WORLD TRADE
ORGANIZATIONG/SG/N/8/USA/4/Suppl.1
23 July 1999
(99-3093)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE AGREEMENT ON
SAFEGUARDS ON FINDINGS OF SERIOUS INJURY OR THREAT
THEREOF CAUSED BY INCREASED IMPORTS
UNITED STATES
Supplement
The following communication, dated 21 July 1999, has been received from the Permanent
Mission of the United States.
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Pursuant to Article 12.1(b) of the WTO Agreement on Safeguards, the United States hereby
submits a supplemental notification regarding determinations of the United States International Trade
Commission (USITC) in respect of serious injury, or threat thereof, to the domestic steel wire rod
industry caused by increased imports of steel wire r od.  A copy of the report from the USITC is also
being submitted to the Secretariat.1
                                                     
1 A copy of the USITC report is available for review by interested delegations, who are requested to
contact Miss Susan Aspinall, Office 1028, telephone 739 51 09.G/SG/N/8/USA/4/Suppl.1
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SUPPLEMENTAL NOTIFICATION UNDER ARTICLE 12.1(B) OF THE
AGREEMENT ON SAFEGUARDS
The United States supplements its notificat ion of 25 May 1999 (G/SG/N/8/USA/4) regarding
determinations of the United States International Trade Commission (USITC) in respect of  serious
injury, or threat thereof, to the domestic steel wire rod industry caused by increased imports of steel
wire rod.
As previously notified (G/SG/N/8/USA/4), th ree of the six USITC Commissioners made an
affirmative determination that steel wire rod is being imported into the United States in such increasedquantities as to be a substantial cause of serious injury or threat thereof to the domestic steel wire rod
industry.  Two Commissioners, Vice Chairman Mi ller and Commissioner Koplan, determined that
imports are a substantial cause of serious injury to the domestic steel wire rod industry.  One
Commissioner, Chairman Bragg, determined that imports are a substantial cause of threat of serious
injury.  Commissioners Crawford, Hillman, and Askey made a negative determination.
The USITC forwarded its report to the President on 12 July 1999.  The report contains the
USITC's findings and reasoned conclusions reach on all pertinent issues of fact and law, and a
summary of the information collected during the investigation.  With this notification, the
United States provides a copy of the USITC's report, excluding confidential business information, tothe Committee.  We understand that the Committee will make a copy of the report available to
Members upon request.
The USITC's full analysis is set out in the report.  Consistent with Article 12.3 of the
Agreement on Safeguards, the United States is prepared to consult with those Members having asubstantial interest as exporters of the product concerned, with a view to, inter alia , reviewing the
information provided in this notification and th e USITC report, exchanging views on the measure
proposed and reaching an understanding on ways to achieve the objective set out in Article 8.1 of the
Agreement.
1. Evidence of serious injury or threat thereof caused by increased imports
Increased Imports (Chairman Bragg, Vice Chairman Miller and Commissioner Koplan): “We
find that total imports of steel wire rod that are the subject of this investigation have increased in both
actual terms and relative to domestic production.  In actual terms, imports increased from
1,776,350 short tons in 1994 to 2,537,404 short tons in 1998, an increase of 42.8 per cent.  The
quantity of imports increased in each of the years covered by the investigation, with almost 60 percent of this increase occurring since 1996.  The ratio of imports to domestic production also increased
during the period of investigation, from 32.2 per cent in 1994 to 44.3 per cent in 1998.”
Serious Injury (Vice Chairman Miller and Commissioner Koplan): “In view of the recent
declines in production, shipments, and capacity utilization, the sharp deterioration in the financial
situation of the industry, evidence of unemployment, and the decline in capital expenditures, we find
that the domestic steel wire rod industry is seriously injured.”
*   *   *   *   *
“Production of domestic steel wire rod increased irregularly during the first 4 years of the
investigation period from 5.5 million short tons in 1994 to 6.0 million short tons in 1997, then
declined in 1998 to 5.7 million short tons.  The quantity and value of domestic shipments similarly
increased irregularly during 1994-1997, and then declined in 1998.  The value of domestic shipmentsG/SG/N/8/USA/4/Suppl.1
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between 1997 and 1998 declined at a greater rate (9.7 per cent) than the quantity of domestic
shipments (3.7 per cent).”
“Capacity utilization in the industry declined during the investigation period, and there is
some evidence the industry experienced a significant idling of productive capacity. ... Domestic firmscancelled plans to build new facilities, reduced shifts, and implemented shutdowns in 1998 and early
1999, and there is also evidence that two relatively new dual-use steel wire rod/rebar plants were
partially idled on their steel wire rod operations.”
*   *   *   *   *
“A significant number of steel wire rod firms have been unable to operate at a reasonable
level of profit. ... In 1998, 9 of 14 domestic wire producers, accounting for 74 per cent of industry
production, reported operating losses.”
*   *   *   *   *
“Respondents have suggested that steel wire rod financial performance was understated due
to low transfer prices to affiliates, a failure to  capture scrap cost declines because of accounting
methods, or because of start up costs.  The evidence does not support these allegations.  Both firms
selling to affiliates and those that do not had operating losses in 1998.  Commission staff verified the
transfer pricing of one of the firms that sells to affiliates and found transfer prices to be equivalent tothose charged to independent customers.  The record also indicates that, even though scrap prices
declined in the second half of 1998, overall material costs did not decline in 1998. ...”
*   *   *   *   *
“The number of production and related workers (PRWs) and total hours worked declined
during 1994-1998, but only marginally. ... Also, 12 of 14 domestic producers reported reductions in
their shifts as a result of a lack of orders in 1998.”
*   *   *   *   *
“Industry productivity increased irregularly over the period, but declined slightly in 1998
from the 1997 level. ... [I]ndustry capital expenditures declined significantly during the period, and
were at their lowest level in 1998.”
Threat of Serious Injury (Chairman Bragg): “In sum, the record reflects broad declines over
the course of the POI in US producers’ market share (as measured by both quantity and value),
profitability (as measured by precipitous drops in gross profits, operating income, and operating
margins), capital expenditures, the number of production and related workers, and increases in both
US producers’ inventories and importers’ inventories.  Moreover, an examination of the latter part of
the POI in particular indicates that between 1997 and 1998 there were significant declines in US
producers’ market share (as measured by both quantity and value), production levels, shipment levels,capacity utilization net of outages, profitability (as measured by precipitous drops in gross profits,
operating income, and operating margins), wages paid, productivity, the number of production and
related workers, capital expenditures, and an increase in importers’ inventories.”
“In light of the precarious financial condition of the domestic steel wire rod industry in 1998,
as evidenced by the significant and increasing number of domestic producers which sustained
operating losses in 1997 and 1998 as well as the extent of such losses, and the contraction in the
domestic industry evidenced particularly in November and December 1998, I find that the indiciaG/SG/N/8/USA/4/Suppl.1
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discussed above demonstrate that the domestic steel wire rod industry is threatened with serious injury
- that is, I find that serious injury is clearly imminent.”
Causation (Vice Chairman Miller and Commissione r Koplan): “In view of the above, we find
that increased imports are a substantial cause, and a cause no less important than any other cause, of
serious injury to the domestic steel wire rod industry.  Our finding is based on the increase in imports
and subsequent increase in the share of the domestic market held by imports, and the declines in
domestic production, shipments, and capacity utilization, the negative profitability of the industry,
evidence of unemployment, and the decline in industry capital expenditures.”
*   *   *   *   *
“We also considered other possible causes of serious injury to the domestic industry,
including respondents’ claim that domestic industry actions, not increasing imports, was the most
important cause of the industry’s falling prices and reduced profitability in 1998.  In particular, we
considered the increase in domestic capacity and start-up costs associated with bringing that capacity
on line.  We also considered raw material costs, in light of respondents’ arguments that falling scrapprices in the second half of 1998 caused the decline in steel wire rod prices in 1998.  However, we do
not view any of these other possible causes of serious injury, as a more important cause than the
increase in imports.”
Causation (Chairman Bragg): “In conclusion, I find that the increased imports are an
important cause, and a cause no less important than any other cause, of the threat of serious injury to
the domestic steel wire rod industry.  My finding is based upon the increase in imports that has
already occurred, and which shows every sign of continuing unabated, the increase in the share of the
domestic market taken by imports, depressed steel wire rod prices due in large part to the increase in
imports, and the high degree of likelihood that the increased imports will have a serious negativeeffect on the volume and prices of the US industry’s sales of steel wire rod.  In short, I am satisfied
that serious injury, although not yet existing, is clearly imminent if import trends continue unabated.”
*  *   *   *   *
“I have found that the financial performance of the domestic industry worsened in 1998 due
largely to falling prices.  For the reasons set forth below, I find that increasing volumes of importscontributed significantly to this price decline, and that future increases in import volumes are likely to
be the chief cause of further negative effects on the domestic industry’s prices, shipment volumes, and
financial condition, in the imminent future.”
*   *   *   *   *
“Second, I find that increased imports are not less than any other cause of the threat of serious
injury to the domestic steel wire rod industry.  In this regard, I have considered each of the alternative
explanations posited by Respondents for the deteriorating condition of the domestic steel wire rod
industry, i.e. the decline in the cost of scrap metal which began in August 1998; alleged overcapacityamong domestic producers; and outages, strikes, and start-up or expansion costs, experienced by
domestic producers.  Upon review, I find that they are not more important than increased imports in
causing the threat of serious injury to the domestic industry.”
2. Provide information on whether there is an absolute increase in imports or an increase in
imports relative to domestic production
See response to item 1, above.  All six Commissioners found that imports of steel wire rod
have increased in both actual terms and relative to domestic production.G/SG/N/8/USA/4/Suppl.1
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3. Provide a precise description of the product involved
“The imported article covered by this investigation is defined as hot-rolled bars and rods, in
irregularly wound coils, of circular or approximately  circular solid cross section, having a diameter of
5 mm or more but less than 19 mm, or non-alloy or alloy steel, except such bars and rods of
free-machining steel or of alloy steel containing by weight 24 per cent or more of nickel.
Free-machining steel is any steel product containing by weight one or more of the following elements,
in the specified proportions: 0.03 per cent or more of lead, 0.05 per cent or more of bismuth, 0.08 per
cent or more of sulphur, more than 0.04 per cent of phosphorous, more than 0.05 per cent of selenium,
and/or more than 0.01 per cent of tellurium.  Certain steel wire rod is provided for in subheadings
7213.91, 7213.99, 7227.20, and 7227.90.60 of the Harmonized Tariff Schedule of the United States(HTS).  The scope of this investigation does not cover concrete reinforcing bars and rods, or bars and
rods of stainless steel or tool steel, which are provided for in other HTS subheadings.”
4. Provide a precise description of the proposed measure
Under US law, those Commissioners who make affi rmative serious injury or threat of injury
determinations also make recommendations to the President on actions that would address the serious
injury, or threat, and be most effective in facilitating the efforts of the domestic industry to make a
positive adjustment to import competition (19 US C ode Section 2252(e)(1) and (6)).  In this case, two
of the three Commissioners who made affirmative determinations, Vice Chairman Miller andCommissioner Koplan, jointly proposed a remedy to the President.  Chairman Bragg recommended a
different remedy.  These proposed measures are set out below.
Safeguard measure proposed by Vice Chai rman Miller and Commissioner Koplan
“1. That the President impose an additional tariff on imported steel wire rod for a four year
period.  The additional tariff would amount to 15.0 per cent ad valorem  in the first year of
relief and be reduced to 13.0 per cent ad valorem  in the second year of relief, 11.0 per cent ad
valorem  in the third year of relief, and 9.0 per cent ad valorem  in the fourth year of relief;
2. Having made negative findings with respect to imports of steel wire rod from Canada and
Mexico, under section 311(a) of the NAFTA Implementation Act, that such imports beexcluded from the additional tariffs
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3. That the increased rates of duty not apply to imports of steel wire rod from Israel, or to any
imports of steel wire rod entered duty-free from beneficiary countries under the Andean Trade
Preference Act, but that the increased duties apply to imports of steel wire rod frombeneficiary countries under the Caribbean Basin Economic Recovery Act; and
4. That the additional tariffs not apply to certain specialty steel wire rod items, specifically, tire
cord quality wire rod, pipe wrap quality wire rod, and valve spring quality wire rod.”
                                                     
2 Vice Chairman Miller and Commissioner Koplan found that “Mexico has accounted for 3 per cent or
less of total imports of steel wire rod during the 3 most recent years, and its imports during this perioddeclined.”  They found that “[b]ased on the evidence,  ... imports from Mexico do not account for a substantial
share of total imports and imports from Mexico do not contribute importantly to the serious injury.”
With respect to Canada, these Commissioners found that Canada has been the largest individual source
of imports in each of the 3 most recent years, and, accordingly, that imports from Canada account for asubstantial share of total imports.  However, they found that imports from Canada have declined substantiallyduring the 3 most recent years.  Further, they found that prices of Canadian steel wire rod were higher than those
for the domestic product.  In view of the evidence they found that “steel wire rod from Canada did not
contribute importantly to the serious injury suffered by the domestic industry.”G/SG/N/8/USA/4/Suppl.1
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Safeguard measure proposed by Chairman Bragg
“1. I recommend that the President impose a duty, in addition to the current rate of duty, for a
four-year period, on all imports of steel wire rod that are the subject of this investigationwithout exclusion except as provided below, as follows: 7 per cent ad valorem  in the first year
of relief; 6.5 per cent ad valorem  in the second year of relief; 6.0 per cent ad valorem  in the
third year of relief; and, 5.5 per cent ad valorem  in the fourth year of relief;
2. Having made an affirmative finding with respect to imports of steel wire rod from Canada
under section 311(a) of the NAFTA Implementation Act, I recommend that such imports be
subject to the increase in duty described above
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3. Having made a negative finding with respect to imports of steel wire rod from Mexico under
section 311(a) of the NAFTA Implementation Act, I recommend that such imports be
excluded from the increase in duty described above;
4. I recommend that the increase in duty described above apply to imports of steel wire rod
entered duty-free from beneficiary countries under the Caribbean Basin Economic Recovery
Act, but that it not apply to imports of steel wire rod entered duty-free from beneficiary
countries under the Andean Trade Preferences Ac t or imports of steel wire rod from Israel.”
5. Provide proposed date of introduction of the measure
Under US law, the President generally has 60 days from receipt of a USITC report containing
an affirmative determination of serious injury, or threat thereof, to determine what safeguard action, if
any, he will take.  When the Commissioners are equally divided, the President may choose to consider
the USITC’s determination as either affirmative or negative.  Any action proclaimed by the President
generally must take effect no later than 15 days after the President proclaims it.
                                                     
3 Chairman Bragg found that “imports of steel wire from Canada do account for a substantial share
of total imports, and do contribute importantly to the threat of serious injury to the domestic industry.”She noted that “Canada was by far the largest sour ce of imports during each year of the POI, and is
projected to remain so in 1999 and 2000.”  She further noted the following: “[P]ursuant to the NAFTA
Implementation Act, imports from a NAFTA country ‘normally’ will not be considered to contribute
importantly to serious injury or the threat thereof if the growth rate of imports from that country during the
period in which an injurious increase in imports occurred is appreciably lower than the growth rate of totalimports from all sources over the same period.  Imports of steel wire rod from Canada to the United States
declined 15.8 per cent between 1996 and 1998, while total steel wire rod imports increased 21.7 per cent
during this same period.  Such a divergence in import trends ‘normally’ would indicate that imports from
Canada do not contribute importantly to the threat of serious injury; in my view, however, the instant
investigation presents a clear example for when departure from this ‘normal’ outcome is warranted. ....Specifically, notwithstanding the sustained decline in steel wire rod imports from Canada during the
1996-1998 period, Canada was still by far the largest source of such imports into the United States,
accounting for more than 20 per cent of total imports  each year; moreover, Canada is projected to remain
the largest source of steel wire rod imports in 1999 and 2000.  In light of my determination that US prices
for steel wire rod have been depressed due in large part to the increase in imports, and that there is a high
degree of likelihood that increased imports will have a substantial negative effect on the volume and prices
of the domestic industry’s sales of steel wire rod (thereby causing further financial deterioration in a
domestic industry which has already sustained a significant aggregate operating loss in 1998), I find thatimports from Canada contribute importantly to the threat of serious injury to the domestic steel wire rod
industry.”G/SG/N/8/USA/4/Suppl.1
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6. Provide expected duration of the measure
As noted in item 4 above, the proposed measures call for the imposition of additional tariffs
over four years.
7. For a measure with a duration of more than three years, provide the proposed date for the
review (under Article 7.4) to be held not later than the mid-term of the measure, if such a date
for the review has already been scheduled
If the measure imposed has a duration of four years, a review will be held no later than the
2-year mark, but no date has been scheduled.
8. If the expected duration is over one year, provide expected timetable for progressive
liberalization of the measures
As noted in item 4 above, Vice Chairman Miller and Commissioner Koplan recommended
that the additional tariff they proposed be decreased by two per cent ad valorem  each year.
Chairman Bragg recommended that the additional tariff she proposed be decreased by one-half of one
per cent ad valorem  each year.
9. Information relating to the extension of a safeguard measure
Not applicable.
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