WORLD TRADE  
ORGANIZATION  WT/DS399/R 
13 December 2010 
 (10-6582) 
 Original:   English 
  
 
     
 
    
 
  
UNITED STATES – MEASURE S AFFECTING IMPORTS  
OF CERTAIN PASSENGER VEHICLE AND  
LIGHT TRUCK TYRES FROM CHINA 
 
 
 
Report of the Panel 
 
   
 
    
 
   WT/DS399/R 
 Page i 
 
 
  TABLE OF CONTENTS 
Page  
 
I. INTRODUCTION ................................................................................................................... .1 
II. FACTUAL ASPECTS ..............................................................................................................2  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.........................2  
A. CHINA ............................................................................................................................... ...........2  
B. THE UNITED STATES ....................................................................................................................3  
IV. ARGUMENTS OF THE PARTIES ........................................................................................3  
V. ARGUMENTS OF THE THIRD PARTIES ..........................................................................3  
VI. INTERIM REVIEW................................................................................................................. 3 
A. REQUEST FOR REVIEW SUBMITTED BY CHINA .............................................................................3  
1. Increasing rapidly ............................................................................................................. ........3  
(a) Para. 7.83 ..................................................................................................................... ...............3  
(b) Para. 7.84 ..................................................................................................................... ...............4  
(c) Para. 7.86 ..................................................................................................................... ...............5  
(d) Para. 7.87 ..................................................................................................................... ...............5  
2. "As such" causation............................................................................................................ ......6  
(a) Paras. 7.138-7.140............................................................................................................. ..........6  
(b) Para. 7.158 .................................................................................................................... ..............7  
3. "As applied" causation......................................................................................................... ....7 
(a) Paras. 7.140 and 7.169-7.170................................................................................................... ...7 
(b) Paras. 7.174 – 7.177........................................................................................................... .........8  
(c) Paras. 7.196 – 7.197........................................................................................................... .........9  
(d) Para. 7.205 .................................................................................................................... ..............9  
(e) Para. 7.229 .................................................................................................................... ............10  
(f) Paras. 7.307 – 7.312........................................................................................................... .......10  
(g) Paras. 7.353 – 7.354........................................................................................................... .......11  
B. REQUEST FOR REVIEW SUBMITTED BY THE UNITED STATES .....................................................13  
1. Standard of review............................................................................................................. .....13  
(a) Para. 7.18 ..................................................................................................................... .............13  
2. "As such" causation............................................................................................................ ....13  
(a) Para. 7.136 .................................................................................................................... ............13  
3. Substantive findings generally...............................................................................................13  
(a) Paras. 7.197, 7.215, 7.216, 7.238, 7. 260, 7.322, 7.359, 7.367, and 7.379 ................................13  
4. Remedy ......................................................................................................................... ...........14  
(a) Para. 7.397 .................................................................................................................... ............14  WT/DS399/R 
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  (b)
 Para. 7.414 .................................................................................................................... ............14  
(c) Para. 7.418, footnote 557. ..................................................................................................... ....14  
5. Conclusion ..................................................................................................................... ..........14  
(a) Para. 8.1 ...................................................................................................................... ..............14  
VII. FINDINGS....................................................................................................................... ........14  
A. GENERAL ISSUES .......................................................................................................................14  
1. Preliminary observations ....................................................................................................... 15 
2. Standard of review............................................................................................................. .....16  
3. Burden of proof................................................................................................................ .......18  
4. Treaty interpretation.......................................................................................................... ....19  
5. Relationship between Paragraph 16.1 and Paragraph 16.4 of the Protocol......................20  
(a) Arguments of the parties....................................................................................................... ....21  
(b) Evaluation by the Panel ........................................................................................................ ....22  
B. WAS THE USITC ENTITLED TO FIND THAT IMPORTS WERE "INCREASING RAPIDLY " IN 
ACCORDANCE WITH PARAGRAPH 16 OF THE PROTOCOL ? .........................................................23  
1. Introduction................................................................................................................... ..........23  
2. Arguments of the Parties....................................................................................................... .23 
3. Evaluation by the Panel........................................................................................................ ..33 
(i) Review of import data .......................................................................................................... .....33  
(ii) The meaning of the phrase "increasing rapidly" ......................................................................35  
(iii) Relative increase in imports................................................................................................... ...37 
(iv) End-point-to-end-point analysis ...............................................................................................3 8 
(v) Value / volume ................................................................................................................. .........39  
(vi) Low base ....................................................................................................................... ............40  
(vii) Interim data for the first quarter of 2009..................................................................................40  
4. Conclusion ..................................................................................................................... ..........41  
C. IS THE U .S. IMPLEMENTING STATUTE 'S CAUSATION STANDARD INCONSISTENT AS SUCH 
WITH PARAGRAPH 16.1  AND PARAGRAPH 16.4  OF THE PROTOCOL ? .........................................41  
1. Threshold issue regarding the applicat ion of the mandatory/discretionary 
distinction .................................................................................................................... ............42  
2. Whether the statute lowers the Paragraph 16.4 causation standard by redefining 
"significant cause" as "contributes significantly"...............................................................43  
(a) Arguments of the parties....................................................................................................... ....43  
(b) Evaluation by the Panel ........................................................................................................ ....46  
3. Whether the statute further lowers the Paragraph 16.4 causation standard by 
allowing imports to be a less important fa ctor than any other single cause, no 
matter how minor that ot her cause might be .......................................................................51  
(a) Arguments of the parties....................................................................................................... ....51   WT/DS399/R 
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  (b) Evaluation by the Panel ........................................................................................................ ....52  
4. Conclusion ..................................................................................................................... ..........53  
D. WHETHER THE USITC PROPERLY FOUND THAT  RAPIDLY INCREASING IMPORTS WERE A 
SIGNIFICANT CAUSE OF MATERIAL INJURY ...............................................................................53  
1. The nature of the analysis required by Paragraph 16 of the Protocol...............................53  
(a) Conditions of competition / correlation ....................................................................................53  
(i) Arguments of the parties ....................................................................................................... ....53  
(ii) Evaluation by the Panel........................................................................................................ ....54  
(b) Non-attribution................................................................................................................ ..........55  
(i) Arguments of the parties ....................................................................................................... ....55  
(ii) Evaluation by the Panel........................................................................................................ ....56  
2. The conditions of competition between subject imports and domestic tyres.....................57  
(a) Different segments in th e replacement  market .........................................................................58  
(i) Arguments of the parties ....................................................................................................... ....58  
(ii) Evaluation by the Panel........................................................................................................ ....59  
(b) U.S. producers' focus on the OEM market ...............................................................................62  
(i) Arguments of the parties ....................................................................................................... ....62  
(ii) Evaluation by the Panel........................................................................................................ ....63  
(c) Reliance on Questionnaire responses to estab lish the substitutability of imports and 
domestic tyres ................................................................................................................. ..........64  
(i) Arguments of the parties ....................................................................................................... ....64  
(ii) Evaluation by the Panel........................................................................................................ ....65  
(d) Conclusion ..................................................................................................................... ...........66  
3. Correlation between the increase in imports and the decline in injury factors ................67  
(a) Arguments of the parties....................................................................................................... ....67  
(b) Evaluation by the Panel ........................................................................................................ ....70  
(i) Correlation generally.......................................................................................................... ......70  
(ii) Cost–price squeeze............................................................................................................. .......74  
COGS/sales  ratio............................................................................................................... ...................... 74  
Underselling ................................................................................................................... ......................... 75  
(c) Conclusion ..................................................................................................................... ...........78  
4. The non-attribution of injury caused by  other factors to increasing imports...................78  
(a) The domestic industry's business strategy ................................................................................79  
(i) Arguments of the parties ....................................................................................................... ....79  
Plant closures................................................................................................................. .......................... 79  
Purchases of tyre-manufacturing eq uipment by Chinese producers........................................................ 81  
Subject imports by U.S. producers.............................................................................................. ............ 82  WT/DS399/R 
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  2006 Article:  imports from China expected to increase ......................................................................... 82 
(ii) Evaluation by the Panel........................................................................................................ ....83  
General observations regard ing China's arguments............................................................................... .. 84 
Plant closures................................................................................................................. .......................... 86  
Subject imports by U.S. producers.............................................................................................. ............ 90  
Purchase of tyre-manufacturing equipment by Chin ese producers ......................................................... 90  
2006 Article:  imports from China expected to increase ......................................................................... 91 
(iii) Conclusion ..................................................................................................................... ...........91  
(b) Changes in demand.............................................................................................................. .....92  
(i) Demand over the period of investigation as  a whole:  correlation with injury ........................92  
Arguments of the parties ....................................................................................................... .................. 92  
Evaluation by the Panel........................................................................................................ ................... 94  
(ii) Demand in the OEM market .....................................................................................................97  
Arguments of the parties ....................................................................................................... .................. 97  
Evaluation by the Panel........................................................................................................ ................... 97  
(iii) The 2008 recession ............................................................................................................. ......98  
Arguments of the parties ....................................................................................................... .................. 98  
Evaluation by the Panel........................................................................................................ ................... 98  
(iv) Shift to larger tyres .......................................................................................................... .........99  
Arguments of the parties ....................................................................................................... .................. 99  
Evaluation by the Panel........................................................................................................ ................... 99  
(v) Conclusion ..................................................................................................................... .........100  
(c) Non-subject imports............................................................................................................ ....100  
(i) Arguments of the parties ....................................................................................................... ..100  
(ii) Evaluation by the Panel........................................................................................................ ..101  
(d) Miscellaneous other factors .................................................................................................... 101 
(i) Arguments of the parties ....................................................................................................... ..101  
(ii) Evaluation by the Panel........................................................................................................ ..102  
(e) Cumulative assessment .......................................................................................................... .102 
(i) Arguments of the parties ....................................................................................................... ..102  
(ii) Evaluation by the Panel........................................................................................................ ..103  
(f) Conclusion ..................................................................................................................... .........104  
5. Conclusion ..................................................................................................................... ........104  
E. WHETHER THE TRANSITIONAL SAFE GUARD MEASURE WENT BEYOND THE "EXTENT 
NECESSARY ", CONTRARY TO PARAGRAPH 16.3  OF THE PROTOCOL ........................................104  
1. Arguments of th e parties......................................................................................................1 04 
(a) China.......................................................................................................................... .............104   WT/DS399/R 
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  (b) United States .................................................................................................................. .........106  
2. Evaluation by the Panel........................................................................................................ 107 
F. WHETHER THE DURATION OF THE REMEDY EXCEEDED THE PERIOD OF TIME 
NECESSARY TO PREVENT OR REMEDY MARKET DISRUPTION ..................................................109  
1. Arguments of th e parties......................................................................................................1 09 
(a) China.......................................................................................................................... .............109  
(b) United States .................................................................................................................. .........111  
2. Evaluation by the Panel........................................................................................................ 112 
G. WHETHER THE U .S. TYRES  MEASURE IS INCONSISTENT WITH ARTICLES I :1 AND II :1(B) 
OF THE GATT 1994...................................................................................................................112  
VIII.  CONCLUSION ..................................................................................................................... 113 
 WT/DS399/R 
Page vi  
 
  LIST OF ANNEXES 
 
 
ANNEX A 
 
EXECUTIVE SUMMARIES OF THE FIRST WRITTEN 
SUBMISSIONS OF THE PARTIES 
 
Contents Page 
Annex-A-1 Executive Summary of the First Written Submission of China A-2 
Annex A-2 Executive Summary of the First Written Submission of the 
United States A-11 
 
 
ANNEX B 
 
EXECUTIVE SUMMARIES OF THIRD PARTIES'  
WRITTEN SUBMISSIONS 
 
Contents Page 
Annex B-1 Executive Summary of the Third Party Written Submission of the 
European Union B-2 
Annex B-2 Executive Summary of the Third Party Written Submission of 
Japan B-4 
 
 
ANNEX C  
 
ORAL STATEMENTS OF THE PARTIES AT THE FIRST  
SUBSTANTIVE MEETING OF THE PANEL OR  
EXECUTIVE SUMMARIES THEREOF 
 
Contents Page 
Annex C-1 Executive Summary of the Oral  statement of China at the First 
Meeting of the Panel C-2 
Annex C-2 Executive Summary of the Oral Statement of the United States at 
the First Meeting of the Panel C-11 
 
 
ANNEX D 
 
ORAL STATEMENTS OF THIRD PARTIES OR 
EXECUTIVE SUMMARIES THEREOF 
 
Contents Page 
Annex D-1 Oral Statement of the European Union D-2 
Annex D-2 Oral Statement of Japan D-3 
 
   WT/DS399/R 
   Page vii  
 
  ANNEX E  
 
EXECUTIVE SUMMARIES OF THE SECOND WRITTEN 
SUBMISSIONS OF THE PARTIES 
 
Contents Page 
Annex E-1 Executive Summary of the Second Written Submission of China E-2 
Annex E-2 Executive Summary of the Second Written Submission of 
the United States E-11 
 
 
ANNEX F 
 
ORAL STATEMENTS OF THE PARTIES AT THE SECOND  
SUBSTANTIVE MEETING OF THE PANEL  
OR EXECUTIVE SUMMARIES THEREOF 
 
Contents Page 
Annex F-1 Executive Summary of the Oral  Statement of China at the Second 
Meeting of the Panel F-2 
Annex F-2 Executive Summary of the Oral Statement of the United States at 
the Second Meeting of the Panel F-11 
Annex F-3 Closing Statement of China at the Second Meeting of the Panel F-20 
 
 
ANNEX G 
 
REQUEST FOR CONSULTATIONS AND REQUEST FOR  
THE ESTABLISHMENT OF A PANEL BY CHINA 
 
Contents Page 
Annex G-1 Request for Consultations by China G-2 
Annex G-2 Request for the Establishment of a Panel by China G-4 
 WT/DS399/R 
Page viii  
 
  TABLE OF CASES CITED IN THIS REPORT  
 
Short Title Full Case Title and Citation 
Argentina – Footwear(EC)  Panel Report, Argentina – Safeguard Measures on Imports of Footwear , 
WT/DS121/R, adopted 12 January 2000, as modified by Appellate Body 
Report WT/DS121/AB/R, DSR 2000:II, 575 
Argentina – Footwear(EC)  Appellate Body Report, Argentina – Safeguard Measures on Imports of 
Footwear , WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515 
Canada – Autos  Appellate Body Report, Canada – Certain Measures Affecting the 
Automotive  Industry , WT/DS139/AB/R, WT/D S142/AB/R, adopted 
19 June 2000, DSR 2000:VI, 2985 
EC – Countervailing Measures 
on DRAM Chips  Panel Report, European Communities – Countervailing Measures on 
Dynamic Random Access Memory Chips from Korea , WT/DS299/R, 
adopted 3 August 2005, DSR 2005:XVIII, 8671 
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat 
Products (Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 
13 February 1998, DSR 1998:I, 135 
EC – Tube or Pipe Fittings  Appellate Body Report, European Communities – Anti-Dumping Duties 
on Malleable Cast Iron Tube or Pipe Fittings from Brazil , 
WT/DS219/AB/R, adopted 18 August 2003, DSR 2003:VI, 2613 
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical 
and Agricultural Chemical Products , WT/DS50/AB/R, adopted 
16 January 1998, DSR 1998:I, 9 
Japan – DRAMS (Korea)  Panel Report, Japan – Countervailing Dutie s on Dynamic Random Access 
Memories from Korea , WT/DS336/R, adopted 17 December 2007, as 
modified by Appellate Body Report WT/DS336/AB/R, DSR 2007:VII, 
2805 
Korea – Commercial Vessels  Panel Report, Korea – Measures Affecting Trade in Commercial Vessels , 
WT/DS273/R, adopted 11 April 2005, DSR 2005:VII, 2749 
Mexico – Anti-Dumping Measures on Rice Panel Report, Mexico – Definitive Anti-Dumpin g Measures on Beef and 
Rice, Complaint with Respect to Rice , WT/DS295/R, adopted 
20 December 2005, as modified  by Appellate Body Report 
WT/DS295/AB/R, DSR 2005:XXIII, 11007 
Mexico – Anti-Dumping Measures on Rice  Appellate Body Report, Mexico – Definitive Anti- Dumping Measures on 
Beef and Rice, Complain t with Respect to Rice , WT/DS295/AB/R, 
adopted 20 December 2005, DSR 2005:XXII, 10853  
Mexico – Steel Pipes and Tubes  Panel Report, Mexico – Anti-Dumping Duties on Steel Pipes and Tubes 
from Guatemala , WT/DS331/R, adopted 24 July 2007, DSR 2007:IV, 
1207 
US – Carbon Steel  Appellate Body Report, United States – Countervailing Duties on Certain 
Corrosion-Resistant Carbon Steel Flat Products from Germany , 
WT/DS213/AB/R and Corr.1, adopted 19 December 2002, DSR 2002:IX, 
3779 
US – Corrosion-Resistant Steel Sunset Review  Panel Report, United States – Sunset Review of Anti-Dumping Duties on 
Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/R, adopted 9 January 2004, as modified by Appellate Body Report WTDS244/AB/R, DSR 2004:I, 85 
US – Corrosion-Resistant Steel 
Sunset Review  Appellate Body Report, United States – Sunset Review of Anti-Dumping 
Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan , 
WT/DS244/AB/R, adopted 9 January 2004, DSR 2004:I, 3   WT/DS399/R 
   Page ix  
 
  Short Title Full Case Title and Citation 
US – Countervailing Duty 
Investigation on DRAMS  Appellate Body Report, United States – Countervailing Duty 
Investigation on Dynamic Random  Access Memory Semiconductors 
(DRAMS) from Korea , WT/DS296/AB/R, adopted 20 July 2005, DSR 
2005:XVI, 8131 
US – Customs Bond Directive  Panel Report, United States – Customs Bond Directive for Merchandise 
Subject to Anti-Dumping/Countervailing Duties , WT/DS345/R, adopted 
1 August 2008, as modified by Appellate Body Report WT/DS343/AB/R, 
WT/DS345/AB/R 
US – Lamb  Appellate Body Report, United States – Safeguard Measures on Imports 
of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia , 
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 4051 
US – Line Pipe  Appellate Body Report, United States – Definitive Safeguard Measures 
on Imports of Circular Welded Carbon Quality Line Pipe from Korea , 
WT/DS202/AB/R, adopted 8 March 2002 
US – Line Pipe  Panel Report, United States – Definitive Safeguard Measures on Imports 
of Circular Welded Carbon Quality Line Pipe from Korea , WT/DS202/R, 
adopted 8 March 2002, as modified by the Appellate Body Report, 
WT/DS202/AB/R 
US – Shrimp Appellate Body Report, United States – Import Prohibition of Certain 
Shrimp and Shrimp Products , WT/DS58/AB/R, adopted 
6 November 1998, DSR 1998:VII, 2755 
US – Softwood Lumber VI 
(Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International 
Trade Commission in Softwood Lumber from Canada – Recourse to 
Article 21.5 of the DSU by Canada , WT/DS277/AB/RW, adopted 
9 May 2006, and Corr.1, DSR 2006:XI, 4865 
 
 US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures 
on Imports of Certain Steel Products , WT/DS248/AB/R, 
WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, 
WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, 
WT/DS259/AB/R, adop ted 10 December 2003,  DSR 2003:VII, 3117  
US – Steel Safeguards  Panel Reports, United States – Definitive Safeguard Measures on Imports 
of Certain Steel Products , WT/DS248/R / WT/DS249/R / WT/DS251/R / 
WT/DS252/R / WT/DS253/R / WT/DS254/R / WT/DS258/R / 
WT/DS259/R, and Corr.1, adopted 10 December 2003, as modified by 
Appellate Body Report WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, 
WT/DS254/AB/R, WT/DS258/AB/R, WT /DS259/AB/R, DSR 2003:VIII, 
3273 
US – Upland Cotton  Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R, adopted 21 March 2005, DSR 2005:I, 3 
US – Upland Cotton  Panel Report, United States – Subsidies on Upland Cotton , WT/DS267/R, 
Corr.1, and Add.1 to Add.3, adopted 21 March 2005, as modified by Appellate Body Report WT/DS267/AB/R, DSR 2005:II, 299 
US – Wheat Gluten   Panel Report, United States – Definitive Safeguard Measures on Imports 
of Wheat Gluten from the European Communities , WT/DS166/R, adopted 
19 January 2001, as modified by the Appellate Body Report, 
WT/DS166/AB/R 
US – Wheat Gluten   Appellate Body Report, United States – Definitive Safeguard Measures 
on Imports of Wheat Gluten from the European Communities , 
WT/DS166/AB/R, adopted 19 January 2001, DSR 2001:II, 717 WT/DS399/R 
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  Short Title Full Case Title and Citation 
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of 
Woven Wool Shirts and Blouses from India , WT/DS33/AB/R, adopted 
23 May 1997, and Corr.1, DSR 1997:I, 323 
US – Zeroing (EC)  (Article 21.5 – EC) Appellate Body Report, United States – Laws, Regulations and 
Methodology for Calculating Dumping Margins ("Zeroing") – Recourse 
to Article 21.5 of the DSU by the European Communities , 
WT/DS294/AB/RW and Corr.1, adopted 11 June 2009 
   WT/DS399/R 
   Page xi  
 
  TABLE OF ABBREVIATIONS USED IN THIS REPORT 
 
Abbreviation Full Reference 
AD Agreement Agreement on Implementation of Article VI of the General Agreement on 
Tariffs and Trade 1994 
COGS Cost of Goods Sold 
DSB Dispute Settlement Body 
DSU Dispute Settlement Understanding 
EU European Union 
GATT 1994 General Agreement on Tariffs and Trade 1994 
Non-subject imports Imports of certain passenger vehicle and light truck tyres from sources other 
than China 
OEM  Original Equipment Manufacturers  
Safeguards Agreement Agreement on Safeguards 
SCM Agreement Agreement on Subsidies and Countervailing Measures 
Subject imports Imports of certain passenger vehicle and light truck tyres from China 
Subject tyres Certain passenger vehicle and light truck tyres 
The Protocol Protocol on the Accession of the People's Republic of China 
Tyres  case The investigation regarding imports of certain passenger vehicle and light 
truck tyres from China before the USITC 
Tyres  measure The additional duties imposed on imports of subject tyres for a three year 
period at: 35 per cent ad valorem in the first year, 30 per cent ad valorem  in 
the second year; and 25 per cent ad valorem  in the third year. 
USITC United States International Trade Commission 
USW United Steel, Paper and Forestry, Rubbe r, Manufacturing, Energy, Allied 
Industrial and Service Workers International Union 
Vienna Convention Vienna Convention on the Law of Treaties 
WTO World Trade Organization 
 
    WT/DS399/R 
   Page 1  
 
  I. INTRODUCTION 
1.1 On 14 September 2009, the People's Republic of China ("China") requested consultations 
with the United States pursuant to Article XXIII:1 of the GATT  1994, Articles 1 and 4 of the DSU 
and Article 14 of the Safeguards Agreement , with regard to certain measures taken by the 
United States allegedly affecting the import of cer tain passenger vehicle and light truck tyres from 
China.
1  China and the United States held consultati ons in Geneva on 9 November 2009, but failed to 
resolve the dispute.  At the DSB meeting on 19 Jan uary 2010, China requested the establishment of a 
Panel pursuant to Article XXIII:2 of the GATT 1994, Articles 4.7 and 6 of the DSU and Article 14 of 
the Safeguards Agreement.2  At that meeting, the DSB establishe d a panel pursuant to the request of 
China.   
1.2 The Panel's terms of reference are the following: 
To examine, in the light of the relevant pr ovisions of the covered agreements cited by 
the parties to the dispute, the matter re ferred to the DSB by China in document 
WT/DS399/2 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements. 
1.3 On 2 March 2010, China requested the Director-G eneral to determine the composition of the 
panel, pursuant to paragraph 7 of Article 8 of the DSU.  This paragraph provides:   
If there is no agreement on the panelists within 20 days after the date of the 
establishment of a panel, at the request of  either party, the Director-General, in 
consultation with the Chairman of the DSB and the Chairman of the relevant Council 
or Committee, shall determine the com position of the panel by appointing the 
panelists whom the Director-General consid ers most appropriate in accordance with 
any relevant special or additional rules or  procedures of the covered agreement or 
covered agreements which are at issue in th e dispute, after consulting with the parties 
to the dispute.  The Chairman of th e DSB shall inform the Members of the 
composition of the panel thus formed no later than 10 days after the date the 
Chairman receives such a request. 
1.4 On 12 March 2010, the Director-General acco rdingly composed the Panel as follows:
3 
 Chairman:  Professor Celso Lafer  
  Members: Professor Donald M. McRae     Mr. Luis M. Catibayan 
 
1.5 The European Union, Japan, Ch inese Taipei, Turkey, and Viet Nam reserved their rights to 
participate in the Panel proceedings as third parties.    
1.6 The Panel met with the parties on 1-2 June 2010 and 20-21 July 2010.  The Panel met with 
the third parties on 2 June 2010.  The Panel issued its interim report to the parties on 
24 September 2010.  The Panel issued its fi nal report to the parties on 8 November 2010. 
                                                     
 
1 WT/DS399/1. 
2 WT/DS399/2. 
3 WT/DS399/3. WT/DS399/R 
Page 2  
 
  II. FACTUAL ASPECTS 
2.1 This case is about a transitional product-specifi c safeguard measure under Paragraph 16 of the 
Protocol that has been applied on imports of cer tain passenger vehicle and light truck tyres from 
China pursuant to Section 421 of the Trade Act of 1974. 
2.2 A petition was filed by the USW on 20 April 2009, requesting the USITC to initiate an 
investigation under Section 421(b) of the Trade Act of 1974.  The USITC instituted the investigation 
effective on 24 April 2009.  The USITC determined that there was market disruption as a result of 
rapidly increasing imports of subject tyres from China that were a significant cause of material injury 
to the domestic industry.  Following a Presidentia l decision additional duties have been imposed on 
imports of subject tyres for a three-year period, in the amount of 35 per cent ad valorem in the first 
year, 30 per cent ad valorem in the second year, and 25 per cent ad valorem in the third year.  The 
Tyres  measure took effect on 26 September 2009.   
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS 
A. 
CHINA  
3.1 China has seven specific claims in this di spute and requests the Panel to find that: 
(i) the United States failed to evaluate properly whether imports from China 
were in "such increased quantities" a nd "increasing rapidly" as required by 
Paragraphs 16.1 and 16.4 of the Protocol;   
(ii) the U.S. statute implementing the causation standard of Paragraph 16 into 
U.S. law is inconsistent "as such" wi th Paragraphs 16.1 and 16.4 of the 
Protocol; 
(iii) the United States failed to evaluate properly whether imports from China 
were a "significant cause" as required by  Paragraphs 16.1 and 16.4 of the 
Protocol; 
(iv) the United States has imposed a transitional safeguard measure that goes 
beyond the "extent necessary", and thus it is inconsistent w ith Paragraph 16.3 
of the Protocol;   
(v) the United States has imposed a trans itional safeguard measure for a three-
year period that is beyond "such period of  time" that is "necessary", and thus 
it is inconsistent with Paragr aph 16.6 of the Protocol.   
3.2 China also claims that the transitional safegua rd measure is inconsistent with the GATT 1994 
and requests the Panel to find that: 
(vi) the transitional safeguard measure is in consistent with Article I:1 of the 
GATT 1994 as the United States does not accord the same treatment that it 
grants to passenger vehicle and light truc k tyres originating in other countries 
to like products originating in China; 
(vii) the transitional safeguard measure is in consistent with Article II:1(b) of 
GATT 1994 as the tariffs consist of unjustified modifications of U.S. 
concessions on passenger vehicle and li ght truck tyres under the GATT 1994.   WT/DS399/R 
   Page 3  
 
  3.3 China asks that the Panel find that the United States is not in conformity with Paragraph 16 of 
the Protocol and Articles I:1 and II:1(b) of GATT 1994.  China asks that the Panel recommend that the United States promptly comply with its oblig ations and withdraw the challenged measures. 
B. 
THE UNITED STATES  
3.4 The United States asks the Panel to reject China's claims in their entirety.   
IV. ARGUMENTS OF THE PARTIES 
4.1 The arguments of the parties are set out in their written submissions and oral statements to the 
Panel and in their answers to questions.  Executiv e summaries of the parties' written submissions, and 
executive summaries of their oral statements are a ttached to this report as annexes (see List of 
Annexes, pages vi and vii).   
V. ARGUMENTS OF THE THIRD PARTIES 
5.1 The European Union, Japan, Chinese Taipei, Turk ey and Viet Nam reserved their rights to 
participate in the Panel proceedings as third parti es.  Chinese Taipei, Turkey and Viet Nam did not 
submit third party written submissions or make  oral statements.  The arguments of the 
European Union and Japan are set out in their wr itten submissions and oral statements.  Executive 
summaries of the third parties' written submissions  and third party oral statements, or executive 
summaries thereof, are attached to this report as a nnexes (see List of Annexes, pages vi and vii). 
VI. INTERIM REVIEW 
6.1 On 24 September 2010, the Panel issued its Interi m Report to the parties.  On 8 October 2010, 
both parties submitted requests for the review of  precise aspects of the Interim Report.  On 
25 October 2010, the parties submitted comme nts on one another's request for review. 
6.2 This Interim Review section summarises the parties' requests for review and comments 
thereon, as well as our responses.  Because the footno te numbering (but not the paragraph numbering) 
of our Report has changed due to changes made at th e interim review stage, fo r the sake of clarity the 
footnote references in this section refl ect the numbering in the Final Report. 
6.3 The Panel is grateful to the parties for their assistance in identifying a number of 
typographical errors in the Interim Report. 
A. REQUEST FOR REVIEW SUBMITTED BY CHINA  
1. Increasing rapidly 
(a) Para. 7.83 
6.4 China  claims that the Panel is going beyond merely presenting the facts in providing the data 
for the increases of subject and non-subject imports and recommends that the Panel "simply report the 
data for subject and non-subject imports."  China continues that if the Panel "wishes to go beyond 
merely summarising the data", the Panel should make  two changes.  First, the Panel should report 
parallel figures for subject and non-s ubject imports.  Second, China argues that if the Panel includes 
percentage increases, it should also include the volu me change from one year to the next for both 
subject and non-subject imports.  China continues th at percentage increases alone are misleading and 
"the Panel should either present no percentage ch anges, or present both percentage changes and 
volume changes from year to year."   WT/DS399/R 
Page 4  
 
  6.5 The United States  claims that, under the standard of re view in Article 11 of the DSU, "the 
Panel will necessarily need to 'go beyond' a 'mere pr esentation' of the facts on the record; instead, the 
Panel is expected to evaluate whether the ITC's an alysis was 'reasoned and adequate' in light of the 
record evidence."  The United States does not consid er that parallel data on non-subject imports is 
necessary to make the Panel's analysis any clearer.  The United States accuses China of attempting to 
place weight on the comparative levels of subject and non-subject volumes, an  approach it did not 
take during the proceedings.  
6.6 We do not consider it necessary to include an y further data on non-subject imports.  The 
obligation in the Protocol is to  consider whether subject imports are "increasing rapidly" on an 
absolute or relative basis.  On China's first poi nt regarding the data for increases in non-subject 
imports, we note that we address the role of non-subject imports throughout the report
4 and 
specifically in paras. 7.364 to 7.367.  Paragraph 7.83 focuses on absolute increases.  However, in 
order to address China's concerns we have deleted th e third table in paragraph 7.83, with appropriate 
adjustments to the text at the beginning of that pa ragraph, and added a citation in new footnote 176 .   
6.7 Regarding China's second point and its desire to include volume changes from year to year, 
we note that China argued the relevance of year- on-year increases in annual volumes at para. 120 of 
its First Written Submission and in para. 28 of its Oral Statement at the First Panel Meeting.  We 
consider this to be an argument associated with the rate of increase.  As we have noted in para. 7.92  
of our Report, under the Protocol the rapid increase need only be on an absolute or relative basis.  
China does not contest this.  As such, we do not cons ider inclusion of this data adds anything further 
to what we have already said about the ra te of increase in paras. 7.87 to 7.93.  
(b) Para. 7.84 
6.8 China  argues that the statement by the Panel "that 'the greatest increase o ccurred in the last 
two years of the period' ... inappropriately accepts the U.S. efforts to combine the final two years of the period."
5  China submits that the Panel should delete this statement or "present a more in-depth 
explanation" given that the "statement, as writte n, is misleading and masks the actual amount of 
increase in 2008, which was the smallest increase of any year of the period."  China continues that if 
"the Panel is to note that the largest increase in th e period occurred in 2007, then the Panel should also 
note that the smallest increase of the entire period,  in terms of both quantity and percentage increase, 
occurred in the last year of the period – 2008."6 
6.9 The United States  argues that the Panel did not focus only on the increases in import 
volumes in 2007 and 2008.  Rather, the Panel conducte d a detailed analysis of the increase in subject 
imports in 2008.  The United States does not thi nk any revision is necessary, but should the Panel 
believe further clarification is justified it sugg ests replacing the sentence: "The greatest increase 
occurred in the last two years of the period" with  "The greatest increases (14.5 million units) occurred 
in 2007.  This was followed by a further si gnificant increase (4.5 million units) in 2008." 
6.10 We note that the jurisprudence states that cons ideration should be given to trends over the 
investigation period, as well as to the recent period.7  In that regard it is entirely appropriate that we 
consider what was happening to imports in the final two years of an investigation as well as 
considering trends during the course of the period of investigation.  China's argument in these 
proceedings was to look at the most recent period, which it considered to be 2008.  The Panel has 
                                                      
4 See for example paras. 7.95, 7.203-7.204, 7.293, and 7.301. 
5 China's comments on the Interim Report, para. 10. 
6 China's comments on the Interim Report, para. 11. 
7 We refer to para. 7.88 of the Interim Report and footnote 187.   WT/DS399/R 
   Page 5  
 
  determined that a focus solely  on 2008 was not appropriate.
8  In any case, paragraph 7.93 of the 
Report recalls that in each year of the period of  investigation, there was an increase that was in 
addition to the increase in the previous year.  However,  to address China's request we have added a 
footnote to the end of the sentence in paragraph 7.84. 
(c) Para. 7.86 
6.11 China argues that the Panel "concludes its review of the import data without ever addressing 
the quarterly or monthly data for 2007 and 2008 wh ich was presented by China."  China continues 
that this is "a major omission that should be co rrected."  China argues that "[i]mports dropped on a 
quarterly basis in three of the four quarters in 2008, and dropped 7.8 per cent in Q3 and Q4 2008 
relative to Q2 2008."9  China claims that this "drop off in s ubject imports at the end of the period is 
directly applicable to the ques tion of whether subject imports ar e 'increasing rapidly' under the 
Protocol."10 
6.12 The United States  argues that the Panel did not need to  dwell on China's arguments based on 
quarterly data as the arguments "were of a subsidiary nature and not persuasive."  
6.13 We consider that China's argument regarding the use of quarterly data is connected to China's 
argument regarding the rate of increase, which wa s addressed in the Report in paragraphs 7.87 to 
7.93.  However, to reflect China's concerns we ha ve added a footnote to th e end of paragraph 7.86. 
(d) Para. 7.87 
6.14 China argues that the Panel mischaracterises Chin a's argument regarding the meaning of 
"increasing rapidly" when it states that China "argu es that for imports to be 'increasing rapidly' there 
must be an increasing rate  of increase in 2008, the final year of the period of investigation, compared 
to 2007."  China claims that it never stated that the rate of increase "must" be higher than that of 2007.  
China continues that it stat ed "that such a scenario could be indicative that imports are 'increasing 
rapidly' under the Protocol."  China claims that its argument regarding the rate of increase "is simply that the effects of a significant decline in the ra te of increase in 2008 should be taken into account 
when assessing the issue of whether or not subject imports are 'increasing rapidly'." 
6.15 The United States  notes that at footnote 134 in paragr aph 7.87 of the Interim Report (now 
see paragraph 7.87 and footnote 182 of the Final Report) "the Panel expressly recognised that China 
had outlined two scenarios for the meaning of 'rap idly,' and acknowledged that other scenarios might 
be possible".  The United States argues that the Pa nel's analysis and focus on the rate of increase 
accurately characterised the "thrust of China's argu ments on this issue throughout its submissions and 
statements." 
6.16 To take into account China's concerns that its  arguments be reflected  accurately, we have 
modified paragraphs 7.87 and 7.92 of our Report.  
6.17 China  also claims that it has "simply argued that the steep drop-off in 2008 (just a 10.8 per 
cent increase as opposed to the 53.7 percent increase in 2007) casts doubt on whether imports can still 
be properly found to be 'increasing rapidly'."  Ch ina argues that the "mischaracterization of China's 
                                                     
 
8 Paras. 7.87 to 7.93 of the Interim Report. 
9 China's comments on the Interim Report, para. 12.  Refers to China's First Written Submission, 
paras. 127-128. 
10 China's comments on the Interim Report, para. 12 .  Refers to China's Second Written Submission, 
paras. 119-122. WT/DS399/R 
Page 6  
 
  argument on this issue resulted in the Panel impermi ssibly glossing over the 2008 drop in the rate of 
increase, when instead the rate trends should have  been examined closely and put into context."
11  
China claims that its argument regarding the rate of increase "is simply that th e effects of a significant 
decline in the rate of increase in 2008 should be taken into account" in determining whether imports 
are "increasing rapidly". 
6.18 The United States  disagrees that the Panel glossed over the drop in the rate of increase in 
2008.  The United States notes that the Panel consider ed the absolute and relative increases in import 
volumes in 2008, and refers to paras 7.87 to 7.93 of the Report to argue that the Panel considered and 
rejected China's claim "that the decline in the rate of increase in Chinese import volumes in 2008 
meant that imports were not 'i ncreasing rapidly' in 2008".   
6.19 We consider there is ample basis in the Re port to negate any accusation that the Panel 
"glossed" over the 2008 drop in the rate of increase.  On the contrary, given China's focus on the rate 
of increase, there was considerable attention given to the data in 2008  in paragraphs. 7.83 to 7.105.  
Therefore, on this point we make no further changes to paragraph 7.87. 
2. "As such" causation 
(a) Paras. 7.138-7.140 
6.20 China contends that the Panel sets up a false st raw man by stating that China is arguing 
"cause" is capable of "producing or bringing a bout a result on its own" while "contribute" would 
require the contribution of other causal factors for an event to occur.  China submits that it never 
argued that "significant cause" must be the sole cause .  China asserts that the Panel's creation of this 
straw man led the Panel to sidestep the real  issue – that of whether "to contribute" requires less  than 
"to cause." 
6.21 The United States  asserts that the Panel accurately re flected China's arguments.  The Panel 
clearly explained that the focus of China's argument  was that "the term 'contribute' is less stringent 
than 'cause ,'" just as China now asserts.12  Moreover, after noting that China had relied on specific 
dictionary definitions of these terms, the Panel then concluded that, "[l]ooking exclusively at these 
terms, one might legitimately conclude that a 'cont ribution' has a lesser causal effect than a 'cause ," 
because "implicit in the definitional differences i nvoked by China is the notion that the term 
'contribute' allows for multiple factors to each 'play a part in' bringing about a result, whereas 'cause' 
means that the triggering event is in and of itsel f capable of bringing out, or producing that result."13  
The Panel's assertion that the definitions cited by Ch ina could be read to imply that a "cause" be the 
"sole" cause of injury were simply its own r easoned way of evaluating the merits of China's 
arguments and entirely appropriate.14 
6.22 The Panel sees no need to make changes in the light of China's request.  The Panel did not 
state that China argued that "significant cause" must be the sole cause.  It reflected China's argument 
accurately in footnote 248 of the Report.  The Panel' s analysis of the meaning of the term "cause" in 
the context of Paragraph 16.4 of the Protocol and its relationship with the term "contribute" is dealt 
with in paragraphs 7.138 – 7.146 of the Final Report. 
                                                      
11 China's comments on the Interim Report, para. 6. 
12 Interim Report, para. 7.137.   
13 Interim Report, para. 7.138.      
14 The United States makes this point, even though it does not fully agree with the Panel's assertion that 
"cause" could, in some cases, be read as having a different definition or meaning than the word "contribute" in 
situations involving descriptions of causal effect.   WT/DS399/R 
   Page 7  
 
  (b) Para. 7.158 
6.23 China claims that the Panel mischaracterizes China's argument on what "significant cause" 
requires.  In particular, China denies that it had argued that "significant cause" means that rapidly increasing imports must be "the most" significant cause of market disruption. 
6.24 The United States  disagrees with China.  The United St ates asserts that China did argue, as it 
now concedes, that the term "significant" necessarily  requires a comparison of the effects of Chinese 
imports "relative to other matters."
15  Moreover, China also made clear in its submissions that it 
believed that the ITC should have weighed the e ffects of Chinese imports against other injury 
causes.16  Indeed, China specifically argued that the U.S.  statute was inconsistent with the Protocol 
because it permitted the ITC to find that Chinese imports  were a "significant cause" of injury even if 
they were "a less important factor than any other single cause."17  Given China's arguments, which 
were not particularly clear, the Panel reasonably concluded that China was suggesting, among other 
things, that the ITC should  have determined wh ether Chinese imports were a "more important" cause 
of injury to the industry than other causes. 
6.25 We have modified para. 7.158 of the Final Report in light of China's request.  We have also 
included new footnote 268 in our Report. 
3. "As applied" causation 
(a) Paras. 7.140 and 7.169-7.170 
6.26 China requests clarification as to what the Panel has interpreted the term "significant" in 
"significant cause" to mean.  China asks the Panel to make two changes.  First, the Panel should 
explain what it interprets "significant" in "signi ficant cause" to mean and distinguish "a significant 
cause" from simply "a cause."  Second, the Panel shou ld then apply this interpretation of "significant 
cause" in each of its findings on causation, noting why certain injury factors indicate that subject imports are a "significant cause" of material injury, and not simply a "cause." 
6.27 The United States  asserts that there is no need for the Panel to clarify its findings on the 
issue or to change its analysis of the USITC's fi ndings on this score, as the Panel could not have been 
clearer on its definition of the term.  The United Stat es submits that the Panel properly stated that the 
United States, China and the Panel all agreed that the word "significant," as used in the Protocol, 
means "important," "notable," or "consequential."  Moreover, the Panel also clearly rejected the idea 
that the U.S. statute or the Protocol contemplated that a "even a minimal cause" of injury might be a "significant cause" of injury under the Protocol.  Finally, the Panel made clear that it applied this 
standard when reviewing the USITC's analysis, stating that it had assessed whether the USITC 
reasonably found that Chinese imports were a "s ignificant," i.e., "important," "notable" or 
"consequential," cause of material injury to the industry. 
6.28 Regarding para. 7.170 of our Report, the phrase "significant cause" is simply a shorthand 
reference to the particular causation standard in Pa ragraph 16.4.  The point is that the causal element 
(as opposed to the "significant" element) of the Pa ragraph 16.4 causation standa rd could likely not be 
established without analysing correlation and the conditions of competition.  Since the causation 
                                                     
 
15 E.g. China's First Written Submission, paras.  204-207; China's Second Written Submission, 
para. 155. 
16 E.g. China's First Written Submission, paras. 204-205. 
17 China's First Written Submission, para. 206. WT/DS399/R 
Page 8  
 
  standard in Paragraph 16.4 is "significant cau se", it would therefore be difficult to establish 
"significant cause" without analysing corre lation or the conditions of competition. 
6.29 We have modified para. 7.159,  to state expressly that a "significant" cause is one that is 
important or notable. 
6.30 Regarding China's second request, we note that the Panel's job is to review the determinations 
(including "significant cause") made by the USITC.  It is not for the Panel to itself explain "why 
certain injury factors indicate that subject imports are a 'significant cause' of material injury".  This is 
the role of the USITC.  Accordingly, we see no need to make the chang es requested by China. 
(b) Paras. 7.174 – 7.177 
6.31 China  requests clarification of the Panel's findings on non-attribution.  China notes the 
Panel's finding that "a finding of causation ... shoul d only be made if it is properly established that 
rapidly increasing imports have injurious effects that cannot be explained  by the existence of other 
causal factors."
18  In China's opinion, the Panel should clarify this "presently-vague" standard, and 
specify under what circumstances injurious effects can be explained by the existence of other causal 
factors.  The Panel should also specif y under what circumstances injurious effects cannot  be 
explained by the existence of other causal factors.  China submits that, in elaborating on this analysis, 
the Panel should follow the A ppellate Body jurisprudence from US – Hot-Rolled Steel  which states 
that investigating authorities must "separate and di stinguish" the injurious effects of imports from the 
injurious effects of other factors. 
6.32 The United States  contends that there is nothing "vague " about the Panel's description of the 
standard that it applied to the USITC's analysis.  Th e Panel's explanation of the standard is as specific 
and clear as statements made by the Appellate Body and WTO panels about the standards to be 
applied when reviewing non-attribution analy ses under other WTO Agreements.  Moreover, the 
Panel's actual review of the USITC's analysis of ot her injury factors, such as the industry's business 
strategy and the effects of demand cha nges, was lengthy, detailed and rigorous,19 despite China's 
claims to the contrary.20  China has provided the Panel with no basis for revisiting or revising its 
findings on these issues.  The United States contends that the Panel correctly found that the specific 
"separate and distinguish" analysis that has been  found applicable under the non-attribution language 
of these Agreements is not  directly applicable to causation analysis under the Protocol, because the 
Protocol does not contain the sort of non-attri bution requirement that is set forth in the AD, SCM  and 
Safeguards Agreements .21  According to the United States, Ch ina itself conceded that, due to the 
absence of specific non-attribution language in th e Protocol, it has "never claimed {in this 
proceeding} that under Article 16 'the authority mu st perform the same non-attribution analysis for 
other factors in the market that it would in a global safeguard proceeding.'"22  Given this, China has no 
basis for asking the Panel to now apply the "sep arate and distinguish" standard to the USITC's 
analysis of other factors in this proceeding. 
6.33 The Panel sees no reason to alter the provisions or paragraphs as requested.  The Panel is 
required to interpret the provisions of the Prot ocol, and assess the USITC's application of those 
                                                      
18 Interim Report, para. 7.177 (emphasis added). 
19 Interim Report, paras. 7.262-7.3.78. 
20 China's Comments, para. 20. 
21 Appellate Body Report, US – Upland Cotton , para. 436 (stating that absence of non-attribution 
language in serious prejudice provisions of the Subsidie s Agreement indicates that a "panel has a certain degree 
of discretion in selecting an appropriate methodology for determining whether the ‘effect of a subsidy is significant price suppression"); Panel Report,  US – Upland Cotton , para. 7.1343. 
22 China's Second Written Submission, para. 309.   WT/DS399/R 
   Page 9  
 
  provisions to the facts at hand.  The Panel is not required to explain how those provisions may or may 
not be applied in all circumstances.  In add ition, the Panel already clearly explained why the US – 
Hot-Rolled Steel  "separate and distinguish" standard is not  applicable in the present case, and China 
conceded as much at para. 309 of its Second Written Submission. 
(c) Paras. 7.196 – 7.197 
6.34 China asks the Panel to correct footnote 305 of the Report, regarding the percentage of tier 1 
shipments accounted for by subject imports.  In  addition, China asks the Panel to explain why 
competition still exists even though subject impor ts do not compete with domestic tires for over 
50 per cent of all shipments.  China also  asks the Panel to clarify the exact " variation  in the levels of 
competition between subject imports and domestic  products as between tier 1 and tiers 2 and 3",
23 
indicating what the degree of competition was in tier 1, and what the degree of competition was in 
tiers 2 and 3. 
6.35 The United States  agrees that the Panel should correct f ootnote 305 of its Report.  Otherwise, 
though, the United States contends that China is doi ng nothing more than re-arguing its theory that 
there was minimal competition between Chinese and U.S. tires in the replacement market.  The 
United States believes there is no need to revise the analysis or conclusions. 
6.36 We have corrected footnote 305 of the Report, as requested by both parties.  The Panel sees 
no need to make any of the additi onal changes requested by China. 
(d) Para. 7.205 
6.37 China asks the Panel to clarify what it means by "t here was some variation in the levels of 
competition within the OEM market."24  The Panel should make a finding as to what degree of 
competition existed in the OEM market between s ubject imports and domestic products – simply 
stating that competition varied is too vague.  In stating what degree of competition existed in the 
OEM market, the Panel should note which fact s it is relying upon in making this finding. 
6.38 The United States  submits that the Panel conducted a de tailed and fact-specific evaluation of 
this issue, correctly finding that  China's share of this market grew from a relatively small level of 
0.2 per cent in 2004 to a more pronounced 4.9 per cent in 2008, the final year of the period.25  As the 
Panel also correctly pointed out, the record showed  that, during the period, the absolute volumes and 
market share of the U.S. tires in this sector fell,  thus indicating that the "degree of resultant 
competition between subject imports and domesti cally-produced tires in the OEM market was 
increasing."26  Given the detailed factual nature of th e Panel's assessment on this issue and the 
reasonableness and clarity of its conclusions, the Unite d States does not believe that there is a need for 
the Panel to revise its findings on the issue, in cluding its correct statement that there was "some 
variation in the levels of competition over the period." 
6.39 The Panel sees no reason to alter the Report as requested. 
                                                      
23 Interim Report, para. 7.197 (emphasis added). 
24 Interim Report, para. 7.205. 
25 Interim Report, para. 7.202. 
26 Interim Report, para. 7.204. WT/DS399/R 
Page 10  
 
  (e) Para. 7.229 
6.40 China  submits that the Panel mischaracterizes Ch ina's argument on correlation.  China asserts 
that it never argued that, for there to be correlati on between imports and injury factors, "a precise 
correlation between the degree of change in imports and the degree of change in the injury factors" is 
necessary.
27  To the contrary, China argued that simple temporal correlation is insufficient.28  There 
should be a general correlation in degree between th e increases in imports and the decreases in injury 
factors – but it need not be precise.29  
6.41 In the United States'  view, the Panel correctly summarized China's arguments on correlation 
in its report by stating, for example, that Chin a argued that "the degree of the respective annual 
increases {in Chinese imports} must correspond genera lly with the degree of the respective declines 
in injury factors."30 Given that China itself stated during the proceeding that, when evaluating the 
Commission's correlation analysis, the Panel must assess whether the "degree  of the respective annual 
increases {in imports} ... correspond generally with the degree  of the respective declines in injury 
factors,"31 China's claim that the Panel mis-characterized or misunderstood its arguments is simply 
unfounded.  
6.42 The United States further contends that the Pane l does not attribute to China the claim that a 
"precise correlation" between import a nd injury factor trends is required.32  Instead, the Panel was 
setting forth its own view that a correlation analysis is not an exact science and that it is therefore unrealistic to expect or require a precise correlati on between the degree of changes in imports and the 
degree of change in the injury factors.
33 
6.43 We have amended para. 7.22 9 of our Report to clarify our understanding of China's 
arguments. 
(f) Paras. 7.307 – 7.312 
6.44 China contends that, in addressing the plant closures, the Panel never puts these closures in 
proper context and never accounts for the closures as an  effect of the globalization of the tyre industry 
and not as an effect of a rapid increase in subject imports (as is necessary if the plant closures are to 
be attributed to subject imports).  The Panel found that all three closures were announced in, and stem 
from, 200634 when subject imports were minimal, yet nonetheless found two of the three closures to 
be attributable to subject imports.35  There is a disconnect, however, from the 2006 closures to what 
the Panel is fundamentally assessing – whether subject imports are rapidly increasing during the recent period and causing injury due to this rapid increase.  In attributing the closures to subject 
imports, the Panel totals data of  subject imports for all of 2006, even though the closures were 
                                                     
 
27 Interim Report, para. 7.229. 
28 China's Oral Statement at the Seco nd Panel Hearing, paras. 62-63. 
29 China's Oral Statement at the S econd Panel Hearing, para. 64 ("The only way for these statements to 
be significant in the context of a proper co incidence analysis, however, is for the degree  of the respective annual 
increases to correspond  generally  with the degree  of the respective declines in injury factors") (emphasis added). 
30 Interim Report, para. 7.217. 
31 China's Oral Statement at the Seco nd Panel Hearing, para. 64 (emphasis in original).  China went on 
to point out that "[t]he orders of magnitude [of these changes] are key. "  Id.     
32 Interim Report, para. 7.229.  On the contrary, the Pa nel correctly states that China argued that "the 
degree of the increases in imports shou ld correspond with the degree of declines in injury factors."  Interim 
Report, para. 7.228. 
33 Interim Report, para. 7.229.   
34 Interim Report, para. 7.307. 
35 Interim report, para. 7.312.   WT/DS399/R 
   Page 11  
 
  announced in June and July of 2006 – only halfway through the year.
36  This is therefore an inaccurate 
reading of the record.  Because the plant closur es were announced only halfway through 2006, these 
decisions were based on data from 2005 – not totals for the whole year 2006.  Thus, the Panel should 
re-assess the closures and do so based off subject import data for 2005 only.  Statements based on 
full-year 2006 data should be deleted.  Finally,  the Panel should explain what significance it accords 
to the questionnaire data where no U.S. producer r esponded that they were materially injured by 
subject imports, four said that they were not, and th e other six either said they were not in a position 
to answer or took no position.37  The Panel notes these facts, but fails to assess them in any way.  The 
Panel should do so and explain what weight it is giving to this evidence and how it effects the Panel's assessment of causation. 
6.45 The United States  asserts that the Panel correctly disag reed with China's claim that there 
were only "minimal" increases in the vo lumes of Chinese imports before 2006.
38  In paragraph 7.307, 
the Panel noted that the record showed that ther e was a "very substantial increase in the volume of 
{Chinese} imports prior to 2006."  As the Panel correctly stated, the subject imports from China 
increased from 14.6 million tires in 2004 to 20.8 milli on tires in 2005, indicating that Chinese imports 
grew by 42.7 per cent between 2004 and 2005.39  Accordingly, as the Pane l indicated, the significant 
increases in subject imports prior in 2005 provided th e USITC with a sufficient basis for concluding 
that these increases were a significant contributing f actor for the industry's decision to close certain 
production plants in 2006.  The United States also co ntends that the Panel co rrectly relied on import 
data for 2006 in its analysis.40  Because the plant closure announcements occurred at least six months 
into 2006, the Panel reasonably relied on the fact that Chinese imports continued to increase 
significantly over their 2005 levels in 2006, and th at Chinese imports became the second-lowest 
priced source of tires in 2006.41  Given that Chinese imports contin ued their aggressive surge into the 
market in 2006 and continued to be increasingly aggressive in their pricing practices in that same 
year, the Panel and the ITC both reasonably relie d on these facts when concluding that Chinese 
imports were a significant factor in the industry's decision to close these production facilities.   
6.46 The United States believes the Panel clearly explai ned what weight it gave to the fact that no 
producer specifically reported that it was materially  injured by imports, and reasonably concluded that 
producers' statements were not dispositive of the question as to whether Chinese imports caused 
material injury to the industry.  As the Panel reasonably noted, even though some domestic producers 
stated that they were not injured by subject imports and even though other producers took no position 
on the issue, these facts did not constitute conclusi ve evidence that domestic producers had not been 
affected by the subject imports, nor did it indicate that the producers did not choose to close certain 
production facilities due to subject import competition. 
6.47 In light of China's request, we have include d footnote 440 in our Report, concerning the 2005 
subject import data.  We see no need to make an y of the additional changes requested by China. 
(g) Paras. 7.353 – 7.354 
6.48 China  submits that the Panel offers a wholly inad equate assessment of the causal implications 
of the recession.  In light of the Panel's c onclusion that "we must assess whether the reasoning 
provided by the USITC in its determination seems adequate in light of plausible alternative 
                                                      
36 Interim Report, paras. 7.307-7.308. 
37 Interim Report, para. 7.312. 
38 Interim Report, para. 7.307. 
39 Interim Report, para. 7.307. 
40 Interim Report, paras. 7.307 and 7.308. 
41 Interim Report, paras. 7.301 and 7.307-308. WT/DS399/R 
Page 12  
 
  explanations of the record evidence or data  advanced by China in this proceeding,"
42 the Panel should 
have assessed the causal implications of the recession  in-depth as it assuredly qualifies as a "plausible 
alternative explanation."  Additionally, the Panel's decision to dismiss the causal implications of the 
recession because the injury to the domestic industry could not be attributed "in whole" to the 
recession is inadequate.43  This too easily dismisses a causal fa ctor that was significantly injuring the 
U.S. industry simply because it was not responsible fo r the entire injury.  The Panel should delete this 
statement and engage in a more in-depth assessment of the causal effects of the recession.  Particular 
factual findings regarding the extent of the effect s of the recession should be made.  The Panel quoted 
the USITC's finding that U.S. apparent cons umption declined by 20.4 million tires in 2008.44  
Accordingly, the Panel should make a finding that this decline in demand was attributable to the 
effects of the recession in 2008 or, if not, the Pane l should note what this decline in demand in 2008 
was attributable to. 
6.49 The United States  asserts that the Panel's analysis of the recession was neither brief nor 
inadequate.  In its analysis, the Panel addressed at length China's arguments that demand declines 
during the period were the primary cause of the industry's troubles over the period of investigation.45  
In the same analysis, the Panel addressed in de tail China's argument that the recession in 2008 
accounted for the bulk of the declines in  the industry's condition in that year.46  As the Panel correctly 
concluded in its factually-detailed consideration of China's claims, th e record clearly showed that, in 
2008, the volume of the Chinese imports increased s ubstantially even as demand fell by 6.9 per cent 
and even as the sales volumes of U.S. and non-subject tires fell.47  As the Panel also correctly 
concluded, this continue d growth in Chinese imports in 2008 mean t that the U.S. industry was forced 
to absorb virtually all of the declines in demand in 2008, thus establishing that the Chinese imports 
had a clear and significant adverse impact on the production, sales and market share levels of the 
industry in that year.48  The Panel's analysis of this issue w as reasoned, detailed and complete, and no 
change to the Panel's analysis is warranted.  
6.50 The United States further asserts that China's argument that the Panel should not have 
dismissed the recession as a causal factor simply b ecause the recession did not explain the injury to 
domestic injury "in whole" China misses the point .  As the Panel and the USITC found, the record 
evidence showed clearly that increased volumes of s ubject imports were having  an adverse impact on 
the domestic industry, and that this impact was i ndependent of the effects of the recession on demand 
in 2008.49  Accordingly, the Panel agreed that the US ITC reasonably found subject imports to be a 
significant cause of material injury to the domestic i ndustry, even in 2008, and that the declines in the 
industry's production, sales, market share and profitabilit y levels in that year could not be attributed 
wholly or primarily to the recession in 2008, or to any other alleged causal factors, as China claimed.  Again, the Panel's analysis was reasoned a nd thoughtful, and need not be revised.   
6.51 The Panel sees no reason to alter the pr ovisions or paragraphs as requested. 
                                                     
 
42 Interim Report, para. 7.18. 
43 Interim Report, para. 7.354. 
44 Interim Report, para. 7.353. 
45 Interim Report, paras. 7.323 - 7.352. 
46 Interim Report, paras. 7.337 - 7.339, 7.342 - 7.343, and 7.351-7.352. 
47 Interim Report, para. 7.203. 
48 Interim Report,  para. 7.354. 
49 Interim Report, paras. 7.337 - 7.339, 7.342 - 7.343, and 7.351-7.352.   WT/DS399/R 
   Page 13  
 
  B. 
REQUEST FOR REVIEW SUBMITTED BY THE UNITED STATES  
1. Standard of review 
(a) Para. 7.18 
6.52 The United States  asks that the word "seems" be replaced  with the word "is" in the final 
sentence of this paragraph. 
6.53 China  believes the change requested by  the United States is unnecessary. 
6.54 We agree with China that the change is not strictly necessary. 
2. "As such" causation 
(a) Para. 7.136 
6.55 The United States  asks that a cite to Article XVI:4 of the WTO Agreement be included at the 
end of the first sentence of this paragraph. 
6.56 China opposes the U.S. suggestion to cite Articl e XVI:4 of the WTO Agreement to support 
the proposition that the "WTO Agreement does no t prescribe any particular manner in which a 
Member's WTO obligations and commitments must be transposed into its domestic law."  China 
asserts that while it may be true that the WTO Agreement does not prescribe a particular manner of 
transposing WTO obligations into domestic law, Article XVI:4 does not say this. 
6.57 We see no need to make the change requested by the United States.  As noted by China, 
Article XVI:4 of the WTO Agreement does not provide that the WTO Agreement does not prescribe any particular manner in which a Member's WTO ob ligations and commitments must be transposed 
into its domestic law. 
3. Substantive findings generally 
(a) Paras. 7.197, 7.215, 7.216, 7.238, 7.260, 7.322, 7.359, 7.367, and 7.379 
6.58 The United States  suggests that the findings set forth in  these paragraphs be linked back to 
the Panel's standard of review through the inserti on of the following sentence: "Therefore, we find 
that the USITC's determination was reasoned and ad equate in this respect, consistent with the 
standard wet out by the Panel in paragraph 7.18."  The United States also proposes a reformulation of 
the Panel's findings in certain of these paragraphs. 
6.59 China  believes these changes are unnecessary.  China further contends that the proposed U.S. 
language actually goes beyond the language of Para 7.18.  Para 7.18 addresses only whether the ITC 
reasoning was "adequate" and does not otherwise ma king any statement about the whether the ITC 
determination was "reasoned." 
6.60 With the exception of a minor change regarding paragraph 7.359, we agree with China that 
the changes proposed by the United States are unnecessary. WT/DS399/R 
Page 14  
 
  4. Remedy 
(a) Para. 7.397 
6.61 The United States suggests that the last sentence of this paragraph is unnecessary. 
6.62 China  opposes the U.S. suggestion to delete the l ast sentence of this paragraph.  The Panel 
has correctly noted that there is "no guarantee" that a measure imposed to improve the injurious 
condition of the domestic industry caused by increased  imports will "not be excessive."  The U.S. 
attempt to delete this fair, objectiv e statement is constitutes over-reaching. 
6.63 We agree with China that there is no need to delete the last sentence of this paragraph. 
(b) Para. 7.414 
6.64 The United States  proposes the insertion of a footnote at the end of the first sentence to refer 
the reader back to paragraph 7.20,  where the Panel concluded that there is no obligation to explain. 
6.65 China  does not comment on this request. 
6.66 In the absence of any objection by China, we have included the new footnote 555 requested 
by the United States. 
(c) Para. 7.418, footnote 557 
6.67 The United States  asks that the Panel explain that it is not addressing the issue raised in this 
footnote as a matter of judicial economy. 
6.68 China  does not comment on this request. 
6.69 The Panel has amended footnote 557 to high light its intended purpose, which is to 
demonstrate that China's GATT 1994 claims are dependent on its claims under the Protocol. 
5. Conclusion 
(a) Para. 8.1 
6.70 The United States  suggests that, for greater clarity, the Panel should include a full conclusion 
on each of China's claims.  The United States also as ks the Panel to include a conclusion regarding the 
rejection of China's "as such" claim. 
6.71 China  does not comment on this request. 
6.72 The Panel sees no reason to alte r the concluding paragraph. 
VII. FINDINGS 
A. 
GENERAL ISSUES  
7.1 We shall begin with some preliminary observati ons and then address general issues relating to 
our standard of review, the burden of proof, and the ru les of treaty interpretation.  We also consider 
the relationship between sub-pa ragraphs 1 and 4 of Paragr aph 16 of the Protocol.     WT/DS399/R 
   Page 15  
 
  1. Preliminary observations 
7.2 The Panel was aware that there are a number of features of this particular case that provide a 
background against which the case has to be considered  and constitute a context for dealing with the 
matters raised. 
7.3 First, this is the first case under the trans itional product-specific safeguard mechanism in 
Paragraph 16 of the Protocol.  It thus raises ques tions that have not yet been dealt with in WTO 
dispute settlement, including the quest ion of the relationship of this particular safeguard measure to 
the global safeguards mechanisms under the WT O Agreements:  GATT Article XIX and the WTO 
Safeguards Agreement.   Thus, the case raises important questions of the interpretation of the 
transitional product-specific safeguard mechanism th at will obviously be of interest to other WTO 
Members even though the m echanism expires in 2013. 
7.4 Second, the safeguard measure imposed in th is case under Paragraph 16 of the Protocol of 
Accession of China is country specific, but neve rtheless such a measure has effects on non-subject 
imports of tyres into the United States with its own systemic implications.   
7.5 Third, imposition of a safeguard measure in this case was based on a determination of the 
USITC that was not unanimous.  Two commissioners  dissented on the critical issue of causation.  
Such a circumstance warrants the panel in giving very  careful consideration in particular to that aspect 
of the USITC determination. 
7.6 Fourth, the investigation that led to the impositi on of a safeguard measure in this case against 
the importation of tyres from China was initiated, unusually, as the result of a petition by a labour 
union in the United States and not by the domestic produ cers of tyres.  This, of itself, alerted the Panel 
to the possibility that there was something different  about this case, particularly where the domestic 
producers, the normal petitioners in such cases, had indicated that they would not make any 
adjustments notwithstanding that a safeguard reme dy was put in place with adjustment purposes. 
7.7 Fifth, the issue of "material injury" was not in question before the Panel and, indeed, the 
determination of the USITC on this point was una nimous.  Thus, a key issue in this case was 
causation, a matter that was complicated  by the fact that the period of investigation involved in part a 
period of massive global economic downturn or recession. 
7.8 Sixth, an important allegation in this case relati ng to this key issue of causation was that the 
U.S. tyre manufacturing industry had voluntarily redu ced its investment in the United States and had 
invested in manufacturing tyres in  China instead.  Thus, according to this view, the reduction in 
domestic manufacturing of tyres and the increase in imports from China were the consequences of 
deliberate economic decision-making by the U.S. tyre industry.  
7.9 In such circumstances, the argument went, th is case involved the invocation of a mechanism 
designed to protect a domestic industry that did not want that protection and by its own actions had 
precipitated the events that were now being invoked  to justify the application of the transitional 
product-specific safeguard mechanism of China's Protocol of Accession.  Arguably, it explained too 
why the investigation had been initiated by a labour  union, a body that was concerned with job losses 
resulting from this transfer of manufacturing capac ity to China, and not by the domestic producers 
themselves.  Thus, the Panel was aware that th is aspect of the case raised the question of the 
suitability or relevance of safeguard mechanisms in  the context of "outsourcing" and "globalization", 
matters of considerable systemic interest to WTO Members. 
7.10 
Having stated this important contextual backgroun d, the Panel was also aware that the issues 
before it involved the interpretation of the provisi ons of the transitional product-specific safeguard WT/DS399/R 
Page 16  
 
  mechanism and that it was the task of the Panel to  do that.  It was not for the Panel to seek to 
recalibrate what the WTO Members had agreed to  in the negotiations that led to the accession of 
China to the WTO in the light of what the Panel might perceive as changi ng economic circumstances 
that perhaps had not been considered when the Prot ocol was negotiated.  That remains the prerogative 
of the WTO Members themselves.  Nevertheless, the Panel felt that it was important to set this 
background out as it informed the understanding of the Panel of the arguments made before it in this 
case. 
2. Standard of review 
7.11 Article 11 of the DSU, and, in particular, its  requirement that "… a panel should make an 
objective assessment of the matter before it, including an objective assessment of the facts of the case 
and the applicability of and conformity with th e relevant covered agreements", sets forth the 
appropriate standard of review for WTO Agreemen ts.  Since the Protocol is silent as to the 
appropriate standard of review, Article 11 of the DSU will be applied by the Panel in examining the 
consistency of the U.S. Tyres  measure with Paragraph 16 of the Protocol. 
7.12 Although there is a disagreement between the par ties regarding certain aspects of the nature 
of the "objective assessment" we must  undertake in this case, there is much regarding our standard of 
review that the parties do agree on. 
7.13 The United States submits that: 
in order for the Panel to make an "obj ective assessment" of the market disruption 
determination by the ITC, it must examine whether the ITC provided a reasoned explanation as to how the evidence before it (on the record) supported its conclusion 
that the requirements set out in paragraph 16.4 of the Protocol were met.  The Panel is 
not acting as an initial trier of fact, and therefore must not conduct a de novo review.  
However, we do not suggest that the Pa nel should grant total deference to the 
competent authority.  The Panel should review whether the analysis and explanations provided in the ITC Report reveal how the ITC considered the factors under 
paragraph 16.4 and whether the ITC provi ded a reasoned explanation as to how the 
facts supported the market disruption determination.
50 
7.14 China agreed with this part of the United Stat es' understanding of our sta ndard of review.  In 
particular: 
China agrees the Panel must not conduct de novo  review.  China agrees the Panel 
must not grant total deference to the au thorities.  China agrees the "Panel should 
review whether the analysis and explanati ons provided in the ITC Report reveal how 
the ITC considered the factors under para graph 16.4 and whether the ITC provided a 
reasoned explanation as to how the f acts supported the market disruption 
determination" – the focus must be on the USITC Determination as it was written, and that rationale must constitute a "reasoned and adequate explanation."
51 
7.15 We agree with this part of the parties' assessment of our standard of review.  It is well 
established in WTO case law regarding trade re medy cases that a Panel should neither conduct a de 
novo review, nor grant total deferenc e to an investigating authority.52  It is also well established that 
                                                      
50 U.S. Reply to Question 18 from th e Panel, para. 47, footnote omitted. 
51 China's Second Written Submission, para. 44. 
52 See, for example, Appellate Body Report, US – Lamb , para. 106.   WT/DS399/R 
   Page 17  
 
  the Panel's standard of review "m ust be understood in the light of the obligations of the particular 
covered agreement at issue".
53  Taking into account the obligations imposed by Paragraph 16,54 we 
consider that our review of China's claims under Paragraph 16 of the Protoc ol should contain both a 
formal and a substantive element.55  The formal aspect is whether the USITC evaluated "objective 
factors", as required by Paragraph 16.4.  The substantive element is whether the USITC provided a 
reasoned and adequate explana tion of its determination, in  line with its obligation under 
Paragraph 16.5. 
7.16 The main disagreement between the parties concerns the USITC's treatment of alternative 
explanations of the evidence and data before it.   China relies on the Appellate Body Report in US – 
Countervailing Duty Investigation on DRAMS  to argue that "the explanation provided by the 
investigating authority 'should also address alterna tive explanations that could reasonably be drawn 
from the evidence, as well as the reasons why the agency chose to  discount such alternatives in 
coming to its conclusions'".56  The United States denies that the USITC was required to address any 
alternative explanations in its determinat ion.  The United States claims that, in US – Countervailing 
Duty Investigation on DRAMS , "this level of detail [of requiring an assessment of alternative 
explanations] is derived from the requireme nts found in Articles 22.3 and 22.5 of the SCM 
Agreement , and particularly the requirement in Article 22.5 for the notice or report to contain "the 
reasons for acceptance or rejection of relevant argum ents or claims made by interested Members and 
by the exporters and importers".57  The United States notes that no such provision is contained in 
Paragraph 16 of the Protocol. 
7.17 In making the abovementioned finding in US – Countervailing Duty Investigation on 
DRAMS , the Appellate Body referred in a f ootnote to para. 106 of its Report in US – Lamb , which 
reads in relevant part: 
A panel must find, in particular, that an  explanation is not reasoned, or is not 
adequate, if some alternative explanation  of the facts is plausible, and if the 
competent authorities' explanation does not seem adequate in the light of that 
alternative explanation.  Thus, in making  an "objective assessment" of a claim under 
Article 4.2(a), panels must be open to the possibility that the explanation given by the 
competent authorities is not reasoned or adequate.58 
7.18 We note that there is no obligation in Paragra ph 16 of the Protocol requiring the USITC to 
address, in its determination, alternative explan ations that could reasonably be drawn from the 
evidence or data before it.59  Nor is there any provision equivalent to Article 22.5 of the SCM 
Agreement .  Since a panel's standard of review is necessarily distinct from the substantive and 
procedural obligations of the investigating authorit y, our standard of review cannot impose any such 
                                                      
53 See, for example, Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , 
para. 184. 
54 We note in particular that, under Paragraph 16.4  of the Protocol, an investigating authority is 
required to "consider objective factors" in determini ng if market disruption exists.  Furthermore, under 
Paragraph 16.5, the importing Member "shall provide written notice of the decision to apply a measure, 
including the reasons for such measure...". 
55 Appellate Body Report, US – Lamb , paras. 103-104. 
56 China's Second Written Submission, para. 46, citing Appellate Body Report, US – Countervailing 
Duty Investigation on DRAMS , para. 186. 
57 U.S. Reply to Question 18 from the Panel, para. 47 n. 52. 
58 Appellate Body Report, US – Lamb , para. 106 (emphasis in original). 
59 This issue concerns alternative explanations gene rally.  It does not concern the issue of whether the 
USITC should have considered alternative causes of injury, or conducted a non-attribution analysis in respect of 
any such alternativ e causes of injury. WT/DS399/R 
Page 18  
 
  obligation on the USITC.
60  For this reason, and guided by  the abovementioned finding of the 
Appellate Body in US – Lamb , we consider that, in order to review whether the reasoning of the 
USITC was reasoned and adequate, we must assess whether the reasoning provided by the USITC in 
its determination seems adequate in light of plausi ble alternative explanations of the record evidence 
or data advanced by China in this proceeding.   
7.19 The other disagreement between the parties c oncerns our review of the U.S. remedy 
determination.  China contends th at our review of remedy should take account of the fact that the 
"United States must ... provide a 'reasoned explana tion' for the remedy being imposed – both the level 
of the tariffs, and the decision to c ontinue the tariffs for three years".61  According to the 
United States, our review should take account of the fact that "the Protocol does not contain an 
obligation for a Member to consider particular fact ors or to demonstrate at the time of the imposition 
of the measure how the measure meets the requirement of Paragraphs 16.3 and 16.6".62 
7.20 We recall that our standard of review "must be  understood in the light of the obligations of 
the particular covered agreement at issue".63  In this regard, we note that the last sentence of 
Paragraph 16.5 of the Protocol requi res a Member to "provide written notice of the decision to apply a 
measure, including the reasons for such measure and its scope and duration".  This provision refers to 
the need to provide a statement of the "reasons for such measure".  It does not refer to the need to 
provide a statement of the "reasons for the scope and duration of such measure".  In our view, 
therefore, a Member need only provide written noti ce of the scope and duration of the measure.  It 
need not provide written notice of the reasons for the scope and duration of that measure. 
7.21  Our interpretation of the last sentence of Pa ragraph 16.5 is consiste nt with the Appellate 
Body's finding64 in US – Line Pipe that Article 5.1 generally does not require a Member to justify, at 
the time of application, that the safeguard measure at  issue is applied "only to the extent necessary".  
The burden, therefore, is on China to establish that the Tyres  measure is excessive.  China cannot 
simply point to any failure on the part of the Unite d States to explain, in a published determination, 
that the measure is not excessive.  Instead, we consid er that our review of the U.S. remedy should be 
based on the arguments and evidence put forward by the parties during the present WTO dispute 
settlement proceeding.65 
3. Burden of proof 
7.22 We recall the general principles applicable to  burden of proof in WTO dispute settlement, 
which require that a party claiming a violation of a provision of a covered agreement by another 
Member must assert and prove its claim.66  In this dispute, China, which has claimed that the 
United States acted inconsistently with Paragraph 16 of the Protocol, and Articles I:1 and II:1 of the 
GATT 1994, thus bears the burden of demonstrating th at the United States acted inconsistently with 
those provisions.  In addition, it is generally for each party asserting a fact to provide proof thereof.67  
We note in addition that a prima facie case is one wh ich, in the absence of effective refutation by the 
                                                      
60 However, if the USITC failed to consider plausi ble alternative explanations, there may be a greater 
risk that we, under our standard of review, would find that the USITC's r easoning does not seem adequate in 
light of those plausible alternative explanations. 
61 China's Second Written Submission, para. 45. 
62 U.S. Reply to Question 18 from the Panel, para. 48. 
63 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 184. 
64 Appellate Body Report, US – Line Pipe , para. 233. 
65 This reflects the approach adopted by the panel in US – Steel Safeguards , paras. 10.25–10.27. 
66 Appellate Body Report, US – Wool Shirts and Blouses , page 16. 
67 Ibid.   WT/DS399/R 
   Page 19  
 
  other party, requires a panel, as a matter of law, to rule in favour of the party presenting the prima 
facie case.
68  
4. Treaty interpretation 
7.23 Article 3.2 of the DSU directs panels to cl arify the existing provisions of the covered 
agreements "in accordance with customary rules of in terpretation of public international law".  It is 
well settled  that the principles codified in Articles 31 and 32 of the Vienna Convention  are such 
customary rules.  Equally, in WTO case law Article 33 is so applied.69  These provisions read as 
follows: 
Article 31:  General rule of interpretation 
1.  A treaty shall be interpreted in goo d faith in accordance with the ordinary 
meaning to be given to the terms of the trea ty in their context and in the light of its 
object and purpose. 
2.  The context for the purpose of the interpretation of a treaty shall comprise, in 
addition to the text, including its preamble and annexes: 
(a)  any agreement relating to the treaty which was made between all the parties 
in connection with the conclusion of the treaty; 
(b)  any instrument which was made by one or more parties in connection with 
the conclusion of the treaty and accepted by the other parties as an instrument related 
to the treaty. 
3.  There shall be taken into account, together with the context: (a)  any subsequent agreement between th e parties regarding the interpretation of 
the treaty or the application of its provisions; 
(b)  any subsequent practice in the appli cation of the treaty which establishes the 
agreement of the parties regarding its interpretation; 
(c)  any relevant rules of international la w applicable in the relations between the 
parties. 
4.  A special meaning shall be given to a term if it is established that the parties 
so intended. 
Article 32:  Supplementary means of interpretation 
Recourse may be had to supplementary me ans of interpretation, including the 
preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the 
meaning when the interpretation according to article 31: 
(a)  leaves the meaning ambiguous or obscure;  or 
                                                     
 
68 Appellate Body Report, EC-Hormones , para. 104.   
69 See, for example, Panel Report, Japan – DRAMS (Korea) , para. 7.45. WT/DS399/R 
Page 20  
 
  (b)  leads to a result which is ma nifestly absurd or unreasonable. 
Article 33:  Interpretation of treaties authenticated in two or more languages 
1.  When a treaty has been authenticated in two or more languages, the text is 
equally authoritative in each language, unless the treaty provides or the parties agree 
that, in case of divergence, a particular text shall prevail. 
2.  A version of the treaty in a language other than one of those in which the text 
was authenticated shall be considered an au thentic text only if the treaty so provides 
or the parties so agree. 
3.  The terms of the treaty are presumed to have the same meaning in each 
authentic text. 
4.  Except where a particular text preva ils in accordance with paragraph 1, when 
a comparison of the authentic texts discloses a difference of meaning which the application of articles 31 and 32 does not remove, the meaning which best reconciles 
the texts, having regard to the object and purpose of the treaty, shall be adopted. 
7.24 We shall apply these principles in this case. 
5. Relationship between Paragraph 16.1 and Paragraph 16.4 of the Protocol 
7.25 In order to properly assess the conformity of th e United States' measure with Paragraph 16 of 
the Protocol, we must establish the conditions und er which the provisions would apply.  This is 
particularly important regarding China's claims on increased imports and causation, in respect of which the parties have developed significantly diverse positions on the in teraction between sub-
paragraphs 1 and 4 of Paragraph 16. 
7.26 Paragraph 16.1 of the Protocol provides: 
In cases where products of Chinese origin are being imported into the territory of any 
WTO Member in such increased quantities or under such conditions as to cause or 
threaten to cause market disruption to th e domestic producers of like or directly 
competitive products, the WTO Member so affected may request consultations with 
China with a view to seeking a mutually sa tisfactory solution, including whether the 
affected WTO Member should pursue app lication of a measure under the Agreement 
on Safeguards.  Any such request shall be  notified immediately to the Committee on 
Safeguards. 
7.27 Paragraph 16.4 of the Protocol provides: 
Market disruption shall exist whenever imports of an article, like or directly 
competitive with an article produced by the domestic industry, are increasing rapidly, 
either absolutely or relatively, so as to be a significant cause of material injury, or 
threat of material injury to the domestic i ndustry.  In determining if market disruption 
exists, the affected WTO Member shall c onsider objective factors, including the 
volume of imports, the effect of imports on prices for like or directly competitive 
articles, and the effect of such imports  on the domestic industry producing like or 
directly competitive products.   WT/DS399/R 
   Page 21  
 
  (a) Arguments of the parties 
7.28 According to China , Paragraphs 16.1 and 16.4 are inte rrelated.  China contends that 
Paragraph 16.1 functions as a chapeau  for Paragraph 16, providing the basic conditions for any action 
under Paragraph 16.
70  China submits that Paragraph 16.1 also provides "important context" for 
understanding the obligations  of Paragraph 16.4 (and vice versa ), such that "[t]he two provisions must 
be read together".71  In reading the two provisions together , China understands Paragraph 16.4 to add 
to the basic conditions set forth in Paragraph 16.1. 
7.29 Thus, in respect of the issue of increased imports, China asserts that "the first requirement of 
[Paragraph] 16.1 sets a base level requirement of 'in such increased  quantities'".72  Referring to the 
case law of the Appellate Body regarding the interpre tation of the same phrase in Article 2.1 of the 
Safeguards Agreement , China contends that imports will only be "in such increased quantities" if they 
are sudden enough, sharp enough, and significant enough , to cause injury.  China continues, though, 
that "even if the increase in imports is sudden enoug h, sharp enough, or significant enough to satisfy 
the [Paragraph 16.1] requirement of 'in such incr eased quantities', they still must meet the additional 
[Paragraph 16.4] standard of 'increasing rapidly'".73 
7.30 China adopts the same approach to the Paragr aph 16 causation standard.  Thus, China asserts 
that the word "cause" in Paragra ph 16.1 constitutes the "base requirement".74  China asserts that the 
Appellate Body has confirmed,  in case law regarding the Safeguards Agreement , that a "'cause' 
requires 'a genuine and substan tial relationship of cause and eff ect' between the imports and the 
alleged injury".75  China contends that "Article 16.4 furt her strengthens this basic requirement, by 
modifying the term 'cause' with 'significant'".76  China contends that s ub-paragraphs 1 and 4 of 
Paragraph 16 therefore require that increased imports  under the Protocol must have "a significant, 
important, genuine and substantial causal relationship with material injury being suffered by the U.S. 
domestic industry".77 
7.31 The upshot of China's interpretative analysis is that the increased imports and causation 
standards of Paragraph 16 are more stringent than those of the Safeguards Agreement , since they 
incorporate both the disciplines of the Safeguards Agreement  (as embodied in Paragraph 16.1), plus 
the additional requirements of Paragraph 16.4. 
7.32 The United States  submits that Paragraph 16.1 does not impose any obligations regarding the 
existence of market disruption, but merely sets fo rth the general conditions under which a Member is 
authorized to seek consultations with China.  Th e United States asserts that, while Paragraph 16.1 
provides context for the interpretation of Paragraph 16.4, it does not set out a general obligation with 
respect to the market disruption determination.78  According to the United States, it is Paragraph 16.4 
that sets the standards that a Memb er has to meet in order to make  an affirmative market disruption 
determination.79  The United States contends that, consiste nt with Paragraph 16.4, a Member must 
find that imports are (1) "increasing rapidly" so as to be (2) a "significant cause" of (3) material injury 
                                                      
70 China's Second Written Submission, para. 176, an d China's Reply to Question 35 from the Panel. 
71 China's Second Written Submission, para. 176.   
72 China's Reply to Question 15 from the Panel, para. 60 (emphasis in original). 
73 China's Reply to Question 15 from the Panel, para. 60. 
74 China's First Written Submission, para. 185. 
75 China's First Written Submission, para. 182. 
76 China's First Written Submission, para. 187. 
77 China's First Written Submission, para. 204. 
78 See Oral Statement by the U.S. at  the Second Meeting, para. 19. 
79 See U.S. Reply to Question 19 from the Panel. WT/DS399/R 
Page 22  
 
  or threat thereof.
80  The United States contends that these are the standards against which its measure 
should be assessed.  The United States contends that  the transitional safegua rd mechanism exists 
outside and apart from the global safeguard disci plines embodied in Article XIX of the GATT 1994, 
and the Safeguards Agreement .   
(b) Evaluation by the Panel 
7.33 In our view, Paragraph 16.1 is c oncerned with more than the mere right of Members to seek 
consultations.  Paragraph 16.1 provides the very basis for action under the Paragraph 16 transitional 
product-specific safeguard mechanism, as Paragr aph 16.1 consultations are the trigger for any 
subsequent action to address the "market disrupti on" in question.  Indeed, it is only if such 
consultations fail that transitional product-specifi c measures may be imposed (under Paragraph 16.3). 
7.34 In accordance with Paragraph 16.1, action unde r Paragraph 16 is triggered when Chinese 
imports are being imported "in such incr eased quantities or under such conditions"81 "as to cause" 
"market disruption".  But what do these terms mean  substantively?  How does a Member know when 
imports are in sufficiently "increased quantities" to jus tify action?  What is the degree of harm that the 
domestic industry must suffer?  And what is the degree of causal relationshi p required between those 
imports and that harm? 
7.35 Similar questions regarding "increased quantiti es" and causation arose in the context of 
disputes concerning Article 2.1 of the Safeguards Agreement .  In that context, the answers were 
provided by the Appellate Body, based on its inte rpretation of the relevant provisions of that 
Agreement.  In the context of Paragraph 16, the answers are provided in Paragraph 16.4, which sets 
forth a definition of "market disruption" that enco mpasses the nature of the increase in imports, the 
nature of the harm to be suffered by the domestic  industry, and the degree of causal nexus that must 
exist between those imports and that harm.  In par ticular, Paragraph 16.4 provides that the increase in 
imports must be rapid, that the harm to the domestic  industry must amount to material injury, and that 
the rapidly increasing imports must be a significant cau se of that material injury.  Thus, imports from 
China will be "in such increased quantities ... as to cau se ... market disruption" when those imports are 
"increasing rapidly ... so as to be a si gnificant cause of material injury."   
7.36 Thus, Paragraphs 16.1 and 16.4 ar e interrelated.  They should be read together, and each 
provision provides important context for interp reting the other.  The interrelation between 
Paragraphs 16.1 and 16.4, the jo int reading of these provisions, and the definitional nature of 
Paragraph 16.4, suggest that Paragraph 16.4 clarifi es the substance of the trigger conditions provided 
for in Paragraph 16.1.82  
7.37 Since Paragraph 16.4 clarifies the substance of the conditions for taking action under 
Paragraph 16, it is in light of the "increasing rapidly" and "significant cause" standards of 
Paragraph 16.4 that the conformity of the U.S. Tyres  measure should be assessed.83  As indicated 
                                                      
80 Oral Statement by the U.S. at  the Second Meeting, para. 21. 
81 In the light of the French and Spanish texts and in accordance with Article 33(4) of the Vienna 
Convention , the word "or" is to be taken to include "and". 
82 Indeed, the clarificatory role of  Paragraph 16.4 has been acknowledg ed by China which, after itself 
noting the interrelationship between Paragraphs 16.1 and 16.4, asserted that: 
Article 16.4, in turn, defines the specific circumstances in which "market disruption" is 
deemed to exist, thus clarifyi ng the applicable requirements – in particular, that imports be 
"increasing rapidly" and constitute a "significant cause" of material injury. (China's Reply to 
Question 35 from the Panel, para. 36.) 
83 We note that China itself has asserted that: 
   WT/DS399/R 
   Page 23  
 
  above, we shall interpret the phrases "increasing rapidly" and "significant cause" in the manner 
prescribed by Articles 31 and 32 of the Vienna Convention .  To the extent that the provisions of 
Article XIX of the GATT 1994 or the Safeguards Agreement , as interpreted by the Appellate Body, 
are relevant they will be taken into account. 
B. 
WAS THE USITC ENTITLED TO  FIND THAT IMPORTS WERE "INCREASING RAPIDLY " IN 
ACCORDANCE WITH PARAGRAPH 16 OF THE PROTOCOL ? 
1. Introduction 
7.38 China claims that the United States failed to  evaluate properly whether imports from China 
were "increasing rapidly" in accordance with Paragr aph 16.4 of the Protocol.  The thrust of China's 
argument is that a decline in the rate  of increase in 2008, the most recent period in China's view, 
means that imports were no lo nger "increasing rapidly".   
2. Arguments of the Parties 
7.39 China  argues that the term "increasing" means imports must be increasing in the most  recent 
past.  China claims that Paragraph 16.1 and Paragr aph 16.4 both use the present continuous tense in 
detailing the increased imports standard under the Protocol.84  China submits that Paragraph 16.1 is in 
the present continuous tense as the phrase "are being"  modifies "imported".  China contends that in 
Paragraph 16.4 the phrase "are increasing rapidly" is  a construction in the present continuous tense.85  
China argues that, therefore, there is consistency in the tenses between the two paragraphs, and it is 
this present continuous tense that requires the investigating authority to focus on the most  recent 
period of time.86   
7.40 China provides two reasons for this.  First, as a matter of grammar, the present continuous 
tense requires the activity to be ha ppening either now, or in the n ear future or very recent past.87  In 
China's view that distinguishes im ports that are "increasing rapidly" from imports that have "increased 
rapidly".  In this case, China argues that the most recent period of time is th e most recently completed 
year and any other period for which data is available.88  Second, China argues that this approach is 
consistent with the way the Appellate Body has in terpreted the textual distinction between "increased" 
and "increasing" when considering Article 4.2 in the Safeguards Agreement.89  China also believes 
that the use of the term "increasing" requires the an alysis under Paragraph 16 of the Protocol to focus 
                                                                                                                                                                     
When evaluating whether China-specific safeguards under Article 16 are WTO-consistent, a panel 
must determine whether the national authorities have properly found that imports are "increasing rapidly" and 
that they are a "significant cause" of any injury.  (China's Reply to Question 9b from the Panel, para. 35.) 
84 China's Second Written Submission, para. 70. 
85 China's Reply to Question 12 from the Panel, para. 46 and footnote 37 noting that the grammatical 
point does not arise in the French and Spanish texts as the present tense captures the English equivalent of both 
the simple present tense and the present continuous tense. 
86 China's Second Written Submission, para. 70. 
87 China's Reply to Question 12 from the Panel, para. 46. 
88 China's Reply to Question 14 from the Panel, para. 53.  China's Second Written Submission, 
para. 84. 
89 China's Reply Question 12 from the Panel, para. 47.  Appellate Body Report, US – Steel Safeguards,  
para. 367.  Oral Statement by China at the First Meeting, para. 22.  China's Reply to Question 36 from the Panel, 
para. 40. WT/DS399/R 
Page 24  
 
  on an even more recent period of time compared to the Safeguards Agreement to determine whether 
imports are increasing.
 90 
7.41 China notes that when describing an increase,  "rapidly" indicates "a significant or steep 
increase"91 or a recent surge.92  China continues that the way to make the distinction between imports 
that are "increasing rapidly" compared to imports that are merely increasing is to consider the rate  at 
which the increase is occurring.93  China contends that a trend line over time that is "progressing 
quickly" must either have a steep slope (a "rapid " change over time, as opposed to a gradual change 
over time) or must have an accelerating slope (a  "rapid" change over time, since the change is 
"progressing quickly" by progressing at an increasingly faster rate).94  China argues that "[t]he 
ordinary meaning of 'rapidly' can best be unders tood in this context as imports increasing more 
'rapidly' than they have been increasing previously".95  In other words, China argues "increasing 
rapidly" does not contemplate the present increase being modest and the past increase being rapid.96  
Rather, imports must be accelerating or continui ng at a high rate in light of the preceding period.97 
7.42 China points to the drop in the rate of in crease in 2006/2007 (53.7 per cent) compared to 
2007/2008 (10.8 per cent) to argue that imports were no longer "increasing rapidly" in the most recent 
past.  China responds to a question from the Panel to  say that imports were "increasing rapidly" in 
2007, but that "such a finding would be premised primarily on the dramatic  changes in rate of 
increase, not simply an increase in absolute quantity".98  China claims that the USITC failed to 
address the fact that the majority of the increase in  volume of imports, approximately 86 per cent, 
occurred between 2004 and 2007.99  China also claims that the U.S.  blurred the last two years of the 
investigation, which obscures the fact that 46 per cen t of the growth in absolute volume occurred from 
2006 to 2007.100  Between 2007 and 2008 the growth in absolute volume was only 14 per cent.101 
7.43 China provides the following table to argue furt her that imports were no longer "increasing 
rapidly" in 2008:102 
                                                      
90 Oral Statement by China at the First Meeting, para. 22.  China's Second Written Submission, 
para. 71.  China's First Wr itten Submission, para. 101. 
91 China's First Written Submission, para. 79. 
92 China's First Written Submission, para. 85. 
93 China's Second Written Submission, para. 77.  We note that China develops a 3 prong qualitative test 
to determine whether imports are "increasing rapidly" that  requires (1) consideration of data in the most recent 
period;  (2) the most weight to be given to the most recent trends;  and (3) an analysis of th e most recent year in 
more detail when the initial analysis shows imports are slowing.   
94 China's Second Written Submission, para. 77. 
95 China's Reply to Question 14 from the Panel, para. 54.  China's Second Written Submission, 
para. 85. 
96 China's First Written Submission, para. 83. 
97 China's First Written Submission, para. 85.  China considers that there may be other scenarios where 
imports can be "increasing rapidly".  Ch ina's First Written Submission, para. 81. 
98 China's Reply to Question 13 from the Panel, para. 49. 
99 China's First Written Submission, para. 13 3, quoting the USITC report, page V-1. 
100 14,498/31400*100 = 46%.   
101 China's Second Written Submission, para. 116. 
102 China's Second Written Submission, para. 114.   China's First Oral Statement, para. 28.   WT/DS399/R 
   Page 25  
 
   Average Annual 
Increase over 2004-
2007 Period Annual Increase in 
2007 Compared to 
2006 Annual Increase in 
2008 Compared to 
2007 
Quantity of Tires 
(million tires) 9.0 M 14.5 M 4.5 M 
Rate of Absolute 
Increase (%) 42.1% 53.7% 10.8% 
Increase in Market 
Share (% pts) 3.1 % pt 4.7 % pt 2.7 % pt 
 
7.44 China challenges the 10.8 per cent increase in 2008 as  not being in and of itself rapid.  China 
argues that the Panel in US – Steel Safeguards found an increase of 11.9 per cent during the most 
recent full year of data not to be su fficient to constitute "increased imports".103  China contends that a 
10.8 per cent increase cannot, therefore, be sufficien t to comply with the higher standard under the 
Protocol for imports to be "increasing rapidly".104 
7.45 China provides the following table regarding relative data of subject imports:105 
Year Per cent of 
Domestic 
Production 
(percentage) Change in Share 
of Production 
(percentage 
points) Per cent of Total 
Consumption 
(percentage) Change in Share 
of Consumption 
(percentage 
points) 
2004 6.7 -- 4.7 -- 
2005 10.0 3.3 6.8 2.1 
2006 14.6 4.6 9.3 2.5 
2007 23.0 8.4 14.0 4.7 
2008 28.7 5.7 16.7 2.7 
 
7.46 China argues that the USITC's treatment of relative import data is cursory and misleading as 
the USITC did not pay enough attention to the cha nges in 2008, but, rather, stressed changes over the 
full period.  China argues that the trends in share of  consumption (i.e. market share), suggest a stable 
trend given that the change in share of consump tion was consistently in the 2-3 percentage points 
range, apart from 2007.106   
7.47 China considers that relative data  under the Protocol refers to mark et share, that is, imports as 
a percentage of total consumption rather than imports relative to domestic production.107  China 
submits that while consideration of imports re lative to domestic production makes sense for global 
safeguards due to Article 2.1 ("absolute or relativ e to domestic production") and Article 4.2(a) ("the 
share of the domestic market taken by increased im ports, changes in the level of sales, production, 
                                                      
103 China's Reply to Question 36 from the Panel, para. 43. 
104 We note that China makes similar claims regarding the comparable numbers in relative data.  See 
China's Reply to Question 36 from the Panel, para. 43. 
105 China's First Written Submission, para. 158.  USITC Report, Table II-2. 
106 China's First Written Submission, para. 132. 
107 China's Reply to Question 38 from the Panel, para. 48.  China's Second Written Submission, 
para. 117. WT/DS399/R 
Page 26  
 
  productivity, capacity utilization, profits and losses and employment") of the Safeguards Agreement , 
under the Protocol there is no elaboration of the mean ing to be given to "relative" data.  China argues 
that the USITC relied on imports relative to dom estic production when Paragraph 16 seems to place 
the focus on market share.
108  China argues that a focus on domestic production is misleading when 
non-subject imports were such an important factor  in the market and the "domestic industry is 
engaging in a conscious strategy of sh ifting some of its production offshore".109 
7.48 China also claims that the blurring of the last two years of the investigation obscures the fact 
that 39 per cent of the growth in market share occurred from 2006 to 2007.  Between 2007 and 2008 the growth of market share was only 22 per cent.
110 
7.49 China argues that the U.S. relies too heavily on an end-point-to-end-point analysis given that 
the Appellate Body has found such an approach to be inadequate for assessing properly whether 
imports have "increased" under the Safeguards Agreement .111  China claims that an end-point-to-end-
point analysis is particularly inappropr iate under Paragraph 16 of the Protocol.112  C h i n a  
acknowledges that a longer period of time may be n ecessary to provide context for what is happening 
in the most recent period, but claims that an end- point-to-end-point analysis "misapplies the relevance 
of this longer period of time and … can obscure the more relevant analysis of what is happening over 
the more recent period".113  
7.50 China recalls that in Argentina – Footwear (EC) , even though imports almost doubled over a 
five year period, due to a decline in imports at  the end of the period neither the Panel nor the 
Appellate Body found "increased imports" in accordance with the Safeguards Agreement .  China 
argues that the essential lesson from Argentina – Footwear (EC) is that any year, and particularly the 
recent period, must be put in context and not considered in isolation.114  China submits that the U.S. 
argument in the case before us, stressing increases over the period of investigation, is similar to that 
argument rejected in Argentina – Footwear (EC).  
7.51 Regarding trends in value, China argues that the USITC erroneously relied on trends in value 
when the "text of Paragraph 16 requires a focus on the 'quantity' of imports".115    
7.52 China argues that the USITC ne ver discussed the implications of the low base level at the 
beginning of the period.116  China continues that when impor ts begin at a low base level it is 
"inevitable that the subsequent increases will seem large".117  China argues that these increases were 
never placed in their proper context.118 
7.53 China argues that the USITC should have included data for the first quarter of 2009 in its 
period of investigation, which would have been in  keeping with USITC established practice.  China 
                                                      
108 China's Second Written Submission, para. 117. 
109 China's Reply to Question 38 from the Panel, para. 51. 
110 China's Second Written Submission, para. 116. 
111 Appellate Body Report, US – Steel Safeguards , paras. 354-355. 
112 China's Second Written Submission, para. 85.  China's Reply to Question 36 from the Panel, 
para. 41. 
113 China's Second Written Submission, para. 105. 
114 China's Second Written Submission, para. 108. 
115 China's First Written Submission, para. 116. 
116 China's First Written Submission, para. 117. 
117 China's First Written Submission, para. 117. 
118 China's First Written Submission, para. 117.   WT/DS399/R 
   Page 27  
 
  contends that had the data from the first quarter of 2009 been included, it would have shown a sharp 
decline in subject imports from China.
119 
7.54 China argues that the USITC's refu sal to collect or consider available interim data "stands in 
stark contrast to its well-estab lished and consistent practice of collecting interim data in other 
cases".120  China notes that the petition in this case was not filed until 20 April 2009.  However, the 
USITC decided not to collect interim data ev en though it had "collected interim data in every single 
other Section 421 safeguard investigation in which an interim period was completed prior to the filing 
of the petition".121  China considers the USITC refusal to co llect interim data for the completed first 
quarter of 2009 is "wholly inconsistent" with  the USITC's practice in other Section 421 cases.122 
7.55 Noting the U.S. argument that the USITC does not  have an established practice of collecting 
interim data as outlined by China, and that it deci des whether to collect interim data on a case by case 
basis, China accuses the United States of being "ove rboard and quite dangerous" in its case by case 
approach.  China believes the United States overstates the burden of collecting such data and that the 
desire to avoid the imposition of a slight reporting burden on domestic producers is not a sufficient 
explanation.123  China claims that when the staff report was completed on 12 June 2009, import data 
was available for the first quarter of 2009 ("Q1 2009").124 
7.56 China  asserts that the Unit ed States collects interim data in antidumping and countervailing 
investigations whenever such data is available.   China claims that in 2009 the USITC collected 
interim data in all such investigations as long as one quarter in 2009 had been completed prior to the 
petition being filed.125  As one example, China notes that in Oil Country Tubular Goods from China, a 
case that began 11 days before the initiation of the Tyres  investigation, the USITC collected interim 
data for Q1 2009.126 
7.57 China argues that in the only Section 421 trans itional safeguard investigation to be initiated 
prior to the completion of an interim period, Uncovered Innerspring Units from China,  the USITC 
collected information for the entire previous year even though the investigation started just 6 days 
after the completion of the prior year.127   
7.58 China  dismisses the contention by the USITC that the first quarter 2009 data would have been 
of limited use given the lack of information on th e relative share of imports from China and claims 
that the "record was incomplete only because th e USITC chose to leave the record incomplete".128  
China argues that the USITC reason for not using Q1 2009 data (i.e. that it would add no probative value in the absence of relative data) "overlooks the f act that the absolute level of imports was still a 
                                                     
 
119 China's First Written Submission, paras. 136-137.  China's Sec ond Written Submission, paras. 123-
126. 
120 China's First Written Submission, para. 139. 
121 China's First Written Submission, para. 139. 
122 China's First Written Submission, para. 139.  We note that China also argues the USITC should 
have issued supplemental questionnaire s to collect the data.  The United States questions the burden on the 
recipients and the likelihood of getting a relatively complete data series at a late stage in the investigation.  See 
China's First Written Submission, paras. 142-144.  Un ited States' First Written Submission, paras. 139-140. 
123 China's Second Written Submission, para. 124. 
124 China's First Written Submission, para. 146. 
125 China's First Written Submission, para. 140. 
126 China's First Written Submission, para. 140. 
127 China's First Written Submission, para. 139. 
128 China's First Written Submission, paras. 147-148. WT/DS399/R 
Page 28  
 
  key issue to be considered ...".
129  China claims that the "inabilit y to address one issue completely 
does not justify ignoring probative data on another issue".130 
7.59 The United States  argues that China seeks to have the Panel impose an overly restrictive 
view of how recent increases in imports should be in order to comply with the Protocol.131  T h e  
United States continues that there is no support in th e text of the Protocol for investigating authorities 
to consider only very recent increases in imports.  The United States contends that there is no 
meaningful distinction between the language in the Protocol and the language in the Safeguards 
Agreement  to indicate an investigating authority must focus its analysis on a more  recent period of 
time under the Protocol compared to the Safeguards Agreement .  The United States notes that the 
USITC has consistently explained that it must "focus on recent increases in imports " under the 
Protocol.132   
7.60 The United States  submits that the ordinary meaning of "rapid" means "progressing quickly, 
developed or completed within a short time".133  The United States contends that, in light of this, when 
the Panel is examining the USITC's analysis re garding imports it should assess whether the USITC 
"reasonably concluded that the growth in Chinese imports had 'progressed quickly' over the period of 
investigation or had been 'developed or completed within a short period of time'".134 
7.61 The United States notes that Paragraph 16 of the Protocol does not define the nature of the 
rapid increase that is sufficient to meet the requirements of Paragraph 16.  The United States 
challenges China's view that imports must be "steep " or "surging", arguing that China is imposing a 
higher standard to find that imports are "inc reasing rapidly" than is warranted by the text.135  
7.62 The United States argues that the Protocol does not preclude a competent authority from 
finding imports to be "increasing rapidly" over  the period examined simply because the rate  of 
increase of imports lessens at the end of the period.  Nor does the Protocol "suggest that imports must 
be growing at their most rapid pace at the end of the period examined  by a competent authority".136  
The United States contends that, instead, the Protoc ol only requires that the competent authority find 
that there was a rapid increase in imports on an abso lute or relative basis, during the period, and that 
these imports were a significant cause of material injury  or threat of material injury to the industry.137   
7.63 The United States claims that China continues to  make the factually mistaken assertion that 
imports from China were "declining in 2008" , the end of the period of investigation.138  T h e  
United States notes that the subject imports were at  their highest levels in absolute terms in 2008.139  
The United States contends that the record shows "clearly and unequivocally" that there was a rapid 
and recent increase in the volumes of Chinese imports.140    
                                                      
129 China's First Written Submission, para 148. 
130 China's First Written Submission, para. 148. 
131 United States' First Written Submission, para. 100. 
132 United States' First Written Submission, para. 89 and USITC Report page 11. 
133 United States' First Written Submission, para. 87.  New Shorter Oxford English Dictionary (2007) 
at 2463. 
134 United States' First Written Submission, para. 87. 
135 United States' First Written Submission, para. 95. 
136 United States' First Written Submission, para. 91 
137 United States' First Written Submission, para. 91. 
138 Oral Statement by China at the First Meeting, para. 7. 
139 United States' First Written Submission, para. 122. 
140 United States' Second Written Submission, para. 20.   WT/DS399/R 
   Page 29  
 
  7.64 The United States criticises the focus by China on the rate
 of increase in volumes of Chinese 
imports rather than actual volumes or market shares of subject imports.  The United States submits that the use of a change in the rate of increase is the only way China can provide support for its claim 
that there was a declining or lessening trend in imports in 2008.
141  The United States submits that 
even if the rate of growth in absolute terms had lessened in 2008 when co mpared to the extremely 
rapid rate of growth seen in 2007, the quantities of Chinese imports in 2008 continued to grow in a 
rapid manner.142  The United States contends that it does not matter that subject imports may have 
increased at a lower rate in 2008 than they did in 2007. 
7.65 The United States continues that in 2008 the absolute volume of imports was 10.8 per cent 
higher than 2007;  70 per cent higher than in 2006;  121 per cent higher than in 2005;  and 215.5 per 
cent higher than in 2004.143  The United States argues that it should be clear that in 2008 Chinese 
imports of subject tyres continued to increase in a rapid manner, just as they had throughout the 
period of investigation.144 
7.66 The United States argues that China's discussion of the US – Steel Safeguards case is 
misleading.  The United States argues that the pane l's decision in that case was based on a sharp 
decline in absolute and relative terms at the end of the period and trends in ab solute imports that differ 
significantly from this case, i.e., "an alternati on of increases and decreases from year to year"145 rather 
than the upwards trend from year to year in the current case. 
7.67 The United States  notes that both the market share of the subject imports and the ratio of 
subject imports to U.S. production rose considerab ly throughout the period examined, with the 
two largest year to year increases, in bot h sets of data, occurring in 2007 and 2008.146  T h e  
United States submits, therefore, that the USITC ha d a reasonable basis for finding that the increase in 
2008 continued to be "large", "rapid" and "significant".147   
7.68 The United States notes that in 2007 and 2008 ther e was a 62 per cent growth in the market 
share of subject imports.148  Overall, the market share of subject  imports increased by 12 percentage 
points between 2004 and 2008.  The market shar e in 2008 was 2.7 percentage points higher 
than 2007;  7.4 percentage points higher than in 2006;   9.9 percentage points higher than in 2005;  and 
12.0 percentage points higher than in 2004.149   
7.69 The United States provides the following graph to illustrate the increases in market share:150 
 
  
 
  
                                                     
 
141 United States' Second Written Submission, para. 23. 
142 United States' Second Written Submission, para. 25. 
143 United States' Second Written Submission para. 20 , and USITC Report pages 11-12 and Table C-1. 
144 United States' Second Written Submission, para. 20. 
145 U.S. comment on China's Reply to Question 36 from the Panel, paras. 20-22.  Panel Report, US – 
Steel Safeguards , para. 10.206. 
146 United States' First Written Submission, para. 111. 
147 United States' First Written Submission, para. 120 - 122. 
148 United States' First Written Submission, para. 122. 
149 USITC Report, pages 11-12 and Table C-1. 
150 United States' First Written Submission, para. 21;  USITC Report Table C-1. WT/DS399/R 
Page 30  
 
   
    
 
    
 
    
 
 7.70 The ratio of subject imports to U.S. production increased by 22 percentage points 
between 2004 and 2008
151 with the highest annual increase in 2007 and the second highest annual 
increase in 2008.152   
7.71 The United States argues that the USITC did not merely recite that there was a growth in 
imports between the first and last years of the peri od.  Rather, the United States argues that the USITC 
specifically considered the growth  in absolute and relative quantities for the subject imports during 
each year of the period of investigation, and in  particular for 2007 and 2008 and concluded that the 
subject imports increased throughout the period and by significant amounts in each year.153   
7.72 The United States notes that an investigating aut hority is not forbidden from examining trends 
in imports between the end points of an investig ation and acknowledges that it should also be looking 
at trends over the entire period.154  The United States recalls that the Appellate Body has explained 
that, in the context of the Safeguards Agreement , the "competent authorities should not consider such 
data [from the most recent past] in isolation from the data pertaining to the entire period of 
investigation".155  The United States contends th at the increase in imports in the Argentina – 
Footwear (EC) case, and specifically the drop in the final two years motivated the comments about an 
end-point-to-end-point analysis by the Appellate Body .  The United States argu es that the facts of the 
present case are very different and that the USITC correctly concluded that the increases in subject 
imports were "large, rapid and c ontinuing" throughout the period, including the final years of the 
period examined by the USITC.156   
7.73 The United States claims that the Protocol does not prohibit a competent authority from 
considering trends in the value of subject imports .  The United States notes that the value of subject 
                                                      
151 United States' First Written Submission, para. 111. 
152 United States' First Written Submission, para. 122. 
153 United States' First Written Submission, para. 114 quoting USITC Report page 12. 
154 United States' First Written Submission, para. 116, quoting Appellate Body Report, Argentina – 
Footwear (EC) , para.129 and Appellate Body Report, US – Lamb paras. 137-138. 
155 Appellate Body Report, US – Lamb , paras. 137-138. 
156 United States' First Written Submission, para . 118, quoting USITC Report at page 12.  
  Market Share (In Percent)  Market Share of Chinese Imports    WT/DS399/R 
   Page 31  
 
  imports increased by 294.5 per cent between 2004  and 2008 and provides the following graph to 
illustrate the changes in value over the period of investigation:
157 
Chart 2:  Absolute Value of Tires Value (million dollars) 
Dollars   1.49 3 
453 692 932 1,4931,788 
2004      2005          2006    2007         2008 2,000 
 
1,500 
1,000 
500 
0 
 
 
7.74 The U.S. claims that imports of subject tyres from China at the beginning of the period were 
not small.  In 2004 imports from China were five pe r cent of the market and the fourth largest import 
source.158  The United States argues that whether or not subject imports were small at the beginning of 
the period, they had become a large presen ce in the market at the end of the period.159 
7.75 The United States argues that the Protocol does not  require the inclusion of the most recently 
concluded quarterly data.  The U.S. contends th at the USITC's choice of a five year period of 
investigation that ended less than four months befo re the beginning of the investigation satisfies the 
standard under the Protocol. 
7.76 The United States  explains that:  
... the ITC has an established practice in  investigations under Section 421 of 
collecting, at a minimum, five full years of data, plus for any interim period that can reasonably be collected, when conducting its investigations.  The ITC decides on a case-by-case basis, whether to attempt to collect  data for the 'interim period,' which is 
the most recently completed period of less than a full calendar year.
160 (footnotes 
omitted)   
7.77 The United States continues that the USITC c onsiders a number of factors in deciding 
whether to use interim data incl uding: the likelihood of obtaining full information;  the amount of 
time elapsed between the end of the most recent qua rter and the issuance of questionnaires;  and the 
number of parties.161  The United States notes that the USITC is less likely to seek data for a particular 
                                                      
157 United States' First Written Submission, paras. 10 8-109.  USITC Report, pages 11-12 and 22.   
158 United States' First Written Submission, para. 129. 
159 United States' First Written Submission, para. 129. 
160 United States' First Written Submission, para. 132. 
161 United States' First Written Submission, para. 132. WT/DS399/R 
Page 32  
 
  quarter if a relatively small amount of time has elapsed between the end of the quarter and the 
beginning of the investigation, if participants in the market are unlikel y to provide meaningful 
information, or if the number of participants is  large so that the USITC is unlikely to obtain 
reasonably complete data in the time allocated.
162   
7.78 The United States argues that in the Tyres  case, data was needed from 10 U.S. producers, 
35 importers and 36 foreign producers.  The USITC believed that "a relatively complete data series 
for that period would not have been availabl e in time for use in this investigation".163  T h e  
United States continues that China fails to mention that in the five Section 421 cases it argues interim 
data was used, the period of time that had elapsed between the end of the most recent quarter and the 
filing of the petition ranged from 33 to 67 days.164  In the Tyres  case just 20 days had elapsed between 
the end of the quarter and when the petition was filed and the staff began preparing questionnaires.165   
7.79 The United States submits that the USITC ta kes a case by case approach regarding the 
availability and usefulness of interim data.166  The United States argues that the antidumping and 
countervailing investigations  referred to by China are not analogous to the Tyres  case.  For 10 of 
the 11 preliminary-phase investigations that occurred in 2009, the period of time that elapsed between 
the end of the quarter and the filing of the petiti ons ranged between 29 and 100 days, "considerably 
longer than the 20 days between the end of the quarter and the filing of the petition in the Tires 
case".167  The United States continues that there have  been occasions where a petition has been filed 
more than 20 days after the end of a quarter where the USITC has not collected interim data.  The United States argues this demonstrates further that the decision to collect interim data "depends on the 
nature and complexities of the relevant investigation".
168   
7.80 The United States explains that in the case of Uncovered Innerspring Units from China , 
China does not recognise that the USITC reasonably c oncluded that asking parties to provide a set of 
data for one full year as opposed to data for a full year plus two interim periods was likely to place a 
significantly lower reporting burden on participants.  The United States explains: 
In the Innersprings investigation, the IT C collected data for five full years, 1999, 
2000, 2001, 2002, and 2003.  Uncovered Innerspring Units from China , Inv. No. TA-
421-5, USITC Pub. 3676 at I-12, III-7-8  (March 2004).  If the ITC had chosen to collect data only through the third quarter of 2003, then it would have had to collect data for seven
, rather than five  reporting periods:  1998, 1999, 2000, 2001, and 2002, 
plus interim data for the first three quarters of 2003 and the first three quarters of 2002.  This would obviously have in creased the burden considerably on all 
respondents.
169  
7.81 The United States argues that absent data to assess whether imports were increasing on a 
relative basis, it would not have been possibl e for the USITC to assess whether imports were 
"increasing rapidly".170  The United States continues that the USITC's ability "to determine whether 
imports were increasing on a relative basis was a necessary component of its 'increasing imports' 
analysis.  Even if the available data showed that  imports were declining on an absolute level during 
                                                      
162 United States' First Written Submission, para. 132. 
163 USITC Report, page 12 footnote 55.   
164 United States' First Written Submission, para. 135. 
165 United States' First Written Submission, para. 133. 
166 United States' First Written Submission, para. 137. 
167 United States' First Written Submission, para. 137. 
168 United States' First Written Submission, para. 138. 
169 United States' First Written Submission, para 136, footnote 265.  Emphasis in original. 
170 United States' First Written Submission, para. 141.   WT/DS399/R 
   Page 33  
 
  the first quarter of 2009, the USITC would still not have  been able to conclude that imports were not 
increasing rapidly overall because it could not assess whether they were increasing rapidly on a 
relative basis
".171  
3. Evaluation by the Panel 
7.82 The Panel begins by reviewing various data concerning the volu me of subject and non-subject 
imports in absolute terms.  We then consider Ch ina's arguments regarding the interpretation of the 
phrase "increasing rapidly".  Thereafter, we consider  issues regarding:  the USITC's determination 
that imports were increasing rapidly in relative te rms;  China's argument that the USITC improperly 
relied on an end-point-to-end-point analysis of imports;  China's argument that the USITC improperly relied on increases in value rather than increases in volume;  China's argument that the USITC should 
have taken account of the fact that subject imports  began from a low base;  and China's argument that 
the USITC should have collected data for the first quarter of 2009.   
(i) Review of import data 
7.83 We summarise below the import data on the ab solute increase in the volume of subject 
imports in each year of the period of investigation
172;  and the percentage increase in subject imports 
year on year between 2005 and 2008.173   
Year 2004 2005 2006 2007 2008 
Quantity of 
subject 
imports 
(1,000 tyres) 14,575 20,790 27,005 41,503 45,975 
 
Year 2004 2005 2006 2007 2008 
Increase in 
subject 
imports 
(percentage 
points) - 42.7 29.9 53.7 10.8 
 
 7.84 There were absolute increases in subject imports in each year of the period of investigation. 
This resulted in an overall increase of 31 million units, or 215.5 per cent, in subject imports from 
China by the end of the period.
174  The greatest increase occurred in the last two years of the period.175  
Regarding non-subject imports, the next largest increase in imports between 2004 and 2008 was from 
Indonesia, representing an increase of just 3.9 million units.176  The absolute increases in volume of 
                                                      
171 United States' First Written Submission, para. 141. USITC Report, page 12, footnote 55. 
172 Data referred to comes from the USITC Report, Table C-1. 
173 Data referred to comes from the USITC Report, Table C-1. 
174 USITC Report, pages 11-12, and Table II-1. 
175 We note that there was a 14.5 million unit increase in subject imports in 2007 compared to 2006, 
representing a 53.7 per cent increase; and a 4.5 million un it increase in 2008 compared  to 2007, representing a 
10.8 per cent increase.  The increase in 2008 was in addition to the large increase in 2007.  
176 USITC Report, Table II-1. WT/DS399/R 
Page 34  
 
  subject imports from China over the period of inv estigation are clearly depicted in the following 
graph:
177 
 
7.85 On the basis of this data, the USITC concluded: 
In absolute terms, imports of subject tir es from China increased throughout the period 
of investigation and were the highest, in te rms of both quantity and value, in 2008, at 
the end of the period.  The quantity of s ubject imports rose by 215.5 percent between 
2004 and 2008, by 53.7 percent between 2006 and 2007, and by 10.8 percent between 
2007 and 2008."  The value of subject imports  rose even more rapidly, increasing by 
294.5 percent between 2004 and 2008, by 60.2 percent between 2006 and 2007, and 
by 19.8 percent between 2007 and 2008. 
...we find that the subject imports increased , both absolutely and relatively throughout 
the period by significant amounts in each year and, as stated above, were at their highest levels at the end of the period in  2008.  Whether viewed in absolute or 
relative terms, and whether viewed in terms of the increase from 2007 to 2008 alone 
or the increase in the last two full years (o r even the last three years), the increases 
were large, rapid, and continuing at th e end of the period – and from an increasingly 
large base.
178 
7.86 At first glance, taking into account the absolute  import data outlined above, we see no error in 
the USITC's conclusion that there was a rapid incr ease in subject imports from China in absolute 
terms.179  
                                                      
177 United States' Second Written Submission, para. 20 .  USITC Report, pages.11-12 and Table C-1.   
178 USITC Report, pages 11-12.  Footnotes omitted.  We consider relative data and data based on value 
in paras. 7.94-7.99 and 7.104 below. 
179 China also argues, as part of a 3 prong test, that there should be an analysis of the most recent year 
in more detail when the initial analysis shows imports are slowing.   In this case, China argues that quarterly 
data for the final two years of the period of investigation should have been analysed.  See China's Second 
Written Submission, para. 87 and  China's Reply to Question 14, para. 56.  We do not agree that subject imports 
were slowing in 2008.  Indeed, in 2008 subject imports were  at their highest levels in absolute terms.  We note 
that China provides quarterly data for 2007 and 2008 in para. 127 of its First Written Submission and at Exhibit 
China-26.  This data reveals that the two highest abso lute quarterly quantities were Q2 and Q3 2008, and apart 
   WT/DS399/R 
   Page 35  
 
  (ii) The meaning of the phrase "increasing rapidly" 
7.87 Despite these absolute increases,  China argues that imports were not "increasing rapidly" in 
accordance with the Protocol.  According to China,  the use of the present continuous tense in the 
phrases "are being imported" (Paragraph 16.1) and "are increasing" (Paragraph 16.4) requires the 
investigating authority to focus on the most  recent past, in this case 2008.
180  China asserts that this 
requirement for the most recent past is reinfor ced by the use of the term "increasing" in 
Paragraph 16.4, rather than the term "increased".181  China also submits that the increase in imports 
must be "rapid", which China understands as requiri ng a quick progression in the rate of increase in 
the volume of imports.182  We note that China outlines two scenar ios for the meaning of "rapidly" and 
acknowledges that other scenarios might be possible.183 The first scenario is that imports must be 
increasing at a consistently very high rate.  The sec ond scenario is that imports must be increasing at a 
higher rate in each successive year.184  China argues that, regardless of  the scenario, the rate cannot be 
declining rapidly and that it is "fatal" that the rate of increase from 2007 to 2008 was "a fraction of 
any of the prior years."185  
7.88 We note China's argument that the use of the present continuous tense in the phrases "are 
being imported" (Paragraph 16.1) and "increasing"  (Paragraph 16.4) require a focus on the most 
recent past.  However, we recall that the Appellate  Body has found the grammatical construction of 
the phrase "is being imported" in Article 2.1 of the Safeguards Agreement to mean that "the increase 
in imports must have been sudden and recent".186  The Appellate Body did not find that the increase 
must have occurred in the most  recent past.187  
                                                                                                                                                                     
from the final quarter, on a comparative basis subject imports were higher in 2008 than 2007.  See U.S. First 
Written Submission para. 28.   In our view, the legal standard for finding imports to be "increasing rapidly" does 
not hinge on the final quarter comparison between 2007 and 2008.    
180 We note that China considers the most recent pa st will include the most recently completed year and 
any more recent period for which data is available.  See China's Reply to Question 14 from the Panel, para. 53.  
China's Second Written Submission, para. 84.  We addres s China's arguments regarding the need to include the 
first quarter 2009 data in paras. 7.106 to 7.109.  We note  that the situation during the period of investigation is 
used as a proxy for the situation pertaining currently at the time of imposition.  Panel Report, Japan – DRAMS 
(Korea) , para. 7.357.  See also Panel Report, Mexico – Anti-Dumping Measures on Rice , para. 7.58. 
181 China's Second Written Submission, para. 71. 
182 We also note that China cons iders a "rapid" increase is an additional requirement to the 
requirements in the Safeguards Agreement , thus setting forth a standard even more demanding under the 
Protocol.  See China's First Written Submission, para. 67.  We do not agree that it is useful to compare the 
Safeguards Agreement and the Protocol in this way.  The obligations under the Protocol must be interpreted 
according to the Vienna Convention .   
183 China's Second Written Submission, para 77.  China's First Written Subm ission, para. 81.   
184 We note that China focuses on the second of these scenarios, as do  we in our analysis.  See, for 
example China's First Written Submission, paras. 115, 120-126, and 131-135; Oral Statement by China at the First Panel Meeting, paras. 26-31; China's Reply to Qu estions 13 and 14, paras. 49-55; China's Second Written 
Submission, paras. 110-117. 
185 China's Second Written Submission, para. 112. 
186 Appellate Body Report, Argentina – Footwear (EC), para. 130.  We do not consider the term 
"sudden" applies here given Paragraph 16.4 of the Protocol includes the term "rapidly".  Since Article 2.1 of the Safeguards Agreement  does not refer to the term "increasing rapidly", case law interpreting what is happening to 
imports under Article 2.1 of the Safeguards Agreement  is of limited contextual relevance.    
187 We note that the period of investigation needs to be recent in order to be relevant, but still long 
enough to ensure a proper analysis of what is happening to imports over the period, with a focus on the latter 
part of the investigation.  Appellate Body Report, US – Steel Safeguards , para. 374. WT/DS399/R 
Page 36  
 
  7.89 According to the panel in US – Line Pipe : 
The word 'recent' – which was used by the Appellate Body in interpreting the phrase 
'is being imported' – is defined as 'not l ong past; that happened, appeared, began to 
exist or existed lately'.
188  In other words, the word 'recent' implies some form of 
retrospective analysis.  It does not imply an analysis of the conditions immediately 
preceding the authority's decision.  Nor do es it imply that the analysis must focus 
exclusively on conditions at the very end of the period of investigation.189 
7.90 The findings of the Appellate Body in Argentina – Footwear (EC)  and the Panel in US – Line 
Pipe are applicable here.  We consider that the phr ase in Paragraph 16.1 of the Protocol, "are being 
imported" is essentially the same as the phrase "is being imported" in Article 2.1 of the Safeguards 
Agreement .  As such, we consider that the Appella te Body's interpretation of the temporal 
implications of the phrase "is being imported" provid es useful guidance in this case.  We are also 
guided by the finding of the panel in US – Line Pipe  that, although "the word 'recent' implies some 
form of retrospective analysis... [i]t does not im ply an analysis of the conditions immediately 
preceding the authority's decision".  These findings suggest that there is nothing in the use of the 
present continuous tense in Paragraphs 16.1 and 16.4 of the Protocol that would require an 
investigating authority to focus on the movements in imports during the most  recent past, or during 
the period immediately preceding the authority's decision. 
7.91 We recall China's focus on the fact that Para graph 16.4 uses the term "increasing", in the 
present continuous tense, rather than the past te nse "increased".  China argues that the difference 
between imports that have "increased rapidly" and imports that are "increasing rapidly" means that an 
investigating authority must find that imports ar e still "increasing" rapidly during the most recent 
period.  We agree there is a temporal difference be tween imports that have increased rapidly and those 
that are increasing rapidly.  However, the text of Paragraph 16.1 does not say "increased rapidly".  
The text says "are being imported … in such in creased quantities" and, as acknowledged by China, 
this phrase uses the same grammatical tense as the phrase "increasing rapidly" in Paragraph 16.4.  
Reading the terms "increased" and "increasing" in th eir proper context, we do not consider that the 
use of the term "increasing" in Paragraph 16.4 requi res a focus on a more recent period than the term 
"increased" in Paragraph 16.1.190 
7.92 We note that the ordinary meaning of rapid means "progressing quickly;  developed or 
completed within a short time".191  The adverb "rapidly" is defined as "… with great speed, 
swiftly".192  There is no reference to the rate  of increase in the dictionary meaning of "rapidly", nor 
any suggestion that imports can only increase rapidly if  there is an increase in the rate of increase in 
those imports.  Accordingly, in order for imports  to be "increasing rapidl y", they need only be 
increasing "with great speed", or "swiftly".  Th ere is no need for any swift progression in the rate of 
increase in those imports.  Nor does a decline in th e rate of increase necessarily preclude a finding that 
imports are "increasing rapidly". Under the Protocol the rapid increase need only be on an absolute or 
relative basis. 
                                                      
188 The Compact Edition of the Oxford English Dictionary , Volume 1 (Oxford University Press, 1971). 
189 Panel Report, US – Line Pipe, para. 7.204. 
190 China also relies on its understanding of the object and purpose of Paragraph 16 of the Protocol to 
support its call for a narrow interpretation of the phrase  "increasing rapidly".  We address China's arguments 
regarding the object and purpose of Paragraph 16 of the Protocol at paras. 7.147-7.149. 
191 Shorter Oxford English Dictionary, Vol.2, page 2463.  Both China and the United States 
acknowledge this dictionary definition.  See China's First Written Submission, para. 79.  United States' First 
Written Submission, para. 87. 
192 Shorter Oxford English Dictionary, Vol. 2, page 2465.   WT/DS399/R 
   Page 37  
 
  7.93 Furthermore, even if the USITC had been required to focus on imports during the last year of 
the period, the fact that the 10.8 per cent increase in 2008 was lower than th e increase in the preceding 
year does not mean that imports were not "increasing rapidly" in 2008.  An increase of 10.8 per cent in 2008 by no means precludes a finding that imports are "increasing rapidly", especially when that increase is assessed in context.
193  Nor is it a "modest" increase.194  In this regard, we recall that the 
10.8 per cent increase in absolute  volumes between 2007 and 2008 was in addition  to an increase of 
53.7 per cent between 2006 and 2007, which was in addition to an increase of 29.9 per cent between 
2005 and 2006, which was in addition to an increase of 42.7 per cent between 2004 and 2005.  In our 
view, the 10.8 per cent increase in absolute volumes from 2007 to 2008 reinforces the USITC's 
conclusion that imports were "incre asing rapidly" during the period, and continued to be "increasing 
rapidly" at the end of the period.  
(iii) Relative increase in imports 
7.94 We note that there is no definition in the Protoc ol for imports that are "increasing rapidly... 
relatively".  Therefore, in our view, any reasonable form of a relative assessment is acceptable.  As such, the interpretation of this factor is not necessar ily limited to a consideration of the market share 
of Chinese imports, i.e., imports from China as a per centage of total consumption.  We see no reason 
why imports relative to domestic pr oduction cannot also be considered . We note that in this case the 
USITC considered both imports relative to market share and imports relative to domestic 
production.
195  Specifically, the USITC found that: 
Both the ratio of subject imports to U.S. production and the ratio of  subject imports to 
U.S. apparent consumption rose throughout the period examined, and both ratios 
were at their highest levels of the period in  2008.  The ratio of subject imports to U.S. 
production increased by 22.0 percentage poi nts between 2004 and 2008, with the two 
largest year-to-year increases occurring at the end of the period in 2007 and 2008.  The ratio of subject imports to U.S. apparent consumption increased by 12.0 percentage points during the period examin ed, with the two largest year-to-year 
increases also occurring at the end of the period in 2007 and 2008.
196 
7.95 We summarise below the data regarding the market share  of China's imports compared to the 
market share of non-subject imports:197 
U.S. imports 
from: 2004 2005 2006 2007 2008 
China (%) 4.7 6.8 9.3 14.0 16.7 
All other 
sources (%) 31.9 33.6 34.5 33.4 33.7 
 
7.96 There was an increase in the market share of  subject imports from China in every year, 
leading to a 12 percentage point increase over the peri od of investigation.  In comparison, the market 
share of non-subject imports was more or less stable.198    
                                                      
193 And we note that in making its finding the USITC considered the "increase and rate of increase in 
subject imports".  USITC Report, page 11. 
194 China's First Written Submission, para. 125. 
195 USITC Report, page 12. 
196 USITC Report, page 12.  See also Table II-2 and Table V-1. 
197 USITC Report, Table C-1.   WT/DS399/R 
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  7.97 We summarise below the data for subject im ports as a percentage of domestic production. 
Year 2004 2005 2006 2007 2008 
Subject imports as 
% of domestic 
production 6.7 10.0 14.6 23.0 28.7 
 
7.98 We note that there were increases in subject imports relative to domestic production year after 
year, as demonstrated in the above table.199  There was a 22 percentage point increase in subject 
imports relative to domestic produc tion over the period of investigation.  Thus, regardless of a focus 
on imports relative to market share or relative to domestic production there were increases from year 
to year and significant increases over the period of investigation. 
7.99 China argues that "stable" changes in market  share reveal that imports are not increasing 
rapidly on a relative basis (See table in para. 7.45 , above:  the change in the market share between 
2004 and 2005 was 2.1 percentage points;  betw een 2005 and 2006 was 2.5 percentage points;  
between 2006 and 2007 was 4.7 percentage points;   and between 2007 and 2008 was 2.7 percentage 
points).  While we consider comparing rates of increase from year to year might be useful, we have already explained its limitations.  The change in the market share seems to us a step further away 
again from the text of the Protocol where the obligati on is to find rapid increases "either absolutely or 
relatively".   
7.100  In any event we have, up to this point, dete rmined that the USITC gave a reasonable and 
adequate explanation for concluding that the abso lute data indicates that imports are "increasing 
rapidly".  That is sufficient under the Protocol and it is not necessary to consider the situation in 
relation to relative data.  However, for the sake of completeness we have done so, and find that given 
rapidly increasing subject imports from China relative to domestic production and relative to market 
share, imports are "increasing ra pidly" in relative terms.   
(iv) End-point-to-end-point analysis 
7.101  The Panel next considers China's arguments rega rding the utility of an end-point-to-end-point 
analysis by recalling what the Appellate Body said in Argentina – Footwear (EC) :   
We agree with the Panel that Articles 2.1 and 4.2(a) of the Agreement on Safeguards  
require a demonstration not merely of any increase in imports, but, instead, of imports 
'in such increased quantities ... and under such  conditions as to cause or threaten to 
cause serious injury.'  In addition, we agr ee with the panel that the specific provisions 
of Article 4.2(a) require that 'the rate and amount of the increase in imports...in 
absolute and relative terms'(emphasis added)  must be evaluated.  Thus, we do not 
dispute the Panel's view and ultimate conc lusion that the competent authorities are 
required to consider the trends in imports over the period of investigation (rather than 
just comparing the end points) under Article 4.2(a).  As a result, we agree with the Panel's conclusion that 'Argentina did not ad equately consider the intervening trends 
in imports, in particular the steady and significant declines in imports beginning in 
                                                                                                                                                                    
 
198 Non-subject imports are discussed in more detail in the discussion on other causes of injury at 
paras. 7.364 to 7.367. 
199 China argues that the domestic production factor is unreliable given that the "domestic industry is 
engaging in a conscious strategy of shifting some of its production offshore …".  China's Reply to Question 38 
from the Panel, para. 51.  We address the business strategy issue in paras. 7.285-7.322.   WT/DS399/R 
   Page 39  
 
  1994, as well as the sensitivity of the analysis to the particular end points of the 
investigation period used.
200 
7.102  As we understand it the Appellate Body is not say ing that an end-point-to-end-point analysis 
is prohibited in all circumstances.  But, rather, that the investigating authority in Argentina – 
Footwear (EC) did not assess the trends in imports during the period of investigation adequately, and 
did not take into account the particular sensitivity of the analysis to the end points selected given 
intervening trends.  That is, the investigating auth ority in that case did not adequately consider the 
declines in absolute and relative imports in  the final two years of the investigation.201  Such was the 
significance of the decreases in that case that a one-y ear change in the base year "transformed the 
increase relied upon by Argentina into a decline".202  We note that in the case before us the facts are 
very different.  The USITC did not rely exclusively on an end-point-to-end-po int analysis, but rather 
engaged in various temporal comparisons.203  Furthermore, there was not even a predominant reliance 
on an end-point-to-end-point analysis, as the USITC re lied on the fact that there was an absolute and 
relative increase in subject imports in every year of the investigation.204 
7.103  China claims that an end-point-to-end-point-analy sis "can obscure the more relevant analysis 
of what is happening over the more recent period".205  We note that the Appellate Body in US – Steel 
Safeguards was concerned that a "simple end-point-t o-end-point analysis could easily be 
manipulated" in cases where there is no "clear and uninterrupted upward trend in import volumes".206  
In this case, however, there was "a clear and unint errupted upward trend in import volumes".  As 
such, the results could not be manipul ated by the selection of end points.207   
(v) Value / volume  
7.104  The Panel next considers China's argument that the USITC relied on increases in value rather 
than increases in volumes.  The Panel begins by noti ng that even though the text of the Protocol refers 
to quantities, it does not prohibit an analysis that look s at the value of imports.  We note that in this 
case the USITC assessed both the quantity and value of imports.208  The value of subject imports rose 
by 294.5 per cent between 2004 and 2008;  52.6 per cent between 2004 and 2005;  34.7 per cent 
between 2005 and 2006;  by 60.2 per cent between 2006 and 2007, and by 19.8 per cent between 2007 
and 2008.209  If an assessment of the quantity of imports tells  a starkly different st ory to that of value 
due to factors influencing value being somethi ng other than volumes of imports, then a more 
searching analysis might discount an assessment b ased on value.  However, China has not presented 
any arguments  to suggest that the increase in valu e in this case could be explained by factors other 
than an increase in subject imports.210    
                                                      
200 Appellate Body Report, Argentina – Footwear (EC) , para. 129.  (Footnotes omitted). 
201 Panel Report, Argentina – Footwear (EC) , paras. 8.153 – 8.164. 
202 Panel Report, Argentina – Footwear (EC) , para. 8.164. 
203 See para. 7.85. 
204 See paras. 7.83-7.86 and 7.94-7.100 on absolute and relative data. 
205 China's Second Written Submission, para. 105. 
206 Appellate Body, US – Steel Safeguards , para 354. 
207 We note that China also argues that the USITC n eeded to focus on the most recent period and look 
at increases in 2008 relative to the entire period.  Chin a considers the failure by the USITC to focus on 2008 in 
this way was "in "large part [due] to its over reliance on an 'end-point-to-end-point' analysis".  We have considered the relevance of the most recent period in paras. 7.87-7.93. 
208 USITC Report, pages 11-12.   
209 See USITC Report, Table C-1. 
210 We note that Table II-I in the USITC Report prov ides information regarding the per unit price of 
subject imports.  It shows that the increase in price over the period (from 31.10 per unit in 2004 to 38.90 per unit 
 WT/DS399/R 
Page 40  
 
  (vi) Low base 
7.105  China also argues that there wa s a "low" base at the beginning of the investigation period and 
this was never put into context by the USITC.  In  our view subject imports were not "low" at the 
beginning of the period.  Having five per cent of the market at a value of 450 million dollars, and 
being the fourth largest import source are far from humble beginnings.  Furthermore, gaining 
12 percentage points in market share at a value of  1.7 billion dollars, and becoming the largest import 
source over the period of investigation means subjec t imports were a large and significant presence in 
the market at the end of the period.211   
(vii) Interim data for the first quarter of 2009  
7.106  Finally, the Panel addresses China's argument that data from the first quarter of 2009 should 
have been included in the period of investigation.  The Panel  begins its analysis by recalling 
footnote 55 on page 12 of the USITC Report which explains why the USITC did not collect or analyse Q1 2009 data. 
... The data the Commission compiled and relie d upon in this inves tigation, however, 
did not include first quarter 2009 data because a relatively complete data series for 
that period would not have been available in time for use in this investigation.  The 
first quarter 2009 import data also are of no probative value in determining whether 
subject imports are increasing rapidly in rela tive terms in the absence of a data series 
that includes first quarter 2009 data on U.S. production and U.S. apparent 
consumption. Thus consideration of firs t quarter 2009 import data alone would not 
change our finding that imports of the subject imports from China are increasing 
rapidly, both absolutely and relatively."
212 
7.107  Regarding the selection of an investigation pe riod, we recall that WTO jurisprudence in 
relation to the Safeguards Agreement says that where there are no specifi c rules as to the length of the 
period of investigation, the period selected must be sufficiently long to allow conclusions to be drawn 
regarding increased imports, and the period must allo w an investigating authority to focus on recent 
imports.213  We consider that the same logic applies in the context of the Protocol.  In our view, given 
that there are no precise guidelines in the Protocol, th e selection of a five year period of investigation 
that ended less than four months before the begi nning of the investigation provides recent data and 
satisfies the standard under the Protocol.   
7.108  We note that the Parties do not agree on what the USITC standard practice is regarding 
interim data.  China argues that the USITC has a "well-established and consistent practice of 
collecting interim data in other cases".214  The United States says that  the USITC has an established 
practice in investigations under Section 421 "of collecti ng, at a minimum, five full years of data, plus 
any interim period that can reasonably be collected"215 but that the USITC decides on a case-by-case 
basis whether to attempt to collect data for the interim period.216  For the purposes of our analysis we 
                                                                                                                                                                     
in 2008, or a 25 per cent increase) was substantially le ss that the overall increase in value (294.5 per cent 
between 2004 and 2008). 
211 USITC Report, Table C-1.   
212 USITC Report, page 12, footnote 55. 
213 Panel Report, US – Line Pipe,  para. 7.201. 
214 China's First Written Submission, para. 139.   
215 United States' First Written Submission, para. 132. 
216 United States' First Written Submission, para. 132.  Regarding the United States argument drawing 
on US – Lamb to support its view of a recent period of time, we note that the comments by the Appellate Body 
in that case were in relation to the evaluation of the state of the domestic industry when making a threat 
   WT/DS399/R 
   Page 41  
 
  do not consider it relevant whether the USITC devi ated from its standard practice, only whether the 
choice of an investigation period was reasonable a nd adequate, and we have  concluded that it was.
217    
7.109  We note that the USITC was concerned at not havi ng relative data for the first quarter of 2009 
and considered that even if it had collected absolute  data for the first quarter of 2009, it would have 
served no probative value as it could not have completed the analys is regarding rapidly increasing 
imports without relative data.  We note also that in  the other Section 421 investigations both absolute 
and relative data were included.218  Given the requirement to consider imports that are "increasing 
rapidly, either absolutely or relatively" it seems onl y practical that all data be available for any period 
selected as part of the investigation period in or der to be able to determine whether imports are 
"increasing rapidly".  In any event, we do not consider the USITC was obliged to collect and 
incorporate absolute and relative data for the firs t quarter of 2009 into its period of investigation. 
4. Conclusion 
7.110  For all of the above reasons, we conclude that  the USITC did not fail to evaluate properly 
whether imports from China met the specific threshold under Paragraph 16.4 of the Protocol of "increasing rapidly".  
C. 
IS THE U .S. IMPLEMENTING STATUTE 'S CAUSATION STANDARD INCONSISTENT AS SUCH WITH 
PARAGRAPH 16.1  AND PARAGRAPH 16.4  OF THE PROTOCOL ? 
7.111  China claims that Section 421 is "as such" in consistent with Paragr aph 16 of the Protocol 
(irrespective of the way in which the USITC applied that standard in the Tyres  investigation), because 
it fails to fully implement the "significant cause" sta ndard set forth in Paragraph 16.4 of the Protocol.  
China asserts that the U.S. implementing statute pr operly cites the appropriate causation standard as 
"significant cause", but then improperly defines "significant cause" as: 
a cause which contributes significantly to the material injury of the domestic industry, 
but need not be equal to or greater than any other cause .219 
7.112  China's claim focuses on two elements of the defi nition set forth in the statute.  First, China 
asserts that the statute lowers the Paragraph 16.4 causation standard by rede fining "significant cause" 
as "contributes significantly".  Second, China contends  that the statute further lowers the causation 
standard by allowing imports to be a less importa nt factor than any other single cause, no matter how 
minor that other cause might be. 
7.113  The United States contends that the causation standard of the U.S. implementing statute is 
fully consistent with the provisions of the Protocol. 
                                                                                                                                                                     
determination.  The comments were not in relation to increased imports.  Theref ore we do not consider it 
relevant context for the purposes of this case.  In any event we have already given our views on the temporal element to be considered  under the Protocol in interpreti ng "increasing rapidl y" - i.e. that it is the recent period 
of time that needs to be considered, while also considerin g trends over the period of investigation with particular 
attention on what is happening to imports in the latter part of the period. 
217 We note that, in the Section 421 investigations mentioned by China, the amount of time that had 
elapsed between the end of the most recent quarter an d the filing of the petition ranged from 33 to 67 days, 
compared to the 20 days in this case.  We consider this difference notable.  We also note that responses to 
questionnaires were due on 7 May 2009, and it is arguably not reasonable to expect exporters, importers and 
producers to supply first quarter absolute and relative data by 7 May.   
218 China's Reply to Question 37 from the Panel, paras. 44-47. 
219 19 U.S.C. § 2451(c)(1).  (emphasis supplied) WT/DS399/R 
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  7.114  Before turning to the substance of the parties'  arguments, we first examine a threshold issue 
regarding the application of the ma ndatory/discretionary distinction. 
1. Threshold issue regarding the application of  the mandatory/discretionary distinction 
7.115  We note the U.S. argument that, consistent with a long-standing distinction in GATT and 
WTO case law between mandatory and discretionary  legislation, China must demonstrate that 
Section 421 mandates, or requires, the USITC to appl y a causation standard that is inconsistent with 
the Protocol.  The United States submits that there is  nothing in the U.S. statute that mandates action 
that is inconsistent with the United States' obligations under the Protocol. 
7.116  China contends that "the Appellate Body has explained that panels are not obliged, as a 
preliminary jurisdictional matter, to examine whether the challenged measure is mandatory".
220  China 
further contends that the general status of the ma ndatory/discretionary dis tinction is unsettled, and 
accordingly the Appellate Body has urged "caution against the applica tion of this distinction in a 
mechanistic fashion".221  China submits that, in any event,  Section 421 does require the USITC to 
apply a fundamentally flawed definition.  China ass erts that the United States has not argued, and 
indeed cannot argue, that the USITC was free to di sregard the statutory definition at its discretion.222  
China asserts that whenever the US ITC makes the legal finding that imports are "a significant cause" 
of material injury, this finding is necessarily defined to be something different from (and lower in standard than) a finding of "significant cause" in accordance with the corre ct standard under the 
Protocol. 
7.117  While we acknowledge that the Appellate Body has cautioned against the application of this 
distinction "in a mechanistic fashion", the Appellate  Body has not expressly ruled out the applicability 
of the mandatory/discretionary distinction in the context of assessing the WTO-consistency of a 
legislative measure.  Rather, the Appellate Body has it self implicitly applied the distinction.  Thus, in 
US – Carbon Steel , the Appellate Body upheld the panel's ruling on the basis that "the 
European Communities did not satisfy its burde n of proving either that United States law mandates  
USDOC to act inconsistently with Article 21.3 of the SCM Agreement , or that such law restricts in a 
material way USDOC's discretion  to make a determination consiste nt with Article 21.3 in a sunset 
review".
223  The Appellate Body also did not rule out the application of the mandatory/discretionary 
distinction when the occasion to do so presented itself in US – Zeroing (EC) (Article 21.5 – EC)  
Instead, the Appellate Body repeated an earlier finding that "the import of the 'mandatory/discretionary distinc tion' may vary from case to case".
224 
7.118  In practice, the import of the mandatory/discre tionary distinction is most pronounced in cases 
where, although a Member's law appears to be WT O-inconsistent on its face, there is sufficient 
discretion to allow national authorities to apply the law in a WTO-consistent manner.  In such cases, 
the discretion reserved to national authorities "saves" the statute.  For the reasons set forth below, we 
do not consider that Section 421 app ears inconsistent on its face.  In this case, therefore, the potential 
import of the mandatory/discretionary distinction is limited.  That being said, we consider that we 
should approach China's "as such" claim agains t Section 421 by evaluating whether or not 
                                                      
220 Panel Report, US – Customs Bond Directive , para. 7.209 (emphasis in original). 
221 Appellate Body Report, US – Corrosion-Resistant Steel Sunset Review , para. 93. 
222 The United States has admitted the definition is binding on the USITC. U.S. Reply to Question 20 
from the Panel, para. 58. 
223 Appellate Body Report, US – Carbon Steel , para. 162 (emphasis supplied). 
224 Appellate Body Report, US – Zeroing (EC) (Article 21.5-EC) , para. 214, citing Appellate Body 
Report, US – Corrosion-Resistant Steel Sunset Review , para. 93.   WT/DS399/R 
   Page 43  
 
  Section 421 requires the United States to estab lish causation in a manner inconsistent with 
Paragraph 16 of the Protocol.
225 
2. Whether the statute lowers the Paragraph 16.4 causation standard by redefining 
"significant cause" as "contributes significantly" 
(a) Arguments of the parties 
7.119  China  asserts that the U.S. "contributes significantly" definition is at odds with the ordinary 
meaning of the Paragraph 16.4 "significant cause" sta ndard, interpreted in context and in light of the 
object and purpose of the Protocol.  
7.120  In respect of the ordinary meaning of the term s, China contends that the statute improperly 
equates the word "cause" with "contribute", wher eas these two words in fact have very different 
meanings.  China asserts that the ordinary meaning of "cause" is "that which produces an effect or 
consequence"226 or "something that brings about an effect or a result".227  China contends that, by 
contrast, the ordinary meaning of "contribute" is "to play a part in the achievement of a result"228, or 
"to play a significant part in bringing about an end or result"229, which is a weaker notion than that of 
"cause".  China contends that a cause "produces" or  "brings about" the consequence, and does not 
merely "contribute to" or "play a part" in its occurrence. 
7.121  China refers to the French and Spanish versions  of the Protocol in support of its argument.  
China asserts that the French version uses the verb  "causer", which means "to be at the origin of 
something, to have something as effect".230  China asserts that the verb "contribuer" is defined so as to 
have a lower determinative value, meaning to mere ly "help with", or "have a part, more or less 
important, in the production of a result".231  China makes similar arguments in respect of the 
translation and meaning of the Spanish terms "causar", "causa" and "contribuir".232  According to 
China, both the French and Spanish versions of the text reveal the much less-determinative character 
of "to contribute" when compared with "to cause". 
7.122  China asserts that the addition of the word "significant" strengthens this causal link 
requirement, since the Shorter Oxford English Dicti onary defines "significant" as "important, notable, 
consequential".233  China submits that the causal connec tion must be important, notable, or 
consequential, such that a simple causal connection is  not sufficient.  China contends that the ordinary 
meaning of "significant cause" therefore requires a particularly strong, manifest and important causal connection.  China contends that the U.S. statute fail s to reflect this standard, since a factor can make 
an "important contribution
" at a far lower level of casual relationship than when it rises to the level of 
an "important cause ". 
                                                      
225 In doing so, we are guided in particular by the approach of the panel in Korea – Commercial 
Vessels,  paras. 7.60–7.67.   
226 Shorter Oxford English Dictionary, Vol. 1, at 365 (2007 ed.). 
227 Webster's Ninth New Collegiate Dictionary, at 217 (1986 ed.).   
228 Shorter Oxford English Dictionary, Vol. 1, at 509 (2007 ed.).   
229 Webster's Ninth New Collegiate Dictionary, at 285. 
230 Trésor de la Langue Francaise, dictionary published by the CNRS (National Center for Scientific 
Research), available at:  http://atilf.atilf.fr/tlf.htm. 
231 Trésor de la Langue Francaise, dictionary published by the CNRS (National Center for Scientific 
Research), available at:  http://atilf.atilf.fr/tlf.htm.   
232 China's First Written Submission, para. 200. 
233 Shorter Oxford English Dictionary, Vol. 2, at 2833 (2007 ed.).   WT/DS399/R 
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  7.123  China relies on the context of the phrase "significant cause", and the object and purpose of the 
Protocol, to argue that "significant cause" should be  interpreted more narrowl y than the "causal link" 
causation standard set forth in Article 4.2(b) of the Safeguards Agreement.  
7.124  Regarding context, China first notes that para graph 246(c) of the Working Party Report 
provides: 
246.  …Members of the Working Party confirmed that in implementing the 
provisions on market disruption, WTO Members would comply with those provisions and the following: …. 
(c) In determining whether market disruption existed, including the 
causal link between imports that were increasing rapidly, either 
absolutely or relatively, and any material injury or threat of material 
injury to the domestic industry, the competent authority would consider objective factors … 
7.125  China contends that the term "cause" in Paragraph 16 of the Protocol and the phrase "causal 
link" in the Working Party Report are used synonym ously.  China then directs the Panel to the WTO 
case law regarding the interpretation of the phrase "causal link" in Article 4.2(b) of the Safeguards 
Agreement.  In particular, China notes that the A ppellate Body has found that the phrase "causal link" 
(as used in Article 4.2(b) of the Safeguards Agreement ) requires a showing that there is a " genuine 
and substantial relationship  of cause and effect between imports and threat of injury".
234 
7.126  China asserts that Paragraph 16.4 of the Protocol  then goes further, as the word "significant" 
is used to strengthen the basic requirement to es tablish a "genuine and s ubstantial relationship of 
cause and effect between imports and threat of injury".  According to China, it is no longer enough for 
the relationship to be "genuine and substantial";  the relationship must be both "genuine and 
substantial" and also must be "significant".  Ch ina asserts that, whereas the Protocol imposes a more 
stringent causation standard than the Safeguards Agreement , the U.S. statutory definition of 
"contributes significantly" actually lowers that threshold. 
7.127  A further contextual element relied on by Chin a concerns the meaning of the term "market 
disruption".  China asserts that the wo rd "disruption" means "break apart,  throw into disorder, shatter;  
separate forcibly;  esp. interrupt the normal continui ty of (an activity etc);  throw into disorder".235  
China also refers to the French and Spanish versi ons of the Protocol (which refer respectively to 
"désorganisation du marché" and "desorganización del Mercado").236  China contends that the causal 
relationship that justifies the imposition of a pr oduct-specific safeguard measure must not only be 
significant, but also have the very serious conseque nce of throwing the market  into disorder, breaking 
it apart, or shattering it. 
7.128  As for object and purpose, China asserts that th e Protocol as a whole should be viewed as an 
instrument which facilitates the expansion of trade.  According to China, Paragraph 16 of the Protocol 
is an exceptional, country-specific measure d esigned to address unforeseen surges in imports from 
China – an "escape valve" to be u sed only in emergency situations as an extraordinary remedy.  China 
contends that Paragraph 16 should therefore be given a narrow cons truction, to differentiate the higher 
                                                      
234 Appellate Body Report,  US – Softwood Lumber VI (Article 21.5 – Canada),  para. 132 (emphasis 
added). 
235 Shorter Oxford English Dictionary, Vol. 1, at 714 (2007 ed.).   
236 China's First Written Submission, para. 189.   WT/DS399/R 
   Page 45  
 
  causation standard of Paragraph 16 from th e lower causation standard applied in the Safeguards 
Agreement.  
7.129  The United States  contends that China's argument rega rding the distinction between "cause" 
and "contribute" is premised on the mistaken notion that the Protocol requires that imports from China 
be the sole cause of material inju ry to an industry.  The United States asserts that China's argument is 
inconsistent with the text of the Protocol, as the Pr otocol provides that "market disruption shall exist" 
if Chinese imports constitute " a significant cause of material injury" to the industry.  By providing 
that Chinese imports may constitute "a significa nt cause" of injury, the Protocol explicitly 
contemplates that there may be multiple significant causes of material injury or threat to an industry, a 
point which China ignores. 
7.130  The United States asserts that China's argument is also inconsistent with  the ordinary meaning 
of the word "cause".  The United States contends that, while the Shorter Oxford English Dictionary 
defines the word "cause" as meaning a factor that "p roduces an effect or consequence" or "that brings 
about an effect or result"
237, there is no question that the word "cause" can be used to describe a 
situation where more than one factor brings about or  produces a particular effect or result.  According 
to the United States, one can correctly state that the "hearing room's heating system and the sun's rays 
on the windows of the hearing room caused the hearing room to be very hot during the morning session".  The United States asserts that, given that it is entirely correct to use "cause" in this manner, 
it is also clear that "cause" can be  used with respect to situations where multiple factors contribute to 
"bringing about" or "producing" an effect or result. 
7.131  The United States further contends that China's argument is inconsistent  with the Appellate 
Body's explanation of the terms "cause" and "causal link" in the Safeguards Agreement  context.  
According to the United States, the Appellate Body examined the "causal link" requirement contained 
in Article 4.2(b) of the Safeguards Agreement in US – Wheat Gluten ,  and explained: 
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," "pr oduced,", or "induced" the existence of the 
second element.  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" or "nexus" between these two elements.   Taking these words together, 
the term "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.
238 
7.132  The United States contends that since China has conceded that the words "cause" and "causal 
link" are effectively the same for the purposes of the analysis set forth in the Protocol239, this 
reasoning would suggest that the ITC can reaso nably assess whether increased imports are a 
significant "cause" of injury to the industry by assessing whether they significantly "contribute" to the 
industry's injury. 
                                                      
237 The United States refers in this regard to the di ctionary definition set forth at para. 198 of China's 
First Written Submission. 
238 Appellate Body Report, US – Wheat Gluten , para. 67, emphasis supplied. 
239 The United States refers in this regard to Ch ina's First Written Submission, para. 180 ("the term 
'cause' in the text of Article 16 of the Protocol and the phrase 'causal link' as used in the discussion of Article 16 
of the Working Party Report are used synonymously"). WT/DS399/R 
Page 46  
 
  7.133  The United States asserts that China is wrong to argue that by modifying "cause" with 
"significant", the Protocol simply took the causation standard of the Safeguards Agreement  and made 
it more "severe".  The United States contends that, under the Vienna Convention , each term must be 
interpreted in the context of its particular agreem ent.  The United States asserts that such analysis 
demonstrates two different requirements:  a "genuine  and substantial relationship of cause and effect" 
under the Safeguards Agreement  and an "important, notable, or consequential" cause under 
Paragraph 16 of the Protocol.  The United States subm its that China's effort to argue that one is more 
"severe" than the other is a poi ntless exercise, as it provides no guid ance as to the meaning of either, 
or as to whether the causation standard under Secti on 241 is consistent w ith Paragraph 16 of the 
Protocol. 
7.134  Regarding China's reliance on definitions of the words "market" and "disruption", the 
United States submits that there is no need for the Panel to consult a dictionary to define the term 
"market disruption" because the Protocol itself defines the term.  The United States relies on 
Article 31.4 of the Vienna Convention , whereby "[a] special meaning shall be given to a term if it is 
established that the parties so intended".  The Unite d States contends that, in accordance with that 
principle, the Protocol's explicit definition of the term makes recourse to other sources unnecessary. 
7.135  The United States disputes China's argument th at a more "demanding" standard for causation 
should be applied under Paragraph 16 of the Pr otocol because the transitional product-specific 
safeguard mechanism is an "exceptional, country -specific measure designed to address unforeseen 
surges in imports from China".
240  The United States contends that China is mistaken in claiming that 
the transitional remedy under Paragraph 16 was inte nded to be used only in exceptional circumstances 
involving unforeseen surges in Chinese imports.  Ac cording to the United States, the extraordinary 
nature of global safeguards is squarely rooted in the texts and immediate contexts of Article XIX of 
the GATT 1994 and the text of the Safeguards Agreement , which refer to the concepts of "emergency 
action" and "unforeseen and unexpected" developmen ts.  The United States contends that China's 
theory is based on the mistaken as sumption that the basic principles th at are applicable to an action 
taken under the Safeguards Agreement  are also applicable to the tr ansitional mechanism specified in 
the Protocol.  The United States asserts that, unlike the provisions of Article XIX of the GATT 1994 and the provisions of the Safeguards Agreement , nothing in the Protocol indicates that the Protocol's 
transitional measure was intended to be an "emergency action"
241 or that the rapid increase in imports 
from China must be the result of "unforeseen developments".242  The United States submits that, 
because similar terms and language were not incl uded in Paragraph 16 of the Protocol, it is 
inappropriate to conclude, as China does, that  the Appellate Body's statements about the 
"extraordinary" nature of a globa l safeguard apply to the transitional mechanism set forth in the 
Protocol. 
(b) Evaluation by the Panel 
7.136  The WTO Agreement does not prescribe any particular manner in which a Member's WTO 
obligations and commitments must be transposed into  its domestic law.  Accordingly, there is nothing 
to prevent a Member from including in its domestic  law definitions of terms used in the WTO 
Agreement.  Although a Member's decision to defi ne WTO terms runs the risk that the resultant 
definition may not be WTO-consistent, WTO-inconsis tency must not be presumed.  Accordingly, the 
onus is on China to establish that the Section 421 definition of "significant cause" as "contributes significantly" is inconsistent with the causation stan dard set forth in Paragraph 16.4 of the Protocol. 
                                                     
 
240 China's First Written Submission, paras. 191-193. 
241 GATT 1994, Article XIX:1(a);  Safeguards Agreement , Article 11.1(a). 
242 GATT 1994, Article XIX:1(a).   WT/DS399/R 
   Page 47  
 
  7.137  China seeks to meet its burden by invoking dictiona ry definitions that allegedly show that the 
term "contribute" is less stringent than "cause".  In particular, China submits that the ordinary 
meaning of "cause" is "that which produces an effect or consequence"
243 or "something that brings 
about an effect or a result"244, whereas the ordinary meaning of "contribute" is merely "to play a part 
in the achievement of a result"245, or "to play a significant part in bringing about an end or result"246, 
which is a weaker notion than that of "cause".  Thus, China contends that a cause "produces" or 
"brings about" the consequence, and does not me rely "contribute to" or "play a part" in its 
occurrence.247   
7.138  Looking exclusively at these dictionary defin itions, one might legitimately conclude that a 
"contribution" has a lesser causal effect than a " cause".  In particular, implicit in the definitional 
differences invoked by China is the notion that the term "contribute" allows for multiple factors to 
each "play a part in" bringing about a result, whereas "cause" means that the tr iggering event is in and 
of itself capable of bringing about, or producing, that  result.  In other words, a "cause" is capable of 
producing or bringing about a result on its own, wh ereas a "contribution" would only ever play a part 
in the occurrence of that result, along with other contributing factors. 
7.139  We recall, though, that the terms of the Protocol mu st be interpreted in c ontext.  Of particular 
contextual importance in this regard is the fact  that, according to Paragraph 16.4 of the Protocol, 
rapidly increasing imports need only be "a" significan t cause of market disruption.  In other words, 
the imports need not be the sole cause of the market disruption.248  We note that the definitions cited 
by China do not appear to leave room for multiple  causes.  In particular, China invokes The Shorter 
Oxford English Dictionary definition of the noun "cause" as " that which produces an effect or 
consequence", and the verb "cause" as "to be the cause of, effect, bring about".249  These definitions 
emphasise the singularity of the causal factor.  The same emphasis on the singularity of cause is found 
in the French and Spanish definitions advanced by China.  China notes that the French verb "causer" 
means "to cause", and is further defined as "to be at the origin of something, to have something as an 
effect".  Regarding the Spanish version of Paragr aph 16.4, China asserts that, in Spanish, the verb 
"causar" means "to cause", and is further defined as "when referring to a cause:  produce its effect" as 
well as "[t]o be the cause, the reason and motive of the occurrence of something".250  China further 
asserts that, "[n]otably, "causa" is defined as "cause"251 as well as that "which is considered as 
fundamental to or the origin  of something".  Thus, both the French and Spanish definitions invoked 
by China suggest that an even t has a single cause.  In addition, both the French and Spanish 
definitions refer to the notion of "origin".  Since an event may only have one origin, the singular 
nature of the causal factor inherent in the de finitions proposed by China is again emphasised. 
7.140  In the context of Paragraph 16.4, which refers to " a significant cause", we consider that 
Members must be entitled to interpret the term "cause " in a way that allows for the possibility that the 
                                                      
243 Shorter Oxford English Dictionary, Vol. 1, at 365 (2007 ed.).   
244 Webster's Ninth New Collegiate Dictionary, at 217 (1986 ed.). 
245 Shorter Oxford English Dictionary, Vol. 1, at 509 (2007 ed.).   
246 Webster's Ninth New Collegiate Dictionary, at 285.   
247 The United States does not contest the dictionary definitions submitted by China. 
248 In its Reply to Question 19 (para. 61) from the Panel, China acknowledges that "the rapidly 
increasing imports need not 'produce' or 'bring about' the injury in and of themselves," but submits that "the 
causal role of subject imports ... requires something significantly more than mere contribution".  This suggests 
that, for China, a contribution could necessarily only ev er be a "mere" contribution.  As explained below ( See 
paras. 7.158 to 7.159), the Section 421 causation standard provides for more than a "mere" contribution. 
249 Shorter Oxford English Dictionary, Vol. 1, at 365-66 (2007 ed.). 
250 Diccionario de la Lengua Espanola, dictionary published by the Real Academia Espanola, available 
at:  http://www.rae.es/rae.html.   
251 The Oxford Spanish Dictionary at 149 (2003 ed.).   WT/DS399/R 
Page 48  
 
  causal factor is one of several causal factors th at together produce or bring market disruption.
252  
Where a Member does so, it is no longer appropriate to refer to each causal factor as "produc[ing] a 
result" (since this implies that each cause has produced the result on its  own, which is not the case).  
Each causal factor might more accurately be said to  play a part in producing that result.  Since the 
ordinary meaning of "contribute" is to "p lay a part" in the achievement of a result"253, it seems 
reasonable that Members might refer to multip le causes each "contributing" to the result. 
7.141  Furthermore, we note that the parties in this  case use the terms "cause" and "causal link" 
synonymously.254  In the particular context of the Protoc ol, we agree with this approach.  While 
Paragraphs 16.1 and 16.4 use the term "cause", para graph 246(c) of the Working Party Report refers 
to the concept of "causal link": 
In determining whether market disruption existed, including the causal link between 
imports which were increasing rapidly, eith er absolutely or relatively, and any 
material injury or threat of material inju ry to the domestic industry, the competent 
authorities would consider objective factors, including (1) the volume of imports of the product which was the subject of the investigation; (2) the effect of imports of 
such product on prices in the importing WTO Member's market for the like or 
directly competitive products; (3) the eff ect of imports of such product on the 
domestic industry producing like or di rectly competitive products. (emphasis 
supplied) 
7.142  According to paragraph 246(c), therefore, the finding of "cause" necessitated by 
Paragraph 16.4 might properly be re ferred to as a finding of "causal link".  Thus, a finding that rapidly 
increasing imports are a (significant) cause of material injury is equivalent to a finding that there is a 
(significant) causal link between the imports and th e injury.  Regarding the meaning of the term 
"causal link" (in the first sentence of Article 4.2(b) of the Safeguards Agreement ), the Appellate Body 
found in US – Wheat Gluten  that: 
The word "link " indicates simply that incr eased imports have played a part in, or 
contributed to, bringing about serious injury so that there is a causal "connection" 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.
255 
7.143  The Appellate Body further explained that the "contribution must be sufficiently clear as to 
establish the existence of 'the causal link' required".256  In other words, the Appellate Body finds that 
the existence of a causal link might be established on the basis of a (sufficiently clear) contribution.  
Since in the context of the Protocol the terms "cause" and "causal link" may properly be used synonymously, this guidance from the Appellate Body provides support – in the context of a provision that envisages a multiplicity of causal factors – for interpreting "cause" as "contribute to 
bring about". 
                                                     
 
252 Although a Member might choose to interpret the term "cause" to mean sole cause, Paragraph 16 of 
the Protocol does not require them to do so. 
253 China's First Written Submission, para. 198. 
254 China's First Written Submission, para. 180, and United States' First Written Submission, para. 172. 
255 Appellate Body Report, US – Wheat Gluten , para. 67. 
256 Appellate Body Report, US – Wheat Gluten , para. 67.   WT/DS399/R 
   Page 49  
 
  7.144  In response to Question 5 from the Panel, Chin a seeks to play down the relevance of the 
abovementioned finding by the Appella te Body (which concerned the first sentence of Article 4.2(b) 
of the Safeguards Agreement ) by arguing that the ordinary meaning of the term "link" does not 
include the notion of "contribute to": 
China strongly doubts that the Appellate B ody was focused here on the particular 
meaning of the word "contribute" and how this might relate to other possible 
formulations in relation to causation.  Nor,  in all likelihood, was the Appellate Body 
attempting to set in stone a definition of the term "link" for all future cases.  More likely, the Appellate Body was concerned with setting out a reasoned explanation in 
the context of the particular circumstances of US - Wheat Gluten , as well as providing 
some useful guidance for the future.   
China notes the ordinary meaning of the word  "link," as a noun, is "a connecting part" 
or "a means of connection."  "Link" as a verb means "to connect or join (two things or one thing to another) with or as with a link."  The notion of "contribute to" is simply not part of the ordinary meaning of "link."
257 
7.145  We are not persuaded by China's reading of the abovementioned finding by the Appellate 
Body in US – Wheat Gluten , or its suggestion that the Appellate Body could not have indicated that 
the term "link" might denote "contribution", for we are in no doubt that the Appellate Body was using 
the term "contribute" to denote the "connection" or "n exus" of the imports to the cause of the injury.  
This is abundantly clear from the Appellate Body's fi nding that "[t]he word 'link' indicates simply that 
increased imports have played a part in, or contribu ted to, bringing about serious injury".  In other 
words, it is through the (causal) link that imports contribute to causing, i.e., bringing about, the injury. 
7.146  Thus, in the context of a provision that envi sages that there might be more than one 
"significant cause" of market disruption, it is not inconsistent with Paragr aph 16.4 to interpret the 
ordinary meaning of the term "cause" as "contribute". 
7.147  Before concluding, we recall that the term "cau se" should also be interpreted in the light of 
the object and purpose of the treaty.  In this regard, China submits that Paragraph 16 of the Protocol is 
an exceptional, country-specific measure desi gned to address unforeseen surges in imports from 
China – an "escape valve" to be used only in em ergency situations as an extraordinary remedy.258  
China contends that Paragraph 16 should therefore be  given a narrow constructi on, to differentiate the 
higher causation standard of Paragraph 16 from the lower causation standard applied in the 
Safeguards Agreement.  
7.148  We note that the Appellate Body in US – Shrimp stated that: 
A treaty interpreter must begin with, and focus upon, the text of the particular 
provision to be interpreted.  It is in the wo rds constituting that provision, read in their 
context, that the object and purpose of the states parties to the treaty must first be 
                                                      
257 China's Second Written Submission, paras. 149–150, footnote omitted. 
258 We note the U.S. argument that because "the Protocol is an integr al part of the WTO Agreement, as 
such, it does not have its own 'object and purpose', in the sense of Article 31(1) of the Vienna Convention ". 
(U.S. First Written Submission, para. 66).  We disagree.  Even though the Agreement on Agriculture and SCM 
Agreement  are both "integral parts" of the WTO Agreement (W TO Agreement, Article II:2), the Appellate Body 
has on various occasions referred to the object  and purpose of these specific Agreements ( See, for example, 
Appellate Body Report on Canada – Autos , paras. 138 and 142, and Appellate Body Report on US – Upland 
Cotton , paras. 613 and 623.  We note that, in the latter cas e, even the United States referred to the object and 
purpose of the Agreement on Agriculture , as distinct from the WTO Agreement ( See para. 68)). WT/DS399/R 
Page 50  
 
  sought.  Where the meaning imparted by the text itself is equivocal or inconclusive, 
or where confirmation of the correctness of the reading of the text itself is desired, 
light from the object and purpose of the tr eaty as a whole may usefully be sought.
259 
7.149  With regard to the claim that Paragraph 16 is an exceptional measure to be used only in 
emergency situations, the Panel notes that whether it is to be regarded as an emergency action or not 
the words of Article 16 still have to be interp reted in accordance with Articles 31 and 32 of the Vienna 
Convention .  
7.150  To determine whether the Section 421 causati on standard is inconsistent with the 
United States' WTO obligations, we must establish what that causation standard actually means.  It is well established that, when ascertaining the meaning of domestic legislation, a panel might refer to 
evidence of the consistent application of that law.
260  In its defence, the United States has produced 
evidence to the effect that the "c ontributes significantly" definition is equivalent to the Protocol's 
"significant cause" standard because of consistent USITC practice requiring the demonstration of a "direct and significant causal link" between the rapi dly increasing imports and the market disruption.  
In particular, the United States refers to the following extract from the USITC Report in the Tyres  
case: 
The third statutory criterion for finding market disruption is whether the rapidly 
increasing imports are a significant cause of material injury or threat of material injury. The term "significant cause" is de fined in section 421(c)(2) of the Trade Act 
of 1974 to mean "a cause which contributes si gnificantly to the material injury of the 
domestic industry, but need not be equal to or greater than any other cause." The 
legislative history of section 406 describes the significant cause standard as follows:  
Under this standard, the imports subj ect to investigation need not be 
the leading or most important cause of injury or more important than (or even equal to) any other cause, so long as a direct and significant causal link exists. Thus, if the ITC finds that there are several causes 
of the material injury, it should seek to determine whether the 
imports subject to investigation ar e a significant contributing cause of 
the injury or are such a subordinate, subsidiary or unimportant cause as to eliminate a direct and significant causal relationship.
261 
7.151  In addition, the United States refers to tw o additional Section 421 investigations:  Pedestal 
Actuators From China  and Certain Ductile Iron Waterworks Fittings From China .  In both cases, the 
USITC made the same reference to the legislative hi story of Section 406.  In our view, these three 
cases are sufficient to show that the USITC consis tently interprets the "contributes significantly" 
standard of Section 421 as requiring a "direct and significant causal link", which is essentially equivalent to a showing of "significant cause".
262   
7.152  Although the fact that the USITC consistently interprets the "contributes significantly" 
standard of Section 421 as requiring a "direct and significant causal link" is not necessarily 
                                                      
259 Appellate Body Report, US – Shrimp ,  para. 114. 
260 See, for example, Appellate Body Report, US – Carbon Steel , para. 157. 
261 USITC Report, page 18. 
262 China has not contested that a showing of "direct and significant causal link" would meet the 
Paragraph 16.4 "significant cause" standard.  Indeed, China argued in para. 40 of its oral statement at the first meeting that "this dispute would be very different" with respect to its "as such" claim if "the statute required a 
'direct and significant causal link', as  does the USITC determination".   WT/DS399/R 
   Page 51  
 
  determinative of the issue at hand, it does support a finding that the Section 421 "contributes 
significantly" standard is no less stringent than  the Paragraph 16.4 "significant cause" standard. 
7.153  China argues that the above extracts from the US ITC determinations relate to the legislative 
history of Section 406, rather than Section 421.  The USITC references the legislative history of 
Section 406 because that contains the same stat utory definition of "sig nificant cause" (i.e., 
"contributes significantly") as provided for in Se ction 421.  The evidence presented by the 
United States relates to the consistent applica tion of the "contributes significantly" standard in 
Section 421 determinations, not in Section 406 determ inations. In these circumstances, we consider it 
appropriate to take into account the legislative hi story of the Section 406 "contributes significantly" 
standard. 
3. Whether the statute further lowers the Paragr aph 16.4 causation standard by allowing 
imports to be a less important factor than any other single cause, no matter how minor 
that other cause might be 
7.154  We recall that Section 421 allows a determ ination that increased imports constitute a 
"significant cause" of material injury even though thei r causal effect is not "equal to or greater than" 
that of any other cause. 
(a) Arguments of the parties 
7.155  China  claims that, in circumstances where ther e are also other causes of injury to the 
domestic industry, the "significance" of the incr eased imports as a causal factor should be assessed 
relative to those other causes, rather  than in a vacuum.  According to China, the core meanings of 
"significant" – important, notable, consequential
263 – all include the notion of significance relative to 
other matters, in this case other causes.  Thus, Ch ina claims that Paragraph 16.4 of the Protocol 
prevents increased imports from being treated as a "significant cause" if the causal effect of the 
increased imports is relatively less important than th e causal effect of some other factor, or if the 
increased imports play a relatively small role in th e market.  China submits that the U.S. statutory 
definition is inconsistent with Paragraph 16.4 of th e Protocol because it fails to provide for any such 
relative assessment between the causal effect of subject imports and other causes of market disruption.  
China claims that, by allowing imports that are a le ss important factor than any other single cause, no 
matter how minor that other cause might be, to still qualify as a "significant cause", the U.S. statutory definition further lowers the causation standard set forth in Paragraph 16.4.  For this reason, China 
refers to the fact that the Section 421 "contribut es significantly" standard requires no more than a 
"mere"
264 contribution. 
7.156  The United States denies that Paragraph 16.4 of the Protocol requires the weighing of causal 
factors, or precludes a finding that increased imports  are a "significant cause" of material injury 
simply because the causal effect of such increased im ports may be less than some other factor(s).  The 
United States asserts that Paragraph 16.4 refers to "a significant cause", indicating that increased 
imports might be one of several "significant causes" of injury to the domestic industry. 
7.157  The United States further submits that the USIT C stated in the underlying determination that 
it may not find that imports from China are a "significant cause" of material injury if those imports are such an "unimportant," subordinate," or "subsidiary" cause of injury that there is no "direct and 
                                                     
 
263 See Panel Report, US – Upland Cotton , para. 7.1325 ("The ordinary meaning of the term 'significant 
is 'important; notable … consequential.  The term 's ignificant' therefore connotes something that can be 
characterized as important, notable or consequential"). 
264 See, for example, China's Second Written Submission, para. 137. WT/DS399/R 
Page 52  
 
  significant causal link" between the imports and material injury or threat.
265  Instead, as the USITC 
has consistently stated, the USITC must find a "direct and significant causal link" between imports from China and material injury or threat.
266  The United States asserts that such an interpretation 
precludes the possibility that increased imports might be treated as a "significant cause" when they do 
not, in fact, have the requisite degree of causal effect. 
(b) Evaluation by the Panel 
7.158  We first consider China's argument that the core meanings of "significant" – important, 
notable, consequential267 – all include the notion of significance relative to other matters (in this case 
other causes).268  While we agree with China (and the United States269) that the ordinary meaning of 
the word "significant" is "important", "notable", "consequential"270, we disagree with China's 
argument that these meanings must include the notion of significance relative to other causal factors.  
We note that China has provided no evidence or explana tion in support of this argument.  In our view, 
rapidly increasing imports might properly constitute  a significant cause of market disruption even 
though their causal role is not as significant as other factors. 
7.159  Regarding China's argument that Section 421 impe rmissibly allows an investigating authority 
to determine that even a minimal cause, which can be less than any other cause, could still be 
considered as "a significant cause," we consider that  this possibility is excluded by the plain text of 
Section 421.  The statutory definition at issue in this claim provides that rapidly increasing imports must "contribute significantly" to the market disrup tion.  Since the relevant contribution must be 
"significant", i.e., important, or notable, we see no basis for concl uding that only a "minimal", or 
"mere", contribution might suffice.
271  Furthermore, we have already explained that, in the context of 
Paragraph 16.4 of the Protocol, the term "cause" ma y be interpreted to mean "contributes".  Thus, if 
rapidly increasing imports "contribute significantly" to  the market disruption, they will necessarily be 
a "significant cause" of that market disruption for the purpose of Paragraph 16.4 of the Protocol.     
                                                      
265 USITC Report, page 18. 
266 The United States refers, by way of an example, to page 18 of the USITC Report. 
267 See Panel Report, US – Upland Cotton , para. 7.1325 ("The ordinary meaning of the term 'significant 
is 'important; notable … consequential.  The term 's ignificant' therefore connotes something that can be 
characterized as important, notable or consequential"). 
268 China challenges the statement in Section 421 that imports "need not be equal to or greater than any 
other cause".  Inherent in this challenge seems to be the notion that imports might only satisfy the "significant cause" standard if their impact is equal to or greater th an any other cause.  This is reflected in para. 155 of 
China's Second Written Submission, where China asserts that "[i]t is hard to see how a minor cause – one 
indeed that is less important than any other cause – can be properly considered to be 'significant'."  This statement is also made in para. 38 of the Oral Statement of China at th e First Meeting.  In our view, this 
argument is at odds with the plain language of Paragraph 16.4, which requires only that rapidly increasing 
imports be "a" significant cause of market disruption.  If the drafters of Paragraph 16.4 had intended that rapidly increasing imports should be "the most" significant cause of market disruption, they would have drafted 
Paragraph 16.4 accordingly. 
269 See, for example, the United States' First Written Submission, para. 179. 
270 The New Shorter Oxford English Dictionary, (1993). 
271 We note China's argument that Paragraph 16.4 focu ses on the nature of the cause, such that "the 
obligation to find imports from China to be a 'significant cause' requires more than a mere contribution", 
whereas Paragraph 16.1 and Article 2.1 of the Safeguards Agreement focus on the (causal) link, rather than the 
nature of the cause itself (China's Reply to Question 16, paras. 61 and 63).  While we do not necessarily agree with China's interpretatio n of Article 2.1 of the Safeguards Agreement  and Paragraph 16.1 of the Protocol, we 
do agree that "significant cause" re quires more than a mere contribution.   WT/DS399/R 
   Page 53  
 
  4. Conclusion 
7.160  For all of the above reasons, we do not co nsider that the Section 421 "contributes 
significantly" standard requires the United States to  establish causation in a manner inconsistent with 
Paragraph 16 of the Protocol. 
D. 
WHETHER THE USITC PROPERLY FOUND THAT  RAPIDLY INCREASING IMPORTS WERE A 
SIGNIFICANT CAUSE OF MATERIAL INJURY  
7.161  China claims that the USITC failed to properly demonstrate that subject imports were a 
"significant cause" of market disruption, contrary  to Paragraphs 16.1 and 16.4 of the Protocol.  
China's claim is based on three principal arguments:  the USITC failed to show that the conditions of 
competition between subject imports and the domes tic product support a finding of causation;  the 
USITC failed to establish any temporal correlati on between rapidly increasing subject imports and 
material injury to the domestic industry;  an d the USITC failed to address alternative causes of 
material injury to the domestic industry, in the sense that the USITC failed to ensure that injury 
caused by other factors was not improperly attributed to subject imports. 
7.162  Before turning to the substance of the USIT C's causation analysis, though, we first address 
disagreements between the parties re garding the nature of the causation analysis actually required by 
Paragraph 16 of the Protocol.   
1. The nature of the analysis required by Paragraph 16 of the Protocol 
(a) Conditions of competition / correlation 
7.163  The parties disagree as to whether the USITC was required to analyse the conditions of 
competition and correlation.  China says it was.  The United States says it was not. 
(i) Arguments of the parties 
7.164  China submits that WTO case law has established that the conditions of competition must 
always be analysed under the Safeguards Agreement , since Article 2.1 of the Safeguards Agreement  
refers to a product being imported in increased quantities and "under such conditions" as to cause 
serious injury.  China argues that Paragraph 16.1 of the Protocol contains the same language ("under 
such conditions") as Article 2.1 of the Safeguards Agreement .  China contends that while a conditions 
of competition assessment is required for global saf eguards, it is especially indispensable under the 
more exacting causation standard of the Protocol.  China submits that this is particularly the case 
where the relevant market encompasses a broad range of products and market se gments, as in the U.S. 
tyre market.   
7.165  China claims that an analysis of correlation is also required under Paragraph 16 of the 
Protocol.  China asserts that WTO case law highlight s the central role played by correlation in the 
context of establishing causation under the Safeguards Agreement .  China refers in particular to the 
finding of the panel in Argentina – Footwear (EC) (affirmed by the Appellate Body) that: 
In practical terms, we believe therefore that  this provision means that if causation is 
present, an increase in imports normally should coincide with a decline in the relevant 
injury factors. While such a coincidence by itself cannot prove causation, its absence WT/DS399/R 
Page 54  
 
  would create serious doubts as to the existence of a causal link, and would require a 
very compelling analysis of  why causation still is present.
272 
7.166  China submits that such case law is relevant to  the Protocol, and that the correlation analysis 
is even more demanding under the Protocol than under the Safeguards Agreement , given the allegedly 
more onerous "significant cause" causation standard provided for in the Protocol. 
7.167  The United States  denies, as a legal matter, that an investigating authority is required to 
analyse the conditions of competition under Paragra ph 16 of the Protocol.  The United States notes in 
this regard that Article 2.1 of the Safeguards Agreement  provides that a Member may impose a global 
safeguard only if it has determined that a 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".  (Emphasis added).  The United States 
asserts, by way of comparison, that the language of Pa ragraph 16.1 of the Protocol states that a need 
for a transitional measure may arise in cases wher e products from China are being imported "in such 
increased quantities or  under such conditions as to cause or th reaten to cause market disruption". 
(Emphasis added).  The United States s ubmits that, unlike the language of the Safeguards Agreement  
which specifically requires an an alysis of increased quantities and the conditions under which imports 
are causing serious injury, the Protocol indicates that increased quantities alone or conditions alone 
may cause market disruption.  The United States fu rther submits that the Protocol's definition of 
market disruption in Paragraph 16.4 does not require the investigating authority to examine conditions 
of competition to determine if market disruption exists, but directs it only to consider import volumes, their price effects, and the effect of imports on the domestic industry. 
7.168  The United States further asserts that the Prot ocol does not indicate that the competent 
authority should assess whether there is a coincide nce of trends between increasing imports and the 
declines in the condition of the industry analysis , or suggest that an authority must provide a 
"compelling analysis of why causation is still present"  if such a coincidence does not exist, as alleged 
by China.  According to the Unite d States, therefore, China has no  basis for asserting that the USITC 
was required to perform a "coincidence of trends" analys is in its determination, or that it must provide 
"a compelling analysis of why causation is still present" if that coincidence does not exist. 
(ii) Evaluation by the Panel 
7.169  The first sentence of Paragraph 16.4
273 requires the importing Member to determine whether 
imports cause market disruption, i.e., whether impor ts (that are increasing rapidly) are a "significant 
cause" of material injury, or threat thereof, to the domestic industry.  The first sentence of 
Paragraph 16.4 does not require that causation be  established on the basis of any particular 
methodology.  In addition, the second sentence of Pa ragraph 16.4 requires that "objective factors " be 
considered in determining the existence of market disruption, including causation:   
In determining if market disruption exis ts, the affected Member shall consider 
objective factors, including the volume of such imports, the effect of imports on 
prices for like or directly competitive articles, and the effect of imports on the 
domestic industry producing like or directly competitive products. 
7.170  Thus, Paragraph 16.4 does not require the im porting Member to apply any particular 
methodology for establishing market disruption, including causation.  The second sentence of 
                                                      
272 Panel Report, Argentina – Footwear (EC) , para. 8.238;  Appellate Body Report, Argentina – 
Footwear (EC) , paras. 144-145. 
273 See paras. 7.33 to 7.37.   WT/DS399/R 
   Page 55  
 
  Paragraph 16.4 simply requires the consideration of objective factors.  This suggests that an 
investigating authority is free to choose any me thodology to establish causation, provided it addresses 
the objective factors set forth in Paragraph 16.4, and provided in particular it is sufficient to establish 
that rapidly increasing imports are a "significant cause" of material injury.  We believe that an analysis of the conditions of competition
274 and correlation will often be  relevant, and may on the 
facts of a given case prove essential, to a consideration of  "significant cause".  Indeed, it might be 
very difficult to establish "significant cause"  without performing these types of analyses.275  Our task 
is to perform an objective assessment of the USIT C's overall determination of "significant cause," in 
light of the arguments of the parties.  The USITC did rely on analyses of the conditions of competition 
and correlation in determining that  rapidly increasing subject imports were a "significant cause" of 
material injury.  Accordingly, to the extent the arguments of the parties require, we shall examine 
those analyses as part of our assessment of the US ITC's overall determination of "significant cause". 
(b) Non-attribution 
7.171  The parties disagree as to the extent to which an importing Member is required to assess the 
injurious effects (on the domestic industry) of fact ors other than increased imports, and ensure that 
injury caused by such other factors is not improperly attributed to increased imports.  Such assessment 
is generally referred to as "non-attribution". 
(i) Arguments of the parties 
7.172  China  attributes the injury suffered by the U.S. domestic industry to a number of alternative 
factors, including changes in demand and the domes tic industry's business strategy.  China contends 
that the USITC ignored or failed to assess fully the se other causes of injury, or to establish that the 
injury caused by such ot her factors was not improperly attributed to the subject imports.  China 
submits that it is impossible to make the requisite  determination of causati on without considering the 
role played by causes of injury other than subject im ports.  China asserts that it would be inconsistent 
with the object and purpose of Paragraph 16 for a Member to apply a safeguard measure based on 
injury caused by factors other than imports from Ch ina.  China acknowledges that there is no explicit 
"non-attribution" requirement in Paragraph 16, but s ubmits that this requirement is in fact embedded 
in the ordinary meaning of the phrase "causal li nk", which the USITC was required to examine by 
virtue of paragraph 246(c) of the Working Party Re port (and which is found in the first sentence of 
Article 4.2(b) of the Safeguards Agreement ).  Reading Paragraph 16 of the Protocol in light of 
paragraph 246(c) of the Working Party Report, Chin a refers to a finding by the Appellate Body in 
US – Lamb  which, it alleges, explains how a "cau sal link" should be established under the Safeguards 
Agreement .  China understands the Appellate Body to ha ve found that, to establish a "causal link" for 
                                                      
274 We recall that, in the light of the French and Sp anish texts and in accordance with Article 33(4) of 
the Vienna Convention , the word "or" in the first sentence of Paragraph 16.1 is to be taken to include "and" ( See 
note 81 above). 
275 In its Reply to Question 25 from the Panel, the United States has indicated that "it is possible for a 
competent authority to evaluate the 'effect of imports on  prices for like or directly competitive articles' and the 
'effect of imports on the domestic indus try producing like or dir ectly competitive products,' as the terms are used 
in paragraph 16.4, without performing a 'coincidence of trends' analysis and/or performing a detailed assessment 
of all possible conditions of competition in the market.  For example, a competent authority could reasonably 
choose to assess the effects of imports on prices and the industry by performing an economic modelling 
exercise, such as a static equilibrium or a linear regre ssion modelling analysis".  We are not persuaded by this 
argument, since a static equilibrium analysis generally involves an advan ced analysis of the conditions of 
competition, and a linear regression modelling analysis ge nerally involves an advanced analysis of correlation 
over an extended period of time (i.e., "regression" back in time).  In our view, therefore, the United States' Reply to Question 25 does not really explain how causation might be established without some form of conditions of 
competition and/or correlation analysis. WT/DS399/R 
Page 56  
 
  the purpose of Article 4.2(b) of the Safeguards Agreement , an investigating authority had to establish 
a "genuine and substantial relationship of cause and effect" between the increased imports and the 
serious injury suffered by the domestic industry.  China further understands the Appellate Body to 
have found that, in order to establish the "genuine a nd substantial relationship of cause and effect", an 
investigating authority must "distinguish[] and sep arate[]" the injurious effects caused by all the 
different causal factors.  China therefore submits that  an investigating authority cannot conclude that a 
"causal link" exists without first assessing whethe r other factors are actually responsible, or better 
explain the data.  However, China does not clai m that, under Paragraph 16, the authority must 
perform the same non-attribution analysis for other factors in the market that it would in a global 
safeguard proceeding.
276  
7.173  The United States  contends that China's argument regarding the need to consider other 
causes, and ensure that their injurious effects are not attributed to rapidly increasing imports, is legally 
mistaken because it is premised on analytical sta ndards developed by the Appellate Body under the 
Safeguards Agreement , which have no basis in the text of the Protocol.  The United States submits 
that China's argument disregards the actual text of the Protocol, and the context and scope of the 
Appellate Body's findings under the Safeguards Agreement .  The United States asserts that, since the 
negotiators of the Protocol were presumably aware that the Safeguards Agreement  and the AD 
Agreement  contained "non-attribution" language but c hose not to include any "non-attribution" 
requirement in the causation provisions of the Protoc ol, the Panel should assume that such an analysis 
was not intended to be required.  The United States submits that it is well-established that, under the 
principle of inclusio unius est exclusio alterius , when a treaty includes a term or requirement in one 
part but excludes that term or requirement from anot her part, the absence of that term or requirement 
indicates that the drafters intentionally chose not to  include that term or requirement in the provision 
from which it is absent.  That being said, the United States does accept that some form of non-
attribution analysis is required – albeit not the non- attribution imposed by the Appellate Body in the 
context of Article 4.2(b) of the Safeguards Agreement .  According to the United States, "a competent 
authority may use any reasonable methodology to co nsider such other factors when assessing whether 
market disruption exists.277  The United States submits that a comp etent authority's need to address the 
effects of other possibly injurious factors will depend on the facts a nd circumstances of the particular 
case.  The United States posits three possibilities in th is regard:  in some cases, another factor might 
arguably be so significant a cause of injury to the industry that the competent authority will need to 
perform a detailed and reasoned explanation of the e ffects of that factor, to ascertain whether that 
factor severs the apparent causal link between imports  and material injury;  in other cases, the factor 
may be contributing to injury in a considerably l ess significant fashion.  In those circumstances, the 
competent authority could reasonably reference the factor and indicate in a reasonable fashion why 
the factor does not explain the inju ry caused to the pertin ent industry;  and, in still other cases, the 
authority could simply find that there was no ev idence establishing that a particular factor caused 
injury to the industry, or that the parties have not presented sufficient evidence to establish that the 
factor causes any injury at all.  In such cases, the authority would have little or nothing to investigate 
and no need to analyze the effects of the factor. 
(ii) Evaluation by the Panel 
7.174  While at the outset of this proceeding, it appear ed that the parties disagreed fundamentally on 
whether an investigating authority was require d by Paragraph 16 to perform a non-attribution 
                                                      
276 China's Second Written Submission, para. 309, footnote omitted. 
277 U.S. First Written Submission, para. 299.  See also U.S. Reply to Question 29 from the Panel.   WT/DS399/R 
   Page 57  
 
  analysis, by the end it was clear that the parties agr eed that some form of non-attribution analysis may 
be required in certain circumstances.
278   
7.175  As to the nature of the non-attribution analys is that may be require d under Paragraph 16 of 
the Protocol, we begin by considering the fo llowing finding of the Appellate Body in US – Lamb , 
which China relied on in its arguments: 
In a situation where several factors  are causing injury "at the same time", a final 
determination about the injurious effects caused by  increased imports   can only be 
made if the injurious effects caused by all the different causal factors are distinguished and separated.  Otherwise,  any conclusion based exclusively on an 
assessment of only one of the causal factors – increased imports – rests on an 
uncertain foundation, because it  assumes  that the other causal factors are  not  
causing the injury which has been  ascribed to increased imports.
279 
7.176  Although the reasoning in US – Lamb was based on the requirement of non-attribution in 
Article 4.2(b) of the Safeguards Agreement  and thus is not directly app licable here, this does not mean 
that the obligation to demonstrate that rapidly in creasing imports are a significant cause of material 
injury should not entail some form of analysis of the injurious effects of other factors.  An analogy 
can be drawn with the approach in US – Upland Cotton , where notwithstanding the absence of non-
attribution language in Articles 5 and 6.3 of the SCM Agreement , both the panel and Appellate Body 
found that (some form of) non-attribution is in herent in establishing the causal link between the 
subsidy and price suppression.  Both took that view that if non-attribution does not occur, one cannot 
establish with certainty that price suppression was the effect of the subsidy (as opposed to some other 
injurious factor). 
7.177  Thus, we consider that the causal link between rapidly increasing imports and material injury 
must be assessed "within the context of other possible causal factors".280  In particular, a finding of 
causation for the purpose of Paragraph 16.4 should only be made if it is properly established that 
rapidly increasing imports have injurious effects th at cannot be explained by the existence of other 
causal factors.  We shall evaluate the USITC' s assessment of alternative causes in this light. 
7.178  We now turn to the substance of China's cl aims against the USITC's finding of significant 
cause, beginning with China's claims against the US ITC's assessment of the conditions of competition 
between subject imports and domestic tyres. 
2. The conditions of competition between subject imports and domestic tyres 
7.179  China  claims that the USITC's causation analys is was based on a misinterpretation and 
distortion of the conditions of competition, such  that the USITC failed to understand the attenuated 
nature of competition between subject imports from China and domestic tyres.281  China claims that 
                                                      
278 See, for example, para. 309 of China's Second Written Submission, and para. 299 of the 
United States' First Written Submission.  China also as serts that non-attribution under the Protocol does not 
require a precise quantification of the injury caused by the various injurious factors ( See China's Reply to 
Question 17(b) from the Panel, para. 71). 
279 Appellate Body Report, US – Lamb , para. 179 (emphasis in original). 
280 Panel Report, US – Upland Cotton , para. 7.1344. 
281 In its First Written Submission, China refers to declining demand and the industry business strategy 
in the context of its claim regarding the USITC's treatme nt of the conditions of competition.  However, China 
only develops its arguments regarding these factors when claiming that the USITC ignored or failed to assess fully other causes of injury (in the context of its non-attribution claim) ( See paras. 219 and 220 of China's First 
Written Submission, which contain cross- references to more detailed arguments set forth in Section V.C.4(a) 
 WT/DS399/R 
Page 58  
 
  the USITC improperly dismissed the fact (a) that  subject imports and domestic tyres focus on 
different market segments in the replacement tyre market, and (b) that U.S. producers have a greater involvement in the OEM sector.  China also clai ms that the USITC (c) improperly concluded from 
questionnaire responses that subject imports  and domestic tyres were substitutable. 
7.180  The United States  denies that there were any flaws in the USITC's analysis of the conditions 
of competition, or that the USITC erred in fi nding that competition between domestic tyres and 
subject imports was not attenuated. 
7.181  We begin by considering China's argument that the USITC dismissed the fact that domestic 
tyres and subject imports focused on differ ent segments of the replacement market. 
(a) Different segments in the replacement market 
(i) Arguments of the parties 
7.182  China  argues that the USITC failed adequately to account for the fact that, within the 
replacement market, Chinese and domestic tyres focus on different market segments.  China contends 
that the largest share of U.S. producer shipments was to the higher-end tier 1, and that the largest 
share of imports from China was to the lower-end tier 3.  China refers to the USITC determination to 
argue that only 18.6 per cent of U.S. producer shipments fell into tier 3.  China also relies on the 
finding by a dissenting commissioner that "U.S. pr oduction is focused on the higher-value, premium 
branded products and the OEM market, segments in which the subject imports are not competing in any meaningful manner".
282  According to China, the most logi cal inference from the record data is 
that any competition between Chinese and domestic ty res in the replacement market is attenuated.  
7.183  China acknowledges that U.S. producers have  not completely exited the tier 2 and tier 3 
categories, and that domestic tyres and subject imports are therefore present in these same 
categories.283  Nevertheless, China contends that the US ITC fails to provide a reasoned or adequate 
explanation why the "vestigial" competition within tiers 2 and 3 rises to the level of "significant 
competition", or permits the further inference that imports from China rise to the level of a "significant cause" of any injury experienced by the U.S. producers.  According to China, subject 
imports are absent from tier 1, which represents appr oximately 70 per cent of the replacement market. 
7.184  The United States  submits that the USITC addressed this issue at length in its determination, 
but found that, although the U.S. replacement market could generally be segmented into three categories, market participants did not ag ree on which tyres fell into which categories.
284  T h e  
United States asserts that market  participants responded to the USITC's supplemental questionnaires 
on this issue with a wide range of estimates of th e share of U.S. producer's and subject Chinese tyre 
shipments falling into each category,  further evidencing the fact that there was no bright line or 
                                                                                                                                                                     
and (b) of China's First Written Submi ssion).  Furthermore, in its Second Wr itten Submission, China only refers 
to demand and industry business strategy as "other causes" of injury (Section IV.C.3(b)).  We therefore do not 
consider it necessary to review these issues in the contex t of the present claim.  At para. 234 of its First Written 
Submission, China also referred to certain "other f actors" allegedly affecting the conditions of competition 
which the USITC allegedly overlooked.  However, China ha s made no specific argument s as to how such "other 
factors" actually affected the conditions of competition,  nor otherwise explained why the USITC should have 
considered such factors in its assessment of the conditions of competition.  There is therefore no basis for us to 
uphold China's claim regard ing these "other factors." 
282 USITC Report, page 52 (dissenting Commissioners). 
283 USITC Report, page 64 (dissenting Commissioners). 
284 USITC Report, page 27.     WT/DS399/R 
   Page 59  
 
  industry-wide accepted dividing line between the three categories.
285  In addition, the United States 
contends that the information on the record did not support China's argument that there was little 
competition between subject tyres and U.S. tyres in  these categories, as the re cord showed that both 
subject tyres and U.S. produced tyres competed in all three segments of the market in 2008, albeit to 
varying degrees.  The USITC found that subject im ports and the domestic product were both present 
in category one, and that both had a signi ficant presence in categories two and three.286  T h e  
United States asserts that, in 2008, 18.6 per cent of U.S. producers' U.S. shipments fell into category 
three, the category in which subject tyres were most  heavily concentrated, and the record showed that 
there was also a significant presence of both subject imports and domestically produced tyres in category two.
287  The United States contends that, given that the record showed that there was 
significant competition between subject imports and U.S.  tyres in the market sectors in which subject 
imports were supposedly most heavily concentrated , the USITC reasonably rejected the claim that 
competition between subject and U.S. tyres was attenuated.  The United States asserts that it is important to recall that the domestic industry shippe d 18.6 per cent of its shipments into the category 
three sector in 2008, the last year of the period, after the domestic industry had already undertaken 
substantial reductions and plant closures to reduce its  production of low-end tyres (a decision that the 
United States claims was made in reaction to the significant and increasing volume of subject imports).
288 
(ii) Evaluation by the Panel 
7.185  China's argument regarding attenuated competition in the replacement market is based on the 
existence of three distinct tiers, or market segments,  and the fact that domestically produced tyres and 
subject imports were focused on diffe rent market segments.  According to China, domestic tyres were 
confined principally to tier 1, whereas subject impo rts were confined principally to tiers 2 and 3.  
China asserts that the limited presence of domestic tyres in tiers 2 and 3 meant that there was only "vestigial" competition between subject imports  and domestic tyres in those segments. 
7.186  We note that the USITC did not deny the existenc e of different market segments.  Instead, the 
USITC issued a supplemental questionnaire to explor e this issue, and to examine the possibility of 
attenuated competition between U.S.  industry and subject imports.
289  On the basis of the 
supplemental questionnaire responses, the USITC "agr ee[d] with respondents that the record supports 
the view that the U.S. replacement market genera lly can be segmented into three categories", but 
noted that "there was less agre ement [among firms submitting questi onnaire responses] as to which 
tires were included in the two lower-priced categories".290 
7.187  China acknowledges that there is no bright dividi ng line between the three different segments, 
but argues that "[t]he fact that the distinction may not be absolute does not mean that the distinction 
does not exist at all, or that the distinctio n does not produce highly attenuated competition".291  China 
further argues that "[a]lthough responses indicated some differences in opinion concerning the dividing line between tiers 2 and 3, there was not much doubt about the dividing line between tier 1, 
                                                     
 
285 USITC Report, page 27.   
286 USITC Report, page 27.   
287 USITC Report, page 27. 
288 USITC Report, pages 24-25.   
289 USITC Report, page 27. 
290 USITC Report, page 27. 
291 China Second Written Submission, para. 201. WT/DS399/R 
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  on the one hand, and tiers 2 and 3, on the other".
292  According to China, "[t]he record as a whole 
demonstrates a strong distinction between tier 1 tires and tier2/tier 3 tires."293  
7.188  Regarding the differentiation between segments in the replacement market, we note the 
finding by dissenting commissioners that: 
There is consensus among the parties that  the subject tire market is segmented 
between the OEM and replacement markets, and, to some degree, that there are 
categories or tiers within the replacement market.   However, there is no consensus on 
how to define what types of tires are cla ssified in each tier, or what brands are 
classified in each tier wi thin the replacement market .  In addition to examining 
industry publications placed on the record, the Commission issued supplemental 
questionnaires to gather additional in formation about competition among tiers.   The 
record indicated that in general, tier 1 co mprises premium or flagship brands; tier 2 
comprises mid-level, secondary/associate, or smaller producer brands; and tier 3 comprises entry-level or non-recognizable branded tires. 
 The majority of 
questionnaire responses classify private brands as tier 3 tires but are mixed as to 
where to place associate brands, with some responses placing them in tier 2 and 
others placing them in tier 3 .  In addition, market participants do not agree on what 
specific brands are classified in each tier.   Other responses classify tires based on 
price.294 
7.189  This finding indicates that there was no con sensus as to the dividing lines between the 
three market segments in the replacement market (particularly in respect of the differentiation 
between tiers 2 and 3).295  The lack of consensus regarding the dividing lines between the market 
segments is further confirmed by the fact that there were: 
wide variations in the estimates for the shar e of the total U.S. market accounted for by 
each tier. Producers and importers reported  that tier 1 ranged from 21 per cent to 
78 percent of the total U.S. tire market; tie r 2 ranged from 7 percent to 52 percent of 
the market; and tier 3 ranged from 10 percent to 50 percent of the market.296 
7.190  In other words, there was no established market perception of where the boundaries between 
tiers 1, 2 and 3 should lie.  Indeed, five of the 26  respondent importers reported that the replacement 
market could not be segmented297, and one major U.S. producer reported "there was no consensus in 
the marketplace on how to divide the U.S. market".298 
7.191  We recall China's arguments that domestically pr oduced tyres were confined principally to 
tier 1, whereas subject imports were confined principally  to tiers 2 and 3, and that there is "a strong 
distinction between tier 1 tires and tier 2/tier 3 tires".  In this regard, we note the statement in the 
finding by the dissenting commissioners that: 
                                                      
292 China Second Written Submission, para. 200. 
293 China Second Written Submission, para. 201. 
294 USITC Report, page 51 (dissenting commissioners), emphasis supplied. 
295 In its comments on the U.S. Reply to Questi on 46 from the Panel, China asserts that "the 
overwhelming number of companies responding to the questionnaire ... were able to segment the market into 
three tiers" (China's comments on U.S. Reply to Question 46 from the Panel, para. 21).  The point is not whether respondents could segment the repl acement market.  The point is whet her the distinction between those 
segments was so well established that it should necessarily have been taken into account by the USITC. 
296 USITC Report, page 52 (dissenting commissioners). 
297 USITC Report, page V-5. 
298 USITC Report, page V-6.     WT/DS399/R 
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  While not arguing that there is a clear dividing line among each of the tiers, 
respondents , in general, contend that co mpetition is attenuated between domestically 
produced tires which are primarily in tier 1 and 2  tires for the OEM and replacement 
markets, and subject imports which are primarily in tier 3  tires for the replacement 
market.
299 
7.192  This statement, which refers to respondents arguing that domestically produced tyres are 
present in both tiers 1 and 2, is at odds with Chin a's argument that there is "a strong distinction 
between tier 1 tires and tier 2/tier 3 tires", and that do mestic tyres compete primarily in tier 1, whereas 
subject imports compete primarily in tiers 2 and 3.  China's argument is also at odds with the specific 
statement by one Chinese producer duri ng the underlying investigation that: 
while there is certainly a real distinction between Tier 1 and Tier 2 tires, it is often 
useful to group Tier 1 and Tier 2 tires together  in the category of 'higher-end" tires, 
since both of these segments are ones in which brand equity is an important element.  Tier 3 tires, by comparison, are 'economy' or 'low-end' tires.  Brand equity plays essentially no role in the marketing of these tires.
300 
7.193  Thus, while this one Chinese producer notes that th ere is a real distinction between tiers 1 and 
2, that distinction is apparently not so prof ound that tier 1 and tier 2 tyres should not be grouped 
together for the purpose of identifying tyres that compete on the basis of brand equity. 
7.194  Given the uncertainty regarding the basis for di stinguishing between tiers 1, 2 and 3 of the 
replacement market, respondents' views that domesti cally produced tyres were primarily in tiers 1 
and 2 , and one respondent's view that it is in any event "useful to group Tier 1 and Tier 2 tires 
together" for certain purposes, we are not persua ded by China's argument that the USITC was 
required to have found that there is "a strong di stinction between tier 1 tires and tier2/tier 3 tires". 
7.195  Furthermore, even if tiers 2 and 3 could be c linically isolated from tier 1, record evidence 
demonstrates that there remained significant competition between domestic tyres and subject imports in tiers 2 and 3.  In 2008
301, U.S. producers and subject imports accounted for 16 and 27.3 per cent 
respectively of tier 2 shipments, and 18.6 and  42.4 per cent respectively of tier 3 shipments.302  In our 
view, such U.S. industry presence in tiers 2 and 3 suggests significantly more than the merely 
"vestigial" competition alleged by China.303  The fact that this data relates to 2008, after the U.S. 
industry closed plant producing lower-value (i.e., tier 2 and 3) tyres, suggests that the competition 
between the U.S. industry and subject imports would have been even greater earlier in the period of 
investigation.  
7.196  We note China's argument that subject imports we re absent from tier 1, which it estimated to 
represent 70 per cent of the replacement market.  The United States contests China's estimate, on the basis of a press article providing an overview of th e tyre market in 2008.  The United States asserts 
                                                     
 
299 USITC Report, page 52 (dissenting commissioners), emphasis supplied. 
300 Post-Hearing Brief of GITI, page 6, (emphasis supplied). 
301 This data is taken from interested parties' responses to a supplemental questionnaire from the 
USITC.  That supplemental questionnaire only requested data for 2008. 
302 These figures are based on each individual pr oducer's and importer's own estimates of the 
percentage of its own shipments that were shipped in each tier in 2008.  The USITC did not itself make a determination that certain volumes of shipments by individual producers and importers in 2008 should be 
classified as tier 1, 2 or 3 tyres.  Certain producers and importers did not report segment-specific data, as they 
claimed that the market could not be divided into distinct segments. 
303 In absolute numbers, there were more U.S. industry sales in tiers 2 and 3 in 2008 than subject 
imports.  See U.S. Reply to Question 46 from the Panel, para. 24. WT/DS399/R 
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  that tier 1 occupies considerably less than the 70 pe r cent share of the replacement market claimed by 
China.  We do not consider it necessary to enter in to the details of the par ties' arguments regarding 
this issue, as China's estimate of the relative impor tance of tier 1 was made before the United States 
provided the abovementioned supplem ental questionnaire data in response to Question 46 from the 
Panel.  On the basis of that data, we note that tier 1
304 accounted for 51.2 per cent of shipments in the 
replacement market.  Thus, while subject imports from China may only have had a limited presence in 
tier 1305, subject imports had a far greater presence in the remainder of the replacement market where, 
as explained above, domestic tyres were also prevalent. 
7.197  In the circumstances, we conclude that while there was a general understanding that the tyre 
replacement market was divided into 3 tiers, we fi nd no fault with the USITC's conclusion that there 
was no distinct dividing line between these tiers.  Also, while we recognize that there was some 
variation in levels of competition between subj ect imports and domestic products as between tier 1 
and tiers 2 and 3, we find no fault with the USIT C's conclusion that subj ect imports and domestic 
products were not focused in different tiers and do not accept that the USITC should have found that 
there was only "vestigial" competition between them in tiers 2 and 3. 
(b) U.S. producers' focus on the OEM market 
(i) Arguments of the parties 
7.198  China  claims that the USITC failed to accord si gnificance to the U.S. producers' greater 
involvement in the OEM market.  China contends that the USITC incorrectly found that there was 
competition between domestic tyres and subject imports in the OEM market, even though between 17.7 and 23.3 per cent of U.S. producers' shipments were in the OEM market, whereas only 
0.8 to 7.3 per cent of subject imports went to the OEM market.  China further contends that subject 
imports only accounted for 0.2 to 4.9 per cent of  all OEM shipments, such that any competition 
between subject imports and domestic tyres in  the domestic OEM market was negligible. 
7.199  The United States  submits that the USITC recognized that  the vast majority of both imports 
of tyres from China and domestically produced tyres were sold in the replacement market
306, but also 
recognized that both Chinese and U.S. producers sold  and competed in the OEM market as well.307  
The United States asserts that th e USITC record showed that U.S. producer's shipments to the 
OEM market declined steadily during this peri od to a period low of 24.2 million tyres in 2008, 
representing 17.7 per cent of U.S. shipments in that year308, whereas import shipments from China 
increased irregularly from 121,000 tyres in 2004 to a period high 2.3 million tyres in 2008, representing five per cent of imports from China in that year, and 4.9 per cent of the OEM market.
309  
The United States therefore asserts that, in every y ear of the period, there were considerable amounts 
of U.S. tyres and an increasingly significant amount of subject imports in the OEM market, thereby demonstrating that there was competition between  imports from China and domestically produced 
tyres in the OEM market. 
                                                     
 
304 We rely in this regard on the data reported by those producers and importers that did divide the 
market into three segments.   
305 The supplemental questionnaire data indicates that subject imports accounted for less than one per 
cent of those tier 1 shipments. 
306 USITC Report, page 21.  The United States a sserts that the USITC noted that the replacement 
market is by far the more important market for both ty pes of producers, but stated that it was relatively more 
important to Chinese producers since a higher percentage of their shipments went to that market. 
307 USITC Report, page 27. 
308 USITC Report, Tables V-2 and V-3. 
309 USITC Report, Tables V-2 and V-3.     WT/DS399/R 
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  7.200  Regarding China's argument that competiti on between domestic and Chinese tyres in the 
OEM market was "negligible", b ecause Chinese tyres amounted to approximately five per cent of 
shipments to that market in 2008
310, the United States contends that this assertion has no basis in the 
text of the Protocol, or the facts on the record.  Th e United States submits that there is no legal basis 
under the Protocol for the USITC to ignore the impact of increasing volumes of subject imports in the 
OEM market simply because these imports accounted  for only five per cent of shipments in the 
market.  The United States further submits that  the facts on the record showed that while 
U.S. producers' U.S. shipments into  the OEM market declined in ev ery year of the period examined, 
shipments of imports from China increased in ever y year.  The United States asserts that, even 
from 2007 to 2008, when both domestically produced tyres and non-subject import tyres declined in 
that sector, subject imports from China continued to grow, reaching their period high in 2008.  
Furthermore, the United States disagrees that Ch inese imports were virtually absent from the OEM 
market.  The United States asserts that, while this st atement may have been true at the start of the 
period in 2004 when Chinese imports of 121,000 tir es accounted for less than one-tenth of one per 
cent of the market, it was certainly not true in 200 8, when OEM subject import volumes rose to their 
period high of 2.3 million tyres and accounted for approximately 5 per cent of the OEM market.   
(ii) Evaluation by the Panel 
7.201  While it is true that the OEM sector was more important for U.S. producers than for subject 
imports, the proportion of U.S. producer shipments to that sector was decreasing , whereas the 
proportion of subject imports to the OEM sector was increasing .  According to Table V-3 of the 
USITC Determination, the proportion of U.S. pro ducer shipments to the OEM sector decreased 
from 23.3 per cent in 2004 to 17.7 per cent in 2 008.  Over the same period, the proportion of 
OEM subject imports increased from 0.8 per cent to 5 per cent. 
7.202  In absolute terms, the quantity of U.S. producer OEM shipments decreased from 45,351,000 
in 2004 to 24,211,000 in 2008, wh ile the quantity of OEM subject imports increased from 121,000 in 
2004 to 2,281,000 in 2008.  Thus, as the absolute volume of U.S. producer OEM shipments decreased 
by 46.6 per cent, the absolute volume of OEM subject imports increased by 1,785 per cent.  The 
OEM market share of subject imports increased  from 0.2 to 4.9 per cent over the period of 
investigation, while the OEM market share of U.S. producer shipments fell from 69.6 to 51.6 per cent. 
7.203  Furthermore, we recall the USITC's finding that , overall, subject imports in 2008 increased 
substantially while apparent c onsumption fell by 6.9 per cent, and non-subject imports and U.S. 
producer shipments declined.311  This trend was even more pronounced in the OEM market.  As 
apparent consumption in the OEM market fell by 16.4 per cent from 2007 to 2008, the volume of 
OEM subject imports increased by 12.4 per cent (while the volume of OEM non-subject imports declined by 11.3 per cent, and U.S. produ cer OEM shipments declined by 22 per cent).
312 
7.204  Thus, during the period of investigation both s ubject imports and domestically-produced tyres 
were present in the OEM sector.  Over the period as a whole, the degree of the resultant competition 
between subject imports and domestically-produced tyres in the OEM sector was increasing, as the 
relative importance of domestically-produced tyres de creased, and that of subject imports increased.313  
                                                      
310 China's First Written Submission, para. 226. 
311 USITC Report, page 26. 
312 Apparent consumption data calculated on the basis of USITC Report, Table V-3. 
313 We note China's argument (China's Second Written Submission, para. 195) that the United States 
improperly relied on ex post rationa lization in arguing that, because "U.S. producers' U.S. shipments into the 
OEM market declined in every year of  the period examined, [while] shipments of imports from China increased 
in every year", "it was therefore reasonable for the USITC to find a growing degree of competition between 
subject imports and domestically produced tyres in the OEM market".  (U.S. First Written Submission, 
 WT/DS399/R 
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  Consistent with the trend for OEM and replaceme nt market shipments overall, the competitive 
importance of subject imports in the OEM market b ecame particularly pronounced at the end of the 
period of investigation, when despite a fall in appa rent consumption of 16.4 per cent, subject imports 
were able to increase by 12.6 per cent, while non- subject imports and U.S. producer shipments fell 
by 11.3 and 22 per cent respectively. 
7.205  In light of the above considerations, although we  accept that there was some variation in the 
levels of competition within the OEM market, we do not consider that the USITC was required to 
dismiss competition from subject imports in the OEM sector as "negligible".
314 
(c) Reliance on Questionnaire responses to establish the substitutability of imports and domestic 
tyres  
(i) Arguments of the parties 
7.206  China  contends that the USITC improperly found  that subject imports and domestic tyres 
were substitutable.  China asserts that the USIT C's finding is improperl y premised on "vague"315 
responses to a questionnaire that simply asked prod ucers, importers and purchasers "if subject tires 
produced in the United States and in other countries are used interchangeably", giving the option of 
"always", "frequently", "sometimes", and "never".316  China asserts that the questionnaire failed to 
differentiate between product type, category or characteristics, even though there is market 
segmentation between the OEM and replacement mark ets, and even though there are three separate 
tiers within the replacement market, and widely vary ing tyre sizes and characteristics.  China submits 
that the questionnaire responses relied on by the USITC constitute the type of subjective and 
overbroad questionnaire data that the panel in Argentina – Footwear (EC)  warned against. 
7.207  The United States  submits that there was nothing "va gue" about the questionnaire responses 
relied on by the USITC, and that the large majority of producers, importers, and purchasers agreed that tyres from China and tyres pr oduced in the United States were "always" or "frequently" used 
interchangeably.
317  The United States asserts that these qu estionnaire responses were also consistent 
with other evidence on the record relating to substitu tability as, for example, the record showed that 
                                                                                                                                                                     
para. 227).  However, we see no reason why the United States may not rely on the fact (established in the 
USITC's record) that OEM imports from China were grow ing while U.S. OEM shipments were falling to rebut 
China's argument regarding the allegedly negligible competitive impact of subject imports in the OEM sector.  Furthermore, we note the USITC's finding that "[t]he  share shipped to the OEM market by U.S. producers 
declined each year during the period  examined, while the share of subject imports from China shipped to the 
OEM market increased irregularly and was at its highest in 2006 at 7.3 percent" (USITC Report, page 21). 
314 China First Written Submission, para. 226.  Regarding China's argument that non-subject 
OEM imports were nine times the quantity of subject OEM imports (China's Second Written Submission, 
para. 193), in our view this relates more to the possibility of non-subject imports being an "other cause" of injury, than to the issue of whether or not there is attenuated competition between subject imports and domestic 
tyres.  This issue is addressed at paras. 7.364 to 7.367. 
315 China's First Written Submission, para. 223. 
316 USITC Report, page V-16, Table V-6, n. 1. 
317 USITC Report, page 23.  The United States asserts that six out of seven U.S. producers, 21 out of 25 
importers, and 18 out of 22 purchasers reported that tyres from China and tyres produced in the United States 
are "always" or "frequently" used inte rchangeably.  USITC Report, Table V-6.   The United States asserts that 
any market participant that responded that tyres from China and tyres from the United States are "sometimes" or 
"never" used interchangeably" was given the opportunity to provide an explanation for this answer in the 
questionnaire.   WT/DS399/R 
   Page 65  
 
  tyres from China and tyres from the United States compete in all segments of the market.
318  T h e  
United States contends that the interchangeability of  subject imports and domestically produced tyres 
was further confirmed by the fact that the USITC was able to conduct pricing comparisons of large 
quantities of shipments by U.S. producers and importers of subject tyres for six specific pricing products, each with specific dimensions, load index es, and speed ratings, in the large majority of 
quarters over the period.
319  The United States submits that, acco rding to this evidence, the large 
majority of responding market participants, whether they are producers, importers, or purchasers, indicated that market segmentation was not a bar to, or limit on the interchangeability of the subject 
and U.S. tyres. 
7.208  Regarding China's reliance on the Appellate Body's report in Argentina – Footwear (EC) , the 
United States contends that the facts of the und erlying investigation are very different.  The 
United States submits that, in Argentina – Footwear (EC) , the panel noted that the investigating 
authority performed no analysis of the conditio ns of competition in the market, but simply 
summarized the conflicting views of domestic produ cers and importers.  The panel noted that the 
investigating authority conducted no price comparisons  of imported and domestic footwear to support 
its references to "cheap imports", despite the fact  that its causation finding was based primarily on 
price considerations.  The panel stated that the au thority did not even analyze the effects of imported 
prices on the domestic industry, but indicated instead  that it compared broad statistical indicators, 
resulting in conclusory statements.  Moreover, the panel noted that the investigating authority itself 
acknowledged that its references to  "cheap imports" had mostly to do with a problem of customs 
valuation and that the composition of imports had act ually shifted to higher-v alued goods.  According 
to the United States, it was in the c ontext of these glaring deficiencies that  the panel stated that this "is 
not an analysis of the conditions of competition that is called for by Articles 2 and 4.2".  The 
United States asserts that the USITC performed a mu ch more rigorous analysis than in that case. 
(ii) Evaluation by the Panel 
7.209   We understand China to claim that the questi onnaire responses were insufficient to establish 
the interchangeability of subject imports and do mestic tyres, as the questionnaire failed to 
differentiate between "product category,  characteristics, or market segment."
320  As a general matter, 
we note that China's arguments concern the origin al questionnaire sent out by the USITC at the 
beginning of the investigation.  In light of the responses to that original questionnaire, the USITC 
issued a supplemental questionnaire to gather additio nal information about the existence of segments 
or product categories in the market.  In our view, there is nothing inherently wrong with an 
investigating authority first issuing a genera lly-worded questionnaire regarding the competitive 
relationship between domestic tyres and subject imports, and then following that original 
questionnaire up with a more detailed supplemental questionnaire addressing particular issues raised 
in the responses to the original questionnaire. 
7.210  Regarding the issue of whether the original  questionnaire should have been phrased more 
specifically in terms of market segmentation, we  recall our findings above regarding the absence of 
any clear differentiation between the market segment s.  We recall that this was confirmed by the 
dissenting commissioners, who found that: 
                                                      
318 USITC Report, page 27.  The United States conten ds that the USITC noted that there was general 
agreement as to the existence of thr ee categories of tyres in the replaceme nt market, but that there was less 
agreement as to which tyres were includ ed in the two lower-priced categories. 
319 USITC Report, Tables V-9-V-14. 
320 China's First Written Submission, para. 222. WT/DS399/R 
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  there is no consensus on how to define what ty pes of tires are classified in each tier, 
or what brands are classified in each tier within the replacement market .
321 
7.211  In the absence of any industry consensus on the di stinction between tiers 1, 2 and 3, we do not 
consider that the USITC was required to have include d, in its original questionnaire, more specific 
questions regarding interchangeability on the basis of  distinctions between tie rs 1, 2 and 3 of the 
replacement market. 
7.212  China also raises the possibility of distinguish ing domestic tyres from subject imports on the 
basis of other factors, such as "product category" or "characteristics"322, or "tire sizes".323  However, it 
is not clear to the Panel how the USITC could have  drawn such distinctions, particularly since it 
appears that there was no industry consensus on wh ich the USITC might have acted.  Furthermore, 
record evidence suggests that size and performan ce would not have been a suitable basis for 
distinguishing domestic tyres from subject imports, as one Chinese respondent witness stated that tier 
3 tyres "cover the same broad spectrum of size  and performance as are offered in the first 
two segments".324 
7.213  Nor do we consider that the findings of the Panel in Argentina – Footwear (EC)  provide any 
guidance on whether the USITC improperly relied on "subjective" questionnaire responses.  The 
Argentina – Footwear (EC)  panel found that "the question of pri ce [wa]s of particular importance to 
the analysis" of the conditions of competition in  that case, as price was "the only 'condition of 
competition' between imports and domestic produ cts on which Argentina's causation finding was 
based".  The panel therefore "focus[ed] [its] assessme nt of this analysis primarily on whether there is 
support in the record for Argentina's conclusions a bout import prices and their effect on the domestic 
industry".  In making its assessment, the panel found: 
no evidence in the record to support the statements  that the imports were cheaper than 
the domestic goods.  In particular, there is no evidence that any price comparisons of 
imported and domestic footwear  were made in the investigation, including on the 
basis of average unit values of a ll imports and all domestic products.325 
7.214  The circumstances of the USITC Tyres investigation are very different from those in 
Argentina – Footwear (EC) .  In particular, this is not a case wh ere the investigating authority had "no 
evidence" regarding the conditions of competition ot her than the original questionnaire responses.  
Nor is this a case where the original questionnair e replies did not address the specific condition of 
competition at hand (i.e., the competition between  subject imports and domestic producers).  
7.215  For the above reasons, we find no error in the USITC's reliance on the original questionnaire 
responses. 
(d) Conclusion 
7.216  For all of the above reasons, we find no error in  the USITC's assessment of the conditions of 
competition. 
                                                      
321 USITC Report, page 51 (dissenting commissioners), emphasis supplied. 
322 See China's First Written S ubmission, para. 222. 
323 See China's First Written S ubmission, para. 223. 
324 USITC Hearing transcript at 246. 
325 Panel Report, Argentina – Footwear (EC) , para. 8.259, emphasis supplied.   WT/DS399/R 
   Page 67  
 
  3. Correlation between the increase in import s and the decline in injury factors 
(a) Arguments of the parties 
7.217  China  submits that the USITC failed to proper ly establish correlation between the rapidly 
increasing subject imports and the material injury su ffered by the domestic industry.  China claims 
that, by finding that imports increased over the five-y ear period of investigation while injury factors 
declined over that period, the USITC merely engage d in an end-point-to-end-point analysis, of the 
sort rejected by the panel in Argentina – Footwear (EC) .  According to China, the consistent teaching 
of WTO jurisprudence is that the coincidence must be apparent with respect to movements in imports 
and injury factors.  As the panel in Argentina – Footwear (EC)  observed, in a causation analysis "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".
326  China contends that 
it is not enough that imports increase in every year of the period and that injury factors decline in 
every year of the period.  According to China,  the degree of the respec tive annual increases must 
correspond generally with the degree of the respective d eclines in injury factors.  China contends that 
the orders of magnitude are key, in the sense that the varying degrees in annual import increases 
should be reflected in varying degrees of annual dec lining injury indicators.  China submits that the 
USITC never addressed these orders of magnitude. 
7.218  China claims that the failure in the USITC's analysis is particularly apparent with respect to 
the more recent period (i.e., changes in 2006-2007 a nd 2007-2008).  China contends that the USITC 
statement that "the largest declines in these indi cators have occurred since 2006 when subject imports 
exhibited the greatest and fastest increases"327 is misleading on several levels.  China asserts that 
the USITC failed to point out that imports from Ch ina grew at their fastest rate in 2006-2007, but 
grew at their slowest rate (10.8 per cent) in  the period from 2007-2008.  Worse still, the USITC 
failed to address the fact that the various injury f actors typically showed a substantial improvement in 
2006-2007, when imports from China were at their hi ghest level in the period, and experienced their 
greatest declines of the period in 2008, when Chinese imports grew at the slowest  rate in the period.  
In other cases, the injury factors (e.g., price, R&D expenditures, and capital improvements) show 
positive trends throughout the period.   According to China, the record regarding the more recent 
period poses two concrete tests for the U.S. theory  of causation.  Given the U.S. argument that 
imports from China were fungible, that the produc t is price sensitive, and that different market 
segments do not matter, China suggests that one would expect the large increase in imports over the 2006 to 2007 period to have the largest adverse imp act on injury indicators.  China also suggests that 
one would also expect that the small increase in  imports over the 2007 to 2008 period would have the 
smallest adverse impact on injury indicators.  China submits, though, that the facts in the record belie 
the U.S. theory. 
7.219  Regarding the 2006-2007 period, China suggests that the U.S. correlation theory would 
demonstrate that the large increase in imports from China over the 2006-2007 period to have the 
largest adverse impact on injury indicators.  China contends that this theory is not supported by the 
facts, though, since over the 2006-2007 period, many key indicators were in fact positive.  China 
asserts that prices – both for specific pricing products and for average unit values overall – were up sharply, as was net sale value.  China asserts th at operating profits were also up sharply.  China 
further asserts that productivity, capacity utilizati on, capital expenditures and R&D spending were all 
up.  According to China, therefore, six of the te n factors showed strong improvements, and a seventh 
factor – net sales – showed improvement on a sales value basis.  China asserts  that these seven out of 
                                                     
 
326 Panel Report, Argentina – Footwear (EC) , para. 8.237. 
327 See USITC Report, page 24 ("All of these indicators were at their lowest levels of the period 
in 2008, when subject imports we re at their highest ...").   WT/DS399/R 
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  ten factors improved, even in the face of the la rgest increase in imports from China over the entire 
period.  China acknowledges that the volume metrics – production, net sales volume, market share, and employment – declined over th e 2006-2007 period, but claims that these declines must be placed 
in context.  In particular, China claims that the declines in the 2006-2007 period are more modest than 
the declines in the "prior two comparison periods".  China therefore claims that these factors, also, 
were actually "much better" in 2007.  China concludes that, of the ten indicators, at most only two 
arguably suggest some possible coincidence – market  share, and employment.  According to China, 
this pattern strongly suggests the absence of any over all coincidence, as it is  hard to see an overall 
coincidence when eight of ten factors actually  show results that are in fact improving. 
7.220  Regarding the 2007-2008 period, China recalls th at the U.S. theory of correlation should 
show the small increase in imports from China ove r the 2007-2008 period having the smallest adverse 
impact on injury indicators.  China contends, though, that in fact the opposite is true, as six indicators (production, net sales volume, profit, productivity, capacity utilization and employment) were all 
down.    
7.221  China submits, therefore, that over the 2006-2007 and 2007-2008 periods, the vast majority of 
the changes in injury indicators are inconsistent with  the U.S. theory, and the few changes that at least 
might support the U.S. theory in fact provide very weak support. 
7.222  The United States  submits that China's arguments agai nst the USITC's analysis must fail 
because they are premised on the concept that even a minor variation in the trends establishes that 
there is not a "coincidence of trends" between  increasing imports and material injury.  The 
United States disagrees that the USITC should have considered whether the "degree of the respective 
annual increases [in Chinese imports] correspond genera lly with the degree of the respective declines 
in injury factors".
328  The United States submits that China' s argument is flawed as an analytical 
matter because it assumes that Chinese imports must cause all, or most, of the injury being suffered by 
an industry in any particular year of the period being examined.  According to the United States, it is only in such a situation that there would be a cl ose "correspondence" betwee n the degree of the annual 
increase in Chinese import volumes and any declines in  the indicia of the industry's condition.  In 
cases where other factors are causing material injury to an industry at the same time as Chinese 
imports, the United States contends that there might not necessarily be the same "degree" of correspondence between changes in the volume tr ends of Chinese imports and changes in the 
industry's condition. 
7.223  The United States asserts that, with respect to the Safeguards Agreement , WTO panels have 
explained that the "overall coincidence [in trends] is  what matters and not whether coincidence or lack 
thereof can be shown in relation to a few sel ect factors which the competent authority has 
considered".
329  The United States notes in this regard that the panel in US – Wheat Gluten  found: 
[I]n light of the overall coincidence of th e 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 
imports would not preclude a finding by the USITC of a causal link between increased imports and serious injury.
330 
7.224  The United States submits that the USITC properly concluded that there was a clear overall 
"coincidence" in trends between the rapidly in creasing imports and their effects on the domestic 
                                                      
328 Oral Statement by China at the Second Panel Meeting, para. 64. 
329 Panel Report, US – Steel Safeguards , para. 10.302. 
330 Panel Report, US – Wheat Gluten , para. 8.101.   WT/DS399/R 
   Page 69  
 
  industry.
331  The United States asserts that, during a period in which Chinese import volumes 
increased rapidly in every year of th e period, the record showed that: 
• The domestic industry's market share fell in every year of the period, declining by 
13.7 percentage points over the period of investigation;332 
 
• The domestic industry's production declined in every year of the period, resulting in an 
overall decline of 26.6 per cent;  
 
• The domestic industry's capacity declined in every year of the period, for an overall decline of 
17.8 per cent;  
 
• The domestic industry's U.S. shipments declined in every year of the period, for an overall 
decline of 29.7 per cent;333 
 
• The domestic industry's net sales quantities declined in every year of the period, for an overall 
decline of 28.3 per cent;334  and  
 
• The domestic industry's employment-related factors fell significantly over the period of 
investigation, with the number of production -related workers falling by 14.2 per cent, the 
number of hours worked falling by 17.0 per cent,  and wages paid falling by 12.5 per cent over 
the period.335  
 
7.225  The United States submits that all of these factors were at their lowest levels in 2008, while 
Chinese tyre imports were at their highest levels in  2008 (in terms of volume of imports and market 
share).  The United States also asserts that the US ITC found that the U.S. industry suffered declines in 
operating income, operating margins, capacity utiliza tion, and productivity of the domestic industry in 
three out of four years of the period, and all, except for capacity utilization, were at their lowest levels 
for the period in 2008.336  Thus, the United States notes that: 
• Productivity fell by 11.5 per cent over the period. 
 
• Capacity utilization fell by 10.3 percentage points over the period. 
 
• Operating margins fell by 4.8 percentage points over the period. 
 
• Operating income fell from $256.2 million in  2004 to a loss of 262.8 million in 2008. 
 7.226  The United States contends that there was theref ore clear evidence of a coincidence between 
imports and declines in the industry's c ondition over the period of investigation.
337 
                                                      
331 USITC Report, page 29.   
332 USITC Report, pages 25-26.   
333 USITC Report, pages 15-18 and 24.   
334 USITC Report, pages 23-24.   
335 USITC Report, pages 17 and 24.   
336 USITC Report, Table C-1.   
337 Oral Statement by the U.S. at th e Second Panel Meeting, para. 59. WT/DS399/R 
Page 70  
 
  (b) Evaluation by the Panel 
7.227  We shall first address China's general arguments regarding correlation.  We shall then address 
China's specific arguments regarding the USITC's fi nding that subject imports caused a cost-price 
squeeze. 
(i) Correlation generally 
7.228  We recall that Paragraph 16 does not require a s howing of correlation between material injury 
and rapidly increasing imports.
338  Instead, correlation is a tool that an investigating authority might 
use to demonstrate causation (either alone, or in c onjunction with other analytical tools).  There is a 
basic disagreement between the parties regarding the type of correlation that might be sufficient to 
establish causation under Paragraph 16 of the Protocol.  In brief, the United States considers that there 
need only be an overall coincidence between imports and injury factors, in the sense that the upward 
movements in imports should occur at the same time  as the downward movements in injury factors.  
China submits that mere temporal coincidence does no t suffice.  China contends that more is required, 
in the sense that the degree of the increases in imports should correspond with the degree of the 
declines in injury factors.  According to Chin a, simply assessing whether an upward movement in 
imports over the period coincides with a downward movement in injury factors amounts to no more 
than an end-point-to-end-point analysis, of the sort condemned by the Appellate Body in Argentina – 
Footwear (EC) . 
7.229  We are not persuaded that causation might only be based on a finding of correlation if the 
varying degrees of increase in imports over the peri od of investigation are reflected in the varying 
degrees, or rates, of declines in injury indicators.   Correlation between the varying degrees of increase 
in imports and decrease in injury indicators sugg ests a certain degree of precision.  However, 
correlation between imports and injury factors is not  an exact science, especially as there may be other 
causes of injury at work.  As a result, it would be  unrealistic to expect, or require, a somewhat precise 
correlation between the degree of change in imports a nd the degree of change in the injury factors.  
While a more precise degree of correlation between  the upward movements in imports and the 
downward movements in injury factors might result in a more robust finding of causation, and might 
indeed suffice on its own to demonstrate causation,  a finding of "significant cause" is not excluded 
simply because an investigating authority reli es on an overall coincidence between the upward 
movement in imports and the downward movement in injury factors, especially if that finding of 
overall coincidence is combined – as it was in th e present case - with other analyses indicative of 
causation. 
7.230  In Argentina – Footwear (EC) the panel stated that it would assess Argentina's causation 
analysis: 
on the basis of (i) whether an upward trend in imports coincides with downward 
trends in the injury factors , and if not, whether a reasone d explanation is provided as 
to why nevertheless the data show causation.339 
7.231  These findings were upheld by the Appellate Body340, and were followed by the panel in US – 
Steel Safeguards .  The latter panel found that: 
                                                      
338 See paras. 7.169 to 7.170 above. 
339 Panel Report, Argentina – Footwear (EC) , para. 8.229, emphasis supplied. 
340 Appellate Body Report, Argentina – Footwear (EC) , para. 145.   WT/DS399/R 
   Page 71  
 
  the word "coincidence" in the current context refers to the temporal  relationship 
between the movements in imports and the m ovements in injury factors.  In other 
words, upward movements in imports should normally occur at the same time as 
downward movements in injury factors in order for coincidence to exist.
 341 
7.232  There is no suggestion in these statements by the Argentina – Footwear (EC)  and US – Steel 
Safeguards  panels that the orders of magnitude are key,  or that changes in the degree of increase in 
imports should be reflected in changes in the degree of  decline in injury factors.  Rather, the panels 
simply found that imports should increase at th e same time as the injury factors decline.   
7.233  The US – Steel Safeguards  panel also found that it is the " overall coincidence ... that matters, 
and not whether coincidence or lack thereof can be shown in relation to a few select factors which the 
authority has considered".342   
7.234  In light of the above considerations rega rding the degree of precision required for an 
assessment of correlation, we consider that the USITC was entitled to suppor t its determination of 
"significant cause" with a finding of overall coinci dence between an upward trend in subject imports 
from China and downward trends in the relevant injury factors.343  We recall our finding that the 
USITC properly established that imports were "incre asing rapidly" during the period of investigation, 
and that imports continued to increase in every year of  the period.  In terms of injury factors, we note 
that: 
• The domestic industry's market share fell in every year of the period, declining by 
13.7 percentage points over the period of investigation;344 
 
• The domestic industry's production declined in every year of the period, resulting in an overall 
decline of 26.6 per cent;  
 
• The domestic industry's capacity declined in every year of the period, for an overall decline of 
17.8 per cent;  
 
• The domestic industry's U.S. shipments declined in every year of the period, for an overall 
decline of 29.7 per cent;345 
 
• The domestic industry's net sales quantities declined  in every year of the period, for an overall 
decline of 28.3 per cent;346 and  
 
• The domestic industry's employment-related factors fell significantly over the period of 
investigation, with the number of production -related workers falling by 14.2 per cent, the 
number of hours worked falling by 17.0 per cent,  and wages paid falling by 12.5 per cent over 
the period.347  
                                                      
341 Panel Report, US – Steel Safeguards , para. 10.299. 
342 Panel Report, US – Steel Safeguards , para. 10.302. 
343 China has advanced detailed arguments regarding the alleged lack of correlation between increased 
imports and injury.  Since these arguments are based on its more precise approach to correlation, which we have 
rejected, we do not need to consider all of China's arguments in detail.  We do, though, consider China's 
arguments regarding the USITC's fi nding of a "cost-price squeeze" ( see paras. 7.239 to 7.260 below). 
344 USITC Report, pages 25-26.   
345 USITC Report, pages 15-18 and 24.   
346 USITC Report, pages 23-24.   
347 USITC Report, pages 17 and 24.   WT/DS399/R 
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7.235  Furthermore, the U.S. industry suffered dec lines in operating income, operating margins, 
capacity utilization, and productivity of the domestic i ndustry in three out of four years of the period, 
and all, except for capacity utilization, were at their lowest levels for the period in 2008, when subject 
imports were at their highest.
348  In particular: 
• Productivity fell by 11.5 per cent over the period; 
 
• Capacity utilization fell by 10.3 percentage points over the period; 
 
• Operating margins fell by 4.8 percentage points ove r the period, with declines in three out of 
four years of that period;  and 
 
• Operating income fell from $256.2 million in  2004 to a loss of 262.8 million in 2008. 
 
7.236  We consider that this data was sufficient for the USITC to properly find that there was an 
overall coincidence between the upward movement in subject imports and the downward movement 
in domestic industry injury factors.  In our view , such overall coincidence is amply demonstrated by 
the following figures submitted by the United States: 
                                                      
348 USITC Report, Table C-1.     WT/DS399/R 
   Page 73  
 
  Subject tires:  Comparison of China imports to 
U.S. industry indicators, in units, 2004-08 
 
 
Source:   USITC Report, Table C-1.  
 
7.237  China contests the relevance of these figures on the basis that it relates only to volume-based 
indicators.  According to China, volume-based indi cators are influenced by the decline in demand and 
the domestic industry's business strategy of ceding the low-end of the replacement market.  We are not persuaded.  First, we find below
349 that no prima facie case has been established that there was 
error in the USITC's conclusion that the industry did not voluntarily adjust its business strategy (i.e., 
cede the low-end of the replacement market) independent of the rapidly increasing imports from 
China.  Second, we also find below that the USIT C properly considered the effect of changes in 
demand on the domestic industry.  In particular, it is apparent that declines in demand do not account 
for the totality of the injury su ffered by the domestic industry.350  In these circumstances, it was 
appropriate for the USITC to take declines in volume-metrics into acco unt for the purpose of 
analysing correlation.  Finally, we recall that th e U.S. industry also suffered declines in operating 
income, operating margins, capacity utilization, a nd productivity of the domestic industry in three out 
                                                      
349 See paras. 7.285 to 7.322 below. 
350 See paras. 7.323 to 7.359 below. 
WT/DS399/R 
Page 74  
 
  of four years of the period, and all, except for capaci ty utilization, were at their lowest levels for the 
period in 2008. 
7.238  For these reasons, we do not accept that the USIT C failed to properly establish correlation in 
the present case.  The USITC's finding of overall co incidence was sufficient to support, along with 
other considerations, its conclusion that subject imports from China were a "significant cause" of 
material injury to the U.S. tyre industry. 
(ii) Cost–price squeeze 
7.239  As part of its arguments regarding an alleged lack of temporal correlation between increasing 
subject imports and declining injury factors, Ch ina claims that there is no correlation between 
increased imports and falling prices, as prices actually increased over the period.
351  The United States 
submits that China's observation is irrelevant, as the USITC did not find that subject imports had 
caused price depression.  Instead, the USITC found price suppression, as underselling by subject imports caused domestic producers to experience a "cost-price squeeze"
352, preventing them from 
raising their prices sufficiently to offset increasing co sts.  China submits that the USITC's "cost-price 
squeeze" theory is predicated on a chain of fal se assumptions and improper inferences concerning (a) 
the cost of goods sold ("COGS") to sales ratio, (b ) alleged underselling by su bject imports, and (c) the 
role of non-subject imports.  China addresses each of these elements in turn. 
COGS/sales ratio  
7.240  China  contends that the USITC found that there was a "cost-price squeeze" over the period 
because the COGS/sales ratio rose by 5.4 percentage  points from 2004 to 2008, when the volume of 
imports from China was at its highest.  China rej ects this finding, alleging that movements in the 
COGS/sales ratio do not correlate with rapidl y increasing imports from China.  China notes in 
particular that the COGS/sales ratio fell by 5.3 percentage points in 2007, which was the very year 
when imports from China rose by their highest ma rgin.  China asserts that, if rapidly increasing 
imports from China were creating a "cost-price squeeze" , one would certainly expect to see that effect 
in 2007. 
7.241  China asserts that the lack of correlation betw een the COGS/sales ratio and rapidly increasing 
imports is further evidenced by 2008 data.  In 2008, the COGS/sales ratio rose by 5.8 percentage 
points, whereas the rate of increase in imports fr om China fell from the previous year.  China 
contends that any "cost-price squeeze" in 2008, if it existed, would have been attributable to the near 
collapse of the U.S. auto industry and the on set of the worst recession since the 1930s.   
7.242  China submits that the USITC theo ry is also at odds with the relatively greater price increases 
that U.S. producers were able to achieve during th e period.  Thus, China notes that the average unit 
value of U.S.-produced tyres rose 44 percentage poi nts over the period, whereas the average price of 
non-subject imports rose by only 36.8 percentage poi nts, and imports from China by 25.1 percentage 
points.  China contends that the consistent av erage unit value increases over the period, and the 
magnitude of the increases U.S. producers were ab le to achieve (admittedly over all market tyre 
segments, including high-value tier 1), do not support the USITC "price squeeze" hypothesis.  China 
                                                      
351 We note that Paragraph 16.4 of the Protocol provides separately for analyses of "the effect of 
imports on prices" and "the effect of such imports on the domestic industry".  Accordingly, it is not apparent to 
us that the question of price should necessarily be reviewed in the context of temporal correlation.  However, 
since the United States has not objected to China's appro ach to this issue, we consider China's arguments on 
price under this section of our Report. 
352 USITC Report, page 24.   WT/DS399/R 
   Page 75  
 
  notes in this regard that, for pricing product no. 1, the average U.S. price increased by $12.57, 
whereas the average subject import price increased by only $1.96.  
7.243  The United States  asserts that China acknowledges that the ratio of costs to goods sold 
increased in every year of the period but one (2007).
353  The United States submits that the fact that 
the ratio of cost of goods sold to sales declined in  2007, when subject imports increased at the greatest 
rate, is not enough to show that ove rall coincidence is not present, as in every other year of the period 
the ratio of cost of goods sold to sales increased , thus corresponding with increases in the volumes of 
subject imports in every year.  The United States c ontends that increases in U.S. industry average unit 
values should be viewed in light of increases in U.S. costs. 
7.244  The Panel  notes that China's claim that there wa s no correlation between the increase in 
subject imports and the increase in the COGS/sales rati o is based on its argument that there must be a 
precise correlation between the relevant trends, and that the USITC's analysis was merely a "simplistic end-point-to-end- point juxtaposition of data"
354 that does not withstand scrutiny.  As 
explained above, we consider that the United Stat es properly found an overall coincidence between 
rapidly increasing imports and the deterioration in the condition of the domestic industry.  The fact 
that annual movements in every single injury factor did not precisely track annual movements in 
subject imports does not invalidate the USITC's finding of overall coincidence. 
7.245  Regarding China's argument that U.S. producers were able to increase their prices by far more 
than subject imports, we recall that the USITC made  a finding of price suppression.  Accordingly, the 
price of U.S. products must be viewed in light of the costs of the U.S. industry.  While China argues355 
that the average U.S. industry price for product no. 1 increased by $12.57 over the period, this price 
increase must be viewed in light of the $21.24 in crease in U.S. industry costs over the same period.  
Similarly, although the average unit value of U.S. -produced tyres increased by 44 percentage points 
over the period, the average unit cost of goods  sold increased by 52.4 percentage points.356 
Underselling  
7.246  China  contends that the USITC misleadingly relie d on questionnaire responses to assert that 
there was "pervasive underselling" by imports fro m China.  China acknowledges that questionnaire 
data showed that imports from Ch ina were cheaper than U.S.-produced tyres in 119 of 120 instances 
in which the USITC compared pricing of Chinese and U.S. tyres, but refers to the observation by the 
dissent that these comparisons appear to have lumped together tyres with different speed ratings, load 
indices, and levels of performance, possibly aggregati ng tyres at different price points.  China submits 
that the margin of underselling calculated and re lied on by the USITC is therefore unreliable.  
7.247  Furthermore, China contends that any price differences between domestic tyres and subject 
imports merely reflected the fact that U.S. pr oducers were predominantly and increasingly positioned 
in the higher-end, premium tyre market, and accounted for more than half of all OEM sales in the U.S., whereas between 95 per cent and 99 per cent of imports from China were in the replacement market, focused on lower-end production.  China su bmits that these differences will inevitably skew 
the data, and inflate any alleged "margin of underse lling".  China contends that the data was further 
skewed by the fact that no OEM sales by subject imports were included in the price comparisons, whereas 3 of the six U.S. producers reported data for the more-expensive OEM sales.  China submits 
                                                     
 
353 China's First Written Submission, para. 257. 
354 China's Second Written Submission, para. 232. 
355 China's Second Written Submission, para. 239. 
356 USITC Report, Table C-1. WT/DS399/R 
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  that the USITC should have engaged in a more rigorous analysis of price competition between 
domestic tyres and subject imports, given the heterogeneous product market in question. 
7.248  Furthermore, China criticises the USITC's re liance on questionnaire responses from three 
U.S. producers to the effect that they had to re duce prices or roll back announced price increases to 
avoid losing sales to competitors selling tyres from Ch ina.  China laments the absence of specifics as 
to when, how frequently, or in what context this dynamic allegedly occurred, or how significant it was 
to operations over the period.  Moreover, China notes (as the dissent observed) that not a single 
producer could report a specific example of lost revenues or lost sales, and that the USITC did not ask for or receive data from producers suggesting that Chinese import competition barred them from passing through cost increases in the form of needed price rises (as the "cost-price squeeze" theory 
would require). 
7.249  In addition, China refers to the USITC's finding that the margin of underselling was the 
greatest in 2007, when the imports from China incr eased by the largest amount.  China notes that 
2007 was also the year in which the domestic industry saw record profitability.  According to China, 
this disconnect between high margins of underselli ng and the financial condition of the domestic 
industry calls into serious doubt the logic of the USITC. 
7.250  The United States  notes that Paragraph 16.4 of the Protocol states that an investigating 
authority shall consider, among other things, "the effect of imports on prices for like or directly 
competitive articles" to determine if market disr uption exists.  The United States submits that the 
USITC conducted a detailed and thorough evaluation of pricing in the tyres market, and explained 
how the persistent and significant underselling by subject imports contributed to the deteriorating 
condition of the domestic industry. 
7.251  The United States explains that the USITC coll ected quarterly data over the period examined 
for six specific products, each of which was defined by specific dimensions, load indexes, and speed 
ratings of each to ensure compatibility.
357  The United States asserts that these pricing products 
accounted for a significant amount of domestic pr oducer's U.S. shipments and subject import 
shipments358, and that the resultant comparisons showed underselling by the subject imports in 
119 out of 120 comparisons, with the average marg ins of underselling at their highest in 2007 
and 2008, coinciding with the la rgest volumes of subject imports.359  The United States asserts that the 
USITC found that the consistent underselling by the large and rapidly increasing volume of subject 
tyres displaced domestic shipments by U.S. produc ers, and eroded the domestic industry's market 
share, leading to a substantial reduction since 2004 in domestic capacity, production, shipments, and 
employment during the period examined.  The United States asserts that the USITC also noted that 
continued underselling by the s ubject imports prevented domestic  producers from raising prices 
sufficiently to offset higher production costs and thus suppressed prices.360 
7.252  The United States rejects China's argument that  the price comparison data collected by the 
USITC is "unreliable" because it does not define the price comparison products in a specific enough 
manner.361  The United States submits th at the USITC defined its price comparison products in a 
                                                      
357 USITC Report, V-23-24.  In response to China's argument that different speed ratings cause the 
USITC data to be unreliable, the United States notes that one of the respondent's own witnesses testified in this 
case that product 3 (which is the on ly passenger vehicle price product to have three speed ratings) "is a 
commodity tyre size and that there is little difference in th e S, T, and H speed ratings in that particular size.  Id. 
at V-35 citing Hearing Transcript, page 304 (Berra). 
358 USITC Report, page 23, n. 128.   
359 USITC Report, Tables V-9-V-14 and Table C-1.   
360 USITC Report, page 24.   
361 China's First Written Submission, para. 260.   WT/DS399/R 
   Page 77  
 
  highly specific manner that allowed it to perform an  apples-to-apples comparison of prices of subject 
and domestic tyres.  The United States further asserts  that, given that the large majority of market 
participants reported that tyres from China and domes tically produced were "always" or "frequently" 
interchangeable, it was entirely reasonable for the US ITC to rely on this pricing data as a basis for 
assessing whether the subject imports were underselling the U.S. tyres. 
7.253  Regarding China's argument that the USITC's price comparison data are unreliable because 
U.S. producers' ship a much higher percentage of their tyres into the more expensive OEM market, 
the United States asserts that the USITC's price comp arison data only compared prices for subject and 
U.S. tyres on sales into the replacement market.
362  The United States argues that, since no shipments 
to the OEM market were included in these price compar isons, the fact that more U.S. tyres were sold 
into the OEM sector than subject tyres does not affect the validity of the USITC's actual price 
comparisons in any way.  
7.254  The Panel  notes that the USITC found underselling in 119 out of 120 price comparisons 
undertaken on the basis of data provided by U.S. producers and importers.  The USITC also found that the margins of underselling for all six products increased during the period of investigation, and 
that the increase in the margins for five of the six products were at their highest levels of the period 
in 2007 and 2008.  The USITC also found that the average margin of underselling for all six products 
coincided with increasing volumes of subject imports , and that the greatest increase in the average 
margin of underselling was in 2007, the year in which the volume of rapidly increasing imports rose 
by the greatest amount.
363 
7.255  China challenges the USITC's findings on variou s grounds.  First, China alleges that the 
USITC's price comparisons were not sufficiently preci se, in the sense that they lumped together tyres 
with different speed ratings, load indices, and leve ls of performance, possibly aggregating tyres at 
different price points.  We note, though, that th e relevant price comparisons were undertaken in 
respect of six different products, each of which was de fined by reference to particular size, load index, 
and speed rating criteria.  For example, the USITC defined Product 1 by tyre size (P225/60R16), load 
index (97-98), and speed rating S or T.364  Product 2 was tyre size P235/75R15, load index 105-108, 
and speed rating S or T.  China has not provided any explanation as to why products defined on the basis of such particular criteria would not provide a proper basis for comparing prices. 
7.256  China also argues that the USITC's findings rega rding underselling were distorted by the fact 
that the U.S. producers accounted for more than half of sales in the OEM market, whereas subject 
imports were focused primarily on the replacement  market.  We note, however, that, according to 
Tables V-9 to V-16 of the USITC Report, the USITC collected price data for each of the six products 
for both the OEM and replacement markets.  Furthermore, the USITC's findings regarding the increase in the average margin of underselling we re based on Tables V-9 to V-14, which concerned 
sales to the replacement market only.  Accordingly, we consider that there was no risk that prices for 
the OEM market were compared with  prices for the replacement market.
365 
7.257  China also argues that the USITC's findings rega rding underselling were distorted by the fact 
that U.S. producers and subject imports targeted different segments of the replacement market, such 
                                                      
362 USITC Report Tables V-9-V-14.  According to the United States, these tables  specify that the price 
comparisons are for shipments to the re placement market only.  The United St ates asserts that shipments to the 
OEM market are in a separate table, V-15. 
363 USITC Report, page 23. 
364 USITC Report, V-23.   
365 In any event, the USITC found that, in 69 out of 78 quarters, the prices of U.S.-produced tyres sold 
to the OEM market were actually lower than the pri ces of comparable U.S.-pr oduced tyres sold to the 
replacement market (USITC Report, page V-35). WT/DS399/R 
Page 78  
 
  that the price of segment 3 subject imports should no t be compared with the price of segment 1 U.S. 
products.  We recall our earlier fi ndings regarding market segmentati on, and our rejection of China's 
claim of attenuated competition.  In light of these findings, we do not consider  that any differentiation 
between segments in the replacement market, was so clearly defined, or pronounced, that it should 
have been incorporated into the pr icing analysis undertaken by the USITC.  We also recall that, in 
2008, the U.S. industry made a large proportion of its sales in tiers 2 and 3, where sales of subject 
imports were concentrated.
366  As explained above367, China's claim that the domestic industry and 
subject imports targeted different segments of th e replacement market is, therefore, unfounded. 
7.258  Furthermore, China submits that there was no correlation between underselling and 
profitability, as the largest margin of underselling coin cided with record profita bility in 2007.  We are 
not persuaded by this argument, as the USITC did properly establish that "increases in the average 
margin of underselling coincided with  increasing volumes of subject imports".368  The USITC further 
established that "significant and continuous underse lling throughout the period ... by the large and 
rapidly increasing volume of subject Chinese tires eroded the domestic industry's market share, leading to a substantial reduction since 2004 in domestic capacity, production, shipments, and 
employment during the period examined".
369  In other words, the USITC found that underselling by 
subject imports generally had a highly detrimental im pact on the domestic industry.  In our view, the 
fact that the USITC might not have specifically  addressed the relationship between underselling and 
one single additional injury indicator – profitab ility – does not detract from the USITC's findings 
regarding the effects of "increasing" underselling by subject imports more generally.  Nor, as 
explained above370, does the fact that profitability might  have increased in 2007 undermine the 
USITC's finding of overall coincide nce between rapidly increasing imports and injury to the domestic 
industry (particularly as operating margins fell by 4.8 percentage points over the period, with declines 
in three out of four years of the period). 
7.259  Finally, we note China's argument that any pr ice suppression would more likely have been 
caused by non-subject imports, which "dwarfed" s ubject imports and which also undersold domestic 
tyres.  We address the role of non-subject imports below371, in the context of our consideration of 
China's arguments regarding other causes of injury. 
7.260  For the above reasons, we find no objection to the USITC's finding of a cost–price squeeze. 
(c) Conclusion 
7.261  In the light of the above considerations, we  find that the USITC's reliance on an overall 
coincidence between an upward movement in imports  and a downward movement in injury factors to 
support its finding of "significant cause" and to  be in accordance with the requirements of 
Paragraph 16.4 of the Protocol. 
4. The non-attribution of injury caused by other factors to increasing imports 
7.262  China  attributes the injury suffered by the U.S. domestic industry to a number of factors other 
than subject imports from China, namely:  the domestic industry's business strategy;  changes in 
demand;  non-subject imports, and various other fact ors.  China submits that, as a result of these other 
                                                      
366 See para. 7.195 above. 
367 See paras. 7.185 to 7.197 above. 
368 USITC Report, page 23. 
369 USITC Report, page 24. 
370 See paras. 7.234 to 7.236 above. 
371 See paras. 7.364 to 7.367 below.   WT/DS399/R 
   Page 79  
 
  causes of injury, the domestic producers would have  experienced the same injury even without 
imports from China.  China contends that the US ITC ignored or failed to assess fully these other 
causes of injury, or to establish th at the injury caused by such other factors was not improperly 
attributed to the subject imports.  China asserts th at the USITC merely listed some of the arguments 
made by respondents regarding alternative causes in a single paragraph and then stated, without 
explanation, that it "considered" them.
372  China submits that the USITC then dismissed these other 
causes as legally irrelevant, stating that Section 421 "does not require a we ighing of causes, but only 
that we find that rapidly increasing imports, in an d of themselves, are a significant cause of material 
injury ...".373  China also claims that, in  addition to examining the impact on the domestic industry of 
each of these alternative factors individually, th e USITC should also have examined the cumulative 
effect of these other causal factors. 
7.263  The United States  contends that the USITC properly addressed all of the factors that could 
reasonably be considered significant enough to br eak the causal link between imports and material 
injury. 
7.264  We shall examine each of the alleged alternativ e causes identified by Ch ina in turn, beginning 
with the change in the domestic industry's business stra tegy.  In examining the parties' arguments, we 
recall our view that a finding of causation for the pur pose of Paragraph 16.4 should only be made if it 
is properly established that rapidly increasing imports  have injurious effects that cannot be explained 
by the existence of other causal factors.374 
(a) The domestic industry's business strategy 
(i) Arguments of the parties 
7.265  China  contends that the USITC relied on four factors to reject the argument that domestic 
producers had voluntarily ceded the low end of the market:  (1) imports from China were increasing 
before plant closures in 2006 and 2008;  (2) signi ficant purchases of tyre-manufacturing equipment in 
China occurred over the past ten years;  (3) U.S. pr oducers were not the largest importers of Chinese 
tyres during the period;  and (4) a 2006 article noted that imports from China were expected to 
increase.375  China challenges the USITC's assessment of each of these factors. 
Plant closures  
7.266  China claims that the USITC improperly attrib uted plant closings to imports from China, 
when the record in fact demonstrates that domest ic producers were engaged in a long-term strategy 
that led them to voluntarily close high-cost U.S. pl ants and plants that focused on small-sized or low-
value tyres, and shift production in the United Stat es towards the higher-end segments of the market.   
7.267  China claims that the USITC ignored the fact th at, rather than sufferi ng injury as a result of 
subject imports, the U.S. industry chose to restru cture itself voluntarily, consistent with its global 
sourcing strategy.  China argues that the U.S. pr oducers are "global companies with global sourcing 
strategies"376, and that their "[o]perations in Chin a have enhanced the[ir] profitability".377  China 
alleges that the domestic industry voluntarily ced ed the low end of the market because it was 
                                                      
372 USITC Report, page 29. 
373 USITC Report, page 29. 
374 See para. 7.177 above. 
375 USITC Report, pages 26-27. 
376 China's First Written Submission, para. 345. 
377 China's First Written Submission, para. 348. WT/DS399/R 
Page 80  
 
  profitable to do so.  In particular, China argues that "the imports from China (and other low-cost 
jurisdictions) are a positive  factor"
378 for U.S. producers, who "were themselves responsible for 
manufacturing and importing many of these tires".379 
7.268  China argues that U.S. producers testified rep eatedly that they had voluntarily shifted 
domestic production away from lower-end tyres to the premium, higher-value branded segment.  
China contends that the USITC improperly rejected the testimony of the U.S. producers concerning 
their own business strategy, declaring erroneously that the restructuring of the U.S. industry was not "voluntary", and that the resultant plant clos ures were instead caused by imports from China.
380 
7.269  According to China, there is no record evid ence to suggest that imports from China caused 
any of the plant closures.  Regarding two plant cl osures by Continental, China asserts that hearing 
testimony indicated that these closures occurred because these two plants were the highest-cost 
facilities in the entire company: 
The Mayfield, Kentucky and Charlotte, No rth Carolina plants were closed in 2004 
and 2006 respectively.  Based on my pers onal knowledge of the situation as a nine-
year employee of Continental, I can tell the Commission that Chinese imports had 
nothing to so with these closings.  As fa r back as 1997 I was involved in monthly 
staff meetings that discussed the cost leve ls in all Continental plants worldwide, 
including the U.S. 
The Mayfield plant was consistently the hi ghest cost plant in the global Continental 
system.  The Charlotte plant was also one of  the highest cost plants in the system.  
Continental was facing many issues during this period.  But Chinese import 
competition was not among them.381 
7.270  China further contends that, in press releases,  Continental attributed the closure of the 
Mayfield site to declining business conditions and escalating energy and raw materials costs, and the 
closure of its Charlotte facility to "global co mpetition putting pressure on us as our manufacturing 
costs are cheaper overseas", the "skyrocketing costs of energy, raw materials, and health care", and 
the plant's inability to successfully rest ructure its labor agreement with USW.382  China submits that 
no mention was made of Chinese import competition. 
7.271  China notes that Bridgestone closed its Ok lahoma City facility in 2006 because it produced 
smaller tyres at the lower-value end of the market.383  China asserts that, in a press release, 
Bridgestone said that "this plant produces tires in th e low-end segment of the market where demand is 
shrinking and fierce competition from low-cost producing countries is increasing".384  China asserts 
that the press release also stated that "the mark et is quickly running away from the products we 
produce in Oklahoma City".385  China submits that, again, no mention was made of Chinese import 
competition.  
                                                      
378 China's First Written Submission, para. 349. 
379 China's First Written Submission, para. 349. 
380 USITC Report, page 26. 
381 USITC Hearing Transcript, page 234. 
382 USITC Report, page I-15 and n. 51 (quoting press releases);  Continental, "CTNA to reduce 
production at Charlotte plant", 9 January 2006;  Contin ental, "CTNA announces indefinite suspension of tire 
production at Charlotte plant", 10 March 2006. 
383 USITC Report, page 64, n. 123 (dissenting Commissioners). 
384 "Bridgestone Firestone to close Oklahoma City Tire Plant", 13 July 2006. 
385 "Bridgestone Firestone to close Oklahoma City Tire Plant", 13 July 2006.   WT/DS399/R 
   Page 81  
 
  7.272  Regarding Goodyear's 2006 announcement of the clos ure of its Tyler plant, China asserts that 
Goodyear's press release explained this closure as co nsistent with its June 2006 announcement that it 
would exit certain segments of the private label tyre market.
386  China asserts that the press release 
also noted that "[t]he Tyler plan t principally produces small diameter passenger tires, a segment that 
has been under considerable pressure from low cost imports".387  According to China, this generic 
reference to "low-cost imports" could apply to any import source, including the many non-subject 
imports that are cheaper than domestic tyres.  China contends that the October 2006 press release 
never mentions imports from China. 
7.273  China also refers to three closures announ ced for 2009.  China contends that these 
three announced closures were all primarily due to  the economic crisis that began in 2008 and the 
overall decline in demand for tyres.388  China submits that there is no evidence that imports from 
China are to blame for these closures. 
7.274  China further contends that the USITC improperly found that imports from China were 
increasing before plant closures in 2006 and 2008, wher eas the decisions to close these plants were 
made before imports rose significantly in 2007. 
7.275  The United States  contends that the record showed that imports were already increasing 
before the announced plant closings, and that U.S.  producers issued contemporaneous statements at 
the time of these plant closings confirming that low-priced competition from imports, including subject imports from China, was an important part of their decisions.
389 
Purchases of tyre-manufacturing equipment by Chinese producers  
7.276  China  notes that the USITC relied on: 
articles in trade publications referred to a surge in the purchase of Western tire 
production equipment by Chinese tire manufacturers during the last ten years, indicating that Chinese producers were e xpanding their capacity to produce and 
export tires.
390 
7.277  China contends that the mere fact that  Chinese companies purchased western tyre 
manufacturing equipment says nothing about whether the U.S. producers voluntarily adopted their 
business strategy, or were "forced" to curtail lowe r-end manufacture in the United States by imports 
from China arriving in the U.S. ma rket.  According to China, the USITC did not find that domestic 
producers shut plants or took other action due to fears about increasing Chinese capacity.  China asserts that there is no evidence on the record to su ggest such a fear.  Furthermore, China contends 
that the increase in Chinese producti on capacity is only relevant in the context of a finding of threat of 
material injury. 
7.278  The United States  asserts that the USITC relied on the above article to demonstrate that 
market participants were well awar e of the extraordinary growth in the size and export capacity of the 
Chinese industry before and during th e period of investigation.  According to the United States, the 
USITC reasonably relied on this article as evidence that U.S. producers had closed certain production 
                                                     
 
386 "Goodyear announces planned closing of Tyler facility", 30 October 2006.   
387 USITC Report, pages I-16 through I-17 (citing "Goodyear announces planned closing of Tyler 
facility", 30 October 2006 (press release)). 
388 USITC Report, page 64 (dissenting Commissioners). 
389 USITC Report, pages 26-27.   
390 USITC Report, page 26. WT/DS399/R 
Page 82  
 
  facilities as a strategy to deal with the rapid grow th in the size and aggressiveness of the Chinese 
industry, and the rapid increase in its exports to the United States. 
Subject imports by U.S. producers
 
7.279  China  notes that the USITC referred to the fact that: 
U.S. producers were not among the largest importers of subject tires from China 
during the period examined and collectively accounted for only approximately 
23.5 percent of subject imports , including purchases in 2008. 
7.280  China  asserts that the fact that U.S. producers we re not the largest importers of Chinese tyres 
is a non sequitur , and has no bearing on whether imports from China were a significant cause of the 
business strategy that these global producers adopted. 
7.281  The United States  asserts that, because U.S. producers were not the primary importers of the 
subject imports, they were also not responsible fo r the large bulk of the increase in Chinese imports 
over the period.  The United States argues that 84.2 pe r cent of the growth in subject imports over the 
period of investigation was imported by companies other than U.S. producers.391  According to the 
United States, it was reasonable for the USITC to c onclude that this indicated that the industry's 
alleged "voluntary business strategy" was not itsel f responsible for the tremendous growth in the 
subject imports during the period. 
2006 Article:  imports from China expected to increase  
7.282  China notes that, in concluding that "a more reasonable explanation for U.S. producers' 
capacity reductions in 2006 and thereafter was a reaction to increases in subject imports from China 
that were already occurring and, given the size a nd degree of the increases, likely would continue in 
the future"392, the USITC cites specifically to a March 2006 article in MTD Modern Tire Dealer , 
entitled "China and You:  Expect more tire imports in  the years to come".  In particular, the USITC 
explains that: 
The article noted that China exported an estimated 21 million tires to the 
United States in 2005, and described the overall effect on domestic supply as 
"profound" and likely to remain so as impor ts increase. The article also said, with 
respect to Chinese production and shipments of  tires for the replacement market, that 
"everyone agrees there will be rapid growth in the segment, especially with all the 
activity from foreign investing."393 
7.283  China  contends that an article positing an e xpectation that imports from China would 
increase by an unspecified amount in the future hardly suggests that the global sourcing strategy 
adopted by the U.S. producers was not "voluntary", or that it was somehow dictated by imports from 
China. 
7.284  The United States asserts that this contemporaneous view of the "profound" effect that the 
increasingly large industry in China had had, and woul d have on the U.S. tyre market supports the 
USITC's view that the subject imports were lik ely to increase as China continued to expand its 
capacity, production, and share of shipments to the Un ited States.  According to the United States, it is 
                                                      
391 USITC Report, Table II-3. 
392 USITC Report, pages 26-27. 
393 USITC Report, page 27, footnote 150.   WT/DS399/R 
   Page 83  
 
  no wonder that domestic producers soon realized th at they could not compete with the increasing 
volumes of low-priced subject imports in that ma rket, and reacted by subs tantially reducing capacity 
and closing U.S. plants.  
(ii) Evaluation by the Panel 
7.285  China presents the domestic industry' s business strategy as an "other cause"
394 of material 
injury to the domestic industry, in the sense that declines in certain injury indicators (such as the 
volume-metrics, including production, shipments and ne t sales quantities) should be attributed to the 
domestic industry's withdrawal from the low-value seg ments of the replacement market (i.e., tiers 2 
and 3), rather than subject imports.  Under this theory, subject imports merely filled a "supply gap"395 
left by the retreating domestic industry. 
7.286  The Chinese respondents presented similar arguments before the USITC.396  Those arguments 
raised a serious issue that had to be addressed by the USITC, particularly given the lack of domestic producer support for the USW's petition, and the assertion by certain producers that they were not materially injured by subject imports from China
397, and would not change their operations in the 
event that a remedy were imposed.398 
7.287  The USITC did address this issue in its Report.   The USITC did so primarily in the follow 
extract from its Report: 
We do not agree that domestic producers voluntarily abandoned the lower-priced part 
of the U.S. tire market and that the subject imports simply filled the void left by their departure. Imports from China were already increasing before Bridgestone, Continental, and Goodyear announced the plant closings that occurred in 2006 and 
2008.
 The three companies confirmed in stat ements issued at the time of the 
announcements that low-priced competiti on from Asia, including China, was an 
important part of their decisions.**  Moreove r, articles in trade publications referred 
to a surge in the purchase of Western tire production equipment by Chinese tire manufacturers during the last ten years,
 indicating that Chinese producers were 
expanding their capacity to produce and e xport tires. U.S. producers were not among 
the largest importers of subject tires from China during the period examined and collectively accounted for only approximate ly 23.5 percent of subject imports, 
including purchases in 2008.
 Thus, we find that a more reasonable explanation for 
U.S. producers' capacity reductions in 2 006 and thereafter was a reaction to increases 
in subject imports from China that were already occurring and, given the size and 
degree of the increases, likely wo uld continue in the future. 399 
** In a footnote, the USITC noted that: 
All three companies cited import competition as a factor in their plant 
closings: Bridgestone cited "fierce competition from low-cost producing countries" as a factor in closing its Oklahoma City plant in 
2006; Continental cited "global competition" and "manufacturing 
                                                     
 
394 See Section V.C.4 of China's First Written Submi ssion, entitled "The USITC ignored or failed to 
assess fully other causes of injury". 
395 See, for example, China's Reply to Question 41 from the Panel, para. 58. 
396 See, for example, USITC Report, pages 19-20, and 26. 
397 USITC Report, page III-10. 
398 USITC Report, page VI-1. 
399 USITC Report, page 26, footnotes generally omitted. WT/DS399/R 
Page 84  
 
  costs [that] are cheaper overseas" as contributing to the closure of its 
Charlotte, NC, plant in 2006; and for Goodyear, pressure from low-cost imports was cited as contributing to closure of its Tyler, TX, plant in 2008. CR at I-20-22, PR at I-15-17.
400 
7.288  The USITC also found that "significant and continuous" underselling by subject imports 
"eroded the domestic industry's market share", causing  the domestic industry to "reduce capacity so as 
to focus on the parts of their business in which they  could expect to remain profitable despite the 
impact of subject imports from China".  The USIT C found that "the substan tial reduction in domestic 
capacity and the closures of U.S. plants during th e period examined were largely a reaction to the 
significant and increasing volume of subject imports from China, and were not, as respondents argue, 
part of a strategy by domestic tire produces to volun tarily abandon the low-priced, 'value' segment of 
the U.S. market".401 
7.289  China challenges the USITC's treatment of a number  of factors, including in particular plant 
closures in 2006 and 2008, the purchase of tyre-m anufacturing equipment by Chinese producers, the 
proportion of total subject imports made by U. S. producers, and a 2006 article regarding the 
"profound" effect of subject imports on the U.S. in dustry.  While we necessarily consider the USITC's 
handling of these factors, and the relevant eviden ce, individually, we shall also assess the USITC's 
conclusion on the basis of the totality of the factors and evidence relied on by the USITC. 
7.290  Before turning to the evidence regarding the abovementioned fact ors, we first consider it 
necessary to make a number of more genera l observations regarding China's arguments. 
General observations regarding China's arguments  
7.291  We note that China presents the domestic indus try's business strategy as an "other cause"402 of 
material injury to the domestic industry.  Chin a contends that, following the domestic's industry's 
abandonment of tier 3, "imports from other countries,  including China, were then left to fill the 
'supply gap'".403  In this sense, subject imports are to so me extent presented as an "own goal", since 
they result from the industry's own business strategy.  At the same time, though, China argues that the 
U.S. producers are "global companies with global sourcing strategies"404, and that their "[o]perations 
in China have enhanced the[ir] profitability".405  China further argues that "the imports from China 
(and other low-cost jurisdictions) are a positive  factor"406 for U.S. producers, who "were themselves 
responsible for manufacturing and importing many of these tires".407  In this sense, China also 
presents the subject imports resulting from408 the domestic industry's strategy of off-shoring the 
production of low-value tyres as being non-injurious.409  These different aspects of China's arguments 
prompt the following observations. 
                                                      
400 USITC Report, footnote 147. 
401 USITC Report, pages 24-25. 
402 See Section V.C.4 of China's First Written Submi ssion, entitled "The USITC ignored or failed to 
assess fully other causes of injury". 
403 China's Reply to Question 41 from the Panel, para. 58. 
404 China's First Written Submission, para. 345. 
405 China's First Written Submission, para. 348. 
406 China's First Written Submission, para. 349. 
407 China's First Written Submission, para. 349. 
408 This would seem to cover all subject imports, and not merely those imported by the U.S. producers. 
409 In the same vein, China argues that the decline in volume-based injury factors should not justify a 
determination of material injury, since those metrics simply reflect the domestic industry's desire to withdraw 
from the low-end of the tyre market.   WT/DS399/R 
   Page 85  
 
  7.292  First, the argument that subject imports are non-injurious is belied by the (increasing) margin 
of underselling established by the USITC.
410  Indeed, one might legitimately wonder why such 
underselling was necessary if the domestic industry had, as alleged by China, voluntarily ceded the 
low-end of the market, and if subject imports were merely filling the resultant "supply gap". 
7.293  Second, if the domestic industry' withdrawal had really left a void in parts of the market, one 
would have expected that both subject and non-su bject imports would have  benefited from the 
domestic industry's withdrawal.  Indeed, China clai ms that "imports from other countries, including 
China," were left to fill that "supply gap".  The record clearly indicates, though, that only subject 
imports benefited from the domestic industry's alleged withdrawal from parts of the market.411  
Furthermore, although China refers specifically to  the U.S. industry shifting production to Brazil and 
Indonesia412, we note that Indonesia's share of imports only increased from 1.8 to 4.3 per cent over the 
period, while Brazil's share barely moved from 4 to 4.1 per cent.  Over the same period, imports from 
China increased from 12.9 to 33.1 per cent of total imports. 
7.294  Third, we note China's argument that "[f]ro m 2006 to 2007, when the largest increases in 
imports from China and Chinese market share occu rred, the U.S. tire industry in fact had its best 
financial performance".413  Although the domestic industry gene rally did record its highest operating 
margin (i.e., operating income as a proportion of sales) of the period in 2007414, when the rate of 
increase in subject imports was greatest, there were  still three (out of ten) domestic producers who 
recorded operating losses that year.415  In addition, when the absolute volume of subject imports was 
greatest, in 2008, the domestic industry recorded its worse operating loss of the period.  We are not persuaded, therefore, that there is necessarily any positive connection between the volume of subject 
imports and the profitability of the domestic industry. 
7.295  Fourth, although China contends that, as a re sult of their business strategy, domestic 
producers "were themselves responsible for manufacturing and importing many of these tires [from China]",
416 the USITC found417 that domestic producers only accounted for 23.5 per cent of subject 
imports in 2008, the year when "the full effect  of the industry's shifting business strategy" was 
allegedly being felt.418  If subject imports really were bei ng imported by U.S. producers consistent 
with their own business strategy of off-shoring produc tion of tier 2 and 3 tyres, and if subject imports 
really were beneficial to domestic  producers, we would expect domest ic producers to account for a far 
greater proportion of subject imports.  In fact, over the period of investigation as a whole, the USITC 
record showed that 84.2 per cent of the growth  in subject imports was imported by companies other 
than U.S. producers.419 
7.296  Fifth, regarding China's claim that the dom estic industry's "[o]perations in China have 
enhanced the[ir] profitability",420 we find no obvious nexus betw een any increase in the domestic 
industry's profitability and the volume of subject tyr es imported by domestic producers.  In particular, 
                                                      
410 See USITC Report, page 23.  China challenges the USITC's findings on underselling.  We address, 
and reject, China's arguments at paras. 7.254 to 7.258 above. 
411 Overall, the share of non-subject imports in total U.S. imports declined from 87.1 to 66.9 per cent 
over the period (USITC Report, Table II-1). 
412 See China's First Written S ubmission, para. 346. 
413 China's First Written Submission, para. 11. 
414 USITC Report, Table C-1. 
415 USITC Report, Table III-5. 
416 China's First Written Submission, para. 349. 
417 USITC Report, page 26. 
418 China's comments on U.S. Reply to Question 49 from the Panel, para. 50. 
419 USITC Report, Table II-3. 
420 China's First Written Submission, para. 348. WT/DS399/R 
Page 86  
 
  as the volume of subject tyres imported by U.S. producers increased by 163 per cent between 2004 
and 2008
421, the domestic industry's operating margin fell by 4.8 percentage points, going from a 
positive operating margin of 2.4 per cent to a negative operating margin of 2.4 per cent.422  
Furthermore, from 2006 to 2007, when the operating margin increased  by 5.5 percentage points, the 
volume of subject imports by U.S. producers had incr eased by only 3.6 per cent.  When the volume of 
subject imports by U.S. producers increased more substantially – by 33.6 per cent – from 2007 to 
2008, the domestic industry's operating margin fell by 6.9 percentage points. 
7.297  We now turn to China's arguments concerning the a number of the specific factors relied on 
by the USITC. 
Plant closures  
7.298  Put simply, the main issue concerning plant cl osures is whether such closures preceded, and 
indeed prompted, the increase in subject imports, or whether plants were closed as a result of 
competition from subject imports.  In addressing this  issue, the USITC relied on evidence regarding 
the closure of the Continental, Charlotte, plant in 2006, the Bridgestone, Oklahoma City, plant in 
2006, and the Goodyear, Tyler, plant in 2008.423  Our analysis will ther efore focus on the evidence 
and arguments regarding these three plant closures.424 
7.299  Regarding the Continental, Charlotte, plant, we note that a contemporaneous Continental 
press release attributed the closure of this plant to inter alia  "global competition putting pressure on us 
as our manufacturing costs are cheaper overseas".425  As observed above, the USITC interpreted this 
to be a reference to import competition from China.   For our part, we consider that Continental's 
reference to "global competition" should  be understood as competition from other Continental plants 
in the world.  This is because the press relea se clearly refers to "our" manufacturing costs being 
"cheaper overseas".  As to whether import compe tition from other Continental plants in the world 
might include subject imports from China, we note that the USITC Report clearly states that 
Continental did not have any production facilities in China.426  Since Continental did not have any 
production facilities in China, there was no proper basi s for the USITC to conclude that imports from 
Continental plants around the world might include subject imports from China.  We also note that a 
former Continental employee testified before the US ITC that "Chinese imports had nothing to do with 
[the Charlotte] closing[]".427  In these circumstances, the USITC c ould not properly have  attributed the 
closure of the Continental, Charlotte plant to subject imports from China. 
7.300  Regarding Bridgestone's closure of its Okla homa plant, the contemporaneous press release 
stated that "this plant produces tires in the low-end segment of the market where demand is shrinking 
and fierce competition from low-cost producing countries is increasing".428  The press release further 
stated that "the market is quickly running away from the products we produce in Oklahoma City".  To 
some extent, then, shifts in demand played a part in  the closure of the Bridgestone, Oklahoma plant.  
However, the reference to "fierce competition from low-cost producing countries" suggests that shifts 
                                                      
421 USITC Report, Table II-3. 
422 USITC Report, Table C-1. 
423 See USITC Report, footnote 147, and U.S. Reply to Question 51 from the Panel. 
424 Since the USITC did not rely on evidence regardin g the Continental, Mayfie ld plant, or the three 
closures announced for 2009, we shall not consider  the evidence regarding these additional closures. 
425 Continental press release, "CTNA announces indefinite suspension of tire production at Charlotte 
plant", 10 March 2006. 
426 USITC Report, pages IV-3 to IV-6, describing "U.S. Producers' Subject Tire Manufacturing 
Facilities in China".  No Continental plant is included in this listing. 
427 USITC hearing transcript, page 234, lines 7-15. 
428 Bridgestone press release, "Bridgestone Firestone to  close Oklahoma City Tire Plant", 13 July 2006.   WT/DS399/R 
   Page 87  
 
  in demand were not entirely responsible for the clos ure of that plant.  The reference to "fierce" 
competition also suggests that import competition was not as benign as China suggests, and that imports were not merely filling a "supply gap" caused  by the industry's retreat from the low-end of the 
market.
429 
7.301  As to whether the USITC could properly have understood Bridgestone's reference to "fierce 
[import] competition" to include competition from s ubject imports from China, we note that the press 
release makes no express mention of imports fro m China.  However, footnote 130 of the USITC 
Report provides that the average margin of underselling by subject imports was 10.8 per cent in 2004, 14.8 per cent in 2005, and 18.8 per cent in 2006.  Furthermore, the average unit price for non-subject imports was consistently higher than the averag e unit price for subject imports during the period 
2004 - 2006.
430  Indeed, by 2006 only imports from Indonesia were cheaper than subject imports from 
China431, and Indonesian imports represented only 3.4 per cent of total imports in 2006, compared to 
subject imports' 21.2 per cent share.  Furthermore,  the Chair of the USITC, in expressing separate 
views on remedy, stated that "information in the record shows that the volume of third-country 
imports has declined since 2005, and that unit va lues of third-country imports are on average well 
above those of imports from China and closer to those of domestic tires".432  In fact, the volume of 
non-subject imports declined 1.8 per cent from 102,424,000 tyres in 2005 to 100,601,000 tyres in 2006, whereas the volume of subject im ports increased 29.9 per cent from 20,790,000 to 
27,005,000 in this period.  In addition, the market share of subject imports nearly doubled from 
4.7 per cent in 2004 to 9.3 per cent in 2006, whereas the market share of non-subject imports increased only slightly from 31.9 per cent to 34.5 pe r cent over the same period.  In light of the 
increasing underselling by, and growth in, subject impor ts relative to non-subject imports in the years 
2004-2006, we consider that it was not unreasonabl e for the USITC to understand the reference to 
"fierce [import] competition" to include subject imports from China. 
7.302  In addition, we note that the USITC Report states: 
The 2006 announced closure of Bridgestone's Oklahoma City, OK plant was 
reportedly related to both the plant's pr oduct mix (low-end segment of the market) 
and intense competition from lower-cost sources - low-cost Korean and Chinese-
made  tires specifically cited.
433 
7.303  In response to a question from the Panel regarding this statement by the USITC, the 
United States explained that a senior Bridgestone  employee was quoted in a contemporaneous press 
article as identifying "low-cost Korean and Chinese-ma de tires flooding the U.S. market as one of the 
reasons for the plant's economic troubles".434 
7.304  For these reasons, we consider that the USITC c ould properly have attributed the closure of 
the Bridgestone, Oklahoma City, plant to subject imports. 
7.305  Regarding the closure of the Goodyear, Tyler, plant in 2008, we note that Goodyear's 
contemporaneous press release noted that "[t]he Tyler plant principally produces small diameter 
passenger tires, a segment that has been under c onsiderable pressure from low cost imports".435  In 
                                                      
429 China's Reply to Question 41 from the Panel, para. 58. 
430 USITC Report, Table C-1. 
431 USITC Report, Table II-1. 
432 USITC Report, page 42. 
433 USITC Report, page III-16, footnote 62, emphasis added. 
434 U.S. Reply to Question 52 from the Panel, para. 55. 
435 USITC Report, pages I-16 through I-17 (citing "Goodyear announces planned closing of Tyler 
facility", 30 October 2006 (press release)). WT/DS399/R 
Page 88  
 
  theory, it is possible that this generic reference to  "low-cost imports" could apply to imports from any 
source, including non-subject imports.  In the circum stances of this case, though, we consider that the 
USITC was entitled to understand this to be a referen ce to subject imports from China, particularly in 
light of the above considerations regarding th e increasing underselling by, and growth in, subject 
imports relative to non-subject imports.  The co mpetition from subject imports was clearly greater 
than the competition from non-subject imports.
436 
7.306  We note China's argument that subject imports c ould not have played an important role in the 
decisions by U.S. producers to close the above mentioned plants because such closures were 
announced before the significant increase in subject im ports in 2007.  China also  contends that subject 
imports only represented 6.8 per cent of the U.S. ma rket by volume and 4.7 per cent by value at the 
end of 2005.  China adds that subject imports were "dwarfed" by non- subject imports, with non-
subject imports holding 33.6 per cent of the U.S. market by volume and 31.2 per cent by value in 
2005. 
7.307  The USITC record indicates that all three of the abovementioned plant closures were 
announced in 2006.  The press release for th e Bridgestone closure was dated July 2006.437  The press 
release for the Continental closure was also dated July 2006.438  The Goodyear closure was described 
in 2008 as being consistent with, and therefore presu mably part of, a June 2006 announcement.  It is 
true, therefore, that these closures were announced  prior to 2007.  However, although China seeks to 
focus the Panel's attention on 2007, and the fact th at subject imports increased by their greatest 
amount in that year, the USITC record shows a ve ry substantial increase in the volume of imports 
prior to 2006.  In particular, the USITC found: 
Subject imports from China increased from 14.6 million tires in 2004 to 20.8 million 
tires in 2005 (or by 42.7 percent), 27.0 million tires in 2006 (or by an additional 29.9 percent), and 41.5 million tires in 20 07 (or by an additional 53.7 percent).
439 
7.308  Thus, between 2004 and 2006, when the above mentioned plant closures were announced, 
subject imports had already increased significantly by 85 per cent.440  Although the greatest growth in 
                                                      
436 Furthermore, we note that union officials testified before the USITC to the e ffect that the Goodyear, 
Tyler, plant was closed as a result of subject imports  from China.  One union official testified that: 
 
Imports from China closed our plant ….  From the very beginning, Goodyear told us the Tyler plant was at risk because of lo w-priced imports.  … the company repeatedly identified imports 
from Asia, including fast-growing imports from China, as a threat to our plant.  (USITC 
Hearing Transcript at 93-94).  
Another union official testified that:  
 In interim meetings with Goodyear since 2003, we've had open discussions about imports 
from China.  In presentations to the union, G oodyear specifically identified low-priced Asian 
imports as a threat to our facilities, and they show that China's share of these imports are 
rising steadily.  … To help the company survive the onslaught of tires from China, it was not 
enough just to cut costs.  There was simply no way to compete with China on cost alone.  
Their prices are so far below any rational level you would get in a functioning market that 
even if we came to work for free we couldn' t compete on the basis of  cost. (USITC Hearing 
Transcript at pages 85-86.) 
437 USITC Report, page I-15, footnote 45. 
438 USITC Report, page I-15, footnote 51. 
439 USITC Report, footnote 146. 
440 At interim review, China argued that because the plant closures were announced only halfway 
through 2006, these decisions should be viewed in light of subject import data from 2005 – not totals for the 
   WT/DS399/R 
   Page 89  
 
  the rate of increase in subject imports was yet to occur, in 2007, the fact that subject imports had 
already increased by 85 per cent before the plant closures was sufficient for the USITC to properly 
find, in the context of the additional evidentiary  considerations outlined above, that these plant 
closures were linked to the increase in subject im ports from China.  Regarding the importance of 
subject imports relative to non-subject imports, we  recall our above finding concerning the increasing 
underselling by, and growth in, subject imports relative to non-subject imports. 
7.309  We also note China's argument that U.S. producer s "testified repeatedly that they had shifted 
domestic production away from lower-end tires to the premium, higher-value branded segment".
441  In 
making this argument, China cites only to the following finding by the dissenting commissioners: 
Domestic producers … made significant strategic business decisions to shift U.S. 
production toward higher-value tires and capitalize on consumer brand loyalty.442 
7.310  This statement by the dissenting commissioners does not constitute, nor refer to, producer 
testimony.  Furthermore, there is no doubt that U.S. producers reduced U.S. production of tyres for tiers 2 and 3 of the replacement market.  The issue un der examination is whether the U.S. industry did 
so voluntarily, independent of competition from s ubject imports, or whether the domestic industry 
was forced to close U.S. production capacity as a result of competition from Chinese imports.  The 
abovementioned statement by the dissenting commissi oners does not address this particular issue. 
7.311  China also submits that testimony before the USITC by "businessmen directly engaged in 
buying and selling tier 3 tires emphasized that U. S. producers were not pushed out of tier 3 – but 
instead abandoned it".
443  We recall, though, that even in 2008 the U.S. industry still made 18.6 per 
cent of its shipments to tier 3 of the replacement ma rket.  We also recall the finding by the dissenting 
commissioners that. 
We recognize that domestic tire producers have not abandoned the tier 3 market, as 
respondents maintain.444 
7.312  Accordingly, China has not presented convinc ing evidence that producers acknowledged that 
they voluntarily closed U.S. production operations for the low-end of the replacement market.  While 
it is true that none of the U.S. producers expr essed support for the petition, only four out of ten 
producers said they were not materially injured by subject imports.  Other producers either said they 
were not in a position to answer, or took no pos ition on the issue.  Furthermore, although some 
producers said they would not change their operati ons in the event that a remedy was imposed,445 this 
fact is hardly surprising given that a remedy of only three years' duration was under consideration.  
There would be little value in adapting to a market situ ation that would likely only last for three years, 
whereupon subject imports would resume. For the a bove reasons, we consider that the USITC could 
properly attribute plant closures to subject imports.   
                                                                                                                                                                     
whole year 2006.  We are not persuaded by this argument.   First, as noted above, the USITC record indicated 
that subject imports had already increased by 42.7 per cent from 2004 to 2005.  Second, the volume of imports 
at the end of 2006 is a fair reflecti on of the trend in subject imports during the course of 2006, while the plant 
closures were occurring. 
441 China's First Written Submission, para. 346. 
442 USITC Report, page 45, cited by China in footnote 386 of its First Written Submission. 
443 China's Reply to Question 41 from the Panel, para. 58. 
444 USITC Report, page 64. 
445 USITC Report, page VI-1. WT/DS399/R 
Page 90  
 
  Subject imports by U.S. producers
 
7.313  China suggests that the proportion of subject imports made by U.S. producers is not relevant 
to the issue of whether or not rapidly increasing subject imports played any role in the domestic 
industry's decision to shift the production of certain tyres overseas.  However, we recall that the USITC was responding to an argument that domestic producers had voluntarily ceased production in 
the United States of lower- value tyres, as part of a restructuring of their global production operations, 
and replaced those tyres with imports from other sources, including China.  Presumably, as discussed 
above,
446 if U.S. production of lower-value tyres ha d declined because domestic producers had 
decided to replace domestic production of low-valu e tyres with imports from their global production 
facilities, it would be expected that much of the gr owth in imports of subject merchandise would have 
been on behalf of those domestic producers.  In this  context, the volume of subject imports made by 
domestic producers is relevant.  China also not es the proportion of subject imports made by 
U.S. producers, and that U.S. producers importing subject imports is "in line with" the abovementioned business strategy.
447  In other words, China itself refers to the proportion of  subject 
imports made by U.S. producers as proof of the existence of the abovementioned business strategy. 
7.314  We already touched upon this issue at para. 7. 295 above.  In this respect, we recall China's 
argument that "the imports from China (and other low-cost jurisdictions) are a positive  factor"448 for 
U.S. producers, who "were themselves responsib le for manufacturing and importing many of these 
tires".449  If China's argument were correct, it would seem reasonable to expect U.S. producers to 
account for a relatively large share of subject imports (as the more they would import, the better off they would be).   
7.315  In these circumstances, we see  no error in the USITC having considered the proportion of 
subject imports actually accounted for by U.S. produ cers.  Furthermore, we see no error in the USITC 
having relied on the fact that U.S. producers onl y accounted for approximately 23.5 per cent of 
subject imports to support a finding – based also on ot her considerations – that U.S. producers had not 
voluntarily ceased U.S. production of the low-end tyres. 
Purchase of tyre-manufacturing equipment by Chinese producers
 
7.316  As an initial matter, we note China's argum ent that any increase in Chinese production 
capacity should only be relevant in the context of a finding by the USITC of a threat of material 
injury.  While this factor would be of particular rele vance in an analysis of threat of material injury, 
we do not consider that an objective and impartia l investigating authority should be precluded from 
relying on such evidence – in conjunction with additional evidence regarding other factors – to 
determine whether subject impor ts might have caused domestic producers to cease producing low-
value tyres. 
7.317  As to the significance of the evidence consid ered by the USITC, we note that the trade 
publication article cited by the USITC reports th at Chinese producers had been increasing their 
production capacity for the ten years preceding 2008, long before the abovementioned plant closures 
in the United States occurred.  The article also reports that the "China boom" (in purchases of tyre-
making equipment) "has not ended", even though Ch ina already hosted half of the world's tyre-
making facilities.  In our view, this article provided a reasonable basis for the USITC to conclude that 
U.S. producers might well have decided that subject imports from China had already become an 
                                                      
446 See para. 7.295 above. 
447 China's First Written Submission, para. 347. 
448 China's First Written Submission, para. 349. 
449 China's First Written Submission, para. 349.   WT/DS399/R 
   Page 91  
 
  inescapable part of the market, and would continue to grow in significance, such that U.S. producers 
should adapt their business strategy accordingly.  Comb ined with other relevant evidence, this article 
could properly support a determination by an objectiv e and impartial investigating authority that "a 
more reasonable explanation for U.S. producers' capacity reductions in 2006 and thereafter was a 
reaction to increases in subject imports from China that were already occurring and, given the size and 
degree of the increases, likely wo uld continue in the future".
450 
2006 Article:  imports from China expected to increase  
7.318  China contends that an article positing an exp ectation that imports from China would increase 
by an unspecified amount in the future hardly sugge sts that the global sourcing strategy adopted by 
the U.S. producers was not "voluntary", or that  it was somehow dictated by imports from China. 
7.319  We agree that the article, in and of itself, does not explain that the U.S. produces closed plants 
as a result of subject imports.  However, the article does indicate that subject imports from China had already had a "profound" impact on the domestic industr y, and that the industry generally agreed that 
subject imports would increase further ("everyone ag rees there will be rapid growth in the segment, 
especially with all the activity from foreign investing" ).  When considered in light of other evidence, 
this evidence might properly be used to support a determination that domestic producers would have 
had an interest in adapting their business strategy in  the face of, rather than independent of, subject 
imports from China.  
(iii) Conclusion 
7.320  The Panel was confronted with the fact that  the majority of the USITC and the dissenting 
commissioners drew precisely the opposite conclu sions on the issue of business strategy.  The 
majority took the view that the strategy to reduce U.S. production and locate production in China was 
itself a response to increased imports and thus it was not an alternative cause that prevented the 
increasing imports from China to be a significant cau se.  The dissenting commissioners took the view 
that the business strategy of relocating production to  China was an independent business strategy that 
began before imports were increasing.  Yet both cons idered precisely the same evidence.  There was 
no evidence considered by the dissentin g commissioners that was not also  considered by the majority.  
And, no further evidence that might have been consid ered by the majority but was not was adduced in 
this case. 
7.321  In these circumstances, it would be inappropriate for the Panel simply to make a choice 
between the views of the majority and the dissenting commissioners.  In fact, our own assessment of the record indicates that it is diffi cult to separate out the business strategy from the increasing imports.  
It may well be, as the dissenting commissioners say, that the strategy of relocating to China began 
before 2004 and before the substantial increases in subject imports.
451  But it is also true that plant 
closures occurred after the increase in imports and may well have been linked to the competition from 
imports.  Indeed, the decision to locate productio n in China might have been the result of an 
independent business strategy, but the decision to cl ose plants might well have been a response to 
imports.   
7.322  In the light of these considerations, the Pa nel can see no basis for determining that the 
USITC's analysis of the alternative business strategy  was in error.  It was for China to establish a 
prima facie case of such error and it failed to do so. 
                                                      
450 USITC Report, page 26. 
451 USITC Report, page 49 (dissenting Commissioners). WT/DS399/R 
Page 92  
 
  (b) Changes in demand 
7.323  China  claims that a proper evaluation of demand by the USITC would have shown that any 
injury suffered by the domestic industry was cau sed by changes in demand,  rather than subject 
imports.  China submits that the USITC overlooked four important changes in demand for tyres in 
the United States.  First, there was a prolonged contr action in demand over the period of investigation, 
with apparent consumption falling by 10.3 per cent during the 2004-2008 period.  China asserts that 
consumption was lower in every year except 2007, which saw a modest, but short-lived, increase.  China recalls the dissent's observation that consum ers were buying fewer ty res, and driving more 
miles on their existing tyres.
452  China also asserts that, from 2007 to 2008, there was almost a one-to-
one correspondence between the decline in the overall U.S. market and the decline in U.S. domestic 
shipments. 
7.324  Second, China contends that the contraction in demand was particularly pronounced in the 
OEM market, with total shipments in that market fall ing by 28 per cent.  China recalls that the U.S. 
producers devoted approximately 20 per cent of their domestic production to the OEM market. 
7.325  Third, China submits that the recession of 2 008, and the near-collapse of the U.S. auto 
industry, greatly accelerated this contraction in  demand.  China notes that consumer demand for 
vehicles – a key determinant for tyre demand – fell dr amatically in 2008.  China refers to the dissent's 
observation that: 
The near collapse of the US automobile industry lent a devastating blow to the OEM 
market in 2008.  Thus the fact that the industry's performance turned negative in 2008 
was not the result of subject imports (whose rate of increase had slowed), but was due 
to the effects of the economic recession on US producers' sales to both the OEM and 
replacement markets.453 
7.326  Fourth, China asserts that, at the same time c onsumer demand shifted in favour of larger 
tyres, even for smaller, fuel-efficient vehicles.  Ac cording to China, this required producers to shift 
production, and in some cases reduce capacity or  close factories that produced smaller tyres.454   
7.327  China contends that the USITC barely acknowledge d these changes in demand in its Report.     
(i) Demand over the period of investigation as a whole:  correlation with injury 
Arguments of the parties  
7.328  China  contends that there was a "prolonged contraction" in demand over the period of 
investigation, with appa rent consumption falling by 10.3 per cent during the 2004-2008 period.  China 
asserts that consumption was lower in every year  except 2007, which saw a modest, but short-lived, 
increase.  China also contends that the volume indi cators (of the condition of the domestic industry) 
track demand more closely than subject imports.  Ac cording to China, moderate declines in demand 
during the 2004-2005 and 2005-2006 periods correspond with moderate declines in domestic industry 
volume indicators.  China asserts that, during the 2006-2007 period, demand increased, and the domestic industry volume indicators improved as a r esult.  China contends that, during the 2007-2008 
period, the trends reverse:  demand and volume indicators fell sharply, while imports from China 
                                                     
 
452 USITC Report, pages 47-48 (dissenting Commissioners). 
453 USITC Report, page 64 (dissenting Commissioners). 
454 See USITC Report, page 51, n. 47 (dissenting Commissioners);  USITC Report, pages III-1 
through III-6.   WT/DS399/R 
   Page 93  
 
  moderated.  China also asserts that, from 2007 to 2008, there was almost a one-to-one correspondence 
between the decline in the overall U.S. market and the decline in U.S. domestic shipments. 
7.329  Regarding the trend in demand over the period of investigation, the United States  denies that 
there was a "prolonged" contraction in demand "appa rent across the entire period of investigation".
455  
The United States asserts that the record showed th at apparent U.S. consumption declined slightly 
by 0.8 per cent from 2004 to 2005, and by 4.4 per cent from 2005 to 2006, but actually increased 
by 1.6 per cent from 2006 to 2007, before declining by 6.9 per cent from 2007 to 2008.  According to the United States, therefore, demand "fluctuated" somewhat during the period, even though it had declined overall by the end of the period.
456   
7.330  The United States submits that the USITC also c onsidered the possibility that the recession in 
2008 had affected the link between the increased imports and injury, by examining the impact of the 
recession in 2008 on the increasing volumes of the su bject imports, and on the volumes trends for the 
U.S. industry and non-subject imports.457  The United States notes that the USITC found that, "even 
in 2008 when U.S. apparent consumption was falling, " the record showed that the subject "imports 
continued to increase rapidly".458  Specifically, the USITC stated, "subject imports increased by 
4.5 million tyres in 2008, while U.S. consumption declined by 20.4 million tyres".459  T h e  
United States asserts that the USITC pointed out th at, in contrast, the quantities of U.S. tyres and 
those of non-subject imports declined during 200 8, with imports from third countries falling at 
roughly the same pace as the decline in consumpti on, and U.S. production falling by 11.1 per cent, a 
pace that was significantly faster than the 6.9 per cent decline in consumption in that year.460  The 
United States argues that, given these trends in 20 08, the USITC reasonably rejected the claims of 
Chinese respondents that the recession in 2008 explaine d all or most of the declines in the industry's 
production and shipment levels during that year461, and therefore reasonably concluded that the 
recession did not indicate that the subject imports were  not a significant cause of material injury to the 
industry.462 
7.331  The United States asserts that if injury fact ors tracked demand, the 2007 1.6 per cent increase 
in demand should have resulted in a similar incre ase in the volume indicators.  The United States 
asserts that this did not happen, as volume indicator s all fell from 2006 to 2007.  The United States 
notes, though, that in 2007 subject imports incr eased by 53.7 per cent, in excess of the increase in 
demand.  The United States asserts that the lack of correlation between injury factors and demand is also evident from the 2004-2005 period, when demand fell slightly, by 0.8 per cent, but the injury 
indicia fell by a considerably faster pace.  The United States acknowledges that both demand and 
injury indicators fell in 2006 and 2008, but asserts  that the declines in the industry's condition 
considerably outpaced the declin es in demand in those years. 
7.332  China  submits that the U.S. analysis is overly- simplistic, and based on the assumption that 
the only causal factor at work is subject imports from China.  Regarding 2007, China contends that 
injury indicators do not have to precisely track th e increase in demand.  According to China, the 
changes in 2007 should rather be compared to the ch anges in 2006.  In this regard, China asserts that, 
because 2006 saw a decrease in demand while 2007 saw  an increase, the changes in the injury 
                                                     
 
455 Oral Statement by China at Fi rst Panel Meeting, paras. 77-78. 
456 USITC Report, page 15 and 32.    
457 USITC Report, page 26.   
458 USITC Report, page 26.   
459 USITC Report, page 26.   
460 USITC Report, page 26.   
461 USITC Report, page 26 & 29.   
462 USITC Report, page 29.   WT/DS399/R 
Page 94  
 
  indicators in 2007 should be much more modest than the changes in 2006.  China contends that they 
were, in the sense that the volume indicators declin ed by less in 2007 than in 2006.  According to 
China, the changes in all volume-based metrics significantly improved in 2007 when demand increased, as compared to the changes in 2006 wh en demand decreased.  China contends that the 
changes experienced by the domestic industry in 2007 must also be viewed in light of the industry's 
change in business strategy, which inevitably cause d volume indicators to decline.  Regarding the 
other years, China contends that the U.S. argum ent rests on the false premise that when assessing the 
changes in demand it is proper to expect the injury factors to change by the same amount .  China 
submits that, while correspondence in degrees of  magnitude is important and indicative of 
coincidence, it is unlikely that there will be a pr ecise one-to-one correlation in a multi-causal world.  
China contends that, where the degree of co rrespondence between demand and the industry's 
condition is not exact, the other causal factors, su ch as changing business strategy, should be taken 
into account. 
Evaluation by the Panel
 
7.333    Although the USITC did not include in its report a discrete section on demand, in our view 
the USITC ultimately did properly address the issue of demand, and did prope rly find that subject 
imports had injurious effects independent of any inju ry caused by changes in demand.  In particular, 
we note the USITC's finding that: 
The large increase in the volume of subject im ports is also reflected in those imports' 
large and growing share of the U.S. market. Subject imports increased their share of the U.S. market by 12 percentage points (more than threefold) between 2004 and 
2008, from 4.7 percent in 2004 to 16.7 percent in 2008. More than half of this 
increase, 7.4 percentage points, has occurred since 2006.
463 
7.334  In a footnote at the end of that finding, the USITC calculates subject imports' "share of the 
quantity of apparent U.S. consumption" for the whol e period of investigation:  4.7 per cent in 2004, 
6.8 per cent in 2005, 9.3 per cent in 2006, 14.0 per cent in 2007, and 16.7 per cent in 2008.464  The 
USITC expressly found: 
The ratio of subject imports to U.S. apparent consumption increased by 
12.0 percentage points during the period exam ined, with the two largest year-to-year 
increases also occurring at the end of the period in 2007 and 2008.465 
7.335  In a related footnote, the USITC stated: 
... The ratio of subject imports to U.S. apparent consumption increased from 
4.7 percent in 2004 to 6.8 percent in 2005, 9.3 percent in 2006, 14.0 percent in 2007, 
and 16.7 percent in 2008.466 
7.336  The USITC clearly found, therefore, that the ratio of subject imports to U.S. apparent 
consumption increased throughout the period of in vestigation.  Even when demand increased by 
1.6 per cent in 2007, the volume of subject imports increased by the significantly greater figure of 
53.7 per cent.  As a result, subject import market sh are increased by 4.8 percentage points, while the 
domestic industry's market share declined by 3.4 po ints (and the market share of non-subject imports 
                                                      
463 USITC Report, page 22. 
464 USITC Report, footnote 127. 
465 USITC Report, page 12. 
466 USITC Report, footnote 52.   WT/DS399/R 
   Page 95  
 
  declined by 1.1 per cent).
467  In 2005, demand fell by a very modest 0.8 per cent.  Subject imports in 
that year increased by 42.7 per cent, resulting in a 2. 1 percentage point increase in market share, while 
the domestic industry's market share fell by 3.7 pe rcentage points.  In 2006, as demand fell by 4.4 per 
cent, the volume of subject imports increased by a fu rther 29.9 per cent, resulting in a 2.4 percentage 
point increase in subject import market share.  This contrasted with a 3.4 percentage point decline in 
the domestic industry's market share. 
7.337  Regarding 2008 in particular, the USITC found: 
Moreover, imports continued to increase ra pidly even in 2008 when U.S. apparent 
consumption was falling. Subject imports increased by 4.5 million tires in 2008, while U.S. apparent consumption declined  by 20.4 million tires. Imports from third 
countries declined by 6.0 million tires in 2008,  or by 6.1 percent, roughly consistent 
with the 6.9 percent decline in U.S. apparent consumption in 2008. Meanwhile, 
domestic production of subject tires declined by 20.0 million tires in 2008, or by 11.1 
percent, and absorbed virtually all the d ecline in U.S. apparent consumption that 
year.
468 
7.338  We further note that, as demand fell by 6.9 per cent in 2008, the volume of subject imports 
continued to increase by an additional 10.8 per cent,  resulting in a 2.7 percentage point increase in 
market share, compared with a fa ll in the domestic industry's market share of 2.9 percentage points. 
7.339  Notwithstanding the above record evidence regard ing the injurious effects of subject imports 
as distinct from the injurious effects of changes in demand, China asserts that the decline in the state 
of the domestic industry correlated with a "prolonge d contraction" in demand, such that the USITC 
should have attributed any injury suffered by the domestic industry to that contraction in demand.  We 
begin by considering whether or not there really was a "prolonged contraction" in demand over the period of investigation as a whole, as alleged by Ch ina.  We note in this regard that apparent 
consumption
469 of all passenger vehicle and light truck tyres declined (by volume) by 10.3 per cent 
from 2004 to 2008.  We also note, though, that the bulk  of this fall in apparent consumption occurred 
at the end of the period of investigation, from 2007 to 2008.470  Prior to 2007, apparent U.S. 
consumption declined slightly by 0.8 per cent  from 2004 to 2005, by 4.4 per cent from 2005 to 2006, 
but actually increased by 1.6 per cent from 2006 to 2 007.  Accordingly, while there was a pronounced 
                                                      
467 USITC Report, Table C-1. 
468 USITC Report, page 26, footnote omitted. 
469 During the Panel's second substantive meeting with the parties, China argued that the USITC 
improperly relied on apparent consumption as a proxy for demand.  China pursued this argument in response to Question 31 from the Panel.  In our view, it is entirely appropriate for investigating authorities to use apparent 
consumption as a proxy for demand in the context of trade remedy investigations.  Indeed, we understand that it 
is common practice for investigating authorities to do so.  Furthermore, in these proceedings China has itself referred to apparent consumption data as a proxy for demand.   At page 32 of its first oral statement, for example, 
China submits a chart of graphs, the first of which is entitled "Changes in Total Consumption (Proxy for 
Demand)".  Furthermore, at para. 76 of its second oral st atement, China refers to the "broader trend of declining 
consumption over the entire period".  In doing so, China refers to para. 322 of its Second Written Submission, 
which in turn refers to "the broader contraction in demand that was apparent over the entire period".  In this 
context, therefore, China is clearly using the term "consumption" as a synonym for demand.  Furthermore, at 
para. 332 of its First Written Submission China refers to the fact that "[a]pparent consumption ... fell by 
10.3 percentage points" to support it argument that there was a "prolonged contraction in demand".  Finally, in China's comments on the U.S. Replies to Questions from  the Panel after the second meeting, China refers to 
USITC apparent consumption data to describe the movements in demand ( See para. 42). 
470 According to Table V-1 of the USITC Report, apparent consumption fell from 307,484,000 to 
296,091,000, i.e., 3.7 per cent, over four years between 2004 and 2007.  Apparent consumption fell by 6.9 per 
cent in the single year from 2007 to 2008 (from 296,091,000 to 275,702,000). WT/DS399/R 
Page 96  
 
  decline in apparent consumption from 2007 to 2008, the record evidence does not demonstrate a 
"prolonged contraction" in demand over the peri od of investigation as a whole.  In these 
circumstances, we see no error in the USITC's finding that demand (or apparent consumption) 
"fluctuated"
471 during the period of investigation. 
7.340  We note China's assertion that demand declined by 4.4 per cent from 2005 to 2006, but 
improved by 1.6 per cent from 2006 to 2007, and that this improvement in demand correlates with an 
"improvement" in injury factors, in the sense that the continued downward movements in volume-
based injury factors from 2006 to 2007 were "muc h more modest" than the changes from 2005 
to 2006.  We acknowledge that the decline in vol ume metrics from 2006 to 2007 was less than for 
2005 to 2006.472  In our view, though, if correlation betw een demand and injury were to exist, an 
improvement in demand should generally result in an upward  movement in volume metrics.473  In this 
case, the 1.6 per cent increase in demand coincided with a 2.4 per cent decline  in production, a 5 per 
cent decline  in U.S. shipments, a 5.5 per cent decline  in net sales quantities, a 3.6 percentage point 
decline  in market share, a 6.4 per cent decrease  in the number of production-related employees, a 
3.7 per cent fall in hours worked, a 6.3 per cent decline  in wages paid, and a 2.7 per cent fall in hourly 
wages.  Thus, injury indicators did not improve as demand increased. 
7.341  Furthermore, we note that the change from 2006 to 2007 does not correlate in any meaningful 
manner with the change from 2004 to 2005.  In 2005,  demand fell by only 0.8 per cent.  At the same 
time, production fell by 4.8 per cent, U.S. shipment s quantities fell by 6.7 per cent, net sales quantities 
fell by 5.7 per cent, and market share fell by 3.7 pe rcentage points.  In other words, the 2005 0.8 per 
cent fall in demand had virtually the same effect on shipments and net sales as the 2007 1.6 per cent 
increase  in demand. 
7.342  Demand fell by 4.4 per cent in 2006, and by 6.9 pe r cent in 2008.  Injury factors also declined 
in those two years.  However, the decline in the volume-based injury factors was considerably more 
pronounced than the fall in demand.  In 2006, comp ared to a 4.4 per cent decline in demand, U.S. 
industry production fell by 11 per cent, shipments fell by 9.9 per cent, and net sales fell by 8.9 per 
cent.  In 2008, compared to a 6.9 per cent fall in demand, U.S. industry production fell by 11.1 per 
cent, U.S. shipments fell by 12.1 per cent, and ne t sales fell by 11.7 per cent.  Although the declines in 
shipments and net sales were more pronounced in 2 008 than 2006, the fall in production was virtually 
the same in those two years, d espite the fall in demand in 2008 (6.9 per cent) being considerably 
greater than in 2006 (4.4 per cent). 
7.343  Regarding 2008, China asserts th at the fact that th ere was almost a one-to-one correspondence 
between the decline in the overall U.S. market a nd the decline in U.S. domestic shipments from 2007 
to 2008 shows that the decline of the domestic i ndustry was closely linked to demand.  We note, 
though, that the U.S. industry held only 49.6 per cent of the market in 2008.474  Accordingly, there is 
no reason why the domestic industry should have absorbed more than its pro rata  share, i.e., 49.6 per 
cent, of the decline in demand in that year.  In our view, a decline in demand should generally have 
comparable effects on all sources of supply, includi ng subject imports.  The fact that the domestic 
industry was required to absorb virtually 100 per cent of the decline in demand in 2008, while subject 
                                                      
471 USITC Report, page 15. 
472 From 2005 to 2006, production fell by 11 per cent, shipments fell by 9.9 per cent, and net sales 
quantities fell by 8.9 per cent. 
473 China itself made a similar argument in these procee dings.  At para. 42 of its second oral statement, 
China argued that "production must go down if demand is going down".  We agree.  Just as production should decrease if demand declines , so production should increase if demand improves. 
474 USITC Report, Table C-1.   WT/DS399/R 
   Page 97  
 
  imports continued to increase by 10.8 per cent, demonstrates that subject imports were having effects 
on the domestic industry that could not be explained by that decline in demand. 
7.344  We note China's argument that, where the de gree of correspondence between demand and the 
industry's condition is not exact, the other causal fa ctors, such as changing business strategy, should 
be taken into account (in the sense that the change in strategy would explain changes in the domestic 
industry's volume metrics, as the production, shipment s and sales of low-value tyres are reduced).  In 
the light of our earlier findings relating to the change in business strategy, this factor cannot be used to 
explain any absence of correlation between demand and the state of the industry. 
7.345  Taking into account the above considerations, including in particular the USITC's findings 
regarding the effects of subject imports independent of changes in  demand, we conclude that the 
USITC's finding that injury should be attributed to su bject imports rather than demand is compelling.   
(ii) Demand in the OEM market 
Arguments of the parties
 
7.346  China  contends that the fall in demand was "particularly pronounced"475 in the OEM sector, 
where the domestic industry focused 20 per cent of its production.  According to China, the USITC 
should therefore have analysed demand trends in  the OEM sector separatel y from demand trends in 
the replacement market. 
7.347  The United States  submits that there was no need fo r the USITC to separately address the 
demand trend in the OEM market, as "there were  similar demand and import volume trends in the 
OEM market and overall market, that is, that demand  declined overall and that imports obtained an 
increasing share of the overall and OEM market".476  The United States also asserts that the OEM 
market was relatively less important for both domestic producers and subject imports from China.  In 
this regard, the United States notes the USITC's finding that the "replacement ma rket [was] by far the 
more important market for both groups of producers".477 
Evaluation by the Panel  
7.348  In support of its claim that the fall in OE M demand was "particularly pronounced", China 
asserts that total OEM shipments fell by 28 per cent ove r the period of investigation.  China derives 
this number from Table V-3 of the USITC Report.  Us ing the same data source, we calculate that the 
fall in total shipments to the replacement  market over the period was 33 per cent.478  By this measure, 
therefore, the decline in OEM demand was actually  less pronounced than the decline in demand in the 
replacement market.   
7.349  Furthermore, we note that the OEM sector was generally less important than the replacement 
market for both the domestic industry and subject imports.  In this regard, only 17.7 per cent of 
U.S. producers' shipments, and 5 per cent of subject  imports, went to the OEM market.  The domestic 
                                                      
475 China's First Written Submission, para. 333. 
476 U.S. Reply to Question 32 from the Panel, para. 5. 
477 USITC Report, page 21. 
478 According to Table V-3, shipments from all s ources to the replacement market in 2008 totalled 
228,162,000.  Total replacement shipments in 2004 totalled 341,332,000.  This constitutes a decline of 
113,170,000, which is 33 per cent of  total 2004 replacement shipments. WT/DS399/R 
Page 98  
 
  industry therefore shipped less tyres to the OEM sector than to tier 3 of the replacement market 
alone.
479 
7.350  Since the decline in demand was not more pronounced in the OEM market than the 
replacement market, and since the OEM market w as less important for the domestic industry and 
subject imports than the replacement market, we do not consider that the USITC was required to 
analyse demand in the OEM market separatel y from demand in the replacement market. 
(iii) The 2008 recession 
Arguments of the parties  
7.351  China  contends that the recession of 2008, and th e near collapse of the U.S. auto industry, 
greatly accelerated the contraction in demand.  Chin a claims that the USITC majority only mentions 
the 2008 recession dismissively and in passing: 
We have also considered the other possi ble causes of material injury cited by 
respondents, including the current recession , the contraction in the OEM tire market, 
sharp increases in raw material costs and raw material shortages, automation for increased productivity, imports from non-subject countries, higher gasoline prices 
resulting in less driving, strikes and labor actions, U.S. tire producers' high legacy 
costs, and other factors such as equipment restraints.
480 
7.352  The United States  contends that the USITC did cons ider the possibility that the recession 
in 2008 had affected the link between the increased im ports and injury, and concluded that it had not 
broken that causal link.481  The United States asserts that the USITC examined the impact of the 
recession in 2008 on the increasing volumes of the su bject imports, and on the volumes trends for the 
U.S. industry and non-subject imports482, and found that, "even in 2008 when U.S. apparent 
consumption was falling", the record showed that  the subject "imports continued to increase 
rapidly".483  Specifically, the USITC stated, "subject im ports increased by 4.5 million tires in 2008, 
while U.S. consumption declined by 20.4 million tires".484  In contrast, the USITC pointed out, the 
quantities of U.S. tyres and those of non-subject imports declined during 2008, with imports from 
third countries falling at roughly the same pace as the decline in consumption, and U.S. production 
falling by 11.1 per cent, a pace that was signifi cantly faster than the 6.9 per cent decline in 
consumption in that year.485 
Evaluation by the Panel  
7.353  We recall the USITC's finding that: 
Moreover, imports continued to increase ra pidly even in 2008 when U.S. apparent 
consumption was falling. Subject imports increased by 4.5 million tires in 2008, 
while U.S. apparent consumption declined  by 20.4 million tires. Imports from third 
                                                      
479 USITC Report, Table V-3 indicates that U.S. producers shipped 24,211,000 units to the OEM 
market in 2008.  According to data submitted by the United States in its Reply to Question 46 from the Panel, 
U.S. producers reportedly shipped 25,430,000 units to tier 3 in 2008. 
480 USITC Report, page 29, emphasis supplied, footnote omitted. 
481 USITC Report, page 26. 
482 USITC Report, page 26. 
483 USITC Report, page 26.   
484 USITC Report, page 26. 
485 USITC Report, page 26.     WT/DS399/R 
   Page 99  
 
  countries declined by 6.0 million tires in 2008,  or by 6.1 percent, roughly consistent 
with the 6.9 percent decline in U.S. apparent consumption in 2008. Meanwhile, 
domestic production of subject tires declined  by 20.0 million tires in 2008, or by 
11.1 percent, and absorbed virtually all the decline in U.S. apparent consumption that 
year.
486 
7.354  In making this finding, the USITC properly established that the injury to the domestic 
industry could not be attributed in whole to the fall in demand resulting from the 2008 recession.  The 
fact that subject imports continued to increase significantly during that recession, forcing the domestic industry to absorb virtually all of the resultant fall in demand, indicates that subject imports were 
having an adverse impact on the domestic industry i ndependent of the effects of the fall in demand 
during the 2008 recession.   
(iv) Shift to larger tyres 
Arguments of the parties
 
7.355  China  asserts that the domestic industry suffered injury as a result of consumer demand 
shifting in favour of larger tyres, even for smaller,  fuel-efficient vehicles.  According to China, this 
required producers to shift production, and in some  cases reduce capacity or close factories that 
produced smaller tyres.487 
7.356  The United States  submits that the record evidence did not  indicate that there was a "shift in 
demand in favor of larger tires" during the period of investigation.  The United States asserts that, in 
its questionnaires, the USITC asked U.S. producers and importers to report the factors that had a 
significant impact on demand trends during the period of investigation.488  The United States asserts 
that not one of the responding U.S. producers or impor ters reported that a "shift in demand in favor of 
larger tires" had affected demand tre nds during the period of investigation.489  Instead, producers and 
importers identified such factors as the "downt urn in the economy", "lower vehicle production", 
"fewer miles being driven", "overstretched tire life", "more radial tire use", "economic growth", 
"increased use in performance wheels", and "con tinued popularity of SUV' s, light trucks, and 
crossover vehicles" as being factors af fecting demand changes over the period.490  The United States 
further asserts that, in the press release cite d in the USITC Report's discussion of demand 
characteristics, the Rubber Manufacturers Association ("RMA") similarly did not attribute declines in 
the passenger or light truck tires markets in 2008 to  a "shift in demand in favor of larger tires".491  
Evaluation by the Panel  
7.357  At para. 339 of its First Written Submission, and para. 322 of its Second Written Submission, 
China asserts that the shift toward s larger tyre sizes caused U.S. pr oducers to close factories that 
produced smaller tyres.  In other words, China assert s that the shift to larger tyre sizes was bad for 
U.S. producers, as it reduced demand for their small- sized products.  In this regard, we note, as argued 
                                                      
486 USITC Report, page 26, footnote omitted. 
487 See USITC Report, page 51, n. 47 (dissenting Commissioners);  USITC Report, pages III-1 through 
III-6. 
488 USITC Report, page V-9-V-11.   
489 USITC Report, page V-9-V-11.   
490 USITC Report, page V-9.   
491 USITC Report, page V-9.   WT/DS399/R 
Page 100  
 
  by the United States
492, that none of the responding U.S. producer s or importers reported that a "shift 
in demand in favor of larger tires" had affected demand trends during the period of investigation.493   
7.358  Given that none of the respondent producers or importers reported any shift in demand in 
favour of larger tyres, we are not persuaded that the USITC should have considered any such shift in 
demand in its Determination.  
(v) Conclusion 
7.359  For the above reasons, we find no error in the USITC's consideration of changes in demand 
for tyres in the United States or the conclusion that any injury suffered by the domestic industry was 
caused by subject imports, rather than changes in demand. 
(c) Non-subject imports 
(i) Arguments of the parties 
7.360  China  argues that the USITC also failed to proper ly analyse the injury caused to the domestic 
industry by imports from countries other than Chin a.  China suggests that injury caused by non-
subject imports was improperly attributed to subject imports. 
7.361  In this regard, China notes the observation by the dissent that non-subject imports "dwarf" 
imports from China throughout the period.  China observes that, although their share of the U.S. 
market declined over the period, non-subject impo rts accounted for 66.9 to 87.1 per cent of all 
U.S. imports by quantity, whereas subject imports  from China accounted for only 12.9 to 33.1 per 
cent.494  
7.362  China contends that non-subject imports were also cheaper than U.S.-made tyres.  While 
China acknowledges that the average unit price for all non-subject imports in the period ($40 to $55) 
was $8-$10 higher than imports from China, this av erage unit price is still below the unit value of 
U.S.-produced tyres, which grew from $48/tyre to $ 69/tyre over the period.  Moreover, China asserts 
that the unit value of tyres imported from Indonesi a was lower than that of imports from China. 
7.363  The United States  asserts that the average unit values for non-subject imports were well 
above the average unit values for subject imports throughout the period.  The United States further 
asserts that the absolute volumes and market shar e for non-subject imports remained relatively steady 
over the period, in contrast to the significant in creases in both volume and market share by subject 
imports.  The United States notes that China had beco me the largest producer of tyres in the world by 
2006, producing 33 per cent of all passenger and light  truck tyres produced globally in that year.495  
According to the United States, therefore, the USITC's finding that undersold subject imports, not non-subject imports, displaced domestic sales, is fully supported by the record. 
                                                     
 
492 United States' Reply to Question 57 from the Panel, para. 67. 
493 USITC Report, pages V-9 to V-11.  Later in this proceeding, China linked th e increase in tyre sizes 
to the popularity of SUVs and light trucks.  However, this  is inconsistent with China's earlier arguments, as the 
decline in SUV production during the period of investigation would have affected the U.S. production of large  
tyres, whereas China initially argued that the shift to la rger tyres would have affected the U.S. production of 
small  tyres. 
494 USITC Report, page II-3, Table II-1. 
495 USITC Report, Table II-1.     WT/DS399/R 
   Page 101  
 
  (ii) Evaluation by the Panel 
7.364  The USITC found that the average unit value of subject imports increased from $31.10 – 
38.90 over the period, while the average unit valu e of non-subject imports increased from $40.42 – 
55.29, and the average unit value of U.S. pro ducers' shipments increased from $48.40 to 69.69.
496  
Thus, the prices of non-subject imports were lower th an those of U.S. producers throughout the period 
of investigation, and this may ha ve impacted negatively on the dom estic industry.  We note, though, 
that the average unit value of non-subject imports  remained 22-25 per cent higher than the average 
unit value of subject imports, suggesting that non-su bject imports would have had considerably less 
price effect on the domestic industry than subject  imports.  Indeed, by 2006 only imports from 
Indonesia were cheaper than subject imports from China497, and Indonesian imports represented only 
3.4 per cent of total imports in 2006, compared to subject imports' 21.2 per cent share.  Although 
imports from Indonesia remained cheaper than subject  imports for the remainder of the period, the 
market share of Indonesian imports only reached 4.3 per cent by the end of the period, compared with 
a market share of 33.1 per cent for subject imports from China.  Overall, the share of non-subject 
imports in total U.S. imports declined from 87.1 to 66.9 per cent over the period, as the share of 
subject imports to total U.S. imports increased from 12.9 to 33.1 per cent.  In this regard, the USITC 
found that "since 2006, imports from China gained a great er share of the U.S. market than was lost by 
domestic producers, indicating that they also took market share away from third-country sources".498   
7.365  The USITC further found that, whereas subject imports "increased by 4.5 million tires 
in 2008, while U.S. apparent consumption dec lined by 20.4 million tires", "[i]mports from third 
countries declined by 6.0 million tires in 2008, or by 6.1 per cent, roughly cons istent with the 6.9 per 
cent decline in U.S. apparent consumption in 200 8".  Furthermore, the Chair of the USITC, in 
expressing separate views on remedy, stated that "inf ormation in the record shows that the volume of 
third-country imports has declined since 2005, and that unit values of third-country imports are on 
average well above those of imports from China and closer to those of domestic tires".499 
7.366  The USITC's record also showed that, whereas subject imports from China were the fourth 
largest single import source in 2004, subject imports accounted for the largest single share of imports 
by 2006, and substantially increased th eir share of total imports by 2008.500 
7.367  Thus, although the volume of non-subject imports was greater than the volume of subject 
imports from China, and although non-subject impor ts remained cheaper th an domestically-produced 
tyres, the dominant feature of the U.S. market was the rise of subject imports from China at the 
expense of both non-subject imports and the U.S. indus try.  In these circumstances, and in light of the 
above considerations, we find that the USITC did not fail to properly analyse injury caused by non-
subject imports or improperly attribute injury cau sed by non-subject imports to subject imports. 
(d) Miscellaneous other factors  
(i) Arguments of the parties 
7.368  China  submits that the USITC also neglected seve ral other alternative causal factors noted by 
respondents, including:  sharp increases in raw materi al costs and raw material shortages;  automation 
                                                      
496 USITC Report, Table C-4. 
497 USITC Report, Table II-1. 
498 USITC Report, page 26. 
499 USITC Report, page 42. 
500 USITC Report, Table II-1, showing that subject impor ts accounted for 12.9 per cent of total imports 
in 2004, and 33.1 per cent of total imports in 2008. WT/DS399/R 
Page 102  
 
  for increased productivity;  higher gasoline prices resulti ng in less driving; strikes and labour actions;  
U.S. tyre producers' high legacy costs; a nd other factors such as equipment restraints.
501  China does 
not develop any arguments regarding these factors, other than to claim that the USITC essentially 
listed and then dismissed these factors, wit hout a reasoned and ade quate explanation. 
7.369  The United States  submits that China has failed to o ffer evidence to support its claim that 
these factors were causes of material injury to the industry during the period, or to explain why they 
are significant enough to break the causal link be tween the subject imports and injury.  The 
United States contends that China simply asserts th at the "USITC essentially listed and then dismissed 
these factors, without a reasoned and adequate explanation" of them.502  The United States argues that 
this is legally insufficient to meet China's burde n, as complainant, to present evidence and argument 
sufficient to establish a presumption that the measu re being challenged is inconsistent with a 
Member's WTO obligations.503  The United States asserts that Ch ina has failed to explain why any of 
these factors was actually a cause of injury to the industry, or why th ese factors break the existence of 
a causal link between the subject imports and injury to the industry.  Furthermore, the United States 
contends that the USITC did, in fact, ad dress these other factors in its analysis. 
7.370  China submits that it did meet its burden of proof regarding these other factors, as it "has 
pointed out that the USITC wrongly dismissed these  factors with little or no discussion, because the 
statute did not require a weighing of causal factors".504  China then challenges the United States' 
assertion that the USITC did adequately address the relevant other factors. 
(ii) Evaluation by the Panel 
7.371  It is not sufficient for a complaining party to si mply point out that the investigating authority 
failed to address certain other factors, or failed to address them in sufficient detail.  The complaining 
party must first establish prima facie the relevance of those other factors, i.e., their capacity to cause injury to the domestic industry, and their potential to break the causal link between the subject imports 
and the material injury to the domestic industry.  This China has not done.  Thus, while these other 
alternative factors might have been relevant, we do no t consider that in this regard China has met its 
burden of proof.   
(e) Cumulative assessment 
(i) Arguments of the parties 
7.372  China  asserts that each of the abovementioned factors taken individually severs the causal 
link between subject imports and market disruption.  China contends that, when these other factors are 
considered cumulatively, "the extent to which th ey sever the causal link is even more dramatic". 
7.373  China acknowledges that "the requirement to cons ider all alternative causes together is not 
required in every case", but claims that "the in terrelated nature of the various conditions of 
competition require them to be considered together."
505  China relies in this regard on the statement by 
the Appellate Body in EC – Tube or Pipe Fittings  that "there may be cases where because of the 
specific factual circumstances therein, the failure to  undertake an examination of the collective impact 
                                                      
501 USITC Report, page 29. 
502 China's First Written Submission, para. 356. 
503 Appellate Body Report, US – Shirts and Blouses , pages 14-15. 
504 China's Second Written Submission, para. 337. 
505 China's First Written Submission, footnote 240.   WT/DS399/R 
   Page 103  
 
  of other causal factors would result in the investigat ing authorities improperly attributing the effect of 
these other causal facts to dumped imports".
506   
7.374  The United States  asserts507 that China's argument ignores th e fact that the Protocol itself 
imposes no obligation on the competent authority to perfo rm an analysis of such other factors at all, 
and certainly does not require the authority to conduct an analysis of the effects of these factors on a 
cumulative basis.  The United St ates asserts that, even under the AD Agreement , the Appellate Body 
has stated that an antidumping authority is not re quired to examine the collective impact of other 
causal factors.508  The United States argues that, although the AD Agreement , unlike the Protocol, 
includes language contemplating that an authority sh ould consider the injurious effects of other causal 
factors in its analysis, the Appellate Body stated that this specific language:  
does not compel, in every case , an assessment of the collective  effects of other causal 
factors, because such an assessment is not always necessary to conclude that injuries 
ascribed to dumped imports are actually caused by those imports and not by other factors.
509 
7.375  According to the United States, even when a pa rticular agreement requires an analysis of 
other injury factors, the Appellate Body has refused  to require the investigating authorities to examine 
the effects of those factors on a cumulative basis.  The United States contends that since China has 
failed to establish why it would be necessary to conduct such an analysis here, and since the Protocol 
does not require any analysis of these factors, the Panel should reject China's interpretation of the 
Protocol on this matter. 
(ii) Evaluation by the Panel 
7.376  China claims that the USITC was required to demonstrate that the collective  injurious effects 
of the industry's business strategy, the change in demand, non-subject im ports and miscellaneous 
other factors were not sufficient to break the causal link between the increasing imports and the 
material injury to the domestic industry. 
7.377  In EC – Tube or Pipe Fittings  the Appellate Body found that "there may be cases where, 
because of the specific factual circ umstances therein, the failure to undertake an examination of the 
collective impact of other causal factors would result in the investigating authority improperly 
attributing the effects of other causal factors to dumped imports".510  Notwithstanding the lack of any 
requirement for cumulative assessment in the Prot ocol, we acknowledge that there may be cases 
where the collective injurious effect of other causal  factors might be so dominant that the injury 
caused by increasing imports could not properly be f ound to be "significant".  However China has not 
demonstrated that this was the case in the underlying USITC investigation.511  Accordingly, we find 
that China has failed to establish that in the context of the present case the USITC should have 
provided a cumulative assessment of the effects of the other causes of injury. 
                                                      
506 Appellate Body Report, EC – Tube or Pipe Fittings , para. 192. 
507 U.S. First Written Submission, paras. 329–330. 
508 Appellate Body Report, EC – Tube or Pipe Fittings , para. 192. 
509 Appellate Body Report, EC – Tube or Pipe Fittings , para. 191. 
510 Appellate Body Report, EC – Tube or Pipe Fittings , para. 192. 
511 Indeed, in rejecting China's claims regarding the USITC's assessment of the individual injurious 
effects of these other factors, we ha ve reviewed record evidence indicatin g that subject imports from China had 
significant injurious effects, independent of any injurious effects of other causal factors. WT/DS399/R 
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  (f) Conclusion 
7.378  For all of the above reasons, we find that Chin a has failed to establish that injury caused by 
other factors was improperly attributed to subject imports.  
5. Conclusion 
7.379  Having carefully considered all of the arguments  of the parties, and taking into account our 
standard of review, we find that the USITC did not fail to properly establish that rapidly increasing 
imports from China were a "significant cause" of material injury to the domestic industry. 
E. 
WHETHER THE TRANSITIONAL SAFE GUARD MEASURE WENT BEYOND THE "EXTENT 
NECESSARY ", CONTRARY TO PARAGRAPH 16.3  OF THE PROTOCOL  
7.380  China has two broad claims.  First, China claims  that no remedy is appropriate in this case as 
the USITC failed to establish that 'increasing rapidl y' imports from China are a 'significant cause' of 
market disruption.  Second, China claims that even if the United States had complied with the other 
requirements of Paragraph 16, the specific remedy applied by the United States in this case was inconsistent with Paragraph 16.3 because the remedy  was not limited to the market disruption caused 
by rapidly increasing imports from China.  China claims that the United States instead imposed a 
remedy that addressed all of the alleged market disr uption, including that caused  by factors other than 
rapidly increasing imports.   
7.381  The United States denies that the remedy we nt beyond the "extent necessary", contrary to 
Paragraph 16.3 of the Protocol. 
7.382  Since China's first claim relates to its subs tantive claims concerning Paragraphs 16.1 and 
16.4, we only address China's second claim in this Section of our Report.  That claim concerns 
Paragraph 16.3 of the Protocol, which provides: 
If consultations do not lead to an agr eement between China and the WTO Member 
concerned within 60 days of the receipt of a request for consultations, the WTO 
Member affected shall be free, in respect of such products, to withdraw concessions 
or otherwise to limit imports only to the ex tent necessary to prevent or remedy such 
market disruption.  Any such action sha ll be notified immediately to the Committee 
on Safeguards. 
1. Arguments of the parties 
(a) China 
7.383  China argues that the ordinary meaning of th e words  "only" and "necessary" (in the first 
sentence of Paragraph 16.3) emphasise the need fo r any restrictions to be "narrowly defined and 
properly focussed".
512  China continues that th e restrictions "cannot overcompensate and attempt to 
address broader injuries being suffered by the domestic industry".513 China argues that "the 
restrictions must be narrowly drawn so that they are limited solely to the extent 'necessary' to address 
the market disruption resulting from rapidly increasi ng imports from China that are a significant cause 
of material injury, and that market disruption alone".514  China argues that the objective is not to 
                                                      
512 China's First Written Submission, para. 362. 
513 China's First Written Submission, para. 362. 
514 China's First Written Submission, para. 362.   WT/DS399/R 
   Page 105  
 
  provide "some general benefit to the domestic industry".
515  China claims that the word "remedy" "can 
be defined as 'a means of counteracting or removing so mething undesirable;  redress;  relief.'  In other 
words, to 'remedy' market disruption m eans to remove that market disruption".516  
7.384  China argues that the terms of Paragraph 16.3 must  be read in context with "other provisions 
of Paragraph 16 and the provisions of other WTO agreements that address analogous issues."517  
China continues that this "context confirms that measures applied under Paragraph 16.3 can only 
address rapidly increasing imports from China that ar e a significant cause of material injury, and 
cannot be used to address the condition of  the domestic industry more generally".518  China claims 
that "the essential phrase of Paragraph 16.3 – that r estrictions may be imposed "only to the extent 
necessary to prevent or remedy such market disrupt ion" – can only be understood in the context of 
understanding the meaning of 'market disruption'.  'M arket disruption' refers to a situation in which 
imports are 'increasing rapidly' and are a 'significant cause of material injury'".519 
7.385  China submits that the focus of any permissible remedy must be on the effect of the allegedly 
injurious imports.  Although it may be possible to consider permissibly other aspects pertaining to the 
domestic industry, any permissible remedy must be limited  to the effect of the imports – and only the 
imports – themselves.  China therefore asserts that th e focus of a remedy should be on the effect of the 
allegedly injurious imports – not on the overall effect  on the domestic industry.  According to China, 
imports cannot be held responsible for the entire  downturn being experienced by the domestic 
industry, and the remedy cannot seek to address that  entire downturn.  China submits that, without 
ever determining the amount or magnitude of the injurious impact subject imports were allegedly 
having on the domestic industry, the United States  could not possibly have limited the imposed 
remedy to "only the extent necessary" to reme dy this impact, as required by Paragraph 16.3. 
7.386  China claims that there is no indication of "how the USITC took 'into account' the specific 
market disruption it had found to exist".520  Quoting further from the USITC Report, China contends 
that the focus of the USITC was on the benefits to  the domestic industry, not on the specific market 
disruption found to exist: 
"This increase in the tariff would significantly improve the competitive position of 
the domestic industry, increasing domestic production, shipments and employment 
and restoring the domestic industry to at l east a modest level of profitability.  The 
increase should accomplish this by reduci ng the quantity of subject imports and 
raising their price in the US market."521 
7.387  China  argues that the USITC's flawed approach to remedy is partly rooted in its flawed 
approach to causation.522  China criticises the USITC for saying, without explanation, that it did not 
need to weigh other causes in the market as im ports from China were themselves a significant 
cause.523  China claims that the USITC failed to provid e any "analysis of the role of alternative causes 
compared to that of imports from China".524  China claims this failure carried through to its remedy 
                                                      
515 China's First Written Submission, para. 363. 
516 China's First Written Submission, para. 363, q uoting the Shorter Oxford English Dictionary. 
517 China's First Written Submission, para. 364. 
518 China's First Written Submission, para. 364. 
519 China's First Written Submission, para. 365. 
520 China's First Written Submission, para. 384. 
521 China's First Written Submission, para. 38 4, quoting the USITC Report at page 35. 
522 China's First Written Submission, para. 386. 
523 China's First Written Submission, para. 386. 
524 China's First Written Submission, para. 387. WT/DS399/R 
Page 106  
 
  analysis where the USITC made "no attempt to calib rate its remedy to the market disruption caused 
solely by rapidly increasing imports from China".
525 
(b) United States 
7.388  The United States agrees that a remedy under the Protocol can only remedy the material 
injury that results from rapidly increasing imports from China.  The United States notes that China 
argues that the USITC considered the effect that increased tariffs would have on the U.S. industry.  In 
doing so, China claims that the USITC went beyond the extent necessary to remedy market disruption 
caused by rapidly increasing imports.  The United Stat es argues that this reasoning runs "directly 
contrary to the Protocol, which defines market disr uption, in part, in terms of material injury and 
threat of material injury to the domestic industry".526  Therefore, a Member seeking to comply with 
Paragraph 16.3 is entitled to consider the effect  on the domestic industry otherwise "it cannot know 
whether its remedy properly addresses market di sruption in the sense of material injury".527   
7.389  The United States disagrees that the statem ents quoted from the USITC Report support 
China's claims.  The United States argues that now here does the USITC suggest that the proposed 
tariffs will address all of the injury to the domestic industry.528  The United States continues in 
paragraph 341 of its submission that the USIT C gave a thorough explanation of its remedy 
determination.  Part D of the remedy recommenda tion "analyses the proposed tariff increase and how 
it is the 'most appropriate remedy to address the market disruption caused by rapidly increasing imports from China' making clear that it addressed  only the material inju ry caused by Chinese 
imports".
529  The United States argues that the USIT C discussion of why it rejected the remedy 
proposed by the petitioners gives further evidence of how it addressed the market disruption caused 
by the subject imports only.530  The USITC explained that the proposed quota by the petitioners would 
have been "equivalent to 65 ad valorem  tariff  'which we view to be higher than necessary to remedy 
the market disruption caused by rapidly increasing imports from China'".531  The United States 
continues that part E of the remedy recommendati on "addresses the short- and long-term effects of the 
recommended remedy, explaining that economic mo delling indicates that the proposed 55 per cent 
tariff would likely reduce shipments of Chinese tyres by 38.2 to 58.4 per cent in the first year.  The 
USITC then explains how this reduction in shipme nts will have an effect on domestic and non-subject 
imports, on their prices, and eventual ly on the domestic industry's revenue".532  The United States also 
quotes Chairman Aranoff's separate views on remedy as further evidence that only the material injury 
caused by subject imports was addressed in its remedy recommendation.533  The United States 
concludes that the USITC conducted a detailed analysis  to craft a remedy that would only address the 
injury caused by Chinese imports. 
                                                      
525 China's First Written Submission, para. 387. 
526 U.S. First Written Submission, para. 333. 
527 U.S. First Written Submission, para. 333.   
528 U.S. First Written Submission, para. 339. 
529 U.S. First Written Submission, para. 341. 
530 U.S. First Written Submission, para. 341. 
531 U.S. First Written Submission, para. 341, quoting page 36 and footnote 200 of the USITC Report. 
532 U.S. First Written Submission, para. 341. 
533 U.S. First Written Submission, para. 342.   WT/DS399/R 
   Page 107  
 
  2. Evaluation by the Panel 
7.390  China's basic argument
534 under Paragraph 16.3 of the Protoc ol is that a transitional product-
specific safeguard measure should not exceed the am ount necessary to prevent or remedy the market 
disruption caused by the subject imports .  China claims that the Tyres  measure necessarily exceeds the 
amount necessary to prevent or remedy the market disruption caused by the subject imports  because 
the USITC never determined the extent of the injury caused by those imports .  In other words, without 
knowing how much injury was caused by the subject imports, it was impossible for the United States to limit the measure to the amount necessar y to prevent or remedy that injury. 
7.391  We begin by noting that the parties agree th at a remedy imposed under Paragraph 16 of the 
Protocol should be limited to the injury / market disruption caused by the subject imports, rather than 
the injury / market disruption caused by all injurious factors generally.  We agree that the scope of the 
remedy should be limited in this way.
535 
7.392  We next consider China's argument that the US ITC's flawed approach to remedy is partly 
rooted in its flawed approach to causation.536  This raises issues regarding the relationship between the 
non-attribution requirement under the Protocol, and the scope of the remedy.  The Appellate Body 
found537 in US – Line Pipe  that Article 5.1 of the Safeguards Agreement  generally538 does not impose 
any obligation on a Member to justify, at the time of application, that the safeguard measure at issue is 
applied "only to the extent necessary."  The Appellate Body went on to state: 
This does not imply, as Korea seems to asser t, that the measure may be devoid of 
justification or that the multilateral verifica tion of the consistency of the measure with 
the Agreement on Safeguards  is impeded.  The Member imposing a safeguard 
measure must, in any event, meet several obligations under the Agreement on 
Safeguards .  And, meeting those obligations sh ould have the effect of clearly 
explaining and "justifying" the extent of the application of the measure.  By separating and distinguishing the injurious effects of factors other than increased imports from those caused by increased imports , as required by Article 4.2(b), and by 
including this detailed analysis in the repor t that sets forth the findings and reasoned 
conclusions, as required by Articles 3.1 a nd 4.2(c), a Member proposing to apply a 
safeguard measure should provide suffi cient motivation for that measure.  
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, as we will explain, should also provide a benchmark against which the 
permissible extent of the measure should be determined.
539 
                                                      
534 We note China's argument that the United States was not permitted to impose any transitional 
safeguard measure as the substantive requirements of the Protocol had not been met.  This argument concerns 
the claims addressed in the preced ing sections of this Report. 
535 We note that this is broadly consistent with the findings of the Appellate Body in US – Line Pipe .  
We generally consider that the reasoning at paras. 252-259 of that Appellate Body Report is not fully applicable 
in these proceedings, since it is based in part on the text of the second sentence of Article 4.2(b) of the 
Safeguards Agreement , which is absent from Paragraph 16 of the Protocol. 
536 China's First Written Submission, para. 386.  The reactions of the United States to this line of 
argument by China are included in Part C, on causation. 
537 Appellate Body Report, US – Line Pipe , para. 233. 
538 An exception is made in cases where the safeguard measure takes the form of a quantitative 
restriction which reduces the quantity of imports below th e average of imports in the last three representative 
years.  This exception has no bearing on the present case. 
539 Appellate Body Report, US – Line Pipe , para. 236. WT/DS399/R 
Page 108  
 
  7.393  Thus, the Appellate Body considers that a non- attribution analysis under Article 4.2(b), 
second sentence, of the Safeguards Agreement  will provide a "benchmark" (of injury attributed to the 
relevant imports), against which the permissible ex tent of the safeguard measure may be measured.  
Indeed, the Appellate Body went on to find that a violation of the obligation to perform a non-attribution analysis under Article 4.2(b), second sen tence, was sufficient to establish a prima facie 
case of violation of the Article 5.1 obligation to rest rict the measure to the ex tent necessary to prevent 
or remedy serious injury caused by the increased impo rts at issue.  This finding is the basis for China's 
argument that, because the USITC never determined th e extent of the injury caused by the subject 
imports, the Tyres  measure is necessarily excessive. 
7.394  Since Paragraph 16.4 of the Protocol does not  require the same type of non-attribution 
analysis as that required by the second sentence of Article 4.2(b) of the Safeguards Agreement
540,  the 
reasoning of the Appellate Body in US – Line Pipe  is not applicable. Although we consider that 
increasing imports should be viewed "in the context of" other factors, to ensure a proper finding of 
causation, there is no obligation to separate and disti nguish the injurious effects of factors other than 
increased imports from those caused by increased im ports (as required by the second sentence of 
Article 4.2(b) of the Safeguards Agreement ).541  Since there is no "full-blown" non-attribution analysis 
under the Protocol, there is no benchmark against whic h to measure the scope of the remedy.  Nor is 
there any basis for finding that a failure to separate and distinguish the injurious effects of rapidly 
increasing imports from the injurious effects of othe r causal factors establishes prima facie that the 
remedy is excessive.  Instead, China must itself demonstrate that the scope of the measure is excessive. 
7.395  While the lack of a benchmark creates difficulties in any challenge of the measure, 
nevertheless, the burden is on China to establish prima facie that the scope of the measure is 
excessive.  But the burden is not impossible.  For example, China might have challenged the accuracy of the analysis set forth in Exhibit US-20 which shows that the Tyres  measure was based on an 
objective assessment of the impact of the measure over the first year, and that the impact of the 
measure would have addressed the volume and price effects of the subject imports.  China has not 
challenged the accuracy of any of that analysis.  Nor did
 China provide any type of assessment of 
what the maximum permissible extent of the measure  should have been (i.e., in relation to the amount 
of injury caused by increased imports), and has th erefore failed to provide any benchmark by which to 
conclude that the extent of the Tyres  measure is excessive. 
7.396  The only additional argument by China concerns the fact that the measure was focused on 
improving the condition of the domestic industry gene rally, rather than on the specific harm caused by 
subject imports.  China alleges that the United States essentially assumed that the increasing imports 
from China were entirely responsible for the deterior ating condition of the domestic industry.  China 
refers in this regard to the following reasoning by the USITC: 
We believe that the tariffs will significantly reduce subject imports and boost U.S. 
industry sales and prices, resulting in increasing profitability.  This profitability will 
lead to the preservation of jobs and the creation of new ones, as well as encourage investment.
542 
                                                      
540 See para. 7.176 above. 
541 We note that China agrees that non-attribution under the Protocol does not require a precise 
quantification of the injury caused by the various injurious factors ( See China's Reply to Question 17(b) from 
the Panel, para. 71). 
542 USITC Report, page 30.   WT/DS399/R 
   Page 109  
 
  This increase in the tariff would signifi cantly improve the competitive position of the 
domestic industry, increasing domestic produc tion, shipments, and employment and 
restoring the domestic industry to at least a modest level of profitability.  The increase should accomplish this by reducing the quantit y of subject imports and raising their 
price in the U.S. market.
543 
7.397  However the Panel is not convinced that this  demonstrates that the measure is excessive.  
First, a measure is not necessarily excessive simply  because it seeks to improve the condition of the 
industry.  To the extent that the condition of the industry deteriorated as a result of increased imports, 
a measure designed to improve the condition of the industry does address the injurious effects of the 
increased imports.  While there is no guarantee that a measure imposed on this basis will not be 
excessive, there is similarly no certainty that a measure imposed on this basis will necessarily be 
excessive.   
7.398  Second, since the USITC found that the domestic industry suffered market disruption as a 
result of rapidly increasing subject imports that we re underselling domestic production, a measure that 
is aimed at "reducing the quantity of subject impor ts and raising their price in the U.S. market"  can be 
justified.  The Panel notes, however, that it does allow for the possibility of the expansion of non-
subject imports rather than the improvement of the condition of the domestic industry, and observes 
that is a consequence of a country-specific safegua rd and not a defect of the remedy in this case. 
7.399  For these reasons, we find that China has fa iled to establish prima facie that the Tyres  
measure exceeds "the extent necessary to prevent or  remedy" the market disruption caused by rapidly 
increasing subject imports, contrary to  Paragraph 16.3 of the Protocol.  
F. WHETHER THE DURATION OF THE REMEDY EXCEEDED THE PERIOD OF TIME NECESSARY TO 
PREVENT OR REMEDY MARKET DISRUPTION  
7.400  China claims that the three-year duration of the remedy exceeds the period of time necessary 
to prevent or remedy the market disruption, contra ry to Paragraph 16.6 of the Protocol.  The first 
sentence of Paragraph 16.6 provides: 
A WTO Member shall apply a measure pursuan t to this Section only for such period 
of time as may be necessary to prevent or remedy the market disruption. 
7.401  The United States denies China's claim. 
1. Arguments of the parties 
(a) China 
7.402  China claims that the decision by the United St ates to impose a remedy for three years is 
inconsistent with Paragraph 16.6 of the Protocol, which provides that a remedy may be imposed "only 
for such period of time as may be necessary to pr event or remedy the market disruption".  China 
asserts that this obligation limits the duration of any such safeguard measures to "such" market 
disruption, which is limited to that disruption pr operly attributed to rapi dly increasing imports from 
China.  In particular, China asserts that the ordi nary meaning of the terms "only" and "necessary" in 
Paragraph 16.6 makes it clear that a remedy measure can be in place only for the exact amount of time 
that is necessary to address and remedy the "mar ket disruption" caused by the rapidly increasing 
imports.  China further contends that the term "n ecessary" adds an additional meaning, in the sense 
                                                      
543 USITC Report, page 35. WT/DS399/R 
Page 110  
 
  that the use of this term confirms that a remedy  measure cannot simply be tangentially useful or 
helpful, but must rather be essential and indispensable  to prevent or remedy the market disruption that 
has been significantly caused by th e rapidly increasing imports from Chin a.  According to China, the 
ordinary meaning of Paragraph 16.6 will not permit a remedy measure that lasts longer than necessary, or one that is not precise in addressi ng the market disruption that has been properly 
justified as having been caused by rapidly increasing imports from China.  China also refers to the 
context of Paragraph 16, and the object and purpose ther eof, in support.  In particular, China contends 
that the Safeguards Agreement , the AD Agreement and the SCM Agreement all contain durational 
limitations, indicating that any remedy must be "narrowly tailored in terms of duration".
544 
7.403  China notes the discussion of the majority of th e USITC regarding the duration of the remedy: 
We recommend that the remedy remain in place for a three-year period because we 
believe that a remedy of such duration is needed to give firms and workers in the 
industry time to identify and implement needed adjustments to import competition.  Although domestic producers did not identify any specific planned adjustments in their questionnaire responses, other informati on in the record indicates that domestic 
producers have put plant and equipment upgrades on hold pending more favourable 
market opportunities.  Moreover, we anticipa te that the relief may encourage certain 
domestic producers to reconsider plant closures.
545 
7.404  According to China, this rationale says nothing about why tariffs need to last for three years 
to address the specific market disruption that had be en found – the market disruption that the USITC 
allegedly linked to imports from China that were "increasing rapidly", and that were the "significant 
cause" of injury to the domestic industry (rather than injury caused by "import competition" more 
generally).  China understands th e USITC's logic to be that b ecause imports from China could be 
blamed for certain problems, and since the domest ic industry would benefit from three years, the 
remedy should last for three years.  But China c ontends that, under Paragr aph 16.6 of the Protocol, 
whether the domestic industry would benefit from a three-year remedy is irrelevant, since this 
provision only allows a remedy to last for the pe riod of time needed to address the specific market 
disruption at issue. 
7.405  China also asserts that the USITC's rationale is defective because the USITC failed to give 
any significant weight to what U.S. producers them selves were saying, and the fact that the domestic 
producers had not provided specific restructuring plans, even though the USITC asked them to do so.
546  Instead, the USITC opined, that "the relief may encourage certain domestic producers to 
reconsider planned plant closures".547  China contends that such "sp eculation" is inadequate, since it 
fails to demonstrate that the three-year remedy measures imposed are necessary to remedy the market 
disruption (and why this three-year duration is n eeded to prompt producers to "reconsider" closure 
decisions).  China asserts that the President also im posed a remedy for three years without any regard 
to the specific market disruption "signifi cantly caused" by rapidly increasing imports. 
                                                      
544 China's First Written Submission, para. 401. 
545 USITC Report, page 36. 
546 USITC Report, page VI-1, Table VI-2.  China asserts that the public version of the determination 
does not provide any details, but does confirm the question was asked.  China notes that the USITC majority then confirms in its commentary that no specific adjustment plans were presented. 
547 USITC Report, page 36 (emphasis added).   WT/DS399/R 
   Page 111  
 
  (b) United States 
7.406  The United States does not dispute China's argum ents regarding the ordinary meaning of 
Paragraph 16.6 of the Protocol.  However, the Unite d States rejects China's argument that the duration 
requirements in the Safeguards Agreement , the AD Agreement , and the SCM Agreement demonstrate 
that "any remedy imposed must be na rrowly tailored in terms of duration".
548  The United States notes 
in this regard that the AD Agreement  and the SCM Agreement  allow the imposition of relief as long as 
the injurious dumping or subsidization continues. 
7.407  Regarding China's argument that a remedy measu re may remain in place "only for the exact 
amount of time" or "for that period of time speci fically found" to address the market disruption549, the 
United States submits that such level of exactitude is neither required nor possible.  The United States 
asserts that authorities cannot know at the time of ta king a measure the "exact amount of time" it will 
be necessary.  According to the United States, th is is why paragraph 246(f) of the Working Party 
Report explicitly allowed authorities to extend a meas ure based on a finding that "action continued to 
be necessary to prevent or remedy market disruption". 
7.408  The United States submits that China also fails to give appropriate weight to the remaining 
elements of Paragraph 16.6, which allow China to suspend concessions substantially equivalent to any 
safeguard measure two years after its application if there was a relative increase in imports and three years after application if there was an absolute  increase.  According to the United States, these 
elements indicate that the negotiators of the Pr otocol envisaged safeguard measures remaining in 
place for at least three years if there was an abso lute increase in Chinese imports, as was the case with 
regard to tyres, or even longer in the case of an extension under paragraph 246(f) of the Working 
Party Report.  The United States notes China's refere nce to these provisions as "rights that China has 
under certain circumstances"
550, but contends that they maintain their utility as context for the first 
sentence of Paragraph 16.6 or as an indication of the expectations of the negotiators of the Protocol. 
7.409  Regarding China's argument that the USITC's rationale "focuses entirely on the condition of 
the domestic industry and the time it needs to adju st", the United States recalls its argument (see 
preceding section) that the effect of the remedy on  the domestic industry is not merely relevant, but 
critical, in understanding whether it is "necessary to prevent or remedy market disruption". 
7.410  Regarding China's argument that the USITC did not give sufficient weight to the views of 
domestic producers who "had not prov ided specific restructuring plans"551, the United States refers to 
its earlier arguments (see preceding section) to the eff ect that the USITC weighed all of the evidence 
before it, and considered that the evidence fa vouring its remedy outweighed the evidence cited by 
China against the remedy. 
7.411  Regarding China's argument that the USITC re lied on "speculation" based on a quotation of 
part of one sentence stating that "we anticipate that the relief may encourage certain domestic producers to reconsider planned plant closures"
552, the United States contends that China draws the 
wrong conclusion.  The United States notes that, in the preceding paragraph, the USITC explained 
that it provided for progressive reduction of the leve l of the relief because "[w]e also expect the level 
of tariff protection that is necessary to offset ma rket disruption to decrease as new investments and 
                                                      
548 China's First Written Submission, para. 401. 
549 China's First Written Submission, paras. 397 and 405. 
550 China's First Written Submission, para. 399. 
551 China's First Written Submission, para. 414. 
552 China's First Written Submission, quoting USITC Report, page 36. WT/DS399/R 
Page 112  
 
  other adjustments are implemented".
553  According to the United States, the subsequent statement that 
the industry "may reconsider" plant closures reflects only the understanding that there are many "investments" or other "adjustments" the industry mi ght take, and that it was impossible to know with 
certainty at the time of its determinations wh ich ones the prevailing business climate would allow. 
2. Evaluation by the Panel 
7.412  As a preliminary matter, we note China's argument that the United States was not permitted to 
impose any transitional safeguard measure of any duration as the substantive requirements of the 
Protocol had not been met.  This argument is tied to the China's claims under Paragraphs 16.1 
and 16.4 of the Protocol, which we address in the preceding Sections of this Report.  The present 
Section focuses on China's arguments regarding th e consistency of the remedy imposed by the 
United States with Paragraph 16.6 of the Protocol. 
7.413  The core of China's claim under Paragraph 16.6 is based on the same arguments that China 
advanced under Paragraph 16.3.  As China itself explains: 
The arguments presented above regarding Artic le 16.3 are also applicable as regards 
the U.S. failure to comply with Article 16.6.  Similar to the requirements of 
Article 16.3, Article 16.6 of the Protocol limits a remedy to "only for such period of 
time as may be necessary…."  The USITC's failure to determine – either quantitatively or qualitatively – what effect  subject imports were allegedly having on 
the domestic industry makes it virtually impossible for a remedy to comply with Article 16.6's requirement.  Without knowing the effect that must be prevented or 
remedied, it is impossible to know for how long a remedy needs to be imposed.
554 
7.414  We recall that there was no obligation on the United States to explain why a three-year 
measure was needed to prevent or remedy th e market disruption caused by subject imports.555  We 
further recall that there was also no obligation on the United States to quantify the injury caused by 
increasing imports, or separate and distinguish that injury from injury caused by other factors.  Accordingly, it is not enough for China to simply "demonstrate[e] that the USITC failed to ascertain 
the amount of the alleged effect of s ubject imports on the domestic industry".
556  Instead, the onus is 
on China to establish prima facie that a three-year measure was excessive.  China has failed to meet 
this burden. 
7.415  For these reasons, we find that China has fa iled to establish prima facie that the Tyres  
measure exceeds the period of time necessary to preven t or remedy the market disruption, contrary to 
Paragraph 16.6 of the Protocol. 
G. WHETHER THE U .S. TYRES  MEASURE IS INCONSISTENT WITH ARTICLES I :1 AND II :1(B) OF THE 
GATT 1994 
7.416  China claims that the imposition of additiona l (transitional safeguard) duties on imports of 
subject tyres from China is inconsistent w ith Article I.1 of the GATT 1994, whereby: 
With respect to customs duties and charg es of any kind imposed on or in connection 
with importation or exportation or imposed on the international transfer of payments 
                                                      
553 USITC Report, pages 35-36. 
554 China's Second Written Submission, para. 361. 
555 See para. 7.20 above. 
556 China's Second Written Submission, para. 362.   WT/DS399/R 
   Page 113  
 
  for imports or exports, and with respect to the method of levying such duties and 
charges, and with respect to all rules a nd formalities in connection with importation 
and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of 
Article III,* any advantage, favour, privilege or immunity granted by any contracting 
party to any product originating in or destin ed for any other country shall be accorded 
immediately and unconditionally to the like pr oduct originating in or destined for the 
territories of all other contracting parties. 
7.417  China also claims that the imposition of th e additional (transitional safeguard) duties on 
imports of subject tyres from China is inconsistent  with Article II.1(b) of the GATT 1994, whereby: 
The products described in Part I of the Sc hedule relating to any contracting party, 
which are the products of territories of other contracting parties, shall, on their 
importation into the territory to which the Sc hedule relates, and subject to the terms, 
conditions or qualifications set forth in that Schedule, be exempt from ordinary 
customs duties in excess of t hose set forth and provided therein.  Such products shall 
also be exempt from all other duties or charges of any kind imposed on or in 
connection with the importation in excess of those imposed on the date of this 
Agreement or those directly and mandator ily required to be imposed thereafter by 
legislation in force in the importing territory on that date. 
7.418  China's GATT 1994 claims are entirely dependent  on its claims under Paragraph 16 of the 
Protocol.
557  Since we have not accepted China's claims under Paragraph 16 of the Protocol, we 
similarly do not accept China's claims under Articles I:1 and II:1 of the GATT 1994.  
VIII.  CONCLUSION  
8.1 For the reasons set forth above, we find that in imposing the transitional safeguards measure 
on 26 September  2009 in respect of  imports of subject tyres from China, the United States did not fail 
to comply with its obligations under Paragraph 16  of the Protocol and Articles I:1 and II:1 of the 
GATT 1994.   
 
_______________ 
 
 
                                                      
557 The dependent nature of China's GATT 1994 clai ms is shown by China's argument that there is 
"also" a GATT 1994 violation because of the additional duties "not having been justified as emergency action under relevant WTO rules" ( See China's First Written Submission, paras. 417 and 421).