UNITED STATES – MEASURES AFFECTING IMPORTS OF CERTAIN PASSENGER VEHICLE AND LIGHT TRUCK TYRES FROM CHINA
Document: Report of the Appellate Body
Date: 5 September 2011
Document codes: WT/DS399/AB/R
Complainant: China
Respondent: U.S.
Third parties: EU, Japan, Taiwan, Turkey, Vietnam
Dispute stage: Appellate Body
Agreements cited: Art. 16.1, 16.3, 16.4, 16.6  Protocol of AccessionArt. I:1, II, XIX  GATT 1994  Safeguards

UNITED STATES – MEASURES AFFECTING IMPORTS OF CERTAIN
PASSENGER VEHICLE AND LIGHT TRUCK TYRES FROM CHINA

AB-2011-4

Report of the Appellate Body

APPELLATE BODY

China, Appellant
United States, Appellee

European Union, Third Participant
Japan, Third Participant
Separate Customs Territory of Taiwan, Penghu,
 Kinmen and Matsu, Third Participant
Turkey, Third Participant
Viet Nam, Third Participant

 AB-2011-4

 Present:

 Hillman, Presiding Member
 Oshima, Member
 Van den Bossche, Member

I. Introduction
1. China appeals certain issues of law and legal in terpretations developed in the Panel Report,
United States – Measures Affecting Imports of C ertain Passenger Vehicle and Light Truck Tyres from
China (the "Panel Report").
1 The Panel was established on 19 Ja nuary 2010 to consider a complaint
by China with respect to a safeguard measure im posed by the United States on imports of certain
passenger vehicle and light truck tyres from China.2
2. The measure was imposed as a product-specific safeguard under Section 16 of the Protocol on
the Accession of the People's Republic of China to the 3 (the "WTO")
("China's Accession Protocol" or the "Protocol" ) following an investigation conducted by the
United States International Trade Commission (the "USITC").

1, 13 December 2010.
2 In this Report, we use the term "subject tyres" to describe the tyres at issue in this
dispute, and which were the subject of the United St ates International Trade Commission (the "USITC")
investigation. More specifically, such tyres consist of "new pneumatic tires, of rubber, from China, of a kind
used on motor cars … and on-the-highway light trucks, vans, and sport utility vehicles, provided for in
subheadings 4011.10.10, 4011.10.50, 4011.20.10, and 4011.20.50 of the Harmonized Tariff Schedule of the
United States." (USITC, Certain Passenger Vehicle and Light Truck Tires from China , Investigation
No. TA-421-7, Publication 4085 (July 2009) (Panel Exhibit US-1) (the "USITC Report"), pp. 3-4)
3WT/L/432. The product-specific safeguard m echanism is implemented in US law through
Sections 421-423 of the United States Trade Act of 1974 (Public Law No. 93-618, 3 January 1975, 88 Stat.
1978, as amended (codified in United States Code, Title 19, section 2451, chapter 12), as amended), commonly
referred to as "Section 421" (added as Public Law No. 106-286, 10 October 2000, 114 Stat. 882 (codified in
United States Code, Title 19, section 2451)).

3. The safeguard investigation in this case was in itiated following receipt of a petition filed by
the United Steel, Paper and Forestry, Rubber, Manuf acturing, Energy, Allied Industrial and Service
Workers International Union on 20 April 2009. Th e petition alleged that certain passenger vehicle
and light truck tyres from China were being impo rted into the United States in such increased
quantities or under such conditions as to cause or threaten to cause market disruption to domestic
producers of like or directly competitive produc ts. The USITC initiated the investigation
on 24 April 2009. The USITC determined that there was market disruption as a result of rapidly
increasing imports of subject tyres from China that were a significant cause of material injury to the
domestic industry.
4 Following a decision by the President of the United States,
dated 11 September 2009, the United States imposed a safeguard measure on imports of subject tyres
in the form of additional import duties for a three-year period: 35% ad valorem in the first year;
30% ad valorem in the second year; and 25% ad valorem in the third year (the "tyres measure"). 5
The measure took effect on 26 September 2009.6
4. Before the Panel, China claimed that, in impos ing the tyres measure, the United States acted
inconsistently with Paragraphs 16.1, 16.3, 16.4, and 16.6 of China's Accession Protocol and
Articles I:1 and II:1(b) of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994").7
5. The Panel Report was circulated to Members of the WTO on 13 December 2010. The Panel
concluded that, in imposing the tyres measure, the United States did not act inconsistently with its
obligations under Section 16 of the Protocol and Articles I:1 and II:1(b) of the GATT 1994. 8 More
specifically, the Panel found that:

4See Panel Report, para. 2.2. More specifically, the USITC determined, on the basis of the information
obtained in the investigation, "that certain passenger vehicle and light truck tires from China are being imported
into the United States in such increased quantities or under such conditions as to cause market disruption to the
domestic producers of certain passenger vehicle and light truck tires." (USITC Report, p. 3) All six of the
USITC commissioners found that subject imports from China were "increasing rapidly" and that the US tyres
industry was "materially injured". ( Ibid., pp. 12, 18, and 45) However, two of the six USITC commissioners
found that market disruption did not exist, because subject imports from Ch ina were not a significant cause of
material injury to the domestic industry. ( Ibid., p. 45) These two commissioners submitted views dissenting
from the decision of the majority of USITC commissioners. The determination made by the USITC and the
views of the commissioners (the views of the majority as well as the dissenting views) are contained in Certain
Passenger Vehicle and Light Truck Tires from China , Investigation No. TA-421-7, USITC Publication 4085
(July 2009) (Panel Exhibit US-1), which we refer to in our discussion as the "USITC Report". The USITC
Report also includes a report containing the information and data gathered by the USITC staff in the
investigation (the "USITC staff report"). In our discussion, we use the term "USITC determination" to refer to
the collective of the determination of the USITC and the views of the majority of the USITC commissioners.
5Panel Report, para. 2.2.
6Panel Report, para. 2.2.
7Panel Report, paras. 3.1 and 3.2.
8Panel Report, para. 8.1.

– the USITC did not fail to evaluate properly whether imports from China met the specific
threshold under Paragraph 16.4 of China's Accession Protocol of "increasing rapidly"9;
– the US statute implementing the causation standard of Section 16 into US law (Section 421 of
the United States Trade Act of 1974 10) does not require the United States to establish
causation in a manner inconsistent with Section 16 of China's Accession Protocol11;
– the USITC did not fail to establish properly th at rapidly increasing imports from China were
"a significant cause" of material injury to the domestic industry12;
– China failed to establish that the tyres measur e exceeds "the extent necessary to prevent or
remedy" the market disruption caused by rapi dly increasing subject imports, contrary to
Paragraph 16.3 of China's Accession Protocol13; and
– China failed to establish that the tyres meas ure exceeds the period of time necessary to
prevent or remedy the market disruption, c ontrary to Paragraph 16.6 of China's Accession
Protocol.14
6. The Panel also rejected consequential clai ms by China that the United States acted
inconsistently with Articles I:1 and II:1(b) of the GATT 1994.15
7. In a communication dated 27 January 2011, China and the United States jointly requested the
Dispute Settlement Body (the "DSB") to agree to an extension of the 60-day period provided for in
Article 16.4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the
"DSU") for the adoption or appeal of the Panel Report until 24 May 2011. 16 At a meeting held on
7 February 2011, the DSB agreed that, upon request by China or the United States, it would adopt the
Panel Report no later than 24 May 2011, unless the DSB decided by consensus not to do so, or either
party to the dispute notified the DSB of its decision to appeal.17
8. On 24 May 2011, China notified the DSB of its intention to appeal certain issues of law
covered in the Panel Report and cer tain legal interpretations devel oped by the Panel, pursuant to

9Panel Report, para. 7.110.
10Supra, footnote 3 of this Report.
11Panel Report, para. 7.160.
12Panel Report, para. 7.379.
13Panel Report, para. 7.399.
14Panel Report, para. 7.415.
15Panel Report, para. 7.418.
16WT/DS399/5.
17WT/DSB/M/292.

Articles 16.4 and 17 of the DSU, and filed a Notice of Appeal
18 and an appellant's submission
pursuant to Rules 20 and 21, respectively, of the Working Procedures for Appellate Review (the
"Working Procedures").19 On 14 June 2011, the United States filed an appellee's submission. 20 On
the same day, the European Union and Japan each filed a third participant's submission 21, and the
Separate Customs Territory of Taiwan, Penghu, Ki nmen and Matsu, Turkey, and Viet Nam each
notified its intention to appear at the oral hearing as a third participant.22
9. The oral hearing in this appeal was held on 7 and 8 July 2011. The participants and one of the
third participants (the European Union) made oral statements. 23 The participants and third
participants responded to questions posed by the Members of the Division hearing the appeal.24
II. Arguments of the Participants and the Third Participants
A. Claims of Error by China – Appellant
10. China appeals the Panel's finding that the USIT C did not fail to evaluate properly whether
imports from China were "increasing rapidly" so as to be "a significant cause" of material injury to the
domestic industry within the meaning of Paragraphs 16.1 and 16.4 of China's Accession Protocol. In
particular, China claims that the Panel erred in its interpretation and applica tion of Paragraph 16.4 of
the Protocol in finding that the USITC properly established that imports from China met the
"increasing rapidly" threshold set fort h in that provision. China claims further that the Panel erred in
its interpretation and application of Paragraph 16.4 in affirming the USITC's determination that
rapidly increasing imports from China were "a signi ficant cause" of material injury to the domestic
industry within the meaning of that provision. Fina lly, China claims that the Panel, in reaching its
findings regarding the application of the term "a si gnificant cause", acted incons istently with its duty
to conduct an objective assessment of the matter as required under Article 11 of the DSU.

18WT/DS399/6 (attached as Annex I to this Report).
19WT/AB/WP/6, 16 August 2010.
20Pursuant to Rule 22 of the Working Procedures.
21Pursuant to Rule 24(1) of the Working Procedures.
22Pursuant to Rule 24(2) of the Working Procedures.
23Japan made concluding remarks at the oral hearing.
24On 22 July 2011, the Chair of the Appellate Body informed the DSB that the Appellate Body Report
in this appeal would be circulated to WTO Members no later than Monday, 5 September 2011 (WT/DS399/7).
On 30 July 2011, we received a letter from the United States indicating that the United States wished to better
understand the reasons why the Appellate Body Report in this dispute would not be submitted within the 90-day
period referred to in Article 17.5 of the DSU. In the interest of transparency, the Chair of the Appellate Body
will, at the time of transmittal of the Report, inform the DSB of the reasons for the delay.

1. Increase in Imports
11. China claims that the Panel erred in finding th at the USITC did not fail to evaluate properly
whether imports from China met the "increasing rapi dly" threshold set forth in Paragraph 16.4 of
China's Accession Protocol. China requests the Appella te Body to reverse this finding, to complete
the legal analysis, and to find, instead, that th e USITC did not provide a reasoned and adequate
explanation for its finding that imports from China were "increasing rapidly" within the meaning of
Paragraph 16.4 of the Protocol for the following reasons.
12. First, China claims that the Panel erred in finding that Paragraph 16.4 of China's Accession
Protocol did not require the USITC to focus its anal ysis on import trends during the most recent past.
China argues that the use of the present continuous tense "increasing" in Paragraph 16.4 suggests a
focus on the most recent period of time. 25 According to China, the Panel failed to attribute
significance to the textual distinction between "incre asing" imports in Paragraph 16.4 and "increased"
imports in Paragraph 16.1. 26 In China's view, Paragraph 16.1 sets forth the "general conditions" for
the application of measures under Section 16 of th e Protocol, and reflects the standard for import
increases contained in provisions of other WTO ag reements, in particular, Article 2.1 of the
Agreement on Safeguards , which requires an assessment of past import increases. 27 However, when
providing specific meaning to the general conditi ons of Paragraph 16.1, Paragraph 16.4 uses the
present continuous tense "increasing", thereby sugges ting that the Protocol provides for a distinct
standard that requires an assessment of present import increases. 28 China emphasizes that the Panel
should have given "more interpretative weight" to th e more specific language of Paragraph 16.4 than
to the more general language of Paragraph 16.1, and that only an interpretation that focuses on the
most recent period of time can be reconciled with both provisions.29
13. China maintains further that, when applying the "increasing rapidly" standard of
Paragraph 16.4, the Panel imprope rly upheld the USITC's assessment of import increases over the
entire 2004-2008 period of investigation. 30 According to China, neither the USITC nor the Panel
adequately explained why import increases over the full five-year period were relevant to a
determination that imports were "increasing rapidl y", or should be accorded equal weight to more
recent import trends.31 In China's view, such missing explanation is "particularly troubling" given the

25China's appellant's submission, paras. 58 and 88.
26China's appellant's submission, paras. 66, 94, 96, 98, and 105.
27China's appellant's submission, paras. 63, 64, and 100.
28China's appellant's submission, paras. 65, 77, and 100.
29China's appellant's submission, paras. 102 and 104.
31Referring to the Appellate Body in US – Lamb, China argues that the USITC had to explain why such
2004-2008 temporal assessment was adequate. (China's appellant's submission, para. 130 (quoting Appellate

"sharp difference" between the average 34% im port increase over the entire five-year period of
investigation and the 10.8% import increase in 2008.
32 China adds that the USITC did not provide an
adequate explanation for its conclusion that impor t increases were "large, rapid, and continuing"
in 2008.33
14. Second, China claims that the Panel erred in finding that Paragraph 16.4 of China's Accession
Protocol did not require the USITC to focus on the rates of increase in imports from China. China
posits that the Panel failed to attribute proper sign ificance to the term "rapidly" in Paragraph 16.4,
which connotes imports that are "increasing at a swift rate".34 China emphasizes that Article 4.2(a) of
the Agreement on Safeguards , Article 3.2 of the Agreement on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994 (the "Anti-Dumping Agreement"), and Article 15.2 of
the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement") do not require that
imports be increasing "rapidly", and that this textual distinction must be given meaning. According to
China, the Panel's reference to the ordinary meaning of "rapidly" ("with great speed" or "swiftly") was
insufficient to dismiss the relevance of the rates of increase in imports, because "[t]here is no way to
determine whether an increase is occurring at a 'great speed' without assessing its rate." 35 C h i n a
maintains further that "rapidly" is a relative con cept that conveys the idea of something increasing
more quickly than something else, and therefore it is "useful" to focus on the rates of increase in
imports.
15. In addition, China claims that the Panel erre d in its application of Paragraph 16.4 of the
Protocol when it upheld the USITC determination d espite the fact that the USITC did not adequately
assess the rates of increase in subject imports. In particular, China contends that the USITC did not
provide an adequate explanation fo r its conclusion that imports were "increasing rapidly" despite the
decline in the rate of increase in subject imports in 2008. 36 According to China, the Panel's reasoning
that the 2008 import increase was in addition to earlier import incr eases was not suffi cient, because
import increases in every year and market share gains over the full period of investigation do not
establish that imports were increasing "rapidly".
16. Third, China claims that the Panel erred in failing to require the USITC to assess the most
recent rate of increase in subject imports relative to the rates of increase in earlier periods. China
argues that the Panel ignored the m eaning that the terms "increasing" and "rapidly" in Paragraph 16.4
of the Protocol impart to one another. China em phasizes that the term "rapid ly" is a relative concept

33China's appellant's submission, para. 136 (quoting USITC Report, p. 12).
34China's appellant's submission, paras. 59 and 89.
36China's appellant's submission, paras. 142 and 144.

and, when used to qualify the term "increasing", it indicates that imports must be increasing more
rapidly than some other benchmark, typically the rate that imports have increased in the past. For this
reason, the rates of increase in imports must be put in the "factual context" of prior rates of increase in
imports.37 According to China, the earlier part of the period of investigation provides a "contextual
baseline" for determining whether the rates of increa se in the latter period can be considered "rapid",
in that they were greater than the earlier rates of increase.38
17. China also claims that, in its application of Pa ragraph 16.4 of the Protocol, the Panel erred in
finding that the USITC properly determined that imports were "increasing rapidly". China argues that
the USITC failed to provide a reas oned and adequate explanation fo r finding that imports from China
were "increasing rapidly" despite the drop in the rate of increase in imports in 2008 compared to the
rates of increase in previous years. According to China, the Panel filled the gap in the USITC's
reasoning by providing its own analysis of 2008 import increases. China adds that both the Panel and
the USITC focused on "[import] increases in every year, the magnitude of the overall increase, and
the fact that the level of imports was highest at th e end of the period", when the legally relevant issue
was whether the changes in the rates of increase at the end of the period of investigation were recent
enough, and of such magnitude, as to be deemed "rapid".39 China stresses further that both the USITC
and the Panel erroneously focused on the overall change in the market share of subject imports over
the entire period of investigation, and did not provide an adequate explanation as to why import
increases could still be considered "rapid" when the rates of increase in their market share declined
in 2008.
18. Finally, China argues that the object and purpose of the Protocol and the balance of rights and
obligations reflected therein must be considered when interpreting the "increasing rapidly" standard
contained in Paragraph 16.4. China emphasizes the Appellate Body's recognition that measures under
the Agreement on Safeguards are "extraordinary", in that they restrict "fair" trade.
40 C h i n a
underscores that the Protocol similarly allows for th e restriction of "fair" trade; however, unlike the
Agreement on Safeguards , it provides for the application of trade-restrictive measures exclusively
against China. This "'extra'-extra ordinary nature" of the Protocol must be taken into account in the
interpretation of the distinct "increasing rapidly" standard set forth in Paragraph 16.4.41

40China's appellant's submission, para. 81 (quoting Appellate Body Report, Argentina – Footwear
(EC), paras. 94 and 95).

2. Causation
19. China claims that the Panel erred in finding that rapidly increasing imports from China were
"a significant cause" of material injury to the US domestic industry within the meaning of
Paragraph 16.4 of China's Accession Protocol. In pa rticular, China argues that the Panel erred in its
interpretation of the causation standard in Paragra ph 16.4; erred in finding that the USITC properly
assessed the conditions of competition in the US market; erred in finding that the USITC was entitled
to rely, in its causation analysis, on the overall correlation between import increases and declines in
injury factors; and erred in finding that the USIT C did not fail to ensure that injury caused by other
factors was not attributed to imports from China. China requests the Appellate Body to reverse these
findings, to complete the legal analysis, and to find, instead, that the USITC did not properly establish
that imports from China were "a significant cause" of material injury to the US industry, as required
by Paragraph 16.4 of the Protocol.
(a) Interpretation
20. China claims that the Panel erred in its inte rpretation of the term "a significant cause" in
Paragraph 16.4 of the Protocol. According to Chin a, in failing to distinguish a "significant cause"
from a "cause", the Panel read the word "significant" out of the text of Paragraph 16.4. In China's
view, the inclusion of the word "significant" to qualify the word "cause" suggests that Paragraph 16.4
requires "a particularly strong, substantial, and important causal connection" between rapidly
increasing imports and any material injury to the domestic industry. 42 In expanding on the general
conditions set forth in Paragraph 16.1 of the Prot ocol and paragraph 246(c) of the Report of the
Working Party on the Accession of China 43 (China's "Accession Working Party Report"),
Paragraph 16.4 of the Protocol specifies that impor ts must be a "significant cause" and not merely a
"cause" of material injury. This, in China's vi ew, indicates that Paragraph 16.4 of the Protocol
requires a higher degree of causality than other WTO ag reements, in particular, Article 4.2(a) of the
Agreement on Safeguards , which merely requires that imports "c ause" serious injury. According to
China, the fact that Paragraph 16.4 provid es for a lower injury threshold than the Agreement on
Safeguards ("material" rather than "serious" injury) does not affect this interpretation, because it
reflects "an overall balance" struck by the Protoc ol between the degree of causation and amount of
injury required. 44 China maintains that, insofar as the Pr otocol permits WTO Members to restrict
"fair" trade and to apply safeguard measures in a discriminatory manner, its object and purpose
suggests that "a significant cause" should be interp reted as setting a distinct standard that requires

43WT/ACC/CHN/49 and WT/ACC/CHN/49/Corr.1.
44China's appellant's submission, paras. 206-208.

more of a Member imposing measures under the Pr otocol than would be required of a Member
imposing measures under the Agreement on Safeguards.
21. In China's view, the Panel erred in failing to establish whether rapidly increasing imports
from China amounted to "a significant cause" rather th an simply a "cause" of material injury to the
domestic industry. China argues that the Panel's reference to the ordinary meaning of the word
"significant" was not sufficient to address its im plications on the causation analysis required under
Paragraph 16.4.45 Following the analytical appro ach of the Appellate Body in US – Upland Cotton ,
China posits that the Panel should have assessed first whether the USITC properly established that
subject imports were a cause of material injury , and second whether the USITC provided a reasoned
and adequate explanation as to why such cause was "significant". 46 Referring to the Appellate Body
reports in US – Lamb and US – Cotton Yarn, China maintains further that the Panel erred in failing to
address how the qualifier "significant" modified the "core obligation" reflected in the term "cause". 47
For China, the Panel's conclusion that reference to "a" significant cause suggests that Paragraph 16.4
admits of multiple causes does not sufficiently a ddress whether a certain cause is "significant",
because this assessment is informed by the relative significance of the other causes at play.48
22. Furthermore, China argues that the Panel erred in failing to "refine" its causation analysis to
meet the distinct "significant cause" standard set forth in Paragraph 16.4. 49 China refers to the
analyses of the conditions of competition, correlation, and non-attribution as "intermediate step[s]" in
the Panel's overall causation analysis, and suggests that a "particularly compelling explanation" is
required from the investigating authority when one of such analyses suggests that subject imports are
not "a significant cause" of material injury.50 According to China, the Panel erred in failing to explain
how these analytical steps should be "adjusted or applied" so as to support a finding of "significant
cause".51
23. More specifically, with respect to the analysis of the conditions of competition, China submits
that the "significant cause" standard of Paragra ph 16.4 requires investigating authorities to establish
the existence of "a greater degree of competitive overlap" between subject imports and the domestic
industry than is required under the Agreement on Safeguards. 52 According to China, this involves a

45China's appellant's submission, paras. 261 and 266 (referring to Panel Report, para. 7.158).
46China's appellant's submission, paras. 265 and 266 (referring to Appellate Body Report, US – Upland
Cotton, para. 429).
47China's appellant's submission, paras. 267-271 (referring to Appellate Body Report, US – Lamb ,
48China's appellant's submission, paras. 273-275 (referring to Panel Report, para. 7.140).
51China's appellant's submission, paras. 278, 279, and 281.

two-step analysis whereby investigating authoriti es must determine, first, how the existence of
different market segments may "attenuate" the degree of competition between subject imports and
other market participants
53; and, second, whether the resulting degree of competition indicates that
subject imports are capable of being a "significant cause" of material injury to the domestic industry.54
24. In relation to the analysis of correlation, Ch ina argues that the "significant cause" standard
requires investigating authorities to go beyond mere "'overall' correlation" and assess the "degree of
correlation" between rapidly increasing imports and injury factors of the domestic industry. 55
According to China, Paragraph 16.4 requires a speci fic correlation both in year-by-year changes and
in the degree of magnitude between increases in im ports and decreases in the performance indicators
of the domestic industry.
25. In relation to the analysis of other causes, Chin a argues that "there is an inherent requirement
to consider other causes [of injury] when finding a causal link between imports and the condition of
the domestic industry." 56 In China's view, the term "significan t" in Paragraph 16.4 of the Protocol
"requires more than just considering other causal factors in some generalized way". 57 In particular,
China contends that an assessment of both the magn itude of "effects" attribut able to subject imports
and an assessment of the magnitude of "effects" attributable to other factors is required. 58 C h i n a
asserts that this involves "separating not just the causes, but also the effects of those causes". 59
Moreover, the investigating authority is required to determine whether the separate effects properly
associated with imports from China rise to the level of "significant".
26. China recognizes that the Protocol does not set forth any specific method for determining
when the effects properly associated with subject imports rise to the level of being "a significant
cause".60 For China, this situation is therefore like those under other WTO agreements, where the
absence of any specific guidance has meant that WTO Members have discretion as to the "methods
and approaches" they employ. 61 In China's view, one approach would be to "weigh the different
causes".62 China recognizes that Paragraph 16.4 "does not specifically require the effects of imports
from China to be larger than the effects of other causes".63 Yet, in cases where "the effects of imports

55China's appellant's submission, para. 229. (emphasis omitted)
61China's appellant's submission, para. 254 (referring to Appellate Body Report, US – Hot-Rolled Steel,
63China's appellant's submission, para. 256. (original underlining)

from China are less than [the effects of] other causes, the investigating authority must pause and
consider the situation very carefully" and "must take particular care in fulfilling its duty to provide a
reasoned and adequate explanation" if it concludes that imports from China are "a significant cause".64
According to China, a finding of "significant cause" when the effects of imports from China are less
than the effects of other causes would also require a "very compelling analysis".65
(b) Conditions of Competition in the US Tyres Market
27. China argues that the Panel erred in finding that the USITC properly assessed the conditions
of competition in the US market. According to China, both the Panel and the USITC failed to explain
adequately how imports from China could be "a significant cause" of material injury under
Paragraph 16.4 of the Protocol, when approximate ly 60% of US production in 2008 went into
two market segments where Chinese imports had only a 2-3% combined market share.66
28. More specifically, China maintains that bot h the Panel and the USITC failed to assess
adequately the existence of "atte nuated competition" between subject imports and domestic tyres in
the US replacement market. 67 In China's view, the Panel's conclu sion that there were no "bright-line
distinctions" between tiers 1, 2, and 3 of the US replacement market does not sufficiently address the
attenuated degree of competition between impor ted and domestic tyres in that market.
68 In addition,
both the Panel and the USITC failed to assess adequa tely data indicating that, in 2008, Chinese
imports represented less than 1% of total shipment s into tier 1 of the replacement market where
US producers concentrated 51% of their shipments. 69 Such "limited presence" of Chinese imports in
tier 1 suggests that a "majority" of US productio n "faced virtually no competition from subject
imports".70 Moreover, the Panel's finding that competition in tiers 2 and 3 was more than "vestigial"
did not, in China's view, provide a sufficient basi s for concluding that subject imports were "a
significant cause" of material injury, insofar as those segments represented "less than half" of the
US replacement market. 71 China posits further that the Panel "went beyond the proper bounds of

65China's appellant's submission, para. 256 (referring to Panel Report, Argentina – Footwear (EC) ,
para. 8.238).
69China's appellant's submission, para. 316. China adds that "the competitive tension in this key tier 1
segment was overwhelming between the U. S. producers with 69.3 percent of the shipments and the non-subject
imports with 29.9 percent of the shipments to this segment." (Ibid., para. 317)
70China's appellant's submission, paras. 318 and 325.

review" by providing its own analysis as to why competition between domestic tyres and subject
imports was "significant" in tiers 2 and 3.
72
29. Furthermore, China contends that the Panel erred in upholding the USITC's conclusion that
subject imports had a "significant" competitive imp act on domestic tyre production in the original
equipment manufacturers ("OEM") market. Accordi ng to China, the Panel erroneously focused on
increasing trends in Chinese imports to the OEM market, when it should have instead assessed
whether competition between Chinese and US tyr es in that segment was significant. China
underscores that its market share in the OEM mark et remained below 5% during the entire period of
investigation. According to China, the Panel's e nd-point-to-end-point analysis obscures the fact that
most of China's market share gains occurred by 2 006. In addition, China stresses that non-subject
imports had a larger and increasing share of the OE M market than subject imports, and that market
share gains by non-subject imports in the OEM market occurred during a period in which they lost
market share in the overall US market.
30. China maintains further that the Panel e rred in separately assessing the conditions of
competition in the replacement market and the OE M market, but failing to address their combined
implication for the degree of competition in th e overall US market. For China, the "extremely
limited"73 presence of Chinese imports in tier 1 of the replacement market and in the OEM market,
where US producers concentrated approximately 60% of their total shipments, suggested that
competition in the overall US market was "highly attenuated". 74 Moreover, the Panel ignored the fact
that subject imports in the OEM market had no competitive effect on domestic tyres in the
replacement market, and that tier 1 of the replacement market was more clearly delineated than tiers 2
and 3. In China's view, both the Panel and the USITC failed to provide a reasoned and adequate
explanation as to how these data could support a finding that subject imports were "a significant
cause" of material injury to the US industry.
(c) Correlation between Rapidly Increasing Imports and Material Injury
31. China argues that the Panel erred in finding that the USITC was entitled to rely on an "overall
coincidence" between rapidly increasing imports a nd declines in injury factors in support of its
conclusion that subject imports were a significant ca use of material injury to the domestic industry. 75
According to China, the "significant cause" standard of Paragraph 16.4 of the Protocol requires a
more specific degree of correlation between import in creases and declines in injury factors. In

72China's appellant's submission, paras. 322 and 323 (referring to Panel Report, para. 7.195).

particular, the Panel erroneously affirmed the US ITC's end-point-to-end-point comparison, when it
should have assessed instead "year-to-year relative changes" between imports and injury factors. 76 In
addition, the Panel failed to assess adequately a "d isconnect" between trends in 2007 and 2008, when
the rate of increase in volume of imports declined , but injury factors such as production, shipments,
and net sales nonetheless further deteriorated. 77 China adds that a similar "disconnect" existed
between declines in the rate of increase in imports and declines in other injury factors such as
operating profits, productivity, capacity u tilization, and research and development. 78 According to
China, the Panel failed to explain adequately whet her these inconsistencies in trends suggested that
injury was caused by other factors, such as the 2008 recession and the domestic industry's strategic
decision to cede the low-end segment of the repl acement market to imports from China and other
countries.
32. Furthermore, China argues that the Panel inco rrectly upheld the USITC's finding that subject
imports had adverse effects on domestic prices and pr ofitability. China stresses that the cost of goods
sold ("COGS")/sales ratio improved by 5.3% in 2007 , when the rate of increase in subject imports
was at its highest, but declined by 5.8% in 2008, wh en the rate of increase in subject imports also
declined.79 In China's view, the Panel uncritically a ccepted the USITC's conclusion that there was
a "sharp increase in this ratio in 2008", and ig nored the sharp decrease in the COGS/sales ratio
in 2007.80 Similarly, the Panel failed to address year-by- year changes in finding that "underselling by
subject imports generally had a highly detrimental impact on the domestic industry". 81 China
emphasizes that, when the margin of underselling was greatest in 2007, the profitability of the
domestic industry improved. In contrast, when th e margin of underselling decreased in 2008, the
profitability of the domestic industry also declined . China adds that the margin of underselling
remained relatively high in 2008 because domestic hi gher-value branded tyres have higher prices than
unbranded Chinese tyres. Thus, the Panel did no t take into account the effects of "attenuated

77China's appellant's submission, paras. 354-358. China emphasizes that, when imports increased
by 53.7% in 2007, US production decreased by 2.4%; US shipments decreased by 5%; and net sales decreased
by 5.5%. However, in 2008 when imports increased by 10.8%, US production decreased by 11.1%;
US shipments decreased by 12.1%; and net sales decreased by 11.7%. (Ibid., para. 355)
78China's appellant's submission, para. 359. China underscores that, when imports increased by 53.7%
in 2007, the domestic industry's operating profits increased by 5.6%; productivity increased by 0.1 tyres
per hour; capacity utilization increased by 6.0%; a nd research and development increased by 6.4%. In
contrast, when imports grew by 10.8% in 2008, operating profits declined by 6.9%; productivity declined by
0.2 tyres per hour; capacity utilization declined by 5.9%; and research and development declined by 0.1%.
(Ibid., para. 359)
80China's appellant's submission, para. 369 (quoting USITC Report, p. 24).
81China's appellant's submission, para. 371 (quoting Panel Report, para. 7.258). (emphasis added
by China)

competition on underselling"
82, and failed to address adequately the fact that non-subject imports also
undersold domestic tyres.
(d) Other Causes of Injury
33. China attributes the injury suffered by the US dom estic industry, at least in part, to three
factors other than subject imports from China, namely: (i) the domestic industry's business strategy of
shifting to higher-value products; (ii) demand declin es in the market; and (iii) non-subject imports.
China contends that the Panel erre d in finding that the USITC prope rly considered and addressed the
effects of these other factors that were allegedly cau sing injury to the industry. China asserts that the
Panel's focus was more on identifying some "residua l effect" from imports, rather than understanding
how each other factor might be affecting the cond ition of the domestic industry, and whether any
remaining effects could properly be deemed "a significant cause" of material injury. 83 I n C h i n a ' s
view, under the Panel's standard, any injurious e ffects—including "residual effects"—could constitute
"a significant cause". In other words, if the othe r causal factors "do not explain everything", and
instead leave some residual injurious effects to s ubject imports, then those residual effects somehow
constitute "a significant cause" of material injury. Ch ina refers to this as an "all or nothing" approach
to other causes.84
34. China also alleges that certain preliminary ob servations made by the Panel regarding China's
arguments on other causes "suffer from the Panel's rep eated tendency to look at one fact in isolation,
and not put that fact into the broader context of other competitive dynamics". 85 According to China,
nothing in these preliminary observations "calls into doubt the importance of the changed business
strategy for understanding the competitive dynamics in the industry, and the extent to which imports
from China could properly be considered a 'significant cause' of injury".86
(i) The US domestic industry's business strategy – Plant
closures
35. China emphasizes that there is no dispute in this case that the US industry changed its
business strategy by withdrawing from low-value se gments of the replacement market and shifting
production in the United States towards the higher-value segments of the market. According to
China, the issue is instead "why the strategy chan ged and what significance the new strategy and the

84See China's appellant's submission, paras. 284, 289, 433, and 436.
85China's appellant's submission, para. 391 (referring to Panel Report, paras. 7.292-7.296).

resulting plant closures had for analyzing causation". 87 For China, the USITC improperly attributed
the plant closures in the United States to imports fro m China, ignoring the effect of the change in
business strategy.
36. At a general level, China submits that the Pa nel committed error when it rejected the USITC's
finding that Chinese imports played a role in th e closure of Continental's plant in Charlotte,
North Carolina, but then failed to assess whether this conclusion undermined the USITC's overall
conclusion concerning the reasons for plant closures, including the reasons for the closure of
Bridgestone's plant in Oklahoma City, Oklahoma, a nd Goodyear's plant in Tyler, Texas. China
further alleges that both the Panel and the USITC fail ed to ensure that the injurious effects resulting
from the closure of Continental's plant in Charlotte were not improperly attributed to imports from
China.
37. With respect to the reasons for the closure of Bridgestone's plant in Oklahoma City, China
argues, on several grounds, that the Panel erred in finding that the USITC properly could have
understood reference in Bridgestone's official pr ess release to "fierce competition from low-cost
producing countries" to include competition from subject imports from China. 88 First, China observes
that the press release by Bridgestone refers only to "low-cost producing countries", and does not refer
explicitly to imports from China as a reason for shutting down the plant. 89 Second, China asserts that
the Panel erred in suggesting that a contemporane ous news report relied upon by the USITC in its
report "quoted" a Bridgestone employee as identif ying "low-cost Korean- and Chinese-made tires
flooding the US market as one of the reasons for the plant's economic troubles". 90 Third, China
claims that the Panel erred by relying on a stat ement made in the USITC staff report (which the
USITC did not cite to in its determination) in assessing whether the USITC could properly attribute
the closure of Bridgestone's plant to imports from China. 91 Fourth, China obser ves that "non-subject
imports held between 78.8 and 87.1 percent of the import market during the period relevant for the
plant closure decisions." 92 In China's view, the Panel "downplayed" the significant and increasing
presence of such non-subject imports. 93 Yet, given the relative magnitude of non-subject imports, it

87China's appellant's submission, para. 387. (original underlining)
88China's appellant's submission, footnote 326 to para. 409 (quoting "Bridgestone Firestone to Close
Oklahoma City Tire Plant", press release of 13 July 2006 (Panel Exhibit China-45)).
90China's appellant's submission, para. 410 and footnote 327 thereto (referring to Panel Report,
para. 7.303, in turn quoting United States' response to Panel Question 52, para. 55).
91China's appellant's submission, para. 411 (referring to USITC Report, footnote 62 at p. III-16).

was improper to conclude that s ubject imports were "a significant cause" of the closures in 2006 and
to "ignore" the effect of non-subject imports.
94
38. China makes similar arguments regarding the Pane l's analysis of the reasons for closure of
Goodyear's plant in Tyler. First, China alleges that there was no factual basis for the Panel's assertion
that "competition from subject imports was clear ly greater than the competition from non-subject
imports".95 For China, given that non-subject imports represented more than 80% of the total import
volume, priced on average approximately 17% below US price levels, and largely imported by
US domestic producers themselves, it made "no sense" for the USITC and the Panel to read a generic
reference to "low-cost imports" as a reference to imports from China.96 China also criticizes the Panel
for its "selective" approach in dealing with certa in evidence, not only by equating "low-cost imports"
to "subject imports" from China, but also by ignor ing certain other factors behind Goodyear's plant
closure that were identified by the USITC.97 According to China, such an approach calls into question
the Panel's "neutrality" in this dispute.98
39. China further contends that the Panel used the split between the majority and dissenting
determinations of the USITC to "tak e a pass" on the plant closure issue. 99 In China's view, "the Panel
never fully assessed whether the majo rity or the dissent was correct." 100 Instead, it merely found that
plant closures "may well have been" linked to competition from imports and the decision to locate
production in China "might well have been" the resu lt of an independent business strategy, but the
decision to close plants "might well have been" a response to imports.
101 China asserts that this
conclusion was "wholly inadequate" and contends that the Panel s hould have considered critically
whether the USITC majority sufficiently explained it s conclusion to "ignore" the effect of the change
in business strategy.102 According to China, the Panel failed to do so and, instead, "simply deferred"
to the USITC majority.103
40. China argues that, "even if one assumes the USITC could properly find that imports from
China played some role in the d ecision to close the plants, that do es not justify attributing the entire
consequences of the plant closures to the imports from China." 104 In China's view, under the Panel's

97China's appellant's submission, paras. 420 and 421 (referring to USITC Report, footnote 62 at
p. III-16).
104China's appellant's submission, para. 433. (original underlining)

logic, "insignificant residual effects become si gnificant effects without any proper factual basis
—much less a reasoned or adequate explanation". 105
41. Referring to the multiple reasons behind the US industry's changed business strategy, the fact
that the domestic producers did not support the petiti on in this case, and "given the importance of the
finding on plant closures for the overall conclusion a bout 'significant cause'", China argues that the
USITC had an obligation to provide a "particularly compelling justification" for its conclusion to
attribute the plant closures to imports from China.106 China asserts that it failed to do so and the Panel
therefore should not have affirmed the USITC's "defective" explanation.107
(ii) Declines in demand
42. China takes issue with the Panel's analysis of declines in demand, arguing that both the Panel
and the USITC failed to "evaluate seriously" demand declines as a possible alternative cause of injury
to the domestic industry. 108 China claims that a contracti on in demand over the full period of
investigation, combined with a sharp decline in demand in 2008 due to the recession, accounted for "a
sizeable portion"—albeit not all—of the injury suffered by the industry over the period of
investigation.109 According to China, however, the Panel conducted a rigid "all or nothing" analysis
of other causes, "believing that if an alternative cause did not explain everything then it explained
nothing".110 For China, because "the contraction in de mand did not explain the entire injury suffered
by the domestic industry, the Panel impermissibly gave it short shrift."111
43. China alleges multiple errors in the Panel's review of the USITC's determination. First, China
claims that, save for its consideration of the e ffects of the recession in 2008, the USITC did not
address "the longer term trend in demand". 112 China asserts that the Panel, in its analysis, referred to
statements by the USITC that addressed the trends in the market share of subject imports but did not
say anything about trends in demand or trends in apparent consumption. Second, China argues that
the USITC improperly assumed that an increasing ma rket share held by imports from China meant
that imports were having an adverse effect distinct from the effect of changing levels of demand.
According to China, there were, however, many other factors at play affecting market shares that
called into question this "simplistic assumption". 113 Third, China submits that the Panel "substituted

its own analysis" instead of anal yzing the USITC's determination.
114 For example, the Panel
compared the changing levels of apparent consumption with the ch anging levels of subject import
penetration, although the USITC did not conduct such an analysis in its determination. China further
submits that the data before the USITC suggested that market demand was shifting to all imports in
general and not just imports from China. In such circumstances, it was "more misleading than useful"
to compare a 42.7% increase in imports from China w ith a 0.8% decrease in overall consumption, as
the Panel did.115 Fourth, China argues that the Panel "confused the distinction between average trends
over time and the fluctuations that inevitably occur year-by-year". 116 China recalls that the Panel
acknowledged that consumption droppe d by 10.3%, reflecting a decline of almost 32 million tyres,
and that there was a decline in three out of four years of the period of investigation. According to
China, these data indicate that total consumption fe ll significantly over the period of investigation,
despite year-by-year variations. In China's vi ew, this decline represents a significant competitive
factor that the Panel and the USITC should have considered "more carefully".
117
44. With respect to declines in demand resulting from the 2008 recession, China argues that the
USITC did not explain how it "connected" certain fact s to its specific conclusions, nor did it explain
how its "consideration" of this issue represented a reasoned and adequate explanation of how it
distinguished the contribution of imports from China from those of the 2008 recession on the overall
condition of the industry.
118 Instead, in China's view, "the USITC simply stated its conclusion
without any discussion or explanation."119
45. China asserts that the Panel a ddressed the 2008 recession in a similar fashion. In particular,
China contends that, in its analysis of this issue, the Panel suggested that, if the sharp decline in
demand "could not explain all of the injury to the dom estic industry, then it could explain none of the
injury".120 According to China, rather than expect the USITC to consider and explain the relative
contribution of each causal factor, the Panel "gave the USITC the far easier task of simply proving
that declining demand did not explain everything". 121 China faults the Panel for stating that
"significantly increased" imports "forced" the US dom estic industry to absorb the fall in demand that
was due to the 2008 recession. 122 In China's view, the data before the USITC in fact suggested that
US producers "switched" their source of imports, "as imports from China increased by

120China's appellant's submission, para. 451. (original underlining)

2.0 million tires while imports from other countries by the U.S. producers dropped by
5.1 million tires".123 China suggests that additional tyres fro m China in 2008 simply "replaced" other
imports brought in by US producers, and did not displace US production or shipments.124
(iii) Non-subject imports
46. China further argues that the USITC failed to address the competitive effect of non-subject
imports in the US market, despite the fact that the non-subject imports held a larger share of the
market than Chinese imports and were lower priced than the tyres produced in the United States.
China also argues that the Panel erred by upholdin g the USITC's determination, despite the USITC's
failure to provide any reasoned a nd adequate explanation for findi ng that non-subject imports were
not an alternative cause of injury.125
47. In particular, China takes issue with the Panel' s statement that "the dominant feature of the
U.S. market was the rise of subject imports from China at the expense of both non-subject imports and
the U.S. industry."126 According to China, the USITC never made such a statement and thus the Panel
"impermissibly substituted its judgment for that of the USITC".127
48. In addition, China alleges that the Panel's an alysis of price effects "ignored" the relative
volumes of subject and non-subject imports. 128 In relation to the US replacement market, China
recalls that "imports from China in 2008 were less than 1 percent of the tier 1 market while imports
from other countries made up 39 percent of the market." 129 In China's view, the Panel's analysis
therefore "essentially assumed that one tire from Chin a at $40 had more of an adverse impact than
thirty nine tires from other countries at $55" per tyre. 130 China adds that "there were approximately
nine times as many non-subject imports in the OEM ma rket in 2008" as there were imports from
China, and non-subject imports grew from 30.2% to 43.5% of the OEM market between 2004 and
2008.131 Noting that together the OEM market and the tier 1 segment of the replacement market

124China's appellant's submission, para. 465. (emphasis omitted)
125At the oral hearing, China disagreed with the Unite d States' assertion that it failed to identify before
the Panel the issue of non-subject imports as a possible "other" factor causing injury that the USITC should have
addressed in its analysis. China added that, in any event, it does not matter whether non-subject imports are
examined as part of a "conditions of competition" analys is or as a possible "other" cause of injury. China
explained that, in either case, the anal ysis is directed at understanding what is going on in the market and the
effect, if any, that this has on the adequacy of the investigating authority's reasoning.
130China's appellant's submission, para. 477. (original underlining)
131China's appellant's submission, para. 478 (referring to USITC Report, Table V-3 at p. V-4). (original
underlining)

represent approximately 60% of US shipments, China asserts that the Panel ignored the fact that non-
subject imports remained the "overwhelming competitive factor facing U.S. producers".
132
(iv) Comparative analysis and cumulative assessment
49. China acknowledges that Section 16 of China's Accession Protocol does not require that an
investigating authority compare or "weigh" the causal effects of various injury factors against one
another.133 However, China maintains that such analys is would provide an alternative way for an
investigating authority appropriately to determine that imports from China are "a significant cause" in
the light of other factors. 134 Moreover, even if this approach is not required, China contends that a
consideration of the relative importance of othe r causes would "reinforce[ ]" the conclusion that
imports from China were not in fact "a significant cause" of injury. 135 In China's view, this is because
other factors reduced any residual contribution by im ports from China to a level that no longer meets
the standard of "significant cause".136
50. According to China, the USITC relied exclus ively on its holistic explanation—based on
conditions of competition, overall correlation, and other causes—without any assessment of the
relative importance of each of the various causes at work. China makes reference to the US industry's
alleged business strategy, declines in demand, and th e role of non-subject imports, maintaining that
the evidence before the USITC "strongly suggested " that these other possible causes of injury were
more important than imports from China. 137 In particular, China asserts that US producers closed
certain plants for a "broader set of economic and bus iness reasons", and that subject imports were just
one of many factors being considered by these firms. 138 China considers, therefore, that it does not
make sense to attribute the entire effect of the US plant closures to imports from China. For China,
approximately 61% of the reduction in US shipments must be attributed solely to the decline in
consumption. Furthermore, there was no reason to conclude that "the smaller volume of imports from
China were having a more significant price effect th an the much higher volume of imports from other
countries."139 In China's view, "[i]t was error for the USITC to give so little attention to these other
causes, and it was error for the Panel to affirm the inadequate USITC conclusions on this key
issue."140

133China's appellant's submission, paras. 480-482.

51. China also argues that the Panel improperly di smissed China's argument concerning the need
to conduct a cumulative assessment of the effects of the other causes of injury. Referring to the
Appellate Body's finding in EC – Tube or Pipe Fittings that "there may be cases where because of the
specific factual circumstances therein, the failure to undertake an examination of the collective impact
of other causal factors would result in the investigat ing authorities improperly attributing the effect of
these other causal facts to dumped imports", China al leges that it provided the Panel with the "unique
factual circumstances by which other causes worked in an interrelated manner in this case to sever or
diminish the magnitude of any causal link" between Chinese imports and material injury.141
52. In China's view, the "interplay" between va rious factors—namely, business strategy, demand
trends, and non-subject imports—reduced the possib ility for subject imports to be a "significant
cause" of domestic injury. 142 China argues, for instance, that import levels in 2007 and 2008
reflected, "at least in part", the consequences of earlier decisions by US producers to globalize and
create more demand for imports. 143 According to China, the "void" left by US producers "became
particularly important during the recession in 2008 as demand shifted to lower-priced value tires and
thus shipments of those imported tires at a lower price-point held up significantly better than domestic
shipments of the more expensive U.S.-manufactured tires." 144 China asserts that it was therefore
"improper to assume imports from China displaced U.S. production at the end of the period when
many of the U.S. production lines of the most dire ctly competitive products had already been shut
down for broader reasons that only par tially related to imports from China." 145 With regard to
non-subject imports, China asserts that it was "imprope r to attribute significant effects to the smaller
volume of imports from China while ignoring the effects of the larger volume of imports from other
countries that also undersold U.S. tire prices by a wide margin."
146 China adds that "the domestic
industry itself was responsible for imports of bo th subject and non-subject imports, and therefore
U.S. producers themselves had some control over the relative magnitude of those imports." 147 China
argues that, given the importance of non-subject impor ts in the overall US market and their ability to
undersell the US-based production of lower-end tyres, US producers themselves "had to find lower
cost places to produce". 148 According to China, this "reinfor ced the need for a new business strategy
to globalize production".149 In China's view, "[i]t makes little sense to blame this need on the smaller

141China's appellant's submission, para. 494 (original underlining) and footnote 424 thereto (quoting
Appellate Body Report, EC – Tube or Pipe Fittings, para. 192).

volume of imports from China", when "[a]ll imports—not just those from China—offered more
price-competitive options and drove the new business strategy."
150 China further argues that the
longer-term decline in overall US demand created the need for US producers to shift production to
where the markets were strongest and "reinforc[ed ] the need for a new business strategy to globalize
production".151 China adds that the "decline in U. S.-based automobile production drove down
production for the OEM market" and further "reinforced the need to produce in other markets".152
(e) Integrated Analysis
53. China further argues that the Panel erred by considering each causation argument raised by
China in isolation, and never addressing th em together in an "integrated analysis". 153 According to
China, this approach led the Panel to "internal in consistencies" that coul d have been avoided by
assessing the competitive dynamics and alleged causal connection more "holistically". 154 In China's
view, the lack of correlation and the existence of attenuated competition in this case "reinforced each
other" and "undermined" any conclusion that subject imports might be a significant cause of material
injury.155 China further argues that the US domestic industry's business strategy "helped explain why
attenuated competition was an accelerating phenome non in the market over the period of
investigation".156 China also refers to the "continuing large presence" of non-subject imports and
improvements in the performance of the domestic industry in 2007, arguing that the Panel focused too
little on how these factors interrelated.157
54. Finally, China argues that Paragraph 16.4 of the Protocol requires linking the condition of the
domestic industry to imports that ar e found to be "increasing rapidly". 158 In China's view, both the
USITC and the Panel failed to do so. In particular , the Panel largely focused its causation analysis on
the overall period of investigation instead of focusi ng on the end of the period so as to establish the
causal linkage between imports that are "increasing rapidly" and the condition of the industry at the
end of the period. In doing so, the Panel drew many of its inferences from changes earlier, rather than
later, in the period. According to China, this constitutes error. China notes, for example, that, in
discussing attenuated competition in the replacement market, the Panel analyzed only data from 2008,
but did not link this discussion to the trend in imports during that year. In addition, when discussing
non-attribution, the Panel provided no analysis of how plant closures earlier in the period of

157China's appellant's submission, paras. 508-510.

investigation affected trends in both subject and non -subject imports later in the period, particularly
in 2007 when apparent consumption increased.
3. Article 11 of the DSU
55. China submits that the Panel acted inconsis tently with its duty to conduct an objective
assessment under Article 11 of the DSU in its revi ew of the USITC's determination that subject
imports from China were "a significant cause" of materi al injury to the US domestic industry. China
submits several arguments in support of its allegation.
56. First, China alleges that the Panel failed to consider the "totality of the evidence" on the
question of causation.159 China faults the Panel for failing to see how the various causation elements
are interrelated, and argues that the Panel also failed to consider the way in which other causes
interacted with each other. 160 Noting that the USITC itself "embraced a holistic approach to the
causation issue", China submits that it was theref ore error for the Panel to address each causation
issue in isolation.161
57. Second, China contends that the Panel faile d to conduct a balanced assessment of the
evidence on the question of causation, and disregar ded evidence that was not consistent with the
conclusions reached by the USITC. In particul ar, China takes issue with the Panel's use of
footnote 62 of the USITC staff report. According to China, the Panel "went out of its way to find and
cite evidence the USITC majority did not cite or rely upon" and "extracted only those pieces of
evidence that supported the USITC conclusion and i gnored those other pieces of evidence that were
not consistent with the USITC conclusion". 162 Referring to the Appellate Body Report in US –
Upland Cotton (Article 21.5 – Brazil) , China submits that panels mu st be "even-handed" in their
review and consider all of the arguments and evidence in a balanced and consistent way.163
58. Third, China submits that the Panel went be yond the rationale contained in the USITC
determination on the question of causation, and relied on post hoc clarifications provided by the
United States or the analysis developed by th e Panel to "bolster the USITC determination". 164 I n

159China's appellant's submission, heading III.E.2(a), p. 148.
161China argues that the situation in this case is thus analogous to the Appellate Body's guidance in
US – Countervailing Duty Investigation on DRAMS , where the Appellate Body explained that, "when the
authorities considered evidence as a whole, a panel must use the same approach when evaluating the WTO
consistency of the decision reached by the authority." (China's appella nt's submission, para. 568 (referring to
Appellate Body Report, US – Countervailing Duty Investigation on DRAMS, paras. 188-190))
163China's appellant's submission, paras. 49 and 562 (referring to Appellate Body Report, US – Upland
Cotton (Article 21.5 – Brazil), para. 293).

support of its claim, China refers to certain argumen ts it made earlier in its submission dealing with
conditions of competition, declining consumption over the period of investigation, the 2008 recession,
and the role of non-subject imports.
165
59. Fourth, China asserts that the Panel acted incons istently with its oblig ations under Article 11
of the DSU by failing to consider China's argu ments on how "other causes interacted with each
other".166 China also submits that the Panel disregarde d China's argument concerning the existence of
"attenuated competition" between subject imports an d domestic tyres in the US replacement market,
including evidence provided by the United States to the Panel indicating a limited presence of Chinese
imports in tier 1 of that market segment. 167 Finally, China maintains that the Panel failed to consider
China's argument that it was necessar y to distinguish the Protocol's standard of "a significant cause"
from the mere "cause" standard of other WTO agreements.
B. Arguments of the United States – Appellee
60. The United States submits on appeal that the Panel did not err in upholding the USITC's
finding that imports from China were "increasing rapidly" so as to be "a significant cause" of material
injury to the domestic industry within the meaning of Paragraphs 16.1 and 16.4 of the Protocol. The
United States argues further that, in reaching these findings, the Panel did not act inconsistently with
its duty to conduct an objective assessment of the matter as required under Article 11 of the DSU.

61. The United States requests the Appellate Body to uphold the Panel's findings and to reject
China's claims on appeal. In the event that the A ppellate Body were to reverse certain findings or
conclusions of the Panel, the United States submit s that the Appellate Body should decline to
complete the analysis, given that this would requi re the Appellate Body to review a number of
contested facts or the weight to be ascribed to those facts.
1. Increase in Imports
62. The United States argues that the Panel did not err in finding that the USITC properly
established that imports from China met the "increasing rapidly" threshold set forth in Paragraph 16.4
of China's Accession Protocol.
63. First, the United States argues that the Panel properly concluded that the USITC was not
required to focus its analysis on the most recent import increases. The United States emphasizes that
the text of Paragraph 16.4 does not provide, explicitly or implicitly, that an authority must focus

165China's appellant's submission, paras. 574-577.

solely on import data for the "most recent" period. 168 The absence of any explicitly prescribed
timeframe in Paragraph 16.4 suggests that investiga ting authorities have the discretion to select any
period of investigation, provided that it allows for an assessment of import increases during a "recent
period".169 For the United States, the Panel's conclusion that the use of the present continuous tense in
Paragraph 16.4 does not require an exclusive fo cus on the most recent past finds support in
Argentina – Footwear (EC) , where the Appellate Body interprete d the use of the present continuous
tense in Article 2.1 of the Agreement on Safeguards to require "sudden and recent" import
increases.170 The United States further rejects China's argument that Paragraph 16.4 should be given
"controlling effect", and argues instead that th e Panel's interpretation gave effect to both
Paragraphs 16.1 and 16.4 of the Protocol.171
64. The United States adds that, contrary to China' s assertion, the USITC and the Panel examined
2008 import data in arriving at the conclusion that import increases were "large, continuing and rapid"
at the end of the period of investigation.172 The USITC specifically indicated that the highest quantity
and value of subject imports were in 2008. 173 The USITC also expressly reasoned that the two largest
"year-to-year increases" in the ratio of the "subject imports to U.S. production" and in the "market
share of the Chinese imports" occurred "at th e end of the period in 2007 and 2008".174 The Panel, for
its part, explained that a 10.8% import increas e in 2008 was neither "modest" nor "preclude[d] a
finding that imports [were] 'incre asing rapidly'", particularly because such increase was in addition to
import increases in each previous year of the period of investigation. 175 The United States contends
that, contrary to China's argument, the USITC and the Panel "focus[ed] appropriately" on the
"significant, continuing increases in Chinese imports that occurred in 2008" and found the increases to
be "rapid".176
65. Second, the United States argues that the Panel did not err in finding that the USITC was not
required to focus its analysis on the rates of increase in subject imports. The Panel correctly held that
the ordinary meaning of the term "rapidly" ("with great speed" or "swiftly") neither refers to the "rate"
of increase in subject imports, nor requires that imports be increasing at an "accelerating rate". 177
According to the United States, the term "rapidly " does not embody a "relative concept", as suggested

168United States' appellee's submission, paras. 36 and 45.
169United States' appellee's submission, paras. 46 and 47.
170United States' appellee's submission, para. 49 (quoting Panel Report, para. 7.88, in turn quoting
Appellate Body Report, Argentina – Footwear (EC), para. 130).
172United States' appellee's submission, para. 55 (referring to USITC Report, pp. 10-11, and 22).
173United States' appellee's submission, para. 55 (referring to USITC Report, p. 12).
174United States' appellee's submission, para. 55 (referring to USITC Report, p. 12).
176United States' appellee's submission, paras. 55-57.
177United States' appellee's submission, paras. 60 and 61 (referring to Panel Report, para. 7.92).

by China, because it does not mean "'more swiftly ', 'more quickly', or 'with greater speed'".
178 The
United States considers China's argument that the addition of the term "rapidly" indicates that
Paragraph 16.4 reflects a more rigorous standard fo r import increases than other WTO agreements to
be "misplaced".179 This is because there are "significant di stinctions" between the text of the Protocol
and other WTO agreements that render the comparis on with other WTO agreements "difficult, if not
pointless".180 The United States adds that the absence of a specific non-attribution requirement and
the inclusion of a lower injury threshold undermine Ch ina's argument that the Protocol reflects a more
rigorous standard for import increases than the Agreement on Safeguards.
66. Moreover, despite China's assertions to the c ontrary, the United States underscores that the
USITC did examine the rates of increase in subject imports over the period of investigation. The
United States stresses that the USITC explicitly refe rred in its analysis to "rates of increase" both in
volume and value of subject imports, with particular emphasis on the rates of increase in the last two
years of the period of investigation.
181 The United States adds that the USITC also reviewed the rates
of increase in the market share of subject imports, and in their ratio to domestic production.182
67. Third, the United States contends that the Panel did not err in failing to require the USITC to
assess the rates of increase in imports in 2008 relativ e to the rates of increase in earlier periods. The
Panel correctly held that Paragraph 16.4 did not requi re a "swift progression in the rate of increase" in
Chinese imports, and that a "decline in the rate of increase [did not] necessarily preclude[ ] a finding
that imports are 'increasing rapidly'".183 In any event, the United States stresses that the USITC, in its
analysis, specifically referred to the percentage ra tes of increase in subject imports in the last two
years of the period of investigation, and placed such rates of increase within the context of previous
years in noting that the "two largest increases" in market share and ratio to domestic production
occurred in 2007 and 2008.184
68. Furthermore, the United States maintains that the USITC provided a reasoned and adequate
explanation for its finding that imports were "inc reasing rapidly", both absolutely and relatively,
within the meaning of Paragraph 16.4. The Un ited States stresses that the USITC assessed both
absolute and relative import increases on a year-on-year basis, the rates of increase in each year, and

178United States' appellee's submission, para. 62 (referring to China's appellant's submission,
paras. 113, 117, and 118).
181United States' appellee's submission, para. 72 (referring to USITC Report, p. 12).
182United States' appellee's submission, para. 72 (referring to USITC Report, p. 12).
184United States' appellee's submission, para. 73 (quoting USITC Report, p. 12).

emphasized the rapid increases that occurred in the last two years of the period of investigation. 185
The USITC further addressed—and rejected—China's contention that import increases had "abated"
in 2008, on the basis of the "large, rapid, and continuing" import increases in 2007 and 2008. 186
Contrary to China's assertion, the import data di d not contain any "complexities" that warranted a
more detailed analysis by the USITC or the Panel, because "all of the possible metrics" indicated a
"clear and uninterrupted upward trend in import volumes" during the period of investigation.187
69. Finally, the United States rejects China's argument that the object and purpose of the Protocol
supports a more rigorous interpretation of the "increasing rapidly" threshold set forth in
Paragraph 16.4. For the United States, unlike the Agreement on Safeguards and Article XIX of the
GATT 1994, the Protocol does not contain language suggesting that the transitional safeguard
mechanism was intended as an "emergency action", or that import increases must be the result of
"unforeseen developments".188 These distinctions, in the United St ates' view, do not suggest that the
Protocol provides for an "extraordinary remedy" such as the one provided for under the Agreement on
Safeguards.189 In addition, the fact that the Protocol provides for a lower "material injury" standard
than the "serious inju ry" standard of the Agreement on Safeguards undermines China's argument that
the Protocol embodies a more rigorous threshold for import increases than the Agreement on
Safeguards.
2. Causation
70. The United States argues that the Panel did not err in finding that the USITC properly
established that rapidly increasing imports from China we re "a significant cause" of material injury to
the domestic industry within the meaning of Paragra ph 16.4 of the Protocol. More specifically, the
United States argues that the Panel did not err in its interpretation of the term "a significant cause" in
Paragraph 16.4; did not err in finding that th e USITC properly assessed the conditions of competition
in the US market; did not err in finding that th e USITC was entitled to rely on the overall correlation
between import increases and injury factors in conc luding that imports from China were "a significant
cause" of material injury; and did not err in finding that the USITC properly ensured that injury
caused by other factors was not attributed to the injury caused by imports from China. The
United States further submits that the Panel acted c onsistently with Article 11 of the DSU in reaching
these findings. The United States requests the Appellate Body to reject the entirety of China's appeal

186United States' appellee's submission, para. 76 (quoting USITC Report, p. 12).
189United States' appellee's submission, para. 53 (referring to Appellate Body Report, Argentina –
Footwear (EC), paras. 93-95; and Appellate Body Report, US – Line Pipe, para. 81).

and to uphold the Panel's finding that the USITC did not fail to establish that imports from China were
"a significant cause" of material injury to the domestic industry under Paragraph 16.4 of the Protocol.
(a) Interpretation
71. The United States argues that the Panel did not err in its interpretation of the term
"a significant cause" in Paragraph 16.4 of the Protocol. The United States contends that nothing in the
text of the Protocol indicates that its causation standard was intended to be more rigorous or
demanding than the causation standards contained in other WTO agreements, as suggested by China.
The United States notes that neither Paragraph 16.1 nor Paragraph 16.4 of the Protocol contains
language specifying that a Member must be able to establish that imports from China are the "sole",
"primary", or "most important" cause of injury to the domestic industry.
190 This, in the United States'
view, supports the Panel's conclusion that the tr ansitional mechanism provided under Section 16 of
the Protocol is available when imports from Chin a are "one, but not the only, significant cause of
material injury".191
72. The United States rejects China's argument that Paragraph 16.4 sets forth a more rigorous
causation standard than other WTO agreements be cause, in Paragraph 16.4, the word "cause" is
modified by the word "significant". According to the United States, China's argument is predicated
on other WTO agreements, such as the Agreement on Safeguards , which requires no more than
imports being "a cause" of injury. However, the Appellate Body has made clear that the Agreement
on Safeguards requires investigating authorities to establish a "genuine and substantial relationship of
cause and effect" between subject imports and the requis ite level of injury. Th is, in the United States'
view, suggests that the Agreement on Safeguards requires, at a minimum, a "significant" causal link
between imports and the requisite level of injury.192 The United States adds that the ordinary meaning
of the word "significant" ("important, notable, [ ] co nsequential") does not support China's view that a
"particularly strong" causal link is required under the Protocol. 193 The United States emphasizes
further that previous WTO panels have interpreted the word "significant" to mean simply more than
"nominal or marginal" or "unimportant".194 Moreover, the United States disagrees with China that the
object and purpose of the Protocol implies a more demanding causation standard than other
WTO agreements, because the Protocol does not refe r to measures as "emergency actions", does not

191United States' appellee's submission, para. 90 (referring to Panel Report, paras. 7.139-7.147).
194United States' appellee's submission, paras. 106 and 107 (referring to Panel Report, EC –
Countervailing Measures on DRAM Chips , para. 7.307; and Panel Report, Korea – Commercial Vessels ,
paras. 7.567-7.571).

contain an "unforeseen developments" requirement, and provides for a lower threshold of injury than
the Agreement on Safeguards.195
73. The United States underscores further that the Protocol does not require an investigating
authority to apply any particular methodology in assessing whether subject imports have been a
significant cause of material injury or threat of ma terial injury to the domestic industry. Moreover,
unlike the Agreement on Safeguards , the Anti-Dumping Agreement , and the SCM Agreement ,
Section 16 of the Protocol does not direct an inves tigating authority to consider the effects of other
factors that also may be causing injury to the domestic industry, or direct the authority to ensure that it
does not attribute the effects of these other factors to subject imports. Therefore, an investigating
authority has the discretion to develop and use "an appropriate methodology that allows it to address
these factors in a reasoned manner"196, as long as it provides the "reasons" and "an explanation for the
basis" for its determination that subject imports are a significant cause of material injury to the
domestic industry.197
74. Accordingly, in the United States' view, the Panel correctly rejected China's argument that the
Protocol required a more rigorous analysis of th e conditions of competition and correlation than other
WTO agreements. The United States stresses that the Protocol neither requires an investigating
authority to apply "a greater degree of care" when performing its analysis of the conditions of
competition and correlation, nor requires a WTO panel to apply "a higher degree of scrutiny" in its
review of that analysis.
198 More specifically, the Panel correctly rejected China's argument that it was
required to establish a correspondence between th e magnitude of changes in imports and the
magnitude of changes in injury factors. According to the United States, the Panel correctly held that a
"coincidence of trends" analysis was "appropriate ly founded on a temporal relationship between
movements in imports and movements in the injury factors", and that no Appellate Body or panel
finding suggests that "the orders of magnitude [in the changes] are key" to a correlation analysis.199 In
addition, the United States agrees with the Panel th at it would be "unrealistic" to expect a "precise
correlation between the degree of change in imports and the degree of change in the injury factors",
particularly where "there may be other causes of injury at work".200
75. With respect to the need to consider other causes and ensure that their injurious effects are not
attributed to rapidly increasing imports, the Unite d States argues that China "relies heavily" on the

195United States' appellee's submission, paras. 109-111.
196United States' appellee's submission, para. 89 (referring to Appellate Body Report, EC – Tube or
Pipe Fittings, para. 189; and Appellate Body Report, US – Hot-Rolled Steel, para. 224).
199United States' appellee's submission, para. 122 (referring to Panel Report, paras. 7.230-7.232).

Appellate Body's findings in pr evious disputes arising under the Agreement on Safeguards and the
Anti-Dumping Agreement, such as US – Lamb and US – Hot-Rolled Steel.
201 The United States points
out, however, that the Appellate Body gr ounded those findings on "express language" in
Article 4.2(b) of the Agreement on Safeguards and Article 3.5 of the Anti-Dumping Agreement "that
specifically requires an authority not to attribute to imports the injury caused by other factors". 202
According to the United States, given the lack of a similar requirement in the Protocol, "there is no
basis for China's assertion … that the USITC wa s required to perform the same 'separate and
distinguish' analysis required by the Appellate Body" under the Agreement on Safeguards and the
Anti-Dumping Agreement.203
76. However, the United States agrees with the Pa nel that "the USITC was required to perform
some analysis of the effects of other factor s that have caused injury to the industry." 204 Referring to
the report of the Appellate Body in US – Upland Cotton , the United States notes, however, that,
"when an agreement does not contain specific non-attribution language, an authority has the discretion
to adopt an appropriate and reasonable analys is to assess the effects of other factors." 205 T h e
United States submits that a competent authority' s need to address the effects of other possibly
injurious factors will depend on the facts and circumst ances of the particular ca se. In some cases, "a
factor might arguably be so significant a cause of inju ry to the industry that the competent authority
will need to perform a detailed and reasoned e xplanation of the effects of that factor." 206 In other
cases, "the factor may be contributing to inju ry in a considerably less significant fashion." 207 For the
United States, in "those circumstances, the competen t authority could reasonably reference the factor
and indicate in a reasonable fashion why the factor does not explain the injury caused to the pertinent
industry."208
(b) Conditions of Competition in the US Tyres Market
77. The United States argues that the Panel did not err in finding that the USITC properly
assessed the conditions of competition in the US mark et. According to the United States, the Panel
correctly rejected China's contention that co mpetition in the overall US market was "highly

202United States' appellee's submission, para. 128 (referring to Appellate Body Report, US – Lamb ,
paras. 162-181; and Appellate Body Report, US – Hot-Rolled Steel, paras. 216-236).
204United States' appellee's submission, para. 132 (referring to Panel Report, paras. 7.176 and 7.177).
205United States' appellee's submission, para. 132 (referring to Appellate Body Report, US – Upland
Cotton, para. 436).

attenuated" because of the "extremely limited co mpetition" between Chinese and domestic tyres in
tier 1 of the US replacement market and in the OEM market.209
78. More specifically, the United States posits that the Panel correctly concluded that there was
"significant competition" in the replacement market, given the "significant quantities" of both US and
Chinese tyres that were shipped into tie rs 2 and 3 of that market in 2008. 210 Although market
participants generally agreed that the US repla cement market could be divided into three broad
segments or tiers, the record evid ence suggested there were no "clear dividing lines" among the tiers
because there was no consensus among producers, importers, and purchasers on which tyre brands
belonged in the different tiers.211 Therefore, there was no reason for the USITC, or for the Panel upon
reviewing this evidence, to find that the products so ld in the various tiers were so distinct from one
another that they were "unlikely to compete in a meaningful way across the tiers that characterized the
replacement market".212 The United States adds that the Panel did not rely on the "mere presence" of
Chinese imports in the US replacement market, as suggested by China, because both the USITC and
the Panel determined that the "significant presence" of Chinese tyres in tiers 2 and 3 suggested that
there was "significant competition" in the replacement market.213
79. The United States maintains further that it was reasonable for the USITC to rely on China's
growing presence in the US OEM market in support of its finding that co mpetition in the overall
US market was significant. The United States em phasizes that Chinese imports increased their share
of the OEM market consistently over the period of investigation, growing from a "minimal 0.8
percent of the market in 2004 to a no longer minimal level of 5.0 percent in 2008", while the domestic
industry consistently lost market share over that period. 214 Because these trends were consistent with
the trends in the overall US market, the USITC was entitled to rely on import trends in the OEM
market as support for its analysis of the conditions of competition in the US market. 215 In addition,
the Panel correctly rejected China's argument th at competition in the OEM market was "negligible"
on the basis of evidence suggesting that Chin ese imports grew from 121,000 tyres in 2004 to
2.3 million tyres in 2008 in that market.216

211United States' appellee's submission, para. 151 (referring to USITC Report, pp. 15 and 27).
213United States' appellee's submission, para. 153 (quoting Panel Report, para. 7.195; and USITC
Report, p. 27).
214United States' appellee's submission, para. 154 (referring to USITC Report, Table V-2 at p. V-3).
215United States' appellee's submission, para. 154 (referring to USITC Report, p. 27).

80. Finally, the United States rejects China's argu ment that the Panel was only able to uphold the
USITC's analysis by creating its "own, new analysis" of the data.
217 Instead, the United States
maintains that the Panel performed a "detailed a nd thorough" review of the USITC's findings, and
correctly concluded that the USITC reasonably dete rmined that there was "significant competition"
between Chinese and domestic tyres in tiers 2 and 3 of the US replacement market; that there was no
"clear dividing line" between the tiers of the repl acement market, with the result that Chinese imports
in one tier could impact volumes and prices of domestic tyres in another tier; and that Chinese tyres
were taking a "growing, though smaller" share of the OEM market.218
(c) Correlation between Rapidly Increasing Imports and Material Injury
81. The United States argues that the Panel did not err in finding that the USITC properly
established a coincidence between increases in Ch inese imports and declines in the performance
indicators of the US domestic industry. For the Un ited States, the Panel properly concluded that the
USITC's analysis of correlation was both reasoned and adequate, and fully consistent with the record
data. The United States rejects China's arguments that Paragraph 16.4 of the Protocol required the
Panel to apply "a heightened standard of revi ew" in its examination of the USITC's correlation
analysis, and to determine whether there was a strong correlation in the "degrees of relative
magnitude" of the changes in imports and industry trends. 219 The United States recalls that both the
Appellate Body and panels have made clear that an analysis of "coincidence of trends" requires only
an assessment of the temporal relationship betw een upward movements in imports and downward
movements in the injury factors.220
82. The United States maintains that both the Panel and the USITC properly found that there was
a clear overall "coincidence" in trends between rapidly increasing imports and their effects on the
domestic industry. 221 The United States emphasizes that in jury indicators such as market share,
production, capacity, shipments, net sales, number of production-related workers, hours worked, and
wages declined in every year of the period of investigation. 222 According to the United States,
improvements in the profitability, productivity, and capacity utilization of the domestic industry

217United States' appellee's submission, para. 156 (quoting China's appellant's submission, para. 321).
218United States' appellee's submission, para. 156 (referring to Panel Report, paras. 7.185-7.195
and 7.201-7.205; and USITC Report, pp. 21 and 27).
219United States' appellee's submission, para. 159 (referring to China's appellant's submission, paras. 30
and 297).
220United States' appellee's submission, para. 160 (referring to Panel Report, paras. 7.230-7.233, in turn
quoting Panel Report, Argentina – Footwear (EC) , para. 8.229; Appellate Body Report, Argentina – Footwear
(EC), para. 145; and Panel Reports, US – Steel Safeguards, paras. 10.299 and 10.302).
221United States' appellee's submission, para. 161 (referring to USITC Report, p. 29).
222United States' appellee's submission, para. 161 (referring to USITC Report, pp. 15-18, 23-26, and
Table C-1).

in 2007 do not undermine the Panel's overall coincide nce finding because other injury factors such as
market share, capacity and production level, shipme nts, sales quantities, production-related workers,
hours worked, and wages continued to fall in that same year. 223 With respect to China's arguments
regarding an absence of correlation in 2008, the United States observes that, despite an almost
7% decline in apparent consumption, subject im ports increased by more than 10% over 2007 levels,
while "virtually every injury factor" examined by the USITC fell to its lowest level for the period. 224
The United States dismisses China's argument that the Panel erroneously affirmed the USITC's
"simplistic end-point-to-end-point analysis", because the Panel an d the USITC reviewed year-to-year
trends in imports and industry indicators during the period. 225 The United States adds that the Panel
and the USITC did not rely exclusively on volume- based indicators, which, according to China,
declined as a result of the domestic industry's business strategy. Rather, the Panel and the USITC also
considered other factors such as the impact of imports on the domestic industry's pricing, productivity,
and profitability levels during the period of investigation.226
83. The United States further submits that the Panel did not err in upholding the USITC's finding
that subject imports adversely impacted the domes tic industry's prices and profitability. In the
United States' view, the Panel sufficiently addr essed and rejected China's argument that an
improvement in the COGS/sales ratio in 2007 suggest ed an absence of correlation, and correctly held
that improvements in the profitability of the US do mestic industry in 2007 did not suggest an absence
of correlation, because the domestic industry's operating margins declined in three out of four years of
the period of investigation. 227 In addition, the Panel correctly found that the USITC's finding of
overall coincidence was not invalidated merely be cause "annual movements in every single injury
factor did not precisely track annual movements in subject imports." 228 Moreover, the United States
explains that the USITC reasonably found that "lev els of pervasive underselling" by subject imports
suppressed prices in the US market, thereby i ndicating that there was "significant pricing
competition" in the replacement market. 229 The United States also stresses that subject imports
consistently undersold non-subject imports over the period of investigation.

223United States' appellee's submission, para. 162 (referring to USITC Report, Table C-1) and
para. 163.
224United States' appellee's submission, para. 164 (referring to USITC Report, Table C-1).
225United States' appellee's submission, para. 166 (quoting China's appellant's submission, para. 363;
and referring to Panel Report, para. 7.234).
226United States' appellee's submission, para. 167 (referring to Panel Report, paras. 7.235
and 7.239-7.261; and USITC Report, pp. 23-24).

(d) Other Causes of Injury
84. The United States considers that, in its determination, the USITC properly addressed all of the
factors that could reasonably be considered si gnificant enough to break the causal link between
subject imports and material injury. Moreover, in the United States' view, the Panel properly
examined China's arguments concerning the causal effects of other factors to determine whether these
arguments seriously undermined the USITC's conc lusion that rapidly increasing imports were a
significant cause of material injury to the US tyres industry.

85. With respect to the Panel's "general observati ons", the United States notes that they were not
a necessary component of the Panel's conclusion that the USITC reasonably found that Chinese
imports played an important role in the US plan t closures that occurred in 2006. Yet, they do
"highlight the inherent weaknesses" of China's arguments regarding the US industry's voluntary
withdrawal from low-value production.
230 The United States considers, for example, that the Panel
reasonably questioned why Chinese imports would con tinue to be sold at prices significantly below
those of domestically produced tyres if they were "simply filling a void left by the industry", as China
had suggested.
231 The United States further argues that the record before the USITC showed that the
domestic industry was not turning to Chinese imports because it had made a "voluntary decision to
shift some production to China".
232 Instead, it was turning to these imports because it concluded that
it could no longer compete with low-cost imports from China. The United States concludes,
therefore, that the fact that the domestic industr y was required to turn increasingly to Chinese imports
reflects the injurious effects of the rapidly growing Chinese imports.
(i) The US domestic industry's business strategy – Plant
closures
86. The United States argues that the USITC had an "ample factual foundation" for its conclusion
that Chinese imports played an "important part" in the decisions taken by several US producers to
close their domestic production facilities. 233 For example, as the USITC explained, "imports of tires
from China had been increasing rapidly before Bri dgestone, Continental, and Goodyear announced
the closing of plants in 2006 and 2008." 234 Moreover, the record indicated that "fierce competition"
from "low-cost … Chinese-made tyres" caused Br idgestone to close down its facility in 2006235, while

233United States' appellee's submission, para. 183 (quoting USITC Report, p. 26).
234United States' appellee's submission, para. 183 (referring to USITC Report, p. 26 and Table C-1).

Goodyear closed down its facility in 2006 due to "significant competition from Chinese imports". 236
In support of its argument, the United States contends that, by 2006, Chinese imports were the largest
of two "low-price" sources for tyre imports in the US market. 237 Furthermore, between 2004 and
2006, Chinese imports gained approximately 4.6 pe rcentage points of market share, whereas non-
subject imports gained 2.6 percentage points. 238 This, according to the United States, "suggests that
Chinese imports were having a more significant impa ct" on the US industry's market share than non-
subject imports.239 In addition, these facts supported the US ITC's conclusion that "low-cost imports"
included Chinese imports. The United States further submits that the issue for the Panel was not
whether Chinese imports were the "'sole' or 'primary ' reason" for the material injury but, rather,
whether they were "a significant cause" of such injury.240
87. The United States further argues that, even if factors other than subject imports had some
impact on the plant closure decisions in 2006, this does not undermine in any significant way a
conclusion that Chinese imports played an "important part" in these decisions. 241 Although the
United States disagrees with the Panel's finding that the closure of Continental's plant in Charlotte,
North Carolina, was not a result of competition fro m Chinese imports, the United States recalls the
Panel's finding that the record s howed that Chinese imports "played a significant role in the facility
closures announced by Bridgestone and Goodyear in 2006". 242 These two closures represented a
reduction in the industry's capacity of approximately 30.1 million tyres in 2006, which, according to
the United States, provided sufficient justification for the USITC's finding that the US industry's
overall capacity were "significantly affected" by Chinese imports.
243
(ii) Declines in demand
88. The United States disagrees with China's asserti on that the USITC and the Panel both "failed
to evaluate seriously" demand declines in the US ma rket as a possible alternative cause of injury to
the domestic industry. 244 The United States considers that the USITC properly found that subject
imports had injurious effects independent of any inju ry caused by changes in demand. In its analysis,
the USITC addressed the factors that affected demand in the market and how demand, as measured by

241United States' appellee's submission, para. 192 (referring to USITC Report, p. 26).
242United States' appellee's submission, para. 193 (referring to Panel Report, paras. 7.298-7.310).
244United States' appellee's submission, para. 200 (referring to China's appellant's submission,
paras. 436-469).

apparent US consumption, change d over the period of investigation.
245 The USITC also found that
demand "fluctuated" from 2004 to 2007, but then fell considerably in 2008 in response to the
recession. Moreover, after examining the impact of the 2008 recession on the increasing volumes of
subject imports, and on the volume trends for US production and for non-subject imports, the USITC
determined that the 2008 recession "did not indicat e that the subject imports were not a significant
cause of material injury to the industry".246
89. The United States rejects China's notion of a "c onsistent demand decline" in the US tyres
market over the period of investigation, noting that the record rather indicated "fluctuat[ions]" in
demand, with the "bulk" of the overall decline in consumption occurring during the recession in
2008.
247 The United States contends that the demand changes during the period of investigation did
not explain "to any significant degree" the declin es in the industry's cond ition, as the industry's
performance worsened consistently while Chinese im ports increased consistently, irrespective of the
trends in demand. 248 The United States further submits that it was reasonable for the USITC to find
that the increasing volumes of Chinese imports were necessarily having a considerable effect on the
industry's production, market share, sales, and othe r condition metrics in 2008 that went well beyond
the effects that could be attributed to any demand decline caused by the recession in that year.249
90. The United States disagrees with China that the Panel substituted its analysis for that of the
USITC, arguing that the Panel simply cited to the USITC's findings and the underlying record
evidence in its discussion. The Un ited States also rejects China's argument that demand was "shifting
to all imports in general, not just imports from China".
250 Rather, the United States contends, demand
was "shifting clearly and indisputably to China".251
(iii) Non-subject imports
91. The United States views China's arguments regarding the competitive significance of
non-subject imports as "unfounded" , and contends that China did not identify before the Panel
non-subject imports as a possible "other" factor causing injury to the domestic industry that the

245United States' appellee's submission, para. 201 (referring to USITC Report, p. 15).
246United States' appellee's submission, para. 202 (referring to USITC Report, p. 29).
247United States' appellee's submission, para. 203 (quoting Panel Report, para. 7.339; and USITC
Report, p. 15).
249United States' appellee's submission, para. 207 (referring to USITC Report, p. 26).
250United States' appellee's submission, para. 210 (quoting China's appellant's submission, para. 441).

USITC should have addressed in its analysis. 252 The United States thus considers it "inappropriate"
for China to raise this issue on appeal.253
92. The United States further argues that the US ITC specifically addressed the issue of the
presence of non-subject imports in the market and re asonably found that they did not sever the causal
link between Chinese imports and material injury. Thus, for example, in its discussion of conditions
of competition in the US market, the USITC pointed out that the "quantity of U.S. imports from China
rose each year during the period examined and was 215.5 percent higher in 2008 than in 2004." 254
The USITC explained that these trends stood "in cont rast" to trends for non-subject imports, whose
quantity level "declined in each year since 2005 (after increasing initially in 2005), and was
5.4 percent lower in 2008 than 2004".255 In these circumstances, the United States submits, it was not
particularly surprising that the USITC and the Panel both concluded that the non-subject imports were
not a significant cause of injury to the domestic i ndustry that could "sever the link" between Chinese
imports and material injury.256
93. The United States disagrees with China's asse rtion that, in its analysis, the Panel
impermissibly substituted its own reasoning for that of the USITC. According to the United States,
the Panel instead specifically relied on the USIT C's findings and report, emphasizing the USITC's
findings on the market shares and pricing levels of the Chinese, US, and non-subject tyres on this
issue and "actively engaged with the evidence before it in light of the arguments of the parties".257
94. The United States rejects China's argument that non-subject imports had a more significant
impact on the domestic industry's prices than subject imports in tier 1 of the US replacement market.
The United States submits that, because of the st rong degree of substitutability between the Chinese,
US and non-subject tyres, the sale of significantly lower-priced tyres by one source in that part of the
tyres market can have a significant adverse effect on prices of other competitors in that market
segment, "since purchasers can use the lower price of the Chinese tire[s] to negotiate down prices of
other tires in the market".
258 The United States further points ou t that China focuses exclusively on
one segment of the overall market. Yet, under the Protocol, the issue for the USITC was not whether
Chinese imports in tier 1 of the US replacement ma rket had significant effects on domestic prices in
that tier alone. Instead, the issue before the USITC was whether all of the Chinese tyre imports in the

254United States' appellee's submission, para. 219 (quoting USITC Report, p. 22).
255United States' appellee's submission, para. 219 (quoting USITC Report, p. 22).
256United States' appellee's submission, para. 220 (referring to USITC Report, p. 29; and Panel Report,
paras. 7.364-7.367).
257United States' appellee's submission, para. 222 (referring to Panel Report, paras. 7.364 and 7.365).

US market, including the significant volumes sold in tiers 2 and 3 of the replacement market, were
having significant effects on domestic pr ices for tyres in the entire US market.
259 Moreover, the
United States points out that the USITC also conclu ded that the low prices of Chinese tyres in tier 2
and tier 3 of the market were likely having effects not only on tyres in those tiers, but also on tyres
sold in tier 1 of the market. 260 The United States adds that, even within the OEM market, the record
showed that Chinese imports increased their market sh are, just as they had in the overall US market,
and took market share from the domestic industry, w hose market share declined in that segment. The
United States submits that, in these circumstances, the USITC was not obliged to perform a more
specific analysis of non-subject import competition in the OEM market than it did.261
(iv) Comparative analysis and cumulative assessment
95. The United States submits that the Panel correc tly rejected China's assertion that the USITC
was required to perform a "cumulative" analysis of the effects of declines in demand, non-subject
imports, and the domestic industry's alleged "busin ess strategy" before it could find that Chinese
imports were a significant cause of material injury. 262 Referring to the Appellate Body report in EC –
Tube or Pipe Fittings, the United States asserts that a complain ant is required to identify the "specific
factual circumstances" that warrant the use of a cumulative analysis in any particular case. 263 In the
present case, however, China failed to demonstrate that a collective consideration of other factors was
required. Instead, China's arguments before the Pane l consisted of "a brief statement setting forth its
position on the issue, and two broad assertions about the need for such an analysis". 264 The United
States adds that China did not attempt to provide th e Panel with the more detailed factual discussions
that are included in China's appellant's submission. 265 In these circumstances, the Panel reasonably
rejected China's assertion that both the USITC and the Panel should have assessed whether the
cumulative effects of other factors were signifi cant enough to break the causal link between Chinese
imports and the injury being suffered by the domestic industry.
96. The United States adds that, as the USITC and the Panel both concluded, the record of the
USITC's investigation showed that the industry's a lleged "business strategy" was not a cause of injury

259United States' appellee's submission, para. 224 (referring to USITC Report, pp. 23-24; and Panel
Report, para. 7.195).
260United States' appellee's submission, para. 225 (referring to USITC Report, p. 27).
261United States' appellee's submission, para. 226 (referring to USITC Report, p. 26, Table II-2, and
Figure II-1).
262United States' appellee's submission, paras. 227 and 228.
263United States' appellee's submission, paras. 228 and 229 (referring to Appellate Body Report, EC –
Tube or Pipe Fittings, paras. 191 and 192).
264United States' appellee's submission, para. 229 (ref erring to China's first written submission to the
Panel, paras. 235-238; and China's second written submission to the Panel, paras. 345-347).
265United States' appellee's submission, para. 229 (referring to China's appellant's submission,
paras. 495-500).

to the domestic industry because the industry's de cision to shift supply from the United States to
China was taken in response to price competition from Chinese imports. 266 Similarly, as the USITC
and the Panel also concluded, the record did not indicate that non-subject imports were a significant
cause of the decline in the industry's condition over th e period of investigation. In the light of these
facts, the United States submits that "there was simply nothing for the USITC and the Panel to
collectively assess."
267
97. Finally, the United States rejects China's cont ention that the USITC should have performed a
"comparative analysis" of the effects of the Chin ese imports and the injurious effects of the other
factors allegedly causing injury to the industry. 268 The United States po ints out that China
acknowledges that "the Protocol does not itself require that an authority compare or 'weigh' the causal
effects of various injury factors against one another."269 In addition, China appears to concede that the
Protocol does not require an authority to establish that Chinese imports are the "sole", "primary", or
"most important" cause of injury to the domestic industry.270 The issue in this case, therefore, was not
whether Chinese imports were a more important or mo re significant cause of injury than any other
alleged causes. Rather, the issue was whether th e Chinese imports were a significant, that is, an
important, cause of material injury to the US domestic industry.271
(e) Integrated Analysis
98. With respect to China's argument that the USITC acted improperly by not performing an
"integrated" analysis of the relationship between imports that are increasing rapidly and the condition
of the domestic industry, the United States submit s that the USITC's causation analysis explained
exactly that the rapid increases in Chinese imports we re a significant cause of material injury to the
US domestic industry. 272 The United States further argues that, as the Panel clarified, "the USITC's
entire analysis was designed to establish the clear link between these imports and injury."273

266United States' appellee's submission, para. 230 (referring to USITC Report, pp. 26-27).
268United States' appellee's submission, para. 231 (referring to China's appellant's submission,
paras. 480-482).
269United States' appellee's submission, para. 231 (referring to China's appellant's submission,
para. 480).
272United States' appellee's submission, footnote 730 to para. 231 (referring to China's appellant's
submission, paras. 502-531; and USITC Report, pp. 22-29).
273United States' appellee's submission, footnote 730 to para. 231.

3. Article 11 of the DSU
99. The United States disagrees with China's assertion that the Panel acted in consistently with its
obligations under Article 11 of the DSU in its review of the USITC's determination that imports from
China were "a significant cause" of material injury to the US domestic industry. According to the
United States, China's arguments regarding its clai m under Article 11 "are merely a repetition of its
arguments in respect of the Panel's interpretation of the substantive requirements of the Protocol
regarding causation".274
100. First, the United States disagrees with China's ar gument that the Panel failed to consider the
totality of the evidence on the question of causation. The United States contends that the Panel did
address the entirety of the evidence and arguments before it and, in doing so, conducted a proper
assessment as required by Article 11 of the DSU.275
101. Second, the United States submits that the Panel did not, as China alleges, deliberately
disregard evidence that did not support the conclu sion reached by the USITC. The United States
considers that a panel cannot realistically refer to all pieces of evidence and must be allowed a
"substantial margin of discretion" in how it assesses the evidence before it.276
102. Third, the United States rejects China's argument that the Panel relied on post hoc
clarifications provided by the United States or the an alysis developed by the Panel instead of by the
USITC. The United States maintains that China's arguments are a "mere recitation" of its arguments
on causation, with cross-references to the various sections of its submission addressing conditions of
competition, demand changes, and non-subject imports. 277 The United States emphasizes, however,
that the Panel conducted an objective assessment of th e facts before it. Specifically, with respect to
the alleged use of post hoc rationalization regarding non-subject imports, the United States reiterates
that non-subject imports were dealt with by the US ITC and formed part of the record upon which the
Panel based its analysis.

275The United States further submits that China's reference to the Appellate Body Report in US –
Countervailing Duty Investigation on DRAMS is inapposite. The United States explains that, in that case, the
Appellate Body found that "the pane l had examined whether certain pieces of circumstantial evidence were
sufficient to establish certain conclusions that the invest igating authority had not sought to draw, at least based
solely on those pieces of evidence." The United States submits, however, that this "is not [the] case here".
(United States' appellee's submission, footnote 742 to para. 237 (referring to China's appellant's submission,
para. 567, in turn referring to Appellate Body Report, US – Countervailing Duty Investigation on DRAMS ,
paras. 188-190))
276United States' appellee's submission, para. 239 (referring to Appellate Body Report, EC – Hormones,
para. 138).
277United States' appellee's submission, para. 240 (referring to China's appellant's submission,
paras. 573-577).

103. Fourth, with respect to China's allegation that the Panel acted inconsistently with Article 11 of
the DSU by failing to consider certain arguments that China made before the Panel, the United States
submits that the Appellate Body need not address this allegation, as it is "merely subsidiary" to
China's argument that the Panel failed to apply the correct substantive standard.278
C. Arguments of the Third Participants
1. European Union
104. The European Union does not "take a position on the facts of this case", but rather focuses its
comments on the interpretation of the terms "i ncreasing rapidly" and "significant cause" in
Paragraph 16.4 of Chin a's Accession Protocol. 279 The European Union also makes additional
observations in relation to China's claims under Article 11 of the DSU.
105. On a preliminary basis, the European Union expresses the view that China's appeal is
"entirely dependent" on whether the Panel erred in its interpretation of the terms "increasing rapidly"
and "a significant cause", because China does not ta ke issue with the manner in which the Panel
applied its own interpretation of the law to the facts of this case. 280 Thus, according to the
European Union, the Appellate Body would not be required to examine whether the Panel erred in its
application of the law to the facts of the case were it to uphold the Panel's interpretation of both terms.
However, if the Appellate Body were to decide otherwise, it should only complete the analysis if
factual findings by the Panel or undisputed facts in the record provide a sufficient basis to do so.281
106. In addition, the European Union considers that China's "distinct and stricter" interpretation of
Paragraph 16.4 fails to take into account the most important differences between that provision and
the Agreement on Safeguards and Article XIX of the GATT 1994. 282 The European Union notes that,
unlike Article XIX of the GATT 1994, China's Acce ssion Protocol does not characterize measures as
"emergency actions" that are the result of "unforeseen developments". 283 This, in the European
Union's view, indicates that Section 16 of the Protocol is not "an 'extraordinary' remedy", as suggested
by China. 284 According to the European Union, this is confirmed by the fact that Paragraph 16.4

279European Union's third participant's submission, para. 7.
280European Union's third participant's submission, paras. 5 and 6.
281European Union's third participant's submission, paras. 5 and 6 (referring to Appellate Body Report,
US – Hot-Rolled Steel , para. 235; Appellate Body Report, EC – Hormones , paras. 222ff; Appellate Body
Report, EC – Poultry , paras. 156ff; Appellate Body Report, Australia – Salmon , paras. 117 and 193ff;
Appellate Body Report, US – Shrimp , paras. 123ff; Appellate Body Report, Japan – Agricultural Products II ,
paras. 112ff; and Appellate Body Report, EC – Asbestos, paras. 133ff).
282European Union's third participant's submission, para. 8.
283European Union's third participant's submission, para. 9.
284European Union's third participant's submission, para. 9.

provides for a lower "material injury" standard than the "serious injury" standard that applies under
the Agreement on Safeguards.
285 Thus, viewed in the proper context, the increase in imports required
under the Protocol is "less recent, less sudden, less sharp and less significant" 286 than that required
under the Agreement on Safeguards and Article XIX of the GATT 1994. The European Union adds
that the object and purpose of the Protocol does not support China's restrictive interpretation of it,
because the Protocol constitutes a single "package" of rights and obligations that imposes obligations
on China that are not imposed on other Members under the WTO agreements.287
107. Turning to the interpretation of the term "inc reasing rapidly", the European Union disagrees
with China that the use of the present continuous te nse in Paragraphs 16.1 and 16.4 implies a focus on
the most recent period of investigation. Accord ing to the European Uni on, the present continuous
tense simply indicates that the period of investig ation must be "recent" and that investigating
authorities must consider "trends" in imports. 288 The European Union adds that Paragraphs 16.1
and 16.4 must be interpreted ha rmoniously, and that the Appellate Body has found that language
similar to that contained in Paragraph 16.1 "does not require that imports need to be increasing at the
time of the determination". 289 Moreover, the European Union does not consider that the term
"rapidly" implies an assessment of the "speed or rate" of import increases, because Paragraphs 16.1
and 16.4 clearly admit of rapid import increases in volume terms. For this reason, a decline in the rate
of increase in imports at the end of the period of investigation does not necessarily preclude a finding
that imports are "increasing rapidly".
290
108. In addition, the European Union notes that Section 16 of the Protocol does not impose any
specific methodology on how to determine whethe r rapidly increasing imports are "a significant
cause" of material injury. However, in the Eur opean Union's view, Paragraph 16.4 incorporates the
requirement to conduct a non-attribution analysis, insofar as the impact of other known factors has to
be assessed in order to determine whether rapidly increasing imports can amount to a "significant"
cause. According to the European Union, the u se of the word "significant" before "cause" in
paragraph 16.4 does not imply a stricter causation st andard than the one reflected in Articles 2.1
and 4.2(a) and (b) of the Agreement on Safeguards , which the Appellate Body has interpreted to
require a "genuine and substan tial relationship of cause and effect" between import increases and

285European Union's third participant's submission, para. 10 (referring to Appellate Body Report, US –
286European Union third participant's submission, para. 12 (referring to Appellate Body Report,
Argentina – Footwear (EC), para. 131).
287European Union's third participant's submission, para. 14.
288European Union's third participant's submission, para. 25 (referring to Appellate Body Report,
Argentina – Footwear (EC), paras. 129 and 131).
289European Union's third participant's submission, para. 26 (quoting Appellate Body Report, US –
290European Union's third participant's submission, para. 29.

serious injury.291 Therefore, China's argument that the analysis of the conditions of competition and
correlation should be stricter under the Protocol than under the Agreement on Safeguards is
inapposite. The European Union adds that referen ce to "a" significant cause implies that rapidly
increasing imports must be "one cause but not the only or main" cause of material injury.292
109. Finally, the European Union observes that, s hould the Appellate Body reverse the Panel's
finding on the basis of a violation of Article 11 of the DSU, China has neither requested completion of
the legal analysis, nor provided "a detailed description … as to how uncontested facts or factual
findings made by the panel" would allow the Appellate Body to do so.293
2. Japan
110. Japan's arguments focus on the Panel's interpreta tion of the terms "incre asing rapidly" and "a
significant cause" in Paragraph 16.4 of China's Accession Protocol.
111. Referring to the Appellate Body report in US – Anti-Dumping and Countervailing Duties
(China), Japan submits that the use of the present con tinuous tense "increasing" in Paragraph 16.4 and
the past tense "increased" in Paragraph 16.1 should be given meaning. 294 However, Japan considers
that the use of the present continuous tense in Paragraph 16.4 does not necessarily mean that
authorities have to rely on "the present data and may not rely on … data sometime in the past". 295
Japan does not take any specific position with respect to the appropriate time period to be used as the
proxy for the present situation in this case, but ne vertheless observes that the Panel did in fact
examine 2008 import increases in reaching its conclusion that imports were "increasing rapidly".296
112. In addition, Japan does not agr ee with China that the term "r apidly" requires a focus on the
rates of increase in imports. 297 Japan submits that the express language in Paragraph 16.4 that
increases may be assessed "either absolutely or re latively" undermines China's arguments in this
respect.298 In Japan's view, the term "either absolutely or relatively" in Paragraph 16.4 indicates that

291European Union's third participant's submission, para. 44 (quoting Appellate Body Report, US –
Wheat Gluten, paras. 67 and 69; and Appellate Body Report, US – Lamb, paras. 168 and 179).
292European Union's third participant's submission, para. 46. (original emphasis)
293European Union's third participant's submission, para. 49 (referring to Appellate Body Report, US –
Countervailing Measures on DRAMs , para. 197; and Appellate Body Report, Japan – DRAMs (Korea) ,
para. 142).
294Japan's third participant's submission, paras. 3 and 4 (referring to Appellate Body Report, US –
Anti-Dumping and Countervailing Duties (China), para. 558).
295Japan's third participant's submission, para. 5.
296Japan's third participant's submission, para. 6 (referring to Panel Report, para. 7.93).
297Japan's third participant's submission, para. 10.
298Japan's third participant's submission, para. 11.

the assessment could be based either on an abso lute increase of import volumes over a certain period
of time, or on an increase of the subject imports relative to other sources, such as domestic production
or imports from other countries.
299
113. Japan maintains further that Ch ina's interpretation extends beyond the ordinary meaning of
the term "a significant cause" and therefore "exaggerate[s]" the causation requirement of
Paragraph 16.4.
300 In Japan's view, the article "a" indicates that imports from China may be one of
various factors that cause material injury to the domestic industry. 301 Japan notes further that the
panel in EC – Countervailing Measures on DRAM Chips interpreted the word "significant" as "more
than just a nominal or marginal movement". 302 Japan considers that a determination of whether
imports make "more than just a nominal or marginal" contribution to material injury can only be made
where the investigating authority reviews the effects of other factors. 303 However, because the
Protocol does not set forth any particular methodol ogy for conducting this assessment, it is sufficient
for the investigating authority to provide a reas oned and adequate explana tion for finding that the
effects of Chinese imports on the domestic industry are "more than just nominal or marginal".304
114. The Separate Customs Territory of Taiwan , Penghu, Kinmen and Matsu, Turkey, and
Viet Nam did not file third participants' submissions, but attended the oral hearing in this appeal.
III. Issues Raised in This Appeal
115. The following issues are raised in this appeal:
(a) whether the Panel erred in finding that the USITC properly determined that subject
imports were "increasing rapidly" within the meaning of Paragraph 16.4 of China's
Accession Protocol; and
(b) whether the Panel erred in finding that the USITC properly established that rapidly
increasing imports from China were "a significan t cause" of material injury to the US
domestic industry within the meaning of Paragraph 16.4 of the Protocol, and in
particular:

299Japan's third participant's submission, para. 11.
300Japan's third participant's submission, para. 16.
301Japan's third participant's submission, para. 16.
302Japan's third participant's submission, para. 18 (quoting Panel Report, EC – Countervailing
303Japan's third participant's submission, para. 20.
304Japan's third participant's submission, para. 21.

(i) whether the Panel erred in finding no error in the USITC's assessment of the
conditions of competition in the US market;
(ii) whether the Panel erred in finding that the USITC was entitled to rely on an
overall correlation between rapidly incr easing imports and declines in injury
factors;
(iii) whether the Panel erred in finding that China had failed to establish that the
USITC's analysis improperly attributed injury caused by other factors to
subject imports; and
(iv) whether, in reaching these findings, the Panel acted inconsistently with its
obligations under Article 11 of the DSU.
IV. Introduction
116. Before commencing our analysis of the issues of law and legal interpretations raised in this
appeal, we briefly introduce the relevant provisions of the Protocol on the Accession of the People's
Republic of China to the WTO (the "Protocol" or "China's Accession Protocol").305
A. China's Accession Protocol and Other WTO Agreements
117. China's appeal focuses on the disciplines that apply under Section 16 of China's Accession
Protocol for the application of a transitional pr oduct-specific safeguard mechanism and the Panel's
assessment of whether the United States Interna tional Trade Commission (the "USITC") properly
determined that imports of cer tain passenger vehicle and light truck tyres from China ("subject
imports") were "increasing rapidly" as to be "a significant cause" of material injury within the
meaning of Paragraph 16.4 of the Protocol.
118. Paragraph 1.2 of China's Accession Protocol provi des that the Protocol "shall be an integral
part"306 of the WTO Agreement. As such, the customary rules of interpretation of public international
law, as codified in Articles 31 and 32 of the Vienna Convention on the Law of Treaties (the "Vienna

305WT/L/432.
306This language mirrors Article II:7 of the GATT 1994 and Article XX:3 of the General Agreement on
Trade in Services (the "GATS"). Specifically, Article II:7 of the GATT 1994 states that "[t]he Schedules
annexed to this Agreement are hereby made an integral part of Part I of this Agreement." Similarly,
Article XX:3 of the GATS provides that "Schedules of specific commitments shall be annexed to this
Agreement and shall form an integral part thereof."

Convention")
307, are, pursuant to Article 3.2 of the DSU, a pplicable in this dispute in clarifying the
meaning of Paragraphs 16.1 and 16.4 of the Protocol.308
119. Paragraphs 16.1 and 16.4 of China's Accession Protocol provide as follows:
1. In cases where products of Chinese origin are being imported
into the territory of any WT O Member in such increased
quantities or under such conditions as to cause or threaten to
cause market disruption to the domestic producers of like or
directly competitive products, the WTO Member so affected
may request consultations with China with a view to seeking a
mutually satisfactory solution, including whether the affected
WTO Member should pursue application of a measure under the
Agreement on Safeguards. Any such request shall be notified
immediately to the Committee on Safeguards.
4. Market disruption shall exist whenever imports of an article, like
or directly competitive with an article produced by the domestic
industry, are increasing rapidly, either absolutely or relatively,
so as to be a significant cause of material injury, or threat of
material injury to the domestic industry. In determining if
market disruption exists, the affected WTO Member shall
consider objective factors, including the volume of imports, the
effect of imports on prices for like or directly competitive
articles, and the effect of such imports on the domestic industry
producing like or directly competitive products.
120. Section 16 of China's Accession Protocol sets out the conditions for the imposition of a
product-specific safeguard measure on imports from China and provides that application of this
transitional safeguard mechanism shall be terminated 12 years after the date of China's accession, that
is, in December 2013. The text of Section 16 of th e Protocol resembles to some extent the language
found in provisions of other WTO agreements, such as the Agreement on Safeguards . Yet, there are
important textual and contextual differences between Section 16 of the Protocol and the relevant
provisions of other WTO agreements that will inform our interpretative analysis. In the light of these
differences, and as we explain further below, we vi ew Paragraphs 16.1 and 16. 4 of the Protocol as
establishing a distinct standard for the imposition of safeguard measures as compared to the standards
set out in other WTO agreements.
309
121. An analysis of the particular obligations set out under Section 16 of China's Accession
Protocol must begin with, and focus upon, the actual language used in the Protocol itself, including
the phrases "increasing rapidly" and "a significant cause". The provisions of other WTO agreements

307Done at Vienna, 23 May 1969, 1155 UNTS 331; 8 International Legal Materials 679.
308See Appellate Body Report, US – Gasoline , p. 17, DSR 1996:I, 3, at 16; and Appellate Body
Report, Japan – Alcoholic Beverages II, p. 31, DSR 1996:I, 97, at 122-123.
309See infra, paras. 131-140 and 176-185 of this Report.

provide context, within the meaning of Article 31(1) and (2) of the Vienna Convention , to the
interpretation of Paragraphs 16. 1 and 16.4 of the Protocol. 310 Such context is relevant to the extent
that it sheds light on the interpretative issues to be resolved in this case.311
B. Standard of Review
122. Article 11 of the DSU states in relevant part that:
... a panel should make an objective assessment of the matter before
it, including an objective assessment of the facts of the case and the
applicability of and conformity with the relevant covered agreements,
and make such other findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in the covered
agreements.
123. Article 11 of the DSU sets out the standard of review applicable in WTO panel proceedings.
It is well established that, in examining an inves tigating authority's determination, a panel must
neither conduct a de novo review nor simply defer to the conclu sions of the investigating authority.
Rather, a panel should examine whether the conclusi ons reached by the investigating authority are
reasoned and adequate in the light of the eviden ce on the record and other plausible alternative
explanations.
312 A panel's examination of an investigati ng authority's conclusions must be critical,
and be based on the information contained in the reco rd and the explanations given by the authority in
its published report. 313 As the Appellate Body has explaine d, what is "adequate" will depend on the
facts and circumstances of the particular case and the claims made. 314 I n US – Lamb , the
Appellate Body provided guidance on how pa nels should assess the conclusions of national
investigating authorities under Article 4.2(a) of the Agreement on Safeguards:
A panel must find, in particular, that an explanation is not reasoned,
or is not adequate, if some alternative explanation of the facts is
plausible, and if the competent authorities' explanation does not seem
adequate in the light of that altern ative explanation. Thus, in making
an "objective assessment" of a claim under Article 4.2(a), panels
must be open to the possibility that the explanation given by the

310Appellate Body Reports, China – Auto Parts, para. 151.
311Appellate Body Reports, China – Auto Parts, para. 151.
312See Appellate Body Report, Argentina – Footwear (EC) , paras. 119-121; Appellate Body Report,
US – Cotton Yarn , paras. 74-78; Appellate Body Report, US – Countervailing Duty Investigation on DRAMS ,
paras. 183 and 186-188; Appellate Body Report, US – Hot-Rolled Steel, para. 55; Appellate Body Report, US –
Lamb, paras. 101 and 105-108; Appellate Body Report, US – Steel Safeguards , para. 299; Appellate Body
Report, US – Wheat Gluten , paras. 160 and 161; Appellate Body Report, US – Softwood Lumber VI
(Article 21.5 – Canada), para. 93; and Appellate Body Report, US – Anti-Dumping and Countervailing Duties
(China), para. 516.
313See Appellate Body Report, US – Lamb, para. 106.
314Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 93.

competent authorities is not reasoned or adequate.
315 (original
emphasis)
124. In articulating the standard of review that it a pplied in this dispute, the Panel referred to, and
quoted from, the above guidance of the Appellate Body, and made certain additional statements.
Importantly, the Panel recalled that the standard of review to be applied by a panel in a given case is
also a function of the substantive provisions of the specific covered agreement that is at issue in the
dispute, and thus "must be understood in the ligh t of the obligations of the particular covered
agreement at issue".316 The Panel noted that, under Paragra ph 16.4 of China's Accession Protocol, an
investigating authority is required to "consider objective factors" in determining whether market
disruption exists, and that, under Paragraph 16.5, the importing Member "shall provide written notice
of the decision to apply a measure, including the reasons for such measure". 317 The Panel further
observed that "a panel's standard of review is nece ssarily distinct from the substantive and procedural
obligations of the investigating authority." 318 On this basis, the Panel considered that, in order to
review whether the reasoning of the USITC was ad equate, the Panel was required to "assess whether
the reasoning provided by the USITC in its determin ation seem[ed] adequate in light of plausible
alternative explanations of the record evidence or data advanced by China in this proceeding." 319 The
USITC made an affirmative determination that certain passenger vehicle and light truck tyres from
China are being imported into the United States in such increased quantities or under such conditions
as to cause market disruption.
320 In the present case, the Panel was therefore required to assess
whether the USITC provided a reasoned and adequate explanation to support this determination.321
125. The participants do not contest the Panel's articulation of the standard of review to be applied
in assessing claims brought under Section 16 of the Pr otocol. In its appeal, China contends, rather,

316Panel Report, para. 7.15 (referring to Appellate Body Report, US – Countervailing Duty
Investigation on DRAMS, para. 184).
317Panel Report, para. 7.18.
318Panel Report, para. 7.18.
319Panel Report, para. 7.18 (referring to, inter alia, Appellate Body Report, US – Lamb, para. 106).
320USITC Report, p. 29.
321USITC Report, p. 29. As noted above in footnote 4 of this Report, the determination of the USITC,
the views of the USITC commissioners, and the "USITC staff report" containing the information and data
gathered by the USITC staff in the investigation are set forth in Certain Passenger Vehicle and Light Truck
Tires from China, Investigation No. TA-421-7, USITC Publication 4085 (July 2009) (Panel Exhibit US-1) (the
"USITC Report"). All six of the USITC commissioners found that subject imports from China were "increasing
rapidly" and that the US tyres industry was "materially injured". (USITC Report, pp. 12, 18 and 45) However,
two of the six USITC commissioners found that market disruption did not exist, because subject imports from
China were not a significant cause of material injury to the domestic industry. ( Ibid., p. 45) These two
commissioners submitted views dissenting from the decision of the majority of USITC commissioners. The
determination of the USITC, the views of the majority , and the separate views of the dissenting commissioners
were accompanied by the USITC staff report. We address the relevance of the separate views of the dissenting
USITC commissioners and the information and data contained in the USITC staff report in paragraphs 211
and 326 of this Report, respectively.

that the Panel erred in its application of the standard of review pre scribed by Article 11 of the DSU,
and as clarified by the Appellate Body in previous disputes.322
V. Increase in Imports
126. Against this background, we turn to the issues ra ised by China in this appeal. We begin our
analysis with China's claim that the Panel erred in finding that the USITC properly determined that
subject imports were "increasing rapidly" within th e meaning of Paragraph 16.4 of China's Accession
Protocol. Because China and the United States offe r conflicting views on the proper interpretation of
the term "increasing rapidly" in Paragraph 16.4, we find it useful to address the meaning of this legal
standard before turning to the specific issues raised by China on appeal.
A. The Meaning of "Increasing Rapidly"
127. China claims that the use of the present continuous tense "increasing" requires investigating
authorities to focus on the most recent past, wher eas the ordinary meaning of the term "rapidly"
implies a focus on the rates of increase in imports. 323 According to China, Paragraph 16.4 provides
specific meaning for the more general langua ge, "in such increased quantities", found in
Paragraph 16.1 of the Prot ocol. China contends that imports must be "increasing rapidly" and not
merely be in an "'increased' state". 324 China also contrasts the "i ncreasing rapidly" standard of
Paragraph 16.4 with the standards contained in other WTO agreements, all of which use the past tense
to provide for an assessment of previous—r ather than current—increases in imports. 325
128. China emphasizes further that the object and purpose of the Protocol supports its contention
that Paragraph 16.4 provides for a higher thr eshold for increases in imports than other
WTO agreements. China notes the Appellate Body's recognition that measures under the Agreement
on Safeguards are "extraordinary" because they restrict "fair" trade. 326 China stresses that the
Protocol similarly allows for the restric tion of "fair" trade; however, unlike the Agreement on
Safeguards, it further allows for the derogation of the most-favoured nation ("MFN") principle,
because it provides for the application of trade-rest rictive measures exclusively against China. For

322China refers to, for example, the Appellate Body Report, US – Countervailing Duty Investigation on
DRAMS, para. 188; Appellate Body Report, US – Lamb, paras. 148 and 149; Appellate Body Report, US –
Wheat Gluten , paras. 160-162; and Appellate Body Report, US – Anti-Dumping and Countervailing Duties
(China), para. 526. (China's appellant's submission, paras. 557-564)
323China's appellant's submission, paras. 58 and 59.
325China's appellant's submission, paras. 64-66.
326China's appellant's submission, para. 81 (quoting Appellate Body Report, Argentina – Footwear
(EC), paras. 94 and 95).

China, this "'extra'-extraordinary" nature of measures under the Protocol must be taken into account in
the interpretation of the distinct "increasing rapidly" standard provided in Paragraph 16.4.
327
129. The United States responds that the text of Paragraph 16.4 does not support the "increasing
rapidly" standard articulated by China. For the Un ited States, the absence of any explicitly prescribed
period of investigation in Paragraph 16.4 suggests th at investigating authorities have the discretion to
select any period, provided that it allows for an assessment of import increases during a "recent
period".328 The United States argues further that the or dinary meaning of the term "rapidly" ("with
great speed" or "swiftly") does not embody a "comparative or relative concept" 329, and that, for this
reason, rates of increase in imports are not relevant . In the United States ' view, the standards for
import increases articulated by other covered agreem ents are significantly different from the specific
standard provided for under the Protocol, and therefore are of limited contextual relevance.330
130. Moreover, the United States argues that the object and purpose of the Protocol does not
support a "heightened standard" for import increases. 331 According to the United States, the
Appellate Body's conclusion that a safeguard meas ure is an "extraordinary remedy" stems from the
express reference to "emergency actions" and "unforeseen developments" in the text of Article XIX of
the GATT 1994, and neither of these terms are present in the text of Section 16 of the Protocol. 332
The United States also emphasizes that the "material in jury" threshold provided for in the Protocol is
lower than the "serious injury" threshold under the Agreement on Safeguards , thus undermining
China's argument that the Protocol provides for a higher threshold for import increases than the
Agreement on Safeguards.333
131. Paragraph 16.1 sets forth the general conditio ns for the imposition of product-specific
safeguard measures provided for unde r Section 16 of the Protocol. It establishes that such measures
may be applied in cases "where products of Chinese origin are being imported into the territory of any
WTO Member in such increased quantities or under such conditions as to cause or threaten to cause
market disruption to the domestic producers of like or directly competitive products".

329United States' appellee's submission, para. 62 (referring to China's appellant's submission,
paras. 113, 117, and 118).
330United States' appellee's submission, paras. 64-68.

132. Paragraph 16.4 specifies the conditions in which "market disruption" within the meaning of
Paragraph 16.1 shall exist, in the following terms:
Market disruption shall exist whenever imports of an article, like or
directly competitive with an ar ticle produced by the domestic
industry, are increasing rapidly, either absolutely or relatively, so as
to be a cause of material injury, or threat of material injury to the
domestic industry. In determini ng if market disruption exits, the
affected WTO Member shall consider objective factors, including the
volume of imports, the effect of imports on prices for like or directly
competitive articles, and the effect of such imports on the domestic
industry producing like or directly competitive products. (emphasis
added)
133. The first sentence of Paragraph 16.4 thus estab lishes that market disruption shall exist when
the following three conditions are met. First, imports from China are "increasing rapidly, either
absolutely or relatively". Second, the domestic industry producing like or directly competitive
products is materially injured, or threatened with material injury. Third, rapidly increasing imports
are "a significant cause" of material injury to the dom estic industry, or threat thereof. This part of
China's appeal concerns only the first condition, which constitutes a threshold requirement for the
existence of "market disruption" within the meaning of Paragraphs 16.1 and 16.4 of the Protocol.
134. We begin our analysis with the ordinary me aning of the term "increasing rapidly". The
ordinary meaning of the verb "increase" is to "m ake or become greater in size, amount, duration or
degree".
334 As noted by China, when specifying th e conditions under whic h products "are being
imported in such increased quantities" under Pa ragraph 16.1, Paragraph 16.4 uses the present
continuous tense "are increasing". In our view , the use of the present continuous tense "are
increasing" connotes import increases that are still in progress at the present time. 335 The use of the
present continuous tense "are increa sing" also suggests that imports follow an upward trend, in that
they have increased in the past and continue to increase at present.
135. The first sentence of Paragraph 16.4 employs th e adverb "rapidly" to describe the nature of
increases in imports that could give rise to "marke t disruption". The ordinary meaning of the term
"rapid" is "with great speed, swift, developed or completed within a short time". 336 Therefore, the
adverb "rapidly" refers both to the speed with whic h, and to the short period of time in which, such

334Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University
Press, 2002), Vol. 1, p. 1350.
335However, as noted in paragraph 146, infra, since investigating authorities do not have access to real-
time import data, they must review imports over a suff iciently recent period, whic h is used as a proxy for
present imports.
336Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University
Press, 2002), Vol. 2, p. 2465.

increase is occurring. Thus, the ordinary meaning of the term "increasing rapidly" seems to suggest
that imports are presently becoming greater in amount or degree, at great speed or swiftly, and within
a short period of time.
136. Paragraph 16.4 further provides that market di sruption exists where imports are increasing
rapidly "either absolutely or relatively ". This suggests that either an absolute or a relative increase
may be relevant in determining whether imports ar e increasing "rapidly" within the meaning of that
provision. In our view, a rapid increase in absolute terms occurs when the volume of imports
increases significantly over a short period of time. Paragraph 16.4 provides no express guidance as to
which benchmarks may be used in assessing whet her imports are "increasing rapidly" in relative
terms. However, to the extent that Paragraph 16.4 defines "market disruption" with reference to
imports that are increasing rapidly "so as to be a significant cause of material injury … to the
domestic industry", any benchmark that compares in creases in imports from China vis-à-vis relevant
indicators of the domestic industry, such as consump tion (that is, market share) or production, could
be appropriate. Therefore, imports will be increasing "rapidly" in relative terms when the share of
imports from China relative to consumption or other relevant benchmarks increases significantly over
a short period of time.
137. Paragraph 16.4 must be read together with Paragraph 16.1, which establishes that market
disruption may arise where products from China "are being imported … in such increased quantities"
as to cause market disruption. In our view, Paragr aph 16.1 imparts two distinct elements that are
relevant for the interpretation of Paragraph 16.4. First, Paragra ph 16.1 requires that Chinese products
"are being imported ". The fact that Paragraph 16.1, li ke Paragraph 16.4, employs the present
continuous tense further buttresses our conclusion that the term "increasing rapidly" in Paragraph 16.4
connotes increases in imports that continue at th e present time. Similar language contained in
Article 2.1 of the Agreement on Safeguards ("is being imported") was in terpreted by the Appellate
Body in Argentina – Footwear (EC) as implying that the increase in imports "must have been sudden
and recent".
337
138. Second, Paragraph 16.1 establishes that Chinese imports are being imported " in such
increased quantities" as to cause market disruption. Reference to " increased quantities" suggests a
comparative assessment, in that imports must have become greater than they once were. The term
"such", in turn, establishes a threshold requirement in relation to the magnitude or degree of import
increases that could cause market disruption under Paragraph 16. 1. Market disruption under
Paragraph 16.1 arises not when Chinese products ar e being imported merely in "increased quantities",

337Appellate Body Report, Argentina – Footwear (EC), para. 130.

but rather "in such increased quantities" as to cause market disruption. This, in our view, suggests
that, in order to cause market disruption, imports mu st be at significantly higher levels than they once
were.338
139. Finally, the "increasing rapidly" threshold of Paragraph 16.4 must be interpreted consistently
with the object and purpose of the Protocol, as refl ected in Section 16 thereof. This object and
purpose is to afford temporary relief to domestic i ndustries that may be exposed to market disruption
as a result of a rapid increase in Chinese imports of like or directly competitive products, subject to
the terms and conditions provided fo r in Section 16. Viewed in this light, Paragraph 16.4 strikes a
particular and distinct balance between, on the one hand, imports that are increasing significantly in a
short period of time and, on the other hand, the requi site level of injury to the domestic industry
("material injury") and the causal link between impor ts that are increasing rapidly and material injury
to the domestic industry (rapidly increasing imports must be a "significant cause" of material injury).
140. In sum, imports from China will be "increasing rapidly" under Paragraph 16.4 of the Protocol
when they are increasing at great speed or swiftly, e ither in relative or absolute terms. Such import
increases must be occurring over a short and recent period of time, and must be of a sufficient
absolute or relative magnitude so as to be a sign ificant cause of material injury to the domestic
industry.
B. China's Claim of Error regarding "Increasing Rapidly"
141. With this interpretative guidance in mind, we tu rn to the specific issu es raised by China on
appeal. China claims that the Panel erred in findi ng that the USITC properly determined that subject
imports met the "increasing rapidly" threshold set forth in Paragraph 16.4 of China's Accession
Protocol. China essentially argues that a decline in the rate of increase in subject imports in the last
year of the 2004-2008 period of investigation indicated that subject imports were not "increasing
rapidly" within the meaning of Paragraph 16.4. China develops three lines of argumentation in

338In the same vein, the Appellate Body found, in Argentina – Footwear (EC) , that the term "in such
increased quantities" in Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994
implied a minimum threshold requirement for the level of imports which would suffice to cause "serious injury"
within the meaning of these provisions. In particular, the Appellate Body found that:
… not just any increased quantities of imports will suffice. There must be
"such increased quantities" as to cause or threaten to cause serious injury to
the domestic industry in order to fulfil this requirement for applying a
safeguard measure. And this language … requires 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".
(Appellate Body Report, Argentina – Footwear (EC), para. 131) (original emphasis))

support of this contention, styled as parallel claims of error in relation to the Panel's interpretation and
its application of the term "increasing rapidly" in Paragraph 16.4 of the Protocol.
1. Most Recent Import Increases
142. First, China claims that the Panel erred in its interpretation of Paragraph 16.4 of the Protocol
in finding that the USITC was not required to focus its analysis on import trends during the most
recent period, in this case, the year 2008. China argu es that the use of the present continuous tense
"increasing" in Paragraph 16.4 requires a focus on th e most recent past, and that the Panel erred in
failing to distinguish between "increasing" imports in Paragraph 16.4, and "increased" imports in
Paragraph 16.1. 339 China adds that the Panel's reliance on the contextual guidance provided in
Article 2.1 of the Agreement on Safeguards was misplaced, insofar as that provision clearly focuses
on past, rather than present, import increases. 340 China further maintains that the more specific
language of Paragraph 16.4 should prevail over the more general language of Paragraph 16.1, and that
interpreting "increasing" as requiring a focus on the mo st recent period is the only interpretation that
can be reconciled with both provisions.341
143. In addition, China claims that the Panel erred in its application of the "increasing rapidly"
standard of Paragraph 16.4 by improperly upholding the USITC's assessment of import increases over
the entire 2004-2008 period of investigation. Accord ing to China, neither the USITC nor the Panel
adequately explained why import increases over the full five-year period of investigation were
relevant to a determination that imports were "increasing rapidly", or should be accorded equal weight
to the most recent import trends. 342 China maintains further that the USITC did not provide an
adequate explanation for its conclusion that impor t increases were "large, rapid, and continuing"
in 2008, and that the Panel filled this gap by providing its own analysis of the 2008 increase viewed in
isolation.343
144. The United States responds that the Panel properly concluded that the USITC was not
required to focus its analysis on the most recent im port increases. For the United States, the absence
of any explicitly prescribed period of investigati on in Paragraph 16.4 suggests that investigating
authorities have the discretion to select any period, provided that it allows for an assessment of import
increases during a "recent period". 344 The United States rejects China's argument that Paragraph 16.4

341China's appellant's submission, paras. 102 and 104.
342China's appellant's submission, paras. 132-134.
344United States' appellee's submission, paras. 46 and 47 (quoting Panel Report, para. 7.88).

should prevail over Paragraph 16.1, and argues instead that the Panel's interpretation gave effect to
both Paragraphs 16.1 and 16.4 of the Protocol.345
145. The United States maintains further that, contrary to China's assertion, both the USITC and
the Panel did in fact examine 2008 import data in arriving at the conclusion that import increases at
the end of the period of investigation were "large, continuing and rapid".346 In its analysis, the USITC
indicated that the highest "quantity" and "aggregate value" of subject imports was in 2008. 347 T h e
United States underscores further that the USITC also expressly reasoned that the two largest
"year-to-year increases" with resp ect to the ratio of the "subject imports to U.S. production" and
"market share of the Chinese imports" occurred "at the end of the period in 2007 and 2008".348
146. We are not persuaded that the use of the present continuous tense "are increasing" in
Paragraph 16.4 of the Protocol requires investig ating authorities to focus exclusively on import
increases that occurred during the most recent past. As noted earlier, the use of the present continuous
tense in both Paragraph 16.4 ("are increasing") and Paragraph 16.1 ("are being imported") connotes an
upward trend in imports that continues at th e present time. However, because investigating
authorities normally do not have access to real-time import data, they have to examine the behaviour
of imports during a sufficiently recent period in the p ast, which is used as a proxy for current imports.
For this reason, the period of investigation selected by the investigating authority must be sufficiently
recent to provide a reasonable indication of current trends in imports. As the Appellate Body noted in
Argentina – Footwear (EC):
[T]he 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.
349 (emphasis added)
147. Thus, the Appellate Body made clear that the use of the present continuous tense in the phrase
"is being imported" requires investigating authoritie s to examine "recent" import trends. For this
reason, investigating authorities must select a period of investigation that is sufficiently recent to

346United States' appellee's submission, para. 55 (referring to USITC Report, p. 12).
347United States' appellee's submission, para. 55 (referring to USITC Report, p. 12).
348United States' appellee's submission, para. 55 (referring to USITC Report, p. 12).
349Appellate Body Report, Argentina – Footwear (EC), para. 130.

provide a reasonable indication of current trends in imports.
350 Or, as the Appellate Body put it, "the
investigation period should be the recent past". 351 However, once the period of investigation is
selected, and is sufficiently recent to provide a r easonable indication of current trends in imports,
nothing in the use of the present continuous tense "a re increasing" in Paragr aph 16.4 and "are being
imported" in Paragraph 16.1 implies that the analys is must be limited to import data relating to the
very end of the period of investigation.
148. Moreover, Paragraph 16.1 establishes that market disruption, as defined in Paragraph 16.4,
may be caused when Chinese products "are being imported … in such increased quantities". As noted
earlier, reference to "in such increased quantities" suggests a comp arative assessment, indicating that
imports must be at significantly higher levels than ear lier in the period of inves tigation. Investigating
authorities would not be able to determine whether imports have increased, and whether the level of
such increase in imports meets the threshold requirement implied by the terms "in such increased
quantities", if they were to focus exclusively on the most recent period.
149. In the light of these considerations, we see no e rror in the Panel's conclusion that "there is
nothing in the use of the present continuous tense in Paragraphs 16.1 and 16.4 of the Protocol that
would require an investigating authority to focus on the movements in imports during the most recent
past, or during the period immediately preceding the authority's decision."352
150. Moreover, the Panel and the USITC did assess 2008 import data in determining that imports
from China were "increasing rapidly" under Paragraph 16.4. The Panel reviewed absolute import data
collected by the USITC for each year of the 2004- 2008 period of investigation and the percentage
increase in imports from China year-on-year between 2005 and 2008. 353 The Panel observed that
there were absolute import increases in each year of the period of investigation, with the greatest
increase occurring in the last two years of the period, when subject imports increased by
14.5 million units and 4.5 million units, respectively.
354 On the basis of this data, the Panel saw no
error in the USITC's conclusion that imports from Ch ina were "increasing rapidly" in absolute terms,
for the following reasons:

350We note that China does not argue on appeal that the USITC selected a period of investigation that is
not sufficiently recent to pr ovide an indication of the current behaviou r of imports. Rather, China argues that
the USITC should have focused its analysis on import data for 2008, which is the mo st recent calendar year of
the five-year 2004-2008 period of investigation. Before the Panel, China also argued that the USITC erred in
not including interim data for the first quarter of 2009 in the period of investigation. The Panel found that the
USITC was not "obliged to collect and incorporate absolute and relative data for the first quarter of 2009 into its
period of investigation". (Panel Report, para. 7.109) China does not challenge this finding on appeal.
351Appellate Body Report, Argentina – Footwear (EC), footnote 130 to para. 130. (original emphasis)
352Panel Report, para. 7.90. (original emphasis)
353Panel Report, para. 7.83.

In absolute terms, imports of subject tires from China increased
throughout the period of investigation and were the highest, in terms
of both quantity and value, in 2008, at the end of the period . The
quantity of subject imports rose by 215.5 percent between 2004 and
2008, by 53.7 percent between 2006 and 2007, and by 10.8 percent
between 2007 and 2008 . The value of subject imports rose even
more rapidly, increasing by 294.5 percent between 2004 and 2008,
by 60.2 percent between 2006 and 2007, and by 19.8 percent between
2007 and 2008.
355 (emphasis added)
151. We agree with the Panel that the USITC's finding that imports were "increasing rapidly" in
absolute terms would have, on its own, satisfi ed the requirements of Paragraph 16.4. 356 Nonetheless,
the USITC took the additional step of reviewing data on import increases in relative terms, and the
Panel accordingly reviewed that analysis. The Pa nel observed that the USITC reviewed both import
data relative to total domestic consumption (that is, market share) and import data relative to domestic
production. The Panel noted the USITC's finding that the relative import data also supported a
finding that subject imports were "increasing rapidly", for the following reasons:
Both the ratio of subject imports to U.S. production and the ratio of
subject imports to U.S. apparent consumption rose throughout the
period examined, and both ratios were at their highest levels of the
period in 2008 . The ratio of subject imports to U.S. production
increased by 22.0 percentage points between 2004 and 2008, with the
two largest year-to-year increases occurring at the end of the period
in 2007 and 2008 . The ratio of subject imports to U.S. apparent
consumption increased by 12.0 percentage points during the period
examined, with the two largest year-to-year increases also occurring
at the end of the period in 2007 and 2008.
357 (emphasis added)
152. The Panel added that both the market share of s ubject imports and the ratio of subject imports
relative to domestic production increased in every y ear of the period of investigation, including in
2008.358 The Panel noted that, over the period of inves tigation, the market share of subject imports
increased by 12%, whereas the market share of non- subject imports remained "more or less stable". 359
Similarly, the ratio of subject imports relativ e to domestic production increased by 22% over the
entire period.360 On this basis, the Panel concluded that "regardless of a focus on imports relative to
market share or relative to domestic production there were increases from year to year and significant
increases over the period of investigation".361

355Panel Report, para. 7.85.
356Panel Report, para. 7.100.
357Panel Report, para. 7.94 (quoting USITC Report, p. 12).
358Panel Report, paras. 7.96 and 7.98.
359Panel Report, para. 7.96.
360Panel Report, para. 7.98.
361Panel Report, para. 7.98.

153. In the light of the above, we do not agree with Ch ina that the Panel erred in its application of
the "increasing rapidly" standard of Paragraph 16.4 by upholding the USITC's assessment of import
increases over the entire 2004-2008 period of investiga tion. In any event, as the Panel noted, the
USITC separately examined absolute and relative im port data for the last two calendar years of the
period of investigation.
2. Rates of Increase in Imports
154. Second, China claims that the Panel erred in its interpretation of Paragraph 16.4 of the
Protocol in finding that the USITC was not required to focus its analysis on the rates of increase in
subject imports. China argues that the term "rapid ly" in Paragraph 16.4 requires that investigating
authorities focus on the rates of increase in subject imports. According to China, the Panel's reference
to the ordinary meaning of "rapidly"—"with great speed" or "swiftly"—was insufficient to dismiss the
relevance of rates of increase, because "[t]here is no way to determine whether an increase is
occurring at a 'great speed' without assessing its rate." 362 China emphasizes that "rapidly" is a relative
concept, which conveys the idea that something is increasing more quickly than something else, and
therefore it is "useful" to assess the rates of increase in subject imports.363
155. Moreover, China claims that the Panel erred in its application of Paragraph 16.4 when it
upheld the USITC's "inadequate" assessment of the rates of increase in subject imports. 364 China
contends that the USITC did not provide an adequate explanation for its conclusion that imports were
"increasing rapidly", despite a decline in the rate of increase in subject imports in 2008. 365 According
to China, the Panel's reasoning that the 2008 rate of increase was in additi on to increases in prior
years was not sufficient, because increases in every year of the period of investigation and market
share gains over the full period of investigation do not establish that increases were "rapid".366
156. The United States responds that the Panel correctly held that the ordinary meaning of the term
"rapidly" does not refer to the "rate" of increase in subject imports. 367 For the United States, the Panel
correctly rejected China's attempt to read into the term "rapidly" a requirement that imports be
increasing not only "swiftly" or "quickly" but also "at an accelerating rate of increase". 368 T h e

364China's appellant's submission, paras. 130, 133, and 134.
365China's appellant's submission, paras. 140 and 144.
366China's appellant's submission, paras. 145 and 146 (referring to Panel Report, para. 7.93).

United States further rejects China's contention that the term "rapidly" necessarily involves a "relative
concept", because the word "rapidly" does not mean "'more swiftly', 'more quickly' or 'with greater
speed'".369
157. In addition, the United States notes that the USITC did examine the rates of increase in
subject imports in the final years of the period of investigation. The United States emphasizes that the
USITC "explicitly" referred in its analysis to "rat es of increase" both in volume and value, and
specifically addressed the rates of increase in the last two years of the period. 370 The United States
adds that the USITC also reviewed the rates of incr ease in the market share of subject imports, and in
their ratio to domestic production, and emphasized th at the "two largest year-to-year increases" in
these metrics occurred in 2007 and 2008.371
158. Like the Panel, we do not find that the ordinary meaning of the term "rapidly" ("with great
speed" or "swiftly") suggests an exclusive focu s on the rates of increase in subject imports. 372 In our
view, the text of Paragraph 16.4 requires that imports—and not the rates of increase in imports—be
increasing "rapidly". While it might be useful for in vestigating authorities to review rates of increase
in imports in assessing whether imports are "increas ing rapidly", we cannot agree with China that
imports will only be increasing "rapidly" when they are increasing at progressively accelerating rates.
To the contrary, we agree with the Panel that a decline in the yearly rate of increase does not
"necessarily preclude a finding that imports are 'increasing rapidly'". 373 This is particularly so
because, under Paragraph 16.4, rapid absolute import increases suffice to es tablish that imports are
"increasing rapidly". Moreover, one might expect th at the rate of increase in imports will normally
decline as imports grow from an increasingly larger base. Yet this alone would not, in our view,
preclude a finding that imports are "increasing rapidly" in absolute terms.
159. As noted earlier, the term "rapidly" in Paragr aph 16.4 connotes both the speed with which,
and the short time period in which, imports are incr easing. Accordingly, imports will be "increasing
rapidly" in absolute terms when the volume of imports increases significantly over a short period of
time. Conversely, imports will be increasing "rapidly" in relative terms when the share of subject
imports relative to production, consumption, or other appropriate benchmarks increases significantly
over a short period of time. Viewed in this light, the term "rapidly" does not require that the rates of
increase in either the volume or market share of subject imports progressively increase over the period

370United States' appellee's submission, paras. 72 and 73.
371United States' appellee's submission, para. 72 (quoting USITC Report, p. 12).
372Panel Report, para. 7.92 (quoting Shorter Oxford English Dictionary , 5th edn, W.R. Trumble,
A. Stevenson (eds) (Oxford University Press, 2002), Vol. 2, p. 2465).
373Panel Report, para. 7.92.

of investigation. This is because the volume or market share of subject imports may still be
increasing significantly over a short period of time in situations where the rate of increase in a given
year decelerates in comparison to previous years. In this sense, we agree with the Panel that the
relative change in either the volume or the market share of subject imports is "a step further away"
from the text of Paragraph 16.4, which requires rapid increases in either the volume or market share of
subject imports.
374
160. In any event, the Panel's analysis indicates that the USITC took sufficient account of the rates
of increase in imports at the end of the period of inve stigation, both in absolute and relative terms. As
the Panel noted, the USITC expressly found that "[t]he quantity of subject imports rose … by
53.7 percent between 2006 and 2007, and by 10.8 percent between 2007 and 2008". 375 The USITC
also expressly noted that "[t]he value of subject imports rose even more rapidly, increasing … by
60.2 percent between 2006 and 2007, and by 19.8 percent between 2007 and 2008". 376 Turning to the
USITC's analysis of relative import data, the Pa nel expressly referred to the USITC's finding that
"[t]he ratio of subject imports to U.S. produc tion increased by 22.0 percentage points between 2004
and 2008, with the two largest year-to-year incr eases occurring at the end of the period in 2007 and
2008."377 Similarly, the Panel also noted the USITC's fi nding that "[t]he ratio of subject imports to
U.S. apparent consumption increased by 12.0 percenta ge points during the period examined, with the
two largest year-to-year increases also occurring at the end of the period in 2007 and 2008."378
161. Moreover, the Panel expressed the view that a decline in the rate of increase in subject
imports in 2008 did not undermine the USITC's findi ng that subject imports were "increasing rapidly"
within the meaning of Paragraph 16.4. The Panel explained that:
… the fact that the 10.8 per cent increase in 2008 was lower than the
increase in the preceding year does no t mean that imports were not
"increasing rapidly" in 2008. An increase of 10.8 per cent in 2008 by
no means precludes a finding that imports are "increasing rapidly",
especially when that increase is asses sed in context. Nor is it a
"modest" increase. In this regard, we recall that the 10.8 per cent
increase in absolute volumes between 2007 and 2008 was in addition
to an increase of 53.7 per cent between 2006 and 2007, which was
in addition to an increase of 29.9 per cent between 2005 and 2006,
which was in addition to an increase of 42.7 per cent between 2004
and 2005. In our view, the 10 .8 per cent increase in absolute
volumes from 2007 to 2008 reinforces the USITC's conclusion that

374Panel Report, para. 7.99.
375Panel Report, para. 7.85 (quoting USITC Report, pp. 11-12).
376Panel Report, para. 7.85 (quoting USITC Report, pp. 11-12).
377Panel Report, para. 7.94 (quoting USITC Report, p. 12).
378Panel Report, para. 7.94 (quoting USITC Report, p. 12).

imports were "increasing rapidly" during the period, and continued to
be "increasing rapidly" at the end of the period.379 (original emphasis)
162. We see no error in the Panel's reasoning. We agr ee, in particular, with the Panel's reasoning
that a decline in the rates of increase in imports towards the end of the period of investigation does
not detract from the USITC's conclusion that imports from China were "increasing rapidly",
particularly when import increases at the end of th e period of investigation remained significant both
in relative and in absolute terms.
3. Rates of Import Increases in Context
163. Third, and finally, China claims that the Panel erred in its interpretati on of Paragraph 16.4 of
the Protocol in finding that the USITC was not re quired to assess the most recent rate of increase in
subject imports relative to the rates of increase in earlier peri ods. China argues that the Panel ignored
the meaning that the words "increasing" and "rapidly " impart to one another. China emphasizes that
"rapidly" is a relative concept and, when qualifyi ng the term "increasing", it indicates that imports
must be increasing more rapidly than some other be nchmark, typically the rate of import increases in
the past. 380 For this reason, the earlier part of the period of investigation provides a "contextual
baseline" for determining whether later rates of incr ease can be considered "rapid", in that they are
greater than prior rates of increase.381
164. China argues further that the Panel erred in a ffirming the USITC's determination, despite the
fact that the USITC failed to provide a reasoned a nd adequate explanation for finding that imports
were "increasing rapidly" when the rate of incr ease in subject imports in 2008 was lower than the
rates of increase in previous years. China char ges the Panel with filling the gap in the USITC's
reasoning by providing its own analysis of the 2008 increases. 382 According to China, neither the
USITC nor the Panel provided an adequate e xplanation as to why import increases could be
considered "rapid" when the rates of increase in market share and in subject imports relative to
domestic production fell in 2008.383
165. The United States responds that the Panel correctly rejected China's argument that an increase
can only be rapid under Paragraph 16.4 where there con tinues to be a "swift progression in the rate of
increase" of imports or "if the rate of increase in the final year does not lessen from the rate of

379Panel Report, para. 7.93.
380China's appellant's submission, paras. 60 and 117.
383China's appellant's submission, paras. 159-163.

increase in the prior year".
384 For the United States, the term "i ncreasing rapidly" does not require an
"accelerating rate of increase" over the period of investigation.385
166. The United States adds that the USITC provided a reasoned and adequate explanation for its
finding that imports were increasing rapidly, both in absolute and relative terms. The United States
stresses that the USITC assessed import increases on a year-on-year basis and the rate of increase in
each year, and emphasized the rapid increases that o ccurred in the last two years of the period of
investigation.386 For the United States, the import data did not contain any "complexities" that
warranted a more detailed analysis by the USITC or the Panel, because "all of the possible metrics"
indicated a "clear and uninterrupted upward trend in import volumes" during the period of
investigation.387
167. We have earlier disagreed with China that the term "increasing rapidly" requires investigating
authorities to focus on import increases during the most recent past, and to focus their analysis on the
rates of increase in imports from China. Instead, we concluded that Paragraph 16.4 requires
investigating authorities to assess import trends over a sufficiently recent period, and to determine
whether imports are increasing significantly, either in absolute or relative terms, within a short period
of time. We have also expressed the view that the de cline in the rate of increase in subject imports in
2008 did not preclude a finding that imports were "inc reasing rapidly", particularly in the light of the
fact that Paragraph 16.4 refers to rapid import in creases either in absolute or relative terms.
Accordingly, we cannot agree with China that the Panel erred in not requiring the USITC to focus on
the rate of increase in subject imports in 2008, and to compare it with the rates of increase earlier in
the period of investigation.
168. In any event, contrary to China's allegation, the Panel's analysis demonstrates that the USITC
provided a reasoned and adequate e xplanation for its conclusion that subject imports continued to
increase rapidly at the end of the period of invest igation. As the Panel noted, the USITC properly
assessed import increases over the last two years of th e period of investigation in finding that "[t]he
quantity of subject imports rose … by 53.7 per cent between 2006 and 2007, and by 10.8 percent
between 2007 and 2008".388 Similarly, turning to the USITC's assessment of relative import data, the
Panel expressly referred to the USITC's finding that both the market share of subject imports and the

omitted)
388Panel Report, para. 7.85 (quoting USITC Report, pp. 11-12). The USITC also expressly noted that
"[t]he value of subject imports rose even more rapidly, increasing by 294.5 percent between 2004 and 2008, by
60.2 percent between 2006 and 2007, and by 19.8 percent between 2007 and 2008." (Ibid.)

ratio of subject imports relative to domestic production increased in every year of the period of
investigation, "with the two largest year-to- year increases occurring at the end of the period in 2007
and 2008".389 Moreover, we cannot agree with China that the Panel impermissi bly filled the gap in
the USITC's analysis simply by noting that the 10.8% increase in imports in 2008 came in addition to
earlier increases in each year of the period of investigation. 390 In our view, the Panel was simply
reciting data contained in the USITC record, and de termining whether the USITC's assessment of that
data supported the USITC's ultimate conclusion that imports from China met the "increasing rapidly"
threshold of Paragraph 16.4.
4. Conclusion
169. On this basis, we find no error in the Panel's finding that the USITC did not fail to provide a
reasoned and adequate explanation for determining that subject imports were "increasing rapidly"
under Paragraph 16.4 of the Protocol. The an alysis above reasonabl y supports the Panel's
endorsement of the USITC's ultimate conclusion that:
... subject imports increased, both absolutely and relatively
throughout the period by significant amounts in each year and, as
stated above, were at their highest levels at the end of the period
in 2008. Whether viewed in absolu te or relative terms, and whether
viewed in terms of the increase from 2007 to 2008 alone or the
increase in the last two full years (o r even the last three years), the
increases were large, rapid, and continuing at the end of the period—
and from an increasingly large base.
391
170. Based on all of the above, we uphold the Panel's finding, in pa ragraph 7.110 of the Panel
Report, that the USITC did not fail to evaluate properly whether imports from China met the specific
threshold under Paragraph 16.4 of China's Accession Protocol of "increasing rapidly".
VI. Causation
171. We turn next to China's appeal of the Panel' s finding that the USITC did not fail to establish
properly that rapidly increasing impor ts from China were "a significant cause" of material injury to
the domestic industry under Paragraph 16.4 of Chin a's Accession Protocol. China argues that this
finding is in error for several reasons. First, Chin a claims that the Panel erred in finding that the
USITC properly assessed the conditions of competition in the US tyres market, which, according to
China, demonstrate the existence of "attenuated" competition between subject imports and domestic
tyres. Second, China claims that the Panel erred in finding that the USITC was entitled to rely on an

389Panel Report, para. 7.94 (quoting USITC Report, p. 12). (emphasis added)
390Panel Report, para. 7.93.
391Panel Report, para. 7.85 (quoting USITC Report, pp. 11-12).

"overall coincidence" between import increases and d eclines in injury factors in finding that subject
imports were a significant cause of material injury to the domestic industry. Third, China claims that
the Panel erred in finding that the USITC did not fail to address adequately the individual and
cumulative effects of other causal factors in findi ng that subject imports were a significant cause of
material injury to the domestic industry. Fu rthermore, China claims that the Panel acted
inconsistently with its obligation to conduct an objective assessmen t of the matter under Article 11 of
the DSU in upholding the USITC's finding that subject imports were a significant cause of material
injury to the domestic industry under Paragraph 16.4 of the Protocol.
172. Before turning to the specific issues raised by China on appeal, we find it useful to address
the meaning of the term "a significant cause" in Paragraph 16.4 of the Protocol, in the light of the
conflicting arguments raised by the participants in this respect.
A. The Meaning of "A Significant Cause"
1. Interpretation
173. China claims that the Panel erred in its interp retation of Paragraph 16.4 of the Protocol in
failing to give meaning to the term "significant". 392 China contends that the inclusion of the term
"significant" to qualify the term "cause" indicates th at Paragraph 16.4 of the Protocol imposes a more
rigorous causation standard than other WTO agreements, which simply refer to "cause". 393 According
to China, Paragraph 16.4 requires a "particularly st rong, substantial, and important causal connection"
between rapidly increasing imports and mate rial injury to the domestic industry. 394 China adds that
the object and purpose of the Protocol weighs in favour of a more rigorous causation standard under
Paragraph 16.4. This is because of the "'extra'-e xtraordinary" nature of the measures provided under
the Protocol, which restrict "fair" trade in a discriminatory manner.395
174. The United States responds that the Panel properl y interpreted the meaning of "a significant
cause" in Paragraph 16.4 of the Protocol. The United States maintains that the ordinary meaning of
the term "significant" does not imply a causation standa rd that is more rigorous than the "genuine and
substantial" causation standard contained in other WTO agreements.396 In the United States' view, the
object and purpose of the Protocol does not sup port a more rigorous causation standard, because
measures under the Protocol are not "emergency actions" resulting from "unforeseen developments",

393China's appellant's submission, paras. 188-210.
395China's appellant's submission, paras. 211-214.
396United States' appellee's submission, paras. 104 and 105.

and because the Protocol provides for a lower injury threshold than the Agreement on Safeguards
("material" rather than "serious" injury).397
175. As we noted above, Paragraph 16.4 specifies the conditions in which products from China
"are being imported … in such increased quan tities" as to cause "market disruption" under
Paragraph 16.1 of the Protocol. Pursuant to Paragr aph 16.4, "market disruption" shall exist where the
following three conditions are met: (i) imports of products from China are increasing rapidly, either
absolutely or relatively; (ii) the domestic industry is materially injured, or threatened with material
injury; and (iii) such rapidly increasing imports are a significant cause of material injury or threat
thereof.398 This part of China's appeal concerns only the last condition.
176. The ordinary meaning of "significant" is "important, notable, [ ] consequential". 399 The term
"significant" qualifies the term "a cause" in Para graph 16.4, thus suggesting that rapidly increasing
imports must be a cause that is "important" or "notable". 400 The term "cause", in turn, has been
interpreted by the Appellate Body in other contexts as "denot[ing] a relationship between, at least, two
elements, whereby the first element has, in some way, 'brought about', 'produced' or 'induced' the
existence of the second element". 401 Thus, Paragraph 16.4 seems to suggest that rapidly increasing
imports must be an "important" or "notable" f actor in "bringing about, producing or inducing"
material injury to the domestic industry.
177. In this respect, we note that Paragraph 16. 4 stipulates that rapidly increasing imports from
China must be "a" significant cause of material inju ry to the domestic industry. This, in our view,
suggests that rapidly increasing imports may be one of several causes that contribute to producing or
bringing about material injury to the domestic industr y. To that extent, we agree with the Panel that
Paragraph 16.4 must be interpreted "in a way that allows for the possibility that [rapidly increasing
imports] is one of several causal factors that together produce or bring market disruption". 402
However, we consider that the inclusion of the te rm "significant" to qualify "a cause" indicates that
rapidly increasing imports must be more than a mere contributing cause to the material injury of the
domestic industry. Rather, the contribution made by rapidly increasing imports to the material injury
of the domestic industry must be important or notable.

397United States' appellee's submission, paras. 109-111.
399Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University
Press, 2002), Vol. 2, p. 2835.
400We do not consider that a "significant" cause can properly be described as a "consequential" cause.
401Appellate Body Report, US – Wheat Gluten , para. 67 (quoting The New Shorter Oxford English
Dictionary, 4th edn, L. Brown (ed.) (Clarendon Press, 1993), Vol. 1, p. 1958).
402Panel Report, para. 7.140.

178. Paragraph 16.4 further establishes that market di sruption exists when imports are "increasing
rapidly … so as to be a significant cause of material injury". As implied by the meaning of the term
"so as to be", that is, "in a manner that"
403, imports can only be "a significant cause" of material injury
when they are "increasing rapidly". In other words, the phrase "so as to be" links the ability of subject
imports to be "a significant cause" of material inju ry to the threshold of imports that are "increasing
rapidly, absolutely or relatively". Reference to "are being imported … in such increased quantities as
to cause … market disruption" in Paragraph 16.1 also links subject imports' ability to cause "market
disruption" to subject imports being imported "in such increased quantities".404
179. The second sentence of Paragraph 16.4 further requi res investigating authorities to consider
"objective factors" in determining whether mark et disruption exists, including the "volume of
imports", the "effect of imports on [domestic] prices", and the "effect of such imports on the domestic
industry". The volume of imports from China and their effects on prices and on the domestic industry
are therefore the factors that an investigating au thority is required to consider in assessing whether
rapidly increasing imports are "a significant cause" of material injury to the domestic industry. The
word "including" in the second sentence of Paragra ph 16.4 suggests that other elements may also be
relevant in determining whether rapidly incr easing imports are a significant cause of market
disruption.
180. In our view, these textual and contextual elem ents suggest that the term "significant"
describes the causal relationship or nexus that mu st be found to exist between rapidly increasing
imports and material injury to the domestic indus try, which must be such that rapidly increasing
imports make an "important" or "notable" contribution in bringing about material injury to the
domestic industry. Such assessment must be carried out on the basis of the objective factors listed in
the second sentence of Paragraph 16.4, such as the volu me of imports, the effect of imports on prices,
and the effect of imports on the domestic industry.
181. In the light of the above, we do not agree w ith China that the inclusion of the term
"significant" to qualify the term "a cause" indicat es that Paragraph 16.4 of the Protocol imposes a
more rigorous causation standard than other WTO agreements, which require that imports "cause"
injury.405 We do not find China's comparison particularly useful, given the distinct causation standard
set forth in the Protocol. In any event, we not e that China's argument is premised on other WTO

403Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University
Press, 2002), Vol. 1, p. 125.
404In US – Steel Safeguards, the Appellate Body noted that similar language contained in Article 2.1 of
the Agreement on Safeguards "clearly links the relevant increased imports to their ability to cause serious
injury". (Appellate Body Report, US – Steel Safeguards, para. 346)
405See, for example, Articles 2.1 and 4.2(a) and (b) of the Agreement on Safeguards; Article 3.5 of the
Anti-Dumping Agreement; and Articles 5 and 15.5 of the SCM Agreement.

agreements requiring that subject imports be no mo re than "a cause" of injury to the domestic
industry. However, the Appellate Body has interpre ted the causation standard reflected in the use of
the term "cause" in other WTO agreements as requi ring a "genuine and substantial relationship of
cause and effect" 406 between import increases and the requisite level of injury. Such a "genuine and
substantial" causal link, in our view, implies a hi gher degree of causality than subject imports being
merely "a cause" of the requisite level of injury to the domestic industry.
182. Furthermore, the context of Paragraph 16.4 does not seem to support China's interpretation of
the requisite causation standard. We note that Paragr aph 16.1 of the Protocol refers to products from
China being imported in such increased quantities as to "cause or threaten to cause" market disruption.
In our view, the fact that the causal link reflected in Paragraph 16.1 is not similarly qualified by the
term "significant" provides contextual support for the interpretation that Paragraph 16.4 does not
establish a more rigorous causation standard, becau se the terms "cause" in Paragraph 16.1 and a
"significant cause" in Paragraph 16.4 must be interpreted harmoniously.
183. In this regard, we also note th at the injury threshold provided for in Paragraph 16.4 of the
Protocol is "material injury", rather than the "seri ous injury" threshold contained in Article 2.1 of the
Agreement on Safeguards . In US – Lamb, the Appellate Body explained that "the word 'serious'
connotes a much higher standard of injury than the word 'material'". 407 Such lower injury threshold
thus seems to imply a lower degree of injurious e ffects caused by rapidly increasing imports to the
domestic industry. This reading also appears to be consistent with the meaning of the term
"disruption" in Paragraph 16.4, that is, "lack of order or regular arrangement; disarray, confused
state"408, which similarly suggests a lower injury threshold than "serious injury".
184. The above observations militate against China's argument that the object and purpose of the
Protocol supports an interpretation of "a significant cause" that implies a "particularly strong,
substantial, and important causal connection"
409 between rapidly increasing imports and material
injury to the domestic industry. China is correct that the Protocol provides for restrictive measures on
"fair" trade, and permits, for a transitional peri od, the application of such measures on Chinese
imports alone. However, as noted above, we consider that the object and purpose of the Protocol, as
reflected in Section 16 thereof, is to afford tempor ary relief to domestic industries that are exposed to

406Appellate Body Report, US – Wheat Gluten , para. 69. See also Appellate Body Report, US –
Softwood Lumber VI (Article 21.5 – Canada) , para. 132; Appellate Body Report, US – Upland Cotton ,
para. 438; Appellate Body Report, US – Steel Safeguards, para. 488; and Appellate Body Report, US – Lamb,
para. 179.
408Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) (Oxford University
Press, 2002), Vol. 1, p. 704.

market disruption as a result of a rapid increase in Chinese imports of like or directly competitive
products, subject to the conditions and requirements provided therein. Therefore, the object and
purpose of the Protocol, as reflected in Section 16 thereof, seems to weigh in favour of an
interpretation pursuant to which temporary relief is available whenever rapidly increasing imports are
making an "important", rather than a "particularly strong [and] substantial"
410, contribution to the
material injury of the domestic industry.
185. In sum, Paragraph 16.4 of the Protocol sets forth a distinct causation standard whereby
rapidly increasing imports must be "a significant cause" of material injury to the domestic industry.
This causation standard requires that rapidly increasing imports from China make an important
contribution in bringing about material injury to the domestic industry. Pursuant to the second
sentence of Paragraph 16.4, such determination is to be made on the basis of objective criteria,
including the volume of imports, the effects of rapidly increasing imports on prices, and the effects of
rapidly increasing imports on the domestic industry.
2. Nature of the Analysis
(a) Conditions of Competition and Correlation
186. China claims that, because Paragraph 16.4 of th e Protocol requires a "particularly strong,
substantial, and important"411 causal link between rapidly increasing imports and material injury to the
domestic industry, investigating authorities are requir ed to conduct a differentiated, more searching
analysis of both the conditions of competition and of the correlation between increasing imports and
declining injury indicators in determining whether such imports are "a significant cause" of material
injury to the domestic industry. According to Ch ina, the analysis of the conditions of competition
must examine the degree of competitive overlap between imported and dom estic products, and the
analysis of correlation must identify a coin cidence both in the "year-by-year changes" 412 and in the
"degree of magnitude" between subject imports and injury factors.413
187. For its part, the United States argues that Paragraph 16.4 of the Protocol does not require
investigating authorities to "refine" their causation analysis by applying a higher degree of scrutiny in
their analysis of conditions of competition or of correlation. 414 The United States underscores that the
Protocol does not set forth any specific methodology for determining whether s ubject imports rise to
the level of "a significant cause" of material injury to the domestic industry. More specifically, with

412China's appellant's submission, para. 232. (original underlining)
413China's appellant's submission, para. 236. (original underlining)

respect to correlation, the Un ited States stresses that Paragr aph 16.4 requires no correspondence
between the magnitude of changes in subject imports and the magnitude of changes in the
performance indicators of the domestic industry.415
188. The Panel found that investigating authorities have the discretion to apply any methodology
to establish causation under Paragraph 16.4, prov ided that it sufficiently addresses the objective
factors listed in the second sentence of Paragraph 16.4, and sufficiently establishes that rapidly
increasing imports are "a significant cause" of material injury. For the Panel, an analysis of the
conditions of competition and of correlation "will often be relevant" and may indeed "prove essential"
to a consideration of "significant cause".416 To the extent that the USITC did rely on the conditions of
competition and on correlation, the Panel said it w ould objectively assess those analyses in reviewing
the USITC's determination of "significant cause".417
189. In relation to the analysis of correlation, th e Panel disagreed with China that a finding of
"significant cause" depended on a finding of correlation between degrees of increase in imports and
degrees of decreases in injury indicators. 418 The Panel reasoned that such "more precise degree of
correlation" was "unrealistic" to expect, especially where other causes of injury might be at work. 419
The Panel added:
While a more precise degree of correlation between the upward
movements in imports and the downward movements in injury
factors might result in a more robust finding of causation, and might
indeed suffice on its own to dem onstrate causation, a finding of
"significant cause" is not excluded simply because an investigating
authority relies on an overall coincidence between the upward
movement in imports and the downward movement in injury factors,
especially if that finding of overall coincidence is combined—as it
was in the present case—with other analyses indicative of
causation.
420
190. On this basis, the Panel concluded that th e USITC "was entitled to support its determination
of 'significant cause' with a finding of overall coincidence between an upward trend in subject imports
from China and downward trends in the relevant injury factors".421
191. On our part, we note that Paragraph 16.4 of the Protocol does not provide specific guidance
with respect to the methodology investigating aut horities may apply in determining whether rapidly

416Panel Report, para. 7.170.
417Panel Report, para. 7.170.
418Panel Report, para. 7.229.
419Panel Report, para. 7.229.
420Panel Report, para. 7.229.
421Panel Report, para. 7.234.

increasing imports are "a significant cause" of materi al injury. Thus, we agree with the Panel that
Paragraph 16.4 gives investigating authorities a certain degree of discretion in selecting the
methodology to assess the existence of a causal link, provided that such methodology establishes that
rapidly increasing imports are "a significant cause" of material injury to the domestic industry, and
considers the objective factors listed in the second sentence of Paragraph 16.4. The Appellate Body
recently noted that "the appropriateness of a partic ular method [to establish causation] may have to be
determined on a case-specific basis, depending on a number of factors and factual circumstances".
422
192. We also agree with the Panel that an analysis of the conditions of competition and of
correlation may prove "essential" in order prope rly to establish causation under Paragraph 16.4. 423
Indeed, rapidly increasing imports from China will be capable of being "a significant cause" of
material injury to the domestic industry only where they are engaged in actual or potential
competition with the like or directly competitive pr oducts in the domestic industry. Similarly, a
temporal coincidence between upward trends in im ports and a decline in the performance indicators
of the domestic industry may evidence the existen ce of a causal link between rapidly increasing
imports and material injury to the domestic indus try. However, as China itself acknowledges, the
examination of the conditions of competition and th e analysis of correlation between movements in
imports and injury factors are merely "analytical t ools" that may assist an i nvestigating authority in
determining whether rapidly increasing imports are "a significant cause" of material injury to the
domestic industry. 424 As such, neither of these analytical tools is dispositive of the question of
whether rapidly increasing imports are "a significant cause" of material injury to the domestic industry
under Paragraph 16.4.
193. In respect of correlation in particular, the Appellate Body agreed with the panel in
Argentina – Footwear (EC) that a correlation analysis focuses on "the relationship between
movements in imports (volume and market share) and the movements in injury factors". 425 T h e
Appellate Body further clarified that:
 … with respect to a "coincidence" between an increase in imports
and a decline in the relevant injury factors, we note that the Panel
simply said that this should "normally" occur if causation is present.
The Panel qualified this statement, however, with the following
sentence:

422Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1376 (referring
to Panel Report, US – Upland Cotton , para. 7.1194; and Panel Report, Korea – Commercial Vessels ,
para. 7.560).
423Panel Report, para. 7.170.
425Appellate Body Report, Argentina – Footwear (EC) , para. 144 (quoting Panel Report, Argentina –
Footwear (EC), para. 8.237). (emphasis added by the Appellate Body)

While such a coincidence by itself cannot prove causation …
its absence would create serious doubts as to the existence of a
causal link, and would require a very compelling analysis of
why causation still is present.
426 (original emphasis; footnotes
omitted)
194. Thus, the Appellate Body made clear that the existence of correlation, though indicative, is by
no means dispositive of the existence of a causal link. Indeed, the Appellate Body considered that the
lack of correlation does not preclude a finding th at a causal link exists, provided that a very
compelling analysis is provided.
195. In our view, China's argument that Paragraph 16.4 of the Protocol requires a more rigorous
scrutiny of the conditions of competition and a stricter correlation between import increases and
decreases in injury factors than other WTO agreements is predicat ed on Paragraph 16.4 requiring a
"particularly strong, substantial, and important" 427 causal link between rapidly increasing imports and
material injury to the domestic industry. For the reasons discussed earlier, we consider that the term
"a significant cause" requires that rapidly increasi ng imports make an important contribution in
bringing about material injury to the domestic i ndustry. This legal standard must inform the
investigating authority's analysis of causation under Pa ragraph 16.4 of the Protocol. As we see it, an
investigating authority may choose to rely—as the USITC did in this case—on both an analysis of the
conditions of competition and an analysis of correla tion to show that rapidly increasing imports are "a
significant cause" of material injury to the domestic industry. A careful analysis of degrees of
competitive overlap and a greater coincidence in the magnitude of import increases vis-à-vis
decreases in injury factors may provide a more robu st basis for a finding of causation. However,
investigating authorities may calibra te their analysis to the partic ular circumstances of the case at
hand, as long as the analysis provides a sufficiently reasoned and adequate explanation for a finding
that rapidly increasing imports are "a significant cause" of material injury. The causation standard set
forth in Paragraph 16.4 will be satisfied where the se analytical tools provide a reasoned and adequate
explanation for the investigating authority's dete rmination that rapidly increasing imports make an
important contribution in bringing about material injury to the domestic industry.

426Appellate Body Report, Argentina – Footwear (EC) , para. 144 (quoting Panel Report, Argentina –
Footwear (EC), para. 8.238). See also Appellate Body Report, Argentina – Footwear (EC), para. 145. In US –
Upland Cotton , the Appellate Body also stated that "mere correlation between payment of subsidies and
significantly suppressed prices would be insufficient, without more, to prove that the effect of the subsidies
[was] significant price suppression." (Appellate Body Report, US – Upland Cotton, para. 451)

(b) Analysis of Other Causes
196. China further argues that "there is an inherent requirement to consider other possible causes
of injury when finding a causal link between impor ts and the condition of the domestic industry."
428
In China's view, the term "significant" in Paragrap h 16.4 of the Protocol "requires more than just
considering other causal factors in some generalized way". 429 In particular, China contends that an
assessment of both the magnitude of "effects" attributable to subject imports and an assessment of the
magnitude of "effects" attributable to "other factors" is required.
430 China asserts that this involves
"separating not just the causes, but also the effects of those causes". 431 Moreover, the investigating
authority is required to determine whether the sep arate effects properly associated with imports from
China rise to the level of "significant" cause.432
197. China recognizes that the Protocol does not set forth any specific method for determining
when the effects properly associated with subject imports rise to the level of being "a significant
cause".433 For China, this situation is therefore like those under other WTO agreements, where the
absence of any specific guidance has meant that WTO Members have discretion as to the "methods
and approaches" they employ. 434 In China's view, one approach would be to "weigh the different
causes".435 China recognizes that Paragraph 16.4 "does not specifically require the effects of imports
from China to be larger than the effects of other causes". 436 Yet, in cases where "the effects of
imports from China are less than the effects of othe r causes, an investigating authority must pause and
consider the situation very carefully" and "must take particular care in fulfilling its duty to provide a
reasoned and adequate explanation" if it conclu des that imports from China are "a significant
cause".437
198. In response, the United States argues that Chin a "relies heavily" on the Appellate Body's
findings in previous disputes, such as US – Lamb and US – Hot-Rolled Steel .438 The United States
points out, however, that the Appellate Body grounded those findings on "express language in
Article 4.2(b) of the Agreement on Safeguards and Article 3.5 of the Anti-Dumping Agreement that

434China's appellant's submission, para. 254 (referring to Appellate Body Report, US – Hot-Rolled
436China's appellant's submission, para. 256. (original underlining)

specifically requires an authority not to attribute to imports the injury cau sed by other factors". 439 In
the present case, the United States ag rees with the Panel that the USITC was required "to perform
some analysis of the effects of other factor s that have caused injury to the industry". 440 Referring to
the report of the Appellate Body in US – Upland Cotton, the United States notes, however, that "when
an agreement does not contain specific non-attribut ion language, an authority has the discretion to
adopt an appropriate and reasonable analysis to assess the effects of other factors."441
199. For its part, the Panel began by noting that the parties agreed that some form of
non-attribution analysis may be requi red under Section 16 of the Protocol. 442 Based on its analysis,
the Panel concluded that "the causal link between ra pidly increasing imports and material injury must
be assessed 'within the context of other possible causal factors'."443
200. As the Panel noted, an analogy can be drawn with the approach in US – Upland Cotton ,
where, notwithstanding the absence of explicit non-a ttribution language in Articles 5 and 6.3 of the
SCM Agreement, both the panel and the Appellate Body found that, where other possible causes are
present, some form of non-attribution analysis is inherent in establishing the causal link between the
subsidy and price suppression and that, if a non-a ttribution analysis does not occur, one cannot
establish with certainty that price suppression was the effect of the challenged subsidy (as opposed to
some other injurious factor). 444 The Appellate Body further found that the absence of expressly
prescribed causation requirements under Articles 5(c) and 6.3(c) suggests that "a panel has a certain
degree of discretion in selecting an appropriate me thodology for determining whether the 'effect' of a
subsidy is significant price suppression".445
201. Although the reasoning of the Appellate Body in that case was based on language found in
other WTO agreements, we consider it apt and instructiv e in this dispute. In particular, it supports the
notion that some form of analysis of the injurious effects of other factors is required to demonstrate
that subject imports are "a significant cause" of in jury within the meaning of Paragraph 16.4 of the
Protocol, despite the absence of language explicitly requiring a consideration of other possible causes

439United States' appellee's submission, para. 12 8 (referring to Appellate Body Report, US – Lamb ,
paras. 162-181; and Appellate Body Report, US – Hot-Rolled Steel, paras. 216-236).
440United States' appellee's submission, para. 132 (referring to Panel Report, paras. 7.176 and 7.177).
441United States' appellee's submission, para. 132 (referring to Appellate Body Report, US – Upland
Cotton, para. 436).
442Panel Report, para. 7.174.
444Panel Report, para. 7.176; Appellate Body Report, US – Upland Cotton, paras. 437 and 438; Panel
Report, US – Upland Cotton, para. 7.1344. See also Appellate Body Report, US – Lamb, para. 179.
445Appellate Body Report, US – Upland Cotton, para. 436.

of injury.
446 As we see it, an investigating authority can make a determination as to whether subject
imports are a significant cause of material injury only if it properly ensures that effects of other known
causes are not improperly attributed to subject imports and do not suggest that subject imports are in
fact only a "remote" or "minimal" cause, rather than a "significant" cause, of material injury to the
domestic industry. For this reason, the significance of the effects of rapidly increasing imports needs
to be assessed in the contex t of other known causal factors.
447 The extent of the analysis that is
required will depend on the impact of other causes that are alleged to be relevant and the facts and
circumstances of the particular case.
B. Conditions of Competition in the US Tyres Market
202. Against this background, we turn to the speci fic issues raised by China on appeal. In this
section, we examine China's claim that the Panel er red in finding that the USITC properly examined
the conditions of competition in the US tyres market in determining that rapidly increasing subject
imports were "a significant cause" of material inju ry to the domestic industry under Paragraph 16.4 of
China's Accession Protocol.
203. China claims that this finding is in error fo r two principal reasons. First, because the Panel
(and the USITC) failed to assess adequately evidence indicating that a majority of US production was
sold in a particular segment (referred to as tier 1) of the replacement market 448, where they faced
"virtually no competition" from subject imports, which were primarily sold in tiers 2 and 3 of that
market.449 Second, because the Panel (and the US ITC) failed to assess adequately evidence
suggesting that domestic producers focused on th e original equipment manufacturer ("OEM")
market450, where competition from subject imports was not significant. According to China, taken

446For example, Article 4.2(a) of the Agreement on Safeguards provides that, "when factors other than
increased imports are causing injury at the same time, such injury shall not be attributed to increased imports".
Article 3.5 of the Anti-Dumping Agreement reads, in relevant part, as follows: "The authorities shall also
examine any known factors other than the dumped imports which at the same time are injuring the domestic
industry, and the injuries caused by these other factors must not be attributed to the dumped imports."
448The replacement market (sometimes al so referred to as "aftermarket ") consists of customers buying
tyres to use as replacement tyres for cars already on the ro ad. It accounts for about 80% of the total US market.
(China's appellant's submission, para. 310 (referring to USITC Report, p. V-3)) Both the Panel and the USITC
accepted that the replacement market generally could be divided into three segments or "tiers", differentiated on
the basis of brand and prices. (See Panel Report, para. 7.197; and USITC Report, p. 27) Tier 1 consists of
major, flagship premium brands; tier 2 consists of secondary, associate, or foreign producer brands; and tier 3
includes private label, mass market, lesser-known brands, and non-branded tyres. (USITC Report, footnote 41 at
p. 9, and p. V-4)
450The OEM market consists of tyres produced for sale to manufacturers of new passenger vehicle and
light trucks. It represents about 20% of the total US market. (See China's appellant's submission, para. 310
(referring to USITC Report, p. V-3))

together, this evidence suggested a "highly attenuated" 451 degree of competition between Chinese
imports and domestic tyres in the US market, and therefore neither the Panel nor the USITC
"provided a reasoned and adequate explanation … [as] to how th ese data could be reconciled with the
ultimate conclusion" that imports from China were "a significant cause" of material injury to the
domestic industry within the meaning of Paragraph 16.4 of the Protocol.452
1. Conditions of Competition in the US Replacement Market
204. China claims that both the Panel and the US ITC failed to assess adequately the existence of
"attenuated competition" between subject imports and domestic tyres in the US replacement
market.453 According to China, the Panel's conclusion that there were no "bright-line distinctions"
between tiers 1, 2, and 3 of the US replacement market did not sufficiently address the attenuated
degree of competition that existed in the US replacement market. 454 China underscores that subject
imports represented less than 1% of total shipme nts in tier 1 of the replacement market, where
US producers concentrated 51% of their shipments. 455 Such "limited presence" of Chinese imports in
tier 1 suggested that a "majority" of US producti on faced "virtually no competition" from subject
imports in the replacement market. 456 Moreover, the Panel's finding that competition in tiers 2 and 3
was more than "vestigial" did not, in China's vi ew, provide a sufficient basis for concluding that
subject imports were "a significant cause" of ma terial injury, because those segments represented
"less than half" of the US replacement market. 457 China further argues that the Panel "went beyond
the proper bounds of review" by providing its own analysis as to why competition between domestic
tyres and subject imports was "significant" in tiers 2 and 3.458
205. The United States responds that the Panel pr operly upheld the USITC's conclusion that
competition between subject imports and domestically produced tyres in the replacement market was
significant. The United States emphasizes that "sig nificant quantities" of both US and Chinese tyres
were shipped into tiers 2 and 3 in 2008, thus s upporting the USITC's conclusion that competition was
significant within those tiers. 459 The United States adds that the Panel correctly upheld the USITC's
conclusion that the unclear demarcations between the tiers of the US replacement market did not

456China's appellant's submission, paras. 318 and 325.
458China's appellant's submission, paras. 322 and 323.

support China's argument that imports in one tier could not impact volumes and prices in another tier
of the market.
460
206. For its part, the Panel noted that the evidence before the USITC suggested that there was no
consensus as to the dividing lines between the tiers of the replacement market, particularly in respect
of the differentiation between tiers 2 and 3. 461 Moreover, the Panel emphasized that, even if tiers 2
and 3 could be "clinically isolated" from tier 1, there remained "significant competition" between
domestic tyres and subject imports in tiers 2 and 3. 462 Therefore, the Panel found no fault with the
USITC's conclusions that "there was no distinct dividing line between … tiers [1, 2, and 3]" 463 and
that "subject imports and domestic products were not focused in different tiers".464
207. We begin our analysis with China's argument that the Panel erred in upholding the USITC's
conclusion that there were no distinct dividing lines between tiers 1, 2, and 3 of the US replacement
market.465 China contends that this finding is in e rror because the Panel did not sufficiently address
the "attenuated" degree of competition that existed in the replacement market. According to China,
the Panel erroneously focused on the question of whet her the distinct tiers of the replacement market
were clearly demarcated, when it should have inst ead focused on how the existence of those segments
affected the USITC's conclusion that competition between imports from China and domestic tyres in
the US replacement market was not attenuated.466
208. At the outset, we note that the Panel (and the USITC) addressed the question of whether
tiers 1, 2, and 3 of the US replacement market we re clearly divided in response to China's argument
that imports from China and domestically produced tyres were focused on different market segments
of the US replacement market. According to China, US tyre production was primarily directed
towards tier 1, whereas Chinese tyres were primarily sold into the low-end tiers 2 and 3.
467 Viewed in
this light, we cannot agree with China to the extent that it suggests that the question of whether the
distinct segments of the replacement market were clearly delineated was not relevant for the Panel's
review of the USITC's assessment of the degree of competition between Chinese and domestic tyres
in the US replacement market. In our view, the f act that the distinct tiers of the US replacement
market were not clearly divided is significant, in sofar as it suggests a greater degree of competitive
overlap across these tiers than otherwise would have existed had such tiers been clearly delineated.

460United States' appellee's submission, paras. 151 and 152.
461Panel Report, para. 7.188 (referring to USITC Report, p. 51).
462Panel Report, para. 7.195.
463Panel Report, para. 7.197.
464Panel Report, para. 7.197.
465Panel Report, para. 7.157.
467Panel Report, para. 7.185.

209. However, a careful review of the Panel's anal ysis indicates that the reasoning articulated by
the Panel in support of the USITC's conclusion that "there was less agreement [among firms
submitting questionnaire responses] as to which tires were included in the two lower-priced
categories"468 refers to the views expressed by the dissenting USITC commissioners . Indeed, in
rejecting China's argument concerning segmentation in the US replacement market, the Panel noted
the dissenting USITC commissioners' observation that questionnaire responses were "mixed as to
where to place associate brands, with some respon ses placing them in tier 2 and others placing them
in tier 3"469, and that there were "wide variations in the est imates for the share of the total U.S. market
accounted for by each tier". 470 For the Panel, these findings suggested that "there was no established
market perception of where the boundari es between tiers 1, 2 and 3 should lie." 471 In response to
China's argument that domestic tyres were princi pally confined to tier 1, whereas subject imports
were concentrated on tiers 2 and 3, the Panel re ferred to the following statement by the dissenting
USITC commissioners:
While not arguing that there is a clear dividing line among each of
the tiers, respondents, in general, contend that competition is
attenuated between domestically produced tires which are primarily
in tier 1 and 2 tires for the OEM and replacement markets, and
subject imports which are primarily in tier 3 tires for the replacement
market.472 (emphasis added by the Panel)
210. The Panel also referred to the testimony of a Ch inese producer who stated that it was "often
useful to group Tier 1 and Tier 2 tires together in the category of 'higher end' tires, since both of these
segments are ones in which brand equity is an important element."473
211. As the above reasoning suggests, the Panel upheld the USITC's conclusion that there were no
distinct dividing lines between tiers 1, 2, and 3 of the US replacement market on the basis of findings
made by the dissenting USITC commissioners , and on the basis of a statement by one Chinese
producer before the USITC. However, as noted earlier, the proper standard of review under
Article 11 of the DSU required the Panel to est ablish whether the USITC provided a reasoned and
adequate explanation for its affirmative finding of market disruption. The separate views of any
dissenting commissioners are not part of the USITC' s determination that market disruption exists.
Accordingly, insofar as the Panel relied on the views of the dissenting USITC commissioners to

468Panel Report, para. 7.186 (quoting USITC Report, p. 27).
469Panel Report, para. 7.188 (quoting USITC Report, p. 51). (emphasis omitted)
470Panel Report, para. 7.189 (quoting USITC Report, p. 52).
471Panel Report, para. 7.190.
472Panel Report, para. 7.191 (quoting statement by the dissenting commissioners, USITC Report,
p. 51).
473Panel Report, para. 7.192 (quoting GITI Post-Hearing Brief (Panel Exhibit China-40), p. 6).
(emphasis added by the Panel)

support its finding that the USITC provided a reasone d and adequate explanation for its determination
that subject imports were a significant cause of ma terial injury under Paragraph 16.4, including the
USITC's assessment of the conditions of competition in the US market, the Panel was in error.
212. Having said that, we note that the Panel's endor sement of the USITC's conclusion that there
were no distinct dividing lines between tiers 1, 2, and 3 of the US replacement market was but one of
the reasons articulated by the Panel in support of its finding that the USITC did not err in finding that
competition between Chinese and domestic tyres in that market was not attenuated.
474 In addition to
finding that the USITC correctly concluded that such tiers were not clearly divided, the Panel further
reasoned that the market share data before th e USITC did not suggest that competition between
domestic and Chinese tyres in the replacement market was attenuated, for the following reasons:
[E]ven if tiers 2 and 3 could be clinically isolated from tier 1, record
evidence demonstrates that ther e remained significant competition
between domestic tyres and subject imports in tiers 2 and 3. In 2008,
U.S. producers and subject imports accounted for 16 and 27.3 per
cent respectively of tier 2 shipments, and 18.6 and 42.4 per cent
respectively of tier 3 shipments. In our view, such U.S. industry
presence in tiers 2 and 3 suggests significantly more than the merely
"vestigial" competition alleged by China. The fact that this data
relates to 2008, after the U.S. industry closed plant producing
lower-value (i.e., tier 2 and 3) tyres, suggests that the competition
between the U.S. industry and subject imports would have been even
greater earlier in the period of investigation.
475 (footnotes omitted)
213. On this basis, although the Panel acknowledge d that imports from China had only a "limited
presence" in tier 1, which accounted for 51.2% of US shipments in the replacement market, the Panel
found that subject imports had "a far greater presen ce in the remainder of the replacement market",
where domestic tyres were also "prevalent".476
214. In our view, the above reasoning reasonably su pports the Panel's conclusion that the USITC
did not err in finding that the presence of both domes tic and Chinese tyres in tiers 2 and 3 suggested
that, overall, there was significant competition in the US replacement market, despite the limited
presence of Chinese imports in the larger tier 1 of that market. As the Panel noted, although there was
some variation in the levels of competition in the distinct tiers of the replacement market, there was

475Panel Report, para. 7.195 (referring to United States ' response to Panel Question 46, para. 24). The
USITC similarly found that "U.S.-produced tires and subject imports from China both have a significant
presence in the Tier 2 and Tier 3 (category 2 and categor y 3) segments of the replacement market, both are also
present in the Tier 1 segment (category 1) and the OEM market, and there is significant competition between the
subject imports and domestic tires in the U.S. market." (USITC Report, p. 27)
476Panel Report, para. 7.196.

significant competition between domestic and Chinese tyres in tiers 2 and 3 477, which in turn
supported the USITC's ultimate finding that subject imports were a significant cause of material injury
to the domestic industry.
215. Accordingly, we are not persuaded that the Pa nel erred in finding that the USITC correctly
assessed the conditions of competition in the US re placement market. Although we consider the
Panel to have fallen into error in referring to views expressed by the dissenting USITC commissioners
on the question of whether the different tiers of the US replacement market were clearly divided, we
do not consider that this error invalidates the Pa nel's ultimate conclusion that the USITC properly
established that there was significant competition between imports from China and domestically
produced tyres in the US replacement market. In our view, this conclusion is supported by the Panel's
reasoning that market share data before the US ITC suggested that both Chinese and domestic tyres
had a significant presence in tiers 2 and 3 of the US replacement market. Accordingly, we do not
consider that the Panel erred in finding that the USITC did not fail to assess adequately the existence
of "attenuated competition" 478 between subject imports and domestic tyres in the US replacement
market.
2. US Producers' Focus on the OEM Market
216. According to China, the Panel erroneously focu sed on increasing trends in Chinese imports to
the OEM market when instead it should have assessed whether co mpetition in that market was
significant.479 China underscores that its share of the OEM market remained below 5% during the
entire period of investigation. 480 For China, the Panel's end-point-to-end-point analysis obscures the
fact that most of China's gain in market share occurred by 2006. 481 China also stresses that non-
subject imports had a larger and increasing share of the OEM market than subject imports, even
during a period of time when they lost market share in the overall US market.482
217. The United States counters that it was reasonable for the USITC to rely on China's growing
presence in the OEM market to support its finding that competition in the overall US market was

477Panel Report, para. 7.195. In this regard, we do not agree with China that the Panel "went beyond
the proper bounds of review" in concluding that there re mained significant competition in tiers 2 and 3 of the
US replacement market. (China's appellant's submission, para. 322) The Panel was simply reciting market share
data before the USITC for those tiers, and critically examining whether this data supported the USITC's
conclusion that competition between domestic tyres and subject imports was significant in the US market.
482China's appellant's submission, paras. 332 and 333.

significant. The United States emphasizes that Ch inese imports increased their share of the OEM
market consistently over the period of investiga tion, while the domestic industry consistently lost
market share.
483 Because these trends were in accordance with the changes in the overall market, the
United States argues, the conditions of competition in the OEM market supported the USITC's overall
finding.484 In addition, the United States points out that a volume of 2.3 million tyres from China,
representing a 5% market share in 2008, could not be considered "negligible".485
218. Although the Panel acknowledged that the OE M sector was more important to domestic
producers than for subject imports, it noted that the proportion of domestic shipments in that segment
was decreasing (from 23.3% in 2004 to 17.7% in 2008), whereas the proportion of subject imports
was increasing (from 0.8% in 2004 to 5% in 2008).
486 In absolute terms, the volume of domestic tyre
shipments to the OEM market over the pe riod of investigation decreased by 46% (from
45,351,000 units in 2004 to 24, 211,000 units in 2008), whereas the volume of subject imports
increased by 1,785% (from 121,000 units in 2004 to 2,281,000 units in 2008). 487 On the basis of this
data, the Panel stated:
Thus, during the period of inves tigation both subject imports and
domestically-produced tyres were present in the OEM sector. Over
the period as a whole, the degree of the resultant competition
between subject imports and domestically-produced tyres in the
OEM sector was increasing, as the relative importance of
domestically-produced tyres decreased, and that of subject imports
increased. Consistent with the trend for OEM and replacement
market shipments overall, the competitive importance of subject
imports in the OEM market became particularly pronounced at the
end of the period of investigation, when despite a fall in apparent
consumption of 16.4 per cent, subject imports were able to increase
by 12.6 per cent, while non-subject imports and U.S. producer
shipments fell by 11.3 and 22 per cent respectively.
488 (footnote
omitted)
Based on this analysis, the Panel rejected China's assertion that "the USITC was required to dismiss
the level of competition from subject imports in the OEM sector as 'negligible'."489
219. We agree with China that the Panel could have provided a more thorough analysis of the data
concerning the level of competition in the OEM ma rket. After noting that both Chinese and domestic
tyres were "present" in the OEM sector, the Panel a ppears to have relied primarily on an end-point-to-

486Panel Report, para. 7.201.
487Panel Report, para. 7.202.
488Panel Report, para. 7.204.
489Panel Report, para. 7.205 (quoting China's first written submission to the Panel, para. 226).

end-point comparison of relative volumes and market share in coming to the conclusion that the
degree of competition between domestically produced tyres and subject imports was "increasing" in
the OEM market. 490 The Panel then sought to buttress this conclusion by juxtaposing the upward
trend in subject imports' market share with downw ard trends in apparent consumption and market
share of both domestic tyres and non-subject imports.491
220. We note that the Appellate Body has expressed reservations about end-point-to-end-point
analyses of the type developed by the Panel in relation to the OEM market. 492 Leaving that aside, the
Panel could have provided a more thorough analysis of the conditions of competition in the OEM
market. In particular, the Panel did not discuss in detail why an "increasing degree of competition" 493
in the OEM market supported its ultimate conclusi on that the USITC was not required to dismiss
competition in that market as "negligible". 494 Having said that, the Panel in this case was called upon
to assess whether the USITC properly concluded that there was significant competition between
subject imports and domestic tyres in the overall US market, rather than in the OEM market alone.
Thus, the relevant question before the Panel w as whether the degree of competition in the OEM
market supported the USITC's conclusion that comp etition between subject im ports and domestically
produced tyres in the overall US market was significant. This is the question to which we turn next.
3. Conditions of Competition in the Overall US Market
221. As a final matter, China claims that the Panel failed to grasp the significance of the combined
effect of attenuated competition in the OEM and re placement markets for its review of the USITC's
assessment of the conditions of competition in the overall US market. According to China, both the
Panel and the USITC failed to explain adequately how subject imports could be a significant cause of
material injury under Paragraph 16.4 of the Protoc ol when approximately 60% of US production went
into tier 1 of the replacement market and the OE M market, where Chinese imports held only a 2-3%
combined market share.495
222. The United States responds that the Panel corr ectly concluded that the USITC reasonably
determined that there was "significant competiti on" between Chinese and domestic tyres in tiers 2

490Panel Report, para. 7.204.
491Panel Report, para. 7.204.
492See, for example, Appellate Body Report, US – Steel Safeguards, para. 354; Appellate Body Report,
Argentina – Footwear (EC) , para. 129; and Appellate Body Report, EC and certain member States – Large
Civil Aircraft, para. 1188.
493Panel Report, para. 7.204.
494Panel Report, para. 7.205.
495China's appellant's submission, paras. 309 and 336.

and 3 of the US replacement market
496; that Chinese imports in different segments could impact
prices and volumes of domestic tyres in other segments because there were "no clear dividing lines"
between the tiers of the replacement market 497; and that subject imports were taking a "growing,
though smaller" share of the OEM market.498
223. We recall our earlier conclusion that the Pa nel did not err in reviewing the USITC's
assessment of the conditions of compet ition in the US replacement market. 499 We have agreed with
the Panel that the USITC properly concluded that the significant presence of both Chinese imports
and domestic tyres in tiers 2 and 3 indicated a su fficient degree of competition in the replacement
market, despite the limited presence of subject imports in tier 1 of that market. However, we have
also found that the Panel could have provided a more thorough analysis of the conditions of
competition in the OEM market.
224. Nonetheless, we observe that the OEM market was generally less important for both US
producers and subject imports than the replacem ent market. As China acknowledges, whereas the
replacement market accounted for more than 80% of the overall US market, the OEM market
represented less than 20% of that market. 500 During the period of investigation, the OEM market
represented from 23.3% to 17.7% of total US producers shipments, and from 0.8% to 5% of subject
imports.501 Therefore, even assuming that China is co rrect in arguing that competition in the OEM
market was not significant 502, the resulting degree of competition between subject imports and
domestic tyres in the larger replacement market w ould have sufficed to establish that competition in
the overall US market was significant. Moreover, the significant presence of Chinese imports in
tiers 2 and 3 of the replacement market, combined with their limited—but growing—presence in tier 1
of the replacement market and in the OEM market , supports the Panel's endorsement of the USITC's
conclusion that there was "significant competition between the subject imports and domestic tires in
the U.S. market".503
225. In our view, China's arguments in respect of "attenuated" competition in the US market are
predicated on its interpretation of the causation standard in Paragraph 16.4 of the Protocol. For China,

496United States' appellee's submission, para. 156 (referring to Panel Report, para. 7.195; and USITC
Report, pp. 21 and 27).
497United States' appellee's submission, para. 156 (referring to Panel Report, paras. 7.185-7.194; and
USITC Report, pp. 21 and 27).
498United States' appellee's submission, para. 156 (referring to Panel Report, paras. 7.201-7.205; and
USITC Report, pp. 21 and 27).
501Panel Report, para. 7.201 (referring to USITC Report, Table V-3).
503USITC Report, p. 27.

the degree of competition in the US market does not support a finding that subject imports are "a
significant cause" of material injury to the domest ic industry because China reads Paragraph 16.4 as
requiring a "particularly strong, substantial, and important" causal link between subject imports and
any material injury to the domestic industry. 504 However, as we explained above 505, the causation
standard of Paragraph 16.4, properly read, requi res that subject imports make an important
contribution in bringing about material injury to the domestic industry. In our view, the degree of
competition between subject imports and domestic tyr es in the US market that was established by the
USITC, and confirmed by the Panel, was sufficient to support a finding that imports from China were
"a significant cause" of material injury to the domestic industry.
4. Conclusion
226. On the basis of the foregoing, we consider that the Panel did not err in finding that the USITC
properly assessed the conditions of competition in the overall US market. Accordingly, we uphold the
Panel's finding, in paragraph 7.216 of the Panel Report, that the USITC did not err in its assessment of
the conditions of competition in the overall US market.
C. Correlation between Rapidly Increasing Imports and Material Injury
227. We turn next to China's claim that the Panel erred in finding that the USITC was entitled to
rely on "overall coincidence" between upwar d movements in subject imports and downward
movements in injury factors in reaching its finding that subject imports were a significant cause of
material injury under Paragraph 16.4 of China's Accession Protocol.
228. First, China argues that the Panel erred in not requiring a more specific degree of correlation
between increases in subject imports and declines in injury factors. According to China, the Panel
was under an obligation under Paragraph 16.4 to analyze carefully "year-to-year relative changes"
506
between subject imports and injury factors. In pa rticular, China contends that the Panel failed to
assess adequately a "disconnect" in the trends betw een 2007 and 2008, when the rate of increase in
subject imports declined, but injury factors su ch as production, shipments, and sales nonetheless
deteriorated.507 China adds that a similar "disconnect" exis ted between declines in the rate of increase
in subject imports and a decline in other injury factors such as operating profits, productivity, capacity
utilization, and research and development. 508 According to China, the Panel failed to address in its
explanation whether these inconsistencies in trends suggested that in jury was caused by other factors,

505Supra, paras. 176 and 177 of this Report.
507China's appellant's submission, paras. 354-358.

such as the 2008 recession and the domestic industry's strategic decision to cede the low-end segment
of the US replacement market.
509
229. Second, China argues that the Panel incorrectly upheld the USITC's finding that subject
imports had adverse effects on domestic prices and profitability. In particular, China stresses that the
cost of goods sold ("COGS")/sales ratio increased between 2007 and 2008, when the rate of increase
in subject imports declined. 510 In China's view, the Panel uncritically accepted the USITC's
conclusion that there was "a sharp increase in this ratio in 2008", and ignored the sharp decrease in the
COGS/sales ratio in 2007. 511 Similarly, the Panel failed to a ddress yearly changes in finding that
"underselling by subject imports generally had a highly detrimental impact on the domestic
industry".512 China emphasizes that, when the margin of underselling was greatest, in 2007, the
profitability of the domestic indus try improved. In contrast, when the margin of underselling
decreased in 2008, the profitability of the domestic industry also declined. 513 China adds that the
margin of underselling remained relatively high in 2008 because domestic higher-value branded tyres
have higher prices than unbranded Chinese tyres. 514 Thus, the Panel did not take into account the
effects of "attenuated competition" on underselling 515, and failed to address adequately the fact that
non-subject imports also undersold domestic tyres.516
230. The United States responds that the USITC's analysis of correlation was both reasoned and
adequate, and sufficiently supported the USITC's conc lusion that subject imports were "a significant
cause" of material injury to the domestic industry. In the United States' view, the Panel correctly held
that Paragraph 16.4 of the Protocol did not require a strict correlation in the degrees of changes in
subject imports and injury factors. 517 The United States emphasizes that injury indicators such as
market share, production, capacity, shipments, ne t sales, number of production-related workers, hours
worked, and wages declined in every year of the period of investigation. 518 Other factors such as
productivity, capacity utilization, operating margins, and operating income fell in three out of

509China's appellant's submission, paras. 364-366.
510China's appellant's submission, para. 368. The COGS /sales ratio expresses the portion of total sales
value that is accounted for by costs directly associated with making a particular good. A higher COGS/sale ratio
therefore indicates that such costs make up a higher por tion of sales value, leaving a smaller margin for selling,
general and administrative expenses, and profits. The COGS/sales ratio therefore provides an indication of
whether the sales value is sufficient to cover the production costs to produce the goods that are sold.
511China's appellant's submission, para. 369 (quoting USITC Report, p. 24).
512China's appellant's submission, para. 371 (quoting Panel Report, para. 7.258). (emphasis added by
China)

four years of the period of investigation. 519 The United States argues that improvements in the
profitability, productivity, and capacity utilization of the domestic industry in 2007 do not undermine
the Panel's overall correlation finding because othe r factors such as market share, capacity and
production levels, shipments, sales quantities, num ber of production-related workers, hours worked,
and wages continued to fall in that same year.520
231. The United States further submits that the Panel did not err in finding that subject imports
adversely impacted the domestic industry's prices and profitability. In the United States' view, the
Panel sufficiently addressed and rejected China's ar gument that an improvement in the COGS/sales
ratio in 2007 suggested an absence of correlation. 521 In addition, the Panel correctly held that
improvements in the profitability of the US industry in 2007 did not suggest an absence of correlation,
because the industry's operating margins declined in three out of four years of the period of
investigation.522 Moreover, the United States explains that the USITC reasonably found that "levels
of pervasive underselling" by subject imports suppressed prices in the US market, thereby indicating
that there was "significant price competition" in the replacement market.
523 In addition, the
United States stresses that subject imports also consistently undersold thir d-country imports over the
period of investigation.524
232. The Panel, for its part, noted that Paragra ph 16.4 did not expressly require a showing of
correlation between material injury and rapidly increasing imports, and described it as a "tool" that the
investigating authority might use to establish causation. 525 The Panel disagreed with China that a
finding of "significant cause" depended on a finding of correlation between varying degrees of
increase in imports and varying degrees of decline in injury indicators. 526 The Panel reasoned that "a
more precise degree of correlation" was "unrealis tic" to expect, especially where other causes of
injury might be at work. 527 The Panel added that a finding of "significant cause" is not excluded
simply because an investigating authority relies on "an overall coincidence" between import increases
and declining injury factors, particularly where that analysis is combined with other analyses
indicative of causation.528

521United States' appellee's submission, paras. 170 and 171.
525Panel Report, para. 7.228.
526Panel Report, para. 7.229.
527Panel Report, para. 7.229.
528Panel Report, para. 7.229.

233. Turning to the correlation analysis conducted by the USITC, the Panel noted that, while
subject imports were "increasing rapidly", the domes tic industry's market share, production, capacity,
shipments, sales quantities, and employment-related f actors declined in every year of the period of
investigation.
529 The Panel added that the domestic indus try suffered declines in operating income,
operating margins, capacity utilization, and productivity in three out of four years of the period of
investigation, and that all, except for capacity utili zation, were at their lowest levels in 2008, when
imports from China were at their highest. 530 For the Panel, these data were sufficient for the USITC
properly to find that there was an overall coinci dence between the upward movement in subject
imports and the downward movement in injury factors.531
234. The Panel further disagreed with China that a decline by 5.3 percentage points in the
COGS/sales ratio in 2007 undermined the USITC's finding that the domestic industry experienced a
"cost-price squeeze" over the period of investigation. The Panel recalled that the USITC had made a
finding of price suppression , and that price increases over the pe riod of investigation were not
sufficient to offset increases in production costs.532 For the Panel, the USITC's conclusion regarding a
"cost-price squeeze" was further confirmed by the "per vasive underselling" by subject imports in the
US market over the period of investigation. 533 The Panel reasoned that the fact that discrete injury
factors—profitability and COGS/sales ratio—impr oved in 2007 did not undermine the USITC's
conclusion concerning overall coincidence between increases in subject imports and declines in injury
factors.534
1. Trend "Disconnect" between 2007 and 2008
235. We begin our analysis with China's claim that the Panel—and the USITC—failed to assess
adequately year-by-year relative changes between s ubject imports and injury factors. According to
China, the following indicators suggest that the performance of the domestic industry improved
in 2007 when the rate of increases in subject imports was hi ghest, at a 53.7% increase over 2006
levels, but deteriorated significantly in 2008 when the rate of increases in subject imports declined to
10.8% over 2007 levels.

529Panel Report, para. 7.234 (referring to USITC Report, pp. 15-18 and 23-26).
530Panel Report, para. 7.235 (referring to USITC Report, Table C-1 at pp. C-3-C-4).
531Panel Report, para. 7.236.
532Panel Report, para. 7.245.
533Panel Report, para. 7.246.
534Panel Report, paras. 7.244 and 7.258.

Volume Disconnects In Correlation (2006/2007 vs. 2007/2008 Period)
Injury Factor Change from '06 to '07 Change from '07 to '08
Production Capacity 18.8 M tire drop-off
(-8.8%)
9.9 M tire drop-off
(-5%)
Production 4.5 M tire drop-off
(-2.4%)
20 M tire drop-off
(-11.1%)
U.S. Shipments 8.1 M tire drop-off
(-5%)
18.9 M tire drop-off
(-12.1%)
Net Sales 10.4 M tire drop-off
(-5.5%)
21 M tire drop-off
(-11.7%)
Source: China's appellant's submission, para. 355 (referring to USITC Report, Table C-1 at pp. C-3-C-4).

Value Disconnects In Correlation (2006/2007 vs. 2007/2008 Period)
Injury Factor Change from '06 to '07 Change from '07 to '08
U.S. Shipments $484 M increase
(+5.1%)
$430 M decrease
(-4.3%)
Net Sales $523 M increase
(+4.8%)
$451 M decrease
(-4%)
Source: China's appellant's submission, para. 358 (referring to USITC Report, Table C-1 at pp. C-3-C-4).

Omitted Factor Disconnects In Correlation (2006/2007 – 2007/2008 Period)535
Injury Factor Change from '06 to '07 Change from '07 to '08
Operating Profits 5.6% pt increase 6.9% pt decrease
Productivity 0.1 tire per hour increase 0.2 tire per hour decrease
Capacity Utilization 6.0% pt increase 5.9% pt decrease
Research and Development 6.4% increase 0.1 percent decrease
Capital Expenditures 3.6% increase 22.1% increase
Source: China's appellant's submission, para. 359 (referring to USITC Report, Table C-1 at pp. C-3-C-4).

236. At the outset, we note that China's argumen t seems premised on its interpretation that
Paragraph 16.4 required the USITC to establish a strict year-by-year correlation between the
magnitude of upward import trends and the magnitude of downward movements in the relevant
performance indicators of the domestic industry. As noted above 536, we see nothing in the text of
Paragraph 16.4 that would require investigating au thorities to establish a stricter degree of correlation
between movements in imports and movements in injury factors in assessing causation under the
Protocol than under other WTO agreements.
237. As the Appellate Body has explained, the analysis of correlation focuses on "the relationship
between movements in imports (volume and market share) and the movements in injury factors". 537

535USITC Report, Table C-1 at pp. C-3-C-4.
536Supra, para. 195 of this Report.
537Appellate Body Report, Argentina – Footwear (EC), para. 144. (original emphasis)

Furthermore, although the Appellate Body has acknowledged that correlation would "normally"
suggest the existence of a causal link, it has made clear that it "cannot by itself prove causation", and
that its absence does not preclude an affirmative cau sation finding provided a "compelling analysis is
present".
538 Hence, a correlation analysis is merely indicative—but not dispositive—of the existence
of a causal link, and may assist an investigating au thority in establishing that subject imports are "a
significant cause" of material injury to the domestic industry under Paragraph 16.4 of the Protocol.
238. Moreover, we agree with the Panel that correla tion between increases in subject imports and
decreases in injury factors "is not an exact science", and that it would be "unrealistic" to require a
strict correlation in the degree of change in subj ect imports and the degree of change in injury
indicators, particularly where other causes of injury are at work.
539 This is particularly so because, in
economic terms, different injury indicators will re spond differently to increases in subject imports,
thereby making it difficult—if not impossible—to estab lish such a precise correlation in the degree of
changes in subject imports and the degree of changes in injury indicators. We agree with the Panel
that, while a more precise degree of correlation between the upward moveme nts in subject imports
and the downward movements in injury factors might result in a more robust finding of causation, a
finding of "significant cause" is not excluded si mply because an investigating authority relies on
overall coincidence between the upward movement in subject imports and the downward movement
in injury factors.540
239. In any event, we are not persuaded that the st atistics put forward by China demonstrate that
the Panel and the USITC failed to assess adequately the relationship between trends in subject imports
and relevant injury indicators in their analyses. We note that China presents data on the relative
change in discrete injury factors as compared to th e immediately preceding year, and compares this
with the relevant change in the rate of increases in subject imports. We do not consider that the
USITC was required to conduct such an analysis. For the reasons articulated above, a correlation
analysis is not one seeking to establish a preci se coincidence between trends in the yearly rates of
increase in subject imports and the yearly rates of change in injury factors. In other words, in its

538Appellate Body Report, Argentina – Footwear (EC) , para. 144 (quoting Panel Report, Argentina –
Footwear (EC), para. 8.238).
539Panel Report, para. 7.229. We understand the Panel' s reference to a "decrease" in injury factors as
referring to a deterioration in the performance of the domestic industry, irrespective of whether the particular
injury factor expresses such deterioration in positive or negative terms.
540Panel Report, para. 7.229.

analysis of correlation, the USITC did not need to establish whether subject imports accelerated over
the period of investigation at the same pace at which the injury factors deteriorated. Moreover, a
proper correlation analysis seeks to establish a temporal coincidence between an upward trend in
subject imports and a downward trend in the performance indicators of the domestic industry, and
does not necessarily require strict simultaneity in th e movements of these indicators. Viewed in this
light, the data compiled by the USITC for the year s 2007 and 2008, and reviewed by the Panel, do not
detract from the USITC's overall finding of coincidence between the upward movement in subject
imports and the downward movement in injury factors, because in that period subject imports
continued to increase
541 and injury indicators continued to deteriorate.
240. Indeed, whereas subject imports increased in both absolute and relative terms in each year of
the period of investigation, including 2008, performance indicators of the domestic industry
consistently deteriorated over the same period. As the Panel correctly observed, factors such as
market share 542, production 543, capacity 544, shipments 545, sales quantities 546, and employment-related
factors547 declined in every year of the period of investigation. 548 Other factors such as operating
income549, operating margins 550, capacity utilization 551, and productivity 552 declined in three out of
four years of the period of investigation, and all, except for capacity utilization, were at their lowest
levels in 2008, when the volume of subject imports was greatest.553

541We recall that the volume of subject imports increased by 53.7% in 2007, and by 10.8% in 2008.
542The domestic industry's market shar e fell in every year of the period of investigation, declining by
13.7% over the entire period. (Panel Report, para. 7.234 (referring to USITC Report, pp. 25-26))
543The domestic industry's production declined in every year of the period of investigation, resulting in
an overall decline of 26.6%. (Panel Report, para. 7.234 (referring to USITC Report, pp. 15-18 and 24))
544The domestic industry's capacity d eclined in every year of the period of investigation, with an
overall decline of 17.8%. (Panel Report, para. 7.234 (referring to USITC Report, pp. 15-18 and 24))
545The domestic industry's US shipments declined in every year of the period of investigation, with an
overall decline of 29.7%. (Panel Report, para. 7.234 (referring to USITC Report, pp. 15-18 and 24))
546The domestic industry's net sales quantities declined in every year of the period of investigation,
with an overall decline of 28.3%. (Panel Report, para. 7.234 (referring to USITC Report, pp. 23-24))
547The domestic industry's employment-related factors fell significantly over the period of
investigation, with the number of production-related workers falling by 14.2%, th e number of hours worked
falling by 17.0%, and wages paid falling by 12.5% over th e entire period. (Panel Report, para. 7.234 (referring
to USITC Report, pp. 17 and 24))
548Panel Report, para. 7.234.
549Operating income fell from US$256.2 million in 2004 to a loss of US$262.8 million in 2008. (Panel
Report, para. 7.235 (referring to USITC Report, Table C-1 at pp. C-3-C-4))
550Operating margins fell by 4.8% over the period of investigation, with declines in three out of four
years of that period. (Panel Report, para. 7.235 (referring to USITC Report, Table C-1 at pp. C-3-C-4))
551Capacity utilization fell by 10.3% over the period of investigation. (Panel Report, para. 7.235
(referring to USITC Report, Table C-1 at pp. C-3-C-4))
552Productivity fell by 11.5% over the period of inves tigation. (Panel Report, para. 7.235 (referring to
USITC Report, Table C-1 at pp. C-3-C-4))
553Panel Report, para. 7.235.

241. Accordingly, we do not consid er that the Panel erred in finding that these data were
"sufficient for the USITC to properly find that th ere was an overall coincidence between the upward
movement in subject imports and the downward movement in domestic industry injury factors."
554
2. Correlation between Import Increases, Domestic Prices, and Profitability
242. We turn to China's claim that the Panel e rred in finding correlation between increases in
subject imports and prices and profitability in the domestic industr y. In particular, China argues that
improvements in the COGS/sales ratio and in the do mestic industry's profitability in 2007 (when the
margin of underselling by subject imports was at its highest) undermined the USITC's conclusion that
domestic producers had suffered a "cost-price squeeze" over the period of investigation. Both of these
indicators, China emphasizes, further deteriorated in 2008, when the margin of underselling by
subject imports declined in comparison to 2007.
243. At the outset, we note that the COGS/sales ratio expresses the portion of total sales value that
is accounted for by costs directly associated with making a particular good. A higher COGS/sale ratio
therefore indicates that such costs make up a highe r portion of sales value, leaving a smaller margin
for selling, general and administrative expenses, and profits. The COGS/sales ratio therefore provides
an indication of whether the sales value is sufficient to cover the production costs of the goods that are
sold. Over the period of investigation, the year ly COGS/sales ratios of US producers were: 84.7%
in 2004; 87.0% in 2005; 89.6% in 2006; 84.3% in 2007; and 90.1% in 2008. 555 China argues that
a 5.3% improvement in the COGS/sales ratio in 2007, when subject imports rose by their highest
margin, suggests a lack of correlation between subject imports and prices of the domestic industry.
244. Addressing the same arguments that China now raises on appeal, the Panel found that "[t]he
fact that annual movements in every single injury factor did not precisely track annual movements in
subject imports does not invalidate the USITC's finding of overall coincidence." 556 Highlighting that
the USITC had found the existence of price suppression over the period of investigation, the Panel
further noted that domestic price increases for that period should be assessed in the light of even
larger increases in industry costs.557
245. We agree with the Panel that an improvement in the COGS/sales ratio in 2007 does not per se
undermine the USITC's finding that subject imports negatively affected domestic prices. As noted
earlier, we do not interpret Paragraph 16.4 of the Protocol as requiring a strict correlation between

554Panel Report, para. 7.236.
555USITC Report, Table III-5 at p. III-13.
556Panel Report, para. 7.244.
557Panel Report, para. 7.245.

yearly upward movements in subject imports and downward movements in all injury factors.
Moreover, the fact that the COGS/sales ratio in creased in all but one year of the period of
investigation reasonably supports, in our view, the Panel's conclusion that the USITC provided a
reasoned and adequate explanation with respect to the occurrence of a "cost-price squeeze" over the
period of investigation.
246. Similarly, the fact that the profitability of the domestic industry improved when margins of
underselling were at their highest in 2007 cannot be determinative as to whether overall there was a
correlation between increases in subject imports and d eclines in injury factors. As the Panel correctly
pointed out, even if the profitability of the domestic industry recovered in 2007, other injury factors
such as domestic capacity, production, shipments, sales, and employment continuously deteriorated in
each year of the period of investigation, including 2007. 558 For the reasons discussed above, we do
not consider that a single injury factor should be determinative, provided that the investigating
authorities' correlation analysis provides a reasoned a nd adequate explanation for a determination that
subject imports are a significant cause of material injury to the domestic industry.
247. In this respect, an analogy can be drawn with the Appellate Body's finding in Argentina –
Footwear (EC) that a decline in each injury factor is not necessary to support a finding that the
domestic industry is seriously injured with in the meaning of Article 4.1(a) of the Agreement on
Safeguards. The Appellate Body explained:
Obviously, any such evaluation will be different for different
industries in different cases, depending on the facts of the particular
case and the situation of the industry concerned. 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.
559
248. Similarly, in this case, we consider that the improvement in discrete injury factors during the
period of investigation does not per se undermine the overall coincidence found by the USITC—and
upheld by the Panel—between increases in subject imports and general downwar d trends in prices.
Moreover, we note that such injury factors dete riorated in all other years of the period of
investigation.

558Panel Report, paras. 7.258 and 7.234.
559Appellate Body Report, Argentina – Footwear (EC), para. 139.

3. Conclusion
249. For these reasons, we uphold the Panel's finding, in paragraph 7.261 of the Panel Report, that
the USITC's reliance on an overall coincidence betw een an upward movement in subject imports and
a downward movement in injury factors reasonably supports the USITC's finding that rapidly
increasing imports from China are a significant cause of material injury to the domestic industry
within the meaning of Paragraph 16.4 of China's Accession Protocol.
D. Other Causes of Injury
1. The Panel's Approach to the USITC's Analysis of Other Causes of Injury
250. The Panel began by noting that, while at the outset of the proceeding, it appeared that the
parties disagreed fundamentally on whether an i nvestigating authority was required under Section 16
of China's Accession Protocol to perform a non-attri bution analysis, by the end it was clear that the
parties agreed that some form of non-attribution analysis may be required in certain circumstances.560
251. China's Accession Protocol does not contain express non-attribution language. The Panel
observed, however, that "this does not mean that the obligation to demonstrate that rapidly increasing
imports are a significant cause of material injury should not entail some form of analysis of the
injurious effects of other factors."
561 As noted above, the Panel drew an analogy with the approach in
US – Upland Cotton , where, notwithstanding the absence of explicit non-attribution language in
Articles 5 and 6.3 of the SCM Agreement, both the panel and Appellate Body found that some form of
non-attribution analysis is inherent in establis hing a causal link between the subsidy and price
suppression and that, "if non-attribution does not occu r, one cannot establish with certainty that price
suppression [is] the effect of the subsidy (as opposed to some other injurious factor)". 562 The Panel
thus concluded that:
… the causal link between rapidly increasing imports and material
injury must be assessed "within th e context of other possible causal
factors". In particular, a finding of causation for the purpose of
Paragraph 16.4 should only be made if it is properly established that
rapidly increasing imports have injurious effects that cannot be
explained by the existence of other causal factors. We shall evaluate
the USITC's assessment of alternative causes in this light.
563
(footnote omitted)

560Panel Report, para. 7.174.
561Panel Report, para. 7.176.
562Panel Report, para. 7.176.

252. We agree with the Panel that some form of non-attribution analysis is inherent in the
establishment of a causal link between rapidly incr easing imports from China and material injury to
the domestic industry. As noted above 564, Paragraph 16.4 of the Protocol requires that rapidly
increasing imports from China make an important contribution to bringing about material injury to the
domestic industry. This determination can only be made if an investigating authority properly ensures
that effects of other known causes are not such as to suggest that subject imports are in fact only a
"remote" or "minimal" cause, rather than a "signi ficant" cause of material injury to the domestic
industry. For this reason, the significance of the effects of rapidly increasing imports from China
must be assessed in the context of other known causal factors. The extent of the analysis of other
causal factors that is required will depend on the imp act of the other factors that are alleged to be
relevant and the facts and circumstances of the part icular case. As noted above, the participants do
not contest that "some form of non-attribution anal ysis" may be required in order to establish properly
that subject imports are a "significant cause" of mate rial injury within the meaning of Paragraph 16.4
of the Protocol.
565 In some cases, the investigating authorit y may need to perform a detailed analysis
of other causes of injury to support adequately a conclusion that subject imports are nonetheless "a
significant cause" of injury. 566 In other cases, a less extensive analysis of other causal factors may
suffice to support adequately a conclusion that subject imports are "a significant cause" of injury.567
253. China takes issue with the Panel's statement that:
… a finding of causation for purpose of Paragraph 16.4 should only
be made if it is properly establis hed that rapidly increasing imports
have injurious effects that cannot be explained by the existence of
other causal factors.568
254. China asserts that the Panel's focus in this case was on identifying some "residual effect" from
subject imports, rather than on assessing how differe nt factors may be affec ting the condition of the
domestic industry and whether any remaining eff ects attributable to imports from China could
properly be deemed to be "a significant cause" of material injury. 569 China argues that, under the
Panel's standard, any injurious effects—including "residual effects"—could constitute "a significant

564Supra, paras. 176 and 177 of this Report.
565Panel Report, para. 7.174. We further note that the United States agrees with the Panel that "the
USITC was required to perform some analysis of the eff ects of other factors that have caused injury to the
industry" in the present case. (United States' appellee's submission, para. 132)
566Such analysis may be necessary, for example, where the volume of subject imports and the margins
of underselling are small and the record evidence suggests that the effects of the other possible causes of injury
are particularly important.
567This may be the case, for example, where the volu me of subject imports and margin of underselling
are very important.
568Panel Report, para. 7.177.

cause".
570 In other words, if the other causal factor s "do not explain everything", and instead leave
some residual injurious effects attributable to imports from China, "then those residual effects
somehow constitute a 'significant cause' of material injury".571 China rejects this as an "all or nothing"
approach to the assessment of other causes.572
255. The United States disagrees with China's assertion that the Panel applied an "all or nothing"
approach to the consideration of other causes, or that the Panel permitted "residual effects" to
constitute a "significant cause". Instead, accordi ng to the United States, the Panel properly assessed
whether subject imports were a "significant" or "im portant" cause of material injury independent of
other possible causes.573
256. Read in isolation, the Panel's reference to "inj urious effects that cannot be explained by the
existence of other causal factors" could give the impression that the Panel viewed Paragraph 16.4 as
requiring only that subject imports have "any" injuri ous effects, rather than examining whether such
imports make an important contribution and theref ore constitute "a significant cause" of material
injury. Certain other statements made by the Pane l might also suggest that the Panel was in fact
examining whether subject imports had "any" injurious effects, rather than "significant" effects. For
example, in relation to the impact of the 2008 recession, the Panel found that the USITC properly
established that the injury to the domestic industry c ould not be attributed "in whole" to the fall in
demand resulting from the 2008 recession.574
257. This finding and other similar statements by the Panel may be unfortunately worded. We
note, however, that the Panel clearly indicated that it viewed the applicable standard under
Paragraph 16.4 to consist of two elements: the "causal" element and the "significant" element. 575
Moreover, the Panel rejected the proposition that ev en "a minimal cause" of injury might be "a
significant cause" of injury. 576 The Panel also stated that the fact that subject imports continued to
increase significantly during that recession indicated that subject imports were having an adverse
impact independent of the effect of the fall in demand during the 2008 recession. 577 Importantly, in
dismissing China's claims regarding the USITC's as sessment of the individual injurious effects of
other factors, the Panel also stated that it had "reviewed record evidence indicating that subject
imports from China had significant injurious effects, independent of any injurious effects of other

572See China's appellant's submission, paras. 284, 289, 433, and 436.
573United States' response to questioning at the oral hearing.
574Panel Report, para. 7.354.
576Panel Report, para. 7.159.
577Panel Report, para. 7.354.

causal factors".578 In the light of these statements, we consid er that the Panel correctly articulated the
standard of review appropriate for assessing the USITC's analysis of other possible causes of injury.
258. For all these reasons, we disagree with China's as sertion that the Panel set out an approach
that focused only on identifying any "residual effects" of imports, rather than on assessing whether the
effects of subject imports could properly be deemed a significant cause of material injury. As
explained above 579, we consider that an investigating au thority can make a determination as to
whether subject imports are a significant cause of ma terial injury only if it properly ensures that
effects of other known causes are not improperly attributed to subject imports and do not suggest that
subject imports are in fact only a "remote" or "min imal" cause, rather than a "significant" cause of
material injury to the domestic industry. In our view, the Panel properly understood that it was
required in this case to assess whether the USITC ha d adequately explained that subject imports were
a "significant" or "important" cause of material inju ry "independent" of the injurious effects of other
possible causes.
2. The Panel's Findings relating to the US ITC's Consideration of Other Causes
of Injury
259. China attributes the injury suffered by the US dom estic industry, at least in part, to three
causal factors other than subject imports from China, namely: (i) the US domestic industry's business
strategy of shifting focus to higher-value products for its US production; (ii) demand declines in the
US market; and (iii) non-subject imports. China contends that the Panel erred in finding that the
USITC properly considered and addressed the effect s of these other factors that were allegedly
causing injury to the domestic industry.
260. First, China argues that the Panel failed to examine properly the USITC's analysis of the
domestic industry's business strategy, including the f actual basis for the USITC's conclusion that the
US producers' capacity reductions in 2006 were largely a reaction to increases in subject imports from
China and not part of a strategy by domestic producers to abandon voluntarily the low-price segment
of the US tyres market. Next, China contends that the Panel failed to review properly the USITC's
analysis of the impact of declines in demand a nd the effect of non-subject imports, even though the
latter had a larger presence in the US market th an the Chinese imports. As we understand it, China
does not claim that these other causal factors explain a ll of the material injury found to exist in this

578Panel Report, footnote 511 to para. 7.377. (emphasis added) The Panel introduced its analysis of
changes in demand by articulating the proper inquiry, that is, whether subject imports had injurious effects
independent of the injury caused by changes in demand. The Panel also concluded that the USITC did not
"improperly attribute injury caused by non-subject imports to subject imports". (See Panel Report, paras. 7.333
and 7.367)

case. However, China asserts that "individually a nd collectively they call into serious doubt the
causal link between imports from China and the condition of the U.S. industry".
580
261. In response, the United States does not contest that the USITC was "required to perform an
assessment of other injury factors under the Protocol". 581 Instead, it agrees with the Panel that the
USITC was under an obligation "to perform some analysis of the effects of other factors that have
caused injury to the industry".
582 The United States considers, however, that the USITC properly
addressed all of the factors that could reasonably be considered significant enough to break the causal
link between subject imports and material injury in the present case. Moreover, in the United States'
view, the Panel properly examined China's arguments concerning the effects of other causal factors to
determine whether they seriously undermined the USITC's conclusion that rapidly increasing imports
from China were a significant cause of material injury to the industry.
(a) The US Domestic Industry's Business Strategy
262. Before the Panel, China claimed that the domes tic industry's business strategy was an "other
cause" of material injury to the domestic industr y, in the sense that decl ines in certain injury
indicators (including production, shipments, and ne t sales quantities) should be attributed to what
China asserted was the domestic industry's voluntary withdrawal from the low-value segments of the
replacement market rather than to subject imports. 583 According to China, this business strategy
involved closing those plants in the United States that made lower-value tyres and shifting that
production to lower-cost fo reign production facilities, while c oncentrating US production on higher-
value tyres. In China's view, this strategy resulte d in a "supply gap" in the US market that was filled
by imports from both China and other sources.
263. As the Panel noted, the USITC rejected the argument that domestic producers voluntarily
abandoned the lower-priced part of the US tyres mark et and that imports from China simply filled the
supply gap left by the re treating domestic industry.584 Instead, the USITC found that the reduction in
domestic capacity and the closures of US plants were largely "a reaction to increases in subject
imports from China that were already occurring and, given the size and degree of the increases, likely
would continue in the future".
585 In reaching this conclusion, the USITC relied upon: (i) data
indicating that imports from China were already increasing before Bridgestone, Continental, and
Goodyear announced the plant closures in 2006 and 2008; (ii) evidence indicating that competition

583See Panel Report, para. 7.285.
584See Panel Report, para. 7.287 (quoting USITC Report, pp. 26-27).
585Panel Report, para. 7.287 (quoting USITC Report, pp. 24-27).

from low-priced imports from Asia, including China, was an "important part" of the companies'
decisions to close these plants; (iii) articles in trade publications referring to a surge in purchases of
tyre-manufacturing equipment by Chinese producers that occurred over the past 10 years; and (iv) a
2006 news article noting that imports from China were expected to increase.586
264. China's arguments on appeal focus on the Panel's analysis of the USITC's conclusion that the
plant closures by US producers were largely a reacti on to increases in subject imports from China. In
particular, China takes issue with the Panel's an alysis of the evidence relied upon by the USITC to
support its conclusions in this regard.
265. As an initial matter, we note that several of Ch ina's arguments appear to be directed at the
objectivity of the Panel's assessment of the facts, while other arguments are directed mainly at the
way in which the Panel assessed the ev idence that was before the USIT C. Regarding several aspects
of its challenge, China has made parallel claims unde r Section 16 of the Protocol, alleging an error of
application, and under Article 11 of the DSU, a lleging that the Panel failed to make an objective
assessment of the facts. While the Appellate Body has noted that "an appellant is free to determine
how to characterize its claims on appeal"587 and that "it is often difficult to distinguish clearly between
issues that are purely legal or purely factual, or are mixed issues of law and fact", the Appellate Body
has also emphasized that "a failure to make a cl aim under Article 11 of the DSU on an issue that the
Appellate Body determines to concern a factual a ssessment may have serious consequences for the
appellant."588
266. With these principles in mind, we proceed to review China's arguments on appeal both below
and in section VI.E of this Report, where we deal wi th claims that China brings referring explicitly to
Article 11 of the DSU.
(i) Continental's plant in Charlotte
267. With respect to the reasons for the closure of Continental's plant in Charlotte, North Carolina,
the Panel noted that a contemporaneous press release by Continental attributed the closure to "global
competition putting pressure on us as our manufacturing costs are cheaper overseas". 589 The USITC
interpreted this statement as including a referenc e to import competition from China. The Panel
disagreed, and found instead that Continental's reference to "global competition" should "be

586Panel Report, para. 7.287 (quoting USITC Report, pp. 26-27).
587Appellate Body Report, Canada – Wheat Exports and Grain Imports , para. 177 (referring to
Appellate Body Report, Japan – Apples, para. 136).
588Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 872; Appellate
Body Report, Mexico – Anti-Dumping Measures on Rice, para. 274.
589Panel Report, para. 7.299.

understood as competition from other Continental plants in the world".
590 The Panel reasoned that
this "is because the press release clearly refers to 'our' manufacturing costs being 'cheaper
overseas'".591 As to whether import competition from othe r Continental plants in the world might
include subject imports from China, the Panel found that since Continental did not have any
production facilities in China, there was therefore " no proper basis for the USITC to conclude that
imports from Continental plants around the world might include subject imports from China". 592 The
Panel concluded that the USITC therefore "could not properly have attributed the closure of
Continental's plant to subject imports from China".593
268. China submits that the Panel erred in rejecting the USITC's conclusion that Chinese imports
played a role in the closure of Continental's plant in Charlotte, without assessing whether that
conclusion undermined the USITC's finding that impor ts from China played an important part in the
decisions to close Bridgestone's plant in Oklahoma City and Goodyear's plant in Tyler.594 In addition,
according to China, both the Panel and the USITC faile d to ensure that the in jurious effects resulting
from the closure of Continental's plant in Charlotte were not attributed to imports from China.
269. We are not persuaded that Continental's reference to "global competition" must necessarily be
understood as referring exclusively to competition from "other Continental" factories located
overseas. However, we note that eviden ce regarding the Charlotte facility was not the only evidence
that the USITC relied upon to support its conc lusion that "low-priced competition from Asia,
including China" was an "important part" of the d ecision by certain US producers to close factories in
the United States, including both Bridgestone's plant in Oklahoma City and Goodyear's plant in Tyler.
We consider it was appropriate for the Panel to proceed to assess the evid ence relied upon by the
USITC regarding those two plant closures given that the USITC also relied on this evidence.595
270. China argues that the Panel's finding regarding the Charlotte plant calls into question the
USITC's conclusions with respect to the closures of Bridgestone's plant in Oklahoma City and
Goodyear's plant in Tyler. China suggests that all three companies were "reacting to the same market

590Panel Report, para. 7.299.
591Panel Report, para. 7.299.
592Panel Report, para. 7.299.
593Panel Report, para. 7.299.
594See China's appellant's submission, paras. 406 and 407.
595In any event, even if we were to accept that the ki nd of non-attribution analysis that is suggested by
China was required, we note that the closure of Contin ental's plant in Charlotte represented a reduction in
industry capacity of 9.3 million units, whereas the closure of Bridgestone's plant in Oklahoma City and
Goodyear's plant in Tyler represented a total reduction in US producers' capacity of 30.1 million units. In the
light of these figures, we do not see why the Panel could not have proceeded to examine in this case whether the
closures of the Bridgestone and Goodyear plants could reasonably support the USITC's overall finding
regarding US producers' capacity reductions in 2006. (USITC Report, pp. 26-27).

situation".596 We do not view the Panel to have found th at the closure of the Charlotte plant was not
caused by subject imports from China. Rather, th e Panel's finding was that the evidence before the
USITC did not support the USITC's conclusion that imports from Asia, including China, played an
important part in the closure of Continental's plan t in Charlotte. In any event, we see no basis to
assume that the reasons for the plant closings were necessarily the same for all three companies. Even
assuming that Continental may not have closed its plant as a resu lt of low-priced competition from
subject imports, this does not mean, without more, that "low-priced competition" from subject imports
may not have played a role in the closing of other plants by other companies.
(ii) Bridgestone's plant in Oklahoma City
271. Bridgestone announced the closure of its plant in Oklahoma City, Oklahoma, in 2006. 597
With respect to the reasons for the plant's clos ure, the Panel noted that the USITC relied on a
contemporaneous press release that stated that "this plant produces tires in the low-end segment of the
market where demand is shrinking and fierce co mpetition from low-cost producing countries is
increasing."598 The Panel reasoned that, "to some extent", "shifts in demand played a part in the
closure of the Bridgestone, Oklahoma, plant". 599 However, the reference to "fierce competition from
low-cost producing countries" in the same press re lease suggested to the Panel that such "shifts in
demand were not entirely responsible for the closure of that plant".600 The Panel further found that the
reference to "fierce" competition also suggested that import competition was not as benign as China
suggested, and that imports were not merely f illing a "supply gap" caused by the industry's retreat
from the low-end of the market.601 For these reasons, the Panel found that "the USITC could properly
have attributed the closure of the Bridgestone, Oklahoma City, plant to subject imports."602
272. China argues, on several grounds, that the Panel erred in finding that the USITC could
properly have understood Bridgest one's reference to "fierce co mpetition from low-cost producing
countries" to include competition from subject import s from China. First, China observes that the
official press release by Bridgestone refers only to "low-cost producing countries", and does not refer
explicitly to imports from China as a reason for shutting down Bridgestone's plant in
Oklahoma City.603 Second, China asserts that the "low -cost imports" causing these closures were
more likely non-subject imports, since they occupied a larger share of the US market than Chinese

597Panel Report, para. 7.302 (referring to USITC Report, footnote 62 at p. III-16). (emphasis added)
598Panel Report, para. 7.300.
599Panel Report, para. 7.300.
600Panel Report, para. 7.300.
601Panel Report, para. 7.300.
602Panel Report, para. 7.304.

imports in 2006.
604 China contends that the Panel " downplayed the significant and increasing
presence" of such non-subject imports.605
273. The issues raised by China on appeal appear to be directed mainly at the Panel's assessment of
the factual basis for the USITC's conclusions. We c onsider these issues to be more in the nature of
claims made under Article 11 of the DSU. Howeve r, China has not brought a claim of error under
Article 11 of the DSU to challenge this aspect of the Panel's findings. Consequently, we do not
consider it necessary to further address China's arguments in this regard.
274. China further claims that the Panel "mischarac terized the evidentiary basis" of the USITC's
finding, when relying on a statement made in the USITC staff report (which the USITC did not
explicitly refer to in its determination) in asse ssing whether the USITC could properly attribute the
closing of the Bridgestone plant to imports from China.
606 We note that China also raises a claim
under Article 11 of the DSU regarding this aspect of the Panel's analysis. Consequently, we address
that claim in section VI.E of this Report.
(iii) Goodyear's plant in Tyler
275. China makes similar claims regarding the Panel's analysis of the reasons for closure of
Goodyear's plant in Tyler, Texas. First, China a lleges that there was no factual basis for the Panel's
assertion that "competition from subject imports was clearly greater than the competition from
non-subject imports".607 For China, with non-subject imports representing more than 80% of the total
import volume, priced on average 17% below US pr ice levels, and largely imported by US domestic
producers themselves, it made "no sense" for the USIT C and the Panel to read a generic reference to
"low-cost imports" as a reference to imports from China. 608 China also criticizes the Panel for its
"selective" approach in dealing with certain evid ence, not only by equating "low-cost imports" to
"subject imports" from China, but also by ignori ng the non-import factors behind the Goodyear plant
closure identified by the USITC.609
276. In our view, China's allegations on appeal are more properly characterized as claims made
under Article 11 of the DSU, because they are directed at the objectivity of the Panel's assessment of
the factual components of the USITC determination. We will examine them under Article 11 of the

609China's appellant's submission, paras. 420 and 421 (referring to USITC Report, footnote 62 at
p. III-16).

DSU in section VI.E of this Report to the extent that these allegations have been brought as claims
under Article 11 of the DSU.
(iv) Plant closures, change in business strategy, and other causes
of injury
277. In addressing China's claim that the US industry's change in business strategy was voluntary
and created a supply gap in the US market, the Pane l observed that "the majority of the USITC and
the dissenting commissioners drew precisely the opposite conclusions on the issue of business
strategy."610 As the Panel noted, the "majority took the view that the strategy to reduce U.S.
production and locate production in China was itself a response to increased imports and thus it was
not an alternative cause that prevented the incr easing imports from China to be a significant cause." 611
By contrast, the "dissenting commissioners took th e view that the business strategy of relocating
production to China was an independent business strategy that began before imports were
increasing."612 The Panel considered that it would be inappropriate in these circumstances "for the
Panel simply to make a choice between th e views of the majority and the dissenting
commissioners".613 The Panel expressed the view that "the decision to [re]locate production in China
might have been the result of an independent busin ess strategy, but the decision to close plants might
well have been a response to imports." 614 In the light of these considerations, the Panel found "no
basis for determining that the USITC's analysis of the alternative business strategy was in error". 615
Rather, the Panel considered that it was for China to establish a prima facie case of such error "and it
failed to do so".616
278. China faults the Panel for failing to assess fully whether the majority or the dissent was
correct, arguing that the Panel failed to "consider cr itically whether the USITC majority sufficiently
explained its conclusion to ignore the effect of the change in business strategy".617
279. China's arguments are based on its own readi ng of the underlying facts. In particular,
according to China:
[T]he domestic industry's business strategy significantly affected the
U.S. industry and many of the injury factors assessed by the USITC.
Given their high costs and comparative advantages in the non-
commodity tire segments, U.S. producers chose to withdraw their

610Panel Report, para. 7.320.
611Panel Report, para. 7.320.
612Panel Report, para. 7.320.
613Panel Report, para. 7.321.
614Panel Report, para. 7.321.
615Panel Report, para. 7.322.
616Panel Report, para. 7.322.

domestic production from the low-value segments of the replacement
market and focus instead on the high -value segments. This decision
to refocus and close certain plan ts created an increased need for
imports—both subject and non-subject, both imported by
U.S. producers and not. Given this strategic decision, which bore
fruit in 2007 prior to the recession, increasing subject imports were
not a "significant cause" of injury to the domestic industry.
618
280. We see no error in the Panel's analysis in this regard. In particular, we note that it is well
established that a panel must neither conduct a de novo review nor simply defer to the conclusions of
the investigating authority. Instead, it must test whether the explanations for the conclusions reached
by the investigating authority are reasoned and ade quate in the light of other plausible alternative
explanations. In doing so, a panel should examin e whether the investigating authority provided a
reasoned and adequate explanation as to how the ev idence on the record supported its factual findings
and how those factual findings suppo rted the overall determinations. 619 C o n t r a r y t o w h a t C h i n a
asserts, it was not for the Panel to decide whet her the majority or the dissent was "correct" 620, and in
this way "substitute its judgement for that of th e competent authorities" by deciding the issue for
itself.621 Instead, it was for the Panel to assess whether the USITC's explanation of its conclusion was
reasoned and adequate in the light of plausible alternative explanations proffered by China.
281. China considers that US producers closed certain plants for a "broader set of economic and
business reasons", and that subject imports were just one of many factors being considered by these
firms.622 China argues that, "even if one assumes th e USITC could properly find that imports from
China played some role in the d ecision to close the plants, that do es not justify attributing the entire
consequences of the plant closures to the imports from China."623
282. China appears to suggest that the USITC attri buted the "entire consequences" of the plant
closures to imports from China. This is not correct . In fact, the USITC simply found that low-cost
imports from Asia, including China, played an "i mportant part" in the decisions to close the
Goodyear, Continental, and Bridgestone plants and acknowledged that there may well be other

619See Appellate Body Report, Argentina – Footwear (EC) , paras. 119-121; Appellate Body Report,
US – Cotton Yarn , paras. 74-78; Appellate Body Report, US – Countervailing Duty Investigation on DRAMS ,
paras. 183 and 186-188; Appellate Body Report, US – Hot-Rolled Steel, para. 55; Appellate Body Report, US –
Lamb, paras. 101 and 105-108; Appellate Body Report, US – Steel Safeguards , para. 299; Appellate Body
Report, US – Wheat Gluten , paras. 160 and 161; and Appellate Body Report, US – Softwood Lumber VI
(Article 21.5 – Canada), para. 93.
621Appellate Body Report, US – Steel Safeguards , para. 299 (referring to Appellate Body Report,
Argentina – Footwear (EC), para. 121).
623China's appellant's submission, para. 433. (original underlining)

reasons for the plant closures. Moreover, the US ITC's analysis focused on the rationale for the
closures rather than the consequences thereof.
283. As a separate matter, we note that China also takes issue with certain general observations
made by the Panel regarding China's argument that imports from other countries, including China,
were merely filling a "supply gap" left by US producers in certain market segments. 624 On this point,
the Panel noted, inter alia, that China presented subject imports as non-injurious because they were
drawn into the US market by the business strategy of US tyres producers. 625 According to China,
nothing in the Panel's observations "calls into doub t … the extent to which imports from China could
properly be considered a 'significant cause'" of material injury. 626 We do not view the Panel's
preliminary remarks to have been a necessary component of the Panel' s analysis of China's arguments
concerning the specific factors relied upon by the US ITC to support its findings regarding the impact
of changes in business strategy during the period of i nvestigation. For this reason, we do not consider
it necessary to address further these remarks by the Panel in our analysis.
284. For all these reasons, we do not agree with China that the Panel erred in its review of the
USITC's analysis of the US domestic industry's business strategy and the reasons for the three
US plant closures.627
(b) Changes in Demand
285. China takes issue with the Panel's analysis of declines in demand arguing that the Panel and
the USITC both failed to "evaluate seriously" de mand declines as a possible alternative cause of
injury to the domestic industry. 628 China claims that a contraction in demand over the full period of
investigation, combined with a sharp decline in demand in 2008 due to the recession, accounted for "a
sizeable portion"—albeit not all—of the injury su ffered by the industry over the relevant period.629
286. China recalls that the consumption data collected by the USITC showed a decline in three out
of four years of the period of investigation, and an overall decline of more than 10% over the entire
period of investigation. 630 China faults the USITC for not addressing this "longer term trend in
demand" and claims that the Panel failed to disti nguish between "average tr ends" over time and "the
fluctuations that inevitably occur year-by-year". 631 In China's view, the overall decline in demand

624See Panel Report, para. 7.291 (quoting China's response to Panel Question 41, para. 58).
625Panel Report, para. 7.291.
627Panel Report, para. 7.322.
631China's appellant's submission, paras. 438 and 443.

represents a significant competitive factor that th e Panel and the USITC should have considered
"more carefully".
632
287. The United States disagrees with what it descr ibes as China's notion of a "consistent demand
decline" in the US tyres market over the period of investigation, arguing instead that the record
indicated "fluctuations" in demand, with the "bul k" of the overall decline in consumption occurring
during the recession in 2008. 633 The United States further conte nds that the demand changes during
the period did not explain "to any significant degree " the declines in the industry's condition, as the
industry's production, shipments, sales, and market sh are levels fell consistently while the volume and
market share of Chinese imports increased, irresp ective of whether demand declined, increased, or
remained relatively stable.634
288. In its analysis of this issue, the Panel obser ved that "apparent consumption of all passenger
vehicle and light truck tyres declined (by volume) by 10.3 per cent from 2004 to 2008". 635 The Panel
added, however, that "the bulk of this fall in appa rent consumption occurred at the end of the period
of investigation, from 2007 to 2008" 636 and "[p]rior to 2007, apparent U.S. consumption declined
slightly by 0.8 per cent from 2004 to 2005, by 4.4 per cent from 2005 to 2006, but actually increased
by 1.6 per cent from 2006 to 2007." 637 The Panel concluded, therefore, that, "while there was a
pronounced decline in apparent consumption from 2007 to 2008", the record evidence did not indicate
a "prolonged contraction" in demand over the peri od of investigation as a whole, as China had argued
before the Panel. 638 On this basis, the Panel found no error in the USITC's finding that demand
"fluctuated"639 during the period of investigation.
289. On appeal, China appears to accept that demand may have "fluctuated" on a yearly basis as
the USITC concluded. China argues, however, that the drop in consumption over the period of
investigation represented a significant competitive f actor that must have had some effect on the
domestic industry and should have been analyzed "more carefully" by the Panel and the USITC.
640

635Panel Report, para. 7.339.
636Panel Report, para. 7.339. According to Table V-1 of the USITC Report, apparent consumption fell
from 307,484,000 units to 296,091,000 units, that is, 3.7%, over four years from 2004 to 2007. Apparent
consumption fell by 6.9% in the single year from 2007 to 2008 (from 296,091,000 units to 275,702,000 units).
637Panel Report, para. 7.329.
638Panel Report, para. 7.339.
639USITC Report, p. 15.

290. Our review of the Panel's reasoning does not indicate that the Panel failed to assess
adequately China's arguments regarding the declin e in demand over the full period of investigation as
distinct from yearly fluctuations in demand. Rath er, as we see it, the Panel carefully examined the
correlation between trends in subject imports and changes in demand over the full period of
investigation. The Panel noted the USITC's finding that:
[t]he large increase in the volume of subject imports is also reflected
in those imports' large and growing share of the U.S. market. Subject
imports increased their share of the U.S. market by 12 percentage
points (more than threefold) between 2004 and 2008, from
4.7 percent in 2004 to 16.7 percent in 2008. More than half of this
increase, 7.4 percentage points, has occurred since 2006.
641
291. The Panel further noted the USITC's finding that "the ratio of subject imports to U.S. apparent
consumption increased by 12.0 percentage points dur ing the period examined , with the two largest
year-to-year increases also occurring at the end of the period in 2007 and 2008." 642 The Panel added
that, in a related footnote, the USITC stated that the "ratio of subject imports to U.S. apparent
consumption increased from 4.7 percent in 2004 to 6.8 percent in 2005, 9.3 percent in 2006,
14.0 percent in 2007, and 16.7 percent in 2008."
643
292. The Panel went on to note that:
… the ratio of subject imports to U.S. apparent consumption
increased throughout the period of investigation. Even when demand
increased by 1.6 per cent in 2007, the volume of subject imports
increased by the significantly greater figure of 53.7 per cent. As a
result, subject import market share increased by 4.8 percentage
points, while the domestic industry's market share declined by
3.4 points (and the market share of non-subject imports declined by
1.1 per cent). In 2005, demand fell by a very modest 0.8 per cent.
Subject imports in that year increased by 42.7 per cent, resulting in a
2.1 percentage point increase in market share, while the domestic
industry's market share fell by 3.7 percentage points. In 2006, as
demand fell by 4.4 per cent, the volume of subject imports increased
by a further 29.9 per cent, resulting in a 2.4 percentage point increase
in subject import market share. This contrasted with a 3.4 percentage
point decline in the domestic industry's market share.
644 (footnote
omitted)
293. Regarding the decline of demand in 2008 due to the recession, the Panel added that, "as
demand fell by 6.9 per cent in 2008, the volume of subject imports continued to increase by an

641Panel Report, para. 7.333 (quoting USITC Report, p. 22). The Panel used the terms "demand" and
"US apparent consumption" interchangeably. (See Panel Report, footnote 469 to para. 7.339)
642Panel Report, para. 7.334 (quoting USITC Report, p. 12).
643Panel Report, para. 7.335 (quoting USITC Report, footnote 52).
644Panel Report, para. 7.336.

additional 10.8 per cent, resulting in a 2.7 percentage point increase in market share, compared with a
fall in the domestic industry's market share of 2.9 percentage points."
645
294. The Panel and the USITC therefore discussed changes in the level of demand over the full
period of investigation. We also attach importan ce to the fact that the "bulk" of the decline in
demand, as the Panel noted, "occurred at the end of the period of investigation, from 2007 to 2008"646;
that this recession-driven decline in demand was se parately addressed by the Panel and the USITC;
and that "[p]rior to 2007, apparent U.S. consum ption declined slightly by 0.8 per cent from 2004
to 2005, by 4.4 per cent from 2005 to 2006, but actually increased by 1.6 per cent from 2006 to
2007".
647 In these circumstances, since the Panel did not find error in the USITC's conclusion that
demand "fluctuated" over the period of investigation, we do not consider that the Panel was required
to address as a separate matter the overall decline in demand over the full period of investigation.
295. China further argues that the Panel erred in findi ng no fault in the USITC's assessment of the
impact of the 2008 recession. We disagree with Ch ina. The Panel noted the USITC's finding that
subject imports "continued to increase rapidly ev en in 2008 when U.S. apparent consumption was
falling".648 As the Panel found, this would suggest th at "subject imports were having an adverse
impact on the domestic industry independent of th e effects of the fall in demand during the 2008
recession."649 We therefore do not agree with China that the USITC failed to distinguish the
"contribution of imports from China from those of the current recession on the overall condition of the
industry".
650
296. Finally, we note China's argument that, in its analysis of the 2008 recession, the Panel
"suggested that if the sharp decline in demand coul d not explain all of the injury to the domestic
industry, then it could explain none of the injury". 651 In particular, China takes issue with the Panel's
finding that:
… the USITC properly established that the injury to the domestic
industry could not be attributed in whole to the fall in demand
resulting from the 2008 recession. The fact that subject imports
continued to increase significantly du ring that recession, forcing the
domestic industry to absorb virtually all of the resultant fall in
demand, indicates that subject imports were having an adverse

645Panel Report, para. 7.338.
646Panel Report, para. 7.339.
647Panel Report, para. 7.329.
648USITC Report, p. 26.
649Panel Report, para. 7.354.
651China's appellant's submission, para. 451. (original underlining)

impact on the domestic industry independent of the effects of the fall
in demand during the 2008 recession.
652
297. As discussed above 653, we agree with China that, read in isolation, the passage quoted above
may suggest that the Panel was merely assessing whethe r "all of the injury" could be attributed to the
fall in demand resulting from the 2008 recession, rath er than examining whether subject imports had
"significant effects". However, the Panel went on to explain that the fact that subject imports
continued to increase significantly during that recessi on indicated that subject imports were having an
adverse impact independent of the effect of the fall in demand during the 2008 recession. 654 T h e
Panel also clarified elsewhere in its Report that, in rejecting China's claims regarding the USITC's
assessment of the individual injurious effects of ot her causal factors, it had "reviewed record evidence
indicating that subject imports from China had significant injurious effects, independent of any
injurious effects of other causal factors". 655 Therefore, while the passage quoted above may give rise
to some concern and is unfortunately worded, we do not agree with China that the Panel suggested
that, if the sharp decline in demand in 2008 "coul d not explain all of the injury to the domestic
industry, then it could explain none of the injury".656
298. China further submits that the Panel "substitu ted its own analysis" instead of assessing the
USITC's determination.657 For example, in China's view, the Panel compared the changing levels of
apparent consumption with the changing levels of subject import penetration, although the USITC did
not conduct such an analysis in its determination. 658 We note that China also raises a claim under
Article 11 of the DSU regarding this aspect of the Panel's analysis and we address that claim in
section VI.E of this Report. Based on the foregoing, we find no error in the Panel's conclusion that
the USITC properly addressed the issue of demand and properly f ound "that subject imports had
injurious effects independent of any injury caused by changes in demand".659
(c) Non-Subject Imports
299. China faults the Panel for upholding the USITC' s finding, contending that the USITC "never
seriously addressed the competitive significance of non-subject imports". 660 According to China,
despite the fact that non-subject imports held a larg er share of the US mark et than Chinese imports

652Panel Report, para. 7.354.
653Supra, paras. 256 and 257 of this Report.
654Panel Report, para. 7.354.
655Panel Report, footnote 511 to para. 7.377. (emphasis added)
656China's appellant's submission, para. 451. (original underlining)
659Panel Report, para. 7.333.

and were lower priced than the tyres produced in the United States, the USITC failed to address their
competitive effects in the market.
661
300. We note, as an initial matter, that the United States contends that China did not identify
before the Panel non-subject imports as a possible "other" factor causing injury that the USITC should
have addressed in its analysis. The United States s ubmits that it is therefore "inappropriate for China
to raise this issue on appeal".662 Contrary to what the United States suggests, however, it appears, that
China did raise this issue before the Panel.663
301. Turning to China's arguments on appeal, we are not persuaded that the USITC failed to
address adequately the competitive effect of non-subj ect imports in the market. As the Panel noted,
the USITC found that, "since 2006, imports from China gained a greater share of the U.S. market than
was lost by domestic producers, indicating that they also took market share away from third-country
sources."664 Moreover, with respect to changes occurring in 2008, the USITC explained:
Subject imports increased by 4.5 million tires in 2008, while U.S.
apparent consumption declined by 20.4 million tires. Imports from
third countries declined by 6.0 million tires in 2008, or by
6.1 percent, roughly consistent with the 6.9 percent decline in U.S.
apparent consumption in 2008. Meanwhile, domestic production of
subject tires declined by 20.0 million tires in 2008, or by
11.1 percent, and absorbed virtually all the decline in U.S. apparent
consumption that year.
665 (footnote omitted)
302. Having said that, China is correct in noting that non-subject imports consistently held a larger
share of the US market than subject imports from China, and that prices for non-subject imports
remained lower than prices for domestically produ ced tyres throughout the period of investigation. 666
Nonetheless, as the Panel noted, the record also in dicates that the average unit value of non-subject

663Panel Report, para. 7.360. The Panel noted China's contention that "the USITC also failed to
properly analyse the injury caused to the domestic industry by imports from countries other than China." The
Panel added that "China suggests that injury caused by non-subject imports was improperly attributed to subject
imports." The United States is correct, however, when it points out that China discussed "in detail only two
factors that China believed were 'other factors' that had allegedly had a significant injurious effect on the
industry during the period of investigation." (United States' appellee's submission, para. 216) Yet, although
China's arguments focused on changes in demand and the US industry's alleged business strategy, we note that
China also referred in its arguments to "other contribu ting factors", including "massive numbers of non-subject
imports", arguing that the USITC "failed to explain why imports from China were nonetheless a 'significant'
cause amid these multiple factors." (China's first written submission to the Panel, para. 332) We note that the
United States suggests that the Panel itself "looked at th is issue primarily because Ch ina addressed the issue of
non-subject imports in the context of its arguments on demand changes in the OEM market." (United States'
appellee's submission, para. 216)
664Panel Report, para. 7.364 (quoting USITC Report, p. 26).
665Panel Report, para. 7.353 (quoting USITC Report, p. 26).

imports remained 22-25% higher than the average unit value of s ubject imports, with the average unit
value of subject imports increasing from US$31.10 to US$38.90 over the period, while the average
unit value of non-subject imports increased from US$40.42 to US$55.29, and the average unit value
of US producers' shipments increased from US$48.40 to US$69.69. 667 In assessing China's allegations
as to the effects of non-subject imports, the Panel further noted that "by 2006 only imports from
Indonesia were cheaper than subject imports from China, and Indonesian imports represented only
3.4 per cent of total imports in 2006, compared to subject imports' 21.2 per cent share."
668 In addition,
the Panel observed that "the share of non-subject imports in total U.S. imports declined from 87.1 to
66.9 per cent over the period, as the share of subject imports to total U.S. imports increased from 12.9
to 33.1 per cent."
669 This suggests, as the Panel found, th at "non-subject imports would have had
considerably less price effect on the domestic industry than subject imports."670
303. China also contends that the Panel impermissibl y substituted its own analysis for that of the
USITC when it stated that "the dominant feature of the U.S. market was the rise of subject imports
from China at the expense of both non-s ubject imports and the U.S. industry." 671 China also raises a
claim under Article 11 of the DSU regarding this aspect of the Panel's analysis. We address that
claim in section VI.E.3 of this Report.
304. China argues that the Panel's analysis of pri ce effects disregarded the "relative volumes" of
non-subject imports vis-à-vis subject imports.672 In relation to the replacement market, China submits
that "imports from China in 2008 were less than 1 percent of the tier 1 market while imports from
other countries made up 39 percent of the market." 673 In China's view, "the Panel's analysis
essentially assumed that one tire from China at $40 had more of an adverse impact than thirty nine
tires from other countries at $55." 674 China adds that "there we re approximately nine times as many
non-subject imports in the OEM market in 2008" as there were imports from China, and "non-subject
imports grew from 30.2 percent to 43.5 percent of the U.S. OEM market between 2004 and 2008". 675
Noting that "[t]ogether the OEM and tier 1 segments represent about 60 percent of U.S. shipments",

667USITC Report, Table C-4.
668Panel Report, para. 7.364 (referring to USITC Report, Table II-1).
669Panel Report, para. 7.364 (referring to USITC Report, Table II-1).
670Panel Report, para. 7.364.
671China's appellant's submission, para. 473 (quoting Panel Report, para. 7.367). See also China's
appellant's submission, para. 577.
672China's appellant's submission, paras. 476 and 477.
674China's appellant's submission, para. 477. (original underlining)
675China's appellant's submission, para. 478 (referring to USITC Report, Table V-3 at p. V-4). (original
underlining)

China asserts that the Panel ignor ed the fact that "non-subject imports remained the overwhelming
competitive factor facing U.S. producers".
676
305. This argument by China focuses exclusively on distinct segments of the overall US tyres
market. While it may be, as China suggests, that subject imports might not have had a significant
effect in tier 1, the issue before the Panel, however, was whether the USITC reasonably established
that subject imports were "a si gnificant cause" of injury in the overall US market , consisting of the
OEM market and the three tiers of the replacement market. In section VI.B of our Report, we have
examined this matter in more detail when addressi ng China's arguments concerning the conditions of
competition.
(d) Comparative Analysis of Alternative Causal Factors
306. China acknowledges that Section 16 of the Protoc ol does not require that an investigating
authority compare or "weigh" the effects of various causal factors against one another. 677 However,
China maintains that such analysis would provide an "alternative way" for an investigating authority
to determine appropriately that imports from China are "a significant cause" of material injury in the
light of the existence of other causal factors.
678 Moreover, even if this approach is not required, China
contends that, in this case, a consideration of the relative importance of other causes "reinforces" the
conclusion that imports from China were not in fact "a significant cause" of injury.
679 In China's
view, this is because other causes reduced any residu al contribution by imports from China to a level
that no longer meets the standard of "significant cause".680
307. According to China, the Panel erred by affirming the USITC's analysis of other causes. China
contends that the USITC relied exclusively on its holistic explanation—based on conditions of
competition, overall correlation, and other causes—w ithout any assessment of the relative importance
of each of the various causes at work. 681 China makes reference to the industry's alleged business
strategy, declines in demand, and the role of non-subject imports, maintaining that the evidence before
the USITC "strongly suggested" that these other possi ble causes of injury were more important than
imports from China.682

308. As we understand it, China does not claim that an investigating authority is required to
compare or "weigh" the effects of various causal factors against one another in order to determine
whether imports from China are a significant cause of injury to the domestic industry. China argues,
however, that a consideration of subject imports in the context of other causes can inform the issue of
whether rapidly increasing imports from China rise to th e level of being a significant cause of injury.
As we see it, China's arguments on this issue are cl osely linked to its argument concerning the need to
consider the relationship between rapidly increasing im ports and other causal factors. We consider it
appropriate therefore to address these arguments together in the following section of this Report.
(e) Cumulative Assessment, Interplay, and Integrated Analysis
309. Referring to the Appellate Body's findings in EC – Tube or Pipe Fittings , the Panel reasoned
that, notwithstanding the lack of any requirement for cumulative assessment under the Protocol,
"there may be cases where the collec tive injurious effect of other causal factors might be so dominant
that the injury caused by increasing imports could not properly be found to be 'significant'." 683 The
Panel stated, however, that China has not demonstr ated that this was the case in the underlying
USITC investigation. The Panel further noted that, in rejecting China's claims regarding the USITC's
assessment of the individual injurious effects of these other causal factors, it had "reviewed record
evidence indicating that subject imports from China had significant injurious effects, independent of
any injurious effects of other causal factors."
684 The Panel found that China had "failed to establish
that in the context of the present case the USITC should have provided a cumulative assessment of the
effects of the other causes of injury".685
310. China takes issue with this finding, claiming that the Panel improperly dismissed China's
arguments on this point. According to China, it provided the Panel with "the unique factual
circumstances by which other causes worked in an interrelated manner in th is case to sever or
diminish the magnitude of any causal link" between Chinese imports and material injury. 686 I n

683Panel Report, para. 7.377 (referring to Appellate Body Report, EC – Tube or Pipe Fittings ,
para. 192).
684Panel Report, footnote 511 to para. 7.377.
685Panel Report, para. 7.377.
686China's appellant's submission, para. 494. (original underlining)

support of its argument, China refers to certain passages in its first and second written submission to
the Panel.
687
311. On appeal, China refers to the "interplay" be tween factors other than subject imports and
points to the "subsequent reduction in the possibilit y for subject imports to be a 'significant cause'". 688
In doing so, China largely repeats the arguments it makes concerning distinct other causes of injury
that it claims the Panel and the USITC failed to address meaningfully. China argues, for instance, that
import levels in 2007 and 2008 reflected , "at least in part", the consequences of earlier decisions by
US producers to globalize and create more demand for imports.689 According to China, the "void" left
by US producers "became particularly important during the recession in 2008 as demand shifted to
lower-priced value tires and thus shipments of those imported tires at a lower price-point held up
significantly better than domestic shipments of the more expensive U.S.-manufactured tires."
690
China asserts that it was therefore "improper to assume imports from China displaced U.S. production
at the end of the period when many of the U.S. production lines of the most directly competitive
products had already been shut down for broader re asons that only partially related to imports from
China."691
312. With regard to non-subject imports, China re iterates its argument that, during the 2004-2006
period, non-subject imports had a much larger shar e of the market than imports from China and were
lower priced than US-made tyres. China asserts that it was therefore "improper to attribute significant
effects to the smaller volume of imports from China while ignoring the effects of the larger volume of
imports from other countries that also undersold U.S. tire prices by a wide margin." 692 China adds
that "the domestic industry itself was responsible for imports of both subject and non-subject imports,
and therefore U.S. producers themselves had some control over the relative magnitude of those
imports."693 Moreover, for China, "[g]iven the importance of non-subject imports in the overall
U.S. market (comprising more than four times as large a presence in the market as imports from

687China's appellant's submission, para. 494 (referring to China's first written submission to the Panel,
paras. 235-238, 357, and 358; and China's second wr itten submission to the Panel, paras. 345-347). China
argued, inter alia, that declining demand, the US domestic industry's business strategy to globalize production,
attenuated competition, and other factors, individually sever the requisite causal link that must be shown in
order to justify the imposition of a product-specific safeguard under Section 16 of the Protocol. China further
argued that these factors "work together to create the overall conditions of competition in the market place" and
that they "interact and reinforce each other". For China, in order to jus tify the imposition of a product-specific
safeguard in this case, the USITC was required to show that, "even in the face of these interrelated conditions of
competition, imports from China were still themselves a 'significant cause' of material injury".

China) and their ability to undersell the higher-c ost U.S.-based production of lower-end tires (with
average unit values about 20 percent lower than U. S.-produced tires), U.S. producers themselves had
to find lower cost places to produce." 694 In China's view, "it makes little sense to blame this need on
the smaller volume of imports from China", when "[a]ll imports—not just those from China—offered
more price-competitive options and drove the new business strategy."695
313. With regard to declines in demand, China fu rther argues that the longer-term decline in
overall US demand created the need for US producer s to shift production to where the markets were
strongest and "reinforced the need for a new business strategy to globalize production". 696 China adds
that the "decline in U.S.-based automobile prod uction drove down production for the OEM market"
and further "reinforced the need to produce in other markets".697
314. China's arguments on appeal regarding the "int erplay" of causes other than rapidly increasing
subject imports are clearly more elaborate and deta iled than the arguments that China developed on
this point before the Panel. Having said this, we recall that the Panel found that China failed to
establish that the USITC's analysis of the dom estic industry's business strategy was in error. 698 We
further recall that the Panel found "no error in the USITC's consideration of changes in demand for
tyres in the United States, or the conclusion that any injury suffered by the domestic industry was
caused by subject imports, rather than demand changes". 699 Moreover, the Panel found that "although
the volume of non-subject imports was greater than the volume of subject imports from China, and
although non-subject imports remained cheaper th an domestically-produced tyres, the dominant
feature of the U.S. market was the rise of subj ect imports from China at the expense of both non-
subject imports and the U.S. industry." 700 On our part, in reviewing China's arguments on appeal, we
have not found the Panel to have erred in reaching these conclusions. In these circumstances, we are
not persuaded that the Panel erred in concluding that China failed to dem onstrate in this case that "the
collective injurious effect of other causal factors mi ght be so dominant that the injury caused by
increasing imports could not properly be found to be 'significant'".701
315. Even accepting that non-subject imports, dec lines in demand, and the domestic industry's
business strategy of shifting focus to higher-value products for its US production may also have
played a role, even an important role, in bringing about material injury to the domestic industry, we

698Panel Report, para. 7.322.
699Panel Report, para. 7.359.
700Panel Report, para. 7.367.
701Panel Report, para. 7.377 (referring Appellate Body Report, EC – Tube or Pipe Fittings, para. 192).

are not persuaded that the Panel erred in conclu ding that the record ev idence before the USITC
indicated "that subject imports from China had significant injurious effects, independent of any
injurious effects of other causal factors."
702 To the contrary, we consider that the Panel properly
concluded that the effects of rapidly increasing imports from China remained significant in the
context of the effects of these other causes.
316. China further argues that the Panel "erred by considering each causation argument raised by
China in isolation", and never addressing them toge ther in what China descr ibes as an "integrated
analysis".703 According to China, the lack of correla tion and the existence of attenuated competition
in this case "reinforced each other" and "undermined " any conclusion that subject imports might be a
significant cause of material injury. 704 China maintains that the domestic industry's business strategy
"helped explain why attenuated competition was an accelerating phenomenon in the market over the
period of investigation". 705 China also refers to the "contin uing large presence" of non-subject
imports and improvements in the performance of the domestic industry in 2007.706
317. We are not persuaded that the Panel failed to consider sufficiently how different causal
factors interacted in its analysis. For example, th e Panel juxtaposed trends in subject imports with
declines in demand, noting that, "[e]ven when de mand increased by 1.6 per cent in 2007, the volume
of subject imports increased by the significantly greater figure of 53.7 per cent". 707 Based on its
analysis, the Panel concluded that the USITC pr operly found "that subject imports had injurious
effects independent of any injury caused by changes in demand." 708 The Panel also noted that the fact
that the "domestic industry was required to absorb virtually 100 per cent of the decline in demand in
2008, while subject imports continued to increase by 10.8 per cent, demonstrates that subject imports
were having effects on the domestic industry that could not be explained by that decline in
demand."709 In addition, the Panel examined the relationship between rapidly increasing imports from
China and imports from third countries, noting, for example, that "the prices of non-subject imports
were lower than those of U.S. producers throughout the period of investigation, and this may have
impacted negatively on the domestic industry."710 The Panel also noted that "the average unit value of
non-subject imports remained 22-25 per cent higher th an the average unit value of subject imports,
suggesting that non-subject imports would have had considerably less price effect on the domestic

702Panel Report, footnote 511 to para. 7.377.
706China's appellant's submission, paras. 508 and 509.
707Panel Report, para. 7.336.
708Panel Report, para. 7.333.
709Panel Report, para. 7.343.
710Panel Report, para. 7.364.

industry than subject imports." 711 The Panel added that "the share of non-subject imports in total
U.S. imports declined from 87.1 to 66.9 per cent ov er the period, as the share of subject imports to
total U.S. imports increased from 12.9 to 33.1 per cent." 712 The Panel's analysis reveals that the
USITC also considered the interaction between sever al of the factors referred to by China. For
example, with respect to changes occurring in 20 08, the USITC referred to subject imports, non-
subject imports, and declines in demand, finding that:
[s]ubject imports increased by 4.5 million tires in 2008, while U.S.
apparent consumption declined by 20.4 million tires. Imports from
third countries declined by 6.0 million tires in 2008, or
by 6.1 percent, roughly consistent with the 6.9 percent decline in
U.S. apparent consumption in 2008. Meanwhile, domestic
production of subject tires declined by 20.0 million tires in 2008, or
by 11.1 percent, and absorbed vi rtually all the decline in U.S.
apparent consumption that year.
713 (footnotes omitted)
318. China suggests that the Panel erred by "isolating elements of the causation analysis instead of
considering their interrelated a nd mutually reinforcing nature". 714 We do not agree. Instead, as we
see it, the Panel's analysis of the USITC's findings largely mirrored arguments that China made before
the Panel. The fact that the Panel assessed Ch ina's arguments concerning the USITC's causation
analysis separately does not mean that the Panel fa iled to consider whether the reasoning provided by
the USITC for its overall conclusion regarding cau sation was adequate in the light of China's
arguments and the record evidence taken as a whol e. Thus, for example, in addressing China's
arguments regarding the US plant closures in 2006 and 2008, the Panel refe rred to various factors
relied upon by the USITC, including the proportion of total subject imports made by US producers.
The Panel emphasized that, while it would consider "the USITC's handling of these factors, and the
relevant evidence, individually", it would "als o assess the USITC's conclusion on the basis of the
totality of the factors and evidence relied on by the USITC".
715 We consider the Panel's analysis to
have been sufficient particularly given that, under Paragraph 16.4 of the Protocol, rapidly increasing
imports from China may be one of several causes that contribute to producing or bringing about
material injury to the domestic industry. China's argument that this is not the case is predicated on
China's interpretation of Paragraph 16.4, which we have rejected above.

711Panel Report, para. 7.364.
712Panel Report, para. 7.364.
713Panel Report, paras. 7.337 and 7.353 (quoting USITC Report, p. 26). In addition, we note that, in
reaching its ultimate conclusion on the existence of mark et disruption, the USITC re lied in large part on the
significant increase in the volume of subject imports, the significant underselling of domestic products, and the
correlation of the increase in subject imports with the domestic indu stry's performance indicators. (See USITC
Report, p. 29)
715Panel Report, para. 7.289.

3. Conclusion
319. Based on the foregoing, we uphold the Panel's finding, in paragraph 7.378 of the Panel
Report, that China has failed to establish that the USITC improperly attributed injury caused by other
factors to subject imports.
E. Article 11 of the DSU
320. China claims that the Panel failed to conduct an objective assessment of the matter as required
under Article 11 of the DSU in its review of the US ITC's determination that subject imports were "a
significant cause" of material injury to the domestic industry. China relies on several arguments to
support its claim. First, China alleges that the Pane l failed to consider the totality of the evidence on
the question of causation. Second, China conten ds that the Panel failed to conduct a balanced
assessment of the evidence on the question of cau sation and disregarded evidence that was not
consistent with the conclusion reached by the USIT C. Third, China submits that the Panel went
beyond the rationale contained in the USITC determ ination on the question of causation and relied on
post hoc clarifications provided by the United States or analysis developed by the Panel itself.
Finally, China asserts that the Panel failed to c onsider all of China's arguments on the cumulative
effects of other causal factors.
716
321. The Appellate Body has consistently recognized that panels enjoy a margin of discretion in
their assessment of the facts. 717 This margin includes the discretion of a panel to decide which
evidence it chooses to utilize in making its findings718, and to determine how much weight to attach to
the various items of evidence placed before it by the parties to the case. 719 A panel does not commit a
reversible error simply because it declines to accord to the evidence the weight that one of the parties
believes should be accorded to it. 720 In addition, as the Appellate Body has previously emphasized, a
claim under Article 11 of the DSU must "stand by its elf and be substantiated with specific arguments,

716China's appellant's submission, paras. 566-583.
717Appellate Body Report, EC – Asbestos , para. 161; Appellate Body Report, EC – Hormones ,
para. 132; Appellate Body Report, EC – Sardines , para. 299; Appellate Body Report, Japan – Apples ,
para. 222; Appellate Body Report, Korea – Dairy, para. 137; and Appellate Body Report, US – Wheat Gluten,
para. 151.
720Appellate Body Report, Australia – Salmon , para. 267; Appellate Body Report, Japan – Apples ,

rather than merely being put forth as a subsidiary ar gument or claim in support of a claim of a panel's
failure to construe or apply correctly a particular provision of a covered agreement."721
322. With these considerations in mind, we turn to China's four specific allegations that the Panel
failed to comply with Article 11 of the DSU.
1. Totality of the Evidence
323. China claims that the Panel failed to consider the "totality of the evidence" on the question of
causation.722 China also faults the Panel for failing to see how the various causes are interrelated, and
for failing to consider the way in whic h other causes interacted with each other. 723 Noting that the
USITC itself "embraced a holistic approach to the causation issue", China submits that it was
therefore error for the Panel to address "each causation issue in isolation". 724 In support of its
position, China refers to the dispute in US – Countervailing Duty Investigation on DRAMS , where the
Appellate Body "explained that when the authorities considered evidence as a whole, a panel must use
the same approach when evaluating the WTO consistency of the decision reached by the authority".725
324. As noted above, the Panel's discussion of possi ble other causes of injury largely mirrored
arguments that China made before the Panel. 726 The fact that the Panel structured its analysis by
addressing China's arguments individually does not mean that the Panel failed to consider whether the
USITC's overall conclusion regarding causation was r easoned and adequate in the light of China's
arguments and the record evidence taken as a whol e. We see no error in the Panel's analytical
approach. We therefore disagree with China's assertions in this respect.
2. Balanced Assessment of the Evidence
325. China claims that the Panel failed to conduct a balanced ass essment of the evidence on the
question of causation, and disregarded evidence that was not consistent with the conclusions reached

721Appellate Body Report, Australia – Apples , para. 406. See also Appellate Body Report, Chile –
Price Band System (Article 21.5 – Argentina) , para. 238 (referring to Appellate Body Report, US – Steel
Safeguards, para. 498); and Appellate Body Report, China – Publications and Audiovisual Products ,
footnote 368 to para. 189. More recently, the Appellate Body found th at "[i]t is also unacceptable for a
participant effectively to recast its argument before the panel under the gui se of an Article 11 claim. Instead, a
participant must identify specific errors regarding the objectivity of the panel's assessment." (Appellate Body
725China's appellant's submission, para. 568 (referring to Appellate Body Report, US – Countervailing
Duty Investigation on DRAMS, paras. 188-190).

by the USITC. In particular, China takes issue w ith the Panel's reliance on footnote 62 of the USITC
staff report, which refers to, inter alia , reasons for the closure of Bridgestone's plant in Oklahoma
City and Goodyear's plant in Tyler.
727 According to China, the Panel "went out of its way to find and
cite evidence the USITC majority did not cite or rely upon" and "extracted only those pieces of
evidence that supported the USITC conclusion and i gnored those other pieces of evidence that were
not consistent with the USITC conclusion". 728 Referring to the Appellate Body Report in US –
Upland Cotton (Article 21.5 – Brazil) , China submits that panels mu st be "even-handed" in their
review and consider all of the arguments and evidence in a balanced and consistent way.729
326. We do not agree with China's assertion that the Panel erred by relying on information
contained in footnote 62 of the USITC staff report that indicates that competition from low-cost
imports from China and Korea was one of the reas ons for the closure of Bridgestone's plant in
Oklahoma City. Instead, the Panel simply engage d in a review of record evidence (including
information found in the USITC staff report) to assess whether the USITC's statement regarding plant
closings was supported by the evidence before the USITC. We see no reason why, in this context, the
Panel would have been precluded from examining in formation set out in the USITC staff report.
Furthermore, the fact that the information is prov ided in a passage of the USITC staff report that
addresses a different issue (COGS/sales ratio) does not mean that it cannot be relevant for purposes of
determining whether the USITC could reasonably understand the reference to "low cost producing
countries" as including China. Rather, as we s ee it, the information on which the Panel relied
provides relevant context for the purpose of assessi ng whether one of Bridgestone's reasons for the
closing of its plant was low-cost imports from China.
327. Moreover, although China is correct in saying that footnote 62 of the USITC staff report cites
three non-import related factors as reasons for the cl osure of the Goodyear plant, the footnote also
states that the plant was experiencing "c onsiderable pressure from low cost imports".
730 We do not
agree with China that the Panel "ignored" these other reasons for the closure of Goodyear's plant in
Tyler. Contrary to what China seems to sugg est, the question before the Panel was not whether
subject imports were the only reason for the closure of the plant. Rather, the Panel was called upon to
assess the USITC's conclusion that competition from low-priced imports from Asia, including China,
played an "important part" in the plant closures that occurred in 2006 and 2008.
731 We therefore do

727China's appellant's submission, para. 569 (referring to USITC Report, footnote 62 at p. III-16).
729China's appellant's submission, paras. 49 and 562 (referring to Appellate Body Report, US – Upland
Cotton (Article 21.5 – Brazil), para. 293).
730USITC Report, footnote 62 at p. III-16. Non-import-related factors justifying Goodyear's plant
closure were identified as rising costs, Goodyear's decision announced in June 2006 to exit the wholesale private
label market, and reduced demand for the types of tyres produced at Goodyear's plant in Tyler.
731See Panel Report, para. 7.287 (quoting USITC Report, p. 26).

not agree with China that the Panel acted inconsis tently with its obligations under Article 11 of the
DSU by failing to conduct a balanced assessment of the evidence before the USITC.
3. Rationale and Reasoning in the USITC Determination
328. China claims that the Panel acted inconsistently with its obligations under Article 11 of the
DSU by going beyond the rationale contained in the USITC determination on the question of
causation, and relying on post hoc clarifications provided by the United States or analysis developed
by the Panel itself to "bolster the USITC determination". 732 China does not set out "specific"
arguments and reasoning to support its claim. Inst ead, China refers to certain arguments it made
earlier in other sections of its appellant's submissi on dealing with conditions of competition, declining
demand over the period of investigation, the recession in 2008, and the role of non-subject imports.733
329. The Appellate Body has previously clarified that a panel's examination of the conclusions of
an investigating authority "must be critical and se arching, and be based on the information contained
in the record and the explanations given by the author ity in its published report ."734 The Appellate
Body has also clarified that during panel pro ceedings a Member is precluded from providing an
ex post rationale to justify the investigating authority's determination.735
330. Based on our examination of the Panel's analysis , we find that the Panel merely engaged in a
review of whether the evidence on record supported the conclusion reached by the USITC, rather than
constructing a rationale for the USITC. The fact th at the Panel may have examined evidence or data
on the record that the USITC did not refer to specifi cally in its determination does not establish that
the Panel conducted an improper review of the US ITC determination. To the contrary, as noted
above, a panel should examine whether the explanation provided by the investigating authority to
support its conclusion is reasoned a nd adequate, in the light of the evidence on the record and other
plausible alternative explanations. Moreover, although the Panel may have attributed different weight
to certain evidence on record than did China, this is insufficient to demonstrate that the Panel acted
inconsistently with its obligations under Article 11 of the DSU.
331. In any event, the Appellate Body has held th at a challenge under Article 11 of the DSU must
"stand by itself and be substantiated with specific arguments, rather than merely being put forth as a
subsidiary argument or claim in support of a claim of a panel's failure to construe or apply correctly a

733China's appellant's submission, paras. 574-577.
734Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada) , para. 93. (emphasis
added)
735Appellate Body Report, Japan – DRAMs (Korea), para. 159.

particular provision of a covered agreement."
736 This, in our view, is not the case here. Accordingly,
we reject this aspect of China's claim that the Panel acted inconsistently with Article 11 of the DSU.
4. Consideration of Certain Arguments Made by China
332. China claims that the Panel acted inconsistently with its obligations under Article 11 of the
DSU by failing to consider China' s arguments regarding: (i) how "other causes interacted with each
other" and had a broader "cumulative effect" 737; (ii) the existence of "attenuated competition"
between subject imports and domestic tyres in the US replacement market, including evidence
provided by the United States to the Panel indicating a limited presence of Chinese imports in tier 1 of
that market
738; and (iii) how it was necessary to disti nguish the standard in China's Accession
Protocol of a "significant cause" from the mere "cause" standard of other WTO agreements.739
333. Contrary to China's assertion, it appears that th e Panel did in fact consider China's arguments
on these three issues. First, in relation to China's argument concerning the cumulative effect of causes
other than subject imports, the Panel reasoned that , notwithstanding the lack of any requirement for
cumulative assessment under the Protocol, "there may be cases where the collective injurious effect of
other causal factors might be so dominant that the injury caused by increasing imports could not
properly be found to be 'significant'." 740 The Panel explained, however, that, in rejecting China's
claims regarding the USITC's assessment of the indi vidual injurious effects of these other factors, it
had "reviewed record evidence indicating that subj ect imports from China had significant injurious
effects, independent of any injurious effects of other causal factors." 741 On this basis, the Panel
concluded that China "failed to establish that in the context of the present case the USITC should have
provided a cumulative assessment of the effects of the other causes of injury".742
334. Second, with respect to the issue of attenuated competition, the Panel noted that there was no
consensus among market participants as to how to de fine what types of tyres should be classified in
each tier, or what brands should be classified in eac h tier, of the US replacement market. On this
basis, and following further analysis, the Panel f ound no fault with the USITC's conclusion that there
were no distinct dividing lines between tiers 1, 2, and 3. Also, while the Panel recognized that "there
was some variation in levels of competition be tween subject imports a nd domestic products as

736Appellate Body Report, US – Steel Safeguards , para. 498; and, most recently, Appellate Body
Report, Australia – Apples, para. 406.
740Panel Report, para. 7.377 (referring Appellate Body Report, EC – Tube or Pipe Fittings, para. 192).
741Panel Report, footnote 511 to para. 7.377.
742Panel Report, para. 7.377.

between tier 1 and tiers 2 and 3", based on its anal ysis, the Panel found "no fault with the USITC's
conclusion that subject imports and domestic products were not focused in different tiers" and did not
accept that "the USITC should have found that ther e was only 'vestigial' competition between them in
tiers 2 and 3."743
335. Third, with respect to the need to distinguish "a cause" from "a significant cause", we note
that the Panel agreed with Ch ina (and the United States) that "a significant cause" is one that is
"important" or "notable". The Panel added, however , that it disagreed with China's argument that the
meaning of "significant" must include the notion of significance relative to other causal factors. The
Panel further explained that China had "provided no evidence or explanation in support of this
argument", and expressed the view that "rapidly increasing imports might properly constitute a
significant cause of market disruption even though th eir causal role is not as significant as other
factors."744
336. Based on our review of the Panel's reasoning, we believe that the Panel reasonably considered
China's arguments regarding the USITC's causation analysis. 745 The fact that the Panel ultimately
disagreed with China's position does not establish th at it committed an error of law under Article 11
of the DSU. While we agree with China that the Panel could have pr ovided more reasoning to
support its findings, we do not think that any shortcomings in the Panel's analysis of the USITC's
determination on causation are so serious as to amount to a failure to make an objective assessment of
the matter before it.
337. Based on the foregoing, we do not consider that the Panel acted inconsistently with its duties
under Article 11 of the DSU.
F. Conclusion
338. For all these reasons, and having considered all of China's arguments concerning the Panel's
assessment of the USITC's causation analysis, we uphold the Panel's finding, in paragraph 7.379 of
the Panel Report, that the USITC did not fail properly to establish that rapidly increasing imports from
China were a significant cause of material injury to the domestic industry within the meaning of
Paragraph 16.4 of China's Accession Protocol.

743Panel Report, para. 7.197.
744Panel Report, para. 7.158. The Panel also explaine d that it agreed with China that the term "a
significant cause" requires more than a mere contribution. (Ibid., footnote 271 to para. 7.159)
745See also Appellate Body Report, EC – Poultry, para. 135.

VII. Findings and Conclusion
339. For the reasons set out in this Report, the Appellate Body:
(a) with respect to the USITC's analysis of whether imports from China are increasing
rapidly within the meaning of Paragraph 16.4 of the Protocol, upholds the Panel's
finding, in paragraph 7.110 of the Panel Report, that the USITC did not fail to
properly evaluate whether imports from China met the specific threshold under
Paragraph 16.4 of China's Accession Protocol of "increasing rapidly";
(b) with respect to whether rapidly increasing imports from China are "a significant
cause" of material injury to the US domestic industry within the meaning of
Paragraph 16.4 of China's Accession Protocol:
(i) upholds the Panel's finding, in paragraph 7.216 of the Panel Report, that the
USITC did not err in its assessment of the conditions of competition in the
US market;
(ii) upholds the Panel's finding, in paragraph 7.261 of the Panel Report, that the
USITC's reliance on overall coincidence between an upward movement in
subject imports and a downward movement in injury factors supports the
USITC's finding that rapidly increasing imports from China are a significant
cause of material injury to the dome stic industry within the meaning of
Paragraph 16.4 of China's Accession Protocol;
(iii) upholds the Panel's finding, in paragra ph 7.378 of the Panel Report, that
China has failed to establish that th e USITC improperly attributed injury
caused by other factors to subject imports;
(iv) finds that the Panel did not act incons istently with its duties under Article 11
of the DSU in its analysis of the USITC's determination that rapidly
increasing imports from China were a significant cause of material injury to
the domestic industry; and accordingly
(v) upholds the Panel's finding, in paragraph 7.379 of the Panel Report, that the
USITC did not fail properly to establish that rapidly increasing imports from
China were a significant cause of materi al injury to the domestic industry
within the meaning of Paragraph 16.4 of China's Accession Protocol.

ANNEX I

27 May 2011
 (11-2662)
 Original: English

Notification of an Appeal by China
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellate Review

 The following notification, dated 24 May 201 1, from the Delegation of China, is being
circulated to Members.
Governing the Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate
Review, the People's Republic of China hereby notifies the Dispute Settlement Body of its decision to
appeal to the Appellate Body certain issues of law and legal interpretation covered in the Panel Report
in (WT/DS399) ("Panel Report"). Pursuant to Rule 20(1) of the Working Procedures for
Appellate Review , China is simultaneously filing this Noti ce of Appeal with the Appellate Body
Secretariat.
2. The measure at issue is a transitional product- specific safeguard measure under Paragraph 16
of the Protocol of Accession that has been applied by the United States on imports of certain
passenger vehicle and light truck tyres from China pursuant to Section 421 of the Trade Act of 1974.
The U.S. International Trade Commission ("USITC") determined that there was market disruption as
a result of rapidly increasing imports of subject tyres from China that were a significant cause of
material injury to the domestic industry. The USIT C made this determination in its investigation of
Certain Passenger Vehicle and Light Truck Tires from China (Inv. No. TA-421-7).
3. The issues that China raises in this appeal rela te to the Panel's findi ngs and conclusions in
respect of the consistency of the challenged measures with the Protocol on the Accession of the
People's Republic of China ("the Protocol") and the Understanding on Ru les and Procedures
Governing the Settlement of Disputes ("DSU").
4. For the reasons stated below, and as will be de veloped in its submissions to the Appellate
Body, China appeals the following errors of law and legal interpretation contained in the Panel Report
and requests the Appellate Body to reverse or m odify the related findings and conclusions of the

Panel. In doing so, China makes five specific cl aims, delineated below and to be detailed in its
submissions to the Appellate Body.
1
5. First, China seeks review by the Appellate Body of the Panel's interpretation of
Paragraph 16.4 of the Protocol as it relates to th e USITC's determination that imports from China
were "increasing rapidly" within the meaning of th at provision. The Panel's legal interpretation erred
by not giving appropriate meani ng to the phrase "increasing rapidly." 2 The Panel's errors of law and
legal interpretation include:
(a) The Panel erred in interpreting the term "increasing" from Paragraph 16.4 as meaning
nothing more than the term "increased" from Paragraph 16.1 and failing to otherwise
address the analytically appropriate period of time in a meaningful way.3

(b) The Panel erred in interpreting the term "r apidly" from Paragraph 16.4 as meaning "with
great speed" but not requiring an assessment of the rate of increase in imports or any
other alternative metric to give meaning to the idea of great speed.4

(c) The Panel erred in interpreting the phrase "increasing rapidly" from Paragraph 16.4 as not
requiring the most recent rate of increase in im ports to be put in context relative to prior
rates of increase earlier in the period, or in any other context, that would distinguish
imports that are "increasing rapidly" from those that merely "increased" or are merely
"increasing."
5

6. Second, China seeks review by the Appellate Body of the Panel's application of
Paragraph 16.4 of the Protocol as it relates to th e USITC's determination that imports from China
were "increasing rapidly" within the meaning of th at provision. The Panel's application of the legal
standard erred by upholding the USITC finding that imports from China were "increasing rapidly." 6
The Panel's errors of law and legal application include:
(a) The Panel erred in upholding the USITC determination even though the USITC assessed
the period as a whole, instead of the most recent period.7 Rather than requiring a focus on
the most recent period, as is necessary to determine properly whether subject imports are
"increasing rapidly," the Panel approved a temporal assessment that stressed the entire
five-year period as a whole.

(b) The Panel erred in upholding the USITC dete rmination even though the USITC failed to
assess properly the rate of increase in imports, particularly that of the most recent year.
8
Instead of determining whether this rate constituted a "rapid" increase, the Panel
dismissed the notion that the USITC was requi red to assess the rate of increase in subject
imports when determining whether they were "increasing rapidly."

(c) The Panel erred in upholding the USITC dete rmination even though the USITC failed to
put the most recent rate of increase in proper context with prior rates of increases.9 To the

1 Pursuant to Rule 20(2)(d)(iii) of the Working Procedures for Appellate Review this Notice of Appeal
includes citations to the paragraphs of the Panel Report containing the alleged errors. These citations, however,
do not prejudice to the ability of China to refer to other paragraphs of the Panel Report in its appeal.
2 Panel Report, para. 7.110.
3 Panel Report, paras. 7.90-7.91.
4 Panel Report, para. 7.92.
5 Panel Report, paras. 7.90-7.93.
6 Panel Report, para. 7.110.
7 Panel Report, paras. 7.83-7.85, 7.96-7.100, 7.104.
8 Panel Report, paras. 7.92-7.93.
9 Panel Report, paras. 7.92-7.93.

extent the Panel did assess the most recent rate of increase in context, the Panel erred in
going beyond the USITC determination as written and in finding that a lower rate of
increase constituted "increasing rapidly" b ecause it came "in addition" to prior
increases.
10

7. Third, China seeks review by the Appellate Body of the Panel's interpretation of
Paragraph 16.4 of the Protocol as it relates to th e USITC's determination that imports from China
were a "significant cause" within the meaning of that provision. The Panel's legal interpretation erred
by not giving proper meaning to the term "signifi cant" from the phrase "significant cause" and failing
to distinguish a "significant cause" from a "cause."11 The Panel's errors of law and legal interpretation
include:
(a) The Panel erred in offering a definition of the term "significant" but not otherwise
providing an interpretation of what "significan t" meant in application, or explaining how
a "significant cause" differed from a "cause."12

(b) The Panel erred in interpreting the phrase "significant cause" as not requiring a conditions
of competition analysis that meaningfully assesses whether subject imports are capable of
being a "significant cause" of injury and not simply whether they are capable of being a
"cause."
13

(c) The Panel erred in interpreting the phrase "significant cause" as not requiring a
coincidence analysis that assesses whether correlation goes beyond mere overall
correlation, and instead corresponds in the degrees of relative magnitude as well as in a
year-by-year assessment.
14

(d) The Panel erred in interpreting the phrase "significant cause" as not requiring analysis that
ensures injury caused by other factors is not being attributed to the significance, or
degree, of the injury allegedly caused by subject imports.
15

8. Fourth, China seeks review by the Appellate Body of the Panel's application of
Paragraph 16.4 of the Protocol as it relates to th e USITC's determination that imports from China
were a "significant cause" within the meaning of th at provision. The Panel's application of the legal
standard erred by upholding the USITC finding that imports from China were a "significant cause" of
injury even though the USITC's and Panel never distinguished a "cause" from a "significant cause"
nor modified their causal analyses to conform to this distinct standard.
16 The Panel's errors of law and
legal application include:
(a) The Panel erred in upholding the USITC determination even though the USITC failed to
conduct the conditions of competition analys is with care sufficient to assess whether
subject imports were in fact capable of be ing a "significant cause" of injury and not
merely a "cause."17

(b) The Panel erred in upholding the USITC dete rmination even though the USITC failed to
conduct a coincidence analysis that asse ssed whether correlation went beyond mere

10 Panel Report, para. 7.93.
11 Panel Report, para. 7.379.
12 Panel Report, paras. 7.158, 7.139-7.146, 7.170-7.178.
13 Panel Report, paras. 7.169-170.
14 Panel Report, paras. 7.228-7.234.
15 Panel Report, paras. 7.175-7.177.
16 Panel Report, para. 7.379.
17 Panel Report, paras. 7.209-7.216.

general overall correlation and instead corres ponded in the degrees of relative magnitude
and in a year-by-year assessment that would be necessary to establish a "significant
cause."
18

(c) The Panel erred in upholding the USITC dete rmination even though the USITC failed to
analyze other causes properly to ensure that injury caused by these other factors was not
being improperly attributed to the significan ce, or degree, of the injury allegedly caused
by subject imports.
19

(d) The Panel erred in upholding the USITC dete rmination even though the USITC failed to
undertake an integrated analysis of all the causation factors to consider their collective
implication for the existence of a sufficie nt link of "significant cause" between those
imports that are "increasing rapidly" at th e end of the period and the condition of the
domestic industry.
20

9. Fifth, China seeks review by the Appellate Body under Article 11 of the DSU of how the
Panel applied the "significant cause" standard of Paragraph 16.4 of the Protocol. The Panel acted
inconsistently with Article 11 of the DSU in con ducting its analysis of whether imports from China
were a "significant cause" of injury by failing to conduct an objective assessment of the matter. The
Panel's errors of law and legal application under Article 11 include:
(a) The Panel erred in failing to consider the to tality of the evidence. Regarding causation,
the Panel approached individual arguments and pieces of evidence in isolation instead of
addressing the ways in which the arguments and supporting evidence interrelated.

(b) The Panel erred in failing to conduct a balan ced assessment of the evidence. Regarding
causation, the Panel went out of its way to c ite evidence the USITC majority did not rely
on from page III-16, footnote 62 of the USITC determination, yet ignored the evidence in
the very same footnote that was not consistent with the USITC conclusion.21

(c) The Panel erred in failing to focus on the US ITC's decision as written. In upholding the
USITC determination on causation, the Pane l repeatedly went beyond the rationale
contained in the determination itself and relied upon post hoc clarifications by the United
States and the Panel's own new analysis of the issues.
22

(d) The Panel erred in failing to consider all the ar guments of the parties. The Panel failed to
consider China's arguments about how other causes interacted with each other and had a
broader cumulative effect,
23 how the more detailed data on the different suppliers to the
aftermarket affected attenuated competition,24 and how it was necessary to distinguish the
Protocol's "significant cause" requirement fro m the mere "cause" requirement of other
WTO agreements.25

18 Panel Report, paras. 7.234-7.238; 7.244-7.245; 7.254-7.260.
19 Panel Report, paras. 7.285-7.322; 7.333-7.345; 7.348-7.350; 7.353-7.354; and 7.364-7.367.
20 Panel Report, paras. 7.376-7.378.
21 Panel Report, paras. 7.301, 7.305, 7.307.
22 Panel Report, paras. 7.195, 7.301, 7.305, 7.336, 7.354, and 7.366-7.367.
23 Panel Report, paras. 7.376-7.377.
24 Panel Report, para. 7.197.
25 Panel Report, paras. 6.26-6.30.

10. China respectfully requests that the Appellate Body reverse the findings and conclusions of
the Panel that are based on the errors of law and le gal interpretation identified above. With respect to
the claims of error iden tified in paragraphs 6 and 8 above, China respectfully requests that the
Appellate Body complete the analysis to conclude that the challenged measures were inconsistent
with the obligations of the United States under the covered agreements.