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WTO ANALYTICAL INDEX: AGREEMENT ON SAFEGUARDS

Agreement on Safeguards

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The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.

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> Article 1
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> Article 8
> Article 9
> Article 10
> Article 11
> Article 12
> Article 13
> Article 14
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XII. Article 11     back to top

A. Text of Article 11

Article 11: Prohibition and Elimination of Certain Measures

1.     (a)     A Member shall not take or seek any emergency action on imports of particular products as set forth in Article XIX of GATT 1994 unless such action conforms with the provisions of that Article applied in accordance with this Agreement.

 

(b)     Furthermore, a Member shall not seek, take or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side.(3,4) These include actions taken by a single Member as well as actions under agreements, arrangements and understandings entered into by two or more Members. Any such measure in effect on the date of entry into force of the WTO Agreement shall be brought into conformity with this Agreement or phased out in accordance with paragraph 2.

 

(footnote original) 3 An import quota applied as a safeguard measure in conformity with the relevant provisions of GATT 1994 and this Agreement may, by mutual agreement, be administered by the exporting Member.

 

(footnote original) 4 Examples of similar measures include export moderation, export-price or import-price monitoring systems, export or import surveillance, compulsory import cartels and discretionary export or import licensing schemes, any of which afford protection.

 

(c)     This Agreement does not apply to measures sought, taken or maintained by a Member pursuant to provisions of GATT 1994 other than Article XIX, and Multilateral Trade Agreements in Annex 1A other than this Agreement, or pursuant to protocols and agreements or arrangements concluded within the framework of GATT 1994.

 

2.     The phasing out of measures referred to in paragraph 1(b) shall be carried out according to timetables to be presented to the Committee on Safeguards by the Members concerned not later than 180 days after the date of entry into force of the WTO Agreement. These timetables shall provide for all measures referred to in paragraph 1 to be phased out or brought into conformity with this Agreement within a period not exceeding four years after the date of entry into force of the WTO Agreement, subject to not more than one specific measure per importing Member,(5) the duration of which shall not extend beyond 31 December 1999. Any such exception must be mutually agreed between the Members directly concerned and notified to the Committee on Safeguards for its review and acceptance within 90 days of the entry into force of the WTO Agreement. The Annex to this Agreement indicates a measure which has been agreed as falling under this exception.

 

(footnote original) 5 The only such exception to which the European Communities is entitled is indicated in the Annex to this Agreement.

 

3.     Members shall not encourage or support the adoption or maintenance by public and private enterprises of non-governmental measures equivalent to those referred to in paragraph 1.


B. Interpretation and Application of Article 11

1. Article 11.1(a)

(a) Relationship with Article XIX of the GATT 1994

251.     With respect to the relationship with Article XIX of the GATT 1994, see paragraphs 49 above.

(b) Relationship with other Articles

252.     The Panel in 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 11 (and Articles 2.2, 3.1, 5.1, 8 and 12) of the Agreement on Safeguards.(411)

2. Article 11.1(b)

253.     The following Members submitted notifications of their timetables for phasing out or bringing into conformity with the Agreement measures referred to in Article 11:1(b): Cyprus, European Communities, Korea, Mauritius, Slovenia, South Africa, Thailand.(412) The Annex to the Agreement identified an additional grey area measure maintained by the European Communities, with an expiration date of 31 December 1999. The Committee discussed these measures, which included both import measures and export restraints.(413) At the Committee meeting of 9 November 2000, the Chairman noted that all of these Members had confirmed that their pre-existing measures were eliminated by 1 January 2000.(414)

3. Article 11.2

254.     At the meeting of the Committee on Safeguards on 24 February 1995, it was clarified that in conformity with Article XVI:2 of the WTO Agreement, the deadlines in Article 11.2 and 12.7 are calculated from the date of entry into force of the WTO Agreement.(415)

255.     At its meeting on 24 February 1995, the Committee on Safeguards decided that the information required in the notifications of the exception under Articles 11.2 of the Agreement on Safeguards should also be provided by signatories that were eligible to become original Members of the WTO within the same time-limits as those which apply to WTO Members.(416) The Committee also adopted a format for notifications of the exception under Articles 11.2 of the Agreement on Safeguards(417) as well as a format for notifications on timetables for phasing out measures referred to in Article 11.1(b) or for bringing them into conformity with the Agreement on Safeguards.(418)

256.     Notifications under Articles 11.2 are found in the G/SG/N/4 and S/SG/N/5 series.

 

XIII. Article 12     back to top

A. Text of Article 12

Article 12: Notification and Consultation

1.     A Member shall immediately notify the Committee on Safeguards upon:

 

(a)     initiating an investigatory process relating to serious injury or threat thereof and the reasons for it;

 

(b)     making a finding of serious injury or threat thereof caused by increased imports; and

 

(c)     taking a decision to apply or extend a safeguard measure.

 

2.     In making the notifications referred to in paragraphs 1(b) and 1(c), the Member proposing to apply or extend a safeguard measure shall provide the Committee on Safeguards with all pertinent information, which shall include evidence of serious injury or threat thereof caused by increased imports, precise description of the product involved and the proposed measure, proposed date of introduction, expected duration and timetable for progressive liberalization. In the case of an extension of a measure, evidence that the industry concerned is adjusting shall also be provided. The Council for Trade in Goods or the Committee on Safeguards may request such additional information as they may consider necessary from the Member proposing to apply or extend the measure.

 

3.     A Member proposing to apply or extend a safeguard measure shall provide adequate opportunity for prior consultations with those Members having a substantial interest as exporters of the product concerned, with a view to, inter alia, reviewing the information provided under paragraph 2, exchanging views on the measure and reaching an understanding on ways to achieve the objective set out in paragraph 1 of Article 8.

 

4.     A Member shall make a notification to the Committee on Safeguards before taking a provisional safeguard measure referred to in Article 6. Consultations shall be initiated immediately after the measure is taken.

 

5.     The results of the consultations referred to in this Article, as well as the results of mid-term reviews referred to in paragraph 4 of Article 7, any form of compensation referred to in paragraph 1 of Article 8, and proposed suspensions of concessions and other obligations referred to in paragraph 2 of Article 8, shall be notified immediately to the Council for Trade in Goods by the Members concerned.

 

6.     Members shall notify promptly the Committee on Safeguards of their laws, regulations and administrative procedures relating to safeguard measures as well as any modifications made to them.

 

7.     Members maintaining measures described in Article 10 and paragraph 1 of Article 11 which exist on the date of entry into force of the WTO Agreement shall notify such measures to the Committee on Safeguards not later than 60 days after the date of entry into force of the WTO Agreement.

 

8.     Any Member may notify the Committee on Safeguards of all laws, regulations, administrative procedures and any measures or actions dealt with in this Agreement that have not been notified by other Members that are required by this Agreement to make such notifications.

 

9.     Any Member may notify the Committee on Safeguards of any non-governmental measures referred to in paragraph 3 of Article 11.

 

10.     All notifications to the Council for Trade in Goods referred to in this Agreement shall normally be made through the Committee on Safeguards.

 

11.     The provisions on notification in this Agreement shall not require any Member to disclose confidential information the disclosure of which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises, public or private.


B. Interpretation and Application of Article 12

1. General

(a) Notification formats adopted by the Committee on Safeguards

257.     At its first meeting on 24 February 1995, the Committee on Safeguards approved formats for notifications under Article 12.(419) However, the Panel in Korea — Dairy noted that it was clear that the provisions of Article 12 prevailed over the notification formats adopted by the Committee:

“It is clear that the provisions of Article 12 of the Agreement on Safeguards prevail over the Guidance issued by the Committee on Safeguards (which contains a disclaimer to that effect) and the Technical Cooperation Handbook on Notification Requirements (prepared by the Secretariat but which explicitly states that it ‘does not constitute a legal interpretation of the notification obligations under the respective agreement (s)’). At issue in this case are the notifications required under Articles 12.1(a), (b) and (c).”(420)

258.     At its meeting of 19 October 2009, the Committee on Safeguards approved certain amendments to existing notification formats under Articles 12.1(a), 12.1(b) and 12.1(c) and 12.4.(421)

259.     At its meeting of 19 October 2009, the Committee on Safeguards also approved of a format for information to be provided upon cessation of a safeguard measure.(422)

(b) Notification under Article 12: document series

260.     Notifications under Article 12 are found in the following document series: Article 12.1(a) (G/SG/N/6/); Article 12.1(b) (G/SG/N/8/); Article 12.1(c) (G/SG/N/10/, G/SG/N/14/); Article 12.4 (G/SG/N/7/); Article 12.5 (G/SG/N/12/, G/SG/N/13/); Article 12.6 (G/SG/N/1/); and Article 12.7 (G/SG/N/3/).

2. Article 12.1

(a) “shall immediately notify”

261.     The Panel in Korea — Dairy read a notion of “urgency” into the phrase “shall immediately notify …” in Article 12.1, but acknowledged that there is a need under this provision to balance the requirement for some minimum level of information in a notification against the requirement for “immediate” notification:

“The ordinary meaning of the term ‘immediately’(423) introduces a certain notion of urgency. As discussed above, we believe that the text of Article 12.1, 12.2 and 12.3 makes clear that the notifications on the finding of serious injury and on the proposed measure shall in all cases precede the consultations referred to in Article 12.3. We note finally that no specific number of days is mentioned in Article 12. For us this implies that there is a need under the agreement to balance the requirement for some minimum level of information in a notification against the requirement for ‘immediate’ notification. The more detail that is required, the less ‘instantly’ Members will be able to notify. In this context we are also aware that Members whose official language is not a WTO working language, may encounter further delay in preparing their notifications.”(424)

262.     The same Panel also notes that “[t]here is no basis in the wording of Article 12.1 to interpret the term ‘immediately’ to mean ‘as soon as practically possible’”.(425)

263.     The Panel in US — Wheat Gluten quoted the above passage from the Panel Report in Korea — Dairy and emphasized the need of all Members to be kept informed, in a timely manner, of the different steps in a safeguard investigation:

“We consider that the text of Article 12.1 SA is clear and requires no further interpretation. The ordinary meaning of the requirement for a Member to notify immediately its decisions or findings prohibits a Member from unduly delaying the notification of the decisions or findings mentioned in Article 12.1 (a) through (c) SA. Observance of this requirement is all the more important considering the nature of a safeguards investigation. A safeguard measure is imposed on imports of a product irrespective of its source and potentially affects all Members. All Members are therefore entitled to be kept informed, without delay, of the various steps of the investigation.”(426)

264.     The Appellate Body in US — Wheat Gluten confirmed this approach and added that “immediate notification” is notification that allows the Committee on Safeguards as well as WTO Members the “fullest possible period” to consider and react to a safeguard investigation:

“As regards the meaning of the word ‘immediately’ in the chapeau to Article 12.1, we agree with the Panel that the ordinary meaning of the word ‘implies a certain urgency’. The degree of urgency or immediacy required depends on a case-by-case assessment, account being taken of the administrative difficulties involved in preparing the notification, and also of the character of the information supplied. As previous panels have recognized, relevant factors in this regard may include the complexity of the notification and the need for translation into one of the WTO’s official languages. Clearly, however, the amount of time taken to prepare the notification must, in all cases, be kept to a minimum, as the underlying obligation is to notify ‘immediately’.

 

‘Immediate’ notification is that which allows the Committee on Safeguards, and Members, the fullest possible period to reflect upon and react to an ongoing safeguard investigation. Anything less than ‘immediate’ notification curtails this period. We do not, therefore, agree … that the requirement of ‘immediate’ notification is satisfied as long as the Committee on Safeguards and Members of the WTO have sufficient time to review that notification. In our view, whether a Member has made an ‘immediate’ notification does not depend on evidence as to how the Committee on Safeguards and individual Members of the WTO actually use that notification. Nor can the requirement of ‘immediate’ notification depend on an ex post facto assessment of whether individual Members suffered actual prejudice through an insufficiency in the notification period.”(427)

(i) “Immediate” notification under Article 12.1(a)

265.     Two panels have had the opportunity to make findings on whether notifications have amounted to “immediate” notifications under Article 12.1.(a). In Korea — Dairy, the Panel found that:

“[T]he 14-day period between Korea’s initiation of the investigation and its presentation of the notification related thereto, does not respect the requirements for ‘immediate’ notification and is in violation of Article 12.1 of the Agreement on Safeguards.”(428)

266.     Similarly, the Panel in US — Wheat Gluten determined that:

“[T]he delay of 16 days between the initiation of the investigation and the notification thereof does not satisfy the requirement of immediate notification of Article 12.1(a) SA.”(429)

267.     The Appellate Body upheld the finding of the Panel in US — Wheat Gluten, but did not pronounce itself on the Panel’s determination in Korea — Dairy.(430)

(ii) “Immediate” notification under Article 12.1(b)

268.     In respect of a notification of a determination of serious injury, the Panel in Korea — Dairy states:

“[A] delay of 40 days … between the domestic publication of the injury finding and the date of that notification to the Committee on Safeguards … does not satisfy the requirements for an immediate notification and therefore is in violation of Article 12.1 of the Agreement on Safeguards.”(431)

269.     The Panel in US — Wheat Gluten found that “the delay of 26 days between the finding of serious injury and the notification thereof does not satisfy the requirement of immediate notification of Article 12.1(b) SA”.(432)

270.     The Appellate Body upheld the finding of the Panel in US — Wheat Gluten, but did not pronounce itself on the Panel’s determination on Korea — Dairy.(433)

(iii) “Immediate” notification under Article 12.1(c)

271.     As regards a notification of a proposed safeguard measure, the Panel Report in Korea — Dairy stated:

“[W]e note that this notification took place more than 6 weeks after the decision on the proposed measure was taken … We consider that this delay does not meet the requirements for an ‘immediate’ notification and therefore is in violation of Article 12.1 of the Agreement on Safeguards.”(434)

272.     In respect of a notification of a final decision to take a safeguard measure, the Panel in Korea — Dairy stated:

“[W]e note that Korea notified on 24 March 1997 that on 1 March 1997 a final decision had been taken to impose a quota as a safeguard measure. We fail to see how this can be viewed as an immediate notification. As far as it covers Korea’s final decision to take a safeguard measure, we find that the timing of the Korean notification of 24 March 1997 does not meet the requirements of Article 12.1 of the Agreement on Safeguards.”(435)

273.     The Appellate Body in US — Wheat Gluten, reversed a Panel finding that a notification of a decision to apply a safeguard measure after the implementation of that decision was inconsistent with Article 12.1(c) of the Agreement on Safeguards.(436) The Panel had considered that Article 12.2 provides relevant context in determining the timeliness of notifications under Article 12.1(c), and reasoned that a notification under Article 12.1(c) must be of a “proposed measure” and its “proposed date of introduction”. On this basis, the Panel concluded that a notification under Articles 12.1(c) must be made before the implementation of the “proposed” safeguard measure. The Appellate Body reasoned as follows:

“In examining the ordinary meaning of Article 12.1(c), we observe that the relevant triggering event is the ‘taking’ of a decision. To us, Article 12.1(c) is focused upon whether a ‘decision’ has occurred, or has been ‘taken’, and not on whether that decision has been given effect. On the face of the text, the timeliness of a notification under Articles 12.1(c) depends only on whether the notification was immediate.”

Article 12.2 is related to, and complements, Article 12.1 of the Agreement on Safeguards. Whereas Article 12.1 sets forth when notifications must be made during an investigation, Article 12.2 clarifies what detailed information must be contained in the notifications under Articles 12.1(b) and 12.1(c). We do not, however, see the content requirements of Article 12.2 as prescribing when the notification under 12.1(c) must take place. Rather, in our view, timeliness under 12.1(c) is determined by whether a decision to apply or extend a safeguard measure is notified ‘immediately’. A separate question arises as to whether notifications made by the Member satisfy the content requirements of Article 12.2. Answering this separate question requires examination of whether, in its notifications under either Article 12.1(b) or Article 12.1(c), the Member proposing to apply a safeguard measure has notified ‘all pertinent information’, including the ‘mandatory components’ specifically enumerated in Article 12.2.”(437)

274.     The Appellate Body in US — Wheat Gluten then found that although the obligations under Article 12.1(b), 12.1(c) and 12.2. were “related”, they constituted “discrete obligations”:

“Thus, the obligations set forth under Articles 12.1(b), 12.1(c) and 12.2 relate to different aspects of the notification process. Although related, these obligations are discrete. A Member could notify ‘all pertinent information’ in its Articles 12.1(b) and 12.1(c) notifications, and thereby satisfy Article 12.2, but still act inconsistently with Article 12.1 because the relevant notifications were not made ‘immediately’. Similarly, a Member could satisfy the Article 12.1 requirement of ‘immediate’ notification, but act inconsistently with Article 12.2 if the content of its notifications was deficient.

 

In our view, in finding that the United States acted inconsistently with Article 12.1(c) solely because the decision to apply a safeguard measure was notified after that decision had been implemented, the Panel confused the separate obligations imposed on Members pursuant to Article 12.1(c) and Article 12.2 and, thereby, added another layer to the timeliness requirements in Article 12.1(c). Instead of insisting on ‘immediate’ notification, as stipulated by Article 12.1(c), the Panel required notification to be made both ‘immediately’ and before implementation of the safeguard measure. We see no basis in Article 12.1(c) for this conclusion.”(438)

275.     The Appellate Body in US — Wheat Gluten then found that the notification at issue was consistent with the requirement of immediate notification under Article 12.1(c). The United States had made the notification five days after the President of the United States had “taken the decision” to apply the safeguard measure, a period the Appellate Body considered sufficient, also taking into account that the notification was made the day after the decision of the President of the United States had been published in the United States Federal Register.(439)

(b) Content of notifications under Article 12.1(a)

276.     At its meeting on 24 February 1995, the Committee on Safeguards adopted a format for notifications under Article 12.1(a) of the Agreement on Safeguards on initiation of an investigation and the reasons for it.(440) The Committee also adopted formats for notifications required under Articles 12.1(b) and (c).(441)

277.     At its meeting on 6 May 1996, the Committee on Safeguards adopted a format for notification of termination of a safeguards investigation where no safeguard measure is imposed.(442)

278.     The Panel in Korea — Dairy noted the limited explicit requirements of Article 12.1(a) with respect to the content of notifications:

“Regarding the ‘content’ of notifications under Articles 12.1, we note that with regard to the notification of the initiation of an investigation, the terms of Article 12.1(a) only refer to the obligation to notify ‘initiating an investigatory process relating to serious injury or threat thereof and the reasons for it.”(443)

279.     In examining the conformity with Article 12.1(a) of the notification at issue, the Panel in Korea — Dairy rejected an argument “that such notification should necessarily include a discussion of all of the legal requirements for a safeguard action to be taken such as a discussion of the conditions of the markets, etc.”:

“We note that initiation is the beginning of the process, and the Agreement on Safeguards does not establish specific standards for the decision to initiate, as do Article 5 of the Agreement on the Implementation of Article VI of GATT 1994 and Article 11 of the Agreement on Subsidies and Countervailing Measures. Thus, to require a discussion in the notification of initiation of evidence regarding the elements that must be found to exist to impose a measure at the end of the investigation would impose a requirement at the initiation stage that is not required by the Agreement on Safeguards itself. We note in the first instance that whatever the relationship between the requirements of Article 12.2 regarding the contents of notifications and the contents of the investigation reports published pursuant to Articles 3.1 and 4.2, this question is not relevant to Article 12.1(a) notifications, as Article 12.2 specifically and exclusively addresses ‘notifications referred to in paragraphs [12.]1(b) and [12.]1(c)’.

 

The format agreed by the Committee for notifications under Articles 12.1(a) is not legally binding, although helpful. The guidance in the format is general as to the kind of information to be provided, referring simply to examples of information on the reasons for initiation, and saying nothing about the level of detail of that information.

 

Although Korea’s notification could usefully have included a reference to allegations of serious injury and a cross-reference to any domestic publication(s) in Korea, we think that this notification was sufficient to inform WTO Members adequately of Korea’s initiation of an investigation concerning a particular product, so that Members having an interest in the product could avail themselves of their right to participate in the domestic investigation process.”(444)

3. Article 12.2

(a) “all pertinent information”

280.     The Panel in Korea — Dairy while analysing the meaning of the expression “all pertinent information” in Article 12.2 of the Agreement on Safeguards, inter alia, observed that the standard of what must be notified to the Committee under Articles 12 of the Agreement on Safeguards differed from what must be published domestically pursuant to Articles 3 and 4.(445) The Panel found that the information contained in the notifications at issue was in conformity with Article 12.2.(446) In respect of one of these notifications, the Panel noted that “this notification contains sufficient information on what Korea considered to be evidence of injury caused by increased imports …”(447) The Appellate Body, however, reversed the finding by the Panel that a notification provided by Korea under Article 12.1(b) of a determination of serious injury met the requirements of Article 12.2.(448) In this context, the Appellate Body interpreted Article 12.2 as follows:

“[I]tems listed … as mandatory components of ‘all pertinent information’, constitute a minimum notification requirement that must be met if a notification is to comply with the requirements of Article 12.

 

We do not agree with the Panel that ‘evidence of serious injury’ in Article 12.2 is determined by what the notifying Member considers to be sufficient information. What constitutes ‘evidence of serious injury’ is spelled out in Article 4.2(a) of the Agreement on Safeguards

We believe that ‘evidence of serious injury’ in the sense of Article 12.2 should refer, at a minimum, to the injury factors required to be evaluated under Article 4.2(a). In other words, according to the text and the context of Article 12.2, a Member must, at a minimum, address in its notifications, pursuant to paragraphs 1(b) and 1(c) of Article 12, all the items specified in Article 12.2 as constituting ‘all pertinent information’, as well as the factors listed in Article 4.2 that are required to be evaluated in a safeguards investigation. We believe that the standard set by Article 12 with respect to the content of ‘all pertinent information’ to be notified to the Committee on Safeguards is an objective standard independent of the subjective assessment of the notifying Member.”(449)

281.     While it had found that the standard for determining “all pertinent information” could not be a subjective assessment by the notifying Member, the Appellate Body in Korea — Dairy emphasized at the same time that it did not interpret “evidence of serious injury” to mean that all details contained in the report of the national authorities should be included:

“In concluding that there is a minimum objective standard, we do not mean to suggest that ‘evidence of serious injury’ should include all the details of the recommendations and reasoning to be found in the report of the competent authorities. We agree with the Panel that, if such had been the intention of the drafters of the Agreement on Safeguards, they would have simply referred back to Articles 3 and 4 when requiring ‘evidence of serious injury’ in Article 12.2. There is, however, an intermediate position between notifying the full content of the report of the competent authorities and giving the notifying Member the discretion to determine what may be included in a notification. To comply with the requirements of Article 12.2, the notifications pursuant to paragraphs 1(b) and 1(c) of Article 12 must, at a minimum, address all the items specified in Article 12.2 as constituting ‘all pertinent information’, as well as the factors listed in Article 4.2 that are required to be evaluated in a safeguards investigation.

 

We are aware that the last sentence of Article 12.2 provides that the Council for Trade in Goods or the Committee on Safeguards may request such additional information as they may consider necessary from the Member proposing to apply a safeguard measure. … Contrary to what Korea argued and the Panel reasoned, such a request is not meant to fill in gaps created by omitting elements required under ‘all relevant information’ or ‘evidence of serious injury’.”(450)

282.     The Appellate Body in Korea — Dairy accordingly reversed the Panel on this point and made the following concluding general statement regarding the object and purpose of the notification requirements at issue:

“We believe that the purpose of notification is better served if it includes all the elements of information specified in Articles 12.2 and 4.2. In this way, exporting Members with a substantial interest in the product subject to a safeguard measure will be in a better position to engage in meaningful consultations, as envisaged by Article 12.3, than they would otherwise be if the notification did not include all such elements. And, the Committee on Safeguards can more effectively carry out its surveillance function set out in Article 13 of the Agreement on Safeguards. At the same time, providing the requisite information to the Committee on Safeguards does not place an excessive burden on a Member proposing to apply a safeguard measure as such information is, or should be, readily available to it.”(451)

(b) Notification of a proposed safeguard measure

283.     The Panel in Korea — Dairy found that Article 12.1, 12.2 and 12.3, taken together, impose the obligation upon a Member to notify the details of a proposed safeguard measure before it is applied, so that affected Members may consult about it before it takes effect.(452)

284.     The Appellate Body Report in US — Wheat Gluten subsequently found to the contrary. See paragraphs 273275 above.

4. Article 12.3

(a) “adequate opportunity for prior consultations”

285.     The Panel in Korea — Dairy rejected a claim that, by not providing “all pertinent information” in its notifications in advance of consultations, a Member had failed to provide “adequate opportunity for prior consultations” within the meaning of Article 12.3. The Panel had found the content of Korea’s notifications in conformity with Article 12 (the Appellate Body subsequently reversed this latter finding, but did not address any of the following issues). The Panel then opined that consultations may be “adequate” even if prior notifications are incomplete,(453) since it considered that one of the purposes of consultations is to review the content of the relevant notifications. The Panel further noted that whether parties eventually reach a mutually agreed solution is not the only criterion for assessing the adequacy of consultations:(454)

“In the present case we note that parties exchanged questions and answers. The European Communities claims that it has always been unsatisfied with the Korean’s answers and notifications (together with Korea’s determination). This may be the case and would explain why it decided to pursue dispute settlement proceedings, but it does not prove that Korea did not consult in good faith for the purpose of informing interested Members of its investigation, its conclusion and its proposed actions. We note also that Korea did impose a measure at a level and for a duration different, and less restrictive, than initially proposed. Consultations were certainly fruitful in this respect, albeit not sufficient to satisfy the European Communities.

 

We reject therefore the EC claim that Korea failed to provide adequate opportunity to consult. Moreover, it seems to us that such consultations have led to an important revision of the initial notification and that parties, at some point, entered into very serious negotiations and considered serious elements of a mutually agreed solution. The fact that this proposed settlement was not formalized through the acceptance by the relevant internal authorities of the European Communities is immaterial. What is relevant for the purpose of this EC claim, is the fact that the parties to these consultations were able to negotiate quite effectively, which, in our view, demonstrates that the consultations were adequate. For us, this is the purpose of any consultation process and the scope of the obligation contained in Article 12.3 of the Agreement on Safeguards, i.e. to favour efforts by the parties to reach a mutually agreed solution of their disagreement.”(455)

286.     In US — Wheat Gluten, the Appellate Body held that the Panel had erred in concluding that the United States had acted inconsistently with Article 12.3 insofar as the Panel had based this conclusion on an erroneous interpretation of Article 12.1(c),(456) but upheld the finding on the basis that there had been no opportunity for consultations on the final proposed measure. In this connection, the Appellate Body first considered that Article 12.3 provides that information on a proposed measure must be provided in advance of the consultation:

“We note, first, that Article 12.3 requires a Member proposing to apply a safeguard measure to provide an ‘adequate opportunity for prior consultations’ with Members with a substantial interest in exporting the product concerned. Article 12.3 states that an ‘adequate opportunity’ for consultations is to be provided ‘with a view to’: reviewing the information furnished pursuant to Article 12.2; exchanging views on the measure; and reaching an understanding with exporting Members on an equivalent level of concessions. In view of these objectives, we consider that Article 12.3 requires a Member proposing to apply a safeguard measure to provide exporting Members with sufficient information and time to allow for the possibility, through consultations, for a meaningful exchange on the issues identified. To us, it follows from the text of Article 12.3 itself that information on the proposed measure must be provided in advance of the consultations, so that the consultations can adequately address that measure. Moreover, the reference, in Article 12.3, to ‘the information provided under’ Article 12.2, indicates that Article 12.2 identifies the information that is needed to enable meaningful consultations to occur Article 12.3. Among the list of ‘mandatory components’ regarding information identified in Article 12.2 are: a precise description of the proposed measure, and its proposed date of introduction.

 

Thus, in our view, an exporting Member will not have an ‘adequate opportunity’ Article 12.3 to negotiate overall equivalent concessions through consultations unless, prior to those consultations, it has obtained, inter alia, sufficiently detailed information on the form of the proposed measure, including the nature of the remedy.”(457)

287.     The Panel in US — Wheat Gluten had found that no consultations had been held between the United States and the European Communities on the final measure that was approved by the President of the United States.(458) The Appellate Body noted:

“[T]he USITC Report set out a number of ‘recommendations’ to the President of the United States …

 

We note that the recommendations made by the USITC did not include specific numerical quota shares for the individual exporting Members concerned, and the recommendations imply, without providing details, that the individual quota shares could be less favourable to imports from the European Communities. We consider that these ‘recommendations’ did not allow the European Communities to assess accurately the likely impact of the measure being contemplated, nor to consult adequately on overall equivalent concessions with the United States.

 

Accordingly, we see no error in the Panel’s conclusion that the United States notifications Article 12.1(b) did not provide a description of the measure under consideration sufficiently precise as to allow the European Communities to conduct meaningful consultations with the United States, as required by Article 12.3 of the Agreement on Safeguards.”(459)’(460)

288.     The Appellate Body in US — Line Pipe, reaffirmed its interpretation in US — Wheat Gluten that the appropriate inquiry for the obligation to provide adequate opportunity for prior consultation is whether the importing Member provided the exporting Members with “sufficient time” to allow for a “meaningful exchange” on the information and that the amount of time needed for a meaningful exchange must be addressed on a case-by-case basis.(461) The Appellate Body also found that failure of the exporting Member to request consultations during an inadequate time period does not excuse the importing Member’s obligation to provide adequate opportunity for prior consultation:

“The obligation of an importing Member Article 12.3 is to ‘provide adequate opportunity for prior consultations’. (emphasis added) That obligation cannot be met if there is insufficient time prior to the application of the measure to have a meaningful exchange. The importing Member’s failure to provide information about a safeguard measure to an exporting Member sufficiently in advance of that measure taking effect is not excused by the fact that the exporting Member did not request consultations during that inadequate time-period.”(462)

5. Relationship with other Articles

(a) Articles 2 and 4

289.     The Panel in Argentina — Footwear (EC) rejected the view that non-compliance with Article 12 ipso facto constitutes a basis for finding a violation of the substantive requirements of Articles 2 and 4, and vice versa:

“In our view, the notification requirements of Article 12 are separate from, and in themselves do not have implications for, the question of substantive compliance with Articles 2 and 4. Similarly, we consider that the substantive requirements of Articles 2 and 4 do not have implications for the question of compliance with Article 12. Article 12 serves to provide transparency and information concerning the safeguard-related actions taken by Members. We note in this context that notification under Article 12 is just the first step in a process of transparency that can include, inter alia, review by the Committee as part of its surveillance functions (Article 13.1(f)), requests for additional information by the Council for Trade in Goods or the Committee on Safeguards (Article 12.2), and/or eventual bilateral consultations with affected Members if application of a measure is proposed (Article 12.3). In this regard, the important point is that the notifications be sufficiently descriptive of the actions that have been taken or are proposed to be taken, and of the basis for those actions, that Members with an interest in the matter can decide whether and how to pursue it further.

Articles 12.2 and 12.3 in our view confirm that Members are not required to notify the full detail of their investigations and findings. Article 12.2 specifically provides for the possibility of requests for further information by the Council for Trade in Goods or the Committee on Safeguards. Article 12.3 provides, inter alia, for consultations, upon request, with other Members, to review the information contained in the notifications. Thus, these provisions specifically create opportunities for further information to be provided, upon request, concerning the details of the actions summarised in the notifications. Ultimately, should a violation of Articles 2 and 4 be alleged, it would be the more detailed information from the record of the investigation, and in particular the published report(s) on the findings and reasoned conclusions of that investigation, that would form the basis for evaluation of such an allegation.”(463)

290.     In Korea — Dairy, the Appellate Body interpreted the notification requirement of “all pertinent information” as requiring a “minimum objective standard” for such notification so as to reflect “an intermediate position between notifying the full content of the report of the competent authorities and giving the notifying Member the discretion to determine what may be included in a notification.” The Appellate Body specifically identified the mandatory factors of all pertinent information as well as factors listed in Article 4.2 of the Agreement on Safeguards that should be covered in the notification:

“In order to determine the appropriate meaning of ‘all pertinent information’, we must examine this phrase in the light of the text and the context of Article 12 as well as the object and purpose of that Article. The text of Article 12.2 makes it clear that a Member proposing to apply a safeguard measure is required to provide the Committee on Safeguards with all pertinent, not just any pertinent, information. Moreover, it provides that such information shall include certain items listed immediately after the phrase ‘all pertinent information’, namely, evidence of serious injury or threat thereof caused by increased imports, a precise description of the product involved and the proposed measure, the proposed date of introduction, the expected duration of the measure and a timetable for progressive liberalization. These items, which are listed as mandatory components of ‘all pertinent information’, constitute a minimum notification requirement that must be met if a notification is to comply with the requirements of Article 12.

 

We do not agree with the Panel that ‘evidence of serious injury’ in Article 12.2 is determined by what the notifying Member considers to be sufficient information. What constitutes ‘evidence of serious injury’ is spelled out in Article 4.2(a) of the Agreement on Safeguards which provides:

 

‘… 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.’

 

We believe that ‘evidence of serious injury’ in the sense of Article 12.2 should refer, at a minimum, to the injury factors required to be evaluated under Article 4.2(a). In other words, according to the text and the context of Article 12.2, a Member must, at a minimum, address in its notifications, pursuant to paragraphs 1(b) and 1(c) of Article 12, all the items specified in Article 12.2 as constituting ‘all pertinent information’, as well as the factors listed in Article 4.2 that are required to be evaluated in a safeguards investigation. We believe that the standard set by Article 12 with respect to the content of ‘all pertinent information’ to be notified to the Committee on Safeguards is an objective standard independent of the subjective assessment of the notifying Member.

 

In concluding that there is a minimum objective standard, we do not mean to suggest that ‘evidence of serious injury’ should include all the details of the recommendations and reasoning to be found in the report of the competent authorities. We agree with the Panel that, if such had been the intention of the drafters of the Agreement on Safeguards, they would have simply referred back to Articles 3 and 4 when requiring ‘evidence of serious injury’ in Article 12.2. There is, however, an intermediate position between notifying the full content of the report of the competent authorities and giving the notifying Member the discretion to determine what may be included in a notification. To comply with the requirements of Article 12.2, the notifications pursuant to paragraphs 1(b) and 1(c) of Article 12 must, at a minimum, address all the items specified in Article 12.2 as constituting ‘all pertinent information’, as well as the factors listed in Article 4.2 that are required to be evaluated in a safeguards investigation.”(464)

(b) Article 7

291.     The Panel in Argentina — Footwear (EC) concluded that it could not examine under Articles 12, a claim regarding a failure to notify a modification of a safeguard measure that increased the restrictiveness of that measure:

“We note that the modifications of definitive safeguard measures foreseen in the Agreement (namely early elimination or faster liberalization potentially resulting from mid-term reviews under Article 7.4, and extension of measures beyond the initial period of application under Article 7. [sic] and 7.4), all are subject to notification requirements under Articles 12.5 and 12.1(c)/12.2, respectively.

 

In this context, we note that the 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. Where the situation at issue is primarily one of substance, i.e., modification of a measure in a way not foreseen by the Safeguards Agreement, we believe that we cannot address the alleged procedural violation concerning notification arising therefrom, as no explicit procedural obligation is foreseen. Therefore, we see no possibility for a ruling on this aspect of the European Communities’ claim under Article 12.”(465)

6. Article 12.5

292.     The Committee on Safeguards has approved a format for notifications under Article 12.5.(466)

7. Article 12.6

293.     At its meeting of 24 February 1995, the Committee adopted a format for notifications of laws, regulations and administrative procedures relating to safeguard measures.(467) Further, the Committee decided that all Members that had available relevant legislation and/or regulations which apply to safeguard measures covered by the Agreement should notify the full and integrated text of that legislation and/or regulations to the Committee by 15 March 1995, with the understanding that if such legislation and/or regulations did not exist or was not yet available, the Member would inform the Committee of this fact, would explain the reasons therefore, and would provide an indicative date by which time a notification was expected.(468) Also, the Committee decided that notification of modifications to legislation should be submitted within 30 days after domestic publication of the modifications, with the understanding the deadline could not be met, the reason would be notified by the deadline, with an indication of when the modification would be notified.(469)

294.     At its meeting on 6 May 1996, the Committee on Safeguards adopted procedures for future reviews of legislative notifications.(470)

295.     As of 22 October 2010, 97 Members had notified the Committee of their domestic safeguards legislation and/or regulations or made communications in this regard to the Committee (G/SG/N/1/… series). 29 Members had not as of that date made such a notification. The extent of the non-compliance with this notification obligation, and the implications of this situation, were raised by the Chairperson at the regular meetings of the Committee held during the review period (G/SG/M/37 and G/SG/M/38).(471)

8. Article 12.7

296.     At its meeting on 24 February 1995, the Committee on Safeguards decided that the information required in the notifications under Article 12.7 of the Agreement on Safeguards should also be provided by signatories that were eligible to become original Members of the WTO within the same time-limits as those which apply to WTO Members.(472)

297.     At its meeting on 24 February 1995, the Committee on Safeguards adopted a format for notifications of pre-existing Article XIX measures described in Article 10.(473) At the same meeting, the Committee also adopted a format for notifications of measures subject to the prohibition and elimination of certain measures under Article 11.1 of the Agreement on Safeguards.(474) With respect to reporting by Members regarding elimination of these pre-existing measures, see under Articles 10, 11.2 and 13.

9. Other notification requirements

298.     Paragraph 16.1 of the Protocol of Accession of China, which provides for consultations with China regarding market disruption, requires that any request be notified immediately to the Committee on Safeguards.(475)

 

XIV. Article 13    back to top

A. Text of Article 13

Article 13: Surveillance

1.     A Committee on Safeguards is hereby established, under the authority of the Council for Trade in Goods, which shall be open to the participation of any Member indicating its wish to serve on it. The Committee will have the following functions:

 

(a)     to monitor, and report annually to the Council for Trade in Goods on, the general implementation of this Agreement and make recommendations towards its improvement;

 

(b)     to find, upon request of an affected Member, whether or not the procedural requirements of this Agreement have been complied with in connection with a safeguard measure, and report its findings to the Council for Trade in Goods;

 

(c)     to assist Members, if they so request, in their consultations under the provisions of this Agreement;

 

(d)     to examine measures covered by Article 10 and paragraph 1 of Article 11, monitor the phase-out of such measures and report as appropriate to the Council for Trade in Goods;

 

(e)     to review, at the request of the Member taking a safeguard measure, whether proposals to suspend concessions or other obligations are “substantially equivalent”, and report as appropriate to the Council for Trade in Goods;

 

(f)     to receive and review all notifications provided for in this Agreement and report as appropriate to the Council for Trade in Goods; and

 

(g)     to perform any other function connected with this Agreement that the Council for Trade in Goods may determine.

 

2.     To assist the Committee in carrying out its surveillance function, the Secretariat shall prepare annually a factual report on the operation of this Agreement based on notifications and other reliable information available to it.


B. Interpretation and Application of Article 13

1. General

(a) Rules of procedure

299.     At its meeting on 6 May 1996, the Committee on Safeguards adopted rules of procedure for its meetings, based on the rules of the General Council and the Council for Trade in Goods, and incorporating relevant changes to make them applicable to the Committee.(476) The Council for Trade in Goods subsequently approved the Committee’s rules of procedure at its meeting of 22 May 1996.(477)

(b) Observers

300.     At its meeting on 24 February 1995, the Committee on Safeguards decided that observer governments should provide the Committee with any information the Observer government considers relevant to matters within the purview of the Agreement, including the text of laws and regulations regarding safeguard measures, and information regarding any safeguard measures taken by the observer government.(478)

2. Article 13.1

301.     The Committee reports annually to the Council for Trade in Goods.(479)

302.     At its meeting on 24 February 1995, the Committee on Safeguards agreed that, in order to perform the task under Article 13.1(d), Members would be asked to report at the end of each year on their progress in phasing out pre-existing Article XIX measures and measures subject to prohibition and elimination under Article 11.1 of the Agreement.(480) At its meeting of 9 November, the Committee agreed that there was no longer any need to report further on this issue, as all pre-existing measures under Articles 10 and 11 had been eliminated by 1 January 2000.(481)

303.     At its meeting on 6 November 1995, the Committee on Safeguards decided that, in order to comply with the provisions of Articles 13.1 (b), (c) and (e), under which the Committee has to provide assistance to Members upon request, the Committee would address these matters on an ad hoc basis, if and when a request in these matters is received, rather than attempt to establish a procedure in advance of any requests for assistance.(482)

 

XV. Article 14    back to top

A. Text of Article 14

Article 14: Dispute Settlement

     The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes arising under this Agreement.


B. Interpretation and Application of Article 14

1. Articles of the Agreement on Safeguards invoked in panel and Appellate Body proceedings

304.     For a table of disputes under the Agreement on Safeguards, see the table of “Articles of the Covered Agreements Invoked in Panel and Appellate Body Proceedings” in the Chapter on the DSU.

2. Standard of review

305.     In Argentina — Footwear (EC), Argentina argued in its appeal that the Panel correctly articulated the standard of review but alleged that the Panel erred in applying that standard of review by conducting a “de facto de novo review” of the findings and conclusions of the Argentine authorities. The Appellate Body rejected Argentina’s argument, stating as follows:

“We have stated, on more than one occasion, that, for all but one of the covered agreements, Article 11 of the DSU sets forth the appropriate standard of review for panels.

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.”(483)

306.     In Korea — Dairy, the Panel considered Korea’s request for the Panel not to engage in a de facto de novo review of its national authorities’ determination to impose a safeguard. More specifically, Korea argued that the standard of review of Article 11 implies that the function of the Panel is to assess whether Korea (i) examined the relevant facts before it at the time of the investigation; and (ii) provided an adequate explanation of how the facts before it as a whole supported the determination made. Furthermore, Korea claimed that a certain deference or latitude should be left to the national authorities in this respect. The Panel held that it could not grant “total deference” to the national authorities but agreed that it could not substitute its assessment for that of the national authority:

“We consider that for the Panel to adopt a policy of total deference to the findings of the national authorities could not ensure an ‘objective assessment’ as foreseen by Article 11 of the DSU. This conclusion is supported, in our view, by previous panel reports that have dealt with this issue(484). However, we do not see our review as a substitute for the proceedings conducted by national investigating authorities. Rather, we consider that the Panel’s function is to assess objectively the review conducted by the national investigating authority, in this case the KTC. For us, an objective assessment entails an examination of whether the KTC had examined all facts in its possession or which it should have obtained in accordance with Article 4.2 of the Agreement on Safeguards (including facts which might detract from an affirmative determination in accordance with the last sentence of Article 4.2 of the Agreement on Safeguards), whether adequate explanation had been provided of how the facts as a whole supported the determination made, and, consequently, whether the determination made was consistent with the international obligations of Korea.”(485)

307.     In US — Lamb, the Appellate Body held that, in considering a claim under the Agreement on Safeguards, a panel’s objective assessment involves both a formal aspect (whether the competent authorities have evaluated “all relevant factors”) and a substantive aspect (whether the competent authorities have given a reasoned and adequate explanation for their determination):

“[A]n ‘objective assessment’ of a claim under Article 4.2 (a) of the Agreement on Safeguards has, in principle, two elements. First, a panel must review whether competent authorities have evaluated all relevant factors, and, second, a panel must review whether the authorities have provided a reasoned and adequate explanation of how the facts support their determination.(486) Thus, the panel’s objective assessment involves a formal aspect and a substantive aspect. The formal aspect is whether the competent authorities have evaluated ‘all relevant factors’. The substantive aspect is whether the competent authorities have given a reasoned and adequate explanation for their determination.

 

This dual character of a panel’s review is mandated by the nature of the specific obligations that Article 4.2 of the Agreement on Safeguards imposes on competent authorities. under Article 4.2(a), competent authorities must, as a formal matter, evaluate ‘all relevant factors’. However, that evaluation is not simply a matter of form, and the list of relevant factors to be evaluated is not a mere “check list”. under Article 4.2(a), competent authorities must conduct a substantive evaluation of ‘the “bearing”, or the “influence” or “effect”(487) or ‘impact’ that the relevant factors have on the ‘situation of [the] domestic industry’. (emphasis added) By conducting such a substantive evaluation of the relevant factors, competent authorities are able to make a proper overall determination, inter alia, as to whether the domestic industry is seriously injured or is threatened with such injury as defined in the Agreement.”(488)

308.     In US — Lamb, the Appellate Body further stated that the panel must examine whether the explanation given by the competent authorities in their published report is reasoned and adequate without conducting a de novo review of the evidence nor substituting the authorities’ conclusions:

“It follows that the precise nature of the examination to be conducted by a panel, in reviewing a claim under Article 4.2 of the Agreement on Safeguards, stems, in part, from the panel’s obligation to make an ‘objective assessment of the matter’ under Article 11 of the DSU and, in part, from the obligations imposed by Article 4.2, to the extent that those obligations are part of the claim. Thus, as with any claim under the provisions of a covered agreement, panels are required to examine, in accordance with Article 11 of the DSU,(489) whether the Member has complied with the obligations imposed by the particular provisions identified in the claim. By examining whether the explanation given by the competent authorities in their published report is reasoned and adequate, panels can determine whether those authorities have acted consistently with the obligations imposed by Article 4.2 of the Agreement on Safeguards.

 

We wish to emphasize that, although panels are not entitled to conduct a de novo review of the evidence, nor to substitute their own conclusions for those of the competent authorities, this does not mean that panels must simply accept the conclusions of the competent authorities. To the contrary, in our view, in examining a claim under Article 4.2(a), a panel can assess whether the competent authorities’ explanation for its determination is reasoned and adequate only if the panel critically examines that explanation, in depth, and in the light of the facts before the panel. Panels must, therefore, review whether the competent authorities’ explanation fully addresses the nature, and, especially, the complexities, of the data, and responds to other plausible interpretations of that data. A panel must find, in particular, that an explanation is not reasoned, or is not adequate, if some alternative explanation of the facts is plausible, and if the competent authorities’ explanation does not seem adequate in the light of that alternative explanation. Thus, in making an “objective assessment” of a claim under Article 4.2(a), panels must be open to the possibility that the explanation given by the competent authorities is not reasoned or adequate.

 

In this respect, the phrase ‘de novo review’ should not be used loosely. If a panel concludes that the competent authorities, in a particular case, have not provided a reasoned or adequate explanation for their determination, that panel has not, thereby, engaged in a de novo review. Nor has that panel substituted its own conclusions for those of the competent authorities. Rather, the panel has, consistent with its obligations under the DSU, simply reached a conclusion that the determination made by the competent authorities is inconsistent with the specific requirements of Article 4.2 of the Agreement on Safeguards.”(490)

309.     In US — Wheat Gluten, the Appellate Body considered the duties of competent authorities and stated that an investigation by a competent authority requires a proper degree of activity. Their “duties of investigation and evaluation preclude them from remaining passive in the face of possible short-comings in the evidence submitted”.(491) They “must undertake additional investigative steps, when the circumstances so require, in order to fulfil their obligation to evaluate all relevant factors.”(492) In this case, the Appellate Body found that the Panel had applied a standard of review which fell short of what is required by Article 11 of the DSU by concluding that the report of the investigating authority contained an adequate explanation. In the Appellate Body’s view, the Panel had heavily relied upon supplementary information supplied by the United States during the Panel proceedings.(493)

310.     In US — Steel Safeguards, the Appellate Body reminded the parties of the importance of providing a reasoned and adequate explanation of the facts supporting the imposition of safeguard measures, thereby enabling panels to make their objective assessment as required under Article 11 of the DSU:

“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 Articles 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’, Articles 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 Articles 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.(494) 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.”

[W]e 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]’.(495) 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.”(496)

 

XVI. Annex    back to top

A. Text of the Annex

Annex: Exception Referred to in Paragraph 2 of Article 11

Members concerned Product Termination
EC/Japan Passenger cars, off road vehicles, light commercial vehicles, light trucks (up to 5 tonnes), and the same vehicles in wholly knocked-down form (CKD sets). 31 December 1999


B. Interpretation and Application of the Annex

311.     See above under Articles 11.2 regarding notification and elimination of measures under Articles 11.2 that were in existence prior to the date of entry into force of the WTO Agreement.

 

XVII. Other    back to top

A. Accession Protocol of China Transitional Safeguard

16. Transitional Product-Specific Safeguard Mechanism

1.     In cases where products of Chinese origin are being imported into the territory of any WTO Member in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products, the WTO Member so affected may request consultations with China with a view to seeking a mutually satisfactory solution, including whether the affected WTO Member should pursue application of a measure under the Agreement on Safeguards. Any such request shall be notified immediately to the Committee on Safeguards.

 

2.     If, in the course of these bilateral consultations, it is agreed that imports of Chinese origin are such a cause and that action is necessary, China shall take such action as to prevent or remedy the market disruption. Any such action shall be notified immediately to the Committee on Safeguards.

 

3.     If consultations do not lead to an agreement between China and the WTO Member concerned within 60 days of the receipt of a request for consultations, the WTO Member affected shall be free, in respect of such products, to withdraw concessions or otherwise to limit imports only to the extent necessary to prevent or remedy such market disruption. Any such action shall be notified immediately to the Committee on Safeguards.

 

4.     Market disruption shall exist whenever imports of an article, like or directly competitive with an article produced by the domestic industry, are increasing rapidly, either absolutely or relatively, so as to be a significant cause of material injury, or threat of material injury to the domestic industry. In determining if market disruption exists, the affected WTO Member shall consider objective factors, including the volume of imports, the effect of imports on prices for like or directly competitive articles, and the effect of such imports on the domestic industry producing like or directly competitive products.

 

5.     Prior to application of a measure pursuant to paragraph 3, the WTO Member taking such action shall provide reasonable public notice to all interested parties and provide adequate opportunity for importers, exporters and other interested parties to submit their views and evidence on the appropriateness of the proposed measure and whether it would be in the public interest. The WTO Member shall provide written notice of the decision to apply a measure, including the reasons for such measure and its scope and duration.

 

6.     A WTO Member shall apply a measure pursuant to this Section only for such period of time as may be necessary to prevent or remedy the market disruption. If a measure is taken as a result of a relative increase in the level of imports, China has the right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 to the trade of the WTO Member applying the measure, if such measure remains in effect more than two years. However, if a measure is taken as a result of an absolute increase in imports, China has a right to suspend the application of substantially equivalent concessions or obligations under the GATT 1994 to the trade of the WTO Member applying the measure, if such measure remains in effect more than three years. Any such action by China shall be notified immediately to the Committee on Safeguards.

 

7.     In critical circumstances, where delay would cause damage which it would be difficult to repair, the WTO Member so affected may take a provisional safeguard measure pursuant to a preliminary determination that imports have caused or threatened to cause market disruption. In this case, notification of the measures taken to the Committee on Safeguards and a request for bilateral consultations shall be effected immediately thereafter. The duration of the provisional measure shall not exceed 200 days during which the pertinent requirements of paragraphs 1, 2 and 5 shall be met. The duration of any provisional measure shall be counted toward the period provided for under paragraph 6.

 

8.     If a WTO Member considers that an action taken under paragraphs 2, 3 or 7 causes or threatens to cause significant diversions of trade into its market, it may request consultations with China and/or the WTO Member concerned. Such consultations shall be held within 30 days after the request is notified to the Committee on Safeguards. If such consultations fail to lead to an agreement between China and the WTO Member or Members concerned within 60 days after the notification, the requesting WTO Member shall be free, in respect of such product, to withdraw concessions accorded to or otherwise limit imports from China, to the extent necessary to prevent or remedy such diversions. Such action shall be notified immediately to the Committee on Safeguards.

 

9.     Application of this Section shall be terminated 12 years after the date of accession.(497)


B. Interpretation and Application

1. Procedural requirements for transitional safeguards under Paragraph 16

312.     The Working Party Report on China’s accession to the WTO provides as follows concerning the procedural requirements for any action under the product-specific transitional safeguard provisions in Paragraph 16:

245.     With respect to implementation of the product-specific safeguard, the representative of China expressed particular concern that WTO Members provide due process and use objective criteria in determining the existence of market disruption or trade diversion, because WTO Members did not have wide experience in implementing the provisions of Section 16 of the Draft Protocol. He stated that with respect to trade diversion, WTO Members needed to apply objective criteria to determine whether an action by China or another WTO Member under the product-specific safeguard to prevent or remedy market disruption caused or threatened to cause significant diversion of trade. Such criteria should include the actual or imminent increase in market share or volume of imports from China, the nature or extent of the action taken by China or the other WTO Member and other similar criteria. In addition, WTO Members should provide an opportunity for importers, exporters and all interested parties to submit their views on the matter.

 

246.     Members of the Working Party noted that the Draft Protocol included specific requirements that WTO Members needed to follow in connection with an action under that Section. Members of the Working Party confirmed that in implementing the provisions on market disruption, WTO Members would comply with those provisions and the following:

 

(a)     An action to address market disruption would be taken only after an investigation by the competent authorities of the importing WTO Member pursuant to procedures previously established and made available to the public;

 

(b)     The competent authority of the importing Member would publish notice of the commencement of any investigation under the product-specific safeguard provisions of the Draft Protocol and would, within a reasonable time thereafter, hold a public hearing or provide other appropriate means for the purpose of permitting interested parties to present evidence and their views as to the appropriateness of whether or not to take a measure and to respond to the presentations of other parties;

 (d)     The competent authorities would publish any measure proposed to be taken and provide the opportunity, including a public hearing, if requested, or provide other appropriate means, for importers, exporters and other interested parties to submit their views and evidence on the appropriateness of the proposed measure and whether it would be in the public interest;

 

(e)     The competent authority would promptly publish notice of the decision to apply a measure, including an explanation of the basis for the decision and the scope and duration of the measure;

 

(f)     The period of application of the measure could be extended, provided that the competent authorities of the importing WTO Member had determined that action continued to be necessary to prevent or remedy market disruption. The competent authorities of the importing WTO Member would publish notice of the commencement of any proceeding to consider whether to extend the duration of an action and would, within a reasonable time thereafter, hold a public hearing or provide other appropriate means for the purpose of permitting all interested parties to have an opportunity to present evidence or their views and to respond to the presentations of other parties;

 

(g)     Except for good cause, no investigation under Section 16 of the Protocol on the same subject matter could be initiated less than one year after the completion of a previous investigation; and

 

(h)     A WTO Member would apply a measure only for such period of time as was necessary to prevent or remedy market disruption.(498)

2. General

(a) Standard of review under Paragraph 16

313.     The Appellate Body in US — Tyres (China) upheld the Panel’s determination that since China’s Accession Protocol is silent regarding the appropriate standard of review, the applicable standard of review is provided by Article 11 of the DSU.(499) See further at paragraphs 147153 above concerning the application of the Article 11 standard of review.

(b) Burden of proof

314.     The Panel in US — Tyres (China) found that in accordance with the general principles on burden of proof applicable in WTO dispute settlement, “China, which has claimed that the United States acted inconsistently with Paragraph 16 of the Protocol … thus bears the burden of demonstrating that the United States acted inconsistently with those provisions.”(500)

3. Paragraph 16.1

(a) Paragraphs 16.1 and 16.4 as context for each other

315.     In US — Tyres (China), the Panel observed:

“Paragraph 16.1 is concerned with more than the mere right of Members to seek consultations. Paragraph 16.1 provides the very basis for action under the Paragraph 16 transitional product-specific safeguard mechanism, as Paragraph 16.1 consultations are the trigger for any subsequent action to address the ‘market disruption’ in question. Indeed, it is only if such consultations fail that transitional product-specific measures may be imposed (under Paragraph 16.3).

 

In accordance with Paragraph 16.1, action under Paragraph 16 is triggered when Chinese imports are being imported ‘in such increased quantities or under such conditions’(501) ‘as to cause’ ‘market disruption’. But what do these terms mean substantively? How does a Member know when imports are in sufficiently ‘increased quantities’ to justify action? What is the degree of harm that the domestic industry must suffer? And what is the degree of causal relationship required between those imports and that harm?

 

… In the context of Paragraph 16, the answers are provided in Paragraph 16.4, which sets forth a definition of ‘market disruption’ that encompasses the nature of the increase in imports, the nature of the harm to be suffered by the domestic industry, and the degree of causal nexus that must exist between those imports and that harm. …

 

Thus, Paragraphs 16.1 and 16.4 are interrelated. They should be read together, and each provision provides important context for interpreting the other. The interrelation between Paragraphs 16.1 and 16.4, the joint reading of these provisions, and the definitional nature of Paragraph 16.4, suggest that Paragraph 16.4 clarifies the substance of the trigger conditions provided for in Paragraph 16.1.”(502)

(b) Notifications

316.     Paragraph 16.1 provides that any request for consultations “shall be notified immediately to the Committee on Safeguards”. Notifications under Article 16.1 have been circulated in the G/SG/N/16 series.

4. Paragraph 16.3: “to the extent necessary”

317.     In US — Tyres (China), China argued that a transitional product-specific safeguard measure should not exceed the amount necessary to prevent or remedy the market disruption caused by the subject imports. The Panel agreed that “a remedy imposed under Paragraph 16 of the Protocol should be limited to the injury / market disruption caused by the subject imports, rather than the injury / market disruption caused by all injurious factors generally”(503) and it further found:

“Although we consider that increasing imports should be viewed ‘in the context of’ other factors, to ensure a proper finding of causation, there is no obligation to separate and distinguish the injurious effects of factors other than increased imports from those caused by increased imports (as required by the second sentence of Article 4.2(b) of the Safeguards Agreement). Since there is no ‘full-blown’ non-attribution analysis under the Protocol, there is no benchmark against which to measure the scope of the remedy. Nor is there any basis for finding that a failure to separate and distinguish the injurious effects of rapidly increasing imports from the injurious effects of other causal factors establishes prima facie that the remedy is excessive…

 

…While the lack of a benchmark creates difficulties in any challenge of the measure, nevertheless, the burden is on China to establish prima facie that the scope of the measure is excessive. But the burden is not impossible. …”(504)

318.     The Panel further observed:

“To the extent that the condition of the industry deteriorated as a result of increased imports, a measure designed to improve the condition of the industry does address the injurious effects of the increased imports. While there is no guarantee that a measure imposed on this basis will not be excessive, there is similarly no certainty that a measure imposed on this basis will necessarily be excessive.

 

… since the USITC found that the domestic industry suffered market disruption as a result of rapidly increasing subject imports that were underselling domestic production, a measure that is aimed at ‘reducing the quantity of subject imports and raising their price in the U.S. market’ can be justified. The Panel notes, however, that it does allow for the possibility of the expansion of non-subject imports rather than the improvement of the condition of the domestic industry, and observes that is a consequence of a country-specific safeguard and not a defect of the remedy in this case.”(505)

5. Paragraph 16.4

(a) Determination of “market disruption” and material injury

319.     The Working Party Report on China’s accession provides as follows regarding the determination of “market disruption” under Paragraph 16.4:

“In determining whether market disruption existed, including the causal link between imports which were increasing rapidly, either absolutely or relatively, and any material injury or threat of material injury to the domestic industry, the competent authorities would consider objective factors, including (1) the volume of imports of the product which was the subject of the investigation; (2) the effect of imports of such product on prices in the importing WTO Member’s market for the like or directly competitive products; (3) the effect of imports of such product on the domestic industry producing like or directly competitive products”.(506)

320.     The Appellate Body Report in US — Tyres (China) noted that:

“[T]he injury threshold provided for in Paragraph 16.4 of the Protocol is ‘material injury’, rather than the ‘serious injury’ threshold contained in Article 2.1 of the Agreement on Safeguards. In US — Lamb, the Appellate Body explained that ‘the word “serious” connotes a much higher standard of injury than the word “material”‘.(507) Such lower injury threshold thus seems to imply a lower degree of injurious effects caused by rapidly increasing imports to the domestic industry. This reading also appears to be consistent with the meaning of the term ‘disruption’ in Paragraph 16.4, that is, ‘lack of order or regular arrangement; disarray, confused state’, which similarly suggests a lower injury threshold than ‘serious injury’.(508)

(b) Period of investigation and data analysis

321.     The Panel in US — Tyres (China) observed that the five-year period of investigation applied in that case satisfied the standard in the Protocol:

“[W]e recall that WTO jurisprudence in relation to the Safeguards Agreement says that where there are no specific rules as to the length of the period of investigation, the period selected must be sufficiently long to allow conclusions to be drawn regarding increased imports, and the period must allow an investigating authority to focus on recent imports.(509) We consider that the same logic applies in the context of the Protocol. In our view, given that there are no precise guidelines in the Protocol, the selection of a five year period of investigation that ended less than four months before the beginning of the investigation provides recent data and satisfies the standard under the Protocol.

Given the requirement to consider imports that are ‘increasing rapidly, either absolutely or relatively’ it seems only practical that all data be available for any period selected as part of the investigation period in order to be able to determine whether imports are ‘increasing rapidly’.”(510)

(c) “increasing rapidly, either absolutely or relatively”

322.     The dispute in US — Tyres (China) concerned in part the application of the “increasing rapidly” threshold in Paragraph 16.4. The underlying investigation found that import volume increased absolutely in each of the five years in the investigation period, but the amount of the increase was smaller in the last year. The Appellate Body upheld the Panel’s conclusion that “there is nothing in the use of the present continuous tense in Paragraphs 16.1 and 16.4 of the Protocol that would require an investigating authority to focus on the movements in imports during the most recent past, or during the period immediately preceding the authority’s decision”(511):

“We are not persuaded that the use of the present continuous tense ‘are increasing’ in Paragraph 16.4 of the Protocol requires investigating authorities to focus exclusively on import increases that occurred during the most recent past.

 

… the use of the present continuous tense in the phrase ‘is being imported’ requires investigating authorities to examine ‘recent’ import trends. For this reason, investigating authorities must select a period of investigation that is sufficiently recent to provide a reasonable indication of current trends in imports. Or, as the Appellate Body put it, ‘the investigation period should be the recent past’.(512) However, once the period of investigation is selected, and is sufficiently recent to provide a reasonable indication of current trends in imports, nothing in the use of the present continuous tense ‘are increasing’ in Paragraph 16.4 and ‘are being imported’ in Paragraph 16.1 implies that the analysis must be limited to import data relating to the very end of the period of investigation.

 

Moreover, Paragraph 16.1 establishes that market disruption, as defined in Paragraph 16.4, may be caused when Chinese products “are being imported … in such increased quantities”. As noted earlier, reference to “in such increased quantities” suggests a comparative assessment, indicating that imports must be at significantly higher levels than earlier in the period of investigation. Investigating authorities would not be able to determine whether imports have increased, and whether the level of such increase in imports meets the threshold requirement implied by the terms “in such increased quantities”, if they were to focus exclusively on the most recent period.”(513)

323.     The Appellate Body agreed with the Panel that “the USITC’s finding that imports were ‘increasing rapidly’ in absolute terms would have, on its own, satisfied the requirements of Paragraph 16.4”.(514)

324.     The Appellate Body also agreed that under Paragraph 16.4, it is imports, and not the rate of increase in imports, that must be increasing “rapidly”:

“In our view, the text of Paragraph 16.4 requires that imports — and not the rates of increase in imports — be increasing ‘rapidly’. While it might be useful for investigating authorities to review rates of increase in imports in assessing whether imports are ‘increasing rapidly’, we cannot agree with China that imports will only be increasing ‘rapidly’ when they are increasing at progressively accelerating rates. To the contrary, we agree with the Panel that a decline in the yearly rate of increase does not ‘necessarily preclude a finding that imports are “increasing rapidly’”(515) This is particularly so because, under Paragraph 16.4, rapid absolute import increases suffice to establish that imports are ‘increasing rapidly’. Moreover, one might expect that the rate of increase in imports will normally decline as imports grow from an increasingly larger base. Yet this alone would not, in our view, preclude a finding that imports are ‘increasing rapidly’ in absolute terms.

 

…the term ‘rapidly’ does not require that the rates of increase in either the volume or market share of subject imports progressively increase over the period of investigation. This is because the volume or market share of subject imports may still be increasing significantly over a short period of time in situations where the rate of increase in a given year decelerates in comparison to previous years. In this sense, we agree with the Panel that the relative change in either the volume or the market share of subject imports is “a step further away” from the text of Paragraph 16.4, which requires rapid increases in either the volume or market share of subject imports.”(516)

(d) Causation

(i) General

325.     The Working Party Report on China’s accession set out the following general considerations regarding determinations of causation in transitional safeguards investigations:

248.     Members of the Working Party agreed that objective criteria had to be applied in determining whether actions to prevent or remedy market disruption caused or threatened to cause significant diversion of trade. Among the factors to be examined were:

 

(a)     the actual or imminent increase in market share of imports from China in the importing WTO Member;

 

(b)     the nature or extent of the action taken or proposed by China or other WTO Members;

 

(c)     the actual or imminent increase in the volume of imports from China due to the action taken or proposed;

 

(d)     conditions of demand and supply in the importing WTO Member’s market for the products at issue; and

 

(e)     the extent of exports from China to the WTO Member(s) applying a measure pursuant to paragraphs 2, 3 or 7 of Section 16 of the Draft Protocol and to the importing WTO Member.(517)

(ii) “a significant cause”

326.     The Appellate Body in US — Tyres (China) agreed with the Panel that the causation standard in paragraph 16.4 means that “rapidly increasing imports may be one of several causes that contribute to producing or bringing about material injury to the domestic industry”.(518) However, the Appellate Body considered that:

“[T]he inclusion of the term ‘significant’ to qualify ‘a cause’ indicates that rapidly increasing imports must be more than a mere contributing cause to the material injury of the domestic industry. Rather, the contribution made by rapidly increasing imports to the material injury of the domestic industry must be important or notable.”(519)

327.     The Appellate Body explained that:

“In our view, these textual and contextual elements [in Paragraph 16.4] suggest that the term ‘significant’ describes the causal relationship or nexus that must be found to exist between rapidly increasing imports and material injury to the domestic industry, which must be such that rapidly increasing imports make an ‘important’ or ‘notable’ contribution in bringing about material injury to the domestic industry. Such assessment must be carried out on the basis of the objective factors listed in the second sentence of Paragraph 16.4, such as the volume of imports, the effect of imports on prices, and the effect of imports on the domestic industry.

 

In the light of the above, we do not agree with China that the inclusion of the term ‘significant’ to qualify the term ‘a cause’ indicates that Paragraph 16.4 of the Protocol imposes a more rigorous causation standard than other WTO agreements, which require that imports ‘cause’ injury.(520) We do not find China’s comparison particularly useful, given the distinct causation standard set forth in the Protocol. …”(521)

328.     The Appellate Body continued:

“China is correct that the Protocol provides for restrictive measures on ‘fair’ trade, and permits, for a transitional period, the application of such measures on Chinese imports alone. However, as noted above, we consider that the object and purpose of the Protocol, as reflected in Section 16 thereof, is to afford temporary relief to domestic industries that are exposed to market disruption as a result of a rapid increase in Chinese imports of like or directly competitive products, subject to the conditions and requirements provided therein. Therefore, the object and purpose of the Protocol, as reflected in Section 16 thereof, seems to weigh in favour of an interpretation pursuant to which temporary relief is available whenever rapidly increasing imports are making an ‘important’, rather than a ‘particularly strong [and] substantial’, contribution to the material injury of the domestic industry.

 

In sum, Paragraph 16.4 of the Protocol sets forth a distinct causation standard whereby rapidly increasing imports must be ‘a significant cause’ of material injury to the domestic industry. This causation standard requires that rapidly increasing imports from China make an important contribution in bringing about material injury to the domestic industry. Pursuant to the second sentence of Paragraph 16.4, such determination is to be made on the basis of objective criteria, including the volume of imports, the effects of rapidly increasing imports on prices, and the effects of rapidly increasing imports on the domestic industry.”(522)

(iii) Causation analysis required by Paragraph 16 of the Protocol

329.     Regarding the cumulative impact of possible causes, the Panel observed:

“Notwithstanding the lack of any requirement for cumulative assessment in the Protocol, we acknowledge that there may be cases where the collective injurious effect of other causal factors might be so dominant that the injury caused by increasing imports could not properly be found to be ‘significant. However China has not demonstrated that this was the case in the underlying USITC investigation.”(523)

330.     In response to an argument that the causation standard in Paragraph 16 requires an analysis of the conditions of competition and an analysis of the correlation between increased imports and relevant injury factors (as under Article 2.1 of the Agreement on Safeguards), the Appellate Body in US — Tyres (China) found:

“Paragraph 16.4 of the Protocol does not provide specific guidance with respect to the methodology investigating authorities may apply in determining whether rapidly increasing imports are ‘a significant cause’ of material injury. Thus, we agree with the Panel that Paragraph 16.4 gives investigating authorities a certain degree of discretion in selecting the methodology to assess the existence of a causal link, provided that such methodology establishes that rapidly increasing imports are ‘a significant cause’ of material injury to the domestic industry, and considers the objective factors listed in the second sentence of Paragraph 16.4. The Appellate Body recently noted that ‘the appropriateness of a particular method [to establish causation] may have to be determined on a case-specific basis, depending on a number of factors and factual circumstances’.(524)

 

We also agree with the Panel that an analysis of the conditions of competition and of correlation may prove ‘essential’ in order properly to establish causation under Paragraph 16.4.(525) Indeed, rapidly increasing imports from China will be capable of being ‘a significant cause’ of material injury to the domestic industry only where they are engaged in actual or potential competition with the like or directly competitive products in the domestic industry. Similarly, a temporal coincidence between upward trends in imports and a decline in the performance indicators of the domestic industry may evidence the existence of a causal link between rapidly increasing imports and material injury to the domestic industry. However, as China itself acknowledges, the examination of the conditions of competition and the analysis of correlation between movements in imports and injury factors are merely ‘analytical tools’ that may assist an investigating authority in determining whether rapidly increasing imports are ‘a significant cause’ of material injury to the domestic industry. As such, neither of these analytical tools is dispositive of the question of whether rapidly increasing imports are ‘a significant cause’ of material injury to the domestic industry under Paragraph 16.4.

… [W]e consider that the term ‘a significant cause’ requires that rapidly increasing imports make an important contribution in bringing about material injury to the domestic industry. This legal standard must inform the investigating authority’s analysis of causation under Paragraph 16.4 of the Protocol. … an investigating authority may choose to rely — as the USITC did in this case — on both an analysis of the conditions of competition and an analysis of correlation to show that rapidly increasing imports are ‘a significant cause’ of material injury to the domestic industry. A careful analysis of degrees of competitive overlap and a greater coincidence in the magnitude of import increases vis-à-vis decreases in injury factors may provide a more robust basis for a finding of causation. However, investigating authorities may calibrate their analysis to the particular circumstances of the case at hand, as long as the analysis provides a sufficiently reasoned and adequate explanation for a finding that rapidly increasing imports are ‘a significant cause’ of material injury. The causation standard set forth in Paragraph 16.4 will be satisfied where these analytical tools provide a reasoned and adequate explanation for the investigating authority’s determination that rapidly increasing imports make an important contribution in bringing about material injury to the domestic industry.”(526)

(iv) Non-attribution of injury caused by other factors

331.     The Panel in US — Tyres (China) also found that “the causal link between rapidly increasing imports and material injury must be assessed ‘within the context of other possible causal factors’. In particular, a finding of causation for the purpose of Paragraph 16.4 should only be made if it is properly established that rapidly increasing imports have injurious effects that cannot be explained by the existence of other causal factors.”(527)

332.     Following the reasoning in its decision on US — Cotton, the Appellate Body agreed that “some form of non-attribution analysis is inherent in the establishment of a causal link between rapidly increasing imports from China and material injury to the domestic industry”:(528)

“[S]ome form of analysis of the injurious effects of other factors is required to demonstrate that subject imports are “a significant cause” of injury within the meaning of Paragraph 16.4 of the Protocol, despite the absence of language explicitly requiring a consideration of other possible causes of injury.(529) As we see it, an investigating authority can make a determination as to whether subject imports are a significant cause of material injury only if it properly ensures that effects of other known causes are not improperly attributed to subject imports and do not suggest that subject imports are in fact only a “remote” or “minimal” cause, rather than a “significant” cause, of material injury to the domestic industry. For this reason, the significance of the effects of rapidly increasing imports needs to be assessed in the context of other known causal factors. The extent of the analysis that is required will depend on the impact of other causes that are alleged to be relevant and the facts and circumstances of the particular case.“(530)

6. Paragraph 16.6: duration of remedy

333.     The Panel in US — Tyres (China) found that it was for China to demonstrate that the duration of a remedy under Paragraph 16 is excessive, and that this burden had not been met:

“[T]here was no obligation on the United States to explain why a three-year measure was needed to prevent or remedy the market disruption caused by subject imports. … there was also no obligation on the United States to quantify the injury caused by increasing imports, or separate and distinguish that injury from injury caused by other factors. Accordingly, it is not enough for China to simply “demonstrate[e] that the USITC failed to ascertain the amount of the alleged effect of subject imports on the domestic industry”. Instead, the onus is on China to establish prima facie that a three-year measure was excessive.”(531)

 

Footnotes:

411. Panel Report, US — Lamb, para. 7.280. back to text
412. G/SG/N/5 and addenda, G/SG/N/THA; see tables in Annex III of G/L/272; G/L/338, back to text
413. G/SG/M/3, 5, 6, 7, 11, 12, 14. back to text
414. G/SG/M/16, para. 105; G/L/409, para. 23. back to text
415. G/SG/M/1, Section D. back to text
416. G/SG/M/1, Section E. With respect to the clarification made by the Chairman concerning the implication of the decision, see G/SG/M/1, para. 28. back to text
417. G/SG/M/1, Section H. The text of the adopted format can be found in G/SG/N/4. back to text
418. G/SG/M/1, Section H. The text of the adopted format can be found in G/SG/N/5. back to text
419. G/SG/1. back to text
420. Panel Report, Korea — Dairy, para. 7.116. back to text
421. The new format for notifications under Articles 12.1(a), 12.1(b) and (c), and 12.4 are found in G/SG/1/Rev.1. back to text
422. The new format for notifications of the cessations of safeguard measures is found in G/SG/1/Rev.1. back to text
423. (footnote original) The New Webster Encyclopaedic Dictionary defines immediately as “without delay, straightaway”; the New Shorter Oxford Dictionary defines it as “without delay, at once, instantly”. back to text
424. Panel Report, Korea — Dairy, para. 7.128. back to text
425. Panel Report, Korea — Dairy, para. 7.134. back to text
426. Panel Report, US — Wheat Gluten, para. 8.194. back to text
427. Appellate Body Report, US — Wheat Gluten, paras. 105–106. back to text
428. Panel Report, Korea — Dairy, para. 7.134. back to text
429. Panel Report, US — Wheat Gluten, para. 8.197. back to text
430. Appellate Body Report, US — Wheat Gluten, para. 112. back to text
431. Panel Report, Korea — Dairy, para. 7.137. back to text
432. Panel Report, US — Wheat Gluten, para. 8.199. back to text
433. Appellate Body Report, US — Wheat Gluten, para. 116. back to text
434. Panel Report, Korea — Dairy, para. 7.140. back to text
435. Panel Report, Korea — Dairy, para. 7.145. back to text
436. Panel Report, US — Wheat Gluten, paras. 8.200–8.207. back to text
437. Appellate Body Report, US — Wheat Gluten, paras. 120 and 123. back to text
438. Appellate Body Report, US — Wheat Gluten, paras. 124–125. back to text
439. Appellate Body Report, US — Wheat Gluten, paras. 128–130. back to text
440. G/SG/M/1, Section H. The text of the adopted format can be found in G/SG/N/6. back to text
441. G/SG/M/1, Section H. The text of the adopted format can be found in G/SG/W/1, Annex, Item VI. back to text
442. G/SG/M/6, Section C. The text of the adopted format can be found in G/SG/2. back to text
443. Panel Report, Korea — Dairy, para. 7.122. back to text
444. Panel Report, Korea — Dairy, paras. 7.131–7.133. back to text
445. Panel Report, Korea — Dairy, paras. 7.125–7.127. back to text
446. Panel Report, Korea — Dairy, paras. 7.136, 7.139 and 7.144. back to text
447. Panel Report, Korea — Dairy, para. 7.136. back to text
448. Appellate Body Report, Korea — Dairy, para. 113. back to text
449. Appellate Body Report, Korea — Dairy, paras. 107–108. back to text
450. Appellate Body Report, Korea — Dairy, paras. 109–110. back to text
451. Appellate Body Report, Korea — Dairy, para. 111. back to text
452. See Panel Report, Korea — Dairy, para. 7.120. back to text
453. Panel Report, Korea — Dairy, para. 7.150. back to text
454. Panel Report, Korea — Dairy, para. 7.151. back to text
455. Panel Report, Korea — Dairy, paras. 7.152–7.153. back to text
456. Appellate Body Report, US — Wheat Gluten, para. 133. back to text
457. Appellate Body Report, US — Wheat Gluten, paras. 136–137. back to text
458. Panel Report, US — Wheat Gluten, para. 8.217. back to text
459. (footnote original) We note that, in so finding, we do not consider it necessary to determine whether the United States notified a “proposed measure” to the European Communities as required by Article 12.2 of the Agreement on Safeguards, as the European Communities did not argue specifically that the United States had acted inconsistently with Article 12.2. back to text
460. Appellate Body Report, US — Wheat Gluten, paras. 140–142. back to text
461. Appellate Body Report, US — Line Pipe, para. 107. In particular, the Appellate Body addressed the issue whether the period from the initial Article 12.1(b) notification to the day the measure takes effect is relevant for assessing whether an adequate opportunity was provided for prior consultations. The Appellate Body found that notifications in Article 12.1(b) in this case were not sufficiently precise to allow the exporting Member to conduct meaningful consultation on the measure at issue. The Appellate Body concurred with the Panel’s finding, that, as a matter of fact, these proposed measures “differed substantially”“ from the one announced and eventually applied in the US — Line Pipe. back to text
462. Appellate Body Report, US — Line Pipe, para. 112. back to text
463. Panel Report, Argentina — Footwear (EC), paras. 8.298 and 8.300. back to text
464. Appellate Body Report, Korea — Dairy, paras. 107–109. back to text
465. Panel Report, Argentina — Footwear (EC), paras. 8.302–8.304. back to text
466. The format for notifications under Articles 12.5 is found in G/SG/1/Rev.1. back to text
467. G/SG/M/1, Section H. The text of the adopted format can be found in G/SG/N/1. The Committee agreed that these notifications would be distributed as unrestricted documents. G/SG/M/1, Section I, paras. 37–38. back to text
468. G/SG/M/1, Section I, paras. 64–65. back to text
469. G/SG/M/1, Section I, paras. 64–65. back to text
470. G/SG/M/6, Section G. The text of the adopted format can be found in G/SG/W/116. back to text
471. G/L/936, para. 7. back to text
472. G/SG/M/1, Section E. With respect to the clarification made by the Chairman concerning the implication of the decision, see G/SG/M/1, para. 28 back to text
473. G/SG/M/1. Section H. The text of the adopted format can be found in G/SG/N/2. back to text
474. G/SG/M/1, Section H. The text of the adopted format can be found in G/SG/N/3. back to text
475. Notifications circulated in the G/SG/N/16 document series. back to text
476. G/SG/M/6, Section I; Rules of Procedure, G/SG/4. back to text
477. G/C/M/10, Section 1. back to text
478. G/SG/M/1, Section F. back to text
479. Reports: G/L/32, G/L/129, G/L/200, G/L/272, G/L/338, G/L/409, G/L/494, G/L/583, G/L/651, G/L/703, G/L/761, G/L/795, G/L/832, G/L/862, G/L/901, G/L/936. back to text
480. G/SG/M/1, Section J. back to text
481. G/SG/M/16, para. 103. back to text
482. G/SG/M/3, Section E. back to text
483. Appellate Body Report, Argentina — Footwear (EC), paras. 118 and 121. back to text
484. (footnote original) We recall that in US — Underwear, paras. 7.53–54, a case dealing with a safeguard action under the ATC, the panel reached the conclusions that the standard of review was that established in Article 11 of the DSU and commented on the implications of such standard of review for safeguard measures. See also the Panel Report in Brazil — Countervailing Duty Proceeding Concerning Imports of Milk Powder from the European Community, SCM/179: “It was incumbent upon the investigating authorities to provide a reasoned opinion explaining how such facts and arguments had led to their finding.” para. 286. back to text
485. Panel Report, Korea — Dairy, para. 7.30. back to text
486. (footnote original) Clearly, a claim under Article 4.2(a) might not relate at the same time to both aspects of the review envisaged here, but only to one of these aspects. For instance, the claim may be that, although the competent authorities evaluated all relevant factors, their explanation is either not reasoned or not adequate. back to text
487. (footnote original) Appellate Body Report, United States — Wheat Gluten Safeguard, supra, footnote 19, para. 71. back to text
488. Appellate Body Report, US — Lamb, paras. 103–104. See also Appellate Body Report, Steel Safeguards, para. 279. back to text
489. (footnote original) We note, however, that Article 17.6 of the Anti-Dumping Agreement sets forth a special standard of review for claims under that Agreement. back to text
490. Appellate Body Report, US — Lamb, paras. 105–107. See also Appellate Body Report, US — Steel Safeguards, para. 302. back to text
491. Appellate Body Report, US — Wheat Gluten, para. 55. back to text
492. Appellate Body Report, US — Wheat Gluten, para. 55. See also Appellate Body Report, US — Cotton Yarn, para. 73. back to text
493. Appellate Body Report, US — Wheat Gluten, paras. 161–162. The Appellate Body found as follows:
     “Although the Panel’s conclusion on this issue was that the USITC Report contained an adequate explanation of the allocation methodologies, the Panel’s reasoning discloses that the Panel clearly did not consider this to be the case. The Panel did not feel able to rely solely or, even, principally, on the explanation actually provided in the USITC Report and, instead, relied heavily on supplementary information provided by the United States in response to the Panel’s questions. Indeed, the most important part of the Panel’s reasoning on this issue is based on those ‘clarifications’. We consider that the Panel’s conclusion is at odds with its treatment and description of the evidence supporting that conclusion. We do not see how the Panel could conclude that the USITC Report did provide an adequate explanation of the allocation methodologies, when it is clear that the Panel itself saw such deficiencies in that Report that it placed extensive reliance on “clarifications” that were not contained in the USITC Report.
     By reaching a conclusion regarding the USITC Report which relied so heavily on supplementary information provided by the United States during the Panel proceedings — information not contained in the USITC Report — the Panel applied a standard of review which falls short of what is required by Article 11 of the DSU.” back to text
494. Appellate Body Report, Argentina — Footwear (EC), para. 121. back to text
495. (footnote original) United States’ appellant’s submission, para. 73. (emphasis original) back to text
496. Appellate Body Report, US — Steel Safeguards, paras. 298–299 and 303. back to text
497. WT/L/432, Protocol on the Accession of the People’s Republic of China, para. 16. back to text
498. WT/MIN(01)/3, paras. 245–246. back to text
499. Panel Report, US — Tyres (China), para. 7.11; Appellate Body Report, US — Tyres (China), paras. 123–124. back to text
500. Panel Report, US — Tyres (China), para. 7.22. back to text
501. (footnote original) In the light of the French and Spanish texts and in accordance with Article 33(4) of the Vienna Convention, the word “or” is to be taken to include “and”. back to text
502. Panel Report, US — Tyres (China), paras. 7.33–7.36. back to text
503. Panel Report, US — Tyres (China), para. 7.391. back to text
504. Panel Report, US — Tyres (China), paras. 7.394–7.395. back to text
505. Panel Report, US — Tyres (China), para. 7.397–7.398. back to text
506. WT/MIN(01)/3, para. 246(c). back to text
507. (footnote original) Appellate Body Report, US — Lamb, para. 124. back to text
508. Appellate Body Report, US — Tyres (China), para. 183. back to text
509. (footnote original) Panel Report, US — Line Pipe, para. 7.201. back to text
510. Panel Report, US — Tyres (China), para. 7.107–7.109. back to text
511. Panel Report, US — Tyres (China), para. 7.90. back to text
512. (footnote original) Appellate Body Report, Argentina — Footwear (EC), footnote 130 to para. 130. (original emphasis) back to text
513. Appellate Body Report, US — Tyres (China), paras. 147–148. back to text
514. Appellate Body Report, US — Tyres (China), para. 151. back to text
515. (footnote original) Panel Report, para. 7.92. back to text
516. Appellate Body Report, US — Tyres (China), paras. 158–159 (referring to Panel Report, para. 7.99). back to text
517. WT/MIN(01)/3, para. 248. back to text
518. Appellate Body Report, US — Tyres (China), para. 177. back to text
519. Appellate Body Report, US — Tyres (China), para. 177. back to text
520. (footnote original) See, for example, Articles 2.1 and 4.2(a) and (b) of the Agreement on Safeguards; Article 3.5 of the Anti-Dumping Agreement; and Articles 5 and 15.5 of the SCM Agreement. back to text
521. Appellate Body Report, US — Tyres (China), paras. 180–181. back to text
522. Appellate Body Report, US — Tyres (China), paras. 184–185. back to text
523. Panel Report, US — Tyres (China), para. 7.377. back to text
524. (footnote original) Appellate Body Report, EC and certain member States — Large Civil Aircraft, para. 1376 (referring to Panel Report, US — Upland Cotton, para. 7.1194; and Panel Report, Korea — Commercial Vessels, para. 7.560). back to text
525. (footnote original) Panel Report, para. 7.170. back to text
526. Appellate Body Report, US — Tyres (China), paras. 191–195. back to text
527. Panel Report, US — Tyres (China), para. 7.177. back to text
528. Appellate Body Report, US — Tyres (China), para. 252. back to text
529. (footnote original) For example, Article 4.2(a) of the Agreement on Safeguards provides that, “when factors other than increased imports are causing injury at the same time, such injury shall not be attributed to increased imports”. Article 3.5 of the Anti-Dumping Agreement reads, in relevant part, as follows: “The authorities shall also examine any known factors other than the dumped imports which at the same time are injuring the domestic industry, and the injuries caused by these other factors must not be attributed to the dumped imports.” back to text
530. Appellate Body Report, US — Tyres (China), para. 201. back to text
531. Panel Report, US — Tyres (China), para. 7.414. back to text

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