WORLD TRADE
ORGANIZATIONG/SG/N/13/USA/3
29 October 2001
(01-5297)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.5 OF THE
AGREEMENT ON SAFEGUARDS OF THE RESULTS
OF A MID-TERM REVIEW REFERRED TO IN ARTICLE 7.4
UNITED STATES
The following communication, dated 23 October 2001, has been received from the Permanent
Mission of the United States.
_______________
Pursuant to Article 12.5 of the Agreement on Safegu ards, and in light of the agreed format for
notifications (G/SG/1, 1 July 1996), the United Stat es provides the following notification to the
Council for Trade in Goods.
1. Specify the measure and the product subject to the measure for which the mid-term
review was conducted, and provide reference to the WTO document that notified the
safeguard measure subject to the review.
As notified in G/SG/N/10/USA/4 (18 February  2000), the measure is a tariff-rate quota on
imports of certain wire rod, as described in paragraphs 3 and 4 of that notification.  The over-quotatariff rate was 10 per cent ad valorem  in the first year of relief, declining to 7.5 and 5 per cent
ad valorem  in the second and third years, respectively.  The measure does not apply to imports from
Canada or Mexico.
2. Provide the dates of initiation  and conclusion of the review.
The US International Trade Commission (“ITC”) initiated its review on 16 March 2001, and
transmitted a confidential version of its report to the President on 23 August 2001.  It issued a public
version of its report on 9 October 2001.
3. Describe the results of the review, providin g some detail on the basis for reaching those
results.
A copy of the executive summary from the public version of the ITC’s report is attached to
this notification.G/SG/N/13/USA/3
Page 2
4. Indicate whether:
(i) the measure has been, or will be, withdrawn as a result of the review.  If yes,
then indicate the date of withdrawal; and
Under US law, the President may take action to reduce, modify or terminate a safeguard
measure after, among other things, receiving a midterm report from the ITC.  The President currently
has made no decision with respect to this measure.
(ii) the pace of liberalization has been, or wi ll be, increased as a result of the review.
If yes, then indicate the revised time-table for progressive liberalization.
Same response as (i) above.G/SG/N/13/USA/3
Page 3
EXECUTIVE SUMMARY
On 16 February 2000, following an affirmative determination1 by the Commission under
section 201 of the Trade Act of 1974, the President proclaimed the imposition of a tariff-rate quota(TRQ) on imports of certain steel wire rod.  Wire rod is a hot-rolled intermediate steel product of
circular or approximately circular cross section that is typically produced in nominal fractional
diameters from 7/32 inch (5.6 mm) to 47/64 inch (18.7 mm), and sold in irregularly wound coils,
primarily for drawing and finishing into wire.  The steel wire rod subject to the TRQ was defined in
the Proclamation as excluding wire rod of tyre cord quality, valve spring quality, class III pipe wrap
quality, aircraft cold-heading quality, aluminium cable steel reinforced quality, piano wire string
quality, grade 1085 annealed bearing quality, and grade 1080 tyre bead quality.  The President appliedthe TRQ to subject steel wire rod imports from all countries with the exception of Canada and
Mexico.
The Presidential Proclamation provided fo r a 3-year plus 1-day TRQ running from
1 March 2000 through 1 March 2003.  In-quota quantities under the TRQ are assessed duties only atthe column-1 general rate.  The rate of duty for over-quota imports is 10.0 per cent ad valorem  for
year 1;  7.5 per cent ad valorem  for year 2;  and 5.0 per cent ad valorem  for year 3.  During the first
three quarters of each quota year, there is a quarterly quota that is one-third of the total TRQ trigger
amount for the year.  Any quantity of product that is entered, or withdrawn from warehouses for
consumption, in excess of the quarterly limit is subject to the over-quota rate of duty then in effect.For the fourth quarter of a quota year, the aggregate quantity of certain steel wire rod entered at the in-
quota rate during the first three quarters of the quota year is subtracted from the total annual within-
quota quantity to calculate the remaining available in-quota quantity (if any) for that quota year.  No
individual country allocations were established by the TRQ.  The annual quota trigger amounts for
each year are as follows:
1 March 2000 through 28 February 2001 1,433,351,886 kg (1,580,000 short tons)
1 March 2001 through 28 February 2002 1,462,018,923 kg (1,611,600 short tons)
1 March 2002 through 1 March 2003 1,491,259,302 kg (1,643,832 short tons)
Implementation of the quota in the first year was not smooth in that there were substantial
mis-classifications by importers of certain steel wire rod as nonsubject product, frequently asexcluded steel wire rod.  This problem, as those shipments were counted towards triggers, resulted in
Customs having to make retroactive downward ad justments in the remaining in-quota amounts that
had previously been announced.  Customs has, however, moved to ensure that there will be tighter
compliance with the TRQ in the future and no parties have expressed concerns at this time about
circumvention.  The majority of importers that re sponded to Commission questionnaires indicated that
the TRQ had a  negative impact on the operations of  their firms, particularly with respect to the
additional administrative burdens and the requirements to time shipments to prevent entries after the
quota had been filled for any quarter.  Over-quota imports of certain steel wire rod, totalling
91,780,787 kg, were entered during the first year of the TRQ.
                                                     
1 The Commission was equally divided on the question of whether certain steel wire rod was being
imported into the United States in such increased quantities as to be a substantial cause of serious injury or the
threat of serious injury to the domestic certain steel wire rod industry.  Chairman Lynn M. Bragg, Vice-Chairman Marcia E. Miller, and Commissioner Stephen Koplan made affirmative determinations andCommissioners Carol T. Crawford, Jennifer A. Hillman, and Thelma J. Askey made negative determinations.Section 330(d)(1) of the Tariff Act of 1930 provides that when the Commission is equally divided on thequestion of injury under section 202(b) of the Trade Act of 1974, "the determination agreed upon by either
group of commissioners may be considered by the President as the determination of the Commission".G/SG/N/13/USA/3
Page 4
Several parties advocated various modifications to the TRQ, including termination.  No party
objected to a specific allocation of quota quantity to the fourth quarter of each quota year.  Producers
from several countries advocated country- or region-specific allocations;  while domestic producers
approved of such allocations in principle, domestic purchasers and Japanese producers opposed it.
Domestic producers opposed any increase in the total within-quota allocation, and also opposedtermination of the TRQ.
2
The Commission's monitoring investigation collected annual data for 1998, 1999, and 2000,
and interim data for January-March 2000, and January-March 2001.  The quantity of imports of
certain steel wire rod from all sources increased steadily from 1998 to 2000, although the import gain
was not as great in 2000.  Imports increased by 19.6 per cent from 1998 to 1999, but only by 7.0 per
cent from 1999 to 2000.  Imports fell 10.2 per cent from the first quarter of 2000 to the first quarter2001.  Firms responding to Commission questionnaires reported that demand for certain steel wire rod
has decreased since 1 March 2000, primarily due to the slowing US economy.  Apparent consumption
of certain steel wire rod decreased by 20.3 per cent from the first quarter of 2000 to the first quarter of
2001, and US shipments of domestically produced certain wire rod fell by 24.5 per cent, in terms of
quantity.  US producers continued to account for the largest, albeit a steadily decreasing, share of thedomestic market for certain steel wire rod throughout the period examined.
Domestic production of certain steel wire rod was relatively level from 1998 to 2000, then fell
by 31.3 per cent from January-March 2000 to January-March 2001.  The magnitude of the fall-off in
production is due in part to the scaling down in operations of domestic plants that are closing, with allbut one of the responding US producers reported declines in production for the first quarter of 2001
compared to the first quarter of 2000.  During the period reviewed, 15 firms manufactured certain
steel wire rod in the United States.  Atlantic shut down its wire rod mill in December 1998;
Birmingham announced that it would close its wire rod plant in June 2001;  GS Industries
permanently idled its Kansas City, MO, mill in February 2001;  North Star's Kingman, AZ, plant shutdown wire rod production in May 2001;  and Nort hwestern announced in May 2001 that it would be
shutting down operations in the near future.  (Of these firms, only GS Industries and North Star
maintain other wire rod production facilities).  US producers' shipments fell at a slower rate in
January-March 2001 than did production as domestic manufacturers drew down their inventories.
A comparison of data on a quota-year basis shows a decreasing volume of imports of all steel
wire rod (including the nonsubject speciality wire pr oducts, which account for about 11 per cent of the
total).  In the 12 months following the imposition of the TRQ (March 2000-February 2001), the
quantity of imports from all sources fell by 1.5 per cent in comparison to the preceding 12-month
period.  However, the trend reported for countries subject to the TRQ differed from the trend for those
that were not subject to the TRQ.  Specifically, imports of all steel wire rod from covered countries
fell by 7.9 per cent in quantity from the year ending 28 February 2000 to the year ending28 February 2001, while imports from Canada and Mexico increased by 16.2 per cent.  Imports from
countries not subject to the restrictions of the TRQ increased in market share from the first quarter of
2000 to the first quarter of 2001, whereas the market share of imports from covered countries as a
whole remained unchanged.
The domestic industry saw no improvement in its financial condition with the imposition of
the TRQ.  In fact, operating losses were greater in 2000 than in 1998 and operating losses increased
further between the first quarter of 2000 and the first quarter of 2001.  The majority of firms reported
operating losses for their certain steel wire rod operations in each of the periods examined.  Falling
prices were the primary factor in the decrease in profitability during 1998-2000;  the drop in operating
                                                     
2 Commissioner Bragg notes that a country-by-country allocation of the tariff rate quota, based on an
historical base period, and/or quarterly quota allocation, would be expected to benefit the domestic industry in
its adjustment to import competition.G/SG/N/13/USA/3
Page 5
income between interim periods resulted from both a decline in unit sales value and a rise in per unit
costs and expenses.
In general, prices for US-produced certain steel wire rod fell during 1998 and the first quarter
of 1999, increased slightly during the rest of 1999 and the first three quarters of 2000, then fell duringthe rest of the period.  The Commission collected quarterly pricing data for five specific products.
Over the entire period, prices for US-produced products 1-5 were lower at the end of the period than
they were at the beginning.  In some cases prices for imported certain steel wire rod showed similar
price trends;  in other cases, price series either fluctuated too widely or did not have enough data
points to show consistent price trends.  In the vast majority of cases, prices for imported certain steel
wire rod were lower at the end of the period than they were at the beginning.
3
During the section 201 injury investigation of certain steel wire rod, the domestic industry
submitted to the Commission its proposals for competitive adjustment under any import relief.  These
proposals consisted of an Adjustment Plan, date d 12 May 1999, comprised mainly of firm-specific
efforts for the majority of the US producers, as well as responses by the individual firms to questions
in the producers' questionnaire about the adjustments that they would make if the industry were toreceive import relief.  All parties to this section 204 proceeding, the domestic industry as well as
respondents, agree that the US producers as a group have been unable to make all of the efforts that
they proposed to the Commission during the section 201 investigation to adjust to import competition.
US producers' capital expenditure for their certain steel wire rod operations fell by 13.3 per cent from
$85.1 million in 1999 to $73.8 million in 2000, then decreased by 32.4 per cent from $12.8 million inthe first quarter of 2000 to $8.7 million in the first quarter of 2001.  Only 3 of the 13 reporting firms
spent more than $*** for capital expenditures every year from 1998 through 2000.  The domestic
industry states in its briefs that the TRQ has failed to limit the quantity of imports entering the
United States or to allow for increases in domestic pr ices by applying a tariff of sufficient magnitude
on over-quota imports.  In their responses to the US producers' questionnaire for the section 204investigation, the majority of firms specifically indicated that the TRQ did not provide relief or had no
effect or that imports continued to have a negative impact on the operations of their firms.  The US
certain steel wire rod industry also has been hampered in its efforts to adjust to import competition by
declining demand since 1 March 2000.
__________
                                                     
3 Overall, there were 281 quarterly price comparisons between US-produced products 1-5 and subject
imports.  Imported products 1-5 undersold US-produced products 1-5 in 193 comparisons and oversold US-
produced products 1-5 in 88 comparisons.