Line Pipe, para. 236.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry is imposed; and (iii) it clearly explains and justifies the measure prior to or at the time it\nimposes the measure.3444\n7.1490 For the European Communities, Japan, China and Switzerland, the Appellate Body in US –\nLine Pipe has made it clear that whether the conditions required to impose a safeguard measure have\nbeen met and whether a safeguard measure has been applied only to the extent necessary are two\nseparate issues.3445 Therefore, if the conditions pertaining to increased imports, injury and causation\nrequired to establish the right to apply a safeguard measure have not been satisfied, it is not necessary\nto investigate whether the extent of such safeguard measure is consistent with Article 5.1. Also, since\nthe conditions required to impose a safeguard measure have not been met, any safeguard measure,\nwhatever its extent might be, would fall short of the obligation set forth in Article 5.1.\n3446\n7.1491 Similarly, for Norway 3447, the violation of injury determination and the violation of causal\nlink are particularly relevant in order to conclude ipso facto that the United States measures go\nbeyond the extent necessary. According to Norway, the violations of the provisions of the Agreement\non Safeguards or GATT 1994 are sufficient to conc lude that the United States measures, for all or\nsome products (depending on the Panel's finding on th e previous violations), also violate Article 5.1\nof the Agreement on Safeguards, whatever the justification given by the United States in the USITC\nReport.3448\n7.1492 Norway and Switzerland add that the justificat ion under Article 5.1 is not only intended to\nhelp the Panel in determining if the relevant conditions are fulfilled but should also help the\nMember making the right decision. Attempts at a post facto justification will not suffice in this\nrespect. As the justification must be determined by the Member prior to imposing the safeguard in\nquestion, there seems to be no legitimate reason why it should be kept secret and not be given to the\nMembers concerned.\n3449 Korea submits that the United States provides an ex post explanation of its\nmeasures and even creates an ex post record from which to construct that explanation.3450\n7.1493 The United States first recalls that the a ssessment of consistency with the Agreement on\nSafeguards involves two \"separate and distinct\" inquiries: \"first, is there a right to apply a safeguard\nmeasure? And, second, if so, has that right been exercised, through the application of such a measure,\nwithin the limits set out in the treaty?\" According to the United States, only the content of the first\ninvestigation is to be reported before the measure is actually imposed. Article 5.1 explicitly states that\nthe role of applying a safeguard measure is \"to prevent or remedy serious injury and to facilitate\nadjustment\". It also states that a Member may apply a safeguard measure \"only to the extent\nnecessary\" for these purposes. Thus, the serious injury experienced by the domestic industry and the\nneed to facilitate adjustment define the limit for applying a safeguard measure. A Member may apply\na safeguard measure in any form and at any level that falls within the parameters of Article 5.1 and\nArticle 5.1 does not restrict a Member's discretion to act within this limitation. The Member may\nchoose any form for the measure – for example, a tari ff, tariff-rate quota, or quantitative restriction.\n\n3444 Norway's second oral statement on behalf of the complainants, paras. 8-9.\n3445 Appellate Body Report, US – Line Pipe, para. 242.\n3446 European Communities' written reply to Panel question No. 105 at the first substantive meeting;\nJapan's first written submission, paras. 319-321.\n3447 Norway's first written submission, para. 352.\n3448 Norway's first written submission, para. 351.\n3449 Switzerland's second written submission, para. 114; Norway's second written submission,\npara. 173.\n3450 Korea's second written submission, para. 241.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nWithin this limitation, the Member may also choose the level of the measure – an ad valorem duty\nrate, a specific duty amount, the volume subject to a quota, etc.3451\n7.1494 Some complainants read the passage of the Appellate Body in US – Line Pipe referring to the\nincidental effects of a proper investigation on the chosen level of remedy as placing an affirmative\nprocedural duty on Members to explain in a published report the \"sufficient motivation\" or\n\"justification\" for the measures selected. 3452 For the United States, this interpretation is devoid of\nmerit. The reasoning in the US – Line Pipe report makes clear that the competent authority's\n\"compliance with Articles 3.1, 4.2(b) and 4.2(c)\" in its investigation ( i.e., by \"separating and\ndistinguishing the injurious effects of factors other than increased imports from those caused by\nincreased imports\" in a detailed report) \" should have the incidental effect of providing sufficient\n'justification'\" for the safeguard measure applied.\n3453 This passage indicates the Appellate Body's\nunderstanding that the competent authorities will not explain how a safeguard measure complies with\nArticle 5.1 – if they did, the justification would be intentional, and not an \"incidental effect.\" In other\nwords, although Members need not explicitly state the reasons for selecting safeguard measures, the\nneed for the measures should be implicit from the findings of the competent authorities. 3454 The\nAppellate Body will use the competent authority's report as the \"benchmark\" to determine, on a\nsubstantive basis, whether the measures selected did, in fact, comply with Article 5.1. However, the\nreport itself need not address this issue. Thus, a Member remains free to explain its compliance with\nArticle 5.1 during the dispute settlement process.3455\n7.1495 The United States notes that the Appellate Body found in Korea – Dairy and reaffirmed in US\n– Line Pipe that Article 5.1 does not oblige a Member to demonstrate, at the time of taking a\nsafeguard measure, how the measure complies with Article 5.1. Nothing in Article 3.1 affects this\nconclusion. In US – Line Pipe , the Appellate Body reiterated that \"[i]t is clear, therefore, that apart\nfrom one exception, Article 5.1, including the first sentence, does not oblige a Member to justify, at\nthe time of application, that the safeguard measure at issue is applied 'only to the extent\nnecessary.'\"\n3456 The texts also make clear that Articles 3.1 and 4.2(c) are obligations of the\n\"competent authorities\". The only functions assigned to the competent authorities under the\nAgreement on Safeguards are to investigate and make determinations of serious injury. The\ncompetent authorities are mentioned only in Articles 3, 4, and 7.2, and always in those contexts. In\ncontrast, Articles 5 and 7.1, which address the extent and duration of a safeguard measure, make no\nmention of the competent authorities or their investigation. These obligations are addressed to the\nMember itself, which is not required to provide a report under Article 3.1.\n3457 The United States\nrecalls that, with respect to the investigation, Articl e 3.1 states that \"[t]he competent authorities shall\npublish a report setting forth their findings and reasoned conclusions\". With respect to the\ndetermination of serious injury, Article 4.2(c) states that \"[t]he competent authorities shall publish\npromptly, in accordance with the provisions of Article 3, a detailed analysis of the case under\ninvestigation as well as a demonstration of the relevance of the factors examined\". As the competent\nauthority, the USITC must comply with these requirements. However, there is no analogous\nprovision applicable to step two, i.e., application of the safeguard measure, except with respect to\ncertain types of quantitative restrictions that were not used in the steel case. According to the United\nStates, neither Article 5 nor any other provisi on of the Agreement on Safeguards contains an\n\n3451 United States' first written submission, paras. 1018-1023.\n3452 Korea's first written submission, paras. 203-207; Norway's first written submission, paras. 348-350.\n3453 Appellate Body Report, US – Line Pipe, para. 236 (emphasis added).\n3454 United States' first written submission, para. 1051.\n3455 United States' first written submission, para. 1031.\n3456 Appellate Body Report, US – Line Pipe, para. 233.\n3457 United States' first written submission, paras. 1018-1023.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nobligation to explain at the time of taking a safeguard measure how the measure remedies or prevents\nserious injury and facilitates adjustment. Thus, the President, who administers this second step, was\nunder no obligation to provide such an explanation. The absence of an explanation of how a measure\nis applied no more than the extent necessary to prevent or remedy serious injury and to facilitate\nadjustment signifies only that the explanation has not been published. It does not indicate anything\nabout whether the explanation would establish consistency with Article 5.1.\n3458\n7.1496 The United States submits that the complainants are now essentially contending that\nArticles 3.1 and 4.2(c) create just the obligation to explain, that the Appellate Body has twice found\ndoes not arise from Article 5.1. 3459 According to the United States, the complainants argue that a\nsafeguard measure's consistency with Article 5.1 is clearly a \"pertinent issue of fact or law\" and,\ntherefore, the report of the competent authorities under Article 3.1 must contain findings or reasoned\nconclusions on that issue.3460 For the United States, the text of Article 3.1 is completely at odds with\nthis interpretation. Rather, it is clear that Article 3.1, third sentence, and Article 4.2(c) are related to\nthe investigation of the competent authorities. Arti cle 4.2(c) references the investigation explicitly,\nwhile the title of Article 3 is \"Investigation\". Article 4.2(a) specifies the purpose of this investigation\n– \"to determine whether increased imports have caused or are threatening to cause serious injury to a\ndomestic industry\". In other words, an investigation is conducted to determine whether conditions (as\nset forth at Article 2.1) are such that safeguard measures may legally be applied. By the terms of\nArticle 3.1, Members may not apply safeguard measures until the \"investigation\" is complete. 3461\nOnce the competent authorities determine that safeguard measures may be applied, the Agreement\nmakes clear that it is the \"Member\", not the \"competent authorities\" of that Member, who decides\nwhat, if any, safeguard measures shall be applied. 3462 Although Article 3.1 provides that the\n\"competent authorities shall publish a report setting forth their findings and reasoned conclusions\",\nthere is no similar requirement that Members publish their findings regarding how the measures\nshould be applied. In particular, other than the requirement to justify certain quantitative restrictions,\nwhich is not applicable to this dispute, there is no provision requiring Members to publish findings\nregarding why the particular safeguard measures selected conform with Article 5.1. The \"pertinent\nissues of fact and law\" that must appear in the re port are, therefore, those issues that relate to the\n\"investigation\" by the \"competent authorities\" regarding whether the conditions for applying\nsafeguard measures have been satisfied.\n3463 They do not include issues related to the Members'\nselection and application of a measure consistent with Article 5.1. 3464 For the United States, it is\nnoteworthy that the Appellate Body only described Article 3 as applicable to the inquiry regarding the\n\n3458 United States' written reply to Panel question No. 128 at the first substantive meeting.\n3459 European Communities' first written submission, para. 632; Japan's first written submission,\nparas. 325-328; Korea's first written submission, paras. 203-213; Norway's first written submission, para. 357;\nNew Zealand's first written submission, paras. 4.203-4.204; Brazil's first written submission, para. 246.\n3460 Korea's first written submission, para. 167.\n3461 Article 3.1 states that \"[a] Member may apply a safeguard measure only following an investigation\nby the competent authorities of that Member\". (Emphasiz added.)\n3462 Article 3.1 states that \"[a] Member may apply a safeguard measure only following an investigation\nby the competent authorities of that Member;\" (emphasis added) and Article 5.1 states that \"[a] Member shall\napply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate\nadjustment\".\n3463 Appellate Body Report, US – Wheat Gluten , para. 52 (\"The scope of the obligation to evaluate 'all\nrelevant factors' is, therefore, related to the scope of the obligation of competent authorities to conduct an\ninvestigation\").\n3464 United States' first submission, paras. 1042-1046.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndetermination of serious injury under Articles 2 and 4, and not in conjunction with the consideration\nwhether the measure is consistent with Article 5.1, first sentence .3465\n7.1497 The complainants challenge the United States view that the United States was under no\nobligation to justify the safeguard measures at the time of application and that a Member remains free\nto explain its compliance with Article 5.1 first during the dispute settlement process. 3466 In the view\nof the complainants, the arguments put forward by the United States have no merit. They are of the\nfirm view that Article 3.1 of the Agreement on Safeguards includes an obligation to provide sufficient\njustification for a safeguard measure.3467\n7.1498 China argues that the United States is trying to make an artificial distinction between the\ninvestigation and the application of the measure. In particular, the United States wrongly asserts that\nArticles 3.1 and 4.2(c) are obligations of the \"competent authorities\" and that the only functions\nassigned to the competent authorities are to inves tigate and make determinations of serious injury.\nThe distinction made by the United States is not relevant, since WTO obligations are always imposed\non a WTO Member. From there on, any authority of a WTO Member is necessarily subject to the\nWTO obligations undertaken by this Member. On the other hand, it is always a WTO Member that is\nconsidered to be responsible for a violation of its WTO obligations committed by any of its\nauthorities. All WTO obligations are, by nature, supported solely and finally by the WTO Members.\nIt is, therefore, not relevant to try to make a distinction between obligations addressed to the Member\nitself and obligations addressed to one of its authorities. The fact that the United States decided to\nsplit its decision process in the context of safeguards investigations is not without any impact on the\ncurrent proceeding. Following the reasoning of the United States, separating and distinguishing the\ninjurious effect of factors other than increased imports from those caused by increased imports should\nbe related to the investigation and therefore be the task of the \"competent authority\". However, China\nnotes that the Appellate Body in US – Line Pipe\n3468, refers to this task as being undertaken by \"a\nMember proposing to apply a safeguard measure\". This should bring enough evidence that there is no\nsuch division of obligations as suggested by the United States under the Agreement on Safeguards and\nthat the related distinction between a \"Member\" and a \"competent authority\" is of no relevance.3469\n7.1499 Korea argues3470 that the United States must demonstrate that the reasoning of its authorities\nregarding increased imports, serious injury and causation, justifies the measure imposed. However, in\nfact, the detailed analysis and reasoned conclusions of the USITC demonstrate that the United States\nmeasure actually imposed exceeded what was \"necessary\". Thus, Korea argues the United States\nproposes instead to justify its measure through ex post reasoning by creating a new record with a new\nanalysis and conclusions, which is actually is in conflict with the USITC's reasoning on serious injury\nin numerous respects.\n3471 However, in the case of welded pipe, the USITC specifically found that\nonly future, additional injury needed to be prevented. 3472 Moreover, Korea argues that the United\nStates is wrong that the USITC remedy recommendati on is not relevant. In fact, it provides further\nclarification or justification of how the remedy should be adapted to the serious injury/threat of\n\n3465 United States' first submission, paras. 1047-1048.\n3466 United States' first written submission, paras. 1051-1052.\n3467 Switzerland's second written submission, para. 112; Japan's first written submission,\nparas. 325-328; Norway's second oral statement on behalf of the complainants, para. 23.\n3468 Appellate Body Report, US – Line Pipe, para. 236.\n3469 China's executive summary of the second written submission, pp. 9-10.\n3470 Korea's second written submission, para. 244.\n3471 Korea's second written submission, paras. 244-245.\n3472 USITC Report, Vol. I, pp. 164 and 383 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nserious injury benchmark by the authors of those underlying factual and legal conclusions. 3473 While\nsuch findings are not binding or determinative for the US President under United States law, those\nfindings and recommendations are grounded in the serious injury/threat finding which the Appellate\nBody has said are relevant and, therefore, those recommendations complement the serious injury\nfindings and offer additional compelling evidence of the benchmark against which to assess the\npermissible extent of the measure. The United States cannot just \"wish away\" parts of its own\npublished report.\n3474\n7.1500 The European Communities and China state that, in principle, the Appellate Body has\nindicated that there is no obligation to justify, prior to the application of a safeguard measure, that it\ndoes not go beyond the extent necessary to prevent or remedy the injury and to facilitate\nadjustment.\n3475 Therefore, an omission of a discussion as to how the safeguard measure is limited to\nthe extent necessary to prevent or remedy the injury and to facilitate adjustment does not in itself\nmean that the measure at issue surpasses that extent. 3476 However, the non-attribution exercise\nrequired under Articles 3.1, 4.2(b) and 4.2(c) must result in findings and reasoned conclusions in the\nreport of the competent authority which have to provide evidence that the safeguard measure applied\non the basis of these findings and reasoned conclusions clearly does not go beyond the extent\nnecessary to prevent or remedy the injury caused by increased imports.\n3477 Therefore, in the view of\nthe European Communities, the question is not so much whether \"Article 3.1 applies to Article 5.1\" as\nwhether the safeguard measures actually imposed pursuant to Article 5.1 can be considered to be\nbased on a determination under Article 3.1. The European Communities considers that this is not the\ncase in respect of many of the safeguard measures imposed by the United States in this case,\nespecially those applied on products in the CCFRS product bundle and on tin mill.\n3478\n7.1501 The United States submits that the complainants rest their arguments almost entirely on their\nclaim that the USITC determinations of serious injury were inconsistent with the Agreement on\nSafeguards, and that this alleged shortcoming invalidates the safeguard measures. The USITC\ndeterminations were fully consistent with the Agreement on Safeguards and GATT 1994. Therefore,\nthe primary argument against the steel safeguard measures themselves is unfounded. However,\nshould the Panel find some flaw with the USITC determinations, the United States submits that two\nsimple numerical tests exist to demonstrate that th e United States complied with Article 5.1. These\nare explained in further detail by the United States below. These tests cannot be interpreted as a\nquantification of injury or of the effect of a safeguard measure, which the United States shows is\nneither consistent with the framework established under the Agreement on Safeguards nor possible.\nAt best, they can provide an approximation that can indicate that a measure is set at an appropriate\norder of magnitude. The United States written s ubmission contains two such numerical tests, which\n\n3473 Presumably, Korea argues, this was the United States' rationale for requiring such a\nrecommendation by the USITC in the first place.\n3474 Korea's second written submission, paras. 244-245.\n3475 Appellate Body Report, Korea – Dairy , paras. 99-100; Appellate Body Report, US – Line Pipe ,\npara. 233.\n3476 The European Communities' and China's written replies to Panel question No. 111 at the first\nsubstantive meeting.\n3477 The European Communities' written reply to Panel question No. 113 at the first substantive\nmeeting.\n3478 The European Communities' and China's written replies to Panel questions No. 110 at the first\nsubstantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nshow that the magnitude of the steel safeguard measures is consistent with the injury attributable to\nincreased non-FTA imports.3479\n7.1502 The complainants respond that they have, however, demonstrated that the measures were\nunjustified based on the facts before the USITC and President. Since the complainants demonstrate\nthat the United States failed, in many respects, to comply with the requirements of Articles 4.2(b)\nand 4.2(c) of the Agreement on Safeguards, they have established a prima facie case that the United\nStates measures are applied beyond the \"extent necessary\" and, therefore, violates Article 5.1 of the\nAgreement on Safeguards.3480\n(ii) Presidential measure differs from measure recommended by the competent authority\n7.1503 The complainants note, in this regard, that the Presidential Proclamation imposed an\ni n c r e a s e d t a r i f f o f : Y e a r 1 : 3 0 % ; Y e a r 2 : 2 4 % ; Y e a r 3 : 1 8 %3481 but there is no particular\nexplanation for this choice. Because the President's measure diverged from the USITC's\nrecommendation, he was required to abide by the \"investigation\" requirements of Article 3.1,\nincluding the requirement to provide a report setting forth \"findings and reasoned conclusions reached\non all pertinent issues of fact and law\".\n3482 In particular, the President made no attempt to\ndemonstrate that his safeguard measures were no more restrictive than necessary under Article 5.1.\nThe President, therefore, did not \"clearly explain[] and 'justify[]' the extent of the application of the\nmeasure\".3483 Norway adds that the absence of any report containing such findings and reasoned\nconclusion is especially surprising given that the USTR conducted its own independent investigation\non behalf of the President.\n3484\n7.1504 New Zealand3485 recalls that notwithstanding the USITC's recommendation for 20% tariff on\nCCFRS with the exception of slab, the President imposed a 30% tariff on these products. 3486 N o\nanalysis accompanied these contrary decisions, and no attempt was made to explain how the 30%\ntariff, applied to a narrower group of countries than that recommended by the USITC, was no more\nrestrictive than necessary. In addition, it is clear that the 30% tariff applied by the President directly\nconflicts with the express statements made in the USITC Report regarding the measures that would\nneed to be taken by the United States domestic industry to adjust to import competition. For example,\nin the context of making its recommendation of a 20% tariff remedy the USITC observed that \"some\n\n3479 United States' first written submission, para. 1056; United States' executive summary of the first\nwritten submission, paras. 115-116.\n3480 European Communities' written reply to Panel question No. 110 at the first substantive meeting;\nChina's second written submission, paras. 303-304; Japan's second written submission, paras. 162-165;\nNorway's second oral statement on behalf of the complainants, para. 20.\n3481 Annex to the Presidential Proclamation at headings 9903.73.37 thro ugh 99.03.73.39\n(Exhibit CC-13); Notification by the United States pursuant to Article 12.1(c) and Article 9, footnote 2, of the\nAgreement on Safeguards on taking a decision to apply a safeguard measure, G/SG/N/10/USA/6 &\nG/SG/N11/USA/5, in point 4(i). (Exhibit CC-14)\n3482 The complainants argues that US law construct that the President rather than the competent\nauthority, i.e., the USITC, makes the final decision in safeguards cases does not absolve the USG of the\nobligation to abide by Article 3.1. If the President deviates from the USITC recommendations (which should be\nsupported by its report, even if such was not in the case here), the President is required to provide an explanation\nfor his decision. (Political expediency – the apparent reason for the decision – is not sufficient.)\n3483 Appellate Body Report, US – Line Pipe, para. 236.\n3484 See for instance Norway's second oral statement on behalf of all complainants, para. 26.\n3485 New Zealand's first written submission, paras. 4.200-4.204.\n3486 Proclamation 7529 of 5 March 2002; To Facilitate Positive Adjustment to Competition From\nImports of Certain Steel Products, 67 Fed. Reg. 10553, 10587 (7 March 2002) (reducing the measure to 24% in\nthe second year and 18% in the third year) (Exhibit CC-13).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof the domestic industries' proposals do not clearly anticipate the reduction in capacity and closures,\nthat, as discussed above, are necessary for the industry's improvement\". 3487 I n t h e v i e w o f N e w\nZealand, the USITC was saying that protection from imports above the 20% rate it was\nrecommending would have an adverse impact on the ability of the industry to reduce its capacity and\nconsolidate and thereby adjust to import competition. The USITC expressly stated that \"they did not\nagree with the domestic industry\" that \"an additional 35, 40 or 50% ad valorem tariff is necessary to\nachieve the desired result, or is otherwise appropriate\". 3488 In light of these statements from the\nUSITC, the President's decision to apply a higher tariff than that recommended demanded explanation\nand justification. New Zealand argues that since the President's measure diverged from the USITC's\nrecommendation, there was an obligation under Article 3.1 to set forth findings and conclusions as to\nwhy his alternative measure was justified. However, the President made no attempt to explain how\nhis safeguard measures are no more restrictive than necessary under Article 5.1. The President,\ntherefore, did not \"clearly explain[] and 'justify[]' the extent of the application of the measure\".\n3489 In\nthe opinion of New Zealand, the United States had an obligation under Article 5.1 to ensure that the\nsafeguard measure it adopted was limited to the extent necessary to prevent or remedy serious injury\nand to facilitate adjustment. The Agreement does not assume that an authority has crafted the\nmeasure as narrowly as possible. Basic procedural fairness, as articulated in Article 5.1, demands an\nexplanation setting forth the authority's \"findings and reasoned conclusions\".\n3490\n7.1505 In the view of the European Communities and China, if a competent authority presents a\nrecommendation, further finds that its recommendation would be adequate to address the injury found\nto be caused by increased import and furthermore explicitly states that any more restrictive remedy\nwould be inappropriate, then it would be difficult to consider that a deviation from such\nrecommendation could be justified on the basis of the determination made by the competent authority\nthat increased imports have caused injury to the domestic industry producing like products. In these\ncircumstances, explanation for departure from the recommendation is necessary. Moreover, if such a\ncompetent authority presents a recommendation and reaches findings and reasoned conclusions that\nits recommendation would be adequate to address the injury caused by increased import and,\nfurthermore, explicitly states that any more restri ctive remedy would be inappropriate, then deviation\nfrom the recommendation resulting in a more tr ade restrictive remedy than that has been\nrecommended would suggest that the remedy effectively implemented goes beyond the extent\nnecessary in violation of Article 5.1.\n3491\n7.1506 The European Communities and China argue that the reason why a political authority (the US\nPresident) does not need to give reasons for the remedy he imposes, is because the justification should\nbe apparent from the determination of the competen t authority. To the extent that the political\nauthority does not rely on a determination by the competent authority, but implicitly changes it, or\npicks and chooses amongst various elements of the findings of the competent authority to create his\nown determination, he is acting as a competent authority and is bound by the requirements of\nArticle 3.1 of the Agreement on Safeguards. The European Communities explains\n3492 that the\ndeterminations of the USITC are based on imports of a different range of products than are covered by\nthe measures. 3493 In addition, the Proclamation excluded from the measures 35 pages of detailed\n\n3487 USITC Report, Vol. 1, p. 358 and footnote 22.\n3488 Ibid., p 363.\n3489 Appellate Body Report, US – Line Pipe, para. 236.\n3490 New Zealand's first written submission, para. 4.202.\n3491 European Communities' and China's written replies to Panel question No. 110 at the first\nsubstantive meeting.\n3492 European Communities' second written submission, paras. 8 to 26.\n3493 As shown in Exhibit CC-107.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproduct descriptions and the determinations are based on imports from all sources but the measures do\nnot apply at all to Canada, Mexico, Israel and Jo rdan. Thus, either the safeguard measures imposed\nare not justified by the determination or the US President made certain determinations for which he\ndid not provide any explanation.3494\n7.1507 New Zealand argues that 3495 because what the President did in this case goes substantially\nbeyond the \"benchmark\" set by the USITC's determinations and its own recommendations as to\nremedy, there is a prima facie breach of Article 5.1. This is especially so where, as in this case also,\nthe USITC reasoning in justifying less restrictive measures explained why a more restrictive tariff was\nnot necessary within the meaning of Article 5.1, and where (as here) no explanation is provided for\nthe more restrictive remedy in fact imposed.\n3496 In Japan's view, the requirement that the President\nabide by Article 3.1 in order to ensure compliance with Article 5.1 does not apply in all cases, but\ncertainly does when the President's measure is not supported by the USITC's analysis. Japan adds a\nfurther distinction whereby if the President's measure exceeds the USITC's recommended measure,\nthen there is no way that it can be said that the measure does not go beyond the extent necessary. 3497\nNorway argues that Article 3.1 applies in all cases, as the proposed remedies by the USITC will have\nto be evaluated and assessed for their effectiveness in relation to the criteria of Article 5.1. This\nassessment of proportionality of the proposed measures is a \"pertinent issue of fact and law\" under\nArticle 3.1. When the President decides to apply measures that have not been evaluated and assessed\nby the USITC, he will have to ensure the fulfilment of the requirements of Article 3.1.3498\n7.1508 In New Zealand's view, the imposition of a safeguard measure more restrictive than that\nrecommended by a competent authority – as occurred in this case – is likely to be very strong and\ncompelling evidence of a violation of Article 5.1. The determination with respect to increased\nimports, serious injury and causation provide a \"benchmark against which the permissible extent of\nthe measure should be determined\".3499 Because what the President did in this case goes substantially\nbeyond the \"benchmark\" set by the USITC's determinations and its own recommendations as to\nremedy, New Zealand submits there is a prima facie breach of Article 5.1.3500\n7.1509 Japan, Korea, China, Norway and Brazil refer to the Appellate Body in US – Line Pipe, which\nsaid that \"Compliance with Articles 3.1, 4.2(b) and 4.2(c) of the Agreement on Safeguards should\nhave the incidental effect of providing sufficient 'justification' for a measure and, should also provide\na benchmark against which the permissible extent of the measure should be determined\". 3501 3502 In\nthe instant case, the United States has neither complied with these Articles by the USITC to justify its\nrecommendations nor any explanation by the President why he deviated from these recommendations.\nThis alone renders the measures invalid. Brazil and Korea add that the panel has before it two issues\narising out of the relationship of Article 3.1 to Article 5.1. First, is there a reasoned explanation of the\nUSITC's recommendation? Second, to the extent that the President did not follow the USITC\nrecommendation, is there a reasoned explanation of the remedies ultimately imposed? If the\nPresident had followed the USITC's recommendation, then the second issue would not arise. In\nneither case was it demonstrated that the remedy (the USITC recommendation or the actual remedy\n\n3494 European Communities' written reply to Panel question No. 45 at the second substantive meeting.\n3495 New Zealand's written reply to Panel question No. 45 at the second substantive meeting.\n3496 New Zealand's written reply to Panel question No. 108 at the first substantive meeting.\n3497 Japan's written reply to Panel question No. 45 at the second substantive meeting.\n3498 Norway's written reply to Panel question No. 45 at the second substantive meeting.\n3499 Appellate Body Report, US – Line Pipe, para. 236.\n3500 New Zealand's written reply to Panel question No. 45 at the second substantive meeting.\n3501 Appellate Body Report, US – Line Pipe, para. 236.\n3502 Japan's, Korea's, and Brazil's written replies to Panel question No. 45 at the second substantive\nmeeting; China's second written submission, para. 303; Norway's first written submission, para. 348.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimposed by the President) remedy was consistent with the underlying USITC injury and causation\ndeterminations.3503 Brazil adds that it is not arguing that the USITC needed to undertake and publish\nan independent analysis of the extent of the measure. The USITC's failing under Article 5.1 is not\nthat it did not perform an assessment of the measure distinct from the non-attribution analysis required\nby 4.2(b). Rather, the failing is reflected in the fact that the USITC failed to perform an analysis of\nany kind. Specifically, by failing to \"separate\" and \"distinguish\" the serious injury caused by\nincreased imports in violation of Article 4.2(b), and without any other independent analysis, it failed\nto meet the requirement of Articles 5.1 and 3.1.3504\n7.1510 The United States argues that since there is no legal requirement for any authority to present a\nremedy recommendation, there would be no requirement either to explain the departure from a\nrecommendation made by a competent authority in addition to a determination performed under\nArticles 2 and 4. The Appellate Body in the US – Line Pipe case has clarified that \"by separating and\ndistinguishing the injurious effects of factors other than increased imports from those caused by\nimports, as required by Article 4.2(b), and by including this detailed analysis in the report setting forth\nthe findings and reasoned conclusions, as required by Article 3.1 and 4.2(c), a Member proposing to\napply a safeguard measure should provide sufficient motivation for that measure\".\n3505 The fact that the\nsafeguard measures adopted by the President differ from the USITC's recommendations does not\nestablish a prima facie case of inconsistency with Article 5.1. The panel in US – Line Pipe found that\nthe President's safeguard measure may differ from the USITC's recommendation without running\nafoul of Article 5.1.\n3506\n7.1511 The United States notes that the European Communities appears to agree that if a Member\nadopted a remedy recommendation of the competent authorities, the Member could rely upon any\nexplanation made by the competent authorities to establish the remedy's consistency with Article 5.1.\nThe United States agrees that in the case of a recommended measure adopted by a Member, any\nexplanation by the competent authorities, if re lied upon by the Member, would be relevant in a\nsubsequent WTO dispute and properly subject to consideration by a panel. In addition, if the Member\napplied a measure to a lesser extent than recommended by the competent authorities, their explanation\nwould establish consistency with Article 5.1. This was unquestionably the case with regard to tin mill\nsteel, FFTJ, stainless steel rod, and stainless steel wire. For each of those products, the President\nestablished a measure at the same level or lower than the recommendation of the USITC, with a\nshorter duration. If the Member applied a measure to a greater extent than recommended by the\ncompetent authorities, the burden would remain upon complainants to establish that such a measure\nwas inconsistent with Article 5.1. Consistent with the Appellate Body's reasoning in US – Line Pipe,\nthe Member would have the opportunity to rebut su ch arguments in any WTO dispute. The United\nStates points out that the Appellate Body has found that the Agreement on Safeguards only requires a\ncontemporaneous explanation of compliance with Article 5.1 in certain limited circumstances that are\nnot applicable to the steel safeguard measures.\n3507 Thus, any analysis adopted by a Member to rebut a\nclaimed inconsistency with Article 5.1 would be rele vant in a dispute. It would not matter whether\n\n3503 Korea's and Brazil's written replies to Panel question No. 45 at the second substantive meeting.\n3504 Brazil's second written submission, para. 111.\n3505 Appellate Body Report, US – Line Pipe, para. 236.\n3506 United States' written replies to Panel questions Nos. 110 and 128 at the first substantive meeting,\nciting US – Line Pipe , Panel Report, para. 7.94 (footnotes omitted). According to the United States, when the\nPanel refers to the term \"necessary\", in this quote, it is referring to the maximum extent \"necessary to remedy\nthe serious injury\".\n3507 Appellate Body Report, US – Line Pipe, para. 233.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe competent authorities or another instrumentality of the Member prepared the analysis, or whether\nthe analysis was prepared before or after application of the measure, or during dispute settlement.3508\n7.1512 Norway recalls also that on 26 October 2001, the USTR issued a notice to the public,\nrequesting input on the measure to be imposed. 3509 Specifically, the USTR asked for comments on:\n(a) what form the measure should take (i.e., tariff, quota, tariff-rate quota, etc.); (b) the duration of any\naction; and (c) any other actions that would facilitate the domestic industry's adjustment to import\ncompetition.3510 Numerous interested parties submitted comments, but the President never issued a\nreport. Nor did he explain how the 30% tariff – applied to a different group of countries – was\ntailored to mitigate the harm sustained as a result of imports from those countries.3511\n7.1513 According to the United States, Korea, Japan and Norway err in characterizing this process as\nan investigation. The USTR merely recognized that in the event of an affirmative determination by\nthe USITC, the United States executive would need to decide whether and to what extent to apply a\nsafeguard measure, and that interested persons w ould want to present the executive departments with\ninformation regarding that decision. It formally requested public commentary to provide a framework\nfor interested persons to provide such information, both in writing an in person.3512\n7.1514 The United States responds 3513 that it, like any WTO Member, is clearly permitted under the\nAgreement on Safeguards to bifurcate the administration of its safeguards law between the USITC\nand the President. As the excerpt from the Appellate Body's decision in US – Line Pipe indicates, a\nWTO Member has the discretion to assign responsibility for making determinations under its\nsafeguards law to as many or as few decision-makers as it sees fit, provided that the \"singular act\",\ni.e., the injury determination by the competent au thorities, complies with the requirements of the\nAgreement on Safeguards. Thus, the United States was free to create a process in which the executive\ndecides the nature and extent of the safeguard measure, but does not participate in the injury\ndetermination. Furthermore, in the opinion of the United States, all parties agree that the Agreement\non Safeguards obligates competent authorities, in this case the USITC, to provide certain findings and\nexplanations related to the investigation and injury determination. The parties disagree, however, on\nwhether the Agreement on Safeguards requires the President to explain how a safeguard measure\nprevents or remedies injury and facilitates adjustment. According to the United States, it has never\nasserted that the \"bifurcation\" of the process allows the President to escape responsibility under the\nAgreement on Safeguards. The key point is that the Agreement on Safeguards itself divides the\nprocess into two stages: (1) the investigation (Article 3) and the determination of serious injury or\nthreat thereof (Article 4); and (2) application of the safeguard measure (Article 5). This is recognized\nby the Appellate Body which stated that \"These two inquiries are separate and distinct. They must not\nbe confused by the treaty interpreter\".\n3514 Thus, the United States contends that it is fully consistent\nwith the Agreement on Safeguards to treat the dete rmination of the competent authorities as separate\nfrom the selection of a safeguard measure consistent with Article 5.1, and to employ different\nprocedures at each stage.\n\n3508 United States' written replies to Panel questions Nos. 110 and 128 at the first substantive meeting.\n3509 Trade Policy Staff Committee; Public Comments on Potential Action Under Section 203 of the\nTrade Act of 1974 With Regard to Imports of Certain Steel, 66 Fed. Reg. 54321 (26 Oct. 2001)\n(Exhibit CC-59).\n3510 Trade Policy Staff Committee; Public Comments on Potential Action Under Section 203 of the\nTrade Act of 1974 With Regard to Imports of Certain Steel, 66 Fed. Reg. 54321, 54323 (26 October 2001)\n(Exhibit CC-59).\n3511 Norway's first written submission, para. 356.\n3512 United States' first written submission at footnote 1368.\n3513 United States' written reply to Panel question No. 128 at the first substantive meeting.\n3514 Appellate Body Report, US – Line Pipe, para. 84.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1515 For the United States, the bifurcation of the proceedings between the USITC and the\nPresident is not pertinent. Even if the USITC administered both stages of the process, the Agreement\non Safeguards still would not require an explanation, at the time a safeguard measure was imposed, of\nhow that measure was only to the extent necessary to remedy or prevent injury and to facilitate\nadjustment. As stated by the Appellate Body in US – Line Pipe , \"[i]t is clear, therefore, that apart\nfrom one exception [certain types of quantitative restrictions that were not used in this case]\nArticle 5.1, including the first sentence, does not oblige a Member to justify, at the time of\napplication, that the safeguard measure at issue is applied 'only to the extent necessary.'\"3515 3516\n(iii) Relationship with the non-attribution requirement and determinations under Article 4.2(b)\n7.1516 The complainants argue that the level of the injury which can be remedied or prevented under\nArticle 5.1 should not correspond to the entirety of the injury suffered by the domestic industry as\nassessed under Article 4.2(a). Instead, the injurious effect of factors other than increased imports\ndetermined in the context of the non-attribution requirement under Article 4.2(b) should be deducted.\nTherefore, if a remedy is tailored to a finding of serious injury which has not undergone a proper\n\"non-attribution\" process, it will be excessive. Hence, in practical terms the non-attribution\nrequirement under Article 4.2(b) serves to determine the portion of the entire injury suffered by the\ndomestic industry which can be remedied in line with Article 5.1. According to the complainants,\nArticle 4.2(b) serves the purposes of Article 5.1 for two reasons. First, it prevents authorities from\ninferring a causal link between increased imports and serious injury when several factors cause injury\nat the same time. Second, and more importantly, it is a \"benchmark for ensuring that only an\nappropriate share of the overall injury is attributed to increased imports\" and, therefore, it \"informs the\npermissible extent to which the safeguard measure may be applied pursuant to Article 5.1\".\n3517 Failing\nto meet the requirements of Article 4.2(b) necessarily creates a presumption that the measure is more\nrestrictive than needed and is therefore in violation of Article 5.1. Without an appropriate\n\"benchmark\", the USITC could not possibly determine how any measure could be tailored to the harm\ncaused by imports alone. In such a case, without a compelling explanation of why the measure was\nstill no more restrictive than necessary, it must be considered to violate Article 5.1.\n3518 Moreover,\nthey add, compliance with the causation or non-attribution requirements of Article 4.2(b) does not\nconclusively establish that the remedy is not excessive.3519\n7.1517 Brazil, Japan and Switzerland argue that a violation of Article 4.2(b) necessarily means a\nviolation of Article 5.1. The European Communities, Korea, China, New Zealand and Norway argue\nthat the Appellate Body in US – Line Pipe ruled that a prima facie case is made under Article 5.1 as\nsoon as a violation of the non-attribution requirement under Article 4.2(b) has been established\n3520, as\nis the case in the present dispute where errors in the serious injury and causation analysis have been\nidentified. As indicated by the Appellate Body, the burden of proof then turns to the Member\napplying the safeguard measure to rebut this prima facie case. 3521 More specifically, the Member\napplying the safeguard measure then bears the burden of proving that its measure does address a\nportion of the injury suffered by its domestic industry equal or less than that caused by increased\n\n3515Appellate Body Report, US – Line Pipe, para. 233.\n3516 United States' written reply to Panel question No. 128 at the first substantive meeting.\n3517 Appellate Body Report, US – Line Pipe, para. 252.\n3518 Norway's first and second oral statements.\n3519 Brazil's and Japan's written replies to Panel question No. 99 at the first substantive meeting.\n3520 Appellate Body Report, US – Line Pipe, para. 261.\n3521 Appellate Body Report, US – Line Pipe, para. 262.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports. In this context, the Member applying th e safeguard measure has the burden of assessing the\ninjury attributed to increased imports.3522\n7.1518 Korea agrees and states that Article 4.2(b) is designed to ensure that the injury caused by\nother factors not be improperly attributed to imports (Article 4.2(b)), while Article 5.1, first sentence,\nis aimed at ensuring that the measure be limited to remedying the impact on the domestic industry\nfrom imports alone. Article 5.1 does not permit the application of a safeguard measure beyond what\nis necessary to prevent or remedy the serious injury caused by imports alone. 3523 Article 5.1 does not\npermit the application of safeguard measures to remedy injury caused by other factors. 3524 For New\nZealand, Article 4.2(b) is absolutely integral to compliance with Article 5.1 and, in particular, to\nmeeting the requirement \"that the part of the total serious damage attributed to an exporting Member\nmust be proportionate to the damage caused by the imports from that Member\".\n3525 The Appellate\nBody emphasized that \"safeguard measures should be applied so as to address only the consequences\nof imports\".3526 3527\n7.1519 The complainants point to the Appellate Body report in US – Line Pipe which emphasized\nthat \"[B]y separating and distinguishing the injurious effects of factors other than increased imports\nfrom those caused by increased imports, as required by Article 4.2(b), and by including this detailed\nanalysis in the report that sets forth the findings and reasoned conclusions, as required by Articles 3.1\nand 4.2(c), a Member proposing to apply a safeguard measure should provide sufficient motivation\nfor that measure. Compliance with Articles 3.1, 4.2(b) and 4.2(c) of the Agreement on Safeguards\n should have the incidental effect of providing sufficient \"justification\" for a measure and should also\nprovide a benchmark against which the permissible extent of the measure should be determined\".\n3528\nFor the complainants, the Appellate Body, therefore, has clarified that an authority not only must\navoid attributing causation to factors other than increased imports (Article 4.2(b)), but must also\nensure that the measure that is applied is limited to the extent necessary to address that particular\ninjury caused by such separated and distinguished imports (Article 5.1), and must justify the measure\nclearly (Article 3.1).\n3529\n7.1520 In the United States' view, the Appellate Body has found that the injury attributed to increased\nimports forms the benchmark for application of a safeguard measure. This injury is identified through\nthe causal link and non-attribution analyses under Article 4.2(b), and informs the selection of a\nsafeguard measure. While one analysis leads to the other, the Appellate Body has emphasized that the\ninjury assessment under Articles 3 and 4 is \"separate and distinct\" from the evaluation of the\npermissible extent for applying a safeguard measure, and that these two inquiries \"must not be\nconfused by the treaty interpreter\".\n3530 Thus, there is no requirement to consider the Article 4.2(a)\nfactors a second time in the application of Article 5.1. 3531 The United States argues that\n\n3522 European Communities', Switzerland's, Japan's, Norway's, New Zealand's written replies to Panel\nquestion No. 114 at the first substantive meeting.\n3523 Appellate Body Report, US – Line Pipe, para. 258.\n3524 Korea's written reply to Panel question No. 99 at the first substantive meeting.\n3525 Appellate Body Report, US – Line Pipe, para. 253, citing with approval the Appellate Body Report,\nUS – Cotton Yarn.\n3526 Appellate Body Report, US – Line Pipe , para. 258 (emphasis in original); New Zealand's written\nreply to Panel question No. 99 at the first substantive meeting.\n3527 New Zealand's written reply to Panel question No. 114 at the first substantive meeting.\n3528 Norway's first written submission, para. 348.\n3529 Complainants' written replies to Panel question Nos. 113-114 at the first substantive meeting;\nNorway's first written submission, para. 350.\n3530 Appellate Body Report, US – Line Pipe, para. 84.\n3531 United States' written reply to Panel question No. 102 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnon-attribution relates to the identification of the causal link between imports and serious injury to the\ndomestic industry by distinguishing the injurious effects of imports from the injurious effects of other\nfactors. It is not a requirement of Article 5.1 and, therefore, is not a requirement for deciding the\nproper safeguard measure to apply. The United States submits that the Appellate Body's analysis of\nArticle 5.1 in US – Line Pipe compels the conclusion that Article 4.2(b) is to provide \"a benchmark\"\nfor ensuring that only an appropriate share of the overall injury is attributed to increased imports.\nThus, the competent authorities must complete the non-attribution analysis under Article 4.2(b) before\nthe Member's decision as to the permissible extent of a safeguard measure. Non-attribution is part of\nthe process of identifying the injury attributable to increased imports, which in turn sets the\n\"benchmark\" for application of the measure. Therefore, under the Appellate Body's reasoning, there\nis a relationship between the non-attribution analys is under Article 4.2(b) and the selection of the\nlevel of a safeguard measure under Article 5.1. The former informs the latter. Since the injury\nattributed to imports, which incorporates the non-attribution analysis, is the benchmark for the extent\nof application of a safeguard measure, a second non-attribution analysis is redundant. If the measure\nfalls below that benchmark, there need be no concern that it is being applied to remedy injury caused\nby factors other than increased imports. For the United States, this is confirmed by the fact that under\nthe Agreement on Safeguards there should be two anal yses. A first analysis is used to determine\nwhether increased imposed were causing serious injury to the domestic producers and a second one to\ndetermine the appropriate remedy. Non-attribution is part of the first basic inquiry, which the\nAppellate Body described as being the determination by the competent authorities pursuant to Articles\n3 and 4 as to whether increased imports are causing or threaten to cause serious injury.\n3532\n7.1521 The United States concludes that the complainants misstate the standard for evaluating the\nUnited States' counter-arguments. The Appellate Body recognized that a Member may \"rebut\" the\npresumption created by an inconsistency with Article 4.2(b). In so doing, it did not suggest that the\nMember bore a burden any greater than a defending party normally bears under the DSU – to counter\nor rebut a prima facie case established by the complaining party.\n3533 When a complaining party relies\non an inconsistency with Article 4.2(b) to create a prima facie case on inconsistency with Article 5.1,\nit will have done nothing more than demonstrate uncertainty as to the appropriate level of the\nsafeguard measure. Thus, the rebuttal would need to show only that the measure was commensurate\nwith the injurious effects attributable to increased imports. The United States submits that it has fully\nrebutted any allegation of inconsistency with Article 4.2(b).3534\n(f) Quantification\n7.1522 The European Communities, Switzerland and Norway argue that Article 5.1 indisputably\nrequires that safeguard measures not exceed the extent necessary to prevent or remedy serious injury\nand to facilitate adjustment. Assessing the \"extent necessary\" inevitably requires some form of\nquantification.3535 They note that no one is asking the United States for absolute precision – just to\nmake an honest estimate.3536 Norway is of the opinion that even if the text of the Agreement does not\nexplicitly use the word \"quantify\", the Appellate Body has in Korea – Dairy explicitly stated that it is\nan obligation under the Agreement to ensure that the safeguard measure applied is \"commensurate\"\nwith the goals of preventing or remedying serious inju ry. It is hard, if not impossible, to understand\nhow one could craft a measure that is tailored only to such injury caused by imports without in any\n\n3532 United States' written reply to Panel question No. 99 at the first substantive meeting.\n3533 Appellate Body Report, EC – Hormones, para. 98.\n3534 United States' executive summary of the second written submission, para. 71.\n3535 European Communities' second written submission, para. 506.\n3536 European Communities' second written submission, para. 508.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nway making attempts to quantify the relevant injury. 3537 Furthermore, quantification allows other\nMembers to control that the chosen level is in compliance with the requirements of the Agreement on\nSafeguards. Where there are no indications of what injury the measure is intended to redress, it is\nimpossible to assess if the measure goes beyond the proportionality requirement or not. This is also\neminently clear from the requirement of non-attrib ution, as set forth by the Appellate Body in US –\nLine Pipe.3538 If one cannot quantify the effects of the different factors that have been attributed to the\nalleged injury, one cannot ensure that non-attribution actually takes place. The allegations by the\nUnited States claiming that there is no requireme nt to quantify anything is not only wrong, but is\nsimply an excuse to include extraneous factor s in their remedy and, thus, overcompensate for\nwhatever injury imports may have caused.3539\n7.1523 The United States takes issue with the complainants' allegation that injury, non-attribution\nand other determinations under the Agreement on Safeguards including that of the appropriate level\nand extent of the remedy, should be \"quantified\". The United States submits that the Agreement on\nSafeguards does not require either the Member applying a safeguard measure or its competent\nauthorities to \"quantify\" the injury attributable to increased imports. In fact, Article 4.2(a) frames the\nanalysis in a way that makes quantification impossible. That provision requires the competent\nauthorities to evaluate a number of specific factors that are measured in different units. No other\nprovision of the Agreement on Safeguards suggests that quantification of \"injury\" is necessary, or\neven possible. Indeed, under GATT 1947, it was reco gnized that \"it is impossible to determine in\nadvance with any degree of precision the level of import duty necessary\" for a safeguard measure to\nachieve the goals of Article XIX.\n3540 For the United States, Articles 5 and 7, which address the extent\nand duration of a safeguard measure, do not require the valuation of either serious injury or the extent\nof application of a safeguard measure. Nor do they eliminate the practical impossibility of such an\nexercise.3541\n7.1524 The United States adds that the text provides no support for the notion that \"injury\", as such,\nmust be quantified. Article 4.1 defines serious injury as \"a significant overall impairment in the\nposition of a domestic industry\". Article 4.2(a) specifies that, in determining whether injury exists,\nthe competent authorities must evaluate \"all relevant factors of an objective and quantifiable nature\nhaving a bearing on the situation of that industry\". Thus, the text itself treats the two concepts\ndifferently. The factors considered by the competent authorities are characterized as \"quantifiable\",\nbut \"serious injury\" itself is not. This omission is significant because, where the covered agreements\nrequire quantification or valuation of something, they generally state so clearly, and often provide\ndetailed guidelines.\n3542 The United States argues that the analytical framework contained in\nArticle 4.2(a) provides further support for this conclusion: it is not possible to \"quantify\" injury for\nmany reasons. The most obvious is that the different factors in Article 4.2(a) are measured in\ndifferent units – market share and capacity utilization in percentages, level of sales and production in\n\n3537 Norway does not exclude there may be a possibility to combine quantification with qualitative\nassessments, but this requires that the qualitative assessments are precise enough to allow a meaningfull\ncomparison and to establish explicitly that the requir ement of proportionality is me t; Norway's second written\nsubmission, para. 159.\n3538 Appellate Body Report, US – Line Pipe, paras. 252-260.\n3539 Norway's second written submission, paras. 159-163; Switzerland's second written submission,\nparas. 109-118.\n3540 US – Fur Felt Hats , para. 35; the Appellate Body cited this report as part of the GATT 1947\nacquis. Appellate Body Report, US – Line Pipe, para. 174.\n3541 United States' first written submission, para. 1032.\n3542 For example, AD Agreement, Article 2; SCM Agreement, Article 14. These detailed requirements\nfor calculation of the dumping margin and amount of the subsidy, respectively, contrast with the\ntreatment of injury in both agreements, which do not require calculation of the amount of the injury.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nunits, profits and losses in currency (or percentages), and employment in number of workers or hours\nworked.3543 The Appellate Body has emphasized that \"it is only when the overall position of the\ndomestic industry is evaluated, in light of all the relevant factors having a bearing on a situation of\nthat industry, that it can be determined whether there is 'a significant overall impairment' in the\nposition of that industry\".3544 3545\n7.1525 The United States submits that another problem with quantification of \"serious injury\" is that\nthe factors most illustrative of the condition of an industry may differ depending on the industry. For\nexample, in an industry that requires highly trained workers to produce a product, reductions in\nemployment may be particularly indicative of injury. Once such workers are dismissed, the industry\ncould have difficulty training replacement workers to permit it to restore production to previous\nlevels. By contrast, in an industry that produces a product incorporating technology that changes\nfrequently, reductions in research and development expenditures may be particularly indicative of\ninjury. Without such expenditures, the industry will be unable to make further developments in its\nproduct needed to remain competitive in the marketplace. Any formulaic mathematical\n\"quantification\" would not allow for these informed judgments about the relative importance of the\nfactors required to be considered.\n3546\n7.1526 Norway notes 3547∗ that although the United States tries to argue that the quantification\nproposed by the complainants is impossible3548, the United States does provide for some ex post facto\nquantification in the economic modelling referred to by the United States in \"Modelling\nWorksheet I\"\n3549 and \"Remedy Worksheet I\" 3550, proving that it is indeed possible to quantify, even\nfor the United States. This modelling, however, was not included in the USITC Report. The United\nStates, therefore, cannot rely on them to justify the measures. Furthermore, the United States does not\ndispute that a rebuttal against a prima facie case of violation of Article 5.1 arising from deficient non-\nattribution analysis would encompass some sort of \"quantification\" of the effect of the remedy in\nconnection with the injury caused by increased imports.\n3551\n7.1527 According to Brazil, national authorities have the obligation of demonstrating that the\nelements necessary to impose safeguard measures, whether qualitative or quantitative, are present.\nFor example, Article 4.2(b) states: \"The determination referred to in subparagraph (a) shall not be\nmade unless this investigation demonstrates, on the basis of objective evidence, the existence of the\ncausal link between increased imports…and serious injury\". Similarly, Article 4.2(c) talks about a\n\"demonstration of the relevance of the factors examined\". Article 3.1, of course, requires competent\nauthorities to set forth \"their findings and reasoned conclusions\". Thus, there is no question that the\nburden is on national authorities. Whether or not a quantitative analysis is provided or necessary will\nvary depending on the circumstances and the availability of data to conduct such an analysis. There\nare two factors present in the instant case which would seem to require a quantitative analysis to\njustify the findings and conclusions of the USITC. First, with regard to CCFRS, there were numerous\nfactors other than subject imports that intuitively would seem to have had a more substantial effect\nindividually and cumulatively than subject imports. For example, intuitively one would think that an\n\n3543 United States' first written submission, para. 1036.\n3544 Appellate Body Report, Argentina – Footwear (EC), para. 139.\n3545 United States' first written submission, para. 1035.\n3546 United States' first written submission, para. 1038.\n3547 Norway's second written submission, para. 163.\n3548 United States' first written submission, para. 1036.\n3549 Exhibit US-57.\n3550 Not exhibited.\n3551 United States' first written submission, para. 1062.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincrease in domestic excess capacity of 16 million tons in excess of demand between 1996 and\n20003552 would have a substantially greater effect in terms of injuring the domestic industry than a\n2.5 million ton increase in imports. One would also assume that an increase of 3 million tons in low-\ncost minimill shipments between 1998 and 2001 3553 would also have a substantially greater effect on\nthe health of the domestic industry than a smaller increase in imports. Thus, Brazil argues that it\nappears that there must be some demonstration that there is a genuine and substantial link between\nincreased imports, as distinguished and separated from these other factors, and serious injury. Where,\nintuitively, the facts seem to indicate one conclusion and the authorities reach another conclusion,\nthere must be some demonstration that the conclusion reached was correct. In this case, Brazil is of\nthe opinion that a quantification of the effects of imports and other causes would seem to have been\nrequired; otherwise, there is not support for the USITC's conclusion. Second, there is an abundance\nof data on which to base a quantification of the causes of injury to the domestic industry. In\nparticular, the main problem according to both the industry and the USITC was the low price levels in\nthe latter part of the period of investigation. There was an abundance of information to model the\neffect of various factors on prices. Indeed, such a model had already been accepted and endorsed by\nthe USITC economic staff in the cold rolled anti-dumping investigation. Such a model could have\nbeen constructed by the USITC. In the alternative, models were provided by various interested parties\nwhich could have been adapted to the USITC's requirements. In the face of a counterintuitive result,\nthe USITC made no effort to demonstrate a basis for its findings and conclusions.\n3554\n7.1528 Brazil asserts that the failure to undertake a proper non-attribution analysis as required by\nArticle 4.2(b) in and of itself establishes a prima facie case. In addition, Brazil believes that a\ncounterintuitive result without a concrete demonstration of how that result was reached also\nestablishes a prima facie case. Finally, as regards whether the remedy is in excess of what is\nnecessary to remedy the injury from increased imports, the imposition of a remedy in excess of that\nrecommended (and supposedly supported by findings and reasoned conclusions) without any\nexplanation of the reason or need for the change in the remedy, would also seem to establish a prima\nfacie case. Whether or not a prima facie case has been established will vary according to the facts and\ncircumstances of each case.\n3555\n7.1529 Similarly, in the opinion of Japan, Korea and New Zealand, since the authorities are the ones\ndeciding to impose safeguard measures, they bear the burden of collecting and assessing sufficient\nfactual information to meet all of the requirements for imposing safeguard measures. In situations\nwhere extensive data is available, and particularly in those cases where the data is both available and\npresented to the authorities, the authorities have an obligation to consider that data. In this case, the\ncomplainants submit that there existed extensive publicly available data and the parties presented\nvarious economic studies utilizing that data. The USITC, therefore, had information and studies at its\ndisposal to quantify the injurious effects, but chose not to do so.\n3556\n7.1530 The United States notes that Japan and Brazil posit only one way to \"quantify\" injury –\nthrough the use of economic modelling. 3557 In effect, they would replace the complex and nuanced\nanalysis anticipated by Article 5.1 with a rigid and formulaic mathematical test. Modelling is widely\nused in theoretical economics, and may play a role in the evaluation of a safeguard measure.\n\n3552 Brazil's first written submission, Figure 3.\n3553 Brazil's first written submission, Figure 24.\n3554 Brazil's written reply to Panel question No. 114 at the first substantive meeting.\n3555 Brazil's written to Panel question No. 114 at the first substantive meeting.\n3556 Japan's, Korea's and New Zealand's written replies to Panel question No. 114 at the first substantive\nmeeting.\n3557 Japan's first written submission, para. 324, Brazil's first written submission, paras. 212-214.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nHowever, modelling has important limitations that prevent it from quantifying \"injury\" within the\nmeaning of the Agreement on Safeguards, or from measuring with any precision the effect of\nincreased imports or of a safeguard measure on the individual factors demonstrating injury.\n3558\n7.1531 The United States suggests that the most important difference between the Japanese/Brazilian\nand United States' approaches lies in how models are used. Japan and Brazil argued to the USITC,\nand now argue to the Panel, that particular models can calculate the effect of imports and other factors\non the domestic industry and that the calculated results should inform the competent authorities\nanalysis of causal link and non-attribution. As a general matter, this view ignores the limitations in\ncomputer models. A model designed to estimate the impact of one market participant's sales on the\nprices and quantities of other market participants will probably reflect the effect of other factors with\nless accuracy. Although one could theoretically design models for all potential causes of injury, they\nwould require different underlying assumptions and qualitative and quantitative inputs, which would\nmake any comparison of the outputs highly suspect. In short, the best computer models available\nprovide a type of \"quantification\" that would not satisfy the obligation under the Agreement on\nSafeguards to demonstrate a causal link or to ensu re non-attribution. Specifically with regard to the\nmodels referenced by Japan and Brazil – which were developed for purposes of the Steel proceedings\n– the USITC staff concluded that they did not provide \"statistical evidence that the effect from import\ncompetition on domestic price was significantly greater than the effect of the other factors included in\ntheir analysis\".\n3559 Moreover, the models did not assess the magnitude of the effects of imports as\nopposed to the effects of other factors \"in a statistical manner\". The models measured the effect of\ndomestic competition either \"weakly\" or \"not ... at all\". 3560 Nor did the models purport to consider\nand weigh all of the factors required to be considered in assessing injury and causation. Accordingly,\nthe USITC gave the models little weight because of their \"serious limitations\".3561 3562\n7.1532 In contrast, the United States argues that it did not use a new computer model to compare\ndifferent factors as part of the causation analysis. Instead, it used an established computer model for a\ndiscrete inquiry related to one factor – imports – in analysing the permissible extent of application of\nthe safeguard measure in terms of the volume, price, and revenue for the product sold by the domestic\nindustry. Specifically, the United States took two scenarios – (1) imports in 2000 remaining at pre-\nsurge levels and (2) application in 2000 of the safeguard measures established by the President – and\nmodelled how prices and volumes of products sold in the United States might have been different. By\nlooking at the volume and price effects of imports in both scenarios and holding all other putative\ncauses of injury constant, the United States claims it had avoided the danger that the model would not\naccurately compare the volume and price effects of two different causes of injury. Moreover, since it\nis \"impossible to determine in advance with any degree of precision the level of import duty necessary\nto enable the United States industry to compete with overseas suppliers in the current competitive\nconditions\"\n3563, the United States argues that the uncertainty inherent in computer modelling is no\ndifferent from any other available analysis. In contrast, when it comes to analysing causation, there is\nan alternative – the type of qualitative analysis employed by the USITC.3564\n7.1533 The United States argues that it cannot discern exactly what the proponents of quantification\nwould have the USITC do differently. Only a few of the complainants have raised this issue and, to\n\n3558 United States' first written submission, para. 1039.\n3559 USITC Memorandum EC-Y-042, p. 42.\n3560 USITC Memorandum EC-Y-042, p. 1.\n3561 USITC Report, p. 59, footnote 260.\n3562 United States' written reply to Panel question No. 116 at the first substantive meeting.\n3564 United States' written reply to Panel question No. 116 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndate, they have not indicated exactly how the USITC should have quantified injury. According to the\nUnited States, Norway states repeatedly that quantification is required, but does not indicate how\nquantification is possible. Brazil also faulted the economic model that the USITC used in its remedy\nrecommendation, but suggests that the USITC should actually have relied upon economic modelling,\nparticularly upon a computer model submitted on behalf of foreign producers, which the USITC\nrejected.\n3565 Japan also faults the USITC for not relying on the foreign producers' computer model.3566\nAccording to the United States, proponents of quanti fication have not explained what they mean by\nthis term, or how a competent authority would quantif y injury or the effects of imports on all of the\nindicators of injury that the Agreement on Safeguards requires to be considered. Therefore, the\nUnited States claims that it cannot tell how its numeric exercise differed from any suggestions the\ncomplainants might have.\n3567\n7.1534 The United States notes that the complainants take varying positions on whether\nquantification is necessary. Most avoid the question by stating that the competent authorities must\nquantify injury \"if necessary\", and bear the burden of doing so.3568 The United States contends that on\nthe contrary, it is a well-established principle in disputes under the DSU that the party asserting the\naffirmative of a proposition bears the burden of proving it. 3569 The United States claims to have\npresented extensive evidence that it is not possible to quantify precisely the injury caused by increased\nimports or the injurious effects of increased imports for use in an analysis separating the injurious\neffects of imports and other factors. Therefore, it argues that the proponents of quantification bear the\nburden of establishing both that (i) the Agreement on Safeguards requires quantification and (ii) an\naccurate quantification of injury or injurious effects caused by increased imports is possible.\nAccording to the United States, the complainants have not met either aspect of this burden. The only\nevidence that the complainants present to demonstrate that quantification is possible consists of\ncomputer models submitted to the USITC, which the USITC rejected. Although Japan and Brazil\ncriticize the USITC for \"dismissing\" economic modelling results \"in a single footnote\"\n3570, they never\naddress the USITC's reasons for placing little weight on the models. The only legal basis the\ncomplainants cite for the proposition that quantification is mandatory is the Article 5.1 \"no more than\nthe extent necessary\" standard. Some complainants believe that a Member can meet this standard\nonly if it quantifies the effects of both increased imports and the safeguard measure. 3571 However, in\nthe opinion of the United States, a qualitative analysis could also suffice to establish that a safeguard\nmeasure was commensurate with the injury attributable to increased imports.3572\n7.1535 For the United States, to the extent that the complainants have suggested that some further\nanalysis is required to precisely and scientifically quantify the exact measure of injury and effect of\nthe measures taken, such a standard would clearly be unworkable and inconsistent with the\n\n3565 Brazil's first oral statement, para. 35.\n3566 Japan's first written submission, paras. 276-281.\n3567 United States' written reply to Panel question No. 116 at the first substantive meeting.\n3568 European Communities' written reply to Panel question No. 114 at the first substantive meeting;\nJapan, Norway and Brazil take a similar position in their written replies to Panel question No. 114 at the first\nsubstantive meeting. Korea and New Zealand argue that the quantification is always necessary, while China and\nSwitzerland take no position; Korea's, New Zealand's an d Switzerland's written replies to Panel question No.\n114 at the first substantive meeting.\n3569 Appellate Body Report, US – Wool Shirts and Blouses, p. 17.\n3570 Brazil's first written submission, para. 213; Japan's first written submission, paras. 276-278; the\nEuropean Communities makes a similar point, European Communities' first written submission, para. 278.\n3571 New Zealand's written reply to Panel question No. 114 at the first substantive meeting.\n3572 United States' second written submission, paras. 192-196.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAgreement. It would create a standard that no party could meet in taking a safeguard measure and\nwould thus effectively nullify the Agreement.3573\n7.1536 In the United States' view, no quantification analysis can meet the requirements of\nArticles 5.1 or 4.2(b). The limited numerical exercises provided in the United States' first written\nsubmission had the limited purpose of providing the Panel with additional evidence that the steel\nsafeguard measures were consistent with Article 5.1. They certainly do not support the notion that\neither the type of quantification envisaged by some complainants or a numerical exercise like the\none(s) used by the United States in this dispute is/are required.3574\n(g) Exclusion of products\n7.1537 The European Communities and Norway argue that to determine whether products\ninvestigated can be excluded from the application of a safeguard measure, Article 5 must be\ninterpreted in the light of the principle of parallelism inherent in that provision and in Articles 2 and 4\nof the Agreement on Safeguards. Seen in this context, the clause \"extent necessary to prevent or\nremedy serious injury\" in Article 5.1 means \"extent necessary to prevent or remedy serious injury\ncaused by the imports which have formed the basis of the 'increased imports' and the 'serious injury'\nand causation determinations\", and which must correspond to the imports subject to the measure. If\nthe serious injury and causation have been assessed with reference to a certain range of products, it is\nthat range of products which has been recognized to cause serious injury. The level and type of\nremedy appropriate to counter that serious injury cannot be re-distributed among a narrower range of\nproducts. Otherwise, these claimants suggest, cert ain imports would be attributed the consequences\nof injury they have not been determined to cause. On the other hand, if all imports investigated and\nfound to have caused serious injury are covered by a measure, then such measure could be uniformly\nreduced to some less than is necessary if the importing country so chose.\n3575\n7.1538 In the view of Brazil, product exclusions alter the remedy by making it less restrictive. As\nsuch, they affect the level of protection afforded by the remedy and should be viewed as such. 3576\nJapan considers that product exclusions are specifically aimed at ensuring that the measures are not in\nexcess of what is necessary to provide relief. If a product is not produced in the United States, then it\nwould be excessive to impose relief for that product.\n3577 According to Korea, by excluding those\nproducts from the remedy, the United States is choosing not to impose relief. Such action is not only\npermitted but contemplated by the terms of Article 5.1, first sentence.3578\n7.1539 According to the European Communities, the exclusion of a product (or sub-product) covered\nby a safeguard measure, because it is requested by the United States industry or for whatever other\nreason, removes the restriction on that sub-product but does nothing to render more proportionate the\napplication of the safeguard measures to the remaining sub-products. Indeed, the fact that product\nexclusions have even been requested and obtained by the United States domestic steel industry itself\n(for example for slabs) would tend to indicate that the original level of the measures was\ndisproportionate.\n3579\n\n3573 United States' first written submission, para. 1064.\n3574 United States' written reply to Panel question No. 116 at the first substantive meeting.\n3575 European Communities' and Norway's written re plies to Panel question No. 100 at the first\nsubstantive meeting.\n3576 Brazil's written reply to Panel question No. 100 at the first substantive meeting.\n3577 Japan's written reply to Panel question No. 100 at the first substantive meeting.\n3578 Korea's written reply to Panel question No. 100 at the first substantive meeting.\n3579 European Communities' second written submission, para. 520.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1540 The United States responds that the exclusion of particular types of each product from the\nmeasures does not establish a prima facie case of inconsistency with Article 5.1. That Article clearly\nallows a Member to apply a safeguard measure less than the extent necessary to remedy or prevent\nserious injury and to facilitate adjustment, as long as it complies with the MFN obligation under\nArticle 2.2. This discretion includes the lessened application – or even non-application – of a measure\nto particular types of a product. The use of \"no more than the extent necessary\" indicates that\nArticle 5.1 establishes a maximum for the application of a safeguard measure. \"No more than\" means\nthat the measure may be applied up to, but not beyond, that level. Since Article 5.1 places no\nconstraint on a Member's ability to apply a measure less than necessary, a Member has discretion to\ndo so. Accordingly, a Member remains free to exclude a type of the product or apply the measure at\nlower levels to that type of the product as long as it complies with the other requirements of the\nAgreement on Safeguards, including the Article 2.2 requirement to apply the measure regardless of\nsource.\n3580\n7.1541 The United States notes that Japan, Korea and Brazil agree that product exclusion is not\nnecessarily inconsistent with Article 5.1. Only New Zealand argues that exclusions are forbidden, on\nthe grounds that parallelism requires the application of any safeguard measure to each and every one\nof the items included in the product subject to a finding of serious injury.3581 (The United States refers\nto this concept as \"scope parallelism\".) New Zealand recognizes that parallelism, as described in US –\nWheat Gluten and US – Line Pipe , \"was, on the facts, restricted to imports by source\". 3582 ( T h e\nUnited States refers to this as \"source parallelism\".) However, according to the United States, New\nZealand argues that those reports also stand for the \"broad principle\" of scope parallelism. For the\nUnited States, no such principle exists. 3583 The United States argues that New Zealand has not\nrebutted their analysis and, therefore, has not established a prima facie case that the Agreement on\nSafeguards requires scope parallelism.3584\n7.1542 For the United States, the exclusions (or reductions in application) are a factor that the Panel\nshould consider in evaluating whether the steel sa feguard measures are consistent with Article 5.1.\nThese adjustments to the steel safeguard measures lessen their effect on the domestic industries, and\nthus lessen the extent to which they prevent or remedy serious injury.3585\n(h) Different remedies for slabs and CCFRS\n7.1543 The European Communities and China note that the two separate safeguard measures on slabs\nand CCFRS respectively, as explained by the USITC itself, have different goals and extents. 3586 I n\nparticular, the tariff rate quota on slabs aims at taking into account the specific end-use and marketing\nchannel of slabs, namely the fact that \"domestic producers typically internally consume nearly all the\nslabs they produce\" and that \"commercial sales of slabs have been extremely limited\". Accordingly,\n\n3580 United States' written reply to Panel question No. 100 at the first substantive meeting.\n3581 New Zealand's written reply to Panel question No. 92 at the first substantive meeting.\n3582 New Zealand's written reply to Panel question No. 92 at the first substantive meeting.\n3583 United States' first written submission, paras. 763-766.\n3584 The United States also notes that, as a systemic matter, New Zealand's understanding of the US –\nWheat Gluten and US – Line Pipe reports is troubling. In New Zealand's view, general comments by the\nAppellate Body in those reports are dispositive as to an issue – scope parallelism – that the parties did not raise\nand that the Appellate Body did not address. Thus, the Appellate Body did not have the chance to fully consider\nthe implications of scope parallelism and the consistency of that concept with the Agreement on Safeguards. Its\nstatements regarding source parallelism should accord ingly be understood as being inapplicable to scope\nparallelism.\n3585 United States' second written submission, para. 210.\n3586 USITC Report, Vol. I, pp. 362-366.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe tariff rate quota on slabs is \"intended to avoid causing harm to domestic steel producers that have\nlegitimate needs to continue to import slabs\". In the light of their respective goals and extents, it\nappears difficult to argue that the safeguard measures for slabs and for the rest of certain carbon and\nalloy flat can be justified on the basis of the same determination that increased imports of all certain\ncarbon and alloy flat have caused injury to the domestic industry producing all carbon and alloy\nflat.\n3587\n7.1544 For the European Communities, if a competent authority does present a recommendation,\nfurther finds that its recommendation would be adequa te to address the injury found to be caused by\nincreased import and furthermore explicitly states that any more restrictive remedy would be\ninappropriate, then it would be difficult to cons ider that a deviation from such recommendation could\nbe justified on the basis of the determination made by the competent authority that increased imports\nhave caused injury to the domestic industry producing like products. In these circumstances,\nexplanation for departure from the recommendation is necessary.\n3588 Moreover, if such competent\nauthority does present a recommendation and reaches findings and reasoned conclusions that its\nrecommendation would be adequate to address the injury caused by increased import and furthermore\nexplicitly states that any more restrictive remedy would be inappropriate, then deviation from the\nrecommendation resulting in a more trade restrictiv e remedy than that has been recommended would\nsuggest that the remedy effectively implemented goes beyond the extent necessary in violation of\nArticle 5.1.\n3589 For Korea, the critical question is whether the measure adopted can be reconciled and\nis consistent with the underlying determinations of serious injury and causation. In the case of welded\npipe, for example, the critical issue is that th e USITC recommendation actually provided a detailed\nexplanation of how the threat of injury fi nding provided a \"benchmark\" for the remedy\nrecommended.3590\n7.1545 Japan adds that if these products are the same and compete with each other, why should they\nbe subjected to different remedies with different effects? The burden is on the United States to\nexplain why the remedy applied to slab, which is less restrictive than the tariffs applied to finished flat\nproducts, should not be expanded and applied to finished flat products so as to meet the obligations of\nArticle 5.1. In other words, absent some explanation, Japan believes there is a presumption that\ndifferent remedies within a \"like product\" violate Article 5.1. Japan submits that different remedies\nfor products within a single like product category, as defined by the competent authority, proves that\nthe products were inappropriately grouped together within that category.3591\n7.1546 Similarly, Korea and New Zealand argue that by applying a remedy to slab that was less\nrestrictive than that applied to other CCFRS produc ts, the United States was acknowledging that the\ninjury caused by CCFRS products (slab) could be addressed through less restrictive means than the\nremedy applied to most CCFRS products.3592\n7.1547 Brazil argues that the fact that the United States granted a separate additional quota for ultra\nlow carbon slab is recognition that there are sub-products within the slab grouping. 3593 Both the\n\n3587 Complainants' written replies to Panel question No. 104 at the first substantive meeting.\n3588 European Communities' written reply to Panel question No. 110 at the first substantive meeting.\n3589 European Communities' written reply to Panel question No. 109 at the first substantive meeting.\n3590 Korea's written reply to Panel question No. 109 at the first substantive meeting.\n3591 Japan's written reply to Panel question No. 103 at the first substantive meeting.\n3592 Korea's and New Zealand's written replies to Panel question No. 103 at the first substantive\nmeeting.\n3593 Exclusion of Particular Products from Actions under Section 203 of the Trade Act of 1974 With\nRegard to Certain Steel Products; Conforming Change s and Technical Corrections to the harmonized Tariff\nSchedule of the United States, 67 FR 56182 (30 August 2002).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexclusions and the additional slab quota are recognition that certain products within a broader like\nproduct category may not be produced in the importing market or might not be produced in sufficient\nquantities. It points out that the United States has traditionally carved out exclusions from like\nproduct definitions in anti-dumping and countervailing duty cases.\n3594 The fact that there are different\nremedies for products within the same USITC product grouping, however, raises a very different\nquestion. Specifically, if all of the products within the like product category compete with each other,\nwhy is it necessary to have a different remedy for a sub-category of these products? Presumably, if\nslab is competing directly with plate, hot-rolled, cold-rolled and corrosion resistant flat products, the\nremedy necessary to eliminate the injury from imports of slab is no different than that necessary to\neliminate the injury from imports of these downstream products. If slab is the same like product\nsubject to the same competitive dynamics as the other flat-rolled carbon products, why is it necessary\nto impose a different remedy on slab? According to Brazil, the need for a different remedy for slab\ndemonstrates that the products within the grouping are not like one another, do not directly compete\nwith one another and should not be grouped together. If products are like one another, then the\ncompetitive dynamics between them should, by definition, be the same. Hence, there is no reason\nwhy the remedy should not be the same. The fact that the President felt compelled to impose a TRQ\nfor slab and a high tariff for the other products within the flat-rolled grouping demonstrates that there\nare different competitive dynamics at play between slab and the finished flat products, meaning that\nthey cannot be part of the same like product.\n3595\n7.1548 The United States argues that the Agreement on Safeguards also allows a Member to reduce\nthe extent of application of a measure to certain items within the imported product. For a tariff-based\nsafeguard measure, such a reduction could take the form of a lower rate of duty for a particular item,\nor a zero-rate for a limited quantity of imports of that item. Just as with a complete exclusion, either\nof these measures would lessen the overall application of the measure. The exclusions endorsed by\nJapan, Korea, and Brazil contain several examples of quantitative exclusions for particular items.\n3596\n7.1549 The complainants misunderstand the basis for the application of a TRQ to slab. The USITC\nfound that slab was part of the certain carbon flat-r olled like product and affected the sale of that\nproduct in the United States. Specifically, the USITC noted that \"slab prices are solely a function of\ndownstream prices for hot-rolled steel and cold-rolled steel, which would suggest a strong cross-price\neffect between these types of steel\". 3597 The President did not revise or modify these conclusions, or\nthe overall finding that slab imports were injurious. Instead, he found that a TRQ for slab was\nappropriate based on the various statutory factors that he was required to consider, even if the remedy\nwas less than the maximum remedy permitted under the Agreement on Safeguards.\n3598\n7.1550 The treatment of slab does not call into question the USITC's like product definition for\ncertain carbon flat-rolled steel. The President did not find that slab was not \"like\" other steel\nproducts. Rather, the President included slab in the safeguard measure precisely because slab imports\nare like domestic certain carbon flat-rolled steel, and have an effect on the domestic industry\nproducing that product. He then applied the measure to slab in the form of a TRQ because the long-\n\n3594 For example, Carbon and Certain Alloy Steel Wire Rod From Brazil et. al., Inv. Nos. 701-TA-417-\n421, and 731-TA-953-954, 956-959, 961-962, USITC Pub. 3546 (Oct. 2002) at fn. 2 (excluding, among other\nproducts, grade 1080 tire cord and tire bead quality wire rod).\n3595 Brazil's written replies to Panel questions Nos. 22 and 103 at the first substantive meeting.\n3596 United States' second written submission, para. 211.\n3597 USITC Report, p. 43.\n3598 United States' second written submission, para. 213.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nterm remedial effect of applying the safeguard tariff to all slab was outweighed by the short-term\ndisruption such action would cause to the broader United States economy.3599\n2. Demonstration/justification by the United States of the measures imposed in this case\n(a) General\n7.1551 The United States argues that an analysis of the ten safeguard measures applied by the United\nStates demonstrates that they are consistent with the standard set out in Article 5.1, as interpreted by\nthe Appellate Body. The USITC Report established that the United States has the right to apply a\nsafeguard measure with regard to each of the ten steel products at issue. The United States claims that\nit has demonstrated that as a result of unforeseen developments, imports of each product increased in\nsuch quantities and under such conditions as to cause or threaten to cause serious injury. The report\nfurther demonstrated that, in reaching this determination, the USITC separated and distinguished the\ninjury caused by increased imports from the injury caused by other factors. According to the United\nStates, no complainant has established a prima facie case of inconsistency with these obligations. To\nthe extent that any complainant could be considered to have made a prima facie case on any of these\nissues, the discussion in the preceding sections has fully rebutted that case.\n3600 The United States\nsubmits it is evident, through both a qualitative and a quantitative assessment of the effects of imports\non the relevant domestic industries and of the measure taken, that the relief provided was only to the\nextent necessary to prevent or remedy serious injury and to facilitate adjustment. The injury suffered\nby the domestic industries at issue in this case was extraordinary by any measure. The nature and\nextent of this injury was documented throughout the findings of the USITC. This injury involved\nsignificant financial losses, numerous bankruptcies, tens of thousands of job losses, as well as lost\nsales, decreased production, reduced capacity utilization, lost investment opportunities and many\nother indicators of serious injury. The USITC's findings also document the extraordinary steps\nrequired for domestic producers to facilitate adjustment to import competition. In the opinion of the\nUnited States, the enormity of the injury documented here plainly necessitated the type and extent of\nthe measures taken by the United States if the industries at issue were to be given any chance to\nrecover from serious injury and adjust going forward.\n3601\n7.1552 According to the United States, one potential numerical approach begins with the ordinary\nmeanings of the terms of Article 5.1. A safeguard measure to \"remedy\" injury caused by increased\nimports would, in the ordinary meaning of the term, need to \"put right, reform, (a state of things);\nrectify, make good\". To \"prevent\" serious injury would be \"to forestall or thwart by previous or\nprecautionary measures\". To \"facilitate\" adjustme nt would be to promote the adaptation to changed\ncircumstances, namely, competition from increased imports. Each aspect of Article 5.1 – the \"injury\"\nbeing prevented or remedied and the \"adjustment\" being facilitated – depends on the facts of the case,\nmost particularly the condition of the industry and the injurious effects of imports. Most of the steel\ndeterminations noted that the low prices of increased imports were forcing domestic producers to\nlower their own prices, thus reducing profitability. In these cases, the United States considers that a\nremedy in the sense of Article 5.1 would both stop the ongoing negative effects of imports and allow\nthe domestic industry to recoup the losses caused by increased imports during the investigation\nperiod. Such a remedy would also advance the goal of facilitating adjustment, since producers could\n\n3599 United States' second written submission, para. 214.\n3600 United States' first written submission, para. 1055.\n3601 United States' first written submission, paras. 1066-1067.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndevote increased profits to projects that would make them more competitive with imports when the\nsafeguard measures are removed.3602\n7.1553 The United States explains that, in some of the steel determinations, the analysis of the\nUSITC noted that the domestic industry's loss of market share played a prominent role. In these\ncases, the United States considers that a remedy in the sense of Article 5.1 would allow the domestic\nproducers to recover market share. The associated improvements in revenue and profits would also,\nto some extent, allow them to undertake projects that would make them more competitive with\nimports when the safeguard measures are removed. In both sets of cases, simply counteracting the\ncurrent negative effects of imports or promoting a temporary return to the industry's historical\ncondition before imports began to increase would not be sufficient. First, the industries' condition\nbefore increased imports manifestly did not permit them to adjust to increased imports. That is why\nthey reached a state of serious injury. Second, the very concept of \"remedy\" suggests an alleviation of\nthe injury identified during the investigation period, as well as cessation of future injury. An industry\ncannot adjust successfully if past losses left it in a financially perilous position that a measure could\nremedy only in the future. Thus, the United States considers that the extent of application of a\nsafeguard measure includes both counteracting current negative effects of imports and alleviating past\nnegative effects to permit the industry's adjustment.\n3603\n(b) Numerical analysis\n7.1554 The United States explains that the simple numerical analysis described below focuses on\nconditions during a year in the investigation period to estimate the change in revenue or import\nvolume necessary to remove the current negative effects of imports and to recoup past negative\neffects. As a surrogate for the \"uninjured\" condition of the industry, the United States uses a year\neither before the increase in imports or before the condition of the industry began to decline. This is a\nconservative approach because the USITC did not identify any time during the investigation period as\none in which there was no injury. Indeed, in several cases, the USITC specifically found that imports\nhad negative effects throughout the period. Thus, any part of the period would potentially reflect a\nlevel of operating income or revenue already reduced by the effects of increased imports.\n3604\n7.1555 The United States recalls that the selection of a comparison year, estimated operating margin,\nor estimated import volume are not intended to suggest that imports did not have negative effects on\nthe domestic industry and its operating income levels at that time. It does not imply either that there\nwas serious injury in that year, or that there was not serious injury, as the USITC did not make a\ndetermination in that regard. The comparison year merely provides a starting point to evaluate the\nnegative effects that imports in subsequent years may have had on the industry's performance. This\nnumerical analysis then estimates the extent to which non-NAFTA import prices would have to\nincrease, or volumes decrease, to attain the desired condition. Accordingly, to perform this numerical\nanalysis for the industries in which the price effects of imports played a prominent role, the United\nStates performs a four-step analysis to estimate the extent to which domestic producers' prices and\nrevenues would have to rise to eliminate the negative effects of increased imports on the industry's\noperating income. The United States then estimates the degree that import prices would have to\n\n3602 United States' first written submission, para. 1066.\n3603 United States' first written submission, para. 1068.\n3604 United States' first written submission para. 1069.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincrease for the domestic industry to achieve this level of profitability, and the additional tariff that\nwould achieve that price increase.3605 3606\n7.1556 The United States explains that the first step of this approach estimates the amount of revenue\ndomestic producers would have needed in each year to raise operating income to its level at a point\n(the \"base year\") in the investigation period before the industry's performance began to decline. The\napproach estimates the degree to which the industry's operating income declined in each year after the\nbase period. In cases in which the USITC found that factors other than imports were also injuring the\nindustry, the approach uses a comparison year in which the USITC observed that one or more non-\nimport factors were affecting the industry. For example, if the USITC found that increased capacity\nhad injurious effects, the United States would attempt to choose a year in which capacity had already\nrisen to its level during the period of serious injury. The approach then estimates the amount that\nrevenue would have had to increase to produce that estimated operating margin in each year in which\nthe USITC identified the industry's performance as deteriorating due to increased imports. In\nsituations in which there is no comparison year that reflected the injurious effect of non-import\nfactors, this analysis either omits the years in which other factors had an effect, or subtracts the\namount of profit shortfall the United States estimates would be attributable to that factor.\n3607\n7.1557 In the second step, the United States' analysis estimates the degree to which domestic\nproducers' prices would have to increase during the pendency of a safeguard measure. Any price\nincrease would have to return domestic prices at least to a level that would provide operating income\nequal to a level that does not reflect the price effect of increased imports and then increase prices by a\nfurther amount to counteract the negative effects of imports from 1998 to 2000 and to facilitate\nadjustment. This estimate calculates the further amount of increase by dividing the revenue shortfall\nestimate in the first step by total revenue during the period of the shortfall, and adding that percentage\nto the operating income margin for the comparison year.\n3608\n7.1558 As a third step, this approach estimates the degree to which import producers' prices would\nhave to increase for domestic producers to achieve the operating income margin described above.\nThe average unit values or USITC pricing comparisons, as appropriate, involved domestic prices from\nyears when the industry did not achieve this level of profitability. To estimate a price that would\nachieve the target operating income level calculated in the second step, this approach decreases\ndomestic producers' annual unit value or price 3609 by the unit operating income 3610 and then increases\nthe resulting figure to a point where it would prod uce an operating income margin equal to the target\noperating income margin. This approach compares this price in each year to the annual unit value or\n\n3605 For the most part, the United States bases the calculations on unit values, as these captured all of\nthe products under investigation. For some products, the findings of the USITC or data in the USITC Report\nindicated that the difference in unit values between im ports and domestic products reflected different product\nmixes, as well as the injurious effects of price underselling by non-FTA imports. In those cases, the United\nStates based our calculations on the item-specific pricing comparisons conducted by the USITC.\n3606 United States' first written submission, para. 1070.\n3607 United States' first written submission, para. 1073.\n3608 United States' first written submission, para. 1074.\n3609 Since the USITC performed pricing comparisons on a quarterly basis, the United States weight\naverages pricing data to produce an annual figure that we could then compare to profitability, which was\nexpressed on an annual basis.\n3610 The United States does this by multiplying the unit value annualized price by the one minus the\nreported profit margin.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nprice of imports to calculate how much import prices would have to increase for the domestic industry\nto achieve the target operating income.3611\n7.1559 As a fourth step, this approach estimates the additional duty that would achieve the price\nincrease calculated in the third step. As part of its investigation, the USITC performed economic\nmodelling on the United States industries. These models indicated that there would not be full \"pass-\nthrough\" of any increases in tariff rates. That is, an increase of tariffs of X% would result in a less-\nthan-X increase in the prices importers charged in the United States market. Based on these models,\nthe United States estimates a range of tariff increases that would produce the target increase in import\nprices for the product in question. These estimates of pass-through were in line with those predicted\nby industry participants.\n3612\n7.1560 The United States explains that this approach uses a somewhat different process for the\nfinding of threat of serious injury with regard to welded pipe. For that industry, the concepts of\n\"preventing\" and \"remedying\" serious injury overla p to a significant degree. To \"prevent\" injury\nattributable to imports, which the USITC found would imminently result from the negative effects of\nincreased imports during the investigation period, a safeguard measure would have to counteract those\ncurrent negative effects. Since the determination reflected negative performance that developed late\nin the period, the revenue shortfall calculation in the first step reflected a shorter period than for the\nindustries subject to determinations of serious injury. Finally for industries in which the market share\neffects of imports were prominent, this approach analyses compliance with Article 5.1 in terms of\nimport volumes. This approach was used with tin mill and stainless steel wire.\n3613\n7.1561 The United States reiterates that while this numerical analysis may be instructive, as\nrecognized by the Working Group in US – Fur Felt Hats , it is not a science. These estimates are\nintended to show that the steel safeguard measures were applied no more than the extent necessary to\nprevent or remedy serious injury. For the United St ates, they are conservative estimates, in that the\nUSITC identified a number of negative effects that imports had on the domestic industry – reduced\nvolume, prices, revenue, production, capacity ut ilization, employment, capital formation and\ninvestment – but these estimates have not attempted to address the negative effects of imports on\nother indicators of injury, such as employment, production, and capacity utilization. These estimates\nalso do not attempt to add to the estimated tariff levels to attain operating income levels that would\nfully facilitate the adjustment of the industry to increased imports.3614\n7.1562 The United States indicates that the safeguard measures worksheets for each product show the\nresults of these calculations, but it reiterates that the decision on the nature and level of a safeguard\nmeasure, or the defense against a claimed inconsistency with Article 5.1, is a not strictly numerical\nexercise. Just as \"serious injury\" as described in the Agreement on Safeguards is not quantifiable, the\noverall effect of a safeguard measure in preventing or remedying serious injury and facilitating\nadjustment is not quantifiable, either. The United States reiterates that there are important limitations\nin the analytical tools that are available to estimate the effect of a remedy. Thus, any numerical\nanalysis is, at best, an approximation that might assist a panel in evaluating whether a measure is\ncommensurate with the injury caused by increas ed imports and the need for adjustment. The\nnumerical analysis will not delineate with any precision the extent of the injury, or the extent of\napplication of the measure that would remedy only that injury. In short, these estimates are not in any\n\n3611 United States' first written submission, para. 1075.\n3612 United States' first written submission, para. 1076.\n3613 United States' first written submission, para. 1077.\n3614 United States' first written submission, para. 1079.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmanner a quantification of injury, excluding as they do a consideration of most of the factors required\nto determine serious injury under Article 4.2(a).3615\n(c) Economic model\n7.1563 The United States explains that economic modelling of the price, volume, and revenue effects\nof increased imports and of the safeguard measures established by the US President on 5 March 2002\nalso suggests that these measures were in accord with Article 5.1. During its remedy phase, the\nUSITC prepared an economic model, similar to ones it has used over a long period and in a variety of\nproceedings, to model the theoretical effect of various measures on the relevant U.S. industries. It is a\ncomparative statics model, which estimates how price, quantity, and total revenue associated with\nsales by domestic producers and various imports sources during a particular period would have been\ndifferent if there were a change in market conditions. It is important to recognize that the model does\nnot predict future performance and, does not measure injury as such. What it does do is estimate how\ncertain indicators of past performance might have changed if market parameters had changed.\n3616\n7.1564 The United States stated that it used this model, inputting variables to model how the\nquantity, price, and revenue of sales by the domestic industry and various import sources would have\nchanged in 2000 if the safeguard measure established by the US President on 5 March 2002, had been\nin effect during that period. The results appear in column 2 of the Modeling Results Worksheet for\neach product.3617\n7.1565 The United States explained that it then modelled how the quantity, price, and revenue of\nsales by the domestic industry would have changed if imports in 2000 had been at the same quantity\nin a year prior to the increase in imports. The resu lts appear in column 1 of each Modelling Results\nWorksheet. This exercise only models the effect of the change in imports on the price, quantity, and\nrevenue associated with sales of the domestic like product. It does not capture the injury that imports\nmay have been causing at lower levels, before any increase. Subject to all of the limitations inherent\nwith modeling, this model provides a rough estimate of certain effects of the increase in imports, i.e.,\non the quantity, price, and revenue of sales by the domestic industry. A comparison between the\nfigures in columns 1 and 2 of each worksheet expl ains how the remedy applied was no more than the\neffect of the increase in imports on indicators of injury covered by the model – the price, volume, and\nrevenue associated with sales by the domestic industry.\n3618\n(d) USITC recommendations compared with justification by the United States in this case\n7.1566 The United States notes that it is important to recognize the differences in the use of the\nmodel by the USITC in its remedy discussion and in the modelling exercise in the United States' first\nwritten submission.3619 Although the volume, price, revenue, and elasticity inputs to reflect market\nconditions in 2000 were the same, the USITC modelled a series of remedy options different from\nremedies subsequently chosen by the President. In contrast, the modelling exercise in the United\nStates' first written submission is based on the estimated price, volume, and revenue effects of the\nremedies actually applied by the President. It compares these with the estimated price, volume, and\nrevenue effects of the increase in imports. The USITC did not model the price, volume, and revenue\n\n3615 United States' first written submission, para. 1080.\n3616 United States' first written submission, para. 1081.\n3617 United States' first written submission, para. 1082.\n3618 United States' first written submission, paras. 1083-1084.\n3619 The United States notes that the USITC used the modelling results as one element in its evaluation\nof the remedy options, and not in its analysis of injury and causation.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\neffect of the increase in imports. It is also im portant to recognize that the USITC reached its remedy\nrecommendation by considering a number of factors, of which the results of the model were only one.\nThe USITC also considered information and arguments submitted by the parties, testimony at its\nremedy hearings, data on the administrative record, and non-modelling economic analysis. Based on\nthis information, the USITC evaluated the remedy in terms of all of the injurious effects of the\nincreased imports – changes in the production, productivity, capacity utilization, profits and losses,\nand employment, as well as the price, volume, a nd revenue of each domestic industry, and any other\nrelevant factor. The Memorandum accompanying Proclamation 7529 specifies that the President\ndetermined that the steel safeguard measures were appropriate, \"after considering all relevant aspects\nof the investigation, including the factors set forth in section 203(a)(2) of the Trade Act and the\nsupplemental report\".\n3620 These include the recommendation and report of the USITC, the extent to\nwhich workers and firms in the domestic industry are benefiting from adjustment assistance and\nengaged in worker retraining efforts, the domestic industries' efforts to make a positive adjustment to\nimport competition, the short- and long-term economic and social costs and benefits of any safeguard\nmeasure, and national economic interests, among other considerations. The modelling exercise uses a\ncomparison of the price, volume, and revenue effects of the actual measures as compared to the price,\nvolume, and revenue effects of increased imports to confirm that the safeguard measures were not\napplied beyond the extent necessary. The United States provides this analysis in rebuttal to the\ncomplainants' arguments that the USITC findings were inconsistent with Article 4.2(b), and that a\nfinding in their favour on this point would, by its elf, create a presumption that the measures are\ninconsistent with Article 5.1.\n3621 3622\n(e) Justifications for each of the safeguard measures\n7.1567 The United States explains how and why it considers that the level of remedy chosen by the\nPresident for each safeguard measure is no more restrictive than what was necessary to remedy\nserious injury and allow for adjustments\n(i) Tariff on CCFRS and tariff-rate quota on slabs\n7.1568 The United States\n3623 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domestic CCFRS industry and this was the starting\nassumption of its justification.\n7.1569 The USITC identified six factors other than in creased imports that potentially caused injury:\ndeclining demand, increased capacity, legacy costs, intra-industry competition, management\ndecisions, and purchaser consolidation. It found that legacy costs, management decisions, and\npurchaser consolidation did not cause injury to the domestic industry during the investigation period.\nThe USITC did not identify declining demand prior to the first half of 2001 as a cause of injury.\nDemand increased from 1996 through the third quarter of 2000, and demand for all CCFRS products\nin full year 2000 was higher than in 1996 or 1999. However, the USITC found that declining demand\ncontributed to serious injury at the end of the investigation period.\n3624 The USITC noted that capacity\nincreases outstripped growth in apparent domestic consumption, and that production increased at a\nlower rate, causing capacity utilization rates to fall, which would affect producers' pricing behavior.\n\n3620 Memorandum of 5 March 2002, 67 Fed. Reg. 10593, 10594 (Exhibit CC-13).\n3621 The Appellate Body has found that any presumption created by an inconsistency with Article 4.2(b)\nwould be rebuttable. Appellate Body Report, US – Line Pipe, para. 262.\n3622 United States' written reply to Panel question No. 72 at the second substantive meeting.\n3623 United States' first written submission, paras. 1085-1101.\n3624 USITC Report, p. 63.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nHowever, it did not attribute this effect to imports. It noted that imports consistently undersold the\ndomestic industry – including those producers that added capacity – and continued to lead prices\ndown in 1999 and 2000. From this, the USITC concluded that imports, not increased capacity, were\nthe primary cause of decreasing prices.\n3625 The USITC found that competition from minimills had\nsome effect on domestic pricing. The Commissioners concluded that although minimills had lower\ncosts than integrated producers, it was imports that were price leaders and led prices down,\nunderselling the minimills throughout the investigation period. Accordingly, the USITC found that\nminimills were not primarily responsible for declines in domestic prices.3626 In this regard, the United\nStates notes that the volume of imports far exceed ed the volume of minimill sales in the commercial\nmarket, by an order of two-to-one. 3627 The USITC found that the only factors other than increased\nimports that caused injury to the domestic industry were increased capacity, competition from\nminimills, and a decline in demand after 2000. This is not to suggest that imports in 1996 and 1997\nhad no negative effects. However, since the analysis of the USITC focused on changes in industry\nperformance after 1997, and as a conservative estimate of the injury attributable to imports, the\nnumerical analysis for CCFRS was based on the changes from 1998 through the first half of 2001\nonly, as compared with 1997. The injury attributable to imports from 1998 to 2000 continued into the\nfirst half of 2001. Non-FTA unit values fell in the first half of 2001, as compared with the same\nperiod in 2000. Beginning in the fourth quarter of 2000, domestic prices collapsed. Import prices fell\nto a lesser extent, resulting in a reduction, or elimination of the margins of underselling.\n7.1570 The United States notes that the numerical analysis follows the general approach outlined\npreviously to evaluate the safeguard measure on CCFRS products, with appropriate modifications to\nreflect the greater variation among the categories of steel covered by the like product. The estimate in\nthe analysis is based on the unit values, which appear to be broadly reflective of the products available\nfrom domestic producers and the import sources. This is a conservative approach since, for most of\nthe period, differences between domestic and non-FTA import unit values were greater [sic] than the\nmargin of underselling. The analysis also considers the effect of anti-dumping and countervailing\nduty orders on the domestic industry. Most of the orders predate the USITC investigation period.\nThe exceptions are the 1997 and 2000 orders on plate, and the 1999 and 2001 anti-dumping orders on\nhot-rolled steel. The USITC found that import surges in many of the products occurred after anti-\ndumping and countervailing duty orders were in place, an observation that applies equally to pre-\ninvestigation-period orders and the 1997 plate orders. In addition, the USITC data for the surge and\npost-surge periods reflect any effect on the industry that these orders may have had. Since the United\nStates bases its estimate of the measure on that data, it considers that it does not need to perform any\nadditional analysis to account for these orders. The 1999 and 2001 anti-dumping duty orders and\nsuspension agreements on hot-rolled steel applied to several countries. However, in light of the fact\nthat the 1999 orders did not prevent the continuation of imports at high and injurious levels, and\nwould not have prevented injury by fairly traded imports, the analysis did not adjust the estimate to\naccount for these orders. With regard to the 2000 anti-dumping orders on plate, it is significant that\nthe offset of dumping under the 1997 dumping orders and suspension agreements affected the volume\nof imports, but did not prevent a reduction in unit values and continued underselling.\n3628 Accordingly,\nthe analysis does not adjust the estimate to reflect the offset of dumping and subsidization under the\n2000 orders.\n\n3625 USITC Report, pp. 63-64.\n3626 USITC Report, p. 65.\n3627 From 1996 to 2000, imports ranged from 18.3 to 25.3 million tons annually, while minimill\nshipments never exceeded 8.49 million annually.\n3628 USITC Report, pp. FLAT-64 & FLAT-C-3"},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.401284"}}},{"rowIdx":3489,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ09_Report_Of_Panel_08.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ09_Report_Of_Panel_08.pdf"},"doc_sequence":{"kind":"number","value":9,"string":"9"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 516 7.1571 The United States suggests that the numerical analysis also attempts to avoid attributing to increased imports the negative price effects of increased capacity and minimill competition, the two other factors that the USITC found to be causing injury during the 1998-2000 period. These two factors are related because, during the investigation period, almost all new capacity for CCFRS products was minimill capacity. The greatest increase in minimill capacity occurred in 1997, which is the comparison year."},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":8,"string":"8"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":85,"string":"85"},"clean_text":{"kind":"string","value":"7.1571 The United States suggests that the numerical analysis also attempts to avoid attributing to\nincreased imports the negative price effects of increased capacity and minimill competition, the two\nother factors that the USITC found to be causing injury during the 1998-2000 period. These two\nfactors are related because, during the investigation period, almost all new capacity for CCFRS\nproducts was minimill capacity. The greatest increase in minimill capacity occurred in 1997, which is\nthe comparison year.\n3629 Thus, the comparison year already reflects much of the capacity expansion\nthat the USITC found was having an effect on United States prices. In 1998, the year with the second\nhighest level of increase in minimill capacity during the investigation period, capacity increases were\nin line with increases in demand, so the analysis makes no adjustment to account for capacity and\nminimill competition in those years.\n3630 Capacity increases in 1999 and 2000 were much smaller than\nin previous years, and demand stayed at roughly the same level. Imports remained in the market at\nhigh levels, and at lower prices than in previous years. Minimill shipments into the commercial\nmarket were at higher levels than at the beginnin g of the investigation period, but still reflected unit\nvalues higher than those for imports. To compete with imports, domestic producers cut prices.\nAccordingly, the United States makes no adjustment for these factors. The United States also makes\nan adjustment to the estimate to reflect the USITC' s finding that the decrease in demand in the first\nhalf of 2001 \"contributed to the industry's continued deterioration at the end of the period\". For\npurposes of the Article 5.1 analysis, and as a cons ervative assumption, the United States notes that\napparent domestic consumption of hot-rolled steel, cold-rolled steel, and coated steel was at levels\ncomparable to those in 1996 in the first half of 200 1. Accordingly, for this period, the United States\nreflects the decreased level of demand by using 1996 as the base period profit. The USITC's findings\nwith regard to imports from Canada and Mexico require no adjustment to the estimate.\n7.1572 The United States then explains that in the first step of the Article 5.1 evaluation, it uses a\nbase year of 1997 for all categories. As a conservative estimate, the estimate reduces the base year\noperating income margin by half for the first half of 2001, to reflect that the USITC found that\ndeclining demand was a factor in causing injury during this period, but was no more important than\nincreased imports. In the second step, the analysis estimates the level to which domestic producers'\nprices would have to increase during the pendency of a safeguard measure to eliminate the price\neffects of increased imports and to counteract the negative effects of imports from 1998 to 2000. This\ninvolves estimating the unit value needed to raise operating margins by the amounts it describes, and\nthen adding an additional increase that would recoup the shortfall in operating income. In the third\nstep, the process described previously produces an estimate for each category of the degree to which\nimport producers' prices would have to increase for domestic producers to achieve the operating\nincome margin described above. Then the United States weight averages these amounts by net\ncommercial sales revenues. As a fourth step, it estimates the additional duty that would be necessary\nto achieve the target increase. During the remedy phase of the investigation, the USITC staff\nprepared economic models on the United States market for CCFRS. The USITC staff adjusted the\nstandard model to reflect linkages among the different categories of flat steel, and ran several\npermutations. This linked model indicated that a 30% increase in duties on all certain flat-rolled steel\n(including slab and Mexico) would result in an increase of between 20.8 and 28.0% in the sale price\n\n3629 USITC Memorandum INV-Y-215, Tables G04-1, G02-1, G03-1, and G06-1. Minimill capacity to\nproduce plate and hot-rolled steel increased as much in 1997 as in all other years of the investigation period,\ncombined.\n3630 For plate, cold rolled steel, and coated steel the increase in demand in 1998 was either greater than\nor roughly equal to the increase in capacity in 1998. The USITC indicated that capacity increases in line with\ndemand were not themselves injurious. For hot-rolled steel, capacity increased by more than demand in 1998.\nHowever, imports of hot-rolled steel increased by 68% in 1998, while production decreased, indicating that the\ndomestic producers were not engaged in competitive price reductions to gain market share and fill capacity,\nwhich the USITC identified as the way that extra minimill capacity would affect prices. USITC Report,\npp. 63-65.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof imported CCFRS products (excluding Canada) in the United States.3631 This suggests that the 30%\ntariff on CCFRS products is set at a magnitude that satisfies the requirements of Article 5.1.\n7.1573 Based on the USITC's analysis, the United States considers that its estimation of the extent of\napplication of the CCFRS measure necessitated modifications to the approach outlined previously.\nThe USITC found that [t]he impact of the 1998 surge in imports on the domestic industry is\nundeniable\". Operating income fell in spite of an increase in demand. 3632 The USITC found further\nthat \"[t]he import surge in 1998 altered the competitive strategy of domestic producers\" in subsequent\nyears, leading to \"repeated price cuts\" that \"while stemming somewhat the tide of imports and\nincreasing domestic shipments, did nothing to improve the industry's condition\".3633 Consequently, in\n2001, \"[t]he domestic industry entered a period of falling demand already in a weakened condition\nand deteriorated even further\".3634\n7.1574 Accordingly, the United States performs the modelling exercise described previously, but\nbased on data for 1998, 1999, and 2000 [sic], rather than just 2000. More specifically, the United\nStates looks at the following sets of scenarios: (i) the change in the price, volume, and revenue for\ndomestic products and imports if the remedy established by the President on 5 March 2002, had been\nin effect in 2000; and (ii) the change in the price, volume, and revenue associated with domestic\nproducts and imports from various sources if imports had remained at 1996 levels in 1998, 1999, and\n2000 [sic]. The price, volume, and revenue results for scenario (i) are in the same range as the price,\nvolume, and revenue results for scenario (ii) in 1998.\n7.1575 The European Communities submits that with resp ect to the numerical analysis used by the\nUnited States, an aggregated analysis has been used for the whole CCFRS product bundle\n3635, but\ndetails product-by-product tables in Exhibit US-56. This confirms that the United States should have\nundertaken a separate investigation for each of the 5 products comprised in the CCFRS category\ninstead of relying on an aggregated basis. In addition, as a first step, the United States has chosen\n1997 as its \"base\" year and admits that only one adjustment has been made to take account of decline\nin demand in 2001. On the contrary, the United States has taken the view that no adjustment was\nnecessary to accommodate legacy costs, management decisions and purchaser consolidation since the\nUSITC has found that these factors had not caused injury to the domestic industry. Moreover, the\nUnited States admits that no adjustment has been made to take account of the injurious effect of\nincreased capacity and minimill competition. More specifically, the United States relies on the fact\nthat its \"base\" year (1997) already corresponds to the greatest capacity increase and that capacity\nincreases in the following year were in line with demand increase. This argument is vitiated because\nthe mere fact that capacity increases allegedly remained in line with demand growth does not\nguarantee that injurious excess capacity did not exist, especially if the initial excess capacity at the\noutset required capacity reduction to get in keeping with demand. The European Communities notes\nthat the United States also relies on the assertion that minimill shipments, although increasing, were\nsold at higher prices than imports. This reasonin g ignores the fact that even if minimill prices were\nhigher than import prices, minimill competition had an injurious effect. The negation of the injurious\neffect of minimill prices is particularly surprising in the light of the US argument that imports prices,\n\n3631 Memorandum EC-Y-050 (US-65). The public materials do not contain model results covering the\nsafeguard measure established by the President. The United States notes that the exclusion of slab and Mexico\nin the model of the President's remedy (US-57) shows a substantially lower effect on import prices.\n3632 USITC Report, p. 60.\n3633 USITC Report, p. 61.\n3634 USITC Report, p. 63.\n3635 United States' first written submission, paras. 1091-1099.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nalthough higher than domestic prices, could have caused injury.3636 If such is the case, the same must\nalso be true for minimill prices higher than import prices.\n7.1576 The European Communities adds that, as a result of its numerical approach, the United States\nseems to submit that an increase of 18.9% in imports prices would be in line with Article 5.1 3637,\nwhereas the USITC modelling indicated that a 30% additional tariff on imports including slabs and\nMexico but excluding Canada would result in an increase of between 20.8 and 28.0% in imports\nprices.3638 There is no need to further argue that the relevant comparison (if any) would have been\nwith an USITC model run for imports from non-NAFTA sources. It is worth noting that, as a matter\nof fact, the USITC modelling for a 20% additional tariff results in an increase of between 14.0 and\n18.6% in imports prices which would strongly suggest that a tariff increase of maybe more than 20%\nbut surely less than 30% would have reached the targeted 18.9% increase in imports prices.\n3639\n7.1577 The European Communities submits3640 that in addition to these discrepancies 3641, the USITC\nmodelling exercise had been performed with respect to imports of all CCFRS and taking account of\nimports from Mexico, whereas the only relevant comparison (if any) would have been with an USITC\nmodel run for imports from non-NAFTA sources. For the European Communities, the United States\nitself admits that the exclusion of Mexico from its modelling of the President's remedy shows a\n\"substantially lower effect on import prices\" .\n3642 This might explain the large discrepancies between\nthe results of the USITC modelling exercise and the United States' ex post numerical analysis, but\nmakes any comparison between them incoherent. Therefore, the United States does not have any\nsupportive evidence that the USITC modelling suggests that a 30% tariff on CCFRS is \"set at a\nmagnitude that satisfies the requirements of Article 5.1\".\n3643\n7.1578 The United States responds that imports from NAFTA countries were properly considered.\nThe United States adds that some complainants as sert that the USITC \"explicitly stated that a more\nrestrictive remedy would not be necessary to address the injury it has found to be caused by increased\nimports\".\n3644 This, it argues, is incorrect. The USITC actually stated that \"[w]e do not agree with the\ndomestic industry, however, that an additional 35, 40, or 50% ad valorem tariff is necessary to\nachieve the desired result, or is otherwise appropriate\". 3645 The exclusion of a 30% tariff from this\nenumeration suggests that the USITC did not find a measure at that level to be excessive.3646 Further,\nin any event, the USITC was evaluating four-year measures, while the President applied remedies for\n\n3636 United States' first written submission, paras. 548-549 (tin mill products).\n3637 Exhibit US-56.\n3638 United States' first written submission, para. 1099.\n3639 European Communities' second written submission, paras. 422-528.\n3640 European Communities' comments on replies to Panel question No. 54 at the second substantive\nmeeting.\n3641 European Communities' second written submission, para. 527.\n3642 United States' first written submission, footnote 1385. The European Communities also notes that\nthe United States improperly included slabs in the modelling of a remedy which excluded slabs.\n3643 United States' first written submission, para. 1099.\n3644 European Communities' written reply to Panel question No. 108 at the first substantive meeting.\n3645 USITC Report, p. 363.\n3646 Korea asserts that the USITC's explanation of its recommendation for other welded pipe is\ninconsistent with the measure established by the Pres ident. Korea's written reply to Panel question No. 108 at\nthe first substantive meeting. The United States argues it has showed in its first written submission that the\nUSITC's findings were not relevant to a consideration of consistency with Article 5.1. United States' first\nwritten submission, paras. 1205 thro ugh 1210. These same points fully rebut the arguments make by Korea in\nresponse to Panel question No. 108.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nonly three years.3647 Therefore, the complainants' analysis of the USITC recommendations does not\nsuggest any inconsistency with Article 5.1.3648\n(ii) Tariff on tin mill products\n7.1579 The United States3649 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domestic tin mill steel industry and this is the starting\nassumption of its justification.\n7.1580 The United States recalls that for tin mill, three Commissioners found serious injury. They\nissued separate views, but agreed on certain key aspects of the injurious condition faced by the\ndomestic industry. Commissioner Miller found serious injury based on a decline in capacity\nutilization, United States shipments and sales, operating margins, average unit values, capital\nexpenditures and employment during the period of the investigation.\n3650 Commissioner Bragg treated\ntin mill as a component part of a single flat-rolled like product, and found serious injury based on\ndecreasing revenues, operating margins, capacity utilization, wages and employment, and the lack of\nability to finance modernization in the last two and half years of the period of investigation. 3651\nCommissioner Devaney also treated tin mill as part of a single flat-rolled like product, and found\nserious injury based on declines in capacity utilization, operating margins, average unit values, and\ndownward trends in employment and capital expe nditures in the later portion of the period of\ninvestigation.3652\n7.1581 For the United States, each of these determinations reflects a permissible analysis of the effect\nof imports on the domestic industry. Under United States law, multiple affirmative determinations by\nindividual Commissioners as to differently defined like products constitute an affirmative\ndetermination of the USITC with regard to the largest product group that is subject to enough\naffirmative determinations to form a majority sufficient to support a determination of the USITC. It is\nthe injury experienced by the producers of tin mill – the product within the intersection of the\ndeterminations of Commissioners Miller, Bragg, and Devaney – that forms the basis for deciding the\nextent of application of the safeguard measure. The performance of these producers is evaluated in\nlight of the findings made by Commissioners Bragg and Devaney as to the larger industry comprising\nproducers of tin mill and flat-rolled products.\n7.1582 The United States recalls that the Commissioners rendering affirmative determinations\nfocused on the following indicators of injury. For tin mill, these were:\n\n3647 The panel in US – Line Pipe found that the duration of a measur e was a valid factor in considering\nwhether it was applied to a lesser extent than a proposed measure with a longer duration. Panel Report, US –\nLine Pipe, paras. 7.96-7.97.\n3648 United States' second written submission, para. 205.\n3649 United States' first written submission, paras. 1170-1186.\n3650 USITC Report, pp. 72-74 and pp. 307-308.\n3651 USITC Report, pp. 283-282.\n3652 USITC Report, p. 345.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n1998 1999 2000 1 st half 2000 1 st half 2001\nRevenues 2,120 2,033 1,974 1,008 880\nShipments 3,287 3,239 3,163 1,597 1,436\nMarket share 87.2% 82.3% 84.5% 84.4% 84.5%\nEmployment 6,322 6,075 5,733 5,884 5,584\nOp. income (78) (141) (119) (25) (65)\nMargin (3.9)% (6.9)% (6.1)% (2.5)% (7.4)%\nCapital expenditures 120 146 97 29 15\nSource: USITC Report, p. FLAT-C-8. Shipments in 1000 short tons; employment in number of workers;\nrevenue, operating income and capital expenditures in US$1 million.\n7.1583 The United States recalls that Commissioner Miller found that although the industry was\nunprofitable before and throughout the period, it suffered a serious downturn in 1999 as imports\nsurged. Despite the increase in demand in 1999, the domestic industry \"realized no gain, and in fact a\nserious loss, in profitability. Imports also showed their greatest increase in United States market share\nover this period\".3653 Commissioner Bragg stated in her opinion that although the volume of imports\nof carbon and alloy flat products declined towards the end of the period of the investigation, \"they still\nremained at relatively high levels and continued to negatively impact prices for the domestic product\nthroughout the period. By forcing domestic prices lower, imports deprived domestic producers of\nrevenue. It should be recognized that given the worsening condition of the domestic industry over the\nperiod of investigation, the amount (level) of imports sufficient to cause serious [injury]\ndeclined correspondingly\".\n3654 Commissioner Miller analysed three additional potential causes of the\nserious injury: declining demand, purchaser consolidation, and overcapacity. Commissioner Bragg\nidentified several potential causes of serious injury other than imports, but determined that for all flat\nproducts, \"any injury sustained by the domestic industry stems solely from increased imports\".\n3655\nCommissioner Devaney found that declining demand, increased capacity, and competition from\nminimills contributed to the deterioration of the industry encompassing all flat steel products. He\nfound that declining demand had effect only at the end of the investigation period.\n3656 Commissioner\nMiller found that declining overall demand was not causing injury. She noted that this condition\nbegan long before the investigation period, and might account for the industry's weak state in 1996,\nbut that demand actually increased in 1999 with no improvement in the condition of the domestic\nindustry.\n3657 Commissioner Miller found that purchaser consolidation existed throughout the\ninvestigation period, and signalled the \"intense price competition that exists for tin mill products, both\ndomestic and imported.3658 Since this factor existed throughout the investigation period, it may have\nhad negative effects throughout, but it would not be responsible for changes in the industry's\n\n3653 USITC Report, p. 308.\n3654 USITC Report, p. 294.\n3655 USITC Report, p. 295.\n3656 USITC Report, p. 63. In footnote 224 of the USITC Report, p. 55, Commissioner Devaney joined\nthe analysis of the majority for the causation of injury in flat products, stating that the result is the same when\nthe analysis is performed over the entire industry as he has defined it, that is that imports are a substantial cause\nof serious injury.\n3657 USITC Report, pp. 308-309.\n3658 USITC Report, p. 309.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncondition. Commissioner Miller found that there was overcapacity during the investigation period,\nbut noted that the decrease in capacity utilization coincided with the import surge. She also noted that\nthe industry's overall capacity decreased during the investigation period, and that the tin mill industry\nhad taken steps to rationalize capacity.\n3659 Although this factor may have had negative effects on the\nindustry during the investigation period, the decline in capacity indicates that it was not responsible\nfor any worsening in the condition of tin mill producers during the investigation period.3660\n7.1584 The United States submits that the USITC Report details the relationship between increased\nimports from non-FTA sources and injury to the domestic industry. Commissioners Bragg, Devaney,\nand Miller found that imports caused serious injury because when an upswing in demand occurred in\n1999, the domestic industry was unable to make any gain as imports surged. Non-NAFTA imports\nsurged 51.5% between 1998 and 1999 resulting in the lowest profit margin (-6.9%) for any full year\nof the period of investigation. Domestic prices an d average unit values were also at their lowest in\n1999. Although non-NAFTA imports declined in 2000, they still were at higher levels than the 1996-\n1998 period. Commissioner Bragg in her analysis fo und that the \"impact of opportunities lost during\nan upswing in the given cycle would not only have an immediate impact on the domestic industry by\nvirtue of suppressed and depressed prices, lost sales, and resulting lost revenues, but would also be\nexpected to have lingering carryover effects on the domestic industry as the cycle turned lower\".\n3661\nCommissioner Miller found that her analysis of tin mill would not change if she had excluded Canada\nand Mexico.\n3662 Commissioner Bragg found that her analysis that the domestic flat-rolled industry\nsuffered serious injury from imports would not change with the exclusion of NAFTA imports.3663\n7.1585 The United States argues that if one of the Commissioners identified a factor as causing\ninjury, that factor caused injury regardless of the views of the other Commissioners. Accordingly, for\npurposes of evaluating whether the tin mill safeguard measure complied with Article 5.1, the United\nStates concludes that non-NAFTA imports were responsible for some of the reduction in domestic\nproducers' sales and market share, production, profits, wages, and employment beginning in 1999.\nThe United States submits that this is not to suggest that imports were not having a negative effect on\nthe domestic industry in preceding years. Accordingly, for purposes of the evaluation of consistency\nwith Article 5.1, the United States explains that it treated increased capacity, competition with\nminimills, and decline in demand in the latter part of the period of investigation as factors causing\ninjury to the domestic tin mill industry.\n7.1586 In evaluating the safeguard measure, the United States also considers Commissioner Miller's\nobservation that the United States imposed anti-dumping duties on tin mill from Japan in the first half\nof 2000. She noted that, even so, imports continued to have a significant presence in the United\nStates.3664 Accordingly, the United States has not adjusted its estimate to reflect these anti-dumping\nduty orders.\n7.1587 The United States explains that for purposes of the estimate of consistency with Article 5.1, it\nfollowed a volume-based approach for the numerical exercise. Commissioner Miller noted the\nsignificant volume of imports and the market share increase, both in 1999 and over the entirety of the\ninvestigation period.3665 Accordingly, the United States has analysed this safeguard measure based on\n\n3659 USITC Report, p. 309.\n3660 United States' first written submission, para. 1177.\n3661 USITC Report, p. 293.\n3662 USITC Report, p. 310, footnotes 28 and 29.\n3663 Second Supplementary Report, p. 14.\n3664 USITC Report, p. 308.\n3665 USITC Report, p. 308.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimport volumes. The United States notes that imports increased substantially between 1998 and 2000.\nAs a first step in the analysis, the United States estimates what non-NAFTA import volume would\nhave been if non-NAFTA imports had stayed at their 1998 market share in 1999 through 2001. It then\ncompares the estimated import volumes with the actual import volumes for those periods, and finds\nthat non-NAFTA imports would have been, on average, approximately 23% lower. This reduction\nrepresents a reduction in import volume roughly equivalent to the USITC modelling associated with a\n30% tariff, suggesting that the 30% tariff on tin mill is set at a magnitude that satisfies the\nrequirements of Article 5.1.\n3666 Since this approach is based on the volume of non-NAFTA imports\nalone, the United States explains that it has concluded that no adjustment to the estimate was\nnecessary. In order to calculate target import levels, the United States has used non-NAFTA market\nshare for 1998, the year immediately preceding the 1999 surge in imports, and then applied it to actual\napparent consumption for years 1999-2001. The United States then compares calculated target import\nlevels to the actual import levels for each year.\n7.1588 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise appear in Modelling Worksheet I.\nFor the United States, they suggest that it applied the safeguard measure no more than the extent\nnecessary to prevent or remedy serious injury and to facilitate adjustment.\n7.1589 Norway\n3667, Japan 3668 and Korea 3669 challenge the justification and the safeguard remedy\nimposed on tin mill. Norway adds that the 30% tariff overshoots the target grossly. As stated by\nCommissioner Miller3670, there is intense price competition for tin mill products. The effect of a 30%\ntariff increase in such circumstances is clearly that imports will be drastically reduced. That is also\ngrosso modo the result except for the products for which exclusions have been accorded. Either this\nwas intended, which thus clearly is in breach of Article 5.1, or the United States had no basis for\nestablishing that a 23% reduction amounts to the alleged serious injury caused by increased imports\nfrom non-NAFTA countries, which is also in clear breach of Article 5.1.\n3671 The European\nCommunities, Norway, Japan, Korea and Brazil also argue that even if one were to argue that the\nPresident can avail himself of the justifications presented by the three commissioners who voted in\nfavour of imposing tariffs on tin mill products, it is clear that their suggested measures do not comply\nwith the requirements of Article 5.1 of the Agreement on Safeguards.\n3672 These complainants\nrecall3673 that the only commissioner that specifically addressed a remedy with respect to tin mill\nproducts, Commissioner Miller, suggested an additional tariff of 20% , declining over four years. 3674\nShe explained the choice of this remedy inter alia as follows: \"The Commission's economic analysis\nshows that an additional tariff of 20% ad valorem will result in a substantial increase in the domestic\nindustry's sales revenues and sales volumes during the first year of relief\" and \"The significant\ndeclines in import volumes expected from the tariff increase will help the domestic industry increase\nits sales revenues substantially and allow it to make significant adjustments to import competition\n\n3666 USITC Memorandum EC-Y-046, p. FLAT-26.\n3667 Norway's second written submission, para. 166. Norway's first written submission, paras. 358-369.\n3668 Japan's first written submission, paras. 208-213.\n3669 Korea's first written submission, paras. 206-207.\n3671 Norway's second written submission, para. 166.\n3672 Norway's second oral statement on behalf of all complainants, para. 31.\n3673 Norway's first written submission, para. 367.\n3674 USITC Report, Vol. I, at pp. 20 and 527. (Exhibit CC-6)\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nduring the period.3675 The United States argues that if looking at the same time at the Commissioners\nwho included tin mill products in the broader category of flat products, Bragg and Devaney suggested\na four year tariff starting at 40% and ending at 31%.\n3676 These complainants recall that Devaney\nexplained this choice by stating inter alia that: \"As I have stated previously, the form of remedy that I\nhave chosen seeks to address the ongoing injury that has occurred over a number of years, and not just\nin the most recent period\" and \"Accordingly, I believe that the significant declines in import volumes\nresulting from the tariff will help the industry in crease it sales volumes substantially and allow it to\nmake significant adjustments to import competition during the period of relief\". 3677 They also recall\nthat Commissioner Bragg gives extensive explanations for her choice of remedy: \"I recognize that\ndifferences exist between my injury findings and remedy recommendations, thus raising an issue as to\nwhether there is an appropriate level of symmetry between my injury findings and these remedy\nrecommendations. Importantly I find that even the maximum remedy I am authorized by US law to\nrecommend to the President would be insufficient to address the level of serious injury I found to exist\nfor some of my defined domestic industries, as well as the product groupings covered at this stage of\nthe proceedings\".\n3678 and \"Tariffs also provide a revenue benefit directly to the US government, in\ncontrast to quotas which arguably provide a benefit to the foreign producers who receive the quota\nrents\".3679\n7.1590 The above-mentioned complainants note that neither Commissioner Devaney nor\nCommissioner Bragg gives an explanation of how exactly they arrived at their suggested percentages,\nand what the effects will actually be on imports. Assuming that the Commission has performed only\none economic analysis, those complainants find it hard to understand how the same figures may\njustify different suggestions on remedies by the other Commissioners. Furthermore, not even\nCommissioner Miller appropriately addressed the non-attribution aspects, which clearly should have\nbeen done given that the three other Commissioners did not attribute the injury suffered by the\ndomestic injury to imports. In her separate determination of serious injury\n3680, she admitted to a\nnumber of causes other than imports that are causing injury, but makes an affirmative determination\nbased on the USITC methodology of looking at whether other causes are equal to or greater than\nimports. However, in her injury determination for tin mill products 3681, there was absolutely no\ndiscussion of non-attribution of the injury from these other causes, in clear violation of Article 5.1. It\nis also noteworthy that she included imports from Canada (but not from Mexico, Israel and Jordan) in\nher determination – and proposes that Canadian imports be subject to the proposed 20% tariff.3682\n7.1591 Norway then argues that it is clear that the remedy suggested by Devaney, as explained by\nhim, goes beyond what is permitted under the Agreement on Safeguards. Addressing not only current\ninjury, or injury suffered during the POI, but also alleged \"past injuries\" – giving a sort of \"extra\npunitive damages\", cannot fulfil the requirements of Article 5.1 Furthermore, nowhere in his separate\nviews on remedy is there a discussion of how his suggested remedy will be limited to only address the\nserious injury attributed to the increased imports af fected by the measure. For the complainants, it is\nequally clear that the remedy suggested by Commissioner Bragg is not limited to the extent necessary\nto address serious injury attributed to the increased imports affected by the measure. As she explains\n\n3675 USITC Report, Vol. I, at p. 528. (Exhibit CC-6)\n3676 USITC Report, Vol. I, at p. 20. (Exhibit CC-6)\n3677 USITC Report, Vol. I, at pp. 533 and 534. (Exhibit CC-6)\n3678 USITC Report, Vol. I, at p. 520. (Exhibit CC-6)\n3679 USITC Report, Vol. I, at p. 522. (Exhibit CC-6)\n3680 USITC Report, Vol. I, at pp. 308-309. (Exhibit CC-6)\n3681 USITC Report, Vol. I, at pp. 527-529. (Exhibit CC-6)\n3682 Japan's first written submission, paras. 208-213; Korea's first written submission, paras. 206-207;\nNorway's second written submission, paras. 166-167.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nherself there are asymetries in her treatment of injury and remedy. Furthermore, her criteria for\nestablishing the level of the tariff is not based on the serious injury that she attributes to imports, but\non the level necessary to \"significantly improve profitability\" of domestic producers.\n3683 B r a g g\nexplains that her exclusions of certain countries from the injury analysis would not change her injury\nfindings, but does not discuss and still not take into account the non-attribution aspects of other\nfactors to the injury in relation to the establishment of the remedy.3684\n7.1592 The European Communities argues that for tin mill products, the US Presidential\nProclamation relied on 3 separate affirmative determinations based on divergent product definitions,\nwhere 3 different USITC Commissioners made 3 distin ct findings. The United States has decided to\ntake account of all the alternative factors found to have caused injury to the domestic industry,\nregardless of the views of other Commissioners3685, but eventually determined that no adjustment was\nnecessary in this respect.3686 Another difference in the application of the numerical analogy proposed\nby the United States arises from the fact that the injurious effect of imports of tin mill products does\nnot rest on prices effect, but on losses of market shares. For this reason, the United States has\nproposed a volume-oriented approach, aiming at maintaining imports market share in 1999 to 2001 at\nthe level reached in 1998, prior to the 1999 imports surge. The United States has noted that non-FTA\nimports would then have been in average 23% lo wer, which would purportedly correspond to the\neffect of a 30% tariff increase as modelled by the USITC.\n3687 Even admitting arguendo that the\nUnited States proposal for a numerical approach based on volume effects could have some relevance,\nthe United States conclusion that a 23% decrease in imports would be \" roughly equivalent\" to the\nUSITC modelling associated with a 30% tariff increase would not be supported by the USITC\nestimate of import decrease resulting from such tariff (from –50.5 to -29.1%). Indeed, a 20% increase\nin duty, resulting in a decrease in imports volume of between –30.7 to –16.6% would have appeared\nmore adequate.\n3688\n(iii) Tariff on hot-rolled bar\n7.1593 The United States3689 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domestic hot-rolled bar steel industry and this was the\nstarting assumption of its justification.\n7.1594 According to the United States, the USITC identified four factors other than increased\nimports that potentially caused injury: competition among domestic producers, inefficient domestic\nproducers, changes in demand prior to 2001, and changes in input costs. The USITC found that none\nof these was a factor causing injury to the domestic industry. The USITC did not attribute any injury\nto competition among domestic producers. It found that this cause might explain changes in the\nrelative market shares of domestic producers, but not their loss of 2.4 percentage points of market\nshare to imports. The USITC also found Nucor – the source of competition among domestic\nproducers – was not a primary source of pricing declines. Thus, increased imports were the only\nfactor causing injury to the domestic industry in 2000. The USITC made no findings with regard to\ndeclining demand in 1998 and 1999. For purposes of this estimate, the United States notes that\ndemand increased in 1998. Based on the USITC's finding of serious injury, for purposes of its\n\n3683 USITC Report, Vol. I, at p. 521. (Exhibit CC-6)\n3684 Norway's first written submission, paras. 358-369.\n3685 United States' first written submission, para. 1180.\n3686 United States' first written submission, para. 1185.\n3687 United States' first written submission, paras. 1183-1185.\n3688 European Communities' second written submission, paras. 529-532.\n3689 United States' first written submission, paras. 1102-1109.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nestimate, the United States treats the injury attributable to imports from 1997 to 2000 as continuing\ninto the first half of 2001. Non-FTA imports undersold domestic products at levels comparable to\npreceding years\n3690, and retained a market share well above 1996 and 1997 levels. The USITC found\nthat the decline in hot-rolled bar consumption in this period led to \"further deterioration\".\n7.1595 The United States then bases its analysis of the permissible remedy on the underselling data\nrather than aggregate unit value data because, as the USITC noted: for a product such as hot-rolled\nbar which covers a broad range of product types and values, pricing data for a more specific product\ncan provide more probative information than average unit sales values.3691 In the first step, the United\nStates chooses 1997, the year before the year when the condition of the domestic industry began to\ndeteriorate, as the appropriate comparison year, keeping in mind that imports may still have had some\nnegative effect on the industry. It estimated that the revenue shortfall in 1998 and 2000, years in\nwhich demand did not decline, was attributable to increased imports. The United States explains that\nit treated half of the decline in revenue in 1999 as attributable to increased imports, and for the first\nhalf of 2001, treats the decline in revenue attributable to imports as equal to the level in 2000. In the\nsecond step, the United States calculates the amount by which the 1997 operating income margin\nwould have to rise to recoup the shortfall in operating income described in the preceding\nparagraph.\n3692 In the third step, it bases the pricing analysis on the USITC pricing comparisons on\npage LONG-87. The United States notes the USITC' s findings with regard to imports from Canada\nand Mexico and concluded that no adjustment to the estimate was necessary. As a fourth step, the\nUnited States estimates the additional duty that would be necessary to achieve the target increase. As\npart of its investigation, the USITC prepared economic models on the United States hot-rolled bar\nmarket. These models indicated that a 30% increase in duties would result in an increase of between\n19.6 and 24.2% in the sale price of imported hot-rolled bar in the United States.\n3693 For the United\nStates, this suggests that the 30% tariff on hot-rolled bar is set at a magnitude that satisfies the\nrequirements of Article 5.1.\n7.1596 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has applied the\nsafeguard measure no more than the extent necessary to prevent or remedy serious injury and to\nfacilitate adjustment.\n7.1597 The European Communities argues that the United States starts off by recalling that the\nUSITC found that none of the four other factors invoked (competition among domestic producers,\ninefficient domestic producers, changes in demand and changes in input costs) had injurious effects,\nbut admits that the USITC had made no finding with respect to declining demand in 1998 and\n1999.\n3694 Then the United States chooses 1997 as its \"base\" year because the industry's condition\nbegan to deteriorate that year (although one would have thought that it would chose the year before\nthe increase in imports – choosing the \"base\" year as the one prior to the decline in the industry's\n\n3690 The unit value of imports increased in 2001 as compared to 2000. Since comparisons of\ncomparable items continued to show underselling, this development indicates that the mix of imported products\nchanged.\n3691 USITC Report, p. 93, footnote 554.\n3692 The United States does this by calculating the revenue shortfall in each year in which the USITC\nidentified imports as having an injurious effect, and dividing that by actual revenue for the same period.\n3693 Memorandum EC-046, p. LONG-29 (US-64).\n3694 United States' first written submission, paras. 1102-1104.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nperformance, does not meet the requirement to address only the injury caused by increased imports).\nThe United States also admits that only one adjustment has been made for 1999. Although the United\nStates does not explicitly acknowledge it, this adjustment seems to reflect the decline in demand in\n1999, although the injury caused by this other factor had (improperly) not been assessed in the\ncausation analysis. As a result of its numerical approach, the United States has found that an increase\nof 22.8% in imports prices would be in line with Article 5.1\n3695, whereas the USITC modelling has\nindicated that a 30% additional tariff on imports excluding Mexico but including Canada would result\nin an increase of between 19.6 and 24.2% in imports prices.3696 3697\n(iv) Tariff on cold-finished bar\n7.1598 The United States3698 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domes tic cold-finished bar industry and this was the\nstarting assumption of its justification.\n7.1599 The United States explains that the USITC identified two factors other than increased imports\nthat potentially caused injury: declining domestic demand for cold-finished bar and the effect of a\npurportedly inefficient domestic producer. The USITC found that the inefficiency of RTI did not\ncause injury to the domestic industry. The USITC considered the effect of declining demand on the\ndomestic industry. It noted the domestic producers' observation that prices for cold-finished bar\nhistorically track demand, and observed that this appeared to be the case in 1999. Accordingly, it\nfound the decline in the domestic industry's financial performance in 1999 to be \"to a large extent\nattributable to declines in demand during that year\".\n3699 The USITC noted that demand increased in\n2000, but that the domestic producers' prices decreased. Accordingly the USITC found that changes\nin demand did not explain the serious injury to the domestic cold-finished bar industry. These\nfindings indicate that changes in demand were having a positive effect in 2000; therefore, no injury\nshould be attributed to this potential cause in 2000. The USITC noted that demand declined in the\nfirst half of 2001, and that the domestic industry's performance further deteriorated.\n3700 This finding\nindicates that some of the injury in the first half of 2001 is attributable to declining demand. These\nfindings demonstrate that the entirety of the reduction in domestic producers' production, shipments,\nmarket share, employment, revenue, and operating income in 2000 is properly attributed to increased\nimports. The USITC's findings further indicate that both increased imports and decreases in demand\nhad an injurious effect in 1999 and the first half of 2001. This is not to suggest that imports in 1996\nthrough 1998 had no negative effects. Since the analysis of the USITC focused on changes in\nindustry performance, and as a conservative estimate of the injury attributable to imports, the United\nStates has decided to base its analysis for cold-finished bar on the changes from 1999 through the first\nhalf of 2001 only.\n7.1600 The United States argues that it has treated non-import factors as responsible for half of the\ndecline in the domestic industry's operating income in 1999. It has assumed that decreased demand\nwas responsible for any change in performance in the first half of 2001 as compared with the full year\n2000. Accordingly, it has estimated that increased imports had the same negative effect in the first\nhalf of 2001 that the United States has estimated for 2000.\n\n3695 See Exhibit US-56.\n3696 United States' first written submission, para. 1108.\n3697 European Communities' second written submission, paras. 533-536.\n3698 United States' first written submission paras. 1110-1119.\n3699 USITC Report, p. 107.\n3700 USITC Report, p. 107.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1601 The United States bases its analysis of the permissible remedy on the underselling data rather\nthan aggregate unit value data because, as the USITC noted: for a product such as hot-rolled bar\nwhich covers a broad range of product types and values, pricing data for a more specific product can\nprovide more probative information than average unit sales values.\n3701 In the first step, the United\nStates claims that as a conservative estimate it chose 1998, a year in which demand was equivalent to\nits level in 2000, as the appropriate base year, keeping in mind that imports increased in that year and,\nthus, may have had some negative effect on the industry. To reflect the impact of non-import factors\non 1999, the United States halves the base operating income margin. It estimates the revenue shortfall\nin 1999 through the first half of 2001, periods in which the USITC indicated that imports caused some\nof the decline in the industry's performance. In the second step, it estimates the amount by which the\n1998 operating income margin would have to rise to recoup the shortfall in operating income.\n3702 In\nthe third step, it bases the pricing analysis on the USITC pricing comparisons on page LONG-92. 3703\nFinally, it notes the USITC's findings with regard to imports from Canada and Mexico and concluded\nthat no adjustment to the estimate was necessary. As a fourth step, it estimates the additional duty\nthat would be necessary to achieve the target increase. As part of the remedy phase of the\ninvestigation, the USITC staff prepared economic models on the United States' cold-finished bar\nmarket. These models indicated that a 30% increase in duties would result in an increase of between\n19.6 and 24.2% in the sale price of imported cold-finished bar (excluding bar from Canada) in the\nUnited States.\n3704 For the United States, this suggests that the 30% tariff on cold-finished bar is set at\na magnitude that satisfies the requirements of Article 5.1.\n7.1602 The United States notes that these figures are lower than the tariff level of the safeguard\nmeasures established by the President and recalls that \"it is impossible to determine in advance with\nany degree of precision the level of import duty necessary to enable the United States industry to\ncompete with overseas suppliers in the current competitive conditions of the United States\nmarket\".\n3705\n7.1603 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has the safeguard\nmeasure no more than the extent necessary to prevent or remedy serious injury and to facilitate\nadjustment.\n7.1604 The European Communities recalls that the United States has determined that 1998 should be\nits \"base\" year and made adjustments to take account of the injurious effect of declining demand in\n1999 and 2001, in line with the USITC findings that this other factor caused injury in these years.\nAlso consistent with the USITC findings, no ad justment has been made with respect to the\n\n3701 USITC Report, p. 103, footnote 614.\n3702 The United States does this by calculating the revenue shortfall in each year in which the USITC\nidentified imports as having an injurious effect, and divided that by actual revenue for the same period.\n3703 This table contains confidential information. The United States has reproduced the results of this\nstep, but not the inputs.\n3704 Memorandum EC-046, p. LONG-29 (US-64).\n3705 US – Fur Felt Hats , para. 35. The United States argues that in the case of cold-finished bar, it has\nnoted that it was relatively simple and inexpensive to convert a hot-rolled bar into a cold-finished bar. If the\ntariff level for these two products were different, it would create an incentive for foreign producers to\ncircumvent the safeguard measure by shifting their hot-rolled bar customers to cold-finished bar. This would\nundermine the remedial effect of the measures on both hot-rolled and cold-finished bar. Accordingly, the\nUnited States did not go beyond the extent necessary by applying a 30% tariff to imports of cold-finished bar.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninefficiency of one domestic producer.3706 As a result of its numerical approach, the United States has\nfound that an increase of 14.4% in imports prices would be in line with Article 5.1 3707 and referred to\nthe USITC modelling indicating that a 30% additional tariff on imports excluding Mexico but\nincluding Canada would result in an increase of between 19.6 and 24.2% in imports prices. Admitting\narguendo that the United States approach could be relevant, a 20% additional tariff, which would\nhave resulted in an increase of between 13.3 and 16.2% in imports prices, would appear more\nadequate than a 30% additional tariff which patently overshoots the mark. On this specific point, the\nUnited States admits that the 30% additional tariff on cold-finished bar was designed to match the\nduty increase for hot-rolled bar and prevent product shifting from hot to cold-finished bar. 3708 This\nbeing said, the purported need to prevent product shifting does not allow the United States to apply a\nsafeguard measure on cold-finished bar beyond the extent necessary to prevent or remedy serious\ninjury caused by increased imports.3709\n(v) Tariff on rebar\n7.1605 The United States3710 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domestic rebar industry and this is the starting\nassumption of its justification. The USITC identified four factors other than increased imports that\npotentially caused injury: demand changes, ch anges in input costs, capacity increases, and\ncompetition between domestic producers. The USITC found that none of these caused injury to the\ndomestic industry. These findings demonstrate that the entirety of the reduction in domestic\nproducers' performance from 1999 through 2001 was attributable to increased imports. The United\nStates submits that this is not to suggest that imports in 1996 through 1998 had no negative effects.\nThe United States explains that since the US ITC's analysis focused on changes in industry\nperformance, and that performance began to decline in 1999, it based its estimate for rebar bar on the\nchanges from 1999 through the first half of 2001 only. The United States also considered the\nUSITC's observation that the United States imposed anti-dumping duties on Turkey in 1996 and on\nBelarus, China, Indonesia, Korea Latvia, Moldova, Poland, and Ukraine in 2001. The USITC noted\nin its remedy recommendation that, although the anti-dumping duties reduced imports from these\nsources, imports from other sources took their place to a significant degree.\n3711 In fact, even though\nthe anti-dumping duty orders took effect in Janu ary, 2001, non-FTA imports for the first half of 2001\nwere only slightly lower than in the first half of 2000. Non-FTA unit values, while slightly higher\nthan in the first half of 2000, remained far below domestic unit values.3712\n7.1606 The United States argues that it bases its analysis of the permissible remedy on the aggregate\nvalue data, rather than the underselling data, because the USITC did not find, as it did for hot-rolled\nbar and cold-finished bar, that rebar encompassed a wide spectrum of products. In the first step, it\nchooses 1998, the year before the industry's profitability began to decline, as the appropriate base\nyear, keeping in mind that imports increased in that year and, thus, may have had some negative effect\non the prices and profitability of the domestic industry. In the second and third steps, it uses data\npertaining to 1999 through the first half of 2001 to estimate how much prices would have to increase\nto recoup the shortfall in revenue attributable to increased imports. The United States claims that as a\nconservative estimate of the effect of the 2001 anti-dumping duty orders, it assumes that they are\n\n3706 United States' first written submission, paras. 1110-1115.\n3707 Exhibit US-56.\n3708 United States' first written submission, footnote 1399.\n3709 European Communities' second written submission, 537-540.\n3710 United States' first written submission, paras. 1120-1127.\n3711 USITC Report, p. 375, footnote 112.\n3712 USITC Report, p. LONG-C-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nresponsible for all of the 6.8% increase in average unit values in the first half of 2001 as compared\nwith the first half of 2000. Then it deducts this amount from the estimated increase in import prices\ncalculated in the first through third steps. As a fourth step, it estimates the additional duty that would\nbe necessary to achieve the target increase. As part of the remedy phase of the investigation, the\nUSITC staff prepared economic models on the United States' rebar bar market. These models\nindicated that a 15% increase in duties would result in an increase of between 8.2% and 10.9% in the\nsale price of imported rebar (excluding rebar from Mexico and Canada) in the United States. 3713 For\nthe United States, this suggests that the 15% tariff on rebar is set at a magnitude that satisfies the\nrequirements of Article 5.1.\n7.1607 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has applied the\nsafeguard measure no more than the extent necessary to prevent or remedy serious injury and to\nfacilitate adjustment.\n7.1608 The European Communities recalls that the United States has chosen 1998, \"a year before the\nindustry's profitability began to decline\" as its \"base\" year.\n3714 One adjustment had been made to take\naccount of the effect of anti-dumping orders on imports prices in 2001. On the contrary, with\nreference to the USITC findings, no adjustment has been made concerning demand changes, input\ncosts, capacity increase and competition among domestic producers. As a result of its numerical\napproach, the United States has found that an increase of 29.1% in imports prices would be in line\nwith Article 5.1\n3715 and referred to the USITC modelling indicating that a 15% additional tariff on\nimports excluding Mexico and Canada would result in an increase of between 8.2% and 10.9% in\nimports prices.\n3716 3717\n(vi) Tariff on welded pipe\n7.1609 The United States3718 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused the threat of serious injury to the domestic welded pipe industry and this is\nthe starting assumption of its justification. The USITC identified two factors other than increased\nimports that potentially caused the industry's weakened condition: increased capacity on an overall\nbasis and cost increases at one significant producer (\"Producer X\") that were unrelated to increased\nimports. The USITC found that the increase in capacity did not contribute in more than a minor way\nto the condition of the industry in 2000 or the first half of 2001. It found that the 1.5 million ton\nincrease was only \"modestly higher\" than the increase in apparent domestic consumption and,\ntherefore, not \"excessive\".\n3719 The USITC found that the main reason for Producer X's declining\nperformance was a drop in the unit value of sales beginning in 1999, and that the drop was largely a\nresult of increased imports.\n3720 In other words, this development was not an alternative \"cause\" of\n\n3713 Memorandum EC-046, p. LONG-27 (US-64).\n3714 United States' first written submission, para. 1124.\n3715 Exhibit US-56.\n3716 United States' first written submission, para. 1126.\n3717 European Communities' second written submission, paras. 541-542.\n3718 United States' first written submission, paras. 1128-1138.\n3719 USITC Report, p. 165.\n3720 USITC Report, p. 165.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury, but a symptom of the injury caused by increased imports. Thus, any injury to the industry as a\nresult of Producer X's performance was properly attributed to increased imports.\n7.1610 For the United States, these findings of the USITC demonstrate that most of the reduction in\ndomestic producers' production, capacity utilization, shipments, number of workers, and profitability\nin 2000 is properly attributed to increased imports. This is not to suggest that imports were not having\na negative effect on the domestic industry in preceding years. The USITC specifically found that\n\"imports have had a negative effect on the domestic industry over the period we have examined\". 3721\nThe United States notes that the USITC did find that the increase in capacity had a negative effect on\nthe industry in 2000, albeit a \"minor\" amount. The data suggest that the amount is quite minor. Total\ndomestic capacity grew by approximately 350,000 tons from 1999 to 2000, an increase of only 4.4%.\nThe industry experienced an even higher increase in capacity, of approximately 488,000 tons, from\n1998 to 1999 (an increase of 6.5%). During that period, profits fell by only 0.2 percentage points.\n3722\nAs an extremely conservative estimate, while recognizing the imports were causing injury to the\ndomestic industry in 1998, 1999, 2000, and 2001, the United States treats the decrease in the\nindustry's performance from 1999 to 2000 as attributable to increases in capacity.\n7.1611 The United States claims that it bases its estimate of the permissible extent of application on\nthe aggregate unit value data. The USITC did not determine, as it did for hot-rolled bar and cold-\nfinished bar, that a difference in product mix between domestic producers and importers might affect\nthe unit value data. Moreover, the unit value data is public, and the pricing data confidential. In its\nestimate regarding consistency with Article 5.1, the United States also considered two issues\naddressed by the USITC: existing anti-dumping duty orders and a likely increase in demand for large\ndiameter line pipe. The USITC found that existing anti-dumping duty orders covered a limited\nnumber of products and countries. Although the orders had been in place since at least 1989, they did\nnot prevent the overall increase in imports, or ev en prevent increases in imports from the covered\ncountries.\n3723 Moreover, the data gathered by the USITC reflects any effect on the industry that the\norders may have had. Since the United States bases its estimate regarding the measure on that data, it\ndid not need to adjust the estimate to account for the effect of the anti-dumping duty orders. As for\nthe likely increase in demand for large diameter line pipe, the USITC found as a general matter that\n\"rising demand tends to ameliorate the effect of a given volume of imports\". However, the United\nStates argues, the Commissioners also found that increasing [sic] demand for standard pipe was\noffsetting the increase in demand for large diameter line pipe. 3724 These findings by the USITC\nindicate that there was no overall increase in demand for welded pipe and, therefore, no basis to\nconclude that increased demand would lessen the future effect of increased imports. Therefore, the\nUnited States explains that it did not attempt to incorporate this factor into its analysis.\n7.1612 The United States argues that, for the first step, in light of its conservative estimate that the\ndecrease in the domestic industry's financial performance in 2000 was attributable to increased\ncapacity, it does not attempt to determine a domestic price that would increase operating income\nmargins above their 2000 levels. In the second and third steps, it bases its estimate on data for 1998\nthrough the first half of 2001, the period when imports were increasing. As a fourth step, it estimates\nthe additional duty that would be necessary to achieve the target increase. As part of the remedy\nphase of the investigation, the USITC staff prepared economic models on the United States' welded\npipe market. These models indicated that a 15% increase in duties would result in an increase of\nbetween 9.3 and 11.5% in the sale price of imported welded pipe (excluding pipe from Canada) in the\n\n3721 USITC Report, p. 163.\n3722 USITC Report, p. TUBULAR-C-4.\n3723 USITC Report, p. 166.\n3724 USITC Report, p. 166.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUnited States.3725 For the United States, this suggests that the 15% tariff on welded pipe is set at a\nmagnitude that satisfies the requirements of Article 5.1.\n7.1613 The United States models two scenarios: (i) the change in the price, volume, and revenue for\ndomestic products and imports if the remedy established by the President on 5 March 2002, had been\nin effect in 2000; and (ii) the change in the price, volume, and revenue associated with domestic\nproducts and imports from various sources if imports had remained at 1997 levels in 2000. The\nUnited States submits that the results of this exercise suggest that it has applied the safeguard measure\nno more than the extent necessary to prevent or remedy serious injury and to facilitate adjustment.\n7.1614 As regards welded tubular products, Switzerland maintains that the measure taken goes\nbeyond the extent necessary to prevent or remedy a threat of serious injury. The Presidential\nproclamation imposed a straight tariff without any further explanation, while the USITC\nrecommended a tariff rate quota. A straight tariff is more trade restrictive than a tariff-rate quota\nbecause the straight tariff imposed hits all imports whereas, with a tariff-rate quota, in quota imports\ncan take place at the normal tariff rate and only out of quota imports will be hit by the additional\ntariff. In the case of welded tubular products the USITC explicitly determined that the current level of\nimports did not cause serious injury to the domestic industry concerned but that the industry was only\napproaching a state of serious injury and that \"a tariff-rate quota would best address the threat of\nserious injury\". The USITC also said that a straight tariff would affect imports even at those levels it\nfound did not cause injury.\n3726 Thus, the USITC recommended a tariff-rate quota in order to maintain\naccess to the United States market for the products concerned and to avoid creating shortfalls during\nthe period of relief. In addition, the USITC recognized that 1996-1998 were years of good health for\nthe United States industry. Therefore, the United States has admitted that the measure, which was\nbased on reducing import levels back to 1997 levels, exceeds the amount of relief necessary to prevent\na threat of serious injury. In the case of welded tubular products, the USITC considered that the tariff\nrate quota it recommended was sufficient to prevent or remedy the threat of serious injury. However,\nthe President of the United States without justifying the necessity of the measure, imposed a straight\ntariff. Because the remedy is the chosen measure and must be tailored to meet the relevant serious\ninjury, that is the serious injury attributed to increased imports Switzerland considers that the United\nStates must explain adequately and justify the extent of the application of the measure prior to\nimposing a safeguard. The United States did not provide such an adequate explanation and\njustification before imposing the safeguard measure and thus did not comply with the requirements of\nthe Agreement on Safeguards.\n3727\n7.1615 Similarly, Korea3728 argues that the measure finally imposed by the United States – a straight\n15% tariff – had been judged by the USITC to be overly excessive, and not limited to the extent\nnecessary because it was applied to imports of injurious and non-injurious imports alike. The USITC\nprovided a reasoned analysis of its recommended tariff-rate quota in the context of its threat of injury\nfinding:\n\"Given that we have found threat of serious injury, the intent of our recommended\nremedy is to prevent imports from rising to a level that would cause serious injury. A\nstraight tariff would affect all welded pipe imports, even those at levels we have found\n\n3725 Memorandum EC-046, p. TUBULAR-21 (US-64).\n3726 USITC Report, Vol. I, p. 383.\n3727 Switzerland's second written submission, paras. 115-118.\n3728 Korea's first written submission, paras. 208-213.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndid not cause serious injury. In light of the diversity of welded pipe imports, we seek\nto avoid creating supply shortfalls during the period of relief.\"3729\n7.1616 Korea notes that the USITC finding of only \"threat\" (not serious injury) establishes the level\nor extent of relief necessary since only that the threat of injury from imports needs to be\n\"prevented\".3730 In fact, the USITC rejected the suggestion of Joint Respondents to use a base period\nof 1998-2000 or 2001 (for imports other than line pipe for which no remedy should be imposed) for\npurposes of establishing the in quota figure and recommended, instead, the higher level of imports\nfrom 2000 as the base.3731 The USITC reasoned as follows:\n\"We estimate that the recommended tariff-rate quota on welded pipe products will\ninitially leave the market share, sales revenue, and profitability of the domestic\nindustry unchanged. If import volumes increase beyond 2000 levels, then the tariff-\nrate quote will begin to take effect, stabilizing prices without preventing the entry of\nproducts at current levels. The tariff-rate quota should limit import growth, thereby\npreventing or restricting the negative impact of such growth on industry profitability.\nAt the same time, our proposal would maintain substantial competition in the US\nmarket for welded pipe products and pose little likelihood of supply problems for\ndomestic consumers. First, our proposed remedy for welded pipe products would still\npermit the same quantity of imports as in 2000 at the current low rate of duty. This\namount exceeds the amount that entered in any previous year of the period of\ninvestigation.\"\n3732\n7.1617 Korea recalls that the USITC was careful to recommend a form of remedy that did not restrict\nimports at levels found non-injurious and which responded at the same time to some of the concerns\ninherent in its like product determination and causation analysis. 3733 Thus, the USITC was careful to\nrecommend action that \"does not exceed the amount necessary to prevent serious injury\" 3734 and\nrecognized that demand for pipe in large-scale pipeline projects required a flexible remedy. 3735 The\nPresident disregarded the USITC's remedy recommendation and without explanation imposed a 15%\ntariff on all imports of welded tube products. The only reference to this choice of remedy versus the\ntariff-rate quota proposed by the USITC is found in a Presidential Press Release and in a Report\nSubmitted to the United States Congress which merely asserts that it is a higher level of relief.3736\n\n3729 USITC Report, Vol. I, p. 383 (emphasis added) (Exhibit CC-6); USITC Report, Vol. I: Views of\nVice Commissioner Deanna Tanner Okun on Remedy, p. 483 (to the same effect that there was only a threat of\ninjury found) (Exhibit CC-6); USITC Report, Vol. I: Views of Vice Chairman Deanna Tanner Okun on\nRemedy, p. 482 (Exhibit CC-6) (\"Given my finding of threat…I do not view increased tariffs as an appropriate\nform of remedy….\").\n3730 Korea's first written submission, paras. 209-210.\n3731 USITC Report, Vol. I: View of Vice Chairman Deanna Tanner Okun on Remedy , p. 482,\nfootnote 266 (Exhibit CC-6).\n3732 USITC Report, Vol. I, p. 386 (Exhibit CC-6).\n3733 Korea's first written submission, paras. 211-212.\n3734 USITC Report, Vol. I, pp. 385-386 (emphasis added) (Exhibit CC-6).\n3735 USITC Report, Vol. I, Views of Chairman Deanna Tanner Okun on Remedy , p. 482\n(Exhibit CC-6).\n3736 Components of the Presidential Decision at Certain Tubular Products and Report Submitted to the\nUnited States Congress at Certain Tubular Products . (Exhibit CC-88) (\"A tariff of 15%…will provide a higher\nlevel of relief than the tariff-rate quota recommended by a majority of the USITC Commissioners.\")\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1618 Korea submits that the most fundamental flaw in the President's remedy is that it does exactly\nwhat the USITC had avoided in its remedy recomm endation – it imposes duties on imports that did\nnot cause serious injury.3737 The USITC clearly stated that \"[a] straight tariff would affect all welded\npipe imports, even those at levels we have found did not cause serious injury \".3738 Since the final\nremedy of the United States affects all welded pipe imports, the measure, on its face, exceeds the level\nnecessary to prevent serious injury and is, therefore, in violation of the United States commitments\nunder the Agreement on Safeguards. 3739 Given such facts, Korea argues that the United States failed\nto provide a justification on how its measure was limited to the necessary extent. The findings of\nthreat/serious injury are the proper \"benchmark\" by which the remedy must be assessed, as the\nAppellate Body has said.\n3740 Moreover, Article 5.1 (last sentence) states that \"Members should\nchoose measures most suitable for the achievement of these objectives.\" The identified \"objectives\"\nrelate to, inter alia, whether serious injury needs to be remedied or whether a threat of serious injury\nneeds to be prevented (Article 5.1, first sentence). So, for example, if serious injury were found, then\ncurrent import levels were injurious. This would support a remedy that should apply to those import\nlevels and a straight tariff would be appropriate. The correct remedy, therefore, depends on the\nparticular findings by the authorities regarding the scope, nature, etc., of the increased imports, serious\ninjury or threat of serious injury, and causation as the Appellate Body instructed in US – Line Pipe.\n3741\n7.1619 The European Communities notes that despite the USITC findings that increased capacity had\nnot contributed to the injury in more than a minor way, the United States has decided to treat the\ndecrease in the industry's performance in 2000 as attributable to increase in capacity.\n3742 According to\nthe European Communities, the United States, therefore, has not attempted to determine a domestic\nprice that would have increased income margin above 2000 levels. As a result of its numerical\napproach, the United States has found that an increase of 16.2% in imports prices would be in line\nwith Article 5.13743 and referred to the USITC modelling indicating that a 15% additional tariff on\nimports excluding Canada but including Mexico would result in an increase of between 9.3 and 11.5%\nin imports prices.3744 3745 China concludes that targeting the imports that remain below such level, and\nhave neither caused nor are threatening to cause serious injury, would imply a failure to meet the\nrequirements of Article 5.1, as clarified by the Appellate Body in US – Line Pipe , that \"safeguard\nmeasures may be applied only to the extent that they address serious injury attributed to increase\nimports\". Therefore, the USITC made a clear finding related to the permissible extent of the\nsafeguard measure on welded pipe, and a proper determination that the best way to address a threat of\nserious injury would be to apply a tariff-rate quota. Accordingly, by deciding to impose a straight\ntariff that would affect all imports, including those that are not threatening to cause serious injury, the\nUnited States adopted a measure that goes beyond the extent necessary to address the threat of serious\ninjury that the USITC found to be caused by increased imports.\n3746\n7.1620 The United States responds to Korea's argument that if other welded pipe imports were held\nto 1997 levels, the estimated price for domestic products would be 4.3% to 6.7% higher, while the\n\n3737 Korea's first written submission, para. 213.\n3738 USITC Report, Vol. I, p. 383 (emphasis added) (Exhibit CC-6). USITC Report, Vol. I: Views of\nVice Chairman Deanna Tanner Okun on Remedy , p. 438 (Exhibit CC-6) (the recommended remedy is \"most\nlikely to address the threat of serious injury\").\n3739 Appellate Body Report, US – Line Pipe, para. 236.\n3740 Korea's second written submission, paras. 305-308.\n3741 Korea's written reply to Panel question No. 106 at the first substantive meeting.\n3742 United States' first written submission, para. 1132.\n3743 Exhibit US-56.\n3744 United States' first written submission, para. 1126.\n3745 European Communities' second written submission, paras. 543-545.\n3746 China's second written submission, paras. 307-308.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nremedy would result in estimated price increases of 8.7% to 11.1%. For the United States, by arguing\nthat Korea's criticism fails to recognize that th e other welded pipe remedy addressed a threat of\nserious injury, and that the analysis based on data for 2000 would not establish what was necessary to\nstop the evolution of the existing injurious effects of increased imports into the full manifestation of\nthat threat as serious injury.3747\n(vii) Tariff on FFTJ\n7.1621 The United States3748 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domestic FFTJ industry and this is the starting\nassumption of its justification. The USITC identified five factors other than increased imports that\npotentially caused injury: the business cycle for the oil and gas industry, increases in capacity and\nintra-industry competition, the inefficiency of domestic producers' outdated facilities, shortage of\nqualified workers, and purchaser consolidation. The USITC found that the business cycle in the oil\nand gas industry in 2000 and the first half of 2001; capacity and intra-industry competition; and\ninefficiencies in domestic producers' facilities or shortages of workers were not factors causing\nserious injury. The USITC found that purchaser consolidation would put \"some\" pressure on\ndomestic producers' prices, but would not explain the reduction in domestic production, shipments,\nemployment and other non-price indicators that occurred.\n3749 Thus, the USITC did not attribute any\nof the decrease in non-price factors to purchaser consolidation, and only \"some\" of the decrease in\ndomestic prices.\n7.1622 The United States points to the fact that the findings of the USITC indicate that most of the\nreduction in domestic producers' production, capacity utilization, shipments, market share, number of\nworkers, wages, and profitability from 1999 through the first half of 2001 is properly attributed to\nincreased non-FTA imports. For the United States, this is not to suggest that imports were not having\na negative effect on the domestic industry in preceding years. Since the analysis of the USITC\nfocused on changes in industry performance, and as a conservative estimate of the injury attributable\nto imports, the United States bases its analysis for FFTJ on the changes from 1999 through the first\nhalf of 2001 only. The USITC did not attribute any injury to four of the five other potential causes of\ninjury. It attributed some of the decrease in FFTJ prices, but none of the other decreases in industry\nperformance, to purchaser consolidation. The USITC attributed domestic producers' loss of market\nshare, decreased prices, and decreased profitability to increased imports, and to no other cause.\n7.1623 The United States bases its analysis of the permissible remedy on the underselling data rather\nthan aggregate unit value data because, as the USITC noted that \"[w]e are cautious of placing undue\nweight on AUV information, as it may be influenced by issues of product mix\".\n3750 In the first step,\nthe United States explains that as a conservative estimate it chose 1998, the year following the first\nsignificant increase in imports, as the appropriate base year, keeping in mind that imports increased\nsomewhat in that year, and thus may have had some negative effect on the industry. The USITC\nfound that purchaser consolidation had negative effects on the industry. The United States explains\nthat as a conservative estimate it treated one-half of the reduction in operating income in each year as\nattributable to purchaser consolidation. It estimates the revenue shortfall in 1999 through the first half\nof 2001, periods in which the USITC indicated that imports caused some of the decline in the\nindustry's performance. In the second step, the United States estimates the amount by which the 1998\noperating income margin would have to rise to recoup the shortfall in operating income estimated in\n\n3747 United States' written reply to Panel question No. 50 at the second substantive meeting.\n3748 United States' first written submission, paras. 1139-1147.\n3749 USITC Report, p. 178.\n3750 USITC Report, p. 176, footnote 1087.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nstep 1.3751 In the third step, it bases the pricing analysis on the USITC pricing comparisons on page\nTUBULAR-59 of the USITC Report. The United States notes the USITC's findings with regard to\nimports from Canada and Mexico and concluded that no adjustment to the estimate was necessary.\nAs a fourth step, it estimates the additional duty that would be necessary to achieve the target\nincrease. As part of the remedy phase of the investigation, the USITC staff prepared economic\nmodels on the United States' FFTJ market. These models indicated that a 15% increase in duties\nwould result in an increase of between 10.5 and 12.5% in the sale price of imported FFTJ in the\nUnited States.\n3752 For the United States, this suggests that the 13% tariff on FFTJ is set at a magnitude\nthat satisfies the requirements of Article 5.1.\n7.1624 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has applied the\nsafeguard measure no more than the extent necessary to prevent or remedy serious injury and to\nfacilitate adjustment.\n7.1625 The European Communities notes that the starting point is again the USITC findings that\namong five other factors (business cycle for oil and gas industry, increase in capacity, intra-industry\ncompetition, inefficiency of domestic producers, shortage of qualified workers and purchasers'\nconsolidation), only the latter played a role on the decrease of domestic prices.\n3753 As a first step in its\nnumerical analysis, the United States has chosen 1998, the year following the first significant increase\nin imports as the \"base\" year and made one adjustment to take account of purchasers'\nconsolidation.3754 As a result of its numerical approach, the United States has found that an increase\nof 30.2% in imports prices would be in line with Article 5.1 3755 and referred to the USITC modelling\nindicating that a 15% additional tariff on imports excluding Canada but including Mexico would\nresult in an increase of between 10.5 and 12.5% in imports prices.3756 3757\n(viii) Tariff on stainless steel bar\n7.1626 For the United States 3758, the USITC demonstrated that increased imports from non-NAFTA\nsources caused serious injury to the domestic stainless steel bar industry and this is the starting\nassumption of its justification.\n7.1627 The United States first notes that the financial data on the stainless steel bar industry were\nconfidential in the USITC Report but notes that they were publicly available data in the prehearing\nreport.3759 The United States explains that it used these public data in making its estimate regarding\n\n3751 The United States states that it does this by estimating the revenue shortfall in each year in which\nthe USITC identified imports as having an injurious effect, and divided that by actual revenue for the same\nperiod.\n3752 Memorandum EC-046, p. TUBULAR-23 (US-64).\n3753 United States' first written submission, paras. 1141-1142.\n3754 United States' first written submission, para. 1144.\n3755 Exhibit US-56.\n3756 United States' first written submission, para. 1146.\n3757 European Communities' second written submission, paras. 546-547.\n3758 United States' first written submission, paras. 1148-1159.\n3759 The United States submits that the USITC made da ta on the financial performance of the stainless\nsteel bar industry publicly available in its prehearing report. Subsequent to issuance of that report, an additional\nsmall producer submitted data. Thus, public revelation of aggregate data available at the time of the USITC\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncompliance with Article 5.1, since no other public data are available. The United States notes that\nthese data are generally reflective of the trends in indicators in the industry. This data is presented in\nthe following table:\n1998 1999 2000 1\nst half 2000 1 st half 2001\nProduction 175,171 164,376 179,090 94,890 81,750\nCapacity utilization 57.8% 52.1% 55.8% 59.5% 49.6%\nShipments 169,515 158,861 173,582 92,878 84,186\nMarket share 60.5% 59.8% 53.5% 52.7% 54.9%\nEmployment 2,125 1,854 1,941 1,901 1,793\nOp. income 20,885* 4,580* 2,266* 8,746* (1,389)*\nMargin 3.7%* 0.9%* 0.4%* 2.8%* (0.5%)*\nCapital exp. 81,120* 55,581* 25,250* 23,169* 12,794*\nInventory 21,130 21,302 19,392 19,435 14,894\nSource: USITC Report, p. STAINLESS-C-4 and USITC prehearing report, p. STAINLESS-C-4 (US-61).\nProduction, shipments and inventory in short tons; employment in number of workers; operating income and\ncapital expenditure in US$1 million.\n* Indicates data made public in the USITC prehearing report.\n7.1628 The United States argues that the USITC identified two factors other than increased imports\nthat potentially caused injury: a downturn in demand for stainless steel bar and increase in energy\ncosts in late 2000 and the first half of 2001 and poor operations by domestic producers AL\nTech/Empire and Republic. The USITC found th at poor operations by domestic producers AL\nTech/Empire and Republic, and the downturn in demand for stainless steel bar and increased energy\ncosts prior to late 2000 were not factors that caused injury to the domestic industry. According to the\nUnited States, these findings indicate that the injury to the domestic industry in 1999, as reflected in\nthe reduction in domestic producers' production, ship ments, market share, employment, revenue, and\noperating income in 1999, is properly attributed to increased imports. For the United States, this is\nnot to suggest that imports before 1999 had no negative effects. Since the analysis of the USITC\nfocused on changes in industry performance, and as a conservative estimate of the injury attributable\nto imports, the United States bases its analysis for stainless steel bar only on the changes in 1999 and\nafter. The USITC found that declining demand and increased energy costs had an effect on the\ndomestic industry in 2000 and the first half of 2001, albeit one less important than the injury caused\nby increased imports. The USITC further indicated that the domestic industry could have increased\nprices to cover increased costs in the absence of increased imports. As a conservative estimate, it\ntreated half of the decline in the industry's performance in 2000 and the first half of 2001 as\nattributable to increased imports. For the United States, non-FTA imports continued in the first half\n2001 at unit values far below those of the domestic producers. Although their volume and market\nshare declined, non-FTA imports maintained a market share two percentage points higher than at any\ntime prior to 2000 and five times higher than FTA imports.\n\nReport would allow anyone to calculate that producer's proprietary data by subtracting out the data from the\npreliminary report. Accordingly, the USITC redacted all financial data on this industry from the final public\nversion of the USITC Report.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1629 The United States explains that in its estimate regarding consistency with Article 5.1, it also\nconsiders existing anti-dumping duty orders. The USITC considered two groups of anti-dumping\nduty orders – orders imposed on imports of stainless steel bar from Brazil, India, Japan, and Spain in\n1995 and orders imposed on stainless steel angles from Japan, Korea, and Spain in May 2001. The\nUSITC found that the 1995 orders did not limit subject countries from exporting substantial, and even\nincreased, quantities to the United States. Moreover, the data gathered by the USITC reflects any\neffect on the industry that the orders may have had. Since the United States bases its estimate on that\ndata, it was of the view that it did not need to ad just the estimate to account for the effect of the 1995\norders. The United States recalls that the USITC found that it was too early to assess the effect of the\n2001 orders. The United States notes, however, that these covered angles alone, which represented at\nmost between 8 and 18% of the non-FTA imports covered by the stainless steel bar safeguard\nmeasure, and a small number of countries.\n3760 The United States explains that as a conservative\nestimate for purposes of this calculation, it has diluted the amount of increase necessary to remedy\nserious injury to reflect that a trade remedy whose effects may not currently be felt already applies to\nthese products.\n7.1630 The United States explains that in its estimate regarding consistency with Article 5.1, it\nfollowed the basic steps of the methodology previous ly outlined, with adaptations appropriate to the\nfacts of this domestic industry. It bases the estimate on the unit values, as there is no suggestion in the\nUSITC Report that differences in the unit values reflect different product mixes. Drawing on the\nUSITC's analysis, the United States uses 1998 as the comparison year. It treats the full difference in\noperating profits in 1999 versus 1998 and one-half of the difference in operating profits in 2000 and\nthe first half of 2001 as compared with 1998, as attributable to increased imports. In the second and\nthird steps, it uses data for the period of 1999 through the first half of 2001.\n7.1631 The United States notes the USITC's findings\n3761 with regard to imports from Canada and\nMexico and concludes that no adjustment to the estimate was necessary. As a fourth step, the United\nStates estimates the additional duty that would be necessary to achieve the target increase. As part of\nthe remedy phase of the investigation, the USITC staff prepared economic models on the United\nStates' stainless steel bar market. These models indicated that a 20% increase in duties would result in\nan increase of between 10.2% and 14.7% in the sale price of imported stainless steel bar (excluding\nMexican products) in the United States.3762 For the United States, this suggests that the 20% tariff on\nstainless steel bar is set at a magnitude that satisfies the requirements of Article 5.1.\n\n3760 Public USITC data on total imports of stainless steel angles (from all sources, both fairly and\nunfairly traded) in the 1998-2000 investigation period show the following figures, which are compared in the\nfollowing table to total non-FTA imports of stainless steel bar from the USITC Report:\n1998 1999 2000\nVolume Value Volume Value Volume Value\nAngles imports 9,802 20,931 16,399 27,163 17,148 32,152\nBar imports 97,552 248,724 92,341 204,223 131,184 302,546\nAngles share 10.0% 8.4% 17,8% 13.3% 13.1% 10.6%\nSource: USITC Report; Stainless Steel Angles From Japan, Korea and Spain, Inv. No. 731-TA-888-890 (Final)\nUSITC Pub. 3421, p. IV-2 (May 2001) (US-62).\n3761 United States' first written submission, para 1157.\n3762 Memorandum EC-046, p. STAINLESS-42 (US-64).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1632 Then the United States modelled two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has applied the\nsafeguard measure no more than the extent necessary to prevent or remedy serious injury and to\nfacilitate adjustment.\n7.1633 The European Communities notes that the United States has chosen 1998 as the \"base\" year\nfor its numerical analysis and made adjustments to take account of the injury caused by a downturn in\ndemand and an increase in energy costs in 2000 and 2001, but refuses further adjustment with respect\nto poor operation by two domestic producers, in line with the USITC findings. The United States has\nalso taken into account anti-dumping orders decided in 2001.\n3763 As a result of its numerical\napproach, the United States has found that an increase of 35.1% in imports prices would be in line\nwith Article 5.13764 and referred to the USITC modelling indicating that a 20% additional tariff on\nimports excluding Mexico but including Canada w ould result in an increase of between 10.2 and\n14.7% in imports prices.3765\n(ix) Tariff on stainless steel rod\n7.1634 The United States3766 submits that the USITC demonstrated that increased imports from non-\nNAFTA sources caused serious injury to the domestic stainless steel rod industry and this is the\nstarting assumption of its justification.\n7.1635 The United States first notes that most of the data are confidential, since the industry had a\nsmall number of producers. For purposes of explaining its estimate relating to compliance with\nArticle 5.1, the United States has obtained ranged data for producers representing a large portion of\nthe domestic industry. These data are within a range either 10% greater or less than the actual data.\nThis data is presented in the following table:\n\n3763 United States' first written submission, paras. 1148-1156.\n3764 Exhibit US-56.\n3765 United States' first written submission, para. 1158.\n3766 United States' first written submission, paras. 1160-1169.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n1996 1997 1998 1999 2000 1st half\n2000\n1st half\n2001\nProduction 120,000 120,000 113,000 107,000 96,000 55,000 39,000\nShipments 118,000 119,000 111,000 107,000 96,000 54,000 40,000\nEmployment 1,000 1,000 900 900 800 800 700\nWages 50,000 52,000 46,000 44,000 43,000 23,000 18,000\nOp. income 5,100 4,400 5,100 (1,300) (4,800) 1,800 (5,200)\nMargin 5.0% 4.0% 6.0% -0.2% -7.0% 4.0% -18.0%\nInventory 1,600 1,000 2,300 400 900 1,900 -\nSource: Stainless Steel Rod (US-63). Production, shipments and inventory in short tons; employment in\nnumbers of workers; wages and operating income in US$1 million; productivity in tons/1000 hours.\n7.1636 The United States submits that the USITC identified two factors other than increased imports\nthat potentially caused injury: downturn in dema nd and increased energy costs in late 2000 and the\nfirst half of 2001 and poor operations by domestic producer AL Tech/Empire. The USITC found that\nthe poor operations by AL Tech/Empire was not a factor that caused injury to the domestic industry.\nThe USITC found that declining demand and increased energy costs had an effect on the domestic\nindustry in 2000 and the first half of 2001, albeit one less important than the injury caused by\nincreased imports. The USITC further indicated that the domestic industry could have increased\nprices to cover increased costs in the absence of increased imports. The findings of the USITC\nindicate that the much of the poor industry performance is attributable to increased imports. It also\nindicated that declining demand and increased energy costs had an effect on the domestic industry in\n2000 and the first half of 2001. The United States explains that it based its analysis of the permissible\nremedy on aggregate unit value data because the pricing series data for domestic industry is\nconfidential.\n7.1637 The United States argues that in its estima te regarding consistency with Article 5.1, it\nconsidered existing anti-dumping duty orders. The USITC noted that anti-dumping and\ncountervailing duty orders were imposed in 1993, 1994, and 1998 against imports of stainless steel\nrod from Brazil, France, India, Italy, Japan, Korea, Spain, Sweden, and Taiwan.\n3767 The USITC found\nthat the orders appeared not to have limited the ability of foreign producers in these countries to\nincrease exports to the United States in 1999 and 2000. The data gathered by the USITC reflects any\neffect on the industry that the orders may have had. Since the United States bases its estimate on that\ndata, the United States does not need to adjust the estimate to account for the effect of the 1995\norders.\n7.1638 The United States explains that it followed the basic steps of the same methodology\npreviously outlined, with adaptations appropriate to the facts of this domestic industry. To estimate\nthe extent of the permissible remedy, it began with the fact that in 1996 the condition of the domestic\nindustry had not yet begun to deteriorate. Therefore, 1996 would be an appropriate comparison year,\nkeeping in mind that imports may still have been having some negative effect on the industry. As\nnoted above, the USITC Report indicates that the inju ry, as reflected in the decrease in the domestic\nindustry's performance from 1997 to 1999, was due to increased imports. Therefore, it was\n\n3767 USITC Report, p. 219.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nreasonable to treat any amount by which operating income in each of these years is below operating\nprofits in 1996 has having been caused by increased imports. As a conservative estimate, it treats half\nof the decline in the industry's performance in 2000 and the first half of 2001 as attributable to this\nfactor. In the second and third steps, the United States uses public data for 1997 through the first half\nof 2001, using publicly available unit values from page STAINLESS-12 of the USITC Report. The\nUnited States notes the USITC's findings with re gard to imports from Canada and Mexico and\nconcluded that no adjustment to the estimate was necessary. As a fourth step, the United States\nestimates the additional duty that would be necessary to achieve the target increase. As part of the\nremedy phase of the investigation, the USITC staff prepared economic models on the United States'\nstainless steel rod market. For the United States, these models suggest that the 15% tariff on stainless\nsteel rod (excluding rod from Canada and Mexico) is set at a magnitude that satisfies the requirements\nof Article 5.1.\n3768\n7.1639 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has applied the\nsafeguard measure no more than the extent necessary to prevent or remedy serious injury and to\nfacilitate adjustment.\n7.1640 The European Communities notes that the United States has determined 1996, a year when\nthe industry's condition hat not yet began to deteriorate, as the adequate \"base\" year for its numerical\nanalysis and made adjustments to take account of the injury caused by a downturn in demand and an\nincrease in energy costs in 2000 and 2001, but refused further adjustment with respect to poor\noperation by two domestic producers, in line with the USITC findings.\n3769 As a result of its numerical\napproach, the United States has found that an increase of 39.0% in imports prices would be in line\nwith Article 5.13770 and referred to the USITC modelling to conclude that a 15% additional tariff on\nimports excluding Mexico and Canada would suggest that a 15% increase in duty would be set at a\nmagnitude that satisfies the requirements of Article 5.1. 3771 However, it is not possible to check the\nlatter assumption, since the results of the modelling exercise had been kept confidential and no non-\nconfidential summary has been provided. Finally, the European Communities argues that the so-\ncalled numerical analysis proposed by the United States does not demonstrate anything.3772\n(x) Tariff on stainless steel wire\n7.1641 The United States3773 recalls that for stainless steel wire, two Commissioners found a threat of\nserious injury and one Commissioner found serious injury, and this is the starting assumption of its\njustification. They issued separate views, but agreed on certain key aspects of the injurious condition\nfaced by the domestic industry. Chairman Koplan found a threat of serious injury based on a decline\nin sales and market share, increasing inventories, and a downward trend in production, profits, wages,\nproductivity, and employment, indicating that the domestic producers could not generate adequate\ncapital for modernization. Commissioner Bragg treated stainless steel wire as part of a single like\n\n3768 Memorandum EC-046, p. STAINLESS-41 (US-64) (the results of the modelling exercise are\nconfidential).\n3769 United States' first written submission, paras. 1160-1163.\n3770 Exhibit US-56.\n3771 United States' first written submission, para. 1168.\n3772 European Communities' second written submission, paras. 554-556.\n3773 United States' first written submission, paras. 1187-1203.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproduct with stainless steel wire rope (terming the combination \"stainless steel wire products\"), and\nfound a threat of serious injury based on decreasing domestic sales and market share in the first half\nof 2001, increases in inventories throughout period of investigation, and lower trends in production,\nprofits, wages, productivity, and employment in the first half of 2001.\n3774 Public data indicated that\nthe volume of stainless steel wire rope imported in to the United States was much smaller than the\nvolume of stainless steel wire, suggesting [sic].3775 Commissioner Devaney also treated stainless steel\nwire as part of a single like product with stainl ess steel wire rope, but found serious injury based on\nfalling operating income levels and a decline in most indicators in the first half of 2001.3776\n7.1642 The United States submits that each of these determinations reflects a permissible analysis of\nthe effect of imports on the domestic industry. Under United States law, multiple affirmative\ndeterminations by individual Commissioners as to differently defined like products constitute an\naffirmative determination of the USITC with regard to the largest product group that is subject to\nenough affirmative determinations to form a majority of the USITC. It is the injury experienced by\nthe producers of stainless steel wire – the product within the intersection of the determinations of\nCommissioners Koplan, Bragg, and Devaney – that forms the basis for deciding the extent of\napplication of the safeguard measure. The performance of these producers is evaluated in light of the\nfindings made by Commissioners Bragg and Devaney as to the larger industry comprising producers\nof stainless steel wire and stainless steel rope. For similar reasons, the overall determination of the\nUSITC is treated as a threat of material injury and refer to the Appellate Body statement in US – Line\nPipe. In the terms adopted by the Appellate Body, treating the affirmative determination of the\nUSITC as threat of serious injury recognizes that all three Commissioners found the industry had at\nleast passed the lower threshold of a threat. It is the degree of injury that is common to all three\ndeterminations. The Commissioners rendering affirmative determinations focused on the same\nindicators of injury. For stainless steel wire, these were:\n1999 2000 1\nst half 2000 1 st half 2001\nProduction 103,484 106,547 56,698 43,347\nShipments 102,211 104,752 55,966 43,933\nMarket share 80.5% 77.0% 77.7% 72,7%\nEmployment 1,022 1,017 1,021 935\nWages 31 31 16 14\nProductivity 48 50 51 46\nOp. income* 7,401 5,854 7,808 (4,428)\nMargin* 2.0% 2.3% 5.5% (4.0%)\nInventory 66,688 71,313 50,589 46,271\nSource: USITC Report, p. STAINLESS-C-7 and USITC Prehearing Report, p. STAINLESS-C-7. Production,\nshipments and inventory in short tons; employment in numbers of workers; wages and operating income in\nUS$1 million; productivity in tons/1000 hours.\n* Indicates data made public in the USITC prehearing report.\n\n3774 USITC Report, pp. 288-289.\n3775 USITC Report, pp. STAINLESS-14 & STAINLESS-16.\n3776 USITC Report, p. 345.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1643 The USITC found that \"increased imports at underselling prices have played a key role in\nbringing about this negative trend\", ending \"at a point near serious injury\". 3777 One or m ore of th e\nCommissioners identified three other potential causes of the threat of serious injury: declining\ndemand, raw material costs, and appreciation of the dollar. The United States recalls that Chairman\nKoplan and Commissioner Bragg found that some portion of the industry's declining performance in\nthe first half of 2001 is attributable to the decline in demand for stainless steel wire. Chairman\nKoplan found that the decline in demand alone did not explain the injury experienced by the domestic\nproducers, whose production and shipments declined more than apparent domestic consumption in the\nfirst half of 2001. Commissioner Bragg found that th e imminent impact of imports outweighed these\nother factors.3778 Commissioners Koplan and Bragg found th at the industry's raw material costs had\nand would continue to have an impact on the dom estic industry, but one outweighed by increased\nimports.3779 Commissioner Bragg found that the appreciation of the dollar had and would continue to\nhave an impact of the domestic industry, but one outweighed by increased imports.3780\n7.1644 The United States argues that, in its view, the USITC Report details the relationship between\nincreased imports from non-FTA sources and injury to the domestic industry. Commissioners Koplan\nand Bragg found that imports caused the threat of serious injury because when domestic consumption\nfell in the first half of 2001, after four years of steady increases, imports increased, resulting in a sharp\ndecrease in sales and market share.3781 As a result, domestic producers could not raise prices to cover\nincreased costs, and their operating income plummeted. 3782 Commissioners Koplan, Bragg, and\nDevaney all found that underselling by imported products played a role in causing serious injury.3783\n7.1645 The United States explains that, as a conservative approach, if one of the Commissioners\nidentified another factor as causing injury, it considered that that factor caused injury regardless of the\nviews of the other Commissioners. Accordingly, for purposes of demonstrating that the safeguard\nmeasures complied with Article 5.1, the United States interprets the findings of the Commissioners as\ndemonstrating that non-FTA imports were responsible for some of the reduction in domestic\nproducers' sales and market share, increasing inventories, production, profits, wages, productivity, and\nemployment in the first half of 2001. This is not to suggest that imports were not having a negative\neffect on the domestic industry in preceding year s. As Chairman Koplan found, \"between 1996 and\n2000, even though domestic consumption increased, the domestic industry kept prices of the domestic\nproduct in line with costs and earned only low profits because of the presence of substitutable\nstainless steel wire imports\".\n3784 Commissioner Bragg found that increased imports prevented\ndomestic producers from taking advantage of an upswing in the business cycle during the 1996 to\n2000 period.3785 The United States assumes that the injury was to some extent attributable to the\ndecline in demand, increasing raw material costs, and currency appreciation, but that none of the\ninjury is attributable to NAFTA imports. The United States considers that the entirety of the decrease\nin the industry's financial performance was due to these factors.\n7.1646 Then the United States explains that it has performed a different analysis for stainless steel\nwire because the Commissioners' causation analyses focused on the volume of imports and their\n\n3777 USITC Report, p. 164.\n3778 USITC Report, pp. 259 and 302. Commissioner Bragg treated this factor under the rubric of the\n\"general downturn in the economy\".\n3779 USITC Report, pp. 259 and 302.\n3780 USITC Report, p. 302.\n3781 USITC Report, pp. 259 and 302.\n3782 USITC Report, p. 259.\n3783 USITC Report, pp. 259, 294, and 346.\n3784 USITC Report, p. 259.\n3785 USITC Report, p. 302.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmarket share. In addition, the underselling data cited by Commissioner Koplan was confidential, and\nthe average unit value data did not show similar patterns, making it unusable as a surrogate.\nAccordingly, the United States analyses this safeguard measure based on import volumes. It noted\nthat imports increased substantially between 1999 and 2000. As a first step in the analysis, the United\nStates calculates what non-NAFTA import volume would have been if non-NAFTA imports had\nstayed at their 1999 market share in 2000 and 2001. It then compares the calculated import volumes\nwith the actual import volumes for those peri ods, and found that non-NAFTA imports would have\nbeen, on average, approximately 20% lower. This reduction represents a reduction in import volume\nlower than the USITC modelling associated with a 10% tariff, indicating that the safeguard measure\nwas applied less than the extent necessary.\n3786 Since, for the United States, this approach was based\non the volume of non-NAFTA imports alone, it concludes that no adjustment to the estimate was\nnecessary. In a similar vein, no adjustment was necessary to reflect the United States' conservative\nestimate that the decrease in the domestic industry's financial performance in 2000 was attributable to\nthe decline in demand or increasing raw material costs. In addition, the United States argues that\nsince its calculation did not make use of import prices, no adjustment was necessary to reflect its\nestimate that currency appreciation was a cause of injury to the domestic industry.\n7.1647 The United States then models two scenarios: (i) the change in the price, volume, and\nrevenue for domestic products and imports if the remedy established by the President on 5 March\n2002, had been in effect in 2000; and (ii) the change in the price, volume, and revenue associated\nwith domestic products and imports from various sources if imports had remained at 1997 levels in\n2000. The United States submits that the results of this exercise suggest that it has applied the\nsafeguard measure no more than the extent necessary to prevent or remedy serious injury and to\nfacilitate adjustment.\n7.1648 The European Communities argues\n3787 that the United States' arguments on Stainless Steel\nWire, like its arguments for other products, amount to a reconstruction of the USITC Report\nunsupported by the facts on the record. Turning first to the issue of non-attribution, the European\nCommunities explains that Commissioner Koplan had not considered the issue of rising costs, and had\nnot ensured that the injurious effect of rising costs was not attributed to increased imports. 3788 Th e\nUnited States expends five paragraphs trying to explain how Commissioner Koplan analysed costs,\ndistinguished and separated their effects, and ensured that they were not attributed to increased\nimports.3789 This is five paragraphs more than the USITC. Commissioner Koplan's opinion rested on\ndevelopments in interim 2001 which led him to consider that increased imports posed a threat of\nserious injury. He identified three factors \"which contributed\" to the domestic industry's decline. 3790\nThe first two were imports and declining demand. Thirdly, \"unit costs of goods sold increased by ***\npercent\" (all financial data for Stainless Steel Wire is confidential).\n3791 He noted that \"the falling\nprices and rising costs led to a *** percentage point loss [sic] in the operating income to sales ratio\nbetween interim 2000 and interim 2001\".\n3792 The European Communities points out that that is all the\ndiscussion of rising costs in interim 2001 that the USITC Report contains. Five paragraphs in the\nUnited States first written submission cannot make up for this total lack of reasoned and adequate\nexplanation. As the financial data is confidential, there is no reasoned and adequate explanation of\nhow the facts support the findings, especially in the absence of a non-confidential indexed version of\n\n3786 USITC Memorandum EC-Y-046, p. STAINLESS-40.\n3787 European Communities' second written submission, paras. 432-435.\n3788 European Communities' first written submission, para. 579.\n3789 United States' first written submission, paras. 736-740.\n3790 USITC Report, Vol. I, p. 259.\n3791 USITC Report, Vol. I, p. 259.\n3792 USITC Report, Vol. I, p. 259.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe data. There is no examination of the relevance or cause of increased costs, no separation and\ndistinction, and thus no non-attribution. With respect to the correlation of trends, the European\nCommunities notes in its first written submission that three other Commissioners had found that\ndespite consistent underselling there was no correlation between pricing of imports and domestic\nproducts.\n3793 Commissioner Koplan did not deal with this issue. Moreover, Commissioner Koplan did\nnot discuss underselling at all in his discussion of interim 2001 developments and, thus, did not\nexplain in a reasoned and adequate manner, how th ere was a correlation between pricing for imports\nand domestic pricing sufficient to establish a causal link. The USITC Report does not provide a\nreasoned and adequate explanation of whether NAFTA imports were causing injury and how any such\ninjury caused was not attributed to non-excluded imports. Chairman Koplan simply concluded that\nimports from neither Mexico or Canada were in the top five suppliers during the period of\ninvestigation. He did not even attempt to analyse whether such imports caused any injury and does\nnot, therefore, ensure that any such injury is not attributed to non-excluded imports.\n2. General criticisms of the numerical analysis and economic model\n3794\n7.1649 Korea criticises the United States' ex post justification of its measure which, it says, more than\nconfirms the reverse-engineered nature of the ex-post methodologies.3795 Korea argues that only the\nmost significant errors are identified ( e.g., mathematical mistakes are not noted), but these errors\ncompletely undermine the legitimacy of the United States' methodologies (the \"simplified numerical\nanalysis\"3796 and \"simplified economic modelling\" using the COMPAS Model 3797) for purposes of\ncomplying with Article 5.1 of the Agreement on Safeguards.3798\n7.1650 In support of its allegations, Korea submits Exhibit 14 3799 that contains further details of its\ncriticism of the United States' methodology 3800 as having the effect of overestimating the tariff\nrequired to restore the domestic industry to profitability. Korea submits that these methodological\nerrors are: (i) the arbitrary and unsubstantiated addition of percentage increases to the percent\nincrease in revenues the United States believes are necessary to restore domestic producers to\nprofitability; (ii) the arbitrary and unsubstantiated subtraction of actual operating income margins\n\n3793 European Communities' first written submission, paras. 580-581.\n3794 The following section includes discussions from Korea's Exhibit 14, Korea's, United States' and the\nEuropean Communities' first and second written submission s, Korea's replies to Panel questions Nos. 48, 54 and\n56 at the second substantive meeting as well as additional comments on those questions, all of which deal with\nthe United States' methodology for its justification pursuant to Article 5.1.\n3795 Korea's second written submission, para. 247 and \"Critique of US Justification of Its Safeguard\nMeasures on Certain Steel Products\" (Korea Exhibit 14, \"K-14\").\n3796 Found in \"Safeguard Measures Worksheets\" at United States' first written submission,\nExhibit US 56.\n3797 Found in \"Modelling Results Worksheets\" at United States' first written submission, Exhibit US 57.\n3798 Korea asserts that the United States' defense of the accuracy of its model is weak at best. Given\nthat the Felt Hats working party ( Report on the Withdrawal by the Unite d States of a Tariff Concession under\nArticle XIX of the General Agreement on Tariffs and Trade , GATT/CP/106, report adopted on 22 October 1951)\non which the United States seeks to rely was decided more than 50 years ago, Korea questions whether it is very\nrelevant to the issue of the required accuracy or usefulness of economic models. In any event, the United States\nseems to be arguing that the inherent imprecision in the \"numeric exercise\" and \"rough estimate\" is fine for\npurposes of defending its measure even if such analysis might be problematic for a proper non-attribution\nevaluation. (US Responses to Questions from Panel, paras. 154-156) Korea does not agree.\n3799 Supported by all complainants, Norway's second oral statement on behalf of all complainants,\npara. 34.\n3800 US Exhibit 56 \"Safeguard Measure Worksheets\" and US Exhibit 57 \"Modelling Results\nWorksheets\"\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfrom domestic average unit values (AUVs) before adjusting domestic AUVs upwards to reach\ntargeted commercial sales; and (iii) the assumption that domestic and imported steel products are\nperfect substitutes for each other, and therefore that imported AUVs must rise to equally match\ndomestic AUVs.\n3801\n7.1651 By way of illustration, Korea submits that the end result for flat products is that the United\nStates should have concluded that imported AUVs needed to increase by 10.1% to remedy injury,\nrather than by the 18.9% increase suggested. This would mean that a 30% tariff that generates a\n20.8% to 28.0% increase in the AUV of imports is, in fact, excessive. In fact, the USITC's estimates\nof the various effects of different tariff rates suggests that a tariff of about 11% to 12% would produce\nnon-NAFTA import price increases closer to 10.1%.\n3802 The United States' methodology with respect\nto other welded pipe is completely indecipherable. There is no justification for the targeted operating\nmargin selected, nor can one be divined from the US discussion in the text.3803\n7.1652 By way of general comment, Korea submits that the numerical approach used by the United\nStates is nothing more than a snapshot of what would happen the day the tariffs are imposed. 3804 It\nholds constant everything that would vary two days after the tariffs are imposed (domestic quantity\nsold, SG&A, COGS). For example, when one impos es a tariff, import prices increase and quantity\ndeclines. Domestic prices increase and quantity sold increases (and therefore SG&A and COGS\nwould also increase). So technically, to achieve the target total revenue needed to reach a particular\n\"profit\" margin, the average unit value of domestic product sold may not need to increase as much as\nthe snap-shot approach would dictate. Domestic producers can hit the desired target revenue by\nselling more product at a slightly lower AUV than the snap-shot would dictate.\n7.1653 Korea also submits that the numerical analysis and model also ignore the fact that tariffs have\ntwo effects on imports – prices and quantities – not just on prices.\n3805 The numerical analysis and\nmodel ignore this effect and, therefore, overstate the increase in prices that must be achieved through\ntariff levels. When imports become more expensive, the United States industry can not only raise\nprices to generate revenue, but it can increase the quantity of sales to generate revenue. This is\nparticularly beneficial to a capital-intensive industry with excess capacity since increased volumes\nalso reduce unit costs. The United States model ignores both effects.\n7.1654 With respect to capture of volume-related cost decreases, the United States notes that Korea\nargues that the numerical exercise does not capture cost savings that would occur when a safeguard\nmeasure resulted in increased sales volume, allowing domestic producers to spread fixed costs over a\nlarger volume.\n3806 The criticism is misplaced. As the United States notes in the first written\nsubmission, the price-based exercise did not attempt to capture the injurious effects of increased\nimports on domestic producers' sales volume or any factor other than price. 3807 Thus, the adjustment\nto reflect the cumulated injurious effects of imports did not include injurious effects associated\nexclusively with the volume effects, or any other non-price effects, of imports. Since the price-based\nexercise omitted the injurious effects of import volume, the United States considered it appropriate to\n\n3801 Exhibit K-14, p.1.\n3802 Exhibit K-14, p.1.\n3803 Exhibit K-14, p.2.\n3804 Exhibit K-14, p.2.\n3805 Korea's written reply to Panel question No. 50 at the second substantive meeting.\n3806 Exhibit K-14, p. 3.\n3807 United States' first written submission, para. 1079. Such factors would include productivity,\nproduction, capacity utilization, employment, etc.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nomit the possible beneficial effects of reduced import volume that might accompany a safeguard\nmeasure.\n7.1655 With respect to the second step of the numerical analysis, Korea notes that the United States\ncalculates the percent difference in targeted revenues from Step 1 over actual revenues. 3808 T h i s\nshould be all that is needed to the estimate the do mestic AUVs required to reach the target operating\nmargin deemed to represent an industry not injured by imports. However, the United States then\nfurther increases the percentage by which operating margin must increase \"to counteract the negative\neffects of imports from 1998 to 2000 and to facilitate adjustment\". 3809 The United States arbitrarily\npicks the target operating margin rate as a measure of what it would take to do this (no rationale is\noffered why the target operating margin is the appropriate rate that \"counteracts\" and \"facilitates\").\nRestoring revenues to the level that would yield an operating income margin \"equal to a level that\ndoes not reflect the price effect of increased imports\"\n3810, (to a level that \"remedies\" injury) should be\nsufficient. However, the United States adds in the target operating margin again, with no explanation\nwhy this rate will accomplish the task. Korea submits that this is arbitrary. It results in\noverestimating the target AUV, and hence the \"required\" tariff. Korea submits that, in fact, this step\nis completely unnecessary. It would be sufficient to calculate the targeted revenues needed to achieve\nthe targeted operating margin in the First Ste p, and then proceed to the Third Step (but with\ncorrections).\n7.1656 The United States responds that with regard to additions to target profit to reflect industry's\nexisting injured condition, the United States reiterates that the ordinary meaning of \"remedy\" means\nto \"rectify\" or \"make good\"\n3811, a concept that clearly encompasses addressing the accumulated effects\nof increased imports. The complainants have not actually disagreed with its analysis of the ordinary\nmeaning of \"remedy\" and its implications, including the observation that imports have cumulative\ninjurious effects.3812 The additions to the target profit in the second step of its numerical exercise\nreflect the cumulative injurious effect of increased imports. Omitting such an addition would ignore\nthose effects, something that the Agreement on Safeguards does not require.\n7.1657 With respect to the third step of the numerical analysis, Korea submits that the methodology\nemployed is convoluted and arbitrary as well, and factually contradicts the USITC's finding that\nimported and domestic products are imperfect substitutes for each other.3813 First, it is not clear why it\nwas necessary to decrease domestic AUVs by the actual operating margins for each year, and then\nincrease them by the (overstated) percentage calculated in Step Two. Again, the resulting domestic\nAUVs are overstated. Second, the United States assumes import AUVs need to rise to exactly equal\nthe target domestic AUVs to enable domestic producers to charge prices that generate those AUVs.\nThis assumes imported products and domestically-produced products are perfect substitutes for each\nother, e.g., that imported plate must be priced at the same level as domestic plate at all times in all\ncases. The USITC in fact assumed that imported and domestically-produced steel products were not\n\n3808 Exhibit K-14, p.3.\n3809 United States' first written submission, para. 1074.\n3810 United States' first written submission, para. 1074.\n3811 United States' second written submission, paras. 180-184.\n3812 The United States argues that the European Communities has not addressed the substance of the\nhypothetical in paragraph 128 of the United States' oral statement regarding the accumulated polluting effects of\na factory, other than to suggest that it treated imports as equivalent to pollution, when the United States' point\nwas that the pollution was analogous to injurious effects. Thus, the United States concludes that the European\nCommunities does not disagree with our observation that imports may have a cumulative negative effect, and\nthat it does not disagree that these cumulative effects may be addressed by a safeguard measure.\n3813 Exhibit K-14, p.3.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nperfect substitutes.3814 Imperfect substitutes (even moderate substitutes) mean that imports can be\npriced lower than comparable domestic products, and domestic producers can still \"make the sale\".\nThe impact of this assumption is that the percent change in import prices required to yield the target\ndomestic AUVs is overstated.\n7.1658 Korea argues that the problem of a \"one-year\" base period approach is inherent to the\nmodel.\n3815 The model attributes all injury occurrin g in subsequent years as injury from imports\nregardless of what effects the other factors may have had in the subsequent years. The model assumes\nthat, ceteris paribus, any injury after the base year is attributable to imports because it is assumed that\nall other factors in the market remain constant. But in Korea's opinion, ceteris paribus does not apply.\nIt recommends looking simply at the developments in mini-mills versus integrated mills. 3816 It also\nrecommends looking at the growth in capacity in pi pe and tube, where the ITC recognized that injury\ndid not exist even as late as mid-2001. For Korea, the point is that once it is demonstrated that the\nassumption of ceteris paribus is not the case – i.e., other factors do not remain constant – the flaw in\nthe United States' argument is equally obvious. All of the changes in US industry's economic and\nfinancial state are assumed by the United States' model to be attributed to imports. Korea argues that\nthat is precisely the problem.\n3817 The more isolated and fewer the data points, the less relevant the\nanalysis becomes as a predictor of future events. The further in the past that benchmark is, the less\nrelevant it also potentially becomes since intervening events may well affect its validity as a predictor\nof future behavior in the market. For example, events that gave rise to industry profitability for flat-\nrolled in 1997 (which had nothing to do with im ports) may or may not replicate in the future ( e.g.,\nhigh demand and favorable exchange rates gave rise to profitability in 1997). To go forward saying\nthat 1997 is an appropriate ruler for the future, all st ars would have to realign in same way for that to\nbe a relevant benchmark for the future. Korea concludes that it is impossible to hold everything\nconstant and the United States' model does not attempt to do so. 3818 Moreover, for example, AUVs\nfor each flat-rolled product and welded pipe were of questionable value due to product mix issues as\nspecifically noted by the USITC 3819 and discussed at length in Korea's Written Rebuttal. 3820 Yet, in\nthe numerical analysis, the United States not only uses AUVs, but it also averages the AUVs for all\nflat products. The product mix issues multiply exponentially. There were very distinct import trends\nfor each flat-rolled product over the period and very different prices for each flat-rolled product. No\none-year \"product mix\" for \"flat-rolled\" makes any sense. The variation is too great to make an\naverage meaningful.\n7.1659 With respect to the fourth step of the numeric al analysis, Korea notes that the United States\ncompares the increase in imported AUVs required to put the industry in a state of non-injury to the\nimport price increases the USITC estimate would result from the tariff rate imposed. 3821 F o r f l a t\n\n3814 The USITC concluded: \"Based on data discussed in the final injury staff report, staff believes that,\nwhile there are some differences in US-produced and imported flat products, overall there is a moderate to high\ndegree of substitution between certain US-produced and imported flat steel products\". (USITC Memorandum\nEC-Y-046, 21 November 2001, p. FLAT-9 (Exhibit CC-10) The substitution elasticities used for flat products\nranged from 2 to 7. The low end of that range represents moderate substitutability; the higher end of that range\nrepresents high substitutability, but \"perfect\" substitutability would be a number in the double-digits.\n3815 Korea's written reply to Panel question No. 50 at the second substantive meeting.\n3816 Korea's second written submission, paras. 169-176\n3817 Korea's written reply to Panel question No. 72 at the second substantive meeting.\n3818 Korea's written reply to Panel question No. 55 at the second substantive meeting.\n3819 USITC Report, Vol. I, p. 61, footnote 279 (flat-rolled); p. 163, footnote 1006 (welded pipe)\n(Exhibit CC-6).\n3820 Korea's second written submission , paras. 251 and 264; Korea's Exhibit 14.\n3821 Exhibit K-14. p.4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproducts, the USITC used linked COMPAS models 3822 (which, Korea submits, is appropriate), which\nfound that a 30% tariff on imports of all flat imports but tin would increase non-NAFTA import prices\nby 20.8% to 28.0%.\n3823 Apparently, this is \"close enough\" to the 18.9% average import price the US\nnumerical analysis generated.3824\n7.1660 With respect to the use of average unit values, the United States reiterates that for the most\npart, it based the calculations on unit values, as these captured all of the products under investigation.\nFor some products, the findings of the USITC or data in the USITC Report indicated that the\ndifference in unit values between imports and domestic products reflected different product mixes, as\nwell as the injurious effects of price underselling by non-FTA imports. In those cases, the United\nStates argues that it based its calculations on the item-specific pricing comparisons conducted by the\nUSITC.\n3825 The United States argues that it sees nothing in Korea's argumentation that suggests any\ninfirmity in the choice of AUVs or item-specific pricing data for particular products.\n7.1661 With respect to Korea's criticism of the decrease in domestic AUVs by the actual operating\nmargins for each year, and then their subsequent increase by the percentage calculated in Step\nTwo\n3826, the United States argues that this step was necessary for an accurate calculation. Had the\nUnited States not \"backed out\" the actual operating margin before adding the target profit margin, the\nestimate of the price increase necessary to achieve the target profit margin would have been higher.\nThis, in turn, would have inaccurately inflated the estimate of the increase in import prices necessary\nto remedy the injurious price effects of increased imports.\n7.1662 Korea submits3827 that using the United States' numerical approach and keeping its grossly\nincorrect assumption about perfect substitutes, but correcting the other flaws noted above, yields the\nfollowing result: Import prices for flat products would need to increase by no more than 10.1%, and\nthe President's 30% tariff which results in a 20.8% to 28.0% price increase is excessive. In fact, the\nUSITC's estimates of the various effects of different tariff rates suggests that a tariff of about 11-12%\nwould produce non-NAFTA import price increases closer to 10.1%.\n3828 Korea argues that it is not\npossible to correct the other welded pipe estimated import AUV increase (as done above for flat-\nrolled) of 16.2%3829 because the proper target operating margin is unclear.\n7.1663 Korea notes 3830 that the USITC found that each flat-rolled product was not a perfect\nsubstitute. They found moderate to high substitutability.3831 Yet, the model assumes that imports and\ndomestic production are \"perfect substitutes\". The effect of this error is to overstate the amount by\nwhich import AUVs needed to be increased because it assumes that import prices must equal United\nStates prices for United States producers to \"get the sale\". Since imports are not perfectly\nsubstitutable, import prices do not need to be raised to the same level as those of domestic products so\na lower tariff is needed. Hence, the United States tariff is not limited to the \"permissible extent\". The\nUnited States defense that perfect substitutability is essentially the same as \"moderate to high\" is\nindefensible from an economic point of view – which the United States knows full well. The United\n\n3822 USITC Memorandum \"Available Information on Economic Models\" (unnumbered; undated).\n(Exhibit CC-10)\n3823 USITC Memorandum EC-Y-050, 5 December 2001, Table 3. (Exhibit CC-10)\n3824 \"Safeguard Measures Worksheets\". (Exhibit US 56).\n3825 United States' first written submission, para. 1072, footnote 1375.\n3826 Exhibit K-14, p. 3.\n3827 Exhibit K-14, p.4.\n3828 USITC Memorandum EC-Y-050 5 December 2001, Table 1. (Exhibit CC-10)\n3829 \"Safeguard Measures Worksheets\". (Exhibit US 56).\n3830 Korea's written reply to Panel question No. 50 at the second substantive meeting.\n3831 USITC Report, Vol. I, p. 58; USITC Report, Vol. II, p. FLAT-54. (Exhibit CC-6)\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nStates then suggested before the Panel that the imported product might be superior in quality.\nHowever, the USITC Report does not support that conclusion.3832 Moreover, the USITC's substitution\nelasticity measure is relative to the United States product. In other words, it measures customer\npreference for the domestic product based on a variety of factors including quality, delivery times,\netc.3833 Quality is but one of a number of factors considered by the USITC in its measure of\nsubstitution elasticity – and the overall substitutability was \"moderate to high\" compared to the United\nStates product.3834\n7.1664 With respect to the treatment of domestic and imported products as perfect substitutes, the\nUnited States argues that, in the price-based exercise, the United States estimated that imports would\nhave to sell at the same average unit value as domestic products for domestic products to achieve the\ntarget operating income levels. The complainants view this element of the calculation as\npresupposing perfect substitutability between imported and domestic products, when the USITC\nfound a moderate to high degree of substitution.\n3835 Assuming that domestic products would sell at a\ngiven level if imported products also sold at that level is consistent with a finding of moderate to high\nsubstitutability. To the extent that domestic and imported products could sell for different price\nlevels, the United States notes that many purchasers felt that imported products were of higher quality\nthan domestic products.\n3836 This would suggest the existence of a price premium, such that domestic\nproducts could achieve a given average price level only if imported products were sold at a higher\nprice level. Thus, if Korea were correct, the assumption that domestic and imported products needed\nto sell at the same level would be conservative.\n7.1665 The European Communities argues that neither the USITC model, nor the ex post numerical\nanalysis, properly deal with NAFTA imports, and thus neither allows the United States to satisfy its\nobligation under Article 5.1 to ensure that the measures remedies the injury allegedly caused by non-\nexcluded imports. The USITC included imports from NAFTA countries where they were found to\ncontribute importantly to injury, while the ex post numerical analysis excluded imports from NAFTA\ncountries entirely. However, the United States was under an obligation to ensure that the injury\ncaused by NAFTA imports was not attributed to non-excluded imports. When it comes to assessing\nthe applicable remedy, the United States was required to determine the extent of the injury caused by\nNAFTA imports, and ensure that the measure did not transfer the burden of remedying such injury to\nnon-excluded imports. In other words, the remedy analysis should have ensured that the domestic\nindustry was not relieved of the injury caused by FTA imports. For the European Communities, it is\nnot enough that the USITC concluded that NAFTA imports did not contribute importantly to serious\ninjury. The concept of contributing importantly does not assess whether NAFTA imports caused\ninjury. There is thus a discrepancy between both analyses and the required analysis.\n3837\n\n3832 USITC Report, Vol. II, Table FLAT-60. (Exhibit CC-6)\n3833 USITC Report, Vol. II, pp. FLAT-58-60, footnote 42. (Exhibit CC-6)\n3834 Korea's written reply to Panel question No. 50 at the second substantive meeting.\n3835 Exhibit K-14, pp. 3-4.\n3836 As a general rule, suggests the United States, the majority of purchasers viewed United States and\nnon-NAFTA products as comparable. However, a significant number of them expressed a preference, generally\nfinding non-NAFTA products to be superior by a two-to-one margin. USITC Report, pp. FLAT-58, LONG-81,\nTUBULAR-49, STAINLESS-69. The precise figures are: flat-rolled steel, 129 comparable, 64 non-NAFTA\nsuperior, 33 United States superior; long steel, 136 comparable, 44 non-NAFTA superior, 22 United States\nsuperior; tubular steel, 85 comparable, 28 non-NAFTA superior, 22 United States superior; stainless and tool\nsteel, 87 comparable, 26 non-NAFTA superior, 10 United States superior. These evaluations of product quality\nwould suggest that, on average, non-NAFTA products would command a price premium over domestic\nproducts.\n3837 European Communities' second written submission, para. 7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1666 The European Communities also argues that the United States also stresses the numerous\nconsiderations which played a role in the President's decision (efforts engaged by workers and firms,\neconomic and social costs and benefits of any safeguard, national economic interests).\n3838 However\nnowhere has the United States elaborated on these other considerations.3839\n7.1667 For Korea, an economic analysis, just like any other form of proof, is only sufficient to the\nextent that it is specific as to the facts, addresses the key issues in dispute, and takes into account the\nproper variables. 3840 For the same reason, mere assertions are not proof. Mere assertions cannot\nsubstitute for a full analysis of the facts and th e basis for the conclusions, nor can mere assertions\novercome a rebuttable presumption that the failure to satisfy Article 4.2(b) also fails to satisfy\nArticle 5.1 of the Agreement on Safeguards. Yet, the United States suggests that given the inherent\nimprecision of economic models, its ex post analysis of the measure should be subject to lighter\nscrutiny, such as whether it is in the \"ballpark\". That is simply incorrect. For the same reasons,\ngeneral theories about what might have occurred and what might have been addressed by the measure,\nare not a sufficient justification for the actual measure. It must be shown that the measure is limited\nto the permissible extent – not that it might be.\n7.1668 According to Korea, what is missing from the United States' economic model is any attempt\nto tie the amount and nature of relief to the specific injury found.\n3841 Why, for example, should the\nUnited States assume that the \"accumulated effects\" which must be remedied, if at all, for flat-rolled\nand the \"accumulated effects\" which must be remedied, if at all, for pipe and tube are the same? The\nUnited States does not even identify what precise accumulated effects it is targeting for each product\n(as opposed to giving some examples) but it doubles the operating margin for both welded pipe and\nflat-rolled. It is obvious that the effects would vary by industry and, in particular, the effects would\nvary (at least in degree) between an industry that wa s only threatened with injury versus one that was\nsuffering serious injury, but the United States simply doubles the profit margin for both. Mere\nassertions that the United States took a \"conservative\" approach by merely doubling the profit margin\nrather than triple it or quadruple it does not answer the question of whether even that relief was\nnecessary.\n7.1669 For Korea, this \"accumulated effects\" analysis also suffers from the same problem as the\n\"direct effect\" they identify – imports were not the only cause of injury even by the USITC's own\nadmission.\n3842 Therefore, these \"accumulated effects\" might be from a number of causes other than\nimports, but the US analysis, by its own explanation, does not limit the relief to those effects produced\nby imports. Finally, the US analysis also ignores the fact that tariffs also have accumulated effects\nover the period of the measure. The more years during which the measure is to be in effect, the\ngreater the effect on the industry.\n7.1670 Finally, Korea disputes the United States' argument, made at paragraph 130 of its oral\nstatement at the second substantive meeting, that the numerical analysis addressed only the \"increase\"\nin imports and not increased imports as a whole. Its model only measures changes in profits (profit\nshortfalls) so it is not correct that the model addresses only the increase in imports.\n3843\n\n3838 United States' written reply to Panel question No. 88 at the first substantive meeting.\n3839 European Communities' second written submission, para. 12.\n3840 Korea's additional comments on Panel question No. 54 at the second substantive meeting.\n3841 Korea's additional comments on Panel question No. 54 at the second substantive meeting.\n3842 Korea's additional comments on Panel question No. 54 at the second substantive meeting.\n3843 Korea's written reply to Panel question No. 47 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1671 By way of a general response, the United States observes again that any numerical analysis –\nbe it the price- or volume-based exercise or economic modelling – can only indicate the order of\nmagnitude of a safeguard measure, and cannot set a precise level.\n3844 Most of Korea's comments are\ndirected at the precision of the United States' numerical exercises, and do not detract from the United\nStates' observation that the exercises demonstrate the consistency of the steel safeguard measures with\nArticle 5.1.\n7.1672 Finally, Korea submits that the USITC's COMPAS results do not confirm the results from the\nUnited States ex post analysis and model. The results are completely distinct. For flat-rolled, the\nCOMPAS shows that a 30% tariff would produc e a 20.8% to 28% increase in non-NAFTA import\nunit values (\"prices\") 3845 while the ex post model shows that import unit values (\"prices\") would\nincrease 18.9%.3846\n7.1673 In response, the United States submits that the price-based exercise and modelling exercise\npresented by the United states \"produce the same results\" only in that both of these exercises confirm\nthat the steel safeguard measures were applied less than the extent necessary to prevent or remedy\nserious injury and to facilitate adjustment. However, this does not suggest that these exercises (or the\nmodelling performed by the USITC staff) yield the same numerical results.\n 3847\n7.1674 The United States submits that, for example, the figures cited by Korea are not based on the\nsame economic model. The 18.9% increase in import prices was calculated according to the\nprice-based exercise described in the United States' first written submission.3848 This figure represents\nthe estimated degree to which import prices would have to increase for domestic producers to achieve\nthe target operating income margin identified in our submission. Thus, it is a goal rather than an\nestimated effect. The other figures cited by Korea – the 20.8% to 28.0% range of projected increases\nin import prices – was the result produced by th e multi-market or linked COMPAS model for a 30%\ntariff on CCFRS.3849 Thus, it is an estimated effect rather than a goal. These are clearly two different\nmethods of analysis. The United States compared the two results solely for the purpose of showing\nthat a tariff of 30% would achieve import price increases in the range required to achieve the targeted\noperating income margin. Comparison for any other reason, such as that suggested by Korea, is both\nimproper and meaningless. Korea's argument re garding the COMPAS results generated by the\nUSITC staff and price-based exercise in the US fi rst written submission is unclear. It could be\ninterpreted in a variety of ways, each of which is incorrect. If Korea is arguing that the COMPAS\nresults generated by the USITC staff are different from the modelling results referenced in the price-\nbased exercise, it is plainly incorrect. The price-based exercise compared an estimated import price\nthat would achieve target operating margins with the estimated price effect of a 30% tariff, as reported\nin the USITC staff's COMPAS modelling.\n3850 For each product, including CCFRS, there is no\ndifference as the exercise correctly reflected the results of the USITC staff's COMPAS modelling.3851\n\n3844 United States' first written submission, para. 1062.\n3845 USITC Memorandum EC-Y-050, 5 December 2001, Table 3. (Exhibit CC-10)\n3846 Exhibit K-14; Korea's written reply to and additional comments on its reply to Panel question No.\n48 at the second substantive meeting.\n3847 United States' additional comments on replies to Panel question No. 48, 54 and 56 at the second\nsubstantive meeting, paras. 1-9.\n3848 United States' first written submission, paras. 1065-1080; Exhibits US-56 and US-57.\n3849 Memorandum EC-Y-050 (Exhibit US-65). According to Korea, since the USITC staff ran the\nmodel before the USITC issued its report, it treated only Canada as excluded from the measure.\n3850 United States' first written submission, para. 1072.\n3851 In this regard, the United States notes, the price-based exercise differed from the modelling\nexercise. The price-based exercise referenced the COMPAS results produced by the USITC staff, which reflect\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1675 The United States notes that if Korea is arguing that the estimated amount that import prices\nwould have to increase to eliminate downward pressure on US producers' prices (18.9% for\nCCFRS)3852 was a projection of the actual amount that prices would increase, it has misunderstood.\nThe 18.9% figure is clearly labeled \"Needed Unit value increase for non-NAFTA imports\". 3853 I t\nrepresents the hoped-for increase in import prices, and not an estimate of what will actually happen.\nIn short, the written description of the price-base d exercise and the spreadsheets in Exhibit US-56\napplying that exercise do not suggest a finding that \"a 30% tariff yields an 18% increase in imports\nprices\".3854 If Korea's point is that the needed unit value increase of 18.9% is slightly below the low\nend of the range of estimated effects of a 30% tariff, the United States explained that \"numerical\nestimates are necessarily limited in their ability to precisely quantify and isolate the full effect of\nimports and the appropriateness of remedial measures. . . . Numerical estimates may be useful to test\nwhether a measure is set at an order of magnitude consistent with Article 5.1\".\n3855 The price-based\nexercise demonstrates that this is the case for the safeguard measure on CCFRS, as well as the other\nsteel safeguard measures.\n3. Criticisms with reference to specific products\n7.1676 With respect to CCFRS, Korea argues that, in relation to the first step, there is no apparent\nreason one can detect for selecting 7.5% as a target operating margin for 2001.3856 In fact, it appears it\nshould be –3.9%, the 1996 operating margin. Correcting the methodology by eliminating step two,\nincreasing domestic prices in step three by the pe rcent needed to reach the target revenue (target\nminus actual divided by target) and calculating the percent difference between the resulting domestic\nAUVs and actual non-NAFTA import AUVs (this assumes perfect competition) results in the\nfollowing import AUV price increase requirements:\nSlab 33.6%\nPlate 7.8%\nHot Rolled 17.4%\nCold Rolled 10.1%\nCoated 5.4%\nAverage weighted by NCS 10.1%\n7.1677 With regard to this comment, the United States points out that the 7.5% figure was a clerical\nerror. The United States notes that it revised the calculation using -3.9% as the target margin for\ninterim 2001.\n3857 The correction does not change the results for certain carbon flat-rolled steel as a\nwhole.3858\n\ntariff levels adopted by the President, but not the exclusion of both Canada and Mexico from all products. In\ncontrast, the modelling exercise used the same inputs as the USITC did for elasticities and for full-year 2000\ndata, but modelled the tariff levels and country exclusions adopted by the President. The modelling exercise\nalso involved modelling of the change in imports during the investigation period, which the USITC did not do.\nUnited States' written reply to Panel question No. 48 at the second substantive meeting. Korea argues that these\ndifferences in the use of the model would obviously change its numerical outputs.\n3852 Exhibit US-56, table labelled \"Weighted based on Net Commercial Sales for FLAT Products\".\n3853 Exhibit US-56, table labelled \"Weighted based on Net Commercial Sales for FLAT Products\".\n3854 Korea's written reply to Panel question No. 48 at the second substantive meeting.\n3855 United States' first written submission, para. 1062.\n3856 Exhibit K-14, pp. 4-5.\n3857 Exhibit US-96 contains a corrected version of the affected pages from Exhibit US-56.\n3858 United States' written reply to Panel question No. 48 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1678 Korea responds to the United States' argument that the results of the USITC model and its ex\npost analysis differ because the ex post analysis is based on the actual remedy taken by the President.\nSpecifically, Korea notes that a key difference between the United States' ex post economic analysis\nand the remedy taken by the President is that the ex post analysis included slab, which the President\nexcluded from the measure on flat-rolled. Therefore, the United States has not established the basic\nrelevance of the model to the actual Presidential remedy. Korea adds that another difference between\nthe USITC model and the US ex post analysis is that the United States doubled profit margins,\napparently to account for \"the cumulative injurious effect of increased imports.\" Stated simply, the\nUSITC model does not assume an arbitrary doubling of profit margins.3859\n7.1679 With respect to certain welded pipe, Korea notes that the tariffs were imposed on other\nwelded pipe as a result of a finding of threat of injury. 3860 However, the United States suggests that\nthe domestic industry producing other welded pipe experienced injury caused by imports in 2000 and\nbefore.3861 It then concentrates is numerical analysis on 2000 for Step 1; but for Steps 2 and 3, it uses\ndata for 1998 through the first half of 2001, \"the period when imports were increasing\".3862 Given that\nthis was a finding of threat, these increasing imports were not causing injury.3863\n7.1680 Korea argues that the methodology for other welded pipe is completely unclear. 3864 T h e\nnumerical analysis focuses only on 2001, but it is impossible to correct the flaws noted above because\nthe target operating margin appears to have no basis. That margin, 5.7% 3865, comes from no data in\nthe USITC staff report, nor can it be derived from various averaging options. The end result was an\nincrease in non-NAFTA import AUVs of 16.2%.\n3866 The US results 3867 show price increases sought\nof 4.3% to 6.7% if other welded imports are held to 1997 levels (although there does not appear to be\nany injury-related reason to do so), and 8.7% to 11.1% resulting from the President's remedy. The\nUnited States also notes that the USITC's models in the remedy phase of the investigation suggested\nthat the 15% tariff imposed would increase non-NAFTA imported AUVs by 9.3% to 11.5%. 3868 That\nsame USITC model suggested that a 15% tariff would decrease non-NAFTA imports by 22% to 34%\nbelow 2000 levels.\n7.1681 Finally, with respect to the modelling results for other welded pipe, Korea notes that if other\nwelded pipe imports were held to 1997 levels, the estimated price for domestic products would be 4.3\nto 6.7% higher, while the remedy would result in estimated price increases of 8.7 to 11.1%. With\nregard to this comment, according to the United St ates, Korea's criticism fails to recognize that the\nother welded pipe remedy addressed a threat of serious injury, and that the analysis based on data for\n2000 would not establish what was necessary to stop the evolution of the existing injurious effects of\nincreased imports into the full manifestation of that threat as serious injury.\n3869\n\n3859 Korea's additional comments on Panel question No. 48 at the second substantive meeting.\n3860 Exhibit K-14, p.5.\n3861 United States' first written submission, para. 1131; United States' written reply to Panel question\nNo. 27 at the first substantive meeting.\n3862 United States' first written submission, para. 1136.\n3863 USITC Report, Vol. I, p. 159: \"We consider the industry's overall condition to be weak. Although\nit has not yet reached the point of serious injury, such injury appears imminent.... The years 1996 to 1998 were a\nperiod of generally good health\". (Exhibit CC-6)\n3864 Exhibit K-14, p.6.\n3865 \"Safeguard Measure Worksheets\". (Exhibit US 56)\n3866 \"Safeguard Measure Worksheets\". (Exhibit US 56)\n3867 \"Modelling Results Worksheets\". (Exhibit US 57)\n3868 United States' first written submission, para. 1137.\n3869 United States' written reply to Panel question No. 54 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1682 Korea adds3870 that the justification by the United States of the 5.7% profit margin for welded\npipe should, at the very least, be consistent with representations made by the United States regarding\nthe methodological approach the United States claims to have adopted ( e.g., the use of the one-year\nbase period\n3871, when the United States actually used an average of two periods for welded pipe –\nwithout explaining why two years was necessary rather than one 3872). However, of greater concern is\nthe fact that the United States now disavows its explanations of the source of the profit figures for\nwelded pipe (1998-2001) as a \"typographical error\". 3873 Unfortunately, the errors are further\ncompounded by its new explanations. The United States asserts that the tables in Exhibit US-56\n\"show that we based the target profit margin on 1999 and 2000 data, and did not use data for\n1998\".\n3874 First, Korea claims to see nothing in that Exhibit which identifies the source of the profit\nfigures. The value appearing in that Exhibit actually seems to be the simple average of 1999 and 2001\n(not 2000). It is still not clear from this latest description what the United States intended to use.\nSecond, the United States now states: \"We omitted data for 2000 from the calculation because the\nUSITC found that excess capacity had a 'minor' effect on the industry's performance in 2000\". 3875\nHowever, this most recent explanation of how it selected the proper target profit years also conflicts\nwith its earlier explanations as to essential elements of its reasoning. Tthe United States asserts that it\ndid not \"determine a domestic price that would increase operating income margins above their 2000\nlevels\".3876 The United States says that this limitation on the profit level was necessary because\nprofits declined in 2000 due to capacity increases (as opposed to imports). 3877 However, the figure of\n5.7%, which it actually used as the target profit margin, is above the profit level of 4.3% for 2000. 3878\nSo, contrary to the US explanation, the measure did seek to increase profits to a level that exceeded\n2000 profit levels. The United States recognizes on the one hand that even in the absence of imports,\nthe industry would not have reached the 2000 level of profitability given the capacity increases, but\nthen proceeds to use a profit target which exceeds 2000 levels. There is no consistency between the\nlogic and the actual figures used. No more compelling is the US attempt to justify the use of 1997\nimport levels as a benchmark for the proper remedy for welded pipe.\n3879 As noted by the USITC, the\nindustry was not seriously injured by imports even in 2001 and continued to be profitable even in\n2001. (\"Our remedy is intended to halt deterioration of revenues, market share and profitability\".3880)\nIn fact, the USITC found that no improvements in profitability were initially necessary. 3881 Given the\nthreat of injury finding, using 1997 as the proper level of imports makes no sense. Astonishingly, the\nUS ex post analysis explicitly shows that the remedy imposed by the President was actually more\n\n3870 Korea' s additional comments on the replies to Panel question No. 54 at the second substantive\nmeeting.\n3871 United States' written reply to Panel question No. 54 at the second substantive meeting.\n3872 United States' written reply to Panel question No. 50 at the second substantive meeting.\n3873 United States' written reply to Panel question No. 50 at the second substantive meeting,\nfootnote 141.\n3874 United States' written reply to Panel question No. 50 at the second substantive meeting,\nfootnote 141. (emphasis added).\n3875 United States' written reply to Panel question No. 50 at the second substantive meeting. But, see\nfootnote 141.\n3876 United States' first written submission, para. 1136.\n3877 United States' first written submission, para. 1136; United States' written reply to Panel question\nNo. 50 at the second substantive meeting.\n3878 USITC Report, Vol. II, Table TUBULAR-18, p. TUBULAR-22 (Exhibit CC-6).\n3879 United States' written reply to Panel question No. 50 at the second substantive meeting.\n3880 USITC Report, Vol. I: Determinations and Views of The Commissioners, p. 386 (emphasis added)\n(Exhibit CC-6).\n3881 \"We estimate that the recommended tariff-rate quota on welded pipe products will initially leave\nthe market share, sales revenue, and profitability of the domestic industry unchanged.\" USITC Report, Vol. I,\np. 386 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrestrictive and had a greater effect on import (prices and quantities) than holding imports at 1997\nlevels.3882\n7.1683 With regard to this comment, the United States indicates that the target margin of 5.7% does\nnot appear in the USITC Report. This figure is the average of profit margins for 1999 and interim\n2001. The United States omitted data for 2000 from the calculation because the USITC found that\nexcess capacity had a \"minor\" effect on the industry's performance in 2000.3883 The United States adds\nthat it did not use the 2000 operating margin as a benchmark. Instead, the United States used the\naverage of operating income margins in 1999 (8.1%) and the first half of 2001 (3.2%) to derive a\ntarget margin of 5.65. 3884 The United States maintains that a simple average is a conservative\nestimate. The 1999 margin represented 12 months of data and the 2001 margin six months. A\nweighted average would have resulted in a target margin of 6.5%.3885\n7.1684 Korea argues that the methodologies used by the United States assume facts and methods of\nanalysis which are either not supported by the USITC's injury analysis or are directly contrary to the\nrequirements of the Agreement on Safeguards. 3886 Korea refers to the errors in relation to the basic\npremises of the \"numerical analyses\". Korea submits that the numerical analyses for welded pipe and\nflat-rolled are entirely based on an estimate of the extent to which non-NAFTA import prices should\nincrease to attain the \"desired condition\".3887 Korea submits that a price analysis is not the appropriate\nanalysis for welded pipe since the USITC's focus was on the effect of future increases in import\nvolumes. Korea further submits that the import and domestic \"prices\" used in the numerical analyses\nare not reliable. The United States' numerical analyses for flat-rolled and welded pipe rely on import\nAUV data, but the USITC specifically found that AUV data was not reliable for either flat-rolled or\nwelded pipe due to changes in product mix year-to-year.\n3888 The United States does not justify its use\nof AUVs or why they were considered reliable. Further, the United States' numerical analysis merely\n\"weight-averaged\" (by the net commercial sales of each product) the targeted AUVs for flat-rolled to\ndo its remedy calculation even though the USITC in its injury analysis never considered a \"flat-rolled\"\nAUV but always considered prices by product and AUVs by product (for cold-rolled, hot-rolled, etc.).\n7.1685 Korea submits that the numerical analyses assume a base year for profitability either before\nthe increase in imports or before the condition of the industry began to decline.3889 This is treated as a\nsurrogate for the condition of the industry prior to serious injury. On its face, such an analysis is\ninappropriate for welded pipe since the industry was never seriously injured so the concept of a\n\"surrogate\" prior to serious injury or prior to import increases is meaningless. Article 5.1 is clear that\n\n3882 US Exhibit 57, Modelling Worksheet E, discussed in United States' written reply to Panel question\nNo. 50 at the second substantive meeting.\n3883 United States' first written submission, paras. 1132 and 1136. Paragraph 1136 contains a\ntypographical error indicating that we used data for 1998 through the first half of 2001. According to the United\nStates, the tables in Exhibit US-56 show that the it based the target profit margin on 1999 and 2000 data, and did\nnot use data for 1998.\n3884 The United States explains that since the spreadsheets in Exhibit US-56 presented operating income\nfigures with one decimal place, this is rounded to 5.7% on the printout. The electronic version of the\nspreadsheet contains reflects the full 5.65% figure.\n3885 United States' additional comments on its written reply to Panel question No. 54 at the second\nsubstantive meeting.\n3886 Korea's second written submission, paras. 248-251.\n3887 United States' first written submission, para. 1071.\n3888 USITC Report, Vol. I, p. 61, n. 279 and p. 163, n. 1006 (Exhibit CC-6).\n3889 Korea's second written submission, para. 252.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"prevent(ing) serious injury\" is the basis for the permissible extent of the measure when threat of\ninjury is found. As of 2001, the industry still was not seriously injured.3890\n7.1686 Korea adds3891 that the numerical analyses improperly treat all the negative effects throughout\nthe period of investigation as attributable to imports, and failed to consider positive economic\nforecasts in some instances: (i) for flat-rolled, the United States admits that it made no adjustment to\nreflect the injury caused by increased capacity or mini-mill competition 3892, anti-dumping and\ncountervailing orders3893, or legacy costs of integrated producers; (ii) for welded pipe, the numerical\nanalysis did not adjust for the effects of existing AD orders 3894, the particular circumstances of one\nsignificant US producer 3895, or the effects of excess capacity over the entire period 3896; and (iii) for\nwelded pipe, the analysis fails to account for the USITC's conclusion that LDLP demand was likely to\nincrease.3897\n7.1687 Korea argues that for flat-rolled, as detailed in the preceding section, the United States has\nincorporated a number of concepts into its numerical analyses which are not properly substantiated, or\nworse, are directly contradicted by the USITC record. 3898 These deficiencies alone render the\nnumerical analyses for flat-rolled useless for purposes of the justification of the permissible extent\n(Article 5.1 of the Agreement on Safeguards). Therefore, the United States has not demonstrated to\nthe Panel its compliance with the requirements that the measure be limited to the permissible extent.\nAs the Appellate Body stated in Korea – Dairy, such a requirement applies regardless of the form of\nthe measure imposed. 3899 Moreover, as demonstrated in Korea Exhibit 14, after correcting the\nnumerical analyses of the United States, the correct calculation demonstrates that only a 10.1%\nincrease in import prices would have been necessary to achieve what the United States claims as the\ntargeted operating margin for the US industry in their numerical analysis. However, according to the\nUSITC Economic Model (the results of which the United States embraced in its first written\nsubmission)3900, the 30% tariff the President imposed was expected to increase import prices by\n20.8% to 28%.3901 Therefore, the tariff imposed raises import prices by much more than is necessary\nto reach the targeted operating margin.\n7.1688 In the case of tin mill, Korea submits that there is no \"finding\" as such of serious injury to tin\nmill products so there is no basis upon which any measure on tin mill products could be imposed.\nOnly one Commissioner found tin mill products to be seriously injured. 3902 All the other\n\n3890 USITC Report, Vol. I, p. 159 (Exhibit CC-6).\n3891 Korea's second written submission, para. 253.\n3892 United States' first written submission, para. 1093.\n3893 United States' first written submission, para. 1092. In terms of anti-dumping and countervailing\norders, the United States defends its failure to adjust its estimate in its numerical analysis for the 1997 and 2000\norders on plate and the 1999 order on hot-rolled, but gives no defense of its failure to account for the 2001 hot-\nrolled orders.\n3894 United States' first written submission, para. 1134.\n3895 United States' first written submission, para. 1130.\n3896 United States' first written submission, paras. 1128-1129.\n3897 United States' first written submission, para. 1135; USITC Report, Vol. I, p. 166 (Exhibit CC-6).\n3898 Korea's second written submission, paras. 254-257.\n3899 Appellate Body Report, Korea – Dairy, para. 96.\n3900 United States' first written submission, para. 1099, n. 1385, referring to the model in USITC\nMemorandum EC-Y-050 (Exhibit US 65).\n3901 United States' first written submission, para. 1099.\n3902 Korea's second written submission, para. 258.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCommissioners disagreed either as to the like product or whether there was serious injury. There\ncertainly is no \"benchmark\" provided as to the proper extent of the measure so the numerical analysis\nbased on tin mill are meaningless. The numeric analysis used in this case for tin mill measures the\nvolume reductions (as opposed to price increases) in imports needed to achieve the benchmark\nprofitability. It is based on tin mill imports considered alone but only one Commissioner who found\nserious injury based her analysis on tin mill imports alone.\n7.1689 For other welded pipe, Korea states that the United States imposed a remedy of 15% tariff on\nall imports.3903 In contrast, the USITC had recommended a TRQ with a 20% tariff only on imports\nexceeding 2.6 million short tons (Koplan and Miller including Canada and Mexico) and 1.4 million\nshort tons (Okun and Hillman, excluding Canada and Mexico)\n3904 This quota was equal to import\nlevels in 2000 because the USITC found that current levels of imports were not injurious. 3905 Korea\nsubmits that the United States seeks to substitute the USITC's specific finding regarding threat of\ninjury and the proper remedy for threat of injury, with an ex post record and a substitute analysis of\nthe timing and scope of present injury. 3906 3907 As noted, this approach clearly deviates from the\nholding of the Appellate Body in US – Line Pipe because such an ex post approach is fundamentally\ninconsistent with and irreconcilable with the USITC's finding that imports were not causing serious\ninjury at any time in the period.3908\n7.1690 Korea states that the United States made a number of erroneous assumptions: (i) the US\nconstruct presented to the Panel is based on the new objective of correcting \"declines\" in industry\nfactors during a period when the industry was not seriously injured by imports. However, the USITC\nspecifically found that it would only be additional declines that needed to be prevented.\n3909 According\nto the new US analysis, a safeguard measure can now be imposed to remedy \"negative effects\". 3910\nHowever, Article 5.1 of the Agreement on Safeguards provides that the measure selected shall be the\n\"most suitable\" for \"preventing serious injury\"\n3911 – not to remedy any \"negative effects\". It was only\nwhen the industry's overall condition transformed into an imminent threat of serious injury that such\nincreased imports became actionable and the USITC's measure correctly addressed the need to was to\nprevent further increases and prevent serious injury. Secondly, the United States is wrong that the\nUSITC did not find problems of product mix which called into question the use of AUV data. 3912 In\nfact, the wide disparities in products created a severe problem with such data. The USITC itself\nobserved: \"We are cautious of placing undue weight on AUV information, as it is influenced by\nissues of product mix\". 3913 Korea challenges the United States assertions that it can substitute a new\nanalysis of AUVs as the basis for its remedy instead of using the pricing data which the USITC\nactually used in its injury analysis. Thirdly, and more fundamentally, the United States cannot just\n\n3903 Korea's second written submission, paras. 259-260.\n3904 USITC Report, Vol. I, p. 384 (Exhibit CC-6).\n3905 USITC Report, Vol. I, p. 386 (\"Our proposed remedy for welded pipe would still permit the same\nquantity of imports as in 2000 at the current low rate of duty.\") (Exhibit CC-6)\n3906 United States' first written submission, para. 1077.\n3907 Korea's second written submission, paras. 261-273.\n3908 USITC Report, Vol. I, p. 159 (Exhibit CC-6).\n3909 USITC Report, Vol. I, p. 386 (Exhibit CC-6).\n3910 United States' first written submission, para. 1132.\n3911 \"A Member shall apply safeguard measures only to the extent necessary to prevent or remedy\nserious injury ... Members should choose measures most suitable for the achievement of these objectives.\"\nArticle 5.1 of the Agreement on Safeguards.\n3912 United States' first written submission, para. 1133.\n3913 USITC Report, Vol. I, p. 163, n. 1006 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nstring together piecemeal data and reach conclusions directly at odds with the underlying threat of\ninjury determination. Korea gives three examples in this regard: (i) The United States maintains that\nthe President's safeguard measure on welded pipe wa s intended to raise prices, not to affect volumes\nof imports.\n3914 However, price levels for welded pipe were not found to be injurious by the USITC\n(unlike for flat-rolled).3915 The United States' ex post numeric analysis confirms that the remedy was\nintended exclusively to achieve increasing prices. The United States has apparently adopted an\nex post methodology for defending its measures which is \"one size fits all\" irrespective of the\nthreat/serious injury finding. However, the US ITC specifically relied on increasing volumes as\nthreatening injury 3916 and those increasing volumes had to be prevented. 3917 Therefore, the US\nmeasure does not find its benchmark in the threat of injury determination. Moreover, it is not the\nmeasure \"commensurate with the goals of preventing...serious injury\" 3918; (ii) Despite the claims by\nthe United States that it was not seeking a volume reduction in imports, the USITC economic analysis\nwhich the United States cites as consistent with its ex post analysis3919 demonstrates that if the 15%\ntariff had been imposed in 2000, it would have resulted in a 34 to 21.8% reduction in imports.\nMoreover, the United States confirms that the USITC's economic analysis of a 15% tariff\ndemonstrates that based on the year 2000 imports, if the tariff had been imposed in 2000, imports\nwould be reduced by 34 to 21.8%.\n3920 Yet, the United States does not seek to reconcile this result\nwith its statement in the previous question that it is not seeking volume reductions. 3921 N o r i s an y\nreconciliation apparent.3922 In its analysis of welded pipe, the United States asserts that it is basing the\ntarget revenue for the industry on the levels of operating income margins in 2000. However, the\noperating profit levels for welded pipe in 2000 were 4.3% and the United States uses a targeted base\noperating income margin of 5.7% in its worksheet. The United States never explains this discrepancy.\n(The United States then incorporates a completely unexplained additional profit margin increase, to\nyield a 7.6% operating income margin as the target, which exceeds the 4.3% in 2000, which the\nUSITC found non-injurious.); and (iii) The United States seeks to substantiate its own ex post\nreasoning in the COMPAS analysis on the grounds that it achieves revenue levels by reducing imports\nto 1997 levels.\n3923 But, such reductions in imports cannot be justified. In fact, the USITC recognized\nthat 1996-1998 were years of \"good health\". 3924 Even 1999 was a year of \"mixed performance\" –\nprofitability remained stable. 3925 In fact, the USITC specifically noted that it was only in 2000 and\ninto 2001 that the industry was \"... approaching a state of serious injury\". 3926 There is absolutely no\nbasis in that determination for trying to set a remedy that achieves 1997 import levels. By its own\n\n3914 United States' written replies to questions from other Parties, paras. 59-60.\n3915 USITC Report, Vol. I, p. 164 (Exhibit CC-6).\n3916 USITC Report, Vol. I, p. 164 (Exhibit CC-6).\n3917 USITC Report, Vol. I, p. 386; Prices needed to be \"stabilized\" with the tariff only if current import\nlevels were exceeded, p. 386 (Exhibit CC-6).\n3918 Appellate Body Report, Korea – Dairy, para. 96.\n3919 United States' first written submission, para. 1137, n. 1409 (citing to USITC Memorandum\nEC-046, p. TUBULAR-21).\n3920 Korea appreciates the United States note that the figures cited by Korea were for a 10% tariff.\nWith a 15% tariff, the reduction is even greater.\n3921 The United States instead makes the obvious point that economic analysis is always based on past\nresults.\n3922 The USITC did not project increases in demand or price increases, which might indicate a change\nin market conditions moderating the effect of the 15% tariff.\n3923 United States' first written submission, para. 1138, \"Simplified Economic Model\" \"COMPAS\nResults for Certain Welded Pipe\" (Exhibit US 57).\n3924 USITC Report, Vol. I, p. 159 (Exhibit CC-6).\n3925 USITC Report, Vol. I, p. 160 (Exhibit CC-6).\n3926 USITC Report, Vol. I, p. 162 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nadmission, a measure based on achieving import levels in 1997 exceeds the amount necessary to\nprevent threat of serious injury.\n7.1691 The United States notes that the arguments summarized in paragraphs 7.1695 and 7.1696\napply equally to the Korean arguments reflected in paragraph 7.1690.\n4. Choice of one-year base period\n7.1692 Korea, Japan and Norway argue that the chosen year must be evaluated in terms of its\nrepresentative nature in all respects including supply, demand, and other factors of injury. 3927\nTherefore, the United States would need first to establish the representativeness with respect to all\nthese issues to demonstrate that it is representative period. The complainants submit that the United\nStates has demonstrated that no single year of the review period is unaffected by other factors of\ninjury in the case of flat-rolled and other welded pipe.\n3928 The European Communities, Korea and\nNorway add that, generally, it is not sufficient to base the benchmark income margin on figures for\none year alone.3929 3930\n7.1693 Korea adds that for flat-rolled, 1997 was used as the pre-injury from imports benchmark year\nfor 1998-2000, and 1996 was used for 2001. However, the United States did not ensure that any\n\"other factors\" would not also distinguish the two periods such as the fact that mini-mills added\nsignificant capacity between 1996 and 2000 3931 which increased price pressure on the market. 3932\nKorea argues that the United States simplistically suggests that it can use 1996 as the benchmark for\n2001 for flat-rolled because 1996 was also a period of depressed demand so that this other factor of\ninjury has been isolated.\n3933 Additionally, the United States' choices of 1996 and 1997 for its analysis\nas years prior to injury does not account for the ef fect of legacy costs, which the USITC found was a\nproblem for the industry throughout the period of investigation. 3934 In the case of welded pipe, it is\nnot even clear where the United States got its targeted benchmark 3935 so it is impossible to comment\non the validity of that benchmark apart from the fact that there is no basis in the record for the number\nused. Korea notes that the other welded pipe industry had excess capacity from the very beginning of\nthe period, so there was no year that was unaffected by this other factor of injury. Further, the United\n\n3927 Appellate Body Report, US – Lamb, paras. 138-139.\n3928 Complainants' written replies to Panel question No. 54 at the second substantive meeting.\n3929 European Communities', Korea's and Norway's written replies to Panel question No. 54 at the\nsecond substantive meeting.\n3930 The complainants' written replies to Panel question No. 54 at the second substantive meeting.\n3931 Korea's written reply to Panel question No. 54 at the second substantive meeting; Korea's second\nwritten submission, para. 169.\n3932 Korea's second written submission, paras. 173-175. Korea points out that the use of the 1996\nbenchmark as a surrogate for the uninjured condition of industry in 2001 does not relate to imports alone. The\nyear 1996 is in fact a year in which mini-mill competition was also substantially lower than at any other point in\nthe period.\n3933 United States' first written submission, para. 1094.\n3934 USITC Report, Vol. I, p. 64 (Exhibit CC-6).\n3935 According to Korea, the United States does not state in its first written submission which year it\nchose as the benchmark year for welded other pipe. Ho wever, in US Exhibit 56, the United States Safeguard\nMeasure Worksheets show in Step 2 that it selects a base target operating margin of 5.7% for the welded other\nindustry for 2001 (its additional calculations manipulate this figure, however, to result in a target operating\nmargin of 7.6%.) The 5.7% base target operating margin does not correspond to any operating margin\nexperienced by the other welded industry in any year of the period of investigation. The welded pipe industry\nhad a healthy 4.3% operating margin in 2000, a year in which the USITC did not consider the industry to be\ninjured (USITC Report, Vol. I, p. 386 (Exhibit CC-6)), so it is unclear why the United States would not have\nchosen a base operating margin of 4.3%, and the year 2000 as the benchmark year.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nStates industry's performance was affected beginning in 1999 by certain cost increases for one United\nStates producer.3936 Korea also notes that the USITC found only a threat of serious injury because it\nconcluded that as of mid-2001, increased imports were not the cause of serious injury to the United\nStates industry. If the industry was suffering injury, it could well have been the result also of other\nfactors, not imports. (The USITC only concluded that imports played a \"key role\" in the negative\ntrends.3937) The only finding by the USITC was that the industry was not seriously injured by imports\nas of the first half of 2001. Yet, it is clear that the United States action restrained imports to levels\nbelow 2000 and 2001 to improve operating results vis-à-vis an \"earlier\" benchmark. Therefore, the\nremedy should have been limited to the threat of serious injury caused by increased imports, and the\nuse of a benchmark prior to 2001 cannot be justified.\n3938\n7.1694 Brazil believes that there are two issues relating to the choice of one year basis. First, is the\nperiod chosen representative in terms of operations of the domestic industry prior to the serious injury\ncaused by imports? Second, have the income margins been adjusted to reflect the effects on non-\nimport factors on the margin in the representative period? The representative period may be one year\nor several years. Brazil suggests, however, that the year of peak industry performance is not a\nrepresentative year and, therefore, 1997 is not representative.\n3939\n7.1695 The United States responds that the price-based exercise was based on the year that best\nreflected the injurious effects of factors other than imports, while minimizing the injurious effects of\nincreased imports. Data from other years would necessarily be a second-best choice, and lower the\nreliability of the exercise. The United States has described the basis for choosing the comparison year\nfor each product.\n3940 Moreover, for many products, the USITC found that imports had injurious\neffects for much of the investigation period. For example, for CCFRS, the USITC found that imports\nhad injurious effects in 1998, 1999, and 2000 and did not identify injurious effects for 1996 and 1997.\nThus, for purposes of confirming the Article 5.1 consistency of the President's safeguard measures,\nonly for 1996 and 1997 was it possible to conclude that data for 1996 or 1997 reflected minimal or no\ninjurious effects, which would make them appropriate for use in deriving a target profit margin. The\nlimited number of years that could provide a reasonable benchmark meant that only one would be\nacceptable. In many cases, the available periods did not fully reflect the profitability levels that the\nrelevant industry would achieve absent the injuriou s effects of increased imports. For example, the\nprice-based exercise used 1997 as the target year for CCFRS, even though profit levels in that year\ndid not reflect greatly increased demand in 1998 through 2000, which should have resulted in higher\nprofits, rather than the lower profits and losses that actually occurred. Thus, for CCFRS, 1997 profit\nmargins provide a conservative estimate of the profits the domestic industry should have made in the\n1998-2000 period.\n3941\n7.1696 Moreover, the United States recalled that Korea criticizes the United States on the grounds\nthat the \"choices of 1996 and 1997 . . . as years prior to injury does not account for the effect of\nlegacy costs\".\n3942 However legacy costs were borne by the domestic industry throughout the entire\nperiod investigated. Korea also objects that no control is made for the increase in minimill capacity\nover the period 3943, but as the United States has already observed, the largest increase in minimill\n\n3936 Korea's first written submission, para. 161; Korea's second written submission, para. 189.\n3937 USITC Report, Vol. I, p. 164 (Exhibit CC-6).\n3938 Korea's written reply to Panel question No. 54 at the second substantive meeting.\n3939 Brazil's written reply to Panel question No. 54 at the second substantive meeting.\n3940 United States' first written submission, paras. 1089, 1096, 1106, 1115, 1124, 1136, 1144, 1156 and\n1166.\n3941 United States' written reply to Panel question No. 54 at the second substantive meeting.\n3942 Korea's written reply to Panel question No. 54 at the second substantive meeting.\n3943 Brazil's written reply to Panel question No. 54 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncapacity was in 1997, the year chosen as the benchmark for the analysis for flat-rolled. Second,\nBrazil objects to the fact that 1997 was a year of peak industry performance over the period and\ntherefore cannot be representative.\n3944 This ignores the fact that the years 1998 through 2000 were\nyears of even higher demand for flat-rolled products than that seen in 1997. 3945 Thus 1997 was a\nconservative choice to use as a benchmark. It was a peak year in terms of industry performance\nduring the period of investigation only because increased imports had negative effects on domestic\nprices in later years.\n5. The use of AUV\n7.1697 On the use of AUV, Brazil, Korea, Japan, Norway argue that the USITC itself has admitted\nthat issues of changing product mix may affect the reliability of AUVs for purposes of analysis. 3946\nAUVs are also inherently unreliable because they mask the dynamics of individual sources by\ncollapsing them into a single average. For exam ple, AUVs are totally irrelevant to determining who\nis exercising downward pressure on price and who is the price leader in the market. A more relevant\nanalysis would be a comparison of the pricing behaviour of those domestic mills that are gaining\nmarket share with those domestic mills that are losing market share. This would allow the USITC to\ndetermine the price leader among the domestic mills. One could then look at how the domestic mill\nprice leader's prices compare over time with offshore sources and whether the domestic price leader is\ngaining or losing market share to these offshore sources. In this case, prices for specific pricing\nproducts would be relevant, not AUVs, since AUVs do not account for how prices for products with\nidentical or even similar specifications vary depending on the domestic mill source or the foreign\nsource. Again, however, averages of prices for specific pricing products are of limited utility in\ndetermining price leadership in that an average does not distinguish between mills that are pricing\naggressively and those that are not. The point be ing that a simple comparison of AUVs tells the\nauthority nothing about who is leading the prices downward in the market. The use of AUVs as\nprobative of pricing behavior in the market is further attenuated by the bundling of multiple products\ninto a single CCFRS category. A comparison of AUVs for CCFRS is meaningless in that the\nproportions of slab, hot-rolled, cold rolled, plate and coated steel within the import AUV calculation\nbears absolutely no relationship to the proportions with the domestic AUV calculation. For imports,\nlower value added slab and hot-rolled product account for the majority of sales, whereas in the\ndomestic market only 0.9% of slab produced is sold and only approximately 1/3 of hot-rolled\nproduced is sold (i.e. higher value added cold rolled and corrosion resistant products make up the\nmajority of sales of domestic product).\n3947\n7.1698 Korea adds that the United States now states for the first time that the underselling data is\nconfidential and it could not use it for that reason. No specific products are cited. However, the\npricing data for non-NAFTA flat-rolled imports is largely available and is not confidential. The\nUnited States used non-NAFTA AUVs for its numerical analysis 3948 so it could have used the actual\npricing data for those products. Finally, Korea argues that the United States cannot simply use\n\n3944 Brazil's written reply to Panel question No. 54 at the second substantive meeting.\n3945 \"By any measure, the period of investigation saw significant growth in US demand for certain\ncarbon flat-rolled steel.\" USITC Report, Steel , Inv. No. TA-201-73, USITC Pub. No. 3479, p. 56,\nDecember 2001.\n3946 Views of the Commission – USITC Report, Vol. I, p. 61, n. 279.\n3947 Complainants' written reply to Panel question No. 53 at the second substantive meeting.\n3948 United States' second oral statement, para. 130.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhatever is \"available\" if it is not reliable. Moreover, the numerical analysis averaged all flat-rolled\nAUVs creating additional distortions.3949\n7.1699 For Norway, the important question is not whether one uses actual sales in a given base year\nor \"average unit values\", but the factors that are included to achieve the AUV, the choice of the base\nyear and – not least – what is not adjusted for in the comparisons (non-attribution). For CCFRS, the\nAUV comparisons do not adjust for legacy costs, management decisions and capacity increases. 3950\nNor do the comparisons and injury offsets take into account purchaser consolidation 3951, declining\ndemand3952, dumping and CVD orders3953 and minimill competition.3954 Furthermore, the use of 1996\nas the base year for profits 3955 instead of an average for the years preceding the increase in 1998 – or\nthe year preceding (1997) is not well explained.3956\n7.1700 The United States argues that the use of unit values is appropriate when imports and domestic\nproducts have comparable product mixes, as was the case for most of the products under\nconsideration by the USITC.3957 If products do not have comparable product mixes, a preponderance\nof inexpensive items in one group may create the impression that the group is selling for a lower price\nthan another group with a preponderance of high-priced items, even if individual comparable items\nare priced identically. Where there are no product mix issues, unit values are useful because they\nreflect the entirety of the imported and domestic products. However, in some situations, a difference\nin product mix for imported and domestic products might limit the usefulness of unit values. In those\ncases, where possible, the United States relies on alternative sources of data, such as item-specific\npricing data.\n3958\n6. Adjustments for NAFTA imports\n7.1701 The United States explains that no adjustment for NAFTA imports was necessary in the\nmodelling exercise, which excluded NAFTA parties and developing country WTO Members\naccounting for less than 3% of total imports. Thus, in both of the two scenarios used in the modelling\nexercise – one holding covered imports in 2000 at pre-increase levels and the other subjecting covered\nimports in 2000 to the safeguard measures – the model results reflects changes in covered imports. 3959\nThe modelling of the effects of the safeguard measures treats imports from NAFTA countries and\nexcludes developing countries as not subject to safeguard measures. The modelling of the increase in\nimports involves only the increase from covered sources. Since excluded sources were treated the\nsame in each scenario, they should not affect the comparison of the price, volume, and revenue effects\nof the increase in imports on the one hand and the safeguard measures on the other.\n3960 In addition,\n\n3949 Korea's written reply to Panel question No. 50 at the second substantive meeting.\n3950 United States' first written submission, paras. 1085 and 1093.\n3951 United States' first written submission, para. 1085.\n3952 United States' first written submission, para. 1086.\n3953 United States' first written submission, para. 1092.\n3954 United States' first written submission, para. 1093.\n3955 United States' first written submission, para. 1094.\n3956 Norway's written reply to Panel question No. 53 at the second substantive meeting.\n3957 The discussion of the numeric exercise in the United States' first written submission indicates the\nUnited States' reasons for considering AUVs to be preferable with regard to particular products.\n3958 United States' written reply to Panel question No. 53 at the second substantive meeting.\n3959 According to the United States, the results of this modelling appear in the COMPAS Results tables\nin Exhibit US-57. The \"other included\" line reflects changes for these covered imports.\n3960 The United States points out that although NAFTA imports were held constant as an input, the\nmodel estimates that if imports had not been at increased levels in 2000 (or if the safeguard measures were in\neffect during that year) the price and volume of NAFTA imports would have been higher. The changes are at\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfor most products, the price, volume, and revenue of domestic products and NAFTA imports change\nby similar amounts. The United States also concludes that no adjustment was necessary for the price-\nor volume- based exercises. For eight products, the exercise was based on data reflecting prices,\neither the unit values or the item-specific pricing data. For reasons previously explained, the exercises\nfor tin mill steel and stainless steel wire were based on the market share effects of imports.\n3961 For the\ntwo products subject to the volume-based exercise, the United States bases the analysis on whether\nthe measure would return non-NAFTA imports to thei r market share prior to the increase in imports.\nThe inputs into the exercise are the market share of non-NAFTA imports, the volume of non-NAFTA\nimports, and United States apparent domestic consumption prior to and during the increase in\nimports.\n3962 This exercise focuses on the volume of non-NAFTA imports, and does not seek to\nguarantee domestic producers a particular volume or market share in comparison with excluded\nNAFTA products. Therefore, according to the Unit ed States, there is no risk that injurious volume\neffects (or any other injurious effects) of NAFTA imports will be attributed to non-NAFTA imports.\nThus, no adjustment was necessary.3963\n7.1702 For the eight products subject to price-based exercises, the United States also concludes that\nno adjustment was necessary. These conclusions are based on the USITC findings regarding each\nproduct. With respect to certain carbon flat-rolled steel, the USITC found that imports from Canada\ndecreased over the course of the investigation period in both absolute and relative terms, and did not\ncontribute importantly to serious injury. In item-specific comparisons, Mexican products showed\nmixed underselling.\n3964 In addition, the USITC found in the second supplemental response that\nexclusion of Canadian and Mexican products \"does not appreciably change price trends\" and that non-\nNAFTA imports \"were generally priced below domestically-produced certain carbon flat-rolled steel\"\nand \"led to the decline in domestic prices\". 3965 Thus, for purposes of evaluating the Article 5.1\nconsistency of the President's safeguard measure, the United States submits that it considered that\nNAFTA imports traded on essentially the same terms as domestic products and, accordingly, did not\nhave effects on domestic pricing that required an adjustment to its price-based exercise. With respect\nto hot-rolled bar , the USITC found that Canadian imports contributed importantly to serious injury\n\nroughly the same level as those to domestic products, reflecting that the exclusion of NAFTA imports is not\nundermining the remedial effect of the safeguard measures.\n3961 United States' first written submission, paras. 1173, 1183, 1197, and 1200-1201. The United States\nnotes in addition that Chairman Koplan found with regard to stainless steel wire that \"[t]he increase in imports\nand the decline in the proportion of the domestic market supplied by domestic producers, at a time of falling\ndomestic consumption indicates that imports are an importa nt cause of the threat of serious injury\". USITC\nReport, p. 259. Commissioner Bragg found with regard to stainless steel wire and wire rope that \"both domestic\nsales and market share turned sharply lower in interim 2001\", along with unfavorable developments in\ninventories, production, profits, wages, productivity and employments, demonstrating a threat of serious injury.\nShe did not discuss price. USITC Report, pp. 288-289.\n3962 The United States notes in this regard that restor ation of the pre-increase market share is the source\nfor the 23% reduction in imports that the United States calculated for tin mill steel, and which Norway criticized\nat the Panel meeting. Norway's second oral statement (Article 5.1), para. 34. For 1999, 2000, and the first half\nof 2001 the United States calculated what the volume of non-NAFTA imports would have been if they had\nretained their 1998 market share of 10.5 percent. The United States then calculates the difference between that\nfigure and actual imports, and calculated the average reduction over three years. According to the United States,\nthis exercise, which appears in Exhibit US-56, indicates that import volume would have been 23.13% lower if\nimports had not increased their market share.\n3963 United States' written reply to Panel question No. 53 at the second substantive meeting.\n3964 USITC Report, pp. 66-67.\n3965 Second Supplementary Report, p. 5. According to the United States, NAFTA imports sold for\nprices lower than comparable domestic items in only 19% of the USITC's comparisons, while non-NAFTA\nimports sold for less than comparable domestic items in 58% of comparisons. USITC Report, p. FLAT-74,\nTable FLAT-77. The United States argues that this is a marked difference in the level of underselling.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbased on \"the sheer volume of the Canadian incr ease\", without mentioning any price effect. The\nUSITC found that Mexico did not contribute importantly to serious injury, as its imports actually\ndecreased over the period of investigation.\n3966 Moreover, it found that unit values for non-NAFTA\nimports fell to a greater degree than those for NAFTA imports, and that item-specific prices for non-\nNAFTA imports were less than comparable NAFTA imports.3967 Thus, for purposes of evaluating the\nArticle 5.1 consistency of the President's safeguard measure, the United States concluded that\nwhatever the volume effect of NAFTA imports, they did not have an effect on the domestic industry's\nprices that required an adjustment to the price-based exercise.\n7.1703 With respect to cold-finished bar , the USITC found that Canadian imports contributed\nimportantly to serious injury based on Canada's \"elevated share of the market in 2000\" and \"large\npercentage of total cold-finished bar imports\". However, it did not indicate that these imports affected\ndomestic prices. The USITC found that Mexico's share of imports was \"very small and declining\"\nand did not contribute to serious injury. 3968 Thus, for purposes of evaluating the Article 5.1\nconsistency of the President's safeguard measure, the United States concluded that there was no need\nto make an adjustment to its price-based exercise. With respect to rebar , all parties to the proceeding\nagreed that the USITC should make a negative injury finding with regard to Canadian and Mexican\nimports.\n3969 The USITC found that the volumes of Canadian rebar were \"consistently very small\",\nand that the volume of Mexican rebar declined by 81% over the investigation period. The USITC\nalso noted that there were no comparisons of Canadian imports with comparable products from\ndomestic or other import sources, and that rebar from Mexico was sold at higher prices than\ncomparable items from other import sources. 3970 Thus, for purposes of evaluating the Article 5.1\nconsistency of the President's safeguard measure, the United States concluded that there was no need\nto make an adjustment to the price-based exercise. With respect to other welded pipe , the USITC\nfound that imports from Canada and Mexico, while substantial, did not contribute importantly to the\nthreat of serious injury. The USITC plurality on this issue found that NAFTA imports were\ndecreasing at the very end of the investigation period, while imports from other sources were\nincreasing. The plurality also noted that Canadian standard pipe, a high-volume product, sold for\nhigher prices than comparable pipe from non- NAFTA sources. The plurality found that, although\nMexican pipe undersold comparable domestic products early in the investigation period, there were\nno comparisons for 2000 and interim 2001. Since they had made a threat of serious injury finding, the\nCommissioners in the plurality directed their focus mainly to the most recent import trends.\n3971 For\nsimilar reasons, the price-based exercise relied on data for the later part of the investigation period.3972\nIn light of the findings of decreasing import volume, overselling for Canadian products, and reduced\nsales of comparable domestic and Mexican products at the end of the investigation period, for\npurposes of evaluating the Article 5.1 consistency of the President's safeguard measure, the United\nStates concluded that there was no need to make an adjustment to the price-based exercise.\n7.1704 With respect to FFTJ, the USITC found that imports from both Canada and Mexico were\nsubstantial and contributed importantly to serious injury. The USITC found that imports from Canada\nhad a large and increasing volume. The unit values for Canadian FFTJ were twice as high as those for\n\n3966 USITC Report, pp. 100-102.\n3967 Second Supplementary Report, p. 6.\n3968 USITC Report, p. 108.\n3969 USITC Report, pp. 115-116, footnotes 698 and 701.\n3970 USITC, pp. 115-116 and footnote 704.\n3971 USITC Report, pp. 168-170. The USITC made a divided finding with regard to whether Canadian\nimports were substantial and contributed importantly to serious injury. (The finding regarding Mexico a 4-2\nvote.) The views of Vice Chairman Okun and Commissioner Hillman, which are discussed here, represent two\nof three votes for exclusion of Canadian imports.\n3972 United States' first written submission, paras. 1133-1137.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nother imports or the domestic product, but the USITC expressed concern that the discrepancy might\nreflect different product mix. There was no item-specific pricing information to confirm that\nCanadian FFTJ sold for higher prices than comparable imported FFTJ.\n3973 In light of these findings,\nfor purposes of evaluating the Article 5.1 consistency of the President's safeguard measure, the United\nStates concluded that there was no need to make an adjustment to its price-based exercise to account\nfor Canadian imports. The USITC also found that FFTJ from Mexico undersold comparable domestic\nproducts \"by substantial and increasing margins\". 3974 The price-based exercise indicated that a\nmeasure of up to 30% would be commensurate with the injury related to increased imports, while the\nsafeguard measure was a tariff of 13% in the first year. Imports of FFTJ from Mexico never\naccounted for more than 9% of apparent domestic consumption, and had fallen to 5.8% of domestic\nconsumption in 2000.\n3975 Accordingly, for purposes of evaluating the Article 5.1 consistency of the\nPresident's safeguard measure, the United States considers that an adjustment to reflect the injurious\neffects of imports from Mexico would not change the conclusion that the safeguard measure was\napplied no more than the extent necessary to prevent or remedy serious injury and to facilitate\nadjustment.\n7.1705 With respect to stainless steel bar , the USITC found that imports from Canada contributed\nimportantly to serious injury, while imports from Mexico did not. Although imports from Canada\nincreased at a lesser rate than other imports from other sources for most of the period, they increased\nat a higher rate in the first half of 2001.\n3976 While imports from Canada sold for less than comparable\ndomestic stainless bar in seven of ten comparisons, they sold at higher prices than comparable non-\nNAFTA imports.3977 In fact, non-NAFTA imports sold for less than comparable domestic products in\n40 of 43 comparisons.3978 Imports from Mexico decreased over the course of the investigation period,\nand accounted for \"an extremely small percentage of total imports\". There were no pricing\ncomparisons for Mexican imports.3979 The USITC also found that imports from non-NAFTA sources\naccounted for all of the domestic industry's market share loss during the 1996-2000 period. 3980 I n\nlight of the larger number of instances of underselling by non-NAFTA imports, and the fact that\nprices for non-NAFTA imports were lower than prices for comparable NAFTA imports, we\nconcluded that there was no need to make an adjustment to its price-based exercise. Finally, with\nrespect to stainless steel rod , the USITC found that imports of stainless steel rod from Canada and\nMexico did not contribute importantly to serious injury. Imports from Canada and Mexico declined\nover the investigation period, while \"Mexico exported an extremely small volume of stainless rod to\nthe United States in 1999 and did not export any stainless rod to the United States in 1998, 2000, and\ninterim 2001\".\n3981 In light of these findings, the United States concluded that there was no need to\nmake an adjustment to its price-based exercise.3982\n7.1706 Korea argues that the injury from NAFTA imports was not isolated as required by\nArticle 4.2(b) and also Article 5.1 of the Agreemen t on Safeguards, and the selection of a benchmark\nyear did not correct in any way for this deficiency. The United States simply focused on non-NAFTA\nimports without regard to the injurious effects of NAFTA imports.3983 Also the United States failed to\n\n3973 USITC Report, p. 179.\n3974 USITC Report, p. 180.\n3975 USITC Report, p. TUBULAR-C-6.\n3976 USITC Report, p. 213.\n3977 USITC Report, p. 214; Second Supplementary Report, p. 9.\n3978 USITC Report, p. STAINLESS-86, Table STAINLESS-99.\n3979 USITC Report, p. 214 and footnote 1361.\n3980 Second Supplementary Report, p. 9.\n3981 USITC Report, pp. 222-223.\n3982 United States' written reply to Panel question No. 52 at the second substantive meeting.\n3983 Korea's second written submission, paras. 213-216 and 235.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ntake into account the extent to which such NAFTA imports were likely to increase if all other sources\nare controlled, and whether such imports would effect or dilute the remedial effects of the measure.3984\n7. Reduction in the level of the measures over a three-year period\n7.1707 The United States notes that it decided to reduce the steel safeguard measures over time\nbecause Article 7.4 of the Agreement on Safeguards (and United States law) require progressive\nliberalization of all safeguard measures of more than one year in duration. The United States did not\nconsider modelling results in choosing the schedule for progressive liberalization. Since the model is\nbased on limited data from a historic time period, its results would, with the passage of time, become\nless reflective of the price, volume, and revenue effects of increased imports and of the measure itself.\nIn addition, the application of the safeguard measures would itself change the effect of imports in the\nfuture, redoubling the difficulty of estimating the effect of a phased liberalization of the measures.\n3985\n7.1708 In line with the Working Party's findings in US – Fur Felt Hats, the United States recalls that\nit did not attempt to predict future developments. Rather, the United States chose a level and schedule\nof progressive liberalization of the steel safeguard measures that would provide the relevant industries\nsufficient resources to adjust, while bringing the level of each measure down sufficiently that a\ntransition to removal of the measure after the third year would not be too abrupt. The United States\napplied the safeguard measures for a period that would require a mid-term review, at which time it\ncould evaluate the condition of the domestic industry and the role of imports to decide whether these\nrequired action of some sort.\n3986\n7.1709 Korea notes that there is no discussion of this point in either the economic or numerical\nanalysis. Moreover, there is no discussion or consideration of the relevant basis for such liberalization\nrequired by Article 7.4 \"to facilitate adjustment\" (cross-referenced in Article 5.1 \"to facilitate\nadjustment\") in any documents forming the record of this proceeding. In terms of the President's\nliberalization schedule for flat-rolled, for example, the tariff declines from 30% to 24% to 18%, while\nthe USITC decline is from 20% to 17% to 14%. For \"welded other\", the President's measure\ndecreases from a 15% tariff to 12% to a 9% tariff, while obviously the USITC recommended a TRQ.\nIn the USITC remedy memos, there is no modelling of liberalization. The different scenarios take\ninto account lower levels of measures ( e.g., a 5% tariff and a 10% tariff) but none use exactly the\nlevels proposed by the USITC majority. Nor is it apparent how the President determined the\nliberalization schedule and therefore limited the measure to the permissible extent as required by\nArticle 5.1.\n3987\n8. Difference between the economic models to be used for non-attribution (Article 4.2(b))\nand for the assessment of the measure to be applied (Article 5.1)\n7.1710 Korea3988 and Brazil3989 argue that there is at least one significant difference in undertaking a\nmodelling exercise for Article 4.2(b) purposes and that required for Article 5.1 purposes. Under\nArticle 4.2(b), one is modelling past events and factors affecting those events. Thus, the outcome is a\ngiven and what is being modelled is the relative importance of the various factors which led to the\noutcome. Under Article 5.1, one is attempting to predict or obtain a future outcome based on past\n\n3984 Korea's written reply to Panel question No. 52 at the second substantive meeting.\n3985 United States' written reply to Panel question No. 55 at the second substantive meeting.\n3986 United States' written reply to Panel question No. 55 at the second substantive meeting.\n3987 Korea's written reply to Panel question No. 51 at the second substantive meeting.\n3988 Korea's written reply to Panel question No. 44 at the second substantive meeting.\n3989 Brazil's written reply to Panel question No. 36 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nevents and the influence of various factors on those events. This means that one has to make certain\nassumptions about, for example, supply from domestic mills and demand. If these assumptions prove\ncorrect, the model will likely provide the desired result. However, if the assumptions prove incorrect\n(for example, demand is stronger than assumed), the model likely will not provide the desired result.\nThus, it is important that the assumptions on which the model is based be reasonable. For example, a\nmodel which does not take into account the existence of anti-dumping and countervailing duty orders\nand their effects on price and volume based on historical experience will not accurately predict the\neffect of tariffs at various levels on import volume and price.\n7.1711 The European Communities\n3990 submits that although the objectives of a non-attribution\nanalysis under Article 4.2(b) and the calculation of the extent of a safeguard measure for purposes of\nArticle 5.1 are different, the basic parameters and characteristics of the models used could be the\nsame. For the purposes of Article 4.2(b), the data on imports and the state of the domestic industry\nwill be a given and the model would be used to assess the correlation between increases in imports\nand the state of the domestic industry compared with that of other factors impacting the domestic\nindustry and therefore to measure the extent to which serious injury suffered by the domestic industry\nis attributable to increased imports. For the purposes of Article 5.1, the same model could be used to\ntest the effect that a proposed safeguard measure (a given variable) would have on the economic\nfactors considered to constitute serious injury (dependent variables) and whether this effect would\ncorrespond to that properly attributed to increased imports. The model would not provide a complete\nanswer to the inquiry required under Article 5.1. According to the European Communities, a WTO\nMember seeking to apply a safeguard measure would also have to assess, in addition, whether a\nsafeguard measure that goes no further than preventing and remedying serious injury properly\nattributed to increased imports, will in fact facilita te adjustment and is in fact needed to facilitate\nadjustment. That is, whether the domestic industry would use the relief granted to adjust and is not\nable to adjust to increased imports without the assistance of safeguard measures.\n9. Conclusions\n7.1712 On behalf of the complainants, Norway concludes that given the legal errors committed by\nthe United States in defining the permissible extent of the measure, it seems very unlikely that the\nUSITC statement has any truth to it. This is al so inconceivable, given the flaws in its causation\nanalysis as well as its failure to adequately perform a non-attribution analysis. Furthermore, the\nUSITC statement is not supported by any facts – making it a mere allegation of consistency that does\nnot in any way rebut the arguments presented by the complainants. However even assuming, for the\nsake of argument, that none of the other violations of preceding Articles existed, the measures would\nstill fail to live up to the substantive requirements of Article 5.1 of the Agreement on Safeguards. The\nUnited States claims in this respect that it can rebut the complainants' prima facie case of\ninconsistency with Article 5.1, by showing that the measures were commensurate with the injurious\neffects attributable to increased imports.\n3991 The United States refers to the USITC Report and its\npresentation of \"indicators of injury\" and the description of the \"interplay among those factors\" 3992,\nbut none of this represents a sufficiently detailed analysis of injurious effects attributable to imports.\nThis is clearly not enough to rebut the presumption that the complainants so clearly establish of a\nprima facie case of violation of Article 5.1. In this respect it should be noted that the President chose\n\n3990 European Communities' written reply to Panel question No. 44 at the second substantive meeting.\n3991 United States' second written submission, para. 220; Norway argues that when this paragraph is\nread in conjunction with the United States' written repl y to Panel question No. 114 at the first substantive\nmeeting, the United States seems to agree that it has the burden of proving that its measures do not go beyond\nwhat is necessary.\n3992 United States' second written submission, para. 221.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmeasures not proposed or evaluated by the USITC. Finally, even if the Panel were to accept that the\nUnited States present only ex post facto justifications, this has not been done either, as Korea details\nin Exhibit 14 and other related documents. The United States' failure to explain and justify its\nmeasures is clearly a breach of Articles 3.1, 4.2(b) and 4.2(c) – as well as Article 5.1 of the\nAgreement on Safeguards.3993\n7.1713 The United States concludes by stating that, in accordance with Article 5.1, the steel\nsafeguard measures were applied no more than to the extent necessary to prevent or remedy serious\ninjury caused by increased imports. The United States submits that the complainants offer arguments\nbased on misinterpretations of Article 5.1, attempt to layer requirements onto the Agreement on\nSafeguards that have no grounding in the text, and assert claims that, if accepted, would undermine\nthe fundamental purpose of the Agreement on Safeguards. Furthermore, the complainants have failed\nto establish a prima facie case that the United States has acted inconsistently with Article 5.1.\n3994\nJ. ARTICLE 7\n7.1714 Norway argues that having established that the US measures go beyond the extent necessary\nto remedy injury caused by imports, a violation of the requirement in Article 7.1 that the remedy\nshould only be applied for such period of time as may be necessary is an automatic consequence.3995\n7.1715 The United States responds that an inconsistency with Article 5.1 does not automatically\nresult in an inconsistency with Article 7.1 because the two provisions cover different aspects of a\nsafeguard measure. In particular, Article 5.1 requires that the safeguard measure not be applied\nbeyond the extent necessary to prevent or remedy serious injury and facilitate adjustment. As the\npanel in US – Line Pipe explained, in examining which of two measures is applied to a greater extent,\nthe analysis should \"compare[] the application of the measures as a whole\" and not \"compare[] the\napplication of the separate constituent parts of the measure in isolation\".\n3996 In performing this\nanalysis, the panel considered the type of measure (TRQ versus quantitative restriction), the level of\nrestriction (amount subject to lower duty rate versus quota) and duration.\n3997 The United States\nsubmits that, in contrast, Article 7.1 addresses only one constituent part of the measure – the duration\n– which may be \"only for such period of time as may be necessary to prevent or remedy serious injury\nand to facilitate adjustment\". A measure might be found inconsistent with Article 5.1 because its\nlevel was too high even though the chosen duration wa s permissible. According to the United States,\ntherefore, an inconsistency with Article 5.1 does not automatically result in an inconsistency with\nArticle 7.1. Norway's arguments regarding Article 5.1, even if accepted by the Panel, do not meet its\nburden of proof to establish an inconsistency with Article 7.1.\n3998\n7.1716 Norway recalls that Article 7.1 is the temporal corollary to the requirement in Article 5.1 on\nthe level of the remedy, and they both come as a package, as the United States seems to admit. 3999\nNorway submits that the Panel should, therefore, find that the breach of Article 5.1 also entails a\nbreach of Article 7.1 of the Agreement on Safeguards.\n4000\n\n3993 Norway's, second oral statement on behalf of the complainants, paras. 29-37.\n3994 United States' second written submission, para. 179.\n3995 Norway's first written submission, paras. 370-371.\n3996 Panel Report, US – Line Pipe, para. 7.97.\n3997 Ibid., para. 7.96.\n3998 United States' first written submission, paras. 1212-1214.\n3999 United States' first written submission., para. 1212.\n4000 Norway's second oral statement on behalf of all complainants, paras. 36-37.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nK. PARALLELISM\n1. Basis and features of the parallelism requirement\n7.1717 Japan and Brazil point out that Articles 2.1 and 2.2 establish the basic requirements for\nimposing safeguards measures. Article 2.1 requires a determination of: (1) increased quantities of the\n\"product … being imported \"; (2) serious injury or threat thereof to a domestic industry; and (3) a\ncausal link between \"such increased imports\" and seri ous injury, or threat thereof, to the domestic\nindustry. Article 2.2 provides that \"[s]afeguard measures shall be applied to a product being imported\nirrespective of its source\". The Appellate Body held that Articles 2.1 and 2.2, read in concert, create a\n\"parallelism\" requirement for safeguard measures.4001\n7.1718 The European Communities, Japan, Korea, Switzerland, Norway and New Zealand point out\nthat the Appellate Body has emphasized several times the requirement that there must be a parallelism\nbetween the scope of a safeguard investigation and the scope of the measures imposed as a result\nthereof: \"the imports included in the determinations made under Articles 2.1 and 4.2 should\ncorrespond to the imports included in the application of the measure, under Article 2.2\". 4002 A g ap\nbetween imports covered under the investigation and imports falling within the scope of the measure\ncan be justified only \"if the competent authorities \"establish explicitly\" that imports from sources\ncovered by the measure \"satisf[y] the conditions for the application of a safeguard measure, as set out\nin Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards\".4003 4004\n7.1719 The complainants recall that the Appellate Body found in US – Wheat Gluten that the United\nStates' approach of including NAFTA imports in the scope of the investigation but excluding them –\nunder certain conditions – from the scope of safeguard measures violates this principle, unless it is\nestablished through reasoned and adequate explanation that non-NAFTA imports alone satisfied the\nconditions for the application of a safeguard measure. In a subsequent case also involving a United\nStates safeguard measure before the Appellate Body (US – Line Pipe), a footnote had been inserted in\nthe relevant USITC Report which purported to conc lude that non-NAFTA imports alone satisfy the\nconditions of the Agreement on Safeguards. However, the Appellate Body considered that the\nreasoning in this footnote did not amount to \"reasoned and adequate explanation\".4005\n7.1720 The European Communities points out that the requirement of parallelism is nothing but an\nobligation to carry out the full analysis required under Articles 2.1 and 4.2 of the Agreement on\nSafeguards. If the parallelism requirement is not respected, a safeguard measure is imposed on\nproducts that have not been found to be imported in increased quantities or have not been found to\ncause serious injury. The wrongly included products may be of a different kind than those found to\n\n4001 Japan's first written submission, paras. 301-302; Brazil's first written submission, para. 222\n(emphasis added).\n4002 Appellate Body Report, US – Wheat Gluten , para. 96. This principle was already established in\nAppellate Body Report, Argentina – Footwear (EC) , paras. 111-113 and most recently confirmed in Appellate\nBody Report, US – Line Pipe, paras. 188 and 198.\n4003 Appellate Body Report, US – Wheat Gluten, para. 98.\n4004 European Communities' first written submission, paras. 598-599; Japan's first written submission,\nparas. 302-305; Korea's first written submission, para. 182; Switzerland's first written submission, paras.\n324-325; Norway's first written submission, paras. 364-366; New Zealand's first written submission, paras.\n4.169 and 4.172.\n4005 European Communities' first written submission, paras. 600, 602; Japan's first written submission,\npara. 304; Korea's first written submission, para. 181; China's first written submission, paras. 559-562;\nSwitzerland's first written submission, paras. 326-327; Norway's first written submission, paras. 379-380; New\nZealand's first written submission, paras. 4.170-4.171; Brazil's first written submission, para. 223.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhave been imported in increased quantities and to cause serious injury or to come from different\nsources than those subject to the determinations.4006\n7.1721 The United States notes that several complainants conclude from the Appellate Body's\nreasoning in US – Line Pipe that the competent authorities must conduct a separate parallelism\nevaluation of each of the Article 4.2(a) factors, the establishment of a causal link based on trends in\nimports and other indicators, and non-attribution. 4007 The United States argues that the sole\nrequirements under Articles 3.1 and 4.2(c) are for the competent authorities to publish \"a report\nsetting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law,\"\nand providing \"a detailed analysis of the case under investigation as well as a demonstration of the\nrelevance of the factors examined.\" The Agreement does not require the use of a particular structure\nor format for the report, or a particular analysis. As the Appellate Body concluded in US – Line Pipe:\n\"[W]e are not concerned with how the competent authorities of WTO Members reach their\ndeterminations in applying safeguard measures.\n4008 4009\n2. Scope of the parallelism requirement\n(a) Exclusions of imports from free-trade areas\n7.1722 The European Communities argues that the exclusion by the United States of four countries\nfrom the safeguard measures (Canada, Mexico, Israel and Jordan) infringes the parallelism\nprinciple.4010 Similarly, Japan and Brazil argue that the safeguard measures in this case violate the\nprinciple of \"parallelism\" in Articles 2.1 and 2.2 because the President excluded NAFTA countries\nfrom the measure without an adequate and reasoned investigation of non-NAFTA imports. The\nUSITC's analysis of non-NAFTA imports in its report in this case was far too abbreviated and\nincomplete to comply with the Agreement on Sa feguards. The USITC's follow-up in response to\nUSTR's request for information offered little improvement.\n4011 Likewise, New Zealand submits that\nthe United States has failed to respect the parall elism requirement. The United States has excluded\ncertain imports that were included in its investigation among the increased imports causing \"serious\ninjury\" from the application of a safeguard measure, but it has failed to establish \"explicitly\" or to\nprovide a \"reasoned and adequate explanation\" to show that the imports not excluded from the\nmeasure meet the conditions for the application of a safeguard. This lack of parallelism relates to,\ninter alia, the exclusion of imports from the United States FTA partners. 4012 4013 Norway argues that\nexclusion of imports from FTA partners is not precluded per se, but requires that all the necessary\ndeterminations be made – and explained in a reasoned and adequate manner – on the basis of the\nimports that are subject to the measure. One consequence of this is that correct increased imports and\ncausation analyses have to be made after the exclusion from the investigation.\n4014 Having failed on\nthese counts, Norway submits that the United States violates the parallelism principle.4015\n\n4006 European Communities' first written submission, para. 601.\n4007 Japan's first written submssion , para. 305\n4008 Appellate Body Report, US – Line Pipe, para. 158.\n4009 United States' first written submission, paras. 748-749\n4010 European Communities' first written submission, paras. 594-595.\n4011 Japan's first written submission, para. 308; Brazil's first written submission, para. 228.\n4012 The factual background to these exclusions is outlined above in Part II A, paras. 2.11-2.12.\n4013 New Zealand's first written submission, para. 4.174.\n4014 Norway's second written submission, para. 182.\n4015 Norway's first written submission, paras. 396-397; Norway's second written submission, para. 187.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(i) Exclusion of NAFTA imports\n7.1723 New Zealand argues that the United States has done here precisely what it did in US – Wheat\nGluten and US – Line Pipe. It conducted its safeguards investigation on the basis of the total quantity\nof subject imports, but then imposed the measure only on the products of those countries that are not\nmembers of the NAFTA.4016 In both US – Wheat Gluten and US – Line Pipe, the Appellate Body held\nthat the failure to correlate imports subject to the measure with the imports on which the injury\ndetermination was based, violated the parallelism requirement.4017\n7.1724 New Zealand contends that the United States did not meet the key parallelism requirements in\nthe case of their investigation into steel imports. In its Report, the USITC made affirmative findings\nthat imports from both Mexico and Canada of CCFRS constituted a substantial share of total imports\nand that imports from Mexico contributed importantly to the serious injury allegedly caused by\nimports. The important role played by imports from NAFTA sources as part of the USITC's\ninvestigation into imports from all sources was quite explicit. 4018 New Zealand submits that the\nfinding in the Second Supplementary Report is just as flawed as the similar finding by the USITC in\nthe US – Line Pipe case. In that case, the United States argued that the determination in respect of\nnon-NAFTA imports had been substantiated by the USITC in footnote 168 to its report. In that\nfootnote, the USITC had indicated that it would have reached the same result \"had we excluded\nimports from Canada and Mexico from our analysis\".4019 The USITC noted that non-NAFTA imports\nincreased significantly over the period of investigation and that the level of non-NAFTA imports was\nhigher during the later part of the period of investigation than in the first years.\n4020 It also stated that\nthe average unit prices of the non-NAFTA imports placed these imports among the lowest-priced\nimports.4021 The Supplementary Report makes an assertion that \"increased imports of CCFRS from\nnon-NAFTA countries are a substantial cause of serious injury to the domestic industry\". However,\nthis assertion is not supported by any reasoned or adequate analysis. According to New Zealand, the\nUSITC, failed to evaluate the share of the domestic market taken by non-NAFTA imports and failed\nto evaluate other factors relevant to the situation of the industry concerned. It did not examine the\nimpact of NAFTA imports on the domestic industry if these exports were to be excluded from the\nmeasure. The USITC also failed to make any finding on the relationship between the movements in\nimports (volume and market share) and the movements in injury factors, and it failed to demonstrate\nthe causal link between increased imports from non-NAFTA sources and serious injury involving a\ngenuine and substantial relationship of cause and effect. Moreover, there is no acknowledgement in\nthe Second Supplementary Report that the USITC had earlier determined that imports of both Mexico\nand Canada, considered individually, accounted for a \"substantial share\" of total imports and that\nimports from Mexico \"contributed importantly\" to the serious injury. The failure by the USITC to\nexplain in its Supplementary Report its earlier findings reinforces the conclusion that the United\nStates has failed to provide an adequate and reasoned explanation to support its exclusion of imports\nfrom its NAFTA partners from the application of the safeguard measure.\n4022\n\n4016 Appellate Body Report, US – Line Pipe, para 186; Appellate Body Report, US – Wheat Gluten ,\npara 98.\n4017 Appellate Body Report, US – Line Pipe , para 197; Appellate Body Report, US – Wheat Gluten,\npara 98.\n4018 New Zealand's first written submission, paras. 4.177-179; see also Japan's first written submission,\npara. 309-311.\n4019 USITC statement quoted in Appellate Body Report, US – Line Pipe, para 189.\n4020 Ibid.\n4021 Ibid.\n4022 New Zealand's first written submission, paras. 4.181-4.185.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1725 Similarly, China and Switzerland submit that neither the USITC Report (and the supplemental\nreport) nor the Presidential Proclamation indicated whether imports from Canada and Mexico were\nexcluded from the scope of the investigation. China and Switzerland consider that it is established,\nprima facie, that the United States included these imports in the scope of its investigation for each of\nthe products concerned.\n4023 The United States failed to show that imports actually included in the\nscope of the safeguard measure alone satisfied the requirements of Articles 2.1 and 4.2 of the\nAgreement on Safeguards. The Second Supplement ary Report of the USITC is not a sufficient\nanalysis establishing through an adequate and reasoned explanation that all other imports without\nthose of Canada and Mexico (and Jordan and Israel) alone fulfilled the conditions of being imported\nin such increased quantities so as to cause or threaten to cause serious injury to the domestic\nindustry.\n4024\n(ii) Exclusion of imports from Israel and Jordan\n7.1726 China, Switzerland, Norway and the European Communties consider that the exclusion of\nIsrael and Jordan from the application of the measures is inconsistent with the United States\nobligations under Articles 2.1 and 4.2 of the Agreement on Safeguards.\n4025 The complainants argue\nthat the USITC Report should have mentioned that imports from Israel and Jordan were \"excluded\"\nfrom the scope of the investigation. Secondly, if such mention is not present, it should be concluded,\na priori, that these imports were included in the scope of the investigation for each of the products\nconcerned. China submits that in the present case, neither the USITC Report (and the Second\nSupplementary report) nor the Presidential Proclamation indicated whether imports from Israel and\nJordan were excluded from the scope of the investigation. Without any proof to the contrary, China\nconsiders that it is established, prima facie, that the United States included these imports in the scope\nof its investigation.\n4026\n7.1727 China notes in this regard that the USITC Second Supplementary Report only indicates on\nthis point that \"the Commission indicates, in accord with its findings in the Views on Remedy, that\nexclusion of imports from Israel and Jordan woul d not change the conclusions of the Commission or\nof individual Commissioners\". 4027 Commissioner Bragg states only that \"Given that imports from\nIsrael and Jordan, respectively, are either negligible or nonexistent for each of my affirmative\ndeterminations, as discussed in my separate views on remedy, I note that the recommended exclusion\nof imports from Israel and Jordan, respectively, from my injury analyses does not change my analyses\nor affirmative injury findings\" 4028 In light of the precise determinations of the Appellate Body,\nespecially in the US – Line Pipe case, China and Norway submit that the United States failed to\nestablish \"explicitly\" that increased imports from sources other than Israel and Jordan satisfy the\nconditions as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards. 4029\nNorway adds that the violation of parallelism doe s not address whether Jordan and Israel could have\nbeen excluded from the measure by virtue of Article 9 of the Agreement on Safeguards.4030\n\n4023 China's first written submission, para. 580; Switzerland's first written submission, para. 346.\n4024 China's first written submission, para. 588.\n4025 European Communities' first written submission, paras. 612; Switzerland's first written\n4026 The complainant's first oral statement on parallelism, para. 729; China's first written submission,\nparas. 571-572.\n4027 USITC Supplementary Report, 4 February 2002, p. 4.\n4028 USITC Supplementary Report, 4 February 2002, p. 19.\n4029 China's first written submission, paras. 576-578; Norway's first written submission, para. 379;\nSwitzerland's first written submission, paras. 337-345.\n4030 Norway's first written submission, para. 380.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1728 New Zealand also argues that the exclusion of imports from Israel and Jordan is inconsistent\nwith the parallelism requirement. Imports from all sources, including Israel and Jordan, were\nincluded in the USITC's increased imports determination. However, Section 403 of the Trade and\nTariff Act of 1984, 19 U.S.C. & 2112, and Section 221 of the United States-Jordan Free Trade Area\nImplementation Act authorize the President to exclude imports from Israel and Jordan, respectively,\nfrom any safeguard action under Section 201. In line with the recommendations made by the USITC\non Remedy4031 Proclamation No. 7529 clearly states that the safeguard measures applied to CCFRS do\nnot apply to imports originating from, inter alia, Israel and Jordan. New Zealand submits that the\nUnited States should have provided a reasoned and adequate explanation establishing explicitly that\nimports from sources other than Israel and Jordan \"satisfied the conditions for the application of a\nsafeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on\nSafeguards\". Yet no such reasoned or adequate explanation is provided in the USITC Report. The\nstatements of the USITC\n4032 and of Commissioner Bragg 4033 in the Second Supplementary Report do\nnot meet the requirements for justifying an absence of parallelism. Accordingly, the exclusion of\nIsrael and Jordan from the application of the measur es is therefore also inconsistent with the United\nStates obligations under Articles 2.1 and 4.2 of the Agreement on Safeguards.\n4034 4035\n7.1729 The United States contends that the USITC's findings regarding the minuscule quantity of\nimports from Israel and Jordan satisfy the requirement to provide findings and reasoned conclusions\nthat imports from other sources by themselves caused serious injury. The USITC found that imports\nfrom Israel were \"small and sporadic\" and that there were \"virtually no imports\" from Jordan. The\nUSITC's finding that the exclusion of imports from Israel and Jordan would not change its\nconclusions met the requirements of Articles 3.1 and 4.2(c).\n4036 In fact, since the USITC Reported\npercentages with a single decimal place, imports from Jordan were less than the rounding error in\nsome of the USITC's statistics. During the entirety of the investigation period, there were no imports\nfrom Israel for four of the ten covered products (cold-finished bar, rebar, stainless steel rod, and tin\nmill ). For CCFRS and hot-rolled bar, imports from Israel were never more than 0.01% of total\nimports. For stainless steel wire, imports from Israel never rose above 0.1% of total imports. For\nwelded pipe, there were essentially no imports after 1998, and imports before that time never\namounted to more than 0.4% of total imports. For FFTJ and stainless steel bar, imports after 1997\nwere never more than 0.3% of total imports. In this situation, the observation that there were\n\"virtually no imports from Jordan\" and that imports from Israel were \"small and sporadic\" provides a\nsuccinct – and thoroughly reasonable and adequate – explanation of why exclusion of such imports\nwould not change the determinations of the USITC or of the individual Commissioners. Any further\nanalysis would simply repeat verbatim the conclusions provided elsewhere in the USITC Report. It\ncomports with the Article 3.1 requirement of findings and reasoned conclusions. If a particular factor\nis so insignificant that it does not change the results of the analysis – which the record shows was the\ncase for imports from Israel and Jordan – a reasoned explanation of that conclusion says just that, and\nno more. There was nothing more to be said about imports from sources other than Israel and Jordan\nexcept what the USITC said – that exclusion would not change the conclusions of the USITC or the\n\n4031 USITC Report, Vol. 1, p 366 and footnote 69.\n4032 Second Supplementary Report, 4 February 2002, p 4 (Exhibit CC-11).\n4033 Ibid., p 19 (Exhibit CC-11).\n4034 It was noted that, in contrast to the substantial level of imports to the United States from Canada\nand Mexico, imports to the United States from Israel and Jo rdan were negligible. It would also appear that the\nUnited States could exclude imports from Jordan under Article 9 of the Agreement on Safeguards.\nNevertheless, the approach taken by the United States to excluding imports from Jordan and Israel from the\napplication of the safeguard remains inconsistent with its obligations in regard to parallelism.\n4035 New Zealand's first written submission, para. 4.187-4.189.\n4036 USITC Report, p. 366; Second Supplementary Report, p. 4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindividual Commissioners.4037 Article 3.1 of the Agreement on Safeguards requires that a competent\nauthority set forth findings and reasoned conclusions on all issues of fact and law. The USITC set\nforth such findings and reasoned conclusions – both for all imports and for non-NAFTA imports.\nBecause exclusion of imports from Israel and Jordan could not have affected the data on which the\nUSITC relied to make its findings and conclusions, it could not have affected the findings and\nconclusions themselves with respect to either all imports or non-NAFTA imports. In other words, the\nfindings and conclusions the USITC reached were equally applicable if imports from Israel and\nJordan were excluded. Additionally, Article 3.1 requires an authority to address all \"pertinent\" issues\nin its report. Consequently, the report need not address issues that are not \"pertinent\", which would\nbe the case if that issue did not affect the underlying data on which the authority relied to make its\nfindings and conclusions.\n4038\n(iii) Existence of a de minimis rule?\n7.1730 The European Communities and New Zealand argue that in relation to Israel and Jordan, the\nUSITC appears to have applied a de minimis exception instead of providing the detailed analysis and\nevaluations required by Article 4.2 of the Agreement on Safeguards. It considers that these imports\nwere indeed small and sporadic but nowhere substantiated this and nowhere established that the\nremaining imports would have satisfied the Agreement on Safeguards. The European Communities\nsubmits that there is no de minimis rule in the Agreement on Safeguards. Where fair trade is\nrestricted, every ton counts.4039\n7.1731 In response, the United States submits that the reasoning expressed above in relation to Israel\nand Jordan does not, as the European Communities charges, read a de minimis rule into the\nAgreement on Safeguards. Rather, it comports with the Article 3.1 requirement of findings and\nreasoned conclusions.4040\n7.1732 The European Communities and Switzerland respond that the United States has not\nprovided a legal basis for a de minimis clause for FTA partners in the Agreement on Safeguards. The\nUnited States tries to excuse its failure to comply with the substantive requirements in the Agreement\non Safeguards by referring to Article 3.1. The European Communities' claim is, however, not merely\none of defective statement of reasons. Failure to provide an adequate explanation to show that a\nsubstantive requirement has been met is a violation of the substantive requirement. 4041 The European\nCommunities and Switzerland point out that the USITC Report of October 2001 contains no separate\ndetermination whatsoever for Israel and Jordan, whose import data are not even disaggregated from\nthe \"all minus NAFTA\" data.\n4042 Since there is no such thing as a de minimis rule for FTA partners in\nthe Agreement on Safeguards 4043, and since the principle of parallelism was enunciated by the\nAppellate Body in broad and unqualified terms, even if excluded countries were the smallest exporters\nof a particular product, the United States is not entitled to rebut the prima facie case made be the\nEuropean Communities by relying on the magnitude of the unlawful exclusion. Also, even assuming\nthat the hypothetical assertion made by the United States was relevant, it was not demonstrated\n\n4037 United States' first written submission, paras. 754-759.\n4038 United States' written reply to Panel question No. 97 at the first substantive meeting.\n4039 European Communities' first written submission, paras. 616, 621; New Zealand's second written\nsubmission, para. 3.147.\n4040 United States' first written submission, paras. 754-759.\n4041 European Communities' second written submission, para. 438; Switzerland's second written\nsubmission, para.108.\n4042 European Communities' second written submission, para. 450; Switzerland's second written\nsubmission, para.108.\n4043 European Communities' first written submission, paras. 616 and 621.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthrough a reasoned and adequate explanation before the relevant determinations were made or before\nthe measures were taken. A fortiori it cannot be justified ex post in dispute settlement. 4044 4045 The\nEuropean Communities insists that a de minimis exclusion in favour of the United States FTA partners\n– Israel and Jordan, and also NAFTA countries – is not in the text of the Agreement on Safeguards.\nThis, says the European Communities, must be contrasted with the de minimis clause which is in the\nAgreement on Safeguards – that is, the one set out in Article 9.1 in favour of developing countries.\nThe European Communities also notes that there are several other WTO texts where de minimis\nclauses are clearly set out, such as Article 5.8 of the Anti-Dumping Agreement, Articles 27.10, 27.11\nand 27.12 of the SCM Agreement and Article 6.4 of the Agreement on Agriculture. The European\nCommunities argues that if the drafters of the Agreement on Safeguards had wanted to write a\nde minimis clause for FTAs in the Agreement, they perfectly knew how to write it.\n4046\n7.1733 The European Communities also contends that it is not possible to claim that there is any\ndetermination whatsoever on imports from all sources minus NAFTA, Israel and Jordan amongst\nthose identified by the United States as the determinations under review. As for Jordan, footnote 69\nto the USITC remedy recommendations\n4047 makes clear that the United States legislation on the basis\nof which the United States eventually excluded Jordan from the safeguard measures 4048 entered into\nforce about two months after the October determinations were made. This further confirms that the\nOctober determinations do not exclude imports from Jordan. It also shows that later findings and\ndecisions based on such legislation cannot be related to the original October 2001 determinations. 4049\nFurthermore, even in the Second Supplementary Report, the only references to Jordan and Israel are\ncross-references to the remedy recommendations pages of the October 2001 USITC Report,\nsupplemented by a generic and unreasoned statement that excluding imports from Israel and Jordan\nwould not change the conclusions of the Commission or individual Commissioners. 4050 However,\nwithout a reasoned and adequate supporting explanation, such conclusion should have the same fate\nas that reviewed by the Appellate Body in US – Line Pipe.\n4051 Two irrelevant findings in the Second\nSupplementary Report do not make a relevant one. In other words, the sum of the findings on non-\nNAFTA imports, and the statements on the individual impact of imports from Israel and Jordan does\nnot amount to a finding that the imports caught by the safeguard measures, alone, underwent a recent\nsudden sharp and substantial increase consistently with Article 2.1 of the Agreement on Safeguards\nand, moreover, caused serious injury to the domestic industry. The remedy recommendations are not,\neven under United States law, increased imports and injury determinations. For some product groups,\nmoreover, imports from Israel are not discussed at all. 4052 Furthermore, there is no breakdown of\nimports from Israel and Jordan in the Second Supplementary Report either.\n7.1734 As regards what the United States means by \"small and sporadic\" imports which \"could not\nhave affected any of the data the USITC used\", the European Communities points to the imports of\nhot-rolled bar from Israel during all the five y ears of the period of investigation. The European\n\n4044 For the avoidance of doubt, the European Co mmunities provides in Exhibit CC-108 to this\nsubmission some examples of the size of excluded NAFTA imports compared to imports from included\ncountries in the present case.\n4045 European Communities' second written submission, para. 459.\n4046 European Communities' written reply to Panel question No. 60 at the second substantive meeting\n4047 USITC Report, Vol. I, p. 366.\n4048 United States-Jordan Free Trade Area Implementation Act , Public Law 107–43—28 September\n2001, 19 U.S.C. 2112, available on the internet at the address: \"http://thomas.loc.gov/\" .\n4049 European Communities' second written submission, paras. 4.66-4.68.\n4050 USITC Second Supplementary Report, p. 4; see also United States first written submission, paras.\n755-769.\n4051 Appellate Body Report, US – Line Pipe, para. 196.\n4052 USITC Report, Vol. I, pp. 399 and 405.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCommunities argues that if these imports were legitimately excluded because, to use the United States\nformula, they are small and sporadic, then the so urces of Denmark, New Zealand, Ireland, Singapore,\nHong Kong, Cyprus and Monaco should also have been so considered. 4053 The European\nCommunities points out that it was forced to reso rt to sources outside the USITC Report to compile\nthese data, since no breakdown of import data from Israel and Jordan can be found in the USITC\nReport. Thus, even if a de minimis exclusion for FTA partners was allowed, quod non, and even if\nthere was an implied determination, quod non, there is certainly no reasoned and adequate explanation\ntherefor in the Report. Although the size of excluded exports from Israel and Jordan might appear\nsmall in this case, upholding this type of exclusion paves the way for an uncontrolled and unlimited\nrelaxation of the standards in the Agreement on Safeguards. The European Communities questions\nwhat is the limit to de minimis?\n4054\n7.1735 New Zealand submits that it, in no way, disputes the fact that imports from Jordan and Israel\nmay indeed be considered negligible. The point is that if the United States wished to exclude imports\nfrom Israel and Jordan from the application of the safeguard, it could have excluded them at the outset\nof its investigation to determine imports causing injury. However it did not do so. Accordingly, this\nmeans that the United States cannot now seek to avoid its obligation to provide a \"reasoned and\nadequate explanation that establishes explicitly\" that imports covered by the measure \"satisfy the\nconditions for the application of a safeguard measure\".\n4055 A statement that simply notes the\nnegligible nature of certain imports certainly does not meet these conditions. 4056 The reasoned and\nadequate explanation that the Appellate Body spoke of is an explanation that would \"establish\nexplicitly\" that imports covered by the measure \"satisfy the conditions for the application of a\nsafeguard measure\".4057 The United States seeks to twist this by referring instead to a \"reasonable and\nadequate explanation of the findings by the USITC … that the exclusion of imports from these FTA\npartners would not change their conclusions\".4058 4059\n7.1736 The United States repeats that it is not arguing that a de minimis rule should be read into the\nparallelism analysis articulated by the Appellate Body. Instead, the United States has argued that,\nwhen imports from certain countries are so minuscule that their exclusion will – quite literally – not\nchange the numeric data examined by a competent authority in its causation analysis, the competent\nauthority has fully complied with its obligation under the Agreement to provide a reasoned and\nadequate analysis of the issue by explaining that exclusion of these volumes will have no impact at all\non its findings in a particular case. As a substantive matter, parallelism requires that imports from\nsources that were not excluded (the \"covered sources\"), by themselves, satisfy the requirements of the\nAgreement on Safeguards. Article 3.1 would require findings and reasoned conclusions for that\nfinding. In the case of imports from sources that are zero, or essentially zero when compared with\nimports from covered sources, a full and complete explanation would indicate that the findings and\nreasoned conclusions remain unchanged because the exclusion of imports from such sources does not\nchange the underlying data in any way. That is exactly the explanation that the USITC provided.\nThus, the United States does not contend that the Agreement on Safeguards contains a de minimis\nrequirement, as it does not. Rather, as a legal matter, the USITC Report complied with Articles 3.1\nand 4.2(c) by stating that imports from Israel and Jordan were isolated and sporadic, and did not\n\n4053 European Communities' second written submission, para. 473.\n4054 European Communities' second written submission, paras. 475-476.\n4055 Appellate Body Report, US – Line Pipe, para 188.\n4056 New Zealand's second written submission, paras. 3.145-3.146.\n4057 Ibid.\n4058 United States' first written submission, para 754.\n4059 New Zealand's second written submission, para. 3.147.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nchange the analysis in any way. Thus, Articles 3.1 and 4.2(c) do not require any further\nexplanation.4060\n(b) Developing country exclusions\n7.1737 The United States contends that there was no obligation to perform a parallelism analysis with\nregard to excluded developing countries. The exclusion of WTO Members from application of a\nsafeguard measure pursuant to Article 9.1 is an exception to Article 2.2 and, as such, is not subject to\nparallelism. Parallelism derives from the use of the term \"products . . . being imported\" in both\nparagraphs 1 and 2 of Article 2. Article 9.1 provides that \"[s]afeguard measures shall not be applied\nagainst a product originating in a developing country Member\" under certain conditions. Thus, it acts\nas an exception to the Article 2.2 obligation that \"[s]afeguard measures shall be applied to a product\nbeing imported irrespective of source\". This exce ption relates exclusively to the application of a\nsafeguard measure, and not to the underlying investigation or determination of serious injury. Thus, a\nMember may include developing country Members in the investigation and determination of serious\ninjury, but still exclude them from the safeguard measure if the Article 9.1 criteria so require. In US –\nWheat Gluten , the Appellate Body confirmed that Article 9.1 acts as an exception to parallelism.\nSince Article 9.1 acts as an exception only to the application of the safeguard measure, the United\nStates argues that it was under no obligation to exclude developing country exports from the analysis\nof whether imports increased. Indeed, Article 4.2(a) requires the competent authorities to evaluate\n\"the rate and amount of the increase in imports of the product concerned\". Absent an exception to this\nrequirement, which Article 9.1 does not provide, the USITC was required to include developing\ncountry imports in its analysis of injury.\n4061\n(c) Product exclusions\n7.1738 The European Communities argues that another fa ilure to respect parallelism arises from the\nfact that many specific products were excluded from the safeguard measures on the basis of individual\nrequests. The European Communities and China argue that these exclusions have been made without\ncarrying out a proper increased imports and injury determination, i.e. more precisely without\ndetermining whether or not serious injury could still be caused by imports of products other than the\nones concerned by the exclusions.\n4062\n7.1739 More specifically, New Zealand points out that Proclamation No. 7529 provided for the\nexclusion from the application of the safeguard measure of certain specified products and provided\nthat requests for the exclusion of other products would be considered in the future. Since 5 March\n2002, in total 727 products have been excluded from the application of the safeguard measure. All of\nthese products were included in the USITC's investigation and determination that increased imports\nwere causing serious injury to the United States domestic industry. New Zealand argues that in this\nregard, as with the exclusion of FTA partners, the United States fails to comply with the requirement\nof parallelism. The United States has at no time established \"explicitly\", or provided any \"reasoned\nand adequate explanation\" to show, that imports of non-excluded products taken alone meet the\nconditions for the imposition of a safeguard measure. The exclusion of certain imports from the\napplication of the safeguard measure on a product-by-product basis, in the manner followed under the\nUnited States \"products exclusions\" process, when those imports were included in determining\nwhether all of the requirements of the Agreement on Safeguards had been met for the taking of a\n\n4060 United States' written reply to Panel question No. 60 at the second substantive meeting.\n4061 United States' first written submission, paras. 775-777.\n4062 European Communities' first written submission, paras. 609-611; China's first written submission,\npara. 618.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsafeguard measure, has implications for all aspects of the USITC's determination and undermines the\nconclusions reached by the USITC on each aspect of that determination. New Zealand submits that it\ndeprives the safeguard measures in this case of any legal basis. As a result, the United States has not\nacted in conformity with its obligations under the Agreement on Safeguards.\n4063\n7.1740 The United States contends that the Agreement on Safeguards does not support the\ncomplainants' assertion of a new type of parallelism, which would preclude the exclusion from a\nsafeguard measure of an imported item covered by the determination of serious injury. \"Parallelism\"\nas enunciated by the Appellate Body derives from the obligation under Article 2.2 to apply safeguard\nmeasures to an imported good \"irrespective of its source\". Since exclusions based on physical\ncharacteristics are neutral as to source, they do not raise parallelism concerns.\n4064 The United States\nargues that other provisions of the Agreement on Safeguards confirm that scope parallelism is not\nrequired. Article 5.1, first sentence, allows a Member to apply a safeguard measure \"only to the\nextent necessary to prevent or remedy serious injury and to facilitate adjustment\". The obligation\nunder the first sentence places a limit on the application of a safeguard measure, but does not restrict a\nMember's discretion to apply a measure to a lesser extent. The admonition to \"choose measures most\nsuitable for the achievement of these objectives\" indicates further that there are many permissible\noptions for the extent to apply a safeguard measure, and that a Member is free to choose among them.\nThe text of Article 5 indicates, further, that a safeguard measure need not apply equally to all of the\nitems covered by a determination of serious injury. The second sentence of Article 5.1 envisages the\napplication of quantitative restrictions, which place no restriction on imports below the quota level,\nwhile prohibiting imports above that level. The Appellate Body has also recognized that a safeguard\nmeasure may take the form of a tariff-rate quota.\n4065 In that situation, one tariff applies to imports\nbelow a specified level, and another tariff to imports above that level. Exclusion of products from the\nscope of a safeguard measure is no different from the application of a tariff rate quota or quota, in that\nsome imports covered by the determination of serious injury are unaffected by the measure, while\nothers are.\n4066\n7.1741 The United States also points out that it undertook the exclusion of particular products from\nthe scope of the safeguard measures at the behest of exporters and exporting Members, including the\nEuropean Communities. 4067 Exporting Members' desire for exclusions was the subject of\nconsultations under Article 12.3 of the Agreement on Safeguards. European Communities officials\nmade public statements to the effect that satisfactory resolution of exclusion requests was necessary to\ndefuse the dispute regarding application of the steel safeguard measures.\n4068 The United States\nassumed that Members such as the European Communities would not request exclusions if they\nbelieved such an action to be inconsistent with the United States' WTO commitments. That the\nEuropean Communities, having received the treatment it requested, now considers such treatment to\nbe inconsistent with WTO rules, appears to be a change in its position. In any event, if it now has a\ndifferent view, it would seem to be more logical to seek revocation of the exclusions, rather than\nperforming an additional parallelism inquiry.\n4069\n\n4063 New Zealand's first written submission, paras. 4.190-4.192.\n4064 United States' first written submission, paras. 760-763.\n4065 Appellate Body Report, Korea – Dairy, para. 96.\n4066 United States' first written submission, paras. 764-766.\n4067 \"Lamy Waffles on Steel Compensation\", Highlights Exclusions, Inside US Trade (28 June 2002)\n(Exhibit US-59).\n4068 Ibid.\n4069 United States' first written submission, paras. 767-768.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1742 New Zealand responds that there is no legal basis in the Agreement on Safeguards nor in\ngeneral international law for a restraint or prohibition on a WTO Member which is harmed by a\nviolation of the WTO Agreements, from seeking to mitigate that harm and then proceeding to a legal\nchallenge. A relevant analogy from domestic law is the position of a party to a contract who seeks to\nmitigate its loss arising from breach by another part y, but does not thereby lose the right to sue for\nbreach. Indeed in some legal traditions, the wronged party is under a duty to mitigate their loss.\n4070\n7.1743 The European Communities considers that the principle of parallelism has been enounced in\nmore general terms than the United States suggests. In US – Wheat Gluten , the Appellate Body\nclarified that the imports included in the determinations made under Article 2.1 and 4.2 of the\nAgreement on Safeguards should correspond to the imports included in the application of the\nmeasure, under Article 2.2.\n4071 However, the Appellate Body based itself on the phrase \"product\nbeing imported\" – which is in no way linked to the origin notion in Article 2.2. The Appellate Body's\nconclusion that \"a product\" must have the same measuring for the purposes of the investigation as\nwhen it comes to imposing a measure is not dependent on the origin of the product. The European\nCommunities submits that it should be noted that Article 2.2 does not employ the term \"origin\" but\nthe broader term \"source\", which is sufficiently broad to cover situations like the product exclusions\nat issue in this dispute. Furthermore, by its te rms, the obligation in Article 2.2 of the Agreement on\nSafeguards is not limited to the case when all imports with a certain origin are first included in the\ninvestigation and later excluded from a measure. A partial discrimination based on the \"source\" is as\nprohibited as a total discrimination.\n4072\n7.1744 The European Communities notes that the United States tries to defend its product exclusions\nby relying on Article 5.1 of the Agreement on Safeguards. To start with, even if the product\nexclusions may not violate Article 5.1 of the Agreement on Safeguards, this would not make them\nipso facto consistent with Articles 2 and 4. The European Communities further disagrees that such\nexclusions comply with Article 5.1 since all the products eventually excluded were counted in making\nfindings under Article 2 and 4 of the Agreement on Safeguards, when the United States' authorities\ndecided the level of remedy necessary to remedy serious injury they had before them the injury\nallegedly caused by all increased imports. A \"lesser extent\" decision must be spread over all the\nproducts investigated.4073\n7.1745 The European Communities considers that the there is no logical or legal reason to distinguish\ncases where, on the one hand, the two import scopes diverge because all imports originating in a\ncertain country are excluded from the measures, and those in which the two import scopes diverge\nbecause certain imports are excluded on the basis of the importing/using interest of certain United\nStates companies, or still other criteria. In bot h cases, the imports included in the determinations\nmade under Articles 2.1 and 4.2 do not correspond to the imports included in the application of the\nmeasures, contrary to the Appellate Body's teachings.\n4074 The language of Article 2.2 of the\nAgreement on Safeguards is sufficiently broad to allow the same rationale developed so far by the\nAppellate Body to what the United States terms as \"product exclusions\". Indeed, the principle of\nparallelism is inherent in the whole Agreement on Safeguards: not just in Article 2.2 or Article 2\naltogether, but also in Articles 4 and 5. The European Communities points out that in Argentina –\nFootwear (EC) , the case in which the principle was first enounced by the Appellate Body, the\n\n4070 New Zealand's written response to the Panel question 93 at the first substantive meeting.\n4071 United States' first written submission, para. 761, referring to Appellate Body Report, US – Wheat\nGluten, para. 96.\n4072 European Communities' second written submission, paras. 488-495.\n4073 European Communities' second written submission, paras. 488-495.\n4074 Appellate Body Report, US – Line Pipe, para. 181.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nEuropean Communities had not brought a claim under Article 2.2 of the Agreement on Safeguards.\nRather, it had relied on the logical continuum set out in Article 2.1 and underlying the entire\nAgreement. If the Appellate Body had exclusively linked the principle of parallelism to Article 2.2, in\nfinding its violation in Argentina – Footwear (EC) it would have made findings extra petitum, i.e.\nbeyond the claims made by the complainant, contrary to its own teachings.\n4075 It is clear from the\nwording of Article 9.1 that when the drafters of the Agreement on Safeguards wanted to limit a\nprovision to certain country origin they knew how to do and actually did so. When enouncing the\nprinciple of parallelism the Appellate Body had before it clear language in the Agreement on\nSafeguards referring to country-based scope limitations. Yet it did not so limit the principle of\nparallelism. It rather referred to parallelism between sources investigated and sources covered by the\nmeasures.\n4076 4077\n7.1746 The European Communities further points out that there are other WTO texts where the term\n\"source\" is employed in a broader sense than the term \"origin\" or \"country of origin\". Thus, for\nexample, the Illustrative List of TRIMS annexed to the Agreement on Trade-–Related Investment\nMeasures mentions as a TRIM \"the purchase or use by an enterprise of products of domestic origin or\nfrom any domestic source\".\n4078 Also, in the Anti-Dumping Agreement, the reference to \" sources\nfound to be dumped\" in Article 9.2 is a reference to sources of supply, not to countries of origin. If\nthe Panel were to accept the US-created labels such as \"scope parallelism\" and \"product exclusions\",\nit would enable the United States, next time it takes a safeguard measure, to carefully fashion its\n\"product exclusions\" to cover even all products from Canada, or Mexico, or Israel, or Jordan, or all of\nthem together, and then claim that, because it achieved this result through what it terms \"product\nexclusions\", it is not subject to the principle of parallelism. It would be too easy indeed to circumvent\nthe principle of parallelism.\n7.1747 Similarly, for China, the parallelism requirement contained in Article 2.1 and 4.2 of the\nAgreement on Safeguards is also relevant to the practice of excluding certain products that were\nincluded in the injury determination from the applic ation of the measure. There is nothing in WTO\ncase law to suggest that the requirement of parallelism should be limited to the sources of imports.\nThe basic rationale is the same. A safeguard measure should only be applied to products if the data\nrelating to increased imports of those products meets the relevant threshold of \"increased imports\",\nand if the data relating to those products shows that the increased imports are causing serious injury a\nsafeguard measures can be imposed on those same products.\n4079 China disagrees with the United\nStates which considers that if the products covered by the injury determination are broader than the\nproducts covered by the measure itself, the measure should be viewed as less restrictive and therefore\nconsistent with Article 5.1 of the Agreement on Safeguards, and with the spirit of the WTO overall.\nIn fact, China considers that the proportionality requirement of Article 5.1 does not allow an authority\nto reduce the scope of application of a measure comp ared to its scope of investigation, and that the\nparallelism requirement fully applies to the scope of products. China adds that the only solution\nlegally possible to exclude, from the scope of application of measures, products included in the scope\nof investigation, would possibly to rely on the notion of \"public interest\" contained in Article 3.1 of\nthe Agreement on Safeguards. However, this would require reasoned and adequate explanation in\n\n4075 Appellate Body Report, India – Patents (US) , para. 92, where the Appellate Body concluded that\n\"[t]he jurisdiction of a panel is established by that panel's terms of reference, which are governed by Article 7 of\nthe DSU. A panel may consider only those claims that it has the authority to consider under its terms of reference.\"\n4076 Appellate Body Report, Argentina – Footwear (EC), paras. 113-114.\n4077 European Communities' written reply to Panel question No. 62 at the second substantive meeting.\n4078 Illustrative List, para. 1(a) (emphasis added).\n4079 China's second written submission, paras. 313-314.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\naccordance with Article 3.1 but, according to China, this has never been forthcoming from the United\nStates.4080\n7.1748 In contrast, Japan contends that the parallelism obligation applies only to sources subject to\nthe investigation, not to specific products. Curren t jurisprudence on parallelism is limited to sources,\ni.e. countries, and not products. The fundamental textual basis for the Appellate Body's interpretation\nof the parallelism requirement in all of the disputes addressing this issue to date is Article 2.2. In\nUS – Wheat Gluten, the Appellate Body held that Articles 2.1 and 2.2, read in concert, create the\nrequirement stating: \"[t]o include imports from all sources in the determination that increased imports\nare causing serious injury, and then to exclude imports from one source from the application of the\nmeasure, would be to give the phrase 'product being imported' a different meaning in Articles 2.1 and\n2.2 of the Agreement on Safeguards. In Article 2.1, the phrase would embrace imports from\nall sources whereas, in Article 2.2, it would exclude imports from certain sources. This would be\nincongruous and unwarranted\".\n4081 Article 2.2, in setting the general MFN rule for safeguard\nmeasures, is first and foremost aimed at addressing the source of imports, and together with Articles\n2.1 and 4.2, requires that injury and remedy be based on the same universe of sources. Indeed, in\nJapan's view, if the products covered by the injury determination are broader than the products\ncovered by the measure itself, the measure is less restrictive than it would be otherwise, which is\nconsistent with the purpose of Article 5.1. It should be noted that Article 5.1 provides the maximum\nlimit of the protection. A WTO Member can lessen the degree of protection, within its discretion, by\nnarrowing the scope of products subject to a safeguard measure. Moreover, Article 3.1 reads\n\"exporters and other interested parties could present evidence and their views…as to whether or not\nthe application of a safeguard measure would be in the public interest\". This implies that the\nAgreement on Safeguards allows Members to exercise discretion to take into consideration a broad\nrange of economic interests other than that of the injured domestic industry. Indeed, during the course\nof an investigation the competent authority should gather information on such other interests so that it\ncan inform the final decision. In some cases, a portion of the products subject to a safeguard measure\ncould be essential to maintaining the competitiveness or high-quality of products produced by\ndownstream industries in an importing country. If damage to such downstream industries outweighs\nthe benefit enjoyed by the domestic industry producing products which are generally like or directly\ncompetitive with the imports, then a small part of the imported products could be excluded from the\nmeasure for the sake of the public interest. This is particularly true in this case, as restrictions on steel\nimports can have extensive negative effects on United States industrial users. It is important to\nunderstand that the product exclusions issued by the United States in this particular case apply on an\nMFN basis. Hence there is no discrimination between countries, either de jure or de facto . If\nproducers in other countries are able to produce and ship to the specification as set forth in the\nexcluded product definition, they are entitled to reap the benefits of that exclusion. Indeed, this is\nwhy some requesters have strenuously objected to any quantity restrictions being placed on their\nexclusions.\n4082 Japan also finds it odd that a country whose exporters have benefited from exclusions\nwould now find fault with this limited method by which the United States has tried to liberalize the\nmeasure. Yet, the exclusions in themselves do not absolve the United States from abiding by its\nobligations under the Agreement. The fact that a limited set of products are not subject to the measure\ndoes not change this fundamental fact.\n4083\n\n4080 China's second written submission, paras. 342-344.\n4081 See Appellate Body Report, US – Wheat Gluten, para. 96 (emphasis original); see also Appellate\nBody Report, US – Line Pipe, para. 180.\n4082 Japan's second written submission, paras. 191-194; Japan's written reply to Panel question No. 92\nat the first substantive meeting.\n4083 Japan's written reply to Panel question No. 93 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1749 Similarly, Brazil submits that product exclusions are addressed by Article 5.1,which limits a\nremedy to the extent necessary to prevent or remedy serious injury and to facilitate adjustment.\nAuthorities are at liberty to adjust the scope of th e remedy to ensure that it is limited to the extent\nnecessary to prevent or remedy serious injury. Article 2.2 is only relevant in that exclusions must be\non an MFN basis.\n4084 Korea also does not agree with the position of New Zealand concerning \"scope\nparallelism\". In Korea's view, parallelism in Articles 2.1 and 2.2 of the Agreement on Safeguards\nrefer to sources of imports. National authorities always retain the ability not to impose safeguard\nmeasures even when conditions for safeguard relief have been met. So long as the exclusion of\ncertain products is done on an MFN basis, the fact that certain products are excluded from a measure\nis not in itself a violation of parallelism. Indeed, to contend the opposite is tantamount to requiring\nthe United States to impose a measure that is greater than it knows to be necessary.\n4085 Korea also\nargues that product exclusions are not addressed by Article 2.2 since that Article deals with the MFN\nrequirement concerning product sources.4086\n7.1750 New Zealand submits that Article 2.1 provides that a Member can only apply a safeguard\nmeasure to \"a product\", if \"such product\" meets the conditions relating to increased imports, causation\nand serious injury. The purpose of parallelism is to ensure that the products subject to the safeguard\nmeasure have themselves met the conditions necessary to justify the application of that measure.\nWhere, as a result of exclusions, the products to which the safeguard measures apply no longer meet\nthe conditions of Article 2, then there is no justification under the Agreement for the application of a\nsafeguard measure.\n4087 New Zealand recalls that the exclusions process has \"resulted in the exclusion\nof approximately one-quarter of covered steel imports from the safeguards investigation\". 4088\nAccordingly, the excluded products represent a very substantial portion of the total imports\nconsidered by the USITC, which provided the basis for the United States imposition of a safeguard\nmeasure. In relying on Article 5.1 in defence, the United States appears to be admitting that certain\nproducts – around one quarter of the total – that they had counted in their determination of increased\nimports causing injury were in fact not in any way responsible for that injury. Indeed, the published\ncriteria for excluding products from the safeguard measure – which focus on whether or not\ncompetitor domestic products exist – suggests that these products could not have caused serious injury\nin the first place. The USTR Federal Register Notice relating to exclusions reads in relevant part:\n4089\n\"Each request will be evaluated on a case-by-case basis. USTR will grant only those\nexclusions that do not undermine the objectives of the safeguard measures. In\nanalysing the requests, USTR will consider whether the product is currently being\nproduced in the United States, whether substitution of the product is possible,\nwhether qualification requirements affect the requestor's ability to use domestic\nproducts, inventories, whether the requested product is under development by a\nUnited States producer who will imminently be able to produce it in marketable\nquantities and any other relevant factors.\"\n7.1751 New Zealand appreciates the candour with which the United States, having utilized imports of\nsuch products to establish the necessary thresholds for the imposition of a safeguard measure, now\nadmits that such products were apparently all along not causing injury. This would of course also\nappear to carry the implication that such products should have been excluded from the \"like product\"\n\n4084 Brazil's written reply to Panel question No. 59 at the second substantive meeting.\n4085 Korea's written response to Panel question No. 92 at the first substantive meeting.\n4086 Korea's written reply to Panel question No. 62 at the second substantive meeting.\n4087 New Zealand's written reply to Panel question No. 62 at the second substantive meeting.\n4088 United States' first written submission, para 40.\n4089 Federal Register Vol. 67 No 75, 18 April 2002 (Exhibit CC-19).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ngroupings utilized by the United States; further underlines the flawed nature of the United States\ncausation analysis which proceeded on the basis that these products like all others included in the like\nproduct category caused serious injury; and demonstrates the inherently flawed nature of the United\nStates approach to remedy. The United States could have excluded such products from its\ndetermination at the outset of its investigation on the basis that they were not like products. However,\nas with FTA imports, it did not do so and included them in its investigation and subsequent\ndetermination. Accordingly, to the extent that the United States may wish after making this\ndetermination to exclude such products, just as in the case of FTA exclusions, the United States is\nobliged to provide a \"reasoned and adequate explanation\" that establishes \"explicitly\" that imports of\nnon-excluded products taken alone meet the conditions for the imposition of a safeguard measure.\nThe United States has at no time made any attempt to provide such an explanation.\n4090\n7.1752 New Zealand insists that there is no basis in terms of logic or principle for a distinction\nbetween \"scope\" parallelism and \"source\" parallelism. The Appellate Body's decisions in US – Wheat\nGluten and US – Line Pipe were focussed on exclusions of products by source, but the reasoning and\nlanguage used in those decisions must logically extend also to exclusions of product types. The basis\nof the Wheat Gluten decision, as confirmed by US – Line Pipe , is that the phrase \"product being\nimported\" has the \"same meaning … in both Articles 2.1 and 2.2\". 4091 In support, New Zealand relies\non the broad principle enunciated by the Appellate Body which counters any suggestion that the\nrestrictive focus on sources was deliberate: \"… the imports included in the determinations made under\nArticles 2.1 and 4.2 should correspond to the imports included in the application of the measure,\nunder Article 2.2\".\n4092 The Appellate Body also saw the concept as one relating broadly to the issue\nof parallelism between the \"scope\" of the investigation and of the measure in US – Wheat Gluten ,\nwhere it rejected the United States' argument based on Article 9.1 of the Agreement on Safeguards as\nirrelevant. The United States argument that exclusion of products \"is no different from a tariff rate\nquota or quota, in that some imports covered by the determination of serious injury are unaffected by\nthe measure, while others are\"\n4093 is nonsensical. In the case of a tariff-rate quota or quota, the\nmeasure is still imposed on the basis of a determination of increased imports causing injury of the\nproducts to which the tariff-rate quota or quota is subsequently applied. The situation flowing from\nproduct exclusions is quite different – it results in a situation where safeguard measures are imposed\non a certain group of products on the basis of a determination based on an analysis of imports of a\nmuch larger group of products. This situation is one in which the legal foundation for the very\nimposition of the safeguard measure is flawed since the data analysed to substantiate the measures\nrelates to products that do not correlate to the products that are actually subject to the safeguard.\n4094\n7.1753 The United States insists that Article 5.1 clearly allows a Member to apply a safeguard\nmeasure less than the extent necessary to remedy or prevent serious injury, as long as it complies with\nthe MFN obligation under Article 2.2. Thus, a Member has discretion to exclude particular items\nentirely from the measure or to grant a limited quant ity exclusion with regard to particular items.\nHowever, New Zealand argues that the Appellate Body reports stand for the \"broad principle\" of\nscope parallelism. The United States submits that no such principle exists. Therefore, either\ncomplete exclusion (or reduced application of a safeguard measure) to particular items within the like\nproduct is consistent with the Agreement on Safeguards. That does not suggest that exclusion or\nreduced application is required. complainants essentially accept that exclusions are not mandatory.\n4095\n\n4090 New Zealand's second written submission, para.3.157-3.160.\n4091 Appellate Body Report, US – Wheat Gluten, para 96 (emphasis in original).\n4092 Ibid.\n4093 United States' first written submission, para 766.\n4094 New Zealand's second written submission, paras. 3.161-3.163.\n4095 United States' second written submission, paras. 206-209.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nArticle 2.2 states that \"[s]afeguard measures shall be applied to a product being imported irrespective\nof its source\". This text places a limitation on application of a safeguard measure, namely that it be\napplied without regard to the source of the product. In this sense, source can have only one meaning –\nreferring to the origin of the product in question.\n4096 This limitation is unrelated to the type of the\nproduct in question. Thus, it does not affect a Memb er's discretion to apply the measure at different\nlevels to different types of the product, as long as the measure does not differentiate among types of\nproduct based upon their source.4097\n7.1754 Norway argues that if the decision to exclude a particular product is based on an incorrect\ndefinition of the imported product, i.e. on artificial groupings of different products as in the present\ncase, then the whole analysis is flawed and so also the product exclusion. This is particularly so as the\noverbroad categories will have led to injury findings in respect of a broader category of products.\nWhen some products within the category is later excluded their contribution to the \"increased\nimports\" and \"serious injury\" will still be factored into the remedy decision for the remaining products\n- making the remedy exceed the level permitted by Article 5.1. If a proper definition of the imported\nproduct has been performed, then any product exclusion will relate to the \"whole\" of the product as\nthere are no \"sub-products\", meaning that the remedy is set at zero. This is permitted.\n4098\n7.1755 The United States also notes that the European Communities' position on this question\nremains self-contradictory. European Communities steel producers continue to request exclusions\nfrom the steel safeguard measures. The European Communities itself has never suggested to the\nadministrative authorities considering these requests th at they are inconsistent with WTO rules. Nor\nhas the European Communities requested the United States to revoke exclusions previously granted at\nthe request of European Communities steel producers, which would be the fastest way to secure the\nremoval of exclusions that the European Communities professes to find inconsistent with WTO\nrules.4099\n7.1756 The European Communities disagrees with the view that the fact that a Member may have\nexpressed a position in respect of product exclusions affects its right to claim their illegality. 4100 That\nright is nowhere restricted under the Agreement on Safeguards and, in the absence of such a\nrestriction, a WTO Member has broad discretion in deciding whether to bring a claim against another\nMember under the DSU.4101 Product exclusions, moreover, are not granted to WTO Members. Even\nassuming that product exclusions were a benefit accruing to Members, quod non , admitting that\nsoliciting such exclusions would take away a Member's right to challenge them as WTO-incompatible\n\n4096 The New Shorter Oxford English Dictionary defines \"source\" as \"[t]he derivation of a material\nthing; a place or thing from which something material is obtained or originates.\" The New Shorter Oxford\nEnglish Dictionary, p. 2957. The dictionary gives as an example of this definition \"Transylvania was the oldest\nsource of gold in the classical world.\" Ibid.\n4097 United States' written reply to Panel question No. 62 at the second substantive meeting.\n4098 Norway's written reply to Panel question No. 58 at the second substantive meeting.\n4099 United States' written reply to Panel question No. 62 at the second substantive meeting.\n4100 United States' first written submission, para. 760. The United States refers to the press article in its\nExhibit US-59 in support of its contention. The European Communities would observe that Commissioner\nLamy's statements reported in the press article were made while clarifying that exclusions \"would not solve the\nunderlying problem of the illegality of the United States safeguard, which is litigated in the World Trade\nOrganization\" (Ibid., p. 2, in fine). The exclusions were discussed in the context of the European Communities'\nevaluating whether or not to exercise its right, under Article 8.3 of the Agreement on Safeguards, to suspend\nequivalent concessions to the value of products which were granted safeguard relief in the absence of an\nabsolute increase in imports, after the United States had refused the European Communities requests for tariff\ncuts as the appropriate form of compensation under Article 8.\n4101 Appellate Body Report, EC – Bananas III, para. 135.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwould be like asserting that the victim of a usurer cannot denounce him because she asked a delay or\nreduction in the repayment of usurious interests.4102\n3. The findings required\n(a) General discussion\n7.1757 The European Communities, China, Norway and Switzerland submit that in order to comply\nwith the parallelism requirement, competent authorities must establish, through an analysis of the\nimports that are covered by the safeguard measures, that these are being imported in increased\nquantities and that they are causing serious injury.4103 Japan, China, Switzerland and Norway add that\nif a WTO Member decides to exclude a country from the application of a safeguard measure, it must\nestablish \"explicitly\" that increased imports from sources covered by the measure satisfy the\nconditions set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.\nFurthermore, the WTO Member must provide a \"reasoned and adequate explanation\" of how the facts\nsupport such a determination.\n4104\n7.1758 China adds that the findings of the competent authorities must be based on a sufficient\n\"reasoned and adequate explanation\" of how the facts support the determination, in light of the\nconditions for the application of a safeguard measure set out in Articles 2.1 and elaborated in\nArticle 4.2 of the Agreement on Safeguards. In other words, it is not sufficient to indicate \"explicitly\"\nthat the non-NAFTA imports \"alone \" caused injury in order to comply with the obligation of\n\"parallelism\". The following elements should, at le ast, be contained in the findings of the competent\nauthorities: (i) evaluation of each of the factors listed in Article 4.2(a) of the Agreement on\nSafeguards (i.e. the rate and amount of the increase in imports of the product concerned in absolute and\nrelative terms, the share of the domestic market taken by increased imports, changes in the level of sales,\nproduction, productivity, capacity utilization, profits and losses, and employment)4105; (ii) evaluation of\nother factors relevant to the situation of the industry concerned 4106; relationship between the\nmovements in imports (volume and market share) and the movements in injury factors 4107; and (iii) a\ndetermination whether \"the causal link\" exists between increased imports and serious injury, and\nwhether this causal link involves a genuine and substantial relationship of cause and effect between\nthese two elements.4108 4109\n7.1759 Korea recalls that the Appellate Body in US – Line Pipe further clarified what a complainant\nis required to show to make a prima facie case that a safeguard measure has been imposed in violation\nof such requirement. The Appellate Body said that it was enough to make a prima facie case of the\nabsence of parallelism to demonstrate that the USITC considered imports from all sources in its\ninvestigation and that that exports from Canada and Mexico were excluded from the safeguard\nmeasure at issue.\n4110 Then, it is up to the imposing party to show that the competent authorities have\nestablished explicitly, through a reasoned and adequate explanation, that imports from non-excluded\n\n4102 European Communities' second written submission, paras. 488-495.\n4103 European Communities' first written submission, para. 603.\n4104 Japan's second written submission, para. 184; China's first written submission, para. 563;\nSwitzerland's first written submission, para. 328; Norway's first written submission, paras. 367 and 371.\n4105 See Appellate Body Report, Argentina – Footwear (EC), para. 136.\n4106 See Appellate Body Report, Argentina – Footwear (EC), para. 136.\n4107 See Appellate Body Report, Argentina – Footwear (EC), para. 144.\n4108 See Appellate Body Report US – Wheat Gluten, para. 69.\n4109 China's first written submission, paras. 587 and 589.\n4110 Appellate Body Report, US – Line Pipe, para. 187.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsources alone were correctly found to support affirmative determinations under Articles 2 and 4 of the\nAgreement on Safeguards.4111 4112\n7.1760 The United States contends that the text of the Agreement on Safeguards, as interpreted by\npanels and the Appellate Body, does not require separate findings specific to non-NAFTA imports for\nall the Article 4.2 factors. The sole requirements under Articles 3.1 and 4.2(c) are for the competent\nauthorities to publish \"a report setting forth their findings and reasoned conclusions reached on all\npertinent issues of fact and law\", and providing \"a detailed analysis of the case under investigation as\nwell as a demonstration of the relevance of the factors examined\". The Agreement does not require\nthe use of a particular structure or format for the report, or a particular analysis. As the Appellate\nBody concluded in US – Line Pipe : \"we are not concerned with how the competent authorities of\nWTO Members reach their determinations in applying safeguard measures. The Agreement on\nSafeguards does not prescribe the internal decision-making process for making such a determination.\nThat is entirely up to WTO Members in the exercise of their sovereignty. We are concerned only with\nthe determination itself … \".\n4113 4114\n7.1761 In response, Japan asks how else – without separate findings specific to non-NAFTA imports\nfor all Article 4.2 factors – would a Member ever know that the imports subject to the safeguard\nmeasure are, in fact, the ones causing serious injury if no causation evaluation is completed for these\nimports by the competent authority. Japan submits that the United States expects the complainants to\nsimply accept that the examination of the various factors having an impact on the domestic industry\nwould have produced the same results had the USITC considered them in comparison with non-\nNAFTA imports. Even more appalling, according to Japan, is the United States' reasoning for its\nrepeated failure to comply with the parallelism re quirement. It boldly believes that it only needs to\nstate explicitly the conclusion that non-NAFTA imports alone caused or threatened to cause serious\ninjury, and does not need to provide an explanation for such findings including the results of each step\nof the analytical process leading to that conclusion.\n4115 4116\n7.1762 China argues that, far from being redundant, separate findings specific to non-NAFTA\nimports for all the Article 4.2 factors – as an other factor of injury – was the only way for the United\nStates to comply with the WTO requirements, i. e. with the need to show that non-NAFTA imports\nwere able, alone, to cause serious injury to the United States industry.4117\n7.1763 Japan adds that \"[t]o be explicit, a statement must express distinctly all that is meant; it must\nleave nothing merely implied or suggested; it must be clear and unambiguous\". 4118 As the Appellate\nBody found in US – Wheat Gluten and US – Line Pipe , a mere recitation of the facts without a\ndetailed analysis of whether the non-NAFTA imports alone cause serious injury is insufficient to limit\nthe application of the measure to any subset of total imports.4119\n7.1764 The United States points out that the complainan ts return repeatedly to the argument that the\nUSITC's analysis of non-NAFTA imports does no t meet the Appellate Body's requirement in US –\n\n4111 Appellate Body Report, US – Line Pipe, paras. 187-188 and 198.\n4112 Korea's second written submission, paras. 207-208.\n4113 Appellate Body Report, US – Line Pipe, para. 158.\n4114 United States' first written submission, paras. 749-750.\n4115 United States' first written submission, paras. 752-753; United States' written replies to the\nquestions from the Parties, para. 18 (in response to a question posed by the European Communities).\n4116 Japan's second written submission, paras. 185-190.\n4117 China's second written submission, para. 318.\n4118 Appellate Body Report, US – Line Pipe, para. 194.\n4119 Japan's first written submission, para. 304.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nLine Pipe to provide \"a reasoned and adequate explanation that establishes explicitly\" that non-FTA\nimports caused serious injury.4120 This focus improperly elevates the Appellate Body's description of\nan obligation above the words of the text. Articles 3 and 4 do not require an \"explicit\" finding, and\nthe Appellate Body has never related such a requirement to the text of the Agreement on Safeguards.\nNor is \"explicitness\" necessary to provide the findings and reasoned conclusions required under\nArticle 3.1, or the \"detailed analysis\" required under Article 4.2(c). Appellate Body reports do not\nmake an \"explicit\" explanation a separate requirement. The term first appeared in the context of\nparallelism in US – Wheat Gluten , in the finding that the USITC's analysis of imports from Canada\ndid not provide an \"explicit determination relating to increased imports, excluding imports from\nCanada\".4121 The Appellate Body then used the same term in US – Line Pipe to describe its finding\nthat the USITC's more detailed analysis in that case still did not establish explicitly that increased\nimports from non-NAFTA sources alone caused serious injury. 4122 In both cases, it used the term in\nconnection with the absence of a \"clear and unambiguous\" statement that increased imports from non-\nNAFTA sources alone caused serious injury. It then inquired as to whether the explanations of the\nstatements that the USITC did make provided a \"reasoned and adequate explanation\", but did not\nrequire that the explanation be \"explicit\". Thus, the Appellate Body's use of the term \"explicit\" is best\nunderstood as referring to the competent authorities' formal conclusion as to whether non-FTA\nimports have caused serious injury, and does not require an \"explicit\" recitation of the results of each\nstep of the analytical process leading to that conclusion.\n4123 4124\n7.1765 New Zealand does not agree that the Appellate Body guidance can be \"best understood\" in\nthis way. For this would reduce the requirement for a \"reasoned and adequate explanation\" to a\nsimple requirement for a conclusion by way of mere assertion that even if FTA imports had not been\nincluded, the result would have been the same. This is of course precisely the basis on which the\nUnited States seeks to justify itself in relation to NAFTA imports. It is also precisely the basis on\nwhich the Appellate Body in Korea – Line Pipe rejected footnote 168 of the USITC Report as a\n\"reasoned and adequate explanation of how the facts support [the] determination\". 4125 It should be\nrecalled that the Appellate Body noted in that case that the explanation must \"leave nothing merely\nimplied or suggested; it must be clear and unambiguous\".4126 Further, as the Appellate Body found in\nthat case as well as in US – Wheat Gluten, a mere recitation of the facts without a detailed analysis of\nwhether the non-NAFTA imports alone cause serious in jury is insufficient to apply the measure to\nless than total imports.4127\n7.1766 Similarly, the European Communities argues that the United States engages in a series of\nrather extraordinary propositions many of which fly in the face of the Appellate Body's reports\naddressing the principle of parallelism. 4128 It is true that the Agreement on Safeguards does not\ncontain the words \"explicit findings\", it does not ev en contain the word parallelism altogether. Yet,\n\n4120 China's first written submission, paras. 588-89; Japan's first written submission, para. 316;\nNew Zealand's first written submission, paras. 4.178-179; Switzerland's first written submission,\nparas. 355-357.\n4121 Appellate Body Report, US – Wheat Gluten, para. 98 (emphasis in original).\n4122 Appellate Body Report, US – Line Pipe, para. 194.\n4123 The Appellate Body has found with regard to a finding of causation that \"[t]hese steps are not legal\n'tests' mandated by the text of the Agreement on Safeguards, nor is it imperative that each step be the subject of\na separate finding or a reasoned conclusion by the competent authorities.\" Appellate Body Report, US – Lamb,\npara. 178.\n4124 United States' first written submission, paras. 752-753.\n4125 Appellate Body Report, US – Line Pipe, para 195.\n4126 Ibid., para. 194.\n4127 New Zealand's second written submission, para. 3.151.\n4128 European Communities' second written submission, para. 452.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe \"parallelism\" requirement is clearly discernible from the text, and the Appellate Body has clarified\nthat such legal principle does exist and that it entails that there must be an explicit finding and a\nreasoned explanation that imports covered by a measure, these alone, satisfy the requirements of\nArticles 2 and 4 of the Agreement on Safeguards. The absence of expressed findings and/or reasoned\nexplanations was precisely the flaw that the Appellate Body found in the measures at issue in US –\nLine Pipe .\n4129 The United States also insists that the Appellate Body did not require that the\nunderlying justification for conclusions relating to non-excluded imports be explicit. The European\nCommunities submits, however, that it fails to show how an explanation which is not even spelled out\nmay really be adequate in the light of the Appellate Body's clear indications and its conclusion that\nthe sum of findings on all imports and findings on Canada and Mexico does not yield a finding on \"all\nimports minus NAFTA\".\n4130 In fact, there is not even an implicit finding.4131\n7.1767 Switzerland also argues that the United States plays with words and in any case did not even\nprovide an adequate and reasoned explanation es tablishing that non-FTA imports caused serious\ninjury. The Appellate Body4132 said that the United States had to demonstrate that the USITC provided\na reasoned and adequate explanation that establishes explicitly that imports from non-NAFTA sources\nsatisfied the conditions for the application of a safeguard measure.4133\n(b) Findings made by the USITC in this case\n(i) Imports from free-trade areas\n7.1768 The European Communities argues that there is no consideration in the main USITC Report\nof the need to ensure parallelism between the findings of increased imports, serious injury and the\nmeasures to be imposed. There is however a belated, but inadequate, attempt to take into account the\nprinciple of parallelism in the Second Supplementary Report.4134\n7.1769 According to the European Communities, the explanation in the Second Supplementary\nReport relates to the exclusion of Canada and Mexico from the scope of the safeguard measure in\nrelation to six of the ten products (i.e. all excluding tin mill products, rebar, stainless steel rod and\nstainless steel wire). With respect to imports from Israel and Jordan, the USITC merely \"indicates, in\naccord with its findings in the Views on Remedy, that exclusion of imports from Israel and Jordan\nwould not change the conclusions of the Commission or individual Commissioners\".\n4135 4136\n7.1770 The European Communities submits that the explanations in the Second Supplementary\nReport are insufficient to repair the failure to respect the principle of parallelism in the main\nReport.4137 A finding that imports from Canada or Mexico, individually, do not constitute a substantial\nshare or did not contribute importantly has no relation with the issue of whether non-excluded imports\nalone meet the standards for imposition of safeguard measures. Furthermore, the references to the\n\n4129 Appellate Body Report, US – Line Pipe, para. 196.\n4130 Appellate Body Report, US – Line Pipe, para. 196.\n4131 European Communities' second written submission, paras. 454-457.\n4132 Appellate Body Report, US – Line Pipe, para. 188\n4133 Switzerland's second written submission, para. 105.\n4134 European Communities' first written submission, paras. 604-605.\n4135 Second Supplementary Report, p. 4.\n4136 European Communities' first written submission, paras. 606-608.\n4137 European Communities' first written submission, para. 613.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC October 2001 Report upon which the United States relies do not consider the most recent\nimport trends (full 2001).4138\n7.1771 As regards tin mill products, rebar, stainless steel rod and stainless steel wire, the European\nCommunities submits that the Panel can already conclude that the United States violated Articles 2.1\nand 4.2 of the Agreement on Safeguards on the basis that the United States has not even made a\nfinding that those particular imports covered by the safeguard measures alone fulfilled the conditions\ncontained in the Agreement.4139\n7.1772 According to the European Communities, the analysis provided in the Second Supplementary\nReport for the remaining six products is flawed as it suffers from the same defects as the main Report.\nFor example, it does not consider the most recent period or contain data on 2001 imports even though\nthis was available when the Second Supplementary Report was produced. In any event, there is no\ndemonstration or adequate explanation for a sudden, recent sharp and significant surge in non-\nNAFTA imports of CCFRS, hot-rolled bar, cold-finished bar, carbon and alloy fittings, stainless steel\nbar and certain tubular products.\n4140\n7.1773 Switzerland maintains that, in its original Report, the USITC unquestionably analysed the\nvarious safeguard factors based on total imports, including FTA imports. In addition, instead of\nmaking all necessary determinations on the basis of the imports that are subject to the measure, the\nUSITC simply adds the recurrent assertion that exclusion would not change the determination based\non all imports. These unfounded generalisations do not correspond to the Appellate Body's standard\nand are clearly wrong. The United States only writes about what it thinks it does not have to do, but it\ndoes not and cannot show that that it did fulfil th e WTO requirements. According to Switzerland and\nNorway, the principle of parallelism does not mean that a WTO Member can exclude whatever\nimports it wishes by saying that such exclusions would not affect the end result. As the Appellate\nBody clarified, what competent authorities have to establish is that imports from sources outside free\ntrade areas alone meet the requirements of Article 2.1 and 4.2 of the Agreement on Safeguards.\n4141\nThis means that, assuming that the exclusion of certain imports from the measure is allowed, all the\nnecessary determinations must be made – and explained in a reasoned and adequate manner – on the\nbasis of imports that are subject to the measure.\n4142 Norway adds that one consequence of this is that\ncorrect increased imports and causation analyses have to be made after the exclusion from the\ninvestigation.4143\n7.1774 In this case, the United States competent authorities' explanation relevant to the question of\nparallelism appeared in various sections of the USITC Report. Some of the discussion appeared in the\nportions of the report containing the analysis for all imports. Some of the discussion also appeared in\nthe analysis specifically pertaining to non-FTA imports in the Second Supplementary Report. These\ntwo documents were meant to be read together, as reflected in the designation of the later-prepared\nportion as \"supplemental\". The USITC's findings with regard to most of the requirements of\nArticle 4.2 appeared in the USITC's analysis of all imports. Insofar as the exclusion of FTA imports\ndid not change these findings, the USITC was not required to repeat them. For example, the\nexclusion of FTA imports did not change the shipments of the domestic producers, their employment\n\n4138 European Communities' second written submission, para. 482.\n4139 European Communities' first written submission, para. 614.\n4140 European Communities' first written submission, paras. 620, 622, 623.\n4141 Appellate Body Report, US – Line Pipe, para. 198.\n4142 Switzerland's second written submission, paras. 103-104; Norway's second written submission,\npara. 182.\n4143 Norway's second written submission, para. 182.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlevels, their profits and losses, or trends in those indicators. The Agreement on Safeguards did not\nrequire the USITC to perform these analyses again to satisfy the parallelism requirement.4144\n7.1775 The United States argues in response that in order to support its conclusions concerning non-\nNAFTA imports, the USITC Report contains for each industry: (i) a specific finding that non-\nNAFTA imports increased; (ii) a finding, in the analysis of all imports, that the industry was seriously\ninjured; (iii) findings, in the analysis of all imports, concerning the pertinent conditions of competition\nin the industry; (iv) a specific finding descri bing the causal link between the non-NAFTA imports\nand the domestic industry's serious injury; and (v) findings, in the analysis of all imports, concerning\nfactors other than imports that were alleged to cause serious injury.4145\n7.1776 The United States insists that the USITC's provision of findings and analysis concerning non-\nFTA imports, and continued reliance on portions of its analysis of all imports that remained\napplicable, was a permissible means to comply with Articles 3.1 and 4.2(c). The USITC's issuance of\nthe supplementary report after it finished its analysis of all imports does not make the supplemental\nreport an \"ex post facto analysis\". The USITC provided the response prior to the decision to apply the\nsafeguard measures, which meets the requirement under Article 2.1 of the Agreement on Safeguards\nto apply a measure \"only if that Member has determined\" that increased imports of a product are\ncausing serious injury.4146\n7.1777 The European Communities takes issue with the proposition that the scope of imports has no\nimpact on the assessment of the domestic industry situation. 4147 For one thing, the first of the factors\nthat domestic authorities must evaluate under Article 4.2(a) is precisely concerned with import trends.\nGiven the symmetry that must exist between the import data used for the determinations and the\nimports subject to a measure, clearly this means that import trends that are relevant under\nArticle 4.2(a) must be assessed exclusively on the basis of imports to be covered by the measure. 4148\nThe European Communities recalls that the USITC had made \"affirmative determinations\" (that is, it\nhad found that these imports did not meet the statutory standards for exclusion) for hot-rolled bar,\ncold-finished bar, carbon and alloy fittings, and st ainless steel bar originating in Canada and CCFRS\nand carbon and alloy stee l fittings from Mexico. 4149 To the extent that Proclamation No. 7529\nexcluded those imports from the scope of the measures 4150, it cannot have been based on the October\n2001 determinations, which did not determine that they could be excluded.4151\n7.1778 The European Communities submits that adding some ex post comments on all imports minus\nNAFTA is not tantamount to meeting the requirements of the Agreement on Safeguards in respect of\n\"all imports minus FTAs\". In other words, even the ex post conclusions in the Second Supplementary\nReport still include imports from sources – Israel and Jordan – which were later excluded from the\nsafeguard measures. Finally, there is no reasoned or adequate explanation in the USITC Report as to\nwhy making an injury finding for non-FTA imports was \"redundant\".\n4152 Further elaborating its\nargument, the European Communities adds that USITC determinations on pp. 17-18 of its Report are:\n(i) determinations on imports from all sources, or (ii) determinations on imports from Canada and (iii)\n\n4144 United States' first written submission, paras. 749-750.\n4145 United States' first written submission, paras. 778-788.\n4146 United States' first written submission, para. 751.\n4147 See e.g. United States' first written submission, para. 750; United States' written reply to Panel\nquestion No. 95 at the first substantive meeting.\n4148 European Communities' second written submission, paras. 460-463.\n4149 Proclamation No. 7529, para. 5.\n4150 Proclamation No. 7529, para. 8.\n4151 European Communities' second written submission, para. 449.\n4152 European Communities' second written submission, paras. 460-463.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfrom Mexico, individually considered. The determinations on imports from all sources are neither\nmodified nor, more specifically, turned into determinations complying with the principle of\nparallelism, by the individual determinations on imports from Canada and Mexico. Thus, even\nassuming that only imports from Canada and Mexico, and not also Israel and Jordan, had been\nexempted from the United States measures under review, those measures and their underlying\nfindings and determinations do not comply with the principle of parallelism. They remain\ndeterminations that do not establish explicitly, through a reasoned and adequate explanation, that\nimports covered by the measures, alone, were being imported in such increased quantities and under\nsuch conditions as to cause serious injury. Specifically, one cannot in any way \"subtract\" from a\ndetermination based on imports from all sources the additional determinations relating to Mexico\nand/or Canada and claim that, by implication, the result of this \"subtraction\" is a determination and an\nexplanation that satisfies the parallelism principle.\n4153\n7.1779 New Zealand argues that in its December 2001 Report, the USITC had made affirmative\nfindings that imports from both Mexico and Canada of CCFRS constituted a substantial share of total\nimports and that imports from Mexico contributed importantly to the serious injury allegedly caused\nby imports. The important role played by imports from NAFTA sources as part of the USITC's\ninvestigation into imports from all sources was quite explicit. These earlier findings are then\nstudiously avoided in the Second Supplementary Report. The failure by the USITC to explain its\nearlier findings reinforces the conclusion that the Unit ed States has failed to provide an adequate and\nreasoned explanation to support its exclusion of imports from its NAFTA partners from the\napplication of the safeguard measure. While the United States claims that the necessary analysis of\nnon-NAFTA imports is somewhere to be found in the more general analysis applicable to all imports,\nthese claims have no foundation. The USITC Report and Second Supplementary Report fail to\nevaluate the share of the domestic market taken by non-NAFTA imports and failed to evaluate other\nfactors relevant to the situation of the industry concerned. The USITC did not examine the impact\nthat NAFTA imports would have on the domestic industry if these exports were to be excluded from\nthe measure. The USITC also failed to make any finding on the relationship between the movements\nin imports (volume and market share) and the movements in injury factors, and it failed to\ndemonstrate the causal link between increased imports from non-NAFTA sources and serious injury\ninvolving a genuine and substantial relationship of cause and effect.4154\n7.1780 The European Communities recalls that, for several product groups, the USITC made\naffirmative determinations against imports from Canada and/or Mexico4155 – that is, it determined that\nimports from Mexico and/or Canada did \"account for a substantial share of total imports\" and did\n\"contribute importantly to the serious inju ry\" pursuant to Section 311(a) of the NAFTA\nImplementation Act. 4156 At any rate, the individual determinations on imports from Mexico and\nCanada are irrelevant to show compliance with the principle of parallelism because they are based on\na standard – that in Section 311(a) of the NAFTA Implementation Act – that is quite different from\nthe WTO ones. Under WTO rules, all imports must be counted (or excluded from the beginning), not\nonly the first five exporting countries, and all injury causes must be evaluated. A further reason is\nthat the determinations of 22 October 2001 do not disaggregate the import data from Israel and Jordan\n\n4153 European Communities' second written submission, paras. 466-467; European Communities'\nsecond oral statement on Parallelism, para. 4.\n4154 New Zealand's second written submission, paras. 3.152-3.153.\n4155 These are the product groups listed at para. 449 of the European Communities' second written\nsubmission (for Canada: Hot-Rolled Bar, Cold-Finished Bar, Carbon and Alloy Fittings, Stainless Steel Bar; for\nMexico, Certain Flat Steel and Carbon and Alloy Steel Fittings).\n4156 Quoted in the European Communities' second written submission, para. 444, footnote 349.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(in fact, not even the Second Supplementary Report does). 4157 In conclusion, all one is left with (in\nthe sense of relevant determinations) after examining the original USITC Report are determinations\nbased on imports from all sources.\n4158\n7.1781 The United States responds that a consequence if the European Communities' argument were\nto be upheld would be that competent authorities could never revise their report, once issued, or\nprovide additional information if the Member evaluating application of a safeguard measure\nconsidered that additional information related to their determination would be useful. Indeed, if the\nEuropean Communities were correct, the competent authorities could not even correct ministerial\nerrors in the report. Nothing suggests that the Ag reement on Safeguards places such a straitjacket on\nthe competent authorities.4159\n7.1782 The European Communities submits that the United States' position is contradictory. On the\none hand, the United States argues that all the relevant determinations are contained in the USITC\nReport of 22 October 2001. Clearly these determinations do not relate to non-FTA imports alone.\nTherefore, they do not support the measures taken by Proclamation No. 7529. On the other hand, the\nUnited States appears to contradict itself because, in its attempt to show that it complied with the\nparallelism requirement, it refers to information that was \"reported\" by the USITC on 4 February\n2002 and appears to treat it as if it were new findings able to justify the safeguard measures.\n4160\nShould the United States argue, that these additional \"reports\" are in fact new determinations that the\nconditions for the application of safeguard measures are met, and should the Panel accept them as\ndeterminations or additional explanation relevant to the October 2001 determinations, the European\nCommunities submits that they are also inadequate because they disregard 2001 data, and fail to\nconsider excluded imports in the causation analysis.\n4161 The determinations contained on pp. 1 and\n17-18 of the USITC Report of 22 October 2001 include no \"increased imports\" determinations\nexclusively referring to imports from excluded sour ces. On the contrary, they concern imports from\nall sources. The legal conclusions of the competent authorities are that increased imports from all\nsources caused injury to the United States industry. In view of these determinations, the measures\ntaken by the President, excluding imports from certain sources, are without legal basis and cannot\nstand.4162\n(ii) Demonstration required with respect to non-excluded imports\n7.1783 Norway argues that NAFTA imports were used by the United States to justify a finding both\nof \"increased imports\" and \"serious injury\". 4163 Japan submits that non-NAFTA imports must be\nanalysed on their own. In other words, it is not possible to make any conclusions about non-NAFTA\nimports based on analyses of total imports on the one hand and NAFTA imports on the other. 4164\nSimilarly, China argues that there must be a reasoned and adequate explanation that establishes\nexplicitly that imports from non-FTA partners satisfied the conditions for the application of a\nsafeguard measure, and in particular that injury was not due to FTA partners, treated as 'other\n\n4157 European Communities' second written submission, paras. 466-467; Oral statement presented by\nthe European Communities on Parallelism at the second substantive meeting of the Panel, para. 4.\n4158 European Communities' written reply to Panel question No. 59 at the second substantive meeting.\n4159 United States' written reply to Panel question No. 59 at the second substantive meeting.\n4160 United States' written reply to Panel question No. 129, para. 239; United States' first written\nsubmission, para. 751.\n4161 European Communities' second written submission, paras. 439-440.\n4162 European Communities' second written submission, paras. 441-442.\n4163 Norway's written reply to Panel question No. 59 at the second substantive meeting.\n4164 Japan's written reply to Panel question No. 59 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfactors'.4165 Likewise, Korea submits that the Appellate Body has made clear that, in order to satisfy\nthe parallelism requirement, the United States must meet all the conditions of Article 2.1 on the basis\nof the same imports that are subject to the measure under Article 2.2. 4166 Therefore, all conditions of\nArticles 2.1 and 4.2 of the Agreement on Safeguards must be satisfied before the parallelism analysis\nis complete. Imports from non-NAFTA countries must be clearly and unambiguously shown to\nsatisfy all the conditions of Articles 2.1 and 4.2. It also follows directly from that analysis that\nimports from NAFTA countries thus become a potenti al \"other factor\" of injury. Finally, Korea\nstresses that \"mere assertions\" cannot substitute for the complete and detailed analysis 4167 required by\nArticles 3 and 4 of the Agreement on Safeguards.4168\n7.1784 Norway argues that the USITC's general discussion of causation, and the role of alternative\ncauses, never once addressed the role of non-NAFTA imports as distinguished from all imports. No\nattempt at factual analysis for non-NAFTA imports was ever made. The response to USTR request\nwas no better. Norway argues that there was no factual analysis, only the simple statement that \"the\nsame considerations that led us to conclude that increased imports of CCFRS are a substantial cause\nof serious injury to the domestic industry are also applicable to increased imports of CCFRS from all\nsources other than Canada and Mexico\".\n4169 4170 According to Norway, it should be clear that such a\nstatement does not fulfil the requirements of the Agreement on Safeguards.4171\n7.1785 The United States admits that the discussion the USITC provided in its analysis of all imports\nconcerning the issues of increased imports and causal link would not automatically be applicable to\nnon-NAFTA imports. However, for each pertinent domestic industry, the USITC provided a\nparticularized discussion of increased imports and causal link for non-NAFTA imports. The USITC\nfrequently found in its analysis of increased imports that overall import trends were the same for non-\nNAFTA imports as they were for all imports. In such circumstances, the USITC's analysis of causal\nlink for non-NAFTA imports focused on the same periods as did the analysis for all imports. This\nfollows from the point that the nature and timing of the serious injury suffered by the domestic\nindustry were the same regardless of the set of imports examined. Additionally, in its discussion of\ncausal link for all imports, the USITC made findings concerning factors other than imports that were\nalleged to cause serious injury. As discussed further below, these findings often focused on data\npertaining to the United States industry or the United States marketplace as a whole. Such findings\nwere equally applicable with respect to an analysis pertaining to non-NAFTA imports as they were to\nan analysis pertaining to all imports. This consequently was another set of findings that the USITC\nwas not obliged to repeat in the sections of its report dealing specifically with non-NAFTA\nimports.\n4172\n7.1786 The European Communities also points out an examination of the actual text of the Second\nSupplementary Report reveals additional flaws: as regards the increased imports assessment, for the\n\"absolute increase\" the USITC simply provides the import data and observes that \"imports have\n\n4165 China's second written submission, para. 310.\n4166 Korea does not agree that this parallelism can be achieved legally except on the basis of a finding\nthat all imports meet the conditions of Article 2.1 and that all imports are the subject of the measure in\nArticle 2.2 as discussed at length in the subsequent section on MFN.\n4167 See United States' first written submission, para. 770; Appellate Body Report, US – Line Pipe ,\npara. 194.\n4168 Korea's second written submission, paras. 216-219.\n4169 USITC's Second Supplementary Report, dated 4 February 2002, p. 5 (Exhibit CC-11).\n4170 Norway's second written submission, para. 183.\n4171 Norway's second written submission, paras. 184-187.\n4172 United States' first written submission, paras. 784-786.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincreased\" without any further qualification. 4173 This effectively continues applying the \"any\nincrease\" standard which the Appellate Body has clearly ruled out. 4174 To the extent that the USITC\nrefers to import projections for 2001-2002 4175, it underlines that the same projections were not made\nfor other product bundles. As regards causation, the USITC failed to separate and distinguish the\nimpact of excluded imports and did not attribute them to the imports covered by the measures. The\nunderselling analysis was not performed for all the product bundles, or was limited to one product. 4176\nThere is no analysis of coincidence in trends.4177\n7.1787 The United States reiterates that the complainants continue to disregard that findings relevant\nto the parallelism analysis are found throughout the USITC Report. While many of the pertinent\nfindings are in the section of the report issued as the Second Supplementary Report, which deals\nspecifically with non-NAFTA imports, there are also pe rtinent findings in the analysis of all imports.\nThe findings are not limited to a discrete section of the report. First, the USITC expressly found, for\neach pertinent like product, that increased non-NAFTA imports caused serious injury or threat of\nserious injury. Second, the analysis of non-NAFTA imports contains not only a description of how\nsuch imports increased, but a particularized causation analysis. Third, the USITC's analysis of all\nimports contains findings concerning serious injury, conditions of competition, and causes of serious\ninjury that were also equally pertinent to and part of the analysis of non-NAFTA imports. The\nUSITC's particularized causation analysis served to separate and distinguish the effects of non-\nNAFTA imports from the effects of NAFTA imports. Because in the particularized causation analysis\nthe USITC considered only non-NAFTA imports, the USITC separated the volume and pricing effects\nof non-NAFTA imports from those of NAFTA imports. The USITC's analysis also incorporated from\nthe analysis of all imports those factors that were unchanged regardless of which imports were\nanalysed.\n4178\n7.1788 The European Communities argues that a major omission, and indeed a fatal flaw, of the\nSecond Supplementary Report is that it nowhere considers imports from Canada, Mexico, Israel and\nJordan as an \"other factor\" causing injury and did not measure its nature and extent, so as to ensure\nthat injury caused by imports from these four coun tries is not attributed to the imports on which the\nactual measures were imposed. The USITC directly jumped into some generalizations about the\ninjurious effects caused by non-NAFTA imports and concluded that \"the same considerations that led\nus to conclude that increased imports [of each of the seven products] are a substantial cause of serious\ninjury are also applicable to increased imports [of these products] from all other sources other than\nCanada and Mexico\".\n4179 However, these conclusions are fundamentally vitiated for each of these\nseven products, because the USITC did not redo the causation analysis by considering the excluded\nimports as other factor.4180 The failure of the USITC to consider excluded imports as an \"other factor\"\nfor injury is all the more glaring as the USITC itself acknowledges in its Report that these imports\ncontributed importantly to the serious injury caused by the total imports. Specifically, the USITC\n\n4173 See e.g. USITC Second Supplementary Report, p. 5 (Carbon and Alloy Hot-Rolled Bar); p. 6\n(Cold-Finished Bar).\n4174 Appellate Body Report, Argentina – Footwear (EC) , para. 129, upholding the findings in Panel\nReport, Argentina – Footwear (EC), para. 8.161; see also Section C above.\n4175 United States' first written submission, para. 867, concerning certain tubular products other than\nOCTG.\n4176 USITC Second Supplementary Report, p. 7 (Cold Finished Bar), where the underselling analysis\nwas only performed for \"one inch round C12 L 14\", and based on confidential data; p. 8 (Carbon and Alloy\nFittings).\n4177 European Communities' second written submission, paras. 478-481, 486.\n4178 United States' second written submission, paras. 158-161.\n4179 Second Supplementary Report, pp. 6, 7, 8, 10, 11, clarification added.\n4180 See Sections IV.F.6 (b), (d), (e), (g), (h), (i), above.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfound that the following imports from NAFTA countries accounted for a \"substantial share of total\nimports and contributed importantly to the serious injury suffered by the domestic industry\": CCFRS\n(from Mexico); hot-rolled bar (from Canada); cold-finished bar (from Canada); certain tubular\nproducts (both from Canada and Mexico); carbon a nd alloy fittings (both from Canada and Mexico);\nstainless steel bar (Canada).\n4181 The European Communities adds that the reference to \"other factors\"\n(as opposed to imports) in the Appellate Body Report in US – Lamb and \"factors other than increased\nimports\" in Article 4.2(b) must be read as a reference to other factors than imports covered by the\nmeasure. It would be absurd if at the same time, a Member imposing safeguard measures could assess\nthe causal link without proceeding to \"non-attribution\" of the effects of NAFTA imports. In fact, it\nwould be tantamount to making an assessment of the causal link based on all imports, included\nNAFTA imports, since in that case the competent authorities would not have \"ensured that the\ninjurious effects of the other causal factors were not included in the assessment of the injury ascribed\nto increased imports\".\n4182 Basing itself on this statutory standard, the USITC did not examine whether\nNAFTA imports caused serious injury. It only examined whether they contributed importantly to\nserious injury. The very conclusion, for some of them, that imports from certain sources \"did not\ncontribute importantly\" does not mean that there such imports did not cause injury, and did not\nrequire, therefore, to be subjected to non-attribution.4183\n7.1789 Japan submits that the shorthand method used by the United States in determining whether\nnon-NAFTA imports are a substantial cause of serious injury, is tantamount to a finding that non-\nNAFTA imports alone satisfy the requirements of increased imports and causation. This approach\nwas found to be insufficient by the Appellate Body in both US – Wheat Gluten and US – Line Pipe .\nAll of the analyses required for finding serious injury caused by increased imports must be performed\nwith respect to non-FTA imports only in order to justify imposition of a safeguard measure on non-\nFTA imports only.4184\n7.1790 The United States responds that, in concluding that non-FTA imports are a substantial cause\nof serious injury, the USITC made findings that non-FTA imports, viewed alone, satisfied the\nincreased imports and causation requirements. 4185 The United States also argues that parallelism did\nnot require the USITC to treat excluded imports from FTA partners as a \"factor other than increased\nimports\" under Article 4.2(b). The USITC Report contai ns the USITC's analysis with regard to total\nimports, its analysis of non-FTA imports, and its analysis of FTA imports. The findings and reasoned\nconclusions in these analyses separate and distinguish the injury attributable to non-FTA imports from\nthe injury attributable to FTA imports, and ensure that the one was not attributed to the other.\n4186 The\nUSITC Report contains the USITC's explicit conclusions with regard to total imports, its explicit\nconclusions that the exclusion of FTA imports would not change those conclusions, and explicit\nconclusions that non-FTA imports were a substantial cause of serious injury. This combination of\nconclusions has the effect of separating and distinguishing the injury attributable to non-FTA imports\nfrom the injury attributable to FTA imports. The USITC began its analysis by making a series of\nconclusions regarding total imports and the injury they caused to the domestic industry. These\nconclusions identified the injury attributable to total imports, separated and distinguished the injury\nattributable to increased imports from injury attr ibutable to other factors, and ensured that injury\nattributable to other factors was not attributed to total imports. This process would by itself separate\ninjury attributable to the combination of FTA and non-FTA imports from injury attributable to other\n\n4181 European Communities' first written submission, paras. 624-626.\n4182 Appellate Body Report, US – Lamb, para. 185.\n4183 European Communities' written reply to Panel question No. 91 at the first substantive meeting.\n4184 Japan's written reply to Panel question No. 96 at the first substantive meeting.\n4185 United States' written reply to Panel question No. 96 at the first substantive meeting.\n4186 United States' first written submission, para. 769.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfactors. The USITC also analysed the injury caused by non-FTA imports. It typically couched the\nresults of this analysis in terms of whether the exclusion of FTA imports would change its conclusions\nwith regard to total imports. Since there were only two factors – non-FTA imports and FTA imports –\nthat could possibly be responsible for the injury attributable to imports from all sources, the\ncomparison of conclusions with regard to non-FTA im ports with the conclusions with regard to total\nimports by process of elimination indicates any injury attributable to FTA imports.\n4187\n7.1791 For example, the United States points out that with regard to hot-rolled bar, the USITC noted\nthat non-NAFTA imports increased at a greater rate than imports from other sources (i.e ., FTA\nimports). It noted further that non-NAFTA imports increased signif icantly in both absolute and\nrelative terms, especially at the end of the period, which caused domestic producers to lose market\nshare, suffer decreased profits and, in some cases, enter bankruptcy. It noted that the bulk of the\ndomestic industry loss in market share was a result of non-NAFTA imports, and that unit values for\nnon-NAFTA imports decreased at a greater rate than unit values for total imports. Finally, the USITC\nnoted that non-NAFTA imports undersold domestic products by greater margins than did total\nimports.\n4188 Therefore, FTA imports were responsible for a minor portion of domestic producers' lost\nmarket share, suffered a shallower decrease in unit values, and did not set the low prices in the\nmarket.4189\n7.1792 China responds that the parallelism principle implies that NAFTA imports be excluded from\nboth the scope of application of the measure and the scope of the investigation. As a consequence,\nthey must be considered as \"another factor\" and must be subject to a proper non-application analysis.\nThe non-analysis requirement is contained in the parallelism requirement.\n4190 The United States is\nwrong when it affirms that \"the findings and reasoned conclusions in these analyses separate and\ndistinguish the injury attributable to non-FTA imports from the injury attributable to FTA imports,\nand ensure that the one was not attributed to the other\". The analysis conducted by the United States\nwas superficial and incompatible with the WTO requirements.\n4191 The \"causal link\" analysis also\nrequires a coincidence in time between the increased imports and the injury suffered by the domestic\nindustry. It may well be, in this particular case, that imports from NAFTA pa rtners are, for example,\nthe only one which mainly coincided in time with the injury suffered by the domestic industry.\nHowever, without carrying out a \"causal link\" analysis specific to NAFTA imports (or non-NAFTA\nimports), the United States were not in a position to establish \"explicitly\" that the injury suffered by\nthe industry was caused by increased imports from sources covered by the measure, and not by\nincreased imports from NAFTA partners.\n4192 China also argues that the United States wrongly\nconsiders that for each product analysed in the report, the USITC properly established that increased\nimports from non-NAFTA countries caused serious injury to the domestic industry.4193\n7.1793 Korea argues that, to achieve that parallelism, the Appellate Body has made clear that all the\nconditions of Article 2.1 must be examined on the basis of the same imports which are subject to the\nmeasure under Article 2.2. It also follows directly from that analysis that imports from NAFTA\ncountries become an \"other factor\" of injury. As the Appellate Body has stated in other contexts, the\nonly means for determining whether imports caused injury is to establish that \"other factors\" causing\n\n4187 United States' first written submission, paras. 770-772.\n4188 Second Supplementary Report, pp. 5-6.\n4189 United States' first written submission, para. 773.\n4190 China's written reply to Panel question No. 30 at the second substantive meeting.\n4191 China's second written submission, paras. 319-320.\n4192 China's second written submission, para. 323.\n4193 China's second written submission, para. 326.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury were separated and distinguished.4194 Since non-NAFTA imports alone (\"by themselves\") must\ncause serious injury 4195, then the injurious effects of NAFTA imports must be separated and\ndistinguished. In the place of such an analysis, the United States proposes that the Panel simply\n\"assume\" that \"FTA imports did not change these findings, (so) the USITC was not required to repeat\nthem\".4196 According to the United States approach, the Appellate Body admonition regarding the\nneed to establish \"explicitly\" or \"clearly and unambiguously\" 4197, would be substituted with an\nassumption.4198 Korea adds that a key element of a paralle lism analysis is to ensure that injury from\nNAFTA imports is not attributed to non-NAFTA imports, thereby justifying safeguard action based\non all imports but imposing safeguard relief only on some imports. The underlying theory of\nparallelism is that the term \"imports\" has the same meaning in Article 2.1 and Article 2.2. Therefore,\nsince NAFTA imports should not be considered \"imports\" for purposes of Article 2.2, imports from\nNAFTA suppliers should be separately evaluated as a \"factor other than increased imports\" to ensure\nthat the injurious effects, if any, from NAFTA imports are not improperly attributed to non-NAFTA\nimports. The United States' position would mean that injury could well be caused by NAFTA\nimports, but such imports could still be excluded from the measure. A measure could then be applied\nto repair injury caused by NAFTA imports only against non-NAFTA imports. This would violate the\nfundamental principle behind parallelism.\n4199\n7.1794 Korea also argues that, alternatively, the United States maintains that it was obvious that\nNAFTA imports were not an \"other factor\" of injury. It also states that NAFTA imports may be so\ninsignificant that a separate analysis is not necessary.\n4200 Yet, Canada and Mexico were very\nsignificant suppliers in flat-rolled and welded non-OCTG. In flat-rolled, the USITC noted that\nCanada and Mexico were among the five largest suppliers4201 and that Mexico's import increases were\ngreater than all non-Mexican sources4202 and Mexican AUVs were the lowest of all imports.4203 In the\ncase of welded non-OCTG, Canada accounted for 35% of all non-OCTG welded pipe imports.\n\"Canada was the top supplier of welded non-OCTG products...for each of the most recent three\nyears...(,)141% greater than (those)...from the second largest source ...\".\n4204 Mexico was also among\nthe five largest suppliers and significantly undersold United States producers and increased imports by\n94% over the period. 4205 Clearly, those NAFTA imports could have caused injury. However, the\nUnited States did not conduct an analysis of the Article 4.2 factors including the injurious effects of\nthose imports because it maintains that none is necessary or required. 4206 Neither the facts nor the\nAgreement on Safeguards support this position. The remaining United States arguments are equally\nunconvincing. The United States would like to substitute its analysis that NAFTA imports did not\nconstitute a substantial share of imports and did not \"contribute importantly\" to the injury in the place\nof the required non-attribution analysis under the Agreement on Safeguards. This analysis may meet\n\n4194 Appellate Body Report, US – Line Pipe , para. 211 (affirming Appellate Body Report, US – Lamb ,\npara. 179).\n4195 Appellate Body Report, US – Line Pipe, para. 194.\n4196 United States' first written submission, para. 750.\n4197 Appellate Body Report, US – Line Pipe, para. 194.\n4198 Korea's second written submission, paras. 210-212.\n4199 Korea's written reply to Panel question No. 30 at the second substantive meeting.\n4200 United States' first written submission, para. 750.\n4201 USITC Report, Vol. I, p. 66 (Exhibit CC-6).\n4202 USITC Report, Vol. I, p. 66 (Exhibit CC-6).\n4203 USITC Report, Vol. I, p. 66 (Exhibit CC-6).\n4204 USITC Report, Vol. I, p. 167 (Exhibit CC-6).\n4205 USITC Report, Vol. I, p. 168 (Exhibit CC-6).\n4206 United States' first written submission, paras. 749 and 769.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe United States law, but it does not satisfy the requirements of Article 4.2 of the Agreement of\nSafeguards.4207\n7.1795 Brazil submits that the NAFTA imports have two effects which must be accounted for in the\nanalysis. First, they increase the level of imports and affect the competitive situation between the\nimports and the domestic like product. Thus, the analysis of the role of imports in causing serious\ninjury to the domestic industry is changed by th e exclusion of NAFTA imports and this must be\nreflected in the analysis of the causal link between imports and serious injury. Second, NAFTA\nimports may themselves be a cause of the serious injury to the domestic industry. As such, NAFTA\nimports are a factor other than the imports subject to investigation/remedies that fall under the non-\nattribution requirement of Article 4.2(b). Unless the analysis is adjusted to reflect both of these\neffects of excluding NAFTA imports, the parallelism requirement cannot be met.\n4208 Brazil also\nargues that, absent an appropriate non-attribution analysis of non-NAFTA imports, an analysis such as\nis required under Article 4.2(b) for all other factors, it is impossible to determine whether there is a\ngenuine and substantial link between non-NAFTA imports and serious injury to the domestic\nindustry. The effects of a factor which could, either individually or in combination with other factors,\nbe the predominant cause of serious injury would simply not have been distinguished from the effects\nof the subject imports.\n4209 The United States' contention that it need not conduct a non-attribution\nanalysis treating excluded NAFTA imports as a \"factor other than increased imports\" under\nArticle 4.2(b) is contrary to the logic underpinning the Appellate Body's holdings in US – Wheat\nGluten and US – Line Pipe . Controlling for the effect of imports from excluded NAFTA sources is\npart and parcel of this requirement. Thus, increased imports coming from sources that are eventually\nexcluded from the safeguard measure must be treated as an \"other\" factor in the causation/non-\nattribution analysis. Imports are a causal factor with respect to the issue of serious injury because\nthey compete with the domestic like product. It would undermine the causation analysis required by\nthe Agreement on Safeguards if a competent authority could render some portion of those imports\nmeaningless simply by excluding certain sources from a measure. It is necessary to control for the\ncausal importance of imports from excluded sources, so as not to attribute injury to subject imports\ncaused by imports from those excluded sources. This is fundamental to the non-attribution\nrequirement. A competent authority cannot ascertain a genuine and substantial causal link unless it\nseparates and distinguishes other causal factors. While it may be true in any given investigation that\nthere is a genuine and substantial relationship of cause and effect between increased imports and\nserious injury, the relevant issue is different where import sources are excluded. Under such\ncircumstances, it is not enough that the competent authority separates and distinguishes all of the\nother causal factors other than the subject and excluded imports. If the competent authority does not\nseparate and distinguish the effect of imports from excluded sources, it could potentially sanction a\nmeasure against subject imports for which there may not be a genuine and substantial causal link to\nserious injury.\n4210 4211\n7.1796 Brazil submits that the USITC did not conduct any specific evaluation of non-NAFTA\nimports. Rather, it evaluated NAFTA imports, c oncluding that the exclusion of NAFTA imports\n\n4207 Korea's second written submission, paras. 213-215.\n4208 Brazil's written reply to Panel question No. 91 at the first substantive meeting.\n4209 Brazil's written reply to Panel question No. 30 at the second substantive meeting.\n4210 The causation standard is affirmatively not just a contributory cause standard. As the Appellate\nBody has held, there must be a \" genuine and substantial relationship of cause and effect between increased\nimports and serious injury.\" Appellate Body Report, US – Lamb at para. 179 (emphasis added), citing Appellate\nBody Report, US – Wheat Gluten.\n4211 Brazil's second written submission, paras. 102-105.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwould not change its findings of injury and causation as to total imports. 4212 However, this finding\ndoes not meet the obligation to explain how the facts support a finding that non-NAFTA imports\nalone caused serious injury or threat of serious injury. As such, it does not reflect a proper non-\nattribution analysis of NAFTA imports. The USITC's analysis of non-NAFTA imports, therefore, did\nnot meet the Appellate Body's standard as set forth in US – Line Pipe, which requires a \"reasoned and\nadequate explanation that establishes explicitly\" that such imports alone caused serious injury to the\ndomestic industry.\n4213\n7.1797 Similarly, Norway maintains that it is clearly the implication of the statement by the\nAppellate Body in US – Line Pipe that the United States had to perform a separate non-attribution\nanalysis in order to \"demonstrate, consistent with our ruling in US – Wheat Gluten , that the USITC\nprovided a reasoned and adequate explanation that establishes explicitly that imports from non-\nNAFTA sources 'satisfied the conditions for the application of a safeguard measure …'\". 4214 The\nUnited States is, therefore, under an obligation to analyse excluded imports as an alternative cause of\ninjury, and consequently to conduct a non-attribution analysis for such excluded imports, together\nwith any other factors found to be causing injury. As the Appellate Body has stated, the United States\nmust provide a reasoned and adequate explanation which establishes explicitly, in a manner which\nleaves nothing merely implied or suggested and which is clear and unambiguous that the injury\ncaused by excluded imports is not attributed to non-excluded imports. The United States did not\nperform this analysis – thus failing to meet this criterion.\n4215\n7.1798 The United States insists that it is not required to treat NAFTA imports as an \"other\" possible\ncause of injury in its \"parallelism\" analysis. Such an analysis is not required under Article 4.2 of the\nAgreement on Safeguards. The second sentence of Article 4.2(b) of the Agreement – which is the\nprovision of the Agreement that requires a competent authority not to attribute to imports the effects\nof other factors – specifically states that, \"when factors other than increased imports are causing injury\nto the domestic industry at the same time, such injury shall not be attributed to increased imports\".\n4216\nAccordingly, the Agreement on Safeguards indicates that a non-attribution analysis is only required\nfor factors \"other than imports\" that may be cau sing injury to the domestic industry, even when\ncertain imports are excluded from the remedy. Article 4.2(b), thus, does not require that an authority\nconduct the same type of analysis with respect to imports from sources not included in the remedy as\nit does for factors other than imports. The United States submits that, accordingly, as a matter of law,\nthe complainants' arguments have no foundation in the language of the Agreement. Notwithstanding\nthe lack of an explicit requirement in the Agreement on Safeguards, however, the USITC did, in fact,\nproperly isolate the effects of NAFTA from non-NAFTA imports in its parallelism analysis. In\nparticular, the United States expressly separated and distinguished the price and volume effects of\n\n4212 As noted in Brazil's first written submission, the USITC actually found in several cases that imports\nfrom NAFTA countries contributed importantly to the serious injuries of the domestic industry! For example, in\nthe USITC's flat-rolled steel analysis, the USITC found that imports from NAFTA accounted for a substantial\nshare of total imports and Mexican imports contributed importantly to the serious injury caused by imports.\nUSITC Report Vol. I at 66. Similarly, in its hot-rolled bar and cold-finished bar analysis, the USITC found that\nCanadian imports represented a substantial share of total imports and contributed importantly to serious injury\ncaused by imports. Ibid., at 100, 107.\n4213 Brazil's second written submission, paras. 102-105.\n4214 Appellate Body Report, US – Line Pipe, para. 188.\n4215 Norway's second written submission, paras. 198-199.\n4216 Agreement on Safeguards, Article 4.2(b).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnon-NAFTA imports from those of NAFTA imports as an integral part of the its parallelism\nanalysis.4217 4218\n7.1799 Moreover, insofar as the complainants contend that the USITC attributed to non-NAFTA\nimports effects due to NAFTA imports, the United States contends that they have misread the USITC\nReport. These complainants overlook that the USITC, in its analysis of non-NAFTA imports, found a\ncausal link between non-NAFTA imports, viewed alone , and the serious injury experienced by the\npertinent domestic industry. Because NAFTA imports were not considered in the USITC's\nparticularized causal link analysis, their effects were already excluded when the USITC found that\nthere was a causal link between the non-NAFTA imports and the serious injury. Further analysing\nNAFTA imports as an alternate cause of serious injury, as advocated by the European Communities\nand Korea, would have been redundant and hence was unnecessary.\n4219\n7.1800 Japan submits that treating NAFTA imports as \"other factor\" for the purposes of non-\nattribution would make it abundantly clear that if a measure is imposed on non-NAFTA imports only,\nthen the injury analysis must likewise be conducted on this basis. 4220 New Zealand argues that the\n\"parallelism requirement\" is a broad one and goes well beyond one aspect (namely non-attribution) of\none stage (namely, a determination as to causation) of establishing the conditions for the application\nof a safeguard measure. The Appellate Body made clear that the competent authority must provide \"a\nreasoned and adequate explanation that establishes explicitly \" that the non-excluded imports\n\"satisfied the conditions for the application of a safeguard measure, as set out in Article 2.1 and\nelaborated in Article 4.2 of the Agreement on Safeguards\".\n4221 The 'conditions for the application of a\nsafeguard measure' include but go well beyond simply establishing causation. For example, a\ncompetent authority would also have to establish that the increased imports requirement had been\nmet.4222\n7.1801 The United States finally reiterates that the USITC's analysis fully satisfies the requirements\nof Articles 2 and 4 of the Agreement, as articulated by the Appellate Body in US – Line Pipe, that an\nauthority establishes explicitly \"through a reasoned and adequate explanation, that imports from\nsources outside the free-trade area, alone, satisfied the conditions for application of a safeguard\nmeasure …\" 4223 The USITC found that non-NAFTA imports, considered alone, satisfied the\nconditions for application of a safeguard measure when it separated and distinguished non-NAFTA\nimports in its analysis of increased imports and causation, the areas in which distinguishing between\nimports from different sources was appropriate and necessary, and adopted other pertinent portions of\nits analysis of all imports that did not change depending on the set of imports examined.\n4224\n\n4217 United States' first written submission, paras. 451-455 and 769-774; United States' written reply to\nPanel question No. 95 at the first substantive meeting.\n4218 United States' second written submission, paras. 149-151 and 162.\n4219 United States' second written submission, paras. 162-165.\n4220 Japan's written reply to Panel question No. 30 at the second substantive meeting; Japan's written\nreply to Panel question No. 91 at the first substantive meeting.\n4221 Appellate Body Report, US – Line Pipe, para 188 (emphasis in original).\n4222 New Zealand's written reply to Panel question No. 30 at the second substantive meeting.\n4223 Appellate Body Report, US – Line Pipe, para. 198.\n4224 United States' second written submission, para. 166."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.461471"}}},{"rowIdx":3490,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ10_Report_Of_Panel_09.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ10_Report_Of_Panel_09.pdf"},"doc_sequence":{"kind":"number","value":10,"string":"10"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 601"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":9,"string":"9"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":78,"string":"78"},"clean_text":{"kind":"string","value":"4. Product-specific allegations\n(a) CCFRS\n7.1802 Japan, Brazil and the European Communities submit that the USITC did not conduct any\nspecific evaluation of non-NAFTA imports as required by parallelism. Rather, it evaluated NAFTA\nimports, concluding that the exclusion of NAFTA imports would not change its findings of injury and\ncausation as to total imports. 4225 In doing do, it repeated the very same mistakes previously\nhighlighted by the Appellate Body. It is remarkab le that the USITC even resorted to its unsupported\nconclusion that it \"would have reached the same result\" in justifying the exclusion NAFTA countries\nfrom the recommended measure. This was the very same language the Appellate Body found to fail\nthe parallelism requirement in US – Line Pipe .\n4226 The statement does not meet the obligation to\nexplain how the facts support a finding that non-NAFTA imports alone caused serious injury or threat\nof serious injury.4227 Providing a handful of numbers with no meaningful analysis accomplishes little\nmore. The USITC's analysis of non-NAFTA imports, therefore, did not meet the Appellate Body's\nparallelism standard as set forth in US – Line Pipe , which requires a \"reasoned and adequate\nexplanation that establishes explicitly\" that such imports alone caused serious injury to the domestic\nindustry. To be explicit, the USITC \"must express distinctly all that is meant; it must leave nothing\nmerely implied or suggested; it must be clear and unambiguous\". 4228 It accomplished none of this. It\nfailed to establish that non-NAFTA imports alone caused serious injury; its conclusions about the\ncausal link between non-NAFTA imports and serious injury were vague; and it merely implied or\nsuggested why non-NAFTA imports alone caused serious injury. The USITC's analysis therefore did\nnot satisfy the parallelism requirement.\n4229\n7.1803 China submits that the USITC Supplementary Report does not evaluate the share of the\ndomestic market taken by non-NAFTA imports, does not evaluate other factors relevant to the\nsituation of the industry concerned, does not make any finding on the relationship between the\nmovements in imports (volume and market share) and the movements in injury factors, and does not\nindicate explicitly whether \"the causal link\" exists between increased imports and serious injury, and\nwhether this causal link involves a genuine and substantial relationship of cause and effect between\nthese two elements. China considers that the USITC Supplementary Report for this product \"does not\nestablish explicitly that imports from sources covered by the measure 'satisf[y] the conditions for the\napplication of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the\n Agreement on Safeguards' [and ] does not amount to a 'reasoned and adequate explanation of how\nthe facts support [the] determination'\", in accordance with the Appellate Body's interpretation.\n4230\n7.1804 Korea also argues that a review of the additional investigation demonstrates that the USITC\nfailed to provide a \"reasoned and adequate\" explanation as required by the Agreement on Safeguards.\n\n4225 Japan's first written submission, para. 312; Brazil's first written submission, para.231, European\nCommunities first written submission, para. 621. Remarkably, the USITC actually found in several cases that\nimports from NAFTA countries contributed importantly to the serious injuries of the domestic industry! For\nexample, in the USITC's flat-rolled steel analysis, the USITC found that imports from NAFTA accounted for a\nsubstantial share of total imports and Mexican imports contributed importantly to the serious injury caused by\nimports. USITC Report Vol. I at 66 (Exhibit CC-6). Similarly, in its hot-rolled bar and cold-finished bar\nanalysis, the USITC found that Canadian imports represented a substantial share of total imports and contributed\nimportantly to serious injury caused by imports. Ibid. at 100, 107.\n4226 Appellate Body Report, US – Line Pipe, para. 194.\n4227 Ibid., at para. 195.\n4228 Ibid., at para. 194.\n4229 Japan's first written submission, paras. 312-315; Brazil's first written submission, paras. 231-233.\n4230 China's first written submission, paras. 592–594.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nWith respect to the increase in imports, the USITC argues that there was an increase in non-NAFTA\nimports absolutely and relatively between 1996 and 2000. It does not demonstrate how such an\nincrease meets the standard of \"recent enough, sudden enough, sharp enough and significant enough,\nboth quantitatively and qualitatively, to cause or threaten to cause 'serious injury'\".\n4231 With respect to\nserious injury and causation, the USITC's supplemental discussion is narrowly focused upon the price\ngap between non-NAFTA imports and domestic products and simply asserts, without substantiation,\nthat increased imports from non-NAFTA sources are the substantial cause of serious injury. 4232 The\ncursory investigation conducted by the USITC for non-NAFTA imports is far from the strict standards\nestablished by the Appellate Body in numerous cases involving this issue. More importantly, the\nUSITC fails to explain how it was able to segr egate the impact of non-NAFTA imports from NAFTA\nimports since it also had determined that: Mexico was one of the top five sources of flat-rolled steel;\nMexico's import volume increased 26.9% during the 1996-2000 period; Mexico's rate of increase was\nhigher than the rate of increase of non-NAFTA imports; and Mexico's AUV for flat-rolled was\nconsistently below the AUVs of other imports. Korea argues that in spite of these specific findings\nwith respect to the serious injury arising from Mexican imports, the USITC failed to separate that\ninjury arising from NAFTA imports from the injury it attributed to non-NAFTA imports.\n 4233\n7.1805 Similarly, the European Communities, Japan and Brazil submit with regard to the USITC's\nanalysis of total imports and non- NAFTA imports of flat-rolled steel 4234 that the USITC's initial\nanalysis on import trends found that total imports and Canadian imports increased absolutely as a\nshare of domestic consumption, and that Canadian imports declined but remained a substantial share\nof total imports.\n4235 The analysis of non-Canada flat-rolled steel imports was limited to whether the\nvolume increase and the decline in AUVs were significant. 4236 The USITC did not specifically\nestablish causation between non-NAFTA imports and the domestic industry's serious injury. The\ngeneral discussion of causation, and the role of alternative causes, never once mentioned the role of\nnon-NAFTA imports as distinguished from all imports.\n4237 This was followed by the response to\nUSTR, in which the USITC merely stated that non-NAFTA imports increased absolutely and as a\nshare of domestic production. As for prices, the USITC merely informed USTR that \"exclu[sion] of\nimports from Canada and Mexico from the database does not appreciably change import pricing\ntrends\".4238 The USITC's treatment of injury and causation was even more perfunctory and\ninadequate. The USITC only noted that \"we would have reached the same result had we excluded\nimports from Canada from our injury analysis\". 4239 Yet, the general discussion of causation, and the\nrole of alternative causes, never once mentioned the role of non-NAFTA imports as distinguished\nfrom all imports. 4240 No attempt at factual analysis for non-NAFTA imports was ever made. The\nresponse to USTR was no better. Again, no factual analysis, only the simple statement that \"the same\nconsiderations that led us to conclude that increased imports of CCFRS are a substantial cause of\nserious injury to the domestic industry are also applicable to increased imports of CCFRS from all\n\n4232 Korea's first written submission, paras. 185, 187, 188, 189, 190, 191\n4233 USITC Report, Vol. I, pp. 66-67 (Exhibit CC-6).\n4234 This product category consists of slabs, plate, hot-rolled steel, cold-rolled steel, and coated steel.\n4235 USITC Report, Vol. I, pp. 66-67 footnote 319 (Exhibit CC-6).\n4236 Ibid., pp. 66-67, footnote 319.\n4237 Ibid., pp. 55-65.\n4238 USITC's 4 February Letter at 5 (Exhibit CC-11).\n4239 USITC Report, Vol. I, at 67 footnote 319 (Exhibit CC-6). The USITC found that \"imports from\nCanada did not contribute importantly to the serious injury suffered by the domestic industry.\" (Ibid., p. 66),\nand thus implicitly acknowledged some contribution to injury by Canadian imports. The USITC never analysed\ncarefully the extent of Canada's contribution.\n4240 Ibid. at 55-65.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsources other than Canada and Mexico\".4241 The USITC focused on non-NAFTA import volumes and\naverage unit volumes to the exclusion of causation.4242 4243\n7.1806 Japan adds that even if one were to accept the USITC statements as accurate, the comparison\ndemonstrates that the USITC's analysis is inadequate, particularly with respect to Canada which the\nUSITC itself identified as \"one of the top five suppliers of CCFRS imports during the [period of\ninvestigation]\".4244 4245 The European Communities considers that there is no correct increased\nimports finding for non-FTA imports and that the USITC failed to acknowledge cumulated imports\nfrom FTA sources as \"other factor\" causing injury and failed to ensure non-attribution.4246\n7.1807 The United States contends that the USITC's analysis of non-NAFTA imports, read in\nconjunction with its discussion of other pertinent issues contained in the analysis of all imports,\ndemonstrates that the USITC specifically considered all issues relating to imports of CCFRS from\nnon-NAFTA sources. In its analysis of non- NAFTA imports, the USITC found that non-NAFTA\nimports increased at a rate similar to all imports. Non-NAFTA imports of CCFRS increased by\n46.8% between 1996 and 1998, and non-NAFTA imports in 2000 were still well above 1996\nlevels.\n4247 The USITC also considered the change in non-NAFTA import volume relative to domestic\nproduction. Non-NAFTA imports were equivalent to a higher share of domestic production in 2000\nthan in 1996. 4248 4249 Consequently, the European Communities' argument that the USITC Report\nprovided insufficient information concerning the nature and significance of the increases in non-\nNAFTA imports is wrong. The European Communities is also wrong to criticize the USITC for\nfailing to find that the increase was \"recent, sudden, sharp, and significant\", and for failing to use full-\nyear 2001 data\n4250, because these are not the relevant criteria.4251\n7.1808 The United States further argues that in its analysis of non-NAFTA imports, the USITC found\nthat each of the causal link elements was applicable to non-NAFTA imports. The USITC found a\nmoderate to high degree of substitutability between domestically-produced CCFRS and imported\nCCFRS, and there was little difference between purchaser appraisals of non-NAFTA imports and all\nimports.\n4252 Non-NAFTA imports followed the same volume trends as did all imports. Non-NAFTA\nimports followed the same pricing trends as did imports from all sources, generally peaking in 1997\nand then falling notably in 1998 and 1999. 4253 In fact, non-NAFTA imports actually undersold the\ndomestic products in a greater share of direct quarterly comparisons and by greater margins than did\nimports from either NAFTA country.4254 Consequently, the USITC's analysis of non-NAFTA imports,\nwhen read in conjunction with the analysis of all imports, establishes that the considerations that\nestablish the existence of a genuine and substantia l causal link between the increased imports and the\n\n4241 USITC's 4 February Letter, p. 5 (Exhibit CC-11).\n4242 Ibid., pp. 5-11.\n4243 Japan's first written submission, paras. 310-311; Brazil's first written submission, para. 229-230.\n4244 USITC Report, p. 66, (Exhibit CC-6).\n4245 Japan's first written submission, para. 309.\n4246 European Communities' first written submission, paras. 622-626; European Communities' second\nwritten submission, paras. 478-483. The detailed arguments are set out in the product-specific section on non-\nattribution (H.3(b)).\n4247 USITC Second Supplementary Report, p. 5.\n4248 USITC Second Supplementary Report, p. 5.\n4249 United States' first written submission, paras. 789-791.\n4250 European Communities' first written submission, paras. 622-623.\n4251 United States' first written submission, para. 792.\n4252 USITC Report, p. 58; USITC Memorandum INV-Y-212, pp. 15-19 (US-39).\n4253 USITC Second Supplementary Report, p. 5.\n4254 USITC Report, Table FLAT-77.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nserious injury were the same whether all imports were examined or whether only imports from non-\nNAFTA sources were examined. In addition, the USITC's analysis of the effects, if any, attributable\nto other factors that increased imports was also equally applicable to non-NAFTA imports. Thus, the\nUSITC's analysis of non-NAFTA imports, when read in conjunction with its analysis of all imports,\nalso establishes that the USITC did not attribute to non-NAFTA imports any effects due to factors\nother than imports. As discussed above, in its consideration of non-NAFTA imports the USITC did\nnot need to conduct a separate non-attribution analysis for NAFTA imports.\n 4255\n7.1809 China argues that the United States wrongly considers that for each product analysed in the\nreport, the USITC properly established that in creased imports from non-NAFTA countries caused\nserious injury to the domestic industry. 4256 Imports from Mexico increased significantly between\n1996 and 2000 at a rate that was higher than the rate of increase for total imports (13.7%) as shown in\nthe USITC Report at page 66. Indeed, when total imports increased by 18.4 million tons in 1996 to\n20.9 million short tons in 2000 (i.e. an increase of 2.5 million tons or 13.7%), Mexican imports, for\ntheir part, increased during the same period by almost 27%. In the same section of the USITC Report,\none can also read that average unit values for CCFRS imports from Mexico were consistently below\nthe average unit value for other imports.\n4257 However, at no time has the USITC analysed the extent\nto which those specific characteristics of the Mexican imports could have a specific impact on the\ninjury caused to the United States industry, different from the one attributable to non-NAFTA\nimports. Accordingly, China considers that the methodology used by the United States prevented it\nfrom establishing that the USITC did not attribute to non-NAFTA imports any effects due to NAFTA\nimports (in this particular case, Mexican imports), as other factors.\n4258\n7.1810 New Zealand submits that the United States' assertion that \"reasoned and adequate\nexplanation\" is constituted by \"the USITC's analysis of non-NAFTA imports , read in conjunction\nwith its discussion of other pertinent issues contained in the analysis of all imports \"4259 is nothing\nmore than an acknowledgement by the United States that the USITC Second Supplementary Report\nfails to provide the necessary adequate and reasoned explanation. The attempt to somehow 'save' this\nsituation with reference to the analysis contained in the USITC Report on all imports fails for the very\nreason that it simply cannot be assumed that an analysis applicable to \"all imports\" provides the\nnecessary information required for one relating specifically to non-NAFTA imports. The United\nStates seeks to convert the requirement of parallelism to a less onerous enquiry in which the\ncompetent authority merely has to assert that its conclusions would not have changed if the non-FTA\nimports had been excluded from the determination. However, this ex post facto justification of an\nearlier pre-judgment begs the very question that the Appellate Body sought to underline.\n4260 T h e\nUSITC's belated attempt to satisfy the parallelism requirement in its Second Supplementary Report\nfell well short of the requirement to \"establish explicitly\" that the imports covered by the measure\nsatisfy the conditions for the imposition of a safe guard measure. Indeed, in relation to CCFRS, the\ninitial determination of the USITC in relation to NAFTA imports, which concluded that imports from\nboth Canada and Mexico represented a substantial share and imports from Mexico \"contributed\n\n4255 United States' first written submission, paras. 793-804.\n4256 China's second written submission, para. 326.\n4257 Incidentally, this statement can hardly be reconciled with the statement of the USITC\nSupplementary Report (p. 5) according to which \" excluding imports from Canada and Mexico from the\ndatabase does not appreciably change import pricing trends during the period examined\".\n4258 China's second written submission, paras. 326-328.\n4259 United States' first written submission., paras. 789, 796, and 804 (emphasis added).\n4260 New Zealand's second written submission, paras. 3.148-3.149.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimportantly\" to the injury, casts even further doubt on any claim that imports, minus the increases\nattributable to NAFTA, could satisfy the requirements of the Agreement on Safeguards.4261\n(b) Tin mill products\n7.1811 The European Communities and China submit that neither the USITC Report nor the USITC\nSupplementary Report contain any particular findings establishing \"explicitly\" that increased imports\nfrom non-NAFTA sources satisfy the conditions set out in Article 2.1 and elaborated in Article 4.2 of\nthe Agreement on Safeguards. The European Communities adds that the finding that this product\ndoes not \"contribute importantly to the serious injury or threat thereof\" in the USITC Report of\nOctober 2001 is not sufficient. For these reasons, the European Communities and China consider that\nthe United States, for this product, failed to respect its obligation under Articles 2.1 and 4.2 of the\nAgreement on Safeguards.\n4262\n7.1812 Korea argues that the USITC did not conduct any investigation on non-NAFTA imports\nalone, either in the original investigation or in response to a request of the USTR. Commissioner\nMiller found that imports of tin mill products from Canada were significant, and had doubled over the\nperiod with a higher rate of growth than imports from non-NAFTA countries. She also found that\nCanada's AUVs declined to their lowest point in 1999, when imports surged.\n4263 Commissioner\nMiller was the only Commissioner to vote affirmatively with respect to injury to the domestic industry\nfrom tin mill products. In the first place, there was no basis whatsoever for the imposition of\nsafeguard measures on imports of tin mill products. However having determined that such measures\nwere appropriate, the United States was obliged to provide a reasoned explanation concerning how the\nserious injury caused by non-NAFTA imports was segregated and identified. The United States was\nalso obliged to establish explicitly that the serious injury suffered by the domestic industry was due to\nnon-NAFTA imports alone. The United States did neither. Thus, the United States is in violation of\nthe parallelism between the scope of investigation and the scope of the measure with respect to tin\nmill products.\n4264\n7.1813 Similarly, Norway notes that, concerning tin mill products, neither the increased imports\nsection nor the serious injury section of the (first) report itself mentions products from these countries\nspecifically. There is also no mention of tin mill products in the Second Supplementary Report. The\ndissenting Commissioner Miller, who analysed tin mill products separately did, however, make\nexplicit findings with respect to imports from Canada. She found that imports from Canada\naccounted for a substantial share of total imports and contribute importantly to the serious injury 4265\n(and therefore also recommended a tariff on such imports 4266). Her statement is somewhat\nambiguous, as it is connected to a footnote 29 where she – in passing – states \"I further note that I\nwould have found imports of tin mill products to be a substantial cause of serious injury had I\nexcluded imports from Canada\".4267 She also states in footnote 28 on the same page that \"I note that\nin my analysis of whether increased imports as a whole are a substantial cause of serious injury, I\nwould have reached the same result had I excluded imports from Mexico\". Norway does not consider\nthat these statements of Commissioner Miller, even considering her individually, complies with the\n\n4261 New Zealand's written reply to Panel question No. 59 at the second substantive meeting.\n4262 China's first written submission, paras. 614-615; European Communities' first written submission,\nparas. 614-615.\n4263 USITC Report, Vol. I, pp. 309-310 (Exhibit CC-6).\n4264 Korea's first written submission, para. 193-194.\n4265 USITC Report, Vol. I, p. 310 (Exhibit CC-6).\n4266 USITC Report, Vol. I, p. 527 (Exhibit CC-6).\n4267 USITC Report, Vol. I, p. 310 (Exhibit CC-6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nstandards set out by the Appellate Body, as there is no finding that products from other sources alone,\nexcluding imports from all the excluded countries, fulfil the requirements of Articles 2.1 and 4. As\nfor the final determinations of the United States for tin mill products, where the President did not\nfollow the recommendations of Commissioner Mi ller, there is nowhere any particular finding\nestablishing \"explicitly\" that increased imports from non-NAFTA sources satisfy the conditions as set\nout in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards and, thus, no findings\nthe President can rely upon in support of his determination. For this reason, the United States, for this\nproduct, has failed to respect its obligation under Articles 2.1 and 4.2 of the Agreement on\nSafeguards.\n4268\n7.1814 The United States asserts that both Commi ssioner Miller and Commissioner Bragg provided\nseparate analyses of non-NAFTA imports relating to tin mill products. These analyses, read in\nconjunction with each Commissioner's discussion of other pertinent issues contained in her analysis of\nall imports, demonstrate that the analyses specifically considered all issues relating to imports from\nnon-NAFTA sources. Commissioner Miller's analysis is found in footnotes 28 and 29 of her separate\nopinion analysing all tin mill imports. In footnote 28, she observes that tin mill exports from Mexico\nwere minuscule, never exceeding 286 tons in any calendar year.\n4269 In footnote 29, she notes that she\nwould have found increased imports of tin mill to be a substantial cause of serious injury if she had\nexcluded imports from Canada. 4270 Given the minuscule volumes of imports from Mexico cited in\nfootnote 28, the analysis Commissioner Miller pr ovides in footnote 29 is clearly applicable when\nimports from both Canada and Mexico are excl uded. Commissioner Miller's footnote was not an\nambiguous statement made \"in passing\", as asserted by Norway. 4271 Instead, it demonstrates that she\nspecifically considered all issues relating to imports of tin mill from imported sources, including\nincreased imports and causal link. In her analysis, Commissioner Miller observed that imports from\nnon-NAFTA sources increased by 22.4% from 1996 to 2000. 4272 The greatest annual percentage\nincrease in non-NAFTA imports occurred between 1998 and 1999, the same year imports from all\nsources increased by the greatest percentage. 4273 Commissioner Miller's analysis also demonstrated\nthat there were imports \"in such increased quantities ... and under such conditions as to cause or\nthreaten to cause serious injury\" by demonstrating the genuine and substantial causal link between\nnon-NAFTA imports and the serious injury experienced by the domestic tin mill industry. The nature\nof that serious injury was discussed in great detail in Commissioner Miller's analysis of all imports.\nEach of these elements was applicable for non-NAFTA imports as well. Commissioner Miller had\nobserved in her analysis of all imports that purchasers generally considered imported and domestically\nproduced tin mill products to be substitutable.\n4274 Because the questionnaire data indicated that non-\nNAFTA imports were not different from all imports in this respect, there was no need for\nCommissioner Miller to discuss this factor further in her analysis of non-NAFTA imports. 4275\nCommissioner Miller's analysis of non-NAFTA impor ts, when read in conjunction with her analysis\nof all imports, establishes that the considerations that establish the existence of a genuine and\nsubstantial causal link between the increased imports and the serious injury were the same whether all\nimports were examined or whether only imports from non-NAFTA sources were examined. Miller's\nanalysis of non-NAFTA imports, when read in co njunction with her analysis of all imports, also\nestablishes that the she did not attribute to non-NAF TA imports any effects due to factors other than\n\n4268 Norway's first written submission, paras. 381-386.\n4269 USITC Report, p. 310, footnote 28.\n4270 USITC Report, p. 310, footnote 29.\n4271 Norway's first written submission, para. 392.\n4272 USITC Report, p. 310, footnote 29.\n4273 USITC Report, Table FLAT-C-8.\n4274 USITC Report, p. 307.\n4275 USITC Memorandum INV-Y-209, p. 20 (US-33).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports. In her consideration of non-NAFTA imports Commissioner Miller did not need to conduct a\nseparate non-attribution analysis for NAFTA imports.4276\n7.1815 The United States further argues that Commissioner Bragg performed her analysis of non-\nNAFTA tin mill imports in the context of her like product analysis encompassing CCFRS.\nCommissioner Bragg first examined the increase in import volume. She found that non-NAFTA\nimports of carbon and alloy flat products including tin mill increased by 16.2% between 1996 and\n2000. The largest single year increase occurred between 1997 and 1998, but an additional increase\noccurred between 1999 and 2000. 4277 Commissioner Bragg also noted that non-NAFTA imports\naccounted for a substantial majority of all imports. 4278 Commissioner Bragg demonstrated a genuine\nand substantial causal link between non-NAFTA imports and the serious injury experienced by the\ndomestic industry. The nature of that serious injury was discussed in her analysis of all imports.4279 In\nher analysis of all imports, Commissioner Bragg specifically examined several other factors alleged to\nbe the cause of serious injury. Commissioner Bragg rejected each of these factors as a cause of injury.\nBecause Commissioner Bragg's analysis of all imports contained the requisite discussion of these\nother factors to satisfy Article 4.2(b) of the Agreement on Safeguards, and she rejected the other\nfactors as causes of injury, she was not obliged to discuss these factors further in her analysis of non-\nNAFTA imports, as she had not attributed any of the serious injury suffered by the domestic industry\nto any of these other factors.\n4280 4281\n7.1816 China points out that for tin mill products, Commissioner Miller, at page 309, made clear that\nthe quantity of imports from Canada doubled over the period (+ 50%), while the growth rate of\nimports from non-NAFTA countries increased only by 22.4% over the period. In the same report,\nCommissioner Miller indicated that the average unit values of imports from Canada declined overall\nfrom 1996 to 2000 and were lowest in 1999, when imports generally surged and the United States\nindustry's condition worsened. 4282 However, at no moment, did the USITC analyse the extent to\nwhich those specific characteristics of the Canadian imports could have a specific impact on the injury\ncaused to the United States industry, different from the one attributable to non-NAFTA imports.\nAccordingly, China considers that the methodology used by the United States prevented it from\nestablishing that the USITC did not attribute to non-NAFTA imports any effects due to NAFTA\nimports (in this particular case, Canadian imports), as other factors.4283\n(c) Hot-rolled bar\n7.1817 China submits that the USITC Supplementary Report does not evaluate the share of the\ndomestic market taken by non-NAFTA imports, does not evaluate other factors relevant to the\nsituation of the industry concerned, does not make any finding on the relationship between the\nmovements in imports (volume and market share) and the movements in injury factors, and does not\nindicate explicitly whether \"the causal link\" exists between increased imports and serious injury, and\nwhether this causal link involves a genuine and substantial relationship of cause and effect between\nthese two elements. China considers that the USITC Supplementary Report for this product \"does not\nestablish explicitly that imports from sources covered by the measure 'satisf[y] the conditions for the\n\n4276 United States' first written submission, paras. 807-818.\n4277 USITC Second Supplementary Report, p. 15.\n4278 USITC Second Supplementary Report, p. 17, footnote 87.\n4279 See USITC Report, pp. 282-283.\n4280 USITC Second Supplementary Report, p. 17, footnote 87.\n4281 United States' first written submission, paras. 819-823.\n4282 China's second written submission, paras. 324, 229.\n4283 China's second written submission, para. 330.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\napplication of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the\nAgreement on Safeguards' [and] does not amount to a 'reasoned and adequate explanation of how the\nfacts support [the] determination'\", in accordance with the Appellate Body's interpretation.4284\n7.1818 The United States asserts that the USITC's analysis of non-NAFTA imports, read in\nconjunction with its discussion of other pertinent issues contained in the analysis of all imports,\ndemonstrates that the USITC specifically considered all issues relating to imports of hot-rolled bar\nfrom non-NAFTA sources, including increased imports and causal link. In its analysis of non-\nNAFTA imports, the USITC found that non-NAFTA imports of hot-rolled bar increased at a greater\nrate than imports from all sources. Non-NAFTA imports increased by 107.9% from 1996 to 2000,\nand had major increases from 1997 to 1998 (when they increased by 70.4% ) and from 1999 to 2000\n(when they increased by 31.2%). In its analysis, the USITC also provided information concerning the\nannual evolution of non-NAFTA import volumes.\n4285 Consequently, the European Communities'\nargument that the USITC Report provided insufficient information concerning the nature and\nsignificance of the increases in non-NAFTA imports is wrong. The European Communities is also\nwrong to criticize the USITC for failing to find that the increase was \"recent, sudden, sharp, and\nsignificant\", and for failing to use full-year 2001 data4286, because, as already argued, these are not the\nrelevant criteria.4287\n7.1819 The United States further argues that the USITC's analysis of all imports also described the\ncausal link between all imports and the serious injury in considerable detail. The USITC determined\nthat through price-based competition increased imports caused domestic hot-rolled bar producers to\nlose market share at the same time prices were falling. Thus, there were three basic elements of the\nfinding of causal link relating to all imports: (1) price-based competition between imports and the\ndomestically produced product; (2) imports gaining market share at the expense of the domestically\nproduced product; and (3) declining prices. These elements collectively led to the hot-rolled bar\nindustry's declines in production, sales volumes and revenues, and employment, as well as its poor\nfinancial performance during the latter portion of the period of investigation. In its analysis of non-\nNAFTA imports, the USITC found that each of these three causal link elements was applicable for\nsuch imports. First, the non-NAFTA imports were even more competitive on price with the\ndomestically-produced product than were all imports, inasmuch as their prices were lower than those\nfor all imports. The USITC found that the non-NAFTA imports undersold the domestically produced\nproduct by substantial margins during the principal period it examined in its causal link analysis –\n1998 through 2000.\n4288 Second, the non-NAFTA imports gained market share at the expense of the\ndomestic industry. In its analysis of causal link for all imports, the USITC emphasized the domestic\nindustry's loss of market share to imports in 1998 and 2000 and explained why this period was\ngermane to its analysis. In its analysis of non-NAFTA imports, the USITC found that those imports\nwere responsible for most of this loss, as they gained 3.7 of the 4.1 percentage points of market share\nthe domestic industry lost from 1997 to 1998, and gained even more market share than the domestic\nindustry lost from 1999 to 2000.\n4289 Third, the USITC found that the value of the non-NAFTA\nimports fell by an even greater proportion during the period of investigation than did imports from all\nsources.\n4290 Consequently, the USITC's analysis of non-NAFTA imports, when read in conjunction\nwith the analysis of all imports, establishes that the considerations that establish the existence of a\n\n4284 China's first written submission, paras. 595–597.\n4285 USITC Second Supplementary Report, p. 5.\n4286 European Communities' first written submission, paras. 622-623.\n4287 United States' first written submission, paras. 825-827.\n4288 USITC Second Supplementary Report, p. 6.\n4289 USITC Second Supplementary Report, p. 6; USITC Report, Table LONG-C-3.\n4290 USITC Second Supplementary Report, p. 6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ngenuine and substantial causal link between the increased imports and the serious injury were the\nsame whether all imports were examined or wh ether only imports from non-NAFTA sources were\nexamined. The USITC did not reach this conclusion by \"jump[ing] into some generalizations\", as\nalleged by the European Communities.4291 Instead, the USITC reached its conclusions on the basis of\nan objective, fact-based analysis of volume and pricing data specifically pertaining to non-NAFTA\nimports.4292\n7.1820 The United States finally argues that in its analysis of all imports the USITC examined four\nfactors other than increased imports alleged to be causes of serious injury to the domestic hot-rolled\nbar industry. It found that three of the four other factors (intra-industry competition, \"inefficient\"\ndomestic producers, and changes in demand) did not cause the injury it observed. The fourth factor,\nrelating to the domestic industry's input costs, related exclusively to domestic industry data which also\ndid not change depending on which imports were being examined. Consequently, there was also no\nneed for the USITC to discuss this factor further in its analysis of non-NAFTA imports.\n4293\n7.1821 In response to the Panel's question about how the USITC conducted a causation analysis that\nisolated the effects of non-NAFTA imports from those of NAFTA imports, the United States\nresponds, taking hot-rolled bar as an example, th at the USITC's methodology for isolating the effects\nof non-NAFTA imports encompassed several steps. First, in its analysis of non-NAFTA imports, the\nUSITC distinguished import volumes from non-NAFTA sources from import volumes from Canada\nand Mexico. Thus, for hot-rolled bar, the USITC specifically discussed the volume of imports from\nnon-NAFTA sources, the rate of increase of that volume, and the ratio of that volume to United States\nproduction.\n4294 Second, in its analysis of all imports, the USITC made findings concerning the\nconditions of competition in the pertinent domestic industry. These findings were not related to either\nthe characteristics or the data relating to imports from specific countries, so no further isolation of\nimports from particular sources was necessary. Third, the USITC made findings, in its analysis of all\nimports, concerning the condition of the pertinent domestic industry. This analysis did not concern\nwhy the industry was seriously injured, but whether it was seriously injured. Consequently, no further\nisolation or discussion was necessary for the non-NAFTA imports. Fourth, the USITC conducted a\nparticularized causation analysis for the non-NAFTA imports. The USITC's causation analysis for all\nimports for each of the pertinent products reflected findings concerning five factors. These were: (1)\nimport volume patterns; (2) the conditions of compe tition; (3) the domestic industry's condition; (4)\nimport volume and pricing patterns; and (5) other alleged causes of serious injury. For each product,\nthe USITC analysed the particularized data for non-NAFTA import volume and non-NAFTA import\npricing. Thus, for hot-rolled bar, the USITC found that average unit values of non-NAFTA imports\ndeclined from 1996 to 2000 and that this decline was greater than that for imports from all sources. It\nengaged in a particularized examination of pricing data for 1998 and the first half of 2000. These\nperiods were of particular significance to its causation analysis because they were periods when both\nnon-NAFTA imports and all imports surged and the domestic industry lost market share. The USITC\nfound that during these periods the non-NAFTA imports undersold domestically produced hot-rolled\nbar by substantial margins. Consequently, based on its analysis of the particularized non-NAFTA\nimport data, the USITC concluded that the same considerations that supported a finding of causal link\nfor all imports – namely, that through price-based competition increased imports caused the domestic\nindustry to lose market share while prices were falling – supported a finding of causal link for non-\n\n4291 European Communities' first written submission, para. 625; China raises a similar objection.\nChina's first written submission, para. 595.\n4292 United States' first written submission, paras. 828-833.\n4293 United States' first written submission, para. 834.\n4294 USITC Second Supplementary Report, pp. 5-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nNAFTA imports. 4295 Again, by considering only non-NAFTA imports, the USITC isolated the\nvolume and pricing effects of non-NAFTA imports fr om those for the NAFTA imports. An isolation\nanalysis was not necessary with respect to conditions of competition or the condition of the domestic\nindustry. An isolation analysis also was not necessary for the other alleged causes of serious injury.\nFor example, with respect to hot-rolled bar, three of the four alleged other causes were not in fact\ncauses of serious injury and the fourth (relating to changes in the domestic industry's input costs)\npertained exclusively to domestic industry data. 4296 Consequently, the USITC conducted a causation\nanalysis that isolated for non-NAFTA imports those factors it needed to isolate, and incorporated from\nthe all imports analysis those factors that were unchanged regardless of which imports were analysed.\nBased on these factors, it explained why its conclusions on causation for all imports were also\napplicable to non-NAFTA imports viewed in isolation.\n4297\n7.1822 The European Communities notes that the United States justifies its \"increased imports\"\nfinding by reference to the USITC Second Supplementary Report. However, the \"increased imports\"\nfinding of 22 October 2001 is clearly based on import data from all countries. 4298 So is the relevant\nCommission determination.4299 The USITC approach underlying the determinations of 22 October\n2001 reflects that followed in the United States measures at issue in US – Line Pipe, and analysed by\nthe Appellate Body who held that the USITC made \"no reference to product origin. The USITC\nconsidered 'imports from all sources in determining whether imports have increased' and relied on\ndata corresponding to total imports\". 4300 In the present case, and in respect of hot-rolled bar the\nUSITC expressly concluded that \"our affirmative determination [that is \"increased imports\" and\n\"serious injury\" and \"causation\"] for hot-rolled bar encompasses imports from Canada\". 4301 T h e\nEuropean Communities submits that three irrelevant determinations in the USITC Report do not\nhowever make one relevant one. In other words, the fact that, in addition to the increased imports and\nserious injury findings based on imports from all sources, the USITC made separate determinations on\nimports from Canada\n4302 and Mexico4303 respectively, does not change the content of the first one and\ndoes not turn it into an \"all imports minus Canada and/or Mexico\" one. Nor does the fact that the\nCommission determination on hot-rolled bar on p. 18 of the USITC Report's Vol. I is followed by two\ndeterminations on Canada and Mexico respectively 4304 means that the first is turned into a\ndetermination on \"all imports minus Canada and/or Mexico\". The Appellate Body has already\nrejected this type of \"shortcut\" in US – Line Pipe.4305\n7.1823 The European Communities submits that the USIT C failed to separate and distinguish the\nimpact of excluded imports and not attribute them to the imports covered by the measures. With\nregard to hot-rolled bar, Canada and Mexico respec tively represented the first and the third or fourth\n\n4295 USITC Second Supplementary Report, p. 6.\n4296 United States' first written submission, para. 834.\n4297 United States' written reply to Panel question No. 95 at the first substantive meeting.\n4298 USITC Report, Vol. I, p. 92, referring to Volume II, p. LONG 9, TABLE LONG-5. The import\ndata referred to on p. 92 are taken from the \"all imports\" rows. Specifically, imports from Canada were found\nby the USITC to \"account for a substantial share of tota l imports\" (USITC Report, Vol. I, p. 100). Indeed,\naccording to USITC data Canada supplied 46.0% of the quantity of all imports in 1998, 50.6% in 1999 and\n45.6% in 2000 (USITC Report, Vol. I, p. 100, referring to USITC Report, Vol. II, Table LONG 5).\n4299 USITC Report, Vol. I, p. 18.\n4300 Appellate Body Report, US – Line Pipe, para. 186.\n4301 USITC Report, Vol. I, p. 100\n4302 USITC Report, Vol. I, p. 100.\n4303 USITC Report, Vol. I, pp. 100-101.\n4304 USITC Report, Vol. I, p. 18, column 2 from the left of the \"Carbon & Alloy Long Products\"\ncolumn, rows 8 to 10 of the column respectively.\n4305 European Communities' second written submission, paras. 445-448.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsupplying country in the most recent three years considered.4306 They also contributed one third of the\nincrease in imports over the period 1996-2000. Thus, it simply cannot be that the their exclusion\nmade no difference to the causation finding. Assuming that imports caused injury, it is far from clear\nthat a finding of a genuine and substantial causal link could be made once the injurious effects of\nCanadian and Mexican imports have been subjected to a non-attribution analysis. At the very least\nthe United States authorities should have explained why the exclusion of certain imports from the\nincreased imports base did not change at all the result.\n4307\n7.1824 China argues that the United States wrongly considers that for each product analysed in the\nreport, the USITC properly established that in creased imports from non-NAFTA countries caused\nserious injury to the domestic industry. 4308 As it appears from the USITC Report at page 92 et seq.,\nthe situation of the United States industry worsened in 1999 in terms of domestic production and\nincreased capacity. At page 97 of the same Report, it is said that in 1999 domestic producers\nrestricted their loss of market share to three-tenths of a percentage point. On page 92, the USITC\nReport indicates that imports from all sources increased slightly from 1998 to 1999, by 1%, while, at\nthe same time, imports from Canada alone increased by almost 5%. However, at no time has the\nUSITC analysed the extent to which those specific characteristics of the Canadian imports could have\na specific impact on the injury caused to the United States industry, different from the one attributable\nto non-NAFTA imports. Accordingly, China considers that the methodology used by the United\nStates prevented it from establishing that the USITC did not attribute to non-NAFTA imports any\neffects due to NAFTA imports (in this particular case, Canadian imports), as other factors.\n4309\n(d) Cold-finished bar\n7.1825 China submits that the USITC Supplementary Report merely contains an indication of loss of\nrevenues for the United States domestic industry. It does not evaluate the share of the domestic market\ntaken by non-NAFTA imports, it does not contain specific elements regarding the injury to the US\nindustry caused by non-NAFTA imports, it does not eval uate other factors relevant to the situation of\nthe industry concerned, it does not make any finding on the relationship between the movements in\nimports (volume and market share) and the movements in injury factors and it does not indicate\nexplicitly whether \"the causal link\" exists between increased imports and serious injury, and whether\nthis causal link involves a genuine and substantial relationship of cause and effect between these two\nelements. The European Communities considers that there is no correct increased imports finding for\nnon-FTA imports and that the USITC failed to acknowledge cumulated imports from FTA sources as\n\"other factor\" causing injury and failed to ensure non-attribution.\n4310 On the basis of the foregoing,\nthe European Communities and China considers that the USITC Supplementary Report for this\nproduct \"does not establish explicitly that imports from sources covered by the measure 'satisf[y] the\nconditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in\nArticle 4.2 of the Agreement on Safeguards' [and ] does not amount to a 'reasoned and adequate\nexplanation of how the facts support [the] determination'\", in accordance with the Appellate Body's\ninterpretation.4311\n\n4306 USITC Report, Vol. I, p. 100.\n4307 European Communities' second written submission, paras. 483-484.\n4308 China's second written submission, para. 326.\n4309 China's second written submission, paras. 331-332.\n4310 European Communities' first written submission, paras. 622-626; European Communities' second\nwritten submission, paras. 478-483. The detailed arguments are set out in the product-specific section on non-\nattribution (H.3(b)).\n4311 China's first written submission, paras. 598–600.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1826 The United States asserts that the USITC's report contains a reasoned and adequate\nexplanation of how the facts supported its conclusion that increased imports from non-NAFTA\ncountries caused serious injury to the domestic cold-finished bar industry. This analysis, according to\nthe United States, satisfies all requirements of Articles 2.1 and 4.2 of the Agreement on\nSafeguards.\n4312 In its analysis of non-NAFTA imports, th e USITC found that non-NAFTA imports of\ncold-finished bar increased at a greater rate than did imports from all sources both from 1999 to 2000\nand over the entire period examined. Non-NAFTA imports increased by 51.0% from 1999 to 2000,\nthe year that imports from all sources increased most sharply. In its analysis, the USITC also\nprovided information concerning the annu al evolution of non-NAFTA import volumes. 4313\nConsequently, the European Communities' argument that the USITC Report provided insufficient\ninformation concerning the nature and significance of the increases in non-NAFTA imports is wrong.\nThe European Communities is also wrong to criticiz e the USITC for failing to find that the increase\nwas \"recent, sudden, sharp, and significant\", and for failing to use full-year 2001 data 4314, because\nthese are not the relevant criteria. The USITC's analysis of all imports also described the causal link\nbetween all imports and the serious injury in c onsiderable detail. The USITC determined that\naggressive pricing by the imports during the latter portion of the period of investigation caused the\ndomestic industry to lose market share and revenues. This resulted in serious injury, most particularly\nthe industry's poor performance in 2000. The USITC found that each of two causal link elements that\nwere applicable for all imports – aggressive pricing and increased market share – were also applicable\nfor non-NAFTA imports. Consequently, the USITC's analysis of non-NAFTA imports, when read in\nconjunction with the analysis of all imports, establishes that the considerations that establish the\nexistence of a genuine and substantial causal link between the increased imports and the serious injury\nwere the same whether all imports were examined or whether only imports from non-NAFTA sources\nwere examined. The USITC did not reach this conclusion by \"jump[ing] into some generalizations\",\nas alleged by the European Communities.\n4315 Instead, the USITC reached its conclusions on the basis\nof an objective, fact-based analysis of volume and pricing data specifically pertaining to non-NAFTA\nimports. In its analysis of all imports the USIT C examined two factors other than increased imports\nalleged to be causes of serious injury to the domestic cold-finished bar industry. It found that one of\nthese factors (the performance of domestic producer RTI) did not cause the injury it observed. The\nUSITC satisfied its obligation to perform a non-attribution analysis of the other factor, demand\npatterns, by focusing on domestic industry data for 2000, a year in which demand for cold-finished\nbar increased. Thus the USITC's analysis of non-NAFTA imports, when read in conjunction with its\nanalysis of all imports, also establishes that the USITC did not attribute to non-NAFTA imports any\neffects due to factors other than imports. In its consideration of non-NAFTA imports the USITC did\nnot need to conduct a separate non-attribution analysis for NAFTA imports.\n4316\n7.1827 China argues that the United States wrongly considers that for each product analysed in the\nreport, the USITC properly established that in creased imports from non-NAFTA countries caused\nserious injury to the domestic industry. 4317 At page 107 of the USITC Report, it is said that the\nquantity of imports from Canada from 1998 to 2000 was 63.7% greater than the quantity of all\nimports from the second largest source, and Canada accounted for at least 25.5% of the quantity of all\nimports during each year in this period. The USITC Report also says at page 107 that Canada was the\ntop supplier of cold-finished bar to the United States for each of the last three years in the period\n\n4312 United States' first written submission, para. 847.\n4313 USITC Second Supplementary Report, pp. 6-7.\n4314 European Communities' first written submission, paras. 622-623.\n4315 European Communities' first written submission, para. 625. China raises a similar objection, see\nChina's first written submission, para. 598.\n4316 United States' first written submission, paras. 838-846.\n4317 China's second written submission, para. 326.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexamined. At the same time, the USITC Report at page 105 indicates that the record indicates that\nprice is an important factor in purchasing decisions for cold-finished bar. Purchasers listed price\nsecond most-frequently, after quality, as the top factor in purchasing decisions, and listed price most\nfrequently as the number two factor. Most purchasers evaluated the imports and domestically-\nproduced cold-finished bar as comparable with respect to product consistency and product quality.\nHowever, at no time has the USITC analysed the extent to which those specific characteristics of the\nCanadian imports could have a specific impact on the injury caused to the United States industry,\ndifferent from the one attributable to non-NAFTA imports. Accordingly, China considers that the\nmethodology used by the United States prevented it from establishing that the USITC did not attribute\nto non-NAFTA imports any effects due to NAFTA imports (in this particular case, Canadian imports),\nas other factors.\n4318\n(e) Rebar\n7.1828 The European Communities and China submit that neither the USITC Report nor the USITC\nSupplementary Report contain any particular findings establishing \"explicitly\" that increased imports\nfrom non-NAFTA sources satisfy the conditions set out in Article 2.1 and elaborated in Article 4.2 of\nthe Agreement on Safeguards. The European Communities adds that the finding that this product\ndoes not \"contribute importantly to the serious injury or threat thereof\" in the USITC Report of\nOctober 2001 is not sufficient. For these reasons, the European Communities and China consider that\nthe United States for this product failed to respect its obligation under Articles 2.1 and 4.2 of the\nAgreement on Safeguards.\n4319\n7.1829 The United States asserts that the USITC's report contains a reasoned and adequate\nexplanation of how the facts supported its conclusion that increased imports from non-NAFTA\ncountries caused serious injury to the domestic rebar industry. This analysis satisfies all requirements\nof Articles 2.1 and 4.2 of the Agreement on Safeguards. 4320 The European Communities and China\noverlook footnote 704 of the USITC's analysis of all imports, which provides a detailed analysis of\nnon-NAFTA rebar imports. In that footnote, the USITC expressly found that \"the conclusions we\nhave made concerning the effects of increased imports are equally applicable whether or not imports\nfrom Canada and Mexico are included among the imports evaluated\". 4321 The meaning of this\nsentence is unambiguous: it is an USITC finding that increased imports from non-NAFTA sources\ncaused serious injury to the United States rebar industry. Moreover, the USITC expressly\nincorporated into its analysis of non-NAFTA imports the pertinent portions of its analysis for all\nimports. Because the USITC expressly made this finding in its analysis of imports from all sources,\nthere was no need for the Trade Representative to request the USITC to make supplemental findings\non this issue. In its analysis of non-NAFTA imports, the USITC emphasized that non-NAFTA\nimports of rebar increased by 434.8% from 1996 to 2000, by 183.5% from 1997 to 1998, and by\n50.2% from 1998 to 1999. Each of these increases was greater than that for all imports for the\napplicable time period. In its analysis, the USITC also provided information concerning the annual\nevolution of non-NAFTA import volumes.\n4322 The USITC's analysis also demonstrated that there\nwere imports \"in such increased quantities … and un der such conditions as to cause or threaten to\ncause serious injury\" by demonstrating the genuine and substantial causal link between non-NAFTA\nimports and the serious injury experienced by the domestic rebar industry. The nature of that serious\n\n4318 China's second written submission, paras. 333-334.\n4319 China's first written submission, paras. 601-602; European Communities' first written submission,\nparas. 614-615.\n4320 United States' first written submission, para. 859.\n4321 USITC Report, p. 116, footnote 704.\n4322 USITC Report, p. 116, footnote 704.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury was discussed in great detail in the USITC's analysis of all imports. The USITC's analysis of\nnon-NAFTA imports, when read in conjunction with the analysis of all imports, therefore, establishes\nthat the considerations that establish the existence of a genuine and substantial causal link between the\nincreased imports and the serious injury were the same whether all imports were examined or whether\nonly imports from non-NAFTA sources were examined. The USITC reached its conclusions on the\nbasis of an objective, fact-based analysis of volume and pricing data specifically pertaining to non-\nNAFTA imports. The USITC's report also establishes that the USITC did not attribute to non-\nNAFTA imports any effects due to factors other than imports. As discussed above, in its\nconsideration of non-NAFTA imports the USITC did not need to conduct a separate non-attribution\nanalysis for NAFTA imports.\n4323\n(f) Welded pipe\n7.1830 Switzerland considers that the United States has failed to fulfil its obligation of parallelism\nprovided by Articles 2.1 and 4.2 of the Agreement on Safeguards. More particularly, China submits\nthat the USITC Supplementary Report does not evaluate the share of the domestic market taken by\nnon-NAFTA imports, does not evaluate other factors relevant to the situation of the industry\nconcerned, does not make any finding on the relationship between the movements in imports (volume\nand market share) and the movements in injury factors, and does not indicate explicitly whether \"the\ncausal link\" exists between increased imports and serious injury, and whether this causal link involves\na genuine and substantial relationship of cause and effect between these two elements. China and\nSwitzerland consider that the USITC Supplementar y Report for this product \"does not establish\nexplicitly that imports from sources covered by the measure 'satisf[y] the conditions for the\napplication of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the\n Agreement on Safeguards' [and ] does not amount to a 'reasoned and adequate explanation of how\nthe facts support [the] determination'\", in accordance with the Appellate Body's interpretation.\n4324\n7.1831 The European Communities submits that the USITC failed to carry out a proper increased\nimports and causation analysis for non-FTA imports. In particular, the USITC failed to separate and\ndistinguish the impact of excluded imports and to ensure that these are not attributed to the imports\ncovered by the safeguard measure. The import data in the USITC Report reveals that the shares of\nNAFTA imports in total imports were significant, reaching up to 50% in the case of certain tubular\nproducts.\n4325 4326\n7.1832 Korea submits that the USITC's supplementary discussion of threat of serious injury from\nnon-NAFTA imports with respect to other welded pi pe was perfunctory and far from complying with\nthe standard set by the Appellate Body in previous safeguard cases. The additional information of the\nUSITC narrowly focuses on the price gap between non-NAFTA imports and domestic products.\nThen, the USITC states conclusively that \"excluding Canada and Mexico from the data base does not\nappreciably alter projections for foreign production, capacity, and exports to the United States.\nIndeed, capacity, production, and exports to the United States from non-NAFTA countries are all\nprojected to reach new peaks during the period 2001-2002\".\n4327 This conclusive statement was made\n\n4323 United States' first written submission, paras. 848-858.\n4324 China's first written submission, paras. 603–605; Switzerland's first written submission,\nparas. 356-357.\n4325 USITC Report, Vol. II, Table TUBULAR-6.\n4326 European Communities' first written submission, paras. 622-627. The detailed arguments are set\nout in the product-specific section on non-attribution (H.3(b)).\n4327 USITC Response to USTR Request For Additional Information, (Questions 1 and 3) (4 February\n2002), p.10 (Exhibit CC-11).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwithout any substantiation other than a footnote to a few tables in the USITC Report. Moreover, the\ntables do not support conclusions for which they are cited by the USITC. For example, the USITC\nasserted that the non-NAFTA capacity is projected to reach a new peak during the period 2001-2002.\nThe analysis of the tables cited by the USITC shows that the non-NAFTA capacity stood at\n17,383,373 tons in 1998 and 17,064,937 tons in 1999, while, according to the USITC table, it was\nprojected to drop to 16,988,276 tons in 2001 and 17,074,446 tons in 2002, respectively.\n4328 T h e\nperfunctory discussion of the impact of non-NAFTA imports is far from the Appellate Body's stated\nrequirements of a \"reasoned and adequate explanation\" of how the facts support their injury\ndetermination by conducting a substantive evaluation of the \"bearing\", or the \"influence\" or \"effect\"\nor \"impact\" that the relevant factors have on the situation of the domestic industry.\n4329 M o r e\nimportantly, the USITC failed to even acknowledge, much less explain, how it segregated the threat\nof injury it had determined to be caused by the largest single supplier to the United States market–i.e.,\nCanada–from all other imports. According to the USITC: Canada was the largest single supplier for\nthe three most recent years; the quantity of imports from Canada between 1999-2000 was 141%\ngreater than the quantity from the second largest supplier; between 1998-2000, Canada accounted for\nat least 35% of the imports; and imports from Canada increased their market share from 10.8% in\n1999 to 14.2% in 2000.\n4330 Korea concludes that the USITC clearly did not segregate the threat\ncaused by imports from Canada from the threat caused by non-NAFTA imports. Therefore, the\nUSITC failed to provide \"reasoned and adequate explanation\" that establishes explicitly that non-\nNAFTA imports, by themselves, satisfy the conditio ns for the application of a safeguard measure as\nset out in Article 2.1 and elaborated in Article 4.2. of the Agreement on Safeguards.\n4331 4332\n7.1833 The United States asserts that the USITC's report contains a reasoned and adequate\nexplanation of how the facts supported its conclusion that increased imports from non-NAFTA\ncountries threatened to cause serious injury to the domestic industry producing welded pipe. This\nanalysis satisfies all requirements of Articles 2.1 and 4.2 of the Agreement on Safeguards.\n4333 In its\nanalysis of non-NAFTA imports, the USITC f ound that non-NAFTA imports increased by 80.7%\nfrom 1996 to 2000, and had major increases of 20-30% in every year of the period examined except\n1999.4334 Non-NAFTA imports of welded pipe increased at a greater rate than imports from all\nsources.4335 Consequently, the European Communities' argument that the USITC Report provided\ninsufficient information concerning the nature and significance of the increases in non-NAFTA\nimports is wrong. The European Communities is also wrong to criticize the USITC for failing to find\nthat the increase was \"recent, sudden, sharp, and significant\", and for failing to use full-year 2001\ndata4336, because, as already argued, these are not the relevant criteria. USITC's analysis of all imports\nalso described the causal link between all imports an d the threat of serious injury in considerable\ndetail. The USITC determined that, through price-based competition, increased imports caused\ndomestic producers of welded pipe to lose market share at the same time prices were falling. The\nUSITC also determined that increases in exports to the United States market resulting from increases\nin foreign capacity would continue unabated in the imminent future. These elements collectively led\nto the domestic industry's continuing declines in production, sales volumes and revenues, and\n\n4328 USITC Response to USTR Request For Additional Information, (Questions 1 and 3) (4 February\n2002), p.10 (Exhibit CC-11).\n4329Appellate Body Report, US – Lamb, paras. 103 and 104 (emphasis in original).\n4330 USITC Report, Vol. I, pp. 166-167 (Exhibit CC-6).\n4331 Appellate body Report, US – Lamb , para. 103; Appellate Body Report, US – Wheat Gluten ,\npara. 98.\n4332 Korea's first written submission, paras. 195-199.\n4333 United States' first written submission, para. 871.\n4334 USITC Second Supplementary Report, p. 10.\n4335 USITC Report, Table TUBULAR-C-4.\n4336 European Communities' first written submission, paras. 622-623.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nemployment, as well as declines in its performance during the period of investigation, and would\nlikely continue to cause serious injury to the domes tic industry in the imminent future, if these trends\ncontinued unabated. In its analysis of non-NAFTA imports, the USITC found that each of these three\ncausal link elements was applicable for such imports. First, the non-NAFTA imports undersold the\ndomestically produced product in all but one quarter (32 of 33 quarters) for which data were available,\nand the prices for such imports declined over the period examined including during the most recent\nquarters.4337 The value of the non-NAFTA imports fell by an even greater amount during the period\nof investigation than did imports from all sources. 4338 Second, the non-NAFTA imports gained\nmarket share at the expense of the domestic industry. In its analysis of causal link for all imports, the\nUSITC emphasized the domestic industry's loss of market share to imports, particularly between 1999\nand 2000. In its analysis of non-NAFTA imports, the USITC found that market share for non-\nNAFTA imports increased from 13.1% in 1996 to 19.8% in 2000.\n4339 Non-NAFTA imports gained\n6.7 of the 10.5 percentage points of market share the domestic industry lost from 1996 to 2000. 4340\nThird, the USITC found that foreign capacity, production, and exports to the United States from non-\nNAFTA countries are all projected to reach new peaks during the period 2001-2002, and thus\nprojections regarding these factors for all imports were not appreciably altered by considering only\nnon-NAFTA imports.4341 In its analysis of all imports the USITC examined three factors other than\nincreased imports alleged to be causes of the threat of serious injury to the domestic welded pipe\nindustry. It found that these other factors (changes in demand, increased domestic capacity, and non-\nimport difficulties of a particular producer) did not cause the injury it observed. Because the USITC's\nanalysis of all imports contained the requisite discussion of these other factors to satisfy Article 4.2(b)\nof the Agreement on Safeguards, and its conclusions were not based upon the particular set of imports\nit examined, the USITC was not obliged to discuss these factors further in its analysis of non-NAFTA\nimports.\n4342\n7.1834 China argues that the United States wrongly considers that for each product analysed in the\nreport, the USITC properly established that in creased imports from non-NAFTA countries caused\nserious injury to the domestic industry. 4343 It is stated at page 167 of the USITC Report that Canada\nwas the top supplier of welded non-OCTG products to the United States for each of the most recent\nthree years in the period examined. The Report then goes on to state that the quantity of imports from\nCanada from 1998 to 2000 was 141% greater than the quantity of imports from the second largest\nsource during this three-year period. From 1998 to 2000, Canada also accounted for at least 35% of\nthe quantity of all imports during each year in this period. In addition, imports from Canada increased\ntheir market share by value from 10.8% in 1999 to 14.2% in 2000. At the same time, it is worth noting\nthat certain United States producers are integrated with Canadian producers and that no domestic\nproducer of welded pipe products took a posit ion regarding NAFTA exclusions during the injury\nphase of the investigation. Furthermore, at page 167, it is evident that Mexico was among the top five\nsuppliers of welded non-OCTG products to the United States in each of the most recent three years in\nthe period examined. Mexico was also the fourth largest supplier each year during 1998-2000 and the\nquantity of imports from Mexico increased by 94.7% from 1996 to 2000. However, at no time has the\nUSITC analysed the extent to which those specific characteristics of the Canadian and Mexican\nimports could have a specific impact on the injury caused to the United States industry, different from\nthe one attributable to non-NAFTA imports. Accordingly, China considers that the methodology used\n\n4337 USITC Second Supplementary Report, p. 10.\n4338 USITC Report, Table TUBULAR-C-4.\n4339 USITC Second Supplementary Report, p. 10; USITC Report, Table TUBULAR-C-4.\n4340 USITC Report, Table TUBULAR-C-4.\n4341 USITC Second Supplementary Report, p. 10; USITC Report, Tables TUBULAR-30-32.\n4342 United States' first written submission, paras. 861-870.\n4343 China's second written submission, para. 326.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nby the United States prevented it from establishing that the USITC did not attribute to non-NAFTA\nimports any effects due to NAFTA imports, as other factors.4344\n(g) FFTJ\n7.1835 China submits that the USITC supplemental finding on non-NAFTA import prices does not\nevaluate the share of the domestic market taken by non-NAFTA imports, it does not contain specific\nelements regarding the injury to the US industr y caused by non-NAFTA imports, it does not evaluate\nother factors relevant to the situation of the indu stry concerned, it does not make any finding on the\nrelationship between the movements in imports (volume and market share) and the movements in\ninjury factors, and it does not indicate explicitly whether \"the causal link\" exists between increased\nimports and serious injury, and whether this causal link involves a genuine and substantial\nrelationship of cause and effect between these two elements. The European Communities submits\nthat the USITC failed to carry out a proper increased imports and causation analysis for non-FTA\nimports. In particular, the USITC failed to separate and distinguish the impact of excluded imports\nand to ensure that these are not attributed to the imports covered by the safeguard measure. The\nEuropean Communities and China consider that the USITC Supplementary Report for this product\n\"does not establish explicitly that imports from sources covered by the measure 'satisf[y] the\nconditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in\nArticle 4.2 of the Agreement on Safeguards' [and ] does not amount to a 'reasoned and adequate\nexplanation of how the facts support [the] determination'\", in accordance with the Appellate Body's\ninterpretation.\n4345\n7.1836 The United States asserts that the USITC's report contains a reasoned and adequate\nexplanation of how the facts supported its conclusion that increased imports from non-NAFTA\ncountries caused serious injury to the domestic FFTJ industry. This analysis satisfies all requirements\nof Articles 2.1 and 4.2 of the Agreement on Safeguards. 4346 In its analysis of non-NAFTA imports,\nthe USITC found that non-NAFTA imports of FFTJ increased during the period of investigation.\nNon-NAFTA imports increased from 76,079 short tons in 1996 to 100,592 short tons in 2000; there\nwere annual increases during each year of the period of investigation except 1997. The ratio of non-\nNAFTA imports to United States production also increased during each year of the period of\ninvestigation except 1997, rising from 37.1% in 1996 to 51.8% in 2000. 4347 Consequently, the\nEuropean Communities' argument that the USITC Report provided insufficient information\nconcerning the nature and significance of the increases in non-NAFTA imports is wrong. The\nEuropean Communities is also wrong to criticize the USITC for failing to find that the increase was\n\"recent, sudden, sharp, and significant\", and for failing to use full-year 2001 data 4348, because these\nare not the relevant criteria. The USITC's analysis of all imports described the causal link between all\nimports and the serious injury in considerable detail. The USITC emphasized that the increasing\npresence of imports in the United States market from 1997 to 2000 coincided with declines in the\ndomestic industry's sales, production, capacity utilization, employment, and profitability. The USITC\nalso emphasized that, for the butt-weld pipe fitting product for which it collected pricing data, imports\n\n4344 China's second written submission, paras. 335-336.\n4345 China's first written submission, paras. 606–608; European Communities' first written submission,\nparas. 622-626; European Communities' second written submission, paras. 478-483. The detailed arguments are\nset out in the product-specific section on non-attribution (H.3(b)).\n4346 United States' first written submission, para. 883.\n4347 USITC Second Supplementary Report, p. 8. The USITC also found that non-NAFTA import\nvolume, both on an absolute basis and relative to United States production, was higher in interim 2001 than in\ninterim 2000. Ibid.\n4348 European Communities' first written submission, paras. 622-623.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconsistently undersold the domestically produced product, with the highest margins of underselling\noccurring at the conclusion of the period of invest igation. In its analysis of non-NAFTA imports, the\nUSITC found that the first of the three causal link elements on which it relied in its analysis of all\nimports – increasing import presence in the United States market – was applicable for non-NAFTA\nimports. The USITC specifically noted the increases in market share for non-NAFTA imports during\nits period of investigation. Indeed, non-NAFTA imports were responsible for 7.7 of the 8.8\npercentage points of market share the domestic industry lost between 1997 and 2000. 4349 The second\nelement in the USITC's analysis of causal link for all imports focused on domestic industry\nperformance data. Because these data did not change depending on which imports were being\nexamined, there was no need for the USITC to discuss this factor further in its analysis of non-\nNAFTA imports. The third element of the causal link analysis – underselling – was also applicable to\nnon-NAFTA imports, as the USITC found. Non-NAFTA imports undersold domestically-produced\nproducts by margins in excess of 20% for every quarter in the period of investigation after the third\nquarter of 1999.\n4350 Consequently, the USITC's analysis of non-NAFTA imports, when read in\nconjunction with the analysis of all imports, establishes that the considerations that establish the\nexistence of a genuine and substantial causal link between the increased imports and the serious injury\nwere the same whether all imports were examined or whether only imports from non-NAFTA sources\nwere examined. The USITC did not reach this conclusion by \"jump[ing] into some generalizations\",\nas alleged by the European Communities.4351 Instead, the USITC reached its conclusions on the basis\nof an objective, fact-based analysis of volume and pricing data specifically pertaining to non-NAFTA\nimports. In its analysis of all imports, the USITC examined five factors other than increased imports\nalleged to be causes of serious injury to the domestic FFTJ industry. It found that four of the five\nother factors (demand for oil and gas related products, increased capacity, industry inefficiency, and\nworker shortages) did not cause the injury it observed. Its analysis of the remaining factor, relating to\npurchaser consolidation, focused exclusively on dom estic industry data which also did not change\ndepending on which imports were being examined. Consequently, there was also no need for the\nUSITC to discuss this factor further in its analysis of non-NAFTA imports.\n4352\n7.1837 China argues that the United States wrongly considers that for each product analysed in the\nreport, the USITC properly established that in creased imports from non-NAFTA countries caused\nserious injury to the domestic industry. 4353 As stated in the USITC Re port at page 179, Canada was\nthe third largest supplier of FFTJ in each of the three recent years and thus was among the top five\nsuppliers. The USITC Report also indicates that imports from Canada have accounted for an\nincreasing share of total imports. Since 1998, imports from Canada have increased more than twice\nas fast (39.4%) as imports from all sources (15.6%) and Canada has accounted for 24.8% of the total\nincrease in imports from all sources since 1998. At the same time, Mexico has been one of the top\nfive suppliers of the product concerned and that imports had surged to an exceptionally high level in\n1998 (46% higher than the next highest year during 1996-2000). At the same time (Page 172 of the\nUSITC Report), it is indicated that in 1998 the domestic industry experienced several plant closures,\nand idle fitting and flange capacity. However, at no time has the USITC analysed the extent to which\nthose specific characteristics of the Canadian and Mexican imports could have a specific impact on\nthe injury caused to the United States industry, different from the one attributable to non-NAFTA\nimports. Accordingly, China considers that the methodology used by the United States prevented it\n\n4349 USITC Second Supplementary Report, p. 8; USITC Report, Table TUBULAR-C-6.\n4350 USITC Second Supplementary Report, p. 8; USITC Report, Table TUBULAR-61. The USITC\nalso made this finding in its analysis of all imports. USITC Report, p. 176.\n4351 European Communities' first written submission, para. 625; China raises a similar objection.\nChina's first written submission, para. 606.\n4352 United States' first written submission, paras. 873-882\n4353 China's second written submission, para. 326.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfrom establishing that the USITC did not attribute to non-NAFTA imports any effects due to NAFTA\nimports, as other factors.4354\n(h) Stainless steel bar\n7.1838 China submits that the USITC Supplementary Report does not evaluate other factors relevant\nto the situation of the industry concerned, does not make any finding on the relationship between the\nmovements in imports (volume and market share) and the movements in injury factors, and does not\nindicate explicitly whether \"the causal link\" exists between increased imports and serious injury, and\nwhether this causal link involves a genuine and substantial relationship of cause and effect between\nthese two elements. The European Communities submits that the USITC failed to carry out a proper\nincreased imports and causation analysis for non-FTA imports. In particular, the USITC failed to\nseparate and distinguish the impact of excluded impor ts and to ensure that these are not attributed to\nthe imports covered by the safeguard measure. The European Communities and China consider that\nthe USITC Supplementary Report for this product \"does not establish explicitly that imports from\nsources covered by the measure 'satisf[y] the conditions for the application of a safeguard measure, as\nset out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards' [and ] does not\namount to a 'reasoned and adequate explanation of how the facts support [the] determination'\", in\naccordance with the Appellate Body's interpretation.\n4355\n7.1839 The United States asserts that the USITC's report contains a reasoned and adequate\nexplanation of how the facts supported its conclusion that increased imports from non-NAFTA\ncountries caused serious injury to the domestic stainless steel bar industry. This analysis satisfies all\nrequirements of Articles 2.1 and 4.2 of the Agreement on Safeguards.\n4356 In its analysis of non-\nNAFTA imports, the USITC found that non-NAFTA imports increased by 61.1% from 1996 to 2000,\nand while the quantity of such imports fluctuated somewhat during the period of investigation, the\nlargest single increase occurred from 1999 to 2000 (when they increased by 42.1%).4357 Non-NAFTA\nimports of stainless steel bar increased at a greater rate than imports from all sources from 1996 to\n2000 and from 1999 to 2000.4358 Consequently, the European Communities' argument that the USITC\nReport provided insufficient information concerning the nature and significance of the increases in\nnon-NAFTA imports is wrong. The European Communities is also wrong to criticize the USITC for\nfailing to find that the increase was \"recent, sudden, sharp, and significant\", and for failing to use full-\nyear 2001 data\n4359, because these are not the relevant criteria. The analysis of all imports also\ndescribed the causal link between all imports and the serious injury in considerable detail. The\nUSITC determined that, through price-based competition, increased imports caused domestic stainless\nsteel bar producers to lose market share, particularly in the latter half of the period of investigation.\nThus, the basic elements of the finding of causal link relating to all imports were: (1) price-based\ncompetition between imports and the like product; and (2) imports gaining market share at the\nexpense of the domestically produced product. These elements collectively led to the stainless steel\nbar industry's declines in production, sales volumes and revenues, and employment, as well as its poor\nfinancial performance. In its analysis of non-NAFTA imports, the USITC found that each of the\ncausal link elements was applicable for such imports. First, the non-NAFTA imports were even more\n\n4354 China's second written submission, paras. 337-338.\n4355 China's first written submission, paras. 609–611; European Communities' first written submission,\nparas. 622-626 and European Communities' second written submission, paras. 478-483. The detailed arguments\nare set out in the product-specific section on non-attribution (H.3(b)).\n4356 United States' first written submission, para. 894.\n4357 USITC Second Supplementary Report, pp. 8-9.\n4358 USITC Report, Table STAINLESS-C-4.\n4359 European Communities' first written submission, paras. 622-623.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncompetitive on price with the domestically-produced product than were all imports, inasmuch as the\npercentage of price comparisons in which underselling occurred during the period was greater for\nnon-NAFTA imports than for all imports. The USITC found that the non-NAFTA imports undersold\nthe domestically produced product by margins of up to 51%.\n4360 The average unit values of the non-\nNAFTA imports fell by an even greater amount during the period of investigation than did imports\nfrom all sources. 4361 Second, the non-NAFTA imports gained market share at the expense of the\ndomestic industry. In its analysis of causal link for all imports, the USITC emphasized the domestic\nindustry's loss of market share to imports. In its analysis of non-NAFTA imports, the USITC found\nthat those imports were responsible for all of this loss, as they gained all 11 percentage points of\nmarket share the domestic industry lost from 1996 to 2000.4362 Consequently, the USITC's analysis of\nnon-NAFTA imports, when read in conjunction with the analysis of all imports, establishes that the\nconsiderations that establish the existence of a genuine and substantial causal link between the\nincreased imports and the serious injury were the same whether all imports were examined or whether\nonly imports from non-NAFTA sources were examined. The USITC did not reach this conclusion by\n\"jump[ing] into some generalizations\", as alleged by the European Communities.\n4363 Instead, the\nUSITC reached its conclusions on the basis of an objective, fact-based analysis of volume and pricing\ndata specifically pertaining to non-NAFTA imports.\n7.1840 The United States further argues that the USITC examined three factors other than increased\nimports alleged to be causes of serious injury to the domestic stainless steel bar industry. It found that\nthese other factors (changes in demand during late 2000 and 2001, increases in energy costs, and the\npoor operating results of two producers during the period) did not cause the injury it observed.\nBecause the USITC's analysis of all imports contained the requisite discussion of these other factors\nto satisfy Article 4.2(b) of the Agreement on Safeguards, and its conclusions were not based upon the\nparticular set of imports it examined, the USITC was not obliged to discuss these factors further in its\nanalysis of non-NAFTA imports. Moreover, the third factor, relating to two producers' performance,\nrelated exclusively to domestic industry data which also did not change depending on which imports\nwere being examined. Consequently, there was also no need for the USITC to discuss this factor\nfurther in its analysis of non-NAFTA imports. Thus, the USITC's analysis of non-NAFTA imports,\nwhen read in conjunction with its analysis of all imports, also establishes that the USITC did not\nattribute to non-NAFTA imports any effects due to factors other than imports. As discussed above, in\nits consideration of non-NAFTA imports the USITC did not need to conduct a separate non-\nattribution analysis for NAFTA imports.\n4364\n7.1841 China argues that the United States wrongly considers that for each product analysed in the\nreport, the USITC properly established that in creased imports from non-NAFTA countries caused\nserious injury to the domestic industry.4365 As indicated in the USITC Report, Canada was one of the\nfive largest suppliers of stainless steel bar during the last three full years of the period of investigation.\nThe Report further states that Canada's growth rate in interim 2001 was 20.4% while the growth rate\nfor all imports was a negative 17.1%. The USITC Report also notes that imports of Canadian\nstainless steel bar undersold domestic merchandise in seven out of ten possible price comparisons.\nHowever, at no time has the USITC analysed the extent to which those specific characteristics of the\nCanadian imports could have a specific impact on the injury caused to the United States industry,\n\n4360 USITC Second Supplementary Report, p. 9.\n4361 USITC Report, Table STAINLESS-C-4.\n4362 USITC Second Supplementary Report, p. 9; USITC Report, Table STAINLESS-C-4.\n4363 European Communities' first written submission, para. 625. China raises a similar objection.\nChina's first written submission, para. 609.\n4364 United States' first written submission, paras. 885–893.\n4365 China's second written submission, para. 326.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndifferent from the one attributable to non-NAFTA imports. Accordingly, China considers that the\nmethodology used by the United States prevented it from establishing that the USITC did not attribute\nto non-NAFTA imports (in this particular case, Canada) any effects due to NAFTA imports, as other\nfactors.\n4366\n(i) Stainless steel wire\n7.1842 The Europoean Communities and China submit that neither the USITC Report nor the USITC\nSupplementary Report contain any particular findings establishing \"explicitly\" that increased imports\nfrom non-NAFTA sources satisfy the conditions set out in Article 2.1 and elaborated in Article 4.2 of\nthe Agreement on Safeguards. The European Communities adds that the finding that this product\ndoes not \"contribute importantly to the serious injury or threat thereof\" in the USITC Report of\nOctober 2001 is not sufficient. For these reasons, the European Communities and China consider that\nthe United States, for this product, failed to respect its obligation under Articles 2.1 and 4.2 of the\nAgreement on Safeguards.\n4367\n7.1843 The United States asserts that the European Co mmunities is incorrect in complaining that the\nUSITC did not make a finding that non-NAFTA imports of stainless steel wire fulfilled the necessary\nconditions for applying a safeguard measure. 4368 Both Chairman Koplan and Commissioner Bragg\nprovided separate analyses of non-NAFTA imports relating to stainless steel wire. These analyses,\nread in conjunction with each Commissioner's discussion of other pertinent issues contained in his or\nher analysis of all imports, demonstrate that the analyses specifically considered all issues relating to\nimports from non-NAFTA sources. In his analysis of non-NAFTA imports, Chairman Koplan found\nthat Canada and Mexico together accounted for a small and declining share of apparent domestic\nconsumption over the period of investigation, while non-NAFTA imports accounted for an increasing\nshare, with a particularly notable increase occurring between the interim periods.\n4369 These were the\nsame import volume trends he had identified in his analysis of all imports. 4370 Chairman Koplan thus\nfound that the conclusions he had made concerning the effects of increased imports were equally\napplicable for non-NAFTA imports. 4371 Consequently, China's argument that the USITC Report\nprovided no particular findings establishing serious injury by non-NAFTA imports is wrong. 4372\nChairman Koplan provided the necessary analys is by demonstrating an increase in non-NAFTA\nimports in the latter portion of the period and by further demonstrating the genuine and substantial\ncausal link between non-NAFTA imports and the serious injury which threatened the domestic\nstainless steel wire industry. The nature of that threat of serious injury was discussed in great detail in\nChairman Koplan's analysis of all imports. Chairm an Koplan's analysis of all imports described the\ncausal link between all imports and the threat of serious injury in some detail. Chairman Koplan\nestablished a direct correlation between the signific ant increase in the market share of all imports in\ninterim 2001 and the substantial decline in the industry's condition in that period.\n4373 In his analysis of\nnon-NAFTA imports, Chairman Koplan found this causal link was applicable to non-NAFTA\nimports. Chairman Koplan specifically found that imports from Canada and Mexico did not account\nfor substantial shares of all imports during the period of investigation. He further specifically found\n\n4366 China's second written submission, paras. 339-340.\n4367 China's first written submission, paras. 616-617; European Communities' first written submission,\nparas. 614-615.\n4368 European Communities' first written submission, para. 614; China makes a similar objection.\nChina's first written submission, para. 616.\n4369 USITC Report, p. 260, footnote 36.\n4370 USITC Report, p. 259.\n4371 USITC Report, p. 260, footnote 36.\n4372 China's first written submission, paras. 616-617.\n4373 USITC Report, p. 258-259.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat non-NAFTA imports increased late in the period , with a particularly notable increase occurring\nbetween the interim periods, at the time the domestic industry's performance deteriorated. 4374\nChairman Koplan specifically found that non-NAFTA imports gained market share at the expense of\nthe domestic industry. In his analysis of all imports, Chairman Koplan emphasized the loss of market\nshare late in the period of investigation. In his analysis of non-NAFTA imports, Chairman Koplan\nfound that non-NAFTA imports were responsible for this loss. 4375 Consequently, Chairman Koplan's\nanalysis of non-NAFTA imports, when read in conjunction with his analysis of all imports,\nestablishes that the considerations that establish the existence of a genuine and substantial causal link\nbetween the increased imports and the threat of serious injury were the same whether all imports were\nexamined or whether only imports from non-NAFTA sources were examined. Chairman Koplan\nexamined the decline in demand as a factor other than increased imports alleged to be a cause of the\nthreat of serious injury facing the domestic stainless steel wire industry. Chairman Koplan found,\nhowever, that the declines in the domestic industry's production and shipments were greater than the\ntotal decline in apparent domestic consumption, and the volume of imports increased despite the\ndecline in demand.\n4376 Non-NAFTA imports accounted for all of that increase. Therefore, Chairman\nKoplan was not obliged to discuss this factor further in his analysis of non-NAFTA imports. Thus,\nChairman Koplan's analysis of non-NAFTA imports, when read in conjunction with his analysis of all\nimports, also establishes that he did not attribut e to non-NAFTA imports any effects due to factors\nother than imports. In his consideration of non-NAFTA imports Chairman Koplan did not need to\nconduct a separate non-attribution analysis for NAFTA imports.\n4377\n7.1844 The United States further argues that Commissioner Bragg performed her analysis of non-\nNAFTA stainless steel wire imports in the context of her like product encompassing stainless steel\nwire and stainless steel wire rope. Commission er Bragg found that non-NAFTA imports increased\nsignificantly, both in terms of import levels and trends. Commissioner Bragg found that non-NAFTA\nimports increased by 35.2% between 1996 and 2000. She further found that non-NAFTA imports\naccounted for a larger share of the domestic market in 2000 than in 1996, and that their market share\nwas larger in interim 2001 than in interim 2000. By interim 2001 non-NAFTA imports accounted for\n31.1% of the United States market. 4378 Commissioner Bragg's analysis also demonstrated that there\nwere imports \"in such increased quantities . . . and under such conditions as to cause or threaten to\ncause serious injury\" by demonstrating the genuine and substantial causal link between non-NAFTA\nimports and the threat of serious injury facing the domestic stainless steel wire products industry. The\nnature of that threat was discussed in detail in Commissioner Bragg's analysis of all imports.\nCommissioner Bragg's analysis of all imports also described the causal link between all imports and\nthe threat of serious injury in considerable detail. Commissioner Bragg found that increased imports\nat declining prices prevented domestic producers from taking advantage of increased consumption\nand threatened the domestic industry with serious injury.\n4379 Commissioner Bragg found that this\nanalysis was applicable for non-NAFTA imports as well. She found that prices for non-NAFTA\nimports declined between 1996 and 2000, and non-NAFTA imports undersold domestic products in\nthe majority of quarterly comparisons. She also emphasized that non-NAFTA imports took market\nshare away from the domestic industry. 4380 Consequently, Commissioner Bragg's analysis of non-\nNAFTA imports, when read in conjunction with her analysis of all imports, establishes that the\nconsiderations that establish the existence of a genuine and substantial causal link between the\n\n4374 USITC Report, pp. 259-260, footnote36.\n4375 USITC Report, p. 260, footnote 36.\n4376 USITC Report, p. 259.\n4377 United States' first written submission, paras. 907-916\n4378 USITC Second Supplementary Report, pp. 22-23.\n4379 USITC Report, pp. 301-302.\n4380 USITC Second Supplementary Report, p. 23.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincreased imports and the serious injury were the same whether all imports were examined or whether\nonly imports from non-NAFTA sources were examined. In her analysis of all imports, Commissioner\nBragg examined three factors other than increased imports alleged to be causes of the threat of serious\ninjury to the stainless steel wire products domestic industry. Commissioner Bragg examined the\ngeneral downturn in the economy, raw material costs, and the appreciation of the United States\ndollar.\n4381 Commissioner Bragg's findings concerning these factors were based on a combination of\noverall United States marketplace data and domestic industry data, neither of which changed\ndepending on which imports were being examined. Thus, there was no need for her to discuss these\nfactors further in her analysis of non-NAFTA imports. Consequently, Commissioner Bragg's analysis\nof non-NAFTA imports, when read in conjunction with her analysis of all imports, establishes that the\nconsiderations that establish the existence of a genuine and substantial causal link between the\nincreased imports and the serious injury were the same whether all imports were examined or whether\nonly imports from non-NAFTA sources were examined. Her analysis also establishes that she did not\nattribute to non-NAFTA imports any effects due to factors other than imports. In her consideration of\nnon-NAFTA imports Commissioner Bragg did not need to conduct a separate non-attribution analysis\nfor NAFTA imports. The analyses of non-NAFTA imports of both Chairman Koplan and\nCommissioner Bragg, when read in conjunction with the analysis of all imports, establish that the\nconsiderations that establish the existence of a genuine and substantial causal link between the\nincreased imports and the threat of serious injury were the same whether all imports were examined or\nwhether only imports from non-NAFTA sources were examined. Chairman Koplan and\nCommissioner Bragg reached their conclusions on the basis of an objective, fact-based analysis of\nvolume and pricing data specifically pertaining to non-NAFTA imports.\n4382\n(j) Stainless steel rod\n7.1845 The European Communities and China submit that neither the USITC Report nor the USITC\nSupplementary Report contain any particular findings establishing \"explicitly\" that increased imports\nfrom non-NAFTA sources satisfy the conditions set out in Article 2.1 and elaborated in Article 4.2 of\nthe Agreement on Safeguards. The European Communities adds that the finding that this product\ndoes not \"contribute importantly to the serious injury or threat thereof\" in the USITC Report of\nOctober 2001 is not sufficient. For these reasons, the European Communities and China consider that\nthe United States, for this product, failed to respect its obligation under Articles 2.1 and 4.2 of the\nAgreement on Safeguards.4383\n7.1846 The United States asserts that the USITC's report contains a complete and detailed analysis\nestablishing that increased imports from non-NAFTA countries caused serious injury to the domestic\nindustry producing stainless steel rod. This analysis satisfies all requirements of Articles 2.1 and 4.2\nof the Agreement on Safeguards. 4384 The European Communities and China overlook footnote 1437\nof the USITC's analysis of all imports. In that footnote, the USITC found that imports from Canada\nand Mexico accounted for an extremely small percentage of total imports during the investigation\nperiod.4385 In no single year of the period of investigation did combined imports from NAFTA\nsources exceed 0.08% of total imports. 4386 Exclusion of this volume of imports had no effect on the\nUSITC's increased import determination, as the timi ng and the rate of the changes in import volume\n\n4381 USITC Report, p. 302.\n4382 United States' first written submission, paras. 917-924.\n4383 China's first written submission, paras. 612-613; European Communities' first written submission,\nparas. 614-619.\n4384 United States' first written submission, para. 906.\n4385 USITC Report, p. 223, footnote 1437.\n4386 USITC Memorandum INV-Y-180, Table G26 (US-40).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwere essentially unchanged. Consequently, the European Communities' argument that the USITC\nReport provided insufficient information concerning the nature and significance of the increases in\nnon-NAFTA imports is wrong.\n4387 Additionally, the appropriate consideration under the Agreement\non Safeguards is not whether the increase in imports was \"recent, sudden, sharp, and significant\" in\nthe abstract, but whether there were imports \"in such increased quantities...and under such conditions\nas to cause or threaten to cause serious injury\". The USITC provided this analysis by demonstrating\nthe causal link between non-NAFTA imports and the serious injury experienced by the domestic\nindustry producing stainless steel rod. The nature of that injury was discussed in great detail in the\nUSITC's analysis of all imports. USITC's analysis of all imports described the causal link between all\nimports and the serious injury in considerable detail. The USITC determined that the increased\nquantities of imports caused domestic producers first to lose market share, then to lose revenue as they\nattempted to bring domestic prices into line with low-priced imports. There were several basic\nelements to the causal link finding: (1) high substitutability between imports and domestic\nmerchandise in a market where price was an important consideration; (2) import increases during a\nperiod of stable demand; (3) persistent underselling by imports; and (4) consequent losses by the\ndomestic industry of market share, production, ship ments, net commercial sales and net commercial\nrevenues. The USITC found a \"clear and direct correlation\" between changes in import volumes and\nthe overall condition of the industry.\n4388 In its analysis of non-NAFTA imports, the USITC found that\neach of these causal links was applicable to non-NAFTA imports. The USITC found specifically that\nexclusion of imports from Canada and Mexico did not change its volume or pricing analysis in any\nsignificant way.\n4389 Non-NAFTA imports exhibited the same trends in import volume and in\nunderselling as did imports from all sources. Consequently, the USITC's analysis of non-NAFTA\nimports, when read in conjunction with the analysis of all imports, establishes that the considerations\nthat establish the existence of a genuine and substantial causal link between the increased imports and\nthe serious injury were the same whether all imports were examined or whether only imports from\nnon-NAFTA sources were examined. In its analysis of all imports the USITC examined several\nfactors other than increased imports alleged to be causes of serious injury to the domestic industry\nproducing stainless steel rod. The USITC specifically examined: (1) demand declines late in the\nperiod; (2) energy cost changes late in the peri od; and (3) the \"aberrational\" performance of one\ndomestic producer. The USITC identified and discussed in detail the nature and extent of any adverse\neffects attributable to each of these factors during the period of investigation and thus ensured it did\nnot attribute to imports any injury caused by another factor. The USITC's analysis of what effects, if\nany, were attributable to those other factors is also equally applicable to non-NAFTA imports. In its\ndiscussion of all imports, the USITC distinguished from the serious injury attributable to imports any\neffects attributable to declines in demand. It noted that demand declines only occurred late in the\nperiod under investigation.\n4390 By contrast, the domestic industry had experienced declines in market\nshare, production volumes, sales, employment, and profitability before the decline in demand began\nbut after import volumes had increased. 4391 As the USITC noted in its analysis of non-NAFTA\nimports, the volume and pricing of non-NAFTA imports followed the same trend over the period of\ninvestigation as did imports from all sources; indeed, non-NAFTA imports accounted for essentially\nall imports and all underselling observations. 4392 Thus the USITC's conclusion regarding the nature\nand extent of injury attributable to increased imports was unchanged, and the USITC was not obliged\nto further discuss demand declines in its analysis of non-NAFTA imports. The examination of the\nremaining two factors – increased energy costs and the poor performance of one domestic producer\n\n4387 European Communities' first written submission, para. 614.\n4388 USITC Report, pp. 220-221.\n4389 USITC Report, p. 223, footnote 1437.\n4390 USITC Report, p. 221.\n4391 USITC Report, p. 221.\n4392 USITC Second Supplementary Report, p. 5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nduring the period of investigation – pertained exclusively to domestic industry data which did not\nchange depending on which imports were being examined. Consequently, there was also no need for\nthe USITC to discuss these factors further in its analysis of non-NAFTA imports. Thus, the USITC's\nanalysis of non-NAFTA imports, when read in conjunction with its analysis of all imports, also\nestablishes that the USITC did not attribute to non-NAFTA imports any effects due to factors other\nthan imports. As discussed above, in its consideration of non-NAFTA imports the USITC did not\nneed to conduct a separate non-attribution analysis for NAFTA imports.\n4393\nL. ARTICLE 5.2 OF THE AGREEMENT ON SAFEGUARDS AND ARTICLE XIII OF GATT 1994\n1. Basis for determining overall quota level\n7.1847 China argues that the basis upon which the United States allocated the shares of the quota for\nslab in setting the tariff rate quota for that product is unclear. 4394 In particular, China argues that\ntaking into account the official United States statistics, the overall quota for the first year (5.4 million\nshort tonnes) was fixed at a very low level in light of former trade. 4395 China argues that, except for\nthe six first months of 2001 and for 1997 (5.3 million tons), imports in the United States were always\nhigher than 5.3 million tons. For the other years (1996, 1999 and 2000), the volume of imports was\nvery large (6.2 million tons, 7.3 million tons and 7.2 million tons respectively).\n4396 China argues that,\ntherefore, it was not possible to fix an overall quo ta at 5.4 million tons. According to China, this\nfixation should be considered a violation of Article 5.2 of the Agreement on Safeguards and\nArticle XIII of the GATT 1994.4397\n7.1848 In response, the United States argues that it based the total quota amount of 5.4 million tons\non imports of slab during 2000, exclusive of FTA imports that were not subject to the safeguard\nmeasures.4398 The United States submits that the year 2000 happened to be the year with the highest\nimport levels of slab during the USITC's investigation period.4399\n2. Allocation of shares of tariff rate quotas and \"substantial interest\"\n7.1849 China also notes that it has not been granted any specific quota in respect of the safeguard\nmeasure for slab and is included in the volume allocated to \"all other\" countries. 4400 China points to\nArticle 5.2 of the Agreement on Safeguards and argues that pursuant to this Article, a Member shall\nallot shares of the tariff rate quota to Members \"having a substantial interest\". The same terminology\nalso exists in Article XIII of the GATT 1994, which provides that \"the contracting party concerned\nshall allot to contracting parties having a substant ial interest in supplying the product shares based\nupon the proportions\".4401\n7.1850 China argues that following the approach of the Panel in the EC – Bananas III case, a\nMember having a \"substantial interest\" may be defined as a Member with a share of at least 10% of\nthe total imports in the country concerned. For countries with a share between 5% and 10%, a case by\n\n4393 United States' first written submission, paras. 895–905.\n4394 China's first written submission, para. 628.\n4395 China's first written submission, para. 629.\n4396 China's first written submission, para. 630.\n4397 China's first written submission, para. 631.\n4398 United States' first written submission, para. 1216.\n4399 United States' first written submission, paras. 1215 and 1226.\n4400 China's first written submission, para. 632.\n4401 China's first written submission, para. 634.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncase analysis should be conducted. For countries with a share between 0% and 5%, it should be\nconcluded a priori that these countries do not have a substantial interest.4402\n7.1851 China submits that it does not seem to reach a sufficient percentage for slabs imports in order\nto have a \"substantial interest\" since China's share accounts for less than 1% during the period). 4403\nHowever, China argues that even if it has no \"substantial interest\" for slabs imports, the United States\nshould still not be allowed to discriminate between WTO Members.\n4404 China notes in particular that\nin the EC – Bananas III case, the Appellate body confirmed that the non-discrimination principle\napplies to the allocation of shares in a tariff ra te quota, and implies, in particular, that a Member\ncannot \"allocate tariff quota shares to some Members not having a substantial interest while not\nallocating shares to other Members who likewise do not have a substantial interest\" .4405 In this\nregard, China submits that, in the present case, the United States allotted shares of the tariff quota to\ncertain Members not having a \"substantial interest\" for slabs. For example, China notes that the\nmarket shares of certain countries were far below 5% (Ukraine and Japan). Moreover, China submits\nthat for Russia (7.45%) and Australia (6.38%), the assessment of their \"substantial interest\" was\nhighly questionable.\n4406\n7.1852 China argues that, therefore, it appears that the United States allotted shares of the tariff quota\nto WTO Members (at least Japan and Ukraine) not having a \"substantial interest\" for slabs, while they\ndid not do the same for other Members (such as China). 4407 China, therefore, considers that the\nsafeguard measure on slabs must be regarded as incompatible with Article 5.2 of the Agreement on\nSafeguards and Article XIII of the GATT 1994.\n4408 In this regard, China further argues that the Panel\nin US – Line Pipe established that Article 5 of the Agreement on Safeguards and Article XIII of the\nGATT 1994 may be relied upon simultaneously to analyse a safeguard measure. 4409 C h i n a f u r t h e r\nnotes that, according to Article XIII.5, these requirements also apply to tariff rate quotas. In\nparticular, China argues that Article XIII.2(d), whose wording is identical to Article 5.2(a) of the\nAgreement on Safeguards, applies to the allocation of shares of a tariff rate quota in the context of a\nsafeguard measure.\n4410\n7.1853 With regard to the argument that the tariff allocation system is inconsistent with Article 5.2\nand Article XIII because it provided allotments to some Members that were not substantial suppliers\nwhile failing to provide allotments to other Memb ers, including China, that were not substantial\nsuppliers, the United States relies upon the Panel decision in US – Line Pipe to argue that Article 5.2,\nwhich applies to quantitative restrictions, does not apply to safeguard measures that take the form of a\ntariff rate quota.\n4411 The United States submits in response to the assertion by China that the Panel in\nUS – Line Pipe decided that Article 5 and Article XIII could apply simultaneously to analyse a\nsafeguard measure, that the Panel actually reached the opposite conclusion with regard to safeguard\nmeasures in the form of a tariff rate quota.4412 It notes that the Panel found that \"[w]e do not consider\nthat tariff quotas are ‘quantitative restriction[s]' within the meaning of Article 5\" and that \"[s]ince we\nhave already found that a tariff quota is not a ‘quantitative restriction' (a broader category including\n\n4402 China's first written submission, para. 635.\n4403 China's first written submission, para. 636.\n4404 China's first written submission, para. 637.\n4405 China's first oral statement, para 8.\n4406 China's first written submission, para. 638.\n4407 China's first written submission, para. 639.\n4408 China's first written submission, para. 640.\n4409 China's first written submission, para. 621.\n4410 China's first oral statement, para 5.\n4411 United States' first written submission, para. 1220.\n4412 United States' first written submission, para. 1221.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nquota) within the meaning of Article 5.1, it cannot constitute a ‘quota' (a narrower category of\nquantitative restriction) within the meaning of Article 5.2(a).\" 4413 However, the United States does\nagree that Article XIII:2 applies to the allotment of shares under a tariff rate quota in accordance with\nArticle 5 of the Agreement on Safeguards.4414\n7.1854 China responds by referring to the following language in the EC – Bananas III case: \"As\nprovided in paragraph 5, Article XIII also applies to tariff quotas. Article XIII:1 sets out a basic\nprinciple of non-discrimination in the administration of both quantitative restrictions and tariff\nquotas\". China submits that, as a consequence, Article XIII:2(a) whose wording is identical to\nArticle 5.2(a) of the Agreement on Safeguards, shall apply to the allocation of shares of a tariff rate\nquota in the context of a safeguard measure. China asserts that, therefore, should Article 5.2 of the\nAgreement on Safeguards not apply, as the United States claims, to safeguard measures that take the\nform of a tariff rate quota, the allocation of shares in this tariff rate quota should remain subject to\nArticle XIII.2 (a) of the GATT 1994, which imposes the same requirements as those formulated in\nArticle 5.2(a), on a Member applying a safeguard measure. China argues that, nonetheless,\nArticle 5.2(a) whose wording is identical to Article XIII.2(a), should apply to the allocation of shares\nof a tariff rate quota.\n4415\n7.1855 The United States notes that China ascribes to the Panel in EC – Bananas III an \"approach\"\nunder which a Member with at least 10% of total im ports is automatically a substantial supplier, a\nMember with less than 5% of total imports is automatically not a substantial supplier, and a case-by-\ncase analysis is applied to Members with between 5% and 10% of total imports.\n4416 In deriving a\nnumerical test from the EC – Bananas III Panel Report, the United States submits that China does\nexactly what the Panel stated it would not do. A ccording to the United States, the Panel not only\nrejected precise numerical thresholds in general, but specifically rejected the 10% threshold proposed\nby the complainants.4417 The United States submits that the Panel's finding in that case that it was not\nunreasonable for the European Communities to conclude that Colombia and Costa Rica were the only\ncontracting parties that had a substantial interest in supplying the European Communities banana\nmarket in terms of Article XIII:2(d) was tightly circumscribed and conditioned on the \"particular\ncircumstances\" of the case. According to the United States, that finding cannot be read to create a set\nof presumptions as to what share of imports gives a supplier a \"substantial interest in supplying the\nproduct\" in the meaning of Article XIII:2(d). Acco rdingly, the US approach of setting a two-percent\nthreshold for treatment as a substantial supplier in light of the conditions of the slab market, rather\nthan using numerical thresholds based on the market for a different product, was consistent with\nArticle XIII:2(d).\n4418\n7.1856 China argues that although it is true that the Panel, in the EC – Bananas III case, also stated\nthat \"a determination of substantial interest might well vary somewhat based on the structure of the\nmarket\", it should be underlined that a \"substantial interest\" cannot be determined arbitrarily and\ncannot correspond to negligible amounts. According to China, this analysis may entail a comparative\nexercise that is based on the structure of the market. This involves an assessment of the position of\nthe different suppliers of the product concerned on this market. This, argues China, is confirmed by\n\n4413 United States' first written submission, para. 1220, citing Panel Report, US – Line Pipe, paras. 7.69\nand 7.73-7.74.\n4414 United States' written reply to Panel question No. 64 at the second substantive meeting.\n4415 China's second written submission, paras. 348-351.\n4416 United States' first written submission, para. 1222.\n4417 United States' first written submission, para. 1223.\n4418 United States' first written submission, paras. 1224-1225.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe reasoning of the Panel in the EC – Bananas III case, which based its conclusions regarding the\nidentification of Members having a substantial interest on the level of their market shares.4419\n7.1857 China submits that, in this particular case, it is clear that a 2% threshold cannot be considered\nas corresponding to a \"substantial\" interest in the supply of slabs. According to China, this is\nparticularly true considering the shares of imports of the main suppliers as determined by the United\nStates. Based on the total of imports for 2001, Brazil's share is 39.20%, Mexico's is 23.52% and\nRussia's is 18.83%. Based on the total of non-NAFTA imports for 2001, Brazil's share is 51.84% and\nRussia's is 24.90%. In comparison to these data, China submits that it seems unreasonable to consider\nthat Members with a share of only 2% of imports have the same \"substantial\" interest as these major\nsuppliers.\n4420 Accordingly, it seems reasonable to consider that the thresholds identified by the Panel\nin the EC – Bananas III case and which, in China's understanding, reflect the common practice of\nWTO Members, should also apply in the present case.4421\n7.1858 China further asserts that although, according to the data provided by the United States related\nto the top ten suppliers, there were three countries (Canada, Venezuela and China) below the 2%\nlevel, imports from those countries were not treated in the same way, and that indeed while imports\nform Canada and Venezuela were finally excluded from the scope of the safeguard measures, imports\nfrom China were fully subject to the import restrictions on slabs without any specific allocation in the\ntariff rate quota.\n4422\n7.1859 The United States counter argues that China has failed to meet its burden of proof in objecting\nthat the 2% threshold chosen by the United States is too low. According to the United States, China\nappears to make the argument that a Member cannot have a substantial interest if any other source\naccounts for a significantly greater share of imports, which is not the standard applied by Article XIII.\nThe United States argues that Article XIII simply states that a Member is entitled to an allotment of a\ntariff rate quota it is has a \"substantial interest in supplying the product\" and does not impose\nobligations regarding how a Member applying tariff rate quotas determine whether another Member\nhas a substantial interest and so the United States was entitled to base its compliance with Article XIII\nsolely on the volume of another Member's shipments, on its share of imports, or any other information\nthat would establish that the other Member has a substantial interest in supplying the product. The\nUnited States argues that elsewhere even China seems to argue for an absolute rule that countries\naccounting for at least 10% of imports must be treated as having a substantial interest. This would\nmean that a Member could thereby meet this threshold regardless of whether another source accounts\nfor a significantly greater share of imports.\n4423\n7.1860 The United States argues as regards the suggestion that it treated differently Members with\nless than a 2% market share, that except for developing countries and FTA partners that were\nexcluded entirely from the safeguard measure, the United States did treat these Members in the same\nmanner.4424\n\n4419 China's written reply to Panel question No. 63 at the second substantive meeting.\n4420 China's second written submission, paras. 356-357.\n4421 China's first oral statement, paras. 10-12.\n4422 China's written reply to Panel question No. 66 at the second substantive meeting.\n4423 United States' written reply to Panel question No. 63 at the second substantive meeting.\n4424 United States' written reply to Panel question No. 66 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n3. Period for determining \"substantial interest\"\n7.1861 The United States submits that it considered the one-year period of 2001 to be a recent,\nrepresentative period for shares of imports. Therefore, the USITC based the identification of\nsubstantial suppliers and allotments of the duty-free quantity among substantial suppliers on shares of\ntotal imports in 2001. In so doing, the United States argues that it complied fully with the obligation\nunder Article XIII:2(d) to provide allotments to substantial supplying Members \"based upon the\nproportions, supplied by such Members during a previous representative period\". 4425 T h e U n i t e d\nStates submits that it decided that in light of the size of the US market for slab and the large quantity\nof imports, 2% of total imports was an appropriate threshold in this case. Consistent with these\nconsiderations, the United States treated as substantial suppliers all countries that exceeded 2% of\ntotal imports in 2001\n4426, and provided specific allocations only to those countries that it considered to\nhave a substantial interest.4427 The United States notes in this regard that, with the exception of Brazil\nand Mexico, the share of total imports held by each source fluctuated to a large degree from year to\nyear. The use of 2001 import share data had the additional benefit of treating as substantial suppliers\nonly countries that had consistently supplied more than 2% of imports. Thus, according to the United\nStates, the identification of substantial suppliers was not based on temporary fluctuations in import\nshares.\n4428 China argues that based on full-year imports data for 2001 there would be a cluster of\ncountries with a market share above 18%, and a cluster of countries with a market share below 6%,\nbeing understood that no other country is to be found between these two thresholds. According to the\nsame logic, but based on the supplied quantities, on would identify a cluster of countries that have\nsupplied over 1,000,000 tons, and a cluster of countries that have supplied less than 400,000 tons.\nAccording to China, those are also clear dividing lines. 4429 China noted that the United States based\nits determinations of substantial suppliers on data concerning the full year 2001, i.e. data that were\nsupposed not to be available by the time of the adoption of the safeguard measure. However, this\nimplies that the justifications given by the United States in its first written submission and in its\nanswers to the questions of China are based on data that were included neither in the USITC report\nnor in the proclamation and therefore have not been communicated to the interested parties.\n4430\n7.1862 The United States also argues that its use of data for the year 2001 for determination of\n\"substantial interest\" was not inconsistent with the USITC's analysis of whether imports increased.\nAccording to the United States, the \"\"substantial in terest\"\" standard arises under Article XIII:2(d),\nwhich provides that a Member allocating a TRQ among other Members must allot shares to Members\n\"having a substantial interest in supplying the product . . . based upon the proportions, supplied by\nsuch [Members] during a previous representative period, of the total quantity or value of imports of\nthe product\". The United States argues that, however, Article XIII provides no guidance for\ndetermining what constitutes a \"previous representative period\", and the Agreement on Safeguards\ndoes not require that the period used be cotermi nous with or subsumed within the investigation\nperiod. The United States submits that there can be no question that 2001 was \"recent\" at the time of\nthe safeguard measures. Data for that year was also representative of import patterns. The United\nStates asserts that it was, therefore, entirely cons istent with Article XIII:2 for the President to use\n2001 as the recent representative period.\n4431\n\n4425 United States' first written submission, para. 1215.\n4426 United States' first written submission, para. 1216.\n4427 United States' written reply to Panel question No. 67 at the second substantive meeting.\n4428 United States' first written submission, para. 1217.\n4429 China's second written submission, paras. 366-368.\n4430 China's second written submission, para. 359.\n4431 United States' written reply to Panel question No. 65 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nM. ARTICLE 9.1 OF THE AGREEMENT ON SAFEGUARDS (SPECIAL AND DIFFERENTIAL TREATMENT)\n1. Identification of developing countries for the purposes of Article 9.1\n7.1863 China argues that the United States unilaterally and arbitrarily links developing country status\nof Article 9.1 of the Agreement on Safeguards with the United States' Generalised System of\nPreferences. In this regard, China points out that within the context of the GSP – a unilateral\ninstrument – the donor country has clear discretion in deciding the list of beneficiaries. 4432 C h in a\nfurther points out that there may be GSP schemes (including the United States GSP) that include\ncriteria for country eligibility, which are unrelated to the level of development. Accordingly, if a\ncountry is excluded from the United States GSP, this does not necessarily mean that this country is\nnot a developing country.\n4433 The application of such criteria would allow a WTO Member to exclude\ncountries, which level of development would qualify them under the generally accepted term of\n\"developing country\" from the benefit of GSP Schemes for reasons other than considerations based on\nthe level of development, and that such criteria would allow a country to select their GSP\nbeneficiaries and to discriminate between countries whose level of development would allow them to\nbe objectively considered as \"developing countries\".4434 Further in China's view, it is not possible that\na single Member be considered a developing country by, say, the United States and not the European\nCommunities and others in respect of the same dispute or the same provision. To proceed otherwise\nwould deprive WTO developing country Members from all legal certainty as far as their rights and\nobligations under WTO Agreements are concerned. To proceed otherwise would also be in\ncontradiction with the need for a multilateral approach of the \"special and differential treatment\"\nprovisions within the WTO.\n4435\n7.1864 In response, the United States argues that it is possible that a single Member be considered a\ndeveloping country by, say the United States, and not the European Communities and others in\nrespect of the same dispute or the same provision. By way of example, the United States notes that it\ntreated Albania, Bulgaria, Croatia, the Czech Republic, Estonia, Georgia, Kyrgyzstan, Latvia,\nLithuania, Moldova, Romania, Slovakia, Slovenia, Hungary, Poland, and Turkey as developing\ncountry Members in the application of its steel safeguard measures whereas the European\nCommunities treated none of these Members as developing countries when it applied its own\nsafeguard measures on steel.\n4436 The United States argues that China itself has accepted this principle\nby agreeing in its Protocol of Accession to developing country treatment in some areas, and non-\ndeveloping country treatment in others. 4437 The United States argues further that these differences\narise from the text of Article 9.1, which does not indicate how a Member must comply with its\nobligations under that Article. Since it is an obligation relating to application of a safeguard measure,\nit falls to the Member applying a measure to iden tify, in the first instance, Members eligible for\ntreatment as developing countries for purposes of Article 9.1. Since different Members may apply\ndifferent procedures, they may reach different results.4438\n7.1865 The United States acknowledges that, for each of the ten safeguard measures, it identified\ndeveloping country Members in keeping with its list of countries eligible for the its GSP, a program of\n\n4432 China's first written submission, para. 655.\n4433 China's first written submission, para. 656.\n4434 China's first oral statement, paras. 24 and 25.\n4435 China's written reply to Panel question No. 127 at the first substantive meeting.\n4436 United States' written reply to Panel question No. 127 at the first substantive meeting.\n4437 United States' written reply to Panel question No. 126 at the first substantive meeting.\n4438 United States' written reply to Panel question No. 127 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbenefits for developing countries.4439 The United States notes in this regard that the WTO Agreement\ndoes not define the term \"developing country\" nor does it establish a procedure or method for\ndetermining when a Member qualifies for that status.\n4440 The United States argues that, therefore, in\nassessing this claim, the Panel need not address the procedure used by the United Sates for identifying\ndeveloping country Members as a general matter. 4441 According to the United States, under\nArticle 9.1, it is the Member applying a safeguard measure that has the obligation to identify the\ndeveloping country Members not subject to application of the measure. This conclusion, argues the\nUnited States, derives from the ordinary meaning of Article 9.1 and its context within the Agreement\non Safeguards and WTO Agreement. 4442 The United States further argues that this conclusion is\nconfirmed by the requirement in footnote 2 to Arti cle 9.1 that \"[a] Member shall immediately notify\nan action taken under paragraph 1 of Article 9 to the Committee on Safeguards\". Neither the footnote\nnor the Article 12 rules for making notifications provides any role in this process for exporting\nMembers, indicating that the importing Member alone has the obligation to identify which Members\nare developing country Members and which of those to exclude. The United States submits that the\nstructure of Article 12 supports this conclusion. Under that article, the Member that makes a decision\nor takes an action with respect to a safeguard measure is the party that provides notification of such\ndecision or action.\n4443 The United States asserts that the Appellate Body confirmed this interpretation\nin US – Line Pipe, when it stated, \"[w]e agree with the United States that Article 9.1 does not indicate\nhow a Member must comply with this obligation\". 4444 Therefore, according to the United States, the\nArticle 9.1 requirement that the Member taking a safeguard measure notify any exclusion of\ndeveloping country Members demonstrates that it is the Member taking the measure that has the\nobligation to decide which countries qualify for exclusion.4445\n7.1866 The United States asserts further that since the obligation falls upon the application of the\nmeasure, it is the Member applying the measure that must determine how to comply. Article 9.1\nassigns no obligation concerning or role in this identification process to exporting Members,\ndeveloping country or otherwise.\n4446 According to the United States, this approach will seldom create\ndifficulties because, in most cases, Members have not disagreed as to the treatment they will afford\neach other.4447 The United States argues that since the Member applying the measure is responsible\nfor compliance with Article 9.1, it must identify which Members are developing countries for the\npurposes of the Agreement on Safeguards, and whether imports from those sources are below the 3%\nthreshold.4448\n7.1867 The United States also notes that development status factors into the first, second, and third\ncriteria for GSP eligibility under section 502(c) of the Trade Act of 1974. The United States argues\nthat these development criteria are introduced by the phrase \"shall take into account\", which\ndemonstrates that they are required criteria. 4449 Moreover, under section 502(b)(1) of the Trade Act,\n\n4439 United States' first written submission, para. 1258.\n4440 United States' first written submission, para. 1261.\n4441 United States' first oral statement, para. 81.\n4442 United States' first written submission, para. 1259.\n4443 United States' first written submission, para. 1264.\n4444 United States' first written submission, para. 1263.\n4445 United States' first written submission, para. 1264.\n4446 United States' first written submission, para. 1260.\n4447 United States' first written submission, para. 1262.\n4448 United States' first written submission, para. 1261.\n4449 United States' second oral statement, para 151.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nspecific developed countries – Australia, Canada, EU member states, Iceland, Japan, Monaco, New\nZealand, Norway, and Switzerland – may not be designated as GSP beneficiaries.4450\n7.1868 China however counter-argues that the criteria under the first second and third criteria Section\n502 (c) are discretionary. Further, there are a number of other discretionary criteria which have\nnothing to do with development status such as Section 502 (c) (4), which deals with access to markets\nand export practices. China submits that there are also seven 4451 other mandatory criteria which are\nunrelated to development status, contained in Section 502 (b), which excludes for instance a country\nfrom GSP beneficiary status if it is dominated or controlled by international communism. 4452 China\nargues that allowing the United States to base their decision on the GSP–eligible beneficiaries list\nmeans that the United States would have the possibility to exclude China from the benefit of\nArticle 9.1 for this safeguard case, or any future case, for reasons that have nothing to do with\ndevelopment. China argues that it is in acknowle dgement of this problem that President Bush issued\nthe 3 July Proclamation allowing the USTR to add developing countries to the United States GSP\nList.\n4453\n7.1869 China notes that, in the present case, the US Pr esident affirmed that \"For purposes of the\nsafeguard measures established under the Proclamation, I determine that the beneficiary countries\nunder the Generalized System of Preferences are developing countries\". 4454 China argues that this\nstatement establishes a clear link between the United States GSP and the developing country status\nunder Art 9.1 of the Agreement on Safeguards. According to China, the United States confirmed this\nlink by stating that:\"…the Presiden t determined that the GSP list of countries encompasses all the\ncountries eligible for treatment as developing country Member under Article 9.1,……and that the list\nin subdivision (d)(i) contains all developing countries that are also WTO Members\". China argues that\nthere would seem to be a contradiction between this statement and the text of a presidential\nproclamation of 3 July 2002. Indeed, paragraph 1 of this proclamation states that: \"The USTR is\nauthorized, upon publication of a notice in the Federal Register of his determination that it is\nappropriate to add WTO member developing countries to the list of countries in subdivision (d)(i) of\nNote 11, to add such countries to that list\". According to China, this clearly demonstrates that the list\nin subdivision (d)(i) did not necessarily cover all the developing countries that are WTO Members.\n4455\nChina argues that such a determination is not acceptable as far as China is concerned. Indeed, the fact\nthat a WTO Member is excluded from the United States GSP cannot be a reason, in itself, to consider\nthat it is not a developing country within the meaning of Article 9.1 of the Agreement on\nSafeguards.\n4456\n7.1870 China notes in this context that, in the past, opposition had already been voiced in the WTO\nover the manner in which the United States had excluded a developing WTO Member from eligibility\nunder Article 9.1 of the Agreement on Safeguards on the grounds that the developing Member was\nnot included in the preference-giving piece of legislation. China relies upon statements made by two\nMembers in meetings of the Committee on Safeguards, to the effect, inter alia , that \"it had been\n\n4450 United States' written reply to Panel question No. 126 at the first substantive meeting.\n4451 China's second oral statement, para. 25.\n4452 China's second written submission, para. 398, China's second oral statement, para. 24.\n4453 China's second written submission, paras. 399-400.\n4454 China's first written submission, para. 653.\n4455 China's first oral statement, paras. 18-20.\n4456 China's first written submission, para. 654.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlongstanding GATT practice that developing country status was self-elected, and that this practice had\nnot changed since the coming into force of the WTO\". 4457\n7.1871 With respect to the argument that the long-standing practice under the GATT and the WTO\nhas been that the determination of a Member's development status is by self-selection, the United\nStates submits that China provides no evidence of such a practice in defining or interpreting the rights\nand obligations of Members. Instead, China has offered, in support, a statement representing the\nviews of two Members. China fails to establish the legal relevance of such a practice even if it\nexisted, since that \"practice\" would not contribute to the definition of a developing country Member\nbut only indicate individual Members who considered that they met the definition. The United States\nsubmits that the statements referred to by China are not an authoritative, or even indicative, statement\nof the practice of the Members. According to the United States, in fact, the WTO does not even have\nan established procedure for Members to register their claim to be a developing country Member.\nUnder China's reasoning any and all WTO Members could claim benefits intended for developing\ncountries which would effectively read out of Article 9.1 the term \"developing\".\n4458\n7.1872 The United States also argues that China has not established that its identification of\ndeveloping country members in keeping with the GSP list is inconsistent with the Agreement on\nSafeguards. In this regard, the United States argues that it applied Article 9.1 in keeping with the list\nof developing countries that are eligible for special and differential treatment under the US GSP. The\nUnited States asserts that there is nothing about the US GSP list that establishes an inconsistency with\nArticle 9.1.4459\n7.1873 China argues that the US President affirmed that: \"For purposes of the safeguard measures\nestablished under the Proclamation, I determine that the beneficiary countries under the Generalized\nSystem of Preferences are developing countries\". 4460 China notes that the US President did not say\nthat, \"for the purposes of the safeguard measures established under the Proclamation, \"developing\ncountries\" within the meaning of Article 9.1 of the Agreement on Safeguards are the beneficiary\ncountries under the GSP\".\n4461 China argues that such a particularly convoluted wording from the\nUnited States authorities reveals that a WTO Member that is not a beneficiary country under the\nUnited States GSP may still be classified as developing country in the context of Article 9.1 of the\nAgreement on Safeguards.4462\n7.1874 China also notes that the \"positive list\" of developing countries excluded from the application\nof the United States measures is given, in subdivision d(i) of point 11 of the Annex to the Presidential\nProclamation, with the following statement: \"… the following developing countries that are members\nof the World Trade Organization shall not be subject to the rates of duty and tariff-rate quotas\nprovided for therein\".\n4463 China asserts that this statement also reveals that not all the developing\ncountries that are Members of the WTO are excluded from the United States' measures.4464\n7.1875 The United States argues that the relevant documents do not support China's claim that the\nUnited States failed to exclude members that the United States considered to be developing country\nmembers. China notes that the introductory text to subdivision (d)(i) states that \"the following\n\n4457 China's first written submission, para. 658.\n4458 United States' first written submission, para. 1261.\n4459 United States' first written submission, para. 1270.\n4460 China's first written submission, para. 661.\n4461 China's first written submission, para. 662.\n4462 China's first written submission, para. 663.\n4463 China's first written submission, para. 664.\n4464 China's first written submission, para. 665.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndeveloping countries that are members of the Worl d Trade Organization shall not be subject to the\nrates of duty and tariff-rate quotas provided therein\". China considers that the use of \"the following\"\nin this statement indicates that the list does not contain all developing country WTO Members. The\nUnited States submits that this is incorrect. The statement merely reflects that the subsequent list\nrepresents a subset of the group of all developing countries, namely, those developing countries that\nare also WTO Members. Indeed, not all beneficiary countries under the US GSP program are WTO\nmembers.\n4465 The United States argues that the President determined that the GSP list of countries\nencompasses all the countries eligible for treatment as developing country Members under Article 9.1,\nand that the list in subdivision (d)(i) contains all developing countries that are also WTO Members.4466\n7.1876 The United States argues that none of the Complainants have established a prima facie case of\ninconsistency with the Safeguards Agreement. In order to do so, they would have had to show that\nthe safeguard measures were applied to a developing country Member accounting for less than three\npercent of total imports, when total imports from such countries did not exceed nine percent of total\nimports. Neither China nor Norway has met this threshold requirement. Norway does not identify\nany developing country Member that it believes was improperly subjected to a safeguard measure.\nChina, for its part, argues only that it has designated itself a developing country Member for purposes\nof Article 9.1.\n4467\n7.1877 In response to a question posed by the Panel, the United States acknowledged that the United\nStates GSP is not always the basis upon which the United States identifies developing countries for\nthe purposes of provisions on special and differential treatment contained in other WTO Agreements.\nThe United States also acknowledged that the GSP list did not represent developing countries for\nWTO purposes. By way of explanation, the United States notes that some of the countries on the GSP\nlist – such as Comoros, Equatorial Guinea, and Ethiopia – are not WTO Members. Nevertheless, the\nUnited States notes that there is no list of developing countries in the WTO against which to compare\nits GSP list.\n4468\n2. Qualification of China as a developing country\n7.1878 According to China, self-designation should apply and entitle that Member to benefit of the\nWTO special and differential treatment provisions available for developing countries as long as this\nright is not challenged specifically by another Member on the basis of an adequate and reasoned\nexplanation.4469 China notes that its claim that it qualifies as a developing country for the purposes of\nArticle 9.1 is based on the self-designation by China as a developing country for the purposes of the\nWTO Agreements.\n4470 China argues that this situation is reflected in the report of the Working Party\non the accession of China, as well as in the Protocol of Accession.4471\n7.1879 China argues that by referring to documents related to its Protocol of Accession, it is clear\nthat China has provided sufficient evidence that it has met its burden of proof that the United States\nfailed to comply with Article 9.1 of the Agreement on Safeguards. 4472 China also notes that the\nreports of the Working Party have been accepted and adopted by WTO Members, including the\n\n4465 United States' first written submission, para. 1275.\n4466 United States' first written submission, para. 1276.\n4467 United States' first oral statement, paras. 82-83.\n4468 United States' written reply to Panel question No. 124 at the first substantive meeting.\n4469 China's written reply to Panel question No. 121 at the first substantive meeting.\n4470 China's written reply to Panel question No. 121 at the first substantive meeting.\n4471 China's written reply to Panel question No. 121 at the first substantive meeting.\n4472 China's second written submission, para. 378.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUnited States. China argues that, consequently, all these documents are an integral part of the WTO\nAgreement.4473\n7.1880 With regard to China's self-designation as a developing country, China notes that although\nimportant achievements have been made in its economic development, China is still a developing\ncountry and, therefore, should have the right to enjoy all the differential and more favourable\ntreatment accorded to developing country Member s pursuant to the WTO Agreement. Accordingly,\nsome WTO Members felt the need to address China's specific situation through a pragmatic and\n\"tailored\" approach . This approach, says China, is reflected in China's Protocol of Accession. China\nsubmits that this reflects the agreement reached between China and other WTO Members that China,\nfor certain specific WTO Agreements, would not benefit from certain WTO provisions available only\nto developing countries. China submits that this underlines the fact that WTO Members\nacknowledged that China is a developing country and was entitled to benefit from the special and\ndifferential treatment provisions contained in the WTO Agreements and available only to developing\ncountries but also, that the benefits linked to this status should simply be excluded for certain WTO\nAgreements. These specific Agreements included those related to agriculture, TRIMs and subsidies.\nChina notes that, however, there was no specific provision in the Accession Protocol related to the\nAgreement on Safeguards and the application of Article 9.1 and that, unlike the other three specific\nareas, nobody questioned the fact that China could benefit from special and differential treatment in\nother areas , during China's accession process.\n4474\n7.1881 China submits that this is particularly true in the context of Article 9.1 of the Agreement on\nSafeguards. More particularly, China submits that such a conclusion is all the more understandable\nthat Article 9.1 should be considered as being pragmatic enough. Indeed, if a developing country is\nabove the 3% threshold, that country will not benefit from Article 9.1. Accordingly, accepting the\nstatus of developing country for China in the context of Article 9.1 has limited consequences, since\nthe de minimis test acts as a \"safety net\" for the Member applying the measure.\n4475 China submits that\nChina's self-designation should, therefore, have rema ined valid in the context of this Agreement. In\nany event, the United States should have provided a reasoned and adequate explanation as to why it\nwas possible to exclude China from the benefit of Article 9.1.4476\n7.1882 The United States submits that China's sole argument in support of its claim to be a\ndeveloping country Member is the assertion that it is, and has always claimed to be, a developing\ncountry Member, especially when it acceded to the WTO. The United States argues that although\nChina may consider itself a developing country Member, its Protocol of Accession to the WTO\nclearly indicates that Members took a different view of China's situation. Members indicated that\nbecause of significant size, rapid growth and transitional nature of the Chinese economy, a pragmatic\napproach needed to be taken in determining China's need for recourse to transitional periods and other\nspecial provisions in the WTO Agreement availa ble to developing country WTO members. \"Each\nagreement and China's situation should be carefully considered and specifically addressed\". This is\nprecisely the approach taken throughout China's accession documents.\n4477 The United States asserts\nthat in particular instances, under certain WTO agreements, China has explicitly abandoned any\nclaims to treatment as a developing country. 4478 The United States contends that China has admitted\nthat the Protocol does not specifically address treatment under the Safeguards Agreement. Thus, in\n\n4473 China's second written submission, para. 389.\n4474 China's second written submission, para. 386.\n4475 China's second written submission, para. 387.\n4476 China's written reply to Panel question No. 122 at the first substantive meeting.\n4477 United States' first written submission, para. 1267.\n4478 United States' first written submission, para. 1268.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe United States' view, the only possible conclusion is that the Protocol and Working Party Report do\nnot establish China's entitlement to treatment as a developing country for purposes of Article 9.1.4479\n7.1883 The United States submits that these commitmen ts demonstrate that China is not invariably\ntreated as a developing country Member for purposes of the covered agreements. Thus, it cannot rely\non a pattern of developing country treatment to support a claim for that status. Since it has provided\nno other basis for asserting developing country status, the United States submits that China has not\nmet its burden of proof to establish that the US was required under the Agreement on Safeguards to\nexclude exports from China from the United States' safeguard measures.4480\n7.1884 In this regard, the United States notes that it has not taken a position in this dispute as to how\nany other Member would establish that it would be entitled to treatment as a developing country under\nArticle 9.1. Nor is it necessary to resolve that question, as no other Member has claimed to be a\ndeveloping country Member that has been subject to the steel safeguard measures in a manner\ninconsistent with Article 9.1.4481\n3. Qualification of China under the de minimis test\n7.1885 China argues, in response to a question posed by the Panel, that although it was not primarily\nup to China to apply the de minimis test, it appears, on the basis of preliminary calculations and of\nUSITC statistics available to the United States' President, that China had a share of imports into the\nUnited States accounting for less than 3%, with the de minimis exporting developing country\nMembers collectively accounting for no more than 9% of total imports, for at least the following\nproducts: slab, hot-rolled steel sheets, coated steel, hot-rolled bar, cold-rolled bar, rebar, tin mill\nproducts, stainless steel bar and stainless steel rod.\n4482 China argues that, therefore, for a large number\nof products, China should have been excluded from the scope of application of the safeguard measure.\nChina alleges that the necessary statistical data were available to the USITC at the time of the\nadoption of the measures from which the United States failed to draw the proper conclusions. 4483 The\nfact that the de minimis test was not alleged is due to the fact that, as a first step, the United States\ndenied China's right to be a \"developing country\" within the meaning of Article 9.1 and that,\ntherefore, there was no need to examine the second step (i.e. the de minimis test) when the United\nStates denied the right to benefit from the first step.4484\n4. Relationship between Articles 9.1 and 3.1 of the Agreement on Safeguards\n7.1886 China argues that Article 9.1 of the Agreement on Safeguards needs to be read in connection\nwith Article 3.1 of the Agreement, which provides that: \"The competent authorities shall publish a\nreport setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and\nlaw\".4485 China is of the opinion that Article 3.1 of the Agreement on Safeguards covers the elements\nof Article 9.1 because Article 3.1 contains both a requirement of \"due process\" (rights of interested\nparties, access to non-confidential files…), which might be limited to the investigation, but also a\nrequirement to provide a \"reasoned and adequate explanation\", which cannot be limited to the mere\n\"investigation\".\n4486 China also argues that Article 9.1's coverage is confirmed by the fact that the first\n\n4479 United States' oral statement at the second substantive meeting, para. 150.\n4480 United States' first written submission, para. 1269.\n4481 United States' written reply to Panel question No. 154 at the first substantive meeting.\n4482 China's second oral statement, para. 7.\n4483 China's second written submission, paras. 376-377.\n4484 China's written reply to Panel question No. 123 at the first substantive meeting.\n4485 China's first written submission, para. 642.\n4486 China's written reply to Panel question No. 120 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsentence of Article 3.1 refers to Article X of GATT 1994, indicating that Article 3.1, in this aspect, is\nnothing more than a lex speciales of Article X in the specific context of safeguard.4487\n7.1887 China argues that this approach is confirmed in US – Lamb case where the Appellate Body\nfound that: \"Article 3.1 requires competent authorities to set forth findings and reasoned conclusions\non 'all pertinent issues of fact and law' in their published report\". 4488 China further relies upon the\nAppellate Body decisions in US – Lamb and US – Cotton Yarn to argue that the standard of review\nunder Article 11 of the DSU in relation to claims under the Agreement on Safeguards is such that\n\"panels must examine whether the competent auth ority has examined all the pertinent facts and\nassessed whether an adequate explanation has been provided as to how those facts support the\ndetermination; and they must also consider whet her the competent authority's explanation addresses\nfully the nature and complexities of the data and responds to other plausible interpretations of the\ndata\".\n4489 In China's view, whether a Member is a developing country accounting for less than 3% of\ntotal imports is a pertinent issue in the application of Article 9.1 and, therefore, must be subject to\n\"findings and reasoned conclusions\" published in accordance with Article 3.1.4490\n7.1888 China argues that the obligation of the United States authorities in this case was twofold: to\nexplain in an adequate and reasoned manner the reasons why China is not a developing country; or to\nexplain in an adequate and reasoned manner the reasons why Chinese products did not meet the de\nminimis test of Article 9.1 of the Agreement on Safeguards. 4491 China submits that the existence of a\n\"developing country\", on the one hand, and the fact that the de minimis test is met, on the other hand,\nare in its view \"pertinent issues of fact\" under Article 3.1, for the application of a safeguard\nmeasure.4492 China argues that it follows that the published report of the competent authorities under\nthat provision must contain an adequate and reas oned explanation as to how the facts support their\ndetermination.4493\n7.1889 China argues that, however, in the present case, the United States authorities failed to provide\na reasoned and adequate explanation of how the facts support their determination that Article 9.1 of\nthe Agreement on Safeguards is not applicable to China. 4494 In particular, China argues that the\nUnited States authorities failed to provide a reasoned explanation as to how the facts support their\ndetermination on Article 9.1 with regard to China and why Chinese products did not meet the de\nminimis test of Article 9.1 of the Agreement on Safeguards. In this regard, China argues that since\nChina is a developing country and has always claimed itself as such, in particular when it joined the\nWTO, the United States authorities could not reasonably exclude China from the benefit of Article 9.1\nof the Agreement on Safeguards, unless in its published report the United States authorities were able\nto explain, in an adequate and reasoned manner, the reasons why China had to fall within the scope of\nthe United States' measures.\n4495\n7.1890 The United States submits that China is mistaken. The \"pertinent issues of fact and law\"\nunder Article 3.1 are those related to the investigation and determination of serious injury by the\ncompetent authorities. Issues related to the application of the safeguard measure under Article 5.1 –\nan inquiry that the Appellate Body has found to be \"separate and distinct\" from the finding of serious\n\n4487 China's second written submission, para. 410.\n4488 China's first written submission, para. 643.\n4489 China's first written submission, paras. 644-645.\n4490 United States' first written submission, para. 1283.\n4491 China's first written submission, para. 668.\n4492 China's first written submission, para. 670.\n4493 China's first written submission, para. 671.\n4494 China's first written submission, para. 672.\n4495 China's first written submission, paras. 652 and 667.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury – are not subject to Article 3.1. 4496 The United States argues further that compliance with\nArticle 9.1 is not part of the investigation or determination of serious injury. The obligation is\nphrased in terms of the application of the safeguard measure to developing country Members. Thus,\nChina is mistaken in its view that \"the existence of a 'developing country' . . . and the fact that the de\nminimis test is met\" are \"pertinent issues of fact\" to be addressed under Article 3.1. These matters\nmay be pertinent to a non-application determination under Article 9.1, but they are not issues pertinent\nto the conduct of an investigation under Article 3.1.\n4497 The United States argues that, moreover,\nnothing in the reasoning of the Appellate Body reports cited by China supports China's conclusion\nthat the reports indicate an obligation to explain an Article 9.1 determination as part of an Article 3.1\nreport. Indeed, in each of the citations noted by China, the Appellate Body is addressing the\nrequirement of Article 3.1 that competent authorities publish a report containing the findings and\nconclusions reached in an investigation. The Appellate Body findings do not indicate that the\ncompetent authorities must address whether the application of a measure is consistent with\nArticle 5.1, or whether non-application of the measure is required under Article 9.1. Thus, these\nfindings of the Appellate Body do not support China's views.\n4498\n7.1891 China argues that the United States is trying to create an illogical line of reasoning between\nthe investigation and the application of the measure. In particular, China argues that the United States\nwrongly asserts that the question of non-application of the measure to the developing countries under\nArticle 9.1 comes after the investigation. In China's view, this is misleading, as all imports are subject\nto investigation. The imports from developing countries, in particular, are placed under the scrutiny\nof the competent authorities whose role is to determine which individual country's imports are under\nthe 3% threshold, and whether the sum of the imports from developing countries does or does not\nexceed 9%. China asserts that, clearly, the findings on Article 9.1 are not only relevant when the\nmeasure is applied, but these findings constitute a part of the investigation process, and therefore must\nbe covered by the obligation expressed in Article 3.1 of providing a reasoned and adequate\nexplanation.\n4499\n5. Time/period during which developing countries identified\n7.1892 Norway argues that the safeguard measures in question are inconsistent with Article I:1 of the\nGATT 1994 and Article 9.1 of the Agreement on Safeguards. In this regard, Norway submits that\nGATT 1994 Article I:1 sets out the general MFN principle, which is also applicable within the sphere\nof the Agreement on Safeguards. According to Norway, any deviation from this principle must have\na legal basis, one of them being the possibility to exclude certain developing countries found in\nArticle 9 of the Agreement on Safeguards.\n4500\n7.1893 Norway submits that the pivotal question in Article 9.1 is what the correct recent\nrepresentative reference period is for the establishment of the exclusions. 4501 Norway argues that in\nthe present case, the United States used import figures for various years and not the same years as the\nperiod of investigation (1996-2000) when establishing which developing countries had imports under\n\n4496 United States' first written submission, para. 1284.\n4497 United States' first written submission, para. 1285.\n4498 United States' first written submission, para. 1286.\n4499 China's second oral statement, paras. 28-30.\n4500 Norway's first written submission, para. 398.\n4501 Norway's first written submission, para. 399.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe threshold in Article 9.1. During consultations, the United States explained that they had mostly\nrelied on import statistics for 1996-97 to determine the import levels of developing countries.4502\n7.1894 Norway points to the statement by the Appellate Body in US – Line Pipe , where it made\nreference to the fact that the United States should ha ve looked at \"the latest data available at the time\nthe line pipe measure took effect\" . Norway believes that the statement of the Appellate Body in US –\nLine Pipe implies that the United States in the present case should have computed their percentages\nbased on 2000 or 2001 figures, not 1996-97. 4503 Norway submits that, having failed to do so, the\nUnited States breached Article 9.1 of the Agreement on Safeguards, and thus also Article I.1 of the\nGATT 1994.4504\n7.1895 The United States argues that the Appellate Body has found that the Agreement on\nSafeguards does not indicate how a Member must comply with Article 9.1 and that it is for the\nimporting member to decide how to apply the safeguard measure. 4505\n7.1896 In counter-response, Norway argues that it must be flatly rejected that it is for the importing\nmember to decide how to implement Article 9:1. All obligations under the covered agreements are\nthe subject of multilateral control. According to Norway, this is the very purpose of the Agreement\non Safeguards, as stated explicitly in the preamble.\n4506\n7.1897 The United States submits that the period 2000 through interim 2001 was one in which the\nUSITC found that increased imports caused or were threatening to cause serious injury. The United\nStates considered that, as a general matter, this period did not reflect normal flows of imports and\nwould accordingly lead to an aberrational calculation as to whether developing countries qualified for\nnon-application of the safeguard measures under Arti cle 9.1. By way of example, the United States\nasserts that for certain carbon flat-rolled steel, imports from developing countries had reached a level\nin 2000 at which those countries accounting for less than 3% of total imports collectively accounted\nfor more than 9% of total imports. If that period were used, no developing country would be eligible\nfor exclusion from the safeguard measure on certain carbon flat-rolled steel. The 1996-1997 period\npredates the beginning of the increase in imports for most products subject to the steel safeguard\nmeasures. Therefore, the United States considered this period particularly appropriate for applying\nthe Article 9.1 criteria.\n4507\n7.1898 The United States argues that Norway has not established that the United States' use of\n1996-97 as the period for calculating the 3% threshold for non-application was inconsistent with\nArticle 9.1. The United States argues that Norway misreads both Article 9.1 and the Appellate Body\nReport. The text of Article 3.1 does not specify any particular period for calculating whether\ndeveloping country Members' imports meet the 3% and 9% thresholds.\n4508 The 1996-1997 period was\nconsistent with these requirements. Since that period predates the increase in imports, it allows an\nevaluation of import levels undistorted by the increased imports or the serious injury they caused to\nthe domestic industries. By using such a period, the United States could accurately evaluate whether\nparticular developing country Members qualified for non-application. 4509 The United States further\nsubmits that Norway misreads the US – Line Pipe Report when it states that the Appellate Body\n\n4502 Norway's first written submission, para. 400.\n4503 Norway's first oral statement on behalf of all complainants, para. 5.\n4504 Norway's first written submission, para. 401.\n4505 United States' first written submission, para 1260.\n4506 Norway's first oral statement on behalf of all complainants, para. 4.\n4507 United States' written reply to Panel question No. 125 at the first substantive meeting.\n4508 United States' first written submission, para. 1279.\n4509 United States' first written submission, para. 1280.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"made reference to the fact that the United States should have looked at 'the latest data available.'\"\nThe Appellate Body was not making a normative statement about what data a Member should\nconsider, but responding to the Panel's citation to particular data. Moreover, it considered that data\nprimarily to evaluate whether the US mechanism for excluding developing countries would work\n\"automatically\", a question that has not been raised in this dispute.\n4510\n7.1899 Norway further argues that Article 9.1 uses the present tense \"as long as its shares of imports\n… does not exceed 3 per cent\". Norway argues that this indicates that import figures for the 'very\nrecent past ' are relevant. 4511 The United States counter argues that the use of the present tense in\nArticle 9.1 does not preclude the possibility of using any period within the investigation period, and\nthat in this case the United States chose a period prior to the increase in imports. The United States\nalso questions the significance of the use of the present tense in the English language version of this\nprovision. The French text of Article 9.1 is written, in part, in the future tense (\"tant que la part de ce\ncent\") (\"as long as the share of the imports of the product concerned in the importing Member will not\nexceed 3 percent\") (emphasis added). Thus, according to the United States, it appears that the\nnegotiators did not attach great significance to the tense of the obligation under Article 9.1.\n4512\n6. Conclusions\n7.1900 China argues that in view of all the above, it would not be appropriate to consider that the\nUnited States authorities fulfilled their obligations under Article 9.1 and 3.1 of the Agreement on\nSafeguards because it failed to provide adequate and reasoned explanation as to how the facts support\nthe exclusion of China from the benefit of Article 9.1 of the Agreement on Safeguards.\n4513 C h i n a\nargues that accepting the conclusion of the United States authorities would allow a WTO Member to\nunilaterally and arbitrarily define another Member's status under the WTO. China submits that this\nwould be a grave concern to all Members, particularly developing countries. China further argues that\nallowing such a practice runs the risk of opening a back door to nullifying or impairing WTO benefits\naccruing to individual Members.\n4514 For all the above reasons, China argues that the Panel should\nreach the conclusion that the determination made by the United States authorities is inconsistent with\nthe specific requirements of both Articles 9.1 and 3.1 of the Agreement on Safeguards.4515\n7.1901 The United States argues that it is well established that under the WTO Agreement the burden\nof proof rests upon the party who asserts the affirmative of a particular claim or defence. In this\ninstance, China and Norway are asserting that the United States failed to comply with Article 9.1.\nThus, according to the United States, they bear th e burden of proof, which would require a showing\nthat the United States has applied the measure to a developing country Member that accounts for less\nthan 3% of total imports. The United States argues that neither China nor Norway has met that\nburden.\n4516 According to the United States Norway does not identify any developing country Member\nthat it believes was improperly subjected to a safeguard measure and China argues only that is has\ndesignated itself a developing country for purposes of Article 9.1, which is not how Article 9.1\nworks.\n4517\n\n4510 United States' first written submission, para. 1281.\n4511 Norway's second written submission, para. 204.\n4512 United States' written reply to Panel question No. 68 at the second substantive meeting.\n4513 China's first written submission, para. 676.\n4514 China's first written submission, para. 666.\n4515 China's first written submission, para. 674.\n4516 United States' first written submission, para. 1266.\n4517 United States' first oral statement, para. 83.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nN. ARTICLE I:1 OF THE GATT 1994 AND ARTICLE 2.2 OF THE AGREEMENT ON SAFEGUARDS\n(NON-DISCRIMINATION)\n1. Exclusion of imports from free-trade areas\n(a) The MFN principle\n7.1902 Japan and Korea argue that according to the plain meaning of \"irrespective of its source\" in\nArticle 2.2 of the Agreement on Safeguards, safeguar d measures must be applied on an MFN basis,\nsubject only to the special treatment of customs union members 4518 and the Article 9 exception for\ndeveloping countries4519 and even then only in certain circumstances. 4520 More specifically, the MFN\nprinciple embodied in Article 2.2 requires that once a Member conducts an investigation of total\nproducts imported and the effects of imports on its domestic industry and reaches an affirmative\ndetermination\n4521, any safeguard measures imposed on the basis of that investigation must be applied\nto imports from all sources, even imports from countries with which the Members have a specific\nagreement prohibiting the application of safeguard measures. 4522 Japan and Korea argue that\nArticle 2.2 prohibits Members from exempting other countries, such as those with which the Member\nhas signed a free trade agreement.\n4523\n7.1903 Japan submits that like Article 2.2 of the Agreement on Safeguards, Article I:1 of GATT 1994\nrequires Members to treat imports from other Members similarly. If an \"advantage, favour, privilege\nor immunity\" is granted to any Member, the same courtesy must be accorded \"immediately and\nunconditionally\" to all other Members. In the context of a safeguards measure, this MFN principle\nrequires the United States to treat imports equally. If the President decides to exclude countries that\nare members of a free trade agreement which is clearly an \"advantage, favour, privilege or immunity\"\nbecause the free trade agreement countries would not be subject to the measure – the President must\nalso extend the exclusion to other WTO members (absent an exception, such as those afforded to\ncustoms union members and developing countries, in certain circumstances).\n4524\n7.1904 Japan and Korea assert that, in this case, the United States violated the MFN principle by\nexempting Canada and Mexico, which are signatories to the North American Free Trade Agreement,\nand Israel, which is a signatory to the United States-Israel Free-trade area from the measures. 4525\nJapan argues that safeguards measures are intended to be global in nature. Any country-specific\nexclusion (with the exception of developing countries under Article 9) violates this principle.\nProvisions within free trade agreements are no exception and cannot justify the departure from the\nnon-discrimination principle. The United States plainly breached its obligation to apply the safeguard\nmeasure to a product \"irrespective of its source\".\n4526\n(b) Application of Article XXIV of GATT 1994\n7.1905 With respect to arguments by Japan and Korea that Article I and Article 2.2 embody the MFN\nprinciple of the WTO and that this principle prevents the exclusion of any Member (other than a\n\n4518 Japan's second written submission, para. 170.\n4519 Japan's first written submission, para. 329; Korea' first written submission, para. 172.\n4520 Japan's second written submission, para. 170.\n4521 Japan's second written submission, para. 170.\n4522 Japan's first written submission, para. 329.\n4523 Japan's first written submission, paras. 330-331.\n4524 Japan's first written submission, para. 330.\n4525 Japan's first written submission, para. 331; Korea's first written submission, para. 173.\n4526 Japan's first written submission, para. 334\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndeveloping country Member subject to Article 9.1) from a safeguard measure, the United States\nargues that Article XXIV creates an exception to the MFN obligation for parties to a free trade\nagreement, allowing them to terminate duties and other restrictive regulations of commerce –\nincluding safeguard measures – between them. Footnote 1 of the Agreement on Safeguards\nestablishes that \"[n]othing in this Agreement prejudges the interpretation of the relationship between\nArticle XIX and paragraph 8 of Article XXIV of GATT 1994\". Therefore, the United States'\nexclusion of products of Canada, Mexico, Israel, and Jordan from the steel safeguard measures is not\ninconsistent with GATT 1994 or the Agreement on Safeguards.\n4527\n7.1906 The United States submits that the text of GA TT 1994 is clear on this point. Article XXIV:4\nrecognizes \"the desirability of increasing freedom of trade by the development, through voluntary\nagreements, of closer integration\" among Members, consistent with the objective of 'facilitating trade\nbetween the constituent territories' of the free trade area 4528 while not raising barriers to trade with\nother Members. To this end, Article XXIV:5 provides that \"the provisions of this Agreement shall not\nprevent\" the formation of a free-trade area, provided that certain conditions are met. 4529 The United\nStates further argues that to the extent that Artic les I or XIX can be interpreted to contemplate the\napplication of safeguard measures to products from all sources, Article XXIV creates a limited\nexception. This is because under the express terms of Article XXIV:5, no other provision of the\nGATT 1994, including Article XIX, can be read to prevent participants in an FTA from carrying out\ntheir mutual commitments to exempt each other's trade from trade restrictive measures, including\nsafeguard measures.4530\n7.1907 The United States argues that the United States' free trade agreements with Canada, Mexico,\nIsrael, and Jordan clearly meet the requirements of Article XXIV.4531 In this regard, the United States\nasserts that no complainant has disputed that the safeguard exclusion is an integral component of the\nelimination of trade restrictive measures incorporated in NAFTA, the Israel FTA, and the Jordan\nFTA, or that the United States acted in compliance with these agreements in excluding FTA partners'\ngoods from the steel safeguard measures. The United States submits that, therefore, the exclusion of\nthe products of each of these countries from the steel safeguard measures is part of the general\nelimination of duties and restrictive regulations of trade in those agreements, and falls within the\npurview of Article XXIV. By virtue of Article XX IV:5, this application by the United States of the\nsafeguards exclusion is not foreclosed either by the requirements of Articles I or XIX.\n4532\n7.1908 The United States argues that while Article 2.2 of the Agreement on Safeguards also creates a\nnondiscrimination requirement, this requirement does not supersede the Article XXIV authorization\nfor Members to exclude free trade agreement partners from safeguard measures. The last sentence of\nfootnote 1 of the Agreement on Safeguards deals with the relationship between Article XXIV and the\nAgreement on Safeguards. It specifies that \"[n]othing in this Agreement prejudges the interpretation\nof the relationship between Article XIX and paragraph 8 of Article XXIV of GATT 1994\". Thus,\nissues related to FTA imports are to be addressed exclusively under the relevant GATT 1994\narticles.\n4533 The United States submits that application of the customary rules of treaty interpretation\nsupports this conclusion. According to these rules, the words in footnote 1 of the Agreement on\nSafeguards must be interpreted in good faith in accordance with their ordinary meaning in their\n\n4527 United States' first written submission, para. 1228.\n4528 United States' second oral statement, para 141.\n4529 United States' first written submission, para. 1229.\n4530 United States' first written submission, para. 1231.\n4531 United States' first written submission, para. 1232.\n4532 United States' first written submission, para. 1240.\n4533 United States' first written submission, para. 1241.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncontext and in the light of the object and purpose of the Agreement on Safeguards. The ordinary\nmeaning of the first four words of the footnote, \"nothing in this Agreement\", is to place a limitation\non the entire agreement by indicating something that it does not do. The end of the sentence indicates\nwhat is being limited – \"the interpretation of the relationship between Article XIX and paragraph 8 of\nArticle XXIV of GATT 1994\".\n4534 The United States submits that, in other words, the footnote means\nthat the provisions of the Agreement on Safeguards are not intended to disturb the relationship\nbetween the GATT 1994 rules addressing safeguard measures on the one hand and the rights and\nobligations of the participants in a free trade agreement on the other.4535\n7.1909 The United States notes that the Panel in US – Line Pipe addressed this question and\nconcluded that the information presented by the United States established a prima facie case that\nNAFTA is in conformity with Article XXIV:5(b) a nd (c), and with Article XXIV:8(b). According to\nthe United States, it found further that \"the United States is entitled to rely on an Article XXIV\ndefence against Korea's claims under Articles I, XIII and XIX regarding the exclusion of imports from\nCanada and Mexico from the scope of the line pipe [safeguard] measure\". The United States submits\nthat the Panel also found, based on footnote 1 of the Agreement on Safeguards, that \"Article XXIV\ncan provide a defence against claims of discrimination brought under Article 2.2\".\n4536 The United\nStates asserts that the Appellate Body declared these findings \"moot\". Accordingly, the DSB did not\nadopt these findings when it adopted the Panel Re port, as modified by the Appellate Body Report.\nHowever, the Appellate Body at no point criticized the Panel's reasoning, which the United States\nsays it finds persuasive on these issues.\n4537\n7.1910 Japan submits that the reliance by the United States on the Panel decision in US – Line Pipe is\nmisplaced. First, the Appellate Body declared th at the Panel's finding was moot and had no legal\neffect. Second, according to Japan, the Panel's reasoning in US – Line Pipe is flawed; it is shallow\nand conclusory rather than convincing.4538\n7.1911 In response, the United States argues that the declaration that a finding is moot means only\nthat it need not have been made. Such a finding does not signify any infirmity in the reasoning\nunderlying the substantive finding. The United States argues that, therefore, the Panel's findings on\nArticle XXIV in US – Line Pipe , like an unadopted panel report, may provide guidance to a later\npanel.4539\n7.1912 Japan further argues that the United States' assertion that footnote 1 to Article 2 of the\nAgreement on Safeguards does not disturb the exceptions permitted by GATT 1994 Article XXIV is\nmisguided and that the United States both misread s footnote 1 and misinterprets prior decisions on\nthis issue. First, Japan notes that footnote 1 is inapplicable to free-trade areas (or their members). It\ndoes not define a \"Member\" as a free-trade area or a country belonging to one; nor does it mention\nfree-trade areas in any other way. According to Japa n, the United States claims, in essence, that the\nlast sentence of footnote 1 has nothing to do with the rest of the footnote, and that it covers free-trade\nareas as well as customs unions. In Japan's view, this sentence, however, merely states that \"[n]othing\nin this Agreement prejudges the interpretation of the relationship between Article XIX and paragraph\n8 of Article XXIV of GATT 1994\". It says nothing about free-trade areas. If the Members meant for\nthe same rules to apply to both customs unions an d free-trade areas, they would have said so quite\n\n4534 United States' first written submission, para. 1242.\n4535 United States' first written submission, para. 1245.\n4536 United States' first written submission, para. 1247.\n4537 United States' first written submission, para. 1248.\n4539 United States' second oral statement, para. 143.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nclearly. Japan argues that the use of the Article XXIV exception is strictly conditioned with respect to\ncustoms unions. The Appellate Body in Argentina – Footwear (EC), citing Turkey – Textiles, said\nthat, under certain conditions, \"Article XXIV may justify a measure which is inconsistent with certain\nother GATT provisions\". ... [T]his defence is available only when it is demonstrated by the Member\nimposing the measure that \"the measure at issue is introduced upon the formation of a customs union\nthat fully meets the requirements of sub-paragraphs 8(a) and 5(a) of Article XXIV\" and \"that the\nformation of that customs union would be prevented if it were not allowed to introduce the measure at\nissue\". Japan submits that, therefore, it would be anomalous, indeed, if free-trade areas and their\nmembers (which are not even mentioned in footnote 1) were subject to no restrictions conditioning\ntheir ability to use the defense of Article XXIV while customs unions (which are specified in the text)\ncould benefit from the defence only in limited circumstances.\n4540\n7.1913 Korea agrees that by its explicit terms, footnote 1 applies to customs unions. Further there is\nno basis to conclude that footnote 1 is actually two footnotes that must be read separately, as the\nUnited States suggests, but never demonstrates. Acco rding to Korea, the last sentence of footnote 1\ncannot be read as separate and apart from the entire footnote – which by its terms applies to customs\nunions alone. Thus, Korea argues that footnote 1 deals with the particular circumstances of safeguard\ninvestigations conducted by a customs union as to all the elements of an investigation when conducted\non the basis of a single market.4541\n7.1914 Norway argues that safeguard measures based on GATT 1994 Article XIX and the\nAgreement on Safeguards may be excluded as between free trade partners, although such an exclusion\nis not required.4542 The Agreement on Safeguard requires that where such an exclusion is undertaken\nthat the imports from these countries also be excluded from the safeguards findings and\ndeterminations. In this regard, Norway argues that GATT 1994 Article XXIV applies to the\nAgreement on Safeguards as it applies to GATT 1994 Article XIX. 4543 According to Norway, the\ncorrect understanding and application of GATT 1994 Article XXIV:8(b) has been somewhat disputed\nfor a long time, but particularly since the 1970s. Norway notes that itself, and its European free trade\npartners have routinely exempted their partners from safeguard actions, based on GATT 1994\nArticle XXIV:8(b) and the provisions of the respective FTA mandating such preferential treatment.\nNorway submits that the Agreement on Safeguards did not change the relationship between\nArticle XXIV and Article XIX. The last sentence of footnote 1 to Article 2 of the Agreement on\nSafeguards indicates that nothing was changed and nothing was finally agreed during the Uruguay\nRound. The sentence itself and the history behind it implies, like Article XXIV itself does, that the\npossibility for exemption applies both to customs unions and free trade areas.\n4544 Norway argues that\nthis follows from the general nature of the wording, which refers to the whole of paragraph 8, not only\nto paragraph 8(a) that concerns customs unions or only to 8(b) that concerns free trade areas. This\nalso follows from the fact that the footnote is attached to the word \"Member\" in paragraph 1. If it\nshould apply only to customs unions, and thus override Article XXIV and limit the rights of Member\nStates, it would have had to state so explicitly. Thus, Norway submits, the non-discrimination\nrequirement of Article 2.2 of the Agreement on Safeguards does not supersede the authorisation of\nArticle XXIV for Members to exclude free trade area partners from safeguard measures.4545\n\n4540 Japan's second written submission, paras. 172-175.\n4541 Korea's second written submission, para. 223.\n4542 Norway's written reply to Panel question No. 117 at the first substantive meeting.\n4543 Norway's second written submission, para. 188.\n4544 Norway's second written submission, paras. 189-190.\n4545 Norway's second oral statement on behalf of all complainants, para. 4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1915 Norway notes that the issue has been touched upon in Turkey – Textiles and Argentina –\nFootwear (EC) , both of which, however, concerned \"c ustoms unions\" and not Free Trade\nAgreements. Norway notes that the issue was raised once more in US – Line Pipe, where the\nAppellate Body explicitly declined to rule on this point However, Norway notes that in Turkey –\nTextiles the Appellate Body and the Panel admitted that an Article XXIV defence in principle exists –\nbut found that the conditions for its application were not met in that specific case.4546\n7.1916 Japan and Korea argue that, even if one assumes that the last sentence of footnote 1 applies to\nfree-trade areas, the Article XXIV defense is not available to the United States. 4547 Korea argues that\nArticle XXIV is intended to preserve the rights of members to form free trade areas. Article XXIV.5\nis intended to protect members' rights to enter into free trade areas by assuring that the provisions of\nthe Agreement on Safeguards do not prevent it, as long as the establishment of a free trade area does\nnot make the duties and other regulations of commerce applicable to WTO members higher than prior\nto the formation of such a free trade area. Korea submits that in this case, the inclusion of NAFTA\nmembers in safeguard measures would not \"prevent\" the formation of NAFTA – NAFTA specifically\npermits NAFTA members to decide unilaterally whether or not to include each other in safeguard\nmeasures on an ad hoc basis. Therefore, Korea argues that regardless of the full meaning of\nArticle XXIV, the United States does not need to invoke Article XXIV to ensure that \"this Agreement\nshall not prevent the formation of a free trade area\". Korea submits that this defence is, therefore,\nunavailable to the United States and the United States is therefore in violation of Article 2.2 of the\nAgreement on Safeguards.\n4548\n7.1917 Article XXIV:8(b) defines an FTA as a group of two or more customs territories in which the\nduties and other restrictive regulations of commerce (except, where necessary, those permitted under\nArticles XI, XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the\nconstituent territories in products originating in such territories. In response to a question from the\nPanel as to the significance of the fact that Article XIX is not mentioned in the brackets of\nArticle XXIV:8(b), Japan asserts that assuming, for purposes of argument, that an FTA member must\neliminate application of safeguard measures to its FTA partners by virtue of the brackets, Members\nwould also have to eliminate other measures not enumerated in the brackets, particularly anti-\ndumping and countervailing duty measures. Clearly, the United States has not eliminated – and has\nno intention to eliminate – anti-dumping and countervailing duty measures against Canada, Mexico\nand Israel.\n4549 Japan argues that, on realising this, the United States changes its position and expects\nto back away from its contention that it must eliminate safeguard measures as a \"restrictive regulation\nof commerce\" because they are not among the measures that a Member is permitted to retain.4550\n7.1918 In response to the same question, Korea argues that the measures mentioned in the\nparenthetical clause in Article XXIV:8(b) of the GATT 1994 are illustrations of the measures\navailable even among the members of an FTA. It is not an exhaustive list. The measures specifically\nidentified in the parenthetical clause are those that by their very nature do not prevent the formation of\nfree trade areas and, therefore, are permitted, if necessary. As to any other measures not listed, the\nfundamental question is: Does the maintenance of those measures prevent the formation of a free\ntrade area? Each measure and the circumstances of its imposition must be examined for all measures\nnot explicitly permitted. In the case of NAFTA and the other FTAs at issue, the imposition of\nsafeguard measures between members would not have prevented the formation of NAFTA, etc. To\n\n4546 Norway's second written submission, paras. 189-191.\n4547 Japan's second written submission, para. 176; Korea's second written submission, para. 224.\n4548 Korea's second written submission, paras. 225-226.\n4549 Japan's written reply to Panel question No. 117 at the first substantive meeting.\n4550 Japan's second written submission, para. 179.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe contrary, the members of NAFTA and the FTAs explicitly preserved the right of members to\nimpose safeguard measures against each other.4551\n7.1919 The United States argues that the formation of a free trade area does not rest on the\nelimination of any single measure. The United States relies upon Article XXIV:8(b) in asserting that\nformation of a free trade area requires the elimination of a package of duties and other restrictive\nregulations of commerce that collectively covers substantially all trade. This standard does not\nrequire an analysis of each distinct measure but, rather, the group. The United States notes that\nArticle XXIV does not require the elimination of all duties and other restrictive regulations of\ncommerce. Some restrictive regulations, if they fall within the enumerated exceptions, may be\napplied \"where necessary\". The remaining restrictiv e regulations must be eliminated on substantially\nall trade. The United States argues that if FTA parties can achieve the Article XXIV:8 threshold\n(covering \"substantially all trade\") without including all duties and other restrictive regulations of\ncommerce, they may retain such duties and regulations. Thus, as with any duty or other restrictive\nregulation of commerce, retention of safeguard measures, in whole or in part, is consistent with\nArticle XXIV:8(b) as long as those measures that are eliminated cover substantially all trade among\nthe parties. According to the United States, the only significance associated with the absence of\nArticle XIX from the bracketed text in Article XXIV:8(b) is that, unlike the measures described\nwithin the brackets, Article XIX measures are not automatically exempt from the requirement to\neliminate duties and other restrictive regulations of commerce on substantially all trade. They may\nstill be retained if the parties to an free trade agreement otherwise meet the requirements of\nArticle XXIV:8. The United States asserts that this was the case for the NAFTA.\n4552\n7.1920 Japan further argues that, assuming that Article XXIV applies to the exclusion of free trade\nagreement partners from safeguard measures, the phrase \"are eliminated\", as used in\nArticle XXIV:8(b), appears to indicate that safeguard measures should be excluded unconditionally at\nthe time a free trade agreement is negotiated\n4553, and that this wording makes clear that a general\nexception from safeguard measures must be written into an FTA in order for the Article XXIV\nexception to be applicable. 4554 Japan argues that, moreover, if the measure is not subject to general\nexemption, how would one judge whether or not the \"substantially all\" requirement under Articles\nXXIV:8(b) is met in terms of such conditional e limination? Safeguard measures were not eliminated\nin either United States FTA. According to Japan, Article 802.1 of the NAFTA conditions exemption\nof Canada and Mexico from a safeguard measure to situations where imports from them do not\naccount for \"a substantial share of total imports\" and they do not \"contribute importantly\" to the\nserious injury. Similarly, Article 5.3 of the United States-Israel Free Trade Agreement limits\nexemption from a safeguard measure to situations where imports from Israel are not \"a substantial\ncause of the serious injury\". Japan argues that the conditional exemption in certain cases when certain\nsubjective conditions are satisfied does not meet the requirements for asserting Article XXIV:8(b) as a\ndefense to Article 2.2 of the Agreement on Safeguards and GATT 1994 Article I:1.\n4555 Korea adds\nthat even if a NAFTA member unilaterally decides that it wishes to exempt another NAFTA member\nfrom the application of a safeguard measure on a case-by-case basis, it is not required to do so by its\nobligations under the free trade agreement. In other words, safeguard measures could be preserved\nagainst other NAFTA members at the discretion of each national authority and so it cannot be said to\nbe an integral component of the elimination of trade restrictive measures, argues Korea.\n4556\n\n4551 Korea's written reply to Panel question No. 117 at the first substantive meeting.\n4552 United States' written reply to Panel question No. 117 at the first substantive meeting.\n4553 Japan's written reply to Panel question No. 118 at the first substantive meeting.\n4554 Japan's second written submission, para. 176.\n4555 Japan's second written submission, paras. 176-178.\n4556 Korea's second written submission, para. 229.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nConsequently, no \"exception\" to the clear mandate of Article 2.2 is established for NAFTA safeguard\nmeasures by Article XXIV. Korea further adds that the United States cannot \"invoke\" Article XXIV\non a case-by-case basis depending on whether the Un ited States decides to exempt Canada and/or\nMexico based on its own internal regulation.\n4557 The fact that the United States cannot \"invoke\" an\nArticle XXIV defence on a case-by-case basis is further confirmed by the review procedures\nestablished by the NAFTA itself. Further, Korea notes that such determinations to include NAFTA\nmembers in a safeguard measure are even exempted from review by NAFTA dispute settlement\npanels.4558\n7.1921 The United States argues that Article XXIV would permit only a safeguard exclusion that is\npermitted under the terms of the FTA.4559 Further, according to the United States, the US – Line Pipe\nReport addresses and disposes of all the arguments raised by Japan and Korea. 4560 In addition, , the\nUnited States notes that Japan and Korea both claim that NAFTA did not truly \"eliminate\" safeguard\nmeasures because it would allow inclusion of Cana da and Mexico in certain limited circumstances.\nHowever, the United States claims, what Japan and Korea fail to recognize is that NAFTA requires\nelimination of safeguard measures in particular circumstances. If those circumstances exist, one party\nmust exclude another from any safeguard measures. There is no choice. The United States further\nsubmits that, contrary to Korea's view, this oblig ation is subject to dispute settlement under NAFTA.\nAccording to the United States, there is, in fact , nothing in Article XXIV that requires complete\nelimination of a duty or other restrictive regulation of commerce. In fact, Article XXIV:8 envisages\nthe retention of some such measures in that it requires elimination on \"substantially all\" – not all –\ntrade among FTA parties. Indeed, it is not uncommon for Members who enter into FTAs to retain\ncertain trade restrictive measures in whole or in part.\n4561\n7.1922 Norway submits that the relevant issue is not whether the free trade partners may be excluded\nfrom safeguard actions, but which criteria apply to make such an exclusion permissible. Norway\nsubmits that there are three main criteria.\n4562 Firstly, that NAFTA itself must fulfil the requirements\nof an FTA under the GATT 1994 Article XXIV:8(b) , which is not contested.4563 Secondly, according\nto Norway, Article XXIV:8(b) implies that the general exclusion from the GATT 1994 Article XIX\nsafeguards must follow from the FTA itself, either directly or implicitly (i.e by way of a prohibition\non all restrictions on commerce). Norway submits that a GATT 1994 Article XXIV exception can, of\ncourse, only cover as much as is covered by the FTA itself.4564 Norway argues that the proscription of\nsafeguards under GATT 1994 Article XIX must, therefore, be contained in the free trade agreement in\norder for Article XXIV to apply. According to Norway, this does not mean that the specific safeguard\nmeasure (for e.g. regarding steel) should be dealt with in the free trade agreement but, rather, that the\nagreement should only contain provision(s) dea ling with the exclusion from safeguards. Norway\nagrees with Korea that conditional exclusions or permissions to exclude, as under NAFTA, do not sit\nwell with GATT 1994 Article XXIV, as the United States is not required under the FTA to exclude its\nfree trade partners.\n4565 According to Norway, Article 802.1 of the NAFTA conditions exclusion of\nCanada and Mexico from a safeguard measure to situations where imports from them do not account\nfor \"a substantial share of total imports\" and they do not \"contribute importantly\" to the serious\n\n4557 Korea's written reply to Panel question No. 118 at the first substantive meeting.\n4558 Korea's second written submission, para 231.\n4559 United States' written reply to Panel question No. 118 at the first substantive meeting.\n4560 United States' second oral statement, para. 144.\n4561 United States' second oral statement, paras. 144-146.\n4562 Norway's second written submission, para. 192.\n4563 Norway's second written submission, para. 193.\n4564 Norway's second written submission, para. 194.\n4565 Norway's written reply to Panel question No. 118 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury.4566 Similarly, Article 5.3 of the United States -Israel Free Trade Area limits exemption from a\nsafeguard measure to situations where imports from Israel are not \"a substantial cause of the serious\ninjury\". Norway submits that these Agreements, particularly the NAFTA, with their conditional\nexceptions, do not fit well with this second criterion – as it is difficult to ascertain from their\nprovisions whether the exclusion from safeguards (based on GATT 1994 Article XIX and Agreement\non Safeguards) is required by the FTA in a particular case – and thus that this exclusion conforms to\nArticle XXIV. Norway argues that, therefore, the second condition does not seems to be fulfilled by\nthe Agreements of the United States.\n4567 As for the third criteria, Norway links this with the\napplication of the principle of parallelism and non-attribution.4568\n7.1923 As a separate argument, Japan and Korea reiterate that this claim is a separate and distinct\nclaim from the Article 2.2 and 2.1 \"parallelism\" claim. 4569 Japan also note that, with regard to the\nexclusion of imports from Israel, this is Japan's onl y claim. Therefore, Japan submits that exercise of\njudicial economy with respect to this claim woul d not be appropriate because, as stated by the\nAppellate Body in Australia – Salmon: 'The principle of judicial economy has to be applied keeping\nin mind the aim of the dispute settlement system. This aim is to resolve the matter at issue and \"to\nsecure a positive solution to a dispute\" [DSU Article 3.7]. To provide only a partial resolution of the\nmatter at issue would be a false judicial economy.'4570\n2. Exclusion from the benefit of Article 9.1 of the Agreement on Safeguards\n7.1924 China argues that due to the fact that Chinese products were unfairly and illegally included in\nthe scope of application of the United States safeguard measures while, at the same time, imports\noriginating from other developing countries were excluded, China considers that the United States\nviolated the Most Favored Nation treatment provided by Article I:1 of the GATT 1994. 4571 I n t h e\nview of China, there is a discrimination, and therefore a violation of Article I.1 of the GATT 1994 as\nwell as Article 2.2 of the Agreement on Safeguards, when a country is excluded from the benefit of\nArticle 9.1 while all criteria of this provision are met. This is the case if not all the de minimis\nexporting developing country Members are excluded.\n4572\n7.1925 The United States argues that China fails to recognize that Article I:1 and Article 2.2 require\nmost favoured nation treatment – the same treatm ent to all Members. When a Member affords\ndeveloping country Members the same treatment as developed country Members, it is acting in\nconformity with Article I:1 and Article 2.2. Article 9.1 acts to require differential treatment\ninconsistent with those Articles, and provides a defense against a claim from developed countries that\nArticle I:1 or Article 2.2 entitles them to the same differential treatment. Therefore, the United States\nargues, if a Member fails to provide treatment consistent with Article 9.1 to a developing country\nMember, it has acted inconsistently with Article 9.1, but not with Article I:1 or Article 2.2.\n4573\n\n4566 Exhibited by the United States in Exhibit US-50.\n4567 Norway's second written submission, para. 194-195.\n4568 Norway's second written submission, para. 197-199.\n4569 Japan's second written submission, para 181; Korea's second written submission, para. 220.\n4570 Japan's second written submission, para. 181.\n4571 China's first written submission, para. 677.\n4572 China's written reply to Panel question No. 119 at the first substantive meeting.\n4573 United States' second written submission, para. 244.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nO. DECISION-MAKING\n1. Articles 2.1 and 4.2(b) of the Agreement on Safeguards\n7.1926 Brazil and Japan submit that Articles 2.1 and 4.2(b) require an exact correspondence between\nthe injury determination, the like product definition, and the measure imposed.4574 In particular, Japan\nargues that according to the plain meaning of Articles 2.1 and 4.2(b) of the Agreement on Safeguards,\na safeguard measure cannot be applied to imports of a product without an affirmative injury or threat\ndetermination based on an examination of the domestic industry producing the like or directly\ncompetitive product. Japan asserts that, in other words, there must be a one-to-one relationship\nbetween the injury determination and the like product definition.4575\n7.1927 The United States argues that, for purposes of determining whether increased imports are\ncausing serious injury to a domestic industry, the \"determination of the competent authorities\" is a\nmatter of the Member's domestic law. There is a well-established practice under US law that when\nUSITC Commissioners disagree with respect to the like product definition, the USITC determination\nis based on the overlap of the determinations of the individual Commissioners. Here, the six\nCommissioners produced three affirmative and three negative individual determinations concerning\nstainless steel wire. Under US domestic law, the President may treat the USITC's equally divided\ndetermination as an affirmative determination. An overlap of decisions is acceptable as long as each\ndecisionmaker addressed the goods in question and found that the increased imports caused serious\ninjury or threat of serious injury.\n4576\n7.1928 The United States further argues that in US – Lin e Pipe, the Appellate Body found that if a\nMember has taken a safeguard action that satisfies the requirements of the Agreement, the particular\nmanner in which the decision is reached by the comp etent authorities is of no consequence. In that\ndispute, the Appellate Body found that a combination of individual determinations based on serious\ninjury and threat of serious injury was sufficient to support an overall affirmative determination.4577\n(a) Tin mill products\n7.1929 According to Brazil and Japan, exact correspondence between the injury determination, the\nlike product definition, and the measure imposed did not exist in the case of tin mill products given\nthe very different findings of the commissioners on injury, like product and the measure\nrecommended with respect to tin mill products.4578\n7.1930 Brazil and Japan argue that in this case, the commissioners did not agree on either the like\nproduct definition or the injury findings for tin mill products. In particular, two commissioners,\nBragg and Devaney, treated tin mill products as part of the CCFRS product category.\n4579 T h ey , in\nturn, made an affirmative injury determination concerning this broader category. 4580 The other four\n\n4574 Brazil's first written submission, para. 250; Japan's first written submission, paras. 153-154. Japan\nclaimed Article X:3(a) violation as well as Articles 2.1 and 4.2(b) violation for the like product determinations\non tin mill and stainless wire products, Ibid. para. 152. See also paras.7.1954-7.1974\n4575 Japan's first written submission, para. 154.\n4576 United States' written reply to Panel question No. 78 at the second substantive meeting.\n4577 United States' first written submission, para. 1005, citing Appellate Body Report, US – Line Pipe ,\npara. 171.\n4578 Brazil's first written submission, para. 250; Japan's first written submission, para. 156.\n4579 USITC Report at 273 (Bragg on tin mill), 277 (Bragg on stainless wire), 36 footnote 65 (Devaney\non tin mill), and 335 (Devaney on stainless wire) (Exhibit CC-6).\n4580 Japan's first written submission, para. 155.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncommissioners considered tin mill products as a separate like product from the CCFRS product\ncategory. Three of these four commissioners made negative injury determinations on the tin mill\nproducts. Commissioners Hillman, Okun, and Koplan found that imports of tin mill products were\nnot injuring the domestic tin mill industry; only Commissioner Miller found otherwise.\n4581 Brazil and\nJapan argue that, in other words, only one commissioner found that imports of tin mill products\nunbundled from other products injured the domestic industry making those products. 4582 Brazil and\nJapan assert that the overall injury votes on tin mill products was three-to-three. However, the\ndecision on the proper like product definitions for the products was four-to-two in favor of treating\nthem as their own like product categories: tin mill was separate from other flat products. Brazil and\nJapan argue further that the injury votes on the preferred like product definition were three-to-one\nnegative determinations.\n4583 4584\n7.1931 Japan argues that the USITC's injury determinations on these products were improperly\ntreated by the President as three-to-three ties.4585 Japan notes that the votes on tin mill products should\nonly have been viewed as tied if they were based on the same like product definition, given how\ncritical this definition is to the ultimate outcome of the analysis.\n4586 Japan argues that the President\napplied what he believed was his discretion under Section 330(d)(1) of the Tariff Act of 1930, as\namended, to treat the votes on tin mill products either as affirmative or as negative decisions. Japan\nasserts that, in this instance, the President chos e the former. The President, however, announced a\nremedy for tin mill products separate from his remedy for CCFRS products, thereby indicating his\nagreement with the four commissioners who treated tin mill products as a separate like product.\n4587\nJapan submits that, yet, only one commissioner found that imports of these products injured the\nrelevant domestic industry. 4588 Japan asserts that the President's reliance on tie votes that did not\ncorrespond to the separate like product definitions with which he implicitly agreed violates Articles\n2.1 and 4.2(b). According to Japan, the measure is not supported by an affirmative injury\ndetermination on the tin mill category itself.\n4589\n7.1932 The United States argues that the Appellate B ody's conclusion is also instructive with regard\nto the affirmative votes made by those Commissioners whose respective starting point for their\nassessment of serious injury began with a different definition of the relevant like products. By way of\nexample, both Commissioners Bragg and Devaney de fined a like product that consisted of a broad\ngrouping of flat-rolled steel products, including tin mill steel. They both analyzed increased imports\ncorresponding to the like product, as they defined it, considered the conditions of competition, and\nassessed whether the domestic industry was suffering or threatened with serious injury and lastly\nconsidered the causal link, if any, between any such injury and the increased imports. The United\nStates argues that, as discussed in more details in sections on injury and causation, their legal findings\nfulfilled the requirements of Articles 2.1 and 4.2 of the Agreement. Therefore, they satisfied the\napplicable requirements set forth in the Agreement to be completed by the competent authorities in\nthis regard. At the same time, four other Commissioners defined a like product consisting exclusively\nof tin mill steel and conducted the same methodical analysis required by Articles 2 and 4 of the\nAgreement. One of the four Commissioners concluded that increased imports of tin mill steel were\n\n4581 USITC Report, Vol. I, at 25 (Hillman, Okun, and Koplan) and 307 (Miller's separate views).\n4582 Brazil's first written submission, para. 248; Japan's first written submission, para. 156.\n4583 USITC Report, Vol. I, at 49.\n4584 Japan's first written submission, para. 157.\n4585 Japan's first written submission, paras. 158-159.\n4586 Japan's oral statement for the second substantive meeting, para. 24; see also Japan's second written\nsubmission, paras. 50-51.\n4587 Japan's first written submission, para. 159.\n4588 Japan's first written submission, para. 160.\n4589 Japan's first written submission, para. 161.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncausing serious injury to the domestic industry produ cing tin mill steel as discussed in the injury and\ncausation.4590\n(b) Stainless steel products\n7.1933 Japan argues that, in this case, the commissioners did not agree on either the like product\ndefinition or the injury findings for stainless steel wire products. In particular, two commissioners,\nBragg and Devaney, treated stainless wire products as a part of a combined stainless wire/wire rope\ncategory.4591 They, in turn, made an affirmative injury determination concerning this broader\ncategory.4592 The other four commissioners considered stainless wire as separate from stainless wire\nrope. Three of these four commissioners made negative injury determinations on the stainless wire\nproducts. Commissioners Hillman, Okun, and Miller fo und that imports of stainless wire were not\ninjuring the domestic stainless wire industry; only Commissioner Koplan found otherwise.\n4593 Japan\nargues that, in other words, only one commissione r found that imports of tin mill products and\nstainless wire products, unbundled from other products, injured the domestic industry making those\nproducts.4594 Japan asserts that the overall injury votes on stainless steel products was three-to-three.\nHowever, the decision on the proper like product definitions for the products was four-to-two in favor\nof treating them as their own like product categories: stainless steel wire was separate from stainless\nwire rope. Japan argues further that the injury votes on the preferred like product definition were\nthree-to-one negative determinations.4595 4596\n7.1934 Japan argues that the USITC's injury determinations on these products were improperly\ntreated by the President as three-to-three ties.4597 Japan notes that the votes on stainless wire products\nshould only have been viewed as tied if they were based on the same like product definition, given\nhow critical this definition is to the ultimate outcome of the analysis. 4598 Japan argues that the\nPresident applied what he believed was his discretion under Section 330(d)(1) of the Tariff Act of\n1930, as amended to treat the votes stainless products either as affirmative or as negative decisions.\nJapan asserts that, in this instance, the President chose the former. However, for stainless wire, the\nPresident had to treat it as a separate like product since the Commission had voted four-to-two that\nstainless wire rope imports were not injuring the domestic stainless wire rope industry.\n4599 4600 Japan\nargues that the President's choice to impose a separate measure on stainless wire products shows that\nhe agreed with a majority of commissioners that stainless wire was a separate like product. Japan\nsubmits that, yet, only one commissioner found that imports of these products injured the relevant\n\n4590 United States' first written submission, para. 1006.\n4591 USITC Report at 273 (Bragg on tin mill), 277 (Bragg on stainless wire), 36 footnote 65 (Devaney\non tin mill), and 335 (Devaney on stainless wire) (Exhibit CC-6).\n4592 Japan's first written submission, para. 155.\n4593 USITC Report, Vol. I, p. 27 (Hillman, Okun, and Miller) and 256 (Koplan's separate views).\n4594 Japan's first written submission, para. 156.\n4595 USITC Report, Vol. I, p. 49.\n4596 Japan's first written submission, para. 157.\n4597 Japan's first written submission, paras. 158-159.\n4598 Japan's oral statement for the second substantive meeting, para. 24; see also Japan's second written\nsubmission, paras. 50-51.\n4599 USITC Report at 27 (Koplan, Bragg, and Devaney affirmative determination on stainless wire and\nOkun, Miller, and Hillman negative determination with respect to stainless wire); also, p. 27 footnote 13 (Bragg\nand Devaney indicate that stainless wire and wire rope are one like product) and 277 (Bragg's separate views for\nstainless steel wire products) along with 335 (Devaney's separate views with respect to stainless steel wire and\nwire rope). See also ibid., p. 26 (Koplan, Okun, Miller and Hillman determine that stainless rope does not cause\nserious injury to the domestic industry) (Exhibit CC-6).\n4600 Japan's first written submission, para. 159.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industry.4601 4602 Japan submits that, therefore, in fact, the President made his decision based\non the vote of a single Commissioner. 4603 Japan asserts that the President's reliance on tie votes that\ndid not correspond to the separate like product definitions with which he implicitly agreed violates\nArticles 2.1 and 4.2(b). According to Japan, the measure is not supported by an affirmative injury\ndetermination on the stainless steel wire category itself.4604\n2. Article X:3(a) of GATT 1994\n(a) Like product determinations\n(i) Comparison with determinations in other anti-dumping and countervailing duty cases\n7.1935 Japan argues that because the USITC adopted a like product analysis contrary to its 15 years\nof precedent in the anti-dumping and countervailing duties context, its actions are inconsistent with\nArticle X:3(a) of GATT 1994. 4605 In particular, Japan argues that plate, hot-rolled, cold-rolled, and\ncorrosion-resistant steel have traditionally been treated as separate like products by the USITC in\nother recent trade remedy cases.4606 The factual findings in these cases confirm the factual findings in\nthis case about physical properties, production processes, and end-uses. 4607 Japan argues the USITC\nhas consistently found that no individual CCFRS is commercially interchangeable with any other\nCCFRS product. Indeed, the USITC considered and rejected making even cut-to-length plate and\nplate-in-coil (a hot-rolled steel product) a single like product, citing \"differences in physical\ncharacteristics and end-uses\", \"some limitations on…interchangeability\", and \"differences in\nproduction facilities\".4608 4609 Japan asserts that the USITC, however, chose to completely ignore this\nprecedent. More particularly, Japan argues that nowhere in its Section 201 determination does the\nUSITC attempt to square its finding of a single CCFRS product with its innumerable factual findings\nfrom previous anti-dumping and countervailing duties cases demonstrating the contrary. According to\nJapan, nowhere does the USITC rebut, or even address, arguments that the USITC's like product\nfactual findings from past anti-dumping and countervailing duties cases are relevant for its\nconsideration of the same products and factors in the Section 201 context.\n4610\n7.1936 Japan also asserts that inconsistent with its previous decisions, the USITC failed to perform\nits like products analysis of CCFRS products in a \"uniform\", \"impartial\", or \"reasonable\" manner,\nconsistent with Article X:3(a) of GATT 1994. The analysis was not \"uniform\" because it did not treat\n\n4601 Treated as a separate like product, imports of tin mill products were found by Commissioner Miller\nto be seriously injuring the domestic tin mill industry. Ibid . at 307. Likewise, stainless wire was regarded by\nChairman Koplan as a separate like product and found the domestic stainless wire industry to be seriously\ninjured. Ibid. at 256.\n4602 Japan's first written submission, para. 160.\n4603 Japan's oral statement for the second substantive meeting, para. 24; see also Japan's second written\nsubmission, para. 56.\n4604 Japan's first written submission, para. 161.\n4605 Japan's first written submission, para. 125.\n4606 See, e.g. , USITC Hot-Rolled (Final) USITC Pub. 3446 (August 2001) (Exhibit CC-30), USITC\nHot-Rolled (Final) USITC Pub. 3468 (November 2001) (Exhibit CC-31), USITC Flat-Rolled (Preliminary)\nUSITC Pub. 2549 (August 1992) (Exhibit CC-32), USITC -Cold-Rolled (Final) USITC Pub. 3283 (March 2000)\n(Exhibit CC-34).\n4607 Japan's first written submission, para. 132.\n4608 Certain Carbon Steel Plate from China, Russia, South Africa, and Ukraine , Inv. Nos.\n731-TA-753-756 (Final), USITC Pub. 3076 (December 1997), at 5-7 (Exhibit CC-41).\n4609 Japan's first written submission, para. 134.\n4610 Japan's first written submission, paras. 135-136.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports the same under similar circumstances. Nor was it \"reasonable\" to break with its past factual\nfindings on the same CCFRS and like product factors without explanation. 4611 Japan argues that\nbased on past precedent, and its own factual findings, the USITC could only have determined that\neach CCFRS product constitutes a separate like product. Its failure to do so constitutes an\ninconsistency with the US obligation under Article X: 3(a) to apply its laws in a uniform, impartial,\nand reasonable manner.4612\n7.1937 According to Japan, the analysis was not \"impartial\" because the USITC's omission of these\nfactual findings was not accidental oversight, but a wilful gambit to facilitate an affirmative injury\ndetermination on CCFRS products to benefit the US domestic industries over their foreign\ncompetitors. Japan submits that under the safeguards statute, the USITC cannot render an affirmative\ndetermination unless it finds: (1) an increase in imports, either actual or as a percentage of domestic\nproduction; (2) the domestic industry producing the like product is suffering serious injury; and (3)\nimports were a substantial cause of the serious injury.\n4613 In Japan's view, in analysing the question of\nincreased imports, the USITC traditionally compares import volume and the ratio of imports to\ndomestic production in the first and last full years of its period of investigation\n4614; in this case, it\ncompared 1996 and 2000. 4615 4616 Japan argues that had the USITC made each CCFRS product a\nseparate domestic like product, consistent with past practice, then it could not have found the requisite\nincrease in import volume for plate – plate import volume declined 50.9% between 1996 and 2000 4617\n– and would have had to somehow explain away th e decline in the ratio of imports to domestic\nproduction for cold-rolled steel and corrosion-resistant steel. 4618 With a single CCFRS like product,\nthe USITC was able simply to note that imports increased from one end-point to another, both\nabsolutely and as a ratio to domestic production 4619 (though, as discussed below, this increased\nimports analysis fails to meet the standard established by the Agreement on Safeguards, as interpreted\nby the Appellate Body).4620\n7.1938 Japan also argues that had the USITC made each CCFRS product a separate like product, it\ncould not have established causation for many of the products. For example, slab import volume\nincreased the most of any CCFRS product between 1996 and 2000, but almost all of these imports\nwere purchased by domestic producers themselves, because they could not produce sufficient volumes\nof slab to meet booming steel demand 4621; in this way, slab imports actually benefited domestic\nproducers.4622 4623 Japan argues that the USITC also could not have found cold-rolled steel imports a\n\"substantial cause\" of serious injury to the domestic cold-rolled steel industry, when it had just\n\n4611 Japan's first written submission, para. 137.\n4612 Japan's first written submission, para. 142.\n4613 19 U.S.C. §§2252(c)(1)(A-C) (Exhibit CC-47).\n4614 USITC Report, pp. 32-33 (Exhibit CC-6).\n4615 Ibid., p. 49.\n4616 Japan's first written submission, para. 138.\n4617 USITC Report, Vol. I, FLAT-9.\n4618 Ibid., FLAT-11 (cold-rolled import volume as a share of domestic production declined from 7.5%\nto 7.3%), and FLAT-13 (corrosion-resistant import volume as a share of domestic production declined from\n13.3% to 11.8%.).\n4619 Ibid., pp. 49-50.\n4620 Japan's first written submission, para. 139.\n4621 USITC Report, Vol. I., p. 56 (\"steelmakers themselves are the only purchasers of slabs\").\n4622 Ibid., p. 62 (\"The domestic industry includes a number of producers who rely on imported certain\ncarbon flat-rolled steel–especially slab–for use as raw materials in the production of further processed certain\ncarbon flat-rolled steel. Some of these producers may have benefited from the decline in import prices during\nthe POI.\").\n4623 Japan's first written submission, para. 140.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndetermined that cold-rolled steel imports had not caused material injury to the domestic industry in its\nMarch 2000 anti-dumping determination for cold-rolled steel4624, under a lower causation standard.4625\nBy combining the major CCFRS products into a single domestic like product, the USITC was able to\nignore conditions of competition unique to individual CCFRS products, thereby facilitating its\naffirmative determination.4626\n7.1939 In response to the argument that the USITC's like product definitions were not reasonable\nbecause the agency departed from a like product determination made in earlier investigations\ninvolving dumped and subsidized steel products, the United States relies upon the Panel's decision in\nUS – Stainless Steel to argue that the requirement of reasonable administration of laws and regulations\nis not violated merely because, in the administration of those laws and regulations, different\nconclusions were reached based upon differences in the relevant facts. 4627 More particularly, the\nUnited States argues that with respect to differing like product determinations issued by the USITC in\nprior anti-dumping and countervailing duty cases, Article X:3(a) does not require \"uniform\"\nadministration between different laws. It requires the uniform, impartial, and reasonable\nadministration of each law. Otherwise, the complainants' approach would require all laws, no matter\nhow different in their texts, purposes, and scope, to be administered in the same way with the same\nsubstantive outcome.\n4628\n7.1940 In counter-response, Japan argues that the safeguards law, like the anti-dumping and\ncountervailing duty laws, is a trade remedy law. Although the standards are not identical, the basic\npurposes of the laws are similar. Of particular importance, all three laws focus on the economic effect\nof imports on the competing domestic industry producing like or substitutable/directly\ncompetitive/similar products. Thus, given the similarities, decisions regarding like products in the\ncontext of one of these trade remedy laws are highly relevant to analysing the uniform application\nrequirement of Article X:3(a).\n4629\n7.1941 The United States argues that the fact that the USITC has reached different like product\ndeterminations in different cases does not establish a violation of Article X:3(a). First, the USITC\nwould not violate Article X:3(a) even if it had reached different like product findings in different\nsafeguards cases. In applying the United States' safeguards law, the USITC has applied the same five\nfactors to define the domestic \"like product\" as it has applied for decades. Thus, its application of the\nsafeguards law is uniform, in compliance with Articl e X. The United States submits that if the facts\nin two different cases differ, or if the scope of the petition in two cases differs, this may lead to two\ndifferent like product findings. Such an outcome is completely consistent with a uniform application\nof the law to different facts. Second, Article X is not violated simply because the interpretation of the\nterm \"like product\" may differ across different statutes. Article X refers to the administration of laws,\nnot the substance of the underlying laws themselves. There is no obligation under Article X to define\nthe same term in the same way in different statutes. Thus, if the underlying laws define the term \"like\nproduct\" differently, then there is no obligation to administer the laws in a way that ignores these\ndifferences. The United States submits that, in the case at hand, the US unfair trade laws approach the\n\n4624 USITC Cold-Rolled (Final) USITC Pub. 3283 (March 2000), at 24 (Exhibit CC-34).\n4625 In anti-dumping investigations, the USITC need only find that a domestic industry is suffering\nmaterial injury \"by reason of\" subject imports. 19 U.S.C. § 1677(7)(A) (defining \"material injury\" as \"harm\nwhich is not inconsequential, immaterial or unimportant.\"). In Section 201 investigations, the USITC must find\nthat imports are a \"substantial cause\" of \"serious inju ry\" meaning \"a cause which is important and not less than\nany other cause.\" 19 U.S.C §2252(b)(1)(B) ( Exhibit CC-47).\n4626 Japan's first written submission, para. 141.\n4627 United States' first written submission, para. 1303.\n4628 United States' first written submission, para. 1304.\n4629 Japan's written reply to Panel question No. 136 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nterm \"like product\" differently than the United States' safeguards law. The USITC explicitly\naddressed some of these differences in its determination. Third, even if the underlying statutes did not\ndirectly address how the term \"like product\" should be interpreted, Article X would not require the\nUSITC to interpret the term uniformly across different statutes. Requiring uniform interpretation\nacross different laws would ignore essential differences between the laws and the situations in which\nthey are applied. Finally, even if Article X required the USITC to interpret the term \"like product\" the\nsame way for purposes of the anti-dumping, counter vailing duty, and safeguard statutes, this would\nnot necessarily mean that the USITC would reach the same \"like product\" findings in all cases. The\nUnited States submits that each case must be judged on its individual facts. The facts of an anti-\ndumping or countervailing duty cases may differ significantly from the facts of a safeguard case.\n4630\n7.1942 In counter-response, Japan submits that the question at stake is whether the USITC\nadministered its laws concerning like product delineations appropriately. The United States appears\nto be saying that like product means something different in the anti-dumping and countervailing\nduties context, but never explains why this is necessarily so. In this regard, Japan notes that the\nUnited States explained in the like product discussion that, under both laws, the purpose is to discern\nthe clear dividing line between products. Japan questions why the clear dividing line would be\ndifferent in an anti-dumping and countervailing duties context from a safeguard context unless the\nUSITC was interested in justifying the difference where it otherwise was unjustifiable.\n4631\n7.1943 The United States responds by stating that Article X:3 applies only to administration of a\nparticular law. It does not require a Member to administer its safeguards law in the same manner as\nits anti-dumping laws, food safety laws, or any other laws. The United States submits that, indeed,\nthere are good reasons why the same term may be interpreted and applied differently under different\nlaws, especially if those laws have different objectives. In the view of the United States, adoption of\nJapan's interpretation of Article X:3 would disregard these differences, and commit Panels to a\nboundless review of Members' entire legal systems to determine whether terms received identical\ntreatment in every law. The United States submits that it sees no indication that Article X:3 imposes\nsuch a requirement.\n4632\n(ii) Comparison with other determinations in the same case\n7.1944 Japan argues that because the USITC adopted a like product analysis contrary to like product\ndistinctions for other products in this case, its actions are inconsistent with Article X:3(a) of GATT\n1994.4633 More particularly, Japan argues that the USITC made similar factual findings for semi-\nfinished flat, long, and stainless steel products under its like product factors, but failed to render\nsimilar like product determinations.4634\n7.1945 By way of elaboration, Japan submits that while the USITC lumped semi-finished flat steels –\nor slab – into the same like product as finished flat steels, it decided to treat semi-finished long\nproducts and semi-finished stainless products as separate like products, apart from finished products.\nCarbon billets, which bear the same relationship to carbon long products as does carbon slab to carbon\nsheet products in that both are the input for further rolling into the next stage product, were found to\nbe a separate like product from finished long products. Stainless slab, which bears the identical\nrelationship to stainless plate and other CCFRS produc ts as carbon slab bears to finished carbon flat\n\n4630 United States' written reply to Panel question No. 136 at the first substantive meeting.\n4631 Japan's oral statement at the second substantive meeting, para. 34.\n4632 United States' second written submission, para. 243.\n4633 Japan's first written submission, para. 125.\n4634 Japan's first written submission, para. 143.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproducts, was found to be a different like product than stainless plate and other flat-rolled stainless\nproducts. Likewise, within the CCFRS category, although both tin mill products and corrosion\nresistant products use a cold rolled substrate, they were treated as separate like products. According\nto Japan, such treatment was not uniform, reasonable or impartial.4635\n7.1946 Japan argues that the USITC combined semi-finished slab with the major finished CCFRS\nproducts made from slab – hot-rolled steel, plate, cold-rolled steel, and corrosion-resistant steel – into\na single CCFRS like product by ignoring the findings of its own analysis of like product factors. 4636\nAccording to Japan, these findings demonstrated that slab is not \"like\" any of the finished CCFRS\nproducts in terms of physical characteristics, end-uses, production processes, channels of distribution,\nand tariff classifications. In terms of physical characteristics, slab is much thicker than any finished\nCCFRS product, all of which are reduced in thickness via rolling.\n4637 In terms of production\nprocesses, slab is continuously cast, whereas all finished CCFRS products are rolled4638, and some are\ncoated.4639 In terms of channels of distribution and end-uses, nearly all slab is internally consumed by\ndomestic producers themselves for the production of downstream products. 4640 By contrast, most\ncorrosion-resistant steel and plate is sold to end-users and distributors, as is a substantial proportion of\nhot-rolled and cold-rolled steel, destined for a variety of end-use applications. 4641 Japan submits that\nthe USITC folded all CCFRS products into a single like product in part because most finished CCFRS\nproducts are sold into the automotive and construction markets, but this logic does not apply to slab.\nFinally, as with all CCFRS products, slab is classified under its own tariff classification numbers.4642\n7.1947 Japan argues that the USITC's like product findings for semi-finished carbon steel, semi-\nfinished long products (billets) and semi-finished stainless products should have resulted in\ndeterminations that all three were not \"like\" the corresponding finished steel products. Yet, the\nUSITC did not render like product determinations consistent with these findings: semi-finished long\nand stainless products were made separate like products, but carbon slab was not.4643 4644 Japan argues\nthat likewise, within the CCFRS category, both tin mill products and corrosion-resistant products use\na cold-rolled substrate. 4645 Tin mill products are coated with tin or chromium; corrosion-resistant\nproducts are coated with zinc or zinc-aluminum alloys. Yet, they were treated as separate like\nproducts, with all commissioners treating corrosion-resistant products as part of the larger flat product\ncategory, and four commissioners treating tin mill products as its own separate like product.4646 Japan\nsubmits that, if anything, it would make more sense to consider tin mill and corrosion-resistant\nproducts as a single like product given their physical characteristics, their location in the production\nchain, and their sometimes common treatment in the HTS. Japan submits that, however, the USITC\nmade the odd leap to consider, effectively, slab and plate to be more comparable to corrosion-resistant\nsteel than tin mill products.\n4647\n\n4635 Japan's second written submission, para. 75.\n4636 USITC Report at 36 (Exhibit CC-6).\n4637 Ibid., at OVERVIEW – 8.\n4638 Ibid., at OVERVIEW – 10.\n4639 Ibid.\n4640 Ibid., p. FLAT – 1.\n4641 Ibid., p. OVERVIEW – 13, Table OVERVIEW – 2.\n4642 Japan's first written submission, para. 144.\n4643 USITC Report, Vol. I, p. 36 (flat), p. 83 (long), p. 193 (stainless).\n4644 Japan's first written submission, para. 145.\n4645 Compare USITC Report, Vol. I, p. 42 (discussing cold-rolled products) to 48 (discussion of tin mill\nproducts).\n4646 Ibid., p. 48 (with Commissioner Devaney not joining in the views of the Commission in tin mills).\n4647 Japan's first written submission, para. 146.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1948 In response, the United States argues that in evaluating the complainants' arguments that the\nUSITC's determinations were not \"uniform, impar tial and reasonable\", the Panel should apply the\nordinary meaning of these terms as used in Article X:3: \"uniform\" means \"of one unchanging form,\ncharacter or kind;\" \"impartial\" means \"not partial; not favouring one party or side more than another;\nunprejudiced; unbiased; fair;\" and \"reasonable\" means that the actions must be rational and not\nabsurd.4648\n7.1949 The United States argues that, in claiming that the USITC failed to provide uniformity when\nit included slab in a single like product with finished CCFRS, while placing semifinished and finished\nproducts in separate like products for other steel products, Japan has shown only that the results were\ndifferent, and has demonstrated no difference in the way the USITC applied the relevant legal\nstandard to the facts. According to the United States, the record before the USITC fully supported\nboth the conclusions reached for each product, and the differences among those conclusions. Thus,\nthe different outcomes all reflect the application of a uniform test to distinct facts.\n4649\n7.1950 Japan also argues that the USITC's like product analysis of CCFRS products increased the\nprobability of an affirmative injury determination because it made slab part of a single domestic like\nproduct encompassing finished CCFRS products, while making semi-finished long and stainless\nproducts separate like products; and it made corrosion-resistant products part of the CCFRS like\nproduct, while making tin mill products a separate like product. Japan submits that in all such\ninstances, the USITC did not administer the safegu ards law in a \"uniform, impartial, and reasonable\nmanner\", as required by GATT 1994 Article X:3(a).4650\n7.1951 Japan states that the USITC's decisions were not \"uniform\" or \"reasonable\" because the\nUSITC had no principled reason for relying on its analysis of like product factors for semi-finished\nlong, semifinished stainless products, and tin mill products while ignoring the same analysis for slab\nand corrosion-resistant products, based on the allegedly greater degree of vertical integration for those\nproducts. It was not \"impartial\" because the USITC's decision to combine all CCFRS products,\nincluding slab, into a single like product was calculated to facilitate an affirmative injury\ndetermination – under WTO-inconsistent application of US law – based on a wrongful like product\ndefinition and resulting in the application of safeguard measure to a wider range of imports than\nshould have been lawfully allowed under the Agreement on Safeguards.\n4651\n7.1952 The United States argues that the USITC provided a uniform, impartial, and reasonable like\nproduct analysis by applying the same legal standards to the distinct facts of each case and reaching\nlegal conclusions supported by the facts of the case..\n4652 According to the United States, relying upon\nthe Panels' decisions in Argentina – Hides and Leather and US – Stainless Steel , Article X:3(a)\nrequires that the administration of a measure be uniform, and not that the results of the measure be the\nsame each time it is applied. The United States submits that the USITC applied the same like product\nfactors that it uses in every safeguard investigation to each group of imports in the steel investigation.\nBased on the facts, the USITC determined that those factors justified the product definitions that it\nused.\n4653\n\n4648 United States' first written submission, para. 1298.\n4649 United States' first written submission, para. 1300.\n4650 Japan's first written submission, para. 125.\n4651 Japan's first written submission, para. 147.\n4652 United States' first written submission, para. 1298.\n4653 United States' first written submission, para. 1299.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1953 The United States also submits that the complainants have failed to establish that the USITC's\nproduct definitions were anything other than impartial. According to the United States, the USITC\nshowed no favoritism to either side. In several instances the Commissioners decided in favor of\nforeign producers by rejecting domestic producer requests to join or subdivide product categories.\nThe claims to the contrary are unsupportable.\n4654 The United States also argues that the complainants\nhave also failed to establish that the USITC product definitions are \"unreasonable\". Rather, the\nagency fully explained its findings, and supported them with record evidence.4655\n(b) Treatment of affirmative votes\n(i) General\n7.1954 Japan argues that the treatment of USITC votes by the President is one of the key areas to\nwhich Article X:3(a) applies. According to Japan, there is no doubt that the US domestic rules on the\nPresident's treatment of USITC tie votes falls within the scope of paragraph 1 of Article X:3(a) –\n\"administrative laws, regulations, decisions and rulings\" pertaining to \"restrictions or prohibition on\nimports\".4656 In this regard, Japan argues that section 330(d)(1) of the Tariff Act of 1930 specifies, in\npertinent part, that when the USITC determines \"whether increased imports of an article are a\nsubstantial cause of serious injury … and the commissioners voting are equally divided with respect\nto such determination\", then the President can choose either of the two decisions. 4657 \"An article\",\naccording to a majority of commissioners, was clearly defined as: (i) tin mill products, separate from\nall other CCFRS products; and (ii) stainless wire, separate from stainless wire rope. Japan submits\nthat only one of four commissioners found imports of these separate articles to injure the relevant\ndomestic industries. However, the President treated the Commission's decision as a tie vote and\naccordingly an affirmative injury determination and he imposed a safeguard measure on imports of tin\nmill and stainless wire.\n4658\n7.1955 Japan argues that such treatment is an unreasonable administration of the safeguard law,\nbecause the President regarded the vote in this par ticular case as a tie when two of the affirmative\nvotes were based on a like product definition with which he disagreed. According to Japan, such a\ndecision simply strains logic. Japan also argues that the President's treatment also constitutes non-\nuniform administration of the safeguard law because the President's treatment of the divided votes as\n\"equally divided\" within the meaning of Section 330(d)(1) of the Tariff Act is a clear departure from\nthe ordinary and longstanding practice in the administration of United States' safeguard law. For the\nPresident to treat the Commission's determination in this instance as a tie vote and an affirmative\ninjury determination and to impose a safeguard measure on imports of tin mill and stainless wire\nproducts is considered to be at least unreasonable and non-uniform and therefore is inconsistent with\nArticle X:3(a).\n4659 Japan adds that, as required by Article X:3, the President has an obligation to treat\ndivided USITC votes in a consistent and transparent way, given that the result of the investigation,\nincluding whether the US eventually imposes a safeguard measure or not, depends on such vote\ntreatment.\n4660 Japan asserts that for the President to rely on the inappropriate mixture of votes based\non different like product definitions in this case does not represent a uniform or reasonable application\n\n4654 United States' first written submission, para. 1302.\n4655 United States' first written submission, para. 1303.\n4656 Japan's first written submission, paras. 151 and 162.\n4657 Japan's first written submission, para. 163.\n4658 Japan's first written submission, para. 164. For Japan's argument for the United States' violation of\nArticles 2.1 and 4.2(b) of the Agreement on Safeguards, see paras. 7.1926-7.1934, and supra. footnote 4574\n4659 Japan's first written submission, para. 164.\n4660 Japan's first written submission, paras. 151 and 162.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof US law, as required by Article X:3(a) of GATT 1994. Japan submits that, left unchecked, such\naction impermissibly would erode the predictability and stability of the administration of the\nsafeguard law.\n4661\n7.1956 With respect to arguments that the President's \"treatment\" of the USITC votes on tin mill and\nstainless steel wire as \"a tie\" was inconsistent with Article X:3(a) because Section 330(d)(1) of the\nTariff Act did not permit such treatment, the United States relies upon the panel decision in US –\nStainless Steel to argue that Article X:3(a) does not bring within the mandate of a panel the allegation\nthat a Member has acted inconsistently with its own domestic legislation. 4662 The United States\nargues that it is also noteworthy that a US court recently held that the USITC's counting of affirmative\nand negative determinations by individual Commissioners in the safeguard investigation on tin mill\nsteel was consistent with US law. Moreover, the Court specifically held that Commissioners\nDevaney and Bragg considered tin mill products in their analysis, and thus made affirmative injury\nand causation findings with respect to tin mill products. The United States submits that this same\nreasoning applies to the divided vote on stainless steel wire products.\n4663\n7.1957 With respect to arguments that the USITC made a negative determination by a vote of 3-1 on\ntin mill product and that the President included tin mill in the remedy based on what is alleged to be\njust one affirmative vote 4664 and that, with respect to stainless steel wire, the President did not\nconsider the determinations of two of the Commissioners since their determinations were based on a\nbroader domestic industry, consisting of producers of stainless steel wire and stainless steel wire rope,\nand that the President's decision was based on the decision of only one Commissioner, the United\nStates submits that none of the complainants provide support for their claims, either in the text of the\nAgreement on Safeguards, or in panel or Appellate Body reports, that the USITC's method of\ncounting votes – cumulating the votes of the individual Commissioners – is within the purview of a\npanel, or explain how it is inconsistent with Articles 2.1 and 4.2 of the Agreement. The United States\nsubmits that nor do they provide support for their underlying claim that the findings of the different\ndecision-makers must be exactly the same on all issues in order to be aggregated.\n4665\n7.1958 In counter-response, Japan submits that in addition to the legal flaw that consistency with\nWTO obligations is not dependent on a domestic court's declaration that action is consistent with a\ndomestic law, the US argument is, in essence, that the absence of standards and criteria in a law\nrenders it impossible to find that the law was administered in a non-uniform, partial and unreasonable\nmanner. Japan submits that, to the contrary, the unfettered ability to apply different standards is as\nmassive a violation of the requirements of GATT Article X:3(a) as can be imagined. The treatment of\nsome so-called tie votes as affirmative and others as negative is not only obviously non-uniform but\nalso partial and unreasonable, particularly without any explanation from the President, as the\ncompetent authority, as to why he made inconsistent decisions. Japan submits that, furthermore, the\ndecision to rely on three affirmative votes when only one of those votes agreed with the President's\nlike product delineations is clearly unreasonable.\n4666\n7.1959 In response to a question from the Panel, the United States argues that the President does not\ncast a \"tie-breaking vote\". He is not a \"competent authority\" under Articles 3 and 4 of the Agreement\non Safeguards and does not vote on whether the increased imports are a substantial cause of serious\n\n4661 Japan's first written submission, para. 165.\n4662 United States' first written submission, para. 1309.\n4663 United States' first written submission, para. 1310.\n4664 United States' first written submission, para. 999.\n4665 United States' first written submission, para. 1001.\n4666 Japan's second written submission, para. 78.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninjury or threat of serious injury. Instead, the President simply identifies which of two evenly\nsupported determinations is the determination of the Commission. Second, the United States submits\nthat the President clearly acted consistently with US law. The United States' safeguard statute states\nthat when \"the commissioners voting are equally divide d with respect to such determination, then the\ndetermination, agreed upon by either group of comm issioners may be considered by the President as\nthe determination of the Commission\". The Commissioners were equally divided with respect to the\ndeterminations on tin mill and stainless steel wire products. In fact, the US Court of International\nTrade recently found that the USITC vote on tin mill was, in fact, evenly divided despite the fact that\nthe Commissioners voting in the affirmative reach different like product findings. Therefore, the\nPresident had the authority under the statute to decide which determination was the determination of\nthe USITC. The United States submits that, finally, interpreting US law is not an appropriate function\nof the Panel in this dispute. In the case at hand, the WTO agreements do not address the question of\nhow a Member may designate which among multiple findings constitutes the determination of the\ncompetent authorities under the Agreement on Safeguards. Whether the President acted consistently\nwith US law is not relevant to the question of whether the United States complied with its WTO\nobligations. The United States submits that, consequently, there is no basis for the Panel to engage in\nan examination of whether the President's actions were consistent with US law.\n4667\n7.1960 In response to the same question from the Panel, Japan submits that the issue is not whether\nUS law permits the President to treat tie votes by the Commission as affirmative. It is that in this\nproceeding, with respect to tin mill and stainless wire, the President should not have treated the\nCommission action as a tie vote because the Commissioners had differing views about the proper\nscope of the like product. Japan argues that, by acting as he did, the President's decision contravened\nArticles 2.1, 3.1 and 4.2 of the Agreement on Safeguards and Article X:3(a) of GATT 1994.\n4668\n7.1961 With respect to the argument that Article X:3(a) does not permit the \"inappropriate\nintegration\" by the USITC or the President of affirmative votes from Commissioners who defined the\nlike product differently from each other (see paragraph 7.1970), the United States submits that it is\nunclear exactly why the complainants consider this to be \"inappropriate\". 4669\n7.1962 The United States submits that if the complainants ' point is that it is impermissible to treat an\ninjury determination regarding a product (such as stainless steel wire products) as applicable to a\nsubset of that product (such as stainless steel wire), that would seem to be an issue of interpreting the\nAgreement on Safeguards, and not Article X. 4670 The United States submits that even if this\nsubstantive decision somehow fell within Article X:3(a), it certainly represents a uniform, impartial,\nand reasonable application of the law. This analysis of individual Commissioners' determinations\nbased on different like products applies in every case, making it uniform. It is also impartial, in that it\ndoes not favor one side over the other. Finally, the US practice follows the logical principle that an\naffirmative (or negative) determination with regard to a product also covers subsets of that product.\nAlthough complainants may disagree with this logic, it is plainly reasonable.\n4671\n7.1963 The United States further submits that if the complainants' impermissible integration point\nrefers to their argument that the President agreed with one set of Commissioners in defining the like\nproducts for tin mill and stainless steel wire, but another set in deciding how to treat the injury votes,\nthey misunderstand the President's action. The President did not evaluate and separately endorse parts\n\n4667 United States' written reply to Panel question 132 at the first substantive meeting.\n4668 Japan's written reply to Panel question 132 at the first substantive meeting.\n4669 United States' first written submission, para. 1311.\n4670 United States' first written submission, para. 1311.\n4671 United States' first written submission, para. 1312.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof the USITC determination. With regard to the like products subject to safeguard measures, he\naccepted the findings of the USITC majority as presented, without agreeing or disagreeing with them.\nWith regard to the divided votes, he considered the determinations of both sides, including the use of\ndifferent like product definitions in the affirmative determinations for tin mill and stainless steel wire.\nUS practice recognizes that determinations based on different like products may be equally valid,\nalbeit different, ways of analysing imports, and this practice is uniform, impartial, and reasonable.\nFor the President to consider a determination based on this principle to be the determination of the\nUSITC is, therefore, also uniform, impartial, and reasonable.\n4672\n7.1964 The United States argues that there is no basis to Japan's claim that the President's actions\ndeviated from an \"ordinary and longstanding practice in the administration of US safeguards law\".\nAccording to the United States, Japan does not cite or otherwise identify this alleged practice, nor is\nthere any authority to cite. The United States reiterates that a US court upheld the President's action\nin accepting these tie votes as affirmative determinati ons. In any event, it is impossible for the panel\nto determine whether the President acted inconsiste ntly with a practice which has not been identified\nwith specificity.4673\n7.1965 The United States also argues that the fact that the President designated some divided\ndeterminations as affirmative (tin mill and stainless steel wire) and others as negative (tool steel and\nstainless fittings and flanges) does not establish an inconsistency with Article X:3(a). Panels have\nfound that Article X:3(a) requires identical treatment, not identical outcomes. Indeed, where the facts\nof two cases differ, uniform treatment might require different outcomes. Thus, the mere fact that\nadministration of a law or regulation in different cases leads to different results cannot by itself\nestablish inconsistency with Article X:3(a).\n4674 The United States submits that in the case of the four\ndivided determinations, there is no question that the facts differed tremendously. The four domestic\nindustries produced different products, under different market conditions, and with greatly different\nperformance levels of revenue, sales, market share, profits, and other performance indicators. Two of\nthe Commissioners recognized that the four domestic industries might warrant different findings.\nCommissioner Miller issued an affirmative determin ation with regard to tin mill, but not the other\nthree divided votes. Chairman Koplan issued an affirmative determination with regard to stainless\nsteel wire, tool steel, and stainless steel fittings and flanges, but not with regard to tin mill. Therefore,\nby doing nothing more than to observe that the divided votes in different factual situations had\ndifferent results, the United States argues that th e complainants have failed to meet their burden of\nproof to establish an inconsistency with Article X:3(a).\n4675\n7.1966 The United States also argues that according to the complainants, a tie vote must always be\ntreated as a negative determination, or always be treated as an affirmative determination. The United\nStates submits that as the complainants would have it, the President should not have the flexibility to\nmake decisions based on the unique facts and merits of each particular case. According to the United\nStates, the complainants' position is untenable. The United States submits that each tie vote must be\njudged on its merits. Article X:3(a) cannot require the same outcome in all tie vote situations, just as\nit could not require, for example, the same injury findings in all safeguards cases or the same dumping\nmargin in all dumping cases. The United States submits that, in fact, Article X:3(a) requires uniform\n\n4672 United States' first written submission, para. 1313.\n4673 United States' first written submission, para. 1314.\n4674 United States' first written submission, para. 1315.\n4675 United States' first written submission, para. 1316.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nadministration of the law, not uniform outcomes, and where the facts of two cases differ, uniform\ntreatment might actually require different outcomes.4676\n7.1967 In response to the United States' claims Japan argues that the United States fails to\ncomprehend that for the two products where the President chose the affirmative side (tin mill and\nstainless steel wire), the Commissioners did not agree on the product definition. The Commission was\ntherefore not, in fact, evenly divided. Furthermore, even if the Panel were to decide that the USITC\nwas in fact, evenly divided, the President still failed to provide an explanation for his decision.\nTherefore the Article X:3(a) violation is attributable to the way in which the President treated the\naffirmative votes of individual Commissioners based on differing views about the proper scope of the\nlike product definitions. Absent a common basis for the affirmative votes, the United States cannot\ncontend that the President administered the law in a uniform, impartial and reasonable manner.\n4677\n(i) Tin mill products\n7.1968 Brazil and Japan explain that the President decided to impose safeguard measures on tin mill\nproducts based on his treatment of the USITC's tie vote on injury as an affirmative determination.\nBrazil, Japan and Korea argue that the Commissi on's decision on tin mill products, however, should\nnot have been treated as equally divided, and does not support the measures.\n4678 Brazil and Japan\nargue that, in effect, the President agreed with the three affirmative votes on tin mill products.\nHowever, in doing so he also agreed with the four commissioners who found tin mill products to be\nseparate like products. Hence, he effectively imposed a measure on products for which only one out\nof four commissioners with whom he agreed in te rms of the like product definition (treating the tin\nmill and stainless wire products as separate products) had made an affirmative determination.\n4679\nSimilarly, Korea argues that the President of the United States considered the situation in relation to\ntin mill products to be a \"tie\" vote – three affirmative and three negative – even though the majority of\nCommissioners who examined the like product adopted by the President–tin mill products – reached a\nnegative injury determination.\n4680\n7.1969 Further, Korea argues that since both the USITC and the President determined that the\nrelevant like product was tin mill products, the President had to rely on the causation and serious\ninjury decisions related to the tin mill industry. The President did not (and could not) impose\nsafeguard measures on that basis. Instead, he based his decision on the combination of a single\naffirmative injury vote by Commissioner Miller together with the votes of two other Commissioners\nwho rendered their affirmative decision based on a different, unadopted like product. Korea argues\nthat it was, in fact, a double counting of the votes of Commissioners Bragg and Devaney in the sense\nthat their affirmative votes were counted both fo r the injury determination on CCFRS products and\nagain for the injury determination on tin mill products.\n4681\n7.1970 Brazil and Japan argue that the WTO Agreements, particularly Article X:3(a) of the GATT\n1994, require the President to administer the safeguard law in a uniform, impartial and reasonable\nmanner. According to Brazil and Japan, the rights of other WTO Members to fundamental fairness\nand due process envisioned under Article X:3(a) were breached when the President treated the USITC\n\n4676 Korea's written reply to Panel question 134 at the first substantive meeting.\n4677 Japan's second written submission, paras. 48 and 76.\n4678 Brazil's first written submission, para. 248; Japan's first written submission, para. 149; Korea's first\nwritten submission, para. 170.\n4679 Brazil's first written submission, para. 249; Japan's first written submission, paras. 149 and 152.\n4680 Report Submitted to the US Congress at Tin Mill Products (March 2002) (Exhibit CC-89).\n4681 Korea's first written submission, para. 170; see also Japan's first written submission,\nparas. 155-157.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nvotes on tin mill as \"evenly divided\" based on an inappropriate integration of affirmative votes\npremised on different like product definitions.4682 Similarly, Korea argues that the US statute was not\nadministered in a \"uniform, impartial and reasonable manner\" and, the United States violated its\nArticle X:3(a) obligation.4683\n7.1971 In response, the United States argues that the USITC and the President permissibly exercised\ntheir authority under US law in their treatment of divided votes. Although two of the Commissioners\nbased their analyses on like product definitions different from those adopted by the remaining four\nCommissioners, all six of them rendered a determination that included imported tin mill and stainless\nsteel wire. According to the United States, US legislation permitted the USITC to count each of these\nindividual determinations in deciding whether the determination of the USITC was affirmative,\nnegative, or divided. The legislation also permitte d the President to accept the determination of the\nUSITC as reported to him. For the divided votes, the President also had the authority to consider the\nCommission determination to be affirmative or negative. That he made different designations with\nregard to the four divided votes does not call into question the uniformity, impartiality, or\nreasonableness of his action, since the individual Commissioners' determinations were based on the\ndistinct facts related to each domestic industry.\n4684\n(ii) Stainless steel wire\n7.1972 Japan argues that the President decided to impose separate safeguard measures on stainless\nsteel wire products based on his treatment of these products as subject to USITC's tie-vote injury\ndeterminations. Japan submits that, the Commission's decisions on these products, however, should\nnot have been treated as equally divided, and do not support the measures. Japan argues that for\nstainless wire products, two commissioners considered these products as part of a combined stainless\nwire and wire rope like product and issued an affirmative determination on these products. The other\nfour commissioners considered them separate like products. All four voted in the negative for\nstainless wire rope, resulting in a majority negative determination for this product. One of the four,\nhowever, made an affirmative determination for stainless wire; the other three voted in the negative\nfor stainless wire. Overall, therefore, the vote was tied at three-to-three for stainless wire; but for\nstainless wire as a separate like product, the vote was three-to-one negative.\n4685\n7.1973 Japan argues that the WTO Agreements, particularly Article X:3(a) of the GATT 1994,\nrequire the President to administer the safeguard law in a uniform, impartial and reasonable manner.\nAccording to Japan, the rights of other WTO Me mbers' to fundamental fairness and due process\nenvisioned under Article X:3(a) were breached when the President treated the USITC votes on\nstainless steel products as \"evenly divided\" based on an inappropriate integration of affirmative votes\npremised on different like product definitions.4686\n7.1974 In response, the United States argues that the USITC and the President permissibly exercised\ntheir authority under US law in their treatment of divided votes. Although two of the Commissioners\nbased their analyses on like product definitions different from those adopted by the remaining four\nCommissioners, all six of them rendered a determination that included imported tin mill and stainless\nsteel wire. According to the United States, US legislation permitted the USITC to count each of these\nindividual determinations in deciding whether the determination of the USITC was affirmative,\n\n4682 Brazil's first written submission, para. 251; Japan's first written submission, para. 150.\n4683 Korea's first written submission, para. 170.\n4684 United States' first written submission, para. 1306.\n4685 Japan's first written submission, para. 149.\n4686 Japan's first written submission, para. 150.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnegative, or divided. The legislation also permitte d the President to accept the determination of the\nUSITC as reported to him. For the divided votes, the President also had the authority to consider the\nCommission determination to be affirmative or negative. That he made different designations with\nregard to the four divided votes does not call into question the uniformity, impartiality, or\nreasonableness of his action, since the individual Commissioners' determinations were based on the\ndistinct facts related to each domestic industry.\n4687\n(c) Exclusion of NAFTA imports\n7.1975 Korea notes that the USITC found that, under Section 311(a) of the US NAFTA\nImplementing Legislation, imports of other weld ed pipe (among other products) from Canada\naccounted \"for a substantial share of total imports and contribute importantly to the threat of serious\ninjury caused by the imports\". 4688 According to Korea, the USITC also found that, under\nSection 311(a) of the US NAFTA Implementing Legislation, imports of CCFRS (among other\nproducts) from Mexico accounted for a substantial share of total imports and contributed importantly\nto the serious injury.4689 4690 4691\n7.1976 Korea states that irrespective of the finding of the USITC, the President of the United States\ndetermined that imports from Canada and Mexico did not account for a substantial share of total\nimports nor did they contribute importantly to the serious injury for any product that was subject to a\nsafeguard measure.4692 Korea argues that in reversing the determination of the USITC, the President\nof the United States did not provide any explanation for the manifest discrepancy between the USITC\ndetermination and the determination of the President. Indeed, the President made a blanket exemption\nfor all products subjected to safeguard measures regardless of the determination by the USITC. It was\non the basis of such a determination by the President that the United States excluded imports from\nCanada and Mexico.4693\n7.1977 Korea argues that although the USITC and the President should administer the same legal\nstandard under sections 311(a) and 312(b) of the US NAFTA Implementing Legislation 4694 when\nassessing the same factual situation, the two authorities came to totally different decisions with\nrespect to flat steel products and other welded pipe . If the two authorities' application of the same\nlegal standard to the same set of facts had been uniform, impartial and reasonable, they would have\ncome to the same conclusion. In Korea's view, since the two authorities' decisions were contradictory,\nthe United States is in violation of Article X:3(a) of the GATT 1994.4695\n7.1978 In response, the United States submits that the USITC's findings are not subject to Article X:3\nsince, under Section 311, they have no legal effect and they do not change any party's legal rights,\nimpose or remove any burden on imports, or require any other agency or government officer to take\naction. Therefore, according to the United States, they are not a law, regulation, judicial decision or\n\n4687 United States' first written submission, para. 1306.\n4688 USITC Report , Vol. I, p. 166 (Exhibit CC-6). The Commission was evenly divided on whether\nthose imports contributed importantly to the threat of serious injury.\n4689 USITC Report, Vol. I, pp. 66-67 (Exhibit CC-6).\n4690 USITC Report, Vol. I, p. 66 (Exhibit CC-6).\n4691 Korea's first written submission, para. 175.\n4692 Proclamation 7529, 67 Fed. Reg. 10553, 10555-56 (2002), para. 8 and clause (2) (Exhibit CC-13).\n4693 Korea's first written submission, para. 176.\n4694 Codified at 19 U.S.C. §§ 3371-3372, Implementing Chapter 8, Article 801 of the North American\nFree Trade Agreement Between the Government of the United States of America, the Government of Canada\nand the Government of Mexico (Exhibit CC-47).\n4695 Korea's first written submission, para. 177.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nadministrative ruling of general application. The United States submits that, similarly, their lack of\neffectiveness means that the USITC findings with respect to Canada and Mexico are not part of the\n\"administration\" of such measures. Since the USITC findings on \"substantial share\" and \"contribute\nimportantly\" have no legal effect, any difference between them and the Presidential determination\nwould not represent a legally cognizable lack of uniformity, impartiality, or reasonableness in the\n\"administration\" of a measure.\n4696\n7.1979 The United States argues that, in any event the President did not, as Korea alleges, apply \"the\nsame legal standard to the same set of facts\". The United States submits that, unlike the USITC, the\nPresident based his determination on the original report and the supplemental responses, which were\nnot available when the USITC made its findings. In addition, although the USITC is subject to a\nstatutory standard almost identical to the one applic able to the President, nothing required the USITC\nand the President to reach identical results in applying that statutory standard. Reasonable minds may\ndiffer in applying the law to the same set of facts. Thus, even if it were assumed that different levels\nof government reached different results, that difference does not implicate Article X.\n4697\n7.1980 In counter-response, Korea notes the following facts that it considers to be salient: 4698 I n\nrelation to CCFRS products, Korea notes that Mexi co was one of the top five sources of CCFRS;\nMexico's import volume increased 26.9% during the 1996-2000 period; Mexico's rate of increase of\nimports was higher than the rate of increase of non-NAFTA imports; and Mexico's AUV for CCFRS\nwas consistently below the AUVs of other imports. .4699 In relation to pipe and tube, Korea notes that\nCanada was the largest single supplier for the three most recent years in the period examined; the\nquantity of imports from Canada between 1998-2000 was 141% greater than the quantity from the\nsecond largest supplier; between 1998-2000, Canada accounted for at least 35% of the imports; and\nimports from Canada increased their market share from 10.8% in 1999 to 14.2% in 2000. 4700Korea\nstates that the evidence concerning the significan ce of NAFTA imports of CCFRS and pipe and tube\ncalls into question whether, indeed, the President's decision to exclude imports from these sources was\nreasonable and not arbitrary, when the United States itself admits that the decision was based on the\nUSITC Report.4701 4702\n(d) Explanation/publication\n7.1981 Brazil and Japan note that the President provided no explanation for why he treated these\npurported \"tie votes\" as affirmative determinations for tin mill products and stainless steel products\nwhile treating tie votes on two other products – tool steel and stainless flanges/fittings – as negative\ndeterminations.\n4703 Brazil and Japan argue that with no explanation of his decision to treat some tie\nvotes as affirmative and some as negative, the President's decisions in this regard are inconsistent with\none another. They, therefore, violate the requirement under Article X:3(a) of the GATT that each\nMember must administer its laws in a uniform, impartial, and reasonable manner.4704 4705\n\n4696 United States' first written submission, para. 1319.\n4697 United States' first written submission, para. 1320.\n4698 Korea's second written submission, para. 235.\n4699 USITC Report, Vol. I, p. 66-67 (Exhibit CC-6).\n4700 USITC Report, Vol. I, pp. 166-167 (Exhibit CC-6).\n4701 United States' first written submission, para. 1320.\n4702 Korea's second written submission, para. 236.\n4703 Brazil's first written submission, para. 249; Japan's first written submission, paras. 152 and 166.\n4704 Argentina –Hides and Leather, paras. 11.78-11.101.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.1982 According to Japan, the decisions here are not uniform for the obvious reason that they are\ninconsistent: two tie votes are treated as affirmative; two are treated as negative. This is not a\nuniform administration of US law. Absent the required explanation for the President's decision, one\ncan only surmise that the decisions are also not impartial. Finally, the decisions are by nature\nunreasonable because, as discussed above, they were not supported by the requisite reports and\nanalyses. It is not a reasonable administration of US law to make a decision without explaining the\nbasis for that decision. The decisions are therefore inconsistent with the requirements of\nArticle X:3(a).\n4706\n7.1983 The United States argues that there is no reason in the text (or even in the \"spirit\") of\nArticle X to support Japan's conclusion that \"impartial\" and \"reasonable\" administration of measures\nlisted in Article X:1 requires the publication of \"principled reasons\" for reaching a decision. Article X\nexplicitly requires publication only in paragraph 1, which is limited to regulations, rulings, judicial\ndecisions and administrative rulings of general application. Even this explicit obligation only requires\npublication \"in such a manner as to enable governments and traders to become acquainted with\" the\nmeasures. In other words, as long as the measure explains what it does, a Member need not explain\nwhy it was adopted. In contrast, Article X:3 contains no reference to publication, suggesting that the\nwords that are actually there – \"administer in a uniform, impartial and reasonable manner\" – do not\nrequire publication. Moreover, a Member can meet the Article X:1 publication requirement by\nindicating what the measure does, without describing why it took the measure. Thus, if any\npublication requirement can be read into Article X:3, it would seem to involve only the description of\naction taken by a Member, and not an explanation of how the measure complies with municipal or\nWTO rules.\n4707\n7.1984 Korea asserts that the President ignored the findings of the USITC with respect to Mexico and\nCanada and rendered a conclusion that imports from Canada and Mexico did not account for a\nsubstantial share of total imports nor contribute importantly to the serious injury.\n4708 However, the\nUnited States failed to provide any explanation of how it reached this directly contrary conclusion on\nthis important and pertinent issue of fact and law. Thus the determination is in violation of Articles 3\nand 4.2(c) of the Agreement on Safeguards as well as Article X:3(a) of the GATT 1994.4709\n7.1985 The United States argues that Article X:3 does not oblige a Member to \"explain\" the reasons\nfor administering a law, regulation, judicial decision, or administrative ruling in a particular manner.\nThus, the absence of such an explanation for the President's decision on the application of the\nsubstantial share and contribute importantly standards cannot establish the existence of an\ninconsistency with Article X:3.\n4710\n(e) Scope of the obligations imposed by Article X:3(a) of GATT 1994\n7.1986 Japan argues that unlike most provisions of GATT 1994, which are concerned with the\ncontent of a government's laws, regulations, decisions and rulings, Article X of GATT 1994 focuses\n\n4705 Brazil's first written submission, para. 253; Japan's first written submission, para. 173. Japan\nclaimed GATT 1994 Article X:3(a) violations as well as Articles 3.1 and 4.2(c) violation for the lack of\nexplanation. Ibid. para. 166. See also paras. 7.1996-7.2018.\n4706 Japan's first written submission, para. 174.\n4707 United States' first written submission, para. 1294.\n4708 Proclamation 7529, 67 Fed. Reg. 10553, 10555 (2002), para. 8 (Exhibit CC-13).\n4709 Korea's first written submission, para. 180.\n4710 United States' first written submission, para. 1321.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\non the administration of those laws, regulations, decisions, and rulings. 4711 According to Japan,\nArticle X articulates the basic principles of what is widely known as due process or fundamental\nfairness.\n4712 4713 Japan further argues that the words \"uniform\", \"impartial\", and \"reasonable\" form the\nessence of the Article X:3(a) obligations. 4714 They are to be interpreted \"in good faith in accordance\nwith the ordinary meaning to be given to the term s of the treaty in the context of its object and\npurpose\".4715 Japan submits that with respect to the administration of laws which Article X:3(a)\ngoverns, \"impartial\" ensures that authorities do not favor particular parties over others 4716;\n\"reasonable\" is directed at the nature of the administration itself and ensures that authorities do not\nadminister a law in an inappropriate manner, such as applying a penalty in a disproportionate\nmanner\n4717; and \"uniform\" ensures that authorities do not administer laws in different ways under\nsimilar circumstances. 4718 Collectively, these obligations ensure due process. 4719 Based on the\nAppellate Body's interpretation of Article X:3 in US – Shrimp 4720, Japan argues that the Appellate\nBody considers the standards contained in Article X:3 to represent in one sense the notion of good\nfaith and in another sense the \"fundamental requirements of due process\".4721\n7.1987 Japan further agues that the Article X:3(a) due process rights may be viewed as a specific\nincorporation of the fundamental international legal principle of abus de droit. Japan submits that\n\n4711 The Appellate Body referenced this distinction in EC – Bananas III, at para. 200 (\"Article X\napplies to the administration of laws, regulations, decisions and rulings.\" (emphasis in original)).\n4712 The term \"due process\" has been used extensively in WTO dispute settlement proceedings. See,\ne.g., Appellate Body Report, India – Patents (US), at para. 94; and Panel Report, US – FSC, at para. 6.3.\n4713 Japan's first written submission, para. 126.\n4714 The New Shorter Oxford Dictionary defines these important terms as:\n\"impartial\" — Not partial; not favouring one party or side more than another; unprejudiced, unbiased; fair, at\n1318;\n\"reasonable\" — 1. Endowed with the faculty of reason, ra tional. 2. In accordance with reason; not irrational or\nabsurd. 3. Proportionate. 4. Having sound judgment; ready to listen to reason, sensible. Also, not asking for\ntoo much. 5. Within the limits of reason; not greatly less or more than might be thought likely or appropriate;\nmoderate, at 2496;\n\"uniform\" — \"1. Of one unchanging form, character, or kind; that is or stays the same in different places or\ncircumstances, or at different times, . . . 4. Of the same form, character, or kind as another or others; conforming\nto one standard, rule, or pattern; alike, similar\" at 3488.\n4715 Vienna Convention, art. 31.1. Article 26 also establishes the concept of pacta sunt servanda stating\n\"Every treaty in force is binding upon the parties to it and must be performed by them in good faith\", and it\nappears in Part III of the Vienna Convention titled, \"Observance, Application and Interpretation of Treaties.\"\nIbid. The Vienna Convention governs the interpretation of the provisions of the WTO Agreements, including\nGATT 1994. See DSU Article 3.2; see also AD Agreement, Article 17.6 (i) (requiring Members' authorities to\nevaluate facts in \"an unbiased and objective manner\"); Article 17.6(ii) (directing Panels interpreting the\nAgreement to use \"customary rules of interpretation of public international law\", i.e., the Vienna Convention).\nMost recently, the Panel in Korea – Procurement recognized the implicit development of Vienna Convention\nArticle 26 pacta sunt servanda in respect of the GATT 1947 and the WTO Agreements, at para. 7.93.\n4716 Argentina – Hides and Leather, para. 11.95, 11.100 (noting that \"impartiality\" prohibits an\nauthority from giving unfair advantage to one party).\n4717 Argentina – Hides and Leather , para. 11.86 (holding that the meaning of \"reasonableness\" relates\nto how a law or regulation is actually administered). Panel Report, US – Stainless Steel , para. 6.51 (\"the\nrequirement of uniform application of laws and regulations must be understood to mean uniformity of treatment\nin respect of persons similarly situation\").\n4718 Ibid.\n4719 Japan's first written submission, paras. 127-131.\n4720Appellate Body Report, US – Shrimp, (emphasis in original), at para. 182.\n4721 Japan's first written submission, para. 128.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nabus de droit, or abuse of law, prohibits a state from engaging in an abusive exercise of its rights. 4722\nAccording to Japan, this principle was recognized by the Appellate Body in the US – Shrimp case. \"It\nnoted that good faith\" is a \"general principle of law and a general principle of international law [that]\ncontrols the exercise of rights by states\" 4723 and that abus de droit is one application of this general\nprinciple.4724 4725 Japan asserts that in this way, the Appe llate Body adopted the concept of good faith\nas a tool for interpreting WTO provisions so as to guarantee the due process rights of WTO Members.\nSpecifically, good faith precludes unreasonable, abusive, or discriminatory interpretation of WTO\nrights and obligations. These principles prove even more crucial when a particular law endows a\nnational authority with discretion. 4726 An exercise of discretion in good faith must include a\nconsideration of the parties' interests. In this way, the concept of good faith imposes a duty upon\nMembers to implement the provisions in a reasonable and equitable manner.4727\n7.1988 In response, the United States argues that Japan's analysis omits a key aspect of the reasoning\nin US – Shrimp. According to the United States, the Appellate Body cited Article X:3 not in response\nto a claimed inconsistency with that Article, but as context for the interpretation of Article XX(g).\nThe United States submits that the Appellate Body appears to have distinguished between \"certain\nminimum standards\" that Article X:3 actually \"establishes\" and other due process ideals that are part\nof the \"spirit, if not the letter\" of that Article. According to the United States, the Appellate Body did\nnot have to clarify this distinction, as consistency with Article X was not subject to the appeal.\n4728\nThe United States further submits that in line with the Appellate Body's repeated cautions against\nreading into the Agreement words that are not there, a panel cannot add new terms or change the\nmeaning of existing terms. Accordingly, the United States reads the Appellate Body's guidance in US\n– Shrimp as a recognition that Article X provides only \"certain minimum standards of transparency\nand procedural fairness\" – namely, those expressly provided by its terms. The United States submits\nthat it does read the Appellate Body's reference to the \"spirit\" of Article X – a \"spirit\" not found in the\n\"letter\" (i.e., the text) – as justifying the importation into Article X of alleged due process concepts\nthat are not expressly provided. '\n4729\n7.1989 The United States further submits that there is nothing in Article X to suggest that it\nincorporates international law principles of abus de droit or \"good faith\". According to the United\nStates, as a general matter, the DSU is specific when it incorporates customary rules of international\nlaw, which it does only in Article 3.2, and only with regard to rules of interpretation. Abus de droit\n\n4722 Sir Robert Jennings, Oppenheim's International Law, Vol. I, p. 407 (9th ed. 1992) (an abuse of\nright occurs when a state avails itself of a right in an arbitrary manner).\n4723 US – Shrimp, at para. 158; see also US – FSC, at para. 166; US – Gasoline, at 18. This principle is\nset out at Article 26 (\"pacta sunt servanda\") of the Vienna Convention, which requires states bound by treaties to\nperform them in good faith.\n4724 As the Appellate Body concluded, \"(a)n abusive exercise by a Member of its own treaty right thus\nresults in a breach of the treaty rights of the other Members and, as well, a violation of the Treaty obligation of\nthe Member so acting.\" US – Shrimp, at para. 158.\n4726The same leading treatise used by the Appellate Body in US – Shrimp explains, \"wherever the law\nleaves a matter to the judgement of the person exercising the right, this discretion must be exercised in good\nfaith, and the law will intervene in all cases where this discretion is abused … Whenever, therefore, the owner\nof a right enjoys a certain discretionary power, this must be exercised in good faith, which means that it must be\nexercised reasonably, honestly, in conformity with the spirit of the law and with due regard to the interests of\nothers.\" B. Cheng, General Principles of Law as applied by International Courts and Tribunals (Stevens and\nSons, Ltd., 1953), Chapter 4, p. 133, (Exhibit CC-48).\n4727 Japan's first written submission, para. 130.\n4728 United States' first written submission, para. 1292.\n4729 United States' first written submission, para. 1293.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndoes not fall into that category. Moreover, the Appellate Body noted in US – Shrimp that this concept\n\"enjoins that whenever the assertion of a right 'impinges on the field covered by [a] treaty obligation,\nit must be exercised bona fide, that is to say, reasonably.'\" However, Article X applies to any\nmeasure described in its first paragraph – including a measure that liberalizes trade. Thus, according\nto the United States, it cannot be understood as the incorporation of a legal principle directed\nexclusively at measures that prejudice other signatories to an Agreement.\n4730\n7.1990 Japan argues that the Agreement on Safeguards requires the competent authority to determine\nwhether or not increased imports cause serious injury to the domestic industry before taking a\nsafeguard measure. Under US law, the USITC is re sponsible for the injury determination. Thus, the\nUSITC determination falls under the scope of Article X:3, since the administration of the laws,\nregulations, decisions and rulings related to the United States' safeguard system mainly consists of the\nUSITC determination based on its investigation as well as the subsequent decision on the application\nof the measure by the President.4731\n7.1991 The United States argues that Article X:3 does not apply to the substantive content of laws,\nregulations, judicial decisions and administrative rulings of general application. More particularly,\nthe United States argues that none of the claims raised in relation to Article X:3(a) is implicated by\nArticle X:3(a), as they involve substantive findin gs or determinations, and not the administration of\nlaws, regulations, judicial decisions or administrative rulings of general application. 4732 The United\nStates submits that the Panel should not even reach the complainants' factual allegations that specific\ndecisions by the President and the USITC were not uniform, impartial, and reasonable. It further\nsubmits that should the Panel decide to reach that question, the facts show that with regard to each of\nthese claims, the complainants have failed to meet their burden of proof to establish an inconsistency\nwith Article X:3(a).\n4733\n7.1992 According to the United States, the argument that some of the decisions by the USITC or the\nPresident under Section 201 or Section 312 are not \"uniform\", \"impartial\", or \"reasonable\" and,\nconsequently, are inconsistent with Article X:3(a) are based on the mistaken view that Article X:3(a)\nrequires \"decisions\" to be uniform and ignores the text of Article X:3(a) which applies to\n\"administering\" laws relating to international trade. According to the United States, panels and the\nAppellate Body have made clear that Article X:3 applies exclusively to the administration – in the\nsense of procedures applied – of the laws, regulations, judicial decisions, and administrative rulings of\ngeneral application described in Article X:1.4734 The United States relies upon comments made by the\nAppellate Body in EC – Poultry and the panel in Argentina – Hides and Leather to argue that the\nArticle X obligations are of a limited nature. On the basis of those decisions, it argues that,\nArticle X:1 covers only certain \"laws, regulations, judicial decisions and administrative rulings of\ngeneral application\", generally those pertaining to international trade. With regard to these measures,\nthe only obligations are that a Member publish them promptly and, for certain of them, not enforce the\nmeasure until after its official publication. Article X:3(a) applies not to the measures described in\nArticle X:1 themselves, but to their administration, which must be \"uniform, impartial and\nreasonable\".\n7.1993 Relying upon the Appellate Body's decision in US – Shrimp, the United States further argues\nthat Article X:3 does not require substantive decisions to be uniform. Indeed, a uniform, impartial,\n\n4730 United States' first written submission, para. 1295.\n4731 Japan's first written submission, para. 131.\n4732 United States' first written submission, para. 1296.\n4733 United States' first written submission, para. 1297.\n4734 United States' first written submission, para. 1287.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand reasonable administration of laws will often require different outcomes because of different facts\nor other circumstances. 4735 According to the United States, other provisions of the covered\nagreements specify the substantive requirements, and these must be the basis for a claim that the\nsubstantive aspects of a Member's actions are inconsistent with WTO obligations. To the extent that\nthe complainants are complaining that a particular outcome is inconsistent with a provision of a\ncovered agreement, they have the burden of proof in establishing that breach, and that would not be a\nclaim under Article X:3(a).4736\n7.1994 In counter-response, Japan argues that to the extent that the Argentina – Hides and Leather\nPanel implied that a measure was either administrative (procedural) or substantive, Japan believes this\nto be erroneous and unsupported by any Appellate Body precedent. That a substantive measure can\nbe administered in a manner that is not uniform, impartial and reasonable is self-evident. According\nto Japan, GATT Article X:3(a) is meant to address and prevent precisely this type of procedural\nprotectionism.\n4737 4738 Japan also submits that the United States' contention that the customary\ninternational law principles of good faith and abus de droit are not applicable to GATT\nArticle X:3(a)4739 is expressly contradicted by the declaration of the panel in Korea – Procurement\nthat principles of customary international law apply to WTO provisions unless they are explicitly\nexcluded by the text of a WTO Agreement.4740 Japan argues that, moreover, in its prior decisions, the\nAppellate Body has declared both that the demands of due process are implicit in the DSU4741 and that\nthe principle of good faith indeed informs the WTO Agreement in general. 4742 4743 Japan concludes\nthat, in light of the foregoing, it is indisputable that the international law principles of due process and\ngood faith are embedded in GATT Article X:3(a). Thus, in analysing how the US administered its\nsafeguard law in this dispute, the Panel should examine the US conduct closely, with an eye to\nwhether the United States administered its law in a way that respected its due process and good faith\nobligations.4744\n7.1995 Japan argues that the United States must administer its safeguard law in a uniform, impartial\nand reasonable manner. The same standards must be applied in every instance. When applied to\ndifferent facts, the outcome may differ. However, different outcomes when faced with the same or\nhighly similar facts do not meet the requirements of Article X:3(a). 4745 Similarly, Korea argues that\n\n4735 United States' first written submission, para. 1290.\n4736 United States' first written submission, para. 1287.\n4737 The erroneous nature of the US argument is also illustrated by the Panel and Appellate Body\nreports in US – Underwear . There, the Panel and Appellate Body said that the administrative (procedural)\nobligations of GATT Articles X:1 and X:2 applied in the context of a textile safeguard restraint measure (a\nsubstantive measure). Appellate Body Report, US – Underwear , at pp. 20-21 and Panel Report, US –\nUnderwear, at paras. 7.64-7.66. Though Article X:3(a) em bodies a different administrative (procedural)\nobligation than Articles X:1 and X:2, like them it applies that administrative (procedural) obligation to\nsubstantive measures of general application.\n4738 Japan's second written submission, paras. 65-67.\n4739 United States' first written submission, at para. 1295.\n4740 Panel Report, Korea – Procurement, at para. 7.97 (decision not appealed).\n4741 Appellate Body Report, India – Patents (US), at para. 94.\n4742 Appellate Body Report, US – Hot-Rolled Steel, at para. 101; Appellate Body Report, US – FSC, at\npara. 166.\n4743 Japan's second written submission, para. 68.\n4744 Japan's second written submission, para. 69.\n4745 Japan's written reply to Panel question No. 134 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhile Article X:3(a) does not require uniformity in outcome in every case there, nevertheless, has to\nbe consistency in administration so that the results are also consistent.4746\n3. Articles 3.1 and 4.2(c) of the Agreement on Safeguards\n(a) Treatment of affirmative votes\n7.1996 Brazil, Norway and Japan argue that even assuming that the President's reliance on three\naffirmative votes based on differing like product definitions for tin mill products and stainless steel\nwire was legitimate, the decision was inconsistent with Articles 3.1 and 4.2(c) of the Agreement on\nSafeguards because the President failed to identify which determinations \"set[s] forth the findings and\nreasoned conclusions reached on all pertinent issues of law and fact\". He, therefore, also failed, as\nrequired by Article 4.2(c), to provide \"a detailed analysis of the case under investigation as well as a\ndemonstration of the factors examined\".\n4747 Japan argues that anytime the President makes a decision\nthat departs from or lacks an USITC majority – which applies with respect to the tin mill and stainless\nwire products – then he must provide an explanation for the decision. Japan submits that, in this case,\nthe President provided no explanation as to why he agreed with those Commissioners voting in the\naffirmative for tin mill and stainless wire, while agreeing with those voting in the negative for tool\nsteel and stainless flanges and fittings.\n4748\n7.1997 Referring to relevant parts of the USITC Report, the United States argues that the\ndeterminations of the three USITC Commissioners who made affirmative determinations on tin mill\nproducts4749 and stainless steel wire 4750 are supported by findings and conclusions and a detailed\nanalysis that fully meets the requirements of Arti cles 3.1 and 4.2(c) of the Agreement on Safeguards.\nMore particularly, the United States argues that the competent authorities (i.e., the USITC) made an\naffirmative determination with regard to tin mill and stainless steel wire under US law and fully\ncomplied with Article 3.1 by publishing \"a report setting forth their findings and reasoned conclusions\nreached on all pertinent issues of fact and law\". The report addressed all of the factors necessary for\nan affirmative determination consistent with Articles 2.1 and 4. Since the views of the\nCommissioners and data in the USITC Report provid ed findings and reasoned conclusions in support\nof the affirmative determinations, Article 3.1 did not require further explanation by the President.\nThis, says the United States, is in keeping with the President's role in the US statutory process – not to\nmake a separate determination, but to decide on which of the determinations already made by the\nCommissioners to rely as the determination of the USITC as a whole.\n4751\n7.1998 In addition, the United States submits that the President did not make a decision that \"departs\nfrom\" the USITC's decision. Instead, he simply iden tified which votes constituted the determination\nof the USITC. Further, in deciding that an affi rmative determination constitutes the determination of\nthe USITC, the President decides which of two determinations – one negative and one affirmative,\neach of them potentially consistent with US law – shall be the collective determination of the USITC.\nHe does not pick and choose among the Commissioners who supported that determination, adopt one\nset of views, or adopt one set of conclusions as his own. The United States submits that this is\nentirely consistent with the Agreement on Safeguards, provided that the Commissioners' written\n\n4746 Korea's written reply to Panel question No. 134 at the first substantive meeting.\n4747 Brazil's first written submission, para. 252; Japan's first written submission, paras. 166 and 167. For\nJapan's related argument for the United States' violation of Articles X:3(a), see 7.1981-7.1983 and\nsupra. footnote 4705\n4748 Japan's oral statement for the first substantive meeting, para. 12.\n4749 United States' first written submission, paras. 982-989.\n4750 United States' first written submission, paras. 990-997.\n4751 United States' first written submission, para. 1017.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nviews provide explanations (albeit alternative explanations) demonstrating the legal sufficiency of the\ndetermination that the President selected.4752\n7.1999 Japan and Norway assert that a question arises in this case as to who is the \"competent\nauthority\" in the United States in safeguard investigations. Although the USITC conducts the injury\ninvestigation, the President makes the ultimate decision on whether and how to impose the measure.\nThis distinction will sometimes not matter if the President agrees with the USITC and imposes the\nremedy they recommend he impose. However, anytime the President makes a decision that departs\nfrom or lacks an USITC majority – which applies with respect to the tin mill and stainless wire\nproducts, and his choice of remedy for all products – then he must provide an explanation for the\ndecision. Japan submits that the US law construct that the President rather than the competent\nauthority, i.e., the USITC, makes the final decision in safeguards cases does not absolve the United\nStates Government of the obligation to abide by Articles 3.1 and 4.2(c). If the President chooses a\ncourse unsupported by an USITC majority, he must issue his own report or, at least, provide a\nreasoned analysis or identify whose reports and analysis he is adopting. Otherwise, as here, the\nmeasure is unsupported and violates Articles 3.1 and 4.2(c).\n4753 More particularly, Japan argues that,\nunder the WTO Agreement, if the President disagrees with the USITC's analysis, then he effectively\ntakes the role of the competent authority within the meaning of Article 3.1 of the Agreement on\nSafeguards, because his decision becomes the injury determination of the United States. Therefore,\nunder such circumstances, the President must abide by Articles 3.1 and 4.2(c) and any other\nobligations applicable to competent authorities.\n4754\n7.2000 Japan submits that the crux of its argument on this point is that the requirements of the\nAgreement on Safeguards must be followed by each Member regardless of the internal decision-\nmaking process for the Member. According to Japan, if the President disagrees with the USITC\nanalysis, then he effectively takes the role of the competent authority within the meaning of\nArticle 3.1 of the Agreement on Safeguards, because his decision becomes the injury determination of\nthe United States. 4755 Furthermore, Article 2.1 provides that \"a Member may apply a safeguard\nmeasure only if that Member has determined\" which makes clear that a measure can only be taken\nafter an investigation is performed pursuant to Article 3.1, and consistent with the result of that\ninvestigation. Japan submits that it is not sufficient for the President to point his finger at the USITC\nand say \"they're the competent authority, not me\". This approach, submits Japan, would apply to all\ncases in which the President's measure lacks support in the USITC's explanation.4756\n7.2001 Similarly, Korea argues that it is not relevant how the internal decision-making process is\norganized by a Member. However, there must be a determination that meets all the requirements of\nthe Agreement on Safeguards and compliance must be judged by reference to the authorities'\npublished report. If that decision contains internal inconsistencies which are not resolved within the\nreport, or legally inconsistent findings, then the requisite legal basis for a safeguard measure has not\nbeen met. Korea submits that, for this reason, when there are conflicting legal recommendations and\neven inconsistent factual findings, the President may not simply pick out any of the findings that\nsupport serious injury, causation, etc. If not even a majority of the Commission agrees that serious\ninjury, causation, or increased imports exists then there are questions raised as to the existence of the\nnecessary pre-conditions for safeguard relief. The failure of the President to either seek a clarification\nfrom his authorities or otherwise explain the decision to nonetheless find serious injury, causation, etc.\n\n4752 United States' written reply to Panel question No. 93 at the second substantive meeting.\n4753 Japan's first written submission, para. 168; Norway's first written submission, para. 342.\n4754 Japan's oral statement for the second substantive meeting, para. 27.\n4755 Japan's second written submission, paras. 59-61.\n4756 Japan's written reply to Panel question No. 69 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrenders the decision-making process not in accord with the Agreement on Safeguards. The necessary\nprerequisites for safeguard relief have not been met.4757\n7.2002 China argues that, pursuant to Article 3.1 of the Agreement on Safeguards, the competent\nauthorities are required to provide a report setting forth their findings and reasoned conclusions\nreached on all pertinent issues of fact and law. These findings represent the legitimate basis for the\nimposition of a safeguard measure. Thus, the Agreement on Safeguards requires that the reasons why\na measure is applied be adequately explained and transparent. According to China, if the authority\napplying the measure (in this case the President) decides to depart from the findings of the\ninvestigating authority by imposing a higher remedy, it has to provide an adequate explanation. Such\nan explanation is necessary in order to provide a legitimate basis for its decision, and in order to\nensure transparency. China submits that the ab sence of explanation would allow the authority to\narbitrarily modify the outcome of the investigation and impose remedies of higher extent than\nnecessary.\n 4758\n7.2003 Norway submits that it is the United States that is the Member of the WTO, not the USITC\nnor the President. The United States has an obligation to ensure that Articles 3.1 and 4.2(c) is adhered\nto. Any decision must be supported, as required by the Agreement on Safeguards, and that support\nmust be published as required by Articles 3.1 and 4.2(c). Internal US legislation on \"bifurcation\" of\ndecision making power or on confidentiality of commissioner's recommendations are irrelevant, and\ncannot override the obligations of the US as a Member of the WTO.4759\n7.2004 In response, the United States submits that the Appellate Body in US – Line Pipe made it\nclear that the internal decision making process of a Member is entirely within the discretion of that\nMember and an exercise of its sovereignty. The United States argues that, on the basis of that\ndecision, the Agreement leaves the decision-making process to the Members, including the\nidentification of what constitutes a decision under its municipal law, provided that the determination,\n\"however it is decided domestically\", meets the requirements of the Agreement.\n4760 The United States\nargues that the United States implementing legislation provides for the USITC to conduct\ninvestigations and make injury determinations a nd for the President to make the decision on remedy\nand certain other matters. It provides that when the USITC is equally divided in its injury\ndetermination, the President may consider as the USITC determination either the determination of the\nCommissioners voting in the affirmative or those voting in the negative.4761\n7.2005 The United States also argues that the President is not a \"competent authority\" for purposes of\nArticles 3 and 4. He does not participate in the investigatory process or cast a vote. He merely\ndecides which explanation by those who did participate in the investigation carries the greater\nweight.4762 The United States further argues that even if the President were a \"competent authority\",\nthe Agreement on Safeguards does not require a report, or even written views, from each member of a\ncompetent authority. Thus, even if the President facing a tie vote of the USITC could be treated as a\ncompetent authority under Articles 3 and 4, he would bear no obligation to explain his views\nseparately.\n4763\n\n4757 Korea's written reply to Panel question No. 69 at the second substantive meeting.\n4758 China's written reply to Panel question No. 69 at the second substantive meeting.\n4759 Norway's written reply to Panel question No. 69 at the second substantive meeting.\n4760 United States' first written submission, para. 980.\n4761 United States' first written submission, para. 981.\n4762 United States' oral statement for the second substantive meeting, para. 136.\n4763 United States' oral statement for the second substantive meeting, para. 137.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n7.2006 The European Communities and Korea agree that it is of no matter whether the determination\nresults from a decision by one or one hundred, individual decision-makers under the municipal law of\nthat WTO Member. However, the European Communities and Korea submit that, in accordance, with\nthe Appellate Body decision in US – Line Pipe, what matters is whether the determination, however it\nis decided domestically, meets the requirements of the Agreement on Safeguards.\n4764 The European\nCommunities submits that one of the requirements of the Agreement on Safeguards is the provision of\na reasoned and adequate explanation in a report. If having a bifurcated or any other system makes\ncompliance more difficult with this obligation, then that is the problem of the Member imposing the\nsafeguard measures and cannot be used as an excuse to lower the standards contained in the\nAgreement on Safeguards.\n4765\n7.2007 The United States argues that it has never asserted that the \"bifurcation\" of the process allows\nthe President to escape responsibility under the Agreement on Safeguards. The Agreement on\nSafeguards itself divides the process into two stages: (a) the investigation (Article 3) and the\ndetermination of serious injury or threat thereof (Article 4); and (b) application of the safeguard\nmeasure (Article 5). The United States submits that with respect to the investigation, Article 3.1\nstates that \"[t]he competent authorities shall publish a report setting forth their findings and reasoned\nconclusions\". With respect to the determination of serious injury, Article 4.2(c) states that \"[t]he\ncompetent authorities shall publish promptly, in accordance with the provisions of Article 3, a\ndetailed analysis of the case under investigation as well as a demonstration of the relevance of the\nfactors examined\". As the competent authority, the USITC must comply with these requirements.\nHowever, the United States submits that there is no analogous provision applicable to step two, i.e.,\napplication of the safeguard measure, except with respect to certain types of quantitative restrictions\nthat were not used in the steel case. Thus, the President, who administers this second step, was under\nno obligation to provide such an explanation. The United States further argues that the bifurcation of\nthe proceedings between the USITC and the President is not pertinent. In fact, even if the USITC\nadministered both stages of the process, the Agreement on Safeguards still would not require an\nexplanation, at the time a safeguard measure was imposed, of how that measure was only to the extent\nnecessary to remedy or prevent injury and to facilitate adjustment.\n4766\n7.2008 The United States submits that the complainants fail to address or even acknowledge the\nrecent finding of the Appellate Body in US – Line Pipe, in which the Appellate Body both confirmed\nthat the decision-making process is left to the discretion of the Members and found no inconsistency\nbetween the requirements of the Agreement and the manner in which the USITC counts votes, at least\nin the instance of its present injury and threat of injury determinations.\n4767 According to the United\nStates, in that case, the Appellate Body said that if a Member has taken a safeguard action that\nsatisfies the requirements of the Agreement, the particular manner in which the decision is reached by\nthe competent authorities is of no consequence.4768\n7.2009 The United States argues that that decision is instructive in relation to stainless steel wire\ninsofar as it indicates that the fact that Commissioner Bragg found that increased imports constituted a\nthreat of serious injury while Commissioner Devaney determined that such imports cause serious\ninjury does not in any way diminish the sufficiency of their findings for purposes of Article 2.1. 4769\n\n4764 European Communities' written reply to Panel question No. 128 at the first substantive meeting;\nKorea's written reply to Panel question No. 128 at the first substantive meeting\n4765 European Communities' written reply to Panel question No. 128 at the first substantive meeting\n4766 United States' written reply to Panel question No. 128 at the first substantive meeting.\n4767 United States' first written submission, para. 1002.\n4768 United States' first written submission, para. 1005.\n4769 United States' first written submission, para. 1005.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAccording to the United States, the Appellate Body's conclusion is also instructive with regard to the\naffirmative votes made by those Commissioners whose respective starting point for their assessment\nof serious injury began with a different definition of the relevant like products, as in the case of tin\nmill products.\n4770 The United States submits that since each Commissioner's determination fulfilled\nthe requirements of Articles 2 and 4, each provides a valid basis under both US law and the\nAgreement for determining whether increased imports are a cause of serious injury to a domestic\nindustry. Accordingly, the USITC was warranted in combining all of the affirmative votes and all of\nthe negative votes to determine the collective decision of the agency. In the case of both tin mill steel\nand stainless steel wire, this process resulted in an evenly divided Commission with each grouping of\nCommissioners, consisting of three votes.\n4771\n7.2010 The United States submits that, as in US – Line Pipe , a multiple number of USITC\nCommissioners reached the same conclusion that domestic producers of tin mill and domestic\nproducers of stainless steel wire, either by themselves or as part of a larger group of producers, are\nseriously injured or threatened with serious injury by increased imports. As in US – Line Pipe , they\nreached the same result, albeit based on different findings on certain discrete subject matter. Each\ngroup of three determined, based on the facts in the case, that the right to apply a safeguard measure\non imports of tin mill and stainless steel wire had been established. 4772 The United States asserts that\nthe essence of what has been argued is that the USITC should hold two votes – one on the definition\nof industry and the other on whether the industry as defined by the majority is seriously injured or\nthreatened with serious injury by increased imports. The United States submits that this is not how\nthe USITC votes or counts votes or a subject to which the Agreement speaks. Moreover, the vote-\ncounting methodology they appear to advocate could have the unintended consequence, in other\ncases, of changing the USITC's decision from a negative one to an affirmative one.\n4773\n7.2011 Japan also agrees with the Appellate Body that the Agreement on Safeguards is silent\nregarding how a Member must undertake its decision-making process. However, Japan submits that\nthis case presents new and different facts. First, there was only one decision that appears to have\nsupported each of the President's decisions on tin mill and stainless wire products (Commissioner\nMiller for the first and Commissioner Koplan for the second) since these are the only Commissioners\nwho agreed with the President on both the like product definition and affirmative injury. Japan\nquestions whether a reasoned and adequate analysis could exist when the decision of only one of six\nCommissioners provides the basis on which the President imposes a measure. Japan states, secondly,\nthat even if this were deemed sufficient, it is still required, when the Commission is split among\nthemselves, that the President indicate which explan ation he has adopted as his own. Otherwise, his\ndecision is not supported by the report required by Article 3.1. In this regard, it is instructive that the\nUnited States does not appear to know itself which decision the President relies upon, as it defends in\nits first submission the views of all the Commissioners voting in the affirmative for these products.\n4774\n7.2012 Further, Japan argues that the US attempt to analogize these facts to the US – Line Pipe case\nis inapt. In that case, the question was whether a current injury finding by some Commissioners and a\nthreat of injury finding by others could be viewed as being consistent with one another. The\nAppellate Body decided that they could. Actual \"serious injury\" and \"threat\" may be \"distinct\nconcepts\" under the Agreement, but if the compet ent authority appropriately determines that an\nimport increase of the same particular product is causing either of these distinct effects to the\n\n4770 United States' first written submission, para. 1006.\n4771 United States' first written submission, para. 1008.\n4772 United States' first written submission, para. 1009.\n4773 United States' first written submission, para. 1010.\n4774 Japan's written reply to Panel question No. 128 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industry producing like or directly competitive products, both determinations would be\nsupportive of a measure on that product. Japan argues that the question in the present case, in stark\ncontrast, is whether an affirmative decision based on one like product definition can be viewed as\nconsistent with an affirmative decision based on another like product definition where these distinct\ndecisions consist of only three affirmative votes altogether out of six. Japan submits that they cannot.\nThis is because like product definitions alter all subsequent analyses – the increased imports analysis,\nthe serious injury analysis, and the causation analysis. Thus, aggregation of the results of these\nanalyses based on differing like product definitions would affect the ultimate result on whether a\nsafeguard measure should be applied on a particular product.\n4775\n7.2013 In counter-response, the United States submits that the Appellate Body in US – Line Pipe\nconcluded that findings of \"serious injury\" and \"threat of serious injury\" are \"two distinct concepts\nthat must be given distinctive meanings in interpreting the Agreement on Safeguards\". 4776 I n\nparticular, these concepts \"refer to different moments in time\" 4777 – \"[p]resent serious injury is often\npreceded in time by an injury that threatens cl early and imminently to become serious injury\". 4778\nAccordingly, the Appellate Body expressed no disagreement with the US – Line Pipe panel's finding\nthat the concepts are \"mutually exclusive\". 4779 Nevertheless, the Appellate Body stated that it does\nnot matter whether the decision is based upon \"serious injury\" or \"threat\" because either finding\nsupports the right to apply safeguard measures.4780 4781 The United States submits that US – Line Pipe\nclearly establishes that individual decision-makers within the competent authorities need not agree on\nwhether there is \"serious injury\" or \"threat\" – even though these are distinct concepts with distinct\nmeanings – because either finding supports application of a safeguard measure. Together, the\ndecision-makers need only agree that there is either serious injury or threat thereof. By analogy,\nwhen the decision-makers agree that increased imports caused serious injury, but differ on the\nrationale for that conclusion, the question for the Panel is not whether the individual conclusions are\nthe same, but whether each conclusion supports application of a safeguard measure. As long as the\nconclusions of each decision-maker supporting an affirmative determination are consistent with the\nAgreement on Safeguards, as was the case for tin mill steel and stainless steel wire, the overall\ndetermination of the competent authorities is valid.\n4782\n7.2014 Japan notes that the Commission in this case was equally divided in its injury determination\nwith respect to four products: tin mill, stainless steel wire, tool steel, and stainless flanges/fittings.\nOn the first two – tin mill and stainless wire – the President sided with the affirmative votes. On the\nthird and fourth – tool steel and stainless flanges/fittings – the President agreed with the negative\nvotes.\n4783 Japan and Norway argue that no explanation was provided at all by the President, in his\nproclamation or elsewhere, as to why he agreed with one or the other side of these tie votes.4784 Japan\npostulates that perhaps it could be inferred in some cases that the President agreed with one side or the\nother because of the existence of just two reports – one signed by three Commissioners, the other\nsigned by the other three. In such instances, one could say that he implicitly adopted the report of the\n\n4775 Japan's oral statement for the second substantive meeting, para. 23.\n4776 Appellate Body Report, US – Line Pipe, para. 167.\n4777 Ibid., para. 166.\n4778 Ibid., para. 168.\n4779 Ibid., paras. 162 and 164 (\"This is not to say that we believe that 'serious injury' and 'threat of\nserious injury' are the same thing, or that competent authorities may make a finding that both exist at the same\ntime\").\n4780 Ibid., para. 171.\n4781 United States' second written submission, para. 234.\n4782 United States' second written submission, para. 235.\n4783 Japan's first written submission, para. 169.\n4784 Japan's first written submission, para. 170; Norway's first written submission, para. 344.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nside with which he agrees. Japan submits, however, that here, there were more than two reports.\nJapan and Norway note, however, that for tin mill and stainless wire products there were four\ndifferent reports, three of which supported affirmative decisions\n4785 and the reports address different\ncombinations of like product categories.4786 4787 Japan argues that, it is impossible, therefore, to know\nwith which Commissioner's or Commissioners' analysis the President agreed. The President failed to\nstate which of the multiple reports issued by the Commission he adopted. Thus, it is impossible to\nknow the basis for his decision. In the parlance of Article 3.1, the President failed to identify which\nreport \"set[s] forth the findings and reasoned conclusions reached on all pertinent issues of law and\nfact\". He has therefore also failed, as required by Article 4.2(c) to provide \"a detailed analysis of the\ncase under investigation as well as a demonstration of the factors examined\".\n4788\n7.2015 In response to a question from the Panel as to whether it is possible to satisfy the requirements\nfor reasoned and adequate explanations under Articles 3.1 and 4.2(c) of the Agreement on Safeguards\nwith a report that is comprised of individual dete rminations of multiple decision-makers that are\ndivergent, the European Communities states that it would not exclude that this is possible provided\nthat the prevailing determination and reasoned and adequate explanation can be determined with\ncertainty.\n4789 However, Japan argues that where the individual determinations are based on different\nlike products, as in this proceeding with respect to tin mill and stainless wire, the answer is no. The\nultimate question, as the Appellate Body found in US – Line Pipe , is whether the decisions are\ninconsistent with one another. When they involve serious injury versus threat, as in US – Line Pipe ,\nthey are not inconsistent. When they involve affirmative versus negative determinations or\ndifferences of opinion as to a critical threshold question such as like product, then such\ninconsistencies matter and therefore require additional consideration and reasoned and adequate\nexplanations.4790 Similarly, Korea argues that the answer to this question depends upon whether the\ndivergent opinions are legally consistent. If they are legally consistent, as the Appellate Body held in\nUS – Line Pipe with respect to serious injury and threat of serious injury, then the decisions are\nlegally sufficient. However, to the extent that the opinions reached are not legally consistent, such as\na finding of serious injury and a finding of no serious injury or distinct like product determinations,\nthey cannot be reconciled nor do they meet the requirements of Articles 3.1 and 4.2(c) of the\nAgreement on Safeguards.\n4791\n7.2016 In response to the same question, the United States argues that it is possible to satisfy the\nrequirements for reasoned and adequate explanations under Articles 3.1 and 4.2(c) of the Agreement\non Safeguards with a report that is comprised of individual determinations of multiple decision-\nmakers that are divergent. First, as indicated by the Appellate Body's decision in US – Line Pipe, the\nAgreement on Safeguards allows multiple decision-makers to be involved in an investigation and\ndetermination of injury. Second, the fact that certain decision-makers may have issued dissenting\nviews is not pertinent. For purposes of determ ining compliance with the Agreement on Safeguards,\nthe Panel need only examine the views of the Commissioners that support the determination of the\ncompetent authorities. The United States submits that the dissenting views that are not part of these\n\n4785 USITC Report at 269 (Bragg's separate views), 307 (Miller's separate views), 311 (Devaney's\nseparate views, 256 (Koplan's separate views) (Exhibit CC -6). Together, four separate reports comprised the\nreasoning of the marginal 3-3 affirmative determinations in the tin mill and stainless wire products.\n4786 Ibid . at 36 (identifying tin mill as a separate product from the flat products category), and 190\n(identifying ten domestic industries producing stainless steel articles of which stainless wire was distinguished\nas a separate industry).\n4787 Japan's first written submission, para. 171; Norway's first written submission, para. 344.\n4788 Japan's first written submission, para. 172; Norway's first written submission, paras. 344-345.\n4789 European Communities' written reply to Panel question No. 130 at the first substantive meeting.\n4790 Japan's written reply to Panel question No. 130 at the first substantive meeting.\n4791 Korea's written reply to Panel question No. 130 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndeterminations are not relevant for determining consistency of the US measures with the Agreement\non Safeguards. Third, the fact that a single determination may be comprised of the views of multiple\nconcurring decisions does not in itself mean that the determination in its entirety is not reasoned or\nthat it does not provide an adequate explanation. Given the complexity of this case, opinions may\nreasonably differ as to how the facts and relevant legal requirements should be interpreted and\napplied. As long as each of the opinions comprising the determination, standing on their own, is\nconsistent with the Agreement on Safeguards including Article 3.1 and 4.2(c), then the determination\nas a whole is consistent with the Agreement. Finally, the mere existence of dissenting or concurring\nopinions should have no bearing on the question of whether the overall determination of a competent\nauthority was properly reasoned or explained. The United States submits that it is common in\ndomestic and international court systems for judges to render dissenting or concurring views, but this\ndoes not in itself call into question the reasoning of the official decision of the court. Dissenting\nviews have even been rendered by WTO panels, but this in itself does not mean that the adopted\nreports reflecting the conclusions of the majority of the panel did not properly \"set out the findings of\nfact, the applicability of relevant provisions and the basic rationale behind any findings and\nrecommendations\" as required by Article 12.7 of the Dispute Settlement Understanding.\n4792\n7.2017 The United States also argues that Articles 3.1 and 4.2(c) do not require the President to issue\na report explaining the basis for his decision to treat certain tie votes as affirmative determinations.\nThe United States notes that section 330 of the Tariff Act allows the President, when faced with a\ndivided vote, to consider the vote to be either an affirmative or negative determination by the USITC\nas a whole. He does not conduct his own investig ation, or render his own determination. Instead, he\nchooses whether the negative or affirmative determinations and their supporting views – each side\ncomplete and potentially valid under US law – will be the determination of the USITC. In this case,\nProclamation 7529 states that he considered \"the determinations of the Commissioners with regard to\ntin mill products and stainless steel wire\", and refers to no other factors.\n4793 The United States\nsubmits that permitting the President to designate the determination of the USITC in the case of a\ndivided vote is part of the US internal process for deciding what is the determination of the competent\nauthorities. The Agreement on Safeguards does not contain an obligation on this process.4794\n7.2018 With respect to arguments that the President acted impermissibly when he \"considered\" or\n\"treated\" these votes as divided votes, the United States submits that it was the USITC that decided\nthat the votes were equally divided. Proclamation 7529 indicates that the President recited this\ncharacterization by the USITC, and did not make an independent decision as to whether the vote was\ndivided.\n4795\n(b) Treatment of NAFTA imports\n7.2019 Korea further argues that in making his determination, the President declared that with respect\nto imports of every product subject to the safeguard measures, imports from Canada and Mexico \"do\nnot account for a substantial share of total imports or do not contribute importantly to the serious\ninjury or threat of serious injury found by the USITC\".\n4796 In fact, however, there is nothing in either\n\n4792 United States' written reply to Panel question No. 130 at the first substantive meeting.\n4793 United States' first written submission, para. 1012.\n4794 United States' first written submission, para. 1013.\n4795 United States' first written submission, para. 1014.\n4796 Proclamation 7529, 67 Fed. Reg. 10553, 10555-56 (2002), para. 8 and clause 2 (Exhibit CC-13)."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.516548"}}},{"rowIdx":3491,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ11_Report_Of_Panel_10.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ11_Report_Of_Panel_10.pdf"},"doc_sequence":{"kind":"number","value":11,"string":"11"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 679 the USITC determination or the supplementary report to support this conclusion. It was simply a blanket conclusion that was applied to every product subject to a safeguard measure.4797 7.2020 Korea asserts that the President ignored the findings of the USITC with respect to Mexico and Canada and rendered a conclusion that imports from Canada and Mexico do not account for a substantial share of total imports nor contribute importantly to the serious injury."},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":10,"string":"10"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":74,"string":"74"},"clean_text":{"kind":"string","value":"the USITC determination or the supplementary report to support this conclusion. It was simply a\nblanket conclusion that was applied to every product subject to a safeguard measure.4797\n7.2020 Korea asserts that the President ignored the findings of the USITC with respect to Mexico and\nCanada and rendered a conclusion that imports from Canada and Mexico do not account for a\nsubstantial share of total imports nor contribute importantly to the serious injury.\n4798 However, the\nUnited States failed to provide any explanation of how it reached this directly contrary conclusion on\nthis important and pertinent issue of fact and law. Thus the determination is in violation of Articles 3\nand 4.2(c) of the Agreement on Safeguards.4799\n7.2021 In response, the United States argues that Korea fails to recognize that findings related to the\nNAFTA, unlike findings under the Agreement on Safeguards, are not \"pertinent\" issues within the\nmeaning of Article 3.1 or part of the \"case under analysis\" within the meaning of Article 4.2(c).\n4800\nVIII. ARGUMENTS OF THE THIRD PARTIES\nA. CANADA\n8.1 The only question Canada addresses is whether the exclusion of imports originating in\nCanada from the scope of application of the challenged safeguard measures conforms to WTO law.\nCanada fully supports the United States' submission on parallelism and on Article XXIV of the GATT\n1994.4801\n8.2 With regard to parallelism, Canada asserts that: (i) there is no requirement to use a particular\nstructure or format or a particular analysis for the report of the competent authority; (ii) the USITC\nReport, when viewed in its entirety, contains an analysis of non-NAFTA imports; and (iii) there is no\nrequirement to conduct a separate analysis of injury caused by NAFTA imports as an \"other\" cause of\ninjury.4802\n8.3 With regard to Article XXIV of the GATT 1994, Canada asserts that this provision creates an\nexception to the most-favoured-nation treatment obligation, allowing parties to a free-trade agreement\nto terminate duties and other restrictive regulations of commerce, including safeguard measures.\nNAFTA meets the requirements of Article XXIV, and Article XXIV:5 in principle authorizes the\nexclusion of imports from within free-trade areas from Safeguard measures. Given that Article XIX\nis not enumerated in Article XXIV:8(b), safeguard measures must generally be eliminated in a free-\ntrade area.\n4803\n8.4 Canada submits that the last sentence of footnote 1 to Article 2 of the Agreement on\nSafeguards confirms the availability of Article XXIV of the GATT 1994 against claims under\nArticle 2.2 of the Agreement on Safeguards. The President's decision to exclude imports from\nCanada (and Mexico) because of the requirements of Article 802 of NAFTA is not within the\n\n4797 Korea's first written submission, paras. 178-179.\n4798 Proclamation 7529, 67 Fed. Reg. 10553, 10555 (2002), para. 8 (Exhibit CC-13).\n4799 Korea's first written submission, para. 180.\n4800 United States' oral statement at the second substantive meeting, para. 138.\n4801 Canada's third party submission, para. 6.\n4802 Canada's third party submission, paras. 13-14.\n4803 Canada's third party submission, paras. 15-21, 24.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\njurisdiction of a WTO panel. The exclusion is not a \"pertinent issue of fact or law\" pursuant to\nArticles 3.1 and 4.2(c) of the Agreement on Safeguards.4804\n8.5 Canada adds that the President, in making his determination under the NAFTA\nImplementation Act, was not required to follow the USITC or to explain his reasons for not doing\nso.4805\nB. CUBA\n8.6 Cuba asserts that the safeguard measures imposed by the United States are completely\nincompatible with the Agreement on Safeguards and have caused distortions in the steel market. As a\nresult, Cuba has to pay higher prices on its steel imports because several steel-producing countries\nhave reduced their production. Due to increased tariffs in countries that used to purchase Cuban steel\nbar, these exports have come to a halt.\n4806\n8.7 Cuba considers that the United States acted inconsistently with Article XIX:1(a) of the GATT\n1994 because the USITC Report contained no demonstration concerning the existence of unforeseen\ndevelopments. The United States also acted inconsistently with the obligation stipulated in Article 3.1\nof the Agreement on Safeguards to publish findings and conclusions regarding unforeseen\ndevelopments.\n4807\n8.8 In relation to serious injury or threat of serious injury to the United States' steel industry,\nCuba claims that the explanation given by the USITC is neither reasoned nor adequate. The USITC\nReport does not contain sufficient data to perform a correct evaluation of the domestic industry's\nsituation.4808 According to Cuba, the USITC Report does not demonstrate that the USITC has ensured\nnon-attribution of injury or threat of injury caused by factors other than increased imports. Although\nthe United States recognized that other factors have contributed to the injury suffered by the domestic\nindustry, the USITC does not touch upon these factors in its report.4809\n8.9 According to Cuba, the USITC has not correctl y determined which is the domestic industry\nmanufacturing products that are like or directly competitive to increased imported products. An\nincorrect industry definition results in an incorrect determination of serious injury and in the\napplication of an unjustified safeguard measure. Firstly, the imports being imported in increased\nquantities must be clearly identified, rather than taking as a starting-point the four product categories\nidentified in the Presidential request. The USITC's subsequent formation of groups of different\nindividual products potentially masks the lack of increased imports for a specific product. Rather than\nrelying on the characteristics of the product itself, the USITC assumed that all products produced with\nthe same production process could be considered to be like.\n4810\n8.10 Cuba also submits that the United States' safeguard measures show a lack of parallelism. The\nUSITC evaluated imports from NAFTA countries in its investigation. Despite the finding that in\nseveral cases these imports significantly contributed to the serious injury caused to the domestic\n\n4804 Canada's third party submission, paras. 23-25, 7.\n4805 Canada's third party submission, para. 10.\n4806 Cuba's third party submission, pp. 4-5.\n4807 Cuba's third party submission, pp. 5-7.\n4808 Cuba's third party submission, p. 8.\n4809 Cuba's third party submission, pp. 8-9.\n4810 Cuba's third party submission, pp. 9-10.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry, the USITC concluded that the exclusion of NAFTA imports does not affect the\ndetermination on injury and causality.4811\n8.11 Finally, Cuba submits that the United States has violated its obligation under Article 5.1 of\nthe Agreement on Safeguards by not demonstrating that the safeguard measure was imposed only to\nthe extent necessary to prevent or remedy serious injury and to facilitate adjustment.4812\nC. CHINESE TAIPEI\n8.12 With regard to unforeseen developments, Chinese Taipei argues that the circumstances\ndescribed in the first clause of Article XIX:1(a) of the GATT 1994 must be demonstrated in the same\nreport, together with the fulfilment of the three conditions set out in Article 2.1 of the Agreement on\nSafeguards. Otherwise, the first clause of Article XIX:1(a) would become an additional condition and\nthe required logical connection to the conditions of Article 2.1 of the Agreement on Safeguards could\nnot be established. For the same reasons, the demonstration of unforeseen developments must also be\nmade on a product-by-product basis. Since the USITC did not do this, it severed the required logical\nconnection between the first clause of Article XIX:1(a) and the conditions of Article 2.1 of he\nAgreement on Safeguards. According to Chinese Taipei, this required logical connection also\nprevents Members from simply relying on any macroeconomic factor which affects all products that\nare part of macroeconomics. In any event, the 2\nnd Supplementary Report cannot change the fact that\nthe USITC consider the existence of unforeseen developments when it was striving to fulfill the three\nconditions. The Russian crisis could not be regarded as an unforeseen development, given that the\nincrease in imports from Russia was significantly higher in the years preceding the conclusion of the\nUruguay Round than thereafter. Contrary to the United States' allegation, a mere sequential\nrelationship does not qualify as logical connection. According to Chinese Taipei, there should at\nleast be a demonstration that \"unforeseen developments\" have caused increased imports for each\nproduct or group of products to enter \"under such conditions\" and to such an extent as to cause serious\ninjury or threat thereof. Finally, it must be demonstrated, as a matter of fact, that the importing\nMember has incurred obligations under the GATT 1994, including tariff concessions. The USITC\nfailed to demonstrate, product by product, how such concessions were logically connected to the three\nconditions identified in Article 2.1 of the Agreement on Safeguards.\n4813\n8.13 Chinese Taipei also argues that the USITC failed to identify the producers of the like products\nin order to define the domestic industry and failed to publish its findings in this regard and therefore\nacted inconsistently with Articles 3.1 and 4.1(c) of the Agreement on Safeguards. Article 4.1(c) of\nthe Agreement on Safeguards provides that the \"domestic industry\" is the totality of the national\nproducers of the like or directly competitive products, or those whose collective output of those\nproducts constitutes a major proportion of the total domestic production. The Member applying a\nsafeguard measure needs to specify in the report of its competent authorities the finding and reasoned\nconclusion that the aggregated production of the producers suffering serious injury exceeds the\npercentage representing the major proportion of the total domestic production. Since \"a major\nproportion\" of the industry is within the scope of \"all pertinent issues of fact and law\" in Article 3.1,\nthere is no apparent reason to exclude from the published findings and conclusions the information\nrelating to the proportional level of production forming \"a major proportion\". From the number of the\nfirms being sent questionnaires and the much lower number of the firms responding to the\nquestionnaires, there is no reasonable basis for other Members to make any proper judgment on\nwhether those responding producers constitute a \"majority\" or a major proportion of the national\n\n4811 Cuba's third party submission, p. 11.\n4812 Cuba's third party submission, p. 12.\n4813 Chinese Taipei's third party submission, paras. 4-18.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproduction. Chinese Taipei argues that statements made in the USITC Report are inconsistent with\nArticle 2.1 of the Agreement on Safeguards because they specify only percentage ranges, rather than\nprecise percentages, which, according to Chinese Taipei, makes the USITC Report untrustworthy.\nThe percentages of several products also exceed 100%. Finally, the USITC Report bases itself on\n\"domestic shipments\" rather than \"total production\", which is the concept stipulated in Article 4.1(c)\nand which is different from \"total shipments\".\n4814\n8.14 Chinese Taipei further submits that the \"substantial cause\" test applied by the United States\nand thus its findings are not in accordance with the Agreement. Article 4.2(b) of the Agreement on\nSafeguards makes clear that there are two basic requirements: first, to establish the causal link\nbetween increased imports and serious injury and, second, when there are other factors causing injury,\nnot to attribute such injury to increased imports. As the Appellate Body has further explained, it is\nthrough distinguishing the injurious effects caused, respectively, by increased imports and other\nfactors that \"the competent authorities determine, as a final step, whether 'the causal link' exists\nbetween increased imports and serious injury\". The application of the substantial cause test by the\nUSITC itself is not in line with the required approach specified in Article 4.2(b). In a case where\nthere are ten equally important causes of serious injury, one of them being increased imports, the\nUnited States would find a causal link. However, under Article 4.2(b), the competent authority should\nfind no link between increase and injury because 10% should in no way be considered as serious\nenough to apply a safeguard measure. In the present case, one cannot see that the USITC has\nseparated and distinguished the factors other than increased imports. One can also not find the\nmethod that ensures non-attribution of these other factors to increased imports. The USITC only\nconducted a relative comparison of these other factors with increased imports and ignored the fact that\nsuch other factors still contributed cumulatively to the said serious injury.\n4815\n8.15 According to Chinese Taipei, the United States' safeguard measures have gone beyond the\nextent necessary to remedy serious injury and thus violate Article 5.1 of the Agreement on\nSafeguards. Given that the terms \"serious injury\" in Article 5.1 should bear the same meaning as\nthose in other provisions in the same Agreement, the factors listed in Article 4.2(a) must also be those\napplied for the purpose of the Article 5.1 evaluation. In addition, when deciding whether the\nsafeguard measure is within the extent necessary to remedy serious injury, the competent authorities\nneed to review the same factors that had contributed to the serious injury. However, in its economic\nmodel, the USITC generally limits itself to three factors when evaluating the remedy, namely\nquantity, price, and revenue. It did not consider the factors identified in the investigation. In addition,\nthe tariff measures in the said model cover the entirety of the injury caused by increased imports and\nby other factors, since those other factors are not separated and distinguished in this model. As a\nresult, it cannot be verified whether the remedy measure is within the necessary extent.\n4816\n8.16 Finally, Chinese Taipei recalls that, in US – Line Pipe 4817, the Appellate Body interpreted\nArticle 3.1 by ruling that the Member imposing a safeguard measure must provide sufficient\nmotivation for that measure. There is a violation of that provision in the present case where the\nPresident imposed a more restrictive tariff th an that recommended by the USITC without any\nreasoning or explanation on the necessary extent of the measure.\n4818\n\n4814 Chinese Taipei's third party submission, paras. 19-24.\n4815 Chinese Taipei's third party submission, paras. 25-30.\n4816 Chinese Taipei's third party submission, paras. 31-36.\n4817 Appellate Body Report, US – Line Pipe, para. 260.\n4818 Chinese Taipei's third party submission, paras. 37-38.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nD. MEXICO\n8.17 Mexico expresses its interest in the correct interpretation of the rules governing the imposition\nof safeguard measures, in particular those referring to the special situation of Members party to a free-\ntrade area. Article XXIV of the GATT 1994 clearly permits Mexico to be excluded from the\napplication of a safeguard measure imposed by the United States, its NAFTA partner. This Article is\na clear exception to the principle of most-favoured-nation treatment and has clearly been recognized\nas such by the Agreement on Safeguards.\n4819\n8.18 Mexico notes that the complainants (with two exceptions) neither argue that NAFTA is\nquestionable in the light of Article XXIV, nor that it confers the right to be excluded from a safeguard\nmeasure. Mexico also notes with satisfaction that Norway recognizes that neither the Agreement on\nSafeguards nor Article XIX of the GATT 1994 prevent the exclusion of imports from free-trade\npartners. The Reports of the Appellate Body in US – Wheat Gluten and US – Line Pipe were clear in\nnot questioning this right. Mexico trusts that the Panel will follow that same line of thinking.\n8.19 In relation to the claims that the principle of most-favoured-nation has been violated, Mexico\nrefers to the arguments submitted by the United States and Canada, as well as to Mexico's statement\nbefore the Panel in US – Line Pipe . According to Mexico, it is well established that the non-\napplication of safeguards to products from the constituents of a free-trade area is not only compatible\nwith Article XXIV:8(b), but also faithful to the finality of this Article, which is to \"facilitate trade\".\nThis was the focus supported by the Appellate Body in Turkey – Textiles . Mexico notes that\nArticle XXIV:8(b) of the GATT 1994 contemplates the exclusion of safeguard measures as part of the\n\"other restrictive trade regulations\" that must be eliminated in the formation of a free-trade area.\n4820\n8.20 Mexico further argues that the complainants who allege a violation of the principle of most-\nfavoured-nation treatment completely ignore the last sentence of footnote 1 to the Agreement on\nSafeguards. This footnote clearly establishes that \"[n]othing in this Agreement prejudges the\ninterpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT\n1994\". A simple interpretation of the terms of this provision removes any doubt about the nature of\nArticle XXIV as an exception. Mexico agrees with the United States that this footnote purports to\nmaintain the previous balance between Articles XXIV and other provisions of the GATT 1994,\nparticularly Article XIX, bearing in mind that this balance existed prior to the implementation of the\nthe Agreement on Safeguards.\n4821\n8.21 With regard to parallelism, Mexico recalls the findings of the panel in US – Line Pipe that the\nprinciple of parallelism means that the United States had to establish explicitly that imports from\nsources other than Canada and Mexico satisfied the conditions for the application of a safeguard\nmeasure stipulated in Article 2.1 of the Agreement on Safeguards. In other words, while there must\nbe a parallelism between the scope of the investigation and the scope of any resultant measure, the\nprinciple of parallelism does not determine the scope of the investigation (emphasis added). In this\nregard the complainants limit their allegations to the fact that the United States has not given a\nreasoned and adequate explanation that establishes explicitly that imports from non-NAFTA sources\nsatisfy the conditions for the application of a safeguard measure pursuant to Articles 2.1 and 4.2 of the\nAgreement on Safeguards. Mexico supports the response given by the United States that the\nAgreement on Safeguards does not prescribe the internal decision-making process for making a\ndetermination. In its response, the United States identifies the detailed analysis conducted by the\nUSITC concerning imports from non-NAFTA sources, which makes the violation claims baseless.\n\n4819 Mexico's oral statement at the first substantive meeting, p. 1.\n4820 Mexico's oral statement at the first substantive meeting, pp. 1-2.\n4821 Mexico's oral statement at the first substantive meeting, p. 2.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nMexico also concurs with the United States that Article 4.2(b) does not provide for an obligation to\nexamine NAFTA imports as a non-import \"other factor\".4822\n8.22 Finally, Mexico supports the United States' arguments that the Presidential determinations\nrelating to Article 802 of the NAFTA Agreement is not subject to the Articles 3.1 and 4.2(b) of the\nAgreement on Safeguards, but that this is a question exclusively related to NAFTA.4823\n8.23 On the basis of the foregoing, Mexico requests the Panel to reject the claim that the exclusion\nof Mexico from the safeguard measure is incompatible with the GATT 1994 and the Agreement on\nSafeguards. In particular, Mexico requests that the Panel carefully examine the nature of the\nexclusion in the light of the object and purpose of Article XXIV and that, in consequence, it confirms\nthe Members' interpretation that Article XXIV permits the exclusion of free-trade partners from the\nscope of safeguard measures, also with regard to the Agreement on Safeguards.\n4824\nE. THAILAND\n8.24 Thailand submits that the safeguard measures imposed on certain steel products by the United\nStates have had a major impact on the industries and markets of Members. According to Thailand,\nthe situation became worse when the European Comm unities followed suit with a view to protecting\nits domestic industry. This gives rise to a wide range of concerns of many, if not all, WTO Members\nto have recourse to panel so that negative effects of such measures, as applied, would be appropriately\nremedied. Thailand notes that under Proclamation No. 7529 of 5 March 2002, entitled \"To Facilitate\nPositive Adjustment to Competition from Imports of Certain Steel Products\", a total of seven steel\nimports from Thailand were investigated by the USITC. 4825 Thailand appreciates the fact that five\nproducts out of seven are presently excluded from the application of such safeguard measures in\naccordance with Article 9.1 of the Agreement on Safeguards as a result of their share of imports not\nexceeding 3% as required by this Article. N onetheless, two imports from Thailand, namely, welded\ncarbon steel pipes and tubes (HS 7306), and carbon steel butt-welded pipe fittings (HS 7307), are still\nsubject to definitive safeguard measures imposed by the United States. According to Thailand, the\nThai steel industry has been adversely affected as a result thereof.\n4826\n8.25 Thailand agrees with the legal arguments made by the complainants and some third parties\nthat the United States has failed to justify adequate ly that the conditions set forth in Article 2 of the\nAgreement on Safeguards and Article XIX: 1(a) of the GATT 1994 have been met in applying\ndefinitive safeguard measures, this is especially so for arguments relating to the issue of lack of causal\nlink. Thailand notes that the Appellate Body ruled in US – Lamb and Argentina – Footwear (EC)\ncases that \"serious injury\" is set at a higher threshold standard in the Agreement on Safeguards than\nthose envisaged in the Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing\nMeasures.\n4827 It could be concluded, based on the reasoning in US – Wheat Gluten and US – Line\nPipe, that the conditions whereby safeguard measures are applied under Article 2 and the definition of\nthe term \"serious injury\" under Article 4.1(a) shall be met at all times, thus triggering the application\nof Article 3 on investigations to be followed by Article 5 on safeguard measures.\n\n4822 Mexico's oral statement at the first substantive meeting, pp. 2-3.\n4823 Mexico's oral statement at the first substantive meeting, p. 3.\n4824 Mexico's oral statement at the first substantive meeting, p. 3.\n4825 USITC Report.\n4826 Thailand's oral statement at the first substantive meeting, p. 1.\n4827 Appellate Body Report, US – Lamb, para. 124; Appellate Body Report, Argentina – Footwear\n(EC), para. 94.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n8.26 Thailand's major concern is that the Proclamation, by its non-application of the above\nmeasures on steel products from the free-trade area partners of the United States despite the USITC's\nfinding of their significant contribution to serious injury, or threat thereof, to the domestic industry,\nwould be WTO-inconsistent, in particular with the GATT 1994 and the Agreement on Safeguards.\nThailand believes that WTO Members can impose safeguard measures only if they have demonstrated\nthat subject imports from non-free trade partners satisfy the conditions for the application of a\nsafeguard measure. In addition, Thailand states that from a reading of the Marrakesh Agreement\nEstablishing the WTO, of which the GATT 1994 forms an integral part, Thailand remains to be\nconvinced how and why elimination of duties, inclus ive of other restrictive regulations of commerce,\nwould imply or indicate non-applic ation of safeguard measures which differ in their nature of\napplication and characteristics. Thailand submits that, so far, there is no jurisprudence established\nthat the interpretation to exclude members in a free trade area is consistent with the GATT 1994 and\nthe Agreement on Safeguards, bearing in mind Argentina – Footwear (EC) and US – Wheat Gluten\ncases. Thus, according to Thailand, this line of argument means that the issue of whether GATT\nArticle XXIV permits an imposing Member to exclude imports originating in its free-trade area\npartners from the scope of a safeguard measure in departure from Article 2.2 has not yet been\nclarified.\n4828 The Appellate Body in US – Line Pipe held that investigating authorities, such as the\nUSITC in this case, must, at the very least, \"provide in its determination a reasoned and adequate\nexplanation that 'establish[es] explicitly' \" that imports from non-free trade area partners satisfied the\nconditions for the application of a safeguard measure, as set forth in Article 2.1 and elaborated in\nArticle 4.2 of the Safeguard Agreement.\n4829 4830\n8.27 According to Thailand, the United States did not clearly demonstrate how imports from its\nnon-free trade area partners, including Thailand, have independently satisfied the conditions\npermitting the application of definitive safeguard measures. Therefore, Thailand concurs with the\npoint raised by the complainants in general, that the USITC analysis of certain tubular products is\nunclear because the investigating authorities reached different conclusions as to the injurious effects\nof the imports from free-trade area partners, and the Proclamation excluded these imports without\nexplication.\n4831 Thailand submits that it is, therefore, questionable whether a causal link between\nimports of said products from Thailand and other non-free trade area partners on the one hand, and\nserious injury or threat thereof on the other hand, does exist. The lack of causal link is a systemic\nissue and is of particular concern to Thailand because it is highly likely that, had USITC authorities\nexcluded said imports from the free-trade area partners of the United States in its investigation, they\nwould not have reached the conclusion that imports from Thailand caused serious injury or threat\nthereof. Thailand submits that because the USITC in its report, and subsequently the President of the\nUnited States in the Proclamation, failed to explicitly establish that imports from non-free trade area\npartners satisfied the conditions under Articles 2 and 4 of the Agreement on Safeguards, perhaps, the\ninjurious effects of these imports to the United States might have been mistakenly attributed to\nimports from non-free trade area partners such as Thailand.\n4832\n8.28 Thailand also submits that it is not convinced that the United States has satisfied the condition\nof \"unforeseen developments\". On this point, Thailand notes that the USITC referred to the\ndevaluations in five Asian countries as the \"Asian Financial Crisis\" and the dissolution of the former\nSoviet Union as constituting unforeseen developments and that the USITC concluded that \"[a]s\n\n4828 Appellate Body Report, US – Line Pipe, para. 198.\n4829 Appellate Body Report, US – Line Pipe, para. 198.\n4830 Thailand's oral statement at the first substantive meeting, pp. 2-3.\n4831 US – Definitive Safeguard Measures on Imports of Certain Steel Products , European Communities'\nfirst written submission, para. 529.\n4832 Thailand's oral statement at the first substantive meeting, p. 3.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncurrency depreciations and economic contractions disrupted other markets, the share of steel imports\nto the US market increased sharply and US prices declined\". 4833 In addition, it is the USITC that\nadmitted that demand in the United States remained strong. Thailand submits that if this was the case,\nthe United States is required to prove that such unforeseen developments led to imports being\nincreased in such quantities and under such conditions as to cause or threaten serious injury to\ndomestic producers of like or directly competitive products.\n4834\n8.29 In conclusion, Thailand submits that the current situation with respect to trade in steel has led\nseveral Members to apply safeguard measures to protect their domestic industries. Thailand is no\nexception. Thailand asserts that should this situation be prolonged, it would inevitably cause a\nchilling effect thereby resulting in an abusive application of safeguard measures. Thailand considers\nthat safeguard measures cannot be regarded as beneficial to any Member, and developing country\nMembers will have to bear the costs of their imposition unless such Members receive due\nconsideration. Therefore, Thailand strongly believes that such measures should be used with\nprudence, and most importantly, in compliance with the WTO Agreement and GATT/WTO\njurisprudence.\n4835\nF. TURKEY\n8.30 Turkey claims that the USITC failed to examine whether the import trends of the products\nunder investigation were the result of \"unforeseen developments\" as provided for in Article XIX:1(a)\nof the GATT 1994. Turkey considers that, in a rapidly changing world, these types of events should\nbe considered as foreseeable developments, occurring as the state of economies differs from one\ncountry to another. It was clear that the integration of the former Soviet Republics into world markets\nwould have some effects on the world economy. The depreciation of the currencies of these republics\nwas the natural result of that integration. The United States could have protected its industry against\ncompeting steel products from these non-WTO countries by raising its tariff levels. The effects of the\nunforeseen developments alleged by the United States were not restricted to the market of the United\nStates, and they were also not country specific and product specific.\n4836\n8.31 Turkey further argues that the United States has also violated its obligations under Article 2.1\nof the Agreement on Safeguards by taking safeguard measures concerning rebar without\ndemonstrating a sharp, sudden and significant increase in rebar imports. Based on Appellate Body\njurisprudence, the USITC's safeguard investigation had to establish that the increase in imports has\nbeen recent enough, sudden enough, sharp enough, and significant enough both quantitatively and\nqualitatively to cause or threaten to cause serious injury or threat thereof to the domestic industry.\nThe USITC's end-point-to-end-point comparison of the import figures of 1996 and 1998 with figures\nof 2000 fails to evaluate the trend or general direction of recent imports and to provide that increases\nin imports were recent, sudden, sharp and significant enough. On the basis of the data contained in\nthe USITC Report, Turkey claims that the quantity of rebar imports declined in 2000 compared to\n1999 and again in interim 2001 compared to interim 2000. Therefore, according to Turkey, the\nUSITC's findings do not justify a determination that rebar is being imported at recently, sharply and\nsignificantly increased quantities. As a result, Turkey asserts that the United States has violated\nArticle XIX:1(a) of GATT 1994 and Articles 2.1 and 4.2(a) of Agreement on Safeguards.\n4837\n\n4833 New Zealand's first written submission, para. 4.12\n4834 Thailand's oral statement at the first substantive meeting, pp. 3-4.\n4835 Thailand's oral statement at the first substantive meeting, p. 4.\n4836 Turkey's third party submission, paras. 13-17.\n4837 Turkey's third party submission, paras. 23-27.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n8.32 According to Turkey, the United States has further failed to provide an adequate and reasoned\nexplanation of the existence of serious injury and therefore violated Article 4.2(a) of the Agreement\non Safeguards. The USITC based a number of its injury determinations (capacity utilization, average\nunit values, productivity) on an end-point-to-en d-point comparison (1996 against 2000), which does\nnot give any information about the trends of the injury indicators over the investigation period. The\nUSITC's conclusion is also contrary to its statistical evaluation which shows an increase of the\ndomestic rebar production, capacity, capacity utilization, employment, domestic demand and\ndomestic shipments. Turkey submits that the problem facing rebar manufacturers is of a financial\nnature (such as the massive increase in selling, general and administrative expenses) and cannot be\nattributed to imports. The USITC Report does not provide information regarding the aggregated size\nand production capacity of the companies taking different positions in response to the USITC's\nquestionnaire. Turkey therefore concludes that the domestic rebar industry did not suffer serious\ninjury or threat of serious injury as stated in the USITC Report.\n4838\n8.33 Turkey further submits that by failing to demonstrate the existence of a causal link between\nthe serious injury and increased imports, the United States has violated Article 4.2(b) of the\nAgreement on Safeguards. Turkey argues that the determination requires analysing the existence of a\ncoincidence between the trends of increased imports and injury indicators. In addition, the United\nStates has failed to separate the effects of injury caused by other factors through a reasoned and\nadequate explanation that injury caused by factors other than increased imports is not attributed to\nallegedly increased imports. Turkey observes that the actual figures give information about the failure\nof the United States' approach in the evaluation of a causal link between increase in imports and\nserious injury. There is no coincidence between the movements in imports and injury factors. The\ndomestic rebar industry made substantial profits in spite of increases in imports between 1996 and\n1999. Imports increased in 1997 (by 21%), 1998 (by 75%) and 1999 (by 49%), but the domestic\nindustry had a positive operating income in each year. The industry had an operating loss in 1996,\nwhich was the year of the lowest rebar imports during the period of investigation. As rebar imports\ndeclined in 2000, total profit of domestic producers declined dramatically. Turkey asserts that the\nprice declines were in fact linked to falling co sts of raw materials. Turkey submits that this\naforementioned information indicates that the USITC has failed to provide a detailed analysis\ndemonstrating the existence of a causal link.\n4839\n8.34 In Turkey's view, the United States has also failed to ensure that its safeguard measures on\nrebar are applied only to the extent necessary to prevent or remedy serious injury caused by increased\nimports and has therefore violated Articles 3.1 and 5.1 of the Agreement on Safeguards. The USITC\nhas failed to tailor the measure by distinguishing and separating the injurious effects of other factors.\nThe United States also ignored the substantial degree of import protection already afforded by anti-\ndumping or countervailing duty actions since 1997 ag ainst Turkey, Belarus, China, Indonesia, Korea,\nLatvia, Moldova, Poland, and Ukraine. The share and the trend of the share of these nine countries in\nthe total rebar imports show that these actions are highly effective in protecting the domestic rebar\nindustry against import competition. The safeguard measures on certain steel products also violates\nArticles 3.1 and 5.1 of the Agreement on Safeguards because, in the absence of an explanation, there\nare dissimilarities between the USITC Report and the Presidential Proclamation in terms of the level\nof protection provided.\n4840\n\n4838 Turkey's third party submission, paras. 28-35.\n4839 Turkey's third party submission, paras. 36-50.\n4840 Turkey's third party submission, paras. 55-61.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nG. VENEZUELA\n8.35 Venezuela claims that the safeguard measures imposed by the United States are incompatible\nwith the GATT 1994 and the Agreement on Safeguards because:\n(a) the condition of unforeseen developments under Article XIX of the GATT 1994 has\nnot been fulfilled;\n(b) with regard to many of the products subject to the investigation, there were no\nincreased imports, as required by Article 2.1 of the Agreement on Safeguards;\n(c) an incorrect definition of the relevant domestic industries was used, according to that\nstipulated in Articles 2.1, 4.2(a) and 4.1(c) of the Agreement on Safeguards;\n(d) the relevant domestic industries did not suffer serious injury or the threat of serious\ninjury, as required by Articles 2 and 4.2(a) of the Agreement on Safeguards;\n(e) the possible increase in imports has not caused or threatened to cause serious injury to\nthe domestic industry in the sense of Articles 2.1 and 4.2(b) of the Agreement on\nSafeguards, in particular because the domestic industry did not suffer serious injury\nand because the injury or threat of injury caused by other factors was attributed to\nimports;\n(f) the safeguard measures do not apply only to the extent necessary to prevent or\nremedy serious injury, as required by Article 5.1 of the Agreement on Safeguards;\n(g) there is no parallelism between the products alleged to have been imported in\nincreased quantities and the products subject to the safeguard measures;\n(h) Article 9.1 of the Agreement on Safeguards has not been observed;\n(i) the report of the investigation and the other documents do not correctly establish the\nfindings and conclusions on all pertinent issues of law and of fact, including the\nrequired justification of the safeguard measures ultimately applied, as required by\nArticle 3.1 of the Agreement on Safeguards.\n4841\n8.36 Venezuela further argues that no basis was shown for the exclusions of imports from Mexico,\nCanada, Israel and Jordan from the measures.4842\n8.37 Although Venezuela is a developing country and does not pose any commercial threat to the\nsteel industry of the United States, it was not taken into account for the exclusions, but its exports of\nrebar are subject to the safeguard measures. According to Venezuela, its inclusion among the origins\ncovered by the measures amounts to a violation of the following Articles of the Agreement on\nSafeguards: Article 2.1 on increased imports; Article 2.2 on the application of the measure on\nproducts irrespective of their origin; and Articles 3.1, 4, 5.1, 8.1, 9.1, 12.2 and 12.3 on the adequate\nopportunity for interested parties.\n4843\n\n4841 Venezuela's third party submission, paras. 2-3.\n4842 Venezuela's third party submission, para. 10.\n4843 Venezuela's third party submission, paras. 11 and 15.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n8.38 Venezuela draws particular attention to Article 9.1 of the Agreement on Safeguards, under\nwhich Venezuela should have been exempted from the application of the safeguard measures with\nregard to rebar. In June 2001, an anti-dumping investigation against Venezuelan imports was\nterminated precisely because the Venezuelan particip ation in the imports to the United States turned\nout to be \"insignificant\" under the Anti-Dumping and SCM Agreements. Venezuela submits that,\nindeed, in all the product categories subject to the present safeguard measures, imports from\nVenezuela are insignificant, and therefore incapable of causing injury to the domestic industry of the\nUnited States. Venezuela also observes that sources of rebar with a significantly higher import\nvolume than Venezuela have been excluded from the measures at issue.\n4844\n8.39 Venezuela also argues that the United States failed to provide reasoned and adequate\nexplanations about how it made its determination on Article 9.1 of the Agreement on Safeguards and\nabout why Venezuelan rebar exports did not satisfy the conditions of that Article. In 2001, imports\nfrom developing country Members affected by the measure amounted to only 15%, with Venezuelan\nexports representing 3.08%. In addition, the majority of Venezuelan exports were destined for Puerto\nRico, a market not regularly supplied by producers from the United States. Venezuela asserts that,\nthus, the measure does not really protect steel manufacturers in the United States but, rather, it unduly\npenalizes Venezuelan exports, whose market share will go to third countries which have even\ncontributed more to the rebar imports during the period of investigation. While Venezuela has been a\nreliable supplier of the United States' market, its rebar exporters have always been careful not to cause\ninjury to the domestic industry. Since sales to the United States have represented over 50% of\nVenezuelan rebar exports, the current safeguard measures have the potential to reduce the exports of\nrebar very significantly, to cut the revenue of the Venezuelan industry and to increase idle capacity.\nVenezuela states that it hopes that the Panel will recommend that the DSB request the United States to\nabolish its safeguard measures, as required by the WTO Agreement.\n4845\nIX. INTERIM REVIEW\n9.1 On 6 February 2003, pursuant to Article 15.1 of the DSU, Article 16 of the Panel's working\nprocedures and the revised timetable at paragraph 3(h), the Panel issued a single draft Descriptive Part\nfor its Reports. Pursuant to the revised timetable, on 19 February 2003, the parties provided their\ncomments on the draft Descriptive Part. The Panel issued its Interim Report on 27 March 2003. On\n9 April 2003, pursuant to Article 15.2 of the DSU, Article 16 of the Panel's working procedures and\nthe revised timetable at paragraphs 3(j) and (k), the parties provided their comments on the Interim\nReport. None of the parties requested that the Panel hold a further meeting with the parties to review\npart(s) of the Panel's Reports. Pursuant to the revised timetable at paragraph 3(l), on 16 April 2003,\nthe parties submitted further written comments on the comments that had already been provided on\nthe Panel's Interim Reports on 9 April 2003.\n9.2 Pursuant to Article 15.3 of the DSU, this section of the Panel's Reports contains the Panel's\nresponse to the comments made by the parties in relation to both the draft Descriptive Part and the\nInterim Reports, and forms part of the Findings of the Panel's Reports.\nA. D\nESCRIPTIVE PART\n9.3 With respect to the draft Descriptive Part, th e Panel reviewed all comments made by the\nparties on 19 February 2003. The complainants provided additional comments on the draft\nDescriptive Part in their comments of 9 April 2003 and 16 April 2003 on the Interim Findings. A\n\n4844 Venezuela's third party submission, paras. 15-16.\n4845 Venezuela's third party submission, paras. 17-18.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnumber of the comments made by the parties suggested insertion of text of the parties' submissions.\nThe Panel accepted all such suggestions except those for which sources for such text were not\nindicated by the parties in their comments and could not be located by the Panel. A number of the\ncomments made by the parties suggested insertion of footnote references or changes to the existing\nfootnote references. These suggestions were largely accepted except those which the Panel\nconsidered to be erroneous or in cases where the Panel considered that the suggested footnote did not\nsupport the text to which the footnote related. Some of the comments contained suggested changes to,\nor insertions of, headings in the draft Descriptive Part. Again, the Panel accepted these suggestions\nunless it considered that the insertions or changes were not appropriate. The parties suggested re-\nordering of the text in a number of sections of the draft Descriptive Part. The Panel accepted these\nchanges where it considered it appropriate. Finally, the parties also suggested corrections to\ntypographical and editorial errors which were accepted by the Panel. The Panel also made additional\ntypographical and editorial changes to the Descriptive Part. Finally, the Panel recalls that in its cover\nletter dated 19 February 2003 attaching comments on the draft Descriptive Part, the complainants\nnoted that they \"have not insisted on systematically assuring that every argument is attributed to every\ncomplainant who made it (often in rather differ ent contexts). The important point is that the\narguments be present somewhere in the common descriptive part.\" We note, in this regard, in the\nDescriptive Part for our Reports, we made reference to specific complainants when indicating\narguments that had been advanced. This was done not to attribute the argumentation exclusively to\nthe identified complainants but, rather, to facilitate the review of the Descriptive Part by the parties.\nB. P\nANEL'S FINDINGS AND CONCLUSIONS\n9.4 In addition to comments on the draft Descriptive Part, the parties' provided comments on the\nPanel's findings and conclusions in their comments of 9 April 2003 and 16 April 2003. In summary,\nthe parties' comments can be divided into a number of categories, which have been listed and dealt\nwith below.\n1. Typographical and editorial changes\n9.5 The parties have suggested a number of editorial changes to the Panel's Interim Reports and\ncorrections of typographical errors. The Panel has accepted all of these suggestions (sometimes with\nsome minor additional amendments), except those for which the suggested changes appear to be\nerroneous (for example, in cases where a change has been suggested to a footnote reference but the\nsource to which that reference pertains does not support the relevant text). The Panel notes in this\nregard that it has amended cross-references to the Descriptive Part of its Reports as well as cross-\nreferences within the section of the Panel's Reports containing its findings. The Panel has also\ncorrected other typographical errors and made some additional editorial changes. The suggestions for\neditorial changes made by the parties that have been accepted by the Panel include those pertaining to\nparagraphs 10.1, 10.18, 10.20, 10.131, 10.370, 10.398, 10.444, 10.702 and 10.711 of the Panel's\nInterim Reports.\n2. Graphs generated by the Panel and the data used as basis for graphs\n9.6 With respect to graphs that were generated by the Panel on the basis of USITC data and\nwhich are contained in its Reports, the Panel notes that, at the suggestion of the complainants, it has\nincluded footnote references indicating the source(s) of data used for all such graphs. It has also\nclarified the units for the productivity graphs that are contained in the Panel's findings on causation.\nThe United States noted that the productivity graph following paragraph 10.367 of the Panel's Interim\nReports reflected incorrect data. The Panel has re-generated this graph using the correct productivity\ndata.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n3. Ways in which facts and parties' arguments are reported\n9.7 A number of the comments made by the parties suggested changes to the way in which the\nfacts, the parties' arguments and the USITC's findings had been reported in the Reports.\n9.8 In particular, the parties suggested changes to paragraph 10.1 of the Panel's Interim Reports to\nclarify that the DSB did not establish five differen t panels that were conducted through a single panel\nprocess but, rather, it accepted eight requests for the establishment of a panel and referred them all to\na single panel pursuant to Article 9.1 of the DSU. The complainants also argued that\nparagraph 10.213 of the Panel's Interim Reports should be modified so as to fully reflect the European\nCommunities' arguments that there had not been an adequate explanation by the USITC for a\nsufficient increase in imports of cold-finished bar. China also requested clarification of\nparagraph 10.157 of the Panel's Interim Reports to make it clear that China has not challenged the\nUSITC's choice of a five-year period of investigation per se. The Panel has accepted, at least\npartially, these suggested amendments and revised its findings accordingly.\n9.9 The United States requested amendment to paragraph 10.357 of the Panel's Interim Reports to\nmake it clear that the USITC findings that had been excerpted in that paragraph were not complete\n(although they had been cited elsewhere in the Panel's causation findings). The Panel has accepted\nthis suggestion and made all the necessary conseque ntial changes to accommodate this request. The\nUnited States also requested changes to paragraphs 10.639 and 10.676 of the Panel's Interim Reports\nto ensure that they correctly reflect the USITC findings. These suggested changes were accepted by\nthe Panel and we have revised our findings accordingly.\n4. Clarifications of certain aspects of the Interim Findings\n9.10 The parties have also made suggestions to clarify certain aspects of the Interim Reports.\n9.11 In particular, the Panel agreed with the complainants that the Panel's increased imports\nfinding for \"welded pipe\" is without prejudice to the question of the product definition. However, the\nPanel rejected the complainants' requests that paragraph 10.595 of the Panel's Interim Reports be\namended and agreed with the United States that the pre-existing order of the Panel's findings was\nlogical.\n9.12 The Panel also accepted the United States' request in relation to paragraphs 10.291-10.292 of\nthe Panel's Interim Reports to make it clear that it was the Panel and not the USITC that characterized\nthe USITC's causation analysis as a \"coincidence\" or \"conditions of competition\" analysis. In\nrequesting this amendment, the United States noted that the USITC does not segregate its causal link\nanalysis into two forms of analysis – that is, a \"coincidence\" analysis or a \"conditions of competition\"\nanalysis. In accepting the suggestion made by the United States, the Panel notes that it considered it\nnecessary to develop an analytical framework to assess the USITC's findings on causal link for each\nof the safeguard measures for the following reasons. First, the Agreement on Safeguards does not\nprescribe how causal link should be demonstrated. At the same time, WTO jurisprudence indicates\nthat coincidence is central to a causation analysis. In this regard, a number of complainants have\nargued that the failure by the USITC to undertake a coincidence analysis in relation to some of the\nsafeguard measures was fatal. Finally, the Panel is of the view that tools other than a coincidence\nanalysis, such as a conditions of competition analysis, could be used to establish or support causal link\nfindings under Article 4.2(b) of the Agreement on Sa feguards. The analytical framework developed\nin paragraphs 10.306-10.308 takes the above-mentioned consideration into account.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n9.13 The Panel notes that the United States has requested a number of additional changes in the\nPanel's measure-by-measure analysis to reflect the fact that the Panel, rather than the USITC,\ncategorized the USITC analysis as a coincidence or conditions of competition analysis. In light of the\nPanel's changes to paragraphs 10.291 and 10.292 of the Panel's Interim Reports, the Panel does not\nconsider that the majority of these additional changes are necessary. However, in its measure-by-\nmeasure analysis, the Panel has, despite the changes made to paragraphs 10.291 and 10.292 of the\nPanel's Interim Reports, made the additional changes where confusion might exist.\n9.14 In addition, the United States notes that in paragraph 10.375 of the Panel's Interim Reports,\nthe Panel states that the sources for domestic and import average values for CCFRS are unclear. The\nUnited States has in its review comments provided clarification of the source for these values. On the\nbasis of this clarification, the Panel has deleted its statement that the source for such data is unclear,\ndespite arguments by the complainants in their comments of 16 April 2003 of the continuing lack of\nclarity concerning the source for such data. Nevertheless, in light of the United States' explanation of\nthe basis for calculation of the average unit values for domestic CCFRS together with comments made\nby the United States in relation to paragraph 10.421 of the Panel's Interim Reports dealing with the\nrelevance of the product definition of CCFRS in th e context of the USITC's causation analysis, the\nPanel has added to what was paragraph 10.375 of its Interim Reports to note the difficulties associated\nwith the aggregation of data by the USITC, which were acknowledged by the USITC itself in its\nReport.\n9.15 Linked to the comments made by the United St ates regarding the availability of data in the\nUSITC report on CCFRS as a single product, the Un ited States argues that paragraph 10.421 of the\nPanel's Interim Reports mistakenly states that \"on a number of occasions, the USITC failed to produce\nnecessary data for CCFRS as a whole and/or it re lied upon data for the items that comprised CCFRS\nrather than for CCFRS without explaining why and how such specific data on such items related to\nthe determination concerning CCFRS as a whole\". In light of the data that was pointed to by the\nUnited States above in relation to paragraph 10.375 of the Panel's Interim Reports, the Panel has made\nthe necessary changes to paragraph 10.421 of the Interim Reports.\n9.16 The United States has also requested, in relation to paragraph 10.421 of the Panel's Interim\nReports, that the Panel confirm that in its view the USITC's exclusive reliance upon sub-category data\nand failure to produce or consider aggregate data was the sole basis for the Panel to conclude that the\nUSITC admitted that CCFRS could not be subjected to the application of the causation requirement\nand that that, in turn,it was also the sole basis for the Panel to conclude that the CCFRS grouping is\ninconsistent with the requirements of Article 4.2( b) of the Agreement on Safeguards. The Panel has\nclarified paragraph 10.421 of the Panel's Interim Reports. As stated, there were a number of bases\nupon which the Panel considered that the product definition for CCFRS was such that it could not\nproperly be subjected to the requirements of Arti cle 4.2(b) of the Agreement on Safeguards. In this\nregard, the Panel notes that the clarificatory amendments that have been made by the Panel to the\nparagraph take account of the concerns raised by the complainants in their comments of 16 April\n2003. The Panel has also taken into account the United States' comment that the conclusion of\nviolation with Article 4.2(b) on the basis of the product definition of CCFRS is not necessary to the\nPanel's overall conclusions on causation with respect to CCFRS.\n9.17 The United States has made a number of comments that essentially request clarification of the\ndistinction between \"average unit values\" and \"prices\". In particular, the United States has requested\nthe Panel to modify the language contained in paragraph 10.432 of the Panel's Interim Reports and the\naccompanying graph to make it clear that the Panel is referencing \"average unit values\" rather than\n\"prices\". Similar requests were made by the United States in relation to paragraphs 10.456, 10.477\nand 10.521 of the Panel's Interim Reports and their accompanying graphs. The Panel has made the\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrequested changes. In addition, the Panel has amended the Reports to make it clear that in reviewing\npricing analyses undertaken by the USITC as part of its causal link analysis, the Panel treated unit\nvalues as a proxy for prices. As noted in our findings below, we consider that this is acceptable given\nthat this is apparently what the USITC itself did. Further, we understand that price trends mirror unit\nvalue trends. As a related point which appears to be raised by the requests for amendments made by\nthe United States, in our reports, we do not consider that any distinction exists between \"unit values\"\non the one hand and \"average unit values\" on the other hand. More particularly, in the context of this\ncase, we consider that unit values for a particular year are implicitly averages.\n9.18 The complainants requested the Panel to clarify that it did not find that there was any USITC\ndetermination other than that made on 22 October 2001 and that the Supplementary Reports were only\npart of the explanation of that determination. The Panel agrees that, for each imported product, the\nUSITC made, on 22 October 2001, one determination for the purposes of Articles 2 and 4 of the\nAgreement on Safeguards. However, the Panel is of the view that the requirement to demonstrate the\ncirumstances of unforeseen developments pursuant to Article XIX of GATT 1994 is additional to the\nrequirement to provide a determination indicating compliance with the conditions of Articles 2 and 4\nof the Agreement on Safeguards. Indeed, the Panel notes that none of the complainants have claimed\nthat the requirement to demonstrate unforeseen developments is one of the conditions for imposition\nof a safeguard measure pursuant to Articles 2 and 4 of the Agreement on Safeguards.\n4846 The WTO\njurisprudence explictly states that the WTO pre-requisites for the imposition of a WTO-compatible\nsafeguard include both the factual demonstration of unforeseen developments pursuant to Article XIX\nof GATT 1994 and the determination that the condit ions of Articles 2 and 4 of the Agreement on\nSafeguards have been fulfilled.\n4847 A coherent, reasoned and adequate explanation that all such\nrequirements have been respected must be included in the report of the competent authority, as\nrequired by Article 3.1 of the Agreement on Safeguards and before a safeguard measure is applied.\n9.19 The Panel has also clarified other aspects of its Interim Findings, including paragraphs 10.13,\n10.17, 10.29, 10.48, 10.74 (footnote 4924), 10.122, 10.132, 10.143, 10.148, 10.149, 10.406-10.411,\n10.419, 10.445, 10.448, 10.471, 10.489, 10.505, 10.538, 10.567, 10.617, 10.623, 10.630, 10.641 and\n10.668.\n5. The Panel's appraisal of the parties' arguments and facts\n9.20 The United States has challenged the Panel's appraisal of arguments and facts in relation to a\nnumber of the measures at issue. In particular, the United States challenges the basis for the Panel's\nconclusions in paragraph 10.401 of the Panel's Interim Reports arguing that the USITC did not state\nthat legacy costs had caused any of the declines in the condition of the CCFRS industry during the\nperiod of investigation because legacy costs actually declined during the period of investigation. The\nUnited States continues by arguing that the fact that legacy costs had been a burden on the industry\nprior to the period of investigation or that they might present difficulties to the industry in the future\nsays nothing about whether legacy costs caused declines in the industry's condition during the period\nof investigation. On the basis of the foregoing, the United States requests the Panel to remove its\nfinding that the USITC's analysis of legacy costs failed to establish that the injury caused by this\nfactor together with other factors was not attributed to increased imports. The complainants oppose\nthis request.\n\n4846 None of the complainants have suggested that the basis for their unforeseen developments claims\nwere found in Articles 2 or 4 of the Agreement on Safeguards. See in this regard the content of the\ncomplainants' requests for establishment of a panel in Articles 3.1 to 3.8 of the Descriptive Part.\n4847 Appellate Body Report, US – Lamb, para. 72.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n9.21 The Panel has decided to reject the United States' requested amendment. The Panel has\nreviewed the USITC's findings and the arguments made in relation to legacy costs and remains of the\nview that the USITC failed to ensure that injury caused by legacy costs, together with other factors,\nwas not attributed to increased imports when assessing whether increased imports of CCFRS were\ncausing injury to the relevant domestic producers. However, in light of comments made by the\nUnited States in this regard, the Panel has elaborated upon its findings to highlight the absence of an\nadequate explanation by the USITC and to emphasize that the mere fact that the issue of legacy costs\npre-dated the period of investigation and may have decreased during the period of investigation does\nnot necessarily mean that they did not play a role in causing injury to the domestic industry.\n9.22 The United States has also challenged the Panel's conclusion in paragraph 10.440 of the\nPanel's Interim Reports that the USITC acknowledged that inefficient producers were a possible cause\nof injury to the hot-rolled bar industry. In light of the United States' comments, the Panel has\nreviewed the USITC's findings and the claims and arguments made by the parties on this issue and\nhas revised its findings to reflect its agreement with the United States. Necessary consequential\nchanges have also been made to our Reports.\n9.23 With respect to paragraph 10.455 of the Panel's Interim Reports, the United States argues that\nthere is no basis for the Panel to be unclear regarding the USITC's reasons for using quarterly data for\nindividual cold-finished bar products when average data was available. The United States points in\nthis regard to note 627 on page 105 of the USITC Report. The Panel has examined the cited note and\nis of the view that it relates to the relative merits of pricing data for specific products within the cold-\nfinished bar product category. The Panel does not consider that this note contains a discussion of the\nrelative merits of quarterly versus (annual) average unit values and, therefore, does not provide any\njustification for the use of quarterly data by the USITC in the absence of a reasoned and adequate\nexplanation as to why the available annual data had not been used on this occasion while such data\nhad been used for a number of the other measures at issue. We note that the quarterly data upon\nwhich the USITC relied suggested underselling whereas the annual average data did not.\n9.24 The United States has also challenged the Panel's review of the USITC's assessment of\ndomestic capacity increases for FFTJ contained in paragraph 10.527 of the Panel's Interim Reports.\nAs a first point, the United States argues that the Panel misunderstood the reference to \"substantial\" to\nmean \"enormous\" when interpreting the USITC co mment that \"the increase in capacity would not be\nexpected to place substantial pressure on domestic prices\". The Panel was under no such\nmisunderstanding. The USITC Report indicates that downward pressure was exerted by capacity on\nprices, however one interprets \"substantial\". The Pane l is of the view that all relevant \"other factors\"\n– even those with limited injurious effects on the domestic industry – must be, together with other\nrelevant factors, identified, distinguished and assessed with a view to reaching an overall conclusion\non whether or not increased imports had a genuine and substantial relationship of cause and effect\nwith the injury suffered by the relevant domestic industry.\n9.25 The United States also requested the Panel to explain why it concluded that the USITC\nacknowledged that domestic capacity increases played a role in causing the injury that was suffered\nby the domestic industry. The Panel notes that in paragraphs 10.527-10.531 of the Panel's Interim\nReports, it explained why it considered that the USITC conceded that increases in capacity lead, at\nleast in part, to downward pressure on domestic prices which, in turn, impacted upon the state of the\ndomestic industry.\n9.26 The United States has also requested the Panel to revise its findings in paragraphs 10.559 and\n10.563 of the Interim Reports that the USITC could have provided a reasoned and adequate non-\nattribution analysis for demand declines by explaining that operating margin declined irrespective of\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndemand trends. In making this request, the United States submits that the very analysis sought by the\nPanel was provided on page 212 of the USITC Report. The Panel has considered the mentioned page\nof the USITC report and is of the view that it confirms the Panel's conclusion, which is challenged by\nthe United States. The relevant page states clearly that demand declined in late 2000 and interim\n2001 whereas substantial declines in the situation of the domestic industry occurred prior to 2000 and\n2001. The fact that injury occurred prior to the point at which a factor comes into play does not\ndetract from the conclusion that the factor may still play a role in causing injury beyond that point in\ntime. We have elaborated our findings to make this clear.\n6. Omissions\n9.27 The parties have also raised what they consider to be omissions from the Panel's Interim\nReports. The Panel agreed with the following suggestions made by the parties. The complainants\nrequested elaboration of paragraph 10.370 of the Panel's Interim Reports to correctly sum up all the\nreasons why the Panel considered the USITC's finding to be inadequate. The complainants also\nsuggested that the Panel's Interim Reports should indicate that the Panel did not consider it necessary\nto specifically address the argument made by a number of complainants that a gap between the range\nof products for which increased imports and serious injury were allegedly found and those on which\nsafeguard measures were finally imposed also constituted a violation of the principle of parallelism.\n9.28 However, there were a number of instances where the Panel did not agree either fully or\npartly that an omission existed and, in those circ umstances, declined to make any amendment or, at\nleast, declined to make the requested amendment. In particular, in their comments, the complainants\nnote that Japan had included a claim under Article XIX:1 of GATT 1994 concerning the United\nStates' failure to abide by the increased imports, causation and parallelism standards. The\ncomplainants further noted that although the Panel addressed this claim in its findings on increased\nimports, it failed to include a reference to Article XIX in its summary findings on increased imports.\nAccording to the complainants, nor did the Panel address this claim in its findings on causation and\nparallelism. The United States did not agree with the complainants' comments in this regard.\n9.29 The Panel is well aware of the claims made by Japan and other complainants under\nArticle XIX of GATT 1994. However, the Panel does not consider that a specific finding on\nArticle XIX in relation to increased imports , causation and parallelism would enhance the\ncomplainants' rights . The Panel notes that Article XIX was not much argued by most parties other\nthan in the context of unforeseen developments. Accordingly, the Panel has decided to reject the\nrequest made by the complainants to add a reference to Article XIX in its findings on causation and\nparallelism. In addition, the Panel does not consider that a reference to Article XIX is necessary in\nrelation to its findings on increased imports. Accordingly, consistent with its approach in relation to\nthe other sections of its Reports, the Panel has revised its findings on increased imports to remove\nreferences to Article XIX. In our view, the removal of such references will not in any way diminish\nthe complainants' rights with reference to their claims on increased imports in the present dispute.\n9.30 Similarly, the complainants note that Japan and Norway included a claim under Article 4.2(c)\nof the Agreement on Safeguards concerning the US decision-making process for tin mill products and\nstainless wire products. The complainants note that although this claim is a part of the Panel's\nfindings on causation, Article 4.2(c) is not listed in the summary findings on causation. They also\nargue that the Article 4.2(c) claim should also have been addressed by the Panel in its findings on\nincreased imports. They argue that given that the Panel found a violation of Article 3.1 with respect\nto increased imports for tin mill products and stainless steel wire, a violation of Article 4.2(c) should\nhave been found to exist. The United States did not agree with the complainants' comments in this\nregard.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n9.31 With respect to the first point, namely whether a finding of violation of Article 4.2(c) is\nnecessary in relation to the issue of causation, the Panel considers that such a reference would not\nenhance the complainants' rights. In addition, the Panel observes that Article 4.2(c) was not\nextensively addressed by the parties as a discrete basis for violation of the causation requirements.\nAccordingly, consistent with its approach in relation to the other sections of its Reports, the Panel has\nrevised its findings on causation to remove references to Article 4.2(c) in its discussion on the claims\nof violation of the causation requirements for tin mill products and stainless steel wire. In our view,\nthe removal of such references will not diminish the parties' rights with regard to causation matters in\nthe present dispute.\n9.32 As for the second point, the Panel agrees that certain parallels can be drawn between\nArticle 4.2(c) and Article 3.1 of the Agreement on Safeguards. However, the Panel does not consider\nthat an additional reference to Article 4.2(c) in relation to the Panel's findings on increased imports or\ncausation would enhance the complainants' rights. Accordingly, the Panel has decided to reject the\nsuggestion made by the complainants to add a reference to Article 4.2(c) to its summary findings on\ncausation and in its findings on increased imports for tin mill products and stainless steel wire.\n7. Confidentialization of data\n9.33 The United States has raised a number of concerns regarding comments made by the Panel in\nits Interim Reports in relation to the confidentialization of data. The Panel agrees that, in some\ncircumstances, Members have the obligation to confidentialize certain information and this obligation\nshould not reduce Members' right to take safeguard actions. The Panel also accepts that the United\nStates should not be held responsible for having confidentialized certain data. To the extent that a\nreasoned and adequate alternative means of supporting its conclusions were provided by the USITC,\nthe Panel has made the necessary changes to paragraph 10.455 (dealing with cold-finished bar),\nparagraph 10.552 (dealing with stainless steel bar) and 10.577 and 10.583 (dealing with stainless steel\nrod) of the Panel's Interim Reports.\n9.34 With respect to paragraph 10.455 of the Panel's Interim Reports, the United States challenges\nthe Panel's statement that \"difficulties with data call into question whether 'underselling' actually\nexisted\" on the basis, inter alia , that the Panel had questioned the confidentialization of certain\nrelevant data. We have reviewed our findings in light of our comments above with respect to data or\ninformation that can be used in substitution for re dacted data. Nevertheless, the Panel maintains its\nfindings in this regard with respect to cold-fin ished bar in light of the absence of explanation\nregarding the data relied upon by the USITC, which calls into question whether \"underselling\"\nactually existed.\n4848\n9.35 With respect to paragraph 10.552 of the Panel's Interim Reports (dealing with stainless steel\nbar) which states that the Panel was unable to assess whether significant import underselling occurred\nduring the period of investigation due to the confidentialization of relevant information, the United\nStates notes that while domestic prices were redacted from the price comparisons contained in a\nnumber of tables to which the Panel had referred, the USITC Report contained another table, Table\nSTAINLESS-99, in which it summarized the instances of underselling by Canadian, Mexican and\nnon-NAFTA imports.\n9.36 The Panel has examined that table and considers that it is sufficient to indicate that import\nunderselling occurred. In particular, as indicated in our revised findings, Table STAINLESS-99\nrefers to 40 instances of underselling by non-NAFTA imports and provides a range of the margins of\n\n4848 See para. 9.23 above.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nunderselling of 0.1 to 51.8 % that applied for all of those instances. As indicated in our findings, this\nfact – that there were 40 instances of underselling by non-NAFTA imports – has not been contested\nby the complainants and we consider that it is contrary to our standard of review to reassess the\nquality of this evidence in the absence of any prima facie challenge. In our view, although relevant\ndata was redacted from the USITC Report, the USITC nevertheless provided alternative information\nthat sought to substitute the redacted data. We have revised our findings accordingly to reflect our\nconclusions in this regard.\n9.37 The United States has challenged the basis for the Panel's comments in paragraphs\n10.578-10.579 of the Panel's Interim Reports that the USITC's analysis with respect to stainless steel\nrod does not contain any comparison between import and domestic prices. The United States points\nto note 1419 on page 220 of the USITC Report together with Table STAINLESS-100 and Table\nSTAINLESS-C-5 to indicate that such a price comparison was undertaken. While Table\nSTAINLESS-C-5 does not contain any public data, the Panel accepts that Table STAINLESS-100\ndoes contain relevant information and has revised its findings accordingly.\n9.38 The complainants have also suggested that paragraph 10.559 of the Interim Reports be\namended to indicate that, when information has been confidentialized, in order for an explanation to\nbe reasoned and adequate, there should be an indication of the applicable trends sufficient to\nsubstantiate the investigating authority's findings. As discussed in paragraphs 10.272-10.275 of our\nfindings, we consider that, in some circumstances, Members have the obligation pursuant to\nArticle 3.2 of the Agreement on Safeguards to confidentialize certain information although they can\nbase their determination on such confidentialized information. Such an obligation should not reduce\nMembers' rights to take safeguard actions. In cases where information has been confidentialized, the\nPanel has examined whether the competent authority provided a reasoned and adequate explanation\nthrough means other than full disclosure of that data. In our view, trends derived from data that has\nbeen redacted may provide sufficient evidence that the relevant explanation is reasoned and adequate.\nHowever, the Panel considers that trends are not the only way in which to support allegations based\nupon confidentialized data.\n8. Request for separate panel reports\n9.39 With regard to the United States' request for separate panel reports, the United States\nrequested the Panel to clarify in paragraph 10.728 of the Interim Reports its statement that the\nissuance of a single consolidated Descriptive Part reflected the fact that \"each of the complainants\nrelied upon arguments made and evidence adduced by other complainants in relation to their\nrespective claims ...\". According to the United States, this statement could mistakenly be read to\nentitle a complainant to rely on another Member's arguments and evidence in order to satisfy that\ncomplaining party's burden of proof.\n9.40 The Panel agrees with the United States th at a complaining party bears the burden of\nestablishing a prima facie case for each of the claims it makes and it may not rely on the other\ncomplaining parties to make its prima facie case, if they had litigated their respective disputes\nindependently. The Panel recalls that the complainants made common claims for all measures and all\nthese common claims are properly before the Panel. The Panel notes that in the present dispute, with\nthe apparent agreement of the United States, the co-complainants referred to and relied upon each\nother's arguments and demonstrations and explicitly stated as much.\n4849 From the initiation of the\n\n4849 See for example, European Communities' first written submission, paras. 16-17; Switzerland's first\nwritten submission, para. 10; Norway's first written submission, para. 8; Brazil's first written submission,\npara. 3; New Zealand's first written submission, para. 1.5; China's first written submission, para. 8; Japan's first\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\npanel process, parties have recognized4850 that the complainants would act together on some common\nclaims and the United States would respond to such common claims while responding as well to\nclaims specific to some of the complainants. Th e complainants often cross-referenced each others'\nwritten submissions, they coordinated their presentations to the Panel and divided among themselves\nthe argumentation on common claims, often explicitly stating that they were speaking on behalf of all\ncomplainants. The complainants submitted common comments on the Descriptive Part, common\ncomments on the Interim Findings as well as a common response to the United States' comments on\nthe Interim Findings. At all these stages, the United States provided one response addressing\ncollectively the arguments made by the complainants. We are aware that Panels are not entitled to\nmake the case for the complainants. 4851 WTO jurisprudence recognizes that panels may, after an\nassessment of the evidence and argumentation made by complainants, reach a conclusion as to\nwhether, overall, the complainants made their prima facie case. 4852 We believe that in the present\ncase, each of the complainants has made a prima facie case that the safeguard measures at issue were\ninconsistent with the WTO provisions listed in our Recommendations, through their own and with\neach other's demonstration. We have revised our findings to clarify this point.\n9. Release of the confidential Interim Reports\n9.41 Finally, we would like to address the issue of confidentiality of the Interim Reports. When,\non 26 March 2002, we transmitted our Interim Reports to the parties, we clearly indicated that such\nReports were confidential. Indeed, pursuant to the DSU, all panel proceedings remain confidential\nuntil the Panel Report is circulated to WTO Members. We had also explicitly emphasized at all our\nmeetings with the parties that the panel proceedin gs were confidential. This was accepted by the\nparties and reflected in the Panel's working procedures and in all our relevant correspondance with the\nparties. Therefore, we are concerned to discover that parties have not respected this confidentiality\nobligation and have disclosed aspects of the Panel's Interim Reports. We consider that this lack of\nrespect of a specific requirement imposed by the DSU and the Panel's working procedures is\nregrettable and should not remain unmentioned.\nX. FINDINGS\nA.\nINTRODUCTION\n1. Panel's terms of reference – a single panel established\n10.1 In accordance with Article 6 of the DSU, eight requests for the establishment of a panel were\nfiled with the DSB in relation to the present dispute. The DSB accepted these requests and, pursuant\nto Article 9, we were ultimately given the mandate to examine the eight requests for the establishment\nof a panel, through a single panel process.4853\n\nwritten submission, para. 5; Korea's first written submission, para. 7. Throughout their written and oral\nsubmissions the complainants refered to each other's alle gations and arguments. See also the oral statements of\nthe complainants (before the Panel) stating that each of the comlainant was speaking on a specific matter on\nbehalf of the other complainants.\n4850 See para. 5 of the Panel's working procedures quoted in para. 6.1 of the Descriptive Part\n4851 Appellate Body Report, Japan – Agricultural Products II, paras. 126-130.\n4852 Appellate Body Report, Korea – Dairy , para. 145. The Appellate Body confirmed this view in\nThailand – H-Beams , para. 134. See also the Panel Report, Argentina – Poultry Anti-Dumping Duties ,\npara. 7.50.\n4853 The first panel request (European Communities – WT/DS248/6) was accepted on 3 June 2002; the\nsecond and third (Japan – WT/DS249/6; Korea – WT/DS251/7) on 14 June 2002 the fourth, fifth and sixth\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.2 On 29 July 2002, the Panel met with the parties for its organizational meeting. On 31 July\n2002, the Panel wrote to the parties issuing some preliminary and organizational rulings including its\ntimetable and working procedures. 4854 The Panel notes, at this early stage, that its Working\nProcedures do not make reference to a \"single\" or \"multiple\" panel report(s). The working procedures\nrefer to \"interim report\" (in paragraph 16). The timetable only refers to various aspects of the \"report\"\n(again in singular) in paragraphs 3(h), (i), (m) and (n) of the timetable. The timetable as well as the\nsize and content of the executive summaries of the United States reflected the fact that the United\nStates would have to reply to common claims and claims specific to some of the complainants.\n10.3 The Panel met with the parties for the first substantive meeting on 29, 30 and 31 October\n2002. With a view to ensuring an efficient process for this single panel, the complainants coordinated\ntheir oral presentations. The Panel met with the parties for the second substantive meeting on 10, 11\nand 12 December 2002; once again the complainants coordinated their presentations to the Panel.\nNumerous questions to the parties were asked by the Panel and the parties. The complainants often\nresponded individually to the Panel's and the United States' questions. On 28 January 2003, the\nUnited States requested the issuance of separate panel reports instead of a single report. We address\nthe United States' request in paragraphs 10.716 ff.\n2. Claims\n10.4 The complainants claim that the United States' safeguard measures do not satisfy the WTO\nprerequisites for taking such action, including those mentioned in Articles 2, 3, 4, 5, 7, 8, 9 and 12 of\nthe Agreement on Safeguards and Articles X and XIX of GATT 1994. All complainants are\nchallenging all safeguard measures but not all their claims are the same. All complainants have raised\nsome common claims in respect of all of the measures. Some complainants have raised specific\nclaims in respect of all or some of the measures. The detailed claims of the complainants are listed in\nSection III supra.\n3. The measures at issue\n10.5 By Proclamation No. 7529 of 5 March 2002, bearing the title \"To Facilitate Positive\nAdjustment to Competition from Imports of Certain Steel Products\", accompanied by a Memorandum\nfor the Secretary of Treasury, the Secretary of Commerce and the USTR, the US President imposed\non 20 March 2002 definitive safeguard measures on imports of the following steel products:\n4855\n– A tariff of 30% imposed on imports of \"Certain Flat Steel other than Slabs\", that is: (i)\nPlate4856; (ii) Hot-Rolled Steel4857; (iii) Cold-Rolled Steel4858; (iv) Coated Steel.4859\n\n(China – WT/DS252/5; Switzerland – WT/DS253/5; Norway – WT/DS254/5) on 24 June, the seventh (New\nZealand – WT/DS258/9) on 8 July and finally the eighth (Brazil – WT/DS/259/10) on 29 July 2002. The\ncontent of the panel requests can be found in paras. 3.1 to 3.8 of the Descritive Part. See also the following\nminutes of the DSB: WT/DSB/M/125, WT/DSB/M/127, WT/DSB/M/128, WT/DSB/M/129 and\nWT/DSB/M/130.\n4854 The Panel's working procedures are contained in para. 6.1 of the Descriptive Part of the present\nReports.\n4855 Proclamation No. 7529 of 5 March 2002, \"To Facilitate Positive Adjustment to Competition from\nImports of Certain Steel Products\", Federal Register, Vol. 67, No. 45, 7 March 2002, p. 10553; Memorandum\nfor the Secretary of Treasury, the Secretary of Commerce and the USTR of 5 March 2002 on the \"Action Under\nSection 203 of the Trade Act of 1974 Concerning Certain Steel Products by the President of the United States of\nAmerica\", Federal Register Vol. 67, No. 45 of 7 March 2002, p. 10593, Exhibit CC-13.\n4856 As defined in the superior text to subheadings 9903.72.50 through 9903.72.60 in the Annex to the\nProclamation.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nA tariff rate quota on the fifth product of the product group \"Certain Flat Steel\", that is\nSlabs.4860 The out-of-quota tariff (applicable beyond 5.4 million short tons) is 30%.\n– A tariff of 30% imposed on imports of tin mill products 4861;\n– A tariff of 30% imposed on imports of hot-rolled bar 4862;\n– A tariff of 30% imposed on imports of cold-finished bar 4863;\n– A tariff of 15% imposed on imports of rebar 4864;\n– A tariff of 15% imposed on imports of certain tubular products 4865;\n– A tariff of 13% imposed on imports of carbon and alloy fittings and flanges 4866;\n– A tariff of 15% imposed on imports of stainless steel bar 4867;\n– A tariff of 8% imposed on imports of stainless steel wire 4868;\n– A tariff of 15% imposed on imports of stainless steel rod. 4869\n10.6 From its examination of the complainants' requests for establishment of a panel, the Panel\nnotes first, that all complainants have challenged all the safeguard measures imposed by the United\nStates pursuant to Proclamation No. 7529 of 5 March 2002. The Panel also notes that the\ncomplainants are challenging the application of the United States' safeguard measures but none of the\n\n4857 As defined in the superior text to subheadings 9903.72.62 through 9903.72.77 in the Annex to the\nProclamation.\n4858 As defined in the superior text to subheadings 9903.72.80 through 9903.72.98 in the Annex to the\nProclamation.\n4859 As defined in the superior text to subheadings 9903.72.99 through 9903.73.14 in the Annex to the\nProclamation.\n4860 As defined in the superior text to subheadings 9903.72.30 through 9903.72.48 in the Annex to the\nProclamation.\n4861 As defined in the superior text to subheadings 9903.73.15 through 9903.73.27 in the Annex to the\nProclamation.\n4862 As defined in the superior text to subheadings 9903.73.28 through 9903.73.38 in the Annex to the\nProclamation.\n4863 As defined in the superior text to subheadings 9903.73.39 through 9903.73.44 in the Annex to the\nProclamation.\n4864 As defined in the superior text to subheadings 9903.73.45 through 9903.73.50 in the Annex to the\nProclamation.\n4865 As defined in the superior text to subheadings 9903.73.51 through 9903.73.62 in the Annex to the\nProclamation.\n4866 As defined in the superior text to subheadings 9903.73.66 through 9903.73.72 in the Annex to the\nProclamation.\n4867 As defined in the superior text to subheadings 9903.73.74 through 9903.73.81 in the Annex to the\nProclamation.\n4868 As defined in the superior text to subheadings 9903.73.91 through 9903.73.96 in the Annex to the\nProclamation\n4869 As defined in the superior text to subheadings 9903.73.83 through 9903.73.89 in the Annex to the\nProclamation.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncomplainant is challenging the United States' statute on safeguards per se, nor are the complainants\nchallenging the practices of the USITC per se.\n10.7 However, the complainants in their argumentation have discussed and challenged what they\ncall the \"methodologies\" used by the USITC when making its determinations for those safeguard\nmeasures. Nevertheless, as noted by the European Communities in its oral statement to the second\nsubstantive meeting, \"complainants have not chosen in this case to request any findings relating to US\nsafeguards law or general practice. … When we say that the complainants are not attacking the\nmethodologies of the USITC per se we mean that we are simply attacking the methods of analysis\nactually used in this case – not necessarily the methodologies that the USITC traditionally uses, as the\nUS seems to believe. … I repeat again – our complaint is with the steps that the USITC actually took\n– or failed to take – in this case.\"\n4870\n10.8 The Panel believes, therefore, that the complainants' reference(s) to the USITC methodologies\nor practices in their argumentation may be helpful to its understanding of the way in which the United\nStates actually made its determination for each of the safeguard measures at issue.\nB. GENERAL CONSIDERATIONS FOR THIS DISPUTE\n1. Interpretation of the Agreement on Safeguards and Article XIX of GATT 1994\n10.9 Article XIX of GATT 1994 and the Agreement on Safeguards provide WTO Members with\nthe conditional right to limit market access (and take measures that would otherwise be inconsistent\nwith incurred obligations) and obtain temporary relief when unforeseen developments have resulted in\nincreased imports (absolute or relative) that are causi ng or threatening to cause serious injury to the\nrelevant domestic producers.\n10.10 Safeguard actions may be needed for the very reason that a Member has incurred obligations\n(namely, market-access commitments) which prohibit that Member from taking any measure that is\ninconsistent with its bindings or the GATT prohibition of quantitative restrictions, for instance. In\nthis sense, Article XIX of GATT 1994 and the Agreement on Safeguards operate as exceptions,\nparticularly to Articles II and XI of GATT 1994.\n10.11 Article XIX of GATT and the Agreement on Safeguards provide for exceptions to general\nGATT market access rules in situations of emergency. In US – Line Pipe , the Appellate Body\nreiterated the following statement that it had made in Argentina – Footwear (EC) :\n\"As part of the context of paragraph 1(a) of Article XIX, we note that the title of\nArticle XIX is: ' Emergency Action on Imports of Particular Products' . The words\n'emergency action' also appear in Article 11.1(a) of the Agreement on Safeguards .\nWe note once again, that Article XIX:1(a) requires that a product be imported 'in such\nincreased quantities and under such conditions as to cause or threaten serious injury\nto domestic producers'. (emphasis added) Clearly, this is not the language of ordinary\nevents in routine commerce. In our view, the text of Article XIX:1(a) of GATT 1994,\nread in its ordinary meaning and in its context, demonstrates that safeguard measures\nwere intended by the drafters of the GATT to be matters out of the ordinary, to be\nmatters of urgency, to be, in short, 'emergency actions'. And, such 'emergency\nactions' are to be invoked only in situations when, as a result of obligations incurred\n\n4870 European Communities' oral statement on behalf of all complainants to the second substantive\nmeeting, paras. 5-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nunder GATT 1994, a Member finds itself confronted with developments it had not\n'foreseen' or 'expected' when it incurred that obligation . The remedy that Article\nXIX:1(a) allows in this situation is temporarily to 'suspend the obligation in whole or\nin part or to withdraw or modify the concession'. Thus, Article XIX is clearly, and in\nevery way, an extraordinary remedy.\nThis reading of these phrases is also confirmed by the object and purpose of\nArticle XIX of GATT 1994. The object and purpose of Article XIX is, quite simply,\nto allow a Member to re-adjust temporarily the balance in the level of concessions\nbetween that Member and other exporting Members when it is faced with 'unexpected'\nand, thus, 'unforeseen' circumstances which lead to the product 'being imported' in\n'such increased quantities and under such conditions as to cause or threaten serious\ninjury to domestic producers of like or directly competitive products'. …\n… In furthering this statement of the object and purpose of the Agreement on\nSafeguards, it must always be remembered that safeguard measures result in the\ntemporary suspension of concessions or withdrawal of obligations, such as those in\nArticle II and Article XI of GATT 1994, which are fundamental to the\nWTO Agreement. …\"\n4871 (emphasis added)\n10.12 In US – Line Pipe, the Appellate Body also emphasized that:\n\"[P]art of the raison d'être of Article XIX of the GATT 1994 and the Agreement on\nSafeguards is, unquestionably, that of giving a WTO Member the possibility , as trade\nis liberalized, of resorting to an effective remedy in an extraordinary emergency\nsituation that, in the judgement of that Member, makes it necessary to protect a\ndomestic industry temporarily.4872 (emphasis added)\nThere is, therefore, a natural tension between, on the one hand, defining the\nappropriate and legitimate scope of the right to apply safeguard measures and, on the\nother hand, ensuring that safeguard measures are not applied against \"fair trade\"\nbeyond what is necessary to provide extraordinary and temporary relief. A WTO\nMember seeking to apply a safeguard measure will argue, correctly, that the right to\napply such measures must be respected in order to maintain the domestic momentum\nand motivation for ongoing trade liberalization. In turn, a WTO Member whose trade\nis affected by a safeguard measure will argue, correctly, that the application of such\nmeasures must be limited in order to maintain the multilateral integrity of ongoing\ntrade concessions. The balance struck by the WTO Members in reconciling this\nnatural tension relating to safeguard meas ures is found in the provisions of the\nAgreement on Safeguards.\" (emphasis added)\n4873\n10.13 Moreover, the Panel, when interpreting Article XIX of GATT 1994 and the Agreement on\nSafeguards, must bear in mind that exceptions under WTO law are not to be interpreted narrowly 4874\n\n4871Appellate Body Report, Argentina – Footwear ( EC), paras. 93–95. See also, Appellate Body\nReport, Korea – Dairy, paras. 86-88.\n4872 Appellate Body Report, US – Line Pipe, para 82.\n4873 Appellate Body Report, US – Line Pipe, para. 83.\n4874 This principle of interpretation in WTO law was first established by the Appellate Body in EC –\nHormones (para. 104) for the SPS Agreement. It was reiterated recently in the Appellate Body Report in EC –\nSardines (para. 271), when discussing Article 2.4 of the TBT Agreement; in the Panel Report in US – Carbon\nSteel (para. 8.45, upheld by the Appellate Body) when discussing Article 21.3 of the SCM Agreement; in the\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbut rather in light of the ordinary meaning of the terms of such exception provisions taking into\naccount the object and purpose of the Agreement on Safeguards, including the need to maintain a\nbalance between market access and safeguards rights and obligations. Since the Agreement on\nSafeguards itself would have been drafted so as to recognize its exceptional nature and the emergency\ncharacter of safeguard measures, the Agreement on Safeguards does not call for any especially\nrestrictive interpretation.\n2. The two fundamental enquiries under the Agreement on Safeguards: the (conditional)\nright to take a safeguard measure and the application of a chosen measure\n10.14 The distinction between the (conditional) right to take a safeguard measure and the\napplication of a specific measure was clearly recognized by the Appellate Body in US – Line Pipe:\n\"This natural tension is likewise inherent in two basic inquiries that are conducted in\ninterpreting the Agreement on Safeguards . These two basic inquiries are: first, is\nthere a right to apply a safeguard measure? And, second, if so, has that right been\nexercized, through the application of such a measure, within the limits set out in the\ntreaty? These two inquiries are separate and distinct. They must not be confused by\nthe treaty interpreter. One necessarily precedes and leads to the other. First, the\ninterpreter must inquire whether there is a right, under the circumstances of a\nparticular case, to apply a safeguard measure. For this right to exist, the WTO\nMember in question must have determined, as required by Article 2.1 of the Agreement\non Safeguards and pursuant to the provisions of Articles 3 and 4 of the Agreement on\nSafeguards, that a product is being imported into its territory in such increased\nquantities and under such conditions as to cause or threaten to cause serious injury to\nthe domestic industry. Second, if this first inquiry leads to the conclusion that there is\na right to apply a safeguard measure in that particular case, then the interpreter must\nnext consider whether the Member has applied that safeguard measure 'only to the\nextent necessary to prevent or remedy serious injury and to facilitate adjustment', as\nrequired by Article 5.1, first sentence, of the Agreement on Safeguards . Thus, the\nright to apply a safeguard measure—even where it has been found to exist in a\nparticular case and thus can be exercised—is not unlimited. Even when a Member\nhas fulfilled the treaty requirements that establish the right to apply a safeguard\nmeasure in a particular case, it must do so 'only to the extent necessary'.\" (emphasis\nadded)\n4875\n10.15 Throughout its examination, this Panel has kept the two enquiries distinct. The Panel is of the\nview that, first, it must examine whether the United States had the right to take the safeguard\nmeasures. Second, should the Panel consider that the United States had the right to take such\nsafeguard measures, the Panel would then assess whether the measures were applied (as regards the\ntype of measure, their level and duration) only to the extent necessary to remedy or prevent serious\ninjury and allow for readjustment.\n10.16 In examining whether the United States had a right to impose the specific safeguard measures\nat issue, the Panel will concern itself with the application of Articles 2, 3 and 4 of the Agreement on\nSafeguards and Article XIX of GATT 1994 (the latter being relevant in particular for the assessment\n\nArticle 21.5 Appellate Body Report in US – FSC (para. 127) when discussing the scope and meaning of\nfootnote 59 of the SCM Agreement; and in the Appellate Body Report in Brazil – Aircraft (para. 137) when\ndealing with the scope of the provisions on developing countries.\n4875 Appellate Body Report, US – Line Pipe, para. 84.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof whether the United States was faced with unforeseen developments) in reviewing the report of the\ncompetent authority. In relation to the second enquiry, when assessing the appropriateness of such\nsafeguards measures, the importing Member is obliged, when challenged by a WTO Member who has\nmade a prima facie case of inconsistency with Article 5.1 of the Agreement on Safeguards, to justify\nbefore the Panel that the safeguard measures were imposed only to the extent necessary to prevent or\nremedy injury and allow for readjustment. Reversals of this burden of proof may take place.\n3. The Agreement on Safeguards is concerned with the \"determination\"\n10.17 The Panel recalls that the Agreement on Safeguards is concerned with the ultimate\ndetermination made and reflected in the Member's report of investigation. There is no provision on\nhow or when the investigation is to be initiated or whether, in a specific Member, the initiation of the\ninvestigation should be undertaken by the King, the President or the industry. Nor does the Agreement\non Safeguards dictate the manner in which determinations are to be arrived at. What matters is that,\nultimately, there is a reported determination of the right to take a safeguards measure (pursuant to\nArticles 2, 3 and 4 of the Agreement on Safeguards and Article XIX of GATT 1994) and that, if, and\nwhen, challenged prima facie before a WTO panel, the choice of safeguard measure (Articles 5, 7 and\n9) can be justified. The Appellate Body made that clear in US – Line Pipe:\n\"We note also that we are not concerned with how the competent authorities of WTO\nMembers reach their determinations in applying safeguard measures. The Agreement\non Safeguards does not prescribe the internal decision-making process for making\nsuch a determination. That is entirely up to WTO Members in the exercise of their\nsovereignty. We are concerned only with the determination itself, which is a singular\nact for which a WTO Member may be accountable in WTO dispute settlement. It is\nof no matter to us whether that singular act results from a decision by one, one\nhundred, or—as here—six individual decision-makers under the municipal law of that\nWTO Member. What matters to us is whether the determination, however it is\ndecided domestically, meets the requirements of the Agreement on Safeguards.\"\n4876\n\"Article 5.1 does not establish a general procedural obligation to demonstrate\ncompliance with Article 5.1, first sentence, at the time a measure is applied.\" 4877\n(emphasis added)\n10.18 The Panel recalls that, in the present dispute, the United States explained that the USITC\nmade its determination on 22 October 2001 pursuant to Articles 2 and 4 and that it was contained in a\nreport published in December 2001 (the \"initial USITC Report\"). The USITC provided\nSupplementary Reports in February 2002. The complainants in the present dispute have challenged\nthe findings supporting the October determination on the basis of the data and evidence contained in\nthe Report published in December 2001. The Panel has thus examined the December 2001 Report\nwhen assessing the complainants' claims and arguments relating to increased imports in\nSection X.D of the present Panel Reports as well as complainants' claims on causation, in Section X.E\nof the present Panel Reports.\n10.19 The United States, following its October determination, decided to exclude all imports from\nCanada, Mexico, Jordan and Israel from the application of its safeguard measures. Seemingly, in an\nattempt to comply with the United States ' parallelism obligations, USTR requested, inter alia ,\nadditional information from USITC on the impact of the exclusions from the measure of imports from\n\n4876 Appellate Body Report, US – Line Pipe, para. 158.\n4877 Appellate Body Report, US – Line Pipe, paras. 233-234.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nIsrael and Jordan, and for certain steel products from Canada and Mexico. This was (partly) the\nsubject of the February Second Supplementary Report. The complainants have challenged whether\nthe October and February reports satisfy the requirements of parallelism, on the basis of the data\ncontained in those reports. The Panel has examined the complainants' claims and arguments relating\nto parallelism in Section X.F of the present Panel Reports and has reviewed both reports.\n10.20 The February Second Supplementary Report also contains information relating to \"unforeseen\ndevelopments\". For the reasons mentioned in paragraphs 10.55-10.58 below, we have decided to\nassume, arguendo, for the purposes of reviewing the unforeseen developments' demonstration under\nArticle XIX of the GATT 1994 in the present dispute that the February Second Supplementary Report\nwas part of the \"report of the competent authority\" . We have, therefore, decided that when assessing\nthe complainants' claims relating to unforeseen deve lopments, in Section X.C, we will examine the\nUSITC's initial report as well as its explanations relating to unforeseen developments contained in the\nFebruary Second Supplementary Report.\n4. Standard of review\n10.21 The Panel discusses specific applications of its standard of review throughout its Reports.\nThe Panel would like to recall at this early stage that the general standard of review contained in\nArticle 11 of the DSU\n4878 is applicable to disputes involving claims of violation of the Agreement on\nSafeguards and Article XIX of GATT 1994.\n10.22 The jurisprudence has examined the application of such general standard of review in the\nspecific context of the Agreement on Safeguards. In Argentina – Footwear (EC), the Appellate Body\nstated that, pursuant to Article 4, a Panel cannot conduct a de novo review of the evidence or\nsubstitute its analysis and judgment for that of the importing Member, but \"[t]o determine whether the\nsafeguard investigation and the resulting safeguard measure applied by [a Member] were consistent\nwith Article 4 of the Agreement on Safeguards, the Panel was obliged, by the very terms of Article 4,\nto assess whether the [Member's] authorities had examined all the relevant facts and had provided a\nreasoned explanation of how the facts supported their determination.\"\n4879\n10.23 The panels in US – Wheat Gluten and in US – Line Pipe concluded that a panel must assess\nwhether a reasoned and adequate explanation has been provided as to how the facts support the\ndetermination4880. In US – Lamb, the Appellate Body added that \"a panel can assess whether the\ncompetent authorities' explanation for its determination is reasoned and adequate only if the panel\ncritically examines that explanation, in depth, and in the light of the facts before the panel. Panels\nmust, therefore, review whether the competent authorities' explanation fully addresses the nature, and,\nespecially, the complexities, of the data, and responds to other plausible interpretations of that data. A\npanel must find, in particular, that an explanation is not reasoned, or is not adequate, if some\n\n4878 Article 11 of the DSU reads as follows: \"Function of Panels: The function of panels is to assist the\nDSB in discharging its responsibilities under this Understanding and the covered agreements. Accordingly, a\npanel should make an objective assessment of the matter before it, including an objective assessment of the facts\nof the case and the applicability of and conformity with the relevant covered agreements, and make such other\nfindings as will assist the DSB in making the recommendations or in giving the rulings provided for in the\ncovered agreements. Panels should consult regularly with the parties to the dispute and give them adequate\nopportunity to develop a mutually satisfactory solution.\"\n4879 Appellate Body Report, Argentina – Footwear (EC), paras. 118 and 121.\n4880 Panel Report, US – Wheat Gluten, para. 8.5; Panel Report, US – Line Pipe, para. 7.194\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nalternative explanation of the facts is plausible, and if the competent authorities' explanation does not\nseem adequate in the light of that alternative explanation.\"4881\n10.24 In US – Cotton Yarn , the Appellate Body referred to its jurisprudence developed under the\nAgreement on Safeguards and relied upon it for a dispute under the Agreement on Textiles and\nClothing:\n\"Our Reports in these disputes under the Agreement on Safeguards spell out key\nelements of a panel's standard of review under Article 11 of the DSU in assessing\nwhether the competent authorities complied with their obligations in making their\ndeterminations. This standard may be summarized as follows: panels must examine\nwhether the competent authority has evaluated all relevant factors; they must assess\nwhether the competent authority has examined all the pertinent facts and assessed\nwhether an adequate explanation has been provided as to how those facts support the\ndetermination; and they must also consider whether the competent authority's\nexplanation addresses fully the nature and complexities of the data and responds to\nother plausible interpretations of the data. However, panels must not conduct a\nde novo review of the evidence nor substitute their judgement for that of the\ncompetent authority.\"\n4882\n10.25 The Panel is of the view that the standard of review applicable in the present dispute must be\nseen in light of the distinction between the first and second enquiry that the Panel must perform when\nassessing a Member's compliance with the requirements of the Agreement on Safeguards and\nArticle XIX of GATT 1994. When assessing a Member's compliance with its obligations pursuant to\nArticles 2, 3 and 4 of the Agreement on Safegu ards and Article XIX of GATT, the Panel is not the\ninitial fact-finder. Rather, the role of the Panel is to \"review\" determinations and demonstrations\nmade and reported by an investigating authority.\n10.26 The situation is different in the context of the second enquiry when assessing whether the\nmeasures were applied only to the extent necessary to prevent the serious injury caused by increased\nimports. In that situation, it is before the Panel, during the WTO dispute settlement process, that the\nimporting Member is forced for the first time to respond to allegations relating to the level and extent\nof its safeguard measures. For us, this is clear fr om the following statement of the Appellate Body in\nUS – Line Pipe:\n\"[I]t is clear, therefore, that, […] Article 5.1, including the first sentence, does not\noblige a Member to justify, at the time of application, that the safeguard measure at\nissue is applied \"only to the extent necessary.\nArticle 5.1 does not establish a general procedural obligation to demonstrate\ncompliance with Article 5.1, first sentence, at the time a measure is applied.\"\n4883\n10.27 In that second enquiry, the Panel is thus reviewing whether the measures \"as applied\" comply\nwith the requirements of Articles 5, 7, 8 and 9 of the Agreement on Safeguards on the basis of the\nevidence and arguments put forward by the parties during the WTO dispute settlement process.\n\n4881 Appellate Body Report, US – Lamb, para. 106.\n4882 Appellate Body Report, US – Cotton Yarn, para. 74\n4883 Appellate Body Report, US – Line Pipe, paras. 233-234.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n5. Burden of proof\n10.28 In general, under WTO law, the burden of proof rests upon the party, whether complaining or\ndefending, who asserts the affirmative of a particular claim or defence. If that party adduces evidence\nsufficient to raise a presumption (or prima facie case) that what is claimed is true, the burden then\nshifts to the other party, who will fail unless it adduces sufficient evidence and arguments to rebut the\npresumption. Therefore, it is for the complainants to convince the Panel that the United States did not\ncomply with the provisions of the Agreement on Safeguards when it imposed its safeguards measures.\n10.29 As discussed above, in the context of the Pane l's first enquiry, it is for the complainants to\nconvince the Panel that, in its Report, the United States failed to provide a reasoned and adequate\nexplanation that the WTO pre-requisites for the imposition of safeguard measures were satisfied. In\npractice, before the WTO panel, the United States will defend USITC's demonstrations and\ndeterminations, and the complainants will challenge their WTO-compatibility. In the context of the\nPanel's second enquiry – when assessing whether the safeguard measures were imposed only to the\nextent necessary – the Appellate Body has ruled that when the panel concludes, at the end of its first\nenquiry, that the safeguard measures were imposed in violation of Article 4.2(b), a reversal of the\nburden of proof occurs so that there is a presumption that the safeguard measures were applied in a\nmanner inconsistent with Article 5.1.\n4884\n6. USITC data\n10.30 As noted throughout our Reports, all data that has been relied upon by the Panel has been\nobtained directly from the USITC Report or from the various tables and annexes to which that report\nrefers. In a number of sections in our Reports, we have represented USITC data in graphical form. In\ncases where data was available for interim 2001, the relevant graphs plot interim 2000 data together\nwith interim 2001 data. We have indicated the USITC Report references to the sources for graphs\ncontained in the Panel's Reports.\nC. C\nLAIMS RELATING TO UNFORESEEN DEVELOPMENTS\n1. Claims and arguments of the parties\n10.31 The arguments of the parties can be found in Section VII.C.1 supra.\n10.32 The European Communities, China, Switzerland, Norway and New Zealand claim that the\nUSITC Report was issued without examining the issue of unforeseen developments, and/or that it did\nnot provide an adequate and reasoned explanation of those developments and the manner in which\nthey resulted in increased imports.\n4885 New Zealand adds that the competent authority has failed to\ndemonstrate the existence of unforeseen developments as a matter of fact. 4886 Moreover, the\nEuropean Communities, China, Norway and New Zealand claim that no opportunity was provided by\nthe USITC to interested parties to present evidence and their views on the issue of unforeseen\ndevelopments.4887 For all of these reasons, they claim that the United States has failed to comply with\n\n4884 See Appellate Body Report, US – Line Pipe, paras. 261-262.\n4885 European Communities' first written submission, paras. 122-123; China's first written submission,\npara. 86; Switzerland's first written submission, paras. 109-110; Norway's first written submission,\nparas. 110-111; New Zealand's first written submission, para. 4.11.\n4886 New Zealand's first written submission, para. 4.29\n4887 European Communities' first written submission, para. 178; China's first written submission,\npara. 125; Norway's first written submission, paras. 166; New Zealand's first written submission, para. 4.30; see\nalso their respective written replies to Panel question No. 1 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe provisions of both Article 3.1 of the Agreement on Safeguards and Article XIX:1(a) of\nGATT 1994.\n10.33 The United States responds that the USITC identified the unforeseen developments that\nresulted in increased imports of certain steel products in a manner that was consistent with the United\nStates' obligations under Article XIX of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards.4888\n2. Relevant WTO provisions\n10.34 Article XIX:1(a) of GATT 1994 provides as follows:\n\"If, as a result of unforeseen developments and of the effect of the obligations\nincurred by a contracting party under this Agreement, including tariff concessions,\nany product is being imported into the territory of that contracting party in such\nincreased quantities and under such conditions as to cause or threaten serious injury\nto domestic producers in that territory of like or directly competitive products, the\ncontracting party shall be free, in respect of such product, and to the extent and for\nsuch time as may be necessary to prevent or remedy such injury, to suspend the\nobligation in whole or in part or to withdraw or modify the concession.\"\n10.35 Article 3.1 of the Agreement on Safeguards provides:\n\"A Member may apply a safeguard measure only following an investigation by the\ncompetent authorities of that Member pursua nt to procedures previously established\nand made public in consonance with Article X of GATT 1994. This investigation\nshall include reasonable public notice to all interested parties and public hearings or\nother appropriate means in which importers, exporters and other interested parties\ncould present evidence and their views, in cluding the opportunity to respond to the\npresentations of other parties and to submit their views, inter alia, as to whether or\nnot the application of a safeguard measure would be in the public interest. The\ncompetent authorities shall publish a report setting forth their findings and reasoned\nconclusions reached on all pertinent issues of fact and law.\"\n3. Analysis by the Panel\n(a) The cumulative application of Article XIX of GATT 1994 and the Agreement on Safeguards\n10.36 Article XIX of GATT 1994 provides that a Member is entitled to impose a safeguard measure\n\"[i]f, as a result of unforeseen developments and of the effect of the obligations incurred by a\ncontracting party under this Agreement, including tariff concessions, any product is being imported\ninto the territory of that contracting party in such increased quantities and under such conditions as to\ncause or threaten serious injury to domestic producer s in that territory of like or directly competitive\nproducts\". There is no reference to unforeseen developments in the Agreement on Safeguards.\nHowever, as repeatedly affirmed by the Appellate Body, Articles 1 and 11.1(a) of the Agreement on\nSafeguards express the continuing applicability of Article XIX of GATT which has been clarified and\nreinforced by the Agreement on Safeguards.\n4889 This interpretation ensures that the provisions of the\n\n4888 United States' first written submission, para. 925.\n4889 See for instance the Appellate Body Report in Korea – Dairy at para. 74: \"We agree with the\nstatement of the Panel that: It is now well established that the WTO Agreement is a \"Single Undertaking\" and\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAgreement on Safeguards and those of Article XIX are given their full meaning and their full legal\neffect within the context of the WTO Agreement.4890\n10.37 It is now clear that the circumstances of unforeseen developments within the meaning of\nArticle XIX:1(a) of GATT 1994 must be demonstrated as a matter of fact, together with the\nconditions mentioned in Article 2.1 of the Agreement on Safeguards, in the report of the competent\nauthority and before a safeguard measure can be applied.4891\n(b) Standard of review\n10.38 As mentioned in paragraphs 10.21-10.24 above, the role of this Panel in the present dispute is\nnot to conduct a de novo review of the USITC's determination. 4892 Rather, the Panel must examine\nwhether the United States respected the provisions of Article XIX of GATT 1994 and of the\nAgreement on Safeguards, including Article 3.1. As further developed below, the Panel must\nexamine whether the United States demonstrated in its published report, through a reasoned and\nadequate explanation, that unforeseen developments and the effects of tariff concessions resulted in\nincreased imports causing or threatening to cause serious injury to the relevant domestic producers.\n4893\n10.39 In considering whether the United States demonstrated as a matter of fact that unforeseen\ndevelopments resulted in increased imports causing serious injury, the Panel will also examine, in\napplication of its standard of review, whether the competent authorities \"considered all the relevant\nfacts and had adequately explained how the facts supported the determinations that were made.\"4894\n(c) What can constitute an unforeseen development?\n10.40 An unforeseen development, pursuant to Article XIX:1(a) GATT 1994, is an unexpected\ncircumstance which has led to a product being imported in such increased quantities and under such\nconditions as to cause or threaten to cause serious injury to relevant domestic producers. 4895 I n the\ncurrent dispute, the United States argues that the USITC identified the financial crises that engulfed\nSoutheast Asia (Asian crisis) and the former USSR (Russian crisis), the continued strength of the\nUnited States' market and persistent appreciation of the US dollar, and the confluence of all of these\nevents as unforeseen developments.\n4896 The European Communities, China, Switzerland and Norway\ncontend that none of these events constituted unf oreseen developments, nor did any combination of\n\ntherefore all WTO obligations are generally cumulative and Members must comply with all of them\nsimultaneously …\" and para. 78: \"Having found that the provisions of both Article XIX:1 of the GATT 1994\nand Article 2.1 of the Agreement on Safeguards apply to any safeguard measure taken under the\nWTO Agreement \".\n4890 Appellate Body Reports, Argentina – Footwear (EC) , para. 95; Korea – Dairy , para. 85; US –\nLamb, para. 71.\n4891 Appellate Body Report, US – Lamb, para. 72; Appellate Body Report, Korea – Dairy, para. 85.\n4892 Appellate Body Report, Argentina – Footwear (EC), paras. 116-117; Appellate Body Report, US –\nLamb, para. 97.\n4893 Appellate Body Report, US – Lamb, paras. 103-106.\n4894 Appellate Body Report, Argentina – Footwear (EC) , para. 121; Appellate Body Report, US –\nLamb, para. 102.\n4895 Appellate Body Report, Argentina – Footwear (EC) , para. 91; Appellate Body Report, Korea –\nDairy, para. 84.\n4896 United States' first oral statement, para. 72.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthem.4897 The same four complainants as well as New Zealand argue that the developments\nmentioned by the United States were not unforeseen because they were not unexpected.4898\n10.41 The legal standard that is used to determine what constitutes an unforeseen development is, as\nagreed by the parties, at least in part, subjective. This is supported by the Appellate Body, who stated\nin Korea – Dairy that safeguard measures \"are to be invoked only in situations when … an importing\nMember finds itself confronted with developments it had not 'foreseen' or 'expected' when it incurred\n[its] obligation [under GATT 1994].\" (emphasis added)4899\n10.42 What was \"unforeseen\" when the contracting parties negotiated their first tariff concessions in\nall likelihood differs from what can be considered to be unforeseen today. The Panel notes that after\n50 years of GATT, tariffs have, for many products, disappeared or reached very low levels. Futher,\nwhat constitutes \"unforeseen developments\" for an importing Member will vary depending on the\ncontext and the circumstances. Nevertheless, the subjectivity of the standard does not take away from\nthe fact that the unexpectedness of a development\n4900 for an importing Member is something that must\nbe demonstrated through a reasoned and adequate explanation.\n10.43 In addition, the standard for unforeseen developments may also be said to have an objective\nelement. The appropriate focus is on what should or could have been foreseen in light of the\ncircumstances. The standard is not what the specific negotiators had in mind but rather what they\ncould (reasonably) have had in mind. This was recognized early in GATT by the US – Fur Felt Hats\ndecision, which characterized unforeseen developments as \"developments […] which it would not be\nreasonable to expect that the negotiators of the country making the concession could and should have\nforeseen at the time when the concession was negotiated\".\n4901\n10.44 Moreover, since all the WTO prerequisites, including the demonstration of unforeseen\ndevelopments, must be satisfied by each safeguard measure, the Panel believes that the factual\ndemonstration of unforeseen developments 4902 must also relate to the specific product(s) covered by\nthe specific measure(s) at issue. Therefore the reasoned and adequate explanation relating to\nunforeseen developments must contain specific factual demonstrations of unforeseen developments\nidentified to have resulted in increased imports ca using or threatening to cause serious injury to the\nrelevant domestic producers for each safeguard measure at issue.\n10.45 In assessing whether the USITC provided a reasoned and adequate explanation of unforeseen\ndevelopments that resulted in increased imports causing serious injury, it is logical to consider\nwhether the USITC addressed unforeseen developments at all in its published reports, as required by\nArticle 3.1 of the Agreement on Safeguards an d Article XIX of GATT 1994, which has been\nchallenged by the complainants.\n\n4897 European Communities' first written submission, para. 151; China's first written submission,\n4898 Switzerland's first oral statement on behalf of the complainants, para. 15.\n4899 Appellate Body Report, Korea – Dairy, para. 86 and Appellate Body Report, Argentina – Footwear\n(EC), para. 93 (emphasis added).\n4900 Appellate Body Report, Argentina – Footwear (EC) , para. 91; Appellate Body Report, Korea –\nDairy, para. 84.\n4901 US – Fur Felt Hats, para. 9, cited with approval in Appellate Body Report, Argentina – Footwear\n4902 Appellate Body Report, US – Lamb, para. 72; Appellate Body Report, Argentina – Footwear (EC),\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(d) Demonstration of \"unforeseen developments\" as a matter of fact: when, where and how to\ndemonstrate unforeseen developments\n(i) Claims and arguments of the parties\n10.46 The arguments of the parties can be found in Sections VII.C.1; C.2(f) supra.\n(ii) Analysis by the Panel\n10.47 The Panel recalls that the complainants first rais ed issues relating to the format and timing of\nthe demonstration of unforeseen developments. The complainants argue that the USITC Report was\nissued without examining the issue of unforeseen de velopment. They submit that the initial USITC\nReport, with the exception of a discussion on the Asian and Russian crises, never addressed the\nrequirement of unforeseen developments. They add that the Second Supplementary Report does not\nform part of the USITC Report and is an ex post attempt to demonstrate the existence of unforeseen\ndevelopments, which did not feature in the same report as the USITC's determination. They argue,\ntherefore, that the Second Supplementary Report should be disregarded. The United States responds\nthat it is perfectly acceptable to issue separate reports, as there is no express guidance on \"when,\nwhere and how\" a demonstration of unforeseen developments must be made. According to the United\nStates, the choice of whether the components of the report are issued at the same time or over a period\nof time is left to the discretion of the individual Member.\n4903 The Panel will deal with the issues of the\nform and timing of the competent authorities' report in turn.\nThe \"form\" of the demonstration of unforeseen developments in relation to the decision to\napply safeguard measures\n10.48 In US – Lamb , the Appellate Body made it clear that the demonstration of unforeseen\ndevelopments must be found in the report of the competent authority. 4904 As the parties have pointed\nout, the requirement to publish a report is a necessary step in conducting an investigation consistent\nwith Article 3.1. However, Switzerland argues that the demonstration of unforeseen developments\nmust be found in the same report as the one containing the determination made pursuant to Articles 2\nand 4 of the Agreement on Safeguards and seems to imply that these elements should be contained in\na single document.\n10.49 The Panel agrees with the United States that nothing in the requirement to publish a report\ndictates the form that the report must take, provid ed that the report complies with all of the other\nobligations contained in the Agreement on Safeguards and Article XIX of GATT 1994. In the end, it\nis left to the discretion of the Members to determine the format of the report, including whether it is\npublished in parts, so long as it contains all of the necessary elements, including findings and\nreasoned conclusions on all pertinent issues of fact and law. Together, these parts can form the report\nof the competent authority.\n10.50 The Panel believes that a competent authority's report can be issued in different parts but such\nmulti-part or multi-stage report must always provide for a coherent and integrated explanation proving\nsatisfaction with the requirements of Article XIX of GATT 1994 and the Agreement on Safeguards,\nincluding the demonstration that unforeseen developments resulted in increased imports causing\nserious injury to the relevant domestic producers. Whether a report drafted in different parts or a\nmulti-stage report constitutes \"the report of the competent authority\" is to be determined on a\n\n4903 United States' first written submission, para. 952.\n4904 Appellate Body Report, US – Lamb, para. 72; Appellate Body Report, Korea – Dairy, para. 85.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncase-by-case basis and will depend on the overall structure, logic and coherence between the various\nstages or the various parts of the report. If separate parts of the report are issued at different times, the\ndiscussion relating to unforeseen developments must, in all cases, be integrated logically in the overall\nexplanation as to how the importing Member's safeguard measures satisfies the requirements of\nArticle XIX of GATT 1994 and the Agreement on Sa feguards. The publication of a report in many\nstages may produce added difficulties for the competent authorities to set forth coherent findings in a\nreasoned and adequate manner.\n10.51 The complainants have also argued that the timing of the USITC's demonstration is not in\naccordance with the requirements of Article XIX of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as articulated by the Appellate Body. We deal with this issue below\nThe timing of the demonstration of unforeseen developments: before the application of the\nmeasure\n10.52 Given that the demonstration of unforeseen developments is a prerequisite for the application\nof a safeguard measure 4905, it cannot take place after the date as of which the safeguard measure is\napplied. This has been confirmed by the Appellate Body, which noted, in US – Lamb, that although\nArticle XIX provides no express guidance on where and when the demonstration of unforeseen\ndevelopments is to be made, it is nonetheless a prerequisite, and \"it follows that this demonstration\nmust be made before the safeguard measure is applied. Otherwise, the legal basis for the measure is\nflawed.\"4906 Any demonstration made after the start of the application of a safeguard measure would\nhave to be disregarded automatically as it cannot afford legal justification for that measure.\n10.53 Article 3.1 of the Agreement on Safeguards requires inter alia that Members apply a\nsafeguard measure only after competent authorities set forth \"their findings and reasoned conclusions\nreached on all pertinent issues of fact and law.\" Accordingly, the Appellate Body Report in US –\nLamb stated that since the demonstration of unforeseen developments is a pertinent issue of fact and\nlaw for the application of a safeguard measure, \"it follows that the published report of the competent\nauthorities … must contain a 'finding' or 'reas oned conclusion' on 'unforeseen developments'.\"\n4907\nSuch a reasoned and adequate explanation of how unforeseen developments resulted in increased\nimports causing serious injury must form part of the overall reported explanation by the competent\nauthority that it has satisfied all the WTO prerequisites for the imposition of a safeguard measure.\nSince the demonstration of unforeseen developments must be included in the published report of the\ncompetent authorities it is necessary to look for the demonstration of unforeseen developments in the\n\"report of the competent authority\", completed and published prior to the application of the safeguard\nmeasures.\n10.54 The Panel notes that, according to the United States, 22 October 2001 was the date of the\ndetermination made pursuant to Articles 2 and 4 of the Agreement on Safeguards.\n4908 T h i s\ndetermination was included in the USITC's Report published in December 2001. On\n22 October 2001, the USITC had not completed its demonstration relating to unforeseen\ndevelopments. In the Second Supplementary Report of 4 February 2002, findings were made\nprincipally with respect to the issues of \"unforeseen developments\" and potential exclusions of certain\n\n4905Appellate Body Report in Korea – Dairy , paragraph 85; see also, Appellate Body Report,\nArgentina – Footwear (EC), para. 92.\n4906 Appellate Body Report, US – Lamb , para. 72 (emphasis in original); see also Panel Report, US –\nLine Pipe, para. 7.296.\n4907 Appellate Body Report, US – Lamb, para. 76.\n4908 United States' written reply to Panel question No. 15 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncountries from the application of the safeguard measures. The safeguard measures came into effect\non 20 March 2002, pursuant to a proclamation by the President on 5 March 2002. 4909 We recall that\nthe demonstration of unforeseen developments must be made in the report of the competent authority\nand before the measure is applied. To the extent that the February Second Supplementary Report\nformed part of the competent authority' report – an issue which we will ultimately not need to decide\nfor reasons explained below – the demonstration of unforeseen developments was not necessarily\nmade in an untimely fashion, since this later report was published before the measure was applied.\nConclusion\n10.55 Before a decision to apply a safeguard measure can be made in accordance with Article 2 of\nthe Agreement on Safeguards and Article XIX of GATT, a number of conditions must be fulfilled,\nand certain circumstances must be demonstrated. It is only once all of these prerequisites or\nrequirements are fulfilled, including the completion of the investigation and the issuance of a report\ncontaining findings and reasoned conclusions, that a Member is entitled to impose a WTO-compatible\nsafeguard measure.\n10.56 The United States refers to 22 October 2001 as the date of the determination pursuant to\nArticles 2 and 4 of theAgreement on Safeguards. In the Panel's opinion that date cannot constitute the\ntime at which full compliance was achieved with th e requirements of Article XIX of GATT and the\nAgreement on Safeguards, since the USITC coul d only have completed its demonstration of\nunforeseen developments on 4 February 2002.\n10.57 The Panel is of the view that the determinati on of satisfaction with the conditions mentioned\nin Articles 2 and 4 of the Agreement on Safeguards, as well as the factual demonstration of\nunforeseen developments required by Article XIX of GATT 1994, are distinct elements for which\nspecific findings can be made by the competent authorities at different moments, as long as all such\nfindings are logically and coherently integrated in a report published before the safeguard measure is\napplied.\n10.58 For the purpose of the present review, the Panel will assume, arguendo, that the USITC\nSecond Supplementary Report of February 2002 is part of the \"USITC Report\" for the purposes of\nArticle 3.1 of the Agreement on Safeguards (and XIX of GATT 1994 relating to unforeseen\ndevelopments). Therefore, any demonstration of unforeseen developments which must take place\nbefore the measure is applied must also be found in the USITC multi-stage report. The Second\nSupplementary Report was the last document published by the competent authority before the\napplication of the safeguards measure, that could be said to form part of the \"report of the competent\nauthority\". Since the Second Supplementary Report is the last pronouncement with regard to\n\"unforeseen developments\" before the application of the measures, the findings contained within it are\nthe latest the Panel will take into consideration.\n(e) The conduct of the investigation – the obligation to consult interested parties\n(i) Claims and arguments of the parties\n10.59 The arguments of the parties can be found in Section VII.C.2.(f)(iii) supra.\n\n4909 Proclamation 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, 7 March 2002.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(ii) Analysis by the Panel\n10.60 The Panel recalls that the European Communities, China, Norway and New Zealand argue\nthat, because the issue of unforeseen developments was only discussed in the Second Supplementary\nReport which came out after the conclusion of the investigation, the interested parties were not given\nan opportunity to comment on the discussion. This, they argue, is contrary to Article 3.1 of the\nAgreement on Safeguards, which contains a general obligation to allow interested parties to express\ntheir views and comment on the views and evidence of other parties concerning all pertinent issues of\nlaw and fact, including the issue of unforeseen developments.\n4910 The United States responds that the\nUSITC Report shows that the unforeseen conditions , which are demonstrated in the USITC Second\nSupplementary Report, informed its injury determination. 4911 Moreover, the USITC specifically\nsought information on unforeseen developments in the course of its investigation. Accordingly,\nargues the United States, the allegation that interested parties had no opportunity to present evidence\nand their views on this issue is patently incorrect.4912\n10.61 The Panel recognizes that Article 3.1 of the Agreement on Safeguards provides certain\nprocedural guarantees to interested parties, such as \"reasonable public notice\" and \"public hearings or\nother appropriate means [to] present evidence and their views\". The important role of interested\nparties was recognized by the Appellate Body in US – Wheat Gluten, when it stated as follows:\n\"The focus of the investigative steps mentioned in Article 3.1 is on 'interested parties',\nwho must be notified of the investigation, and who must be given an opportunity to\nsubmit 'evidence', as well as their 'views', to the competent authorities. The interested\nparties are also to be given an opportunity to 'respond to the presentations of other\nparties'. The Agreement on Safeguards , therefore, envisages that the interested\nparties play a central role in the investigation and that they will be a primary source\nof information for the competent authorities.\"\n4913\n10.62 Since the opportunity of interested parties to present evidence and their views is a necessary\npart of the investigation, it must be reflected in the published report. The United States does not\ndispute this, but argues instead that the interested parties were given multiple opportunities to present\nevidence and the USITC actively sought their input. 4914 According to the United States, this is\nreflected in the USITC Report.4915\n\n4910 European Communities' first written submission, para. 177; China's first written submission,\nEuropean Communities', China's and Norway's written replies to Panel question No. 1 at the first substantive\nmeeting.\n4911 USITC Report, pp. OVERVIEW-17, OVERVIEW-18, OVERVIEW-57.\n4912 United States' first written submission, para. 954; United States' written reply to Panel question No.\n1 at the first substantive meeting.\n4913 Appellate Body Report, US – Wheat Gluten, para. 54.\n4914 In response to the Panel's question No.1 at the first substantive meeting, the United States replied:\n\"In this investigation, the ITC gave public notice of its institution of the steel investigation. (66 Fed. Reg. 35267\n(3 July 2001)). The ITC invited public comments and suggestions regarding the content of its questionnaires,\nwhich included a question regarding unforeseen developments. (66 Fed. Reg. 34717 (29 June 2001)). The ITC\nreceived extensive responses to that public request, including one 110-page submission from respondents from a\nvariety of countries, including Japan, Korea, Brazil, and New Zealand. (Joint Comments of Respondents on\nDraft Questionnaires, 2 July 2001, Exhibit US-67.) The ITC accepted prehearing written submissions with no\npage limits, and several of those initial written submissions discussed unforeseen developments. ( E.g.,\nRespondents' Joint Prehearing Framework Brief, 12 Sept. 2001 (Joint filing from 40 companies in 25 countries,\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.63 In particular, the USITC requested, by way of questionnaires to be returned by 30 July 2001,\nthat the importers, producers and purchasers:\n\"[P]lease identify any developments during the last ten years that resulted in certain\nsteel products under investigation being imported into the United States in such\nincreased quantities as to have an adverse impact on the domestic industry[ies] during\nthe period January 1996-June 2001. For each development, please describe the\ndevelopment, when it occurred, and whether it was unexpected.\"4916\n10.64 Based on the above questions, it is clear that the issue of unforeseen developments was part of\nthe investigation. By inviting comments in response to the questionnaires, and addressing the issue\nduring its public hearings 4917, the Panel is of the view that the United States has complied with its\nArticle 3.1 obligation to provide \"appropriate means in which importers, exporters and other\ninterested parties [can] present evidence and their views\".\n10.65 The European Communities complains that \"there was no provisional reasoning on or\nexplanation of unforeseen developments on which interested parties could comment\". 4918 The Panel\ndoes not believe that Article 3 of the Agreement on Safeguards requires the competent authority to\nsend to interested parties \"draft findings\" of its demonstration relating to unforeseen developments in\norder to allow them to comment prior to the publication of the competent authority's report.\n10.66 We, therefore, reject the European Communities, China, Norway and New Zealand 's claims\nthat the United States violated Article 3.1 in refusing to provide to interested parties an opportunity to\npresent evidence and share their views on unforeseen developments.\n(f) Reasoned and adequate explanation that unforeseen developments resulted in increased\nimports causing serious injury\n10.67 Following the approach suggested by the Appellate Body in US – Lamb\n4919, the Panel will\nnow consider whether the USITC offered a reasoned and adequate explanation as to why and how the\ncited unforeseen developments could be so regarde d. This requires, at a minimum, some discussion\nby the competent authority as to how the developm ents were unforeseen at the appropriate time, and\n\nincluding Japan, Brazil, Thailand, Korea, the European Communities, Venezuela, Norway, India, New Zealand,\nand China), pp. 106-109 (Exhibit US-68); Prehearing Submission of the European Commission, 10 Sep. 2001,\npp. 4-5 (Exhibit US-69); AK Steel Prehearing Brief, 11 Sep. 2001, pp. 60-63 (Exhibit US-70); Prehearing Brief\nof United Steelworkers of America, 11 Sep. 2001, pp. 129-131 (Exhibit US-71); Prehearing Brief of Domestic\nCarbon Flat Steel Producers, 11 Sep. 2001, pp. 31-36 (Exhibit US-72); Respondents' Joint Prehearing Brief for\nProduct #18, Seamless Tubular Products other than OCTG, 10 Sep. 2001, pp. 11-13 (Exhibit US-73); Minimill\nCoalition (Long Products) Prehearing Brief, 11 Sep. 2001, pp. 18-22 (Exhibit US-74).) The ITC's prehearing\nStaff Report included information on the Asian economic crisis, continuing post-dissolution difficulties in the\nformer USSR republics, and the appreciation of the US dollar. (Prehearing Staff Report at OVERVIEW-22-24\nand OVERVIEW-70-71 (Exhibit US-75)). The ITC held a series of public hearings at which various\nCommissioners directly solicited comments from the parties on unforeseen developments. (Tr., pp. 326-327\n(Chairman Koplan) (Exhibit US-44); 343 (Commissioner Hillman) (Exhibit US-45); 1445 (Vice Chairman\nOkun) (Exhibit US-46); and 2626 (Vice Chairman Okun) (Exhibit US-47)). The ITC accepted post-hearing\nwritten submissions with no page limits, several of which also discussed the issue of unforeseen developments.\"\n4915 United States' second written submission, para. 168.\n4916 Domestic Producer's Questionnaire, question I-7 (US-41); Importer's Questionnaire, question I-6\n(US-42); Purchaser's Questionnaire, question I-6 (US-43).\n4917 United States' first written submission, para. 954.\n4918 European Communities' second written submission, para. 85.\n4919 Appellate Body Report, US – Lamb, para. 73.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwhy conditions in the second clause of Article XIX:1(a) occurred as a result of circumstances in the\nfirst clause.\n(i) Unforeseen developments\nClaims and arguments of the parties\n10.68 The arguments of the parties can be found in Section VII.C.1 supra.\nAnalysis by the Panel\n10.69 We will begin our assessment of the USITC's e xplanation of the unforeseen developments by\nconsidering the competent authority's explanation of why they were unforeseen. The Panel will then\nmove on to consider the explanation of how the unforeseen developments \"resulted in\" increased\nimports. In order to answer these questions, it is necessary to ask what the alleged unforeseen\ndevelopments were and as of when they must have been unforeseen.\n10.70 The Appellate Body in both Argentina – Footwear (EC) and Korea – Dairy quoted the\nfollowing statement from the US – Fur Felt Hats GATT Working Party report of 1951:\n\" '[U]nforeseen developments' should be interpreted to mean developments occurring\nafter the negotiation of the relevant tariff concession which it would not be\nreasonable to expect that the negotiators of the country making the concession could\nand should have foreseen at the time when the concession was negotiated.\"\n4920\n10.71 In its report in Korea – Dairy, the Appellate Body made the following finding:\n\"And, such 'emergency actions' are to be in voked only in situations when, as a result\nof obligations incurred under the GATT 1994, an importing Member finds itself\nconfronted with developments it had not 'foreseen' or 'expected' when it incurred that\nobligation.\"\n4921\n10.72 The United States argues that the four factors cited by the USITC, namely the Russian crisis,\nthe Asian crisis and the continued strength of the United States' market together with the persistent\nappreciation of the US dollar, each constituted unforeseen developments. It also argues that the\nconfluence, or simultaneous occurrence, of these three events amounted to an unforeseen\ndevelopment.\n4922\n10.73 The complainants argue that none of the above events constituted unforeseen developments,\nnor did any combination of them. 4923 Moreover, they argue that the explanation of how the above\nevents have resulted in increased imports has not been performed in a manner that is reasoned and\nadequate.\n10.74 Parties agree that, in the present dispute, the point in time at which developments should have\nbeen unforeseen is that of the completion of the Uruguay Round. The Panel will apply the above\n\n4920 See Appellate Body Reports, Argentina – Footwear (EC), para. 96, and Korea – Dairy , para. 89,\nciting US – Fur Felt Hats , adopted 22 October 1951.\n4921 See Appellate Body Reports, Argentina – Footwear (EC), para. 93, and Korea – Dairy, para. 86.\n4922 United States' first oral statement, para. 72.\n4923 European Communities' first written submission, para. 151; China's first written submission, para.\n97; Switzerland's first written submission, para. 137; Norway's first written submission, para. 139.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninterpretation to determine if the USITC assessed whether the developments which it identified were\nunforeseen as at the time that the Uruguay Round negotiations were concluded.\nThe Asian and Russian crises\n10.75 The complainants argue that the Asian and Russian crises could not have been unforeseen\nbecause they were not unexpected.4924 With respect to the Russian crisis, the dissolution of the USSR\noccurred in 1991. New Zealand argues that the United States' negotiators were fully aware of this\nwhen they agreed to tariff concessions during the Uruguay Round.4925 The complainants contend that\nif a development had started before the concessions were granted, it could not be considered to have\nbeen unforeseen. For them, there is normally a close temporal connection between the unforeseen\ndevelopments and the increased imports. 4926 Taking the figures from the USITC Report that show\nconsumption drops and export increases, they argue that the changes in steel markets were much more\npronounced after the dissolution of the former Soviet Union in 1991 than later on and could,\ntherefore, not be unforeseen after 1994.4927\n10.76 The United States responds that the Southeast Asia and former USSR crises were perhaps\nforeseeable in the general, hypothetical sense, but the timing, extent and ongoing effect on global steel\ntrade were not foreseen by the United States until well after the conclusion of the Uruguay Round.\n4928\nIt claims that the unforeseen developments that it is invoking took place after the Uruguay Round.\nThe East Asian financial crisis began in mid-1997, and although the Soviet Union collapsed in 1991,\nwith resulting dislocations in the successor states, these were not the developments that the USITC\nfound to be unforeseen. Rather, the developments in question were such that those countries'\nconditions changed after 1996 from the condition prevalent at the time of the Uruguay Round\nnegotiations.4929\n10.77 The Panel will first consider the USITC's explanation of the Asian crisis as an unforeseen\ndevelopment before considering the Russian crisis, the invocation of the strength of the United States'\neconomy and the appreciation of the US dollar, as well as the confluence of those factors.\nAsian crisis\n10.78 The USITC offered the following explanation in its initial report:\n\"[S]ignificant production capacity increases occurred during a period of disruption in\nworld steel markets. The depreciation of several Asian currencies in late 1997 and\nearly 1998 significantly curtailed steel consumption in those countries and created a\npool of steel seeking alternative markets.\"\n4930\n10.79 For the Panel, this statement amounts to an identification of the depreciation of Asian\ncurrencies, which occurred in 1997 and 1998, and its effects on the steel world market, as unforeseen\ndevelopments. Although it does not provide an explanation as to why the development was\nunforeseen, we can assume that, as the crisis began in 1997, it could not have been foreseen by the\n\n4924 Switzerland's first oral statement, delivered on behalf of the complainants, para. 15.\n4925 New Zealand's first written submission, paras. 4.25-4.27.\n4926 European Communities' first written submission, para 133; Norway's first written submission,\n4927 Switzerland's first oral statement, delivered on behalf of the complainants, paras. 16-17.\n4928 United States' first written submission, para. 930.\n4929 United States' written reply to Panel question No. 11 at first substantive meeting.\n4930 USITC Report, p. 58 (footnotes omitted).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUnited States negotiators in 1994, when the Uruguay Round ended. Moreover, it is consistent with\nthe following statement of the USITC, which was made in the Second Supplementary Report:\n\"Growth rates in [South East Asian] countries exceeded eight percent per year in the\nfirst half of the 1990s. These high growth rates were supported by even sharper\ngrowth in exports. As late as the fall of 1997, economists projected continued growth\nat similarly impressive rates for these emerging markets. Despite this period of\nintense growth and generally optimistic predictions, the 'Asian Financial Crisis' began\nwith the depreciation of the Thai baht in mid-1997. The depreciation of the baht and\nloss of investor confidence sparked a wider crisis that affected many developing\nmarkets. The crisis slowed economic growth and reduced demand for steel in many\nemerging country markets. Between 1997 and 1998, steel consumption in Indonesia,\nKorea, Malaysia, the Philippines, and Thailand fell by 29.6 million tons, a drop of\n41.4 percent. In Korea alone finished steel consumption dropped by 14.5 million tons\nor 34.4 percent. The crisis also led to depreciations in the currencies of the\nPhilippines, Indonesia, Malaysia, and Korea with respect to the US dollar. By\nJanuary 1998, these currencies had declined between 38 and 76 percent in nominal\nterms.\"\n4931\n10.80 Likewise, this statement identifies the Asian financial crisis as an unforeseen development,\nwhich began in 1997. It also explains that the development was not foreseen. Based on the USITC\nstatements quoted above, the Panel concludes that the United States demonstrated that the Asian crisis\nand its effects on the steel world market could constitute an unforeseen development within the\nmeaning of Article XIX of GATT 1994, since the Asian Crisis took place after the United States last\nnegotiated its tariff concessions on the steel products covered by the investigation at issue. We\nexplore in paragraphs 10.96-10.101 below, the USITC's explanation that the confluence of the Asian\nfinancial crisis, together with other factors (the Russian financial crisis, the strong United States'\neconomy and the strong US dollar) constituted unforeseen developments that resulted in increased\nimports causing serious injury to the relevant domestic producers.\nRussian crisis\n10.81 With respect to the Russian crisis, the USITC stated, in its initial Report, that:\n\"The dissolution of the USSR led to significant increases in steel exports to the\nUnited States from former USSR countries.\"\n4932\n10.82 Further, in the Second Supplementary Report, the USITC explains that:\n\"Although the dissolution of the former Soviet Union and the resulting economic\ndislocations in the former Soviet republics predated the conclusion of the Uruguay\nRound, unanticipated financial difficulties led to a sharp increase in exports of steel\nfrom the former Soviet Union between 1996 and 1999. 4933 In particular, as Russia\nand other former republics experienced intense financial disruptions and currency\n\n4931 USITC Second Supplementary Report, p. 4 (footnotes omitted).\n4932 USITC Report, p. 58 (footnotes omitted).\n4933 (original footnote) Exports increased because redu ctions in steel production in the former Soviet\nUnion did not keep pace with declines in consumption. Steel consumption fell more than 70 percent from 1991\nto 1998. USITC Pub. 3479, Vol. II at Table OVERVIEW-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfluctuations in this period, steel exports rose nearly 22 percent. 4934 Other Eastern\nEuropean countries also emerged as net exporters of steel.\"4935\n10.83 The unforeseen developments, as identified by the USITC, were the \"unanticipated financial\ndifficulties\", which, in particular, were the \"intense financial disruptions and currency fluctuations\"\nbetween 1996 and 1999, resulting from the dissolution of the Soviet Union.\n10.84 The Panel is of the view that this statement distinguishes between the foreseen financial\ndifficulties that arose from the dissolution of the USSR, and the financial difficulties that were\nunforeseen. The Panel is also of the view that there may be instances when an event which is already\nknown will develop into a situation initially unforeseen. Therefore, an unforeseen development may\nevolve from well-known prior facts. Nevertheless, the competent authority must provide a reasoned\nand adequate explanation as to how the later deve lopments were unforeseen given the earlier known\nfacts.\n10.85 Therefore, the Panel will accept, arguendo, that there may have been, between 1996 and\n1999, unforeseen financial disruptions and currency fluctuations linked to the USSR dissolution that\nwere thus unforeseen at the conclusion of the Uruguay Round.\nThe strength of the US economy and the appreciation of the US dollar\n10.86 The European Communities, Norway, Switzerland and China argue that the \"robustness\" of\nthe United States' market cannot be considered an \"unforeseen development\" by the United States,\nbecause United States' economic policy was likely to have been conducted with this objective.\n4936\nThese complainants argue that the growth of the United States' economy started in 1990, well before\nthe Uruguay Round, so it must have been foreseen. 4937 The European Communities, Norway and\nSwitzerland also challenge the notion that such favourable developments are capable of being\nconsidered unforeseen developments, since the term within the meaning of Article XIX is meant to\ncover unfavourable developments or shocks to the system that are susceptible to lead to adverse\nconsequences. Such is not the case of the \"robustness\" of the United States' economy and the strength\nof the US dollar.\n4938\n10.87 The United States responds that nothing in Article XIX prevents the continued strength of a\nmarket or the appreciation of a currency from constituting an unforeseen development. 4939 It argues\nthat in US – Fur Felt Hats, the unforeseen development was a shift in fashion to a different sort of hat.\nThat shift in fashion was presumably unfavourable to the industries making the less fashionable hats,\nbut that shift could probably not be described as \"unfavourable\" in any broader sense. According to\nthe United States, US – Fur Felt Hats supports the conclusion that an unforeseen development may be\na development that could be described as neutral or even positive in general terms, but which results\nin a change in trade patterns that proves injurious to a particular industry.\n4940\n\n4934 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-19 and Table OVERVIEW-5.\n4935 USITC Second Supplementary Report, p. 4.\n4936 European Communities' first written submission, para. 150; Switzerland's first written submission,\n4937 Switzerland's first oral statement, delivered on behalf of the complainants, para. 19.\n4938 European Communities' second written submission, para. 56; Norway's second written submission,\n4939 United States' first written submission, para s. 972-973, citing USITC Second Supplementary\nReport, p.1; USITC Report, Table OVERVIEW-16.\n4940 United States' second oral statement, para. 106.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.88 The Panel turns immediately to the explanation afforded by the USITC, which states that:\n\"While other markets experienced significant turmoil and contraction after 1997,\ndemand in the United States remained robust. Indeed, the US economy enjoyed an\noverall economic expansion in the 1990s of unprecedented length. Consequently, US\ndemand for steel remained strong.\"\n10.89 From the above statement, it seems that th e competent authority did not interpret the\nrobustness of the United States' economy to be an \"unforeseen development\" in and of itself\n4941, but\nrather, it viewed the strength of the economy in the context of the turmoil in other markets.\nTherefore, the Panel is of the view that the strength of the United States' market was considered by the\nUSITC along with the other alleged unforeseen developments and as part of a set of world events\nwhich together constituted unforeseen developments.\n10.90 As regards the US dollar appreciation, the European Communities, Norway, China and\nSwitzerland argue that a change in the value of a currency such as the US dollar cannot be accepted as\nan unforeseen development.\n4942 According to the European Communities, China and Norway,\nexchange-rate developments are foreseeable in two main senses. 4943 First, it is foreseeable that the\nexchange rate between two currencies that are not fixed will change over time. Second, it is\nforeseeable that the exchange rate of a currency of a country with a robust economy and low inflation\n(such as the United States in the 1990s) will rise over time compared with the currency of a country\nwith a weak economy and high inflation rate (such as Russia). 4944 For them, the value of the dollar in\nrelation to other currencies has regularly changed by significant amounts since the collapse of the\nBretton Woods system of fixed exchange rates in 1971. Such changes can no longer be considered to\nbe \"unforeseen\", but it must, on the contrary, be considered to be quite expected that the dollar would\nnot remain stable vis-à-vis other currencies.\n4945\n\n4941 However see at para. 976 of its first written submission, the United States argues that:\n\"The ITC report cited a number of unforeseen developments that resulted in the ten steel\nproducts being imported into the United States in such increased quantities and under such\nconditions as to cause serious injury to the domestic industries. Each of those developments\nwas unforeseen in and of itself. However, the confluence of this particular set of events can\nbe described as an unforeseen development.\"\nSee also the United States' written reply to Panel question No. 18 at the first substantive meeting:\n\"Are you relying/did the ITC rely on the robustness of the United States Dollar as an\nunforeseen development?\nThe robustness of the United States dollar was a development which combined with the other\ndevelopments, namely, the currency crises in Southeast Asia and the former USSR countries\nand the continued growth in steel demand in the US market as other markets declined, to\nproduce the increased volume of imports.\"\n4942 European Communities' first written submission, para. 152; Switzerland's first written submission,\n4943 European Communities', China's, and Norway's written replies to Panel question No. 10 at the first\nsubstantive meeting.\n4944 European Communities', China's, and Norway's written replies to Panel question No. 10 at the first\nsubstantive meeting.\n4945 Switzerland's first oral statement, delivered on behalf of the complainants, para. 20.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.91 The United States responds that nothing in Article XIX prevents the appreciation of a\ncurrency from constituting an unforeseen development. The period under investigation saw persistent\nand widespread appreciation of the US dollar against virtually all other major currencies. 4946 T h e\nUnited States argues that the fact that exchange rates change over time could be described as\nforeseeable, but not necessarily foreseen. Particular exchange rate developments, such as an\nunusually rapid or severe change in rates, are not likely to have been foreseen at the time of a\nparticular concession. It argues that the complainants have presented no evidence that the currency\ndisruptions that occurred prior to the import surges were in fact foreseen by anyone, much less that\nthose events were foreseen by any negotiator from the United States during the Uruguay Round.4947\n10.92 Once again, the Panel turns immediately to the USITC explanation, which states that:\n\"Continued growth in the US market, comb ined with uncertainty and contraction in\nother markets, led to significant upward pressure on the US dollar. The dollar\nappreciated significantly against many currencies during the period of investigation,\nand that appreciation became more notable after the foreign currency dislocations of\n1997 and 1998. Between 1996 and the first quarter of 2001, many currencies\nexperienced double-digit declines, in real terms, relative to the dollar.\n4948 The high\nvalue of the US dollar made the US market an especially attractive market for steel\nproducts displaced from other markets.\"\n10.93 Like the statement above regarding the strength of the United States' economy, this statement\nby the competent authority shows that the appreciation of the US dollar was not thought to be a stand-\nalone \"unforeseen development\". Instead, the USITC considered the relevance of the appreciation of\nthe US dollar \"after the foreign currency dislocations of 1997 and 1998\". Presumably, it was the fact\nthat the United States dollar remained high while the Thai baht, the Russian ruble and other Southeast\nAsian and Eastern European currencies became weak that allegedly resulted in increased imports.\nMoreover, the competent authority recognized the link between the upward pressure on the dollar and\nthe combination of the growth in the United States' market with the contraction in other markets.\n10.94 Since we believe the USITC did not regard the continued strength of the United States' market\nand appreciation of the US dollar as a distinct development, separate from the other alleged\nunforeseen developments, the Panel does not need to address the arguments of the complainants that\nsuch factors could not constitute unforeseen developments.\n10.95 The Panel will thus review the explanation provided by the USITC which, in our view, treated\nthe strength of the United States' market and the appreciation of the US dollar as factors that were part\nof a confluence of developments that together caused turmoil in these markets.\nThe confluence of developments\n10.96 The European Communities, China, Switzerland and Norway argue that no combination of\nevents cited by the USITC can constitute an unforeseen development.4949\n\n4946 United States' first written submission, para s. 972-973, citing USITC Second Supplementary\nReport, p.1; USITC Report, Table OVERVIEW-16.\n4947 United States' written reply to Panel question No. 10 at the first substantive meeting.\n4948 (original footnote) USITC Pub. 3479, Vol. II, Table OVERVIEW-16.\n4949 European Communities' first written submission, para. 151; China's first written submission, para.\n97; Switzerland's first written submission, para. 137; Norway's first written submission, para. 139.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.97 The United States argues that the robustness of the US dollar was a development which\ncombined with the other developments, namely, the currency crises in Asia and the former USSR and\nthe continued growth in steel demand in the United States' market as other markets declined, lead to\nincreased imports.\n4950\n10.98 The Panel has already accepted that the Russian and the Southeast Asian financial crises, at\nleast conceptually, could be considered unforeseen developments that did not exist at the end of the\nUruguay Round. We have also found that the USIT C did not consider the strength of the United\nStates' economy and the appreciation of the US dollar as unforeseen developments per se; it had\nreferred to these factors in relation to other unforeseen developments, which together had resulted in\nincreased imports causing or threatening to cause injury.\n10.99 Article XIX does not preclude consideration of the confluence of a number of developments\nas \"unforeseen developments\". Accordingly, the Panel believes that confluence of developments can\nform the basis of \"unforeseen developments\" for the purposes of Article XIX of GATT 1994. The\nPanel is of the view, therefore, that it is for each Member to demonstrate that a confluence of\ncircumstances that it considers were unforeseen at the time it concluded its tariff negotiations resulted\nin increased imports causing serious injury.\n10.100 To the complainants' argument that the changes in steel markets were much more pronounced\nin 1991 following the dissolution of the former Soviet Union than later on and could not, therefore, be\nunforeseen after 1994, the Panel notes that the fact that the dissolution of the USSR and its overall\neffects may have constituted an unforeseen development in 1991 does not mean that a subsequent\nfinancial crisis also resulting somehow from th e dissolution of the USSR, cannot, with other\ndevelopments, be considered part of a \"confluence of unforeseen developments\" in 1997 for the\npurpose of Article XIX of GATT 1994.\n4951\n10.101 The Panel will now proceed to an assessment of whether the USITC provided a reasoned and\nadequate explanation that the Asian and Russian crises taken together, alongside the additional factors\nof the strength of the United States' economy and the appreciation of the US dollar, and their effects\non steel world markets, resulted in increased imports into the United States causing or threatening to\ncause serious injury to the relevant domestic producers.\n(ii) \" as a result of unforeseen developments and tariffs concessions\"\nClaims and arguments of the parties\n10.102 The arguments of the parties can be found in Section VII.C.2.(d).\nAnalysis by the Panel\n10.103 We recall that Article XIX of GATT 1994 reads as follows:\n\"If, as a result of unforeseen developments and of the effect of the obligations\nincurred by a contracting party under this Agreement, including tariff concessions,\nany product is being imported into the territory of that contracting party in such\nincreased quantities and under such conditions as to cause or threaten serious injury\nto domestic producers in that territory of like or directly competitive products, (…).\"\n\n4950 United States' written reply to Panel question No. 17 at the first substantive meeting.\n4951 Switzerland's first oral statement, delivered on behalf of the complainants, paras. 16-17.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.104 The Appellate Body has interpreted the phrase \"as a result of\" in Article XIX:1(a) of GATT\n1994 as a logical connection that exists between the first two clauses of that Article. In other words, a\nlogical connection must be demonstrated to have existed between the elements of the first clause of\nArticle XIX:1(a) – \"as a result of unforeseen developments and of the effect of the obligations\nincurred by a Member under this Agreement, including tariff concessions\" – and the conditions set\nforth in the second clause of that Article – \"increased imports causing serious injury\" – for the\nimposition of a safeguard measure.\n4952\nLogical connection between unforeseen developments and \"increased imports so as to\ncause serious injury\"\n10.105 In the following paragraphs, we note some of the references to the Russian crisis, the Asian\ncrisis and exchange rates in the initial USITC Report and the Second Supplementary Report including\nthe separate views of Commissioners Okun and Bragg.\n10.106 The USITC offered the following statements, in its initial Report, with respect to:\n\"CCFRS:\nThese significant production capacity increases occurred during a period of disruption\nin world steel markets. The depreciation of several Asian currencies in late 1997 and\nearly 1998 significantly curtailed steel consumption in those countries and created a\npool of steel seeking alternative markets.\n4953 The dissolution of the USSR led to\nsignificant increases in steel exports to the United States from former USSR\ncountries.4954 4955\nHot-rolled bar:\nThe timing of domestic producers' price declines do not correspond precisely to the\ntiming of the import surges. The record, however, indicates that imports had a\nnegative effect on prices and that the domestic industry used different strategies over\nthe course of the period examined to comp ete with the imports. The largest increase\nin hot-rolled bar imports occurred in 1998, s hortly following the financial crisis that\nled to sharply decreased steel consumption in several Asian countries. Import\nvolumes increased by 29.5 percent from 1997 to 1998.4956 4957\nCold-finished bar:\nA substantial increase in cold-finished bar imports occurred in 1998, shortly\nfollowing the financial crisis that led to sharply decreased steel consumption in\nseveral Asian countries.4958\n\n4953 (original footnote) CR and PR, p. OVERVIEW-17.\n4954 (original footnote) CR and PR, p. OVERVIEW-18.\n4955 USITC Report, p. 58.\n4956 (original footnote) CR and PR, Table LONG-5.\n4957 USITC Report, p. 96.\n4958 USITC Report, p.106, fn. 630.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nRebar:\nRebar imports increased significantly in 1998, shortly following the financial crisis\nthat led to sharply decreased steel consumption in several Asian countries.4959\nStainless Steel Wire Rod:\nWe have taken into account a number of factors that affect the competitiveness of\ndomestic and imported stainless rod in the US market, including factors related to the\nproduct itself, the degree of substitutability between the domestic and imported\narticles, changes in world capacity and production, market conditions, and exchange\nrates.\"4960\n10.107 In a separate decision, Commissioner Okun made the following remark with respect to the\n\"Selection of Import Quotas\" as part of a \"Justification for Form of Relief\":\n\"[T]he record indicates that the currencies of selected countries, many of which\nexport substantial amounts of steel to the United States, demonstrated substantial\ndepreciations relative to the US dollar.4961 Exchange rate fluctuations between the US\ndollar and foreign currencies can have a significant effect on the relative\ncompetitiveness of global steelmakers selling products in the US market. Quotas\nprevent a surge of low-priced imports from countries that have experienced currency\ndepreciations.\"\n4962\n10.108 The USITC also appended the following to its December 2001 Report:\n\"THE ASIAN FINANCIAL CRISIS\nThe 'Asian Financial Crisis' began with the depreciation of the Thai baht in mid-1997,\nfollowed by depreciations in the currenci es of the Philippines, Indonesia, Malaysia\nand Korea. During January 1996-January 1998, the currencies of these five countries\ndepreciated between 38 and 76% in nominal terms. As these economies slowed, their\nfinished steel consumption fell significantly (figure OVERVIEW-7). Finished steel\nconsumption in Indonesia, Korea, Malaysia, the Philippines and Thailand together\nfell by 29.6 million tons during 1997-98, w ith the largest decl ine occurring with\nrespect to Korean finished steel consumption, 14.5 million tons.\n4963\n[…]\n\n4959 USITC Report, p. 113.\n4960 USITC Report, p. 217.\n4961 (original footnote) CR/PR at Table OVERVIEW-16. All but two countries showed depreciations.\n4962 Views of Vice Chairman Deanna Tanner Okun on Remedy, USITC Report, p.437.\n4963 USITC Report, Vol. II, p. OVERVIEW-17; Followed this excerpt is Figure OVERVIEW-7, a\ngraph entitled \"Finished steel consumption in sel ected Asian countries, 1991-99\", demonstrating the\nconsumption trends for Indonesia, Korea, Malaysia, the Philippines and Thailand. Unfortunately, we are unable\nto reproduce the graph in the present Panel Reports because we do not have the data upon which the graph was\nbased, p. OVERVIEW-18.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nPOST-USSR DEVELOPMENTS\nChanges in Russia and other states formerly part of the USSR during 1991-2000 have\nhad an impact on the global steel market. The shift in these states toward market\nforces in 1992 precipitated a drop in overall economic activity, especially in industrial\noutput and investment such as machine building, which has been a major focus of the\nUSSR steel industry. The problems in the overall post-USSR economy resulted in\nsharp declines in both steel production (table OVERVIEW-3) and steel consumption\n(table OVERVIEW-4).\nTable OVERVIEW-3\nProduction of Crude Steel in Russia, Ukraine and the Former USSR, 1991-2000\nCountry 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000\nQuantity (1,000 tons)\nRussia (1) 73,902 64,329 53,817 56,879 54,303 53,475 48,315 56,792 65,160\nUkraine (1) 46,041 35,953 26,550 24,596 24,622 28,257 26,951 30,268 34,620\nFormer\nUSSR2 146,460 130,077 108,171 86,281 87,194 85,088 89,334 82,051 94,975 (1)\n1 Not available\n2 Includes all of the states of the former USSR. Virtually all of the steel production is in Russia, Ukraine and\nKazakhstan (in order of the volume produced).\nSource: IISI\nTable OVERVIEW-4\nApparent Consumption of Finished Steel in Russia, Ukraine and the Former USSR,\n1991-2000\nCountry 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000\nQuantity (1,000 tons)\nRussia (1) 50,539 34,026 21,904 20,728 18,082 17,200 16,979 18,633 25,358\nUkraine (1) 27,901 16,510 7,718 6,505 6,946 9,041 5,954 9,592 10,695\nFormer\nUSSR2 111,029 84,495 56,997 37,785 35,502 33,407 34,840 31,753 37,045 44,873\n1 Not available\n2 Includes all of the states of the former USSR.\nSource: IISI\nThe movement toward a market economy also resulted in a disruption of traditional\ntrade flows for steel within the former COMECON structure. COMECON was set up\nin 1949 to facilitate trade and economic cooperation between the USSR and certain\ncommunist countries. The organization attempted to integrate the economies of\nEastern Europe with that of the USSR . From 1949 to 1991, USSR steel exports\nprimarily went to COMECON members. With the breakup of the USSR and\nmovement by the former USSR toward a market economy, COMECON became\nobsolete. The ending of COMECON in 1991 marked a loss to the former USSR of its\ntraditional foreign buyers of its steel. The position of the former USSR in the global\nsteel market changed from a minor player in 1991 to the largest steel exporter in the\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nworld by 1999. These developments have resulted in trade frictions in many markets.\nAnti-dumping investigations or orders have been initiated against imports of Russian\nsteel by 21 trading partners including Argentina, Brazil, Canada, Chile, China,\nColombia, the EU, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines,\nSouth Africa, Taiwan, Thailand, Turkey, the United States, Venezuela and Vietnam.\nIn addition, both the EU and the United States have negotiated agreements setting\nquotas on imports of most Russian steel prod ucts. The United States also has two\nsuspension agreements in place on imports of Russian hot-rolled steel and steel plate.\nWith the restructuring of the economy in the post-USSR period, energy and\ntransportation costs are rising, resulting in a significant increase in production costs.\nFull restructuring and movement toward market relations is hindered in part because\nthese mills continue to provide the entire wage base in some areas. Several also\naccounted for a sizable share of USSR regional agricultural production. Therefore,\nsteel producers face decreased domestic demand and increased energy, transportation\nand input costs while lacking the ability to cut costs by substantially reducing the\nnumber of employees. One way steel producers have tried to resolve these problems\nis to substantially increase exports (table OVERVIEW-5).\nTable OVERVIEW-5\nExports of Steel from Russia, Ukraine and the Former USSR, 1991-2000\nCountry 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000\nQuantity (1,000 tons)\nRussia (1) 7,912 18,388 28,275 30,178 29,762 28,798 27,377 30,313 (1)\nUkraine (1) 8,580 12,083 12,831 12,848 13,387 17,803 17,583 20,896 (1)\nFormer USSR2 6,101 21,375 33,160 44,278 46,481 46,763 51,696 49,916 57,018 (1)\n1 Not available\n2 Includes all of the states of the former USSR.\nSource: IISI\n[…]\nEXCHANGE RATES\nExchange rate fluctuations between the US dollar and foreign currencies can have a\nsignificant effect on the relative competitiveness of global steelmakers selling\nproducts in the US market. As shown in table OVERVIEW-16, the dollar has\nstrengthened considerably against the currencies of many of the major import sources\nfor subject steel products during the period examined. As a country's currency\ndepreciates against the dollar, the foreign producer can lower product prices\nexpressed in dollars in the US market while still receiving the same price expressed in\nits home currency. These shifts are mitigated somewhat in many countries as the\nmajor raw materials used in steelmaking, such as iron ore, scrap, and metallurgical\ncoal and coke, are sold on a dollar-basis throughout the world. However, for\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncountries that purchase raw materials in the global market, an estimated two-thirds of\nthe costs of steelmaking are still in local currencies.4964\n[…]\nTable OVERVIEW-16\nOverall Appreciation and Depreciation Amounts for Currencies\nof Selected Countries relative to the US dollar,\nJanuary-March 1996 through January-March 2001\nNominal Exchange Rate Real Exchange Rate\nCountry\nAppreciation Depreciation A ppreciation Depreciation\nArgentina – – – 11.5\nAustralia 43.4 – 48.1 –\nBrazil – 52.0 – 24.9\nCanada – 10.5 – 9.1\nGermany – 30.4 – 36.0\nIndia – 33.5 – 8.2\nIndonesia – 76.3 – 31.1\nItaly – 24.8 – 25.0\nJapan – 10.4 – 20.1\nKorea – 38.4 – 31.7\nLatvia – 11.3 – 13.8\nMexico – 22.4 36.7 –\nNetherlands – 31.1 – 33.6\nPoland – 37.9 55.8 –\nRomania – 89.7 10.9 –\nRussia – 83.3 – 45.6\nSouth Africa – 51.9 – 37.1\nSpain – 31.2 – 31.2\nThailand – 41.5 – 37.0\nTurkey – 91.9 – 19.2\nUnited\nKingdom 4.8 – 2.2 –\nSource: International Monetary Fund, International Financial Statistics , December 1999\nand July 2001.\n\n4964(original footnote) Peter Marcus and Karlis Kirsis, Steel in 2001: Constraints Unparalleled,\nOpportunities Unmatched, presented to Steel Success Strategies XVI, World Steel Dynamics, 19 June 2001.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.109 On 3 January 2002, the USTR asked the USITC to provide, inter alia, additional information\non unforeseen developments. On 9 February 2002, the USITC responded to this request, submitting\nits Second Supplementary Report, which states by way of introduction:\n\"We provide the following response to USTR's request that we identify any\nunforeseen developments that led to the relevant steel products being imported into\nthe United States in such increased quantities as to be a substantial cause of serious\ninjury or threat thereof. (…)\nTo the extent that WTO panel decisions have suggested that the concept of\n'unforeseen' developments relates to the expectations of negotiators of the relevant\ntariff concessions, we note that such an assessment is in many respects outside of the\npurview of this agency, since multilateral trade negotiations are not within its\nmandate, but are the responsibility of the USTR and relevant Executive Branch\nagencies.\"\n4965\n10.110 The Second Supplementary Report then goes on to provide an explanation of \"unforeseen\ndevelopments\". The USITC's explanation is rather brief:\n\"At the time of the Uruguay Round negotiations, and for some time after its\nconclusion, there had been substantial overall economic growth in a number of\nemerging markets, most notably those in southeast Asia. Growth rates in those\ncountries exceeded eight percent per year in the first half of the 1990s.4966 These high\ngrowth rates were supported by even sharper growth in exports.4967 As late as the fall\nof 1997, economists projected continued growth at similarly impressive rates for\nthese emerging markets. 4968 Despite this period of intense growth and generally\noptimistic predictions, the \"Asian Financial Crisis\" began with the depreciation of the\nThai baht in mid-1997. 4969 The depreciation of the baht and loss of investor\nconfidence sparked a wider crisis that affected many developing markets. The crisis\nslowed economic growth and reduced demand for steel in many emerging country\nmarkets. Between 1997 and 1998, steel consumption in Indonesia, Korea, Malaysia,\nthe Philippines, and Thailand fell by 29.6 million tons, a drop of 41.4 percent.\n4970 In\nKorea alone finished steel consumption dropped by 14.5 million tons or 34.4\npercent.4971 The crisis also led to depreciations in the currencies of the Philippines,\nIndonesia, Malaysia, and Korea with respect to the US dollar. 4972 By January 1998,\nthese currencies had declined between 38 and 76 percent in nominal terms.4973\n\n4965 (original footnote) USITC Second Supplementary Report, Attachment I, pp. 1-4 (Exhibit CC-11).\n4966 (original footnote) World Economic Outlooks, October 1995-October 1997, Surveys by the Staff\nof the International Monetary Fund, Exh. 19 of Minimill 201 Coalition (Long Products) Prehearing Injury Brief.\n4967 (original footnote) World Economic Outlooks and APEC Economic Forecasts, Exhs. 19 and 20 of\nMinimill 201 Coalition (Long Products) Prehearing Injury Brief.\n4968 (original footnote) World Economic Outlooks, Exh. 19 of Minimill 201 Coalition (Long Products)\nPrehearing Injury Brief and pp. 20-21.\n4969 (original footnote) Steel, Inv. No. TA-201-73, USITC Pub. 3479 (Dec. 2001), Vol II,\nOVERVIEW-17.\n4970 (original footnote) USITC Pub. 3479, Vol. II, OVERVIEW-17.\n4971 (original footnote) USITC Pub. 3479, Vol. II, OVERVIEW-17.\n4972 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-17.\n4973 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-17.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAlthough the dissolution of the former Soviet Union and the resulting economic\ndislocations in the former Soviet republics predated the conclusion of the Uruguay\nRound, unanticipated financial difficulties led to a sharp increase in exports of steel\nfrom the former Soviet Union between 1996 and 1999.\n4974 In particular, as Russia\nand other former republics experienced intense financial disruptions and currency\nfluctuations in this period, steel exports rose nearly 22 percent. 4975 Other Eastern\nEuropean countries also emerged as net exporters of steel.4976\nWhile other markets experienced significant turmoil and contraction after 1997,\ndemand in the United States remained robust. Indeed, the US economy enjoyed an\noverall economic expansion in the 1990s of unprecedented length. Consequently, US\ndemand for steel remained strong. Apparent US consumption of certain flat-rolled\ncarbon steel products rose by 7.8 percent between 1996 and 2000, and apparent US\nconsumption peaked in 2000.\n4977 Apparent US consumption of long products rose by\n20.5 percent between 1996 and 2000 and apparent US consumption for the period\npeaked in 2000.4978 Apparent US consumption of tubular products rose 18.2 percent\nbetween 1996 and 2000, with apparent US consumption peaking in 2000. 4979\nApparent US consumption of stainless products increased 29.5 percent between 1996\nand 2000, with apparent US consumption peaking in 2000.\n4980\nContinued growth in the US market, combined with uncertainty and contraction in\nother markets, led to significant upward pressure on the US dollar. The dollar\nappreciated significantly against many currencies during the period of investigation,\nand that appreciation became more notable after the foreign currency dislocations of\n1997 and 1998. Between 1996 and the first quarter of 2001, many currencies\nexperienced double-digit declines, in real terms, relative to the dollar.\n4981 The high\nvalue of the US dollar made the US market an especially attractive market for steel\nproducts displaced from other markets.\nSteel imports historically have played a role in the US market.\n4982 After the beginning\nof the Asian and Russian economic crises, however, unusually large volumes of\nforeign steel production were displaced from foreign consumption. The US market,\nin which demand remained strong, was the destination for a significant portion of that\ndisplaced foreign production. Widespread currency devaluations made the displaced\nexports especially attractive to US purchasers on price terms. As currency\ndepreciations and economic contractions disrupted other markets, the share of steel\nimports to the US market increased sharply and US prices declined.\"\n4983 4984 4985\n\n4974 (original footnote) Exports increased because redu ctions in steel production in the former Soviet\nUnion did not keep pace with declines in consumption. Steel consumption fell more than 70 percent from 1991\nto 1998. USITC Pub. 3479, Vol. II at Table OVERVIEW-4.\n4975 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-19 and Table OVERVIEW-5.\n4976 (original footnote) Questionnaire Responses of US producers, importers, purchasers, and foreign\nproducers.\n4977 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n4978 (original footnote) USITC Pub. 3479, Vol. III at Table LONG-C-1.\n4979 (original footnote) USITC Pub. 3479, Vol. III at Table TUBULAR-C-1.\n4980 (original footnote) USITC Pub. 3479, Vol. III at Table STAINLESS-C-1.\n4981 (original footnote) USITC Pub. 3479, Vol. II at Table OVERVIEW-16.\n4982 (original footnote) USITC Pub. 3479, Vol. II at Figure OVERVIEW-10.\n4983 (original footnote) USITC Pub. 3479, Vol. II at Figures OVERVIEW-10 and OVERVIEW-16.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.111 We also looked at Commissioner Bragg's separate opinion in the Second Supplementary\nReport with respect to \"unforeseen developments\". Her statement, in its entirety, is as follows:\n\"For each affirmative determination I rendered under Section 202(b)(1) of the Trade\nAct, as I stated in my separate views on injury, I considered the condition of the\ndomestic industry over the course of the relevant business cycle, in order to properly\nunderstand the role of imports in the US market over the period of investigation. I\nfurther examined factors other than imports that may be a cause of serious injury or\nthreat to the domestic industry. 4986 Importantly, these other factors were also\nconsidered within the context of the relevant business cycle.\nThe framework of my injury analyses was based upon the statutory directive that the\nCommission consider the condition of each domestic industry over the course of the\nrelevant business cycle4987, as well as examine factors other than imports that may be\na cause of serious injury or threat to the domestic industry. 4988 Importantly, both the\ntiming and trend of each domestic industry's business cycle are difficult, if not\nimpossible to anticipate, as well as those conditions of competition which can\nmagnify or diminish the operation of e ach domestic industry's business cycle.\nAlthough the nature and importance of the business cycle for each domestic industry\nis empirically recognized to varying degrees , it is only within the context of the\ncourse of the relevant business cycle, including the unexpected and uncontrollable\nupturn and downturn in the cycle, together with the unprecedented level of injury\ndemonstrated by the domestic industries and the unforeseen volume and timing of\nincreased imports, that one can adequately determine the full and relevant impact of\nincreased imports on the domestic industries over the entire period of investigation.\nIn particular, as the record data indicate, imports increased over the period of\ninvestigation with many product categories at issue experiencing peak import\nvolumes in 1998. It is apparent that these increased imports were the result of the\n\n4984 (original footnote) Most of the increase in stainless and tool steel imports occurred late in the\nperiod of investigation. The record indicates that the dramatic changes in exchange rates for the US dollar\nduring the period of investigation led to increased imports of stainless and tool steel products during the latter\nhalf of the period. Moreover, while the Asian financial crisis and the dissolution of the Soviet Union (and the\nconsequent changes in the Russian and Eastern European markets for steel) may have played a smaller role than\nthey did on imports of other steel products covered by this investigation, their continued effect made the US\nmarket more attractive to imports of stainless and tool steel products. These unforeseen developments affected\nthe conditions of competition under which stainless and tool steel imports caused serious injury or threatened to\ncause serious injury to the domestic stainless bar, stainless wire rod, stainless wire, stainless fittings, and tool\nsteel industries. See INV-Z-013.\n4985 USITC Second Supplementary Report.\n4986 (original footnote) In the investigation questionnaires, US producers, US importers, foreign\nproducers, and US purchasers identified certain developm ents (and whether the developments were unexpected)\nduring the last ten years that resulted in certain steel products under investigation being imported into the United\nStates in such increased quantities as to have an advers e impact on the domestic industries during the period\nJanuary 1996 to June 2001. Generally, for each of the like product categories I found in my determinations, the\nresponses identified several common unforeseen developments, including the Asian economic crisis, Russian\neconomic crisis, the collapse of the USSR., emergence of Eastern Europe and China as global steel producers,\nincreasing US demand, the strength of the US dollar relative to foreign currencies, and lower prices of imports.\nSee Commission questionnaire responses from US producers, US importers, foreign producers, and US\npurchasers indicating any developments and whether such developments were unexpected.\n4987 (original footnote) 19 U.S.C. § 2252(c)(2)(A).\n4988 (original footnote) 19 U.S.C. § 2252(c)(2)(B).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nunforeseen global financial crises in Asia and Russia, as well as unanticipated levels\nof global steel overcapacity, the collapse of foreign steel markets, emerging countries\nbeginning massive steel production, and foreign producers focusing their sales into\nthe lucrative US market, as discussed in my colleagues' response.\n4989 Each of these\nfactors was identified in several questionnaire responses. The timing of these imports\nwas such that the volume of imports increased just as the domestic producers\nexpected to enjoy gains in profitability given the simultaneous upswing in the\nrelevant business cycle. As stated in my views, historically, gains during upswings\nare essential for domestic producers to build financial resources to withstand the\ninevitable downturn in the cycle. Thus, here the impact of opportunities lost during\nan upswing in the cycle not only had an immediate impact on the domestic industry\nby virtue of suppressed and depressed prices, lost sales, and resulting lost revenues,\nbut also produced carryover effects on the domestic industry, which lingered as the\ncycle turned lower.\nHaving lost opportunities to the unforeseen increase and timing of imports during the\nupturn in the relevant business cycle of each domestic industry, many of the\nindustries were therefore weakened in th eir ability to withstand a downturn and\nunprepared for the continued impact of lower-priced and sustained imports. As the\ncycles turned lower towards the end of the investigation period, imports continued\nentering the United States at relatively high levels further pressuring the domestic\nmarket. The effects of injury carryover from the unexpected 1998 surges, together\nwith the more contemporaneous injury result ing from imports continuing to enter the\nUnited States at high levels, had a combined hammering effect on the various\ndomestic industries and disrupted the ability of each domestic industry to adjust to the\nbusiness cycle. As a result, profits for most domestic industries declined sharply and\nseveral domestic producers were forced into bankruptcy.\nAccordingly, the unforeseen developments identified in this investigation include the\nAsian economic crisis, Russian economic crisis, the collapse of the USSR.,\nemergence of Eastern Europe and China as global steel producers, increasing US\ndemand, the strength of the US dollar relative to foreign currencies, and lower prices\nof imports. Within the context of the relevant business cycle of each domestic\nindustry, these unforeseen developments, as identified by several questionnaire\nresponses, led to the relevant steel products being imported into the United States in\nsuch unforeseen timing and increased quantities as to be a substantial cause of\nunprecedented level of serious injury demonstrated by the domestic industry.\"\nClaims and arguments of the parties\n10.112 The arguments of the parties can be found in Section VII.C.2(d)(i) supra.\n\n4989 (original footnote) I concur with my colleagues' discussion regarding the response to question 1-\nUnforeseen developments, with exception of the first three paragraphs. Although I do not necessarily disagree\nwith the perspective provided in the first three paragraphs, I note that the parties and others did not have an\nopportunity to comment on this construction of \"unforeseen developments.\"\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAnalysis by the Panel\n10.113 Although all of the parties to this dispute recognize the need to show that a logical connection\nexists between \"unforeseen developments\" and the increased imports which a Member is seeking to\naddress through the use of a safeguard measure\n4990, they differ on how this can be achieved.\n10.114 For the complainants, there must be a \"causal link\" between \"unforeseen developments\" and\nincreased imports that cause or threaten to cause serious injury. 4991 The investigating authority must\nexplain how these developments are linked to th e increased imports that they rely on for the\nimposition of a safeguard measure. 4992 For the complainants, the USITC's analysis was based on\nscattered and incomplete facts and resulted in vague suggestions and speculations that severe currency\ndislocations in the former USSR and Asia led to massive increases of exports, or reductions in steel\nimports, in these countries, which consequently increased the amounts of steel on the world market\nand allegedly caused increased imports into the United States. The USITC's assumptions rely on data\nshowing a decline in consumption of steel in th e affected markets. The USITC did not, however,\naddress whether production also declined in those markets. According to the United States, the phrase\n\"as a result of\" indicates that one thing is the \"eff ect, consequence, issue, or outcome\" of another.\nTherefore, showing that a product is being imported in such quantities and under such conditions as to\ncause serious injury as a result of unforeseen developments by itself establishes a logical connection\nbetween the first and second clauses of Article XIX:1(a). There is no need for a further demonstration\nor explanation.\n4993\n10.115 The Panel agrees with New Zealand that it would be improper to reduce to a nullity the\nobligation to explain how \"unforeseen developmen ts\" resulted in increased imports causing or\nthreatening to cause serious injury. In some cases, the explanation may be as simple as bringing two\nsets of facts together. However, in other situations, it may require much more detailed analysis in\norder to make clear the relationship that exists between the unforeseen developments and the\nincreased imports that are causing or threatening to cause serious injury. The nature of the facts,\nincluding their complexity, will dictate the extent to which the relationship between the unforeseen\ndevelopments and increased imports causing injury needs to be explained. The timing of the\nexplanation, its extent and its quality are all factors that can affect whether a explanation is reasoned\nand adequate.\n10.116 First, the Panel notes that at no point in the initial USITC Report is the issue of \"unforeseen\ndevelopments\" per se mentioned, except, as the complainants have pointed out, in a footnote in the\nseparate view of one commissioner explaining that although such a demonstration is required in WTO\nlaw, it is not required by US law.\n4994 There is otherwise no discussion of the effects of unforeseen\ndevelopments for the specific safeguard measures at issue. It is true that the dissolution of the USSR\nand the depreciation of Asian currencies are mentioned with respect to CCFRS. 4995 T h e r e l e v a n t\nparagraph, which pertains to a discussion on causation, refers to the OVERVIEW section of the\nAppendix to the Report, a 2-3 pages discussion on the Russian crisis, the Asian crisis and exchange\nrates. There are also additional references in the determinations for hot-rolled bar, cold-finished bar,\n\n4991 See the written replies of the European Communities, China, and Norway to Panel question No. 2\nat the first substantive meeting.\n4992 New Zealand's written reply to Panel question No. 2 at the first substantive meeting.\n4993 United States' written reply to Panel question No. 2 at the first substantive meeting.\n4994 Switzerland's first oral statement, paras. 8-10, citing USITC Report, Vol. I, separate opinion of\nCommissioner Bragg, p. 270, footnote 4. (Exhibit CC-6).\n4995 See para. 10.106.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrebar and stainless steel rod, as listed in paragraphs 10.106-10.108 above. In the OVERVIEW\nsection, the Russian and Asia crises as well as exchange rate fluctuations are identified, and post-\nUSSR changes are even referred to as \"developments\" 4996, but the identification of these crises and\nfluctuations is not done within the context of an explanation of whether they constituted unforeseen\ndevelopments and whether they resulted in increased imports causing injury.\n10.117 In addition, in its initial Report, the USITC stat ed that \"[t]he dissolution of the USSR led to\nsignificant increases in steel exports to the United States from former USSR countries\", again without\nany supporting data. 4997 Moreover, the United States points in its submissions to the increase of\nimports from Russia, Kazakhstan and Lithuania. 4998 These figures were part of a chart of imports\nfrom numerous countries (INV-Y-180), but the chart was cross-referred in the USITC Report only to\nsupport statements relating to NAFTA imports\n4999 or imports generally without any discussion of\nwhether the imports were as a result of unforeseen developments.5000 More importantly, they were not\ncited in support of, or included in, any discussion relating to unforeseen developments. Likewise,\ntherefore, they cannot be used before the Panel to fill gaps in the USITC's reasoning.\n10.118 In summary, there are only ad hoc references to the Asian and Russian crises in the initial\nUSITC Report, which did not address the issue of \"unforeseen developments\" per se . Moreover,\nthere is no adequate discussion of the linkage between unforeseen developments and increased\nimports causing serious injury in relation to each of the specific safeguard measures at issues in this\ndispute.\n10.119 We examine now the February Second Supplementary Report which begins with the\nfollowing statement:\n\"We provide the following response to USTR's request that we identify any\nunforeseen developments that led to the relevant steel products being imported into\nthe United States in such increased quantities as to be a substantial cause of serious\ninjury or threat thereof. (…)\"\n10.120 This may be an acknowledgement by the USITC that it was, for the first time, formally\nidentifying \"unforeseen developments\" that resulted in the relevant steel products being imported into\nthe United States in such increased quantities as to cause serious injury or the threat thereof, within\nthe meaning of Article XIX of GATT 1994. We note in this regard the statement by the USITC that\n\"To the extent that WTO panel decisions have suggested that the concept of 'unforeseen'\ndevelopments relates to the expectations of negotiators of the relevant tariff concessions, we note that\nsuch an assessment is in many respects outside of the purview of this agency, since multilateral trade\n\n4996 See para. 10.108.\n4997 USITC Report, p. 58.\n4998 United States' first written submission, paras. 970-971, citing USITC Dataweb tables (US-49),\nwhich were not included in the report of the competent authority, and INV-Y-180 :-(US-40), which was cited in\nthe report of the competent authority but for reasons having nothing to do with an explanation of unforeseen\ndevelopments.\n4999 USITC Report, pp. 167-169, footnotes 1026, 1032, 1044; p. 179, footnote 1109; pp. 213-214,\nfootnotes 1354-1355 and 1357-1361; pp. 222-223, footnotes 1433-1437; similar cross-references can be found\namong the Commissioners' separate views.\n5000 USITC Report, p. 210, footnote 1328; p.213, footnote 1353; p. 218, footnote 1402; p. 222, footnote\n1432; p. 371, footnote 88; pp. 372-373, footnote 98; p. 374, footnote 108; pp. 387-388, footnote 165; p. 396,\nfootnote 203; p. 402, footnote 245; similar cross-references can be found among the Commissioners' separate\nviews.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nnegotiations are not within its mandate, but are the responsibility of the USTR and relevant Executive\nBranch agencies.\"5001\n10.121 In the Secondary Supplementary Report, the USITC insists on the overall effects of the Asian\nand Russian financial crisis together with the strong US dollar and economy to displace steel to other\nmarkets (and evidenced by what it calls \"trade frictions in many markets\"). Following the Russian\ncrisis, for instance, anti-dumping investigations or orders had been initiated against imports of\nRussian steel by 21 trading partners including Argentina, Brazil, Canada, Chile, China, Colombia, the\nEU, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines, South Africa, Taiwan,\nThailand, Turkey, the United States, Venezuela and Vietnam.\n10.122 In our view, the weakness of the USITC Report is that, although it describes a plausible set of\nunforeseen developments that may have resulted in increased imports to the United States from\nvarious sources, it falls short of demonstrating that such developments actually resulted in increased\nimports into the United States causing serious injury to the relevant domestic producers.\n10.123 The Panel is of the view that even if \"large volumes of foreign steel production were\ndisplaced from foreign consumption\" 5002 this does not, in itself, imply that imports to the United\nStates increased as a result of unforeseen developments. Article XIX of GATT, however, requires a\ndemonstration that the unforeseen development resulted in increased imports into the United States.\nIn our view, the USITC's explanation failed to link these steel market displacements to the specific\nincreased imports into the United States at issue.\n10.124 The USITC does refer to increased imports: \"In particular, as the record data indicate,\nimports increased over the period of investigation with many product categories at issue experiencing\npeak import volumes in 1998\". However, again such a reference is made without any supporting data.\nThe USITC adds that \"as currency depreciations and economic contractions disrupted other markets\nthe share of steel imports to the US market increased sharply and US prices declined\" and\n\"[w]idespread currency devaluations made the displaced exports especially attractive to US\npurchasers on price terms\". While this may have been true, and we note in this regard the increased\nimports data contained in the USITC's increased imports findings, there is no reference to any specific\nsupporting discussion or evidence.\n10.125 It may very well be that the contractions in consumption to which the USITC referred in some\nparts of the world resulted in increased imports to the United States, especially if overproduction of\nsteel products generally in the world steel market led to price suppression. Although this may be a\nplausible explanation, the USITC did not provide any data to support its general assertion that the\nconfluence of unforeseen developments resulted in the specific increased imports at issue in this\ndispute. The Panel is of the view that in light of the complexity of the matter, a more sophisticated\nand detailed economic analysis was called for.\n10.126 As the complainants have rightly pointed out, the USITC's explanation relates to steel\nproduction in general and does not describe how the unforeseen developments resulted in increased\nimports in respect of the specific steel products at issue.\n5003\n\n5001 USITC Second Supplementary Report, Attachment I, pp. 1-4 (Exhibit CC-11).\n5002 See para. 10.110.\n5003 European Communities' first written submission, paras. 136-139; Switzerland's first written\nsubmission, para. 122-125; Norway's first written submission, paras. 124-127; China's first written submission,\nparas. 94-96, New Zealand's first written submission, para. 4.20.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.127 The Panel finds that while it is not necessary for an unforeseen development to affect only\none economic sector, or to affect segments of an economic sector or industry differently, it was\nnecessary for the USITC to explain how the increased imports of the specific steel products subject of\nthe investigation were linked to and resulted from the confluence of unforeseen developments.\nPresumably, the Asian and Russian crises affected some countries worse than others and certain steel\nproducts more than others depending on the countries' respective production fo such products. This\nwas certainly the view of producers who stated in USITC questionnaires for example that the Asian\nfinancial crisis was having an adverse impact on the operation of the domestic industry with respect to\nstainless steel wire, but not with respect to stainless steel rod, stainless steel bar or rebar.\n5004\n10.128 In spite of what it asked the producers to do in the questionnaires, the USITC made no\nattempt to differentiate between the impact that the alleged unforeseen developments had on the\ndifferent product sectors to which the various safeguard measures related.\n10.129 In a footnote, the USITC stated:\n\"Most of the increase in stainless and tool steel imports occurred late in the period of\ninvestigation. The record indicates that the dramatic changes in exchange rates for\nthe US dollar during the period of investigation led to increased imports of stainless\nand tool steel products during the latter half of the period. Moreover, while the Asian\nfinancial crisis and the dissolution of the Soviet Union (and the consequent changes\nin the Russian and Eastern European markets for steel) may have played a smaller\nrole than they did on imports of other steel products covered by this investigation ,\ntheir continued effect made the US market more attractive to imports of stainless and\ntool steel products. These unforeseen developments affected the conditions of\ncompetition under which stainless and tool steel imports caused serious injury or\nthreatened to cause serious injury to the domestic stainless bar, stainless wire rod,\nstainless wire, stainless fittings, and tool steel industries. See INV-Z-013.\"5005\n10.130 The USITC did not further develop this point but instead, simply asserted that \"unforeseen\ndevelopments resulted \"as the record data indicate, [in] imports increased over the period of\ninvestigation with many product categories at issue experiencing peak import volumes in 1998\". 5006\nThe USITC did not back-up such an allegation by pointing to the relevant data for each specific steel\nsafeguard measures at issue.\n10.131 The same is true with Commissioner Bragg who provided additional separate views on\nunforeseen developments in the February Second Supplementary Report. Leaving aside the question\nof the value of one Commissioner's view in relation to the majority, Commissioner Bragg's asserts\nclearly \"that these increased imports were the result of the unforeseen global financial crises in Asia\nand Russia…\". However, the Commissioner does not back-up her conclusion, stating simply that the\nconclusion in her cited sentence \"is apparent\". In a footnote she adds: \"(…) resulted in certain steel\nproducts under investigation being imported into the United States in such increased quantities as to\nhave an adverse impact on the domestic industries during the period January 1996 to June 2001.\"\n(emphasis added). Here again, Commissioner Bragg seems to be able to conclude that \"certain\" steel\nproducts increased. However, she did not specify which ones and how increased imports for each of\nthe safeguard measures were connected to the identified confluence of unforeseen developments.\n\n5004 Table STAINLESS-108, USITC Report, Vol. III, p. STAINLESS-89, and Table LONG-102,\nUSITC Report, Vol. II, p. LONG-100.\n5005 USITC, Second Supplementary Report, at footnote 24, p. 4.\n5006 See para. 10.111.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.132 Although the United States argues that there were data to support the USITC's analysis, which\nextended beyond consumption data for the most severely affected countries in south east Asia and\nproduction and consumption data for the former USSR republics 5007, the Panel is concerned with this\nevidence which was presented as relevant evidence for the first time before the Panel and was not\ncited in the USITC Report as part of a reasoned and adequate explanation of unforeseen\ndevelopments.\n10.133 For instance, the United States points in its submission 5008 to parts of the USITC Report,\nwhich contain footnote references to tables that show imports by country and by product for the entire\nperiod of investigation.5009 It is undoubtedly true that these tables contained data that could have been\nused to explain how unforeseen developments resulted in increased imports that caused injury.\nHowever, the competent authority did no such thin g. In fact, the text to which the footnotes\ncorrespond is either totally unrelated to an explanation of unforeseen developments, or it deals\ngenerally with imports without specifying from where those imports came.\n10.134 In its submissions, the United States also points to the increase of imports from Indonesia,\nKorea, Malaysia, the Philippines and Thailand.\n5010 We find that this ex post supporting evidence,\nwhich relies on information not found or mentioned in the report of the competent authority, (but\navailable on the USITC website), may be useful to dispel alternative arguments put forth by the\ncomplainants, and it may even be the proper explanat ion of how unforeseen developments resulted in\nincreased imports. However, it raises the issue of whether the United States is, at this later stage of\nthe WTO dispute settlement process, trying to fill gaps left by the USITC in its explanation provided\nin its published Report.\n10.135 The Panel believes that in light of the complexities deriving from the confluence of\nunforeseen developments that the USITC referred to, coupled with the complexity of the case at hand,\nthe explanation provided by the USITC how unfores een developments resulted in increased imports\ncausing serious injury is not reasoned and adequate. Moreover, it is not supported by relevant data\nand it does not demonstrate, as a matter of fact, that such unforeseen developments resulted in\nincreased imports into the United States of the sp ecific steel products that are the subject of the\nsafeguard measures at issue.\n10.136 The complainants also argue, in particular, that there was no demonstration that those\nunforeseen developments resulted in increased imports from Russia and that the United States was not\nentitled to take account of increased imports from Russia. We address this issue below.\n\n5007 United States' written reply to Panel question No. 7 at the second substantive meeting.\n5008 United States' first written submission, paras. 966 – 970.\n5009 The sections of the USITC Report to which the United States has brought our attention are: pp. 65-\n66 (CCFRS), 99-100 (hot-rolled bar), 107-108 (cold-finished bar), 115-116 (rebar), 168-170 (certain welded\npipe), 178-180 (FFTJ), 213-214 (stainless steel bar), 222-223 (stainless steel rod), 259-260 (stainless steel wire,\nCommissioner Koplan), 303-305 (carbon flat products and stainless steel wire and wire rope, Commissioner\nBragg), 309-310 (tin mill, Commissioner Miller), 347 (stainless steel wire and wire rope, Commissioner\nDelaney).\n5010 United States' first written submission, paras. 962-965, citing China's first written submission, para.\n103 and USITC Dataweb tables (US-49).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nLogical connection between a Member's tariff concessions and increased imports\ncausing serious injury\nClaims and arguments of the parties\n10.137 The arguments of the parties can be found in Section VII.C.2.(d) supra.\nAnalysis by the Panel\n10.138 The complainants' arguments arise out of the language of Article XIX:1(a), which provides\ninter alia that increased imports causing injury must occur \" as a result of unforeseen developments\nand of the effect of the obligations incurred by a contracting party under this Agreement, including\ntariff concessions.\"\n10.139 The Appellate Body in Korea – Dairy and Argentina – Footwear (EC) stated:\n\"With respect to the phrase \"of the effect of the obligations incurred by a Member\nunder this Agreement, including tariff concessions … \", we believe that this phrase\nsimply means that it must be demonstrated, as a matter of fact, that the importing\nMember has incurred obligations under the GATT 1994, including tariff concessions .\nHere, we note that the Schedules annexed to the GATT 1994 are made an integral\npart of Part I of that Agreement, pursuant to paragraph 7 of Article II of the GATT\n1994. Therefore, any concession or commitment in a Member's Schedule is subject\nto the obligations contained in Article II of the GATT 1994.\"\n5011 (emphasis added)\n10.140 It seems to us that when the Appellate Body wrote \"this phrase simply means\" it was\ninterpreting \"as a result of … tariff concessions\" to mean that the logical connection between tariff\nconcessions and increased imports causing serious injury is proven once there is evidence that the\nimporting Member has tariff concessions for the relevant product.\n10.141 However, the complainants have argued that the present dispute raises a different issue. For\nthem, the issue is whether a Member can invoke a safeguard measure in order to protect its industry\nfrom increased imports coming from a non-WTO Member – in other words, from a country with\nwhich it has no relevant WTO obligations or tariff concession.\n10.142 The Panel agrees with the parties that safeguard measures are to be used against imports of\nproducts for which WTO tariff concessions have been granted. The issue here, however, is that it is\nnot clear whether the USITC wanted to argue that the confluence of unforeseen developments led to\nincreased imports from Russia or the ex-Soviet Republics per se. In its initial Report, the USITC\nindeed asserts \"[t]he dissolution of the USSR led to significant increases in steel exports to the United\nStates from former USSR countries.\"\n5012 In its Second Supplementary Report, USITC also submits\nthat \"unanticipated financial difficulties led to a sharp increase in exports of steel from the former\nSoviet Union between 1996 and 1999. 5013\" Yet, towards the end of its demonstration, the USITC\nseems to argue rather that unforeseen developments together led generally to world displacement of\n\n5011 Appellate Body Report, Argentina – Footwear (EC) , para. 91; Appellate Body Report, Korea –\nDairy, para. 84.\n5012 USITC Report, p. 58 (footnotes omitted).\n5013 Exports increased because reductions in steel pr oduction in the former Soviet Union did not keep\npace with declines in consumption. Steel consumptio n fell more than 70 percent from 1991 to 1998. USITC\nPub. 3479, Vol. II at Table OVERVIEW-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsteel markets that resulted in increased imports of steel products into the United States from various\nand numerous foreign sources:\n\"Steel imports historically have played a role in the US market. 5014 After the\nbeginning of the Asian and Russian economic crises, however, unusually large\nvolumes of foreign steel production were displaced from foreign consumption. The\nUS market, in which demand remained strong, was the destination for a significant\nportion of that displaced foreign production. Widespread currency devaluations made\nthe displaced exports especially attractive to US purchasers on price terms. As\ncurrency depreciations and economic contractions disrupted other markets, the share\nof steel imports to the US market increased sharply and US prices\ndeclined.\"\n5015 5016 5017\n10.143 The Panel understands the United States' arguments to be that the displacements of steel on\nworld markets led to increased imports to the United States from all sources, and not only to increased\nimports from Asia and Russia. We believe the USITC could argue that the geographical location of\nthe birth or origin of unforeseen developments may differ from the origin of increased imports, but\nthis hypothesis calls for a reasoned and adequate explanation of such correlation of events and effects.\n10.144 We are of the view that this later USITC's explanation of the effects of such a confluence of\nunforeseen developments leading to increased imports from numerous sources seems plausible but it\nis not sufficiently supported and explained. Therefore, in light of our ultimate conclusion in\nparagraphs 10.145-10.150 below, the Panel sees no need to examine the complainants' argument that\nincreased imports (directly) from Russia are not relevant on the grounds that the United States has no\ntariff concessions with Russia.\n4. Conclusion\n10.145 In sum, the Panel believes that the complexity of the unforeseen developments pointed to by\nUSITC called for a more elaborate demonstration and supporting data than that provided by the\nUSITC. For instance, although USITC states that \"[t]he US market, in which demand remained\nstrong, was the destination for a significant portion of that displaced foreign production\"\n5018, one is\nleft to wonder how much steel was displaced in the first place and from where. If the portion being\nimported to the United States was thought by the competent authority to be \"a significant portion\",\nthis would suggest that the USITC was aware of how much was displaced in total, as well as how\nmuch was displaced to the United States as opposed to other countries, or at least the proportion.\n\n5014 (original footnote) USITC Pub. 3479, Vol. II at Figure OVERVIEW-10.\n5015 (original footnote) USITC Pub. 3479, Vol. II at Figures OVERVIEW-10 and OVERVIEW-16.\n5016 (original footnote) Most of the increase in stainless and tool steel imports occurred late in the\nperiod of investigation. The record indicates that the dramatic changes in exchange rates for the US dollar\nduring the period of investigation led to increased imports of stainless and tool steel products during the latter\nhalf of the period. Moreover, while the Asian financial crisis and the dissolution of the Soviet Union (and the\nconsequent changes in the Russian and Eastern European markets for steel) may have played a smaller role than\nthey did on imports of other steel products covered by this investigation, their continued effect made the US\nmarket more attractive to imports of stainless and tool steel products. These unforeseen developments affected\nthe conditions of competition under which stainless and tool steel imports caused serious injury or threatened to\ncause serious injury to the domestic stainless bar, stainless wire rod, stainless wire, stainless fittings, and tool\nsteel industries. See INV-Z-013.\n5017 USITC Second Supplementary Report.\n5018 See para. 10.110.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.146 We believe that, the USITC should have offered a more comprehensive and coherent\nexplanation as to how the unforeseen developments resulted in increased imports into the United\nStates, their origin and their extent. We believe the USITC could argue that the geographical location\nof the birth or origin of unforeseen developments may differ from the origin of increased imports, but\nfailed to provide a reasoned and adequate explanation to that effect.\n10.147 The Panel recalls that since the demonstration of unforeseen developments is a pre-requisite\nto the imposition of a safeguard measure, such demonstration must be performed for each safeguard\nmeasure. Even if unforeseen developments provide the same justification for several safeguard\nmeasures, the Panel believes that the USITC was obliged to explain why this is so and why the\nspecific products under examination were affected individually by the confluence of unforeseen\ndevelopments.\n10.148 On the basis of the foregoing, the Panel finds that, in light of the complexity of the allegations\nmade by USITC, including its reliance on a confluence of economic factors, the USITC failed to\nprovide a reasoned and adequate explanation of how the confluence of unforeseen developments it\npointed to had resulted in increased imports into the United States of the specific steel products at\nissue – causing serious injury to the relevant domestic producers. Therefore, there is no need to\nexamine the remainder of the arguments raised by the complainants, including whether the facts\nsupported the USITC's unforeseen developments' findings.\n10.149 For all of the above reasons, the Panel finds that the USITC's unforeseen development\nfindings do not provide a reasoned and adequate explanation of how the confluence of the Asian and\nRussian Crises, together with the strong United States' economy and US dollar, actually resulted in\nspecific increased imports into the United States causing serious injury to the relevant domestic\nproducers.\n10.150 Therefore, the Panel finds that all safeguard measures at issue in this dispute are inconsistent\nwith the requirements of Article XIX:1(a) of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards with regard to the demonstration of unforeseen developments.\nD. C\nLAIMS RELATING TO INCREASED IMPORTS\n1. Claims and arguments of the parties\n10.151 The claims and arguments of the parties regarding \"increased imports\" are set out in\nSections VII.F.2-4 supra.5019\n2. Relevant WTO provisions\n10.152 Article 2.1 of the Agreement on Safeguards, which sets forth the conditions for the\napplication of a safeguard measure, reads as follows:\n\"A Member may apply a safeguard measure to a product only if that Member has\ndetermined, pursuant to the provisions set out below, that such product is being\n\n5019 The Panel is aware of the fact that some of the complainants did not invoke Article XIX of GATT\n1994 in support of their claims relating to increased imports. Accordingly, the Panel has not examined such\nclaims but, rather, has focused on the claims made under Articles 2 and 4 of the Agreement on Safeguards,\nwhich were made by all the complainants. The Panel considers that this approach does not in any way affect the\nparties' rights in relation to their respective claims and defences relating to increased imports in this dispute.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimported into its territory in such increased quantities, absolute or relative to domestic\nproduction, and under such conditions as to cause or threaten to cause serious injury\nto the domestic industry that produces the like or directly competitive\nproducts.\" (footnote omitted)\n10.153 Article 4.2 sets forth the operational requirements for determining whether the conditions\nidentified in Article 2.1 exist. Regarding increased imports, Article 4.2(a) requires in relevant part\nthat:\n\"[I]n the investigation to determine whether increased imports have caused or are\nthreatening to cause serious injury to a domestic industry under the terms of this\nAgreement, the competent authorities shall evaluate … the rate and amount of the\nincrease in imports of the product concerned in absolute and relative terms …\"\n3. Analysis by the Panel\n(a) The requirements of Articles 2.1 of the Agreement on Safeguards\n10.154 Article 2.1 of the Agreement on Safeguards requires that before a Member applies a safeguard\nmeasure, it determines \"that [a] product is being imported into its territory in such increased\nquantities, absolute or relative to domestic production, and under such conditions as to cause or\nthreaten to cause serious injury to the domestic in dustry that produces like or directly competitive\nproducts …\".\n10.155 All parties agree that Article 2.1 contains three conditions that must be satisfied before a\nsafeguard measure can be imposed and one of these conditions is concerned with \"increased imports\".\nParties disagree on whether Article 2.1 imposes any threshold for this \"increased imports\"\nrequirement whether quantitative and/or qualitative.\n10.156 The complainants refer to Argentina – Footwear (EC) where the Appellate Body stated that:\n\"[I]ncreased quantities of imports should have been unforeseen or unexpected… In\nour view the determination of whether the requirements of imports 'in such increased\nquantities' is met is not merely mathematical or technical requirements. In other\nwords, it is not enough for an investigation to show simply that imports of the product\nthis year were more than last year – or five years ago. Again, and it bears repeating,\nnot just any increased quantities of imports will suffice. There must be ' such\nincreased quantities' as to cause or threat en to cause serious injury to the domestic\nindustry in order to fulfil this requirement for applying a safeguard measure. And this\nlanguage in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of\nthe GATT 1994, we believe, requires that the increase in imports must have been\nrecent enough, sudden enough, sharp enough, and significant enough, both\nquantitatively and qualitatively, to cause or threaten to cause 'serious injury'.\"\n5020\n10.157 The United States takes issue with this interpretation by the Appellate Body of the wording of\nArticle 2.1 of the Agreement on Safeguards. For the United States, the Appellate Body could not\nhave read into Article 2.1 requirements that were not envisaged by the drafters of the treaty. In\nparticular, the United States points to the wording of Article 2.1 which does not include any reference\nto the terms \"recent\", \"sudden\", \"significant\" and \"sharp\". Moreover, the United States is of the view\n\n5020 Appellate Body Report, Argentina – Footwear (EC), para. 131.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthat once a competent authority has determined that imports have increased, it is entitled to, and it\nwill, examine whether such increased imports are causing serious injury so that only increased\nimports that are causing serious injury will authorize WTO compatible safeguard measures. Only\nonce the competent authority has reached such findings relating to the serious injury and causation\ncan it make an overall determination that increased imports are causing serious injury to the producers\nof domestic like products. In other words, the United States argues that whether the increased imports\nare recent enough, sudden enough, sharp enough, and significant enough to cause or threaten serious\ninjury are questions that are answered as competent authorities proceed with the remainder of their\nanalysis (i.e., with their consideration of serious injury or threat thereof and causation). According to\nthe United States, these analyses need not form a part of the evaluation of the threshold issue of\nwhether the imports have increased either absolutely or relative to the domestic industry.\n5021\n10.158 The Panel notes, first, that all parties agree that Article 2.1 requires that imports have\nincreased. A conclusion that imports have increased, would normally call for a comparison between\nthe levels of imports in different periods or at different points in time. Article XIX of GATT 1994\nand Article 2.1 of the Agreement on Safeguards are silent on precisely which points in time are to be\nthe basis for the comparison.\n10.159 However, Article 2.1 of the Agreement on Safeguards requires that \"a product is being\nimported in … increased quantities\". The Panel believes that the use of the present tense in the verb\nphrase \"is being imported\" in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a)\nof the GATT 1994 indicates that it is necessary for the competent authorities to examine recent\nimports and that the increase in imports was \"recent\". The Panel notes that neither the Agreement on\nSafeguards nor Article XIX of GATT 1994 specify expressly the length of the period of investigation\nfor the purpose of increased imports.\n10.160 The complainants do not challenge the choice of a five-year period of investigation per se.\nComplainants rather disagree with the fact that, generally, the USITC did not focus sufficiently on the\nsituation of imports in the latest part of the period of investigation.\n10.161 The Panel believes that whether imports have recently increased, therefore, calls for an\nidentification of the relevant recent period as well as an assessment of the situation of imports during\nthat recent period, on a case-by-case basis. Moreover, the amount of (absolute or relative) increased\nimports in practice often shows not an unequivo cal upward movement, but instead both upward and\ndownward movements which alternate ov er time with different amplitudes.\n5022 Since there is no\ndefined or prescribed periods within which imports must be compared, a competent authority must\nconduct a quantitative and qualitative analysis of the features of the development of import numbers\nover the entire period of investigation and assess whether, overall, imports have increased recently.5023\n10.162 As regards the question of how recently the imports must have increased, the Panel notes, as\nthe Panel in US – Line Pipe did 5024, that Article 2.1 of the Agreement on Safeguards speaks of a\nproduct that \"is being imported … in such increased quantities\". Thus, imports need not be increas ing\nat the time of the determination; what is necessary is that imports have increas ed, if the products\ncontinue \"being imported\" in (such) increas ed quantities. The Panel, therefore, agrees with the US –\nLine Pipe Panel's view that the fact that the increase in imports must be \"recent\" does not mean that it\n\n5021 United States' first written submission, para. 177.\n5022 In this regard, see as illustrative examples, the graphs on absolute and relative imports represented\nhereafter in this Section on Increased Imports.\n5023 See also Panel Report, Argentina – Footwear (EC), para. 8.161.\n5024 Panel Report, US – Line Pipe, para. 7.207.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmust continue up to the period immediately preceding the investigating authority's determination, nor\nup to the very end of the period of investigation. 5025 As pointed out by the Panel in US – Line\nPipe5026, the most recent data must be the focus, but should not be considered in isolation from the\ndata pertaining to the less recent portion of the period of investigation. However, as indicated by the\npresent continuous \"are being\", there is an implicat ion that imports, in the present, remain at higher\n(i.e. increased) levels.\n10.163 Whether a decrease in imports at the end of the period of investigation, in the individual case,\nprevents a finding of increased imports in the sense of Article 2.1 of the Agreement on Safeguards\nwill, therefore, depend on whether, despite the later decrease, a previous increase nevertheless results\nin the product (still) \"being imported in (such) increased quantities\". In this evaluation, factors that\nmust be taken into account are the duration and the degree of the decrease at the end of the relevant\nperiod of investigation, as well as the nature, for instance the sharpness and the extent, of the increase\nthat intervened beforehand.\n10.164 To give an extreme example, a short and very recent slight decrease would not detract from\nan overall increase if imports have increased tenfold over the several years beforehand. Conversely,\nto give an opposite extreme example, one could no longer talk about a product that \"is being imported\nin (such) increased quantities\", or in fact in any increased quantities at all, if, at the time of the\ndetermination, import numbers have plummeted nearly to zero or to a level below any past point in\nthe period of investigation.\n5027\n10.165 The Panel believes that, in their investigation whether imports have increased in the recent\nperiod, and whether increased imports are causing serious injury to the domestic producers of like or\ndirectly competitive domestic products, competen t authorities are required to consider the trends in\nimports over the period of investigation, as suggested by Article 4.2(a). 5028 While Article 4.2(a)\nrequires the evaluation of the \"rate and amount of the increase in imports … in absolute and relative\nterms\", the Panel sees no basis for the argument that this rate must always accelerate or that the rate\nmust always be positive at each point in time during the period of investigation.\n10.166 Moreover, the Panel recalls that the very purpose of a safeguard measure is to address the\nresults of unexpected events (unforeseen developments pursuant to Article XIX of GATT), namely\nincreased imports causing serious injury. This unforeseen and unexpected character of the\ndevelopments resulting in the increased imports as well as the emergency nature of safeguard\nmeasures calls for an assessment of whether imports increased suddenly so that the situation became\none of emergency for which safeguard measures became necessary. The Panel believes therefore that\nincreased imports must be \"sudden\".\n10.167 We consider that when the Appellate Body stated \"that the increase in imports must have\nbeen recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and\nqualitatively, to cause or threaten to cause 'serious injury'\"\n5029, it was operating under the mandate of\nArticle 3.2 of the DSU which is to clarify the existing provisions, here the meaning of in \"such\n\n5025 Panel Report, US – Line Pipe, para. 7.207.\n5026 Panel Report, US – Line Pipe, para. 7.207.\n5027 We do not intend to rule out that an exception could be made, if, despite the deep drop, there are\nindications that this drop is only temporary and in some sense artificial. See, also, Panel Report, Argentina –\nFootwear (EC), para. 8.159.\n5028 Appellate Body Report, Argentina – Footwear (EC) , para. 129; and Panel Report, Argentina –\nFootwear (EC), para. 8.276.\n5029 Appellate Body Report, Argentina – Footwear (EC), para. 131.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nincreased quantities\".5030 In the Panel's view, a finding that imports have increased pursuant to Article\n2.1 can be made when an increase evidences a certain degree of recentness, suddenness, sharpness\nand significance.\n10.168 The Panel agrees with the United States that there are no absolute standards as regards how\nsudden, recent, and significant the increase must be in order to qualify as an \"increase\" in the sense of\nArticle 2.1 of the Agreement on Safeguards. In contrast, from the absence of absolute standards one\ncannot conclude that there are no standards at all and that any increase between any two identified\npoints in time meets the requirements of Article 2.1 of the Agreement on Safeguards. The Panel also\nagrees with the United States that the inquiry is not whether imports have increased \"recently and\nsuddenly\" in the abstract. A concrete evaluation is what is called for. A competent authority must\nconduct an analysis considering all the features of the development of import quantities and that an\nincrease in imports has a certain degree of being recent and sudden.\n10.169 The Panel believes that although a competent authority must make a single 5031 determination\nthat increased imports were such as to cause serious injury, the Panel considers that distinct findings\nare necessary for each of the requirements of Article 2.1 of the Agreement on Safeguards. Before a\nMember can impose a safeguard measure, it must have demonstrated relevant unforeseen\ndevelopments (Article XIX of GATT 1994) and it must have made a determination that increased\nimports were causing serious injury (Article 2.1 of the Agreement on Safeguards) to the relevant\ndomestic producers. The Panel considers that the investigation of the three requirements that\ncompose the determination that increased imports are causing serious injury and the demonstration\nwhether this resulted from unforeseen developments, do not have to be performed or completed in any\nspecific order. Together these distinct findings must provide a reasoned and adequate explanation\n(Articles 2, 3.1 and 4 of the Agreement on Safeguards) as to how the relevant pre-requisites to\nimposing a WTO compatible safeguards measure are satisfied.\n10.170 Having said this, the Panel agrees with the United States that in assessing whether the facts\njustify a conclusion that imports had increased in \"such quantities \" and \"under such conditions\" the\ncompetent authorities must demonstrate in the firs t instance that there was an increase in imports,\nabsolute or relative to domestic production. This does not mean that ultimately \"any increase will\ndo\", as the competent authorities must also determine whether such an increase is sudden and recent\nwithin a relevant period of time determined on a case-by-case basis.\n10.171 The Panel believes, however, that such a competent authority's findings on increased imports,\ndistinct from its causality and injury findings, may be informed by the results of its entire\ninvestigation. The competent authority's findings on the first requirement – increased imports – may\nhave effects on the injury findings or on the causation findings, as prescribed by Article 4.2(a). As a\ncompetent authority considers the other conditions necessary for imposition of a safeguard, it\ndetermines, as directed by the Appellate Body in Argentina – Footwear (EC), whether the increase in\nimports was recent enough, sudden enough, and significant enough to cause or threaten serious injury\nto the relevant domestic producers.\n\n5030 The Panel is also bound by the mandate to clarify the existing provisions, which obviously also\nimplies, as pointed out in Article 19.2 of the DSU that, in their findings and recommendations, a panel and the\nAppellate Body \"cannot add to or diminish the rights and obligations provided in the covered agreements.\"\n5031 See Appellate Body Report, US – Wheat Gluten paras. 73-74: \"We believe that Articles 4.2(a) and\n4.2(b) of the Agreement on Safeguards must be given a mutually consistent interpretation, particularly in light\nof the explicit textual connection between these two provisions. According to the opening clause of\nArticle 4.2(b) – \"The determination referred to in subparagraph (a) shall not be made unless …\" – both\nprovisions lay down rules governing a single determination, made under Article 4.2(a)\".\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(b) Full-year 2001 data\n10.172 The complainants argue that the USITC ignored import trends in the most recent past, i.e. the\nfull-year data for 2001 (including the last six months that followed the end of the period of\ninvestigation) insisting that the import data for the full-year of 2001 were available when the USITC\nupdated its Report and completed its determination in February 2002. According to the United States,\nfundamental legal and practical considerations shou ld lead the Panel to reject the complainants'\nattempts to expand the period of investigation to encompass full-year 2001 data that are not on the\nrecord of the USITC's investigation that began in early July 2001.\n10.173 The Panel agrees with the United States that a competent authority cannot be requested to\ntake into account data and evidence that is not available at the time it made its determination.\n5032 In\nthis case, the determination in the sense of Article 2.1 of the Agreement on Safeguards, i.e the\ndetermination on increased imports, causation and serious injury, was made by the USITC in October\n2001. At that time, data for the full-year of 2001 could not possibly have been available.\nFurthermore, such data related to events (at least partially) occurring after the determination. The fact\nthat new data becomes public after a determination has been made does not result in an obligation to\nmake a new determination that replaces the one already made. What the President did in 2002 was\nnot a \"determination\" within the meaning of Article 2 of the Agreement on Safeguards because the\nPresident made no determination that increased imports were causing serious injury to the relevant\ndomestic producers. Therefore, data for import volumes for the second half of 2001 was not relevant\nfor the question whether there were relevant \"incr eased imports\" with respect to determinations made\nby the USITC in October 2001.\n10.174 The Panel will, therefore, proceed to evaluate the USITC's findings on increased imports for\neach product at issue on the basis of the data that was available to the USITC at the end of the entire\nperiod of investigation, i.e. by the end of June 2001. The Panel will thus not take into account data\nrelating to the second half of 2001.\n5033\n(c) The recent period in the present investigation\n10.175 The Panel notes again that the Agreement on Safeguards does not specify how long the period\nof investigation in a safeguards investigation should be, or whether or how that period should be\nsegmented for purposes of analysis. In light of the Panel's above conclusion that the competent\nauthority must have determined that imports increased suddenly and recently, the Panel will generally\n\n5032 See Appellate Body Report, US – Cotton Yarn , at para. 77: \"The exercise of due diligence by a\nMember cannot imply, however, the examination of evidence that did not exist and that, therefore, could not\npossibly have been taken into account when the Member made its determination. The demonstration by a\nMember that a particular product is being imported into its territory in such increased quantities as to cause\nserious damage (or actual threat thereof) to the domestic industry can be based only on facts and evidence which\nexisted at the time the determination was made. The urgent nature of such an investigation may not permit the\nMember to delay its determination in order to take into account evidence that might be available only at a future\ndate. Even a determination on the existence of threat of serious injury must be based on projections\nextrapolating from existing data.\" See also Appellate Body Report, US – Lamb, paras. 150 and 172.\n5033 The Panel recalls that a Member can only impose a safeguard measure to the extent and for the\nduration necessary to remedy the serious injury caused by increased imports. Delays between the determination\nthat increased imports were causing serious injury and the imposition of the safeguard measure will generally\naffect the decision pursuant to Articles 5 and 7 of the Agreement on Safeguard. If too long a delay exists\nbetween the determination by a competent authority and the actual imposition of the safeguard measure such\nimporting Member may be faced with a situation where the application of a safeguard measure is no longer\nnecessary to remedy serious injury.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfocus its analysis on the situation of imports in th e more recent period that preceded the end of the\nperiod of investigation, keeping in mind that the situation of imports in the earlier part of the period of\ninvestigation may also shed light on the movements of imports.\n(d) Standard of review\n10.176 Finally, with regard to the assessment of the factual aspects of the USITC's determination of\nan increase in imports, the Panel recalls that the standard of review to be applied is whether the\npublished report on the investigation contains an adequate and reasoned explanation of how the facts\nbefore the USITC support the determination made with respect to increased imports.5034\n10.177 The Panel now proceeds to examine the USITC findings on increased imports for each of the\nproducts at issue.\n4. Measure-by-measure analysis\n(a) CCFRS\n(i) The USITC's findings\n10.178 As regards increased imports of CCFRS, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.5035 We find that total\nimports of certain carbon flat-rolled steel, including slabs, plate, hot-rolled, cold-\nrolled, and coated steel increased in both actual terms and relative to domestic\nproduction. In actual terms, total imports increased from 18.4 million short tons in\n1996 to 20.9 million short tons in 2000, an increase of 13.7 percent.5036 Total imports\ndeclined from 11.5 million short tons in interim 2000 to 6.9 million short tons in\ninterim 2001.\n5037 The ratio of imports to domestic production (including production\nfor captive consumption) also increased during the POI, from 10.0 percent in 1996 to\n10.5 percent in 2000. 5038 Imports also increased relative to domestic commercial\nshipments. Total imports were equivalent to 32.6 percent of domestic commercial\nshipments in 2000, up from 31.5 percent in 1996. 5039 In interim 2001 total imports\nwere equivalent to 22.7 percent of domestic commercial shipments.5040\nWe note that in 1998, the midpoint of the full five-year period examined, there was a\nrapid and dramatic increase in imports, as import volumes both in absolute terms and\nas a percentage of US production peaked. Imports of certain carbon flat-rolled steel\nwere 25.3 million short tons, an increase of 37.5 percent over 1996 levels. While the\nvolume of imports declined in 1999 and 2000 from this peak, the absolute volume\n\n5034 See Panel Report, US – Wheat Gluten, para. 8.5; Panel Report, US – Line Pipe, para. 7.194.\n5035 (original footnote) Commissioner Devaney joins in the analysis of the majority, related to increased\nimports, as presented here. He further finds that if the analysis is performed over the entire industry as he has\ndefined it, the result is the same, i.e., the statutory criterion of increased imports is met.\n5036 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5037 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5038 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5039(original footnote) CR and PR at Tables FLAT-12 to FLAT-15, FLAT-17, FLAT-C-2 to FLAT-C-5\nand FLAT-C-7.\n5040 (original footnote) CR and PR at Tables FLAT-12 to FLAT-15, FLAT-17, FLAT-C-2 to FLAT-C-5\nand FLAT-C-7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand ratio of imports to US production were still significantly higher in 1999 and 2000\nthan at the beginning of the period. The significance of this trend in imports to the\ndomestic industry's performance is discussed below under Substantial Cause of\nSerious Injury.\"\n5041\n10.179 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5042\nAbsolute Imports\n0\n10,000,000\n20,000,000\n30,000,000\n40,000,000\n50,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\n\n5041 USITC Report, Vol. I, pp. 49-50\n5042 The data represented in the following two graphs are contained in the USITC Report, in particular\nin INV-Y-209 at Table FLAT-ALT 7. As is visible from the graphs, the data for 2001 have not been\n\"annualized\" but have been left in thei r raw format. The Panel finds this format sufficient to reach a conclusion\non the trends of imports in the most recent past and therefore does not take a position on the question of whether\nand how these six-month data can be \"annualized\", a question on which there is disagreement between the\nparties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports/Production ratio (Percentage)\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.180 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(a) supra.\n(iii) Analysis by the Panel\nAbsolute imports\n10.181 The Panel believes that the USITC's determination on increased imports of CCFRS, as\npublished in its report 5043, does not contain an adequate and reasoned explanation of how the facts\nsupport the determination. The USITC recognized that the sharpest increase took place in the period\nuntil 1998, and that, since then, imports have decreased, in 1999 and 2000, back to levels nearly as\nlow as the 1996 level. The USITC also noted the significant decrease between interim 2000 and\ninterim 2001 (from 11.5 to 6.9 million short tons)\n5044, but it did not seem to focus on, or at least\naccount for, this most recent trend in concluding that imports are \"still significantly higher … than at\nthe beginning of the period\".5045 Given the sharpness and significance of this most recent decrease the\nPanel does not find that the USITC explanation as published in its report 5046 contains an adequate and\nreasoned explanation of how the facts support th e determination CCRFS \"is being imported in …\nincreased quantities\".\n10.182 It may well be that the increase occurring until 1998 could have qualified at the time as an\nincrease satisfying the criteria of Article 2.1 of the Agreement on Safeguards, but the Panel need not\nexpress itself on that point because that increase, in itself, was no longer recent enough at the time of\nthe determination. In other words, the increase occurring until 1998, taken by itself and with the\n\n5043 USITC Report, pp. 49–50.\n5044 USITC Report, p. 49.\n5045 USITC Report, p. 50.\n5046 USITC Report, pp. 49–50.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndecrease thereafter, is not a sufficient factual basis for supporting a determination in October 2001\nthat CCFRS \"is being imported in … increased quantities\".\nRelative imports\n10.183 The Panel also considers that the USITC's determination on increased imports of CCFRS\nrelative to domestic production5047 does not contain an adequate and reasoned explanation of how the\nfacts support the determination. The USITC recognized that the sharpest increase took place in the\nperiod until 1998, and that, since then, imports have decreased, in 1999 and 2000, to levels nearly as\nlow as the level in 1996. The USITC noted the significant decrease in interim 2001 only in terms of\nimports relative to domestic commercial shipments 5048, not in terms of imports relative to domestic\nproduction, the criterion stipulated in Article 2.1 of the Agreement on Safeguards.\n10.184 As in the situation of absolute imports, the USITC did not seem to focus on, or at least\naccount for, this most recent decline to levels be low any point of the investigated period, when it\nconcluded that the ratio of imports to domestic production was \"still significantly higher … than at the\nbeginning of the period\". 5049 Given the sharpness and significance of this most recent decrease, the\nPanel does not find the USITC explanation, as published in its Report5050 to be adequate and reasoned\nenough to support a conclusion that CCFRS, as a proportion to domestic production, \"is being\nimported in … increased quantities\".\n10.185 The Panel also need not express itself on the question whether the increase of imports,\nrelative to domestic production occurring until 1998 could have qualified as an increase satisfying the\ncriteria of Article 2.1 of the Agreement on Safeguards because, in any event, that increase, in itself,\nwas no longer recent enough at the time of the determination. In other words, the increase occurring\nuntil 1998, taken for itself and with the decrease thereafter, is not a sufficient factual basis for\nsupporting a determination in October 2001 that CCFRS \"is being imported in … increased\nquantities\".\nConclusion\n10.186 The Panel consequently finds that the USITC Report did not provide an adequate and\nreasoned explanation of how the facts support th e determination that CCFRS was being imported in\n\"increased quantities\", contrary to the requirement of Article 2.1 Agreement on Safeguards that the\nproduct \"is being imported in (such) increased quantities\".\n10.187 The Panel notes that the parties have also made submissions with regard to the question\nwhether imports of the various products comprised in CCFRS, taken individually, have increased.\nHowever, the USITC did not make a determination on individual products within the CCFRS group.\nThe USITC made its determination on increased imports only with regard to a category defined as\nCCFRS products.5051 This determination, pursuant to which safeguard action has been taken against\n\n5047 USITC Report, pp. 49–50.\n5048 USITC Report, p. 50.\n5049 USITC Report, p. 50.\n5050 USITC Report, pp. 49–50.\n5051 USITC Report, Vol. I, p. 49. See also USITC Report, Vol. I, p. 25.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports of CCFRS, is subject to review in this dispute. Therefore, in light of the Panel's standard of\nreview, the Panel will not scrutinize individual items comprised in CCFRS.5052\n(b) Tin mill products\n(i) The USITC's findings\n10.188 As regards increased imports of tin mill, the USITC determined:\n\"We find that the statutory criterion of increased imports is met. We find that total\nimports5053 of tin mill products have increased both in actual terms and relative to\ndomestic production during the POI. 5054 In actual terms, imports increased from\n444,684 short tons in 1996 to a peak level of 698,543 short tons in 1999, and while\nthey declined to 580,196 short tons in 2000, the overall increase from 1996 to 2000\nwas 30.5 percent.\n5055 Imports of tin mill products were 263,091 short tons in interim\n2001, 11.1 percent lower than in interim 2000. 5056 The ratio of imports to domestic\nproduction increased during the POI, from 12.0 percent to 17.4 percent in 2000. 5057\nThe ratio of imports to production was 20.1 percent during the import volume peak in\n1999. \"\n5058 5059\n10.189 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5060\n\n5052 We note the complainants' claims that the tariff quota imposed on slabs constitute a distinct\nmeasure from that imposed on the rest of CCFRS. The Panel does not examine these claims and arguments here\ngiven that the USITC made its determination on the basis of CCFRS as a single product which included slabs.\n5053 (original footnote) Including imports from NAFTA countries.\n5054 (original footnote) We recognize that the official import data for tin mill products, which is used in\nour discussion, overstate the imports subject to this in vestigation to some degree because it includes tin mill\nproducts specifically excluded from the request. For example, using Joint Respondents' data, imports of tin mill\nproducts increased from 414,013 short tons in 1996 to a peak level of 642,353 short tons in 1999, and declined\nto 491,836 short tons in 2000. The overall increase from 1996 to 2000 was 18.8 percent. See Appendix 2 to\nRequest and Joint Respondents' Tin Mill Prehearing Brief at 5-7.\n5055 (original footnote) CR and PR at Tables FLAT-10 and FLAT-C-8.\n5056 (original footnote) CR and PR at Tables FLAT-10 and FLAT-C-8.\n5057 (original footnote) CR and PR at Table FLAT-10. Tin mill product imports were 17.7 percent of\ndomestic production in interim 2001, compared to 17.1 percent in interim 2000. Id. Joint Respondents alleged\nthat if the tin mill products excluded from the request were subtracted from the official import data, the ratio of\nsubject imports to domestic production would increase from 11.2 percent in 1996 to a peak of 18.5 percent in\n1999 and decline to 14.8 percent in 2000. Joint Respondents' Tin Mill Prehearing Brief at 7.\n5058 (original footnote) CR and PR at Table FLAT-10.\n5059 USITC Report, p. I-71.\n5060 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table FLAT-10 at FLAT-14 and Table FLAT C-8. As is visible from the graphs, the data for 2001 have not\nbeen \"annualized\" but have been left in their raw format . The Panel finds this format sufficient to reach a\nconclusion on the trends of imports in the most recent past and therefore does not take a position on the question\nof whether and how these six-month data can be \"annualized\", a question on which there is disagreement\nbetween the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports (Tons)\n0\n100,000\n200,000\n300,000\n400,000\n500,000\n600,000\n700,000\n800,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.190 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5.(b) as well as O.1 and 3 supra.\n(iii) Analysis by the Panel\n10.191 Before being able to review the USITC's determination on increased imports of tin mill the\nPanel needs to address the issue of the divergent findings made by individual USITC Commissioners:\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfour of the six Commissioners made findings on tin mill as a separate product 5061, but the two other\nCommissioners (Bragg and Devaney) treated tin mill products as part of the larger CCFRS\ncategory.5062 The four who examined tin mill as a separate product made a common affirmative\nfinding on increased imports and on serious injury, but later diverged on the question of causation, for\nwhich only Commissioner Miller made an affirmative determination. 5063 Ultimately, therefore, only\nCommissioner Miller reached positive findings regarding tin mill as a separate product. The two\nCommissioners who treated tin mill as part of CCFRS, reached a positive conclusion on that larger\ncategory. Despite the divergent product definitions, the USITC Report concludes that three\nCommissioners have made \"an affirmative determination regarding imports of carbon and alloy tin\nmill products.\"5064\n10.192 In the March Proclamation, the President did not select any of the various affirmative\ndeterminations on tin mill as the basis of the decision to impose the safeguard measure on tin mill.\nRather, pursuant to domestic law, the President \"decided to consider the determinations of the groups\nof commissioners voting in the affirmative with regard to [tin mill products and stainless steel wire] to\nbe the determination of the [US]ITC\". 5065 Therefore, it is apparent that the President based his\ndetermination on the findings of all three Commissioners (Bragg, Devaney and Miller), although\nthose three commissioners did not perform their analysis on the basis of the same like product\ndefinition.\n10.193 The Panel recalls that a Member can impose a safeguard measure only after it has published a\nreport that demonstrates that the WTO pre-requisites for the imposition of a safeguard are satisfied.\nThe Panel agrees with the United States that there must always be a \"connection\" between the\ninvestigation by a Member's competent authorities and the Member's decision to take a safeguard\nmeasure.\n5066 In fact, the measure ultimately imposed must be based on a determination and the\nunderlying investigation, as published in the report. This report must thus provide a reasoned and\nadequate explanation of how the WTO requirements relating to the imposition of safeguard measures\nare satisfied. In application of its standard of review, a panel must review whether these requirements\nare satisfied.\n10.194 On its face, the USITC (the three Commissioners voting in the affirmative) made divergent\nfindings relating to tin mill and these different findings are impossible to reconcile, given that they are\nbased on differently defined products. Whatever flexibility the Agreement on Safeguards accords to\nWTO Members as regards the structure of their internal decision-making processes\n5067, it is clear from\nArticles 2.1 and 3.1 of the Agreement on Safegu ards, Article 11 of the DSU and our standard of\nreview that the competent authorities must always provide a reasoned and adequate explanation of\ntheir determinations and demonstrations. If they do not, a Panel cannot uphold the measure. The\nPanel fails to see how the USITC Report, as it stands, can provide a logical explanation of the\nmeasure imposed on tin mill and of why the conditions for its imposition, here, increased imports, are\nsatisfied. There is no indication of how interested parties (and the Panel for that matter) can identify\nwhich of the various and inconsistent findings by various Commissioners is the basis for the\nimposition of the safeguard measure on tin mill.\n\n5061 USITC Report, pp. I-71 et seq.\n5062 USITC Report, p. I-71, footnote 368 and p. 279.\n5063 USITC Report, pp. I-307-309.\n5064 USITC Report, p. I-25.\n5065 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\n5066 United States' First Written Submission, para. 207.\n5067 See Appellate Body Report, US – Line Pipe, para. 158.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.195 The Panel notes that the issue at hand is not one where a Member publishes dissenting\nopinions and where these dissents depart from the findings which serve as the basis of a measure. In\nthe instant case, the three various individual findings all served as the basis of the \"determination of\nthe [US]ITC\".\n5068 The Panel believes that a Member is not permitted under Articles 2.1 and 3.1 of the\nAgreement on Safeguards to base a safeguard measure on a determination supported by a set of\nexplanations each of which is different and impossible to reconcile with the other. Such findings\ncannot simultaneously form the basis of a determination. For the purposes of the Agreement on\nSafeguards, with regard to, for instance, the question of whether imports have increased, it makes a\ndifference whether the product at issue is tin mill or a much broader category called CCFRS and\ncontaining tin mill products. The difference is that the import numbers for different product\ndefinitions will not be the same.\n10.196 The Panel believes that this is not the situation that was at issue in US – Line Pipe where the\nAppellate Body held that no violation of the Agreement on Safeguards had occurred. The question in\nUS – Line Pipe was whether a determination could leave open the question whether there was serious\ninjury or threat of serious injury. From the perspective of the Agreement on Safeguards, the\nconditions of Article 2.1 are satisfied equally by serious injury and by threat of serious injury.\n5069 The\nchallenge was not that the underlying report was split and contained different reasonings that could\nnot be reconciled one with another and that, therefore, there was a violation of Articles 2.1 and 3.1 of\nthe Agreement on Safeguards.\n10.197 The Panel adheres to the Appellate Body's statements made in US – Line Pipe on the\nMembers' discretion regarding their internal decision-making process. Specifically, the Appellate\nBody found:\n\"[W]e are not concerned with how the competent authorities of WTO Members reach\ntheir determinations in applying safeguard measures. The Agreement on Safeguards\ndoes not prescribe the internal decision-making process for making such a\ndetermination. That is entirely up to WTO Members in the exercise of their\nsovereignty. We are concerned only with the determination itself, which is a singular\nact for which a WTO Member may be accountable in WTO dispute settlement. It is\nof no matter to us whether that singular act results from a decision by one, one\nhundred, or – as here – six individual decision-makers under the municipal law of that\nWTO Member. What matters to us is whether the determination, however it is\ndecided domestically, meets the requirements of the Agreement on Safeguards.\"\n5070\n10.198 Against this background, the Panel is not concerned with the fact that, as in the present case,\nonly the findings of one commissioner making an affirmative determination relate to tin mill as a\nseparate product, while the United States' domestic law requires at least three affirmative\ndeterminations. It is for each Member to determine, in their domestic law, how many affirmative\ndecisions are necessary in a collegial decision-making body, be it one, three, four (a majority) or six\n(unanimity). Obviously, the question of consistency or inconsistency with domestic law is not\nrelevant to the question of WTO consistency. Therefore, the Panel sees no inconsistency with WTO\nlaw in the fact itself that only one commissioner re ached affirmative findings with regard to tin mill\nproducts as a separate product.\n\n5068 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\n5069 Appellate Body Report, US – Line Pipe, para. 170.\n5070 Appellate Body Report, US – Line Pipe, para. 158."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.564520"}}},{"rowIdx":3492,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ12_Report_Of_Panel_11.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ12_Report_Of_Panel_11.pdf"},"doc_sequence":{"kind":"number","value":12,"string":"12"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 753 10.199 However, if a Member relies on the findings made by three Commissioners and the findings of those three Commissioners constitute the determination of the competent authorities in the sense of Article 2.1 of the Agreement on Safeguards, there is a requirement for those findings to provide a reasoned and adequate explanation. A reasoned and adequate explanation is not contained in a set of findings which cannot be reconciled one with another. 10.200 In conclusion, the Panel, therefore, finds that there is a violation of the obligation under Articles 2.1 and 3.1 to provide a reasoned and adequate explanation of how the facts support the determination of increased imports, since the explanation consists of alternative explanations partly departing from each other which, given the different product bases, cannot be reconciled as a matter of their substance. Thus, the USITC Report does not contain a determination supported by a reasoned"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":11,"string":"11"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":67,"string":"67"},"clean_text":{"kind":"string","value":"10.199 However, if a Member relies on the findings made by three Commissioners and the findings\nof those three Commissioners constitute the determination of the competent authorities in the sense of\nArticle 2.1 of the Agreement on Safeguards, there is a requirement for those findings to provide a\nreasoned and adequate explanation. A reasoned and adequate explanation is not contained in a set of\nfindings which cannot be reconciled one with another.\n10.200 In conclusion, the Panel, therefore, finds that there is a violation of the obligation under\nArticles 2.1 and 3.1 to provide a reasoned and adequate explanation of how the facts support the\ndetermination of increased imports, since the explanation consists of alternative explanations partly\ndeparting from each other which, given the different product bases, cannot be reconciled as a matter\nof their substance. Thus, the USITC Report does not contain a determination supported by a reasoned\nand adequate explanation of how the facts support the determination that tin mill products have been\nimported in such increased quantities, as required by Articles 2.1 and 3.1 of the Agreement on\nSafeguards.\n(c) Hot-rolled bar\n(i) The USITC's findings\n10.201 As regards increased imports of hot-rolled bar, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.\nImports of hot-rolled bar increased from 1.66 million tons in 1996 to 1.81 million\ntons in 1997 and then to 2.34 million tons in 1998. Imports then declined to 2.26\nmillion tons in 1999 but increased in 2000 to 2.53 million tons. Imports were lower\nin interim (January-June) 2001, at 952,392 tons, than in interim 2000, when they were\n1.34 million tons. Imports increased by 52.5 percent from 1996 to 2000 and by 11.9\npercent from 1999 to 2000.\n5071\nAs a ratio to US production, imports declined from 19.2 percent in 1996 to 18.4\npercent in 1997, but then rose to 23.8 percent in 1998, 24.9 percent in 1999, and 27.5\npercent in 2000. The ratio was lower in interim 2001, at 24.6 percent, than in interim\n2000, when it was 27.0 percent.\n5072\nImports were higher, both in absolute terms and relative to US production, in 2000\nthan in any prior year of the period examined and showed a rapid and dramatic\nincrease from the previous year. While imports declined in the interim period\ncomparison, the ratio of imports to US production in interim 2001 was higher than\nthat for the first three years of the period examined, and was only three-tenths of a\npercentage point below the 1999 level.\nIn view of the above, we find that imports are in increased quantities and that the first\nstatutory criterion is satisfied.\"\n5073\n10.202 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5074\n\n5071 (original footnote) CR and PR, Table LONG-5.\n5072 (original footnote) CR and PR, Table LONG-5.\n5073 USITC Report, Vol. I, p. 92.\n5074 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table LONG-5 at LONG-9. As is visible from the graphs, the data for 2001 have not been \"annualized\" but\nhave been left in their raw format. The Panel finds this format sufficient to reach a conclusion on the trends of\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports (Tons)\n0\n1,000,000\n2,000,000\n3,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.203 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5 (c) supra.\n\nimports in the most recent past and therefore does not take a position on the question of whether and how these\nsix-month data can be \"annualized\", a question on which there is disagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Analysis by the Panel\nAbsolute imports\n10.204 The Panel believes that the USITC's determination on increased imports of hot-rolled bar, as\npublished in its report 5075, does not contain an adequate and reasoned explanation of how the facts\nsupport the determination. The USITC relied on the higher amount of imports in 2000 than in any\nprevious year of the period examined and on the \"rapid and dramatic increase\" from 1999 to 2000.\nThe decline between interim 2000 and 2001 was acknowledged, but the USITC did not give an\nexplanation why it, nevertheless, found that there was an increase of imports in absolute numbers. It\ndid so only with regard to imports relative to domestic production 5076, a finding with which the Panel\nwill deal separately.\n10.205 This failure to account for the most recent data from interim 2001, as far as absolute imports\nare concerned, is serious in the view of the Panel. The decrease from interim 2000 (1.34 million tons)\nto interim 2001 (952,392 tons) represented a decrease by 28.9%, whereas the increase in the year-to-\nyear period before (1999 to 2000) that was characterized as \"rapid and dramatic\" was merely 11.9%.\nIn light of this decrease in the most recent period, the Panel does not believe that the trend of imports\nfrom 1996 to 2000 (an increase by 52.5%) is sufficient to provide a basis for a finding that, at the\nmoment of the determination, hot-rolled bar \"is being imported in such increased quantities\".\n10.206 In the Panel's view, the trend of absolute imports between 1997 and interim 2001 is best\ndescribed as an alternation of increases and decreases from year to year. Given this up-and-down\nmovement ending with a decrease of 28.9% (in interim 2001), the Panel does not believe that the facts\nsupport a conclusion of increased imports, nor has the USITC provided an explanation to that effect.\nThe Panel acknowledges that, until 2000, there was a net increasing trend, in other words, the two\nincreases in 1998 and 2000 were stronger than the decrease in 1999. However, the picture changes\nagain significantly, when one includes the decrease (by 28.9%) in interim 2001, a fact that the USITC\nacknowledged, but did not evaluate. Taking into account all qualitative and quantitative features of\nthe trends of imports over the period of examination, the Panel, therefore, finds that the USITC's\ndetermination on increased imports of hot-rolled bar, as published in its Report\n5077, does not contain a\nreasoned and adequate explanation of how the facts support a conclusion that hot-rolled bar \"is being\nimported in such increased quantities.\"\n10.207 It may well be that the increase occurring from 1997 to 1998, or from 1996 to 1998, taken by\nitself, would qualify as an increase satisfying the criteria of Article 2.1 of the Agreement on\nSafeguards. However, at the time of the determination, this development was not a recent\ndevelopment. Given how the trends in imports developed after 1998, the increase up to 1998 is not a\nsufficient factual basis to support a determination in October 2001 that hot-rolled bar is \"being\nimported in (such) increased quantities\".\nRelative imports\n10.208 The Panel also considers that the USITC's determination on increased imports of hot-rolled\nbar relative to domestic production5078 does not contain an adequate and reasoned explanation of how\nthe facts support the determination. The USITC's conclusion relied on the statement that imports\n\n5075 USITC Report, Vol. I, p. 92.\n5076 USITC Report, Vol. I, p. 92.\n5077 USITC Report, Vol. I, p. 92.\n5078 USITC Report, Vol. I, p. 92.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrelative to domestic production in 2000 were \"higher than in any prior year of the period examined\nand showed a rapid and dramatic increase from the previous year.\" We note with puzzlement that the\nattributes \"rapid and dramatic\" refer to an increase from 24.9% (1999) to 27.5% (2000). The decline\nin imports in interim 2001 was acknowledged, but according to the USITC \"the ratio of imports to US\nproduction in interim 2001 was higher than that for the first three years of the period examined, and\nwas only three-tenths of a percentage point below the 1999 level.\"\n10.209 The Panel is not convinced by this statement and does not consider it to be a reasoned and\nadequate explanation supporting the determination of increased imports, given that the ratio of\nimports to domestic production in the most recent period, interim 2001 (24.6%), not only declined\ncompared with full-year or interim 2000 (27.5% and 27.0% respectively) but was also lower than in\n1999 (24.9%) and nearly as low as in 1998 (23.8%). Therefore the facts do not support a conclusion\nthat hot-rolled bar \"is being imported in such increased quantities, … relative to domestic\nproduction\".\nConclusion\n10.210 The Panel consequently finds that the USITC Report 5079 did not provide an adequate and\nreasoned explanation of how the facts support the determination that hot-rolled bar was being\nimported in \"increased quantities\", contrary to the requirements of Article 2.1 Agreement on\nSafeguards that the product \"is being imported in (such) increased quantities\".\n(d) Cold-finished bar\n(i) The USITC's findings\n10.211 As regards increased imports of cold-finished bar, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.\nImports of cold-finished bar increased from 206,272 tons in 1996 to 238,221 tons in\n1997 and then to 272,972 tons in 1998. Imports then declined to 235,693 tons in\n1999 but increased in 2000 to 314,958 tons. Imports were lower in interim 2001, at\n134,971 tons, than in interim 2000, when they were 169,889 tons. Imports increased\nby 52.7 percent from 1996 to 2000 and by 33.6 percent from 1999 to 2000.\n5080\nAs a ratio to US production, imports declined from 17.6 percent in 1996 to 17.3\npercent in 1997, rose to 19.5 percent in 1998, declined to 17.0 percent in 1999, and\nthen rose to 23.7 percent in 2000. The ratio was higher in interim 2001, at 23.9\npercent, than in interim 2000, when it was 23.6 percent.\n5081\nImports were higher, both in absolute terms and relative to US production, in 2000\nthan in any prior year of the period examined and showed a rapid and dramatic\nincrease. Although import volumes declined in the interim period comparison, the\nratio of imports to US production in interim 2001 was higher than in any full-year\nduring the period examined.\nIn view of the above, we find that imports are in increased quantities and that the first\nstatutory criterion is satisfied.\"\n5082\n\n5079 USITC Report, Vol. I, p. 92.\n5080 (original footnote) CR and PR, Table LONG-6.\n5081 (original footnote) CR and PR, Table LONG-6.\n5082 USITC Report, Vol. I, pp. 101-102.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.212 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5083\nImports (Tons)\n0\n50,000\n100,000\n150,000\n200,000\n250,000\n300,000\n350,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments by the parties\n10.213 The claims and arguments of the parties regarding the USITC's findings are set out in\nSections VII.F.4 and 5.(d) supra.\n\n5083 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table LONG-6 at LONG-10. As is visible from the graphs, the data for 2001 have not been \"annualized\" but\nhave been left in their raw format. The Panel finds this format sufficient to reach a conclusion on the trends of\nimports in the most recent past and therefore does not take a position on the question of whether and how these\nsix-month data can be \"annualized\", a question on which there is disagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Analysis by the Panel\nRelative imports\n10.214 The Panel believes that the USITC's determination on increased imports of cold-finished bar,\nrelative to domestic production 5084, contains an adequate and reasoned explanation of how the facts\nsupport the determination. After an up-and-dow n movement between 1996 and 1999 (starting with\n17.6% and ending with 17.0%) without any significant overall net trend, imports increased to 23.7%\nin 2000 and 23.9% in interim 2001. Comparing the two ratios, this represents 40.6% increase and is a\ndevelopment in the recent past. Given the overall neutral trends in the period until 1999, the Panel\nsees no development in the period preceding the very recent past that would cast doubt on its\nevaluation of the most recent trends.5085\n10.215 Therefore, the Panel considers that the USITC's determination on increased imports of cold-\nfinished bar, relative to domestic production 5086, contains an adequate and reasoned explanation of\nhow the facts support the determination.\n10.216 The Panel notes the doubts expressed by the European Communities as to whether the mere\nsix per cent increase in the ratio between imports and domestic production could be seen as a sudden,\nsharp and significant surge in imports that is capable of causing injury to a domestic industry.\n5087 The\nPanel also notes that 6% is the absolute difference between the two ratios, a variable that is not\nparticularly meaningful. As to whether this proportionate increase by 40.6% is sudden and significant\nenough in order to cause serious injury, the Panel believes that the increase by 40.6% over the most\nrecent 18 months evidences a certain degree of sharpness, significance, recentness and suddenness.\n10.217 Whether the increase by 40.6% is sudden, sharp, recent and significant enough as to cause\nserious injury is a question that is appropriately to be addressed in the context of causation of serious\ninjury, not in the context of the condition of the increase, where no well-founded judgment in this\nregard can be made. In this regard, the Panel's finding on increased imports must be read together\nwith its subsequent findings on the other conditions of Article 2.1 of the Agreement on Safeguards.\n10.218 Further, the Panel does not agree with the European Communities' argument that the absolute\ndecrease in imports from 2000 to 2001 (interim period) detracts from the conclusion of the relative\nincrease.5088 The Agreement on Safeguards makes clear that the requirement is that of an increase,\neither in absolute or in relative terms. If there is an increase both in absolute and in relative terms, the\ncondition of increased imports, of course, is also met. However, as a legal matter, a decrease in\nabsolute terms does not invalidate the sufficiency of a relative increase. The Panel also believes that\nthis legal framework is in line with the object and purpose of Article XIX:1(a) of GATT 1994 and the\nAgreement on Safeguards to allow for emergency ac tion in specific circumstances: if absolute\nimports decrease, but imports, relative to domestic production, are on the increase, this means that the\ndecrease of domestic production is stronger than that of imports (in absolute levels). Such a scenario\nmay well warrant the imposition of a safeguard measure.\n\n5084 USITC Report, Vol. I, pp. 101-102.\n5085 European Communities' first written submission, para. 321.\n5086 USITC Report, Vol. I, pp. 101-102.\n5087 European Communities' first written submission, para. 321.\n5088 European Communities' first written submission, para. 321.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAbsolute imports\n10.219 Given the Panel's finding regarding relative imports, there is no need to make findings on\nabsolute imports, since such findings could not change the overall result that the complainants' claims\nof violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be\nrejected. Therefore, since the Panel has already disposed of the claims on the basis of relative\nimports, the Panel sees no need to examine the claims relating to absolute imports.\nConclusion\n10.220 The Panel consequently finds that the USITC Report contained an adequate and reasoned\nexplanation of how the facts support the determina tion made with respect to \"increased imports\" of\ncold-finished bar with regard to relative imports. The USITC's determination that cold-finished bar\nwas being imported in \"increased quantities\" is not inconsistent with the requirement of Article 2.1 of\nthe Agreement on Safeguards that the product \"is being imported in (such) increased quantities\".\nTherefore, the Panel rejects violation claims made in this regard.\n(e) Rebar\n(i) The USITC's findings\n10.221 As regards increased imports of rebar, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.\nImports of rebar increased from 581,731 tons in 1996 to 701,303 tons in 1997 and\nthen to 1.2 million tons in 1998. Imports further increased to 1.8 million tons in 1999\nand then declined to 1.7 million tons in 2000. Imports were lower in interim 2001, at\n852,488 tons, than in interim 2000, when they were 985,991 tons.\n5089\nAs a ratio to US production, imports rose from 11.7 percent in 1996 to 12.8 percent in\n1997, 19.9 percent in 1998, and 29.1 percent in 1999. This ratio then declined to 25.2\npercent in 2000. The ratio was lower in interim 2001, at 24.3 percent, than in interim\n2000, when it was 30.9 percent.\n5090\nNotwithstanding the decline from 1999 levels, imports in 2000 were substantially\nhigher than they were during earlier portions of the period examined, reflecting the\nrapid and dramatic increase in the prior two years. The quantity of imports in 2000\nwas 187.0 percent above the 1996 quantity and 35.8 percent over the 1998 quantity,\nand the ratio of imports to US production in 2000 was more than double the ratio in\n1996. By the same token, import quantities for the first six months of 2001 were\nhigher than the quantities for the full-years of either 1996 or 1997, and the ratio of\nimports to US production in interim 2001 was higher than that for any year from 1996\nto 1998.\nIn view of the above, we find that imports are in increased quantities and that the first\nstatutory criterion is satisfied.\"\n5091\n10.222 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5092\n\n5089 (original footnote) CR and PR, Table LONG-7.\n5090 (original footnote) CR and PR, Table LONG-7.\n5091 USITC Report, Vol. I, p. 109.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports (Tons)\n0\n500,000\n1,000,000\n1,500,000\n2,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.223 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(e) supra.\n\n5092 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table LONG-7 at LONG-11. As is visible from the graphs, the data for 2001 have not been \"annualized\" but\nhave been left in their raw format. The Panel finds this format sufficient to reach a conclusion on the trends of\nimports in the most recent past and therefore does not take a position on the question of whether and how these\nsix-month data can be \"annualized\", a question on which there is disagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Analysis by the Panel\nAbsolute imports\n10.224 The Panel believes that the USITC's determination on increased imports of rebar in absolute\nterms5093, contains an adequate and reasoned explanation of how the facts support the determination.\nIn particular, the Panel considers that it amounts to such an adequate and reasoned explanation given\nthat imports more than tripled from 1996 to 1999 (from 581,731 tons to 1.8 million tons) and then\ndeclined relatively insignificantly in 2000 (to 1.7 million tons, or by 5.6%) and in interim 2001 (by\n13.5%).\n10.225 These decreases in themselves might not be insignificant, but as the Panel has stated, the\nanalysis of imports must take into account all features of the development of imports over the period\nexamined, which is what the USITC did with regard to imports of rebar. In light of the tripling of\nimports, the decrease over the last 18 months is not significant enough in order to stand in the way of\na conclusion that rebar \"is being imported in such increased quantities\". As the Panel has stated, there\nis no need for imports to \"be increas ing\". Instead, the product must (presently) be imported \"in\nincreased quantities\". The Panel has no doubt that the increase until 1999 is recent enough and the\nsubsequent decrease – in comparison – small enough in order to support such a conclusion. On the\nbasis of the facts, the Panel, therefore, disagrees with the contention of the complainants. On the\ncontrary, rebar is, as a matter of fact, being imported in recently and suddenly increased quantities.\n10.226 As regards the question raised by the complainants whether the increase was sudden enough,\nsharp enough, recent enough and significant enough to cause serious injury , that is a question more\nappropriately addressed in the context of causation of serious injury , not in the context of the\nrequirement of the increase, where no well-founded judgment in this regard can be made. The Panel's\nfinding on increased imports must be read together with its subsequent findings on the other\nconditions of Article 2.1 of the Agreement on Safeguards. Therefore, the Panel considers that the\nUSITC's determination on increased imports of rebar\n5094 contains an adequate and reasoned\nexplanation of how the facts support the determination.\nRelative imports\n10.227 Given the Panel's finding regarding absolute imports, there is no need to make findings on\nrelative imports, since such findings could not chan ge the overall result that the complainants' claims\nof violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be\nrejected. Since the Panel has already disposed of the claims on the basis of absolute imports, the\nPanel sees no need to examine the claims relating to relative imports.\nConclusion\n10.228 The Panel consequently finds that the USITC Report contained an adequate and reasoned\nexplanation of how the facts support the determina tion made with respect to \"increased imports\" of\nrebar with regard to absolute imports. The USITC's determination that rebar was being imported in\n\"increased quantities\" is not inconsistent with the requirement of Article 2.1 of the Agreement on\nSafeguards that the product \"is being imported in (such) increased quantities\". The Panel rejects the\nviolation claims made in this regard.\n\n5093 USITC Report, Vol. I, p. 109.\n5094 USITC Report, Vol. I, p. 109.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(f) Welded pipe\n(i) The USITC's findings\n10.229 As regards increased imports of welded pipe, the USITC determined:\n\"We find that the statutory criterion of incr eased imports is met. Imports of welded\npipe other than OCTG increased steadily throughout most of the period examined in\nboth absolute terms and relative to domestic production, with the largest increase\noccurring in 2000. Imports increased from 1.57 million short tons in 1996 to 1.86\nmillion short tons in 1997 and 2.26 million short tons in 1998, declined slightly to\n2.12 million short tons in 1999, and then surged to 2.63 million short tons in 2000.\nImports increased by 24.2 percent in quantity between 1999 and 2000, which was the\nlargest annual percentage increase of the period examined, and in 2000 were at their\nhighest level of the period examined. Imports continued at a very high level in\ninterim 2001, only slightly (1.7 percent) below the level of the same period of 2000.\nImports were 1.41 million short tons in interim 2001, compared to 1.44 million short\ntons in the same period of 2000.\n5095 Thus, imports of welded (non-OCTG) pipe have\nincreased in absolute terms.5096\nImports of welded (non-OCTG) pipe also increased relative to domestic production,\nwith the largest increase in the ratio occurring at the end of the period examined,\nbetween 1999 and 2000, and into 2001.\n5097 Thus, imports have increased relative to\ndomestic production as well as in absolute terms.\"5098\n10.230 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5099\n\n5095 (original footnote) CR and PR at TUBULAR-C-4.\n5096 (original footnote) ESTA argues imports of weld ed line pipe decreased in the most recent period,\nbased on data they have compiled for 2001. ESTA Posthearing Injury Brief at 8-9. ESTA provided extensive\ndocumentation regarding product entered as plate by Berg Steel Pipe Corporation into its foreign trade zone\n(FTZ) – but entered for customs purposes as imports for consumption of welded line pipe – for this limited\nperiod in a separate submission. See ESTA submission of October 9, 2001. We note that Berg only provided\ndata for interim 2001, whereas Berg has conducted similar activities in prior years included in our period\nexamined. See, e.g., Certain Cut-to-Length Steel Plate from France, India, Indonesia, Italy, Japan, and Korea ,\nInvs. Nos. 701-TA-387-391 (Final) and 731-TA-816-821 (Final), USITC Pub. 3273 (Jan. 2000) at IV-5. Thus\nadjusting data for only one part of the period examined may be misleading. In any event, even if these\nquantities are excluded, the overall year-to-year trend in imports is not changed; nor is the fact that January-June\n2001 imports are higher than imports during the im mediately preceding six-mo nth period (July-December\n2000). Accordingly, these data do not alter our conclusion that imports increased, or (as described below) that\nincreased imports are a substantial cause of the threat of serious injury.\n5097 (original footnote) In 1996, the ratio of imports to production was 33.8 percent. The ratio increased\nto 36.4 percent in 1997 and 41.9 percent in 1998, fell slightly to 40.8 percent in 1999, and then increased sharply\nto 55.0 percent in 2000. The ratio of imports to production was 55.9 percent in interim 2001, comparable to the\n56.8 percent level in the same period of 2000. CR at TUBULAR-11; PR at TUBULAR-8.\n5098 USITC Report, Vol. I, pp. 157-158.\n5099 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table TUBULAR-6 at TUBULAR-8 and Table TUBULAR-C-4. As is visible from the graphs, the data for\n2001 have not been \"annualized\" but have been left in their raw format. The Panel finds this format sufficient to\nreach a conclusion on the trends of imports in the most recent past and therefore does not take a position on the\nquestion of whether and how these six-month data can be \"annualized\", a question on which there is\ndisagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports (Tons)\n0\n500,000\n1,000,000\n1,500,000\n2,000,000\n2,500,000\n3,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n10\n15\n20\n25\n30\n35\n40\n45\n50\n55\n60\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.231 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(f) supra.\n(iii) Analysis by the Panel\nAbsolute imports\n10.232 In the present context, the Panel does not address the contention of the European\nCommunities, Korea and Switzerland that the USITC was supposed to make findings on each of the\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nspecific products it grouped together as \"certain tubular products\".5100 This is similar to the arguments\nmade by the European Communities, Korea and Switzerland that the definitions of the \"imported\nproduct\" and the \"domestic industry producing like … products\" were erroneous. The Panel will, in\nits examination of the USITC's \"increased imports\" finding, assess the USITC's determination on the\nbasis of the product identified by the USITC in th is regard without prejudice to the question of the\nproduct/industry definition itself.\n5101\n10.233 The Panel believes that the USITC's determination on increased imports of welded pipe in\nabsolute terms 5102 contains an adequate and reasoned explanation of how the facts support the\ndetermination. The USITC took into account the import data for each of the years of the period of\ninvestigation and conducted a satisfactory analysis of the developments of imports. As the USITC\nnoted, imports declined only from 1998 to 1999 (from 2.26 to 2.12 million short tons, i.e. by 6.2%)\nand from interim 2000 to 2001 (by 1.7%)\n5103, whereas all other years showed increases. Each of these\nincreases was more significant than the two mentioned decreases, so that the overall evaluation is that\nof a clearly discernible increase. Against the background of the total increase from 1996 to 2000\n(from 1.57 million short tons to 2.63 million short tons, i.e. by 67.5%), the subsequent decrease in\ninterim 2001 (by 1.7%) means that imports remained at increased levels even in the most recent past.\nThese facts that were listed and evaluated in the USITC Report, in the view of the Panel, do support a\nconclusion that welded pipe \"is being imported in (such) increased quantities\".\n10.234 The increase also shows a certain degree of suddenness, sharpness and significance. The\nPanel disagrees with Switzerland's contention that the increase of imports of welded pipe was\n\"steady\" and \"gradual\", hence \"adjustable\" and, therefore, not an increase satisfying the requirements\nof Article 2.1 of the Agreement on Safeguards. The Panel recognizes the possibility that, due to the\ngradual and steady pattern of an increase, the domestic industry manages to adjust and, therefore,\nsuffers no injury. However, this is a question to be addressed within the context of whether there is\nserious injury and whether it has been caused by increased imports. An increase in absolute terms\nmay even go hand in hand with an equally strong, or stronger increase of domestic production and a\nflourishing domestic industry. In such a case, there would be no relative increase, and there may not\nbe any causation of serious injury . However, for the purposes of the first condition of Article 2.1 of\nthe Agreement on Safeguards, an absolute increase (without a relative increase) is sufficient.\n10.235 The Panel also sees no relevance in the point raised by Switzerland that the increase between\n1996 and 1998 was stronger and did not result in the imposition of a safeguard measure. WTO\nMembers do not forego their right to impose a safeguard measure because they refrained from taking\nsuch action in a past situation. There is also no justification for the additional argument that, because\nof an increase at a previous point in time, the more recent increase cannot be sudden and sharp enough\nso as to qualify as an increase in the sense of Article 2.1 of the Agreement on Safeguards. According\nto this argument, a Member would forego the right to take a safeguard measure, if in the most distant\npast, there was a very sharp and sudden increase, which is followed by a less significant increase\ncausing additional serious injury to the relevant domestic industry. The Panel sees no basis in\n\n5100 European Communities' first written submission, para. 236. European Communities' second written\nsubmission, paras. 140 and 283-285.\n5101 The Panel recalls that, for reasons of logic, it has to make this assumption in order to be able to\nreview the USITC's determination with a view to assessing the claim of an inconsistency with the \"increased\nimports\" requirement itself. The Panel notes that previous panels and the Appellate Body have operated with\nsimilar assumptions, see, e.g., Appellate Body Report, US – Lamb, paras. 121, 172; and Panel Report, US –\nLamb, para. 8.1.\n5102 USITC Report, Vol. I, p. 157.\n5103 Ibid.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nArticle XIX:1 of GATT 1994 or in the Agreement on Safeguards for the proposition that a WTO\nMember should be prohibited from applying a safeguard measure in such a scenario.\n10.236 Whether the increase in the instant case was sudden enough, sharp enough, recent enough and\nsignificant enough to cause serious injury is a question that is appropriately addressed in the context\nof causation of serious injury , not in the context of the requirement of the increase, where no well-\nfounded judgment in this regard can be made. In this regard, the Panel's finding on increased imports\nmust be read together with its subsequent findings on the other conditions of Article 2.1 of the\nAgreement on Safeguards.\n10.237 The Panel also rejects the European Commun ities' contention that the USITC failed to\nprovide annual percentage increases and to evaluate all the trends by comparing their increases and\ndecreases over the period of investigation.5104 The requirement under the Agreement on Safeguards is\nnot to present the data in all kinds of possible ways. Rather, the requirement is to provide an adequate\nand reasoned explanation of how the facts support the conclusion about increased imports. The Panel\nbelieves that the USITC has complied with this requirement in this case.\nRelative imports\n10.238 Given the Panel's finding regarding absolute imports, there is no need to make findings on\nrelative imports, since such findings could not chan ge the overall result that the complainants' claims\nof violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be\nrejected. Since the Panel has already disposed of the claims on the basis of absolute imports, the\nPanel sees no need to examine the claims relating to relative increase.\nConclusion\n10.239 The Panel consequently finds that the USITC Report contained an adequate and reasoned\nexplanation of how the facts support the determina tion made with respect to \"increased imports\" of\nwelded pipe with regard to absolute imports. Th e USITC's determination that welded pipe was being\nimported in \"increased quantities\" is not inconsistent with the requirement of Article 2.1 of the\nAgreement on Safeguards that the product \"is being imported in (such) increased quantities\".\nTherefore, the Panel rejects the violation claims that have been made in this regard.\n(g) FFTJ\n(i) The USITC's findings\n10.240 As regards increased imports of FFTJ, the USITC determined:\n\"We find that the statutory criterion of increased imports is met. Imports of fittings\nand flanges steadily increased in both absolute terms and relative to domestic\nproduction during the period examined, with the largest increase occurring at the end\nof the period. Imports increased by 30.8 percent from 1996 to 2000, including 15.3\npercent between 1999 and 2000. Imports were 32.1 percent higher in interim 2001\nthan in the same period of 2000.\n5105\n\n5104 European Communities' first written submission, para. 334.\n5105 (original footnote) Imports were at their highest level of the period examined in 2000 (135,399\nshort tons), and were significantly above the level of the second highest year, 1999 (117,461 short tons).\nImports in interim 2001 were 81,380 short tons, well above the level of the same period in 2000 (61,588 short\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe ratio of imports to US production also increased significantly during the period\nexamined, rising from 50.5 percent in 1996 to 69.7 percent in 2000, and was at its\nhighest full-year level in 2000. The ratio in interim 2001 (88.8 percent) was\nsubstantially above the level of the same period of 2000 (59.4 percent).\n5106\nThus, imports of fittings, flanges, and tool joints are entering the United States in\nincreased quantities.\"\n5107\n10.241 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5108\nImports (Tons)\n0\n25,000\n50,000\n75,000\n100,000\n125,000\n150,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\n\ntons). The value of total imports also increased subs tantially during the period examined (45.9 percent), and\nbetween 1999 and 2000 (19.3 percent), and was at its highest full-year level in 2000 ($307.9 million). The value\nof imports was significantly higher in interim 2001 ($182 .3 million) than in the same period of 2000 ($144.7\nmillion). CR and PR at Table TUBULAR-C-6.\n5106 (original footnote) CR and PR at Table TUBULAR-8.\n5107 USITC Report, Vol. I, p. 171.\n5108 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table TUBULAR-8 at TUBULAR-10 and Table TUBULAR-C-6. As is visible from the graphs, the data for\n2001 have not been \"annualized\" but have been left in their raw format. The Panel finds this format sufficient to\nreach a conclusion on the trends of imports in the most recent past and therefore does not take a position on the\nquestion of whether and how these six-month data can be \"annualized\", a question on which there is\ndisagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports/Production ratio (Percentage)\n40\n45\n50\n55\n60\n65\n70\n75\n80\n85\n90\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.242 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(g) supra.\n(iii) Analysis by the Panel\nRelative imports\n10.243 In the present context, the Panel does not address the contention of the European\nCommunities that the USITC was supposed to make findings on each of the specific products it\ngrouped together in its mix of heterogeneous products.5109 This is the same argument advanced by the\nEuropean Communities in the context of its claim of an erroneous definition of the \"imported\nproduct\" and the \"domestic industry producing like … products\". The Panel will, in its examination\nof the \"increased imports\" finding, assess the USITC's determination using as its basis the product\ncategory on which it was made. In this review, it is to be assumed that the product definition is\ncorrect, without prejudice to the question of the product/industry definition itself.\n5110\n10.244 The Panel believes that the USITC's determination on increased imports of FFTJ in relative\nterms5111 contains an adequate and reasoned explanation of how the facts support the determination.\nThe USITC noted how much imports, relative to domestic production, had increased during the entire\nperiod of investigation and assessed the significance of that increase. The USITC also noted that the\nend of the period of examination showed the most significant increases (from 50.5% to 69.7% in 2000\nand from 59.4% to 88.8% from interim 2000 to interim 2001. Also, in the light of the fact that only\n\n5109 European Communities' first written submission, para. 344.\n5110 The Panel recalls that, for reasons of logic, it has to make this assumption in order to be able to\nreview the USITC's determination with a view to assessing the claim of an inconsistency with the \"increase\"\nrequirement itself. The Panel notes that previous panels and the Appellate Body have operated with similar\nassumptions, see, e.g., Appellate Body Report, US – Lamb, paras. 121, 172; and Panel Report, US – Lamb,\npara. 8.1.\n5111 USITC Report, Vol. I, p. 171.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe period from 1996 to 1997 showed a decrease (from 50.5% to 47.7%) and that this decrease was\nless significant than each of the year-to-year increases in the period thereafter, the Panel considers that\nthe increase found by the USITC is of a recent nature. The facts listed and evaluated in the USITC\nReport, in the view of the Panel, support a conclusion that FFTJ \"is being imported in (such)\nincreased quantities\".\n10.245 The increase also shows a certain degree of sharpness, suddenness and significance,\nparticularly in the very recent past. The Panel disagrees with the European Communities' contention\nthat the USITC failed to explain why the \"steady increase\" in imports of FFTJ was \"sharp and\nsignificant enough so as to cause serious injury or a threat thereof\".\n5112\n10.246 Whether the increase in the instant case was sharp and significant enough to cause serious\ninjury or threat thereof is a question that is appropriately addressed in the context of causation of\nserious injury or threat thereof , not in the context of the requirement of the increase, where no well-\nfounded judgment in this regard can be made. In this regard, the Panel's finding on increased imports\nmust be read together with its subsequent findings on the other conditions of Article 2.1 of the\nAgreement on Safeguards.\n10.247 The USITC's determination that FFTJ was being imported in \"increased quantities\" is not\ninconsistent with the requirement of Article 2.1 Agreement on Safeguards that the product \"is being\nimported in (such) increased quantities\". The Panel rejects the violation claims made in this regard.\nAbsolute imports\n10.248 Given the Panel's finding regarding relative imports, there is no need to make findings on\nabsolute imports, since such findings could not change the overall result that the complainants' claims\nof violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be\nrejected. Since the Panel has already disposed of the claims on the basis of relative imports, the Panel\nsees no need to examine the claims relating to absolute increase.\nConclusion\n10.249 The Panel consequently finds that the USITC Report contained an adequate and reasoned\nexplanation of how the facts support the determina tion made with respect to \"increased imports\" of\nFFTJ with regard to relative imports. The USITC's determination that FFTJ was being imported in\n\"increased quantities\" is not inconsistent with the requirement of Article 2.1 of the Agreement on\nSafeguards that the product \"is being imported in (such) increased quantities\". Therefore, the Panel\nrejects the violation claims made in this regard.\n(h) Stainless steel bar\n(i) The USITC's findings\n10.250 As regards increased imports of stainless steel bar, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.\nIn terms of quantity, imports of stainless bar and light shapes increased by 53.8\npercent during the five full-years of the period of investigation, growing from 97.9\n\n5112 European Communities' first written submission, para. 344.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthousand short tons in 1996 to 150.6 thousand short tons in 2000. 5113 Although the\nquantity of imports fluctuated somewhat (declining slightly in 1998 and 1999 from its\nlevel in 1997), a rapid and dramatic increase in import quantity occurred during the\nlast full-year of the period of investigation, when imports of stainless bar grew by 44\nthousand short tons.\n5114 The quantity of imports declined between interim 2000 and\ninterim 2001, dropping from 83.4 thousand short tons to 69.2 thousand short tons.5115\nThe ratio of imports of stainless steel bar to domestic production also increased\nsignificantly during the period, growing from 51.8 percent in 1996 to 84.1 percent in\n2000, with the largest single percentage increase in the ratio (19.3 percentage points)\noccurring in 2000.\n5116 The ratio of imports to domestic production decreased from\n87.9 percent in interim 2000 to 84.6 percent in interim 2001.5117\nIn sum, imports of bar and light shapes increased significantly, both in quantity terms\nand as a ratio to domestic production, between 1996 and 2000, with the largest single\nincrease in imports occurring during the last full-year of the period. Although there\nwas a decline in imports in terms of quantity and as a ratio to domestic production\nbetween interim 2000 and interim 2001, we find that the first statutory criterion is\nsatisfied.\"\n5118\n10.251 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5119\n\n5113 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.\n5114 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.\n5115 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.\n5116 (original footnote) CR and PR at Table STAINLESS-6.\n5117 (original footnote) CR and PR at Table STAINLESS-6.\n5118 USITC Report, Vol. I, pp. 205-206.\n5119 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table STAINLESS-6 at STAINLESS-11 and Table STAINLESS-C-4. As is visible from the graphs, the data\nfor 2001 have not been \"a nnualized\" but have been left in their raw format. The Panel finds this format\nsufficient to reach a conclusion on the trends of impor ts in the most recent past and therefore does not take a\nposition on the question of whether and how these six-month data can be \"annualized\", a question on which\nthere is disagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports (Tons)\n0\n20,000\n40,000\n60,000\n80,000\n100,000\n120,000\n140,000\n160,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n40\n45\n50\n55\n60\n65\n70\n75\n80\n85\n90\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.252 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(h) supra.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Analysis by the Panel\nRelative imports\n10.253 The Panel believes that the USITC's determination on increased imports of stainless steel bar,\nrelative to domestic production 5120, contains an adequate and reasoned explanation of how the facts\nsupport the determination. The USITC found that the \"ratio of imports of stainless steel bar to\ndomestic production increased significantly during the period, growing from 51.8 percent in 1996 to\n84.1 percent in 2000\". The USITC also noted that \"the largest single percentage increase in the ratio\n(19.3 percentage points)\" occurred in 2000. According to the USITC, the slight decrease in the most\nrecent past (from 87.9% in interim 2000 to 84.6% in interim 2001) was not an obstacle for finding\nthat the requirement of increased imports was satisfied.5121\n10.254 The Panel considers this to be a satisfactory explanation of how the facts support the\ndetermination. In particular, in the light of the significant increase from 1999 to 2000 (19.3\npercentage points), the decline by 3.3 percentage points from interim 2000 to interim 2001 is, contrary\nto what the European Communities has stated 5122, insignificant. It simultaneously does not detract\nfrom a finding that imports, relative to domestic production, remain at high levels so that stainless\nsteel bar \"is being imported in (such) increased quantities\".\n10.255 The Panel is satisfied that the increase of relative imports of stainless steel bar, given the\nsharp increase from 1999 to 2000 shows a certain degree of recentness, sharpness, suddenness and\nsignificance. Whether the increase by 40.6% is sudden, sharp and significant enough as to cause\nserious injury is a question that is appropriately to be addressed in the context of causation of serious\ninjury, not in the context of the condition of the increase, where no well-founded judgment in this\nregard can be made. In this regard, the Panel's finding on increased imports must be read together\nwith its subsequent findings on the other conditions of Article 2.1 of the Agreement on Safeguards.\nAbsolute imports\n10.256 Given the Panel's finding regarding relative imports, there is no need to make findings on\nabsolute imports, since such findings could not change the overall result that the complainants' claims\nof violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be\nrejected. Therefore, since the Panel has already disposed of the claims on the basis of relative\nimports, the Panel sees no need to examine the claims relating to absolute increase.\nConclusion\n10.257 The Panel consequently finds that the USITC Report contained an adequate and reasoned\nexplanation of how the facts support the determina tion made with respect to \"increased imports\" of\nstainless steel bar with regard to relative imports. The USITC's determination that stainless steel bar\nwas being imported in \"increased quantities\" is not inconsistent with the requirement of Article 2.1 of\nthe Agreement on Safeguards that the product \"is being imported in (such) increased quantities\".\nTherefore, the Panel rejects the violation claims made in this regard.\n\n5120 USITC Report, Vol. I, pp. 101-102.\n5121 USITC Report, Vol. I, p. 206.\n5122 European Communities' first written submission, para. 350.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(i) Stainless steel wire\n(i) The USITC's findings\n10.258 As regards increased imports of stainless steel wire, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.\nIn quantity terms, imports of stainless wire increased from 27.3 thousand short tons in\n1996 to 31.3 thousand short tons in 2000. 5123 The quantity of stainless wire imports\nfluctuated somewhat during the period, increasing from 27.3 thousand short tons in\n1996 to 29.9 thousand short tons in 1997 and then to 30.7 thousand short tons in\n1998.5124 The quantity of imports then declined by 19.4 percent, to 24.7 thousand\nshort tons, in 1999. However, the single largest increase in import quantity occurred\nbetween 1999 and 2000, when imports increased by 26.5 percent, from 24.8 thousand\nshort tons to 31.3 thousand short tons.\n5125 The quantity of stainless wire imports\nincreased between interim 2000 and 2001, as import volumes grew from\n16.0 thousand short tons to 16.5 thousand short tons.5126\nThe ratio of stainless steel wire imports to domestic production exhibited a similar\ntrend during the period of investigation. The ratio remained relatively stable\n(between 31 and 32 percent) during the first three years of the period but then\ndeclined to 23.9 percent in 1999. 5127 The ratio of stainless wire imports to domestic\nproduction then increased by 5.5 percentage points, to 29.4 percent, in 2000. 5128 The\nratio of imports to domestic production increased to its highest level during the\nperiod, 38 percent, in interim 2001.\n5129\nIn sum, the record indicates that imports of stainless wire increased in quantity terms\nand as a ratio to domestic production during the period of investigation. Accordingly,\nwe find that the first statutory criterion is satisfied.\"\n5130 5131\n10.259 The trends in imports, both in absolute and in relative terms, are shown in the following\ngraphs illustrating the data relied upon by the USITC:5132\n\n5123 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.\n5124 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.\n5125 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.\n5126 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.\n5127 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7\n5128 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.\n5129 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.\n5130 (original footnote) Chairman Koplan does not join the remainder of this section of the opinion.\n5131 USITC Report, Vol. I, pp. 234-235.\n5132 The data represented in the following two graphs are contained in the USITC Report, in particular\nin Table STAINLESS-9 at STAINLESS-14 and Table STAINLESS-C-7. As is visible from the graphs, the data\nfor 2001 have not been \"a nnualized\" but have been left in their raw format. The Panel finds this format\nsufficient to reach a conclusion on the trends of impor ts in the most recent past and therefore does not take a\nposition on the question of whether and how these six-month data can be \"annualized\", a question on which\nthere is disagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports (Tons)\n0\n5,000\n10,000\n15,000\n20,000\n25,000\n30,000\n35,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\nImports/Production ratio (Percentage)\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\nAnnual data\nSemi-Annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.260 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(i) as well as VII.O.1 and 3 supra.\n(iii) Analysis by the Panel\n10.261 At the outset, the Panel notes that, in its defence, the United States relies not only on the\nincreased imports findings reached by Commissioner Koplan, but also on those made by\nCommissioners Bragg and Devaney. The former made findings on stainless steel wire as a separate\nproduct whereas the latter two made affirmative find ings with regard to a broader product category\nthan stainless steel wire (stainless steel wire and rope). In this regard, the situation is equivalent to\nthat encountered in the context of tin mill products, because the other Commissioners who defined\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nstainless steel wire as a separate product, did not reach an affirmative result. In the March\nProclamation, the President did not select any of the various affirmative determinations as the basis of\nthe decision to impose the safeguard measure on stainless steel wire. Rather, pursuant to domestic\nlaw, the President \"decided to consider the determinations of the groups of commissioners voting in\nthe affirmative with regard to [tin mill products and stainless steel wire] to be the determination of the\nUSITC\".\n5133 It, therefore, is apparent that the President based his determination on the findings of all\nthree Commissioners (Bragg, Devaney and Koplan ), although those three Commissioners did not\nperform their analysis on the basis of the same like product definition.\n10.262 For the reasons set out above in relation to the USITC's determination(s) on tin mill 5134, the\nPanel believes that the Agreement on Safeguards does not permit the combination of findings as\nsupporting a determination, if these findings were reached on the basis of differently defined products.\nIf such findings cannot be reconciled one with another (as a matter of substance), they cannot\nsimultaneously form the basis of a determination. The Panel therefore believes that there is a\nviolation of the obligation under Articles 2.1 and 3.1 of the Agreement on Safeguards to provide a\nreasoned and adequate explanation of how the facts support the determination, if that explanation\nconsists of alternative explanations departing from each other and which, given the different product\nbasis, cannot be reconciled as a matter of substance.\n10.263 Thus, the USITC Report did not contain a determination supported by a reasoned and\nadequate explanation of how the facts support the determination that imports of stainless steel wire\nhave increased, contrary to Articles 2.1 and 3.1 of the Agreement on Safeguards.\n(j) Stainless steel rod\n(i) The USITC's findings\n10.264 As regards increased imports of stainless steel rod, the USITC determined:\n\"We find that the statutory criterion of increased imports is met.\nIn quantity terms, imports of stainless rod increased by 36.1 percent during the period\nof investigation, growing from 60.5 thou sand short tons in 1996 to 82.3 thousand\nshort tons in 2000.\n5135 Although the quantity of imports fluctuated somewhat during\nthe period of investigation, the largest increase in terms of quantity occurred in 2000,\nthe last full-year of the period of investigation, when import quantities increased by\nmore than 25 percent, growing from 65.9 thousand short tons to 82.3 thousand short\ntons.\n5136 The quantity of stainless rod imports declined by 31.3 percent between\ninterim 2000 and 2001, falling from 45.6 thousand short tons to 31.4 thousand short\ntons.5137 We note, however, that the market share of imports remained essentially\nstable in interim 2001, declining slightly from *** percent interim 2000 to ***\npercent in interim 2001.5138\n\n5133 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\n5134See supra paras. 10.191-10.200.\n5135 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.\n5136 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.\n5137 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.\n5138 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe ratio of imports of stainless steel rod to domestic production also increased\nsignificantly during the period, increasing from *** percent in 1996 to *** percent in\n2000. While the ratio fluctuated somewhat during the period of investigation, the\nlargest single increase in the ratio (*** percentage points) occurred in 2000, the last\nfull-year of the period of investigation.\n5139 The ratio of imports to domestic\nproduction decreased from *** percent of domestic production in interim 2000 to ***\npercent in interim 2001.5140\nIn sum, imports of stainless rod increased significantly, both in quantity terms and as\na ratio of domestic production, between 1996 and 2000, with a rapid and dramatic\nincrease in imports occurring during the last full-year of the period of investigation.\nAccordingly, we find that the first statutory criterion is satisfied.\"\n5141\n10.265 The trends in imports, in absolute terms, are shown in the following graph illustrating the data\nrelied upon by the USITC:5142\nImports (Tons)\n0\n10,000\n20,000\n30,000\n40,000\n50,000\n60,000\n70,000\n80,000\n90,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nAnnual data\nSemi-annual (Jan-Jun) data\n(ii) Claims and arguments of the parties\n10.266 The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4\nand 5(j) supra.\n\n5139 (original footnote) CR and PR at Table STAINLESS-7.\n5140 (original footnote) CR at Table STAINLESS-7.\n5141 USITC Report, Vol. I, pp. 214-215.\n5142 The data represented in the following graph are contained in the USITC Report, Table\nSTAINLESS-7 at STAINLESS-12 and Table STAINLESS-C-5. As is visible from the graphs, the data for 2001\nhave not been \"annualized\" but have been left in their raw format. The Panel finds this format sufficient to\nreach a conclusion on the trends of imports in the most recent past and therefore does not take a position on the\nquestion of whether and how these six-month data can be \"annualized\", a question on which there is\ndisagreement between the parties.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Analysis by the Panel\nAbsolute imports\n10.267 The Panel believes that the USITC's determination on increased imports of stainless steel rod,\nas published in its Report5143, does not contain an adequate and reasoned explanation of how the facts\nsupport the determination. The USITC relied on the increase occurring between 1996 and 2000, with\nthe largest increase from 1999 to 2000 (25%). The decline between interim 2000 and interim 2001\nwas acknowledged, but the USITC did not give an explanation why it nevertheless found that there\nwas an increase of imports in absolute numbers. This failure is particularly serious since this decrease\n(by 31.3%) was sharper than the preceding increase, and, as a matter of proportion, offset the increase\nof the two preceding years.\n10.268 The only additional aspect adduced by the USITC in response to the decrease in interim 2001\nwas the nearly stable market share of imports. The market share, however, is the relative notion of\nimports vis-à-vis domestic sales, and is not related to absolute import volumes. In light of the\ndecrease in the most recent period and the overall developments between 1996 and interim 2001\nwhich can be best described as a double up-and-down movement (returning to the low point at the\nend), the Panel does not believe that the facts support a finding that, at the moment of the\ndetermination, stainless steel rod \"is being imported in (such) increased quantities\".\n10.269 It may well be that the increases occurring from 1996 to 1997, or from 1998 to 2000, taken by\nthemselves, would qualify as an increase satisfying the criteria of Article 2.1 of the Agreement on\nSafeguards. However, at the time of the determination, the trends of imports showed a significant\nrecent decline, so that these past increases can no longer serve as the basis that stainless steel rod \"is\nbeing imported in (such) increased quantities\".\n10.270 The Panel notes the argument made by the United States, that even if imports followed a\npattern of successive surging and receding, this could cause serious injury to the domestic industry,\nsuch as to warrant a safeguard measure.\n5144 In the eyes of the Panel, it is true that, despite a return of\nimports to a low level and, therefore, the absence of a product \"being imported in … increased\nquantities\", it is, nevertheless, conceivable that the intervening increases, or the shock-therapy of\nincreases and decreases have caused serious injury to the domestic industry. In the Panel's view, the\nright to impose a safeguard exists only when, in addition to serious injury, and causation, there is also\nan increase in imports and this increase has to be recent. The legal framework contained in the\nAgreement on Safeguard requires, in addition to the causation of serious injury that the product \"is\nbeing imported in … increased quantities\".\nRelative imports\n10.271 The Panel also considers that the USITC's determination on increased imports of stainless\nsteel rod relative to domestic production5145 does not contain an adequate and reasoned explanation of\nhow the facts support the determination. The USITC performed an analysis which is similar to that\nrejected by the Panel in the context of absolute imports. What is more, the USITC did not provide\nany of the data on which it relied. All such numbers were replaced by asterisks. Therefore, there is\nno explanation of how the facts support a conclusion of increased imports because there are no facts\nsupporting any conclusion.\n\n5143 USITC Report, Vol. I, pp. 214-215.\n5144 United States' first written submission, paras. 295-296 and 300.\n5145 USITC Report, Vol. I, p. 215.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.272 The Panel agrees that a competent authority is not barred from relying on data provided by\nindividual parties on a confidential basis in the course of the investigation. Article 3.2 of the\nAgreement on Safeguards contains an obligation to treat such data as confidential, i.e. not to disclose\nit (without permission). In this sense, the Panel, therefore, takes a position similar to that of the\nAppellate Body in Thailand – H-Beams .\n5146 Competent authorities may rely on confidential data,\neven if these data are not disclosed to the public in their Reports.\n10.273 However, Article 3.1 of the Agreement on Safeguards contains the obligation that competent\nauthorities \"publish a report setting forth their findings and reasoned conclusions reached on all\npertinent issues of fact and law.\" Article 4.2(c) adds the obligation that competent authorities\n\"publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case under\ninvestigation as well as a demonstration of the relevance of the factors examined\". On the basis of\nthese obligations and the obligation under Article 2.1, to make a determination, inter alia , that\nimports of the product in question have increased, competent authorities must provide a reasoned and\nadequate explanation of how the facts support th e conclusion. In the view of the Panel, this\nrequirement can, in an individual case, be limited by the obligation of Article 3.2 to protect\nconfidential data.\n10.274 However, we believe that Article 3.1 and 3.2 can be interpreted harmoniously.\n5147 T h e\nobligation of Article 3.1 cannot be interpreted so as to imply a violation of Article 3.2. In other\nwords, a competent authority is obliged to provide these explanations to fullest extent possible\nwithout disclosing confidential information. This implies that if there are ways of presenting data in a\nmodified form (e.g. aggregation or indexing), which protects confidentiality, a competent authority is\nobliged to resort to these options. Conversely, the provision of no data at all, is permitted only when\nall these methods fail in a particular case.\n10.275 The Panel believes that even if competent authorities are permitted not to disclose the data\nyet, nevertheless, rely on it, they are still required to provide through means other than full disclosure\nof that data, a reasoned and adequate explanation. This obligation could be complied with through the\nkind of explanation that the USITC has provided on page 215 of its report\n5148, i.e. an explanation in\nwords and without numbers. However, this obligati on also includes an explanation by the competent\nauthority of why there was no possibility of presenting any facts in a manner consistent with the\nobligation of protecting confidential information. That explanation was not provided in the instant\ncase.\n\n5146 Appellate Body Report, Thailand – H-Beams, paras. 111, 112 and 119.\n5147 See Appellate Body Report, Korea – Dairy , para. 81: \"In light of the interpretive principle of\neffectiveness, it is the duty of any treaty interpreter to 'read all app licable provisions of a treaty in a way that\ngives meaning to all of them, harmoniously.' \" See also Appellate Body Report, Argentina – Footwear (EC) ,\npara. 81; Appellate Body Report, US – Gasoline , p. *23; Appellate Body Report, Japan – Alcoholic\nBeverages II, p. *12; and Appellate Body Report, India – Patents (US), para. 45.\n5148 For instance, at page 215 of the USITC's Report, Vol. I, one can read the following analysis\nprotecting confidential information:\n\"The ratio of imports of stainless steel rod to domestic production also increased significantly\nduring the period, increasing from *** percent in 1996 to *** percent in 2000. While the ratio\nfluctuated somewhat during the period of investigation, the largest single increase in the ratio\n(*** percentage points) occurred in 2000, the last full year of the period of investigation. The\nratio of imports to domestic production decreased from *** percent of domestic production in\ninterim 2000 to *** percent in interim 2001.\" (Footnotes omitted).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.276 The Panel also believes that, irrespective of the confidentialization of the numbers, the\nUSITC's determination on increased imports of stainless steel rod relative to domestic production, as\npublished in its Report 5149, does not contain an adequate and reasoned explanation of how the facts\nsupport the determination. The USITC relied on a \"significant\" increase occurring between 1996 and\n2000, with the largest increase from 1999 to 2000, the last full-year investigated. The decline\nbetween interim 2000 and interim 2001 was acknowledged, as was the fact that the ratio fluctuated\nover the period of investigation. Given these fluctuations and the most recent decline, the Panel does\nnot believe that the USITC gave a reasoned and adequate explanation supporting that stainless steel\nrod, relative to domestic production \"is being imported in increased quantities\". This would at least\nhave required some indication that relative imports, at the end of the period of investigation, remain at\nincreased levels, for example, because the decline in th e interim period was small in comparison with\nthe increase until 2000. Such indication does not exist in the present case where the USITC, much as\nin the context of absolute imports, failed to place the existing, intervening increases in the context of\nprevious and subsequent decreases. The only indication that remains is the stated increase from 1996\nto 2000, but 2000 is not the end of the period investigated, so that the mentioned statement cannot\nprovide a basis for the conclusion that stainless steel rod \"is being imported\" in increased quantities,\nrelative to domestic production.\nConclusion\n10.277 The Panel consequently finds that the USITC Report did not provide an adequate and\nreasoned explanation of how the facts support the determination made with respect to \"increased\nimports\" and that the USITC's determination that stainless steel rod was being imported in \"increased\nquantities\" is inconsistent with the requirement of Article 2.1 of the Agreement on Safeguards that the\nproduct \"is being imported in (such) increased quantities\".\nE. CLAIMS RELATING TO CAUSATION\n10.278 As a preliminary point, the Panel notes that it has assumed for the purposes of its\nconsideration of the issue of causation, that serious injury or threat thereof to all relevant domestic\nproducers of the like or directly competitive products within the meaning of Article 4.2(a) of the\nAgreement on Safeguards, existed with respect to each of the safeguard measures at issue. The Panel\nhas also assumed that the relevant domestic producers had been correctly defined, within the meaning\nof Article 4.1(c) of the Agreement on Safeguards. Of course, if there was no serious injury (or threat\nthereof) at all, serious injury could not have been caused by increased imports.\n1. Claims and arguments of the parties\n10.279 The arguments of the parties are set out in Section VII.H.1-3 supra. I n s u m m a r y , t h e\ncomplainants claim that: (i) the USITC determinatio n(s) failed to establish the necessary causal link\nbetween increased imports and serious injury for each of the US measures; and (ii) the USITC failed\nto comply with the obligation that injury from other factors not be attributed to imports, contrary to\nthe requirements of Article XIX of GATT 1994, and Articles 2.1 and 4.2(b) of the Agreement on\nSafeguards.\n\n5149 USITC Report, Vol. I, pp. 214-215.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n2. Relevant WTO provisions5150\n10.280 Article 2.1 of the Agreement on Safeguards provides that:\n\"A Member may apply a safeguard measure to a product only if that Member has\ndetermined, pursuant to the provisions set out below, that such product is being\nimported into its territory in such increased quantities, absolute or relative to domestic\nproduction, and under such conditions as to cause or threaten to cause serious injury\nto the domestic industry that produces like or directly competitive products.\"\n(footnote omitted)\n10.281 Article 4.2(a) provides that:\n\"In the investigation to determine whether increased imports have caused or are\nthreatening to cause serious injury to a domestic industry under the terms of this\nAgreement, the competent authorities shall evaluate all relevant factors of an\nobjective and quantifiable nature having a bearing on the situation of that industry, in\nparticular, the rate and amount of the increase in imports of the product concerned in\nabsolute and relative terms, the share of the domestic market taken by increased\nimports, changes in the level of sales, production, productivity, capacity utilization,\nprofits and losses, and employment.\"\n10.282 In addition, Article 4.2(b) provides that:\n\"The determination referred to in subparagraph (a) shall not be made unless this\ninvestigation demonstrates, on the basis of objective evidence, the existence of the\ncausal link between increased imports of the product concerned and serious injury or\nthreat thereof. When factors other than increased imports are causing injury to the\ndomestic industry at the same time, such injury shall not be attributed to increased\nimports.\"\n3. Standard of review\n10.283 We recall that, as the Appellate Body has stated, the precise nature of the examination to be\nconducted by a panel in reviewing a claim under Article 4.2 of the Agreement on Safeguards stems in\npart from the panel's obligation to make an \"objective assessment of the matter\" under Article 11 of\nthe DSU and, in part, from the obligations imposed by Article 4.2.\n5151 Article 11 requires us to make\nan objective assessment of the facts and the applicability and conformity of the measures in question\nin this dispute with the Agreement on Safeguards.\n5152\n\n5150 The Panel is aware that Article XIX is relevant to the issue of causation but that Article 2.1 and, in\nparticular, Article 4.2(b) of the Agreement on Safeguards address the issue of causation more specifically. The\nPanel is also aware that some complainants have raised causation claims pursuant to Article XIX of GATT as\nwell as pursuant to the Agreement on Safeguards. However, the Panel considers that it need not to examine the\nrelationship between Article XIX and the Agreement on Safeguards with regard to the causation to resolve the\ncomplainants' claims relating to causation. Therefore, the Panel has addressed the issue of causation by\nreferring exclusively to the relevant provisions contained in the Agreement on Safeguards. We believe that this\napproach does not diminish the rights of the parties in this dispute.\n5151 Appellate Body Report, US – Lamb, para. 105.\n5152 Appellate Body Report, Argentina – Footwear (EC), para. 120.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.284 In addition, the Appellate Body has provided us with specific guidance with respect to the\napplication of the standard of review in cases involving claims under Article 4 of the Agreement on\nSafeguards. In particular, in Argentina – Footwear (EC), the Appellate Body stated that the Panel in\nthat case was obliged by the terms of Article 4 to assess whether the competent authorities had\nexamined all the relevant facts and had provided a reasoned explanation. 5153 In US – Lamb , the\nAppellate Body added that a panel can assess whether the competent authority's explanation for its\ndetermination is reasoned and adequate only if the panel critically examines that explanation in depth\nand in the light of the facts before the panel. The Appellate Body stated that, therefore, panels must\nreview whether the competent authorities' explanation fully addresses the nature, and, especially, the\ncomplexities, of the data, and responds to other plausible interpretations of that data. A panel must\nfind, in particular, that an explanation is not reasoned, or is not adequate, if some alternative\nexplanation of the facts is plausible, and if th e competent authorities' explanation does not seem\nadequate in the light of that alternative explanation.\n5154 Further, the Appellate Body in US – Line Pipe\nstated that a mere assertion that injury caused by other factors has not been attributed to increased\nimports does not establish explicitly with a reasoned and adequate explanation that injury caused by\nfactors other than increased imports was not attributed to increased imports.\n5155\n10.285 We have further guidance as to how to apply the standard of review in relation to the\ncompetent authorities' causation analysis. In particular, in Argentina – Footwear (EC) , the panel 5156\nstated:\n\"Applying our standard of review, we wi ll consider whether Argentina's causation\nanalysis meets these requirements on the basis of (i) whether an upward trend in\nimports coincides with downward trends in the injury factors, and if not, whether a\nreasoned explanation is provided as to why nevertheless the data show causation; (ii)\nwhether the conditions of competition in the Argentine footwear market between\nimported and domestic footwear as analysed demonstrate, on the basis of objective\nevidence, a causal link of the imports to any injury; and (iii) whether other relevant\nfactors have been analysed and whether it is established that injury caused by factors\nother than imports has not been attributed to imports.\"5157\n4. Analysis by the Panel\n10.286 The first sentence of Article 4.2(b) of the Agreement on Safeguards provides that, in\ndetermining whether increased imports have caused or are threatening to cause serious injury to a\ndomestic industry under Article 4.2(a), a competent authority must demonstrate, \"on the basis of\nobjective evidence, the existence of the causal link between increased imports of the product\nconcerned and serious injury or threat thereof.\"\n10.287 In US – Wheat Gluten , the Appellate Body interpreted the reference to \"the causal link\" in\nArticle 4.2(b) and concluded that it effectively requires a finding of a \"genuine and substantial\nrelationship of cause and effect\" between increased imports and serious injury. 5158 Nevertheless,\n\n5153 Appellate Body Report, Argentina – Footwear (EC), para. 121.\n5154 Appellate Body Report, US – Lamb, para. 106.\n5155 Appellate Body Report, US – Line Pipe, para. 220.\n5156 While the Appellate Body in Argentina – Footwear (EC) did not specifically comment on these\ncausation findings, it did state that it saw \"no error in the Panel's interpretation of the causation requirements, or\nin its interpretation of Article 4.2(b) of the Agreement on Safeguards \": Appellate Body Report, Argentina –\nFootwear (EC), para. 145.\n5157 Panel Report, Argentina – Footwear (EC), para. 8.229.\n5158 Appellate Body Report, US – Wheat Gluten, para. 69.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nquestions arise as to what is entailed in such a requirement. More particularly, how should the first\nand second sentences of Article 4.2(b) be operationalized to meet this requirement? The Panel\nconsiders that important issues to be addressed in th is regard include the following. The first is the\nstandard or threshold that should apply in dete rmining whether or not a \"genuine and substantial\nrelationship of cause and effect\" exists. The second is the issue of how (that is, using which analytical\ntools) a causal link can be established for the purposes of Article 4.2(b). The third is concerned with\nthe non-attribution requirement provided for in the second sentence of Article 4.2(b) – how it is to be\nperformed and its relationship with the overall demonstration of a causal link.\n(a) Standard for assessment of the \"causal link\"\n10.288 We commence with the first issue referred to above, namely the standard or threshold that\nshould apply in determining whether or not a \"genuine and substantial relationship of cause and\neffect\" exists. At the outset, the Panel notes that the Appellate Body in US – Wheat Gluten found that\n\"[T]he first sentence of Article 4.2(b) … provides that a determination 'shall not be\nmade unless [the] investigation demonstrates … the existence of the causal link\nbetween increased imports … and serious injury or threat thereof.' (emphasis added)\nThus, the requirement for a determination, under Article 4.2(a), is that 'the causal link'\nexists. The word 'causal' means 'relating to a cause or causes', while the word 'cause',\nin turn, denotes a relationship between, at least, two elements, whereby the first\nelement has, in some way, 'brought about', 'produced' or 'induced' the existence of the\nsecond element.\n5159 The word 'link' indicates simply that increased imports have\nplayed a part in, or contributed to, bringing about serious injury so that there is a\ncausal 'connection'5160 or 'nexus' between these two elements. Taking these words\ntogether, the term 'the causal link' denotes, in our view, a relationship of cause and\neffect such that increased imports contribute to 'bringing about', 'producing' or\n'inducing' the serious injury. Although that contribution must be sufficiently clear as\nto establish the existence of 'the causal link' required, the language in the first\nsentence of Article 4.2(b) does not suggest that increased imports be the sole cause of\nthe serious injury, or that ' other factors' causing injury must be excluded from the\ndetermination of serious injury. To the contrary, the language of Article 4.2(b), as a\nwhole, suggests that 'the causal link' be tween increased imports and serious injury\nmay exist, even though other factors are also contributing, 'at the same time', to the\nsituation of the domestic industry.\"\n5161\n10.289 In US – Lamb , the Appellate Body reiterated that the Agreement on Safeguards does not\nrequire that increased imports alone be capable of causing, or threatening to cause, serious injury. 5162\nIn addition, the Appellate Body in US – Wheat Gluten found that the causation requirement of\nArticle 4.2(b) can be met where serious injury is caused by the interplay of increased imports and\nother factors. 5163\n10.290 It is clear to the Panel that, in order to meet the causation requirements in Article 4.2(b), it is\nnot necessary for the competent authority to show that increased imports alone must be capable of\n\n5159 (original footnote) The New Shorter Oxford English Dictionary , supra, footnote 43, Vol. I, pp. 355\nand 356.\n5160 (original footnote) Ibid., p. 1598.\n5161 Appellate Body Report, US – Wheat Gluten, para. 67.\n5162 Appellate Body Report, US – Lamb, paras. 165-170.\n5163 Appellate Body Report, US – Wheat Gluten, paras. 67-68.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncausing serious injury. 5164 Rather, if a number of factors have caused serious injury, a causal link may\nbe demonstrated if the increased imports have, in some way, contributed to \"bringing about\",\n\"producing\" or \"inducing\" the serious injury. In this regard, the Appellate Body in US – Wheat\nGluten concluded that the contribution must be sufficiently clear as to establish the existence of \"the\ncausal link\" required5165 but rejected the panel's conclusion that the serious injury must be caused by\nthe increased imports alone and that the increased imports had to be sufficient to cause \"serious\"\ninjury.5166\n10.291 The Panel notes that the United States has argued that, on the basis of the standard dictionary\ndefinitions of the words \"substantial\" and \"important\", the words have essentially the same meaning\nwhen used to define the weight that must be given to a particular factor in a decision or an\nanalysis.\n5167 The United States further argues that, therefore, by requiring the USITC to find that\nincreased imports are an \"important\" cause of injury and as important as any other cause, the United\nStates' safeguards statute ensures that the USITC finds a \"genuine and substantial\" causal link\nbetween imports and serious injury before issuing an affirmative safeguards finding.5168\n10.292 The Panel considers that the mere fact that the literal definitions of \"important\" and\n\"substantial\" may be considered by some to be \"equivalent\" is not necessarily relevant. In our view,\nwhat is important for this Panel is whether the test applied by the USITC for each of the safeguard\nmeasures at issue meets the standard or threshold prescribed by the requirement that there be a\n\"genuine and substantial\" relationship of cause and effect between the increased imports and the\nserious injury. We will discuss this further in the measure-by-measure analysis, which we undertake\nbelow.\n10.293 Finally, the Panel recalls that serious injury within the meaning of Article 4.2(a) of the\nAgreement on Safeguards is to be determined wi th reference to the \"overall impairment in the\nposition of the domestic industry\". Similarly, as further developed below, we believe that pursuant to\nArticles 2 and 4 of the Agreement on Safeguards, a competent authority must determine whether\n\"overall\", a genuine and substantial relationship of cause and effect exists between increased imports\nand serious injury suffered by the relevant domestic producers.\n(b) Demonstration of a causal link\n10.294 We proceed with the second issue referred to above, namely the question of how a causal link\ncan be demonstrated for the purposes of Article 4.2(b) of the Agreement on Safeguards. The Panel\nnotes first that Article 4.2(b) does not prescribe the use of any particular methods or analytical tools\nfor demonstrating a causal link.\n5169 The Panel is of the view that it is for the competent authority to\ndecide the method it considers most appropriate in making a causal link determination. While the\nmethods to determine causal link are not prescribed by Article 4.2(b), the competent authority should\nbe encouraged to perform this analysis as thoroughly as the circumstances require. Whatever tool or\nmethod is used, it must be capable of determining whether or not a genuine and substantial\nrelationship of cause and effect exists between the increased imports and the serious injury suffered\nby the relevant domestic producers.\n\n5164 Appellate Body Report, US – Wheat Gluten, para. 70.\n5165 Appellate Body Report, US – Wheat Gluten, paras. 66 and 69.\n5166 Appellate Body Report, US – Wheat Gluten, para. 61 ff and 79.\n5167 United States' first written submission, paras. 442 and 443.\n5168 United States' first written submission, paras. 442 and 443.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.295 This dispute raises the issue of the role that analyses of coincidence and conditions of\ncompetition must or may play in the demonstration of a causal link under Article 4.2(b). More\nparticularly, the Panel considers that this dispute raises the issue of whether a competent authority\nmust undertake a coincidence analysis when determining whether a causal link exists between\nincreased imports and serious injury. We need to consider this issue because for some of the\nmeasures that are the subject of our review in this case, the USITC did not perform a coincidence\nanalysis. Rather, the USITC limited itself to an analysis of the conditions of competition. We note in\nthis regard that the USITC did not in its Report explicitly make a distinction between coincidence and\nconditions of competition analyses. Both types of analyses were undertaken by the USITC either\nindividually or in conjunction in the section of the USITC Report containing its causation analysis.\n10.296 Indeed, the characterization of the analyses undertaken by the USITC as coincidence and/or\nconditions of competition analyses is something that was done by the Panel for a number of reasons,\nwhich are further elaborated below. First, we note that the Agreement on Safeguards does not\nprescribe how causal link should be demonstrated. At the same time, WTO jurisprudence indicates\nthat coincidence is central to a causation analysis. In this regard, a number of complainants have\nargued that the failure by the USITC to undertake a coincidence analysis in relation to some of the\nsafeguard measures was fatal. Finally, the Panel is of the view that tools other than a coincidence\nanalysis, such as a conditions of competition analysis, could also be used to establish a causal link\nunder Article 4.2(b). We, therefore, developed an analytical framework to assess whether, in light of\nthe circumstances of the causation determinations for each of the measures, the USITC demonstrated,\nthrough a reasoned and adequate explanation, that the facts supported its findings that causation\nexisted. The Panel explains hereafter its understanding of what is entailed in coincidence and\nconditions of competition analyses. As a preliminary point, the Panel notes that in making this\ndistinction between the types of analyses undertaken by the USITC, we have looked at the substance\nof the analyses undertaken rather than the labels used by the USITC in its Report.\n(i) Coincidence\n10.297 We first consider the role that a coincidence analysis plays in the context of the causal link\nanalysis that is demanded by Article 4.2(b) of the Agreement on Safeguards. In this regard, the Panel\nrecalls that the panel in Argentina – Footwear (EC) stated that Article 4.2(a) \"requires\" national\nauthorities to analyse trends in both injury fact ors and imports. The panel considered that such an\nanalysis was relevant in relation to a causation assessment:\n\"In making our assessment of the causation analysis and finding, we note in the first\ninstance that Article 4.2(a) requires the authority to consider the 'rate' (i.e., direction\nand speed) and 'amount' of the increase in imports and the share of the market taken\nby imports, as well as the 'changes' in the injury factors (sales, production,\nproductivity, capacity utilization, profits and losses, and employment) in reaching a\nconclusion as to injury and causation. As noted above we consider that this language\nmeans that the trends – in both the injury factors and the imports – matter as much as\ntheir absolute levels. In the particular context of a causation analysis, we also\nbelieve that this provision means that it is the relationship between the movements in\nimports (volume and market share) and the mo vements in injury factors that must be\ncentral to a causation analysis and determination.\"\n5170 (emphasis added)\n10.298 The Appellate Body agreed with the panel and observed:\n\n5170 Panel Report, Argentina – Footwear (EC), para. 8.237.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"We see no reason to disagree with the Panel's interpretation that the words 'rate and\namount' and 'changes' in Article 4.2(a) mean that 'the trends – in both the injury\nfactors and the imports – matter as much as their absolute levels'. We also agree with\nthe Panel that, in an analysis of causation, 'it is the relationship between the\nmovements in imports (volume and market share) and the movements in injury factors\nthat must be central to a causation analysis and determination.' \"\n5171 (emphasis added)\n10.299 We understand from the foregoing, firstly, that the term \"coincidence\" refers to the\nrelationship between the movements in imports and the movements in injury factors. The panel and\nAppellate Body made it clear that, in considering movements in imports, it is necessary to look at\nmovements in import volumes and import market shares. 5172 In our view, the word \"coincidence\" in\nthe current context refers to the temporal relationship between the movements in imports and the\nmovements in injury factors. In other words, upward movements in imports should normally occur at\nthe same time as downward movements in injury fact ors in order for coincidence to exist. We note\nthat, below, we qualify these comments to take account of cases where a lag exists between the influx\nof imports and the manifestation of the effects of injury suffered by the domestic industry.\n10.300 Secondly, the above indicates that the Appellate Body considers that \"coincidence\" between\nmovements or trends in imports and movements or trends in the relevant injury factors plays a\n\"central\" role in determining whether or not a causal link exists. Indeed, both the panel and the\nAppellate Body in Argentina – Footwear (EC) stated that the relationship between the movements in\nimports and the movements in injury factors must be central to a causation analysis. We also note that\nthe same panel, supported by the Appellate Body 5173 went on to state that \"[I]n practical terms, we\nbelieve therefore that [Article 4.2(a)] means that if causation is present, an increase in imports\nnormally should coincide with a decline in the relevant injury factors.\"5174\n10.301 The Panel is of the view that since coincidence is \"central\" to a causation analysis, a\ncompetent authority should \"normally\" undertake a coincidence analysis when determining the\nexistence of a causal link. We believe that in situations where the effects of injurious factors other\nthan increased imports have not been attributed to increased imports 5175, overall clear coincidence\nbetween movements in imports and movements in injury factors will provide a competent authority\nwith an adequate basis upon which to conclude that a genuine and substantial relationship of cause\nand effect between increased imports and serious injury exists.\n10.302 As mentioned, the Panel is also of the view that overall coincidence is what matters and not\nwhether coincidence or lack thereof can be shown in relation to a few select factors which the\ncompetent authority has considered. We refer in this regard to the panel's decision in US – Wheat\nGluten, where it stated that:\n\"[I]n light of the overall coincidence of the upward trend in increased imports and the\nnegative trend in injury factors over the period of investigation, the existence of slight\nabsences of coincidence in the movement of individual injury factors in relation to\n\n5171 Appellate Body Report, Argentina – Footwear (EC), para. 144.\n5172 Significantly, no mention was made by the panel and the Appellate Body in Argentina – Footwear\n(EC) to movements in import prices. We will discuss the relevance of this in the succeeding section of our\nfindings dealing with \"conditions of competition\".\n5173 Appellate Body Report, Argentina – Footwear (EC), para. 144.\n5174 Panel Report, Argentina – Footwear (EC), para. 8.238.\n5175 That is, in compliance with the non-attribution requirements as discussed in paras. 10.325-10.334\ninfra.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports would not preclude a finding by the USITC of a causal link between\nincreased imports and serious injury.\" 5176\n10.303 In the present dispute, the question arises as to how a causal link must be established for the\npurposes of Article 4.2(b) in cases where there is an absence of coincidence . By absence of\ncoincidence we mean situations where coincidence does not exist or an analysis of coincidence has\nnot been undertaken. In this regard, we agree with statements made by the panel and Appellate Body\nin Argentina – Footwear (EC) and the panel in US – Wheat Gluten, that coincidence in movements in\nimports and the movements in injury factors would ordinarily tend to support a finding of causation,\nwhile the absence of such coincidence would ordinarily tend to detract from such a finding and would\nrequire a compelling explanation as to why a causal link is still present.5177\n10.304 We also recall that the panel in Argentina – Footwear (EC) , supported by the Appellate\nBody5178, as well as the panel in US – Wheat Gluten 5179, noted that, in situations where a causal link\nexists, \"an increase in imports normally should coincide with a decline in the relevant injury factors\"\nand \"coincidence… would ordinarily tend to support a finding of causation.\" In our view, even when\ncoincidence does not exist or an analysis of coincidence has not been undertaken, a competent\nauthority may still be able to demonstrate the existence of a causal link if it can offer a compelling\nexplanation that such causal link exists.\n10.305 The Panel emphasizes that the Appellate Body in Argentina – Footwear (EC) upheld the\npanel's statement that \"coincidence by itself cannot prove causation\" (emphasis added).\n5180 The Panel\nconsiders that there are situations where a coincidence analysis may not suffice to prove causation or\nwhere the facts may not support a clear finding of coincidence and that, therefore, such situations may\ncall for further demonstration of the existence of a causal link. Indeed, there may be situations where\na competent authority, as part of its overall demonstration of the existence of a causal link, undertakes\ndifferent analyses, with a view to proving that a genuine and substantial relationship of cause and\neffect exists between increased imports and serious injury.\n10.306 In our view, there may be cases where: (i) a coincidence analysis has been undertaken and\nshows clear coincidence between movements in imports and movements in injury factors; (ii) as part\nof its overall demonstration of causal link, the competent authority has undertaken, inter alia , a\ncoincidence analysis which, in and of itself, does not fully demonstrate the existence of a causal link\nand further analysis is undertaken; (iii) a coincidence analysis has been undertaken (with or without\nany other analysis) but it does not demonstrate any coincidence; and, finally, (iv) a coincidence\nanalysis has not been undertaken but other analytical tools have been used with a view to proving a\ncausal link.\n5181\n10.307 We are of the view that in all cases, the competent authority must provide a reasoned and\nadequate explanation of its causal link findings. In the first case (i), assuming fulfilment of the non-\nattribution requirement, when clear coincidence exists, no further analysis is required of the\n\n5176 Panel Report, US – Wheat Gluten, para. 8.101.\n5177 Panel Report, US – Wheat Gluten , para. 8.95; Panel Report, Argentina – Footwear (EC ),\nparas. 8.237-8.238; Appellate Body Report, Argentina – Footwear (EC), para. 144.\n5178 Panel Report, Argentina – Footwear (EC ), paras. 8.238; Appellate Body Report, Argentina –\nFootwear (EC), para. 144.\n5179 Panel Report, US – Wheat Gluten, para. 8.95.\n5180 Panel Report, Argentina – Footwear (EC ), paras. 8.237-8.238; Appellate Body Report, Argentina\n– Footwear (EC), para. 144.\n5181 These are situations that the Panel has encountere d in this case. This is not to say that other\nsituations may not exist.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncompetent authority and the Panel will confine its review to the coincidence analysis. In the second\ncase (ii), the Panel will examine both the coincidence analysis and the other analysis undertaken by\nthe competent authority with a view to assessing whether the competent authority has provided a\nreasoned and adequate explanation that, overall, a genuine and substantial relationship of cause and\neffects exists between increased imports and serious injury.\n10.308 In cases (iii) and (iv), the competent authority should explain the absence of coincidence or\nwhy a coincidence analysis was not undertaken and provide, in particular, a compelling explanation as\nto why a causal link exists notwithstanding the abse nce of coincidence. Ultimately, it is for the\ncompetent authority to decide upon the analytical tool it considers most appropriate to perform this\ncompelling analysis in demonstrating the existence of a causal link.\n10.309 Another issue that has arisen in the present dispute is whether or not coincidence can be\nconsidered to exist in cases where there is a temporal lag between the influx of imports and the\nmanifestation of the effects of such an influx on the domestic industry. More particularly, the United\nStates has argued that a lag or delay in the manifestation of certain injury factors may be attributed to\nthe delayed effect of increased imports on certain factors, such as employment and bankruptcy.\n5182 A\nnumber of the complainants argue, on the other hand, that the nature of the markets involved in the\npresent case is such that such a lag effect could not exist. They submit that the effect of the increased\nimports should be felt immediately and that a lag of two years, which they submit existed in the\npresent case, is too long.5183\n10.310 The Panel considers that the argument by the United States of a lag between the increased\nimports and the manifestation of the effects of such increased imports on the domestic industry may\nhave merit in certain cases. More particularly, in our view, there may be instances in which injury\nmay be suffered by an industry at the same point in time as the influx of increased imports. However,\nthe injury that is caused at that point in time ma y not become apparent until some later point in time.\nIn other words, there may be a lag between the influx of imports and the manifestation of the injurious\neffects on the domestic industry of such an influx.\n10.311 We find support for this view from the panel's decision in Egypt – Steel Rebar . There, the\npanel rejected Turkey's contention that there must be a strict temporal connection between the\ndumped imports and any injury being suffered by the industry5184, noting that this argument:\n\"[R]est[ed] on the quite artificial assumption that the market instantly absorbs, and\nreacts to, imports the moment they enter the territory of the importing company.\nSuch an assumption implicitly rests on the existence of so-called \"perfect\ninformation\" in the market (i.e., that all actors in the market are instantly aware of all\nmarket signals.)\"5185\nNevertheless, we note that, in that case, the lag between the effects of imports on a market that the\npanel suggested was acceptable was, at most, a year in duration.\n\n5182 United States' first written submission, paras. 446, 448 and 449; United States' second written\nsubmission, paras. 119-122.\n5183 Japan's written reply to Panel question No. 86 at the first substantive meeting; Korea's second\nwritten submission, para. 141; Brazil's written reply to Panel question No. 86 at the first substantive meeting.\n5184 Panel Report, Egypt – Steel Rebar, paras. 7.127-7.132.\n5185 Panel Report, Egypt – Steel Rebar, para. 7.129.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.312 The Panel considers that there are limits in temporal terms on the length of lags between\nincreased imports and the manifestation of the effects that are acceptable for the purposes of a\ncoincidence analysis under Article 4.2(b) of the Agreement on Safeguards. The limits that apply\nwould, undoubtedly, vary from industry to industry and factor to factor. Generally speaking, the more\nrigid the market structure associated with a particular industry, the more likely a lag in effects would\nexist, at least in relation to some factors. Conver sely, the more competitive the market structure, the\nless tenable it is that lagged effects could be expected. In addition, the Panel considers that while lags\nmay be expected in relation to some factors (for example, employment), lags in the manifestation of\neffects are less likely to exist in relation to other injury factors such as production, inventories and\ncapacity utilization, which, ordinarily, would react relatively quickly to changes taking place in the\nmarket, such as an influx of imports if increased imports are causing serious injury. If the competent\nauthority does rely upon a lag as between the increa sed imports and the injury factors, we consider\nthat such a lag must be fully explained by the competent authority on the basis of objective data.\n(ii) Conditions of competition\n10.313 The Panel recalls that while coincidence plays a central role in determining whether or not a\ncausal link exists, other analytical tools may also come in to play.\n10.314 As mentioned above, there may be cases, for instance, where a competent authority does not\nundertake a coincidence analysis or does so, but the facts do not support a finding of causal link on\nthe basis of such an analysis. In such situations, reference could be made to the conditions of\ncompetition as between imports and domestic products with a view to providing a compelling\nexplanation, in the absence of coincidence, as to why a causal link nevertheless exists. Indeed, in our\nview, consideration of the conditions of competition of the market in which the relevant imported and\ndomestic products are being sold may generally prove insightful in respect of the issue of the causal\nrelationship between increased imports and serious injury.\n10.315 There may also be cases where a competent authority considers that it is necessary to support\nits coincidence analysis with another analysis because, for example, coincidence cannot be established\nwith a sufficient degree of certainty. In such situations, the competent authority may rely upon\nanalysis of the conditions of competition to reinforce its causal link demonstration. In such situations,\na panel will review the conditions of competition analysis performed by the competent authority with\na view to assessing whether it provided a reasoned and adequate explanation that, overall, a genuine\nand substantial relationship of cause and effects exists between increased imports and serious injury.\n10.316 We believe that Articles 2.1 and 4.2(a) and (b) confirm the relevance of conditions of\ncompetition when determining causation. Article 2.1 calls for a determination that increased imports\nare occurring \"under such conditions as to cause or threaten to cause serious injury.\" The Appellate\nBody in US – Wheat Gluten interpreted the meaning of \"under such conditions\" in Article 2.1 as\nfollows:\n\"[T]he phrase 'under such conditions' refers generally to the prevailing 'conditions', in\nthe marketplace for the product concerned, when the increase in imports occurs.\nInterpreted in this way, the phrase 'under such conditions' is a shorthand reference to\nthe remaining factors listed in Article 4.2(a), which relate to the overall state of the\ndomestic industry and the domestic market, as well as to other factors 'having a\nbearing on the situation of [the] industry'. The phrase 'under such conditions',\ntherefore, supports the view that, under Articles 4.2(a) and 4.2(b) of the Agreement on\nSafeguards, the competent authorities should determine whether the increase in\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports, not alone, but in conjunction with the other relevant factors, cause serious\ninjury.\"5186\n10.317 We also note that the panels in Argentina – Footwear (EC) and US – Wheat Gluten\nconsidered the conditions of competition in the market between imported and domestic footwear in\nreviewing whether a causal link existed between increased imports and injury. 5187 The Appellate\nBody in Argentina – Footwear (EC) explicitly supported the panel's analysis, stating that: \"[W]e\nagree with the Panel's conclusions that 'the conditions of competition between the imports and the\ndomestic product were not analysed or adequately explained (in particular price)' \".5188\n10.318 The Panel is of the view that the factors that should be considered in a conditions of\ncompetition analysis for the purposes of Article 4.2(b) are not pre-determined but include those\nmentioned in Article 4.2(a). This is so because Articles 4.2(a) and 4.2(b) of the Agreement on\nSafeguards must be given a mutually consistent interpretation.\n5189 We refer in this regard to the\nfollowing comments of the Appellate Body in US – Wheat Gluten:\n\"[B]oth provisions [4.2(a) and 4.2(b)] lay down rules governing a single\ndetermination, made under Article 4.2(a). In our view, it would contradict the\nrequirement in Article 4.2(a) to evaluate – and, thereby, include in the determination\n– the 'bearing' or effect all the relevant factors have on the domestic industry, if those\nsame effects, caused by those same factors, were, with the exception of increased\nimports, to be excluded under Article 4.2(b), as the Panel suggested.\" (emphasis\noriginal)\n5190\n10.319 Given then that the factors referred to in Article 4.2(a) are relevant in defining the conditions\nof competition for the purposes of the causation analysis under Article 4.2(b), in the Panel's view,\nvolume of imports, imports' market share, changes in the level of sales and profit and losses are of\nparticular interest. In addition, we note that the panel in Argentina – Footwear (EC) referred to\nphysical characteristics, quality, service, delivery, technological developments, consumer tastes, and\nother supply and demand factors in the market as factors that could be taken into consideration in\nassessing the conditions of competition in a market for the purposes of a causation analysis.\n5191\n10.320 A consideration of the various factors that have been mentioned provides context for the\nconsideration of price, which, in the Panel's view, is an important, if not the most important, factor in\nanalysing the conditions of competition in a particular market, although consideration of prices is not\nnecessarily mandatory.\n5192 The Panel agrees with the argument advanced by the European\nCommunities insofar as it submits that price will often be relevant to explain how the increased\nvolume of imports caused serious injury.5193 Indeed, we consider that relative price trends as between\n\n5186 Appellate Body Report, US – Wheat Gluten, para. 78.\n5187 Panel Report, Argentina – Footwear (EC) , para. 8.250; Panel Report, US – Wheat Gluten ,\npara. 8.108.\n5188 Appellate Body Report, Argentina – Footwear (EC), para. 145.\n5189 Appellate Body Report, US – Wheat Gluten, para. 73.\n5190 Appellate Body Report, US – Wheat Gluten, para. 73.\n5191 Panel Report, Argentina – Footwear (EC), para. 8.251.\n5192 The Panel agrees with the following comments made by the panel in Korea – Dairy at para. 7.51 in\nthis regard: \"Although the prices of the imported products will most often be a relevant factor indicating how\nthe imports do, in fact, cause serious injury to the domestic industry, we note that there is no explicit\nrequirement in Article 2, that the importing Member perform a price analysis of the imported products and the\nprices of the like or directly competitive products in the market of the importing country.\"\n5193 European Communities' written reply to Panel's question No. 29 at the second substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports and domestic products will often be a good indicator of whether injury is being transmitted to\nthe domestic industry (provided that the market context for such trends are borne in mind) given that\nprice changes have an immediate effect on profitability, all other things being equal. In turn,\nprofitability is a useful measure of the state of the domestic industry.\n10.321 The relevance of price in the analysis of the conditions of competition appears to be supported\nby comments made by the panel in Argentina – Footwear (EC).\n5194 Further, the panel in US – Wheat\nGluten was of the view that a price analysis is potentially relevant, although not necessarily\nmandatory:\n\"'Price' is not expressly listed in Article 4.2(a) [of the Agreement on Safeguards\n('SA')] as a 'relevant factor' having a bearing on the situation of the domestic industry.\nHowever, this is not to say that 'price' may not be a relevant factor in a given case.\nAn imported product can compete with a domestic product in various ways in the\nmarket of the importing country. Clearly, the relative price of the imported product is\none of these ways, but it is certainly not the only way, and it may be irrelevant or only\nmarginally relevant in a given case.\nTherefore, in the context of safeguards measures, the relevance of 'price' will vary\nfrom case to case, in light of the particular circumstances and the nature of the\nparticular product and domestic industry involved. Given that this is the nature of the\n'price' factor under the Agreement on Safeguards, we consider that the phrase 'under\nsuch conditions' does not necessarily, in every case, require a price analysis.\"\n5195\n10.322 With respect to the argument made by the European Communities that if imports are sold at a\nhigher price than domestic products, it is unlikely that such imports are responsible for any serious\ninjury5196, the Panel considers that the existence or absence of underselling by imports cannot, on its\nown, lead to a definitive conclusion regarding the presence or otherwise of a causal link between the\nincreased imports and the serious injury. In our view, pricing trends must always be considered in\ncontext. It is only after this contextual consideration that conclusions can be drawn regarding the\nexistence or otherwise of the causal link.\n10.323 As to how detailed an analysis of the conditions of competition must be, the Panel is of the\nview that the more complicated the factual situatio n, the more important it is for a number of factors\nto be taken into consideration.\n5197 In this regard, the Panel agrees with the following statement by the\npanel in Argentina – Footwear (EC) , particularly in relation to CCFRS, which will be discussed\nfurther below:\n\"We note in this regard that there would seem to be a relationship between the depth\nof detail and degree of specificity required in a causation analysis and the breadth and\nheterogeneity of the like or directly competitive product definition. Where as here a\nvery broad product definition is used, within which there is considerable\nheterogeneity, the analysis of the conditions of competition must go considerably\nbeyond mere statistical comparisons for imports and the industry as a whole, as given\ntheir breadth, the statistics for the industry and the imports as a whole will only show\naverages, and therefore will not be able to provide sufficiently specific information on\n\n5194 Panel Report, Argentina – Footwear (EC), para. 8.251.\n5195 Panel Report, US – Wheat Gluten, paras. 8.109-8.110.\n5196 European Communities' written reply to Panel's question No. 29 at the second substantive meeting.\n5197 Panel Report, Argentina – Footwear (EC), para. 8.261, footnote 557.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe locus of competition in the market. With regard to the present case, we do not\ndisagree that a quite detailed investigation of the industry was conducted, in which a\ngreat deal of statistical and other information was amassed. What in our view was\nmissing was a detailed analysis, on the basis of objective evidence, of the imports and\nof how in concrete terms those imports caused the injury found to exist in 1995. In\nthis regard, we note that Act 338 contains a section entitled 'Conditions of\ncompetition between the domestic products and imports'. This section does not\ncontain such a detailed analysis, however, but rather summarizes questionnaire\nresponses from domestic producers about their strategies for 'fending off foreign\ncompetition', and from importers and domestic producers concerning 'the sales mix'\nof domestic products and imports, including their overall views about quality and\nother issues concerning domestic and imported footwear, with the importers stressing\nthe benefits of imports. This summary of subjective statements by questionnaire\nrespondents does not constitute an analysis of the 'conditions of competition' by the\nauthority on the basis of objective evidence.\"\n5198\n10.324 The Panel will consider in detail below in its measure-by-measure analysis the relevance of\nthe conditions of competition for the purposes of determining whether the USITC provided a reasoned\nand adequate explanation that the facts supported a determination that a causal link existed in the\ncontext of a number of the safeguard measures at issue in this dispute.\n(iii) Non-attribution\n10.325 A third important issue arising in a causation analysis is the non-attribution requirement. The\nsecond sentence of Article 4.2(b) provides that:\n\"When factors other than increased imports are causing injury to the domestic\nindustry at the same time, such injury shall not be attributed to increased imports.\"\n10.326 The above makes it clear that in cases where factors other than increased imports have caused\ninjury to the domestic industry, a \"non-attribution\" exercise must be undertaken pursuant to the\nsecond sentence of Article 4.2(b). As noted by the Appellate Body 5199, it is precisely because there\nmay be several factors, besides increased imports, contributing simultaneously to the situation of the\ndomestic industry that the last sentence of Article 4.2(b) states that competent authorities \"shall not …\nattribute\" to increased imports injury caused by other factors.\n10.327 The scope of the non-attribution requirement has been articulated by the Appellate Body on a\nnumber of occasions. In its discussion of the non-attribution requirement, the Appellate Body in US –\nWheat Gluten stated that:\n\"Article 4.2(b) presupposes, therefore, as a first step in the competent authorities'\nexamination of causation, that the injurious effects caused to the domestic industry by\nincreased imports are distinguished from the injurious effects caused by other factors.\nThe competent authorities can then, as a second step in their examination, attribute to\nincreased imports, on the one hand, and, by implication, to other relevant factors, on\nthe other hand, 'injury' caused by all of these different factors, including increased\nimports. Through this two stage process, the competent authorities comply with\nArticle 4.2(b) by ensuring that any injury to the domestic industry that was actually\n\n5198 Panel Report, Argentina – Footwear (EC), para. 8.261, footnote 557.\n5199 Appellate Body Report, US – Wheat Gluten, para. 68.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncaused by factors other than increased imports is not 'attributed' to increased imports\nand is, therefore, not treated as if it were injury caused by increased imports, when it\nis not. In this way, the competent authorities determine, as a final step, whether 'the\ncausal link' exists between increased imports and serious injury, and whether this\ncausal link involves a genuine and substantial relationship of cause and effect\nbetween these two elements, as required by the Agreement on Safeguards.\"\n5200\n10.328 The Appellate Body in US – Lamb emphasized that the three steps mentioned in US – Wheat\nGluten simply describe a logical process for complying with the obligations relating to causation set\nout in Article 4.2(b). It further stated that these steps are not legal \"tests\" mandated by the text of the\nAgreement on Safeguards, nor is it imperative that each step be the subject of a separate finding or a\nreasoned conclusion by the competent authorities.\n5201 Nevertheless, it concluded that the primary\nobjective of the process described in US – Wheat Gluten is to determine whether there is \"a genuine\nand substantial relationship of cause and effect\" between increased imports and serious injury or\nthreat thereof.5202\n10.329 On the basis of its findings in US – Wheat Gluten 5203, US – Lamb 5204 and US – Hot-Rolled\nSteel5205, the Appellate Body in US – Line Pipe stated that:\n\"Article 4.2(b), last sentence, requires that, when factors other than increased imports\nare causing injury at the same time as increased imports, competent authorities must\nensure that injury caused to the domestic industry by other factors is not attributed to\nthe increased imports. We have previously ruled, and we reaffirm now, that, to fulfill\nthis requirement, competent authorities must separate and distinguish the injurious\neffects of the increased imports from the injurious effects of the other factors.\n 5206 As\nwe ruled in US – Hot-Rolled Steel with respect to the similar requirement in\nArticle 3.5 of the Anti-Dumping Agreement, so, too, we are of the view that, with\nrespect to Article 4.2(b), last sentence, competent authorities are required to identify\nthe nature and extent of the injurious effects of the known factors other than increased\nimports, as well as explain satisfactorily the nature and extent of the injurious effects\nof those other factors as distinguished from the injurious effects of the increased\nimports.\"\n5207\n10.330 The Appellate Body in US – Line Pipe further added that to fulfil the requirement contained\nin the second sentence of Article 4.2(b), the competent authority must establish explicitly, through a\nreasoned and adequate explanation, that injury caused by factors other than increased imports is not\nattributed to increased imports. This explanation must be clear and unambiguous. It must not merely\nimply or suggest an explanation. It must be a straightforward explanation in express terms.5208\n\n5200 Appellate Body Report, US – Wheat Gluten, para. 69.\n5201 Appellate Body Report, US – Lamb, para. 178.\n5202 Appellate Body Report, US – Lamb, para. 179.\n5203 Appellate Body Report, US – Wheat Gluten, para. 70.\n5204 Appellate Body Report, US – Lamb, para. 179.\n5205 Appellate Body Report, US – Hot-Rolled Steel, paras. 222, 223, 230 and 214.\n5206 (original footnote) Appellate Body Report, US – Wheat Gluten, , para. 70; Appellate Body Report,\nUS – Lamb, para. 179. In the context of the Anti-Dumping Agreement, see, Appellate Body Report, US – Hot-\nRolled Steel, para. 222.\n5207 Appellate Body Report, US – Line Pipe, para. 215.\n5208 Appellate Body Report, US – Line Pipe, para. 217.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.331 Clearly, when factors other than increased imports are causing or are said to be causing injury\nto the industry, the competent authority must perform a non-attribution exercise to assess the effects\nof these other factors so that injury caused by those other factors is not attributed to increased imports\nwith a view to determining whether a genuine and substantial relationship of cause and effects exist\nbetween increased imports and serious injury to the relevant domestic producers.\n10.332 The Panel notes that purpose of the non-attribution exercise is to enable a competent authority\nto separate and distinguish the effects of increased imports from those caused by factors other than\nincreased imports and, ultimately, to assess the nature and extent of the injurious effects of those other\nfactors as distinguished from the injurious effects of the increased imports. Therefore, the\nrequirement to identify the nature and extent of the injurious effects of factors other than increased\nimports calls for an overall assessment of such \"other factors\". As we see it, Article 4.2(b) is not\nconcerned with the relative importance of individual factors as between themselves or as compared\nwith increased imports. Essentially, Articles 2 and 4 of the Agreement on Safeguards are concerned\nwith the injurious effects of increased imports on the situation of the domestic industry as distinct\nfrom the injurious effects of all \"other factors\".\n10.333 With regard to arguments made by complainants regarding the consistency of the \"substantial\ncause\" test applied by the USITC\n5209 and the Agreement on Safeguards, the Panel notes that the\nAppellate Body in US – Lamb stated that:\n\"[B]y examining the relative causal importance of the different causal factors, the\nUSITC clearly engaged in some kind of process to separate out, and identify, the\neffects of the different factors, including increased imports. Although an examination\nof the relative causal importance of the different causal factors may satisfy the\nrequirements of United States law, such an examination does not, for that reason,\nsatisfy the requirements of the Agreement on Safeguards. On the record before the\nPanel in this case, a review of whether the United States complied with the non-\nattribution language in the second sentence of Article 4.2(b) can only be made in the\nlight of the explanation given by the USITC for its conclusions on the relative causal\nimportance of the increased imports, as distinguished from the injurious effects of the\nother causal factors.\"\n5210\n10.334 In the Panel's view, there is nothing in the substantial cause test applied by the USITC, in\nitself, that would necessarily mean that the obligation to \"separate and distinguish\" the effects of other\ncauses on the state of domestic industry cannot be fulfilled and was not fulfilled in the case of the\nsafeguard measures that are the subject of our review in this case. Nor do we consider that it would\nnecessarily preclude the consideration and evaluation of the nature and extent of the effects of those\nfactors as required by the Agreement on Safeguards. The Panel does, however, believe that whether\nor not the approach that the USITC has adopted for each of the safeguard measures complies with the\nrequirements of the Agreement on Safeguards will depend, in each case, on whether the USITC's\nanalysis \"established explicitly\" on the basis of a \"reasoned and adequate explanation\" that the effect\nof the other factors on the situation of the domestic industry had not been attributed to the increased\nimports. We will consider this issue below in our measure-by-measure analysis.\n\n5209 The Panel recalls that the complainants have not challenged the United States' statute on safeguards\nper se, see at paras 10.6 – 10.8 above.\n5210 Appellate Body Report, US – Lamb, para. 184.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iv) Quantification\n10.335 In their argumentation on the legal standard for causation (as well as for the appropriate\nremedy), parties advanced detailed arguments on the question of whether quantification is required\nand on the use of econometric models.\n10.336 We note, first, that the text of the Agreement on Safeguards does not require quantification.\nHowever, in the Panel's view both the Agreement on Safeguards and relevant jurisprudence anticipate\nthat quantification may occur. In addition, the Panel considers that quantification may be particularly\ndesirable in cases involving complicated factual situations where qualitative analyses may not suffice\nto more fully understand the dynamics of the relevant market.\n10.337 In support, we note that Article 4.2(a) of the Agreement on Safeguards refers to \"factors of [a]\nquantifiable nature.\" As explained in paragraph 10.318 above, we consider that Articles 4.2(a) and\n4.2(b) must be read together and in a mutually consistent fashion. Therefore, the factors referred to in\nArticle 4.2(a) must be taken into consideration in undertaking the non-attribution exercise (in addition\nto any other factors that may be relevant). In addition, the requirement in Article 4.2(a) that evaluated\nfactors be of a \"quantifiable nature\" implies that at least some of the factors assessed in the non-\nattribution exercise will be quantifiable and, in those circumstances, should be quantified.\n10.338 Further, the Panel recalls comments made by the Appellate Body in US – Line Pipe where it\nstated that compliance with Articles 3.1, 4.2(b) and 4.2(c) of the Agreement on Safeguards should\nhave the incidental effect of providing sufficient justification for a measure and should also provide a\nbenchmark against which the permissible extent of the measure should be determined. In particular,\nthe Appellate Body stated that:\n\"We observe here that the non-attribution language of the second sentence of\nArticle 4.2(b) is an important part of the architecture of the Agreement on\nSafeguards and thus serves as necessary context in which Article 5.1, first sentence,\nmust be interpreted. In our view, the non-attribution language of the second sentence\nof Article 4.2(b) has two objectives. First, it seeks, in situations where several factors\ncause injury at the same time, to prevent investigating authorities from inferring the\nrequired 'causal link' between increased imports and serious injury or threat thereof\non the basis of the injurious effects caused by factors other than increased imports.\nSecond, it is a benchmark for ensuring that only an appropriate share of the overall\ninjury is attributed to increased imports. As we read the Agreement, this latter\nobjective, in turn, informs the permissible extent to which the safeguard measure may\nbe applied pursuant to Article 5.1, first sentence. Indeed, as we see it, this is the only\npossible interpretation of the obligation set out in Article 4.2(b), last sentence, that\nensures its consistency with Article 5.1, first sentence. It would be illogical to require\nan investigating authority to ensure that the 'causal link' between increased imports\nand serious injury not be based on the share of injury attributed to factors other than\nincreased imports while, at the same time, permitting a Member to apply a safeguard\nmeasure addressing injury caused by all factors.\"\n5211\n10.339 The Panel considers that quantification could help in identifying the share of the overall injury\ncaused by increased imports, as distinct from the in jury caused by other factors, which would in turn\nyield a \"benchmark\" for ensuring that the safeguard measure is imposed only to the extent necessary to\nprevent or remedy serious injury and allow for adjustments.\n\n5211 Appellate Body Report, US – Line Pipe, para. 252.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.340 In addition, the Panel considers that quantification may, in certain cases, be entailed in the\nobligation on competent authorities to establish non-attribution \"explicitly\" on the basis of a reasoned\nand adequate explanation.5212 In this regard, the Panel recalls that, as stated on several occasions by the\nAppellate Body, WTO Members are expected to in terpret and apply their WTO obligations in good\nfaith.5213 Moreover, in light of the obligations imposed on competent authorities to consider all plausible\nalternative explanations submitted by the interested parties, we believe that a competent authority may\nfind itself in situations where quantification and some form of economic analysis are necessary to rebut\nallegedly plausible alternative explanations that have been put forward. While the wording of the\nprovisions of the Agreement on Safeguards does not require quantification in the causal link analysis per\nse, the circumstances of a specific dispute may call for quantification.\n10.341 Having said that quantification may be desirable, useful and sometimes necessary depending\non the circumstances of a case, the Panel recognizes that quantification may be difficult and is less\nthan perfect. Therefore, the Panel is of the view that the results of such quantification may not\nnecessarily be determinative. We consider that an overall qualitative assessment that takes into\naccount all relevant information, must always be performed. Nevertheless, in the Panel's view, even\nthe most simplistic of quantitative analyses may yield useful insights into the overall dynamics of a\nparticular industry and, in particular, into the nature and extent of injury being caused by factors other\nthan increased imports to a domestic industry.\n10.342 Regarding argumentation by the parties as to the form which quantification should take, the\nPanel considers that this will depend again upon the complexity of the situation under consideration.\nThe approach adopted should enable a competent authority to apportion, even roughly, the injury\nattributable to factors other than increased imports that may come into play in the context of a\nparticular industry. The more complex the situation, the more necessary a sophisticated analysis\nbecomes.\n5214 Whatever approach or model is adopted, it should be applied in good faith and with due\ndiligence.5215 It seems to us that this is demanded by the good faith interpretation and application of\nArticles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards.\n(v) Sequence of assessment\n10.343 As for the sequence of assessment of the various elements that may be involved in\nestablishing the existence of a causal link, the Panel is of the view that the Agreement on Safeguards\ndoes not prescribe any order. The Panel recalls the Appellate Body's comments in US – Lamb, where,\nin defining the steps that might be undertaken in the non-attribution analysis, it stated that \"these steps\nare not legal 'tests' mandated by the text of the Agreement on Safeguards , nor is it imperative that\n\n5212 The Appellate Body in US – Line Pipe stated that a mere assertion that injury caused by other\nfactors has not been attributed to increased imports does not establish ex plicitly with a reasoned and adequate\nexplanation that injury caused by factors other than in creased imports was not attributed to increased imports.:\nAppellate Body Report, US – Line Pipe, para. 220.\n5213 See, for example, Appellate Body Report, US – Offset Act (Byrd Amendment), para. 297 et seq.\n5214 We note in this regard that the United States used econometric models in its demonstration of\ncompliance with Article 5.1 before the Panel.\n5215 In support of our argument that the approach or model used for quantification should be one based\non good faith and due diligence, we refer to the Appellate Body's decision in US – Cotton Yarn, which said the\nexercise of due diligence was required in relation to the obligations under the Agreement on Textiles and\nClothing, being the equivalent to Article 3 of the Agreement on Safeguards (Appellate Body Report, para. 76).\nIn addition, the Appellate Body in US – Offset Act acknowledged the relevance of the principle of good faith as\na general rule of conduct in international relations that controls the exercise of rights by states. The Appellate\nBody stated that there is a basis for a dispute settlement panel to determine, in an appropriate case, whether a\nMember has not acted in good faith. (Appellate Body Report, para. 297 et seq)\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\neach step be the subject of a separate finding or a reasoned conclusion by the competent\nauthorities.\"5216\n10.344 Accordingly, the Panel does not consider that the non-attribution exercise need necessarily\nprecede a consideration of coincidence between the increased imports and the injury factors and the\nconditions of competition or vice versa. The Panel is of the view that the wording of Articles 2.1 and\n4.2 does not require that non-attribution be undertaken in advance of or following any other analysis\nthat may be undertaken with a view to establishing the existence of a causal link. Provided that the\nvarious elements entailed in a causation analysis are considered and analysed in coming to a\nconclusion on the existence or otherwise of a \"causal link\", this should suffice. This much is clear\nfrom the Appellate Body's comments in US – Wheat Gluten and US – Lamb:\n\"[L]ogically, the final identification of the injurious effects caused by increased\nimports must follow a prior separation of the injurious effects of the different causal\nfactors. If the effects of the different factors are not separated and distinguished from\nthe effects of increased imports, there can be no proper assessment of the injury\ncaused by that single and decisive factor. As we also indicated, the final\ndetermination about the existence of 'the causal link' between increased imports and\nserious injury can only be made after the effects of increased imports have been\nproperly assessed, and this assessment, in turn, follows the separation of the effects\ncaused by all the different causal factors.\"\n5217\n10.345 As for the significance of the fact that the US ITC, in a number of instances, may have begun\nits text with a finding of a \"causal link\" before it undertook the non-attribution demonstration, in the\nPanel's view, this does not necessarily entail a violation of Article 4.2(b). In this regard, we\nemphasise the Appellate Body's comment that \"the final determination about the existence of the\n'causal link' between increased imports and serious injury can only be made after the effects of\nincreased imports have been properly assessed, and this assessment in turn follows the separation of\nthe effects caused by all the different factors\". In our view, what matters is whether, ultimately, the\nUSITC's report contains a reasoned and adequate explanation of the various elements that need to be\nestablished under Article 4.2(b).\n10.346 As noted above, it is always incumbent upon a competent authority to determine, including\nthrough compliance with the non-attribution requirement, whether, overall, a genuine and substantial\nrelationship of cause and effect exists between increased imports and serious injury. In this context,\nthe Panel disagrees with the suggestion by Japan and Brazil that, in certain cases, once the effect of\nother factors has been separated and distinguished, the \"connection between the imports and the\nserious injury is ascertained\".\n5218 The Panel is of the view that this assumption cannot be made\nautomatically since the determination of whether a causal link exists always calls for an overall\nassessment.\n\n5216 Appellate Body Report, US – Lamb, para. 178.\n5217 Appellate Body Report, US – Lamb , para. 180; Appellate Body Report, US – Wheat Gluten ,\npara. 69.\n5218 Brazil's written reply to Panel's question No. 87 at the first substantive meeting, Japan's written\nreply to Panel's question No. 87 at the first substantive meeting.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(vi) Imports from free-trade areas – \"other factors\"?\n10.347 The complainants' claims raise the issue of whether imports from free-trade areas that were\nultimately excluded from the application of the safeguard measures had to be treated as an \"other\nfactors\" in the context of the non-attribution exercise that is required under Article 4.2(b).\n10.348 The Panel will review, in the following measure-by-measure analysis, the USITC's causation\nfindings for each specific safeguard measures at issue and contained in its 22 October 2001\ndetermination published in December 2001. That determination treated imports from all sources\ntogether. Since the excluded imports (from Canada, Mexico, Jordan and Israel) were part of all\nimports for the purposes of the October causation analysis, they cannot be simultaneously treated as\nan \"other factor\" and part of \"all imports\" at the same time.\n10.349 In the present case, there was indeed a \"gap\" between the imports covered by the\ndetermination (October 2001) and those covered by the safeguard measures (March 2002). In such a\nsituation, pursuant to the principle of parallelism, the importing Member must establish explicitly that\nimports from sources covered by the measure satisfy the requirements of Articles 2 and 4 of the\nAgreement on Safeguards. The Panel's review of the demonstration of compliance with the principle\nis contained in the following section of our Reports dealing with parallelism. There, we will consider\nhow the USITC treated the exclusion of imports from Canada, Mexico, Jordan and Israel in the\ncontext of the re-adjustments called for by the existence of a \"gap\" between the imports covered by\nthe determination and those covered by safeguard measures.\n5. Measure-by-measure analysis\n10.350 We recall first our findings in paragraphs 10.306-10.308 above . There may be cases where:\n(i) a coincidence analysis has been undertaken and shows clear coincidence between movements in\nimports and movements in injury factors; (ii) as part of its overall demonstration of causal link, the\ncompetent authority has undertaken, inter alia, a coincidence analysis which, in and of itself, does not\nfully demonstrate the existence of a causal link and further analysis is undertaken; (iii) a coincidence\nanalysis has been undertaken (with or without an y other analysis) but it does not demonstrate any\ncoincidence at all; and, finally, (iv) a coincidence analysis has not been undertaken but other\nanalytical tools have been used with a view to proving causal link.\n10.351 We also stated previously that, in all cases, in conducting its causal link analysis, the\ncompetent authority must provide a reasoned and adequate explanation of such analysis. In cases\nwhere there is an absence of coincidence (whether or not a coincidence analysis was undertaken), a\ncompelling explanation of why causation exists is needed, since coincidence should normally be\ncentral to causation determinations. In light of our foregoing legal analysis, the Panel will review the\nvarious components of the USITC's findings on causat ion in the order they were dealt with by the\nUSITC in its Report.\n10.352 In cases where the USITC undertook a coincidence analysis and the causal link determination\nhas been challenged by the complainants, we will examine whether the USITC provided a reasoned\nand adequate explanation that a causal link existed where it found coincidence between movements in\nimports and movements in injury factors.\n10.353 As will be seen below, there is an instance where the Panel agreed with the USITC's\nconclusion that clear coincidence existed.\n5219 In such cases, according to our analytical framework in\n\n5219 We refer, in particular, to the case of FFTJ.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nparagraphs 10.306-10.308, there is generally no need for the competent authority to conduct a further\nanalysis to support its coincidence analysis. Nor would it be necessary in these cases for the Panel to\nreview any further analysis if it has been undertaken by the competent authority. However, in that\nparticular instance, the USITC had not provided a reasoned and adequate explanation of the existence\nof coincidence, so the Panel proceeded to review the USITC's conditions of competition analysis.\n10.354 There are also a number of instances where the Panel considered that the relevant facts did\nnot support a finding of coincidence by the USITC at all. In these cases, the Panel proceeded to\nconsider whether the USITC, nevertheless, provided a compelling explanation that a causal link\nexisted. The Panel proceeded in this fashion even in cases where the complainants did not\nspecifically challenge the compelling explanation provided by the USITC. We consider that we are\nentitled to adopt such an approach, provided that the complainants challenged the causal link\ndetermination.\n10.355 Finally, there are a number of instances where the Panel was unsure whether the facts\nsupported a finding of coincidence or where overall coincidence was not clear. In these cases, the\nPanel considered whether the USITC undertook a further analysis to demonstrate that a causal link\nexisted. Where it did so, the Panel examined the further analysis performed by the USITC to assess\nwhether, overall, a causal link existed. We consider that we are entitled to adopt such an approach,\nprovided that the complainants challenged the causal link determination.\n10.356 In cases where the USITC did not undertake a coincidence analysis , we assessed whether the\nUSITC provided a reasoned and adequate explanation as to why it did not do so and whether it\nprovided a compelling explanation as to why a causal link nevertheless existed. In so doing, we\nconsidered whether, on the basis of the analysis used by the USITC in such cases, the facts supported\nthe conclusions drawn by the USITC. Again, the Panel proceeded in this fashion even in cases where\nthe complainants did not specifically challenge the compelling explanation. We consider that we are\nentitled to adopt such an approach, provided the complainants challenged the causal link\ndetermination.\n10.357 With respect to non-attribution, the Panel will consider whether relevant factors other than\nimports were considered by the USITC. Further, we will consider whether the USITC established\nexplicitly, on the basis of a reasoned and adequate explanation, that injury caused by those other\nfactors was not attributed to imports.\n10.358 Finally, in the case of CCFRS, the Panel will examine the difficulties encountered in\nreviewing the USITC's causation analysis for this product. We note that such difficulties are\nassociated with the fact that CCFRS is comprised of five constituent items, namely, slab, plate, hot-\nrolled steel, cold-rolled steel and coated steel.\n10.359 As a preliminary point, we note that all data that has been relied upon by the Panel in this\nsection was obtained directly from the USITC Report or from the various tables and annexes to which\nthat Report refers. In addition, we note that, for each part of our discussion on the USITC's causation\nanalysis for the various safeguard measures at issue, we have set out what we consider to be the\nrelevant parts of the USITC Report. Finally, as a more specific point, the Panel notes that, on a\nnumber of occasions, we have reviewed pricing analyses undertaken by the USITC as part of its\ncausal link analysis. We note that in conducting such a review, the Panel has treated unit values as a\nproxy for prices. We consider that this is acceptable given that this is apparently what the USITC\nitself did.\n5220 Further, we understand that price trends mirror unit value trends. As a related point, we\n\n5220 See, for example, the USITC's analysis for CCFRs at pp 55 – 63 of the USITC Report, Vol I.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndo not consider that any distinction exists between \"unit values\" on the one hand and \"average unit\nvalues\" on the other hand. More particularly, in the context of this case, we consider that unit values\nfor a particular year are implicitly averages.\n(a) CCFRS\n10.360 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants which, for us, raised the most problematic aspects of the USITC's determinations on\ncausation – that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\n(i) Coincidence and conditions of competition\nUSITC findings\n10.361 The USITC findings read as follows:\n\"We find that the increased imports of certain carbon flat-rolled steel are an important\ncause, and a cause not less than any other cause, of serious injury to the domestic\nindustry.5221 In making this finding, we have considered carefully evidence in the\nrecord relating to the enumerated statutory factors, as well as evidence relating to\ndomestic production, capacity, capacity utilization, shipments, market share, profit\nand loss data, plant closings, wages and other employment-related data, productivity,\ncapital expenditures, and research and development expenditures. Accordingly, we\nfind that increased imports are a substantial cause of serious injury to the domestic\nindustry producing certain carbon flat-rolled steel.\na. Conditions of Competition\nWe take into account a number of factors that affect the competitiveness of\ndomestic and imported certain carbon flat-rolled steel in the US market, including\nfactors related to the product itself, the degree of substitutability between the\ndomestic and imported articles, changes in world capacity and production, and market\nconditions. These factors affect prices and other considerations taken into account by\npurchasers in determining whether to purchase domestic or imported articles.\nProducers generally agree that there are few or no substitutes for certain\ncarbon flat-rolled steel.\n5222 Certain carbon flat-rolled steel may represent a relatively\nhigh share of the cost of downstream certain carbon flat-rolled steel, but typically\nrepresents a relatively small share of the value of finished products.5223\n\n5221 (original footnote) Commissioner Devaney joins in the analysis of the majority, related to\ncausation, as presented here. He further notes that when the analysis is performed over the entire industry as he\nhas defined it, the result is the same, i.e. imports are a substantial cause of serious injury.\n5222 (original footnote) CR at FLAT-67 and PR at FLAT-53. There are few or no substitute products\nfor each of the product categories included in our certa in carbon flat-rolled products class. CR at FLAT-67-68\nand PR at FLAT-53-FLAT-54.\n5223 (original footnote) CR at FLAT-68 and PR at FLAT-54.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nDemand for certain carbon flat-rolled steel depends upon the demand for a\nvariety of end-use applications. 5224 A significant percentage of certain carbon flat-\nrolled steel is consumed in the production of other downstream certain carbon flat-\nrolled steel.\n5225 All slabs are consumed in the production of downstream steel, and\nsteelmakers themselves are the only purchasers of slab. Slab is not a rolled product\nand requires additional processing before it may be incorporated into a finished\nproduct. As expected for feedstock products, the majority of domestically-produced\nhot-rolled and cold-rolled steel are consumed in the production of further processed\nsteel, although a merchant market exists for both hot-rolled and cold-rolled steel. 5226\nOn the other hand, a majority of domestically-produced plate and coated steel, which\nare further processed steel, is sold on the merchant market, with relatively small\nshares of these steels being devoted to the production of downstream products. 5227\nConstruction and automotive applications are significant end-uses for plate, hot-\nrolled, cold-rolled, and coated steel.\n5228\nBy any measure, the period of investigation saw significant growth in US\ndemand for certain carbon flat-rolled steel. 5229 Apparent domestic consumption of\ncertain carbon flat-rolled steel, including internally consumed production, climbed\nsteadily during the period, from 203.2 million short tons in 1996 to 219.0 million\nshort tons in 2000, an increase of 7.8 percent. 5230 Apparent domestic consumption of\ncertain carbon flat-rolled steel, including internally consumed production, declined\n14.9 percent from interim 2000 to interim 2001.\n5231 Net sales of certain carbon flat-\nrolled steel increased from 58.8 million short tons in 1996 to 65.2 million short tons\nin 2000, an increase of 10.9 percent. 5232 Net sales of certain carbon flat-rolled steel\ndeclined 11.7 percent between interim 2000 and interim 2001. 5233 A decline in\ndemand, however, can be seen at the end of the period examined, as apparent\ndomestic consumption of certain carbon flat-rolled steel was 14.9 percent lower in\ninterim 2001 than in interim 2000.\nSimilar, though not identical, increases occurred in the consumption of each\ntype of flat-rolled steel. Apparent domestic consumption of slabs rose from 71.4\nmillion short tons in 1996 to 74.4 million short tons in 2000; apparent domestic\n\n5224 (original footnote) CR at FLAT-66 and PR at FLAT-51.\n5225 (original footnote) CR and PR at OVERVIEW-10 and Table OVERVIEW-2.\n5226 (original footnote) CR and PR at Tables FLAT-14 and FLAT-15.\n5227 (original footnote) CR and PR at Tables FLAT-13 and FLAT-16.\n5228 (original footnote) CR and PR at Table OVERVIEW-2.\n5229 (original footnote) We are cognizant of the difficulty of measuring consumption, production,\ncapacity, and import penetration in a product for which a significant portion of production is consumed in the\nproduction of other, downstream materials also included in the like product. Adding figures for each of the\nproduct categories would tend to overstate domestic capacity and production and understate the true impact of\nimports, while concentrating solely on commercial shipments would be inconsistent with available capacity\ndata. See CR at FLAT-18 n.11, FLAT-34 n.13, and FLAT-60 n.14, PR at FLAT-15 n.11, FLAT-30 n.13, and\nFLAT-44 n.14. We have considered the arguments of both domestic producers and respondents regarding the\nappropriate method for determining these indicators, and we have considered a variety of different\nmeasurements in reaching our determination. In general, however, we found that the same conclusions were\nwarranted regardless of which measurement was used.\n5230 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5231 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5232 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5233 (original footnote) INV-Y-209 at Table FLAT-ALT7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconsumption of slabs in 2000 was the highest level registered in the POI. 5234\nApparent domestic consumption of slabs declined 15.6 percent between interim 2000\nand interim 2001. 5235 Apparent domestic consumption of hot-rolled steel increased\nfrom 68.5 million short tons in 1996 to 75.1 million short tons in 2000; apparent\ndomestic consumption of hot-rolled steel in 2000 was the highest level registered in\nthe POI.5236 Apparent domestic consumption of hot-rolled steel declined 17.1 percent\nbetween interim 2000 and interim 2001.5237 Apparent domestic consumption of cold-\nrolled steel actually peaked in 1999 at 40.6 million short tons. Nonetheless, apparent\ndomestic consumption of cold-rolled steel in 2000, at 40.0 million short tons, was 9.8\npercent higher than the 1996 level of 36.4 million short tons. 5238 Apparent domestic\nconsumption of cold-rolled steel declined 12.3 percent between interim 2000 and\ninterim 2001.5239 Similarly, apparent domestic consumption of coated steel peaked in\n1999 at 22.8 million tons, but apparent domestic consumption in 2000, at 22.3 million\nshort tons, was 16.9 percent higher than the 1996 level of 19.1 million short tons. 5240\nApparent domestic consumption of coated steel was 13.0 percent lower in interim\n2001 than in interim 2000. 5241 Only plate consumption exhibited a significantly\ndifferent trend, with apparent consumption in 2000, at 7.1 million short tons, below\nthe 1996 level of 7.8 million short tons. 5242 Apparent domestic consumption of plate\nwas 3.6 percent lower in interim 2001 than in interim 2000.5243\nWith regard to supply of certain carbon flat-rolled steel, as discussed above,\ndomestic capacity increased steadily from 1996 to 2000. Foreign production capacity\nalso increased from 1996 to 2000. 5244 As measured by production capacity for plate\nand hot-rolled steel only, foreign production capacity rose from 290.9 million short\ntons in 1996 to 335.2 million short tons in 2000, an increase of 15.2 percent. 5245\nForeign production capacity for each of the product categories increased during the\nPOI. Foreign production capacity for slabs rose 8.0 percent between 1996 and 2000,\nwhile production capacity for plate rose 9.5 percent. 5246 Foreign production capacity\nfor further processed flat-rolled steel rose much more significantly between 1996 and\n2000, with production capacity for hot-rolled steel rising by 16.3 percent, for cold-\nrolled steel by 13.9 percent, and for coated steel by 29.4 percent.5247\n\n5234 (original footnote) CR and PR at Table FLAT-C-2.\n5235 (original footnote) CR and PR at Table FLAT-C-2.\n5236 (original footnote) CR and PR at Table FLAT-C-4.\n5237 (original footnote) CR and PR at Table FLAT-C-4.\n5238 (original footnote) CR and PR at Table FLAT-C-5.\n5239 (original footnote) CR and PR at Table FLAT-C-5.\n5240 (original footnote) CR and PR at Table FLAT-C-7.\n5241 (original footnote) CR and PR at Table FLAT-C-7.\n5242 (original footnote) CR and PR at Table FLAT-C-3.\n5243 (original footnote) CR and PR at Table FLAT-C-3.\n5244 (original footnote) We note that domestic producers criticized the quality of data from our\nquestionnaires regarding foreign capacity. Prehearin g Brief of Bethlehem Steel Corporation, LTV Steel\nCompany, Inc., National Steel Corporation and United States Steel LLC at 70 n.217 and Appendix A. We have\nfollowed our long-standing practice of relying on questionnaire data in reaching our determination, although we\nhave considered the alternative data provided by domestic producers and other parties.\n5245 (original footnote) INV-Y-215 at Table VII-ALT1.\n5246 (original footnote) CR and PR at Tables FLAT-30 and FLAT-33.\n5247 (original footnote) CR and PR at Tables FLAT-36, FLAT-39, and FLAT-43.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThese significant production capacity increases occurred during a period of\ndisruption in world steel markets. The de preciation of several Asian currencies in\nlate 1997 and early 1998 significantly curtailed steel consumption in those countries\nand created a pool of steel seeking alternative markets.\n5248 The dissolution of the\nUSSR led to significant increases in steel exports to the United States from former\nUSSR countries.5249\nThere is a moderate to high degree of substitutability between domestically-\nproduced and imported certain carbon flat-rolled steel. 5250 Purchasers typically\nranked \"quality\" as the most important factor in their purchasing decision. 5251 A\nsignificant majority of purchasers found domestically-produced and imported certain\ncarbon flat-rolled steel comparable in product quality, product range, and\nconsistency.\n5252 Only in delivery time did purchasers note a clear difference between\ndomestically-produced and imported certain carbon flat-rolled steel.5253 Furthermore,\nwhile more purchasers ranked quality as the most important factor in the purchasing\ndecision, a significant number ranked price first, and most purchasers included price\nas one of the top three factors.\n5254 A significant number of purchasers reported they\n\"always\" or \"usually\" purchase the lowest priced flat-rolled steel offered.5255\nImports of various certain carbon flat-rolled steel products are affected by a\nnumber of existing antidumping and countervailing duty orders and suspension and\nother trade restricting agreements.5256 Some of these measures pre-dated the POI and\ndid not prevent the import surge observed in this investigation. However, other\nmeasures were imposed during the POI.\nb. Analysis\n…\nThe dramatic increase in the volume of imports in 1998 – at the midpoint of\nthe period examined – coincided with sharp declines in the domestic industry's\nperformance and condition which occurred despite growing US demand. Total\nimports were 18.4 million short tons in 1996 and 19.3 million short tons in 1997, an\nincrease that only modestly exceeded the increase in total apparent domestic\n\n5248 (original footnote) CR and PR at OVERVIEW-17.\n5249 (original footnote) CR and PR at OVERVIEW-18.\n5250 (original footnote) CR at FLAT-68, PR at FLAT-54.\n5251 (original footnote) CR and PR at Table FLAT-64. Purchasers made similar responses for each of\nthe types of certain carbon flat-rolled steel. INV-Y-212 at Flat Products, pp.20-22.\n5252 (original footnote) CR at Table FLAT-65, PR at Table FLAT-65. Purchasers made similar\nresponses for each of the types of certain carbon flat-rolled steel. INV-Y-212 at Flat Products, pp.15-19.\n5253 (original footnote) CR at Table FLAT-65, PR at Table FLAT-65. Purchasers made similar\nresponses for each of the types of certain carbon flat-rolled steel. INV-Y-212 at Flat Products, pp.15-19.\n5254 (original footnote) CR at Table FLAT-64, PR at Table FLAT-64. Purchasers made similar\nresponses for each of the types of certain carbon flat-rolled steel. INV-Y-212 at Flat Products, pp.20-22.\n5255 (original footnote) CR at FLAT-71, PR at FLAT-57.\n5256 (original footnote) CR and PR at Table OVERVIEW-1; see also Certain Cold-Rolled Steel\nProducts from Argentina, Brazil, Japan, Russia, South Africa, and Thailand , Inv. Nos. 701-TA-393 (Final) and\n731-TA-829-830, 833-834, 836, and 838 (Final), USITC Pub. 3283 (March 2000) at 20 (comprehensive\nagreement with Russia); Certain Hot-Rolled Steel from Brazil and Japan, 701-TA-384 (Final) and 731-TA-806\nand 808 (Final), USITC Pub. 3223 (Aug. 1999) at 3 n.7 (suspension agreements with Brazil and Russia).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconsumption.5257 Imports in 1998 jumped more than 30 percent over the previous\nyear's level, to a total of 25.3 million short tons. 5258 This increase occurred in a year\nwhen total apparent domestic consumption, including all captive consumption,\nincreased 3.2 percent and net domestic sales rose a scant 0.5 percent.\n5259 After this\nsteep increase, import volume lessened in 1999 and 2000 but remained above 1996\nand 1997 levels.5260\nThis import surge occurred in most types of certain carbon flat-rolled steel.\nImports of plate increased by 53.4 percent between 1997 and 1998; imports of hot-\nrolled steel increased by 76.4 percent; and imports of cold-rolled steel increased 13.0\npercent, after already increasing 38.2 percent between 1996 and 1997. 5261 For coated\nsteel, the surge came a year later, as imports increased by 15.8 percent between 1998\nand 1999. 5262 After these primary surges, imports of hot-rolled steel increased by\nanother 14.4 percent between 1999 and 2000, and cold-rolled steel imports by 11.2\npercent between interim 2000 and interim 2001, despite a sharp decrease in\ndemand.5263\nThe impact of the 1998 surge in imports on the domestic industry is\nundeniable. In 1996 and 1997, before the rapid escalation in import volume, the\ndomestic industry performed moderately well. In 1997, with net merchant sales of\n61.1 million short tons, the domestic industry had an operating income of 6.1 percent\nof sales and a net income of 4.5 percent. 5264 In 1998, despite an increase in net sales\nto 61.3 million short tons and a modest decrease in unit costs, the industry's operating\nmargin declined to 4.0 percent. In 1999, net sales increased to 63.5 million short tons\nand cost of goods sold were the lowest during the POI, but the industry experienced\noperating losses of 0.7 percent of sales. In 2000, net sales again increased to 65.2\nmillion short tons and the total cost of goods sold increased a modest one percent, yet\noperating losses fell further, to 1.4 percent of sales. The industry experienced net\noperating losses in both 1999 and 2000.\n5265 The industry's operating margin\ncontinued to slide in the first half of 2001, to a loss of 11.5 percent of sales.\nAfter the initial import surges in 1998, as noted, the volume of imports\nslackened somewhat but remained above the levels seen in 1996-1997. One way in\nwhich the impact of the massive import volume continued to reverberate beyond\n1998 was through increased inventories. End-of-period inventories held by importers\nincreased substantially in 1998, as did inventories held by service centers.\n5266\nThe imports that entered the US market between 1998 and 2000 were\ngenerally significantly lower-priced than in the earlier years of the POI. These price\n\n5257 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5258 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5259 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5260 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5261 (original footnote) CR and PR at Tables FLAT-C-3-FLAT-C-5.\n5262 (original footnote) CR and PR at Table FLAT-C-7.\n5263 (original footnote) CR and PR at Tables FLAT-C-4 and FLAT-C-5.\n5264 (original footnote) INV-Y-212 at STL201FT.WK4.\n5265 (original footnote) INV-Y-212 at STL201FT.WK4.\n5266 (original footnote) CR and PR at Table FLAT-49; Dewey/Skadden Prehearing Brief at Exhs. 55\nand 56 (we note that the data in the latter exhibits do not distinguish between domestic and imported product).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndecreases were sharp and generally unrelated to overall demand in the US market,\nwhich steadily increased even as prices fell.\nImport Average Unit Values5267\n1996 1997 1998 1999 2000 Interim\n2000\nInterim\n2001\nCertain Carbon\nFlat-Rolled 370 376 344 298 331 323 310\nSlabs 253 251 231 177 221 222 180\nPlate 400 424 466 400 398 418 409\nHot-Rolled 331 325 288 269 303 299 276\nCold-Rolled 505 485 447 402 466 463 399\nCoated 608 609 596 537 558 556 519\nThe import surge in 1998 altered the competitive strategy of domestic\nproducers. After the initial wave of imports in 1998, which captured substantial\nmarket share from domestic producers, domestic producers sought to protect market\nshare against further import penetration by competing aggressively against imports on\nprice.\n5268 Repeated price cuts by the industry, while stemming somewhat the tide of\nimports and increasing domestic shipments, did nothing to improve the industry's\ncondition. Moreover, the price declines occurred despite the fact that demand for\ncertain carbon flat-rolled steel increased in both 1999 and 2000.\nAverage Unit Values of Commercial Shipments for Domestically Produced Steel5269\n1996 1997 1998 1999 2000 Interim\n2000\nInterim\n2001\nCertain Carbon\nFlat-Rolled 470 474 459 415 418 428 373\nSlabs5270 248 251 250 215 214 224 205\nPlate 482 473 470 402 401 400 379\nHot-Rolled 348 356 335 294 312 329 257\nCold-Rolled 492 496 472 440 445 452 409\nCoated 616 621 597 557 544 553 508\nA review of product specific data supports the claims of the domestic\nproducers that imports were priced below domestically produced steel, and that\nimports led to the decline in prices. For example, for hot-rolled product 3A, *** led\n\n5267 (original footnote) CR and PR at Tables FLAT-C-1-FLAT-C-5 and FLAT-C-7. We are mindful\nnot to place undue weight on average unit values, as these may be affected by issues of product mix.\n5268 (original footnote) Dewey/Skadden Posthearing Brief on Flat-Rolled at 27.\n5269 (original footnote) CR and PR at Tables FLAT-12 to FLAT-15, and FLAT-17.\n5270 (original footnote) Between 1996 and 2000, commercial shipments of slabs accounted for only 0.9\npercent of total shipments of domestically produced slab. CR and PR at Table FLAT-12.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto ***, reductions in shipments of the domestic product, and sharp subsequent\nreductions in domestic prices. 5271 Similar pricing and volume patterns, with\nsignificant dips in import prices garnering historically large sales volumes, followed\nby sharp cuts in domestic prices, occurred for cold-rolled products 4A and 4B.\n5272\nAs noted above, purchasers generally consider price an important factor in\nthe purchasing decision, and the lowest price frequently wins the sale. In addition,\nalthough purchasers rank quality as the most important purchasing factor, purchasers\ngenerally consider imported certain carbon flat-rolled steel comparable in quality to\ndomestically produced certain carbon flat-rolled steel. In such a market, the\nincreased volume of imports, at prices that undercut and depressed and suppressed\ndomestic prices, had an injurious impact on the domestic industry, particularly when\nthe domestic industry aggressively cut prices to meet the continued influx of import\nvolumes.\nThe domestic industry includes a number of producers who rely on imported\ncertain carbon flat-rolled steel–especially slab–for use as raw materials in the\nproduction of further processed certain carbon flat-rolled steel. Some of these\nproducers may have benefitted from the decline in import prices during the POI.\n5273\nDespite these possible isolated individual benefits 5274, the record indicates that the\ndomestic industry as a whole suffered serious injury from increased imports.\nRespondents have argued that, since imports generally peaked in 1998, any\ninjury resulting from increased imports has long since passed, or been repaired by the\nimposition of subsequent Title VII duties. Between the surge in 1998 and the last\nfull-year of the POI, 2000, domestic producers filed Title VII complaints on carbon\nsteel plate, hot-rolled steel, and cold-rolled steel.5275 Additionally, outstanding orders\non coated steel were reviewed and retained during this same time period.5276 Existing\norders on cold-rolled steel were revoked only late in 2000. 5277 We find it reasonable\nto conclude that the filing of these Title VII actions to some extent staunched the flow\nof imports after 1998; indeed, respondents admit that the filing of a Title VII action\ntemporarily repressed cold-rolled imports. 5278 We note, however, that import levels\nremained high through 1999 and 2000, and that the corrosive effects of low-priced\n\n5271 (original footnote) INV-Y-212 at Table FLAT-ALT69. See also Product 3B (historically high\nimport volume in 1998, and falling domestic prices from second quarter 1998 to second quarter 1999).\n5272 (original footnote) INV-Y-212 at Tables FLAT-ALT70 and FLAT-ALT71.\n5273 (original footnote) The *** US firms that rely exclusively on imported slab–***–showed generally\nmore positive financial results than the industry as a whole. However, the unit raw material costs of these ***\nfirms were ***. INV-Y-212 at STL201P2.WK4 (results on plate for ***), STL201H3.WK4 (results on hot-\nrolled for ***), STL 201C4.WK4 (results on cold-rolled for ***), and ST201R6.WK4 (results on coated steel\nfor ***).\n5274 (original footnote) For example, slab imports represent approximately ten percent of the slab\nconsumed in the United States. CR and PR at Table FLAT-C-2.\n5275 (original footnote) CR and PR at Table OVERVIEW-1.\n5276 (original footnote) Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada,\nFinland, France, Germany, Japan, Korea, Mexico, the Netherlands, Poland, Romania, Spain, Sweden, Taiwan,\nand the United Kingdom , Inv. Nos. AA1921-197, 701-TA-231, 319-320, 322, 325-328, 340, 342, and 348-350\n(Review), and 731-TA-573-576, 578, 582-587, 604, 607-608, 612, and 614-618 (Review), USITC Pub. 3364\n(November 2000) at 3.\n5277 (original footnote) USITC Pub. 3364 at 3.\n5278 (original footnote) Joint Respondents' Prehearing Brief on Cold-Rolled Steel at 11-12.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports continued to injure the domestic industry even as the absolute volume of\nimports slackened somewhat. Although the volume of imports was lower in 1999\nand 2000, prices of those imports continued to decline.\nIn sum, the causal link between increased imports and the injury to the\ndomestic industry is clear. In 1997, at an operating margin of 6.1 percent, the\nindustry was performing modestly well and thus was well poised to increase its\nprofitability in 1998 as demand strengthened. However, the surge in imports in 1998,\nat prices below domestic prices, led to a decline in the industry's financial and other\nindicators. The industry then cut prices to hold on to market share but the price cuts\nprevented the industry from restoring profitability. The industry's operating margins\ndeclined steadily from 6.1 percent in 1997 to 4.0 percent in 1998 to negative\n0.7 percent in 1999 and to negative 1.4 percent in 2000. Finally, in interim 2001,\nalthough import levels declined somewhat, prices remained low. The domestic\nindustry entered a period of falling demand already in a weakened condition and\ndeteriorated even further to an operating margin of negative 11.5 percent.\"\n5279\nClaims and arguments of the parties\n10.362 The arguments of the parties are set out in Section VII.H.2(a)(i) and (ii) supra.\nAnalysis by the Panel\n10.363 At the outset, the Panel notes that the USIT C undertook a coincidence analysis for CCFRS\nand concluded that coincidence existed. Accordingly, we will consider whether these findings\nprovide a reasoned and adequate explanation of how the facts support this conclusion.\n10.364 The Panel recalls that, when examined by a competent authority, coincidence must be\ndemonstrated between the movements in imports and the movements in injury factors. The injury\nfactors are listed in Article 4.2(a) of the Agreement on Safeguards. Specifically, they are: the rate and\namount of the increase in imports of the product concerned in absolute and relative terms, the share of\nthe domestic market taken by increased imports, changes in the level of sales, production,\nproductivity, capacity utilization, profits and losses, and employment.\n10.365 The Panel has considered coincidence between a number of the injury factors mentioned in\nArticle 4.2(a), including those referred to by the USITC, and imports. More specifically, we make\nreference to the following graphs of imports versus injury factors, which have been generated using\nUSITC data, with a view to determining whether the USITC provided a reasoned and adequate\nexplanation of how the facts support its determination that coincidence between increased imports and\nserious injury factors existed for CCFRS. Since CCFRS was treated by the USITC as a single\nproduct, aggregated data for each of the constitu ent items of CCFRS have been relied upon by the\nPanel.\n10.366 The Panel has first considered the relationship between imports and production. In the Panel's\nview, there does not appear to be any coincidence between import trends and production trends. In\nfact, production seems to have increased (albeit gradually) throughout most of the period of\n\n5279 USITC Report, Vol. I, pp. 55-63.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninvestigation, despite an increase in imports in 1998. Further, at the very end of the period of\ninvestigation, production decreased even though imports also decreased during that time.5280\nImports and Production (Tons)\n0\n25,000,000\n50,000,000\n75,000,000\n100,000,000\n125,000,000\n150,000,000\n175,000,000\n200,000,000\n225,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImports\nImports (semi-annual)\nProduction\nProduction (semi-annual)\n10.367 Similarly, despite an increase in imports in 1998, net commercial sales increased (again,\nalbeit gradually) throughout most of the period of investigation and do not appear to have been\naffected by the level of imports. Further, at the very end of the period of investigation, net\ncommercial sales decreased even though imports also decreased during that time.5281\nImports and net commercial sales (Tons)\n0\n10,000,000\n20,000,000\n30,000,000\n40,000,000\n50,000,000\n60,000,000\n70,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImpor ts\nImports (semi-annual)\nNet commercial sales\nNet commercial sales (semi-annual)\n\n5280 The data represented in the graph below are contained in the USITC Report, in particular in\nINV-Y-209 at Table FLAT-ALT 7.\n5281 The data represented in the graph below are contained in the USITC Report, in particular in\nINV-Y-209 at Table FLAT-ALT 7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.368 Assuming that a lag in the manifestation of effects can be expected in relation to employment,\nit would appear that, indeed, there is some coincidence between import levels in 1998 and\nemployment levels in 1999. In particular, the surge in imports in 1998 appears to have been followed\nby a drop in employment levels in the following year. Similarly, a drop in import levels between\n1998 and 1999 seems to correspond to a slight gain in employment levels in the succeding year,\nnamely 1999 to 2000. In our view, the fact that employment decreased at the very end of the period\nof investigation even though imports also decreased during that time does not detract from our\nconclusion that, overall, coincidence appears to exist between import trends and employment trends,\nassuming a lag in the manifestation of the effects.\n10.369 In our view, it is not inconceivable that a lag could be expected with respect to employment.\nWe tend to agree with the argument made by the United States that companies may, in the face of\nadverse market conditions, defer taking employment decisions in the hope that the market situation\nwill improve. A one-year lag between the influx of imports and declines in employment would, in the\nPanel's view, be reasonable. However, despite the fact that a lag is conceivable in relation to\nemployment, we note that the USITC made no reference in its Report to this lag effect and the United\nStates cannot rely on this argument before the Panel.\n5282\nImports and employment (Tons and employees)\n0\n10,000,000\n20,000,000\n30,000,000\n40,000,000\n50,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n80,000\n85,000\n90,000\n95,000\n100,000\n105,000\n110,000\nEmployees\nImports\nImports (semi-annual)\nEmployment\nEmployment (semi-annual)\n10.370 With respect to operating margin, which was apparently used by the USITC as a proxy for\nprofit and losses and is, consequently, used for the same purpose here by the Panel, there appears to\nbe some coincidence between a rise in imports from 1997 until 1998 and a sharp decline in the level\nof operating margin during the same period. However, from 1998 to 1999 when the level of imports\nfell and then subsequently stabilized from 1999 to 2000, the operating marging continued to decline\nquite dramatically. The continuing decline in operating margin in the latter part of the period of\n\n5282 The data represented in the graph below are contained in the USITC Report, in particular in\nINV-Y-209 at Table FLAT-ALT 7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ninvestigation despite the decline in the level of imports suggests that something other than increased\nimports was also causing injury.5283\nImports and Operating margin (Tons and '000 $)\n0\n10,000,000\n20,000,000\n30,000,000\n40,000,000\n50,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n-2,000,000\n-1,500,000\n-1,000,000\n-500,000\n0\n500,000\n1,000,000\n1,500,000\n2,000,000\n'000 $\nImpor ts\nimports (semi-annual)\nOperating margin\nOperating margin (semi-annual)\n10.371 There does not appear to be coincidence between the import trends and trends in productivity.\nIndeed, even following the alleged surge in impor ts in 1998, productivity levels increased from 1998\nonwards. Further, at the very end of the period of investigation, productivity decreased even though\nimports also decreased during that time.5284\nImports and productivity (Tons and tons/1000 hours)\n0\n10,000,000\n20,000,000\n30,000,000\n40,000,000\n50,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n660\n680\n700\n720\n740\n760\n780\n800\n820\n840\n860\n880\nTons/1000 hours\nImports\nImports (semi-annual)\nProductivity\nProductivity (semi-annual)\n\n5283 The data represented in the graph below are contained in the USITC Report, in particular in\nINV-Y-209 at Table FLAT-ALT 7.\n5284 The data represented in the graph below are contained in the USITC Report, in particular inINV-Y-\n209 at Table FLAT-ALT 7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.372 In the Panel's view, there appears to be an absence of coincidence between trends in imports\nand capacity utilization trends. In particular, capacity utilization appears to be fairly stable throughout\nthe period of investigation, even following the increase in imports in 1998. Further, at the very end of\nthe period of investigation, capacity utilization decreased even though imports also decreased during\nthat time.\n5285\nImports and capacity utilization ( Tons and percentage)\n0\n10,000,000\n20,000,000\n30,000,000\n40,000,000\n50,000,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImports\nImports (semi-annual)\nCapacity utilization\nCapacity utilization (semi-annual)\n10.373 With respect to importers' inventories, the Pa nel notes that the USITC stated in its Report\nthat: \"One way in which the impact of the massive import volume continued to reverberate beyond\n1998 was through increased inventories.\" Reference is made by the USITC in its report to\nTable-FLAT 49, which does, as the USITC finds, indicate that importers' inventories climbed\nsignificantly during the period of investigation. We agree that a build-up in importers' inventories\nmay provide such importers with the ability to flood the domestic market. However, unless there is\nevidence of a subsequent increased volume of sales of imported products, we do not consider that a\nbuild-up of importers' inventories is necessarily relevant. While there was a peak in imports in 1998,\nthis was followed by a return in the level of imports to that which existed towards the beginning of the\nperiod of investigation. Therefore, we do not consider that the build-up in importers' inventories is\nnecessarily indicative of anything in this case, particularly since the USITC did not provide any\nexplanation of the relationship between the building up of importers' inventories and the serious\ninjury suffered by the producers of domestic CCFRS.\n10.374 As stated by the Panel above, it is the overall coincidence of the upward trend in increased\nimports and the negative trend in injury factors over the period of investigation that must be\nconsidered. The Panel has assessed whether the USITC provided a reasoned and adequate\nexplanation of how the facts support the determina tion that coincidence existed for CCFRS. In so\ndoing, we have found that there was no coincidence between, on the one hand, imports trends and the\nsituation of the domestic industry of CCFRS, as reflected in data for production, net commercial sales,\nproductivity and capacity utilization of the domestic CCFRS. We have also found that there was a\nlack of coincidence between imports trends and declines in domestic operating margin, particularly\n\n5285 The data represented in the graph below are contained in the USITC Report, in particular in\nINV-Y-209 at Table FLAT-ALT 7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ntowards the end of the period of investigation. We did discern coincidence, albeit lagged, between\nincreased imports, on the one hand, and employment, on the other hand. However, we note that the\nUSITC made no reference in its Report to a lagged effect between increased imports and employment\nand the United States cannot now rely on this argument before the Panel. Finally, we did not consider\nthat the build-up of importers' inventories during the course of the period of investigation was relevant\ngiven that there was no evidence to indicate that such a build-up subsequently entered into the market\nthrough sale (except for in 1998).\n10.375 Having taken into consideration all of the foregoing, in the Panel's view, overall, coincidence\ndid not exist between import trends for CCFRS an d the serious injury suffered by the domestic\nindustry. The Panel is particularly compelled by the fact that the indicators that would ordinarily be\nassumed to react shortly after an increase in impor ts did not display coincidence with the increased\nimports – namely, production, net commercial sales, productivity, capacity utilization and, most\nimportantly, operating margin. The Panel notes in this regard that the USITC relied primarily on\ntrends in net commercial sales and operating margin in its determination that coincidence existed, two\nfactors for which we believe the facts do not support a conclusion that coincidence existed.\n10.376 Given the lack of coincidence between imports trends and the injury factors, it was for the\nUSITC to provide a compelling explanation as to why a causal link was considered, nevertheless, to\nexist. We proceed now to the USITC's analysis of the conditions of competition for CCFRS.\n10.377 At the outset, the Panel would like to make some observations about the pricing data upon\nwhich the USITC relied in making its analysis of the conditions of competition in the CCFRS market\nfor the purposes of determining whether or not a causal link existed between the increased imports\nand the serious injury. First, as mentioned above, the premise for the USITC's investigation regarding\nCCFRS is that CCFRS is a single product. Reference is made in the USITC's price analysis to\naverage unit values ($/ton) for imported and domestically produced CCFRS. The Panel notes that the\nUSITC itself admits that there may be difficulties associated with aggregated data upon which it\nrelied, presumably including average unit values for CCFRS as a single product. In particular, the\nUSITC stated in its Report that:\n\"Throughout our analysis, we generally rely on combined data for five types of\ncertain carbon flat-rolled steel. However, we also recognize that some combined data\n– for production and capacity for example – may involve double-counting, and we\ntherefore cite data for the separate types of certain carbon flat-rolled steel where\nappropriate. Separate data also show trends similar to those for the industry as a\nwhole in most cases.\"\n5286\nIn light of the foregoing, the Panel considers that it was incumbent upon the USITC to explain, where\nappropriate, why aggregate data could not be relied upon and justify the use of data for the items\nconstituting CCFRS.\n10.378 Further, as a related point, on the basis of the Panel's comments in Argentina – Footwear\n(EC), the Panel notes that the use of a very broad product definition in this case that covered a number\nof separately identifiable items, means that \"the statistics for the industry and the imports as a whole\nwill only show averages, and therefore will not be able to provide sufficiently specific information on\nthe locus of competition in the market.\"\n5287 Given the similarities in terms of product breadth between\nthe products at issue in Argentina – Footwear (EC) and CCFRS, we consider that serious doubt would\n\n5286 USITC Report Vol I, p. 51, note 193.\n5287 Panel Report, Argentina – Footwear (EC), para. 8. 261, footnote 557.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbe cast on the validity of the price analysis for CCFRS on the basis of the foregoing. More\nparticularly, in cases where a causal link determination is made using a conditions of competition\nanalysis, the product upon which the safeguard measure was imposed, namely, CCFRS, should be\namenable to a proper analysis of the conditions prevailing in the market. We do not consider that the\ngrouping of the various products that constituted CCFRS renders it amenable to such an analysis\nbecause it becomes difficult, if not impossible, for the competent authority to identify the proper locus\nof competition while undertaking a conditions of competition analysis for the purposes of establishing\na causal link for CCFRS.\n10.379 In any event, and this leads us to our second point, we note that, in concluding that there was\nimport underselling for CCFRS as a single product, the USITC appears to have primarily relied upon\ndata for constituent items of CCFRS rather than fo r CCFRS as a whole. This much is evident from\nthe following statement made by the USITC: \"A review of product specific data supports the claims\nof the domestic producers that imports were priced below domestically produced steel, and that\nimports led to the decline in prices\". Putting aside the difficulties we have with the USITC's reliance\non such data that have already been mentioned, a comparison of the imported and domestic prices for\nthe constituent items of the CCFRS product indicates that while some of the domestically produced\nconstituent items were undersold by the import counterparts at particular points during the period of\ninvestigation, this was not necessarily the case for the entire period of investigation. Nor was it the\ncase for all the constituent items that made up CCFRS. Indeed, the USITC was, in our view,\nconveniently selective in the data to which it referr ed in its pricing analysis. In particular, it only\nreferred to prices for hot-rolled products and cold-rolled products:\n\"For example, for hot-rolled product 3A, *** led to ***, reductions in shipments of\nthe domestic product, and sharp subsequent reductions in domestic prices.\n5288 Similar\npricing and volume patterns, with significant dips in import prices garnering\nhistorically large sales volumes, followed by sharp cuts in domestic prices, occurred\nfor cold-rolled products 4A and 4B.\n5289\"\nFurther, it provided no explanation as to why pricing data for the other three items that constituted\nCCFRS were not specifically considered and why the pricing data that it did refer to was\nrespresentative of CCFRS.\n10.380 For the reasons expressed above, we consider that whether the USITC relied upon average\nunit values for CCFRS as a single product or values for constituent items making up CCFRS, the\nUSITC's analysis could certainly not justify the conclusion that:\n\"In such a market, the increased volume of imports, at prices that undercut and\ndepressed and suppressed domestic prices, had an injurious impact on the domestic\nindustry, particularly when the domestic industry aggressively cut prices to meet the\ncontinued influx of import volumes.\n…\nHowever, the surge in imports in 1998, at prices below domestic prices, led to a\ndecline in the industry's financial and other indicators.\"\n\n5288 (original footnote) INV-Y-212 at Table FLAT-ALT69. See also Product 3B (historically high\nimport volume in 1998, and falling domestic prices from second quarter 1998 to second quarter 1999).\n5289 (original footnote) INV-Y-212 at Tables FLAT-ALT70 and FLAT-ALT71.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.381 In conclusion, we are of the view that in conducting a conditions of competition analysis for\nCCFRS, the USITC did not provide a compelling expl anation that demonstrates the existence of a\ncausal link between increased imports and serious in jury suffered by domestic producers of CCFRS.\nIn particular, it is our view that the flaws in the data referred to by the USITC coupled with selective\nreliance upon data undermines the validity of the USITC's analysis.\n(ii) Non-attribution\nUSITC findings\n10.382 The USITC's findings read as follows:\n\"Respondents have suggested several alternate sources of injury to the domestic\nindustry, including declining domestic demand, intra-industry competition, domestic\ncapacity increases, buyer consolidation, excess leverage of domestic producers, and\nlegacy costs. We consider each of these in turn.\nRespondents argue that the domestic industry has been injured by declining US\ndemand. But all evidence suggests that the de cline occurred very late in the POI, as\nlate as the fourth quarter of 2000. Demand for certain carbon flat-rolled steel was\nlower in the first six months of 2001 than in the first six months of 2000.\n5290\nApparent domestic demand in 2000 was higher than in 1996 for slabs, hot-rolled,\ncold-rolled, and coated steel, and apparent domestic demand for all certain carbon\nflat-rolled steel was higher in 2000 than in 1999.\n5291 The domestic industry showed\nthe signs of injury described above well before the latter portion of 2000, when\ndemand began to drop off. The domestic industry first saw its operating income\ndecline in 1998, at a time when demand was increasing and would continue to\nincrease for another two years.\n5292 The period of increasing demand was also when\nimports surged. We thus find that the domestic industry was already injured by\nincreased imports when demand began to decline, and declining demand, while not\nthe cause of the injury found here, contributed to the industry's continued\ndeterioration at the end of the period. Indeed, the losses experienced by the industry\nin 1999 and 2000 as a result of imports left the industry in a much weakened position\nto face the slowdown in demand.\nRespondents argue that the domestic industry has been injured by increases in\ndomestic capacity well in excess of the increase in domestic demand. As noted\nabove, domestic capacity for certain carbon flat-rolled steel in total and each certain\ncarbon flat-rolled steel category increased between 1996 and 2000. These capacity\nincreases occurred at a time when domestic demand rose consistently. Thus, increases\nin domestic capacity in general were justified in light of market conditions.\nIt is true, as alleged by respondents, that capacity increases did exceed the increases\nin domestic consumption. From 1996 to 2000, apparent consumption of certain\ncarbon flat-rolled steel increased by 7.8 percent for both internal transfers and\ncommercial shipments, and increased by 10.9 percent for commercial shipments\n\n5290 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5291 (original footnote) INV-Y-209 at Table FLAT-ALT7 and CR and PR at Tables FLAT-C-2, FLAT-\nC4-FLAT-C-5, and FLAT-C-7.\n5292 (original footnote) INV-Y-209 at Table FLAT-ALT7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nalone.5293 By contrast, domestic capacity increased by the following amounts from\n1996 to 2000: 15.9 percent, for certain carbon flat-rolled steel; 12.2 percent for\ninitial-stage steel-making capacity (slabs); 16.9 percent for combined hot-rolled steel\nand plate. Because domestic production did not increase by an amount as great as the\nincrease in capacity but did increase commensurate with increased consumption, the\nincrease in capacity appears to explain, in significant part, the decline in the rate of\ndomestic capacity utilization that occurred over the period examined.\nRespondents have argued that the presence of this new capacity, combined with the\nfailure of the industry to retire older, less efficient capacity, put tremendous pressure\non the domestic industry to cut costs in order to generate sales to fill the new\ncapacity. It is true that there is a significant incentive to maximize the use of\nsteelmaking assets, which can affect producers' pricing behavior. As we noted above,\nhowever, product-specific data, as well as AUV data, indicate that imports, rather\nthan domestically produced steel, led prices downward during the POI. Indeed,\ncapacity of foreign producers, already substantial exporters, increased steadily over\nthe POI.\n5294 Additionally, imports supplied a higher share of apparent domestic\nconsumption in 2000 than in 1996. If increased domestic capacity were in fact the\nsource of injury to the domestic industry, we would have expected to see the domestic\nindustry lead prices downward, and wrest market share from imports. Therefore, we\nfind that increased production capacity, while likely playing a role in the price\ndeclines that helped cause injury, was not an important cause of serious injury to the\ndomestic industry equal to or greater than the injury caused by increased imports.\nRespondents have also claimed that poor management decisions, such as capital\ninvestment decisions that increased companies' debt load, are responsible for\nbankruptcies and poor financial performance by the domestic industry.\n5295 We do not\nfind these arguments persuasive. We noted above that the financial position of the\nindustry weakened after imports first surged in 1998. The most serious injury to the\ndomestic industry occurred in years of record overall demand. High levels of low-\npriced imports prevented the domestic industry from achieving profitability despite\nincreased demand and increased shipments by the domestic industry. We find that\nthe poor financial position of the domestic industry, including the high degree of debt\nleverage, is a result of the injury from increased imports suffered by the domestic\nindustry, including poor equity performance, rather than a cause of that injury.\n5296\nMoreover, increased debt load and other allegedly poor management decisions cannot\nexplain the price declines experienced by this industry.\n5297\nRespondents argue that legacy costs, in the form of pension and non-pension benefits,\nhave increased costs substantially, and those increased costs are more responsible for\n\n5293 (original footnote) INV-Y-209 at Table FLAT-ALT7, CR and PR at Tables FLAT-12 to FLAT-15,\nFLAT-17, FLAT-C-2 to FLAT-C-5 and FLAT-C-7.\n5294 (original footnote) INV-Y-215 at Table VII-ALT1.\n5295 (original footnote) Joint Respondents' Prehearing Framework Brief at 63-83.\n5296 (original footnote) Injury Tr. at 988-89 (Dr. Kothari).\n5297 (original footnote) We have examined respondents' allegations of poor strategies followed by\nindividual domestic companies. In an industry as large and diverse as the industry producing certain carbon\nflat-rolled steel, it is always possible to question the business strategies of individual firms. However, such\nexamples, even if true, could not explain the substantial decline in the performance of the domestic industry as a\nwhole. We do not find such a pattern of poor decision-making.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe wave of bankruptcy filings than are increased imports. 5298 The funding of legacy\ncosts is a vexing problem for the domestic industry, and evidence on the record\nindicates that legacy costs have prevented needed consolidation within the domestic\nindustry from taking place. However, the burden of legacy costs varies tremendously\namong domestic producers.\n5299 The issue of legacy costs is not a new one to this\nindustry. The difficulties in meeting these obligations were recognized before the\nPOI, and the domestic industry was able to earn a reasonable rate of return in 1996\nand 1997 despite these costs. Respondents have offered no reason why the industry's\nlongstanding problem would cause no in jury in 1996 or 1997 but then begin to\ndepress prices and strangle revenue in 1998-2000. Legacy costs may have left certain\nmembers of the domestic industry less able to compete with low-priced imports, but\nare not responsible for the low prices that have injured the industry. We therefore\nfind that legacy costs are not a source of injury to the domestic industry equal to or\ngreater than increased imports.\nRespondents argue that intra-industry competition, spurred by the increased presence\nof efficient minimills, has caused injury to the domestic industry. Minimills did\ntypically enjoy cost advantages over integrated producers, based in part on differing\nproduct mixes and raw material costs. However, these cost advantages existed\nthroughout the POI, and integrated producers as well as minimills enjoyed declining\ncosts throughout the POI.\n5300 The addition of a greater volume of lower-cost capacity\nwould be expected to have an effect on prices, and we find that it did. However, as\nnoted above, imports, rather than minimi lls, typically led prices downward. Hot-\nrolled steel is the primary commercial product for minimills. Prices for hot-rolled\nsteel produced by minimills typically *** prices of hot-rolled steel produced by\nintegrated producers ***.5301 In 1998 and again in 2000, imports *** hot-rolled steel\nproduced by both integrated producers and minimills by ***, resulting in lowered\nsales for domestically produced hot-rolled steel and subsequent price cuts by both\nintegrated producers and minimills. 5302 Thus, while in general, minimills may have\nbeen in a somewhat better position to withstand low-priced import competition than\nother domestic producers, we find that minimills were not primarily responsible for\nthe declines in domestic prices or an important cause of serious injury to the domestic\nindustry, which is equal to or greater than the injury caused by increased imports.\nRespondents have also argued that buyer consolidation, especially among automobile\nmanufacturers, reduced the bargaining power and the profit margins of domestic\nproducers. The record does contain evidence that automobile manufacturers in\nparticular have either consolidated or attempted to consolidate their buying\noperations. Automotive manufacturers are important purchasers of certain carbon\nflat-rolled steel.\n5303 There is some consolidation in other steel-purchasing sectors as\n\n5298 (original footnote) Joint Respondents' Posthearing Brief on Flat-Rolled Steel, Vol. 2 at Exh. B,\nAnswers to Vice Chairman Okun's Questions at 17.\n5299 (original footnote) CR and PR at OVERVIEW-31-35. Producers Birmingham, CSI, Commercial\nMetals, Nucor, and SDI have defined contribution plans, while other steel producers provide defined benefit\nplans. CR and PR at OVERVIEW-32 nn.37 and 38.\n5300 (original footnote) INV-Y-215 at STL20P2I.WK4, STL20P2M.WK4, STL20H3I.WK4,\nSTL20H3M.WK4, STL20C4I.WK4, STL40C4M.WK4, STL20R6I.WK4, and STL20R6M.WK4.\n5301 (original footnote) INV-Y-215 at Pricing Tables for products 3A and 3B.\n5302 (original footnote) INV-Y-215 at Pricing Tables for products 3A and 3B.\n5303 (original footnote) CR and PR at Table OVERVIEW-2.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwell.5304 A smaller number of purchasers would tend to give the purchasers greater\nbargaining power which would be expected to impact price. However, purchaser\nconsolidation has been an ongoing process that did not suddenly occur beginning in\n1998. We do not find that purchaser consolidation can explain the substantial decline\nin domestic prices or that consolidation is an important cause of serious injury to the\ndomestic industry, which is equal to or greater than the injury caused by increased\nimports.\nIn view of the above, we find that increased imports are a substantial cause, and a\ncause no less important than any other cause, of serious injury to the domestic certain\ncarbon flat-rolled steel industry. Our finding is based on the increase in imports and\nsubsequent increase in the share of the domestic market held by imports, the lower\nprices of the imports, and the corresponding declines in domestic market share,\nprices, and capacity utilization, negative profitability, evidence of unemployment, and\nthe decline in capital expenditures. Accordingly, we make an affirmative\ndetermination.\"\n5305\nFactors considered by the USITC\nDeclining domestic demand\nClaims and arguments of the parties\n10.383 The arguments of the parties are set out in Section VII.H.3(b)(i) supra.\nAnalysis by the Panel\n10.384 The Panel notes the USITC statement that: \"We thus find that the domestic industry was\nalready injured by increased imports when demand began to decline, and declining demand, while not\nthe cause of the injury found here, contributed to the industry's continued deterioration at the end of\nthe period.\" We take the statement that declining demand \"contributed to the industry's continued\ndeterioration at the end of the period\" to amount to an acknowledgement by the USITC that declining\ndemand did, in fact, play a role in causing the injury suffered by the industry, albeit at the end of the\nperiod of investigation.\n10.385 We note that the USITC discussed demand trends during the period of investigation. That\ndiscussion confirms the USITC's statement that demand declined towards the end of the period of\ninvestigation. In particular, in the section of the report dealing with conditions of competition for\nCCFRS, the USITC stated that:\n\"By any measure, the period of investigation saw significant growth in US demand\nfor certain carbon flat-rolled steel.\n5306 Apparent domestic consumption of certain\n\n5304 (original footnote) CR and PR at OVERVIEW-53-54.\n5305 USITC Report, Vol. I, pp. 63-65.\n5306 We are cognizant of the difficulty of measuring consumption, production, capacity, and import\npenetration in a product for which a significant portion of production is consumed in the production of other,\ndownstream materials also included in the like product. Adding figures for each of the product categories would\ntend to overstate domestic capacity and production and understate the true impact of imports, while\nconcentrating solely on commercial shipments would be inconsistent with available capacity data. See CR at\nFLAT-18 n.11, FLAT-34 n.13, and FLAT-60 n.14, PR at FLAT-15 n.11, FLAT-30 n.13, and FLAT-44 n.14.\nWe have considered the arguments of both domestic producers and respondents regarding the appropriate\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncarbon flat-rolled steel, including internally consumed production, climbed steadily\nduring the period, from 203.2 million short tons in 1996 to 219.0 million short tons in\n2000, an increase of 7.8 percent. 5307 Apparent domestic consumption of certain\ncarbon flat-rolled steel, including internally consumed production, declined 14.9\npercent from interim 2000 to interim 2001. 5308 Net sales of certain carbon flat-rolled\nsteel increased from 58.8 million short tons in 1996 to 65.2 million short tons in\n2000, an increase of 10.9 percent. 5309 Net sales of certain carbon flat-rolled steel\ndeclined 11.7 percent between interim 2000 and interim 2001. 5310 A decline in\ndemand, however, can be seen at the end of the period examined, as apparent\ndomestic consumption of certain carbon flat-rolled steel was 14.9 percent lower in\ninterim 2001 than in interim 2000.\nSimilar, though not identical, increases occurred in the consumption of each type of\nflat-rolled steel. Apparent domestic consumption of slabs rose from 71.4 million\nshort tons in 1996 to 74.4 million short tons in 2000; apparent domestic consumption\nof slabs in 2000 was the highest level registered in the POI.\n5311 Apparent domestic\nconsumption of slabs declined 15.6 percent between interim 2000 and interim\n2001.5312 Apparent domestic consumption of hot-rolled steel increased from 68.5\nmillion short tons in 1996 to 75.1 million short tons in 2000; apparent domestic\nconsumption of hot-rolled steel in 2000 was the highest level registered in the\nPOI.5313 Apparent domestic consumption of hot-rolled steel declined 17.1 percent\nbetween interim 2000 and interim 2001.5314 Apparent domestic consumption of cold-\nrolled steel actually peaked in 1999 at 40.6 million short tons. Nonetheless, apparent\ndomestic consumption of cold-rolled steel in 2000, at 40.0 million short tons, was 9.8\npercent higher than the 1996 level of 36.4 million short tons. 5315 Apparent domestic\nconsumption of cold-rolled steel declined 12.3 percent between interim 2000 and\ninterim 2001.\n5316 Similarly, apparent domestic consumption of coated steel peaked in\n1999 at 22.8 million tons, but apparent domestic consumption in 2000, at 22.3 million\nshort tons, was 16.9 percent higher than the 1996 level of 19.1 million short tons. 5317\nApparent domestic consumption of coated steel was 13.0 percent lower in interim\n2001 than in interim 2000.\n5318 Only plate consumption exhibited a significantly\ndifferent trend, with apparent consumption in 2000, at 7.1 million short tons, below\n\nmethod for determining these indicators, and we have considered a variety of different measurements in\nreaching our determination. In general, however, we found that the same conclusions were warranted regardless\nof which measurement was used.\n5307 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5308 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5309 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5310 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5311 (original footnote) CR and PR at Table FLAT-C-2.\n5312 (original footnote) CR and PR at Table FLAT-C-2.\n5313 (original footnote) CR and PR at Table FLAT-C-4.\n5314 (original footnote) CR and PR at Table FLAT-C-4.\n5315 (original footnote) CR and PR at Table FLAT-C-5.\n5316 (original footnote) CR and PR at Table FLAT-C-5.\n5317 (original footnote) CR and PR at Table FLAT-C-7.\n5318 (original footnote) CR and PR at Table FLAT-C-7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe 1996 level of 7.8 million short tons. 5319 Apparent domestic consumption of plate\nwas 3.6 percent lower in interim 2001 than in interim 2000.5320\" 5321\n10.386 In addition, in its non-attribution analysis, the USITC stated that:\n\"But all evidence suggests that the decline occurred very late in the POI, as late as the\nfourth quarter of 2000. Demand for certain carbon flat-rolled steel was lower in the\nfirst six months of 2001 than in the first six months of 2000. 5322 Apparent domestic\ndemand in 2000 was higher than in 1996 for slabs, hot-rolled, cold-rolled, and coated\nsteel, and apparent domestic demand for all certain carbon flat-rolled steel was higher\nin 2000 than in 1999.5323 The domestic industry showed the signs of injury described\nabove well before the latter portion of 2000, when demand began to drop off. The\ndomestic industry first saw its operating income decline in 1998, at a time when\ndemand was increasing and would continue to increase for another two years.\n5324\"5325\n10.387 We note that the USITC dismissed this factor in its non-attribution analysis because: \"The\ndomestic industry showed the signs of injury … well before the latter portion of 2000, when demand\nbegan to drop off\". The Panel notes in this regard that the fact that the contribution of a factor to the\ninjury suffered may have only occurred late in the period of investigation or for only a relatively short\nperiod within that time-span does not relieve a compet ent authority of its obligation to ensure that the\ninjury caused by that factor is not attributed to the increased imports. It may be the case that such a\nfactor may inflict considerable damage on the industry, even though its effects appeared late in the\nperiod and/or for a relatively short duration. However, the USITC did not consider this possibility in\nits analysis.\n10.388 Accordingly, in our view, the USITC unjustifiabl y dismissed this factor in its non-attribution\nanalysis despite the fact that it explicitly acknowledged that declines in demand played a role in the\ninjury suffered by the industry, albeit at the end of the period of investigation. The USITC dismissed\nthis factor on the basis that the industry was already injured when demand began to decline. Despite\nthe apparent role played by this factor in causing injury to the industry, we find nothing in the USITC\nReport to indicate whether and how the injury caused by this factor was not attributed to increased\nimports.\n10.389 In failing to adequately analyse this factor, the Panel finds that the USITC failed to meet its\nobligation to establish explicitly, through a reasoned and adequate explanation, that the injury caused\nby this factor, together with other factors, was not attributed to increased imports.\nDomestic capacity increases\nClaims and arguments of the parties\n10.390 The arguments of the parties are set out in Section VII.H.3(b)(i) supra.\n\n5319 (original footnote) CR and PR at Table FLAT-C-3.\n5320 (original footnote) CR and PR at Table FLAT-C-3.\n5321 USITC Report, Vol. I, pp. 56-57.\n5322 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5323 (original footnote) INV-Y-209 at Table FLAT-ALT7 and CR and PR at Tables FLAT-C-2, FLAT-\nC4-FLAT-C-5, and FLAT-C-7.\n5324 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5325 USITC Report, Vol. I, p. 63.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAnalysis by the Panel\n10.391 The Panel considers that the USITC explicitly acknowledged that domestic capacity increases\nwere causing injury to the industry. In particular, the USITC stated:\n\"Because domestic production did not increase by an amount as great as the increase\nin capacity but did increase commensurate with increased consumption, the increase\nin capacity appears to explain, in significant part, the decline in the rate of domestic\ncapacity utilization that occurred over the period examined.\n…\nTherefore, we find that increased production capacity, while likely playing a role in\nthe price declines that helped cause injury, was not an important cause of serious\ninjury to the domestic industry equal to or greater than the injury caused by increased\nimports.\"\n5326\n10.392 We note that, in the first cited paragraph, the USITC links capacity increases to declines in\ndomestic capacity utilization, the latter being an injury factor referred to in Article 4.2(a) of the\nAgreement on Safeguards. In addition, the second cited paragraph states explicitly that domestic\ncapacity increases likely played a role in causing injury to the industry.\n10.393 We note that the USITC identified increases in the level of domestic capacity during the\nperiod of investigation. In particular, in the section of the USITC's Report dealing with injury, the\nUSITC stated that:\n\"We recognize that the industry's production and capacity both increased from 1996\nto 2000 … The sum of all productive capacity for slab, plate, hot-rolled, cold-rolled,\nand coated steel increased by 15.9 percent between 1996 and 2000.\n5327 The sum of all\nproductive capacity for slab, plate, hot-rolled, cold-rolled, and coated steel fell by 0.8\npercent between interim 2000 and interim 2001.5328\"5329\n10.394 Nevertheless, the USITC dismissed domestic capacity increases in its non-attribution analysis\non the basis of the assertion that: \"If increased domestic capacity were in fact the source of injury to\nthe domestic industry, we would have expected to see the domestic industry lead prices downward,\n\n5326 USITC Report, Vol. I, pp. 63-67.\n5327 (original footnote) INV-Y-209 at Table FLAT-ALT7.\n5328 (original footnote) INV-Y-209 at Table FLAT-ALT7. Slab-making capacity increased by 12.2\npercent between 1996 and 2000, rising from 66.9 million short tons in 1996 to 75.1 million short tons in 2000.\nCR and PR at Table FLAT-C-2. Slab-making capacity declined by 2.4 percent between interim 2000 and\ninterim 2001. CR and PR at Table FLAT-C-2. Combined domestic production capacity for hot-rolled and plate\nincreased by 16.9 percent, rising from 76.6 million shor t tons in 1996 to 89.5 million short tons in 2000. CR\nand PR at Tables FLAT-C-3 and FLAT-C-4. Some domestic producers suggested that aggregating hot-rolled\nand plate capacity is an appropriate measure of dome stic capacity. Dewey/Skadden Posthearing Brief at 18.\nCombined domestic production capacity for hot-rolled and plate increased by 1.6 percent between interim 2000\nand interim 2001, rising from 44.5 million short tons to 45.2 million short tons. CR and PR at Tables FLAT-C-\n3 and FLAT-C-4. Capacity for cold-rolled steel production rose by 14.4 percent between 1996 and 2000, but\ndeclined 4.3 percent between interim 2000 and interim 2001. CR and PR at Table FLAT-C-5. Domestic\ncapacity for coated steel production rose by 28.1 percent between 1996 and 2000 and rose by 1.8 percent\nbetween interim 2000 and interim 2001. CR and PR at Table FLAT-C-7.\n5329 USITC Report, Vol. I, p. 52.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand wrest market share from imports\".5330 In the Panel's opinion, this analysis is simplistic and fails to\naddress the complexities associated with this factor, which the USITC itself acknowledged. In\nparticular, it stated that: \"Because domestic production did not increase by an amount as great as the\nincrease in capacity but did increase commensurat e with increased consumption, the increase in\ncapacity appears to explain, in significant part, the decline in the rate of domestic capacity utilization\nthat occurred over the period examined\".\n5331\n10.395 This statement indicates to us that, in its consideration of domestic capacity increases, the\nUSITC recognized the interrelatedness between capacity on the one hand and domestic production\nand capacity utilization on the other hand, the latter two being injury factors referred to in\nArticle 4.2(a). In addition, the USITC referred on a number of occasions in its injury analysis for\nCCFRS to \"a significant idling of the domestic in dustry's productive facilities.\" It would not be\nimplausible to conclude that such idling may have been caused by increased capacity, which the\nUSITC also acknowledged exceeded increases in domestic consumption. Despite these clear inter-\nlinkages between domestic capacity increases and other factors or effects that were observed in the\nmarket, the USITC dismissed it in its non-attribution analysis.\n10.396 In failing to adequately analyse this factor, th e Panel considers that the USITC failed to meet\nits obligation to establish explicitly, through a reasoned and adequate explanation, that the injury\ncaused by this factor, together with other factors, was not attributed to increased imports.\nIntra-industry competition\nClaims and arguments of the parties\n10.397 The arguments of the parties are set out in Section VII.H.3(b)(i) supra.\nAnalysis by the Panel\n10.398 The Panel considers that the USITC explicitly acknowledged that intra-industry competition\nplayed a role in causing the injury suffered by the domestic industry. This acknowledgement is\ncontained in the following statement: \"[W]e find that minimills were not primarily responsible for the\ndeclines in domestic prices or an important cause of serious injury to the domestic industry, which is\nequal to or greater than the injury caused by increased imports\".\n5332 We read this statement to mean\nthat while the USITC did not consider that intra-industry competition was \"primarily\" responsible for\nthe serious injury suffered by the industry, it, nevertheless, considered that this factor played a role in\ncausing such injury. The USITC also explicitly acknowledged that low-cost capacity created by\ndomestic minimill producers had an effect (implicitly, a negative one) on prices. In particular, the\nUSITC stated that: \"The addition of a greater volume of lower-cost capacity would be expected to\nhave an effect on prices, and we find that it did\".\n5333\n10.399 In our view, the USITC did not adequately assess the role played by this factor. It is true that\nit referred to cost advantages enjoyed by minimills over integrated producers. It is also true that the\nUSITC engaged in a price comparison for products produced both by minimills and integrated\nproducers. However, in our view, this analysis does not provide sufficient insights into the effects\nthat intra-industry competition had on the market.\n\n5330 See para. 10.382.\n5331 See para. 10.382.\n5332 See para. 10.382.\n5333 See para. 10.382."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.603441"}}},{"rowIdx":3493,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ13_Report_Of_Panel_12.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ13_Report_Of_Panel_12.pdf"},"doc_sequence":{"kind":"number","value":13,"string":"13"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 820 10.400 In addition, the USITC appears to have dismissed this factor in its non-attribution analysis merely on the basis that \"the cost advantage enjoyed by minimills existed throughout the period of investigation.\" In the Panel's view, the fact that a factor existed throughout the period of investigation does not necessarily mean that it cannot play a role in causing serious injury. Moreover, changing circumstances in a market may result in a number of factors, that previously seemed harmless, playing a significant role in causing serious injury. 10.401 In failing to adequately analyse this factor, th e Panel considers that the USITC failed to meet its obligation to establish explicitly, through a reasoned and adequate explanation, that the injury caused by this factor, together with other factors, was not attributed to increased imports. Legacy costs"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":12,"string":"12"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":64,"string":"64"},"clean_text":{"kind":"string","value":"10.400 In addition, the USITC appears to have dismissed this factor in its non-attribution analysis\nmerely on the basis that \"the cost advantage enjoyed by minimills existed throughout the period of\ninvestigation.\" In the Panel's view, the fact that a factor existed throughout the period of investigation\ndoes not necessarily mean that it cannot play a role in causing serious injury. Moreover, changing\ncircumstances in a market may result in a number of factors, that previously seemed harmless, playing\na significant role in causing serious injury.\n10.401 In failing to adequately analyse this factor, th e Panel considers that the USITC failed to meet\nits obligation to establish explicitly, through a reasoned and adequate explanation, that the injury\ncaused by this factor, together with other factors, was not attributed to increased imports.\nLegacy costs\nClaims and arguments of the parties\n10.402 The arguments of the parties are set out in Section VII.H.3(b)(i) supra.\nAnalysis by the Panel\n10.403 It seems to the Panel from the USITC's Report that the USITC considered that legacy costs\nplayed a role in causing the injury that was being suffered by the domestic industry. To us, this is\napparent from the following comment made by the USITC: \"The funding of legacy costs is a vexing\nproblem for the domestic industry, and evidence on the record indicates that legacy costs have\nprevented needed consolidation within the domestic industry from taking place\". 5334 We note in this\nregard that this statement is made in the present tense, indicating that legacy costs are currently a\nvexing problem and not only a problem of the past.\n10.404 The Panel notes that the USITC did consider the effect on the market of legacy costs.\nSpecifically, in pages OVERVIEW 31 – OVERVIEW 35, the USITC describes pensions and other\npost-employment benefits for steel company retirees. In Table OVERVIEW-9, the USITC sets out\npost-employment benefit data of selected steelmakers for the fiscal years 1996 – 2000.\n10.405 However, even though it effectively acknowledged the role played by legacy costs in causing\ninjury, the USITC appeared to dismiss this factor in its non-attribution analysis merely on the basis\nthat this factor existed prior to the period of investigation. In particular, the USITC stated that \"the\nissue of 'legacy costs' is not a new one to this industry\".5335 In the Panel's view, that a factor pre-dated\nthe period of investigation does not necessarily mean that it cannot play a role in causing serious\ninjury during the period of investigation itself. Nor does the Panel consider that a reduction in the\nlevel of legacy costs during the period of investigation will necessarily mean that such costs could not\nand did not cause injury to the relevant domestic producers.\n10.406 The Panel also notes that the USITC stated in its Report that \"[t]he difficulties in meeting\nthese [legacy cost] obligations were recognized before the POI, and the domestic industry was able to\nearn a reasonable rate of return in 1996 and 1997 despite these costs. Respondents have offered no\nreason why the industry's longstanding problem would cause no injury in 1996 or 1997 but then begin\nto depress prices and strangle revenue in 1998-2000. Legacy costs may have left certain members of\nthe domestic industry less able to compete with low-priced imports, but are not responsible for the\n\n5334 See para. 10.382.\n5335 See para. 10.382.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlow prices that have injured the industry.\" 5336 In our view, the foregoing amounts to an\nacknowledgement that legacy costs compromised the competitive position of certain domestic\nproducers. However, this effect was dismissed on the basis of the rather cursory and unsubstantiated\nassertion that \"legacy costs are not responsible for the low prices that have injured the industry.\" The\nPanel considers that given the apparent significan ce of legacy costs to the situation of the domestic\nindustry, it was incumbent upon the USITC to further examine this issue.\n10.407 In failing to adequately analyse this factor, th e Panel considers that the USITC failed to meet\nits obligation to establish explicitly, through a reasoned and adequate explanation, that the injury\ncaused by this factor, together with other factors, was not attributed to increased imports.\nConclusions\n10.408 The Panel considers that, with respect to CCF RS, the USITC failed to comply with its non-\nattribution obligation contained in the second sentence of Article 4.2(b). In particular, we consider\nthat the USITC failed to properly separate, distinguish and assess the nature and extent of the\ninjurious effects of factors other than increased imports that were causing injury to the relevant\ndomestic industry. This, to us, is clear from the fact that the USITC dismissed a number of factors\n(namely, declining domestic demand, domestic capacity increases, intra-industry competition and\nlegacy costs) in its non-attribution analysis even though it acknowledged that those factors were\ncausing injury to the industry.\n10.409 The Panel also recalls that the USITC disregarded the effect of increases in domestic capacity,\nintra-industry competition and legacy costs because \"they were not a cause of serious injury that was\nequal to or greater than the injury caused by increased imports\".\n5337 The Panel considers that such an\napproach is problematic if the cumulative effects of individual factors are not analysed or assessed in\ncases where, individually, each of them are acknowledged to have caused some injury to the relevant\ndomestic industry. In the case of CCFRS, by discarding factors that individually caused injury to the\nindustry, we consider that the USITC failed to distinguish and assess the nature and extent of the\neffects of these other factors taken together, as distinct from those injurious effects caused by\nincreased imports.\n10.410 Therefore, the USITC failed to meet its obligation to establish explicitly, through a reasoned\nand adequate explanation, that the injury caused by other factors, such as declines in demand,\ndomestic capacity increases, intra-industry competition and legacy costs, together with other factors,\nwas not attributed to increased imports of CCFRS.\n(iii) Relevance of the product definition for CCFRS\n10.411 The Panel would like to address some of the arguments made by the parties regarding the\nproduct definition for CCFRS, particularly relating to the USITC's causation analysis.\nClaims and arguments of the parties\n10.412 The arguments of the parties are set out in Section VII.H.3(b)(i) supra.\n\n5336 USITC Report, Vol. I , p.64.\n5337 See para. 10.382.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAnalysis by the Panel\n10.413 The Panel notes that we are not, in this section, evaluating arguments made by complainants\nthat the USITC's grouping of the items of CCFRS is inconsistent with Article 2.1 because it violates\nthe obligation to identify a specific imported product. Nor is the Panel dealing here with the argument\nthat the USITC acted inconsistently with Articles 2.1 and 4.1(c) of the Agreement on Safeguards in its\ndefinition of the domestic industry that produces products that are like CCFRS. The Panel will\nconfine its attention in this section to arguments made that the product defined as CCFRS was such\nthat it could not be subjected to the application of the causation requirements contained in\nArticle 4.2(b).\n10.414 The Panel recalls the text of Article 4.2(b) of the Agreement on Safeguards as the starting-\npoint for its analysis in this respect:\n\"The determination referred to in subparagraph (a) shall not be made unless this\ninvestigation demonstrates, on the basis of objective evidence, the existence of the\ncausal link between increased imports of the product concerned and serious injury or\nthreat thereof. When factors other than increased imports are causing injury to the\ndomestic industry at the same time, such injury shall not be attributed to increased\nimports.\"\n10.415 We note that, according to Article 4.2(b), th e causal link must exist \"between increased\nimports of the product concerned and serious injury or threat thereof\". Serious injury is defined in\nArticle 4.1(a) as \"a significant overall impairment in the position of a domestic industry.\" \"Domestic\nindustry\" is defined, in turn, in Article 4.1(c) as \"the producers as a whole of the like or directly\ncompetitive products operating within the territory of a Member or those whose collective output of\nthe like or directly competitive products constitutes a major proportion of the total domestic\nproduction of those products.\"\n10.416 Reading these provisions together, it is clear that, under Article 4.2(b), a causal link must be\nestablished between, on the one hand, increased imports of the product concerned and, on the other\nhand, serious injury or threat thereof suffered by producers of the like or directly competitive\nproducts. In our view, the imported product and the like or directly competitive products must be\ndefined in such a way that the causal link analysis required by Article 4.2(b) can be undertaken. More\nparticularly, they must be defined in such a way that, for example, a coincidence or a conditions of\ncompetition analysis may be undertaken. They must also be defined in such a way that it can be\nestablished that injury suffered by producers of the like or directly competitive products caused by\nfactors other than increased imports is not attributed to the increased imports. In our view, if the\nimported products or the like or directly competitive products are defined in such a way that prevents\nthe proper application of the causation requirements contained in Article 4.2(b), the causation\ndetermination will necessarily be inconsistent with the prescriptions of Article 4.2(b).\n10.417 In our view, CCFRS was defined in such a way that prevented the proper application of the\ncausation requirements contained in Article 4.2(b). We consider that the USITC itself effectively\nadmitted that CCFRS could not be subjected to the application of the causation requirements given the\nfact that, on a number of occasions, it relied upon data for the items that constituted CCFRS rather\nthan for CCFRS as a whole without explaining why and how such specific data on such items related\nto the determination concerning CCFRS as a whole. In addition, the USITC itself admitted that the\nreliance on combined data for \"the five types of certain carbon flat-rolled steel … may involve\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndouble-counting.\"5338 Finally, as noted above, we do not c onsider that the grouping of the various\nproducts that constituted CCFRS renders it amenable to conditions of competition analysis because it\nbecomes difficult, if not impossible, for the comp etent authority to identify the proper locus of\ncompetition while undertaking a conditions of competition analysis for the purposes of establishing a\ncausal link for CCFRS.\n(iv) Overall conclusion on USITC's determination of a causal link\n10.418 As indicated above, the Panel found that the USITC did not provide a reasoned and adequate\nexplanation of how the facts supported its finding th at coincidence existed in this case. Nor did the\nUSITC provide a compelling explanation that demonstrated the existence of a causal link between\nincreased imports and serious injury suffered by domestic producers of CCFRS in the absence of\ncoincidence. Further, the USITC's non-attribution analysis failed to separate, distinguish and assess\nthe nature and extent of the injurious effects of declines in demand, domestic capacity increases, intra-\nindustry competition and legacy costs so that the injury caused by these factors, together with other\nfactors, was not attributed to increased imports. Thus, the USITC did not provide a reasoned and\nadequate explanation supporting a determination that there was a genuine and substantial relationship\nof cause and effect between increased imports and serious injury to the relevant domestic producers.\n10.419 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of CCFRS and injury caused to the relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n(b) Tin mill products\n10.420 As we did in relation to our findings on increased imports for tin mill products\n(paragraphs 10.191-10.200 above), the Panel needs to address the issue of the divergent findings made\nby individual USITC Commissioners: four of th e six Commissioners made findings on tin mill as a\nseparate product\n5339, but the two other Commissioners (Bragg and Devaney) treated tin mill products\nas part of the larger CCFRS category.5340 The four who examined tin mill as a separate product made\na common affirmative finding on increased imports and on serious injury, but later diverged on the\nquestion of causation, for which only Commissioner Miller made an affirmative determination. 5341\nUltimately, therefore, only Commissioner Miller reached positive findings regarding tin mill as a\nseparate product. The two Commissioners who treated tin mill as part of the CCFRS category,\nreached a positive conclusion on that larger category. Despite the divergent product definitions, the\nUSITC Report concluded that three Commissioners made \"an affirmative determination regarding\nimports of carbon and alloy tin mill products.\"\n5342\n10.421 In the March Proclamation, the President did not select any of the various affirmative\ndeterminations on tin mill as the basis of the decision to impose the safeguard measure on tin mill.\nRather, pursuant to domestic law, the President \"decided to consider the determinations of the groups\nof commissioners voting in the affirmative with regard to [tin mill products and stainless steel wire] to\nbe the determination of the [US]ITC\".\n5343 It, therefore, is apparent that the President based his\ndetermination on the findings of all three Commissioners (Bragg, Devaney and Miller), although\n\n5338 USITC Report, Vol. I, p. 51, note 193.\n5339 USITC Report, Vol. I, pp. 71 et seq.\n5340 USITC Report, Vol. I, p. 71, footnote 368 and p. 279.\n5341 USITC Report, Vol. I, pp. 307-309.\n5342 USITC Report, Vol. I, p. 25.\n5343 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthose three Commissioners did not perform their analysis on the basis of the same like product\ndefinition.\n10.422 In this regard, the Panel refers to its discussion in the context of its review of the USITC's\nincreased import determination in paragraphs 10.191-10.200 above. In sum, the Panel finds that a\nMember is not permitted to base its safeguard measures on an explanation that consists of alternative\nexplanations which, given the different products upon which such explanations are based, cannot be\nreconciled as a matter of substance. Therefore, it is our view that the USITC Report does not contain a\nreasoned and adequate explanation of how the facts support the determination that increased imports\nof tin mill products caused serious injury to the relevant domestic industry, as required by\nArticles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards.\n(c) Hot-rolled bar\n10.423 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants that, for us, raised the most problematic aspects of the USITC's determinations on\ncausation, that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\n(i) Coincidence and conditions of competition\nUSITC findings\n10.424 The USITC's findings read as follows:\n\"We find that the increased imports of hot-rolled bar are an important cause, and a\ncause not less than any other cause, of serious injury to the domestic industry.\nAccordingly, we find that increased imports of hot-rolled bar are a substantial cause\nof serious injury to the domestic hot-rolled bar industry.\na. Conditions of Competition\nWe have taken into account a number of factors that affect the\ncompetitiveness of domestic and imported hot-rolled bar in the US market, including\nfactors related to the product itself, the degree of substitutability between the\ndomestic and imported articles, changes in world capacity and production, and market\nconditions. These factors affect prices and other considerations taken into account by\npurchasers in determining whether to purchase domestically-produced or imported\narticles.\nMarket participants generally agree that there are few or no substitutes for\nlong products such as hot-rolled bar. 5344 As discussed in section V.A.1. above, hot-\nrolled bar is used in construction, automotiv e equipment, and industrial applications.\nHot-rolled bar encompasses a wide range of products including merchant bar, special\nbar quality steel bars, and light shapes.5345\n\n5344 (original footnote) CR and PR at LONG- 78.\n5345 (original footnote) See CR and PR at LONG-1.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe record indicates strong demand during the period examined, with\napparent US consumption of hot-rolled bar increasing during every full-year but one\nof the period. Apparent consumption rose during the first three years of the period,\nincreasing from 10.0 million tons in 1996 to 11.7 million tons in 1998. It then\ndeclined to 11.0 million tons in 1999 but increased to 11.2 million tons in 2000.\nApparent consumption was lower in interim 2001, at 4.9 million tons, than in interim\n2000, when it was 6.0 million tons.\n5346\nWith regard to supply of hot-rolled bar, US capacity reported in\nquestionnaires increased slightly from 1996 to 2000, but overall industry capacity\ndeclined during the period examined. The domestic industry's capacity utilization\nfluctuated over the period examined. Capacity utilization for full-year periods ranged\nbetween 67.2 percent in 1996 to 74.3 percent in 1998. Foreign capacity reported in\nquestionnaires increased from 26.7 million tons in 1996 to 29.8 million tons in 2000,\nand was higher in interim 2001 than in interim 2000. Foreign capacity utilization for\nfull-year periods ranged from 74.3 percent in 1999 to 79.4 percent in 2000.\n5347\nPrice is a moderately important factor in purchasing decisions for hot-rolled\nbar. Price was listed as the top factor in purchasing decisions by 27.8 percent of hot-\nrolled purchasers in their questionnaire responses. While more purchasers listed\nquality than price as their top factor in purchasing decisions, they generally deemed\ndomestically-produced hot bar and imports to be comparable with respect to the\nparticular quality considerations most important in their purchasing decisions.\n5348\nb. Analysis 5349\nThrough price-based competition, the increased imports caused domestic hot-\nrolled bar producers to lose market share at the same time prices were falling. The\nresulting loss in revenues led to the poor operating results and plant closures\ndiscussed above.\nThe timing of domestic producers' price declines do not correspond precisely\nto the timing of the import surges. The record, however, indicates that imports had a\nnegative effect on prices and that the domestic industry used different strategies over\nthe course of the period examined to comp ete with the imports. The largest increase\nin hot-rolled bar imports occurred in 1998, s hortly following the financial crisis that\nled to sharply decreased steel consumption in several Asian countries. Import\nvolumes increased by 29.5 percent from 1997 to 1998.\n5350 During 1998, the imports\nconsistently undersold the domestically-produced product. Underselling margins for\n\n5346 (original footnote) CR and PR, Table LONG-70.\n5347 (original footnote) CR and PR, Table LONG-42. We have relied upon the questionnaires for\nforeign capacity and capacity utilization data, although such data are not complete. We acknowledge that the\ndomestic producers contended that the questionnaire data understated foreign capacity and overstated foreign\ncapacity utilization.\n5348 (original footnote) INV-Y-212 at 45.\n5349 (original footnote) The Minimill 201 Coalition produced an economic model that attempted to\nmeasure the relationship between imports and the domestic industry's prices and profits. We considered this\nmodel in making our determination but note its limitations. In particular, there were defects in the manner the\nmodel measured import competition, and the model did not adequately address changes in domestic\ncompetition.\n5350 (original footnote) CR and PR, Table LONG-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe hot-rolled bar product on which the Commission collected pricing data, which\nhovered around 5.0 percent during the first three quarters of 1998, increased to 7.0\npercent in the fourth quarter.\n5351\nDomestic producers generally maintained their prices in 1998, but at the cost\nof market share. The average unit values of US shipments increased by a very slight\n0.3 percent from 1997 to 1998. 5352 Prices for the domestically-produced hot-rolled\nbar product on which the Commission collected data remained generally stable during\nthe first three quarters of 1998. Indeed, prices for the domestically-produced product\nduring these three quarters exceeded prices during any other portion of the period\nexamined. Prices for the domestically-produced product did fall slightly – by 3\npercent – between the third and fourth quarters of 1998.\n5353\nAs a result of maintaining prices, the domestic industry maintained its\noperating margins, which declined by only three-tenths of a percentage point from\n1997 to 1998. However, total operating income declined by 9.3 percent during this\nperiod.\n5354 The industry also lost 4.1 percentage points of market share to the\nimports. This was the largest drop in domestic producers' market share over the\nperiod examined.5355\nIn 1999 the domestic industry responded to the import competition by\nreducing prices in an attempt to maintain market share. Import volumes remained\nhigh, with import market share rising slightly from 20.1 percent in 1998 to 20.4\npercent in 1999. 5356 Moreover, inventories held by US importers had increased\nsharply in 1998.5357 Thus, imports continued to be a significant competitive factor in\n1999 although the quantity of imports that year was below the level of 1998. Prices\nfor the domestically-produced hot-rolled bar product on which the Commission\ncollected data declined by 7.8 percent from the fourth quarter of 1998 to the first\nquarter of 1999, and fluctuated within a narrow range during the remaining three\nquarters of 1999. During this period, the domestic producers' prices were below those\nof the imports.\n5358 Domestic producers' average unit values showed comparable\ndeclines.5359 As a result, in 1999 domestic producers held their loss of market share\nto three-tenths of a percentage point. 5360 Nevertheless, because declines in the\ndomestic industry's average unit sales values exceeded declines in the average unit\ncosts of goods sold, its operating margin fell.\n5361\nIn 2000, the domestic industry initially increased prices. Prices for the\ndomestically-produced hot-rolled bar product for which the Commission collected\ndata rose during the first quarter of 2000, although pricing levels remained below\nthose of 1998. In the first half of the year, however, underselling by the imports\n\n5351 (original footnote) INV-Y-212, Table LONG-ALT-90.\n5352 (original footnote) CR and PR, Table LONG-16.\n5353 (original footnote) INV-Y-212, Table LONG-ALT-90.\n5354 (original footnote) CR and PR, Table LONG-27.\n5355 (original footnote) CR and PR, Table LONG-70.\n5356 (original footnote) CR and PR, Table LONG-70.\n5357 (original footnote) CR and PR, Table LONG-C-3.\n5358 (original footnote) INV-Y-212, Table LONG-ALT-90.\n5359 (original footnote) CR and PR, Table LONG-27.\n5360 (original footnote) CR and PR, Table LONG-70.\n5361 (original footnote) CR and PR, Table LONG-27.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nresumed.5362 The imports consequently gained 1.7 percentage points of market share\nfrom the conclusion of 1999 to June 2000. In response, the domestic producers again\ncut prices during the second half of 2000. Prices declined by 6.1 percent between the\nsecond and third quarters of 2000, and by another 2.3 percent between the third and\nfourth quarters.\n5363\nThese price declines mitigated, but did not eliminate, further erosion in the\ndomestic industry's market share.5364 Indeed, the domestic industry sold less tonnage\nin 2000 than in 1999, although total US consumption was greater in 2000. 5365 Also,\nprice declines during the second half of the year negated the price increases during\nthe first half of the year – average unit sales values were unchanged in 2000 from\n1999.\n5366 The combination of lost market share, lower sales volumes, and lower\nprices during 2000 -- all of which were linked to the increased imports -- led to the\nindustry's poor operating performance and closure of productive facilities. We\nconsequently conclude that the increased imports were an important cause of the\nserious injury sustained by the domestic hot-rolled bar industry.\"\n5367\nClaims and arguments of the parties\n10.425 The arguments of the parties are set out in Section VII.H.2(c) supra.\nAnalysis by the Panel\n10.426 The Panel has examined the relevant section of the USITC Report for hot-rolled bar and notes\nthat, in determining causal link, the USITC did not conduct a coincidence analysis. As mentioned\npreviously, the Panel considers that if a competent authority has not examined coincidence of trends,\nit must, in proving causation, provide a reasoned and adequate explanation as to why such an analysis\nwas not undertaken as well as a compelling explanation establishing the existence of a causal link.\nWe note that for hot-rolled bar, the USITC analys ed the conditions of competition in the hot-rolled\nbar market. Accordingly, we will now proceed to review the conditions of competition analysis\nundertaken by the USITC for this measure, with a view to determining whether the USITC provided\nsuch a compelling explanation.\n10.427 As a starting point, we note that the essential premise for the USITC's determination of a\ncausal link between increased imports and serious injury was the existence of price-based competition\nbetween imported and domestic products. The USITC conceded that: \"The timing of domestic\nproducers' price declines do not correspond precisely to the timing of the import surges\". However, it\nwent on to state that: \"The record, however, indicates that imports had a negative effect on prices and\nthat the domestic industry used different strategies over the course of the period examined to compete\nwith the imports\". Further, the USITC concluded that: \"The combination of lost market share, lower\nsales volumes, and lower prices during 2000 – all of which were linked to the increased imports – led\nto the industry's poor operating performance and closure of productive facilities. We consequently\n\n5362 (original footnote) INV-Y-212, Table LONG-ALT-90.\n5363 (original footnote) INV-Y-212, Table LONG-ALT-90. Price declines continued through the first\ntwo quarters of 2001. Ibid.\n5364 (original footnote) The domestic industry's market share was 77.0 percent in the second half of\n2000, as opposed to 77.9 in the first half of the year. CR and PR, Table LONG-70.\n5365 (original footnote) CR and PR, Table LONG-C-3.\n5366 (original footnote) CR and PR, Table LONG-27.\n5367 USITC Report, Vol. I, pp. 95-97.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nconclude that the increased imports were an important cause of the serious injury sustained by the\ndomestic hot-rolled bar industry\".5368\n10.428 Set out below is a graphical representation of import and domestic pricing trends during the\nperiod of investigation. This graph has been generated using USITC data. We note that at every\npoint of the period of investigation, import prices exceeded domestic prices. This is not inconsistent\nwith the overall observations made by the USITC regarding the relative prices for import and\ndomestic products.5369\nImports vs imports unit values and domestic unit values\n(Tons and $/ton)\n0\n2,000,000\n4,000,000\n6,000,000\n8,000,000\n10,000,000\n12,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n0\n100\n200\n300\n400\n500\n600\n$/ton\nImports Imports (semi-annual)\nDomestic unit values Imports unit values\nDomestic unit values (semi-annual) Imports unit values (semi-annual)\n10.429 The USITC explained that domestic prices declined in an effort to mitigate the erosion of\nmarket share. Set out below is another graph, again generated using USITC data, indicating the\nimport market share during the course of the period of investigation, which tends to support the\nUSITC's conclusion that the domestic industry lost market share in favour of imports.5370\n\n5368 See para. 10.424.\n5369 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-5 at LONG-9; Table LONG-16 at LONG-21.\n5370 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-5 at LONG-9; Table LONG-70 at LONG-67; Table LONG-C-3.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and imports' market shares (Tons and percentage)\n0\n1,000,000\n2,000,000\n3,000,000\n4,000,000\n5,000,000\n6,000,000\n7,000,000\n8,000,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImpor ts\nImports (semi-annual)\nImports' market shares\nImports' market shares (semi-annual)\n10.430 On the basis of the foregoing, overall, we find that the USITC's conditions of competition\nanalysis was compelling in providing indications of the existence of a causal link between increased\nimports of hot-rolled bar and serious injury, subject, of course, to fulfilment of the non-attribution\nrequirement.\n(ii) Non-attribution\nUSITC findings\n10.431 The USITC's findings read as follows:\n\"We next consider whether there is any other cause of injury to the domestic hot-\nrolled bar industry as substantial as the increased imports. Respondents initially\ncontend that competition among domestic producers is at least as great a cause of\ninjury to the domestic industry as increased imports. In particular, they assert that\ndomestic producer Nucor is a market leader that drives down prices. They contend\nthat, through its price leadership, Nucor has increased its market share and made its\ndomestic competitors less profitable.\n5371\nWe observe initially that competition among domestic producers cannot provide any\nexplanation for certain indicia of serious injury. While competition among domestic\nproducers might explain why some individu al producers gained market share during\nthe period examined while others lost market share, it cannot explain why the\ndomestic industry as a whole lost market share over the period examined to the\nimports. The imports' share of the quantity of US apparent consumption rose from\n16.5 percent in 1996 to 22.5 percent in 2000, and was higher in 2000 than at any\nother point during the period examined.\n5372 As previously discussed, this loss in\nmarket share is a critical component in our causation analysis; the price declines that\n\n5371 (original footnote) See Hot-Rolled Bar Respondents Prehearing Brief at 58-60.\n5372 (original footnote) CR and PR, Table LONG-70.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\noccurred during the period examined were a function of the industry's efforts to\npreclude or mitigate losses in market share in the face of increased import volumes.\nWe additionally examined data concerning Nucor to ascertain the extent to which it\nwas a \"price leader\" and whether its pricing policies served to increase its market\nshare vis a vis other domestic producers, as respondents contend. The data do not\nsupport the notion that Nucor was a primary source of pricing declines. While\nNucor's average unit values were ***.5373 ***.5374\nThe data additionally do not establish that Nucor ***. 5375 We consequently conclude\nthat Nucor's pricing practices cannot provide any explanation for the serious injury\nexperienced by the domestic industry. Moreover, neither Nucor's practices nor\ninternal industry competition in general can explain why the domestic industry as a\nwhole lost market share to the imports.\nRespondents next contend that inefficient producers are a larger cause of any serious\ninjury to the domestic industry than increased imports. They contend that domestic\nproducers *** have much higher costs than industry averages and lost money\nthroughout the period examined regardless of market conditions.\n5376\nRespondents' theory fails on two accounts. First, if the difficulties of *** were due to\ntheir inefficiency relative to other domestic producers, one might expect that they\nwould lose market share to other domestic producers that are more efficient and could\ntherefore offer lower prices for their products. This, however, was not the case.\nJointly, *** accounted for a higher proportion of the quantity of US producers'\ncommercial sales in 2000 – at *** percent -- than they did in 1996, when they jointly\naccounted for *** percent of such sales.\n5377 Consequently, the so-called\n\"inefficiency\" of *** was not causing them to lose market to their domestic\ncompetitors. Second, if *** were aberrational performers, as respondents contend,\none would expect their performance trends to differ from the other domestic\nproducers. This was also not the case. Declines in operating performance were\npervasive among hot-rolled bar producers. While *** were the only domestic\nproducers to experience operating losses in 1997, four additional firms experienced\noperating losses in 1998, and four more producers beyond that experienced operating\nlosses in 2000.\n5378 Thus, at most *** consistent operating losses served to make\noverall domestic industry operating performance consistently worse than it would\nhave been had these two firms not been in the domestic industry. These firms'\nperformance, however, cannot explain the overall declines in operating performance\namong domestic hot-rolled bar producers, the increasing incidence of operating\nlosses, or the industry's overall loss of market share to the imports. Because neither\nstructural problems nor the poor performance of *** can explain the domestic\n\n5373 (original footnote) Nucor's average unit values were ***. Questionnaire Data, INV-Y-212.\n5374 (original footnote) See Producer's Questionnaires.\n5375 (original footnote) Nucor's share of the quantity of domestic hot-rolled bar producers' commercial\nsales was *** in 1996, *** in 1997, *** in 1998, *** in 1999, and *** in 2000. Questionnaire Data,\nINV-Y-212.\n5376 (original footnote) See Hot-Rolled Bar Respondents Prehearing Brief at 80-81.\n5377 (original footnote) Questionnaire Data, INV-Y-212.\n5378 (original footnote) Questionnaire Data, INV-Y-212. Moreover, as previously stated, three\nproducers that did not respond to the questionnaires declared bankruptcy and shut down production operations\naltogether in interim 2001.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry's serious injury, we conclude that the alleged inefficiency of these two firms\ncannot be a more important cause of injury than increased imports.\nWe have also examined the role of changes in demand in explaining the serious\ninjury of the domestic industry. We observe that US apparent consumption,\nmeasured by quantity, increased by 11.7 percent from 1996 to 2000. The increase\nwas not evenly distributed throughout the period examined, and apparent\nconsumption peaked in 1998. We observe, however, that during this period apparent\nconsumption declined only from 1998 to 1999, when the domestic industry\nmaintained profitable operating performance. From 1999 to 2000, however, apparent\nconsumption rose – yet the domestic industry became unprofitable. That domestic\nperformance reached injurious levels in 2000, a time of rising apparent consumption,\nindicates to us that changes in demand cannot be a cause of the serious injury evident\nat that time.\n5379\nFinally, we have examined changes in input costs as a possible source of serious\ninjury to the domestic industry. We note that costs declined during the period and\nobserve that declines in input costs, in and of themselves, cannot be an alternative\n\"cause\" of injury. At most, a decline in input costs may indicate that a factor other\nthan imports may be responsible for price declines.\nFor hot-rolled bar, unit cost of goods sold (COGS) declined from $399 in 1996 to\n$362 in 1999, and then increased to $380 in 2000; unit raw material costs declined\nthroughout the period examined.5380 As previously stated, demand for hot-rolled bar\nwas higher in 1999 than in 1996 and was higher in 2000 than in 1999. In times of\nincreasing demand, producers normally need not cut their prices to reflect fully\ndeclines in cost of goods sold. Yet from 1996 to 1999, the domestic industry's\ndeclines in average unit sales values outpaced the decline in unit COGS. From 1999\nto 2000, when unit COGS increased, unit average sales values remained the same. If\nthe domestic industry could have increased its average unit sales values in 2000 to\nreflect increasing COGS – a reasonable expectation during a year of increasing\ndemand – the industry could have maintained positive operating margins of at least\nthe levels of 1999. As explained above, however, the industry could not sustain\nwhatever price increases it initiated in 2000 because of that year's import surge.\nBecause we cannot attribute the domestic industry's declines in operating\nperformance in 2000 to increases in COGS, we conclude that changes in input costs\ncannot be as important a cause of serious injury as increased imports.\nWe consequently conclude that alternative causes cannot individually or collectively\nexplain the serious injury to the domestic industry, particularly the declining market\nshare over the course of the period examined, and the deteriorating operating\nperformance leading to negative operating margins for the domestic industry in 2000.\n\n5379 (original footnote) CR and PR, Table LONG-C-3. We observe that, during interim 2001, when\napparent consumption fell significantly, the domestic industry experienced further declines in operating\nperformance. The interim 2001 data merely indicate that declines in apparent consumption can lead to further\ndeterioration to an industry that was already seriously injured.\n5380 (original footnote) CR and PR, Table LONG-27.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nAccordingly, we find that increased imports are a substantial cause of serious injury\nto the domestic hot-rolled bar industry that is not less than any other cause.\"5381\nFactors considered by the USITC\nCompetition among domestic producers\nClaims and arguments of the parties\n10.432 The arguments of the parties are set out in Section VII.H.3(b)(iii) supra.\nAnalysis by the Panel\n10.433 The Panel agrees with the United States insofa r as it stated that the USITC dismissed this\nfactor as a possible cause of injury to the industry. In particular, the USITC stated that: \"We observe\ninitially that competition among domestic producers cannot provide any explanation for certain\nindicia of serious injury\". In addition, it stated that: \"We consequently conclude that Nucor's pricing\npractices cannot provide any explanation for the serious injury experienced by the domestic industry.\nMoreover, neither Nucor's practices nor internal industry competition in general can explain why the\ndomestic industry as a whole lost market share to the imports\".\n5382\n10.434 We note that the complainants arguments with respect to this factor are premised on the\nassumption that the USITC acknowledged that competition among domestic producers was a cause of\ninjury. However, as noted above, this assumption is not valid. Further, in our view, the complainants\nhave not put forward an alternative plausible explanation that, in fact, competition among domestic\nproducers was a cause of serious injury.\nInefficient producers\nClaims and arguments of the parties\n10.435 The arguments of the parties are set out in Section VII.H.3(b)(iii) supra.\nAnalysis by the Panel\n10.436 The Panel notes at the outset that the USITC stated that \"the alleged inefficiency of these two\nfirms cannot be a more important cause of injury than increased imports.\" It could be concluded from\nthis statement, taken in isolation, that the USITC considered that inefficient producers were a cause of\ninjury, albeit not a cause that was more important than increased imports. However, in the Panel's\nview, in light of the remainder of the USITC's analysis, it would seem that the USITC made this\nstatement merely in keeping with domestic law requ irements. On the contrary, the substance of the\nUSITC's analysis indicates that the USITC dismissed this factor as a possible cause of injury to the\nindustry. In particular, the USITC stated that: \"Respondents next contend that inefficient producers\nare a larger cause of any serious injury to the domestic industry than increased imports…Respondents'\ntheory fails on two accounts…\" In addition, the USITC stated that: \"These firms' performance,\nhowever, cannot explain the overall declines in operating performance among domestic hot-rolled bar\nproducers, the increasing incidence of operating losses, or the industry's overall loss of market share\nto the imports. Because neither structural problems nor the poor performance of *** can explain the\n\n5381 USITC Report, Vol. I, pp. 97-99.\n5382 See para. 10.431.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndomestic industry's serious injury, we conclude that the alleged inefficiency of these two firms cannot\nbe a more important cause of injury than increased imports.\"\n10.437 We note that the complainants' arguments with respect to this factor are premised on the\nassumption that the USITC acknowledged that inefficient producers were a cause of injury. However,\nas noted above, this assumption is not valid. Further, in our view, the complainants have not put\nforward an alternative plausible explanation that, in fact, inefficient producers were a cause of serious\ninjury.\nChanges in input costs\nClaims and arguments of the parties\n10.438 The arguments of the parties are set out in Section VII.H.3(b)(iii) supra.\nAnalysis by the Panel\n10.439 The Panel notes that although the USITC did not expressly state that increases in COGS\nplayed a role in the decline in the domestic operating margin, it did explicitly state that COGS\nincreased for hot-rolled bar from 1999 to 2000. In particular, the USITC stated that: \"For hot-rolled\nbar, unit cost of goods sold (COGS) declined from $399 in 1996 to $362 in 1999, and then increased\nto $380 in 2000\". In addition, the USITC stated that: \"If the domestic industry could have increased\nits average unit sales values in 2000 to reflect increasing COGS – a reasonable expectation during a\nyear of increasing demand – the industry could have maintained positive operating margins of at least\nthe levels of 1999. As explained above, however, the industry could not sustain whatever price\nincreases it initiated in 2000 because of that year's import surge. Because we cannot attribute the\ndomestic industry's declines in operating performance in 2000 to increases in COGS, we conclude\nthat changes in input costs cannot be as important a cause of serious injury as increased imports\".\n10.440 In the Panel's view, the USITC's dismissal of the effect of increases in COGS in its non-\nattribution analysis was not adequately reasoned. In particular, the USITC merely stated that the only\nreason why the domestic industry did not increase prices to recoup growing COGS was the import\nsurge that occurred in the year 2000. This, in the Panel's view, did not amount to a reasoned and\nadequate explanation. Nevertheless, the Panel does consider that the USITC was probably correct in\nconcluding that changes in input costs were not a cause of serious injury. If, indeed, COGS was\nplaying a significant role in situation of the domestic industry, one would have expected operating\nmargins to increase while COGS was decreasing, in particular, from 1996 until 1999 inclusive.\nHowever, as can be seen from the graph below, which has been generated using USITC data, the\ntrends in operating margin appear to be independent of trends in COGS. While it is true that there\nappears to be coincidence between, on the one hand, increases in COGS from 1999 until 2000 and, on\nthe other hand, declines in the operating margin during that period, the Panel considers that\ncoincidence during one brief window in the period of investigation cannot detract from a lack of\ncoincidence during the rest of the period of investigation.\n5383\n\n5383 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-27 at LONG-33.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nCost of goods and Operating margin ($/ton and ' 000 $)\n0\n50\n100\n150\n200\n250\n300\n350\n400\n450\n500\n1996 1997 1998 1999 2000 2001\nYears\n$/ton\n-100,000\n-50,000\n0\n50,000\n100,000\n150,000\n200,000\n250,000\n'000 $\nCost of goods\nCost of goods (semi-annual)\nOperating margin\nOperating margin (semi-annual)\nDeclines in demand\nClaims and arguments of the parties\n10.441 The arguments of the parties are set out in Section VII.H.3(b)(iii) supra.\nAnalysis by the Panel\n10.442 The Panel notes that the USITC did not give any indication in its Report that it considered\nthat demand played any role in causing serious injury to the industry. Rather, the USITC explained\nadequately that US apparent consumption of hot-rolled bar increased by 11.7% from 1996 to 2000,\nand that it increased on a year-to-year basis for every available comparison except that for 1998 to\n1999. The USITC added that apparent US consumption increased from 1999 to 2000, the year that\ndomestic industry performance reached injurious levels. Consequently, it concluded that changes in\ndemand could not explain the industry's condition in 2000.\n5384 In the Panel's view the USITC\nexamined the nature and effects of declines in demand when assessing whether increased imports of\nhot-rolled were causing serious injury to the relevant domestic producers. Accordingly, the Panel\nrejects the complainants' claims in relation to this factor.\nConclusions\n10.443 In the Panel's view, the USITC failed to meet its obligation to establish explicitly, through a\nreasoned and adequate explanation, that the injury caused by increases in COGS, together with other\nfactors, was not attributed to increased imports contrary to the requirements of Article 4.2(b) of the\nAgreement on Safeguards. Having said this, the Panel notes that the facts do appear to support the\nUSITC's conclusion regarding increases in COGS.\n\n5384 United States' first written submission, para. 578.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Overall conclusion on USITC's determination of a causal link\n10.444 We conclude that with respect to hot-rolled bar, although the USITC did not conduct any\ncoincidence analysis, its conditions of competition' s analysis provided a compelling explanation that\nindicated the existence of a causal link, subject to fulfilment of the non-attribution requirement. In\nthis regard, we found that the USITC's non-attribution analysis failed to separate, distinguish and\nassess the nature and extent of the injurious effects of increases in COGS so that the injury caused by\nthese factors, together with other factors, was not attributed to increased imports. Thus, the USITC did\nnot provide a reasoned and adequate explanation supporting a determination that there was a genuine\nand substantial relationship of cause and effect between increased imports and serious injury to the\nrelevant domestic producers.\n10.445 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of hot-rolled bar and injury caused to the relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n(d) Cold-finished bar\n10.446 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants that, for us, raised the most problematic aspects of the USITC's determinations on\ncausation, that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\n(i) Coincidence and conditions of competition\nUSITC findings\n10.447 The USITC's findings read as follows:\n\"We find that the increased imports of cold-finished bar are an important cause, and a\ncause not less than any other cause, of serious injury to the domestic industry.\nAccordingly, we find that increased imports of cold-finished bar are a substantial\ncause of serious injury to the domestic cold-finished bar industry.\na. Conditions of Competition\nWe have taken into account a number of factors that affect the\ncompetitiveness of domestic and imported cold-finished bar in the US market,\nincluding factors related to the product itself, the degree of substitutability between\nthe domestic and imported articles, changes in world capacity and production, and\nmarket conditions. These factors affect prices and other considerations taken into\naccount by purchasers in determining whether to purchase domestically-produced or\nimported articles.\nMarket participants generally agree that there are few or no substitutes for\nlong products such as cold-finished bar.\n5385 As discussed in section V.A.2. above, the\nprincipal use of cold-finished bar is in automotive applications.\n\n5385 (original footnote) CR and PR at LONG-78.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe record indicates strong demand during most of the period examined with\nUS apparent consumption of cold-finished bar increasing during every full-year but\none. Apparent consumption rose from 1.41 million tons in 1996 to 1.60 million tons\nin 1997 and then to 1.67 million tons in 1998. Apparent consumption then declined\nto 1.61 million tons in 1999 but increased to 1.64 million tons in 2000. Apparent\nconsumption was lower in interim 2001, at 700,202 tons, than in interim 2000, when\nit was 905,184 tons.\n5386\nWith regard to supply of cold-finished bar, US capacity increased from 1996\nto 2000 despite declines since 1998. Domestic industry capacity utilization fluctuated\nduring the period examined. Notwithstanding that the capacity utilization data\nreported in the questionnaires appear to be understated, it is clear that there was\nadditional productive capacity available to the domestic industry throughout the\nperiod examined. Foreign capacity reported in questionnaires increased from 1.6\nmillion tons in 1996 to 2.0 million tons in 2000, and was higher in interim 2001 than\nin interim 2000. Foreign capacity utilization for full-year periods ranged from 75.2\npercent in 1999 to 84.3 percent in 2000.\n5387\nThe record indicates that price is an important factor in purchasing decisions\nfor cold-finished bar. Purchasers listed price second most-frequently, after quality, as\nthe top factor in purchasing decisions, and listed price most frequently as the number\ntwo factor. Most purchasers evaluated the imports and domestically-produced cold-\nfinished bar as comparable with respect to product consistency and product\nquality.\n5388\nb. Analysis 5389\nAggressive pricing by the imports during the latter portion of the period\nexamined caused the domestic industry to lose market share and revenues. This\nresulted in the poor operating performance and serious injury discussed above.\nAverage unit values of the imports trended downward from 1996 to 1998,\nand the decline accelerated in 1999. Import average unit values declined by 1.3\npercent from 1996 to 1997 and by 0.1 percent from 1997 to 1998. They then fell by\n7.7 percent from 1998 to 1999. 5390 Additional evidence that import prices declined\ndramatically in 1999 is provided by data for one-inch round C12L14, the cold-\nfinished bar product for which the Commission obtained significant pricing data\nconcerning imports.\n5391 Between the fourth quarter of 1998 and the first quarter of\n\n5386 (original footnote) CR and PR, Table LONG-71.\n5387 (original footnote) CR and PR, Table LONG-45. We have relied upon the questionnaires for\nforeign capacity and capacity utilization data, although such data are not complete. We acknowledge that the\ndomestic producers contended that the questionnaire data understated foreign capacity and overstated foreign\ncapacity utilization.\n5388(original footnote) INV-Y-212 at 46.\n5389 (original footnote) The Minimill 201 Coalition produced an economic model that attempted to\nmeasure the relationship between imports and the domestic industry's prices and profits. In particular, there\nwere defects in the manner the model measured import competition, and the model did not adequately address\nchanges in domestic competition.\n5390 (original footnote) CR and PR, Table LONG-6.\n5391 (original footnote) The Commission collected pricing data concerning two cold-finished bar\nproducts. For one of the products, however, the reported data covered very small import volumes: less than 500\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n1999, import prices for this product declined by *** percent. They fell an additional\n*** percent between the first and second quarters of 1999, the largest quarterly\ndecline to that point in the period examined. Although prices rose during the next\ntwo quarters, the fourth quarter 1999 price remained 8.2 percent below the fourth\nquarter 1998 price.\n5392\nPrices for domestically-produced C12L14 declined by 3.9 percent between\nthe fourth quarter of 1998 and the first quarter of 1999 but fluctuated in a narrow\nrange during the remainder of 1999. As a result, underselling margins were higher in\nthe last three quarters of 1999 than in earlier periods. Between the first quarter of\n1996 and the first quarter of 1999, the margin of underselling or overselling by the\nimports was no greater than 1.8 percent in any quarter. The underselling margin\nincreased to 8.1 percent in the second quarter of 1999, however, and remained above\n5.8 percent for the remaining quarters of that year.\n5393\nThe market did not react immediately to the price reductions by the imports.\nIndeed, neither the absolute volume of the imports nor their market share increased in\n1999.5394 The lack of immediate reaction by the market may reflect extensive\ncontract sales: over 40 percent of cold-finished bar purchasers made over 90 percent\nof their purchases on a contract basis, with contracts commonly six months to over\none year in length. 5395 However, the aggressive pricing by the imports continued in\n2000. Compared to 1999, average unit values for all imports declined by 5.1\npercent.5396 Prices for imported C12L14 declined during all but one quarter in 2000,\nand the price for the fourth quarter of 2000 was 14.0 percent below the price for the\nfourth quarter of 1999.5397\nDomestic prices also declined in 2000. Average unit values for US\nshipments of all cold-finished bar products were lower in 2000 than in 1999. 5398\nPrices for domestically-produced C12L14 were 4.2 percent lower in the fourth\nquarter of 2000 than in the fourth quarter of 1999. Nevertheless, underselling by the\n\ntons of imports in each quarter, and less than 100 tons of imports for each of the last six quarters for which data\nwere collected. INV-Y-212, Table LONG-91. By contrast, reported import volume for one-inch round\nCL12L14 was at least 1,166 tons in every quarter during the entire period examined, and at least 2,636 tons for\nevery quarter during 1999 and interim 2000. INV-Y-212, Table LONG-ALT92. Consequently, in our analysis\nof pricing we have focused on the latter, more complete data set. We also observe that, in an analysis of\nwhether there is overselling or underselling, pricing data for a specific product can provide more probative\ninformation than average unit value data, where comparisons between values for imports and domestically-\nproduced products can reflect variations in product mix. This is particularly true for a product such as cold-\nfinished bar which covers a broad range of product types and values.\n5392 (original footnote) INV-Y-212, Table LONG-ALT92.\n5393 (original footnote) INV-Y-212, Table LONG-ALT92.\n5394 (original footnote) See CR and PR, Tables LONG-6, LONG-71. A substantial increase in cold-\nfinished bar imports occurred in 1998, shortly following the financial crisis that led to sharply decreased steel\nconsumption in several Asian countries.\n5395 (original footnote) Purchaser Questionnaire Responses.\n5396 (original footnote) CR and PR, Table LONG-6.\n5397 (original footnote) INV-Y-212, Table LONG-ALT92.\n5398 (original footnote) CR and PR, Table LONG-17.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports persisted, with quarterly underselling margins in 2000 ranging from 3.9\npercent to 15.5 percent.5399\nIn 2000, the continued underselling by the imports led to significant increases\nin both import volume and market share. As previously stated, import quantities were\n33.6 percent higher in 2000 than in 1999. 5400 The imports' share of US apparent\nconsumption, measured by quantity, increased from 14.7 percent in 1999 to 19.2\npercent in 2000.5401\nBecause the imports succeeded in increasing their share of the US market in\n2000, the domestic industry's production and shipments declined from 1999 levels\nnotwithstanding the increase in US apparent consumption.\n5402 The decline in output,\ntogether with the decline in prices, led to declining revenues and poor operating\nperformance, with an operating margin in 2000 of only 2.8 percent.5403\" 5404\nClaims and arguments of the parties\n10.448 The arguments of the parties are set out in Section VII.H.2(d) supra.\nAnalysis by the Panel\n10.449 The Panel has considered the relevant section of the USITC Report for cold-finished bar and\nnotes that, in determining whether a causal link existed between increased imports and serious injury,\nthe USITC did not conduct a coincidence analysis. As mentioned previously, the Panel considers that\nif a competent authority has not examined coincidence of trends, it must, in proving causation,\nprovide a reasoned and adequate explanation as to why such an analysis was not undertaken as well as\na compelling explanation establishing the existence of a causal link. We note that the USITC\nanalysed the conditions of competition. Accordingly, we will now proceed to review the conditions\nof competition analysis undertaken by the USITC for this measure, with a view to determining\nwhether the USITC provided such a compelling explanation.\n10.450 We note as a preliminary point that the USITC considered that \"[a]ggressive pricing by the\nimports during the latter portion of the period examined caused the domestic industry to lose market\nshare and revenues. This resulted in the poor operating performance and serious injury discussed\nabove.\" The USITC ultimately concluded that \"[t]he decline in output, together with the decline in\nprices, led to declining revenues and poor operating performance, with an operating margin in 2000 of\nonly 2.8 percent.\"\n10.451 It is apparent from the USITC's analysis that the essential premise for its conclusion that\n\"increased imports of cold-finished bar are a substantial cause of serious injury to the domestic cold-\nfinished bar industry\" was that \"aggressive\" pricing by imports caused the domestic industry to lose\nmarket share and revenues. In assessing whether the USITC has provided a reasoned and adequate\nexplanation of how the facts support such a finding, the Panel will first consider whether import\npricing can be labelled as \"aggressive\".\n\n5399 (original footnote) INV-Y-212, Table LONG-ALT92.\n5400 (original footnote) CR and PR, Table LONG-6.\n5401 (original footnote) CR and PR, Table LONG-71.\n5402 (original footnote) CR and PR, Tables LONG-17, LONG-71.\n5403 (original footnote) CR and PR, Table LONG-28.\n5404 USITC Report, Vol. I, pp. 104-106.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.452 As a starting point, the Panel notes that the USITC pointed to underselling during the period,\npresumably in justification of its assertion that import pricing had been aggressive. Specifically, it\nstated that: \"[U]nderselling by the imports persisted, with quarterly underselling margins in 2000\nranging from 3.9 percent to 15.5 percent.\n5405 In 2000, the continued underselling by the imports led to\nsignificant increases in both import volume and market share. As previously stated, import quantities\nwere 33.6 percent higher in 2000 than in 1999. 5406\" The Panel notes firstly that the USITC, without\nany explanation as to why it did so, relied upon quarterly data for individual cold-bar products 5407\nwhen annual average data was available and such annual data had been used by the USITC in relation\nto other products, when available.5408 Unlike the quarterly data, the annual data indicated that imports\ndid not undersell domestic products at any point in the period of investigation. For us, the lack of\nexplanation regarding the data relied upon by the USITC calls into question whether \"underselling\"\nactually existed and, therefore, whether import pricing was, in fact, \"aggressive\" at all.\n10.453 Further, we note that at no point during the period of investigation did average unit values for\nimports undersell average unit values for domestic products. In other words, import prices exceeded\ndomestic prices throughout the period of investigation. This is evident from the graph below, which\nrepresents in graphical form USITC data. In the Panel's view, the fact that import prices exceeded\ndomestic prices throughout the period of investigation tends to detract from the conclusion that import\npricing was \"aggressive\". This is not to say, however, that the absence of underselling by imports\nmeans that pricing cannot be labelled as \"aggressive\". On the contrary, we concede that import\noverselling may, in certain circumstances, drive domestic prices downwards. However, in this case,\nthe USITC relied upon the existence of import underselling as the basis for its assertion that import\npricing was \"aggressive\". As noted, in fact, average unit values were always higher than domestic\nprices.\n5409\n\n5405 (original footnote) INV-Y-212, Table LONG-ALT92.\n5406 (original footnote) CR and PR, Table LONG-6.\n5407 Table LONG-91 and Table LONG-ALT92.\n5408 Table LONG-C-4.\n5409 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-6 at LONG-10; Table LONG-17 at LONG-22.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports vs imports unit values and domestic unit values\n(Tons and $/ton)\n0\n200,000\n400,000\n600,000\n800,000\n1,000,000\n1,200,000\n1,400,000\n1,600,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n0\n100\n200\n300\n400\n500\n600\n700\n800\n900\n1000\n$/ton\nImports Imports (semi-annual)\nDomestic unit values Imports unit values\nDomestic unit values (semi-annual) Imports unit values (semi-annual)\n10.454 Putting aside the difficulties with the data relied upon by the USITC, the Panel notes the\nconclusions drawn by the USITC in its conditions of competition analysis:\n\"Because the imports succeeded in increasing their share of the US market in 2000,\nthe domestic industry's production and shipments declined from 1999 levels\nnotwithstanding the increase in US apparent consumption. 5410 The decline in output,\ntogether with the decline in prices, led to declining revenues and poor operating\nperformance, with an operating margin in 2000 of only 2.8 percent.5411\"5412\n10.455 The facts do appear to bear out the conclusion that \"the imports succeeded in increasing their\nshare of the United States' market in 2000,\" as is evident from the graph below generated using\nUSITC data.5413\n\n5410 (original footnote) CR and PR, Tables LONG-17, LONG-71.\n5411 (original footnote) CR and PR, Table LONG-28.\n5412 See para. 10.447.\n5413 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-6 at LONG-10; Table LONG-71 at LONG-68; Table LONG-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and imports' market shares (Tons and percentage)\n0\n200,000\n400,000\n600,000\n800,000\n1,000,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImpor ts\nImports (semi-annual)\nImports' market shares\nImports' market shares (semi-annual)\n10.456 The facts also appear to bear out the conclusion that production and shipments declined from\n1999 levels as is evident from the graphs below, also generated using USITC data.5414\nImports and Production (Tons)\n0\n200,000\n400,000\n600,000\n800,000\n1,000,000\n1,200,000\n1,400,000\n1,600,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImpor ts\nImports (semi-annual)\nProduction\nProduction (semi-annual)\n\n5414 The data represented in the two graphs below are contained in the USITC Report, in particular in\nTable LONG-6 at LONG-10; Table LONG-17 at LONG-22; Table LONG-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and domestic shipments (Tons)\n0\n200,000\n400,000\n600,000\n800,000\n1,000,000\n1,200,000\n1,400,000\n1,600,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImports\nImports (semi-annual)\nDomestic Shipments\nDom estic shipments (semi-annual)\n10.457 Despite the foregoing, we find limited support for the conclusion that \"[t]he decline in output,\ntogether with the decline in prices, led to declining revenues and poor operating performance, with an\noperating margin in 2000 of only 2.8 percent.\" Indeed, we note that significant declines in revenues\nand operating margin began well in advance of 2000, the year when, according to the USITC \"the\ncontinued underselling by the imports led to significant increases in both import volume and market\nshare.\" This is evident from the graph below, based on USITC data, which illustrates the trends in\noperating margin together with import trends.\n5415\nImports and Operating margin (Tons and '000 $)\n0\n200,000\n400,000\n600,000\n800,000\n1,000,000\n1,200,000\n1,400,000\n1,600,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n-10,000\n0\n10,000\n20,000\n30,000\n40,000\n50,000\n60,000\n70,000\n'000 $\nImpor ts\nimports (semi-annual)\nOperating margin\nOperating margin (semi-annual)\n\n5415 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-6 at LONG-10; Table LONG-28 at LONG-34; Table LONG-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.458 In light of the foregoing, the Panel finds that the USITC has not provided a compelling\nexplanation that a causal link existed between increased imports of cold-finished bar and injury\nsuffered by the relevant domestic industry. In particular, aside from the difficulties we have identified\nin relation to the data upon which the USITC relied in undertaking its conditions of competition\nanalysis, we consider that the USITC has not provided a reasoned and adequate explanation of how\nthe facts supported its conclusion that \"[t]he decline in output, together with the decline in prices, led\nto declining revenues and poor operating performance, with an operating margin in 2000 of only\n2.8 percent\".\n(ii) Non-attribution\nUSITC findings\n10.459 The USITC's findings read as follows:\n\"The domestic industry's experience in 2000 serves to rebut one of the principal\narguments of respondents – that declines in demand were a greater cause of the\nsubstantial injury to the domestic industry than increased imports. The domestic\nindustry acknowledges that prices for cold-finished bar have historically tracked\ndemand conditions.\n5416 Indeed, the domestic industry's decline in operating\nperformance in 1999, a year when import volume and market penetration declined,\nappears to a large extent attributable to the declines in demand during that year.\nHowever, in 2000 demand increased above the level of 1999. Nevertheless, as\npreviously discussed, prices for US-produ ced product did not recover with demand,\nbut instead declined further in the face of the import surge. The per unit difference\nbetween average unit values and COGS, although slightly higher in 2000 than in\n1999, was well below the levels of any of the prior years of the period examined.\nSimilarly, the industry's operating margin, while slightly above the level of 1999, was\nonly 2.8 percent, less than half the levels of 1997 and 1998. The number of producers\nexperiencing operating losses increased. When demand again declined in interim\n2001, the imports maintained their significant presence in the market, and the\ndomestic industry's performance further deteriorated. The domestic industry's poor\nperformance despite increasing demand in 2000 indicates that it is the imports, not\nchanges in demand, that explain the serious injury the domestic industry is\nexperiencing.\nWe have also considered respondents' arguments that the domestic industry's poor\nperformance was due more to the presence of a purportedly inefficient producer with\nstructural problems, RTI, than to increased imports.\n5417 RTI's structural difficulties,\nhowever, ***. 5418 ***. We consequently reject the proposition that RTI's\nperformance was somehow anomalous or se rved to skew overall data for the\ndomestic industry.\nWe consequently conclude that alternative causes proffered by respondents cannot\nindividually or collectively explain the serious injury to the domestic industry,\nparticularly the declining market share over the course of the period examined, and\n\n5416 (original footnote) See CFTC Prehearing Brief at 7.\n5417 (original footnote) See Cold-Finished Bar Respondents Prehearing Brief at 18-23.\n5418 (original footnote) *** Producer's Questionnaire Response.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe poor operating performance in 2000. Accordingly, we find that increased imports\nare a substantial cause of serious injury to the domestic cold-finished bar industry that\nis not less than any other cause.\"\n5419\nFactors considered by the USITC\nDeclines in demand\nClaims and arguments of the parties\n10.460 The arguments of the parties are set out in Section VII.H.3(b)(iv) supra.\nAnalysis by the Panel\n10.461 In the Panel's view, the USITC clearly acknowle dged that decline in demand contributed to\ninjury that was being suffered by the domestic industry. In particular, the USITC stated that: \"The\ndomestic industry acknowledges that prices for cold-finished bar have historically tracked demand\nconditions.5420 Indeed, the domestic industry's decline in operating performance in 1999, a year when\nimport volume and market penetration declined, appears to a large extent attributable to the declines\nin demand during that year.\" As is apparent from this last statement, the USITC made a clear linkage\nbetween declines in demand and operating performan ce, the latter being an important injury factor\nreferred to in Article 4.2(a) of the Agreement on Safeguards.\n10.462 We note that the USITC considered demand changes that occurred during the period of\ninvestigation. In particular, it noted demand declines and increases during the period of investigation.\nIn addition, in the section in which it analysed the conditions of competition, the USITC stated that:\n\"The record indicates strong demand durin g most of the period examined with US\napparent consumption of cold-finished bar increasing during every full-year but one.\nApparent consumption rose from 1.41 million tons in 1996 to 1.60 million tons in\n1997 and then to 1.67 million tons in 1998. Apparent consumption then declined to\n1.61 million tons in 1999 but increased to 1.64 million tons in 2000. Apparent\nconsumption was lower in interim 2001, at 700,202 tons, than in interim 2000, when\nit was 905,184 tons.\n5421\"5422\n10.463 Having acknowledged that demand declines contributed to the state of the domestic industry,\nthe USITC dismissed this factor in its non-attribution analysis on the basis of the assertion that: \"The\ndomestic industry's poor performance despite increasing demand in 2000 indicates that it is the\nimports, not changes in demand, that explain the serious injury the domestic industry is experiencing.\"\nIn the Panel's view, the mere fact that demand increased during a segment of the period of\ninvestigation during which injury persisted does not detract from the conclusion reached by the\nUSITC itself that decline in demand contributed to injury that was being suffered by the domestic\nindustry.\n10.464 We find nothing in the report to indicate whether and how the injury caused by this factor was\nnot attributed to increased imports. In our view, the need to separate and distinguish the effects of\n\n5419 USITC Report, Vol. I, p. 107.\n5420 (original footnote) See CFTC Prehearing Brief at 7.\n5421 (original footnote) CR and PR, Table LONG-71.\n5422 See para. 10.446.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndeclines in demand was particularly important in this case given the acknowledgement by the USITC\nitself that \"the domestic industry's decline in operating performance in 1999, a year when import\nvolume and market penetration declined, appears to a large extent attributable to the declines in\ndemand during that year.\"\n10.465 The significance of this decline in operating performance in 1999 that was \"to a large extent\nattributable to declines in demand\" should be viewed in context. Below is a graph that has been\ngenerated using USITC data. This graph illustrates that the industry's operating margin dropped\nprecipitously in 1999. Prior to 1999, the operating margin was significantly higher. Following 1999,\nthe operating margin began to increase again.\n5423\nImports and Operating margin (Tons and '000 $)\n0\n200,000\n400,000\n600,000\n800,000\n1,000,000\n1,200,000\n1,400,000\n1,600,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n-10,000\n0\n10,000\n20,000\n30,000\n40,000\n50,000\n60,000\n70,000\n'000 $\nImpor ts\nimports (semi-annual)\nOperating margin\nOperating margin (semi-annual)\n10.466 Clearly, 1999 was a significant year in terms of the industry's operating performance. Given\nthat \"the domestic industry's decline in operating performance in 1999, a year when import volume\nand market penetration declined, appears to a large extent attributable to the declines in demand\nduring that year\", we consider that this illustrates that declines in demand potentially played a\nsignificant role in causing injury to the domestic industry.\nConclusions\n10.467 The Panel considers that, with respect to cold-f inished bar, the USITC failed to comply with\nits non-attribution obligation contained in the second sentence of Article 4.2(b). In particular, we\nconsider that the USITC failed to properly separate, distinguish and assess the nature and extent of the\ninjurious effects of factors other than increased imports that were causing injury to the domestic\nindustry. This, to us, is clear from the fact that the USITC dismissed one factor (namely, declining\ndomestic demand) of the two that it considered in its non-attribution analysis even though it\nacknowledged the importance of that factor in causing injury to the industry.\n\n5423 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-6 at LONG-10; Table LONG-28 at LONG-34; Table LONG-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Overall conclusion on USITC's determination of a causal link\n10.468 The Panel finds that the USITC failed to explain why it did not conduct a coincidence\nanalysis and did not provide a compelling explanation indicating the existence of a causal link\nbetween increased imports of cold-finished bar and serious injury to the relevant domestic producers.\nFurther, the Panel found that the USITC's non-attrib ution analysis for cold-finished bar was flawed\nbecause the USITC failed to separate, distinguish and assess the nature and extent of the injurious\neffects of declines in demand so that the injury caused by these factors, together with other factors,\nwas not attributed to increased imports. We found this flaw to be significant given the\nacknowledgement by the USITC itself that \"the domestic industry's decline in operating performance\nin 1999, a year when import volume and market penetration declined, appears to a large extent\nattributable to the declines in demand during that year.\" Thus, the USITC did not provide a reasoned\nand adequate explanation supporting a determination that there was a genuine and substantial\nrelationship of cause and effect between increased imports and serious injury to the relevant domestic\nproducers.\n10.469 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of cold-finished bar and injury caused to th e relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n(e) Rebar\n10.470 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants that, for us, raised the most problematic aspects of the USITC's determinations on\ncausation, that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\n(i) Coincidence and conditions of competition\nUSITC findings\n10.471 The USITC's findings read as follows:\n\"We find that the increased imports of rebar are an important cause, and a cause not\nless than any other cause, of serious injury to the domestic industry. Accordingly, we\nfind that increased imports of rebar are a substantial cause of serious injury to the\ndomestic rebar industry.\na. Conditions of Competition\nWe have taken into account a number of factors that affect the\ncompetitiveness of domestic and imported rebar in the US market, including factors\nrelated to the product itself, the degree of substitutability between the domestic and\nimported articles, changes in world capacity and production, and market conditions.\nThese factors affect prices and other considerations taken into account by purchasers\nin determining whether to purchase domestically-produced or imported articles.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nMarket participants generally agree that there are few or no substitutes for\nlong products such as rebar. 5424 Rebar is used solely for structural reinforcement\nwithin cast concrete structures.5425\nUS apparent consumption of rebar increased throughout the period examined.\nApparent consumption rose every year from 1996, when it was 5.5 million tons, to\n2000, when it was 8.1 million tons, a net increase of 48.1 percent. Apparent\nconsumption was also higher in interim 2001, at 4.2 million tons, than in interim\n2000, when it was 4.1 million tons.5426\nWith regard to supply of rebar, US capacity increased throughout the period\nexamined. Capacity utilization fluctuated; for full-year periods it ranged between\n64.9 percent in 1996 to 68.5 percent in 2000. Foreign capacity reported in\nquestionnaires increased from 24.0 million tons in 1996 to 29.6 million tons in 2000,\nand was higher in interim 2001 than in interim 2000. Foreign capacity utilization for\nfull-year periods ranged from 81.7 percent in 1996 to 86.5 percent in 2000.5427\nPrice is a very important purchasing factor in purchasing decisions for rebar.\nA majority of all purchasers listed price as the number one factor in purchasing\ndecisions for rebar, and price was named over three times more often than any other\nindividual factor.5428 One purchaser testified at the Commission hearing that rebar\nwas a commodity product sold on the basis of price, a proposition not disputed by any\nrespondent.\n5429\nFinally, rebar imports from several countries were subject to antidumping\nduties during portions of the period examined. In particular, Commerce imposed\nprovisional antidumping duties on rebar from Turkey on October 10, 1996 and issued\nan antidumping order on these imports on April 17, 1997. 5430 Commerce imposed\nprovisional antidumping duties on rebar from Belarus, China, Indonesia, Korea,\nLatvia, Moldova, Poland, and Ukraine on January 30, 2001 and issued an\nantidumping order on imports from these eight countries on September 7, 2001.5431\n\n5424 (original footnote) CR and PR at LONG-78.\n5425 (original footnote) CR and PR at LONG- 2.\n5426 (original footnote) CR and PR, Table LONG-72.\n5427 (original footnote) CR and PR, Table LONG-48. We have relied upon the questionnaires for\nforeign capacity and capacity utilization data, although such data are not complete. We acknowledge that the\ndomestic producers contended that the questionnaire data understated foreign capacity and overstated foreign\ncapacity utilization.\n5428 (original footnote) INV-Y-212 at 47.\n5429 (original footnote) Tr. at 1316 (Koch).\n5430 (original footnote) See 61 Fed. Reg. 53203 (Oct. 10, 1996), 62 Fed. Reg. 18748 (April 17, 1997).\n5431 (original footnote) See 66 Fed. Reg. 8324, 8329, 8333, 8339, 8343 (Jan. 30, 2001); 66 Fed. Reg.\n46777 (Sept. 7, 2001).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nb. Analysis 5432\nThe increased imports put price pressure on domestic producers. This price\npressure prevented domestic producers from fully achieving the benefits of cost\nreductions during certain portions of the period examined and from fully recovering\nincreasing costs during others. It also prevented domestic producers from fully\nbenefitting from the large increase in domestic consumption over the period\nexamined. As a result, operating margins declined and by 2000 the industry's\noperating income was negative.\nRebar imports increased significantly in 1998, shortly following the financial\ncrisis that led to sharply decreased steel consumption in several Asian countries. As\nhas been observed with other long products, domestic producers did not immediately\nchange their pricing strategy in response to the initial import surge. The average unit\nvalue of the domestic industry's US shipments declined by only one dollar per ton\nfrom 1997 to 1998. 5433 For the rebar product on which the Commission collected\npricing data, prices for the domestically-produced product were higher during the first\nthree quarters of 1998 than they were during the comparable quarter of 1997. Prices\ndid begin to fall for the domestically-produced product during the fourth quarter of\n1998. Throughout 1998, however, imports undersold the domestically-produced\nproduct by margins exceeding 20 percent. 5434 The imports in 1998 took nearly six\npercentage points of market share away from the domestic industry.5435\nDuring 1999, imports again increased by substantial margins. The quantity\nof imports was 49.1 percent higher in 1999 than in 1998. 5436 T h i s s u r g e w a s\naccompanied by price declines for both the imports and the domestically-produced\nproduct. Average unit values of the imports declined by 23.6 percent from 1998 to\n1999, and average unit values of US shipments of domestically produced rebar\ndeclined by 8.9 percent.\n5437 For the rebar product on which the Commission collected\npricing data, import prices fell by 8.8 percent from the fourth quarter of 1998 to the\nfirst quarter of 1999, and the first quarter 1999 price was 11.5 percent below the first\nquarter 1998 price. Similarly, for the domestically-produced product, prices declined\nby 5.0 percent from the fourth quarter of 1998 to the first quarter of 1999, and the\nfirst quarter 1999 price was 10.6 percent below the first quarter 1998 price. There\nwere further price declines in the second quarter of 1999 before prices stabilized\nduring the final two quarters of the year; the second quarter 1999 price was below the\nsecond quarter 1998 price by 12.7 percent for the domestically-produced product and\nby 15.6 percent for the imports.\n5438\n\n5432 (original footnote) The Minimill 201 Coalition produced an economic model that attempted to\nmeasure the relationship between imports and the domestic industry's prices and profits.. We considered this\nmodel in making our determination but note its limitations. In particular, there were defects in the manner the\nmodel measured import competition, and the model did not adequately address changes in domestic\ncompetition.\n5433 (original footnote) CR and PR, Table LONG-18.\n5434 (original footnote) INV-Y-212, Table LONG-ALT93.\n5435 (original footnote) CR and PR, Table LONG-72.\n5436 (original footnote) CR and PR, Table LONG-7.\n5437 (original footnote) CR and PR, Tables LONG-7, LONG-18.\n5438 (original footnote) INV-Y-212, Table LONG-ALT93.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nWe can discern no reason other than the imports for the magnitude of price\nand average unit value declines during 1999. The decline was not a function of\ndemand changes, because US apparent consumption for rebar increased by 14.1\npercent from 1998 to 1999.\n5439 Indeed, in light of these demand conditions, we would\nordinarily expect prices to have stayed stable or risen, and not to have declined by\nsuch large amounts. Changes in input costs also cannot explain the magnitude of the\nprice decline. While there was a reduction in per unit COGS from 1998 to 1999, this\nreduction was less than the per unit decline in average sales values. 5440 In any event,\nin a period of sharply increasing demand, producers normally need not cut their\nprices to reflect fully declines in costs of goods sold.\n5441 Thus the price pressure\nimposed by the surging volume of imports prevented the domestic rebar producers\nfrom achieving the full benefits of declining input costs in a growing market.\nThe imports undersold domestically-produced rebar by quarterly margins\nbetween *** and *** percent during 1999. 5442 During that year, the imports gained\nanother five percentage points of market share. 5443 Nevertheless, because of the\nstrong growth in demand, the domestic industry continued to perform profitably,\nalthough operating margins were below the levels of 1998.5444\nThere was not a further import surge in 2000, when import quantity and\nmarket share declined somewhat from 1999 levels. Imports did maintain a significant\npresence in the market in 2000, however. Import quantity and market penetration in\n2000 were still both significantly above 1998 levels, not to mention those of earlier\nyears; import quantity in 2000 was considerably more than twice the 1996 level and\nmarket penetration was nearly twice the 1996 level.\n5445\nImports maintained their pricing pressure as well in 2000. Average unit\nvalues of imports in 2000 increased only incrementally from their depressed levels of\n1999, while the average unit values for the domestically-produced product declined\nfurther from 1999 to 2000. 5446 Prices for both the domestically-produced and the\nimported rebar product on which the Commission collected data fluctuated within a\nfairly narrow range, with prices for the domestic product generally being slightly\nbelow the 1999 levels. Imports continued to undersell the domestically-produced\nproduct by margins of over 20 percent.5447\nAs was the case in 1999, factors in the market other than imports cannot\nexplain why rebar pricing in 2000 continued to be at depressed levels. Demand for\n\n5439 (original footnote) CR and PR, Table LONG-72.\n5440 (original footnote) CR and PR, Table LONG-29.\n5441 (original footnote) Additionally, competition between domestic producers cannot be a cause for\nprice declines of the magnitude observed. While cost differentials do exist among domestic producers, even the\ndomestic producer with the lowest cost structure had per-unit COGS that was considerably above the average\nunit sales values of the imports. See Producers' Questionnaires. Given the importance of price in rebar\npurchasing decisions, the commodity nature of rebar and the magnitude of underselling by the imports, it is clear\nthat price leadership was exerted by the imports, rather than any domestic producer.\n5442 (original footnote) INV-Y-212, Table LONG-ALT93.\n5443 (original footnote) CR and PR, Table LONG-72.\n5444 (original footnote) CR and PR, Table LONG-29.\n5445 (original footnote) CR and PR, Tables LONG-7, LONG-72.\n5446 (original footnote) CR and PR, Tables LONG-7, LONG-18.\n5447 (original footnote) INV-Y-212, Table LONG-ALT93.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrebar continued to increase in 2000, although this increase was less than that of the\npreceding years. 5448 Additionally, per unit COGS increased in 2000 from 1999\nlevels.5449 The combination of rising demand and rising costs should have led prices\nof domestically-produced rebar to increase in 2000. Instead, prices generally\ndeclined -- a result we conclude is attribut able to the intense price-based competition\nfrom imported rebar.5450 This decline in prices led to the poor financial performance,\nmost notably the negative operating margins discussed above.\nThe data for interim 2001 indicate a continuation of the trends observed\nduring 2000. Imports continued to maintain their presence in the market. Although\nimport average unit values in interim 2001 were above those for interim 2000, they\nwere still far below those from 1996 to 1998. The average unit values for US\nshipments of domestically-produced rebar also remained depressed, notwithstanding\nincreasing demand. Underselling by the imports persisted. Operating performance\nwas poor and below the level of interim 2000.\"5451\nClaims and arguments of the parties\n10.472 The arguments of the parties are set out in Section VII.H.2(e) supra.\nAnalysis by the Panel\n10.473 The Panel has considered the relevant section of the USITC Report for rebar and notes that, in\ndetermining causal link, the USITC did not conduct a coincidence analysis. As mentioned previously,\nthe Panel considers that if a competent authority has not examined coincidence of trends, it must, in\nproving causation, provide a reasoned and adequate explanation why such an analysis was not\nundertaken as well as a compelling explanation establishing the existence of a causal link. We note\nthat the USITC analysed the conditions of compe tition. Accordingly, we will now proceed to review\nthe conditions of competition analysis undertaken by the USITC for this measure, with a view to\ndetermining whether the USITC provided such a compelling explanation.\n10.474 The Panel considers that the facts before the USITC did not preclude a finding that\n\"the increased imports put price pressure on domestic producers. This price pressure prevented\ndomestic producers from fully achieving the benefits of cost reductions during certain portions of the\nperiod examined and from fully recovering increasing costs during others.\" In coming to this\nconclusion, we first examined average unit value data for imports and domestic products. The graph\nbelow, which has been generated using USITC data, indicates that imports undersold domestic\nproducts throughout the period of investigation and quite significantly so from 1999 onwards. This is\nconsistent with the USITC's pricing trends findings.\n5452\n\n5448 (original footnote) CR and PR, Table LONG-72.\n5449 (original footnote) CR and PR, Table LONG-29.\n5450 (original footnote) Moreover, although the largest individual component of COGS – raw materials\ncosts – declined from 1999 to 2000 on a per unit basis, th is decline was still not as great as the per unit decline\nin average commercial sales values. CR and PR, Table LONG-29.\n5451 USITC Report, Vol. I, pp. 111-114.\n5452 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-7 at LONG-11; Table LONG-18 at LONG-23.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports vs imports unit values and domestic unit values\n(Tons and $/ton)\n0\n1,000,000\n2,000,000\n3,000,000\n4,000,000\n5,000,000\n6,000,000\n7,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n0\n50\n100\n150\n200\n250\n300\n350\n$/ton\nImports Imports (semi-annual)\nDomestic unit values Imports unit values\nDomestic unit values (semi-annual) Imports unit values (semi-annual)\n10.475 We also considered the import market share during the period of investigation. As is evident\nfrom the graph below, as imports increased from 1997 onwards, the import market share also\nprogressively increased.\n5453\nImports and imports' market shares (Tons and percentage)\n0\n500,000\n1,000,000\n1,500,000\n2,000,000\n2,500,000\n3,000,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImpor ts\nImports (semi-annual)\nImports' market shares\nImports' market shares (semi-annual)\n\n5453 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-7 at LONG-11; Table LONG-72 at LONG-68; Table LONG-C-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.476 In addition, the graph below illustrating import trends and trends in the operating margin\nseems to indicate that some coincidence betw een increases in imports from 1997 onwards and\ndeclining operating margin existed from 1998 onwards.5454\nImports and Operating margin (Tons and '000 $)\n0\n1,000,000\n2,000,000\n3,000,000\n4,000,000\n5,000,000\n6,000,000\n7,000,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n-40,000\n-20,000\n0\n20,000\n40,000\n60,000\n80,000\n100,000\n'000 $\nImpor ts\nimports (semi-annual)\nOperating margin\nOperating margin (semi-annual)\n10.477 Taken together, it is our view that the above data supports the USITC finding that increased\nimports exerted downward pressure on domestic prices and that this, in turn, had an impact upon the\nfinancial performance of domestic producers. In our view, the USITC provided a compelling\nexplanation indicating the existence of a causal link between increased imports and serious injury,\nsubject, of course, to fulfilment of the non-attribution requirement. Therefore, we reject the\ncomplainants' claims and arguments in this regard.\n(ii) Non-attribution\nUSITC findings\n10.478 The USITC's finding reads as follows:\n\"In our discussion above, we have already considered and rejected several alternative\ncauses advanced by the respondents to explain the condition of the domestic rebar\nindustry. As discussed in the section on serious injury, the domestic industry's\ncapacity increases cannot be deemed to be an alternative cause of injury because\ncapacity increased far less than did US apparent consumption of rebar during the\nperiod examined; indeed, capacity utilization generally increased during the period\nexamined. We have also discussed changes in input costs and demand and found that\nthey cannot explain the changes in pricing that occurred during the period examined;\nif anything, these factors indicate that prices should have been stable to increasing\n\n5454 The data represented in the graph below are contained in the USITC Report, in particular in Table\nLONG-7 at LONG-11; Table LONG-29 at LONG-35; Table LONG-C-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nduring the latter portion of the period examined. Instead, because of competition\nfrom the increased imports, prices declined.\"5455\nFactors considered by the USITC\nDomestic capacity increases\nClaims and arguments of the parties\n10.479 The arguments of the parties are set out in Section VII.H.3(b)(v) supra.\nAnalysis by the Panel\n10.480 The Panel agrees with the United States that the USITC dismissed this factor in its non-\nattribution analysis. In particular, during its causation analysis, the USITC stated that: \"[T]he\ndomestic industry's capacity increases cannot be deemed to be an alternative cause of injury because\ncapacity increased far less than did US apparent consumption of rebar during the period examined;\nindeed, capacity utilization generally increased during the period examined.\" In addition, during its\ninjury analysis, the USITC stated that: \"Reported capacity also increased during each year of the\nperiod examined, rising from 7.6 million tons in 1996 to 9.7 million tons in 2000. Capacity was\nhigher in interim 2001, when it was 4.8 million tons, than in interim 2000, when it was 4.7 million\ntons in 2000.\n5456 The increases in capacity, however, must be viewed in the context of the increases in\ndemand for rebar during the period examined. The 26.6 percent increase in productive capacity\nbetween 1996 and 2000 was far smaller than the 48.1 percent increase in US apparent consumption\nover that period. Moreover, notwithstanding the overall increases in capacity, several firms that\nproduce rebar have shuttered production facilities during the period examined.\n5457\"5458\n10.481 We consider that the USITC provided a reasoned and adequate explanation as to why\ndomestic capacity increases were not a cause of serious injury. In the Panel's view, the complainants\nhave not put forward a plausible alternative explanation as to why this factor was a cause of serious\ninjury.\nChanges in input costs\nClaims and arguments of the parties\n10.482 The arguments of the parties are set out in Section VII.H.3(b)(v) supra.\nAnalysis by the Panel\n10.483 The USITC dismissed this factor as a possible cause of injury to the industry. In particular,\nduring its analysis of the conditions of competition, the USITC stated that: \"Changes in input costs\nalso cannot explain the magnitude of the price decline. While there was a reduction in per unit COGS\nfrom 1998 to 1999, this reduction was less than the per unit decline in average sales values.\n5459\"\nFurther, it stated that: \"Additionally, per unit COGS increased in 2000 from 1999 levels. 5460 T h e\n\n5455 USITC report, Vol. I, pp. 114-115.\n5456 (original footnote) CR and PR, Table LONG-18.\n5457(original footnote) See Minimill 201 Coalition Posthearing Brief, vol. 3 at 5-6.\n5458 USITC Report, Vol. I, p. 109.\n5459 (original footnote) CR and PR, Table LONG-29.\n5460 (original footnote) CR and PR, Table LONG-29.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncombination of rising demand and rising costs should have led prices of domestically-produced rebar\nto increase in 2000. Instead, prices generally declined – a result we conclude is attributable to the\nintense price-based competition from imported rebar.\n5461\"5462 Finally, in its causation analysis, the\nUSITC stated that: \"We have also discussed changes in input costs… and found that they cannot\nexplain the changes in pricing that occurred durin g the period examined; if anything, these factors\nindicate that prices should have been stable to increasing during the latter portion of the period\nexamined. Instead, because of competition from the increased imports, prices declined.\"\n10.484 The question remains as to whether the USITC was correct in discounting changes in input\ncosts as a possible cause of injury without further analysis. It is evident from Table-LONG 29 that\nCOGS increased quite significantly between 1999 a nd 2000. In addition, SG&A expenses increased\nsignificantly between 1998 and 2000.\n5463 Notably, the domestic industry's operating margin rose until\n1998 and declined quite precipitously thereafter. In our view, at the least, the USITC should have\nexplained why these increases in costs and expenses were not a cause of injury. It was not enough, in\nour view, to dismiss the effects of these increases on the mere basis that they could not account for\ndomestic price declines.\nConclusions\n10.485 In the Panel's view, the USITC failed to properly separate, distinguish and assess the nature\nand extent of the injurious effects of increase s in COGS and SG&A expenses, contrary to the\nrequirements of Article 4.2(b) of the Agreement on Safeguards. The Panel finds that, in failing to\nadequately analyse increases in COGS and SG&A, the USITC failed to meet its obligation to\nestablish explicitly, through a reasoned and adequate explanation, that the injury caused by these\nfactors, together with other factors, was not attributed to increased imports.\n(iii) Overall conclusion on USITC's determination of a causal link\n10.486 As indicated above, the Panel found that, although the USITC did not explain why it did not\nundertake a coincidence analysis, it nonetheless provided a compelling explanation that indicated,\nleaving aside the issue of compliance with the non-attribution requirement, the existence of a causal\nlink. However, we found that the USITC failed to meet its obligation to establish explicitly, through a\nreasoned and adequate explanation, that the injury caused by increases in COGS and SG&A, together\nwith other factors, was not attributed to increased imports. Thus, the USITC did not provide a\nreasoned and adequate explanation supporting a determination that there was a genuine and\nsubstantial relationship of cause and effect between increased imports and serious injury to the\nrelevant domestic producers.\n10.487 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of rebar and injury caused to the relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n\n5461 (original footnote) Moreover, although the largest individual component of COGS – raw materials\ncosts – declined from 1999 to 2000 on a per unit basis, th is decline was still not as great as the per unit decline\nin average commercial sales values. CR and PR, Table LONG-29.\n5462 See para. 10.471.\n5463 Even if SG&A expenses cannot be regarded as \"input costs\", we consider that such expenses\nshould have been taken into account by the USITC.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(f) Welded pipe\n10.488 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants that, for us, raised the most problematic aspects of the USITC's determinations on\ncausation, that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\n10.489 We note that the complainants have not challenged the USITC's coincidence and conditions\nof competition analyses. Accordingly, we will proceed directly to a review of the USITC's non-\nattribution analysis.\n(i) Non-attribution\nUSITC findings\n10.490 The USITC's findings read as follows:\n\"We find that increased imports of welded pipe are a substantial cause of the threat of\nserious injury: that is, we find that serious injury – a \"significant overall impairment\nin the position\" of the domestic industry – due to imports is \"clearly imminent,\" and\nthat increased imports of welded pipe are an important cause, and a cause not less\nthan any other cause, of the threat of serious injury to the domestic industry.\n…\nWe also considered other possible causes of the current condition of the domestic\nindustry, as well as respondents' arguments that no future threat of serious injury\nexists. Several respondents argued that increased domestic capacity had a negative\nimpact on prices and therefore on the condition of the domestic industry.\n5464 T h e\nincrease in capacity (1.5 million tons) was only modestly higher than the increase in\ndomestic consumption of welded pipe (1.2 million tons) over the period examined.\nThus, the increase was not inconsistent with the overall increase in consumption\nduring the period examined – apparent US consumption increased by 73 percent of\nthe amount of the increase in capacity. We do not view this differential as excessive\nor as contributing in more than a minor way to the condition of the industry in 2000\nor interim 2001.\nJoint Respondents argue that the declining profitability is explained by events\npertaining to a significant domestic producer that raised the company's costs but are\nunrelated to imports.\n5465 While certain company costs appear to have increased, the\nmain reason for the decline in the company's financial performance was the\nsubstantial drop in the unit value of company sales beginning in 1999. 5466 A s\ndiscussed above, this decline was largely the result of the substantial increased\n\n5464 (original footnote) See, e.g., Joint Respondents Prehearing Injury Brief on Welded Tubular\nProducts Other Than OCTG at 45.\n5465 (original footnote) Joint Respondents Prehearing Injury Brief on Welded Tubular Products Other\nThan OCTG at 14-15. Our discussion of this issue is framed in general terms to avoid referencing business\nproprietary information.\n5466 (original footnote) OINV-Y-212.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports. Moreover, excluding this company does not substantially alter the\ndownward trend in industry profitability described earlier.\nWe considered whether the antidumping orders in place on some welded non-OCTG\nproducts from several countries reduce the current or likely imminent impact of\nimports. The orders cover only a limited number of welded pipe products and, of\nthose, only imports from a limited number of countries. Moreover, the orders were\nissued between 1984 and 1989 and thus were in place before the start of the period\nexamined.5467 They clearly did not preclude the surge in imports in 2000 and\ncontinued high level of imports in 2001, or even prevent a surge in imports from\ncountries covered by the orders.\n5468 Given these increases despite the existence of the\norders, these pre-existing orders do not provide a basis to conclude that imports\nwould not continue to increase in the imminent future.5469\nSeveral respondents argue that the industry is not threatened with serious injury\nbecause the market for large diameter line pipe has begun to surge and will continue\nto expand in the imminent future.\n5470 We agree with respondents that available\ninformation indicates that there has been a recent increase in demand for large\ndiameter line pipe and that projections are for continued growth due to rising demand\nfor pipeline projects. We also agree that rising demand tends to ameliorate the impact\nof a given volume of imports. However, large diameter line pipe is only a portion of\nthis industry -- an estimated 20 to 30 percent of the overall welded product\ncategory.\n5471 Indeed, even with a recent rise in large diameter line pipe demand,\noverall demand for covered welded tubular products has been relatively constant on a\nfull-year basis since 1998, as well as between interim periods. Thus, we do not\nconsider the likely increased demand for large diameter line pipe as eliminating the\nthreat of serious injury.\nFor all of the reasons we have discussed, we conclude that increased imports pose a\nreal and imminent threat of serious injury to the welded pipe industry.\"\n5472\n\n5467 (original footnote) CR and PR at Table OVERVIEW-1.\n5468 (original footnote) For example, imports from Thailand, which are covered by the orders, increased\nby 69,621 tons, or 248.2 percent, between 1998 and 2000 and undersold the domestic product by double digit\nmargins in 2000 and the first half of 2001. Committee on Pipe and Tube Imports Posthearing Injury Brief at 19,\nexhibits 3, 5. Imports have also increased by significant amounts since 1998 from Korea (68,418 tons, or 19.5\npercent), Taiwan (18,762 tons, or 40.1 percent), and Turkey (30,440 tons, or 317.9 percent). In the case of\nKorea, such imports undersold the domestic product by margins up to 8.8 percent in 2000 and the first half of\n2001, and in the case of Taiwan and Turkey generally undersold the domestic product by double digit margins\nin 2000 and the first half of 2001 in quarters for which data were reported. Committee on Pipe and Tube\nImports Posthearing Injury Brief at 15-17, 21-22.\n5469 (original footnote) The pending antidumping investigation on welded non-alloy steel pipe from\nChina is not a basis to conclude that imports will not increase. It would be speculative to attempt to determine\nthe outcome of that investigation or its effect on any imports in the imminent future. The Commission made an\naffirmative determination in the preliminary phase of this investigation in July 2001, and made negative\ndeterminations in the other investigations considered at that time. See Circular Welded Non-Alloy Steel Pipe\nFrom China, Indonesia, Malaysia, Romania, and South Africa, Invs. Nos. 731-TA-943-947 (Preliminary),\nUSITC Pub. 3439 (July 2001).\n5470 (original footnote) See, e.g., European Steel Tube Association Prehearing Injury Brief at 11-13.\n5471 (original footnote) CR at TUBULAR-55; PR at TUBULAR-43.\n5472 USITC Report, Vol. I, pp. 165-166.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFactors considered by the USITC\nDomestic industry overcapacity\nClaims and arguments of the parties\n10.491 The arguments of the parties are set out in Section VII.H.3(b)(vi) supra.\nAnalysis by the Panel\n10.492 In the Panel's view, the USITC clearly considered that domestic industry overcapacity played\nsome role in causing the injury that was suffered by the domestic industry. In particular, the USITC\nstated that: \"The increase in capacity (1.5 million tons) was only modestly higher than the increase in\ndomestic consumption of welded pipe (1.2 million tons) over the period examined. Thus, the increase\nwas not inconsistent with the overall increase in consumption during the period examined – apparent\nUS consumption increased by 73 percent of the amount of the increase in capacity. We do not view\nthis differential as excessive or as contributing in more than a minor way to the condition of the\nindustry in 2000 or interim 2001.\"\n10.493 We note that the USITC identified and consid ered changes in domestic capacity during the\nperiod of investigation. In particular, the USITC stated that:\n\"Domestic capacity rose 22 percent during the period examined, from 6.86 million\nshort tons in 1996 to 8.37 million short tons in 2000, with the largest one-year\nincrease occurring in the middle of the period, between 1997 and 1998 (7.1 percent).\nDomestic capacity has increased by smaller amounts recently (by 4.4 percent between\n1999 and 2000, and by 0.5 percent between interim 2000 and interim 2001).\n5473\n…\nDomestic welded pipe capacity increased during the period examined, and was at its\nhighest level in 2000.5474 US capacity growth largely tracked the increase in apparent\nUS consumption of welded pipe. 5475 However, the recent decline in domestic\nproduction coupled with the increase in domestic capacity resulted in a significant\ndecline in capacity utilization beginning in 1999 and continuing through 2000, and in\ninterim 2001 compared to interim 2000. The capacity utilization rate for the industry\nfluctuated during the first three years of the period examined (66.7 percent in 1996,\n71.9 percent in 1997, and 70.7 percent in 1998), and then declined sharply to 63.8\n\n5473 (original footnote) CR and PR at TUBULAR-C-4.\n5474 (original footnote) US producers' average capacity was 6.86 million short tons in 1996, and\nincreased to 7.04 million short tons in 1997, 7.54 million short tons in 1998, 8.02 million short tons in 1999, and\n8.38 million short tons in 2000. US producers' average capacity was 4.69 million short tons in interim 2001\n(half year basis), virtually the same as in the same period of 2000 (4.67 million short tons). CR and PR at Table\nTUBULAR-C-4.\n5475 (original footnote) The increase in average annual capacity of approximately 1.5 million short tons\nduring the period examined was slightly above the 1.2 million short ton increase in domestic consumption that\noccurred during that period. We note that US producers maintain capacity to export, and that exports have\naccounted for as much as 475,000 tons of productio n during the period examined. CR and PR at Table\nTUBULAR-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\npercent in 1999 and 56.2 percent in 2000. This rate was 53.2 percent in interim 2001\nas compared to 53.4 percent in the same period of 2000.5476\"\n10.494 The Panel further notes that the USITC dismissed this factor in its non-attribution analysis on\nthe basis that it was not regarded as contributing to injury suffered by the domestic industry in \"more\nthan a minor way.\" In our view, that a factor contributes to injury in no \"more than a minor way\"\ndoes not detract from the implicit acknowledgement that it, nevertheless, contributes to the injury. In\nour view, the need to separate and distinguish the effects of domestic industry over-capacity was\nparticularly pertinent in this case given its apparent inter-relationship with a number of the injury\nfactors referred to in Article 4.2(a), namely, domestic production and capacity utilization. This\nrelationship was referred to by the USITC itself when it stated that: \"However, the recent decline in\ndomestic production coupled with the increase in domestic capacity resulted in a significant decline in\ncapacity utilization beginning in 1999 and continuing through 2000, and in interim 2001 compared to\ninterim 2000.\"\n10.495 As a further point, the Panel notes that the apparent premise upon which the USITC dismissed\ndomestic industry overcapacity in its non-attribution analysis was that: \"The increase in capacity (1.5\nmillion tons) was only modestly higher than the increase in domestic consumption of welded pipe (1.2\nmillion tons) over the period examined.\" Even t hough the USITC dismissed this factor on the basis\nthat it contributed to injury in no \"more than a minor way\", the Panel considers that the USITC\nimplicitly acknowledged the importance of this factor. In particular, it noted that capacity increased\nby a not insubstantial amount of 22% during the period of investigation.\n10.496 The Panel considers that in dismissing this factor in its non-attribution analysis, the USITC\nfailed to meet its obligation to establish, through a reasoned and adequate explanation, that the injury\ncaused by it, together with other factors, was properly distinguished and not attributed to increased\nimports. At the very least, the USITC should have specifically identified what it considered to be the\n\"minor\" contribution that domestic industry over-capacity played in causing serious injury to the\nindustry.\nAberrational performance of one member of the industry\nClaims and arguments of the parties\n10.497 The arguments of the parties are set out in Section VII.H.3(b)(vi) supra.\nAnalysis by the Panel\n10.498 The Panel notes that the USITC addressed the aberrational performance of one member of the\ndomestic industry in its Report. In particular, it stated that:\n\"Joint Respondents argue that the declining profitability is explained by events\npertaining to a significant domestic producer that raised the company's costs but are\nunrelated to imports.5477 While certain company costs appear to have increased, the\nmain reason for the decline in the company's financial performance was the\n\n5476 (original footnote) CR and PR at Table TUBULAR-C-4.\n5477 (original footnote) Joint Respondents Prehearing Injury Brief on Welded Tubular Products Other\nThan OCTG at 14-15. Our discussion of this issue is framed in general terms to avoid referencing business\nproprietary information.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsubstantial drop in the unit value of company sales beginning in 1999. 5478 A s\ndiscussed above, this decline was largely the result of the substantial increased\nimports. Moreover, excluding this company does not substantially alter the\ndownward trend in industry profitability described earlier.\"\n10.499 The Panel considers that the USITC's decision to dismiss the aberrational performance of one\nmember of the domestic industry in its non-attribution analysis was not adequately reasoned. The\nUSITC states that the \"main\" reason for the decline in the company's financial performance was the\ndrop in units sales caused \"largely\" by imports. In our view, words such as \"main\" and \"largely\"\nindicate subjective judgement on the part of the USITC, which should have been the subject of further\nexplanation. We believe that the USITC should have identified and considered possible reasons other\nthan the asserted \"main\" one for the company's declin e, which apparently were identified in the Joint\nRespondents Prehearing Injury Brief for welded pipe.\n5479 In addition, we note that the USITC stated\nthat excluding the poor performer from the analysis would not have \"substantially\" affected the\ndownward trend in profitability. By implication, the exclusion had some effect, albeit not substantial.\nIn the Panel's view, this effect should have been identified, evaluated and explained.\nConclusions\n10.500 The Panel considers that, with respect to welded pipe, the USITC failed to comply with its\nnon-attribution obligation contained in the second sentence of Article 4.2(b). In particular, we\nconsider that the USITC failed to properly separate, distinguish and assess the nature and extent of the\ninjurious effects of factors other than increased imports that were causing injury to the domestic\nindustry. This, to us, is clear from the fact th at the USITC dismissed a number of factors (namely,\ndomestic industry overcapacity and aberrational performance of one member of the industry) in its\nnon-attribution analysis even though it acknowledged that those factors were causing injury to the\nindustry.\n10.501 We thus find that the USITC failed to meet its obligation to establish explicitly, through a\nreasoned and adequate explanation, that the injury caused by other factors such as domestic industry\novercapacity and aberrational performance of one member of the industry, together with other factors,\nwas not attributed to increased imports.\n(ii) Overall conclusion on USITC's determination of a causal link\n10.502 In the Panel's view, the USITC failed to properly separate, distinguish and assess the nature\nand extent of the injurious effects of domestic industry overcapacity and the aberrational performance\nof one member of the industry, contrary to the requirements of Article 4.2(b) of the Agreement on\nSafeguards. The USITC, therefore, failed to meet its obligation to establish explicitly, through a\nreasoned and adequate explanation, that the injury caused by these factors, together with other factors,\nwas not attributed to increased imports. Thus, the USITC did not provide a reasoned and adequate\nexplanation supporting a determination that there was a genuine and substantial relationship of cause\nand effect between increased imports and serious injury to the relevant domestic producers.\n10.503 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of welded pipe and injury caused to the relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n\n5478 (original footnote) INV-Y-212.\n5479 See the complainants' Common Exhibit CC-78.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(g) FFTJ\n10.504 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants that, for us, raised the most probl ematic aspects of the USITC's determinations on\ncausation, that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\n(i) Coincidence and conditions of competition\nUSITC findings\n10.505 The USITC's findings read as follows:\n\"We find that the increased imports of fittings, flanges, and tool joints are an\nimportant cause, and a cause not less than any other cause, of serious injury to the\ndomestic industry. Accordingly, we find that increased imports of fittings, flanges,\nand tool joints are a substantial cause of serious injury to the domestic industry.\na. Conditions of Competition\nPipe connection products are diverse (flanges, butt-weld fittings, other fittings,\nincluding couplings and nipples, and tool joints), but in general are used to join or cap\npipe. Many of the products are commodity grade, produced to standards and\nspecifications established by standards and testing bodies such as ASTM, API, and\nAWWA. Fittings and flanges are often distributed with other tubular products, and\npurchasers stated that demand for them is driven by utilities, automotive products,\nand import competition in downstream markets.\n5480 Demand for tool joints is\nconnected with OCTG demand, since tool joints are used in manufacturing finished\ndrill pipe. 5481 Purchasers of fittings and flanges reported that imported and\ndomestically produced fittings and flanges produced to the same grade and\nspecification are used in the same applications.\n5482 Once the standards are met, price\nand cost competitiveness often become the most important factor.5483\nApparent US consumption of fittings and flanges increased by 9.7 percent between\n1996 and 2000, with most of this increase occurring between 1996 and 1997.\nDemand was less volatile thereafter, until interim 2001, when it rose by 10.4 percent\nover interim 2000.\n5484\nDomestic producers' capacity increased by 7.4 percent over the period examined,\nsomewhat less than the growth rate in consumption. Domestic capacity reached its\nhighest level of the period examined in 1999, and declined by 5.2 percent in 2000,\nand by an additional 4.6 percent in interim 2001 compared to interim 2000. 5485 As\nindicated above, Trinity Fitting Group, a domestic producer, has closed plants in\n\n5480 (original footnote) CR at TUBULAR-55; PR at TUBULAR-43.\n5481 (original footnote) CR at TUBULAR-55; PR at TUBULAR-43.\n5482 (original footnote) CR at TUBULAR-62; PR at TUBULAR-50.\n5483 (original footnote) CR at TUBULAR-59; PR at TUBULAR-47; Tr. at 2514 (Berger); Tr. at 2516\n(Zidell); Tr. at 2524 (Keilers).\n5484 (original footnote) CR and PR at Table TUBULAR-C-6.\n5485 (original footnote) CR and PR at Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nKentucky, Arkansas, Mississippi, and in early 2001, Texas, effectively exiting the\nflange business. Domestic production fluctuated during the period examined, and\nwas 5.3 percent lower in 2000 than in 1996; domestic production was 11.6 percent\nlower in interim 2001.\n5486\nForeign producers' reported capacity increased throughout the period examined, and\nwas 19.5 percent higher in 2000 than in 1996. It rose in interim 2001 compared to\ninterim 2000. Foreign producers' production, on the other hand, fluctuated, and was\nhigher in 2000 than in 1996, and higher in interim 2001 than in interim 2000.\nForeign producers became more export-oriented during the period examined. Their\nshare of total shipments exported also fluctuated, but was higher in 2000 at 60.5\npercent (60.6 percent in interim 2001) than at the beginning of the period examined\n(58.9 percent in 1996). The share shipped to the US market also fluctuated but was at\nits highest level at the end of the period examined, 19.0 percent in 2000 and 19.2\npercent in interim 2001. Foreign producers' capacity utilization rate also fluctuated\nduring the period examined, and was 58.4 percent in 2000 and 70.4 percent in interim\n2001\n5487, indicating available capacity for additional production.\nb. Analysis of Factors\nAs indicated above, imports of fittings and flanges have increased in both actual\nterms and relative to domestic production. Imports increased in actual terms by 30.8\npercent (as measured in quantity) during the course of the investigation, and by 15.3\npercent between 1999 and 2000. Imports were 32.1 percent higher in interim 2001\nthan in the same period of 2000. Imports increased in each year of the period\nexamined and were at their highest level of the period in 2000.\n5488\nImports have taken an increasingly larger share of the domestic market each year\nsince 1997, with the largest increase occurring in 2000. The market share captured\nby imports also increased sharply in interim 2001 as compared to the same period of\n2000. The share of the domestic market held by imports was 35.0 percent in 1996\nand fell to 32.9 percent in 1997 and then rose to 35.5 percent in 1998, 37.7 percent in\n1999, and 41.7 percent in 2000. The share of the market held by imports was 46.7\npercent in interim 2001, well above the market share of 39.0 percent in the same\nperiod of 2000. 5489 The steady increase in volume of imports, and the increase in\nimport market share, especially since 1997, coincided with the deterioration of the\ncondition of the domestic industry described above.\nInformation on prices was mixed. The AUVs of domestic shipments fluctuated from\n1996 to 1998, then fell somewhat from 1998 to 2000; they were lower in interim\n2001 compared to interim 2000. The AUVs of imports fluctuated but increased\n\n5486 (original footnote) CR and PR at Table TUBULAR-C-6.\n5487 (original footnote) CR and PR at Table TUBULAR-36.\n5488 (original footnote) The ratio of imports to domestic production also increased significantly during\nthe period examined, from 50.5 percent in 1996 to 69.7 percent in 2000, and was at its highest full-year level in\n2000. This was significantly above the level of 55.3 percent in 1998 and 63.0 percent in 1999. The ratio in\ninterim 2001 (88.8 percent) was substantially above the level of the same period of 2000 (59.4 percent). CR and\nPR at Table TUBULAR-15.\n5489 (original footnote) CR and PR at Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\noverall during the period. Import AUVs were generally above domestic AUVs. 5490\nBy contrast, pricing information gathered by the Commission on a butt weld fitting\nproduct5491 showed that imports from non-NAFTA sources and Mexico (there were\nno reported imports from Canada) undersold the domestic product in each quarterly\nperiod for which data were provided. The data further showed that the margin of\nunderselling was at its highest level in 2000 and January-June 2001. Non-NAFTA\nimports have been priced at more than 20 percent below the domestic product since\nthe fourth quarter of 1999.5492 Domestic prices for the butt-weld product fell slightly\nduring the period, before rising in the final quarter. 5493 Import prices for this product\nfell significantly over the period, particularly since 1998.\nPurchasers of tubular products indicated that price was a key factor in their\npurchasing decisions, behind only quality. 5494 Moreover, nearly all purchasers\nindicated that imported and domestic fittings and flanges made to the same grade and\nspecification may be used in the same applications. We find that such broad\ninterchangeability indicates that price plays an important role in the market. In light\nof these facts, we find the product-specific evidence of underselling to be significant.\nIn sum, the steady and large increase in imports, which captured an increasing share\nof the US market, led to erosions in such industry indicators as production, capacity\nutilization, shipments, and employment indicators. Lower production and shipments\nmeant fewer sales over which to spread fixed costs, contributing to increased unit\ncosts. The increasing presence of imports, in at least some cases at substantial\nunderselling margins, prevented the industry from recouping increased costs through\nhigher prices; instead, prices fell somewhat over the period. Accordingly, we find\nthat imports are a substantial cause of serious injury.\n5495\nRespondents argued that none of the injury data in the Commission prehearing staff\nreport can be correlated to import volumes. They allege that when import volumes\nincreased by the greatest margin, domestic industry operating income increased by\nthe greatest margin. 5496 The evidence in the record does not support respondents'\ncontentions. Imports increased by the greatest margin of the period examined in 2000\n\n5490 (original footnote) We are cautious of placing undue weight on AUV information, as it may be\ninfluenced by issues of product mix.\n5491 (original footnote) Carbon steel butt-weld fitting, 6 inch nominal diameter, 90 degree elbow, long\nradius, standard weight, meeting ASTM A-234, grade WPB or equivalent specification.\n5492 (original footnote) CR and PR at Table TUBULAR-61.\n5493 (original footnote) We observe that the domestic producers' attempt to raise prices in that final\nquarter, even in a period of rising demand, resulted in a substantial loss of volume.\n5494 (original footnote) CR and PR at Table TUBULAR-53. Domestic producers of fittings and flanges\nand a distributor of fittings testified that price was an important consideration in customer purchasing decisions.\nTr. at 2516 (Zidell); Tr. at 2518 (Graham); Tr. at 2520 (Ketchum); Tr. at 2523 (Bernobich).\n5495 (original footnote) Domestic producers cited increased imports as the cause of injury to the\ndomestic industry. In the questionnaire sent to fittings producers, the Commission asked recipients to identify\nthe factors, from a list of 13, including imports, that are adversely impacting the domestic industry. Recipients\nwere given the option of identifying more than one factor. Of those responding, 16 producers identified\nimports, and one identified the general economic downturn. No other factors were identified. Persons testifying\nat the public hearing also cited imports. One company of ficial asserted that declining sales volumes and profits\ncaused by imports have forced his firm to shelve plans for capital investment, severely impairing the firm's\ncompetitiveness and efficiency. Tr. at 2517 (Zidell).\n5496 (original footnote) Bebitz et al. posthearing brief at 11-17.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(15.3 percent), and the domestic industry operated at a loss that year, its worst year of\nthe period examined. This occurred notwithstanding a 4.3 percent increase in\napparent US consumption of fittings and related products that year.\n5497 While it is\ntrue that industry profit margins also fell sharply in 1999 when the quantity of\nimports increased by only a small amount (0.3 percent), the unit value of imports fell\nthat year by 7.1 percent, domestic consumption fell by 5.5 percent, and the share of\nthe market held by imports that year increased to 37.7 percent from 35.5 percent in\n1998.5498\nRespondents also contend that segments of the market are wholly or partially closed\nto imports due to Approved Manufacturers' Lists.5499 However, it is questionable how\nmuch, if any, impact that such lists have on limiting import competition in fittings\nand flanges. Domestic fittings and flanges producers who appeared at the\nCommission's injury hearing testified that approved manufacturer lists have been\nexpanded to include many foreign producers of fittings and flanges, and approved\nlists of butt-weld pipe fittings suppliers include firms in Italy, Thailand, Japan, the\nUnited Kingdom, Austria, France, Germany, Canada, and Mexico.\n5500 M o r e\ngenerally, approved manufacturer lists do not appear to have been an insurmountable\nhurdle to imports entering the US market, as they increased by over 30 percent from\n1996 to 2000, and by another 32 percent between interim 2000 and 2001.\"5501\nClaims and arguments of the parties\n10.506 The arguments of the parties are set out in Section VII.H.2(f) supra.\nAnalysis by the Panel\n10.507 At the outset, the Panel notes that the USITC undertook a coincidence analysis for FFTJ and\nconcluded that coincidence existed. Accordingly, we will consider whether these findings provide a\nreasoned and adequate explanation of how the facts support this finding.\n10.508 In particular, we note that USITC found that:\n\"Imports have taken an increasingly larger share of the domestic market each year\nsince 1997, with the largest increase occurring in 2000. The market share captured\nby imports also increased sharply in interim 2001 as compared to the same period of\n2000. The share of the domestic market held by imports was 35.0 percent in 1996\nand fell to 32.9 percent in 1997 and then rose to 35.5 percent in 1998, 37.7 percent in\n1999, and 41.7 percent in 2000. The share of the market held by imports was 46.7\npercent in interim 2001, well above the market share of 39.0 percent in the same\nperiod of 2000.\n5502 The steady increase in volume of imports, and the increase in\nimport market share, especially since 1997, coincided with the deterioration of the\ncondition of the domestic industry described above.\"5503\n\n5497 (original footnote) CR and PR at Table TUBULAR-C-6.\n5498 (original footnote) CR and PR at Table TUBULAR-C-6.\n5499 (original footnote) Bebitz et al. Posthearing Injury Brief at 11-17.\n5500 (original footnote) Tr. at 2516-17 (Zidell); at 2522-23 (Bernovich).\n5501 USITC Report, Vol. I, pp. 174-177.\n5502 (original footnote) CR and PR at Table TUBULAR-C-6.\n5503 See para. 10.505.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.509 The Panel recalls that, when examined, coincidence needs to be established between the\nmovements or trends in imports and the movements or trends in injury factors. The Panel has\nconsidered coincidence between a number of the inju ry factors mentioned in Article 4.2(a), including\nthose referred to by the USITC, and imports on the basis of facts that were available to the USITC in\nmaking its determination.\n10.510 First, the Panel considers that coincidence does appear to exist between upward trends in\nimports and downward trends in production for the duration of the period of investigation.\n5504\nImports and Production (Tons)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImpor ts\nImports (semi-annual)\nProduction\nProduction (semi-annual)\n10.511 With respect to the relationship between incr eased imports and net commercial sales, the\nPanel again considers that coincidence does appear to exist between upward trends in imports and\ndownward trends in net commercial sales during the period of investigation.5505\n\n5504 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-14 at TUBULAR-17; Table TUBULAR-C-6.\n5505 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-20 at TUBULAR-24; Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and net commercial sales (Tons)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImports\nN et com m ercial sales\nImports (semi-annual)\nN et com m ercial sales (semi-annual)\n10.512 Similarly, the Panel considers that coincidence does appear to exist between upward trends in\nimports and overall downward trends in employment during the period of investigation.5506\nImports and employment (Tons and employees)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n0\n500\n1,000\n1,500\n2,000\n2,500\n3,000\n3,500\nEmployees\nImports\nImports (semi-annual)\nEmployment\nEmployment (semi-annual)\n10.513 The Panel also considers that coincidence does appear to exist between upward trends in\nimports and downward trends in operating margin during the period of investigation. More\nparticularly, the level of operating margin dropped quite precipitously from 1997 onwards as import\n\n5506 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-14 at TUBULAR-17; Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlevels started to rise. In this regard, the Panel does not consider that rising operating margin during\ninterim 2001, which was accompanied by rising imports, detracts from our conclusion.5507\nImports and Operating margin (Tons and '000 $)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n-5,000\n0\n5,000\n10,000\n15,000\n20,000\n25,000\n30,000\n35,000\n40,000\n'000 $\nImports\nimports (semi-annual)\nOperating margin\nOperating margin (semi-annual)\n10.514 The Panel does not discern coincidence between productivity trends and imports trends.\nWhile it is true that coincidence can be discerned at the very end of the period of investigation when\nproductivity declined quite significantly and imports increased, the Panel considers that the trends\nduring the rest of the period of investigation do not demonstrate any coincidence. In particular,\nbetween 1997 and 1999 when imports started to rise, productivity levels remained more or less\nunchanged. From 1999 until 2000, as import levels increased further, productivity also increased.5508\n\n5507 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-20 at TUBULAR-24; Table TUBULAR-C-6.\n5508 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-14 at TUBULAR-17; Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and productivity (Tons and tons/1000 hours)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n24\n25\n26\n27\n28\n29\nTons/1000 hours\nImports\nImports (semi-annual)\nProductivity\nProductivity (semi-annual)\n10.515 The Panel considers that coincidence does appe ar to exist between upward trends in imports\nand downward trends in capacity utilization during the period of investigation. More particularly, as\nimport levels started to rise from 1997 onwards, capacity utilization also declined.5509\nImports and capacity utilization ( Tons and percentage)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImports\nImports (semi-annual)\nCapacity utilization\nCapacity utilization (semi-annual)\nConclusions\n10.516 On the basis of the foregoing, the Panel concludes that, overall, clear coincidence exists\nbetween the upward trend in imports and the downw ard trend in the injury factors, except for\nproductivity. Accordingly, we consider that the US ITC was justified in concluding that: \"The steady\nincrease in volume of imports, and the increase in import market share, especially since 1997,\n\n5509 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-14 at TUBULAR-17; Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ncoincided with the deterioration of the conditi on of the domestic industry.\" We note, however, that\nthe USITC did not provide a reasoned and adequate explanation of how the facts support the finding\nthat that coincidence existed. Indeed, apart from the quoted sentence from the USITC Report (at\nparagraph 10.508), we cannot find anything further in the USITC Report that demonstrates that\nmovements in imports coincided with movements in injury factors. Given that the USITC failed to\nprovide a reasoned and adequate explanation that demonstrated the existence of coincidence between\nmovements in imports and movements in injury factors, it was for the USITC to provide a compelling\nexplanation as to why a causal link was considered, nevertheless, to exist. We proceed now to the\nUSITC's analysis of the conditions of competition for FFTJ.\n10.517 The Panel considers that the following observations made by the USITC are seminal to its\nconditions of competition analysis. First, the USITC stated that \"[i]mports have taken an increasingly\nlarger share of the domestic market each year since 1997\". We agree with this observation on the\nbasis of the graph below, which has been generated using USITC data.\n5510\nImports and imports' market shares (Tons and percentage)\n50,000\n75,000\n100,000\n125,000\n150,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImpor ts\nImports (semi-annual)\nImports' market shares\nImports' market shares (semi-annual)\n10.518 Secondly, the USITC observed that \"Import AUVs were generally above domestic AUVs.\nBy contrast, pricing information gathered by the Commission on a butt weld fitting product showed\nthat imports from non-NAFTA sources and Mexico (there were no reported imports from Canada)\nundersold the domestic product in each quarterly period for which data were provided.\" We also\nagree with the USITC's observation that import average unit values were generally above domestic\naverage unit values on the basis of the graph below, which, again, has been generated using USITC\ndata.\n5511\n\n5510 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-45 at TUBULAR-38; Table TUBULAR-C-6.\n5511 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-14 at TUBULAR-17; Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports vs imports unit values and domestic unit values\n(Tons and $/ton)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n0\n500\n1000\n1500\n2000\n2500\n$/ton\nImports Imports (semi-annual)\nDomestic unit values Imports unit values\nDomestic unit values (semi-annual) Imports unit values (semi-annual)\n10.519 We note that the USITC questioned the relevance of average unit values in the context of its\nconditions of competition analysis, stating that: \"We are cautious of placing undue weight on AUV\ninformation, as it may be influenced by issues of product mix.\" While we consider that the USITC\nshould have provided a more detailed explanation of why it so readily dismissed such data, we do not\nnecessarily consider that the USITC was wrong to rely upon data for the \"butt weld fitting product \" to\nthe exclusion of the average unit value data. Indeed, at page TUBULAR-54 of Volume II of the\nUSITC Report, it is stated that this product, otherwise referred to as \"Product 22\", is a \"high volume\"\nfitting product. This suggests to us that Product 22 was a reasonably representative basis for the\nUSITC's conditions of competition analysis. We also agree with the USITC's observation that\n\"pricing information gathered by the Commission on a butt weld fitting product showed that imports\n… undersold the domestic product in each quarterly period for which data were provided.\" This\nmuch is evident from Table TUBULAR-61.\n5512\n10.520 Finally, we note that the USITC found \"the product-specific evidence of underselling to be\nsignificant\" and concluded that \"[t]he increasing presence of imports, in at least some cases at\nsubstantial underselling margins, prevented the industry from recouping increased costs through\nhigher prices; instead, prices fell somewhat over the period. Accordingly, we find that imports are a\nsubstantial cause of serious injury.\" As noted above, there was evidence of import underselling for\nProduct 22, which we consider to be sufficiently representative to have formed the basis of the\nUSITC's conditions of competition analysis. We find that the existence of underselling together with\nthe increasing level (and market share) of imports, as evidenced above in relation to our review of the\n\n5512 USITC Report, Vol. II, TUBULAR-61.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nUSITC's coincidence analysis, coincided with the decline in the situation of the domestic industry and\ntends to support the USITC finding above.5513\nImports and Operating margin (Tons and '000 $)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n-5,000\n0\n5,000\n10,000\n15,000\n20,000\n25,000\n30,000\n35,000\n40,000\n'000 $\nImports\nimports (semi-annual)\nOperating margin\nOperating margin (semi-annual)\n10.521 Therefore, on the basis of the foregoing, the Panel concludes that the USITC provided a\ncompelling explanation that indicated, subject to the fulfilment of the non-attribution requirement,\nthat a causal link existed between increased imports and serious injury.\n(ii) Non-attribution\nUSITC findings\n10.522 The USITC's findings read as follows:\n\"Respondents also alleged that causes other than imports were responsible for any\ninjury experienced by the domestic industry. First, respondents assert that the\nindustry's performance is related to factors such as the business cycle in the oil and\ngas industry.5514 A certain portion of domestic production is used for oil- and gas-\nrelated purposes and thus would be affected by market dynamics in that sector.\nHowever, to the extent that the industry's performance is related to the business cycle\nin the oil and gas industry, this should mean that the industry's financial performance\nshould have been strong in 2000 and into 2001 because demand for OCTG and other\noil and gas related products was very strong during that period. In fact, consumption\nof fittings and flanges was 4.3 percent higher in 2000 than in 1999, and was 10.4\npercent higher in interim 2001 than in interim 2000. However, the financial\nperformance of the fittings industry was at its lowest level in 2000, and the profit\n\n5513 The data represented in the graph below are contained in the USITC Report, in particular in Table\nTUBULAR-8 at TUBULAR-10; Table TUBULAR-20 at TUBULAR-24; Table TUBULAR-C-6.\n5514 (original footnote) Joint Respondents Prehearing Injury Brief on Product 22, Carbon Steel Flanges,\nFittings, and Tool Joints, at 49.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nlevel in interim 2001, while positive, remained well below the level of earlier years in\nthe period examined on an annualized basis.5515\nRespondents also claim that the domestic industry's capacity expansion and intra-\nindustry price competition led to injury. 5516 The industry did add capacity over the\nperiod examined, but at a rate less than the increase in apparent consumption. 5517\nThus, the increase in capacity would not be expected to place substantial pressure on\ndomestic prices. Nor have respondents identified what has changed over the period\nexamined such that competition among domestic producers alone would turn a solidly\nprofitable industry into one experiencing operating losses.\nRespondents allege that the decreasing profitability of the domestic has resulted from\nindustry facilities that are inefficient or outdated, and that domestic producers are\nunable to obtain sufficient forgings used in domestic production.\n5518 These\nallegations are not supported by record information.\nRespondents also claim that the industry suffered from a shortage of qualified\nworkers.5519 While a few producers noted worker shortages at certain times, the claim\nof a worker shortage is inconsistent with the fact that the domestic industry reduced\nits production workers by 6 percent from 1998 to 1999, another 8.7 percent from\n1999 to 2000, and by 4.5 percent between interim 2000 and interim 2001. These\nreductions coincided with reduced industry production, shipments, and market share,\nas imports increased.\nFinally, respondents claim that purchaser consolidation explains any negative price\neffects experienced by the industry.\n5520 In support, respondents cite one domestic\nproducer who indicated that consolidation had negatively impacted price levels, but\nalso had the benefit of reducing shipping costs. In general, purchaser consolidation\nwould be expected to place some pressure on domestic prices. However, any\nconsolidation would not explain the reduction in domestic production, shipments,\nemployment, and other non-price indicato rs that occurred during the period\nexamined.\nIn summary, we find that the increase in imports of fittings is an important cause of\nthe serious injury to the domestic fittings industry and not less important than any\nother cause, and therefore have made an affirmative determination.\"\n5521\n\n5515 (original footnote) CR and PR at Table TUBULAR-C-6.\n5516 (original footnote) Joint Respondents Prehearing Injury Brief on Product 22, Carbon Steel Flanges,\nFittings, and Tool Joints, at 53, 59.\n5517 (original footnote) CR and PR at Table TUBULAR-C-6.\n5518 (original footnote) Joint Respondents Prehearing Injury Brief on Product 22, Carbon Steel Flanges,\nFittings, and Tool Joints, at 51, 53.\n5519 (original footnote) Joint Respondents Prehearing Injury Brief on Product 22, Carbon Steel Flanges,\nFittings, and Tool Joints, at 58.\n5520 (original footnote) Joint Respondents Prehearing Injury Brief on Product 22, Carbon Steel Flanges,\nFittings, and Tool Joints, at 52.\n5521 USITC Report, Vol. I, pp. 177-178\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFactors considered by the USITC\nIncreased capacity\nClaims and arguments of the parties\n10.523 The arguments of the parties are set out in Section VII.H.3(b)(vii) supra.\nAnalysis by the Panel\n10.524 The Panel considers that the USITC acknowledged that domestic capacity increases played a\nrole in causing the injury that was suffered by the domestic industry. In particular, the USITC stated\nthat: \"Thus, the increase in capacity would not be expected to place substantial pressure on domestic\nprices.\" In our view, this statement implies that increases in capacity would be expected to place\nsome pressure on domestic prices, even if not \"substantial\".\n10.525 That the USITC considered pricing to be important is evident from the following statement\ncontained in its analysis of the conditions of competition for FFTJ:\n\"Purchasers of tubular products indicated that price was a key factor in their\npurchasing decisions, behind only quality.\n5522 Moreover, nearly all purchasers\nindicated that imported and domestic fittings and flanges made to the same grade and\nspecification may be used in the same applications. We find that such broad\ninterchangeability indicates that price plays an important role in the market.\"5523\n10.526 In addition, in the same section of its report, the USITC stated that:\n\"The increasing presence of imports, in at least some cases at substantial underselling\nmargins, prevented the industry from recouping increased costs through higher prices;\ninstead, prices fell somewhat over the period. Accordingly, we find that imports are a\nsubstantial cause of serious injury.5524\"5525\n10.527 It is clear to the Panel from the foregoing that the USITC considered that downward pressure\non prices played an important role in causing the injury that was suffered by the domestic industry.\nAccordingly, it can be deduced from the foregoing that the USITC conceded that increases in capacity\nlead, at least in part, to downward pressure on domestic prices, which, in turn, impacted upon the state\nof the domestic industry. Indeed, the Panel considers that downward pressure was exerted by\nincreases in capacity on prices, regardless of how one interprets \"substantial\" (the adjective used by\n\n5522 (original footnote) CR and PR at Table TUBULAR-53. Domestic producers of fittings and flanges\nand a distributor of fittings testified that price was an important consideration in customer purchasing decisions.\nTr. at 2516 (Zidell); Tr. at 2518 (Graham); Tr. at 2520 (Ketchum); Tr. at 2523 (Bernobich).\n5523 See para. 10.505.\n5524 (original footnote) Domestic producers cited increased imports as the cause of injury to the\ndomestic industry. In the questionnaire sent to fittings producers, the Commission asked recipients to identify\nthe factors, from a list of 13, including imports, that are adversely impacting the domestic industry. Recipients\nwere given the option of identifying more than one factor. Of those responding, 16 producers identified\nimports, and one identified the general economic downturn. No other factors were identified. Persons testifying\nat the public hearing also cited imports. One company of ficial asserted that declining sales volumes and profits\ncaused by imports have forced his firm to shelve plans for capital investment, severely impairing the firm's\ncompetitiveness and efficiency. Tr. at 2517 (Zidell).\n5525 See para. 10.505.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe USITC). The Panel is of the view that all relevant \"other factors\" – even those with limited\ninjurious effects on the domestic industry – must, together with other relevant factors, be identified,\ndistinguished and assessed with a view to reaching an overall conclusion that increased imports have a\ngenuine and substantial relationship of cause and effect with the injury suffered by the relevant\ndomestic producers.\n10.528 The Panel notes that the USITC considered trends in domestic industry capacity during the\nperiod of investigation, noting that domestic producer's capacity increased by 7.4% over the period of\ninvestigation. In particular, it stated that:\n\"Domestic producers' capacity increased by 7.4 percent over the period examined,\nsomewhat less than the growth rate in consumption. Domestic capacity reached its\nhighest level of the period examined in 1999, and declined by 5.2 percent in 2000,\nand by an additional 4.6 percent in interim 2001 compared to interim 2000.\n5526\"\n10.529 Despite the fact that the USITC acknowledged the role played by this factor in causing injury\nto the industry, it appeared to dismiss it in its non-attribution analysis. In our view, in dismissing\nincreased capacity in its non-attribution analysis, the USITC did not, through a reasoned and adequate\nexplanation, separate, distinguish and assess the nature and extent of the injurious effects caused by\nincreased capacity so that the injury caused by this factor, together with other factors, was not\nattributed to increased imports.\nPurchaser consolidation\nClaims and arguments of the parties\n10.530 The arguments of the parties are set out in Sections VII.H.3(b)(vii) supra.\nAnalysis by the Panel\n10.531 The Panel also considers that the USITC acknowledged that purchaser consolidation played a\nrole in the injury that was suffered by the domestic industry. In particular, the USITC stated that:\n\"[i]n general, purchaser consolidation would be expected to place some pressure on domestic prices.\nHowever, any consolidation would not explain the reduction in domestic production, shipments,\nemployment, and other non-price indicators that occu rred during the period examined.\" In our view,\nalthough this statement indicates that the USITC did not consider that purchaser consolidation would\nexplain declines in all injury factors, it nevert heless implicitly accepted that purchaser consolidation\nwould place \"some\" pressure on domestic prices. For the reasons explained below, we consider that\nthis effectively amounts to an acknowledgement that purchaser consolidation played a role in causing\ninjury to the industry.\n10.532 As mentioned above, it is clear to the Panel that the USITC considered that downward\npressure on prices played an important role in causing the injury that was suffered by the domestic\nindustry. Also pointed out above, the USITC stat ed that purchaser consolidation exerted downward\npressure on prices. Therefore, following the USITC's logic, we consider that there is a link between\npurchaser consolidation and injury suffered by the domestic industry.\n10.533 However, despite this link, the USITC dismissed this factor in its non-attribution analysis on\nthe basis of the assertion that \"any consolidation would not explain the reduction in domestic\n\n5526 (original footnote) CR and PR at Table TUBULAR-C-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproduction, shipments, employment, and other non-price indicators that occurred during the period\nexamined.\" Other than this statement, the USITC did not provide any explanation of why\n\"consolidation would not explain the reduction in domestic production, shipments, employment, and\nother non-price indicators that occurred during the period examined.\" Accordingly, in the Panel's\nview, the USITC's explanation of its analysis of purchaser consolidation was not adequately reasoned.\nFurther, it is our view that in failing to adequately explain this factor, the USITC failed to meet its\nobligation to establish explicitly, through a reasoned and adequate explanation, that the injury caused\nby purchaser consolidation, together with other fa ctors, was properly separated and distinguished and\nnot attributed to increased imports.\nConclusions\n10.534 The Panel considers that, with respect to FFTJ, the USITC failed to comply with its non-\nattribution obligation contained in the second sentence of Article 4.2(b). In particular, we consider\nthat the USITC failed to properly separate, distinguish and assess the nature and extent of the\ninjurious effects of factors other than increased imports that were causing injury to the domestic\nindustry on the basis of a reasoned and adequate explanation. This, to us, is clear from the fact that\nthe USITC dismissed a number of factors (namely, increased capacity and purchaser consolidation) in\nits non-attribution analysis even though it effectively acknowledged that those factors were causing\ninjury to the industry.\n(iii) Overall conclusion on USITC's determination of a causal link\n10.535 Notwithstanding the fact that the USITC did not provide an adequate and reasoned\nexplanation of how the facts supported its finding of coincidence, the Panel was of the view that clear\ncoincidence existed between the upward trend in im ports and the downward trend in injury factors.\nThe Panel proceeded to review the USITC's examination of the condition of competition and\nconcluded that the USITC provided a compelling explanation that indicated, subject to fulfilment of\nthe non-attribution requirement, a causal link existed between increased imports of FFTJs and serious\ninjury to the relevant domestic producers. Further, we found that the USITC's non-attribution analysis\nfailed to separate, distinguish and assess the nature and extent injurious effects of purchaser\nconsolidation and increased capacity so that the in jury caused by these factors, together with other\nfactors, was not attributed to increased imports. Thus, the USITC did not provide a reasoned and\nadequate explanation supporting a determination that there was a genuine and substantial relationship\nof cause and effect between increased imports and serious injury to the relevant domestic producers.\n10.536 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of FFTJ and injury caused to the relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n(h) Stainless steel bar\n10.537 The Panel notes at the outset that it has focused in this section on the arguments made by the\ncomplainants that, for us, raised the most problematic aspects of the USITC's determinations on\ncausation, that is, those aspects that more obviously entailed violations of the Agreement on\nSafeguards. Since we will dispose of the complainants' claims in our review below, the Panel sees no\nneed to deal with the other arguments.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(i) Coincidence and conditions of competition\nUSITC findings\n10.538 The USITC's findings read as follows:\n\"We find that the increased imports of stainless bar are an important cause, and a\ncause not less than any other cause, of serious injury to the domestic industry.\nAccordingly, we find that increased imports of stainless bar are a substantial cause of\nserious injury to the domestic stainless bar industry.\na. Conditions of Competition\nWe have taken into account a number of factors that affect the\ncompetitiveness of domestic and imported stainless bar in the US market, including\nfactors related to the product itself, the degree of substitutability between the\ndomestic and imported articles, changes in world capacity and production, and market\nconditions. These factors affect prices and other considerations taken into account by\npurchasers in determining whether to purchase domestically-produced or imported\narticles.\nFirst, demand for stainless bar fluctuated somewhat but grew overall during\nthe five full-years of the period of investigation. Apparent US consumption of\nstainless bar increased from 276.6 thousand short tons in 1996 to 294.4 thousand\nshort tons in 1997 but then declined to 280.3 thousand short tons in 1998 and to 265.5\nthousand short tons in 1999. In 2000, how ever, apparent consumption of bar\nincreased by 22.2 percent, growing to 324.2 thousand short tons.\n5527 This level of\nconsumption was 17.2 percent larger than in 1996. 5528 As the overall economy\ndeclined in 2001, apparent consumption of bar declined by 13 percent between\ninterim 2000 and interim 2001.5529\nSecond, stainless steel bar is used in the aerospace, automotive, chemical\nprocessing, dairy, food processing, pharmaceutical equipment, marine application,\nand other fluid handling industries. 5530 The large majority of market participants\nindicate that there are no known substitutes for stainless bar.5531\nThird, although fourteen domestic firms reported producing stainless steel bar\nin 2000 5532, four firms accounted for the large majority of domestic production of\nstainless bar in 2000: Carpenter/Talley, Crucible Specialty Metals, AvestaPolarit,\nand Slater Steels Corp.\n5533 The domestic bar industry became more concentrated\nduring the period of investigation. In 1997, Carpenter Technology, the *** domestic\n\n5527 (original footnote) CR and PR at Tables STAINLESS-67 and STAINLESS-C-4.\n5528 (original footnote) CR and PR at Tables STAINLESS-67 and STAINLESS-C-4.\n5529 (original footnote) CR and PR at Tables STAINLESS-67 and STAINLESS-C-4.\n5530 (original footnote) CR at STAINLESS-2, PR at STAINLESS-1.\n5531 (original footnote) EC-Y-046 at Table STAINLESS-6.\n5532 (original footnote) CR and PR at Table STAINLESS-1.\n5533 (original footnote) In 2000, these four firms accounted for *** percent of reported domestic\nproduction of stainless bar. CR and PR at Table STAINLESS-1.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproducer of stainless bar in 2000 5534, purchased Talley, the *** largest producer in\n2000.5535 In addition, Empire Specialty Steel, the *** largest bar producer in 2000,\nshut down its stainless operations in June 2001.5536\nThe industry's aggregate capacity level increased during the period of\ninvestigation, growing by 5.5 percent from 1996 to 2000. 5537 Capacity was 2.2\npercent higher in interim 2001 than in interim 2000. 5538 Capacity utilization declined\nfrom 63.0 percent in 1996 to 52.1 percent in 1999 but increased to 55.8 percent in\n2000.5539 Industry capacity utilization then declined from 59.5 percent to 49.6 percent\nbetween interim 2000 and 2001.5540\nFourth, price is an important factor in purchasing decisions for stainless bar.\nAlthough quality was generally ranked by the majority of responding purchasers as\nthe most important factor in the purchasing decision for stainless bar, the large\nmajority of purchasers reported price as being one of the three most important factors\nin the purchase decision.5541\nFifth, like many stainless steel products, the price of stainless bar is directly\naffected by the price of nickel. 5542 To account for fluctuations in the cost of nickel,\nstainless steel producers impose a surcharge on the price of their stainless bar\nproducts whenever the price of nickel reaches a certain level. 5543 Generally, after\ndeclining during the first three years of the period of investigation, nickel prices\nincreased significantly throughout 1999 and the first half of 2000. Nickel prices fell\nthereafter, declining through interim 2001.\n5544 The price of domestic stainless bar\nfollowed this trend somewhat during the period of investigation, with average unit\nvalues of domestic bar shipments and sales declining through the end 1999,\nrecovering in 2000, and then declining in interim 2001.5545\nSixth, during the period of investigation, there were imports of stainless bar\nfrom over 40 countries, although not every country exported stainless bar to the\nUnited States in every year.5546 The quantity of imports of stainless bar from sources\nother than Mexico increased by 54 percent from 1996 to 2000 but fell by 17 percent\n\n5534 (original footnote) Carpenter accounted for *** percent of reported domestic production of\nstainless bar in 2000. CR and PR at Table STAINLESS-1.\n5535 (original footnote) Talley accounted for *** percent of reported domestic production of stainless\nbar in 2000. CR and PR at Table STAINLESS-1.\n5536 (original footnote) Empire Specialty Steel, Inc. Questionnaire Response at August 6, 2001\nAttachment.\n5537 (original footnote) CR and PR at Tables STAINLESS-18 & STAINLESS-C-4.\n5538 (original footnote) CR and PR at Tables STAINLESS-18 & STAINLESS-C-4.\n5539 (original footnote) CR and PR at Tables STAINLESS-18 & STAINLESS-C-4.\n5540 (original footnote) CR and PR at Tables STAINLESS-18 & STAINLESS-C-4.\n5541 (original footnote) INV-Y-212 at 95.\n5542 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71.\n5543 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71.\n5544 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71.\n5545 (original footnote) CR and PR at Tables STAINLESS-18, STAINLESS-30, & STAINLESS-C-4.\n5546 (original footnote) INV-Y-180 at Table G25 – Stainless Bar and Light Shapes.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nbetween interim 2000 and interim 2001. 5547 The record indicates that domestic and\nimported stainless bar are comparable in most respects.5548\nThe aggregate capacity of foreign producers of stainless bar in countries other\nthan Mexico increased by 10.5 percent during the period examined. The capacity\nutilization of these producers increased from 74.2 percent in 1996 to 82.3 percent in\n1998, declined to 77.2 percent in 1999, and then increased to 87.1 percent in 2000.\nAggregate foreign capacity utilization increased from 89.2 percent to 90 percent in\ninterim 2001.5549\nSeventh, antidumping duty orders were imposed on imports of stainless bar\nfrom Brazil, India, Japan, and Spain in 1995. 5550 Antidumping duty orders were\nimposed against imports of stainless steel angle from Japan, Korea, and Spain in May\n2001.5551\nb. Analysis\nWe find first that the import increases between 1996 and 2000 had a serious\nadverse impact on the production levels, shipments, commercial sales and market\nshare of the domestic industry. As we described above, the quantity and market share\nof imports both increased considerably during the period of investigation, with the\nquantity of imports increasing by 53.8 percent during the period from 1996 to 2000\nand import market share increasing by 11 percentage points during that period as\nwell.\n5552 Despite the fact that these import increases occurred during a period of\ngrowing demand, the industry's production volumes, shipment levels and sales\nrevenues all declined significantly as a result of increases in import volume during the\nperiod.5553\nIn particular, the industry's production levels fell by 10 thousand short tons\n(or 5.5 percent) during the period between 1996 and 2000 5554, its net commercial\nsales fell by *** short tons (or *** percent) during that period5555, and the value of its\nnet commercial sales declined by *** percent during the period. 5556 A s a r e s u l t o f\nthese production and sales declines, the industry's capacity utilization rates fell\nconsiderably as well, dropping from 63.0 percent in 1996 to 55.8 percent in 2000. 5557\n\n5547 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.\n5548 (original footnote) EC-Y-046 at Table STAINLESS-24; see generally EC-Y-046 at 14-28.\n5549 (original footnote) CR and PR at Table STAINLESS-45.\n5550 (original footnote) CR and PR at Table OVERVIEW-1.\n5551 (original footnote) CR and PR at Table OVERVIEW-1.\n5552 (original footnote) CR and PR at Tables STAINLESS-67 & STAINLESS-C-4.\n5553 (original footnote) CR and PR at Tables STAINLESS-18, STAINLESS-30, & STAINLESS-C-4.\n5554 (original footnote) CR and PR at Tables STAINLESS-18 & STAINLESS-C-4.\n5555 (original footnote) CR and PR at Tables STAINLESS-30 & STAINLESS-C-4.\n5556 (original footnote) CR and PR at Tables STAINLESS-30 & STAINLESS-C-4.\n5557 (original footnote) In this regard, purchasers in the market reported that there was a moderately\nhigh level of substitutability between the imported and domestic merchandise, suggesting that the volume\nincrease on the part of imports came directly out of domestic market share.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nMoreover, the industry's share of the market also fell considerably, dropping from\n64.6 percent in 1996 to 59.8 percent in 1999 and then to 53.5 percent in 2000.5558\nIn fact, the declines in the industry's production, shipment and market share\nlevels occurred despite the fact that the industry added significant amounts of\ncapacity during a period of reasonably strong growth in demand for stainless bar.\nEven with this increased capacity, the industry was unable to take advantage of the\ngrowth in demand for stainless bar as imports obtained an increasingly larger share of\nthe domestic market for bar over the period of investigation. In particular, while\napparent consumption of stainless bar grew by 48 thousand short tons between 1996\nand 2000, the quantity of imports grew at a more accelerated rate, increasing by\nnearly 53 thousand short tons during this same period. This growth in imports\neffectively foreclosed the domestic industry from participating in the growth in\ndemand during the period of investigation. In sum, the import increases that occurred\nduring the period clearly had a serious adverse impact on the production volumes,\nsales levels, sales revenues, and market share of the industry during the period.\nThe record also indicates that imports affected domestic prices of stainless\nbar negatively during the period of investigation. The record in this investigation\nshows that most purchasers consider domestic and imported stainless bar to be\ncomparable in most respects\n5559, indicating that there is a high degree of\nsubstitutability between the products. Moreover, the record of this investigation also\nindicates that price is an important part of the purchasing decision. 5560 Finally, we\nnote that imports undersold the domestic merchandise throughout the period of\ninvestigation in 47 of 53 possible quarterly comparisons at underselling margins of up\nto 51 percent.5561\nWe find that this underselling depressed and suppressed domestic prices\nduring the period of investigation. Although the price of stainless bar is expected by\nmarket participants to track the price of nickel, the net sales revenues of the domestic\nstainless bar industry failed to keep pace with movements in the cost of nickel during\nthe second half of the period of investigation, particularly during the latter half of\n1999 and 2000, when the price of nickel increased substantially. 5562 While the\naverage unit value of the industry's net commercial sales increased in 2000 and\ninterim 2001, the industry's cost of goods sold rose from *** percent of its net sales\nrevenues in 1998 to *** percent of its net commercial values in 1999, *** percent of\nnet commercial sales in 2000, and *** percent in interim 2001. As a result of these\n\n5558 (original footnote) CR and PR at Tables STAINLESS-67 & STAINLESS-C-4. Indeed, the most\nsignificant adverse impact of imports in quantity terms occurred during the last full-year of the period of\ninvestigation, when apparent consumption of stainless bar grew by 22.1 percent and import quantities grew by\n41.3 percent. In that year, the industry lost 6.3 percentage points of market share and experienced the most\nsignificant declines in its capacity utilization rates of the entire period of investigation. CR and PR at Tables\nSTAINLESS-18, STAINLESS-30, STAINLESS-67, & STAINLESS-C-4.\n5559 (original footnote) INV-Y-212 at 95.\n5560 (original footnote) INV-Y-212 at 95.\n5561 (original footnote) CR and PR at Tables STAINLESS-87, STAINLESS-99, & Figure\nSTAINLESS-9. These consistent underselling figures are supported by an examination of the average unit\nvalue for domestic and imported merchandise, which also show imports being priced at consistently lower levels\nthan domestic merchandise during the period. CR and PR at Table STAINLESS-C-4.\n5562 (original footnote) CR and PR at 95-96, PR at STAINLESS-70-71 & Tables STAINLESS-6,\nSTAINLESS-18, STAINLESS-30, & STAINLESS-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndecreasing margins between the industry's cost of goods sold and its net sales values,\nthe industry's operating income levels declined from a profit of *** percent in 1998 to\na loss of *** percent in 1999, recovered only slightly to a minimal profit of ***\npercent in 2000, and then fell to a loss of *** percent in interim 2001.\n5563 Moreover,\nthe overall declines in the industry's operating levels in the last two-and-a-half years\nof the period occurred when imports were at their highest market share levels during\nthe period 5564 and when imports were consistently underselling the domestic\nmerchandise.5565 Therefore, we find that consistent and significant price underselling\nby imports during the latter half of the period of investigation suppressed and\ndepressed domestic prices to a serious degree, despite the fact that nickel prices and\nthe industry's average unit values also increased significantly during this period.\nIn sum, we find that increased quantities of imports of stainless bar during the\nperiod were a substantial cause of the declines in the industry's trade and financial\ncondition during the period. …\"\n5566\nClaims and arguments of the parties\n10.539 The arguments of the parties are set out in Section VII.H.2(g) supra.\nAnalysis by the Panel\n10.540 At the outset, the Panel notes that the USITC undertook a coincidence analysis for stainless\nsteel bar and concluded that coincidence existed. Accordingly, we will consider whether these\nfindings provide a reasoned and adequate explanation of how the facts support this finding.\n10.541 The Panel again recalls that coincidence, when examined, needs to be established between the\nmovements or trends in imports and the movements or trends in injury factors. Applying our standard\nof review, the Panel has considered coincidence between a number of the injury factors mentioned in\nArticle 4.2(a), including those referred to by the USITC, and imports on the basis of facts that were\navailable to the USITC in making its determination.\n10.542 First, with regard to import trends and production trends, the Panel notes that there does not\nappear to be any coincidence. In particular, production declined between 1997 and 1999, when\nimport levels declined during the same period. Similarly, as imports increased from 1999 to 2000, so\ntoo did production. Finally, as imports decreased at the very end of the period of investigation, so too\ndid production.\n5567\n\n5563 (original footnote) CR and PR at Table STAINLESS-30 & STAINLESS-C-4.\n5564 (original footnote) CR and PR at Table STAINLESS-67 & STAINLESS-C-4.\n5565 (original footnote) CR and PR at Tables STAINLESS-86-87 & STAINLESS-Figures 9-10.\n5566 USITC Report, Vol. I, pp. 208-212.\n5567 The data represented in the graph below are contained in the USITC Report, in particular in Table\nSTAINLESS-6 at STAINLESS-11; Table STAINLESS-18 at STAINLESS-24; Table STAINLESS-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and Production (Tons)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\nImports\nImports (semi-annual)\nProduction\nProduction (semi-annual)\n10.543 There appears to be a similar disconnect between import trends and trends in employment as\nthat detected in relation to production. In particular, employment declined between 1997 and 1999.\nDuring the same period, import levels declined. Similarly, as imports increased from 1999 to 2000,\nso too did employment. Finally, as imports decreased at the very end of the period of investigation, so\ntoo did employment.5568\nImports and employment (Tons and employees)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n1,500\n1,750\n2,000\n2,250\n2,500\nEmployees\nImpor ts\nImports (semi-annual)\nEmployment\nEmployment (semi-annual)\n10.544 We also discern no coincidence between import trends and productivity trends. In particular,\nproductivity progressively climbed from 1997 onwards. Apparently, this occurred independently of\ntrends in imports, which declined between 1997 and 1999 and then increased between 1999 and 2000.\n\n5568 The data represented in the graph below are contained in the USITC Report, in particular in Table\nSTAINLESS-6 at STAINLESS-11; Table STAINLESS-18 at STAINLESS-24; Table STAINLESS-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFinally, as imports decreased at the very end of the period of investigation, so too did productivity,\nalbeit slightly.5569\nImports and productivity (Tons and tons/1000 hours)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nTons\n0\n5\n10\n15\n20\n25\n30\n35\n40\n45\n50\nTons/1000 hours\nImports\nImports (semi-annual)\nProductivity\nProductivity (semi-annual)\n10.545 Similarly, there does not appear to be any coincidence between increases in imports and\ncapacity utilization. In particular, capacity utilization declined between 1997 and 1999 despite the\nfact that imports also declined during that period. Capacity utilization increased (albeit slightly)\nbetween 1999 and 2000, during which time imports also increased. Finally, as imports decreased at\nthe very end of the period of investigation, so too did capacity utilization.5570\n\n5569 The data represented in the two graphs below are contained in the USITC Report, in particular in\nTable STAINLESS-6 at STAINLESS-11; Table STAINLESS-18 at STAINLESS-24; Table STAINLESS-C-4.\n5570 The data represented in the graph below are contained in the USITC Report, in particular in Table\nSTAINLESS-6 at STAINLESS-15; Table STAINLES-18 at STAINLESS-24; Table STAINLESS-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nImports and capacity utilization ( Tons and percentage)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImports\nImports (semi-annual)\nCapacity utilization\nCapacity utilization (semi-annual)\n10.546 While our evaluation is that coincidence does not exist between, on the one hand, import\ntrends and, on the other hand, trends in production, employment, productivity and capacity utilization,\nthis does not necessarily mean that, overall, coincidence did not exist. In this regard, we note that we\nwere unable to consider whether the facts indicated that coincidence existed between the import\ntrends and trends in operating margin and net commercial sales, given that data relating to the latter\ntwo factors had been redacted from the USITC Report on the ground of confidentiality. Such facts\nmay affect the overall conclusion as to the existence or otherwise of coincidence in trends in imports\nand injury factors. Accordingly, the Panel is unable to come to a definitive conclusion as to whether,\noverall, coincidence existed.\n10.547 As stated previously, in cases where, as part of an overall demonstration of causal link, a\ncoincidence analysis has been undertaken but does not demonstrate a causal link, the Panel will\ncontinue its review turning to the conditions of competition analysis to assess whether the USITC,\nnevertheless, managed to provide a compelling analysis that a genuine and substantial relationship\nbetween cause and effect existed. We note that the USITC analysed the conditions of competition in\naddition to undertaking a coincidence analysis.\n10.548 The Panel notes that the USITC considered that \"imports affected domestic prices of stainless\nbar negatively during the period of investigation.\" The USITC additionally stated that \"imports\nundersold the domestic merchandise throughout the period of investigation in 47 of 53 possible\nquarterly comparisons at underselling margins of up to 51 percent.\" Finally, it found that \"this\nunderselling depressed and suppressed domestic prices during the period of investigation … .\nTherefore, we find that consistent and significant price underselling by imports during the latter half\nof the period of investigation suppressed and depressed domestic prices to a serious degree, despite\nthe fact that nickel prices and the industry's average unit values also increased significantly during this\nperiod.\"\n10.549 We note as a preliminary point that the relevant domestic prices have been redacted from the\nUSITC record, on the ground of confidentiality The Panel agrees that, in some circumstances,\nMembers have the obligation, pursuant to Article 3.2 of the Agreement on Safeguards, to\nconfidentialize certain information although the competent authorities can base their determination on\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nsuch confidentialized information.5571 Such an obligation should not reduce Members' rights to take\nsafeguard actions. In cases where information has been confidentialized, the Panel will examine\nwhether the competent authority provided a reasoned and adequate explanation through means other\nthan full disclosure of that data.\n5572\n10.550 We note in this regard in relation to stainless steel bar that Table STAINLESS-99 summarizes\nthe number of instances of underselling and provides a range of the margins of underselling that\noccurred for all of those instances. In particular, that Table indicates that there were 40 instances of\nunderselling by non-NAFTA imports and that the range of underselling was between 0.1%-51.8%.\nWe note also that this factual allegation – that there were 40 instances of underselling by non-NAFTA\nimports – is not contested by the complainants and it is contrary to our standard of review to reassess\nthe quality of this evidence in the absence of any prima facie challenge. In our view, although\nrelevant data was redacted from the USITC Report, the USITC nevertheless provided alternative\ninformation in Table STAINLESS-99 that sought to substitute the redacted data. In light of the\nforegoing, the Panel concludes that the facts that are available to us tend to support the USITC's\nconclusion that there was import underselling during the period of investigation.\n10.551 We note that trends in import market share are illustrated in the graph below, which has been\ngenerated using USITC data.\n5573\nImports and imports' market shares (Tons and percentage)\n50,000\n75,000\n100,000\n125,000\n150,000\n175,000\n200,000\n225,000\n250,000\n1996 1997 1998 1999 2000 2001\nYears\nPercentage\n0\n10\n20\n30\n40\n50\n60\n70\n80\n90\n100\nTons\nImpor ts\nImports (semi-annual)\nImports' market shares\nImports' market shares (semi-annual)\n10.552 The Panel notes that the facts indicate that import market share increased quite significantly\nduring the period of investigation, which would be consistent with a finding of import underselling.\nIn particular, the USITC found that \"consistent and significant price underselling by imports during\nthe latter half of the period of investigation suppressed and depressed domestic prices to a serious\ndegree\". In our view, given the facts referred to above, the USITC provided a compelling explanation\nindicating that, subject to the fulfilment of the non-attribution requirement, a causal link existed\nbetween increased imports and serious injury.\n\n5571 Appellate Body Report, Thailand – H-Beams, paras. 111, 112 and 119.\n5572 See our discussions in paras. 10.272-10.275.\n5573 The data represented in the graph below are contained in the USITC Report, in particular in Table\nSTAINLESS-6 at STAINLESS-11; Table STAINLESS 67 at STAINLESS-55; Table STAINLESS-C-4."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.637641"}}},{"rowIdx":3494,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ14_Report_Of_Panel_13.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ14_Report_Of_Panel_13.pdf"},"doc_sequence":{"kind":"number","value":14,"string":"14"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 884 10.553 In conclusion, the Panel considers that the USITC's conditions of competitions analysis provided a compelling explanation that a causal link existed between increased imports and serious injury caused to the relevant domestic industry. (ii) Non-attribution USITC findings 10.554 The USITC's findings read as follows: \"In fact, the declines in the industry's production, shipment and market share levels occurred despite the fact that the industry added significant amounts of capacity during a period of reasonably strong growth in demand for stainless bar. Even with this increased capacity, the industry was unable to take advantage of the growth in"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":13,"string":"13"},"case_title":{"kind":"string","value":""},"date":{"kind":"null"},"header_codes":{"kind":"string","value":"WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":54,"string":"54"},"clean_text":{"kind":"string","value":"10.553 In conclusion, the Panel considers that the USITC's conditions of competitions analysis\nprovided a compelling explanation that a causal link existed between increased imports and serious\ninjury caused to the relevant domestic industry.\n(ii) Non-attribution\nUSITC findings\n10.554 The USITC's findings read as follows:\n\"In fact, the declines in the industry's production, shipment and market share levels\noccurred despite the fact that the industry added significant amounts of capacity\nduring a period of reasonably strong growth in demand for stainless bar. Even with\nthis increased capacity, the industry was unable to take advantage of the growth in\ndemand for stainless bar as imports obtained an increasingly larger share of the\ndomestic market for bar over the period of investigation. In particular, while apparent\nconsumption of stainless bar grew by 48 thousand short tons between 1996 and 2000,\nthe quantity of imports grew at a more accelerated rate, increasing by nearly 53\nthousand short tons during this same period. This growth in imports effectively\nforeclosed the domestic industry from part icipating in the growth in demand during\nthe period of investigation. In sum, the import increases that occurred during the\nperiod clearly had a serious adverse impact on the production volumes, sales levels,\nsales revenues, and market share of the industry during the period.\n…\nIn sum, we find that increased quantities of imports of stainless bar during the period\nwere a substantial cause of the declines in the industry's trade and financial condition\nduring the period. In making this finding, we considered the argument of the\nrespondents that the adverse changes in the industry's condition during the latter half\nof the period were caused primarily by a downturn in the demand for stainless steel\nbar in late 2000 and in interim 2001, as well as an increase in energy costs during the\nsame period.\n5574 Although we agree with Euro fer that there was a downturn in\ndemand for stainless bar and an increase in energy costs in late 2000 and interim\n2001, the record indicates that there were substantial declines in the industry's\nproduction, sales, and profitability levels during the years prior to 2000 and 2001. In\nparticular, we note that the industry's market share, production volumes, employment\nlevels and profitability levels all declined considerably during the period from 1996\nto 1999 in the face of increasing import volumes. Given this, we find that imports\nwere a more important cause of the declines in the industry's condition in 2000 and\ninterim 2001 than demand declines and energy cost increases, especially given that\nimport volumes and market share both increased significantly in 2000. In fact, we\nfind that the industry's inability to maintain its operating profits in the face of these\ndemand and energy cost changes is a direct result of the increasing share of the\nmarket obtained by imports and their consistent underselling of domestic\nmerchandise during the period.\nIn addition, we have considered respondents' argument that the industry's condition\nduring the period was affected significantly by the poor operations of the domestic\n\n5574 (original footnote) Eurofer Prehearing Brief on Injury at 3.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nproducers AL Tech/Empire and Republic, whose stainless bar operations suffered\nduring the period of investigation -- they assert -- for reasons having little to do with\nimports.\n5575 We note, however, that ***. 5576 We further note that, even if these two\nproducers were excluded from our analysis, the record indicates that the remaining\ndomestic producers of stainless bar also experienced substantial declines in their\noperating income levels, net commercial sales values, unit sales values, and\nemployment levels during the period.5577\nFinally, we note that antidumping duty orde rs were put in place against imports of\nstainless bar from Brazil, India, Japan, and Spain in 1995. 5578 While these orders are\nintended to offset dumping margins on sales of these imports, we note that the record\nof this investigation indicates that the orders did not limit the ability of producers in\nthese countries to continue shipping substantial, and even increasing, volumes of\nstainless bar to the United States during the period of investigation.5579\nIn light of the foregoing, we conclude that increased imports of stainless steel bar are\nan important cause, and a cause not less important than any other cause, of serious\ninjury to the domestic industry producing stainless steel bar. Accordingly, we find\nthat the increased imports are a substantial cause of serious injury to the domestic\nindustry.\"5580\nFactors considered by the USITC\nDownturn in demand\nClaims and arguments of the parties\n10.555 The arguments of the parties are set out in Section VII.H.3(b)(viii) supra.\nAnalysis by the Panel\n10.556 The Panel considers that the USITC acknowledged that declines in demand played a role in\ncausing the injury that was suffered by the domestic industry. In particular, the USITC stated that:\n\"Although we agree with Eurofer that there was a downturn in demand for stainless bar … in late\n2000 and interim 2001, the record indicates that there were substantial declines in the industry's\nproduction, sales, and profitability levels during the years prior to 2000 and 2001.\" In our view, had\nthe decline in demand not been a cause of injury at all, the USITC would have stated as much.\nInstead, it stated that: \"we find that imports were a more important cause of the declines in the\nindustry's condition in 2000 and interim 2001 than demand declines.\"\n\n5575 (original footnote) Eurofer Prehearing Brief on Injury at 10-17.\n5576 (original footnote) ***.\n5577 (original footnote) Finally, we also note that, although the statute directs us to assess whether a\nsignificant number of producers have been able to operate at reasonable levels of profits, it ultimately requires\nus to assess whether increased imports have been a subs tantial cause of serious injury to the industry \"as a\nwhole\". 19 U.S.C. §2252(c)(6).\n5578 (original footnote) CR and PR at Table OVERVIEW-1. We also note that antidumping order were\nput in place against imports of stainless steel angle from Japan, Korea, and Spain in May 2001. We note that it\nis too early to assess whether these orders will significantly reduce the level of imports from these countries.\n5579 (original footnote) INV-Y-180 at G25 – Stainless Bar and Light Shapes.\n5580 USITC Report, Vol. I, pp. 211-213.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.557 The Panel notes that the USITC considered demand trends during the period of investigation.\nIt noted that while demand increased between 1996 and 1997, it declined again in 1998 and 1999.\nDemand picked up again in 2000 but declined again during interim 2001. More particularly, in the\nsection containing its analysis of the conditions of competition, the USITC found that:\n\"First, demand for stainless bar fluctuated somewhat but grew overall during the five\nfull-years of the period of investigation. Apparent US consumption of stainless bar\nincreased from 276.6 thousand short tons in 1996 to 294.4 thousand short tons in\n1997 but then declined to 280.3 thousand short tons in 1998 and to 265.5 thousand\nshort tons in 1999. In 2000, however, apparent consumption of bar increased by 22.2\npercent, growing to 324.2 thousand short tons.\n5581 This level of consumption was\n17.2 percent larger than in 1996. 5582 As the overall economy declined in 2001,\napparent consumption of bar declined by 13 percent between interim 2000 and\ninterim 2001.5583\"5584\n10.558 Although the USITC acknowledged that declines in demand played a role in the injury that\nwas suffered by the domestic industry, it appeared to dismiss this factor in its non-attribution analysis\nstating that \"We find that the industry's inability to maintain its operating profits in the face of these\ndemand and energy cost changes is a direct result of the increasing share of the market obtained by\nimports and their consistent underselling of domestic merchandise during the period.\" In our view,\nthis is not a reasoned and adequate explanation. While the Panel is reluctant to prescribe what may\namount to a reasoned and adequate explanation, the Panel considers that the USITC could have, for\nexample, demonstrated that there was no linkage between demand declines during the period of\ninvestigation and injury suffered in this particular case. More particularly, the USITC could have\nexplained that operating margin, perhaps the most relevant injury factor in this regard, declined\nirrespective of demand trends. This analysis could have been bolstered by an explanation that\ndeclines in operating margin coincided with increases in imports rather than declines in demand.\n10.559 We note that the USITC stated that \"[a]lthough we agree with Eurofer that there was a\ndownturn in demand for stainless bar … in late 2000 and interim 2001, the record indicates that there\nwere substantial declines in the industry's production, sales, and profitability levels during the years\nprior to 2000 and 2001. In particular, we note that the industry's market share, production volumes,\nemployment levels and profitability levels all declined considerably during the period from 1996 to\n1999 in the face of increasing import volumes.\" In our view, the fact that injury occurred prior to the\npoint at which a factor comes into play does not detract from the conclusion that that factor may still\nplay a role in causing injury beyond that point.\n10.560 By dismissing downturn in demand in its non-attribution analysis, the Panel finds that the\nUSITC failed to meet its obligation to establish explicitly, through a reasoned and adequate\nexplanation, that the injury caused by this factor, together with other factors, was properly separated\nand distinguished and not attributed to increased imports.\n\n5581 (original footnote) CR and PR at Tables STAINLESS-67 and STAINLESS-C-4.\n5582 (original footnote) CR and PR at Tables STAINLESS-67 and STAINLESS-C-4.\n5583 (original footnote) CR and PR at Tables STAINLESS-67 and STAINLESS-C-4.\n5584 See para. 10.538.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nIncreases in energy costs\nClaims and arguments of the parties\n10.561 The arguments of the parties are set out in Section VII.H.3(b)(viii) supra.\nAnalysis by the Panel\n10.562 The Panel considers that the USITC acknowledged that increases in energy costs played a\nrole in causing the injury that was suffered by the domestic industry. In particular, the USITC stated\nthat: \"Although we agree with Eurofer that there was … an increase in energy costs in late 2000 and\ninterim 2001, the record indicates that there were substantial declines in the industry's production,\nsales, and profitability levels during the years prior to 2000 and 2001\". In our view, had energy costs\nnot been a cause of injury at all, the USITC would have stated as much. Instead, it stated that \"we\nfind that imports were a more important cause of the declines in the industry's condition in 2000 and\ninterim 2001 than energy cost increases\".\n10.563 We note that the USITC discussed changes in energy costs during the period of investigation.\nIn particular, it stated that there was \"an increase in energy costs in late 2000 and interim 2001\".\nHowever, having acknowledged that this factor play ed a role in causing the injury that was suffered\nby the domestic industry, the USITC appeared to dismiss this factor in its non-attribution analysis on\nthe basis of the assertion that \"We find that the industry's inability to maintain its operating profits in\nthe face of these demand and energy cost changes is a direct result of the increasing share of the\nmarket obtained by imports and their consistent underselling of domestic merchandise during the\nperiod.\" As we stated in relation to declines in demand, the Panel considers that the USITC could\nhave demonstrated that there was no linkage between increases in energy costs during the period of\ninvestigation and injury suffered in this particular case. More particularly, the USITC could have\nexplained that operating margin declined irrespective of energy cost trends. This analysis could have\nbeen bolstered by an explanation that declines in operating margin coincided with increases in imports\nrather than increases in energy costs.\n10.564 We note that the USITC stated that \"[a]lthough we agree with Eurofer that there was … an\nincrease in energy costs in late 2000 and interim 2001, the record indicates that there were substantial\ndeclines in the industry's production, sales, and profitability levels during the years prior to 2000 and\n2001. In particular, we note that the industry's market share, production volumes, employment levels\nand profitability levels all declined considerably during the period from 1996 to 1999 in the face of\nincreasing import volumes.\" In our view, the fact th at injury occurred prior to the point at which a\nfactor comes into play does not detract from the conclusion that that factor may still play a role in\ncausing injury beyond that point.\n10.565 In our view, by dismissing increases in energy costs in its non-attribution analysis, the USITC\nfailed to meet its obligation to establish explicitly, through a reasoned and adequate explanation, that\nthe injury caused by this factor, together with other factors, was properly distinguished and not\nattributed to increased imports.\nConclusions\n10.566 The Panel considers that, with respect to stainless steel bar, the USITC failed to comply with\nits non-attribution obligation contained in the second sentence of Article 4.2(b). In particular, we\nconsider that the USITC failed to properly separate, distinguish and assess the nature and extent of the\ninjurious effects of factors other than increased imports that were causing injury to the domestic\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nindustry. This, to us, is clear from the fact th at the USITC dismissed a number of factors (namely,\ndownturn in demand and increases in energy costs) in its non-attribution analysis even though it\nacknowledged that those factors were causing injury to the industry.\n10.567 The Panel also recalls that the USITC disregarded the effect of downturn in demand and\nincreases in energy costs because \"imports were a more important cause of the declines.\" The Panel\nconsiders that such an approach is problematic because the cumulative effect of individual other\nfactors was not analyzed or assessed despite the fact that the USITC had acknowledged that,\nindividually, each of the factors caused some injury to the relevant domestic industry. Therefore, by\ndiscarding factors that individually caused injury to the industry, the USITC failed to distinguish and\nassess the nature and extent of the injurious effects of these other factors taken together, as distinct\nfrom the effects caused by increased imports.\n(iii) Overall conclusion on USITC's determination of a causal link\n10.568 In conclusion it is the Panel's view, that while the Panel was unable to come to a definitive\nconclusion as to whether, overall, coincidence existed, we, nevertheless, found that the USITC's\nconditions of competition analysis provided a compelleing explanation indicating that a causal link\nexisted between increased imports and serious injury subject to fulfilment of the non-attribution\nrequirement. In this regard, the Panel found that the USITC's non-attribution analysis for stainless\nsteel bar failed to separate, distinguish and assess the nature and extent of the injurious effects of\ndeclines in demand and increases in energy costs so that the injury caused by these factors, together\nwith other factors, was not attributed to increased imports. Thus, the USITC did not provide a\nreasoned and adequate explanation supporting a determination that there was a genuine and\nsubstantial relationship of cause and effect between increased imports and serious injury to the\nrelevant domestic producers.\n10.569 Therefore, the Panel concludes that the USITC's finding that a causal link existed between\nimports of stainless steel bar and injury caused to the relevant domestic producers is inconsistent with\nArticles 4.2(b), 2.1 and 3.1 of the Agreement on Safeguards.\n(i) Stainless steel wire\n10.570 As we did in relation to our findings on causation for tin mill products (see paragraphs\n10.420-10.422 above), the Panel needs to address the issue of divergent findings made by individual\ncommissioners for stainless steel wire. The Panel notes that, in its defence, the United States relies\nnot only on the causation findings made by Commissioner Koplan, but also on those made by\nCommissioners Bragg and Devaney. The former made affirmative findings on stainless steel wire as\na separate product whereas the latter two made affirmative findings with regard to a broader product\ncategory than stainless steel wire, namely, stainless steel wire and rope. In this regard, the situation is\nequivalent to that encountered in the context of tin mill products, because the Commissioners who\ndefined stainless steel wire as a separate product, did not reach an affirmative result.\n10.571 In the March Proclamation, the President did not select any of the various affirmative\ndeterminations as the basis of the decision to impose the safeguard measure on stainless steel wire.\nRather, pursuant to domestic law, the President \"decided to consider the determinations of the groups\nof commissioners voting in the affirmative with regard to [tin mill products and stainless steel wire] to\nbe the determination of the USITC\".\n5585 It is, therefore, apparent that the President based his\ndetermination on the findings of all three Commissioners (Bragg, Devaney and Koplan), although\n\n5585 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthose three Commissioners did not perform their respective analyses on the basis of the same like\nproduct definition.\n10.572 For the reasons set out above in relation to the USITC's determination(s) on tin mill 5586, the\nPanel believes that the Agreement on Safeguards does not permit the combination of findings reached\non the basis of differently defined products. Such findings cannot be reconciled with each other and\nthey cannot simultaneously form the basis of a determination. In conclusion, the Panel finds that an\nexplanation that consists of alternative explanations which, given the different products upon which\nsuch explanations are based, cannot be reconciled as a matter of substance, amounts to a violation of\nthe obligations under Articles 2.1, 4.2(b) and 3.1 to provide a reasoned and adequate explanation of\nhow the facts support the determination of causation.\n10.573 Therefore, it is our view that the USITC Report did not contain a a reasoned and adequate\nexplanation of how the facts support the determination that increased imports of stainless steel wire\ncaused serious injury to the relevant domestic industry as required by Articles 2.1, 4.2(b), and 3.1 of\nthe Agreement on Safeguards.\n(j) Stainless steel rod\n(i) Coincidence and conditions of competition\nUSITC findings\n10.574 The USITC's findings read as follows:\n\"We find that the increased imports of stainless rod are an important cause, and a\ncause not less than any other cause, of serious injury to the domestic industry.\nAccordingly, we find that increased imports of stainless rod are a substantial cause of\nserious injury to the domestic stainless rod industry.\na. Conditions of Competition\nWe have taken into account a number of factors that affect the\ncompetitiveness of domestic and imported stainless rod in the US market, including\nfactors related to the product itself, the degree of substitutability between the\ndomestic and imported articles, changes in world capacity and production, market\nconditions, and exchange rates. These factors affect prices and other considerations\ntaken into account by purchasers in determining whether to purchase domestically-\nproduced or imported articles.\nFirst, demand for stainless rod remained essentially stable during the period\nof investigation. Apparent US consumptio n of stainless rod was *** thousand short\ntons in 1996, *** thousand short tons in 1997, *** thousand short tons in 1998 and\n1999, and *** thousand short tons in 2000. 5587 With the overall decline in the\neconomy in interim 2001, apparent consumption of stainless rod also declined, falling\nby *** percent between interim 2000 and interim 2001.5588\n\n5586 See paras. 10.420-10.422.\n5587 (original footnote) CR and PR at Tables STAINLESS-68 and STAINLESS-C-5.\n5588 (original footnote) CR and PR at Tables STAINLESS-68 and STAINLESS-C-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nSecond, stainless rod is primarily used in the production of stainless steel\nwire but may also be fabricated into various downstream products, like industrial\nfasteners, springs, medical and dental instruments, automotive parts, and welding\nelectrodes.\n5589 The large majority of market participants indicate that there are no\nknown substitutes for stainless steel rod.5590\nThird, the domestic stainless rod industry became increasingly concentrated\nduring the period of investigation. Only four domestic firms reported producing\nstainless steel rod in 2000. 5591 In 1997, Carpenter Technology, the dominant\ndomestic producer of stainless rod in 2000 5592, purchased Talley, the *** largest\nproducer of stainless rod.5593 In addition, Empire Specialty Steel, the *** largest rod\nproducer in 2000, shut down its stainl ess rod operations in June 2001. 5594 With the\nacquisition of Talley by Carpenter in 1997 and the exit of Empire from the market,\nCarpenter/Talley remains the only large domestic producer of stainless rod in the\nmarket.\nThe industry's aggregate capacity level increased during the period of\ninvestigation, growing by *** percent from 1996 to 2000.5595 Domestic capacity was\n*** percent higher in interim 2001 than in interim 2000. 5596 The industry's capacity\nutilization rate declined from *** percent in 1996 to *** percent in 1999, and then to\n*** percent in 2000. Capacity utilization also declined between interim periods,\ndropping from *** percent to *** percent.\n5597 Moreover, the stainless rod industry\ncaptively consumes more than *** of its stainless rod production in the downstream\nproduction of wire and other stainless products.5598\nFourth, price is an important factor in purchasing decisions for stainless rod.\nAlthough quality was generally ranked by the majority of responding purchasers as\nthe most important factor in the purchasing decision for stainless rod, the large\nmajority of purchasers reported price as being one of the three most important factors\nin the purchase decision.\n5599\nFifth, like many stainless steel products, the price of stainless rod is related to\nthe price of nickel.5600 To account for fluctuations in the cost of nickel, stainless steel\nrod producers impose a surcharge on the price of their products whenever the price of\nnickel reaches a certain level. 5601 Generally, after declining during the first three\n\n5589 (original footnote) CR and PR at STAINLESS-3.\n5590 (original footnote) EC-Y-046 at Table STAINLESS-6.\n5591 (original footnote) CR and PR at Table STAINLESS-1.\n5592 (original footnote) Carpenter accounted for *** percent of reported domestic production of\nstainless rod in 2000. CR and PR at Table STAINLESS-1.\n5593 (original footnote) Eurofer Prehearing Brief on Injury at 2. Talley accounted for *** percent of\nreported domestic production of stainless rod in 2000. CR and PR at Table STAINLESS-1.\n5594 (original footnote) Empire Specialty Steel, Inc. Questionnaire Response at August 6, 2001\nAttachment.\n5595 (original footnote) CR and PR at Tables STAINLESS-C-5 & STAINLESS-19.\n5596 (original footnote) CR and PR at Tables STAINLESS-C-5 & STAINLESS-19.\n5597 (original footnote) CR and PR at Tables STAINLESS-C-5 & STAINLESS-19.\n5598 (original footnote) CR and PR at Table STAINLESS-19.\n5599 (original footnote) INV-Y-212 at 95.\n5600 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71.\n5601 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nyears of the period of investigation, nickel prices increased significantly throughout\n1999 and the first half of 2000. Nickel prices fell thereafter, declining through\ninterim 2001.\n5602 The price of domestic stainless rod generally followed this trend\nduring the period of investigation, with the average unit values of domestic rod\nshipments and sales declining through the end of 1999, recovering in 2000, and then\ndeclining again in interim 2001.5603\nSixth, during the period of investigation, there were imports of stainless rod\nfrom over 30 countries, although not every country exported stainless rod in every\nyear.5604 The quantity of imports of stainless steel rod from sources other than\nCanada and Mexico increased by 36 percent from 1996 to 2000 but fell by 31 percent\nbetween interim 2000 and interim 2001. 5605 The record indicates that purchasers\ngenerally perceive domestically-produced and imported stainless rod to be\ncomparable in most respects, which indicates that they are at least reasonably\nsubstitutable.5606 The level of substitutability is reduced somewhat by the significant\ndegree of captive consumption of stainless rod by the domestic industry.5607\nThe aggregate capacity of foreign producers of stainless steel rod from\nsources other than Mexico and Canada increased by 16.5 percent during the period of\ninvestigation. The capacity utilization rates of these producers increased from 70.8\npercent in 1996 to 83.7 percent in 1997 and remained essentially stable thereafter,\nwith capacity utilization being 84.3 percent in 2000 and 82.2 percent in interim\n2001.\n5608\nSeventh, antidumping and countervailing duty orders were imposed against\nimports of stainless rod from Brazil, France, India, Italy, Japan, Korea, Spain,\nSweden, and Taiwan in 1993, 1994, and 1998.5609\nb. Analysis\nWe find that the increased quantities of stainless rod imports during the\nperiod of investigation had a direct and serious adverse impact on the production\nlevels, shipments, commercial sales, and market share of the domestic industry. With\ndemand remaining essentially flat during the period of investigation 5610, the increases\nin import volumes during the period (particu larly the surge that occurred in the last\nyear of the period) resulted in a dramatic increase in the market share of stainless rod\nimports.\n5611 With the growth in the quantity and market share of imports during the\n\n5602 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71.\n5603 (original footnote) CR and PR at Tables STAINLESS-19, STAINLESS-88, & STAINLESS-C-5.\n5604 (original footnote) INV-Y-180, Table G26- Stainless Steel Rod.\n5605 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.\n5606 (original footnote) EC-Y-046 at Table STAINLESS-25; see generally EC-Y-046 at\nSTAINLESS-14-28..\n5607 (original footnote) EC-Y-046 at STAINLESS-31.\n5608 (original footnote) CR and PR at Table STAINLESS-47.\n5609 (original footnote) CR and PR at Table OVERVIEW-1.\n5610 (original footnote) We note that apparent consumption fell by *** percent between interim periods.\n5611 (original footnote) CR and PR at Tables STAINLESS-68 & STAINLESS-C-5. The market share\nof imports increased from *** percent in 1996 to *** percent in 1997, declined in 1998 to *** percent, but then\nincreased to *** percent in 1999 and *** percent in 2000. Id. It then declined slightly to *** percent in interim\n2001. Id.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nperiod of investigation, especially during the last year of the period, the industry's\nproduction levels, shipment volumes, net commercial sales, and net commercial sales\nrevenues all fell considerably, especially in the last full-year of the period. In\nparticular, the industry's production levels declined by *** percent during the period\nfrom 1996 to 2000, its US shipment volumes fell by *** percent during the period, its\nnet commercial sales fell by *** percent during the period, and its net commercial\nsales revenues fell by *** percent.\n5612 Moreover, the industry's capacity utilization\nrates were impacted as well, falling from *** percent in 1996 to *** percent in 2000,\nand then to *** percent in interim 2001. 5613 Further, as import quantity and market\nshare increased during the period of investigation, the share of the market held by the\ndomestic industry declined dramatically as well, falling from *** percent in 1996 to\n*** percent in 1999 and to *** percent in 2000.5614\nIndeed, the most serious adverse impact of imports in quantity terms occurred\nduring the last full-year of the period of investigation, when import quantities reached\ntheir highest level during the period, growing by 25.0 percent from the previous\nyear.\n5615 With growth in imports in that year, the market share of the industry fell by\n*** percentage points, its production volumes fell by *** percent, its US shipment\nlevels fell by *** percent, and its net commercial sales quantities fell by *** percent\nfrom the prior year's levels. 5616 Moreover, partly as a direct result of these volume\ndeclines5617, the industry's profitability levels declined by *** percentage points in\nthat year from the previous year's level. 5618 In our view, the increases in import\nquantities during the period of investigation, particularly its last full-year, have had a\nserious and adverse impact on the sales revenue and production volumes of the\nindustry.\nThe record also indicates that imports had a negative effect on domestic\nprices of stainless rod during the period of investigation. Purchasers generally\nconsider domestic and imported stainless rod to be comparable in most respects, 5619\nwhich indicates that there is a high degree of substitutability between the products.\nMoreover, the record shows that price is an important part of the purchasing\ndecision\n5620 and that imports consistently and significantly undersold the domestic\nmerchandise throughout the period of investigation. 5621 In addition to causing\n\n5612 (original footnote) CR and PR at Tables STAINLESS-19, STAINLESS-31 & STAINLESS-C-5.\nDeclines in these indicators continued in interim 2001, as well, when demand for stainless rod fell considerably\nfrom its prior levels. Id.\n5613 (original footnote) CR and PR at Tables STAINLESS-19 and STAINLESS-C-5. As noted earlier,\nwe are cognizant of the fact that the industry increased its capacity during the period. Nonetheless, despite this\nincrease, the industry's production volumes fell by *** percent during the period from 1998 to 2000 and by an\nadditional *** percent in interim 2001. Id. Thus, the industry's capacity utilization rates would have declined\nsubstantially even in the absence of these capacity increases.\n5614 (original footnote) CR and PR at Tables STAINLESS-68 & STAINLESS-C-5.\n5615 (original footnote) CR and PR at Tables STAINLESS-7, STAINLESS-68, & STAINLESS-C-5.\n5616 (original footnote) CR and PR at Tables STAINLESS-19, STAINLESS-68, & STAINLESS-C-5.\n5617 (original footnote) As we describe below, the decline in the industry's profitability was also the\nresult of price-suppression and depression by imports during the period of investigation.\n5618 (original footnote) CR and PR at Tables STAINLESS-31 & STAINLESS-C-5.\n5619 (original footnote) INV-Y-212 at 96.\n5620 (original footnote) INV-Y-212 at 96.\n5621 (original footnote) CR and PR at Tables STAINLESS-88, STAINLESS-100, & Figure\nSTAINLESS-11. The price comparison data indicate that imports undersold the domestic merchandise in every\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\npurchasers to shift a significant volume of their purchases from domestic to imported\nproduct, we find that this underselling also depressed and suppressed domestic prices\nduring the period of investigation.\nIn this regard, although trends in the price of stainless rod are expected to\nfollow trends in the price of nickel, prices of domestic stainless rod failed to keep\npace with movements in the cost of nickel during the second half of the period of\ninvestigation, particularly during the latter half 1999 and 2000, when the price of\nnickel (and the nickel surcharge) increased substantially.\n5622 For example, in 1999,\nthe average unit values of the industry's net commercial sales fell by *** percent\nalthough its unit cost of goods sold fell by only *** percent.\n5623 Similarly, in 2000,\nthe average unit values of the industry's net commercial sales increased by ***\npercent despite the fact that its unit cost of goods sold increased by *** percent. 5624\nFinally, in interim 2001, the unit value of the industry's net commercial sales fell by\n*** percent, despite the fact that its unit cost of goods sold increased by ***\npercent.\n5625 In sum, during the latter half of the period, the record indicates that\nconsistent and significant price underselling by imports managed to suppress and\ndepress domestic prices. This resulted in the inability of the industry to effectuate\nchanges in the price of its stainless rod sales that would cover increases (or keep pace\nwith declines) in the price of its raw materials. Accordingly, the price-suppression\nand depression caused by imports resulted in the continuing depression and\nsuppression of the industry's operating income levels.\n5626\nFinally, the record shows a clear and direct correlation between changes in\nthe volume of imports and the overall condition of the industry. In particular, the\noperating income margins of the industry declined in 1997, 1999, and 2000, all of\nwhich were years in which import quantities increased from their level in the prior\nyear.\n5627 The only full-year in which the industry's operating income margin actually\nincreased from the prior year's level was 1998, when import quantities decreased by\n21.5 percent.5628\n…\nIn light of the foregoing, we conclude that increased imports of stainless rod\nare an important cause, and a cause no less important than any other cause, of serious\ninjury to the domestic industry producing stainless rod. Accordingly, we find that\n\npossible price comparison, at margins ranging from 6.5 per cent to 23 percent. Id. These consistent underselling\nfigures are supported by an examination of the average unit value for domestic and imported merchandise,\nwhich also show imports being priced at consistently lower levels than domestic merchandise during the period.\nCR and PR at Table STAINLESS-C-5.\n5622 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71 & Tables STAINLESS-7,\nSTAINLESS-19, STAINLESS-31, & STAINLESS-C-5.\n5623 (original footnote) CR and PR at Table STAINLESS-C-5, STAINLESS-19, & STAINLESS-31.\n5624 (original footnote) CR and PR at Table STAINLESS-C-5, STAINLESS-19, & STAINLESS-31.\n5625 (original footnote) CR and PR at Table STAINLESS-C-5, STAINLESS-19, & STAINLESS-31.\n5626 (original footnote) CR and PR at Table STAINLESS-31.\n5627 (original footnote) CR and PR at Tables STAINLESS-7, STAINLESS-31, STAINLESS-68, &\nSTAINLESS-C-5.\n5628 (original footnote) CR and PR at Tables STAINLESS-7, STAINLESS-31, STAINLESS-68, &\nSTAINLESS-C-5.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports of stainless rod are a substantial cause of serious injury to the domestic\nindustry producing stainless rod.\"5629\nClaims and arguments of the parties\n10.575 The arguments of the parties are set out in Section VII.H.2 (i) supra.\nAnalysis by the Panel\n10.576 At the outset, the Panel notes that the USITC undertook a coincidence analysis for stainless\nsteel rod and concluded that coincidence existed. However, the Panel notes that it is unable to assess\nthe complainants claims regarding the existence or otherwise of coincidence because of the redaction\nof relevant confidential information.\n10.577 The Panel also notes that the United States, in rebutting the European Communities claim in\nthis regard stated that: \"In addition, as the USITC clearly explained in its analysis (even with the\nredaction of confidential data), imports undersold domestic merchandise in every period of the period\nof investigation, including 1999, which resulted in the suppression and depression of domestic prices\nduring the last two-and-a-half years of the period of investigation, thus preventing the industry from\nkeeping its prices at a level that would allow it to recoup its nickel costs during this period, including\n1999.\"\n10.578 We have examined the USITC's condition of competition analysis. We understand that the\nessential premise of the USITC's finding of a causal relationship between increased imports and\nserious injury is that imports undersold domestic products. In particular, the USITC stated that\n\"imports consistently and significantly undersold the domestic merchandise throughout the period of\ninvestigation.\n5630 In addition to causing purchasers to shift a significant volume of their purchases\nfrom domestic to imported product, we find that this underselling also depressed and suppressed\ndomestic prices during the period of investigation.\"\n10.579 The Panel notes that the assertion that underselling depressed and suppressed domestic prices\nis accompanied by the following analysis:\n\"In this regard, although trends in the price of stainless rod are expected to follow\ntrends in the price of nickel, prices of domestic stainless rod failed to keep pace with\nmovements in the cost of nickel during the second half of the period of investigation,\nparticularly during the latter half 1999 and 2000, when the price of nickel (and the\nnickel surcharge) increased substantially. 5631 For example, in 1999, the average unit\nvalues of the industry's net commercial sales fell by *** percent although its unit cost\nof goods sold fell by only *** percent.\n5632 Similarly, in 2000, the average unit values\nof the industry's net commercial sales increased by *** percent despite the fact that\n\n5629 USITC Report, Vol. I, pp. 217-222.\n5630 (original footnote) CR and PR at Tables STAINLESS-88, STAINLESS-100, & Figure\nSTAINLESS-11. The price comparison data indicate that imports undersold the domestic merchandise in every\npossible price comparison, at margins ranging from 6.5 per cent to 23 percent. Id. These consistent underselling\nfigures are supported by an examination of the average unit value for domestic and imported merchandise,\nwhich also show imports being priced at consistently lower levels than domestic merchandise during the period.\nCR and PR at Table STAINLESS-C-5.\n5631 (original footnote) CR at STAINLESS-95-96, PR at STAINLESS-70-71 & Tables STAINLESS-7,\nSTAINLESS-19, STAINLESS-31, & STAINLESS-C-5.\n5632 (original footnote) CR and PR at Table STAINLESS-C-5, STAINLESS-19, & STAINLESS-31.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nits unit cost of goods sold increased by *** percent. 5633 Finally, in interim 2001, the\nunit value of the industry's net commercial sales fell by *** percent, despite the fact\nthat its unit cost of goods sold increased by *** percent.\n5634 In sum, during the latter\nhalf of the period, the record indicates that consistent and significant price\nunderselling by imports managed to suppress and depress domestic prices. This\nresulted in the inability of the industry to effectuate changes in the price of its\nstainless rod sales that would cover increases (or keep pace with declines) in the price\nof its raw materials. Accordingly, the price-suppression and depression caused by\nimports resulted in the continuing depression and suppression of the industry's\noperating income levels.\n5635\"\n10.580 We note that a footnote to the above excerpt from the USITC Report stated that \"The price\ncomparison data indicate that imports undersold the domestic merchandise in every possible price\ncomparison, at margins ranging from 6.5 percent to 23 percent.\" This statement seems to be\nsupported by Table STAINLESS-100.\n10.581 In the Panel's view, although relevant data was redacted from the USITC Report, the USITC\nnevertheless provided alternative information in Ta ble STAINLESS-100 that sought to substitute the\nredacted data. In light of the foregoing, the Panel concludes that the facts that are available to us tend\nto support the USITC's conclusion that there was import underselling during the period of\ninvestigation. We note that none of the complainants have challenged the USITC's data indicating\nthat \"in every possible price comparison, at margins ranging from 6.5 percent to 23 percent\". We\nrecall that it is contrary to our standard of review to reassess the quality of the data contained in the\nUSITC's Report. In our view, given the facts referred to above, the USITC provided a compelling\nexplanation indicating that, subject to the fulfilment of the non-attribution requirement, a causal link\nexisted between increased imports and serious injury.\nConclusions\n10.582 In conclusion, the Panel is unable to assess the USITC's coincidence analysis given that\nessential information has been redacted. As stated above, the Panel agrees that, in some\ncircumstances, Members have the obligation to confidentialize certain information, pursuant to\nArticle 3.2 of the Agreement on Safeguards, although they can base their determination on such\nconfidentialized information but this obligation should not reduce Members' rights to take safeguard\nactions. Also as mentioned above, in cases where information has been confidentialized, the Panel\nwill examine whether the competent authority provided a reasoned and adequate explanation through\nmeans other than full disclosure of that data.\n5636 In light of our approach, we reviewed the USITC's\nconditions of competition analysis and consider that it provided a compelling explanation, subject to\nfulfillment of the non-attribution requirement, that indicated the existence of a causal link between\nincreased imports of stainless steel rod and serious injury to the relevant domestic producers.\n(ii) Non-attribution\nUSITC findings\n10.583 The USITC's findings read as follows:\n\n5633 (original footnote) CR and PR at Table STAINLESS-C-5, STAINLESS-19, & STAINLESS-31.\n5634 (original footnote) CR and PR at Table STAINLESS-C-5, STAINLESS-19, & STAINLESS-31.\n5635 (original footnote) CR and PR at Table STAINLESS-31.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"The industry's aggregate capacity level increased during the period of investigation,\ngrowing by *** percent from 1996 to 2000. 5637 Domestic capacity was *** percent\nhigher in interim 2001 than in interim 2000. 5638 The industry's capacity utilization\nrate declined from *** percent in 1996 to *** percent in 1999, and then to ***\npercent in 2000. Capacity utilization also declined between interim periods, dropping\nfrom *** percent to *** percent. 5639 Moreover, the stainless rod industry captively\nconsumes more than *** of its stainless rod production in the downstream production\nof wire and other stainless products.5640\n…\nIn sum, we find that the increased quantities of imports of stainless rod during the\nperiod of investigation were an important cause of the declines in the industry's trade\nand financial condition during the period. In making this finding, we note that we\nhave considered respondents' argument that adverse changes in the industry's\ncondition during the latter half of the period were caused primarily by a downturn in\nthe demand for stainless steel rod in late 2000 and in interim 2001, as well as an\nincrease in energy costs during the same period.\n5641 Although the record does show a\ndownturn in demand for stainless bar [sic] and an increase in energy costs in late\n2000 and interim 2001, there were substantial declines in the industry's production,\nsales, and profitability levels during the years prior to 2000 and interim 2001. In\nparticular, the industry's market share, production volumes, employment levels and\nprofitability levels all declined considerably during the period from 1996 to 1999 in\nthe face of increased import volumes, despite the fact that there were only small\nchanges overall in the amount of stainless rod consumed in the US market and despite\nthe fact that there is little evidence that energy costs were increasing substantially in\nthese periods. Considering this, it is clear that imports had a greater impact on the\ndeclines in the industry's condition in 2000 and interim 2001 than demand declines\nand energy cost increases, especially given the substantial increase in import\nquantities and market share during the last year-and-a half of the period.\nIn addition, we also have considered respondents' argument that the industry's\ncondition during the period was affected significantly by the poor operations of the\ndomestic producer AL Tech/Empire.\n5642 However, ***. 5643 Moreover, even if this\nproducer were excluded from our analysis, the remaining domestic producers of\nstainless rod still experienced substantial declines in their operating income margins,\nproduction levels, shipments, capacity utilization, and employment levels during the\nperiod of investigation.5644\n\n5637 (original footnote) CR and PR at Tables STAINLESS-C-5 & STAINLESS-19.\n5638 (original footnote) CR and PR at Tables STAINLESS-C-5 & STAINLESS-19.\n5639 (original footnote) CR and PR at Tables STAINLESS-C-5 & STAINLESS-19.\n5640 (original footnote) CR and PR at Table STAINLESS-19.\n5641 (original footnote) Eurofer Prehearing Brief on Injury at 2.\n5642 (original footnote) Eurofer Prehearing Brief on Injury at 2.\n5643 (original footnote) Empire Specialty Steel, Inc. Questionnaire Response at August 6, 2001\nAttachment; Republic Technologies International Questionnaire Response at p. 54.\n5644 (original footnote) We also note that, although the statute directs us to assess whether a significant\nnumber of producers have been able to operate at reasonab le levels of profits, it ultimately requires us to assess\nwhether increased imports have been a substantial cause of serious injury to the industry \"as a whole\". 19\nU.S.C. §2252(c)(6).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nFinally, although antidumping and countervailing duty orders were imposed against\nimports of stainless rod from Brazil, France, India, Italy, Japan, Korea, Spain,\nSweden, and Taiwan in 1993, 1994, and 1998\n5645, the imposition of these orders\nappears not to have limited the ability of foreign producers in most of these countries\nto increase their stainless rod exports to the United States in 1999 and 2000.5646\nIn light of the foregoing, we conclude that increased imports of stainless rod are an\nimportant cause, and a cause no less important than any other cause, of serious injury\nto the domestic industry producing stainless rod. Accordingly, we find that imports\nof stainless rod are a substantial cause of serious injury to the domestic industry\nproducing stainless rod.\"\n5647\nFactors considered by the USITC\nIncreases in capacity\nClaims and arguments of the parties\n10.584 The arguments of the parties are set out in Section VII.H.3(b)(x) supra.\nAnalysis by the Panel\n10.585 The Panel notes that while the USITC discussed increases in capacity and declines in capacity\nutilization in its Report, it did not go so far as to acknowledge that increases in capacity played a role\nin causing the injury that was suffered by the domestic industry. The United States submits that even\nwith the noted capacity increases, \"the industry's actual production levels and shipments actually\ndeclined during the period from 1996 through 2000, primarily because imports increased their\nvolumes and market share through price underselling during the period of investigation\". In light of\nthe Panel's conclusions above in relation to the USITC's conditions of competition analysis, the Panel\nconsiders that the facts that are available to the Panel tend to support the USITC's conclusion that\nimport underselling, rather than capacity increases, caus ed injury to the industry. Therefore, in the\nPanel's view, capacity increase was not one of the \"other factors\" which the USITC should have\nseparated, distinguished and assessed in order to reach a finding that increased imports were causing\nserious injury to the relevant domestic producers.\n(iii) Overall conclusion on USITC's determination of a causal link\n10.586 The facts that are available to the Panel tend to support the conclusions reached by the\nUSITC. Accordingly, the Panel finds that the USITC's causation analysis for stainless steel rod was\nnot inconsistent with the requirements of the Agreement on Safeguards.\nF. C\nLAIMS RELATING TO PARALLELISM\n1. Claims and arguments of the parties\n10.587 The complainants claim that the United States failed to meet the requirement of parallelism\nwith regard to all safeguards at issue. The Unit ed States responds that the USITC's analysis in the\n\n5645 (original footnote) CR and PR at Table OVERVIEW-1.\n5646 (original footnote) INV-Y-180 at G26 – Stainless Steel Rod.\n5647 USITC Report, Vol. I, pp. 221-222.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nSecond Supplementary Report, read in conjunction with the initial USITC Report, satisfies the\nrequirement of parallelism.\n10.588 The arguments of the parties as regards the legal standard to be applied are set out in\nSection VII.K.1-3 supra.\n2. Relevant WTO provisions\n10.589 The concept of parallelism has been derived from the parallel language in the first and second\nparagraphs of Article 2 of the Agreement on Safeguards. Article 2 provides as follows:\n1. A Member 1 may apply a safeguard measure to a product only if that Member\nhas determined, pursuant to the provisions set out below, that such product is being\nimported into its territory in such increased quantities, absolute or relative to domestic\nproduction, and under such conditions as to cause or threaten to cause serious injury\nto the domestic industry that produces like or directly competitive products.\n2. Safeguard measures shall be applied to a product being imported irrespective\nof its source.\n1 A customs union may apply a safeguard measure as a single unit or on\nbehalf of a member State. When a customs union applies a safeguard measure as a\nsingle unit, all the requirements for the determination of serious injury or threat\nthereof under this Agreement shall be based on the conditions existing in the customs\nunion as a whole. When a safeguard measure is applied on behalf of a member State,\nall the requirements for the determination of serious injury or threat thereof shall be\nbased on the conditions existing in that member State and the measure shall be\nlimited to that member State. Nothing in this Agreement prejudges the interpretation\nof the relationship between Article XIX and paragraph 8 of Article XXIV of GATT\n1994.\n3. Analysis by the Panel\n10.590 The requirement of parallelism was first relied upon by the panel, and endorsed by the\nAppellate Body, in Argentina – Footwear (EC) .\n5648 On the basis of the same phrase – \"product …\nbeing imported\" – appearing in both paragraphs of Article 2 of the Agreement on Safeguards, the\nAppellate Body found, in US – Wheat Gluten , that the phrase has the same meaning in both\nArticle 2.1 and Article 2.2. The Appellate Body held, that the phrase would have two different\nmeanings in both paragraphs if imports from all sources were included in the determination that\nincreased imports are causing serious injury, and imports not from all these sources were covered by\nthe measure.\n5649\n10.591 The conclusion to be drawn from this is that the imports included in the determination and\nthose covered by the measure should correspond.5650 If they do not correspond, i.e. if there is a \"gap\"\nbetween imports covered by the determination and imports falling within the scope of the measure,\n\n5648 Panel Report, Argentina – Footwear (EC) , para. 8.87; Appellate Body Report, Argentina –\nFootwear (EC), paras. 111-113.\n5649 Appellate Body Report, US – Wheat Gluten , para. 96. See also Appellate Body Report, US – Line\nPipe, para. 180.\n5650 Appellate Body Report, US – Wheat Gluten , para. 96. See also Appellate Body Report, US – Line\nPipe, para. 181.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe competent authorities must establish explicitly that imports from sources covered by the measure\nsatisfy the conditions for a safeguard measure set out in Article 2.1 and elaborated in Article 4.2 of the\nAgreement on Safeguards.\n5651\n10.592 When the determination and the eventual measure do not correspond, the Panel believes that\nMembers can establish explicitly that imports from sources covered satisfy the conditions for\nsafeguard action, also when the decision to exclude certain sources from the safeguard measure is\nmade subsequent to a determination, in the sense of Article 2.1. In such cases, the importing Member\nis entitled to make and publish these findings subsequent to the publication of the report setting out\nthe determination in the sense of Article 2.1.5652\n10.593 On that basis, in the present case, both the findings made in the initial USITC Report and\nthose contained in the Second Supplementary Report issued in February 2002, are able to satisfy the\nrequirement of establishing explicitly that imports covered by the measure satisfy the conditions of\nArticles 2.1 and 4.2. This, of course, assumes that such findings are necessary because there is a gap\nbetween sources covered by the ultimate measure and sources covered by the October 2001\ndetermination. Conversely, however, that requirement must be fulfilled before the application of the\nsafeguard measure. An explanation provided after the start of the application of the safeguard\nmeasure on 20 March 2002\n5653 is not capable of meeting the requirement to establish explicitly that\nimports from sources covered by the measure meet the requirements for its application.\n10.594 The Panel notes that there is some debate between the parties as to what amounts to a finding\nthat does indeed establish explicitly that imports from sources covered by the measure satisfy the\nconditions for a safeguard measure. The United States maintains that Articles 3 and 4 of the\nAgreement on Safeguards do not require an \"explicit\" finding and that the Appellate Body has never\nrelated such a requirement to the text of the Agreement on Safeguards. According to the United\nStates, the Appellate Body's use of the term \"explicit\" is best understood as referring to the competent\nauthorities' formal conclusion as to whether non-FTA imports have caused serious injury, and does\nnot require an \"explicit\" recitation of the results of each step of the analytical process leading to that\nconclusion.\n5654 In contrast, New Zealand rejects the idea of reducing the requirement for a \"reasoned\nand adequate explanation\" to a simple requirement for a conclusion by way of mere assertion that\neven if FTA imports had not been included, the result would have been the same. 5655 The European\nCommunities stresses that the \"parallelism\" requirement is clearly discernible from the text and the\nAppellate Body has clarified that it entails that there must be an explicit finding and a reasoned\nexplanation that imports covered by a measure alone satisfy the requirements of Articles 2 and 4.\n5656\n10.595 The Panel recalls that the requirement of parallelism, as developed by panels and the\nAppellate Body, is that the competent authorities must establish explicitly that imports covered by the\nsafeguard measure satisfy the conditions for its application. This implies that the competent\n\n5651 Appellate Body Report, US – Wheat Gluten , para. 98. See also Appellate Body Report, US – Line\nPipe, para. 181.\n5652 The Panel notes that some of the complainants have argued that the Unites States has also violated\nthe principle of parallelism in that it has granted so-called \"product exclusions\" (see paras.7.1680 to 7.1698)\nGiven that, for the reasons discussed below, the Panel has found a violation of the principle of parallelism, there\nis no need for the Panel to specifically address this further argument.\n5653 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5654 United States' first written submission, paras. 752-753.\n5655 New Zealand's second written submission, para. 3.151.\n5656 European Communities' second written submission, paras. 454-457. Japan even argues in its\nInterim Review comments that the parallelism obligation existed in the wording of Article XIX. The Panel has,\nhowever, decided that it need not examine this claim pursuant to Article XIX of the GATT 1994.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nauthorities must provide a reasoned and adequate explanation of how the facts support their\ndetermination.5657 As the Appellate Body has also clarified, \"to be explicit, a statement must express\ndistinctly all that is meant; it must leave nothing merely implied or suggested; it must be clear and\nunambiguous.\"5658\n10.596 The Panel believes that the requirement of parallelism also exists in the interest of the other\nMembers. The other Members who are facing the safeguard measure should be able to assess its\nlegality on the basis of the determination and explanations provided by the competent authorities.\nThis function would not be fulfilled if the other Members were left with statements such as those to\nthe effect that the exclusion of subsets of all imports would not change the conclusions and, elsewhere\nin the report, that certain imports are very small.\n10.597 Finally, the Panel notes the dispute between the parties as to whether competent authorities\nmust consider imports from sources excluded by the measure as an \"other factor\" in the sense of\nArticle 4.2(b) of the Agreement on Safeguards, when they perform the exercise of establishing\nexplicitly that imports from sources covered by the measure satisfy the requirements set out in\nArticle 2.1 and elaborated in Article 4.2.\n10.598 As clarified by the Appellate Body, if the scope of the measure does not match the scope of\nthe determination, competent authorities must \"establish explicitly that increased imports from non-\n[FTA] sources alone\"\n5659 caused serious injury or threat of serious injury. 5660 Increased imports from\nsources ultimately excluded from the application of the measure must hence be excluded from the\nanalysis. The increase of these imports and their effect on the domestic industry cannot be used to\nsupport a conclusion that the product in question \"is being imported in such increased quantities so as\nto cause serious injury\". This makes it necessary – whether imports excluded from the measure are an\n\"other factor\" or not – to account for the fact that excluded imports may have some injurious impact\non the domestic industry. As said, this impact must not be used as a basis supporting the\nestablishment of the Article 2.1 criteria.\n4. Measure-by-measure analysis\n(a) CCFRS\n(i) The USITC's findings\n10.599 In the Second Supplementary Report, the USITC reported \"that its results would have been\nthe same had imports from Canada and Mexico been excluded from the analysis.\" The USITC also\nindicated, \"in accord with its findings in the Views on Remedy, that exclusion of imports from Israel\n\n5657 Appellate Body Report, US – Line Pipe, para. 181.\n5658 Appellate Body Report, US – Line Pipe, para. 194.\n5659 In the view of the Panel, \"alone\", in this context means: \"to the exclusion of increased imports from\nother sources (i.e. sources excluded from the measure)\"; it does not mean: \"to the exclusion of other factors, i.e.\nnon-increased imports factors in the sense of Article 4.2(b), second sentence\". The Appellate Body has clarified\nthat increased imports precisely need not, by themselves, cause serious injury (Appellate Body Report, US –\nWheat Gluten, paras. 70 and 79; Appellate Body Report, US – Lamb , para. 170). There is no reason why this\nlatter aspect should be any different in the context of parallelism, where the same test of Articles 2 and 4 is\napplied, only to a narrower base of imports. See also Appellate Body Report, US – Wheat Gluten , para 98:\n\"establish explicitly that imports from these same sources, excluding Canada, satisfied the conditions for the\napplication of a safeguard measure\".\n5660 Appellate Body Report, US – Line Pipe, para. 194;\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand Jordan would not change the conclusions of the Commission or of individual Commissioners.\"5661\nSpecifically as regards CCFRS, the USITC made the following findings:\n\"We report that increased imports of certain carbon flat-rolled steel from non-NAFTA\ncountries are a substantial cause of serious injury to the domestic industry producing\ncertain carbon flat-rolled steel.\nNon-NAFTA imports of certain carbon flat-rolled steel have increased. Imports of\ncertain carbon flat-rolled steel from non-NAFTA sources increased from 14.5 million\nshort tons in 1996 to 21.2 million short tons in 1998, an increase of 46.8 percent.\nNon-NAFTA imports were lower in 1999 and in 2000 but remained well above 1996\nlevels.\n5662\nIn addition, the increase in non-NAFTA imports as a share of domestic production\nwas substantial. Non-NAFTA imports were equivalent to 7.8 percent of domestic\nproduction in 1996 and peaked at 11.1 percent of domestic production in 1998. Such\nimports were equivalent to 8.4 percent of domestic production in 2000, still above the\n1996 level.\n5663\nThe average unit values of non-NAFTA imports followed the same pattern as the\naverage unit values of imports from all sources. The average unit value of non-\nNAFTA imports peaked at $372 per short ton in 1997, then fell notably in both 1998\nand in 1999. The average unit value of non-NAFTA imports rose somewhat in 2000,\nalthough average unit values of non-NAFTA imports were lower in interim 2001 than\nin interim 2000.\n5664\nFinally, excluding imports from Canada and Mexico from the database does not\nappreciably change import pricing trends during the period examined. Our finding\nthat imports were generally priced below domestically-produced certain carbon flat-\nrolled steel, and that imports led to the decline in domestic prices, also applies to non-\nNAFTA imports.\n5665\nConsequently, the same considerations that led us to conclude that increased imports\nof certain carbon flat-rolled steel are a substantial cause of serious injury to the\ndomestic industry\n5666 are also applicable to increased imports of certain carbon flat-\nrolled steel from all sources other than Canada and Mexico.\"5667\n(ii) Claims and arguments of the parties\n10.600 The arguments of the parties as regards the US ITC's findings are set out in Sections VII.K.2,\n3(b) and 4(a) supra.\n\n5661 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5662 (original footnote) Non-NAFTA imports were lower in interim 2001 than in interim 2000. See\nINV-Y-209 at Table ALT7.\n5663 (original footnote) Non-NAFTA imports were equivalent to a smaller share of domestic production\nin interim 2001 than in interim 2000. See INV-Y-209 at Table ALT7.\n5664 (original footnote) See INV-Y-209 at Table ALT7.\n5665 (original footnote) See USITC Pub. 3479, Vol. II at Table FLAT-77.\n5666 (original footnote) See USITC Pub. 3479, Vol. I at 59-65.\n5667 USITC Second Supplementary Report, pp. 4-5\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(iii) Analysis by the Panel\n10.601 The Panel notes that the safeguard action on CCFRS excludes imports from Canada, Mexico,\nIsrael and Jordan and that the determination made by the USITC in October 2001 covered imports\nfrom all sources. The question is, therefore, whether the competent authorities of the United States\nhave established explicitly, with a reasoned and adequate explanation, that imports from sources other\nthan Canada, Mexico, Israel and Jordan meet the conditions for the application of a safeguard measure\nas set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.\n10.602 The Panel notes that the USITC has, in its Second Supplementary Report, made certain\nfindings on the exclusion of imports from Israel and Jordan and with regard to the question of whether\nincreased imports of CCFRS from non-NAFTA countries are a substantial cause of serious injury to\nthe domestic industry. 5668 In these findings, the USITC established and explained that non-NAFTA\nimports had increased. The USITC also examined average unit values and pricing trends of imports\nfrom non-NAFTA sources and concluded that the statements of underselling and of imports leading to\nthe decline in domestic prices made in relation to all imports (investigated in the USITC Report) were\nequally applicable to non-NAFTA imports.\n10.603 The Panel notes two legal flaws in these findin gs and, therefore, believes that they do not\nestablish explicitly, with a reasoned and adequate explanation, that imports from sources covered by\nthe measure satisfy the requirements for the imposition of a safeguard measure. First, with regard to\nthe question of whether imports from non-NAFTA sources caused serious injury, the USITC found\nthat the statements made on all imports as regards average unit values – the fact of underselling and\nthe result of a decline in domestic prices – could also be made with respect to non-NAFTA imports.\nThis is not a reasoned and adequate explanation because one cannot conclude that the fact that all\nimports and non-NAFTA imports have the same characte ristic mean that they have identical effects.\nThis misses out on the important aspect that non-NAFTA imports are, at least in quantity, less than all\nimports. This smaller amount of imports, i.e. imports to the exclusion of Canadian and Mexican\nimports, may well result in a different impact on the domestic industry than imports including\nCanadian and Mexican imports. An assessment of this difference was all the more necessary in the\npresent case, given that the USITC had previously established that imports from Canada and equally\nimports from Mexico represented a substantial share of total imports, and that Mexican imports\ncontributed importantly to serious injury caused by imports.\n5669 Therefore, the United States'\nexplanation does not address the possibility th at, unlike all imports, non-NAFTA imports are not a\ncause of serious injury in the sense of having a genuine and substantial relationship of cause and\neffect.\n10.604 More specifically, the requirement of causation in Articles 2.1 and 4.2(b) of the Agreement on\nSafeguards, including the requirement of non-attribution, has not been satisfied. In the Second\nSupplementary Report, the USITC did not address factors other than increased imports which\ncontributed to the causation of serious injury to the domestic CCFRS industry. The United States\nmaintains that there was no need to do so since the \"other factors\", i.e. the non-import factors\nremained the same, so that the non-attribution performed in the main USITC Report remains valid.\n5670\n10.605 In the view of the Panel, the fact that those other factors were the same, does not mean that\nnew findings on causation did not have to be made. The obligation of non-attribution comprises the\nobligation to separate and distinguish the respective effects of increased imports and other factors to\n\n5668 USITC Second Supplementary Report, pp. 4-5.\n5669 USITC Report, Vol. I, pp. 65-66.\n5670 United States' first written submission, paras. 797-804.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\ndiscern whether there is a genuine and substantial relationship of cause and effect between increased\nimports and serious injury. It may be unnecessary to repeat the exercise of separating and\ndistinguishing the effects of other factors. However, the effects of increased imports from all sources\nand the effects of increased imports only from a subset of sources will not necessarily be the same.\nTherefore, it potentially makes a difference whether one compares the effects of all increased imports\nor the effects of only some increased imports with the effects of other factors.\n10.606 Hence, a genuine and substantial relationship of cause and effect between all increased\nimports and serious injury, if established, is not a sufficient basis for assuming the existence of such a\ngenuine and substantial link between increased imports from non-NAFTA sources and serious injury.\nThe United States' proposition could be maintained only if those two groups of imports had the same\neffects. At least for quantitative reasons and the fact that increased NAFTA imports undoubtedly had\nsome effect, this proposition cannot be upheld in this case. The competent authority is under an\nobligation to account for the fact that excluded (FTA) imports contributed to the serious injury\nsuffered by the domestic industry in establishing whether imports from sources covered by the\nmeasure satisfy the requirement of causing serious injury.\n10.607 Second, the Panel notes that the sources excluded from the measure are not only Canada and\nMexico, but also Israel and Jordan.\n5671 Accordingly, imports from sources covered by the measure are\nnot \"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and Jordan.\nWith regard to such imports, the USITC did not establish explicitly that they satisfied the\nrequirements of Article 2.1 (as elaborated in Article 4) of the Agreement on Safeguards, neither in the\nUSITC Report, nor in the Second Supplementary Report.\n10.608 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be necessary for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding to be made, it is not sufficient to merely find that the exclusion of imports from Israel\nand Jordan would not change the conclusions regarding the prerequisites for a safeguard measure.\n5672\nThe Panel recognizes that if, as established elsewhere in the report of the competent authorities,\nimports from an excluded source were \"small and sporadic\" and those of another excluded source\n\"virtually non-existent\"\n5673, it is very possible that the facts allow a finding that imports from sources\ncovered by the measure do satisfy the conditions for the application of a safeguard measure. This,\nhowever, still needs to be established explicitly and supported with a reasoned and adequate\nexplanation.\n(iv) Conclusion\n10.609 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on CCFRS, after\nincluding imports from all sources in its determination, and without establishing explicitly, with a\nreasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right to\napply a safeguard measure.\n\n5671 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5672 USITC Second Supplementary Report, p. 4.\n5673 USITC Report, Vol. I, p. 366 and footnote 69.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(b) Tin mill products\n(i) Claims and arguments of the parties\n10.610 The complainants assert that the determination made by the USITC in October includes all\nimports. Neither the initial USITC Report nor the Second Supplementary Report establishes\nexplicitly that imports from sources covered by the measure satisfy the conditions of Articles 2.1 and\n4.2 of the Agreement on Safeguards. The Second Supplementary Report does not even mention tin\nmill products specifically. The claims and arguments of the complainants as regards the USITC's\nfindings on tin mill products are set out in more detail in Sections VII.K.2, 3(b) and 4(b) supra.\n10.611 The United States contends that, when performing the analysis of all imports, Commissioner\nMiller made the necessary findings on non-NAFTA imports of tin mill products and Commissioner\nBragg on non-NAFTA imports of CCFRS, comprising tin mill products. The claims and arguments\nof the United States as regards the USITC's findings on tin mill products are set out in more detail in\nSections VII.K.2, 3(b) and 4(b) supra.\n(ii) Analysis by the Panel\nSplit findings\n10.612 The Panel first notes that imports from Canada, Mexico, Israel and Jordan have been\nexcluded from the safeguard measure on tin mill products. 5674 Second, the October 2001\ndetermination by the USITC covered imports from all sources. The question is, therefore, whether the\ncompetent authorities of the United States have established explicitly, with a reasoned and adequate\nexplanation, that imports from sources other than Canada, Mexico, Israel and Jordan meet the\nconditions for the application of a safeguard measure as set out in Article 2.1 and elaborated in Article\n4.2 of the Agreement on Safeguards. In this regard, the United States relies, before the Panel, on\nfindings made by Commissioners Miller\n5675 and Bragg5676 in the USITC Report.\n10.613 The Panel recalls that Commissioner Bragg made her findings on a product category much\nbroader than, and comprising, tin mill products, as Commissioner Devaney did. 5677 The Pan el also\nrecalls that the United States has imposed a safeguard measure on tin mill products and this measure\nhas been challenged by the complainants. Three Commissioners have made an affirmative\ndetermination with regard to tin mill products , as is apparent from the very first paragraph of the\nactual USITC determination.5678 They supported this determination with findings that are based on\ndifferent product categories. However, it remains that for the purpose of WTO law the USITC has\nactually made a determination on tin mill as a separate product. The Panel notes that this is confirmed\nby the Proclamation of the President of 5 March 2001, in which the President \"decided to consider the\ndeterminations of the groups of commissioners voting in the affirmative with regard to [tin mill\nproducts and stainless steel wire] to be the determination of the [US]ITC\".\n5679\n\n5674 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5675 USITC Report, Vol. I, pp. 307-308 and footnotes 28 and 29 on p. 310.\n5676 USITC Report, Vol. I, pp. 15-17.\n5677 USITC Report, Vol. I, p. 71, footnote 368. The Panel notes that the United States does not rely on\nfindings made by Commissioner Devaney in defence against the claim of violation of parallelism, possibly\nbecause this Commissioner appears not to have reac hed any conclusions about imports other than excluded\nimports. See USITC Report, Vol. I, p. 317.\n5678 USITC Report, Vol. I, p. 25.\n5679 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.614 According to the Panel, this means that if there is a gap between the sources covered by a\nmeasure on tin mill products and a determination on tin mill products, the competent authority must,\npursuant to the requirement of parallelism, establish explicitly that tin mill products from sources\ncovered by the measure satisfy the conditions of Articles 2.1 and 4.\n10.615 The Panel does not believe that findings on a product category other than tin mill products are\nable to support a measure relating to tin mill products as a separate product category, unless there is a\nreasoned and adequate explanation relating the two product categories. If it was necessary to\nestablish explicitly certain conditions with regard to tin mill products, then these conditions cannot be\nestablished with findings on a different (broader) product category. Such findings would not be\nspecific to the product to which the USITC determination and the United States' safeguard measure\nrelated. Hence, the views of Commissioners Bragg and Devaney, who reached no findings on tin mill\nbut reached findings on the broader category of CCFRS, do not meet the requirements of parallelism.\nTherefore, the Panel will review the findings reached by Commissioner Miller who defined tin mill\nproducts as a separate product.\nCommissioner Miller's and the USITC's findings\n10.616 In the initial USITC Report, in two footnotes, Commissioner Miller, the only Commissioner\nmaking an affirmative determination with regard to tin mill products as a separately defined product,\nmade the following statements:\n\"I note that in my analysis of whether increased imports as a whole are a substantial\ncauses of serious injury, I would have reached the same result had I excluded imports\nfrom Mexico. The quantity of imports from Mexico was so minuscule – 57 tons in\n1996, 21 tons in 1997, 286 tons in 1998, 156 tons in 1999, 39 tons in 2000, and no\nimports in 2001 – that it accounted for zero percent of US market share in each year\nof the period examined. At their highest, in 1998, imports from Mexico represented\n0.1 percent of imports, and zero percent in all other years. Therefore, the results with\nrespect to increases in imports, their share of apparent US consumption, and their\nratio to US production are virtually the same whether imports from Mexico are\nincluded in total imports or not. CR/PR at Table FLAT-10, Table FLAT-C-8.\n5680\nI further note that I would have found imports of tin mill products to be a substantial\ncause of serious injury had I excluded imports from Canada. Imports from all other\nsources increased by a significant amount – 22.4 percent – over the period, despite an\noverall decline in consumption. In addition, the US market share held by these\nimports increased by 2.9 percentage points over the period, while imports from\nCanada as a share of the US market increased by only 1.3 percentage points. CR/PR\nat Table-FLAT-C-8. The pricing data collected by the Commission show no\nunderselling by imports from Canada. CR/ PR at Table-FLAT-75. Also, while the\nAUVs of imports from Canada declined overall during the period, the rate of decline\n– 3.5 percentage points – was significantly lower than that of all other imports – 13.1\npercentage points, and toward the end of the period, in 1999, 2000, and interim 2001,\nthe AUVs of imports from Canada were higher than those of the other imports.\nCR/PR at Table-FLAT-C-8.\"\n5681\n10.617 In her recommendation on remedy, Commissioner Miller stated:\n\n5680 USITC Report, Vol. I, p. 310, footnote 28.\n5681 USITC Report, Vol. I, p. 310, footnote 29.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n\"I also recommend that the President not include imports from Israel and from\nbeneficiary countries under the Caribbean Basin Economic Recovery Act and the\nAndean Trade Preference Act in any remedy action.\n5 The only imports of tin mill\nproducts from these countries during the period of investigation were small and\nsporadic.\"5682\nDecember 17, 2001, two days before submission of this report on our findings and\nrecommendations in investigation No. TA-201-73, Steel, to the President. There have been no\nimports of tin mill products from Jordan during the period of investigation, and they are\ntherefore not a substantial cause of serious injury or threat of serious injury. Therefore, to the\nextent that section 221(a) of the Jordan FTA applies to this investigation, I recommend that\nsuch imports not be subject to the additional tariff described above.\"\n10.618 On that basis, the USITC reported in the Second Supplementary Report, \"in accord with its\nfindings in the Views on Remedy, that exclusion of imports from Israel and Jordan would not change\nthe conclusions of the Commission or of individual Commissioners.\"5683\nPanel's Assessment\n10.619 The Panel is unable to identify in these statements any finding that establishes explicitly, with\na reasoned and adequate explanation, that imports from other sources than Canada, Mexico, Israel and\nJordan satisfy the conditions of Article 2.1 as elaborated by Article 4.2 of the Agreement on\nSafeguards. In particular, none of the footnotes relied upon by the United States addresses the\nconsequences of excluding imports from Canada, Mexico, Israel and Jordan. They only address the\nexclusion of imports from one Member, respectively.\n10.620 Further, these findings do not account for the fact that imports other than those from an\nexcluded source are less than those from all sources and that the effects on the domestic producers\nare, therefore, not the same. Commissioner Miller did not address factors other than increased\nimports which contributed to serious injury to the domestic tin mill industry.\n10.621 In the view of the Panel, the fact that those other factors were the same, does not mean that\nnew findings on causation did not have to be made. The non-attribution obligation comprises the\nobligation of separating and distinguishing the respective effects of increased imports and other\nfactors to discern whether there is a genuine and substantial relationship of cause and effect between\nincreased imports and serious injury. It may be unnecessary to repeat the exercise of separating and\ndistinguishing the effects of other factors. However, the effects of increased imports from all sources\nand the effects of increased imports only from a subset of sources will not necessarily be the same.\nTherefore, it potentially makes a difference whether one compares the effects of all increased imports\nor the effects of only some increased imports with the effects of other factors. For that reason, a\ngenuine and substantial relationship of cause and effect between all increased imports and serious\ninjury, if established, is not a sufficient basis for assuming the existence of such a genuine and\nsubstantial link between increased imports from non-Canadian sources and serious injury.\n10.622 Second, it may well be that imports from Mexico, Israel and Jordan were so small that they\ncould not possibly affect the findings reached, whether about all imports or about non-Canadian\n\n5682 USITC Second Supplementary Report, p. 529\n5683 USITC Second Supplementary Report, p. 4 (footnote omitted).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports. However, in the view of the Panel, it would then still be required for the competent\nauthorities to actually express the findings required under parallelism with regard to increased imports\nother than those from Canada, Mexico, Israel and Jordan. The standard is that the Member must\nestablish explicitly that imports from sources covered by the measure satisfy all conditions for the\nright to apply a safeguard measure. For this finding to be made it is not sufficient to merely find that\nthe exclusion of imports from Israel and Jordan would not change the conclusions regarding the\nprerequisites for a safeguard measure. 5684 The Panel recognizes that if imports from an excluded\nsource were \"small and sporadic\", \"(virtually) non-existent\" 5685 or \"miniscule\" 5686, it is very possible\nthat the facts allow a finding that imports from sources covered by the measure do satisfy the\nconditions for the application of a safeguard measure. This, however, still needs to be established\nexplicitly and supported with a reasoned and adequate explanation.\n10.623 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on tin mill products,\nafter including imports from all sources in its determination, and without establishing explicitly, with\na reasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right\nto apply a safeguard measure.\n(c) Hot-rolled bar\n(i) The USITC's findings\n10.624 In the Second Supplementary Report, the USITC reported \"that its results would have been\nthe same had imports from Canada and Mexico been excluded from the analysis.\" The USITC also\nindicated, \"in accord with its findings in the Views on Remedy, that exclusion of imports from Israel\nand Jordan would not change the conclusions of the Commission or of individual Commissioners.\"\n5687\nSpecifically as regards hot-rolled bar, the USITC made the following findings:\n\"We report that increased imports of carbon and alloy hot-rolled bar and light shapes\n('hot-rolled bar') from non-NAFTA countries are a substantial cause of serious injury\nto the domestic industry producing hot-rolled bar.\nNon-NAFTA imports of hot-rolled bar have increased. The quantity of these imports\nrose from 584,126 short tons in 1996 to 644,577 short tons in 1997 and to 1.1 million\nshort tons in 1998. Non-NAFTA imports then declined to 925,711 short tons in 1999\nand increased to 1.2 million short tons in 2000. Non-NAFTA imports increased by\n107.9 percent from 1996 to 2000, and had major increases from 1997 to 1998 (when\nthey increased by 70.4 percent) and from 1999 to 2000 (when they increased by 31.2\npercent). These were the same years that imports from all sources increased most\nrapidly. Non-NAFTA imports, however, increased at a greater rate than imports from\nall sources.\n5688\n\n5684 USITC Second Supplementary Report, p. 4.\n5685 USITC Report, Vol. I, p. 529 and footnote 5; United States' first written submission, para. 754.\n5686 USITC Report, Vol. I, footnote 28 on p. 310.\n5687 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5688 (original footnote) USITC Pub. 3479, vol. III at Table LONG-C-3. The quantity of non-NAFTA\nimports was lower in interim 2001, when it was 403,165 short tons, than in interim 2000, when it was 630,673\nshort tons.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nThe ratio of non-NAFTA imports of hot-rolled bar to domestic production also\nincreased significantly during the period examined, growing from 6.8 percent in 1996\nto 13.2 percent in 2000. The ratio increased most notably from 1997 to 1998 and\nfrom 1999 to 2000.\n5689\nIn our analysis of causation with respect to imports from all sources, we observed that\nincreased imports caused domestic hot-rolled bar producers to lose market share at\nthe same time prices were falling, leading to poor operating results and plant\nclosures.\n5690 This is also applicable to non-NAFTA imports.\nWith respect to market share measured by quantity, hot-rolled bar imports from\nsources other than Canada and Mexico declined from 5.8 percent in 1996 to 5.7\npercent in 1997, increased to 9.4 percent in 1998, declined to 8.4 percent in 1999, and\nthen increased to 10.8 percent in 2000. Like imports from all sources, non-NAFTA\nimports posted their greatest increases in market share between 1997 and 1998 and\nbetween 1999 and 2000. Moreover, the bulk of the increased market share that all\nimports captured from the domestic industry during the period examined was\nattributable to non-NAFTA imports.\n5691\nAverage unit values of non-NAFTA imports declined during every full-year of the\nperiod examined, as did average unit values of imports from all sources. However,\nthe average unit values of non-NAFTA imports declined by a greater proportion from\n1996 to 2000 than did imports from all sources. The average unit values of non-\nNAFTA imports fell from $679 in 1996 to $478 in 2000, a decline of 29.6 percent.\nBy contrast, the average unit value of imports from all sources fell 13.5 percent over\nthe same period.\n5692\nIn our analysis of import competition, we placed particular emphasis on underselling\nby imports from all sources during 1998 and the first half of 2000. 5693 During these\nperiods, non-NAFTA imports undersold domestically produced hot-rolled bar by\nsubstantial margins.5694 Indeed, non-NAFTA imports were priced lower than imports\nfrom all sources during these periods.5695\nConsequently, the same considerations that led us to conclude that increased imports\nof hot-rolled bar are a substantial cause of serious injury are also applicable to\nincreased imports of hot-rolled bar from all sources other than Canada and\nMexico.\"\n5696\n\n5689 (original footnote) USITC Pub. 3479, vol. II at Table LONG-5. The ratio was lower in interim\n2001, at 10.4 percent, than it was in interim 2000, when it was 12.7 percent.\n5690 (original footnote) USITC Pub. 3479, vol. I at 96.\n5691 (original footnote) USITC Pub. 3479, vol. III at Table LONG-C-3. The market share of non-\nNAFTA imports was lower in interim 2001, when it was 8.2 percent, than in interim 2000, when it was 10.4\npercent.\n5692 (original footnote) USITC Pub. 3479, vol. III at Table LONG-C-3. Average unit values of imports\nfrom sources other than Canada and Mexico were higher in interim 2001 than in interim 2000.\n5693 (original footnote) See USITC Pub. 3479, vol. I at 96-97.\n5694 (original footnote) USITC Pub. 3479, vol. II at Table LONG-90\n5695 (original footnote) Compare USITC Pub. 3479, vol. II at Table LONG-90, with Confidential\nReport (CR), Table LONG-ALT-90.\n5696 USITC Second Supplementary Report, pp. 5-6.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(ii) Claims and arguments of the parties\n10.625 The arguments of the parties as regards the US ITC's findings are set out in Sections VII.K.2,\n3(b) and 4(c) supra.\n(iii) Analysis by the Panel\n10.626 The Panel notes that the safeguard measure on hot-rolled bar excludes imports from Canada,\nMexico, Israel and Jordan5697 and that the determination made by the USITC in October 2001 covered\nimports from all sources. The question is, therefore, whether the competent authorities of the United\nStates have established explicitly, with a reasoned and adequate explanation, that imports from\nsources other than Canada, Mexico, Israel and Jordan meet the conditions for the application of a\nsafeguard measure as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on\nSafeguards.\n10.627 The Panel notes that the USITC has, in its Second Supplementary Report, made certain\nfindings on the exclusion of imports from Israel and Jordan and with regard to the question whether\nincreased imports of hot-rolled bar from non-NAFTA countries are a substantial cause of serious\ninjury to the domestic industry.\n5698 In these findings, the USITC established and explained that non-\nNAFTA imports had increased. The USITC also examined market shares, average unit values and\nunderselling of imports from non-NAFTA sources and found that non-NAFTA imports captured the\nbulk of the market share lost by domestic producers, that their average unit values declined more\nsharply and that they were priced lower than was the case for all imports.5699\n10.628 The Panel notes two legal flaws in these findin gs and, therefore, believes that they do not\nestablish explicitly, with a reasoned and adequate explanation, that imports from sources covered by\nthe measure satisfy the requirements for the imposition of a safeguard measure. First, the requirement\nof causation in Articles 2.1 and 4.2(b) of the Agreement on Safeguards, including the requirement of\nnon-attribution, has not been satisfied. In the Second Supplementary Report, the USITC did not\naddress factors other than increased imports which contributed to the causation of serious injury to the\ndomestic hot-rolled bar industry. The United States maintains that there was no need to do so since\nthe \"other factors\", i.e. the non-import factors either did not cause the serious injury or were unrelated\nto the specific source of imports, so that the non-attribution performed in the main USITC Report\nremains valid.\n5700\n10.629 In the view of the Panel, the fact that those other factors were the same, does not mean that\nnew findings on causation did not have to be made. The obligation of non-attribution comprises the\nobligation of separating and distinguishing the respective effects of increased imports and other\nfactors to discern whether there is a genuine and substantial relationship of cause and effect between\nincreased imports and serious injury. It may be unnecessary to repeat the exercise of separating and\ndistinguishing the effects of other factors. However, the effects of increased imports from all sources\nand the effects of increased imports only from a subset of sources will not necessarily be the same.\nTherefore, it potentially makes a difference whether one compares the effects of all increased imports\nor the effects of only some increased imports with the effects of other factors.\n\n5697 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5698 USITC Second Supplementary Report, pp. 4-6.\n5699 Second Supplementary Report, p. 6.\n5700 United States' first written submission, para. 834.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.630 For that reason, a genuine and substantial relationship of cause and effect between all\nincreased imports and serious injury, if established, is not a sufficient basis for assuming the existence\nof such a genuine and substantial link between increased imports from non-NAFTA sources and\nserious injury. The United States' proposition could be maintained only if those two groups of\nimports had the same effects. At least for quantitative reasons and the fact that increased NAFTA\nimports undoubtedly had some effect, this proposition cannot be upheld in this case. The competent\nauthority is under an obligation to account for the fa ct that excluded (FTA) imports contributed to the\nserious injury suffered by the domestic industry in establishing whether imports from sources covered\nby the measure satisfy the requirement of causing serious injury.\n10.631 Second, the Panel notes that the sources excluded from the measure are not only Canada and\nMexico, but also those from Israel and Jordan.\n5701 Accordingly, imports from sources covered by the\nmeasure are not \"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and\nJordan. With regard to such imports, the USITC did not establish explicitly that they satisfied the\nrequirements of Article 2.1 (as elaborated in Article 4) of the Agreement on Safeguards, neither in the\nUSITC Report, nor in the Second Supplementary Report.\n10.632 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be required for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding to be made it is not sufficient to merely find that the exclusion of imports from Israel\nand Jordan would not change the conclusions regarding the prerequisites for a safeguard measure.\n5702\nThe Panel recognizes that if imports from an excluded source were \"small and sporadic\" and\n\"virtually non-existent\"5703 or, as the USITC found, \"at very low levels\" and non-existent5704, it is very\npossible that the facts allow a finding that imports from sources covered by the measure do satisfy the\nconditions for the application of a safeguard measure. This, however, still needs to be established\nexplicitly and supported with a reasoned and adequate explanation.\n10.633 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on hot-rolled bar\nafter including imports from all sources in its determination and without establishing explicitly, with a\nreasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right to\napply a safeguard measure.\n(d) Cold-finished bar\n(i) The USITC's findings\n10.634 In the Second Supplementary Report, the USITC reported \"that its results would have been\nthe same had imports from Canada and Mexico been excluded from the analysis.\" The USITC also\nindicated, \"in accord with its findings in the Views on Remedy, that exclusion of imports from Israel\n\n5701 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5702 USITC Second Supplementary Report, p. 4.\n5703 United States' first written submission, para. 754.\n5704 USITC Report, Vol. I, p. 376 and footnote 117.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nand Jordan would not change the conclusions of the Commission or of individual Commissioners.\"5705\nSpecifically, as regards cold-finished bar, the USITC made the following findings:\n\"We report that increased imports of carbon and alloy cold-finished bar (\"cold-\nfinished bar\") from non-NAFTA countries are a substantial cause of serious injury to\nthe domestic industry producing cold-finished bar.\nNon-NAFTA imports of cold-finished bar have increased. The quantity of these\nimports rose from 137,834 short tons in 1996 to 167,256 short tons in 1997 and then\nto 201,473 short tons in 1998. Non-NAFTA imports then declined to 154,971 short\ntons in 1999 and increased to 233,940 short tons in 2000. Non-NAFTA imports had a\nmajor increase from 1999 to 2000, when they rose by 51.0 percent. This was the\nsame year that imports from all sources increased most sharply. Non-NAFTA\nimports, however, increased at a greater rate than imports from all sources both from\n1999 to 2000 and over the entire period examined.\n5706\nThe ratio of non-NAFTA imports of cold-finished bar to domestic production also\nincreased significantly during the period examined, growing from 11.8 percent in\n1996 to 17.6 percent in 2000. The ratio increased most notably from 1999 to 2000,\nwhen it rose by 6.4 percentage points.5707\nIn our analysis of causation with respect to imports from all sources, we stated that\naggressive pricing by imports during the latter portion of the period examined caused\nthe industry to lose market share and revenues.\n5708 This observation is applicable as\nwell to non-NAFTA imports.\nWith respect to market share measured by quantity, cold-finished bar imports from\nnon-NAFTA sources increased from 9.8 percent in 1996 to 10.5 percent in 1997 and\nthen to 12.1 percent in 1998. The market share of these imports then declined to 9.6\npercent in 1999 and increased to 14.3 percent in 2000. Like imports from all sources,\nnon-NAFTA imports posted a significant increase in market share between 1999 and\n2000. Indeed, non-NAFTA imports were responsible for the entire increase in import\nmarket share both during this period and the period between 1996 and 2000.\n5709\nAverage unit values of cold-finished bar imports from sources other than Canada and\nMexico declined during every full-year of the period examined, falling from $919 in\n1996 to $758 in 2000. The 17.6 percent decline in average unit values for non-\n\n5705 Second Supplementary Report, p. 4 (footnote omitted).\n5706 (original footnote) USITC Pub. 3479, vol. III at Table LONG-C-4. The quantity of non-NAFTA\nimports was lower in interim 2001, when it was 99,082 short tons, than in interim 2000, when it was 122,028\nshort tons.\n5707 (original footnote) USITC Pub. 3479, vol. II at Table LONG-6. The ratio was higher in interim\n2001, at 17.5 percent, than it was in interim 2000, when it was 17.0 percent.\n5708 (original footnote) See USITC Pub. 3479, vol. I at 105.\n5709 (original footnote) USITC Pub. 3479, vol. III at Table LONG-C-4. The market share of non-\nNAFTA imports was higher in interim 2001, when it was 14.2 percent, than in interim 2000, when it was 13.5\npercent.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nNAFTA imports from 1996 to 2000 was greater than the decline in average unit\nvalues for imports from all sources over the same period.5710\nIn our analysis of import competition, we discussed pricing trends and underselling of\none-inch round C12L14 during 1999 and 2000. 5711 For imported C12L14 from non-\nNAFTA sources, there were significant price declines during 1999. Prices declined\nfurther during 2000, particularly during the final quarter of the year. Between the\nsecond quarter of 1999 and the fourth quarter of 2000, non-NAFTA imports of\nC12L14 undersold the domestically-produced product by margins ranging from\n***.5712 Both the pricing trends and the underselling data for non-NAFTA imports\nare similar to those for imports from all sources on which we relied in our injury\ndetermination.5713\nConsequently, the same considerations that led us to conclude that increased imports\nof cold-finished bar are a substantial cause of serious injury are also applicable to\nincreased imports of cold-finished bar from all sources other than Canada and\nMexico.\"\n5714\n(ii) Claims and arguments of the parties\n10.635 The arguments of the parties as regards the US ITC's findings are set out in Sections VII.K.2,\n3(b) and 4(d) supra.\n(iii) Analysis by the Panel\n10.636 The Panel notes that the safeguard measure on cold-finished bar excludes imports from\nCanada, Mexico, Israel and Jordan5715 and that the determination made by the USITC in October 2001\ncovered imports from all sources. The question is, therefore, whether the competent authorities of the\nUnited States have established explicitly, with a reasoned and adequate explanation, that imports from\nsources other than Canada, Mexico, Israel and Jordan meet the conditions for the application of a\nsafeguard measure as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on\nSafeguards.\n10.637 The Panel notes that the USITC has, in its Second Supplementary Report, made certain\nfindings on the exclusion of imports from Israel and Jordan and with regard to the question of whether\nincreased imports of cold-finished bar from non-NAFTA countries are a substantial cause of serious\ninjury to the domestic industry.\n5716 In these findings, the USITC established and explained that non-\nNAFTA imports had increased. The USITC also examined the market share, average unit values and\npricing data concerning imports from non-NAFTA sources. It concluded that non-NAFTA imports\nwere responsible for the entire increase in import market share from 1999 to 2000 and from 1996 to\n2000, that the average unit values of such imports declined during every full year of the period\n\n5710 (original footnote) USITC Pub. 3479, vol. III at Table LONG-C-4. The average unit values of non-\nNAFTA imports were higher in interim 2001 than in interim 2000.\n5711 (original footnote) See USITC Pub. 3479, vol. I at 106-07.\n5712 (original footnote) CR, Table LONG-92.\n5713 (original footnote) Compare USITC Pub. 3479 at 105-07.\n5714 USITC Second Supplementary Report, pp. 6-7.\n5715 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5716 USITC Second Supplementary Report, pp. 4, 6-7.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexamined, and that non-NAFTA imports of the C12L14 product undersold the domestically producer\nproduct between the second quarter of 1999 and the fourth quarter of 2000.5717\n10.638 The Panel notes two legal flaws in these findin gs and, therefore, believes that they do not\nestablish explicitly, with a reasoned and adequate explanation, that imports from sources covered by\nthe measure satisfy the requirements for the imposition of a safeguard measure. First, the requirement\nof causation in Articles 2.1 and 4.2(b) of the Agreement on Safeguards, including the requirement of\nnon-attribution, has not been satisfied. In the Second Supplementary Report, the USITC did not\naddress other factors than increased imports which contributed to the causation of serious injury to the\ndomestic cold-finished bar industry. The United States maintains that there was no need to do so,\nsince of the two \"other factors\", i.e. the non-import factors identified, one did not cause the serious\ninjury observed and the other one was discussed in the analysis pertaining to all imports. Hence, in\nthe view of the United States, the non-attribu tion performed in the main USITC Report remains\nvalid.\n5718\n10.639 In the Panel's view, the fact that those other factors were the same, does not mean that no new\nfindings on causation had to be made. The obligation of non-attribution comprises the obligation of\nseparating and distinguishing the respective effects of increased imports and other factors to discern\nwhether there is a genuine and substantial causal relationship between increased imports and serious\ninjury. It may be unnecessary to repeat the exercise of separating and distinguishing the effects of\nother factors. However, the effects of increased imports from all sources and the effects of increased\nimports only from a subset of sources will not necessarily be the same. Therefore, it potentially\nmakes a difference whether one compares the effects of all increased imports or the effects of only\nsome increased imports with the effects of other factors.\n10.640 For that reason, a genuine and substantial relationship of cause and effect between all\nincreased imports and serious injury, if established, is not a sufficient basis for assuming the existence\nof such a genuine and substantial link between increased imports from non-NAFTA sources and\nserious injury. The United States' proposition could be maintained only if those two groups of\nimports had the same effects. At least for quantitative reasons and the fact that increased NAFTA\nimports undoubtedly had some effect, this proposition cannot be upheld in this case. The competent\nauthority is under an obligation to account for the fa ct that excluded (FTA) imports contributed to the\nserious injury suffered by the domestic industry in establishing whether imports from sources covered\nby the measure satisfy the requirement of causing serious injury.\n10.641 Second, the Panel notes that the sources excluded from the measure are not only Canada and\nMexico, but also those from Israel and Jordan.\n5719 Accordingly, imports from sources covered by the\nmeasure are not \"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and\nJordan. With regard to such imports, the USITC did not establish explicitly that they satisfied the\nrequirements of Article 2.1 (as elaborated in Article 4) of the Agreement on Safeguards, neither in the\nUSITC Report, nor in the Second Supplementary Report.\n10.642 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be required for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\n\n5717 See para. 10.634.\n5718 United States' first written submission, paras. 838-846.\n5719 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding (establishing explicitly) to be ma de it is not sufficient to merely find that the\nexclusion of imports from Israel and Jordan would not change the conclusions regarding the\nprerequisites for a safeguard measure. 5720 The Panel recognizes that if imports from an excluded\nsource were \"small and sporadic\" and \"virtually non-existent\" 5721 or non-existent 5722, it is very likely\nthat the facts allow a finding that imports from sources covered by the measure do satisfy the\nconditions for the application of a safeguard measure. This, however, still needs to be established\nexplicitly and supported with a reasoned and adequate explanation.\n10.643 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on cold-finished\nbar, after including imports from all sources in its determination, and without establishing explicitly,\nwith a reasoned and adequate explanation, that non- excluded imports satisfy the requirements for the\nright to apply a safeguard measure.\n(e) Rebar\n(i) The USITC's findings\n10.644 Before the Panel, the United States relies on footnote 704 of the USITC Report. This\nfootnote states:\n\"We find that our injury analysis would not be affected in any way by the exclusion\nof rebar imports from Canada and Mexico.\nExclusion of imports from Canada and Mexico only makes the increase in imports\nduring the period examined more dramatic. Imports of rebar from all sources other\nthan Canada and Mexico increased from 302,217 tons in 1996 to 403,881 tons in\n1997, to 1.1 million tons in 1998, and then to 1.7 million tons in 1999. Imports then\ndecreased to 1.6 million tons in 2000. Imports from sources other than Mexico and\nCanada were lower in interim 2001, at 778,779 tons, than in interim 2000, when they\nwere 960,625 tons. Imports from sources other than Mexico and Canada increased by\n434.8 percent from 1996 to 2000, and had major increases both from 1997 to 1998\n(183.5 percent) and from 1998 to 1999 (50.2 percent). See CR and PR, Table\nLONG-7.\nExcluding Canada and Mexico also serves to accentuate the increase in market share\nof imports from other sources. The market share of rebar imports from sources other\nthan Canada and Mexico increased from 5.5 percent in 1996 to 21.4 percent in 1999,\nits peak level of the period examined, and then declined to 19.9 percent in 2000. The\nmarket share of imports from sources other than Mexico and Canada was lower in\ninterim 2001 than interim 2000. See CR and PR, Table LONG-72.\nAverage unit values of imports from sources other than Canada and Mexico followed\nthe same pattern as average unit values of imports from all sources. The average unit\nvalue of imports from sources other than Canada and Mexico from $300 in 1996 to\n\n5720 USITC Second Supplementary Report, p. 4.\n5721 United States' first written submission, para. 754.\n5722 USITC Report, Vol. I, p. 376 and footnote 117.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n$275 in 1998, then plummeted to $207 in 1999, and increased slightly to $215 in\n2000. These average unit values were $210 in interim 2000 and $224 in interim\n2001. See CR and PR, Table LONG-7.\nFinally, excluding imports from Canada and Mexico from the database does not\nappreciably change import pricing trends during the period examined. There were no\npricing observations for imports from Canada, and imports from Mexico were sold at\nhigher prices than imports from all other sources during every quarter for which\npricing data were collected except the fourth quarter of 1996 and the first quarter of\n1997. Consequently, for periods after 1998, exclusion of Mexican imports increases\nthe magnitude of underselling margins somewhat. See CR and PR, Table LONG-93.\nConsequently, the conclusions we have made concerning the effects of increased\nimports are equally applicable whether or not imports from Canada and Mexico are\nincluded among the imports evaluated.\"\n5723\n10.645 The USITC also reported in the Second Supplementary Report, \"in accord with its findings in\nthe Views on Remedy, that exclusion of imports from Israel and Jordan would not change the\nconclusions of the Commission or of individual Commissioners\".5724\n(ii) Claims and arguments of the parties\n10.646 The complainants assert that neither the USITC Report nor the USITC Supplementary Report\ncontain any particular findings establishing \"explicitly\" that increa sed imports from non-NAFTA\nsources satisfy the conditions set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on\nSafeguards. The claims and arguments of the complainants as regards the USITC's findings on rebar\nare set out in more detail in Sections VII.K.2, 3(b) and 4(e) supra.\n10.647 The United States relies on footnote 704 of the USITC's analysis of all imports, which\nprovides a detailed analysis of non-NAFTA rebar imports. In that footnote, the USITC expressly\nfound that \"the conclusions we have made concerning the effects of increased imports are equally\napplicable whether or not imports from Canada and Mexico are included among the imports\nevaluated\".\n5725 The claims and arguments of the United States as regards the USITC's findings on\nrebar are set out in more detail in Sections VII.K.2, 3(b) and 4(e) supra.\n(iii) Analysis by the Panel\n10.648 The Panel first notes that imports from Canada, Mexico, Israel and Jordan have been\nexcluded from the safeguard measure on rebar. 5726 The question is, therefore, whether the competent\nauthorities of the United States have established explicitly, with a reasoned and adequate explanation,\nthat imports from sources other than Canada, Mexico, Israel and Jordan meet the conditions for the\napplication of a safeguard measure as set out in Article 2.1 and elaborated in Article 4.2 of the\nAgreement on Safeguards.\n\n5723 USITC Report, Vol. I, p. 116, footnote 704.\n5724 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5725 USITC Report, p. 116, footnote 704.\n5726 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.649 The Panel notes two legal flaws in the USITC's findings and, therefore, believes that they do\nnot establish explicitly, with a reasoned and adequate explanation, that imports from sources covered\nby the measure satisfy the requirements for the imposition of a safeguard measure.\n10.650 First, the requirement of causation in Articl es 2.1 and 4.2(b) of the Agreement on Safeguards\nhas not been satisfied. In the view of the Panel, the USITC failed to consider adequately the fact that\nit was dealing with a smaller amount of increased imports. In order to establish the existence of a\ngenuine and substantial relationship of cause and effect between increased imports (covered by the\nmeasure) and serious injury, the injury caused by excluded imports must be accounted for. The\nUSITC did not sufficiently do so by noting the similarity of average unit value patterns between all\nimports and non-NAFTA imports and that non-NAFTA import undersold domestic goods even more\nstrongly than all imports (on average) did.\n5727 This approach does not account for the possibility that\nserious injury caused by non-NAFTA imports is but a part of serious injury caused by all imports and\ndoes not establish that there is a genuine and substantial relationship of cause and effect. In other\nwords, a genuine and substantial relationship of cause and effect between all increased imports and\nserious injury, if established, is not a sufficient basis for assuming the existence of such a genuine and\nsubstantial link between increased imports from non-NAFTA sources and serious injury.\n10.651 Second, the Panel notes that the sources excluded from the measure are not only Canada and\nMexico, but also those from Israel and Jordan.\n5728 Accordingly, imports from sources covered by the\nmeasure are not \"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and\nJordan. With regard to such imports, the USITC did not establish explicitly that they satisfied the\nrequirements of Article 2.1 (as elaborated in Article 4) of the Agreement on Safeguards, neither in the\nUSITC Report, nor in the Second Supplementary Report.\n10.652 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be required for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding to be made it is not sufficient to merely find that the exclusion of imports from Israel\nand Jordan would not change the conclusions regarding the prerequisites for a safeguard measure.\n5729\nThe Panel recognizes that if imports from an excluded source were \"small and sporadic\" and\n\"virtually non-existent\" 5730 or non-existent 5731, it is very likely that the facts allow a finding that\nimports from sources covered by the measure do satisfy the conditions for the application of a\nsafeguard measure. This, however, still needs to be established explicitly and supported with a\nreasoned and adequate explanation.\n10.653 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on rebar, after\nincluding imports from all sources in its determination, and without establishing explicitly, with a\nreasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right to\napply a safeguard measure.\n\n5727 USITC Report, Vol. I, p. 116, footnote 704.\n5728 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5729 Second Supplementary Report, p. 4.\n5730 United States' first written submission, para. 754.\n5731 USITC Report, Vol. I, p. 376 and footnote 117.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n(f) Welded pipe\n(i) The USITC's findings\n10.654 In the Second Supplementary Report, the USITC reported \"that its results would have been\nthe same had imports from Canada and Mexico been excluded from the analysis.\" The USITC also\nindicated, \"in accord with its findings in the Views on Remedy, that exclusion of imports from Israel\nand Jordan would not change the conclusions of the Commission or of individual Commissioners.\"5732\nSpecifically as regards welded pipe, the USITC made the following findings:\n\"We report that increased imports of welded tubular products other than OCTG from\nnon-NAFTA countries are a substantial cause of the threat of serious injury to the\ndomestic industry producing welded tubular products other than OCTG.\nNon-NAFTA imports of welded tubular products other than OCTG have increased.\nImports from sources other than the NAFTA countries increased from 786,151 short\ntons in 1996 to 1,420,685 short tons in 2000, and from 724,859 short tons in interim\n2000 to 870,944 short tons in interim 2001. Non-NAFTA imports had major\nincreases of 20-30 percent in every year of the period examined except 1999.\n5733\nSimilarly, the ratio of non-NAFTA imports of such welded tubular products to US\nproduction increased in each year except 1999 during the period examined; the ratio\nrose from 16.9 percent in 1996 to 29.7 percent in 2000, and was 34.5 percent in\ninterim 2001 compared to 28.6 percent in interim 2000.\n5734\nSimilarly, with respect to market share, measured by quantity, non-NAFTA imports\nincreased from 13.1 percent in 1996 to 19.8 percent in 2000, and were 22.7 percent of\nthe market in the first half of 2001, compared to 18.9 percent in the first half of\n2001 [sic].5735\nMoreover, prices for standard pipe and mechanical pipe from non-NAFTA sources\nundersold comparable domestic products in all but one quarter (32 of 33 quarters) for\nwhich data were available. For both products, the prices of pipe from non-NAFTA\ncountries fell over the period examined, including during the most recent quarter or\nquarters for which data are available.5736\nFinally, excluding Canada and Mexico from the database does not appreciably alter\nprojections for foreign production, capacity, and exports to the United States. Indeed,\ncapacity, production, and exports to the United States from non-NAFTA countries are\nall projected to reach new peaks during the period 2001-2002.\n5737\nConsequently, the same considerations that led us to conclude that increased imports\nof welded tubular products (other than OCTG) are a substantial cause of the threat of\n\n5732 Second Supplementary Report, p. 4 (footnote omitted).\n5733 (original footnote) USITC Pub. 3479, vol. III, at Table TUBULAR C-4.\n5734 (original footnote) USITC Pub. 3479, vol. II, at Table TUBULAR-6.\n5735 (original footnote) USITC Pub. 3479, vol. III, at Table TUBULAR C-4.\n5736 (original footnote) USITC Pub. 3479, vol. II, at Table TUBULAR-58-59.\n5737 (original footnote) USITC Pub. 3479, vol. II, at Tables TUBULAR-30-32.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nserious injury are also applicable to increased imports of welded tubular products\n(other than OCTG) from all sources other than Canada and Mexico.\"5738\n(ii) Claims and arguments of the parties\n10.655 The claims and arguments of the parties as regards the USITC's findings are set out in\nSections VII.K.2, 3(b) and 4(f) supra.\n(iii) Analysis by the Panel\n10.656 The Panel notes that the safeguard measure on welded pipe excludes imports from Canada,\nMexico, Israel and Jordan5739 and that the determination made by the USITC in October 2001 covered\nimports from all sources. The question is, therefore, whether the competent authorities of the United\nStates have established explicitly, with a reasoned and adequate explanation, that imports from\nsources other than Canada, Mexico, Israel and Jordan meet the conditions for the application of a\nsafeguard measure as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on\nSafeguards. In this regard, the Panel notes that the USITC has, in its Second Supplementary Report,\nmade certain findings on the exclusion of imports from Israel and Jordan and with regard to the\nquestion whether increased imports of welded pipe from non-NAFTA countries are a substantial\ncause of the threat of serious injury to the domestic industry.\n5740\n10.657 The Panel notes two legal flaws in these findin gs and, therefore, believes that they do not\nestablish explicitly, with a reasoned and adequate explanation, that imports from sources covered by\nthe measure satisfy the requirements for the imposition of a safeguard measure. First, the requirement\nof causation in Articles 2.1 and 4.2(b) of the Agreement on Safeguards has not been satisfied. In the\nview of the Panel, the USITC failed to consider adeq uately the fact that it was dealing with a smaller\namount of (increased) imports. In order to establish the existence of a genuine and substantial\nrelationship of cause and effect between increased imports (covered by the measure) and the threat of\nserious injury to the domestic industry, the threat of serious injury caused by excluded imports must\nbe accounted for. The USITC did not adequately do so by stating that standard and mechanical pipe\nfrom non-NAFTA countries undersold domestic goods.\n5741 This does not account for the fact that the\nthreat of serious injury caused by non-NAFTA imports is but a part of the threat of serious injury\ncaused by all imports and does not establish that there is a genuine and substantial relationship of\ncause and effect. In other words, a genuine and substantial relationship of cause and effect between\nall increased imports and threat of serious injury, if established, is not a sufficient basis for assuming\nthe existence of such a genuine and substantial link between increased imports from non-NAFTA\nsources and threat of serious injury.\n10.658 Second, the sources excluded from the measure are not only Canada and Mexico, but also\nthose from Israel and Jordan.\n5742 Accordingly, imports from sources covered by the measure are not\n\"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and Jordan. With\nregard to such imports, the USITC did not establish explicitly that they satisfied the requirements of\nArticle 2.1 (as elaborated in Article 4) of the Ag reement on Safeguards, neither in the USITC Report,\nnor in the Second Supplementary Report.\n\n5738 USITC Second Supplementary Report, pp. 10-11.\n5739 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5740 USITC Second Supplementary Report, pp. 4, 10-11.\n5741 USITC Second Supplementary Report, p. 10.\n5742 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.659 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be required for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding to be made it is not sufficient to merely find that the exclusion of imports from Israel\nand Jordan would not change the conclusions regarding the prerequisites for a safeguard measure.\n5743\nThe Panel recognizes that if imports from an excluded source were \"small and sporadic\" and\n\"virtually non-existent\"5744 or below one per cent and non-existent 5745, it is very likely that the facts\n allow a finding that imports from sources covered by the measure do satisfy the conditions for the\napplication of a safeguard measure. This, however, still needs to be established explicitly and\nsupported with a reasoned and adequate explanation.\n10.660 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on welded pipe,\nafter including imports from all sources in its determination, and without establishing explicitly, with\na reasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right\nto apply a safeguard measure.\n(g) FFTJ\n(i) The USITC's findings\n10.661 In the Second Supplementary Report, the USITC reported \"that its results would have been\nthe same had imports from Canada and Mexico been excluded from the analysis.\" The USITC also\nindicated, \"in accord with its findings in the Views on Remedy, that exclusion of imports from Israel\nand Jordan would not change the conclusions of the Commission or of individual Commissioners.\"\n5746\nSpecifically as regards FFTJ, the USITC made the following findings:\n\"We report that increased imports of carbon and alloy fittings from non-NAFTA\ncountries are a substantial cause of serious injury to the domestic industry producing\ncarbon and alloy fittings.\nNon-NAFTA imports of carbon and alloy fittings have increased. Imports from\nsources other than the NAFTA countries increased from 76,079 short tons in 1996 to\n100,592 short tons in 2000; non-NAFTA imports increased in each year of the period\nexamined except 1997.\n5747 Similarly, the ratio of non-NAFTA imports to US\nproduction increased in each year of the period examined except 1997; the ratio rose\nfrom 37.1 percent in 1996 to 51.8 percent in 2000, and was 69.0 percent in interim\n2001 compared to 43.9 percent in interim 2000.5748\n\n5743 USITC Second Supplementary Report, p. 4.\n5744 United States' first written submission, para. 754.\n5745 USITC Report, Vol. I, p. 385 and footnote 155.\n5746 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5747 (original footnote) USITC Pub. 3479, vol. III, at Table TUBULAR C-6.\n5748 (original footnote) USITC Pub. 3479, vol. II, at Table TUBULAR-8.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nWith respect to market share, measured by quantity, non-NAFTA imports increased\nfrom 25.7 percent in 1996 to 31.0 percent in 2000, and were 36.3 percent of the\nmarket in the first half of 2001, compared to 28.8 percent in the first half of\n2001 [sic].\n5749\nAverage unit values of non-NAFTA imports were similar to the average unit values\nof imports from all sources and generally were above domestic average unit\nvalues.\n5750 ***.5751 ***.\nConsequently, the same considerations that led us to conclude that increased imports\nof carbon and alloy fittings are a substantial cause of serious injury are also\napplicable to increased imports of carbon and alloy fittings from all sources other\nthan Canada and Mexico.\nThe conclusion would not be different if only Mexico was excluded, or if only\nCanada was excluded.\"\n5752\n(ii) Claims and arguments of the parties\n10.662 The claims and arguments of the parties as regards the USITC's findings are set out in\nSections VII.K.2, 3(b) and 4(g) supra.\n(iii) Analysis by the Panel\n10.663 The Panel notes that the safeguard measure on FFTJ excludes imports from Canada, Mexico,\nIsrael and Jordan5753 and that the determination made by the USITC in October 2001 covered imports\nfrom all sources. The question is, therefore, whether the competent authorities of the United States\nhave established explicitly, with a reasoned and adequate explanation, that imports from sources other\nthan Canada, Mexico, Israel and Jordan meet the conditions for the application of a safeguard measure\nas set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards. In this regard,\nthe Panel notes that the USITC has, in its Second Supplementary Report, made certain findings on the\nexclusion of imports from Israel and Jordan and with regard to the question whether increased imports\nof FFTJ from non-NAFTA countries are a substantial cause of serious injury to the domestic\nindustry.\n5754\n10.664 The Panel notes two legal flaws in these findin gs and, therefore, believes that they do not\nestablish explicitly, with a reasoned and adequate explanation, that imports from sources covered by\nthe measure satisfy the requirements for the imposition of a safeguard measure. First, the requirement\nof causation in Articles 2.1 and 4.2(b) of the Agreement on Safeguards has not been satisfied. In the\nview of the Panel, the USITC failed to consider adeq uately the fact that it was dealing with a smaller\namount of (increased) imports. In order to establish the existence of a genuine and substantial\nrelationship of cause and effect between increased imports (covered by the measure) and serious\ninjury, the injury caused by excluded imports must be accounted for. The USITC did not adequately\ndo so by stating that average unit values of non-NAFTA imports were similar to those of all\n\n5749 (original footnote) USITC Pub. 3479, vol. III, at Table TUBULAR C-6. Non-NAFTA imports\nincreased from 45,537 short tons in interim 2000 to 63,226 short tons in interim 2000 [sic]. Id.\n5750 (original footnote) USITC Pub. 3479, Vol. I, at 176.\n5751 (original footnote) USITC Pub. 3479, Vol. II, at Table TUBULAR-61.\n5752 Second Supplementary Report, p. 8.\n5753 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5754 USITC Second Supplementary Report, pp. 4, 8.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nimports.5755 This does not account for the fact that serious injury caused by non-NAFTA imports is\nbut a part of serious injury caused by all imports and does not establish that there is a genuine and\nsubstantial relationship of cause and effect.\n10.665 Moreover, when discussing non-NAFTA imports in the Second Supplementary Report, the\nUSITC did not address other factors than increased imports which contributed to the causation of\nserious injury to the domestic FFTJ industry. The United States maintains that there was no need to\ndo so since of the five \"other factors\" identified in the analysis of all imports, four were found not to\ncause the serious injury and one, purchaser consolidation, focused exclusively on domestic industry\ndata.\n5756\n10.666 In the view of the Panel, the fact that those other factors were the same, does not mean that no\nnew findings on causation had to be made. The non-attribution obligation comprises the obligation of\nseparating and distinguishing the respective effects of increased imports and other factors to discern\nwhether there is a genuine and substantial causal relationship between increased imports and serious\ninjury. It may be unnecessary to repeat the exercise of separating and distinguishing the effects of\nother factors. However, the effects of increased imports from all sources and the effects of increased\nimports only from a subset of sources will not necessarily be the same. Therefore, it potentially\nmakes a difference whether one compares the effects of all increased imports or the effects of only\nsome increased imports with the effects of other factors.\n10.667 For that reason, a genuine and substantial relationship of cause and effect between all\nincreased imports and serious injury, if established, is not a sufficient basis for assuming the existence\nof such a genuine and substantial link between increased imports from non-NAFTA sources and\nserious injury. The United States' proposition could be maintained only if those two groups of\nimports had the same effects. At least for quantitative reasons and the fact that increased NAFTA\nimports undoubtedly had some effect, this proposition cannot be upheld in this case. As already\nstated, the competent authority is under an obligation to account for the fact that excluded (FTA)\nimports contributed to the serious injury suffered by the domestic industry in establishing whether\nimports from sources covered by the measure satisfy the requirement of causing serious injury.\n10.668 Second, the sources excluded from the measure are not only Canada and Mexico, but also\nthose from Israel and Jordan.\n5757 Accordingly, imports from sources covered by the measure are not\n\"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and Jordan. With\nregard to such imports, the USITC did not establish explicitly that they satisfied the requirements of\nArticle 2.1 (as elaborated in Article 4) of the Ag reement on Safeguards, neither in the USITC Report,\nnor in the Second Supplementary Report.\n10.669 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, be they about all imports, be they about non-NAFTA imports. However,\nin the view of the Panel, it would then still be required for the competent authorities to actually\nexpress the findings required under parallelism with regard to increased imports other than those from\nCanada, Mexico, Israel and Jordan. The standard is that the Member must establish explicitly that\nimports from sources covered by the measure satisfy all conditions for the right to apply a safeguard\nmeasure. For this finding to be made it is not su fficient to merely find that the exclusion of imports\nfrom Israel and Jordan would not change the conclusions regarding the prerequisites for a safeguard\n\n5755 USITC Second Supplementary Report, p. 8.\n5756 United States' first written submission, para. 882.\n5757 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nmeasure.5758 The Panel recognizes that if imports from an excluded source were \"small and\nsporadic\"5759 or below one per cent and \"virtually non-existent\" 5760, it is very possible that the facts\n allow a finding that imports from sources covered by the measure do satisfy the conditions for the\napplication of a safeguard measure. This, however, still needs to be established explicitly and\nsupported with a reasoned and adequate explanation.\n10.670 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on FFTJ, after\nincluding imports from all sources in its determination and without establishing explicitly, with a\nreasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right to\napply a safeguard measure.\n(h) Stainless steel bar\n(i) The USITC's findings\n10.671 In the Second Supplementary Report, the USITC reported \"that its results would have been\nthe same had imports from Canada and Mexico been excluded from the analysis.\" The USITC also\nindicated, \"in accord with its findings in the Views on Remedy, that exclusion of imports from Israel\nand Jordan would not change the conclusions of the Commission or of individual Commissioners.\"\n5761\nSpecifically as regards stainless steel bar, the USITC made the following findings:\n\"We report that increased imports of stainless bar and light shapes (\"stainless bar\")\nfrom non-NAFTA countries are a substantial cause of serious injury to the domestic\nindustry producing stainless bar.\nNon-NAFTA imports of stainless bar have increased. In terms of quantity, imports of\nstainless bar and light shapes from non-NAFTA countries increased by 61.1 percent\nduring the five full-years of the period of investigation, growing from 81,426 short\ntons in 1996 to 131,184 short tons in 2000.\n5762 Although the quantity of non-NAFTA\nimports fluctuated somewhat during the period (remaining essentially stable in 1998\nand declining somewhat in 1999 from its level in 1997 and 1998), a rapid and\ndramatic increase in the quantity of non-NAFTA imports occurred during the last\nfull-year of the period of investigation, when non-NAFTA imports of stainless bar\ngrew by 38,843 short tons.5763\nThe ratio of non-NAFTA imports of stainless steel bar to domestic production also\nincreased significantly during the period, growing from 43.1 percent in 1996 to 73.3\n\n5758 USITC Second Supplementary Report, p. 4.\n5759 United States' first written submission, para. 754.\n5760 USITC Report, Vol. I, p. 390 and footnote 180.\n5761 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5762 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-6 & STAINLESS-C-4.\n5763 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-6 & STAINLESS-C-4. The\nquantity of these imports declined between interim 2000 and interim 2001, dropping from 73,738 short tons to\n57,584 short tons. USITC Pub. 3479, Vol. III at Tables STAINLESS-6 & STAINLESS-C-4.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\npercent in 2000, with the largest single percentage increase in the ratio (17.1\npercentage points) occurring in 2000.5764\nIn sum, non-NAFTA imports of stainless bar increased significantly, both in quantity\nterms and as a ratio to domestic production, between 1996 and 2000, with the largest\nsingle increase in imports occurring during the last full-year of the period. Although\nthere was a decline in non-NAFTA imports in terms of quantity and as a ratio to\ndomestic production between interim 2000 and interim 2001, we report that non-\nNAFTA imports of stainless bar have increased.\nAs we concluded with respect to imports of stainless bar from all sources, we report\nthat increases in non-NAFTA import volumes between 1996 and 2000 had a serious\nadverse impact on the production levels, shipments, commercial sales and market\nshare of the domestic industry. During the period from 1996 to 2000, the quantity of\nnon-NAFTA imports increased by 61.1 percent and the market share of those imports\nincreased by 11 percentage points as well. 5765 Although these import increases\noccurred during a period of growing demand, the industry's production volumes,\nshipment levels and sales revenues all declined significantly as a result of increases in\nnon-NAFTA import volume during the period between 1996 and 2000 5766, with the\nindustry's production levels falling by 5.3 percent 5767, its net commercial sales falling\nby *** percent 5768, and the value of its net commercial sales falling by *** percent\nduring the period. 5769 Moreover, the industry's share of the market also fell\nconsiderably, dropping from 64.6 percent in 1996 to 59.8 percent in 1999 and then to\n53.5 percent in 2000, with imports from non-NAFTA sources accounting for all of\nthe industry's market share loss during that period.5770 Accordingly, we report that the\nincreasing imports from non-NAFTA sources had a serious adverse impact on the\nproduction, shipment, sales and market share levels of the industry during the period\nof investigation.\nExcluding imports from Canada and Mexico from our analysis also would not affect\nour conclusion that imports affected domestic prices of stainless bar negatively during\nthe period of investigation. There were no reported prices for the price comparison\nproducts with respect to imports from Mexico and the exclusion of the reported price\ncomparisons for Canadian imports results in an increase in the percentage of price\ncomparisons in which underselling by imports occurred during the period.\n5771 In\nparticular, after excluding the data for Canada, the record indicates that imports from\nother sources undersold the domestic merchandise throughout the period of\ninvestigation in 40 of 43 possible quarterly comparisons at underselling margins of up\n\n5764 (original footnote) USITC Pub. 3479, Vol. III at Table STAINLESS-6. The ratio of non-NAFTA\nimports to domestic production declined from 77.7 percent in interim 2000 to 70.4 percent in interim 2001.\nUSITC Pub. 3479, Vol. III at Table STAINLESS-6.\n5765 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-67 & STAINLESS-C-4.\n5766 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-18, STAINLESS-30, &\nSTAINLESS-C-4.\n5767 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-18 & STAINLESS-C-4.\n5768 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-30 & STAINLESS-C-4.\n5769 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-30 & STAINLESS-C-4.\n5770 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-67 & STAINLESS-C-4.\n5771 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-86, STAINLESS-87,\nSTAINLESS-98, STAINLESS-99, & Figures STAINLESS-7 & STAINLESS-8.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nto 51 percent.5772 Given these underselling trends and taking into account the analysis\nset forth in our pricing analysis for imports of stainless bar from all sources, we report\nthat this underselling by non-NAFTA imports depressed and suppressed domestic\nprices during the period of investigation and led to declines in the sales revenues and\noperating profits of the industry.\nConsequently, the same considerations that led us to conclude that increased imports\nof stainless bar from all sources are a substantial cause of serious injury to the\ndomestic industry are also applicable to increased imports of stainless bar from all\nsources other than Canada and Mexico.\"\n5773 5774\n(ii) Claims and arguments of the parties\n10.672 The claims and arguments of the parties as regards the USITC's findings are set out in\nSections VII.K.2, 3(b) and 4(h) supra.\n(iii) Analysis by the Panel\n10.673 The Panel notes that the safeguard measure on stainless steel bar excludes imports from\nCanada, Mexico, Israel and Jordan5775 and that the determination made by the USITC in October 2001\ncovered imports from all sources. The question is, therefore, whether the competent authorities of the\nUnited States have established explicitly, with a reasoned and adequate explanation, that imports from\nsources other than Canada, Mexico, Israel and Jordan meet the conditions for the application of a\nsafeguard measure as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on\nSafeguards. In this regard, the Panel notes that the USITC has, in its Second Supplementary Report,\nmade certain findings on the exclusion of imports from Israel and Jordan and with regard to the\nquestion whether increased imports of stainless steel bar from non-NAFTA countries are a substantial\ncause of serious injury to the domestic industry.\n5776\n10.674 The Panel notes two legal flaws in these findin gs and, therefore, believes that they do not\nestablish explicitly, with a reasoned and adequate explanation, that imports from sources covered by\nthe measure satisfy the requirements for the imposition of a safeguard measure. First, the requirement\nof causation in Articles 2.1 and 4.2(b) of the Agreement on Safeguards has not been satisfied. In the\nview of the Panel, the USITC failed to consider adeq uately the fact that it was dealing with a smaller\namount of (increased) imports. In order to establish the existence of a genuine and substantial\nrelationship of cause and effect between increased imports (covered by the measure) and serious\ninjury, the injury caused by excluded imports must be accounted for. In assessing the injurious\nimpact of non-NAFTA imports on the domestic indu stry, the USITC found that frequent underselling\nby non-NAFTA imports at high margins depressed and suppressed domestic prices during the period\n\n5772 (original footnote) USITC Pub. 3479, Vol. III at Tables STAINLESS-87, STAINLESS-99, &\nFigure STAINLESS-9.\n5773 (original footnote) In this regard, we note that we would make this finding whether imports of\nstainless bar and light shapes from Mexico are included in the analysis outlined above or not. Imports of\nstainless bar and light shapes from Mexico accounted for a minuscule and declining share of the market and\nimports during the period of investigation and there was no reported price comparison data for imports from\nMexico. Consequently, the analysis set forth above would apply whether or not the President chose to include\nimports from Mexico in any remedy imposed against imports of stainless bar and light shapes.\n5774 USITC Second Supplementary Report, pp. 8-10.\n5775 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5776 USITC Second Supplementary Report, pp. 4, 8-10.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nof investigation and led to declines in the sales revenues and operating profits of the industry.5777 This\napproach is inadequate because it does not account for the fact that serious injury caused by non-\nNAFTA imports is but a part of serious injury cause d by all imports and does not establish that there\nis a genuine and substantial relationship of cause and effect.\n10.675 Moreover, when discussing non-NAFTA imports in the Second Supplementary Report, the\nUSITC did not address other factors than increased imports which contributed to the causation of\nserious injury to the domestic stainless steel bar industry. The United States maintains that there was\nno need to do so since of the three \"other factors\" identified and investigated in the analysis of all\nimports (changes in demand during late 2000 and 2001, increases in energy costs, and the poor\noperating results of two producers during the period) were found not to cause the serious injury\nobserved.\n5778\n10.676 As the Panel understands, the USITC rather conc luded, about the first two of the three \"other\nfactors\" that they were not a more important cause of serious injury than imports. 5779 In other words,\nthere were other factors and they also did cause some injury. In the view of the Panel, this made it\nnecessary to make adjusted new findings on whether there is a genuine and substantial causal\nrelationship between increased imports (from covered sources) and serious injury. It may be\nunnecessary to repeat the exercise of separating and distinguishing the effects of other factors.\nHowever, the effects of increased imports from all sources and the effects of increased imports only\nfrom a subset of sources will not necessarily be the same. Therefore, it potentially makes a difference\nwhether one compares the effects of all increased imports, or the effects of only some increased\nimports with the effects of other factors.\n10.677 For that reason, a genuine and substantial relationship of cause and effect between all\nincreased imports and serious injury, if established, is not a sufficient basis for assuming the existence\nof such a genuine and substantial link between increased imports from non-NAFTA sources and\nserious injury. The United States' proposition could be maintained only if those two groups of\nimports had the same effects. At least for quantitative reasons and the fact that increased NAFTA\nimports undoubtedly had some effect, this proposition cannot be upheld in this case. As already\nstated, the competent authority is under an obligation to account for the fact that excluded (FTA)\nimports contributed to the serious injury suffered by the domestic industry in establishing whether\nimports from sources covered by the measure satisfy the requirement of causing serious injury.\n10.678 Second, the sources excluded from the measure are not only Canada and Mexico, but also\nIsrael and Jordan.\n5780 Accordingly, imports from sources covered by the measure are not \"non-\nNAFTA imports\", but imports other than those from Canada, Mexico, Israel and Jordan. With regard\nto such imports, the USITC did not establish explicitly that they satisfied the requirements of\nArticle 2.1 (as elaborated in Article 4) of the Agreement on Safeguards, neither in the USITC Report,\nnor in the Second Supplementary Report.\n10.679 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be required for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\n\n5777 USITC Second Supplementary Report, p. 9. See para. 10.671.\n5778 United States' first written submission, para. 893.\n5779 USITC Report, Vol. I, p. 212.\n5780 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding to be made it is not sufficient to merely find that the exclusion of imports from Israel\nand Jordan would not change the conclusions regarding the prerequisites for a safeguard measure.\n5781\nThe Panel recognizes that if imports from an excluded source were \"small and sporadic\" and\n\"virtually non-existent\"\n5782 or \"small or non-existent\" and \"non-existent\"5783, it is very possible that the\nfacts allow a finding that imports from sources covered by the measure do satisfy the conditions for\nthe application of a safeguard measure. This, however, still needs to be established explicitly and\nsupported with a reasoned and adequate explanation.\n10.680 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on stainless steel bar\nafter including imports from all sources in its determination and without establishing explicitly, with a\nreasoned and adequate explanation, that non-excluded imports satisfy the requirements for the right to\napply a safeguard measure.\n(i) Stainless steel wire\n(i) Claims and arguments of the parties\n10.681 The complainants assert that the determination made by the USITC in October includes all\nimports. Neither the initial USITC Report nor the Second Supplementary Report establishes\nexplicitly that imports from sources covered by the measure satisfy the conditions of Articles 2.1 and\n4.2 of the Agreement on Safeguards. The Second Supplementary Report does not even mention\nstainless steel wire specifically. The claims and arguments of the complainants as regards the\nUSITC's findings on stainless steel wire are set out in more detail in Sections VII.K.2, 3(b) and 4(i)\nsupra.\n10.682 The United States contends that, when performing the analysis of all imports, Commissioners\nBragg and Koplan made the necessary findings on non-NAFTA imports of stainless steel wire. The\nclaims and arguments of the United States as regards the USITC's findings on stainless steel wire are\nset out in more detail in Sections VII.K.2, 3(b) and 4(i) supra.\n(ii) Analysis by the Panel\nSplit findings\n10.683 The Panel first notes that imports from Canada, Mexico, Israel and Jordan have been\nexcluded from the safeguard measure on stainless steel wire. 5784 Second, the October 2001\ndetermination by the USITC covered imports from all sources. Hence, the requirement of parallelism\nrequires that the competent authorities of the United States have established explicitly, with a\nreasoned and adequate explanation, that imports of stainless steel wire from sources other than\nCanada, Mexico, Israel and Jordan satisfy the requirements for the application of a safeguard measure,\nas set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards. In this regard,\nbefore the Panel, the United States relies on findings made by Commissioners Koplan and Bragg in\nthe USITC Report.\n\n5781 USITC Second Supplementary Report, p. 4.\n5782 United States' first written submission, para. 754.\n5783 USITC Report, Vol. I, p. 399 and footnote 225.\n5784 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.684 The Panel recalls that Commissioner Bragg made her findings on a product category broader\nthan, and comprising, stainless steel wire (stainless steel wire and stainless steel wire rope), as\nCommissioner Devaney did.\n5785 The Panel also recalls that stainless steel wire is not only the product\ncategory for a separate remedy imposed by the United States, but also the product for which the three\nCommissioners were reported to have made the affirmative determination5786 which later served as the\nbasis for the safeguard measure. 5787 Those three Commissioners supported this determination with\nfindings that are based on different product categories. However, for the purposes of WTO law, the\nUSITC has actually made a determination on stainless steel wire as a separate product. The Panel\nnotes that this is confirmed by the Proclamation of the President of 5 March 2001, in which the\nPresident \"decided to consider the determinations of the groups of commissioners voting in the\naffirmative with regard to [tin mill products and st ainless steel wire] to be the determination of the\n[US]ITC\".\n5788\n10.685 Therefore, and for the reasons elaborated in the context of tin mill products5789, the Panel does\nnot believe that findings on a product category other than stainless steel wire are able to support a\nmeasure relating to stainless steel wire, unless there is a reasoned and adequate explanation relating\nthe two product categories. If it was necessary to establish explicitly certain conditions with regard to\nstainless steel wire, then these conditions cannot be established with findings on a different (broader)\nproduct category. Such findings would not be specific to the product to which the USITC\ndetermination and the United States' safeguard measure related. Hence, the views of Commissioners\nBragg\n5790 and Devaney5791, who reached no findings on stainless steel wire but did reach findings on a\nbroader category including stainless steel wire, do not meet the requirements of parallelism.\nTherefore, in the remainder of this section, the Panel will review the findings reached by\nCommissioner Koplan which relate to stainless steel wire as a separate product.\nCommissioner Koplan's and the USITC's findings\n10.686 Commissioner Koplan made the following findings:\n\"Additionally, I conclude that increased imports from all sources other than Canada\nand Mexico are a substantial cause of the threat of serious injury to the domestic\nindustry. Imports of stainless steel wire from Canada and Mexico accounted for a\nsmall and decreasing share of domestic apparent consumption over the period of\ninvestigation. Imports from Canada and Mexico accounted for 3.8 percent of\napparent consumption in 1996, 3.6 percent in 1997, 1.5 percent in 1998, 0.4 percent\nin 1999, and 0.3 percent in 2000. Imports from Canada and Mexico accounted for 0.3\npercent of apparent consumption in interim 2000 and in interim 2001. Imports from\nall sources other than Canada and Mexico accounted for an increasing share of\napparent consumption over the period of investigation, increasing from 20.1 percent\nin 1996 to 22.8 percent in 2000. Between the interim periods, imports from all other\nsources other than Canada and Mexico increased from 20.7 percent in interim 2000 to\n27.8 percent in interim 2001. CR and PR at Table STAINLESS-C-7. Consequently,\n\n5785 USITC Report, Vol. I, p. 277 (Commissioner Bragg) and p. 335 (Commissioner Devaney).\n5786 USITC Report, Vol. I, p. 27.\n5787 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\n5788 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.\n5789 Supra paras. 10.613-10.614.\n5790 USITC Second Supplementary Report, pp. 22-23.\n5791 The Panel notes that the United States does not rely on findings made by Commissioner Devaney\nin defence, possibly because this Commissioner app ears not to have reached any conclusions about imports\nother than excluded imports. See USITC Report, Vol. I, p. 347.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nthe conclusions I have made concerning the effects of increased imports are equally\napplicable whether or not imports from Canada and Mexico are included among the\nimports evaluated.\"\n5792\n10.687 The USITC also reported in the Second Supplementary Report, \"in accord with its findings in\nthe Views on Remedy, that exclusion of imports from Israel and Jordan would not change the\nconclusions of the Commission or of individual Commissioners.\"5793\nPanel's assessment\n10.688 The Panel does not believe that these statements establish explicitly, with a reasoned and\nadequate explanation, that increased imports from sources other than Canada, Mexico, Israel and\nJordan, alone, satisfy the requirements of Article 2.1 as elaborated in Article 4.2 of the Agreement on\nSafeguards. The findings relied upon by the United States do not take account of the portion of the\nthreat of serious injury caused by NAFTA imports. They do not establish a genuine and substantial\nrelationship of cause and effect between non-NAFTA imports and the threat of serious injury in the\nlight of the threat attributable to other factors. They examine an increase in imports merely in a\nrudimentary fashion and otherwise focus on market share developments before stating that the\nconclusions made concerning the effects of increased imports are equally applicable even when\nNAFTA imports are excluded.\n10.689 Second, the Panel recalls that the sources excluded from the measure are not only Canada and\nMexico, but also those from Israel and Jordan. 5794 Accordingly, imports from sources covered by the\nmeasure are not \"non-NAFTA imports\", but imports other than those from Canada, Mexico, Israel and\nJordan. With regard to such imports, the USITC did not establish explicitly that they satisfied the\nrequirements of Article 2.1 (as elaborated in Article 4) of the Agreement on Safeguards, neither in the\nUSITC Report, nor in the Second Supplementary Report.\n10.690 It may well be that imports from Israel and Jordan were so small that they could not possibly\naffect the findings reached, whether about all imports or about non-NAFTA imports. However, in the\nview of the Panel, it would then still be required for the competent authorities to actually express the\nfindings required under parallelism with regard to increased imports other than those from Canada,\nMexico, Israel and Jordan. The standard is that the Member must establish explicitly that imports\nfrom sources covered by the measure satisfy all conditions for the right to apply a safeguard measure.\nFor this finding to be made it is not sufficient to merely find that the exclusion of imports from Israel\nand Jordan would not change the conclusions regarding the prerequisites for a safeguard measure. 5795\nThe Panel recognizes that if imports from an excluded source were \"small and sporadic\" 5796 or \"small\nor non-existent\" and \"virtually non-existent\"5797, it is very possible that the facts allow a finding that\nimports from sources covered by the measure do satisfy the conditions for the application of a\nsafeguard measure. This, however, still needs to be established explicitly and supported with a\nreasoned and adequate explanation.\n10.691 These findings, finally, relate only to non-NAFTA imports, not to imports from sources other\nthan Canada, Mexico, Israel and Jordan. They do not establish explicitly, with a reasoned and\n\n5792 USITC Report, p. 260, footnote 36.\n5793 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5794 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\n5795 Second Supplementary Report, p. 4.\n5796 United States' first written submission, para. 754.\n5797 USITC Report, Vol. I, p. 405 and footnote 268.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nadequate explanation, that imports from sources other than Canada, Mexico, Israel and Jordan\nsatisfied the requirements of Article 2.1 (as elaborated in Article 4) of the Agreement on Safeguards.\n10.692 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on stainless steel\nwire, after including imports from all sources in its determination and without establishing explicitly,\nwith a reasoned and adequate explanation, that non- excluded imports satisfy the requirements for the\nright to apply a safeguard measure.\n(j) Stainless steel rod\n(i) The USITC's findings\n10.693 Before the Panel, the United States relies on footnote 1437 of the USITC's analysis of all\nimports. This footnote states:\n\"We also have considered whether the exclusion of imports of stainless rod from\nMexico or Canada from our injury analysis would have affected our finding that\nimports were a substantial cause of serious injury to the stainless rod industry.\nBecause imports of stainless rod from Mexico and Canada each accounted for an\nextremely small percentage of total imports during the period of investigation,\nINV-Y-180 at Table G-25, we find the exclusion of these volumes does not change\nour volumes or pricing analysis in a significant manner. Accordingly, our injury\nanalysis would not be changed in any way by their exclusion.\"\n5798\n10.694 The USITC also reported in the Second Supplementary Report, \"in accord with its findings in\nthe Views on Remedy, that exclusion of imports from Israel and Jordan would not change the\nconclusions of the Commission or of individual Commissioners.\"5799\n(ii) Claims and arguments of the parties\n10.695 The claims and arguments of the parties as regards the USITC's findings are set out in\nSections VII.K.2, 3(b) and 4(j) supra.\n(iii) Analysis by the Panel\n10.696 The Panel first notes that imports from Canada, Mexico, Israel and Jordan have been\nexcluded from the safeguard measure on stainless steel rod. 5800 Second, the October 2001\ndetermination by the USITC covered imports from all sources. Hence, the requirement of parallelism\nrequires that the competent authorities of the United States have established explicitly, with a\nreasoned and adequate explanation, that imports of stainless steel rod from sources other than Canada,\nMexico, Israel and Jordan satisfy the requirements for the application of a safeguard measure, as set\nout in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.\n10.697 The Panel agrees with the United States that in a case where excluded imports account for\nless than 0.08% of total imports, it would normally be possible to reach the conclusion that imports\n\n5798 USITC Second Supplementary Report, p. 223, footnote 1437.\n5799 USITC Second Supplementary Report, p. 4 (footnote omitted).\n5800 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10556.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nfrom other sources satisfy the same requirements as all imports do. 5801 However, the Panel is unable\nto identify in the statements contained in footnote 1437 the required findings that establishes\nexplicitly, with a reasoned and adequate explanation, that imports from other sources than Canada,\nMexico, Israel and Jordan satisfy the conditions of Article 2.1 as elaborated by Article 4.2 of the\nAgreement on Safeguards. In particular, the rather implicit statement made that imports other than\nCanadian and Mexican imports have increased and that they have caused serious injury to the\ndomestic industry, does not relate to imports covered by the measure which are imports from sources\nother than Canada, Mexico, Israel and Jordan.\n10.698 Also, it may well be that imports from Israel and Jordan were so small that they could not\npossibly affect the findings reached, whether about all imports or about non-NAFTA imports.\nHowever, in the view of the Panel, it would then still be required for the competent authorities to\nactually express the findings required under paralleli sm with regard to increased imports other than\nthose from Canada, Mexico, Israel and Jordan. The standard is that the Member must establish\nexplicitly that imports from sources covered by the measure satisfy all conditions for the right to\napply a safeguard measure. For this finding to be made it is not sufficient to merely find that the\nexclusion of imports from Israel and Jordan would not change the conclusions regarding the\nprerequisites for a safeguard measure.\n5802 The Panel recognizes that if imports from an excluded\nsource were \"small and sporadic\" and \"virtually non-existent\" 5803 or \"small and non-existent\" and\n\"non-existent\"5804, it is very likely that the facts allow a finding that imports from sources covered by\nthe measure do satisfy the conditions for the application of a safeguard measure. This, however, still\nneeds to be established explicitly and supported with a reasoned and adequate explanation.\n10.699 The Panel concludes that the United States has acted inconsistently with the requirement of\nparallelism under Articles 2 and 4 of the Agreement on Safeguards by excluding imports from\nCanada, Mexico, Israel and Jordan from the application of the safeguard measure on stainless steel\nrod, after including imports from all sources in its determination, and without establishing explicitly,\nwith a reasoned and adequate explanation, that non- excluded imports satisfy the requirements for the\nright to apply a safeguard measure.\nG.\nADDITIONAL FINDINGS\n1. Judicial economy\n10.700 The Panel has not addressed each and every claim raised by the complainants. Relying on\njudicial economy, the Panel refrains from ruling on several claims and sub-claims, including those\nrelating to the proper definition of the imported product, the like product and the domestic industry;\nclaims relating to serious injury; claims relating to the consistency of product exclusions with the\nprinciple of parallelism; claims relating to Articles 5, 7, 8 and 9 of the Agreement on Safeguards as well\nas claims relating to Articles I, X, XIII, XIX (ex cept insofar as the latter deals with the unforeseen\ndevelopments requirement) and XXIV of GATT 1994.\n10.701 The principle of judicial economy is recognized in WTO law. In US – Wool Shirt and\nBlouses, the Appellate Body made clear that panels are not required to address all the claims made by\n\n5801 The Panel recalls in this regard that it has found the USITC's finding on increased imports of\nstainless steel rod to be legally inconsistent with WTO law since the facts did not show that stainless steel rod\nwas being imported in increased quantities and therefore the USITC failed to provide a reasoned and adequate\nexplanation of how the facts support the conclusion.\n5802 USITC Second Supplementary Report, p. 4.\n5803 United States' first written submission, para. 754.\n5804 USITC Report, Vol. I, p. 405 and footnote 268.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\na complaining party. The Appellate Body relied on the explicit aim of the dispute settlement\nmechanism which is to secure a positive solution to a dispute (Article 3.7) or a satisfactory settlement of\nthe matter (Article 3.4). Thus, the basic aim of dispute settlement in the WTO is to settle disputes and\nnot to develop jurisprudence. The Appellate Body stated:\n\"[G]iven the explicit aim of dispute settlement that permeates the DSU, we do not\nconsider that Article 3.2 of the DSU is meant to encourage either panels or the\nAppellate Body to 'make law' by clarifying existing provisions of the WTO\nAgreement outside the context of resolving a particular dispute. A panel need only\naddress those claims which must be addressed in order to resolve the matter in issue\nin the dispute.\n5805\" 5806\n10.702 In its supporting reasoning, the Appellate Body also explored Article 11 of the DSU, the\nprovision setting out the mandate of panels and found nothing in this provision that would require\npanels to examine all legal claims made by a complaining party. The Appellate Body relied on\nprevious dispute settlement practice, inter alia, under the GATT 1947. Specifically, it stated: \"if a\npanel found that a measure was inconsistent wi th a particular provision of the GATT 1947, it\ngenerally did not go on to examine whether the measure was also inconsistent with other GATT\nprovisions that a complaining party may have argued were violated.\"5807\n10.703 Yet, the Panel is aware of the limits to its discretionary right to exercise judicial economy. As\nthe Appellate Body stated in Australia – Salmon, the right to exercise judicial economy could not be\nexercised where only a partial resolution of a dispute would result:\n\"The principle of judicial economy has to be applied keeping in mind the aim of the\ndispute settlement system. This aim is to resolve the matter at issue and 'to secure a\npositive solution to a dispute'. To provide only a partial resolution of the matter at\nissue would be false judicial economy. A panel has to address those claims on which\na finding is necessary in order to enable the DSB to make sufficiently precise\nrecommendations and rulings so as to allow for prompt compliance by a Member\nwith those recommendations and rulings 'in order to ensure effective resolution of\ndisputes to the benefit of all Members.'\"\n5808\n10.704 The Panel believes that these principles are applicable in the present dispute. The\ncomplainants have raised a large number of legal claims, arguing that each of the safeguard measures\nat issue in this dispute violates various obligations contained in the Agreement on Safeguards and\nGATT 1994. The Panel has concluded that each safeguard measure is inconsistent with various\nprovisions of the Agreement on Safeguards or the GATT 1994. The Panel need not to examine\nwhether each of the same safeguard measures also violates other provisions of the Agreement on\nSafeguards or the GATT 1994 that were raised by the complainants.\n10.705 In addressing several of the claims raised in this dispute (those relating to unforeseen\ndevelopments, increased imports, causation and parallelism), the Panel believes that it has effectively\nresolved the dispute in finding inconsistencies that result in the absence of the right of the United\nStates to take the safeguard measures at issue in this dispute. Since the safeguard measures at issue\n\n5805 (original footnote) The \"matter in issue\" is the \"matter referred to the DSB\" pursuant to Article 7 of\nthe DSU.\n5806 Appellate Body Report, US – Wool Shirts and Blouses, DSR 1997:I, 323 at 340.\n5807 Appellate Body Report, US – Wool Shirts and Blouses, DSR 1997:I, 323 at 340 (footnote omitted).\n5808 Appellate Body Report, Australia – Salmon, para. 223.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nwere deprived of a legal basis, the United States could not impose such safeguard measures against\nany WTO Members, Thus, the Panel does not need to examine the remaining claims, a number of\nwhich, have been raised only by some of the complainants and sometimes only for some of the\nmeasures at issue.\n10.706 Since the Panel's conclusions mean that the United States had not complied with the\nrequirements to exercise the right to apply safeguard measures, there is no need to address those\nclaims relating to the alleged breaches of obligations regarding the application of such safeguard\nmeasures. For the same reasons, we believe that the Panel need not examine whether the tariff quota\non slabs constitutes a distinct measure from that applied on the rest of CCFRS. Since the basis for\nthat safeguard measure on slabs was a determination made on CCFRS which we concluded lacked\nlegal basis, such determination could not provide any legal basis for a tariff quota on a sub-group of\nCCFRS, namely on slabs. Moreover, the Panel does not have to address the legal questions of\nwhether the United States, in applying its safeguard measures, acted inconsistently with Articles 5.1\nand 7 (relating to the necessary extent and duration), Article 5.2 of the Agreement on Safeguards and\nArticle XIII of the GATT (quota allocation), Article 8 of the Agreement on Safeguards (maintenance\nof an equivalent level of concessions) or Articl e 9.1 of the Agreement on Safeguards (exemption of\n de minimis developing country exporters).\n10.707 The Panel finds support for its exercise of judicial economy in the practice of panels and the\nAppellate Body in previous dispute settlement proceedings relating to safeguard measures. In US –\nWheat Gluten, the Appellate Body upheld the panel's exercise of judicial economy by not ruling on\nclaims relating to Article XIX (unforeseen developments), Article I of GATT 1994 and Article 5 of\nthe Agreement on Safeguards.\n5809 In US – Lamb , the Appellate Body upheld the panel's exercise of\njudicial economy by not ruling on a claim relating to Article 5 of the Agreement on Safeguards.5810 In\nfact, the panel had exercized judicial economy in relation to claims under Articles 2.2, 3.1, 5.1, 8, 11\nand 12 of the Agreement on Safeguards and Articles II and XI of GATT 1994.\n5811\n10.708 In the two mentioned cases, the Appellate Body accepted as basis for the panels' exercise of\njudicial economy the fact that the panels had reached the conclusion that inconsistencies with\nArticles 2.1 and 4 of the Agreement on Safeguards and Article XIX of GATT 1994 deprived the\nsafeguard measures at issue of a legal basis. 5812 According to the Appellate Body, the panels were,\ntherefore, entitled to exercise judicial economy and not to address further claims relating to alleged\ninconsistencies with further provisions of the same safeguard measures. The Appellate Body also\nobserved that additional findings (on Article I of GATT 1994 or Article 5.1 of the Agreement on\nSafeguards) would not have enhanced the ability of the DSB to make sufficiently precise\n\n5809 Appellate Body Report, US – Wheat Gluten, paras. 183-184.\n5810 Appellate Body Report, US – Lamb, paras. 193-195. In US – Lamb (para. 192), the Appellate Body\nalso referred to Argentina – Footwear (EC) and stated that the panel in that case had, like the panel in US –\nWheat Gluten, \"acted within its discretion in declining to a ddress the issue of 'unforeseen developments' under\nArticle XIX:1(a) of the GATT 1994.\" As a matter of fact, the panel considered Article XIX:1(a) to be of no\nindependent relevance (see Panel Report, Argentina – Footwear Safeguard (EC) , para. 8.69). However, the\nAppellate Body itself, after reversing the panel's conclusion, saw no need to complete the analysis on the claim\nunder Article XIX of the GATT 1994 (unforeseen developments) because violations of Articles 2 and 4 already\ndeprived the measure of a legal basis. See Appellate Body Report, Argentina – Footwear , para. 98 and\nAppellate Body Report, US – Wheat Gluten, paras. 181-182.\n5812 Appellate Body Report, US – Wheat Gluten , para. 183; Appellate Body Report, US – Lamb ,\npara. 193.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nrecommendations and rulings in the dispute. 5813 The Panel believes that the circumstances in the\npresent dispute are similar.\n10.709 Two further claims on which the Panel exercises judicial economy are, on the one hand, under\nArticles 2.1 and 4.1(c) of the Agreement on Safeguards relating to the allegedly incorrect definition of\nthe imported product, like product and the domestic industry and, on the other hand, under Articles\n2.1 and 4.2(a) relating to serious injury. These claims are also concerned with the question of whether\nthe United States has complied with the WTO requirements that must be satisfied for the right to\napply a safeguard measure to exist. According to the Panel's conclusions, each of the safeguard\nmeasures lacked a legal basis under WTO law. There is, therefore, no need to address further claims\nwhich also relate to the question of whether the United States satisfied the conditions for the right to\napply these measures.\n10.710 All of the determinations on which the safeguard measures challenged in this dispute are\nbased have been found to be inconsistent with several of the requirements of Article 2.1 and 4 of the\nAgreement on Safeguards. There is, therefore, also no need to address the claim made under\nArticle X of GATT 1994 in relation to the decision-making process leading to the relevant\ndeterminations.\n10.711 Finally, since the Panel has found that the exemption of imports from Canada, Mexico, Israel\nand Jordan in this case was inconsistent with the requirement of parallelism, there was no need to\naddress the question whether this exemption in departure of Article I of GATT 1994 and Article 2.2 of\nthe Agreement on Safeguards was justified by Article XXIV of GATT 1994. As the Appellate Body\nhas stated, the question of whether Article XXIV of GATT 1994 can serve as an exception to\nArticle 2.2 of the Agreement on Safeguards becomes relevant only when the requirement of\nparallelism has been complied with.\n5814\n10.712 With reference to China and Norway's claims under Article 9.1 of the Agreement on\nSafeguards, the Panel recalls the provisions of Article 12.11 of the DSU pursuant to which where one\nor more of the parties is a developing country Member, the panel's report shall explicitly indicate the\nform in which account has been taken of relevant provisions on differential and more-favourable\ntreatment for that developing country.\n10.713 The Panel is aware of the crucial importance of the provisions on special and differential\ntreatment in the WTO Agreement in general, and of Article 9.1 of the Agreement on Safeguards as\none such provision. 5815 Article 9.1 of the Agreement on Safeguards, under certain circumstances,\nrequires importing Members to exempt developing country Members from the application of\nsafeguard measures. Those developing country Members, accordingly, are intended to enjoy the\nbenefit of continued access to the market of the importing Member without facing the restrictions\nimposed by the safeguard measure. A Member imposing a safeguard measure is under an obligation\nto accord these advantages to every Member which is a developing country. We note that China's\nProtocol of Accession to the WTO makes reference to China's status in the WTO context.\n\n5813 Appellate Body Report, US – Wheat Gluten , para. 184; Appellate Body Report, US – Lamb ,\npara. 194.\n5814 Appellate Body Report, US – Line Pipe, paras. 198-199.\n5815 It is not without reason that the Doha Minister ial Declaration contains a mandate to review all\nspecial and differential treatment provisions with a view to strengthening them and making them more precise,\neffective and operational. See Ministerial Declaration, WT/MIN(01)/DEC/1, adopted on 14 November 2001,\npara. 44.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.714 Nevertheless, the Panel believes that the principle of judicial economy also applies to a claim\nsuch as that made under Article 9.1 of the Agreement on Safeguards. The Panel, therefore, believes\nthat it is not necessary to examine the additional specific claim raised under Article 9.1 and that China\nis not prejudiced in its asserted rights under Article 9.1, by the Panel's exercise of judicial economy.\nSince there was no legal basis to impose any of the safeguard measures at issue in this dispute against\nany other WTO Member, there was obviously also no legal basis to apply any of these measures to\nChina. For this Panel, the recommendations and ru lings of the DSB on claims relating to Article 9.1\nwould not have had any different practical effects on the WTO-compatibility of these safeguard\nmeasures.\n10.715 Finally, in resorting to judicial economy, the Pa nel has been aware of the need for a \"prompt\nsettlement\" of disputes, including the expeditious issuance of its report, as called for by Article 3.3 of\nthe DSU.\n2. The United States' request for the issuance of separate panel reports\n10.716 The Panel recalls that in accordance with Article 6 of the DSU, the DSB originally\nestablished multiple panels to examine similar matters raised by the various complainants. Pursuant\nto two procedural agreements (one concl uded on 27 June 2002 between, on the one hand, the\nEuropean Communities, Japan, Korea, China, Switzerland, Norway and New Zealand and, on the\nother hand, the United States\n5816 and the other concluded on 18 July 2002 between Brazil and the\nUnited States5817), the United States accepted, inter alia , the establishment of a single panel under\nArticle 9.1 of the DSU. Pursuant to the two agr eements and in accordance with Article 9.1 of the\nDSU, the DSB agreed that the various disputes would proceed on the basis of a single panel.5818\n10.717 On 28 January 2003, the Panel received a request from the United States pursuant to\nArticle 9.1 of the DSU that the Panel issue eight separate panel reports rather than one single report.\nThe basis for the United States' request was to prot ect its DSU rights including the right to seek a\nsolution with one or more of the individual complaints without adoption of a report or without an\nappeal, in case this right depended on the existence of separate reports.\n10.718 On 30 January 2003, the complainants opposed that request for a number of reasons, notably\nbecause the request had not been made in a timely fashion, that complying with the request would\nresult in additional delays and that had the complainants known that multiple reports would be issued,\nthey would have presented their arguments differently.\n10.719 A series of communications between the parties followed. 5819 On 3 February 2003, the Panel\nwrote to the parties that a decision on the United States' request would be issued with the Interim\nPanel Report but that, in any case, should the United States' request be accepted by the Panel, all such\nseparate Panel Reports would have the same Descriptive Part. The content of this letter is reproduced\nin paragraph 2.18 of the Descriptive Part. On Thursday, 6 February 2003, the Panel issued a single\ndraft Descriptive Part. On 19 February 2003 the Panel received consolidated comments from the\ncomplainants as well as comments from the United States.\n5820\n\n5816 WT/DS248/13, WT/DS249/7, WT/DS251/8, WT/DS252/6, WT/DS253/6, WT/DS254/6,\n\n5817 WT/DS259/9.\n5818 See para. 10.1.\n5819 See paras. 2.6-2.19.\n5820 The Panel notes also that complainants co-ordinated their comments on the Panel's Interim\nFindings (of 9 April) as well as their comments on the United States' comments (of 16 April).\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\n10.720 The Panel will now examine the United States' request for the issuance of separate Panel\nReports. We recall that our working procedures do not address this issue as such. 5821 As a starting-\npoint, we refer to Article 9.2 of the DSU, which deals with the issue of requests for separate reports in\ncases involving multiple complainants. Article 9.2 provides in relevant part that:\n\"The … panel shall organize its examination and present its findings to the DSB in\nsuch a manner that the rights which the parties to the dispute would have enjoyed had\nseparate panels examined the complaints are in no way impaired. If one of the parties\nto the dispute so requests, the panel shall submit separate reports on the dispute\nconcerned.\"\n10.721 The Appellate Body in US – Offset Act (Byrd Amendment) acknowledged that, by its terms,\nArticle 9.2 accords to the requesting party a broad right to request a separate report, which is not made\ndependent on any conditions. 5822 The Appellate Body also noted that the text of Article 9.2 of the\nDSU contains no requirement for the request for a separate panel report to be made by a certain time,\nbut also observed that the text does not explicitly provide that such requests may be made at any\ntime.5823 The Appellate Body went on to observe that Article 9.2 must not be read in isolation from\nother provisions of the DSU and without taking into account the overall object and purpose of that\nAgreement, namely that expressed in Article 3.3 of that Agreement, the prompt settlement of\ndisputes.5824 On the basis of the foregoing, the Appellate Body concluded that the right contained in\nArticle 9.2 is not unqualified. In particular, it cannot justify a request for a separate panel report at\nany time during the panel proceedings.5825\n10.722 We note also that the United States did express a reason for its request for separate Panel\nReports – that is, to protect its right to seek a solution to one or more of the individual complaints\nwithout adoption of a report (or without an appeal) and, thus, claimed that it might otherwise suffer\nprejudice.\n10.723 As for the timing of the United States' request, in the Panel's view, the United States' request\nfor separate Panel Reports was not necessarily made in an untimely fashion. The Panel finds that the\nUnited States' request did not come too late in order to adopt the approach that we have chosen in the\nissuance of this report. We use the word \"necessarily\" because we consider that despite the fact that\nthe request was made when the Panel's process was quite advanced – that is, three days before the\ndraft Descriptive Part was due to be issued5826, this did not necessarily prevent the Panel from settling\nthe dispute in a prompt fashion. Indeed, for the reasons mentioned in the Panel's letter dated\n3 February 2003\n5827 and with a view to expediting the process, while respecting all the parties' rights,\nthe Panel decided to issue a single draft Descriptive Part. The question remains, however, as to\nwhether separate Panel Reports should be issued, of which the common Descriptive Part will form a\npart, to address the concerns expressed by the United States in requesting the issuance of separate\nPanel Reports.\n10.724 In this regard, the Panel notes that the Appellate Body in US – Offset Act interpreted the\nmeaning of the first sentence in Article 9.2, which pr ovides that it is for the panel to \"organize its\n\n5821 See para. 6.1.\n5822 Appellate Body Report, US – Offset Act (Byrd Amendment), para. 310.\n5823 Appellate Body Report, US – Offset Act (Byrd Amendment), para. 310.\n5824 Appellate Body Report, US – Offset Act (Byrd Amendment), para. 311.\n5825 Appellate Body Report, US – Offset Act (Byrd Amendment), para. 311.\n5826 The draft Descriptive Part was, however, not issued on 31 January 2003 but rather on\n6 February 2003; the United States' request for separate reports was made on 28 January 2003.\n5827 See para. 2.18.\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nexamination and present its findings in such a manner that the rights which the parties to the dispute\nwould have enjoyed had separate panels examined the complaints are in no way impaired.\" 5828 In so\ndoing, the Appellate Body, referred to its comments in EC – Hormones about panels' discretion in\ndealing with procedural issues, which it said were pertinent in the context of Article 9.2 of the DSU:\n\"[T]he DSU and in particular its Appendix 3, leave panels a margin of discretion to\ndeal, always in accordance with due process, with specific situations that may arise in\na particular case and that are not explicitly regulated. Within this context, an\nappellant requesting the Appellate Body to reverse a panel's ruling on matters of\nprocedure must demonstrate the prejudice generated by such legal ruling.\" 5829\n(emphasis added)\n10.725 In exercising our \"margin of discretion\" under Article 9.2 of the DSU, and taking into account\nthe particularities of this dispute, the Panel decides to issue its Reports in the form of one document\nconstituting eight Panel Reports. For WTO purposes, this document is deemed to be eight separate\nreports, each of the reports relating to each one of the eight complainants in this dispute. The\ndocument comprises a common cover page and a common Descriptive Part. This reflects the fact that\nthe eight steel safeguard disputes were reviewed through a single panel process. This single\ndocument also contains a common set of Findings in relation to each of the claims that the Panel has\ndecided to address. In our exercise of judicial economy, we have mainly addressed the complainants'\ncommon claims and on that basis, we were able to issue a common set of Findings which, we\nbelieved, resolved the dispute. Finally, this document also contains Conclusions and\nRecommendations that are particularised for each of the complainants, with a separate number\n(symbol) for each individual complainant.\n10.726 In coming to this solution, which is specific to the present dispute, the Panel is aware that it\nmust, in exercising its discretion under Article 9.2 of the DSU, bear in mind that \"the rights which\n[all] the parties would have enjoyed had separate panels examined the complaints are in no way\nimpaired\". In fact, the approach seeks to protect the rights of both sides to the dispute. In particular,\nwe consider that the approach protects the rights of the complainants who, in the present dispute, with\nthe apparent agreement of the United States, referred to and relied upon each other's arguments and\ndemonstrations, cross-referenced each other's written submissions\n5830 and written answers, and\nexplicitly stated as much. From the initiation of the panel process, parties have recognized5831 that the\ncomplainants would act together on some common claims and that the United States would respond\nonce to such common claims while responding as well to claims specific to some of the complainants.\nThe complainants coordinated their presentations to the Panel, divided among themselves the\nargumentation on common claims often explicitly stating that they were speaking on behalf of all\ncomplainants. The complainants submitted common comments on the Descriptive Part, common\ncomments on the Interim Findings as well as a common response to the United States' comments on\nthe Interim Findings. At all these stages, the United States often provided one response addressing\ncollectively the arguments made by the complainants. We are aware that some complainants may not\n\n5828 Appellate Body Report, US – Offset Act (Byrd Amendment), para. 315.\n5829 Appellate Body Report, EC – Hormones, footnote 138 to para. 152.\n5830 See for example, European Communities' first written submission, paras. 16-17; Switzerland's first\nwritten submission, para. 10; Norway's first written submission, para. 8; Brazil's first written submission,\npara. 3; New Zealand's first written submission, para. 1.5; China's first written submission, para. 8; Japan's first\nwritten submission, para. 5; Korea's first written submission, para. 7. Throughout their written and oral\nsubmissions the complainants refered to each other's alle gations and arguments. See also the oral statements of\nthe complainants (before the Panel) stating that each of the complainant was speaking on a specific matter on\nbehalf of the other complainants.\n5831 See para. 5 of the Panel's working procedures quoted in para. 6.1 of the Descriptive Part\nWT/DS248/R, WT/DS249/R,\nWT/DS251/R, WT/DS252/R,\nWT/DS253/R, WT/DS254/R,\nWT/DS258/R, WT/DS259/R\n\nhave developed much argumentation in relation to one or more of the measures at issue. 5832 Yet, all\ncomplainants challenged the WTO-compatibility of all measures and decided to argue their case\ntogether; this was encouraged by the Panel and seemed to have been accepted by the United States.\n10.727 Therefore, in organizing its examination of the various claims at issue, at the outset, the Panel\nunderstood that since all complainants made (some) similar violation claims against the USITC's\nReport for all measures at issue and since such claims were to be examined through a single panel\nprocess, complainants would rely upon each other's arguments and demonstrations when making their\ncase. On the basis of our findings on common claims, we were able to conclude that the United\nStates' safeguard measures lack legal basis.\n10.728 We are aware that panels are not entitled to make the case for the complainants.\n5833 WT O\njurisprudence recognizes that panels may, after an assessment of the evidence and argumentation\nmade by complainants, reach a conclusion as to whether, overall, the complainants made their\nprima facie case.5834 We believe that in the present case, each of the complainant has made a prima\nfacie case that the safeguard measures at issue were inconsistent with the WTO provisions listed in\nour Recommendations, through its own and together with each other's demonstration. In addition, we\nconsider that this approach also protects, the right of the United States, by allowing it to respond to all\narguments and allegations made with regard to each measure in a more coherent and comprehensive\nmanner and to seek a solution with one or more of the individual complaints without adoption of that\ncomplainant's report or without an appeal, should this right at all depend on the existence of separate\nreports. Accordingly, we are of the view that the approach we adopted respects the principles of\njudicial economy and the rights of all parties.\n10.729 Finally, in considering the United States' request for separate panel reports, and throughout\nthis Panel process, the Panel has been aware of its duty to make all efforts to ensure, as far as possible,\na prompt and effective resolution of the dispute, while respecting the rights of all parties. We believe\nthis is essential to the functioning of the WTO.\n5835\n\n5832 We note in this regard that, in fact, some of the complainants may not have much trade interest in\nrelation to some of the measures at issue, which would have a direct impact on these complainants' rights\npursuant to Article 22.4 of the DSU.\n5833 Appellate Body Report, Japan – Agricultural Products II, paras. 126-130.\n5834 Appellate Body Report, Korea – Dairy, para. 145. The Appellate Body confirmed this view in\nThailand – H-Beams, para. 134. See also the Panel Report, Argentina – Poultry Anti-Dumping Duties ,\npara. 7.50.\n5835 The Panel notes that Members are now negotiating amendments to the DSU, Ministerial\nDeclaration, WT/MIN(01)/DEC/1 adopted on 14 November 2001, para. 30. Members may want to address the\nissue of the legal consequences of the establishment of a single panel during these negotiations."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.672517"}}},{"rowIdx":3495,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"248"},"original_filename":{"kind":"string","value":"DS248_SEQ15_Report_Of_Panel_14.pdf"},"new_filename":{"kind":"string","value":"DS248_SEQ15_Report_Of_Panel_14.pdf"},"doc_sequence":{"kind":"number","value":15,"string":"15"},"doc_type":{"kind":"string","value":"Report_Of_Panel"},"doc_type_raw":{"kind":"string","value":"WT/DS248/R Page A-1 XI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY THE EUROPEAN COMMUNITIES (WT/DS248) 11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard measures imposed by the United States on the imports of certain steel products as of 20 March 2002 are inconsistent with the Agreement on Safeguards and GATT 1994. 11.2 Specifically, the Panel upholds the following claims of the European Communities, that the application of a safeguard measure by the United States on imports of: CCFRS5836: – is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on Safeguards, as the United States failed to provide a reasoned and adequate explanation demonstrating that \"unforeseen developments\" had resulted in increased imports causing serious injury to the relevant domestic producers; – is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States"},"doc_class":{"kind":"string","value":"PANEL_REPORT"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":14,"string":"14"},"case_title":{"kind":"string","value":""},"date":{"kind":"string","value":"20 March 2002"},"header_codes":{"kind":"string","value":"WT/DS248/R"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['EU']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by the European Communities.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":32,"string":"32"},"clean_text":{"kind":"string","value":"XI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY THE\nEUROPEAN COMMUNITIES (WT/DS248)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following claims of the European Communities, that the\napplication of a safeguard measure by the United States on imports of:\nCCFRS5836:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n\n5836 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nHot-rolled bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation that\nunforeseen developments resulted in increased imports causing serious injury to the relevant\ndomestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\n\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation that\nunforeseen developments resulted in increased imports causing serious injury to the relevant\ndomestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\nStainless steel rod:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to the European\nCommunities under the Agreement on Safeguards and GATT 1994.\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY JAPAN\n(WT/DS249)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following claims of Japan, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5837:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"parallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nHot-rolled bar:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n\n5837 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\nStainless steel bar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel rod:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to Japan under the\nAgreement on Safeguards and GATT 1994.\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY KOREA 5838\n(WT/DS251)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following clai ms of Korea, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5839:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\n5838 In its request for the establishment of a Panel, Korea did raise a claim for Unforeseen\nDevelopments. However, in its first and second written submissions, Korea did not develop this claim or request\nany findings on the issue.\n5839 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\nHot-rolled bar:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel rod:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to Korea under the\nAgreement on Safeguards and GATT 1994.\n\n11.4 The Panel therefore recommend that the Dispute Settlement Body request the United States to\nbring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY CHINA\n(WT/DS252)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following claims of China, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5840:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n\n5840 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nHot-rolled bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\n\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\nStainless steel rod:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to China under the\nAgreement on Safeguards and GATT 1994.\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY\nSWITZERLAND (WT/DS253)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following claims of Switzerland, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5841:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n\n5841 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nHot-rolled bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation that\nunforeseen developments resulted in increased imports causing serious injury to the relevant\ndomestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\n\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation that\nunforeseen developments resulted in increased imports causing serious injury to the relevant\ndomestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\nStainless steel rod:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to Switzerland\nunder the Agreement on Safeguards and GATT 1994.\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY NORWAY\n(WT/DS254)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following clai ms of Norway, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5842:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n\n5842 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nHot-rolled bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\n\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"parallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\nStainless steel rod:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to Norway under\nthe Agreement on Safeguards and GATT 1994.\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY NEW\nZEALAND (WT/DS258)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the impor ts of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following claims of New Zealand, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5843:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n\n5843 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nHot-rolled bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\n\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of parallelism between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"parallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\nStainless steel rod:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Article XIX:1 of GATT 1994 and Article 3.1 of the Agreement on\nSafeguards, as the United States failed to provide a reasoned and adequate explanation\ndemonstrating that \"unforeseen developments\" had resulted in increased imports causing\nserious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to New Zealand\nunder the Agreement on Safeguards and GATT 1994.\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994.\n\nXI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY BRAZIL 5844\n(WT/DS259)\n11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard\nmeasures imposed by the United States on the imports of certain steel products as of 20 March 2002\nare inconsistent with the Agreement on Safeguards and GATT 1994.\n11.2 Specifically, the Panel upholds the following claims of Brazil, that the application of a\nsafeguard measure by the United States on imports of:\nCCFRS5845:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nTin mill:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n\n5844 In its request for the establishment of a Panel, Brazil did raise a claim for unforeseen developments.\nHowever, in its first and second written submissions, Brazil did not develop this claim or request any findings\non the issue.\n5845 The USITC's determination on CCFRS served as a basis for safeguard measure(s) imposed on\nCCFRS including slabs. Therefore, our conclusions cover any safeguard measure imposed on CCFRS which\nincludes the tariff quota on slabs.\n\nHot-rolled bar:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nCold-finished bar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nRebar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nWelded pipe:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nFFTJ:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel bar:\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation that a \"causal link\" existed\nbetween any increased imports and serious injury to the relevant domestic producers;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"parallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel rod:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\";\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\nStainless steel wire:\n– is inconsistent with Articles 2.1 and 3.1 of the Agreement on Safeguards, as the United States\nfailed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination with respect to \"increased imports\", since the explanation given consisted of\nalternative explanations partly departing from each other, which given the different product\nbases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards, as the United\nStates failed to provide a reasoned and adequate explanation of how the facts supported its\ndetermination of a \"causal link\" between any increased imports and serious injury since the\nexplanation given consisted of alternative explanations partly departing from each other,\nwhich given the different product bases, cannot be reconciled as a matter of substance;\n– is inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, as the United States\nfailed to comply with the requirement of \"p arallelism\" between the products for which the\nconditions for safeguard measures had been established, and the products which were\nsubjected to the safeguard measure.\n11.3 Under Article 3.8 of the DSU, in cases where there is infringement of the obligations assumed\nunder a covered agreement, the action is considered prima facie to constitute a case of nullification or\nimpairment of benefits under that agreement. Accordingly, the Panel concludes that to the extent that\nthe United States has acted inconsistently with the provisions of the Agreement on Safeguards and\nGATT 1994, as described above, it has nullified or impaired the benefits accruing to Brazil under the\nAgreement on Safeguards and GATT 1994.\n\n11.4 The Panel therefore recommends that the Dispute Settlement Body request the United States\nto bring all the above safeguard measures into conformity with its obligations under the Agreement on\nSafeguards and GATT 1994."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.686996"}}},{"rowIdx":3496,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"249"},"original_filename":{"kind":"string","value":"DS249_SEQ01_Request_For_Consultations_01.pdf"},"new_filename":{"kind":"string","value":"DS249_SEQ01_Request_For_Consultations_01.pdf"},"doc_sequence":{"kind":"number","value":1,"string":"1"},"doc_type":{"kind":"string","value":"Request_For_Consultations"},"doc_type_raw":{"kind":"string","value":"Request for Consultations by Japan"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS"},"date":{"kind":"string","value":"26 March 2002"},"header_codes":{"kind":"string","value":"WT/DS249/1; G/L/529; G/SG/D21/1"},"agreement_indicators":{"kind":"string","value":"General Council; Safeguards (SG)"},"complainant":{"kind":"string","value":"['Japan']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Japan.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":3,"string":"3"},"clean_text":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES\nON IMPORTS OF CERTAIN STEEL PRODUCTS\nRequest for Consultations by Japan\nThe following communication, dated 20 March 2002, from the Permanent Mission of Japan to\nthe Permanent Mission of the United States and to the Chairman of the Dispute Settlement Body, is\ncirculated in accordance with Article 4.4 of the DSU.\nUpon instruction from my authorities, I hereby wish to convey the request of the Government\nof Japan (GOJ) for consultations with the Government of the United States (USG) pursuant to\nArticle 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU),\nArticle XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994), and Article 14 of\nthe Agreement on Safeguards, with regard to the safeguard measures imposed by the USG on imports\nof certain steel products.\nUnder the \"Proclamation 7529 of March 5, 2002 – To Facilitate Positive Adjustment to\nCompetition from Imports of Certain Steel Products\" and the \"Memorandum of March 5, 2002 -\nAction Under Section 203 of the Trade Act of 1974 Concerning Certain Steel Products\" by the\nPresident of the United States, published in the Federal Resister Vol. 67. No.45 of 7 March 2002, the\nUSG imposed safeguard measures in the form of an increase in duties on imports of certain flat steel,\nhot-rolled bar, cold-finished bar, rebar, certain welded tubular products, carbon and alloy fittings,\nstainless steel bar, stainless steel rod, tin mill products and stainless steel wire and in the form of a\ntariff rate quota on imports of slabs effective as of 20 March 2002. Upon taking this decision to apply\nthe safeguard measures, the USG made notifications under Article 12.1(c ) and Article 9, footnote 2,\nof the Agreement on Safeguards on 12 March 2002.\nThe GOJ requested the USG to hold prior consultations pursuant to Article 12.3 of the\nAgreement on Safeguards as a Member having a substantial interest as an exporter of the products\nconcerned on 6 March 2002. The consultation was held in Washington, D.C. on 14 March 2002, and\nboth sides exchanged views on the measures. The GOJ, however, is of the view that the USG did not\nprovide adequate explanation during the consultation as to the consistency of the measures with the\nrelevant provisions of the Agreement on Safeguards and the GATT 1994 and therefore requests to\nhold the consultations under the DSU upon introduction of the safeguard measures on 20 March 2002.\nThe GOJ considers that these US safeguard measures are in violation of US obligations under\nthe provisions of the GATT 1994 and of the Agreement on Safeguards, in particular, but not\nnecessarily exclusively, of:\n– Articles 2.1 and 2.2 of the Agreement on Safeguards, because, inter alia, they are based on\nthe deficient determinations on the like or directly competitive products, absence of \"imports\n\nin such increased quantities\" and \"under such conditions,\" lack of serious injury or threat\nthereof, lack of causality, and discriminations based on the source of the products.\n– Articles 3.1 and 3.2 of the Agreement on Safeguards, because, inter alia, the USG did not\nallow appropriate means in which the interested parties could present evidence and their\nviews, the report published by the competent authorities did not set forth adequately the\nfinding and reasoned conclusions on all pertinent issues of facts and law, including the\njustification for the actual measures imposed, as well as abusive recourse to confidentiality in\nrelation to disclosure of information.\n– Articles 4.1 and 4.2 of the Agreement on Safeguards, because, inter alia, they are, based on\nlack of serious injury or threat thereof, and lack of causality including the non-attribution\nrequirement.\n– Articles 5.1 and 7.4 of the Agreement on Safeguards, since, inter alia, they grant relief\nbeyond \"the extent necessary to prevent or remedy serious injury and to facilitate adjustment\"\nin terms of the initial degree of the measures as well as at each stage of the progressive\nliberalization.\n– Article 7.1 of the Agreement on Safeguards, since, inter alia, they grant relief beyond \"the\nperiod of time necessary to prevent or remedy serious injury and to facilitate adjustment\".\n– Article 8.1 of the Agreement on Safeguards, since, inter alia, the USG failed to endeavour, in\naccordance with the provisions of Article 12.3, to maintain a substantially equivalent level of\nconcessions and other obligations between it and the affected Members.\n– Articles 12.1, 12.2 and 12.3 of the Agreement on Safeguards, since, inter alia, the USG failed\nto provide immediate notification with all pertinent information and deprived adequate\nopportunity for prior consultation with WTO Members having a substantial interest as\nexporters of the product concerned.\n– Article I:1 of the GATT 1994, since, inter alia , they discriminate between products\noriginating in Japan and products originating in other WTO Members.\n– Article II of the GATT 1994, since, inter alia, they consist of withdrawal or modification of\nUS concessions without justification under Article XIX of the GATT 1994 nor the Agreement\non Safeguards nor any other provisions of the WTO Agreement.\n– Article X:3 of the GATT 1994, since they are not based on uniform, impartial and reasonable\nadministration of the relevant US laws and regulations.\n– Article XIII of the GATT 1994, as regards the allocation of the tariff rate quota on imports of\nslabs.\n– Articles XIX:1 of the GATT 1994, because, inter alia, the USG failed to show, prior to the\napplication of the measures, that the increases in imports and the conditions of importation of\nthe products covered by the above-mentioned measures were the result of \"unforeseen\ndevelopment\" and of the effect of the US obligations under the GATT 1994.\n– Articles XIX:2 of the GATT 1994, because, inter alia , the USG failed to give notice in\nwriting to WTO Members as far in advance as may be practical and to afford WTO Members\n\nhaving a substantial interest as exporters of the product concerned an opportunity to consult\nwith it in respect of the proposed action.\nThe GOJ reserves its right to raise further factual claims and legal issues during the course of\nconsultations and in any future request for panel proceedings.\nThe GOJ also reserves all its rights regarding the pursuit of the rights and remedies provided\nfor under the Agreement on Safeguards and the DSU, particularly Article 8 of the Agreement on\nSafeguards.\nWe look forward to receiving your reply to this request and to fixing a mutually acceptable\ndate for consultations."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.751301"}}},{"rowIdx":3497,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"249"},"original_filename":{"kind":"string","value":"DS249_SEQ02_Request_To_Join_Consultations_00.pdf"},"new_filename":{"kind":"string","value":"DS249_SEQ02_Request_To_Join_Consultations_00.pdf"},"doc_sequence":{"kind":"number","value":2,"string":"2"},"doc_type":{"kind":"string","value":"Request_To_Join_Consultations"},"doc_type_raw":{"kind":"string","value":"Request to Join Consultations Communication from Norway"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS"},"date":{"kind":"string","value":"2 April 2002"},"header_codes":{"kind":"string","value":"WT/DS249/2"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Japan']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Japan.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES\nON IMPORTS OF CERTAIN STEEL PRODUCTS\nRequest to Join Consultations\nCommunication from Norway\nThe following communication, dated 27 March 2002, from the Permanent Mission of Norway\nto the Permanent Mission of the United States, the Permanent Mission of Japan and to the Chairman\nof the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.\nPursuant to paragraph 11 of Article 4 of the Understanding on Rules and Procedures\nGoverning the Settlement of Disputes (DSU), the Government of Norway hereby notifies the\nGovernment of the United States that, in the light of the substantial trade interest of Norway, it desires\nto be joined in the consultations requested by Japan in a communication circulated to WTO Members\non 26 March 2002 (, , ) titled \"\"."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.751652"}}},{"rowIdx":3498,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"249"},"original_filename":{"kind":"string","value":"DS249_SEQ03_Request_To_Join_Consultations_01.pdf"},"new_filename":{"kind":"string","value":"DS249_SEQ03_Request_To_Join_Consultations_01.pdf"},"doc_sequence":{"kind":"number","value":3,"string":"3"},"doc_type":{"kind":"string","value":"Request_To_Join_Consultations"},"doc_type_raw":{"kind":"string","value":"Request to Join Consultations Communication from New Zealand"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS"},"date":{"kind":"string","value":"9 April 2002"},"header_codes":{"kind":"string","value":"WT/DS249/3; WT/DS249/1; G/L/529; G/SG/D21/1"},"agreement_indicators":{"kind":"string","value":"General Council; Safeguards (SG)"},"complainant":{"kind":"string","value":"['Japan']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Japan.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES\nON IMPORTS OF CERTAIN STEEL PRODUCTS\nRequest to Join Consultations\nCommunication from New Zealand\nThe following communication, dated 5 April 2002, from the Permanent Mission of\nNew Zealand to the Permanent Mission of the United States, the Permanent Mission of Japan and to\nthe Chairman of the Dispute Settlement Body, is circulated in accordance with Article 4.11 of the\nDSU.\nWith reference to document , , of 26 March 2002, and\npursuant to Article 4.11 of the Dispute Settlement Understanding (DSU), in view of New Zealand's\nsubstantial trade interest in the subject-matter of the consultations requested by Japan relating to\n , I am writing to\nadvise you of New Zealand's desire to be joined in these consultations.\nI look forward to your advice regarding the timing and venue for the consultations."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.751969"}}},{"rowIdx":3499,"cells":{"folder_number":{"kind":"string","value":"249"},"case_number":{"kind":"string","value":"249"},"original_filename":{"kind":"string","value":"DS249_SEQ04_Request_To_Join_Consultations_02.pdf"},"new_filename":{"kind":"string","value":"DS249_SEQ04_Request_To_Join_Consultations_02.pdf"},"doc_sequence":{"kind":"number","value":4,"string":"4"},"doc_type":{"kind":"string","value":"Request_To_Join_Consultations"},"doc_type_raw":{"kind":"string","value":"Request to Join Consultations Communication from Mexico"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":2,"string":"2"},"case_title":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS"},"date":{"kind":"string","value":"10 April 2002"},"header_codes":{"kind":"string","value":"WT/DS249/4; WT/DS249/1"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Japan']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela']"},"dispute_stage":{"kind":"string","value":"Appellate Body"},"agreements_cited":{"kind":"string","value":"Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Japan.\nOn 7 March 2002, the European Communities\n requested consultations with the United States regarding the definitive\n safeguard measures imposed by the US in the form of an increase in\n duties on imports of certain flat steel, hot-rolled bar, cold-finished\n bar, rebar, certain welded tubular products, carbon and alloy fittings,\n stainless steel bar, stainless steel rod, tin mill products and\n stainless steel wire and in the form of a tariff rate quota on imports\n of slabs effective as of 20 March 2002. The European Communities\n considered that the aforementioned US measures were in breach of US\n obligations under the Agreement on Safeguards and GATT 1994, and in\n particular Articles 2.1, 2.2 ,3.1, 3.2, 4.1, 4.2, 5.1, 5.2, 7.1 and 9.1\n of the Agreement on Safeguards and Articles I:1, XIII and XIX:1 of GATT\n 1994. The European Communities also reserved all its rights regarding\n the pursuit of the remedies provided for under the Agreement on\n Safeguards and the DSU.\nOn 14 March 2002, Japan and Korea requested to\n join the consultations. On 15 March 2002, Switzerland and Canada also\n requested to join the consultations. On 20 March 2002, Venezuela also\n requested to join the consultations. On 21 March 2002, Norway and China\n requested to join the consultations as well. On 22 March 2002, Mexico\n also requested to join the consultations. On 25 March 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Canada, China, Japan, Korea, Mexico, New\n Zealand, Norway, Switzerland and Venezuela to join the consultations.\nOn 20 March 2002, Japan (WT/DS249) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 7.1, 7.4. 8.1, 12.1, 12.2, 12.3 of the Agreement on Safeguards\n and Articles I:1, II, X:3, XIII and XIX:2 of GATT 1994. On 27 March,\n Norway requested to join the consultations. On 5 April, Mexico requested\n to join the consultations. On 9 April 2002, New Zealand requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of Mexico, New Zealand and Norway to join the consultations.\nOn 20 March 2002, Korea (WT/DS251) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on the imports of certain steel\n products and the related laws of the US, including Sections 201 and 202\n of the Trade Act of 1974 and Section 311 of the NAFTA Implementation\n Act. Korea claimed violations of Articles 2.1, 2.2, 3, 4, 5, 7.1, 7.4,\n 8.1, 9.1 and 12 of the Agreement on Safeguards, Articles X:3 and XIX:1\n of GATT 1994 and Article XVI:4 of the Marrakesh Agreement. On 27 March\n 2002, Japan and Norway requested to join the consultations. On 5 April,\n Mexico and New Zealand requested to join the consultations. The US\n informed the DSB that it had accepted the requests of Japan, Mexico, New\n Zealand and Norway to join the consultations.\nOn 26 March 2002, China (WT/DS252) requested\n consultations with the United States also with regard to the definitive\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 2.1, 2.2, 3.1, 3.2, 4.1,\n 4.2, 5.1, 5.2, 7.1, 8.1, 9.1 and 12 of the Agreement on Safeguards and\n Articles I:1, II, X:3, XIX:1 and XIX:2 of GATT 1994. On 4 April 2002,\n Japan requested to join the consultations. On 5 April 2002, New Zealand\n also requested to join the consultations. The US informed the DSB that\n it had accepted the requests of Japan and New Zealand to join the\n consultations.\nOn 3 April 2002, Switzerland (WT/DS253) also\n requested consultations with the United States with regard to the\n definitive safeguard measures imposed by the US on imports of certain\n steel products and claimed violations of Articles 2.1, 2.2, 3, 4.1, 4.2,\n 5.1, 7.1, 8.1 and 12 of the Agreement on Safeguards and Articles I:1 and\n XIX:1 of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 4 April 2002, Norway (WT/DS254) requested\n consultations with he United States with regard to the same\n safeguard measures imposed by the US on imports of certain steel\n products and claimed violations of Articles 3, 4.1, 4.2, 5.1, 7, 8.1,\n 9.1 and 12 of the Agreement on Safeguards and Articles I:1, II, X:3 and\n XIX of GATT 1994. On 11 April 2002, New Zealand requested to join the\n consultations. On 15 April 2002, Japan requested to join the\n consultations. The US informed the DSB that it had accepted the requests\n of Japan and New Zealand to join consultations.\nOn 14 May 2002, New Zealand (WT/DS258)\n requested consultations with the United States with regard to the same\n safeguard measures on steel imposed by the US and claimed violations of\n Articles 2.1, 2.2, 3.1, 3.2, 4.1, 4.2, 5.1, 7, 8.1 and 12 of the\n Agreement on Safeguards and Articles I:1, X and XIX:1 of GATT 1994. On\n 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nOn 21 May 2002, Brazil (WT/DS259) requested\n consultations with the United States with regard to the same definitive\n safeguard measures imposed by the US on imports of certain steel\n products. On 24 May 2002, the European Communities requested to join the\n consultations. On 27 May 2002, Japan requested to join the\n consultations. On 30 May 2002, Korea requested to join the\n consultations. On 31 May 2002, Norway, China and Mexico requested to\n join the consultations. The US informed the DSB that it had accepted the\n requests of China, the EC, Japan, Korea, Mexico and Norway to join\n consultations.\nFurther to individual requests for the\n establishment of a panel submitted by the eight complainants at the\n following DSB meetings:\n\nPanel and Appellate Body proceedings\nThe DSB established a single Panel, pursuant\n to an agreement between the parties and in accordance with Article 9.1\n of the DSU.\nThe Members which had reserved their\n third-party rights in the Panels established at the request of these\n parties were also considered as third parties in the single Panel.\n Canada, Chinese Taipei, Cuba, Malaysia, Mexico, Thailand, Turkey and\n Venezuela have reserved their rights to participate in the Panel\n proceedings as a third party.\nOn 15 July 2002, the DSB was notified of a\n procedural agreement between the United States and the European\n Communities, Japan, Korea, China, Switzerland, Norway and New Zealand.\n On 18 July 2002, the DSB was notified of a procedural agreement between\n the United States and Brazil.\nOn 15 July 2002, the European Communities,\n Japan, Korea, China, Switzerland, Norway and New Zealand requested the\n Director-General to determine the composition of the Panel. On 25 July\n 2002, the Panel was composed.\nOn 23 October 2002, Malaysia decided to\n withdraw as a third party from the panel proceedings.\nOn 20 February 2003, the Chairman of the Panel\n informed the DSB that the Panel would not be able to complete its work\n in six months due to the volume, complexities and sensitivity of the\n legal and factual questions that had been raised. The Panel hoped to\n complete its work by the end of April 2003.\nThe Panel circulated its Reports1\n to Members on\n 11 July 2003. The Panel concluded that all the United States’ safeguard\n measures at issue were inconsistent with at least one of the following\n WTO pre-requisites for the imposition of a safeguard measure: lack of\n demonstration of (i) unforeseen developments; (ii) increased imports;\n (iii) causation; and (iv) parallelism. The Panel thus requested the\n United States to bring the relevant\n safeguard measures into conformity with its obligations under the\n Agreement on Safeguards and GATT 1994.\nOn 11 August 2003, the US notified its decision to\n appeal to the Appellate Body certain issues of law covered in the Panel\n Report and certain legal interpretations developed by the Panel.\nOn 8 October 2003, the Chairman of the Appellate Body\n informed the DSB that the Appellate Body would not be able to circulate\n its Report within 60 days due to the time required for completion and\n translation of the Report and that it estimated that the Appellate Body\n Report in this appeal would be circulated to WTO Members no later than 10\n November 2003.\nOn 10 November 2003, the Appellate Body Report was\n circulated to Members. The Appellate Body upheld the Panel’s\n ultimate conclusions that each of the ten safeguard measures at issue in\n this dispute was inconsistent with the United States’ obligations under\n Article XIX:1(a) of the GATT 1994 and the Agreement on Safeguards. The\n Appellate Body reversed the Panel’s findings that the US failed to\n provide a reasoned and adequate explanation on “increased\n imports” and on the existence of a “causal link” between\n increased imports and serious injury for two of the ten safeguard\n measures. Ultimately, however, even these measures were found to be\n inconsistent with the WTO Agreement on other grounds.\nAt its meeting on 10 December 2003, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting of 10 December 2003, the US\n informed Members that, on 4 December 2003, the President of the United\n States had issued a proclamation that terminated all of the safeguard\n measures subject to this dispute, pursuant to section 204 of the US\n Trade Act of 1974."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – DEFINITIVE SAFEGUARD MEASURES\nON IMPORTS OF CERTAIN STEEL PRODUCTS\nRequest to Join Consultations\nCommunication from Mexico\nThe following communication, dated 5 April 2002, from the Permanent Mission of Mexico to\nthe Permanent Mission of the United States, the Permanent Mission of Japan and to the Chairman of\nthe Dispute Settlement Body, is circulated in accordance with Article 4.11 of the DSU.\nPursuant to Article 4.11 of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes (DSU), I have the honour to inform you that Mexico wishes to be joined in the\nconsultations requested by Japan in document ( ), circulated on 26 March 2002. In the light of various\narguments submitted by Japan, Mexico considers that it has a substantial trade interest in this matter."},"processing_date":{"kind":"string","value":"2026-03-15T15:44:22.752269"}}}],"truncated":false,"partial":false},"paginationData":{"pageIndex":34,"numItemsPerPage":100,"numTotalItems":9414,"offset":3400,"length":100}},"jwt":"eyJhbGciOiJFZERTQSJ9.eyJyZWFkIjp0cnVlLCJwZXJtaXNzaW9ucyI6eyJyZXBvLmNvbnRlbnQucmVhZCI6dHJ1ZX0sImlhdCI6MTc3OTU5MzI0Nywic3ViIjoiL2RhdGFzZXRzL2RlYW4yMjAyOS9XVE9fRG9jcyIsImV4cCI6MTc3OTU5Njg0NywiaXNzIjoiaHR0cHM6Ly9odWdnaW5nZmFjZS5jbyJ9.tmu6PkoX1SBqNWxu7onnECmGgbdGvHjramPDVFbxyoC95fWTo0tyA5DoVOskEhncdDds6j96rhQZ6EUYMCQcBg","displayUrls":true,"splitSizeSummaries":[{"config":"default","split":"train","numRows":9414,"numBytesParquet":235278256}]},"discussionsStats":{"closed":0,"open":1,"total":1},"fullWidth":true,"hasGatedAccess":true,"hasFullAccess":true,"isEmbedded":false,"savedQueries":{"community":[],"user":[]}}">
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245 | 245 | DS245_SEQ14_Notification_Of_Mutually_Agreed_Solution.pdf | DS245_SEQ14_Notification_Of_Mutually_Agreed_Solution.pdf | 14 | Notification_Of_Mutually_Agreed_Solution | Notification of Mutually Agreed Solution | NUMBERED | null | null | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 2 September 2005 | WT/DS245/21; G/L/520/Add.1; G/SPS/GEN/299/Add.1; G/AG/GEN/50/Add.1 | Agriculture (AG); General Council; Sanitary and Phytosanitary Measures (SPS) | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 2 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Notification of Mutually Agreed Solution
The following communication, dated 30 August 2005, from the delegation of Japan and the
delegation of the United States to the Chairman of the Dispute Settlement Body, is circulated pursuant
to Article 3.6 of the DSU.
On ... | 2026-03-15T15:43:50.839842 |
245 | 245 | DS245_SEQ15_Request_For_Consultations.pdf | DS245_SEQ15_Request_For_Consultations.pdf | 15 | Request_For_Consultations | Request for Consultations by the United States | NUMBERED | null | null | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 6 March 2002 | WT/DS245/1; G/L/520; G/SPS/GEN/299; G/AG/GEN/50 | Agriculture (AG); General Council; Sanitary and Phytosanitary Measures (SPS) | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Request for Consultations by the United States
The following communication, dated 1 March 2002, from the Permanent Mission of the
United States to the Permanent Mission of Japan and to the Chairman of the Dispute Settlement Body,
is circulated in accordance with Arti... | 2026-03-15T15:43:50.840385 |
245 | 245 | DS245_SEQ16_Report_Of_Panel_00.pdf | DS245_SEQ16_Report_Of_Panel_00.pdf | 16 | Report_Of_Panel | Panel Report pursuant to Article 21.5 of the DSU Action by the Dispute Settlement Body | PANEL_REPORT | null | 0 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 26 July 2005 | WT/DS245/20; WT/DS245/RW | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Panel Report pursuant to Article 21.5 of the DSU
Action by the Dispute Settlement Body
At its meeting on 20 July 2005, the Dispute Settlement Body adopted the Panel report on
: Recourse to Article 21.5 of the DSU by the
United States ().
JAPON – MESURES VISANT L... | 2026-03-15T15:43:50.840792 | |
245 | 245 | DS245_SEQ17_Report_Of_Panel_01.pdf | DS245_SEQ17_Report_Of_Panel_01.pdf | 17 | Report_Of_Panel | Report of the Panel | PANEL_REPORT | null | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 15 July 2003 | WT/DS245/R | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 288 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF
APPLES
Report of the Panel
The report of the Panel on is being circulated
to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from
15 July 2003 pursuant to the Procedures for the Circulation and Derestri ction of WTO Documents
(WT... | 2026-03-15T15:43:51.003666 | |
245 | 245 | DS245_SEQ18_Report_Of_Panel_00.pdf | DS245_SEQ18_Report_Of_Panel_00.pdf | 18 | Report_Of_Panel | Recourse to Article 21.5 of the DSU by the United States Report of the Panel | PANEL_REPORT | null | 0 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 23 June 2005 | WT/DS245/RW | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 138 | JAPAN – MEASURES AFFECTING
THE IMPORTATION OF APPLES
Recourse to Article 21.5 of the DSU by the United States
Report of the Panel
I. INTRODUCTION
1.1 On 10 December 2003, the Dispute Settlement Body ("DSB") adopted its recommendations
and rulings in the dispute Japan - Measures Affecting the Importation of Apples (t... | 2026-03-15T15:43:51.090880 | |
245 | 245 | DS245_SEQ19_Appellate_Body_Report_And_Panel_Report.pdf | DS245_SEQ19_Appellate_Body_Report_And_Panel_Report.pdf | 19 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Report Action by the Dispute Settlement Body | AB_REPORT | null | null | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 16 December 2003 | WT/DS245/8; WT/DS245/AB/R; WT/DS245/R | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Appellate Body Report and Panel Report
Action by the Dispute Settlement Body
At its meeting on 10 December 2003, the Dis pute Settlement Body adopted the Appellate
Body report on () and the
Panel report (), as upheld by the Appella te Body report. The Panel repor... | 2026-03-15T15:43:51.091384 | |
245 | 245 | DS245_SEQ20_Report_Of_Appellate_Body_00.pdf | DS245_SEQ20_Report_Of_Appellate_Body_00.pdf | 20 | Report_Of_Appellate_Body | Appellate Body report | AB_REPORT | null | 0 | JAPAN - MEASURES AFFECTING THE IMPORTATION OF APPLES | 2 July 2004 | WT/DS245/10 | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 3 | JAPAN - MEASURES AFFECTING THE IMPORTATION OF APPLES
Confirmed Procedures between Japan and the United States
under Articles 21 and 22 of the DSU
The following communication, dated 30 June 2004, from the delegation of Japan and the
delegation of the United States to the Chairman of th e Dispute Settlement Body, is c... | 2026-03-15T15:43:51.092779 | |
245 | 245 | DS245_SEQ21_Report_Of_Appellate_Body_01.pdf | DS245_SEQ21_Report_Of_Appellate_Body_01.pdf | 21 | Report_Of_Appellate_Body | Report of the Appellate Body | AB_REPORT | null | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES AB-2003-4 | 26 November 2003 | WT/DS245/AB/R | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 100 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
AB-2003-4
Report of the Appellate Body
APPELLATE BODY
Japan – Measures Affecting the
Importation of Apples
Japan, Appellant/Appellee
United States, Appellant/Appellee
Australia, Third Participant
Brazil, Third Participant
European Communities, Third Participant
New ... | 2026-03-15T15:43:51.136894 | |
245 | 245 | DS245_SEQ22_Recourse.pdf | DS245_SEQ22_Recourse.pdf | 22 | Recourse | Recourse to Article 22.2 of the DSU by the United States | RECOURSE | null | null | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 20 July 2004 | WT/DS245/12 | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 3 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Recourse to Article 22.2 of the DSU by the United States
The following communication, dated 19 July 2004, from the delegation of the United States
to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 22.2 of the DSU.
Pursuant to A... | 2026-03-15T15:43:51.138094 | |
245 | 245 | DS245_SEQ23_Recourse_01.pdf | DS245_SEQ23_Recourse_01.pdf | 23 | Recourse | RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE UNITED STATES Working Procedures for the Panel | RECOURSE | null | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES (WT/DS245) | null | WT/DS245/RW | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 40 | ANNEX 1
JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES (WT/DS245)
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE UNITED STATES
Working Procedures for the Panel
1. In its proceedings the Panel shall follow the relevant provisions of the Dispute Settlement
Understanding (DSU). In addition, the following working pro... | 2026-03-15T15:43:51.161460 | |
245 | 245 | DS245_SEQ24_Request_For_Arbitration_00.pdf | DS245_SEQ24_Request_For_Arbitration_00.pdf | 24 | Request_For_Arbitration | Request by Japan for Arbitration under Article 22.6 of the DSU | ARBITRATION | null | 0 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 29 July 2004 | WT/DS245/13 | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Request by Japan for Arbitration under Article 22.6 of the DSU
The following communication, dated 29 July 2004, from the delegation of Japan to the
Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 22.6 of the DSU.
On 30 June 2004, Ja... | 2026-03-15T15:43:51.162085 | |
245 | 245 | DS245_SEQ25_Request_For_Arbitration_01.pdf | DS245_SEQ25_Request_For_Arbitration_01.pdf | 25 | Request_For_Arbitration | Request by Japan for Arbitration under Article 22.6 of the DSU Communication from the Arbitrator | ARBITRATION | null | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 10 August 2004 | WT/DS245/16 | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Request by Japan for Arbitration under Article 22.6 of the DSU
Communication from the Arbitrator
The following communication, dated 4 August 2004, has been received from the Delegation
of Japan and the Delegation of the United States an d addressed to Mr. Michael... | 2026-03-15T15:43:51.162638 | |
245 | 245 | DS245_SEQ26_Request_For_Arbitration_02.pdf | DS245_SEQ26_Request_For_Arbitration_02.pdf | 26 | Request_For_Arbitration | Request by Japan for Arbitration under Article 22.6 of the DSU Communication from the Arbitrator | ARBITRATION | null | 2 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 20 July 2005 | WT/DS245/18; WT/DS245/RW | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Request by Japan for Arbitration under Article 22.6 of the DSU
Communication from the Arbitrator
The following communication, dated 19 July 2005, has been received from the Delegation of
Japan and the Delegation of the United States and addressed to Mr. Michael C... | 2026-03-15T15:43:51.163097 | |
245 | 245 | DS245_SEQ27_Request_For_Arbitration_Corr.pdf | DS245_SEQ27_Request_For_Arbitration_Corr.pdf | 27 | Request_For_Arbitration | Request by Japan for Arbitration under Article 22.6 of the DSU Communication from the Arbitrator Corrigendum Please note that the introductory sentence should read as follows: | ARBITRATION | Corr | null | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES | 22 July 2005 | WT/DS245/18/Corr.1 | ['U.S.'] | ['Japan'] | ['Australia', 'Brazil', 'China', 'Taiwan', 'EU', 'New Zealand'] | Mutually Agreed Solution | Art. XI GATT 1994Art. 2.2, 2.3, 5.1, 5.2, 5.3 Sanitary and Phytosanitary Measures (SPS)Art. 4.2 AgricultureArt. 5.5, 5.6, 6.1, 6.2, 7, Annex B Sanitary and Phytosanitary Measures (SPS) | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the United States.
On 1 March 2002, the United States requested consultations with Japan regarding restrictions allegedly imposed by Japan on imports of apples f... | 1 | JAPAN – MEASURES AFFECTING THE IMPORTATION OF APPLES
Request by Japan for Arbitration under Article 22.6 of the DSU
Communication from the Arbitrator
Corrigendum
Please note that the introductory sentence should read as follows:
The following communication, dated 18 July 2005, has been received from the Delegati... | 2026-03-15T15:43:51.163297 | |
246 | 246 | DS246_SEQ01_Request_For_Consultations.pdf | DS246_SEQ01_Request_For_Consultations.pdf | 1 | Request_For_Consultations | Request for Consultations by India | NUMBERED | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 12 March 2002 | WT/DS246/1; G/L/521 | General Council | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 2 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Request for Consultations by India
The following communication, dated 5 March 2002, from the Permanent Mission of India to
the Permanent Delegation of the European Commission and to the Chairman of the Dispute
Settlement Bo... | 2026-03-15T15:43:55.674965 |
246 | 246 | DS246_SEQ02_Request_To_Join_Consultations_00.pdf | DS246_SEQ02_Request_To_Join_Consultations_00.pdf | 2 | Request_To_Join_Consultations | Request to Join Consultations Communication from Venezuela | NUMBERED | null | 0 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 25 March 2002 | WT/DS246/2 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Request to Join Consultations
Communication from Venezuela
The following communication, dated 20 March 2002, from the Permanent Mission of
Venezuela to the Permanent Delegation of the European Commission, the Permanent Miss... | 2026-03-15T15:43:55.675301 | |
246 | 246 | DS246_SEQ03_Request_To_Join_Consultations_01.pdf | DS246_SEQ03_Request_To_Join_Consultations_01.pdf | 3 | Request_To_Join_Consultations | Request to Join Consultations Communication from Colombia | NUMBERED | null | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 5 April 2002 | WT/DS246/3; WT/DS246/1; G/L/521 | General Council | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Request to Join Consultations
Communication from Colombia
The following communication, dated 21 March 2002, from the Permanent Mission of
Colombia to the Permanent Delegation of the European Commission, the Permanent Missio... | 2026-03-15T15:43:55.675722 |
246 | 246 | DS246_SEQ04_Request_For_Establishment_Of_Panel.pdf | DS246_SEQ04_Request_For_Establishment_Of_Panel.pdf | 4 | Request_For_Establishment_Of_Panel | Request for the Establishment of a Panel by India | NUMBERED | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 9 December 2002 | WT/DS246/4 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 2 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Request for the Establishment of a Panel by India
The following communication, dated 6 December 2002, from the Permanent Mission of India
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2... | 2026-03-15T15:43:55.676457 | |
246 | 246 | DS246_SEQ05_Note_By_Secretariat_00.pdf | DS246_SEQ05_Note_By_Secretariat_00.pdf | 5 | Note_By_Secretariat | Constitution of the Panel Established at the Request of India Note by the Secretariat | NUMBERED | null | 0 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 6 March 2003 | WT/DS246/5; WT/DS246/4; WT/DS246/4 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Constitution of the Panel Established at the Request of India
Note by the Secretariat
1. At its meeting on 27 January 2003, the Dispute Settlement Body (DSB) established a Panel
pursuant to the request of India in document ... | 2026-03-15T15:43:55.677025 | |
246 | 246 | DS246_SEQ06_Communication_00.pdf | DS246_SEQ06_Communication_00.pdf | 6 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 0 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 24 September 2003 | WT/DS246/6 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Communication from the Chairman of the Panel
The following communication, dated 22 September 2003, addressed to the Chairman of the
Dispute Settlement Body (DSB), is circulated in accordance with Article 12.9 of the Dispute... | 2026-03-15T15:43:55.677419 | |
246 | 246 | DS246_SEQ07_Notification_Of_Appeal.pdf | DS246_SEQ07_Notification_Of_Appeal.pdf | 7 | Notification_Of_Appeal | Notification of an Appeal by the European Communities under paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") | NUMBERED | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 8 January 2004 | WT/DS246/7 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 2 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF
TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Notification of an Appeal by the European Communities
under paragraph 4 of Article 16 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes ("DSU")
The following notification, dated 8 January ... | 2026-03-15T15:43:55.678194 | |
246 | 246 | DS246_SEQ08_Communication_01.pdf | DS246_SEQ08_Communication_01.pdf | 8 | Communication | Communication from the Appellate Body | NUMBERED | null | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 5 March 2004 | WT/DS246/8 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF
TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Communication from the Appellate Body
The following communication, dated 5 March 2004, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with
Ar... | 2026-03-15T15:43:55.678671 | |
246 | 246 | DS246_SEQ09_Communication_02.pdf | DS246_SEQ09_Communication_02.pdf | 9 | Communication | Communication from the Appellate Body | NUMBERED | null | 2 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 7 April 2004 | WT/DS246/9; WT/DS246/AB/R. | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF
TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Communication from the Appellate Body
The following communication, dated 7 April 2004, from the Chairman of the Appellate Body,
addressed to the Chair of the Dispute Settlement Bo dy, is circulated in accordance with Art... | 2026-03-15T15:43:55.679002 | |
246 | 246 | DS246_SEQ10_Implementation_Report.pdf | DS246_SEQ10_Implementation_Report.pdf | 10 | Implementation_Report | implementation of the recommendations | NUMBERED | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 2 July 2004 | WT/DS246/11 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Extension of Time-Period under Article 21.3 of the DSU
The following communication, dated 29 June 2004, from the Delegation of the European
Commission and the Delegation of India to the Chairman of the Dispute Settlement... | 2026-03-15T15:43:55.679540 | |
246 | 246 | DS246_SEQ11_Note_By_Secretariat_01.pdf | DS246_SEQ11_Note_By_Secretariat_01.pdf | 11 | Note_By_Secretariat | Appointment of Arbitrator by the Director-General Note by the Secretariat On 4 August 2004, pursuant to the request by India of 26 July 2004, the Director-General appointed Mr. John Lockhart to act as arbitrator under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes i... | NUMBERED | null | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 10 August 2004 | WT/DS246/13 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF
TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Appointment of Arbitrator by the Director-General
Note by the Secretariat
On 4 August 2004, pursuant to the request by India of 26 July 2004, the Director-General
appointed Mr. John Lockhart to act as arbitrator under A... | 2026-03-15T15:43:55.679739 | |
246 | 246 | DS246_SEQ12_Understanding_00.pdf | DS246_SEQ12_Understanding_00.pdf | 12 | Understanding | ARB-2004-1/17 Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes | NUMBERED | null | 0 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 20 September 2004 | WT/DS246/14 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 31 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
ARB-2004-1/17
Arbitration
under Article 21.3(c) of the
Understanding on Rules and Procedures
Governing the Settlement of Disputes
Award of the Arbitrator
John Lockhart
AWARD OF THE ARBITRATOR
Parties:
European Communi... | 2026-03-15T15:43:55.693505 | |
246 | 246 | DS246_SEQ13_Understanding_01.pdf | DS246_SEQ13_Understanding_01.pdf | 13 | Understanding | Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes | NUMBERED | null | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 22 September 2004 | WT/DS246/15; WT/DS246/14 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF
TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Arbitration under Article 21.3(c) of the Understanding
on Rules and Procedures Governing the Settlement of Disputes
The following communication, dated 20 September 2004, from the arbitrator,
Mr. John Lockhart, to the Cha... | 2026-03-15T15:43:55.693859 | |
246 | 246 | DS246_SEQ14_Status_Report.pdf | DS246_SEQ14_Status_Report.pdf | 14 | Status_Report | Status Report by the European Communities | NUMBERED | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 8 April 2005 | WT/DS246/16 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Status Report by the European Communities
The following communication, dated 7 April 2005, from the delegation of the
European Communities to the Chairman of the Dis pute Settlement Body, is circulated pursuant to
Articl... | 2026-03-15T15:43:55.694466 | |
246 | 246 | DS246_SEQ15_Status_Report_Add.pdf | DS246_SEQ15_Status_Report_Add.pdf | 15 | Status_Report | Status Report by the European Communities Addendum | NUMBERED | Add | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 9 May 2005 | WT/DS246/16/Add.1 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Status Report by the European Communities
Addendum
The following communication, dated 4 May 2005, from the delegation of the
European Communities to the Chairman of the Dis pute Settlement Body, is circulated pursuant t... | 2026-03-15T15:43:55.695061 | |
246 | 246 | DS246_SEQ16_Status_Report_Add2.pdf | DS246_SEQ16_Status_Report_Add2.pdf | 16 | Status_Report | Status Report by the European Communities Addendum | NUMBERED | Add | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 10 June 2005 | WT/DS246/16/Add.2 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Status Report by the European Communities
Addendum
The following communication, dated 9 June 2005, from the delegation of the
European Communities to the Chairman of the Dis pute Settlement Body, is circulated pursuant ... | 2026-03-15T15:43:55.695638 | |
246 | 246 | DS246_SEQ17_Status_Report_Add3.pdf | DS246_SEQ17_Status_Report_Add3.pdf | 17 | Status_Report | Status Report by the European Communities Addendum | NUMBERED | Add | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 8 July 2005 | WT/DS246/16/Add.3 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 2 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Status Report by the European Communities
Addendum
The following communication, dated 7 July 2005, from the delegation of the
European Communities to the Chairman of the Dis pute Settlement Body, is circulated pursuant ... | 2026-03-15T15:43:55.696331 | |
246 | 246 | DS246_SEQ18_Report_Of_Panel_00.pdf | DS246_SEQ18_Report_Of_Panel_00.pdf | 18 | Report_Of_Panel | Report of the Panel | PANEL_REPORT | null | 0 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 1 December 2003 | WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 166 | EUROPEAN COMMUNITIES – CONDITIONS FOR
THE GRANTING OF TARIFF PREFERENCES
TO DEVELOPING COUNTRIES
Report of the Panel
I. INTRODUCTION
1.1 On 5 March 2002, pursuant to Article 4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (hereafter the "DSU"), Article XXIII:1 of the General
Agreeme... | 2026-03-15T15:43:55.799490 | |
246 | 246 | DS246_SEQ19_Report_Of_Panel_01.pdf | DS246_SEQ19_Report_Of_Panel_01.pdf | 19 | Report_Of_Panel | Panel report | PANEL_REPORT | null | 1 | 7 May 2003 | WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 2 | ANNEX A
Request for Enhanced Third-Party Rights
Decision of the Panel
1. On 31 March 2003, 11 third parties in this case (Bolivia, Colombia, Costa Rica, Ecuador,
El Salvador, Guatemala, Honduras, Nicaragua, Pana ma, Peru and Venezuela, hereafter referred to
collectively as "the Applicants") requested that the Panel ... | 2026-03-15T15:43:55.800764 | ||
246 | 246 | DS246_SEQ20_Report_Of_Panel_02.pdf | DS246_SEQ20_Report_Of_Panel_02.pdf | 20 | Report_Of_Panel | WT/DS246/R Page B-1 ANNEX B Parties Page Annex B-1 Replies of India to Questions from the Panel after the First Panel Meeting B-2 Annex B-2 Replies of the European Communities to Questions from the Panel after the First Panel Meeting B-36 Annex B-3 Replies of the European Communities to Questions from India after the F... | PANEL_REPORT | null | 2 | null | WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 169 | ANNEX B
Parties
Page
Annex B-1 Replies of India to Questions from the Panel after the First Panel
Meeting B-2
Annex B-2 Replies of the European Communities to Questions from the Panel
after the First Panel Meeting B-36
Annex B-3 Replies of the European Communities to Questions from India after the
First Panel Meeting B... | 2026-03-15T15:43:55.892339 | ||
246 | 246 | DS246_SEQ21_Report_Of_Panel_03.pdf | DS246_SEQ21_Report_Of_Panel_03.pdf | 21 | Report_Of_Panel | WT/DS246/R Page C-1 ANNEX C Third Parties Comments Page Annex C-1 Replies of the Andean Community Collectively to Questions from the Panel and from India after the First Panel Meeting C-2 Annex C-2 Replies of Members of the Andean Community Separately to Questions from the Panel and from India after the First Panel Mee... | PANEL_REPORT | null | 3 | null | WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 47 | ANNEX C
Third Parties
Comments Page
Annex C-1 Replies of the Andean Community Collectively to Questions from the
Panel and from India after the First Panel Meeting C-2
Annex C-2 Replies of Members of the Andean Community Separately to
Questions from the Panel and from India after the First Panel Meeting C-9
Annex C-3... | 2026-03-15T15:43:55.918330 | ||
246 | 246 | DS246_SEQ22_Report_Of_Panel_04.pdf | DS246_SEQ22_Report_Of_Panel_04.pdf | 22 | Report_Of_Panel | WT/DS246/R Page D-1 ANNEX D Page Annex D-1 Differential and More Favourable Treatment, Reciprocity and Fuller Participation of Developing Countries (the "Enabling Clause") D-2 Annex D-2 Decision on Generalized System of Preferences (the "1971 Waiver Decision") D-4 Annex D-3 Resolution of the Second Session of UNCTAD on... | PANEL_REPORT | null | 4 | null | WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 16 | ANNEX D
Page
Annex D-1 Differential and More Favourable Treatment, Reciprocity and Fuller
Participation of Developing Countries (the "Enabling Clause") D-2
Annex D-2 Decision on Generalized System of Preferences (the "1971 Waiver
Decision") D-4
Annex D-3 Resolution of the Second Session of UNCTAD on the Expansion and
D... | 2026-03-15T15:43:55.924784 | ||
246 | 246 | DS246_SEQ23_Report_Of_Panel_05.pdf | DS246_SEQ23_Report_Of_Panel_05.pdf | 23 | Report_Of_Panel | WT/DS246/R Page E-1 ANNEX E List of Waivers for Preferences Country Type Decision of Expiry Document United States Trust territory of Pacific Islands | PANEL_REPORT | null | 5 | null | WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 2 | ANNEX E
List of Waivers for Preferences
Country Type Decision of Expiry Document
United States Trust territory of Pacific
Islands
8 September 1948 No time-limit BISD II/9
United
Kingdom
Items traditionally admitted
free of duty from countries of
the Commonwealth
24 October 1953 No time-limit BISD 2S/20
United
Kingdom
A... | 2026-03-15T15:43:55.925656 | ||
246 | 246 | DS246_SEQ24_Appellate_Body_Report_And_Panel_Report.pdf | DS246_SEQ24_Appellate_Body_Report_And_Panel_Report.pdf | 24 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Report Action by the Dispute Settlement Body | AB_REPORT | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 23 April 2004 | WT/DS246/10; WT/DS246/AB/R; WT/DS246/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF
TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Appellate Body Report and Panel Report
Action by the Dispute Settlement Body
At its meeting on 20 April 2004, the Disput e Settlement Body adopted the Appellate Body
report on European Communities – Conditions for the G... | 2026-03-15T15:43:55.926183 | |
246 | 246 | DS246_SEQ25_Report_Of_Appellate_Body.pdf | DS246_SEQ25_Report_Of_Appellate_Body.pdf | 25 | Report_Of_Appellate_Body | Report of the Appellate Body | AB_REPORT | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 7 April 2004 | WT/DS246/AB/R | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 88 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
AB-2004-1
Report of the Appellate Body
APPELLATE BODY
European Communities, Appellant
India, Appellee
Bolivia, Third Participant
Brazil, Third Participant
Colombia, Third Participant
Costa Rica, Third Participant
Cuba,... | 2026-03-15T15:43:55.967254 | |
246 | 246 | DS246_SEQ26_Request_For_Arbitration.pdf | DS246_SEQ26_Request_For_Arbitration.pdf | 26 | Request_For_Arbitration | Request by India for Arbitration under Article 21.3(c) of the DSU | ARBITRATION | null | null | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES | 20 July 2004 | WT/DS246/12 | ['India'] | ['EU'] | ['Bolivia, Plurinational State of', 'Brazil', 'Colombia', 'Costa Rica', 'Cuba', 'Ecuador', 'El Salvador', 'Guatemala', 'Honduras', 'Mauritius', 'Nicaragua', 'Pakistan', 'Panama', 'Paraguay', 'Peru', 'Sri Lanka', 'Venezuela', 'U.S.'] | Appellate Body | Art. I:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by India.
On 5 March 2002, India
requested consultations with the EC concerning the conditions under
which the EC accords tariff preferences to develo... | 1 | EUROPEAN COMMUNITIES – CONDITIONS FOR THE GRANTING
OF TARIFF PREFERENCES TO DEVELOPING COUNTRIES
Request by India for Arbitration under Article 21.3(c) of the DSU
The following communication, dated 16 July 2004, from the delegation of India to the
Chairperson of the Dispute Settlement Body, is circulated at the requ... | 2026-03-15T15:43:55.967773 | |
247 | 247 | DS247_SEQ01_Request_For_Consultations_01.pdf | DS247_SEQ01_Request_For_Consultations_01.pdf | 1 | Request_For_Consultations | Request for Consultations by Canada | NUMBERED | null | 1 | UNITED STATES – PROVISIONAL ANTI-DUMPING MEASURE ON IMPORTS OF CERTAIN SOFTWOOD LUMBER FROM CANADA | 12 March 2002 | WT/DS247/1; G/L/522; G/ADP/D40/1 | Anti-Dumping Practices (ADP); General Council | ['Canada'] | ['U.S.'] | [] | Consultation | Art. 2.1, 2.2, 2.4.2, 5.2, 5.3, 7.1 Anti-dumping | The summary below was up-to-date at
24 February 2010
Consultations
Complaint by Canada.
On 6 March 2002, Canada
requested consultations under Article 4.8 of the DSU (urgency procedure)
with the United States regarding an anti-dumping measure applied by the
US to imports of softwood lum... | 2 | UNITED STATES – PROVISIONAL ANTI-DUMPING MEASURE
ON IMPORTS OF CERTAIN SOFTWOOD LUMBER FROM CANADA
Request for Consultations by Canada
The following communication, dated 6 March 2002, from the Permanent Mission of Canada
to the Permanent Mission of the United States and to the Chairman of the Dispute Settlement Body, i... | 2026-03-15T15:43:56.320821 |
247 | 247 | DS247_SEQ02_Notification_Of_Mutually_Agreed_Solution_02.pdf | DS247_SEQ02_Notification_Of_Mutually_Agreed_Solution_02.pdf | 2 | Notification_Of_Mutually_Agreed_Solution | Notification of Mutually Agreed Solution | NUMBERED | null | 2 | UNITED STATES – PROVISIONAL ANTI-DUMPING MEASURE ON IMPORTS OF CERTAIN SOFTWOOD LUMBER FROM CANADA | 16 November 2006 | WT/DS247/2; G/L/522/Add.1; G/ADP/D40/2 | Anti-Dumping Practices (ADP); General Council | ['Canada'] | ['U.S.'] | [] | Consultation | Art. 2.1, 2.2, 2.4.2, 5.2, 5.3, 7.1 Anti-dumping | The summary below was up-to-date at
24 February 2010
Consultations
Complaint by Canada.
On 6 March 2002, Canada
requested consultations under Article 4.8 of the DSU (urgency procedure)
with the United States regarding an anti-dumping measure applied by the
US to imports of softwood lum... | 83 | French
UNITED STATES – PROVISIONAL ANTI-DUMPING MEASURE
ON IMPORTS OF CERTAIN SOFTWOOD LUMBER FROM CANADA
Notification of Mutually Agreed Solution
The following communication, dated 12 Octobe r 2006, from the delegation of the United
States and the delegation of Canada to the Chairman of the Dispute Settlement Body... | 2026-03-15T15:43:56.352737 |
247 | 247 | DS247_SEQ03_Notification_Of_Mutually_Agreed_Solution.pdf | DS247_SEQ03_Notification_Of_Mutually_Agreed_Solution.pdf | 3 | Notification_Of_Mutually_Agreed_Solution | Notification of Mutually Agreed Solution Addendum | NUMBERED | null | null | UNITED STATES – PROVISIONAL ANTI-DUMPING MEASURE ON IMPORTS OF CERTAIN SOFTWOOD LUMBER FROM CANADA | 9 March 2007 | WT/DS247/2/Add.1; G/L/522/Add.2; G/ADP/D40/2/Add.1 | Anti-Dumping Practices (ADP); General Council | ['Canada'] | ['U.S.'] | [] | Consultation | Art. 2.1, 2.2, 2.4.2, 5.2, 5.3, 7.1 Anti-dumping | The summary below was up-to-date at
24 February 2010
Consultations
Complaint by Canada.
On 6 March 2002, Canada
requested consultations under Article 4.8 of the DSU (urgency procedure)
with the United States regarding an anti-dumping measure applied by the
US to imports of softwood lum... | 20 | French
UNITED STATES – PROVISIONAL ANTI-DUMPING MEASURE
ON IMPORTS OF CERTAIN SOFTWOOD LUMBER FROM CANADA
Notification of Mutually Agreed Solution
Addendum
The following communication, received on 23 February 2007, from the delegation of the
United States and the delegation of Canada to th e Chairman of the Disput... | 2026-03-15T15:43:56.359426 |
248 | 248 | DS248_SEQ01_Request_For_Consultations_01.pdf | DS248_SEQ01_Request_For_Consultations_01.pdf | 1 | Request_For_Consultations | Request for Consultations by the European Communities | NUMBERED | null | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 13 March 2002 | WT/DS248/1; G/L/527; G/SG/D20/1 | General Council; Safeguards (SG) | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 2 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request for Consultations by the European Communities
The following communication, dated 7 March 2002, from the Permanent Delegation of the
European Commission to the Permanent Mission of the United States and to the Chairman of the
Disp... | 2026-03-15T15:44:08.335741 |
248 | 248 | DS248_SEQ02_Request_To_Join_Consultations_00.pdf | DS248_SEQ02_Request_To_Join_Consultations_00.pdf | 2 | Request_To_Join_Consultations | Request to Join Consultations Communication from Japan | NUMBERED | null | 0 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 18 March 2002 | WT/DS248/2 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Japan
The following communication, dated 14 March 2002, from the Permanent Mission of Japan to
the Permanent Mission of the United States, the Permanent Delegation of the European Commissi... | 2026-03-15T15:44:08.336139 | |
248 | 248 | DS248_SEQ03_Request_To_Join_Consultations_01.pdf | DS248_SEQ03_Request_To_Join_Consultations_01.pdf | 3 | Request_To_Join_Consultations | Request to Join Consultations Communication from Switzerland | NUMBERED | null | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 18 March 2002 | WT/DS248/3 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Switzerland
The following communication, dated 15 March 2002, from the Permanent Mission of
Switzerland to the Permanent Mission of the United States, the Permanent Delegation of the Europ... | 2026-03-15T15:44:08.336453 | |
248 | 248 | DS248_SEQ04_Request_To_Join_Consultations_02.pdf | DS248_SEQ04_Request_To_Join_Consultations_02.pdf | 4 | Request_To_Join_Consultations | Request to Join Consultations Communication from Korea | NUMBERED | null | 2 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 20 March 2002 | WT/DS248/4; WT/DS248/1; G/L/527; G/SG/D20/1 | General Council; Safeguards (SG) | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Korea
The following communication, dated 14 March 2002, from the Permanent Mission of Korea
to the Permanent Mission of the United States, the Permanent Delegation of the European
Commissi... | 2026-03-15T15:44:08.336893 |
248 | 248 | DS248_SEQ05_Request_To_Join_Consultations_03.pdf | DS248_SEQ05_Request_To_Join_Consultations_03.pdf | 5 | Request_To_Join_Consultations | Request to Join Consultations Communication from Norway | NUMBERED | null | 3 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 25 March 2002 | WT/DS248/5 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Norway
The following communication, dated 21 March 2002, from the Permanent Mission of Norway
to the Permanent Mission of the United States, the Permanent Delegation of the European
Commis... | 2026-03-15T15:44:08.337419 | |
248 | 248 | DS248_SEQ06_Request_To_Join_Consultations_04.pdf | DS248_SEQ06_Request_To_Join_Consultations_04.pdf | 6 | Request_To_Join_Consultations | Request to Join Consultations Communication from Venezuela | NUMBERED | null | 4 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 25 March 2002 | WT/DS248/6 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Venezuela
The following communication, dated 20 March 2002, from the Permanent Mission of
Venezuela to the Permanent Mission of the United States, the Permanent Delegation of the European
... | 2026-03-15T15:44:08.337750 | |
248 | 248 | DS248_SEQ07_Request_To_Join_Consultations_05.pdf | DS248_SEQ07_Request_To_Join_Consultations_05.pdf | 7 | Request_To_Join_Consultations | Request to Join Consultations Communication from Canada | NUMBERED | null | 5 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 26 March 2002 | WT/DS248/7 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Canada
The following communication, dated 15 March 2002, from the Permanent Mission of Canada
to the Permanent Mission of the United States, the Permanent Delegation of the European
Commis... | 2026-03-15T15:44:08.338219 | |
248 | 248 | DS248_SEQ08_Request_To_Join_Consultations_06.pdf | DS248_SEQ08_Request_To_Join_Consultations_06.pdf | 8 | Request_To_Join_Consultations | Request to Join Consultations Communication from Mexico | NUMBERED | null | 6 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 27 March 2002 | WT/DS248/8; WT/DS248/1 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Mexico
The following communication, dated 22 March 2002, from the Permanent Mission of Mexico
to the Permanent Mission of the United States, the Permanent Delegation of the European
Commis... | 2026-03-15T15:44:08.338588 | |
248 | 248 | DS248_SEQ09_Request_To_Join_Consultations_07.pdf | DS248_SEQ09_Request_To_Join_Consultations_07.pdf | 9 | Request_To_Join_Consultations | Request to Join Consultations Communication from China | NUMBERED | null | 7 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 26 March 2002 | WT/DS248/9 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from China
The following communication, dated 21 March 2002, from the Permanent Mission of China
to the Permanent Mission of the United States, the Permanent Delegation of the European
Commissi... | 2026-03-15T15:44:08.338996 | |
248 | 248 | DS248_SEQ10_Request_To_Join_Consultations_08.pdf | DS248_SEQ10_Request_To_Join_Consultations_08.pdf | 10 | Request_To_Join_Consultations | Request to Join Consultations Communication from New Zealand | NUMBERED | null | 8 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 27 March 2002 | WT/DS248/10; WT/DS248/1; G/L/527; G/SG/D20/1 | General Council; Safeguards (SG) | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from New Zealand
The following communication, dated 25 March 2002, from the Permanent Mission of
New Zealand to the Permanent Mission of the United States, the Permanent Delegation of the
Europ... | 2026-03-15T15:44:08.339312 |
248 | 248 | DS248_SEQ11_Request_To_Join_Consultations_09.pdf | DS248_SEQ11_Request_To_Join_Consultations_09.pdf | 11 | Request_To_Join_Consultations | Acceptance by the United States of the Requests to Join Consultations Canada, China, Japan, Korea, Mexico, New Zealand, Norway, Switzerland and Venezuela notified the Dispute Settlement Body of their desire to be joined in the consultations requested by the European Communities, pursuant to Article 4.11 of the DSU. The... | NUMBERED | null | 9 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 11 April 2002 | WT/DS248/11 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Acceptance by the United States of the Requests to Join Consultations
Canada, China, Japan, Korea, Mexico, New Zealand, Norway, Switzerland and Venezuela
notified the Dispute Settlement Body of their desire to be joined in the consultati... | 2026-03-15T15:44:08.340921 | |
248 | 248 | DS248_SEQ12_Request_For_Establishment_Of_Panel.pdf | DS248_SEQ12_Request_For_Establishment_Of_Panel.pdf | 12 | Request_For_Establishment_Of_Panel | Request for the Establishment of a Panel by the European Communities | NUMBERED | null | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 8 May 2002 | WT/DS248/12 | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 2 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request for the Establishment of a Panel by the European Communities
The following communication, dated 7 May 2002, from the Permanent Delegation of the
European Communities to the Chairman of the Dispute Settlement Body, is circulated p... | 2026-03-15T15:44:08.341957 | |
248 | 248 | DS248_SEQ13_Working_Procedures_01.pdf | DS248_SEQ13_Working_Procedures_01.pdf | 13 | Working_Procedures | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 38 The Panel will therefore proceed according to the attached Working Procedures and Timetable. Finally, the Panel would like to remind parties that this communication, constituting part of the panel process, is confide... | NUMBERED | null | 1 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 68 | The Panel will therefore proceed according to the attached Working Procedures and
Timetable. Finally, the Panel would like to remind parties that this communication,
constituting part of the panel process, is confidential."
VI. THE PANEL'S WORKING PROCEDURES
6.1 The working procedures adopted by the Panel for the prese... | 2026-03-15T15:44:08.387513 | ||
248 | 248 | DS248_SEQ14_Report_Of_Panel_00.pdf | DS248_SEQ14_Report_Of_Panel_00.pdf | 14 | Report_Of_Panel | Final Reports of the Panel The reports of the Panel on United States – Definitive Safeguard Measures on Imports of Certain Steel Products are being circulated to all Members, pursuant to the DSU. The reports are being circulated as an unrestricted document from 11 July 2003 pursuant to the Procedures for the Circulat... | PANEL_REPORT | null | 0 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 11 July 2003 | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 57 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Final Reports of the Panel
The reports of the Panel on are being circulated to all Members, pursuant to the DSU. The reports are being
circulated as an unrestricted document from 11 July 2003 pursuant to the Procedures for the
Circulatio... | 2026-03-15T15:44:08.410462 | |
248 | 248 | DS248_SEQ15_Report_Of_Panel_02.pdf | DS248_SEQ15_Report_Of_Panel_02.pdf | 15 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 106 | PANEL_REPORT | null | 2 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 59 | 2. Defining/identifying the "imported product"
(a) Specificity of the imported product
7.212 The European Communities, Switzerland, Norway and Brazil recall that the Appellate Body
has made clear in US – Lamb that "a safeguard measure can only be imposed on a specific 'product',
namely the imported product", and that t... | 2026-03-15T15:44:08.455358 | ||
248 | 248 | DS248_SEQ16_Report_Of_Panel_03.pdf | DS248_SEQ16_Report_Of_Panel_03.pdf | 16 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 165 Production processes 7.394 The European Communities and China point out that the USITC's decisive argument for aggregating the five different products into one single category was the vertical integration of the indu... | PANEL_REPORT | null | 3 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 73 | Production processes
7.394 The European Communities and China point out that the USITC's decisive argument for
aggregating the five different products into one single category was the vertical integration of the
industry and the common production processes.1112 The USITC, in this safeguard determination, was,
again, re... | 2026-03-15T15:44:08.508357 | ||
248 | 248 | DS248_SEQ17_Report_Of_Panel_04.pdf | DS248_SEQ17_Report_Of_Panel_04.pdf | 17 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 238 7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737, since that data alone related to stainless steel wire as such. The analysis provided by Commissioners Bragg and De... | PANEL_REPORT | null | 4 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 69 | 7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737,
since that data alone related to stainless steel wire as such. The analysis provided by Commissioners
Bragg and Devaney could not provide any useful basis for the assessment of imports trends for
stainless steel wire, si... | 2026-03-15T15:44:08.557850 | ||
248 | 248 | DS248_SEQ18_Report_Of_Panel_05.pdf | DS248_SEQ18_Report_Of_Panel_05.pdf | 18 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 307 7.886 Even assuming prices of imports to be lower than prices of domestically produced steel, the European Communities submits that low priced imports could only force down prices if imports had a role in setting pri... | PANEL_REPORT | null | 5 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 65 | 7.886 Even assuming prices of imports to be lower than prices of domestically produced steel, the
European Communities submits that low priced imports could only force down prices if imports had a
role in setting prices on the United States market. However, other than an increase to 11.8% in 1998,
imports did not have,... | 2026-03-15T15:44:08.602909 | ||
248 | 248 | DS248_SEQ19_Report_Of_Panel_06.pdf | DS248_SEQ19_Report_Of_Panel_06.pdf | 19 | Report_Of_Panel | 7.1097 According to Japan, the USITC analysis is also too static. The United States argues that demand in 2000 was higher than in 1996. 2674 This statement may be true, but it is largely irrelevant. In most markets, demand increases over time. The issue for understanding the competitive dynamics is not a mechanical ... | PANEL_REPORT | null | 6 | 2H 2000 38.1 -6.9 1H 2001 36.7 -1.4 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 68 | 7.1094 In counter-response, Japan argues 2669 that the United States analysis is based on incorrect
data. Japan submits that United States and the USITC rely on figures that merely add together
shipments of each type of CCFRS, ignoring the fact that these figures reflect double and triple
counting of tons of steel as t... | 2026-03-15T15:44:08.649962 | |
248 | 248 | DS248_SEQ20_Report_Of_Panel_07.pdf | DS248_SEQ20_Report_Of_Panel_07.pdf | 20 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 440 7.1339 China further argues that in the Supplementary Report, the USITC was required to assess the injury caused by imports from Mexico and Canada and to ensure that this injury would not be attributed to increased i... | PANEL_REPORT | null | 7 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 76 | 7.1339 China further argues that in the Supplementary Report, the USITC was required to assess the
injury caused by imports from Mexico and Canada and to ensure that this injury would not be
attributed to increased imports from non-NAFTA countries. China argues that it did not do so. China
further argues that the USITC... | 2026-03-15T15:44:08.705558 | ||
248 | 248 | DS248_SEQ21_Report_Of_Panel_08.pdf | DS248_SEQ21_Report_Of_Panel_08.pdf | 21 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 516 7.1571 The United States suggests that the numerical analysis also attempts to avoid attributing to increased imports the negative price effects of increased capacity and minimill competition, the two other factors t... | PANEL_REPORT | null | 8 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 85 | 7.1571 The United States suggests that the numerical analysis also attempts to avoid attributing to
increased imports the negative price effects of increased capacity and minimill competition, the two
other factors that the USITC found to be causing injury during the 1998-2000 period. These two
factors are related beca... | 2026-03-15T15:44:08.768244 | ||
248 | 248 | DS248_SEQ22_Report_Of_Panel_09.pdf | DS248_SEQ22_Report_Of_Panel_09.pdf | 22 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 601 | PANEL_REPORT | null | 9 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 78 | 4. Product-specific allegations
(a) CCFRS
7.1802 Japan, Brazil and the European Communities submit that the USITC did not conduct any
specific evaluation of non-NAFTA imports as required by parallelism. Rather, it evaluated NAFTA
imports, concluding that the exclusion of NAFTA imports would not change its findings of i... | 2026-03-15T15:44:08.826353 | ||
248 | 248 | DS248_SEQ23_Report_Of_Panel_10.pdf | DS248_SEQ23_Report_Of_Panel_10.pdf | 23 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 679 the USITC determination or the supplementary report to support this conclusion. It was simply a blanket conclusion that was applied to every product subject to a safeguard measure.4797 7.2020 Korea asserts that the ... | PANEL_REPORT | null | 10 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 74 | the USITC determination or the supplementary report to support this conclusion. It was simply a
blanket conclusion that was applied to every product subject to a safeguard measure.4797
7.2020 Korea asserts that the President ignored the findings of the USITC with respect to Mexico and
Canada and rendered a conclusion t... | 2026-03-15T15:44:08.876045 | ||
248 | 248 | DS248_SEQ24_Report_Of_Panel_11.pdf | DS248_SEQ24_Report_Of_Panel_11.pdf | 24 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 753 10.199 However, if a Member relies on the findings made by three Commissioners and the findings of those three Commissioners constitute the determination of the competent authorities in the sense of Article 2.1 of th... | PANEL_REPORT | null | 11 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 67 | 10.199 However, if a Member relies on the findings made by three Commissioners and the findings
of those three Commissioners constitute the determination of the competent authorities in the sense of
Article 2.1 of the Agreement on Safeguards, there is a requirement for those findings to provide a
reasoned and adequate ... | 2026-03-15T15:44:08.914844 | ||
248 | 248 | DS248_SEQ25_Report_Of_Panel_12.pdf | DS248_SEQ25_Report_Of_Panel_12.pdf | 25 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 820 10.400 In addition, the USITC appears to have dismissed this factor in its non-attribution analysis merely on the basis that "the cost advantage enjoyed by minimills existed throughout the period of investigation." ... | PANEL_REPORT | null | 12 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 64 | 10.400 In addition, the USITC appears to have dismissed this factor in its non-attribution analysis
merely on the basis that "the cost advantage enjoyed by minimills existed throughout the period of
investigation." In the Panel's view, the fact that a factor existed throughout the period of investigation
does not neces... | 2026-03-15T15:44:08.947797 | ||
248 | 248 | DS248_SEQ26_Report_Of_Panel_13.pdf | DS248_SEQ26_Report_Of_Panel_13.pdf | 26 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 884 10.553 In conclusion, the Panel considers that the USITC's conditions of competitions analysis provided a compelling explanation that a causal link existed between increased imports and serious injury caused to the r... | PANEL_REPORT | null | 13 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 54 | 10.553 In conclusion, the Panel considers that the USITC's conditions of competitions analysis
provided a compelling explanation that a causal link existed between increased imports and serious
injury caused to the relevant domestic industry.
(ii) Non-attribution
USITC findings
10.554 The USITC's findings read as follo... | 2026-03-15T15:44:08.981565 | ||
248 | 248 | DS248_SEQ27_Report_Of_Panel_14.pdf | DS248_SEQ27_Report_Of_Panel_14.pdf | 27 | Report_Of_Panel | WT/DS248/R Page A-1 XI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY THE EUROPEAN COMMUNITIES (WT/DS248) 11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard measures imposed by the United States on the imports of certain steel products as of 20 March 2002 are inconsistent w... | PANEL_REPORT | null | 14 | 20 March 2002 | WT/DS248/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 32 | XI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY THE
EUROPEAN COMMUNITIES (WT/DS248)
11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard
measures imposed by the United States on the imports of certain steel products as of 20 March 2002
are inconsistent with the Agreement on... | 2026-03-15T15:44:08.995507 | ||
248 | 258 | DS258_SEQ01_Agreed_Procedures.pdf | DS258_SEQ01_Agreed_Procedures.pdf | 1 | Agreed_Procedures | Procedural Agreement between the United States and China, the European Communities, Japan, Korea, New Zealand, Norway and Switzerland | NUMBERED | null | null | UNITED STATES - DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 22 July 2002 | WT/DS248/13; WT/DS249/7; WT/DS251/8; WT/DS252/6; WT/DS253/6; WT/DS254/6; WT/DS258/10 | ['New Zealand'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'EU', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 4.2, 5.1, 3, 8 SafeguardsArt. XIX:1, X:3 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by New Zealand.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impos... | 3 | UNITED STATES - DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Procedural Agreement between the United States and
China, the European Communities, Japan, Korea, New Zealand, Norway and Switzerland
The following communication, dated 15 July 2002, from the Permanent Delegation of the
European Commissi... | 2026-03-15T15:44:09.022029 | |
248 | 258 | DS258_SEQ02_Note_By_Secretariat.pdf | DS258_SEQ02_Note_By_Secretariat.pdf | 2 | Note_By_Secretariat | Constitution of the Panel Established at the Request of the European Communities, Japan, Korea, China, Switzerland, Norway and New Zealand Note by the Secretariat | NUMBERED | null | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 29 July 2002 | WT/DS248/14; WT/DS249/8; WT/DS251/9; WT/DS252/7; WT/DS253/7; WT/DS254/7; WT/DS258/11; WT/DS248/12; WT/DS249/6; WT/DS251/7 | ['New Zealand'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'EU', 'Japan', 'South Korea', 'Mexico', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 4.2, 5.1, 3, 8 SafeguardsArt. XIX:1, X:3 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by New Zealand.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impos... | 2 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Constitution of the Panel Established at the Request of
the European Communities, Japan, Korea, China, Switzerland,
Norway and New Zealand
Note by the Secretariat
1. In accordance with Article 6 of the Dispute Settlement Understanding (D... | 2026-03-15T15:44:09.022803 | |
248 | 259 | DS259_SEQ01_Note_By_Secretariat.pdf | DS259_SEQ01_Note_By_Secretariat.pdf | 1 | Note_By_Secretariat | Constitution of the Panel Established at the Request of the European Communities, Japan, Korea, China, Switzerland, Norway, New Zealand and Brazil Note by the Secretariat | NUMBERED | null | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 12 August 2002 | WT/DS248/15; WT/DS249/9; WT/DS251/10; WT/DS252/8; WT/DS253/8; WT/DS254/8; WT/DS258/12; WT/DS259/11 | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 2 | 1
UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Constitution of the Panel Established at the Request of
the European Communities, Japan, Korea, China, Switzerland,
Norway, New Zealand and Brazil
Note by the Secretariat
1. At its meetings of 3 June 2002, 14 June 2002, 24 June 2002 a... | 2026-03-15T15:44:10.645399 | |
248 | 259 | DS259_SEQ02_Communication_00.pdf | DS259_SEQ02_Communication_00.pdf | 2 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 0 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 24 February 2003 | WT/DS248/16; WT/DS249/10; WT/DS251/11; WT/DS252/9; WT/DS253/9; WT/DS254/9; WT/DS258/13; WT/DS259/12 | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Communication from the Chairman of the Panel
The following communication, dated 20 February 2003, addressed to the Chairman of the
Dispute Settlement Body, is circulated in accordance with Article 12.9 of the Dispute Settlement
Understan... | 2026-03-15T15:44:10.645888 | |
248 | 259 | DS259_SEQ03_Notification_Of_Appeal.pdf | DS259_SEQ03_Notification_Of_Appeal.pdf | 3 | Notification_Of_Appeal | Notification of an Appeal by the United States under paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) | NUMBERED | null | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 14 August 2003 | WT/DS248/17; WT/DS249/11; WT/DS251/12; WT/DS252/10; WT/DS253/10; WT/DS254/10; WT/DS258/14; WT/DS259/13 | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 5 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Notification of an Appeal by the United States
under paragraph 4 of Article 16 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU)
The following notification, dated 11 August 2003, sent by the United S... | 2026-03-15T15:44:10.648129 | |
248 | 259 | DS259_SEQ04_Communication_01.pdf | DS259_SEQ04_Communication_01.pdf | 4 | Communication | Communication from the Appellate Body | NUMBERED | null | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 14 October 2003 | WT/DS248/18; WT/DS249/12; WT/DS251/13; WT/DS252/11; WT/DS253/11; WT/DS254/11; WT/DS258/15; WT/DS259/14 | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Communication from the Appellate Body
The following communication, dated 8 October 2003, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with
Article 17.5 of t... | 2026-03-15T15:44:10.648397 | |
248 | 259 | DS259_SEQ05_Communication_Rev.pdf | DS259_SEQ05_Communication_Rev.pdf | 5 | Communication | Communication from the Appellate Body Revision | NUMBERED | Rev | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 17 October 2003 | WT/DS248/18/Rev.1; WT/DS249/12/Rev.1; WT/DS251/13/Rev.1; WT/DS252/11/Rev.1; WT/DS253/11/Rev.1; WT/DS254/11/Rev.1; WT/DS258/15/Rev.1; WT/DS259/14/Rev.1 | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Communication from the Appellate Body
Revision
The following communication, dated 8 October 2003, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with
Article ... | 2026-03-15T15:44:10.648841 | |
248 | 259 | DS259_SEQ06_Communication_02.pdf | DS259_SEQ06_Communication_02.pdf | 6 | Communication | Communication from the Appellate Body | NUMBERED | null | 2 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 12 November 2003 | WT/DS248/19; WT/DS249/13; WT/DS251/14; WT/DS252/12; WT/DS253/12; WT/DS254/12; WT/DS258/16; WT/DS259/15; WT/DS248/AB/R; WT/DS249/AB/R; WT/DS251/AB/R | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Communication from the Appellate Body
The following communication, dated 10 November 2003, from Mr. James Bacchus, Chairman
of the Appellate Body, addressed to the Chairman of the Dispute Settlement Body, is circulated in
accordance with... | 2026-03-15T15:44:10.649140 | |
248 | 259 | DS259_SEQ07_Note_By_Secretariat_Corr.pdf | DS259_SEQ07_Note_By_Secretariat_Corr.pdf | 7 | Note_By_Secretariat | Reports of the Panel Corrigendum Cover page, sub-title: delete the word "Final". Cover page, Note by the Secretariat, 3 rd line: "report" should read "reports". Page vii, Section O.2(b): sub-items "(i) Tin mill products" and "(ii) Stainless steel wire" should be renumbered "(ii) Tin mill products" and "(iii) Stainle... | NUMBERED | Corr | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 11 July 2003 | WT/DS248/R/Corr.11; WT/DS249/R/Corr.1; WT/DS251/R/Corr.1; WT/DS252/R/Corr.1; WT/DS253/R/Corr.1; WT/DS254/R/Corr.1; WT/DS258/R/Corr.1; WT/DS259/R/Corr.1 | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Reports of the Panel
Corrigendum
Cover page, sub-title: delete the word "Final".
Cover page, Note by the Secretariat, 3
rd line: "report" should read "reports".
Page vii, Section O.2(b): sub-items "(i) Tin mill products" and "(ii) Stainl... | 2026-03-15T15:44:10.649441 | |
248 | 259 | DS259_SEQ08_Appellate_Body_Report_And_Panel_Report.pdf | DS259_SEQ08_Appellate_Body_Report_And_Panel_Report.pdf | 8 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Reports Action by the Dispute Settlement Body | AB_REPORT | null | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 16 December 2003 | WT/DS248/20; WT/DS249/14; WT/DS251/15; WT/DS252/13; WT/DS253/13; WT/DS254/13; WT/DS258/17; WT/DS259/16; WT/DS248/AB/R; WT/DS249/AB/R; WT/DS252/AB/R; WT/DS253/AB/R; WT/DS254/AB/R; WT/DS258/AB/R; WT/DS259/AB/R; WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Appellate Body Report and Panel Reports
Action by the Dispute Settlement Body
At its meeting on 10 December 2003, the Dis pute Settlement Body adopted the Appellate
Body report on
(, , WT/DS251 /AB/R, , ,
, , ) and the Panel reports ... | 2026-03-15T15:44:10.649691 | |
248 | 259 | DS259_SEQ09_Report_Of_Appellate_Body.pdf | DS259_SEQ09_Report_Of_Appellate_Body.pdf | 9 | Report_Of_Appellate_Body | Report of the Appellate Body | AB_REPORT | null | null | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS AB-2003-3 | 10 November 2003 | WT/DS248/AB/R; WT/DS249/AB/R; WT/DS251/AB/R; WT/DS252/AB/R; WT/DS253/AB/R; WT/DS254/AB/R; WT/DS258/AB/R; WT/DS259/AB/R | ['Brazil'] | ['U.S.'] | ['Canada', 'Taiwan', 'Cuba', 'Mexico', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2.1, 4 SafeguardsArt. XIX:1, X:3 GATT 1994Art. 2.2, 3 SafeguardsArt. I:1 GATT 1994Art. 5 SafeguardsArt. XVI Agreement Establishing the World Trade Organization Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by
Brazil.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures impo... | 185 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
AB-2003-3
Report of the Appellate Body
APPELLATE BODY
United States – Definitive Safeguard
Measures on Imports of Certain Steel
Products
United States, Appellant/Appellee
Brazil, Appellant/Appellee
China, Appellant/Appellee
European Com... | 2026-03-15T15:44:10.738241 | |
249 | 248 | DS248_SEQ01_Working_Procedures_01.pdf | DS248_SEQ01_Working_Procedures_01.pdf | 1 | Working_Procedures | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 38 The Panel will therefore proceed according to the attached Working Procedures and Timetable. Finally, the Panel would like to remind parties that this communication, constituting part of the panel process, is confide... | NUMBERED | null | 1 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 68 | The Panel will therefore proceed according to the attached Working Procedures and
Timetable. Finally, the Panel would like to remind parties that this communication,
constituting part of the panel process, is confidential."
VI. THE PANEL'S WORKING PROCEDURES
6.1 The working procedures adopted by the Panel for the prese... | 2026-03-15T15:44:22.094343 | ||
249 | 248 | DS248_SEQ02_Report_Of_Panel_00.pdf | DS248_SEQ02_Report_Of_Panel_00.pdf | 2 | Report_Of_Panel | Final Reports of the Panel The reports of the Panel on United States – Definitive Safeguard Measures on Imports of Certain Steel Products are being circulated to all Members, pursuant to the DSU. The reports are being circulated as an unrestricted document from 11 July 2003 pursuant to the Procedures for the Circulat... | PANEL_REPORT | null | 0 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 11 July 2003 | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 57 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Final Reports of the Panel
The reports of the Panel on are being circulated to all Members, pursuant to the DSU. The reports are being
circulated as an unrestricted document from 11 July 2003 pursuant to the Procedures for the
Circulatio... | 2026-03-15T15:44:22.115730 | |
249 | 248 | DS248_SEQ03_Report_Of_Panel_02.pdf | DS248_SEQ03_Report_Of_Panel_02.pdf | 3 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 106 | PANEL_REPORT | null | 2 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 59 | 2. Defining/identifying the "imported product"
(a) Specificity of the imported product
7.212 The European Communities, Switzerland, Norway and Brazil recall that the Appellate Body
has made clear in US – Lamb that "a safeguard measure can only be imposed on a specific 'product',
namely the imported product", and that t... | 2026-03-15T15:44:22.158066 | ||
249 | 248 | DS248_SEQ04_Report_Of_Panel_03.pdf | DS248_SEQ04_Report_Of_Panel_03.pdf | 4 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 165 Production processes 7.394 The European Communities and China point out that the USITC's decisive argument for aggregating the five different products into one single category was the vertical integration of the indu... | PANEL_REPORT | null | 3 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 73 | Production processes
7.394 The European Communities and China point out that the USITC's decisive argument for
aggregating the five different products into one single category was the vertical integration of the
industry and the common production processes.1112 The USITC, in this safeguard determination, was,
again, re... | 2026-03-15T15:44:22.210173 | ||
249 | 248 | DS248_SEQ05_Report_Of_Panel_04.pdf | DS248_SEQ05_Report_Of_Panel_04.pdf | 5 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 238 7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737, since that data alone related to stainless steel wire as such. The analysis provided by Commissioners Bragg and De... | PANEL_REPORT | null | 4 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 69 | 7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737,
since that data alone related to stainless steel wire as such. The analysis provided by Commissioners
Bragg and Devaney could not provide any useful basis for the assessment of imports trends for
stainless steel wire, si... | 2026-03-15T15:44:22.257447 | ||
249 | 248 | DS248_SEQ06_Report_Of_Panel_05.pdf | DS248_SEQ06_Report_Of_Panel_05.pdf | 6 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 307 7.886 Even assuming prices of imports to be lower than prices of domestically produced steel, the European Communities submits that low priced imports could only force down prices if imports had a role in setting pri... | PANEL_REPORT | null | 5 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 65 | 7.886 Even assuming prices of imports to be lower than prices of domestically produced steel, the
European Communities submits that low priced imports could only force down prices if imports had a
role in setting prices on the United States market. However, other than an increase to 11.8% in 1998,
imports did not have,... | 2026-03-15T15:44:22.301790 | ||
249 | 248 | DS248_SEQ07_Report_Of_Panel_06.pdf | DS248_SEQ07_Report_Of_Panel_06.pdf | 7 | Report_Of_Panel | 7.1097 According to Japan, the USITC analysis is also too static. The United States argues that demand in 2000 was higher than in 1996. 2674 This statement may be true, but it is largely irrelevant. In most markets, demand increases over time. The issue for understanding the competitive dynamics is not a mechanical ... | PANEL_REPORT | null | 6 | 2H 2000 38.1 -6.9 1H 2001 36.7 -1.4 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 68 | 7.1094 In counter-response, Japan argues 2669 that the United States analysis is based on incorrect
data. Japan submits that United States and the USITC rely on figures that merely add together
shipments of each type of CCFRS, ignoring the fact that these figures reflect double and triple
counting of tons of steel as t... | 2026-03-15T15:44:22.347924 | |
249 | 248 | DS248_SEQ08_Report_Of_Panel_07.pdf | DS248_SEQ08_Report_Of_Panel_07.pdf | 8 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 440 7.1339 China further argues that in the Supplementary Report, the USITC was required to assess the injury caused by imports from Mexico and Canada and to ensure that this injury would not be attributed to increased i... | PANEL_REPORT | null | 7 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 76 | 7.1339 China further argues that in the Supplementary Report, the USITC was required to assess the
injury caused by imports from Mexico and Canada and to ensure that this injury would not be
attributed to increased imports from non-NAFTA countries. China argues that it did not do so. China
further argues that the USITC... | 2026-03-15T15:44:22.401284 | ||
249 | 248 | DS248_SEQ09_Report_Of_Panel_08.pdf | DS248_SEQ09_Report_Of_Panel_08.pdf | 9 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 516 7.1571 The United States suggests that the numerical analysis also attempts to avoid attributing to increased imports the negative price effects of increased capacity and minimill competition, the two other factors t... | PANEL_REPORT | null | 8 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 85 | 7.1571 The United States suggests that the numerical analysis also attempts to avoid attributing to
increased imports the negative price effects of increased capacity and minimill competition, the two
other factors that the USITC found to be causing injury during the 1998-2000 period. These two
factors are related beca... | 2026-03-15T15:44:22.461471 | ||
249 | 248 | DS248_SEQ10_Report_Of_Panel_09.pdf | DS248_SEQ10_Report_Of_Panel_09.pdf | 10 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 601 | PANEL_REPORT | null | 9 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 78 | 4. Product-specific allegations
(a) CCFRS
7.1802 Japan, Brazil and the European Communities submit that the USITC did not conduct any
specific evaluation of non-NAFTA imports as required by parallelism. Rather, it evaluated NAFTA
imports, concluding that the exclusion of NAFTA imports would not change its findings of i... | 2026-03-15T15:44:22.516548 | ||
249 | 248 | DS248_SEQ11_Report_Of_Panel_10.pdf | DS248_SEQ11_Report_Of_Panel_10.pdf | 11 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 679 the USITC determination or the supplementary report to support this conclusion. It was simply a blanket conclusion that was applied to every product subject to a safeguard measure.4797 7.2020 Korea asserts that the ... | PANEL_REPORT | null | 10 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 74 | the USITC determination or the supplementary report to support this conclusion. It was simply a
blanket conclusion that was applied to every product subject to a safeguard measure.4797
7.2020 Korea asserts that the President ignored the findings of the USITC with respect to Mexico and
Canada and rendered a conclusion t... | 2026-03-15T15:44:22.564520 | ||
249 | 248 | DS248_SEQ12_Report_Of_Panel_11.pdf | DS248_SEQ12_Report_Of_Panel_11.pdf | 12 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 753 10.199 However, if a Member relies on the findings made by three Commissioners and the findings of those three Commissioners constitute the determination of the competent authorities in the sense of Article 2.1 of th... | PANEL_REPORT | null | 11 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 67 | 10.199 However, if a Member relies on the findings made by three Commissioners and the findings
of those three Commissioners constitute the determination of the competent authorities in the sense of
Article 2.1 of the Agreement on Safeguards, there is a requirement for those findings to provide a
reasoned and adequate ... | 2026-03-15T15:44:22.603441 | ||
249 | 248 | DS248_SEQ13_Report_Of_Panel_12.pdf | DS248_SEQ13_Report_Of_Panel_12.pdf | 13 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 820 10.400 In addition, the USITC appears to have dismissed this factor in its non-attribution analysis merely on the basis that "the cost advantage enjoyed by minimills existed throughout the period of investigation." ... | PANEL_REPORT | null | 12 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 64 | 10.400 In addition, the USITC appears to have dismissed this factor in its non-attribution analysis
merely on the basis that "the cost advantage enjoyed by minimills existed throughout the period of
investigation." In the Panel's view, the fact that a factor existed throughout the period of investigation
does not neces... | 2026-03-15T15:44:22.637641 | ||
249 | 248 | DS248_SEQ14_Report_Of_Panel_13.pdf | DS248_SEQ14_Report_Of_Panel_13.pdf | 14 | Report_Of_Panel | WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 884 10.553 In conclusion, the Panel considers that the USITC's conditions of competitions analysis provided a compelling explanation that a causal link existed between increased imports and serious injury caused to the r... | PANEL_REPORT | null | 13 | null | WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 54 | 10.553 In conclusion, the Panel considers that the USITC's conditions of competitions analysis
provided a compelling explanation that a causal link existed between increased imports and serious
injury caused to the relevant domestic industry.
(ii) Non-attribution
USITC findings
10.554 The USITC's findings read as follo... | 2026-03-15T15:44:22.672517 | ||
249 | 248 | DS248_SEQ15_Report_Of_Panel_14.pdf | DS248_SEQ15_Report_Of_Panel_14.pdf | 15 | Report_Of_Panel | WT/DS248/R Page A-1 XI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY THE EUROPEAN COMMUNITIES (WT/DS248) 11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard measures imposed by the United States on the imports of certain steel products as of 20 March 2002 are inconsistent w... | PANEL_REPORT | null | 14 | 20 March 2002 | WT/DS248/R | ['EU'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'Cuba', 'Japan', 'South Korea', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 9 SafeguardsArt. XIX:1 GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by the European Communities.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safegua... | 32 | XI. CONCLUSIONS AND RECOMMENDATIONS ON THE CLAIMS BY THE
EUROPEAN COMMUNITIES (WT/DS248)
11.1 In light of the findings made in Section X above, the Panel concludes that the safeguard
measures imposed by the United States on the imports of certain steel products as of 20 March 2002
are inconsistent with the Agreement on... | 2026-03-15T15:44:22.686996 | ||
249 | 249 | DS249_SEQ01_Request_For_Consultations_01.pdf | DS249_SEQ01_Request_For_Consultations_01.pdf | 1 | Request_For_Consultations | Request for Consultations by Japan | NUMBERED | null | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 26 March 2002 | WT/DS249/1; G/L/529; G/SG/D21/1 | General Council; Safeguards (SG) | ['Japan'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Japan.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures imposed... | 3 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request for Consultations by Japan
The following communication, dated 20 March 2002, from the Permanent Mission of Japan to
the Permanent Mission of the United States and to the Chairman of the Dispute Settlement Body, is
circulated in a... | 2026-03-15T15:44:22.751301 |
249 | 249 | DS249_SEQ02_Request_To_Join_Consultations_00.pdf | DS249_SEQ02_Request_To_Join_Consultations_00.pdf | 2 | Request_To_Join_Consultations | Request to Join Consultations Communication from Norway | NUMBERED | null | 0 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 2 April 2002 | WT/DS249/2 | ['Japan'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Japan.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures imposed... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Norway
The following communication, dated 27 March 2002, from the Permanent Mission of Norway
to the Permanent Mission of the United States, the Permanent Mission of Japan and to the Chair... | 2026-03-15T15:44:22.751652 | |
249 | 249 | DS249_SEQ03_Request_To_Join_Consultations_01.pdf | DS249_SEQ03_Request_To_Join_Consultations_01.pdf | 3 | Request_To_Join_Consultations | Request to Join Consultations Communication from New Zealand | NUMBERED | null | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 9 April 2002 | WT/DS249/3; WT/DS249/1; G/L/529; G/SG/D21/1 | General Council; Safeguards (SG) | ['Japan'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Japan.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures imposed... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from New Zealand
The following communication, dated 5 April 2002, from the Permanent Mission of
New Zealand to the Permanent Mission of the United States, the Permanent Mission of Japan and to
... | 2026-03-15T15:44:22.751969 |
249 | 249 | DS249_SEQ04_Request_To_Join_Consultations_02.pdf | DS249_SEQ04_Request_To_Join_Consultations_02.pdf | 4 | Request_To_Join_Consultations | Request to Join Consultations Communication from Mexico | NUMBERED | null | 2 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES ON IMPORTS OF CERTAIN STEEL PRODUCTS | 10 April 2002 | WT/DS249/4; WT/DS249/1 | ['Japan'] | ['U.S.'] | ['Brazil', 'Canada', 'China', 'Taiwan', 'EU', 'South Korea', 'Mexico', 'New Zealand', 'Norway', 'Switzerland', 'Thailand', 'Turkey', 'Venezuela'] | Appellate Body | Art. 2, 3, 4, 5, 7, 8, 12 SafeguardsArt. I:1, II, X:3, XIII, XIX GATT 1994 | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Japan.
On 7 March 2002, the European Communities
requested consultations with the United States regarding the definitive
safeguard measures imposed... | 1 | UNITED STATES – DEFINITIVE SAFEGUARD MEASURES
ON IMPORTS OF CERTAIN STEEL PRODUCTS
Request to Join Consultations
Communication from Mexico
The following communication, dated 5 April 2002, from the Permanent Mission of Mexico to
the Permanent Mission of the United States, the Permanent Mission of Japan and to the Chairm... | 2026-03-15T15:44:22.752269 |
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