WORLD TRADE WT/DS24/R
8November 1996
ORGANIZATION(96-4540)
Original: English
UNITED STATES -RESTRICTIONS ONIMPORTS OFCOTTON
AND MAN-MADE FIBRE UNDERWEAR
Report ofthePanel
The report ofthePanel onUnited States -Restrictions onImports ofCotton and
Man-Made Fibre Underwear isbeing circulated toallMembers, pursuant totheDSU.
Thereport isbeing circulated asanunrestricted document from 8November 1996
pursuant totheProcedures fortheCirculation andDerestriction ofWTO Documents
(WT/L/160/Rev.1). Members arereminded thatinaccordance with theDSU only
parties tothedispute may appeal apanel report, anappeal shall belimited toissues
oflawcovered inthepanel report andlegal interpretations developed bythepanel,
andthatthere shall benoexparte communications with thepanel orAppellate Body
concerning matters under consideration bythepanel orAppellate Body.-i-
TABLE OFCONTENTS
Page
I Introduction 1
II Factual Aspects 1
- Outward Processing Regime: "807 Trade" and"Guaranteed Access Levels" 1
- Guaranteed Access Levels 3
- Specific Limits 3
- Chronology ofEvents 3
- Review bytheTMB 4
- Further Consultations 5
- Action Under theDispute Settlement Understanding 5
III Findings Requested 5
- Other Issues 8
IV Third Party Submission: India 8
V Main Arguments bytheParties 10
A. TheSafeguard Action Taken bytheUnited States 10
- Statement ofSerious Damage: Category 352/652
(March 1995 Market Statement) 10
- Attribution toExporting Countries 11
- Consultations with Costa Rica 12
B. Review bytheTextiles Monitoring Body 13
- Determining Domestic Market Data 13
- TheJuly 1995 Market Statement 14
- Outcome oftheTMB review 15
C. TheStandard ofReview andBurden ofProof 16
- Standard ofReview -the"Fur FeltHat" Case 16
- Applying the"Fur FeltHat" Case tothePresent Case 18
- Views ofCosta Rica onStandard ofReview 20
- Views ofAuthors Relating toStandard ofReview 22
- Relationship toOther GATT Provisions 22
- Deference toNational Authorities 24
- Burden ofProof 26
D. Article 6oftheATC: General Views onitsApplication 28
E. Requirements fortheApplication ofaSafeguard Measure 30
- Determination ofSerious Damage orActual Threat Thereof 30
- Increase inImports intotheUnited States 32
- Application ofSafeguard toIndividual Member(s) 33
- Obligation ofDemonstration -Fulfilment ofSubstantive
Requirements 33
- Consultations onSafeguard 34
- Data Required forConsultations andOther Relevant
Information 34-ii-
Page
V Main Arguments bytheParties (cont 'd)
F. Serious Damage orActual Threat Thereof 35
- TheMarch 1995 Market Statement 39
- TheJuly 1995 Market Statement 42
- Analysis ofMarch andJuly Market Statements 43
- TheCounting ofRe-imports 43
G. Existence ofCausal Link 45
- Restraint Agreements with Other Countries 46
- TheUSPolicy inApplying theSafeguard 50
H. Attribution toIndividual Exporting Country(ies) 51
- Obligation toSubmit Specific andRelevant Information 51
- TheNature ofCosta Rica'sExports 52
I. More Favourable Treatment forRe-imports 53
- TheUnited States Fabric Industry 56
J. TheRequirement toHold Consultations 58
K. Effective Date oftheRestriction 60
L. Article 2oftheATC 62
M. AMember Must Endeavour toAccept Recommendations oftheTMB 64
N. Nullification orImpairment ofBenefits 68
VI Interim Review 69
VII Findings 70
A. Claims oftheParties 70
- Introduction 70
- Main Substantive Claims 71
B. General Interpretative Issues 71
- Standard ofReview 72
- Burden ofProof 74
- TheInterpretation oftheATC 74
- TheStructure ofArticle 6oftheATC 76
C. Review oftheFindings bytheUSInvestigating Authorities onSerious
Damage Attributable toCosta Rican Imports 77
- TheScope oftheMatter 77
- Serious Damage 77
- Overview 78
- Output (USProduction) 78
- Market Share (Market Share Loss/Import Penetration) 79
- Employment 79
- Man-Hours 80
- Sales 80
- Profits 80
- Investment 80
- Utilization ofCapacity 81
- Prices 81
- Causality 82
- Attribution ofSerious Damage toCosta Rica 82
D. Actual Threat ofSerious Damage 84-iii-
Page
VII Findings (cont 'd)
E. Other Claims 85
- Article 6.6(d) oftheATC 85
- Obligation toConsult 86
- Date ofApplication oftheRestriction 86
- Article 2.4oftheATC 88
- Article 8oftheATC 88
VIII Recommendation 89
ANNEX March 1995 Market Statement 90WT/DS24/R
Page 1
I INTRODUCTION
1.1 On22December1995,CostaRicarequestedconsultationswiththeUnitedStatesunderArticle4
andother relevant provisions oftheUnderstanding onRules andProcedures Governing theSettlement
ofDisputes (DSU), Article XXIII oftheGeneral Agreement onTariffs andTrade 1994 (GATT 1994)
andthecorresponding provisions oftheAgreement onTextiles andClothing (ATC) (WT/DS24/1).
Consultations were heldon18January and1February 1996, however, nomutually satisfactory solution
wasreached. On22February 1996, Costa Rica requested theestablishment ofapanel (WT/DS24/2)
which wasconsidered bytheDSB atitsmeeting on5March 1996 (WT/DSB/M/12). TheDispute
Settlement Body (DSB) accordingly agreed toestablish apanel with standard terms ofreference in
accordance with Article 6oftheDSU.
1.2 On19April 1996, theDSB wasinformed thattheterms ofreference andthecomposition of
thePanel (WT/DS24/3) were asfollows:
Terms ofReference
"To examine, inthelight oftherelevant provisions ofthecovered agreements cited by
Costa Rica indocument WT/DS24/2, thematter referred totheDSB byCosta Rica inthat
document andtomake such findings aswillassist theDSB inmaking therecommendations
oringiving therulings provided forinthose agreements".
Composition
Chairman: Mr.Thomas Cottier
Panelists: Mr.Martin Harvey
Mr.Johannes Human
1.3 ThePanel heard theparties tothedispute on24-25 June 1996 and29July 1996. ThePanel
alsometwith theparties on15October 1996 toreview aspects oftheinterim report, attherequest
oftheparties. ThePanel submitted itscomplete findings andconclusions totheparties tothedispute
on25October 1996.
*****
II FACTUAL ASPECTS
Outward Processing Regime: "807 Trade" and"Guaranteed Access Levels"
2.1 Inthecourse ofthelastsixyears, there hasbeen asignificant change intheUScotton and
man-made fibre underwear manufacturing industry which hassignificantly switched from producing
andassembling underwear domestically toproducing components intheUnited States forassembly
inother countries andsubsequent return tothesame enterprises intheUnited States formarketing.
This pattern ofco-production hasenabled thecompanies inthisindustry tomaintain their share of
theUSmarket bymaking useofthelabour force available outside thecountry while atthesame time
controlling thesource ofrawmaterials, theproduction timetable, thetypes andamounts ofunderwear
tobeproduced andthemarketing ofthefinal product. Moreover, these co-production operations were
consistent with thepolicies oftheUnited States, which wasencouraging investment andproduction
inMexico andtheCaribbean Basin.WT/DS24/R
Page 2
2.2 Item 9802.00.80 oftheHarmonized Tariff Schedule oftheUnited States (HTSUS)1provides
forre-importation intotheUSofgoods thathave been assembled abroad from US-made components;
itprovides thebasis foratype ofoutward processing regime which enables USmanufacturers of
relatively labour-intensive products toexport USparts forassembly abroad andreturn oftheassembled
products totheUnited States with partial exemption from USduties. This programme isnotlimited
toapparel, although itiswidely used inapparel trade because ofthehigh labour content andthe
substantial USduties onapparel imports. Toqualify forpartial duty exemption under item9802.00.80,
articles must beassembled abroad inwhole orinpartoffabricated components, theproduct ofthe
United States, which hasbeen exported incondition ready forassembly without further fabrication;
hasnotlostitsphysical identity insuch articles bychange inform, shape orotherwise; andhasnot
been advanced invalue orimproved incondition abroad except bybeing assembled andexcept by
operations incidental totheassembly process such ascleaning, lubricating andpainting.
2.3 Theexported articles used intheimported goods must be"fabricated UScomponents," i.e.,
manufactured articles ready forassembly intheir exported condition, except foroperations incidental
totheassembly process. Integrated circuits, compressors, zippers, buttons andprecut orpreformed
sections ofagarment areexamples offabricated components inthissense. Tobeconsidered "US
components,"theexportedarticlesdonotnecessarilyneedtobefabricatedfrommaterialsorcomponents
wholly made intheUnited States. Ifaforeign product undergoes processing intheUnited States
sufficient toconfer USorigin forcustoms purposes, thentheresulting processed goods maybeexported,
assembled abroad andre-imported andstillqualify forpartial duty exemption under item 9802.00.80.
Thus, inan807operation, thecloth cancome from anycountry intheworld: what isimportant is
tohave itcutintheUnited States. There isnoobligation tore-import thearticles assembled abroad
intotheUnited States; producers ofunderwear assembled from UScomponents could selltheunderwear
toanymarket intheworld.
2.4 Anarticle imported under item 9802.00.80 istreated asaforeign article forcustoms purposes
andrecorded asaforeign article inUSimport statistics. Chapter 98,Subchapter II,Note 2ofthe
HTSUS, provides thatanyproduct oftheUSwhich isreturned after having been advanced invalue
orimproved incondition abroad, orassembled abroad, shall bea"foreign article" forthepurposes
oftheTariff Actof1930, asamended. Itisnotlegally ofUSorigin even ifthepieces ofagarment
re-imported arecutintheUnited States. This rulehasbeen provided asanexplicit exception tothe
USruleoforigin fortextiles andapparel, inforce upto30June 1996, which normally deems such
products tooriginate from theplace where garment pieces arecut. This exception remains even in
therevised rules oforigin fortextiles which took effect on1July 1996. HTSUS Note 2alsoprovided
thattextile orapparel articles aretobetreated asforeign articles even iftheyareassembled orprocessed
inwhole offabricated components thatareaproduct oftheUnited States orareprocessed inwhole
ofingredients (other than water) thatareaproduct oftheUnited States, inbeneficiary countries of
theCaribbean Basin Initiative.
2.5 Anarticle imported under item 9802.00.80 isdutiable under therateotherwise applicable to
theassembled product, butthedutiable value isreduced bydeducting thecostorvalue oftheexported
fabricated components from thevalue oftheimported assembled product. Forinstance, theunderwear
re-imports inthepresent case aresubject tocustoms duties attherateapplicable tounderwear, but
their customs value isreduced bydeducting thecostorvalue oftheexported garment sections, elastic,
zippers, buttons, thread, etc.used inassembling theunderwear inCosta Rica. Theduty reduction
(which isnotregulated bytheATC) isakeyfactor inmaking theoffshore assembly operations in
Costa Rica economically viable. The"807" programme isnotmandated bytax,social orindustrial
requirements. However, theunderlying intent encompasses avariety ofbroader social andeconomic
objectives,suchasaidingstructuraladjustment,assistingtheeconomicdevelopmentofforeigncountries,
1This provision isfrequently referred toas"807 trade" asitwascovered bythatchapter intheformer UStariff
schedules.WT/DS24/R
Page 3
maintaining thecompetitiveness ofUSindustry, lowering prices forconsumers, andreducing thetax
burden onUScompanies.
Guaranteed Access Levels
2.6 Guaranteed Access Levels, orGALs, areprovided fortextile re-imports under theUSSpecial
Access Programme, aprogramme designed todevelop andexpand manufacturing intheCaribbean
Basin,AndeanTradePreferencecountriesandMexico(undertheNorthAmericanFreeTradeAgreement
(NAFTA)) byallowing guaranteed access totheUSmarket forre-imports ofapparel made with fabric
formed andcutintheUnited States. TheUnited States employs thisprogramme asaform of"more
favourable treatment" forcertain re-imports -those using USformed andcutfabric -asprovided for
inArticle 6.6(d) oftheATC. Under thisprogramme, guaranteed quota access ("GALs") forparticular
apparel products arespecified byagreement with therelevant exporting country. Garment pieces cut
intheUnited States from US-formed fabric (e.g. woven orknitted intheUnited States) areexported
tothatcountry, where they areassembled; theapparel assembled from them isguaranteed access to
theUnited States atthenegotiated level, andisentered under HTSUS subparagraph 9802.00.8015,
which corresponds totheformer Item 807A inthepre-HTSUS tariff nomenclature. Entries must be
accompanied byanITA 370-P form, which certifies thefacts necessary foreligibility ofthegoods
under thissubparagraph. TheSpecial Access Programme only affects access totheUSmarket for
textiles andapparel articles, anddoes notaffect theeffective duty rateforimports.
Specific Limits
2.7 Aspecific limit (SL) refers tothelevel ofrestraint (quota) ontheexports orimports ofthe
productinquestionduringasetperiodoftime.TheATCprovisionsettingoutthemethodforcalculating
theapplicable restraint level isfound inArticle 6.8.
Chronology ofEvents
2.8 Inearly1995theUnitedStatesCommitteefortheImplementationofTextilesAgreements(CITA)
revieweddataontotalimportsofcottonandman-madefibreunderwear(category352/652)andexamined
thestate ofthedomestic industry producing such goods. Based onthefactors examined, theCITA
determined thatthere wasasituation ofserious damage oractual threat thereof totheUSunderwear
industry. TheUnited States attributed theserious damage oractual threat thereof, toimports from
seven countries, Colombia, Costa Rica, Dominican Republic, ElSalvador, Honduras, Thailand and
Turkey. (See Section V.A.)
2.9 Based onitsfindings, theUnited States requested consultations on27March 1995 with,
inter alia,Costa Rica ontrade incotton andman-made fibre underwear (UStextile category 352/652),
with aview toinitiating thetransitional safeguard procedure forestablishing aquantitative restriction
onthatproduct inaccordance with Article 6oftheATC andprovided astatement ofserious damage
setting outthefactual information inthematter (Annex). TheUnited States proposed alevel ofrestraint
forunderwear imports from Costa Rica pursuant toArticle 6.8oftheATC. On21April 1995, the
United States published thecontents oftherequest forconsultations, including therestraint level and
period, intheFederal Register.
2.10 Consultationswereheldon1-2June1995atwhichtheUnitedStatesproposedatwo-partmeasure
comprising aspecific limit (SL) of1.25 million dozen andaguaranteed access level (GAL) of
20million dozen. Costa Rica didnotconsider thattheUnited States hadsubstantiated itscase under
theprovisions oftheATC andtheconsultations didnotresult inamutually acceptable solution.WT/DS24/R
Page 4
2.11 On22June 1995, theUnited States made anewproposal fortheestablishment ofaquantitative
restriction atalevel of1.325 million dozen specific level (SL) with annual growth of6percentand
20million dozen GAL for1996.
2.12 Because nomutual agreement hadbeen reached between theUnited States andCosta Rica by
theendof30days after the60-day consultation period provided forinArticle 6.7oftheATC, the
UnitedStatesimplementedarestraintonimportsfromCostaRicaeffective23June1995fora12-month
quota period starting 27March 1995 andreferred thematter totheTextiles Monitoring Body (TMB),
pursuant toArticle 6.10 oftheATC.
2.13 On10July1995,theUnitedStatessentCostaRicaafurtherproposalforaspecificlimitfor1996
of3million dozen with 6percentannual growth andaguaranteed access level of30million dozen.
This proposal included aprovision toreduce thespecific limit to1.5million dozen intheevent the
USCongress passed alawproviding forquota-free treatment forgoods from theCaribbean Basin that
prescribed certain rules oforigin (the"ratchet-down" clause). Costa Rica continued toquestion the
basis fortherequest forarestriction anddidnotrespond tothisproposal.
2.14 On12July 1995 theUSmade aproposal toCosta Rica with thesame levels ason10July
butwhich didnotspecify thereduction inthespecific limit intheevent oftheabove-mentioned law
being passed andsubjected reduction inSLtosubsequent negotiations.
Review bytheTMB
2.15 TheTMB reviewed thiscase, andothers, inaccordance with Article 6.10 oftheATC and
heard presentations from theUnited States, Costa Rica, Honduras, Thailand andTurkey from
13-21 July 1995. During theproceedings, theUnited States provided updated dataandother relevant
information (July 1995 Market Statement, seeparagraphs 5.135-5.138). These datawere usedtoupdate
thedata presented inMarch sothatallofthedata would beconsistent with thereference period of
thecall, theyear ending inDecember 1994. TheUnited States alsosupplied theTMB with additional
information requested byMembers subject tothecallandbytheTMB members concerning theindustry,
re-imports andexports.
2.16 During itsreview ofthis safeguard action bytheUnited States against imports of
category 352/652 from inter alia Costa Rica, theTMB found thatserious damage hadnotbeen
demonstrated. TheTMB could not,however, reach consensus ontheexistence ofactual threat ofserious
damage. TheTMB recommended thatfurther consultations beheld between theUnited States and
Costa Rica,
"with aview toarriving atamutual understanding, bearing inmind theabove, andwith due
consideration totheparticular features ofthis case, aswell asequity considerations"
(G/TMB/R/2).
2.17 Anew round ofconsultations washeld on16-17 August 1995 atwhich anumber ofissues
were raised byCosta Rica with respect tothejustification ofUSactions. Theconsultations didnot
produce anagreement andboth parties reported thesituation totheTMB.
2.18 Atitsmeeting on16-20 October 1995, theTMB received reports from Costa Rica andthe
United States onthebilateral consultations they hadhadfollowing theTMB recommendation. Ittook
note ofthereports andofthefactthatthetwoparties hadnotreached amutual understanding during
theconsultations. TheTMB 'sdiscussions confirmed theBody 'sprevious findings inthismatter; there
being nofurther requests bytheparties involved, theTMB considered itsreview ofthematter completed
(G/TMB/R/5).WT/DS24/R
Page 5
Further Consultations
2.19 On22November 1995, afurther consultation washeldatwhich theUnited States made anew
restraint proposal foraspecific limit of7million dozen (sub-limit of4million dozen forknitproducts)
andaGAL of40million dozen fortheperiod 1April 1996 to31March 1997 andalsoincluding the
previously mentioned "ratchet-down" clause and6percentgrowth. Costa Rica submitted aproposal
foraspecific limit of21million dozen for1996 followed byasecond proposal fixing SLandGAL
access fortheperiod corresponding to1996-1997 at15.4 and40million dozen respectively. These
were notaccepted bytheUnited States. Thereafter, Costa Rica requested consultations under Article 4
oftheDSU.
2.20 Therestriction, augmented bytheapplication ofagrowth rateof6percentwasrenewed for
asecond 12-month period on27March 1996.
*****
Action Under theDispute Settlement Understanding
2.21 On22December 1995, Costa Rica requested theUSGovernment tohold consultations under
Article 4oftheATC andtheother relevant provisions oftheDSU, Article XXIII ofGATT 1994 and
thecorresponding provisions oftheATC. Thetwocountries metontwooccasions, on18January
and1February 1996.
2.22 Atthefirstofthese meetings, Costa Rica raised anumber ofquestions, which itsubsequently
submitted inwriting, requesting theearliest possible written reply. Moreover, reiterating itsview that
thecallforconsultations wasnotjustified under theATC, Costa Rica again requested thatitbe
withdrawn.On18January1996,CostaRicaproposedestablishing,insteadofarestriction,amechanism
formonitoring thecomposition andpatterns oftrade between thetwocountries inthecategory in
question. However, thissuggestion wasnotaccepted bytheUnited States.
2.23 Atameeting held on1February 1996 theUnited States made anewproposal toCosta Rica
offering access for57million dozen during theperiod 27March 1995 to30September 1996. In
addition, access forthe18-month period from 1October 1996 to26March 1998 would befixed at
12million dozen SL,with asub-limit of6.8million dozen forknitwear, and30million GAL. This
restraint proposal included a"ratchet-down" clause, inaccordance with which SLaccess would be
reduced to1.5and1.6million dozen foreach oftheperiods covered bytherestriction. Once again,
Costa Rica rejected thisproposal asinconsistent with thecorresponding provisions oftheATC.
2.24 Theperiod of60days forconsultations provided forintheDSU ended without anysatisfactory
agreement having been reached between theparties, andtheUnited States continued tomaintain its
unilateral restrictions ontheproducts inquestion. Consequently, on5March 1996, Costa Rica made
arequest totheDSB, which wasgranted, fortheestablishment ofaPanel.
*****
III FINDINGS REQUESTED
3.1 Costa Rica requested thePanel tofindspecifically, inter alia,onthefollowing aspects:
1. That asaresult ofhaving imposed anewrestriction onthetrade incotton andman-made
fibre underwear inviolation oftheprovisions oftheATC, theUnited States wasin
breach ofArticle 2ofthatAgreement;WT/DS24/R
Page 6
2. That theincrease in"807 trade" could notbeconsidered toconstitute increased imports,
within themeaning ofArticle 6.2oftheATC;
3. That if,theabove notwithstanding, itwasconsidered thatthese increased imports did
fallwithin theprovisions ofArticle 6.2oftheATC, thefactwasthatthisshowed the
USindustry manufacturing underwear cutpieces tobeinexcellent condition andnot
tobeinneed ofanyprotection;
4. That serious damage andactual threat ofserious damage were twodifferent concepts
which, tobedemonstrated, required thesubmission ofseparate information anda
different analysis;
5. That thefinding oftheTMB totheeffect thattheUnited States hadnotdemonstrated
serious damage toitsunderwear-manufacturing industry should beupheld;
6. That, given theunreliable, erroneous, contradictory andincomplete nature ofthe
information submitted bytheUnited States inanattempt tojustify itsaccount ofthe
situation ofitsindustry, thatcountry hadfailed tofulfil itsobligation todemonstrate
serious damage;
7. That theUnited States, having changed theostensible basis foritsmeasure, had
nonetheless never submitted theinformation required orprovided theanalysis necessary
todemonstrate the existence ofactual threat ofserious damage toits
underwear-manufacturing industry;
8. That, even assuming theexistence ofincreased imports andserious damage oractual
threat ofserious damage, theUnited States hadnotdemonstrated theexistence ofa
causal linkbetween thetwo, andindeed thattheagreements which ithadreached with
theother countries called toconsultations inthiscategory confirmed thenon-existence
ofsuch acausal link;
9. That, even supposing thattheUnited States hadmetthethree basic requirements for
entitlement toresort tothespecial transitional safeguard mechanism, ithadnever
submitted theinformation necessary norcarried outtheanalysis required toattribute
thealleged damage orthreat toimports from Costa Rica;
10. That thevarious factors present inthiscaseand,inparticular, theproposals forrestraint
made bytheUnited States toCosta Rica andthequota levels which ithadnegotiated
with theother countries called toconsultations inthiscategory, indicated thatwhat
theUnited States wasreally seeking wastoprotect nottheunderwear-manufacturing
industry butrather thebranch ofthedomestic industry which manufactured thecloth
used inunderwear production;
11. That theATC didnotpermit theimposition ofasafeguard measure onanimported
clothing product inorder toprotect thecloth used toproduce it;
12. That theUnited States hadimposed andrenewed therestriction onthebasis ofthe
existence ofanactual threat ofserious damage, despite never having heldconsultations
onthesubject;
13. That inJune 1995 theUnited States hadimposed aunilateral restriction onCosta Rica,
making itretroactive toMarch ofthatyear, despite thefactthatunder theATC ithad
noauthority todoso;andWT/DS24/R
Page 7
14. That theUnited States violated thespirit andtheletter ofArticle 8oftheATC by
refusing, without anyjustification, tofollow therecommendations made bytheTMB,
inparticular, thatitshould hold consultations with Costa Rica bearing inmind that
serious damage hadnotbeen demonstrated, thatnoconsensus could bereached on
theexistence ofactual threat ofserious damage, thatthetrade concerned hadparticular
features andthatthere were equity considerations which should betaken intoaccount,
andbyfailing tosubmit areport explaining itsinability toconform with those
recommendations.
3.2 Costa Rica further requested thePanel, onthebasis oftheabove considerations andinview
ofthefactthattheUnited States hadproceeded inviolation oftheATC, tofindinitsreport thatthe
Government oftheUnited States should ensure thattheunilateral restriction adopted against Costa Rica
should comply withtheATC andthatinthisparticular casecompliance should bethrough theimmediate
withdrawal ofthemeasure. Costa Rica based itsrequest onArticle 19.1 oftheDSU, which authorized
thePanel tospecify theappropriate way ofapplying itsrecommendations.
3.3 TheUnited States requested thePanel tofindthat:
- theUnited States application andmaintenance ofasafeguard restriction onimports
ofcotton andman-made fibre underwear from Costa Rica wasconsistent withArticle 6
oftheATC;
- therestriction wasnotinconsistent with Articles 2and8oftheATC; and
- theabove measure didnotnullify andimpair benefits accruing toCosta Rica under
theATC orGATT 1994.
3.4 With respect toCosta Rica'srequest thatthePanel find
"inaccordance with theterms ofreference assigned toitbytheDSB, thattheUnited States
should withdraw theunilateral restriction imposed onCosta Rica forthwith",
andalsotofindinitsreport
"that theUnited States should proceed tobring itsmeasure intoconformity with theATC,
which implies immediately withdrawing it";
theUnited States considered thattheheterogeneity ofphrasing leftCosta Rica’sobjective indoubt,
butargued thatiftherequest wasforaPanel recommendation thatspecific actions should betaken,
orforfindings thatwould amount ineffect tosuch arecommendation, therequest wasinconsistent
with Article 19.1 oftheDSU.
3.5 Intheview oftheUnited States, theDSU gave WTO panels explicit instructions with respect
totheoneandonly recommendation thatproperly may beoffered ifthemeasures ofaMember were
found tobeinconsistent with itsobligations: tobring themeasures intoconformity with itsobligations.
Theavoidance ofgranting specific remedies, such asthewithdrawal ormodification ofameasure,
wasawell-established practice under theGATT, andhadbeen codified inArticle 19.1 oftheDSU,
which provided:
"Where apanel ortheAppellate Body concludes thatameasure isinconsistent with acovered
agreement, itshall recommend thattheMember concerned bring themeasure intoconformity
with thatagreement."WT/DS24/R
Page 8
ThePanel need tomake norecommendations atall,asthemeasures atissue were fully consistent with
USobligations under theATC; however, ifanyrecommendation wasmade, intheir view, thePanel
wasnotauthorized tomake anyrecommendation other than thatprovided forinArticle 19.1 ofthe
DSU.
3.6 Costa Rica replied that, Article 19.1 oftheDSU, contrary tothestatement made bythe
United States, authorized thePanel tospecify theappropriate way ofapplying itsrecommendations
byproviding that:
"Where apanel ortheAppellate Body concludes thatameasure isinconsistent with acovered
agreement, itshall recommend thattheMember concerned bring themeasure intoconformity
with that agreement. Inaddition toitsrecommendations, thepanel orAppellate Body
may suggest ways inwhich theMember concerned could implement therecommendations."
*****
Other Issues
3.7 On21June 1996, theUnited States requested thePanel 'sattention tobreaches inconfidentiality
byCosta Rica concerning proposals made bytheUnited States inconsultations, andCosta Rica'suse
ofthatinformation inthisproceeding toprejudice theUnited States case. On24June 1996, Costa
Rica hadresponded inthefirstsubstantive meeting ofthePanel withinformation concerning disclosures
made bytheUSembassy inSanJose, Costa Rica, concerning USproposals inconsultations with Costa
Rica. Subsequently, theUShadinvestigated those disclosures anddiscovered thatthey were made
inresponse tothenumerous press statements inSanJosebyjournalists andmembers oftheCosta Rican
Government. USembassy statements hadbeen made solely inresponse tothispress offensive byCosta
Rica.
3.8 Costa Rica emphasized thatpublication ofanyarticle prior totheinitiation ofthedispute
settlement procedure under theDSU, which inanycase wasattheinitiative oftheUnited States as
partoftheir strategy toexert pressure ontheGovernment ofCosta Rica, wasirrelevant from thepoint
ofview oftheconfidentiality prescribed byArticle 4.6oftheDSU because thisapplied toconsultations
initiated under thedispute settlement mechanism oftheDSU andnottoanyevent thatoccurred prior
tothattime. Accordingly, oneofthedocuments referred tobytheUnited States wasirrelevant as
itwaspublished prior totheinitiation oftheconsultation procedure under theDSU. Theother two
articles were replies topublic declarations byrepresentatives oftheUnited States Government orby
theenterprise which theUnited States wasseeking toprotect. Moreover, Costa Rica indicated that
thefactthatArticle 4.6stated thatconsultations were confidential could notbeinterpreted asalimitation
ontherights ofparties atthePanel stage. Onthecontrary, confidentiality must beunderstood as
referring toparties notinvolved inthedispute andtothepublic, butnotinanywaytothePanel itself.
Itwasnottheintention ofArticle 4.6tolimit thepossibilities available tothePanel tobeapprised
ofinformation onthedispute before itbecause thiswould betothedetriment oftheprocedure itself.
3.9 The United States accepted that since theUSembassy was responsible forsome ofthe
disclosures, theywithdrew therequest. This withdrawal wasmade without prejudice totheother points
made concerning Costa Rica’smisuse anddistortion ofinformation onconsultations inthiscase.
*****
IV THIRD PARTY SUBMISSION: INDIA
4.1 India hadindicated their interest inthematter andtheir desire toparticipate inthePanel process
asaninterested third party pursuant toArticle 10oftheDSU. Accordingly, India wasinvited topresentWT/DS24/R
Page 9
their views tothePanel atitsfirstmeeting on25June 1996. Intheir submission India reviewed the
measure taken bytheUnited States andprovided views onvarious aspects. Inparticular, India requested
thePanel toinclude initsfindings:
(a) thattheUnited States didnothave theoption ofclaiming asituation ofactual threat ofserious
damage inJuly 1995 after having determined inMarch 1995 thatthere wasasituation ofserious
damage andhaving issued theconsultation calltoCosta Rica onthatbasis;
(b) thatallthedatanecessary tobeprovided toCosta Rica interms oftheprovisions ofArticle 6
ofATC hadnotbeen provided bytheUnited States andsome ofthedata provided wasnot
compiled objectively andtherefore lacked reliability;
(c) thatthedataavailable hadnotindicated thatthere hadbeen either asituation ofserious damage
oroneofactual threat ofserious damage tothedomestic industry oftheUnited States,
attributable toimports;
(d) thatimports from Costa Rica which hadbeen almost entirely from UScomponents supplied
bytheUSindustry producing underwear andmostly produced inCosta Rica byunits established
byUSunderwear manufacturers could nothave contributed toserious damage ofactual threat
thereof tothesame USindustry which engaged voluntarily insuch co-production activities;
(e) thattheUSaction actually sought toprotect theUSindustry producing fabrics forunderwear
andnottheindustry producing underwear andthiswasinconsistent with theprovisions ofthe
Article 6oftheATC;
(f) thatatemporary safeguard action under Article 6oftheATC hadtobepursued bytheimporting
country andreviewed bytheTMB entirely onthebasis ofdatathathadbeen available tothe
importing country atthetime they made adetermination thatthere wasasituation ofserious
damage oractual threat thereof;
(g) thattheimporting country hadtochoose between thegrounds ofserious damage andofactual
threat ofserious damage atthetime ofdetermination ofthemarket situation before initiating
thesafeguard action andthedatarequirements forthese twogrounds wasdifferent innature
andnotindegree;
(h) thatthere wasnoprovision intheATC forretroactive restraints; and
(i) thatifnotendorsed bytheTMB after themandatory review, asafeguard action would not
survive.
4.2 With reference tothesubmission byIndia, theUnited States expressed theview thattheATC
didnotrequire theimporting country tochoose between serious damage andactual threat when making
itsdetermination andsotheUnited States hadrelied upon both, andreferred toboth, intheir request
forconsultations. Also, Article 6.3oftheATC didnotprovide anyseparate criteria forevaluating
serious damage ontheonehand, andactual threat thereof ontheother. TheATC alsohadnoprovisions
specifically addressing actual threat (unlike theWTO legal provisions concerning anti-dumping duties,
countervailing duties, orGATT Article XIX safeguards). India hadalso referred to"sharp and
substantial" and"imminent" increases intheir submission. However, intheview oftheUnited States,
those standards applied toadetermination ofattribution under Article 6.4oftheATC, andwere
irrelevant toadetermination under Article 6.2oftheATC.WT/DS24/R
Page 10
4.3 CostaRicaendorsedandformallyincorporatedinitssubmissiontheargumentsandobservations
contained inthesubmission made byIndia andtook theview thatthePanel should make reference
initswritten report tothepoints ithaddeveloped andtoruleoneach ofthem.
*****
V MAIN ARGUMENTS BYTHE PARTIES
A. THE SAFEGUARD ACTION TAKEN BYTHE UNITED STATES
Statement ofSerious Damage: Category 352/652 (March 1995 Market Statement)
5.1 Costa Rica noted thattheMarch Market Statement oftheUnited States (annexed tothisreport)
hadsaidnothing about thepercentage of"807 trade" intheproduction andimport dataandmade no
attempt toanalyze theimpact ofthisfactor onthetrade inthiscategory. Accordingly, there wasno
way ofdetermining whether domestic production really grew ornot; what theactual market share
oftheUnited States industry was; andthetrueratio ofimports todomestic production.
5.2 TheUnited States explained bywayofbackground thattheir Office ofTextiles andApparel
(OTEXA) attheDepartment ofCommerce wasresponsible forcollecting dataandproducing statements
ofserious damage oractual threat thereof forconsideration bytheCITA. Inearly 1995, theCITA
hadreviewed thedata ontotal imports ofcotton andman-made fibre underwear (category 352/652)
intotheUnited States inaccordance with Article 6.2oftheATC. Following thecriteria inthatArticle,
theUnited States hadlooked attotal imports ofcategory 352/652. Insodoing, they hadfound that
such imports hadsurged from 65,507,000 dozen in1992 to79,962,000 dozen in1993. TheCITA
hadfound thattotal imports continued tosurge in1994, reaching 97,375,000 dozen, 22percentabove
the1993 level and49percent above the1992 level. These data included re-imports.
5.3 The CITA had estimated that approximately 395 establishments intheUnited States
manufacturing underwear employed about 6percent oftotal USapparel workers, andhadannual
shipments of$3.2 billion, accounting forapproximately 5percentoftotal annual apparel shipments.
Theconcentration offirms inthisindustry washigher inthemen’sunderwear segment than inthe
women ’ssegment. Inthemen’ssegment, four firms hadaccounted forover 60percent ofthe
shipments. Theproduction ofwomen ’sunderwear wasmore subject tofashion changes. Asaresult,
production waslessstandardized, requiring different types ofknitting machines andagreater number
ofworkers being employed. There was, however, alarge number ofsmaller producers which generally
didnothave integrated operations butusually purchased fabrics andthen cutandsewed them.
5.4 TheCITA hadthenexamined factors listed inArticle 6.3oftheATC, such asUSproduction,
market share loss, employment, domestic prices, profits andinvestment, production capacity andsales.
TheCITA hadfound thatUSproduction incategory 352/652 haddeclined from 175,542,000 dozen
in1992 to168,802,000 dozen in1993, representing a4percentdecline. Production hadcontinued
todecline in1994 falling to126,962,000 dozen during thefirst9months of1994, fourpercentbelow
theJanuary-September 1993 production level. USmanufacturers 'domestic market share haddropped
from 73percentin1992 to68percentin1993, adecline of5percentage points. During thefirst
9months of1994 thatshare haddropped to65percent. AsapercentofUSproduction, imports had
increased from 37percentin1992 to47percentin1993, andhadgrown by54percentinthefirst
nine months of1994.
5.5 Costa Rica questioned ifthedataonemployment andman-hours were aspecial situation linked
toincreased imports orifthey reflected acontinuing trend within theindustry. Itwasalsoobserved
thatnonumbers were given forlayoffs; there wasnocausal linkmade between imports andjoblosses;
andnobasis wasgiven forthestatements about postponed investment ordisinvestment, norwasWT/DS24/R
Page 11
consideration given tothepossibility thatthese might represent economically rational decisions onthe
partofthecompanies concerned andmight have nocausal relationship atallwith thetrend orlevel
ofimports. Thecomment wasalsomade thatshifting production capacity toother product lines should
beregarded asapositive trend, favouring theinterests oftheUnited States companies themselves.
5.6 Costa Rica affirmed thattheUnited States hadnotsatisfactorily established theexistence of
problems affecting employment, sales andprofits, investment orcapacity initsindustry inasmuch as
itwasnotpossible toestablish clearly thestate oftheindustry onthebasis ofevidence from oneor
twoenterprises. TheUnited States hadnotproperly established either thefacts related toimports,
domestic production andmarket size, especially because ofthetotal absence ofanyanalysis ofthe
question of807trade initsMarch statement.
5.7 TheUnited States alsopointed outthattheCITA hadfound thatthenumber ofproduction
workers intheUSunderwear industry haddropped from 46,377 in1992 to44,056 in1994, declining
by5percent, resulting inthelossof2,321 workers. Average annual man-hours worked haddropped
from 86.2 million in1992 to81.5 million in1994. Based onasurvey ofindividual firms producing
cotton andman-made fibre underwear, thefollowing conditions were reported: individual firms had
reported layoffs, import-related plant closings andslowed sales; onefirm hadreported adecline in
sales of17percentin1994 andadecline inprofits by18percentandthere waspressure onthebottom
linethroughout theindustry duetorising costs andstiffimport competition. Theuncertainty dueto
theincreasing imports hadcaused UScompanies topostpone investment inthisindustry. Some
companies hadalsoclosed plants permanently orshifted production capacity offshore, andadditional
disinvestment ofthisnature wascontemplated byunderwear manufacturing firms. Import prices were
very lowandplaced considerable pressure ondomestic producers.
5.8 Costa Rica didnotaccept thatanincrease inrawcotton prices hadaffected theproducers of
cotton fabric oryarn ortheproducers ofcotton orman-made fibre underwear. Astotheprice-edge
which imports enjoyed over domestically produced goods, there wasnoindication whether thismeant
allimports orsome imports were produced with lower priced fabric andnojustification wasgiven
forthese assertions. Also, these statements didnottake intoconsideration thefactthatmost ofthe
growth in"imports" oftheproducts inquestion wasconcentrated inthose assembled outside the
United States from UScomponents. This meant thatthedomestic industry used thesame rawmaterial
asthe"imports"ofproductsassembledfromUScomponents,sothatthecottonpriceincreasesmentioned
should have hadnoeffect atallonimport levels.
5.9 TheUnited States, however, argued thatcompeting imports hadenjoyed aprice edge over
domestically produced goods because theimports were produced with lower-priced foreign fabric.
Asaresult oftheincreased market share inunderwear held byimports, average retail prices of
underwear intheUnited States hadgenerally declined during thepasttwoyears, atatime when US
manufacturers 'costs, particularly forrawcotton, hadincreased substantially. This development had
seriously eroded theprofitability ofUSunderwear manufacturers. Based ontheabove factors and
inaccordance with Articles 6.2and6.3oftheATC, theCITA haddetermined thatthere wasserious
damage, oractual threat thereof, totheUSunderwear industry. TheUnited States then proceeded
toidentify Member countries towhom thisdamage could beattributed, asrequired byArticle 6.4of
theATC.
Attribution toExporting Countries
5.10 Costa Rica noted thatdata ontheir exports totheUSmade noreference totheprocess of
production sharing between thetwocountries, even though alltheincrease inimports could beattributed
precisely tosuch co-production.WT/DS24/R
Page 12
5.11 TheUnited States explained thatinapplying thecriteria inArticle 6.4oftheATC, theCITA
hadattributedtheseriousdamage,oractualthreatthereof,toimportsfromfiveWTOmembercountries-
Costa Rica, theDominican Republic, Honduras, Thailand, andTurkey -andtotwocountries thathad
notyetbecome WTO Members -Colombia andElSalvador. Total imports from thefiveWTO countries
hadincreased from 22,675,508 dozen in1992 to40,293,259 dozen in1994. This increase had
represented acollective sharp andsubstantial increase of78percent. Together, imports from these
countries hadincreased 32percentin1994 over their 1993 level. Imports in1992 forthese countries
were 35percentoftotal USimports incotton andman-made fibre underwear. In1994, their share
hadincreased to41percent.
5.12 Inthecase ofCosta Rica, theCITA hadfound thattheincrease inimports from Costa Rica
alone washigher than thelevel ofimports ofcategory 352/652 from atleast 85other countries and
hadexceeded thelevels ofsixother suppliers whose imports were under quota. Costa Rica wasthe
second largest supplier totheUnited States. Consistent with thecriteria inArticle 6.4oftheATC,
theCITA hadfound thatthere wasasharp andsubstantial increase oflow-priced imports from Costa
Rica, asimports ofcotton andman-made fibre underwear hadreached 14,423,178 dozen in1994,
a22percentincrease above the1993 level of11,844,331 dozen and61percentabove the1992 level.
Such imports hadentered theUnited States from Costa Rica atanaverage landed duty-paid value of
$9.39 perdozen, 69percentbelow theUSproducers 'average price fortheproduct. TheCITA had
alsofound thatimports from Costa Rica were equivalent to8.8percentofUSproduction ofcategory
352/652 intheyear ending September 1994.
Consultations with Costa Rica
5.13 TheUnited States advised that, based ontheir findings, theCITA hadrequested consultations
with Costa Rica. Inaccordance with Article 6.7oftheATC, therequest wasaccompanied bya
statement (theMarch Market Statement) complying withArticles 6.2, 6.3and6.4oftheATC. Further,
asrequired byArticle 6.7oftheATC, theUnited States hadproposed alevel ofrestraint forunderwear
imports from Costa Rica which would beatalevel notlessthan thelevel existing at12ofthe
14months preceding themonth oftherequest forconsultations.
5.14 During thefirstround ofconsultations, on1-2June 1995, theUnited States haddiscussed the
basis foritsrequest forconsultations andthehigh level ofestimated re-imports inCosta Rican trade,
approximately 94percent oftheir total trade of14,423,178 dozen atthetime ofthecall. Taking
itsestimates ofre-imports from Costa Rica intoaccount, theUnited States hadproposed aspecific
limit (SL) of1.25 million dozen tocover theportion ofimports notqualifying formore favourable
treatment thatwould have grown to1,488,770 dozen inthefinal yearofthethree-year restraint period
specified intheATC. Re-imports hadrepresented asignificant portion ofCosta Rica'stotal underwear
exports totheUnited States. Accordingly, consistent with USpolicy anditsobligation under
Article 6.6(d) oftheATC toprovide more favourable treatment tosuch re-imports, theUnited States
hadproposed aguaranteed access level (GAL) of20,000,000 dozen. Costa Rica didnotmake a
counterproposal, butmaintained thattherequest forconsultations wasunsubstantiated.
5.15 With respect tothefirstbilateral consultations, Costa Rica saidthatthey haddrawn attention
toaseries ofinconsistencies, defects andomissions intheMarch Market Statement, raising numerous
points with aview toquestioning thecompatibility oftheStatement with theparameters established
byArticle 6oftheATC andhence showing thattheStatement could notserve asabasis forthe
imposition ofarestriction.
5.16 Costa Rica also observed that the remedy being proposed bythe United States
(21.25 million dozen) consisted ofanextra dose (30percent ormore) ofthelevel they claimed to
beattacking (14.4 million dozen). Although 14.4 million dozen wassupposed tobecausing serious
damage, theUnited States hadproposed thattrade berestricted to21.52 million dozen. From thatWT/DS24/R
Page 13
point on,aserious question hadarisen astotheobjective being pursued bytheUnited States intheir
attempt toestablish newrestrictions: wasittoprotect theunderwear manufacturers -byguaranteeing
them afurther increase inimports, orwasittobenefit theUSmakers ofthecloth used formanufacturing
theproduct? Without having replied toanyofthequestions raised byCosta Rica inconnection with
theMarch Market Statement, on22June 1995 theUnited States hadmade anew proposal forthe
establishment ofaquantitative restriction, thistimeoffering 1.3million dozen SLand20million GAL
fortheperiod from 1January 1996 to31December 1996, with anincrease of6percentonthequota
forsubsequent periods. Again, Costa Rica rejected thisproposal astheUnited States wasstillnot
complying with therequirements oftheATC fortheapplication ofatransitional safeguard.
B. REVIEW BYTHE TEXTILES MONITORING BODY
Determining Domestic Market Data
5.17 Initsreview (seeparagraphs 2.15 to2.18), theTMB members hadinquired concerning double-
counting inthedatapresented bytheUnited States because inofficial USdata, re-imports hadappeared
inboth imports andproduction. Such double-counting hadresulted inanoverstatement ofthesize
ofthedomestic market. TheUnited States pointed outthattheUSCensus Bureau counted domestic
apparel production bycollecting data onunassembled garment parts cutintheUnited States before
they were assembled domestically orshipped offshore forassembly. Asaresult, Census statistics
reflected re-imports asapparel which wascutintheUS,sentoutside thecountry tobesewn, andthen
returned under thetariff provision forre-imports asafinished garment. Re-imports were included
asdomestic output (cutparts), exports (unassembled cutparts), andimports (finished garments).
5.18 Since export quantity datawere generally lessreliable than import data, thedomestic market
fortextile andapparel categories asderived bytheUnited States forquota purposes, was: production
+imports. AstheTMB hadrequested export data, theUnited States wasnow defining thedomestic
market as:production +imports -exports. Consequently, thedomestic market wasoverstated by
theamount ofthere-imported products, since re-imported products were counted asproduction (before
assembled) andimports (when finished). Inanattempt toremove thedouble-counting from theUS
market, theUnited States hadsubtracted there-imports from domestic production. Costa Rica had
claimed during theTMB proceeding thatsuch overstatement should beresolved bydeducting re-imports
from import datainstead ofproduction data. However, asanexception thegeneral rule, theHarmonized
Tariff Schedule identified re-imported textile andapparel articles asforeign goods. Therefore, the
re-imports were properly counted inimport data. After adjusting fortheoverstatement ofthesize
ofthemarket, theUSproducers 'share ofthedomestic market hadfallen from 69percentin1992
to62percent in1993 andto55percent in1994, a14percentage point drop intwoyears.
5.19 Costa Ricahighlighted thatinthecaseofimports ofcutpieces forassembly intheUnited States,
theUnited States Government hadbeen treating theproduct asoriginating inthecountry inwhich the
pieces were cut. Thus, forexample, fabric cutinChina andthen assembled inCosta Rica hadbeen
treated asaproduct ofChina onentering theUnited States market. Atthesame time, theUSCensus
Bureau considered thatfabric cut,forexample inAlabama forassembly inCosta Rica wasUnited States
domestic production. That waswhy "re-imports" were considered tobedomestic production bythat
USstatistical office andwhytheUnited States included them assuch initsMarch Statement. However,
itwasalsoclear thattheUnited States treated thesame garments as"imports" when entered under
heading 9802 ofitstariff, forthepurpose ofcollecting duty onthevalue added abroad andpreventing
theuseofthe"Made intheUnited States" label.WT/DS24/R
Page 14
5.20 TheUnited States alsosaidthatwhen theTMB hadsuggested later intheproceeding thatthe
overstatement intheUSdomestic market should beadjusted byintroducing USexport data, they had
pointed outtotheTMB thatthedataderived from thisformula would stillbeflawed because export
datawere generally lessreliable thanimport data. Despite itsconcerns about thevalidity oftheavailable
export data, theUnited States hadsupplied theTMB with therequested export data. Theintroduction
ofexport data hadlefttheimport/production ratio unchanged from theratio intheMarch Market
Statement, demonstrating thesame picture ofdeclining domestic production andsurging imports. Data
showing thevalue ofexports hadbeen first presented because oftheir greater reliability. Data in
quantity terms hadalsobeen presented inarevised market calculation. TheUSproducers 'share of
thedomestic market hadshown adrop from 70percentin1992 to63percentin1993 andto57percent
in1994, a13percentage point drop intwoyears.
5.21 CostaRicarecalledthattheyhadassertedonnumerousoccasionsthattherequirementsof"actual
threat ofserious damage" hadnotbeen evaluated intheMarch Statement, norwasitincluded inthe
publications intheFederal Register noralleged bytheUnited States inthefirst four proposals of
restriction itpresented toCosta Rica.
The July 1995 Market Statement
5.22 Costa Rica considered thattheupdated datapresented bytheUSwasnotrelevant information
intended todevelop theinformation contained intheMarch Market Statement butwasinformation
which openly andexpressly contradicted it.TheUnited States wasendeavouring tosubmit completely
revised andadjusted information inanattempt tojustify theadoption ofarestriction which ithadalready
adopted. Theintroduction ofanewstatement atthatpoint wasunacceptable toCosta Rica inasmuch
asthedata anddeterminations contained intheMarch Market Statement hadbeen those which had
served toinitiate theconsultations, impose aunilateral restriction andprovide thegrounds forthereview
bytheTMB.
5.23 TheUnited States noted thatthey hadsupplied updated dataandnewrelevant information at
theJuly 1995 TMB proceeding. Although notrequired, these submissions hadbeen provided tothe
TMB consistent with Article 6.10 oftheATC andaspartofthepractice oftheCITA tobring the
dataup-to-date, tomake them asconsistent aspossible with thereference period fortheMarch 1995
Market Statement, andtoprovide further information demonstrating thatthefinding ofserious damage,
oractual threat thereof remained justified inlight oftheadditional information continually becoming
available. TheCITA hadbased itsdeterminations ofserious damage, oractual threat thereof onpublicly
available information from official USGovernment sources. There wasnoneed toindependently verify
thisinformation. Theproduction, import, andmarket share data onwhich cases were based were
published quarterly bytheOTEXA andavailable toallinterested parties. Thecollection andanalysis
ofthisdatawere partofalongstanding process thathadbeen inplace foraslong asthere hadbeen
acomprehensive international textile trade agreement, i.e., since theMFA began in1974.
5.24 Theadditionalrelevantinformationsuppliedatthetimehadconcernedtradeadjustmentassistance
forUScompanies adversely impacted byimports andimport prices. Alloftheinformation provided
atthetime oftheJuly TMB session hadsupported andwasconsistent with theMarch 1995 Market
Statement andthebasic justification fortheUnited States safeguard action with respect tounderwear
imports from Costa Rica remained fully warranted.
5.25 Costa Rica pointed outthat, intheJuly Market Statement there were 302establishments in
theUnited States thatmanufactured garments classified incategory 352/652, whereas according to
theMarch Market Statement thenumber ofestablishments was395. TheMarch andJulyStatementsWT/DS24/R
Page 15
indicated thatannual shipments hadamounted to$3.2 billion, although thedataonwhich itwasbased
(domestic production andtheUSproducers 'average price) were notthesame inthetwoStatements.
AccordingtotheJulyStatement,in1992employmentinthesectorwas35,191,fallingin1994to33,309.
According totheMarch Statement, employment inthesector was46,377 in1992, dropping to44,056
in1994. TheJulyStatement didnotexplain whythere should bethisdifference ofabout 10,000 between
thefigures given inthetwoStatements. Nordidthedataforannual man-hours coincide, inasmuch
astheJuly Statement gave afigure of65.4 million in1992 falling to61.6 million in1994, whereas
thecorresponding figures intheMarch Statement were 86.2 million and81.5 million respectively.
5.26 Costa Rica alsonoted thattheJuly Market Statement included asection ontrade adjustment
assistance forUnited States companies adversely impacted byimports, giving dataonthecurrent US
federalprogrammesforassistingindustriesandworkersthathadbeenunfavourablyimpactedbyimports.
Itwasquestioned howthese programmes could beputforward asadditional justification forimposing
aquantitative restriction when their purpose wasprecisely toprovide alternatives totheimposition
ofarestriction onimports. Thefourth section oftheJuly Statement which concerned thecountries
contributing toserious damage described theprice difference between USunderwear production and
underwear production inother countries. Itwasnoted thatthissection contained adiscrepancy between
theJulyandMarch Statements, namely whereas inMarch theaverage United States producers 'price
wassaidtobe$30perdozen, theJulyStatement indicated thatthatprice varied between $16and$20
perdozen, depending onwhere theproduct wasassembled. Noinformation hadbeen given toexplain
thereason forsuch asubstantial error intheMarch Statement.
5.27 TheUnited States commented thatCosta Rica wasincorrect initscharacterization oftheTrade
Adjustment Assistance programme asan"alternative" tosafeguard action under theATC. The
United States hadnotcreated theprogramme toreplace USrights andobligations under theATC,
Section 204, orsimilar actions under USlawandtheWTO. Asregards thedifferences inprice and
other figures between theMarch andJulyStatements, theUnited States noted thateven though there
were differences intheupdated data, theCITA 'sdetermination ofserious damage oractual threat thereof
wasstillsustainable.
Outcome oftheTMB Review
5.28 Attheconclusion ofitsexamination, theTMB haddecided thattheUnited States hadnot
demonstrated serious damage, butitcould notreach consensus ontheexistence ofactual threat ofserious
damage (G/TMB/R/2). Asaresult, theTMB hadnotreached theissue ofattribution. TheTMB had,
however, recommended thattheUnited States, Costa Rica andHonduras consult further,
"with aview toarriving atamutual understanding, bearing inmind theabove, with due
consideration totheparticular features ofthis case, aswell asequity considerations".
(G/TMB/R/2)
5.29 According toCosta Rica, atthenew round ofconsultations asrecommended bytheTMB,
heldon17-18 August 1995, they hadasked theUnited States toclarify thedifference between serious
damage andactual threat ofserious damage andforrelevant factual information insupport ofthelatter.
They hadalsourged theUnited States toexplain why, having amarket supposedly threatened bythe
importationof14.4milliondozengarmentsfromCostaRica,theyhadproposedtoestablishaquantitative
restriction which would allow imports ofCosta Rican underwear toriseto33million dozen. The
United States hadnotoffered anyexplanation, atleast atthatmeeting, which ended without asatisfactory
solution having been reached. Thetwoparties then submitted their reports totheTMB forreview
purposes.
5.30 Costa Rica alsopointed outthatinOctober 1995, theOTEXA hadpublished new statistics
forthecategory inquestion which showed theproduction situation tobedifferent from thatindicatedWT/DS24/R
Page 16
intheMarch andJulyStatements. Whereas according totheMarch Statement production haddeclined
by4percentbetween 1992 and1993 andby4percentbetween 1993 and1994, theJulydataindicated
thatthedecline was4percentforthefirstperiod andalmost non-existent inthesecond, while according
totheOctober information thepercentage decreases were oftheorder of1.5percentand2.6percent
respectively.
5.31 Atitsmeeting on16-20 October 1995, theTMB received reports from Costa Rica andthe
United States onthebilateral consultations theyhadheldfollowing theTMB recommendation. Ittook
note ofthereports andofthefactthatthetwoparties hadnotreached amutual understanding during
theconsultations. TheTMB 'sdiscussions confirmed theBody 'sprevious findings inthismatter; there
being nofurther requests bytheparties involved, theTMB considered itsreview ofthematter completed
(G/TMB/R/5).
C. THE STANDARD OFREVIEW AND BURDEN OFPROOF
Standard ofReview -The "Fur Felt Hat" Case2
5.32 TheUnited States considered thattheappropriate standard toapply totheimporting country ’s
determination wasastandard ofreasonableness. Article 6oftheATC referred to"adetermination
byaMember," based onweighing ofevidence oncertain factors. Thestandard forpanel evaluation
ofsuch determinations should follow established GATT practice, which wasbased ontheGATT 1947
caseconcerning thewithdrawal bytheUnited States under Article XIXofatariff concession onwomen 's
furfelthatsandhatbodies. IntheFurFeltHatcase, theCzechoslovak Government hadsought a
determination thattheUSinvocation ofArticle XIX hadbeen improper, andasserted thattheUnited
States hadnotmetcertain conditions under Article XIX totaketheaction, seeking revocation ofthe
measure. TheWorking Party rejected theCzechoslovak argument andstated:
"...it may beobserved thattheWorking Party naturally could nothave thefacilities available
totheUnited States authorities forexamining interested parties andindependent witnesses from
theUnitedStateshat-makingareas,andforformingjudgementsonthebasisofsuchexamination.
Further, itisperhaps inevitable thatgovernments should onoccasion lend greater weight to
thedifficulties orfears oftheir domestic producers than would anyinternational body, and
thattheymayfeelitnecessary onsocial grounds, e.g.because oflackofalternative employment
inthelocalities concerned, toafford ahigh degree ofprotection toindividual industries which
interms ofcostofproduction arenoteconomic. Moreover, theUnited States isnotcalled
upon toprove conclusively thatthedegree ofinjury caused orthreatened inthiscase must
beregarded asserious; since thequestion under consideration iswhether ornotthey arein
breach ofArticle XIX, they areentitled tothebenefit ofanyreasonable doubt" ("Fur Felt
Hat" case, paragraph 30).
5.33 TheUnited States recalled thattheUSaction involved inthe1951 GATT working party Report
hadbeen taken under GATT Article XIX:1, which referred tothefactual existence ofincreased imports
under conditions
"such ...astocause orthreaten serious injury todomestic producers ...oflikeordirectly
competitive products".
Thelegal standard, andthefacts required tobefound, were similar tothose involved inthecase of
transitional safeguards under Article 6.2oftheATC.
2Report ontheWithdrawal bytheUnited States ofaTariff Concession under Article XIX oftheGeneral
Agreement onTariffs andTrade Concerning Women 'sFurFeltHats andHatBodies, 27March 1951 -CP/106.WT/DS24/R
Page 17
5.34 InOctober 1950, justbefore theFifth Session oftheCONTRACTING PARTIES, the
United States hadannounced itsintention towithdraw theconcession inquestion under Article XIX.
TheUSGovernment hadentered intoconsultation withthecontracting party withwhich theconcessions
hadbeen negotiated andwith several contracting parties having asubstantial supplying interest. The
following month, Czechoslovakia brought acomplaint claiming thattheaction taken didnotmeet the
criteria ofArticle XIX:1, andsought adetermination bytheCONTRACTING PARTIES thatthisaction
wasinconsistent with Article XIX. Thecomplaint wasreferred toaworking party forstudy. The
working party hadexamined separately each oftheconditions forinvocation ofArticle XIX, and
presented areport inMarch 1951 which embodied thefindings ofthemembers other than thetwo
parties tothedispute. This report wasthenadopted attheSixth Session in1951. Thereport hadfound
thattheUnited States hadsatisfied these conditions.
5.35 TheUnited States suggested thattheinformation used bythe"Fur FeltHat" working party
asabasisforitsconclusionsshouldbenoted,thatisGATTnotifications,summaryrecordsofdiscussions
attheFifth Session, some additional datasubmitted attheworking party 'srequest, andthereport made
bytheUSTariff Commission inconnection with itsdetermination ofserious injury. However, in
examining whether serious injury andtheother conditions inArticle XIX:1 existed, theworking party
chose torelymainly onthedataintheTariff Commission report. These datawere notperfect; for
instance, they failed toseparate figures onproduction ofmen'sandwomen 'shatbodies. However,
theywere thedataavailable atthepoint intime determined bytheworking party tobelegally relevant
inevaluating compliance with Article XIX. Asthereport stated:
"Since theWorking Party wasrequired toconsider whether theaction taken bytheUnited
States inautumn 1950 fulfilled therequirements ofArticle XIX, thequestion here tobe
considered iswhether serious injury orathreat thereof totheUnited States women 'shatbody
industry could beconsidered tohave existed atthetime oftheUnited States Tariff Commission
investigation onwhich theUnited States action wasbased ...".
5.36 Theworking party then examined thedata andfound them inconclusive. Itstated that:
"...theUnited States isnotcalled upon toprove conclusively thatthedegree ofinjury caused
orthreatened inthiscasemust beregarded asserious; since thequestion under consideration
iswhether ornotthey areinbreach ofArticle XIX, they areentitled tothebenefit ofany
reasonable doubt. Nofacts have been advanced which provide anyconvincing evidence that
itwould beunreasonable toregard theadverse effects onthedomestic industry concerned as
aresult ofincreased imports asamounting toserious injury ofathreat thereof; andthefacts
asawhole certainly tend toshow thatsome degree ofadverse effect hasbeen caused or
threatened. Itmust beconcluded, therefore, thattheCzechoslovak Government hasfailed
toestablish thatnoserious injury hasbeen sustained orthreatened."
5.37 Theworking party members, excluding thetwodisputants, concluded thattheywere satisfied
thattheUSauthorities hadinvestigated thematter thoroughly onthebasis ofthedataavailable tothem
atthetime oftheir inquiry, andhadreached ingood faith theconclusion thattheproposed action fell
within theterms ofArticle XIX. Iftheworking party initsappraisal ofthefacts naturally gave weight
tointernational factors, andtheUSauthorities would normally givemore weight todomestic factors,
"itmust berecognized thatanyview onsuch amatter must betoacertain extent amatter of
economic judgment andthatitisnatural thatgovernments should onoccasion begreatly
influenced bysocial factors, such aslocal employment problems. Itwould notbeproper to
regard theconsequent withdrawal ofatariff concession asipsofacto contrary toArticle XIX
unlesstheweightattachedbythegovernmentconcernedtosuchfactorswasclearlyunreasonably
great".WT/DS24/R
Page 18
Thus, theworking party concluded thatthere wasnoconclusive evidence thatthesafeguard measure
inquestion constituted abreach ofobligations under theGATT.
Applying the"Fur Felt Hat" Case tothePresent Case
5.38 TheUnited States argued thatthereasoning ofthe"Fur FeltHat" case applied equally tothe
present case. Both theworking party inthatcase andthepresent Panel have been charged with
determining whether asafeguard action wasproperly taken atthetime thatthedecision wasmade.
Inthecase ofArticle XIX, theworking party hadexamined theinformation collected bytheTariff
Commission intheinvestigation which wasthebasis forthedecision, andwhether theCommission ’s
evaluation ofthatinformation hadbeen unreasonable. Inthepresent case, thePanel hadbeen asked
toevaluatetheconsistencyoftheCITAdeterminationunderArticle6.2oftheATCwiththerequirements
ofArticles 6.2and6.3oftheATC. Article 6.2oftheATC referred tocertain facts tobedemonstrated
"onthebasis ofadetermination byaMember" andArticle 6.3oftheATC required thatcertain analyses
becarried outinmaking such adetermination. Thus, intheview oftheUnited States thefocus of
thePanel’sexaminationshouldbenotthequestionofwhetherseriousdamageorthreatofseriousdamage
exists now, butwhether theCITA could reasonably determine thatitexisted atthetime oftheCITA
determination inMarch 1995 andwhether, after giving theCITA thebenefit ofanyreasonable doubt,
Costa Rica hadestablished thatnoserious damage orthreat thereof existed atthattime.
5.39 TheCITA determination could therefore only beevaluated onthebasis ofdataexisting atthe
time ofitsoriginal determination. Thedatapresented later totheTMB infactcorroborated theanalysis
done inMarch 1995, buttheywere notlegally relevant inevaluating USconformity with Articles 6.2
and6.3oftheATC. Article 6.10 oftheATC provided forlater refinement ofdataandforresponse
toTMB requests foradditional information, consistent withtheTMB spirit ofconciliation, compromise
andnegotiation. However, itwas theMarch data thatwere legally relevant forevaluating the
determination, notthelater data. Thedatarecorded intheMarch Market Statement formed theentire
basis oftheCITA ’sdetermination.
5.40 Thedata available inMarch need nothave been perfect, asseen inthe"Fur FeltHat" case.
Article 6oftheATC wasasafeguard provision invoked incases ofserious damage orthreat toan
industry, andcould notbeinterpreted torequire thattheimporting Member waituntil itsindustry had
succumbed because acomplete census oftheindustry hadnotyetbeen conducted. Article 6.7ofthe
ATC recognized thisfactbyrequiring only thatthedatasubmitted with therequest forconsultations
must be"asup-to-date aspossible".
5.41 Inthepresent case theburden wasonCosta Rica tobring forward evidence andarguments
demonstrating aprima facie casethattheUnited States hadacted inconsistently withArticles 6.2and6.3
oftheATC. When evaluating theCITA 'sanalysis ofthedataavailable toitinMarch 1995, thePanel
should takeintoaccount thatdomestic authorities were uniquely well-placed toscrutinize andevaluate
thesituation inadomestic industry, andthatthefacts intheMarch Statement clearly indicated that
there were adverse effects ontheUSunderwear industry resulting from increased imports ofunderwear.
ThePanel should examine whether Costa Rica hadadvanced facts which provided convincing evidence
thatitwasunreasonable fortheCITA todetermine thattheadverse effects ofincreased underwear
imports ontheUSdomestic underwear industry amounted toserious damage, oractual threat thereof.
Asimilar examination should beapplied with respect todeterminations under Article 6.4oftheATC.
5.42 TheUnited States considered thatthe"Fur FeltHat" case wasstillrelevant forpurposes of
thepresentdispute,evenaftertheincorporationoftheAgreementonSafeguardsintheWTOAgreement.
TheAgreement onSafeguards provided forapackage ofrights andobligations differing from those
under Article XIX oftheGATT 1994. This package included new procedural andtransparency
requirements;additionalobligationsregardingthedurationandreviewofsafeguardsmeasures;anexplicit
banongrey area measures; andontheother hand, abanoncompensatory withdrawals underWT/DS24/R
Page 19
Article XIX:3 ifthesafeguard measure satisfied certain conditions. Thestandards foraction provided
intheAgreement alsoreflected ashift infocus incorporating thejurisprudence ofthe"Fur FeltHat"
case. While Article XIX itself referred totheexistence ofserious injury orthreat, inthe"Fur Felt
Hat" casetheworking party hadfocused instead ontheevidence found bytheauthorities intheimporting
country before their determination andtheextent towhich ithadbeen shown thattheauthorities ’
evaluation ofthatevidence wasunreasonable. TheAgreement onSafeguards adopted thisapproach.
Itsstandards were notphrased interms offacts thattheimporting Member must prove (ifnecessary
toapanel). Rather, they were phrased explicitly interms oftheinvestigation tobeundertaken by
thecompetent authorities intheimporting country. Forinstance, Article 2.1oftheAgreement on
Safeguards provided that:
"AMember mayapply asafeguard measure toaproduct only ifthatMember hasdetermined,
pursuant totheprovisions setoutbelow, thatsuch product isbeing imported intoitsterritory
insuch increased quantities, absolute orrelative todomestic production, andunder such
conditions astocause orthreaten tocause serious injury tothedomestic industry thatproduces
likeordirectly competitive products."
Thus, theUnited States argued, apanel ’sevaluation ofmeasures taken pursuant totheAgreement on
Safeguards should follow theapproach taken inthe"Fur FeltHat" case.
5.43 Itwasnoted bytheUnited States thattheapproach adopted inthe"Fur FeltHat" working
party report hadalsobeen adopted intheAgreement onSafeguards because ithadcome tobewidely
accepted. In1951 the"Fur FeltHat" report wasviewed asanimportant precedent, anditwasagreed
that, because ofitsvalue inrelation totheinterpretation ofArticle XIX oftheGeneral Agreement,
thetextofthereportshouldbepublished.Thisworkingpartyreporthadbecometheacceptedbenchmark
forpanel evaluation ofsafeguards actions. Noassertion wasmade thattheapproach adopted bythat
working party hadbeen legally incorrect. Indeed, thegeneral acquiescence tothisstandard, inspite
ofthemany invocations ofArticle XIX:1 recorded inover 45years oflater GATT history, indicated
thatthisapproach hadbecome customary law, orattheleast,
"subsequent practice intheapplication ofthetreaty which establishes theagreement ofthe
parties regarding itsinterpretation",
inthesense ofArticle 31.3(b) oftheVienna Convention ontheLaw ofTreaties.
5.44 TheUnited States stated thatthey hadnotargued, andwould notargue, thattheregime now
governing textile trade intheWTO wasasuigeneris regime. Itwasasafeguards regime justasthe
regime under Article XIX andtheAgreement onSafeguards were safeguard regimes. Both regimes
permitted aMember torestrict trade infairly traded goods onthebasis ofadetermination made by
thatMember, subject tocertain limitations. Thetextile regime diverged from Article XIX butmany
ofitsbasic concepts depended onthefundamental concepts behind Article XIX; likeEnglish and
American law, thetwowere originally one, have diverged over time, butstillshared fundamental
concepts andstructure. Where thenegotiators hadindicated their desire thatthetworegimes differ
(forinstance, concerning theselectivity ofactions taken ortheduration ofsafeguards once imposed),
thedifference inrights andobligations provided inthenegotiated textmust berespected. However,
the"Fur FeltHat" case, anaccepted precedent which predated thedivergence between thetworegimes,
wasrelevant andpersuasive ininterpreting theprovisions inboth, oreither, ofthese regimes concerning
theinitial decision totake safeguards action.
5.45 TheUnited States confirmed itsargument thatthestandard ofreview appropriate forthiscase
wastheoneenunciated inthe"Fur FeltHat" case. That is,thePanel should look toseewhether the
authority 'sdeterminations were reasonable inlight oftherequirements oftherelevant agreement, in
thiscasetheATC, andconsidering thedataavailable atthetime. TheUnited States didnotadvocateWT/DS24/R
Page 20
denovoreview.InresponsetothePanel'squestion,theUnitedStatessaidthatif"adequatelymotivated"
meantthatthePanelwastoexplorethepossiblemotivesunderlyingtheCITA'sdecisionmakingprocess,
theUnited States disagreed with such astandard ofreview. If"adequately motivated" meant thatthe
Panel wastoexamine whether thedomestic authorities hadbased their determination onanexamination
offactors required intheATC, andwhether thebasis forthedetermination hadbeen adequately
explained, theUnited States would agree with thisformulation asitwascompatible with thestandard
ofreview inthe"Fur FeltHat" case, andtheUnited States didnotadvocate aposition onhow the
TMB 'sfinding byconsensus onserious damage should betreated bythePanel. Itwasonly stated
thattheUnited States didnotagree with theTMB 'sfinding andtheATC, Article 8,didnotrequire
themtoinformtheTMB concerningtheirviewontheirfinding.Instead,theATCrequiredthatMembers
endeavour tocomply with recommendations andinform theTMB ifrecommendations could notbe
accepted. InthiscasetheTMB recommendation didnotinclude arecommendation thattheyexpressed
aparticular view ontheTMB 'sconsensus finding orthelack ofconsensus onthreat.
Views ofCosta Rica onStandard ofReview
5.46 Asregards thestandard ofreview, Costa Rica recalled thattheUnited States hadproposed
thatthePanel should restrict itself, solely andexclusively, toverifying whether theUnited States had
followed theprocedures laiddown inArticle 6oftheATC andtoruling thatitsdetermination was
reasonable considering theinformation available atthetime thedetermination wasmade. Costa Rica
argued andrequested thePanel toruleaccordingly, thatonthispoint theUnited States waswrong,
since thestandard ofreview which thePanel should apply wasavery different one
5.47 Intheview ofCosta Rica, thestandard ofreview applicable tothiscase,which must bebased
onthegeneral principles ofGATT lawandtheprovisions oftheDSU, required thePanel toundertake
ananalysis andmonitor thefollowing fiveaspects: compliance with theprocedural rules; proper
establishment ofthefacts; objective andimpartial evaluation ofthefacts inthelight oftherules of
theATC; proper exercise ofdiscretion ininterpretation oftherules; andcompliance with therules.
5.48 Although novel inthetextile field, thestandard ofreview tobeapplied byapanel, wasnot
newinthecontext oftheGATT dispute settlement mechanism norinthecontext ofmany legal systems.
Norwasitaquestion foreign totheWTO itself, since ithadarisen invarious WTO Agreements.
Neither wasitunknown tothejurisprudence which, although notvery abundant, nevertheless threw
useful light onthematter.
5.49 Firstly, Costa Rica noted thatthissubject hadbeen dealt with onnumerous occasions inthe
reports ofvarious panels setuptoreview theconsistency ofaparticular measure with theGATT rules,
especially intheanti-dumping field. Forexample, inthecase oftheNew Zealand transformers3,the
Panel didnotshare theview expressed byNew Zealand totheeffect thatthedetermination of"material
injury" could notbechallenged orscrutinized byother contracting parties norindeed bythe
CONTRACTING PARTIES themselves. Insupport ofitsruling, thePanel pointed outthat:
"Toconclude otherwise would givegovernments complete freedom andunrestricted discretion
indeciding anti-dumping cases without anypossibility toreview theaction taken intheGATT.
This would leadtoanunacceptable situation under theaspect oflawandorder ininternational
trade relations asgoverned bytheGATT."
5.50 Thus, thefirstthing thatCosta Rica noted wasthattheGATT jurisprudence onthisparticular
point hadnotbeen uniform over thecourse oftime andinrelation todifferent subjects. Itfollowed
thattheabove-mentioned "Fur FeltHat" casecould notberegarded asaleading caseinthisfield which
3"New Zealand -Imports ofElectrical Transformers from Finland", BISD 32S/67, paragraph 4.4.WT/DS24/R
Page 21
ought necessarily tobefollowed bysubsequent panels. Thesecond argument wasbased onageneral
principle ofGATT lawaccording towhich, intheabsence ofanexpress ruletothecontrary, itwas
notpossible toassume anylimitation onthestandard ofreview. This principle wasclearly expressed
inArticle 11oftheDSU, according towhich:
"The function ofpanels istoassist theDSB indischarging itsresponsibilities under this
Understanding andthecovered agreements. Accordingly, apanel should make anobjective
assessment ofthematter before it,including anobjective assessment ofthefacts ofthecase
andtheapplicability ofandconformity with therelevant covered agreements, andmake such
other findings aswillassist theDSB inmaking therecommendations oringiving therulings
provided forinthecovered agreements...".
5.51 Atthesame time, according toArticle 3.2oftheDSU, theessential functions oftheWTO 's
dispute settlement system -and, consequently, oftheDSB -were:
"...topreserve therights andobligations ofMembers under thecovered agreements, and...
toclarify theexisting provisions ofthose agreements inaccordance with customary rules of
interpretation ofpublic international law...".
5.52 Onthebasis ofthese provisions, inCosta Rica'sview, inorder properly toperform itstask
ofpreserving therights andobligations ofMembers andclarifying theexisting provisions oftheWTO
Agreements, theDSB must require thatthework ofpanels notbesubjected toapriori limitations,
based onaputative restriction onitspowers ofreview inaparticular case.
5.53 With reference toCosta Rica'sargument thatthereference toobjective assessment inArticle 11
oftheDSU required thatpanels 'scope ofreview notbelimited, theUnited States pointed outthat
they hadnotargued thatpanels could notreview Article 6determinations bydomestic authorities;
theyhadsimply argued thatthese determinations should beaccorded theproper weight. Itshould also
benoted thatthisreference to"objective assessment" andtomaking findings inDSU Article 11did
notrepresent apolicy-making initiative intheUruguay Round, butitwasthewholesale incorporation
ofparagraph 16ofthe1979 GATT Understanding Regarding Notification, Consultation, Dispute
Settlement andSurveillance. Asthedrafters oftheDSU hadsought tomake thereview acomprehensive
textincorporating allprior codification efforts ondispute settlement, theGATT Contracting Parties
hadintended the1979 Understanding anditsannex toreflect customary practice andimprovements
inthatpractice, which included thestandard ofreview inthe"Fur FeltHat" case.
5.54 Costa Rica pointed outthatinthecase oftheAgreement onSafeguards andtheATC there
wasnoexplicit (orimplicit) provision establishing limitations onapanel 'sfreedom ofreview, which
waswhytheabove-mentioned general principle should beapplied. Where anti-dumping wasconcerned,
thesituation was different. Given theactual existence ofArticle 17.6 oftheAgreement on
ImplementationofArticleVIoftheGATT1994(hereinafterthe"Anti-DumpingAgreement"),according
towhich, inexamining thematter submitted toit,thePanel:
"(i) initsassessment ofthefacts ofthematter, shall determine whether theauthorities '
establishment ofthefacts wasproper andwhether their evaluation ofthose facts was
unbiased andobjective. Iftheestablishment ofthefacts wasproper andtheevaluation
wasunbiased andobjective, even though thePanel might have reached adifferent
conclusion, theevaluation shall notbeoverturned;
(ii) shall interpret therelevant provisions oftheAgreement inaccordance with customary
rules ofinterpretation ofpublic international law. Where thePanel finds thatarelevant
provision oftheAgreement admits ofmore than onepermissible interpretation, theWT/DS24/R
Page 22
Panel shall findtheauthorities 'measure tobeinconformity with theAgreement if
itsrests upon oneofthose permissible interpretations."
Views ofAuthors Relating toStandard ofReview
5.55 Costa Rica referred tothisprovision andthehistory ofitsnegotiation, andnoted thattheauthors
Croley andJackson hadpointed outthattheaimofthose behind thedrafting ofthisArticle hadbeen
toestablish limits onthestandard ofreview which could beapplied byaWTO panel, forwhich purpose
they hadbased themselves onthejurisprudence ofUnited States administrative law.4Theidea was
toestablish anexpress rulemainly forthepurpose ofintroducing limitations, inthespecific case of
anti-dumping matters, onthegeneral principle mentioned above.
5.56 TheUnitedStatesconsideredtheabove-citedarticlebyCroleyandJacksontobelargelyirrelevant
tothework ofthisPanel asitfocused almost entirely onspecific provisions ofadifferent agreement
outside thePanel 'sterms ofreference, theAnti-Dumping Agreement. They nevertheless noted in
examining thisarticle thatittoorecognized theimportance ofthe"Fur FeltHat" caseinGATT law5,
andreferred toother GATT cases recognizing arestrained standard ofreview.6They hadalsonoted
thattheauthors, intheir conclusions, overall hadrecommended caution onthepartofWTO panels,
arguing that:
"...panels should alsorecognize thatnational governments often have legitimate reasons for
thedecisions they take. Attimes forexample such governments canjustifiably argue thatan
appropriate allocation ofpower should tiltinfavour ofthenational governments thatareclosest
totheconstituencies most affected byagiven decision."7
Relationship toOther GATT Provisions
5.57 Intheview ofCosta Rica, these authors hadclearly explained how itfollowed unequivocally
from theDecision onReview ofArticle 17.6 oftheAnti-Dumping Agreement andtheDeclaration
onDispute Settlement Pursuant totheAgreement onImplementation ofArticle VIoftheGATT 1994
orPart VoftheAgreement onSubsidies andCountervailing Measures thatthislimited standard of
review wasapplicable solely tothereview ofanti-dumping measures. Itwasimportant tomake this
clear asitprovided auseful guide todefining what should bethestandard ofreview inacaseinwhich
what wasbeing scrutinized wastheconsistency ofaclothing trade restriction with therequirements
ofArticle VI.Asalready pointed out,thelimitation onthestandard ofreview inanti-dumping matters
operated solely andexclusively inthatfield and, inthatrespect, must beregarded asanexception to
thegeneral ruleoutlined above.
5.58 Costa Rica argued that, inview oftheabove, itwasnotpossible toaccept astandard ofreview
which would bejustasrestricted oreven more restricted than thatestablished inArticle 17.6 ofthe
Anti-Dumping Agreement when apanel scrutinized matters other thanthose covered bythatAgreement,
4Steven P.Croley andJohn H.Jackson, "WTO Dispute Procedures, Standard ofReview, andDeference
toNational Governments", inAmerican Journal ofInternational Law, Vol. 90,No.2,April 1996, page 199.
5Croley andJackson, op.cit.page 196.
6Citationsinclude"UnitedStates-RestrictionsonImportsofTuna",DS29/R,paragraph3.73;"UnitedStates-
Imposition ofAnti-Dumping Duties onImports ofFresh andChilled Atlantic Salmon from Norway", ADP/87,
paragraph 232; "United States -Imposition ofCountervailing Duties onImports ofFresh andChilled Atlantic
Salmon from Norway", SCM/153, paragraphs 209-212.
7Croley andJackson, pages 212-213.WT/DS24/R
Page 23
astheUnited States insisted. Infact, inthepresent casetheUnited States wanted thestandard ofreview
toconsist inverifying thattheprocedures established inArticle 6oftheATC were followed andruling
thatthedetermination bytheUnited States wasreasonable, which waseven more limited than the
obligation imposed upon anypanel under theabove-mentioned Article 17.6 oftheAnti-Dumping
Agreement. This interpretation wasnotacceptable. Thestandard ofreview ofthisPanel wasand
must bemuch broader thanthatproposed bytheUnited States andthatwhich Article 17.6 oftheAnti-
Dumping Agreement established forthereview ofanti-dumping measures.
5.59 TheUnited States noted thevarious GATT cases concerning anti-dumping determinations,
which Costa Rica hadcited. IntheUSview, however, thiswasnotananti-dumping case. An
interpretation oftheGATT ortheAgreement ontheImplementation ofArticle VIwasclearly outside
ofthescope oftheterms ofreference ofthePanel. Inanyevent, theUShadnever argued thatan
importing Member wasnotrequired tocarry outaninvestigation andcarefully examine thefacts before
making itsArticle 6.2oftheATC determinations under Articles 6.2and6.4oftheATC. TheUS
hadalsonever argued thatthedeterminations were exempt from Panel review. TheUSauthorities
hadcarried outacareful investigation, theresults ofwhich appeared intheMarch Market Statement
annexed totheir first submission. Inthatsubmission, they hadestablished thefacts ofthecase by
going through theMarch Statement andpointing outsystematically how theCITA hadmetthe
requirements ofArticle 6oftheATC. They hadsimply argued thattheexpertise ofUSauthorities
andthefindings intheinvestigation should beaccorded anappropriate weight ormargin ofappreciation.
This would also beconsistent with thetransitional nature oftheATC andtheroleoftheTMB in
monitoring measures taken while textile andapparel trade wasintegrated intotheGATT 1994 and
other Annex 1AAgreements.
5.60 Furthermore, according totheUnited States, Costa Rica'sreference toanti-dumping cases
was also irrelevant because inananti-dumping case before aWTO panel, Article 17.6 ofthe
Anti-Dumping Agreement superseded panel reports under GATT Article VI. Even inthe
"Transformers" casecited byCosta Rica, thePanel hadrecognized theappropriateness inthecontext
ofdeferring tofactual expertise ofdomestic investigating authorities:
"The Panel ...considered theevidence putforward byboth sides astotheappropriateness
ofthecost elements used bytheNew Zealand authorities inarriving attheir decision that
dumping hadoccurred. ThePanel noted thatthisevidence wasofahighly technical nature,
especially because itrelated tocomplicated custom-built products. Italsonoted thatArticle VI
didnotcontain anyspecific guidelines forthecalculation ofcost-of-production andconsidered
thatthemethod used inthisparticular case appeared tobeareasonable one. Inview ofthis
andhaving noted thearguments ofboth sides ...thePanel considered thatthere wasnobasis
onwhich todisagree with theNew Zealand authorities 'finding ofdumping ...".8
5.61 Costa Rica argued thatinorder todefine thisstandard ofreview forthespecific caseinquestion,
itwasimportanttobearinmindvariousconsiderations.Firstly,effectivecompliancewiththesubstantive
requirements oftheATC fortheadoption ofatransitional safeguard could notbeachieved without
thecertainty thatthefullextent ofthedeterminations oftheimporting Member wasopen toreview.
Without such aguarantee there wasvery little incentive foranimporting Member tocomply with the
basic rules oftheAgreement which, inpractice, meant areturn tothesituation thatexisted inthetextiles
andclothing trade before theUruguay Round. Itwasimportant tonote theincreasing legalization
ofthedispute settlement system, firstly oftheGATT andnow oftheWTO, with theaimofraising
legal standards. Itwasnotfornothing thatArticle 8andArticle 14oftheAgreement onSafeguards
subjected themeasures adopted totheir review procedures, inaccordance with therules oftheabove-
mentioned dispute settlement mechanism.
8L/5814, adopted on18July 1985, BISD 32S/55, 67,paragraph 4.3.WT/DS24/R
Page 24
Deference toNational Authorities
5.62 CostaRicarecognizedthatalthoughthenationalauthoritiescouldusuallycountonhavingaccess
tomost ofthefactual information needed tocarry outaneffective investigation, forexample forthe
purpose ofdetermining whether adomestic industry hadsuffered serious damage, itwasalsoclear
thatthose same national authorities could become ahostage tothelocal forces ofprotectionism sothat
theywere prevented from carrying outtheinvestigation properly orinterpreting andapplying therules
oftheagreement inquestion tothebesteffect. Inthisconnection, forexample, Meier wrote thatfor
deference tobepaid tothedecisions ofanational body:
"...there should beagreement thatthenational body beindependent ofgovernment, thatall
interests begiven dueconsideration, andthatthenational procedure ofenquiry besimilar to
thatfollowed bytheUnited States International Trade Commission".9
Pursuing thisquestion further, Meier expresses theopinion thatArticle XIX oftheGATT should be
revised inorder toincorporate twokeyprinciples:
"(i) thatthedetermination ofconditions onwhich theexecutive iscalled totake action be
entrusted toastatutory body whose term ofoffice should notbecoextensive with thatofthe
executive, and(ii)that, after apreliminary investigation byitsownspecialized personnel, this
body should hold public hearings inwhich allinterested parties, including theforeign firms,
could berepresented andnotonly present their views butalsocross-examine each other within
anadversary procedure".10
5.63 Costa Rica considered thatthenational body entrusted with applying thetransitional safeguard
intheUnited States, CITA innowayresembled thatdescribed byMeier andneither didtheprocedure
itused toarrive atitsdetermination bearanyresemblance tothatrecommended forenabling thedecisions
ofthenational body tobeheld ingreater respect. Accordingly, atleast inconnection with thereview
ofadetermination toapply atransitional safeguard, thisargument should notcarry much weight with
thePanel.Finally,thereasonsforadoptingarestrictivestandardofreviewinthedomesticadministrative
lawofsome countries, forexample theUnited States, notonly could notbetransposed tothecontext
oftheWTO but,inmany cases, ifsotransposed, would produce theopposite effect.
5.64 Intheview oftheUnited States, thepoints Costa Rica hadcited from thearticle byMeier
were wrong orpeculiar. TheUruguay Round negotiators appeared inpractice tohave overruled Meier
asthey negotiated anoriginal Agreement onSafeguards which facilitates access toArticle XIX while
barring grey-area measures. Moreover Costa Rica hadurged thatthePanel adopt proposals byMeier
in1977forrevisionofArticleXIX,whichamountedtorequiringthatallgovernmentsinstallanimitation
oftheUSinternational trade commission. TheUruguay Round negotiators hadrejected thispoint
aswell. TheWTO Agreements donotregulate theseparation ofpowers ordelegation ofauthority
bygovernments todomestic institutions ofanyWTO Member. USlawhappens toseparate theauthority
fortheimplementation ofsafeguards taken ontextiles andclothing purposes andthatforsafeguards
under Article XIX. Itwould beinappropriate, andlegally unsupported toimpose amodel onany
government asamatter ofitsWTO obligations ortoaccord thatmodel alegally privileged position
asargued byCosta Rica. Thenotifications made totheWTO concerning national safeguard systems
clearly showed great diversity intrade policy making andimplementation, adiversity which theWTO
hasnotonly tolerated butwelcomed. Inanyevent, thedetermination ofserious damage oractual threat
9Gerald M.Meier, "Externality Law andMarket Safeguards: Applications intheGATT Multilateral Trade
Negotiations", inHarvard International Law Journal, Volume 18,Number 3,Summer 1977, footnote 10,page
510.
10Idem ,page 515.WT/DS24/R
Page 25
thereof made bytheUSauthorities inthiscase must beevaluated notagainst oneacademic proposal,
butagainst thelawandpractice oftheATC.
5.65 Onthebasis oftheabove, even ifahigh degree ofdeference waspaid tothedecision taken
bythenational authorities, Costa Rica wasoftheopinion thatthestandard ofreview applicable in
thiscase required thePanel toscrutinize andverify thefollowing aspects:
(i) Compliance with theprocedural rules: thismeant formally confirming notonly that
allthesteps intheprocess ofapplying thetransitional safeguard followed each other
chronologically -astheUnited States would have it-butalso thateach ofthese
procedural rules wasactually complied with. Inthisconnection, theutmost importance
attached totheobligation upon theimporting Member tobring evidence, asalready
indicated, and, above all,theeffective fulfilment ofthat obligation through the
submission ofspecific andrelevant information, asrequired bytheATC, andtheproper
scrutinyofthatinformationinrelationtotheparametersoftheAgreement,asCostaRica
hadpreviously pointed out. This same aspect alsoincluded theobligation upon the
importing Member toestablish, atthetime ofmaking thedetermination, whether the
testofserious damage oractual threat ofserious damage hadbeen applied, aswell
astheobligation tohold consultations with theexporting Member onthebasis ofthe
premises onwhich thecase wasfounded.
(ii) Theproper establishment ofthefacts: from thisaspect, thePanel should confirm that,
onthebasis ofthespecific andrelevant information submitted, adetailed examination
hadbeen carried out,thereby enabling thefacts tobeproperly established. From this
itfollowed thatthere must beareliable andlogical correlation between theinformation
inquestion anditsexamination, ontheonehand, andbetween thelatter andthe
establishment ofthefacts, ontheother. This meant, inter alia,properly justifying
each ofthefacts established and, conversely, thatitwasnotpossible toestablish facts
which hadnotbeen duly justified. With thisinmind, forexample, itwasnotpossible
intheview ofCosta Rica toaccept thattheUnited States haddemonstrated theexistence
ofproblems affecting employment, sales andprofits, investment orcapacity inits
industry, inasmuch asthese facts hadnotbeen properly substantiated, having been
established onthebasis oftheevidence ofonly oneortwoenterprises. Norwasit
possible toaccept thatthedataonimports, domestic production andmarket sizeresulted
intheestablishment ofthefacts adduced bytheUnited States, considering theproblem
created inthisparticular case bythefactthat"807 trade" wascounted twice, notto
mention thetotal absence ofanalysis ofthisquestion within theunderwear trade.
(iii) Theobjective andimpartial evaluation ofthefacts inthelight oftherules oftheATC:
thePanel must determine whether thefacts hadbeen objectively andimpartially
evaluated bythenational body within theframework oftherules oftheATC.
Accordingly, thePanel must verify thattheprocess ofsubsumption ofthefacts inthe
legal arguments provided forbytherules hadproceeded logically andnaturally, without
distorting theevaluation ofthefacts orinvolving errors ofjudgement orabuse ofpower
which might have ledtoaresult different from thatwhich could have been anticipated
under conditions ofobjectivity andimpartiality. Thus, forexample, itwasimpossible
toconclude thattheestablishment ofanSLquota below thecalllevel could constitute
themore favourable treatment forre-imports envisaged inArticle 6.6(d) oftheATC.
(iv) Theproper exercise ofdiscretion intheinterpretation oftherules: when itbecame
necessary tointerpret aruleoftheATC, thenational body may notassume unlimited
powers ofdiscretion, inasmuch astheATC itself imposed limits which must be
respected. Thus, asCosta Rica hadalready pointed, theprinciples underlying theWT/DS24/R
Page 26
adoption ofatransitional safeguard were clearly established inArticle 6.1oftheATC,
according towhich thesafeguard should beapplied,
"assparinglyaspossible,consistentlywiththeprovisionsofthisArticleandtheeffective
implementation oftheintegration process under thisAgreement".
Given these limits, therules could notbeunderstood, forexample, tomean thatthe
ATC authorized theretroactive imposition ofasafeguard measure.
(v) Compliance with therules: finally, thePanel must make sure that, despite having
complied with therequirements mentioned above, theimporting Member hadnot
infringed theATC insome other way.
5.66 Only acasewhich survived thescrutiny ofaPanel onthebasis oftheabove standard ofreview
could beconsidered consistent with theATC. Inthecaseinquestion, ithadalready been amply shown
thattherestriction adopted bytheUnited States onthisoccasion could notsurvive scrutiny ofthiskind,
which waswhy Costa Rica hadrequested thePanel torulethatitbewithdrawn.
Burden ofProof
5.67 Recalling thatthemeasures atissue were taken asaninvocation ofthemultilaterally-agreed
safeguard provisions setforth inArticle 6oftheATC, theUnited States argued that, consistent with
accepted GATT dispute settlement practice thathadbeen carried over intheWTO, theburden was
onCosta Rica inthefirst instance todemonstrate thatUnited States actions were inconsistent with
theATC. Theburden wasnotontheUnited States tore-demonstrate thatitsactions were justified.
Itwasconsidered thattheUnited States hadpresented ample material intheTMB justifying thesafeguard
measure, andthey were prepared torefute theclaims thatCosta Rica hadmade; however, thePanel
should firstdetermine whether Costa Rica hadindeed brought forward factual information andlegal
arguments substantiating itscase, which, intheir view, Costa Rica hadnotdone.
5.68 Costa Rica argued thatthisparticular conclusion bytheUnited States waswrong, since the
burden ofproof inadispute settlement proceeding under theDSU forthepurpose ofdetermining the
consistency ofaclothing trade restriction with Article 6oftheATC fellupon theimporting Member
which hadadopted therestriction. This followed from theATC, since Article 6.2oftheATC expressly
stated thattheimporting Member must demonstrate thefulfilment ofthebasic requirements which
must besatisfied before atransitional safeguard canbeadopted. Accordingly, theimporting Member
must show orprove thattheactual situation against which itwould protect itself fully satisfied the
basic requirements. Theimporting Member hadtwoobligations tofulfil: firstly, they must submit
specific andrelevant factual information insupport oftheir claim and, secondly, review thefactors
listed inArticle 6andshow howtheir casefitted within thesubstantive criteria established bytheATC
asprerequisites fortheadoption ofaspecial transitional safeguard.
5.69 IntheviewofCostaRica,theimportingMemberhadanobligationtodemonstratethesatisfaction
ofthese requirements notonly totheexporting Member during theconsultations butalsototheTMB
and, where appropriate, tothePanel. Inaccordance with Articles 6.7, 6.9and6.10 oftheATC, it
wasclear thattheimporting Member must demonstrate itscompliance with thebasic requirements
oftheATC totheTMB. Inthecase inquestion theTMB hadruled that"the existence ofserious
damage hadnotbeen demonstrated" and"did notreach consensus ontheexistence ofactual threat
ofserious damage". From thisitclearly followed thattheburden ofproof vis-à-vis theTMB fellupon
theimporting Member, who must demonstrate theexistence oftheconditions laiddown bytheATC.
Theimporting Member wasalsoobliged todemonstrate theexistence ofdamage inadispute settlement
proceeding under theDSU, since logic forbid that, inthisstage, suddenly andfornoreason, theburden
ofproof should bereversed, requiring theexporting Member todemonstrate thatthebasic requirementsWT/DS24/R
Page 27
oftheATC hadnotbeen fulfilled bytheimporting Member. Toproceed inthisway would beto
establish apresumption infavour ofthelatter, inthesense thatanyrestriction onthetextile andclothing
trade adopted byaMember would have tobeassumed tobeconsistent with Article 6oftheATC unless
theexporting Member could prove otherwise. Itwasclear thatsuch arulewould make completely
pointless theexistence ofthesubstantive requirements established bytheATC toensure thatthespecial
transitional safeguard remained anemergency measure anddidnotbecome thegeneral rule. There
wasnoreason to"reward" aMember which wasunable todemonstrate itscasetotheTMB byrelieving
thisburden ofproof. Moreover, establishing apresumption infavour oftheimporting Member even
against theruling oftheTMB didnotmake sense, since thatwould imply depriving theTMB ofany
roleinthesupervision oftheoperation oftheATC.
5.70 Costa Rica pointed outthattheUnited States wasjustifying itsposition onthebasis ofasingle
case, whose findings should notbetaken intoconsideration bythePanel since, intheir view, they
were wrong. They stressed thatnoother panel, from 1951 uptotoday, hadbased itsfindings onthat
case. Itwasalsoimportant tonote thatpanels setupinother cases, inparticular where anti-dumping
measures were concerned, hadtreated thequestion oftheburden ofproof very differently. Forexample,
when Finland requested areview ofitsdispute with New Zealand over ananti-dumping proceeding
initiated against shipments ofelectrical transformers from aFinnish company toalocal power company
inNew Zealand (seealsoparagraph 5.49), thepanel hadshared theview expressed bythepanel on
complaints setuptoexamine acomplaint against anti-dumping duties applied bySweden (BISD, 3S/81)
totheeffect that:
"itwasclear from thewording ofArticle VI(oftheGATT) thatnoanti-dumping duties should
belevied until certain facts hadbeen established. Asthisrepresented anobligation onthepart
ofthecontracting party imposing such duties, itwould bereasonable toexpect thatthat
contracting party should establish theexistence ofthese facts when itsaction ischallenged."
Thereport ofthatPanel didnomore than recognize what wasageneral principle ofGATT law,
according towhich theburden ofproof fellupon theMember which invoked Article VIorArticle XIX
oftheGeneral Agreement. Inthisrespect, theprinciple wasclearly laiddown inArticles 3and11
oftheAgreement onSafeguards, according towhich itwastheimporting Member which, inaccordance
with aseries ofpre-established procedures, must demonstrate compliance with thebasic requirements
inorder tobeabletoproceed with theadoption ofasafeguard measure. Astheprinciple wasofgeneral
application, itshould also govern theadoption ofaspecial transitional safeguard under theATC,
especially asArticle 6.2oftheATC itself wasclearly based onthesame principle.
5.71 TheUnited States failed toseetherelevance oftheCosta Rican arguments thatlegal duties
under theATC flowed from ageneral principle ofGATT law; thattheburden ofproof fellonthe
member which invoked GATT Articles VIorXIX; orthatsince aMember invoking safeguard action
under Article XIXmust establish certain facts under Articles 3and11oftheAgreement onSafeguards,
thatprinciple should govern transitional safeguards under theATC. Interpretation oftheGATT or
theSafeguard Agreement wasbeyond thePanel 'sterms ofreference. Moreover since theUShadnot
yetintegratedtheapparelcategoriesinquestion,neithertheGATTnortheSafeguardsAgreementapplied
inthiscase. Even ifArticles 3and11oftheSafeguards Agreement applied here, their provisions
only required thattheimporting country conduct aninvestigation, provide dueprocess tointerested
parties andpublish areport. Inparticular there wasnothing ineither ofthese articles thatshifted the
burden ofproof inWTO Dispute Settlement totheimporting Member.
5.72 Costa Rica noted thatvarious authors hadvery sharply criticised thereport onthe"Fur Felt
Hat" case. Thus, forexample, Meier wrote:
"IntheUnited States withdrawal case(Hatters 'Furcase), forexample, theworking party held
thattheinvoking party (United States) was'entitled tothebenefit ofanyreasonable doubt 'WT/DS24/R
Page 28
andthatthecomplainant (Czechoslovakia) 'hasfailed toestablish thatnoserious injury has
been sustained orthreatened '.Thishasmade itdifficult tomaintain thesubstantive requirements
with respect tocausation of'injury ',andithasmade access toArticle XIX freer thanitshould
be.This procedural ruleshould berevised torequire theinvoking party togoforward with
theburden ofproof of'serious injury '."11
5.73 Commenting onthesame case, Dam pointed outthat:
"Whatever distinctions may bemade between theburden ofcoming forward with evidence
andtheburden ofconvincing theworking party, itisclear thattheeffect ofthisprocedural
ruleistopermit much freer access toArticle XIX relief than might appear possible from the
language ofthatarticle ...".12
5.74 Costa Rica suggested thatthePanel should takethisopportunity tocorrect theapproach taken
inthecasecited bytheUnited States andproceed onthebasis oftheconsiderations previously advanced
toestablish clearly thattheburden ofproof inthiscase rests upon theUnited States, which must
demonstrate tothesatisfaction ofthePanel thatithascomplied with therequirements laiddown by
theATC fortheadoption ofatransitional safeguard.
5.75 TheUnitedStatesnotedthatArticle3.1oftheDSUaffirmedMembers'adherencetotheprinciple
inArticle XVI:1 oftheAgreement Establishing theWTO thatMembers must beguided bythedecisions,
procedures andcustomary practices oftheGATT 1947 andthatsuch practice included findings and
recommendations ofthe"Fur FeltHat" working party. Therefore, theUnited States suggested that
thePanel refrain from intervening, asrequested byCosta Rica, toalter theestablished practice.
D. ARTICLE 6OFTHE ATC: GENERAL VIEWS ONITSAPPLICATION
5.76 Costa Rica argued thattheUnited States hadfailed tocomply with theprinciples applicable
totheadoption ofasafeguard measure under Article 6oftheATC. Article 6.1oftheATC established
twoprinciples thatmust guide theapplication ofanysafeguard tobeadopted under thesaidprovision.
Firstly, "The transitional safeguard should beapplied assparingly aspossible ...". This principle of
sparing application ofthemeasure carried anobligation oftempering oradjusting safeguard action
prudently orsensitively, avoiding excess. Itimposed anobligation tobeasscrupulous aspossible
when seeking toestablish newrestrictions. Failure tocomply withthisprinciple would hinder ormight
even altogether prevent attainment oftheobjective offurther liberalization oftrade intextiles and
clothing. Secondly, Article 6.1oftheATC went ontosaythatthetransitional safeguard should be
applied. "...consistently with theprovisions ofthisArticle andtheeffective implementation ofthe
integration process under thisAgreement".
5.77 Costa Rica further argued thatinaccordance with thissecond principle, itwasclear, firstly,
thatanyMember wishing tousethismechanism hadanobligation tocomply with theprovisions
established bytheArticle forthispurpose, andsecondly, thattheapplication ofthemeasure must be
guided bythefinal objective oftheATC which wasthefullintegration oftextiles andclothing into
theGATT rules. When considering these twoprinciples together, itwasclear thatArticle 6ofthe
ATC sought toprevent thearbitrary and/or unjustified useofthetransitional safeguard, byimposing
onallMembers areference framework towhich theapplication ofanysafeguard measure wassubject
andagainst which theadoption ofevery safeguard must bemeasured. Theimposition oftheunilateral
11Meier, op.cit.,page 516.
12Kenneth W.Dam, TheGATT Law andInternational Economic Organization, TheUniversity ofChicago
Press, Chicago andLondon, 1970, page 103.WT/DS24/R
Page 29
restriction bytheUnited States ontrade from Costa Rica inthecategory under consideration had
infringed Article 6.1oftheATC because itwasanarbitrary andunjustified action thatdidnotcomply
with theprovisions ofthisArticle.
5.78 TheUnitedStatescommentedthatCostaRica'sargumentconsistentlydependedontheassumption
thattheATC integration process must bereadintoArticle 6soastoaccelerate thepace ofintegration.
This wasnotthecase. Itwasclear intheATC thatintegration wasanindependently determined process,
andthatArticle 6applied only toproducts notyetintegrated.
5.79 TheUnited States noted thatboth parties tothedispute hadagreed thattheATC wastheonly
relevant agreement inthiscase. Initsview, itwasclear from thestructure oftheATC, Article 6in
particular, andtheexpress direction ofArticle 3.2oftheDSU, thatthePanel ’sreport,
"cannot addtoordiminish therights andobligations provided inthecovered agreements".
Accordingly, where thenegotiators oftheATC hadfailed toagree oncertain provisions orotherwise
hadchosen nottoaddress them intheATC, thePanel must refrain from appearing tocreate such
obligations. Article 6oftheATC emphasized thatitwas theimporting Member thatmade the
determination based onthe"relevant factual information, asup-to-date aspossible" and"information
...related, asclosely aspossible, toidentifiable segments ofproduction andtothereference period
setoutinparagraph 8"ofArticle 6oftheATC.
5.80 Accordingly, when examining conformity withtherelevant procedures ofArticle 6oftheATC,
theUnited States argued thatthePanel should seekonlytodetermine whether theinvestigating authority
hadfollowed theprocedures inArticle 6oftheATC andwhether based ondata available, the
investigating authority hadacted reasonably (seeStandard ofReview inSection C).Thesubstantive
standardformakingsafeguarddeterminationsfortextilesandclothingnotyetintegratedintoGATT1994
wasprovided forintheATC andwassubstantially, asCosta Rica admitted initssubmission, thesame
asthatexisting under Article 3oftheMultifibre Arrangement (MFA).
5.81 TheUnited States further argued thatArticle 6oftheATC wasnotthesame asother trade
remedy provisions withrespect tosubstantive standards. Theabove-mentioned articles were therelevant
provisions tobeconsidered bythePanel initsreview. These provisions contained theuniverse of
factors andprocedures tobefollowed byMembers taking safeguard action. Article 6oftheATC
didnotinclude more detailed procedures forinvestigation, nordiditprovide more specific definitions
tointerpret thestandard oflawtobeapplied. This omission wasadeliberate choice bytheUruguay
Round negotiators who inother contexts, such astheAgreement onSafeguards ortheAgreement on
Subsidies andCountervailing Measures, were capable ofproviding detailed standards andprocedures.
5.82 IntheUnited States 'view, theappropriate standard toapply totheimporting country ’s
determination wasastandard ofreasonableness. Article 6oftheATC referred to"adetermination
byaMember," based onweighing ofevidence oncertain factors. Thestandard forpanel evaluation
ofsuch determinations should follow established GATT practice, which wasbased onthe1951 "Fur
FeltHat" case (seeSection C).
5.83 TheUnited States argued thatalthough thequantum ofinjury required tobedemonstrated under
Article XIX wasgreater than thatunder theATC Article 6,thefundamental process forweighing
information wasthesame. ThePanel must determine whether based ontheinformation available,
theUSdetermination wasmade ingood faith application ofand,wastherefore, consistent withArticle 6
oftheATC.WT/DS24/R
Page 30
E. REQUIREMENTS FOR THE APPLICATION OFASAFEGUARD MEASURE
5.84 Costa Rica argued thattheUnited States hadnotfulfilled thespecific requirements forthe
adoption ofatransitional safeguard measure. Such action required ademonstration oftheexistence
ofanumber ofsubstantive elements laiddown byArticle 6oftheATC itself. Thus, inaccordance
with paragraphs 2and4ofthatArticle, twostages may bedistinguished, with their corresponding
substantive requirements, thatmust bestrictly fulfilled inorder tobeabletoimpose such ameasure.
Inafirststage, itwasnecessary todemonstrate theexistence ofthesubstantive prerequisites forthe
importing Member tobeentitled tohave recourse toatransitional safeguard. Thus, Article 6.2of
theATC provided:
"Safeguard action may betaken under thisArticle when, onthebasis ofadetermination by
aMember, itisdemonstrated thataparticular product isbeing imported intoitsterritory in
such increased quantities astocause serious damage, oractual threat thereof, tothedomestic
industry producing likeand/or directly competitive products ...".
5.85 TheUnited States argued thattheCITA hadfollowed alloftheprocedures required under
Article 6oftheATC inmaking itsserious damage, oractual threat thereof, determination.
Determination ofSerious Damage orActual Threat Thereof
5.86 Intheview ofCosta Rica, Article 6.2oftheATC established three requirements thatmust
befulfilled andwere theprerequisites forbeing abletoimpose aspecific safeguard, namely: (a)an
increase intotal imports ofaparticular product, regardless oftheir origin; (b)serious damage oractual
threat thereof tothedomestic industry producing likeand/or directly competitive products; and(c)a
causal relationship between theincrease intotal imports andtheexistence oftheserious damage or
actual threat ofserious damage.
5.87 Theestablishment ofthese three requirements, which were developed indetail inparagraphs 2
and3ofArticle 6oftheATC, wasnotnewinforeign trade law, asinonewayoranother they were
theconditions laiddown byArticle XIX ofGATT 1994 andbytheWTO Agreement onSafeguards
fortheimposition ofasafeguard measure. Broadly speaking, theideawasthatthese measures were
bydefinition anexception totheruleoffreetrade. Furthermore, since what they were intended to
restrict wasfairtrade andnotunfair trade, such measures must comply with anumber ofstrict
requirements soastobeable to"justify" departing from theprinciples offreetrade. Thefactthat
theATC hadestablished aspecific safeguard mechanism foruseduring thetransition period didnot
depriveitoftheintrinsicnatureorphilosophyofanysafeguardmechanism,andinparticularitscharacter
ofbeing atemporary exception tofreetrade based onstrict fulfilment ofanumber ofrequirements.
Indeed, insofarasthetransitional safeguard provided forbytheATC didnotrequire compensation,
itsapplication must bestrictly subject tothesubstantive criteria laiddown bytheATC, andthismust
bejudged very rigorously.
5.88 TheUnitedStatesnotedthattheATCtransitionalsafeguarddepartedfromtheGATTArticleXIX
requirement thatthesafeguard beapplied onanon-discriminatory basis andthatcompensation must
beprovided. Thesafeguard standard wasserious damage, oractual threat thereof. Under theATC,
Members must first determine thataproduct such as,inthiscase, underwear, wasbeing imported
insuch increased quantities astocause serious damage oractual threat thereof totheir domestic industry
producing likeordirectly competitive products. Article 6.2oftheATC provided that:
"safeguard action may betaken under thisArticle when, onthebasis ofadetermination by
aMember,[footnote omitted] itisdemonstrated thataparticular product isbeing imported into
itsterritory insuch increased quantities astocause serious damage, oractual threat thereof,
tothedomestic industry producing likeand/or directly competitive products. Serious damageWT/DS24/R
Page 31
oractualthreatthereofmustdemonstrablybecausedbysuchincreasedquantitiesintotalimports
ofthatproduct andnotbysuch other factors astechnological changes orchanges inconsumer
preferences."
5.89 Costa Rica submitted thattohave theright totake safeguard action, theimporting Member
must fulfil therequirements established forthispurpose inArticle 6.2oftheATC asdeveloped in
detail inthatArticle andinArticle 6.3oftheATC. Article 6.2oftheATC obliged animporting
Member todemonstrate thatthesubstantive requirements hadbeen metbefore imposing atransitional
safeguard. This demonstration procedure required theMember tosubmit specific andrelevant
information onthefacts giving risetoitsclaim andtomake therequired examination ofthisinformation
inrelation totheparameters oftheAgreement. This information, together with thecorresponding
analysis, must besubmitted atthecorrect time, namely thetime theimporting Member determines
thestate ofthemarket, sothattheexporting Member canexercise their right ofdefence. Any failure
toobserve theprovisions could notberemedied bythesubsequent submission ofinformation (theJuly
orOctober Statements) since, theinformation thatwaslegally relevant forthepurpose ofanalysing
conformity ofthemeasure with theATC wasthatcontained intheMarch Statement. Theexhaustion
ofthisfirststage, with thefulfilment ofeach andevery oneofitsrequirements, wasasinequanon
condition foracquiring what might becalled a"generic" entitlement totheuseofaspecific safeguard
measure, which mayonly beparticularized ormaterialized against aspecific Member when thesecond
stage oftheprocess hadalso been fulfilled. The United States hadnotfulfilled itsobligation to
demonstrate theexistence ofthesubstantive factors thatwere partofthisfirststage, andthushadfailed
tofulfil therequirements laiddown inArticles 6.2and6.3oftheATC.
5.90 TheUnitedStatespointedoutthatArticle6.3oftheATCrequiredthatinmakingadetermination
ofserious damage, oractual threat thereof, aMember
"shall examine theeffect ofthose imports onthestate oftheparticular industry, asreflected
inchanges insuch relevant economic variables asoutput, productivity, utilization ofcapacity,
inventories,marketshare,exports,wages,employment,domesticprices,profitsandinvestment;
none ofwhich, either alone orcombined with other factors, cannecessarily give decisive
guidance."
This textrequired thataMember seriously examine theeffects ofimports ontheindustry asreflected
inchanges ineconomic dataonthatindustry. However, itdidnotrequire thattheimporting Member
examine only thelisted variables, orallthelisted variables. Itonly required thattheimporting Member
examine variables such asthose listed. CITA hadinfactexamined many variables including those
listedasrelevantinArticle6.3oftheATC.TheMarchMarketStatementnotedthatCITAhadexamined
production, market share, imports, employment, profits, investment, sales, capacity, prices and
manhours. Alloftheinformation provided intheMarch Market Statement contained allthesubstantive
economic information onwhich CITA ’sdecision hadbeen based. While Costa Rica hadpointed in
particular toexports, exports were only onevariable ofalong listinArticle 6.3oftheATC andas
thatArticle stipulated, anyonevariable alone could notnecessarily give decisive guidance.
5.91 TheUnited States noted thatwhile export datawere generally notasreliable asimport data,
attherequest oftheTMB, theUShadsupplied anexport table. Even after using export datatoadjust
fortheoverstatement inthemarket, thefigures before theTMB hadconfirmed thedetermination made
byCITA.Afterexaminingtheimportdata,CITAexaminedoutput,marketshare,employment,domestic
price andprofits andinvestment information. That information hadledCITA totheconclusion that
there wasacase ofserious damage, oractual threat thereof totheUSdomestic industry. While the
United States didnotsupply dataonproductivity, inventory, wages andexports, itwasnotrequired
todosounder Article 6.3oftheATC. Thevariables inArticle 6.3oftheATC notdirectly included
intheMarch Market Statement (productivity, inventories andwages) hadbeen discussed during theWT/DS24/R
Page 32
TMB examination inoralresponses bytheUnited States toquestions from TMB members. Costa Rica
hadomitted anyrecognition oftheexpress proviso inArticle 6.3oftheATC that:
"noneof[thesefactors]eitheraloneorcombinedwithotherfactors,cannecessarilygivedecisive
guidance."
Asimilar proviso wasalsofound concerning theadditional factors forconsideration inArticle 6.4
oftheATC. Nevertheless, theUnited States hadprovided verbal responses toquestions concerning
productivity, wages, andinventory totheTMB.
Increase inImports into theUnited States
(seealsoTheCounting ofRe-imports, paragraphs 5.142-5.149)
5.92 Costa Rica further argued that, inaccordance with itsobligation todemonstrate theexistence
ofanincrease inimports, theUnited States should have presented specific andrelevant factual
information onthesubject, andthen have analyzed it.Inthisregard, however, theMarch Market
Statement only indicated thatimports inthiscategory hadincreased from 65.5 million dozen in1992
to79.9 million dozen in1993 and97.3 million dozen in1994, reflecting increases of22percentin
each yearwith respect totheprevious year. TheUnited States hadnotmade anydistinction concerning
thenature ofthistrade, noranyanalysis thereof, anomission which wasparticularly serious inthis
case given theincreasing importance of"807 trade" inthiscategory. Infact, over thelastsixyears
there hadbeen asubstantial change intheUnited States industry producing cotton andman-made fibre
underwear. There hadbeen ashift from producing andassembling theproduct locally toproducing
theproduct components locally, which were thenassembled abroad andreturned tothesame companies
intheUnited States formarketing. This co-production process (seeSection II)hadenabled theUnited
States industries toretain their market share intheUnited States.
5.93 CostaRicaquestionedwhether,inthecaseofclothingproducedonthebasisoftheco-production
process, onewasdealing with "imports" orrather with acase ofdomestic production which, despite
assembly inanother country, didnotforthatreason alone cease tobedomestic production. Infact,
theUnited States itself hadconsidered imports ofcutparts forassembly intheUnited States asproducts
ofthecountry where theparts were cut. United States exports ofcutparts should beconsidered
United States products. Furthermore, when thiscase wasreviewed bytheTMB inJuly 1995, the
United States itself hadsubmitted aloose sheet giving alleged export datainthiscategory, inwhich
cutparts subsequently assembled abroad were included asexports, which logically showed thatfor
thisindustry these were partofdomestic production.
5.94 Costa Rica noted that the"807 trade" had risen from 31.8 million dozen in1992 to
42million dozen in1993 and57million dozen in1994, accounting foranever larger partoftrade
incategory 352/652. This reflected apattern which, byallindications, would continue andbecome
more pronounced inthefuture, driven bytheinvestment policies andincentives thattheUnited States
maintained inrelation totheCaribbean Basin andMexico.
5.95 Intheview ofCosta Rica, much ofthecited increase inimports didnotinfactexist, and
therefore theUnited States didnothave theright tousethetransitional safeguard. Bynevertheless
having done so,itviolated Article 6.2oftheATC. However, ifitwere tobeconsidered thatthere
wasinfactanincrease inimports ofunderwear, itwasquite clear thatifsuch imports were increasing
itwasbecause United States production ofthecutpieces, thatwere subsequently assembled, was
increasing inthesame proportions. Inother words, ifever more underwear wasbeing assembled in
other countries itwasbecause intheUnited States ever more cutpieces forunderwear were being
produced thatneed tobeassembled, from which itnecessarily followed thatanyindustry producing
cutpieces forunderwear wasthriving andtherefore didnotneed tobeprotected from something that
wasrather ofbenefit toit.WT/DS24/R
Page 33
5.96 TheUnited States considered thattheATC didnotprohibit inclusion ofre-imports inimports;
onthecontrary, Article 6.2oftheATC directed importing Members toexamine increases in"total"
imports. TheATC alsodidnotrequire Members toseparate re-imports from total imports. Infact,
alltextile andapparel re-imports were defined under United States lawasforeign articles. TheUS
Bureau oftheCensus ’statistics reflected HTSUS 9802 re-imports asapparel which were cutinthe
US, exported tobeassembled, andthen re-imported under HTSUS 9802 asfinished garments.
HTSUS 9802 re-imports were included indomestic production (cutparts), exports (cutparts), and
imports (finished garments). Re-imports must clear customs likeanyother imported good. Costa
Rica hadadmitted totheTMB thatcompanies producing goods forre-import intotheUnited States
were subject tothesame laws, fees and taxes asother domestic Costa Rican manufacturers.
HTSUS 9802 apparel re-imports intotheUSreceived dutyreductions totheextent thattheyincorporated
UScontent.
Application ofSafeguard toIndividual Member(s)
5.97 Costa Rica argued thatinthecaseoftheATC, since theAgreement allowed theselective and
discriminatory application ofasafeguard measure, itwasnecessary tofulfil thissecond stage which
wasnotnormally present inother existing safeguard mechanisms inthemultilateral system, precisely
inorder tobeabletoidentify theMember orMembers towhich themeasure would beapplied. Thus,
Article 6.4oftheATC stated that:
"Any measure invoked pursuant totheprovisions ofthisArticle shall beapplied onaMember-
by-Member basis. TheMember orMembers towhom serious damage, oractual threat thereof,
referred toinparagraphs 2and3,isattributed, shall bedetermined onthebasis ofasharp
andsubstantial increase inimports, actual orimminent, from such aMember orMembers
individually, andonthebasis ofthelevel ofimports ascompared with imports from other
sources, market share, andimport anddomestic prices atacomparable stage ofcommercial
transaction: none ofthese factors, either alone orcombined with other factors, cannecessarily
give decisive guidance ...".
5.98 Intheview ofCosta Rica, inthesecond, attribution stage, theimporting Member must
demonstrate thefulfilment oftwosubstantive requirements: asharp andsubstantial increase inimports,
actual orimminent, from such aMember orMembers individually; andthecausal relationship between
thisincrease andtheserious damage oractual threat thereof created bytotal imports. Inaccordance
with theabove provisions, thefulfilment ofthethree requirements setoutinthefirst stage wasan
essential pre-condition tobeable togoontothesecond stage ofthedemonstration process. Only
when, after having fulfilled therequirements ofthefirst stage, andithadalso fulfilled thetwo
requirements ofthesecond stage, may theimporting Member apply atransitional safeguard toan
exporting Member.
Obligation ofDemonstration -Fulfilment ofSubstantive Requirements
5.99 Costa Rica argued that, inorder tobeable tofulfil theabove-mentioned requirements, the
ATC imposed ontheimporting Member anobligation ofdemonstration. Under Article 6.2oftheATC,
theMember wishing toapply atransitional safeguard wasobliged tomake adetermination prior to
adopting themeasure. Inthedetermination, theMember hadtheobligation todemonstrate fulfilment
ofthesubstantive requirements laiddown inorder tobeabletoestablish such ameasure. Itwasnoted
thatwhile itwas theMember 'sobligation tomake thedetermination, theactual content ofthe
determination wasclearly established byArticle 6oftheATC itself: itconsisted indemonstrating
theexistence ofthesubstantive requirements thatmust befulfilled inorder toadopt atransitional
safeguard. Itwasnotaquestion ofstating, alleging orrepeating opinions without anygrounds, but
rather ofshowing orproving thatthefactual situation onwhich theMember wished totakeprotective
action fully metthespecified conditions. Theburden ofproof rested with theMember intending toWT/DS24/R
Page 34
restrict trade. IftheMember took safeguard action without having demonstrated theexistence ofall
thesubstantive requirements inthetwostages asdescribed above -astheUnited States haddone in
thiscase, itwasviolating theATC (seealsoBurden ofProof inSection C).
5.100 This demonstration process which theMember wishing toimpose thesafeguard must carry
outmay inturn bedivided into two: firstly, theMember must present thespecific andrelevant
information onthefacts giving risetoitsclaim inaccordance withArticle 6.7oftheATC; andsecondly,
itmust make anexamination ofthefactors listed inArticles 6.2,6.3and6.4andofhowtheconditions
itwaspresenting fellwithin thesubstantive criteria laiddown bytheATC asnecessary requirements
tojustify theadoption ofasafeguard measure. Iftheinformation wasnotpresented, thenecessary
analysis could notbecarried out,andconsequently there would beabreach oftheATC. Inthecase
under consideration, theUnited States hadfailed todemonstrate theexistence ofthesubstantive elements
ofthefirststage ofthedemonstration process, andstilllessthose ofthesecond stage, thereby violating
Articles 6.2, 6.3, 6.4and6.7.
5.101 TheUnited States stated thatithadmetallofthesubstantive requirements ofArticle 6ofthe
ATC andthatafter doing so,metitsburden ofproof andthetransitional safeguard action wasjustified.
Itwasnow uptoCosta Rica toshow thattheUnited States determination wasunreasonable and
inconsistent with therequirements oftheATC, inparticular Article 6.2, 6.3, 6.4, 6.7and6.6(d).
Consultations onSafeguard
5.102 TheUnited States noted that, once thedetermination hadbeen made, theimporting Member
must request consultations with therelevant exporting Members. Article 6.7oftheATC alsoprovided
thatrequests forconsultations onproposed safeguard action must beaccompanied by"specific and
relevant factual information, asup-to-date aspossible," particularly factors referenced inArticles 6.3
and6.4oftheATC.
5.103 Asunder theMultifibre Arrangement (MFA) system, during consultations ontheapplication
ofthesafeguard, importing Members must takeintoaccount fourareas ofmore favourable treatment
asappropriate. One area ofmore favourable treatment relevant inthismatter wasthataccorded to
re-imports included inthedetermination ofserious damage, oractual threat thereof thatconstituted
asignificant proportion ofanexporting Member 'strade. Itwasnotuntil theconsultation stage that
theUnited States wasrequired togive more favourable treatment inaccordance with Article 6.6(d)
oftheATC. TheATC leftthedefinition ofre-imports andthemanner ofapplying more favourable
treatment totheimporting Member. Iftheconsultations provided forinArticle 6.7oftheATC did
notresult inamutual solution, theimporting Member must exercise itsoption totakeaction tolimit
therelevantimportswithin30days.Oncethatactionwastaken,Article6oftheATCrequiredautomatic
review bytheTMB.
Data Required forConsultations andOther Relevant Information
5.104 Costa Ricaconsidered thatthe"other relevant information" should beunderstood asinformation
relevant orrelated totheinformation specified intheearlier paragraph, which was taken into
considerationbytheimportingMemberatthetimeofmakingitsdeterminationaboutthemarketsituation
andwhich wasavailable totheexporting Member. Themain taskoftheTMB inthisrespect was,
inaccordancewithArticle6.10oftheATC,toexaminewhetherthedeterminationmadebytheimporting
Member fittherequirements oftheATC. Thus, theexamination wasrestricted tothose elements which
theimporting Member hadtaken intoconsideration inmaking itsdetermination andofwhich the
exporting Member wasduly cognizant atthetime. These may bedifferent from thefactual elements
mentioned inArticle 6.7oftheATC, butthey must berelated tothem. Itcould notbeargued that
theTMB could conduct itsexamination onthebasis ofinformation which theimporting Member had
nottaken intoconsideration atthetime ofmaking itsdetermination -because itdidnotexist, becauseWT/DS24/R
Page 35
itwasnotavailable orforanyother reason -andwhich theexporting Member didnothave an
opportunity toexamine andrefute before theimposition oftherestraint. Todootherwise would
jeopardize therights oftheexporting Member andwould becontrary totheprovisions oftheATC.
5.105 Costa Rica recognized thatparagraphs 2,3and4ofArticle 6oftheATC didnotdistinguish
between "re-imports" andimports, butused only thelatter term. However, they didnotconsider that
thisbyitself should betaken tomean that"807 trade" should necessarily beregarded asimports.
Onthecontrary, theword "imports" should beanalysed inthecontext ofthecase inquestion andthe
economic rationale of"807 trade", inorder todetermine whether, inthisparticular case, "807 trade"
could orcould notberegarded asimports forthepurposes ofArticles 6.2, 6.3and6.4.
5.106 TheUnited States pointed outthatArticle 6.7oftheATC required thatthecallforconsultations
must be"accompanied byspecific andrelevant data, asup-to-date aspossible" relating tothefactors
referred toinArticles 6.3and6.4oftheATC. Like theworking party inthe"Fur FeltHat" case,
Article 6.7oftheATC didnotrequire perfect data. Thedata relied upon bytheCITA atthetime
ofitsdetermination inMarch were infactasup-to-date aspossible, andprovided information asclose
aspossible tothereference period. TheUnited States hadpresented revised andupdated datatothe
TMB inJulywhich only confirmed thecorrectness oftheCITA 'sanalysis inMarch thattransitional
safeguard action wasappropriate.
5.107 Thedata tobeused inexamining whether adetermination wasconsistent with Article 6of
theATC must bethose data actually used bytheauthorities oftheimporting Member atthetime it
made thedetermination. Therelevant datainthiscasewere those required byArticle 6.7oftheATC.
Nevertheless, alllater updated orsupplementary dataonly corroborated thedataintheMarch Market
Statement.
5.108 TheUnited States pointed outthattheTMB must review thecase, determine whether the
safeguard action wasjustified andmake appropriate recommendations totheMembers concerned.
Inaddition tothedatasupplied inaccordance with Articles 6.7and6.10 oftheATC alsoallowed the
TMB toconsider "any other relevant information provided bytheMembers concerned." Importing
Members must notify theChairman oftheTMB, providing relevant factual dataatthesame time the
request forconsultations wasmade. When arestriction wasinplace, theATC placed athree-year
capontheduration ofsafeguard measures applied byMembers, unless theproduct concerned was
integrated earlier.
F. SERIOUS DAMAGE ORACTUAL THREAT THEREOF
5.109 CostaRicasubmittedthatthesecondsubstantiverequirementthatanyMemberwishingtoacquire
theright totakesafeguard action must demonstrate wasserious damage oractual threat thereof tothe
domestic industry producing likeand/or directly competitive products, asstated inArticle 6.2ofthe
ATC. Itwasnoted thatArticle 6.2oftheATC referred tothefulfilment ofarequirement thatmay
takeoneoftwoforms: itmay bethatwhat existed wasserious damage tothedomestic industry, or
itmaybethatwhat existed wastheactual threat ofserious damage tothedomestic industry. However,
itwasalsonoted thatwhile therequirement wasfulfilled bytheexistence ofeither ofthetwoconditions,
theywere precisely twodifferent hypotheses, owing tothetime factor. Inthecaseofserious damage,
theinjury tothedomestic industry hadalready occurred, whereas inthecaseofactual threat ofserious
damage theinjury totheindustry hadnotyetoccurred butthere wasanimminent andhence actual
possibility thatitwould occur. Itwasnotpossible tousethesame information andthesame type of
analysis toprove both thatasupposed facthadoccurred orthatitwasabout tooccur.
5.110 Costa Rica claimed thatitwastheunderstanding oftheTMB itself thatserious damage and
actual threat ofserious damage were notthesame thing, since inthisparticular case ithadconcluded
thattheexistence ofserious damage hadnotbeen found, butitcould notreach aconsensus ontheWT/DS24/R
Page 36
existence ofactual threat ofserious damage. Ifthetwoconditions were asingle hypothesis, the
conclusion thatonedidnotexist would necessarily leadtotheconclusion thattheother didnotexist.
However, theTMB hadnottaken thisview. Themost important consequence ofthisdifference was
thatthenature oftheinformation submitted andoftheanalysis made todemonstrate each hypothetical
condition wasnecessarily different, asitwasnotthesame thing todemonstrate thatdamage hadalready
occurred astodemonstrate thatdamage might occur. That waswhy thelogical corollary ofthis
difference wasthatanimporting Member could notsubmit thesame information inthisconnection
andcarry outthesame type ofanalysis inorder toargue indiscriminately thatwhat hadexisted was
damage orthreat ofdamage. Atagiven point intime -themoment when thecallforconsultations
wasmade -either onecondition existed ortheother condition existed. Tomake anappropriate
demonstrationthereoftheimportingMembermustatthatpointintimedefinewhatthesupposedsituation
ofitsindustry actually was andmake thecall, submitting thecorresponding information and, if
appropriate, adopting therestriction onthebasis ofthecondition itselected.
5.111 Costa Rica stated thatcorrect identification bytheimporting Member ofthesupposed claim
made inrelation tothestate ofitsdomestic production wasessential inorder tocomply properly with
itsdemonstration obligation. Intheview ofCosta Rica, itwasonly when theTMB haddetermined
thattheexistence ofserious damage hadnotbeen proven thattheUnited States changed tack and
appeared toassume thatitcould maintain itsrestriction onthebasis ofthepurported threat, which
hadnotbeen alleged orproved previously. TheUnited States affirmed thatastheATC wasnotworded
inthesame terms asother WTO Agreements, itwasnotpossible torequire thepresentation ofdifferent
information inorder toprove serious damage oractual threat ofserious damage. However, Costa Rica
arguedthateventhoughsomethingmaynotbespecificallystatedinanagreement,commonunderstanding
required it,because itwasnotpossible tousethesame information andthesame type ofanalysis to
prove both thatasupposed facthasoccurred orthatitisabout tooccur.
5.112 Costa Rica argued that, insome measure, thatwaswhat theUnited States haddone inthis
process. Thegreat majority ofthecommunications initially sentbytheUnited States inconnection
with thecase, theStatement submitted inMarch andtheadoption oftheunilateral restriction inJune
were allbased onthepurported existence ofserious damage totheUnited States industry. TheUnited
States hadbegun thiscaseandhadadopted thisrestriction onthebasis oftheexistence ofserious damage,
andhadnotconsidered thatathreat existed. That waswhy theelement ofactual threat hadnoteven
been taken intoaccount. Hence, atthemoment when theTMB determined thatserious damage did
notexist, theUnited States should have withdrawn theunilateral restriction ithadimposed.
5.113 However, theUnited States hadnotwithdrawn therestriction, buthadmaintained andeven
renewed it.Although theUnited States hadnotexplicitly argued thisatanytime, itappeared tohave
assumed thatitwasauthorized tomaintain themeasure onthebasis thattheTMB could notreach a
consensus ontheexistence ofactual threat ofserious damage. Intheview ofCosta Rica, thisreasoning
wasincorrectandviolatedArticles6.2and6.3oftheATC,whichspecificallyrequiredthedemonstration
thatthiswasthecondition, with thepresentation andanalysis ofspecific andrelevant information
concerning theexistence ofactual threat ofserious damage. Thefactwasthatthere existed neither
serious damage totheUnited States industry, noractual threat ofserious damage tothatindustry, which
waswhy, byadopting arestriction without thissecond requirement being fulfilled, theUnited States
hadviolated Articles 6.2and6.3oftheATC.
5.114 TheUnited States argued thatArticle 6.2oftheATC required thataMember determine that
aparticular product wasbeing imported intoitsterritory insuch increased quantities astocause "serious
damage,oractualthreatthereof"tothedomesticindustryproducinglikeordirectlycompetitiveproducts.
Unlike other agreements such astheAgreement onImplementation ofArticle VI,theATC didnot
provide separate requirements fordeterminations ofthreat ofinjury. "Serious damage" or"actual
threat" never appeared separately inthetextofArticle 6oftheATC; each reference tooneofthese
twodifferent legal concepts wascoupled with areference totheother. Thus, Article 6oftheATCWT/DS24/R
Page 37
provided only onestandard, with onesetofcriteria, fordeterminations ofserious damage oractual
threat thereof. This standard andthese criteria hadbeen employed intheCITA determination of
March 1995. Thus, thisdetermination of"serious damage, oractual threat thereof" wasfully consistent
with Articles 6.2and6.3oftheATC.
5.115 TheUnited States noted thattheir 27March 1995 diplomatic note toCosta Rica making the
actual callforconsultations hadreferred to"serious damage, oractual threat thereof" totheindustry
producing underwear intheUnited States, even iftheMarch Market Statement which accompanied
itabbreviated thisreference to"serious damage". Furthermore, during consultations with Costa Rica
theUnited States hadconsistently taken theposition thatunderwear imports from Costa Rica were
causing both serious damage andactual threat ofserious damage. During TMB deliberations, in
July 1995, itwasclarified thatthereference intheMarch Statement hadincluded both serious damage
andactual threat ofserious damage, andtheUnited States hadcorrected thestatement accordingly.
5.116 Costa Rica wasoftheview thattheUSdiplomatic noteof27March 1995 wasmerely astandard
form used bytheUnited States foritscalls. Even though thenote alleged athreat ofserious damage,
thefactwasthatthestatement attached toitinorder tojustify therestriction -theMarch Market
Statement -didnotcontain anyinformation oranalysis relating tothisallegation. Moreover, during
theconsultations heldbetween thetwogovernments under Article 6oftheATC, noevidence oranalysis
ofanykind wassubmitted thatmight have demonstrated theexistence ofsuch athreat. Similarly,
there wasnomention oftheexistence ofathreat ofserious damage asjustification fortheadoption
ofasafeguard inthenotes which theUnited States hadattached tothevarious restraint proposals it
submitted totheGovernment ofCosta Rica.
5.117 With respect tothestatus oftheTMB finding thatserious damage hadnotbeen demonstrated,
theUnited States pointed outthatthey didnotagree with theTMB finding anddidnotatthetime
itwasmade; nothing intheATC made TMB findings orrecommendations binding ontheparties
concerned. Asapractical matter inlight oftheTMB ’sinitial finding theUnited States hadbeen
compelled toshift thefocus ofitsargument to"actual threat" after July 1995, butasamatter oflaw
theATC didnotconfer upon theTMB thepower tomake findings offactthatlegally bound Members.
Moreover, asnoted inrelation tothestandard ofreview, theburden ofproof wasonCosta Rica to
produce aprima facie case thattheUSdetermination wasinconsistent with Articles 6.2and6.3of
theATC; theUnited States didnothave theburden hereofproving thatitsactions hadbeen consistent
with theATC (seealsoSection V:C). Furthermore, thequestion tobeaddressed wasnottheexistence
of"serious damage" assuch, butwhether facts hadbeen advanced which provided convincing evidence
thatitwasunreasonable forCITA todetermine thattheadverse effects ofincreased underwear imports
ontheUSdomestic underwear industry hadamounted toserious damage, oractual threat thereof.
5.118 Costa Rica observed that, initsfirst review ofthiscase, theTMB hadreached theclear
conclusion that"serious damage ...hadnotbeen demonstrated", asrequired byArticles 6.2and6.3
oftheATC. Itwasclear thattherestriction imposed bytheUnited States infringed theabove-mentioned
provision because theUnited States hadfailed todemonstrate theexistence ofserious damage toits
industry. AstheTMB decision inthisregard hadnotbeen challenged, ithadtobeunderstood that
bothparties hadaccepted it.Consequently, thediscussion astothesupposed existence ofserious damage
should notbereopened, since itwasclear thatthiswasnotdemonstrated atthetime when itshould
have been demonstrated.
5.119 Costa Rica argued thattheUnited States hadalsofailed todemonstrate thepurported actual
threat ofserious damage. Theindustry producing clothing classified incategory 352/652 wasnotonly
notsuffering anyserious damage butalsonotsuffering anyactual threat ofserious damage, asrequired
under Article 6oftheATC. Firstly, theUnited States itself didnotconsider thatactual threat ofserious
damage existed inthiscase. Itnever argued thatthiswasthecase inorder tojustify theunilateral
restriction imposed onCosta Rica. This wasshown bytheunreliable, erroneous, contradictory andWT/DS24/R
Page 38
incomplete information ithadincluded intheMarch Market Statement, which didnotserve formaking
ananalysis ofwhether serious damage existed, andwasnoteven designed tobeused asabasis for
analleged actual threat ofserious damage. When theUnited States made thecallforconsultations,
thecondition ithadinview wasthatofserious damage andnotofactual threat ofserious damage.
That waswhy theMarch Statement didnotmake anyspecific reference totheissue ofthreat, except
indirectly inasingle sentence ofthetext. That isalsowhy, when theUnited States published inthe
Federal Register therequest forpublic comments concerning these negotiations, itreferred only to
serious damage, andnottoactual threat ofserious damage.
5.120 Thesupposition ofactual threat ofserious damage became important when theTMB, after
having reached theconclusion thattheexistence ofserious damage hadnotbeen demonstrated, did
notreach aconsensus astotheexistence ofactual threat ofserious damage -astrange decision,
considering thatthehypothetical condition ofactual threat wasnotinitself under consideration -and
recommended thattheparties hold further consultations bearing thisinmind, inter alia. Itmay be
thought that, following theTMB 'sdecision, theonly option open totheUnited States wastotryto
justifyaposterioritherestrictionadopted,bynowinvokingasupposedthreattoitsunderwear-producing
industry. However, thefactwasthatitalsofailed toestablish thisjustification, even insubsequent
months.
5.121 Costa Rica argued thatneither theMarch Market Statement, northeJulyStatement, norany
other information furnished bytheUnited States, noteven following theimposition oftheunilateral
restriction, provided evidence orfurnished ananalysis ofthekind required todemonstrate theexistence
ofactual threat. Theobligation todemonstrate theactual threat ofserious damage hadtwodimensions.
Firstly, itwasnecessary todemonstrate thatanimminent increase inimports existed, onthebasis of
objective criteria, such asthegoods having already been exported andenroute; orthatthey were
inport waiting tobeshipped; orthatthey were covered byacontract andwould beshipped once
production hadbeen completed. Asecond dimension, closely linked tothefirst, referred tovolume,
inthesense thatnotevery possible increase inimports wascapable ofcreating athreat. Itfollowed
from theforegoing thatitwasnecessary thatthegoods should beable tobecounted, which inturn
waslinked with theneed forobjective criteria todetermine theimminence oftheimports.
5.122 TheUnited States argued thatthey were notrequired bytheATC tochoose between serious
damage andactual threat inmaking their determination. TheATC standard allowed Members toassert,
atthesame time, both serious damage oractual threat. Theplain meaning ofthestandard invoked
merely thenotion thatthere could beadetermination onthebasis ofserious damage oractual threat.
Neither wasexclusive oftheother. There wasnoobligation inother safeguard proceedings thatone
standard must bealleged instead oftheother. TheATC treats them equally, thatis,without anyspecial
factors toestablish acase foroneortheother. Thesimple factwasthatMembers could allege both
based onthesame factors. Inaddition, contrary totheassertion ofCosta Rica, itdidnotfollow that
iftheTMB found thatthere wasnoserious damage, andreached noconsensus onthreat, there was
nothreat. Noconsensus onthreat wasjustthat. Noconsensus onthatfinding, therefore, nofinding
ordecision onthreat.
5.123 Upon request ofthePanel, theUnited States argued thattheydidnottaketheview thatafinding
ofactual threat ofserious damage implied some sortofprospective analysis because there wasno
provision ofthiskind intheATC thatwould have guided theUnited States inmaking itsdetermination.
TheUnited States didnotsplitthephrase "serious damage, oractual threat thereof" andwasnotasking
thePanel todoso.TheATC didnotprovide separate criteria forthreat. They maintained thatwhatever
analysis waschosen bythePanel must notaddtoordiminish therights andobligations oftheparties.
They believed thattheATC must beobserved andthatanyinterpretation thatwould re-write theATC
would probably require there-opening oftheMarrakesh Agreement Establishing theWTO.WT/DS24/R
Page 39
The March 1995 Market Statement
5.124 Costa Rica considered thattheUnited States could baseitsrestriction onlyontheMarch Market
Statement which wasthestatement theUnited States hadnotified within theterms ofArticle 6ofthe
ATC andonthebasis ofwhich consultations hadbeen held. Italsoprovided thebasis fortheUnited
States 'adoption ofaunilateral restraint. Thus, itwasclear thattheMarch Market Statement alone
ought tobeexamined bythePanel inorder todetermine whether therestriction applied bytheUnited
States complied with Article 6oftheATC.
5.125 Conversely, Costa Rica wasoftheview thatafinding ofactual threat ofserious damage implied
aprospective analysis. Since theATC required thatthethreat be"actual", thisimplied thattheMember
wishing toimpose thisground could notdosoonthebasis ofconjecture ofspeculation, butmust
effectively demonstrate thatthere wasanimminent damaging impact ontheindustry which wasabout
tooccur inthefuture. Once thisspecific andrelevant information hadbeen presented, theimporting
Member must carry outaprospective, forward-looking analysis ofwhat could happen toitsindustry,
bearing inmind thatwhat wasunder examination wastheimminence ofasituation thathadnotyet
occurred. Inthecaseunder consideration, theUnited States hadsubmitted absolutely noinformation
aimed atseeking todemonstrate theexistence ofactual threat ofserious damage, stilllesstocarry
outanykind ofanalysis tothatend. Hence, itwasimpossible toconsider thattheunilateral restriction
imposed could have been based ontheexistence ofasupposed actual threat.
5.126 Costa Rica contrasted therequirements ofArticle 6.3oftheATC withtheinformation included
intheMarch Market Statement. According toArticle 6.3oftheATC, inmaking adetermination of
serious damage,
"The Member shall examine theeffect ofthose imports onthestate oftheparticular industry,
asreflected inchanges insuch relevant economic variables asoutput, productivity, utilization
ofcapacity, inventories, market share, exports, wages, employment, domestic prices, profits
andinvestment; none ofwhich, either alone orcombined with other factors, cannecessarily
give decisive guidance."
5.127 Costa Rica argued that, pursuant tothisprovision, theUnited States hadtodemonstrate the
effectofimportsfromCostaRicaonthestateofitsunderwearproducingindustry,asreflectedinchanges
intherelevant economic variables. Thefirststage ofthisprocess ofdemonstration consisted ofthe
presentation ofthenecessary information tobeablesubsequently tomake ananalysis oftheinformation.
Inthisconnection, Article 6.7oftheATC provided that:
"The request forconsultations shall beaccompanied byspecific andrelevant factual information,
asup-to-date aspossible, particularly inregard to:(a)thefactors referred toinparagraph 3,
onwhich theMember invoking theaction hasbased itsdetermination oftheexistence ofserious
damage oractual threat thereof; ...".
5.128 Given thecharacteristics oftheinformation intheMarch Market Statement -summarized by
Costa Rica inthefollowing table -itwasimpossible intheir view fortheUnited States tofulfil their
obligation todemonstrate theexistence ofserious damage.WT/DS24/R
Page 40
Information Required Under theATC andInformation
Presented bytheUnited States
ATC Information included intheMarch Statement (MS) submitted bythe
United States
Output TheMSmentioned thatproduction haddeclined by4%in1992 and1993 anda
further 4%between 1993 and1994; inJuly theUnited States indicated thatthe
percentage ofdecline ofthefirst period remains thesame butthatinthesecond
there wasnodecline; inOctober theUnited States believed thatforthefirst
period there wasadecline of1.5%, whereas inthesecond thesupposed decline
was2.6%.
Productivity Noinformation wasincluded onthisvariable.
Utilization of
capacityNospecific information wasincluded onthisvariable, apart from asentence
stating thatbecause oftheimport competition, firms reported shifting
production capacity toother product lines. Thesource ofthisinformation was
thesurvey which theUnited States says thatithadcarried out,buttheslightest
details ofwhich were unknown.
Inventories Noinformation wasincluded onthisvariable.
Market share TheMSstates thatthedomestic industry 'sshare ofthemarket fellfrom 73%
to68%. Theproblem ofhow totreat "807 trade" wasnottaken into
consideration, andtherefore itwasnotdetermined forcertain thatthedomestic
industry 'smarket share didnotrather increase.
Exports TheMSdidnotinclude anyinformation ofthisvariable. InJuly theUnited
States hadsubmitted aloose sheet stating thatexports hadincreased from $284
million in1992 to$406 million in1993 andto$458 million in1994. This
loose sheet didnotindicate thesource oftheinformation.
Wages Noinformation wasincluded onthisvariable.
Employment TheMSstated thatemployment declined from 46,377 workers in1992 to
44,056 workers in1994. InJuly, however, theUnited States saidthatthe
number ofworkers in1992 was35,191 andthatthenumber haddeclined to
33,309.
Domestic prices TheMSstated thattheproducers 'average price is$30perdozen in1994,
without giving thesource oftheinformation. InJuly theUnited States
"corrected" thisinformation andindicated thatitbelieves thatthisprice is
between $16and$20perdozen.
Profits TheMSstated thatprofits were down 18% atonefirm -ofthe395which
supposedly existed -andthere waspressure onthebottom linethroughout the
industry duetorising costs andstiffimport competition. TheMSalsostated
thatsales declined andthatonecompany hadreported thattheir sales were
down about 17% in1994. Nostatistics were given inthisrespect. Thesource
ofthisinformation wasthesurvey thattheUnited States saiditcarried out,but
thedetails ofwhich were unknown.
Investment TheMSstated thatcompanies "generally" hadbeen postponing investment in
thisindustry, thatsome companies hadclosed plants permanently orshifted
production offshore, andadditional disinvestment ofthisnature "was being
contemplated". Nostatistics were given inthisrespect. Thesource ofthis
information wasthesurvey thattheUnited States saiditcarried out,butthe
details ofwhich were unknown.WT/DS24/R
Page 41
5.129 Costa Rica noted thatofthe11factors listed inArticle 6.3oftheATC, theMarch Market
Statement hadnotincluded anyinformation concerning fourofthem; ithadincluded information which
theUnited States itself subsequently considered wrong inthecaseofthree ofthem (two ofwhich were
output andprices); andincluded information forthree factors based onasurvey whose coverage,
methodology, representativeness, dates etc.were notmentioned -andindeed, onanother occasion the
United States itself declared thatitcould notusethistypeofinstrument tocollect information inthese
cases. Inthese circumstances, theonly possible conclusion wasthattheinformation submitted bythe
United States wasunreliable, erroneous, contradictory andlacking, andtherefore anymeasure based
onitwasinbreach ofArticles 6.2, 6.3and6.7oftheATC.
5.130 Costa Rica argued thattheinformation submitted wasunreliable forthree reasons: firstly,
much ofitdidnotgive thesource from which itistaken; secondly, where asource wasspecified,
itturned outnottobevery serious; andlastly, thebestevidence thattheinformation oftheMarch
Market Statement wasunreliable wasthatinJulytheUnited States itself submitted fresh information
thatsubstantially contradicted allthemajor indicators covered intheMarch Statement. Then, afew
months latertheUnited States again published information thatwasatvariance bothwiththeinformation
produced inJuly andwith theinformation included intheMarch Statement.
5.131 CostaRicarecalledthatSectionIIIoftheMarchMarketStatementwasdividedintotwosections,
thefirstheaded "serious damage tothedomestic industry" andthesecond "industry statements". The
firstofthese sections included dataondomestic production, market share lossandimport penetration,
forwhich thesource wasgiven. Inthecaseoftheinformation onemployment andmanhours itstated
thatthedatawere derived from various sources, which were notidentified with anydegree ofprecision.
Itwasnoted thattheindustry statements hadaquestionable source, being
"Based onasurvey ofindividual firms producing cotton andman-made fibre underwear ...
theobservations areconcentrated inthemen'sunderwear sector butalsoinclude theeven more
heavily import-impacted ladies underwear sector."
5.132 Ineffect, thedataonemployment, sales, profits, investment, capacity andprices included in
theMarch Market Statement were based onanalleged survey whose coverage, methodology,
representativeness, date, etc., were unknown since theStatement wascompletely silent inthisrespect.
This explained theopinions included intheStatement forwhich there wassolittle basis orjustification.
Clearly, itwasimpossible tomake generalizations ofanykind ordetermine thestate oftheindustry
onthebasis ofanumber ofopinions from oneortwofirms -itwasrecalled thattheStatement itself
stated thatthere were 395establishments producing inthiscategory -forwhich nogrounds or
explanations were given andincluded inasurvey whose details were unknown. Itwasalsoobvious
thatthiscould notconstitute anykind ofdemonstration oftheimpact ofimports ontheindustry in
question, since itdidnotshed anylight ontheeffect oftheincreased imports onthevariables mentioned.
5.133 Costa Rica didnotconsider thedatabased onthealleged survey ofindividual firms, ofwhich
nothing wasknown, tobeserious. Thesurvey referred totheopinions ofoneortwofirms astocapacity
utilization, inventories, exports, wages, profits andinvestment. Thesubmission ofinformation was
soimportant thattheUnited States should have included initsStatement dataonatleast allthefactors
setoutinArticle 6.3oftheATC andperhaps even onsome others; however, ithadfailed todoso.
5.134 Theproblem oftheMarch Market Statement wasnotconfined tothelackofinformation but
alsotothetotal absence ofanyanalysis ofthatinformation. TheUnited States didnotmake anykind
ofanalysis oftheinformation, although given theincoherencies ofthatinformation, itwould have
been difficult todoso.This ledCosta Rica totheconclusion thatwith theinformation submitted,
theUnited States hadfailed tofulfil itsobligation todemonstrate theexistence ofserious damage to
itsindustry, asrequired under Articles 6.2and6.3oftheATC, andastheTMB itself hadfound.WT/DS24/R
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The July 1995 Market Statement
5.135 Costa Rica considered thatthereliability oftheinformation wasalsobrought intoquestion
bytheUnited States, which published further datainJulyandagain inOctober 1995, altering theMarch
data substantially. Thus, inJulydatathatdiffered from theMarch datawere given inessential fields
including: (a)number ofestablishments producing underwear incategory 352/652: inMarch there
were 395, butinJulythere were 302; (b)supposed decline inoutput: whereas inMarch output was
believed tohave declined by4percentbetween 1992 and1993 andbyafurther 4percentbetween
1993 and1994, inJulyitwasindicated thatthefirstpercentage remained thesame butthatinthesecond
period there wasnodecline; (c)market size: whereas inMarch, "807" production waswrongly counted
twice, both asdomestic production andasimports, inJulythismarket sizewas"adjusted", introducing
significant alterations compared with theMarch Statement; (d)number ofworkers employed inthe
sector: whereas theMarch Statement stated that46,377 people worked inthesector in1992, inJuly
itwasstated thatthatwasnotthenumber, butrather 35,191 persons, inother words theMarch Statement
waswrong by11,000 workers; (e)average price ofUnited States underwear production: whereas
inMarch itwasstated thatthiswas$30perdozen, inJulyitwas"clarified" thatthisfigure hadamargin
oferror ofnearly 100percent, theprice being between $16and$20perdozen.
5.136 Costa Rica emphasized thattheMarch Market Statement, onwhich theconsultations hadbeen
heldandtheunilateral restriction imposed inJune 1995, hadsomany errors thatallitsmain parameters
were modified inJuly. Virtually theonly section oftheMarch Statement thatwasnotmodified was
thatbased onthesurvey. Furthermore, inOctober 1995 theTextile andApparel Office oftheUnited
States Department ofCommerce hadpublished updated statistics toJune 1995 forcategory 352/652
inwhich some ofthedata given inJuly were "revised" once again, having already been "revised"
with respect totheMarch Statement, andtheresults obtained were atvariance with those submitted
earlier. Itthus turned outonce again thatthedata foroutput andmarket sizewere different. This
lackofreliability oftheinformation submitted bytheUnited States wasenough tomaintain beyond
alldoubt thattheUnited States hadfailed initsprimary duty ofpresenting thenecessary information
toproceed tocarry outananalysis ofwhether theserious damage italleged actually existed.
5.137 The July Statement hadbeen used bytheUnited States from July 1995 anduptothe
establishment ofthePanel asan"expostfacto" justification fortherestriction applied toCosta Rican
trade inthiscategory inJune 1995. Nevertheless, Costa Rica hadalways maintained thattheJuly
Statement could notberegarded asthebasis forthecall, since itwasnot. Theinformation contained
intheJulyStatement wasnotthatwhich should beanalysed forthepurpose ofdetermining whether
therestriction adopted bytheUnited States complied with Article 6oftheATC. Inthisrespect, it
wascorrect tosaythatthisstatement hadnolegal relevance. TheJuly Statement wasuseful for
confirming how erroneous wastheinformation included intheMarch Statement which formed the
basis oftheunilateral restriction adopted inJune 1995. This Statement -which forthemost partwas
based onthesame information thatwasavailable inMarch -wasuseful asevidence, inasmuch asit
showed thattheinformation which served asbasis fortheadoption oftherestriction inquestion was
seriously flawed.
5.138 TheUnited States pointed outthatithadageneral practice ofmonitoring andupdating textile
andapparel production andtrade data. Thedataprovided inJuly only confirmed thecorrectness of
theCITA 'sanalysis inMarch thattransitional safeguard action wasappropriate. Asregards theupdated
information provided inOctober 1995, these were equally irrelevant. TheUnited States pointed out,
however, thattheOctober 1995 datastillshowed a5.5percentdecline inunderwear production during
theJanuary-June 1995 period. Furthermore, more recent published updates inMarch 1996 showed
thatunderwear production actually declined by2.8percent fortheperiod from 1October 1994 to
30September 1995. This andother updated information demonstrated thatthesituation forUS
underwear manufacturers progressively deteriorated during 1995.WT/DS24/R
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Analysis ofMarch andJuly Market Statements
5.139 According toCosta Rica, both theMarch Market Statement andtheJuly Market Statement,
annual shipments amounted to$3.2 billion. However, analysing thedataonthebasis ofwhich this
information hadbeen obtained itfound thatthisfigure wasnotcorrect. Thus, considering thatthe
amount ofannual shipments wasobtained bymultiplying thevolume ofclothing produced bytheaverage
producer price oftheclothing, andmaking thiscalculation for1994, theensuing result would be$5.06
billion according tothedata intheMarch Statement, while according totheinformation intheJuly
Statement thisfigure could be$3.37 billion or$3.03 billion, according towhich United States producer
price wasused. Inanycase, what wasimportant tostress wasthatwhile onesection ofeach ofthe
Statements gave afigure, ifthedataintheStatement itself were multiplied inorder toobtain thesame
figure adifferent result wasobtained. Clearly, there wasanerror inthefigure oftheannual shipments,
production data orintheprice, which then also significantly affected other data included inthe
Statement.
5.140 TheUnited States considered thattheinformation provided intheMarch andJulyStatements
wasnotcontradictory andwasconsistent with therequirements ofArticle 6oftheATC. Costa Rica
hadasserted thatthedataavailable inMarch 1995 contradicted theupdated datatheUnited States had
provided totheTMB inJuly 1995. TheMarch Statement presented bytheUnited States contained
datafrom avariety ofofficial sources, current atthattime. Article 6.7oftheATC provided thatwhen
requesting consultations therequesting Member must supply "factual information asup-to-date as
possible". TheMarch datahadsatisfied thatrequirement, even though some oftheinformation had
been preliminary. During consultations andtheTMB proceeding, theUnited States hadbeen asked
toprovide other andupdated information. TheTMB hadputmany questions totheUnited States for
response during theproceeding aswell. Inthecontext oftheArticle 6.10 oftheATC reference that
theTMB must consider theearlier statement and"any other relevant information", theUnited States
hadprovided arevised statement during theJuly proceeding which wasaccepted bytheTMB.
5.141 Theinformation intheJulyStatement hadnot,intheview oftheUnited States contradicted
theMarch Statement, buthadonly supported it.Since Article 6.7oftheATC stated that
"therequest forconsultation shall beaccompanied byspecific andrelevant factual information,
asup-to-date aspossible, ..." andthat"...theinformation shall berelated, asclosely as
possible, toidentifiable segments ofproduction andtothereference period ..."
ofthecallaction, there wasnocredibility issue with respect tothedatapresented inMarch orJuly.
Article 6.7oftheATC clearly recognized thatthedataupon which theinitial request forconsultations
wasbased, would necessarily beimperfect. Article 6.10 oftheATC similarly acknowledged thatdata
would notbeasaccurate asdesired atthetime ofthecall, requiring thattheTMB
"have available toitthefactual data provided totheChairman oftheTMB, referred toin
paragraph 7,aswellasanyother relevant information provided bytheMembers concerned".
Thelatter wasclearly designed toinclude further updated information thatwasavailable atthetime
ofTMB review.
The Counting ofRe-imports
(seealsoIncrease inImports, paragraphs 5.92-5.96)
5.142 According toCosta Rica, oneofthemost serious mistakes intheMarch Market Statement,
wasthedouble counting of"807" production andtheproblem ofthealteration ofmarket size. In
itsstatistics, theUnited States hadrightly included asdomestic production theproduction ofpieces
thatwere partofagarment subsequently assembled inanother country andthen reimported intotheWT/DS24/R
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United States under tariff heading 9802.00.80. However, ithadalsoincluded asimports thesame
piecesoncetheyhadbeenassembled,eventhoughtheyhadalreadybeencountedasdomesticproduction.
This resulted inanalteration inthesizeofthemarket, because thesame product wasincluded twice.
5.143 Having been made aware ofthisproblem bythecomments addressed toitbyCosta Rica, the
United States hadtried tocorrect thesituation initsJulyMarket Statement, but,according toCosta Rica,
inthewrong way. Thus, inJuly theUnited States counted "807" production once; butitchose to
include "807" production asimports andnotasdomestic output, which appeared inconsistent as
"807" production was domestic production inthesense ofmanufacture and/or cutting ofcloth.
Assembly, which wastheonly partoftheprocess carried outabroad, hadamuch smaller weight in
thefinal costofproduction ofunderwear, andtherefore this"807" production should nothave been
counted asimports.
5.144 Insupport ofthissame approach, although incontradiction with what ithaddone intheJuly
Statement, when thecasewasbeing reviewed bytheTMB inJulytheUnited States submitted aloose
sheet giving thesupposed export datainthiscategory, inwhich itincluded cutpieces asexports. In
other words, whereas intheJuly Statement theUnited States counted "807" production asimports,
intheexport data itprovided inthesame month itcounted itasdomestic production. Then, inthe
datapublished inOctober theyreturned totheMarch situation, disregarding theentire problem ofdouble
counting of"807" production which theJuly Statement hadtried totake intoconsideration.
5.145 TheUnited States explained thatunder Article 6.2oftheATC, before taking safeguard action
animporting Member ’sauthorities must make adetermination thataparticular product wasbeing
imported insuch increased quantities astocause serious damage oractual threat thereof; thisserious
damage oractual threat thereof must becaused byincreased quantities of"total imports" oftheproduct
concerned. Thereference to"total" imports included re-imports. Nodistinction wasmade between
re-imports andother imports inArticles 6.2,6.3or6.4oftheATC. Thedrafters oftheATC were
quite aware oftheexistence ofre-imports andoutward processing trade, which were significant
commercial factors inworld textile andclothing trade andwhich were explicitly referred toinArticle 6.6
oftheMFA. Thedrafters hadchosen torefer specifically tore-imports inArticle 6.6(d) oftheATC,
inrelation totheapplication ofatransitional safeguard, after thedeterminations necessary forasafeguard
action have been made. Thus, ifthedrafters hadmeant toexclude re-imports from thescope of"total
imports", thusbarring transitional safeguard action against re-imports, theycertainly could have done
so.However, they didnot,anditmust beassumed thatthisomission wasintentional. Ittherefore
could notbeassumed thatre-imports areincapable ofcausing orthreatening damage totheindustry
ofanimporting Member. Thus, theincrease in“total imports ”referred toinArticle 6.2oftheATC
included increases inre-imports aswell.
5.146 TheUnitedStatesreferredtotheallegationofCostaRicathattheMarchStatementhadoverstated
thelevel ofimports through itstreatment ofre-imports. Itwasexplained thatduring theprocess of
negotiations andtheTMB examination ofthiscase, itwasrecognized thatthere wasdouble-counting
ofre-imports, andtheUnited States hadmade appropriate corrections. However, theeffect ofthis
double-counting wasnotanoverstatement ofthelevel ofimports butanoverstatement ofthesizeof
theUSunderwear market. CITA practice, long accepted bytheTSB intheir examination ofcalls
bytheUnited States, hadconsistently been totreat thetotal market foratextile orapparel category
asproduction plus imports. Inresponse toquestions during bilateral consultations with Costa Rica,
theUnited States haddeducted re-imports from production, because re-imports areofforeign origin
under therelevant USruleoforigin. Costa Rica hasrepeatedly asserted thattheorigin ofapparel
re-imports wasdetermined bytheplace where thepieces were cut,but,asdiscussed below, thisis
afactual error.
5.147 Costa Rica hadthen claimed during theTMB proceeding thatre-imports should bededucted
from imports. TheTMB hadsuggested thattheoverstatement intheUSdomestic market should beWT/DS24/R
Page 45
adjusted byusing USexport data. TheUnited States hadpointed outtotheTMB thatexport datawere
generally lessreliable than import data, butthey supplied theTMB with therequested export datain
atable adjusting fortheoverstatement intheUSunderwear market. Thechanges inthedatadidnot
contradict theMarch Statement. Infact, thedatacorroborated theoriginal determination ofserious
damage oractual threat thereof. Thechange inthedatawasminimal; even asadjusted, thedatastill
showed alarge increase inimports. Theadjustment inmarket sizealsohadnoimpact inthedataon
important factors listed inArticle 6.3oftheATC, such asproduction, output, capacity, employment,
domestic prices, profits andinvestment. Even taking theadjustments intoaccount, thedataasawhole
stillshowed apicture ofaseriously damaged industry threatened with further damage.
5.148 TheUnited States alsonoted thattheupdated data andother relevant information presented
totheTMB only supported thebasis forthedetermination oftheUnited States. Atthetime when
thedatawere initially presented intheMarch 1995 statement, they were thelatest available andmost
correct. Theupdated datapresented intheJuly1995 statement totheTMB alsoprovided import data
throughApril1995,indicatingthatimportscontinuedtoincrease,supportingthedetermination.Contrary
tothestatement ofCosta Rica initssubmission, theUnited States considered thattheTMB hadnot
excluded ordisregarded theupdated data provided inJuly. Infact, theTMB referred mostly tothe
revised data throughout itsexamination. TheTMB considered theupdated andother relevant data
intheJulyStatement, with fullregard totherelevant provisions inArticles 6.7and6.10 oftheATC,
despite attempts ofCosta Rica andothers tocharacterize thedatainboth statements asinaccurate and
contradictory.Infact,duringtheTMB proceedingtheUnitedStateshadadjusteddatatoreflectconcerns
about double counting ofre-imports. TheUnited States hadinitially properly deducted re-imports
from production. TheUnited States hadthen responded toTMB comments andrequests byfurther
adjusting thedata, using USexport data. After these adjustments, thedata stillshowed declines in
production andincreases inimports.
5.149 Intheview ofCosta Rica, byfailing totreat thisaspect correctly initsMarch Market Statement
orinJuly orOctober, theUnited States wasnotonly making amistake from thestandpoint ofthe
counting ofdata; thiserror alsoproved tobevery important inthisparticular case, given thenature
ofthetrade between Costa Rica andtheUnited States inthiscategory. IftheUnited States hadnot
differentiated this"807" production, itshould nothave continued with thiscase. Accordingly,
Costa Rica argued thattheinformation submitted bytheUnited States todemonstrate thesupposed
serious damage was notonly unreliable, erroneous andcontradictory, butabove allitwas also
incomplete.
G. EXISTENCE OFACAUSAL LINK
5.150 Costa Rica claimed thatthethird requirement whose existence theUnited States should have
demonstrated inorder tobeabletoinvoke atransitional safeguard measure wastheexistence ofacausal
linkbetween thesupposed increase inimports andthesupposed serious damage oractual threat of
serious damage tothedomestic industry producing alikeand/or directly competing product. TheUnited
States didnotdoso,andconsequently violated Article 6.2oftheATC. This Article provided that
ameasure ofthekind described may beapplied when animporting Member demonstrated that:
"...aparticular product isbeing imported intoitsterritory insuch increased quantities asto
cause serious damage, oractual threat thereof, tothedomestic industry producing likeand/or
directly competitive products. Serious damage oractual threat thereof must demonstrably be
caused bysuch increased quantities intotalimports ofthatproduct andnotbysuch other factors
astechnological changes orchanges inconsumer preference" .
5.151 Itfollowed that, prior todemonstrating theexistence ofacausal link, theUnited States should
have demonstrated theexistence ofthetwoconditions which itwould betrying tolinkinthisexercise,
namely, theincrease inimports andtheserious damage oractual threat thereof. Since theUnited StatesWT/DS24/R
Page 46
hadfailed tofulfil thatpartoftheexercise, itwasimpossible toanalyze whether ornotacausal link
existed. Even assuming forthesake ofargument thatthere hadexisted anincrease inimports and
serious damage oractual threat thereof totheUnited States industry producing cotton andman-made
fibre underwear -which, asrepeatedly stated byCosta Rica, didnotexist -itwould notbepossible
toconclude thatthissupposed damage orthreat wasbeing caused byimports.
Restraint Agreements with Other Countries
5.152 InCosta Rica'sview, thebestproof ofthenon-existence ofthiscausal relationship layinthe
levels ofrestraint which theUnited States hadobtained with theother countries thathadbeen called
forconsultations incategory 352/652 -Colombia, ElSalvador, Honduras, theDominican Republic
andTurkey. Itwaspointed outthattheaccess which theUnited States hadgranted tothefivecountries
with which ithadreached anunderstanding inthiscategory wasabout 170million dozen for1996,
equivalent toanincrease of478percentwith respect toimports from thesame fivecountries in1994,
which amounted to29million dozen. If29million dozen were causing orthreatening tocause serious
damage, how could theUnited States have negotiated anincrease inthisquantity byapercentage of
478percent?
5.153 Costa Rica argued thattheforegoing provided grounds forcategorically maintaining thatif
theUnited States underwear industry wassuffering anyserious damage oractual threat thereof -which,
itclaimed, itwasnot-itwasimpossible tobelieve thatimports were thecause ofit,asinthatcase
itwould bemost strange fortheUnited States itself toseek toincrease thesource ofitssupposed
problems insuch asignificant wayastocause itsruin. Theonly reasonable conclusion wasthatimports
were neither causing northreatening tocause serious damage totheUnited States industry andthat
bynevertheless taking safeguard action theUnited States hadviolated Article 6.2oftheATC.
5.154 TheUnited States noted thatCosta Rica hadmade extensive useofinformation onnegotiated
settlements with countries notparty tothisdispute initsfirstsubmission andatthefirstsubstantive
Panel meeting. This information, intheUSview, wasinappropriate tothePanel ’staskandthePanel
should notallow ittobeused toprejudice USrights inthiscase. Article 6.9oftheATC provided
amechanism forcollective review ofnegotiated settlements intheform ofTMB review. Costa Rica’s
argument undercut andattacked those settlements inamanner which alsoundercut theTMB. These
settlements andArticle 6.9oftheATC were notwithin thePanel ’sterms ofreference. However,
since thePanel ’squestions hadfocused inpartonthese settlements, theUnited States responded to
thequestion while reserving their rights inthismatter.
5.155 Upon request ofthePanel, theUnited States commented thatthePanel should consider the
situation which required them toimpose therestraint onCosta Rican underwear inabroader context.
When afinding ofserious damage orthreat thereof wasmade, andintheresulting imposition ofa
restraintandformulationofanegotiatingstrategy,variousconsiderationsneededtobetakenintoaccount,
some ofwhich may beinconflict asmeasures were devised toachieve thegreatest degree offairness
toallconcerned. These included: special attributes oftheindividual major suppliers, which affected
equity considerations towards other countries under restriction; theUSobligation tocomply with
Article 6.6(d) oftheATC; andthediverse nature oftheUSindustry andthediffering impact ofthe
increased quantities ofunderwear imports ontheindividual segments oftheindustry. After making
afindingofseriousdamage,oractualthreatthereof,affectingtheindustryproducingaparticularproduct,
theUnited States must thenconsider attribution totheparticular countries whose imports were causing
theserious damage, oractual threat thereof. Itwasatthisstage oftheprocess thatarange offactors
must beintegrated intothedecision such asthenature oftheimports, thevarious levels ofimports
accounted forbythesupplying countries (both controlled anduncontrolled), andthespecific impact
ontheUSfirms andtheir employees (including those thatparticipate inoutward processing andthose
thatdonot). When theunderwear calls were made, there were many divergent interests involved.WT/DS24/R
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5.156 Inestablishing attribution toindividual countries, thebasic situation facing theCITA wasthat
inthe352/652 category, halfoftheimport totalwasaccounted forbyimports under outward processing
arrangements (cutparts assembled offshore), and30percentoftheimports were from thetwolargest
suppliers, Dominican Republic andCosta Rica, both uncontrolled. TheUnited States hadtoestablish
abalance when implementing policies affecting itsown outward processing programmes with noone
consideration taking precedence over another. Theunderwear restraint onCosta Rica wasanexample.
5.157 TheUnited States explained thatmany countries supplying underwear totheUnited States that
were under restriction, didnotutilize the"807" programme andwere noteligible forthe"807A"
programme. Many ofthespecific limits towhich these countries were subject hadbeen substantially
exceeded bytheimport level attained byCosta Rica atthetime itsrestraint wasimposed. Costa Rica's
higher level wasattained because ofitsparticipation inoutward processing, yetitevidently wasnot
interested inparticipating intheprogramme designed togive more favourable treatment tothetrade.
TheUSpolicy allowing liberal import access forCaribbean-assembled clothing thus hadresulted in
asituation whereby competing imports from non-CBI countries incategory 352/652 hadbeen placed
atadisadvantage. Theproposed levels were intended asapartial redress tothissituation. Inasafeguard
action, anumber offactors such asequity towards other suppliers, welfare ofUSfirms, andbroader
trade policy considerations were also reflected intheoverall position taken innegotiations. In
conjunction with theoffer ofsubstantial GAL made toCosta Rica, theUnited States hadproposed
tosetaSpecific Limit tocover theimports ofunderwear made from fabric notformed andcutinthe
United States that, while lower than thecalllevel, wasmore than enough toallow fortheestimated
existing level ofthistrade. This offer wasconsistent with theoffers accepted byother major suppliers,
theDominican Republic, forexample, which agreed toanSLwell below thelevel oftrade.
5.158 Thelimits established covering the1995 underwear calls were heavily weighted infavour of
"807A trade". TheUSpolicy toallow more liberal treatment fortheCBIproducts thatcontain US-made
fabric obviously maximised thebenefit toUSeconomic welfare. Inevaluating thedamaging impact
ofimports, absolute levels were only oneofmany elements taken intoconsideration, along with rates
ofgrowth, theability ofthedomestic producers toadjust, employment patterns, industry structure,
etc.Goodsimportedunderthe"807A"provisionwerenotregardedaslessdamagingthannon-GAL807
andother imports, butitwasrecognized thatthenature oftheir effect onthedomestic industry could
besignificantly different. Unlike GALs, non-GAL imports were noteligible forincreased quota access.
OnesignificantdistinctionamongUScompanieswasbetweenthosethathadmovedtheirfinishedgarment
assembly facilities totheCaribbean totakeadvantage ofthe807duty provision andCBIliberal access,
andthose thatcontinued toproduce finished garments domestically. Theformer were thecompanies
which hadmoved thebulk oftheir underwear production offshore andwere reaping enormous benefit
from thetrade concessions affecting theCBI. Atthesame time, therestrictions were alsointended
tofurnish adegree oftemporary protection fortheUSproducers which hadnotyetbegun toorwere
intheearly stages ofmaking theadjustment toincreased international competition inthisproduct
category.
5.159 Intheview oftheUnited States, theGAL programme recognized theeconomic realities of
apparel manufacturing andwasintended tofurnish acompetitive option toUSfirms operating inthis
industry and, from apolicy perspective, provides some important benefits: (i)thecomparatively high
levels offered allowed sufficient flexibility andlatitude forUScompanies andtheir CBI partners to
efficiently serve themarket, while providing some certainty andareference level forthose domestic
producers thatwere unable orunwilling toparticipate inoutward processing arrangements; (ii)prior
toeventual CBI parity with theNAFTA, theGAL programme provided ameans ofidentifying the
goods thatwould qualify forparity while allowing alower Specific Limit toexercise adegree ofcontrol
over thenon-GAL component oftrade which could conceivably befilled bygoods with nonUScontent;
and(iii)thehigh GAL levels offered in352/652 were intended asaguarantee ofample access tothe
USmarket during thethree-year term oftherestraint andinanticipation oftheCBIcountries 'futureWT/DS24/R
Page 48
inclusion inawider Free Trade Area oftheAmericas. They were notexpected tobefully filled
immediately.
5.160 Costa Rica pointed outthatnone ofthese considerations were included intheATC: Therefore,
they could notbeused asjustifications todeviate from theATC provisions. Although these
considerations could beuseful atthedomestic level, theydidnotauthorize theUnited States tobreach
itsobligations under theATC.
5.161 Costa Rica emphasized that GAL trade and"807 trade" were notthesame thing. The
"807 trade" referred toproducts assembled using UScomponents which could represent allorpart
ofthecomponents used toassemble theproduct andmust becutintheUS,although thefabric could
besourced from anywhere. Thus, within "807 trade", there might begarments thatqualify forGAL,
which would bethose made from fabric formed andcutintheUS,andothers thatrequire SL,which
would bethose made with anyamount ofnon-US formed andcutfabric. Insum, forUSrestraints,
"807" trade included both SLandGAL totheextent thatboth ofthem shared thecharacteristic ofbeing
made from atleast some fabric cutintheUS.
5.162 TheUnited States, commenting ontheabove, agreed thatitwasimpossible todistinguish,
from thedataavailable, between Category 352/652 products thatwould qualify foraGAL quota and
those thatwould not. This hadbeen their position throughout theproceeding. This consideration was,
infact, amajor element intheUSoffers ofaGAL quota innegotiations with Costa Rica, since such
adetermination could notbemade without anagreement inplace containing aGAL provision.
5.163 Costa Rica alsodrew particular reference totheUSstatement inthepenultimate sentence of
paragraph 5.149. With reference tothis, Costa Rica pointed outtwoaspects, first, itwasonly after
finding thattheimposition ofarestraint wasjustified thattheimporting Member could implement it,
bearing inmind itsobligation togrant theminimum SLlevel mandated byArticle 6.8oftheATC,
which inthepresent casewould beequal to14,423,178 dozen. Moreover, according tothelanguage
ofArticle 6.6(d), a"more favourable treatment" tore-imports, which would necessarily represent an
improvement intheconditions towhich theMember whose trade hadbeen restricted would have been
entitled, must alsobegranted. Anyother interpretation ofthisprovision wasconsidered tobeincorrect.
Costa Rica further argued thatbypretending toimpose onCosta Rica anSLquota lower than thecall
level andattempting tojustify itsaction under Article 6.6(d) oftheATC bygranting aGAL quota
of40million, theUnited States was violating Article 6.8oftheATC aswell asArticle 6.6(d).
Article 6.8mandated thattheminimum SLlevel should bethequota level. Ontopofthatlevel, the
importing Member wasobliged tooffer amore favourable treatment tore-imports from theexporting
Member. Inanycase, anunconditioned access could notbesubstituted byaconditioned access, even
ifthelatter were larger inquantitative terms than theformer.
5.164 Costa Rica reiterated thatintheabsence ofGAL procedures, itwasimpossible fortheUS
toidentify andmonitor imports thatmight beentitled totheGAL programme andtherefore todetermine
thattheSLquota offered, although lower than thecalllevel, was"more than enough" since there was
nodata todetermine thatamount. Thestandard provided intheATC wasnotanSLlevel thatwas
more than enough, butanSLlevel thatequalled thecalllevel asaminimum. TheUnited States was
justifying itsoffers onestimates thathadnobasis, being only arbitrary estimates made bytheUS
Government.
5.165 Inresponse totheabove point, theUnited States agreed thatitwasonly after theimporting
Member haddetermined thatasafeguard restriction wasnecessary andjustified thattheMember could
implement therestriction. TheUnited States hadalways maintained thatthiswasthecasehere. They
disagreed thattheir proposals during consultations were inconsistent with Article 6.8oftheATC.
Itwasclear thatallproposals toCosta Rica involved levels above thereference period mandated in
Article 6.8. Theproposals made concerning theguaranteed access level (GAL) component oftheWT/DS24/R
Page 49
restriction were consistent with Article 6.8andtherequirements ofArticle 6.6(d) oftheATC. The
GAL proposals were offered with theunderstanding thattheprogramme wasimproved access forCosta
Rica. Theimproved access wasevidenced inearlier agreements with Costa Rica, andother Caribbean
Basin countries, aswell asthefactthatcompanies established inCosta Rica participating inthe
GAL programme hadresulted inmore employment forCosta Rican nationals andinvestment inCosta
Rica andthatproducts exported totheUnited States under theGAL programme were treated even
inCosta Rican statistics asCosta Rican products when exported totheUnited States (and asimports
when entering Costa Rica ascutparts).
5.166 TheUnited States hadmetitsobligation under theATC toprovide more favourable treatment
tore-imports. That obligation hadbeen metafter theUnited States satisfied therequirements ofArticles
6.2,6.3and6.4. Article 6.6(d) gave theimporting Member wide discretion onhowmore favourable
treatment tore-imports wastobeprovided. That isthewaythetextwasnegotiated. TheUnited States
hasestablishedaGALprogrammewhichrequires,forpropermonitoringandcertification,theagreement
oftheexporting Member. TheUnited States could notbefaulted ifCosta Rica chose nottoaccept
itsoffer ofmore favourable treatment. Alloutward processing programmes inother countries typically
were preferential programmes which allowed theimporting country thelatitude toestablish thecriteria
forparticipation intheprogramme -including theconditioning oftheuseoffabric manufactured in
theimportingcountry.TheUnitedStateswasnotaloneconcerningthatcondition;otherWTOMembers
maintained quotas, which limited outward processing traffic. Thepolicy basis forthevarious conditions
forparticipation inanimporting country 'soutward processing programme may inherently represent
thebalancing ofvarious domestic interests. InthecaseoftheUnited States, thebalancing ofinterests
reached beyond theindustry provided relief when safeguard action wastaken onimports thatincludes
re-imports.Thesafeguardactiontakeninthiscasewasnotactiontoprovideadjustmenttoan"upstream"
product.
5.167 Costa Rica pointed outthattheUShadmentioned thatequity wasoneofthefactors taken into
account when establishing asafeguard. However, theUnited States, besides having nojustification,
never achieved halfoftheminimum SLlevel towhich Costa Rica wasentitled, norwasthislevel
comparable ineither relative orabsolute terms tothelevels agreed with theother countries called under
thissame category. Other countries received anSLquota higher thantheir calllevels, insome instances
obtaining increases thatwent upfrom 54to99percentinSLaccess. Intheview ofCosta Rica, the
Dominican Republic hadaccepted anSLquota lower than itscalllevel asaresult offindings reached
bytheUSafteranumberofinvestigationsthatdeterminedtheexistenceoftransshipmentinthiscategory.
5.168 TheUnited States responded totheabove point, stating thattheequity considerations taken
bytheUnited States were discussed thoroughly withCosta Ricaandother countries during consultations.
Costa Rica insisted onaccess thatwasbeyond what wasequitable inthecaseofaccess totheUSmarket
forCosta Rica andcompared toother countries. Itwasincorrect thatalloftheother countries received
SL'shigher than thecalllevel. Most egregious ofCosta Rica'sassertions onthatpoint wasthefalse
statement thatthelower SLportion fortheDominican Republic wastoaccount fortransshipments.
Thealleged transshipments referred tobyCosta Rica were already covered before theagreement with
theDominican Republic, andthetransshipment cases took place before thetime frame ofthesafeguard
action. Further, intheview oftheUS,even theDominican Republic didnotagree with theassertion
ofCosta Rica.
5.169 Costa Rica alsonoted thattheUShadstated (paragraph 5.158) that"unlike GALs, non-GAL
imports arenoteligible forincreased quota access"; however, theUShadnotified both SLandGALs
under Article 2oftheATC. Therefore, bothquotas were subject totheincreased percentages mandated
byArticle 2.1oftheATC. Also, theUSconsiderations intended tojustify theGAL levels offered
andagreed inthiscategory (NAFTA Parity Programme ortheFree Trade Area oftheAmericas) could
notbeused asjustifications todeviate from theATC provisions.WT/DS24/R
Page 50
5.170 TheUnited States argued thatCosta Rica wasincorrect initsinterpretation ofArticle 2.1of
theATC concerning growth forquotas, andinparticular growth forGALs notified bytheUnited States
underArticle2.First,CostaRicadidnotunderstandwhattheUnitedStatesmeantconcerningeligibility
forincreased quota access. Eligibility forincreased quota access referred totherequirements ofthe
GAL programme which wasaUSdomestic programme, notestablished under theATC. Second,
theUnited States could notdiscern anyincreased percentages ofquotas mandated byArticle 2.1of
theATC asclaimed byCosta Rica. Even ifCosta Rica meant torefer toanother provision ofArticle
2,theprovision would only apply tothose levels thatwere specifically allocated growth before
notification under Article 2.TheGALs notified under Article 2specifically didnotinclude growth
percentages since GAL quotas already provide preferential access. USpolicy considerations when
providing more favourable treatment ornegotiating anysettlement with Costa Rica, especially when
thosepolicyconsiderationsincludedbenefitsforboththeUnitedStatesandCostaRica,werenotbreaches
oftheATC. There wasnoissue here concerning whether theATC contained orrequired anypolicy
considerations. TheUnited States noted inthisproceeding, however, thatthevery discretion provided
inArticle 6.6(d) formore favourable treatment didaccount forsuch policy considerations -including
taking intoaccount NAFTA parity fortextile andapparel products -which theUnited States thought
wasofgeneral interest toCosta Rica.
The United States Policies inApplying theSafeguard
5.171 IntheUnited States 'view, theCITA determination hadbeen entirely reasonable, based on
thesituation ofserious damage oractual threat, andCosta Rica hadnotdemonstrated otherwise. If
theUnited States hadshown generosity inthecontext ofitsbilateral negotiating strategy, thisstilldid
notchange thefactthattheoriginal determination hadbeen made onthebasis ofserious damage or
actual threat thereof. Inbilateral textile negotiations, theUnited States formulated itsoverall position
byintegrating anumber ofpolicies, such astheneed fortime forstructural adjustment intheUS
industry, equity toward other suppliers, therequirements ofATC Article 6.6oftheATC, andbroader
trade policy andforeign policy considerations. TheATC didnotlimit thepolicies thatcould betaken
intoaccount inthiscontext; indeed, todosowould becontrary totheinterests oftextile andapparel
exporters. Should theATC beinterpreted inaccordance with Costa Rica’sarguments, soastorequire
animporting Member tooffer innegotiations only themost restricted access toitsmarket?
5.172 Inthecontext ofArticle 6.6(d) oftheATC, theUnited States hadproposed toCosta Rica a
restraint of7million dozen onaspecific limit (SL) basis andanadditional 40million dozen guaranteed
access level forfuture GAL-qualifying trade. CITA haddetermined thatimports inCategory 352/652
were causing serious damage oractual threat thereof totheUSunderwear industry, andthatthisserious
damage wasattributable tothe14.4 million dozen imports from Costa Rica. Theaccess levels proposed
toCosta Rica were designed toprovide security ofaccess forCosta Rican exports during therestraint
period. Inreturn, theagreement would have provided foranorderly flow ofimports from Costa Rica,
allowing theUSindustry timetoadjust totheincreased import competition intheUSunderwear market.
5.173 TheUnited States argued that, inevaluating theGAL programme, thePanel should notlose
sight oftheoverall goals oftheATC. TheAgreement willaccomplish thelong-sought integration
ofthetextile andclothing sector intotheGATT, over itsten-year lifetime. Accomplishment ofthat
goal willrequire substantial anddifficult structural adjustment bythetextile andapparel industries
ofimporting Members during thatperiod. TheGAL programme served asanadjustment mechanism.
Safeguards under Article 6oftheATC were only transitory matters, lasting amaximum ofthree years.
However, theAgreement hadrecognized theneed forsuch safeguards inorder toallow industry to
adjust andprepare forthepost-integration environment thatwasnow lessthan tenyears away. The
Agreement provided procedural provisions thatrequired thatsuch safeguards notbetaken without
consultation anddiscussion with theexporting country andmaximized thepossibility thatsafeguards
would beimplemented consensually inamanner thattook theinterests oftheexporting country into
account. TheGAL programme wasfully consistent with those policies.WT/DS24/R
Page 51
H. ATTRIBUTION TOINDIVIDUAL EXPORTING COUNTRY(IES)
5.174 Costa Rica noted thattheapplication ofatransitional safeguard measure tothetrade ofa
particularMemberrequiredthefulfilmentoftwosuccessivestages,eachofwhichhaditsownsubstantive
requirements. Inthecase under consideration, theUnited States hadfailed todemonstrate the
prerequisites forhaving theright toresort tothesafeguard mechanism inaccordance with Articles 6.2
and6.3oftheATC. Consequently, ananalysis ofwhether ornotithadfulfilled thesubstantive
requirements laiddown fortheattribution stage provided forinArticle 6.4oftheATC wasnotrequired.
Nevertheless, forillustration, ananalysis ofhowtheUnited States hadalsofailed tofulfil thissecond
stage oftheprocess, thus once again demonstrating theunjustified nature oftherestriction adopted
against Costa Rican trade incategory 352/652, wasprovided.
5.175 Thefirstrequirement which theimporting Member must demonstrate inthissecond stage of
theprocess was, under Article 6.4oftheATC, thefollowing:
"...TheMember orMembers towhom serious damage, oractual threat thereof, referred
toinparagraphs 2and3,isattributed, shall bedetermined onthebasis ofasharp andsubstantial
increase intheimports, actual orimminent, from such aMember orMembers individually
...".
Forthese purposes, Article 6.7oftheATC provided that
"...The request forconsultations should beaccompanied byspecific andrelevant factual
information, asup-to-date aspossible, particularly inregard to:...(b)thefactors, referred
toinparagraph 4,onthebasis ofwhich itproposes toinvoke thesafeguard action with respect
totheMember orMembers concerned".
Obligation toSubmit Specific andRelevant Information
5.176 Costa Rica argued thatinaccordance with theabove, theUnited States hadtheobligation to
submit specific andrelevant information andtocarry outanexamination, onanindividual basis, of
thespecific case ofCosta Rican trade. IntheMarch Market Statement, thebasis oftheunilateral
restriction, theUnited States hadclaimed toshow infourlines thatthere wasasharp andsubstantial,
realorimminent increase, inimports from Costa Rica. Tothisend, theUnited States hadprovided
afewstatistics, without anykind ofanalysis. This omission ofanyanalysis, which waspartofits
demonstration obligation forthisrequirement, wasextremely serious, allthemore serious inthiscase
since, astheimpact of"807 trade" onCosta Rican trade inproducts classified incategory 352/652
wasall-important.
5.177 Thepossibility ofattributing aparticular condition ofserious damage oractual threat thereof
toanother Member obviously depended ontheexistence oftheserious damage oractual threat thereof.
Inthecase under consideration, firstly itwashighly questionable whether anincrease inCosta Rican
imports ofthisproduct existed, except ifsuch imports were considered purely andsimply assuch,
without regard fortheir special features, andsecondly, nosuch serious damage oractual threat thereof
existed.
5.178 Itcould bedemonstrated thatifsuch damage orthreat hadexisted, itcould notbeattributed
toimports from Costa Rica, byreferring totheproposals made bytheUnited States toCosta Rica
inseeking toreach anagreement onthevolume ofthequantitative restriction. How could itbeargued
that14.4 million dozen ofunderwear, which waswhat Costa Rica exported in1994, wascausing serious
damage oractual threat thereof totheUnited States underwear industry iftheUnited States hadproposed
toCosta Rica thattherestriction forthiscategory should beintheorder of47million dozen? TheWT/DS24/R
Page 52
only possible conclusion wasthattheUnited States hadalso failed todemonstrate thissubstantive
requirement, thus infringing Article 6.4oftheATC.
The Nature ofCosta Rica'sExports
5.179 Itwasrecalled byCosta Rica that99.5 percentoftheir exports incategory 352/652 in1993,
and 99.76 per cent oftheir exports in1994, had entered theUnited States under tariff
subheading 9802.00.80, inorder tobenefit from thetariff exemption provided forthatsubheading.
This meant thattrade inthecategory under consideration between Costa Rica andtheUnited States
concerned almost exclusively aprocess ofco-production orshared production. Inthiscondition, it
wasquestionable whether onewasdealing with "imports" orrather with domestic production, which,
while assembled inCosta Rica, didnotcease tobedomestic production simply forthatreason. It
wasrecalled thattheUnited States itself considered imports ofcutparts forassembly intheUnited
States asproducts ofthecountry inwhich theparts were cut. Inthese circumstances, United States
exports ofcutpieces should logically have been considered United States products. Accordingly, one
could notspeak ofanincrease in"imports", since they were notreally imports.
5.180 TheUnited States noted thatArticle 6.6(d) oftheATC stated thatre-imports were "...defined
bythelaws andpractices oftheimporting Member. ”Allapparel re-imports, qualifying forspecial
quota access ornot,were defined under United States lawandpractice as"foreign articles" andwere
accorded duty reductions totheextent oftheir UScontent. Under USlaw, quota benefits accrued
ifanagreement with theexporting country hadbeen concluded forapparel assembled with USformed
andcutfabric. However, ahigh percentage ofUScontent didnotautomatically confer USorigin or
make are-import aUSgood under USlaw.
5.181 TheUnited States considered thatCosta Rica hadbeen given incorrect information with respect
tothere-imports oftextile andapparel articles. Costa Rica hadasserted initssubmission thattherule
oforigin intheUnited States forproducts entering under tariff heading 9802.00.80 wastheplace where
thepieces were cut. Thus, Costa Rica wasasserting thatbecause underwear exported byCosta Rica
totheUnited States hadbeen cutintheUnited States, itwasUSorigin under USlaw. Cutting did
notconfer origin forthese products under USlaw. Neither theruleoforigin fortextiles andapparel
which wasineffect atthattime northerevised ruleoforigin, which became effective on1July1996,
hadanyapplicability toapparel re-imports because theUSheadnote toHTSUS 9802 clearly stated
thatsuch goods were “foreign articles ”andnotUSgoods. Therefore, underwear re-imported from
Costa Rica totheUnited States wastreated byUSlawasCosta Rican goods.
5.182 Costa Rica argued that, ifitwere decided toconsider thatthere hadbeen anincrease inimports
ofCosta Rican underwear, itwasquite clear thatifsuch imports were increasing itwasbecause
United States production ofcutpieces thatwere subsequently assembled inCosta Rica wasincreasing
inthesame proportion. Ifever more underwear wasbeing assembled inCosta Rica itwasbecause
intheUnited States ever more cutpieces forunderwear were being produced thatneeded tobe
assembled. Ittherefore followed thatanyindustry producing cutpieces forunderwear wasinathriving
condition andsodidnotneed tobeprotected from something thatwasrather ofbenefit totheunderwear
producing industry. Consequently, under either hypothesis, thefactwasthatthemeasure imposed
bytheUnited States against Costa Rica'strade inproducts included incategory 352/652 hadnogrounds
inArticle 6.4oftheATC.
I. MORE FAVOURABLE TREATMENT FOR RE-IMPORTS
5.183 With respect totheprovision ofpreferential treatment under Article 6.6(d) oftheATC,
Costa Rica considered thatthere were three aspects tobetaken intoaccount: (i)before establishing
arestriction ithadtobejustified under theterms ofArticles 6.2and6.3oftheATC; (ii)only after
thatstage hadbeen fulfilled, theimporting Member could implement such arestriction, bearing inWT/DS24/R
Page 53
mind itsobligation togrant theminimum SLlevel mandated byArticle 6.8oftheATC (i.e. inthe
present case14,426,178 SLquota) andonly over thatminimum extend themore favourable treatment
established inArticle 6.6(d) oftheATC; and(iii)according tothelanguage ofArticle 6.6(d) ofthe
ATC thismore favourable treatment wasmandatory andshall represent animprovement onconditions
towhich theMember whose trade hasbeen restricted would have been entitled toifithadnothad
theright tosuch more favourable treatment. Upon request ofthePanel, Costa Rica clarified thatit
hadnever rejected amore preferential treatment because such treatment hadnever been offered by
theUnited States. ThebestSLquota offered toCosta Rica hadnoteven reached halfoftheminimum
SLlevel towhich itwasentitled under Article 6.8oftheATC. Furthermore, theSLhadbeen more
restrictive totheextent thatitwassubject toasub-limit andtothe"ratchet down" provision.
5.184 TheUnited States noted thatthesolereference tore-imports intheATC appeared after the
stagewhentheimportingMemberhadmadeitsdeterminationofseriousdamage,oractualthreatthereof,
andattribution, inthecontext ofconsultations ontheapplication ofthetransitional safeguard. The
United States hadsought toprovide preferential treatment tore-imports from Costa Rica consistent
with therequirements ofArticle 6.6(d) oftheATC which provided, inpart, that,
"[i]ntheapplicationofthetransitionalsafeguard,particularaccountshallbetakenoftheinterests
ofexporting Members assetoutbelow: (d)more favourable treatment shall beaccorded to
re-imports byaMember oftextile andclothing products which thatMember hasexported to
another Member forprocessing andsubsequent reimportation, asdefined bythelaws and
practices oftheimporting Member, andsubject tosatisfactory control andcertification
procedures, when these products areimported from aMember forwhich thistype oftrade
represents asignificant proportion ofitstotal exports oftextiles andclothing."
5.185 TheUnitedStatesarguedthat,inaccordancewithcustomaryrulesofinternationallawconcerning
treaty interpretation, asreflected intheVienna Convention ontheLaw ofTreaties, theUnited States
hadlooked totheplain meaning oftheterms intheir context andobject andpurpose. Theplain meaning
of"more favourable treatment" didnotmean thatre-imports must beexcluded from safeguard action.
Ifthatwere theintent, theagreement would have sostated. Concerning thecontext ofArticle 6.6(d)
oftheATC, they sawthatthisandtheother provisions forfavourable treatment inArticle 6.6ofthe
ATC appeared inthetextofArticle 6oftheATC after andseparate from theprovisions onthe
requirements formaking determinations oftheserious damage, oractual threat thereof, andattribution.
Also, the"chapeau" ofArticle 6.6oftheATC plainly stated "intheapplication ofthetransitional
safeguard... ."Totheextent thatthemeaning oftheplain textofArticle 6.6oftheATC may be
considered ambiguous, Article 32oftheVienna Convention ontheLaw ofTreaties permitted recourse
tosupplementary means ofinterpretation "inorder toconfirm themeaning resulting from theapplication
ofArticle 31"oftheConvention. They could findsupplementary assistance inasimilar provision
intheMFA.
5.186 Article 6.6(d) oftheATC wasderived from Article 6.6oftheMFA andparagraph 15ofthe
1986 Protocol totheMFA concerning more favourable treatment tore-imports. These provisions for
more favourable treatment forre-imports were largely demanded byexporting countries benefitting
from outward processing programmes. MFA Article 6.6provided that
"[c]onsideration shall begiven tospecial anddifferential treatment tore-imports into a
participating country oftextile products which thatcountry hasexported toanother participating
country forprocessing andsubsequent re-importation, inthelight ofthespecial nature ofsuch
trade without prejudice totheprovisions ofArticle 3[MFA safeguard]." Paragraph 15of
1986 Protocol added that: "inconformity withtheprovisions ofArticle 6.6oftheArrangement
forconsideration tobegiven tospecial differential andmore favourable treatment, inthelight
ofthespecial nature ofthetrade referred totherein, participants agreed that, innegotiatingWT/DS24/R
Page 54
bilateral restraints account shall betaken oftherelative degree towhich these exports contribute
tosituations ofmarket disruption orrealriskthereof."
5.187 Itwas noted that onecommentator intheUnited States13hadobserved concerning the
interpretation ofparagraph 15:
"Totheextent itcould beargued thatparagraph 15does gobeyond Article 6[oftheMFA]
bydefining 'special anddifferential treatment 'toinclude anaccounting oftheextent towhich
such merchandise contributes tomarket disruption, itappears tobeapplicable only inthe
negotiation ofbilateral restraints. Inanyevent, neither the[MFA] northeProtocol creates
apresumption thatre-imports cannot cause orcontribute tomarket disruption."
Both ofthese provisions clearly indicated thatthepreferential consideration forre-imports arose only
after thedetermination ofmarket disruption hadbeen made; thatis,intheapplication ofthesafeguard
andinproposals forrestraints tobeapplied bymutual agreement. TheUnited States considered that
they hadfollowed therequirements inArticle 6.6(d) oftheATC inconsultations with Costa Rica.
5.188 TheUnited States alsoargued thattheform of“more favourable treatment ”waslefttothe
importing Member. Whereas other provisions forfavourable treatment intheATC provided forspecific
types offavourable treatment tobegiven, Article 6.6(d) oftheATC indicated thatitwastheimporting
Memberwhichaccordedthemorefavourabletreatment,andthenegotiatorshadleftituptotheimporting
Member toassign thetype oftreatment tobegiven tore-imports. Itfollowed thateven thedefinition
ofwhat kindofmore favourable treatment wastobegiven tore-imports waslefttothelawandpractice,
orotherwise discretion, oftheimporting Member. Therelevant laws andpractices included customs
laws, which affected theapplied duty rateonre-imports, aswellasthelaws andregulations governing
textile andapparel trade quota programme, which affected thetreatment accorded re-imports inthis
context.
5.189 TheATCdidnotdefinehowanimportingcountrymustgivemorefavourabletreatment.Nothing
inthetextornegotiating history ofArticle 6.6(d) oftheATC provided otherwise. Importing countries
haddifferent ways ofaccording more favourable treatment tore-imports. Noonecountry defined
itsoutward processing programmes thesame way. Article 6.6(d) oftheATC, andtheMFA provisions
from which itwasderived, allowed forthatfact. Inthiscase, theUnited States hadmade useofthe
GAL programme asitsmeans ofproviding preferential quantitative treatment forapparel re-imports
from theCaribbean Basin. TheUnited States could mitigate theeffects ofserious damage andactual
threat thereof toitsdomestic producers byoffering more favourable treatment tosome re-imports than
itprovided toother re-imports.
5.190 Costa Rica considered thattherestraint proposals made bytheUnited States could notlead
totheconclusion thatthese could besituated within theconcept ofmore favourable treatment provided
forinArticle 6.6(d) oftheATC. Thespecific restraint level (SL) offered toCosta Rica wasnoteven
close totheminimum SLlevel towhich Costa Rica would have hadtheright pursuant toArticle 6.8
oftheATC which obliged theUnited States tooffer asaminimum anSLquota of14,423,178 dozen
whereas theUS'most generous proposal didnoteven reach halfthelevel atthetime oftherequest
forconsultations andwaseven more restrictive duetothefixing ofasub-limit andthe"ratchet-down"
provision. Since theUnited States hadnotgranted theminimum level towhich Costa Rica hadaright,
itwas notpossible toconsider thatthey hadgranted themore favoured treatment prescribed in
Article 6.6(d) oftheATC. Onthecontrary, theUnited States hadgranted Costa Rica lessfavourable
treatment than thetreatment itwasobliged togrant toanyMember oftheWTO under Article 6.8of
theATC.
13Jacob, B."Renewal andExpansion oftheMultifibre Arrangement" 19Law andPolicy inInternational
Business 7,33(Georgetown University Law Center, 1987).WT/DS24/R
Page 55
5.191 Theestablishment ofanSLquota below thelevel provided forinArticle 6.8oftheATC,
together with theestablishment ofaGAL quota tocover thedifference andifnecessary exceed this
level, wascontrary tothespirit andletter ofArticle 6.6(d) oftheATC andwould place anexporting
Member thatdidnotparticipate inco-production inabetter situation thanaMember thatdoes participate
because theformer would enjoy theminimal unconditional level ofaccess provided forinArticle 6.8
oftheATC, while thesecond would seetheir market access subject torigid conditions.
5.192 IntheUnited States 'view, Costa Rica'sarguments treated theprocess ofmaking determinations
under Article 6oftheATC asaone-dimensional process inwhich thesolefactors thatgoverned action
byimporting Members were those listed inArticles 6.3and6.4oftheATC. InArticle 6.6(d), the
ATC fully permitted Members tobeflexible “intheapplication ofthetransitional safeguard ”forspecial
needs oftheexporting country andtheimporting country. Article 6.6(d) oftheATC permitted the
importing country toprovide more favourable treatment bytaking advantage ofspecial access policies,
such asthe807A (GAL) outward processing programme. Itdidnotrequire thatsuch programmes
reflect solely theneeds oftheexporting country. Infact, theaccess levels offered inthecontext of
theGAL programme donotlegally correspond tothedeterminations required under Articles 6.2,6.3
and6.4oftheATC. These factors were distinct from thefactors thattheauthorities should takeinto
account when making thedeterminations required inArticles 6.2, 6.3and6.4oftheATC. GALs
were arranged through negotiation andagreement inorder toverify andcertify thatsuch goods met
therequirements oftheprogramme. Article 6.6(d) oftheATC even made reference tosatisfactory
control andcertification procedures. Acountry may opt,asdidCosta Rica, nottoaccept thetype
ofmore favourable treatment offered.
5.193 Thepurpose ofthesafeguard wastoprovide relief from import surges, nottoprevent growth
ofimports. Therefore, ifre-imports were surging, theywould contribute toserious damage andactual
threat thereof. Unlike theother provisions forspecial treatment, Article 6.6(d) oftheATC allowed
importing countries themost flexibility todecide how toprovide favourable treatment forre-imports,
taking intoaccount thespecial nature ofthetrade, butitdidnotmandate anyparticular form ormanner
ofproviding favourable treatment. Theother subparagraphs inArticle 6.6oftheATC provided more
specific guidance onhow thespecial treatment should begiven inthose cases. TheUnited States at
onepoint hadoffered 7million dozen specific limit and40million dozen GAL toCosta Rica. This
offer wasmade toprovide security ofaccess forCosta Rica exports throughout thethree-year term
oftherestriction. Italsowould have provided fororderly access ofimports from Costa Rica allowing
theUSindustry toadjust toincreased import competition intheUSunderwear market. Theoffers
made concerning acombination ofSLandGAL access were consistent with theATC andoverall US
policy interests andwere consistent with USpolicy under theMFA.
5.194 TheUnited States referred totheassertion ofCosta Rica thatsince some oftheprovisions for
special treatment inArticle 6.6oftheATC specified theform such treatment was totake, and
Article 6.6(d) oftheATC didnot,then animporting Member must accord favourable treatment to
re-imports atsome earlier point: while making itsdetermination ofserious damage, oractual threat
thereof; while making itsattribution determination; and/or before consultations. This argument was
without basis inArticles 6.2,6.3or6.4oftheATC, which didnoteven mention re-imports, letalone
provide forspecial treatment. Theonly provision forspecial treatment wasArticle 6.6oftheATC,
which only addressed special treatment tobegiven "[i]n theapplication ofthetransitional safeguard".
DSU Article 3.2stated thefundamental principle thatDSB recommendations could not"add to...
therights andobligations provided inthecovered agreements." Toreadobligations intothepurposeful
blanks leftinArticle 6.6(d) oftheATC would contradict thisprinciple, which wascentral tothestability
ofthedispute settlement system. Thenotion thatfavourable treatment under Article 6.6(d) oftheATC
must beaccorded inaparticular form wasinconsistent with theplain textofArticle 6.6(d) oftheATC,
which provided nosuch limitation ontreatment.WT/DS24/R
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5.195 TheUnited States estimated that94percent ofCosta Rica’sexports were re-imports made
from fabric cutintheUnited States. Theremaining 6percent, made from fabric notcutintheUnited
States, amounted to889,101 dozen. This meant thattheportion made from fabric notcutintheUnited
States would notqualify fortheguaranteed access level. The889,101 dozen alone would stillhave
ledtheUnited States toattribute serious damage, oractual threat thereof toCosta Rica'simports.
Therefore, Costa Rica'sassertion thattheremaining 6percentcould notdamage orthreaten damage
totheUSdomestic industry wasfalse. Finally, there-imports hadposed athreat totheUSdomestic
industry thatdidnotparticipate inoutward processing (approximately 60percent oftheUSfirms
producing underwear intheUnited States). TheUnited States hadtaken thisintoaccount during
negotiations when balancing theeffect ofre-imports onthedomestic industry andformulating proposals
formore favourable treatment under Article 6.6(d) oftheATC.
5.196 Costa Rica wasconcerned thatthere could besome confusion about thelevels oftrade in"807"
andthose inGALs. Intheir view, theUnited States could notknow prior totheimplementation of
aGAL programmes which clothing was"eligible" ornotunder theprogramme because itwasonly
when thecustoms inspections under theprogramme were carried outthatitwaspossible toknow which
clothing hadbeen manufactured using cloth formed andcutintheUnited States. The figure of
94percentwhich theUnited States hadreferred towasnotnecessarily alleligible forGAL. Infact,
according tothestatistics published bytheUnited States Department ofTrade, thepercentage of
Costa Rican trade inthe352/652 category within theframework of"807 trade" exceeded 99percent.
However, even if99percentofacountry 'strade wasunder the"807 trade" framework, thiswould
bear norelation tothepercentage ofitstrade which utilized fabric formed intheUnited States.
5.197 TheUnitedStatespointedoutthatithadalwaysstatedinthisproceedingthatitcouldnotidentify
GAL eligible products until acountry entered intoanagreement with theUSforGALs andtheproper
certification wasinplace thatwould verify thatUS"formed" fabric wasused, notjustthatitwasfabric
"cut" intheUS. Before aGAL agreement wasestablished, theUSonly haddataonfabric "cut" in
theUS,not"formed" intheUSaswell. ForGAL eligibility, US"formed" and"cut" fabric must
beused. AstheUnited States hadstated initssubmissions, the94percentfigure only indicated "cut"
parts notwhether thefabric wasalso"formed" intheUnited States. TheUnited States hadverified
that94percent ofCosta Rica'strade wasmade from parts "cut" intheUnited States.
The United States Fabric Industry
5.198 Costa Rica claimed that, from itsanalysis thequestion arose: what wasthedomestic industry
which theUnited States wasreally trying toprotect byimposing thesafeguard onCosta Rica inthis
category? Inaccordance with Article 6.2oftheATC itwasclear thatasafeguard measure asprovided
fortherein hadthepurpose ofproviding temporary protection forthedomestic industry producing
"likeand/ordirectlycompetitiveproducts"withrespecttothespecificproductsthatwerebeingimported.
That waswhytheproper action toprovide such protection, once theduejustification hadbeen provided,
wastherestriction ofimports.
5.199 CostaRicaarguedthat,astheproductbeingimportedwascottonandman-madefibreunderwear,
theonly domestic industry which itcould besought toprotect through Article 6oftheATC wasthe
United States industry thatproduced cotton andman-made fibre underwear, andnotanyother industry.
Although theUnited States hadformally stated thattheindustry itwasseeking toprotect wasthecotton
andman-made fibre underwear industry, thefactofthematter wasthatinview oftheproposals made
bytheUnited States toCosta Rica andtheagreements ithadreached with other countries called for
consultations over thiscategory, theclear conclusion wasthattheUnited States wasnotseeking to
protect thedomestic industry producing such products. Itwasimpossible toconsider thatthatwas
itsobjective when inthenegotiations ithadagreed toasubstantial increase inmarket access forimports
ofsuch products. Ontheother hand, neither diditappear reasonable toconsider thattheUnited States
hadnomotives foritsdecision toapply aspecific safeguard measure toCosta Rica incategory 352/652.WT/DS24/R
Page 57
TheUnited States certainly didhave amotive, but,intheview ofCosta Rica, thatmotive wasnot
covered bytheATC.
5.200 Costa Rica considered thatthereply tothisquestion wastobefound both intheproposals
made bytheUnited States toCosta Rica andintheagreements reached with theother countries called
forconsultations inthiscategory, anditwasthefollowing: what theUnited States wasseeking to
dowastoprotect thedomestic industry thatproduced thefabric used intheproduction ofunderwear.
Forthispurpose, theUnited States hadfollowed tworoutes: firstly, ithadsought torestrict access
toitsmarket forunderwear made from fabric notproduced intheUnited States, andsecondly, ithad
guaranteed wider andsubstantial access toitsmarket forunderwear made from fabric formed andcut
intheUnited States. Asthesame time asimports ofunderwear produced from non-US fabric were
restricted, aguaranteed broad level ofaccess wasprovided forimports using fabric formed andcut
intheUnited States. That waswhy thevarious proposals made bytheUnited States toCosta Rica
totrytoreach anagreement onthelevel ofrestriction were two-fold innature: alower access level
fornon-conditional orspecific level (SL) trade -intheorder of1.5to4.5million dozen versus the
14.4 million dozen which wastheminimum guaranteed forCosta Rica bytheATC -anda"generous"
level forconditional orGAL trade, amounting toasmuch as40million dozen depending onthespecific
proposal. That was also why among theagreements reached with theother countries called for
consultation inthiscategory, more than 80percent ofthenegotiated restraint volumes -oraccess
volumes -required theuseofUnited States formed fabric, while only theremaining 20percentmay
usenon-United States formed fabric.
5.201 Costa Rica stated thattheUnited States may wish topromote theuseoffabric produced in
thatcountry; however, theproblem layinthemechanism ithaddecided touseforthispurpose.
Imposing arestriction onimports ofunderwear from acountry inorder tooblige thatcountry touse
United States cloth fortheproduction oftheunderwear asarequirement forittobeabletoenter the
United States market wasnotacondition provided forinArticle 6oftheATC. TheATC didnot
allow imposition ofasafeguard measure onaclothing product inorder toprotect thefabric used to
produce it.TheATC only envisaged thesafeguard governed byArticle 6oftheAgreement toprotect
thedomestic industry producing "like and/or directly competitive products". Underwear wasnota
likeordirectly competing product withrespect tothefabric used toproduce it,since these were products
which haddifferent characteristics from thestandpoint ofanyobjective orsubjective criterion. The
factthatunderwear andfabric were notlikeordirectly competitive products wasrecognized bythe
United States itself. This wasshown bythefactthattheUnited States hadnoteven attempted toargue
thisopenly, since initsreports ithadalways argued thatthedomestic industry allegedly affected was
theunderwear industry anddidnotmention thefabric industry explicitly. However, thereason why
thecase wasconfusing wasthatbasically theUnited States wastrying tojustify anaction whose true
objective wasvery different from itsapparent objective inorder totrytobring itwithin theterms of
aprovision which didnotauthorize action toattain theobjective which theUnited States wasactually
pursuing. Byproceeding inthisway, theUnited States hadaffected notonly Costa Rica butalsoall
theproducers ofthistype offabric, whose rights would beimpaired insofarastheaction restricted
andpossibly hindered their ability tobecome suppliers ofthisrawmaterial.
5.202 TheUnited States argued thattheyhadproperly based their determination ondamage orthreat
tothedomestic industry producing likeordirectly competitive products. TheUnited States hadsatisfied
theArticle 6requirement thattheserious damage, oractual threat thereof, must betothedomestic
industryproducinglikeordirectlycompetitiveproducts,ascouldbeseenfromtheMarch1995Statement
andfurther confirmed bytheUSstatements. Unlike agreements thatpermit other safeguard actions,
theATC didnotprovide adefinition ofdomestic industry nordiditrequire thattheimporting member
apply atransitional safeguard thatcorresponded exactly tothescope oftheindustry seriously damaged
oractually threatened byserious damage. While theUSfabric industry mayincidentally benefit from
themore favourable treatment provided forre-imports incorporating USformed andcutfabric, ithad
been made clear intheMarch 1995 Statement thattheserious damage, oractual threat thereofWT/DS24/R
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determination wasmade solely onthebasis ofthesituation intheUSunderwear industry, which included
both vertically integrated firms which manufactured their own fabric anddomestic firms thatdidnot
useoffshore operations. There were approximately 220underwear manufacturers intheUnited States,
85ofwhich used outward processing operations andtheremaining 60percent, or135firms, which
didnotuseoffshore operations. Inmaking itsdetermination under Article 6.2oftheATC, theCITA
hadexamined thesituation ofthebroad array ofUSunderwear producers, including theintegrated
firms which spun their own yarn, knitfabric, andcutandassembled thefinished product; thelarge
number ofsmall “cutandsew”operators who obtained their fabric andtrim from avariety of
independent sources, anddidnothave offshore operations; andthose operators who knitfabric and
cutpieces intheUnited States forfinal assembly overseas. Thefactthattheunderwear industry in
theUnited States wasadiverse industry, andthatsome producers alsomade their ownfabric, didnot
change thefactthattheCITA ’sdetermination wasbased ontheeconomic conditions intheunderwear
industry, nottheindustry producing only fabric.
5.203 TheUnited States noted thatmany countries with outward processing programmes condition
participation inthatprogramme onuseoffabric manufactured intheir countries. They alsomaintain
quantitative limits onhow much ofthattrade canbere-imported.
5.204 Intheview oftheUnited States, thefacts before theCITA andtherecord before thePanel
demonstrated thatUSunderwear producers (including both those which didandthose which didnot
manufacture offshore) hadbeen seriously damaged oractually threatened with such damage from a
surge inre-imports. Itwastheresponsibility oftheUnited States tobalance thedamage toandinterests
ofmany different types ofdomestic underwear producers. TheATC permitted Members toimpose
atransitional safeguard even ifthedamage didnotextend to100percent oftheindustry. Any
requirement thatthedamage must besustained byapercentage ormajority oftheindustry oracertain
sizeortype offirm, wasconspicuously omitted from theATC. Inother WTO safeguard procedures,
there were express requirements with respect totheproportion oftheaffected industry represented.
Clearly, thenegotiators oftheATC hadbeen aware ofthose procedures, buthadchosen tocontinue
thesafeguard mechanism used under theMFA system.
J. THE REQUIREMENT TOHOLD CONSULTATIONS
5.205 Costa Rica argued thateven if,forillustration, itwasconsidered thattheUnited States had
fulfilled thesubstantive requirements needed tohave theright toapply atransitional safeguard measure
toCosta Rican trade incategory 352/652, which, asthey hadalready shown, theUnited States had
notdone, thefactwasthattheunilateral restriction imposed wasfraught with itsown problems and
initself alsoviolated theATC. Theadoption, maintenance andrenewal bytheUnited States ofthis
unilateral restriction suffered from twoserious flaws ofdifferent kinds. First, theUnited States had
adopted, maintained andrenewed ameasure unilaterally, without having heldconsultations onthebasis
ofthesubstantive requirement onwhich themeasure wassupposedly based, thusviolating Articles 6.7
and6.10 oftheATC. And second, ithadapplied themeasure retroactively tothedateofthecallfor
consultations, thus violating Article 6.10 oftheAgreement.
5.206 Therequest forconsultations made bytheUnited States, theinformation presented inthe
Statement onwhich theaction taken wasbased, theconsultations heldwith Members andtheunilateral
restriction adopted inthiscase allreferred tothecondition oftheexistence ofserious damage tothe
United States industry. Inother words, theUnited States made thecallforconsultations andproceeded
thereafter until itadopted thetransitional safeguard inJune 1995 onthebasis ofthepurported existence
ofserious damage toitsindustry.
5.207 Costa Rica noted that, atitsJuly meeting theTMB haddetermined thatserious damage did
notexist. TheUnited States should then have immediately withdrawn themeasure. Nevertheless,
itdidnotdoso,butrather appeared tohave interpreted that, astheTMB hadnotreached aconclusionWT/DS24/R
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astotheexistence ornotofactual threat ofserious damage, itcould continue maintaining themeasure
onthatbasis. Byproceeding inthisway, theUnited States hadviolated Articles 6.7and6.10 ofthe
ATC, insofarasthey contained anobligation tohold consultations during a60-day period before
aunilateral restriction maybeadopted. Inother words, itwasimpossible toadopt aunilateral restriction
without having heldconsultations with theMember affected, asprovided forbythevarious paragraphs
ofArticle 6oftheATC.
5.208 This meant that, inorder tohave been abletoadopt ameasure onthebasis oftheexistence
ofactual threat ofserious damage, theUnited States should have made thecall,presented theinformation
andheldconsultations onthatbasis. Itcould notbeadmitted thataunilateral restriction maybeimposed
withoutspecificallyhavinghadtheopportunitytorebuttheallegedexistenceofasubstantiverequirement
onwhich themeasure wasallegedly based. Tomaintain thecontrary would imply leaving theexporting
Member completely defenceless, because there would notbeapoint intheproceedings atwhich it
could trytodefend itself. Inthecase under consideration, iftheUnited States hadconsidered that
thebasis foritscallwastheexistence ofactual threat ofserious damage, itshould have saidsoinits
callforconsultations, andshould have presented thefactors andinformation required todemonstrate
itsexistence, andthen should have imposed theunilateral restriction onthatbasis.
5.209 The United States pointed outthat Article 6.10 oftheATC regulated thedate when, if
consultations hadfailed toreach agreement, animporting Member may move ahead unilaterally with
implementation ofthetextile restriction inquestion. Provision ofsuch deadlines wasfully consistent
with thescheme ofArticle 6oftheATC, which attempted tomaximize thepossibility thattransitional
safeguards would beapplied onaconsensual basis; anynegotiator could appreciate thatalack of
deadlines would mean lackofanyincentive fornegotiation andagreement. However, Article 6.10
oftheATC didnotregulate theeffective dateforaunilateral transitional safeguard. TheUnited States
hadapplied itstransitional safeguard with respect toimports ofunderwear from Costa Rica effective
on23June 1995. This date fellwithin 30days following the60-day period forconsultations after
theinitial callmade on27March 1995. Thereference year forimports within thelevels specified
inthistransitional safeguard began onMarch 27.This reference year wasfully consistent with US
obligations under Article 6.10 oftheATC.
5.210 Costa Rica argued that, when theTMB determined thatserious damage totheUnited States
industry didnotexist inthiscase, what theUnited States should properly have done wastowithdraw
themeasure adopted onthatbasis and, ifthere really were grounds justifying theexistence ofactual
threat ofserious damage, begin theprocedure anew onthatground, tocomply withArticles 6.7and6.10
oftheATC, andgiveCosta Rica achance todefend itself. Byfailing todoso,theUnited States violated
theabove-mentioned provisions.
5.211 TheUnited States argued thatthey were notrequired bytheATC tochoose between serious
damage andactual threat inmaking their determination. TheATC standard allowed Members toassert,
atthesame time, both serious damage oractual threat. Theplain meaning ofthestandard invoked
merely thenotion thatthere could beadetermination onthebasis ofserious damage, oractual threat.
Neither wasexclusive oftheother. There wasnoobligation inother safeguard proceedings thatone
standard must bealleged instead oftheother. TheATC treated them equally, thatis,without any
special factors toestablish acaseforoneortheother. Thesimple factwasthatMembers could allege
both based onthesame factors. Inaddition, contrary totheassertion ofCosta Rica, itdidnotfollow
thatiftheTMB hadfound thatthere wasnoserious damage, andreached noconsensus onthreat, there
wasnothreat. Noconsensus onthreat wasjustthat. Noconsensus onthatfinding, therefore, no
finding ordecision onthreat.
5.212 TheUnited States also stated thatitheld consultations with Costa Rica inaccordance with
Article 6.7oftheATC before placing arestriction. Itthenapplied therestraint, andreferred thematter
totheTMB, pursuant toArticle 6.10. Article 6.12 therefore permitted theUnited States tomaintainWT/DS24/R
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therestraint foruptothree years, without extension. Article 6.10 expressly allowed fortheplacement
ofaunilateral restraint before TMB review. Nothing inthetextindicated thattherestraint must be
withdrawn intheabsence ofanyrecommendation todoso.Alackofconsensus intheTMB, oreven
afinding without arecommendation towithdraw, didnotobligate animporting Member towithdraw
arestraint. Even ifthere was arecommendation towithdraw arestraint, Members must only
"endeavour" tocomply, and provide reasons totheTMB ifthey could notcomply with the
recommendation. Inthiscase, theUnited States hadcomplied with theTMB recommendation.
K. EFFECTIVE DATE OFTHE RESTRICTION
5.213 Costa Rica alsoargued thattheUnited States hadapplied retroactively theunilateral restriction
imposed ontrade with Costa Rica incategory 352/652, thereby violating Article 6.10 oftheATC.
This Article provided that:
"If,however, after theexpiry oftheperiod of60days from thedateonwhich therequest for
consultations wasreceived, there hasbeen noagreement between theMembers, theMember
which proposed totakesafeguard action may apply therestraint bydateofimport ordateof
export, inaccordance with theprovisions ofthisArticle, within 30days following the60-day
period forconsultations ...".
5.214 Inaccordance with theabove, iftheMembers failed toreach agreement ontheapplication
ofthesafeguard once the60-day period fixed forholding consultations hadexpired, theMember which
proposed totake safeguard action may dosounilaterally within thefollowing 30days. Thus, the
provision under consideration granted theimporting Member thepower during aspecified period to
impose aunilateral restriction ontheimports after acertain number ofdays hadpassed. Nowhere,
inCosta Rica'sview, didArticle 6.10 oftheATC authorize theimposition ofaunilateral restriction
retroactive tothedateofthecallforconsultations. Thefactwasthatretroactivity could notbeassumed,
butmust beexplicitly authorized, asitwasunder theMFA. Article 3.5(i) oftheMFA explicitly stated
that:
"...If,however, after aperiod ofsixty days from thedate onwhich therequest hasbeen
received bytheparticipating exporting country orcountries, there hasbeen noagreement either
ontherequest forexport restraint oronanyalternative solution, therequesting participating
country maydecline toaccept imports forretention from theparticipating country orcountries
referred toinparagraph 3above ofthetextiles andtextile products causing market disruption
(asdefined inAnnex A)atalevel forthetwelve-month period beginning onthedaywhen
therequest wasreceived bytheparticipating exporting country orcountries notlessthan the
level provided forinAnnex B...".
5.215 Costa Rica further argued that, ifretroactivity wasnotexplicitly provided for,asinthecase
ofArticle 6.10 oftheATC, themeasure inquestion must beapplied "forwards". This wasparticularly
clear inthecase ofthisprovision oftheATC which, when establishing aprocedure similar tothat
provided forintheMFA fortheimposition ofaunilateral restriction, differed from thelatter inrespect
ofretroactivity, byeliminating theexplicit provision theMFA contained inthisregard. This
interpretation wasbolstered bytheprinciples established inArticle 6.1oftheATC, according towhich:
"...Thetransitional safeguard should beapplied assparingly aspossible, consistently with
theprovisions ofthisarticle andtheeffective implementation oftheintegration process under
thisAgreement".
5.216 Since anygaps ordoubts arising inthelegal textgoverning theimposition ofatransitional
safeguard must beinterpreted onthebasis oftheprinciples andspirit guiding theATC, itwasnot
possible toconclude thatarestriction adopted under theAgreement may beapplied retroactively inWT/DS24/R
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theabsenceofanyexplicitprovisiontothateffect.Thisinterpretationwassupportedbyotheragreements
thatwere anintegral partoftheWTO Agreement andwhich therefore must alsoserve asinterpretative
sources fortheATC intheabsence ofanyexpress provision inthelatter. Thus, forexample,
ArticleXIII:3(b)ofGATT1994,referringtoimportrestrictionsinvolvingthefixingofquotas,expressly
authorized retroactive application ofarestriction only forproducts thatwere enroute atthetime at
which public notice wasgiven oftherestriction.
5.217 Accordingly, intheview ofCosta Rica, theonlypossible conclusion wasthat, where Members
hadnotreached agreement, theimporting Member may, within thefollowing 30days, adopt aunilateral
restriction which would begin tobeapplied asfrom thetime when itwasadopted, andnotbefore.
This meant thattheimposition oftherestriction bytheUnited States should have begun asfrom
16June 1995, thedate when therestriction wasestablished, andcould notbemade retroactive to
27March 1995, thedateoftherequest forconsultations, astheUnited States infacthaddone. By
proceeding inthisway, andbycontinuing todoso,theUnited States haddisregarded theverysignificant
revisions oftheinformation presented asabasis foritsaction, disregarded alltheaspects discussed
intheconsultations, andtheconclusions oftheTMB andhadviolated Article 6.10 oftheATC.
5.218 TheUnited States argued thattheATC wassilent concerning theeffective dateofsafeguard
measures, anddidnotprevent aMember from providing thattheeffective datewould bethedateof
therequest forconsultations. TheUnited States hadheld consultations with Costa Rica inaccordance
with Article 6.7oftheATC before placing arestriction; hadthen applied therestraint atissue inthis
case; andhadreferred thematter totheTMB, pursuant toArticle 6.10 oftheATC. Article 6.12
oftheATC therefore, permitted theUnited States tomaintain therestraint foruptothree years, without
extension. When asked byexporting countries including Costa Rica toaddress thisquestion, theTMB
hadresponded recognizing thisfact. TheTMB hadnoted that
"with respect totheintroduction ofasafeguard measure, the[ATC] does notprovide any
indication with respect totheeffective dateofimplementation ofthatmeasure" (G/TMB/R/2).
TheMFA explicitly recognized thecustomary practice ofcounting imports during theconsultation
period against restraint levels, andtheATC didnotchange thispractice. Theuniversal application
oftextile restraints onthisbasis andtherecognition accorded tothispractice generally intheTSB
andTMB, demonstrated thatitwasinfactamatter ofaccepted custom which constitutes "subsequent
practice intheapplication ofthetreaty which establishes theagreement oftheparties regarding its
interpretation" inthesense ofArticle 31.3(b) oftheVienna Convention ontheLaw ofTreaties (1969).
5.219 Inthisregard theUnited States (and Costa Rica) were oftheview thatthereference in
Article XVI:1 oftheWTO Agreement to"decisions, procedures andcustomary practices followed
bytheCONTRACTING PARTIES toGATT 1947 andthebodies established intheframework of
GATT 1947" didnotinclude theMFA. Costa Rica noted thatGATT 1947 andtheMFA were two
independent, self-standing agreements while theUnited States pointed outthattosome extent, theMFA
wasanagreement relevant tothehistory oftheATC, aseven though theMFA hadexpired, many
oftheprovisions oftheATC were drawn from theMFA.
5.220 TheUnited States emphasized thattheomission ofanexplicit reference totheeffective date
oftherestriction intheATC could notbeconstrued asanattempt toprevent it.Itwasessential to
theeffective application oftransitional safeguard asanadjustment mechanism. Textile restrictions
would notwork without theflexibility tosettheeffective date. Without it,aflood ofimports would
vitiate their adjustment function. Under Article XIX animporting country could simply actwhen it
hadmade itsdetermination ofserious injury, butunder theMFA andtheATC importing countries
hadbeen required towait forconsultations before acting. Itwasargued thattheprinciple ofeffective
treaty interpretation requires thattransitional safeguards under Article 6oftheATC must bepermittedWT/DS24/R
Page 62
tohave aneffective dateasofthedateoftherequest ofconsultations asanycontrary position would
make theATC-consistent transitional safeguards ineffective.
5.221 Along these same lines, itwasobserved thatrestraints were normally applied effective onthe
date ofthecallasacallwould trigger speculative trade. Iftraders believed thatimports before
completion oftheconsultation process would notbecounted, speculative imports would aggravate
injury orbankrupt theremaining industry. Atransitional safeguard wasanadjustment measure which
facilitated theultimate accomplishment oftheten-year programme oftheATC. Asudden flood of
speculative imports forstockpiling inwarehouses could notbepermitted tofrustrate thisadjustment
process. Thewidespread recognition ofapplication oftextile restrictions asfrom thedateoftherequest
reflected acommon-sense appreciation ofthepractical aspects ofthislarger policy imperative. As
amatter oftreaty law, theprinciple ofeffective application oftreaties (utresmagis valeat quam pereat)
argues thatrestrictions must bepermitted tohave aneffective date asofthedate oftherequest for
consultations, asanycontrary position would make ATC-consistent transitional safeguards ineffective.
5.222 Article 6.10 oftheATC expressly allowed fortheplacement ofaunilateral restraint before
TMB review. Nothing inthetextindicated thattherestraint must bewithdrawn intheabsence ofany
TMB recommendation todoso. Alack ofconsensus intheTMB, oreven afinding without a
recommendation towithdraw, didnotobligate animporting Member towithdraw arestraint. Even
ifthere wasarecommendation towithdraw arestraint, Members must only "endeavour" tocomply,
andprovide reasons totheTMB ifthey could notcomply with therecommendation.
5.223 TheUnited States noted thattheATC provided foranabsolute sunset ofthree years foran
Article 6safeguard measure. Furthermore, itwasrecalled thatsuch safeguards were transitional and
could only beinvoked until theATC expired, eight andahalfyears from now. TheUnited States
hadcontinuously reviewed data onproducts subject torestraint andmonitored production andtrade
dataonavoluntary basis, even though theATC didnotsorequire. When newdatawarranted review
ofasafeguard measure, theUnited States considered whether itwasnecessary tomaintain therestraint.
5.224 With respect tothePanel ’squestion totheUnited States concerning "retroactive application
oftreaty obligations"; thiscould beread torefer toArticle 28ofthe1969 Vienna Convention.
However, thiswasnotacase ofretroactive application ofatreaty toevents which took place before
thetreaty entered intoforce; Article 28wasnotrelevant atall.Allevents which hadledtothisdispute
took place after entry intoforce oftheWTO Agreement, andinparticular took place within thetime
frame provided forunder ATC Article 6,including Articles 6.7and6.8. Itcould notbeargued that
Costa Rica wasunaware oftheapplicable treaty rules atthetime these events took place.
L. ARTICLE 2OFTHE ATC
5.225 Costa Rica argued thattheUnited States hadintroduced anewrestriction onitstrade inthe
clothing products classified incategory 352/652, without basing itself ontheprovisions oftheATC,
andthereby violated Article 2.4, ofthesaidAgreement. Asrecalled inthePreamble oftheATC,
thetermsofreferenceoftheUruguayRoundNegotiatingGrouponTextilesandClothinghadestablished
that:
"Negotiations intheareaoftextiles andclothing shall aimtoformulate modalities thatwould
permit theeventual integration ofthissector intoGATT onthebasis ofstrengthened GATT
rules anddisciplines, thereby alsocontributing totheobjective offurther liberalization oftrade."
Inorder tocarry outthismandate, Article 1.1oftheATC, provided that:
"This Agreement setsoutprovisions tobeapplied byMembers during atransition period for
theintegration ofthetextiles andclothing sector intoGATT 1994."WT/DS24/R
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Costa Rica further argued thatforthepurpose ofattaining thisobjective, theATC strictly
defined, inter alia,what typeofrestrictions maybeapplied totrade intextiles andclothing under cover
ofthesafeguard clause. These restrictions must necessarily fallwithin oneofthefollowing three
categories:
(a) Quantitative restrictions within bilateral agreements maintained under theMFA inforce
onthedaybefore theentry intoforce oftheWTO Agreement andnotified inaccordance
with Article 2.1oftheATC, which would continue tobegoverned bytheprovisions
oftheATC inthisrespect:
(b) restrictions established under thespecific transitional safeguard mechanism governed
byArticle 6oftheATC, which may beapplied, inaccordance with paragraph 1of
thatArticle, toalltextile andclothing products thathadnotyetbeen integrated into
GATT 1994; or
(c) restrictions established inaccordance with Article XIX ofGATT 1994, inthecase
ofproducts already integrated intoGATT 1994.
5.226 Thus, Article 2.4oftheATC, provided very clearly that:
"No new restrictions interms ofproducts orMembers shall beintroduced except under the
provision ofthisAgreement orrelevant GATT 1994 provisions."
Conversely, itfollowed from thisprovision thattheintroduction ofnewrestriction interms ofproducts
orMembers thathadnotbeen introduced inaccordance with therules oftheATC orGATT 1994
infringed Article 2.4oftheATC.
5.227 Inthecaseinpoint, imports intotheUnited States from Costa Rica incategory 352/652 were
notsubject toanyquantitative restriction based ontheMultifibre Arrangement prior totheentry into
force oftheWTO Agreement, andtherefore thefirstoption wasruled out. Furthermore, cotton and
man-made fibre underwear wasnotaproduct thattheUnited States hadalready incorporated into
GATT 1994 andtherefore Article XIX waslikewise notapplicable. Hence, theonly possibility open
totheUnited States torestrict theimports under consideration wastoapply thespecific transitional
safeguard mechanism inaccordance with thecriteria established inArticle 6oftheATC. However,
theUnited States hadfailed todemonstrate theexistence oftherequirements laiddown inArticle 6
oftheATC asanessential condition forbeing abletoapply atransitional safeguard. Consequently,
theUnited States hadviolated Article 2.4oftheATC, asithadapplied toCosta Rica anewrestriction
ontrade inproducts classified incategory 352/652 without complying with theprovisions ofArticle 6
oftheATC.
5.228 TheUnited States argued thatbecause thesafeguard action taken onimports ofunderwear in
category 352/652 from Costa Rica wasfully consistent withArticle 6oftheATC, there wasnoviolation
ofArticle 2oftheATC.
M. AMEMBER MUSTENDEAVOURTOACCEPTRECOMMENDATIONSOFTHETMB
5.229 Costa Rica argued thattheUnited States hadviolated Article 8oftheATC, which inits
paragraphs 9and10,defined thenature oftherecommendations made bytheTMB. Thus, thefirst
ofthese paragraphs provided that: "The Members shall endeavour toaccept infulltherecommendations
oftheTMB ...". Paragraph 10provided that:WT/DS24/R
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"IfaMember considers itself unable toconform with therecommendations oftheTMB; it
shall provide theTMB with thereasons therefor notlater than onemonth after thereceipt of
such recommendations ...".
5.230 Intheview ofCosta Rica, itwasclear from ananalysis ofthese twoprovisions thattheTMB 's
recommendations were notbinding. However, itwas also clear that theformulation ofsuch
recommendations must have some purpose, because itwasmeaningless fortheATC toprovide for
theTMB tocarry outanexercise without anypurpose. This aspect became clear from thereading
ofparagraphs 9and10ofArticle 8oftheATC, from which itmaybeconcluded thatalthough Article 8
does notimpose theobligation toabide bytherecommendations oftheTMB, itdoes impose other
obligations onMembers. Article 8oftheATC laiddown twoobligations onMembers: firstly, in
paragraph 9itimposed anobligation forMembers toendeavour toaccept infulltherecommendations
oftheTMB .Thiswasa"best-endeavours"obligation,inthesensethatwhiletheTMB recommendations
were notbinding, there wasanobligation forMembers todotheir besttoaccept them. If,given the
TMB 'srecommendations, aMember didnoteven trytoaccept them, itwould beviolating the
best-endeavours obligation ofArticle 6.9oftheATC.
5.231 Secondly, Article 8.10 oftheATC imposed onMembers another obligation thatcomplemented
thefirst, namely, thatwhere aMember, having endeavoured toaccept therecommendations ofthe
TMB, found itself unable toconform with them, itshall provide theTMB with thereasons therefor.
The imperative character oftheverb used inthisArticle clearly indicated that, while theTMB
recommendations maynotbebinding, thisprovision didimpose onaMember theobligation tojustify,
"not later than onemonth after receipt ofsuch recommendations", thereasons why itwasunable to
conform with them.
5.232 Costa Rica argued thatinthecaseunder consideration, theUnited States notonly hadnottried
toaccept theTMB recommendations, butfurthermore didnotsubmit tothatbody anydocument
explaining thereasons why itconsidered itself unable toconform with therecommendations, and
therefore itwasinbreach ofArticles 8.9and8.10 oftheATC.
5.233 TheUnited States argued thatCosta Rica'sallegation thattheUShadviolated Article 6.9of
theATC waswithout legal orfactual foundation. They hadproceeded ingood faith toreach mutual
understandinginconsultationsrecommendedbytheTMB ,consistentwithobligationsinherentinArticle8
oftheATC. They alsonoted thattheTMB recommendation hadbeen directed toboth theUnited States
andCosta Rica. Contrary totheassertion ofCosta Rica, theUnited States hadfollowed theTMB
recommendation toconsult andtotakeintoaccount theconsiderations ithadcited. Therefore, there
wasnoneed toinvoke Article 8.10 oftheATC andprovide reasons totheTMB fornotaccepting
itsrecommendation inthiscase. Asevidenced bytheinitiation ofthese Panel proceedings, itwas
Costa Rica thatcould notultimately comply with theTMB recommendation. TheTMB ’sresponse
inOctober 1995 tothereports oftheUnited States andCosta Rica didnotcharacterize theUnited
States ashaving failed tofollow theTMB ’srecommendation. TheTMB stated that:
"[i]t took note ofthereports andofthefactthatthetwoparties didnotreach amutual
understanding during theconsultations. TheTMB 'sdiscussions confirmed theBody 'sprevious
findings inthismatter (G/TMB/R/2, first twosentences ofparagraph 16). There being no
further requests bytheparties involved, theTMB considered itsreview ofthematter completed"
(G/TMB/R/5).
5.234 Costa Rica argued thattheviolation bytheUnited States ofthebest-endeavours obligation
imposed byArticle 8.9oftheATC wasclearly demonstrated bythefollowing facts. InJuly 1995,
theTMB, pursuant toArticle 6.10 oftheATC, hadproceeded toexamine theunilateral restriction
applied bytheUnited States toCosta Rica incategory 352/652. Onthatoccasion, theTMB hadfound
that"serious damage", asenvisaged inArticles 6.2and6.3oftheATC, "had notbeen demonstrated",WT/DS24/R
Page 65
but"could not, however, reach consensus ontheexistence ofactual threat ofserious damage".
Therefore, theTMB recommended:
"...thatfurther consultations beheld between theUnited States andtheparties concerned,
with aview toarriving atamutual understanding, bearing inmind theabove, andwith due
consideration totheparticular features ofthiscase, aswell asequity considerations".
Thus, therecommendation oftheTMB hadbeen thatCosta Rica andtheUnited States should hold
new consultations, butalso that these consultations should beconducted onthebasis ofthree
considerations: (a)thatitwasclear thattheUnited States hadnotdemonstrated theexistence ofserious
damage, butthataconsensus hadnotbeen reached intheTMB astotheexistence ofactual threat
ofserious damage; (b)thattrade inthiscategory between theUnited States andCosta Rica hadsome
particular features, which should beborne inmind; and(c)thatequity considerations should beborne
inmind, with respect tothelevels ofrestriction agreed bytheUnited States with other countries called
forconsultations onthissame category.
5.235 Intheview oftheUnited States, theTMB recommendation went nofurther than a
recommendation toconsult further andreport back totheTMB. TheTMB didnotrecommend that
theparties actually reach agreement, nordiditrecommend thattheUnited States withdraw thesafeguard
measure, nordiditrecommend thattheparties even discuss dropping therestriction. Also, alack
ofconsensus intheTMB didnottranslate intoarecommendation todrop arestriction. Inaccordance
with theTMB ’srecommendation, theUnited States hadduly consulted, andduly reported back; thus,
theUnited States hadcomplied fully with theTMB recommendation. Initsnote ofOctober 1995,
theTMB hadstated thattheparties hadreported nosolution andthatitconsidered itsreview completed.
5.236 InCosta Rica'sview, what subsequently hadoccurred, however, showed thattheUnited States
hadnotfulfilled theobligation imposed byArticle 8.9oftheATC inthesense ofatleast endeavouring
toproceed inaccordance with therecommendations oftheTMB. Firstly, theUnited States didnot
even attempt tojustify theadoption ofthesafeguard measure onthebasis ofthealleged actual threat
ofserious damage. Once theTMB haddetermined thatserious damage didnotexist andthatthere
wasnoconsensus astotheexistence ofactual threat ofserious damage, theUnited States -asaminimum
atthatstage oftheproceedings -should have demonstrated theexistence ofthislatter hypothetical
condition brought tolight bytheTMB. However, thefactwasthatthey didnoteven attempt todo
so,nordidittake intoaccount thespecial characteristics ortrade between thetwocountries inthis
category -feigning toignore theoverriding importance ofso-called 807trade -nordidittake into
account anyconsiderations ofequity because, even ifthere were grounds forimposing thesafeguard
inquestion, thelevels ofrestriction proposed toCosta Rica were very different tothose offered and
granted toother countries involved inconsultations.
5.237 TheUnited States argued thatCosta Rica hadmisinterpreted theTMB recommendation tomean
thattheTMB hadasked theUnited States toreconsider, inconsultations, itsdetermination thatthere
wasserious damage, oractual threat thereof tothedomestic underwear producing industry which had
been attributed toimports from Costa Rica. Further, Costa Rica hadmisinterpreted theTMB
recommendation totake intoaccount equity considerations inlight ofthespecific case tomean that
theUnited States wastodeem there-import content inCosta Rica'strade nottocause oractually threaten
serious damage toUSindustry. Based onthese misinterpretations, Costa Rica hadasserted thatthe
United States wasrequired inconsultations towithdraw therestraint.
5.238 CostaRicaheldthatiftheUnitedStatesgenuinelyhadacceptedtoconsidertherecommendations
oftheTMB, when taking intoaccount thattheTMB hadnotreached aconsensus astotheexistence
ofactual threat ofserious damage itshould have lifted thequota unilaterally imposed onCosta Rica
incategory 352/652. This wasbecause theletter andspirit oftheATC were very clear: theATC
wasconceived asatransitional system whose essential function wastointegrate trade intextiles andWT/DS24/R
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clothing intotherules andthedisciplines ofGATT 1994. From thisstatement, thetransitional safeguard
provided forinArticle 6oftheATC wasextraordinary bynature andshould beapplied only incases
where ithadbeen possible todemonstrate theexistence oftherequirements laiddown byparagraphs 2
and3ofthatArticle, andwhere consequently theTMB hadarrived ataconsensus thattheexistence
ofthethreat hadbeen demonstrated. Conversely, iftheTMB hadnotarrived ataconsensus tothat
effect, arestriction thathadbeen imposed could notbemaintained, because itwould mean thatthe
TMB hadnotfound thenecessary justification fortaking such action. There wasnothing intheATC
toestablish apresumption that, intheabsence ofconsensus intheTMB, itshould bepresumed that
theimporting Member hadthenecessary justification toimpose themeasure. Intheabsence ofany
explicit provision tothateffect, following Article 6.1oftheATC andthespirit oftheATC itwas
necessary toproceed intheleast restrictive manner, thatistosay,theimposed restriction should have
been lifted asthere wasnojustification foradopting it.
5.239 Inthis respect, theUnited States considered that Costa Rica had construed theTMB
recommendation tomean thattheUnited States wastorescind therestraint onCosta Rican exports
byincluding ananalysis ofArticle 6.1oftheATC. Reference tointegration andthetaking oftransitional
safeguard action andthere-import content ofCosta Rican exports supported thenotion thattheUnited
States wasrequired torescind therestraint when itconsulted with Costa Rica. Costa Rica'sargument
consistently depended ontheassumption thattheATC integration process must beread intoArticle 6
soastoaccelerate thepace oftheintegration. This wasnotthecase. Itwasclear intheATC that
integration wasanindependently determined process, andthatArticle 6applied only toproducts not
yetintegrated. Article 2oftheATC specifically allowed Members todesignate what products would
beintegrated andwhen, aslong astheywere chosen from theAnnex totheATC, from certain product
groups andcomprised theappropriate proportion oftrade indicated foreach stage ofthetransition.
Nothing intheATC required theUnited States orother Members toschedule sensitive products at
certain stages forintegration. Thenegotiators hadspecifically leftthatdecision totheimporting
Members. Thus, Costa Rica could notusethisPanel proceeding tocompel integration ofthiscategory.
5.240 Costa Rica alsoargued that, inaccordance withtheTMB 'srecommendations, theUnited States
wasobliged totakeintoconsideration theparticular features ofthetrade inthiscategory between the
twocountries. This meant thattheUnited States should have borne inmind that, given thatvirtually
allexports from Costa Rica incategory 352/652 were "807 trade" ,thepossibility thatthey should
have been causing serious damage oractual threat thereof wasreally non-existent. IftheUnited States
hadendeavoured toaccept therecommendation oftheTMB toconsider theparticular features oftrade
with Costa Rica inthiscategory, itwould clearly have appreciated howabsurd itwastoimpose aquota
insuch circumstances. However, theUnited States had notmade any effort toaccept the
recommendation oftheTMB.
5.241 TheUnited States further argued thattheTMB recommendation didnotsaywhat Costa Rica
claimed itdid. Again, theTMB hadnot,inits25October 1995 note, responded toCosta Rica'ssame
assertions intheir report back totheTMB dated 24August 1995. (G/TMB/SPEC/107) Thelackof
TMB consensus onactual threat ofserious damage didnottranslate intoa"recommendation" thata
restraint bewithdrawn. Accordingly, there wasnoobligation ontheUnited States, inconsultations,
toassume such aproposition.
5.242 Intheview ofCosta Rica, iftheUnited States hadinsisted onadopting asafeguard measure
inthese circumstances -when infactitshould have withdrawn themeasure -itshould atleast have
borne inmind theobligation togrant more favourable treatment tore-imports from Costa Rica, as
provided forinArticle 6.6(d) oftheATC. Inthisregard, however, theposition oftheUnited States
appeared tohave been somewhat self-contradictory. Ontheonehand, itstarted from theposition that
theriseinimports ofthese products wascausing serious damage toitsindustry, butontheother, the
level ofthese imports wasofnoimportance whatsoever provided theproduct inquestion wasproduced
using fabric formed andcutintheUnited States. TheATC established thisobligation togrant moreWT/DS24/R
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favourable treatment tore-imports -which theUnited States hadnever tried tofulfil inanyofits
proposals -butwhat itcertainly didnotprovide forwastheestablishment ofnewrestrictions inorder
toensure thatfuture trade consists solely ofre-imports.
5.243 Costa Rica noted thattheTMB hadalsoindicated thatequity considerations should beborne
inmind, bywhich itwasreferring tothefactthatthesame treatment should beaccorded tothose who
were inthesame position. Inthisconnection, apart from Costa Rica, theUnited States hadcalled
forconsultations sixother countries concerning thiscategory, hadwithdrawn thecalladdressed toone
ofthem andhadreached anagreement with theremaining five. Inthecase ofeach ofthelatter, the
United States hadagreed onspecific level (SL) restraints thatwere much higher than therespective
"call" levels. Thus -andassuming thattheUnited States hadtheright toadopt asafeguard, which,
intheview ofCosta Rica, wasnotthecase -inorder tocomply with theTMB 'srecommendation
itshould have made restraint proposals toCosta Rica thatreflected SLrestraint levels which provided
forincreases inrelation tothecalllevel, inthesame way asithadgranted totheother countries.
Innone oftheproposals formulated bytheUnited States toCosta Rica wasthisequity factor taken
intoconsideration, because noteven initslastproposal didtheUnited States propose aSLrestraint
level approaching thecalllevel, stilllessexceeding it.Infact, thehighest level thattheUnited States
hadoffered atanytime fortheestablishment oftheSLrestraint wasabout 40percent below what
should have been thelevel forCosta Rica inaccordance withtheATC itself -assuming thatthenecessary
requirements forimposing ithadbeen demonstrated, which wasnotthecase.
5.244 Costa Rica argued that, onthebasis oftheabove explanation, itwasclearly demonstrated that
theUnited States hadcompletely disregarded therecommendations adopted bytheTMB inJuly1995,
without even endeavouring toaccept them asprovided forinArticle 8.9oftheATC. Furthermore,
theUnited States hadviolated Article 8.10 oftheATC, which imposed onMembers another obligation
thatcomplemented theobligation established inArticle 8.9oftheATC. That istosay, theUnited
States hadnotfulfilled theobligation ofpresenting totheTMB itsreasons explaining whyitconsidered
itself unable toconform with theTMB 'srecommendations. Suffice ittosaythattheUnited States
hadnever atanytime presented totheTMB anydocument tothateffect. Failure tocomply with this
requirement imposed under Article 8.10 oftheATC maybeduetothefactthat, since theUnited States
hadnoteven attempted tofollow theTMB 'srecommendations, itwould bedifficult, ifnotimpossible,
forittojustify ahypothetical failure initsattempt toaccept those recommendations, since ithadmade
nosuch attempt.
5.245 Costa Rica alsonoted thattheUnited States haddeclared thattheydidnotagree withthefinding
oftheTMB thattheexistence ofserious damage hadnotbeen demonstrated. Moreover, asintheUS
view there wasnoprovision intheATC thatmade theTMB 'sfindings binding, thePanel wasobliged
toconsider thequestion ofserious damage. Inthisconnection, Costa Rica emphasized thatthe
United States hadnotcontested attheappropriate moment intheprocedure theTMB 'sfinding that
theexistence ofserious damage hadnotbeen demonstrated, asrequired byArticles 6.2and6.3of
theATC. Costa Rica was, therefore, concerned thatcontesting theaction oftheTMB atthisstage
oftheprocedure andcalling intoquestion itsdecisions would mean divesting theBody ofanyfunction
related tomonitoring theimplementation oftheATC.
5.246 TheUnited States argued thattheyhadmade efforts toreach amutual understanding with Costa
Rica. Asrecommended bytheTMB, theUnited States hadtaken intoaccount thattheTMB could
notreach consensus onactual threat ofserious damage (though they maintained that they had
demonstrated theexistence ofserious damage); hadexamined thenature oftrade from Costa Rica;
and, intheinterest ofequity, hadagain compared Costa Rica'strade with trade from other countries
towhich theserious damage andactual threat hadbeen attributed. Therecord showed thatCosta Rica
hadrefused torespond. Insodoing, theUnited States hadmade aproposal toCosta Rica that, in
itsview, took these factors intoaccount inaneffort towards mutual understanding. TheUnited States
stated thattherecord showed thatCosta Rica hadrefused torespond. TheUnited States stated thatWT/DS24/R
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there wasnorequirement intheATC thattheUnited States respond to"findings" butmust "endeavour
tocomply" with TMB "recommendations". The United States didcomply with theTMB
recommendation.
N. NULLIFICATION ORIMPAIRMENT OFBENEFITS
5.247 CostaRicaarguedthattheunilateralrestrictionimposedbytheUnitedStatesontradeinclothing
classified incategory 352/652 from Costa Rica wasablatant violation oftheobligations laiddown
intheATC, inparticular Articles 2,6and8.Onthisbasis, andgiven thattheATC wasa"covered
agreement"withinthemeaningofArticle1oftheDSU,theprovisionsofArticle3.8oftheDSUapplied.
That Article stated:
"Incases where there isaninfringement oftheobligations assumed under acovered agreement,
theaction isconsidered prima facie toconstitute acase ofnullification orimpairment ...".
Itclearly followed from theabove provision thatinthecaseunder consideration, given theinfringement
ofArticles 2,6and8bytheUnited States, benefits accruing toCosta Rica under theWTO Agreement,
andinparticular under theATC, hadbeen nullified orimpaired.
5.248 Considering thatArticle 3.1oftheDSU stipulated that
"Members affirm their adherence totheprinciples forthemanagement ofdisputes heretofore
applied under Articles XXII andXXIII ofGATT 1947 ...",
itwasimportant tonote thatthese Articles hadestablished thatthebenefits accruing under theGATT
Rules -andconsequently theWTO Rules -didnotcomprise exclusively those derived from the
Agreement atthetime when aconcession came intoeffect, butalsothefuture trading opportunities
thatwould result from thatconcession. Thus, andbyvirtue oftheprima facie case ofnullification
orimpairmentofbenefitsthatexistedincasesofinfringementoftheobligationsassumedunderacovered
agreement, such astheATC, theclaims presented byoneormore Members relating totheimposition
ofinfringing unilateral measures must beaccepted even where statistical evidence ofcommercial damage
cannot exist.
5.249 Itwasalsonecessary toemphasize thatnullification orimpairment should beconsidered not
only inrelation totheeffect which theviolation inquestion may have hadonthevolume oftrade but
alsoinrelation topossible increases intransaction costs andthecreation ofuncertainty liable toaffect
investment plans.
5.250 Asaresult ofalltheforegoing, Costa Rica considered thatthePanel should find thatthe
unilateral restriction imposed bytheUnited States onthetrade ofCosta Rica incategory 352/652
infringed Articles 2,6and8oftheATC andthat, consequently, these infringements entailed the
nullification orimpairment ofbenefits accruing toCosta Rica under theWTO Agreement. Accordingly,
Costa Rica urged thePanel tofindinitsreport thattheUnited States should proceed tobring itsmeasure
intoconformity with theATC, which implied immediately withdrawing it.
5.251 TheUnited States argued thatCosta Rica'srights andbenefits under theATC hadnotbeen
nullified andimpaired. TheUnited States haddemonstrated thatthey hadnotviolated Articles 2,6
or8oftheATC. Thus, nullification andimpairment ofanybenefits andrights accruing toCosta Rica
inthiscase could notbepresumed.
*****
VI INTERIM REVIEWWT/DS24/R
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6.1 On4October 1996, theUnited States andCosta Rica requested thePanel toreview, in
accordance with Article 15.2 oftheDSU, precise aspects oftheinterim report thathadbeen issued
totheparties on20September 1996. Both Costa Rica andtheUnited States requested thePanel to
hold ameeting forthatpurpose. ThePanel metwith theparties on15October 1996 tohear their
arguments concerning theinterim report. ThePanel carefully reviewed thearguments presented by
theparties.
6.2 Inapproaching theinterim review stage, thePanel drew guidance from Article 15.2 ofthe
DSU, which states that"aparty may submit awritten request forthepanel toreview precise aspects
oftheinterim report prior tocirculation ofthefinal report toMembers". While thePanel waswilling
toapproach theinterim review stage with thebroadest possible interpretation ofArticle 15.2 ofthe
DSU, itwasoftheview thatthepurpose ofthereview meeting wasnottoprovide theparties with
anopportunity tointroduce new legal issues andevidence, ortoenter intoadebate with thePanel.
Thepurpose oftheinterim review, inthePanel 'sview, wastoconsider specific andparticular aspects
oftheinterim report. Consequently, thePanel addressed theentire range ofsuch arguments presented
bytheparties which itconsidered tobesufficiently specific anddetailed.
6.3 TheUnited States submitted tothePanel atthereview meeting copies ofpress reports relating
totheinterim report. Atthemeeting, thePanel expressed itsdisappointment about theapparent breach
ofconfidentiality andreiterated theutmost importance ofmaintaining confidentiality soastopreserve
thecredibility andintegrity ofthedispute settlement process, particularly attheinterim review stage.
6.4 Regarding thetiming ofsettlements with other exporters, theUnited States argued thatthe
Panel haderroneously stated thattheUnited States requested consultations with Costa Rica while at
thesame time itsettled with other countries. Inorder toclarify itsfindings, thePanel introduced
some drafting modifications inthefinal report atparagraphs 7.50 and7.51.
6.5 TheUnited States disagreed with theinterim report thatuseoftheATC safeguard should be
exceptional. Itbased itsargument onthefactthatArticle 6.1oftheATC couples theterm "sparingly"
with "aspossible", suggesting thatthestandard wasrelative. ThePanel wasnotpersuaded bythis
argument, which ineffect would result inreading thetextoftheArticle asmeaning thatthetransitional
safeguard "should beapplied sparingly ifpossible".
6.6 RegardingthecausationanalysisrequiredunderArticle6.2oftheATC,theUnitedStatesargued
thatthePanel 'sfinding inparagraph 7.46 ofthefinal report wasamischaracterization oftheCITA 's
conclusions. The Panel slightly modified thelanguage ofthis paragraph soastoavoid any
misunderstanding ofitsfindings.
6.7 Inrespect oftherelationship between Articles 6.2and6.4oftheATC, theUnited States argued
thatthePanel incorrectly merged theanalyses under these twoparagraphs. This wasnottheintention
ofthePanel. Toclarify itsfindings, thePanel introduced certain drafting changes inparagraphs 7.23,
7.24, 7.47 and7.48.
6.8 TheUnited States argued thatinitsreview oftheMarch Market Statement, thePanel haderred
byrelying ontheJuly Market Statement. Itspecifically argued thatifMembers were penalized in
thedispute settlement process forsupplying updated datatotheTMB, there would beadisincentive
toproviding itattheTMB level. The Panel consequently examined theissue, asspelled outin
paragraphs 7.29 and7.45 ofitsfinal report.
6.9 Regarding thePanel 'sinterpretation ofArticle 6.6(d) oftheATC, theUnited States argued
thatfinding theUnited States inviolation ofthisprovision based ontherequirements under Article
6.8waserroneous because theUSaction wastaken based onArticle 6.10. ThePanel 'sadditional
discussion onthispoint isreflected inparagraph 7.59.WT/DS24/R
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6.10 Both theUnited States andCosta Rica disagreed with thePanel 'sinterpretation ofArticle 6.10
oftheATC regarding theeffective date ofapplication oftherestriction. TheUnited States argued
thattherestraint wasnotameasure "ofgeneral application" within themeaning ofArticle X:2ofGATT
1994. Itfurther argued thattherestraint wasnot"enforced" until 23June 1995, which wasafter the
dateofthepublication. ThePanel 'sfinding onthese points canbefound inparagraphs 7.65 and7.69
ofthefinal report. Costa Rica questioned thecompatibility ofthePanel 'sgeneral approach thatArticle
6oftheATC should beinterpreted narrowly anditsinterpretation ofArticle X:2ofGATT 1994.
ThePanel failed toseeanyincompatibility orcontradiction between thetwoapproaches. Costa Rica
further questioned thePanel 'sconsideration ofpractical aspects ofthisissue. ThePanel carefully
examined Costa Rica'sargument, anddecided tomaintain paragraph 7.68 ofthefinal report.
6.11 Costa Rica andtheUnited States differed with respect toacceptable figures forthepercentage
of807or807A trade inCosta Rican underwear exports totheUnited States. Intheabsence ofclear
verification bytheimporting country (i.e., theUnited States), thePanel decided tousethemost
conservative figure of94percent, coupled with theexpression "atleast" inparagraph 7.46 ofthefinal
report.
6.12 Costa Rica andtheUnited States made some other suggestions concerning language changes,
which thePanel accepted andintroduced initsfinal report.
VII FINDINGS
A. CLAIMS OFTHE PARTIES
Introduction
7.1 Wenotethattheissues indispute arise essentially from thefollowing facts: On27March 1995,
theUnited States requested consultations with Costa Rica ontrade incotton andman-made fibre
underwear (UScategory 352/652) under Article 6.7oftheATC. Asconsultations between thetwo
countries didnotresult inamutually acceptable solution, on23June 1995 theUnited States implemented
arestriction onunderwear imports from Costa Rica foraperiod of12months starting from
27March 1995. Atthesame time, theUnited States referred thematter totheTMB inaccordance
with Article 6.10 oftheATC. TheTMB found thatserious damage hadnotbeen demonstrated by
theUnited States, butitcould notreach consensus ontheexistence ofactual threat ofserious damage.
TheTMB recommended further consultations between thetwoparties. Aseries offurther consultations
washeldinwhich theUnited States putforward several newproposals asfarasthelevel oftherestriction
wasconcerned. However, theparties failed toreach amutually agreed solution. Therestriction,
augmented bytheapplication ofagrowth rateof6percent, wasrenewed fora12-month period on
27March 1996.
Main substantive claims
7.2 Costa Rica essentially claims before thePanel thattheUnited States, byimposing aunilateral
quantitative restriction oncotton andman-made fibre underwear classified incategory 352/652, has
acted inviolation ofArticles 2,6and8oftheATC. Costa Rica requests thePanel torecommend
thattheUnited States withdraw themeasure inquestion.
7.3 TheUnitedStatesessentiallyclaimsthatitrespecteditsobligationsundertheATCwhenimposing
therestriction oncotton andman-made fibre underwear classified incategory 352/652. Consequently,
theUnited States requests thePanel todismiss Costa Rica'sclaim.
7.4 There isnodisagreement between theparties tothedispute thattherestriction applied bythe
United States isa"transitional safeguard" andthattransitional safeguards aretobeapplied inaccordanceWT/DS24/R
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with Article 6oftheATC. Inthisrespect, Costa Rica claims thattheUnited States hasviolated a
number ofprovisions ofthisArticle. Inparticular, Costa Rica claims thattheUnited States violated
itsobligations under Article 6oftheATC by:
(a) imposingarestrictiononimportsfromCostaRicawithouthavingsatisfiedtheconditions
laiddown inArticle 6.2and6.4oftheATC, namely bynothaving shown thatserious
damage oractual threat thereof resulted from those imports;
(b) notgranting, when applying therestriction, more favourable treatment tore-imports
from Costa Rica incontravention ofArticle 6.6(d) oftheATC;
(c) notconsulting with Costa Rica ontheissue ofactual threat ofserious damage contrary
toitsobligations under Article 6.7and6.10 oftheATC; and
(d) applying therestriction retroactively incontravention ofArticle 6.10 oftheATC.
Costa Rica alsoclaims thattheUnited States violated Articles 2and8oftheATC. Inthisrespect,
Costa Rica claims thattheUnited States violated Article 2.4oftheATC which stipulates that: "[n]o
newrestrictions interms ofproducts orMembers shall beintroduced except under theprovisions of
thisAgreement orrelevant GATT 1994 provisions". With respect tothealleged violation ofArticle 8
oftheATC, Costa Rica essentially claims thattheUnited States hasnotrespected therecommendations
made bytheTMB inthiscase.
7.5 Wewilldealfirstwith what weview asCosta Rica'sbasic claim under Article 6oftheATC:
thattheUnited States imposed restrictions onimports intotheUnited States ofunderwear without having
demonstrated, asrequired byArticle 6.2and6.4oftheATC, thattheUSunderwear industry had
suffered serious damage from Costa Rican imports orthatthere wasanactual threat ofsuch damage.
Inconsidering thisclaim, weexamine theissues inthefollowing order: First weconsider general
interpretative issues. Second, weconsider Costa Rica'sbasic claim byreviewing thefindings bythe
USinvestigating authorities onserious damage attributed toCosta Rica. Third, weconsider thequestion
ofactual threat ofserious damage -amatter relating tothescope ofCosta Rica'sbasic claim. Finally,
weconsider Costa Rica'sother claims, namely, itsclaims with respect toArticle 6.6(d) oftheATC,
with respect tothealleged failure oftheUnited States toconsult, with respect tothealleged retroactive
application oftheUSrestriction, with respect tothealleged violation ofArticle 2.4oftheATC and
with respect tothealleged violation ofArticle 8oftheATC.
B. GENERAL INTERPRETATIVE ISSUES
7.6 Before turning totheexamination ofthespecific import restriction, wedeal with four
interpretative issues relating totheapplication oftheATC, namely:
(a) thestandard ofreview thatshould beapplied inthiscase;
(b) theburden ofproof;
(c) theinterpretation oftheATC; and
(d) thestructure ofArticle 6oftheATC.WT/DS24/R
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Standard ofReview
7.7 Wenotethatthetwoparties tothedispute present diverging views with respect tothestandard
ofreview tobeapplied bythePanel inthiscase. TheUnited States advocates astandard ofreview
similar tothatapplied inthe"Fur FeltHat" case14,inwhich theneutral members oftheWorking Party,
examining aUSescape clause measure inlight oftherequirements ofArticle XIX oftheGeneral
Agreement onTariffs andTrade (GATT) 1947, afforded totheUSauthorities considerable discretion
byconcluding thattheUnited States wasnotcalled upon toprove conclusively thatthedegree ofinjury
caused orthreatened inthatcaseshould beregarded asserious. Costa Rica argues infavour ofafive-
stepprocedure whereby thePanel would certify whether theadministrative authority oftheimporting
country, when imposing therestriction had:(i)complied with theATC 'sprocedural rules; (ii)properly
established thefacts; (iii)made anobjective andimpartial evaluation ofthefacts inthelight ofthe
rules oftheATC; (iv)properly exercised itsdiscretion intheinterpretation oftherules; and(v)complied
withtherules ingeneral, while alsohaving complied withtheother fourrequirements mentioned above.
7.8 WenotethattheATC does notestablish astandard ofreview forpanels, contrary, forexample,
totheWTO Agreement onImplementation ofArticle VIoftheGeneral Agreement onTariffs and
Trade 1994, where Article 17.6 defines thestandard ofreview thatpanels have toapply when reviewing
cases arising under thatAgreement. Wefurther note thattheDSU does notcontain aprovision
mandating aspecific standard ofreview.
7.9 Inourview, themain relevant provision oftheDSU inthisrespect isArticle 11,which reads
asfollows:
"The function ofpanels istoassist theDSB indischarging itsresponsibilities under
thisUnderstanding andthecovered agreements. Accordingly, apanel should make
anobjective assessment ofthematter before it,including anobjective assessment of
thefacts ofthecaseandtheapplicability ofandconformity with therelevant covered
agreements, andmake such other findings aswill assist theDSB inmaking the
recommendations oringiving therulings provided forinthecovered agreements".
7.10 Inouropinion, apolicy oftotal deference tothefindings ofthenational authorities could not
ensure an"objective assessment" asforeseen byArticle 11oftheDSU. This conclusion issupported,
inourview, byprevious panel reports thathave dealt with thisissue, andmost notably inthepanel
report onthe"Transformers" case.15
7.11 Thepanel inthe"Transformers" casewasconfronted with theargument ofNew Zealand that
thedetermination of"material injury" bythecompetent New Zealand investigating authority could
notbescrutinized bythepanel. The"Transformers" panel responded tothisargument asfollows:
"The Panel agreed thattheresponsibility tomake adetermination ofmaterial injury
caused bydumped imports rested inthefirstplace with theauthorities oftheimporting
contracting party concerned. However, thePanel could notshare theview thatsuch
adetermination could notbescrutinized ifitwere challenged byanother contracting
party. Onthecontrary, thePanel believed thatifacontracting party affected bythe
determination could make acasethattheimportation could notinitself have theeffect
ofcausing material injury totheindustry inquestion, thatcontracting party wasentitled,
14See"ReportontheWithdrawalbytheUnitedStatesofaTariffConcessionUnderArticleXIXoftheGeneral
Agreement onTariffs andTrade", GATT document CP/106, adopted on22October 1951 (CP.6/SR.19), version
published bytheSecretariat inNovember 1951, preface byE.Wyndham White.
15"New Zealand -Imports ofElectrical Transformers from Finland", adopted on18July1985, BISD 32S/55.WT/DS24/R
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under therelevant GATT provisions and inparticular Article XXIII, that its
representationsbegivensympatheticconsiderationandthateventually,ifnosatisfactory
adjustment waseffected, itmight refer thematter totheCONTRACTING PARTIES,
ashadbeen done byFinland inthepresent case. Toconclude otherwise would give
governments complete freedom andunrestricted discretion indeciding anti-dumping
cases without anypossibility toreview theaction taken intheGATT. This would lead
toanunacceptable situation under theaspect oflawandorder ininternational trade
relations asgoverned bytheGATT".
7.12 Weseegreat force inthisargument. Wedonot,however, seeourreview asasubstitute for
theproceedings conducted bynational investigating authorities orbytheTMB. Rather, inourview,
thePanel 'sfunction should betoassess objectively thereview conducted bythenational investigating
authority, inthiscasetheCITA. Wedraw particular attention tothefactthataseries ofpanel reports
intheanti-dumping andsubsidies/countervailing duties context have made itclear thatitisnotthe
roleofpanels toengage inadenovo review.16Inourview, thesame istrueforpanels operating in
thecontext oftheATC, since they would becalled upon, asinthecontext ofcases dealing with anti-
dumpingand/orsubsidies/countervailingduties,toreviewtheconsistencyofadeterminationbyanational
investigating authority imposing arestriction under therelevant provisions oftherelevant WTO legal
instruments, inthiscase theATC. Inourview, thetaskofthePanel istoexamine theconsistency
oftheUSaction with theinternational obligations oftheUnited States, andnottheconsistency ofthe
USaction with theUSdomestic statute implementing theinternational obligations oftheUnited States.
Consequently, theATC constitutes, inourview, therelevant legal framework inthismatter.
7.13 Wehave therefore decided, inaccordance with Article 11oftheDSU, tomake anobjective
assessment oftheStatement issued bytheUSauthorities on23March 1995 (the"March Statement)
which, astheparties tothedispute agreed, constitutes thescope ofthematter properly before thePanel
without, however, engaging inadenovo review.17Inourview, anobjective assessment would entail
anexamination ofwhether theCITA hadexamined allrelevant facts before it(including facts which
might detract from anaffirmative determination inaccordance with thesecond sentence ofArticle 6.2
oftheATC), whether adequate explanation hadbeen provided ofhow thefacts asawhole supported
thedetermination made, and, consequently, whether thedetermination made wasconsistent with the
international obligations oftheUnited States.18Wenote inthisrespect, thatinresponse toaquestion
bythePanel, theUnited States argued thatthePanel hadtoexamine whether thedomestic authorities
hadbased their determination onanexamination offactors required bytheATC andwhether thebasis
16Seethepanel reports on"Korea -Anti-Dumping Duties onImports ofPolyacetal Resins from the
United States", adopted on27April 1993, BISD 40S/205; "United States -Imposition ofAnti-Dumping Duties
onImports ofFresh andChilled Atlantic Salmon from Norway", adopted on27April 1994; "United States -
Initiation ofaCountervailing Duty Investigation intoSoftwood Lumber Products from Canada", adopted on
3June 1987, BISD 34S/194.
17Adenovo review, ifatall,istobeconducted bytheTMB. Article 8.3oftheATC reads asfollows:
"The TMB...shall relyonnotifications andinformation supplied bytheMembers under therelevant Articles
oftheAgreement, supplemented byanyadditional information ornecessary details they may submit oritmay
decide toseek from them". Article 8.5oftheATC calls fora"thorough andprompt" review ofthematter by
theTMB.
18This approach islargely consistent with theapproach adopted bythepanel reports cited infootnote 16,
although itshould bepointed outthatthestandard ofreview wasexpressed inslightly different terms ineach
oftheaforementioned panel reports.WT/DS24/R
Page 74
forthedetermination wasadequately explained. IntheUSview, such anapproach wascompatible
with thestandard ofreview adopted inthe"Fur FeltHat" case.19
Burden ofProof
7.14 Theparties tothedispute have divergent views onthequestion ofburden ofproof. TheUnited
States essentially argues thatitisnotitsduty tore-establish theconsistency oftherestriction with the
relevant rules oftheATC, since ithasalready established thatintheMarch Statement. Costa Rica,
ontheother hand, insists thatinaccordance with Article 6.2and6.4oftheATC, itisincumbent upon
theUnited States toestablish tothePanel 'ssatisfaction thattheconditions required before imposing
arestriction have infactbeen met.
7.15 Werecall inthiscontext thatoneofthecentral elements oftheATC istheprohibition, in
principle, forMembers tohave recourse toanynewrestrictions beyond those notified under Article 2.1
oftheATC. Article 2.4oftheATC reads asfollows:
"...No new restrictions interms ofproducts orMembers shall beintroduced except
under theprovisions ofthisAgreement orrelevant GATT 1994 provisions" (emphasis
added).
Wefurther note thatArticle 6.2oftheATC reads asfollows:
"Safeguard action maybetaken under thisArticle when, onthebasis ofadetermination
byaMember, itisdemonstrated that..." (emphasis added).
7.16 Inourview, Article 6oftheATC isanexception totheruleofArticle 2.4oftheATC. It
isageneral principle oflaw, well-established bypanels inprior GATT practice, thattheparty which
invokes anexception inorder tojustify itsaction carries theburden ofproof thatithasfulfilled the
conditions forinvoking theexception. Consequently, inourview, itisuptotheUnited States to
demonstrate thatithadfulfilled therequirements contained inArticle 6.2and6.4oftheATC inthe
March Statement which, astheparties tothedispute agreed, constitutes thescope ofthematter properly
before thePanel.
The Interpretation oftheATC
7.17 Article 3.2oftheDSU requires panels tointerpret thecovered agreements "inaccordance with
customary rules ofinterpretation ofpublic international law". Thecustomary rules ofinterpretation
ofpublic international lawareembodied inthetextoftheVienna Convention ontheLaw ofTreaties
(VCLT).20
Article 31.1 oftheVCLT reads:
"Atreaty shall beinterpreted ingood faith inaccordance with theordinary meaning
tobegiven totheterms ofthetreaty intheir context andinthelight ofitsobject and
purpose".
19See paragraph 5.45 above.
20SeetheAppellateBodyDecisionon"UnitedStates-StandardsforReformulatedandConventionalGasoline"
(WT/DS2/AB/R).WT/DS24/R
Page 75
7.18 First, wepayattention tothephrase "ordinary meaning tobegiven totheterms ofthetreaty
intheir context". Thereason why, inourview, particular attention ispaid tothecontext issimply
thattheterms ofatreaty should notbeinterpreted inisolation, butintheir particular context inthe
entire agreement. Werecall thatArticle 31.2 oftheVCLT expressly defines thecontext ofthetreaty
toinclude thetext. Thus, itisclear thattheentire textoftheATC isrelevant inorder tointerpret
Article 6.2to6.4oftheATC.
7.19 Second, theoverall purpose oftheATC istointegrate thetextiles andclothing sector into
GATT 1994. Article 1oftheATC makes thispoint clear. Tothiseffect, theATC requires notification
ofallexisting quantitative restrictions (Article 2oftheATC) andprovides thatthey willhave tobe
terminated bytheyear 2004 (Article 9oftheATC). TheATC allows adoption ofnew restrictions
inaddition tothose notified under Article 2oftheATC forproducts notyetintegrated intoGATT 1994
pursuant toArticle 2.6to2.8oftheATC only exceptionally andinaccordance with therelevant
provisions oftheATC orinaccordance with therelevant provisions ofGATT 1994. Article 2.4of
theATC reads:
"...No new restrictions interms ofproducts orMembers shall beintroduced except
under theprovisions ofthisAgreement orrelevant GATT 1994 provisions" (emphasis
added).21
Theexceptional nature ofthese restrictions isconfirmed bythewording ofArticle 6.1oftheATC
which reads asfollows:
"...The transitional safeguard should beapplied assparingly aspossible, consistently
with theprovisions ofthisArticle andtheeffective implementation oftheintegration
process under thisAgreement" (emphasis added).
7.20 Finally, werecall thattherelevant provisions have tobeinterpreted ingood faith. Based upon
thewording, thecontext andtheoverall purpose oftheAgreement, exporting Members canlegitimately
expect thattransitional safeguards, adopted under Article 6oftheATC, would onlybeapplied sparingly
inorder toserve thenarrow purpose ofprotecting domestic producers oflikeand/or directly competitive
products. Exporting Members can, inother words, legitimately expect that market access and
investments made would notbefrustrated byimporting Members taking improper recourse tosuch
action.
7.21 Weconclude from theinterpretation ofthese provisions inthelight ofArticle 31oftheVCLT
thatrecourse totransitional safeguards should betaken onanexceptional basis only. Consequently,
inourview, Article 6oftheATC should beinterpreted narrowly. This conclusion isconsistent with
thepastpractice ofGATT panels.22
21Wenote thatafootnote toArticle 2.4oftheATC reads asfollows: "The relevant GATT 1994 provisions
shall notinclude Article XIX inrespect ofproducts notyetintegrated intoGATT 1994, except asspecifically
provided inparagraph 3oftheAnnex".
22Seethepanel reports on"Canada -Administration oftheForeign Investment Review Act(FIRA)", adopted
on7February 1984, BISD 30S/140; "United States -Customs User Fee", adopted on2February 1988, BISD
35S/245; "Japan -Restrictions onImports ofCertain Agricultural Products", adopted on22March 1988, BISD
35S/163; "European Economic Community -Restrictions onImports ofDessert Apples", Complaint byChile,
adopted on22June 1989, BISD 36S/93; "Canada -Import Restrictions onIceCream andYogurt", adopted on
5December 1989, BISD 36S/68; "European Economic Community -Regulation onImports ofParts and
Components", adopted on16May 1990, BISD 37S/132; "United States -Countervailing Duties onFresh, Chilled
andFrozen Pork from Canada", adopted on11July1991, BISD 38S/30; "United States -Definition ofIndustry
(continued...)WT/DS24/R
Page 76
The Structure ofArticle 6oftheATC
7.22 Article 6.2oftheATC conditions theapplication ofatransitional safeguard onafinding that
aproduct isbeing imported insuch increased quantities soastocause serious damage, oractual threat
thereof, tothedomestic industry producing likeand/or directly competitive products. Article 6.2of
theATC reads asfollows:
"Safeguard action maybetaken under thisArticle when, onthebasis ofadetermination
byaMember, itisdemonstrated thataparticular product isbeing imported intoits
territory insuchincreased quantities astocause serious damage, oractual threat thereof,
tothedomestic industry producing likeand/or directly competitive products. Serious
damageoractualthreatthereofmustdemonstrablybecausedbysuchincreasedquantities
intotal imports ofthatproduct andnotbysuch other facts astechnological changes
orchanges inconsumer preference".
Article 6.3oftheATC contains anindicative listofeconomic variables thatcanbetaken intoaccount
inorder toassess theserious damage oractual threat thereof. After having satisfied theconditions
ofArticle 6.2oftheATC, Members must attribute theserious damage oractual threat thereof toa
particularMemberorMembers,since,inaccordancewithArticle6.4oftheATC,transitionalsafeguards
"shall beapplied onaMember-by-Member basis". Article 6.4oftheATC reads asfollows:
"Any measure invoked pursuant totheprovisions ofthisArticle shall beapplied on
aMember-by-Member basis. TheMember orMembers towhom serious damage,
oractual threat thereof, referred toinparagraphs 2and3,isattributed, shall be
determined onthebasis ofasharp andsubstantial increase inimports, actual or
imminent23,from such aMember orMembers individually, andonthebasis ofthe
level ofimports ascompared withimports from other sources, market share, andimport
anddomestic prices atacomparable stage ofcommercial transaction; none ofthese
factors, either alone orcombined with other factors, cannecessarily give decisive
guidance. Such safeguard measure shall notbeapplied totheexports ofanyMember
whose exports oftheparticular product arealready under restraint under this
Agreement."
7.23 Theoverall purpose ofArticle 6oftheATC istogive Members thepossibility toadopt new
restrictions onproducts notalready integrated intoGATT 1994 pursuant toArticle 2.6to2.8ofthe
ATC andnotunder existing restrictions, i.e., notnotified under Article 2.1oftheATC. Article 6
oftheATC, inourview, establishes athree-step approach which hastobefollowed foranewrestriction
tobeimposed. Articles 6.2and6.4oftheATC constitute thefirsttwosteps which, taken together,
amount toadetermination thatserious damage hasoccurred orisactually threatening tooccur and
thatitmay beattributed toasharp andsubstantial increase inimports from aparticular Member or
Members: Noaction canbetaken onthebasis ofArticle 6.2alone.
7.24 Adetermination under Article 6.2oftheATC is,therefore, anecessary butnotsufficient
condition tohave recourse tobilateral consultations under Article 6.7oftheATC. Only when serious
22(...continued)
Concerning Wine andGrape Products", adopted on28April 1992, BISD 39S/436; "United States -Measures
Affecting Alcoholic andMalt Beverages", adopted on19June 1992, BISD 39S/206.
23Footnote 6accompanying thistextreads: "Such animminent increase shall beameasurable oneandshall
notbedetermined toexist onthebasis ofallegation, conjecture ormere possibility arising, forexample, from
theexistence ofproduction capacity intheexporting Members".WT/DS24/R
Page 77
damage oractual threat thereof hasbeen demonstrated under Article 6.2andhasbeen attributed to
aparticular Member orMembers under Article 6.4oftheATC, canrecourse toArticle 6.7ofthe
ATC bemade inaway consistent with theprovisions oftheATC.
C. REVIEW OFTHE FINDINGS BYTHE USINVESTIGATING AUTHORITIES ON
SERIOUS DAMAGE ATTRIBUTABLE TOCOSTA RICAN IMPORTS
7.25 Wenow turntoanexamination ofCosta Rica'sbasic claim: thattheUnited States imposed
restrictions onimports ofunderwear intotheUnited States without having demonstrated, asrequired
byArticle 6.2and6.4oftheATC, thattheUSunderwear industry suffered serious damage from Costa
Rican imports. Wefirstdiscuss thescope ofthematter before us,i.e., theinformation thatwewill
consider inourexamination ofCosta Rica'sclaim. Wethen undertake anobjective assessment of
theUSaction anditsconformity with theATC inaccordance with thestandard ofreview setoutabove.
Inthisrespect, wewillexamine thedetermination bytheUnited States inrespect of(i)whether the
USindustry suffered serious damage, (ii)thecause oftheserious damage and(iii)theattribution of
serious damage toCosta Rican imports.
The Scope oftheMatter
7.26 Weagree with theparties tothedispute thatweshould restrict ourreview toanexamination
oftheMarch Statement. Webelieve thatstatements subsequent totheMarch Statement should not
beviewed asalegally independent basis forestablishing serious damage oractual threat thereof in
thepresent case. Arestriction may beimposed, inamanner consistent with Article 6oftheATC,
when based onadetermination made inaccordance with theprocedure embodied inArticle 6.2and
6.4oftheATC. This isprecisely therole that theMarch Statement iscalled upon toplay.
Consequently, toreview thealleged inconsistency oftheUSaction with theATC, wemust focus our
legal analysis ontheMarch Statement astherelevant legal basis forthesafeguard action taken bythe
United States.
7.27 Costa Rica submitted tothePanel information concerning thebilateral negotiations thattook
place between Costa Rica andtheUnited States before andafter theimposition oftherestriction. More
specifically, Costa Rica submitted information relating tosettlement offers made bytheUnited States
concerning thelevel oftherestriction tobeimposed. Inthisrespect, wenote thatArticle 4.6ofthe
DSU reads asfollows:
"Consultations shall beconfidential, andwithout prejudice totherights ofanyMember
inanyfurther proceedings."
Inourview, thewording ofArticle 4.6oftheDSU makes itclear thatoffers made inthecontext of
consultations are,incase amutually agreed solution isnotreached, ofnolegal consequence tothe
later stages ofdispute settlement, asfarastherights oftheparties tothedispute areconcerned.
Consequently, wewillnotbase ourfindings onsuch information.
Serious Damage
7.28 Article 6.2oftheATC authorizes safeguard action following ademonstration thataparticular
productisbeingimportedinsuchincreasedquantitiesastocauseseriousdamage,oractualthreatthereof,
tothedomestic industry. Thefactors thatshould betaken intoaccount inorder toestablish serious
damage arelisted inArticle 6.3oftheATC, which reads asfollows:
"Inmaking adetermination ofserious damage, oractual threat thereof, asreferred
toinparagraph 2,theMember shall examine theeffect ofthose imports onthestate
oftheparticular industry, asreflected inchanges insuch relevant economic variablesWT/DS24/R
Page 78
asoutput,productivity,utilizationofcapacity,inventories,marketshare,exports,wages,
employment, domestic prices, profits andinvestment; none ofwhich, either alone or
combined withother factors, cannecessarily givedecisive guidance "(emphasis added).
TheUnited States determination inthisregard iscontained intheMarch Statement.
7.29 TheMarch Statement included under theheading "Market Situation" onesub-heading entitled
"Serious Damage totheDomestic Industry" (sub-heading A),which contained general information
about theeffect ofunderwear imports inCategory 352/652, andasecond sub-heading "Industry
Statements" (sub-heading B),which summarized statements totheUSauthorities byindividual US
companies. Tosome extent, there wasanoverlap between theinformation contained under thetwo
sub-headings. Thesame categories ofinformation were equally discussed inastatement submitted
totheTMB bytheUnited States inJuly1995 (the" JulyStatement"). While wehave concluded that
theJulyStatement should notbeviewed asalegally independent basis forestablishing serious damage
oractual threat thereof, wefeelthatwecanlegitimately taketheJulyStatement intoaccount asevidence
submitted bytheUnited States inourassessment oftheoverall accuracy oftheMarch Statement.
Consequently, wewillusetheJulyStatement forthislimited purpose only. Bydoing so,wedonot
share theconcerns expressed bytheUnited States thatsuch useoftheJuly Statement would impair
proceedings intheTMB inthefuture. Weconsider thatareluctance tosubmit updated information
would normally adversely affect Members concerned. The interest tocooperate asrequired by
Articles 6.7and6.9oftheATC would prevail.
7.30 Inthefollowing paragraphs, weevaluate theinformation intheMarch Statement inlight of
theeconomic variables listed inArticle 6.3oftheATC, totheextent andintheorder thatthey were
raised intheMarch Statement.
Overview
7.31 TheMarch Statement under theheading "Industry Profile" refers to395establishments that
manufacture cotton andman-made fibre underwear, while theJulyStatement under thesame heading
refers to"approximately 302establishments". Inourview, thisbasic andsubstantial inconsistency
concerning thescope ofthedomestic industry raises serious questions about theaccuracy ofthe
information contained intheMarch Statement andtheconclusion thatserious damage exists.
Output (USProduction)
7.32 The March Statement contains general information ontheevolution ofUSproduction of
underwear. Inthisconnection, however, Costa Rica argues thattheUSrestriction wasintroduced
toprotect theUSfabric-producing industry andnottheUSunderwear industry. Weseetwoaspects
tothisargument. First, thisargument may beviewed asaclaim thattheUnited States hadnot
demonstrated theexistence ofserious damage totheUSdomestic industry producing products that
were likeand/or directly competitive with products imported from Costa Rica (i.e., underwear). In
thisconnection, wedonotseeanywhere intheMarch Statement where fabric producers were treated
asthedomestic industry. Rather, theStatement consistently refers totheindustry thatmanufactures
"cotton andman-made fibre underwear", which isthesubject oftherestriction inquestion. Thestatistics
allpurport torelate tothatindustry. Thus, theclaim byCosta Rica would seem tolackafactual basis.
7.33 There is,however, asecond aspect toCosta Rica'sargument. Theparties agree thattheindustry
situation within theUnited Sates isdifferent between those manufacturers thatproduce underwear in
atotally domestic process andthose thatutilize theoutward processing regime ("807 or807A trade").
Themanufacturers inthelatter category areengaged inthecutting process, while assembly ofthecut
pieces iscontracted outtooverseas manufacturers andthen thefinished products arere-imported by
theUSmanufacturers forsaleintheUSmarket. Itisquite possible thatinthecaseofincreased importsWT/DS24/R
Page 79
damage could occur tomanufacturers intheformer category, while those inthelatter category could
seetheir position improve. TheMarch Statement contains nobreakdown oftheeffect ofimports on
these twocomponents oftheUSindustry. That such ananalysis would have been appropriate is
indirectly confirmed bystatements oftheUnited States, which recognize thatthenature oftheeffect
of807or807A trade onthedomestic industry could besignificantly different thannon807/807A trade
(paragraph 5.158).
7.34 Finally, wewould note thatthegeneral statistics ondeclining production ofunderwear only
weaklysupportademonstrationofseriousdamage.Forexample,ifthosefirmswithdecliningunderwear
production shifted their capacity toother products (seebelow under "Utilization ofCapacity", where
thisisreported asoccurring), then itisquite possible thatneither thefirms northeir workers would
beseriously damaged. This uncertainty about therelation ofproduction declines toserious damage
arises because ofthelimited statistics andcursory analysis contained intheMarch Statement.
Market Share (Market Share Loss/Import Penetration)
7.35 The March Statement contains general information onthemarket share ofUSunderwear
producers andonimport penetration levels. Asnoted inthepreceding paragraph, however, thefailure
oftheMarch Statement toanalyze theextent of807or807A trade detracts from itsconclusion that
serious damage wascaused bytheincrease inimports.
7.36 With respect totheUSanalysis ofimports, Costa Rica argues thevolume ofimportation is
overstated because 807/807A trade should notbecounted asimports bytheUnited States. Wedisagree
withthisassertion. Article 6.6(d) oftheATC clearly acknowledges thepossibility thatMembers might
impose restrictions onre-imports "asdefined bythelaws andpractices oftheimporting Member".
According totheUnited States, 807/807A trade isconsidered asre-imports. Consequently, the
United States could consider 807and807A trade originating inCosta Rica initsanalysis ofwhether
theUSunderwear industry hadsuffered serious damage andcould impose arestraint onsuch trade,
provided thattherestoftheconditions ofArticle 6oftheATC were met.
Employment
7.37 With respect to"Employment", theMarch Statement reads asfollows:
"Employment intheUScotton andman-made fibre underwear industry dropped from
46,377 production workers in1992 to44,056 workers in1994, afivepercent decline
andalossof2,321 employees".
Thesame heading intheJuly Statement reads asfollows:
"Employment intheUScotton andman-made fibre underwear industry dropped from
35,191 production workers in1992 to33,309 workers in1994, afivepercent decline
andalossof1,882 employees".
Aswenoted inrespect ofthegeneral industry description discussed above, theextent ofthediscrepancy
between thestatistics intheMarch andJulyStatements, which purported tocover thesame time period,
raises questions about theaccuracy oftheinformation contained intheMarch Statement. This concern
wasnotalleviated bytheindustry statement insub-heading Bsince information astoemployment was
obtained from only twocompanies outofthemore than 300establishments intheindustry, ofwhich
only onewasapparently suffering damage. TheMarch Statement reads inthisrespect asfollows:
"...onecompany reported thatemployees were alsobeing transferred toproduction
ofother types ofgarments. Employment losses have alsooccurred because ofimport-WT/DS24/R
Page 80
related plant closing. Acompany thathasalready closed twoplants employing 165
workers isanticipating twoadditional closures in1995 representing total employment
ofabout 400".
Man-Hours
7.38 Under theheading "Man-Hours", theMarch Statement reads asfollows:
"Averageannualman-hoursdroppedfrom86.2millionin1992to81.5millionin1994,
afivepercent decline."
Thesame heading intheJuly Statement reads asfollows:
"Average annual man-hours worked dropped from 65.4 million in1992 to61.6 million
in1994, asixpercent decline."
Inourview, asexpressed above, theextent ofthediscrepancy intheinformation included inthetwo
statements casts doubts astothesufficient accuracy ofthedata included intheMarch Statement.
Sales
7.39 TheMarch Statement reads asfollows:
"Sales have slowed, andonecompany reported thattheir sales were down about
17percent in1994".
Theinformation ononly onecompany, however, does notsuffice, inourview, tosupport thegeneral
statement thatsales have slowed.
Profits
7.40 TheMarch Statement reads asfollows:
"Profits were down 18percentatonefirm, andthere ispressure onthebottom line
throughout theindustry duetorising costs andstiffimport competition".
Again, information ononly onecompany does notsuffice, inourview, tosupport thegeneral statement
thatprofits were under "pressure" (whatever thatmay mean) generally.
Investment
7.41 TheMarch Statement reads asfollows:
"Because oftheimpact ofimports andtheuncertainty theyhave caused inthemarket,
UScompanies generally have been postponing investment inthisindustry. Some
companieshaveclosedplantspermanentlyorshiftedproductionoff-shore,andadditional
disinvestment ofthisnature isbeing contemplated byunderwear manufacturing firms".
Inourview, theinformation contained inthisstatement isnotsufficiently conclusive. Wefailtosee,
forreasons discussed above (paragraph 7.34), asufficient causal linkbetween imports and"postponing
investment" intheUSindustry. Moreover, thesecond sentence ofthisstatement isindefinite ("some
companies")andmerelyspeculative("isbeingcontemplated")andcannotsupportanydefiniteconclusionWT/DS24/R
Page 81
onthereasons why investment were slowing down intheUnited States. Finally, wenote theabsence
ofanystatistics on,oranalysis of,theevolution ofinvestment intheUSindustry.
Utilization ofCapacity
7.42 TheMarch Statement reads asfollows:
"Because oftheimport competition, firms report shifting production capacity toother
product lines including outerwear".
Again, thestatement isvague asnoquantification isgiven. Moreover, itisnotclear thatashift of
production, asopposed toadecline, would support thedetermination ofserious damage inanyevent.
Prices
7.43 TheMarch Statement indicates thattheUSproducers 'average price was$30.00 perdozen
in1994, while theJulyStatement indicates thattheaverage USprice was$20.00 perdozen. Theextent
ofthisdiscrepancy between theMarch andJulyStatements raises serious questions about theaccuracy
oftheinformation contained intheMarch Statement.
7.44 Inaddition, inrespect of"Prices", theMarch Statement reads asfollows:
"Import prices inthese sectors have been very lowwhich hasplaced considerable
pressure ondomestic producers:
(a) Raw cotton costs intheUnited States have increased substantially, seriously
eroding USunderwear producers 'margins. These costincreases have notbeen
recouped because prices cannot beraised without becoming uncompetitive with
imports.
(b) Competing imports enjoy aprice edge over domestically produced goods
because theimports areproduced with lower priced foreign fabric which often
reflects asubsidized cotton price. Asaresult oftheincreased import market
share inunderwear, average retail prices ofunderwear intheUnited States
have generally declined during thepast two years atatime when US
manufacturers 'costs, particularly forrawcotton, have increased substantially.
This development hasseriously eroded theprofitability ofUSunderwear
manufacturing".
Itcould beargued thatpoints (a)and(b)show thatthedamage totheUSindustry wasnotdueonly
toimports, butalsotoincreases intheUSprice forrawcotton. Therelative importance ofthese two
causes isnotanalyzed. There is,forexample, nodiscussion ofwhy UScotton prices increased and,
more tothepoint, whether theprice increases areexpected tocontinue ineffect. Moreover, tothe
extent thatimports are807A trade, theincrease incotton prices would bereflected intheir prices as
well, buthere again there wasnoconsideration of807A trade inrespect ofthisitem. Finally, wefind
thattheconclusion thatprofitability hasbeen "seriously eroded" isnotsufficiently precise toserve
asabasis forestablishing serious damage.
7.45 Inconclusion, inourview, theinformation submitted intheMarch Statement under theheading
"Market Situation" suffers from twoimportant weaknesses: theinformation insome cases isinconsistent
with other information later submitted bytheUnited States totheTMB andinother cases isinadequate
todemonstrate serious damage totheUSindustry. This latter problem isgenerally trueinrespect
oftheinformationsuppliedbyspecificcompaniesinsub-headingB,wheretheMarchStatementtypicallyWT/DS24/R
Page 82
refers toonly oneortwocompanies ofindeterminate sizeormarket share outofanindustry consisting
of395establishments. Moreover, while there aregeneral statistics ondeclines inproduction andmarket
share, there isnoinformation atallonthegeneral state andperformance oftheUSunderwear industry.
Forexample, thediscussion ofprofits intheindustry refers toonly onecompany. Inthisconnection
generally, wenote thattheTMB, initsmore fact-intensive review inaccordance with Article 8.3of
theATC, hasbyconsensus concluded inthiscase thatthere wasabsence ofserious damage caused
totheUSindustry. Theweaknesses intheMarch Statement thatarediscussed above raise considerable
doubts astowhether serious damage hasbeen demonstrated. However, werefrain from making a
finding onthispoint oflaw. Thefactors listed inArticle 6.3oftheATC donotprovide sufficient
andexclusive guidance inthiscase. Weare,therefore, notinaposition toconclude thattheUnited
States hasfailed todemonstrate serious damage oractual threat thereof.
Causality
7.46 Inaddition toestablishing serious damage oractual threat thereof, theUnited States wasrequired
todemonstrate thatsuch damage orthreat wascaused byimports. Article 6.2oftheATC, second
sentence, reads asfollows:
"Serious damage oractual threat thereof must demonstrably becaused bysuchincreased
quantities intotal imports ofthatproduct andnotbysuch other factors astechnological
changes orchanges inconsumer preference" (emphasis added).
Nowhere intheMarch Statement could wefindadiscussion ordemonstration ofcausality asrequired
under thisprovision, beyond themere statement thattheimports were responsible forthedamage.
Thisassertion isinadequate, inourview, because ofspecial factors affecting trade inunderwear between
theUnited States andanumber ofexporting Members including Costa Rica. (Asnoted above, most
ofthistrade with Costa Rica --atleast 94percent--isapparently 807or807A trade.) While such
trade may certainly cause damage tothedomestic industry, thenature ofthetrade issuch thatitmay
benefit thedomestic firms thatparticipate init(seeparagraph 7.44). Thus, inadiscussion ofwhether
such trade hascaused serious damage, itisnecessary tolook atthistrade todetermine itseffects on
theindustry. Because ofthenature ofthetrade itisnotpossible inthese circumstances toconclude
from thesimple factthatthere hasbeen afallinproduction thatthere hasalsobeen serious damage.
TheMarch Statement undertakes nosuch discussion. Moreover, theMarch Statement suggests other
possible causes ofserious damage, such asrising cotton prices (seeparagraph 7.44), butdoes not
consider their role asacause ofsuch damage. Thus, itcannot besaid thattheMarch Statement
"demonstrably" shows thatserious damage wascaused byincreased levels ofimports. Wefind,
therefore, thatanobjective assessment oftheMarch Statement leads totheconclusion thattheUnited
States failed tocomply with itsobligations under Article 6.2oftheATC byimposing arestriction
onimports ofCosta Rican underwear without adequately demonstrating thatincreased imports had
caused serious damage.
Attribution ofSerious Damage toCosta Rica
7.47 Wenowturntotheissue ofwhether theMarch Statement adequately attributed serious damage
toCosta Rica. Article 6.4oftheATC requires theattribution ofserious damage, oractual threat thereof,
toaMember orMembers before their imports mayberestricted. This alsoraises anissue ofcausality
since attribution results inadirect linkage being drawn between exports from aparticular Member
orMembers andserious damage tothedomestic industry oftheimporting Member. Thequestion
facing theCITA inthepresent case waswhether Costa Rican exports contributed toserious damage
intheUSdomestic industry. Since theUSauthorities have attributed serious damage inthepresent
casetoimports from Costa Rica, allofthedeficiencies with respect totheanalysis ofserious damage
andcausality thataredetailed inthepreceding sections arerelevant totheanalysis under Article 6.4
oftheATC.WT/DS24/R
Page 83
7.48 With respect toserious damage attributed toimports from Costa Rica, theMarch Statement
reads asfollows:
"The sharp andsubstantial increase oflowpriced imports from Costa Rica iscausing
serious damage totheUSdomestic industry producing cotton andman-made fibre
underwear.
"USimports ofcotton andman-made fibre underwear, Category 352/652, from Costa
Rica reached 14,423,178 dozen in1994, 22percent above the11,844,331 dozen
imported in1993 and61percent above its1992 level.
"US imports ofcotton andman-made fibre underwear, from Costa Rica inCategory
352/652, entered theUSatanaverage landed duty-paid value of$9.39 perdozen,
69percent below U.S. producers 'average price forcotton andman-made fibre
underwear.
"Costa Rica isthenumber twosupplier ofCategory 352/652 imports with 15percent
oftotal USimports ofCategory 352/652 in1994. Category 352/652 imports from
Costa Rica were equivalent to8.8percentofUSproduction ofCategory 352/652 in
theyear ending September 1994."
7.49 Article 6.4oftheATC requires thattheattribution ofserious damage toindividual Members
bemade onthebasis of"asharp andsubstantial increase inimports" andonthebasis of"the level
ofimports compared with imports from other sources, market share andimport anddomestic prices
...".While there hasbeen asignificant increase inimports ofunderwear from Costa Rica, wewould
note inoverview thattheposition ofCosta Rica inrespect ofeach ofthese factors isnotsignificantly
different from thatoftheother fiveexporting Members considered intheMarch Statement andthat
theMarch Statement undertakes nocomparative assessment ofimports from Costa Rica andthose five
exporting Members.
7.50 Inouranalysis ofwhether theUSauthorities appropriately attributed serious damage toCosta
Rican imports, wepayparticular attention tothefactthatimports intotheUnited States from Costa
Ricahadreached14,423,178dozenin1994,anincreaseof22percentduringtheperiodofinvestigation.
However, wealsonotethefollowing facts: Therestraint wasimposed onCosta Rica on23June 1995;
Bilateral agreements were concluded with Colombia on27June 1995, with theDominican Republic
on25June 1995 andwithElSalvador on6July1995; Later, agreements were concluded with Honduras
on15September 1995 andwith Turkey on19July 1995. TheUnited States imposed therestraint
onunderwear imports from Costa Rica while, during theperiod thatimmediately ensued, itreached
agreement with fiveother exporters onquotas of170,305,774 dozen, anincrease of478percent
compared totheactual exports from these countries during theperiod ofinvestigation.
7.51 Thus, taking intoaccount theUSagreements with itsother suppliers andthestatement bythe
United States thatgoods imported under 807A arenotregarded aslessdamaging than non-GAL 807
andother imports (paragraph 5.159), wecannot reconcile theUSrestriction onimports from Costa
Rica with therequirements ofattribution under Article 6.4oftheATC. More specifically, inlight
ofthepurpose ofArticle 6,wefindthattheUnited States cannot enter intoagreements permitting
imports of170,305,774 dozen units ofaproduct (anincrease of478percentover thencurrent import
levels) andatthesame time claim thatimports of14,423,178 dozen units (anincrease of22percent
over thencurrent import levels) arecontributing toserious damage. Inthisregard, werecall theTMB 's
consensus conclusion thattheUnited States hadnotdemonstrated thatimports were causing serious
damage totheUSunderwear industry. Wefindtherefore thatanobjective assessment oftheMarch
Statement leads totheconclusion thattheUnited States failed tocomply with itsobligations underWT/DS24/R
Page 84
Article 6.4oftheATC byimposing arestriction onimports ofCosta Rican underwear without making
anadequate attribution ofserious damage tosuch imports.24
7.52 Inlight of(i)thefactthatrestrictions under Article 6oftheATC aretobeapplied only
sparingly, (ii)thefactthattheUnited States hastheburden ofproving thatithascomplied with the
requirements ofArticle 6oftheATC, (iii)thedeficiencies detailed above inrespect oftheevidence
ontheexistence ofserious damage, which raise serious questions inourview astowhether there was
serious damage shown under Article 6.2atall,(iv)thefactthattheUnited States failed todemonstrate
adequately thatthecause ofserious damage was imports, and(v)thefactthattheUnited States
voluntarily agreed toaccept import limits from other countries exporting underwear totheUnited States
thatpermitted increases over their current export levels thatwere farinexcess ofCosta Rica'sexport
levels totheUnited States, weconclude thattheUnited States failed todemonstrate adequately inthe
March Statement thatitsdomestic industry suffered serious damage thatcould beattributed toCosta
Rican imports andthus, byimposing import restrictions onimports ofCosta Rican underwear, the
United States failed tocomply with itsobligations under Article 6.2and6.4oftheATC.
D. ACTUAL THREAT OFSERIOUS DAMAGE
7.53 Wenextturntoaquestion related tothescope ofCosta Rica'sbasic claim: Whether theMarch
Statement contained afinding onactual threat ofserious damage.
7.54 TheUnited States argued before thePanel thattheMarch Statement supports afinding onactual
threat. Wenote thattheMarch Statement contains noreference toactual threat; thefindings included
related exclusively toserious damage. Werecall, however, thattheparties tothedispute agreed that
theDiplomatic Note thatwashanded toCosta Rica along with theMarch Statement made reference
toactual threat ofserious damage.
7.55 Article 6.2and6.4oftheATC make reference to"serious damage, oractual threat thereof".
Theword "thereof", inourview, clearly refers to"serious damage". Theword "or" distinguishes
between"seriousdamage"and"actualthreatthereof".Inourview,"seriousdamage"referstoasituation
thathasalready occurred, whereas "actual threat ofserious damage" refers toasituation existing at
present which might leadtoserious damage inthefuture. Consequently, inourview, afinding on
"serious damage" requires theparty thattakes action todemonstrate thatdamage hasalready occurred,
whereas afinding on"actual threat ofserious damage" requires thesame party todemonstrate that,
unless action istaken, damage willmost likely occur inthenearfuture.25TheMarch Statement contains
noelements ofsuch aprospective analysis.26Inourview, even ifthemention of"actual threat" in
24Wenote thatbythesame reasoning wecould have concluded thattheUnited States failed todemonstrate
theexistence ofserious damage intheMarch Statement asrequired byArticle 6.2oftheATC. Thefactthat
theUSunderwear industry wasabletoaccept andwithstand such ahuge inroad ofproducts from thefiveother
exporting Members suggests thatthere wasnoserious damage totheindustry inthefirstplace. However, we
feltthattheinadequacy oftheUSmeasure wasmore acutely represented intheattribution under Article 6.4,
which requires asource-specific orMember-by-Member analysis, asopposed totheanalysis oftotal imports
under Article 6.2. Seealsoourdiscussion inparagraph 7.45 above.
25Seethepanel reports on"United States -Measures Affecting Imports ofSoftwood Lumber from Canada",
adopted on27October 1993, BISD 40S/358, paras. 402, 408; "New Zealand -Imports ofElectrical Transformers
from Finland", op.cit.,para. 4.8;and"Korea -Antidumping Duties onImports ofPolyacetal Resins from the
United States", op.cit.,paras. 253, 272, 278.
26Wenotethattheonlyelemen tsthatcouldbeusedinaprospectiveanalysiswerethefollowing:insub-heading
B("Industry Statements") under "Employment", theMarch Statement reads: "Acompany ...isanticipating
(continued...)WT/DS24/R
Page 85
theDiplomatic Note accompanying theMarch Statement were tobeconsidered, thefactthattheMarch
Statement made noreference toactual threat andcontained noelements ofsuch aprospective analysis
wasdispositive perse.Consequently, wedonotagree with theUSargument thattheMarch Statement
supports afinding onactual threat ofserious damage.
E. OTHER CLAIMS
Article 6.6(d) oftheATC
7.56 Costa Rica claims thattheUnited States violated Article 6.6(d) oftheATC bynotgranting
amore favourable treatment toCosta Rican imports under "807 trade". Article 6.6(d) oftheATC
reads asfollows:
"Intheapplication ofthetransitional safeguard, particular account shall betaken of
theinterests ofexporting Members assetoutbelow:
(d) more favourable treatment shall beaccorded tore-imports byaMember of
textile andclothing products which thatMember hasexported toanother Member for
processing andsubsequent reimportation, asdefined bythelaws andpractices ofthe
importing Member, andsubject tosatisfactory control andcertification procedures,
when these products areimported from aMember forwhich thistypeoftrade represents
asignificant proportion ofitstotal exports oftextiles andclothing".
7.57 TheUnited States accepted before thePanel that"807 trade" should beconsidered are-import
according toUSlaws. Inourview, thelegal issue before usistheinterpretation oftheterm "more
favourable treatment". The"chapeau" toArticle 6.6(d) oftheATC makes itclear thatthemore
favourable treatment must begranted "intheapplication ofthetransitional safeguard" (emphasis added).
This means, inourview, thatMembers availing themselves oftheArticle 6transitional safeguard are
obliged togrant more favourable treatment tore-imports, independently ofwhether such treatment
hasbeen previously rejected bytheaffected Member during thebilateral consultations orwhether other
privileges were envisaged tobeaccorded tosuch aMember innegotiations based upon theimplemented
safeguard measure. Theterm "more favourable treatment" isnotfurther qualified intheATC. We,
therefore,rejecttheUnitedStatesargument(paragraph5.157)thattheyhadcompliedwithArticle6.6(d)
oftheATC byoffering Costa Rica enhanced access under GAL programmes during thecourse ofthe
consultations.
7.58 Costa Rica specifically argues inthisrespect thattheUnited States wasobliged togrant to
CostaRicanimportsaquantitativelymorefavourabletreatment.CostaRicaarguesthattheUnitedStates
wasobliged togrant Costa Rica aquota larger thanthatunder Article 6.8oftheATC, which provides
thataquota cannot befixed atalevel:
"lower than theactual level ofexports orimports from theMember concerned during
the12-month period terminating twomonths preceding thatmonth inwhich therequest
forconsultation wasmade".
26(...continued)
twoadditional closures in1995 representing total employment ofabout 400". Inthesame sub-heading, under
"Investment", theMarch Statement reads: "...additional disinvestment ofthisnature isbeing contemplated
byunderwear manufacturing firms". Wenote thatboth elements were used intheMarch Statement tosupport
afinding onserious damage. Even if,however, these elements were used tosupport afinding onactual threat,
they could hardly constitute adequate evidence ofactual threat ofserious damage.WT/DS24/R
Page 86
Wecannot fully share theapproach advocated byCosta Rica. Weagree with Costa Rica that
quantitatively more favourable treatment forthefullthree-year period isoneoftheoptions available
toMembers inorder tocomply with therequirements ofArticle 6.6(d) oftheATC. Wedonotconsider
it,however, tobetheonly option. Inourview, aMember could, forexample, comply with the
requirements under Article 6.6(d) oftheATC byimposing arestriction foraperiod shorter thanthree
years.
7.59 However, inourview, under Article 6.10 oftheATC, thelevel ofCosta Rican imports required
tobeadmitted totheUnited States under anArticle 6oftheATC restraint was14,423,178 dozen,
which equals theminimum level under Article 6.8. Wereach thisconclusion because ofthefollowing
tworeasons: First, intheabsence ofamutual agreement under Article 6.8, Article 6.10 authorizes
theapplication of"the" restraint. Inourview, thisreference points toArticle 6.8. Second, theabsence
ofaminimum restraint level under Article 6.10, setatthelevel specified inArticle 6.8, would
fundamentallyunderminethebalanceofrightsandobligationsbetweenexportingandimportingMembers
andanyinterest they might have toenter intonegotiations. The restriction imposed onCosta Rican
imports under theimplementing order oftheMarch Statement was14,423,178 dozen, i.e., identical
tothelevel required under Article 6.8oftheATC, anddidnotmake allowance forre-imports ina
quantitative way.27Nordoes theimplementing order make allowance forre-imports inanyother way.
We,consequently, conclude thattheUnited States hasviolated itsobligations under Article 6.6(d) of
theATC.
Obligation toconsult
7.60 Wenext examine Costa Rica'sclaim thattheUnited States violated Article 6.7oftheATC
byfailing tohold consultations onthebasis ofactual threat ofserious damage following theTMB 's
conclusion thattheexistence ofserious damage wasnotdemonstrated, since allthebilateral consultations
were based ontheMarch Statement which explicitly based itsfindings ontheexistence ofserious
damage. WenotethattheUnited States maintains thatthereference to"serious damage" intheMarch
statementwasanabbreviatedexpressionfor"seriousdamage,oractualthreatthereof"andtheDiplomatic
Note toCosta Rica making theactual request forconsultations infactreferred to"serious damage,
oractual threat thereof".
7.61 Since consultations under Article 6.7areessentially abilateral process andnoofficial records
arekept, apanel generally isnotinaposition toknow exactly what hasbeen discussed during the
consultations. However, inourview, itisunnecessary todecide whether thebasis oftheconsultations
inthepresent case was"serious damage" or"actual threat thereof", because wehave already found
thattheissue ofactual threat didnotdispose ofthisparticular dispute. Both Costa Rica andtheUnited
States agree thattheMarch Statement should bethesolebasis forthePanel toexamine thelegality
oftheUSaction, andasnoted above, inourview, theMarch Statement wasnotpredicated onand
didnotdemonstrate theexistence ofactual threat.
Date ofApplication oftheRestriction
7.62 Costa Rica argues thattheUnited States retroactively applied therestriction inviolation of
Article 6.10 oftheATC. Therestriction wasintroduced on23June 1995 foraperiod of12months
starting on27March 1995, which wasthedateoftherequest forconsultations under Article 6.7of
theATC. Although Article 6.10 oftheATC allows theimporting country to"apply therestraint,
...within 30days following the60-day period forconsultations", itissilent about theinitial datefrom
which therestraint period should becalculated. Incontrast, Article 3.5(i) oftheMultifibre Arrangement
(MFA) stated thattherestraint could beinstituted "forthetwelve-month period beginning ontheday
27SeetheImplementing Order published in60Federal Register 32653, No.121, 23June 1995.WT/DS24/R
Page 87
when therequest wasreceived bytheparticipating exporting country orcountries". Thus, thequestion
before thePanel iswhether thesilence oftheATC inthisregard should beinterpreted asprohibition
ofapractice which wasexplicitly recognized under theMFA, andifso,what should betheappropriate
date from which therestraint period istobecalculated under theATC.
7.63 Inourview, thisisnotaquestion ofretroactive application ofatreaty toevents thattook place
before theentry intoforce ofthetreaty, asenvisaged inArticle 28oftheVienna Convention onthe
Law ofTreaties (VCLT). Rather, itisatechnical question regarding theopening dateofaquota period.
7.64 Since theATC issilent onthisquestion, wewillfirstexamine howthematter istreated under
theprovisions oftheGATT 1994, which isanintegral partoftheWTO Agreement along with the
ATC. Article 1.6oftheATC states that"[u]nless otherwise provided inthisAgreement, itsprovisions
shall notaffect therights andobligations ofMembers under theprovisions oftheWTO Agreement
andtheMultilateral Trade Agreements". Members assume under theWTO certain transparency
obligations when theyimplement trade-restrictive measures. Article X:2ofGATT 1994 istherelevant
provision, which reads:
"No measure ofgeneral application taken byany[Member] effecting anadvance in
arateofduty orother charge onimports under anestablished anduniform practice,
orimposing anew ormore burdensome requirement, restriction orprohibition of
imports, oronthetransfer ofpayments therefor, shall beenforced before such measure
hasbeen officially published".
7.65 WenotethatArticle X:1ofGATT 1994, which alsousesthelanguage "ofgeneral application",
includes "administrative rulings" initsscope. The mere factthattherestraint atissue was an
administrative order does notprevent usfrom concluding thattherestraint wasameasure ofgeneral
application. Nordoes thefactthatitwasacountry-specific measure exclude thepossibility ofitbeing
ameasure ofgeneral application. If,forinstance, therestraint wasaddressed toaspecific company
orapplied toaspecific shipment, itwould nothave qualified asameasure ofgeneral application.
However, totheextent thattherestraint affects anunidentified number ofeconomic operators, including
domestic andforeign producers, wefindittobeameasure ofgeneral application.
7.66 Intheabsence ofaprovision comparable toArticle 3.5(i) oftheMFA intheATC, aMember 's
obligation under thisprovision applies intheapplication oftransitional safeguard measures fortextiles.
IfaMember setstheinitial dateofarestraint period asthedateoftherequest forconsultations, without
having officially published thecontent oftherequest forconsultations, theMember isacting inviolation
ofArticle X:2ofGATT 1994. Conversely, iftheMember haspublished thatinformation, specifying
theproposed restraint level andrestraint period, itcan,when implementing therestraint atalater time,
settheinitial dateasthedateofthepublication oftheinformation, which could bethedateoftherequest
forconsultation iftheinformation were published onthesame day.
7.67 Inthiscontext, wenote thatthePanel report onthe"Chilean Apples" case stated that"the
allocation ofback-dated quotas, thatis,quotas declared tohave been filled atthetime oftheir
announcement, didnotconform totherequirements ofArticle XIII:3(b) andArticle XIII:3 (c)"ofthe
GATT.28While weagree with thisconclusion, wenote thatthefacts aredifferent inthepresent case.
After having made therequest forconsultations on27March 1995, theUnited States published the
proposed restraint period andtherestraint level intheFederal Register on21April 1995. TheUnited
States therefore didnot"back-date" therestraint period inthewaywhich wasfound tobeinconsistent
28"EuropeanEconomicCommu nity-RestrictionsonImportsofDessertApples",ComplaintbyChile,op.cit.,
atpara. 12.26.WT/DS24/R
Page 88
inthereport on"Chilean Apples" since here itwasmade public wellbefore themeasure wasimposed
on23June 1995.
7.68 Finally, wenotetheUSargument thatifthesafeguard measure could only beapplied starting
atsome time later than thedate oftherequest forconsultations, there would beaflood ofimports
inanticipation oftheeventual restriction, which might defeat thewhole purpose ofthetransitional
safeguard measure. Wefind thisargument tobepersuasive from apractical point ofview. Inorder
toavoid such aconsequence, inourview, allthatisneeded onthepartoftheimporting country is
topublish thecontent oftherequest forconsultations immediately.
7.69 Inlight oftheforegoing, weconclude thattheprevalent practice under theMFA ofsetting
theinitial dateofarestraint period asthedateofrequest forconsultations cannot bemaintained under
theATC. However, wenotethatiftheimporting country publishes theproposed restraint period and
restraint level after therequest forconsultations, itcanlater settheinitial dateoftherestraint period
asthedateofthepublication oftheproposed restraint. Inthepresent case, theUnited States violated
itsobligations under Article X:2ofGATT 1994 andconsequently under Article 6.10 oftheATC by
setting therestraint period for12months starting on27March 1995. However, haditsettherestraint
period starting on21April 1995, which wasthedateofthepublication oftheinformation about the
request forconsultations, itwould nothave acted inconsistently withGATT 1994 ortheATC inrespect
oftherestraint period. TheUnited States argues thatitdidnot"enforce" therestraint until 23June 1995.
WenotetheUSargument. However, insofarastherestraint wasapplied toexports from Costa Rica
which hadtaken place prior tothepublication, itwasimplemented andtherefore enforced within the
meaning ofArticle X:2ofGATT 1994.29
Article 2.4oftheATC
7.70 Inourview, afinding thattheUnited States violated Article 2.4oftheATC would depend
onaprevious finding thattheUnited States violated Article 6oftheATC; conversely, afinding by
thePanel thattheUnited States acted consistently with itsobligations under Article 6oftheATC would
automatically mean thatArticle 2.4oftheATC wasnotviolated.
7.71 Wenote ourprevious conclusion thattheUnited States imposed therestriction inamanner
inconsistent with itsobligations under Articles 6.2,6.4and6.6(d) oftheATC. Inourview, theUnited
States byviolating itsobligations under Article 6oftheATC hasipso facto violated itsobligations
under Article 2.4oftheATC aswell.
Article 8oftheATC
7.72 Finally, weturn toCosta Rica'sclaim thattheUnited States violated Article 8oftheATC
byrefusing tofollow therecommendations made bytheTMB andbyfailing tosubmit areport explaining
itsinability toconform with therecommendations.
7.73 Wehave examined thecontents ofrecommendations made bytheTMB inthepresent case.
Intherelevant part ofitsreport, theTMB made thefollowing recommendations after thereview
conducted between 13and21July 1995:
"During itsreview under paragraphs 2and3ofArticle 6ofthesafeguard action taken
bytheUnitedStatesagainstimportsofcategory352/652fromCostaRicaandHonduras,
theTMB found thatserious damage, asenvisaged inthese provisions, hadnotbeen
29Asimilarconclusionwasreach edbythepanelon"EuropeanEconomicCommu nity-RestrictionsonImports
ofApples", Complaint bytheUnited States, adopted on22June 1989, BISD 36S/135, atpara. 5.23.WT/DS24/R
Page 89
demonstrated. TheTMB could not, however, reach consensus ontheexistence of
actual threat ofserious damage. TheTMB recommended thatfurther consultations
beheld between theUnited States andtheparties concerned, with aview toarriving
atamutual understanding, bearing inmind theabove, andwith dueconsideration to
theparticular features ofthiscase, aswell asequity considerations.
"These consultations shall beheld consistent with theAgreement onTextiles and
Clothing, inparticular with Articles 6and4,andbeconcluded within 30days. Parties
shall report totheTMB ontheoutcome ofsuch consultations nolater than attheend
ofthatperiod."30
7.74 Wenotethattheonly obligation theUnited States assumed under these recommendations was
tohold consultations with Costa Rica regarding thesafeguard action inquestion. TheUnited States
andCosta Rica infactheld consultations on16-17 August 1995. Therefore, weconclude thatthe
United States didnotactinconsistently with itsobligations under Article 8oftheATC.
VIII RECOMMENDATION
8.1 Costa Rica requests thePanel torecommend ifitreached theconclusion thattheUSrestriction
wasimposed inamanner inconsistent with theobligations oftheUnited States under theATC that
theUnited States withdraw theillegal act. TheUnited States essentially argues thatArticle 19.1 of
theDSU prohibits panels from recommending such aremedy.
Article 19.1 oftheDSU reads asfollows:
"Where apanel ortheAppellate Body concludes thatameasure isinconsistent with
acovered agreement, itshall recommend thatthemember concerned bring themeasure
intoconformity with thatagreement. Inaddition toitsrecommendations, thepanel
orAppellate Body maysuggest ways inwhich themember concerned could implement
therecommendations".
8.2 Under thesecond sentence ofArticle 19.1 oftheDSU, panels can, inaddition totheir
recommendations, "suggest ways inwhich the Member concerned could implement the
recommendations".
8.3 Werecall ourconclusions thattheUnited States violated itsobligations under Article 6.2and
6.4oftheATC byimposing arestriction onCosta Rican exports without having demonstrated that
serious damage oractual threat thereof wascaused bysuch imports totheUSdomestic industry and
under Article 6.6(d) oftheATC bynotgranting treatment more favourable toCosta Rican re-imports.
Wefurther recall ourconclusion thattheUnited States violated itsobligations under Article 2.4of
theATC byimposing arestriction inamanner inconsistent with itsobligations under Article 6ofthe
ATC. Wealsorecall ourconclusion thattheUnited States violated itsobligations under Article 6.10
oftheATC bysetting therestraint period starting onthedateoftherequest forconsultations, rather
than thedate ofpublication ofthatinformation. We, consequently, recommend thattheDispute
Settlement Body request theUnited States tobring themeasure challenged byCosta Ricaintocompliance
with USobligations under theATC. Wefindthatsuch compliance canbestbeachieved andfurther
nullificationandimpairmentofbenefitsaccruingtoCostaRicaundertheATCbestbeavoidedbyprompt
removal ofthemeasure inconsistent with theobligations oftheUnited States. Wefurther suggest that
theUnited States bring themeasure challenged byCosta Rica intocompliance with USobligations
under theATC byimmediately withdrawing therestriction imposed bythemeasure.
30Textiles Monitoring Body, Report oftheSecond Meeting (G/TMB/R/2), paras. 16and17.WT/DS24/R
Page 90
ANNEX MARCH 1995
STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Cotton andMan-made Fibre Underwear
Category 352/652
Table ofContents
I. Product Description
II. Industry Profile
III. Market Situation
A. Serious Damage totheDomestic Industry
1. USProduction
2. Market Share Loss
3. Import Penetration
4. Employment
5. Man-hours
B. Industry Statements
IV. Countries Contributing toSerious Damage
A. Dominican Republic
B. Costa Rica
C. Honduras
D. Thailand
E. Turkey
F. ElSalvador1
G. Colombia1
Table I. USImports From Selected Suppliers
Table II. USProduction, Imports, Market, Import/Production Ratio andDomestic Market Share
Table III. USEmployment
Table IV. Average Landed Duty-paid Value ofImports
Table V. Selected Suppliers Share ofImports andProduction
Table VI. Suppliers Report.
1Called under domestic legal authority. NotaWTO Member.WT/DS24/R
Page 91
MARCH 1995
STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Cotton andMan-made Fibre Underwear
Category 352/652
I. Product Description
Category 352/652 covers men'sandboys',andwomen 'sandgirls'underwear. Theterm
"underwear" refers togarments which areworn under other garments andarenotexposed toview
when thewearer isconventionally dressed. Men'sandboys'andwomen 'sandgirls'knitunderwear
isprovidedforinHarmonizedTariffSchedule(HTS)headings6107,6108and6109.Wovenunderwear
isprovided forinHTS headings 6207 and6208.
II. Industry Profile
There areapproximately 395establishments intheUSthatmanufacture cotton andman-made
fibre underwear, Category 352/652. Theestablishments arelocated mainly intheAtlantic seaboard
states, especially New York, Pennsylvania, North Carolina, andGeorgia. This industry employs close
to6percentofthetotal apparel workers intheUS,andtheannual shipments from these establishments
at$3.2 billion account forapproximately 5percent ofthetotal annual apparel industry shipments.
Theconcentration offirms inthisindustry ishigher inthemen'sandboys'underwear than
inthewomen 'sandgirls'.Inthemen'sandboys'segment, four firms account forover 60percent
oftheshipments. Theproduction ofwomen 'sandgirls'underwear ismore diversified, largely because
women 'sunderwear issubject tomore fashion changes. Asaresult production islessstandardized,
requiring different types ofknitting machines andagreater number ofworkers employed. There is,
however, alarge number ofsmaller producers which generally donothave integrated operations but
usually purchase fabric andthen cutandsewit.
III. Market Situation
A. Serious Damage totheDomestic Industry
Thesharp andsubstantial increase inimports ofcotton andman-made fibre underwear,
Category352/652,iscausingseriousdamagetotheUSindustryproducingcottonandman-made
fibre underwear.
Category352/652importssurgedfrom65,507,000dozenin1992to79,962,000dozen
in1993, a22percentincrease. Cotton andman-made fibre underwear, Category 352/652,
imports continued toincrease in1994, reaching 97,375,000 dozen, 22percent above the
1993 level and49percent above thelevel imported in1992 (seeTable I).
Seriousdamagetothedomesticindustryresultingfromthesharpandsubstantialincrease
inimports ofcotton andman-made fibre underwear isattributed toimports from theDominican
Republic,CostaRica,Honduras,ThailandandTurkey.2Thecombinationofhighimportlevels,
surging imports, andlow-priced goods from these countries have resulted inlossofdomestic
output, market share, investment, employment andman-hours worked.
2ElSalvador andColombia called under domestic legal authority notWTO.WT/DS24/R
Page 92
MARCH 1995
STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
1. USProduction
USproduction ofcotton andman-made fibre underwear, Category 352/652,
declined from 175,542,000 dozen in1992 to168,802,000 dozen in1993, adecline
of4percent. Production continued todecline in1994, falling to126,962,000 dozen
during thefirst nine months of1994, 4percent below January-September 1993
production level (Table II).
2. Market Share Loss
Theshare ofthismarket heldbydomestic manufacturers fellfrom 73percent
in1992 to68percent in1993, adecline offivepercentage points. Thedomestic
market share dropped to65percentduring thefirstnine months of1994 (Table II).
3. Import Penetration
Theratio ofimports todomestic production increased from 37percentin1992
to47percent in1993, andreached 54percent during January-September 1994
(Table II).
4. Employment
Employment intheUScotton andman-made fibre underwear industry dropped
from46,377productionworkersin1992to44,056workersin1994,a5percentdecline
andalossof2,321 employees (Table III).
5. Man-hours
Average annual man-hours worked dropped from 86.2 million in1992 to
81.5 million in1994, a5percent decline (Table III).
B. Industry Statements
Based onasurvey ofindividual firms producing cotton andman-made fibre underwear
thefollowing conditions were reported. The observations areconcentrated inthemens '
underwear sector butalsoinclude theeven more heavily import-impacted ladies underwear
sector.
1. Employment
There have been layoffs inthesector andonecompany reported thatemployees
were alsobeing transferred toproduction ofother types ofgarments. Employment
losses have alsooccurred because ofimport-related plant closings. Acompany that
hasalready closed twoplants employing 165workers isanticipating twoadditional
closures in1995 representing total employment ofabout 400.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
2. Sales
Sales have slowed, andonecompany reported thattheir sales were down about
17percent in1994.
3. Profits
Profits were down 18percentatonefirm, andthere ispressure onthebottom
linethroughout theindustry duetorising costs andstiffimport competition.
4. Investment
Because oftheimpact ofimports andtheuncertainty they have caused inthe
market, UScompanies generally have been postponing investment inthisindustry.
Some companies have closed plants permanently orshifted production offshore, and
additionaldisinvestmentofthisnatureisbeingcontemplatedbyunderwearmanufacturing
firms.
5. Capacity
Because oftheimport competition, firms report shifting production capacity
toother product lines including outerwear.
6. Prices
Import prices inthese sectors have been verylowwhich hasplaced considerable
pressure ondomestic producers:
(a) Raw cotton costs intheUShave increased substantially, seriously eroding US
underwear producers 'margins. These costincreases have notbeen recouped
because prices cannot beraised without becoming uncompetitive withimports.
(b) Competing imports enjoy aprice edge over domestically produced goods
because theimports areproduced with lower priced foreign fabric which often
reflects asubsidized cotton price. Asaresult oftheincreased import market
share inunderwear, average retail prices ofunderwear intheUnited States
have generally declined during thepast two years atatime when US
manufacturers 'costs, particularly forrawcotton, have increased substantially.
This development hasseriously eroded theprofitability ofUSunderwear
manufacturing.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
IV. Countries Contributing toSerious Damage: Category 352/652 (Table I,IVandV)
Serious damage, oractual threat thereof, toUSproducers ofcotton andman-made fibre
underwear, Category 352/652, isattributed tothesharp andsubstantial increase inimports from the
Dominican Republic, Costa Rica, Honduras, Thailand andTurkey.3
Total imports from thefivecountries listed above increased from 22,675,508 dozen in1992
to40,293,259 dozen in1994, asharp andsubstantial increase of78percent. Asagroup their imports
were up32percentin1994 over their 1993 level. Together their 1992 imports were 35percentof
totalCategory 352/652 imports. Their share oftotalcategory imports increased to41percentin1994.
A. Dominican Republic
Thesharp andsubstantial increase oflow-priced imports from theDominican Republic
iscausing serious damage totheUSdomestic industry producing cotton andman-made fibre
underwear.
USimports ofcotton andman-made fibre underwear, Category 352/652, from the
DominicanRepublicreached16,442,148dozenin1994,20percentabovethe13,691,280dozen
imported in1993 and60percent above its1992 level.
USimports ofcotton andman-made fibre underwear, from theDominican Republic
inCategory 352/652, entered theUSatanaverage landed duty-paid value of$10.10 perdozen,
66percent below USproducers 'average price forcotton andman-made fibre underwear.
TheDominican Republic isthenumber onesupplier ofCategory 352/652 imports with
17percentoftotalUSimports ofCategory 352/652 in1994. Category 352/652 imports from
theDominican Republic in1994 were equivalent to10percent ofUSproduction of
Category 352/652 intheyear ending September 1994.
B. Costa Rica
Thesharp andsubstantial increase oflow-priced imports from Costa Rica iscausing
serious damage totheUSdomestic industry producing cotton andman-made fibre underwear.
USimports ofcotton and man-made fibre underwear, Category 352/652, from
CostaRicareached14,423,178dozenin1994,22percentabovethe11,844,331dozenimported
in1993 and61percent above its1992 level.
US imports ofcotton and man-made fibre underwear, from Costa Rica in
Category 352/652, entered theUSatanaverage landed duty-paid value of$9.39 perdozen,
69percent below USproducers 'average price forcotton andman-made fibre underwear.
3ElSalvador andColombia called under domestic legal authority notWTO.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Costa Rica isthenumber twosupplier ofCategory 352/652 imports with 15percent
oftotalUSimports ofCategory 352/652 in1994. Category 352/652 imports from Costa Rica
were equivalent to8.8percent ofUSproduction ofCategory 352/652 intheyear ending
September 1994.
C. Honduras
Thesharp andsubstantial increase oflow-priced imports from Honduras iscausing
serious damage totheUSdomestic industry producing cotton andman-made fibre underwear.
USimportsofcottonandman-madefibreunderwear,Category352/652,fromHonduras
reached 6,550,810 dozen in1994, 108percentabove the3,153,608 dozen imported in1993
and182percent above its1992 level.
US imports ofcotton and man-made fibre underwear, from Honduras in
Category 352/652, entered theUSatanaverage landed duty-paid value of$11.39 perdozen,
62percent below USproducers 'average price forcotton andman-made fibre underwear.
Imports from Honduras were 6.7percentoftotal USimports ofCategory 352/652
in1994, andwere equivalent to4percentofUSproduction ofCategory 352/652 intheyear
ending September 1994.
D. Thailand
Thesharpandsubstantialincreaseoflow-pricedimportsfromThailandiscausingserious
damage totheUSdomestic industry producing cotton andman-made fibre underwear.
USimportsofcottonandman-madefibreunderwear,Category352/652,fromThailand
reached 1,586,005 dozen in1994, 20percentabove the1,323,116 dozen imported in1993
andnearly double its1992 level.
US imports ofcotton and man-made fibre underwear, from Thailand in
Category 352/652, entered theUSatanaverage landed duty-paid value of$18.58 perdozen,
38percent below USproducers 'average price forcotton andman-made fibre underwear.
Imports from Thailand were 1.6percent oftotal USimports ofCategory 352/652
in1994, andwere equivalent tonearly 1percent ofUSproduction ofCategory 352/652 in
theyear ending September 1994.
E. Turkey
Thesharp andsubstantial increase oflow-priced imports from Turkey iscausing serious
damage totheUSdomestic industry producing cotton andman-made fibre underwear.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
USimports ofcotton andman-made fibre underwear, Category 352/652, from Turkey
reached 1,291,118 dozen in1994, 133percent above the553,442 dozen imported in1993
andtwoandahalftimes its1992 level.
USimportsofcottonandman-madefibreunderwear,fromTurkeyinCategory352/652,
entered theUSatanaverage landed duty-paid value of$10.43 perdozen, 65percentbelow
USproducers 'average price forcotton andman-made fibre underwear.
ImportsfromTurkeywere1.3percentoftotalUSimportsofCategory352/652in1994,
andwere equivalent to0.8percentofUSproduction ofCategory 352/652 intheyear ending
September 1994.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Table I
USImports from Selected Suppliers
Cotton andMan-made Fibre Underwear
Category 352/652
(Dozen)
1992 1993 1994 94/92
%Change94/93
%Change
World 65,507,078 79,961,555 97,375,350 48.65 21.78
Dominican
Republic10,264,139 13,691,280 16,442,148 60.19 20.09
Costa Rica 8,935,565 11,844,331 14,423,178 61.41 21.77
Honduras 2,318,683 3,153,608 6,550,810 182.52 107.72
Thailand 796,235 1,323,116 1,586,005 99.19 19.87
Turkey 360,886 553,442 1,291,118 257.76 133.29
TOTAL 22,675,508 30,565,777 40,293,259 77.7 31.8
Table II
Category 352/652
Cotton andMan-made Fibre Underwear
USProduction, Imports, Market, Import/Production Ratio andDomestic Market Share
Period Production1Imports Market2I/P Domestic
Market
Share
1,000 dozen Percent
1992 175,542 65,507 241,049 37 73
1993 168,802 79,962 248,764 47 68
Year Ending September
1993 175,392 77,368 252,760 44 69
1994 164,252 88,961 253,213 54 65
January-September
1993 131,512 59,388 190,900 45 69
1994 126,962 68,387 195,349 54 65
1Anewbenchmark wasestablished with the1992 Census ofManufacturers Survey, therefore, USapparel
production data for1992 forward isnotcomparable toprevious years 'data.
2USmarket fordomestically produced andimported cotton andman-made fibre underwear.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Table III
Employment Data forIndustry1Producing Cotton andMan-made Fibre Underwear
Category 352/652
Employment Data 1992 1993 1994
Number ofProduction Workers 46,377 44,379 44,056
Average Weekly Hours 35.8 37.1 35.6
Average Annual Manhours (million) 86.2 82.5 81.5
Table IV
Average Landed Duty-Paid Value ofImports ofCotton andMan-made Fibre Underwear
Category 352/652
1994 Unit Value
($perDoz)%Above orBelow US
Producers 'Price
USProducers 'Average Price 30.00
World 12.11 -60
Thailand 18.58 -38
Honduras 11.39 -62
Turkey 10.43 -65
Dominican Republic 10.10 -66
Costa Rica 9.39 -69
Table V
Selected Suppliers 'Share ofImports andProduction
Cotton andMan-made Fibre Underwear
Category 352/652
(Dozen)
1992
%ofImports1994
%ofImports1992
%ofProductionY/E 9/1994
%ofProduction
World 100.0 100.0 37.3 59.3
Dominican Republic 15.7 16.9 5.8 10.0
Costa Rica 13.6 14.8 5.1 8.8
Honduras 3.5 6.7 1.3 4.0
Thailand 1.2 1.6 0.5 1.0
Turkey 0.6 1.3 0.2 0.8
Total 34.6 41.4 12.9 24.5
1Data derived from 1992 USCensus ofmanufacturers, Apparel Current Industrial Reports, anddatafrom
theBureau ofLabor Statistics.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Table VI
Suppliers Report
Cotton andMan-made Fibre Underwear
Category 352/652
(Data inDozens)
Calendar Years Year-to-date Year-endings YE12/94
Country 1992 1993 12/93 12/94 %Change 12/93 10/94 11/94 12/94 %Change %
Share
World 65,507,078 79,961,555 79,961,555 97,375,350 21.78 79,961,555 91,625,866 94,555,451 97,375,350 21.78 100.00
Dom Rep 10,264,139 13,691,280 13,691,280 16,442,148 20.09 13,691,280 15,676,793 15,902,873 16,442,148 20.09 16.89
CRica 8,935,565 11,844,331 11,844,331 14,423,178 21.77 11,844,331 13,846,643 14,196,660 14,423,178 21.77 14.81
SLJamaica 6,596,435 8,106,198 8,106,198 9,978,577 23.10 8,106,198 9,169,675 9,665,903 9,978,577 23.10 10.25
FTAs15,490,979 6,464,009 6,464,009 9,860,275 52.54 6,464,009 8,743,600 9,344,737 9,860,275 52.54 10.13
SLHgKong 9,169,333 9,085,459 9,085,459 9,541,766 5.02 9,085,459 10,401,446 9,995,260 9,541,766 5.02 9.80
Bangladesh 5,164,020 6,819,003 6,819,003 7,830,510 14.83 6,819,003 7,127,727 7,527,240 7,830,510 14.83 8.04
Honduras 2,318,683 3,153,608 3,153,608 6,550,810 107.72 3,153,608 5,421,420 5,983,533 6,550,810 107.72 6.73
ElSalvador 765,769 2,053,364 2,053,364 3,687,034 79.56 2,053,364 3,243,942 3,478,203 3,687,034 79.56 3.79
SLChina P 4,437,640 3,484,724 3,484,724 3,562,255 2.22 3,484,724 3,302,675 3,373,159 3,562,255 2.22 3.66
SLChina T 2,409,266 2,685,501 2,685,501 2,063,022 -23.18 2,685,501 2,254,257 2,176,921 2,063,022 -23.18 2.12
Thailand 796,235 1,323,116 1,323,116 1,586,005 19.87 1,323,116 1,463,139 1,512,123 1,586,005 19.87 1.63
Colombia 578,279 1,032,210 1,032,210 1,509,880 46.28 1,032,210 1,328,882 1,430,758 1,509,880 46.28 1.55
SLPhilR 2,048,570 1,727,028 1,727,028 1,478,666 -14.38 1,727,028 1,420,086 1,463,627 1,478,666 -14.38 1.52
Turkey 360,886 553,442 553,442 1,291,118 133.29 553,442 1,115,084 1,177,758 1,291,118 133.29 1.33
SLSriLanka 798,776 989,448 989,448 1,137,616 14.97 989,448 1,120,226 1,099,663 1,137,616 14.97 1.17
Guatemala 326,737 828,515 828,515 959,160 15.77 828,515 950,353 941,687 959,160 15.77 0.99
Bahrain 137,417 716,778 716,778 691,230 -3.56 716,778 704,461 671,224 691,230 -3.56 0.71
Panama 145,468 393,336 393,336 502,240 27.69 393,336 543,352 520,857 502,240 27.69 0.52
SLMauritius 609,979 862,584 862,584 494,726 -42.65 862,584 487,706 526,852 494,726 -42.65 0.51
Indonesia 443,659 383,209 383,209 459,638 19.94 383,209 382,965 437,614 459,638 19.94 0.47
Macau 163,885 81,710 81,710 404,474 395.01 81,710 149,441 296,165 404,474 395.01 0.42
SLPakistan 376,607 430,932 430,932 391,567 -9.13 430,932 373,324 384,040 391,567 -9.13 0.40
Malaysia 303,221 355,939 355,939 375,266 5.43 355,939 317,227 330,718 375,266 5.43 0.39
EC152473,808 414,549 414,549 352,212 -15.04 414,549 364,664 362,983 352,212 -15.04 0.36
Haiti 923,951 872,826 872,826 228,920 -73.77 872,826 302,108 261,023 228,920 -73.77 0.24
KorRep 184,097 174,729 174,729 167,517 -4.13 174,729 149,556 150,762 167,517 -4.13 0.17
Guyana 124,382 83,955 83,955 160,373 91.02 83,955 127,108 145,311 160,373 91.02 0.16
Swaziland 64,290 148,958 148,958 147,389 -1.05 148,958 119,311 148,291 147,389 -1.05 0.15
Chile 11,990 84,730 84,730 128,507 51.67 84,730 147,957 135,107 128,507 51.67 0.13
Myanmar 0 0 0 125,705 * 0 48,125 71,126 125,705 * 0.13
Nicaragua 0 24,651 24,651 125,625 409.61 24,651 134,632 133,028 125,625 409.61 0.13
Bulgaria 0 123,367 123,367 119,775 -2.91 123,367 110,211 119,775 119,775 -2.91 0.12
Brazil 80,027 64,349 64,349 93,206 44.84 64,349 80,935 88,630 93,206 44.84 0.10
Egypt 203,163 29,528 29,528 82,926 180.84 29,528 75,854 81,133 82,926 180.84 0.09
SLArab Em 1,000 50,388 50,388 55,598 10.34 50,388 50,302 50,552 55,598 10.34 0.06
Peru 74,285 85,630 85,630 51,302 -40.09 85,630 34,173 47,298 51,302 -40.09 0.05
1Free Trade Arrangements: Canada, Mexico, Israel.
2European Union.WT/DS24/R
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STATEMENT OFSERIOUS DAMAGE: CATEGORY 352/652
Table VI(continued)
Suppliers Report
Cotton andMan-made Fibre Underwear
Category 352/652
(Data inDozens)
Calendar Years Year-to-date Year-endings YE12/94
Country 1992 1993 12/93 12/94 %Change 12/93 10/94 11/94 12/94 %Change %
Share
Syria 49,458 64,088 64,088 42,752 -33.29 64,088 47,680 46,832 42,752 -33.29 0.04
Mongolia 0 0 0 35,664 * 0 25,104 25,104 35,664 * 0.04
Ecuador 21,150 53,566 53,566 34,512 -35.57 53,566 45,523 41,821 34,512 -35.57 0.04
Australia 7,774 16,875 16,875 24,613 45.85 16,875 24,562 24,307 24,613 45.85 0.03
Barbados 23,778 31,977 31,977 24,290 -23.41 31,977 22,965 23,191 24,490 -23.41 0.03
Lesotho 375 11,748 11,748 21,248 80.86 11,748 26,848 21,248 21,248 80.86 0.02
SLucia 14,939 21,324 21,324 20,457 -4.07 21,324 20,548 20,344 20,457 -4.07 0.02
India 851 4,832 4,832 14,885 208.05 4,832 7,650 11,689 14,885 208.05 0.02
Palau 0 0 0 13,044 * 0 13,044 13,044 13,044 * 0.01
Singapore 36,474 51,590 51,590 11,286 -78.12 51,590 17,010 13,111 11,286 -78.12 0.01
Switzerland 11,738 8,977 8,977 10,557 17.60 8,977 9,588 9,727 10,557 17.60 0.01
Japan 12,353 6,602 6,602 9,344 41.53 6,602 7,611 8,045 9,344 41.53 0.01
Qatar 6,950 0 0 8,890 * 0 5,408 8,890 8,890 * 0.01
Dominica 0 0 0 6,397 * 0 0 0 6,397 * 0.01
Maldives 153,021 177,739 177,739 5,174 -97.09 177,739 12,247 5,570 5,174 -97.09 0.01
Russia * 4,836 4,836 4,913 1.59 4,836 3,345 4,913 4,913 1.59 0.01
Nepal 0 0 0 3,465 * 0 0 3,264 3,465 * 0.00
Ukraine * 10,418 10,418 3,342 -67.92 10,418 9,142 9,142 3,342 -67.92 0.00
Jordan 0 139 139 3,150 2,166.19 139 3,289 3,289 3,150 2,166.19 0.00
StKitts N 133,297 119,810 119,810 2,891 -97.59 119,810 22,382 15,119 2,891 -97.59 0.00
Venezuela 141,555 2,363 2,363 2,387 1.02 2,363 3,221 2,721 2,387 1.02 0.00
Poland 0 2 2 2,030 101,400.00 2 0 1,870 2,030 101,400.00 0.00
Lebanon 419 63,702 63,702 1,607 -97.48 63,702 1,448 1,607 1,607 -97.48 0.00
RepSAf 0 538 538 1,365 153.72 538 1,365 1,365 1,365 153.72 0.00
Cyprus 7,512 10,144 10,144 1,334 -86.85 10,144 1,334 1,334 1,334 -86.85 0.00
Trinidad 0 808 808 1,165 44.18 808 1,165 1,165 1,165 44.18 0.00
Fiji 89,754 0 0 990 * 0 990 990 990 * 0.00
Tokelau 0 6 6 790 13,066.67 6 790 790 790 13,066.67 0.00
NZealand 37 68 68 687 910.29 68 731 731 687 910.29 0.00
Oman 0 464 464 655 41.16 464 655 655 655 41.16 0.00
Cocos Is. 0 0 0 442 * 0 442 442 442 * 0.00
St.Vincent 0 0 0 124 * 0 124 124 124 * 0.00
NAntilles 0 0 0 77 * 0 77 77 77 * 0.00
Vietnam 0 0 0 73 * 0 73 73 73 * 0.00
Tunisia 0 52 52 71 36.34 52 18 24 71 36.54 0.00
Brunei 0 0 0 60 * 0 60 60 60 * 0.00
Morocco 546 61 61 44 -27.87 61 11 11 44 -27.87 0.00
Monsrat 0 0 0 42 * 0 42 42 42 * 0.00
Romania 0 0 0 40 * 0 0 40 40 * 0.00
Hungary 4,452 0 0 30 * 0 30 30 30 * 0.00
Malta 0 0 0 21 * 0 21 21 21 * 0.00
Slovenia * 0 0 13 * 0 0 13 13 * 0.00
Zimbabwe 0 0 0 7 * 0 7 7 7 * 0.00
Norway 441 23 23 6 -73.91 23 9 15 6 -73.91 0.00