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Status of Safeguards Legislative Notifications

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IV. Article 3     back to top

A. Text of Article 3

Article 3: Investigation

1.     A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public in consonance with Article X of GATT 1994. This investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard measure would be in the public interest. The competent authorities shall publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law.

2.     Any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities. Such information shall not be disclosed without permission of the party submitting it. Parties providing confidential information may be requested to furnish non-confidential summaries thereof or, if such parties indicate that such information cannot be summarized, the reasons why a summary cannot be provided. However, if the competent authorities find that a request for confidentiality is not warranted and if the party concerned is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct.

B. Interpretation and Application of Article 3

1. General

(a) Absence of a claim under Article 3

89.     The Panel on Korea — Dairy, in a finding not reviewed by the Appellate Body, observed that the absence of a claim under Article 3 concerning the requirement to publish a report on a safeguard investigation did not preclude the possibility of claims relating to other aspects of an injury determination or safeguard measure:

“[T]he absence of a claim under Article 3 of the Agreement on Safeguards means at most that the European Communities agrees that the report is WTO compatible for the purpose of Article 3.1 of the Agreement on Safeguards. The European Communities has the right to raise more specific claims under Article 4 of the Agreement on Safeguards and has done so. We consider that if a Member wants to challenge the WTO compatibility of the manner in which an ‘injury’ determination was performed, or the choice of an appropriate measure to be imposed, this Member does not have to challenge the publication of the final report as such.”(147)

2. Article 3.1

(a) “investigation”

(i) Duty of national authorities

90.     In US — Wheat Gluten, the Appellate Body referred to Article 3.1 as part of the context for the interpretation of the requirement of Article 4.2(a) to evaluate “all relevant factors”. The Appellate Body addressed the question whether, and to what extent, national authorities must, in their investigation, seek out pertinent information on possible injury factors other than those explicitly raised as relevant by the parties to the national investigation. In the course of its discussion, the Appellate Body further considered the meaning, nature and focus of an investigation:

“The ordinary meaning of the word ‘investigation’ suggests that the competent authorities should carry out a ‘systematic inquiry’ or a ‘careful study’ into the matter before them. The word, therefore, suggests a proper degree of activity on the part of the competent authorities because authorities charged with conducting an inquiry or a study … must actively seek out pertinent information.

The nature of the ‘investigation’ required by the Agreement on Safeguards is elaborated further in the remainder of Article 3.1, which sets forth certain investigative steps that the competent authorities ‘shall include’ in order to seek out pertinent information…. The focus of the investigative steps mentioned in Article 3.1 is on ‘interested parties’, who must be notified of the investigation, and who must be given an opportunity to submit ‘evidence’, as well as their ‘views’, to the competent authorities. The interested parties are also to be given an opportunity to ‘respond to the presentations of other parties’. The Agreement on Safeguards, therefore, envisages that the interested parties play a central role in the investigation and that they will be a primary source of information for the competent authorities.”(148)

91.     The Appellate Body reversed the Panel on US — Wheat Gluten, which had held that national authorities need only consider other factors that are “clearly raised before them as relevant by the interested parties in the domestic investigation”(149) and held that national authorities may not limit their investigation to information submitted and claims raised by the parties:

“However, in our view, that does not mean that the competent authorities may limit their evaluation of ‘all relevant factors’, under Article 4.2(a) of the Agreement on Safeguards, to the factors which the interested parties have raised as relevant. The competent authorities must, in every case, carry out a full investigation to enable them to conduct a proper evaluation of all of the relevant factors expressly mentioned in Article 4.2(a) of the Agreement on Safeguards. Moreover, Article 4.2(a) requires the competent authorities — and not the interested parties — to evaluate fully the relevance, if any, of ‘other factors’. If the competent authorities consider that a particular ‘other factor’ may be relevant to the situation of the domestic industry, under Article 4.2(a), their duties of investigation and evaluation preclude them from remaining passive in the face of possible short-comings in the evidence submitted, and views expressed, by the interested parties…. In that respect, we note that the competent authorities’ ‘investigation’ under Article 3.1 is not limited to the investigative steps mentioned in that provision, but must simply ‘include’ these steps. Therefore, the competent authorities must undertake additional investigative steps, when the circumstances so require, in order to fulfill their obligation to evaluate all relevant factors.”(150)

92.     The Appellate Body on US — Wheat Gluten did however set limits to the duty of the national authorities to undertake additional investigative steps:

“However, … we also reject the … argument that the competent authorities have an open-ended and unlimited duty to investigate all available facts that might possibly be relevant.”(151)

93.     In US — Steel Safeguards, the Panel concluded that the findings of three Commissioners were not based on an identically defined like product, and that this rendered the findings of the three Commissioners “irreconcilable”. On the basis of this conclusion, the Panel had deduced that these findings could not provide a reasoned and adequate explanation for the USITC’s single determination. The Appellate Body reversed this Panel conclusion on the grounds that USITC had not examined the conclusions reached by each Commissioner critically and in-depth:

“[W]e do not read Article 3.1 as necessarily precluding the possibility of providing multiple findings instead of a single finding in order to support a determination under Articles 2.1 and 4 of the Agreement on Safeguards. Nor does any other provision of the Agreement on Safeguards expressly preclude such a possibility. The Agreement on Safeguards, therefore, in our view, does not interfere with the discretion of a WTO Member to choose whether to support the determination of its competent authority by a single explanation or, alternatively, by multiple explanations by members of the competent authority. This discretion reflects the fact that, as we stated in US — Line Pipe, ‘the Agreement on Safeguards does not prescribe the internal decision-making process for making [ ] a determination [in a domestic safeguard investigation]’.(152)

…

[R]ather, a panel must ascertain whether a reasoned and adequate explanation for the USITC’s determination is contained in the report, even if only in one of the Commissioners’ individual findings.

In our view, in the case before us, the Panel should, therefore, not have ended its enquiry after noting that the conclusions of Commissioners Bragg and Devaney were based on a product definition that differed from that on which Commissioner Miller based her conclusion. After making this correct observation, the Panel should have continued its enquiry by examining the views of the three Commissioners separately, in order to ascertain whether one of these sets of findings contained a reasoned and adequate explanation for the USITC’s ‘single institutional determination’ on tin mill products.

It bears emphasizing that, in reviewing each of such findings separately, a panel is of course obliged to assess whether that particular finding provides a reasoned and adequate explanation of how the facts support the competent authority’s determination. As we held in US — Lamb, ‘panels must [not] simply accept the conclusions of the competent authorities’; they must examine these conclusions ‘critically’ and ‘in depth’.(153) Hence, in examining whether one of the multiple sets of explanations set forth by the competent authority, taken individually, provides a reasoned and adequate explanation for the competent authority’s determination, a panel may have to address, inter alia, the question whether, as a matter of WTO obligations, findings by individual Commissioners made on the basis of a broad product grouping can provide a reasoned and adequate explanation for a ‘single institutional determination’ of the USITC concerning a narrow product grouping.(154)

…

[O]ur finding implies that a panel may not conclude that there is no reasoned and adequate explanation for a competent authority’s determination by relying merely on the fact that distinct multiple explanations given by the competent authority are not based on an identically-defined like product.(155)”(156)

(ii) The conduct of the investigation — the obligation to consult interested parties

94.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, concluded that the relevant authority must consult with interested parties but that this consultation can be conducted by means of questionnaires:

“The Panel recalls that the European Communities, China, Norway and New Zealand argue that, because the issue of unforeseen developments was only discussed in the Second Supplementary Report which came out after the conclusion of the investigation, the interested parties were not given an opportunity to comment on the discussion.

…

[B]y inviting comments in response to the questionnaires, and addressing the issue during its public hearings,(157) the Panel is of the view that the United States has complied with its Article 3.1 obligation to provide ‘appropriate means in which importers, exporters and other interested parties [can] present evidence and their views’.

The European Communities complains that ‘there was no provisional reasoning on or explanation of unforeseen developments on which interested parties could comment’.(158) The Panel does not believe that Article 3 of the Agreement on Safeguards requires the competent authority to send to interested parties ‘draft findings’ of its demonstration relating to unforeseen developments in order to allow them to comment prior to the publication of the competent authority’s report.”(159)

(b) Internal decision-making process prior to determination

95.     The Appellate Body on US — Line Pipe stated that it was not concerned with the way the investigating authority reach their safeguards determinations:

“We note also that we are not concerned with how the competent authorities of WTO Members reach their determinations in applying safeguard measures. The Agreement on Safeguards does not prescribe the internal decision-making process for making such a determination. That is entirely up to WTO Members in the exercise of their sovereignty. We are concerned only with the determination itself, which is a singular act for which a WTO Member may be accountable in WTO dispute settlement. It is of no matter to us whether that singular act results from a decision by one, one hundred, or — as here — six individual decision-makers under the municipal law of that WTO Member. What matters to us is whether the determination, however it is decided domestically, meets the requirements of the Agreement on Safeguards.

…

Article 5.1 does not establish a general procedural obligation to demonstrate compliance with Article 5.1, first sentence, at the time a measure is applied.”(160)

96.     In US —Steel Safeguards, the Panel, in a finding not reviewed by the Appellate Body, recalled that the Agreement on Safeguards is not concerned with the manner in which determinations are made:

“There is no provision on how or when the investigation is to be initiated or whether, in a specific Member, the initiation of the investigation should be undertaken by the King, the President or the industry. Nor does the Agreement on Safeguards dictate the manner in which determinations are to be arrived at. What matters is that, ultimately, there is a reported determination of the right to take a safeguards measure (pursuant to Articles 2, 3 and 4 of the Agreement on Safeguards and Article XIX of GATT 1994) and that, if, and when, challenged prima facie before a WTO panel, the choice of safeguard measure (Articles 5, 7 and 9) can be justified.”(161)

97.     In US — Steel Safeguards, the Appellate Body considered whether a failure to comply with the appropriate standard of review was merely a procedural mistake inconsistent with Article 3.1 of the Agreement on Safeguards. The Appellate Body rejected the United States’ allegation that a failure to provide an adequate and reasoned explanation pursuant to Article 3.1 of the Agreement on Safeguards does not imply a violation of Articles 2 and 4 of the Agreement on Safeguards:

“We turn now to the United States’ argument that, since ‘the Panel based many of its findings against the United States on its conclusions that the USITC Report failed to provide a “reasoned and adequate explanation’ of certain findings”,(162) it follows that there can only be a violation of Article 3.1, and not also of Articles 2 and 4 of the Agreement on Safeguards’. The United States adds that a failure to explain a finding does not automatically prove that the USITC had not performed the analysis necessary to make the finding.(163)

We recall again our earlier statements on the appropriate standard of review for panels in disputes that arise under the Agreement on Safeguards. When the Panel found that the USITC report failed to provide a ‘reasoned and adequate explanation’ of certain findings, the Panel was assessing compliance with the obligations contained in Articles 2 and 4 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994. As we said in US — Lamb, ‘[i]f a panel concludes that competent authorities, in a particular case, have not provided a reasoned or adequate explanation for their determination … [that] panel has … reached a conclusion that the determination is inconsistent with the specific requirements of [the relevant provision] of the Agreement on Safeguards.’(164) Thus, we do not agree with the United States that the lack of a reasoned and adequate explanation does not imply a violation of Articles 2 and 4 of the Agreement on Safeguards. (emphasis added)

Moreover, we cannot accept the United States’ interpretation that a failure to explain a finding does not support the conclusion that the USITC ‘did not actually perform the analysis correctly, thereby breaching Article 2.1, 4.2, or 4.2(b) [of the Agreement on Safeguards]’.(165) As we stated above, because a panel may not conduct a de novo review of the evidence before the competent authority, it is the explanation given by the competent authority for its determination that alone enables panels to determine whether there has been compliance with the requirements of Article XIX of the GATT 1994 and of Articles 2 and 4 of the Agreement on Safeguards. It may well be that, as the United States argues, the competent authorities have performed the appropriate analysis correctly.

However, where a competent authority has not provided a reasoned and adequate explanation to support its determination, the panel is not in a position to conclude that the relevant requirement for applying a safeguard measure has been fulfilled by that competent authority. Thus, in such a situation, the panel has no option but to find that the competent authority has not performed the analysis correctly.”(166)

(c) The published report

(i) “To publish” versus “to make publicly available”

98.     In Chile — Price Band System, in the context of similar obligations under the SCM and Anti-Dumping Agreements, the Panel distinguished between “to publish” and “to make publicly available”, and ruled, in a finding not reviewed by the Appellate Body, that the Article 3.1 requirement to “publish” must be interpreted as meaning “to make generally available through an appropriate medium” as contrasted with “making publicly available”:

“[W]e note that the Minutes of the relevant CDC sessions have not been ‘published’ through any official medium. Rather, they were transmitted to the interested parties and placed at the disposal of ‘whoever wishes to consult them at the library of the Central Bank of Chile’. In order to determine whether it is sufficient under Article 3.1 of the Agreement on Safeguards to make the investigating authorities’ report ‘available to the public’ in such a manner, we first refer to the dictionary meaning of ‘to publish’. The term can mean ‘to make generally known’, ‘to make generally accessible’, or ‘to make generally available through [a] medium’. We therefore turn to the context of Article 3.1 provided by similar publication requirements in the AD and SCM Agreements. We note that both Article 22 of the SCM Agreement (‘public notice and explanation of determinations’) and Article 12 of the AD Agreement (‘public notice and explanation of determination’) distinguish between giving ‘public notice’ and ‘making otherwise available through a separate report’, which must be ‘readily available to the public’. In addition, we also note that various ‘transparency’ provisions in the covered agreements, such as Article III of the GATS, Article 63.1 of the TRIPS Agreement, and Article 2.11 of the TBT Agreement all distinguish between ‘to publish’ and ‘to make publicly available’. In the light of these considerations, we find that the verb ‘to publish’ in Article 3.1 of the Agreement on Safeguards must be interpreted as meaning ‘to make generally available through an appropriate medium’, rather than simply ‘making publicly available’. As regards the minutes of the relevant CDC sessions, we therefore find that they have not been generally made available through an appropriate medium so as to constitute a ‘published’ report within the meaning of Article 3.1 of the Agreement on Safeguards.”(167)

(ii) Reasoned conclusions

99.     In US — Steel Safeguards, the Appellate Body expressed the opinion that since the report must contain “reasoned conclusions”, such report must therefore include, as suggested by the Panel, an explanation of the rationale for the determinations from the facts and data contained in the report of the competent authority:

“[W]e note that the definition of ‘conclusion’ is ‘the result of a discussion or an examination of an issue’ or a ‘judgement or statement arrived at by reasoning: an inference; a deduction’. Thus, the ‘conclusion’ required by Article 3.1 is a ‘judgement or statement arrived at by reasoning’. We further note that the word ‘reasoned’, which the United States defines in terms of the verb ‘to reason’, is, in fact, used in Article 3.1, last sentence, as an adjective to qualify the term ‘conclusion’. The relevant definition of the intransitive verb ‘to reason’ is ‘to think in a connected or logical manner; use one’s reason in forming conclusions’. The definition of the transitive verb ‘to reason’ is ‘to arrange the thought of in a logical manner, embody reason in; express in a logical form’. Thus, to be a ‘reasoned’ conclusion, the ‘judgement or statement’ must be one which is reached in a connected or logical manner or expressed in a logical form. Article 3.1 further requires that competent authorities must ‘set forth’ the ‘reasoned conclusion’ in their report. The definition of the phrase ‘set forth’ is ‘give an account of, esp. in order, distinctly, or in detail; expound, relate, narrate, state, describe’. Thus, the competent authorities are required by Article 3.1, last sentence, to ‘give an account of’ a ‘judgement or statement which is reached in a connected or logical manner or expressed in a logical form’, ‘distinctly, or in detail.’

Panels have a responsibility in WTO dispute settlement to assess whether a competent authority has complied with its obligation under Article 3.1 of the Agreement on Safeguards to ‘set forth’ ‘findings and reasoned conclusions’ for their determinations. The European Communities and Norway argue that panels could not fulfill this responsibility if they were left to ‘deduce for themselves’ from the report of that competent authority the ‘rationale for the determinations from the facts and data contained in the report of the competent authority.’(168) We agree.

…

Thus, we see Article 4.2(c) as an elaboration of the requirement set out in Article 3.1, last sentence, to provide a ‘reasoned conclusion’ in a published report.

…

Article 4.2(c) is an elaboration of Article 3; moreover ‘unforeseen developments’ under Article XIX:1(a) of the GATT 1994 is one of the ‘pertinent issues of fact and law’ to which the last sentence of Article 3.1 refers. It follows that Article 4.2(c) also applies to the competent authorities’ demonstration of ‘unforeseen developments’ under Article XIX:1(a).”(169)

100.     In adding to its discussion on the “specifics” of any determination, the Appellate Body on US — Steel Safeguards concluded that the competent authority shall provide a conclusion supported by facts and reasoning:

“The issue in this case is not whether certain data referred to in the USITC report had, in fact, been ‘considered’ by the USITC. The USITC may indeed have ‘considered’ all the relevant data contained in its report or referred to in the footnotes thereto. However, it did not use those data to explain how ‘unforeseen developments’ resulted in increased imports. Rather, as the Panel found, ‘the text to which the footnotes correspond is either totally unrelated to an explanation of unforeseen developments, or it deals generally with imports without specifying from where those imports came.’(170) Hence, what is wanting here is not the data, but the reasoning that uses those data to support the conclusion. The USITC did not, in our view, provide a conclusion that is supported by facts and reasoning, in short, a ‘reasoned conclusion’, as required by Article 3.1. Moreover, as we have stated previously, it was for the USITC, and not the Panel, to provide ‘reasoned conclusions’. It is not for the Panel to do the reasoning for, or instead of, the competent authority, but rather to assess the adequacy of that reasoning to satisfy the relevant requirement. In consequence, we cannot agree with the United States that the Panel was ‘required’ to consider the relevant data to which the USITC referred in other sections of its report to support the USITC’s finding that ‘unforeseen developments’ had resulted in increased imports; and, for the reasons mentioned, we do not see how our findings in EC — Tube or Pipe Fittings support the United States’ view to that effect.”(171)

(iii) “on all pertinent issues of law and fact”

101.     In US — Lamb, the Appellate Body stated that a published report within the meaning of Article 3.1 must also contain a finding on the existence of “unforeseen developments” within the meaning of Article XIX:1(a) of the GATT 1994:

“Article 3.1 requires competent authorities to set forth findings and reasoned conclusions on ‘all pertinent issues of fact and law’ in their published report. As Article XIX:1(a) of the GATT 1994 requires that ‘unforeseen developments’ must be demonstrated, as a matter of fact, for a safeguard measure to be applied, the existence of ‘unforeseen developments’ is, in our view, a ‘pertinent issue[] of fact and law’, under Article 3.1, for the application of a safeguard measure, and it follows that the published report of the competent authorities, under that Article, must contain a ‘finding’ or ‘reasoned conclusion’ on ‘unforeseen developments’.” (172)

(iv) Format of the report

102.     The Panel on US — Steel Safeguards, in a finding upheld by the Appellate Body, concluded that the report may be presented in different parts or in any other format:

“The Panel agrees with the United States that nothing in the requirement to publish a report dictates the form that the report must take, provided that the report complies with all of the other obligations contained in the Agreement on Safeguards and Article XIX of GATT 1994. In the end, it is left to the discretion of the Members to determine the format of the report, including whether it is published in parts, so long as it contains all of the necessary elements, including findings and reasoned conclusions on all pertinent issues of fact and law. Together, these parts can form the report of the competent authority.

The Panel believes that a competent authority’s report can be issued in different parts but such multi-part or multi-stage report must always provide for a coherent and integrated explanation proving satisfaction with the requirements of Article XIX of GATT 1994 and the Agreement on Safeguards, including the demonstration that unforeseen developments resulted in increased imports causing serious injury to the relevant domestic producers. Whether a report drafted in different parts or a multistage report constitutes ‘the report of the competent authority’ is to be determined on a case-by-case basis and will depend on the overall structure, logic and coherence between the various stages or the various parts of the report. If separate parts of the report are issued at different times, the discussion relating to unforeseen developments must, in all cases, be integrated logically in the overall explanation as to how the importing Member’s safeguard measure satisfies the requirements of Article XIX of GATT 1994 and the Agreement on Safeguards. The publication of a report in many stages may produce added difficulties for the competent authorities to set forth coherent findings in a reasoned and adequate manner.”(173)

(v) Timing of the report

103.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, explained that the timing of the explanation is a factor that can affect the reasonableness and adequacy of the explanation:

“The nature of the facts, including their complexity, will dictate the extent to which the relationship between the unforeseen developments and increased imports causing injury needs to be explained. The timing of the explanation [relating to unforeseen developments], its extent and its quality are all factors that can affect whether [that] explanation is reasoned and adequate.”(174)

(d) Relationship with other paragraphs of Article 3

104.     As regards the relationship of Article 3.1 with Article 3.2, see paragraph 110 below.

(e) Relationship with other Articles

105.     In US — Steel Safeguards, the Panel and the Appellate Body discussed the relationship between Articles 3.1 and 4.2(c) of the Agreement on Safeguards:

“We note further, as context, that Article 4.2(c) of the Agreement on Safeguards requires the competent authorities to:

… publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined. (emphasis added)

We observe that this requirement is expressed as being ‘in accordance with’ Article 3, and not ‘in addition’ thereto. Thus, we see Article 4.2(c) as an elaboration of the requirement set out in Article 3.1, last sentence, to provide a ‘reasoned conclusion’ in a published report.”(175)

(f) Relationship with other WTO Agreements

(i) Article XIX of the GATT 1994

106.     In US — Steel Safeguards, the Panel and the Appellate Body discussed the relationship between Article XIX of the GATT 1994 on unforeseen developments and Articles 3.1 and 4.2(c) of the Agreement on Safeguards:

“The United States argued at the oral hearing that ‘Article 4.2(c) does not apply to the competent authorities’ demonstration of unforeseen developments’(176) under Article XIX:1(a) of the GATT 1994. We disagree. Article 4.2(c) is an elaboration of Article 3; moreover ‘unforeseen developments’ under Article XIX:1(a) of the GATT 1994 is one of the ‘pertinent issues of fact and law’ to which the last sentence of Article 3.1 refers. It follows that Article 4.2(c) also applies to the competent authorities’ demonstration of ‘unforeseen developments’ under Article XIX:1(a).”(177)

(ii) Article 11 of the DSU

107.     In US — Steel Safeguards, the Appellate Body reviewed the relationship between Article 11 of the DSU and Articles 3.1 and 4.2 of the Agreement on Safeguards:

“It bears repeating that a panel will not be in a position to assess objectively, as it is required to do under Article 11 of the DSU, whether there has been compliance with the prerequisites that must be present before a safeguard measure can be applied, if a competent authority is not required to provide a ‘reasoned and adequate explanation’ of how the facts support its determination of those prerequisites, including ‘unforeseen developments’ under Article XIX:1(a) of the GATT 1994. A panel must not be left to wonder why a safeguard measure has been applied.

It is precisely by ‘setting forth findings and reasoned conclusions on all pertinent issues of fact and law’, under Article 3.1, and by providing ‘a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined’, under Article 4.2(c), that competent authorities provide panels with the basis to ‘make an objective assessment of the matter before it’ in accordance with Article 11. As we have said before, a panel may not conduct a de novo review of the evidence or substitute its judgement for that of the competent authorities.(178) Therefore, the ‘reasoned conclusions’ and ‘detailed analysis’ as well as ‘a demonstration of the relevance of the factors examined’ that are contained in the report of a competent authority, are the only bases on which a panel may assess whether a competent authority has complied with its obligations under the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994. This is all the more reason why they must be made explicit by a competent authority.”(179)

3. Article 3.2

(a) Confidential information

108.     In examining a claim concerning the omission from the published report of a safeguards investigation of certain information considered to be confidential by the investigating authorities, the Panel on US — Wheat Gluten interpreted the requirements of Article 3.2 concerning the treatment to be accorded to such confidential information:

“Article 3.2 [of the Agreement on Safeguards (“SA”)] places an obligation upon domestic investigating authorities not to disclose — including in their published report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law and demonstrating the relevance of the factors examined — information which is ‘by nature confidential or which is provided on a confidential basis’ without permission of the party submitting it. Article 3.2 SA does not define the term ‘confidential’ nor does it contain any examples of the type of information that might qualify as ‘by nature confidential’ or ‘information that is submitted on a confidential basis’.

Article 3.2 SA requires that information that is by nature confidential or which is submitted on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities. In the absence of a detailed elaboration or definition of the types of information that must be treated as confidential, we consider that the investigating authorities enjoy a certain amount of discretion in determining whether or not information is to be treated as ‘confidential’. While Article 3.2 does not specifically address the nature of any policies pertaining to the treatment of such ‘confidential’ information which a Member’s investigating authority may or must adopt, that provision does specify that such ‘information shall not be disclosed without permission of the party submitting it’. The provision is specific and mandatory in this regard. This furnishes an assurance that the confidentiality of qualifying information will be preserved in the course of a domestic safeguards investigation, and encourages the fullest possible disclosure of relevant information by interested parties.”(180)

109.     The Panel on US — Wheat Gluten subsequently addressed the argument that certain aggregate data could not be considered to be “confidential” within the meaning of Article 3.2, and that, even if it was confidential, it could have been presented in percentages and indexes:

“While the United States has described the USITC’s efforts to characterize as much confidential information as possible in its Report without compromising the confidential nature of that information, the USITC might ideally have been more creative in trying to provide the essence of the confidential information in its findings in the published USITC Report. We draw attention to the provision in Article 3.2 SA that parties providing confidential information in a domestic safeguard investigation ‘may be requested to furnish non-confidential summaries thereof or, if such parties indicate that such information cannot be summarized, the reasons why a summary cannot be provided …’ The language of this provision is hortatory. However, this is one vehicle envisaged by the Agreement on Safeguards that may provide a greater degree of transparency while respecting the confidentiality of qualifying information.

Nevertheless, given the small number of firms comprising the United States domestic industry (and the non-US producers and exporters) in this case; the fundamental importance of maintaining the confidentiality of sensitive business information in order to ensure the effectiveness of domestic safeguards investigations; the discretion implied in Article 3.2 SA for the investigating authorities to determine whether or not ‘cause’ has been shown for information to be treated as ‘confidential’; and the specific and mandatory prohibition in that provision against disclosure by them of such information without permission of the party submitting it, we cannot find that the United States has violated its obligations under Articles 2.1 and 4 SA, nor specifically under Article 4.2(c), by not disclosing, in the published report of the USITC, information qualifying under the USITC policy as information ‘which is by nature confidential or which is provided on a confidential basis’, including aggregate data.”(181)

(b) Relationship with other paragraphs of Article 3

110.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, addressed the issue of the relationship of Article 3.2 with Article 3.1:

“The Panel agrees that a competent authority is not barred from relying on data provided by individual parties on a confidential basis in the course of the investigation. Article 3.2 of the Agreement on Safeguards contains an obligation to treat such data as confidential, i.e. not to disclose it (without permission). In this sense, the Panel, therefore, takes a position similar to that of the Appellate Body in Thailand — H-Beams.(182) Competent authorities may rely on confidential data, even if these data are not disclosed to the public in their Reports.

However, Article 3.1 of the Agreement on Safeguards contains the obligation that competent authorities ‘publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law.’ Article 4.2(c) adds the obligation that competent authorities ‘publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined’. On the basis of these obligations and the obligation under Article 2.1, to make a determination, inter alia, that imports of the product in question have increased, competent authorities must provide a reasoned and adequate explanation of how the facts support the conclusion. In the view of the Panel, this requirement can, in an individual case, be limited by the obligation of Article 3.2 to protect confidential data.

However, we believe that Article 3.1 and 3.2 can be interpreted harmoniously.(183) The obligation of Article 3.1 cannot be interpreted so as to imply a violation of Article 3.2. In other words, a competent authority is obliged to provide these explanations to the fullest extent possible without disclosing confidential information. This implies that if there are ways of presenting data in a modified form (e.g. aggregation or indexing), which protects confidentiality, a competent authority is obliged to resort to these options. Conversely, the provision of no data at all is permitted only when all these methods fail in a particular case.

The Panel believes that even if competent authorities are permitted not to disclose the data yet, nevertheless, rely on it, they are still required to provide through means other than full disclosure of that data, a reasoned and adequate explanation. This obligation could be complied with through the kind of explanation that the USITC has provided on page 215 of its report,(184) i.e. an explanation in words and without numbers. However, this obligation also includes an explanation by the competent authority of why there was no possibility of presenting any facts in a manner consistent with the obligation of protecting confidential information. That explanation was not provided in the instant case.”(185)

(c) Relationship with other WTO Agreements

(i) Articles 11 and 13 of the DSU

111.     The Panel on US — Wheat Gluten commented on the relationship between Article 3.2 of the Agreement on Safeguards and Article 13 of the DSU. This Panel had taken certain steps to have access to certain information that had not been included in the published report of the investigation at issue on account of its confidential nature, but the parties were unable to reach agreement on the procedures proposed by the Panel for viewing this information.(186) In light of this disagreement between the parties, the Panel had decided not to adopt these procedures. The report then commented as follows:

“In our view, the protracted exchange of communications between the parties about the circumstances under which the Panel should view the requested information demonstrates the existence of a serious systemic issue as to the relationship between, on the one hand, the confidentiality obligations under Article 3.2 SA of a Member’s investigating authorities with respect to confidential information obtained in the course of a domestic safeguards investigation and, on the other hand, the duties of Members when faced with a panel request for such confidential information under Article 13 DSU. The Panel’s efforts to develop a consensual approach to the conditions under which the Panel might view the requested information were ultimately unsuccessful.”(187)

112.     Although in US — Wheat Gluten, the Panel concluded that the record before it, without the confidential information, provided a sufficient basis for an objective assessment of the facts as required by Article 11 of the DSU, it cautioned that “the WTO dispute settlement system cannot function optimally if relevant information is withheld from a panel”.(188) The Appellate Body on US — Wheat Gluten endorsed this finding:

“[We agree] with the panel that a ‘serious systemic issue’ is raised by the question of the procedures which should govern the protection of information requested by a panel under Article 13.1 of the DSU and which is alleged by a Member to be ‘confidential’. We believe that these issues need to be addressed.”(189)

113.     The Appellate Body on US — Wheat Gluten also shared the concerns expressed by the Panel related to the proper functioning of the WTO dispute settlement system:

“[T]he refusal by a Member to provide information requested of it undermines seriously the ability of a panel to make an objective assessment of the facts and the matter, as required by Article 11 of the DSU. Such a refusal also undermines the ability of other Members of the WTO to seek the ‘prompt’ and ‘satisfactory’ resolution of disputes under the procedures ‘for which they bargained in concluding the DSU’.”(190)

V. Article 4    back to top

A. Text of Article 4

Article 4: Determination of Serious Injury or Threat Thereof

1.     For the purposes of this Agreement:

(a)     “serious injury” shall be understood to mean a significant overall impairment in the position of a domestic industry;

(b)     “threat of serious injury” shall be understood to mean serious injury that is clearly imminent, in accordance with the provisions of paragraph 2. A determination of the existence of a threat of serious injury shall be based on facts and not merely on allegation, conjecture or remote possibility; and

(c)     in determining injury or threat thereof, a “domestic industry” shall be understood to mean the producers as a whole of the like or directly competitive products operating within the territory of a Member, or those whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products.

2.     (a)     In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry under the terms of this Agreement, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment.

(b)     The determination referred to in subparagraph (a) shall not be made unless this investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.

(c)     The competent authorities shall publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined.

 
B. Interpretation and Application of Article 4

1. Article 4.1(a)

(a) “serious injury” as “significant overall impairment” in the position of the domestic industry

(i) “serious injury” as a high standard of injury

114.     The Appellate Body on US — Lamb also described “serious injury” as a “very high standard of injury”:

“The standard of ‘serious injury’ set forth in Article 4.1(a) is, on its face, very high. Indeed, in United States — Wheat Gluten Safeguard, we referred to this standard as ‘exacting’. Further, in this respect, we note that the word ‘injury’ is qualified by the adjective ‘serious’, which, in our view, underscores the extent and degree of ‘significant overall impairment’ that the domestic industry must be suffering, or must be about to suffer, for the standard to be met.

…

[I]n making a determination on … the existence of ‘serious injury’ … panels must always be mindful of the very high standard of injury implied by these terms.”(191)

115.     Moreover, the Appellate Body, also on US — Lamb, juxtaposed the concept of “serious injury” in the Agreement on Safeguards and the concept of “material injury” contained in the Anti-Dumping Agreement and the SCM Agreement:

“We are fortified in our view that the standard of ‘serious injury’ in the Agreement on Safeguards is a very high one when we contrast this standard with the standard of ‘material injury’ envisaged under the Anti-Dumping Agreement, the Agreement on Subsidies and Countervailing Measures (the ‘SCM Agreement’) and the GATT 1994. We believe that the word ‘serious’ connotes a much higher standard of injury than the word ‘material’.(192) Moreover, we submit that it accords with the object and purpose of the Agreement on Safeguards that the injury standard for the application of a safeguard measure should be higher than the injury standard for anti-dumping or countervailing measures, since, as we have observed previously:

‘[t]he application of a safeguard measure does not depend upon ‘unfair’ trade actions, as is the case with anti-dumping or countervailing measures. Thus, the import restrictions that are imposed on products of exporting Members when a safeguard action is taken must be seen, as we have said, as extraordinary. And, when construing the prerequisites for taking such actions, their extraordinary nature must be taken into account.’(193)”(194)

(ii) Evaluation of all injury factors

116.     In Argentina — Footwear (EC), the Appellate Body discussed the relationship between the definition of “serious injury” in Article 4.1(a) and the requirement of an evaluation of “all relevant factors” in Article 4.2(a):

“[I]t is only when the overall position of the domestic industry is evaluated, in light of all the relevant factors having a bearing on a situation of that industry, that it can be determined whether there is ‘a significant overall impairment’ in the position of that industry. Although Article 4.2(a) technically requires that certain listed factors must be evaluated, and that all other relevant factors must be evaluated, that provision does not specify what such an evaluation must demonstrate. Obviously, any such evaluation will be different for different industries in different cases, depending on the facts of the particular case and the situation of the industry concerned. An evaluation of each listed factor will not necessarily have to show that each such factor is ‘declining’. In one case, for example, there may be significant declines in sales, employment and productivity that will show ‘significant overall impairment’ in the position of the industry, and therefore will justify a finding of serious injury. In another case, a certain factor may not be declining, but the overall picture may nevertheless demonstrate ‘significant overall impairment’ of the industry. Thus, in addition to a technical examination of whether the competent authorities in a particular case have evaluated all the listed factors and any other relevant factors, we believe that it is essential for a panel to take the definition of ‘serious injury’ in Article 4.1(a) of the Agreement on Safeguards into account in its review of any determination of ‘serious injury’.”(195)

117.     The Panel on US — Wheat Gluten, in a finding upheld by the Appellate Body, elaborated on the meaning of the term “serious injury”:

“[A] determination as to the existence of such ‘significant overall impairment’ can be made only on the basis of an evaluation of the overall position of the domestic industry, in light of all the relevant factors having a bearing on the situation of that industry.

…

[W]e do not consider that a negative trend in every single factor examined is necessary in order for an industry to be in a position of significant overall impairment. Rather, it is the totality of the trends, and their interaction, which must be taken into account in a serious injury determination. Thus, such upturns in a number of factors would not necessarily preclude a determination of serious injury. It is for the investigating authorities to assess and weigh the evidence before them, and to give an adequate, reasoned and reasonable explanation of how the facts support the determination made.”(196)

118.     The Appellate Body on US — Wheat Gluten held that “serious injury” should be determined on the basis of all relevant factors:

“The term ‘serious injury’ is defined as ‘a significant overall impairment in the position of a domestic industry’. (emphasis added) The breadth of this term also suggests that all factors relevant to the overall situation of the industry should be included in the competent authorities’ determination.”(197)

119.     In reviewing a determination of the existence of a threat of serious injury, the Panel on US — Lamb found that not each of the listed injury factors in Article 4.2 (a) need show a declining tendency. Rather, a determination of serious injury within the meaning of Article 4.1(b) requires an assessment of all injury factors “as a whole”:

“[W]e do not exclude that in the particular circumstances of a case, e.g., prices remaining at a depressed level for a longer period may be sufficient for a determination on the whole that an industry is threatened with serious injury even if a given injury factor does not show a recent, sharp and sudden decline. Also, a threat finding does not require that, e.g., financial performance of each individual firm operating in the industry show a decline. A competent national authority may arrive at a threat determination even if the majority of firms within the relevant industry is not facing declining profitability, provided that an evaluation of the injury factors as a whole indicates threat of serious injury.

…

… Article 4.1(b) and 4.2(a) do not require the competent national authority to show that each listed injury factor is declining, i.e., point in the direction of serious injury or threat thereof. The competent national authority is required to make its determination in the light of the developments of injury factors on the whole in order to determine whether the relevant industry’s condition is facing ‘significant overall impairment’ in the industry’s condition is imminent.”(198)

(b) “current” serious injury

120.     The Panel on US — Wheat Gluten considered that, as the investigation of increased imports should focus on recent imports, serious injury should also be found to exist within the recent past. (The Appellate Body did not specifically address this finding.)

“[A]ny determination of serious injury must pertain to the recent past. This flows from the wording of the text of Article XIX:1(a) of the GATT 1994 and Article 2.1 SA, which requires an examination as to whether a product ‘is being imported’ ‘in such increased quantities … and under such conditions as to cause or threaten serious injury…’. The use of the present tense of the verb in the phrase ‘is being imported’ in that provision indicates that it is necessary for the competent authorities to examine recent imports. It seems to us logical that if the increase in imports that the investigating authorities must examine must be recent, so also must be any basis for a determination by the authorities as to the situation of the domestic industry. Given that a safeguard measure will necessarily be based upon a determination of serious injury concerning a previous period, we consider it essential that current serious injury be found to exist, up to and including the very end of the period of investigation.(199)”(200)

2. Article 4.1(b)

(a) Serious injury “that is clearly imminent”; determination of a threat of serious injury “based on facts and not merely on allegation, conjecture or remote possibility”

121.     The Panel on US — Lamb interpreted Article 4.1(b) to signify that an industry’s overall impairment “needs to be ‘ready to take place’(201) or ‘be impending, soon to happen … event, especially danger or disaster’”.(202) Next, the Panel stated that a determination of a threat of serious injury has to be based on facts and not on allegation, conjecture, or remote possibility. The Panel concluded (i) that a threat determination needs to be based on an analysis which takes objective and verifiable data from the recent past (i.e. the latter part of an investigation period) as a starting-point so as to avoid basing a determination on allegation, conjecture or remote possibility; (ii) that factual information from the recent past, complemented by fact-based projections concerning developments in the industry’s condition, and concerning imports in the imminent future, needs to be taken into account in order to ensure an analysis of whether a significant overall impairment of the relevant industry’s position is imminent in the near future; (iii) that the analysis needs to determine whether injury of a serious degree will actually occur in the near future unless safeguard action is taken.(203) The Appellate Body’s approach largely coincided with the Panel’s:

“[W]e note that th[e] term [‘threat of serious injury’] is concerned with ‘serious injury’ which has not yet occurred, but remains a future event whose actual materialization cannot, in fact, be assured with certainty. We note, too, that Article 4.1(b) builds on the definition of ‘serious injury’ by providing that, in order to constitute a ‘threat’, the serious injury must be ‘clearly imminent‘. The word ‘imminent’ relates to the moment in time when the ‘threat’ is likely to materialize. The use of this word implies that the anticipated ‘serious injury’ must be on the very verge of occurring. Moreover, we see the word ‘clearly’, which qualifies the word ‘imminent’, as an indication that there must be a high degree of likelihood that the anticipated serious injury will materialize in the very near future. We also note that Article 4.1(b) provides that any determination of a threat of serious injury ‘shall be based on facts and not merely on allegation, conjecture or remote possibility.’ (emphasis added) To us, the word ‘clearly’ relates also to the factual demonstration of the existence of the ‘threat’. Thus, the phrase ‘clearly imminent’ indicates that, as a matter of fact, it must be manifest that the domestic industry is on the brink of suffering serious injury.”(204)

122.     In US — Lamb, the Appellate Body also reiterated the strict standard of “serious injury” in the context of the “threat of serious injury”:

“We recall that, in Argentina — Footwear Safeguard, we stated that ‘it is essential for a panel to take the definition of “serious injury” in Article 4.1(a) of the Agreement on Safeguards into account in its review of any determination of “serious injury”.’(205) The same is equally true for the definition of ‘threat of serious injury’ in Article 4.1(b) of that Agreement. Thus, in making a determination on either the existence of ‘serious injury’, or on a ‘threat’ thereof, panels must always be mindful of the very high standard of injury implied by these terms.”(206)

123.     The Panel on US — Lamb considered that a focus on the recent data available pertaining to the end of an investigation period was logical in view of the future-oriented nature of a threat of serious injury analysis:

“In our view, due to the future-oriented nature of a threat analysis, it would seem logical that occurrences at the beginning of an investigation period are less relevant than those at the end of that period. While the SG Agreement does not specify the appropriate duration of the time-period to be considered in an investigation, the Panel and Appellate Body in Argentina — Footwear both considered this issue to some extent. Both concluded that (for an actual serious injury finding) the most recent data were clearly the most relevant. In particular, the Appellate Body stated that ‘the relevant investigation period should not only end in the very recent past, the investigation period should be the recent past’.

Given that a threat of serious injury pertains to imminent significant overall impairment, i.e., an event to take place in the immediate future, the same principle should hold true a fortiori for threat determinations compared with present serious injury determinations. This supports the view that the USITC was correct to focus on the most recent data available from the end of the investigation period. We also consider that data from 1997 and interim-1998 cover an adequate and reasonable time-period if complemented by projections extrapolating existing trends into the imminent future so as to ensure the prospective analysis which a threat determination requires.

Therefore, we consider that, by basing its determination on events at the end of the investigation period (i.e., one year and nine months) rather than over the course of the entire investigation period, the USITC analysed sufficiently recent data for making a valid evaluation of whether significant overall impairment was “imminent” in the near future. By the same token, we also consider that, by basing its determination at all on data about events from the recent past, rather than relying exclusively on projections for the various industry indicators into the future, the USITC made its threat determination on the basis of objective and quantifiable facts, and ‘not merely on allegation, conjecture or remote possibility’.”(207)

(b) Increased imports as a prerequisite for a determination of threat of serious injury

124.     The Panel on Argentina — Footwear (EC) considered that a mere threat of increased imports is insufficient for the purposes of a determination of threat of serious injury (the Appellate Body did not explicitly address this issue):

“[I]f only a threat of increased imports is present, rather than actual increased imports, this is not sufficient. Article 2.1 requires an actual increase in imports as a basic prerequisite for a finding of either threat of serious injury or serious injury. A determination of the existence of a threat of serious injury due to a threat of increased imports would amount to a determination based on allegation or conjecture rather than one supported by facts as required by Article 4.1(b).”(208)

125.     The Panel on US — Lamb, in a finding subsequently not reviewed by the Appellate Body, addressed the question whether, once imports have increased to already cause already some degree of injury, there is a requirement of additional increased imports in order to legitimately determine the existence of a threat of serious injury:

“The complainants further claim that the US reference to projections of future increases in imports in defending its threat analysis amounts to equating a ‘threat of increased imports’ with a ‘threat of serious injury’, which the Argentina — Footwear panel found not to be permissible.

…

We agree in general with the complainants’ argument that a threat of increased imports as such cannot be equated with threat of serious injury. However, in our view, this is not what the USITC has done in this case. Moreover, we also deem it possible that imports continuing on an elevated level for a longer period without further increasing at the end of the investigation period may, if unchecked, go on to cause serious injury (i.e., may threaten to cause serious injury). That is, if increased imports at a certain point in time cause less than serious injury, it is not necessarily true that a threat of serious injury can only be caused by a further increase, i.e., additional increased imports. In our view, in the particular circumstances of a case, a continuation of imports at an already recently increased level may suffice to cause such threat.”(209)

(c) Relationship between a determination of the existence of serious injury and a determination of the existence of a threat of serious injury

126.     The Panel on Argentina — Footwear (EC) observed that in the dispute before it, it was not necessary “to rule on the question of whether it is possible to make simultaneously findings of serious injury and threat of serious injury”.(210)

(d) Relationship with Article 4.1(c)

127.     In US — Lamb, the Panel held that the definition of domestic industry by the United States authorities was inconsistent with Article 4.1(c) of the Agreement on Safeguards. The Panel then explained its decision not to exercise judicial economy, but rather to proceed to examine other claims, including those pertaining to Article 4.1(b):

“A finding that the industry definition used by the USITC is inconsistent with SG Article 4.1(c) would appear to compromise the investigation and determination overall…. [T]he Appellate Body focuses on the need for panels to address all claims and/or measures necessary to secure a positive solution to a dispute and adds that providing only a partial resolution of the matter at issue would be false judicial economy. It is in the spirit of the Appellate Body’s statements in Australia — Salmon that we continue with an analysis of other claims in the alternative, assuming arguendo either (1) that the USITC’s industry definition were consistent with the Safeguards Agreement or (2) that, as the United States argues in the alternative, the USITC would have made a finding of threat of serious injury even if the industry definition had been limited to packers and breakers.”(211)

3. Article 4.1(c)

(a) “domestic industry” — “producers as a whole … of the like or directly competitive products”

128.     In US — Lamb the Appellate Body concurred with the finding of the Panel in that dispute that in the context of an investigation in which the relevant like product was defined as lamb meat, the term “domestic industry” could not be interpreted as including growers and feeders of live lambs. The Appellate Body began by identifying the analytical approach towards defining “domestic industry”:

“Accordingly, the first step in determining the scope of the domestic industry is the identification of the products which are ‘like or directly competitive’ with the imported product. Only when those products have been identified is it possible then to identify the ‘producers’ of those products.”(212)

129.     The Appellate Body first considered the definition of “domestic industry” with reference to products:

“[A] safeguard measure is imposed on a specific ‘product’, namely, the imported product. The measure may only be imposed if that specific product (‘such product’) is having the stated effects upon the ‘domestic industry that produces like or directly competitive products’. (emphasis added) The conditions in Article 2.1, therefore, relate in several important respects to specific products. In particular, according to Article 2.1, the legal basis for imposing a safeguard measure exists only when imports of a specific product have prejudicial effects on domestic producers of products that are ‘like or directly competitive’ with that imported product. In our view, it would be a clear departure from the text of Article 2.1 if a safeguard measure could be imposed because of the prejudicial effects that an imported product has on domestic producers of products that are not ‘like or directly competitive products’ in relation to the imported product.”(213)

130.     After addressing the definition of “domestic industry” with respect to products, the Appellate Body in US — Lamb then proceeded to consider the issue of producers:

“As the Panel indicated, ‘producers’ are those who grow or manufacture an article; ‘producers’ are those who bring a thing into existence. This meaning of ‘producers’ is, however, qualified by the second element in the definition of ‘domestic industry’. This element identifies the particular products that must be produced by the domestic ‘producers’ in order to qualify for inclusion in the ‘domestic industry’. According to the clear and express wording of the text of Article 4.1(c), the term ‘domestic industry’ extends solely to the ‘producers … of the like or directly competitive products’. (emphasis added) The definition, therefore, focuses exclusively on the producers of a very specific group of products. Producers of products that are not ‘like or directly competitive products’ do not, according to the text of the treaty, form part of the domestic industry.”(214)

131.     In US — Lamb, the Appellate Body upheld the findings of the Panel and also concluded that the definition of “domestic industry” by the United States authorities was too broad:

“There is no dispute that in this case the ‘like product’ is ‘lamb meat’, which is the imported product with which the safeguard investigation was concerned. The USITC considered that the ‘domestic industry’ producing the ‘like product’, lamb meat, includes the growers and feeders of live lambs. The term ‘directly competitive products’ is not, however, at issue in this dispute as the USITC did not find that there were any such products in this case.(215)

“In this respect, we are not persuaded that the words ‘as a whole’ in Article 4.1(c), appearing in the phrase ‘producers as a whole’, offer support to the United States position. These words do not alter the requirement that the ‘domestic industry’ extends only to producers of ‘like or directly competitive products’. The words ‘as a whole’ apply to ‘producers’ and, when read together with the terms ‘collective output’ and ‘major proportion’ which follow, clearly address the number and the representative nature of producers making up the domestic industry. The words ‘as a whole’ do not imply that producers of other products, which are not like or directly competitive with the imported product, can be included in the definition of domestic industry. Like the Panel, we see the words ‘as a whole’ as no more than ‘a quantitative benchmark for the proportion of producers … which a safeguards investigation has to cover.’”(216)

132.     The Appellate Body on US — Lamb expressed scepticism that the degree of integration of production processes within an industry should have any bearing on the determination of the “domestic industry”.

“Although we do not disagree with the Panel’s analysis of the USITC Report, nor with the conclusions it drew from that analysis, we have reservations about the role of an examination of the degree of integration of production processes for the products at issue. As we have indicated, under the Agreement on Safeguards, the determination of the “domestic industry” is based on the ‘producers … of the like or directly competitive products’. The focus must, therefore, be on the identification of the products, and their ‘like or directly competitive’ relationship, and not on the processes by which those products are produced. (217)”(218)

(b) “those whose collective output … constitutes a major proportion”

133.     The Panel on US — Wheat Gluten addressed the link between the phrase “major proportion” and the question of data coverage:

“[T]he Agreement expressly envisages that, in certain circumstances, the ‘domestic industry’ may consist of those domestic producers ‘whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products’. This implies that complete data coverage may not always be possible and is not required. While the fullest possible data coverage is required in order to maximize the accuracy of the investigation, there may be circumstances in a particular case which do not allow an investigating authority to obtain such coverage. In this case, the fact that the USITC record included full period data for only two domestic producers was partially a result of the fact that Heartland became part of the domestic industry only in 1996. Furthermore, the profitability data provided by ADM did not pertain specifically to the domestic industry under investigation and was therefore excluded.

Moreover, the USITC found that ‘[p]rofitability reflected the trends in average unit value prices, which initially rose and then fell.’ The USITC had before it data pertaining to unit value from all producers, including ADM. The concurrence in trends between these two factors supports the view that the profitability data used by the USITC was representative of the domestic industry’s situation.

On the basis of the information contained, or referred to, in the sections of the USITC Report relating to profits and losses and the statement by the USITC that the three domestic producers that provided usable financial data on wheat gluten ‘accounted for the substantial majority of domestic production of wheat gluten’, we find that the United States did not act inconsistently with Article 4.2(a) in terms of the coverage of the ‘profits and losses’ data.”(219)

134.     In contrast to the Panel’s findings on US — Wheat Gluten, the Panel on US — Lamb held that the data gathered by the investigating authorities in the specific case were not sufficiently representative of those producers whose collective output constitutes a major proportion of the products in question:

“[T]he crucial problem with the data used by the USITC relates to the representativeness of the questionnaire data where they were used (e.g., employment, financial indicators), and not with the use of USDA data where available. In particular the low data coverage for growers and feeders (approximately six per cent), the lack of financial data for interim 1997 and 1998 for grower/feeders, and the uneven data coverage for packers and breakers (especially in the financial data as outlined above) raises serious doubts as to whether the data represent a ‘major proportion’ of the domestic industry, in the sense of SG Article 4.1(c).”(220)

135.     The Panel on US — Lamb also pointed out that an incorrect determination of what constitutes the “domestic industry” will likely vitiate also the representativeness of data related to such incorrectly determined domestic industry:

“This lack of representativeness is likely compounded by the fact that the USITC defined the domestic industry broadly as including growers and feeders, as the conclusions drawn from the data pertaining to only a small proportion of US growers and feeders are central to the USITC’s overall finding of threat of serious injury.”(221)

136.     The Panel on US — Lamb made clear that a national authority is not under an obligation to collect information from all domestic producers so as to ensure the representativeness of the data used for its final determination. Nevertheless, the Panel invoked, among other things, the need for a “statistically valid sample”:

“We agree with the United States that the Safeguards Agreement does not specify any particular methodology to ensure the representativeness of data collected in an investigation. But we also note that the USITC itself concedes that the questionnaire responses do not constitute a statistically valid sample of the producers which, in the USITC’s view, form an essential part of the domestic industry. While, again accepting arguendo the USITC’s industry definition,(222) we recognize that in practical terms it would have been impossible for the USITC to collect data from all of the more than 70,000 growers, we nevertheless believe that the USITC could have obtained data from a larger percentage of the growers than it did or from a statistically valid sample, so as to ensure that the data collected were representative of growers as a whole. In any case, petitioners requesting the initiation of an investigation could not automatically be taken to represent a major proportion of the domestic industry.

In the light of the foregoing, we conclude that on the basis of the information made available by the United States in this dispute (and absent more detailed information on the exact coverage of the questionnaire responses), by industry segment and by injury factor, we are not persuaded that the data used as a basis for the USITC’s determination in this case was sufficiently representative of ‘those producers whose collective output … constitutes a major proportion of the total domestic production of those products’ within the meaning of SG Article 4.1(c).”(223)

(c) Relationship with other Articles

137.     With respect to the relationship with Article 4.1(b), see paragraph 127 above.

4. Article 4.2(a)

(a) “shall evaluate all relevant factors”

(i) Relationship between the requirement to evaluate all relevant factors and the definition of serious injury in Article 4.1(a)

138.     With respect to the relationship between the requirement to evaluate all relevant factors and the definition of serious injury in Article 4.1(a), see paragraphs 116–118 above.

(ii) “All” relevant factors — factors relating to imports and factors relating to the domestic industry

139.     In the context of reversing the interpretation by the Panel on US — Wheat Gluten of the requisite causal link between increased imports and serious injury, the Appellate Body held that a national authority should consider all the factors listed in Article 4.2(a), regardless of whether they relate to imports specifically or to the domestic industry more generally. The Appellate Body did not consider that Article 4.2(a) attached any special significance to any one of these factors in particular:

“The use of the word ‘all’ in the phrase ‘all relevant factors’ in Article 4.2(a) indicates that the effects of any factor may be relevant to the competent authorities’ determination, irrespective of whether the particular factor relates to imports specifically or to the domestic industry more generally. This conclusion is borne out by the list of factors which Article 4.2(a) stipulates are, ‘in particular’, relevant to the determination. This list includes factors that relate both to imports specifically and to the overall situation of the domestic industry more generally. The language of the provision does not distinguish between, or attach special importance or preference to, any of the listed factors. In our view, therefore, Article 4.2(a) of the Agreement on Safeguards suggests that all these factors are to be included in the determination and that the contribution of each relevant factor is to be counted in the determination of serious injury according to its ‘bearing’ or effect on the situation of the domestic industry. Thus, we consider that Article 4.2(a) does not support the Panel’s conclusion that some of the ‘relevant factors’ — those related exclusively to increased imports — should be counted towards an affirmative determination of serious injury, while others — those not related to increased imports — should be excluded from that determination.”(224)

140.     In US — Wheat Gluten, after finding that the phrase “all relevant factors” under Article 4.2(a) refers to factors relating both to imports and to the domestic industry, the Appellate Body further held that the determination of “causality” under Article 4.2(b) must give the phrase “all relevant factors” the same meaning as under Article 4.2(a). The Appellate Body noted that Article 4.2(a) imposes an obligation to evaluate (and by implication to include) the effect of all the relevant factors on the domestic industry and went on to state that this obligation under Article 4.2(a) would be violated if the very same effects, caused by those same factors, were — with the exception of increased imports — to be excluded from consideration under Article 4.2(b).

“We believe that Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards must be given a mutually consistent interpretation, particularly in light of the explicit textual connection between these two provisions. According to the opening clause of Article 4.2(b) — “The determination referred to in subparagraph (a) shall not be made unless …” — both provisions lay down rules governing a single determination, made under Article 4.2(a). In our view, it would contradict the requirement in Article 4.2(a) to evaluate — and, thereby, include in the determination — the ‘bearing’ or effect all the relevant factors have on the domestic industry, if those same effects, caused by those same factors, were, with the exception of increased imports, to be excluded under Article 4.2(b), as the Panel suggested.”(225)

(iii) Requirement to consider all factors listed in Article 4.2(a)

141.     The Panel on Korea — Dairy found, with respect to the list of factors contained in Article 4.2(a), that the national investigating authority was under an obligation to evaluate all of these factors:

“This provision sets out the general principle regarding the economic factors which need to be considered in a serious injury investigation, and provides a list of factors that are a priori considered to be especially relevant and informative of the situation of the domestic industry. The use of the wording ‘in particular’ makes it clear to us that, among ‘all relevant factors’ that the investigating authorities ‘shall evaluate’, the consideration of the factors listed is always relevant and therefore required, even though the authority may later dismiss some of them as not having a bearing on the situation of that industry.”(226)

142.     The Panel on Argentina — Footwear (EC) in a finding subsequently upheld by the Appellate Body, made a similar statement:

“We note, first, that the text of Article 4.2(a) of the Safeguards Agreement explicitly requires the evaluation of ‘all relevant factors’, in particular those listed in that article. Second, Article 6.4 of the ATC contains no such express requirement and recognises that ‘none of these factors … can necessarily give decisive guidance. Nonetheless, the panels on United States — Underwear and United States — Shirts and Blouses ruled that each and every injury factor mentioned in Article 6.4 of the ATC has to be considered by the national authority. With regard to the obligation to evaluate ‘all relevant factors’ we consider these past panel reports relevant. Consequently, in accordance with the text of the Safeguards Agreement and past practice, we consider that an evaluation of all factors listed in Article 4.2(a) is required.

…

… we must consider, first, whether all injury factors listed in the Agreement were considered by Argentina as the text of Article 4.2(a) of the Agreement (‘all relevant factors…. including … changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment’) is unambiguous that at a minimum each of the factors listed, in addition to all other factors that are ‘relevant’, must be considered.”(227)

143.     The Appellate Body on Argentina — Footwear (EC) agreed “with the Panel’s interpretation that Article 4.2(a) of the Agreement on Safeguards requires a demonstration that the competent authorities evaluated, at a minimum, each of the factors listed in Article 4.2(a) as well as all other factors that are relevant to the situation of the industry concerned”.(228)

144.     The Panel on US — Wheat Gluten reiterates this standard:

“[T]he language in this provision is mandatory (‘shall…’). Furthermore, this list is preceded by the term ‘in particular…’. On the basis of the text of the provision, we therefore concur with the shared view of the parties that all of the factors listed in Article 4.2(a) must be evaluated. Of course, an examination of any one of those factors in a given case may lead the investigating authority to conclude that a particular factor is not probative in the circumstances of a particular industry or a particular case, and therefore is not relevant to the actual determination.”(229)

(iv) Standard of review

145.     In Argentina — Footwear (EC), the Appellate Body reiterated its statement in EC — Hormones, and upheld the findings by the Panel that the Agreement on Safeguards is silent as to the appropriate standard of review. Therefore, the “objective assessment” requirement under Article 11 of the DSU sets forth the appropriate standard of review for examining the WTO-consistency of a safeguard measure. With respect to the application of the standard of review, the Appellate Body ruled that a panel is obliged to assess whether the importing authorities “had examined all the relevant facts and had provided a reasoned explanation of how the facts supported their determination”. In addition to “an objective assessment of the facts”, the Appellate Body in Argentina — Footwear (EC) held that a panel shall examine “the applicability of and conformity with the relevant covered agreements”. Specifically, the Appellate Body found that Article 11 of the DSU requires a panel to correctly interpret and apply the substantive provisions of Articles 2 and 4 of the Agreement on Safeguards, in particular, those relating to the requirements of imports “in such increased quantities”, “serious injury” to the domestic industry, and causation:

“Although that case dealt with the panel’s assessment of the facts, and this case deals with the Panel’s assessment of the matter, more generally, the same reasoning applies here. The Agreement on Safeguards, like the Agreement on the Application of Sanitary and Phytosanitary Measures, is silent as to the appropriate standard of review. Therefore, Article 11 of the DSU, and, in particular, its requirement that, … a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, sets forth the appropriate standard of review for examining the consistency of a safeguard measure with the provisions of the Agreement on Safeguards.

Based on our review of the Panel’s reasoning, we find that the Panel correctly stated the appropriate standard of review, as set forth in Article 11 of the DSU. And, with respect to its application of the standard of review, we do not believe that the Panel conducted a de novo review of the evidence, or that it substituted its analysis and judgement for that of the Argentine authorities. Rather, the Panel examined whether, as required by Article 4 of the Agreement on Safeguards, the Argentine authorities had considered all the relevant facts and had adequately explained how the facts supported the determinations that were made. Indeed, far from departing from its responsibility, in our view, the Panel was simply fulfilling its responsibility under Article 11 of the DSU in taking the approach it did. To determine whether the safeguard investigation and the resulting safeguard measure applied by Argentina were consistent with Article 4 of the Agreement on Safeguards, the Panel was obliged, by the very terms of Article 4, to assess whether the Argentine authorities had examined all the relevant facts and had provided a reasoned explanation of how the facts supported their determination.

In addition to ‘an objective assessment of the facts’, we note, too, that part of the ‘objective assessment of the matter’ required of a panel by Article 11 of the DSU is an assessment of ‘the applicability of and conformity with the relevant covered agreements’. Consequently, we must also examine whether the Panel correctly interpreted and applied the substantive provisions of Articles 2 and 4 of the Agreement on Safeguards, in particular, those relating to the requirements of imports ‘in such increased quantities’, ‘serious injury’ to the domestic industry, and causation.”(230)

146.     In US — Lamb, the Appellate Body articulated the standard of review for a national authority’s determination of serious injury or threat thereof:

“[I]n examining a claim under Article 4.2 of the Agreement on Safeguards, a panel’s application of the appropriate standard of review of the competent authorities’ determination has two aspects. First, a panel must review whether the competent authorities have, as a formal matter, evaluated all relevant factors and, second, a panel must review whether those authorities have, as a substantive matter, provided a reasoned and adequate explanation of how the facts support their determinations.”(231)

147.     The Appellate Body’s application of its standard of review toward a national authority’s determination of serious injury or threat thereof is illustrated by its findings in US — Lamb. Here, after criticizing the United States authorities’ determination of threat of serious injury, the Appellate Body stated:

“We wish to emphasize again that our remarks about the price data are not intended to suggest that the domestic industry was not threatened with serious injury. Rather, our conclusion is simply that the USITC has not adequately explained how the facts relating to prices support its determination, under Article 4.2(a), that the domestic industry was threatened with such injury.”(232)

148.     Although on US — Lamb the Appellate Body agreed with the Panel’s articulation of the appropriate standard of review, it held that the Panel had not applied this standard correctly in that case. The Appellate Body took issue with the fact that the Panel had considered the evaluation of certain factors to be ‘a sufficient basis’ for the national authorities’ determination, but did not engage in any substantive review of these factors. The Appellate Body found that the Panel had not applied the required standards of review because:

“[B]y failing to review the USITC’s determination in light of these detailed substantive arguments, [it] failed to examine critically whether the USITC had, indeed, provided a reasoned and adequate explanation of how the facts supported its determination that there existed a ‘threat of serious injury’.”(233)

149.     The Appellate Body on US — Cotton Yarn, in the context of examination of a transitional textile safeguard under Article 6 of the ATC, found that a panel “must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority”, and summarized the standard of review for past safeguard disputes as follows:

“Our Reports in these disputes under the Agreement on Safeguards spell out key elements of a panel’s standard of review under Article 11 of the DSU in assessing whether the competent authorities complied with their obligations in making their determinations. This standard may be summarized as follows: panels must examine whether the competent authority has evaluated all relevant factors; they must assess whether the competent authority has examined all the pertinent facts and assessed whether an adequate explanation has been provided as to how those facts support the determination; and they must also consider whether the competent authority’s explanation addresses fully the nature and complexities of the data and responds to other plausible interpretations of the data. However, panels must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority.”(234)

(v) “of an objective and quantifiable nature”

150.     In its determination of what would constitute “factors of an objective and quantifiable nature” within the meaning of Article 4.2(a), the Appellate Body in US — Lamb opined that the requirement of objectivity and quantifiability applies, not only to factors, but also to data, the evaluation of which would “enable the measurement and quantification of these factors”. The Appellate Body then specified that for data to be “objective and quantifiable”, such data would have to be both sufficient and representative of the domestic industry:

“We note that no provision of the Agreement on Safeguards specifically addresses the question of the extent of data collection, and in particular, whether competent authorities must have before them data that is representative of the domestic industry. However … competent authorities are obliged to ‘evaluate’ all relevant factors of an ‘objective and quantifiable’ nature … We recognize that the clause ‘of an objective and quantifiable nature’ refers expressly to ‘factors’, but not expressly to data. We are, however, convinced that factors can only be ‘of an objective and quantifiable nature’ if they allow a determination to be made, as required by Article 4.2(b) of the Agreement on Safeguards, on the basis of ‘objective evidence’. Such evidence is, in principle, objective data. The words ‘factors of an objective and quantifiable nature’ imply, therefore, an evaluation of objective data which enables the measurement and quantification of these factors.

[T]he requirement for competent authorities to evaluate the ‘bearing’ that the relevant factors have on the ‘domestic industry ‘ and, subsequently, to make a determination concerning the overall ‘situation of that industry‘, means that competent authorities must have a sufficient factual basis to allow them to draw reasoned and adequate conclusions concerning the situation of the ‘domestic industry’. The need for such a sufficient factual basis, in turn, implies that the data examined, concerning the relevant factors, must be representative of the ‘domestic industry’. Indeed, a determination made on the basis of insufficient data would not be a determination about the state of the ‘domestic industry’, as defined in the Agreement, but would, in reality, be a determination pertaining to producers of something less than ‘a major proportion of the total domestic production’ of the products at issue. Accordingly, we agree with the Panel that the data evaluated by the competent authorities must be sufficiently representative of the ‘domestic industry’ to allow determinations to be made about that industry.”(235)

151.     The Appellate Body on US — Lamb nevertheless stressed that data could fulfil the requirement of being representative even if they did not cover all domestic producers whose production constitutes a major proportion of the domestic industry:

“We do not wish to suggest that competent authorities must, in every case, actually have before them data pertaining to all those domestic producers whose production, taken together, constitutes a major proportion of the domestic industry. In some instances, no doubt, such a requirement would be both impractical and unrealistic. Rather, the data before the competent authorities must be sufficiently representative to give a true picture of the ‘domestic industry’. What is sufficient in any given case will depend on the particularities of the ‘domestic industry’ at issue.”(236)

152.     In US — Lamb, the Appellate Body addressed what it calls the “tension between a future oriented ‘threat’ analysis” on the one hand, and the “need for a fact-based determination of serious injury” on the other:

“[W]e agree with the Panel that a threat determination is ‘future-oriented’. However, Article 4.1(b) requires that a “threat” determination be based on “facts” and not on ‘conjecture’. As facts, by their very nature, pertain to the present and the past, the occurrence of future events can never be definitively proven by facts. There is, therefore, a tension between a future-oriented ‘threat’ analysis, which, ultimately, calls for a degree of ‘conjecture’ about the likelihood of a future event, and the need for a fact-based determination. Unavoidably, this tension must be resolved through the use of facts from the present and the past to justify the conclusion about the future, namely that serious injury is ‘clearly imminent’. Thus, a fact-based evaluation, under Article 4.2(a) of the Agreement on Safeguards, must provide the basis for a projection that there is a high degree of likelihood of serious injury to the domestic industry in the very near future.(237)”(238)

153.     With respect to the temporal focus of data used in a threat analysis, the Appellate Body on US — Lamb held:

“[W]e note that the Agreement on Safeguards provides no particular methodology to be followed in making determinations of serious injury or threat thereof. However, whatever methodology is chosen, we believe that data relating to the most recent past will provide competent authorities with an essential, and, usually, the most reliable, basis for a determination of a threat of serious injury. The likely state of the domestic industry in the very near future can best be gauged from data from the most recent past … [I]n principle, within the period of investigation as a whole, evidence from the most recent past will provide the strongest indication of the likely future state of the domestic industry.”(239)

154.     The Appellate Body, also on US — Lamb, nevertheless cautioned against the use of recent data in isolation from data pertaining to the entire period of investigation:

“However, we believe that, although data from the most recent past has special importance, competent authorities should not consider such data in isolation from the data pertaining to the entire period of investigation. The real significance of the short-term trends in the most recent data, evident at the end of the period of investigation, may only emerge when those short-term trends are assessed in the light of the longer-term trends in the data for the whole period of investigation. If the most recent data is evaluated in isolation, the resulting picture of the domestic industry may be quite misleading. For instance, although the most recent data may indicate a decline in the domestic industry, that decline may well be a part of the normal cycle of the domestic industry rather than a precursor to clearly imminent serious injury. Likewise, a recent decline in economic performance could simply indicate that the domestic industry is returning to its normal situation after an unusually favourable period, rather than that the industry is on the verge of a precipitous decline into serious injury. Thus, we believe that, in conducting their evaluation under Article 4.2(a), competent authorities cannot rely exclusively on data from the most recent past, but must assess that data in the context of the data for the entire investigative period.(240)”(241)

(vi) “Rate and amount” of the increase; “changes” in the level of sales

155.     The Panel on Argentina — Footwear (EC), subsequently upheld on this point by the Appellate Body, read the requirement under Article 4.2(a) to evaluate the rate and amount of the increase in imports to mean a requirement to analyse the trends of imports over the period of investigation:

“[W]e recall Article 4.2(a)’s requirement that ‘the rate and amount of the increase in imports’ be evaluated.(242) In our view this constitutes a requirement that the intervening trends of imports over the period of investigation be analysed. We note that the term ‘rate’ connotes both speed and direction, and thus intervening trends (up or down) must be fully taken into consideration. Where these trends are mixed over a period of investigation, this may be decisive in determining whether an increase in imports in the sense of Article 2.1 has occurred. In practical terms, we consider that the best way to assess the significance of any such mixed trends in imports is by evaluating whether any downturn in imports is simply temporary, or instead reflects a longer-term change.”(243)

156.     The Appellate Body on Argentina — Footwear (EC) affirmed this interpretation of the words “rate and amount” in Article 4.2(a) by agreeing:

“[W]ith the Panel that the specific provisions of Article 4.2(a) require that ‘the rate and amount of the increase in imports … in absolute and relative terms’ … must be evaluated. Thus, we do not dispute the Panel’s view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a).”(244)

157.     In US — Line Pipe, the Panel found, in a statement not reviewed by the Appellate Body, that “there is no need for a determination that imports are presently still increasing. Rather, imports could have ‘increased’ in the recent past, but not necessarily be increasing up to the end of the period of investigation or immediately preceding the determination.”(245) The Panel thus ruled that “a determination of either an absolute or relative increase in imports causing serious injury is sufficient to authorize a Member to adopt safeguard measures, even if it found the absolute increased imports determination by the importing Member was incorrect”.(246) For a detailed discussion, see paragraph 48 above.

158.     With respect to the coincidence between trends in injury factors and import trends, see paragraphs 178–180 below.

(vii) “productivity”

159.     The Panel on US — Wheat Gluten held that the term “productivity” may refer to the overall productivity of an industry and encompasses productivity of both labour and capital (the Appellate Body did not address this particular finding):

“[T]he Agreement on Safeguards provides no precise definition of the term ‘productivity’ that appears in Article 4.2(a) SA. The context of this term includes the rest of the text of Article 4.2(a) — and in particular, the phrase ‘all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry’ … We consider that this term, read in its context, may refer to the overall productivity of the industry.

It is apparent to us from the USITC Report that the USITC gathered and analysed data on capital investment in the industry as well as data pertaining to worker productivity. In these Panel proceedings, the United States asserts that ‘it is simple mathematics that if production declines (as it did in 1996–1997 from 1995 levels), while the amount of capital in the industry increases (as it did from the capital projects adding capacity), the productivity of capital will correspondingly decline.’ We would have preferred a more integrated examination in the USITC Report of ‘productivity’ that explicitly encompassed overall industry productivity — particularly in light of the acknowledgement by the USITC that ‘production of wheat gluten is extremely capital intensive and requires very few production workers’. Nevertheless, we consider that the data and statements pertaining to worker productivity, in conjunction with those on capital investments, in the overall context of the USITC Report, indicate that the USITC considered industry productivity as required by Article 4.2(a).”(247)

(viii) Factors not listed in Article 4.2(a)

160.     In US — Wheat Gluten, the Appellate Body disagreed with the interpretation by the Panel in that dispute that, with regard to factors not enumerated in Article 4.2(a), competent authorities are obliged only to evaluate factors “clearly raised” as relevant by interested parties in a domestic investigation.(248) The Appellate Body first established a link between the requirement, under Article 4.2(a), to evaluate “all relevant factors” and the obligation, under Article 3.1, to conduct an investigation:

“The word ‘all’ has a broad meaning which, if read alone, would suggest that the scope of the obligation on the competent authorities to evaluate ‘relevant factors’ is without limits or exceptions.(249) However, the word cannot, of course, be read in isolation…. the text of Article 4.2(a) itself imposes certain explicit qualifications on the obligation to evaluate ‘all relevant factors’ as it states that competent authorities need only evaluate factors which are ‘objective and quantifiable’ and which ‘[have] a bearing on the situation of that industry’.

The obligation to evaluate ‘relevant factors’ must also be interpreted in light of the duty of the competent authorities to conduct an ‘investigation’ under the Agreement on Safeguards. The competent authorities must base their evaluation of the relevance, if any, of a factor on evidence that is ‘objective and quantifiable’. The competent authorities will, in principle, obtain this evidence during the investigation they must conduct, under Article 3.1, into the situation of the domestic industry. The scope of the obligation to evaluate ‘all relevant factors’ is, therefore, related to the scope of the obligation of competent authorities to conduct an investigation.

We turn, therefore, for context, to Article 3.1 of the Agreement on Safeguards, which is entitled ‘Investigation’.”(250)

161.     The Appellate Body on US — Wheat Gluten then reversed the Panel’s finding that the competent authorities are obliged only to evaluate factors “clearly raised” as relevant by interested parties in a domestic investigation. Rather, the Appellate Body held that the investigating authorities must, where necessary, “undertake additional investigative steps … in order to fulfill their obligation to evaluate all relevant factors”:

“The competent authorities must, in every case, carry out a full investigation to enable them to conduct a proper evaluation of all of the relevant factors expressly mentioned in Article 4.2(a) of the Agreement on Safeguards. Moreover, Article 4.2(a) requires the competent authorities — and not the interested parties — to evaluate fully the relevance, if any, of ‘other factors’. If the competent authorities consider that a particular ‘other factor’ may be relevant to the situation of the domestic industry, under Article 4.2(a), their duties of investigation and evaluation preclude them from remaining passive in the face of possible short-comings in the evidence submitted, and views expressed, by the interested parties. In such cases, where the competent authorities do not have sufficient information before them to evaluate the possible relevance of such an ‘other factor’, they must investigate fully that ‘other factor’, so that they can fulfill their obligations of evaluation under Article 4.2(a). In that respect, we note that the competent authorities’ ‘investigation’ under Article 3.1 is not limited to the investigative steps mentioned in that provision, but must simply ‘include’ these steps. Therefore, the competent authorities must undertake additional investigative steps, when the circumstances so require, in order to fulfill their obligation to evaluate all relevant factors.

Thus, we disagree with the Panel’s finding that the competent authorities need only examine ‘other factors’ which were ‘clearly raised before them as relevant by the interested parties in the domestic investigation.’ (emphasis added) … However, as is clear from the preceding paragraph of this Report, we also reject the European Communities’ argument that the competent authorities have an open-ended and unlimited duty to investigate all available facts that might possibly be relevant.”(251)

(ix) Consideration of “all relevant factors” in the case of a segmented domestic industry

162.     The Panel on Korea — Dairy held that while it is permissible to analyse distinct market segments in order to make a finding of serious injury to the whole domestic industry, the investigating authorities must nevertheless comply with certain requirements in this respect:

“[T]he definition of the domestic industry in this case as comprising two different segments of the dairy products market has consequences for the evaluation of the situation of the industry. In assessing the serious injury to the whole domestic industry, we find that it is acceptable to analyse distinct market segments but, as stated above, all factors listed in Article 4.2 must be addressed. In considering each of the factors listed in Article 4.2, and any others found to be relevant by the authority, the investigating authority has two options: for each factor, the investigating authority can consider it either for all segments, or if it decides to examine it for only one or some segment(s), it must provide an explanation of how the segment(s) chosen is (are) objectively representative of the whole industry…. Our point here is that an analysis of only a segment of the domestic industry, without any explanation of its significance for the whole industry, will not satisfy the requirements of the Agreement on Safeguards.”(252)

163.     In Argentina — Footwear (EC), the Panel addressed the argument that, since the investigation had been conducted on the basis of a division of the product under investigation into five product groups, the investigating authorities were required to prove serious injury in all segments in which safeguard measures were to be imposed:

“We disagree with the European Communities that Argentina was required to conduct its injury and causation analysis on a disaggregated basis. In our view, since in this case the definition of the like or directly competitive product is not challenged, it is this definition that controls the definition of the ‘domestic industry’ in the sense of Article 4.1(c) as well as the manner in which the data must be analysed in an investigation. While Argentina could have considered the data on a disaggregated basis (and in fact did so in some instances), in our view, it was not required to do so. Rather, given the undisputed definition of the like or directly competitive product as all footwear, Argentina was required at a minimum to consider each injury factor with respect to all footwear.(253) By the same token the European Communities, having accepted Argentina’s aggregate like product definition, has no basis to insist on a disaggregated analysis in which injury and causation must be proven with respect to each individual product segment.(254) Thus, in our review of the injury finding, we will consider the analysis and conclusions pertaining to the footwear industry in its entirety.”(255)

164.     The Panel on US — Lamb found that an investigation of the injury factors with respect to particular industry segments is sufficient, provided an adequate explanation of certain issues is furnished:

“An initial issue before us is whether, accepting arguendo the USITC’s industry definition, all factors need to be investigated in detail for all identified industry segments (i.e., growers, feeders, packers and breakers) or whether an investigation of certain injury factors with respect to particular segments only would be sufficient to meet the requirements of SG Article 4.2(a). In the light of the general standard of review, as it applies to contingent trade remedy cases, we consider the latter as sufficient if there is an adequate explanation in the report published by the USITC, of (i) why conclusive inferences from the data concerning one industry segment can be drawn for another industry segment, or (ii) why the factual constellation in the particular industry segment in the given case does not permit data collection (i.e., not a ‘factor of a objective and quantifiable nature’), or (iii) renders a certain injury factor not probative in the circumstances of a particular industry segment (i.e., not a factor ‘having a bearing on the situation of that industry’ within the meaning of SG Article 4.2(a)).”(256)

165.     The Panel on US — Lamb then noted with respect to the investigation at issue:

“[W]here the USITC did not collect data concerning a particular injury factor with respect to all industry segments, the USITC report provides an adequate explanation for that. Either the USITC report explains how inferences can be drawn from the data collected with regard to one segment for another segment for which data were not collected, or it explains why, in the circumstances of the particular industry segment at issue, the collection of data of an objective and quantifiable nature was not possible, or it explains why a specific injury factor is not probative for that segment.”(257)

(x) Consideration of trends

166.     The Panel on Argentina — Footwear (EC) considered inconsistent with the requirement of an evaluation of “all relevant factors” what it characterized as “the investigation’s almost exclusive reliance on end-point-to-end-point comparisons in its analysis of the changes in the situation of the industry”. The Panel observed in this respect:

“[I]f intervening trends are not systematically considered and factored into the analysis, the competent authorities are not fulfilling Article 4.2(a)’s requirement to analyse ‘all relevant factors’, and in addition, the situation of the domestic industry is not ascertained in full. For example, the situation of an industry whose production drops drastically in one year, but then recovers steadily thereafter, although to a level still somewhat below the starting level, arguably would be quite different from the situation of an industry whose production drops continuously over an extended period. An end-point-to-end-point analysis might be quite similar in the two cases, whereas consideration of the year-to-year changes and trends might lead to entirely opposite conclusions.”(258)

(xi) Allocation methodology

167.     In US — Wheat Gluten, the Panel stressed the importance of sound allocation methodologies, but acknowledged that the Agreement on Safeguards does not provide for one particular methodology in this context:

“We recognize the fundamental importance of assuring that data gathered in the course of a safeguards investigation is accurate and that any allocation of costs and revenues reflects, to the greatest extent possible, the realities of the domestic industry concerned. However, we note that the Agreement on Safeguards does not set out precise rules on the collection and analysis of data, nor does it require the use of any particular allocation methodology with respect to financial data gathered by the investigating authorities in the course of the investigation.

We note that the USITC paid attention to the allocation methodologies used by all domestic producers and in the questionnaire requested firms that did not maintain separate records for wheat gluten to make allocations and explain the methodology used. We also note that the USITC conducted certain procedures, including internal analysis by its staff as well as an on-site verification by a USITC auditor, in order to verify the accuracy and the adequacy of the financial information provided. We believe that, in support of the USITC statement concerning the ‘careful review’ and the finding that the methodologies were ‘appropriate’, the USITC Report could have included a description of such procedures and a more detailed explanation as to how and why the USITC considered the allocations to be ‘appropriate’, in addition to a characterization of the redacted confidential information.”(259)

(b) Relationship with Article 4.2(b)

168.     With respect to the relationship with Article 4.2(b), see paragraphs 140 above and 212–213 below.

5. Article 4.2(b)

(a) General approach to the causation analysis

169.     The Panel on Korea — Dairy set forth the basic approach for determining “causation”:

“In performing its causal link assessment, it is our view that the national authority needs to analyse and determine whether developments in the industry, considered by the national authority to demonstrate serious injury, have been caused by the increased imports. In its causation assessment, the national authority is obliged to evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry. In addition, if the national authority has identified factors other than increased imports which have caused injury to the domestic industry, it shall ensure that any injury caused by such factors is not considered to have been caused by the increased imports.

To establish a causal link, Korea has to demonstrate that the injury to its domestic industry results from increased imports. In other words, Korea has to demonstrate that the imports of SMPP cause injury to the domestic industry producing milk powder and raw milk. In addition, having analysed the situation of the domestic industry, the Korean authority has the obligation not to attribute to the increased imports any injury caused by other factors.”(260)

170.     In Argentina — Footwear (EC), the Panel set forth the following approach to the analysis of causation:

“Applying our standard of review, we will consider whether Argentina’s causation analysis meets these requirements on the basis of (i) whether an upward trend in imports coincides with downward trends in the injury factors, and if not, whether a reasoned explanation is provided as to why nevertheless the data show causation; (ii) whether the conditions of competition in the Argentine footwear market between imported and domestic footwear as analysed demonstrate, on the basis of objective evidence, a causal link of the imports to any injury; and (iii) whether other relevant factors have been analysed and whether it is established that injury caused by factors other than imports has not been attributed to imports.”(261)

171.     Although the Appellate Body on Argentina — Footwear (EC) considered that the Panel should have exercised judicial economy as regards the causation-related claims, it saw no error in the Panel’s interpretation of the causation requirements, or in its interpretation of Article 4.2(b) of the Agreement on Safeguards:

“We are somewhat surprised that the Panel, having determined that there were no ‘increased imports’, and having determined that there was no ‘serious injury’, for some reason went on to make an assessment of causation. It would be difficult, indeed, to demonstrate a ‘causal link’ between ‘increased imports’ that did not occur and ‘serious injury’ that did not exist. Nevertheless, we see no error in the Panel’s interpretation of the causation requirements, or in its interpretation of Article 4.2(b) of the Agreement on Safeguards. Rather, we believe that Argentina has mischaracterized the Panel’s interpretation and reasoning. Furthermore, we agree with the Panel’s conclusions that ‘the conditions of competition between the imports and the domestic product were not analysed or adequately explained (in particular price)’; and that ‘other factors’ identified by the CNCE in the investigation were not sufficiently evaluated, in particular, the tequila effect.”(262)

172.     The Panel on US — Wheat Gluten confirmed and repeated this general causation standard:

“We consider that an appropriate approach for a panel to take in assessing whether a Member has fulfilled the requirements of Article 4.2(a) and (b) SA with respect to causation consists of a consideration of: (i) whether an upward trend in imports coincides with downward trends in the injury factors, and if not, whether an adequate, reasoned and reasonable explanation is provided as to why nevertheless the data show causation; (ii) whether the conditions of competition between the imported and domestic product as analysed demonstrate the existence of the causal link between the imports and any injury; and (iii) whether other relevant factors have been analysed and whether it is established that injury caused by factors other than imports has not been attributed to imports.”(263)

173.     The Appellate Body on US — Wheat Gluten concluded that the contribution by increased imports must be sufficiently clear so as to establish the existence of “the causal link” required, but rejected the Panel’s conclusion that the serious injury must be caused by the increased imports alone and that the increased imports had to be sufficient to cause “serious injury”:

“In essence, the Panel has read Article 4.2(b) of the Agreement on Safeguards as establishing that increased imports must make a particular contribution to causing the serious injury sustained by the domestic industry. The level of the contribution the Panel requires is that increased imports, looked at ‘alone’, ‘in and of themselves’, or ‘per se’, must be capable of causing injury that is ‘serious’. It seems to us that the Panel arrived at this interpretation through the following steps of reasoning: first, under the first sentence of Article 4.2(b), there must be a ‘causal link’ between increased imports and serious injury; second, the non-’attribution’ language of the last sentence of Article 4.2(b) means that the effects caused by increased imports must be distinguished from the effects caused by other factors; third, the effects caused by other factors must, therefore, be excluded totally from the determination of serious injury so as to ensure that these effects are not ‘attributed’ to the increased imports; fourth, the effects caused by increased imports alone, excluding the effects caused by other factors, must, therefore, be capable of causing serious injury.

We begin our reasoning with the first sentence of Article 4.2(b). That sentence provides that a determination ‘shall not be made unless [the] investigation demonstrates … the existence of the causal link between increased imports … and serious injury or threat thereof.’ (emphasis added) Thus, the requirement for a determination, under Article 4.2(a), is that ‘the causal link’ exists. The word ‘causal’ means ‘relating to a cause or causes’, while the word ‘cause’, in turn, denotes a relationship between, at least, two elements, whereby the first element has, in some way, ‘brought about’, ‘produced’ or ‘induced’ the existence of the second element. The word ‘link’ indicates simply that increased imports have played a part in, or contributed to, bringing about serious injury so that there is a causal ‘connection’ or ‘nexus’ between these two elements. Taking these words together, the term ‘the causal link’ denotes, in our view, a relationship of cause and effect such that increased imports contribute to ‘bringing about’, ‘producing’ or ‘inducing’ the serious injury. Although that contribution must be sufficiently clear as to establish the existence of ‘the causal link’ required, the language in the first sentence of Article 4.2(b) does not suggest that increased imports be the sole cause of the serious injury, or that ‘other factors’ causing injury must be excluded from the determination of serious injury. To the contrary, the language of Article 4.2(b), as a whole, suggests that ‘the causal link’ between increased imports and serious injury may exist, even though other factors are also contributing, ‘at the same time’, to the situation of the domestic industry.

It is precisely because there may be several factors, besides increased imports, contributing simultaneously to the situation of the domestic industry that the last sentence of Article 4.2(b) states that competent authorities shall not … attribute’ to increased imports injury caused by other factors. The opening clause of that sentence indicates, to us, that this sentence provides rules that apply when ‘increased imports’ and certain ‘other factors’ are, together, ‘causing injury’ to the domestic industry ‘at the same time’. The last clause of the sentence stipulates that, in that situation, the injury caused by other factors shall not be attributed to increased imports’. (emphasis added) Synonyms for the word ‘attribute’ include ‘assign’ or ‘ascribe’. Under the last sentence of Article 4.2(b), we are concerned with the proper ‘attribution’, in this sense, of ‘injury’ caused to the domestic industry by ‘factors other than increased imports’. Clearly, the process of attributing injury’, envisaged by this sentence, can only be made following a separation of the ‘injury’ that must then be properly ‘attributed’. What is important in this process is separating or distinguishing the effects caused by the different factors in bringing about the ‘injury’.

Article 4.2(b) presupposes, therefore, as a first step in the competent authorities’ examination of causation, that the injurious effects caused to the domestic industry by increased imports are distinguished from the injurious effects caused by other factors. The competent authorities can then, as a second step in their examination, attribute to increased imports, on the one hand, and, by implication, to other relevant factors, on the other hand, ‘injury’ caused by all of these different factors, including increased imports. Through this two stage process, the competent authorities comply with Article 4.2(b) by ensuring that any injury to the domestic industry that was actually caused by factors other than increased imports is not ‘attributed’ to increased imports and is, therefore, not treated as if it were injury caused by increased imports, when it is not. In this way, the competent authorities determine, as a final step, whether ‘the causal link’ exists between increased imports and serious injury, and whether this causal link involves a genuine and substantial relationship of cause and effect between these two elements, as required by the Agreement on Safeguards.”(264)

174.     The Appellate Body on US — Wheat Gluten further reviewed the relationship between Article 2.1 and Article 4.2 of the Agreement on Safeguards in order to support its view that the competent authorities should determine whether the increase in imports, not alone, but in conjunction with the other relevant factors, cause serious injury:

“Article 2.1 reflects closely the ‘basic principles’(265) in Article XIX:1(a) of the GATT 1994 and also sets forth ‘the conditions for imposing a safeguard measure’,(266) including those relating to causation. The rules on causation, which are elaborated further in the remainder of the Agreement on Safeguards, therefore, find their roots in Article 2.1. According to that provision, a safeguard measure may be applied if a ‘product is being imported … in such increased quantities … and under such conditions as to cause …’ serious injury. Thus, under Article 2.1, the causation analysis embraces two elements: the first relating to increased ‘imports’ specifically and the second to the ‘conditions’ under which imports are occurring.

Each of these two elements is, in our view, elaborated further in Article 4.2(a). While Article 2.1 requires account to be taken of the ‘increased quantities’ of imports, both in ‘absolute’ terms and ‘relative to domestic production’, Article 4.2(a) states, correspondingly, that ‘the rate and amount of the increase in imports of the product concerned in absolute and relative terms, [and] the share of the domestic market taken by increased imports’ are relevant.

As for the second element under Article 2.1, we see it as a complement to the first. While the first element refers to increased imports specifically, the second relates more generally to the ‘conditions’ in the marketplace for the product concerned that may influence the domestic industry. Thus, the phrase ‘under such conditions’ refers generally to the prevailing ‘conditions’, in the marketplace for the product concerned, when the increase in imports occurs. Interpreted in this way, the phrase ‘under such conditions’ is a shorthand reference to the remaining factors listed in Article 4.2(a), which relate to the overall state of the domestic industry and the domestic market, as well as to other factors ‘having a bearing on the situation of [the] industry’. The phrase ‘under such conditions’, therefore, supports the view that, under Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards, the competent authorities should determine whether the increase in imports, not alone, but in conjunction with the other relevant factors, cause serious injury.(267)”(268)

175.     In US — Lamb, the Appellate Body concluded that Article 4.2(b) requires a “demonstration” of the “existence” of a causal link, and it requires that this demonstration must be based on “objective data”.(269)

176.     In US — Steel Safeguards, the Panel, in a finding not reviewed by the Appellate Body,(270) discussed the standard for the assessment of a “causal link”:

“[I]f a number of factors have caused serious injury, a causal link may be demonstrated if the increased imports have, in some way, contributed to ‘bringing about’, ‘producing’ or ‘inducing’ the serious injury.

It is clear to the Panel that, in order to meet the causation requirements in Article 4.2(b), it is not necessary for the competent authority to show that increased imports alone must be capable of causing serious injury.(271) Rather, if a number of factors have caused serious injury, a causal link may be demonstrated if the increased imports have, in some way, contributed to ‘bringing about’, ‘producing’ or ‘inducing’ the serious injury. In this regard, the Appellate Body in US — Wheat Gluten concluded that the contribution must be sufficiently clear as to establish the existence of ‘the causal link’ required(272) but rejected the panel’s conclusion that the serious injury must be caused by the increased imports alone and that the increased imports had to be sufficient to cause ‘serious’ injury.(273)

……

In our view, what is important for this Panel is whether the test applied by the USITC for each of the safeguard measures at issue meets the standard or threshold prescribed by the requirement that there be a ‘genuine and substantial’ relationship of cause and effect between the increased imports and the serious injury. We will discuss this further in the measure-by-measure analysis, which we undertake below.

Finally, the Panel recalls that serious injury within the meaning of Article 4.2(a) of the Agreement on Safeguards is to be determined with reference to the ‘overall impairment in the position of the domestic industry’. Similarly, as further developed below, we believe that pursuant to Articles 2 and 4 of the Agreement on Safeguards, a competent authority must determine whether ‘overall’, a genuine and substantial relationship of cause and effect exists between increased imports and serious injury suffered by the relevant domestic producers.”(274)

177.     In US — Steel Safeguards, the Appellate Body decided to exercise judicial economy over the Panel’s conclusion with respect to the causation requirements of the US Steel Safeguard measures. Yet since the United States was asking for further guidance on how to comply with the causation determination, the Appellate Body summed up what it considered to be relevant jurisprudence:

“Guidance may be found in our previous rulings. In US — Line Pipe, for example, we interpreted Article 4.2(b) of the Agreement on Safeguards as establishing:

[T]wo distinct legal requirements for competent authorities in the application of a safeguard measure. First, there must be a demonstration of the ‘existence of the causal link between increased imports of the product concerned and serious injury or threat thereof’. Second, the injury caused by factors other than the increased imports must not be attributed to increased imports.(275) (emphasis added)

Moreover, in US — Lamb, when examining the requirement of Article 4.2(b) that the determination as to increased imports must be ‘on the basis of objective evidence’, we explained that ‘objective evidence’ means ‘objective data’.(276) Thus, Article 4.2(b) requires a ‘demonstration’ of the ‘existence’ of a causal link, and it requires that this demonstration must be based on ‘objective data’. Further, this ‘demonstration’ must be included in the report of the investigation, which should ‘set[ ] forth the findings and reasoned conclusions, as required by Articles 3.1 and 4.2(c)’ of the Agreement on Safeguards.(277)

In US — Line Pipe, we also found that, in the context of ‘non-attribution’, competent authorities: (i) ‘must “establish explicitly” that imports from sources covered by the measure “satisf[y] the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards”’;(278) and (ii) must provide a ‘reasoned and adequate explanation of how the facts support their determination’.(279)

In US — Wheat Gluten, we found that ‘the term “causal link” denotes … a relationship of cause and effect’(280) between ‘increased imports’ and ‘serious injury’. The former — the purported cause — contributes to ‘bringing about’, ‘producing’ or ‘inducing’ the latter(281) — the purported effect. The ‘link’ must connect, in a ‘genuine and substantial’(282) causal relationship, ‘increased imports’, and ‘serious injury’.

In sum, the Agreement on Safeguards — in Article 2.1, as elaborated by Article 4.2, and in combination with Article 3.1 — requires that competent authorities demonstrate the existence of a ‘causal link’ between ‘increased imports’ and ‘serious injury’ (or the threat thereof) on the basis of ‘objective evidence’. In addition, the competent authorities must provide a reasoned and adequate explanation of how facts (that is, the aforementioned ‘objective evidence’) support their determination. If these requirements are not met, the right to apply a safeguard measure does not arise.

In EC — Tube or Pipe Fittings, we found that the nonattribution language of Article 3.5 of the Anti-Dumping Agreement does not require, in each and every case, an examination of the collective effects of other causal factors, in addition to an examination of the individual effects of those causal factors.(283) We explained there that an assessment of the collective effects of other causal factors ‘is not always necessary to conclude that injuries ascribed to dumped imports are actually caused by those imports and not by other factors.’(284) We acknowledged, however, that ‘there may be cases where, because of the specific factual circumstances therein, the failure to undertake an examination of the collective impact of other causal factors would result in the investigating authority improperly attributing the effects of other causal factors to dumped imports’.(285) We explained further that ‘an investigating authority is not required to examine the collective impact of other causal factors, provided that, under the specific factual circumstances of the case, it fulfils its obligation not to attribute to dumped imports the injuries caused by other causal factors’.(286)

Lastly, it may be useful to refer to our finding in EC — Tube or Pipe Fittings in respect of the relevance of factors that ‘had effectively been found not to exist’.(287) In that case, the competent authority had found, contrary to the submissions of the exporters, that the difference in costs of production between the imported product and the domestic product was virtually non-existent and thus did not constitute a ‘factor other than dumped imports’ causing injury to the domestic industry under Article 3.5 of the Anti-Dumping Agreement.

Consequently, we found that there was no reason for the investigating authority to undertake the analysis of whether the alleged ‘other factor’ had any effect on the domestic industry under Article 3.5(288) because the alleged ‘other factor’ ‘had effectively been found not to exist’.(289) In other words, we did not rule that minimal (or not significant) factors need not be considered by the competent authorities in conducting non-attribution analyses. Rather, we ruled that only factors that have been found to exist need be taken into account in the non-attribution analysis.”(290)

(i) Coincidence of trends

178.     In Argentina — Footwear (EC), both the Panel and Appellate Body considered that the “relationship between the movements in imports (volume and market share) and the movements in injury factors” must be central to a causation analysis and determination. The Panel on Argentina — Footwear (EC), in a finding upheld by the Appellate Body, recalled that Article 4.2(a) requires national authorities to analyse trends in both injury factors and imports, and related this finding to the context of causation. Furthermore, with respect to a “coincidence” between an increase in imports and a decline in the relevant injury factors, the Panel noted that this should ‘normally’ occur if causation is present:

“In making our assessment of the causation analysis and finding, we note in the first instance that Article 4.2(a) requires the authority to consider the ‘rate’ (i.e., direction and speed) and ‘amount’ of the increase in imports and the share of the market taken by imports, as well as the ‘changes’ in the injury factors (sales, production, productivity, capacity utilisation, profits and losses, and employment) in reaching a conclusion as to injury and causation. As noted above we consider that this language means that the trends — in both the injury factors and the imports — matter as much as their absolute levels. In the particular context of a causation analysis, we also believe that this provision means that it is the relationship between the movements in imports (volume and market share) and the movements in injury factors that must be central to a causation analysis and determination.

In practical terms, we believe therefore that this provision means that if causation is present, an increase in imports normally should coincide with a decline in the relevant injury factors. While such a coincidence by itself cannot prove causation (because, inter alia, Article 3 requires an explanation — i.e., ‘findings and reasoned conclusions’), its absence would create serious doubts as to the existence of a causal link, and would require a very compelling analysis of why causation still is present.”(291)

179.     As noted above, the Appellate Body on Argentina — Footwear (EC) agreed with the Panel and observed:

“We see no reason to disagree with the Panel’s interpretation that the words ‘rate and amount’ and ‘changes’ in Article 4.2(a) mean that ‘the trends — in both the injury factors and the imports — matter as much as their absolute levels.’ We also agree with the Panel that, in an analysis of causation, ‘it is the relationship between the movements in imports (volume and market share) and the movements in injury factors that must be central to a causation analysis and determination.’ … Furthermore, with respect to a ‘coincidence’ between an increase in imports and a decline in the relevant injury factors, we note that the Panel simply said that this should ‘normally’ occur if causation is present.”(292)

180.     Besides the finding that coincidence in movements in imports and the movements in injury factors would “ordinarily” tend to support a finding of causation, the Panel on US — Wheat Gluten concurred with the Appellate Body on Argentina — Footwear (EC), and ruled that the “absence of such coincidence would ordinarily tend to detract from such a finding and would require a compelling explanation as to why a causal link is still present”.(293) Particularly, the Panel on US — Wheat Gluten was of the view that “overall coincidence” is what matters and not whether coincidence or lack thereof can be shown in relation to a few select factors which the competent authority has considered:

“[I]n light of the overall coincidence of the upward trend in increased imports and the negative trend in injury factors over the period of investigation, the existence of slight absences of coincidence in the movement of individual injury factors in relation to imports would not preclude a finding by the USITC of a causal link between increased imports and serious injury.”(294)

181.     After quoting the Panel and the Appellate Reports on Argentina — Footwear (EC) (see paragraph 178 above), the Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, pronounced on the term “coincidence”:

“Firstly, that the term ‘coincidence’ refers to the relationship between the movements in imports and the movements in injury factors. The panel and Appellate Body made it clear that, in considering movements in imports, it is necessary to look at movements in import volumes and import market shares.(295) In our view, the word ‘coincidence’ in the current context refers to the temporal relationship between the movements in imports and the movements in injury factors. In other words, upward movements in imports should normally occur at the same time as downward movements in injury factors in order for coincidence to exist. We note that, below, we qualify these comments to take account of cases where a lag exists between the influx of imports and the manifestation of the effects of injury suffered by the domestic industry.

Secondly, the above indicates that the Appellate Body considers that ‘coincidence’ between movements or trends in imports and movements or trends in the relevant injury factors plays a ‘central’ role in determining whether or not a causal link exists. Indeed, both the panel and the Appellate Body in Argentina — Footwear (EC) stated that the relationship between the movements in imports and the movements in injury factors must be central to a causation analysis. We also note that the same panel, supported by the Appellate Body,(296) went on to state that ‘[I]n practical terms, we believe therefore that [Article 4.2(a)] means that if causation is present, an increase in imports normally should coincide with a decline in the relevant injury factors.’(297)”(298)

182.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, discussed the relationship between “a coincidence analysis” and “a causation analysis”:

“The Panel is of the view that since coincidence is ‘central’ to a causation analysis, a competent authority should ‘normally’ undertake a coincidence analysis when determining the existence of a causal link. We believe that in situations where the effects of injurious factors other than increased imports have not been attributed to increased imports,(299) overall clear coincidence between movements in imports and movements in injury factors will provide a competent authority with an adequate basis upon which to conclude that a genuine and substantial relationship of cause and effect between increased imports and serious injury exists.

As mentioned, the Panel is also of the view that overall coincidence is what matters and not whether coincidence or lack thereof can be shown in relation to a few select factors which the competent authority has considered. We refer in this regard to the panel’s decision in US — Wheat Gluten, where it stated that:

‘[I]n light of the overall coincidence of the upward trend in increased imports and the negative trend in injury factors over the period of investigation, the existence of slight absences of coincidence in the movement of individual injury factors in relation to imports would not preclude a finding by the USITC of a causal link between increased imports and serious injury.’(300)”(301)

183.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, further addressed how a causal link must be established for the purposes of Article 4.2(b) in cases where there is an absence of coincidence:

“By absence of coincidence we mean situations where coincidence does not exist or an analysis of coincidence has not been undertaken. In this regard, we agree with statements made by the panel and Appellate Body in Argentina — Footwear (EC) and the panel in US — Wheat Gluten, that coincidence in movements in imports and the movements in injury factors would ordinarily tend to support a finding of causation, while the absence of such coincidence would ordinarily tend to detract from such a finding and would require a compelling explanation as to why a causal link is still present.(302)

We also recall that the panel in Argentina — Footwear (EC), supported by the Appellate Body,(303) as well as the panel in US — Wheat Gluten,(304) noted that, in situations where a causal link exists, ‘an increase in imports normally should coincide with a decline in the relevant injury factors’ and ‘coincidence … would ordinarily tend to support a finding of causation.’ In our view, even when coincidence does not exist or an analysis of coincidence has not been undertaken, a competent authority may still be able to demonstrate the existence of a causal link if it can offer a compelling explanation that such causal link exists.

The Panel emphasizes that the Appellate Body in Argentina — Footwear (EC) upheld the panel’s statement that ‘coincidence by itself cannot prove causation’ (emphasis added).(305) The Panel considers that there are situations where a coincidence analysis may not suffice to prove causation or where the facts may not support a clear finding of coincidence and that, therefore, such situations may call for further demonstration of the existence of a causal link. Indeed, there may be situations where a competent authority, as part of its overall demonstration of the existence of a causal link, undertakes different analyses, with a view to proving that a genuine and substantial relationship of cause and effect exists between increased imports and serious injury.”(306)

184.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, further elaborated four scenarios with regard to a coincidence analysis and how the competent authority should explain in order to satisfy the causal requirement under Article 4.2 of the Agreement on Safeguards:

“In our view, there may be cases where: (i) a coincidence analysis has been undertaken and shows clear coincidence between movements in imports and movements in injury factors; (ii) as part of its overall demonstration of causal link, the competent authority has undertaken, inter alia, a coincidence analysis which, in and of itself, does not fully demonstrate the existence of a causal link and further analysis is undertaken; (iii) a coincidence analysis has been undertaken (with or without any other analysis) but it does not demonstrate any coincidence; and, finally, (iv) a coincidence analysis has not been undertaken but other analytical tools have been used with a view to proving a causal link.(307)

We are of the view that in all cases, the competent authority must provide a reasoned and adequate explanation of its causal link findings. In the first case (i), assuming fulfilment of the non-attribution requirement, when clear coincidence exists, no further analysis is required of the competent authority and the Panel will confine its review to the coincidence analysis. In the second case (ii), the Panel will examine both the coincidence analysis and the other analysis undertaken by the competent authority with a view to assessing whether the competent authority has provided a reasoned and adequate explanation that, overall, a genuine and substantial relationship of cause and effects exists between increased imports and serious injury.

In cases (iii) and (iv), the competent authority should explain the absence of coincidence or why a coincidence analysis was not undertaken and provide, in particular, a compelling explanation as to why a causal link exists notwithstanding the absence of coincidence. Ultimately, it is for the competent authority to decide upon the analytical tool it considers most appropriate to perform this compelling analysis in demonstrating the existence of a causal link.”(308)

185.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, examined whether or not coincidence can be considered to exist in cases where there is a temporal lag between the influx of imports and the manifestation of the effects of such an influx on the domestic industry:

“More particularly, the United States has argued that a lag or delay in the manifestation of certain injury factors may be attributed to the delayed effect of increased imports on certain factors, such as employment and bankruptcy.(309) A number of the complainants argue, on the other hand, that the nature of the markets involved in the present case is such that such a lag effect could not exist. They submit that the effect of the increased imports should be felt immediately and that a lag of two years, which they submit existed in the present case, is too long.(310)

The Panel considers that the argument by the United States of a lag between the increased imports and the manifestation of the effects of such increased imports on the domestic industry may have merit in certain cases. More particularly, in our view, there may be instances in which injury may be suffered by an industry at the same point in time as the influx of increased imports. However, the injury that is caused at that point in time may not become apparent until some later point in time. In other words, there may be a lag between the influx of imports and the manifestation of the injurious effects on the domestic industry of such an influx.

We find support for this view from the panel’s decision in Egypt — Steel Rebar. There, the panel rejected Turkey’s contention that there must be a strict temporal connection between the dumped imports and any injury being suffered by the industry,(311) noting that this argument:

‘[R]est[ed] on the quite artificial assumption that the market instantly absorbs, and reacts to, imports the moment they enter the territory of the importing company. Such an assumption implicitly rests on the existence of so-called ‘perfect information’ in the market (i.e., that all actors in the market are instantly aware of all market signals.)’(312)

Nevertheless, we note that, in that case, the lag between the effects of imports on a market that the panel suggested was acceptable was, at most, a year in duration.

The Panel considers that there are limits in temporal terms on the length of lags between increased imports and the manifestation of the effects that are acceptable for the purposes of a coincidence analysis under Article 4.2(b) of the Agreement on Safeguards. The limits that apply would, undoubtedly, vary from industry to industry and factor to factor. Generally speaking, the more rigid the market structure associated with a particular industry, the more likely a lag in effects would exist, at least in relation to some factors. Conversely, the more competitive the market structure, the less tenable it is that lagged effects could be expected. In addition, the Panel considers that while lags may be expected in relation to some factors (for example, employment), lags in the manifestation of effects are less likely to exist in relation to other injury factors such as production, inventories and capacity utilization, which, ordinarily, would react relatively quickly to changes taking place in the market, such as an influx of imports if increased imports are causing serious injury. If the competent authority does rely upon a lag as between the increased imports and the injury factors, we consider that such a lag must be fully explained by the competent authority on the basis of objective data.”(313)

(ii) Conditions of competition between imported and domestic products(314)

186.     In examining whether in the case at issue conditions of competition had been analysed, the Panel on Argentina — Footwear (EC) observed that a juxtaposition of statistics on imports and injury factors did not constitute an analysis of the conditions of competition between the imports and the domestic product;(315) that, in the absence of price comparisons between imported and domestic products, there was no factual basis for the statement that imports were cheaper than domestic products;(316) and that there was no evidence that lower-priced imports had any injurious effects on the domestic industry.(317) In the latter regard, the Panel stated:

“[T]he report on the investigation contains no evidence to indicate that the effect of the prices of imported footwear on domestic producers’ prices, production, etc., was specifically analysed, in spite of the fact that the causation finding was fundamentally based on price considerations. Rather, aggregate trends in broad statistical indicators were compared and conclusory statements made (e.g., that ‘the decline in output was replaced by imports, essentially cheap imports’). This is not an analysis of the conditions of competition that is called for by Articles 2 and 4.2….”(318)

187.     In a footnote to this paragraph, the Panel on Argentina — Footwear (EC) addressed the relationship between the determination of like or directly competitive products on the one hand and the parameters of causation analysis on the other:

“We note in this regard that there would seem to be a relationship between the depth of detail and degree of specificity required in a causation analysis and the breadth and heterogeneity of the like or directly competitive product definition. Where as here a very broad product definition is used, within which there is considerable heterogeneity, the analysis of the conditions of competition must go considerably beyond mere statistical comparisons for imports and the industry as a whole, as given their breadth, the statistics for the industry and the imports as a whole will only show averages, and therefore will not be able to provide sufficiently specific information on the locus of competition in the market. With regard to the present case, we do not disagree that a quite detailed investigation of the industry was conducted, in which a great deal of statistical and other information was amassed. What in our view was missing was a detailed analysis, on the basis of objective evidence, of the imports and of how in concrete terms those imports caused the injury found to exist in 1995. In this regard, we note that Act 338 contains a section entitled ‘Conditions of competition between the domestic products and imports’. This section does not contain such a detailed analysis, however, but rather summarizes questionnaire responses from domestic producers about their strategies for ‘fending off foreign competition’, and from importers and domestic producers concerning ‘the sales mix’ of domestic products and imports, including their overall views about quality and other issues concerning domestic and imported footwear, with the importers stressing the benefits of imports. This summary of subjective statements by questionnaire respondents does not constitute an analysis of the ‘conditions of competition’ by the authority on the basis of objective evidence.”(319)

188.     With respect to the standards set forth in the preceding excerpt, the Panel on Argentina — Footwear (EC) concluded that “the conditions of competition between the imports and the domestic product were not analysed or adequately explained (in particular price)”.(320) The Appellate Body affirmed this conclusion.(321)

189.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, was of the view that while coincidence plays a central role in determining whether or not a causal link exists, other analytical tools may also come into play, in particular with reference to the conditions of competition as between imports and domestic products:

“As mentioned above, there may be cases, for instance, where a competent authority does not undertake a coincidence analysis or does so, but the facts do not support a finding of causal link on the basis of such an analysis. In such situations, reference could be made to the conditions of competition as between imports and domestic products with a view to providing a compelling explanation, in the absence of coincidence, as to why a causal link nevertheless exists. Indeed, in our view, consideration of the conditions of competition of the market in which the relevant imported and domestic products are being sold may generally prove insightful in respect of the issue of the causal relationship between increased imports and serious injury.

There may also be cases where a competent authority considers that it is necessary to support its coincidence analysis with another analysis because, for example, coincidence cannot be established with a sufficient degree of certainty. In such situations, the competent authority may rely upon analysis of the conditions of competition to reinforce its causal link demonstration. In such situations, a panel will review the conditions of competition analysis performed by the competent authority with a view to assessing whether it provided a reasoned and adequate explanation that, overall, a genuine and substantial relationship of cause and effects exists between increased imports and serious injury.”(322)

190.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, further concluded that Articles 2.1 and 4.2(a) and (b) confirm the relevance of conditions of competition when determining causation:

“We believe that Articles 2.1 and 4.2(a) and (b) confirm the relevance of conditions of competition when determining causation. Article 2.1 calls for a determination that increased imports are occurring ‘under such conditions as to cause or threaten to cause serious injury.’ The Appellate Body on US — Wheat Gluten interpreted the meaning of ‘under such conditions’ in Article 2.1 as follows:

‘[T]he phrase “under such conditions” refers generally to the prevailing “conditions”, in the marketplace for the product concerned, when the increase in imports occurs. Interpreted in this way, the phrase “under such conditions” is a shorthand reference to the remaining factors listed in Article 4.2(a), which relate to the overall state of the domestic industry and the domestic market, as well as to other factors “having a bearing on the situation of [the] industry”. The phrase “under such conditions”, therefore, supports the view that, under Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards, the competent authorities should determine whether the increase in imports, not alone, but in conjunction with the other relevant factors, cause serious injury.’(323)

We also note that the panels in Argentina — Footwear (EC) and US — Wheat Gluten considered the conditions of competition in the market between imported and domestic footwear in reviewing whether a causal link existed between increased imports and injury.(324) The Appellate Body on Argentina — Footwear (EC) explicitly supported the panel’s analysis, stating that: ‘[W]e agree with the Panel’s conclusions that “the conditions of competition between the imports and the domestic product were not analysed or adequately explained (in particular price)”.’(325)”(326)

191.     With respect to the factors that should be considered in a conditions of competition analysis for the purposes of Article 4.2(b), the Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, pointed out:

“The factors referred to in Article 4.2(a) are relevant in defining the conditions of competition for the purposes of the causation analysis under Article 4.2(b), in the Panel’s view, volume of imports, imports’ market share, changes in the level of sales and profit and losses are of particular interest. In addition, we note that the panel in Argentina — Footwear (EC) referred to physical characteristics, quality, service, delivery, technological developments, consumer tastes, and other supply and demand factors in the market as factors that could be taken into consideration in assessing the conditions of competition in a market for the purposes of a causation analysis.(327)”(328)

(iii) Factors other than increased imports (non-attribution requirement)

192.     The Panel on Argentina — Footwear (EC) emphasized the importance of a sufficient consideration of “other factors” in order to satisfy the requirements of Article 4.2(b):

“We recall that Article 4.2(b) requires that ‘[w]hen factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.’ Thus, as part of the causation analysis, a sufficient consideration of ‘other factors’ operating in the market at the same time must be conducted, so that any injury caused by such other factors can be identified and properly attributed.”(329)

193.     The Panel on Argentina — Footwear (EC) found that, in the investigation at issue, factors other than imports had not been sufficiently evaluated, in particular the effect of a domestic recession.(330) The Appellate Body noted in general that it saw “no error in the Panel’s interpretation of the causation requirements, or in its interpretation of Article 4.2(b) of the Agreement on Safeguards” and agreed with the Panel’s conclusion that the impact of the domestic recession had not been sufficiently evaluated.(331)

194.     The Panel on US — Wheat Gluten interpreted the relationship between increased imports and “other factors” within the context of the causation analysis pursuant to Article 4.2(b) to mean that increased imports “in and of themselves” are causing serious injury. While not demanding that increased imports be the only factor present in a situation of serious injury, the Panel held that the increased imports must be “sufficient in and of themselves, to cause injury which achieves the threshold of ‘serious’ as defined in the Agreement”.(332) The Panel then further clarified its approach to Article 4.2(b) by stating that “where a number of factors, one of which is increased imports, are sufficient collectively to cause a ‘significant overall impairment of the position of the domestic industry’, but increased imports alone are not causing injury that achieves the threshold of ‘serious’ within the meaning of Article 4.1(a) of the Agreement,(333) the conditions for imposing a safeguard measure are not satisfied.”(334) Upon appeal, the Appellate Body reversed the interpretation of Article 4.2(b) by the Panel on US — Wheat Gluten that increased imports “alone”, “in and of themselves”, or “per se” must be capable of causing injury that is “serious”.(335) According to the Appellate Body:

“[T]he Panel arrived at this interpretation through the following steps of reasoning: first, under the first sentence of Article 4.2(b), there must be a ‘causal link’ between increased imports and serious injury; second, the non-’attribution’ language of the last sentence of Article 4.2(b) means that the effects caused by increased imports must be distinguished from the effects caused by other factors; third, the effects caused by other factors must, therefore, be excluded totally from the determination of serious injury so as to ensure that these effects are not ‘attributed’ to the increased imports; fourth, the effects caused by increased imports alone, excluding the effects caused by other factors, must, therefore, be capable of causing serious injury.”(336)

195.     The Appellate Body on US — Wheat Gluten first considered that the requirement of a “causal link” under Article 4.2(b) suggests a “clear contribution” and that, furthermore, increased imports need not be the sole cause of “serious injury”:

“The word ‘causal’ means ‘relating to a cause or causes’, while the word ‘cause’, in turn, denotes a relationship between, at least, two elements, whereby the first element has, in some way, ‘brought about’, ‘produced’ or ‘induced’ the existence of the second element.(337) The word ‘link’ indicates simply that increased imports have played a part in, or contributed to, bringing about serious injury so that there is a causal ‘connection’(338) or ‘nexus’ between these two elements. Taking these words together, the term ‘the causal link’ denotes, in our view, a relationship of cause and effect such that increased imports contribute to ‘bringing about’, ‘producing’ or ‘inducing’ the serious injury. Although that contribution must be sufficiently clear as to establish the existence of ‘the causal link’ required, the language in the first sentence of Article 4.2(b) does not suggest that increased imports be the sole cause of the serious injury, or that ‘other factors’ causing injury must be excluded from the determination of serious injury. To the contrary, the language of Article 4.2(b), as a whole, suggests that ‘the causal link’ between increased imports and serious injury may exist, even though other factors are also contributing, ‘at the same time’, to the situation of the domestic industry.”(339)

196.     With respect to its finding that increased imports need not be the sole cause of the serious injury, the Appellate Body on US — Wheat Gluten referred, as support, to the “non-attribution” requirement in the last sentence of Article 4.2(b):

“It is precisely because there may be several factors, besides increased imports, contributing simultaneously to the situation of the domestic industry that the last sentence of Article 4.2(b) states that competent authorities ‘shall not … attribute’ to increased imports injury caused by other factors. The opening clause of that sentence indicates, to us, that this sentence provides rules that apply when ‘increased imports’ and certain ‘other factors’ are, together, ‘causing injury’ to the domestic industry ‘at the same time’. The last clause of the sentence stipulates that, in that situation, the injury caused by other factors ‘shall not be attributed to increased imports’…. Synonyms for the word ‘attribute’ include ‘assign’ or ‘ascribe’. Under the last sentence of Article 4.2(b), we are concerned with the proper ‘attribution’, in this sense, of ‘injury’ caused to the domestic industry by factors other than increased imports’. Clearly, the process of attributing ‘injury’, envisaged by this sentence, can only be made following a separation of the ‘injury’ that must then be properly ‘attributed’. What is important in this process is separating or distinguishing the effects caused by the different factors in bringing about the ‘injury’.”(340)

197.     The Appellate Body on US — Wheat Gluten subsequently set out a three-stage process under Article 4.2(b):

“Article 4.2(b) presupposes, therefore, as a first step in the competent authorities’ examination of causation, that the injurious effects caused to the domestic industry by increased imports are distinguished from the injurious effects caused by other factors. The competent authorities can then, as a second step in their examination, attribute to increased imports, on the one hand, and, by implication, to other relevant factors, on the other hand, ‘injury’ caused by all of these different factors, including increased imports. Through this two stage process, the competent authorities comply with Article 4.2(b) by ensuring that any injury to the domestic industry that was actually caused by factors other than increased imports is not ‘attributed’ to increased imports and is, therefore, not treated as if it were injury caused by increased imports, when it is not. In this way, the competent authorities determine, as a final step, whether ‘the causal link’ exists between increased imports and serious injury, and whether this causal link involves a genuine and substantial relationship of cause and effect between these two elements, as required by the Agreement on Safeguards.

The need to ensure a proper attribution of ‘injury’ under Article 4.2(b) indicates that competent authorities must take account, in their determination, of the effects of increased imports as distinguished from the effects of other factors. However, the need to distinguish between the effects caused by increased imports and the effects caused by other factors does not necessarily imply, as the Panel said, that increased imports on their own must be capable of causing serious injury, nor that injury caused by other factors must be excluded from the determination of serious injury.”(341)

198.     The Appellate Body reiterated its above-quoted approach to the causation analysis under Article 4.2(b) in US — Lamb:

“As we held in United States — Wheat Gluten Safeguard, the Agreement on Safeguards does not require that increased imports be ‘sufficient’ to cause, or threaten to cause, serious injury. Nor does that Agreement require that increased imports ‘alone’ be capable of causing, or threatening to cause, serious injury.”(342)

199.     Also in US — Lamb, the Appellate Body again stressed the importance of the separation of injurious effects caused by increased imports on the one hand and other factors on the other hand:

“Article 4.2(b) states expressly that injury caused to the domestic industry by factors other than increased imports ‘shall not be attributed to increased imports.’ In a situation where several factors are causing injury ‘at the same time’, a final determination about the injurious effects caused by increased imports can only be made if the injurious effects caused by all the different causal factors are distinguished and separated. Otherwise, any conclusion based exclusively on an assessment of only one of the causal factors — increased imports — rests on an uncertain foundation, because it assumes that the other causal factors are not causing the injury which has been ascribed to increased imports. The non-attribution language in Article 4.2(b) precludes such an assumption and, instead, requires that the competent authorities assess appropriately the injurious effects of the other factors, so that those effects may be disentangled from the injurious effects of the increased imports. In this way, the final determination rests, properly, on the genuine and substantial relationship of cause and effect between increased imports and serious injury.

As we said in our Report in United States — Wheat Gluten Safeguard, the non-attribution language in Article 4.2(b) indicates that, logically, the final identification of the injurious effects caused by increased imports must follow a prior separation of the injurious effects of the different causal factors. If the effects of the different factors are not separated and distinguished from the effects of increased imports, there can be no proper assessment of the injury caused by that single and decisive factor. As we also indicated, the final determination about the existence of ‘the causal link’ between increased imports and serious injury can only be made after the effects of increased imports have been properly assessed, and this assessment, in turn, follows the separation of the effects caused by all the different causal factors.”(343)

200.     The Appellate Body acknowledged in US — Lamb that its methodology for complying with the non-attribution requirement was not expressly provided for in Article 4.2(b), emphasizing that these three steps

“[s]imply describe a logical process for complying with the obligations relating to causation set forth in Article 4.2(b). These steps are not legal ‘tests’ mandated by the text of the Agreement on Safeguards, nor is it imperative that each step be the subject of a separate finding or a reasoned conclusion by the competent authorities. Indeed, these steps leave unanswered many methodological questions relating to the non-attribution requirement found in the second sentence of Article 4.2(b).

….

We emphasize that the method and approach WTO Members choose to carry out the process of separating the effects of increased imports and the effects of the other causal factors is not specified by the Agreement on Safeguards. What the Agreement requires is simply that the obligations in Article 4.2 must be respected when a safeguard measure is applied.”(344)

201.     In US — Lamb, the Appellate Body applied its standard under Article 4.2(b) to the findings of USITC and found that the latter’s causation analysis incorrectly considered whether increased imports were “an important cause, and a cause no less important than any other cause, of the threat of serious injury”. The Appellate Body considered this approach insufficient in the light of Article 4.2(b) because the USITC had not ascertained that the injury caused by other factors, whatever the magnitude of the injury, was not attributed to increased imports. The Appellate Body specifically held that it was “impossible to determine whether the USITC properly separated the injurious effects of these other factors from the injurious effects of the increased imports. It is, therefore, also impossible to determine whether injury caused by these other factors has been attributed to increased imports as it had not assessed the injurious effects of these other factors.”(345)

202.     In US — Wheat Gluten, the Appellate Body considered that the text of Article 4.2(a), the relationship between Articles 4.2(a) and 4.2(b) and the phrase “significant overall impairment” in Article 4.1(a) indicated that both factors specifically relating to imports and factors relating to the overall situation of the domestic industry must be included in a determination of serious injury. See paragraphs 139–140 above.

203.     While it reversed the Panel’s legal interpretation of Article 4.2(b), the Appellate Body in US — Wheat Gluten found that in the investigation at issue, the competent authorities had acted inconsistently with Article 4.2(b) as a consequence of an inadequate examination of the role of increases in average capacity. The Appellate Body noted that under Article 4.2(b), it is essential for the competent authorities to examine whether factors other than increased imports are simultaneously causing injury: “If the competent authorities do not conduct this examination, they cannot ensure that injury caused by other factors is not ‘attributed’ to increased imports.”(346) The Appellate Body then concluded that, in the case at hand, the competent authority had “not demonstrated adequately, as required by Article 4.2(b), that any injury caused to the domestic industry by increases in average capacity has not been ‘attributed’ to increased imports and, in consequence, the USITC could not establish the existence of ‘the causal link’ Article 4.2(b) requires between increased imports and serious injury”.(347)

204.     In US — Line Pipe, the Appellate Body reaffirmed its ruling in US — Wheat Gluten and US — Lamb that to fulfil the Article 4.2(b) requirement,(348) competent authorities must separate and distinguish the injurious effects of the increased imports from the injurious effects of other factors, and establish explicitly, with a reasoned and adequate explanation, that injury caused by factors other than the increased imports was not attributed to increased imports.(349) Specifically, the last sentence of Article 4.2(b) establishes a “procedural obligation”, which requires competent authorities to “identify the nature and extent of the injurious effects of the known factors other than increased imports, as well as explain satisfactorily the nature and extent of the injurious effects of those other factors as distinguished from the injurious effects of the increased imports”:(350)

“In addition, in US — Wheat Gluten, we stated in the context of parallelism that the competent authorities must ‘establish explicitly’ that imports from sources covered by the measure ‘satisf[y] the conditions for the application of a safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on Safeguards.’(351) We explained further in US — Lamb, in the context of a claim under Article 4.2(a) of the Agreement on Safeguards, that the competent authorities must provide a ‘reasoned and adequate explanation of how the facts support their determination’. We are of the view that, by analogy, the requirements elaborated in US — Wheat Gluten and in US — Lamb, also apply to the exercise contemplated in Article 4.2(b), last sentence, since in all those cases, the competent authorities are under a procedural obligation to provide an explanation as regards a determination.

Thus, to fulfill the requirement of Article 4.2(b), last sentence, the competent authorities must establish explicitly, through a reasoned and adequate explanation, that injury caused by factors other than increased imports is not attributed to increased imports. This explanation must be clear and unambiguous. It must not merely imply or suggest an explanation. It must be a straightforward explanation in express terms.”(352)

205.     To complement its finding, the Appellate Body on US — Line Pipe found, although the text of the Agreement on Safeguards on causation is by no means identical to that of the Anti-Dumping Agreement, there are “considerable similarities between the two regarding non-attribution”. Thus, the Appellate Body in US — Line Pipe ruled that its statements in US — Hot-Rolled Steel regarding Article 3.5 of the Anti-Dumping Agreement provide “guidance” in the interpretation of the similar language of the last sentence of Article 4.2(b):

“Article 3.5 of the Anti-Dumping Agreement requires an identification of ‘the nature and extent of the injurious effects of the other known factors’(353) as well as ‘a satisfactory explanation of the nature and extent of the injurious effects of the other factors, as distinguished from the injurious effects of the dumped imports.’(354)

These statements in US — Hot-Rolled Steel provide guidance for us here. As we noted in that appeal: ‘[a]lthough the text of the Agreement on Safeguards on causation is by no means identical to that of the Anti-Dumping Agreement, there are considerable similarities between the two Agreements as regards the non-attribution language.’(355) We then went on to say that ‘adopted panel and Appellate Body reports relating to the non-attribution language in the Agreement on Safeguards can provide guidance in interpreting the non-attribution language in Article 3.5 of the Anti-Dumping Agreement.’ We are of the view that this reasoning applies both ways. Our statements in US — Hot-Rolled Steel on Article 3.5 of the Anti-Dumping Agreement likewise provide guidance in interpreting the similar language in Article 4.2(b) of the Agreement on Safeguards.”(356)

206.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, addressed the question of whether quantification and use of econometric models is required in order to satisfy the legal standard for causation (as well as for the appropriate remedy):

“We note, first, that the text of the Agreement on Safeguards does not require quantification. However, in the Panel’s view both the Agreement on Safeguards and relevant jurisprudence anticipate that quantification may occur. In addition, the Panel considers that quantification may be particularly desirable in cases involving complicated factual situations where qualitative analyses may not suffice to more fully understand the dynamics of the relevant market.

In support, we note that Article 4.2(a) of the Agreement on Safeguards refers to ‘factors of [a] quantifiable nature.’ As explained in paragraph 10.318 above, we consider that Articles 4.2(a) and 4.2(b) must be read together and in a mutually consistent fashion. Therefore, the factors referred to in Article 4.2(a) must be taken into consideration in undertaking the non-attribution exercise (in addition to any other factors that may be relevant). In addition, the requirement in Article 4.2(a) that evaluated factors be of a ‘quantifiable nature’ implies that at least some of the factors assessed in the non-attribution exercise will be quantifiable and, in those circumstances, should be quantified.

…

The Panel considers that quantification could help in identifying the share of the overall injury caused by increased imports, as distinct from the injury caused by other factors, which would in turn yield a ‘benchmark’ for ensuring that the safeguard measure is imposed only to the extent necessary to prevent or remedy serious injury and allow for adjustments.”(357)

207.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, determined that quantification may, in certain cases, be entailed in the obligation on competent authorities to establish non-attribution “explicitly” on the basis of a reasoned and adequate explanation:

“In addition, the Panel considers that quantification may, in certain cases, be entailed in the obligation on competent authorities to establish non-attribution ‘explicitly’ on the basis of a reasoned and adequate explanation.(358) In this regard, the Panel recalls that, as stated on several occasions by the Appellate Body, WTO Members are expected to interpret and apply their WTO obligations in good faith.(359) Moreover, in light of the obligations imposed on competent authorities to consider all plausible alternative explanations submitted by the interested parties, we believe that a competent authority may find itself in situations where quantification and some form of economic analysis are necessary to rebut allegedly plausible alternative explanations that have been put forward. While the wording of the provisions of the Agreement on Safeguards does not require quantification in the causal link analysis per se, the circumstances of a specific dispute may call for quantification.”(360)

208.     The Panel on US — Steel Safeguards, in a finding not reviewed by the Appellate Body, determined that quantification may not necessarily be determinative:

“Having said that quantification may be desirable, useful and sometimes necessary depending on the circumstances of a case, the Panel recognizes that quantification may be difficult and is less than perfect. Therefore, the Panel is of the view that the results of such quantification may not necessarily be determinative. We consider that an overall qualitative assessment that takes into account all relevant information, must always be performed. Nevertheless, in the Panel’s view, even the most simplistic of quantitative analyses may yield useful insights into the overall dynamics of a particular industry and, in particular, into the nature and extent of injury being caused by factors other than increased imports to a domestic industry.”(361)

209.     As for the sequence of assessment of the various elements in the non-attribution analysis, the Panel on US — Steel Safeguards, in a finding subsequently not reviewed by the Appellate Body, was of the view that the Agreement on Safeguards does not prescribe any order:

“The Panel recalls the Appellate Body’s comments in US — Lamb, where, in defining the steps that might be undertaken in the non-attribution analysis, it stated that ‘these steps are not legal “tests” mandated by the text of the Agreement on Safeguards, nor is it imperative that each step be the subject of a separate finding or a reasoned conclusion by the competent authorities.’(362)

Accordingly, the Panel does not consider that the non-attribution exercise need necessarily precede a consideration of coincidence between the increased imports and the injury factors and the conditions of competition or vice versa. The Panel is of the view that the wording of Articles 2.1 and 4.2 does not require that non-attribution be undertaken in advance of or following any other analysis that may be undertaken with a view to establishing the existence of a causal link. Provided that the various elements entailed in a causation analysis are considered and analysed in coming to a conclusion on the existence or otherwise of a ‘causal link’, this should suffice. This much is clear from the Appellate Body’s comments in US — Wheat Gluten and US — Lamb:

‘[L]ogically, the final identification of the injurious effects caused by increased imports must follow a prior separation of the injurious effects of the different causal factors. If the effects of the different factors are not separated and distinguished from the effects of increased imports, there can be no proper assessment of the injury caused by that single and decisive factor. As we also indicated, the final determination about the existence of ‘the causal link’ between increased imports and serious injury can only be made after the effects of increased imports have been properly assessed, and this assessment, in turn, follows the separation of the effects caused by all the different causal factors.’(363)”(364)

(b) Relationship with other Articles

210.     See paragraphs 49–57 above concerning the relationship with Article 2.1.

211.     The Panel on US — Lamb, after making findings of inconsistency with Article XIX:1(a) of GATT 1994 and with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards, exercised judicial economy with respect to claims raised under Articles 2.2, 3.1, 5.1, 8, 11 and 12 of the Agreement on Safeguards.(365)

212.     The Panel on Korea — Dairy, after finding that the determination of the existence of serious injury at issue in that dispute was inconsistent with Article 4.2, noted that, as a consequence, it was not necessary for the Panel to reach any findings as to whether Korea had demonstrated that increased imports were causing serious injury to the domestic industry. However, referring to the Appellate Body findings in Australia — Salmon, the Panel opted for offering “some general comments relevant to an analysis of a causal link between increased imports and injury, in the context of the Korean investigation”.(366)

213.     In Argentina — Footwear (EC), the Appellate Body expressed its surprise that the Panel “having determined that there were no ‘increased imports’, and having determined that there was no ‘serious injury’, for some reason went on to make an assessment of causation”. The Appellate Body found difficulty in understanding a “causal link” between “increased imports” that did not occur and “serious injury” that did not exist.(367)

(c) Relationship with other WTO Agreements

(i) Anti-Dumping Agreement

214.     The Appellate Body on US — Line Pipe ruled that its statements in US — Hot-Rolled Steel regarding Article 3.5 of the Anti-Dumping Agreement provide guidance in the interpretation of the similar language of the last sentence of Article 4.2(b). See paragraph 205 above.

6. Article 4.2(c)

(a) Relationship with other Articles

215.     In Argentina — Footwear (EC), the Appellate Body rejected an argument that, in referring to Article 3, in the context of its reasoning on Article 4.2(a) and 4.2(c), the Panel had exceeded its terms of reference: (368)

“We have examined the specific paragraphs in the Panel Report cited by Argentina, and we see no finding by the Panel that Argentina acted inconsistently with Article 3 of the Agreement on Safeguards. In one instance, the Panel referred to Article 3 parenthetically in support of its reasoning on Article 4.2(a) of the Agreement on Safeguards. Every other reference to Article 3 cited by Argentina was made by the Panel in conjunction with the Panel’s reasoning and findings relating to Article 4.2(c) of the Agreement on Safeguards. None of these references constitutes a legal finding or conclusion by the Panel regarding Article 3 itself.

We note that the very terms of Article 4.2(c) of the Agreement on Safeguards expressly incorporate the provisions of Article 3. Thus, we find it difficult to see how a panel could examine whether a Member had complied with Article 4.2(c) without also referring to the provisions of Article 3 of the Agreement on Safeguards. More particularly, given the express language of Article 4.2(c), we do not see how a panel could ignore the publication requirement set out in Article 3.1 when examining the publication requirement in Article 4.2(c) of the Agreement on Safeguards. And, generally, we fail to see how the Panel could have interpreted the requirements of Article 4.2(c) without taking into account in some way the provisions of Article 3. What is more, we fail to see how any panel could be expected to make an “objective assessment of the matter”, as required by Article 11 of the DSU, if it could only refer in its reasoning to the specific provisions cited by the parties in their claims.

Consequently, we conclude that the Panel did not exceed its terms of reference by referring in its reasoning to the provisions of Article 3 of the Agreement on Safeguards. On the contrary, we find that the Panel was obliged by the terms of Article 4.2(c) to take the provisions of Article 3 into account. Thus, we do not believe that the Panel erred in its reasoning relating to the provisions of Article 3 of the Agreement on Safeguards in making its findings under Article 4.2(c) of that Agreement.”(369)

216.     See paragraphs 99 and 105 above in respect of the relationship with Article 3.1.

217.     The Panel on US — Wheat Gluten considered the relationship between Article 4.2(c) and the confidentiality requirements of Article 3.2.(370)

“Given that the very terms of Article 4.2(c) expressly incorporate the provisions of Article 3, and given the specific and mandatory language of Article 3.2 dealing with the required treatment of information that is by nature confidential or is submitted on a confidential basis, the requirement in Article 4.2(c) to publish a ‘detailed analysis of the case under investigation’ and ‘demonstration of the relevance of the factors examined’ cannot entail the publication of ‘information which is by nature confidential or which is provided on a confidential basis’ within the meaning of Article 3.2 SA.”(371)

218.     With respect to this issue, see also paragraphs 108–109 above.

VI. Article 5     back to top

A. Text of Article 5

Article 5: Application of Safeguard Measures

1.     A Member shall apply safeguard measures only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment. If a quantitative restriction is used, such a measure shall not reduce the quantity of imports below the level of a recent period which shall be the average of imports in the last three representative years for which statistics are available, unless clear justification is given that a different level is necessary to prevent or remedy serious injury. Members should choose measures most suitable for the achievement of these objectives.

2.     (a)     In cases in which a quota is allocated among supplying countries, the Member applying the restrictions may seek agreement with respect to the allocation of shares in the quota with all other Members having a substantial interest in supplying the product concerned. In cases in which this method is not reasonably practicable, the Member concerned shall allot to Members having a substantial interest in supplying the product shares based upon the proportions, supplied by such Members during a previous representative period, of the total quantity or value of imports of the product, due account being taken of any special factors which may have affected or may be affecting the trade in the product.

         (b)     A Member may depart from the provisions in subparagraph (a) provided that consultations under paragraph 3 of Article 12 are conducted under the auspices of the Committee on Safeguards provided for in paragraph 1 of Article 13 and that clear demonstration is provided to the Committee that (i) imports from certain Members have increased in disproportionate percentage in relation to the total increase of imports of the product concerned in the representative period, (ii) the reasons for the departure from the provisions in subparagraph (a) are justified, and (iii) the conditions of such departure are equitable to all suppliers of the product concerned. The duration of any such measure shall not be extended beyond the initial period under paragraph 1 of Article 7. The departure referred to above shall not be permitted in the case of threat of serious injury.

B. Interpretation and application of Article 5

1. Article 5.1

(a) Scope of requirement to explain the necessity of a safeguard measure

219.     In Korea — Dairy, the Appellate Body upheld the finding by the Panel in that dispute that the first sentence of Article 5.1 imposes an obligation on a Member applying a safeguard measure to ensure that the measure applied is commensurate with the goals of preventing or remedying serious injury and facilitating adjustment of the domestic industry, and that this obligation applies irrespective of the particular form of the safeguard measure.(372) However, the Appellate Body reversed the Panel’s finding regarding the scope of the requirement to explain the necessity of a safeguard measure.(373) In this respect, the Appellate Body stated:

“[The second sentence of Article 5.1] requires a ‘clear justification’ if a Member takes a safeguard measure in the form of a quantitative restriction which reduces the quantity of imports below the average of imports in the last three representative years for which statistics are available. We agree with the Panel that this ‘clear justification’ has to be given by a Member applying a safeguard measure at the time of the decision, in its recommendations or determinations on the application of the safeguard measure.

However, we do not see anything in Article 5.1 that establishes such an obligation for a safeguard measure other than a quantitative restriction which reduces the quantity of imports below the average of imports in the last three representative years. In particular, a Member is not obliged to justify in its recommendations or determinations a measure in the form of a quantitative restriction which is consistent with ‘the average of imports in the last three representative years for which statistics are available’.

For these reasons, we do not agree with the Panel’s broad finding in paragraph 7.109 that:

‘Members are required, in their recommendations or determinations on the application of a safeguard measure, to explain how they considered the facts before them and why they concluded, at the time of the decision, that the measure to be applied was necessary to remedy serious injury and facilitate the adjustment of the industry.’”(374)

220.     In US — Line Pipe, the Appellate Body reiterated its finding in Korea — Dairy, that Article 5.1 imposes a general “substantive obligation” to apply safeguard measures only to the “permissible extent”, and a particular “procedural obligation” to provide a “clear justification” only in the specific case of quantitative restrictions reducing the volume of imports below the average of imports in the last three representative years.(375) The Appellate Body also reaffirmed its interpretation in Korea — Dairy that Article 5.1 does not establish a “general procedural obligation” to demonstrate compliance with Article 5.1, first sentence, at the time of application, in its recommendations or determinations on the application of the safeguard measure:

“It is clear, therefore, that, apart from one exception, Article 5.1, including the first sentence, does not oblige a Member to justify, at the time of application, that the safeguard measure at issue is applied ‘only to the extent necessary’. The exception we identified in Korea — Dairy lies in the second sentence of Article 5.1. That exception concerns safeguard measures in the form of quantitative restrictions, which reduce the quantity of imports below the average of imports in the last three representative years. That exception does not apply to the line pipe measure.”(376)

221.     Regarding the “permissible extent” of the application of a safeguard measure under Article 5.1,(377) the Appellate Body in US — Line Pipe, in the context of Article 4.2(378) and the objective and purpose of the Agreement, concluded that although the “serious injury” in Article 5.1 and Article 4.2 was “one and the same”,(379) the phrase “only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment” in Article 5.1, first sentence, must be read as requiring that safeguard measures may be applied “only to the extent that they address serious injury attributed to increased imports,(380) not “all serious injury”.(381) The Appellate Body, in particular, ruled that Article 4.2(b), as the context for Article 5.1, seeks to prevent investigating authorities from inferring a causal link between serious injury and increased imports as a result of injurious effects from other sources, and it is “a benchmark for ensuring that only an appropriate share of the overall injury is attributed to increased imports”:

“We observe here that the non-attribution language of the second sentence of Article 4.2(b) is an important part of the architecture of the Agreement on Safeguards and thus serves as necessary context in which Article 5.1, first sentence, must be interpreted. In our view, the non-attribution language of the second sentence of Article 4.2(b) has two objectives. First, it seeks, in situations where several factors cause injury at the same time, to prevent investigating authorities from inferring the required ‘causal link’ between increased imports and serious injury or threat thereof on the basis of the injurious effects caused by factors other than increased imports. Second, it is a benchmark for ensuring that only an appropriate share of the overall injury is attributed to increased imports. As we read the Agreement, this latter objective, in turn, informs the permissible extent to which the safeguard measure may be applied pursuant to Article 5.1, first sentence. Indeed, as we see it, this is the only possible interpretation of the obligation set out in Article 4.2(b), last sentence, that ensures its consistency with Article 5.1, first sentence. It would be illogical to require an investigating authority to ensure that the ‘causal link’ between increased imports and serious injury not be based on the share of injury attributed to factors other than increased imports while, at the same time, permitting a Member to apply a safeguard measure addressing injury caused by all factors.

….

For all these reasons, we conclude that the phrase ‘only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment’ in Article 5.1, first sentence, must be read as requiring that safeguard measures may be applied only to the extent that they address serious injury attributed to increased imports.”(382)

222.     In addition, the Appellate Body on US — Line Pipe referred to the object and purpose of the Agreement on Safeguards and the rules of general international law on state responsibility to support its conclusion that the phrase “only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment” in Article 5.1, first sentence, must be read as requiring that safeguard measures may be applied “only to the extent that they address serious injury attributed to increased imports”:

“If the pain inflicted on exporters by a safeguard measure were permitted to have effects beyond the share of injury caused by increased imports, this would imply that an exceptional remedy, which is not meant to protect the industry of the importing country from unfair or illegal trade practices, could be applied in a more trade-restrictive manner than countervailing and anti-dumping duties.

The object and purpose of the Agreement on Safeguards support this reading of the context of Article 5.1, first sentence. The Agreement on Safeguards deals only with imports. It deals only with measures that, under certain conditions, can be applied to imports. The title of Article XIX of the GATT 1994 is ‘Emergency Action on Imports of Particular Products’. (emphasis added) It seems apparent to us that the object and purpose of both Article XIX of the GATT 1994 and the Agreement on Safeguards support the conclusion that safeguard measures should be applied so as to address only the consequences of imports. And, therefore, it seems apparent to us as well that the limited objective of Article 5.1, first sentence, is limited by the consequences of imports.

We recalled there that the rules of general international law on state responsibility require that countermeasures in response to breaches by States of their international obligations be proportionate to such breaches. Article 51 of the International Law Commission’s Draft Articles on Responsibility of States for Internationally Wrongful Acts provides that ‘countermeasures must be commensurate with the injury suffered, taking into account the gravity of the internationally wrongful act and the rights in question’.

For all these reasons, we conclude that the phrase ‘only to the extent necessary to prevent or remedy serious injury and to facilitate adjustment’ in Article 5.1, first sentence, must be read as requiring that safeguard measures may be applied only to the extent that they address serious injury attributed to increased imports.”(383)

(b) Adjustment plans

223.     The Panel on Korea — Dairy rejected the view that Article 5.1 imposes an obligation to consider adjustment plans:

“We wish to make it clear that we do not interpret Article 5.1 as requiring the consideration of an adjustment plan by the authorities … The Panel finds no specific requirement that an adjustment plan as such must be requested and considered in the text of the Agreement on Safeguards. Although there are references to industry adjustment in two of its provisions, nothing in the text of the Agreement on Safeguards suggests that consideration of a specific adjustment plan is required before a measure can be adopted. Rather, we believe that the question of adjustment, along with the question of preventing or remedying serious injury, must be a part of the authorities’ reasoned explanation of the measure it has chosen to apply. Nonetheless, we note that examination of an adjustment plan, within the context of the application of a safeguard measure, would be strong evidence that the authorities considered whether the measure was commensurate with the objective of preventing or remedying serious injury and facilitating adjustment.”(384)

(c) Relationship with other Articles

224.     The Panel on Argentina — Footwear (EC), after finding that the safeguard investigation and determination leading to the imposition of the definitive safeguard measure at issue were inconsistent with Articles 2 and 4, exercised judicial economy with respect to claims under Article 5.(385)

225.     The Panel on US — Wheat Gluten, after finding the measure at issue to be inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards, exercised judicial economy with respect to claims under Article 5 of the Agreement on Safeguards (and under Articles I and XIX of the GATT 1994).(386) The Appellate Body upheld this exercise of judicial economy by the Panel. In so doing, the Appellate Body referred to its statements on judicial economy in US — Wool Shirts and Blouses and in Australia — Salmon, and recalled that in Argentina — Footwear (EC) it had found that, since inconsistency with Articles 2 and 4 deprived the measure at issue in that case of its legal basis, it was not necessary to complete the analysis of the Panel relating to Article XIX:1 of the GATT 1994.(387) Similarly, the Appellate Body also upheld the Panel’s exercise of judicial economy with respect to the claims under Article I of the GATT 1994 and Article 5 of the Agreement on Safeguards.(388)

226.     The Panel on US — Lamb, after making findings of inconsistency with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards (and with Article XIX:1(a) of the GATT 1994), exercised judicial economy with respect to claims raised under Article 5.1 (and Articles 2.2, 3.1, 8, 11 and 12) of the Agreement on Safeguards.(389) The Appellate Body upheld this exercise of judicial economy.(390)

(d) Relationship with other WTO Agreements

(i) GATT 1994

227.     As regards the relationship with Article XIII of the GATT 1994, the Panel on US — Line Pipe held, in a statement not reviewed by the Appellate Body, that Article XIII does applies to tariff quota safeguard measures. In its view, “[i]f Article XIII did not apply to tariff quota safeguard measures, such safeguard measures would escape the majority of the disciplines set forth in Article 5”:

“[I]t is the paucity of disciplines governing the application of tariff quota safeguard measures in Article 5 of the Safeguards Agreement that supports our interpretation of Article XIII. If Article XIII did not apply to tariff quota safeguard measures, such safeguard measures would escape the majority of the disciplines set forth in Article 5. This is an important consideration, given the quantitative aspect of a tariff quota. For example, if Article XIII did not apply, quantitative criteria regarding the availability of lower tariff rates could be introduced in a discriminatory manner, without any consideration to prior quantitative performance.(391) In our view, the potential for such discrimination is contrary to the object and purpose of both the Safeguards Agreement, and the WTO Agreement. In this regard, the preamble of the Safeguards Agreement refers to the “need to clarify and reinforce the disciplines of GATT 1994” in the context of safeguards. We consider that the “disciplines of GATT 1994” surely include those providing for non-discrimination. In any event “the elimination of discriminatory treatment in international trade relations” is referred to explicitly in the preamble to the WTO Agreement. We further note that the preamble of the Safeguards Agreement also mentions that one of the objectives of the Safeguards Agreement is to “establish multilateral control over safeguards and eliminate measures that escape such control”. We are of the view that non-application of Article XIII in the context of safeguards would result in tariff quota safeguard measures partially escaping the control of multilateral disciplines. This result would be contrary to the objectives set out in the preamble of the Safeguards Agreement.”(392)

228.     The Panel on US — Lamb, after making findings of inconsistency with Article XIX:1(a) of the GATT 1994 (and with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards), exercised judicial economy with respect to claims raised under Article 5.1 (and Articles 2.2, 3.1, 8, 11 and 12) of the Agreement on Safeguards.(393) The Appellate Body upheld this exercise of judicial economy.(394)

2. Article 5.2

(a) Article 5.2(b)

(i) “the departure referred to above shall not be permitted in the case of threat of serious injury”

229.     In US — Line Pipe, the Appellate Body ruled that Article 5.2(b) is an “exception” to the general rule, and not relevant to the non-discrete determination of injury or threat thereof in the safeguard measure in US — Line Pipe:

“Article 5.2(b) excludes quota modulation in the case of threat of serious injury. It is, in our view, the only provision in the Agreement on Safeguards that establishes a difference in the legal effects of ‘serious injury’ and ‘threat of serious injury’. Under Article 5.2(b), in order for an importing Member to adopt a safeguard measure in the form of a quota to be allocated in a manner departing from the general rule contained in Article 5.2(a), that Member must have determined that there is ‘serious injury’. A Member cannot engage in quota modulations if there is only a ‘threat of serious injury’. This is an exception that must be respected. But we do not think it appropriate to generalize from such a limited exception to justify a general rule. In any event, this exceptional circumstance is not relevant to the line pipe measure. We find nothing in Article 5.2(b), viewed as part of the context of Article 2.1, that would support a finding that, in this case, the USITC acted inconsistently with the Agreement on Safeguards by making a non-discrete determination in this case.”(395)

VII. Article 6    back to top

A. Text of Article 6

Article 6: Provisional Safeguard Measures

     In critical circumstances where delay would cause damage which it would be difficult to repair, a Member may take a provisional safeguard measure pursuant to a preliminary determination that there is clear evidence that increased imports have caused or are threatening to cause serious injury. The duration of the provisional measure shall not exceed 200 days, during which period the pertinent requirements of Articles 2 through 7 and 12 shall be met. Such measures should take the form of tariff increases to be promptly refunded if the subsequent investigation referred to in paragraph 2 of Article 4 does not determine that increased imports have caused or threatened to cause serious injury to a domestic industry. The duration of any such provisional measure shall be counted as a part of the initial period and any extension referred to in paragraphs 1, 2 and 3 of Article 7.

B. Interpretation and Application of Article 6

1. Relationship with other Articles

230.     The Panel on Argentina — Footwear (EC) considered that, in light of its findings “concerning the investigation and the definitive measure” (the Panel had found a violation of Articles 2.1, 4.2(a), 4.2(b) and 4.2(c)), it was not necessary to make a finding concerning a claim under Article 6.(396)

VIII. Article 7     back to top

A. Text of Article 7

Article 7: Duration and Review of Safeguard Measures

1.     A Member shall apply safeguard measures only for such period of time as may be necessary to prevent or remedy serious injury and to facilitate adjustment. The period shall not exceed four years, unless it is extended under paragraph 2.

2.     The period mentioned in paragraph 1 may be extended provided that the competent authorities of the importing Member have determined, in conformity with the procedures set out in Articles 2, 3, 4 and 5, that the safeguard measure continues to be necessary to prevent or remedy serious injury and that there is evidence that the industry is adjusting, and provided that the pertinent provisions of Articles 8 and 12 are observed.

3.     The total period of application of a safeguard measure including the period of application of any provisional measure, the period of initial application and any extension thereof, shall not exceed eight years.

4.     In order to facilitate adjustment in a situation where the expected duration of a safeguard measure as notified under the provisions of paragraph 1 of Article 12 is over one year, the Member applying the measure shall progressively liberalize it at regular intervals during the period of application. If the duration of the measure exceeds three years, the Member applying such a measure shall review the situation not later than the mid-term of the measure and, if appropriate, withdraw it or increase the pace of liberalization. A measure extended under paragraph 2 shall not be more restrictive than it was at the end of the initial period, and should continue to be liberalized.

5.     No safeguard measure shall be applied again to the import of a product which has been subject to such a measure, taken after the date of entry into force of the WTO Agreement, for a period of time equal to that during which such measure had been previously applied, provided that the period of non-application is at least two years.

6.     Notwithstanding the provisions of paragraph 5, a safeguard measure with a duration of 180 days or less may be applied again to the import of a product if:

(a)     at least one year has elapsed since the date of introduction of a safeguard measure on the import of that product; and

(b)     such a safeguard measure has not been applied on the same product more than twice in the five-year period immediately preceding the date of introduction of the measure.

B. Interpretation and Application of Article 7

1. Article 7.4

231.     In dismissing a claim under Article 12 regarding an alleged failure to notify modifications of a definitive safeguard measure which increased the restrictiveness of that measure, the Panel Report in Argentina — Footwear (EC) observed:

“[T]he only modifications of safeguard measures that Article 7.4 contemplates are those that reduce its restrictiveness (i.e., to eliminate the measure or to increase their pace of its liberalisation pursuant to a mid-term review). The Agreement does not contemplate modifications that increase the restrictiveness of a measure, and thus contains no notification requirement for such restrictive modifications.

We note that the modifications of the definitive safeguard measure made by Argentina are not contemplated by Article 7, and thus Article 12 does not foresee notification requirements with respect to such modifications. Any substantive issues pertaining to these subsequent Resolutions would need to be addressed under Article 7, but the European Communities made no such claim.”(397)

232.     With respect to a failure to notify a modification of a safeguard measure that increased the restrictiveness of that measure, see paragraph 275 below.

IX. Article 8     back to top

A. Text of Article 8

Article 8: Level of Concessions and Other Obligations

1.     A Member proposing to apply a safeguard measure or seeking an extension of a safeguard measure shall endeavour to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure, in accordance with the provisions of paragraph 3 of Article 12. To achieve this objective, the Members concerned may agree on any adequate means of trade compensation for the adverse effects of the measure on their trade.

2.     If no agreement is reached within 30 days in the consultations under paragraph 3 of Article 12, then the affected exporting Members shall be free, not later than 90 days after the measure is applied, to suspend, upon the expiration of 30 days from the day on which written notice of such suspension is received by the Council for Trade in Goods, the application of substantially equivalent concessions or other obligations under GATT 1994, to the trade of the Member applying the safeguard measure, the suspension of which the Council for Trade in Goods does not disapprove.

3.     The right of suspension referred to in paragraph 2 shall not be exercised for the first three years that a safeguard measure is in effect, provided that the safeguard measure has been taken as a result of an absolute increase in imports and that such a measure conforms to the provisions of this Agreement.

B. Interpretation and Application of Article 8

1. Article 8.1

(a) "in accordance with the provisions of paragraph 3 of Article 12"

233.     In US — Wheat Gluten, the Appellate Body upheld a finding by the Panel in that dispute that the United States had failed to endeavour to maintain a substantially equivalent level of concessions and other obligations to that existing under GATT 1994 between it and the exporting Members which would be affected by such a measure, in accordance with Article 12.3:

“Article 8.1 imposes an obligation on Members to ‘endeavour to maintain’ equivalent concessions with affected exporting Members. The efforts made by a Member to this end must be ‘in accordance with the provisions of ‘ Article 12.3 of the Agreement on Safeguards.

In view of this explicit link between Articles 8.1 and 12.3 of the Agreement on Safeguards, a Member cannot, in our view, ‘endeavour to maintain’ an adequate balance of concessions unless it has, as a first step, provided an adequate opportunity for prior consultations on a proposed measure. We have upheld the Panel’s findings that the United States did not provide an adequate opportunity for consultations, as required by Article 12.3 of the Agreement on Safeguards. For the same reasons, we also uphold the Panel’s finding, in paragraph 8.219 of its Report, that the United States acted inconsistently with its obligations under Article 8.1 of the Agreement on Safeguards.”(398)

234.     In US — Line Pipe, the Appellate Body, referring to its Report in US — Wheat Gluten, upheld the Panel’s finding that the obligation under Article 8.1 to “maintain a substantially equivalent level of concessions” is linked with the Members’ consultation obligation under Article 12.3:

“As we stated in US — Wheat Gluten, there must be sufficient time ‘to allow for the possibility … for a meaningful exchange’.(399) This requirement presupposes that exporting Members will obtain the relevant information sufficiently in advance to permit analysis of the measure, and assumes further that exporting Members will have an adequate opportunity to consider the likely consequences of the measure before the measure takes effect. For it is only in such circumstances that an exporting Member will be in a position, as required by Article 12.3, to ‘reach[] an understanding on ways to achieve the objective set out in paragraph 1 of Article 8’ of ‘maintain[ing] a substantially equivalent level of concessions and other obligations to that existing under GATT 1994’. We see this specific textual link between Article 12.3 and paragraph 1 of Article 8 as especially significant.

…

In our view, our reasoning in US — Wheat Gluten is also applicable in this case. Therefore, we agree with the Panel that the United States, ‘by failing to comply with its obligations under Article 12.3, has also acted inconsistently with its obligations under Article 8.1 to endeavour to maintain a substantially equivalent level of concessions….’ We, therefore, uphold the Panel’s finding that the United States acted inconsistently with its obligations under Article 8.1 of the Agreement on Safeguards.”(400)

(b) Relationship with other Articles

235.     With respect to the relationship with Article 12.3, see also paragraphs 269–270 below.

236.     The Panel on US — Lamb, after making findings of inconsistency with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards (and with Article XIX:1(a) of GATT 1994), exercised judicial economy with respect to claims raised under Article 8 (and Articles 2.2, 3.1, 5.1, 11 and 12) of the Agreement on Safeguards.(401)

(c) Relationship with other WTO Agreements

237.     The Panel on US — Lamb, after making findings of inconsistency with Article XIX:1(a) of the GATT 1994 (and with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards), exercised judicial economy with respect to claims raised under Article 8 (and Articles 2.2, 3.1, 5.1, 11 and 12) of the Agreement on Safeguards.(402)

X. Article 9     back to top

A. Text of Article 9

Article 9: Developing Country Members

1.     Safeguard measures shall not be applied against a product originating in a developing country Member as long as its share of imports of the product concerned in the importing Member does not exceed 3 per cent, provided that developing country Members with less than 3 per cent import share collectively account for not more than 9 per cent of total imports of the product concerned.(2)

(footnote original) 2 A Member shall immediately notify an action taken under paragraph 1 of Article 9 to the Committee on Safeguards.

2.     A developing country Member shall have the right to extend the period of application of a safeguard measure for a period of up to two years beyond the maximum period provided for in paragraph 3 of Article 7. Notwithstanding the provisions of paragraph 5 of Article 7, a developing country Member shall have the right to apply a safeguard measure again to the import of a product which has been subject to such a measure, taken after the date of entry into force of the WTO Agreement, after a period of time equal to half that during which such a measure has been previously applied, provided that the period of non-application is at least two years.

B. Interpretation and Application of Article 9

1. Article 9.1

(a) Exclusion of developing country exporting less than “de minimis” levels

238.     In US — Line Pipe, based upon the statistical evidence, the Appellate Body upheld the Panel’s findings(403) and concluded that the importing Member acted inconsistently with Article 9.1 by failing to “take all reasonable steps it could, and exclude developing countries exporting less than de minimis levels in Article 9.1”.(404) However, the Appellate Body in US — Line Pipe held that Article 9.1 does not indicate how a Member must comply with an obligation to provide specifically for “non-application” of a safeguard measure, and it is possible to comply with Article 9.1 “without providing a specific list of the Members excluded from the safeguard measure”:

“There is nothing, for example, in the text of Article 9.1 to the effect that countries to which the measure will not apply must be expressly excluded from the measure. Although the Panel may have a point in saying that it is ‘reasonable to expect’ an express exclusion, we see nothing in Article 9.1 that requires one.

We agree also with the United States that it is possible to comply with Article 9.1 without providing a specific list of the Members that are either included in, or excluded from, the measure. Although such a list could, and would, be both useful and helpful by providing transparency for the benefit of all Members concerned, we see nothing in Article 9.1 that mandates one.”(405)

239.     In US — Line Pipe, concerning the safeguard measure which took the form of a supplemental duty, the Appellate Body clarified that “duties are ‘applied [against a product] irrespective of whether they result in making imports more expensive, in discouraging imports because they become more expensive, or in preventing imports together”. In this case, no evidence had been presented before the Panel that the importing Member made an effort “to make certain that de minimis imports from developing countries were excluded from the application of the measures”:

“On this point, we start by observing that Article 9.1 obliges Members not to apply a safeguard measure against products originating in developing countries whose individual exports are below a de minimis level of three percent of the imports of that product, provided that the collective import share of such developing countries does not account for more than nine percent of the total imports of that product…. However, we note that Article 9.1 is concerned with the application of a safeguard measure on a product. And we note, too, that a duty, such as the supplemental duty imposed by the line pipe measure, does not need actually to be enforced and collected to be ‘applied’ to a product. In our view, duties are ‘applied against a product ‘ when a Member imposes conditions under which that product can enter that Member’s market — including when that Member establishes, as the United States did here, a duty to be imposed on over-quota imports. Thus, in our view, duties are ‘applied’ irrespective of whether they result in making imports more expensive, in discouraging imports because they become more expensive, or in preventing imports altogether.

…

[T]he available documents reveal no efforts whatsoever by the United States — apart from the claimed ‘automatic’ structure of the measure itself — to make certain that de minimis imports from developing countries were excluded from the application of the measure.”(406)

XI. Article 10    back to top

A. Text of Article 10

Article 10: Pre-existing Article XIX Measures

     Members shall terminate all safeguard measures taken pursuant to Article XIX of GATT 1947 that were in existence on the date of entry into force of the WTO Agreement not later than eight years after the date on which they were first applied or five years after the date of entry into force of the WTO Agreement, whichever comes later.

B. Interpretation and Application of Article 10

No jurisprudence or decision by a competent WTO body.

Footnotes:

147. Panel Report on Korea — Dairy, para. 7.22. back to text
148. Appellate Body Report on US — Wheat Gluten, paras. 53–54. back to text
149. Panel Report on US — Wheat Gluten, para. 8.121. back to text
150. Appellate Body Report on US — Wheat Gluten, para. 55. back to text
151. Appellate Body Report on US — Wheat Gluten, para. 56. back to text
152. (footnote original) Appellate Body Report, US — Line Pipe, para. 158. back to text
153. (footnote original) Appellate Body Report, US — Lamb, para. 106. (original emphasis) back to text
154. (footnote original) In this regard, we note that the fact that, pursuant to the domestic law of a WTO Member, a finding made on the basis of a broad product grouping is deemed to support a competent authority’s determination which relates to a narrower product, does not, in and of itself, imply that this conclusion holds true also for the purposes of the Agreement on Safeguards. back to text
155. (footnote original) We also emphasize that our finding does not address the question whether the USITC and/or individual Commissioners correctly defined the "like product", the "imported product", or the "domestic industry". back to text
156. Appellate Body Report on US — Steel Safeguards, paras. 414–419. back to text
157. (footnote original) United States’ first written submission, para. 954. back to text
158. (footnote original) European Communities’ second written submission, para. 85. back to text
159. Panel Report on US — Steel Safeguards, para. 10.60 and 10.64–65. back to text
160. Appellate Body Report, US — Line Pipe, paras. 158 and 234. back to text
161. Panel Report on US — Steel Safeguards, para. 10.17. back to text
162. (footnote original) United States’ appellant’s submission, para. 73. back to text
163. (footnote original) Ibid., para. 74. back to text
164. Appellate Body Report, US — Lamb, para. 107. back to text
165. (footnote original) United States’ appellant’s submission, para. 73. (original emphasis) back to text
166. Appellate Body Report on US — Steel Safeguards, paras. 301–303. back to text
167. Panel Report on Chile — Price Band System, para. 7.128. back to text
168. (footnote original) European Communities’ appellee’s submission, para. 48; Norway’s appellee’s submission, para. 75. back to text
169. Appellate Body Report on US — Steel Safeguards, paras 287–290. back to text
170. (footnote original) Panel Reports, para. 10.133. back to text
171. Appellate Body Report on US — Steel Safeguards, para. 329. back to text
172. Appellate Body Report on US — Lamb, para. 76. back to text
173. Panel Report on US — Steel Safeguards, paras. 10.49–10.50 back to text
174. Panel Report on US — Steel Safeguards, para. 10.115. back to text
175. Appellate Body Report on US — Steel Safeguards, para. 289. back to text
176. (footnote original) United States’ response to questioning at the oral hearing. back to text
177. Appellate Body Report on US — Steel Safeguards, para. 290. back to text
178. (footnote original) Appellate Body Report, Argentina — Footwear (EC), para. 121. back to text
179. Appellate Body Report on US — Steel Safeguards, paras. 298–299. back to text
180. Panel Report on US — Wheat Gluten, paras. 8.19–8.20. back to text
181. Panel Report on US — Wheat Gluten, paras. 8.23–8.24. See also Chapter on the Anti-Dumping Agreement, Sections VI.B.1 and 4 and the Appellate Body Report on Thailand — H-Beams, para. 112. back to text
182. (footnote original) Appellate Body Report Thailand — H-Beams, paras. 111, 112 and 119. back to text
183. (footnote original) See Appellate Body Report, Korea — Dairy, para. 81: "In light of the interpretive principle of effectiveness, it is the duty of any treaty interpreter to ‘read all applicable provisions of a treaty in a way that gives meaning to all of them, harmoniously’." See also Appellate Body Report, Argentina — Footwear (EC), para. 81; Appellate Body Report, US — Gasoline, p. *23; Appellate Body Report, Japan — Alcoholic Beverages II, p. *12; and Appellate Body Report, India — Patents (US), para. 45. back to text
184. (footnote original) For instance, at page 215 of the USITC’s Report, Vol. I, one can read the following analysis protecting confidential information:
"The ratio of imports of stainless steel rod to domestic production also increased significantly during the period, increasing from *** percent in 1996 to *** percent in 2000. While the ratio fluctuated somewhat during the period of investigation, the largest single increase in the ratio (*** percentage points) occurred in 2000, the last full year of the period of investigation. The ratio of imports to domestic production decreased from *** percent of domestic production in interim 2000 to *** percent in interim 2001." (Footnotes omitted). back to text
185. Panel Report on US — Steel Safeguards, paras.10.272–10.275. back to text
186. Panel Report on US — Wheat Gluten, paras. 8.7–8.10. back to text
187. Panel Report on US — Wheat Gluten, para. 8.11. back to text
188. Panel Report on US — Wheat Gluten, para. 8.12. back to text
189. Appellate Body Report on US — Wheat Gluten, para. 170. back to text
190. Appellate Body Report on US — Wheat Gluten, para. 171. Faced with a Member’s refusal to grant access to confidential information, a WTO panel has the discretion, under Article 11 of the DSU, to draw inferences "adverse" to such Member’s position in a particular dispute. With respect to adverse inferences in general, see Chapter on the DSU, Section XI.B.3(c). back to text
191. Appellate Body Report on US — Lamb, paras. 124 and 126. back to text
192. (footnote original) We find support for our view that the standard of "serious injury" is higher than "material injury" in the French and Spanish texts of the relevant agreements, where the equivalent terms are, respectively, dommage grave and dommage important; and daño grave and daño importante. back to text
193. (footnote original) Appellate Body Report, Argentina — Footwear Safeguard, para. 94. back to text
194. Appellate Body Report on US — Lamb, para. 124. back to text
195. Appellate Body Report on Argentina — Footwear (EC), para. 139. back to text
196. Panel Report on US — Wheat Gluten, paras. 8.80 and 8.85. back to text
197. Appellate Body Report on US — Wheat Gluten, para. 74. back to text
198. Panel Report on US — Lamb, paras. 7.188 and 7.203. back to text
199. (footnote original) Except, of course, in a case involving threat of serious injury, where the issue involves future injury. back to text
200. Panel Report on US — Wheat Gluten, para. 8.81. back to text
201. (footnote original) Webster’s New Encyclopaedic Dictionary (1994), at 496. back to text
202. (footnote original) Oxford English Dictionary, at 1316. back to text
203. Panel Report on US — Lamb, paras. 7.127–7.129. back to text
204. Appellate Body Report on US — Lamb, para. 125. back to text
205. (footnote original) [Appellate Body Report on Argentina — Footwear (EC),] para. 139. back to text
206. Appellate Body Report on US — Lamb, para. 126. back to text
207. Panel Report on US — Lamb, paras. 7.192–7.194. back to text
208. Panel Report on Argentina — Footwear (EC), para. 8.284. back to text
209. Panel Report on US — Lamb, paras. 7.185–7.187. back to text
210. Panel Report on Argentina — Footwear (EC), para. 8.285. back to text
211. Panel Report on US — Lamb, para. 7.119. back to text
212. Appellate Body on US — Lamb, para. 87. back to text
213. Appellate Body on US — Lamb, para. 86. back to text
214. Appellate Body on US — Lamb, para. 84. back to text
215. (footnote original) We note that two Commissioners (Askey and Crawford) did not join in the findings of the USITC on this point. These two Commissioners both found that live lambs, produced by growers and feeders, are directly competitive with lamb meat and that, accordingly, the "domestic industry" includes the producers of these competing products. USITC Report, pp. I-8 and I-9, footnotes 7 (Commissioner Askey) and 8 (Commissioner Crawford). The United States has not argued, before the Panel or before us, that live lambs are directly competitive with lamb meat, and that issue, as we stated earlier, does not form part of this appeal. back to text
216. Appellate Body Report on US — Lamb, para. 91. back to text
217. (footnote original) We can, however, envisage that in certain cases a question may arise as to whether two articles are separate products. In that event, it may be relevant to inquire into the production processes for those products. back to text
218. Appellate Body Report on US — Lamb, para. 94. back to text
219. Panel Report on US — Wheat Gluten, paras. 8.54–8.56. back to text
220. Panel Report on US — Lamb, para. 7.218. back to text
221. Panel Report on US — Lamb, para. 7.219. back to text
222. (footnote original) Of course, only once the relevant domestic industry has been defined consistently with SG Article 4.1(c) is it logically possible to select producers representing a "major proportion" of the collective output of the like or directly competitive product in question, or to develop a valid statistical sample that would ensure that the data collected are representative of a major proportion of the domestic industry. back to text
223. Panel Report on US — Lamb, paras. 7.220–7.221. back to text
224. Appellate Body Report on US — Wheat Gluten, para. 72. back to text
225. Appellate Body Report on US — Wheat Gluten, para. 73. back to text
226. Panel Report on Korea — Dairy, para. 7.55. back to text
227. Panel Report on Argentina — Footwear (EC), paras. 8.123 and 8.206. back to text
228. Appellate Body Report on Argentina — Footwear (EC), para.136. back to text
229. Panel Report on US — Wheat Gluten, para. 8.39. See also the Panel Report on US — Lamb, para 7.139. back to text
230. Appellate Body Report on Argentina — Footwear (EC), paras. 120–122. back to text
231. Appellate Body Report on US — Lamb, para. 141. back to text
232. Appellate Body Report on US — Lamb, para. 160. back to text
233. Appellate Body Report on US — Lamb, para. 148. back to text
234. Appellate Body Report on US — Cotton Yarn, para. 74. back to text
235. Appellate Body Report on US — Lamb, paras. 130–131. back to text
236. Appellate Body Report on US — Lamb, para. 132. back to text
237. (footnote original) We observe that the projections made must relate to the overall state of the domestic industry, and not simply to certain relevant factors. back to text
238. Appellate Body Report on US — Lamb, para. 136. back to text
239. Appellate Body Report on US — Lamb, para. 137. back to text
240. (footnote original) We note that, at footnote 130 of our Report in Argentina — Footwear Safeguard, …, we said that "the relevant investigation period should not only end in the very recent past, the investigation period should be the recent past." In this Report, we comment on the relative importance, within the period of investigation, of the data from the end of the period, as compared with the data from the beginning of the period. The period of investigation must, of course, be sufficiently long to allow appropriate conclusions to be drawn regarding the state of the domestic industry. back to text
241. Appellate Body Report on US — Lamb, para. 138. back to text
242. (footnote original) We recognize that Article 4.2(a) makes this reference in the specific context of the causation analysis, which in our view is inseparable from the requirement of imports in "such increased quantities" (emphasis added). Thus, we consider that in the context of both the requirement that imports have increased, and the analysis to determine whether these imports have caused or threaten to cause serious injury, the Agreement requires consideration not just of data for the end-points of an investigation period, but for the entirety of that period. back to text
243. Panel Report on Argentina — Footwear (EC), para. 8.159. back to text
244. Appellate Body Report on Argentina — Footwear (EC), para. 129. back to text
245. Panel Report on US — Line Pipe, para. 7.207. back to text
246. Panel Report on US — Line Pipe, para. 7.211. back to text
247. Panel Report on US — Wheat Gluten, paras. 8.44–8.45. back to text
248. Panel Report on US — Wheat Gluten, paras. 8.69 and 8.121. back to text
249. (footnote original) The New Shorter Oxford English Dictionary, (Brown, ed.) (Clarendon Press, 1993), Vol. I, p. 52, indicates that, when the word "all" is used as an adjective preceding a noun in the plural form (as in "all … factors"), it means "The entire number of; the individual constituents of, without exception." back to text
250. Appellate Body Report on US — Wheat Gluten, paras. 51–53. See also paras. 90–92 of this Chapter. back to text
251. Appellate Body Report on US — Wheat Gluten, paras. 55–56. The Appellate Body also found, based on an examination of the evidence of record, that the factor which the investigating authorities had allegedly failed to evaluate was not a particular relevant factor requiring evaluation under Article 4.2(a) of the Agreement on Safeguards. Appellate Body Report on US — Wheat Gluten, paras. 57–58. back to text
252. Panel Report on Korea — Dairy, para. 7.58. back to text
253. (footnote original) Or, to the extent that Argentina relied on data for particular product segments as the basis for conclusions pertaining to the entire industry, it was required to explain how its analysis regarding those segments related to or was representative of the industry as a whole. back to text
254. (footnote original) We note that in any case, only if serious injury or a threat thereof exists with respect to the product market segments accounting for the bulk of the industry’s output will injury be evident with respect to the industry as a whole. The European Communities appears to acknowledge this, in indicating that the share of a given product category of the total industry is relevant for the injury analysis of the entire industry…. back to text
255. Panel Report on Argentina — Footwear (EC), para. 8.137. back to text
256. Panel Report on US — Lamb, para. 7.141. back to text
257. Panel Report on US — Lamb, para. 7.177. back to text
258. Panel Report on Argentina — Footwear (EC), para. 8.216. back to text
259. Panel Report on US — Wheat Gluten, paras. 8.63–8.64. back to text
260. Panel Report on Korea — Dairy, paras. 7.89–7.90. back to text
261. Panel Report on Argentina — Footwear (EC), para. 8.229. back to text
262. (footnote original) Appellate Body Report on Argentina — Footwear (EC), para. 145. back to text
263. Panel Report on US — Wheat Gluten, para. 8.91. See also Panel Report on US — Lamb, para. 7.232. back to text
264. Appellate Body Report on US — Wheat Gluten, paras. 66–69. back to text
265. (footnote original) Preamble to the Agreement on Safeguards. back to text
266. (footnote original) Appellate Body Report, Argentina — Footwear Safeguards, para. 112. back to text
267. (footnote original) We do not, of course, exclude the possibility that "serious injury" could be caused by the effects of increased imports alone. back to text
268. Appellate Body Report, on US — Wheat Gluten, paras. 76–79. back to text
269. Appellate Body Report, US — Lamb, para. 130. back to text
270. The Appellate Body exercised judicial economy: see Appellate Body Report on US — Steel Safeguards, para. 483. back to text
271. (footnote original) Appellate Body Report, US — Wheat Gluten, para. 70. back to text
272. (footnote original) Appellate Body Report, US — Wheat Gluten, paras. 66 and 69. back to text
273. (footnote original) Appellate Body Report, US — Wheat Gluten, paras. 61 ff and 79. back to text
274. Panel Report on US — Steel Safeguards, paras. 10.290–293. back to text
275. (footnote original) Appellate Body Report, US — Line Pipe, para. 208. back to text
276. (footnote original) Appellate Body Report, US — Lamb, para. 130. back to text
277. (footnote original) Appellate Body Report, US — Line Pipe, para. 236. back to text
278. (footnote original) We first made this assertion in US — Wheat Gluten, in the context of a discussion on parallelism. (Appellate Body Report, US — Wheat Gluten, para. 98.) In US — Line Pipe, we explained that the same reasoning would apply to Article 4.2(b), last sentence. (Appellate Body Report, US — Line Pipe, para. 216.) back to text
279. (footnote original) We made this assertion originally in US — Lamb in the context of a discussion of a claim under Article 4.2(a) of the Agreement on Safeguards. (Appellate Body Report, US — Lamb, para. 103.) In US — Line Pipe, we explained that the same reasoning would apply to Article 4.2(b), last sentence. (Appellate Body Report, US — Line Pipe, para. 216.) back to text
280. (footnote original) Appellate Body Report, US — Wheat Gluten, para. 67. back to text
281. (footnote original) Ibid. back to text
282. (footnote original) Ibid., para. 69. back to text
283. (footnote original) Appellate Body Report, EC — Tube or Pipe Fittings, para. 190. back to text
284. (footnote original) Ibid., para. 191. (emphasis added) back to text
285. (footnote original) Appellate Body Report, EC — Tube or Pipe Fittings, para. 192. back to text
286. (footnote original) Ibid. (emphasis added) back to text
287. (footnote original) Appellate Body Report, EC — Tube or Pipe Fittings, para. 178. back to text
288. (footnote original) Ibid., para. 177. back to text
289. (footnote original) Ibid., para. 178. (original emphasis) back to text
290. Appellate Body Report on US — Steel Safeguards, paras. 485–491. back to text
291. Panel Report on Argentina — Footwear (EC), paras. 8.237–8.238. back to text
292. Appellate Body Report on Argentina — Footwear (EC), para. 144. back to text
293. Panel Report on US — Wheat Gluten, para. 8.95. back to text
294. Panel Report on US — Wheat Gluten, para. 8.101. back to text
295. (footnote original) Significantly, no mention was made by the panel and the Appellate Body in Argentina — Footwear (EC) to movements in import prices. We will discuss the relevance of this in the succeeding section of our findings dealing with "conditions of competition". back to text
296. (footnote original) Appellate Body Report, Argentina — Footwear (EC), para. 144. back to text
297. (footnote original) Panel Report, Argentina — Footwear (EC), para. 8.238. back to text
298. Panel Report on US — Steel Safeguards, paras. 10.299–10.300. back to text
299. (footnote original) That is, in compliance with the non-attribution requirements as discussed in paras. 10.325–10.334 infra. back to text
300. (footnote original) Panel Report, US — Wheat Gluten, para. 8.101. back to text
301. Panel Report on US — Steel Safeguards, paras. 10.301–10.302. back to text
302. (footnote original) Panel Report, US — Wheat Gluten, para. 8.95; Panel Report, Argentina — Footwear (EC), paras. 8.237– 8.238; Appellate Body Report, Argentina — Footwear (EC), para. 144. back to text
303. (footnote original) Panel Report, Argentina — Footwear (EC), para. 8.238; Appellate Body Report, Argentina — Footwear (EC), para. 144. back to text
304. (footnote original) Panel Report, US — Wheat Gluten, para. 8.95. back to text
305. (footnote original) Panel Report, Argentina — Footwear (EC), paras. 8.237–8.238; Appellate Body Report, Argentina — Footwear (EC), para. 144. back to text
306. Panel Report on US — Steel Safeguards, para. 10.303–306. back to text
307. (footnote original) These are situations that the Panel has encountered in this case. This is not to say that other situations may not exist. back to text
308. Panel Report on US — Steel Safeguards, para. 10.303–308. back to text
309. (footnote original) United States’ first written submission, paras. 446, 448 and 449; United States’ second written submission, paras. 119–122. back to text
310. (footnote original) Japan’s written reply to Panel question No. 86 at the first substantive meeting; Korea’s second written submission, para. 141; Brazil’s written reply to Panel question No. 86 at the first substantive meeting. back to text
311. (footnote original) Panel Report, Egypt — Steel Rebar, paras. 7.127–7.132. back to text
312. (footnote original) Panel Report, Egypt — Steel Rebar, para. 7.129. back to text
313. Panel Report on US — Steel Safeguards, para. 10.309–312. back to text
314. See also paragraphs 49–57 above. back to text
315. Panel Report on Argentina — Footwear (EC), para. 8.254. back to text
316. Panel Report on Argentina — Footwear (EC), para. 8.259. back to text
317. Panel Report on Argentina — Footwear (EC), para. 8.261. back to text
318. Panel Report on Argentina — Footwear (EC), para. 8.261. back to text
319. Panel Report on Argentina — Footwear (EC), para. 8.261, footnote 557. back to text
320. Panel Report on Argentina — Footwear (EC), para. 8.278. back to text
321. Appellate Body Report on Argentina — Footwear (EC), para. 145. back to text
322. Panel Report on US — Steel Safeguards, para. 10.314–10.315. back to text
323. (footnote original) Appellate Body Report, US — Wheat Gluten, para. 78. back to text
324. (footnote original) Panel Report, Argentina — Footwear (EC), para. 8.250; Panel Report, US — Wheat Gluten, para. 8.108. back to text
325. (footnote original) Appellate Body Report, Argentina — Footwear (EC), para. 145. back to text
326. Panel Report on US — Steel Safeguards, para. 10.316–10.317. back to text
327. (footnote original) Panel Report, Argentina — Footwear (EC), para. 8.251. back to text
328. Panel Report on US — Steel Safeguards, para. 10.318–10.319. back to text
329. Panel Report on Argentina — Footwear (EC), para. 8.267. back to text
330. Panel Report on Argentina — Footwear (EC), paras. 8.269 and 8.278. back to text
331. Appellate Body Report on Argentina — Footwear (EC), para. 145. back to text
332. Panel Report on US — Wheat Gluten, para. 8.138. back to text
333. (footnote original) Article 4.1(a) … states: "‘serious injury’ shall be understood to mean a significant overall impairment in the position of a domestic industry." back to text
334. Panel Report on US — Wheat Gluten, para. 8.139. back to text
335. Appellate Body on US — Wheat Gluten, para. 79. back to text
336. Appellate Body Report on US — Wheat Gluten, para. 66. back to text
337. (footnote original) The New Shorter Oxford English Dictionary, supra, footnote 43, Vol. I, pp. 355 and 356. back to text
338. (footnote original) Ibid., p. 1598. back to text
339. Appellate Body Report on US — Wheat Gluten, para. 67. back to text
340. Appellate Body Report on US — Wheat Gluten, para. 68. back to text
341. Appellate Body Report on US — Wheat Gluten, paras. 69–70. back to text
342. Appellate Body Report on US — Lamb, para. 170. back to text
343. Appellate Body Report on US — Lamb, paras. 179–180. back to text
344. Appellate Body Report on US — Lamb, paras. 178 and 181. back to text
345. Appellate Body Report on US — Lamb, para. 186. back to text
346. Appellate Body Report on US — Wheat Gluten, para. 91. back to text
347. Appellate Body Report on US — Wheat Gluten, para. 91. back to text
348. Article 4.2(b), last sentence, requires that, when factors other than increased imports are causing injury at the same time as increased imports, competent authorities must ensure that injury caused to the domestic industry by other factors is not attributed to the increased imports. back to text
349. Appellate Body Report on US — Line Pipe, para. 217. back to text
350. Appellate Body Report on US — Line Pipe, para. 215. back to text
351. (footnote original) Appellate Body Report, supra, footnote 1, para. 98. back to text
352. Appellate Body Report on US — Line Pipe, paras. 216–217. back to text
353. (footnote original) Appellate Body Report, para. 227. back to text
354. (footnote original) Para. 226. back to text
355. (footnote original) Para. 230. back to text
356. Appellate Body Report on US — Line Pipe, paras. 213–214. back to text
357. Panel Report on US — Steel Safeguards, para. 10.336–10.339. back to text
358. (footnote original) The Appellate Body in US — Line Pipe stated that a mere assertion that injury caused by other factors has not been attributed to increased imports does not establish explicitly with a reasoned and adequate explanation that injury caused by factors other than increased imports was not attributed to increased imports: Appellate Body Report, US — Line Pipe, para. 220. back to text
359. (footnote original) See, for example, Appellate Body Report, US — Offset Act (Byrd Amendment), para. 297 et seq. back to text
360. Panel Report on US — Steel Safeguards, para. 10.340. back to text
361. Panel Report on US — Steel Safeguards, para. 10.341. back to text
362. (footnote original) Appellate Body Report, US — Lamb, para. 178. back to text
363. (footnote original) Appellate Body Report, US — Lamb, para. 180; Appellate Body Report, US — Wheat Gluten, para. 69. back to text
364. Panel Report on US — Steel Safeguards, para. 10.335–342. back to text
365. Panel Report on US — Lamb, para. 7.280. back to text
366. Panel Report on Korea — Dairy, paras. 7.87. The Panel’s "general comments" can be found in paras. 7.89–7.96. back to text
367. Appellate Body Report on Argentina — Footwear (EC), para. 145. back to text
368. With respect to terms of reference in general, see Chapter on the DSU, Section VII. back to text
369. Appellate Body Report on Argentina — Footwear (EC), paras. 73–75. back to text
370. With respect to confidentiality in general, see Chapter on the DSU, Section XXXVI.C(h). back to text
371. Panel Report on US — Wheat Gluten, para. 8.21. back to text
372. Appellate Body Report on Korea — Dairy, paras. 96 and 103. back to text
373. Appellate Body Report on Korea — Dairy, para. 103. back to text
374. Appellate Body Report on Korea — Dairy, paras. 98–100. back to text
375. Appellate Body Report on US — Line Pipe, paras. 231 and 234. Since the safeguard measure in US — Line Pipe is a tariff, not a quantitative restriction, the Appellate Body upheld the panel’s conclusion that an importing Member is not required to demonstrate, at the time of imposition, that the line pipe measure was "necessary to prevent or remedy serious injury and to facilitate adjustment". Appellate Body Report on US — Line Pipe, para. 235. back to text
376. Appellate Body Report on US — Line Pipe, para. 233. back to text
377. In specific, the issue is whether the permissible extent of a safeguard measure is limited to the injury that can be attributed to increased imports, or whether a safeguard measure may also address the injurious effects caused by other factors. Appellate Body Report on US — Line Pipe, para. 241. back to text
378. Article 4.2(b) requires exclusion of the impact of causes of injury other than increased imports. back to text
379. Appellate Body Report on US — Line Pipe, para. 249. back to text
380. Appellate Body Report on US — Line Pipe, para. 260. back to text
381. Appellate Body Report on US — Line Pipe, para. 250. back to text
382. Appellate Body Report on US — Line Pipe, para. 260. back to text
383. Appellate Body Report on US — Line Pipe, paras. 257 and 260. back to text
384. Panel Report on Korea — Dairy, para. 7.108. back to text
385. Panel Report on Argentina — Footwear (EC), para. 8.289. back to text
386. Panel Report on US — Wheat Gluten, para. 8.220. back to text
387. Appellate Body Report on US — Wheat Gluten, paras. 179–182. back to text
388. Appellate Body Report on US — Wheat Gluten, paras. 184–185. back to text
389. Panel Report on US — Lamb, para. 7.280. back to text
390. Appellate Body Report, US — Lamb, paras. 193–195. back to text
391. (footnote original) The same concern does not arise in respect of tariff measures — which also appear not to be covered by all Article 5 disciplines — because tariff measures affect all exporting Members equally. back to text
392. Panel Report on US — Line Pipe, para. 7.49 back to text
393. Panel Report on US — Lamb, para. 7.280. back to text
394. Appellate Body Report, US — Lamb, paras. 193–195. back to text
395. Appellate Body Report on US — Line Pipe, para. 173. back to text
396. Panel Report on Argentina — Footwear (EC), para. 8.292. back to text
397. Panel Report on Argentina — Footwear (EC), paras. 8.303–8.304. back to text
398. Appellate Body Report on US — Wheat Gluten, paras. 145–146. back to text
399. (footnote original) Appellate Body Report, US — Wheat Gluten, para. 136. back to text
400. Appellate Body Report on US — Line Pipe, paras. 108 and 119. back to text
401. Panel Report on US — Lamb, para. 7.280. back to text
402. Panel Report on US — Lamb, para. 7.280. back to text
403. The Panel found that the safeguard measure did not contain any "express exclusion" of those developing countries which fit the description of de minimis imports in Article 9.1; and "in the absence of any other relevant documentation," the safeguard measure applied to developing countries with de minimis imports. The Panel also concluded that Article 9.1 contains an obligation not to apply a measure, while the safeguard measure in the US — Line Pipe "applies" to all developing countries in principle. Thus the United States had not complied with its obligations under Article 9.1 of the Agreement on Safeguards. Panel Report on US — Line Pipe, paras. 7.180–7.181. back to text
404. Appellate Body Report on US — Line Pipe, para. 132. back to text
405. Appellate Body Report on US — Line Pipe, paras. 127–128. back to text
406. Appellate Body Report on US — Line Pipe, paras. 129 and 132. back to text