WORLD TRADE G/SG/N/8/USA/2/Rev.1
27March 1998
ORGANIZATION(98-1224)
Original: English Committee onSafeguards
NOTIFICATION UNDER ARTICLE 12.1(B) OFTHE
AGREEMENT ONSAFEGUARDS ONAFINDING OFSERIOUS INJURY
ORTHREAT THEREOF CAUSED BYINCREASED IMPORTS
UNITED STATES
Revision
Thefollowing communication, dated 24March 1998, hasbeenreceived fromthePermanent
Mission oftheUnited States.
_______________
PursuanttoArticle12.1(b)oftheAgreement,andinlightoftheformatsfornotificationsadopted
bytheCommittee (G/SG/W/1, 23February 1995), theUnited States provides notification ofafinding
ofserious injury caused byincreased imports ofwheat gluten.
On15January 1998, theUSInternational Trade Commission (USITC) voted 3-0thatwheat
gluten isbeing imported intotheUnited States insuchincreased quantities astobeasubstantial cause
ofserious injury tothedomestic wheat gluten industry. TheUSITC forwarded itsinjury findings and
remedy recommendations tothePresident on18March 1998. Thisreport contains theUSITC ’sanalysis
andasummary oftheinformation collected during theinvestigation.
With thisnotification, theUnited States provides acopy oftheUSITC ’sreport, excluding
confidential business information, totheCommittee. Weunderstand thattheCommittee willmake
acopyofthereport -which isover100pages long-available toMembers uponrequest. Thepassages
inquotes initems 1and2below areshort excerpts fromtheUSITC ’sfindings (omitting footnotes).
TheUSITC ’sfullanalysis issetoutinthereport.
Consistent withArticle 12.3oftheAgreement onSafeguards, theUnited States isprepared
toconsult withthose Members having asubstantial interest asexporters oftheproduct concerned,
withaviewto,interalia,reviewing theinformation provided inthisnotification andtheUSITC report,
exchanging views onthemeasure andreaching anunderstanding onways toachieve theobjective set
outinArticle 8.1oftheAgreement onSafeguards.
1. Evidence ofserious injury orthreat thereof caused byincreased imports
References toyearly dataaretocropyeardata,fortheperiod July1-June 30(e.g.areference
to1997 refers totheperiod 1July1996 to30June1997).
- Increased imports .“During theperiod examined, imports ofwheat gluten increased from
128million pounds in1993 to177million pounds in1997. Virtually allofthisincrease occurred
during thelasttwoyears oftheperiod examined, when imports surged from 127million pounds inG/SG/N/8/USA/2/Rev.1
Page2
1995to156million pounds in1996and177million pounds in1997. Thus, between 1995 and1997,
imports increased bynearly 40percent. Theratioofimports toproduction followed asimilar trend,
rising from 100.6 percentin1993 to145.4 percentin1997. Respondents conceded thatimports
ofwheat gluten haveincreased. ”
- Serious injury .“Wefindthatthedomestic industry producing wheat gluten isseriously injured.
Inreaching thisconclusion, weexamined awidearray offactors relating tothecondition oftheindustry,
including capacity utilization, plant closings, production, shipments, inventories, financial data, unit
values, prices, employment levels, productivity, wages, andother employment-related data.”
*******
“Insummary, bytheendoftheperiod examined, virtually allofthefactors relevant toindustry
performance were negative. Industry capacity utilization hasdeclined significantly, production and
shipments havedeclined, end-of-period inventories havemore thandoubled, theindustry hasgone
frombeing profitable tooperating ataloss,average unitvalues havedeclined andwereattheirlowest
levels in1997atthesametimethatunitcostswererising, hourly wages havebeenrelatively flat,worker
productivity hasdeclined duetothedecline incapacity utilization, andunitlabour costs havealmost
doubled. While there havebeenminor improvements inseveral factors during themostrecent year,
theseimprovements areisolated anddonotchange ourconclusion thatthedomestic industry ispresently
seriously injured. Thus, wefindthatthedomestic wheat gluten industry isseriously injured. ”
- Causation .“Asweestablished inthe‘increased imports ’section oftheseviews, imports have
increased significantly, bothinactual terms andrelative todomestic production. Thequantity ofimports
alsoincreased relative todomestic consumption. Imports, asashare ofUSconsumption, wererelatively
stable during thefirstthree years oftheinvestigative period, declining slightly from51.4percentto
50.1percent. Theratioofimports toconsumption thenincreased sharply to58.9percentin1996
and60.2percentin1997. Therecord reflects thatmost ofthisincrease consisted ofimports from
theEU.Therecord alsoshows thatimports fromtheEUconsistently undersold domestic wheat gluten.
Thissurge inrelatively low-priced imports in1996 and1997 coincided withthedecline inindustry
performance described above. There isadirect correlation between thedramatic increase inwheat
gluten imports andthesignificant decline indomestic wheat gluten industry performance in1996and
1997. Inthefaceofrising domestic demand andconsumption, domestic production, shipments, capacity
utilization, unitprices, industry financial performance, andworker productivity alldeclined during
theperiod ofgreatest import penetration. ”
*******
“Wereviewedcarefullythealternativecausesofinjurysuggestedbythepartiesandotherpossible
causes,[suchas‘co-productionmarkets’,importationofwheatglutenbydomesticproducers,competition
among domestic producers, increased capacity, andrising rawmaterial costs,] andhaveconcluded
thatincreased imports arebothanimportant cause ofserious injury andacause thatisgreater than
anyother cause. ”
2. Provide information onwhether thereisanabsolute increase inimports ofanincrease inimports
relative todomestic production.
Asnoted above, theUSITC found thatimports ofwheat gluten increased inabsolute terms
from128million pounds in1993to177million pounds in1997, andthatvirtually allofthisincrease
occurred during thelasttwoyears oftheperiod examined.G/SG/N/8/USA/2/Rev.1
Page3
3. Provide aprecise description oftheproduct involved.
Wheat gluten, provided forinsubheadings 1109.00.10 and1109.00.90 oftheHarmonized
Tariff Schedule oftheUnited States.
4. Provide precise description oftheproposed measure
Asasafeguard measure, theUSITC hasrecommended thatthePresident:
- impose aquantitative restriction, fora4-year period, onimports ofwheat gluten in
theamount of126million pounds inthefirstyear, tobeincreased by6percenteach
subsequent yearthattheaction isineffect;
- allocate, within theoverall quantitative restriction, separate quantitative restrictions
fortheEuropean Union, Australia, and“allother”non-excluded countries, taking into
account thedisproportional growth andimpact ofimports ofwheat gluten from the
European Union;
- inviewoftheUSITC ’snegative findings withrespect toimports ofwheat gluten from
Canada andMexico under section 311(a) oftheNAFTA Implementation Act(i.e.the
USITC ’sfindings thatimports from Canada andMexico either donotaccount fora
substantial share oftotalimports ordonotcontribute importantly toserious injury,
orboth), exclude suchimports from thequantitative restriction;
- exclude fromtherelief imports fromIsrael, andanyimports thatenterdutyfreefrom
beneficiary countries under theCaribbean Basin Economic Recovery ActortheAndean
Trade Preference Act,inviewoftheUSITC ’sfinding thattherewerefewornoimports
ofwheat gluten from these countries.
Under USlaw,thePresident generally has60daysfromreceipt ofaUSITC report containing
anaffirmative determination ofserious injury todetermine whatsafeguard action, ifany,hewilltake.
Among thetypes ofsafeguard action thePresident mayimpose areaquantitative restriction, increased
tariffs, oratariff-rate quota.
5. Provide proposed dateofintroduction ofthemeasure
The60-day period mentioned initem(4.)expires on17May1998. Under USlaw,anyaction
proclaimed bythePresident istotakeeffect nolaterthan15daysthereafter.
6. Provide expected duration ofthemeasure
Asnoted above, theUSITC hasrecommended aquantitative restriction foraperiod of4years.
7. Forameasure withaduration ofmore thanthree years, provide theproposed dateforthe
review tobeheldnotlaterthanthemid-term ofthemeasure, ifsuchadateforthereview
hasalready beenscheduled
Ifthemeasure imposed hasaduration of4years, areview willbeheldnolaterthanthe2-year
mark, butnodatehasbeenscheduled.G/SG/N/8/USA/2/Rev.1
Page4
8. Iftheexpected duration isover oneyear, provide expected timetable forprogressive
liberalization ofthemeasure
Asnoted above, theUSITC hasrecommended thatthelevelofthequantitative restriction be
increased by6percenteachyeartherestriction isinplace.
9. N.A.
__________