WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 753
10.199  However, if a Member relies  on the findings made by three  Commissioners and the findings
of those three Commissioners constitute the determination  of the competent authorities in the sense of
Article 2.1 of the Agreement on Safeguards, there is a requirement for those findings to provide areasoned and adequate explanation.  A reasoned and adequate explanation is not contained in a set of
findings which cannot be reconciled one with another.
10.200  In conclusion, the Panel, therefore, finds that there is a violation of the obligation under
Articles 2.1 and 3.1 to provide a reasoned and adequate explanation of how the facts support the
determination of increased imports, since the explanation consists of alternative explanations partly
departing from each other which, given the different product bases, cannot be reconciled as a matter
of their substance.  Thus, the USITC Report does not contain a determination supported by a reasonedand adequate explanation of how the facts support the determination that tin mill products have been
imported in such increased quantities, as required by Articles 2.1 and 3.1 of the Agreement on
Safeguards.
(c) Hot-rolled bar
(i) The USITC's findings
10.201  As regards increased imports of hot-rolled bar, the USITC determined:
"We find that the statutory criterion of increased imports is met.
Imports of hot-rolled bar increased from 1.66 million tons in 1996 to 1.81 million
tons in 1997 and then to 2.34 million tons in 1998.  Imports then declined to 2.26
million tons in 1999 but increased in 2000 to 2.53 million tons.  Imports were lowerin interim (January-June) 2001, at 952,392 tons, than in interim 2000, when they were
1.34 million tons.  Imports increased by 52.5 percent from 1996 to 2000 and by 11.9
percent from 1999 to 2000.
5071
As a ratio to US production, imports declined from 19.2 percent in 1996 to 18.4percent in 1997, but then rose to 23.8 percent in 1998, 24.9 percent in 1999, and 27.5percent in 2000.  The ratio was lower in interim 2001, at 24.6 percent, than in interim
2000, when it was 27.0 percent.
5072
Imports were higher, both in absolute terms and relative to US production, in 2000than in any prior year of the period examined and showed a rapid and dramatic
increase from the previous year. While imports declined in the interim periodcomparison, the ratio of imports to US production in interim 2001 was higher than
that for the first three years of the period examined, and was only three-tenths of a
percentage point below the 1999 level.
In view of the above, we find that imports are in increased quantities and that the first
statutory criterion is satisfied."
5073
10.202  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5074
                                                     
5071 (original footnote) CR and PR, Table LONG-5.
5072 (original footnote) CR and PR, Table LONG-5.
5073 USITC Report, Vol. I, p. 92.
5074 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table LONG-5 at LONG-9.  As is visible from the graphs, the data for 2001 have not been "annualized" buthave been left in their raw format.  The Panel finds this format sufficient to reach a conclusion on the trends ofWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 754
Imports (Tons)
01,000,0002,000,0003,000,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
05101520253035404550
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.203  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5 (c) supra .
                                                                                                                                                                    
imports in the most recent past and therefore does not take a position on the question of whether and how these
six-month data can be "annualized", a question on which there is disagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 755
(iii) Analysis by the Panel
Absolute imports
10.204  The Panel believes that the USITC's determination on increased imports of hot-rolled bar, as
published in its report5075, does not contain an adequate and reasoned explanation of how the facts
support the determination.  The USITC relied on the higher amount of imports in 2000 than in any
previous year of the period examined and on the "rapid and dramatic increase" from 1999 to 2000.
The decline between interim 2000 and 2001 was acknowledged, but the USITC did not give an
explanation why it, nevertheless, found that there was an increase of imports in absolute numbers.  It
did so only with regard to imports relative to domestic production5076, a finding with which the Panel
will deal separately.
10.205  This failure to account for the most recent data from interim 2001, as far as absolute imports
are concerned, is serious in the view of the Panel.  The decrease from interim 2000 (1.34 million tons)
to interim 2001 (952,392 tons) represented a decrease by 28.9%, whereas the increase in the year-to-
year period before (1999 to 2000) that was characterized as "rapid and dramatic" was merely 11.9%.
In light of this decrease in the most recent period, the Panel does not believe that the trend of importsfrom 1996 to 2000 (an increase by 52.5%) is sufficient to provide a basis for a finding that, at the
moment of the determination, hot-rolled bar "is being imported in such increased quantities".
10.206  In the Panel's view, the trend of absolute imports between 1997 and interim 2001 is best
described as an alternation of increases and decreases from year to year.  Given this up-and-down
movement ending with a decrease of 28.9% (in interim 2001), the Panel does not believe that the factssupport a conclusion of increased imports, nor has the USITC provided an explanation to that effect.
The Panel acknowledges that, until 2000, there was a net increasing trend, in other words, the two
increases in 1998 and 2000 were stronger than the decrease in 1999.  However, the picture changes
again significantly, when one includes the decrease (by 28.9%) in interim 2001, a fact that the USITC
acknowledged, but did not evaluate.  Taking into account all qualitative and quantitative features ofthe trends of imports over the period of examination, the Panel, therefore, finds that the USITC's
determination on increased imports of hot-rolled bar, as published in its Report
5077, does not contain a
reasoned and adequate explanation of how the facts support a conclusion that hot-rolled bar "is being
imported in such increased quantities."
10.207  It may well be that the increase occurring from 1997 to 1998, or from 1996 to 1998, taken by
itself, would qualify as an increase satisfying the criteria of Article 2.1 of the Agreement on
Safeguards.  However, at the time of the determination, this development was not a recent
development.  Given how the trends in imports developed after 1998, the increase up to 1998 is not a
sufficient factual basis to support a determination in October 2001 that hot-rolled bar is "being
imported in (such) increased quantities".
Relative imports
10.208  The Panel also considers that the USITC's determination on increased imports of hot-rolled
bar relative to domestic production5078 does not contain an adequate and reasoned explanation of how
the facts support the determination.  The USITC's conclusion relied on the statement that imports
                                                     
5075 USITC Report, Vol. I, p. 92.
5076 USITC Report, Vol. I, p. 92.
5077 USITC Report, Vol. I, p. 92.
5078 USITC Report, Vol. I, p. 92.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 756
relative to domestic production in 2000 were "higher than in any prior year of the period examined
and showed a rapid and dramatic increase from the previous year."  We note with puzzlement that the
attributes "rapid and dramatic" refer to an increase from 24.9% (1999) to 27.5% (2000).  The declinein imports in interim 2001 was acknowledged, but according to the USITC "the ratio of imports to US
production in interim 2001 was higher than that for the first three years of the period examined, and
was only three-tenths of a percentage point below the 1999 level."
10.209  The Panel is not convinced by this statement and does not consider it to be a reasoned and
adequate explanation supporting the determination of increased imports, given that the ratio of
imports to domestic production in the most recent period, interim 2001 (24.6%), not only declined
compared with full-year or interim 2000 (27.5% and 27.0% respectively) but was also lower than in1999 (24.9%) and nearly as low as in 1998 (23.8%).  Therefore the facts do not support a conclusion
that hot-rolled bar "is being imported in such increased quantities, … relative to domestic
production".
Conclusion
10.210  The Panel consequently finds that the USITC Report5079 did not provide an adequate and
reasoned explanation of how the facts support the determination that hot-rolled bar was being
imported in "increased quantities", contrary to the requirements of Article 2.1 Agreement on
Safeguards that the product "is being imported in (such) increased quantities".
(d) Cold-finished bar
(i) The USITC's findings
10.211  As regards increased imports of cold-finished bar, the USITC determined:
"We find that the statutory criterion of increased imports is met.
Imports of cold-finished bar increased from 206,272 tons in 1996 to 238,221 tons in
1997 and then to 272,972 tons in 1998.  Imports then declined to 235,693 tons in
1999 but increased in 2000 to 314,958 tons.  Imports were lower in interim 2001, at134,971 tons, than in interim 2000, when they were 169,889 tons.  Imports increased
by 52.7 percent from 1996 to 2000 and by 33.6 percent from 1999 to 2000.
5080
As a ratio to US production, imports declined from 17.6 percent in 1996 to 17.3percent in 1997, rose to 19.5 percent in 1998, declined to 17.0 percent in 1999, and
then rose to 23.7 percent in 2000.  The ratio was higher in interim 2001, at 23.9percent, than in interim 2000, when it was 23.6 percent.
5081
Imports were higher, both in absolute terms and relative to US production, in 2000than in any prior year of the period examined and showed a rapid and dramatic
increase.  Although import volumes declined in the interim period comparison, the
ratio of imports to US production in interim 2001 was higher than in any full-year
during the period examined.
In view of the above, we find that imports are in increased quantities and that the firststatutory criterion is satisfied."
5082
                                                     
5079 USITC Report, Vol. I, p. 92.
5080 (original footnote) CR and PR, Table LONG-6.
5081 (original footnote) CR and PR, Table LONG-6.
5082 USITC Report, Vol. I, pp. 101-102.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 757
10.212  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5083
Imports (Tons)
050,000100,000150,000200,000250,000300,000350,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
05101520253035404550
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments by the parties
10.213  The claims and arguments of the parties regarding the USITC's findings are set out in
Sections VII.F.4 and 5.(d) supra .
                                                     
5083 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table LONG-6 at LONG-10.  As is visible from the graphs, the data for 2001 have not been "annualized" but
have been left in their raw format.  The Panel finds this format sufficient to reach a conclusion on the trends ofimports in the most recent past and therefore does not take a position on the question of whether and how thesesix-month data can be "annualized", a question on which there is disagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 758
(iii) Analysis by the Panel
Relative imports
10.214  The Panel believes that the USITC's determination on increased imports of cold-finished bar,
relative to domestic production5084, contains an adequate and reasoned explanation of how the facts
support the determination.  After an up-and-dow n movement between 1996 and 1999 (starting with
17.6% and ending with 17.0%) without any significant overall net trend, imports increased to 23.7%
in 2000 and 23.9% in interim 2001.  Comparing the two ratios, this represents 40.6% increase and is a
development in the recent past.  Given the overall neutral trends in the period until 1999, the Panel
sees no development in the period preceding the very recent past that would cast doubt on its
evaluation of the most recent trends.5085
10.215  Therefore, the Panel considers that the USITC's determination on increased imports of cold-
finished bar, relative to domestic production5086, contains an adequate and reasoned explanation of
how the facts support the determination.
10.216  The Panel notes the doubts expressed by the European Communities as to whether the mere
six per cent increase in the ratio between imports and domestic production could be seen as a sudden,sharp and significant surge in imports that is capable of causing injury to a domestic industry.
5087  The
Panel also notes that 6% is the absolute difference between the two ratios, a variable that is not
particularly meaningful.  As to whether this proportionate increase by 40.6% is sudden and significant
enough in order to cause serious injury, the Panel believes that the increase by 40.6% over the most
recent 18 months evidences a certain degree of sharpness, significance, recentness and suddenness.
10.217  Whether the increase by 40.6% is sudden, sharp, recent and significant enough as to cause
serious injury  is a question that is appropriately to be addressed in the context of  causation of serious
injury , not in the context of the condition of the increase, where no well-founded judgment in this
regard can be made.  In this regard, the Panel's finding on increased imports must be read together
with its subsequent findings on the other conditions of Article 2.1 of the Agreement on Safeguards.
10.218  Further, the Panel does not agree with the European Communities' argument that the absolute
decrease in imports from 2000 to 2001 (interim period) detracts from the conclusion of the relative
increase.5088  The Agreement on Safeguards makes clear that the requirement is that of an increase,
either in absolute or in relative terms.  If there is an increase both in absolute and in relative terms, the
condition of increased imports, of course, is also met.  However, as a legal matter, a decrease inabsolute terms does not invalidate the sufficiency of a relative increase.  The Panel also believes that
this legal framework is in line with the object and purpose of Article XIX:1(a) of GATT 1994 and the
Agreement on Safeguards to allow for emergency ac tion in specific circumstances:  if absolute
imports decrease, but imports, relative to domestic production, are on the increase, this means that the
decrease of domestic production is stronger than that of imports (in absolute levels).  Such a scenario
may well warrant the imposition of a safeguard measure.
                                                     
5084 USITC Report, Vol. I, pp. 101-102.
5085 European Communities' first written submission, para. 321.
5086 USITC Report, Vol. I, pp. 101-102.
5087 European Communities' first written submission, para. 321.
5088 European Communities' first written submission, para. 321.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 759
Absolute imports
10.219  Given the Panel's finding regarding relative imports, there is no need to make findings on
absolute imports, since such findings could not change  the overall result that the complainants' claims
of violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be
rejected.  Therefore, since the Panel has already disposed of the claims on the basis of relative
imports, the Panel sees no need to examine the claims relating to absolute imports.
Conclusion
10.220  The Panel consequently finds that the USITC Report contained an adequate and reasoned
explanation of how the facts support the determina tion made with respect to "increased imports" of
cold-finished bar with regard to relative imports.  The USITC's determination that cold-finished bar
was being imported in "increased quantities" is not inconsistent with the requirement of Article 2.1 of
the Agreement on Safeguards that the product "is being imported in (such) increased quantities".
Therefore, the Panel rejects violation claims made in this regard.
(e) Rebar
(i) The USITC's findings
10.221  As regards increased imports of rebar, the USITC determined:
"We find that the statutory criterion of increased imports is met.
Imports of rebar increased from 581,731 tons in 1996 to 701,303 tons in 1997 and
then to 1.2 million tons in 1998.  Imports further increased to 1.8 million tons in 1999
and then declined to 1.7 million tons in 2000.  Imports were lower in interim 2001, at852,488 tons, than in interim 2000, when they were 985,991 tons.
5089
As a ratio to US production, imports rose from 11.7 percent in 1996 to 12.8 percent in1997, 19.9 percent in 1998, and 29.1 percent in 1999.  This ratio then declined to 25.2
percent in 2000.  The ratio was lower in interim 2001, at 24.3 percent, than in interim
2000, when it was 30.9 percent.
5090
Notwithstanding the decline from 1999 levels, imports in 2000 were substantially
higher than they were during earlier portions of the period examined, reflecting the
rapid and dramatic increase in the prior two years.  The quantity of imports in 2000
was 187.0 percent above the 1996 quantity and 35.8 percent over the 1998 quantity,
and the ratio of imports to US production in 2000 was more than double the ratio in1996.  By the same token, import quantities for the first six months of 2001 were
higher than the quantities for the full-years of either 1996 or 1997, and the ratio of
imports to US production in interim 2001 was higher than that for any year from 1996
to 1998.
In view of the above, we find that imports are in increased quantities and that the first
statutory criterion is satisfied."
5091
10.222  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5092
                                                     
5089 (original footnote) CR and PR, Table LONG-7.
5090 (original footnote) CR and PR, Table LONG-7.
5091 USITC Report, Vol. I, p. 109.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 760
Imports (Tons)
0500,0001,000,0001,500,0002,000,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
05101520253035404550
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.223  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(e) supra .
                                                                                                                                                                    
5092 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table LONG-7 at LONG-11.  As is visible from the graphs, the data for 2001 have not been "annualized" but
have been left in their raw format.  The Panel finds this format sufficient to reach a conclusion on the trends ofimports in the most recent past and therefore does not take a position on the question of whether and how thesesix-month data can be "annualized", a question on which there is disagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 761
(iii) Analysis by the Panel
Absolute imports
10.224  The Panel believes that the USITC's determination on increased imports of rebar in absolute
terms5093, contains an adequate and reasoned explanation of how the facts support the determination.
In particular, the Panel considers that it amounts to such an adequate and reasoned explanation given
that imports more than tripled from 1996 to 1999 (from 581,731 tons to 1.8 million tons) and then
declined relatively insignificantly in 2000 (to 1.7 million tons, or by 5.6%) and in interim 2001 (by
13.5%).
10.225  These decreases in themselves might not be insignificant, but as the Panel has stated, the
analysis of imports must take into account all features of the development of imports over the periodexamined, which is what the USITC did with regard to imports of rebar.  In light of the tripling of
imports, the decrease over the last 18 months is not significant enough in order to stand in the way of
a conclusion that rebar "is being imported in such increased quantities".  As the Panel has stated, there
is no need for imports to "be increas ing".  Instead, the product must (presently) be imported "in
increas ed quantities".  The Panel has no doubt that the increase until 1999 is recent enough and the
subsequent decrease – in comparison – small enough in order to support such a conclusion.  On the
basis of the facts, the Panel, therefore, disagrees with the contention of the complainants.  On the
contrary, rebar is, as a matter of fact, being imported in recently and suddenly increased quantities.
10.226  As regards the question raised by the complainants whether the increase was sudden enough,
sharp enough, recent enough and significant enough to cause serious injury , that is a question more
appropriately addressed in the context of causation of serious injury , not in the context of the
requirement of the increase, where no well-founded judgment in this regard can be made. The Panel's
finding on increased imports must be read together with its subsequent findings on the other
conditions of Article 2.1 of the Agreement on Safeguards.  Therefore, the Panel considers that the
USITC's determination on increased imports of rebar
5094 contains an adequate and reasoned
explanation of how the facts support the determination.
Relative imports
10.227  Given the Panel's finding regarding absolute imports, there is no need to make findings on
relative imports, since such findings could not chan ge the overall result that the complainants' claims
of violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to berejected.  Since the Panel has already disposed of the claims on the basis of absolute imports, the
Panel sees no need to examine the claims relating to relative imports.
Conclusion
10.228  The Panel consequently finds that the USITC Report contained an adequate and reasoned
explanation of how the facts support the determina tion made with respect to "increased imports" of
rebar with regard to absolute imports.  The USITC's determination that rebar was being imported in
"increased quantities" is not inconsistent with the requirement of Article 2.1 of the Agreement onSafeguards that the product "is being imported in (such) increased quantities".  The Panel rejects the
violation claims made in this regard.
                                                     
5093 USITC Report, Vol. I, p. 109.
5094 USITC Report, Vol. I, p. 109.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 762
(f) Welded pipe
(i) The USITC's findings
10.229  As regards increased imports of welded pipe, the USITC determined:
"We find that the statutory criterion of incr eased imports is met.  Imports of welded
pipe other than OCTG increased steadily throughout most of the period examined in
both absolute terms and relative to domestic production, with the largest increase
occurring in 2000.  Imports increased from 1.57 million short tons in 1996 to 1.86
million short tons in 1997 and 2.26 million short tons in 1998, declined slightly to
2.12 million short tons in 1999, and then surged to 2.63 million short tons in 2000.
Imports increased by 24.2 percent in quantity between 1999 and 2000, which was thelargest annual percentage increase of the period examined, and in 2000 were at their
highest level of the period examined.  Imports continued at a very high level in
interim 2001, only slightly (1.7 percent) below the level of the same period of 2000.
Imports were 1.41 million short tons in interim 2001, compared to 1.44 million short
tons in the same period of 2000.
5095  Thus, imports of welded (non-OCTG) pipe have
increased in absolute terms.5096
Imports of welded (non-OCTG) pipe also increased relative to domestic production,with the largest increase in the ratio occurring at the end of the period examined,
between 1999 and 2000, and into 2001.
5097  Thus, imports have increased relative to
domestic production as well as in absolute terms."5098
10.230  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5099
                                                     
5095 (original footnote) CR and PR at TUBULAR-C-4.
5096 (original footnote) ESTA argues imports of weld ed line pipe decreased in the most recent period,
based on data they have compiled for 2001.  ESTA Posthearing Injury Brief at 8-9.  ESTA provided extensivedocumentation regarding product entered as plate by Berg Steel Pipe Corporation into its foreign trade zone
(FTZ) – but entered for customs purposes as imports for consumption of welded line pipe – for this limited
period in a separate submission.  See ESTA submission of October 9, 2001.  We note that Berg only provided
data for interim 2001, whereas Berg has conducted similar activities in prior years included in our periodexamined.  See, e.g., Certain Cut-to-Length Steel Plate from France, India, Indonesia, Italy, Japan, and Korea ,
Invs. Nos. 701-TA-387-391 (Final) and 731-TA-816-821 (Final), USITC Pub. 3273 (Jan. 2000) at IV-5.  Thus
adjusting data for only one part of the period examined may be misleading.  In any event, even if these
quantities are excluded, the overall year-to-year trend in imports is not changed; nor is the fact that January-June2001 imports are higher than imports during the im mediately preceding six-mo nth period (July-December
2000).  Accordingly, these data do not alter our conclusion that imports increased, or (as described below) thatincreased imports are a substantial cause of the threat of serious injury.
5097 (original footnote) In 1996, the ratio of imports to production was 33.8 percent.  The ratio increased
to 36.4 percent in 1997 and 41.9 percent in 1998, fell slightly to 40.8 percent in 1999, and then increased sharply
to 55.0 percent in 2000.  The ratio of imports to production was 55.9 percent in interim 2001, comparable to the56.8 percent level in the same period of 2000.  CR at TUBULAR-11; PR at TUBULAR-8.
5098 USITC Report, Vol. I, pp. 157-158.
5099 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table TUBULAR-6 at TUBULAR-8 and Table TUBULAR-C-4.  As is visible from the graphs, the data for
2001 have not been "a nnualized" but have been left in their raw format.  The Panel finds this format sufficient to
reach a conclusion on the trends of imports in the most recent past and therefore does not take a position on thequestion of whether and how these six-month data can be "annualized", a question on which there isdisagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 763
Imports (Tons)
0500,0001,000,0001,500,0002,000,0002,500,0003,000,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
1015202530354045505560
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.231  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(f) supra .
(iii) Analysis by the Panel
Absolute imports
10.232  In the present context, the Panel does not address the contention of the European
Communities, Korea and Switzerland that the USITC was supposed to make findings on each of theWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 764
specific products it grouped together as "certain tubular products".5100  This is similar to the arguments
made by the European Communities, Korea and Switzerland that the definitions of the "imported
product" and the "domestic industry producing like … products" were erroneous.  The Panel will, inits examination of the USITC's "increased imports" finding, assess the USITC's determination on the
basis of the product identified by the USITC in th is regard without prejudice to the question of the
product/industry definition itself.
5101
10.233  The Panel believes that the USITC's determination on increased imports of welded pipe in
absolute terms5102 contains an adequate and reasoned explanation of how the facts support the
determination.  The USITC took into account the import data for each of the years of the period of
investigation and conducted a satisfactory analysis of the developments of imports.  As the USITCnoted, imports declined only from 1998 to 1999 (from 2.26 to 2.12 million short tons, i.e. by 6.2%)
and from interim 2000 to 2001 (by 1.7%)
5103, whereas all other years showed increases.  Each of these
increases was more significant than the two mentioned decreases, so that the overall evaluation is that
of a clearly discernible increase.  Against the background of the total increase from 1996 to 2000
(from 1.57 million short tons to 2.63 million short tons, i.e. by 67.5%), the subsequent decrease ininterim 2001 (by 1.7%) means that imports remained at increased levels even in the most recent past.
These facts that were listed and evaluated in the USITC Report, in the view of the Panel, do support a
conclusion that welded pipe "is being imported in (such) increased quantities".
10.234  The increase also shows a certain degree of suddenness, sharpness and significance.  The
Panel disagrees with Switzerland's contention that the increase of imports of welded pipe was"steady" and "gradual", hence "adjustable" and, therefore, not an increase satisfying the requirements
of Article 2.1 of the Agreement on Safeguards.  The Panel recognizes the possibility that, due to the
gradual and steady pattern of an increase, the domestic industry manages to adjust and, therefore,
suffers no injury.  However, this is a question to be addressed within the context of whether there is
serious injury and whether it has been caused by increased imports.  An increase in absolute termsmay even go hand in hand with an equally strong, or stronger increase of domestic production and a
flourishing domestic industry.  In such a case, there would be no relative increase, and there may not
be any causation of serious injury .  However, for the purposes of the first condition of Article 2.1 of
the Agreement on Safeguards, an absolute increase (without a relative increase) is sufficient.
10.235  The Panel also sees no relevance in the point raised by Switzerland that the increase between
1996 and 1998 was stronger and did not result in the imposition of a safeguard measure.  WTO
Members do not forego their right to impose a safeguard measure because they refrained from taking
such action in a past situation.  There is also no justification for the additional argument that, because
of an increase at a previous point in time, the more recent increase cannot be sudden and sharp enough
so as to qualify as an increase in the sense of Article 2.1 of the Agreement on Safeguards.  According
to this argument, a Member would forego the right to take a safeguard measure, if in the most distant
past, there was a very sharp and sudden increase, which is followed by a less significant increasecausing additional serious injury to the relevant domestic industry. The Panel sees no basis in
                                                     
5100 European Communities' first written submission, para. 236. European Communities' second written
submission, paras. 140 and 283-285.
5101 The Panel recalls that, for reasons of logic, it has to make this assumption in order to be able to
review the USITC's determination with a view to assessing the claim of an inconsistency with the "increasedimports" requirement itself.  The Panel notes that previous panels and the Appellate Body have operated with
similar assumptions, see, e.g., Appellate Body Report, US – Lamb , paras. 121, 172; and Panel Report, US –
Lamb , para. 8.1.
5102 USITC Report, Vol. I, p. 157.
5103 Ibid .WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 765
Article XIX:1 of GATT 1994 or in the Agreement on Safeguards for the proposition that a WTO
Member should be prohibited from applying a safeguard measure in such a scenario.
10.236  Whether the increase in the instant case was sudden enough, sharp enough, recent enough and
significant enough to cause serious injury  is a question that is appropriately addressed in the context
of causation of serious injury , not in the context of the requirement of the increase, where no well-
founded judgment in this regard can be made.  In this regard, the Panel's finding on increased imports
must be read together with its subsequent findings on the other conditions of Article 2.1 of the
Agreement on Safeguards.
10.237  The Panel also rejects the European Commun ities' contention that the USITC failed to
provide annual percentage increases and to evaluate all the trends by comparing their increases and
decreases over the period of investigation.5104  The requirement under the Agreement on Safeguards is
not to present the data in all kinds of possible ways.  Rather, the requirement is to provide an adequate
and reasoned explanation of how the facts support the conclusion about increased imports.  The Panel
believes that the USITC has complied with this requirement in this case.
Relative imports
10.238  Given the Panel's finding regarding absolute imports, there is no need to make findings on
relative imports, since such findings could not chan ge the overall result that the complainants' claims
of violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be
rejected.  Since the Panel has already disposed of the claims on the basis of absolute imports, the
Panel sees no need to examine the claims relating to relative increase.
Conclusion
10.239  The Panel consequently finds that the USITC Report contained an adequate and reasoned
explanation of how the facts support the determina tion made with respect to "increased imports" of
welded pipe with regard to absolute imports.  Th e USITC's determination that welded pipe was being
imported in "increased quantities" is not inconsistent with the requirement of Article 2.1 of theAgreement on Safeguards that the product "is being imported in (such) increased quantities".
Therefore, the Panel rejects the violation claims that have been made in this regard.
(g) FFTJ
(i) The USITC's findings
10.240  As regards increased imports of FFTJ, the USITC determined:
"We find that the statutory criterion of increased imports is met.  Imports of fittings
and flanges steadily increased in both absolute terms and relative to domestic
production during the period examined, with the largest increase occurring at the end
of the period.  Imports increased by 30.8 percent from 1996 to 2000, including 15.3
percent between 1999 and 2000.  Imports were 32.1 percent higher in interim 2001
than in the same period of 2000.
5105
                                                     
5104 European Communities' first written submission, para. 334.
5105 (original footnote) Imports were at their highest level of the period examined in 2000 (135,399
short tons), and were significantly above the level of the second highest year, 1999 (117,461 short tons).Imports in interim 2001 were 81,380 short tons, well above the level of the same period in 2000 (61,588 shortWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 766
The ratio of imports to US production also increased significantly during the period
examined, rising from 50.5 percent in 1996 to 69.7 percent in 2000, and was at its
highest full-year level in 2000.  The ratio in interim 2001 (88.8 percent) wassubstantially above the level of the same period of 2000 (59.4 percent).
5106
Thus, imports of fittings, flanges, and tool joints are entering the United States inincreased quantities."
5107
10.241  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5108
Imports (Tons)
025,00050,00075,000100,000125,000150,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
                                                                                                                                                                    
tons).  The value of total imports also increased subs tantially during the period examined (45.9 percent), and
between 1999 and 2000 (19.3 percent), and was at its highest full-year level in 2000 ($307.9 million).  The value
of imports was significantly higher in interim 2001 ($182 .3 million) than in the same period of 2000 ($144.7
million).  CR and PR at Table TUBULAR-C-6.
5106 (original footnote) CR and PR at Table TUBULAR-8.
5107 USITC Report, Vol. I, p. 171.
5108 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table TUBULAR-8 at TUBULAR-10 and Table TUBULAR-C-6.  As is visible from the graphs, the data for
2001 have not been "a nnualized" but have been left in their raw format.  The Panel finds this format sufficient to
reach a conclusion on the trends of imports in the most recent past and therefore does not take a position on thequestion of whether and how these six-month data can be "annualized", a question on which there isdisagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 767
Imports/Production ratio (Percentage)
4045505560657075808590
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.242  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(g) supra .
(iii) Analysis by the Panel
Relative imports
10.243  In the present context, the Panel does not address the contention of the European
Communities that the USITC was supposed to make findings on each of the specific products it
grouped together in its mix of heterogeneous products.5109  This is the same argument advanced by the
European Communities in the context of its claim of an erroneous definition of the "imported
product" and the "domestic industry producing like … products".  The Panel will, in its examination
of the "increased imports" finding, assess the USITC's determination using as its basis the productcategory on which it was made.  In this review, it is to be assumed that the product definition is
correct, without prejudice to the question of the product/industry definition itself.
5110
10.244  The Panel believes that the USITC's determination on increased imports of FFTJ in relative
terms5111 contains an adequate and reasoned explanation of how the facts support the determination.
The USITC noted how much imports, relative to domestic production, had increased during the entireperiod of investigation and assessed the significance of that increase.  The USITC also noted that the
end of the period of examination showed the most significant increases (from 50.5% to 69.7% in 2000
and from 59.4% to 88.8% from interim 2000 to interim 2001.  Also, in the light of the fact that only
                                                     
5109 European Communities' first written submission, para. 344.
5110 The Panel recalls that, for reasons of logic, it has to make this assumption in order to be able to
review the USITC's determination with a view to assessing the claim of an inconsistency with the "increase"
requirement itself.  The Panel notes that previous panels and the Appellate Body have operated with similar
assumptions, see, e.g., Appellate Body Report, US – Lamb , paras. 121, 172; and Panel Report, US – Lamb ,
para. 8.1.
5111 USITC Report, Vol. I, p. 171.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 768
the period from 1996 to 1997 showed a decrease (from 50.5% to 47.7%) and that this decrease was
less significant than each of the year-to-year increases in the period thereafter, the Panel considers that
the increase found by the USITC is of a recent nature.  The facts listed and evaluated in the USITCReport, in the view of the Panel, support a conclusion that FFTJ "is being imported in (such)
increased quantities".
10.245  The increase also shows a certain degree of sharpness, suddenness and significance,
particularly in the very recent past.  The Panel disagrees with the European Communities' contention
that the USITC failed to explain why the "steady increase" in imports of FFTJ was "sharp and
significant enough so as to cause serious injury or a threat thereof".
5112
10.246  Whether the increase in the instant case was sharp and significant enough to cause serious
injury or threat thereof  is a question that is appropriately addressed in the context of causation of
serious injury or threat thereof , not in the context of the requirement of the increase, where no well-
founded judgment in this regard can be made.  In this regard, the Panel's finding on increased imports
must be read together with its subsequent findings on the other conditions of Article 2.1 of the
Agreement on Safeguards.
10.247  The USITC's determination that FFTJ was being imported in "increased quantities" is not
inconsistent with the requirement of Article 2.1 Agreement on Safeguards that the product "is being
imported in (such) increased quantities".  The Panel rejects the violation claims made in this regard.
Absolute imports
10.248  Given the Panel's finding regarding relative imports, there is no need to make findings on
absolute imports, since such findings could not change  the overall result that the complainants' claims
of violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be
rejected.  Since the Panel has already disposed of the claims on the basis of relative imports, the Panel
sees no need to examine the claims relating to absolute increase.
Conclusion
10.249  The Panel consequently finds that the USITC Report contained an adequate and reasoned
explanation of how the facts support the determina tion made with respect to "increased imports" of
FFTJ with regard to relative imports.  The USITC's determination that FFTJ was being imported in
"increased quantities" is not inconsistent with the requirement of Article 2.1 of the Agreement on
Safeguards that the product "is being imported in (such) increased quantities".  Therefore, the Panelrejects the violation claims made in this regard.
(h) Stainless steel bar
(i) The USITC's findings
10.250  As regards increased imports of stainless steel bar, the USITC determined:
"We find that the statutory criterion of increased imports is met.
In terms of quantity, imports of stainless bar and light shapes increased by 53.8
percent during the five full-years of the period of investigation, growing from 97.9
                                                     
5112 European Communities' first written submission, para. 344.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 769
thousand short tons in 1996 to 150.6 thousand short tons in 2000.5113  Although the
quantity of imports fluctuated somewhat (declining slightly in 1998 and 1999 from its
level in 1997), a rapid and dramatic increase in import quantity occurred during thelast full-year of the period of investigation, when imports of stainless bar grew by 44
thousand short tons.
5114  The quantity of imports declined between interim 2000 and
interim 2001, dropping from 83.4 thousand short tons to 69.2 thousand short tons.5115
The ratio of imports of stainless steel bar to domestic production also increased
significantly during the period, growing from 51.8 percent in 1996 to 84.1 percent in
2000, with the largest single percentage increase in the ratio (19.3 percentage points)occurring in 2000.
5116  The ratio of imports to domestic production decreased from
87.9 percent in interim 2000 to 84.6 percent in interim 2001.5117
In sum, imports of bar and light shapes increased significantly, both in quantity terms
and as a ratio to domestic production, between 1996 and 2000, with the largest singleincrease in imports occurring during the last full-year of the period.  Although there
was a decline in imports in terms of quantity and as a ratio to domestic production
between interim 2000 and interim 2001, we find that the first statutory criterion is
satisfied."
5118
10.251  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5119
                                                     
5113 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.
5114 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.
5115 (original footnote) CR and PR at Tables STAINLESS-6 & STAINLESS-C-4.
5116 (original footnote) CR and PR at Table STAINLESS-6.
5117 (original footnote) CR and PR at Table STAINLESS-6.
5118 USITC Report, Vol. I, pp. 205-206.
5119 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table STAINLESS-6 at STAINLESS-11 and Table STAINLESS-C-4.  As is visible from the graphs, the data
for 2001 have not been "a nnualized" but have been left in their raw format.  The Panel finds this format
sufficient to reach a conclusion on the trends of impor ts in the most recent past and therefore does not take a
position on the question of whether and how these six-month data can be "annualized", a question on whichthere is disagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 770
Imports (Tons)
020,00040,00060,00080,000100,000120,000140,000160,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
4045505560657075808590
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.252  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(h) supra .WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 771
(iii) Analysis by the Panel
Relative imports
10.253  The Panel believes that the USITC's determination on increased imports of stainless steel bar,
relative to domestic production5120, contains an adequate and reasoned explanation of how the facts
support the determination.  The USITC found that the "ratio of imports of stainless steel bar to
domestic production increased significantly during the period, growing from 51.8 percent in 1996 to
84.1 percent in 2000".  The USITC also noted that "the largest single percentage increase in the ratio
(19.3 percentage points)" occurred in 2000.  According to the USITC, the slight decrease in the most
recent past (from 87.9% in interim 2000 to 84.6% in interim 2001) was not an obstacle for finding
that the requirement of increased imports was satisfied.5121
10.254  The Panel considers this to be a satisfactory explanation of how the facts support the
determination.  In particular, in the light of the significant increase from 1999 to 2000 (19.3
percentage points), the decline by 3.3 percentage points from interim 2000 to interim 2001 is, contrary
to what the European Communities has stated5122, insignificant.  It simultaneously does not detract
from a finding that imports, relative to domestic production, remain at high levels so that stainlesssteel bar "is being imported in (such) increased quantities".
10.255  The Panel is satisfied that the increase of relative imports of stainless steel bar, given the
sharp increase from 1999 to 2000 shows a certain degree of recentness, sharpness, suddenness and
significance.  Whether the increase by 40.6% is sudden, sharp and significant enough as to cause
serious injury  is a question that is appropriately to be addressed in the context of  causation of serious
injury , not in the context of the condition of the increase, where no well-founded judgment in this
regard can be made.  In this regard, the Panel's finding on increased imports must be read together
with its subsequent findings on the other conditions of Article 2.1 of the Agreement on Safeguards.
Absolute imports
10.256  Given the Panel's finding regarding relative imports, there is no need to make findings on
absolute imports, since such findings could not change  the overall result that the complainants' claims
of violation of Article 2.1 of the Agreement on Safeguards on the lack of increased imports are to be
rejected.  Therefore, since the Panel has already disposed of the claims on the basis of relative
imports, the Panel sees no need to examine the claims relating to absolute increase.
Conclusion
10.257  The Panel consequently finds that the USITC Report contained an adequate and reasoned
explanation of how the facts support the determina tion made with respect to "increased imports" of
stainless steel bar with regard to relative imports.  The USITC's determination that stainless steel bar
was being imported in "increased quantities" is not inconsistent with the requirement of Article 2.1 of
the Agreement on Safeguards that the product "is being imported in (such) increased quantities".
Therefore, the Panel rejects the violation claims made in this regard.
                                                     
5120 USITC Report, Vol. I, pp. 101-102.
5121 USITC Report, Vol. I, p. 206.
5122 European Communities' first written submission, para. 350.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 772
(i) Stainless steel wire
(i) The USITC's findings
10.258  As regards increased imports of stainless steel wire, the USITC determined:
"We find that the statutory criterion of increased imports is met.
In quantity terms, imports of stainless wire increased from 27.3 thousand short tons in
1996 to 31.3 thousand short tons in 2000.5123  The quantity of stainless wire imports
fluctuated somewhat during the period, increasing from 27.3 thousand short tons in
1996 to 29.9 thousand short tons in 1997 and then to 30.7 thousand short tons in
1998.5124  The quantity of imports then declined by 19.4 percent, to 24.7 thousand
short tons, in 1999.  However, the single largest increase in import quantity occurredbetween 1999 and 2000, when imports increased by 26.5 percent, from 24.8 thousand
short tons to 31.3 thousand short tons.
5125  The quantity of stainless wire imports
increased between interim 2000 and 2001, as import volumes grew from
16.0 thousand short tons to 16.5 thousand short tons.5126
The ratio of stainless steel wire imports to domestic production exhibited a similar
trend during the period of investigation.  The ratio remained relatively stable
(between 31 and 32 percent) during the first three years of the period but then
declined to 23.9 percent in 1999.5127  The ratio of stainless wire imports to domestic
production then increased by 5.5 percentage points, to 29.4 percent, in 2000.5128  The
ratio of imports to domestic production increased to its highest level during theperiod, 38 percent, in interim 2001.
5129
In sum, the record indicates that imports of stainless wire increased in quantity termsand as a ratio to domestic production during the period of investigation.  Accordingly,
we find that the first statutory criterion is satisfied."
5130 5131
10.259  The trends in imports, both in absolute and in  relative terms, are shown in the following
graphs illustrating the data relied upon by the USITC:5132
                                                     
5123 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.
5124 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.
5125 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.
5126 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.
5127 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7
5128 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.
5129 (original footnote) CR and PR at Table STAINLESS-9 & STAINLESS-C-7.
5130 (original footnote) Chairman Koplan does not join the remainder of this section of the opinion.
5131 USITC Report, Vol. I, pp. 234-235.
5132 The data represented in the following two graphs are contained in the USITC Report, in particular
in Table STAINLESS-9 at STAINLESS-14 and Table STAINLESS-C-7.  As is visible from the graphs, the data
for 2001 have not been "a nnualized" but have been left in their raw format.  The Panel finds this format
sufficient to reach a conclusion on the trends of impor ts in the most recent past and therefore does not take a
position on the question of whether and how these six-month data can be "annualized", a question on whichthere is disagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 773
Imports (Tons)
05,00010,00015,00020,00025,00030,00035,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
Imports/Production ratio (Percentage)
05101520253035404550
1996 1997 1998 1999 2000 2001
YearsPercentage
Annual data
Semi-Annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.260  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(i) as well as VII.O.1 and 3 supra .
(iii) Analysis by the Panel
10.261  At the outset, the Panel notes that, in its defence, the United States relies not only on the
increased imports findings reached by Commissioner Koplan, but also on those made byCommissioners Bragg and Devaney.  The former made findings on stainless steel wire as a separate
product whereas the latter two made affirmative find ings with regard to a broader product category
than stainless steel wire (stainless steel wire and rope).  In this regard, the situation is equivalent to
that encountered in the context of tin mill products, because the other Commissioners who definedWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 774
stainless steel wire as a separate product, did not reach an affirmative result.  In the March
Proclamation, the President did not select any of the various affirmative determinations as the basis of
the decision to impose the safeguard measure on stainless steel wire.  Rather, pursuant to domesticlaw, the President "decided to consider the determinations of the groups of commissioners voting in
the affirmative with regard to [tin mill products and stainless steel wire] to be the determination of the
USITC".
5133  It, therefore, is apparent that the President based his determination on the findings of all
three Commissioners (Bragg, Devaney and Koplan ), although those three Commissioners did not
perform their analysis on the basis of the same like product definition.
10.262  For the reasons set out above in relation to the USITC's determination(s) on tin mill5134, the
Panel believes that the Agreement on Safeguards does not permit the combination of findings assupporting a determination, if these findings were reached on the basis of differently defined products.
If such findings cannot be reconciled one with another (as a matter of substance), they cannot
simultaneously form the basis of a determination.  The Panel therefore believes that there is a
violation of the obligation under Articles 2.1 and 3.1 of the Agreement on Safeguards to provide a
reasoned and adequate explanation of how the facts support the determination, if that explanationconsists of alternative explanations departing from each other and which, given the different product
basis, cannot be reconciled as a matter of substance.
10.263  Thus, the USITC Report did not contain a determination supported by a reasoned and
adequate explanation of how the facts support the determination that imports of stainless steel wire
have increased, contrary to Articles 2.1 and 3.1 of the Agreement on Safeguards.
(j) Stainless steel rod
(i) The USITC's findings
10.264  As regards increased imports of stainless steel rod, the USITC determined:
"We find that the statutory criterion of increased imports is met.
In quantity terms, imports of stainless rod increased by 36.1 percent during the period
of investigation, growing from 60.5 thou sand short tons in 1996 to 82.3 thousand
short tons in 2000.
5135  Although the quantity of imports fluctuated somewhat during
the period of investigation, the largest increase in terms of quantity occurred in 2000,
the last full-year of the period of investigation, when import quantities increased by
more than 25 percent, growing from 65.9 thousand short tons to 82.3 thousand shorttons.
5136  The quantity of stainless rod imports declined by 31.3 percent between
interim 2000 and 2001, falling from 45.6 thousand short tons to 31.4 thousand short
tons.5137  We note, however, that the market share of imports remained essentially
stable in interim 2001, declining slightly from *** percent interim 2000 to ***
percent in interim 2001.5138
                                                     
5133 Proclamation No. 7529 of 5 March 2002, Federal Register, Vol. 67, No. 45, p. 10553.
5134See supra paras. 10.191-10.200.
5135 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.
5136 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.
5137 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.
5138 (original footnote) CR and PR at Table STAINLESS-7 & STAINLESS-C-5.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 775
The ratio of imports of stainless steel rod to domestic production also increased
significantly during the period, increasing from *** percent in 1996 to *** percent in
2000.  While the ratio fluctuated somewhat during the period of investigation, thelargest single increase in the ratio (*** percentage points) occurred in 2000, the last
full-year of the period of investigation.
5139  The ratio of imports to domestic
production decreased from *** percent of domestic production in interim 2000 to ***
percent in interim 2001.5140
In sum, imports of stainless rod increased significantly, both in quantity terms and asa ratio of domestic production, between 1996 and 2000, with a rapid and dramatic
increase in imports occurring during the last full-year of the period of investigation.Accordingly, we find that the first statutory criterion is satisfied."
5141
10.265  The trends in imports, in absolute terms, are shown in the following graph illustrating the data
relied upon by the USITC:5142
Imports (Tons)
010,00020,00030,00040,00050,00060,00070,00080,00090,000
1996 1997 1998 1999 2000 2001
YearsTons
Annual data
Semi-annual (Jan-Jun) data
(ii) Claims and arguments of the parties
10.266  The arguments of the parties regarding the USITC's findings are set out in Sections VII.F.4
and 5(j) supra .
                                                     
5139 (original footnote) CR and PR at Table STAINLESS-7.
5140 (original footnote) CR at Table STAINLESS-7.
5141 USITC Report, Vol. I, pp. 214-215.
5142 The data represented in the following graph are contained in the USITC Report, Table
STAINLESS-7 at STAINLESS-12 and Table STAINLESS-C-5.  As is visible from the graphs, the data for 2001
have not been "annualized" but have been left in their raw format.  The Panel finds this format sufficient to
reach a conclusion on the trends of imports in the most recent past and therefore does not take a position on thequestion of whether and how these six-month data can be "annualized", a question on which there isdisagreement between the parties.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 776
(iii) Analysis by the Panel
Absolute imports
10.267  The Panel believes that the USITC's determination on increased imports of stainless steel rod,
as published in its Report5143, does not contain an adequate and reasoned explanation of how the facts
support the determination.  The USITC relied on the increase occurring between 1996 and 2000, with
the largest increase from 1999 to 2000 (25%).  The decline between interim 2000 and interim 2001
was acknowledged, but the USITC did not give an explanation why it nevertheless found that there
was an increase of imports in absolute numbers.  This failure is particularly serious since this decrease
(by 31.3%) was sharper than the preceding increase, and, as a matter of proportion, offset the increase
of the two preceding years.
10.268  The only additional aspect adduced by the USITC in response to the decrease in interim 2001
was the nearly stable market share of imports.  The market share, however, is the relative notion of
imports vis-à-vis  domestic sales, and is not related to absolute import volumes.  In light of the
decrease in the most recent period and the overall developments between 1996 and interim 2001
which can be best described as a double up-and-down movement (returning to the low point at theend), the Panel does not believe that the facts support a finding that, at the moment of the
determination, stainless steel rod "is being imported in (such) increased quantities".
10.269  It may well be that the increases occurring from 1996 to 1997, or from 1998 to 2000, taken by
themselves, would qualify as an increase satisfying the criteria of Article 2.1 of the Agreement on
Safeguards.  However, at the time of the determination, the trends of imports showed a significantrecent decline, so that these past increases can no longer serve as the basis that stainless steel rod "is
being imported in (such) increased quantities".
10.270  The Panel notes the argument made by the United States, that even if imports followed a
pattern of successive surging and receding, this could cause serious injury to the domestic industry,
such as to warrant a safeguard measure.
5144  In the eyes of the Panel, it is true that, despite a return of
imports to a low level and, therefore, the absence of a product "being imported in … increased
quantities", it is, nevertheless, conceivable that the intervening increases, or the shock-therapy of
increases and decreases have caused serious injury to the domestic industry.  In the Panel's view, the
right to impose a safeguard exists only when, in addition to serious injury, and causation, there is also
an increase in imports and this increase has to be recent.  The legal framework contained in theAgreement on Safeguard requires, in addition to the causation of serious injury that the product "is
being imported in … increased quantities".
Relative imports
10.271  The Panel also considers that the USITC's determination on increased imports of stainless
steel rod relative to domestic production5145 does not contain an adequate and reasoned explanation of
how the facts support the determination.  The USITC performed an analysis which is similar to that
rejected by the Panel in the context of absolute imports.  What is more, the USITC did not provideany of the data on which it relied.  All such numbers were replaced by asterisks.  Therefore, there is
no explanation of how the facts support a conclusion of increased imports because there are no facts
supporting any conclusion.
                                                     
5143 USITC Report, Vol. I, pp. 214-215.
5144 United States' first written submission, paras. 295-296 and 300.
5145 USITC Report, Vol. I, p. 215.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 777
10.272  The Panel agrees that a competent authority is not barred from relying on data provided by
individual parties on a confidential basis in the course of the investigation.  Article 3.2 of the
Agreement on Safeguards contains an obligation to treat such data as confidential, i.e. not to discloseit (without permission).  In this sense, the Panel, therefore, takes a position similar to that of the
Appellate Body in Thailand – H-Beams .
5146  Competent authorities may rely on confidential data,
even if these data are not disclosed to the public in their Reports.
10.273  However, Article 3.1 of the Agreement on Safeguards contains the obligation that competent
authorities "publish a report setting forth their findings and reasoned conclusions reached on all
pertinent issues of fact and law."  Article 4.2(c) adds the obligation that competent authorities
"publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case underinvestigation as well as a demonstration of the relevance of the factors examined".  On the basis of
these obligations and the obligation under Article 2.1, to make a determination, inter alia , that
imports of the product in question have increased, competent authorities must provide a reasoned and
adequate explanation of how the facts support th e conclusion.  In the view of the Panel, this
requirement can, in an individual case, be limited by the obligation of Article 3.2 to protectconfidential data.
10.274  However, we believe that Article 3.1 and 3.2 can be interpreted harmoniously.
5147  T h e
obligation of Article 3.1 cannot be interpreted so as to imply a violation of Article 3.2.  In other
words, a competent authority is obliged to provide these explanations to fullest extent possible
without disclosing confidential information.  This implies that if there are ways of presenting data in amodified form (e.g. aggregation or indexing), which protects confidentiality, a competent authority is
obliged to resort to these options.  Conversely, the provision of no data at all, is permitted only when
all these methods fail in a particular case.
10.275  The Panel believes that even if competent authorities are permitted not to disclose the data
yet, nevertheless, rely on it, they are still required  to provide through means other than full disclosure
of that data, a reasoned and adequate explanation.  This obligation could be complied with through the
kind of explanation that the USITC has provided on page 215 of its report
5148, i.e. an explanation in
words and without numbers.  However, this obligati on also includes an explanation by the competent
authority of why there was no possibility of presenting any facts in a manner consistent with the
obligation of protecting confidential information.  That explanation was not provided in the instantcase.
                                                     
5146 Appellate Body Report, Thailand – H-Beams , paras. 111, 112 and 119.
5147 See Appellate Body Report, Korea – Dairy , para. 81: "In light of the interpretive principle of
effectiveness, it is the duty of any treaty interpreter to 'read all app licable provisions of a treaty in a way that
gives meaning to  all of them, harmoniously.' "  See also Appellate Body Report, Argentina – Footwear (EC) ,
para. 81;  Appellate Body Report, US – Gasoline , p. *23; Appellate Body Report,  Japan – Alcoholic
Beverages II , p. *12;  and Appellate Body Report, India – Patents (US) , para. 45.
5148 For instance, at page 215 of the USITC's Report, Vol. I, one can read the following analysis
protecting confidential information:
"The ratio of imports of stainless steel rod to  domestic production also increased significantly
during the period, increasing from *** percent in 1996 to *** percent in 2000.  While the ratiofluctuated somewhat during the period of investigation, the largest single increase in the ratio
(*** percentage points) occurred in 2000, the last full year of the period of investigation.  The
ratio of imports to domestic production decreased from *** percent of domestic production ininterim 2000 to *** percent in interim 2001." (Footnotes omitted).WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 778
10.276  The Panel also believes that, irrespective of the confidentialization of the numbers, the
USITC's determination on increased imports of stainless steel rod relative to domestic production, as
published in its Report5149, does not contain an adequate and reasoned explanation of how the facts
support the determination.  The USITC relied on a "significant" increase occurring between 1996 and
2000, with the largest increase from 1999 to 2000, the last full-year investigated.  The decline
between interim 2000 and interim 2001 was acknowledged, as was the fact that the ratio fluctuated
over the period of investigation.  Given these fluctuations and the most recent decline, the Panel does
not believe that the USITC gave a reasoned and adequate explanation supporting that stainless steel
rod, relative to domestic production "is being imported in increased quantities".  This would at least
have required some indication that relative imports, at the end of the period of investigation, remain atincreased  levels, for example, because the decline in th e interim period was small in comparison with
the increase until 2000.  Such indication does not exist in the present case where the USITC, much as
in the context of absolute imports, failed to place the existing, intervening increases in the context of
previous and subsequent decreases.  The only indication that remains is the stated increase from 1996
to 2000, but 2000 is not the end of the period investigated, so that the mentioned statement cannotprovide a basis for the conclusion that stainless steel rod "is being imported" in increased quantities,
relative to domestic production.
Conclusion
10.277  The Panel consequently finds that the USITC Report did not provide an adequate and
reasoned explanation of how the facts support the determination made with respect to "increased
imports" and that the USITC's determination that stainless steel rod was being imported in "increased
quantities" is inconsistent with the requirement of Article 2.1 of the Agreement on Safeguards that the
product "is being imported in (such) increased quantities".
E. CLAIMS RELATING TO CAUSATION
10.278  As a preliminary point, the Panel notes that it has assumed for the purposes of its
consideration of the issue of causation, that serious injury or threat thereof to all relevant domestic
producers of the like or directly competitive products within the meaning of Article 4.2(a) of the
Agreement on Safeguards, existed with respect to each of the safeguard measures at issue. The Panel
has also assumed that the relevant domestic producers had been correctly defined, within the meaning
of Article 4.1(c) of the Agreement on Safeguards.  Of course, if there was no serious injury (or threatthereof) at all, serious injury could not have been caused by increased imports.
1. Claims and arguments of the parties
10.279  The arguments of the parties are set out in Section VII.H.1-3 supra .   I n  s u m m a r y ,  t h e
complainants claim that: (i) the USITC determinatio n(s) failed to establish the necessary causal link
between increased imports and serious injury for each of the US measures; and (ii) the USITC failed
to comply with the obligation that injury from other factors not be attributed to imports, contrary to
the requirements of Article XIX of GATT 1994, and Articles 2.1 and 4.2(b) of the Agreement onSafeguards.
                                                     
5149 USITC Report, Vol. I, pp. 214-215.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 779
2. Relevant WTO provisions5150
10.280  Article 2.1 of the Agreement on Safeguards provides that:
"A Member may apply a safeguard measure to a product only if that Member has
determined, pursuant to the provisions set out below, that such product is being
imported into its territory in such increased quantities, absolute or relative to domestic
production, and under such conditions as to cause  or threaten to cause serious injury
to the domestic industry that produces like or directly competitive products."
(footnote omitted)
10.281  Article 4.2(a) provides that:
"In the investigation to determine whether increased imports have caused or are
threatening to cause serious injury to a domestic industry under the terms of this
Agreement, the competent authorities shall evaluate all relevant factors of an
objective and quantifiable nature having a bearing on the situation of that industry, in
particular, the rate and amount of the increase in imports of the product concerned in
absolute and relative terms, the share of the domestic market taken by increasedimports, changes in the level of sales, production, productivity, capacity utilization,
profits and losses, and employment."
10.282  In addition, Article 4.2(b) provides that:
"The determination referred to in subparagraph (a) shall not be made unless this
investigation demonstrates, on the basis of objective evidence, the existence of thecausal link between increased imports of the product concerned and serious injury or
threat thereof.  When factors other than increased imports are causing injury to the
domestic industry at the same time, such injury shall not be attributed to increased
imports."
3. Standard of review
10.283  We recall that, as the Appellate Body has stated, the precise nature of the examination to be
conducted by a panel in reviewing a claim under Article 4.2 of the Agreement on Safeguards stems in
part from the panel's obligation to make an "objective assessment of the matter" under Article 11 of
the DSU and, in part, from the obligations imposed by Article 4.2.
5151  Article 11 requires us to make
an objective assessment of the facts and the applicability and conformity of the measures in questionin this dispute with the Agreement on Safeguards.
5152
                                                     
5150 The Panel is aware that Article XIX is relevant to the issue of causation but that Article 2.1 and, in
particular, Article 4.2(b) of the Agreement on Safeguards address the issue of causation more specifically.  ThePanel is also aware that some complainants have raised causation claims pursuant to Article XIX of GATT aswell as pursuant to the Agreement on Safeguards.  However, the Panel considers that it need not to examine therelationship between Article XIX and the Agreement on Safeguards with regard to the causation to resolve thecomplainants' claims relating to causation.  Therefore, the Panel has addressed the issue of causation by
referring exclusively to the relevant provisions contained in the Agreement on Safeguards.  We believe that this
approach does not diminish the rights of the parties in this dispute.
5151 Appellate Body Report, US – Lamb , para. 105.
5152 Appellate Body Report, Argentina – Footwear (EC) , para. 120.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 780
10.284  In addition, the Appellate Body has provided us with specific guidance with respect to the
application of the standard of review in cases involving claims under Article 4 of the Agreement on
Safeguards.  In particular, in Argentina – Footwear (EC) , the Appellate Body stated that the Panel in
that case was obliged by the terms of Article 4 to assess whether the competent authorities had
examined all the relevant facts and had provided a reasoned explanation.5153  In US – Lamb , the
Appellate Body added that a panel can assess whether the competent authority's explanation for its
determination is reasoned and adequate only if the panel critically examines that explanation in depth
and in the light of the facts before the panel.  The Appellate Body stated that, therefore, panels must
review whether the competent authorities' explanation fully addresses the nature, and, especially, the
complexities, of the data, and responds to other plausible interpretations of that data.  A panel mustfind, in particular, that an explanation is not reasoned, or is not adequate, if some alternative
explanation of the facts is plausible, and if th e competent authorities' explanation does not seem
adequate in the light of that alternative explanation.
5154  Further, the Appellate Body in US – Line Pipe
stated that a mere assertion that injury caused by other factors has not been attributed to increased
imports does not establish explicitly with a reasoned and adequate explanation that injury caused byfactors other than increased imports was not attributed to increased imports.
5155
10.285  We have further guidance as to how to apply the standard of review in relation to the
competent authorities' causation analysis.  In particular, in Argentina – Footwear (EC) , the panel5156
stated:
"Applying our standard of review, we wi ll consider whether Argentina's causation
analysis meets these requirements on the basis of (i) whether an upward trend in
imports coincides with downward trends in the injury factors, and if not, whether a
reasoned explanation is provided as to why nevertheless the data show causation; (ii)
whether the conditions of competition in the Argentine footwear market between
imported and domestic footwear as analysed  demonstrate, on the basis of objective
evidence, a causal link of the imports to any injury; and (iii) whether other relevant
factors have been analysed and whether it is established that injury caused by factors
other than imports has not been attributed to imports."5157
4. Analysis by the Panel
10.286  The first sentence of Article 4.2(b) of the Agreement on Safeguards provides that, in
determining whether increased imports have caused or are threatening to cause serious injury to a
domestic industry under Article 4.2(a), a competent authority must demonstrate, "on the basis of
objective evidence, the existence of the causal link between increased imports of the product
concerned and serious injury or threat thereof."
10.287  In US – Wheat Gluten , the Appellate Body interpreted the reference to "the causal link" in
Article 4.2(b) and concluded that it effectively requires a finding of a "genuine and substantial
relationship of cause and effect" between increased imports and serious injury.5158  Nevertheless,
                                                     
5153 Appellate Body Report, Argentina – Footwear (EC) , para. 121.
5154 Appellate Body Report, US – Lamb , para. 106.
5155 Appellate Body Report, US – Line Pipe , para. 220.
5156 While the Appellate Body in Argentina – Footwear  (EC)  did not specifically comment on these
causation findings, it did state that it saw "no error in the Panel's interpretation of the causation requirements, or
in its interpretation of Article 4.2(b) of the Agreement on Safeguards ":  Appellate Body Report, Argentina –
Footwear (EC),  para. 145.
5157 Panel Report, Argentina – Footwear  (EC ), para. 8.229.
5158 Appellate Body Report, US – Wheat Gluten , para. 69.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 781
questions arise as to what is entailed in such a requirement.  More particularly, how should the first
and second sentences of Article 4.2(b) be operationalized to meet this requirement?  The Panel
considers that important issues to be addressed in th is regard include the following.  The first is the
standard or threshold that should apply in dete rmining whether or not a "genuine and substantial
relationship of cause and effect" exists.  The second is the issue of how (that is, using which analytical
tools) a causal link can be established for the purposes of Article 4.2(b).  The third is concerned with
the non-attribution requirement provided for in the second sentence of Article 4.2(b) – how it is to be
performed and its relationship with the overall demonstration of a causal link.
(a) Standard for assessment of the "causal link"
10.288  We commence with the first issue referred to above, namely the standard or threshold that
should apply in determining whether or not a "genuine and substantial relationship of cause and
effect" exists.  At the outset, the Panel notes that the Appellate Body in US – Wheat Gluten  found that
"[T]he first sentence of Article 4.2(b) … provides that a determination 'shall not be
made unless [the] investigation demonstrates … the existence of the causal link
between increased imports … and serious injury or threat thereof.' (emphasis added)Thus, the requirement for a determination, under Article 4.2(a), is that 'the causal link'
exists.  The word 'causal' means 'relating to a cause or causes', while the word 'cause',
in turn, denotes a relationship between, at least, two elements, whereby the first
element has, in some way, 'brought about',  'produced' or 'induced' the existence of the
second element.
5159  The word 'link' indicates simply that increased imports have
played a part in, or contributed to, bringing about serious injury so that there is a
causal 'connection'5160 or 'nexus' between these two elements.  Taking these words
together, the term 'the causal link' denotes, in our view, a relationship of cause and
effect such that increased imports contribute to 'bringing about', 'producing' or
'inducing' the serious injury.  Although that contribution must be sufficiently clear asto establish the existence of 'the causal link' required, the language in the first
sentence of Article 4.2(b) does not suggest that increased imports be the sole cause of
the serious injury, or that ' other  factors' causing injury must be excluded from the
determination of serious injury.  To the contrary, the language of Article 4.2(b), as a
whole, suggests that 'the causal link' be tween increased imports and serious injury
may exist, even though other factors are also contributing, 'at the same time', to the
situation of the domestic industry ."
5161
10.289  In US – Lamb , the Appellate Body reiterated that the Agreement on Safeguards does not
require that increased imports alone be capable of causing, or threatening to cause, serious injury.5162
In addition, the Appellate Body in US – Wheat Gluten   found that the causation requirement of
Article 4.2(b) can be met where serious injury is caused by the interplay of increased imports and
other factors. 5163
10.290  It is clear to the Panel that, in order to meet the causation requirements in Article 4.2(b), it is
not necessary for the competent authority to show that increased imports alone  must be capable of
                                                     
5159 (original footnote) The New Shorter Oxford English Dictionary , supra , footnote 43, Vol. I, pp. 355
and 356.
5160 (original footnote) Ibid ., p. 1598.
5161 Appellate Body Report, US – Wheat Gluten , para. 67.
5162 Appellate Body Report, US – Lamb , paras. 165-170.
5163 Appellate Body Report, US – Wheat Gluten , paras. 67-68.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 782
causing serious injury. 5164  Rather, if a number of factors have caused serious injury, a causal link may
be demonstrated if the increased imports have, in some way, contributed to "bringing about",
"producing" or "inducing" the serious injury.  In this regard, the Appellate Body in US – Wheat
Gluten concluded that the contribution must be sufficiently clear as to establish the existence of "the
causal link" required5165 but rejected the panel's conclusion that the serious injury must be caused by
the increased imports alone and that the increased imports had to be sufficient to cause "serious"
injury.5166
10.291  The Panel notes that the United States has argued that, on the basis of the standard dictionary
definitions of the words "substantial" and "important", the words have essentially the same meaning
when used to define the weight that must be given to a particular factor in a decision or ananalysis.
5167 The United States further argues that, therefore, by requiring the USITC to find that
increased imports are an "important" cause of injury and as important as any other cause, the United
States' safeguards statute ensures that the USITC finds a "genuine and substantial" causal link
between imports and serious injury before issuing an affirmative safeguards finding.5168
10.292  The Panel considers that the mere fact that the literal definitions of "important" and
"substantial" may be considered by some to be "equivalent" is not necessarily relevant.  In our view,
what is important for this Panel is whether the test applied  by the USITC for each of the safeguard
measures at issue meets the standard or threshold prescribed by the requirement that there be a
"genuine and substantial" relationship of cause and effect between the increased imports and the
serious injury.  We will discuss this further in the measure-by-measure analysis, which we undertakebelow.
10.293  Finally, the Panel recalls that serious injury within the meaning of Article 4.2(a) of the
Agreement on Safeguards is to be determined wi th reference to the "overall impairment in the
position of the domestic industry".  Similarly, as further developed below, we believe that pursuant to
Articles 2 and 4 of the Agreement on Safeguards, a competent authority must determine whether"overall", a genuine and substantial relationship of cause and effect exists between increased imports
and serious injury suffered by the relevant domestic producers.
(b) Demonstration of a causal link
10.294  We proceed with the second issue referred to above, namely the question of how a causal link
can be demonstrated for the purposes of Article 4.2(b) of the Agreement on Safeguards.  The Panelnotes first that Article 4.2(b) does not prescribe the use of any particular methods or analytical tools
for demonstrating a causal link.
5169  The Panel is of the view that it is for the competent authority to
decide the method it considers most appropriate in making a causal link determination.  While the
methods to determine causal link are not prescribed  by Article 4.2(b), the competent authority should
be encouraged to perform this analysis as thoroughly as the circumstances require.  Whatever tool or
method is used, it must be capable of determining whether or not a genuine and substantial
relationship of cause and effect exists between the increased imports and the serious injury sufferedby the relevant domestic producers.
                                                     
5164 Appellate Body Report, US – Wheat Gluten , para. 70.
5165 Appellate Body Report, US – Wheat Gluten , paras. 66 and 69.
5166 Appellate Body Report, US – Wheat Gluten , para. 61 ff and 79.
5167 United States' first written submission, paras. 442 and 443.
5168 United States' first written submission, paras. 442 and 443.
5169 Panel Report, Korea – Dairy , para. 7.96.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 783
10.295  This dispute raises the issue of the role that analyses of coincidence and conditions of
competition must or may play in the demonstration of a causal link under Article 4.2(b).  More
particularly, the Panel considers that this dispute raises the issue of whether a competent authoritymust  undertake a coincidence analysis when determining whether a causal link exists between
increased imports and serious injury.  We need to consider this issue because for some of the
measures that are the subject of our review in this case, the USITC did not perform a coincidence
analysis.  Rather, the USITC limited itself to an analysis of the conditions of competition.  We note in
this regard that the USITC did not in its Report explicitly make a distinction between coincidence and
conditions of competition analyses.  Both types of analyses were undertaken by the USITC either
individually or in conjunction in the section of the USITC Report containing its causation analysis.
10.296  Indeed, the characterization of the analyses undertaken by the USITC as coincidence and/or
conditions of competition analyses is something that was done by the Panel for a number of reasons,
which are further elaborated below.  First, we note that the Agreement on Safeguards does not
prescribe how causal link should be demonstrated.  At the same time, WTO jurisprudence indicates
that coincidence is central to a causation analysis.  In this regard, a number of complainants haveargued that the failure by the USITC to undertake a coincidence analysis in relation to some of the
safeguard measures was fatal.  Finally, the Panel is of the view that tools other than a coincidence
analysis, such as a conditions of competition analysis, could also be used to establish a causal link
under Article 4.2(b).  We, therefore, developed an analytical framework to assess whether, in light of
the circumstances of the causation determinations for each of the measures, the USITC demonstrated,through a reasoned and adequate explanation, that the facts supported its findings that causation
existed.  The Panel explains hereafter its understanding of what is entailed in coincidence and
conditions of competition analyses.  As a preliminary point, the Panel notes that in making this
distinction between the types of analyses undertaken by the USITC, we have looked at the substance
of the analyses undertaken rather than the labels used by the USITC in its Report.
(i) Coincidence
10.297  We first consider the role that a coincidence analysis plays in the context of the causal link
analysis that is demanded by Article 4.2(b) of the Agreement on Safeguards.  In this regard, the Panel
recalls that the panel in Argentina – Footwear (EC)  stated that Article 4.2(a) "requires" national
authorities to analyse trends in both injury fact ors and imports.  The panel considered that such an
analysis was relevant in relation to a causation assessment:
"In making our assessment of the causation analysis and finding, we note in the first
instance that Article 4.2(a) requires the authority to consider the 'rate' (i.e., direction
and speed) and 'amount' of the increase in imports and the share of the market takenby imports, as well as the 'changes' in the injury factors (sales, production,
productivity, capacity utilization, profits and losses, and employment) in reaching a
conclusion as to injury and causation.  As noted above we consider that this languagemeans that the trends  – in both the injury factors and the imports – matter as much as
their absolute levels.  In the particular context of a causation analysis, we also
believe that this provision means that it is the relationship between the movements in
imports (volume and market share) and the mo vements in injury factors that must be
central to a causation analysis and determination."
5170 (emphasis added)
10.298  The Appellate Body agreed with the panel and observed:
                                                     
5170 Panel Report, Argentina – Footwear (EC ), para. 8.237.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 784
"We see no reason to disagree with the Panel's interpretation that the words 'rate and
amount' and 'changes' in Article 4.2(a) mean that 'the trends –  in both the injury
factors and the imports – matter as much as their absolute levels'.  We also agree withthe Panel that, in an analysis of causation, 'it is the relationship between the
movements  in imports (volume and market share) and the movements  in injury factors
that must be central to a causation analysis and determination.' "
5171 (emphasis added)
10.299  We understand from the foregoing, firstly, that the term "coincidence" refers to the
relationship between the movements in imports and the movements in injury factors.  The panel and
Appellate Body made it clear that, in considering movements in imports, it is necessary to look at
movements in import volumes and import market shares.5172  In our view, the word "coincidence" in
the current context refers to the temporal  relationship between the movements in imports and the
movements in injury factors.  In other words, upward movements in imports should normally occur at
the same time as downward movements in injury fact ors in order for coincidence to exist.  We note
that, below, we qualify these comments to take account of cases where a lag exists between the influx
of imports and the manifestation of the effects of injury suffered by the domestic industry.
10.300  Secondly, the above indicates that the Appellate Body considers that "coincidence" between
movements or trends in imports and movements or trends in the relevant injury factors plays a
"central" role in determining whether or not a causal link exists.  Indeed, both the panel and the
Appellate Body in Argentina – Footwear (EC)  stated that the relationship between the movements in
imports and the movements in injury factors must  be central to a causation analysis.  We also note that
the same panel, supported by the Appellate Body5173 went on to state that "[I]n practical terms, we
believe therefore that [Article 4.2(a)] means that if causation is present, an increase in imports
normally  should coincide with a decline in the relevant injury factors."5174
10.301  The Panel is of the view that since coincidence is "central" to a causation analysis, a
competent authority should "normally" undertake a coincidence analysis when determining the
existence of a causal link.  We believe that in situations where the effects of injurious factors other
than increased imports have not been attributed to increased imports5175, overall clear coincidence
between movements in imports and movements in injury factors will provide a competent authority
with an adequate basis upon which to conclude that a genuine and substantial relationship of cause
and effect between increased imports and serious injury exists.
10.302  As mentioned, the Panel is also of the view that overall  coincidence is what matters and not
whether coincidence or lack thereof can be shown in relation to a few select factors which the
competent authority has considered.  We refer in  this regard to the panel's decision in US – Wheat
Gluten , where it stated that:
"[I]n light of the overall  coincidence of the upward trend in increased imports and the
negative trend in injury factors over the period of investigation, the existence of slight
absences of coincidence in the movement of individual  injury factors in relation to
                                                     
5171 Appellate Body Report, Argentina – Footwear (EC ), para. 144.
5172 Significantly, no mention was made by the panel and the Appellate Body in Argentina – Footwear
(EC)  to movements in import prices.  We will discuss the relevance of this in the succeeding section of our
findings dealing with "conditions of competition".
5173 Appellate Body Report, Argentina – Footwear (EC ), para. 144.
5174 Panel Report, Argentina – Footwear (EC ), para. 8.238.
5175 That is, in compliance with the non-attribution requirements as discussed in paras. 10.325-10.334
infra .WT/DS248/R, WT/DS249/R,
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imports would not preclude a finding by the USITC of a causal link between
increased imports and serious injury." 5176
10.303  In the present dispute, the question arises as to how a causal link must be established for the
purposes of Article 4.2(b) in cases where there is an absence of coincidence .  By absence of
coincidence we mean situations where coincidence does not exist or an analysis of coincidence has
not been undertaken.  In this regard, we agree with statements made by the panel and Appellate Body
in Argentina – Footwear (EC) and the panel in US – Wheat Gluten , that coincidence in movements in
imports and the movements in injury factors would ordinarily tend to support a finding of causation,
while the absence of such coincidence would ordinarily tend to detract from such a finding and would
require a compelling explanation as to why a causal link is still present.5177
10.304  We also recall that the panel in Argentina – Footwear (EC) , supported by the Appellate
Body5178, as well as the panel in US – Wheat Gluten5179, noted that, in situations where a causal link
exists, "an increase in imports normally  should coincide with a decline in the relevant injury factors"
and "coincidence… would ordinarily  tend to support a finding of causation." In our view, even when
coincidence does not exist or an analysis of coincidence has not been undertaken, a competentauthority may still be able to demonstrate the existence of a causal link if it can offer a compelling
explanation that such causal link exists.
10.305  The Panel emphasizes that the Appellate Body in Argentina – Footwear (EC)  upheld the
panel's statement that "coincidence by itself cannot prove  causation" (emphasis added).
5180 The Panel
considers that there are situations where a coincidence analysis may not suffice to prove causation orwhere the facts may not support a clear finding of coincidence and that, therefore, such situations may
call for further demonstration of the existence of a causal link.  Indeed, there may be situations where
a competent authority, as part of its overall demonstration of the existence of a causal link, undertakes
different analyses, with a view to proving that a genuine and substantial relationship of cause and
effect exists between increased imports and serious injury.
10.306  In our view, there may be cases where: (i) a coincidence analysis has been undertaken and
shows clear coincidence between movements in imports and movements in injury factors;  (ii) as part
of its overall demonstration of causal link, the competent authority has undertaken, inter alia , a
coincidence analysis which, in and of itself, does not fully demonstrate the existence of a causal link
and further analysis is undertaken;  (iii) a coincidence analysis has been undertaken (with or withoutany other analysis) but it does not demonstrate any coincidence;  and, finally, (iv) a coincidence
analysis has not been undertaken but other analytical tools have been used with a view to proving a
causal link.
5181
10.307  We are of the view that in all cases, the competent authority must provide a reasoned and
adequate explanation of its causal link findings.  In the first case (i), assuming fulfilment of the non-
attribution requirement, when clear coincidence exists, no further analysis is required of the
                                                     
5176 Panel Report, US – Wheat Gluten , para. 8.101.
5177 Panel Report, US – Wheat Gluten , para. 8.95; Panel Report, Argentina – Footwear (EC ),
paras. 8.237-8.238;  Appellate Body Report, Argentina – Footwear (EC ), para. 144.
5178 Panel Report, Argentina – Footwear (EC ), paras. 8.238;  Appellate Body Report, Argentina –
Footwear (EC ), para. 144.
5179 Panel Report, US – Wheat Gluten , para. 8.95.
5180 Panel Report, Argentina – Footwear (EC ), paras. 8.237-8.238;  Appellate Body Report, Argentina
– Footwear (EC ), para. 144.
5181 These are situations that the Panel has encountere d in this case.  This is not to say that other
situations may not exist.WT/DS248/R, WT/DS249/R,
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competent authority and the Panel will confine its review to the coincidence analysis.  In the second
case (ii), the Panel will examine both the coincidence analysis and the other analysis undertaken by
the competent authority with a view to assessing whether the competent authority has provided areasoned and adequate explanation that, overall, a genuine and substantial relationship of cause and
effects exists between increased imports and serious injury.
10.308  In cases (iii) and (iv), the competent authority should explain the absence of coincidence or
why a coincidence analysis was not undertaken and provide, in particular, a compelling explanation as
to why a causal link exists notwithstanding the abse nce of coincidence.  Ultimately, it is for the
competent authority to decide upon the analytical tool it considers most appropriate to perform this
compelling analysis in demonstrating the existence of a causal link.
10.309  Another issue that has arisen in the present dispute is whether or not coincidence can be
considered to exist in cases where there is a temporal lag  between the influx of imports and the
manifestation of the effects of such an influx on the domestic industry.  More particularly, the United
States has argued that a lag or delay in the manifestation of certain injury factors may be attributed to
the delayed effect of increased imports on certain factors, such as employment and bankruptcy.
5182  A
number of the complainants argue, on the other hand, that the nature of the markets involved in the
present case is such that such a lag effect could not exist.  They submit that the effect of the increased
imports should be felt immediately and that a lag of two years, which they submit existed in the
present case, is too long.5183
10.310  The Panel considers that the argument by the United States of a lag between the increased
imports and the manifestation of the effects of such increased imports on the domestic industry may
have merit in certain cases.  More particularly, in our view, there may be instances in which injury
may be suffered by an industry at the same point in time as the influx of increased imports.  However,
the injury that is caused at that point in time ma y not become apparent until some later point in time.
In other words, there may be a lag between the influx  of imports and the manifestation of the injurious
effects on the domestic industry of such an influx.
10.311  We find support for this view from the panel's decision in Egypt – Steel Rebar .  There, the
panel rejected Turkey's contention that there must be a strict temporal connection between the
dumped imports and any injury being suffered by the industry5184, noting that this argument:
"[R]est[ed] on the quite artificial assumption that the market instantly absorbs, and
reacts to, imports the moment they enter the territory of the importing company.
Such an assumption implicitly rests on the existence of so-called "perfect
information" in the market (i.e., that all actors in the market are instantly aware of all
market signals.)"5185
Nevertheless, we note that, in that case, the lag between the effects of imports on a market that thepanel suggested was acceptable was, at most, a year in duration.
                                                     
5182 United States' first written submission, paras. 446, 448 and 449; United States' second written
submission, paras. 119-122.
5183 Japan's written reply to Panel question No. 86 at the first substantive meeting; Korea's second
written submission, para. 141; Brazil's written reply to Panel question No. 86 at the first substantive meeting.
5184 Panel Report, Egypt – Steel Rebar , paras. 7.127-7.132.
5185 Panel Report, Egypt – Steel Rebar , para. 7.129.WT/DS248/R, WT/DS249/R,
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10.312  The Panel considers that there are limits in temporal terms on the length of lags between
increased imports and the manifestation of the effects that are acceptable for the purposes of a
coincidence analysis under Article 4.2(b) of the Agreement on Safeguards.  The limits that applywould, undoubtedly, vary from industry to industry a nd factor to factor.  Generally speaking, the more
rigid the market structure associated with a particular industry, the more likely a lag in effects would
exist, at least in relation to some factors.  Conver sely, the more competitive the market structure, the
less tenable it is that lagged effects could be expected.  In addition, the Panel considers that while lags
may be expected in relation to some factors (for example, employment), lags in the manifestation of
effects are less likely to exist in relation to other injury factors such as production, inventories and
capacity utilization, which, ordinarily, would react relatively quickly to changes taking place in themarket, such as an influx of imports if increased imports are causing serious injury.  If the competent
authority does rely upon a lag as between the increa sed imports and the injury factors, we consider
that such a lag must be fully explained by the competent authority on the basis of objective data.
(ii) Conditions of competition
10.313  The Panel recalls that while coincidence plays a central role in determining whether or not a
causal link exists, other analytical tools may also come in to play.
10.314  As mentioned above, there may be cases, for instance, where a competent authority does not
undertake a coincidence analysis or does so, but the facts do not support a finding of causal link on
the basis of such an analysis.  In such situations, reference could be made to the conditions of
competition as between imports and domestic products with a view to providing a compellingexplanation, in the absence of coincidence, as to why a causal link nevertheless exists.  Indeed, in our
view, consideration of the conditions of competition of the market in which the relevant imported and
domestic products are being sold may generally prove insightful in respect of the issue of the causal
relationship between increased imports and serious injury.
10.315  There may also be cases where a competent authority considers that it is necessary to support
its coincidence analysis with another analysis because, for example, coincidence cannot be established
with a sufficient degree of certainty.  In such  situations, the competent authority may rely upon
analysis of the conditions of competition to reinforc e its causal link demonstration.  In such situations,
a panel will review the conditions of competition analysis performed by the competent authority with
a view to assessing whether it provided a reasoned and adequate explanation that, overall, a genuineand substantial relationship of cause and effects exists between increased imports and serious injury.
10.316  We believe that Articles 2.1 and 4.2(a) and (b) confirm the relevance of conditions of
competition when determining causation.  Article 2.1 calls for a determination that increased imports
are occurring " under such conditions  as to cause or threaten to cause serious injury."  The Appellate
Body in US – Wheat Gluten  interpreted the meaning of "under such conditions" in Article 2.1 as
follows:
"[T]he phrase 'under such conditions' refers generally to the prevailing 'conditions', in
the marketplace for the product concerned, when the increase in imports occurs.
Interpreted in this way, the phrase 'under such conditions' is a shorthand reference to
the remaining factors listed in Article 4.2(a), which relate to the overall state of the
domestic industry and the domestic market, as well as to other factors 'having a
bearing on the situation of [the] industry'.  The phrase 'under such conditions',therefore, supports the view that, under Articles 4.2(a) and 4.2(b) of the Agreement on
Safeguards , the competent authorities should determine whether the increase inWT/DS248/R, WT/DS249/R,
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imports, not alone, but in conjunction with the other relevant factors, cause serious
injury."5186
10.317  We also note that the panels in Argentina – Footwear (EC)  and US – Wheat Gluten
considered the conditions of competition in the market between imported and domestic footwear in
reviewing whether a causal link existed between increased imports and injury.5187  The Appellate
Body in Argentina – Footwear (EC)  explicitly supported the panel's analysis, stating that:  "[W]e
agree with the Panel's conclusions that 'the conditions of competition between the imports and the
domestic product were not analysed or adequately explained (in particular price)' ".5188
10.318  The Panel is of the view that the factors that should be considered in a conditions of
competition analysis for the purposes of Article 4.2(b) are not pre-determined but include thosementioned in Article 4.2(a).  This is so because  Articles 4.2(a) and 4.2(b) of the Agreement on
Safeguards must be given a mutually consistent interpretation.
5189  We refer in this regard to the
following comments of the Appellate Body in US – Wheat Gluten :
"[B]oth provisions [4.2(a) and 4.2(b)] lay down rules governing a single
determination, made under Article 4.2(a).  In our view, it would contradict therequirement in Article 4.2(a) to evaluate – and, thereby, include in the determination
– the 'bearing' or effect all the relevant factors have on the domestic industry, if those
same  effects, caused by those same  factors, were, with the exception of increased
imports, to be excluded under Article 4.2(b), as the Panel suggested." (emphasis
original)
5190
10.319  Given then that the factors referred to in Article 4.2(a) are relevant in defining the conditions
of competition for the purposes of the causation analysis under Article 4.2(b), in the Panel's view,
volume of imports, imports' market share, changes in the level of sales and profit and losses are of
particular interest.  In addition, we note that the panel in Argentina – Footwear (EC) referred to
physical characteristics, quality, service, delivery, technological developments, consumer tastes, andother supply and demand factors in the market as factors that could be taken into consideration in
assessing the conditions of competition in a market for the purposes of a causation analysis.
5191
10.320  A consideration of the various factors that have been mentioned provides context for the
consideration of price , which, in the Panel's view, is an important, if not the most important, factor in
analysing the conditions of competition in a particular market, although consideration of prices is notnecessarily mandatory.
5192  The Panel agrees with the argument advanced by the European
Communities insofar as it submits that price will often be relevant to explain how the increased
volume of imports caused serious injury.5193  Indeed, we consider that relative price trends as between
                                                     
5186 Appellate Body Report, US – Wheat Gluten , para. 78.
5187 Panel Report, Argentina – Footwear (EC) , para. 8.250;  Panel Report, US – Wheat Gluten ,
para. 8.108.
5188 Appellate Body Report, Argentina – Footwear  (EC), para. 145.
5189 Appellate Body Report, US – Wheat Gluten , para. 73.
5190 Appellate Body Report, US – Wheat Gluten , para. 73.
5191 Panel Report, Argentina – Footwear (EC) , para. 8.251.
5192 The Panel agrees with the following comments made by the panel in Korea – Dairy  at para. 7.51 in
this regard:  "Although the prices of the imported products will most often be a relevant factor indicating how
the imports do, in fact, cause serious injury to the domestic industry, we note that there is no explicit
requirement in Article 2, that the importing Member perform a price analysis of the imported products and theprices of the like or directly competitive products in the market of the importing country."
5193 European Communities' written reply to Panel's question No. 29 at the second substantive meeting.WT/DS248/R, WT/DS249/R,
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Page 789
imports and domestic products will often be a good indicator of whether injury is being transmitted to
the domestic industry (provided that the market context for such trends are borne in mind) given that
price changes have an immediate effect on profitability, all other things being equal.  In turn,profitability is a useful measure of the state of the domestic industry.
10.321  The relevance of price in the analysis of the conditions of competition appears to be supported
by comments made by the panel in Argentina – Footwear (EC) .
5194  Further, the panel in US – Wheat
Gluten  was of the view that a price analysis is potentially relevant, although not necessarily
mandatory:
"'Price' is not expressly listed in Article 4.2(a) [of the Agreement on Safeguards
('SA')] as a 'relevant factor' having a bearing on the situation of the domestic industry.However, this is not to say that 'price' may not be a relevant factor in a given case.
An imported product can compete with a domestic product in various ways in the
market of the importing country.  Clearly, the relative price of the imported product is
one of these ways, but it is certainly not th e only way, and it may be irrelevant or only
marginally relevant in a given case.
Therefore, in the context of safeguards measures, the relevance of 'price' will vary
from case to case, in light of the particular circumstances and the nature of the
particular product and domestic industry involved.  Given that this is the nature of the
'price' factor under the Agreement on Safeguards, we consider that the phrase 'under
such conditions' does not necessarily, in every case, require a price analysis."
5195
10.322  With respect to the argument made by the European Communities that if imports are sold at a
higher price than domestic products, it is unlikely that such imports are responsible for any serious
injury5196, the Panel considers that the existence or absence of underselling by imports cannot, on its
own, lead to a definitive conclusion regarding the presence or otherwise of a causal link between the
increased imports and the serious injury.  In our view, pricing trends must always be considered incontext.  It is only after this contextual consideration that conclusions can be drawn regarding the
existence or otherwise of the causal link.
10.323  As to how detailed  an analysis of the conditions of competition must be, the Panel is of the
view that the more complicated the factual situatio n, the more important it is for a number of factors
to be taken into consideration.
5197  In this regard, the Panel agrees with the following statement by the
panel in Argentina – Footwear (EC) , particularly in relation to CCFRS, which will be discussed
further below:
"We note in this regard that there would seem to be a relationship between the depth
of detail and degree of specificity required in a causation analysis and the breadth and
heterogeneity of the like or directly competitive product definition.  Where as here a
very broad product definition is used, within which there is considerable
heterogeneity, the analysis of the conditions of competition must go considerablybeyond mere statistical comparisons for imports and the industry as a whole, as given
their breadth, the statistics for the industry and the imports as a whole will only show
averages, and therefore will not be able to provide sufficiently specific information on
                                                     
5194 Panel Report, Argentina – Footwear (EC) , para. 8.251.
5195 Panel Report, US – Wheat Gluten , paras. 8.109-8.110.
5196 European Communities' written reply to Panel's question No. 29 at the second substantive meeting.
5197 Panel Report, Argentina – Footwear (EC) , para. 8.261, footnote 557.WT/DS248/R, WT/DS249/R,
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the locus of competition in the market.  With regard to the present case, we do not
disagree that a quite detailed investigation of the industry was conducted, in which a
great deal of statistical and other information was amassed.  What in our view wasmissing was a detailed analysis, on the basis of objective evidence, of the imports and
of how in concrete terms those imports caused the injury found to exist in 1995.  In
this regard, we note that Act 338 contains a section entitled 'Conditions of
competition between the domestic products and imports'.  This section does not
contain such a detailed analysis, however, but rather summarizes questionnaire
responses from domestic producers about their strategies for 'fending off foreign
competition', and from importers and domestic producers concerning 'the sales mix'of domestic products and imports, including their overall views about quality and
other issues concerning domestic and imported footwear, with the importers stressing
the benefits of imports.  This summary of subjective statements by questionnaire
respondents does not constitute an analysis of the 'conditions of competition' by the
authority on the basis of objective evidence."
5198
10.324  The Panel will consider in detail below in its measure-by-measure analysis the relevance of
the conditions of competition for the purposes of determining whether the USITC provided a reasoned
and adequate explanation that the facts supported a determination that a causal link existed in the
context of a number of the safeguard measures at issue in this dispute.
(iii) Non-attribution
10.325  A third important issue arising in a causation analysis is the non-attribution requirement.  The
second sentence of Article 4.2(b) provides that:
"When factors other than increased imports are causing injury to the domestic
industry at the same time, such injury shall not be attributed to increased imports."
10.326  The above makes it clear that in cases where factors other than increased imports have caused
injury to the domestic industry, a "non-attribution" exercise must be undertaken pursuant to the
second sentence of Article 4.2(b).  As noted by the Appellate Body5199, it is precisely because there
may be several factors, besides increased imports, contributing simultaneously to the situation of the
domestic industry that the last sentence of Article 4. 2(b) states that competent authorities "shall not …
attribute" to increased imports injury caused by other factors.
10.327  The scope of the non-attribution requirement has been articulated by the Appellate Body on a
number of occasions.  In its discussion of the non-attribution requirement, the Appellate Body in US –
Wheat Gluten   stated that:
"Article 4.2(b) presupposes, therefore, as a first step in the competent authorities'
examination of causation, that the injurious effects caused to the domestic industry by
increased imports are distinguished from the injurious effects caused by other factors.
The competent authorities can then, as a second step in their examination, attribute toincreased imports, on the one hand, and, by implication, to other relevant factors, on
the other hand, 'injury' caused by all of these different factors, including increased
imports.  Through this two stage process, the competent authorities comply with
Article 4.2(b) by ensuring that any injury to the domestic industry that was actually
                                                     
5198 Panel Report, Argentina – Footwear (EC) , para. 8.261, footnote 557.
5199 Appellate Body Report, US – Wheat Gluten , para. 68.WT/DS248/R, WT/DS249/R,
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caused by factors other than increased imports is not 'attributed' to increased imports
and is, therefore, not treated as if it were injury caused by increased imports, when it
is not.  In this way, the competent authorities determine, as a final step, whether 'thecausal link' exists between increased imports and serious injury, and whether this
causal link involves a genuine and substantial relationship of cause and effect
between these two elements, as required by the  Agreement on Safeguards ."
5200
10.328  The Appellate Body in US – Lamb  emphasized that the three steps mentioned in US – Wheat
Gluten  simply describe a logical process for complying with the obligations relating to causation set
out in Article 4.2(b).  It further stated that these steps are not legal "tests" mandated by the text of the
Agreement on Safeguards, nor is it imperative that each step be the subject of a separate finding or areasoned conclusion by the competent authorities.
5201  Nevertheless, it concluded that the primary
objective of the process described in US – Wheat Gluten  is to determine whether there is "a genuine
and substantial relationship of cause and effect" between increased imports and serious injury or
threat thereof.5202
10.329  On the basis of its findings in US – Wheat Gluten5203, US – Lamb5204 and US – Hot-Rolled
Steel5205, the Appellate Body in US – Line Pipe  stated that:
"Article 4.2(b), last sentence, requires that, when factors other than increased imports
are causing injury at the same time as increased imports, competent authorities must
ensure that injury caused to the domestic industry by other factors is not attributed to
the increased imports.  We have previously ruled, and we reaffirm now, that, to fulfillthis requirement, competent authorities must separate and distinguish the injurious
effects of the increased imports from the injurious effects of the other factors.
 5206  As
we ruled in US – Hot-Rolled Steel  with respect to the similar requirement in
Article 3.5 of the Anti-Dumping Agreement , so, too, we are of the view that, with
respect to Article 4.2(b), last sentence, competent authorities are required to identifythe nature and extent of the injurious effects of the known factors other than increased
imports, as well as explain satisfactorily the nature and extent of the injurious effects
of those other factors as distinguished from the injurious effects of the increased
imports."
5207
10.330  The Appellate Body in US – Line Pipe  further added that to fulfil the requirement contained
in the second sentence of Article 4.2(b), the competent authority must establish explicitly, through a
reasoned and adequate explanation, that injury caused by factors other than increased imports is not
attributed to increased imports.  This explanation must be clear and unambiguous.  It must not merely
imply or suggest an explanation.  It must be a straightforward explanation in express terms.5208
                                                     
5200 Appellate Body Report, US – Wheat Gluten , para. 69.
5201 Appellate Body Report, US – Lamb , para. 178.
5202 Appellate Body Report, US – Lamb , para. 179.
5203 Appellate Body Report, US – Wheat Gluten , para. 70.
5204 Appellate Body Report, US – Lamb , para. 179.
5205 Appellate Body Report, US – Hot-Rolled Steel , paras. 222, 223, 230 and 214.
5206 (original footnote) Appellate Body Report, US – Wheat Gluten , , para. 70;  Appellate Body Report,
US – Lamb , para. 179.  In the context of the Anti-Dumping Agreement , see, Appellate Body Report, US – Hot-
Rolled Steel , para. 222.
5207 Appellate Body Report, US – Line Pipe , para. 215.
5208 Appellate Body Report, US – Line Pipe , para. 217.WT/DS248/R, WT/DS249/R,
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10.331  Clearly, when factors other than increased imports are causing or are said to be causing injury
to the industry, the competent authority must  perform a non-attribution exercise to assess the effects
of these other factors so that injury caused by those other factors is not attributed to increased importswith a view to determining whether a genuine and substantial relationship of cause and effects exist
between increased imports and serious injury to the relevant domestic producers.
10.332  The Panel notes that purpose of the non-attribution exercise is to enable a competent authority
to separate and distinguish the effects of increased imports from those caused by factors other than
increased imports and, ultimately, to assess the nature and extent of the injurious effects of those other
factors as distinguished from the injurious effects of the increased imports.  Therefore, the
requirement to identify the nature and extent of the injurious effects of factors other than increasedimports calls for an overall assessment of such "other factors".  As we see it, Article 4.2(b) is not
concerned with the relative importance of individual factors as between themselves or as compared
with increased imports.  Essentially, Articles 2 and 4 of the Agreement on Safeguards are concerned
with the injurious effects of increased imports on the situation of the domestic industry as distinct
from the injurious effects of all "other factors".
10.333  With regard to arguments made by complainants regarding the consistency of the "substantial
cause" test applied  by the USITC
5209 and the Agreement on Safeguards, the Panel notes that the
Appellate Body in US – Lamb  stated that:
"[B]y examining the relative causal importance of the different causal factors, the
USITC clearly engaged in some kind of process to separate out, and identify, theeffects of the different factors, including increased imports.  Although an examination
of the relative  causal importance of the different causal factors may satisfy the
requirements of United States law, such an examination does not, for that reason,
satisfy the requirements of the  Agreement on Safeguards .  On the record before the
Panel in this case, a review of whether the United States complied with the non-attribution language in the second sentence of Article 4.2(b) can only be made in the
light of the explanation given by the USITC for its conclusions on the relative causal
importance of the increased imports, as distinguished from the injurious effects of the
other causal factors."
5210
10.334  In the Panel's view, there is nothing in the substantial cause test applied by the USITC, in
itself, that would necessarily mean that the obligation to "separate and distinguish" the effects of other
causes on the state of domestic industry cannot be fulfilled and was not fulfilled in the case of the
safeguard measures that are the subject of our review in this case.  Nor do we consider that it would
necessarily preclude the consideration and evaluation of the nature and extent of the effects of those
factors as required by the Agreement on Safeguards.  The Panel does, however, believe that whether
or not the approach that the USITC has adopted for each of the safeguard measures complies with the
requirements of the Agreement on Safeguards will depend, in each case, on whether the USITC'sanalysis "established explicitly" on the basis of a "reasoned and adequate explanation" that the effect
of the other factors on the situation of the domestic industry had not been attributed to the increased
imports.  We will consider this issue below in our measure-by-measure analysis.
                                                     
5209 The Panel recalls that the complainants have not challenged the United States' statute on safeguards
per se , see at paras 10.6 – 10.8 above.
5210 Appellate Body Report, US – Lamb , para. 184.WT/DS248/R, WT/DS249/R,
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(iv) Quantification
10.335  In their argumentation on the legal standard for causation (as well as for the appropriate
remedy), parties advanced detailed arguments on the question of whether quantification is requiredand on the use of econometric models.
10.336  We note, first, that the text of the Agreement on Safeguards does not require quantification.
However, in the Panel's view both the Agreement on Safeguards and relevant jurisprudence anticipate
that quantification may occur.  In addition, the Panel considers that quantification may be particularly
desirable in cases involving complicated factual situations where qualitative analyses may not suffice
to more fully understand the dynamics of the relevant market.
10.337  In support, we note that Article 4.2(a) of the Agreement on Safeguards refers to "factors of [a]
quantifiable nature."  As explained in paragraph 10.318 above, we consider that Articles 4.2(a) and
4.2(b) must be read together and in a mutually consistent fashion.  Therefore, the factors referred to in
Article 4.2(a) must be taken into consideration in undertaking the non-attribution exercise (in addition
to any other factors that may be relevant).  In addition, the requirement in Article 4.2(a) that evaluated
factors be of a "quantifiable nature" implies that at least some of the factors assessed in the non-attribution exercise will be quantifiable and, in those circumstances, should be quantified.
10.338  Further, the Panel recalls comments made by the Appellate Body in US – Line Pipe  where it
stated that compliance with Articles 3.1, 4.2(b) and 4.2(c) of the Agreement on Safeguards  should
have the incidental effect of providing sufficient justification for a measure and should also provide a
benchmark against which the permissible extent of the measure should be determined.  In particular,the Appellate Body stated that:
"We observe here that the non-attribution language of the second sentence of
Article 4.2(b) is an important part of the architecture of the  Agreement on
Safeguards   and thus serves as necessary context in which Article 5.1, first sentence,
must be interpreted.  In our view, the non-attribution language of the second sentenceof Article 4.2(b) has two objectives.  First, it seeks, in situations where several factors
cause injury at the same time, to prevent investigating authorities from inferring the
required 'causal link' between increased imports and serious injury or threat thereof
on the basis of the injurious effects caused by factors other than increased imports.
Second, it is a benchmark for ensuring that only an appropriate share of the overallinjury is attributed to increased imports.  As we read the Agreement, this latter
objective, in turn, informs the permissible extent to which the safeguard measure may
be applied pursuant to Article 5.1, first sentence.  Indeed, as we see it, this is the only
possible interpretation of the obligation set out in Article 4.2(b), last sentence, that
ensures its consistency with Article 5.1, first sentence.  It would be illogical to require
an investigating authority to ensure that  the 'causal link' between increased imports
and serious injury not be based on the share of injury attributed to factors other thanincreased imports while, at the same time, permitting a Member to apply a safeguard
measure addressing injury caused by all factors."
5211
10.339  The Panel considers that quantification could help  in identifying the share of the overall injury
caused by increased imports, as distinct from the in jury caused by other factors, which would in turn
yield a "benchmark" for ensuring that the safeguard measure is imposed only to the extent necessary to
prevent or remedy serious injury and allow for adjustments.
                                                     
5211 Appellate Body Report, US – Line Pipe , para. 252.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
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Page 794
10.340  In addition, the Panel considers that quantification may, in certain cases, be entailed in the
obligation on competent authorities to establish non-attribution "explicitly" on the basis of a reasoned
and adequate explanation.5212  In this regard, the Panel recalls that, as stated on several occasions by the
Appellate Body, WTO Members are expected to in terpret and apply their WTO obligations in good
faith.5213 Moreover, in light of the obligations imposed on competent authorities to consider all plausible
alternative explanations submitted by the interested parties, we believe that a competent authority may
find itself in situations where quantification and some  form of economic analysis are necessary to rebut
allegedly plausible alternative explanations that have been put forward. While the wording of the
provisions of the Agreement on Sa feguards does not require quantification in the causal link analysis per
se, the circumstances of a specific dispute may call for quantification.
10.341  Having said that quantification may be desirable, useful and sometimes necessary depending
on the circumstances of a case, the Panel recognizes that quantification may be difficult and is less
than perfect.  Therefore, the Panel is of the view that the results of such quantification may not
necessarily be determinative.  We consider that  an overall qualitative assessment that takes into
account all relevant information, must always be performed.  Nevertheless, in the Panel's view, eventhe most simplistic of quantitative analyses may yield useful insights into the overall dynamics of a
particular industry and, in particular, into the nature and extent of injury being caused by factors other
than increased imports to a domestic industry.
10.342  Regarding argumentation by the parties as to the form which quantification should take, the
Panel considers that this will depend again upon the complexity of the situation under consideration.The approach adopted should enable a competent authority to apportion, even roughly, the injury
attributable to factors other than increased imports that may come into play in the context of a
particular industry.  The more complex the situation, the more necessary a sophisticated analysis
becomes.
5214  Whatever approach or model is adopted, it should be applied in good faith and with due
diligence.5215  It seems to us that this is demanded by the good faith interpretation and application of
Articles 2.1, 4.2(b) and 3.1 of the Agreement on Safeguards.
(v) Sequence of assessment
10.343  As for the sequence of assessment of the various elements that may be involved in
establishing the existence of a causal link, the Panel is of the view that the Agreement on Safeguards
does not prescribe any order.  The Panel recalls the Appellate Body's comments in US – Lamb , where,
in defining the steps that might be undertaken in the non-attribution analysis, it stated that "these steps
are not legal 'tests' mandated by the text of the  Agreement on Safeguards ,  nor is it imperative that
                                                     
5212 The Appellate Body in US – Line Pipe  stated that a mere assertion that injury caused by other
factors has not been attributed to increased imports does not establish ex plicitly with a reasoned and adequate
explanation that injury caused by factors other than in creased imports was not attributed to increased imports.:
Appellate Body Report, US – Line Pipe , para. 220.
5213 See, for example, Appellate Body Report, US – Offset Act (Byrd Amendment) , para. 297 et seq .
5214 We note in this regard that the United States used econometric models in its demonstration of
compliance with Article 5.1 before the Panel.
5215 In support of our argument that the approach or model used for quantification should be one based
on good faith and due diligence, we refer to the Appellate Body's decision in US – Cotton Yarn, which said the
exercise of due diligence was required in relation to  the obligations under the Agreement on Textiles and
Clothing, being the equivalent to Article 3 of the Agreement on Safeguards (Appellate Body Report, para. 76).
In addition, the Appellate Body in US – Offset Act  acknowledged the relevance of the principle of good faith as
a general rule of conduct in international relations that controls the exercise of rights by states.  The AppellateBody stated that there is a basis for a dispute settlement panel to determine, in an appropriate case, whether aMember has not acted in good faith.  (Appellate Body Report, para. 297 et seq )WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
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Page 795
each step be the subject of a separate finding or a reasoned conclusion by the competent
authorities."5216
10.344  Accordingly, the Panel does not consider that the non-attribution exercise need necessarily
precede a consideration of coincidence between the increased imports and the injury factors and the
conditions of competition or vice versa .  The Panel is of the view that the wording of Articles 2.1 and
4.2 does not require that non-attribution be undertaken  in advance of or following any other analysis
that may be undertaken with a view to establishing the existence of a causal link.  Provided that the
various elements entailed in a causation analysis are considered and analysed in coming to a
conclusion on the existence or otherwise of a "causal link", this should suffice.  This much is clear
from the Appellate Body's comments in US – Wheat Gluten  and US – Lamb :
"[L]ogically, the final identification of the injurious effects caused by increased
imports must follow a prior separation of the injurious effects of the different causal
factors.  If the effects of the different factors are not separated and distinguished from
the effects of increased imports, there can be no proper assessment of the injury
caused by that single and decisive factor.  As we also indicated, the finaldetermination about the existence of 'the causal link' between increased imports and
serious injury can only be made after the effects of increased imports have been
properly assessed, and this assessment, in turn, follows the separation of the effects
caused by all the different causal factors."
5217
10.345  As for the significance of the fact that the US ITC, in a number of instances, may have begun
its text with a finding of a "causal link" before it undertook the non-attribution demonstration, in the
Panel's view, this does not necessarily entail a violation of Article 4.2(b).  In this regard, we
emphasise the Appellate Body's comment that "the final determination about the existence of the
'causal link' between increased imports and serious injury can only be made after  the effects of
increased imports have been properly assessed, and this assessment in turn follows the separation ofthe effects caused by all the different factors".  In our view, what matters is whether, ultimately, the
USITC's report contains a reasoned and adequate explanation of the various elements that need to be
established under Article 4.2(b).
10.346  As noted above, it is always incumbent upon a competent authority to determine, including
through compliance with the non-attribution requirement, whether, overall, a genuine and substantialrelationship of cause and effect exists between increased imports and serious injury.  In this context,
the Panel disagrees with the suggestion by Japan and Brazil that, in certain cases, once the effect of
other factors has been separated and distinguished, the "connection between the imports and the
serious injury is ascertained".
5218  The Panel is of the view that this assumption cannot be made
automatically since the determination of whether a causal link exists always calls for an overall
assessment.
                                                     
5216 Appellate Body Report, US – Lamb , para. 178.
5217 Appellate Body Report, US – Lamb , para. 180;  Appellate Body Report, US – Wheat Gluten ,
para. 69.
5218 Brazil's written reply to Panel's question No. 87 at the first substantive meeting, Japan's written
reply to Panel's question No. 87 at the first substantive meeting.WT/DS248/R, WT/DS249/R,
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Page 796
(vi) Imports from free-trade areas – "other factors"?
10.347  The complainants' claims raise the issue of whether imports from free-trade areas that were
ultimately excluded from the application of the safeguard measures had to be treated as an "otherfactors" in the context of the non-attribution exercise that is required under Article 4.2(b).
10.348  The Panel will review, in the following measure-by-measure analysis, the USITC's causation
findings for each specific safeguard measures at issue and contained in its 22 October 2001
determination published in December 2001.  That determination treated imports from all sources
together.  Since the excluded imports (from Canada, Mexico, Jordan and Israel) were part of all
imports for the purposes of the October causation analysis, they cannot be simultaneously treated as
an "other factor" and part of "all imports" at the same time.
10.349  In the present case, there was indeed a "gap" between the imports covered by the
determination (October 2001) and those covered by the safeguard measures (March 2002).  In such a
situation, pursuant to the principle of parallelism, the importing Member must establish explicitly that
imports from sources covered by the measure satisfy the requirements of Articles 2 and 4 of the
Agreement on Safeguards.  The Panel's review of the demonstration of compliance with the principleis contained in the following section of our Reports dealing with parallelism.  There, we will consider
how the USITC treated the exclusion of imports from Canada, Mexico, Jordan and Israel in the
context of the re-adjustments called for by the existence of a "gap" between the imports covered by
the determination and those covered by safeguard measures.
5. Measure-by-measure analysis
10.350  We recall first our findings in paragraphs 10.306-10.308 above .  There may be cases where:
(i) a coincidence analysis has been undertaken and shows clear coincidence between movements in
imports and movements in injury factors;  (ii) as part of its overall demonstration of causal link, the
competent authority has undertaken, inter alia , a coincidence analysis which, in and of itself, does not
fully demonstrate the existence of a causal link and further analysis is undertaken;  (iii) a coincidenceanalysis has been undertaken (with or without an y other analysis) but it does not demonstrate any
coincidence at all;  and, finally, (iv) a coincidence analysis has not been undertaken but other
analytical tools have been used with a view to proving causal link.
10.351  We also stated previously that, in all cases, in conducting its causal link analysis, the
competent authority must provide a reasoned and adequate explanation of such analysis.  In caseswhere there is an absence of coincidence (whether  or not a coincidence analysis was undertaken), a
compelling explanation of why causation exists is needed, since coincidence should normally be
central to causation determinations.  In light of our foregoing legal analysis, the Panel will review the
various components of the USITC's findings on causat ion in the order they were dealt with by the
USITC in its Report.
10.352  In cases where the USITC undertook a coincidence analysis  and the causal link determination
has been challenged by the complainants, we will examine whether the USITC provided a reasonedand adequate explanation that a causal link existed where it found coincidence between movements in
imports and movements in injury factors.
10.353  As will be seen below, there is an instance where the Panel agreed with the USITC's
conclusion that clear coincidence existed.
5219  In such cases, according to our analytical framework in
                                                     
5219 We refer, in particular, to the case of FFTJ.WT/DS248/R, WT/DS249/R,
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WT/DS253/R, WT/DS254/R,
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Page 797
paragraphs 10.306-10.308, there is generally no need for the competent authority to conduct a further
analysis to support its coincidence analysis.  Nor would it be necessary in these cases for the Panel to
review any further analysis if it has been undertaken by the competent authority.  However, in thatparticular instance, the USITC had not provided a reasoned and adequate explanation of the existence
of coincidence, so the Panel proceeded to review the USITC's conditions of competition analysis.
10.354  There are also a number of instances where the Panel considered that the relevant facts did
not support a finding of coincidence by the USITC at all.  In these cases, the Panel proceeded to
consider whether the USITC, nevertheless, provided a compelling explanation that a causal link
existed.  The Panel proceeded in this fashion even in cases where the complainants did not
specifically challenge the compelling explanation provided by the USITC.  We consider that we areentitled to adopt such an approach, provided that the complainants challenged the causal link
determination.
10.355  Finally, there are a number of instances where the Panel was unsure whether the facts
supported a finding of coincidence or where overall coincidence was not clear. In these cases, the
Panel considered whether the USITC undertook a further  analysis to demonstrate that a causal link
existed.  Where it did so, the Panel examined the further analysis performed by the USITC to assess
whether, overall, a causal link existed.  We consider that we are entitled to adopt such an approach,
provided that the complainants chal lenged the causal link determination.
10.356  In cases where the USITC did not undertake a coincidence analysis , we assessed whether the
USITC provided a reasoned and adequate explanation as to why it did not do so and whether itprovided a compelling explanation as to why a causal link nevertheless existed.  In so doing, we
considered whether, on the basis of the analysis used by the USITC in such cases, the facts supported
the conclusions drawn by the USITC.  Again, the Panel proceeded in this fashion even in cases where
the complainants did not specifically challenge the compelling explanation.  We consider that we are
entitled to adopt such an approach, provided  the complainants challenged the causal link
determination.
10.357  With respect to non-attribution, the Panel will consider whether relevant factors other than
imports were considered by the USITC.  Further, we will consider whether the USITC established
explicitly, on the basis of a reasoned and adequate explanation, that injury caused by those other
factors was not attributed to imports.
10.358  Finally, in the case of CCFRS, the Panel will examine the difficulties encountered in
reviewing the USITC's causation analysis for this product.  We note that such difficulties are
associated with the fact that CCFRS is comprised of  five constituent items, namely, slab, plate, hot-
rolled steel, cold-rolled steel and coated steel.
10.359  As a preliminary point, we note that all data that has been relied upon by the Panel in this
section was obtained directly from the USITC Report or from the various tables and annexes to which
that Report refers.  In addition, we note that, for each part of our discussion on the USITC's causationanalysis for the various safeguard measures at issue, we have set out what we consider to be the
relevant parts of the USITC Report.  Finally, as a more specific point, the Panel notes that, on a
number of occasions, we have reviewed pricing analyses undertaken by the USITC as part of its
causal link analysis.  We note that in conducting such  a review, the Panel has treated unit values as a
proxy for prices.  We consider that this is acceptable given that this is apparently what the USITCitself did.
5220  Further, we understand that price trends mirror unit value trends.  As a related point, we
                                                     
5220 See, for example, the USITC's analysis for CCFRs at pp 55 – 63 of the USITC Report, Vol I.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
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Page 798
do not consider that any distinction exists between "unit values" on the one hand and "average unit
values" on the other hand.  More particularly, in the context of this case, we consider that unit values
for a particular year are implicitly averages.
(a) CCFRS
10.360  The Panel notes at the outset that it has focused in this section on the arguments made by the
complainants which, for us, raised the most problematic aspects of the USITC's determinations on
causation – that is, those aspects that more obviously entailed violations of the Agreement on
Safeguards.  Since we will dispose of the complainants' claims in our review below, the Panel sees no
need to deal with the other arguments.
(i) Coincidence and conditions of competition
USITC findings
10.361  The USITC findings read as follows:
"We find that the increased imports of certain carbon flat-rolled steel are an important
cause, and a cause not less than any other cause, of serious injury to the domestic
industry.5221  In making this finding, we have considered carefully evidence in the
record relating to the enumerated statutory factors, as well as evidence relating to
domestic production, capacity, capacity utilization, shipments, market share, profit
and loss data, plant closings, wages and other employment-related data, productivity,
capital expenditures, and research and development expenditures.  Accordingly, we
find that increased imports are a substantial cause of serious injury to the domesticindustry producing certain carbon flat-rolled steel.
a. Conditions of Competition
We take into account a number of factors that affect the competitiveness of
domestic and imported certain carbon flat-rolled steel in the US market, including
factors related to the product itself, the degree of substitutability between the
domestic and imported articles, changes in world capacity and production, and market
conditions.  These factors affect prices and other considerations taken into account by
purchasers in determining whether to purchase domestic or imported articles.
Producers generally agree that there are few or no substitutes for certain
carbon flat-rolled steel.
5222  Certain carbon flat-rolled steel may represent a relatively
high share of the cost of downstream certain carbon flat-rolled steel, but typically
represents a relatively small share of the value of finished products.5223
                                                     
5221 (original footnote) Commissioner Devaney joins in the analysis of the majority, related to
causation, as presented here. He further notes that when the analysis is performed over the entire industry as hehas defined it, the result is the same, i.e. imports are a substantial cause of serious injury.
5222 (original footnote) CR at FLAT-67 and PR at FLAT-53.  There are few or no substitute products
for each of the product categories included in our certa in carbon flat-rolled products class.  CR at FLAT-67-68
and PR at FLAT-53-FLAT-54.
5223 (original footnote) CR at FLAT-68 and PR at FLAT-54.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
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Page 799
Demand for certain carbon flat-rolled steel depends upon the demand for a
variety of end-use applications.5224  A significant percentage of certain carbon flat-
rolled steel is consumed in the production of other downstream certain carbon flat-rolled steel.
5225  All slabs are consumed in the production of downstream steel, and
steelmakers themselves are the only purchasers of slab.  Slab is not a rolled product
and requires additional processing before it may be incorporated into a finished
product.  As expected for feedstock products, the majority of domestically-produced
hot-rolled and cold-rolled steel are consumed in the production of further processed
steel, although a merchant market exists for both hot-rolled and cold-rolled steel.5226
On the other hand, a majority of domestically-produced plate and coated steel, which
are further processed steel, is sold on the merchant market, with relatively small
shares of these steels being devoted to the production of downstream products.5227
Construction and automotive applications are significant end-uses for plate, hot-rolled, cold-rolled, and coated steel.
5228
By any measure, the period of investigation saw significant growth in US
demand for certain carbon flat-rolled steel.5229  Apparent domestic consumption of
certain carbon flat-rolled steel, including internally consumed production, climbed
steadily during the period, from 203.2 million short tons in 1996 to 219.0 million
short tons in 2000, an increase of 7.8 percent.5230  Apparent domestic consumption of
certain carbon flat-rolled steel, including internally consumed production, declined14.9 percent from interim 2000 to interim 2001.
5231  Net sales of certain carbon flat-
rolled steel increased from 58.8 million short tons in 1996 to 65.2 million short tons
in 2000, an increase of 10.9 percent.5232  Net sales of certain carbon flat-rolled steel
declined 11.7 percent between interim 2000 and interim 2001.5233  A decline in
demand, however, can be seen at the end of the period examined, as apparentdomestic consumption of certain carbon flat-rolled steel was 14.9 percent lower in
interim 2001 than in interim 2000.
Similar, though not identical, increases occurred in the consumption of each
type of flat-rolled steel.  Apparent domestic consumption of slabs rose from 71.4
million short tons in 1996 to 74.4 million short tons in 2000; apparent domestic
                                                     
5224 (original footnote) CR at FLAT-66 and PR at FLAT-51.
5225 (original footnote) CR and PR at OVERVIEW-10 and Table OVERVIEW-2.
5226 (original footnote) CR and PR at Tables FLAT-14 and FLAT-15.
5227 (original footnote) CR and PR at Tables FLAT-13 and FLAT-16.
5228 (original footnote) CR and PR at Table OVERVIEW-2.
5229 (original footnote) We are cognizant of the difficulty of measuring consumption, production,
capacity, and import penetration in a product for which a significant portion of production is consumed in theproduction of other, downstream materials also included  in the like product.  Adding figures for each of the
product categories would tend to overstate domestic capacity and production and understate the true impact of
imports, while concentrating solely on commercial shipments would be inconsistent with available capacity
data.  See CR at FLAT-18 n.11, FLAT-34 n.13, and FLAT-60 n.14, PR at FLAT-15 n.11, FLAT-30 n.13, and
FLAT-44 n.14.  We have considered the arguments of both domestic producers and respondents regarding theappropriate method for determining these indicators, and we have considered a variety of different
measurements in reaching our determination.  In general, however, we found that the same conclusions werewarranted regardless of which measurement was used.
5230 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5231 (original footnote)  INV-Y-209 at Table FLAT-ALT7.
5232 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5233 (original footnote) INV-Y-209 at Table FLAT-ALT7.WT/DS248/R, WT/DS249/R,
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Page 800
consumption of slabs in 2000 was the highest level registered in the POI.5234
Apparent domestic consumption of slabs declined 15.6 percent between interim 2000
and interim 2001.5235  Apparent domestic consumption of hot-rolled steel increased
from 68.5 million short tons in 1996 to 75.1 million short tons in 2000; apparent
domestic consumption of hot-rolled steel in 2000 was the highest level registered in
the POI.5236  Apparent domestic consumption of hot-rolled steel declined 17.1 percent
between interim 2000 and interim 2001.5237  Apparent domestic consumption of cold-
rolled steel actually peaked in 1999 at 40.6 million short tons.  Nonetheless, apparent
domestic consumption of cold-rolled steel in 2000, at 40.0 million short tons, was 9.8
percent higher than the 1996 level of 36.4 million short tons.5238  Apparent domestic
consumption of cold-rolled steel declined 12.3 percent between interim 2000 and
interim 2001.5239  Similarly, apparent domestic consumption of coated steel peaked in
1999 at 22.8 million tons, but apparent domestic consumption in 2000, at 22.3 million
short tons, was 16.9 percent higher than the 1996 level of 19.1 million short tons.5240
Apparent domestic consumption of coated steel was 13.0 percent lower in interim
2001 than in interim 2000.5241  Only plate consumption exhibited a significantly
different trend, with apparent consumption in 2000, at 7.1 million short tons, below
the 1996 level of 7.8 million short tons.5242  Apparent domestic consumption of plate
was 3.6 percent lower in interim 2001 than in interim 2000.5243
With regard to supply of certain carbon flat-rolled steel, as discussed above,
domestic capacity increased steadily from 1996 to 2000.  Foreign production capacity
also increased from 1996 to 2000.5244  As measured by production capacity for plate
and hot-rolled steel only, foreign production capacity rose from 290.9 million short
tons in 1996 to 335.2 million short tons in 2000, an increase of 15.2 percent.5245
Foreign production capacity for each of the product categories increased during the
POI.  Foreign production capacity for slabs rose 8.0 percent between 1996 and 2000,
while production capacity for plate rose 9.5 percent.5246  Foreign production capacity
for further processed flat-rolled steel rose much more significantly between 1996 and
2000, with production capacity for hot-rolled steel rising by 16.3 percent, for cold-
rolled steel by 13.9 percent, and for coated steel by 29.4 percent.5247
                                                     
5234 (original footnote) CR and PR at Table FLAT-C-2.
5235 (original footnote) CR and PR at Table FLAT-C-2.
5236 (original footnote) CR and PR at Table FLAT-C-4.
5237 (original footnote) CR and PR at Table FLAT-C-4.
5238 (original footnote) CR and PR at Table FLAT-C-5.
5239 (original footnote) CR and PR at Table FLAT-C-5.
5240 (original footnote) CR and PR at Table FLAT-C-7.
5241 (original footnote) CR and PR at Table FLAT-C-7.
5242 (original footnote) CR and PR at Table FLAT-C-3.
5243 (original footnote) CR and PR at Table FLAT-C-3.
5244 (original footnote) We note that domestic producers criticized the quality of data from our
questionnaires regarding foreign capacity.  Prehearin g Brief of Bethlehem Steel Corporation, LTV Steel
Company, Inc., National Steel Corporation and United States Steel LLC at 70 n.217 and Appendix A.  We havefollowed our long-standing practice of relying on questionnaire data in reaching our determination, although we
have considered the alternative data provided by domestic producers and other parties.
5245 (original footnote) INV-Y-215 at Table VII-ALT1.
5246 (original footnote) CR and PR at Tables FLAT-30 and FLAT-33.
5247 (original footnote) CR and PR at Tables FLAT-36, FLAT-39, and FLAT-43.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
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Page 801
These significant production capacity increases occurred during a period of
disruption in world steel markets.  The de preciation of several Asian currencies in
late 1997 and early 1998 significantly curtailed steel consumption in those countriesand created a pool of steel seeking alternative markets.
5248  The dissolution of the
USSR led to significant increases in steel exports to the United States from former
USSR countries.5249
There is a moderate to high degree of substitutability between domestically-
produced and imported certain carbon flat-rolled steel.5250  Purchasers typically
ranked "quality" as the most important factor in their purchasing decision.5251  A
significant majority of purchasers found domestically-produced and imported certaincarbon flat-rolled steel comparable in product quality, product range, and
consistency.
5252  Only in delivery time did purchasers note a clear difference between
domestically-produced and imported certain carbon flat-rolled steel.5253  Furthermore,
while more purchasers ranked quality as the most important factor in the purchasing
decision, a significant number ranked price first, and most purchasers included priceas one of the top three factors.
5254  A significant number of purchasers reported they
"always" or "usually" purchase the lowest priced flat-rolled steel offered.5255
Imports of various certain carbon flat-rolled steel products are affected by a
number of existing antidumping and countervailing duty orders and suspension and
other trade restricting agreements.5256  Some of these measures pre-dated the POI and
did not prevent the import surge observed in this investigation.  However, other
measures were imposed during the POI.
b. Analysis
…
The dramatic increase in the volume of imports in 1998 – at the midpoint of
the period examined – coincided with sharp declines in the domestic industry's
performance and condition which occurred despite growing US demand.  Total
imports were 18.4 million short tons in 1996 and 19.3 million short tons in 1997, an
increase that only modestly exceeded the increase in total apparent domestic
                                                     
5248 (original footnote) CR and PR at OVERVIEW-17.
5249 (original footnote) CR and PR at OVERVIEW-18.
5250 (original footnote) CR at FLAT-68, PR at FLAT-54.
5251 (original footnote) CR and PR at Table FLAT-64.  Purchasers made similar responses for each of
the types of certain carbon flat-rolled steel.  INV-Y-212 at Flat Products, pp.20-22.
5252 (original footnote) CR at Table FLAT-65, PR at Table FLAT-65.  Purchasers made similar
responses for each of the types of certain carbon flat -rolled steel.  INV-Y-212 at Flat Products, pp.15-19.
5253 (original footnote) CR at Table FLAT-65, PR at Table FLAT-65.  Purchasers made similar
responses for each of the types of certain carbon flat -rolled steel.  INV-Y-212 at Flat Products, pp.15-19.
5254 (original footnote) CR at Table FLAT-64, PR at Table FLAT-64.  Purchasers made similar
responses for each of the types of certain carbon flat -rolled steel.  INV-Y-212 at Flat Products, pp.20-22.
5255 (original footnote) CR at FLAT-71, PR at FLAT-57.
5256 (original footnote) CR and PR at Table OVERVIEW-1; see also Certain Cold-Rolled Steel
Products from Argentina, Brazil, Japan, Russia, South Africa, and Thailand , Inv. Nos. 701-TA-393 (Final) and
731-TA-829-830, 833-834, 836, and 838 (Final), USITC Pub. 3283 (March 2000) at 20 (comprehensiveagreement with Russia); Certain Hot-Rolled Steel from Brazil and Japan, 701-TA-384 (Final) and 731-TA-806
and 808 (Final), USITC Pub. 3223 (Aug. 1999) at 3 n.7 (suspension agreements with Brazil and Russia).WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 802
consumption.5257  Imports in 1998 jumped more than 30 percent over the previous
year's level, to a total of 25.3 million short tons.5258  This increase occurred in a year
when total apparent domestic consumption, including all captive consumption,increased 3.2 percent and net domestic sales rose a scant 0.5 percent.
5259  After this
steep increase, import volume lessened in 1999 and 2000 but remained above 1996
and 1997 levels.5260
This import surge occurred in most types of certain carbon flat-rolled steel.
Imports of plate increased by 53.4 percent between 1997 and 1998; imports of hot-
rolled steel increased by 76.4 percent; and imports of cold-rolled steel increased 13.0
percent, after already increasing 38.2 percent between 1996 and 1997.5261  For coated
steel, the surge came a year later, as imports increased by 15.8 percent between 1998
and 1999.5262  After these primary surges, imports of hot-rolled steel increased by
another 14.4 percent between 1999 and 2000, and cold-rolled steel imports by 11.2
percent between interim 2000 and interim 2001, despite a sharp decrease in
demand.5263
The impact of the 1998 surge in imports on the domestic industry is
undeniable.  In 1996 and 1997, before the rapid escalation in import volume, the
domestic industry performed moderately well.  In 1997, with net merchant sales of
61.1 million short tons, the domestic industry had an operating income of 6.1 percent
of sales and a net income of 4.5 percent.5264  In 1998, despite an increase in net sales
to 61.3 million short tons and a modest decrease in unit costs, the industry's operating
margin declined to 4.0 percent.  In 1999, net sales increased to 63.5 million short tons
and cost of goods sold were the lowest during the POI, but the industry experienced
operating losses of 0.7 percent of sales.  In 2000, net sales again increased to 65.2
million short tons and the total cost of goods sold increased a modest one percent, yetoperating losses fell further, to 1.4 percent of sales.  The industry experienced net
operating losses in both 1999 and 2000.
5265  The industry's operating margin
continued to slide in the first half of 2001, to a loss of 11.5 percent of sales.
After the initial import surges in 1998, as noted, the volume of imports
slackened somewhat but remained above the levels seen in 1996-1997.  One way inwhich the impact of the massive import volume continued to reverberate beyond
1998 was through increased inventories.  End-of-period inventories held by importers
increased substantially in 1998, as did inventories held by service centers.
5266
The imports that entered the US market between 1998 and 2000 were
generally significantly lower-priced than in the earlier years of the POI.  These price
                                                     
5257 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5258 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5259 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5260 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5261 (original footnote) CR and PR at Tables FLAT-C-3-FLAT-C-5.
5262 (original footnote) CR and PR at Table FLAT-C-7.
5263 (original footnote) CR and PR at Tables FLAT-C-4 and FLAT-C-5.
5264 (original footnote) INV-Y-212 at STL201FT.WK4.
5265 (original footnote) INV-Y-212 at STL201FT.WK4.
5266 (original footnote) CR and PR at Table FLAT-49; Dewey/Skadden Prehearing Brief at Exhs. 55
and 56 (we note that the data in the latter exhibits do not distinguish between domestic and imported product).WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 803
decreases were sharp and generally unrelated to overall demand in the US market,
which steadily increased even as prices fell.
Import Average Unit Values5267
1996 1997 1998 1999 2000Interim
2000Interim
2001
Certain CarbonFlat-Rolled 370 376 344 298 331 323 310
Slabs 253 251 231 177 221 222 180
Plate 400 424 466 400 398 418 409
Hot-Rolled 331 325 288 269 303 299 276
Cold-Rolled 505 485 447 402 466 463 399
Coated 608 609 596 537 558 556 519
The import surge in 1998 altered the competitive strategy of domestic
producers.  After the initial wave of imports in 1998, which captured substantial
market share from domestic producers, domestic producers sought to protect marketshare against further import penetration by competing aggressively against imports on
price.
5268  Repeated price cuts by the industry, while stemming somewhat the tide of
imports and increasing domestic shipments, did nothing to improve the industry's
condition.  Moreover, the price declines occurred despite the fact that demand for
certain carbon flat-rolled steel increased in both 1999 and 2000.
Average Unit Values of Commercial Shipments for Domestically Produced Steel5269
1996 1997 1998 1999 2000Interim
2000Interim
2001
Certain CarbonFlat-Rolled 470 474 459 415 418 428 373
Slabs5270248 251 250 215 214 224 205
Plate 482 473 470 402 401 400 379
Hot-Rolled 348 356 335 294 312 329 257
Cold-Rolled 492 496 472 440 445 452 409
Coated 616 621 597 557 544 553 508
A review of product specific data supports the claims of the domestic
producers that imports were priced below domestically produced steel, and that
imports led to the decline in prices.  For example, for hot-rolled product 3A, *** led
                                                     
5267 (original footnote) CR and PR at Tables FLAT-C-1-FLAT-C-5 and FLAT-C-7.  We are mindful
not to place undue weight on average unit values, as these may be affected by issues of product mix.
5268 (original footnote) Dewey/Skadden Posthearing Brief on Flat-Rolled at 27.
5269 (original footnote) CR and PR at Tables FLAT-12 to FLAT-15, and FLAT-17.
5270 (original footnote) Between 1996 and 2000, commercial shipments of slabs accounted for only 0.9
percent of total shipments of domestically produced slab.  CR and PR at Table FLAT-12.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 804
to ***, reductions in shipments of the domestic product, and sharp subsequent
reductions in domestic prices.5271  Similar pricing and volume patterns, with
significant dips in import prices garnering historically large sales volumes, followedby sharp cuts in domestic prices, occurred for cold-rolled products 4A and 4B.
5272
As noted above, purchasers generally consider price an important factor in
the purchasing decision, and the lowest price frequently wins the sale.  In addition,
although purchasers rank quality as the most important purchasing factor, purchasers
generally consider imported certain carbon flat-rolled steel comparable in quality to
domestically produced certain carbon flat-rolled steel.  In such a market, the
increased volume of imports, at prices that undercut and depressed and suppresseddomestic prices, had an injurious impact on the domestic industry, particularly when
the domestic industry aggressively cut prices to meet the continued influx of import
volumes.
The domestic industry includes a number of producers who rely on imported
certain carbon flat-rolled steel–especially slab–for use as raw materials in theproduction of further processed certain carbon flat-rolled steel.  Some of these
producers may have benefitted from the decline in import prices during the POI.
5273
Despite these possible isolated individual benefits5274, the record indicates that the
domestic industry as a whole suffered serious injury from increased imports.
Respondents have argued that, since imports generally peaked in 1998, any
injury resulting from increased imports has long since passed, or been repaired by the
imposition of subsequent Title VII duties.  Between the surge in 1998 and the last
full-year of the POI, 2000, domestic producers filed Title VII complaints on carbon
steel plate, hot-rolled steel, and cold-rolled steel.5275  Additionally, outstanding orders
on coated steel were reviewed and retained during this same time period.5276  Existing
orders on cold-rolled steel were revoked only late in 2000.5277  We find it reasonable
to conclude that the filing of these Title VII actions to some extent staunched the flow
of imports after 1998; indeed, respondents admit that the filing of a Title VII action
temporarily repressed cold-rolled imports.5278  We note, however, that import levels
remained high through 1999 and 2000, and that the corrosive effects of low-priced
                                                     
5271 (original footnote) INV-Y-212 at Table FLAT-ALT69.  See also Product 3B (historically high
import volume in 1998, and falling domestic prices from second quarter 1998 to second quarter 1999).
5272 (original footnote) INV-Y-212 at Tables FLAT-ALT70 and FLAT-ALT71.
5273 (original footnote) The *** US firms that rely exclusively on imported slab–***–showed generally
more positive financial results than the industry as a whole.  However, the unit raw material costs of these ***firms were ***.  INV-Y-212 at STL201P2.WK4 (results on plate for ***), STL 201H3.WK4 (results on hot-
rolled for ***), STL 201C4.WK4 (results on cold-rolled for ***), and ST201R6.WK4 (results on coated steel
for ***).
5274 (original footnote) For example, slab imports represent approximately ten percent of the slab
consumed in the United States.  CR and PR at Table FLAT-C-2.
5275 (original footnote) CR and PR at Table OVERVIEW-1.
5276 (original footnote) Certain Carbon Steel Products from Australia, Belgium, Brazil, Canada,
Finland, France, Germany, Japan, Korea, Mexico, the Netherlands, Poland, Romania, Spain, Sweden, Taiwan,and the United Kingdom , Inv. Nos. AA1921-197, 701-TA-231, 319-320, 322, 325-328, 340, 342, and 348-350
(Review), and 731-TA-573-576, 578, 582-587, 604, 607-608, 612, and 614-618 (Review), USITC Pub. 3364
(November 2000) at 3.
5277 (original footnote) USITC Pub. 3364 at 3.
5278 (original footnote) Joint Respondents' Prehearing Brief on Cold-Rolled Steel at 11-12.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 805
imports continued to injure the domestic industry even as the absolute volume of
imports slackened somewhat.  Although the volume of imports was lower in 1999
and 2000, prices of those imports continued to decline.
In sum, the causal link between increased imports and the injury to the
domestic industry is clear.  In 1997, at an operating margin of 6.1 percent, the
industry was performing modestly well and thus was well poised to increase its
profitability in 1998 as demand strengthened.  However, the surge in imports in 1998,
at prices below domestic prices, led to a decline in the industry's financial and other
indicators.  The industry then cut prices to hold on to market share but the price cuts
prevented the industry from restoring profitability.  The industry's operating marginsdeclined steadily from 6.1 percent in 1997 to 4.0 percent in 1998 to negative
0.7 percent in 1999 and to negative 1.4 percent in 2000.  Finally, in interim 2001,
although import levels declined somewhat, prices remained low.  The domestic
industry entered a period of falling demand already in a weakened condition and
deteriorated even further to an operating margin of negative 11.5 percent."
5279
Claims and arguments of the parties
10.362  The arguments of the parties are set out in Section VII.H.2(a)(i) and (ii) supra .
Analysis by the Panel
10.363  At the outset, the Panel notes that the USIT C undertook a coincidence analysis for CCFRS
and concluded that coincidence existed.  Accordingly, we will consider whether these findingsprovide a reasoned and adequate explanation of how the facts support this conclusion.
10.364  The Panel recalls that, when examined by a competent authority, coincidence must be
demonstrated between the movements in imports and the movements in injury factors.  The injury
factors are listed in Article 4.2(a) of the Agreement on Safeguards.  Specifically, they are: the rate and
amount of the increase in imports of the product concerned in absolute and relative terms, the share ofthe domestic market taken by increased imports, changes in the level of sales, production,
productivity, capacity utilization, profits and losses, and employment.
10.365  The Panel has considered coincidence between a number of the injury factors mentioned in
Article 4.2(a), including those referred to by the USITC, and imports.  More specifically, we make
reference to the following graphs of imports versus  injury factors, which have been generated using
USITC data, with a view to determining whether the USITC provided a reasoned and adequate
explanation of how the facts support its determinat ion that coincidence between increased imports and
serious injury factors existed for CCFRS.  Since CCFRS was treated by the USITC as a single
product, aggregated data for each of the constitu ent items of CCFRS have been relied upon by the
Panel.
10.366  The Panel has first considered the relationship between imports and production.  In the Panel's
view, there does not appear to be any coincidence between import trends and production trends.  Infact, production seems to have increased (albeit gradually) throughout most of the period of
                                                     
5279 USITC Report, Vol. I, pp. 55-63.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 806
investigation, despite an increase in imports in 1998.  Further, at the very end of the period of
investigation, production decreased even though imports also decreased during that time.5280
Imports and Production (Tons)
025,000,00050,000,00075,000,000100,000,000125,000,000150,000,000175,000,000200,000,000225,000,000
1996 1997 1998 1999 2000 2001YearsTons
Imports
Imports (semi-annual)
Production
Production (semi-annual)
10.367  Similarly, despite an increase in imports in 1998, net commercial sales increased (again,
albeit gradually) throughout most of the period of  investigation and do not appear to have been
affected by the level of imports.  Further, at the very end of the period of investigation, net
commercial sales decreased even though imports also decreased during that time.5281
Imports and net commercial sales (Tons)
010,000,00020,000,00030,000,00040,000,00050,000,00060,000,00070,000,000
1996 1997 1998 1999 2000 2001 YearsTons
Imports
Imports (semi-annual)
Net commercial sales
Net commercial sales (semi-annual )
                                                     
5280 The data represented in the graph below are contained in the USITC Report, in particular in
INV-Y-209 at Table FLAT-ALT 7.
5281 The data represented in the graph below are contained in the USITC Report, in particular in
INV-Y-209 at Table FLAT-ALT 7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 807
10.368  Assuming that a lag in the manifestation of effects can be expected in relation to employment,
it would appear that, indeed, there is some coincidence between import levels in 1998 and
employment levels in 1999.  In particular, the surge in imports in 1998 appears to have been followedby a drop in employment levels in the following year.  Similarly, a drop in import levels between
1998 and 1999 seems to correspond to a slight gain in employment levels in the succeding year,
namely 1999 to 2000.  In our view, the fact that employment decreased at the very end of the period
of investigation even though imports also decreased during that time does not detract from our
conclusion that, overall, coincidence appears to exist between import trends and employment trends,
assuming a lag in the manifestation of the effects.
10.369  In our view, it is not inconceivable that a lag could be expected with respect to employment.
We tend to agree with the argument made by the United States that companies may, in the face of
adverse market conditions, defer taking employment decisions in the hope that the market situation
will improve.  A one-year lag between the influx of imports and declines in employment would, in the
Panel's view, be reasonable.  However, despite the fact that a lag is conceivable in relation to
employment, we note that the USITC made no reference in its Report to this lag effect and the UnitedStates cannot rely on this argument before the Panel.
5282
Imports and employment (Tons and employees)
010,000,00020,000,00030,000,00040,000,00050,000,000
1996 1997 1998 1999 2000 2001
YearsTons
80,00085,00090,00095,000100,000105,000110,000
Employees
Imports
Imports (semi-annual)
Employment
Employment (semi-annual )
10.370  With respect to operating margin, which was apparently used by the USITC as a proxy for
profit and losses and is, consequently, used for the same purpose here by the Panel, there appears tobe some coincidence between a rise in imports from 1997 until 1998 and a sharp decline in the level
of operating margin during the same period.  However, from 1998 to 1999 when the level of imports
fell and then subsequently stabilized from 1999 to 2000, the operating marging continued to decline
quite dramatically.  The continuing decline in operating margin in the latter part of the period of
                                                     
5282 The data represented in the graph below are contained in the USITC Report, in particular in
INV-Y-209 at Table FLAT-ALT 7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 808
investigation despite the decline in the level of imports suggests that something other than increased
imports was also causing injury.5283
Imports and Operating margin (Tons and '000 $)
010,000,00020,000,00030,000,00040,000,00050,000,000
1996 1997 1998 1999 2000 2001
YearsTons
-2,000,000-1,500,000-1,000,000-500,0000500,0001,000,0001,500,0002,000,000
'000 $
Imports
imports (semi-annual)
Operating margin
Operating margin (semi-annual)
10.371  There does not appear to be coincidence between the import trends and trends in productivity.
Indeed, even following the alleged surge in impor ts in 1998, productivity levels increased from 1998
onwards.  Further, at the very end of the period of investigation, productivity decreased even though
imports also decreased during that time.5284
Imports and productivity (Tons and tons/1000 hours)
010,000,00020,000,00030,000,00040,000,00050,000,000
1996 1997 1998 1999 2000 2001
YearsTons
660680700720740760780800820840860880
Tons/1000 hours
Imports
Imports (semi-annual)
Productivity
Productivit y (semi-annual )
                                                     
5283 The data represented in the graph below are contained in the USITC Report, in particular in
INV-Y-209 at Table FLAT-ALT 7.
5284 The data represented in the graph below are contained in the USITC Report, in particular inINV-Y-
209 at Table FLAT-ALT 7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 809
10.372  In the Panel's view, there appears to be an absence of coincidence between trends in imports
and capacity utilization trends.  In particular, capacity utilization appears to be fairly stable throughoutthe period of investigation, even following the increase in imports in 1998.  Further, at the very end of
the period of investigation, capacity utilization decreased even though imports also decreased during
that time.
5285
Imports and capacity utilization ( Tons and percentage)
010,000,00020,000,00030,000,00040,000,00050,000,000
1996 1997 1998 1999 2000 2001
Years
Percentage
0102030405060708090100Tons
Imports
Imports (semi-annual)
Capacity utilization
Capacity utilization (semi-annual)
10.373  With respect to importers' inventories, the Pa nel notes that the USITC stated in its Report
that: "One way in which the impact of the massive import volume continued to reverberate beyond
1998 was through increased inventories."  Reference is made by the USITC in its report to
Table-FLAT 49, which does, as the USITC finds, indicate that importers' inventories climbed
significantly during the period of investigation.  We agree that a build-up in importers' inventoriesmay provide such importers with the ability to flood the domestic market.  However, unless there is
evidence of a subsequent increased volume of sales of imported products, we do not consider that a
build-up of importers' inventories is necessarily relevant.  While there was a peak in imports in 1998,
this was followed by a return in the level of imports  to that which existed towards the beginning of the
period of investigation.  Therefore, we do not consider that the build-up in importers' inventories isnecessarily indicative of anything in this case, particularly since the USITC did not provide any
explanation of  the relationship between the building up of importers' inventories and the serious
injury suffered by the producers of domestic CCFRS.
10.374  As stated by the Panel above, it is the overall  coincidence of the upward trend in increased
imports and the negative trend in injury factors over the period of investigation that must beconsidered.  The Panel has assessed whether the USITC provided a reasoned and adequate
explanation of how the facts support the determina tion that coincidence existed for CCFRS.  In so
doing, we have found that there was no coincidence between, on the one hand, imports trends and the
situation of the domestic industry of CCFRS, as reflected in data for production, net commercial sales,
productivity and capacity utilization of the domestic CCFRS.  We have also found that there was a
lack of coincidence between imports trends and declines in domestic operating margin, particularly
                                                     
5285 The data represented in the graph below are contained in the USITC Report, in particular in
INV-Y-209 at Table FLAT-ALT 7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 810
towards the end of the period of investigation.  We did discern coincidence, albeit lagged, between
increased imports, on the one hand, and employment, on the other hand.  However, we note that the
USITC made no reference in its Report to a lagged effect between increased imports and employmentand the United States cannot now rely on this argument before the Panel.  Finally, we did not consider
that the build-up of importers' inventories during the course of the period of investigation was relevant
given that there was no evidence to indicate that such a build-up subsequently entered into the market
through sale (except for in 1998).
10.375  Having taken into consideration all of the foregoing, in the Panel's view, overall, coincidence
did not exist between import trends for CCFRS an d the serious injury suffered by the domestic
industry.  The Panel is particularly compelled by the fact that the indicators that would ordinarily beassumed to react shortly after an increase in impor ts did not display coincidence with the increased
imports – namely, production, net commercial sales, productivity, capacity utilization and, most
importantly, operating margin.  The Panel notes in this regard that the USITC relied primarily on
trends in net commercial sales and operating margin in its determination that coincidence existed, two
factors for which we believe the facts do not support a conclusion that coincidence existed.
10.376  Given the lack of coincidence between imports trends and the injury factors, it was for the
USITC to provide a compelling explanation as to why a causal link was considered, nevertheless, to
exist.  We proceed now to the USITC's analysis  of the conditions of competition for CCFRS.
10.377  At the outset, the Panel would like to make some observations about the pricing data upon
which the USITC relied in making its analysis of the conditions of competition in the CCFRS marketfor the purposes of determining whether or not a causal link existed between the increased imports
and the serious injury.  First, as mentioned above, the premise for the USITC's investigation regarding
CCFRS is that CCFRS is a single product.  Reference is made in the USITC's price analysis to
average unit values ($/ton) for imported and domestically produced CCFRS.  The Panel notes that the
USITC itself admits that there may be difficulties associated with aggregated data upon which itrelied, presumably including average unit values for CCFRS as a single product.  In particular, the
USITC stated in its Report that:
"Throughout our analysis, we generally rely on combined data for five types of
certain carbon flat-rolled steel.  However, we also recognize that some combined data
– for production and capacity for example – may involve double-counting, and wetherefore cite data for the separate types of certain carbon flat-rolled steel where
appropriate.  Separate data also show trends similar to those for the industry as a
whole in most cases."
5286
In light of the foregoing, the Panel considers that it was incumbent upon the USITC to explain, whereappropriate, why aggregate data could not be relied upon and justify the use of data for the items
constituting CCFRS.
10.378  Further, as a related point, on the basis of the Panel's comments in Argentina – Footwear
(EC) , the Panel notes that the use of a very broad product definition in this case that covered a number
of separately identifiable items, means that "the statistics for the industry and the imports as a whole
will only show averages, and therefore will not be able to provide sufficiently specific information on
the locus of competition in the market."
5287  Given the similarities in terms of product breadth between
the products at issue in Argentina – Footwear (EC)  and CCFRS, we consider that serious doubt would
                                                     
5286 USITC Report Vol I, p. 51, note 193.
5287 Panel Report, Argentina – Footwear (EC ), para. 8. 261, footnote 557.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 811
be cast on the validity of the price analysis for CCFRS on the basis of the foregoing.  More
particularly, in cases where a causal link determination is made using a conditions of competition
analysis, the product upon which the safeguard measure was imposed, namely, CCFRS, should beamenable to a proper analysis of the conditions prevailing in the market.  We do not consider that the
grouping of the various products that constituted CCFRS renders it amenable to such an analysis
because it becomes difficult, if not impossible, for th e competent authority to identify the proper locus
of competition while undertaking a conditions of competition analysis for the purposes of establishing
a causal link for CCFRS.
10.379  In any event, and this leads us to our second point, we note that, in concluding that there was
import underselling for CCFRS as a single product, the USITC appears to have primarily relied upondata for constituent items of CCFRS rather than fo r CCFRS as a whole.  This much is evident from
the following statement made by the USITC:  "A review of product specific data supports the claims
of the domestic producers that imports were priced below domestically produced steel, and that
imports led to the decline in prices".  Putting aside the difficulties we have with the USITC's reliance
on such data that have already been mentioned, a comparison of the imported and domestic prices forthe constituent items of the CCFRS product indicates that while some of the domestically produced
constituent items were undersold by the import counterparts at particular points during the period of
investigation, this was not necessarily the case for the entire period of investigation.  Nor was it the
case for all the constituent items that made up CCFRS.  Indeed, the USITC was, in our view,
conveniently selective in the data to which it referr ed in its pricing analysis.  In particular, it only
referred to prices for hot-rolled products and cold-rolled products:
"For example, for hot-rolled product 3A, *** led to ***, reductions in shipments of
the domestic product, and sharp subsequent reductions in domestic prices.
5288  Similar
pricing and volume patterns, with significant dips in import prices garnering
historically large sales volumes, followed by sharp cuts in domestic prices, occurredfor cold-rolled products 4A and 4B.
5289"
Further, it provided no explanation as to why pricing data for the other three items that constituted
CCFRS were not specifically considered and why the pricing data that it did refer to was
respresentative of CCFRS.
10.380  For the reasons expressed above, we consider that whether the USITC relied upon average
unit values for CCFRS as a single product or values for constituent items making up CCFRS, the
USITC's analysis could certainly not justify the conclusion that:
"In such a market, the increased volume of imports, at prices that undercut and
depressed and suppressed domestic prices, had an injurious impact on the domestic
industry, particularly when the domestic industry aggressively cut prices to meet the
continued influx of import volumes.
…
However, the surge in imports in 1998, at prices below domestic prices, led to a
decline in the industry's financial and other indicators."
                                                     
5288 (original footnote) INV-Y-212 at Table FLAT-ALT69.  See also Product 3B (historically high
import volume in 1998, and falling domestic prices from second quarter 1998 to second quarter 1999).
5289 (original footnote) INV-Y-212 at Tables FLAT-ALT70 and FLAT-ALT71.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 812
10.381  In conclusion, we are of the view that in conducting a conditions of competition analysis for
CCFRS, the USITC did not provide a compelling expl anation that demonstrates the existence of a
causal link between increased imports and serious in jury suffered by domestic producers of CCFRS.
In particular, it is our view that the flaws in the data referred to by the USITC coupled with selective
reliance upon data undermines the validity of the USITC's analysis.
(ii) Non-attribution
USITC findings
10.382  The USITC's findings read as follows:
"Respondents have suggested several alternate sources of injury to the domestic
industry, including declining domestic demand, intra-industry competition, domesticcapacity increases, buyer consolidation, excess leverage of domestic producers, and
legacy costs.  We consider each of these in turn.
Respondents argue that the domestic industry has been injured by declining US
demand.  But all evidence suggests that the de cline occurred very late in the POI, as
late as the fourth quarter of 2000.  Demand for certain carbon flat-rolled steel waslower in the first six months of 2001 than in the first six months of 2000.
5290
Apparent domestic demand in 2000 was higher than in 1996 for slabs, hot-rolled,cold-rolled, and coated steel, and apparent domestic demand for all certain carbon
flat-rolled steel was higher in 2000 than in 1999.
5291  The domestic industry showed
the signs of injury described above well before the latter portion of 2000, whendemand began to drop off.  The domestic industry first saw its operating income
decline in 1998, at a time when demand was increasing and would continue to
increase for another two years.
5292  The period of increasing demand was also when
imports surged.  We thus find that the domestic industry was already injured by
increased imports when demand began to decline, and declining demand, while notthe cause of the injury found here, contributed to the industry's continued
deterioration at the end of the period.  Indeed, the losses experienced by the industry
in 1999 and 2000 as a result of imports left the industry in a much weakened position
to face the slowdown in demand.
Respondents argue that the domestic industry has been injured by increases in
domestic capacity well in excess of the increase in domestic demand.  As noted
above, domestic capacity for certain carbon flat-rolled steel in total and each certain
carbon flat-rolled steel category increased between 1996 and 2000.  These capacity
increases occurred at a time when domestic demand rose consistently. Thus, increases
in domestic capacity in general were justified in light of market conditions.
It is true, as alleged by respondents, that capacity increases did exceed the increases
in domestic consumption.  From 1996 to 2000, apparent consumption of certaincarbon flat-rolled steel increased by 7.8 percent for both internal transfers and
commercial shipments, and increased by  10.9 percent for commercial shipments
                                                     
5290 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5291 (original footnote) INV-Y-209 at Table FLAT-ALT7 and CR and PR at Tables FLAT-C-2, FLAT-
C4-FLAT-C-5, and FLAT-C-7.
5292 (original footnote) INV-Y-209 at Table FLAT-ALT7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 813
alone.5293  By contrast, domestic capacity increased by the following amounts from
1996 to 2000:  15.9 percent, for certain carbon flat-rolled steel; 12.2 percent for
initial-stage steel-making capacity (slabs); 16.9 percent for combined hot-rolled steeland plate.  Because domestic production did not increase by an amount as great as the
increase in capacity but did increase commensurate with increased consumption, the
increase in capacity appears to explain, in significant part, the decline in the rate of
domestic capacity utilization that occurred over the period examined.
Respondents have argued that the presence of this new capacity, combined with the
failure of the industry to retire older, less efficient capacity, put tremendous pressure
on the domestic industry to cut costs in order to generate sales to fill the newcapacity.  It is true that there is a significant incentive to maximize the use of
steelmaking assets, which can affect producers' pricing behavior.  As we noted above,
however, product-specific data, as well as AUV data, indicate that imports, rather
than domestically produced steel, led prices downward during the POI.  Indeed,
capacity of foreign producers, already substantial exporters, increased steadily overthe POI.
5294  Additionally, imports supplied a higher share of apparent domestic
consumption in 2000 than in 1996.  If increased domestic capacity were in fact the
source of injury to the domestic industry, we would have expected to see the domestic
industry lead prices downward, and wrest market share from imports.  Therefore, we
find that increased production capacity, while likely playing a role in the pricedeclines that helped cause injury, was not an important cause of serious injury to the
domestic industry equal to or greater than the injury caused by increased imports.
Respondents have also claimed that poor management decisions, such as capital
investment decisions that increased companies' debt load, are responsible for
bankruptcies and poor financial performance by the domestic industry.
5295  We do not
find these arguments persuasive.  We noted above that the financial position of the
industry weakened after imports first surged in 1998.  The most serious injury to the
domestic industry occurred in years of record overall demand.  High levels of low-
priced imports prevented the domestic industry from achieving profitability despite
increased demand and increased shipments by the domestic industry.  We find thatthe poor financial position of the domestic i ndustry, including the high degree of debt
leverage, is a result of the injury from increased imports suffered by the domestic
industry, including poor equity performance,  rather than a cause of that injury.
5296
Moreover, increased debt load and other allegedly poor management decisions cannotexplain the price declines experienced by this industry.
5297
Respondents argue that legacy costs, in th e form of pension and non-pension benefits,
have increased costs substantially, and those increased costs are more responsible for
                                                     
5293 (original footnote) INV-Y-209 at Table FLAT-ALT7, CR and PR at Tables FLAT-12 to FLAT-15,
FLAT-17, FLAT-C-2 to FLAT-C-5 and FLAT-C-7.
5294 (original footnote) INV-Y-215 at Table VII-ALT1.
5295 (original footnote) Joint Respondents' Prehearing Framework Brief at 63-83.
5296 (original footnote) Injury Tr. at 988-89 (Dr. Kothari).
5297 (original footnote) We have examined respondents' allegations of poor strategies followed by
individual domestic companies.  In an industry as large and diverse as the industry producing certain carbon
flat-rolled steel, it is always possible to question the business strategies of individual firms.  However, suchexamples, even if true, could not explain the substantial decline in the performance of the domestic industry as awhole.  We do not find such a pattern of poor decision-making.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 814
the wave of bankruptcy filings than are increased imports.5298  The funding of legacy
costs is a vexing problem for the domestic industry, and evidence on the record
indicates that legacy costs have prevented needed consolidation within the domesticindustry from taking place.  However, the burden of legacy costs varies tremendously
among domestic producers.
5299  The issue of legacy costs is not a new one to this
industry.  The difficulties in meeting these obligations were recognized before the
POI, and the domestic industry was able to earn a reasonable rate of return in 1996
and 1997 despite these costs.  Respondents have offered no reason why the industry's
longstanding problem would cause no in jury in 1996 or 1997 but then begin to
depress prices and strangle revenue in 1998-2000.  Legacy costs may have left certainmembers of the domestic industry less able to compete with low-priced imports, but
are not responsible for the low prices that have injured the industry.  We therefore
find that legacy costs are not a source of injury to the domestic industry equal to or
greater than increased imports.
Respondents argue that intra-industry compet ition, spurred by the increased presence
of efficient minimills, has caused injury to the domestic industry.  Minimills did
typically enjoy cost advantages over integrated producers, based in part on differing
product mixes and raw material costs.  However, these cost advantages existed
throughout the POI, and integrated producers as well as minimills enjoyed declining
costs throughout the POI.
5300  The addition of a greater volume of lower-cost capacity
would be expected to have an effect on prices, and we find that it did.  However, as
noted above, imports, rather than minimi lls, typically led prices downward.  Hot-
rolled steel is the primary commercial product for minimills.  Prices for hot-rolled
steel produced by minimills typically *** prices of hot-rolled steel produced by
integrated producers ***.5301  In 1998 and again in 2000, imports *** hot-rolled steel
produced by both integrated producers and minimills by ***, resulting in lowered
sales for domestically produced hot-rolled steel and subsequent price cuts by both
integrated producers and minimills.5302  Thus, while in general, minimills may have
been in a somewhat better position to withstand low-priced import competition than
other domestic producers, we find that minimills were not primarily responsible forthe declines in domestic prices or an important cause of serious injury to the domestic
industry, which is equal to or greater than the injury caused by increased imports.
Respondents have also argued that buyer consolidation, especially among automobile
manufacturers, reduced the bargaining power and the profit margins of domestic
producers.  The record does contain evidence that automobile manufacturers in
particular have either consolidated or attempted to consolidate their buying
operations.  Automotive manufacturers are important purchasers of certain carbonflat-rolled steel.
5303  There is some consolidation in other steel-purchasing sectors as
                                                     
5298 (original footnote) Joint Respondents' Posthearing Brief on Flat-Rolled Steel, Vol. 2 at Exh. B,
Answers to Vice Chairman Okun's Questions at 17.
5299 (original footnote) CR and PR at OVERVIEW-31-35.  Producers Birmingham, CSI, Commercial
Metals, Nucor, and SDI have defined contribution plans, while other steel producers provide defined benefitplans.  CR and PR at OVERVIEW-32 nn.37 and 38.
5300 (original footnote) INV-Y-215 at STL20P2I.WK4, STL20P2M.WK4, STL20H3I.WK4,
STL20H3M.WK4, STL20C4I.WK4, STL40C4M.WK4, STL20R6I.WK4, and STL20R6M.WK4.
5301 (original footnote) INV-Y-215 at Pricing Tables for products 3A and 3B.
5302 (original footnote) INV-Y-215 at Pricing Tables for products 3A and 3B.
5303 (original footnote) CR and PR at Table OVERVIEW-2.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 815
well.5304  A smaller number of purchasers would tend to give the purchasers greater
bargaining power which would be expected to impact price.  However, purchaser
consolidation has been an ongoing process that did not suddenly occur beginning in1998.  We do not find that purchaser consolidation can explain the substantial decline
in domestic prices or that consolidation is an important cause of serious injury to the
domestic industry, which is equal to or greater than the injury caused by increased
imports.
In view of the above, we find that increased imports are a substantial cause, and a
cause no less important than any other cause, of serious injury to the domestic certain
carbon flat-rolled steel industry.  Our finding is based on the increase in imports andsubsequent increase in the share of the domestic market held by imports, the lower
prices of the imports, and the corresponding declines in domestic market share,
prices, and capacity utilization, negative profitability, evidence of unemployment, and
the decline in capital expenditures.  Accordingly, we make an affirmative
determination."
5305
Factors considered by the USITC
Declining domestic demand
Claims and arguments of the parties
10.383  The arguments of the parties are set out in Section VII.H.3(b)(i) supra .
Analysis by the Panel
10.384  The Panel notes the USITC statement that:  "We thus find that the domestic industry was
already injured by increased imports when demand began to decline, and declining demand, while not
the cause of the injury found here, contributed to the industry's continued deterioration at the end of
the period."  We take the statement that declining demand "contributed to the industry's continued
deterioration at the end of the period" to amount to an acknowledgement by the USITC that declining
demand did, in fact, play a role in causing the injury suffered by the industry, albeit at the end of the
period of investigation.
10.385  We note that the USITC discussed demand trends during the period of investigation.  That
discussion confirms the USITC's statement that demand declined towards the end of the period of
investigation.  In particular, in the section of the report dealing with conditions of competition forCCFRS, the USITC stated that:
"By any measure, the period of investigation saw significant growth in US demand
for certain carbon flat-rolled steel.
5306  Apparent domestic consumption of certain
                                                     
5304 (original footnote) CR and PR at OVERVIEW-53-54.
5305 USITC Report, Vol. I, pp. 63-65.
5306 We are cognizant of the difficulty of measuring consumption, production, capacity, and import
penetration in a product for which a significant portion of production is consumed in the production of other,downstream materials also included in the like product.  Adding figures for each of the product categories would
tend to overstate domestic capacity and production and understate the true impact of imports, while
concentrating solely on commercial shipments would be inconsistent with available capacity data.  See CR at
FLAT-18 n.11, FLAT-34 n.13, and FLAT-60 n.14, PR at FLAT-15 n.11, FLAT-30 n.13, and FLAT-44 n.14.We have considered the arguments of both domestic producers and respondents regarding the appropriateWT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 816
carbon flat-rolled steel, including internally consumed production, climbed steadily
during the period, from 203.2 million short tons in 1996 to 219.0 million short tons in
2000, an increase of 7.8 percent.5307  Apparent domestic consumption of certain
carbon flat-rolled steel, including internally consumed production, declined 14.9
percent from interim 2000 to interim 2001.5308  Net sales of certain carbon flat-rolled
steel increased from 58.8 million short tons in 1996 to 65.2 million short tons in
2000, an increase of 10.9 percent.5309  Net sales of certain carbon flat-rolled steel
declined 11.7 percent between interim 2000 and interim 2001.5310  A decline in
demand, however, can be seen at the end of the period examined, as apparent
domestic consumption of certain carbon flat-rolled steel was 14.9 percent lower ininterim 2001 than in interim 2000.
Similar, though not identical, increases occurred in the consumption of each type of
flat-rolled steel.  Apparent domestic consumption of slabs rose from 71.4 million
short tons in 1996 to 74.4 million short tons in 2000; apparent domestic consumption
of slabs in 2000 was the highest level registered in the POI.
5311  Apparent domestic
consumption of slabs declined 15.6 percent between interim 2000 and interim
2001.5312  Apparent domestic consumption of hot-rolled steel increased from 68.5
million short tons in 1996 to 75.1 million short tons in 2000; apparent domestic
consumption of hot-rolled steel in 2000 was the highest level registered in the
POI.5313  Apparent domestic consumption of hot-rolled steel declined 17.1 percent
between interim 2000 and interim 2001.5314  Apparent domestic consumption of cold-
rolled steel actually peaked in 1999 at 40.6 million short tons.  Nonetheless, apparent
domestic consumption of cold-rolled steel in 2000, at 40.0 million short tons, was 9.8
percent higher than the 1996 level of 36.4 million short tons.5315  Apparent domestic
consumption of cold-rolled steel declined 12.3 percent between interim 2000 andinterim 2001.
5316  Similarly, apparent domestic consumption of coated steel peaked in
1999 at 22.8 million tons, but apparent domestic consumption in 2000, at 22.3 million
short tons, was 16.9 percent higher than the 1996 level of 19.1 million short tons.5317
Apparent domestic consumption of coated steel was 13.0 percent lower in interim2001 than in interim 2000.
5318  Only plate consumption exhibited a significantly
different trend, with apparent consumption in 2000, at 7.1 million short tons, below
                                                                                                                                                                    
method for determining these indicators, and we have considered a variety of different measurements in
reaching our determination.  In general, however, we found that the same conclusions were warranted regardlessof which measurement was used.
5307 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5308 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5309 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5310 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5311 (original footnote) CR and PR at Table FLAT-C-2.
5312 (original footnote) CR and PR at Table FLAT-C-2.
5313 (original footnote) CR and PR at Table FLAT-C-4.
5314 (original footnote) CR and PR at Table FLAT-C-4.
5315 (original footnote) CR and PR at Table FLAT-C-5.
5316 (original footnote) CR and PR at Table FLAT-C-5.
5317 (original footnote) CR and PR at Table FLAT-C-7.
5318 (original footnote) CR and PR at Table FLAT-C-7.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 817
the 1996 level of 7.8 million short tons.5319  Apparent domestic consumption of plate
was 3.6 percent lower in interim 2001 than in interim 2000.5320" 5321
10.386  In addition, in its non-attribution analysis, the USITC stated that:
"But all evidence suggests that the decline occurred very late in the POI, as late as the
fourth quarter of 2000.  Demand for certain carbon flat-rolled steel was lower in the
first six months of 2001 than in the first six months of 2000.5322  Apparent domestic
demand in 2000 was higher than in 1996 for slabs, hot-rolled, cold-rolled, and coated
steel, and apparent domestic demand for all certain carbon flat-rolled steel was higher
in 2000 than in 1999.5323  The domestic industry showed the signs of injury described
above well before the latter portion of 2000, when demand began to drop off.  Thedomestic industry first saw its operating income decline in 1998, at a time when
demand was increasing and would continue to increase for another two years.
5324"5325
10.387  We note that the USITC dismissed this factor in its non-attribution analysis because: "The
domestic industry showed the signs of injury … well before the latter portion of 2000, when demand
began to drop off".  The Panel notes in this regard that the fact that the contribution of a factor to theinjury suffered may have only occurred late in the period of investigation or for only a relatively short
period within that time-span does not relieve a compet ent authority of its obligation to ensure that the
injury caused by that factor is not attributed to the increased imports.  It may be the case that such a
factor may inflict considerable damage on the industry, even though its effects appeared late in the
period and/or for a relatively short duration.  However, the USITC did not consider this possibility inits analysis.
10.388  Accordingly, in our view, the USITC unjustifiabl y dismissed this factor in its non-attribution
analysis despite the fact that it explicitly acknowledged that declines in demand played a role in the
injury suffered by the industry, albeit at the end of the period of investigation.  The USITC dismissed
this factor on the basis that the industry was already injured when demand began to decline.  Despitethe apparent role played by this factor in causing injury to the industry, we find nothing in the USITC
Report to indicate whether and how the injury caused by this factor was not attributed to increased
imports.
10.389  In failing to adequately analyse this factor, the Panel finds that the USITC failed to meet its
obligation to establish explicitly, through a reasoned  and adequate explanation, that the injury caused
by this factor, together with other factors, was not attributed to increased imports.
Domestic capacity increases
Claims and arguments of the parties
10.390  The arguments of the parties are set out in Section VII.H.3(b)(i) supra .
                                                     
5319 (original footnote) CR and PR at Table FLAT-C-3.
5320 (original footnote) CR and PR at Table FLAT-C-3.
5321 USITC Report, Vol. I, pp. 56-57.
5322 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5323 (original footnote) INV-Y-209 at Table FLAT-ALT7 and CR and PR at Tables FLAT-C-2, FLAT-
C4-FLAT-C-5, and FLAT-C-7.
5324 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5325 USITC Report, Vol. I, p. 63.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 818
Analysis by the Panel
10.391  The Panel considers that the USITC explicitly acknowledged that domestic capacity increases
were causing injury to the industry.  In particular, the USITC stated:
"Because domestic production did not increase by an amount as great as the increase
in capacity but did increase commensurate with increased consumption, the increase
in capacity appears to explain, in significant part, the decline in the rate of domestic
capacity utilization that occurred over the period examined.
…
Therefore, we find that increased production capacity, while likely playing a role in
the price declines that helped cause injury, was not an important cause of seriousinjury to the domestic industry equal to or greater than the injury caused by increased
imports."
5326
10.392  We note that, in the first cited paragraph, the USITC links capacity increases to declines in
domestic capacity utilization, the latter being an injury factor referred to in Article 4.2(a) of the
Agreement on Safeguards.  In addition, the second cited paragraph states explicitly that domesticcapacity increases likely played a role in causing injury to the industry.
10.393  We note that the USITC identified increases in the level of domestic capacity during the
period of investigation.  In particular, in the section of the USITC's Report dealing with injury, the
USITC stated that:
"We recognize that the industry's production and capacity both increased from 1996
to 2000 … The sum of all productive capacity for slab, plate, hot-rolled, cold-rolled,
and coated steel increased by 15.9 percent between 1996 and 2000.
5327  The sum of all
productive capacity for slab, plate, hot-rolled, cold-rolled, and coated steel fell by 0.8
percent between interim 2000 and interim 2001.5328"5329
10.394  Nevertheless, the USITC dismissed domestic capacity increases in its non-attribution analysis
on the basis of the assertion that:  "If increased domestic capacity were in fact the source of injury to
the domestic industry, we would have expected to see the domestic industry lead prices downward,
                                                     
5326 USITC Report, Vol. I, pp. 63-67.
5327 (original footnote) INV-Y-209 at Table FLAT-ALT7.
5328 (original footnote) INV-Y-209 at Table FLAT-ALT7.  Slab-making capacity increased by 12.2
percent between 1996 and 2000, rising from 66.9 million short tons in 1996 to 75.1 million short tons in 2000.
CR and PR at Table FLAT-C-2.  Slab-making capacity declined by 2.4 percent between interim 2000 andinterim 2001.  CR and PR at Table FLAT-C-2.  Combined domestic production capacity for hot-rolled and plate
increased by 16.9 percent, rising from 76.6 million shor t tons in 1996 to 89.5 million short tons in 2000.  CR
and PR at Tables FLAT-C-3 and FLAT-C-4.  Some domestic producers suggested that aggregating hot-rolledand plate capacity is an appropriate measure of dome stic capacity.  Dewey/Skadden Posthearing Brief at 18.
Combined domestic production capacity for hot-rolled and plate increased by 1.6 percent between interim 2000and interim 2001, rising from 44.5 million short tons to 45.2 million short tons.  CR and PR at Tables FLAT-C-3 and FLAT-C-4.  Capacity for cold-rolled steel production rose by 14.4 percent between 1996 and 2000, but
declined 4.3 percent between interim 2000 and interim 2001.  CR and PR at Table FLAT-C-5.  Domestic
capacity for coated steel production rose by 28.1 percent between 1996 and 2000 and rose by 1.8 percentbetween interim 2000 and interim 2001.  CR and PR at Table FLAT-C-7.
5329 USITC Report, Vol. I, p. 52.WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R
Page 819
and wrest market share from imports".5330  In the Panel's opinion, this analysis is simplistic and fails to
address the complexities associated with this factor, which the USITC itself acknowledged.  In
particular, it stated that:  "Because domestic production did not increase by an amount as great as theincrease in capacity but did increase commensurat e with increased consumption, the increase in
capacity appears to explain, in significant part, the decline in the rate of domestic capacity utilization
that occurred over the period examined".
5331
10.395  This statement indicates to us that, in its consideration of domestic capacity increases, the
USITC recognized the interrelatedness between capacity on the one hand and domestic production
and capacity utilization on the other hand, the latter two being injury factors referred to in
Article 4.2(a).  In addition, the USITC referred on a number of occasions in its injury analysis forCCFRS to "a significant idling of the domestic in dustry's productive facilities."  It would not be
implausible to conclude that such idling may have been caused by increased capacity, which the
USITC also acknowledged exceeded increases in domestic consumption.  Despite these clear inter-
linkages between domestic capacity increases and other factors or effects that were observed in the
market, the USITC dismissed it in its non-attribution analysis.
10.396  In failing to adequately analyse this factor, th e Panel considers that the USITC failed to meet
its obligation to establish explicitly, through a reasoned and adequate explanation, that the injury
caused by this factor, together with other factors, was not attributed to increased imports.
Intra-industry competition
Claims and arguments of the parties
10.397  The arguments of the parties are set out in Section VII.H.3(b)(i) supra .
Analysis by the Panel
10.398  The Panel considers that the USITC explicitly acknowledged that intra-industry competition
played a role in causing the injury suffered by  the domestic industry.  This acknowledgement is
contained in the following statement:  "[W]e find that minimills were not primarily responsible for thedeclines in domestic prices or an important cause of serious injury to the domestic industry, which is
equal to or greater than the injury caused by increased imports".
5332  We read this statement to mean
that while the USITC did not consider that intra-industry competition was "primarily" responsible for
the serious injury suffered by the industry, it, nevertheless, considered that this factor played a role in
causing such injury.  The USITC also explicitly acknowledged that low-cost capacity created bydomestic minimill producers had an effect (implicitly, a negative one) on prices.  In particular, the
USITC stated that: "The addition of a greater volume of lower-cost capacity would be expected to
have an effect on prices, and we find that it did".
5333
10.399  In our view, the USITC did not adequately assess the role played by this factor.  It is true that
it referred to cost advantages enjoyed by minimills over integrated producers.  It is also true that the
USITC engaged in a price comparison for products produced both by minimills and integrated
producers.  However, in our view, this analysis does not provide sufficient insights into the effectsthat intra-industry competition had on the market.
                                                     
5330 See para. 10.382.
5331 See para. 10.382.
5332 See para. 10.382.
5333 See para. 10.382.