WORLD TRADE
ORGANIZATIONG/L/478
G/SG/N/13/USA/2
19 September 2001
(01-4465)
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 18 September 2001, has been received from the
Permanent Mission of the United States.
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Pursuant to Article 12.5 of the Agreement on Safeguards, 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/11/USA/4, G/SG/N/10/ USA/5/Rev.1 (28 March 2000), the measure is
an increase in duty on imports of certain line pipe, as described in paragraph 3 of that notification.The additional duty was 19 per cent ad valorem  in the first year of relief, declining to 15 and 11 per
cent ad valorem  in the second and third years, respectively.  Each year, the first 9,000 short tons of
imports from each supplying country is excluded from the increase in duty.  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 1 March 2001, and
transmitted a confidential version of its report to the President on 30 August 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 of the ITC’s report on the mid-term review is attached to
this notification.
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(i) the measure has been, or will be, withdrawn as a result of the review.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; andG/L/478
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(ii) the pace of liberalization has been, or will be, increased as a result of the review.
If yes, then indicate the revised time-table for progressive liberalization.
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 has not, at
this time, decided to take such action with respect to this measure.G/L/478
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EXECUTIVE SUMMARY
BACKGROUND
■ On 18 February 2000, following an affirmative determination of serious injury by the
Commission1 under section 202 of the Trade Act of 1974, the President implemented a
safeguard action to facilitate efforts by the welded line pipe industry to make a positive
adjustment to import competition.  This monitoring investigation was instituted by the
Commission under section 204(a)(2) of the Trade Act of 1974 for the purpose of preparing a
mid-point report to the President and the Congress regarding developments with respect to thewelded line pipe industry since the imposition of import relief.
■ Presidential Proclamation 7274 implemented relief action in the form of an increase in duties,
effective 1 March 2000, for a period of 3 years and 1 day.  The principal provisions of the
proclamation included an increase in duty of 19 per cent ad valorem  in the first year of relief,
declining to 15 and 11 per cent ad valorem  in the second and third years, respectively;
exemption of the first 9,000 short tons of imports of welded line pipe from each supplying
country each year;  exclusion from the relief action of product of Canada or Mexico;  and
suspension of duty-free treatment for welded line pipe that is the  product of beneficiary
countries under the Generalized System of Preferences (GSP), the Caribbean Basin EconomicRecovery Act (CBERA), and the Andean Trade Preference Act (ATPA), as well as the
product of Israel under the United States-Isr ael Free Trade Area Implementation Act of 1985
(IFTA Act).
■ The subject product includes welded carbon quality line pipe of circular cross section, of a
kind used for oil and gas pipelines, whether or not stencilled, and not more than 16 inches
(406.4 mm) in outside diameter (OD), a nd excludes goods commonly described in
commercial usage as arctic grade line pipe.
■ The Commission's monitoring investigation collected data for the period 1998 through
March 2001.
IMPACT OF RELIEF ACTION ON IMPORTS
■ In the 12-month period since the imposition of import relief (March 2000-February 2001),
imports of welded line pipe from covered countries decreased by over 100,000 short tons, or
more than half, when compared to the prior 12-month period.  Imports of welded line pipe notexceeding the 9,000 ton exemption totalled less than 75,000 short tons.  Imports of the subject
product in excess of the 9,000 ton exemption in the aggregate accounted for more than
20,000 short tons from three sources:  Chinese Taipei, Germany and Korea.
■ As shares of total imports, imports of the subject product from Canada accounted for
approximately 3 per cent in 1998 and 10 per cent  in 2000;  imports of the subject product
from Mexico accounted for approximately 15 per cent in 1998 and approximately 30 per cent
in 2000.
                                                     
1 Vice Chairman Marcia E. Miller and Commissioners Jennifer A. Hillman and Stephen Koplan found
serious injury.  Chairman Lynn M. Bragg and Commissioner Thelma J. Askey found a threat of serious injury.
Commissioner Carol T. Crawford made a negative determination.G/L/478
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■ Korean respondents argued that the doubling of the share of line pipe imports by product from
Canada and Mexico constitutes a surge that has undermined the effectiveness of the import
relief action, and that the Commission should recommend to the President that Canada and
Mexico be included in the action.  Petitioners argued that the vast majority of market sharelost by imports from covered countries went to domestic producers, that imports from Canada
and Mexico have entered the United States at higher prices since the imposition of import
relief, and that there is no need for the action to be modified at this time.
US DEMAND
■ The demand for welded line pipe is primarily derived from the demand for pipelines, mainly
those used for natural gas.  Since 1 March 2000, both energy prices and drilling activity have
increased.  The average price of natural gas at the wellhead was an estimated $2.30 per
thousand cubic feet in February 2000, and increased to $5.84 per thousand cubic feet in
February 2001.  In response, drilling activity in the United States for natural gas increased
from an average of 616 rotary drilling rigs in operation in February 2000 to 913 inMarch 2001.  Since March 2000, oil prices and the number of oil wells drilled have increased,
though at a slower rate than natural gas prices and drilling activity.
■ Demand for welded line pipe is also dependent on overall economic activity. From
March 2000 through March 2001, the value of construction put in place in the United Stateswas highest in the summer and autumn months.  Construction value declined irregularly to a
low in July 2000, and has since increased slightly.
■ Most domestic producers reported that demand for line pipe has declined, or first increased,
then declined, since 1 March 2000.  Domestic producers generally reported a decrease indemand for line pipe in the first half of 2001, and forecast modest improvements at best for
the remainder of 2001.
■ Data gathered by the Commission during this investigation indicate that apparent US
consumption of line pipe was slightly higher in 2000 than in 1999, but was nearly 25 per cent
lower in the first quarter of 2001 than in the first quarter of 2000.  Possible factors
contributing to a decline in domestic demand for line pipe include a general economicslowdown in the US economy, a slight decline in the seasonally adjusted value of new
construction, and increased imports of standard and structural pipe.
ADJUSTMENT EFFORTS
■ During the section 201 investigation, the domestic welded line pipe industry submitted to the
Commission its proposals for competitive adjustment, comprised of firm-specific efforts to
compete if the industry were to receive import relief.
■ In general, approximately $33 million, or 53 per cent, of the $63 million in planned
investments reported by US producers in their adjustment plans for the period 2000-2001, had
been completed by May 2001.
■ During 2000-2001, improving productivity/efficiency and quality accounted for 59 per cent of
total investments, expanding product lines accounted for 27 per cent, and lowering costsaccounted for 13 per cent of the total.G/L/478
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CONDITION OF THE US INDUSTRY
■ Between 1998 and 1999, the share of the US market held by US producers remained stable.
Apparent US consumption, however, declined by 12.3 per cent.  US producers' output andsales volumes fell markedly, as did prices, resulting in declines in most of the domestic
industry's trade and financial performance indicators.
■ Three US producers - Maverick, Prudential, and IPSCO - opened new pipe facilities in 1999
and 2000, during which time a fourth producer - Northwest - achieved API certification.  One
US producer - LTV - shut down a welding line in 1999.  Overall, the domestic industry's
capacity was substantially greater than US production and apparent consumption in both 1999and 2000, reflecting domestic capacity growth and declining apparent US consumption.
■ From 1999 to 2000, after the imposition of import relief, most indicators of performance
showed improvement:  capacity utilization incr eased by 14.1 percentage points, US shipments
(quantity) increased by 17.9 per cent, domestic industry market share (based on quantity)increased by 10.7 percentage points, unit values of US shipments increased by approximately
13 per cent, operating income (and unit operating income) went from losses to positive
income, the ratio of cost of goods sold to sales decreased by 10.6 percentage points and the
ratio of operating income to sales increased by 12.2 percentage points, the number of workers
increased by 13.9 per cent, hourly wages increased by 4.8 per cent, and productivity improvedby 15.5 per cent.
■ Comparing January-March 2000 with January-March 2001, US industry performance
generally declined, but average unit values and the ratio of operating income to sales
registered slight increases.
PRICING
■ Trends - In general, domestic prices declined through 1998 and into 1999.  Of the six specific
products for which the Commission gathered pricing information, average prices for four
products reported by domestic producers increased through mid-2000, and have since fallen
slightly.  The average prices of the remaining two products were higher in the first quarter of2001 than in any period since 1998.  Prices for all covered imports in the aggregate generally
exhibited similar trends, but remained at lower levels than prices for comparable domestic
products.
■ Comparisons - Imported line pipe undersold the comparable domestic product in 42 of 47
comparisons through the first quarter of 2000, and in each of the 20 instances in which
comparisons could be made since the first quarter of 2000.
FOREIGN INDUSTRIES
■ Thirteen firms in six covered countries prov ided information to the Commission regarding
their welded line pipe operations.
■ In general, the firms operated their plants at le ss than two-thirds of capacity, declining during
1998-2000 to an approximate 57 per cent capacity utilization rate, with unused capacityincreasing to more than 355,000 short tons in 2000, or by approximately 12 per cent, since
1998.
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