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the USITC determination or the supplementary report to support this conclusion.  It was simply a
blanket conclusion that was applied to every product subject to a safeguard measure.4797
7.2020 Korea asserts that the President ignored the findings of the USITC with respect to Mexico andCanada and rendered a conclusion that imports from Canada and Mexico do not account for a
substantial share of total imports nor contribute importantly to the serious injury.
4798  However, the
United States failed to provide any explanation of how it reached this directly contrary conclusion on
this important and pertinent issue of fact and law.  Thus the determination is in violation of Articles 3
and 4.2(c) of the Agreement on Safeguards.4799
7.2021 In response, the United States argues that Korea fails to recognize that findings related to theNAFTA, unlike findings under the Agreement on Safeguards, are not "pertinent" issues within the
meaning of Article 3.1 or part of the "case under analysis" within the meaning of Article 4.2(c).
4800
VIII.  ARGUMENTS OF THE THIRD PARTIES
A. CANADA
8.1 The only question Canada addresses is whether the exclusion of imports originating in
Canada from the scope of application of the challenged safeguard measures conforms to WTO law.
Canada fully supports the United States' submissi on on parallelism and on Article XXIV of the GATT
1994.4801
8.2 With regard to parallelism, Canada asserts that: (i) there is no requirement to use a particular
structure or format or a particular analysis for the report of the competent authority; (ii) the USITC
Report, when viewed in its entirety, contains an analysis of non-NAFTA imports; and (iii) there is no
requirement to conduct a separate analysis of inju ry caused by NAFTA imports as an "other" cause of
injury.4802
8.3 With regard to Article XXIV of the GATT 1994, Canada asserts that this provision creates an
exception to the most-favoured-nation treatment obligation, allowing parties to a free-trade agreement
to terminate duties and other restrictive regulations of commerce, including safeguard measures.
NAFTA meets the requirements of Article XXIV, and Article XXIV:5 in principle authorizes the
exclusion of imports from within free-trade areas from Safeguard measures.  Given that Article XIXis not enumerated in Article XXIV:8(b), safeguard measures must generally be eliminated in a free-
trade area.
4803
8.4 Canada submits that the last sentence of footnote 1 to Article 2 of the Agreement on
Safeguards confirms the availability of Article XXIV of the GATT 1994 against claims under
Article 2.2 of the Agreement on Safeguards.  The President's decision to exclude imports from
Canada (and Mexico) because of the requirements of Article 802 of NAFTA is not within the
                                                     
4797 Korea's first written submission, paras. 178-179.
4798 Proclamation 7529, 67 Fed. Reg. 10553, 10555 (2002), para. 8 (Exhibit CC-13).
4799 Korea's first written submission, para. 180.
4800 United States' oral statement at the second substantive meeting, para. 138.
4801 Canada's third party submission, para. 6.
4802 Canada's third party submission, paras. 13-14.
4803 Canada's third party submission, paras. 15-21, 24.WT/DS248/R, WT/DS249/R,
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Page 680
jurisdiction of a WTO panel.  The exclusion is not a "pertinent issue of fact or law" pursuant to
Articles 3.1 and 4.2(c) of the Agreement on Safeguards.4804
8.5 Canada adds that the President, in making his determination under the NAFTA
Implementation Act, was not required to follow the USITC or to explain his reasons for not doing
so.4805
B. CUBA
8.6 Cuba asserts that the safeguard measures imposed by the United States are completely
incompatible with the Agreement on Safeguards and have caused distortions in the steel market.  As a
result, Cuba has to pay higher prices on its steel imports because several steel-producing countries
have reduced their production.  Due to increased tariffs in countries that used to purchase Cuban steelbar, these exports have come to a halt.
4806
8.7 Cuba considers that the United States acted inconsistently with Article XIX:1(a) of the GATT
1994 because the USITC Report contained no demonstration concerning the existence of unforeseen
developments.  The United States also acted inconsistently with the obligation stipulated in Article 3.1
of the Agreement on Safeguards to publish findings and conclusions regarding unforeseendevelopments.
4807
8.8 In relation to serious injury or threat of serious injury to the United States' steel industry,
Cuba claims that the explanation given by the USITC is neither reasoned nor adequate.  The USITC
Report does not contain sufficient data to perform a correct evaluation of the domestic industry's
situation.4808  According to Cuba, the USITC Report does not demonstrate that the USITC has ensured
non-attribution of injury or threat of injury caused by factors other than increased imports.  Although
the United States recognized that other factors have contributed to the injury suffered by the domestic
industry, the USITC does not touch upon these factors in its report.4809
8.9 According to Cuba, the USITC has not correctl y determined which is the domestic industry
manufacturing products that are like or directly competitive to increased imported products.  Anincorrect industry definition results in an incorrect determination of serious injury and in the
application of an unjustified safeguard measure.  Firstly, the imports being imported in increased
quantities must be clearly identified, rather than taking as a starting-point the four product categories
identified in the Presidential request.  The USITC's subsequent formation of groups of different
individual products potentially masks the lack of increased imports for a specific product.  Rather thanrelying on the characteristics of the product itself, the USITC assumed that all products produced with
the same production process could be considered to be like.
4810
8.10 Cuba also submits that the United States' safeguard measures show a lack of parallelism.  The
USITC evaluated imports from NAFTA countries in its investigation.  Despite the finding that in
several cases these imports significantly contributed to the serious injury caused to the domestic
                                                     
4804 Canada's third party submission, paras. 23-25, 7.
4805 Canada's third party submission, para. 10.
4806 Cuba's third party submission, pp. 4-5.
4807 Cuba's third party submission, pp. 5-7.
4808 Cuba's third party submission, p. 8.
4809 Cuba's third party submission, pp. 8-9.
4810 Cuba's third party submission, pp. 9-10.WT/DS248/R, WT/DS249/R,
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industry, the USITC concluded that the exclusion of NAFTA imports does not affect the
determination on injury and causality.4811
8.11 Finally, Cuba submits that the United States has violated its obligation under Article 5.1 of
the Agreement on Safeguards by not demonstrating that the safeguard measure was imposed only to
the extent necessary to prevent or remedy serious injury and to facilitate adjustment.4812
C. CHINESE TAIPEI
8.12 With regard to unforeseen developments, Chinese Taipei argues that the circumstances
described in the first clause of Article XIX:1(a) of the GATT 1994 must be demonstrated in the same
report, together with the fulfilment of the three conditions set out in Article 2.1 of the Agreement on
Safeguards.  Otherwise, the first clause of Article XIX:1(a) would become an additional condition andthe required logical connection to the conditions of Article 2.1 of the Agreement on Safeguards could
not be established.  For the same reasons, the dem onstration of unforeseen developments must also be
made on a product-by-product  basis.  Since the USITC did not do this, it severed the required logical
connection between the first clause of Article XIX:1(a) and the conditions of Article 2.1 of he
Agreement on Safeguards.  According to Chinese Taipei, this required logical connection alsoprevents Members from simply relying on any macroeconomic factor which affects all products that
are part of macroeconomics.  In any event, the 2
nd Supplementary Report cannot change the fact that
the USITC consider the existence of unforeseen developments when it was striving to fulfill the three
conditions.  The Russian crisis could not be regarded as an unforeseen development, given that the
increase in imports from Russia was significantly higher in the years preceding the conclusion of theUruguay Round than thereafter.  Contrary to the United States' allegation, a mere sequential
relationship does not qualify as logical connection.  According to Chinese Taipei, there should at
least be a demonstration that "unforeseen developments" have caused increased imports for each
product or group of products to enter "under such conditions" and to such an extent as to cause serious
injury or threat thereof.  Finally, it must be demonstrated, as a matter of fact, that the importingMember has incurred obligations under the GATT 1994, including tariff concessions.  The USITC
failed to demonstrate, product by product, how such concessions were logically connected to the three
conditions identified in Article 2.1 of the Agreement on Safeguards.
4813
8.13 Chinese Taipei also argues that the USITC failed to identify the producers of the like products
in order to define the domestic industry and failed to publish its findings in this regard and thereforeacted inconsistently with Articles 3.1 and 4.1(c) of the Agreement on Safeguards.  Article 4.1(c) of
the Agreement on Safeguards provides that the "domestic industry" is the totality of the national
producers of the like or directly competitive products, or those whose collective output of those
products constitutes a major proportion of the total domestic production.  The Member applying a
safeguard measure needs to specify in the report of its competent authorities the finding and reasoned
conclusion that the aggregated production of the producers suffering serious injury exceeds the
percentage representing the major proportion of the total domestic production.  Since "a majorproportion" of the industry is within the scope of "all pertinent issues of fact and law" in Article 3.1,
there is no apparent reason to exclude from the published findings and conclusions the information
relating to the proportional level of production forming "a major proportion".  From the number of the
firms being sent questionnaires and the much lower number of the firms responding to the
questionnaires, there is no reasonable basis for other Members to make any proper judgment onwhether those responding producers constitute a "majority" or a major proportion of the national
                                                     
4811 Cuba's third party submission, p. 11.
4812 Cuba's third party submission, p. 12.
4813 Chinese Taipei's third party submission, paras. 4-18.WT/DS248/R, WT/DS249/R,
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production.  Chinese Taipei argues that statements made in the USITC Report are inconsistent with
Article 2.1 of the Agreement on Safeguards because they specify only percentage ranges, rather than
precise percentages, which, according to Chinese Taipei, makes the USITC Report untrustworthy.The percentages of several products also exceed 100%.  Finally, the USITC Report bases itself on
"domestic shipments" rather than "total production", which is the concept stipulated in Article 4.1(c)
and which is different from "total shipments".
4814
8.14 Chinese Taipei further submits that the "substantial cause" test applied by the United States
and thus its findings are not in accordance with the Agreement.  Article 4.2(b) of the Agreement on
Safeguards makes clear that there are two basic requirements: first, to establish the causal link
between increased imports and serious injury and, second, when there are other factors causing injury,not to attribute such injury to increased imports.  As the Appellate Body has further explained, it is
through distinguishing the injurious effects caused, respectively, by increased imports and other
factors that "the competent authorities determine, as a final step, whether 'the causal link' exists
between increased imports and serious injury".  The application of the substantial cause test by the
USITC itself is not in line with the required approach specified in Article 4.2(b).  In a case wherethere are ten equally important causes of serious injury, one of them being increased imports, the
United States would find a causal link.  However, under Article 4.2(b), the competent authority should
find no link between increase and injury because 10% should in no way be considered as serious
enough to apply a safeguard measure.  In the present case, one cannot see that the USITC has
separated and distinguished the factors other than increased imports.  One can also not find themethod that ensures non-attribution of these other factors to increased imports.  The USITC only
conducted a relative comparison of these other factors with increased imports and ignored the fact that
such other factors still contributed cumulatively to the said serious injury.
4815
8.15 According to Chinese Taipei, the United States' safeguard measures have gone beyond the
extent necessary to remedy serious injury and thus violate Article 5.1 of the Agreement onSafeguards.  Given that the terms "serious injury" in Article 5.1 should bear the same meaning as
those in other provisions in the same Agreement, the factors listed in Article 4.2(a) must also be those
applied for the purpose of the Article 5.1 evaluation.  In addition, when deciding whether the
safeguard measure is within the extent necessary to  remedy serious injury, the competent authorities
need to review the same factors that had contributed to the serious injury.  However, in its economicmodel, the USITC generally limits itself to three factors when evaluating the remedy, namely
quantity, price, and revenue.  It did not consider the factors identified in the investigation.  In addition,
the tariff measures in the said model cover the entirety of the injury caused by increased imports and
by other factors, since those other factors are not separated and distinguished in this model.  As a
result, it cannot be verified whether the remedy measure is within the necessary extent.
4816
8.16 Finally, Chinese Taipei recalls that, in US – Line Pipe4817, the Appellate Body interpreted
Article 3.1 by ruling that the Member imposing a safeguard measure must provide sufficientmotivation for that measure.  There is a violation of that provision in the present case where the
President imposed a more restrictive tariff th an that recommended by the USITC without any
reasoning or explanation on the necessary extent of the measure.
4818
                                                     
4814 Chinese Taipei's third party submission, paras. 19-24.
4815 Chinese Taipei's third party submission, paras. 25-30.
4816 Chinese Taipei's third party submission, paras. 31-36.
4817 Appellate Body Report, US – Line Pipe , para. 260.
4818 Chinese Taipei's third party submission, paras. 37-38.WT/DS248/R, WT/DS249/R,
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D. MEXICO
8.17 Mexico expresses its interest in the correct in terpretation of the rules governing the imposition
of safeguard measures, in particular those referring to the special situation of Members party to a free-trade area.  Article XXIV of the GATT 1994 clearly permits Mexico to be excluded from the
application of a safeguard measure imposed by the United States, its NAFTA partner.  This Article is
a clear exception to the principle of most-favoured-nation treatment and has clearly been recognized
as such by the Agreement on Safeguards.
4819
8.18 Mexico notes that the complainants (with two exceptions) neither argue that NAFTA is
questionable in the light of Article XXIV, nor that it confers the right to be excluded from a safeguard
measure.  Mexico also notes with satisfaction that  Norway recognizes that neither the Agreement on
Safeguards nor Article XIX of the GATT 1994 prevent the exclusion of imports from free-trade
partners.  The Reports of the Appellate Body in US – Wheat Gluten and US – Line Pipe were clear in
not questioning this right.  Mexico trusts that the Panel will follow that same line of thinking.
8.19 In relation to the claims that the principle of most-favoured-nation has been violated, Mexico
refers to the arguments submitted by the United States and Canada, as well as to Mexico's statementbefore the Panel in US – Line Pipe .  According to Mexico, it is well established that the non-
application of safeguards to products from the constituents of a free-trade area is not only compatible
with Article XXIV:8(b), but also faithful to the finality of this Article, which is to "facilitate trade".
This was the focus supported by the Appellate Body in Turkey – Textiles .  Mexico notes that
Article XXIV:8(b) of the GATT 1994 contemplates the exclusion of safeguard measures as part of the
"other restrictive trade regulations" that must be eliminated in the formation of a free-trade area.
4820
8.20 Mexico further argues that the complainants who allege a violation of the principle of most-
favoured-nation treatment completely ignore the last sentence of footnote 1 to the Agreement on
Safeguards.  This footnote clearly establishes that "[n]othing in this Agreement prejudges the
interpretation of the relationship between Article XIX and paragraph 8 of Article XXIV of GATT1994".  A simple interpretation of the terms of this provision removes any doubt about the nature of
Article XXIV as an exception.  Mexico agrees with the United States that this footnote purports to
maintain the previous balance between Articles XXIV and other provisions of the GATT 1994,
particularly Article XIX, bearing in mind that this  balance existed prior to the implementation of the
the Agreement on Safeguards.
4821
8.21 With regard to parallelism, Mexico recalls the findings of the panel in US – Line Pipe that the
principle of parallelism means that the United States had to establish explicitly that imports from
sources other than Canada and Mexico satisfied the conditions for the application of a safeguard
measure stipulated in Article 2.1 of the Agreement on Safeguards.  In other words, while there must
be a parallelism between the scope of the investigation and the scope of any resultant measure, the
principle of parallelism does not determine the scope of the investigation  (emphasis added).  In this
regard the complainants limit their allegations to the fact that the United States has not given a
reasoned and adequate explanation that establishes explicitly that imports from non-NAFTA sources
satisfy the conditions for the application of a safeguard measure pursuant to Articles 2.1 and 4.2 of the
Agreement on Safeguards.  Mexico supports the response given by the United States that the
Agreement on Safeguards does not prescribe the internal decision-making process for making a
determination.  In its response, the United States identifies the detailed analysis conducted by theUSITC concerning imports from non-NAFTA sources, which makes the violation claims baseless.
                                                     
4819 Mexico's oral statement at the first substantive meeting, p. 1.
4820 Mexico's oral statement at the first substantive meeting, pp. 1-2.
4821 Mexico's oral statement at the first substantive meeting, p. 2.WT/DS248/R, WT/DS249/R,
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Mexico also concurs with the United States that Article 4.2(b) does not provide for an obligation to
examine NAFTA imports as a non-import "other factor".4822
8.22 Finally, Mexico supports the United States' arguments that the Presidential determinations
relating to Article 802 of the NAFTA Agreement is not subject to the Articles 3.1 and 4.2(b) of the
Agreement on Safeguards, but that this is a question exclusively related to NAFTA.4823
8.23 On the basis of the foregoing, Mexico requests the Panel to reject the claim that the exclusion
of Mexico from the safeguard measure is incompatible with the GATT 1994 and the Agreement on
Safeguards.  In particular, Mexico requests that the Panel carefully examine the nature of the
exclusion in the light of the object and purpose of Article XXIV and that, in consequence, it confirms
the Members' interpretation that Article XXIV permits the exclusion of free-trade partners from thescope of safeguard measures, also with regard to the Agreement on Safeguards.
4824
E. THAILAND
8.24 Thailand submits that the safeguard measures imposed on certain steel products by the United
States have had a major impact on the industries and markets of Members.  According to Thailand,
the situation became worse when the European Comm unities followed suit with a view to protecting
its domestic industry.  This gives rise to a wide range of concerns of many, if not all, WTO Members
to have recourse to panel so that negative effects of such measures, as applied, would be appropriately
remedied.  Thailand notes that under Proclamation No. 7529 of 5 March 2002, entitled "To Facilitate
Positive Adjustment to Competition from Imports of Certain Steel Products", a total of seven steel
imports from Thailand were investigated by the USITC.4825  Thailand appreciates the fact that five
products out of seven are presently excluded from the application of such safeguard measures in
accordance with Article 9.1 of the Agreement on Safeguards as a result of their share of imports not
exceeding 3% as required by this Article.  N onetheless, two imports from Thailand, namely, welded
carbon steel pipes and tubes (HS 7306), and carbon steel butt-welded pipe fittings (HS 7307), are still
subject to definitive safeguard measures imposed by the United States.  According to Thailand, theThai steel industry has been adversely affected as a result thereof.
4826
8.25 Thailand agrees with the legal arguments made by the complainants and some third parties
that the United States has failed to justify adequate ly that the conditions set forth in Article 2 of the
Agreement on Safeguards and Article XIX: 1(a) of the GATT 1994 have been met in applying
definitive safeguard measures, this is especially so for arguments relating to the issue of lack of causallink.  Thailand notes that the Appellate Body ruled in US – Lamb and Argentina – Footwear (EC)
cases that "serious injury" is set at a higher threshold standard in the Agreement on Safeguards than
those envisaged in the Anti-Dumping Agreement and the Agreement on Subsidies and Countervailing
Measures.
4827  It could be concluded, based on the reasoning in US – Wheat Gluten  and US – Line
Pipe, that the conditions whereby safeguard measures are applied under Article 2 and the definition of
the term "serious injury" under Article 4.1(a) shall be  met at all times, thus triggering the application
of Article 3 on investigations to be followed by Article 5 on safeguard measures.
                                                     
4822 Mexico's oral statement at the first substantive meeting, pp. 2-3.
4823 Mexico's oral statement at the first substantive meeting, p. 3.
4824 Mexico's oral statement at the first substantive meeting, p. 3.
4825 USITC Report.
4826 Thailand's oral statement at the first substantive meeting, p. 1.
4827 Appellate Body Report, US – Lamb, para. 124; Appellate Body Report, Argentina – Footwear
(EC) , para. 94.WT/DS248/R, WT/DS249/R,
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8.26 Thailand's major concern is that the Proclamation, by its non-application of the above
measures on steel products from the free-trade area partners of the United States despite the USITC's
finding of their significant contribution to serious injury, or threat thereof, to the domestic industry,would be WTO-inconsistent, in particular with  the GATT 1994 and the Agreement on Safeguards.
Thailand believes that WTO Members can impose safeguard measures only if they have demonstrated
that subject imports from non-free trade partners satisfy the conditions for the application of a
safeguard measure.  In addition, Thailand states that from a reading of the Marrakesh Agreement
Establishing the WTO, of which the GATT 1994 forms an integral part, Thailand remains to be
convinced how and why elimination of duties, inclus ive of other restrictive regulations of commerce,
would imply or indicate non-applic ation of safeguard measures which differ in their nature of
application and characteristics.  Thailand submits that, so far, there is no jurisprudence established
that the interpretation to exclude members in a free trade area is consistent with the GATT 1994 and
the Agreement on Safeguards, bearing in mind Argentina – Footwear (EC)  and US – Wheat Gluten
cases.  Thus, according to Thailand, this line of argument means that the issue of whether GATT
Article XXIV permits an imposing Member to exclude imports originating in its free-trade areapartners from the scope of a safeguard measure in departure from Article 2.2 has not yet been
clarified.
4828  The Appellate Body in US – Line Pipe  held that investigating authorities, such as the
USITC in this case, must, at the very least, "provide in its determination a reasoned and adequate
explanation that 'establish[es] explicitly' " that imports from non-free trade area partners satisfied the
conditions for the application of a safeguard measure, as set forth in Article 2.1 and elaborated inArticle 4.2 of the Safeguard Agreement.
4829 4830
8.27 According to Thailand, the United States did not clearly demonstrate how imports from its
non-free trade area partners, including Thailand, have independently satisfied the conditions
permitting the application of definitive safeguard measures.  Therefore, Thailand concurs with the
point raised by the complainants in general, that the USITC analysis of certain tubular products isunclear because the investigating authorities reached different conclusions as to the injurious effects
of the imports from free-trade area partners, and the Proclamation excluded these imports without
explication.
4831  Thailand submits that it is, therefore, questionable whether a causal link between
imports of said products from Thailand and other non-free trade area partners on the one hand, and
serious injury or threat thereof on the other hand, does exist.  The lack of causal link is a systemicissue and is of particular concern to Thailand because it is highly likely that, had USITC authorities
excluded said imports from the free-trade area partners of the United States in its investigation, they
would not have reached the conclusion that imports from Thailand caused serious injury or threat
thereof.  Thailand submits that because the USITC in  its report, and subsequently the President of the
United States in the Proclamation, failed to explicitly establish that imports from non-free trade area
partners satisfied the conditions under Articles 2 and 4 of the Agreement on Safeguards, perhaps, the
injurious effects of these imports to the United States might have been mistakenly attributed toimports from non-free trade area partners such as Thailand.
4832
8.28 Thailand also submits that it is not convinced that the United States has satisfied the condition
of "unforeseen developments".  On this point, Thailand notes that the USITC referred to the
devaluations in five Asian countries as the "Asian Financial Crisis" and the dissolution of the former
Soviet Union as constituting unforeseen developments and that the USITC concluded that "[a]s
                                                     
4828 Appellate Body Report, US – Line Pipe , para. 198.
4829 Appellate Body Report, US – Line Pipe , para. 198.
4830 Thailand's oral statement at the first substantive meeting, pp. 2-3.
4831 US – Definitive Safeguard Measures on Imports of Certain Steel Products , European Communities'
first written submission, para. 529.
4832 Thailand's oral statement at the first substantive meeting, p. 3.WT/DS248/R, WT/DS249/R,
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currency depreciations and economic contractions disrupted other markets, the share of steel imports
to the US market increased sharply and US prices declined".4833  In addition, it is the USITC that
admitted that demand in the United States remained strong.  Thailand submits that if this was the case,the United States is required to prove that such unforeseen developments led to imports being
increased in such quantities and under such conditions as to cause or threaten serious injury to
domestic producers of like or directly competitive products.
4834
8.29 In conclusion, Thailand submits that the current si tuation with respect to trade in steel has led
several Members to apply safeguard measures to protect their domestic industries.  Thailand is no
exception.  Thailand asserts that should this situation be prolonged, it would inevitably cause a
chilling effect thereby resulting in an abusive application of safeguard measures.  Thailand considersthat safeguard measures cannot be regarded as beneficial to any Member, and developing country
Members will have to bear the costs of their imposition unless such Members receive due
consideration.  Therefore, Thailand strongly believes that such measures should be used with
prudence, and most importantly, in compliance with the WTO Agreement and GATT/WTO
jurisprudence.
4835
F. TURKEY
8.30 Turkey claims that the USITC failed to examine whether the import trends of the products
under investigation were the result of "unforeseen developments" as provided for in Article XIX:1(a)
of the GATT 1994.  Turkey considers that, in a rapidly changing world, these types of events should
be considered as foreseeable developments, occurring as the state of economies differs from onecountry to another.  It was clear that the integration of the former Soviet Republics into world markets
would have some effects on the world economy.  The depreciation of the currencies of these republics
was the natural result of that integration.  The United States could have protected its industry against
competing steel products from these non-WTO countries by raising its tariff levels.  The effects of the
unforeseen developments alleged by the United States were not restricted to the market of the UnitedStates, and they were also not country specific and product specific.
4836
8.31 Turkey further argues that the United States has also violated its obligations under Article 2.1
of the Agreement on Safeguards by taking safeguard measures concerning rebar without
demonstrating a sharp, sudden and significant increase in rebar imports.  Based on Appellate Body
jurisprudence, the USITC's safeguard investigation had to establish that the increase in imports hasbeen recent enough, sudden enough, sharp enough, and significant enough both quantitatively and
qualitatively to cause or threaten to cause serious injury or threat thereof to the domestic industry.
The USITC's end-point-to-end-point comparison of the import figures of 1996 and 1998 with figures
of 2000 fails to evaluate the trend or general direction of recent imports and to provide that increases
in imports were recent, sudden, sharp and significant enough.  On the basis of the data contained in
the USITC Report, Turkey claims that the quantity of rebar imports declined in 2000 compared to
1999 and again in interim 2001 compared to interim 2000.  Therefore, according to Turkey, theUSITC's findings do not justify a determination that rebar is being imported at recently, sharply and
significantly increased quantities.  As a result, Turkey asserts that the United States has violated
Article XIX:1(a) of GATT 1994 and Articles  2.1 and 4.2(a) of Agreement on Safeguards.
4837
                                                     
4833 New Zealand's first written submission, para. 4.12
4834 Thailand's oral statement at the first substantive meeting, pp. 3-4.
4835 Thailand's oral statement at the first substantive meeting, p. 4.
4836 Turkey's third party submission, paras. 13-17.
4837 Turkey's third party submission, paras. 23-27.WT/DS248/R, WT/DS249/R,
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8.32 According to Turkey, the United States has further failed to provide an adequate and reasoned
explanation of the existence of serious injury and therefore violated Article 4.2(a) of the Agreement
on Safeguards.  The USITC based a number of its injury determinations (capacity utilization, averageunit values, productivity) on an end-point-to-en d-point comparison (1996 against 2000), which does
not give any information about the trends of the injury indicators over the investigation period.  The
USITC's conclusion is also contrary to its statistical evaluation which shows an increase of the
domestic rebar production, capacity, capacity utilization, employment, domestic demand and
domestic shipments.  Turkey submits that the problem facing rebar manufacturers is of a financial
nature (such as the massive increase in selling, general and administrative expenses) and cannot be
attributed to imports.  The USITC Report does not provide information regarding the aggregated sizeand production capacity of the companies taking different positions in response to the USITC's
questionnaire.  Turkey therefore concludes that the domestic rebar industry did not suffer serious
injury or threat of serious injury as stated in the USITC Report.
4838
8.33 Turkey further submits that by failing to demonstrate the existence of a causal link between
the serious injury and increased imports, the United States has violated Article 4.2(b) of theAgreement on Safeguards.  Turkey argues that the determination requires analysing the existence of a
coincidence between the trends of increased imports and injury indicators.  In addition, the United
States has failed to separate the effects of injury caused by other factors through a reasoned and
adequate explanation that injury caused by factors other than increased imports is not attributed to
allegedly increased imports.  Turkey observes that th e actual figures give information about the failure
of the United States' approach in the evaluation of a causal link between increase in imports and
serious injury.  There is no coincidence between the movements in imports and injury factors.  The
domestic rebar industry made substantial profits in spite of increases in imports between 1996 and
1999.  Imports increased in 1997 (by 21%), 1998 (by 75%) and 1999 (by 49%), but the domestic
industry had a positive operating income in each year.  The industry had an operating loss in 1996,which was the year of the lowest rebar imports during the period of investigation.  As rebar imports
declined in 2000, total profit of domestic producers declined dramatically.  Turkey asserts that the
price declines were in fact linked to falling co sts of raw materials.  Turkey submits that this
aforementioned information indicates that the USITC has failed to provide a detailed analysis
demonstrating the existence of a causal link.
4839
8.34 In Turkey's view, the United States has also failed to ensure that its safeguard measures on
rebar are applied only to the extent necessary to prevent or remedy serious injury caused by increased
imports and has therefore violated Articles 3.1 and 5.1 of the Agreement on Safeguards.  The USITC
has failed to tailor the measure by distinguishing and separating the injurious effects of other factors.
The United States also ignored the substantial degree of import protection already afforded by anti-
dumping or countervailing duty actions since 1997 ag ainst Turkey, Belarus, China, Indonesia, Korea,
Latvia, Moldova, Poland, and Ukraine.  The share and the trend of the share of these nine countries inthe total rebar imports show that these actions are highly effective in protecting the domestic rebar
industry against import competition.  The safeguard measures on certain steel products also violates
Articles 3.1 and 5.1 of the Agreement on Safeguards because, in the absence of an explanation, there
are dissimilarities between the USITC Report and the Presidential Proclamation in terms of the level
of protection provided.
4840
                                                     
4838 Turkey's third party submission, paras. 28-35.
4839 Turkey's third party submission, paras. 36-50.
4840 Turkey's third party submission, paras. 55-61.WT/DS248/R, WT/DS249/R,
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G. VENEZUELA
8.35 Venezuela claims that the safeguard measures imposed by the United States are incompatible
with the GATT 1994 and the Agreement on Safeguards because:
(a) the condition of unforeseen developments under Article XIX of the GATT 1994 has
not been fulfilled;
(b) with regard to many of the products subject to the investigation, there were no
increased imports, as required by Article 2.1 of the Agreement on Safeguards;
(c) an incorrect definition of the relevant domestic industries was used, according to that
stipulated in Articles 2.1, 4.2(a) and 4.1(c) of the Agreement on Safeguards;
(d) the relevant domestic industries did not suffer serious injury or the threat of serious
injury, as required by Articles 2 and 4.2(a) of the Agreement on Safeguards;
(e) the possible increase in imports has not caused or threatened to cause serious injury to
the domestic industry in the sense of Articles 2.1 and 4.2(b) of the Agreement on
Safeguards, in particular because the domestic industry did not suffer serious injury
and because the injury or threat of injury caused by other factors was attributed to
imports;
(f) the safeguard measures do not apply only to the extent necessary to prevent or
remedy serious injury, as required by Article 5.1 of the Agreement on Safeguards;
(g) there is no parallelism between the products alleged to have been imported in
increased quantities and the products subject to the safeguard measures;
(h) Article 9.1 of the Agreement on Safeguards has not been observed;(i) the report of the investigation and the other documents do not correctly establish the
findings and conclusions on all pertinent issues of law and of fact, including the
required justification of the safeguard measures ultimately applied, as required by
Article 3.1 of the Agreement on Safeguards.
4841
8.36 Venezuela further argues that no basis was shown for the exclusions of imports from Mexico,
Canada, Israel and Jordan from the measures.4842
8.37 Although Venezuela is a developing country and does not pose any commercial threat to the
steel industry of the United States, it was not taken into account for the exclusions, but its exports of
rebar are subject to the safeguard measures.  According to Venezuela, its inclusion among the origins
covered by the measures amounts to a violation of the following Articles of the Agreement on
Safeguards: Article 2.1 on increased imports; Article 2.2 on the application of the measure on
products irrespective of their origin; and Articles 3.1, 4, 5.1, 8.1, 9.1, 12.2 and 12.3 on the adequateopportunity for interested parties.
4843
                                                     
4841 Venezuela's third party submission, paras. 2-3.
4842 Venezuela's third party submission, para. 10.
4843 Venezuela's third party submission, paras. 11 and 15.WT/DS248/R, WT/DS249/R,
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8.38 Venezuela draws particular attention to Article 9.1 of the Agreement on Safeguards, under
which Venezuela should have been exempted from the application of the safeguard measures with
regard to rebar.  In June 2001, an anti-dumping investigation against Venezuelan imports wasterminated precisely because the Venezuelan particip ation in the imports to the United States turned
out to be "insignificant" under the Anti-Dumping and SCM Agreements.  Venezuela submits that,
indeed, in all the product categories subject to the present safeguard measures, imports from
Venezuela are insignificant, and therefore incapable of causing injury to the domestic industry of the
United States.  Venezuela also observes that sources of rebar with a significantly higher import
volume than Venezuela have been excluded from the measures at issue.
4844
8.39 Venezuela also argues that the United States failed to provide reasoned and adequate
explanations about how it made its determination on Article 9.1 of the Agreement on Safeguards and
about why Venezuelan rebar exports did not satisfy the conditions of that Article.  In 2001, imports
from developing country Members affected by the measure amounted to only 15%, with Venezuelan
exports representing 3.08%.  In addition, the majority of Venezuelan exports were destined for Puerto
Rico, a market not regularly supplied by producers from the United States.  Venezuela asserts that,thus, the measure does not really protect steel manufacturers in the United States but, rather, it unduly
penalizes Venezuelan exports, whose market share will go to third countries which have even
contributed more to the rebar imports during the period of investigation.  While Venezuela has been a
reliable supplier of the United States' market, its rebar exporters have always been careful not to cause
injury to the domestic industry.  Since sales to the United States have represented over 50% ofVenezuelan rebar exports, the current safeguard measures have the potential to reduce the exports of
rebar very significantly, to cut the revenue of the Venezuelan industry and to increase idle capacity.
Venezuela states that it hopes that the Panel will r ecommend that the DSB request the United States to
abolish its safeguard measures, as required by the WTO Agreement.
4845
IX. INTERIM REVIEW
9.1 On 6 February 2003, pursuant to Article 15.1 of the DSU, Article 16 of the Panel's working
procedures and the revised timetable at paragraph 3(h), the Panel issued a single draft Descriptive Part
for its Reports.  Pursuant to the revised timetable, on 19 February 2003, the parties provided their
comments on the draft Descriptive Part.  The Panel issued its Interim Report on 27 March 2003.  On
9 April 2003, pursuant to Article 15.2 of the DSU, Article 16 of the Panel's working procedures andthe revised timetable at paragraphs 3(j) and (k), the parties provided their comments on the Interim
Report.  None of the parties requested that the Panel hold a further meeting with the parties to review
part(s) of the Panel's Reports.  Pursuant to the revised timetable at paragraph 3(l), on 16 April 2003,
the parties submitted further written comments on the comments that had already been provided on
the Panel's Interim Reports on 9 April 2003.
9.2 Pursuant to Article 15.3 of the DSU, this section of the Panel's Reports contains the Panel's
response to the comments made by the parties in relation to both the draft Descriptive Part and theInterim Reports, and forms part of the Findings of the Panel's Reports.
A. D
ESCRIPTIVE PART
9.3 With respect to the draft Descriptive Part, th e Panel reviewed all comments made by the
parties on 19 February 2003.  The complainants provided additional comments on the draft
Descriptive Part in their comments of 9 April 2003 and 16 April 2003 on the Interim Findings.  A
                                                     
4844 Venezuela's third party submission, paras. 15-16.
4845 Venezuela's third party submission, paras. 17-18.WT/DS248/R, WT/DS249/R,
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number of the comments made by the parties suggested insertion of text of the parties' submissions.
The Panel accepted all such suggestions except those for which sources for such text were not
indicated by the parties in their comments and could not be located by the Panel.  A number of thecomments made by the parties suggested insertion of footnote references or changes to the existing
footnote references.  These suggestions were largely accepted except those which the Panel
considered to be erroneous or in cases where the Panel considered that the suggested footnote did not
support the text to which the footnote related.  Some of the comments contained suggested changes to,
or insertions of, headings in the draft Descriptive Part.  Again, the Panel accepted these suggestions
unless it considered that the insertions or changes were not appropriate. The parties suggested re-
ordering of the text in a number of sections of the draft Descriptive Part.  The Panel accepted thesechanges where it considered it appropriate.  Finally, the parties also suggested corrections to
typographical and editorial errors which were accepted by the Panel.  The Panel also made additional
typographical and editorial changes to the Descriptive Part.  Finally, the Panel recalls that in its cover
letter dated 19 February 2003 attaching comments on the draft Descriptive Part, the complainants
noted that they "have not insisted on systematically a ssuring that every argument is attributed to every
complainant who made it (often in rather differ ent contexts).  The important point is that the
arguments be present somewhere in the common descriptive part."  We note, in this regard, in the
Descriptive Part for our Reports, we made reference to specific complainants when indicating
arguments that had been advanced.  This was done not to attribute the argumentation exclusively to
the identified complainants but, rather, to facilitate  the review of the Descriptive Part by the parties.
B. P
ANEL 'S FINDINGS AND CONCLUSIONS
9.4 In addition to comments on the draft Descriptive Part, the parties' provided comments on the
Panel's findings and conclusions in their comments of 9 April 2003 and 16 April 2003.  In summary,
the parties' comments can be divided into a number of categories, which have been listed and dealt
with below.
1. Typographical and editorial changes
9.5 The parties have suggested a number of editorial changes to the Panel's Interim Reports and
corrections of typographical errors.  The Panel has accepted all of these suggestions (sometimes with
some minor additional amendments), except those for which the suggested changes appear to be
erroneous (for example, in cases where a change has been suggested to a footnote reference but thesource to which that reference pertains does not support the relevant text).  The Panel notes in this
regard that it has amended cross-references to the Descriptive Part of its Reports as well as cross-
references within the section of the Panel's Reports containing its findings.  The Panel has also
corrected other typographical errors and made some additional editorial changes.  The suggestions for
editorial changes made by the parties that have been accepted by the Panel include those pertaining to
paragraphs 10.1, 10.18, 10.20, 10.131, 10.370, 10.398, 10.444, 10.702 and 10.711 of the Panel's
Interim Reports.
2. Graphs generated by the Panel and the data used as basis for graphs
9.6 With respect to graphs that were generated by the Panel on the basis of USITC data and
which are contained in its Reports, the Panel notes that, at the suggestion of the complainants, it has
included footnote references indicating the source(s) of data used for all such graphs.  It has also
clarified the units for the productivity graphs that are contained in the Panel's findings on causation.The United States noted that the productivity graph following paragraph 10.367 of the Panel's Interim
Reports reflected incorrect data.  The Panel has re-generated this graph using the correct productivity
data.WT/DS248/R, WT/DS249/R,
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3. Ways in which facts and parties' arguments are reported
9.7 A number of the comments made by the parties suggested changes to the way in which the
facts, the parties' arguments and the USITC's findings had been reported in the Reports.
9.8 In particular, the parties suggested changes to paragraph 10.1 of the Panel's Interim Reports to
clarify that the DSB did not establish five differen t panels that were conducted through a single panel
process but, rather, it accepted eight requests for the establishment of a panel and referred them all to
a single panel pursuant to Article 9.1 of the DSU.  The complainants also argued that
paragraph 10.213 of the Panel's Interim Reports should be modified so as to fully reflect the European
Communities' arguments that there had not been an adequate explanation by the USITC for a
sufficient increase in imports of cold-finished bar.  China also requested clarification ofparagraph 10.157 of the Panel's Interim Reports to make it clear that China has not challenged the
USITC's choice of a five-year period of investigation per se.   The Panel has accepted, at least
partially, these suggested amendments and revised its findings accordingly.
9.9 The United States requested amendment to paragraph 10.357 of the Panel's Interim Reports to
make it clear that the USITC findings that had been excerpted in that paragraph were not complete(although they had been cited elsewhere in the Panel's causation findings).  The Panel has accepted
this suggestion and made all the necessary conseque ntial changes to accommodate this request.  The
United States also requested changes to paragraphs 10.639 and 10.676 of the Panel's Interim Reports
to ensure that they correctly reflect the USITC findings.  These suggested changes were accepted by
the Panel and we have revised our findings accordingly.
4. Clarifications of certain aspects of the Interim Findings
9.10 The parties have also made suggestions to clarify certain aspects of the Interim Reports.
9.11 In particular, the Panel agreed with the complainants that the Panel's increased imports
finding for "welded pipe" is without prejudice to th e question of the product definition.  However, the
Panel rejected the complainants' requests that paragraph 10.595 of the Panel's Interim Reports beamended and agreed with the United States that the pre-existing order of the Panel's findings was
logical.
9.12 The Panel also accepted the United States' request in relation to paragraphs 10.291-10.292 of
the Panel's Interim Reports to make it clear that it was the Panel and not the USITC that characterized
the USITC's causation analysis as a "coincidence" or "conditions of competition" analysis.  Inrequesting this amendment, the United States noted that the USITC does not segregate its causal link
analysis into two forms of analysis – that is, a "coincidence" analysis or a "conditions of competition"
analysis.  In accepting the suggestion made by the United States, the Panel notes that it considered it
necessary to develop an analytical framework to assess the USITC's findings on causal link for each
of the safeguard measures for the following reasons.  First, the Agreement on Safeguards does not
prescribe how causal link should be demonstrated.  At the same time, WTO jurisprudence indicates
that coincidence is central to a causation analysis.  In this regard, a number of complainants haveargued that the failure by the USITC to undertake a coincidence analysis in relation to some of the
safeguard measures was fatal.  Finally, the Panel is of the view that tools other than a coincidence
analysis, such as a conditions of competition analysis, could be used to establish or support causal link
findings under Article 4.2(b) of the Agreement on Sa feguards.  The analytical framework developed
in paragraphs 10.306-10.308 takes the above-mentioned consideration into account.WT/DS248/R, WT/DS249/R,
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9.13 The Panel notes that the United States has requested a number of additional changes in the
Panel's measure-by-measure analysis to reflect the fact that the Panel, rather than the USITC,
categorized the USITC analysis as a coincidence or conditions of competition analysis.  In light of thePanel's changes to paragraphs 10.291 and 10.292 of the Panel's Interim Reports, the Panel does not
consider that the majority of these additional changes are necessary.  However, in its measure-by-
measure analysis, the Panel has, despite the changes made to paragraphs 10.291 and 10.292 of the
Panel's Interim Reports , made the additional changes where confusion might exist.
9.14 In addition, the United States notes that in paragraph 10.375 of the Panel's Interim Reports,
the Panel states that the sources for domestic and import average values for CCFRS are unclear.  The
United States has in its review comments provided clarification of the source for these values.  On thebasis of this clarification, the Panel has deleted its statement that the source for such data is unclear,
despite arguments by the complainants in their comments of 16 April 2003 of the continuing lack of
clarity concerning the source for such data.  Nevertheless, in light of the United States' explanation of
the basis for calculation of the average unit values for domestic CCFRS together with comments made
by the United States in relation to paragraph 10.421 of the Panel's Interim Reports dealing with therelevance of the product definition of CCFRS in th e context of the USITC's causation analysis, the
Panel has added to what was paragraph 10.375 of its Interim Reports to note the difficulties associated
with the aggregation of data by the USITC, which were acknowledged by the USITC itself in its
Report.
9.15 Linked to the comments made by the United St ates regarding the availability of data in the
USITC report on CCFRS as a single product, the Un ited States argues that paragraph 10.421 of the
Panel's Interim Reports mistakenly states that "on a number of occasions, the USITC failed to produce
necessary data for CCFRS as a whole and/or it re lied upon data for the items that comprised CCFRS
rather than for CCFRS without explaining why and how such specific data on such items related to
the determination concerning CCFRS as a whole".  In  light of the data that was pointed to by the
United States above in relation to paragraph 10.375 of the Panel's Interim Reports, the Panel has made
the necessary changes to paragraph 10.421 of the Interim Reports.
9.16 The United States has also requested, in relation to paragraph 10.421 of the Panel's Interim
Reports, that the Panel confirm that in its view the USITC's exclusive reliance upon sub-category data
and failure to produce or consider aggregate data was the sole basis for the Panel to conclude that the
USITC admitted that CCFRS could not be subjected to the application of the causation requirement
and that that, in turn,it was also the sole basis for the Panel to conclude that the CCFRS grouping is
inconsistent with the requirements of Article 4.2( b) of the Agreement on Safeguards.  The Panel has
clarified paragraph 10.421 of the Panel's Interim Reports. As stated, there were a number  of bases
upon which the Panel considered that the product definition for CCFRS was such that it could not
properly be subjected to the requirements of Arti cle 4.2(b) of the Agreement on Safeguards. In this
regard, the Panel notes that the clarificatory amendments that have been made by the Panel to theparagraph take account of the concerns raised by the complainants in their comments of 16 April
2003.  The Panel has also taken into account the United States' comment that the conclusion of
violation with Article 4.2(b) on the basis of the product definition of CCFRS is not necessary to the
Panel's overall conclusions on causation with respect to CCFRS.
9.17 The United States has made a number of comments that essentially request clarification of the
distinction between "average unit values" and "prices".  In particular, the United States has requested
the Panel to modify the language contained in paragraph 10.432 of the Panel's Interim Reports and the
accompanying graph to make it clear that the Panel is referencing "average unit values" rather than
"prices".  Similar requests were made by the United States in relation to paragraphs 10.456, 10.477
and 10.521 of the Panel's Interim Reports  and their accompanying graphs.  The Panel has made theWT/DS248/R, WT/DS249/R,
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requested changes.  In addition, the Panel has amended the Reports to make it clear that in reviewing
pricing analyses undertaken by the USITC as part of its causal link analysis, the Panel treated unit
values as a proxy for prices.  As noted in our findings below, we consider that this is acceptable giventhat this is apparently what the USITC itself did.  Further, we understand that price trends mirror unit
value trends.  As a related point which appears to be raised by the requests for amendments made by
the United States, in our reports, we do not consider  that any distinction exists between "unit values"
on the one hand and "average unit values" on the other hand.  More particularly, in the context of this
case, we consider that unit values for a particular year are implicitly averages.
9.18 The complainants requested the Panel to clarify that it did not find that there was any USITC
determination other than that made on 22 October 2001 and that the Supplementary Reports were onlypart of the explanation of that determination.  The Panel agrees that, for each imported product, the
USITC made, on 22 October 2001, one determination for the purposes of Articles 2 and 4 of the
Agreement on Safeguards.  However, the Panel is of the view that the requirement to demonstrate the
cirumstances of unforeseen developments pursuant to Article XIX of GATT 1994 is additional to the
requirement to provide a determination indicating compliance with the conditions of Articles 2 and 4of the Agreement on Safeguards.  Indeed, the Panel notes that none of the complainants have claimed
that the requirement to demonstrate unforeseen developments is one of the conditions for imposition
of a safeguard measure pursuant to Articles 2 and 4 of the Agreement on Safeguards.
4846  The WTO
jurisprudence explictly states that the WTO pre-requisites for the imposition of a WTO-compatible
safeguard include both the factual demonstration of unforeseen developments pursuant to Article XIXof GATT 1994 and the determination that the condit ions of Articles 2 and 4 of the Agreement on
Safeguards have been fulfilled.
4847  A coherent, reasoned and adequate explanation that all such
requirements have been respected must be included in the report of the competent authority, as
required by Article 3.1 of the Agreement on Safeguards and before a safeguard measure is applied.
9.19 The Panel has also clarified other aspects of its Interim Findings, including paragraphs 10.13,
10.17, 10.29, 10.48, 10.74 (footnote 4924), 10.122, 10.132, 10.143, 10.148, 10.149, 10.406-10.411,
10.419, 10.445, 10.448, 10.471, 10.489, 10.505, 10.538, 10.567, 10.617, 10.623, 10.630, 10.641 and
10.668.
5. The Panel's appraisal of the parties' arguments and facts
9.20 The United States has challenged the Panel's appraisal of arguments and facts in relation to a
number of the measures at issue.  In particular, the United States challenges the basis for the Panel's
conclusions in paragraph 10.401 of the Panel's Interim Reports arguing that the USITC did not state
that legacy costs had caused any of the declines  in the condition of the CCFRS industry during the
period of investigation because legacy costs actually declined during the period of investigation.  The
United States continues by arguing that the fact that legacy costs had been a burden on the industry
prior to the period of investigation or that they might present difficulties to the industry in the future
says nothing about whether legacy costs caused declines in the industry's condition during the periodof investigation.  On the basis of the foregoing, the United States requests the Panel to remove its
finding that the USITC's analysis of legacy costs failed to establish that the injury caused by this
factor together with other factors was not attributed to increased imports.  The complainants oppose
this request.
                                                     
4846 None of the complainants have suggested that the basis for their unforeseen developments claims
were found in Articles 2 or 4 of the Agreement on Safeguards.  See in this regard the content of thecomplainants' requests for establishment of a panel in Articles 3.1 to 3.8 of the Descriptive Part.
4847 Appellate Body Report, US – Lamb , para. 72.WT/DS248/R, WT/DS249/R,
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9.21 The Panel has decided to reject the United States' requested amendment.  The Panel has
reviewed the USITC's findings and the arguments made in relation to legacy costs and remains of the
view that the USITC failed to ensure that injury caused by legacy costs, together with other factors,was not attributed to increased imports when assessing whether increased imports of CCFRS were
causing injury to the relevant domestic producers.  However, in light of comments made by the
United States in this regard, the Panel has elaborated upon its findings to highlight the absence of an
adequate explanation by the USITC and to emphasize that the mere fact that the issue of legacy costs
pre-dated the period of investigation and may have decreased during the period of investigation does
not necessarily mean that they did not play a role in causing injury to the domestic industry.
9.22 The United States has also challenged the Panel's conclusion in paragraph 10.440 of the
Panel's Interim Reports that the USITC acknowledged that inefficient producers were a possible cause
of injury to the hot-rolled bar industry.  In light of the United States' comments, the Panel has
reviewed the USITC's findings and the claims and arguments made by the parties on this issue and
has revised its findings to reflect its agreement with the United States.  Necessary consequential
changes have also been made to our Reports.
9.23 With respect to paragraph 10.455 of the Panel's Interim Reports, the United States argues that
there is no basis for the Panel to be unclear regarding the USITC's reasons for using quarterly data for
individual cold-finished bar products when average data was available.  The United States points in
this regard to note 627 on page 105 of the USITC Report.  The Panel has examined the cited note and
is of the view that it relates to the relative merits of pricing data for specific products within the cold-
finished bar product category.  The Panel does not consider that this note contains a discussion of the
relative merits of quarterly versus (annual) average unit values and, therefore, does not provide any
justification for the use of quarterly data by the USITC in the absence of a reasoned and adequate
explanation as to why the available annual data had not been used on this occasion while such data
had been used for a number of the other measures at issue.  We note that the quarterly data uponwhich the USITC relied suggested underselling whereas the annual average data did not.
9.24 The United States has also challenged the Panel's review of the USITC's assessment of
domestic capacity increases for FFTJ contained in paragraph 10.527 of the Panel's Interim Reports.
As a first point, the United States argues that the Panel misunderstood the reference to "substantial" to
mean "enormous" when interpreting the USITC co mment that "the increase in capacity would not be
expected to place substantial pressure on domestic prices".  The Panel was under no such
misunderstanding.  The USITC Report indicates that downward pressure was exerted by capacity on
prices, however one interprets "substantial".  The Pane l is of the view that all relevant "other factors"
– even those with limited injurious effects on the domestic industry – must be, together with other
relevant factors, identified, distinguished and assessed with a view to reaching an overall conclusion
on whether or not increased imports had a genuine and substantial relationship of cause and effect
with the injury suffered by the relevant domestic industry.
9.25 The United States also requested the Panel to explain why it concluded that the USITC
acknowledged that domestic capacity increases played a role in causing the injury that was suffered
by the domestic industry.  The Panel notes that in paragraphs 10.527-10.531 of the Panel's Interim
Reports, it explained why it considered that the USITC conceded that increases in capacity lead, at
least in part, to downward pressure on domestic prices which, in turn, impacted upon the state of thedomestic industry.
9.26 The United States has also requested the Panel to revise its findings in paragraphs 10.559 and
10.563 of the Interim Reports that the USITC could have provided a reasoned and adequate non-
attribution analysis for demand declines by explaining that operating margin declined irrespective ofWT/DS248/R, WT/DS249/R,
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demand trends.  In making this request, the United States submits that the very analysis sought by the
Panel was provided on page 212 of the USITC Report.  The Panel has considered the mentioned page
of the USITC report and is of the view that it confirms the Panel's conclusion, which is challenged bythe United States.  The relevant page states clearly that demand declined in late 2000 and interim
2001  whereas substantial declines in the situation of the domestic industry occurred prior to 2000 and
2001 .  The fact that injury occurred prior to the point at which a factor comes into play does not
detract from the conclusion that the factor may still play a role in causing injury beyond that point in
time.  We have elaborated our findings to make this clear.
6. Omissions
9.27 The parties have also raised what they consider to be omissions from the Panel's Interim
Reports.  The Panel agreed with the following suggestions made by the parties.  The complainants
requested elaboration of paragraph 10.370 of the Panel's Interim Reports to correctly sum up all the
reasons why the Panel considered the USITC's finding to be inadequate.  The complainants also
suggested that the Panel's Interim Reports should indicate that the Panel did not consider it necessary
to specifically address the argument made by a number of complainants that a gap between the rangeof products for which increased imports and serious injury were allegedly found and those on which
safeguard measures were finally imposed also constituted a violation of the principle of parallelism.
9.28 However, there were a number of instances where the Panel did not agree either fully or
partly that an omission existed and, in those circ umstances, declined to make any amendment or, at
least, declined to make the requested amendment.  In particular, in their comments, the complainants
note that Japan had included a claim under Article XIX:1 of GATT 1994 concerning the United
States' failure to abide by the increased imports, causation and parallelism standards.  The
complainants further noted that although the Panel addressed this claim in its findings on increased
imports, it failed to include a reference to Article XIX in its summary findings on increased imports.
According to the complainants, nor did the Panel address this claim in its findings on causation andparallelism.  The United States did not agree with the complainants' comments in this regard.
9.29 The Panel is well aware of the claims made by Japan and other complainants under
Article XIX of GATT 1994.  However, the Panel does not consider that a specific finding on
Article XIX in relation to increased imports , causation and parallelism would enhance the
complainants' rights .   The Panel notes that Article XIX was not much argued by most parties otherthan in the context of unforeseen developments.  Accordingly, the Panel has decided to reject the
request made by the complainants to add a reference to Article XIX in its findings on causation and
parallelism.  In addition, the Panel does not consider that a reference to Article XIX is necessary in
relation to its findings on increased imports.  Accordingly, consistent with its approach in relation to
the other sections of its Reports, the Panel has revised its findings on increased imports to remove
references to Article XIX.  In  our view, the removal of such references will not in any way diminish
the complainants' rights with reference to their claims on increased imports in the present dispute.
9.30 Similarly, the complainants note that Japan and Norway included a claim under Article 4.2(c)
of the Agreement on Safeguards concerning the US decision-making process for tin mill products and
stainless wire products.  The complainants note that although this claim is a part of the Panel's
findings on causation, Article 4.2(c) is not listed  in the summary findings on causation.  They also
argue that the Article 4.2(c) claim should also have been addressed by the Panel in its findings onincreased imports.  They argue that given that the Panel found a violation of Article 3.1 with respect
to increased imports for tin mill products and stainless steel wire, a violation of Article 4.2(c) should
have been found to exist.  The United States did not agree with the complainants' comments in this
regard.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 696
9.31 With respect to the first point, namely whether a finding of violation of Article 4.2(c) is
necessary in relation to the issue of causation, the Panel considers that such a reference would not
enhance the complainants' rights.  In addition, the Panel observes that Article 4.2(c) was notextensively addressed by the parties as a discrete basis for violation of the causation requirements.
Accordingly, consistent with its approach in relation to the other sections of its Reports, the Panel has
revised its findings on causation to remove references to Article 4.2(c) in its discussion on the claims
of violation of the causation requirements for tin mill products and stainless steel wire.  In our view,
the removal of such references will not diminish the parties' rights with regard to causation matters in
the present dispute.
9.32 As for the second point, the Panel agrees that certain parallels can be drawn between
Article 4.2(c) and Article 3.1 of the Agreement on Safeguards.  However, the Panel does not consider
that an additional reference to Article 4.2(c) in relation to the Panel's findings on increased imports or
causation would enhance the complainants' rights.  Accordingly, the Panel has decided to reject the
suggestion made by the complainants to add a reference to Article 4.2(c) to its summary findings on
causation and in its findings on increased imports for tin mill products and stainless steel wire.
7. Confidentialization of data
9.33 The United States has raised a number of concerns regarding comments made by the Panel in
its Interim Reports in relation to the confidentialization of data.  The Panel agrees that, in some
circumstances, Members have the obligation to confidentialize certain information and this obligation
should not reduce Members' right to take safeguard actions.  The Panel also accepts that the UnitedStates should not be held responsible for having confidentialized certain data.  To the extent that a
reasoned and adequate alternative means of supporting its conclusions were provided by the USITC,
the Panel has made the necessary changes to paragraph 10.455 (dealing with cold-finished bar),
paragraph 10.552 (dealing with stainless steel bar) and 10.577 and 10.583 (dealing with stainless steel
rod) of the Panel's Interim Reports.
9.34 With respect to paragraph 10.455 of the Panel's Interim Reports, the United States challenges
the Panel's statement that "difficulties with data call into question whether 'underselling' actually
existed" on the basis, inter alia , that the Panel had questioned the confidentialization of certain
relevant data. We have reviewed our findings in light of our comments above with respect to data or
information that can be used in substitution for re dacted data.  Nevertheless, the Panel maintains its
findings in this regard with respect to cold-fin ished bar in light of the absence of explanation
regarding the data relied upon by the USITC, which calls into question whether "underselling"
actually existed.
4848
9.35 With respect to paragraph 10.552 of the Panel's Interim Reports (dealing with stainless steel
bar) which states that the Panel was unable to assess whether significant import underselling occurred
during the period of investigation due to the confidentialization of relevant information, the United
States notes that while domestic prices were redacted from the price comparisons contained in anumber of tables to which the Panel had referred, the USITC Report contained another table, Table
STAINLESS-99, in which it summarized the instances of underselling by Canadian, Mexican and
non-NAFTA imports.
9.36 The Panel has examined that table and considers that it is sufficient to indicate that import
underselling occurred.  In particular, as indicated in our revised findings, Table STAINLESS-99refers to 40 instances of underselling by non-NAFTA imports and provides a range of the margins of
                                                     
4848 See para. 9.23 above.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 697
underselling of 0.1 to 51.8 % that applied for all of those instances.  As indicated in our findings, this
fact – that there were 40 instances of underselling by non-NAFTA imports – has not been contested
by the complainants and we consider that it is contrary to our standard of review to reassess thequality of this evidence in the absence of any prima facie challenge.  In our view, although relevant
data was redacted from the USITC Report, the USITC nevertheless provided alternative information
that sought to substitute the redacted data.  We have revised our findings accordingly to reflect our
conclusions in this regard.
9.37 The United States has challenged the basis for the Panel's comments in paragraphs
10.578-10.579 of the Panel's Interim Reports that the USITC's analysis with respect to stainless steel
rod does not contain any comparison between import and domestic prices.  The United States pointsto note 1419 on page 220 of the USITC Report together with Table STAINLESS-100 and Table
STAINLESS-C-5 to indicate that such a price comparison was undertaken.  While Table
STAINLESS-C-5 does not contain any public data, the Panel accepts that Table STAINLESS-100
does contain relevant information and has revised its findings accordingly.
9.38 The complainants have also suggested that paragraph 10.559 of the Interim Reports be
amended to indicate that, when information has been confidentialized, in order for an explanation to
be reasoned and adequate, there should be an indication of the applicable trends sufficient to
substantiate the investigating authority's findings.  As discussed in paragraphs 10.272-10.275 of our
findings, we consider that, in some circumstances, Members have the obligation pursuant to
Article 3.2 of the Agreement on Safeguards to confidentialize certain information although they canbase their determination on such confidentialized information.  Such an obligation should not reduce
Members' rights to take safeguard actions.  In cases where information has been confidentialized, the
Panel has examined whether the competent authority provided a reasoned and adequate explanation
through means other than full disclosure of that data.  In our view, trends derived from data that has
been redacted may provide sufficient evidence that the relevant explanation is reasoned and adequate.However, the Panel considers that trends are not the only way in which to support allegations based
upon confidentialized data.
8. Request for separate panel reports
9.39 With regard to the United States' request for separate panel reports, the United States
requested the Panel to clarify in paragraph 10.728 of the Interim Reports its statement that theissuance of a single consolidated Descriptive Part  reflected the fact that "each of the complainants
relied upon arguments made and evidence adduced by other complainants in relation to their
respective claims ...".  According to the United States, this statement could mistakenly be read to
entitle a complainant to rely on another Member's arguments and evidence in order to satisfy that
complaining party's burden of proof.
9.40 The Panel agrees with the United States th at a complaining party bears the burden of
establishing a prima facie case for each of the claims it makes and it may not rely on the othercomplaining parties to make its prima facie case, if they had litigated their respective disputes
independently.  The Panel recalls that the complainants made common claims for all measures and all
these common claims are properly before the Panel.  The Panel notes that in the present dispute, with
the apparent agreement of the United States, the co-complainants referred to and relied upon each
other's arguments and demonstrations and explicitly stated as much.
4849  From the initiation of the
                                                     
4849 See for example, European Communities' first written submission, paras. 16-17;  Switzerland's first
written submission, para. 10; Norway's first written submission, para. 8;  Brazil's first written submission,para. 3; New Zealand's first written submission, para. 1.5;  China's first written submission, para. 8; Japan's firstWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 698
panel process, parties have recognized4850 that the complainants would act together on some common
claims and the United States would respond to such common claims while responding as well to
claims specific to some of the complainants.  Th e complainants often cross-referenced each others'
written submissions, they coordinated their presentations to the Panel and divided among themselves
the argumentation on common claims, often explicitly stating that they were speaking on behalf of all
complainants.  The complainants submitted common comments on the Descriptive Part, common
comments on the Interim Findings as well as a common response to the United States' comments on
the Interim Findings.  At all these stages, the United States provided one response addressing
collectively the arguments made by the complainants.  We are aware that Panels are not entitled to
make the case for the complainants.4851  WTO jurisprudence recognizes that panels may, after an
assessment of the evidence and argumentation made by complainants, reach a conclusion as to
whether, overall, the complainants made their prima facie case.4852  We believe that in the present
case, each of the complainants has made a prima facie case that the safeguard measures at issue were
inconsistent with the WTO provisions listed in our Recommendations, through their own and with
each other's demonstration.  We have revised our findings to clarify this point.
9. Release of the confidential Interim Reports
9.41 Finally, we would like to address the issue of confidentiality of the Interim Reports.  When,
on 26 March 2002, we transmitted our Interim Reports to the parties, we clearly indicated that such
Reports were confidential.  Indeed, pursuant to the DSU, all panel proceedings remain confidential
until the Panel Report is circulated to WTO Members.  We had also explicitly emphasized at all ourmeetings with the parties that the panel proceedin gs were confidential.  This was accepted by the
parties and reflected in the Panel's working procedures and in all our relevant correspondance with the
parties.  Therefore, we are concerned to discover that parties have not respected this confidentiality
obligation and have disclosed aspects of the Panel's Interim Reports.  We consider that this lack of
respect of a specific requirement imposed by the DSU and the Panel's working procedures isregrettable and should not remain unmentioned.
X. FINDINGS
A. 
INTRODUCTION
1. Panel's terms of reference – a single panel established
10.1 In accordance with Article 6 of the DSU, eight requests for the establishment of a panel were
filed with the DSB in relation to the present dispute.  The DSB accepted these requests and, pursuant
to Article 9, we were ultimately given the mandate to examine the eight requests for the establishment
of a panel, through a single panel process.4853
                                                                                                                                                                    
written submission, para. 5; Korea's first written submission, para. 7.  Throughout their written and oral
submissions the complainants refered to each other's alle gations and arguments.  See also the oral statements of
the complainants (before the Panel) stating that each of the comlainant was speaking on a specific matter onbehalf of the other complainants.
4850 See para. 5 of the Panel's working procedures quoted in para. 6.1 of the Descriptive Part
4851 Appellate Body Report, Japan – Agricultural Products II , paras. 126-130.
4852 Appellate Body Report, Korea – Dairy , para. 145.  The Appellate Body confirmed this view in
Thailand – H-Beams , para. 134.  See also the Panel Report, Argentina – Poultry Anti-Dumping Duties ,
para. 7.50.
4853 The first panel request (European Communities – WT/DS248/6) was accepted on 3 June 2002; the
second and third (Japan – WT/DS249/6;  Korea – WT/DS251/7) on 14 June 2002 the fourth, fifth and sixthWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 699
10.2 On 29 July 2002, the Panel met with the parties for its organizational meeting.  On 31 July
2002, the Panel wrote to the parties issuing some preliminary and organizational rulings including its
timetable and working procedures.4854  The Panel notes, at this early stage, that its Working
Procedures do not make reference to a "single" or "multiple" panel report(s).  The working procedures
refer to "interim report" (in paragraph 16).  The timetable only refers to various aspects of the "report"
(again in singular) in paragraphs 3(h), (i), (m) and (n) of the timetable.  The timetable as well as the
size and content of the executive summaries of the United States reflected the fact that the United
States would have to reply to common claims and claims specific to some of the complainants.
10.3 The Panel met with the parties for the first substantive meeting on 29, 30 and 31 October
2002.  With a view to ensuring an efficient process fo r this single panel, the complainants coordinated
their oral presentations.  The Panel met with the parties for the second substantive meeting on 10, 11
and 12 December 2002;  once again the complainants coordinated their presentations to the Panel.
Numerous questions to the parties were asked by the Panel and the parties.  The complainants often
responded individually to the Panel's and the United States' questions.  On 28 January 2003, the
United States requested the issuance of separate panel reports instead of a single report.  We addressthe United States' request in paragraphs 10.716 ff.
2. Claims
10.4 The complainants claim that the United States' safeguard measures do not satisfy the WTO
prerequisites for taking such action, including those mentioned in Articles 2, 3, 4, 5, 7, 8, 9 and 12 of
the Agreement on Safeguards and Articles X and XIX of GATT 1994.  All complainants arechallenging all safeguard measures but not all their claims are the same.  All complainants have raised
some common claims in respect of all of the measures.  Some complainants have raised specific
claims in respect of all or some of the measures.  The detailed claims of the complainants are listed in
Section III supra .
3. The measures at issue
10.5 By Proclamation No. 7529 of 5 March 2002, bearing the title "To Facilitate Positive
Adjustment to Competition from Imports of Ce rtain Steel Products", accompanied by a Memorandum
for the Secretary of Treasury, the Secretary of Commerce and the USTR, the US President imposed
on 20 March 2002 definitive safeguard measures on imports of the following steel products:
4855
– A tariff of 30% imposed on imports of "Certain Flat Steel other than Slabs", that is:  (i)
Plate4856;  (ii) Hot-Rolled Steel4857;  (iii) Cold-Rolled Steel4858;  (iv) Coated Steel.4859
                                                                                                                                                                    
(China – WT/DS252/5;  Switzerland – WT/DS253/5;  Norway – WT/DS254/5) on 24 June, the seventh (New
Zealand – WT/DS258/9) on 8 July and finally the eighth (Brazil – WT/DS/259/10) on 29 July 2002.  Thecontent of the panel requests can be found in paras. 3.1 to 3.8 of the Descritive Part.  See also the followingminutes of the DSB:  WT/DSB/M/125, WT/DSB/M/127, WT/DSB/M/128, WT/DSB/M/129 and
WT/DSB/M/130.
4854 The Panel's working procedures are contained in para. 6.1 of the Descriptive Part of the present
Reports.
4855 Proclamation No. 7529 of 5 March 2002, "To Facilitate Positive Adjustment to Competition from
Imports of Certain Steel Products", Federal Register, Vol. 67, No. 45, 7 March 2002, p. 10553; Memorandumfor the Secretary of Treasury, the Secretary of Commerce and the USTR of 5 March 2002 on the "Action Under
Section 203 of the Trade Act of 1974 Concerning Certain Steel Products by the President of the United States of
America", Federal Register Vol. 67, No. 45 of 7 March 2002, p. 10593, Exhibit CC-13.
4856 As defined in the superior text to subheadings 9903.72.50 through 9903.72.60 in the Annex to the
Proclamation.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 700
A tariff rate quota on the fifth product of the product group "Certain Flat Steel", that is
Slabs.4860  The out-of-quota tariff (applicable beyond 5.4 million short tons) is 30%.
– A tariff of 30% imposed on imports of tin mill products4861;
– A tariff of 30% imposed on imports of hot-rolled bar4862;
– A tariff of 30% imposed on imports of cold-finished bar4863;
– A tariff of 15% imposed on imports of rebar4864;
– A tariff of 15% imposed on imports of certain tubular products4865;
– A tariff of 13% imposed on imports of carbon and alloy fittings and flanges4866;
– A tariff of 15% imposed on imports of stainless steel bar4867;
– A tariff of 8% imposed on imports of stainless steel wire4868;
– A tariff of 15% imposed on imports of stainless steel rod.4869
10.6 From its examination of the complainants' requests for establishment of a panel, the Panel
notes first, that all complainants have challenged all the safeguard measures imposed by the United
States pursuant to Proclamation No. 7529 of 5 March 2002.  The Panel also notes that thecomplainants are challenging the application  of the United States' safeguard measures but none of the
                                                                                                                                                                    
4857 As defined in the superior text to subheadings 9903.72.62 through 9903.72.77 in the Annex to the
Proclamation.
4858 As defined in the superior text to subheadings 9903.72.80 through 9903.72.98 in the Annex to the
Proclamation.
4859 As defined in the superior text to subheadings 9903.72.99 through 9903.73.14 in the Annex to the
Proclamation.
4860 As defined in the superior text to subheadings 9903.72.30 through 9903.72.48 in the Annex to the
Proclamation.
4861 As defined in the superior text to subheadings 9903.73.15 through 9903.73.27 in the Annex to the
Proclamation.
4862 As defined in the superior text to subheadings 9903.73.28 through 9903.73.38 in the Annex to the
Proclamation.
4863 As defined in the superior text to subheadings 9903.73.39 through 9903.73.44 in the Annex to the
Proclamation.
4864 As defined in the superior text to subheadings 9903.73.45 through 9903.73.50 in the Annex to the
Proclamation.
4865 As defined in the superior text to subheadings 9903.73.51 through 9903.73.62 in the Annex to the
Proclamation.
4866 As defined in the superior text to subheadings 9903.73.66 through 9903.73.72 in the Annex to the
Proclamation.
4867 As defined in the superior text to subheadings 9903.73.74 through 9903.73.81 in the Annex to the
Proclamation.
4868 As defined in the superior text to subheadings 9903.73.91 through 9903.73.96 in the Annex to the
Proclamation
4869 As defined in the superior text to subheadings 9903.73.83 through 9903.73.89 in the Annex to the
Proclamation.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 701
complainant is challenging the United States' statute on safeguards per se , nor are the complainants
challenging the practices of the USITC per se .
10.7 However, the complainants in their argumentation have discussed and challenged what they
call the "methodologies" used by the USITC when making its determinations for those safeguard
measures.  Nevertheless, as noted by the European Communities in its oral statement to the second
substantive meeting, "complainants have not chosen in this case to request any findings relating to US
safeguards law or general practice.  …  When we say that the complainants are not attacking the
methodologies of the USITC per se  we mean that we are simply attacking the methods of analysis
actually used in this case  – not necessarily the methodologies that the USITC traditionally uses, as the
US seems to believe. … I repeat again – our complaint is with the steps that the USITC actually took– or failed to take – in this case."
4870
10.8 The Panel believes, therefore, that the complainants' reference(s) to the USITC methodologies
or practices in their argumentation may be helpful to its understanding of the way in which the United
States actually made its determination for each of the safeguard measures at issue.
B.  GENERAL CONSIDERATIONS FOR THIS DISPUTE
1. Interpretation of the Agreement on Safeguards and Article XIX of GATT 1994
10.9 Article XIX of GATT 1994 and the Agreement on Safeguards provide WTO Members with
the conditional right to limit market access (and take measures that would otherwise be inconsistent
with incurred obligations) and obtain temporary relief  when unforeseen developments have resulted in
increased imports (absolute or relative) that are causi ng or threatening to cause serious injury to the
relevant domestic producers.
10.10  Safeguard actions may be needed for the very reason that a Member has incurred obligations
(namely, market-access commitments) which prohibit that Member from taking any measure that is
inconsistent with its bindings or the GATT prohibition of quantitative restrictions, for instance.  In
this sense, Article XIX of GATT 1994 and the Agreement on Safeguards operate as exceptions,particularly to Articles II and XI of GATT 1994.
10.11  Article XIX of GATT and the Agreement on Safeguards provide for exceptions to general
GATT market access rules in situations of emergency.  In US – Line Pipe , the Appellate Body
reiterated the following statement that it had made in Argentina – Footwear (EC) :
"As part of the context of paragraph 1(a) of Article XIX, we note that the title of
Article XIX is:  ' Emergency Action on Imports of Particular Products' .  The words
'emergency action' also appear in Article 11.1(a) of the Agreement on Safeguards .
We note once again, that Article XIX:1(a) requires that a product be imported ' in such
increased quantities  and under such conditions  as to cause or threaten serious injury
to domestic producers'. (emphasis added)  Clearly, this is not the language of ordinary
events in routine commerce.  In our view, the text of Article XIX:1(a) of GATT 1994,
read in its ordinary meaning and in its context, demonstrates that safeguard measureswere intended by the drafters of the GATT to be matters out of the ordinary, to be
matters of urgency, to be, in short, 'emergency actions'.  And, such 'emergency
actions' are to be invoked only in situations when, as a result of obligations incurred
                                                     
4870 European Communities' oral statement on behalf of all complainants to the second substantive
meeting, paras. 5-6.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 702
under GATT 1994, a Member finds itself confronted with developments it had not
'foreseen' or 'expected' when it incurred that obligation .  The remedy that Article
XIX:1(a) allows in this situation is temporarily to 'suspend the obligation in whole orin part or to withdraw or modify the con cession'.  Thus, Article XIX is clearly, and in
every way, an extraordinary remedy.
This reading of these phrases is also confirmed by the object and purpose of
Article XIX of GATT 1994.  The object and purpose of Article XIX is, quite simply,
to allow a Member to re-adjust temporarily the balance in the level of concessions
between that Member and other exporting Members when it is faced with 'unexpected'
and, thus, 'unforeseen' circumstances which lead to the product 'being imported' in'such increased quantities and under such conditions as to cause or threaten serious
injury to domestic producers of like or directly competitive products'.  …
… In furthering this statement of the object and purpose of the Agreement on
Safeguards , it must always be remembered that safeguard measures result in the
temporary suspension of concessions or withdrawal of obligations, such as those inArticle II and Article XI of GATT 1994, which are fundamental to the
WTO Agreement . …"
4871  (emphasis added)
10.12  In US – Line Pipe, the Appellate Body also emphasized that:
"[P]art of the raison d'être  of Article XIX of the GATT 1994 and the Agreement on
Safeguards  is, unquestionably, that of giving a WTO Member the possibility , as trade
is liberalized, of resorting to an effective remedy in an extraordinary emergency
situation that, in the judgement of that Member, makes it necessary to protect a
domestic industry temporarily .4872 (emphasis added)
There is, therefore, a natural tension between, on the one hand, defining the
appropriate and legitimate scope of the right to apply safeguard measures and, on theother hand, ensuring that safeguard measures are not applied against "fair trade"
beyond what is necessary to provide extraordinary and temporary relief.  A WTO
Member seeking to apply a safeguard measure will argue, correctly, that the right  to
apply such measures must be respected in order to maintain the  domestic  momentum
and motivation for ongoing trade liberalization.  In turn, a WTO Member whose tradeis affected by a safeguard measure will argue, correctly, that the  application   of such
measures must be limited in order to maintain the  multilateral   integrity of ongoing
trade concessions.  The balance struck by the WTO Members in reconciling this
natural tension relating to safeguard meas ures is found in the provisions of the
Agreement on Safeguards. "  (emphasis added)
4873
10.13  Moreover, the Panel, when interpreting Article XIX of GATT 1994 and the Agreement on
Safeguards, must bear in mind that exceptions under WTO law are not to be interpreted narrowly4874
                                                     
4871Appellate Body Report, Argentina – Footwear  (EC), paras. 93–95.  See also,  Appellate Body
Report, Korea – Dairy , paras. 86-88.
4872 Appellate Body Report, US – Line Pipe , para 82.
4873 Appellate Body Report, US – Line Pipe , para. 83.
4874 This principle of interpretation in WTO law was first established by the Appellate Body in EC –
Hormones  (para. 104) for the SPS Agreement.  It was reiterated recently in the Appellate Body Report in EC –
Sardines  (para. 271), when discussing Article 2.4 of the TBT Agreement; in the Panel Report in US – Carbon
Steel (para. 8.45, upheld by the Appellate Body) when discussing Article 21.3 of the SCM Agreement; in theWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 703
but rather in light of the ordinary meaning of the terms of such exception provisions taking into
account the object and purpose of the Agreement on Safeguards, including the need to maintain a
balance between market access and safeguards rights and obligations.  Since the Agreement onSafeguards itself would have been drafted so as to recognize its exceptional nature and the emergency
character of safeguard measures, the Agreement on Safeguards does not call for any especially
restrictive interpretation.
2. The two fundamental enquiries under the Agreement on Safeguards: the (conditional)
right  to take a safeguard measure and the application  of a chosen measure
10.14  The distinction between the (conditional) right to take a safeguard measure and the
application of a specific measure was clearly recognized by the Appellate Body in US – Line Pipe :
"This natural tension is likewise inherent in two basic inquiries that are conducted in
interpreting the  Agreement on Safeguards .  These two basic inquiries are:  first,  is
there a right to apply a safeguard measure?  And,  second,  if so, has that right been
exercized, through the application of such a measure, within the limits set out in the
treaty?  These two inquiries are separate and distinct.   They must not be confused by
the treaty interpreter.  One necessarily precedes and leads to the other.  First ,  the
interpreter must inquire whether there is a right, under the circumstances of a
particular case, to apply a safeguard measure.  For this right to exist, the WTO
Member in question must have determined, as required by Article 2.1 of the Agreement
on Safeguards  and pursuant to the provisions of Articles 3 and 4 of the Agreement on
Safeguards , that a product is being imported into its territory in such increased
quantities and under such conditions as to cause or threaten to cause serious injury to
the domestic industry.  Second , if this first inquiry leads to the conclusion that there is
a right to apply a safeguard measure in that particular case, then the interpreter must
next consider whether the Member has applied that safeguard measure 'only to theextent necessary to prevent or remedy serious injury and to facilitate adjustment', as
required by Article 5.1, first sentence, of the  Agreement on Safeguards .  Thus, the
right to apply a safeguard measure—even where it has been found to exist in a
particular case and thus can be exercised—is not unlimited.  Even when a Member
has fulfilled the treaty requirements that establish the right to apply a safeguardmeasure in a particular case, it must do so 'only to the extent necessary'." (emphasis
added)
4875
10.15  Throughout its examination, this Panel has kept the two enquiries distinct.  The Panel is of the
view that, first, it must examine whether the United States had the right  to take the safeguard
measures.  Second, should the Panel consider that the United States had the right to take such
safeguard measures, the Panel would then assess whether the measures were applied (as regards the
type of measure, their level and duration) only to the extent necessary to remedy or prevent seriousinjury and allow for readjustment.
10.16  In examining whether the United States had a right to impose the specific safeguard measures
at issue, the Panel will concern itself with the application of Articles 2, 3 and 4 of the Agreement on
Safeguards and Article XIX of GATT 1994 (the latter being relevant in particular for the assessment
                                                                                                                                                                    
Article 21.5 Appellate Body Report in US – FSC (para. 127) when discussing the scope and meaning of
footnote 59 of the SCM Agreement; and in the Appellate Body Report in Brazil – Aircraft  (para. 137) when
dealing with the scope of the provisions on developing countries.
4875 Appellate Body Report, US – Line Pipe , para. 84.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 704
of whether the United States was faced with unforeseen developments) in reviewing the report of the
competent authority.  In relation to the second enquiry, when assessing the appropriateness of such
safeguards measures, the importing Member is obliged, when challenged by a WTO Member who hasmade a prima facie case of inconsistency with Article 5.1 of the Agreement on Safeguards, to justify
before the Panel that the safeguard measures were imposed only to the extent necessary to prevent or
remedy injury and allow for readjustment.  Reversals of this burden of proof may take place.
3. The Agreement on Safeguards is co ncerned with the "determination"
10.17  The Panel recalls that the Agreement on Safeguards is concerned with the ultimate
determination made and reflected in the Member's report of investigation.  There is no provision on
how or when the investigation is to be initiated or whether, in a specific Member, the initiation of theinvestigation should be undertaken by the King, the President or the industry. Nor does the Agreement
on Safeguards dictate the manner in which determinations are to be arrived at. What matters is that,
ultimately, there is a reported determination of the right to take a safeguards measure  (pursuant to
Articles 2, 3 and 4 of the Agreement on Safeguards and Article XIX of GATT 1994) and that, if, and
when, challenged prima facie  before a WTO panel, the choice of safeguard measure (Articles 5, 7 and
9) can be justified.  The Appellate Body made that clear in US – Line Pipe :
"We note also that we are not concerned with how the competent authorities of WTO
Members reach their determinations in applying safeguard measures.  The Agreement
on Safeguards  does not prescribe the internal decision-making process for making
such a determination.  That is entirely up to WTO Members in the exercise of theirsovereignty.  We are concerned only with the determination itself , which is a singular
act for which a WTO Member may be accountable in WTO dispute settlement.  It is
of no matter to us whether that singular act results from a decision by one, one
hundred, or—as here—six individual decision-makers under the municipal law of that
WTO Member.  What matters to us is whether the determination, however it is
decided domestically, meets the requirements of the Agreement on Safeguards ."
4876
"Article 5.1 does not establish a general procedural obligation to demonstrate
compliance with Article 5.1, first sentence, at the time a measure is applied."4877
(emphasis added)
10.18  The Panel recalls that, in the present dispute, the United States explained that the USITC
made its determination on 22 October 2001 pursuant to Articles 2 and 4 and that it was contained in a
report published in December 2001 (the "initial USITC Report").  The USITC provided
Supplementary Reports in February 2002.  The complainants in the present dispute have challenged
the findings supporting the October determination on the basis of the data and evidence contained in
the Report published in December 2001.  The Panel has thus examined the December 2001 Report
when assessing the complainants' claims and arguments relating to increased imports in
Section X.D of the present Panel Reports as well as complainants' claims on causation, in Section X.Eof the present Panel Reports.
10.19  The United States, following its October determination, decided to exclude all imports from
Canada, Mexico, Jordan and Israel from the application of its safeguard measures.  Seemingly, in an
attempt to comply with the United States ' parallelism obligations, USTR requested, inter alia ,
additional information from USITC on the impact of the exclusions from the measure of imports from
                                                     
4876 Appellate Body Report, US – Line Pipe , para. 158.
4877 Appellate Body Report, US – Line Pipe , paras. 233-234.WT/DS248/R, WT/DS249/R,
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Israel and Jordan, and for certain steel products from Canada and Mexico.  This was (partly) the
subject of the February Second Supplementary Report.  The complainants have challenged whether
the October and February reports satisfy the requirements of parallelism, on the basis of the datacontained in those reports.  The Panel has examined the complainants' claims and arguments relating
to parallelism in Section X.F of the present Panel Reports and has reviewed both reports.
10.20  The February Second Supplementary Report also contains information relating to "unforeseen
developments".  For the reasons mentioned in paragraphs 10.55-10.58 below, we have decided to
assume, arguendo , for the purposes of reviewing the unforeseen developments' demonstration under
Article XIX of the GATT 1994 in the present dispute that the February Second Supplementary Report
was part of the "report of the competent authority" .  We have, therefore, decided that when assessingthe complainants' claims relating to unforeseen deve lopments, in Section X.C, we will examine the
USITC's initial report as well as its explanations relating to unforeseen developments contained in the
February Second Supplementary Report.
4. Standard of review
10.21  The Panel discusses specific applications of its standard of review throughout its Reports.
The Panel would like to recall at this early stage that the general standard of review contained in
Article 11 of the DSU
4878 is applicable to disputes involving claims of violation of the Agreement on
Safeguards and Article XIX of GATT 1994.
10.22  The jurisprudence has examined the application of such general standard of review in the
specific context of the Agreement on Safeguards.  In Argentina – Footwear (EC) , the Appellate Body
stated that, pursuant to Article 4, a Panel cannot conduct a de novo  review of the evidence or
substitute its analysis and judgment for that of the importing Member, but "[t]o determine whether the
safeguard investigation and the resulting safeguard measure applied by [a Member] 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 [Member's] authorities had examined all the relevant facts and had provided areasoned explanation of how the facts supported their determination."
4879
10.23  The panels in US – Wheat  Gluten  and in US – Line Pipe  concluded that a panel must assess
whether a reasoned and adequate explanation has been provided as to how the facts support the
determination4880.  In US – Lamb,  the Appellate Body added that "a panel can assess whether the
competent authorities' explanation for its determination is reasoned and adequate only if the panelcritically 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
                                                     
4878  Article 11 of the DSU reads as follows: "Function of Panels: The function of panels is to assist the
DSB in discharging its responsibilities under this Understanding and the covered agreements.  Accordingly, apanel should make an objective assessment of the matter before it, including an objective assessment of the factsof the case and the applicability of and conformity with the relevant covered agreements, and make such otherfindings as will assist the DSB in making the recommendations or in giving the rulings provided for in the
covered agreements.  Panels should consult regularly with the parties to the dispute and give them adequate
opportunity to develop a mutually satisfactory solution."
4879 Appellate Body Report, Argentina – Footwear (EC) , paras. 118 and 121.
4880 Panel Report, US – Wheat Gluten , para. 8.5; Panel Report, US – Line Pipe, para. 7.194WT/DS248/R, WT/DS249/R,
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alternative explanation of the facts is plausible, and if the competent authorities' explanation does not
seem adequate in the light of that alternative explanation."4881
10.24  In US – Cotton Yarn , the Appellate Body referred to its jurisprudence developed under the
Agreement on Safeguards and relied upon it for a dispute under the Agreement on Textiles and
Clothing:
"Our Reports in these disputes under the Agreement on Safeguards  spell out key
elements of a panel's standard of review under Article 11 of the DSU in assessing
whether the competent authorities complied with their obligations in making their
determinations.  This standard may be summarized as follows:  panels must examine
whether the competent authority has evaluated all relevant factors;  they must assesswhether the competent authority has examined all the pertinent facts and assessed
whether an adequate explanation has been provided as to how those facts support the
determination;  and they must also consider whether the competent authority's
explanation addresses fully the nature and complexities of the data and responds to
other plausible interpretations of the data.  However, panels must not conduct ade novo  review of the evidence nor substitute their judgement for that of the
competent authority."
4882
10.25  The Panel is of the view that the standard of review applicable in the present dispute must be
seen in light of the distinction between the first and second enquiry that the Panel must perform when
assessing a Member's compliance with the requirements of the Agreement on Safeguards andArticle XIX of GATT 1994.  When assessing a Member's compliance with its obligations pursuant to
Articles 2, 3 and 4 of the Agreement on Safegu ards and Article XIX of GATT, the Panel is not the
initial fact-finder.  Rather, the role of the Panel is to "review" determinations and demonstrations
made and reported by an investigating authority.
10.26  The situation is different in the context of the second enquiry when assessing whether the
measures were applied only to the extent necessary to prevent the serious injury caused by increased
imports.  In that situation, it is before the Panel, during the WTO dispute settlement process, that the
importing Member is forced for the first time to respond to allegations relating to the level and extent
of its safeguard measures.  For us, this is clear fr om the following statement of the Appellate Body in
US – Line Pipe :
"[I]t is clear, therefore, that, […] Article 5.1, including the first sentence, does not
oblige a Member to justify, at the time of application, that the safeguard measure at
issue is applied "only to the extent necessary.
Article 5.1 does not establish a general procedural obligation to demonstrate
compliance with Article 5.1, first sentence, at the time a measure is applied."
4883
10.27  In that second enquiry, the Panel is thus reviewing whether the measures "as applied" comply
with the requirements of Articles 5, 7, 8 and 9 of the Agreement on Safeguards on the basis of theevidence and arguments put forward by the parties during the WTO dispute settlement process.
                                                     
4881 Appellate Body Report, US – Lamb , para. 106.
4882 Appellate Body Report, US – Cotton Yarn , para. 74
4883 Appellate Body Report, US – Line Pipe , paras. 233-234.WT/DS248/R, WT/DS249/R,
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5. Burden of proof
10.28  In general, under WTO law, the burden of proof rests upon the party, whether complaining or
defending, who asserts the affirmative of a particular claim or defence.  If that party adduces evidencesufficient to raise a presumption (or prima facie case) that what is claimed is true, the burden then
shifts to the other party, who will fail unless it adduces sufficient evidence and arguments to rebut the
presumption.  Therefore, it is for the complainants to convince the Panel that the United States did not
comply with the provisions of the Agreement on Safeguards when it imposed its safeguards measures.
10.29  As discussed above, in the context of the Pane l's first enquiry, it is for the complainants to
convince the Panel that, in its Report, the United States failed to provide a reasoned and adequate
explanation that the  WTO pre-requisites for the imposition of safeguard measures were satisfied.  Inpractice, before the WTO panel, the United States will defend USITC's demonstrations and
determinations, and the complainants will challenge their WTO-compatibility.  In the context of the
Panel's second enquiry – when assessing whether the safeguard measures were imposed only to the
extent necessary – the Appellate Body has ruled that when the panel concludes, at the end of its first
enquiry, that the safeguard measures were imposed in violation of Article 4.2(b), a reversal of theburden of proof occurs so that there is a presumption that the safeguard measures were applied in a
manner inconsistent with Article 5.1.
4884
6. USITC data
10.30  As noted throughout our Reports, all data that has been relied upon by the Panel has been
obtained directly from the USITC Report or from the various tables and annexes to which that reportrefers.  In a number of sections in our Reports, we have represented USITC data in graphical form.  In
cases where data was available for interim 2001, the relevant graphs plot interim 2000 data together
with interim 2001 data.  We have indicated the USITC Report references to the sources for graphs
contained in the Panel's Reports.
C. C
LAIMS RELATING TO UNFORESEEN DEVELOPMENTS
1. Claims and arguments of the parties
10.31  The arguments of the parties can be found in Section VII.C.1 supra .
10.32  The European Communities, China, Switzerland, Norway and New Zealand claim that the
USITC Report was issued without examining the issue of unforeseen developments, and/or that it did
not provide an adequate and reasoned explanation of those developments and the manner in whichthey resulted in increased imports.
4885  New Zealand adds that the competent authority has failed to
demonstrate the existence of unforeseen developments as a matter of fact.4886  Moreover, the
European Communities, China, Norway and New Zealand claim that no opportunity was provided by
the USITC to interested parties to present evidence and their views on the issue of unforeseen
developments.4887  For all of these reasons, they claim that the United States has failed to comply with
                                                     
4884 See Appellate Body Report, US – Line Pipe , paras. 261-262.
4885 European Communities' first written submission, paras. 122-123; China's first written submission,
para. 86; Switzerland's first written submission, paras. 109-110; Norway's first written submission,paras. 110-111; New Zealand's first written submission, para. 4.11.
4886 New Zealand's first written submission, para. 4.29
4887 European Communities' first written submission, para. 178; China's first written submission,
para. 125; Norway's first written submission, paras. 166; New Zealand's first written submission, para. 4.30; seealso their respective written replies to Panel question No. 1 at the first substantive meeting.WT/DS248/R, WT/DS249/R,
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the provisions of both Article 3.1 of the Agreement on Safeguards and Article XIX:1(a) of
GATT 1994.
10.33  The United States responds that the USITC identified the unforeseen developments that
resulted in increased imports of certain steel products in a manner that was consistent with the United
States' obligations under Article XIX of GATT 1994 and Article 3.1 of the Agreement on
Safeguards.4888
2. Relevant WTO provisions
10.34  Article XIX:1(a) of GATT 1994 provides as follows:
"If, as a result of unforeseen developments and of the effect of the obligations
incurred by a contracting party under this Agreement, including tariff concessions,any product is being imported into the territory of that contracting party in such
increased quantities and under such conditions as to cause or threaten serious injury
to domestic producers in that territory of like or directly competitive products, the
contracting party shall be free, in respect of such product, and to the extent and for
such time as may be necessary to prevent or remedy such injury, to suspend the
obligation in whole or in part or to withdraw or modify the concession."
10.35  Article 3.1 of the Agreement on Safeguards provides:
"A Member may apply a safeguard measure only following an investigation by the
competent authorities of that Member pursua nt to procedures previously established
and made public in consonance with Article X of GATT 1994.  This investigationshall include reasonable public notice to all interested parties and public hearings or
other appropriate means in which importers, exporters and other interested parties
could present evidence and their views, in cluding the opportunity to respond to the
presentations of other parties and to submit their views, inter alia , as to whether or
not the application of a safeguard measure would be in the public interest.  Thecompetent authorities shall publish a report setting forth their findings and reasoned
conclusions reached on all pertinent issues of fact and law."
3. Analysis by the Panel
(a) The cumulative application of Article XIX of GATT 1994 and the Agreement on Safeguards
10.36  Article XIX of GATT 1994 provides that a Member is entitled to impose a safeguard measure
"[i]f, as a result of unforeseen developments and of the effect of the obligations incurred by a
contracting party under this Agreement, including tariff concessions, any product is being imported
into the territory of that contracting party in such  increased quantities and under such conditions as to
cause or threaten serious injury to domestic producer s in that territory of like or directly competitive
products".  There is no reference to unforeseen developments in the Agreement on Safeguards.
However, as repeatedly affirmed by the Appellate Body, Articles 1 and 11.1(a) of the Agreement on
Safeguards express the continuing applicability of Article XIX of GATT which has been clarified andreinforced by the Agreement on Safeguards.
4889  This interpretation ensures that the provisions of the
                                                     
4888 United States' first written submission, para. 925.
4889 See for instance the Appellate Body Report in Korea – Dairy  at para. 74: "We agree with the
statement of the Panel that: It is now well established that the WTO Agreement is a "Single Undertaking" andWT/DS248/R, WT/DS249/R,
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Agreement on Safeguards and those of Article XIX are given their full meaning and their full legal
effect within the context of the WTO Agreement.4890
10.37  It is now clear that the circumstances of unforeseen developments within the meaning of
Article XIX:1(a) of GATT 1994 must be demonstrated as a matter of fact, together with the
conditions mentioned in Article 2.1 of the Agreement on Safeguards, in the report of the competent
authority and before a safeguard measure can be applied.4891
(b) Standard of review
10.38  As mentioned in paragraphs 10.21-10.24 above, the role of this Panel in the present dispute is
not to conduct a de novo  review of the USITC's determination.4892  Rather, the Panel must examine
whether the United States respected the provisions of Article XIX of GATT 1994 and of theAgreement on Safeguards, including Article 3.1.  As further developed below, the Panel must
examine whether the United States demonstrated in its published report, through a reasoned and
adequate explanation, that unforeseen developments and the effects of tariff concessions resulted in
increased imports causing or threatening to cause serious injury to the relevant domestic producers.
4893
10.39  In considering whether the United States demonstrated as a matter of fact that unforeseen
developments resulted in increased imports causing serious injury, the Panel will also examine, in
application of its standard of review, whether the competent authorities "considered all the relevant
facts and had adequately explained how the facts supported the determinations that were made."4894
(c) What can constitute an unforeseen development?
10.40  An unforeseen development, pursuant to Article XIX:1(a) GATT 1994, is an unexpected
circumstance which has led to a product being imported in such increased quantities and under such
conditions as to cause or threaten to cause serious injury to relevant domestic producers.4895  I n the
current dispute, the United States argues that the USITC identified the financial crises that engulfed
Southeast Asia (Asian crisis) and the former USSR (Russian crisis), the continued strength of the
United States' market and persistent appreciation of the US dollar, and the confluence of all of theseevents as unforeseen developments.
4896  The European Communities, China, Switzerland and Norway
contend that none of these events constituted unf oreseen developments, nor did any combination of
                                                                                                                                                                    
therefore all WTO obligations are generally cumulative and Members must comply with all of them
simultaneously …"  and para. 78:  "Having found that the provisions of both Article XIX:1 of the GATT 1994
and Article 2.1 of the Agreement on Safeguards  apply to any safeguard measure taken under the
WTO Agreement  ".
4890 Appellate Body Reports, Argentina – Footwear (EC) , para. 95;  Korea – Dairy , para. 85;  US –
Lamb , para. 71.
4891 Appellate Body Report, US – Lamb , para. 72; Appellate Body Report,  Korea – Dairy , para. 85.
4892 Appellate Body Report, Argentina – Footwear (EC) , paras. 116-117;  Appellate Body Report,  US –
Lamb, para. 97.
4893 Appellate Body Report, US – Lamb , paras. 103-106.
4894 Appellate Body Report, Argentina – Footwear (EC) , para. 121;  Appellate Body Report,  US –
Lamb, para. 102.
4895 Appellate Body Report, Argentina – Footwear (EC) , para. 91;  Appellate Body Report,  Korea –
Dairy , para. 84.
4896 United States' first oral statement, para. 72.WT/DS248/R, WT/DS249/R,
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them.4897  The same four complainants as well as New Zealand argue that the developments
mentioned by the United States were not unforeseen because they were not unexpected.4898
10.41  The legal standard that is used to determine wh at constitutes an unforeseen development is, as
agreed by the parties, at least in part, subjective.  This is supported by the Appellate Body, who stated
in Korea – Dairy that safeguard measures "are to be invoked only in situations when … an importing
Member finds itself confronted with developments it had not 'foreseen'  or 'expected'  when it incurred
[its] obligation [under GATT 1994]." (emphasis added)4899
10.42  What was "unforeseen" when the contracting parties negotiated their first tariff concessions in
all likelihood differs from what can be considered to be unforeseen today.  The Panel notes that after
50 years of GATT, tariffs have, for many products, disappeared or reached very low levels.  Futher,what constitutes "unforeseen developments" for an importing Member will vary depending on the
context and the circumstances.  Nevertheless, the subjectivity of the standard does not take away from
the fact that the unexpectedness of a development
4900 for an importing Member is something that must
be demonstrated through a reasoned and adequate explanation.
10.43  In addition, the standard for unforeseen developments may also be said to have an objective
element. The appropriate focus is on what should or could have been foreseen in light of the
circumstances.  The standard is not what the specific negotiators had in mind but rather what they
could (reasonably) have had in mind.  This was recognized early in GATT by the US – Fur Felt Hats
decision, which characterized unforeseen developments as "developments […] which it would not be
reasonable to expect that the negotiators of the country making the concession could and should haveforeseen at the time when the concession was negotiated".
4901
10.44  Moreover, since all the WTO prerequisites, including the demonstration of unforeseen
developments, must be satisfied by each safeguard measure, the Panel believes that the factual
demonstration of unforeseen developments4902 must also relate to the specific product(s) covered by
the specific measure(s) at issue.  Therefore the reasoned and adequate explanation relating tounforeseen developments must contain specific  factual demonstrations of unforeseen developments
identified to have resulted in increased imports ca using or threatening to cause serious injury to the
relevant domestic producers for each safeguard measure at issue.
10.45  In assessing whether the USITC provided a reasoned and adequate explanation of unforeseen
developments that resulted in increased imports causing serious injury, it is logical to considerwhether the USITC addressed unforeseen developments at all in its published reports, as required by
Article 3.1 of the Agreement on Safeguards an d Article XIX of GATT 1994, which has been
challenged by the complainants.
                                                     
4897 European Communities' first written submission, para. 151;  China's first written submission,
para. 97;  Switzerland's first written submission, para. 137;  Norway's first written submission, para. 139.
4898  Switzerland's first oral statement on behalf of the complainants, para. 15.
4899 Appellate Body Report, Korea – Dairy , para. 86 and Appellate Body Report,  Argentina – Footwear
(EC) , para. 93 (emphasis added).
4900 Appellate Body Report, Argentina – Footwear (EC) , para. 91;  Appellate Body Report,  Korea –
Dairy , para. 84.
4901 US – Fur Felt Hats, para. 9, cited with approval in Appellate Body Report, Argentina – Footwear
(EC) , para. 96;  Appellate Body Report,  Korea – Dairy , para. 89.
4902 Appellate Body Report, US – Lamb , para. 72;  Appellate Body Report, Argentina – Footwear (EC) ,
para. 92;  Appellate Body Report, Korea – Dairy , para. 85.WT/DS248/R, WT/DS249/R,
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(d) Demonstration of "unforeseen developments" as a matter of fact:  when, where and how to
demonstrate unforeseen developments
(i) Claims and arguments of the parties
10.46  The arguments of the parties can be found in Sections VII.C.1; C.2(f) supra .
(ii) Analysis by the Panel
10.47  The Panel recalls that the complainants first rais ed issues relating to the format and timing of
the demonstration of unforeseen developments.  The complainants argue that the USITC Report was
issued without examining the issue of unforeseen de velopment.  They submit that the initial USITC
Report, with the exception of a discussion on the Asian and Russian crises, never addressed the
requirement of unforeseen developments.  They add that the Second Supplementary Report does notform part of the USITC Report and is an ex post  attempt to demonstrate the existence of unforeseen
developments, which did not feature in the same report as the USITC's determination.  They argue,
therefore, that the Second Supplementary Report should be disregarded.  The United States responds
that it is perfectly acceptable to issue separate reports, as there is no express guidance on "when,
where and how" a demonstration of unforeseen developments must be made. According to the UnitedStates, the choice of whether the components of the report are issued at the same time or over a period
of time is left to the discretion of the individual Member.
4903  The Panel will deal with the issues of the
form and timing of the competent authorities' report in turn.
The "form" of the demonstration of unforeseen developments in relation to the decision to
apply safeguard measures
10.48  In US – Lamb , the Appellate Body made it clear that the demonstration of unforeseen
developments must be found in the report of the competent authority.4904  As the parties have pointed
out, the requirement to publish a report is a necessary step in conducting an investigation consistent
with Article 3.1.  However, Switzerland argues that the demonstration of unforeseen developments
must be found in the same report as the one containing the determination made pursuant to Articles 2and 4 of the Agreement on Safeguards and seems to imply that these elements should be contained in
a single document.
10.49  The Panel agrees with the United States that nothing in the requirement to publish a report
dictates the form that the report must take, provid ed that the report complies with all of the other
obligations contained in the Agreement on Safeguards and Article XIX of GATT 1994.  In the end, itis left to the discretion of the Members to determine the format of the report, including whether it is
published in parts, so long as it contains all of the necessary elements, including findings and
reasoned conclusions on all pertinent issues of fact and law.  Together, these parts can form the report
of the competent authority.
10.50  The Panel believes that a competent authority's report can be issued in different parts but such
multi-part or multi-stage report must always provide for a coherent and integrated explanation proving
satisfaction with the requirements of Article XIX of GATT 1994 and the Agreement on Safeguards,including the demonstration that unforeseen developments resulted in increased imports causing
serious injury to the relevant domestic producers.  Whether a report drafted in different parts or a
multi-stage report constitutes "the report of the competent authority" is to be determined on a
                                                     
4903 United States' first written submission, para. 952.
4904 Appellate Body Report, US – Lamb , para. 72;  Appellate Body Report, Korea – Dairy , para. 85.WT/DS248/R, WT/DS249/R,
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case-by-case basis and will depend on the overall structure, logic and coherence between the various
stages or the various parts of the report.  If separate parts of the report are issued at different times, the
discussion relating to unforeseen developments must, in all cases, be integrated logically in the overallexplanation as to how the importing Member's safeguard measures satisfies the requirements of
Article XIX of GATT 1994 and the Agreement on Sa feguards.  The publication of a report in many
stages may produce added difficulties for the competent authorities to set forth coherent findings in a
reasoned and adequate manner.
10.51  The complainants have also argued that the timing of the USITC's demonstration is not in
accordance with the requirements of Article XIX of GATT 1994 and Article 3.1 of the Agreement on
Safeguards, as articulated by the Appellate Body.  We deal with this issue below
The timing of the demonstration of unforeseen developments:  before the application of the
measure
10.52  Given that the demonstration of unforeseen developments is a prerequisite for the application
of a safeguard measure4905, it cannot take place after the date as of which the safeguard measure is
applied.  This has been confirmed by the Appellate Body, which noted, in US – Lamb,  that although
Article XIX provides no express guidance on where and when the demonstration of unforeseen
developments is to be made, it is nonetheless a prerequisite, and "it follows that this demonstration
must be made  before   the safeguard measure is applied.  Otherwise, the legal basis for the measure is
flawed."4906 Any demonstration made after the start of the application of a safeguard measure would
have to be disregarded automatically as it cannot afford legal justification for that measure.
10.53  Article 3.1 of the Agreement on Safeguards requires inter alia that Members apply a
safeguard measure only after competent authorities set forth "their findings and reasoned conclusions
reached on all pertinent issues of fact and law."  Accordingly, the Appellate Body Report in US –
Lamb  stated that since the demonstration of unforeseen developments is a pertinent issue of fact and
law for the application of a safeguard measure, "it follows that the published report of the competentauthorities … must contain a 'finding' or 'reas oned conclusion' on 'unforeseen developments'."
4907
Such a reasoned and adequate explanation of how unforeseen developments resulted in increased
imports causing serious injury must form part of the overall reported explanation by the competent
authority that it has satisfied all the WTO prerequisites for the imposition of a safeguard measure.
Since the demonstration of unforeseen developments must be included in the published report of thecompetent authorities it is necessary to look for the demonstration of unforeseen developments in the
"report of the competent authority", completed and published prior to the application of the safeguard
measures.
10.54  The Panel notes that, according to the United States, 22 October 2001 was the date of the
determination made pursuant to Articles 2 and 4 of the Agreement on Safeguards.
4908  T h i s
determination was included in the USITC's Report published in December 2001.  On
22 October 2001, the USITC had not completed its demonstration relating to unforeseendevelopments.  In the Second Supplementary Report of 4 February 2002, findings were made
principally with respect to the issues of "unforesee n developments" and potential exclusions of certain
                                                     
4905Appellate Body Report in Korea – Dairy , paragraph 85;  see also, Appellate Body Report,
Argentina – Footwear (EC) , para. 92.
4906 Appellate Body Report, US – Lamb , para. 72 (emphasis in original); see also Panel Report, US –
Line Pipe , para. 7.296.
4907 Appellate Body Report, US – Lamb, para. 76.
4908 United States' written reply to Panel question No. 15 at the first substantive meeting.WT/DS248/R, WT/DS249/R,
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countries from the application of the safeguard measures.  The safeguard measures came into effect
on 20 March 2002, pursuant to a proclamation by the President on 5 March 2002.4909  We recall that
the demonstration of unforeseen developments must be made in the report of the competent authorityand before the measure is applied.  To the extent that the February Second Supplementary Report
formed part of the competent authority' report – an issue which we will ultimately not need to decide
for reasons explained below – the demonstration of unforeseen developments was not necessarily
made in an untimely fashion, since this later report was published before the measure was applied.
Conclusion
10.55  Before a decision to apply a safeguard measure can be made in accordance with Article 2 of
the Agreement on Safeguards and Article XIX of GATT, a number of conditions must be fulfilled,and certain circumstances must be demonstrated.  It is only once all of these prerequisites or
requirements are fulfilled, including the completion of the investigation and the issuance of a report
containing findings and reasoned conclusions, that a Member is entitled to impose a WTO-compatible
safeguard measure.
10.56  The United States refers to 22 October 2001 as the date of the determination pursuant to
Articles 2 and 4 of theAgreement on Safeguards.  In the Panel's opinion that date cannot constitute the
time at which full compliance was achieved with th e requirements of Article XIX of GATT and the
Agreement on Safeguards, since the USITC coul d only have completed its demonstration of
unforeseen developments on 4 February 2002.
10.57  The Panel is of the view that the determinati on of satisfaction with the conditions mentioned
in Articles 2 and 4 of the Agreement on Safeguards, as well as the factual demonstration of
unforeseen developments required by Article XIX of GATT 1994, are distinct elements for which
specific findings can be made by the competent authorities at different moments, as long as all such
findings are logically and coherently integrated in a report published before the safeguard measure is
applied.
10.58  For the purpose of the present review, the Panel will assume, arguendo,  that the USITC
Second Supplementary Report of February 2002 is part of the "USITC Report" for the purposes of
Article 3.1 of the Agreement on Safeguards (and XIX of GATT 1994 relating to unforeseen
developments). Therefore, any demonstration of unforeseen developments which must take place
before the measure is applied must also be found in the USITC multi-stage report.  The SecondSupplementary Report was the last document published by the competent authority before the
application of the safeguards measure, that could be said to form part of the "report of the competent
authority".  Since the Second Supplementary Report is the last pronouncement with regard to
"unforeseen developments" before the application of the measures, the findings contained within it are
the latest the Panel will take into consideration.
(e) The conduct of the investigation – the obligation to consult interested parties
(i) Claims and arguments of the parties
10.59  The arguments of the parties can be found in Section VII.C.2.(f)(iii) supra .
                                                     
4909 Proclamation 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, 7 March 2002.WT/DS248/R, WT/DS249/R,
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Page 714
(ii) Analysis by the Panel
10.60  The Panel recalls that the European Communities, China, Norway and New Zealand argue
that, because the issue of unforeseen developments was only discussed in the Second SupplementaryReport which came out after the conclusion of the investigation, the interested parties were not given
an opportunity to comment on the discussion.  This, they argue, is contrary to Article 3.1 of the
Agreement on Safeguards, which contains a general obligation to allow interested parties to express
their views and comment on the views and evidence of  other parties concerning all pertinent issues of
law and fact, including the issue of unforeseen developments.
4910  The United States responds that the
USITC Report shows that the unforeseen conditions , which are demonstrated in the USITC Second
Supplementary Report, informed its injury determination.4911  Moreover, the USITC specifically
sought information on unforeseen developments in the course of its investigation.  Accordingly,
argues the United States, the allegation that interested parties had no opportunity to present evidence
and their views on this issue is patently incorrect.4912
10.61  The Panel recognizes that Article 3.1 of the Agreement on Safeguards provides certain
procedural guarantees to interested parties, such as "reasonable public notice" and "public hearings orother appropriate means [to] present evidence and their views".  The important role of interested
parties was recognized by the Appellate Body in US – Wheat Gluten , when it stated as follows:
"The focus of the investigative steps mentioned in Article 3.1 is on 'interested parties',
who must be notified of the investigation, and who must be given an opportunity to
submit 'evidence', as well as their 'views', to the competent authorities.  The interestedparties are also to be given an opportunity to 'respond to the presentations of other
parties'.  The Agreement on Safeguards , therefore, envisages that the interested
parties play a central role in the investigation and that they will be a primary source
of information for the competent authorities."
4913
10.62  Since the opportunity of interested parties to present evidence and their views is a necessary
part of the investigation, it must be reflected in the published report.  The United States does not
dispute this, but argues instead that the interested parties were given multiple opportunities to present
evidence and the USITC actively sought their input.4914  According to the United States, this is
reflected in the USITC Report.4915
                                                     
4910 European Communities' first written submission, para. 177; China's first written submission,
para. 124; Norway's first written submission, para.165; New Zealand's first written submission, para. 4.29;
European Communities', China's and Norway's written replies to Panel question No. 1 at the first substantivemeeting.
4911 USITC Report, pp. OVERVIEW-17, OVERVIEW-18, OVERVIEW-57.
4912 United States' first written submission, para. 954; United States' written reply to Panel question No.
1 at the first substantive meeting.
4913 Appellate Body Report, US – Wheat Gluten , para. 54.
4914 In response to the Panel's question No.1 at the first substantive meeting, the United States replied:
"In this investigation, the ITC gave public notice of its institution of the steel investigation.  (66 Fed. Reg. 35267(3 July 2001)).  The ITC invited public comments and suggestions regarding the content of its questionnaires,which included a question regarding unforeseen developments.  (66 Fed. Reg. 34717 (29 June 2001)).  The ITCreceived extensive responses to that public request, in cluding one 110-page submission from respondents from a
variety of countries, including Japan, Korea, Brazil, and New Zealand.  (Joint Comments of Respondents on
Draft Questionnaires, 2 July 2001, Exhibit US-67.)  The ITC accepted prehearing written submissions with nopage limits, and several of those initial written submissions discussed unforeseen developments.  ( E.g.,
Respondents' Joint Prehearing Framework Brief, 12 Sept. 2001 (Joint filing from 40 companies in 25 countries,WT/DS248/R, WT/DS249/R,
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Page 715
10.63  In particular, the USITC requested, by way of questionnaires to be returned by 30 July 2001,
that the importers, producers and purchasers:
"[P]lease identify any developments during the last ten years that resulted in certain
steel products under investigation being imported into the United States in such
increased quantities as to have an adverse impact on the domestic industry[ies] during
the period January 1996-June 2001.  For each development, please describe the
development, when it occurred, and whether it was unexpected."4916
10.64  Based on the above questions, it is clear that the issue of unforeseen developments was part of
the investigation.  By inviting comments in response to the questionnaires, and addressing the issue
during its public hearings4917, the Panel is of the view that the United States has complied with its
Article 3.1 obligation to provide "appropriate means in which importers, exporters and other
interested parties [can] present evidence and their views".
10.65  The European Communities complains that "there was no provisional reasoning on or
explanation of unforeseen developments on which interested parties could comment".4918  The Panel
does not believe that Article 3 of the Agreement on Safeguards requires the competent authority tosend to interested parties "draft findings" of its demonstration relating to unforeseen developments in
order to allow them to comment prior to the publication of the competent authority's report.
10.66  We, therefore, reject the European Communities, China, Norway and New Zealand 's claims
that the United States violated Article 3.1 in refusing  to provide to interested parties an opportunity to
present evidence and share their views on unforeseen developments.
(f) Reasoned and adequate explanation that unforeseen developments resulted in increased
imports causing serious injury
10.67  Following the approach suggested by the Appellate Body in US – Lamb
4919, the Panel will
now consider whether the USITC offered a reasoned and adequate explanation as to why and how the
cited unforeseen developments could be so regarde d.  This requires, at a minimum, some discussion
by the competent authority as to how the developm ents were unforeseen at the appropriate time, and
                                                                                                                                                                    
including Japan, Brazil, Thailand, Korea, the European Communities, Venezuela, Norway, India, New Zealand,
and China), pp. 106-109 (Exhibit US-68); Prehearing Submission of the European Commission, 10 Sep. 2001,pp. 4-5 (Exhibit US-69); AK Steel Prehearing Brief, 11 Sep. 2001, pp. 60-63 (Exhibit US-70); Prehearing Briefof United Steelworkers of America, 11 Sep. 2001, pp. 129-131 (Exhibit US-71); Prehearing Brief of Domestic
Carbon Flat Steel Producers, 11 Sep. 2001, pp. 31-36 (Exhibit US-72); Respondents' Joint Prehearing Brief for
Product #18, Seamless Tubular Products other than OCTG, 10 Sep. 2001, pp. 11-13 (Exhibit US-73); MinimillCoalition (Long Products) Prehearing Brief, 11 Sep. 2001,  pp. 18-22 (Exhibit US-74).)  The ITC's prehearing
Staff Report included information on the Asian economic crisis, continuing post-dissolution difficulties in theformer USSR republics, and the appreciation of the US dollar.  (Prehearing Staff Report at OVERVIEW-22-24and OVERVIEW-70-71 (Exhibit US-75)). The ITC held a series of public hearings at which various
Commissioners directly solicited comments from the parties on unforeseen developments.  (Tr., pp. 326-327
(Chairman Koplan) (Exhibit US-44); 343 (Commissioner Hillman) (Exhibit US-45); 1445 (Vice ChairmanOkun) (Exhibit US-46); and 2626 (Vice Chairman Okun)  (Exhibit US-47)). The ITC accepted post-hearing
written submissions with no page limits, several of which also discussed the issue of unforeseen developments."
4915 United States' second written submission, para. 168.
4916 Domestic Producer's Questionnaire, question I-7 (US-41); Importer's Questionnaire, question I-6
(US-42); Purchaser's Questionnaire, question I-6 (US-43).
4917 United States' first written submission, para. 954.
4918 European Communities' second written submission, para. 85.
4919 Appellate Body Report, US – Lamb , para. 73.WT/DS248/R, WT/DS249/R,
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Page 716
why conditions in the second clause of Article XIX:1(a) occurred as a result of circumstances in the
first clause.
(i) Unforeseen developments
Claims and arguments of the parties
10.68  The arguments of the parties can be found in Section VII.C.1 supra .
Analysis by the Panel
10.69  We will begin our assessment of the USITC's e xplanation of the unforeseen developments by
considering the competent authority's explanation of why they were unforeseen.  The Panel will then
move on to consider the explanation of how the unforeseen developments "resulted in" increased
imports.  In order to answer these questions, it is necessary to ask what the alleged unforeseendevelopments were and as of when they must have been unforeseen.
10.70  The Appellate Body in both Argentina – Footwear (EC) and Korea – Dairy quoted the
following statement from the US – Fur Felt Hats GATT Working Party report of 1951:
" '[U]nforeseen developments' should be interpreted to mean developments occurring
after the negotiation of the relevant tariff concession  which it would not be
reasonable to expect that the negotiators of the country making the concession could
and should have foreseen at the time when the concession was negotiated."
4920
10.71  In its report in Korea – Dairy , the Appellate Body made the following finding:
"And, such 'emergency actions' are to be in voked only in situations when, as a result
of obligations incurred under the GATT 1994, an importing Member finds itselfconfronted with developments it had not 'foreseen' or 'expected' when it incurred that
obligation."
4921
10.72  The United States argues that the four factors cited by the USITC, namely the Russian crisis,
the Asian crisis and the continued strength of the United States' market together with the persistent
appreciation of the US dollar, each constituted unforeseen developments.  It also argues that theconfluence, or simultaneous occurrence, of these three events amounted to an unforeseen
development.
4922
10.73  The complainants argue that none of the above events constituted unforeseen developments,
nor did any combination of them.4923  Moreover, they argue that the explanation of how the above
events have resulted in increased imports has not been performed in a manner that is reasoned andadequate.
10.74  Parties agree that, in the present dispute, the point in time at which developments should have
been unforeseen is that of the completion of the Uruguay Round.  The Panel will apply the above
                                                     
4920 See Appellate Body Reports, Argentina – Footwear (EC),  para. 96, and Korea – Dairy , para. 89,
citing US – Fur Felt Hats  , adopted 22 October 1951.
4921 See Appellate Body Reports, Argentina – Footwear (EC),  para. 93, and Korea – Dairy , para. 86.
4922 United States' first oral statement, para. 72.
4923 European Communities' first written submission, para. 151; China's first written submission, para.
97; Switzerland's first written submission, para. 137; Norway's first written submission, para. 139.WT/DS248/R, WT/DS249/R,
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Page 717
interpretation to determine if the USITC assessed whether the developments which it identified were
unforeseen as at the time that the Ur uguay Round negotiations were concluded.
The Asian and Russian crises
10.75  The complainants argue that the Asian and Russian crises could not have been unforeseen
because they were not unexpected.4924  With respect to the Russian crisis, the dissolution of the USSR
occurred in 1991.  New Zealand argues that the United States' negotiators were fully aware of this
when they agreed to tariff concessions during the Uruguay Round.4925  The complainants contend that
if a development had started before the concessions were granted, it could not be considered to have
been unforeseen.  For them, there is normally a close temporal connection between the unforeseen
developments and the increased imports.4926  Taking the figures from the USITC Report that show
consumption drops and export increases, they argue that the changes in steel markets were much more
pronounced after the dissolution of the former Soviet Union in 1991 than later on and could,
therefore, not be unforeseen after 1994.4927
10.76  The United States responds that the Southeast Asia and former USSR crises were perhaps
foreseeable in the general, hypothetical sense, but the timing, extent and ongoing effect on global steeltrade were not foreseen by the United States until well after the conclusion of the Uruguay Round.
4928
It claims that the unforeseen developments that  it is invoking took place after the Uruguay Round.
The East Asian financial crisis began in mid-1997, and although the Soviet Union collapsed in 1991,
with resulting dislocations in the successor states, these were not the developments that the USITC
found to be unforeseen.  Rather, the developments  in question were such that those countries'
conditions changed after 1996 from the condition prevalent at the time of the Uruguay Round
negotiations.4929
10.77  The Panel will first consider the USITC's explanation of the Asian crisis as an unforeseen
development before considering the Russian crisis, th e invocation of the strength of the United States'
economy and the appreciation of the US dollar, as well as the confluence of those factors.
Asian crisis
10.78  The USITC offered the following explanation in its initial report:
"[S]ignificant production capacity increases occurred during a period of disruption in
world steel markets.  The depreciation of several Asian currencies in late 1997 and
early 1998 significantly curtailed steel consumption in those countries and created apool of steel seeking alternative markets."
4930
10.79  For the Panel, this statement amounts to an identification of the depreciation of Asian
currencies, which occurred in 1997 and 1998, and its effects on the steel world market, as unforeseen
developments.  Although it does not provide an explanation as to why the development was
unforeseen, we can assume that, as the crisis began in 1997, it could not have been foreseen by the
                                                     
4924 Switzerland's first oral statement, delivered on behalf of the complainants, para. 15.
4925 New Zealand's first written submission, paras. 4.25-4.27.
4926 European Communities' first written submission, para 133; Norway's first written submission,
para. 121; China's first written submission, para. 90.
4927 Switzerland's first oral statement, delivered on behalf of the complainants, paras. 16-17.
4928 United States' first written submission, para. 930.
4929 United States' written reply to Panel question No. 11 at first substantive meeting.
4930 USITC Report, p. 58 (footnotes omitted).WT/DS248/R, WT/DS249/R,
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Page 718
United States negotiators in 1994, when the Uruguay Round ended.  Moreover, it is consistent with
the following statement of the USITC, which was made in the Second Supplementary Report:
"Growth rates in [South East Asian] countries exceeded eight percent per year in the
first half of the 1990s.  These high growth rates were supported by even sharper
growth in exports.  As late as the fall of 1997, economists projected continued growth
at similarly impressive rates for these emerging markets.  Despite this period of
intense growth and generally optimistic predictions, the 'Asian Financial Crisis' began
with the depreciation of the Thai baht in mid-1997.  The depreciation of the baht and
loss of investor confidence sparked a wider crisis that affected many developing
markets.  The crisis slowed economic growth and reduced demand for steel in manyemerging country markets.  Between 1997 and 1998, steel consumption in Indonesia,
Korea, Malaysia, the Philippines, and Thailand fell by 29.6 million tons, a drop of
41.4 percent.  In Korea alone finished steel consumption dropped by 14.5 million tons
or 34.4 percent.  The crisis also led to depreciations in the currencies of the
Philippines, Indonesia, Malaysia, and Korea with respect to the US dollar.  ByJanuary 1998, these currencies had declined between 38 and 76 percent in nominal
terms."
4931
10.80  Likewise, this statement identifies the Asian financial crisis as an unforeseen development,
which began in 1997.  It also explains that the development was not foreseen.  Based on the USITC
statements quoted above, the Panel concludes that the United States demonstrated that the Asian crisisand its effects on the steel world market could constitute an unforeseen development within the
meaning of Article XIX of GATT 1994, since the Asian Crisis took place after the United States last
negotiated its tariff concessions on the steel products covered by the investigation at issue.  We
explore in paragraphs 10.96-10.101 below, the USITC's explanation that the confluence of the Asian
financial crisis, together with other factors (the Russian financial crisis, the strong United States'economy and the strong US dollar) constituted unforeseen developments that resulted in increased
imports causing serious injury to the relevant domestic producers.
Russian crisis
10.81  With respect to the Russian crisis, the USITC stated, in its initial Report, that:
"The dissolution of the USSR led to significant increases in steel exports to the
United States from former USSR countries."
4932
10.82  Further, in the Second Supplementary Report, the USITC explains that:
"Although the dissolution of the former Soviet Union and the resulting economic
dislocations in the former Soviet republics predated the conclusion of the Uruguay
Round, unanticipated financial difficulties led to a sharp increase in exports of steel
from the former Soviet Union between 1996 and 1999.4933  In particular, as Russia
and other former republics experienced intense financial disruptions and currency
                                                     
4931 USITC Second Supplementary Report, p. 4 (footnotes omitted).
4932 USITC Report, p. 58 (footnotes omitted).
4933 (original footnote) Exports increased because redu ctions in steel production in the former Soviet
Union did not keep pace with declines in consumption.   Steel consumption fell more than 70 percent from 1991
to 1998.  USITC Pub. 3479, Vol. II at Table OVERVIEW-4.WT/DS248/R, WT/DS249/R,
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Page 719
fluctuations in this period, steel exports rose nearly 22 percent.4934  Other Eastern
European countries also emerged as net exporters of steel."4935
10.83  The unforeseen developments, as identified by the USITC, were the "unanticipated financial
difficulties", which, in particular, were the "intense financial disruptions and currency fluctuations"
between 1996 and 1999, resulting from the dissolution of the Soviet Union.
10.84  The Panel is of the view that this statement distinguishes between the foreseen financial
difficulties that arose from the dissolution of the USSR, and the financial difficulties that were
unforeseen.  The Panel is also of the view that there may be instances when an event which is already
known will develop into a situation initially unforeseen.  Therefore, an unforeseen development may
evolve from well-known prior facts.  Nevertheless, the competent authority must provide a reasonedand adequate explanation as to how the later deve lopments were unforeseen given the earlier known
facts.
10.85  Therefore, the Panel will accept, arguendo , that there may have been, between 1996 and
1999, unforeseen financial disruptions and currency fluctuations linked to the USSR dissolution that
were thus unforeseen at the conclusion of the Uruguay Round.
The strength of the US economy and the appreciation of the US dollar
10.86  The European Communities, Norway, Switzerland and China argue that the "robustness" of
the United States' market cannot be considered an "unforeseen development" by the United States,
because United States' economic policy was likely to have been conducted with this objective.
4936
These complainants argue that the growth of the United States' economy started in 1990, well before
the Uruguay Round, so it must have been foreseen.4937  The European Communities, Norway and
Switzerland also challenge the notion that such favourable developments are capable of being
considered unforeseen developments, since the term within the meaning of Article XIX is meant to
cover unfavourable developments or shocks to the system that are susceptible to lead to adverse
consequences.  Such is not the case of the "robustness" of the United States' economy and the strengthof the US dollar.
4938
10.87  The United States responds that nothing in Article XIX prevents the continued strength of a
market or the appreciation of a currency from constituting an unforeseen development.4939  It argues
that in US – Fur Felt Hats , the unforeseen development was a shift in fashion to a different sort of hat.
That shift in fashion was presumably unfavourable to the industries making the less fashionable hats,but that shift could probably not be described as "unfavourable" in any broader sense.  According to
the United States, US – Fur Felt Hats  supports the conclusion that an unforeseen development may be
a development that could be described as neutral or even positive in general terms, but which results
in a change in trade patterns that proves injurious to a particular industry.
4940
                                                     
4934 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-19 and Table OVERVIEW-5.
4935 USITC Second Supplementary Report, p. 4.
4936 European Communities' first written submission, para. 150; Switzerland's first written submission,
para. 136; Norway's first written submission, para. 138; China's first written submission, para. 100.
4937 Switzerland's first oral statement, delivered on behalf of the complainants, para. 19.
4938 European Communities' second written submission, para. 56; Norway's second written submission,
para. 40; Switzerland's second written submission, para. 31.
4939 United States' first written submission, para s. 972-973, citing USITC Second Supplementary
Report, p.1; USITC Report, Table OVERVIEW-16.
4940 United States' second oral statement, para. 106.WT/DS248/R, WT/DS249/R,
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10.88  The Panel turns immediately to the explanation afforded by the USITC, which states that:
"While other markets experienced significant turmoil and contraction after 1997,
demand in the United States remained robust.  Indeed, the US economy enjoyed anoverall economic expansion in the 1990s of unprecedented length.  Consequently, US
demand for steel remained strong."
10.89  From the above statement, it seems that th e competent authority did not interpret the
robustness of the United States' economy to be an "unforeseen development" in and of itself
4941, but
rather, it viewed the strength of the economy in the context of the turmoil in other markets.
Therefore, the Panel is of the view that the strength of the United States' market was considered by the
USITC along with the other alleged unforeseen developments and as part of a set of world eventswhich together  constituted unforeseen developments.
10.90  As regards the US dollar appreciation, the European Communities, Norway, China and
Switzerland argue that a change in the value of a currency such as the US dollar cannot be accepted as
an unforeseen development.
4942  According to the European Communities, China and Norway,
exchange-rate developments are foreseeable in two main senses.4943  First, it is foreseeable that the
exchange rate between two currencies that are not fixed will change over time.  Second, it is
foreseeable that the exchange rate of a currency of a country with a robust economy and low inflation
(such as the United States in the 1990s) will rise over time compared with the currency of a country
with a weak economy and high inflation rate (such as Russia).4944  For them, the value of the dollar in
relation to other currencies has regularly changed by significant amounts since the collapse of theBretton Woods system of fixed exchange rates in 1971.  Such changes can no longer be considered to
be "unforeseen", but it must, on the contrary, be considered to be quite expected that the dollar would
not remain stable vis-à-vis other currencies.
4945
                                                     
4941 However see at para. 976 of its first writte n submission, the United States argues that:
"The ITC report cited a number of unforeseen developments that resulted in the ten steel
products being imported into the United States in such increased quantities and under such
conditions as to cause serious injury to the domestic industries.  Each of those developments
was unforeseen in and of itself.  However, the confluence of this particular set of events canbe described as an unforeseen development."
See also the United States' written reply to Panel question No. 18 at the first substantive meeting:
"Are you relying/did the ITC rely on the robustness of the United States Dollar as an
unforeseen development?
The robustness of the United States dollar was a development which combined with the other
developments, namely, the currency crises in Southeast Asia and the former USSR countries
and the continued growth in steel demand in the US market as other markets declined, to
produce the increased volume of imports."
4942 European Communities' first written submission, para. 152; Switzerland's first written submission,
para. 138; Norway's first written submission, para. 140; China's first written submission, para. 101.
4943 European Communities', China's, and Norway's written replies to Panel question No. 10 at the first
substantive meeting.
4944 European Communities', China's, and Norway's written replies to Panel question No. 10 at the first
substantive meeting.
4945 Switzerland's first oral statement, delivered on behalf of the complainants, para. 20.WT/DS248/R, WT/DS249/R,
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10.91  The United States responds that nothing in Article XIX prevents the appreciation of a
currency from constituting an unforeseen development. The period under investigation saw persistent
and widespread appreciation of the US dollar against virtually all other major currencies.4946  T h e
United States argues that the fact that exchange rates change over time could be described as
foreseeable, but not necessarily foreseen.  Particular exchange rate developments, such as an
unusually rapid or severe change in rates, are not likely to have been foreseen at the time of a
particular concession.  It argues that the complainants have presented no evidence that the currency
disruptions that occurred prior to the import surges were in fact foreseen by anyone, much less that
those events were foreseen by any negotiator from the United States during the Uruguay Round.4947
10.92  Once again, the Panel turns immediately to the USITC explanation, which states that:
"Continued growth in the US market, comb ined with uncertainty and contraction in
other markets, led to significant upward pressure on the US dollar.  The dollar
appreciated significantly against many currencies during the period of investigation,
and that appreciation became more notable after the foreign currency dislocations of
1997 and 1998.  Between 1996 and the first quarter of 2001, many currenciesexperienced double-digit declines, in real terms, relative to the dollar.
4948  The high
value of the US dollar made the US market an especially attractive market for steel
products displaced from other markets."
10.93  Like the statement above regarding the strength of the United States' economy, this statement
by the competent authority shows that the appreciati on of the US dollar was not thought to be a stand-
alone "unforeseen development".  Instead, the USITC considered the relevance of the appreciation of
the US dollar "after the foreign currency dislocations of 1997 and 1998".  Presumably, it was the fact
that the United States dollar remained high while the Thai baht, the Russian ruble and other Southeast
Asian and Eastern European currencies became weak that allegedly resulted in increased imports.
Moreover, the competent authority recognized the link between the upward pressure on the dollar and
the combination of the growth in the United States' market with the contraction in other markets.
10.94  Since we believe the USITC did not regard the continued strength of the United States' market
and appreciation of the US dollar as a distinct development, separate from the other alleged
unforeseen developments, the Panel does not need to address the arguments of the complainants that
such factors could not constitute unforeseen developments.
10.95  The Panel will thus review the explanation provided by the USITC which, in our view, treated
the strength of the United States' market and the appreciation of the US dollar as factors that were part
of a confluence of developments that together caused turmoil in these markets.
The confluence of developments
10.96  The European Communities, China, Switzerland and Norway argue that no combination of
events cited by the USITC can constitute an unforeseen development.4949
                                                     
4946 United States' first written submission, para s. 972-973, citing USITC Second Supplementary
Report, p.1; USITC Report, Table OVERVIEW-16.
4947 United States' written reply to Panel question No. 10 at the first substantive meeting.
4948 (original footnote) USITC Pub. 3479, Vol. II, Table OVERVIEW-16.
4949 European Communities' first written submission, para. 151; China's first written submission, para.
97; Switzerland's first written submission, para. 137; Norway's first written submission, para. 139.WT/DS248/R, WT/DS249/R,
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Page 722
10.97  The United States argues that the robustness of the US dollar was a development which
combined with the other developments, namely, the currency crises in Asia and the former USSR and
the continued growth in steel demand in the United States' market as other markets declined, lead toincreased imports.
4950
10.98  The Panel has already accepted that the Russian and the Southeast Asian financial crises, at
least conceptually, could be considered unforeseen developments that did not exist at the end of the
Uruguay Round.  We have also found that the USIT C did not consider the strength of the United
States' economy and the appreciation of the US dollar as unforeseen developments  per se;  it had
referred to these factors in relation to other unforeseen developments, which together  had resulted in
increased imports causing or threatening to cause injury.
10.99  Article XIX does not preclude consideration of the confluence of a number of developments
as "unforeseen developments".  Accordingly, the Panel believes that confluence of developments can
form the basis of "unforeseen developments" for the purposes of Article XIX of GATT 1994.  The
Panel is of the view, therefore, that it is for each Member to demonstrate that a confluence of
circumstances that it considers were unforeseen at the time it concluded its tariff negotiations resultedin increased imports causing serious injury.
10.100  To the complainants' argument that the changes in steel markets were much more pronounced
in 1991 following the dissolution of the former Soviet Union than later on and could not, therefore, be
unforeseen after 1994, the Panel notes that the fact that the dissolution of the USSR and its overall
effects may have constituted an unforeseen development in 1991 does not mean that a subsequentfinancial crisis also resulting somehow from th e dissolution of the USSR, cannot, with other
developments, be considered part of a "confluence of unforeseen developments" in 1997 for the
purpose of Article XIX of GATT 1994.
4951
10.101  The Panel will now proceed to an assessment of whether the USITC provided a reasoned and
adequate explanation that the Asian and Russian crises taken together, alongside the additional factorsof the strength of the United States' economy and the appreciation of the US dollar, and their effects
on steel world markets, resulted  in increased imports into the United States causing or threatening to
cause serious injury to the relevant domestic producers.
(ii) " as a result of unforeseen developments and tariffs concessions"
Claims and arguments of the parties
10.102  The arguments of the parties can be found in Section VII.C.2.(d).
Analysis by the Panel
10.103  We recall that Article XIX of GATT 1994 reads as follows:
"If, as a result  of unforeseen developments and  of the effect of the obligations
incurred by a contracting party under this Agreement, including tariff concessions ,
any product is being imported into the territory of that contracting party in such
increased quantities and under such conditions as to cause or threaten serious injuryto domestic producers in that territory of like or directly competitive products, (…)."
                                                     
4950 United States' written reply to Panel question No. 17 at the first substantive meeting.
4951 Switzerland's first oral statement, delivered on behalf of the complainants, paras. 16-17.WT/DS248/R, WT/DS249/R,
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Page 723
10.104  The Appellate Body has interpreted the phrase "as a result of" in Article XIX:1(a) of GATT
1994 as a logical connection that exists between the firs t two clauses of that Article.  In other words, a
logical connection must be demonstrated to have existed between the elements of the first clause ofArticle XIX:1(a) – "as a result of unforeseen developments and of the effect of the obligations
incurred by a Member under this Agreement, including tariff concessions" – and the conditions set
forth in the second clause of that Article – "increased imports causing serious injury" – for the
imposition of a safeguard measure.
4952
Logical connection between unforeseen developments and "increased imports so as tocause serious injury"
10.105  In the following paragraphs, we note some of the references to the Russian crisis, the Asian
crisis and exchange rates in the initial USITC Report and the Second Supplementary Report including
the separate views of Commissioners Okun and Bragg.
10.106  The USITC offered the following statements, in its initial Report, with respect to:
"CCFRS:
These significant production capacity increases occurred during a period of disruption
in world steel markets. The depreciation of several Asian currencies in late 1997 and
early 1998 significantly curtailed steel consumption in those countries and created a
pool of steel seeking alternative markets.
4953  The dissolution of the USSR led to
significant increases in steel exports to the United States from former USSR
countries.4954 4955
Hot-rolled bar:
The timing of domestic producers' price declines do not correspond precisely to the
timing of the import surges.  The record, however, indicates that imports had a
negative effect on prices and that the domestic industry used different strategies over
the course of the period examined to comp ete with the imports.  The largest increase
in hot-rolled bar imports occurred in 1998, s hortly following the financial crisis that
led to sharply decreased steel consumption in several Asian countries.   Import
volumes increased by 29.5 percent from 1997 to 1998.4956 4957
Cold-finished bar:
A substantial increase in cold-finished bar imports occurred in 1998, shortly
following the financial crisis that led to sharply decreased steel consumption in
several Asian countries.4958
                                                     
4952 Appellate Body Reports, Argentina – Footwear (EC) , para. 92; Korea – Dairy , para. 85.
4953 (original footnote) CR and PR, p. OVERVIEW-17.
4954 (original footnote) CR and PR, p. OVERVIEW-18.
4955 USITC Report, p. 58.
4956 (original footnote) CR and PR, Table LONG-5.
4957 USITC Report, p. 96.
4958 USITC Report, p.106, fn. 630.WT/DS248/R, WT/DS249/R,
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Page 724
Rebar:
Rebar imports increased significantly in 1998, shortly following the financial crisis
that led to sharply decreased steel consumption in several Asian countries.4959
Stainless Steel Wire Rod:
We have taken into account a number of factors that affect the competitiveness of
domestic and imported stainless rod in the US market, including factors related to the
product itself, the degree of substitutability between the domestic and imported
articles, changes in world capacity and production, market conditions, and exchange
rates."4960
10.107  In a separate decision, Commissioner Okun made the following remark with respect to the
"Selection of Import Quotas" as part of a "Justification for Form of Relief":
"[T]he record indicates that the currencies of selected countries, many of which
export substantial amounts of steel to the United States, demonstrated substantial
depreciations relative to the US dollar.4961  Exchange rate fluctuations between the US
dollar and foreign currencies can have a significant effect on the relativecompetitiveness of global steelmakers selling products in the US market.  Quotas
prevent a surge of low-priced imports from countries that have experienced currency
depreciations."
4962
10.108  The USITC also appended the following to its December 2001 Report:
"THE ASIAN FINANCIAL CRISIS
The 'Asian Financial Crisis' began with the depreciation of the Thai baht in mid-1997,
followed by depreciations in the currenci es of the Philippines, Indonesia, Malaysia
and Korea.  During January 1996-January 1998, the currencies of these five countries
depreciated between 38 and 76% in nominal terms.  As these economies slowed, their
finished steel consumption fell significantly (figure OVERVIEW-7).  Finished steelconsumption in Indonesia, Korea, Malaysia, the Philippines and Thailand together
fell by 29.6 million tons during 1997-98, w ith the largest decl ine occurring with
respect to Korean finished steel consumption, 14.5 million tons.
4963
[…]
                                                     
4959 USITC Report, p. 113.
4960 USITC Report, p. 217.
4961 (original footnote) CR/PR at Table OVERVIEW-16.  All but two countries showed depreciations.
4962 Views of Vice Chairman Deanna Tanner Okun on Remedy, USITC Report, p.437.
4963 USITC Report, Vol. II, p. OVERVIEW-17; Followed this excerpt is Figure OVERVIEW-7, a
graph entitled "Finished steel consumption in sel ected Asian countries, 1991-99", demonstrating the
consumption trends for Indonesia, Korea, Malaysia, the Philippines and Thailand.  Unfortunately, we are unable
to reproduce the graph in the present Panel Reports because we do not have the data upon which the graph wasbased, p. OVERVIEW-18.WT/DS248/R, WT/DS249/R,
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Page 725
POST-USSR DEVELOPMENTS
Changes in Russia and other states formerly part of the USSR during 1991-2000 have
had an impact on the global steel market.  The shift in these states toward marketforces in 1992 precipitated a drop in overall economic activity, especially in industrial
output and investment such as machine building, which has been a major focus of the
USSR steel industry.  The problems in the overall post-USSR economy resulted in
sharp declines in both steel production (table OVERVIEW-3) and steel consumption
(table OVERVIEW-4).
Table OVERVIEW-3
Production of Crude Steel in Russia, Ukraine and the Former USSR, 1991-2000
Country 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Quantity (1,000 tons)
Russia(1)73,902 64,329 53,817 56,879 54,303 53,475 48,315 56,792 65,160
Ukraine(1)46,041 35,953 26,550 24,596 24,622 28,257 26,951 30,268 34,620
Former
USSR2 146,460 130,077 108,171 86,281 87,194 85,088 89,334 82,051 94,975(1)
1 Not available
2 Includes all of the states of the former USSR.  Virtually all of the steel production is in Russia, Ukraine and
Kazakhstan (in order of the volume produced).
Source:  IISI
Table OVERVIEW-4
Apparent Consumption of Finished Steel in Russia, Ukraine and the Former USSR,
1991-2000
Country 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Quantity (1,000 tons)
Russia(1)50,539 34,026 21,904 20,728 18,082 17,200 16,979 18,633 25,358
Ukraine(1)27,901 16,510 7,718 6,505 6,946 9,041 5,954 9,592 10,695
Former
USSR2 111,029 84,495 56,997 37,785 35,502 33,407 34,840 31,753 37,045 44,873
1 Not available
2 Includes all of the states of the former USSR.
Source:  IISI
The movement toward a market economy also resulted in a disruption of traditional
trade flows for steel within the former COMECON structure.  COMECON was set up
in 1949 to facilitate trade and economic cooperation between the USSR and certaincommunist countries.  The organization attempted to integrate the economies of
Eastern Europe with that of the USSR .  From 1949 to 1991, USSR steel exports
primarily went to COMECON members.  With the breakup of the USSR and
movement by the former USSR toward a market economy, COMECON became
obsolete.  The ending of COMECON in 1991 ma rked a loss to the former USSR of its
traditional foreign buyers of its steel.  The position of the former USSR in the global
steel market changed from a minor player in 1991 to the largest steel exporter in theWT/DS248/R, WT/DS249/R,
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Page 726
world by 1999.  These developments have resulted in trade frictions in many markets.
Anti-dumping investigations or orders have been initiated against imports of Russian
steel by 21 trading partners including Argentina, Brazil, Canada, Chile, China,Colombia, the EU, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines,
South Africa, Taiwan, Thailand, Turkey, the United States, Venezuela and Vietnam.
In addition, both the EU and the United States have negotiated agreements setting
quotas on imports of most Russian steel prod ucts.  The United States also has two
suspension agreements in place on imports of Russian hot-rolled steel and steel plate.
With the restructuring of the economy in the post-USSR period, energy and
transportation costs are rising, resulting in a significant increase in production costs.Full restructuring and movement toward market relations is hindered in part because
these mills continue to provide the entire wage base in some areas.  Several also
accounted for a sizable share of USSR regional agricultural production.  Therefore,
steel producers face decreased domestic demand and increased energy, transportation
and input costs while lacking the ability to cut costs by substantially reducing thenumber of employees.  One way steel producers have tried to resolve these problems
is to substantially increase exports (table OVERVIEW-5).
Table OVERVIEW-5
Exports of Steel from Russia, Ukraine and the Former USSR, 1991-2000
Country 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Quantity (1,000 tons)
Russia(1)7,912 18,388 28,275 30,178 29,762 28,798 27,377 30,313(1)
Ukraine(1)8,580 12,083 12,831 12,848 13,387 17,803 17,583 20,896(1)
Former USSR26,101 21,375 33,160 44,278 46,481 46,763 51,696 49,916 57,018(1)
1 Not available
2 Includes all of the states of the former USSR.
Source:  IISI
[…]
EXCHANGE RATES
Exchange rate fluctuations between the US dollar and foreign currencies can have a
significant effect on the relative competitiveness of global steelmakers selling
products in the US market.  As shown in table OVERVIEW-16, the dollar has
strengthened considerably against the currencies of many of the major import sources
for subject steel products during the period examined.  As a country's currencydepreciates against the dollar, the foreign producer can lower product prices
expressed in dollars in the US market while still receiving the same price expressed in
its home currency.  These shifts are mitigated somewhat in many countries as the
major raw materials used in steelmaking, such as iron ore, scrap, and metallurgical
coal and coke, are sold on a dollar-basis throughout the world.  However, forWT/DS248/R, WT/DS249/R,
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Page 727
countries that purchase raw materials in the global market, an estimated two-thirds of
the costs of steelmaking are still in local currencies.4964
[…]
Table OVERVIEW-16
Overall Appreciation and Depreciation Amounts for Currencies
of Selected Countries relative to the US dollar,
January-March 1996 through January-March 2001
Nominal Exchange Rate Real Exchange Rate
Country
Appreciation Depreciation A ppreciation Depreciation
Argentina – – – 11.5
Australia 43.4 – 48.1 –
Brazil – 52.0 – 24.9
Canada – 10.5 – 9.1
Germany – 30.4 – 36.0
India – 33.5 – 8.2
Indonesia – 76.3 – 31.1
Italy – 24.8 – 25.0
Japan – 10.4 – 20.1
Korea – 38.4 – 31.7
Latvia – 11.3 – 13.8
Mexico – 22.4 36.7 –
Netherlands – 31.1 – 33.6
Poland – 37.9 55.8 –
Romania – 89.7 10.9 –
Russia – 83.3 – 45.6
South Africa – 51.9 – 37.1
Spain – 31.2 – 31.2
Thailand – 41.5 – 37.0
Turkey – 91.9 – 19.2
United
Kingdom4.8 – 2.2 –
Source:  International Monetary Fund, International Financial Statistics , December 1999
and July 2001.
                                                     
4964(original footnote) Peter Marcus and Karlis Kirsis, Steel in 2001:  Constraints Unparalleled,
Opportunities Unmatched , presented to Steel Success Strategies XVI, World Steel Dynamics, 19 June 2001.WT/DS248/R, WT/DS249/R,
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Page 728
10.109  On 3 January 2002, the USTR asked the USITC to provide, inter alia , additional information
on unforeseen developments.  On 9 February 2002, the USITC responded to this request, submitting
its Second Supplementary Report, whic h states by way of introduction:
"We provide the following response to USTR's request that we identify any
unforeseen developments that led to the relevant steel products being imported into
the United States in such increased quantities as to be a substantial cause of serious
injury or threat thereof.  (…)
To the extent that WTO panel decisions have suggested that the concept of
'unforeseen' developments relates to the expectations of negotiators of the relevant
tariff concessions, we note that such an assessment is in many respects outside of thepurview of this agency, since multilateral trade negotiations are not within its
mandate, but are the responsibility of the USTR and relevant Executive Branch
agencies."
4965
10.110  The Second Supplementary Report then goes on to provide an explanation of "unforeseen
developments".  The USITC's explanation is rather brief:
"At the time of the Uruguay Round negotiations, and for some time after its
conclusion, there had been substantial overall economic growth in a number of
emerging markets, most notably those in southeast Asia.  Growth rates in those
countries exceeded eight percent per year in the first half of the 1990s.4966  These high
growth rates were supported by even sharper growth in exports.4967  As late as the fall
of 1997, economists projected continued growth at similarly impressive rates for
these emerging markets.4968  Despite this period of intense growth and generally
optimistic predictions, the "Asian Financial Crisis" began with the depreciation of the
Thai baht in mid-1997.4969  The depreciation of the baht and loss of investor
confidence sparked a wider crisis that affected many developing markets.  The crisisslowed economic growth and reduced demand for steel in many emerging country
markets.  Between 1997 and 1998, steel consumption in Indonesia, Korea, Malaysia,
the Philippines, and Thailand fell by 29.6 million tons, a drop of 41.4 percent.
4970  In
Korea alone finished steel consumption dropped by 14.5 million tons or 34.4
percent.4971  The crisis also led to depreciations in the currencies of the Philippines,
Indonesia, Malaysia, and Korea with respect to the US dollar.4972  By January 1998,
these currencies had declined between 38 and 76 percent in nominal terms.4973
                                                     
4965 (original footnote) USITC Second Supplementary Report, Attachment I, pp. 1-4 (Exhibit CC-11).
4966  (original footnote) World Economic Outlooks, October 1995-October 1997, Surveys by the Staff
of the International Monetary Fund, Exh. 19 of Minimill 201 Coalition (Long Products) Prehearing Injury Brief.
4967 (original footnote) World Economic Outlooks and APEC Economic Forecasts, Exhs. 19 and 20 of
Minimill 201 Coalition (Long Products) Prehearing Injury Brief.
4968 (original footnote) World Economic Outlooks,  Exh. 19 of Minimill 201 Coalition (Long Products)
Prehearing Injury Brief and pp. 20-21.
4969 (original footnote) Steel , Inv. No. TA-201-73, USITC Pub. 3479 (Dec. 2001), Vol II,
OVERVIEW-17.
4970 (original footnote) USITC Pub. 3479, Vol. II, OVERVIEW-17.
4971 (original footnote) USITC Pub. 3479, Vol. II, OVERVIEW-17.
4972 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-17.
4973 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-17.WT/DS248/R, WT/DS249/R,
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Page 729
Although the dissolution of the former Soviet Union and the resulting economic
dislocations in the former Soviet republics predated the conclusion of the Uruguay
Round, unanticipated financial difficulties led to a sharp increase in exports of steelfrom the former Soviet Union between 1996 and 1999.
4974  In particular, as Russia
and other former republics experienced intense financial disruptions and currency
fluctuations in this period, steel exports rose nearly 22 percent.4975  Other Eastern
European countries also emerged as net exporters of steel.4976
While other markets experienced significant turmoil and contraction after 1997,demand in the United States remained robust.  Indeed, the US economy enjoyed an
overall economic expansion in the 1990s of unprecedented length.  Consequently, USdemand for steel remained strong.  Apparent  US consumption of certain flat-rolled
carbon steel products rose by 7.8 percent between 1996 and 2000, and apparent US
consumption peaked in 2000.
4977  Apparent US consumption of long products rose by
20.5 percent between 1996 and 2000 and apparent US consumption for the period
peaked in 2000.4978  Apparent US consumption of tubular products rose 18.2 percent
between 1996 and 2000, with apparent US consumption peaking in 2000.4979
Apparent US consumption of stainless products increased 29.5 percent between 1996and 2000, with apparent US consumption peaking in 2000.
4980
Continued growth in the US market, combined with uncertainty and contraction inother markets, led to significant upward pressure on the US dollar.  The dollarappreciated significantly against many currencies during the period of investigation,
and that appreciation became more notable after the foreign currency dislocations of
1997 and 1998.  Between 1996 and the first quarter of 2001, many currencies
experienced double-digit declines, in real terms, relative to the dollar.
4981  The high
value of the US dollar made the US market an especially attractive market for steelproducts displaced from other markets.
Steel imports historically have played a role in the US market.
4982  After the beginning
of the Asian and Russian economic crises, however, unusually large volumes of
foreign steel production were displaced from foreign consumption.  The US market,
in which demand remained strong, was the destination for a significant portion of thatdisplaced foreign production.  Widespread currency devaluations made the displaced
exports especially attractive to US purchasers on price terms.  As currency
depreciations and economic contractions disrupted other markets, the share of steel
imports to the US market increased sharply and US prices declined."
4983 4984 4985
                                                     
4974 (original footnote) Exports increased because redu ctions in steel production in the former Soviet
Union did not keep pace with declines in consumption.   Steel consumption fell more than 70 percent from 1991
to 1998.  USITC Pub. 3479, Vol. II at Table OVERVIEW-4.
4975 (original footnote) USITC Pub. 3479, Vol. II at OVERVIEW-19 and Table OVERVIEW-5.
4976 (original footnote) Questionnaire Responses of US producers, importers, purchasers, and foreign
producers.
4977 (original footnote) INV-Y-209 at Table FLAT-ALT7.
4978 (original footnote) USITC Pub. 3479, Vol. III at Table LONG-C-1.
4979 (original footnote) USITC Pub. 3479, Vol. III at Table TUBULAR-C-1.
4980 (original footnote) USITC Pub. 3479, Vol. III at Table STAINLESS-C-1.
4981 (original footnote) USITC Pub. 3479, Vol. II at Table OVERVIEW-16.
4982 (original footnote) USITC Pub. 3479, Vol. II at Figure OVERVIEW-10.
4983 (original footnote) USITC Pub. 3479, Vol. II at Figures OVERVIEW-10 and OVERVIEW-16.WT/DS248/R, WT/DS249/R,
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Page 730
10.111  We also looked at Commissioner Bragg's separate opinion in the Second Supplementary
Report with respect to "unforeseen developments".  Her statement, in its entirety, is as follows:
"For each affirmative determination I rendered under Section 202(b)(1) of the Trade
Act, as I stated in my separate views on injury, I considered the condition of the
domestic industry over the course of the relevant business cycle, in order to properly
understand the role of imports in the US market over the period of investigation.  I
further examined factors other than imports that may be a cause of serious injury or
threat to the domestic industry.4986  Importantly, these other factors were also
considered within the context of the relevant business cycle.
The framework of my injury analyses was based upon the statutory directive that the
Commission consider the condition of each domestic industry over the course of the
relevant business cycle4987, as well as examine factors other than imports that may be
a cause of serious injury or threat to the domestic industry.4988  Importantly, both the
timing and trend of each domestic industry's business cycle are difficult, if not
impossible to anticipate, as well as those conditions of competition which canmagnify or diminish the operation of e ach domestic industry's business cycle.
Although the nature and importance of the business cycle for each domestic industry
is empirically recognized to varying degrees , it is only within the context of the
course of the relevant business cycle, including the unexpected and uncontrollable
upturn and downturn in the cycle, together with the unprecedented level of injurydemonstrated by the domestic industries and the unforeseen volume and timing of
increased imports, that one can adequately determine the full and relevant impact of
increased imports on the domestic industries over the entire period of investigation.
In particular, as the record data indicate, imports increased over the period of
investigation with many product categories at issue experiencing peak importvolumes in 1998.  It is apparent that these increased imports were the result of the
                                                                                                                                                                    
4984 (original footnote) Most of the increase in stainless and tool steel imports occurred late in the
period of investigation.  The record indicates that the dramatic changes in exchange rates for the US dollar
during the period of investigation led to increased imports of stainless and tool steel products during the latter
half of the period.  Moreover, while the Asian financial crisis and the dissolution of the Soviet Union (and theconsequent changes in the Russian and Eastern European markets for steel) may have played a smaller role than
they did on imports of other steel products covered by this investigation, their continued effect made the USmarket more attractive to imports of stainless and tool steel products.  These unforeseen developments affected
the conditions of competition under which stainless and tool steel imports caused serious injury or threatened to
cause serious injury to the domestic stainless bar, stainless wire rod, stainless wire, stainless fittings, and toolsteel industries.  See INV-Z-013.
4985 USITC Second Supplementary Report.
4986 (original footnote) In the investigation questionnaires, US producers, US importers, foreign
producers, and US purchasers identified certain developm ents (and whether the developments were unexpected)
during the last ten years that resulted in certain steel products under investigation being imported into the United
States in such increased quantities as to have an advers e impact on the domestic industries during the period
January 1996 to June 2001.  Generally, for each of the like product categories I found in my determinations, theresponses identified several common unforeseen developments, including the Asian economic crisis, Russianeconomic crisis, the collapse of the USSR., emergence of Eastern Europe and China as global steel producers,increasing US demand, the strength of the US dollar relative to foreign currencies, and lower prices of imports.
See Commission questionnaire responses from US producers, US importers, foreign producers, and US
purchasers indicating any developments and whether such developments were unexpected.
4987 (original footnote) 19 U.S.C. § 2252(c)(2)(A).
4988 (original footnote) 19 U.S.C. § 2252(c)(2)(B).WT/DS248/R, WT/DS249/R,
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Page 731
unforeseen global financial crises in Asia and Russia, as well as unanticipated levels
of global steel overcapacity, the collapse of foreign steel markets, emerging countries
beginning massive steel production, and foreign producers focusing their sales intothe lucrative US market, as discussed in my colleagues' response.
4989  Each of these
factors was identified in several questionnaire responses.  The timing of these imports
was such that the volume of imports increased just as the domestic producers
expected to enjoy gains in profitability given the simultaneous upswing in the
relevant business cycle.  As stated in my  views, historically, gains during upswings
are essential for domestic producers to build financial resources to withstand the
inevitable downturn in the cycle.  Thus, here the impact of opportunities lost duringan upswing in the cycle not only had an immediate impact on the domestic industry
by virtue of suppressed and depressed prices, lost sales, and resulting lost revenues,
but also produced carryover effects on the domestic industry, which lingered as the
cycle turned lower.
Having lost opportunities to the unforeseen increase and timing of imports during the
upturn in the relevant business cycle of each domestic industry, many of the
industries were therefore weakened in th eir ability to withstand a downturn and
unprepared for the continued impact of lower-priced and sustained imports.  As the
cycles turned lower towards the end of the investigation period, imports continued
entering the United States at relatively high levels further pressuring the domesticmarket.  The effects of injury carryover from the unexpected 1998 surges, together
with the more contemporaneous injury result ing from imports continuing to enter the
United States at high levels, had a combined hammering effect on the various
domestic industries and disrupted the ability of each domestic industry to adjust to the
business cycle.  As a result, profits for most domestic industries declined sharply andseveral domestic producers were forced into bankruptcy.
Accordingly, the unforeseen developments id entified in this investigation include the
Asian economic crisis, Russian economic crisis, the collapse of the USSR.,
emergence of Eastern Europe and China as global steel producers, increasing US
demand, the strength of the US dollar relative to foreign currencies, and lower pricesof imports.  Within the context of the relevant business cycle of each domestic
industry, these unforeseen developments, as identified by several questionnaire
responses, led to the relevant steel products being imported into the United States in
such unforeseen timing and increased quantities as to be a substantial cause of
unprecedented level of serious injury demonstrated by the domestic industry."
Claims and arguments of the parties
10.112  The arguments of the parties can be found in Section VII.C.2(d)(i) supra .
                                                     
4989 (original footnote) I concur with my colleagues' discussion regarding the response to question 1-
Unforeseen developments, with exception of the first three paragraphs.  Although I do not necessarily disagreewith the perspective provided in the first three paragraphs, I note that the parties and others did not have anopportunity to comment on this construction of "unforeseen developments."WT/DS248/R, WT/DS249/R,
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Page 732
Analysis by the Panel
10.113  Although all of the parties to this dispute recogn ize the need to show that a logical connection
exists between "unforeseen developments" and the increased imports which a Member is seeking toaddress through the use of a safeguard measure
4990, they differ on how this can be achieved.
10.114  For the complainants, there must be a "causal link" between "unforeseen developments" and
increased imports that cause or threaten to cause serious injury.4991  The investigating authority must
explain how these developments are linked to th e increased imports that they rely on for the
imposition of a safeguard measure.4992  For the complainants, the USITC's analysis was based on
scattered and incomplete facts and resulted in vague suggestions and speculations that severe currency
dislocations in the former USSR and Asia led to massive increases of exports, or reductions in steelimports, in these countries, which consequently increased the amounts of steel on the world market
and allegedly caused increased imports into the United States.  The USITC's assumptions rely on data
showing a decline in consumption of steel in th e affected markets. The USITC did not, however,
address whether production also declined in those markets.  According to the United States, the phrase
"as a result of" indicates that one thing is the "eff ect, consequence, issue, or outcome" of another.
Therefore, showing that a product is being imported in such quantities and under such conditions as to
cause serious injury as a result of unforeseen developments by itself establishes a logical connection
between the first and second clauses of Article XIX:1(a).  There is no need for a further demonstration
or explanation.
4993
10.115  The Panel agrees with New Zealand that it would be improper to reduce to a nullity the
obligation to explain how "unforeseen developmen ts" resulted in increased imports causing or
threatening to cause serious injury.  In some cases, the explanation may be as simple as bringing two
sets of facts together.  However, in other situations, it may require much more detailed analysis in
order to make clear the relationship that exists between the unforeseen developments and the
increased imports that are causing or threatening to cause serious injury.  The nature of the facts,including their complexity, will dictate the extent to which the relationship between the unforeseen
developments and increased imports causing injury needs to be explained. The timing of the
explanation, its extent and its quality are all factors that can affect whether a explanation is reasoned
and adequate.
10.116  First, the Panel notes that at no point in the initial USITC Report is the issue of "unforeseen
developments" per se  mentioned, except, as the complainants have pointed out, in a footnote in the
separate view of one commissioner explaining that  although such a demonstration is required in WTO
law, it is not required by US law.
4994  There is otherwise no discussion of the effects of unforeseen
developments for the specific safeguard measures at issue.  It is true that  the dissolution of the USSR
and the depreciation of Asian currencies are mentioned with respect to CCFRS.4995  T h e  r e l e v a n t
paragraph, which pertains to a discussion on causation, refers to the OVERVIEW section of the
Appendix to the Report, a 2-3 pages discussion on the Russian crisis, the Asian crisis and exchangerates. There are also additional references in the determinations for hot-rolled bar, cold-finished bar,
                                                     
4990 Appellate Body Reports, Argentina – Footwear (EC) , para. 92;  Korea – Dairy , para. 85.
4991 See the written replies of the European Communities, China, and Norway to Panel question No. 2
at the first substantive meeting.
4992 New Zealand's written reply to Panel question No. 2 at the first substantive meeting.
4993 United States' written reply to Panel question No. 2 at the first substantive meeting.
4994 Switzerland's first oral statement, paras. 8-10, citing USITC Report, Vol. I, separate opinion of
Commissioner Bragg, p. 270, footnote 4. (Exhibit CC-6).
4995 See para. 10.106.WT/DS248/R, WT/DS249/R,
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Page 733
rebar and stainless steel rod, as listed in paragraphs 10.106-10.108 above.  In the OVERVIEW
section, the Russian and Asia crises as well as exchange rate fluctuations are identified, and post-
USSR changes are even referred to as "developments"4996, but the identification of these crises and
fluctuations is not done within the context of an explanation of whether they constituted unforeseen
developments and whether they resulted in increased imports causing injury.
10.117  In addition, in its initial Report, the USITC stat ed that "[t]he dissolution of the USSR led to
significant increases in steel exports to the United  States from former USSR countries", again without
any supporting data.4997  Moreover, the United States points in its submissions to the increase of
imports from Russia, Kazakhstan and Lithuania.4998  These figures were part of a chart of imports
from numerous countries (INV-Y-180), but the chart was cross-referred in the USITC Report only tosupport statements relating to NAFTA imports
4999 or imports generally without any discussion of
whether the imports were as a result of unforeseen developments.5000  More importantly, they were not
cited in support of, or included in, any discussion relating to unforeseen developments.  Likewise,
therefore, they cannot be used before the Panel to fill gaps in the USITC's reasoning.
10.118  In summary, there are only ad hoc references to the Asian and Russian crises in the initial
USITC Report, which did not address the issue of "unforeseen developments" per se .  Moreover,
there is no adequate discussion of the linkage between unforeseen developments and increased
imports causing serious injury in relation to each of the specific safeguard measures at issues in this
dispute.
10.119  We examine now the February Second Supplementary Report which begins with the
following statement:
"We provide the following response to USTR's request that we identify any
unforeseen developments that led to the relevant steel products being imported into
the United States in such increased quantities as to be a substantial cause of serious
injury or threat thereof.  (…)"
10.120  This may be an acknowledgement by the USITC that it was, for the first time, formally
identifying "unforeseen developments" that resulted  in the relevant steel products being imported into
the United States in such increased quantities as to cause serious injury or the threat thereof, within
the meaning of Article XIX of GATT 1994.  We note in this regard the statement by the USITC that
"To the extent that WTO panel decisions have suggested that the concept of 'unforeseen'developments relates to the expectations of negotiators of the relevant tariff concessions, we note that
such an assessment is in many respects outside of  the purview of this agency, since multilateral trade
                                                     
4996 See para. 10.108.
4997 USITC Report, p. 58.
4998 United States' first written submission, paras. 970-971, citing USITC Dataweb tables (US-49),
which were not included in the report of the competent authority, and INV-Y-180 :-(US-40), which was cited in
the report of the competent authority but for reasons having nothing to do with an explanation of unforeseendevelopments.
4999 USITC Report, pp. 167-169, footnotes 1026, 1032, 1044; p. 179, footnote 1109; pp. 213-214,
footnotes 1354-1355 and 1357-1361; pp. 222-223, footnotes 1433-1437; similar cross-references can be foundamong the Commissioners' separate views.
5000 USITC Report, p. 210, footnote 1328; p.213, footnote 1353; p. 218, footnote 1402; p. 222, footnote
1432; p. 371, footnote 88; pp. 372-373, footnote 98; p.  374, footnote 108; pp. 387-388, footnote 165; p. 396,
footnote 203; p. 402, footnote 245; similar cross-references can be found among the Commissioners' separateviews.WT/DS248/R, WT/DS249/R,
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Page 734
negotiations are not within its mandate, but are the responsibility of the USTR and relevant Executive
Branch agencies."5001
10.121  In the Secondary Supplementary Report, the USITC insists on the overall effects  of the Asian
and Russian financial crisis together with the strong US dollar and economy to displace steel to other
markets (and evidenced by what it calls "trade frictions in many markets").  Following the Russian
crisis, for instance, anti-dumping investigations or orders had been initiated against imports of
Russian steel by 21 trading partners including Argentina, Brazil, Canada, Chile, China, Colombia, the
EU, India, Indonesia, Korea, Malaysia, Mexico, Peru, the Philippines, South Africa, Taiwan,
Thailand, Turkey, the United States, Venezuela and Vietnam.
10.122  In our view, the weakness of the USITC Report is  that, although it describes a plausible set of
unforeseen developments that may have resulted in increased imports to the United States from
various sources, it falls short of demonstrating that such developments actually resulted in increased
imports into the United States causing serious injury to the relevant domestic producers.
10.123  The Panel is of the view that even if "large volumes of foreign steel production were
displaced from foreign consumption"5002 this does not, in itself, imply that imports to the United
States increased as a result of unforeseen developments. Article XIX of GATT, however, requires a
demonstration that the unforeseen development resulted in increased imports into  the United States.
In our view, the USITC's explanation failed to link these steel market displacements to the specific
increased imports into the United States  at issue.
10.124  The USITC does refer to increased imports:  "In particular, as the record data indicate,
imports increased over the period of investigation with many product categories at issue experiencing
peak import volumes in 1998".  However, again such a reference is made without any supporting data.
The USITC adds that "as currency depreciations and economic contractions disrupted other markets
the share of steel imports to the US market increased sharply and US prices declined" and
"[w]idespread currency devaluations made the displaced exports especially attractive to USpurchasers on price terms".  While this may have been true, and we note in this regard the increased
imports data contained in the USITC's increased imports findings, there is no reference to any specific
supporting discussion or evidence.
10.125  It may very well be that the contractions in consumption to which the USITC referred in some
parts of the world resulted in increased imports to the United States, especially if overproduction ofsteel products generally in the world steel market led to price suppression.  Although this may be a
plausible explanation, the USITC did not provide any data to support its general assertion that the
confluence of unforeseen developments resulted in the specific  increased imports at issue in this
dispute.  The Panel is of the view that in light of  the complexity of the matter, a more sophisticated
and detailed economic analysis was called for.
10.126  As the complainants have rightly pointed out, the USITC's explanation relates to steel
production in general and does not describe how the unforeseen developments resulted in increasedimports in respect of the specific  steel products at issue.
5003
                                                     
5001 USITC Second Supplementary Report, Attachment I, pp. 1-4 (Exhibit CC-11).
5002 See para. 10.110.
5003 European Communities' first written submission, paras. 136-139; Switzerland's first written
submission, para. 122-125; Norway's first written submission, paras. 124-127; China's first written submission,paras. 94-96, New Zealand's first written submission, para. 4.20.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
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Page 735
10.127  The Panel finds that while it is not necessary for an unforeseen development to affect only
one economic sector, or to affect segments of an economic sector or industry differently, it was
necessary for the USITC to explain how the increased imports of the specific steel products subject ofthe investigation were linked to and resulted from the confluence of unforeseen developments.
Presumably, the Asian and Russian crises affected some countries worse than others and certain steel
products more than others depending on the countries' respective production fo such products.  This
was certainly the view of producers who stated in  USITC questionnaires for example that the Asian
financial crisis was having an adverse impact on the operation of the domestic industry with respect to
stainless steel wire, but not with respect to stainless steel rod, stainless steel bar or rebar.
5004
10.128  In spite of what it asked the producers to do in the questionnaires, the USITC made no
attempt to differentiate between the impact that the alleged unforeseen developments had on the
different product sectors to which the various safeguard measures related.
10.129  In a footnote, the USITC stated:
"Most of the increase in stainless and tool steel imports  occurred late in the period of
investigation.  The record indicates that the dramatic changes in exchange rates for
the US dollar during the period of investigation led to increased imports of stainless
and tool steel products during the latter half of the period.  Moreover, while the Asian
financial crisis and the dissolution of the Soviet Union (and the consequent changes
in the Russian and Eastern European markets for steel) may have played a smaller
role than they did on imports of other steel products covered by this investigation ,
their continued effect made the US market more attractive to imports of stainless and
tool steel products.  These unforeseen developments affected the conditions of
competition under which stainless and tool steel imports caused serious injury or
threatened to cause serious injury to the domestic stainless bar, stainless wire rod,
stainless wire, stainless fittings, and tool steel industries.  See INV-Z-013."5005
10.130  The USITC did not further develop this point but instead, simply asserted that "unforeseen
developments resulted "as the record data indicate, [in] imports increased over the period of
investigation with many product categories at issue experiencing peak import volumes in 1998".5006
The USITC did not back-up such an allegation by pointing to the relevant data for each specific steelsafeguard measures at issue.
10.131  The same is true with Commissioner Bragg who provided additional separate views on
unforeseen developments in the February Second Supplementary Report.  Leaving aside the question
of the value of one Commissioner's view in relation to the majority, Commissioner Bragg's asserts
clearly "that these increased imports were the result of the unforeseen global financial crises in Asia
and Russia…".  However, the Commissioner does not back-up her conclusion, stating simply that the
conclusion in her cited sentence  "is apparent".  In a footnote she adds: "(…) resulted in certain steel
products under investigation being imported into the United States in such increased quantities  as to
have an adverse impact on the domestic industries during the period January 1996 to June 2001."
(emphasis added).  Here again, Commissioner Bragg seems to be able to conclude that "certain" steel
products increased. However, she did not specify which ones and how increased imports for each of
the safeguard measures were connected to the identified confluence of unforeseen developments.
                                                     
5004 Table STAINLESS-108, USITC Report, Vol. III, p. STAINLESS-89, and Table LONG-102,
USITC Report, Vol. II, p. LONG-100.
5005 USITC, Second Supplementary Report, at footnote 24, p. 4.
5006 See para. 10.111.WT/DS248/R, WT/DS249/R,
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Page 736
10.132  Although the United States argues that there were data to support the USITC's analysis, which
extended beyond consumption data for the most severely affected countries in south east Asia and
production and consumption data for the former USSR republics5007, the Panel is concerned with this
evidence which was presented as relevant evidence for the first time before the Panel and was not
cited in the USITC Report as part of a reasoned and adequate explanation of unforeseen
developments.
10.133  For instance, the United States points in its submission5008 to parts of the USITC Report,
which contain footnote references to tables that show imports by country and by product for the entire
period of investigation.5009  It is undoubtedly true that these tables contained data that could have been
used to explain how unforeseen developments resulted in increased imports that caused injury.However, the competent authority did no such thin g.  In fact, the text to which the footnotes
correspond is either totally unrelated to an explanation of unforeseen developments, or it deals
generally with imports without specifying from where those imports came.
10.134  In its submissions, the United States also points to the increase of imports from Indonesia,
Korea, Malaysia, the Philippines and Thailand.
5010  We find that this ex post  supporting evidence,
which relies on information not found or mentioned in the report of the competent authority, (but
available on the USITC website), may be useful to dispel alternative arguments put forth by the
complainants, and it may even be the proper explanat ion of how unforeseen developments resulted in
increased imports.  However, it raises the issue of whether the United States is, at this later stage of
the WTO dispute settlement process, trying to fill gaps left by the USITC in its explanation providedin its published Report.
10.135  The Panel believes that in light of the complexities deriving from the confluence of
unforeseen developments that the USITC referred to, coupled with the complexity of the case at hand,
the explanation provided by the USITC how unfores een developments resulted in increased imports
causing serious injury is not reasoned and adequate.  Moreover, it is not supported by relevant dataand it does not demonstrate, as a matter of fact, that such unforeseen developments resulted in
increased imports into the United States of the sp ecific steel products that are the subject of the
safeguard measures at issue.
10.136  The complainants also argue, in particular, that there was no demonstration that those
unforeseen developments resulted in increased imports from Russia and that the United States was notentitled to take account of increased imports from Russia.  We address this issue below.
                                                     
5007 United States' written reply to Panel question No. 7 at the second substantive meeting.
5008 United States' first written submission, paras. 966 – 970.
5009 The sections of the USITC Report to which the United States has brought our attention are: pp. 65-
66 (CCFRS), 99-100 (hot-rolled bar), 107-108 (cold-finished bar), 115-116 (rebar), 168-170  (certain welded
pipe), 178-180 (FFTJ), 213-214 (stainless steel bar), 222-223 (stainless steel rod), 259-260 (stainless steel wire,Commissioner Koplan), 303-305 (carbon flat products and stainless steel wire and wire rope, Commissioner
Bragg), 309-310 (tin mill, Commissioner Miller), 347 (stainless steel wire and wire rope, Commissioner
Delaney).
5010 United States' first written submission, paras. 962-965, citing China's first written submission, para.
103 and USITC Dataweb tables (US-49).WT/DS248/R, WT/DS249/R,
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Page 737
Logical connection between a Member's tariff concessions and increased imports
causing serious injury
Claims and arguments of the parties
10.137  The arguments of the parties can be found in Section VII.C.2.(d) supra .
Analysis by the Panel
10.138  The complainants' arguments arise out of the language of Article XIX:1(a), which provides
inter alia  that increased imports causing injury must occur " as a result of  unforeseen developments
and of the effect of  the obligations incurred by a contracting party under this Agreement, including
tariff concessions ."
10.139  The Appellate Body in Korea – Dairy  and Argentina – Footwear (EC)  stated:
"With respect to the phrase "of the effect of the obligations incurred by a Member
under this Agreement, including tariff concessions … ", we believe that this phrase
simply means that it must be demonstrated, as a matter of fact, that the importing
Member has incurred obligations under the GATT 1994, including tariff concessions .
Here, we note that the Schedules annexed to the GATT 1994 are made an integralpart of Part I of that Agreement, pursuant to paragraph 7 of Article II of the GATT
1994.  Therefore, any concession or commitment in a Member's Schedule is subject
to the obligations contained in Article II of the GATT 1994."
5011  (emphasis added)
10.140  It seems to us that when the Appellate Body wrote "this phrase simply means" it was
interpreting "as a result of … tariff concessions" to mean that the logical connection between tariffconcessions and increased imports causing serious injury is proven once there is evidence that the
importing Member has tariff concessions for the relevant product.
10.141  However, the complainants have argued that the present dispute raises a different issue.  For
them, the issue is whether a Member can invoke a safeguard measure in order to protect its industry
from increased imports coming from a non-WTO Member – in other words, from a country withwhich it has no relevant WTO obligations or tariff concession.
10.142  The Panel agrees with the parties that safeguard measures are to be used against imports of
products for which WTO tariff concessions have been granted.  The issue here, however, is that it is
not clear whether the USITC wanted to argue that the confluence of unforeseen developments led to
increased imports from Russia or the ex-Soviet Republics per se .  In its initial Report, the USITC
indeed asserts "[t]he dissolution of the USSR led to  significant increases in steel exports to the United
States from former USSR countries."
5012  In its Second Supplementary Report, USITC also submits
that "unanticipated financial difficulties led to a sharp increase in exports of steel from the former
Soviet Union between 1996 and 1999.5013" Yet, towards the end of its demonstration, the USITC
seems to argue rather that unforeseen developments together led generally to world displacement of
                                                     
5011 Appellate Body Report, Argentina – Footwear (EC) , para. 91; Appellate Body Report, Korea –
Dairy , para. 84.
5012 USITC Report, p. 58 (footnotes omitted).
5013 Exports increased because reductions in steel pr oduction in the former Soviet Union did not keep
pace with declines in consumption.  Steel consumptio n fell more than 70 percent from 1991 to 1998.  USITC
Pub. 3479, Vol. II at Table OVERVIEW-4.WT/DS248/R, WT/DS249/R,
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Page 738
steel markets that resulted in increased imports of steel products into the United States from various
and numerous foreign sources:
"Steel imports historically have played a role in the US market.5014  After the
beginning of the Asian and Russian economic crises, however, unusually large
volumes of foreign steel production were displaced from foreign consumption.  The
US market, in which demand remained strong, was the destination for a significant
portion of that displaced foreign production.  Widespread currency devaluations made
the displaced exports especially attractive to US purchasers on price terms.  As
currency depreciations and economic contractions disrupted other markets, the share
of steel imports to the US market increased sharply and US pricesdeclined."
5015 5016 5017
10.143  The Panel understands the United States' arguments to be that the displacements of steel on
world markets led to increased imports to the United States from all sources, and not only to increased
imports from Asia and Russia. We believe the USITC could argue that the geographical location of
the birth or origin of unforeseen developments may differ from the origin of increased imports, butthis hypothesis calls for a reasoned and adequate explanation of such correlation of events and effects.
10.144  We are of the view that this later USITC's explanation of the effects of such a confluence of
unforeseen developments leading to increased imports from numerous sources seems plausible but it
is not sufficiently supported and explained.  Therefore, in light of our ultimate conclusion in
paragraphs 10.145-10.150 below, the Panel sees no need to examine the complainants' argument thatincreased imports (directly) from Russia are not relevant on the grounds that the United States has no
tariff concessions with Russia.
4. Conclusion
10.145  In sum, the Panel believes that the complexity of the unforeseen developments pointed to by
USITC called for a more elaborate demonstration and supporting data than that provided by theUSITC.  For instance, although USITC states that "[t]he US market, in which demand remained
strong, was the destination for a significant portion of that displaced foreign production"
5018, one is
left to wonder how much steel was displaced in the first place and from where.  If the portion being
imported to the United States was thought by the competent authority to be "a significant portion",
this would suggest that the USITC was aware of how much was displaced in total, as well as howmuch was displaced to the United States as opposed to other countries, or at least the proportion.
                                                     
5014 (original footnote) USITC Pub. 3479, Vol. II at Figure OVERVIEW-10.
5015 (original footnote) USITC Pub. 3479, Vol. II at Figures OVERVIEW-10 and OVERVIEW-16.
5016 (original footnote) Most of the increase in stainless and tool steel imports occurred late in the
period of investigation.  The record indicates that the dramatic changes in exchange rates for the US dollar
during the period of investigation led to increased imports of stainless and tool steel products during the latter
half of the period.  Moreover, while the Asian financial crisis and the dissolution of the Soviet Union (and theconsequent changes in the Russian and Eastern European markets for steel) may have played a smaller role than
they did on imports of other steel products covered by this investigation, their continued effect made the USmarket more attractive to imports of stainless and tool steel products.  These unforeseen developments affected
the conditions of competition under which stainless and tool steel imports caused serious injury or threatened to
cause serious injury to the domestic stainless bar, stainless wire rod, stainless wire, stainless fittings, and tool
steel industries.  See INV-Z-013.
5017 USITC Second Supplementary Report.
5018 See para. 10.110.WT/DS248/R, WT/DS249/R,
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Page 739
10.146  We believe that, the USITC should have offered a more comprehensive and coherent
explanation as to how the unforeseen developments resulted in  increased imports into the United
States, their origin and their extent.  We believe the USITC could argue that the geographical locationof the birth or origin of unforeseen developments may differ from the origin of increased imports, but
failed to provide a reasoned and adequate explanation to that effect.
10.147  The Panel recalls that since the demonstration of unforeseen developments is a pre-requisite
to the imposition of a safeguard measure, such demonstration must be performed for each safeguard
measure.  Even if unforeseen developments provide the same justification for several safeguard
measures, the Panel believes that the USITC was obliged to explain why this is so and why the
specific products under examination were affected individually by the confluence of unforeseendevelopments.
10.148  On the basis of the foregoing, the Panel finds that, in light of the complexity of the allegations
made by USITC, including its reliance on a confluence of economic factors, the USITC failed to
provide a reasoned and adequate explanation of how the confluence of unforeseen developments it
pointed to had resulted in increased imports into the United States of the specific steel products at
issue – causing serious injury to the relevant domestic producers.  Therefore, there is no need to
examine the remainder of the arguments raised by  the complainants, including whether the facts
supported the USITC's unforeseen developments' findings.
10.149  For all of the above reasons, the Panel finds that the USITC's unforeseen development
findings do not provide a reasoned and adequate explanation of how the confluence of the Asian andRussian Crises, together with the strong United States' economy and US dollar, actually resulted in
specific increased imports into the United States  causing serious injury to the relevant domestic
producers.
10.150  Therefore, the Panel finds that all safeguard measures at issue in this dispute are inconsistent
with the requirements of Article XIX:1(a) of GATT 1994 and Article 3.1 of the Agreement onSafeguards with regard to the demonstration of unforeseen developments.
D. C
LAIMS RELATING TO INCREASED IMPORTS
1. Claims and arguments of the parties
10.151  The claims and arguments of the parties regarding "increased imports" are set out in
Sections VII.F.2-4 supra .5019
2. Relevant WTO provisions
10.152  Article 2.1 of the Agreement on Safeguards, which sets forth the conditions for the
application of a safeguard measure, reads as follows:
"A Member may apply a safeguard measure to a product only if that Member has
determined, pursuant to the provisions set out below, that such product is being
                                                     
5019 The Panel is aware of the fact that some of the complainants did not invoke Article XIX of GATT
1994 in support of their claims relating to increased imports.  Accordingly, the Panel has not examined such
claims but, rather, has focused on the claims made under Articles 2 and 4 of the Agreement on Safeguards,
which were made by all the complainants.  The Panel cons iders that this approach does not in any way affect the
parties' rights in relation to their respective claims and defences relating to increased imports in this dispute.WT/DS248/R, WT/DS249/R,
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Page 740
imported into its territory in such increased quantities, absolute or relative to domestic
production, and under such conditions as to cause or threaten to cause serious injury
to the domestic industry that produces the like or directly competitiveproducts." (footnote omitted)
10.153  Article 4.2 sets forth the operational requirements for determining whether the conditions
identified in Article 2.1 exist.  Regarding increased imports, Article 4.2(a) requires in relevant part
that:
"[I]n the investigation to determine whether increased imports have caused or are
threatening to cause serious injury to a domestic industry under the terms of this
Agreement, the competent authorities shall evaluate … the rate and amount of theincrease in imports of the product concerned in absolute and relative terms …"
3. Analysis by the Panel
(a) The requirements of Articles 2.1 of the Agreement on Safeguards
10.154  Article 2.1 of the Agreement on Safeguards requires that before a Member applies a safeguard
measure, it determines "that [a] product is being imported into its territory in such increasedquantities, absolute or relative to domestic production, and under such conditions as to cause or
threaten to cause serious injury to the domestic in dustry that produces like or directly competitive
products …".
10.155  All parties agree that Article 2.1 contains three conditions that must be satisfied before a
safeguard measure can be imposed and one of these conditions is concerned with "increased imports".Parties disagree on whether Article 2.1 imposes any threshold for this "increased imports"
requirement whether quantitative and/or qualitative.
10.156  The complainants refer to Argentina – Footwear (EC)  where the Appellate Body stated that:
"[I]ncreased quantities of imports should have been unforeseen or unexpected… In
our view the determination of whether the requirements of imports 'in such increasedquantities' is met is not merely mathematical or technical requirements. In other
words, it is not enough for an investigation to show simply that imports of the product
this year were more than last year – or five years ago.  Again, and it bears repeating,
not just any increased quantities of imports will suffice.  There must be ' such
increased quantities' as to cause or threat en to cause serious injury to the domestic
industry in order to fulfil this requirement for applying a safeguard measure.  And this
language in both Article 2.1 of the Agreement on Safeguards  and Article XIX:1(a) of
the GATT 1994, we believe, requires that the increase in imports must have been
recent enough, sudden enough, sharp enough, and significant enough, both
quantitatively and qualitatively, to cause or threaten to cause 'serious injury'."
5020
10.157  The United States takes issue with this interpretation by the Appellate Body of the wording of
Article 2.1 of the Agreement on Safeguards.  For the United States, the Appellate Body could nothave read into Article 2.1 requirements that were not envisaged by the drafters of the treaty.  In
particular, the United States points to the wording of Article 2.1 which does not include any reference
to the terms "recent", "sudden", "significant" and "sharp".  Moreover, the United States is of the view
                                                     
5020 Appellate Body Report, Argentina – Footwear (EC) , para. 131.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 741
that once a competent authority has determined that imports have increased, it is entitled to, and it
will, examine whether such increased imports are causing serious injury so that only increased
imports that are causing serious injury will authorize WTO compatible safeguard measures.  Onlyonce the competent authority has reached such findings relating to the serious injury and causation
can it make an overall determination that increased imports are causing serious injury to the producers
of domestic like products.  In other words, the Unit ed States argues that whether the increased imports
are recent enough , sudden enough , sharp enough , and significant enough to cause or threaten serious
injury are questions that are answered as competent authorities proceed with the remainder of their
analysis ( i.e., with their consideration of serious injury or threat thereof and causation).  According to
the United States, these analyses need not form a part of the evaluation of the threshold issue ofwhether the imports have increased either absolutely or relative to the domestic industry.
5021
10.158  The Panel notes, first, that all parties agree that Article 2.1 requires that imports have
increased.  A conclusion that imports have increased, would normally call for a comparison between
the levels of imports in different periods or at different points in time.  Article XIX of GATT 1994
and Article 2.1 of the Agreement on Safeguards are silent on precisely which points in time are to bethe basis for the comparison.
10.159  However, Article 2.1 of the Agreement on Safeguards requires that "a product is being
imported in … increased quantities".  The Panel believes that the use of the present tense in the verb
phrase "is being imported" in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a)
of the GATT 1994 indicates that it is necessary for the competent authorities to examine recent
imports and that the increase in imports was "recent".  The Panel notes that neither the Agreement on
Safeguards nor Article XIX of GATT 1994 specify expressly the length of the period of investigation
for the purpose of increased imports.
10.160  The complainants do not challenge the choice of a five-year period of investigation per se .
Complainants rather disagree with the fact that, generally, the USITC did not focus sufficiently on thesituation of imports in the latest part of the period of investigation.
10.161  The Panel believes that whether imports have recently increased, therefore, calls for an
identification of the relevant recent period as well as an assessment of the situation of imports during
that recent period, on a case-by-case basis.  Moreover, the amount of (absolute or relative) increased
imports in practice often shows not an unequivo cal upward movement, but instead both upward and
downward movements which alternate ov er time with different amplitudes.
5022  Since there is no
defined or prescribed periods within which imports must be compared, a competent authority must
conduct a quantitative and qualitative analysis of the features of the development of import numbers
over the entire period of investigation and assess whether, overall, imports have increased recently.5023
10.162  As regards the question of how recently the imports must have increased, the Panel notes, as
the Panel in US – Line Pipe  did5024, that Article 2.1 of the Agreement on Safeguards speaks of a
product that "is being imported … in such increased quantities".  Thus, imports need not be increas ing
at the time of the determination; what is necessary is that imports have  increas ed, if the products
continue "being imported" in (such) increas ed quantities.  The Panel, therefore, agrees with the US –
Line Pipe  Panel's view that the fact that the increase in imports must be "recent" does not mean that it
                                                     
5021 United States' first written submission, para. 177.
5022 In this regard, see as illustrative examples, the graphs on absolute and relative imports represented
hereafter in this Section on Increased Imports.
5023 See also Panel Report, Argentina – Footwear (EC), para. 8.161.
5024 Panel Report, US – Line Pipe , para. 7.207.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 742
must continue up to the period immediately preceding the investigating authority's determination, nor
up to the very end of the period of investigation.5025  As pointed out by the Panel in  US – Line
Pipe5026, the most recent data must be the focus, but should not be considered  in isolation from the
data pertaining to the less recent portion of the period of investigation.  However, as indicated by the
present continuous "are being", there is an implicat ion that imports, in the present, remain at higher
(i.e. increased) levels.
10.163  Whether a decrease in imports at the end of the period of investigation, in the individual case,
prevents a finding of increased imports in the sense of Article 2.1 of the Agreement on Safeguards
will, therefore, depend on whether, despite the later decrease, a previous increase nevertheless results
in the product (still) "being imported in (such) increased quantities".  In this evaluation, factors thatmust be taken into account are the duration and the degree of the decrease at the end of the relevant
period of investigation, as well as the nature, for instance the sharpness and the extent, of the increase
that intervened beforehand.
10.164  To give an extreme example, a short and very recent slight decrease would not detract from
an overall increase if imports have increased tenfold over the several years beforehand.  Conversely,to give an opposite extreme example, one could no longer talk about a product that "is being imported
in (such) increased quantities", or in fact in  any increased quantities at all, if, at the time of the
determination, import numbers have plummeted nearly to zero or to a level below any past point in
the period of investigation.
5027
10.165  The Panel believes that, in their investigation whether imports have increased in the recent
period, and whether increased imports are causing serious injury to the domestic producers of like or
directly competitive domestic products, competen t authorities are required to consider the  trends   in
imports over the period of investigation, as suggested by Article 4.2(a).5028  While Article 4.2(a)
requires the evaluation of the "rate and amount of the increase in imports … in absolute and relative
terms", the Panel sees no basis for the argument that this rate must always accelerate or that the ratemust always be positive at each point in time during the period of investigation.
10.166  Moreover, the Panel recalls that the very purpose of a safeguard measure is to address the
results of unexpected events (unforeseen developments pursuant to Article XIX of GATT), namely
increased imports causing serious injury.  This unforeseen and unexpected character of the
developments resulting in the increased imports as well as the emergency nature of safeguardmeasures calls for an assessment of whether imports increased suddenly so that the situation became
one of emergency for which safeguard measures became necessary.  The Panel believes therefore that
increased imports must be "sudden".
10.167  We consider that when the Appellate Body stated "that the increase in imports must have
been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and
qualitatively, to cause or threaten to cause 'serious injury'"
5029, it was operating under the mandate of
Article 3.2 of the DSU which is to clarify the existing provisions, here the meaning of in "such
                                                     
5025 Panel Report, US – Line Pipe , para. 7.207.
5026 Panel Report, US – Line Pipe , para. 7.207.
5027 We do not intend to rule out that an exception could be made, if, despite the deep drop, there are
indications that this drop is only temporary and in some sense artificial.  See, also, Panel Report, Argentina –
Footwear (EC) , para. 8.159.
5028 Appellate Body Report, Argentina – Footwear (EC) , para. 129; and Panel Report, Argentina –
Footwear (EC) , para. 8.276.
5029 Appellate Body Report, Argentina – Footwear (EC) , para. 131.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 743
increased quantities".5030  In the Panel's view, a finding that imports have increased pursuant to Article
2.1 can be made when an increase evidences a certain degree of recentness, suddenness, sharpness
and significance.
10.168  The Panel agrees with the United States that there are no absolute standards as regards  how
sudden, recent, and significant the increase must be in order to qualify as an "increase" in the sense of
Article 2.1 of the Agreement on Safeguards.  In contrast, from the absence of  absolute standards one
cannot conclude that there are no standards at all and that any increase between any two identified
points in time meets the requirements of Article 2.1 of the Agreement on Safeguards.  The Panel also
agrees with the United States that the inquiry is not whether imports have increased "recently and
suddenly"  in the abstract .  A  concrete  evaluation is what is called for.  A  competent authority must
conduct an analysis considering all the features of the development of import quantities and that an
increase in imports has a certain degree of being recent and sudden.
10.169  The Panel believes that although a competent authority must make a single5031 determination
that increased imports were such as to cause serious injury, the Panel considers that distinct findings
are necessary for each of the requirements of Article 2.1 of the Agreement on Safeguards.  Before aMember can impose a safeguard measure, it must have demonstrated relevant unforeseen
developments (Article XIX of GATT 1994) and it must have made a determination that increased
imports were causing serious injury (Article 2.1 of the Agreement on Safeguards) to the relevant
domestic producers.  The Panel considers that the investigation of the three requirements that
compose the determination that increased imports are causing serious injury and the demonstrationwhether this resulted from unforeseen developments, do not have to be performed or completed in any
specific order.  Together these distinct findings must provide a reasoned and adequate explanation
(Articles 2, 3.1 and 4 of the Agreement on Safeguards) as to how the relevant pre-requisites to
imposing a WTO compatible safeguards measure are satisfied.
10.170  Having said this, the Panel agrees with the United States that in assessing whether the facts
justify a conclusion that imports had increased in "such quantities " and "under such conditions" the
competent authorities must demonstrate in the firs t instance that there was an increase in imports,
absolute or relative to domestic production.  This does not mean that ultimately "any increase will
do", as the competent authorities must also determine whether such an increase is sudden and recent
within a relevant period of time determined on a case-by-case basis.
10.171  The Panel believes, however, that such a competent authority's findings on increased imports,
distinct from its causality and injury findings, may be informed by the results of its entire
investigation.  The competent authority's findings on the first requirement – increased imports – may
have effects on the injury findings or on the causation findings, as prescribed by Article 4.2(a).  As a
competent authority considers the other conditions necessary for imposition of a safeguard, it
determines, as directed by the Appellate Body in Argentina – Footwear (EC) , whether the increase in
imports was recent enough, sudden enough, and significant enough to cause or threaten serious injuryto the relevant domestic producers.
                                                     
5030 The Panel is also bound by the mandate to clarify the existing provisions, which obviously also
implies, as pointed out in Article 19.2 of the DSU that, in their findings and recommendations, a panel and theAppellate Body "cannot add to or diminish the rights and obligations provided in the covered agreements."
5031 See Appellate Body Report, US – Wheat Gluten  paras. 73-74: "We believe that Articles 4.2(a) and
4.2(b) of the  Agreement on Safeguards   must be given a mutually consistent interpretation, particularly in light
of the explicit textual connection between these two provisions.  According to the opening clause ofArticle 4.2(b) – "The determination referred to in subparagraph (a) shall not be made unless …" –  both 
provisions lay down rules governing a single  determination, made under Article 4.2(a)".WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 744
(b) Full-year 2001 data
10.172  The complainants argue that the USITC ignored im port trends in the most recent past, i.e. the
full-year data for 2001 (including the last six months that followed the end of the period ofinvestigation) insisting that the import data for the full-year of 2001 were available when the USITC
updated its Report and completed its determination in February 2002.  According to the United States,
fundamental legal and practical considerations shou ld lead the Panel to reject the complainants'
attempts to expand the period of investigation to encompass full-year 2001 data that are not on the
record of the USITC's investigation that began in early July 2001.
10.173  The Panel agrees with the United States that a competent authority cannot be requested to
take into account data and evidence that is not available at the time it made its determination.
5032  In
this case, the determination in the sense of Article 2.1 of the Agreement on Safeguards, i.e the
determination on increased imports, causation and serious injury, was made by the USITC in October
2001.  At that time, data for the full-year of 2001 could not possibly have been available.
Furthermore, such data related to events (at least partially) occurring after  the determination.  The fact
that new data becomes public after a determination has been made does not result in an obligation tomake a new determination that replaces the one already made.  What the President did in 2002 was
not a "determination" within the meaning of Article 2 of the Agreement on Safeguards because the
President made no determination that increased imports were causing serious injury to the relevant
domestic producers.  Therefore, data for import volumes for the second half of 2001 was not relevant
for the question whether there were relevant "incr eased imports" with respect to determinations made
by the USITC in October 2001.
10.174  The Panel will, therefore, proceed to evaluate the USITC's findings on increased imports for
each product at issue on the basis of the data that was available to the USITC at the end of the entire
period of investigation, i.e. by the end of June 2001.  The Panel will thus not take into account data
relating to the second half of 2001.
5033
(c) The recent period in the present investigation
10.175  The Panel notes again that the Agreement on Safeguards does not specify how long the period
of investigation in a safeguards investigation should be, or whether or how that period should be
segmented for purposes of analysis. In light of the Panel's above conclusion that the competent
authority must have determined that imports increased suddenly and recently, the Panel will generally
                                                     
5032 See Appellate Body Report, US – Cotton Yarn , at para. 77:  "The exercise of due diligence by a
Member cannot imply, however, the examination of evidence that did not exist and that, therefore, could notpossibly have been taken into account when the Member made its determination.  The demonstration by aMember that a particular product is being imported into its territory in such increased quantities as to cause
serious damage (or actual threat thereof) to the domestic industry can be based only on facts and evidence whichexisted at the time the determination was made.  The urgent nature of such an investigation may not permit the
Member to delay its determination in order to take into  account evidence that might be available only at a future
date.  Even a determination on the existence of threat of serious injury must be based on projectionsextrapolating from  existing  data."  See also Appellate Body Report, US – Lamb , paras. 150 and 172.
5033 The Panel recalls that a Member can only impose a safeguard measure to the extent and for the
duration necessary to remedy the serious injury caused by increased imports.  Delays between the determination
that increased imports were causing serious injury and the imposition of the safeguard measure will generally
affect the decision pursuant to Articles 5 and 7 of the Agreement on Safeguard.  If too long a delay exists
between the determination by a competent authority and the actual imposition of the safeguard measure suchimporting Member may be faced with a situation where the application of a safeguard measure is no longer
necessary to remedy serious injury.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 745
focus its analysis on the situation of imports in th e more recent period that preceded the end of the
period of investigation, keeping in mind that the situation of imports in the earlier part of the period of
investigation may also shed light on the movements of imports.
(d) Standard of review
10.176  Finally, with regard to the assessment of the factual aspects of the USITC's determination of
an increase in imports, the Panel recalls that the standard of review to be applied is whether the
published report on the investigation contains an adequate and reasoned explanation of how the facts
before the USITC support the determination made with respect to increased imports.5034
10.177  The Panel now proceeds to examine the USITC findings on increased imports for each of the
products at issue.
4. Measure-by-measure analysis
(a) CCFRS
(i) The USITC's findings
10.178  As regards increased imports of CCFRS, the USITC determined:
"We find that the statutory criterion of increased imports is met.5035  We find that total
imports of certain carbon flat-rolled steel, including slabs, plate, hot-rolled, cold-
rolled, and coated steel increased in both actual terms and relative to domestic
production.  In actual terms, total imports increased from 18.4 million short tons in
1996 to 20.9 million short tons in 2000, an increase of 13.7 percent.5036  Total imports
declined from 11.5 million short tons in interim 2000 to 6.9 million short tons ininterim 2001.
5037  The ratio of imports to domestic production (including production
for captive consumption) also increased during the POI, from 10.0 percent in 1996 to
10.5 percent in 2000.5038  Imports also increased relative to domestic commercial
shipments.  Total imports were equivalent to 32.6 percent of domestic commercial
shipments in 2000, up from 31.5 percent in 1996.5039  In interim 2001 total imports
were equivalent to 22.7 percent of domestic commercial shipments.5040
We note that in 1998, the midpoint of the full five-year period examined, there was a
rapid and dramatic increase in imports, as import volumes both in absolute terms and
as a percentage of US production peaked.  Imports of certain carbon flat-rolled steelwere 25.3 million short tons, an increase of 37.5 percent over 1996 levels.  While the
volume of imports declined in 1999 and 2000 from this peak, the absolute volume
                                                     
5034 See Panel Report, US – Wheat Gluten , para. 8.5; Panel Report, US – Line Pipe, para. 7.194.
5035 (original footnote) Commissioner Devaney joins in the analysis of the majority, related to increased
imports, as presented here.  He further finds that if the analysis is performed over the entire industry as  he hasdefined it, the result is the same, i.e., the statutory criterion of increased imports is met.
5036 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5037 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5038 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5039(original footnote)  CR and PR at Tables FLAT-12 to FLAT-15, FLAT-17, FLAT-C-2 to FLAT-C-5
and FLAT-C-7.
5040 (original footnote) CR and PR at Tables FLAT-12 to FLAT-15, FLAT-17, FLAT-C-2 to FLAT-C-5
and FLAT-C-7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 746
and ratio of imports to US production were still significantly higher in 1999 and 2000
than at the beginning of the period.  The significance of this trend in imports to the
domestic industry's performance is discussed below under Substantial Cause ofSerious Injury."
5041
10.179  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5042
Absolute Imports
010,000,00020,000,00030,000,00040,000,00050,000,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
                                                     
5041 USITC Report, Vol. I, pp. 49-50
5042 The data represented in the following two graphs are contained in the USITC Report, in particular
in INV-Y-209 at Table FLAT-ALT 7.  As is visible from the graphs, the data for 2001 have not been
"annualized" but have been left in thei r raw format.  The Panel finds this format sufficient to reach a conclusion
on the trends of imports in the most recent past and therefore does not take a position on the question of whetherand how these six-month data can be "annualized", a question on which there is disagreement between theparties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 747
Imports/Production ratio (Percentage)
05101520253035404550
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.180  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(a) supra .
(iii) Analysis by the Panel
Absolute imports
10.181  The Panel believes that the USITC's determination on increased imports of CCFRS, as
published in its report5043, does not contain an adequate and reasoned explanation of how the facts
support the determination.  The USITC recognized that the sharpest increase took place in the period
until 1998, and that, since then, imports have decreased, in 1999 and 2000, back to levels nearly as
low as the 1996 level.  The USITC also noted the significant decrease between interim 2000 andinterim 2001 (from 11.5 to 6.9 million short tons)
5044, but it did not seem to focus on, or at least
account for, this most recent trend in concluding that imports are "still significantly higher … than at
the beginning of the period".5045  Given the sharpness and significance of this most recent decrease the
Panel does not find that the USITC explanation as published in its report5046 contains an adequate and
reasoned explanation of how the facts support th e determination CCRFS "is being imported in …
increased quantities".
10.182  It may well be that the increase occurring until 1998 could have qualified at the time as an
increase satisfying the criteria of Article 2.1 of the Agreement on Safeguards, but the Panel need not
express itself on that point because that increase, in itself, was no longer recent enough at the time of
the determination.  In other words, the increase occurring until 1998, taken by itself and with the
                                                     
5043 USITC Report, pp. 49–50.
5044 USITC Report, p. 49.
5045 USITC Report, p. 50.
5046 USITC Report, pp. 49–50.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 748
decrease thereafter, is not a sufficient factual basis for supporting a determination in October 2001
that CCFRS "is being imported in … increased quantities".
Relative imports
10.183  The Panel also considers that the USITC's determination on increased imports of CCFRS
relative to domestic production5047 does not contain an adequate and reasoned explanation of how the
facts support the determination.  The USITC recognized that the sharpest increase took place in the
period until 1998, and that, since then, imports have decreased, in 1999 and 2000, to levels nearly as
low as the level in 1996.  The USITC noted the significant decrease in interim 2001 only in terms of
imports relative to domestic commercial shipments5048, not in terms of imports relative to domestic
production, the criterion stipulated in Article 2.1 of the Agreement on Safeguards.
10.184  As in the situation of absolute imports, the USITC did not seem to focus on, or at least
account for, this most recent decline to levels be low any point of the investigated period, when it
concluded that the ratio of imports to domestic production was "still significantly higher … than at the
beginning of the period".5049  Given the sharpness and significance of this most recent decrease, the
Panel does not find the USITC explanation, as published in its Report5050 to be adequate and reasoned
enough to support a conclusion that CCFRS, as a proportion to domestic production, "is being
imported in … increased quantities".
10.185  The Panel also need not express itself on the question whether the increase of imports,
relative to domestic production occurring until 1998 could have qualified as an increase satisfying the
criteria of Article 2.1 of the Agreement on Safeguards because, in any event, that increase, in itself,was no longer recent enough at the time of the determination.  In other words, the increase occurring
until 1998, taken for itself and with the decrease thereafter, is not a sufficient factual basis for
supporting a determination in October 2001 that CCFRS "is being imported in … increased
quantities".
Conclusion
10.186  The Panel consequently finds that the USITC Report did not provide an adequate and
reasoned explanation of how the facts support th e determination that CCFRS was being imported in
"increased quantities", contrary to the requirement of Article 2.1 Agreement on Safeguards that the
product "is being imported in (such) increased quantities".
10.187  The Panel notes that the parties have also made submissions with regard to the question
whether imports of the various products comprised in CCFRS, taken individually, have increased.
However, the USITC did not make a determination on individual products within the CCFRS group.
The USITC made its determination on increased imports only with regard to a category defined as
CCFRS products.5051  This determination, pursuant to which safeguard action has been taken against
                                                     
5047 USITC Report, pp. 49–50.
5048 USITC Report, p. 50.
5049 USITC Report, p. 50.
5050 USITC Report, pp. 49–50.
5051 USITC Report, Vol. I, p. 49.  See also USITC Report, Vol. I, p. 25.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 749
imports of CCFRS, is subject to review in this dispute.  Therefore, in light of the Panel's standard of
review, the Panel will not scrutinize individual items comprised in CCFRS.5052
(b) Tin mill products
(i) The USITC's findings
10.188  As regards increased imports of tin mill, the USITC determined:
"We find that the statutory criterion of increased imports is met.  We find that total
imports5053 of tin mill products have increased both in actual terms and relative to
domestic production during the POI.5054  In actual terms, imports increased from
444,684 short tons in 1996 to a peak level of 698,543 short tons in 1999, and while
they declined to 580,196 short tons in 2000, the overall increase from 1996 to 2000was 30.5 percent.
5055  Imports of tin mill products were 263,091 short tons in interim
2001, 11.1 percent lower than in interim 2000.5056  The ratio of imports to domestic
production increased during the POI, from 12.0 percent to 17.4 percent in 2000.5057
The ratio of imports to production was 20.1 percent during the import volume peak in1999. "
5058 5059
10.189  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5060
                                                     
5052 We note the complainants' claims that the tariff quota imposed on slabs constitute a distinct
measure from that imposed on the rest of CCFRS.  The Panel does not examine these claims and arguments heregiven that the USITC made its determination on the basis of CCFRS as a single product which included slabs.
5053 (original footnote) Including imports from NAFTA countries.
5054 (original footnote) We recognize that the official import data for tin mill products, which is used in
our discussion, overstate the imports subject to this in vestigation to some degree because it includes tin mill
products specifically excluded from the request.  For example, using Joint Respondents' data, imports of tin millproducts increased from 414,013 short tons in 1996 to a peak level of 642,353 short tons in 1999,  and declinedto 491,836 short tons in 2000.  The overall increase from 1996 to 2000 was 18.8 percent.  See Appendix 2 to
Request and Joint Respondents' Tin Mill Prehearing Brief at 5-7.
5055 (original footnote) CR and PR at Tables FLAT-10 and FLAT-C-8.
5056 (original footnote) CR and PR at Tables FLAT-10 and FLAT-C-8.
5057 (original footnote) CR and PR at Table FLAT-10.  Tin mill product imports were 17.7 percent of
domestic production in interim 2001, compared to 17.1 percent in interim 2000.  Id.  Joint Respondents alleged
that if the tin mill products excluded from the request were subtracted from the official import data, the ratio of
subject imports to domestic production would increase from 11.2 percent in 1996 to a peak of 18.5 percent in
1999 and decline to 14.8 percent in 2000.  Joint Respondents' Tin Mill Prehearing Brief at 7.
5058 (original footnote) CR and PR at Table FLAT-10.
5059 USITC Report, p. I-71.
5060 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table FLAT-10 at FLAT-14 and Table FLAT C-8.  As is visible from the graphs, the data for 2001 have not
been "annualized" but have been left in their raw format .  The Panel finds this format sufficient to reach a
conclusion on the trends of imports in the most recent past and therefore does not take a position on the questionof whether and how these six-month data can be "annualized", a question on which there is disagreementbetween the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 750
Imports (Tons)
0100,000200,000300,000400,000500,000600,000700,000800,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
05101520253035404550
1996 1997 1998 1999 2000 2001
Years
Percentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.190  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5.(b) as well as O.1 and 3 supra .
(iii) Analysis by the Panel
10.191  Before being able to review the USITC's determination on increased imports of tin mill the
Panel needs to address the issue of the divergent findings made by individual USITC Commissioners:WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 751
four of the six Commissioners made findings on tin mill as a separate product5061, but the two other
Commissioners (Bragg and Devaney) treated tin mill products as part of the larger CCFRS
category.5062  The four who examined tin mill as a separate product made a common affirmative
finding on increased imports and on serious injury, but later diverged on the question of causation, for
which only Commissioner Miller made an affirmative determination.5063  Ultimately, therefore, only
Commissioner Miller reached positive findings regarding tin mill as a separate product.  The two
Commissioners who treated tin mill as part of CCFRS, reached a positive conclusion on that larger
category.  Despite the divergent product definitions, the USITC Report concludes that three
Commissioners have made "an affirmative determination regarding imports of carbon and alloy tin
mill products."5064
10.192  In the March Proclamation, the President did not select any of the various affirmative
determinations on tin mill as the basis of the decision to impose the safeguard measure on tin mill.
Rather, pursuant to domestic law, the President "decided to consider the determinations of the groups
of commissioners voting in the affirmative with regard to [tin mill products and stainless steel wire] to
be the determination of the [US]ITC".5065  Therefore, it is apparent that the President based his
determination on the findings of all three Commissioners (Bragg, Devaney and Miller), although
those three commissioners did not perform their analysis on the basis of the same like product
definition.
10.193  The Panel recalls that a Member can impose a safeguard measure only after it has published a
report that demonstrates that the WTO pre-requisites for the imposition of a safeguard are satisfied.The Panel agrees with the United States that there must always be a "connection" between the
investigation by a Member's competent authorities and the Member's decision to take a safeguard
measure.
5066  In fact, the measure ultimately imposed must be based on a determination and the
underlying investigation, as published in the report.  This report must thus provide a reasoned and
adequate explanation of how the WTO requirements relating to the imposition of safeguard measuresare satisfied.  In application of its standard of review, a panel must review whether these requirements
are satisfied.
10.194  On its face, the USITC (the three Commissioners voting in the affirmative) made divergent
findings relating to tin mill and these different findings are impossible to reconcile, given that they are
based on differently defined products.  Whatever flexibility the Agreement on Safeguards accords toWTO Members as regards the structure of their internal decision-making processes
5067, it is clear from
Articles 2.1 and 3.1 of the Agreement on Safegu ards, Article 11 of the DSU and our standard of
review that the competent authorities must always provide a reasoned and adequate explanation of
their determinations and demonstrations.  If they do not, a Panel cannot uphold the measure.  The
Panel fails to see how the USITC Report, as it stands, can provide a logical explanation of the
measure imposed on tin mill and of why the conditions for its imposition, here, increased imports, are
satisfied.  There is no indication of how interested parties (and the Panel for that matter) can identifywhich of the various and inconsistent findings by various Commissioners is the basis for the
imposition of the safeguard measure on tin mill.
                                                     
5061 USITC Report, pp. I-71 et seq.
5062 USITC Report, p. I-71, footnote 368 and p. 279.
5063 USITC Report, pp. I-307-309.
5064 USITC Report, p. I-25.
5065 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.
5066 United States' First Written Submission, para. 207.
5067 See Appellate Body Report, US – Line Pipe , para. 158.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 752
10.195  The Panel notes that the issue at hand is not one where a Member publishes dissenting
opinions and where these dissents depart from the findings which serve as the basis of a measure.  In
the instant case, the three various individual findings all served as the basis of the "determination ofthe [US]ITC".
5068  The Panel believes that a Member is not permitted under Articles 2.1 and 3.1 of the
Agreement on Safeguards to base a safeguard measure on a determination supported by a set of
explanations each of which is different and impossible to reconcile with the other.  Such findings
cannot simultaneously form the basis of a determination.  For the purposes of the Agreement on
Safeguards, with regard to, for instance, the question of whether imports have increased, it makes a
difference whether the product at issue is tin mill or a much broader category called CCFRS and
containing tin mill products.  The difference is that the import numbers for different productdefinitions will not be the same.
10.196  The Panel believes that this is not the situation that was at issue in US – Line Pipe  where the
Appellate Body held that no violation of the Agreement on Safeguards had occurred.  The question in
US – Line Pipe  was whether a  determination  could leave open the question whether there was serious
injury or threat of serious injury.  From the perspective of the Agreement on Safeguards, theconditions of Article 2.1 are satisfied equally by serious injury and by threat of serious injury.
5069  The
challenge was not that the  underlying report was split and contained different reasonings that could
not be reconciled one with another and that, therefore, there was a violation of Articles 2.1 and 3.1 of
the Agreement on Safeguards.
10.197  The Panel adheres to the Appellate Body's statements made in  US – Line Pipe on the
Members' discretion regarding their internal decision-making process.  Specifically, the Appellate
Body found:
"[W]e are not concerned with how the competent authorities of WTO Members reach
their determinations in applying safeguard measures.  The Agreement on Safeguards
does not prescribe the internal decision-making process for making such adetermination.  That is entirely up to WTO Members in the exercise of their
sovereignty.  We are concerned only with the determination itself, which is a singular
act for which a WTO Member may be accountable in WTO dispute settlement.  It is
of no matter to us whether that singular act results from a decision by one, one
hundred, or – as here – six individual decision-makers under the municipal law of thatWTO Member.  What matters to us is whether the determination, however it is
decided domestically, meets the requirements of the Agreement on Safeguards ."
5070
10.198  Against this background, the Panel is not concerned with the fact that, as in the present case,
only the findings of one commissioner making an affirmative determination relate to tin mill as a
separate product, while the United States' domestic law requires at least three affirmative
determinations.  It is for each Member to determine, in their domestic law, how many affirmative
decisions are necessary in a collegial decision-making body, be it one, three, four (a majority) or six(unanimity).  Obviously, the question of consistency or inconsistency with domestic law is not
relevant to the question of WTO consistency.  Therefore, the Panel sees no inconsistency with WTO
law in the fact itself that only one commissioner re ached affirmative findings with regard to tin mill
products as a separate product.
                                                     
5068 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.
5069 Appellate Body Report, US – Line Pipe , para. 170.
5070 Appellate Body Report, US – Line Pipe , para. 158.