Document: WT/DS202/R Page B-1 ANNEX B Parties' Answers to Written Questions Contents Page Annex B-1 Korea's answers to questions from the Panel B-2 Annex B-2 United States' answers to questions from the Panel and Korea B-17 Annex B-3 Canada's answers to questions from the Panel to third parties B-61 Annex B-4 European Communities' answers to questions from the Panel to third parties B-64 Annex B-5 Japan's answers to questions from the Panel to third parties B-77 Annex B-6 Mexico's answers to questions from the Panel to third parties B-82 Annex B-7 Korea's answers to questions from the Panel at the second meeting with the parties
Document codes: WT/DS202/R
Complainant: South Korea
Respondent: U.S.
Third parties: Australia, Canada, EU, Japan, Mexico
Dispute stage: Appellate Body
Agreements cited: Art. 2, 3, 4, 5, 7.1, 8  SafeguardsArt. I, XIII, XIX  GATT 1994Art. 11, 12, 9.1  Safeguards

ANNEX B
Parties' Answers to Written Questions
Contents Page
Annex B-1 Korea's answers to questions from the Panel B-2
Annex B-2 United States' answers to questions from the Panel and Korea B-17
Annex B-3 Canada's answers to questions from the Panel to third parties B-61
Annex B-4 European Communities' answers to questions from the Panel to
third parties
B-64
Annex B-5 Japan's answers to questions from the Panel to third parties B-77
Annex B-6 Mexico's answers to questions from the Panel to third parties B-82
Annex B-7 Korea's answers to questions from the Panel at the second meeting
with the parties
B-85
Annex B-8 United States' answers to questions from the Panel at the second
meeting with the parties
B-91

ANNEX B-1
KOREA’S ANSWERS TO QUESTIONS FROM THE PANEL
(7 May 2001)
I. INTRODUCTION
Before responding to the Panel’s questions, Korea would like to take the opportunity to note
that on 1 May 2001, the Appellate Body released its decision in US – Lamb Meat . In Korea’s
opinion, that decision is quite helpful in evaluating the issues before the Panel in this proceeding. Due
to the time constraints, Korea has not incorporated an analysis of that decision in its response to the
questions posed by the Panel, although Korea believes that its positions are consistent with the views
expressed by the Appellate Body. Korea has attempted, where possible, to incorporate references to
the Appellate Body’s decision in its Written Rebuttal, and Korea welcomes the opportunity to more
fully explore the implications of this decision at the next session of the Panel.
(i) Increased imports
3. In Argentina – Footwear, the Appellate Body found that the increase in imports must be
inter alia “recent enough.” (a) How “recent” should the increase in imports be, relative to the
date of the competent authority’s decision to impose a safeguard measure? (b) What is the
minimum period of time that a domestic industry would need in order to file a petition following
a sudden increase in imports? (c) In the present case, could the US line pipe industry have filed
a petition before it did? Please explain. (d) Could the ITC have reached its determination
before it did? Please explain.
Answer
(a) How recent?
It is the position of Korea that the “recent” increase in import levels should be in the period
immediately preceding the authority’s decision. From this it can be concluded that the last one-year
period is the “recent period” and a decline in the interim six-month period would constitute the most
relevant evidence in the recent period.1
Korea’s interpretation proceeds from the Appellate Body’s admonition in Argentina –
Footwear and Korea – Dairy that safeguard measures are reserved for emergency situations and thus
the requirements of the SA must be construed strictly. 2 Only a conservative approach to the question

1 A one-year period should be sufficient to evaluate whether a downward trend in imports (following
an increase) is sustained such that imports are not “being imported ... in such increased quantities.” See
Article 2.1 of the SA.
2 See Argentina – Safeguard Measures on Imports of Footwear, Report of the Appellate Body,
WT/DS121/AB/R (“ Argentina – Footwear (AB) ”) at para. 94 (“construing the prerequisites ... extraordinary
nature must be taken into account.”).

of the “recent period” can ensure that the increase in imports is “recent enough” to satisfy the
requirements of Article 2.1 of the SA.3
The concept of “recent” is crucial to the gravamen of Article XIX of the GATT 1994 and the
SA. The purpose of import measures under Article XIX and the SA is to remedy present or imminent
serious injury – not past injury.
In this case, the legal implications of th e texts of Article XIX of the GATT 1994 and of
Articles 2.1 and 4.2(a) of the SA, read together with the interpretations of the Appellate Body in
Argentina – Footwear, are as follows:
(a) “[I]s being imported ... in such increased quantities” refers to at the time the authority
makes its decision. Here, the “recent” period is characterized by a sustained decline
in absolute import levels which commenced in the second half of 1998 and continued
through the end of the period of investigation, coupled with the decline in the level of
imports relative to production in the six-month period immediately proceeding the
ITC’s decision. That was the present.
(b) It is not proper to analyze imports in 1999 by referring only to the same period one
year earlier and ignoring the immediately preceding six months. Article 4.2(a) of the
SA requires the consideration of all relevant factors concerning increased imports--
including the “rate and amount.” 4
(c) Specifically, given the finding of the Appellate Body in Argentina – Footwear
(“recent imports ... not simply trends ... during any other period of several years”), 5
the determination of what is “recent” cannot be several years. “Recent imports” are
those that occurred in the last year of the period with the most recent trends being the
most significant trends.
(b) Minimum time
Korea does not know the minimum time an industr y would need to file a petition; likely, this
would vary from case to case. However, the petition not only must demonstrate that imports were
increasing, it also must satisfy all of the other conditions of Article 2 of the SA. Thus, it must show
that the industry is significantly impaired (“seriously injured”) or that serious injury is imminent and
that the increase in imports is causally related to the serious injury of the industry. In this case, the
petition was filed in June of 1999. By that time, imports had been declining for a 12-month period,
two new US producers had emerged, and domestic capacity had increased by 25 per cent.
6

3 See e.g., Argentina – Footwear (AB) at para. 130 (“ ... the use of the present tense of the verb phase
‘is being imported’ in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994
indicates that it is necessary ... to examine recent imports. ... the phrase ‘is being imported’ implies that the
increase in imports must have been sudden and recent.”); see also para. 131.
4 We do not have information on the amount of the relative decline in imports because it is confidential,
but the United States permits the Panel (First Substantive Meeting) to do its own calculations of relative import
trends. Given that US domestic production increased in the first half of 1999 (ITC Determination, Staff Report
at II-20) and imports declined in the first half of 1999 (US 16 February Letter), imports declined relative to
domestic production in the first half of 1999.
5 Argentina – Footwear (AB) at para. 130 (emphasis added).
6 See ITC Determination, Separate Views on Injury at I-46; ITC Determination, Dissenting Views on
Injury at I-61, n.26; Exhibit 48A (Welded Line Pipe – Domestic Industry Capacity, Apparent Consumption and
Export Shipments)(KOR-48A).

(c) When the petition could have been filed
With respect to whether the US line pipe industry could have filed a petition before it did, this
question highlights the temporary nature of the decline in the line pipe industry factors. It also
confirms that there was no coincidence of trends between increased imports and declining industry
economic indicators and that import relief therefore was improper. When imports were increasing
(first half 1998), industry indicators were uniformly and strongly positive. In fact, many indicators
exceeded 1997 levels.
7 The industry was not suffering serious injury and imports were increasing
together with domestic shipments. When those industry indicators declined in late 1998/first half
1999, so did imports. Then, after the first half of 1999, the industry indicators had already improved
so any injury was no longer present at the end of the period. 8 Some illustrative scenarios can be
posed:
(a) Instead of filing in June 1999, when subject imports had declined for 12 months, the
industry could have filed in June 1998. Imports measured at that time would have
shown an increase, but the domestic indu stry would have shown sustained and
unprecedented growth, making an affirmative serious injury decision impossible.
(b) The industry could have filed after June of 1999, but the recovery of the industry
would have been even more apparent than it already was. The US industry had to
“rush to file” the case 9 due to the very temporary nature of the industry’s downturn
and the 12-month reversal of import trends in the second half of 1998 through the
first half of 1999.
Although the US industry could have filed the petition earlier or later than they did, it actually
does not matter in this case since the performance of the line pipe industry was dependent on demand
in the oil and gas sector, not imports.
(d) Could the ITC have reached its determination before it did?
The Petition was filed on 30 June 1999 and the ITC’s decision on injury was reached in
October. Thus, there was only a three-month period between the filing of the petition and the decision
of the ITC. The industry chose to file when it did even though the industry understood that its
performance depended on the recovery of demand in the oil and gas sector and, thus, was tied to
rising oil and gas prices and increased drilling activity. The industry’s rebound was apparent before
June 1999.10 Oil prices began to recover after the first quarter of 1999 11, and the rig count recovered
shortly thereafter.12 The trends observed after the petition was filed confirmed that these trends would
be sustained.13 If there was any doubt in that regard, the ITC could have taken additional time to

7 See Exhibit 48A (KOR-48A); Exhibit 48F (Average Monthly US Shipments of Line Pipe) (KOR-
48F).
8 See generally Korea’s First Written Submission paras. 252-62; Exhibit 48D (The Status Of The US
Line Pipe Industry At The “Very End Of The Period”)(KOR- 48D).
9 See Preston Pipe & Tube Report, United States & Canada, Vol. 17, No. 6 (June 1999) at 1 (KOR-47).
10 See ITC Determination, Staff Report, Figure 3 at II-46 (KOR-6).
11 See id.
12 See Exhibit 48B (Comparison of US Rotary Rigs in Operation with Domestic Shipments of Welded
Line Pipe and Welded OCTG)(KOR-48B).
13 “Natural gas and oil prices have increased since early 1999 ... and hence increased demand for line
pipe.” ITC Determination, Majority Views on Remedy at I-76-77 (KOR-6); “We note in this regard that
natural gas and crude oil prices have increased si nce early 1999 and, consequently, drilling and production
activity, as measured by the active rotary rig count, ha s improved.” Id. at I-80. See also ITC Determination,
Bragg and Askey Views on Remedy at I-91 (KOR-6) (“Commissioner Askey also notes that the recent upturn in

review the case, including collecting an additional period of data. Given the extraordinary nature of
this remedy, it would have been appropriate to do so if the ITC had any doubts whether the decline in
imports and/or the recovery of the industry were sustained.
4. Please comment on the US assertion that “K orea has failed to show, as a matter of law,
that the period it proposed for assessing increased imports is mandated by the Safeguards
Agreement or by the Appellate Body and panel decisions interpreting the Agreement.”
Answer
Please see Korea’s First Written Submission and Oral Statement, which establish that there is
a very specific legal requirement regarding the proper period. Specifically, in Argentina – Footwear,
the Appellate Body stressed that, when examining the question of increased imports:
(a) “[T]he relevant investigation period should not only end in the very recent past, the
investigation period should be the recent past.”14
(b) “. . . the use of the present tense of the verb phrase ‘is being imported’ in both
Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994
indicates that it is necessary for the competent authorities to examine recent imports,
and not simply trends in imports during the past five years--or, for that matter, during
any other period of several years.”
15
(c) “[T]he increase in imports must have been recent enough, sudden enough, sharp
enough, and significant enough, both quantitatively and qualitatively, to cause or
threaten to cause ‘serious injury.’”16
The Appellate Body clearly was establishing a requirement as a “matter of law” regarding
what period and what increase must be shown. Unequivocally, “recent” cannot mean a period of
“several years.” Thus, the recent period, as a matter of law, is, at most, the last year of the period.
The most recent data available is the most relevant--the six-month interim period, in this case.
The Appellate Body set the appropriate legal standard for increased imports in every case, not
just for the facts presented in Argentina – Footwear . Paragraphs 129-131 of the Appellate Body’s
decision demonstrate that the Appellate Body upheld the Panel’s conclusion that Argentina had not
met the requirement of “increased imports,” but rejected the narrow grounds of the Panel’s
determination and explained the proper legal basis for the analysis. The need for such a precise legal
standard was justified by the Appellate Body on the grounds that Article XIX of the GATT 1994 is an
extraordinary remedy dealing with fair trade, so “when construing the prerequisites for taking such
actions, their extraordinary nature must be taken into account.” 17 Clearly, it is the view of the
Appellate Body that the extraordinary nature of Article XIX of the GATT 1994, dealing with
“emergency action,” informs the interpretation of all of the provisions of Article XIX and the SA.18

the oil and gas industries, the line pipe industry’s principal customers, should assist the domestic industry in its
efforts to respond to competition from imports.”).
14 See Argentina – Footwear (AB) at para. 130, n.130 (emphasis in original).
16 Id. at para. 131.
17 Id. at para. 94.
18 Id. at para. 93.

(ii) Serious injury
5. At para. 214 of its first written submission, Korea refers to alleged violations of inter
alia SA Article 4.2(c). In the title to section IV.B.3, however, Korea refers to SA Article 4 more
generally. With regard to SA Article 4, do the claims set forth in section IV.B.3(b) – (e) only
relate to paragraph 2(c) of that provision? If not, please explain which claim (in section IV.B.3)
relates to which element of SA Article 4.
Answer
The claims made in Korea’s First Written Submission with respect to Article 4 of the SA are
not limited to Article 4.2(c). We apologize for any lack of clarity.
Korea’s claims with respect to Article 4 of the SA encompass Articles 4.1(a), (b) and (c), and,
4.2(a), (b) and (c). Specifically:
(a) Korea’s claims at paragraphs 214-224 are based on Articles 3.1 and 4.2(c) of the SA
and Article 11 of the DSU.
(b) Korea’s claim at paragraph 225 is based on the preamble to the SA (“Emergency
Action”), Article 11 of the SA and Article XIX of the GATT 1994.
(c) Korea’s claims at paragraphs 226-244 are based on Articles 4.1(c) (definition of
“domestic industry”) and 4.2(a) of the SA (as indicated in paragraph 226), as well as
Articles 4.2(a) and 4.2(b) of the SA with respect to the need to evaluate “all relevant
factors” and to isolate the effects of “other factors” causing injury.
(d) Korea’s claims at paragraphs 245-262 relate to the requirement to demonstrate
serious injury, “significant overall impairment,” in accordance with Articles 2.1,
4.1(a) and 4.2(a) of the SA.
(e) Korea’s claims at paragraphs 312-317 related to the requirement to demonstrate
“threat of serious injury” in accordance with Article 4.1(b), 4.1(c) and 4.2(a).
These constitute Korea’s claims of the US violations.
(iii) The measure
6. Article 5.1 of the Safeguards Agreement refers to quantitative restrictions that “reduce
the quantity of imports below the level of a re cent period ... .” (a) Does a TRQ reduce the
quantity of imports? Please explain. (b) If the second sentence of Article 5.1 is applicable to
TRQs, why would a Member impose a TRQ instead of a simple quota?
Answer
(a) Yes, a TRQ does restrict the quantity of imports. 19 The distinction between a TRQ
and an absolute quota is a difference of degree not kind. This question may best be
addressed be referring to the ITC Majority’s recommendation of a TRQ. A TRQ was
recommended to reduce imports to a certain level unless purchasers sought specialty
products not produced in the United States.
20 Following the requirement of

19 See also Response to Question 9.
20 See ITC Determination, Majority Views on Remedy at I-81 (KOR-6).

Article 5.1 of the SA, the ITC Majority recommended a TRQ with a quota element of
151,124 tons, which the Majority states would be “approximately equivalent to the
average level of imports in 1996-98.” 21 The 30 per cent tariff was expected to
“discourage” additional imports.22 The ITC concluded that restricting imports to this
level would restore the industry to a “reasonable level of profitability.” 23 Thus, a
TRQ also reduces the quantity of imports.
(b) Concerning why a Member would impose a TRQ instead of a quota, we again refer to
the ITC and the fact that the distinction between a TRQ and absolute quota is one of
degree not kind. The ITC rejected a straight quota because it could severely restrict
or eliminate imports of several specialty grades, where US demand had been
“satisfied primarily by imports.” 24 Thus, a Member might want to impose a TRQ
when it wants a less restrictive measure than a straight quota but still wants to restrict
quantities.
7. Korea’s claim that the Line Pipe measure violates GATT Article XIX.1 and SA
Article 5.1 because it is excessive appears to be based on its argument that the measure is more
restrictive of imports than the ITC recommenda tion. How would Korea demonstrate that the
Line Pipe measure is more restrictive than the ITC recommendation, taking into account all
aspects of the measure and recommendation?
Answer
Korea’s claims regarding the violations of Article XIX.1 of the GATT 1994 and Article 5.1 of
the SA are not based exclusively on the argument that the measure is more restrictive than the ITC
recommendation. First, the United States violated the requirements in Article 5.1 that quantitative
restrictions should not reduce imports below the level of the last three representative years unless
clearly justified. Second, the United States is obligated by Article 5.1 to make explicit findings in
their decision that the measure is “necessary” regardless of the form of the measure. Korea does not
agree with the US interpretation of Korea – Dairy and, in any event, Articles 3.1 and 4.2(c) of the SA
require the same explicit findings. Third, in this case, the analytical basis for the President’s remedy
directly put into question whether the level of relief was more than necessary so the President had an
obligation to address the issue. Article 5.1 places an affirmative obligation on the United States to
ensure that the measure is limited to the extent necessary. The United States has produced no
evidence to demonstrate that it complied with that obligation. These issues all relate to the amount of
import relief imposed. Article 5.1 also requires that the form of the measure be the most suitable to
achieve the objectives to prevent or remedy injury and facilitate adjustment. The United States also
did not demonstrate that the form of the measure best met the objectives of Article 5.1, and therefore,
is in violation of Article 5.1.
To answer the Panel’s question, there is prima facie evidence that the measure was excessive
based on the ITC Majority’s conclusions regarding both the level of relief that is “necessary” and the
level of relief which would be “excessive.” The ITC Majority concluded that limiting imports to
151,124 tons at normal bound rates of duty would allo w the industry to recover from serious injury.
The ITC also considered that the 30 per cent duty level would “discourage” any imports except for
certain specialty products.
25 Therefore, the ITC viewed its remedy recommendation, in its totality
(quota plus duty), as an import restriction at the approximate level of 151,124 tons.

21 Id. at I-82.
22 Id. at I-81.
23 Id.
24 Id. at I-80.
25 Id. at I-81.

The ITC Majority also concluded that market participation of imports at only 105,849 tons
“would be excessive.” 26 These conclusions were based on the findings in the ITC’s Economic
Memoranda which the United States had previously implied were the basis for the President’s
measure as well.
Neither Korea nor the Panel has the entire Economic Memoranda, so neither Korea nor the
Panel knows the projected level of imports with a 9,000-ton quota and a 19 per cent tariff. Further,
neither Korea nor the Panel knows: (i) whether the United States analyzed the projected level of
imports under the TRQ measure actually imposed; or (ii) if it did, the results of the analysis. Further,
it appears from the US Letter of 23 April that we will never know.27
What Korea does know is that any reasonable calculation of the quota portion of the measure
imposed results in far less than 151,124 tons. We also know that the measure as a whole actually
restricted imports to 78,671 tons during the first quota year March 2000-February 2001. 28 The Panel
also can consider the following facts from the ITC’s opinion which would indicate that very limited
imports would enter at 19 per cent under the measure as constructed:29
(a) Total “in-quota” imports were projected to be approximately 63,000 tons, based on
the fact that the ITC listed only seven significant suppliers other than Canada and
Mexico. (Current US import data for March 2000-February 2001, show total “in-
quota” imports of 64,067 tons.)30
(b) Very limited “out-of-quota” imports could be expected at the 19 per cent tariff level:
(i) The duty imposed was 6 to 10 times the level of the bound rate.
(ii) Each supplying country could supply 9,000 tons at bound rates. It could be
presumed that the market would absorb these imports first (and those of
Canada and Mexico) before the imports at the 19 per cent additional duty.
(iii) Two very significant suppliers were not controlled. (The actual data shows
that Canada and Mexico now supply approximately 50 per cent of total
imports.) The NAFTA exemption had a much more negative impact on other
suppliers under the Presidential measure than it did under the measure
recommended by the ITC. Under the ITC recommendation, it would have
been only after imports of 151,124 tons entered that the preference for
Canada and Mexico would have created a price advantage. Under the
Presidential measure, the preference affects exporters after they reach
9,000 tons.

26 Id. at I-80.
27 See US 23 April Letter, Response to Question 6.
28 See Exhibit 49 (Chart 1: US Imports of Line Pipe (1999-2001); Chart 2: US Imports of Line Pipe
(March 2000-February 2001) (KOR-49). One question for the United States is whether that level of import
restriction is what the United States intended to achieve.
29 See generally ITC Determination, Majority Views on Remedy at I-76-78 (KOR-6); Bragg and Askey
Views on Remedy at I-88-90 (KOR-6).
30 See Exhibit 49 (KOR-49).

(iv) Imported and domestic line pipe were highly substitutable. 31 Moreover,
according to testimony before the ITC, consumers preferred domestic
products.32
(v) The US industry had substantial unused capacity and US capacity exceeded
consumption.
(c) Total imports, excluding Canada and Mexico, equalled 78,671 tons from
March 2000-February 2001. Of that total, only 14,604 tons entered at the 19 per cent
duty rate. In-quota imports totaled 64,067 tons.33
(d) The only economic analysis done for the purpose of meeting obligations under
Article 5.1 of the SA were the Economic Memoranda. From these analyses, the ITC
Majority concluded that 151,124 tons at bound rates would reduce imports to a
“sufficient” level. These appear to be the only economic basis for the level of
restriction recommended by the ITC. The ITC recommendation--which appeared to
be more in line with WTO rules--was rejected in favor of a remedy that did not
comply with WTO rules.
34
Thus, the pattern of imports resulting from the import restriction could have been and should
have been anticipated. Total imports, excluding Mexico and Canada, equalled 78,671 tons during the
first quota year – far below the 151,124 tons analyzed by the ITC as “necessary” and sufficient to
remedy the injury.
35 In the absence of contrary analysis that: (i) the President concluded that a higher
level of relief was “necessary” and not “excessive”; or (ii) the level of imports subject to the
restrictions had been projected to equal or exceed 151,124 tons, the Panel can only conclude from the
facts available that the measure imposed was greater than necessary to remedy the injury.
8. Are there circumstances in which the na ture of a safeguard measure may change,
depending on whether the competent authority ma kes a finding of present serious injury, or a
finding of threat of serious injury? If the competent authority finds that increased imports have
caused “serious injury or a threat thereof,” ho w does that authority ensure that the resultant
safeguard measure is “necessary to prevent or remedy serious injury” within the meaning of
Article 5.1 of the Safeguards Agreement? Is it necessary to choose between a finding of present
serious injury and a finding of threat of seriou s injury in order to co mply with the necessity
requirement contained in the first sentence of Article 5.1? Please explain.
Answer
The texts of Articles 4.1, 5.1 and 5.2(b) of the SA show that the nature and effect of a “serious
injury” finding are not the same as those of a “threat of serious injury” finding. The different nature
of these findings has specific implications for the measure that is imposed.

31 See US First Written Submission at para. 170.
32 See Transcript of Hearing on Injury, Circular Welded Carbon-Quality Line Pipe, Inv. No. TA-201-70
(30 September 1999) at 145-147 (KOR-50).
33 See Exhibit 49 (KOR-49).
34 It is now unclear, based on the US Letter of 23 April, whether the measure imposed by the President
was based on the economic assessment of the ITC. To the extent that the United States now claims that the
Presidential Proclamation and Memorandum “form the entirety of the explanation of the decision to impose the
line pipe safeguard measure,” there is no economic support for the measure. See US 23 April Letter, Response
to Question 6, p.(i).
35 See Exhibit 49 (KOR-49).

First, in the case of serious injury, the industry must be in a state of significant overall
impairment caused by increased imports. In contrast, for threat of serious injury, the increase in
imports already must have occurred, but the industry is not yet in a state of significant overall
impairment. These are mutually exclusive findings: an industry cannot simultaneously be and not be
in a state of significant overall impairment.
For this reason (as well as others), the decisions of the ITC Majority (on serious injury) and
the Separate Views on Injury (on threat of injury) are contradictory. Because the ITC failed to
reconcile these contradictions and inconsistencies in its detailed analysis and findings and
conclusions, its analysis and determination are insufficient under Articles 3.1 and 4.2(c) of the SA.
Article 5.1 of the SA applies this distinction be tween present and threatened serious injury to
the safeguard measure, itself. The measure is to be imposed only “to the extent necessary” to
“prevent” or “remedy” serious injury. A measure necessary to remedy injury that has already
occurred and needs to be reversed would have a different objective and might be more restrictive than
a remedy to keep the industry healthy. This interpretation is confirmed by Article 5.1, which also
requires a Member to choose the measure “most suitable for the achievement of these objectives”
(i.e., prevent or remedy injury). Due to the difference in objectives, the measures should vary.
The ITC Commissioners in this case recognized th at the remedy had to be tied to their injury
findings. They also appear to have recognized that distinct remedies would be warranted based on
whether the Commissioners found serious injury or only threat of serious injury. The ITC Majority,
which made a finding of present injury, recommended a TRQ of 151,124 tons.
36 They determined
that a limit at that quantity was sufficient to remedy the serious injury.37
In the Separate Views on Injury concerning threat, the Commissioners state that in
considering the form and amount of the relief, “we took into account ... the threat of serious injury
that we found to exist ... .”
38 The tariff increase they recommended was based on “estimates by
Commission staff” that “indicate that our recommended remedy will result in increased revenues to
the domestic industry through a combination of increased prices and sales volumes ... .” 39 I n t h e
Separate Views on Remedy, the Commissioners sought a “modest” price increase. 40 Because the
United States has not supplied the ITC calculations in the Economic Memoranda, we do not know
what level of imports was projected at that tariff level. We do know that it was above the level
recommended by Petitioners41 because the increases in price levels and revenue were projected to be
smaller than those sought by Petitioners.42
Article 5.2(b) of the SA further shows that a measure to “remedy” serious injury and one to
“prevent” injury differ. The departure referred to in that paragraph, to allocate quotas in
“disproportionate” shares, is not permitted in the case of threat of serious injury. This confirms that
the two findings support different measures.
This discussion highlights an important point that should be considered when examining the
safeguard measure. The last sentence of Article 5.1 of the SA confirms that the form of the measure

36 See ITC Determination, Majority Views on Remedy at I-81 (KOR-6).
37 Id. at I-82.
38 See ITC Determination, Bragg and Askey Views on Remedy at I-88 (KOR-6).
39 See id. at I-92.
40 See id.
41 See id. at I-90.
42 See id.

should be a function of the objective of the measure. 43 First, the Member should determine the level
of imports (or the “amount” of the restriction) that is necessary to prevent or remedy the injury (“the
objective”). This determination should be based on an analysis of the price and volume effects of
certain levels of import restriction. The “amount” is likely to vary depending on the industry’s
condition (i.e., significantly overall impaired or only thre atened with such a condition). Only when
the determination of “amount” is made, can the form of the measure ( e.g., a tariff, an absolute quota,
or a TRQ) be determined based on which is most “suitable” to achieve the amount of import relief
necessary to effectuate the objective (i.e., “necessary” to remedy or prevent serious injury).44
In fact, this is the analytical approach of the ITC. The ITC first develops a number of
scenarios to see what economic effects are produced on the industry’s volumes and/or prices by
various import restrictions.45 After determining the appropriate level of imports (the “amount” of the
measure) based on the volume and/or price effects to be realized, then the ITC selects the form of the
measure that will best achieve that level of import restriction. In other words, the form of the measure
is just a means to an end – a level of import relief that will have the desired effect on the industry.
Thus, an authority cannot ensure that a measure is limited to what is “necessary” without
distinguishing between threat and present injury. Without exercising the intellectual discipline to
determine whether serious injury either exists or is merely threatened, an authority cannot limit the
measure to what is “necessary.” That which is “necessary” to remedy what presently exists may not
be necessary to avoid that which otherwise might exist in the future.
In conclusion, before applying a measure, an authority must distinguish between threat of
serious injury versus serious injury, because the measure: (i) must only be imposed to the “extent
necessary;” and (ii) must be tailored to meet very different objectives (it must be the “most suitable”
measure). In this case, the President failed to indicate both which type of injury determination he was
adopting and whether his remedy was intended to prevent or remedy serious injury. This is a
violation of the provisions of Articles 3.2, 4.2(c) and 5.1 of the SA, which require a detailed analysis
of the case as well as published findings and conclusions on all relevant issues of fact and law.
9. In Section F.2.b of its first written submissi on, the United States argues that the rules in
Article 5 of the Safeguards Agreement for quantitative restrictions and quotas do not apply
because the Line Pipe measure is not a quantitat ive restriction. Does Korea consider that the
terms “quantitative restriction” and “quota” (in Article 5 of the Safeguards Agreement) are
synonymous? Please explain. In particular, and considering the US argument that a measure is
only a TRQ if it includes an overall limit on eligibility, why should the term “quota”
(Article 5.2) not refer to the quota element of a TRQ?
Answer
(a) Quantitative restrictions are a broader concept than quotas
Quotas are one form of quantitative restriction. There are other forms as well, which are
specifically noted in Article XI of the GATT 1994, including “import or export licenses” and an all-
encompassing category of “other measures.” 46

43 See Article 5.1 of the SA (“Members should choose measures most suitable for the achievement of
these objectives.”).
44 See id.
45 See e.g., USA-9 (USITC Memorandum EC-W-070); USA-10 (USITC Memorandum EC-W-072);
USA-11 (USITC Memorandum EC-W-073); USA-12 (USITC Memorandum EC-W-074).
46 Many other forms of import restrictions, “other measures,” have been found to fall within Article XI,
including minimum price systems. They have been held to constitute “quantitative restraints” since the quantity

Article XI of the GATT 1994 defines quantitative restrictions (by excluding “other than
duties, taxes, or other charges”). In addition, Article XIII.2 of the GATT 1994 provides for the
manner in which all quantitative restrictions are to be imposed (normal distribution of trade).
Specifically, in the case of quotas, Article XIII.2 of the GATT 1994 provides for the means by which
quota amounts are to be fixed both on an overall basis (Article XIII.2(a)) and by supplier
(Article XII.2(d)). There is no dispute that the term “quota” in Article XIII.2 includes both tariff-rate
quotas and absolute quotas. There is no basis in the text of Article 5.2 of the SA to create a distinction
between absolute quotas and tariff rate quotas.
(b) Tariff-rate quotas restrict quantities
TRQs, as a general matter, restrict the quantities imported even if they do not expressly ban
imports above a certain level (straight quota). The distinction is one of degree, not one of kind. The
fact that a certain level of imports is allowed at a bound rate of duty acts to restrict the amount of
imports that will enter at the higher rate of duty because the market naturally prefers the “cheaper”
imports and the remainder will enter only to the degree that the market is willing to absorb the higher
rate of duty. Thus, the combined effects of both an increased duty of 19 per cent and 9,000-ton quota
at normal duty levels must be analyzed.
When the combined effect of a quota at normal duty levels plus a tariff are analyzed, the
restriction is not felt uniformly. Unlike a straight tariff, which affects each ton of imports across the
board and, therefore, makes all imports equally competitive or uncompetitive, a 9,000-ton limit on
each supplier creates a natural cost preference for “in-quota” imports, particularly when combined
with a significant duty rate (19 per cent). In the absence of the Economic Memoranda, the actual
effect of the President’s import restriction is instructive. The 9,000-ton restriction acts as a virtual
limit on imports (as noted, during the first quota year ending in February 2001, imports at the 19 per
cent duty rate were limited to 14,604 tons for the entire year).
47 This is due to the two attributes of a
TRQ which are inextricably related: the fact that each country has a 9,000-ton limit of supply at
normal rates of duty and the fact that the tariff level on the remainder is 19 per cent. The combined
effects of those two elements have significantly restricted imports.
(c ) Object and purpose of the “quota” provisions
It is significant for the purpose of interpreting Article 5.2 of the SA and of the meaning of
“quota” that it is the common nature of absolute quotas and TRQs that “non-discrimination” must be
accomplished in a different manner than for tariffs. Applying a single tariff affects all suppliers
equally and complies with Article I of the GATT. In the case of absolute quotas or tariff-rate quotas,
in contrast, when quotas are assigned among suppliers, the effect would be to discriminate against
traditional sources of supply if the same quota were given to every supplier. This would disrupt
historical trade patterns. “Equal” quotas for historic suppliers with vastly different historic shares is
discriminatory. MFN therefore is respected only by ensuring that historic shares are respected.
For this reason, Article XIII.2 of the GATT 1994 requires that import restrictions preserve
traditional trade patterns. Specifically, for quotas that are assigned by supplier, there are specific rules
for how that is to be achieved.
48 The rationale for doing so to preserve historical shares and avoid

that can be sold below a certain price was limited and it was a restriction “other than duties, taxes, or other
charges.” See GATT, Analytical Index: Guide to GATT Law and Practice, Updated 6th Edition (1995) at
p. 321 (citing EEC – Program of Minimum Import Prices, Licenses and Surety Deposits for Certain Processed
Fruits and Vegetables).
47 See Exhibit 49 (KOR-49).
48 Article XIII:2(d) of the GATT 1994.

discrimination applies equally to absolute quotas and tariff-rate quotas and hence both are subject to
the disciplines of Article XIII.2.
The same concept, prohibiting a discriminatory effect on suppliers, is contained in Article 5.2
of the SA. The conditions that must be present to depart from this requirement are specifically
delineated in Article 5.2(b) and are quite strict. Finally, again, an analysis of the ITC Majority’s TRQ
recommendation demonstrates that the ITC understood that the requirements of Article XIII:2 of the
GATT 1994 and Article 5.2(a) apply to TRQ’s. The US representative at the First Substantive
Meeting denied that the ITC’s practice constituted the US practice. Of course, the United States also
denied that the measure imposed is a TRQ. In fact, the US representative is wrong on both counts.
The United States cannot avoid the requirements of Article 5.2(b) of the SA in order to depart
from Article 5.1(a) and, yet, discriminate among suppliers by calling its measure a “tariff.”
 49 T h e
President’s measure is discriminatory precisely because it does contain a quota element that fails to
respect historic market shares.
10. In Korea – Dairy, the Appellate Body stated that it does “not see anything in Article 5.1
that establishes such an obliga tion [to justify the necessity of a safeguard measure] for a
safeguard measure other than a quantitative restriction which reduces the quantity of imports
below the average of imports in the last three representative years.” Could the Appellate Body
have inferred that there is no obligation on a Member to explain that its safeguard measure is
“necessary” (within the meaning of Article 5.1) unless that safeguard measure is a quantitative
restriction which reduces the level of import s below the average level of the last three
representative years? Please explain.
Answer
The decision of the Appellate Body in Korea – Dairy must be placed in its proper legal
context. The issue before the Appellate Body in Korea – Dairy was whether Article 5.1 of the SA by
its terms required a specific finding that the measure, in that case (as here) a quantitative restriction,
was “necessary.” The Appellate Body held that a quantitative restriction which reduced imports
below the three-year representative period specified in Article 5.1 clearly had to be justified at the
time of the decision and in the authority’s recommendations on the application of the measure.50 The
Appellate Body then examined whether a quantitative restriction that set the level at or above the last
three representative years also had to be justified. The Appellate Body concluded, “[i]n particular, a
Member is not obliged to justify in its recommendations or determinations a measure in the form of a
quantitative restriction which is consistent with ‘the average of imports in the last three representative
years ... .’”
51
This is a logical conclusion given that Article 5.1 of the SA sets out a benchmark (the last
three representative years) for what level of quantitative restriction is presumed “necessary.” No
specific reaffirmation of that fact was therefore needed. Only a departure from the benchmark
required the explanation that the measure was “necessary.”
While it is true that the Appellate Body rejected the broad language of the Panel with respect
to the obligations of Article 5.1 of the SA, the holding did not extend past the question presented to
the Appellate Body regarding the extent of the obligation to justify a quantitative restriction. The

49 The departure provided for in Article 5.2(b) is not permitted in the case of a threat determination.
50 See Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, Report of the
Appellate Body, WT/DS98/AB/R (14 December 1999) at para. 98.
51 See id. at para. 99.

Appellate Body independently observed that the first sentence of Article 5.1 imposes a very specific
obligation and that this obligation applies regardless of the particular form of the safeguard measure.52
The legal issue concerning the obligation of the United States to provide a separate economic
justification arises specifically because the President imposed a measure harsher than that justified by
the ITC decision or underlying economic analysis. If the President takes action which is either the
same as that recommended by the ITC or less restrictive, the underlying explanation and justification
required by Articles 3.1, 4.2(c), and 5.1 of the SA mi ght be met by the ITC analysis. That is not the
case here. Where: (i) there are substantial indications that the measure taken is more restrictive than
what was recommended; (ii) the ITC specifically observed what level of relief would be “excessive”;
(iii) the President’s announcement of the TRQ measure as a tariff with an exemption was intentionally
confusing; and (iv) no explanation or reasoning comparable to that provided by the ITC or response to
the analysis provided by the ITC has been provided, the United States has an affirmative obligation to
explain why the measure is “necessary” and not “excessive.”
If the United States has confidential data to demonstrate that the President’s measure would
not reduce imports below the 151,124-ton level defined by the ITC as “necessary” and sufficient, it
should provide it. The evidence we do have--the actual performance under the President’s remedy--
confirms that the measure reduced imports to less than 80,000 tons during the first quota year, a level
far below the “excessive[ly]” restrictive level of 105,124 tons.
53 Korea submits that, in the absence of
an affirmative demonstration by the United States of its “intended level,” the actual level of imports is
the best evidence of the import target level of the measure. That level is excessive under any reading
of the ITC Majority or Separate Views on Injury.
In any event, Articles 3.1 and 4.2(c) of the SA require the publication of the findings and
conclusions of the competent authorities on all pertinent issues of fact and law. Since the President is
clearly a “competent authority” under US law, and the findings of fact and conclusions of law with
respect to serious injury or threat thereof must inform the decision of what safeguard measure to
impose, the basis for the President’s measure must also comply with Articles 3.1 and 4.2(c). The
requirements are inextricably related.
(iv) Developing country exemption
11. At para. 181, Korea asserts that “the United States did not even attempt to determine
which countries qualified for this exemption .” Does the Safeguards Agreement require
Members imposing safeguard measures to determine in advance which developing countries
should be excluded from those safeguard measures under Article 9.1?
Answer
The administering authorities must assure that the measure is not “applied” to developing
countries that meet the requirements of Article 9.1 of the SA. In the past, the United States has
provided a list of countries that qualify for such treatment to make their exemption administratively
feasible.
(v) Causal link
12. If oil and gas prices began to improve in April 1999, causing domestic shipments to
increase (as alleged at para. 258 of Korea’s first written submission), why didn’t imports also
increase at that time?

52 See id. at para. 96.
53 See Exhibit 49 (KOR-49).

Answer
Imports did not increase at the same time as domestic shipments in 1999, for the same reason
that imports at the beginning of the market decline in 1998 did not decline as quickly as domestic
shipments. Imports have a delayed reaction or a natural lag-time to changing market conditions such
as a decline in demand. There is a period of months between the sales date when the material is
ordered and the actual shipments and custom’s entry.
54 It takes time for the “fall off” in customer
orders to translate into fewer entries into the United States.
In the second half of 1998, subject imports declined, but not as rapidly as domestic shipments.
In the first half of 1999, imports declined precipitously due to lower demand in the second half of
1998. As demand picked up in 1999, domestic shipments responded immediately and increased. 55
Imports lagged the recovery in the market.
13. At para. 258, Korea asserts that imports were declining as domestic shipments were
increasing. At para. 272, however, Korea refers to “the coincidence in trends in imports and the
domestic industry sales.” If imports were declining as domestic shipments were increasing, how
is there any “coincidence” in these two trends?
Answer
Korea wishes to clarify that the Panel is correct that there was no coincidence of trends
between domestic shipments and imports at the end of the period in the first half of 1999. Imports
continued to decline in the first half of 1999 while domestic shipments increased due to the recovery
in oil and gas prices. Imports also had peaked in the first half of 1998 due to very strong demand
factors.
It was unlikely given the past performance of imports that they would increase market share
to the same levels since this effect was produced when the oil and gas industry’s demand dropped
suddenly and sharply in late 1998/1999 before imports had a chance to react. Please see Korea’s
response to the previous question regarding why imports tend to lag changes in demand conditions.
14. At para. 293, Korea states that oil prices collapsed in late 1998 and early 1999.
However, at page 39 of the Japanese and Korean Respondents’ Prehearing Brief, reference is
made to “declines in the oil and gas market beginning in late 1997 and continuing through early
1999 …” (KOR-22). Please reconcile these statemen ts regarding the date when the decline in
the oil and gas market began.
Answer
The reference in the Prehearing Brief at pages 39-42 was to the antidumping petition that had
been filed in the United States against imported oil.56 That petition noted that the price of oil dropped
from $19.76/barrel in October and November 1997 to $10.95/barrel in December 1998. Thus, the
description in the Prehearing Brief was to the end-point/end-point analysis.
The observation concerning the “collapse in oil prices” in late-1998/early-1999 refers to the
$10.95/barrel price in December 1998. That the nadir of oil prices occurred in December 1998 is

54 See Posthearing Brief on Injury, at 14 (KOR-25).
55 See US 16 February Letter.
56 See Prehearing Brief on Injury (KOR-22).

apparent from Figure 3.57 Finally, the correlation to subject merchandise was to the drilling rig count,
which in turn was dependent on the prices of oil and natural gas. 58 During this period, the rig count
reached its lowest point ever in April 1999. 59 Demand and, with it, the performance of the line pipe
industry closely followed the rapid decline in the rig count in 1998.
(vi) Exclusion of Canada and Mexico
15. If footnote 1 to the Safeguards Agreement was relevant in some way to the issue of
which Members could be subject to a safeguard measure, is it relevant that footnote 1 has been
inserted in Article 2.1 of the Safeguards Agreement, rather than Article 2.2? Please explain.
Answer
We agree that the placement of Footnote 1 as a footnote to Article 2.1 of the SA rather than
Article 2.2 is significant and confirms the reading of Footnote 1 as relating to the definition of a
Member and to the proper modalities for safeguard investigations conducted by a Customs Union. It
does not relate either to FTAs or to the MFN requirement.
16. Is it logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are, given the fact that Article XIX safeguard measures
may take the form of (Article XI) quantitative restrictions? Please explain.
Answer
No. Article XI of the GATT 1994 measures and measures pursuant to Article XIX in the
form of Article XI measures would have the same effect on trade. The emergency nature of safeguard
measures also confirms that such measures are permitted.

57 Normal Index of Monthly US Crude Oil and Natural Gas Prices, January 1994-June 1999, ITC
Determination, Staff Report at p. II-46 (KOR-6).
58 See, e.g., ITC Determination, Majority Views on Remedy at I-80 (concerning this correlation)
(KOR-6).
59 See Exhibit 48B (Comparison of US Rotary Rigs in Operation with Domestic Shipments of Welded
Line Pipe and Welded OCTG) (KOR-48B).

ANNEX B-2
UNITED STATES' ANSWERS TO QUESTIONS
FROM THE PANEL AND KOREA
(7 May 2001)
I. RESPONSES TO QUESTIONS FROM THE PANEL
Note: The United States previously provided early written responses to questions 6, 7, and 8 at the
request of the Panel. This document contains a further elaboration on those earlier answers.
1a. Are there circumstances in which the na ture of a safeguard measure may change,
depending on whether the competent authority ma kes a finding of present serious injury, or a
finding of threat of serious injury?1
Response
1. Since a Member may apply a safeguard measure only to the extent necessary to prevent or
remedy serious injury and facilitate adjustment, the nature of a safeguard measure depends primarily
on the condition of the industry and its need for ad justment. The competent authorities’ finding of
serious injury or threat of serious injury is a legal characterization of the condition of the industry.
Thus, there is likely to be a relationship between the finding of the competent authorities and the
safeguard measure applied by a Member. However, it is the underlying facts describing the condition
of the industry, and not the choice to label that condition as serious injury or threat of serious injury,
that provide the benchmark for the application of the measure.
2. Article 4.1 of the Safeguards Agreement
2 defines serious injury as “a significant overall
impairment in the position of a domestic industry,” and threat of serious injury as “serious injury that
is clearly imminent.” Article 4.2(a) requires that the competent authorities base their findings in this
regard on a consideration of the absolute and relative increase in imports, import market share,
changes in the level of sales, production, productivity, capacity utilization, profits and losses,
employment, and any other objective and quantifiable factor having a bearing on the situation of the
industry. Since the evaluation occurs on an overall basis, an industry may be in a state of serious
injury or threat of serious injury even if some factors viewed in isolation would suggest a healthy
condition.
3 With so many factors, each of which may reveal varying degrees of negative or positive

1 Question 1 consists of three related, but distinct questions. For clarity, we have divided the question
and our response into three subsections.
2 Unless otherwise specified all citations to an article using Arabic numerals reference provisions of the
WTO Agreement on Safeguards (“Safeguards Agreement” or “SGA”), and all citations to an article using
Roman numerals reference provisions of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”).
3 The Appellate Body concluded in Argentina – Footwear that “An evaluation of each listed factor will
not necessarily have to show that each such factor is "declining". In one case, for example, there may be
significant declines in sales, employment and productivity that will show "significant overall impairment" in the
position of the industry, and therefore will justify a finding of serious injury. In another case, a certain factor
may not be declining, but the overall picture may nevertheless demonstrate "significant overall impairment" of
the industry.” Argentina – Footwear, WT/DS121/AB/R, para. 139.

performance, there are a myriad of potential combinations that could demonstrate the existence of
serious injury or threat of serious injury.
3. Similarly, safeguard measures imposed by a Member may take a variety of forms, including
tariff increases, quotas, and TRQs at varying levels and for varying lengths of time. Thus, for any
industry, a number of combinations of these elements could satisfy the Article 5.1 requirement not to
apply a safeguard measure beyond the extent necessary.
4. In contrast to the diversity of potential industry situations and safeguard measures, the
competent authorities have only three options in rendering their determination – no serious injury,
current serious injury, or threat of serious injury. Fitting an industry into one of these broad
categories addresses primarily the timing of the onset of serious injury – not at all, now, or imminent
– and does not indicate much about the precise state of the industry. Thus, the mere fact that the
competent authorities found serious injury instead of threat of serious injury, or vice versa, in their
investigation does not provide the information needed to determine the extent to which a Member
may or should apply a safeguard measure. That is defined by the factors measuring the industry’s
performance and need for adjustment.
5. There is one limited circumstance in which the characterization of the industry’s condition
affects how a Member may structure a safeguard measure. Article 5.2(b) allows a departure from the
Article 5.2(a) requirements for allocation of a safeguard measure in the form of a quantitative
restriction. A Member may not invoke that provis ion if it has found that increased imports cause a
threat of serious injury. However, this limitation becomes relevant only if a Member is seeking to
allocate a quantitative restriction on terms different than those provided under Article 5.2(a). It does
not affect the requirements of Article 5.1 in any way.
6. In short, it is the condition of the industry, as delineated by various relevant factors, that
provides the benchmark against which a Member determines the extent to which to apply a safeguard
measure. The broad characterization of that condition as present serious injury or threat of serious
injury does not by itself change those factors and, therefore, will not change the nature of the
safeguard measure applied by the Member.
b. If the competent authority finds that increase d imports have caused “serious injury or a
threat thereof”, how does that authority ensu re that the resultant safeguard measure is
“necessary to prevent or remedy serious injur y” within the meaning of Article 5.1 of the
Safeguards Agreement?
Response
7. As an initial point, Article 5 does not require the competent authority to ensure that the
resultant safeguard measure is “necessary to prevent or remedy serious injury.” Article 5 places that
obligation on the Member itself. In fact, the Safeguards Agreement creates a clear division of labour.
Articles 3 and 4 reference the competent authori ties seven times, charging them with conducting “the
investigation to determine whether increased imports have caused or are threatening to cause serious
injury.” In that process, the competent authorities must conduct a hearing, evaluate relevant factors,
and issue a report. In contrast, Article 5, entitled “Application of Safeguard Measures,” does not
reference the competent authorities at all. Its obligations apply exclusively to the Member itself. Nor
does any other part of the Agreement require any action from the competent authorities in the
formulation and application of a safeguard measure.
8. This marked difference in terminology between Articles 3 and 4 on the one hand and
Article 5 on the other can only mean that the competent authorities bear responsibility for the
investigation and determination of serious injury, while the Member alone bears responsibility for

compliance with Article 5. The first sentence of Article 3 reflects this dichotomy, stating that “[a]
Member may apply a safeguard measure only following an investigation by the competent
authorities.”
9. Korea’s arguments demonstrate confusion about the tasks performed by the USITC and the
President with regard to a US safeguard measure. The USITC is the competent authority in the
United States and, as such, determines whether increased imports are a substantial cause of serious
injury, or the threat thereof, to the domestic industry. The President has no role in that process, and
must accept the determination of the USITC.4 In contrast, if the USITC makes an affirmative serious
injury determination, it issues only a recommendation with regard to the application of a safeguard
measure. The US notification under Article 12.1(b) typically identifies the majority recommendation
as the proposed measure of the United States. However, the President retains complete freedom to
modify that measure or disregard it completely. Thus, it is the President, and not the USITC, who
bears the ultimate responsibility for ensuring that the safeguard measure is not applied beyond the
extent necessary to prevent or remedy serious injury and facilitate adjustment.
10. In deciding what remedy to apply, the President considers a large number of factors, which
include:
- the determination of serious injury by the USITC;
- the recommendation and explanation of the USITC;
- the form and amount of tariff, TRQ, or quota that would prevent or remedy serious
injury or the threat of serious injury;
- the extent to which industry workers benefit from other programmes;
- the industry’s plans and existing efforts to adjust to import competition;
- the likelihood that the measure will facilitate adjustment;
- short- and long-term economic and social costs of the measure, as well as other
factors related to the economic interest of the United States; and
- conditions of competition in the global and domestic markets, and how those
conditions may develop while the measure is in effect.
5
The President’s consideration of these factors, especially identification of the form and
amount of tariff, TRQ, or quota that would prevent or remedy serious injury or threat of serious

4 Section 330(d) of the Tariff Act of 1930 provides that if the Commission is evenly split, with an equal
number of Commissioners issuing affirmative and negative findings with regard to serious injury or threat of
serious injury, the President must decide which group represents the determination of the Commission. In
making this decision, the President does not gather additional evidence or make any determination of his own.
He merely decides which of the existing determinations and underlying explanations is the determination of the
US competent authority.
5 Sections 203(a)(2) and 202(e)(5) of the Trade Act of 1974 list these factors. The USITC remedy
recommendation is not part of the report of the competent authorities on the question of serious injury that is
required by Article 4 of the Safeguards Agreement. Accordingly, that recommendation need not be made a part
of the public report under the Safeguards Agreement, although the United States customarily includes the
remedy recommendation there.

injury, ensures that the application of the safeguard measure does not exceed the extent necessary to
prevent or remedy serious injury and facilitate adjustment.
c. Is it necessary to choose between a finding of present serious injury and a finding of
threat of serious injury in order to comply with the necessity requirement contained in the first
sentence of Article 5.1? Please explain.
Response
11. No. As we explained in segment a of this question and in paragraphs 37-42 of the US first
oral statement, the benchmark for application of a safeguard measure is the condition of the domestic
industry and its need for adjustment. A finding of present serious injury or threat of serious injury is
merely a broad legal conclusion about that condition. By itself, that finding simply does not provide
enough information about the industry to identify whether a particular measure would satisfy the
requirements of Article 5.1. A Member must look instead to the underlying facts about the industry’s
condition and need for adjustment to delineate the extent to which it may apply a safeguard measure.
Therefore, although competent authorities may choose to specify the condition of the industry as
being present serious injury or threat of serious in jury, such a choice is not necessary to comply with
Article 5.1.
2. At para. 184 of its first written submission, the US asserts that “the only limit on the
volume of imports free from the 19 per cent supplemental duty is the number of WTO Members
who choose to take advantage of the 9000 ton exemption”. Would this mean that there is a limit
on the volume of imports subject to the lower tariff, and that the limit will be reached if all
WTO Members choose to take advantage of the 9000 short ton exemption?
Response
12. On further reflection, it would be more correct to say that the only limit is the number of
customs territories that take advantage of the 9000 ton exemption. For example, China and Russia,
which are not WTO Members, are still eligible for the 9000 ton exemption. On the other hand, not all
countries have line pipe production facilities, so the practical limit would be less than if all customs
territories took advantage of the exemption.
3. GATT Article XIII.2(a) provides that quotas representing the total amount of permitted
imports shall be fixed “wherever practicable”. GATT Article XIII.5 states that Article XIII.2(a)
shall apply to tariff quota. Would this suggest th at there may be situations in which it may not
be “practicable”, in the context of a tariff quota, to fix a quota representing the total amount of
permitted imports? If not, why not? If ye s, would this also suggest that a measure may
constitute a tariff quota even if there is no “overall limit on eligibility” (para. 185, US first
written submission)?
Response
13. Yes. Article XIII:2(a), read together with Article XIII:5, applies to situations in which a
Member considering the application of a tariff quota cannot fix a quota representing the total quantity
of special-duty imports. However, the resulting measure would not constitute a tariff quota because it
would not meet the ordinary meaning of tariff quota – the “[a]pplication of a higher tariff rate to
imported goods after a specified quantity of the item has entered the country at a lower prevailing

rate.”6 Using the terminology of Article XIII, such a measure would be an “import restriction,” but
without a specific name.
14. The text of Article XIII supports this conclusion. Paragraph 2(a) states that “[w]herever
practicable, quotas representing the total amount of permitted imports ... shall be fixed.” If a quota is
not “practicable,” the logical implication is that any measure that is practicable is not a quota.
Paragraph 2(b) confirms this conclusion in stating that “[i]n cases in which quotas are not practicable,
the restrictions may be applied by means of import licenses or permits without a quota.”
7 Thus, any
measure that is not “practicable” under Article XIII:2(a) is not a quota and, pursuant to Article XIII:5,
is not a tariff quota.
4. In Section F.2.b of its first written submissi on, the US argues that the rules in Article 5
of the Safeguards Agreement for quantitative restrictions and quotas do not apply because the
Line Pipe measure is not a quantitative restriction. Does the US consider that the terms
“quantitative restriction” and “quota” (in Article 5 of the Safeguards Agreement) are
synonymous? Please explain. In particular, and considering the US argument that a measure is
only a TRQ if it includes an overall limit on eligibility, why should the term “quota”
(Article 5.2) not refer to the quota element of a TRQ?
Response
15. “Quantitative restriction” and “quota,” as used in Article 5 and elsewhere in the WTO
Agreement, are not synonymous. “Quantitative restriction” is a general term covering any measure
that restricts the quantity of imports into or exports from a country. “Quota” is a form of quantitative
restriction that specifies the maximum quantity of imports into or exports from a country. In contrast,
a TRQ is in essence a tariff. It does not restrict the quantity of imports as such because, as long as
someone is willing to pay the requisite tariff, there is no limit to the quantity that they can import.
16. The use of these terms in the GATT 1994 supports this conclusion. Article XI is entitled
“General Elimination of Quantitative Restrictions,” and its first paragraph states:
No prohibitions or restrictions other than duties, taxes or other charges, whether made
effective through quotas, import or export licenses, or other measures, shall be
instituted or maintained by any contracting party on the importation of any product of
the territory of any other contracting party ...
Thus, this paragraph provides a definition for the type of measure – a quantitative restriction – that is
eliminated by Article XI. It specifies that quotas and import licenses that prohibit or restrict imports
are forms of quantitative restrictions, and that both are prohibited.
17. Since the signature of GATT 1947, Article XI has never been understood to ban TRQs. In
fact, when faced with the obligation under Article 4.2 of the WTO Agreement on Agriculture to
convert quantitative import restrictions into “ordinary customs duties,” many Members complied by
transforming quotas into TRQs. Moreover, a number of Members (including Korea) apply TRQs,
indicating a belief, both widespread and current, that such measures comply with the requirements of
the WTO Agreement.

6 Definition of “tariff quota,” Dictionary of International Trade Terms, p. 157 (William S. Hein & Co.,
Inc. 1996) (emphasis added) (Exhibit USA-6). Paragraph 185 of the US first written submission provides a
more detailed discussion of the ordinary meaning of “tariff quota.”
7 Emphasis added.

18. The established view that TRQs are not prohibited by Article XI has two important
implications. First, neither a TRQ itself nor the quota element of a TRQ is a “quota” for purposes of
Article XI. If they were, they would be prohib ited. Second, since Article XI permits only import
restrictions in the form of duties, taxes, and “other charges” (and certain types of quotas not relevant
in this dispute), a TRQ must be a duty, tax or other charge for purposes of Article XI. As we
explained in paragraphs 192-94 of our first written submission, Article XIII reflects the same
understanding. Although the disciplines specifically reference “quantitative restrictions” and
“quotas,” Article XIII:5 adds that “[t]he provisions of this Article shall apply to any tariff quota.”
That addition would be unnecessary if a TRQ, or the “quota element” of a TRQ, were in fact a quota.
19. It also makes sense to view a TRQ as a duty, tax or other charge. A TRQ is nothing but a
stepped tariff, with the cumulative volume of imports determining the level of tariff. It does not
actually limit the quantity of imports as such.
20. This understanding extends to Article 5. The Safeguards Agreement contains nothing to
suggest that longstanding GATT terms like “quota” and “quantitative restriction” as used in the
Safeguards Agreement have meanings different than they do under GATT 1994. The appearance of
the Article XIII:2(d) text in Article 5.2(a) suggest s that it has the same meaning in the Safeguards
Agreement and, thus, excludes TRQs because the Safeguards Agreement contains no equivalent to
Article XIII:5.
5. In Korea – Dairy, the Appellate Body stated that it does “not see anything in Article 5.1
that establishes such an obliga tion [to justify the necessity of a safeguard measure] for a
safeguard measure other than a quantitative restriction which reduces the quantity of imports
below the average of imports in the last three representative years”. Could the Appellate Body
have inferred that there is no obligation on a Member to explain that its safeguard measure is
“necessary” (within the meaning of Article 5.1) unless that safeguard measure is a quantitative
restriction which reduces the level of import s below the average level of the last three
representative years? Please explain.
Response
21. The Appellate Body did not infer that there is no “justification” requirement for safeguard
measures other than quantitative restrictions that reduce the quantity of imports below the average of
imports in the last three representative years. Rather, the ordinary meaning of the terms in Article 5.1
compels such a conclusion.
22. In Korea – Dairy , the Appellate Body rejected a panel’s broad finding that Members that
apply safeguard measures are required to explain in their recommendations or determinations how
they considered the facts before them and why they concluded that the measure was necessary to
remedy serious injury and facilitate adjustment.
8 The Appellate Body found that Article 5.1 imposes
a justification requirement only for safeguard measures that take the form of quantitative restrictions
that reduce the quantity of imports below the average of imports in the last three representative years.9
Since the US safeguard measure did not take such a form, the United States was under no obligation
to justify the measure. Instead, the burden is on Korea to demonstrate that the US safeguard measure
was not applied “only to the extent necessary to remedy or prevent serious injury and to facilitate
adjustment.”

8 Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products , WT/DS98/AB/R,
9 Ibid., para. 99.

23. It is well established that the complainant has the burden of presenting a prima facie case of
noncompliance with the terms of a covered agreement.10 If Korea were to meet its burden, the United
States would then be obliged to bring evidence and argument to rebut Korea’s prima facie case. In no
event, however, would the United States be obliged to “justify” the US measure.
24. Korea has not begun to meet its burden on this issue. Korea’s argument that the United States
was required to “provide the required explanation” of its safeguard measure 11 is in essence an
improper attempt to shift the burden of proof under Article 5.1 to the United States. Its approach in
this regard is reminiscent of the Panel’s conclusion in Hormones that the SPS Agreement allocated the
“evidentiary burden” to the Member imposing an SPS measure. The Appellate Body rejected the
panel’s conclusion on the grounds that:
[i]t does not appear to us that there is any necessary (i.e. logical) or other connection
between the undertaking of Members to ensure, for example, that SPS measures are
“applied only to the extent necessary to protect human, animal or plant life or health .
. .”, and the allocation of burden of proof in a dispute settlement proceeding.
Article 5.8 [of the SPS Agreement] does not purport to address burden of proof
problems; it does not deal with a dispute settlement situation ...
12
25. Like Article 5.8 of the SPS Agreement, Article 5.1 “does not purport to address burden of
proof problems; it does not deal with a dispute settlement situation.” Therefore, the United States
submits that the Appellate Body’s ruling with respect to Article 5.8 of the SPS Agreement is equally
valid with respect to Article 5.1 of the Safeguards Agreement. As the Appellate Body stated in Wool
Shirts (at 19), “a party claiming a violation of a provision of the WTO Agreement by another Member
must assert and prove its claim.” Korea has not done so. Therefore, the United States has no
obligation to produce evidence to establish that the line pipe safeguard is consistent with Article 5.
6. In their oral presentation the US asserted that the President’s decision on the safeguard
measure relied on the same data and information as the ITC recommendation. Can the US also
confirm that there were no other documents pr epared after the ITC’s recommendation that
formed the basis for the President’s decision on the measure even if those documents relied on
the same data and information before the ITC?
Response
26. Documents prepared after the ITC’s recommendation were pre-decisional memoranda to the
President from his staff, and to the US Trade Representative from her staff. The pre-decisional
memoranda are privileged communications under US law, which means that they are presumptively
protected from release to anyone, even in the context of domestic judicial proceedings.

10 United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India ,
WT/DS33/AB/R (25 April 1997) p. 16 (stating that it “was up to India to present evidence and argument
sufficient to establish a presumption that the transitional safeguard determination made by the United States was
inconsistent with its obligations under Article 6 of the ATC. With this presumption thus established, it was then
up to the United States to bring evidence and argument to rebut the presumption.”). Ibid., p. 17 (“[W]e find it
difficult, indeed, to see how any system of judicial sett lement could work if it incorporated the presumption that
the mere assertion of a claim might amount to proof ... ”).
11 Korea’s first written submission, para. 147.
12 EC Measures Concerning Meat and Meat Products (Hormones) , WT/DS26/AB/R, WT/DS48/AB/R,
Report of the Appellate Body, 16 January 1998, para. 102.

27. There are several reasons that such documents are presumptively protected from release under
domestic law. First, such memoranda typically provide various reasons for and against a particular
outcome, which the decisionmaker might – or might not – adopt in the final decision. As such, they
are part of the decision-making process, akin to rough drafts of the decision. The release of such
materials could create confusion as to the actual basis for a decision, and place the decisionmaker in
the position of addressing grounds for decision that he or she actually rejected as invalid.
28. Second, pre-decisional memoranda typically contain advice on the relative merits of various
arguments, including arguments that might be raised against a particular conclusion. If such
memoranda were available after the taking of a decision, government decision-makers and their
advisors would not feel free to debate alternativ e approaches in complete candour in their private
deliberations. Without candid discussions, the quality of the final decision would inevitably suffer.
29. Third, under US law, there is a special privilege attached to communications between the
President and his advisors. The US courts have explained that this rule is necessary to guarantee the
candour of presidential advisors and to provide the President and those who assist him with the
freedom to explore alternatives in the process of shaping policies and making decisions and to do so
in a way many would be unwilling to express publicly.
30. In short, the Presidential proclamation and published memorandum form the entirety of the
explanation of the decision to impose the line pipe safeguard measure. To the extent that the pre-
decisional memoranda contain the same reasoning and conclusions as the proclamation and published
memorandum, they are redundant. To the extent that pre-decisional memoranda contain reasoning
different from that in the proclamation and published memorandum, that reasoning was considered
and not adopted by the President. It forms no part of his decision.
7. At para. 267 of its first written subm ission, the US submits that “any problems
experienced by Geneva resulted in part from the difficulties it experienced in line pipe sales ... ”.
What “part” or proportion, of Geneva Steel’s “dif ficulties” could be directly attributed to its
line pipe operations? Please explain, and provide supporting documentation.
Response
31. It was not necessary for the USITC or Geneva Steel to apportion the difficulties reflected in
its data because the USITC collected financial information from Geneva Steel (and 14 other US line
pipe producers) specifically regarding their line pipe operations .13 As noted in the USITC Report,
Geneva Steel did not produce other products in the facilities where line pipe was made.14
32. It is further clear from the record before the USITC that declines in line pipe operations had a
significant overall effect on Geneva Steel’s operations and, more importantly, for the US domestic
industry as a whole. At the hearing in the injury phase of the USITC investigation an executive from
Geneva Steel confirmed that line pipe “is an essential part of our business from an overall margin
perspective,” and that Geneva lost half of its volume of line pipe sales between 1997 and 1998.
15

13 USITC Report, p. II-25.
14 USITC Report, p. II-25. Any allocations that had to be made by the US line pipe producers in order
to report financial data specific to their line pipe operations were based on their sales of end products or on other
generally accepted accounting principles. See USITC Report, p. I-31 (explaining that increases in per unit
overhead and SG&A were allocated in proportion to their sales of end products or on other acceptable allocation
methodologies).
15 Transcript of Injury Phase Hearing (30 September 1999), p. 52 (Ken Johnson, Geneva Steel).

8. Commissioner Crawford found that the Lone Star’s allocation of extraordinary charges
had a “marked impact on SG&A for the company and for the industry as a whole, reducing the
level of operating income to $10.8 million in 1998”. Did the remaining Commissioners address
this specific finding by Commissioner Crawfo rd? If so, how? What would the level of
operating income have been absent the allocation of this extraordinary charge?
Response
33. It is not the practice of USITC Commissioners to address factual findings made by other
Commissioners. Moreover, the separate views of any dissenting Commissioner are not part of the
determination of the competent authorities for purposes of either Article 3 or Article 4 of the
Safeguards Agreement. Accordingly, the United States submits that such dissenting views are of no
legal consequence and, therefore, irrelevant to the Panel’s consideration of whether the determination
of the competent authorities is consistent with the US obligations under the WTO Agreement.
34. Although the Commissioners whose views constituted those of the competent authority in this
investigation thoroughly reviewed the industry financial data,
16 none of them found that Lone Star’s
allocation of these charges was “extraordinary” or had a “marked” impact on the industry’s selling,
general, and administrative expenses. Indeed, those Commissioners explicitly found that the domestic
producers, without exception, allocated increases in overhead and SG&A expenses on the basis of
acceptable allocation methodologies. 17 Furthermore, those Commissioners concluded that not any
one firm, but “a significant number of firms in the industry were unable to carry out their domestic
line pipe operations at a reasonable profit.”
18 We also note that, aside from the legal irrelevance of
her finding, even Commissioner Crawford acknowledged that the first half of 1999, which did not
include the mentioned Lone Star allocation, was “a difficult period” for the US industry.
35. Although we are unable to disclose the exac t level of industry-wide operating income absent
Lone Star’s allocation of charges (because to do so would disclose confidential business information
of Lone Star), we can assure the Panel that adding the Lone Star charge would not increase the
industry’s 1998 aggregate operating income of $ 10.8 million by more than 20 per cent, or increase
the ratio of operating income to net sales for 1998 of 2.9 per cent by more than one percentage point.
9. At footnote 75 of the ITC’s determination (page I-16), reference is made to data at
page II-31 of the staff report. What is the equi valent reference in the non-confidential version
of the staff report? In note 75, reference is also made to the “two of the largest firms”. Does
this reference include Geneva Steel and/or Lone Star Steel?
Response
36. The equivalent reference in the non-confidential version of the staff report is to page II-25.
The two firms referred to in note 75, whose questionnaire responses (including allocations) were
verified by the USITC are California Steel and Lone Star Steel.19

16 See, e.g., USITC Staff Report at I-16, n.75.
17 USITC Report, p. I-31.
18 USITC Report, p. I-19. The undisputed facts relied on by the USITC show that in 1998, ten of 14
domestic producers reported either reduced operating income as compared to 1997 or had operating losses.
USITC Report, p. I-18. Five of the 14 reporting domestic producers operated at a loss in their line pipe
operations in 1998. Ibid. In interim 1999, this number had doubled, with ten of the 14 reporting producers
operating losses. Ibid.
The two Commissioners who found threat of serious injury likewise found it significant that in interim
1999 a majority of firms in the domestic industry sustained operating losses. Report at I-41.
19 USITC Report, p. II-25.

10. Under the US system for imposing safe guard measures, what are the “competent
authorities” within the meaning of Article 3.1 of the Safeguards Agreement? Do they include
the President of the United States? If not, why not? In the present case, please specify precisely
where the “reasoned conclusions” – within the meaning of Article 3.1 – are to be found. Do they
include conclusions of the President of the United States?
Response
37. Pursuant to Article 4.2(a) of the Safeguards Agreement, the determination of serious injury is
to be made by the competent authorities. Under US law, the only competent authority for making
serious injury determinations is the USITC. 20 Therefore, the US President is not the competent
authority for purposes of either Article 3 or Article 4 of the Safeguards Agreement. 21 Accordingly,
the President’s decision concerning the measure is not part of the report to be prepared by the
competent authorities pursuant to Article 3.1 of the Safeguards Agreement.
38. The last sentence of Article 3.1 provides that “[t]he competent authorities shall publish a
report setting forth their findings and reasoned conclusions ... .” This provision highlights that the
competent authorities’ published report must include only the findings and conclusions reached by the
competent authorities (in US cases, the USITC), and not any findings or conclusions reached by the
Member (in US cases, the President). The language of the last paragraph of Article 4.2(c) likewise
supports this view. It provides that:
The competent authorities shall publish promptly, in accordance with the provisions
of Article 3, a detailed analysis of the case under investigation as well as a
demonstration of the relevance of the factors examined.
The “reasoned conclusions” of the USITC on “all pertinent issues of fact and law” in the line pipe
safeguards investigation are found in the portions of the USITC Report labelled Views on Injury of
Chairman Lynn M. Bragg, Vice Chairman Marcia E. Miller, and Commissioners Jennifer A. Hillman,
Stephen Koplan, and Thelma J. Askey and Separate Views on Injury of Chairman Lynn M. Bragg and
Commissioner Thelma J. Askey . These Views, which explain the USITC’s findings, reasoning and
conclusions appear on pages I-7 through I-54 of Circular Welded Carbon Quality Line Pipe ,
Investigation No. TA-201-70, USITC Publication 3261 (December 1999). Neither these Views nor
any other part of the USITC Report include the conclusions of the President of the United States.
11. With regard to note 21 of the US first writ ten submission, what is the relevance of the
US statement that “capacity and capital expe nditures are not among the factors listed in
Article 4.2(a) of the Safeguards Agreement ...” Does the US consider that the Panel is precluded
from making any findings regarding the ITC’s treatment of capacity and capital expenditure,
simply because they are not mentioned in Article 4.2(a)?
Response
39. As the United States explained in the argument section of its first written submission, 22 the
USITC met its obligations under SGA Article 4.2(a) to evaluate all relevant factors of an objective

20 By comparison, US law provides for two “investigating authorities” – the USITC and the US
Department of Commerce – within the context of the Antidumping and SCM Agreements.
21 See Section 202(b)(1)(A) of the Trade Act of 1974, which states that the USITC shall conduct
safeguards investigations, and section 201(a), which describes the action which the US President is required to
take if the USITC determines that the prerequisites for applying a safeguards measure have been met.
22 US first written submission, paras. 85, 119.

and quantifiable nature having a bearing on the situation of the industry. The USITC evaluated not
only the enumerated factors, but various other factors, including capacity and capital expenditures.
Based on its evaluation of these two particular factors, however, the USITC placed limited weight
upon the data gathered about them, for independent reasons explained with respect to each.
40. With respect to capital expenditures, the USITC found that reported data did not reflect
current industry conditions because capital investment projects in the industry generally involve long
lead times, to allow for project approval, obtaining financing, installation, and start-up operations. As
an example, the USITC noted one case where a line pipe producer bought land in 1993, began
commercial discussions on a new mill in 1995, star ted placing equipment orders in 1997, and began
commissioning the mill in mid-1999.23
41. With respect to capacity, the data showed that the overall decline in capacity utilization far
outpaced the slight increase in capacity.24 In considering the weight to place on the capacity data, the
USITC found that the modest increase in domestic capacity over the period investigated was
considerably less than the growth in consumption, and that this slight increase in capacity was
reasonable in view of the growing consumption.25
42. The United States does not consider that the Panel is precluded from making any findings
regarding the USITC’s treatment of capacity and capital expenditures. To the contrary, the Panel
should find that the USITC met its obligations under SGA Article 4.2(a) in its evaluation of these
“other” industry factors.
12. Leaving aside the factual circumstances of th e present case, does the US consider, as a
matter of principle, that improvements in domestic industry performance at the end of the
relevant period of investigation would be inconsistent with a finding of present serious injury?
Response
43. No. The United States does not consider that improvements in domestic industry
performance at the end of the relevant period of investigation would necessarily be inconsistent with a
finding of present serious injury. Both the degree and nature of the improvement would be relevant to
whether serious injury exists at the time of the inju ry determination. Certainly, an industry that is
currently seriously injured could see improvement in certain factors and still continue to experience
serious injury overall. On the other hand, there also may be circumstances in which the recovery of
an industry is so significant that despite having suffered serious injury at some point during the
investigatory period, such injury is no longer in evidence at the end of the period of investigation.
13. At para. 134 of its first written submission, the US asserts that “Korean respondents
failed to place on the record objective and quant ifiable information as to the extent to which
imports from Korea of dual-stencilled line pipe were used in standard pipe applications”. Did
the USITC seek such information for itself?
Response
44. The USITC sought information on this question during the hearing conducted in conformity
with Article 3.1 of the Safeguards Agreement. However, the source for the allegation that much dual-
stencilled line pipe was used in standard pipe applications was not able to quantify the amount used.
As explained below, any reliable quantitative information was for all practical purposes unobtainable

23 USITC Report, p. I-20 n.122, I-42.
24 USITC Report, p. I-17.
25 USITC Report, p. I-30.

because distributors do not typically know how the pipe that is sold will be used, and even when they
might be able to infer the nature of the use by the identity of the purchaser, such information is not
routinely recorded.
45. It might be helpful for the Panel to understand the context in which the issue of dual-
stencilled line pipe from Korea arose. The issue was first raised by the Korean and Japanese
respondents in their prehearing brief in the injury investigation before the USITC. These respondents
claimed that most imports of dual stencilled line pipe imported from Korea into the West Coast of the
United States were sold for standard pipe applications. They based this claim in large part on an
affidavit from a former executive with several West Coast distributors, who estimated that 70-80 per
cent of imports of dual-stencilled line pipe importe d from Korea into the West Coast were sold for
standard pipe applications. These respondents also claimed that selected questionnaire responses of
domestic producers and distributors supported their theory.
26
46. The executive who provided the affidavit testified at the USITC’s injury hearing. The
exchange between the USITC Commissioner and the witness on this point was as follows:27
COMMISSIONER KOPLAN: Thank you, Let me ask you this, Mr. Smith. Your
estimate of 70 to 80 per cent; is it possible that it could have been 60 to 70 per cent?
MR. SMITH: Absolutely.
COMMISSIONER KOPLAN: Okay. Is it possible that it could have been, possible
now, that it could have been 50 to 60 per cent?
MR. SMITH: Well, there is no way of act ually knowing without tabulating every
sale.
COMMISSIONER KOPLAN: Right.
MR. SMITH: Most distributors don’t keep track of where their material goes, and
unless you’re an on-hands manager reviewing the invoices daily, on a daily basis, and
knowing who the customer is, where it’s going, and if you have some interest,
knowing what kind of a projects it’s going to, can you build this type of information.
COMMISSIONER KOPLAN: And I appreciate your candour on that. What I’m
hearing you say is that the figure could be substantially off the mark.
MR. SMITH: Absolutely.
47. As this exchange makes clear, there was no practical way of knowing what proportion of
Korean dual-stencilled line pipe was actually sold for standard pipe applications. Such information
could have been gathered only if all distributors had kept records of the intended application of the
line pipe involved in each sale, and this is information which the distributors did not keep.
48. In their posthearing brief in the injury investigation before the USITC, the petitioners
contested the claim that large amounts of Korean dual-stencilled line pipe were sold in the standard
pipe market. They pointed out that certain questionnaire responses contradicted this claim. They also
stressed that the witness for the Korean respondents had admitted at the hearing that his estimates

26 Prehearing Brief of Japanese and Korean Respondents (24 Sept. 1999), pp. 66-70. Exhibit USA-23.
27 Transcript of USITC Injury Hearing (30 September 1999), p. 216, Exhibit USA-24.

were not based on any concrete or quantifiable data and might well not be accurate. The petitioners
also claimed that this witness was not reliable because he had no experience in the line pipe business;
his experience was limited to the standard pipe market.28
49. Finally, the record reflects that the greatest absolute and percentage increases in the volume of
imports from Korea occurred in shipments to the Gulf Coast area of the United States, which
comprises the largest US geographic market for line pipe. Shipments of Korean pipe to the Gulf
Coast increased from 16,430 to 68,810 tons between 1997 and 1998 whereas total shipments of line
pipe to the United States from Korea increased from 76,671 to 158,099 tons during the same period.
29
Korea has not claimed, and there is no record evidence suggesting, that dual-stencilled pipe was
shipped to the Gulf Coast.
14. Did the ITC undertake any quantitative analysis (such as regression analysis, and/or
elasticity analysis) regarding the impact of other factors such as the oil and gas crisis, and
declines in the domestic industry exports?
Response
50. The USITC did not formally prepare an econometric analysis in order to quantify the exact
impact of each of various factors on the domestic industry. The United States observes that there is
nothing in the Safeguards Agreement that requires competent authorities to prepare or consider a
quantitative analysis of that sort. Nor has the Appellate Body, in its numerous reviews of panel
reports addressing Members’ safeguard actions, ever suggested that such an analysis is necessary.
51. Notwithstanding the lack of any requirement fo r precise quantification of effects, the USITC
did in many respects consider and rely on quantitative record data and economic or financial analyses
in distinguishing the effects of possible other causes from the effects of increased imports. As an
initial matter, USITC staff prepared a preliminary elasticity analysis for the Commission’s
consideration in making its injury determination.
30 The demand, supply and substitutability estimates
provided in that analysis provided a background for the USITC’s consideration of the factors affecting
the conditions in the industry.
52. As appropriate to its consideration of the various factors possibly having an impact on the
industry’s condition, the USITC carefully scrutinized the quantitative data, and compared the
indicators affected by imports to the indicators affected by other factors. Thus, in distinguishing the
effects of reduced oil and natural gas drilling and production activities, the USITC compared the 1994
through June 1999 data on apparent consumption (which reflected declines in demand due to the
reduction in these “gathering” activities) to the industry financial data for the same period. These data
showed that the demand in interim 1999 was comparable to the level during the period 1994 through
1996; yet, after suffering slight operating losses in 1994, the industry’s financial performance in 1995
and 1996 was healthy. Based on this comparison, the USITC was able to conclude that the reduction
in the level of demand in 1998 and 1999 was not of a magnitude that would be expected to generate
the severe financial losses suffered by the industry in 1998 and 1999.
31
53. The USITC also looked at the market share data in relation to demand, and found that imports
increased their market share at the domestic producers’ expense, at the same time that oil and natural
gas drilling declined. All other things being equal, the USITC found that the decline in demand for a
standardized product like line pipe should impact all sources of supply in roughly proportional

28 Posthearing Brief of Petitioners (6 Oct. 1999), pp. 15-19. Exhibit USA-25.
29 USITC Report, Table D-2.
30 USITC Report, pp. II-42-51.
31 USITC Report, p. I-28.

amounts.32 The USITC looked further to quantitative information to test respondents’ explanation
that imports have longer lead times than domestic product and therefore allegedly respond more
slowly to a decrease in demand. The monthly import data examined by the USITC disproved
respondents’ theory because these data showed high levels of imports for the months which according
to respondents’ argument should have reflected orders taken in late 1998 and early 1999, when
drilling activities were at their lowest.
54. Further to its analysis of the impact of the reduction in oil and gas drilling and production
activities, the USITC considered the timing of that reduction in relation to the data for the various
relevant industry performance indicators. The USITC found that the most significant difference in
market conditions in interim 1999 as compared to the 1994 through 1996 period (when apparent
consumption was at levels comparable to 1999) was the market presence of imports, which in 1999
accounted for double the market share they held during 1994-1996.
33
55. Based on its analysis of the corresponding data for the various industry performance
indicators, the USITC concluded that the reduction in exploring and drilling activities mainly affected
demand aspects, whereas the increases in imports and import shares correlated to price declines. The
USITC also analysed the price data on a product-specific basis.
34 These data indicated that price
declines appeared to be across the board and not to affect disproportionately those line pipe grades
that are typically used in oil and gas drilling applications.
56. Finally, the USITC looked to the financial variance analysis to confirm its conclusion that the
substantial decline in domestic prices caused by the increased imports, rather than reduced shipment
volumes caused by the decline in demand, were mainly responsible for the industry’s dismal financial
performance.35
57. In addition to relying on the data to address the impact of the reduction in exploration and
drilling activities, the USITC likewise evaluated quantitative information where appropriate to
address other possible causes of injury. In considering the impact of competition among domestic
producers, the USITC compared the data on industry capacity to the data on domestic consumption,
and found that the increases in capacity were reasonable in light of the growth in consumption from
1994 to 1998.
36
58. With respect to the impact of declines in export markets, the USITC examined the data on
domestic producers’ exports against domestic production and import data. Finding that the increase in
imports in 1998 was considerably larger than the decline in exports, the USITC concluded that any
impact on the domestic industry from a drop in exports was dwarfed by the impact of the rise in
imports.37
15. In para. 104 of its first submission the US responds to Korea’s argument that the
industry was not injured as shown by an increase in capital expenditure during the POI. Would
the US also comment on Korea’s argument made in Para 250 of its first submission that during
the POI two new producers began operations in 1998 and 1999?

32 USITC Report, p. I-29.
33 USITC Report, p. I-28.
34 USITC Report, p. I-29.
35 USITC Report, p. I-29, n.180.
36 USITC Report, p. I-30.
37 USITC Report, p. I-31.

Response
59. It is correct that two new line production facilities began operations, one in 1998 and the other
in early 1999.38 The United States does not agree with Korea’s argument in paragraph 250 of its first
written submission that the addition of these production facilities was inconsistent with the USITC’s
conclusion that the domestic industry was seriously injured or threatened with serious injury. Both
the Commissioners finding serious injury and those finding a threat thereof noted that capital
investments in this industry involve long lead-times.
39 Plants brought on-line in 1998 and early 1999
would have reflected investment decisions and commitments made well before the surge in imports in
1997 and 1998. Indeed, the USITC found that the entr y of new facilities was reasonable in light of
the growing consumption through 1998.
16. In para. 109 of its first submission the US explains that the $25-$30 price increase
referred to by Korea could just as likely compensa te for rising raw material costs following the
imposition of anti-dumping duties on hot-rolled steel. Were all imports of hot-rolled steel
affected by the anti-dumping measure? What was the coverage of the US measure or measures
on hot-rolled steel? Were there other suppliers of hot-rolled steel that were not affected by the
anti-dumping measures? Furthermore, at para. 22 of its first written submission, the US refers
to a “decline in the price of hot-rolled carbon st eel.” Is such a price decline consistent with the
rising raw material costs referred to in para. 109 of its first written submission? Please explain.
Were all imports of hot-rolled steel affected by the anti-dumping measure?
Response
60. First, the United States must emphasize that Korea clarified at the first substantive meeting of
the panel that the so-called “price increases” that it originally referenced, and that the United States
consequently also characterized as price increases in its first written submission, were actually
announcements of intended price increases by a US producer. There is no evidence in the record that
the announced attempts to increase prices were in fact successful.
61. While not all imports of hot-rolled steel were subject to antidumping orders, all imports of
hot-rolled steel, including fairly traded imports, presumably were affected by those orders. The
objective of antidumping measures is, of course, to eliminate injury to the domestic industry caused
by the subject imports that were found to be sold at less than normal value. The orders accomplish this
by providing for the imposition of an antidumping duty in the amount of the margin of price
discrimination. By increasing the price at which the subject imports are sold, the antidumping duties
are intended to reduce or eliminate the market-wide price suppression or depression that had been
occasioned by the dumped imports. Once the unfairly traded imports are either priced appropriately
or leave the market, the prices of not only domestic hot-rolled steel, but also of fairly traded imports
of hot-rolled steel would be expected to increase.
What was the coverage of the US measure or measures on hot-rolled steel?
Response
62. The antidumping duty measures imposed in Ju ly and August of 1999 covered imports of hot-
rolled steel from Japan (subject to antidumping duties), and Brazil and Russia (subject to suspension
agreements providing for minimum prices, in the case of Brazil, and minimum prices and quantitative

38 USITC Report, p. II-11.
39 USITC Report, p. I-20 n. 122 (Commissioners finding serious injury), p. I-42 (Commissioners
finding threat of serious injury).

export limits, in the case of Russia). The scope of the antidumping duty order on imports from Japan
and of the suspension agreements affecting imports from Brazil and Russia was as follows:
certain hot-rolled flat-rolled carbon-quality steel products of a rectangular shape, of a
width of 0.5 inch or greater, neither clad, plated, nor coated with metal and whether
or not painted, varnished, or coated with plastics or other non-metallic substances, in
coils (whether or not successively superimposed layers) regardless of thickness, and
in straight lengths, of a thickness less than 4.75 mm and of a width measuring at least
10 times the thickness. Universal mill plate (i.e., flat-rolled products rolled on four
faces or in a closed box pass, of a width exceeding 150 mm but not exceeding 1250
mm and of a thickness of not less than 4 mm, not in coils and without patterns in
relief) of a thickness not less than 4.0 mm is not included within the scope of these
investigations.
Specifically included in this scope are vacuum degassed, fully stabilized (commonly
referred to as interstitial-free (“IF”)) steels, high strength low alloy (“HSLA”) steels,
and the substrate for motor lamination steels. IF steels are recognized as low carbon
steels with micro-alloying levels of elements such as titanium and/or niobium added
to stabilize carbon and nitrogen elements. HSLA steels are recognized as steels with
micro-alloying levels of elements such as chromium, copper, niobium, titanium,
vanadium, and molybdenum. The substrate for motor lamination steels contains
micro-alloying levels of elements such as silicon and aluminum.
Steel products to be included in the scope of this investigation, regardless of HTSUS
definitions, are products in which: 1) iron predominates, by weight, over each of the
other contained elements, 2) the carbon content is 2 per cent or less, by weight, and 3)
none of the elements listed below exceeds the quantity, by weight, respectively
indicated:
1.80 per cent of manganese, or
1.50 per cent of silicon, or
1.00 per cent of copper, or
0.50 per cent of aluminum, or
1.25 per cent of chromium, or
0.30 per cent of cobalt, or
0.40 per cent of lead, or
1.25 per cent of nickel, or
0.30 per cent of tungsten, or
0.012 per cent of boron, or
0.10 per cent of molybdenum, or
0.10 per cent of niobium, or
0.41 per cent of titanium, or
0.15 per cent of vanadium, or
0.15 per cent of zirconium.
All products that meet the physical and chemical description provided above are within the scope of
this investigation unless otherwise excluded. The following products, by way of example, are outside
and/or specifically excluded from the scope of this investigation:
- Alloy hot-rolled steel products in which at least one of the chemical elements exceeds
those listed above (including e.g., AS TM specifications A543, A387, A514, A517,
and A506).

- SAE/AISI grades of series 2300 and higher.
- Ball bearing steels, as defined in the HTSUS.
- Tools steels, as defined in the HTSUS.
- Silico-manganese (as defined in the HTSUS) or silicon electrical steel with a silicon
level exceeding 1.50 per cent.
- ASTM specifications A710 and A736.
- USS abrasion-resistant steels (USS AR 400, USS AR 500).
- Hot-rolled steel coil which meets the following chemical, physical and mechanical
specifications: C, 0.10-0.14%; Mn, 0.90% max; P, 0.025% max; S, 0.005% max; Si,
0.30-0.50%; Cr, 0.50-0.70%; Cu, 0.20-0.40%; Ni, 0.20% max; Width = 44.80 inches
maximum; Thickness = 0.063-0.198 inches; Yield Strength = 50,000 ksi minimum;
Tensile Strength = 70,000-88,000 psi.
- Hot-rolled steel coil which meets the following chemical, physical and mechanical
specifications: C, 0.10-0.16%; Mn, 0.70-0.90%; P, 0.025% max; S, 0.006% max; Si,
0.30-0.50%; Cr, 0.50-0.70%; Cu, 0.25% max; Ni, 0.20% max; Mo, 0.21% max;
Width = 44.80 inches maximum; Thickness = 0.350 inches maximum; Yield Strength
= 80,000 ksi minimum; Tensile Strength = 105,000 psi Aim.
- Hot-rolled steel coil which meets the following chemical, physical and mechanical
specifications: C, 0.10-0.14%; Mn, 1.30-1.80%; P, 0.025% max; S, 0.005% max; Si,
0.30-0.50%; Cr, 0.50-0.70%; Cu, 0.20-0.40%; Ni, 0.20% max; V (wt.), 0.10% max;
Cb, 0.08% max; Width = 44.80 inches maximum; Thickness = 0.350 inches
maximum; Yield Strength = 80,000 ksi minimum; Tensile Strength = 105,000 psi
Aim.
- Hot-rolled steel coil which meets the following chemical, physical and mechanical
specifications: C, 0.15% max; Mn, 1.40% max; P, 0.025% max; S, 0.010% max; Si,
0.50% max; Cr, 1.00% max; Cu, 0.50% max; Ni, 0.20% max; Nb, 0.005% min; Ca,
Treated; Al, 0.01-0.07%; Width = 39.37 inches; Thickness = 0.181 inches maximum;
Yield Strength = 70,000 psi minimum for thicknesses ≤ 0.148 inches and 65,000 psi
minimum for thicknesses > 0.148 inches; Tensile Strength = 80,000 psi minimum.
- Hot-rolled dual phase steel, phase-hardened, primarily with a ferritic-martensitic
microstructure, containing 0.9% up to and including 1.5% silicon by weight, further
characterized by either (i) tensile strength between 540 N/mm² and 640 N/mm² and
an elongation percentage ≤26% for thicknesses of 2 mm and above, or (ii) a tensile
strength between 590 N/mm² and 690 N/mm ² and an elongation percentage of ≤25%
for thicknesses of 2mm and above.
- Hot-rolled bearing quality steel, SAE grade 1050, in coils, with an inclusion rating of
1.0 maximum per ASTM E 45, Method A, with excellent surface quality and
chemistry restrictions as follows: 0.012% maximum phosphorus, 0.015% maximum
sulphur, and 0.20% maximum residuals including 0.15 per cent maximum chromium.

- Grade ASTM A570-50 hot-rolled steel sheet in coils or cut lengths, width of 74
inches (nominal, within ASTM tolerances), thickness of 11 gauge (0.119 inch
nominal), mill edge and skin passed, with a minimum copper content of 0.20%.40
Were there other suppliers of hot-rolled steel that were not affected by the anti-dumping
measures?
Response
63. As indicated above, no. All suppliers of hot-rolled steel were affected by the anti-dumping
measures regardless of whether such imports were subject to the measures themselves. The USITC’s
report accompanying the1999 investigations shows that 61 per cent (7.0 million of 11.4 million tons)
of 1998 imports of hot-rolled steel were from Brazil, Russia and Japan, and therefore became subject
to the antidumping duty orders or suspension agreements.
41
Furthermore, at para. 22 of its first written submission, the US refers to a “decline in the
price of hot-rolled carbon steel.” Is such a pri ce decline consistent with the rising raw material
costs referred to in para. 109 of its first written submission? Please explain.
Response
64. Paragraphs 22 and 109 of the US first written submission discuss prices in the domestic
market at different times during the period of investigation. Paragraph 22 explains that the USITC
considered (pp. I-31-32 of the USITC Report) whether declines in raw material costs accounted for
the decline in line pipe prices, in particular the 1998 and interim (January-June) 1999 decline in the
price of hot-rolled carbon steel. (The USITC found that the line pipe price declines could not be
attributed to a decline in raw material costs.) Paragraph 109 refers to announced price increases, and
to the imposition of antidumping measures, in August 1999. With respect to these later events, the
USITC stated:
We are persuaded that, to the extent any such announced price increases may have
“stuck” in the marketplace, they are attributable in significant part to anticipated
increases in raw material costs by domestic producers.42
65. Moreover, the record of the USITC injury investigation closed before the announced effective
date of anticipated increases, and therefore there is no evidence in the record that the price increases
occurred.
17. According to the US, the absence of any reference to GATT Article XIX in
Article XXIV:8(b) means that Article XIX safegu ard measures “may or must be made part of
the general elimination of ‘restrictive regulations of commerce’ under any FTA (para. 216, US
first written submission). Why does the US consider that safeguard measures “may” (as
opposed to “must”) be made part of the general elimination of “restrictive regulations of
commerce” under any FTA? Would an a contrario reading of Article XXIV:8(b) mean that the
imposition of a safeguard measure between FTA partners is inconsistent with the concept of an
FTA? Please explain.

40 Antidumping Duty Order; Certain Hot-Rolled Fl at-Rolled Carbon-Quality Steel Products from
Japan, 64 Fed. Reg. 34778 (US Dept. of Commerce, 29 June 1999), Exhibit USA-26.
41 Exhibit USA-27.
42 USITC Report, p. I-48 n. 88. (Views of Chairman Bragg and Commissioner Askey).

Response
66. The degree to which FTA partners must eliminate safeguard measures among themselves
depends on the overall package of trade liberalization that accompanies the formation of the FTA. If
that package meets the requirements of Article XXIV:8(b) without the elimination of safeguard
measures, the FTA partners have the option of eliminating safeguard measures, but are not required to
do so. However, if the elimination of safeguard measures is necessary to meet the requirements of
Article XXIV:8(b), the FTA partners must do so. In this regard, the authority to apply safeguard
measures to FTA partners is no different from any other restrictive regulation of commerce that
applies on an MFN basis.
67. To create an FTA consistent with Article XXIV, the parties must satisfy the
Article XXIV:8(b) definition of an FTA as:
a group of two or more customs territories in which the duties and other restrictive
regulations of commerce (except, where necessary, those permitted under Articles XI,
XII, XIII, XIV, XV and XX) are eliminated on substantially all the trade between the
constituent territories in products originating in such territories.
This text does not require the elimination of all duties and other restrictive regulations of commerce.
Some restrictive regulations, if they fall within the enumerated exceptions, may be applied “where
necessary.” The remaining restrictive regulations must be eliminated on substantially all trade. As
the Appellate Body explained in Turkey – Textiles,
Neither the GATT CONTRACTING PARTIES nor the WTO Members have ever
reached an agreement on the interpretation of the term “substantially” in this
provision. It is clear, though, that “substantially all the trade” is not the same as all
the trade, and also that “substantially a ll the trade” is something considerably more
than merely some of the trade.
43
68. Therefore, the package of trade liberalizing measures that accompanies formation of an FTA
need not eliminate all duties and restrictive regulations of trade. If FTA parties, while retaining some
duties and restrictive regulations of commerce, can still achieve the Article XXIV:8 threshold
(covering “substantially all trade”), they may retain those regulations. If the elimination of other
restrictive regulations covers substantially all trade, the parties may also eliminate safeguard
measures. This is by far the most likely scenario. We included the possibility that safeguard
measures “must” be eliminated to cover all eventual ities. For example, if the elimination of duties
and other restrictive regulations that the FTA parties accept does not cover substantially all trade, they
must eliminate restrictive regulations that they had intended to retain, which could include safeguard
measures. However, this is not a likely scenario.
18. Is it logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are, given the fact that Article XIX safeguard measures
may take the form of (Article XI) quantitative restrictions? Please explain.
Response
69. A treaty, and especially a multilateral agreement, reflects a series of compromises and trade-
offs. No one signatory’s “logic” will necessarily prevail in this process. Under customary rules of

43 Turkey – Restrictions on Imports of Textile and Clothing Products , WT/DS34/AB/R, para. 48
(22 October 1999).

interpretation of international law, the text of the treaty determines the rights and obligations of the
signatories. Whether a later interpreter can derive an underlying “logic” from the text does not
change the explicit rights and obligations. In this case, the text of Article XXIV:8 differentiates
between Article XI measures and Article XIX measures, thereby authorizing differential treatment of
the two.
70. It is always speculative to attempt to reconstruct the logic of the negotiators of a treaty. In
this case, we can conclude that the difference in treatment is logical because Articles XI and XIX
permit the imposition of quantitative restrictions for different reasons. Article XI permits three types
of quantitative restriction: temporary export prohibitions to prevent critical shortages of food or other
products; import or export prohibitions necessary for classification, grading, or marketing of
commodities in international trade; and import restrictions on agricultural and fisheries products
necessary to enforce domestic controls on the production of agricultural and fisheries products. And
of these, some are no longer permitted as a result of the Agreement on Agriculture. Article XIX
allows the suspension of obligations (which could include imposition of a quantitative restriction
otherwise inconsistent with Article XI) to the extent necessary to remedy serious injury caused by
increased imports. Accordingly, the drafters agreed that FTA partners could retain the quantitative
restrictions permitted under Article XI where those measures were necessary, but did not make the
same provision for quantitative restrictions permitted under Article XIX.
71. One logical conclusion is that the basis for a quantitative restriction affects its permissibility
in the context of an FTA. FTA parties have an unqualified right to apply those quantitative
restrictions permitted under Article XI among themselves where necessary. One might view the
GATT 1994 as allowing the application among FTA partners of measures permitted under Article XI
because they may be necessary for implementation of particularly important national policies or
programmes. In contrast, an FTA party’s authority to include FTA partners in quantitative restrictions
under Article XIX must be balanced against other restrictive measures of trade in meeting the
Article XXIV:8 threshold. Presumably, this treatment evinces the importance of achieving the
elimination of restrictive regulations on substantially all trade.
72. We note that there is nothing unusual in this treatment. Articles XI and XIX both permit the
maintenance of quantitative restrictions that would otherwise be prohibited, but under different
conditions. Article XXIV:8 follows the same approach, placing different prerequisites on application
of an Article XI quantitative restriction in the context of an FTA than on application of an Article XIX
quantitative restriction.
19. In Turkey – Textiles (WT/DS34), the Appellate Body stated that a GATT Article XXIV
defence may be available in the context of a customs union if two conditions are met: (1) the
measure at issue is introduced upon the formation of the customs union, and (2) “the formation
of [the] customs union would be prevented if it were not allowed to introduce the measure at
issue”.
44
(a) In this regard, please explain how the formation of the NAFTA would have been
prevented if the NAFTA parties had not been allowed to introduce the
safeguards exemption provided for in section 311(a) of the NAFTA
Implementation Act.

44 This question consists of two related, but distinct questions. For clarity, we have divided the question
and our response into two subsections.

Response
73. Under the North American Free Trade Agreement (“NAFTA”), the parties introduced a
multitude of rights and obligations removing many restrictive regulations of commerce – tariffs,
customs fees, safeguards laws, and others. These rights and obligations, including the safeguard
exemption, were conceived as a package and introduced as a package. Together they resulted in the
elimination of restrictive regulations of commerce on substantially all trade among the three NAFTA
parties, thus forming the basis for the creation of a free trade area. Failure to accept these rights and
obligations would have meant inability to become a party to the NAFTA, preventing the NAFTA
from entering into force, and thus would have prev ented the formation of the free-trade area created
by the NAFTA.
74. In Turkey – Textiles , the Appellate Body interpreted the chapeau to Article XXIV:5 to
determine the conditions under which a Member could assert Article XXIV as a defense for a WTO-
inconsistent measure affecting the rights of third parties that is introduced as part of the creation of a
customs union:
we note that the chapeau states that the provisions of the GATT 1994 “ shall not
prevent” the formation of a customs union. We read this to mean that the provisions
of the GATT 1994 shall not make impossible the formation of a customs union.
45
The Appellate Body found further that the chapeau “indicates that Article XXIV can justify
the adoption of a measure which is inconsistent with certain other GATT provisions ... only to the
extent that the formation of the customs union would be prevented if the introduction of the measure
were not allowed.” It noted that this text “cannot be interpreted without reference to the definition of
a ‘customs union.’”
46
75. However, Turkey – Textiles dealt primarily with a measure applied to non-members of the
customs union. The Appellate Body did not indicate the conditions under which a Party could assert
Article XXIV as a defense with regard to a measure liberalizing internal trade among customs union
members. Thus, its reasoning is not germane in this dispute, which involves a measure – the
exclusion from safeguard measures – that was part of the NAFTA trade liberalization package.
76. In any event, the Turkey – Textiles analysis establishes that Article XXIV invalidates Korea’s
claim that the NAFTA safeguard exemption is inconsistent with Articles I, XIII, and XIX. 47 In line
with the Appellate Body’s reasoning, the analysis begins with the definition of an FTA, which
Article XXIV:8(b) describes as an area in which “duties and other restrictive regulations of commerce
... are eliminated on substantially all the trade among the parties.” Article XXIV:8(a)(i) contains
similar language with regard to customs unions. The Turkey – Textiles report indicated that the terms
“offer ‘some flexibility’ to the constituent members of a customs union when liberalizing their
internal trade in accordance with this sub-paragraph.”
48
77. The ordinary meaning of Article XXIV:8(b) provides the necessary guidance. The text
contains a direct object (duties and other restrictive regulations), a verb (eliminate), and a
prepositional phrase (on substantially all trade) modifying the direct object. The direct object is both
plural and conjunctive, indicating that the obligation (to eliminate) applies to the direct object,
namely, the duties and restrictive regulations of commerce on substantially all trade, in the aggregate.
The text does not contain language indicating that the obligation applies separately to each duty or

45 Turkey – Textiles, para. 45.
46 Ibid., paras. 46-47.
47 Korea’s first written submission, para. 168.
48 Turkey – Textiles, para. 48.

restrictive regulation. Thus, compliance with Article XXIV:8(b) is determined with reference to the
entire package of the duties and restrictive regulations of commerce that are eliminated.
78. In light of this definition, the parties will be prevented from forming a free trade area if they
cannot accept the elimination of the group of duties and restrictive regulations of commerce on
substantially all trade that they have agreed upon. This would occur if they were not allowed to
accept the elimination of any one of the duties or regulations.
79. The NAFTA parties conceived of the various types of duties and restrictive regulations of
commerce that they would eliminate as a group and negotiated over them at the same time. At no
point did the parties indicate that failure to accept any particular obligation would prevent the
formation of the free trade area. As part of the package of trade liberalization, they agreed to NAFTA
Article 802, which eliminated each party’s authority to apply safeguard measures on imports from the
other party that did not contribute importantly to serious injury. Section 311 of the NAFTA
Implementation Act effectuated this obligation as a matter of US law.
80. If the GATT 1994 were interpreted to prohibit the Article 802 safeguard exemption, it would
unravel the package of trade liberalizing rights and obligations agreed upon by the NAFTA parties.
Therefore, Article XXIV permits the exclusion of Canada and Mexico from the line pipe safeguard
notwithstanding Article II.
(b) If the formation of NAFTA would have been prevented but for the safeguards
exemption, why are NAFTA members not automatically excluded from
safeguard measures imposed by other NAFTA members?
81. Under the NAFTA, the Article 802 conditional exemption from safeguards measures formed
part of the final balance of concessions and obligations to which the parties agreed. That package
went well beyond liberalizing substantially all trade, so a partial exemption was permissible. If that
particular package were not accepted, the formation of the free-trade area created by the NAFTA
would have been prevented.
82. During negotiations, the parties did not agree to completely eliminate their authority to take
safeguard measures against each other. If they had, it is possible that they would have changed other
elements of the liberalization package to maintain the balance of concessions and other obligations.
On the other hand, they may not have achieved agreement on that basis. It is the view of the United
States that the possibility of a different outcome to the NAFTA negotiations is too speculative to form
the basis for any conclusions with regard to the measures that the parties actually adopted.
20. The US argues, on the basis of the last sent ence of note 1 to the Safeguards Agreement,
that “issues related to FTA imports are to be addressed exclusively under the relevant GATT
1994 articles” (para. 220, US first written submission ). In this regard, please comment on the
Appellate Body’s finding in Argentina – Footwear (para. 106) that “the footnote only applies
when a customs union applies a safeguard measure ‘as a single unit or on behalf of a member
State’”. Does the US consider that the Appellate Body’s finding does not apply to the last
sentence of footnote 1? Please explain.
Response
83. The Appellate Body’s exact finding was that:

The ordinary meaning of the first sentence of footnote 1 appears to us to be that the
footnote only applies when a customs union applies a safeguard measure “as a single
unit or on behalf of a member State.”49
It reached this conclusion in response to a panel’s analysis based on the first and third
sentences of footnote 1. 50 At no point did either the panel or the Appellate Body address the fourth
(and last) sentence of the footnote, or how that sentence might affect the meaning of the entire
footnote. Consequently, the Appellate Body’s finding does not provide any guidance for the Panel’s
interpretation of the last sentence.
21. If footnote 1 to the Safeguards Agreemen t was relevant in some way to the issue of
which Members could be subject to a safeguard measure, is it relevant that footnote 1 has been
inserted in Article 2.1 of the Safeguards Agreement, rather than Article 2.2? Please explain.
Response
84. The fact that footnote 1 appears in Article 2.1 is relevant in that it establishes a context for the
footnote. However, Korea was wrong in asserting that the footnote is applicable to Article 2.1 alone.
By its terms, the footnote says that “Nothing in this Agreement ...” (emphasis added). If the footnote
applied only to Article 2.1, it would have said “Nothing in this paragraph ...” Therefore, the insertion
of footnote 1 into Article 2.1 instead of Article 2.2 has no effect on the interpretation of the relevant
text – the last sentence of footnote 1. In fact, it is equally relevant that paragraph 2.1 forms part of
Article 2, which includes Article 2.2. Thus, any relevance ascribed to the location of footnote 1
would suggest that it applies equally to all of Article 2, and not just the paragraph within which it
appears.
85. Under the customary rules of interpretation of international law, “a treaty shall be interpreted
in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their
context and in light of its object and purpose.”
51 Thus, the ordinary meaning of the terms is the
primary basis for interpreting a treaty, with contex t and object and purpose informing the application
of the ordinary meaning. The location of a provision within a particular paragraph (such as
paragraph 1 of Article 2) may be relevant in providing context, but the article in which the provision
is located and other articles in the agreement and other agreements may also provide context for the
provision.52
86. Paragraphs 221-225 of the US first written submission discuss the ordinary meaning of the
last sentence of footnote 1 – that nothing in the Safeguards Agreement affects a WTO Member’s right
to exclude FTA partners from safeguard measures. The location of the footnote 1 in Article 2.1,
which specifies the prerequisites for a Member to apply a safeguard measure, does not change that
meaning. Specifically, footnote 1 is appended to the word “Member,” suggesting that it amplifies the
meaning of that word. The first three sentences of footnote 1 serve this role, defining the terms in
which a customs union, acting as a WTO Member, may take a safeguard measure on its own behalf or
on behalf of a member of the customs union.

49 Argentina – Footwear, WT/DS121/AB/R, para. 106 (emphasis added).
50 Ibid., para. 102.
51 These customary rules of interpretation are reflected in Article 31 of the Vienna Convention on the
Law of Treaties.
52 For example, in EC – Bed Linen , the Appellate Body treated Article 2.4 of the Antidumping
Agreement as context for the interpretation of Article 2.4.2. In US – Wheat Gluten , the Appellate Body treated
Article 3.1 SGA as context for the interpretation of Article 4.2(b). European Communities – Anti-Dumping
Duties on Imports of Cotton-Type Bed Linen from India , WT/DS141/AB/R, 1 March 2001, para. 59;
United States – Definitive Safeguard Measures on Wheat Gluten from the European Communities ,
WT/DS166/AB/R, adopted 19 January 2001, paras. 52-53 (“US – Wheat Gluten (AB)”).

87. However, the text of the last sentence of footnote 1 indicates that it has a broader reach than
the first three sentences. It opens with the phrase “[n]othing in this Agreement,” thus setting out an
interpretation applicable to every other provision in the Agreement, and not just the word “Member”
in Article 2.1. Where each of the first three sentences address “customs unions” and “member states”
specifically, the last sentence does not mention them at all. Instead, it cites to a provision –
paragraph 8 of Article XXIV – covering both customs unions and FTAs. Thus, the text of footnote 1,
last sentence, indicates that it applies beyond the limited purpose of clarifying the meaning of the term
“Member.” Having dealt with one particular aspect concerning customs unions, it made sense to
speak to the overall issue of the effect of the Safeguards Agreement on customs unions and the clearly
related issue of FTAs. The last sentence is a clarification that neither the preceding sentence nor any
other language in the Safeguards Agreement disturbs the relationship between safeguard measures
and customs unions or FTAs that is set out in GATT 1994. This was a controversial subject that the
negotiators never sought to resolve in the Safeguards Agreement.
53
88. The location of footnote 1 within Article 2.1 is not the sole context for its terms. Articles 2.1
and 2.2 together form Article 2, which is entitled “Conditions.” Article 2.2 states that “[s]afeguard
measures shall be applied to a product being imported irrespective of its source.” This text establishes
that Article 2 addresses not just the identity of the Member applying a safeguard measure and the
conditions for doing so, but also the identity of the Members subject to the measure. This context
reinforces the conclusion that footnote 1, like the Article in which it appears, provides the basis for
determining what Members are subject to a safeguard measure.
89. In short, it is relevant that footnote 1 is inserted into Article 2.1. It is also relevant that
Article 2.1 is paired with Article 2.2 in a single article addressing the conditions for application of a
safeguard measure. The ordinary meaning of the text of the footnote is dispositive. For the reasons
discussed above and in the US first written submission, these interpretative guides together establish
that nothing in the Safeguards Agreement affects a Member’s ability to exclude FTA partners from
safeguard measures.
22. At para. 230 of its first written submission, the US asserts that the collapse in oil prices
was not expected. At what point in time is the US referring to in making this statement? In
other words, when was the collapse in oil prices not expected, or unforeseen?
Response
90. The relevant point of inquiry for unforeseen developments is the time at which the Member
undertook an obligation, including a tariff concession. In Felt Hats, a GATT 1947 working group
found that the United States had demonstrated that it met the unforeseen developments requirement
because “the effect of the circumstances indicated above,” (a marked change in hat fashions) “and
particularly the degree to which the change in fash ion affected the competitive situation, could not
reasonably be expected to have been foreseen by the United States authorities in 1947,” when the
United States made a tariff concession on hats.
54 There is no question that the decrease in oil prices
that occurred in the latter part of the investigation period in Line Pipe was not foreseen at the time that
the United States entered into its Uruguay Round tariff reduction commitments, and certainly not at
the time of preceding tariff concessions. Indeed, the decrease in oil prices was unexpected almost up
to the time it began.55

53 Guide to GATT Law and Practice, vol. 2, pp. 838-840 (WTO 1995).
54 Report on the Withdrawal by the United States of a Tariff Concession under Article XIX of the
General Agreement on Tariffs and Trade, 27 March 1951, para. 12.

(v) Causal link
23. Did the ITC demonstrate that the oil and gas crisis was not a more important cause of
injury than increased imports, as it claimed, or did the ITC simply demonstrate that the oil and
gas crisis did not account for the totality of th e injury suffered by the domestic industry? In
other words, did the US simply demonstrate that the industry would still have suffered injury,
irrespective of the crisis in the oil and gas industry? If so, is this sufficient to distinguish the
injurious effects of the increased imports from th e injurious effects of the oil and gas crisis?
Please explain.
Response
91. In its Report, the USITC provided a detailed and meaningful explanation of its finding that
the oil and gas crisis was not a more important cause than increased imports. 56 In its causation
analysis, the USITC first undertook a thorough analysis of the relationship between the increased
imports and the factors bearing on the situation of the industry. 57 As explained in the United States
first and second written submissions, the USITC found that imports had significant adverse price
effects on the domestic industry. In turn, these adverse price effects resulted in a significant loss of
sales, market share and revenue on the part of the domestic industry, as well as a decline in other key
indicators of the industry’s health, such as capacity utililization and employment. 58 T h e U S I T C
concluded that imports were an important cause of injury, i.e., that there was a causal link between the
imports and the serious injury.
92. As a second step in its causation analysis, the USITC examined other possible causes for the
purposes of addressing the “substantial cause” requirements of the US statute. It conducted its
examination of the effects of other possible causes, including mainly the oil and gas crisis, against the
background of its finding in the first instance of a causal link between the increased imports and the
serious injury the domestic industry was suffering. The USITC did not merely determine that there
was at least some injury being caused to the industry by factors other than the oil and gas crisis.
Rather, the USITC compared the effects of the changes in demand caused by the oil and gas crisis to
the effects caused by the imports. It found that, of the two principal factors affecting the industry, the
increased imports were more responsible for the serious injury. In so doing, the USITC assured itself
that any effects caused by the changes in demand did not sever the causal link between the increased
imports and the serious injury.
93. Accordingly, the USITC examined the effects of reductions in oil and gas drilling on line pipe
demand and compared such effects to those of the increased imports.
59 As an initial matter, the
USITC found that it was not clear that line pipe demand was as closely tied to oil and gas drilling
activities as respondents had contended.60
94. To the extent line pipe demand was tied to drilling activities, the USITC found that the trends
in apparent consumption (which reflects demand), unlike the import trends, did not track the financial
experience of the domestic industry.
61 Consumption in interim 1999, when the industry was at a
financial low point, was comparable to consumption in the period 1994 through 1996, when the
industry’s financial performance was healthy. The USITC explained that the most significant

56 USITC Report, pp. I-27-30.
57 USITC Report, pp. 23-26.
58 USITC Report, p. I-26.
59 The United States has already set out some of the quantitative details of this comparison in our
response to the Panel’s question number 14.
60 USITC Report, p. I-27.
61 USITC Report, p. I-28.

difference in market conditions between interim 1999 and the 1994 through 1996 period was the
import market presence and in particular the doubling of import market share.
95. Further, the USITC explained that the substantial price declines in 1998 and interim 1999,
which correlated to increases in imports, could not be attributed to declines in oil and gas drilling and
production activities.62 The USITC noted that the decrease in line pipe prices that occurred during the
post-1998 period was across the board.63 It was not limited to those line pipe grades used for drilling,
as would be expected if the industry slowdown had been caused by a reduction in demand from the oil
and gas industry. 64 The USITC further found that the questionnaire responses supported the
conclusion that imports, and not reduction in demand, played the major role in the decline in domestic
line pipe prices in 1998 and interim 1999. 65 Thus, the USITC found that as the imports played as or
more important a role in the domestic industry’s poor performance than the reduced oil and gas
drilling. As such, the oil and gas crisis did not sever the causal link between the increased imports
and the serious injury.
24. Is a determination that the crisis in the oil and gas industry could not have accounted
for the totality of the serious injury experi enced by the domestic industry sufficient to
demonstrate a genuine and substantial relationship of cause and effect between the increased
imports and the serious injury suffered by the domestic industry? Does such a determination
ensure that none of the injurious effects caused by the crisis in the oil and gas industry have
been attributed to increased imports? Please explain.
Response
96. As discussed above, the USITC did not merely find that the crisis in the oil and gas industry
could not have accounted for the totality of the serious injury experienced by the domestic industry.
Rather, the USITC found that there was a direct, i.e. “genuine and substantial,” causal link between
the significant increase in imports, the prevalent price depression that followed this increase, and the
consequent deterioration in the industry’s financial condition. In confirming this causal relationship,
it found that of the two principal factors affecting the industry, the increased imports played a larger
role.
97. Since the USITC did not base its causation conclusion on a finding that the injury field was
not completely occupied by the oil and gas crisis, the US response must consider this question to be a
hypothetical one. Under SGA Article 4.2(b), a comp etent authority would always have to find, as an
affirmative matter, that there was a causal link between increased imports and serious injury. Merely
eliminating other possible causes without independently confirming this causal relationship would not
appear to be sufficient to meet this requirement. Assuming that this link is established, there could be
some factual circumstances, such as where there is only one possible cause of injury other than the
imports, in which a finding that the alternative cause was not responsible for all injury would be
sufficient to meet the SGA’s causation requirements. In other circumstances, this approach might not
suffice.

62 USITC Report, pp. I-29-30.
63 USITC Report, p. I-29. Domestic producers were steadily losing market share for all types of line
pipe products to foreign producers.
64 USITC Report, p. I-29.
65 USITC Report, p. I-30 and n. 186.

98. The United States notes that the Appellate Body has emphasized that the method and
approach WTO Members choose to carry out the non-attribution process is not specified by the
Safeguards Agreement.66
25. Did the ITC find that injury was caused by “o ther factors” in addition to the decline in
the oil and gas industry? If so, how did the ITC ascertain that there was a genuine and
substantial relationship of cause and effect between the increased imports and the serious
injury?
Response
99. As explained in response to Panel question number 23, the USITC’s conclusion that there was
a genuine and substantial causal link between the increased imports and the serious injury starts with
its analysis of the adverse effects the imports had on the industry’s condition. In particular, in this
case, the USITC found that the increased imports caused significant price depression, which in turn
resulted in lost sales, market share and revenues for domestic producers and lost jobs for their
workers. Thus, the USITC established that there was a causal link between the increased imports and
the industry’s poor performance. The USITC then examined other actual or alleged causes of injury
to the industry. In comparing the weight of those causes to that of the imports, the USITC
distinguished the effects of each alternative cause from the effects caused by the imports. The USITC
explained that it did not attribute injury caused by other factors to the imports.
67
100. In addition to the reduction in oil and gas drilling, the USITC examined five other possible
causes of injury alleged by respondents. It found that the evidence did not bear out respondents’
allegations that the increases in the domestic producers’ per-unit overhead and SG&A were caused by
misallocation of declines in production of other pipe products. As explained in the United States
written submissions and response to Panel question 8, the USITC concluded that the domestic
producers had not mistakenly or disproportionately attributed their overall per-unit allocated overhead
and SG&A expenses.
68
101. The USITC also examined whether a decline in interim 1999 prices for the main raw material
– hot-rolled carbon steel – caused the line pipe price declines which had triggered the domestic
industry’s financial downturn. It determined that declining costs did not cause the price declines, 69
and that with respect to costs, it was not misattributing the price effects caused by the imports. In its
Report, the USITC explained that the questionnaire data showed that overall raw material costs
remained stable through 1998, and therefore declines in raw material costs could not have been an
alternative cause of the 1998 price declines. Although the data showed declines in raw material costs
in interim 1999, these lower costs were for the most part (all but 5 per cent) offset by increased labour
and other factor costs, thereby balancing the cost of goods sold. In addition, the USITC noted that
there were indications of increases in raw material co sts, particularly for hot-rolled steel, in the latter
half of 1999. Based on this reasoned examination of the evidence, the USITC found that the decline
in raw material costs in interim 1999 was not causing injury to the domestic industry, and certainly
was not causing the price declines found to be attributable to the increased imports.

66 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, 1 May 2001, para. 180 (“ US – Lamb Meat
(AB)”).
67 USITC Report, p. I-30.
68 USITC Report, p. I-31.
69 USITC Report, pp. I-31-32.

102. The USITC examined the effects of each of the other four possible alternative causes, and did
not attribute injury caused by any of them to the imports. 70 Addressing competition among domestic
producers, the USITC found that such competition had always been a factor in the market, and that it
did not explain the severe decline in domestic prices and shipments that occurred toward the end of
the period investigated. The USITC further found that although the addition of two new facilities in
1998 added to capacity, the 8 per cent increase in capacity was reasonable and moderate in
comparison to the 23 per cent growth in consumption from 1994 through 1998.
103. The USITC also examined the effects of changes in the oil country tubular goods (“OCTG”)
market that caused domestic producers to shift production out of OCTG to line pipe. The USITC
found that this factor was actually another form of increased intra-industry competition because its
effect would be to increase production, and therefore supply, of line pipe.
71 As noted, the USITC
found that domestic competition had always been a factor but had not caused prices depression and
shipment declines such as those caused by the imports. Furthermore, the USITC found that any
switch from OCTG to line pipe would have been in relatively small quantities.
104. The USITC next examined the decline in export markets in 1998 and interim 1999. It found
that although this decline worsened the serious injury caused by the increased imports, the increase in
imports was far larger than the decline in exports. Thus, although the modest declines in exports may
have also affected the producers’ bottom line, those effects were not attributed to imports because, as
the USITC found, the impact of the increased imports dwarfed the decline in exports.72
105. Thus, the USITC distinguished the effects of each of the alternative causes and found that
none of the other factors severed the causal link it had found to exist between the increased imports
and the serious injury. The USITC’s thorough explanation of this analysis in its Report demonstrates
that the USITC based its serious injury determination upon the existence of a genuine and substantial
relationship of cause and effect between the increased imports and the serious injury.
26. Does the Line Pipe measure “appl[y]” (within the meaning of Article 9.1 of the
Safeguards Agreement) to developing countries?
Response
106. The line pipe safeguard does not apply to any developing country Members that account for
less than three per cent of total imports. Article 9.1 of the Safeguards Agreement states that safeguard
measures shall not “be applied” against imports from a developing country Member under the
circumstances set forth in that article. The ordinary meaning of the terms provides no guidance on
how a Member may meet the Article 9.1 requirement, thus leaving the decision to the Member. In the
present case, the United States met the requirements of Article 9.1 by permitting the first 9,000 short
tons from any supplier country to enter the United States free of additional duty. Since the US
measure permits the first 9,000 short tons of imports from each supplier country to enter free of
additional duty, the measure is not “applied” against any developing country Member’s imports
unless and until the 19 per cent additional tariff takes effect. This would occur only if imports from a
particular developing country Member exceeded 9,000 short tons in a given remedy year.
107. When the United States constructed its remedy, historical import patterns indicated that
permitting each supplier country to enter 9,000 short tons of line pipe free of additional duty would
ensure that the remedy would not apply to any developing country Member with a 3 per cent or lower

70 See USITC Report, p. I-30.
71 USITC Report, pp. I-30-31 & n.190.
72 USITC Report, p. I-31.

share of total imports. 73 Accordingly, the US measure would not “be applied” to the imports of any
developing country Member eligible for exclusion under the terms of Article 9.1. If the US
expectations were to prove mistaken, the affected developing country Member would be fully within
its rights to raise its concerns with the United States directly or under the auspices of the WTO. They
do not need Korea to enforce their rights for them.
108. It is important to recall that Korea, as the complaining Member, has the burden of
demonstrating a lack of compliance with Article 9.1. Notably, while Korea makes generalized
assertions about the US approach to this issue, 74 it has failed to identify a single developing country
Member whose imports are being subjected to the 19 per cent additional tariff. Korea’s claim on this
issue is purely speculative.
27. With regard to para. 227 of the US first written submission, does the 9,000 short ton
exemption guarantee that developing country Members accounting for 3 per cent or less of total
subject line pipe imports into the US will not be subject to the Line Pipe measure? What if the
volume of subject line pipe imports (especially from Canada and Mexico) increases to such an
extent that a developing country Member could export more than 9,000 short tons to the US,
and still remain at or below the 3 per cent threshold?
Response
109. The Panel’s question appears to be based upon the erroneous premise that the United States is
under an obligation to “guarantee” at the time of imposition that the measure will never – under any
hypothetical eventuality – apply to a developing country Member with less than a 3 per cent share of
imports. In actuality, Article 9.1 states that a safeguard measure shall not be “applied” against a
developing country Member’s imports “as long as” the Member’s import share does not exceed
3 per cent. Korea has pointed to no evidence suggesting that the United States is applying (or will
apply) the safeguard measure to any particular developing country Member in contravention of
Article 9.1.
110. Moreover, as the United States noted above, historical import patterns demonstrate the
unlikelihood that any developing country Member would export more than 9,000 short tons of line
pipe to the United States in a single year and yet remain below a three per cent share of total imports.
The Panel’s question appears to assume – without basis – that the United States would take no action
to address such a situation in the extremely unlikel y event that it were to occur. If the Panel’s
hypothetical does occur, and if the United States takes no action, then the affected developing country
Member will be able to exercise its rights as it chooses.
111. Finally, the Panel’s question anticipates a surge in the volume of imports from Canada and
Mexico. US law protects against the possibility that imports from excluded free trade agreement
partners will surge to fill demand previously filled by third country imports. If the President were to
determine that a “surge” in imports of Canadian or Mexican line pipe was undermining the
effectiveness of the line pipe safeguard measure, he could include those imports within the measure. 75
US law defines the term “surge” as “a significant increase in imports over the trend for a recent

73 Only in the surge year of 1998 did imports rise to a level at which 9000 short tons would represent
less than 3 per cent of total imports, and only by a small degree. Since the imposition of the measure was
expected to lead to a reduction in overall imports, the exemption for the first 9000 short tons will always
represent more than 3 per cent of total imports.
74 See Korea’s First Written Submission at paras. 180-183.
75 19 U.S.C. § 3372(c) (attached as US Exhibit-28).

representative base period.”76 Thus, any appreciable increase in imports of Mexican or Canadian line
pipe could subject those imports to inclusion in the US safeguard measure.
(vii) Increased imports
28. In Argentina – Footwear, the Appellate Body found that the increase in imports must be
inter alia “recent enough.” How “recent” should the increase in imports be, relative to the date
of the competent authority’s decision to impose a safeguard measure? What is the minimum
period of time that a domestic industry would need in order to file a petition following a sudden
increase in imports? In the present case, could the US line pipe industry have filed a petition
before it did? Please explain. Could the ITC have reached its determination before it did?
Please explain.
Response
How “recent” should the increase in imports be , relative to the date of the competent
authority’s decision to impose a safeguard measure?
112. The United States submits that this question cannot be answered in the abstract as the answer
may depend on the industry involved, including any relevant business cycle, as well as other
considerations peculiar to the circumstances of a particular safeguard investigation. Accordingly, the
United States will address this question in the context of the current dispute.
113. As earlier indicated, an increase in the absolute volume of imports as well as an increase in
the volume of imports relative to domestic production occurred in 1998, the last full year of the five
year investigatory period established by the USITC in its line pipe safeguard investigation. Indeed,
the annual increase in both the absolute volume of imports as well as the increase relative to domestic
production was the greatest in 1998. A comparison of data for interim 1999 with those for the
comparable period of 1998 indicates a continuation of the increase in imports relative to domestic
production. Since the increase in import volume occurr ed in the last full year of the investigatory
period as well as (in the case of relative import levels) in the last partial year for which the USITC had
data prior to its determination of serious injury, there can be no question that the increase in imports
was sufficiently recent to satisfy the requirements of the Safeguards Agreement.
What is the minimum period of time that a domestic industry would need in order to file
a petition following a sudden increase in imports?
114. The Safeguards Agreement does not contain any requirements for the timing of a petition.
The amount of time that a domestic industry might reasonably need to file a petition following a
sudden increase in imports could vary greatly, depending upon factors such as the resources of the
domestic industry and the complexity of the potential case. An industry that is faced with a sudden
increase in imports might also decide to wait to see whether the situation improves. In light of the
many variables involved in the timing of the filing of a petition, we do not believe it would be
appropriate to provide a generalized answer as to the minimum period of time that an industry would
need to file a petition.
In the present case, could the US line pipe industry have filed a petition before it did?
115. We are not in a position to speculate regarding the circumstances surrounding the domestic
line pipe industry’s decision to file its petition, and the preparation of its petition.

76 19 U.S.C. § 3372(c)(3).

Could the ITC have reached its determination before it did?
116. By statute, the USITC makes its injury determination within 120 days after a safeguards
investigation has been initiated. This time is required for: the collection of data from industry
participants, the analysis of this data by the USITC staff, the submission of briefs by parties, a
hearing, and the evaluation of the case by the USITC Commissioners.
29. The US argues in para. 66 of its first su bmission that a comparison of “mismatched”
interim period could create distortions because of seasonal changes in market conditions. Does
the US therefore, believe that line pipe is a seas onal product? If line pipe is not a seasonal
product why is it necessary to compare “mat ched” interim periods, as opposed to the
immediately preceding interim period?
Response
117. The USITC traditionally examines a five- year time period, unless circumstances peculiar to a
specific industry warrant otherwise, and collects annual data for each year in the investigatory period.
In addition, the USITC routinely gathers partial year data for any interim period occurring at the end
of the investigatory period. Collection of data for this interim period allows the USITC to have
information available to it on the most current period possible. The USITC’s approach is entirely
reasonable and certainly not inconsistent with the Safeguards Agreement.
77 Indeed, the Agreement is
silent regarding the period of investigation to be used in evaluating the impact of increased imports
and does not require that import trends be analysed in time increments of any particular duration (e.g.,
monthly, quarterly, annually.)
118. The availability of data for the latest interim period is useful for analysis, however, only if the
USITC also has available data of a comparable kind for a comparable earlier period. To ensure the
availability of such data, information is also collected by the USITC for the same calendar year
segment in the last full year of the investigatory period that corresponds to the calendar segment
included in the interim period, e.g. one, two, or three calendar quarters as the timing of the
investigation permits. The selection and consideration of data for these corresponding interim periods
is predicated on two reasonable principles. First, the use of a uniform analytical approach in all
investigations establishes an objective and predictable methodology that is not susceptible to
manipulation or distortion. Recognizing the efficacy of a general rule, the Commission also chose a
rule which served a second function. The reliance on comparable time periods in each year ensures to
the extent possible that any variation in industry data that might be occasioned by sales or production
cycles, or other conditions unique to a particular industry, not result in a distortion in the analysis
conducted by the competent authorities. Thus, this general approach is undertaken by the USITC
regardless of whether there are seasonal or other issues involved. While production of line pipe does
not appear to follow any particular seasonal cycles, industries using line pipe may sometimes be
affected by weather conditions and be less likely to conduct pipe laying and other activities in those
seasons of the year that are less conducive to their operations.
119. Thus, in its line pipe investigation, the US ITC followed its long-standing methodology of
examining imports on a calendar year basis with additional data collected for interim periods (in this
case the first six months of 1999 compared to the first six months of 1998).

77 The United States notes that its practice in this regard appears to be similar to Korea's practice. See
Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products , WT/DS98/R, 21 June 1999,
paras. 7.62, 7.64, 7.65, 7.67, 7.78, 7.84 (“Korea – Dairy (Panel)”).

II. US RESPONSES TO ADDITIONAL ORAL QUESTIONS POSED BY THE PANEL
AT THE FIRST SUBSTANTIVE MEETING
Response
Did imports increase by a greater percentage from 1996-1997 than 1997-1998?
120. In absolute quantities, the increase in imports was greater between 1997-1998 than between
1996-1997 (110,000 vs. 95,000 tons). In percentage terms, the rate of increase in imports was greater
in the 1996-1997 period than in the 1997-1998 period. On an absolute basis imports increased by
67 per cent from 1996 to1997, and by an additional 44 per cent from 1997 to 1998. 78 Imports relative
to US production rose from more than 17.2 per cent in 1996, to more than 23.2 per cent in 1997, to
more than 42 per cent in 1998.
79 Thus, the relative level of imports as a percentage of US production
increased by the greatest rate between 1997-1998.
121. Whether viewed on an absolute basis or relative to domestic production, the increase in
imports was greater between 1997-1998 than between 1996-1997. The Safeguards Agreement
requires only that the imports have increased either in absolute terms or relative to domestic
production. Line pipe imports increased both relative to domestic production as well as in absolute
terms, and the rate at which imports increased greatest was between 1997 and 1998.
Does the Safeguards Agreement distinguish serious injury and threat of serious injury
for any purpose?
122. Articles 4.1(a) and (b) of the Safeguards Agreement provide separate definitions for “ serious
injury” and “threat of serious injury.” Other than this, the Safeguards Agreement does not distinguish
between serious injury and threat. The injury component of the two definitions is the same, with the
differences between the two being a matter of timing: threat is defined as serious injury that is
“clearly imminent.” Under the Safeguards Agreement, competent authorities must evaluate the same
enumerated factors set out in Article 4.2(a) in all injury investigations. Unlike the Antidumping and
SCM Agreements, the Safeguards Agreement does not specifically list additional factors that
competent authorities must consider in addressing threat.
80
123. The only specific legal consequence that flows from the fact that a safeguard measure is
predicated on serious injury as opposed to a threat of serious injury in found in Article 5.2.
81 I n
addition, any difference in condition of the industry that may be reflected in the individual
determinations, however, is to be considered in the decision regarding the safeguard measure itself.

78 See Table 1 to the letter from United States Re: Panel’s Request for Information (16 February 2001)
(“February 16th Letter”).
79 See USITC Report, p. II-20, Table 4. The percentages of imports relative to domestic production
given above are derived by subtracting the percentage for “US Imports from Japan” from the “Total US
Imports” percentage in Table 4. Because imports from Japan did not consist entirely of Arctic grade or alloy
line pipe, this adjustment overcompensates for the exclusion of these two types of pipe. Accordingly, the
percentages of imports relative to domestic production shown above are understated.
80 Antidumping Agreement Article 3.7, SCM Agreement Article 15.7. See Mexico - Anti-dumping
Investigation of High Fructose Corn Syrup (HFCS) from the United States , Panel Report WT/DS132/R,
28 January 2000 at ¶ 7.131.
81 Article 5.2(a) specifies that a Member who allocates a quota among supplying countries shall seek
agreement as to the allocation from other Members having a substantial interest in the supplying the product
concerned, or a lot the quota based upon the proportions supplied by the Members during a previous
representative period. Article 5.2(b) permits members to depart from the provisions of subparagraph (a) under
certain conditions, but provides that such a departure “shall not be permitted in the case of threat of serious
injury.”

Is it possible to find serious injury and threat of serious injury at the same time?
124. Under US law each USITC Commissioner who ma kes an affirmative determination must base
that determination on either serious injury or threat thereof. An affirmative determination of the
USITC (i.e., of the competent authority) may be based on serious injury or threat thereof and there
certainly are circumstances in which it would be possible to reach a conclusion either that the industry
was either currently seriously injured or threatened by serious injury. Since a finding of threat of
serious injury requires that the injury be imminent, the temporal difference between current serious
injury and threat of serious injury is not likely to be substantial.
III. RESPONSES TO QUESTIONS FROM KOREA
1. The United States argues that the Agreement on Safeguards (“SA”) contains no
requirement for a Member to use economic analysis to determine the level of a safeguard
measure (US Submission at para. 178). The United States also argues that import volume after
the safeguard measure is inadmissible in the panel proceedings (Id. at para. 176). If neither ex
ante nor ex post analysis is allowed as the Unit ed States argues, then, in the US view, how could
a Panel analyse a Member’s compliance with its obligations under Article 5.1 of the SA?
Response
125. As the Appellate Body explained in Korea – Dairy , except in the limited circumstances
described in Article 5.1, the Safeguards Agreement does not require a Member to adopt a justification
for a safeguard measure at the time it takes the measure.82 By the same token, it is not precluded from
providing a justification of the measure at that time. If the measure becomes subject to dispute under
the DSU, the Member may issue a justification in those proceedings or elaborate upon an earlier
justification. In short, the Safeguards Agreement is silent as to when a Member needs to justify its
safeguard measure. In this regard, safeguard measures are like any other measure taken by a Member
in that there is no need to explain consistency with the WTO Agreement unless another Member
presents a prima facie case that the measure is inconsistent.
126. As we explain above, the Safeguards Agreement does require that the measure be based on
information available at the time of the decision to take the measure. Therefore, regardless of when a
Member justifies a measure, it must rely on the body of information available at the time of the
decision to take the measure. Similarly, a Member claiming that the decision is inconsistent with
GATT 1994 and the Safeguards Agreement must base its claim on that body of information, as must a
Panel evaluating the measure in the context of a dispute.
127. The United States also notes that Korea’s question distorts the US position. The US
observation that the Article 5 does not require an economic analysis does imply that an ex ante
analysis is “not allowed.” The Safeguards Agreement does not require an explanation of the basis for
a safeguard measure in general, or the use of economic analysis in that explanation. Therefore, a
Member retains the discretion to explain a safeguard measure whenever it considers appropriate,
using whatever type of analysis it considers appropriate.
128. By the same token, the US view that the Panel may not consider post-decision evidence in
evaluating the decision to take a safeguard measure does not imply that ex post analysis is “not
allowed.” As we have stated in response to this question, the Panel may not consider after-the-fact
evidence (such as import statistics for the period after application of the line pipe safeguard). It is
required to consider ex post explanations and argumentation.

82 Korea – Dairy (Panel), WT/DS98/AB/R, para. 103.

2. Did NAFTA “eliminate” safeguard measures among its Members or is this a decision to
be reached on a case-by-case, product-by-product basis?
Response
129. The NAFTA requires parties to exclude each other from safeguard measures under certain
conditions. Parties may include each other in safeguard measures only under the conditions specified
in Article 802 of the NAFTA. The United States also wishes to call Korea’s attention to its response
to question 17 from the Panel.
3. Is it the position of the United States that the provisions of Article XXIV of the GATT
1994 apply to its exemption of Mexico and Canada from the safeguard measure on line pipe
independently of whether Footnote 1 of the SA applies to US safeguards actions under NAFTA?
Response
130. In its first written submission, Korea claimed that the exclusion of Canada and Mexico from
the line pipe safeguard was inconsistent with Articles I, XIII:1, and XIX of the GATT 1994. 83
Article XXIV:5 states that “the provisions of this Agreement shall not prevent, as between the
territories of contracting parties, the formation of a ... free-trade area ... .” Thus, Article XXIV
prevents the alleged inconsistencies with all the referenced provisions of the GATT 1994. Footnote 1
simply makes clear that the Safeguards Agreement does not alter this.
4. Is it the position of the United States that Article XIX measures, and thus Article 5
safeguard measures, are permitted between free trade members and thus do not prevent the
formation of a free trade area under Article XXIV?
Response
131. The United States wishes to direct Korea’s attention to its response to questions 17-21 from
the Panel.
5. The United States states that the indexed da ta provided in its February 16th letter can
be used to calculate relative import trends (Id. at para. 261). Therefore, using the indexed data,
please calculate the percentage of imports relative to production for the following period:
1997 1998 1st half of 1998 2nd half of 1998 1st half of 1999
Response
132. What the United States said in paragraph 261 of its first written submission is that “the panel
can analyse the relationship between production and subject imports based on non-confidential
production data in the USITC Report and the indexed data in the February 16th Letter.” This can be
done in the following manner:

83 Korea’s first written submission, paras. 167-173 and 179.

1994 1995 1996 1997 1998 Interim
1998
Interim
1999
US production
(absolute data)84
635,815 770,011 694,663 881,946 669,876 412,872 282,247
US production
(indexed data)85
100.0 121.1 109.3 138.7 105.4 100.0 68.4
Total imports
(indexed data)86
100.0 64.5 70.4 96.4 142.0 100.0 81.3
133. The United States explained at the first panel meeting that it has no objection to the Panel
relying on the data showing the ratios of total US imports to US production in Table 4 on p. II-20 of
the USITC Report, adjusted to exclude all imports from Japan. These adjusted ratios were provided
in the United States’ letter to the Panel dated April 23, 2001. As the United States explained in that
letter, because not all imports from Japan consisted of Arctic-grade or alloy line pipe, such an
adjustment understates the true levels of relative imports.
6. The United States repeatedly asserts that imports relative to production reached “their
highest level of the entire five-and-a-half year pe riod of investigation” in interim 1999. Id, at
para. 54; see id , also at paras 8.75. 117. Isn’t it correct that imports reached their highest level
relative to production in the p eriod July-December 1998? If the United States disagrees that
imports relative to production were higher in the second half of 1998 than the first half of 1999,
please explain with specific reference to the actual figures for those periods.
Response
134. Imports relative to domestic production reached their highest level in interim 1999, out of all
periods for which data were collected in the period of investigation. The USITC did not collect
segregated data for the second half of 1998. Indeed, doing so would have been inconsistent with its
longstanding practice. Following that practice, the USITC in this investigation collected data for
each calendar year for the past five full years – 1994 through 1998 – and through the most recent
quarter of the year in progress, in this case January through June 1999.
87 Also consistent with this
practice, the USITC asked questionnaire respondents to provide segregated 1998 data for the
comparable period to interim 1999. Again consistent with its routine and unbiased approach used in
virtually all investigations, the USITC, in evaluating the data (including import data), compared the
interim periods to confirm trends that were otherwise indicated from the data.
88 Thus, the USITC
collected and evaluated the data in a neutral and objective manner, consistent with Article 4.2(a) of
the Safeguards Agreement.
135. Notwithstanding the objective approach ta ken by the USITC, Korea suggests that the
Safeguards Agreement somehow required the competent authority to deviate from its usual practice in
this particular investigation. Korea’s preferred methodology is no more mandatory than a comparison
of quarterly import data. Korea’s suggested approach, and not that taken by the USITC, is result-
oriented and inconsistent with the SGA’s objectivity requirements.

84 USITC Report, p. II-20, Table 4.
85 USITC Report, p. II-20, Table 4.
86 United States’ 16 February 2001 letter to the Panel, Table 1.
87 See, e.g., USITC Report, pp. C-3-4, Table C-1.
88 The United States has explained in both its first and second written submissions the reasons for its
long-standing practice of comparing the latest interim period (in this case, January-June 1999) to the same
calendar segment of the preceding year (in this case, January -June 1998).

7. Please confirm whether the United States continues to maintain that the public import
data and the confidential import data follow th e same trends, with specific reference to imports
in the periods January-June 1998, July-December 1998, and January-June 1999.
Response
136. The USITC stated that “the adjusted data follow similar trends as the unadjusted data
presented in Table C-1 of the report.”89 As explained in response to Question 6 above, the USITC did
not collect data for the July-December 1998 period. Therefore, the USITC and the United States were
not referring to any comparisons involving the July-December 1998 period, when they stated that
public and confidential data followed similar trends.
8. Is it the position of the United States that it does not have to explain and distinguish
whether imports increased absolute or relative to production? Doesn’t Article 8.3 of the SA
apply only in cases in which the increase in imports is absolute? If so, how can it be that a
Member can be exempt from explaining the basis of its finding?
Response
137. The United States has not taken any position on whether a Member must “explain and
distinguish whether imports increased absolute or relative to production.” The question is not relevant
in this case, because imports increased on both an absolute and a relative basis.
(Serious Injury)
9. Korea notes that the Majority ITC Opinio n frequently makes reference to the industry
performance by distinguishing between the periods of the first and second half of 1998 (see, e.g.,
ITC Determination. Majority Views on Injury at I-22). Yet, the United States maintains in its
submission that the United States only looks at “full years.” Is it the US position that import
data should be looked at only on a yearly basis but that factors of injury can be looked at on the
basis of half-year periods? What it the basis in the SA for this distinction?
Response
138. Korea’s characterization notwithstanding, the USITC looked at the injury factors for the
purposes of addressing serious injury solely based on a year-by-year analysis. This is apparent from a
review of the USITC’s discussion of the seriou s injury factors on pages I-16 through I-20 of its
Report. In its findings and conclusions about both the general overview of the line pipe industry and
each individual factor, the USITC focused its analysis on year-by-year comparisons starting with
1994 and ending with interim 1999.
139. In addressing increased imports and the existence of a causal link between the increased
imports and the serious injury, the USITC conducted an analysis parallel to that described above.
That is, the USITC evaluated the absolute volume, ratio of imports to domestic production and
imports’ market share, and average unit values on a year-to-year basis and by comparison of interim
1999 with interim 1998.
90

89 USITC Report, p. I-14 n.62; see also US first written submission, para. 4.
90 USITC Report, pp. I-14-15, I-23-24. As is also its usual practice, the USITC evaluated price
comparison data on a quarterly basis, which examination showed similar trends to those found for average unit
values. USITC Report, p. I-25.

140. The United States is puzzled by Korea’s statement the USITC majority “frequently” makes
references to the industry’s performance by dis tinguishing between the first half of 1998 and the
second half of 1999. In fact, Korea’s reference apparently is to two statements the USITC made in its
Report in which it noted that the industry’s poor health began in particular in the second half of 1998.
The USITC made this point in response to arguments raised by the respondents. The Korean and
Japanese respondents argued that “the effect of the oil and natural gas price declines on the gathering
segment was sufficiently powerful to produce an overall decline in the apparent consumption of line
pipe in the second half of 1998.”
91 Upon consideration of this argument, the USITC found that both
the substantial increase in low-priced imports, as well as decreases in demand for line pipe resulting
from the oil and gas crisis, contributed to the domestic industry’s poor health beginning in the second
half of 1998.
92 In explaining why the imports were the greater contributing factor of the two, the
USITC stated that the patterns of correlation between apparent consumption and the industry’s
financial condition indicated that the reduced level of demand in the second half of 1998 “would not
be expected to generate the severe financial losses suffered by the industry in the second half of 1998
and first half of 1999, and that other factors therefore must account for this very different level of
industry performance.”
93
141. Thus, the USITC referred to the conditions in the second half of 1998 in response to
respondents’ arguments concerning conditions during that period. The USITC did not base its injury
determination upon a comparison of half year da ta, as Korea urges the USITC should have been
required to do with respect to import data.
10. For purposes of its remedy recommendation, the United States relies on the fact that the
domestic industry admitted that demand for line pipe was growing by the time of the ITC
determination (Id. at para. 175) Does the United States agree that this fact should have been
considered by the ITC in its injury determination as well? If not, why not?
Response
142. The statement relied on for the comment in paragraph 175 was not on the record of the
USITC injury investigation.94 As discussed in the US second written submission, the USITC can base
its serious injury determination only on evidence that was before it during the injury investigation.
Consistent with the DSU Article 11 standard of review and Articles 3 and 4 of the Safeguards
Agreement, the Panel likewise cannot consider extr a-record evidence in reviewing the competent
authority’s injury determination. In fact, the evidence in the record of the injury investigation showed
that apparent consumption declined during the first half of 1999. 95 We also note that the referenced
statement in the US submission does not say that the demand was growing “by the time of the ITC
determination,” and that the actual reference is to a prediction that line pipe consumption would grow
in 2000.
(Threat of Serious Injury)
11. The United States argues in para. 56 that the difference between a finding of serious
injury and one of threat thereof is a matter of degree and timing. The United States also argues
that the SA does not require the competent author ities to choose between serious injury or the

91 USITC Report, pp. I-21-22 (emphasis added), citing Japanese and Korean Respondents’ Posthearing
Brief at 29.
92 USITC Report, p. I-22.
93 USITC Report, p. I-28.
94 The comment cites to USITC remedy recommendation at I-77, which in turn cites to Petitioners’
Posthearing Brief on Remedy.
95 See USITC Report, p. I-23.

threat thereof (Id. at para. 57) Does the United States argue here that the SA does not establish
the different conditions and the different legal effe ct for serious injury on the one hand and the
threat thereof on the other hand? For example, could the United States have applied the
provisions of Article 5.2(b) of the SA on the ba sis of a “serious injury or threat of serious
injury” finding?
Response
143. The United States has addressed the first question in its response to the oral questions posed
by the Panel at the first substantive meeting. As to the second question, the United States has not
taken action pursuant to Article 5.2(b), and therefore the question is not relevant to this dispute.
(Causation)
12. The ITC record shows that it was fully aw are that the situation in the oil and gas
industry was a major cause of decline in the US line pipe industry. In the questionnaire
prepared by the ITC (ITC Determination at II-66-68), why did the ITC not include the situation
in the oil and gas industry as a choice of answers?
Response
144. Korea’s question presumes that the USITC was fully aware, before it gathered information in
this investigation of the causes of any declines in the US industry. 96 In the Line Pipe investigation,
the USITC asked producers to rate the factors othe r than imports that were adversely affecting the
domestic industry and similarly asked importers and purchasers to rate factors that were affecting
prices. Accompanying the questions, the USITC prov ided an objective list of factors derived from
the USITC’s generic questionnaire as well as an opportunity to identify other factors. Thus, the
USITC asked these questions in unbiased terms rather than by prompting the questionnaire recipients
with prejudged answers, as Korea would have preferred. In this way, the USITC assured that its
investigation was objective and therefore in compliance with the SGA Article 4.2(b) requirement that
the competent authority base its injury determination on objective evidence.
145. What is more, many firms that responded to the questionnaires in fact took the opportunity to
mention “other” factors. In fact, the responses indicated that a number of purchasers were aware of
the overall importance of the oil and gas drilling and production activities, but, as the USITC found,
the purchasers consistently identified imports as the major cause of the sharp decline in line pipe
prices.
97 Further, the USITC did not ignore the importance of the oil and gas crisis as a cause of
injury, and in fact exhaustively discussed that factor in its determination.
13. In para. 114, the United States argues that the ITC ensures “that injury caused by any
or all other factors together, is not sufficient to sever the causal link.” (Emphasis added). The
US standard is that an increase in imports is a cause which is “important and not less than any
other cause.” How does this standard ensure th at “all other factors together” are not sufficient
to sever the causal link? Doesn’t US law require comparison of imports to other causes singly,
not together?

96 The United States notes that the Korea’s statement exaggerates the findings the USITC reached even
at the end of the investigation: the USITC did not find that the oil and gas crisis was the major cause of the
decline in the US pipe line industry, and particularly did not find a causal relationship between the oil and crisis
and the price declines in the domestic line pipe market.
97 USITC Report, pp. I-26 & n.163, I-30 & n.186.

Response
146. As an initial point, the United States notes that the consistency of the US statute with the
Safeguards Agreement is not within the terms of re ference in this dispute. Accordingly, insofar as
Korea is asking this question to challenge the standards set by US law, the question is not relevant to
this dispute.
147. What is relevant to this dispute is that the United States has shown that the USITC’s Line
Pipe causation analysis meets the requirements of the Safeguards Agreement. Both in its written
submissions and in its responses to Panel questions numbers 23 and 25, the United States has
explained how the USITC’s causation analysis assured that there was a substantial and genuine causal
relationship between the increased imports of line pipe and the serious injury, and that the effects of
other factors were not attributed to the imports and did not sever the causal link. The United States
has also shown in its written submissions and responses to Panel questions that it meaningfully
explained this analysis in its Report.
148. As demonstrated in this case, the USITC conducted a multi-step causation analysis. First, it
determined that the increased imports were an important cause of serious injury, i.e., that there was a
definite causal link between the imports and the injury. Only after having found this causal link in the
first instance did it proceed to test the genuineness and substantiality of this causal relationship and in
doing so ensured that it was not attributing the effects of other causes to the imports. It makes no
difference under the Safeguards Agreement whether the USITC examined one other possible cause or
numerous other possible causes, so long as it found that the causal relationship between the increased
imports and the serious injury remained intact (or, in terms of the US statute was a substantial cause)
when evaluated against any other cause.
149. The Appellate Body has twice held that Arti cle 4.2(a) of the Safeguards Agreement does not
require that increased imports “alone”, “in and of themselves”, or “per se” must be capable of causing
injury.
98 Rather, the Appellate Body has recognized that other factors may be contributing “at the
same time” to the situation of the domestic industry. 99 Further, “where there are several causal
factors,” the competent authority meets the causation requirements and assures non-attribution by
separating and identifying the effects of the different factors. 100 As described above and in our
response to Panel questions 23-25, the USITC met these requirements. The Safeguards Agreement
requires no more, and any suggestion by Korea to the contrary is not supported by the Agreement or
by the Appellate Body reports interpreting the safe guards causation standard. Indeed, the Appellate
Body has emphasized that the method and approach Members use to carry out the process of
separating out the effects of other causal factors is not specified by the Agreement.
101
14. In paragraphs 238-239, Korea characterized Commissioner Crawford’s views
concerning the impact of Lone Star on the performance of the industry in 1998 as follows:
238. In the case of Lone Star Steel, Commissioner Crawford observed that
the company allocated to line pipe certain production-specific costs for items
which appear to have been unrelated to the production and sales of line pipe.
The description of these items is treated confidentially by the ITC so their exact
nature or overall effect is not known to Korea.

98 US – Lamb Meat (AB), paras. 169-171; Wheat Gluten (AB), para. 79.
99 US – Lamb Meat (AB), para. 166; US – Wheat Gluten (AB), para. 67, n.19..
100 US – Lamb Meat (AB), paras. 183-184.

239. Commissioner Crawford, however, concludes that this misallocation
resulted in a substantial reduction in the level of operating income in the
industry as a whole, particularly for the second half of 1998, and for reasons
wholly unrelated to the conditions of competition in the pipe industry, much less
imports of line pipe.
At paragraph 101, the United States claims that Korea “Misquotes”
Commissioner Crawford. According to the United States:
In connection with charges incurred by Lone Star Steel, Commissioner
Crawford stated that the domestic industry’s operating income “may be
somewhat misleading.” Commissioner Crawford did not conclude that Lone
Star had “misallocated” charges, or that this resulted in “a substantial reduction
in the level of operating income in the industry as a whole,” as Korea claims.
What Commissioner Crawford actually said, in full, was as follows:
I note that the 1998 operating income on the record may be somewhat
misleading. In 1998, Lone Star allocated *** of charges for *** (primarily a
reduction in operating its *** in favour of ***). The results of this decision
appear to have been felt most keenly in the second half of 1998. This decision
had a marked impact on SG&A for the company and for the industry as a
whole, reducing the industry’s level of operating income to $10.8 million in 1998.
ITC Determination at I-13 (emphasis added).
With specific reference to paragraphs 238 and 239 of Korea’s written submission, please
indicate where Korea “misquoted” Commissioner Crawford. Secondly, since Commissioner
Crawford appears to suggest that these charges should not have been allocated to line pipe, and
that the result of the allocation was to lower the operating income of both Lone Star and the
industry as a whole for reasons having nothing to do with imported line pipe, please provide the
confidential version of her statement or explain how paragraphs 238 and 239 of Korea’s written
submission are not accurate representation of her statement.
Response
150. The United States used the term misquoted to avoid using the more accurate term
misrepresented. Korea did so in two ways in paragraph 239 of its first written submission. First,
Commissioner Crawford nowhere concluded that Lone Star had “misallocated” charges, as Korea
asserts. Second, Commissioner Crawford nowhere concluded that this resulted in “a substantial
reduction in the level of operating income in the industry as a whole,” as Korea asserts.
151. In its response to Panel question number 8, the United States has explained that adding the
Lone Star charge at issue would not increase the industry’s 1998 aggregate operating income of $10.8
million by more than 20 per cent, or increase the ratio of operating income to net sales for 1998 of 2.9
per cent by more than one percentage point. Thus, contrary to Korea’s assertion in paragraph 239 of
its first written submission, the Lone Star charge did not result in a “substantial reduction in the level
of operating income in the industry as a whole.” This can be seen by comparing the industry
operating income in 1997 to what it would have been in 1998 if the Lone Star charge were reversed to
the full extent of the parameters identified above:

1997 1998 1998 (adjusted by reversing
Lone Star charge to full
extent of parameters given)
Operating Income $34,662,000 $10,768,000 $12,922,000
Operating Income
Ratio
8.1% 2.9% 3.9%
Source: 1997 and 1998 data are from USITC Report, P. II-27, Table 9.
152. As this chart makes clear, if the Lone Star charge were reversed to the full extent of the
20 per cent/one percentage point parameters, the domestic industry’s operating income and operating
income ratio would still have declined precipitously (by 63 per cent) from 1997 to 1998. Finally, it
should be noted that the five Commissioners finding serious injury and threat thereof did not conclude
that the Lone Star charge was improperly allocated to line pipe production.
153. Further, we note again that no matter how of ten Korea quotes from Commissioner Crawford’s
views, they have no legal consequence to this dispute because they do not constitute the findings of
the competent authority.
15. The United States argues that Korea “received notice of the measure” on 11 February
17 days before the date the measure was scheduled to take effect (US Submission at para. 234).
Korea learned of the measure through a press release on February 11. There was no other
separate prior notification. The United States also argues that Korea could have had
Article 12.3 consultations after the press release and before the effective date of the measure (Id.
at para 238). Is there any record that the US Government has ever modified a trade defense
measure after the measure was announced through a press release issued by the President of the
United States and before the effective date?
Response
154. Prior to the Line Pipe case, the United States had imposed safeguard measures under the
WTO Agreement three times. In none of those cases did the United States change the announced
measure prior to its implementation.
155. The United States questions the relevance of Korea’s question. This dispute involves the US
decision with regard to the line pipe safeguard. We are not aware that the President’s actions with
regard to earlier safeguard measures indicated his potential response to consultations in the Line Pipe
case. In this regard, it is highly relevant that another Member did engage in consultations between the
announcement and implementation of the line pipe safeguard.
102
156. Insofar as Korea considers that the President’s past practice might support its view that it “had
no meaningful ability to discuss the actual remedy proposed before it was imposed,” that argument is
irrelevant. Article 12.3 obligates the United States to “provide an adequate opportunity for prior
consultations with those Members having a substantial interest as exporters of the product
concerned ... ” Korea’s opinion that consultations would not be “meaningful” does not affect the
question of whether the United States met this obligation. Indeed, it is hard to see how a Member
could comply with Article 12.3 if another Member’s pessimism about a successful outcome of
consultations by itself established an inconsistency with that provision.

102 US first written submission, para. 238, n. 265.

Table X-1
Welded line pipe: Weighted-average f.o.b. prices and quantities of
domestic and imported products 1-2, by quarters, January 1994 – June 1999
Product 1 Product 2
United States Imports United States ImportsPeriod
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
1994:
Jan.-Mar.
$478 5,158 --- --- $472 4,304 $*** ***
Apr.-June 485 5,730 $*** *** 472 5,405 *** ***
July-Sept. 496 5,038 *** *** 477 4,654 *** ***
Oct.-Dec. 517 4,854 377 160 488 4,469 *** ***
1995:
Jan.-Mar.
536 4,824 371 716 512 4,072 *** ***
Apr.-June 522 5,475 *** *** 514 4,247 *** ***
July-Sept. 503 4,005 --- --- 511 4,062 *** ***
Oct.-Dec. 493 4,004 *** *** 506 5,052 *** ***
1996:
Jan.-Mar.
471 3,505 --- --- 487 4,240 *** ***
Apr.-June 482 6,149 *** *** 489 6,841 *** ***
July-Sept. 494 4,454 407 594 499 5,403 456 1,765
Oct.-Dec. 507 5,370 *** *** 500 6,151 455 1,862
1997:
Jan.-Mar.
528 4,866 432 379 532 4,187 470 1,806
Apr.-June 545 4,479 *** *** 547 5,220 429 2,312
July-Sept. 549 7,449 469 929 547 2,514 470 2,317
Oct.-Dec. 552 5,016 *** *** 560 2,928 457 2,809
1998:
Jan.-Mar.
543 4,507 *** *** 558 4,427 475 1,741
Apr.-June 533 6,795 *** *** 528 2,756 440 2,186
July-Sept. 509 2,333 443 900 490 1,970 421 1,638
Oct.-Dec. 480 2,618 *** *** 455 2,022 402 3,718
1999:
Jan.-Mar.
422 2,426 *** *** 440 3,364 376 2,068
Apr.-June 394 3,977 *** *** 414 3,008 339 3,650
Note: “ ---” indicates that no reported data and “***” indicates the data is withheld to protect business
confidential information when 75 per cent or more of the data is provided by one firm or when 90 per cent or
more of the data is provided by two firms.
Source: Compiled from data submitted in response to Commission questionnaires.

Table X-2
Welded line pipe: Weighted-average f.o.b. prices and quantities of
domestic and imported products 3-4, by quarters, January 1994 – June 1999
Product 3 Product 4
United States Imports United States ImportsPeriod
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
1994:
Jan.-Mar.
$457 6,254 $424 2,089 $466 3,576 $426 181
Apr.-June 463 7,699 436 620 477 4,120 453 503
July-Sept. 473 5,589 *** *** 485 6,976 461 538
Oct.-Dec. 482 5,598 444 2,036 506 6,702 465 1,143
1995:
Jan.-Mar.
509 6,354 439 2,830 511 4,290 470 824
Apr.-June 510 5,984 471 3,710 515 2,716 *** ***
July-Sept. 531 6,555 481 1,338 503 4,385 495 498
Oct.-Dec. 497 5,472 *** *** 489 3,929 *** ***
1996:
Jan.-Mar.
531 6,882 *** *** 478 4,709 *** ***
Apr.-June 519 8,208 484 854 491 8,066 *** ***
July-Sept. 536 7,418 445 1,401 483 7,529 *** ***
Oct.-Dec. 535 6,932 465 2,370 490 5,328 *** ***
1997:
Jan.-Mar.
519 3,797 463 1,524 504 6,943 *** ***
Apr.-June 536 5,528 444 2,059 507 6,678 *** ***
July-Sept. 548 3,026 457 2,661 551 9,569 *** ***
Oct.-Dec. 535 5,185 466 2,548 516 4,878 486 242
1998:
Jan.-Mar.
544 4,169 474 1,370 530 6,339 *** ***
Apr.-June 504 6,663 456 2,822 506 4,536 426 528
July-Sept. 496 4,605 416 2,650 441 1,920 *** ***
Oct.-Dec. 448 2,383 417 4,243 466 1,929 407 678
1999:
Jan.-Mar.
398 3,617 370 1,772 399 2,418 *** ***
Apr.-June 383 4,828 339 2,889 375 2,706 377 468
Note: “ ---” indicates that no reported data and “***” indi cates the data is withheld to protect business
confidential information when 75 per cent or more of the data is provided by one firm or when 90 per cent or
more of the data is provided by two firms.
Source: Compiled from data submitted in response to Commission questionnaires.

Table X-3
Welded line pipe: Weighted-average f.o.b. prices and quantities of
domestic and imported products 5-6, by quarters, January 1994 – June 1999
Product 5 Product 6
United States Imports United States ImportsPeriod
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
Price
(per ton)
Quantity
(tons)
1994:
Jan.-Mar.
$460 2,018 $435 588 $494 3,276 --- ---
Apr.-June 452 5,942 415 620 494 3,736 --- ---
July-Sept. 460 4,990 438 614 504 2,616 --- ---
Oct.-Dec. 477 3,158 438 1,967 511 4,444 $*** ***
1995:
Jan.-Mar.
516 4,104 *** *** 500 4,090 --- ---
Apr.-June 508 5,232 499 1,994 497 3,092 --- ---
July-Sept. 507 5,618 497 377 497 3,032 *** ***
Oct.-Dec. 516 4,350 490 353 497 3,008 --- ---
1996:
Jan.-Mar.
482 5,991 458 230 480 1,578 --- ---
Apr.-June 484 6,059 473 566 487 5,312 --- ---
July-Sept. 445 9,999 445 1,232 494 5,372 --- ---
Oct.-Dec. 481 7,127 467 950 516 2,500 *** ***
1997:
Jan.-Mar.
476 2,301 502 1,396 522 3,576 *** ***
Apr.-June 442 8,986 440 866 510 4,448 --- ---
July-Sept. 468 6,578 468 418 513 4,754 --- ---
Oct.-Dec. 455 12,843 453 1,039 507 6,326 *** ***
1998:
Jan.-Mar.
459 12,661 491 1,447 525 8,527 *** ***
Apr.-June 449 17,285 448 1,468 530 5,423 --- ---
July-Sept. 429 11,239 450 2,008 498 2,749 --- ---
Oct.-Dec. 404 3,140 393 1,392 483 2,544 *** ***
1999:
Jan.-Mar.
385 1,886 393 1,273 382 2,648 --- ---
Apr.-June 347 10,174 317 1,111 379 4,732 *** ***
Note: “ ---” indicates that no reported data and “***” indicates the data is withheld to protect business
confidential information when 75 per cent or more of the data is provided by one firm or when 90 per cent or
more of the data is provided by two firms.
Source: Compiled from data submitted in response to Commission questionnaires.

ANNEX B-3
CANADA’S ANSWERS TO QUESTIONS FROM
THE PANEL TO THIRD PARTIES
(7 May 2001)
I. QUESTIONS TO CANADA
(i) Exclusion of Canada and Mexico
Q1. [CANADA ONLY] Canada argues (para. 9) that "safeguard measures applied
pursuant to Article XIX are not among the measures that Article XXIV:8 specifically authorizes
participants in an FTA to maintain against each other". If that is the case, why does the
NAFTA allow for the imposition of safeguard measures between NAFTA members if certain
conditions are met?
Reply
1. Canada agrees with the position of the United States that the fact that XIX is not among the
enumerated articles in Article XXIV:8(b) means, by implication, that safeguard measures generally
must be made part of the elimination of “restrictive regulations of commerce” under an FTA. This
does not mean, however, that safeguard measures between members of an FTA are prohibited. The
manner in which the NAFTA safeguard exclusion operates is consistent with this position because
Article 802 provides, as the general rule, that such measures are not to be taken against another
NAFTA party. The extent to which safeguard measures can be taken against another NAFTA Party is
limited to the circumstances set out in Article 802 of NAFTA.
Q2. [ALL] Is it logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are, given the fact that Article XIX safeguard measures
may take the form of (Article XI) quantitative restrictions?
Reply
2. Although potentially a different argument than that put forward by Canada, the fact that both
Article XIX safeguard measures and Article XI measures can take the form of quantitative restrictions
may provide another basis for the conclusion that in certain circumstances safeguard measures may be
allowed between members of an FTA.
Q3. [CANADA AND MEXICO] In Turkey – Textiles (WT/DS34), the Appellate Body stated
that a GATT Article XXIV defence may be availa ble in the context of a customs union if two
conditions are met: (1) the measure at issue is introduced upon the formation of the customs
union, and (2) "the formation of [the] customs union would be prevented if it were not allowed
to introduce the measure at issue". Would the formation of the NAFTA have been prevented if
the NAFTA parties had not been allowed to introduce the safeguards exemption provided for in
section 311(a) of the NAFTA Implementation Act? Please explain. If so, why are NAFTA
parties not automatically excluded from safeguard measures imposed by other NAFTA
members?

Reply
3. NAFTA reflects a complex balancing of many elements, including its safeguards provisions,
which were part of NAFTA at the time of its entry into force, that make up the substantive obligations
that are found in the final text of the agreement. As noted above, Article 802 provides, as the general
rule, that safeguard measures are not to be taken against another NAFTA party. However, consistent
with Article XXIV:8(b), Article 802 allows for such measures in limited circumstances.
Q4. [ALL] Please comment on the US argument that the absence of any reference to GATT
Article XIX in Article XXIV:8(b) means that Article XIX safeguard measures “may or must be
made part of the general elimination of 'restrictive regulations of commerce' under any FTA
(para. 216, US first written submission). Is it possible that safeguard measures “may” (as
opposed to “must”) be made part of the general elimination of “restrictive regulations of
commerce” under any FTA? Would an a contrario reading of Article XXIV:8(b) mean that the
imposition of a safeguard measure between FTA partners is inconsistent with the concept of an
FTA? Please explain.
Reply
4. As stated in answer to question #1, Canada agr ees with the position of the United States that
the fact that XIX is not among the enumerated arti cles in Article XXIV:8(b) means, by implication,
that safeguard measures generally must be made part of the elimination of “restrictive regulations of
commerce” under an FTA. This does not mean, however, that safeguard measures between members
of an FTA are prohibited. The manner in which the NAFTA safeguard exclusion operates is
consistent with this position because it provides, as the general rule, that these measures are not to be
taken against another NAFTA party. The extent to which safeguard measures can be taken against
another NAFTA Party is limited to the circumstances set out in Article 802 of NAFTA.
Q5. [ALL] The US argues, on the basis of th e last sentence of note 1 to the Safeguards
Agreement, that "issues related to FTA imports are to be addressed exclusively under the
relevant GATT 1994 articles" (para. 220, US first written submission). In this regard, please
comment on the Appellate Body's finding in Argentina – Footwear (para. 106) that "the footnote
only applies when a customs union applies a safeguard measure 'as a single unit or on behalf of
a member State'". Does the Appellate Body's finding apply to the last sentence of footnote 1?
Please explain.
Reply
5- In Canada’s view, the Appellate Body’s comments found at paragraph 106 of its report in
Argentina-Footwear apply only to the first three sentences of footnote 1, which specifically refer to
customs unions and the actions taken by member State of a customs union. The last sentence in
footnote 1 does not specifically mention customs unions and thus properly understood applies to both
customs unions and free trade areas.
Q6. [ALL] If footnote 1 to the Safeguards Agreement were relevant in some way to the issue
of which Members could be subject to a safeguard measure, is it relevant that footnote 1 has
been inserted in Article 2.1 of the Safeguar ds Agreement, rather than Article 2.2? Please
explain.

Reply
6. With respect to the last sentence of Footnote 1, Canada notes that by its wording this sentence
applies to the whole of the Agreement on Safeguards . Thus its placement has no bearing on the its
interpretation and the fact that it is meant to inform the interpretation of the whole of the Agreement.
7. Canada’s submissions in this matter addressed the issue of Canada’s exclusion from the
safeguard measure in question. Therefore Canada has no comment at this time with respect to
questions 7-13 posed by the Panel.
II. QUESTION FOR MEXICO AND CANADA FROM KOREA
Q14. Did NAFTA “eliminate” safeguard measures among its Members or is this a decision to
be reached on a case-by-case, product-by-product basis?
Reply
8. As indicated in Canada’s answers to the Panel’s first three questions above, consistent with
NAFTA Member’s WTO obligations, NAFTA Article 802 provides, as a general rule, safeguard
measures are not to be taken against another NAFTA party. The extent to which safeguard measures
can be taken against another NAFTA Party is limited to the circumstances set out in Article 802 of
NAFTA, which are determined on a case-by-case basis.

ANNEX B-4
EUROPEAN COMMUNITIES' ANSWERS TO QUESTIONS
FROM THE PANEL TO THIRD PARTIES
(7 May 2001)
THESE QUESTIONS ARE INTENDED TO FACILITATE THE WORK OF THE PANEL,
AND DO NOT IN ANY WAY PREJUDGE THE PANEL’S FINDINGS ON THE MATTER
BEFORE IT
(i) Exclusion of Canada and Mexico
1. [CANADA ONLY] Canada argues (para. 9) that “safeguard measures applied pursuant
to Article XIX are not among the measures that Article XXIV:8 specifically authorizes
participants in an FTA to maintain against each other”. If that is the case, why does the
NAFTA allow for the imposition of safeguard measures between NAFTA members if certain
conditions are met?
2. [ALL] Is it logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are, given the fact that Article XIX safeguard measures
may take the form of (Article XI) quantitative restrictions?
Reply
1. See further discussion in the reply to question 4.
3. [CANADA AND MEXICO] In Turkey – Textiles (WT/DS34), the Appellate Body stated
that a GATT Article XXIV defence may be availa ble in the context of a customs union if two
conditions are met: (1) the measure at issue is introduced upon the formation of the customs
union, and (2) “the formation of [the] customs union would be prevented if it were not allowed
to introduce the measure at issue”. Would the formation of the NAFTA have been prevented if
the NAFTA parties had not been allowed to introduce the safeguards exemption provided for in
section 311(a) of the NAFTA Implementation Act? Please explain. If so, why are NAFTA
parties not automatically excluded from safeguard measures imposed by other NAFTA
members?
4. [ALL] Please comment on the US argument that the absence of any reference to GATT
Article XIX in Article XXIV:8(b) means that Article XIX safeguard measures “may or must be
made part of the general elimination of ‘restrictive regulations of commerce’ under any FTA
(para. 216, US first written submission). Is it possible that safeguard measures “may” (as
opposed to “must”) be made part of the general elimination of “restrictive regulations of
commerce” under any FTA? Would an a contrario reading of Article XXIV:8(b) mean that the
imposition of a safeguard measure between FTA partners is inconsistent with the concept of an
FTA? Please explain.

General remarks
2. The EC would reiterate what it has already subm itted to the Panel in its Oral Statement, i.e.
that it is not necessary for the Panel to decide in this proceeding about the relationship between
Article XXIV and Article XIX of GATT 1994.
1 The point in dispute in these proceedings is whether
in the Line Pipe investigation the ITC exclusion of imports from Canada and Mexico from the scope
of the safeguard measure was correct. The EC would also urge the Panel not to decide in general
terms on the relationship between Article XXIV and Article XIX because the question raises complex
issues that cannot be fully debated in the course of these proceedings.
3. The Panel’s decision on this point does not however require a decision on the issue of
principle of whether an FTA member may or must, under Article XXIV of GATT, legitimately
exclude its FTA partners from the scope of a safeguard measure.
4. Indeed, the facts of the case are such that they allow the Panel to decide on the basis of the
previous Appellate Body reports, notably the report in Argentina – Footwear .2 I n t h a t c a s e , t h e
investigating authorities had included imports from customs union partners in the investigation, and
had even made a “serious injury” finding based i.a. on those imports. Notwithstanding this, they had
eventually excluded those imports from the reach of the measure.
5. Confronted with that factual situation, the Appellate Body in Argentina – Footwear
recognized that there must be a “parallelism” be tween the product scope of an investigation and on
the other hand the product scope of a safeguard measure. Moreover, it found that, since this
parallelism had been broken by Argentina, then this was also contrary to the requirement of
Article 2.2 of the Agreement on Safeguards:
“112. While Articles 2.1 and 4.1(c) set out the conditions for imposing a safeguard
measure and the requirements for the scope of a safeguard investigation, these
provisions do not resolve the matter of the scope of application of a safeguard
measure. In that context, Article 2.2 of the Agreement on Safeguards provides:
Safeguard measures shall be applied to a product being imported
irrespective of its source.
As we have noted, in this case, Argentina applied the safeguard measures at issue
after conducting an investigation of products being imported into Argentine territory
and the effects of those imports on Argentina’s domestic industry. In applying
safeguard measures on the basis of this investigation in this case, Argentina was also
required under Article 2.2 to apply those measures to imports from all sources,
including from other MERCOSUR member States.” 3 [underlined added]

1 EC Oral Statement, paras. 9-27.
2 For a recent example where the similarity with a previously reviewed case led the Appellate Body to
decide in the same way see United States – Safeguard Measures on Imports of Fresh Chilled or Frozen Lamb
Meat from New Zealand and Australia (“US – Lamb ”), WT/DS177/AB/R, WT/DS178/AB/R, 1 May 2001,
para. 170. The Appellate Body also reviewed a case of breach of parallelism between the scope of the
investigation and the scope of a safeguard measure in United States – Definitive Safeguard Measures on Import
of Wheat Gluten from the European Communities (“ US – Wheat Gluten ”), WT/DS166/AB/R,
22 December 2000.
3 Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear (“ Argentina –
Footwear”), WT/DS121/AB/R, 14 December 1999, para. 112.

6. Thus, the Appellate Body has clearly indicated that the parallelism, and notably the inclusion
of investigated imports from all sources within the scope of the measure, is also required by
Article 2.2 of the Agreement on Safeguards. Therefore, a contrario, at least whenever this parallelism
is not respected, Article 2.2 will also be violated.
7. As pointed out by the EC in its Oral Statement 4, in the case under review the ITC investigated
imports from i.a. Canada and Mexico and even took account of these imports to arrive at the general
determination of “serious injury”. Nevertheless, it eventually excluded Canadian and Mexican
imports from the scope of the safeguard measure.
8. Given the close similarity between the situations in the Argentina – Footwear and US – Line
Pipe investigations, the same conclusions drawn by the Appellate Body in Argentina – Footwear
apply in the present case. Accordingly, already on that basis, and without entering into the general
issue of the relationship between Article XXIV and Article XIX of GATT 1994, the Panel should find
in favour of Korea and conclude that the US, by failing to respect the parallelism between
investigation and measure, has breached Article 2.2 of the Agreement on Safeguards.
Reply to questions 2 and 4
9. The EC does not believe that the imposition of safeguard measures between FTA partners is
inconsistent with the concept of an FTA. The EC further considers that the US argument that the
absence of a reference to Article XIX in Article XXIV:8(b) entails that WTO Members must exclude
their FTA partners from the scope of safeguard measures they take is flawed in two fundamental
ways.
10. In the first place, the US defence is not relevant to the present case. Article XXIV:8 of GATT
1994 is by nature a definitional provision, which sets out the conditions to qualify as an FTA, and
does not, by itself impose obligations on WTO Members:
5 in particular, it does not impose an
obligation to exclude FTA partners from protective measures nor the hypothetical conditions under
which such exclusions may be granted. Moreover, the express mention in Article XXIV:8(b) of the
maintenance of certain restrictive measures between FTA partners refers to restrictions which are
WTO-compatible (since that provision refers to measures “permitted under Articles XI, XII, XIII,
XIV, XV and XX”).
11. The legal basis for the prohibition of (and thus the obligation to eliminate) WTO-inconsistent
restrictive measures is found (even for FTA partners), not in Article XXIV:8(b), but in all the relevant
provisions of GATT 1994. In other words, there is no specific need to regulate in Article XXIV:8(b)
the elimination of WTO-inconsistent measures between FTA partners, as this obligation is already
laid down with effect for the whole WTO membership in other GATT provisions.
12. An analysis under Article XXIV:8(b) therefore assumes that the restrictive measure under
review is WTO-consistent. Thus, an analysis of whether the exclusion of FTA partners from a
safeguard measure is legitimate should be conducted by the Panel only after it has reviewed the other
claims against the US investigation and measure on Line Pipe and only if the Panel has concluded that
the other claims are unfounded (that is, the Panel has concluded that the ITC investigation and
measure are consistent with all the requirements for imposition of safeguard measures, both in
Article XIX of GATT 1994 and in the Agreement on Safeguards , claimed by Korea to have been

4 EC Oral Statement, paras. 12-19.
5 The same distinction is drawn by the Appellate Body in US – Lamb, para. 133.

violated). In the EC’s view, since the US safeguard action against line pipe imports is WTO
incompatible in different respects, such an analysis is clearly not allowed in the present case.6
13. Even assuming, arguendo, that the US safeguard measure on Line Pipe were otherwise WTO-
compatible, and thus the US argument were relevant , the second flaw in such argument is that it is
both unsupported and not compatible with the general purpose and design of the relevant provisions
of GATT 1994.
14. Perhaps the most appropriate approach to the issue is to start by addressing the definition of
FTAs in GATT 1994. That definition is found in para. 8 (b) of Article XXIV, pursuant to which:
“(b) A free-trade area shall be understood to mean a group of two or more customs
territories in which the duties and other restrictive regulations of commerce (except,
where necessary, those permitted under Articles XI, XII, X III, XIV, XV and XX) are
eliminated on substantially all the trade between the constituent territories in products
originating in such territories.” [emphasis added]
15. One could recall what the Appellate Body observed in Turkey – Textiles: 7
“Sub-paragraph 8(a)(i) of Article XXIV establishes the standard for the internal trade
between constituent members in order to satisfy the definition of a “customs union”.
It requires the constituent members of a customs union to eliminate “duties and other
restrictive regulations of commerce” with respect to “substantially all the trade”
between them.”
Similarly, Article XXIV:8(b) lays down the standard for internal trade between members of an FTA
and requires that an FTA (a) eliminate restrictive trade regulations and (b) that elimination covers
substantially all trade between members.
16. One can further refer to what the Appellate Body observed in respect of the “substantially all
the trade” clause when appearing in Article XXIV:8(a):
“Neither the GATT C
ONTRACTING PARTIES nor the WTO Members have ever
reached an agreement on the interpretation of the term “substantially” in this
provision.14 It is clear, though, that “substantially all the trade” is not the same as all
the trade”.8
“14 Panel Report, para. 9.148.”
17. Thus, the clause “substantially all the trade” as interpreted by the Appellate Body already
entails that an absolute obligation to eliminate all restrictive measures is not imposed by
Article XXIV:8(b) of GATT 1994. Therefore, inasmuch as an FTA remains within the outer limit of

6 The EC is aware that in Turkey – Textiles the Appellate Body found that WTO-inconsistent measures
may be maintained by a customs union in respect of trade with third parties if certain conditions are met
(Appellate Body Report, Turkey – Restrictions on Imports of Textile and Clothing Products (“ Turkey –
Textiles”), WT/DS34/AB/R, 22 October 1999, para. 58). In the EC’s view, to the extent that these findings can
be applied to the present case, the conditions dictated by the Appellate Body are not fulfilled by the US measure
since it was neither taken upon the formation of NAFTA nor has it been shown to have been necessary for such
formation.
7 Appellate Body Report, Turkey – Textiles, para. 48.
8 Appellate Body Report, Turkey – Textiles, para. 48.

“liberalization of substantially all the trade”, the remaining trade which is not liberalized may
arguably remain so as a result of the application of safeguard measures.
18. This conclusion is further corroborated, under the circumstances of the present case, by the
fact that the contracting parties to NAFTA them selves have not made the mutual exclusion from
safeguard measures an absolute obligation. Instead, in Sec. 802(1) of the NAFTA Agreement they
have provided for the possibility of inclusion in certain circumstances. 9 If there were an absolute
obligation to exclude partners ( quod non), then whenever this provision is applied NAFTA partners
would themselves violate Article XXIV.10
19. Likewise, if the US argument was taken literally and all safeguards were to be eliminated
between FTA partners as a condition for the establishment of the FTA, then also bilateral safeguard
clauses, such as that laid down in Sec. 801 of the NAFTA Agreement, would be prohibited.
20. There are further reasons why the US argument that safeguard measures must not be applied
between FTA partners because Article XIX of GATT 1994 is not expressly mentioned in
Article XXIV:8 is unconvincing.
21. In the first place, Article XIX is not the only provision allowing trade restrictive measures
that is not referred to in Article XXIV:8(b). If the US reasoning was correct, then also measures
under e.g. Article VI of GATT 1994 (as supplemented, clarified and modified by the Anti-Dumping
Agreement and the SCM Agreement), could never be imposed against FTA partners. Perhaps even
more obviously, the omission of any reference to Article XXI of GATT 1994 (security exceptions) in
Article XXIV:8(b), in stark contrast with the reference to Article XX (general exceptions), can hardly
be understood to mean that FTA partners would be precluded from relying upon such provision in
case of a situation calling for national security protection involving inter alia FTA partners.
22. Another unreasonable result of espousing the US interpretation is hinted to in Panel’s
question 2. The EC’s view in that respect is that, given the fact that safeguard measures adopted
consistently with Article XIX may take the form of quantitative restrictions covered by Article XI of
GATT 1994, it is not logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are.
23. If quantitative restrictions can be maintained on a permanent basis (such as when they are
based on Article XI:2) a fortiori it must be possible to apply them on “emergency” grounds.
24. The same can be said for, at the very leas t, all the measures based on the GATT provisions
listed in Article XXIV:8(b), as well as for those which take the form of increased duties: whether or
not adopted on safeguard grounds, there should be no obligation to exclude FTA partners.

9 Section 802(1) of the NAFTA Agreement reads, in pertinent part:
“Any party taking an emergency action under Article XIX or any such agreement shall exclude imports
of a good from each other Party from the action unless (1) (a) imports from a Party, considered individually,
account for a substantial share of total imports; and (b) imports from a party considered individually, or in
exceptional circumstances imports from Parties considered collectively, contribute importantly to the serious
injury, or threat thereof, caused by imports.”
10 This is even more the case because, if the two conditions in Sec. 802(1) are met, a NAFTA Party is
entitled to include its partners’ imports irrespective of whether this result in reducing liberalization below the
“substantially all trade” threshold. It is not plausible that the NAFTA partners would have agreed on such a text
if they were convinced that there is an absolute obligation in Article XXIV to exclude FTA partners from
safeguard measures.

25. It is therefore unconvincing to conclude that the list of trade restrictive measures whose
continuation between FTA partners is expressly permitted by Article XXIV:8(b) is meant to be
exhaustive.
26. More fundamentally, it is not clear that the adoption of safeguard measures, by their nature
temporary and extraordinary remedies aimed at facing an exceptional emergency situation, 11 amounts
to re-introducing trade restrictions relevant under Article XXIV:8 of GATT 1994, and therefore runs
counter the obligation to liberalize trade between FTA partners. As clarified by Article XIX:1 of
GATT 1994, the adoption of a (GATT-consistent) safeguard measure in a form other than a
modification of a tariff concession amounts to “temporarily to ‘suspend the obligation in whole or in
part’”12 “to the extent and for such time as may be necessary to prevent or remedy [serious] injury.”
27. It is not to be excluded that among the obligations which can temporarily be suspended on
safeguards grounds is also the obligation in Articl e XXIV:8(b) to eliminate restrictions between FTA
partners. This however is not tantamount to saying that such an obligation is violated.
28. It follows from the foregoing that, even taking Article XXIV:8(b) of GATT 1994 in isolation,
that is without relating it to the Agreement on Safeguards, there is no absolute obligation for an FTA
Member to exclude FTA partners from the scope of its safeguard measures.
5. [ALL] The US argues, on the basis of th e last sentence of note 1 to the Safeguards
Agreement, that “issues related to FTA imports are to be addressed exclusively under the
relevant GATT 1994 articles” (para. 220, US first written submission). In this regard, please
comment on the Appellate Body’s finding in Argentina – Footwear (para. 106) that “the
footnote only applies when a customs union applies a safeguard measure ‘as a single unit or on
behalf of a member State’”. Does the Appellate Body’s finding apply to the last sentence of
footnote 1? Please explain.
6. [ALL] If footnote 1 to the Safeguards Agreement were relevant in some way to the issue
of which Members could be subject to a safeguard measure, is it relevant that footnote 1 has
been inserted in Article 2.1 of the Safeguar ds Agreement, rather than Article 2.2? Please
explain.
Reply to questions 5-6
29. In the EC’s view the US argument is unwarranted. Footnote 1 to the Agreement on
Safeguards is not relevant to decide on whether an FTA member is entitled to derogate from MFN by
excluding FTA partners from safeguard measures it takes.
30. The fact that footnote 1 is not relevant to decide the matter before the Panel results from both
its textual and contextual interpretation.
31. As to the ordinary meaning of footnote 1 to the Agreement on Safeguards, its first three
sentences are expressly and exclusively concerned wi th the situation of customs unions. In the EC’s
view this is a first indication that the note is inte nded to deal with customs unions, and with a specific
issue arising in the application of safeguard measures when customs unions are involved.

11 Appellate Body Report, Argentina – Footwear, paras. 93-94.
12 Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of Certain Dairy
Products (“Korea – Dairy Products ”), WT/DS98/AB/R, 14 December 1999, paras. 86, 88; Appellate Body
Report, Argentina – Footwear, para. 93.

32. The fact that the last sentence of footnote 1 refers in general terms to the relationship between
Article XIX and paragraph 8 of Article XXIV of GATT 1994, which remains unaffected, has to be
related to the rest of the text of the footnote, and is not modifying the general scope of the footnote.
33. This is confirmed i.a. by the Appellate Body’s finding in para. 106 of Argentina – Footwear,
which is unqualified and applies to the whole content of footnote 1. That paragraph, along with the
passage of the Panel Report that the Appellate Body criticized in the previous paragraph, is worth
being quoted in full:
“105. Finally, the Panel concluded as follows:
in the light of Article 2 of the Safeguards Agreement and
Article XXIV of GATT, we conclude that in the case of a customs
union the imposition of a safeguard measure only on third-country
sources of supply cannot be justified on the basis of a member-state-
specific investigation that finds serious injury or threat thereof caused
by imports from all sources of supply from within and outside a
customs union.
94
“94 Panel Report, para. 8.102.”
106. We question the Panel’s implicit assumption that footnote 1 to Article 2.1 of the
 Agreement on Safeguards applies to the facts of this case. The ordinary meaning of
the first sentence of footnote 1 appears to us to be that the footnote only applies when
a customs union applies a safeguard measure “as a single unit or on behalf of a
member State”. 95 On the facts of this case, Argentina applied the safeguard measures
at issue after an investigation by Argentine authorities of the effects of imports from
all sources on the Argentine domestic industry.” [emphasis added]
“95 We also note that footnote 1 relates to the word “Member” in Article 2.1, which is
commonly understood to mean a Member of the WTO.”
34. Thus, in paragraph 106 of its Report the Appellate Body understood the first sentence of
footnote 1 to determine the scope of the whole footnote and drew from that first sentence a conclusion
in respect of the whole footnote.
Specifically, the Appellate Body identified the subject matter of the footnote as being
safeguard actions taken by customs unions (as opposed to action taken by one of their constituent
members).
35. The Appellate Body’s conclusion was that the w hole footnote was irrelevant to the case under
review, which was concerned with whether Argentina, rather than the customs union of which it is a
member, could rely on the last sentence of the footnote to justify exclusion of its customs union
partners from the application of the measure.
The Appellate Body considered that the fact that the safeguard action under review was not
attributable to a customs union was sufficient to exclude the relevance of the footnote.

36. The issue before the Panel in the present proceedings mirrors the one before the Appellate
Body in Argentina – Footwear and addressed in para. 106 of the Appellate Body report. As recalled,
in that case, at issue was the possibility for Argentina, as a customs union member, of relying on
footnote 1, to exclude a customs union partner from the reach of a safeguard measure. Similarly, in
the present case the issue is whether a member of an FTA, rather than the FTA itself, can rely on the
last sentence of the footnote to exclude its partners from the application of its safeguard measure.
37. If the footnote, even if referring to customs unions, was held by the Appellate Body not to be
relevant to actions taken by members of customs unions, a fortiori it cannot be relevant to actions
taken by members of FTAs, which are not even mentioned in that footnote.
13
38. Furthermore, if the last sentence of footnote 1 had the general scope and meaning that the US
suggests, then it would have allowed the Appellate Body to apply it to the case at issue in Argentina –
Footwear as well.
39. That footnote 1 is not relevant to decide the matter before the Panel is further confirmed by
the fact that it has been inserted in Article 2.1 of the Agreement on Safeguards, rather than Article 2.2,
as recalled in the text of question 6.
40. The text of the footnote is, moreover, attached to a specific term in Article 2.1, notably the
word “Member”, as also pointed out by the Appellate Body in Argentina – Footwear.
14 The footnote
is thus aimed at regulating a specific instance, which can only concern actions taken by some of the
Members. FTAs do not have a single customs territory and a single tariff schedule, and thus cannot
become a WTO Member in their own right.
41. The EC would recall that still in Argentina – Footwear the Appellate Body expressly
recognized that the requirement in Article 2.2 of the Agreement on Safeguards applies to actions taken
by a customs union member when it has included imports from its customs unions partners in its
safeguards investigation.
15
42. Given that the Appellate Body’s conclusion in para. 112 of the Argentina – Footwear Report
was based on the facts of Argentina’s investigation, not on Argentina’s membership in a customs
union, it equally applies to other cases, like the on e in dispute, where the parallelism between the
scope of an investigation and the scope of a measure is not observed.
(ii) The measure
7. [ALL] Are there circumstances in whic h the nature of a safeguard measure may
change, depending on whether the competent au thority makes a finding of present serious
injury, or a finding of threat of serious injury?
If the competent authority finds that increased imports have caused “serious injury or a
threat thereof”, how does that authority ensu re that the resultant safeguard measure is
“necessary to prevent or remedy serious inju ry” within the meaning of Article 5.1 of the
Safeguards Agreement?

13 That FTAs are not concerned by footnote 1 is not surprising. Unlike customs unions, FTAs do not
require the establishment of a uniform external trade regime; therefore, the specific issue that is regulated in
footnote 1 in respect of customs unions would unlikely arise for FTAs.
14 As also pointed out by the Appellate Body in Argentina – Footwear, para. 106, footnote 95.
15 Appellate Body Report, Argentina – Footwear, para. 112, supra, reply to questions 4 and 2, general
remarks.

Is it necessary to choose between a finding of present serious injury and a finding of
threat of serious injury in order to comply with the necessity requirement contained in the first
sentence of Article 5.1? Please explain.
Reply
43. The “nature” of a safeguard measure as an extraordinary remedy against fair trade does not
change depending on the conditions that must be present for its adoption to be WTO-compliant. This
also applies to the specific condition of the exis tence of “serious injury” or of “threat of serious
injury”.
44. The fact that a measure is based on a finding of “serious injury” or of “threat of serious
injury” can however affect the features of the measure (such as level, type or duration). In fact, each
measure must be based on the specific facts of the case, and what is “necessary” to remedy actual
“serious injury” may not be equally “necessary” to prevent “ threat of serious injury”. Likewise, the
necessary “adjustment” of the domestic industry to changes may be different in cases of actual serious
injury and in cases of threatened serious injury.
45. As regards the way of ensuring that a safeguard measure is “necessary” within the meaning of
Article 5.1, the assessment of the “necessity” calls for a comparison between, on the one hand, the
serious injury/threat thereof caused by increased im ports and the adjustment required in either case,
and, on the other hand, the anticipated effects of the proposed measure on import flows and on
adjustment.
46. It has to be recalled that in order to make a finding of “serious injury” or of “threat of serious
injury” domestic authorities must determine the relevant “serious injury” or “threat thereof” caused by
increased imports – a step that is only completed after i.a. “non-attribution” to imports of injury
caused by other factors is ensured.
16
47. The determination of the “necessary” remedy is thus the determination of a remedy that will
neutralize the serious injury or threat thereof caused by increased imports, as well as facilitate
adjustment, and that will not exceed that objective.
48. Furthermore, concerning the question of whether choosing between a finding of present
serious injury and a finding of threat of serious injury is necessary to comply with the necessity
requirement contained in the first sentence of Article 5.1, in the EC’s view this choice is necessary.
The reason for this is, first of all, that from a lo gical point of view these two notions appear to be
mutually exclusive. The same situation cannot at the same time constitute threat and actual serious
injury.
49. More importantly, choosing between the two fi ndings is necessary in that the safeguard
response is measured by the problem to be remedied. Because a “threat of serious injury” is not as
immediately detrimental as actual serious injury, the remedy sufficient and not excessive to prevent
serious injury from materializing will likely be less restrictive on trade than a remedy to redress a
situation of actual “serious injury”. Like for diseases, preventing is better than treating and normally
comes at a lower cost.
50. The different consequences between a “serious injury” and “threat of serious injury” finding
were also clear to the ITC in this very case. The ITC Report accounts for the different views on injury
of the various commissioners, and those who had found threat of serious injury recommended a

16 Appellate Body Report, US – Lamb, para. 180.

different and less restrictive measure from that recommended by the commissioners who had found
serious injury.17
51. The fact that the level and type of remedy is likely to be different in the case of serious injury
and of threat of serious injury does not, however, entail that the measure changes in nature, as
explained above.
8. [ALL] GATT Article XIII.2(a) provides that quotas representing the total amount of
permitted imports shall be fixed “wherever practicable”. GATT Article XIII.5 states that
Article XIII.2(a) shall apply to tariff quota. Would this suggest that there may be situations in
which it may not be “practicable”, in the context of a tariff quota, to fix a quota representing
the total amount of permitted imports?
Reply
52. Yes.
If not, why not? If yes, would this also suggest that a measure may constitute a tariff
quota even if there is no “overall limit on eligibility” (para. 185, US first written submission)?
Reply
53. Yes, the very presence of this clause (“wherever practicable”) suggests the a contrario
inference that in the case of a tariff quota fixing a quota representing the total amount of permitted
imports may not always be “practicable”. This is however without prejudice to the question of
whether in the present case fixing such a total amount was or was not “practicable”.
9. [ALL] In Section F.2.b of its first writte n submission, the US argues that the rules in
Article 5 of the Safeguards Agreement for quantitative restrictions and quotas do not apply
because the Line Pipe measure is not a quantitative restriction. Does your delegation consider
that the terms “quantitative restriction” and “quota” (in Article 5 of the Safeguards Agreement)
are synonymous? Please explain. In particular, and considering the US argument that a
measure is only a TRQ if it includes an overall limit on eligibility, why should the term “quota”
(Article 5.2) not refer to the quota element of a TRQ?
Reply
54. The EC does not consider that the terms “quantitative restriction” and “quota” are
synonymous. This seems to be consistent with use of those two terms elsewhere in the legal texts
resulting from the Uruguay Round.
55. For example, the two terms already appear in GATT Article XI. That provision, while
prohibiting any form of quantitative restriction, specifies that quotas are but one of the possible ways
to effect such restrictions.
56. Furthermore, Article XIII of GATT 1994 makes clear in para. 5 that “quotas” can also be
“tariff quotas”, as it states that Article XIII provisions also cover tariff quotas.
57. Since tariff quotas are also covered, the reference in e.g. Article XIII:2(d) to the allocation of
a “quota” must be a reference to the allocation of the “quota” part of a TRQ.

17 ITC Report, pp. I-75 and I-87 respectively.

58. The EC would also recall that, as clarified by the Appellate Body, the various texts resulting
from the Uruguay Round negotiations constitute an inseparable package of rights and obligations.
Those obligations apply together. Therefore, Artic le XIII of GATT 1994 applies together with the
Agreement on Safeguards unless it is demonstrated that there is a conflict or that it is derogated from
the latter text. 18
10. [ALL] In Korea – Dairy, the Appellate Body stated that it does “not see anything in
Article 5.1 that establishes such an obligation [to justify the necessity of a safeguard measure]
for a safeguard measure other than a quantitat ive restriction which reduces the quantity of
imports below the average of imports in the last three representative years”. Could the
Appellate Body have inferred that there is no obligation on a Member to explain that its
safeguard measure is “necessary” (within the meaning of Article 5.1) unless that safeguard
measure is a quantitative restriction which reduces the level of imports below the average level
of the last three representative years? Please explain.
Reply
59. In the paragraph of the Report referred to by the Panel, 19 the Appellate Body contrasted the
obligation in the first sentence of Article 5.1 of the Agreement on Safeguards with the one laid down
in the second sentence. In respect of the second sentence, it had just observed
“This sentence requires a “clear justification” if a Member takes a safeguard measure
in the form of a quantitative restriction which reduces the quantity of imports below
the average of imports in the last three representative years for which statistics are
available. We agree with the Panel that this “clear justification” has to be given by a
Member applying a safeguard measure at the time of the decision , in its
recommendations or determinations on the application of the safeguard measure.” 20
60. Therefore, by noting in paragraph 99 of the Report that there is not
“anything in Article 5.1 that establishes such an obligation for a safeguard
measure other than a quantitative restriction which reduces the quantity of imports
below the average of imports in the last three representative years”,
the Appellate Body simply considered that only the second sentence of Article 5.1 requires a
clear justification, at the time of the adoption of the measure, as to why a quantitative restriction
below a certain threshold is necessary. Not requiring a “clear justification” in other cases does not,
however, amount to say that no justification at all is required, nor that it need not be provided at the
time of the decision on the application of a safeguard measure.
61. As explained above,
21 the assessment of the “necessity” of a given safeguard measure is made
by comparing the “serious injury” or “threat of serious injury” found and the requirements for an
orderly adjustment with the expected effect of the measure envisaged. Therefore, the necessity (or
lack of necessity) of a measure may be already be evaluated by referring to the injury findings of the
investigating authorities, if consistent with Article 4 of the Agreement on Safeguards and if

18 Appellate Body Report, Korea – Dairy Products , para. 81; Appellate Body Report, Argentina –
Footwear, para. 89; Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland
Cement from Mexico (“Guatemala – Cement”), WT/DS60/AB/R, 2 November 1998, paras. 65, 75.
19 Appellate Body Report, Korea – Dairy Products, para. 99.
20 Appellate Body Report, Korea – Dairy Products, para. 98.
21 Supra, reply to question 7.

appropriately reported in the domestic measure, and to the reasoning concerning the details (including
level, type, duration) of the measure.
62. Most recently in US – Lamb , the Appellate Body confirmed that fulfilment of the
requirements of the Agreement on Safeguards must be reviewed by looking at the domestic measure
in the following terms:
“we observe that Article 3.1 requires competent authorities to set forth findings and
reasoned conclusions on “all pertinent issues of fact and law” in their published
report. As Article XIX:1(a) of the GATT 1994 requires that “unforeseen
developments” must be demonstrated, as a matter of fact, for a safeguard measure to
be applied, the existence of “unforeseen developments” is, in our view, a “pertinent
issue[] of fact and law”, under Article 3.1, for the application of a safeguard measure,
and it follows that the published report of the competent authorities, under that
Article, must contain a “finding” or “reasoned conclusion” on “unforeseen
developments”.” [emphasis added] 22
63. Since this conclusion is based on the general language of Article 3.1 of the Agreement on
Safeguards, it logically applies to all the “pertinent issues of fact and law”, including compliance with
the obligation in the first sentence of Article 5.1.
(iii) Serious injury
11. [ALL] Leaving aside the factual circumstances of the present case, does your delegation
consider, as a matter of principle, that improvements in domestic industry performance at the
end of the relevant period of investigation would be inconsistent with a finding of present
serious injury?
Reply
64. No, they would not be always and per se inconsistent. However, they are particularly relevant
in safeguard investigations, in view of the emergency nature of safeguard action.
(iv) Increased imports
12. [ALL] In Argentina – Footwear, the Appellate Body found that the increase in imports
must be inter alia “recent enough”. How “recent” should the increase in imports be, relative to
the date of the competent authority’s decision to impose a safeguard measure? What is the
minimum period of time that a domestic industry would need in order to file a petition following
a sudden increase in imports? In the present case, could the US line pipe industry have filed a
petition before it did? Please explain. Could the ITC have reached its determination before it
did? Please explain.
Reply
65. There is not a predetermined benchmark for deciding if imports are recent enough, but in
view of the emergency nature of safeguard measures the exceptional situation justifying safeguard
action must be as close as possible to the decision of such action.

22 Appellate Body Report, US – Lamb , para. 76. Still in Korea – Dairy Products the Appellate Body
upheld the Panel’s finding of a violation of Article 4 of the Agreement on Safeguards which was based on
examination of whether certain “relevant factors” in Ar ticle 4.2(a) had or had not been reviewed in the OAI
Report (Appellate Body Report, Korea – Dairy Products, paras. 138, 141).

66. Likewise, there is no minimum predetermined period to wait before a petition for safeguard
relief may be filed with the competent authorities.
(v) Developing country exemption
13. [ALL] At para. 181, Korea asserts that “t he United States did not even attempt to
determine which countries qualified for this exemption”. Does the Safeguards Agreement
require Members imposing safeguard measures to determine in advance which developing
countries should be excluded from those safeguard measures under Article 9.1?
Reply
67. In the EC’s view Members imposing safeguard measures are required to determine in advance
which developing countries should be excluded by reason of Article 9.1. In fact before imposing a
measure they are required to assess import trends and to conduct a full investigation. This also
applies to imports from developing countries, so that data concerning their individual and aggregate
share in the trade in the investigated product also need to be available and be reviewed before the
adoption of a measure.

ANNEX B-5
JAPAN'S ANSWERS TO QUESTIONS FROM
THE PANEL TO THIRD PARTIES
(7 May 2001)
2. Is it logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are, given the fact that Article XIX safeguard measures
may take the form of (Article XI) quantitative restrictions?
4. Please comment on the US argument th at the absence of any reference to GATT
Article XIX in Article XXIV:8(b) means that Article XIX safeguard measures “may or must be
made part of the general elimination of 'restrictive regulations of commerce' under any FTA
(para. 216, US first written submission). Is it possible that safeguard measures “may” (as
opposed to “must”) be made part of the general elimination of “restrictive regulations of
commerce” under any FTA? Would an a contrario reading of Article XXIV:8(b) mean that the
imposition of a safeguard measure between FTA partners is inconsistent with the concept of an
FTA? Please explain.
Answers to Questions 2/4
The GATT Contracting Parties and WTO Members have addressed the scope and meaning of
GATT Article XXIV:8(b) a number of times, without developing a consensus. 1 In this type of
situation, the Panel should be cautious in making a ruling regarding the provision based solely on
deduction from its text.
This being said, Japan has argued in the Committee on Regional Trade Agreements, citing the
absence of Article XXI from the list, that the exceptions listed in Article XXIV:8(b) are illustrative so
as not to negate the purpose of an RTA stipulated in Article XXIV(to facilitate trade).2
In reference to the specific case before the Panel, Japan draws the attention of the Panel to the
following. The United States relies on Article XXIV:8(b) to assert that the North American Free
Trade Agreement (NAFTA) is an FTA as defined at GATT Article XXIV:8(b) and that this, in turn,
justifies the US exclusion of Mexico and Canada from its safeguard measure. Yet under such an
interpretation, the United States also would be prohibited from imposing anti-dumping and
countervailing duties on Mexico and Canada, because, like GATT Article XIX (providing for
safeguard measure), GATT Articles VI and XVI (providing for antidumping and countervailing
duties) are excluded from the list of measures excepted at GATT Article XXIV:8(b). But the
United States does not do so
3 and has not provided a logical explanation of this obvious contradiction.

1 See, e.g., WT/REG/W/37.
2 Id.
3 See, e.g ., Continuation of Antidumping and Countervailing Duty Orders on Certain Carbon Steel
Products from Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan, South Korea, Mexico,
Poland, Romania, Spain, Sweden, Taiwan, and the United Kingdom, 65 Fed. Reg. 78467-70

5. The US argues, on the basis of the last sentence of note 1 to the Safeguards Agreement,
that “issues related to FTA imports are to be addressed exclusively under the relevant GATT
1994 articles” (para. 220, US first written submission ). In this regard, please comment on the
Appellate Body's finding in Argentina – Footwear (para. 106) that “the footnote only applies
when a customs union applies a safeguard measure 'as a single unit or on behalf of a member
State’”. Does the Appellate Body's finding appl y to the last sentence of footnote 1? Please
explain.
Answer to Question 5
No, it does not. In Argentina – Footwear, the Appellate Body was concerned only with issues
in the context of customs unions. The Appellate Body’s finding does not address the last sentence of
footnote 1.
6. If footnote 1 to the Safeguards Agreemen t were relevant in some way to the issue of
which Members could be subject to a safeguard measure, is it relevant that footnote 1 has been
inserted in Article 2.1 of the Safeguards Agreement, rather than Article 2.2? Please explain.
Answer to Question 6
Article 2.2 of the Safeguards Agreement applies to Members implementing safeguard
measures, whether or not the Member is a party to an FTA (as is the United States here) or to a
customs union. Footnote 1 stipulates additional conditions applicable to customs unions acting as a
single unit or on behalf of a member State. Thus, it is placed appropriately under the first paragraph
that sets general conditions for safeguard measures, namely paragraph 1 of Article 2. Moreover, it is
placed after “Member” because it qualifies “Member” in the context of customs unions.
(i) The measure
7. Are there circumstances in which the na ture of a safeguard measure may change,
depending on whether the competent authority ma kes a finding of present serious injury, or a
finding of threat of serious injury? If the competent authority finds that increased imports have
caused “serious injury or a threat thereof”, ho w does that authority ensure that the resultant
safeguard measure is “necessary to prevent or remedy serious injury” within the meaning of
Article 5.1 of the Safeguards Agreement? Is it necessary to choose between a finding of present
serious injury and a finding of threat of seriou s injury in order to co mply with the necessity
requirement contained in the first sentence of Article 5.1? Please explain.
Answer to Question 7
Article 4 of the Safeguards Agreement defines “serious injury” and “threat of serious injury.”
Circumstances relevant to either finding would vary from case to case, but the Agreement sets forth
no specific criteria.
8. GATT Article XIII.2(a) provides that quotas representing the total amount of permitted
imports shall be fixed “wherever practicable”. GATT Article XIII.5 states that Article XIII.2(a)
shall apply to tariff quota. Would this suggest th at there may be situations in which it may not
be “practicable”, in the context of a tariff quota, to fix a quota representing the total amount of
permitted imports? If not, why not? If ye s, would this also suggest that a measure may

(15 December 2000); Continuation of Antidumping Duty Order and Countervailing Duty Order: New Steel Rail
from Canada, 65 Fed. Reg. 6358 (9 February 2000) (attached as ROK Exh. 1).

constitute a tariff quota even if there is no “overall limit on eligibility” (para. 185, US first
written submission)?
Answer to Question 8
The phrase “whenever practicable” in GATT Article XIII:2(a) suggests that there may be
situations in which fixing the quota representing the total amount of permitted imports is not
practicable. However, in such a situation, Article XIII:2(b) restricts the measures that a Member may
impose to “import licenses or permits without a quota.”
In direct violation of these provisions, the United States applied a tariff rate quota (TRQ)
measure with no overall limit on eligibility. The US TRQ applies a higher tariff rate of 19 per cent to
imports above a specific quantity of imports (9,000 short tons for each exporting country).
The provisions of Articles XIII:2(a) and XIII:5 require an “overall limit on eligibility” for any
TRQ. In this regard, the US argument that the measure is not a TRQ because it lacks an overall limit
on eligibility is flawed. The United States confuses the legal requirements that apply to a TRQ with
the definition of TRQ. If the US argument were accepted, a Member’s failure to fix the total amount
of a TRQ quota automatically would convert a TRQ into a non-TRQ measure and allow the Member
to escape the requirements of Articles XIII:2(a) and XIII:5.
9. In Section F.2.b of its first written submissi on, the US argues that the rules in Article 5
of the Safeguards Agreement for quantitative restrictions and quotas do not apply because the
Line Pipe measure is not a quantitative restriction. Does your delegation consider that the
terms “quantitative restriction” and “quota” (in Article 5 of the Safeguards Agreement) are
synonymous? Please explain. In particular, and considering the US argument that a measure is
only a TRQ if it includes an overall limit on eligibility, why should the term “quota”
(Article 5.2) not refer to the quota element of a TRQ?
Answer to Question 9
“Quota” and “quantitative restriction” are not synonymous. As a review of GATT
Article XIII indicates, “quota” allocation is one of the methods for implementing a “quantitative
restriction” or a “TRQ.” A quantitative restriction also may be implemented through “import licenses
or permits without a quota” (GATT Article XIII:2(b)) and a TRQ may be implemented without quota
allocation. Article 5.2 applies to a “quantitative restriction” and a “TRQ” if quota allocation is used.
10. In Korea – Dairy, the Appellate Body stated that it does “not see anything in Article 5.1
that establishes such an obliga tion [to justify the necessity of a safeguard measure] for a
safeguard measure other than a quantitative restriction which reduces the quantity of imports
below the average of imports in the last three representative years”. Could the Appellate Body
have inferred that there is no obligation on a Member to explain that its safeguard measure is
“necessary” (within the meaning of Article 5.1) unless that safeguard measure is a quantitative
restriction which reduces the level of import s below the average level of the last three
representative years? Please explain.
Answer to Question 10
The text of the second sentence of Article 5.1 of the Safeguards Agreement indicates that it
relates only to a “quantitative restriction.” The Appellate Body in Korea – Dairy did not agree with
the Panel’s finding that Members are required, in their recommendations or determinations on the
application of a safeguard measure, to explain how they considered the facts before them and why

they concluded, at the time of the decision, that the measure to be applied was necessary to remedy
serious injury and facilitate the adjustment within the meaning of Article 5.1.
(ii) Serious injury
11. Leaving aside the factual circumstances of the present case, does your delegation
consider, as a matter of principle, that improvements in domestic industry performance at the
end of the relevant period of investigation would be inconsistent with a finding of present
serious injury?
Answer to Question 11
In general, improvements at the end of a period of investigation would detract from a finding
of current injury. However, one must consider the characteristics of the market, such as seasonal ups
and downs, and elasticity of demand relative to price. Therefore, the determination must account for
all relevant product-specific variables.
(iii) Increased imports
12. In Argentina – Footwear, the Appellate Body found that the increase in imports must be
inter alia “recent enough”. How “recent” should the increase in imports be, relative to the date
of the competent authority’s decision to impose a safeguard measure? What is the minimum
period of time that a domestic industry would need in order to file a petition following a sudden
increase in imports? In the present case, could the US line pipe industry have filed a petition
before it did? Please explain. Could the ITC have reached its determination before it did?
Please explain.
Answer to Question 12
In Argentina – Footwear , the Appellate Body held that “the increase in imports must have
been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and
qualitatively, to cause or threaten to cause ‘serious injury,’” taking into account the many
characteristics of each industry.4 Thus, a case-by-case analysis is required to evaluate whether or not
an increase in imports is “recent enough.” But, although as this analysis suggests, it may be difficult
to set a period that in all cases is “recent enough,” in Argentina – Footwear, the Appellate Body found
that a period of several years was not sufficiently recent.
5
(iv) Developing country exemption
13. At para. 181, Korea asserts that “the United States did not even attempt to determine
which countries qualified for this exemption ”. Does the Safeguards Agreement require
Members imposing safeguard measures to determine in advance which developing countries
should be excluded from those safeguard measures under Article 9.1?

4 Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R (14 December 1999) at
para. 131.
5 Id. at para. 130.

Answer to Question 13
Article 9.1 of Agreement on Safeguards provides that “Safeguard measures shall not be
applied against a product originating in a developing country Member as long as its share of imports
of the product concerned in the importing Member does not exceed 3 per cent.” Because Article 9.1
says “shall not be applied,” the competent authority must determine before implementing a safeguard
if any developing countries should be excluded from the measure per Article 9.1 of Safeguards
Agreement.

ANNEX B-6
MEXICO'S ANSWERS TO QUESTIONS FROM THE
PANEL TO THIRD PARTIES
(7 May 2001)
Before replying to the panel's questions, Mexico respectfully points out that, since our
arguments refer exclusively to the right to exclude free-trade area partners from the application of the
safeguard measure, our replies will deal exclusively with this issue.
Q2. [ALL] Is it logical that Article XIX safeguard measures are not permitted between FTA
partners, while Article XI measures are, given the fact that Article XIX safeguard measures
may take the form of (Article XI) quantitative restrictions?
Reply
Firstly, we must point out that the fact that Article XIX is not included in the list of
exceptions in Article XXIV:8(b) of the GATT 1994 does not mean that its application is prohibited
among members of a free-trade area, in the same way as we believe that, for example the imposition
of measures under Article XXI of the GATT 1994 is likewise not prohibited.
GATT Article XXIV:8(b) provides for the elimination of duties and other restrictive
regulations of commerce on substantially all – and not the entirety of – trade between the partners of a
free-trade area. The general exclusion of the application of safeguard measures among NAFTA
partners is in keeping with such elimination, wh ile Article 802 of the Treaty lays down the limited
circumstances in which the exclusion does not apply.
Furthermore, we believe that it is wrong to equate Article XI and Article XIX of the GATT,
since they are very different in nature. Although in both cases the result could be the imposition of a
quantitative restriction, the causes giving rise to them as well as the requirements established for
imposing them are different. In addition, the wording of Article XIX, unlike Articles XI
1, XII2, XIII3,
XIV4, XV5 and XX 6, does not refer to the imposition of restrictions but rather to the ability to deal
with emergency situations through the total or partial suspension of an obligation or modification of a
concession. In the case of free-trade areas, the level of obligations and of concessions granted among
members of the area is different (and normally greater) than the level of concessions and obligations
acquired in the multilateral context. Therefore, Article XXIV does not prejudge the rights of
Members in that context, but confines itself to establishing the parameters to be complied with by
free-trade areas. The partners of a free-trade area are free to decide how they will achieve their trade
liberalization objectives, provided they comply with the conditions laid down in Article XXIV.

1 Paragraphs 1 and 2.
2 Paragraphs 2, 3 and 4.
3 Paragraphs 1, 2 3, 4 and 5.
4 Paragraphs 1, 2, 3, 4 and 5.
5 Paragraphs 1, 5 and 9.
6 Introductory paragraph and sub-paragraphs (g), (i) and (h).

Q3. [CANADA AND MEXICO] In Turkey – Textiles (WT/DS34), the Appellate Body stated
that a GATT Article XXIV defence may be availa ble in the context of a customs union if two
conditions are met: (1) the measure at issue is introduced upon the formation of the customs
union, and (2) "the formation of [the] customs union would be prevented if it were not allowed
to introduce the measure at issue". Would the formation of the NAFTA have been prevented if
the NAFTA parties had not been allowed to introduce the safeguards exemption provided for in
section 311(a) of the NAFTA Implementation Act? Please explain. If so, why are NAFTA
parties not automatically excluded from safeguard measures imposed by other NAFTA
members?
Reply
The exclusion power provided for in Article 802 of the NAFTA is a fundamental element of
the set of concessions and obligations designed to facilitate trade between Canada, the United States
and Mexico, as it ensures that, in the absence of very specific conditions, market access is guaranteed.
Hence, it may be affirmed that if the manner in which market access would be guaranteed had not
been clearly established, it would have prevented the establishment of the free-trade area.
Notwithstanding the above, we wish to point out the following: the criterion established in
"Turkey – textiles", in establishing the obligation to "demonstrate that the formation of the customs
union would be prevented if it were not allowed to introduce the measure at issue" is in fact an
obligation to demonstrate a hypothetical situation, which is impossible. Moreover, this criterion
cannot be applied separately to each of the constituent elements of a free-trade area. The language of
the chapeau to Article XXIV:5 provides that "the provisions of this Agreement shall not prevent …
the formation … of a free-trade area". This means that what is protected is the set of provisions
forming the area and not each of them separately. The establishment of a free-trade area is a delicate
balance among an infinite number of economic, trade, legal, political and other factors. Accordingly,
it is impossible to demonstrate that each and every one of the elements making up the free-trade area
is such that if it had not been introduced, the establishment of the free-trade area would have been
prevented. It is important to recall that, given the nature of free-trade areas, the benefits granted are
not extended on a most-favoured-nation basis. Obviously, a Member cannot demonstrate that each
and every one of the concessions therein granted is so important that its absence would have made it
impossible to conclude such an agreement. Any other interpretation would impose on partners of a
free-trade area additional obligations besides those laid down in GATT Article XXIV, contrary to
Articles 3.2 and 19.2 of the DSU. It could also gi ve rise to endless disputes concerning different
constituent elements making up the area.
Lastly, we wish to point out that Article 802 of the North American Free Trade Agreement
(NAFTA) is the Article which governs relations among the partners to the Agreement, whereas the
NAFTA Implementation Act is United States domestic legislation.
Q4. [ALL] Please comment on the US argument that the absence of any reference to GATT
Article XIX in Article XXIV:8(b) means that Article XIX safeguard measures “may or must be
made part of the general elimination of 'restrictive regulations of commerce' under any FTA
(para. 216, US first written submission). Is it possible that safeguard measures “may” (as
opposed to “must”) be made part of the general elimination of “restrictive regulations of
commerce” under any FTA? Would an a contrario reading of Article XXIV:8(b) mean that the
imposition of a safeguard measure between FTA partners is inconsistent with the concept of an
FTA? Please explain.
Reply

As stated in the reply to question 2, the partners in a free-trade area are free to decide how
they will attain the objective of facilitating trade amongst themselves. Thus, Article XXIV should be
interpreted in the light of the objective of "trade facilitation". In the case under consideration, the
NAFTA partners agreed that they would ensure access to their markets and established very clear
provisions governing the limited circumstances in which such market access could not be guaranteed.
Q5. [ALL] The US argues, on the basis of the last sentence of note 1 to the Safeguards
Agreement, that "issues related to FTA imports are to be addressed exclusively under the
relevant GATT 1994 articles" (para. 220, US first written submission). In this regard, please
comment on the Appellate Body's finding in Argentina – Footwear (para. 106) that "the footnote
only applies when a customs union applies a safeguard measure 'as a single unit or on behalf of
a member State'". Does the Appellate Body's finding apply to the last sentence of footnote 1?
Please explain.
Reply
No. The language of paragraph 106 of the Appellate Body's report states " … the ordinary
meaning of the first sentence of footnote 1 appears to us to be that the footnote only applies when a
customs union applies a safeguard measure ´as a single unit or on behalf of a Member state` … "
(footnote omitted). There is no reference to the last sentence of footnote 1.
Furthermore, in the "Argentina – footwear" case the Appellate Body found that Argentina had
not invoked GATT Article XXIV as a defence 7, and therefore did not take up the discussion of that
Article.
In addition, as Mexico pointed out in its oral statement, the last sentence of the footnote is not
confined to Article XXIV:8(a) of the GATT (customs unions), but covers the entire paragraph
(including free-trade areas). Maintaining a contrary interpretation would be tantamount to reducing
Mexico's rights under the Safeguards Agreement.
Q6. [ALL] If footnote 1 to the Safeguards Ag reement were relevant in some way to the issue
of which Members could be subject to a safeguard measure, is it relevant that footnote 1 has
been inserted in Article 2.1 of the Safeguar ds Agreement, rather than Article 2.2? Please
explain.
Reply
The answer is no. The last sentence of footnote 1 states that " … nothing in this Agreement
prejudges … ". This means that neither Article 2.1 nor Article 2.2 nor any other article of the
Agreement on Safeguards prejudges the relationship between GATT Articles XIX and XXIV:8.
QUESTION FOR MEXICO AND CANADA FROM KOREA
Q14. Did NAFTA “eliminate” safeguard measures among its Members or is this a decision to
be reached on a case-by-case, product-by-product basis?

7 WT/DS121/AB/R, paragraph 110.

Reply
NAFTA contains the general principle that the NAFTA partners will not apply safeguard
measures to each other. This general principle, and the exceptions to it, are laid down in Article 802
of the NAFTA.

ANNEX B-7
KOREA’S ANSWERS TO QUESTIONS FROM
THE PANEL AT THE SECOND MEETING
WITH THE PARTIES
(15 June 2001)
I. BOTH PARTIES
A. EXCLUSION OF CANADA AND MEXICO
Q1. Are safeguard measures taken under GATT Article XIX and the Safeguards Agreement
“duties” or “other restrictive regulations of commerce” within the meaning of GATT
Article XXIV:8(b)? Please explain.
Reply
1. It appears that the parenthetical list in Article XXIV:8(b) is not exhaustive of what constitutes
“duties or other restrictive regulations of commerce”. 1 Even if this phrase is broadly defined to
include safeguards measures, the United States has ad mitted in this case that it eliminated restrictions
for “substantially all” trade irrespective of its treatment of individual safeguards measures. Whether it
did or not, the fact remains that the United States is not maintaining as an affirmative defence that
Article XXIV prevents safeguard measures between FTA members. Following the reasoning of the
Appellate Body in Argentina – Footwear , the Panel does not need to reach this issue if it finds that
Footnote 1 does not apply.
2. Article XIX measures adopted in conformity with Article XIII, including the non-
discrimination provisions, are expressly permitted under Article XXIV:8(b). There is an agreement
between Korea and the United States in this particular case that the provision permits the application
of a safeguard measure.
B. NATURE OF THE MEASURE/ARTICLE XIII
Q2. Article XIII:5 provides:
The provisions of this Article shall apply to any tariff quota instituted or
maintained by any [Member], and, in so far as applicable, the principles of this
Article shall also extend to export restrictions.

1 See Turkey – Restrictions on Imports of Textile and Clothing Products, Report of the Appellate Body,
WT/DS34/AB/R (22 October 1999). See also discussion regarding the difference between fiscal measures
(revenue duties) and other “protective” measures and the question of whether “quantitative restrictions” are
included within “other restrictive regulation of commerce.” Guide to GATT Law and Practice , World Trade
Organization and Bernan Press, 6
th ed. (1995) at 820-22.

What, in your opinion, is the basis for th e distinction between (1) “apply[ing] the
“provisions” of Article XIII to tariff quotas, and (2) “ext end[ing]” the “principles” of
Article XIII to export restricti ons? Does the fact that Ar ticle XIII:5 does not state that
the provisions of Article XIII “shall apply” to “export restrictions” suggest that such
provisions already apply to “export restrictions”?
Reply
3. Clearly, Article XIII:5 is recognizing that the nature and effect of “quotas”, whether they be
in the form of quotas or tariff-rate quotas (“TRQs”), are the same and require the same treatment to
ensure that they are “non-discriminatory”. In the case of export restrictions, since their nature is
distinct, the provisions of Article XIII may not a pply in their entirety, but rather “extend to” export
restrictions to the extent that they are applicable. “Extend to” implies something less than “apply to”.
This distinction is confirmed by the use of the term “principles” with respect to export restrictions
rather than the term “provisions” which “shall apply” to TRQs. One can “apply” the “provisions” to
TRQs, but only the “principles” of Article XIII can be “extended” to export restrictions.
4. No, see above. Korea also notes that Article XIII serves to clarify exactly the manner in
which various “permissible” quantitative restrictions under Article XI are to be applied. For this
reason, it is necessary to identify there the various “forms” or “types” of quantitative restrictions and
how Article XIII applies or only extends to each, including TRQs and export restrictions.
Q3. Are all quantitative restrictions quotas? If not, what is the difference between a
quantitative restriction and a quota? Please explain. Are all tariff quotas quotas? Please
explain.
Reply
5. All quantitative restrictions are not quotas. Article XI defines “prohibitions or restrictions”
by excluding “duties, taxes or other charges”. TRQs are not excluded by that definition. Article XI is
very clear that “quantitative restrictions” are “quotas, import or export licences or other measures”.
Therefore, quantitative restrictions are broader than quotas, but include quotas.
6. All TRQs have a quota component. As Korea explained in its initial answer to Panel
questions, “quotas” must be subject to the same non-discriminatory discipline, whether they are
absolute quotas or TRQs, to avoid distorting traditional trade patterns. For tariff measures, non-
discrimination can only be ensured through MFN. For quotas, non-discrimination can be ensured
through the application of proportional shares.
7. For this reason, it is Article XIII that is most relevant to the interpretation of Article 5 of the
Agreement on Safeguards (“SA”) because both provisions regulate the non-discriminatory application
of the quota portion of TRQs.
C. ARTICLE 5
Q4. At paras. 53 - 57 of its rebuttal submission, Korea claims that the US violated
Articles 3.1 and 4.2(c) of the Safeguards Agreement by failing to demonstrate that the Line Pipe
measure was in conformity with the requirements of Article 5.1. Is this Article 3.1 / 4.2(c) claim
within the Panel’s terms of reference? Please explain.

Reply
8. Paragraph 3 of the terms of reference in Korea’s Panel Request objects to the failure of the
United States to justify the measure under Article 5 of the SA. Yes, Korea submits that it has
maintained that Article 5 claims are integrally linked to Articles 3.1 and 4.2(c). 2 Paragraph 9 of
Korea’s Panel Request states specifically that Articles 3 and 4 of the SA have been violated because
“critical confidential information” relied on in the decision-making of the United States has not been
provided (inter alia, the basis for the President’s decision-making documents or any information at all
with respect to the justification of the safeguard measure). The obligation to sufficiently explain why
the measure was “necessary” by reference to the evidence that existed at the time that the Presidential
decision was taken is a “pertinent issue of fact and law.” It also relates to the serious injury finding
and the “detailed analysis of the case” required by Article 4. (As the United States noted in its
response to the Panel, the Article 3 and Article 4 claims with respect to the ITC proceeding were
made in Paragraph 1.)
9. Therefore, as demonstrated, Korea has properly set out its “claims” by referencing Article 3
and Article 4 of the SA.
3 Korea also elaborated that critical information, which the United States
claimed was of a confidential nature, had not been provided in violation of Article 3 and Article 4
requirements.
10. Furthermore, we note that the United States ha s not made any claims of prejudice prior to the
Panel’s question, and the United States has fully responded to Korea’s claims regarding Article 3.1 as
they related to Article 5 since the First Substantive Meeting with the Panel.
11. As the Appellate Body held in Thailand – Antidumping Duties on Angles , the question of
whether the claims were adequately made is in essence a requirement of due process. The question is
whether the party “suffer[ed] any prejudice on account of any lack of clarity in the panel request”.
4
None has been shown.
II. KOREA
A. EXCLUSION OF CANADA AND MEXICO
Q1. At note 21 of its first oral statement, Korea states that “NAFTA is not in compliance
with Article XXIV:8 of the GATT 1994”. Please explain precisely why, in Korea’s view,
NAFTA is not “in compliance with” GATT Article XXIV:8.
Reply
12. Korea’s position that NAFTA has not been demonstrated to be in compliance with
Article XXIV:8 is based on the preliminary analysis of the Committee on Regional Trade Agreements

2 See United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality
Line Pipe from Korea , Request for the Establishment of a Panel by Korea, WT/DS202/4 (15 September 2000)
(“Korea’s Panel Request”) at paras. 3, 9.
3 See Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products, Report of the
Appellate Body, WT/DS98/AB/R (14 December 1999) (“ Korea – Dairy (AB) ”) at para. 123; European
Communities – Regime for the Importation, Sale and Distribution of Bananas , Report of the Appellate Body,
WT/DS27/AB/R (9 September 1997) at para. 141-43 (“Article 6.2 of the DSU requires that claims, but not the
arguments, must all be specified sufficiently . . . in order to allow the defending party . . . to know the legal basis
of the complaint.”)
4 Thailand – Antidumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-
Beams from Poland, Report of the Appellate Body, WT/DS122/AB/R (12 March 2001) at para. 95.

which is still considering the question and has not yet issued a final decision on the matter. As the
Panel observed, the United States has not presented any evidence that NAFTA qualifies as an FTA
under Article XXIV:8(b).
13. Regardless of the Panel’s conclusion as to whether Article XXIV could hypothetically apply
to NAFTA, Korea maintains that this issue is not re levant to the legal issue before the Panel because
the United States cannot invoke the applicability of Article XXIV to NAFTA without Footnote 1 of
the SA. As discussed extensively throughout this proceeding, Footnote 1 does not apply to the US
safeguard action.5
B. INCREASED IMPORTS
Q2. At para 62 of its rebuttal submission, Korea asserts that “the ITC itself looked at 1998
as two six-month periods with very distinct trends for purposes of its injury decision.” In
support, Korea cites (in note 69) certain parts of the ITC Determination, Majority Views on
Injury. Please indicate precisely, by quoting the relevant text, which parts of the ITC
Determination Korea is referring to.
Reply
14. We apologize to the Panel because the citation in footnote 69 of the Rebuttal Submission is
not correct. The correct citation is provided in Korea’s Second Oral Statement at footnote 75 and at
footnote 5 of the US Second Oral Statement. The pages, with the quotations, are as follows:
I-19 (Dealing with Injury):
The much stronger financial performance . . . declined sharply in the
second half of 1998, indicating that the very depressed financial
condition of the domestic industry evident from the interim 1999 data
extends back into mid-1998. (emphasis added)
I-22 (Dealing with Causation):
Finding. There are two principal causes of injury in this case: . . .
increase[d]…imports in 1998-99, and . . . decrease[d] . . . demand in
1998-99 . . . . Both factors significantly contributed to the domestic
industry’s poor health beginning in the second half of 1998. . . .
Consequently, we find the statute’s causation criterion is met.
(emphasis added)
I-28:
This prior experience suggests that the reduced level of demand
would not be expected to generate the severe financial losses suffered
by the industry in the second half of 1998 and the first half of 1999,
and that the other factors therefore must account for this very
different level of industry performance.
15. Finally, as noted in footnote 75 of the Second Oral Statement, the Separate Views on Injury
specifically reference the second half of 1998 at pages I-38-41, I-43-44, and I-46. The quotations are
numerous. The ITC Report is littered with these citations specifically because the period identified
for threat of injury was the period beginning in the second half of 1998.

5 See Argentina – Safeguard Measures on Imports of Footwear , Report of the Appellate Body,
WT/DS121/AB/R (14 December 1999) at para. 106.

16. We recall that the United States argued in the Second Substantive Meeting with the Parties
(“Second Substantive Meeting”) that all references to the condition of the US industry beginning in
the second half of 1998--in both the Majority and Separate Views--were solely in response to
arguments made by Respondents. As Korea noted in its reply, it is difficult to reconcile this
interpretation with the fact that the Majority specific ally included this analysis in their “findings” on
causation. Furthermore, the basis of the threat finding was conditions beginning in the second half of
1998.
17. Again, we sincerely apologize for any inconvenience that we may have caused the Panel, and
we thank the Panel for the opportunity to make corrections.
Q3. During the ITC’s investigation, did the Korean respondents ask the ITC to compare the
volume of imports in the first half of 1999 against the volume of imports in the second half of
1998?
Reply
18. First of all, Korean respondents argued throughout the ITC proceeding that the most recent
period demonstrated a decline in imports. 6 However, until the Japanese arctic-grade imports were
excluded in the final decision of the ITC, the import trends did not show an absolute decline
commencing in the last half of 1998 (only in the first half of 1999). (This is the reason that public and
confidential data trends do not match.) Therefore, this issue arose late in the proceeding.
Nonetheless, the Respondents did argue that imports declined at the end of the period and
Respondents argued for the exclusion of arctic pipe.
19. Second, the US legal standard for increased imports would not take into account a decline in
the latter half of 1998 since under the US legal standard, a “simple increase” over the 5-year
investigation period is sufficient. Moreover, as the United States repeatedly states, the ITC does not
evaluate second-half 1998 data as distinguished from first-half data for purposes of examining
increased imports. They only examine full-year data and compare interim period to interim period.
20. In this connection, we further note that, as the Appellate Body reasoned in US – Lamb Meat ,
“Arguments before national competent authorities may be influenced by . . . the requirements of the
national laws. . . .”
7 For this reason, “a WTO member is not confined merely to rehearsing
arguments that were made to the competent authorities.”8
21. The ITC has admitted throughout this proceeding that it does not consider such arguments as
relevant under US law and practice.
Q4. Regarding para. 73 of Korea’s rebuttal submission, would Korea accept that there was
an absolute increase in imports for the purpose of Article 2.1 if the “monthly import data”
regarding the end of interim 1999 did relate to subject merchandise? Please explain.

6 See Prehearing Brief of Japanese and Korean Respondents on Injury (27 September 1999) at 8, 52
(KOR-22) and Posthearing Brief on Injury of Japanese and Korean Respondents (7 October 1999) at 13, 40
(KOR-25).
7 United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from
New Zealand, Report of the Appellate Body, WT/DS177/AB/R (1 May 2001) (“ US – Lamb Meat ( AB)”) at
para. 113.
8 Id.

Reply
22. No. First of all, the United States did not consider this data in the increased imports analysis
it conducted.9 The only US analysis of May and June imports trends occurs at page I-29 of the ITC
Determination and relates to causation and whether imports were responding to demand conditions in
the oil and gas sector. Therefore, this data was not used to show increased imports. There also was
no method to demonstrate that “such” increased quantities as to cause serious injury under Article 2.1,
since clearly there was no injury during the period in question. As Commissioner Crawford observed,
domestic shipments increased sharply between the months of May and August 1999.
10
23. Finally, Korea notes that the United States never cites to the source of its conclusion that
Japan did not export any arctic-grade material during 1999. Korea questions why this data is not
confidential, and if it is not, why isn’t all the data on arctic-grade imports non-confidential as well?
At the Second Substantive Meeting, the United St ates explained that the fact that “no imports” of
arctic-grade material entered in the first half of 1999 is contained in a confidential letter which,
apparently, cannot be provided to the Panel or Korea and for which no public summary was ever
provided to the ITC.
24. The only party involved in this proceeding which has complete access to the confidential
record--and has the ability to pick and choose between what data to provide this Panel and how it can
be provided--is the United States. Put simply, if the United States is unwilling to put all data
concerning imports of arctic-grade line pipe on the record, then the selective reference to import
levels in one period of the investigation should be rejected.
25. Korea reiterates its concern that the disclosure of, or rather the refusal to disclose, confidential
record information can be a tactical decision by a party to limit the scope and nature of the Panel’s
findings regarding errors. It is for this reason that Korea believes that the United States should
resolve its chronic “systemic issue” concerning the treatment of confidential information. The
United States has yet to satisfactorily explain why WTO Panels should be treated differently from US
courts or NAFTA Panels with respect to access to confidential information. The full and complete
record should be reviewable by WTO Panels just as it is reviewable by these other bodies.

9 Circular Welded Carbon-Quality Line Pipe , USITC Pub. 3261, Inv. No. TA-201-70
(December 1999) (“ITC Determination ”) at I-1-6 (KOR-6); ITC Determination , Views on Injury of Chairman
Lynn M. Bragg, Vice Chairman Marcia E. Miller, and Commissioners Jennifer A. Hillman, Stephen Koplan,
and Thelma J. Askey at I-7-15 (KOR-6).
10 ITC Determination, Crawford Dissenting Views on Injury and Addendum at I-65, n. 44 (KOR-6).

ANNEX B-8
UNITED STATES ANSWERS TO QUESTIONS
FROM THE PANEL AT THE SECOND
MEETING WITH THE PARTIES
(15 June 2001)
I. BOTH PARTIES
A. EXCLUSION OF CANADA AND MEXICO
Q1. Are safeguard measures taken under GATT Article XIX and the Safeguards Agreement
"duties" or "other restrictive regulations of commerce" within the meaning of GATT
Article XXIV:8(b)? Please explain.
Reply
1. Safeguard measures can be restrictive regulations of commerce. A safeguard measure can
take multiple forms. If the safeguard measure is a tariff or tariff-rate quota, it is a “duty”. If the
safeguard measure is a quantitative restriction, it is an “other restrictive regulation of commerce.”
2. A safeguard measure need not be a duty or a restrictive regulation of commerce. While this is
not an issue in this dispute, Article 5.1 of the WTO Agreement on Safeguards (“Safeguards
Agreement” or “SGA”) does not limit safeguard measures to duties (including tariff-rate quotas
(“TRQs”)) and quantitative restrictions. SGA Article 1 defines safeguard measures as “those
measures provided for in Article XIX of GATT 1994.” 1 Article XIX:1(a), in turn, authorizes a
Member “to suspend the obligation in whole or in part or to withdraw or modify the concession”.
Thus, a Member that satisfied the prerequisites for imposition of a safeguard measure could suspend
any obligation or withdraw any concession. For example, it could impose an internal tax that would
otherwise be inconsistent with Article III:2.
B. NATURE OF THE MEASURE /ARTICLE XIII
Q2. (a) Article XIII:5 provides:
2
The provisions of this Article shall apply to any tariff quota instituted or maintained by
any [Member], and, in so far as applicable, the principles of this Article shall also extend
to export restrictions.

1 Unless indicated otherwise, references to Ar ticles numbered with Roman numerals are to GATT
1994, while references to Articles with Arabic numerals are to the Safeguards Agreement.
2 For clarity, we have divided this question and our response into two subsections.

What, in your opinion, is the basis for the distinction between (1) "apply[ing] the
"provisions" of Article XIII to tariff quotas, and (2) "extend[ing]" the "principles" of
Article XIII to export restrictions?
Reply
3. The distinction arises from the nature of the provisions in question. Paragraphs 2, 3, and 4 of
Article XIII address “import restrictions” and “impor t licences . . . issued in connection with import
restrictions.” Since a TRQ is a form of import restriction, those provisions can “apply” directly to
TRQs by, for example, determining how to fix the overall amount subject to a lower tariff rate and
allocating that amount among supplying countries.
4. However, since paragraphs 2, 3, and 4 by their terms refer to “import restrictions” or “import
licences,” they cannot “apply” directly to “export re strictions,” which fall into an entirely different
class of measures. In addition, the provisions of paragraph 2(d) dealing with Members who have a
substantial interest in supplying the product to the imposing Member could not “apply” to an export
restriction. Therefore, only the “principles” of these paragraphs, and not their literal obligations, can
be “extended” to export restrictions, and then only so far as “applicable” – for example, if the
restriction took the form of an export quota allocated among consuming Members.
(b) Does the fact that Article XIII:5 does not state that the provisions of Article XIII
"shall apply" to "export restrictions" suggest that such provisions already apply
to "export restrictions"?
Reply
5. No, just the contrary. The fact that Article XIII:5 states that only the “principles” of
Article XIII shall be extended “so far as applicable” indicates that, except as specifically provided, all
of the provisions of Article XIII do not apply directly to export restrictions. Article XIII:1 is one such
specific provision. It explicitly refers to export restrictions and, therefore, applies to them.
Article XIII:5 does not change this conclusion. In contrast, as we noted above, the paragraphs 2, 3,
and 4 of Article XIII “apply” only to import restrictions and, therefore, not to export restrictions.
Furthermore, if these provisions could somehow be interpreted to “apply” directly to export
restrictions, their “principles” would already “extend” to export restrictions, and the export restriction
language in Article XIII:5 would become superfluous. In accordance with the principle of
effectiveness in treaty interpretation, the Panel should accordingly avoid the interpretation suggested
in this segment of the question.
3
Q3. Are all quantitative restrictions quotas? If not, what is the difference between a
quantitative restriction and a quota? Please explain. Are all tariff quotas quotas? Please
explain.
Reply
6. No. Article XI:1 indicates that quantitative restrictions may take the form of import licensing
or “other measures”. “Quantitative restriction” is a general term covering any measure that restricts
the quantity of imports into or exports from a country. “Quota” is a subset of the class of quantitative
restrictions, one that specifies the maximum quantity of imports into or exports from a country.

3 Argentina – Safeguard Measures on Imports of Footwear , WT/DS121/AB/R, 14 December 1999,
para. 88, n. 76 (“An interpreter is not free to adopt a reading that would result in reducing whole clauses or
paragraphs of a treaty to redundancy or inutility”).

7. Tariff quotas are never quotas. They are contingent tariffs, with different rates applicable
depending on the total amount of imports during a specified period. They are not the only form of
contingent tariffs. Some members impose seasonal tariffs, with the rates differing depending on the
date of entry of imported goods.
C. ARTICLE 5
Q4. At paras. 53 – 57 of its rebuttal submis sion, Korea claims that the US violated
Articles 3.1 and 4.2(c) of the Safeguards Agreement by failing to demonstrate that the Line Pipe
measure was in conformity with the requirements of Article 5.1. Is this Article 3.1 / 4.2(c) claim
within the Panel’s terms of reference? Please explain.
Reply
8. No, it is not. Korea’s request for the establishment of a panel (WT/DS202/4) does not make
this claim. The only references to Articles 3 or 4 appear in paragraphs 1, 2, 7, and 9 of that request,
which do not provide a basis for the claim in question
· Para. 1 deals with alleged flaws in the investigation regarding increased imports,
injury, threat of injury and causation. It does not claim that these flaws exist with
regard to the US application of Article 5.1.
· Para. 2 deals with issues of “emergency action” and “unforeseen developments”.
These issues are not relevant to the requirements of Article 5.1.
· Para. 7 claims that the United States acted improperly in excluding Canada and
Mexico from application of the safeguard measure. This is a substantive claim, and
does not reach the procedural question of whether the United States failed to
demonstrate conformity with Article 5.1 at the time it applied the measure.
· Para. 9 deals with access to confidential information and the sufficiency of public
summaries. It does not refer to the requirements of Article 5.
9. At the meeting with the Panel, Korea suggested that paragraph 3 of its request constituted the
basis for a claim that the United States violated Articles 3.1 and 4.2(c) of the Safeguards Agreement
by failing to demonstrate that the Line Pipe measure conformed with the requirements of Article 5.1.
However, in its first written submission, Korea did not raise this issue as a claim under Articles 3.1 or
4.2(c). Instead, it based its claim that the United States “did not provide the required explanation” of
the safeguard measure on Article 5 of the Safeguards Agreement.
4
10. Korea itself has recognized that its claims under Article 5 do not encompass inconsistencies
with Articles 3.1 and 4.2(c). Its second written submission states:
Whether or not Article 5.1 requires an explicit finding or holding regarding the
necessity of the measure under Article 5.1, Article 3.1 of the SA imposes an
independent obligation that the investigation itself and the findings and conclusions
of the competent authorities resulting from such investigation must demonstrate that
the legal and factual basis for the measure.5

4 First Submission of the Republic of Korea, paras. 147-151.
5 Written Rebuttal of the Republic of Korea, para. 53 (emphasis added).

That is exactly the point. Whatever obligations arise under Articles 3.1 and 4.2(c), they are
independent of Article 5 and, therefore, a claim under Article 5 in a party’s panel request does not
equate with a claim under Articles 3.1 or 4.2(c).6
11. On a related matter, questions arose at the second panel meeting as to whether Article 5.1
imposes an ongoing requirement for a Member to ensure that a measure was not applied beyond the
extent necessary. The United States explained why this is not a valid interpretation of the Agreement.
We would note further that Korea phrased both of its claims under Article 5 in the past tense, and
addressed only the terms under which the United States imposed the measure. Therefore, any claim
that actions or events subsequent to the imposition of the safeguard measure demonstrate an
inconsistency with the WTO Agreement is outside the Panel’s terms of reference.
II. KOREA
A. EXCLUSION OF CANADA AND MEXICO
Q1. At note 21 of its first oral statement, Korea states that "NAFTA is not in compliance
with Article XXIV:8 of the GATT 1994". Please explain precisely why, in Korea's view,
NAFTA is not "in compliance with" GATT Article XXIV:8.
Reply
12. The United States addresses this issue in its response to question 2 of section III.
B. INCREASED IMPORTS
Q2. At para. 62 of its rebuttal submission, Korea asserts that "the ITC itself looked at 1998
as two six-month periods with very distinct trends for purposes of its injury decision". In
support, Korea cites (in note 69) certain parts of the ITC Determination, Majority Views on
Injury. Please indicate precisely, by quoting the relevant text, which parts of the ITC
Determination Korea is referring to.
Reply
13. At the second panel meeting Korea corrected the citations in footnote 69 of its rebuttal
submission, and stated that the US ITC looked at 1998 as two six month periods at three points in its
opinion: at pages I-19, I-22 and I-28.
14. The United States notes that the USITC was not examining 1998 as two six-month periods (as
Korea asserts) at any of these three points in its opinion. Korea has merely identified the only three
times in the determination that the Commissioners finding serious injury referred to either of those
six-month periods for any purpose whatsoever. On page I-19 of the USITC Report, the USITC was

6 We note that Korea took this same position in Korea – Dairy:
Article 4.2(c) states that the competent authority must publish, in accordance with the
provisions of Article 3, a detailed analysis of the case under investigation, as well as a
demonstration of the relevance of the factors examine. Article 5, however, contains no similar
provision. The drafters must have intended to exclude the requirement to give a reasoned
explanation, and such intention must be given effect.
Korea – Definitive Safeguard Measure on Imports of Certain Dairy Products , WT/DS98/AB/R,
14 December 1999, para. 20.

explaining why the financial performance of the domestic industry was much stronger in interim 1998
than in full year 1998 – that is, because the financial performance declined sharply in the second half
of 1998. On page I-22 the USITC was responding to arguments raised by respondents, which were
couched in terms of developments in the second half of 1998. On page I-28 the USITC merely
referred to “the second half of 1998 and the first half of 1999" to pinpoint when the financial
performance of the domestic industry declined; the USITC was not analyzing 1998 in two separate
six-month periods. The USITC Co mmissioners who found serious injury were not comparing the
second half of 1998 with either the first half of 1998 or the first half of 1999, as Korea repeatedly
asserts. Rather, these Commissioners were discussing a continuous period beginning in mid -1998,
during which the condition of the domestic industry was in decline.
15. The Commissioners finding threat of serious injury also were not comparing the second half
of 1998 with either the first half of 1998 or the first half of 1999. Rather, the references cited by
Korea at the second Panel meeting
7 show that these Commissioners also examined a continuous
period from 1994 through mid-1999, and, based on this examination, found dramatic increases in
imports and a precipitous worsening of the industry’s financial condition beginning in mid-1998 and
extending through interim 1999.
16. The USITC, following its standard procedure, collected and examined data on the basis of full
years and comparable interim periods – and not for the first and second halves of 1998. This is clear
from a review of the overall discussion of the serious injury factors in the USITC Report, and from an
examination of virtually every table with numerical data in the entire USITC Report.
Q3. During the ITC's investigation, did the Korean respondents ask the ITC to compare the
volume of imports in the first half of 1999 against the volume of imports in the second half of
1998?
Reply
17. Korea conceded at the second panel meeting that it did not ask the ITC to compare the
volume of imports in the first half of 1999 against the volume of imports in the second half of 1998.
The United States notes that the Korean respond ents compared imports in interim 1999 with imports
in interim 1998 when they discussed the issue of increased imports in their briefs to the USITC.8
Q4. Regarding para. 73 of Korea's rebuttal submission, would Korea accept that there was
an absolute increase in imports for the purpose of Article 2.1 if the "monthly import data"
regarding the end of interim 1999 did relate to subject merchandise? Please explain.
Reply
18. The United States has no comment on this question.

7 USITC Report, pp. I-38-41, I-43-44, and I-46.
8 E.g., Prehearing Brief of the Japanese and Korean Respondents, p. 8 (attached as US
Exhibit 31).

III. UNITED STATES
A. ARTICLE 5
Q1. Please explain exactly how the United States ensured, at the time of application, that the
Line Pipe measure would be commensurate with the goals of preventing or remedying serious
injury and of facilitating adjustment? Please provide any supporting documentation.
Reply
19. As a preliminary matter, the United States notes that the word “commensurate” does not
appear in the text of Article 5.1, but instead derives from the Appellate Body’s description in Korea –
Dairy of the obligations under that Article. That description may be useful in evaluating compliance
with Article 5.1, but it is the text of the Agreement and not subsequent glosses in panel or Appellate
Body reports, that define the obligations of the Members.
20. We also note that Article 5.1 obligates Members to “apply safeguard measures only to the
extent necessary to prevent or remedy serious injury and to facilitate adjustment”. Thus, it is the
extent of the application of the measure – its duration, level, and other attributes – and not the
measure itself, that determines conformity with Article 5.1.
21. Proclamation 7274 of 18 February 2000 states that the President imposed the line pipe
safeguard “after taking into account the considerations specified in section 203(a)(2). Those include
“the recommendation and report of the Commission,” “the probable effectiveness of the actions . . . to
facilitate positive adjustment to import competition,” and “the form and amount of action . . . that
would prevent or remedy the injury or threat thereof.” 9 The memorandum issued in tandem with
Proclamation 7274 repeats this statement, and states further that the President took the safeguard
measure “in order to facilitate efforts by the domestic industry to make a positive adjustment to
import competition.” Thus, the President considered each of the criteria listed in Article 5.1.
10
22. Under the cited statutory provisions, the President takes into account several additional
considerations, including the short- and long-term economic and social costs of any safeguard
measure, the national economic interest of the United States, and national security interests. All of
these considerations could lead to a decision to apply a measure less than the extent necessary to
prevent or remedy serious injury and to facilitate adjustment. Through the President’s consideration
of all of these factors, the United States ensured that the line pipe safeguard would comply with the
requirements of Article 5.1.
23. As stated in our earlier submissions, ther e is no other documentation demonstrating how, at
the time it applied the line pipe safeguard, the United States ensured its compliance with the
obligations of Article 5.1. Nor, as we have demonstrated in previous submissions, was there any
requirement to produce such documentation.
B. EXCLUSION OF CANADA/MEXICO
Q2. The United States asserts that "to the extent that Articles I, XIII, or XIX can be
interpreted to contemplate the application of safeguard measures from all sources,

9 See section 203(a)(2)(A), (D), and (J) of the Trade Act of 1974, which include a cross-reference to
section 202(e)(5)(i).
10 We also note, that section 203(e)(2) of the Trade Act requires that a tariff, TRQ, or quota imposed as
a safeguard measure “may be taken . . . only to the extent the cumulative impact of such action does not exceed
the amount necessary to prevent or remedy the serious injury”.

Article XXIV creates a limited exception" (para, 217, US first written submission). What are
the conditions governing the application of the alleged "limited exception"? Please explain how
the United States complied with those conditions in respect of the Line Pipe measure.
Reply
24. The conditions are those laid out in Article XXIV:
(1) The party applying the exception and the party subject to exception must be parties to
an FTA that satisfies the Article XXIV:8 definition of an FTA, and
(2) The exclusion from safeguard measures must have been implemented as part of the
elimination of duties and restrictive regulations of trade among the FTA parties.
The United States complied with these conditions in this case by entering into an FTA with Canada
and Mexico that satisfies the definition under of Article XXIV:8. As part of the package of trade
liberalizing measures under the North American Free Trade Agreement (“NAFTA”), the
United States undertook the obligation to exclude Canada and Mexico from safeguard measures under
certain pre-specified conditions. Since these conditions existed with regard to the line pipe safeguard,
the United States excluded Canada and Mexico.
25. The Panel also asked that the United States indicate the basis for its belief that NAFTA
complies with the requirements of Article XXIV. NAFTA provided for the elimination within ten
years of all duties on 97 per cent of the Parties’ tariff lines, representing more than 99 per cent of the
trade among them in terms of volume. This is the basis for our belief that, wherever the threshold
established under Article XXIV:8 for elimination of duties on substantially all trade, NAFTA exceeds
that threshold.
26. With regard to eliminating other restrictiv e regulations of commerce, NAFTA applies the
principles of national treatment, transparency, and a variety of other market access rules to trade
among the Parties. The NAFTA Parties also eliminated the application of global safeguard measures
among themselves under certain conditions. There is also no question of NAFTA raising barriers to
third countries, since none of the NAFTA Parties increased tariffs on trade with non-NAFTA
measures. The NAFTA Parties also did not place other restrictive regulations of commerce on other
WTO Members upon formation of the FTA.
27. Further explanation of the US views on NAFTA and its compliance with Article XXIV
appear in the following documents: L/7176, WT/REG4/1 & Corr.1-2, WT/REG4/1/Add.1 & Corr.1,
WT/REG4/5, and WT/REG4/6/Add.1. Since these ar e voluminous materials, we will not append
them, but incorporate them into this submission by reference.
C. SERIOUS INJURY
Q3. Please comment on Korea's arguments regarding allegedly increased shipments
beginning April 1999 (Korea's first written submission, para. 255). If shipments were
increasing as of April 1999, how does the United States reconcile this increase with the ITC's
determination of serious injury or threat thereof?
Reply
28. Korea states in paragraph 255 of its first written submission that shipments “began recovering
strongly beginning in April 1999”. We do not agree with this characterization. Although shipments
did increase in the months following the first quarter of 1999, average monthly shipments in the

period April through August 1999 (the months following the first quarter for which data was provided
in memorandum OINV-W-247) remained lower than in any prior year of the period investigated
except 1994.11
29. Almost all indicia of the domestic industry’s c ondition deteriorated sharply beginning in 1998
and continuing into interim 1999. The mere fact that shipments were increasing as of April 1999 does
not negate the extensive evidence of serious injury or threat thereof that continued into 1999 and that
is evident by the comparison of interim 1999 with the comparable period of 1998. And, as noted
above, the increased monthly shipment levels did not reach monthly levels of previous years, except
1994. Furthermore, imports also increased after the first quarter of 1999. 12 The United States does
not perceive any inconsistency that would require reconciliation.
30. Korea asserted at the second panel meeting that all other indicia of an industry’s health flow
from shipments. The United States does not agree with this assertion. There is nothing in the
Safeguards Agreement that confers primacy on shipments as an indicator of an industry’s health.
Clearly, increased shipments do not in-and-of-themselves translate into improved financial
performance for the domestic industry. For example, shipment levels could increase merely because
firms are disposing of excess inventories. Or, imports may also increase -- as they did here – and thus
maintain their growing market share and have injurious price effects that harm the domestic industry
regardless of the volume of sales.
Q4. At para. 35 of its rebuttal submission, the US refers to certain data regarding shipment
levels. According to the US, these shipment levels "are only approximate, because the shipment
data in the USITC memorandum are presented in the form of bar charts, and not precise
monthly numbers". Please provide the precise nu mbers used to prepare the bar charts in the
relevant USITC memorandum.
Reply
31. These numbers are provided in US Exhibit -3, USITC Memorandum INV-W-247, on the last
two pages, in charts entitled “Net Shipments of welded OCTG products by AISI reporting companies,
by month, 1994-1999" and “Net Shipments of weld ed line pipe, 16 inches and under, by AISI
reporting companies, 1994-1999, by month".
Q5. At para. 38 of its rebuttal submission, the US asserts that the "statement [at page II-26
of the USITC Report regarding collective opera ting leverage] is not associated with the
performance of other pipe products". If that is the case, what is that statement associated with?
Furthermore, why does the relevant section of the Staff Report begin with the observation that
"[i]n addition to welded line pipe, producers manufacture and sell other products"? What is
the basis on which the USITC Report found "the presence of some form of collective operating
leverage"?
Reply
32. As we explained in para. 98 of our first written submission, “operating leverage” refers to the
ability of a firm to increase profitability by an amount that is more than proportionate to the increase
in sales volume. This is achieved by spreading fixed costs over a larger volume of products.

11 See OINV-W-247, table entitled “Net Shipments of welded line pipe, 16 inches and under, by AISI
reporting companies, by month, 1994-1999" (US Exhibit -3).
12 Id.

33. “Collective operating leverage” refers to the combined pattern of change in profitability
reported by US line pipe producers. It is “collective” in that it reflects the operating leverages of all
of the line pipe facilities that comprise the US line pipe industry. The statement on page II-26 of the
Report was based solely on the observation that line pipe profitability in 1997 increased at a faster rate
than the increase in sales of line pipe. The Report also noted that in 1998, line pipe profitability
declined at a faster rate than the decline in sale s revenues; that is, operating leverage works in both
directions. The term “collective” was chosen because, while costs structures are unique to each
company, when combined the financial results indicate that operating leverage was present. Using the
term “collective” also was intended to indicate to the reader that, individually, the level of operating
leverage would differ from company to company.
34. The Panel asks why the relevant section of the Report begins with the observation (on p. II-25
of the Report) that line pipe producers make other pipe products (in the same facilities where line pipe
is produced). This observation that companies generally produced other products was intended to
provide additional background. The subsequent narrative and financial tables referred exclusively to
line pipe. The statement regarding collective operating leverage (at the end of the section) was
referring specifically to line pipe, not to line pipe and other products produced in the same facilities.
This is clear if one considers the text of the Report on p. II-26 that immediately follows the reference
to “collective operating leverage.” The remainder of that paragraph gives examples of collective
operating leverage, which are taken exclusively from the financial data in Table 9 on p. II-27, which is
limited to the results of operations on welded line pipe.
35. With regard to the last part of the Panel’s question, the statement regarding “collective
operating leverage” was based on the observation that line pipe profitability increased and decreased
more than proportionately as compared to changes in revenue. The presence of operating leverage is
clearly demonstrated by this pattern and is not contingent, or even related to, the initial observation
that other products are produced in the same facilities.
Q6. Why did the ITC "specifically address[] Korea's arguments that low production
quantities and sales of OCTG distorted the profitability data on the line pipe industry" by
checking allocation methodologies, if "Korea's argument with respect to the domestic industry's
profitability data rests entirely on a faulty pr emise"? Why didn't the ITC specifically address
Korea's arguments by pointing out this faulty premise, rather than referring to allocation
methodologies?
Reply
36. The discussion of allocation methodologies in the USITC Report and the observation in the
US written submission that Korea relied on a faulty premise were responses to two different, albeit
related, assertions. In paragraph 95 of our first written submission, we were addressing the USITC’s
consideration of arguments raised by the Korean respondents to the USITC during the injury
investigation. Those respondents had argued that “factory overhead and SG&A were allocated based
on declining production for all products, including OCTG and seamless,” and that “these increased
allocated costs have reduced the profits for the welded pipe industry”. Respondents cautioned that
“the difficulties resulting from declining production of other products, however, must not be attributed
to the declines in welded pipe production”.
13 The USITC considered this argument and explained
that it was not misattributing difficulties resulting from production of other products, since the
increases in per-unit allocated overhead and SG&A resulting from declines in the production of other
products were not mistakenly or disproportionately attributed to line pipe.14

13 Japanese and Korean respondents’ prehearing brief, dated September 24, 1999, at 49 (US
Exhibit 31).
14 USITC Report, p. I-31.

37. In paragraph 96 of our first written submission, we were addressing a related argument made
by Korea raised in this dispute . That is, Korea has argued to the Panel that OTGC shipments fell
disproportionately to shipments of line pipe and therefore that a disproportionate share of fixed costs
were attributed to line pipe. In support of this statement, Korea relied solely on a statement by
Commissioner Crawford in her dissenting views, which, as we demonstrated in our written
submission, misread AISI data presented in USITC staff memorandum INV-W-247 (US Exhibit -3).
In fact, those data showed the line pipe and OCTG shipments declined at similar times and to similar
degrees. Therefore, Korea’s argument that a disportionate share of costs was attributed to line pipe
was based on the faulty premise that OCTG shipments fell disproportionately to line pipe shipments.
Q7. Were Geneva Steel's line pipe production facilities also used to produce non-pipe
products? Please explain.
Reply
38. There is no information on the record which directly addresses this question. However, the
record suggests that most, if not all, of Geneva’s line pipe production facilities were not used to
produce non-pipe products.
39. A Geneva Steel executive testified at the USITC injury hearing that the company has three
main finished products: cut-to-length plate, hot-rolled sheet, and line pipe. Geneva does not produce
any tubular products other than line pipe. The USITC Report (at p. II-7) describes the manufacturing
process for welded line pipe. Most of the manufacturing equipment described (the tube mill, welding
equipment, a tool to remove the outside flash resulting from the pressure during welding, and sizing
rolls to shape the tube to accurate diameters) would appear to be used only for line pipe production.
The only equipment which might theoretically have been used by Geneva to produce its other
products are the cutting tools and heat treatment machinery.
Q8. What impact did the charge booked for the closure of Geneva Steel's blast furnace have
on industry operating income, both in absolute terms and relative to net sales? What would
industry operating income have been without that charge?
Reply
40. We are not aware that Geneva Steel booked a charge for the temporary closure of its blast
furnace, or when any such charge might even have been booked (we note that the blast furnace was
closed between December 1998 and September 1999). There is no reference in Commissioner
Crawford’s discussion of this issue in her dissenting views (p. I-63 of the Report) to any such charge,
or to any effect that it might have had on the industry’s operating income. Commissioner Crawford
merely referenced “the negative effects that these actions [that is, the closure of the blast furnace and
Geneva’s bankruptcy] have had on the company’s cost structure,” but she did not specify or even
provide a footnote in her dissenting views indicating what, if any, these ‘effects” might have been.
Q9. Did the ITC confirm or verify the Geneva St eel executive's oral testimony regarding the
importance of Geneva Steel's line pipe operations from an overall margin perspective, and the
50 per cent decrease in line pipe sales between 1997 and 1998? Did the Geneva Steel executive
provide any evidence/documentation in support of that testimony? How much of Geneva Steel's
hot-rolled steel production was used to make line pipe?

Reply
41. We note that the Geneva executive, like all witnesses at USITC hearing, testified under oath.
US law provides for criminal penalties for those who testify untruthfully in these circumstances, and
witnesses before the ITC are made aware of these penalties. We are not aware that the Geneva
executive provided documentation to support his testimony. Witnesses are not required to do so; as
we have noted they testify to the ITC under oath. Information on how much of Geneva Steel's
hot-rolled steel production was used to make line pipe is not in the record.
D. UNFORESEEN DEVELOPMENTS
Q10. In US - Lamb Meat, the Appellate Body found that "as the existence of unforeseen
developments is a prerequisite that must be de monstrated, as we have stated, 'in order for a
safeguard measure to be applied' consistently with Article XIX of the GATT 1994, it follows
that this demonstration must be made before the safeguard measure is applied." Please indicate
where the United States made the required demonstration of unforeseen developments. Please
provide any supporting documentation, and give specific references.
Reply
42. As the United States pointed out in its first written statement, Korea has conceded that certain
conditions leading up to the increase in imports were unexpected. (para. 230) Therefore, it has not
made a prima facie case of action inconsistent with the unforeseen developments text in Article XIX.
Under Japan – Varietals, a panel is not permitted to construct a claim that Korea has failed to make.
15
E. THE NATURE OF THE MEASURE /GATT ARTICLE XIII
Q11. With reference to para. 204 of the United States' first written submission, does the
United States consider that GATT Article XIII does not "relate to" the application of safeguard
measures? Please explain.
Reply
43. The question refers to the US quotation of language from Argentina – Footwear, in which the
Appellate Body found that Article XIX “relate[s] to the same thing” as the Safeguards Agreement,
“namely application by Members of safeguard measures”. The Appellate Body based this conclusion
on the numerous references to Article XIX in the Safeguards Agreement. There are no such
references to Article XIII. Moreover, as we have pointed out, the Safeguards Agreement adopts
certain provisions of Article XIII, but not the others. Therefore, the remaining provisions of
Article XIII do not “relate to” application of a safeguard measure in the sense used by the Appellate
Body in Argentina – Footwear.
44. The Panel asked whether, in light of this view, the United States considers that the last
sentence of Article XIII:2(d) applies to safeguard measures. That sentence states that
No conditions or formalities shall be imposed which would prevent any contracting
party from utilizing fully the share of any such total quantity or value which has been

15 Japan – Measures Affecting Agricultural Products , WT/DS76/AB/R, para. 129 (“[P]anels have a
significant investigative authority. However, this authority cannot be used by a panel to rule in favour of a
complaining party which has not established a prima facie case of inconsistency based on specific legal claims
asserted by it”.).

allotted to it, subject to importation being made within any prescribed period to which
the quota may relate.
This sentence was not incorporated into Article 5.2(a) of the Safeguards Agreement, even though the
preceding two sentences of Article XIII:2(d) were incorporated verbatim.
45. In accordance with our analysis of the other provisions of Article XIII, the fact that the
Safeguards Agreement incorporates the first two sentences of Article XIII:2(d), but not the last
sentence, indicates that the last sentence does not apply to safeguard measures. However, the
omission of that sentence does not leave Members free to prevent other Members from fully using
their share of a safeguard quota. If a Member imposes a safeguard quota and applies it at a level
necessary to prevent or remedy serious injury and to facilitate adjustment, any additional conditions or
formalities it applies to limit the use of the quota would likely result in application of the measure
beyond the extent necessary. Therefore, a measure prohibited by the last sentence of Article XIII:2(d)
would likely also be prohibited by Article 5.1.
46. Although it is always hazardous to attempt to ascertain the intent of the negotiators from the
written text, this analysis suggests that the last sentence of Article XIII:2(d) may have been excluded
from Article 5.2(a) because it was redundant. With Article 5.1 already prohibiting application of a
safeguard measure beyond the extent necessary, there is no need for an additional prohibition on the
application of conditions or formalities that would prevent full use of the quota.
Q12. At para. 193 of its first written submissi on, the United States submits that "[i]f TRQs
were by their very nature 'quantitative restrict ions' or 'quotas,' the tariff quota language in
Article XIII would be superfluous". Does the United States consider that "export restrictions"
within the meaning of GATT Article XIII:5 are "prohibition[s] or restriction[s] … on the
exportation of any product" within the meaning of Article XIII:1? Please explain. If they are,
is the reference to "export restrictions" in Article XIII:5 superfluous? Please explain.
Reply
47. Yes, export restrictions are prohibitions or restrictions on the exportation of a product within
the meaning of Art. XIII:1. However, the reference to “export restrictions” in Article XIII:5 is not
superfluous. Article XIII contains other provisions in addition to paragraph 1. Paragraphs 2, 3, and 4
by their terms apply only to import restrictions. Thus, the reference in paragraph 5 to “export
restrictions” was necessary if the “principles” of these additional paragraphs were to “extend” to
export restrictions. We refer the Panel to our answers to questions 2 (a) and (b) for further discussion
of this issue.
IV. ADDITIONAL QUESTIONS POSED ORALLY BY THE PANEL AT THE SECOND
SUBSTANTIVE MEETING
The Panel asked for confirmation of whet her the Japanese respondents indicated that
there were no exports of Arctic-grade line pipe to the United States in interim 1999.
48. As explained at the Panel’s second meeting, the Japanese respondents were asked to provide
information concerning exports of Arctic-grade and alloy line pipe during the USITC’s period of
investigation. These respondents provided information on exports of alloy line pipe in 1999, but did
not provide information on exports of Arctic-grade line pipe. From this, it can be inferred that there
were no exports of Arctic-grade line pipe from Japan in 1999. We regret that we are unable to
provide the Panel with the letter confirming this information because counsel for the Japanese
respondents designated it as business confidential. It was provided at the request of the USITC staff
and was treated as a supplement to the Japanese producers’ questionnaire responses, as it provided

additional data of the type collected in questionnaire responses. Thus, a public version of the letter
was not filed with the USITC.
The Panel asked how the USITC instructed US line pipe producers to report their
production capacity.
49. A blank copy of the USITC’s questionnaire to US line pipe producers is attached as US
Exhibit - 32. The producers were asked (on p. 6, Question II-10) to report their “average production
capability” for each full year of the period investig ated and for the two interim periods. “Average
production capability” is defined (on p. 6 of the General Information section of the questionnaire).
The producers were asked (on p. 4, Question II-4) whether they produced other products using the
same equipment and machinery used to produce line pipe; and, if so, to explain their basis for
allocating capacity data.
The Panel asked whether the USITC questionnaires were sent to purchasers of line pipe
before the issue of the extent to which dual-stenciled line pipe from Korea was sold for standard
pipe applications was raised. The Panel also asked how the USITC identified purchasers who
were to receive questionnaires. Finally, the Panel asked whether these purchasers were
distributors or end-users of line pipe.
50. It is correct that the USITC sent questionnaires to purchasers of line pipe well before the
“dual-stenciled” issue was raised. The petition leading to the USITC’s investigation was filed on
30 June 1999. Questionnaires were sent to purchasers on 2 August 1999, with a request that
responses be submitted by 19 August 1999. The “dual-stenciled” issue appears first to have been
raised by Korean respondents on 24 September 1999, in their pre-hearing brief to the USITC.
51. Prior to sending out questionnaires, the USITC staff contacted petitioners and all known
importers. The USITC requested that petitioners collectively identify (through counsel) their top
25 customers and that each known importer identify its top ten customers. The USITC sent purchaser
questionnaires to each purchaser as identified. As is standard in most investigations, the producer and
importer questionnaires also asked these firms to identify their top customers. In this investigation,
USITC staff reviewed the responses to those questions to confirm its previous identification of the
main purchasers.
52. The USITC received responses from 40 identified purchasers of line pipe, 31 of which
reported purchasing since 1994 and therefore completed the purchaser questionnaire.
16 Of these 31
purchasers, 18 were distributors, 12 were end users, and one was both a distributor and an end user.
The Panel asked whether in paragraphs 31-34 of its oral statement, the USITC is
referring to the Commissioners who found serious injury or those who found threat?
53. The analysis presented in paragraphs 31-34 represents the views of all the Commissioners
who issued affirmative determinations, regardless of whether the basis was serious injury or threat.
Those paragraphs respond to Korea’s summary assertion in paragraphs 108 and 109 of its second
written submission that the USITC had not responded to arguments Korea initially made in its first
written submission, concerning (i) the entry of two new producers in the industry and (ii) statements
by USITC Commissioners in their views on remedy to the effect that conditions in the oil and gas
industries were improving. Paragraph 34 of the oral statement refutes Korea’s challenge to the US
observation that announced attempts to increase prices are not the same as actual price increases.

16 USITC Report, p. II-48, n 111.

54. Korea originally raised these three arguments in reference only to the findings of the
Commissioners who found serious injury. 17 In its second oral statement, the United States refuted
Korea’s arguments as originally raised. However, the US statement on these issues applies equally to
the findings of the Commissioners who found threat.
55. With respect to the two new producers, our re ference to information contained in the USITC
staff report would have been considered by all Commissioners. The threat Commissioners as well as
the serious injury Commissioners found that capital investments in the line pipe industry involve
long-lead times. (Serious injury: Report at I-20, n.122; threat Commissioners at I-42.) Also, the
threat Commissioners recognized the added industrywide production capacity that resulted from the
addition of these producers; but they found that there was a significant decline in capacity utilization
irrespective of the added capacity.18
56. As to the price increase announcements, the threat Commissioners specifically noted that any
such price increases were to have taken effect contemporaneously with the imposition of antidumping
duties or effective dates of suspension agreements covering hot-rolled steel. They stated that they
were persuaded that, to the extent any such announced price increases may have “stuck” in the
marketplace, they are attributable in significant part to anticipated increases in raw material costs.
19
It is not clear whether the United Stat es considers the competent authorities’
determination to be one finding serious injury or one finding “serious injury or threat”.
57. As the United States explained in its first written submission (paragraphs 53, 56, 57), the
findings and conclusions of the five Commissioners who reached affirmative determination constitute
the determination of the competent authority under Article 4 that “increased imports have caused or
are threatening to cause serious injury to a domestic industry.” The determination is an affirmative
determination for the purposes of both US law and the WTO Safeguards Agreement. We previously
advised the Panel that the SGA only distinguishe s between threat and present injury for a single
narrow definitional purpose, that is not relevant here. There is no requirement under either SGA (or
US law) to characterize the determination as primarily present serious injury or primarily threat of
serious injury, as long as the Commissioners reaching an affirmative determination properly evaluated
the relevant Article 4.2 factors and explained their findings and reasoned conclusions in accordance
with Articles 3.1 and Articles 4.2(c).
The Panel asked for an explanation of how US law distinguishes between the
“determination of the Commission” and “separate views”.
58. The US safeguards statute requires the USITC to submit to the President a report of each
safeguards investigation undertaken “to determine whether an article is being imported into the
United States in such increased quantities as to be a substantial cause of serious injury, or the threat
thereof, to the domestic industry producing an article like or directly competitive with the imported
article.”
20 In order to meet the domestic law report requirements, the USITC’s reports contain much
more information than that which is required by the Safeguards Agreement. For example, the US
statute, but not the Safeguards Agreement, requires the USITC to include in its report the dissenting
views by members on the injury question. The statute, again in contrast to the Agreement, also
requires the USITC to include in the report its remedy recommendation and the separate views by any
members on remedy.

17 Korea’s first submission at paras. 250, 259, 261, 262.
18 USITC Report, p. I-40, n 21 (Views of Chairman Bragg and Commissioner Askey).
19 USITC Report, p. I-48, n 88 (Views of Chairman Bragg and Commissioner Askey).
20 Section 202(f) and, by reference , section 202(b)(1)(A) of the Trade Act of 1974, as amended, 19
U.S.C. §§ 2252 (b)(1)(A), (f) (US Exhibit -1).

59. Specifically, section 202(f)(2) of the US safeguards statute provides:
The Commission shall include in the report [to the President] the following:
(A) The determination made under subsection (b) [whether increased imports
are a substantial cause of serious injury or threat thereof to the domestic industry],
and an explanation of the basis for that determination.
(B) If the determination under subsection (b) is affirmative, the
recommendations for action made under subsection (e) and an explanation of the
basis for each recommendation.
(C) Any dissenting or separate views by members of the Commission
regarding the determination and any recommendation referred to in subparagraphs
(A) and (B).
(D) The findings required to be included in the report under subsection (c)(2)
[the results of the Commission’s examination of factors other than imports which
may be a cause of serious injury, or threat of serious injury, to the domestic industry].

21
60. Under subparagraph (A) of the US statute, th e USITC must include in the Report to the
President both “the determination” and “an explanation of the basis for that determination”. In all
USITC reports on safeguards investigations, the determination precedes the explanation, and the latter
is contained in the Views of the Commissioners who agreed with the determination. For example, in
the Line Pipe investigation, the determination is set out at pages I-3-I-5 of the USITC Report. The
determination states that the Commission, and specifically Chairman Bragg, Vice Chairman Miller,
and Commissioners Hillman, Koplan and Askey determined that line pipe is being imported into the
United States in such increased quantities as to be a substantial cause of serious injury or threat of
serious injury to the domestic industry producing a like or directly competitive article. In other
words, the determination indicates that thes e five Commissioners reached an affirmative
determination, which is the only determination made by the competent authorities. The required
findings and explanation of the basis for the affirmative determination (under both US law and
Article 3.1 of the Safeguards Agreement) are set out in the respective Views of those Commissioners
voting in the affirmative.
61. It appears that the mention in section 202(f)(2)(C) to “any dissenting or separate views by
members of the Commission regarding the determination and any recommendation referred to in
subparagraphs (A) and (B)” is intended to refe r to “any dissenting views by members of the
Commission regarding the determination referred to in subparagraph (A) [ i.e., the injury
determination]” and to “separate views by members of the Commission regarding any
recommendation referred to in subparagraph (B) [ i.e., recommendations for action].” This becomes
clear when subparagraph(f)(2)(C) is read in the context of subparagraph (e)(6), which states that–
Only those members of the Commission who agreed to the affirmative determination
under subsection (b) are eligible to vote on the recommendation . . . .Members of the
Commission who did not agree to the affirmative determination may submit, in the
report required under subsection (f), separate views regarding what action, if any,
should be taken under section 203. (Emphasis added)

21 The remaining items required to be included in the report to the President relate to the industry’s
adjustment plan and to the likely effects of the remedy action recommended by the Commission.

Thus, in referring to separate views, subparagraph (e)(6) cross-references to subparagraph (f)(2)(C).
These are the only two references in the statute to separate views. This suggests that separate views
as used in subparagraph (f)(2)(C) refers to views on remedy.
62. While the two commissioners who reache d their affirmative determination in Line Pipe on the
basis of threat of serious injury labeled their explanation as Separate Views, those views form part of
the basis for the USITC’s affirmative determination. 22 They are not “separate views” as that term is
used in Section 202(f)(2)(C). In fact, other related statutory provisions further demonstrate that the
findings and conclusions contained in the Views of Chairman Bragg and Commissioner Askey form
part of the basis for the USITC’s affirmative determination on the question of serious injury or threat
thereof.
63. Section 330 (d)(1) of the Tariff Act of 1930, as amended, provides that, if the commissioners
voting on the serious injury question in a safeguards investigation “are equally divided with respect to
that determination, then the determination agreed upon by either group of Commissioners may be
considered by the President as the determination of the Commission.” (Emphasis added). The use of
the terms “equally divided” and “either” demonstrat es that the law contemplates only two generic
types of determinations by the USITC–either an affirmative determination or a negative
determination. This is further emphasized by the incorporation of the possibilities of present serious
injury and threat of serious injury into one definition for the purposes of deciding whether the
USITC’s determination is affirmative or negative.23 When the vote is equally divided, the President is
not given the choice of which of the two determinations to act on, but rather he must choose which
group of Commissioners’ determination constitutes the determination of the Commission. Thus, in all
instances, including an equally split vote, US law provides for only one operative determination of the
competent authorities.