Document: WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R Page 238 7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737, since that data alone related to stainless steel wire  as such.  The analysis provided by Commissioners Bragg and Devaney could not provide any useful basis for the assessment of imports trends for stainless steel wire, since they focused on another product, i.e. "stainless steel wire products, including stainless steel wire and rope".1738 (j) Stainless steel rod 7.643 China claims that the USITC failed to determ ine whether the increase in imports was recent enough, sudden enough, sharp enough and significant enough.  According to China, indeed, the USITC did not address the right question when it stated that imports showed a dramatic and rapid increase in 2000, since "rapid and dramatic" was not the vocabulary chosen by the Appellate Body.
Document codes: WT/DS248/R; WT/DS249/R; WT/DS251/R; WT/DS252/R; WT/DS253/R; WT/DS254/R; WT/DS258/R; WT/DS259/R
Complainant: EU
Respondent: U.S.
Third parties: Brazil, Canada, China, Taiwan, Cuba, Japan, South Korea, New Zealand, Norway, Switzerland, Thailand, Turkey, Venezuela
Dispute stage: Appellate Body
Agreements cited: Art. 2, 3, 4, 5, 7, 9  SafeguardsArt. XIX:1  GATT 1994

7.642 China responds that it was right to rely only on the data considered by Chairman Koplan 1737,
since that data alone related to stainless steel wire as such. The analysis provided by Commissioners
Bragg and Devaney could not provide any useful basis for the assessment of imports trends for
stainless steel wire, since they focused on another product, i.e. "stainless steel wire products,
including stainless steel wire and rope".1738
(j) Stainless steel rod
7.643 China claims that the USITC failed to determ ine whether the increase in imports was recent
enough, sudden enough, sharp enough and significant enough. According to China, indeed, the
USITC did not address the right question when it stated that imports showed a dramatic and rapid
increase in 2000, since "rapid and dramatic" was not the vocabulary chosen by the Appellate Body.
In any event, there is a lack of explanation.
1739
7.644 China also argues that the USITC failed to consider the rate and amount of increased imports
in absolute and relative terms and the trends. 1740 China and the European Communities further argue
that the USITC failed to consider trends in imports over the period of investigation. According to
China and the European Communities, these trends show that imports of stainless steel rod increased
twice during the period of investigation (by 29.4% in 1997 and by 25% in 2000), and that each surge
was followed by a decline in the following year. Being immediately compensated the following year,
these imports could not be considered as significant.
1741 The European Communities adds that the
decline in actual import levels was already noti ceable during the first half of 2001 and acknowledged
by the USITC as a decline by 31.3% between interim 2000 and interim 2001 and that there is no
reasoned and adequate explanation of how this just another one-year high justifies a safeguard
measure and there is also no explanation with regard to the relative import increase, given that the
USITC Report only shows asterisks.1742
7.645 The United States maintains that the USITC Report contains an adequate, reasoned and
reasonable explanation of how the facts in the reco rd support the USITC's determination that there
were increased imports of stainless steel rod. China's and the European Communities' contentions rest
on the use of full-year 2001 data, which were not, and should not be, considered. When viewed
within the USITC's period of investigation, imports show a clear rising trend over the last two full
years, with the largest increase – of over 25% on an absolute basis – occurring in 2000. Moreover,
even if imports followed a pattern of successive surging and receding, this could cause serious injury
to the domestic industry, such as to warrant a safeguard measure.1743
7.646 China points out that since a decline in imports in interim 2001 occurred, it was a clear signal
for the United States to look at the full data for 2001, in order to determine whether or not this new
trend was representative. In view of the fact that increased quantities in 1997 and 2000 had vanished
by the following year, it was all the more necessary to look at data for the full year 2001.1744

1737 United States' first written submission, para.314.
1738 China's second written submission, para. 128.
1739 China's first written submission, para. 278.
1740 China's first written submission, para. 275.
1741 China's first written submission, para. 281; European Communities' first written submission,
para. 353.
1742 European Communities' first written submission, paras. 355-357; European Communities' second
written submission, paras. 219-221.
1743 United States' first written submission, paras. 295-296, 300.
1744 China's first written submission, paras. 119, 121.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.647 In response to China's argument that the USITC failed to evaluate the rate and amount of
increased imports, the United States points out that the USITC noted the amount of the increase in
imports from the first full year to the last full year of the period of investigation; and it noted the
trends during the period of investigation (some fluctuation, with a sharp increase at the end). The
Agreement on Safeguards does not require that competent authorities describe the data in certain
ways.
1745
7.648 The United States further argues that China misconstrues what is meant by "recent" when
arguing that the USITC failed to consider the most recent period, i.e. interim 2001. As the US – Line
Pipe Panel recognized, it is not necessary that imports be increasing up to the very end of the period
of investigation. The Agreement on Safeguards also does not require a determination that the increase
in imports was "recent enough, sudden enough, sharp enough and significant enough".
7.649 China finally affirms that imports decreased from 45,647 short tons in the first half of 2000,
to 36,697 short tons in the second half of 2000, and finally to 31,365 short tons in the first half of
2001. China submits that this strong and lasting recent decline was not given any consideration.1746
7.650 As regards China's argument about a decline in imports that started in 2000 and lasted until
the end of the period of investigation, the United States rejects this attempt to carve up the
investigation period to achieve a desired result. Also, the Agreement on Safeguards does not specify
how the period of investigation should be br oken down. In the absence of any evidence of
manipulation or bias, the investigating authorities' methodology should be left undisturbed.1747
G. SERIOUS INJURY OR THREAT OF SERIOUS INJURY
1. Competent authorities' obligations under the Agreement on Safeguards in making
injury determinations
7.651 Relying upon the Appellate Body decision in US – Lamb, China asserts that, in determining
whether the domestic industry has suffered serious injury, that is "significant overall impairment" of
its position in the industry, competent authorities must evaluate all relevant factors and conduct a
substantive evaluation of the "bearing", "influence", "effect" or "impact" that the relevant factors have
on the situation of [the] domestic industry.
1748 China and the European Communities also rely upon
that decision to argue that the competent authorities' explanation must fully address the nature, and,
especially, the complexities of the data, and respond to other plausible interpretations of that data.1749
7.652 The European Communities argues that it follows from Articles 2.1 and 4.2 of the Agreement
on Safeguards, that a competent authority is under an obligation to justify its decision to impose
safeguard measures. That is, in the words of the Appellate Body, it must provide a "reasoned and
adequate explanation" of its determination that the necessary pre-conditions for the application of
safeguard measures have been fulfilled.
1750
7.653 The European Communities argues that, in addition, flowing from Articles 3.1 and 4.1(c) of
the Agreement on Safeguards, a competent authority must publish a report setting out its factual

1745 United States' first written submission, para. 297.
1746 China's first written submission, para. 283.
1747 United States' first written submission, para. 301.
1748 China's first written submission, paras. 305-307.
1749 China's first written submission, paras. 305-307; European Communities' first written submission,
para. 381.
1750 European Communities' first written submission, para. 380.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

findings and providing justification for the conclusions which led to the imposition of safeguard
measures. The European Communities argues that this is also a logical consequence of the domestic
investigation process set out in Article 3, which is intended to give interested parties the opportunity
to make any concerns known to the competent authority. The European Communities argues that a
competent authority must also justify its decision in the light of the comments made before it during
its investigation.
1751 In the view of the European Communities, the competent authority's report must
set out the pertinent facts on the basis of which a Member imposes a safeguard measure. Moreover,
the published report cannot leave the reader guessing about how the competent authority dealt with
complexities arising from the data- examination process.1752
2. "Significant overall impairment"
(a) CCFRS
7.654 With regard to the USITC's determination of whether there had been a "significant overall
impairment in the position of the domestic i ndustry" producing CCFRS, New Zealand argues that
although the USITC referred to some factors to support its findings, it did not balance these factors in
any objective way. New Zealand questions how, when the domestic industry's share of total domestic
consumption had remained stable (and increased significantly in the interim 2001 figures to 93.1%
from 91% in 1996), when the domestic share of total commercial shipments had been stable (and
increased from 76% in 1996 to 81.5% in interim 2001), when domestic sales had been shown to have
increased by 10.9%, when domestic production had increased 8.4% and when productivity had
"increased sharply" rising 13.2% there could still be a finding of "serious injury".
1753 New Zealand
asserts that the USITC chose to disregard these factors, focussing instead on the fact that capacity
utilization had decreased from 91.0% to 85.1%, the fact that operating income had fallen from 4.3%
of sales to –1.4% of sales and the fact that the number of workers had declined by 4.4% and the
number of hours worked had declined by 3.5%. New Zealand argues that the USITC did not explain
why these three negative factors should have outweighed the five positive factors.
1754
7.655 Further, New Zealand argues that the USITC failed to accord appropriate weight to the
significant number of factors indicating gains rather than declines in the position of the domestic
industry, and it accorded disproportionate weight to the factors that indicated declines. New Zealand
asserts that the USITC frequently rejected factors that did not support a predetermined conclusion of
"serious injury" and that nowhere did the USITC show how the factors it had relied upon adequately
demonstrate the "very high" standard of "significant overall impairment" in the position of the
industry.
1755 Similarly, China notes that the USITC made reference to the industry's financial
problems in its report. However, China argues that at no point did the USITC explain how the
importance of this factor outweighed the other positive factors and leads to the conclusion that there is
an overall impairment of the situation of the industry.1756
7.656 In response, the United States asserts that the USITC acknowledged that not every single
factor it examined pertinent to the industry's conditio n was in decline. The United States argues that
there need not be a decline in each Article 4.2(a) factor for there to be a finding of serious injury. The
United States notes that the USITC specifically found, however, that improvements in certain factors

1751 European Communities' first written submission, para. 382.
1752 European Communities' first written submission, para. 383.
1753 New Zealand's first written submission, para. 4.101.
1754 New Zealand's first written submission, para. 4.102.
1755 New Zealand's first written submission, para. 4.103.
1756 China's first written submission, para. 315.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

"do not offset the significant declines exhibited by other indicia of the industry's condition with
respect to the issue of whether the industry is suff ering serious injury". In this regard, the United
States makes reference to declines, which it claims have not been disputed by any party, including
significant idling of productive capacity, sharp deterioration in financial performance, and significant
unemployment.1757
7.657 The United States also asserts that the USITC specifically discussed and acknowledged
increases in capacity, production and productivity 1758 and examined the implications of the increases.
The USITC fulfilled its obligation under Articles 2.1 and 4.2(a) by concluding that these isolated
increases did not detract from its finding of serious injury in light of all pertinent factors having a
bearing on the state of the industry.
1759
7.658 In particular, the United States argues that the USITC Report provided several reasons why
increases in production and capacity were consistent with a finding of serious injury. First, according
to the United States, the USITC explained that increases from 1996 to 2000 occurred at a time when
apparent domestic consumption of CCFRS was increasing. The United States asserts that one would
normally expect production and capacity to increase in a growing market. However, according to the
United States, the increase in production from 1996 to 2000 was only incrementally greater than the
increase in United States apparent consumption of CCFRS during the same period.
1760 Second, the
USITC emphasized that the increased capacity was not being utilized. Instead, capacity utilization for
the domestic industry had declined steadily from 1996 to 2000 and fell sharply between interim 2000
and interim 2001. The United States asserts that the USITC emphasized that declines in capacity
utilization were apparent in each of the particular product categories within the industry, as well as in
the industry as a whole.
1761 In any event, the United States argues that Article 4.2(a) does not
expressly mention changes in capacity as a factor that an investigating authority must consider in
evaluating whether there is serious injury. Instead, it references changes in "capacity utilization". 1762
Third, according to the United States, the overall picture in the industry was not one of steady
expansion. The United States asserts that, as had been found by the USITC, ten United States
producers of CCFRS declared bankruptcy during the period of its investigation and several shut down
and ceased production altogether. 1763 The United States argues that, in light of the foregoing, the
USITC thoroughly explained why the positive trends with respect to capacity and production did not
outweigh other negative trends concerning idling productive resources in the industry.1764
7.659 According to the United States, the USITC also acknowledged that productivity in the
CCFRS industry increased from 1996 to 2000. The United States asserts that the USITC considered
the effect of this increase on employment levels in the industry and concluded that the increase in
productivity "may have offset to some degree the declines in employment". 1765 The United States
argues that, therefore, it is clear that the USITC considered the increase in productivity but concluded
that it did not outweigh or entirely explain the declines in employment. According to the United
States, the annual trends in productivity do not correl ate with the trends in employment. Productivity
for the CCFRS industry increased during every full year during the period of investigation. This

1757 United States' first written submission, para. 338.
1758 United States' first written submission, paras. 339 and 349.
1759 United States' first written submission, para. 349.
1760 United States' first written submission, paras. 340-341.
1761 United States' first written submission, para. 342.
1762 United States' first written submission, para. 344.
1763 United States' first written submission, para. 343.
1764 United States' first written submission, para. 344.
1765 United States' first written submission, para. 345.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

included years in which employment was relatively stable as well as those in which it declined. 1766
The United States argues that, moreover, increased productivity could only explain declining
employment at a particular facility where produc tion continued on an ongoing basis. It could not
explain declines in employment attributable to the shutting down of operations at production facilities.
According to the United States, the decline in employment for the CCFRS industry occurred at a time
when several productive facilities closed entirely. Thus, there were losses of employment at facilities
where productivity essentially declined to zero. 1767 The United States also argues that increases in
productivity, which would generally be expected to lead to improved financial results, did not track
productivity given that the financial results of the CCFRS industry declined sharply after 1997, and
the industry recorded overall operating losses in 1999, 2000, and interim 2001.
1768
7.660 In counter-response, New Zealand asserts that a simple unreasoned assertion that
improvements in the range of performance factors described in detail by the USITC itself "do not
offset the significant declines exhibited by other indicia" 1769, can never hope to meet these
requirements.1770
7.661 New Zealand further argues that the United States provides no substantiation for the key
propositions it asserts. New Zealand questions why it is necessarily "consistent with a finding of
serious injury" that production increases from 1996 to 2000 of 8.4% "occurred at a time when
apparent consumption of certain flat steel was increasing"? According to New Zealand, an increase in
production is a positive indicator in its own right, to be weighed and balanced with other factors,
positive and negative, when coming to an overall determination on serious injury. So, for that matter,
is an increase in consumption, which offers strong evidence of a healthy market. New Zealand asserts
that, what is more, there is no logical or legal basis in Article 4.2(a) – and the United States offers
none – for ignoring a positive industry condition indicator just because it correlates (or does not
correlate) with movements in another of the listed factors.
1771
7.662 With regard to the reasons advanced by the United States as to why the industry's increase in
capacity is irrelevant and not to be taken into account as a positive factor 1772, New Zealand submits
that none is credible. According to New Zealand, the mere fact that this factor is not included in the
Article 4.2(a) list is neither here nor there, given that the text requires an evaluation of all relevant
factors, "in particular" (i.e. not limited to) those factors then listed. Capacity increases could well be
evidence of an industry in good health and therefore need to be assessed and weighed against other
factors in the course of reaching an overall evaluation of serious injury. In this connection, the United
States argument that certain producers declared bankruptcy so there is no overall industry picture of
expansion is belied by the USITC's own figures, which showed an increase in capacity of 15.9%.
1773
Nor should capacity increases be discounted just because they correlate, or do not correlate, with
movements in other factors such as capacity utilization.
1774 Accordingly, it should be regarded as a
potential positive factor in its own right.1775

1766 United States' first written submission, para. 346.
1767 United States' first written submission, para. 347.
1768 United States' first written submission, para. 348.
1769 USITC Report, Vol. I, p. 55, quoted in United States' first written submission, para 338.
1770 New Zealand's second written submission, para. 3.74.
1771 New Zealand's second written submission, para. 3.78.
1772 United States first written submission, paras. 342-344.
1773 USITC Report, Vol. I, p. 54.
1774 As claimed by the United States; United States first written submission, para 342.
1775 New Zealand's second written submission, para. 3.79.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.663 In relation to the sharp productivity increase of 13.2%, New Zealand submits that the United
States considers this can apparently be discounted because "annual trends in productivity do not
correlate with the trends in employment"
1776 and the increase "cannot explain the financial results of
the certain flat steel industry". According to New Zealand, nothing in Article 4.2(a) suggests that a
productivity increase has to correlate with employment trends 1777 or a certain type of financial result
before it qualifies to be weighed and balanced with the whole range of negative and positive factors in
making an overall assessment of serious injury.1778
7.664 In the context of its arguments regarding causation, the United States argues that the
Agreement on Safeguards "requires not a focus on one or two selected criteria but on all of the
relevant criteria bearing on the condition of the industry".
1779 New Zealand argues in response that
the United States then fails to draw the obvious co nclusions: that the USITC's serious injury analysis
does not meet the relevant requirements of the Agreement on Safeguards as interpreted by the
Appellate Body. According to New Zealand, to a large extent the United States submissions comprise
mere repetition of the USITC's findings and "reasoning" and fail to provide any credible defence of
why what the USITC did could in fact comply with the Agreement on Safeguards provisions and the
relevant Appellate Body decisions in this area.
1780
7.665 With respect to the USITC's conclusion that th ere had been a "significant idling" in the
domestic industry's productive facilities, New Zealand asserts that the USITC placed great weight on
the decline between 1996 and 2000 but argues that the 6% overall decline in capacity utilization was
dwarfed by the much more significant capacity, production, and productivity increases that occurred
during the same period. In particular, New Zealand argues that during that period, capacity increased
15.9%, production 8.2%, and productivity "sharply increased" by 13.2%.
1781 New Zealand argues that
the USITC simply brushed these factors aside without any adequate or reasoned explanation,
observing simply that "despite increases in capacity and production, there was significant idling of the
domestic industry's productive facilities during the period, given the numerous bankruptcies and the
shut down of some facilities, as well as decreased capacity utilization". In making this statement,
New Zealand argues that the USITC also failed to explain that the bankruptcies referred to did not
necessarily equate with an idling of productive facilities; the USITC itself conceded that only "some"
bankrupt companies "ceased operations altogether".
1782 With regard to the issue of capacity
utilization, see arguments made by the United States in paragraph 7.658.
7.666 New Zealand also argues that the USITC's finding that there was "significant unemployment
or underemployment in the domestic industry" was based on a reduction over the period of
investigation in the number of workers and the number of hours worked. According to New Zealand,
the USITC did not consider the role of increased productivity in reducing labour requirements; nor did
it consider the role of newer, less labour intensive, technology upon this indicator. New Zealand
asserts that this failure is particularly noteworthy given the USITC's recognition that the period of
investigation witnessed the "first large-scale production of cold-rolled and coated steel by minimills".
New Zealand argues that the fact that the number of workers and hours worked had reduced should

1776 New Zealand's second written submission, paras. 346-348.
1777 In fact, the 1996-2000 figures throws doubt on the United States factual assertion also – a
productivity increase of 13.2% corresponds over this period with a decline of 4.4% in the number of workers
and of 3.5% of hours worked.
1778 New Zealand's second written submission, para. 3.80.
1779 United States' first written submission, para. 450.
1780 New Zealand's second written submission, para. 3.76.
1781 New Zealand's first written submission, para. 4.104.
1782 New Zealand's first written submission, para. 4.105.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

not be presumed to indicate injury given the labour advantages enjoyed by minimills. 1783 With regard
to the issue of productivity, see arguments made by the United States in paragraph 7.659.
7.667 New Zealand also argues that the USITC failed to investigate the extent to which the negative
effects they perceived to be affecting the domestic industry differed as between integrated producers
and more modern efficient minimills, which was necessary in order to arrive at an accurate
assessment of significant "overall" impairment. According to New Zealand, while the former were
utilizing increasingly obsolete production technolo gy, the latter were taking advantage of modern
technologies and increasing their market share during the period of the investigation. The analysis
thus failed to reckon with the fact that during th e period of investigation the United States steel
industry was an industry in transition – undergoing structural change – with modern minimill
producers displacing or taking market share away from obsolete integrated plants. 1784 New Zealand
argues that the USITC failed to investigate properly the extent to which performance differed as
between integrated mills and minimills.1785
7.668 In response, the United States argues that under both Articles 2.1 and Article 4.2(a) of the
Agreement on Safeguards, an investigating authority must determine whether "a domestic industry" is
experiencing serious injury or is threatened with serious injury. According to the United States,
nothing in these provisions require an authority further to determine that each discrete segment that
may exist within a particular industry is seriously injured. Having determined that the pertinent
domestic industry was the one producing CCFRS, the United States asserts that the USITC's
obligation was to assess serious injury on an industry-wide basis. This is precisely what it did.
1786
The United States submits that an examination of the CCFRS industry could not have encompassed
only minimills, when the industry contained both minimill producers and the much larger integrated
producers. It adds that the obligation to evaluate the industry as a whole, however, does not require
an investigating authority to obtain information concerning every producer, or on 100% of industry
production. The Panel in US – Lamb observed that the "as a whole" and "major proportion" clauses in
Article 4.1(c) were grammatically linked and relate "to the representativeness of the data pertaining to
the condition of the industry". The United States submits that the USITC collected and used the most
comprehensive data possible concerning each of the ten domestic industries on which it made an
affirmative finding of serious injury or threat of serious injury. The USITC collected questionnaire
data from United States producers representing a clear majority of production in each of these
industries.
1787 In this regard, the United States notes that based on the data concerning CCFRS
minimill production1788 and the data concerning total CCFRS production 1789, minimills account for
less than 15% of total United States CCFRS production in 2000.1790
7.669 The United States argues in this regard that minimills were part of the domestic CCFRS
industry, and the USITC found both that the CCFRS industry as a whole was seriously injured and
that minimills, as well as integrated producers, had been adversely affected by the increased imports.
The USITC acknowledged that minimills had cost advantages over integrated producers, and had
some effect on price levels. It concluded, however, that the imports, not the minimills, led to the price
pressure that typically drove prices downwards.
1791 The United States argues that numerous

1783 New Zealand's first written submission, para. 4.106.
1784 New Zealand's first written submission, para. 4.107.
1785 New Zealand's written reply to Panel question No. 70 at the first substantive meeting.
1786 United States' first written submission, para. 351.
1787 United States' written reply to Panel question No. 70 at the first substantive meeting.
1788 United States' first written submission, footnote 668.
1789 US Exhibit-33.
1790 United States' written reply to Panel question No. 76(a) at the first substantive meeting.
1791 United States' written reply to Panel question No. 76(c) at the first substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

manifestations of serious injury to the CCFRS industry were applicable to minimill producers.
Minimill producers' prices went down and their profitability declined during the period of
investigation.
1792
7.670 The United States adds that even if a sectoral analysis of the CCFRS was required, the USITC
engaged in such an analysis as well. In particular, the United States argues that the USITC's analysis
was conducted on the basis of the pertinent product categories (i.e, slab, plate, hot-rolled, cold-rolled,
and galvanized) on which the producers and importers were requested to provide data. According to
the United States, the USITC found that its conclusions concerning declines in capacity utilization and
financial performance were applicable for each product category as well as for the industry as a
whole.
1793 The United States also submits that, in any event, the impact of minimills was pertinent, if
at all, to the issue of causation rather than to th e issue of whether the entire CCFRS industry in which
minimills were responsible for a much smaller share of production than were integrated producers
was incurring serious injury.1794
7.671 In counter-response, New Zealand observes that the USITC focuses in an unbalanced and
unobjective way on the poorly performing sectors of the industry while seemingly unaware that the
industry was already making the transition to efficiency and long-term viability, as evidenced by the
increasingly strong performance of minimill producers. 1795 This fact receives no mention in the
USITC serious injury analysis. According to New Zealand, the United States mischaracterizes this
observation as a claim by New Zealand that the US ITC was required to undertake separate sectoral
injury evaluations, whereas the Agreement on Safeguards requires an analysis of the whole industry.
In fact, New Zealand is saying the opposite – that the USITC needed to consider adequately the
condition of all sectors, not just the sector that was failin g, in order to carry out the industry-wide
analysis which the United States accepts was required.1796
7.672 In conclusion, New Zealand submits that the Un ited States has failed to rebut New Zealand's
case that the USITC selectively and disproportionately accorded weight to some factors and not
others. Nor has the United States been able to demonstrate that adequate consideration was given to
the condition of all sectors of the domestic industry or that the high threshold of "serious injury" has
been met. Accordingly, the United States has fail ed to demonstrate the existence of "serious injury"
being suffered by the domestic industry as required by Articles 2.1 and 4.2(a) of the Agreement on
Safeguards. It also follows that the United States has failed to provide a reasoned and adequate
explanation for its determination of "serious injury" as required by Article 3.1 of the Agreement on
Safeguards.
1797
7.673 The United States submits that because a serious injury finding must focus on an entire
industry, an authority is not obliged to conduct an analysis that focuses only on one segment of an
industry in isolation. For this reason, the United States submits that the Panel must reject New
Zealand's claim that the USITC gave insufficient attention to minimill producers in determining that
the CCFRS industry was seriously injured.
1798 The United States reiterates that minimill producers

1792 United States' written reply to Panel question No. 76(b) at the first substantive meeting.
1793 United States' first written submission, para. 352.
1794 United States' first written submission, para. 353.
1795 New Zealand first written submission, paras. 2.27-2.32. The United States notes that minimills
accounted for fully one-third of total CCFRS productio n in the United States; United States' first written
submission, para. 353, footnote 381.
1796 New Zealand's second written submission, para. 3.81.
1797 New Zealand's second written submission, para. 3.82.
1798 New Zealand's written reply to Panel question No. 70 at the first substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

accounted for less than 15% of overall United States CCFRS production in 2000. 1799 T h e U S I T C
acted appropriately, and consistently with United States obligations under the Agreement, by basing
its serious injury finding for CCFRS on data relating to the entire industry, rather than to only the 15%
of the industry which was represented by minimill production.
1800
(b) Rebar
7.674 China argues that given that most of the injury factors were positive in the case of rebar, the
USITC had the obligation to explain how the negative factors outweighed the positive factors and
why the overall situation of the industry was nevertheless severely impaired. China asserts that it was
not enough to merely state that positive factors reflected strong increases in United States apparent
consumption.
1801
7.675 In response, the United States argues that the USITC did exactly what China suggests it
should have done. In particular, the United Stat es contends that the USITC explained how the
negative factors outweighed the positive factors and why the overall situation of the industry was
nevertheless considered to have been severely impaired. The USITC acknowledged that "several
indicators pertaining to the rebar industry, such as capacity, production, and employment, increased
during the period examined". It found, however, th at these increases reflected strong increases in
United States apparent consumption.
1802 The United States asserts, however, that United States
producers' shipments did not increase commensura tely with apparent consumption notwithstanding
increases in the domestic industry's productive capacity. The United States argues that, consequently,
as the USITC emphasized, the domestic industry lost substantial market share during the period of
investigation. In the United States' view, relying on this consideration was clearly consistent with
Article 4.2(a), which specifically references "the rate and amount of the increase in imports of the
products concerned in absolute and relative terms" as a pertinent factor in evaluating serious
injury.
1803
7.676 China disagrees that the USITC has provided sufficient explanation as how the negative
factors outweighed the positive factors. China reiterates that it was not admissible to disregard all the
positive factors by simply stating that they reflected strong increases in United States apparent
consumption. According to China, the United Stat es' reply does not provide any further justification,
but rather only restates what already was to be found in the USITC Report.1804
(c) Welded pipe
7.677 Switzerland argues that the trends of several indicators referred to by the USITC do not testify
to a threat of injury that was serious enough to fulfil the criteria of the Agreement on Safeguards.
Switzerland notes in this regard that the USITC mentions that "the years 1996 to 1998 were a period
of generally good health for the domestic industry producing welded tubular products". Switzerland
argues that, moreover, some of the indicators examined by the USITC were positive: the number of
employees as well as the hourly wages were higher in 2000 than in 1996; the same remarks can be
made in relation to United States shipments quantities, operative income and capital expenditures.
1805
Switzerland also notes that the USITC mentioned that two United States firms closed down during the

1799 United States', response to Panel question No. 76 at the first substantive meeting.
1800 United States' second written submission, para. 114.
1801 China's first written submission, para. 335.
1802 United States' first written submission, para. 370.
1803 United States' first written submission, para. 371.
1804 China's second written submission, para. 150.
1805 Switzerland's first written submission, para. 272.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

examined period. Switzerland argues, however, that the USITC failed to show why this fact was
relevant, since the importance of these bankruptcies was not clearly explained in the USITC Report.
Moreover, according to Switzerland, bankruptcies of non-competitive firms were, in principle,
considered to be normal phenomena in a market-based economy and must not necessarily be the
consequence of serious injury that has been suffered by a certain industry. 1806 With regard to the
relevance of bankruptcies, see arguments made by the United States in paragraph 7.681.
7.678 In response to Switzerland's criticism of the USITC's determination on the basis that certain
factors, such as employment and United States shipment quantity, were higher in 2000 than in 1996,
and that the operating income of the industry producing welded pipe products remained positive, the
United States contends that this overlooks the fact that the USITC's determination was based on threat
of serious injury rather than serious injury. The USITC acknowledged that the industry's condition
was not at the level of serious injury.
1807 However, in the United States' view, the USITC found that
the industry's condition would imminently deteriorate to the level of serious injury. In so doing, the
USITC put particular emphasis on declines since 1998 in many factors, particularly production,
shipments, capacity utilization, financial performa nce, and employment. The United States submits
that this is fully consistent with the statement of the Appellate Body that, for purposes of the
Agreement on Safeguards, "data relating to the most recent past will provide competent authorities
with an essential, and, usually, the most reliable, basis for a determination of a threat of serious
injury".
1808 The United States notes that the Appellate Body has also instructed that "competent
authorities cannot rely exclusively on data from the most recent past, but must assess that data in the
context of the data for the entire investigative period". The United States contends that, consistent
with this instruction, the USITC did not rely solely on the fact that important indicators of industry
performance had declined during the latter portion of the period of investigation. Instead, it
emphasized that, in 2000, several of these indicators were at their lowest full-year level during the
period of investigation (i.e., capacity utilization, market share, operating income), or were only
marginally higher than the period lows (i.e., production, employment). The USITC thus fully
explained why the declines it observed during the latter portions of the period of investigation
demonstrated an imminent threat of serious injury.
1809
3. Obligation to evaluate all relevant factors
7.679 New Zealand argues that in view of the disproportionate weight that the USITC accorded to
some factors in making its serious injury determination and its failure to accord appropriate weight to
others, the USITC failed to evaluate all relevant factors.
1810
7.680 The United States asserts that the USITC evaluated each of the factors specified in
Article 4.2(a).1811 The United States argues that while the factors expressly articulated in
Article 4.2(a) are "of an objective and quantifiable nature", the factors are not all quantifiable in the
same manner. For example, imports, sales, and production will be measured in units of output,
employment will be measured in numbers of workers, profits and losses will be measured in units of
currency, and capacity utilization and productivity are ratios.
1812 The United States argues that,
consequently, when conducting its analysis under Article 4.2(a), an investigating authority cannot

1806 Switzerland's first written submission, para. 273.
1807 United States' first written submission, para. 383.
1808 United States' first written submission, para. 384.
1809 United States' first written submission, para. 385.
1810 New Zealand's first written submission, para. 4.108.
1811 United States' first written submission, para. 322.
1812 United States' first written submission, para. 323.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

derive a single injury "measure" and that there is no requirement that it do so. According to the
United States, the evaluation must be based on the factors as a whole. Moreover, the authority may
find serious injury even if not every single factor it examines concerning the industry's condition is
declining. The United States contends that, inst ead, "it is the totality of the trends, and their
interaction, which must be taken into account in a serious injury determination" and the "overall
picture" of industry factors must demonstrate significant overall impairment.
1813
7.681 The United States argues that in conducting its analysis of serious injury an authority may
examine factors not expressly referenced in Article 4.2(a). More particularly, the United States argues
that an authority can and should examine additiona l "factors of an objective and quantifiable nature
having a bearing on the industry" that it has concluded are relevant. For several industries, the USITC
evaluated additional factors it deemed to be relevant, including bankruptcies that had been declared by
producers. The United States argues that while several complainants have questioned the relevance of
this factor, its significance is clear. According to the United States, firms that declare bankruptcy but
remain in operation frequently restructure their operations as part of the bankruptcy process.
Consequently, bankruptcies can indicate declines in productive facilities and employment levels.
Additionally, the United States argues that when a corporation lacks sufficient liquid assets to pay its
creditors, and consequently must seek protection, restructuring, or even liquidation from the United
States bankruptcy courts, this situation has obvious implications for the competitive viability of that
producer. According to the United States, a corporation will generally not make a bankruptcy filing
unless its operations have been significantly impaired. Similarly, an entire industry's viability may be
in question when several producers within that industry declare bankruptcy.
1814 The United States
also questions the contention by China that the USITC's finding that hot-rolled bar producers had
gone bankrupt "is not supported by all the relevant and sufficient data". It points in this regard to the
fact that bankruptcies of United States firms are a matter of public record. It also notes that the public
USITC Report identified four hot-rolled bar producers that declared bankruptcy and indicated that
three of the four had shut down all or a portion of their production operations in 2001. The United
States asserts that the accuracy of this data cannot be challenged.
1815
7.682 China refers to the Appellate Body decision in US – Lamb. China states that, in that case, the
Appellate Body stated that:
"[…] Under Article 4.2(a), competent authorities must, as a formal matter, evaluate
'all relevant factors'. However, that evaluation is not simply a matter of form, and the
list of relevant factors to be evaluated is not a mere 'check-list'. Under Article 4.2(a),
competent authorities must conduct a substantive evaluation of 'the 'bearing ', or the
 'influence ' or 'effect ' " or "impact" that the relevant factors have on the "situation of
[the] domestic industry". (Emphasis added)".1816
7.683 China asserts that what the United States seems to be saying is that a competent authority has
no obligation to make a separate evaluation of injury for all the relevant factors. According to China,
this is not true. Moreover, China does not agree with the United States that this evaluation "must be
based on the factors as a whole". It is true that the Appellate Body stated that competent authorities
must reach a determination in light of the evidence as a whole. 1817 However, according to China, this
requirement relates only to the final determination of injury and does not prevent the competent

1813 United States' first written submission, para. 323.
1814 United States' first written submission, para. 325.
1815 United States' first written submission, para. 359.
1816 China's second written submission, para. 133.
1817 Appellate Body report, US – Lamb, para.144.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

authority from conducting, prior to this final determ ination, an evaluation of injury from all relevant
factors.1818
7.684 In support, the European Communities notes that in Argentina – Footwear (EC) the Appellate
Body stated that:
"Article 4.2(a) of the Agreement on Safeguards requires a demonstration that the
competent authorities evaluated, at a minimum, each of the factors listed in
Article 4.2(a) as well as all other factors that are relevant to the situation of the
industry concerned."1819
7.685 The European Communities submits that this makes it clear that there must be an evaluation
of each factor listed in Article 4.2(a). The European Communities submits that the competent
authority is then under an obligation to determine whether, on the basis of an evaluation of these and
any other relevant factors, the domestic industry has suffered a "significant overall impairment" in the
sense of Article 4.1(a). The European Communities refers to the following excerpt from the
Appellate Body's report in Argentina – Footwear (EC):
"In our view it is only when the overall position of the domestic industry is evaluated,
in light of all the relevant factors having a bearing on a situation of that industry, that
it can be determined whether there is 'a significant overall impairment' in the position
of that industry. Although Article 4.2(a) technically requires that certain listed
factors must be evaluated, and that all other relevant factors must be evaluated, that
provision does not specify what such an evaluation must demonstrate. [….] [I]n
addition to a technical examination of whether the competent authorities in a
particular case have evaluated all the listed factors and any other relevant factors, we
believe that it is essential for a panel to take the definition of 'serious injury' in
Article 4.1(a) of the Agreement on Safeguards into account in its review of any
determination of 'serious injury'."
1820 1821
7.686 New Zealand also refers to the Appellate Body decision in US – Lamb where, New Zealand
says, the Appellate Body repeatedly emphasized that a competent authority must evaluate, in
assessing serious injury, " all relevant factors " of an "objective and quantifiable nature" and their
"bearing" on the domestic industry. This requires a separate evaluation of each factor.1822
7.687 New Zealand also argues that the Panel's duty is to review whether the competent authority
has, "as a formal matter", evaluated all relevant factors, and second whether it has, "as a substantive
matter, provided a reasoned and adequate explanation of how the facts support their determinations".
The Appellate Body in US – Lamb found that the USITC failed this second requirement, though
emphasized it was not making a factual determination as to whether or not there was a threat of
serious injury. New Zealand submits that the present case is very similar. The USITC had as a
formal matter identified a series of positive and negative factors but had as a substantive matter failed
to provide a reasoned and adequate explanation of how the facts supported its serious injury
determinations. For example it did not examine and weigh these factors together. Hence, whether or

1818 China's second written submission, para. 134.
1819 Appellate Body report, Argentina – Footwear (EC), para. 136.
1820 Appellate Body report, Argentina – Footwear (EC), para. 139.
1821 European Communities' written reply to Panel question No. 23 at the second substantive meeting.
1822 New Zealand's written reply to Panel question No. 23 at the second substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

not serious injury actually existed, the USITC – to paraphrase the finding in US – Lamb – "acted
inconsistently with Article 4.2(a) and Article 2.1 of the Agreement on Safeguards".1823
7.688 China submits that the United States seems to consider that the competent authority
conducting an investigation should have discretion in determining what other factors are relevant for
its injury determination and that its evaluation should be limited to these other factors alone. 1824
China believes that such an interpretation does not meet the requirements of the Agreement on
Safeguards, as clarified by the Appellate Body. The United States refers to the Appellate Body report
in US – Wheat Gluten to assert that: "An authority can and should examine additional 'factors of an
objective and quantifiable nature having a bearing on the industry' that it has concluded are relevant".
According to China, such an interpretation would restrict the obligations of the competent authority
far beyond the requirements of the Agreement on Safeguards as clarified by the Appellate Body.
1825
In China's view, rather, it is clear that the first obli gation of the competent authority is to evaluate all
the relevant factors and that, therefore, the competent authorities "must undertake additional
investigative steps, when the circumstances so require, in order to fulfil their obligation to evaluate all
relevant factors".1826
7.689 In this regard, and as far as the bankruptcy factor is concerned, China asserts that the United
States may not provide in its written submission an explanation regarding the relevance of this factor.
Rather, the USITC should have provided, in its report, an adequate and reasoned explanation as why it
was relevant to analyse this factor in its injury determination and to what extent it was allowed to
demonstrate the existence of serious injury. According to China, the fact that the United States needs
to provide such additional information in its writ ten submission is clear evidence that the USITC
failed to do so.1827
4. Obligation to provide reasoned and adequate explanations
7.690 China argues that, with respect to the USITC's interpretation of the investigation data on
injury for all ten products that are covered by the safeguard measures, the USITC failed to provide
reasoned and adequate explanations.1828 Similarly, the European Communities argues that the United
States is in breach of its obligations under Articles 2.1 and 4.2 of the Agreement on Safeguards
because it failed to provide reasoned and adequate explanations of its determination that serious
injury, or threat thereof existed. The European Communities also asserts that it is also in violation of
Articles 3.1 and 4.2(c).1829
7.691 In response, the United States contends that the USITC explained in some detail why there
was a significant overall impairment of the state of each industry that it concluded was seriously
injured. According to the United States, these industries uniformly reported poor financial
performance. Numerous firms, and often the entire industry, showed unprofitable operations. In
several industries, producers had gone bankrupt. For most of the pertinent industries, there were also

1823 New Zealand's written reply to Panel question No. 23 at the second substantive meeting, citing
Appellate Body Report, US – Lamb, para. 161.
1824 United States' first written submission, para. 325, referred to in China's second written submission,
para. 135.
1825 United States' first written submission, para. 325, referred to in China's second written submission,
para. 136.
1826 Appellate Body report, US – Wheat Gluten , para. 55, cited in China's second written submission,
para. 137.
1827 China's second written submission, para. 138.
1828 China's first written submission, para. 308.
1829 European Communities' first written submission, para. 429.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

declines in capacity and production, with closures in productive facilities. Many also had declines in
capacity utilization and employment.1830 The United States also argues that for both welded pipe and
stainless steel wire (the two industries on which it found threat of serious injury) the USITC provided
a detailed, fact-based explanation why a significant overall impairment in the state of the industry was
clearly imminent.1831
7.692 China disagrees that the USITC has sufficiently explained, in a reasoned and adequate
manner, "why there was a significant overall impairment of the state of each industry that it concluded
was seriously injured".1832
(a) Alternative explanations of data
7.693 On the basis of the Appellate Body decision in US – Lamb , China argues that the Panel
should determine whether the explanations given in the USITC Report fully addressed the nature and,
especially, the complexities of the data, and responded to the interpretations of that data by China. In
other words, if the explanations given by the USITC do not rebut China's interpretation, or if
contradictions between the facts and the USITC's conclusions are not fully addressed, China asserts
that the Panel must find that the explanations are not reasoned and adequate.
1833
7.694 In response, the United States observes that China did not provide any interpretations of data
to the USITC in its investigation and that Article 3.1 merely directs authorities to provide "findings
and reasoned conclusions reached on all pertinent issues of fact and law"; it does not further require
authorities to respond directly to all arguments raised by parties to the investigation. The United
States indicates that the USITC report nevertheless contains sufficient reasoning to respond to the
criticisms of China.
1834
(i) CCFRS
7.695 China argues that the determination that the domestic industry of CCFRS products was
suffering serious injury did not fulfil the requirements of Articles 2.1 and 4.2 of the Agreement on
Safeguards.
1835
7.696 China refers 1836 to the statement contained in the USITC Report that "In view of the
significant idling of productive facilities, the sharp deterioration in the financial performance of the
domestic industry, and significant unemployment or underemployment within the domestic industry,
we find that the domestic industry producing CCFRS is seriously injured". With regard to
employment, China argues that, contrary to the conclusion reached by the USITC, although
employment had decreased, this did not necessarily indicate the industry had been injured. Indeed,
productivity had increased by 13.2% between 1996 and 2000 and consumption had only increased by
7.8%. China further argues that since the industry is capital-intensive rather than labour-intensive, it
may be that unemployment was mainly due to higher productivity.
1837

1830 United States' first written submission, para. 335.
1831 United States' first written submission, para. 337.
1832 China's second written submission, para. 139.
1833 China's first written submission, para. 309.
1834 United States' first written submission, para. 363.
1835 China's first written submission, para. 317.
1836 China's first written submission, para. 312.
1837 China's first written submission, para. 313.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.697 China notes that the USITC also mentioned a decline in capacity utilization with respect to
CCFRS in its report. China argues that the fact that the increase in productivity was well in excess of
domestic demand must also have had some impact on capacity utilization. China argues that,
therefore, although capacity utilization declined, this does not mean that the industry was in a difficult
position, especially given the fact that the domestic industry gained a larger market share of the
United States market.
1838
7.698 China also notes that the USITC made reference to the industry's financial problems in its
report. However, China argues that at no point did the USITC explain how the importance of this
factor outweighed the other positive factors leading to the conclusion that there is an overall
impairment of the state of the industry.
1839
7.699 China argues that the USITC did not provide a reasoned and adequate explanation for its
determination given that the USITC Report did not address the issues referred to by China nor did it
explain why the industry had been seriously injured, despite the existence of the positive factors that
had been raised by China.1840
7.700 In response, the United States asserts that the USITC acknowledged that not every single
factor it examined, pertinent to the industry's condition, was in decline. The United States argues that
there need not be a decline in each Article 4.2(a) factor in order for there to be a finding of serious
injury. The United States notes that the USITC specifically found, however, that improvements in
certain factors "do not offset the significant declines exhibited by other indicia of the industry's
condition with respect to the issue of whether the indust ry is suffering serious injury". In this regard,
the United States makes reference to declines, which it claims have not been disputed by any party,
including significant idling of productive capacity, sharp deterioration in financial performance and
significant unemployment.
1841
7.701 The United States also asserts that the USITC specifically discussed and acknowledged
increases in capacity, production and productivity 1842 and examined the implications of the increases.
The USITC, it asserts, fulfilled its obligation under Articles 2.1 and 4.2(a) by concluding that these
isolated increases did not detract from its finding of serious injury in light of all the pertinent factors
having a bearing on the state of the industry.1843
7.702 In particular, the United States argues that the USITC Report provided several reasons why
increases in production and capacity were consistent with a finding of serious injury. First, according
to the United States, the USITC explained that increases from 1996 to 2000 occurred at a time when
apparent domestic consumption of CCFRS was increasing. The United States asserts that one would
normally expect production and capacity to increase in a growing market. However, according to the
United States, the increase in production from 1996 to 2000 was only incrementally greater than the
increase in United States apparent consumption of CCFRS during the same period.
1844 Second, the
USITC emphasized that the increased capacity was not being utilized. Instead, capacity utilization for
the domestic industry had declined steadily from 1996 to 2000 and fell sharply between interim 2000
and interim 2001. The United States asserts that the USITC emphasized that declines in capacity

1838 China's first written submission, para. 314.
1839 China's first written submission, para. 315.
1840 China's first written submission, para. 316.
1841 United States' first written submission, para. 338.
1842 United States' first written submission, paras. 339 and 349.
1843 United States' first written submission, para. 349.
1844 United States' first written submission, paras. 340-341.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

utilization were apparent in each of the particular product categories within the industry, as well as in
the industry as a whole. 1845 In any event, the United States argues that Article 4.2(a) does not
expressly mention changes in capacity as a factor that an investigating authority must consider in
evaluating whether there is serious injury. Instead, it references changes in "capacity utilization". 1846
Third, according to the United States, the overall picture in the industry was not one of steady
expansion. The United States asserts that, as had been found by the USITC, ten United States
producers of CCFRS declared bankruptcy during the period of its investigation and several shut down
and ceased production altogether.
1847 The United States argues that, in light of the foregoing, the
USITC thoroughly explained why the positive trends with respect to capacity and production did not
outweigh other negative trends concerning idling productive resources in the industry.1848
7.703 According to the United States, the USITC also acknowledged that productivity in the
CCFRS industry increased from 1996 to 2000. The United States asserts that the USITC considered
the effect of this increase on employment levels in the industry and concluded that the increase in
productivity "may have offset to some degree the declines in employment". 1849 The United States
argues that, therefore, it is clear that the USITC considered the increase in productivity but concluded
that it did not outweigh or entirely explain the declines in employment. According to the United
States, the annual trends in productivity did not correlate with the trends in employment. Productivity
for the CCFRS industry increased every full year during the period of investigation. This included
years in which employment was relatively stable as well as those in which it declined.1850 The United
States argues that, moreover, increased productivity could only explain declining employment at a
particular facility where production continued on an ongoing basis. It could not explain declines in
employment attributable to the shutting down of oper ations at production facilities. According to the
United States, the decline in employment for the CCFRS industry occurred at a time when several
productive facilities closed down entirely. Thus, there were losses of employment at facilities where
productivity essentially declined to zero.
1851 The United States also argues that increases in
productivity, which would generally be expected to lead to improved financial results, did not track
productivity given that the financial results of the CCFRS industry declined sharply after 1997, and
the industry recorded overall operating losses in 1999, 2000, and interim 2001.1852
7.704 Despite explanations proffered by the United States, China submits that it still considers that
the USITC did not provide an adequate and reasoned explanation for its determination. Indeed, China
does not consider that the USITC has furnished sufficient explanation as to how the negative factors
outweighed the other positive factors. In China's view, a mere statement that "the improvements in
these indicia do not offset the significant declines exhibited by other indicia" is an insufficient
explanation.
1853 Furthermore, China notes that the explanations given by the United States, which are
to a large extent a re-statement of the USITC Report as far as capacity, production and productivity
are concerned, are largely based on end-points comparison between 1996 and 2000. According to
China, reliance on such end-points comparison is insufficient to rebut the claim by China that the
USITC did not properly examine these three factors.
1854

1845 United States' first written submission, para. 342.
1846 United States' first written submission, para. 344.
1847 United States' first written submission, para. 343.
1848 United States' first written submission, para. 344.
1849 United States' first written submission, para. 345.
1850 United States' first written submission, para. 346.
1851 United States' first written submission, para. 347.
1852 United States' first written submission, para. 348.
1853 China's second written submission, para. 141.
1854 China's second written submission, para. 142.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.705 China argues that the USITC did not provide a reasoned and adequate explanation for its
determination given that the USITC Report did not address the issues referred to by China nor did it
explain why the industry had been seriously injured, despite the existence of positive factors that had
been raised by China.
1855
(ii) Hot-rolled bar
7.706 China argues that the determination that the domestic industry of hot-rolled bar was suffering
serious injury did not fulfil the requirements of Articles 2.1 and 4.2 of the Agreement on
Safeguards.1856 China believes that the USITC did not fully address the nature and the complexity of
the data. China argues, that, moreover, the USITC Report does not contain a response to the
interpretations of the data that have been put forwar d by China. On this basis, China argues that the
USITC failed to provide a reasoned and adequate explanation for its determination.
1857
7.707 In response, the United States argues that there is no basis for China's assertion that the
USITC did not fully address the nature and complexity of the data. The United States submits that, on
the contrary, the USITC's report fully explained both the nature of the data the USITC used in
analysing serious injury to the hot-rolled bar industry and why that data supported its conclusion of
serious injury. That conclusion satisfies the obligations of Articles 2.1 and 4.2(a) of the Agreement
on Safeguards.
1858
7.708 More particularly, the United States argues that in determining that the hot-rolled bar industry
was seriously injured, the USITC cited a wide variety of data indicating that the industry was in a
significantly impaired condition. It pointed to declining production, shipments, and capacity that had
occurred in the industry since 1998; three United States producers declaring bankruptcy and shutting
down production in early 2001; idling productive facilities; the sharply declining financial
performance of the industry since 1998 and the overall operating losses in 2000 and interim 2001;
declining employment during the latter portion of the period of investigation and capital expenditures
and research and development expenditures declining throughout the period of investigation.
1859 The
United States asserts that China, ignoring these pe rvasive declines and the reasoning the USITC used
to support its serious injury conclusion, instead chooses to direct a number of scattered criticisms
concerning the USITC's analysis. The United States argues that China's criticisms, in addition to
being factually incorrect, do not demonstrate that the United States failed to comply with its
obligations under Articles 2.1 and 4.2(a).1860
7.709 China refers to the statement contained in the USITC Report that: "In light of the poor
financial performance of the hot-rolled bar industry, the declines in output and shipments, and the
numerous bankruptcies and plant closures that occurred during the latter portion of the period
examined, with the consequent unemployment due to these closures, we conclude that the industry is
seriously injured". 1861 China argues that the USITC's statement as far as it concerns "declines in
output and shipments" is not supported by the fact s of the investigation. Rather, in China's view,
production and shipments increased between 1996 and 2000. China acknowledges that both factors
declined towards the end of the period of investigation. However, China argues that the USITC failed

1855 China's first written submission, para. 316.
1856 China's first written submission, para. 326.
1857 China's first written submission, para. 325.
1858 United States' first written submission, para. 363.
1859 United States' first written submission, para. 354.
1860 United States' first written submission, para. 355.
1861 China's first written submission, para. 318.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

to explain why these declines indicated serious injury and were not just a normal reaction to the sharp
increase in these factors which had occurred at the beginning of the period of investigation. China
argues that, in any case, the USITC failed to justify why only the last years of the period of
investigation were considered relevant in examining these factors. In addition, China asserts that the
USITC failed in its argument that these factors declined between interims 2000 and 2001 because the
industry was injured rather than as a result of a decline in consumption.
1862
7.710 In response, the United States argues that the fact that production and shipments for the hot-
rolled bar industry were each higher in 2000 than they were in 1996 cannot be dispositive. According
to the United States, Article 4.2 does not permit an investigating authority to rely exclusively on an
endpoint-to-endpoint analysis in assessing serious injury.
1863 The United States asserts that the
USITC did not stop with an endpoint-to-endpoint analysis. It also examined trends within the period
of investigation. The United States contends that this examination demonstrated that production,
shipments, sales quantities and revenues pervasively declined over the latter portion of the period of
investigation. Moreover, shipments and sales quantities declined, and production increased only
minimally from 1999 to 2000, when United States apparent consumption of hot-rolled bar increased.
Consequently, in the United States' view, this was not a situation where the rate of increase merely
slowed during the period of investigation, as China a ppears to posit. According to the United States,
the USITC's thorough examination and explanation of trends within its period of investigation further
indicates that the declines in output-related indicators were not merely functions of changes in United
States apparent consumption.
1864 The United States also states that declines in production, shipments,
and sales during the latter portion of the period of investigation were significant because, first, they
were based on the most recent data available and clearly probative of current impairment in the
position of the domestic industry and. secondly, they were coincident with other negative trends upon
which the USITC relied – namely, the industry's deteriorating operating performance.1865
7.711 China disagrees with the statement by the United States that China tried to rely on an end-
points comparison, as far as the analysis of production and shipments is concerned. In its submission,
China stated that: "Production and shipments rather increased between 1996 and 2000". Rather than
relying on a comparison between end-points, China emphasized that the general trend over the whole
investigation period was somewhat upward, even if slight decreases could be noticed.1866
7.712 China also states that special attention needs to be drawn to the "numerous bankruptcies and
plant closures". Contrary to the USITC's view, China does not believe that this criterion should be
used as grounds for a determination of serious injury since it was not supported by all the relevant and
sufficient data.
1867 In this respect, China asserts that all that was known about the hot-rolled bar
industry was that there were 32 domestic firms that responded to the questionnaire and which
represented 70 to 78% of domestic production. No information had been provided on the total
number of firms or the size of the different firms.1868 China also notes that the USITC stated that the 3
firms that declared bankruptcy in 2001 did not respond to the questionnaire.1869 China asserts that the
only information available was that these three firms accounted for approximately 1.5 million tons of
capacity. However, according to China, there wa s no information concerning the time during which

1862 China's first written submission, para. 319.
1863 United States' first written submission, para. 356.
1864 United States' first written submission, para. 357.
1865 United States' first written submission, para. 358.
1866 China's second written submission, para. 143.
1867 China's first written submission, para. 320.
1868 China's first written submission, para. 321.
1869 China's first written submission, para. 320.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

such capacity was achieved, nor concerning productivity or any other criteria. Furthermore, there was
no information concerning the health of these firms during and before the period of investigation.
China argues, in addition, that there was no information as to why this factor should be considered.
1870
7.713 With respect to the reference to bankruptcies by the USITC in making its serious injury
determination, the United States argues that in conducting its analysis of serious injury an authority
may examine factors not expressly referenced in Article 4.2(a). More particularly, the United States
argues that an authority can and should examine ad ditional "factors of an objective and quantifiable
nature having a bearing on the industry" that it has concluded are relevant. For several industries, the
USITC evaluated additional factors it deemed to be relevant, including bankruptcies that had been
declared by producers. The United States argues that while several complainants have questioned the
relevance of this factor, its significance is clear. According to the United States, firms that declare
bankruptcy but remain in operation frequently restructure their operations as part of the bankruptcy
process. Consequently, bankruptcies can indicate declines in productive facilities and employment
levels. Additionally, the United States argues that lacking sufficient liquid assets to pay its creditors,
and consequently having to seek protection, restructuring, or even liquidation from the United States
bankruptcy courts, has obvious implications for the competitive viability of a producer. According to
the United States, a corporation will generally not make a bankruptcy filing unless its operations have
been significantly impaired. Similarly, an entire industry's viability may be in question when several
producers within that industry declare bankruptcy.
1871 The United States also questions the contention
by China that the USITC's finding that hot-rolled bar producers had gone bankrupt "is not supported
by all the relevant and sufficient data". It points, in this regard, to the fact that bankruptcies of United
States firms are a matter of public record. It also notes that the public USITC Report identified four
hot-rolled bar producers that declared bankruptcy and indicated that three of the four had shut down a
portion or all of their production operations in 2001. The United States asserts that the accuracy of
this data cannot be challenged.
1872
7.714 As far as bankruptcies are concerned, China does not challenge the accuracy of the data, but
rather would like to underline that, due to the lack of response to the questionnaire, there is
insufficient explanation as to how this criterion could be used in the assessment of whether the
industry has suffered a serious injury and whether this injury can be attributed to increased
imports.1873 China reiterates that if some producers did not respond to the questionnaires, the
information provided to the competent authority may not reflect completely, and may not be truly
representative of the industry's situation. The authority must therefore be particularly cautious when
using this information. In this case, the need for a reasoned and adequate explanation is of particular
importance.
1874
7.715 China notes that, according to the USITC, the data from the questionnaires showed a decline
in employment. However, China is of the opinion that no such decline took place and that, rather,
changes in employment were a function of cycles during the period of investigation.
1875 China notes,
in this regard, that while the USITC stated that "the lack of questionnaire responses from some
producers that have shut down facilities means that the questionnaire data do not fully reflect declines
in employment that occurred at the conclusion of the period examined" it went on to state that
following the closing down of th e three firms, which have not answered the questionnaire, 1,000

1870 China's first written submission, para. 321.
1871 United States' first written submission, para. 325.
1872 United States' first written submission, para. 359.
1873 China's second written submission, para. 144.
1874 China's second written submission, para. 145.
1875 China's first written submission, para. 322.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

employees have lost their jobs.1876 China argues that if the answers to the questionnaires did not fully
reflect the situation of the industry as regards unemployment, such information was not representative
of the industry and the USITC's conclusion in respect of this criterion could not have been reasoned
and adequate.
1877
7.716 China also argues that the treatment of the employment factor by the USITC was not
objective. In this regard, China points out that the USITC considered unemployment in all three firms
that declared bankruptcy, although these firms did not respond to the questionnaire. However, the
USITC did not consider employment in the remaining firms which were not bankrupt and which did
not answer the questionnaire either. China argues that the examination of the employment factor was
not objective, reasoned or adequate preventing the USITC from making an objective determination of
the overall situation of the industry.1878
7.717 In response, the United States notes that, as stated in its report, because not all the bankrupt
hot-rolled bar producers responded to its questionnaire, the USITC referred to public data concerning
these firms in its analysis of capacity and employment trends for the hot-rolled bar industry. 1879 The
United States also asserts that China cites no provision of the Agreement on Safeguards to justify its
apparent belief that the USITC could only use information it obtained from the questionnaire
responses it received in its analysis of serious inju ry. The United States submits that, to the contrary,
Article 3.1 of the Agreement on Safeguards requires investigating authorities to provide "public
hearings or other appropriate means in which importers, exporters, and other interested parties could
present evidence and their views" but that, presumably, it would not require investigating authorities
to permit interested parties to submit evidence pe rtinent to the investigation if the investigating
authorities could not consider such evidence once it were submitted.
1880 The United States notes that
interested parties that supported the imposition of safeguards remedies for hot-rolled bar presented
information concerning certain hot-rolled bar producers that did not respond to the USITC's
questionnaire, including information on capacity of certain firms that had ceased operations and the
number of employees affected by each shutdown. The United States argues that parties that opposed
the imposition of remedies had the opportunity to challenge the accuracy or reliability of this data.
According to the United States, none did so before the USITC and China does not do so before the
Panel. In the United States' view, the USITC found the data to be reliable and probative.
Consequently, it acted in a manner fully consistent with the Agreement on Safeguards when relying
on the entirety of data in its record concerning the hot-rolled bar industry.
1881
7.718 As far as employment is concerned, China considers that, since the USITC acknowledged that
the questionnaire data did not fully reflect falls in employment, this data was not sufficiently reliable
for the USITC to draw conclusions from it. Since the data gathered by the USITC through the
questionnaires was clearly incomplete, it should have considered this data very carefully and there
was an increased need for an adequate and reas oned explanation as to how it was supporting the
USITC's conclusion that the industry was being seriously injured. 1882 China also submits that the
USITC should have addressed the issue of unemployment for the remaining firm that were not

1876 China's first written submission, para. 323.
1877 China's first written submission, para. 324.
1878 China's first written submission, para. 324.
1879 United States' first written submission, para. 360.
1880 United States' first written submission, para. 361.
1881 United States' first written submission, para. 362.
1882 China's second written submission, para. 146.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

bankrupt. According to China, there is no evidence indicating that the United States did so. On this
basis, China considers that the USITC did not fully address the nature and complexity of the data.1883
(iii) Cold-finished bar
7.719 China argues that the USITC determination that the domestic industry of cold-finished bar
was suffering serious injury did not fulfil the requirements of Articles 2.1 and 4.2 of the Agreement
on Safeguards.1884 China believes that the USITC did not fully address the nature and the complexity
of the data. China argues, moreover, that the USITC Report does not contain a response to the
interpretations of the data that have been put forwar d by China. On this basis, China argues that the
USITC failed to provide a reasoned and adequate explanation for its determination.1885
7.720 In response, the United States notes that in finding that the cold-finished bar industry was
seriously injured, the USITC identified the industry's poor financial performance (such as drops in
operating income, the existence of operating losses and declines in sales revenue) and loss of market
share as particularly pertinent. The United States contends that the USITC also cited declines in the
industry's capacity, shipments, and production during the last three full years of its period of
investigation, and its low levels of capacity utilization.
1886 The United States argues that the USITC
objectively examined all pertinent factors and prov ided a reasoned explanation for its conclusion that
the cold-finished bar industry was seriously injured. The United States, therefore, satisfied its
obligations under Articles 2.1 and 4.2(a) of the Agreement on Safeguards.1887
7.721 China notes that the concluding section on injury in respect of cold-finished bar in the USITC
Report stated that: "The most pertinent indicator of the industry's condition is the poor financial
performance. The industry's financial condition improved in 1997 and 1998 from the level in 1996,
but its operating performance declined sharply in 1999 and continued to be poor in 2000. During both
1999 and 2000, the industry was only marginally profitable, with an increasing number of firms
posting operating losses. Industry financial performance continued to deteriorate in interim 2001,
when the industry sustained an operating loss. Although the cold finished-bar industry's shipments
and production were higher in 2000 than in 1996, these indicators declined during the last three years
of the period examined and there was significant unused capacity throughout the period. In light of
these considerations, we conclude that the cold-finished bar industry is seriously injured".
1888 China
argues that this statement does not present an accurate picture of the situation of the industry. With
regard to production, United States shipments, capacity and capacity utilization, increases between
1996 to 1998 were significant. China argues that, accordingly, even if production and the other
factors subsequently declined in the period of investigation, levels in 2000 were significantly higher
than the 1996 levels. China also asserts that United States consumption significantly increased
between 1996-2000. China argues that, therefore, a sound interpretation of the data should be that the
position of the industry was positive.
1889
7.722 According to China, the USITC could not ignore the positive factors that it itself
acknowledged, by simply stating that the financial performance was the most pertinent indicator of
the industry's condition. In any case, it is China's vi ew that this is insuffic ient to explain how the

1883 China's second written submission, para. 147.
1884 China's first written submission, para. 331.
1885 China's first written submission, para. 330.
1886 United States' first written submission, para. 364.
1887 United States' first written submission, para. 368.
1888 USITC Pub. 3479, Vol. I at 104 cited in China's first written submission, para. 327.
1889 China's first written submission, para. 328.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

negative factors outweighed the positive factors. Indeed, there is nothing in the Agreement on
Safeguards that would allow the USITC to consider one indicator more important than the others.
Furthermore, the USITC has given no explanation as to why the deterioration of the industry's
financial performance was to be considered as the "most pertinent indicator of the industry's
condition".
1890
7.723 In response, the United States notes that the USITC expressly acknowledged that certain
output-related factors increased from 1996 to 2000 for cold-finished bar. The United States further
contends that the analysis of serious injury is not merely a question of endpoint-to-endpoint
comparisons.1891
7.724 China also does not agree with the USITC's interpretation that emphasis should be placed on
the most recent period, given the sharp increase in most factors at the beginning of the period of
investigation. More particularly, China argues that the recent decline in factors had to be evaluated in
the light of the unusual increase that had taken pl ace just before that period. In China's view, the
recent decline in some factors only demonstrates that factors were stabilizing and that, therefore, the
industry was not seriously injured.
1892
7.725 In response, the United States argues that China has not explained what was "unusual" about
the increases in shipments and production that the USITC acknowledged occurred between 1996 and
1998. In the United States' view, these increases merely followed increases in domestic consumption.
Apparent consumption also increased from 1999 to 2000, yet the domestic industry's shipments and
production declined during this period. The United States argues that the USITC appropriately
concluded that, although the United States cold-finished bar industry was able to increase its output to
reflect changes in apparent consumption at the beginning of the period of investigation, it was not able
to do so at the conclusion of the period.
1893 The United States also argues that, contrary to a
submission made by China, the cold-finished bar industry's financial condition was not "stabilizing" at
the conclusion of the period of investigation. Instead, financial indicators declined sharply after 1998.
The United States asserts that the deterioration of the industry's financial performance, which the
USITC explained was "[t]he most pertinent indicato r of the industry's condition" was simply ignored
by China.
1894
7.726 As far as the word "unusual" is concerned, China states that it was used by China to underline
the clear contradiction between the USITC's conclu sion that the industry has been seriously injured
and the clear positive trends shown by certain factors. However, the point of the sentence quoted by
the United States was to make clear that Chin a disagrees with the USITC's interpretation that
considerable importance should be given to the most recent period. The state of the domestic industry
should have been assessed with a view of the trends over the whole investigation period, which are
clearly positive for a certain number of indicators.
1895
(iv) Rebar
7.727 China argues that the USITC failed to make a determination of injury with respect to rebar
that was consistent with the requirements of Articles 2.1 and 4.2(a) of the Agreement on

1890 USITC Pub. 3479, Vol. I, p. 104, cited in China's second written submission, para. 148.
1891 United States' first written submission, para. 365.
1892 China's first written submission, para. 329.
1893 United States' first written submission, para. 366.
1894 United States' first written submission, para. 367.
1895 China's second written submission, para. 149.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

Safeguards.1896 China believes that the USITC did not fully address the nature and the complexity of
the data and that, as a result, the USITC failed to provide a reasoned and adequate explanation for its
determination.
1897
7.728 In response, the United States argues that the USITC objectively considered all the pertinent
data and provided a reasoned basis in finding that the rebar industry was seriously injured. According
to the United States, that finding is consistent with Articles 2.1 and 4.2(a) of the Agreement on
Safeguards.1898 More particularly, the United States notes that in finding that the rebar industry was
seriously injured, the USITC emphasized the industry's poor financial performance during the latter
portion of the period of investigation. Reference is made by the United States in particular to the
deterioration of the industry's financial condition between 1999 and 2000: the fact that the domestic
industry's capital expenditures declined during each year of the period of investigation, and the 2000
expenditures were less than half the 1996 level; and that the domestic industry's market share was
considerably lower in 2000 than it was in 1996.
1899
7.729 China notes that the USITC stated in its report that: "Although several indicators pertaining to
the rebar industry, such as capacity, production, and employment, increased during the period
examined, these increases reflect strong increases in United States apparent consumption.
Notwithstanding these increases, however, the re bar industry showed poor financial performance
during the latter portion of the period examined. The industry's financial condition deteriorated
sharply between 1999, when it had a positive operating margin of 5.0%, and 2000, when it had a
negative operating margin of 1.6%. Additionally, the domestic industry's market share declined
during the period examined and its capital expenses declined considerably. We consequently conclude
that the rebar industry is seriously injured".
1900 China believes that this statement does not present an
accurate picture of the situation of the industry.1901 In particular, China argues that while the imports'
share of the domestic market was greater in 2000 as compared to the level in 1996, it remained low.
Furthermore, domestic industry sales and capacity ut ilization increased. China further argues that
losses suffered by the industry were incurred towards the end of the period of investigation. China
points out that such losses were also suffered at the beginning of the period of investigation, which
did not prevent the industry from realizing important profits three years in a row. Thus, China posits
that the losses incurred by the industry towards the end of the period of investigation were just part of
a cycle. China argues that the USITC did not make any demonstration to the contrary.
1902
7.730 In response, the United States argues that the record did not show an industry with cyclical
patterns. Rather, it showed one that had continued and sustained increases in demand for its product
throughout the period of investigation. According to the United States, rebar producers' inability to
operate profitably during a time of record demand was a clear indication of serious injury. 1903 The
United States notes that apparent United States consumption of rebar rose by 48.1% during 1996 to
2000 and was also 2.0% higher in interim 2001 than in interim 2000. In light of these conditions of
competition, the fact that the United States rebar industry expanded capacity and employment and was
able to increase its output during the period of investigation was not surprising. The United States
submits that, as the USITC observed the rebar industry was not able to benefit from increasing

1896 China's first written submission, para. 337.
1897 China's first written submission, para. 336.
1898 United States' first written submission, para. 373.
1899 United States' first written submission, para. 369.
1900 USITC Pub. 3479, Vol. I at 111 cited in China's first written submission, para. 332.
1901 China's first written submission, para. 333.
1902 China's first written submission, para. 334.
1903 United States' first written submission, para. 372.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

demand. Its share of the United States market fell significantly (10 percentage points) from 1996 to
2000. Moreover, notwithstanding increases in f actors such as production and employment, its
financial condition deteriorated sharply. The industry had an operating loss in 2000, and was only
marginally profitable during interim 2001. The USITC also noted that the industry's capital expenses
declined over the period of investigation. The USITC properly evaluated both the industry's
improvements and declines with respect to each of the Article 4.2(a) factors, and fully explained why
the factors as a whole supported its conclusion of serious injury.1904
7.731 China submits that its claim that the losses incurred by the industry towards the end of the
period of investigation are just part of a cycle was an illustration of the lack of adequate explanation
provided by the USITC regarding the losses incurred by the industry with regard to only one specific
part of the investigation period.
1905
7.732 The United States submits in response that the USITC explained that it was highly pertinent
that the domestic rebar industry had sharply deteriorating financial performance during the latter
portion of the period of investigation, notwithstanding its increases in output. There was no evidence
in the record for finding that the domestic industry's financial performance was a reflection of a
business cycle. The record did not show an industr y with cyclical patterns – it showed one that had
continued and sustained increases in demand for its product throughout the period of investigation.
Rebar producers' inability to operate profitably during a time of record demand was a clear indication
of serious injury.
1906
7.733 China notes that, in its reply, the United States responds that "the USITC further explained
that it was highly pertinent that the domestic rebar industry had sharply deteriorating financial
performances during the latter portion of the period of investigation, notwithstanding its increases in
output". However, there is no explanation as why this would be "highly pertinent".1907
(v) Welded pipe
7.734 Switzerland argues that the USITC failed to demonstrate for welded pipe products (other than
OCTG), that there was a threat of "serious injury" in the sense of a "significant overall impairment in
the position" of the industry, as is required by Article 4.1(a) of the Agreement on Safeguards. 1908 In
particular, Switzerland argues that if the categorisation of welded pipe products had been done
correctly, the USITC would have found that for precision tubes, there was until recently only one firm
among the tubes producers in the United States that claimed to be able to produce similar products,
albeit not of the same quality. Accordingly, Switzerland argues that it fails to understand how the
United States industry in the sector could face serious injury.
1909
7.735 By way of a general response, the United States argues that, in requesting establishment of a
Panel, Switzerland did not include a claim that the United States findings of serious injury or threat of
serious injury were inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards. The
United States submits, therefore, that this claim is outside the Panel's terms of reference, and there is

1904 United States' written reply to Panel question No. 79 at the first substantive meeting.
1905 China's second written submission, para. 334.
1906 United States' first written submission, para. 372.
1907 China's second written submission, para. 152.
1908 Switzerland's first written submission, para. 259.
1909 Switzerland's first written submission, para. 268.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

no basis for the Panel to address it. It goes on to state, however, that if the Panel decides to address
this issue, it should find that Switzerland has failed to meet their burden of proof.1910
7.736 In counter-response, Switzerland submits that it did not specifically mention the requirement
of serious injury or the threat thereof in its request for establishment of a Panel. However, in its
request for the establishment of a Panel, it invoked Articles 2.1 and 4.2(a) of the Agreement on
Safeguards, which explicitly refer to increased imports, serious injury or threat thereof and causal
link. Switzerland, furthermore, specifically referred to increased imports and causal link. The
argument of causal link (between increased imports and serious injury or threat thereof) inherently
covers the element of serious injury or threat thereof as no argument can be made regarding the causal
link if the argument of injury or threat thereof is excluded.
1911
7.737 China argues that the USITC failed to make a determination of threat of serious injury in
relation to certain pipe products that was consistent with the requirements of Articles 2.1 and 4.2(a) of
the Agreement on Safeguards.1912
7.738 In response, the United States notes that the USITC's determination on welded pipe was based
on threat of serious injury. While the USITC found that the industry producing welded pipe was not
seriously injured, it characterized its overall condition as "weak". It concluded that serious injury
appeared imminent on the basis of the fact that production had declined since 1998 despite generally
stable United States apparent consumption; cap acity utilization had fallen sharply in 1999 and 2000;
United States producers' market share had fallen sharply in 2000 and declined further in interim 2001;
domestic producers' operating income was at its lowest full-year level in 2000; and employment in the
industry had fallen in 1999 and 2000, and was close to the lowest level of the period of investigation
in 2000. Wages showed similar trends. Interi m 2001 employment levels were above those of 2000,
but wages and the number of hours worked were not.
1913
7.739 Switzerland does not dispute that the United States industry has suffered difficulties.
However, it argues that the USITC has not demonstrated, for the welded pipe products (other than
OCTG), the threat of "serious injury" in the sense of a threat of a "significant overall impairment in
the position" of the industry, as is required by Article 4.1(a) of the Agreement on Safeguards .1914 In
this regard, Switzerland points out that the USITC found that the domestic industry of welded pipe
was facing a threat of serious injury. The USITC came to this conclusion after having given
particular emphasis to the following declining factors since 1998: production, shipments, capacity
utilization, financial performance and employment. However, the USITC itself recognized that
"during the period of investigation the domestic welded pipe capacity increased and was at its highest
level in 2000. According to Switzerland, United States capacity growth largely tracked the increase in
apparent consumption of welded pipe. The recent decline in domestic production coupled with the
increase in domestic capacity resulted in a significant decline in capacity utilization beginning in 1999
and continuing through 2000, and interim 2001".
 1915
7.740 China argues that the USITC failed to explain, in a reasoned and adequate manner, why there
was a threat of serious injury to the certain pipe products industry, given that the market for large

1910 United States' first written submission, para. 382.
1911 Switzerland's second written submission, para. 78.
1912 China's first written submission, para. 343.
1913 United States' first written submission, para. 374.
1914 Switzerland's second written submission, para. 80.
1915 USITC Report, Vol. I, p.160, cited in China's second written submission, para. 81.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

diameter line pipe had begun to surge and would continue to expand in the immediate future. 1916
China asserts in this regard that the USITC agreed with the projections of continued growth due to
rising demand for pipeline projects. According to China, the USITC also stated that domestic
production increased between 1996 and 1998 in conjunction with rising levels of aggregate apparent
United States consumption. China argues that, according to the USITC, since rising levels of
consumption resulted in an increase in production, one could expect the increase in demand for line
pipe to result in an increase in production, which would improve the situation of the industry.1917
7.741 In response, the United States argues that the USITC acknowledged in its report that there had
been a recent increase in demand for large diameter line pipe and that continued growth in this market
segment was likely. 1918 The United States notes that the USITC provided two reasons why this fact
did not detract from its conclusion of threat of serious injury. It first observed that large diameter line
pipe accounted for only 20 to 30% of the entire industry producing welded pipe. 1919 Contrary to
China's contention, the USITC was justified in concluding that it should not have been dispositive. In
support, the United States asserts that the USITC was analysing serious injury on the basis of the
industry as a whole. In making an analysis for 100% of the industry, the USITC was not compelled to
conclude that increased demand in 20% of the industry outweighed the remaining 80% facing
different conditions of competition.
 1920 Secondly, the USITC did not find the increase in demand for
large diameter line pipe to be dispositive. As the USITC noted, demand for this product had already
begun to increase. Consequently, whether the increa se in demand for large diameter line pipe would
affect demand in the entire industry would be apparent in the data collected in the USITC
investigation.1921 However, overall demand for welded pipe had not increased appreciably during the
latter portion of the period of investigation. Instead, as the USITC observed, it had remained
generally stable since 1998. 1922 The United States argues that, although the increases in demand for
large diameter line pipe observed at the conclusion of the period of investigation had been sufficient
to stabilize overall United States demand for welded pipe, it had not been sufficient to prevent the
declines in shipments, production and capacity utilization observed during these periods. Although
the USITC concluded that demand conditions for the imminent future would be the same as those
observed during the latter portion of the period of investigation, it was nevertheless justified in finding
that the unfavourable trends in output-related factors for the entire industry producing welded pipe,
which it had observed during these periods would continue.
1923
7.742 China notes that, despite the foregoing, the USITC explained that large diameter line pipe
only represented a portion of the industry and that overall demand for welded pipe products remained
"relatively" constant despite the recent rise in demand. On that basis, the USITC believed that the
threat of serious injury remains.1924 In China's opinion, this explanation was far from sufficient. First,
China argues that it was normal that overall demand increased only slightly in interim 2001 given that
demand was only starting to rise at that point. Moreover, China argues that in order to come to the
conclusion that serious injury was still imminent, the USITC had to determine the impact in the near
future of this increase in demand and then determine whether it could prevent serious injury or not.
1925
China argues that the fact that 20-30% of the whole category of the product in question would be

1916 China's first written submission, para. 338.
1917 China's first written submission, para. 339.
1918 United States' first written submission, para. 376.
1919 United States' first written submission, para. 377.
1920 United States' first written submission, para. 378.
1921 United States' first written submission, para. 379.
1922 United States' first written submission, para. 380.
1923 United States' first written submission, para. 381.
1924 China's first written submission, para. 340.
1925 China's first written submission, para. 341.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

affected by the increasing demand was a very important factor to be considered. China argues that the
USITC did not examine it closely enough and did not give reasoned and adequate explanations as to
why injury was still imminent.
1926
7.743 Despite arguments of the United States, China notes that the USITC did not assess to what
extent the demand for line pipe, that the USITC acknowledged should still be increasing in the future,
could have an impact in the on the demand for the overall welded product category. Indeed, this
might have confirmed the trend, underlined in the United States' reply, that consumption of welded
pipe has been increasing since 1999. 1927 Accordingly, China maintains that the USITC failed to
provide a reasoned and adequate explanation as to why injury was still imminent.1928
7.744 Switzerland notes that the USITC, in its report, stated that: "In view of the declining trends in
most of the industry's performance factors beginning in 1999 and continuing through 2000 and into
2001, particularly the decline in industry production, capacity utilization, shipments, number of
workers, and profitability in 2000, we find that the domestic industry is approaching a state of serious
injury".1929 Switzerland argues that rather than there being a threat of serious injury, the relevant
United States domestic industry actually failed to adapt to the adjustment process of the steel industry
world-wide.1930
7.745 In response, the United States argues that Switzerland does not explain why a more
generalized discussion of the adjustment process of the steel industry world-wide is required under
Article 4.2(a). According to the United States, this topic clearly does not pertain to any factor
expressly listed under Article 4.2(a) nor is the topic analogous to any factor listed under Article 4.2(a).
The United States contends that the focus in that provision is on objective, empirical factors "having a
bearing on the situation" of the pertinent domestic industry. These factors describe or indicate the
state of the industry, as opposed to considerations not subject to quantification that may have an effect
on the domestic industry. The United States submits that, in contrast, an analysis of the effects of
world-wide conditions of competi tion would appear more properly to relate to the evaluation of the
causal link between increased imports and serious injury required under Article 4.2(b). The United
States argues that the USITC's consideration of all the factors expressly listed in Article 4.2(a),
together with several other empirical factors relevant to evaluation of the condition of the domestic
industry producing welded pipe, fully satisfies the requirements of that provision.
1931
7.746 Concerning the question of the adaptation of the United States domestic industry to the
adjustment process world-wide, Switzerland, on the basis of the injury factors considered by the
USITC, is of the view that the United States industry of welded tubes increased its capacity to the
extent that, already in 1996, the capacity exceeded the United States apparent consumption by
855,809 tons.
1932 Recognizing that Article 4.2(a) of the Agreement on Safeguards does not require an
analysis of the adjustment process of the steel industry world-wide, Switzerland does not claim that
the United States should have done so. Switzerland submits that it deduced from the figures cited in
the USITC Report and the developments in the steel industry worldwide that the United States

1926 China's first written submission, para. 342.
1927 China's second written submission, para. 153.
1928 China's second written submission, para. 154.
1929 USITC Report, Vol. I, p. 162 cited in Switzerland's first written submission, para. 267.
1930 Switzerland's first written submission, para. 269.
1931 United States first written submission, para. 388.
1932 Switzerland's second written submission, para. 85.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

industry must not have adapted to the situation of the steel industry world-wide, suffering from
chronic overcapacity of production, the way for instance Swiss steel industry did.1933
7.747 As regards the indicator of capacity, Switzerland notes that United States domestic capacity
increased strongly (+22%) and constantly between 1996 and 2000, whereas United States domestic
demand increased to a lesser extent (+19%). In comparison, foreign capacity increased only slightly
(+3%) during the same period. Switzerland states that during the period of investigation the share of
the United States industry in global capacity rose from about 25% to nearly 29%. With an increase in
their capacity larger than the increase in United States demand, United States firms had either to gain
market share in the United States, to produce for the stocks or not to use their capacity. 1934
Switzerland further argues that because the United States industry increased, between 1996 and 2000
its production capacity (+22%) more than the United States demand increased (+19%), United States
firms had either to gain market share in the United States, to produce for the stocks or not to use their
capacity. Switzerland submits that the decline in the factors examined by the USITC should not be a
surprise, because the United States capacity of the welded pipe industry was too great and still
increased while the situation of the United States industry started to deteriorate. The argument made
by the United States that the decline of capacity utilization is an indication that the industry was
facing a threat of serious injury is not valid despite Article 4.2(a) of the Agreement on Safeguards
because firms cannot simply assume that they can increase the capacity as they like and transform it
into increased production opportunities.
1935
7.748 Switzerland also notes that the import unit va lue continuously decreased (-9%) between 1996
and 2000. Switzerland suggests that this could be explained by the fact that, abroad, investments were
largely made with the objective of reducing production costs. However, according to Switzerland, in
the United States, the average sales value in creased by 3% between 1996 (USD606) and 1998
(USD622), before it started decreasing. Switzerland suggests that this could have been due to either
enterprises' inadequate pricing policies or to a wrong investment policy, or to other reasons.1936
7.749 Switzerland also notes that the USITC Report indicates that the United States producers'
shipments increased through 1999, but then fell by 9.1% in 2000 and remained stable (at slightly
lower levels) in the first half of 2001. Accordin g to the figures in the USITC Report, the United
States producers' shipments increased slightly in interim 2001 compared with interim 2000. 1937 Thus,
according to Switzerland, if the situation stabilized or even seemed to have improved recently, the
threat of serious injury is not really demonstrated.1938
7.750 Finally, Switzerland submits that using the basis of only a one-year decline to conclude that
the United States industry is in a situation of threat of serious injury is using too short a period of
time. The threat could be demonstrated almost at will. In the present case, it is more important to
take into account a longer period, because certain indicators were increasing also in the short run.
Taking, for instance, employment, the United States claims that serious injury appeared imminent
because the employment in the industry fell in 1999 and 2000 and was close to the lowest level of the
period of investigation in 2000.
1939 In reality, the number of workers was relatively stable and

1933 Switzerland's second written submission, para. 86.
1934 Switzerland's first written submission, para. 270.
1935 Switzerland's second written submission, para. 82.
1936 Switzerland's first written submission, para. 271.
1937 USITC Report, Vol. II, TUBULAR 15.
1938 Switzerland's second written submission, para. 83.
1939 United States first written submission, para. 374.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

fluctuated just slightly during the period of investigation except in 1999 where it increased by 7%. 1940
It even increased in interim 2001 (1.2%) compared to interim 2000. Industries that consider they are
facing a threat of serious injury would not hire additional workforce. In addition, the number of
production workers was higher at the end (6,736 in 2000) of the period of investigation than at the
beginning (6,539 in 1996).1941
(vi) Stainless steel wire
7.751 China argues that the determination that the domestic industry of stainless steel wire was
suffering serious injury or threat of serious injury did not fulfil the requirements of Articles 2.1 and
4.2 of the Agreement on Safeguards. 1942 China believes that the USITC did not fully address the
nature and complexity of the data. China argues, moreover, that the USITC Report does not contain a
response to the interpretations of the data that have been put forward by China. On this basis, China
argues that the USITC failed to provide a reasoned and adequate explanation for its determination.1943
7.752 In response, the United States argues that each of the affirmative-voting Commissioners
provided a lengthy analysis of the Article 4.2(a) factors, and explained how these factors supported
their affirmative conclusions.
1944
7.753 China argues that consideration of the relevant injury factors for stainless steel wire
demonstrate that there was no overall impairment of the situation of the industry.1945
7.754 In response, the United States notes that Chairman Koplan made an affirmative determination
of threat of serious injury based on a domestic industry producing stainless steel wire. He emphasized
pervasive declines in many industry indicators between interim 2000 and interim 2001, including
shipments, production, market share, productivity , employment, wages and financial performance.
The United States submits that several of the other factors were already at low levels or well below
period peaks before they declined in interim 2001, such as operating income, which declined rapidly
between interim 2000 and interim 2001, employment indicia and capital expenditures. The United
States notes that Commissioner Bragg based her determination on a domestic industry producing both
stainless steel wire and stainless steel wire rope. She likewise cited pervasive declines in industry
performance from interim 2000 to interim 2001. Commissioner Devaney also found that the pertinent
domestic industry produced both stainless steel wire and stainless steel wire rope. He found this
industry to be seriously injured, citing inadequate profitability and declines in market share,
employment, and capital expenditures.
1946
7.755 China argues that there was no threat of serious injury to the market for stainless steel wire.
In support, China argues that slight declines in employment, R&D and capital expenditure were not
significant enough to offset the overall positive situation of the industry. Moreover, according to
China, there were no signs that competitive conditions would change in the immediate future so as to
warrant the conclusion that the industry would be impaired especially given that imports' market share
declined during the first five full years of the period of investigation. China also argues that although
imports consistently undersold domestic products, price movements did not clearly correlate with the
underselling of imports. Since imports had failed to injure the industry in the past, and since the

1940 USITC Report, Vol. II, TUBULAR-15.
1941 Switzerland's second written submission, para. 84.
1942 China's first written submission, para. 349.
1943 China's first written submission, para. 347.
1944 United States first written submission, para. 391.
1945 China's first written submission, para. 344.
1946 United States' first written submission, para. 390.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

condition of the industry had improved over the period of investigation, China submits that the only
sound conclusion that could be reached was that that there was no threat of serious injury.1947
7.756 Similarly, the European Communities argues that the USITC's finding of threat of serious
injury for stainless steel wire was premised on the notion that imports would continue to increase and
the threat of serious injury would materialise into serious injury. However, according to the European
Communities, while the data before the USITC for interim 2001 showed a small increase in imports
when compared to interim 2000, the data available before the President decided to impose safeguard
measures showed that imports for full year 2001 had decreased slightly from full year 2000. The
European Communities asserts that this suggested that the trend of increase in interim 2001, on which
the USITC based its determination, did not continue in the second half of 2001. According to the
European Communities, given this change in tre nd, the competent authority, who should have been
aware of this data, was under a duty to reason its decision to impose safeguard measures based on the
threat of serious injury. The European Communitie s asserts that the President did no such thing and
that, therefore, the measures imposed on stainless steel wire were inadequately explained and
inconsistent with Article 2.1 and 4.2.
1948
7.757 In response, the United States asserts that China's argument that affirmative threat
determinations were not warranted in light of "slight" declines in indicators during the latter part of
the period of investigation and the "overall positive" condition of the industry, mischaracterizes and
fails to address or acknowledge the findings that Commissioners Koplan and Bragg made. Neither
Commissioner found the current condition of the industry to be positive overall. According to the
United States, Chairman Koplan emphasized the low operating margins of the industry.
Commissioner Bragg characterized industry performance as "not strong". Both Commissioners noted
significant declines between the interim periods in production, capacity utilization, market share and
employment.
1949 Consequently, both Commissioners Kopl an and Bragg evaluated the declines in
industry indicators during interim 2001 in the context of the industry's lacklustre performance overall
during the period of investigation as a whole. The United States argues that, as a consequence, both
their analyses and explanations of threat of serious injury with respect to domestic industries
producing stainless steel wire satisfy the requirements of Articles 2.1 and 4.2(a).1950
7.758 China also argues that three USITC Commissioners expressed in the USITC Report that there
was no serious injury or threat of serious injury in relation to stainless steel wire. In China's view,
their conclusions were also supported by explanations concerning the facts of the investigation. China
argues that, as a result, the remaining Commissioners had a duty to support their affirmative
determinations with explanations that rebutted the interpretations and conclusions of the three
Commissioners who voted in the negative. China submits that the absence of such a rebuttal resulted
in contradictions. Furthermore, in China's view, there was no clear indication as to why serious injury
or threat thereof was still present. Accordingly, China argues that there is a clear lack of reasoned and
adequate explanation by the USITC.
1951
7.759 In response to a question from the Panel as to whether, in the event of a split vote within a
competent national authority such as the USITC, there is a legal requirement to rebut the arguments of
the negative determinations, the European Commun ities and Norway answered in the affirmative
arguing that the negative or dissenting determinations constitute, or at least contain, plausible

1947 China's first written submission, para. 345.
1948 European Communities' first written submission, para. 420.
1949 United States' first written submission, para. 392.
1950 United States' first written submission, para. 393.
1951 China's first written submission, para. 346.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

alternative explanations and the prevailing determination must therefore consider them and explain
why they are not adopted or followed in the prevailing determination. 1952 Korea argues that since the
concept of a split vote does not exist in the context of the Agreement on Safeguards, the question is
whether the conditions for safeguard relief have been met. A finding that they have been met and a
finding that they have not been met in the same determination cannot be reconciled and, consequently,
the conditions for imposing safeguard relief have not been met. 1953 Japan, on the other hand, argues
that as long as there is a legitimate affirmative determination (in other words, a majority of
Commissioners voting affirmative or negative on the basis of the same like product), there is no legal
requirement to rebut the arguments of Commissioners dissenting from the majority vote; nor does it
matter whether a dissenting Commissioner publishes a separate dissenting opinion.
1954
7.760 The United States answers in the negative. It submits that there is no requirement in the
Agreement on Safeguards for members of the USITC voting in the affirmative to rebut the arguments
raised by other members of the USITC who voted in the negative. As long as the official
determination of the USITC includes the findings, reasoned conclusions, detailed analysis of the case
and demonstration of the relevance of the factors examined as required by Articles 3 and 4 of the
Agreement on Safeguards, then the determination is sufficient. The United States argues that this
conclusion does not change depending on whether or not a Member publishes separate or dissenting
votes. A determination stands on its own, regardless of whether certain decision-makers disagree
with that determination. A contrary conclusion would lead to absurd results. It would mean, in effect,
that a determination might be consistent with the Agreement on Safeguards when the views of
dissenting or concurring decision-makers are not published, but an identical determination would be
inconsistent when such views are published. Such a rule would lead Members to avoid publishing
separate or dissenting votes, which would stifle a full discussion of the issues.
1955
7.761 For China, it remains clear that the fact th at the decision, by the President, that the
determinations of those Commissioners who voted in the affirmative should be the determination of
the USITC, is not sufficient to resolve the contradictions between the views of the various
Commissioners. In particular, China finds it surprising that the United States seems to consider the
three Commissioners, members of the USITC, even if they made negative findings related to the
existence of serious injury, as "persons or entities who may participate in the investigation, but are not
part of the authority that has made the serious injury determination".1956
7.762 Furthermore, according to China, even for the Commissioners who voted in the affirmative, it
is clear that, in view of the numerous positive trends in certain factors, their determination is revealing
a lack of adequate and reasoned explanation. For instance, the fact that Chairman Koplan mainly
relied on interim data clearly provides insufficient justification for the findings.1957 In any case, China
considers that, as for the analysis on increased imports, the analysis provided by Commissioners
Bragg and Devaney is of no relevance since it was based on an industry producing not stainless steel
wire, but "stainless steel wire products", i.e. stainless steel wire and stainless steel wire rope.
Therefore, these analyses cannot provide any useful indications as far as the state of the industry
producing stainless steel wire only is concerned, and cannot be compared with the results of the

1952 European Communities' written reply to Panel question No. 131 at the first substantive meeting;
Norway's written reply to Panel question No. 131 at the first substantive meeting.
1953 Korea's written reply to Panel question No. 131 at the first substantive meeting.
1954 Japan's written reply to Panel question No. 131 at the first substantive meeting.
1955 United States' written reply to Panel question No. 131 at the first substantive meeting.
1956 United States' first written submission, para. 391, footnote 431, cited in China's second written
submission, para. 155.
1957 China's second written submission, para. 156.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

analysis provided by Chairman Koplan either. There is a clear lack of adequate and reasoned
explanation as to how the analyses of these tw o Commissioners can support final determinations
regarding the state of the industry producing stainless steel wire. 1958 According to China, this is even
more evident in view of the fact that there was not even agreement between the three Commissioners
voting affirmatively about the state of these different domestic industries. Indeed, Chairman Koplan
found a domestic industry producing stainless steel wire to be threatened with serious injury. 1959
While Commissioner Bragg found a domestic indus try producing both stainless steel wire and
stainless steel wire rope to be threatened with serious injury. 1960, At the same time, Commissioner
Devaney found the same industry producing stainless steel wire and stainless steel wire rope to have
been seriously injured.
1961
7.763 China argues that, consequently, the decision by the President itself does not provide
sufficient explanation as to the final determination by the USITC. Indeed, it is not clear whether the
final determination of the USITC was that the i ndustry was suffering serious injury (opinion of
Commissioner Devaney), or that serious injury was only threatened (opinion of Commissioners
Koplan and Bragg). This reveals obvious contradictions in the assessment both of the domestic
industry and of the injury indicators that, in itself, sufficiently demonstrates the lack of adequate and
reasoned explanation underlying the US measure on stainless steel wire. 1962 China states that it does
not intend to contest the right of WTO Members to establish their own decision-making processes for
reaching determinations in applying safeguard measures. China merely argues that this does not
excuse the United States from satisfying the requirement of providing an "adequate and reasoned
explanation", in particular, from giving proper or adequate consideration to views, even minority
ones, that have been expressed in the USITC Report.
1963
(vii) Other products
7.764 The United States notes that none of the complainants have made any challenge to the
USITC's determinations of serious injury to the industries producing tin mill, carbon and alloy fittings
and flanges, stainless steel bar, or stainless steel rod. The United States argues that, consequently, the
complainants have not satisfied their burden of presenting a prima facie case of a violation of section
4.2(a) with respect to the findings concerning these industries.1964
7.765 In response, China disagrees with the statement by the United States that "no complainant has
made any challenge to the USITC's determinations of serious injury to the industries producing tin
mill, FFTJ, stainless steel bar, or stainless steel rod". In its second written submission, China states
that it did challenge the determinations of the USITC regarding serious injury for all ten products in
the following terms: "China believes that for all ten products covered by the measures of safeguard,
the USITC failed to provide reasoned and adequate explanations".
1965 In addition, for six out of ten
products, China presented some possible alternative interpretations of the facts.1966
7.766 The European Communities asserts that the sugge stion by the United States that for four
product bundles the complainants had not challenged the USITC's serious injury determination is

1958 China's second written submission, para. 157.
1959 USITC Pub. 3479, Vol. I, p. 255.
1960 USITC Pub. 3479, Vol. I, p. 288.
1961 USITC Pub. 3479, Vol. I, p. 344, cited in China's second written submission, para. 158.
1962 China's second written submission, para. 159.
1963 China's second written submission, para. 160.
1964 United States' first written submission, para. 336.
1965 China's first written submission, para. 308.
1966 China's second written submission, para. 130.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

inaccurate. While the European Communities has not entered into a discussion of the specifics of any
product bundle determination, it has challenged the methodology applied in each of those
determinations. Not only has the USITC employed a methodology which fails to meet the standards
of the Agreement on Safeguards, it has also failed to provide a reasoned and adequate explanation of
certain findings where it has provided insufficient or no data at all.
1967
7.767 Norway also submits that Norway did challenge the USITC's determination of serious injury
to the industry producing tin mill products, in the following manner:
"For the Tin Mill Products, the USITC claims that the domestic industry is
experiencing serious injury. While Norway will not dispute before this Panel that the
United States steel industry in general has suffered difficulties, the United States has
not demonstrated, for the producers of inter alia Tin Mill Products, the existence of
'serious injury' in the sense of a 'significant overall impairment in the position' of the
industry, that can be attributed to imports."
1968
7.768 Norway states that it did not expand further on this issue while it was so blatantly clear that
no causal link whatsoever existed between any injury that might be suffered by the United States'
industry and imports.1969
(b) Representativeness of data
(i) Production destined for internal consumption
7.769 The European Communities argues that in anal ysing financial performance only on the basis
of commercial shipments, i.e. production which was not destined for further internal consumption, the
USITC failed to examine the industry as a whole and thus failed to arrive at an objective and reasoned
determination of the existence of serious injury. 1970 The European Communities argues that this
vitiates both the USITC's injury finding and also the causation finding given that causation is
established by relating and comparing the trends between the injury indicators and increased
imports.
1971 The European Communities further argues that such a selective examination does not
permit a competent authority to establish the existe nce of serious injury. By limiting its examination
in such a manner, the competent authority does not determine the existence of "serious injury" as is
required by Articles 2.1 and 4.2(a) of the Agreement on Safeguards and as a consequence does not
provide a reasoned and adequate explanation of its findings.1972
7.770 In response, the United States argues that the data collected by the USITC purported to
provide, and did in fact provide, information pertaining to the entire industry. 1973 Consequently, the
USITC satisfied the obligation under Articles 4.1 and 4.2(a) of the Agreement on Safeguards to render
its analysis of serious injury or threat of serious injury based on information pertaining to each

1967 European Communities' second written submission, para. 290.
1968 Norway's second written submission, para. 100, referring to para. 278 of Norway's first written
submission.
1969 Norway's second written submission, para. 101.
1970 European Communities' first written submission, para. 378.
1971 European Communities' first written submission, paras. 378 and 379.
1972 European Communities' written reply to Panel question No. 71 at the first substantive meeting.
1973 United States' first written submission, para. 334; United States' second written submission,
para. 109.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

domestic industry at issue.1974 The United States submits that the USITC did not reduce the scope of
its injury examination.1975
7.771 The United States notes in this regard that th ere is an important distinction between transfers
for internal consumption, on the one hand, and transactions in the commercial or merchant market, on
the other. In the commercial market, a producer sells product to a purchaser in an arm's-length
transaction. By contrast, the internal transfers of an individual producer are not the result of such
transactions and, thus, should not be considered "sales". The United States submits that because
product that is internally transferred is not sold, the USITC could not generate objective and
consistently-derived data concerning the valuation of such transfers that could be used in financial
analysis. Consequently, the USITC's financial analysis was based on the one type of objective
industry-wide data available in the record, namely that pertaining to commercial sales. The United
States further notes that the unreliability of transfer value data was a particular problem for the
domestic industry producing CCFRS. Including data on internal transfers would have resulted in
double or triple counting of the same unit of production. This is because all internal transfers of hot-
rolled steel are ultimately reported as cold-rolled or corrosion-resistant steel when sold in their final
processed form. Thus, to have included in the CCFRS financial analysis data concerning both internal
transfers of hot-rolled steel and commercial sales of cold-rolled or coated steel would have counted
the same ton of steel twice. The United States submits that by using commercial sales value, the
USITC was able to avoid problems relating to double-counting of product. The United States submits
that, by contrast, the USITC could and did generate objective quantity-based information on internal
transfers. It used and relied on such data in its report in calculating the quantity of production, total
United States shipments, and United States apparent consumption.
1976
7.772 The European Communities submits that the claim that the USITC could not "generate
objective and consistently-derived data" is not a sufficient defence. First, there is no examination of
the industry as a whole – as is clearly required by the Agreement on Safeguards. There can be little
doubt that the USITC is capable of obtaining such data at least for all productive activities of the
industry – that is exactly what it did in the determination which led to the US – Hot-Rolled Steel
dispute.
1977 The European Communities questions why this exercise is possible for an industry where
60% of production is internally consumed but not possible for industries in which considerably less
production is internally consumed. Second, even if the USITC was not in a position to gather the data
which it considered necessary, the Appellate Body clearly required that an explanation be given why
production for internal consumption was not examined.
1978 The USITC never provided such an

1974 United States' first written submission, para. 334.
1975 United States' second written submission, para. 1090.
1976 United States' written reply to Panel question No. 73 at the first substantive meeting.
1977 The Panel in US – Hot-Rolled Steel quoted the USITC Report which stated:
"From 1997 to 1998, as apparent consumption increased significantly,
operating income declined by more than half. On merchant market sales, the
ratio of operating income to net sales declined from 5.9 per cent in 1997 to
0.6 per cent in 1998 and overall, the ratio declined from 5.5 per cent in 1997
to 2.6 per cent in 1998."
USITC Report, quoted Panel Report, US – Hot-Rolled Steel, para. 7.209.
1978 Appellate Body Report, US – Hot-Rolled Steel, para. 204, where the Appellate Body stated:
In our view, [an objective examination] means that, where investigating authorities undertake
an examination of one part of a domestic industry, they should, in principle, examine, in like
manner, all other the other parts that make up the industry, as well as examine the industry as
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

explanation.1979 The European Communities submits that, as a result, the United States has, by failing
to examine performance on production for internal consumption failed both to ensure an examination
of the performance of the industry as a whole and to examine, where it has examined only one part of
the industry, other parts in an equivalent manner. Therefore, all the USITC's injury determinations
should be found to be inconsistent with Articles 2.1 and 4.2 of the Agreement on Safeguards.1980
7.773 The European Communities further argues that Article 4(1)(c) of the Agreement on
Safeguards refers to "producers as a whole" and producers of a major proportion of "total domestic
production" as the object of the serious injury examination. The European Communities argues that
in making the serious injury examination, a competent authority cannot distinguish per se between
producers on the basis of the destination of their output. That is, a competent authority cannot define
the "domestic industry" as only those producers who sell their produce on the "free" or "merchant"
market as opposed to those who produce for inte rnal consumption of an integrated downstream
processor, or captively consumed products. In this regard, the European Communities points to the
Appellate Body decision of US – Cotton Yarn. The European Communities asserts that, when faced
with a United States decision to exclude from the definition of "domestic industry" producers of
cotton yarn who produced for integrated upstream pr ocessors, the Appellant Body found in that case
that the term "producing" in Article 6.2 of the Agreement on Textiles and Clothing "cannot be given a
different or a qualified meaning on the basis of what a domestic producer chooses to do with a
product".1981 The European Communities argues that while it is not alleged that the USITC has
defined the domestic industry so as to exclude producers who produce only for internal consumption,
the USITC has, nevertheless, in its examination of profits and losses, neglected to examine the
potential relevance of an industry's production for internal consumption, and in so doing has reduced
the scope of its injury examination.1982
7.774 The European Communities also makes reference to the Appellate Body decision made in the
context of an injury determination for an anti-d umping investigation. According to the European
Communities, in US – Hot-Rolled Steel , the Appellate Body found that the definition of "domestic
industry", and the use of the term in Article 3 of the Anti-Dumping Agreement, indicated that an
investigating authority was not entitled to look only at "one part, sector or segment of the domestic
industry".1983 The European Communities also asserts that the Appellate Body found in that case that
investigating authorities are not entitled to conduct their investigations in such a way that it becomes
more likely that, as a result of the fact finding or evaluation process, they will determine that the
domestic industry is injured.
1984 The European Communities asserts that in US – Hot-Rolled Steel, the
Appellate Body found that where free market sales are subject to a specific examination, it is not
enough that captive sales be included in the overall assessment, they must be disaggregated and a
separate analysis must be carried out.1985 The European Communities asserts that the same reasoning
applies to a safeguards investigation.1986

a whole. Or, in the alternative, the investigating authorities should provide a satisfactory
explanation as to why it was not necessary to examine directly or specifically the other parts
of the domestic industry.
1979 European Communities' second written submission, para. 299.
1980 European Communities' second written submission, para. 300.
1981 European Communities' first written submission, para. 391.
1982 European Communities' written reply to Panel question No. 71 at the first substantive meeting.
1983 European Communities' first written submission, para. 397.
1984 European Communities' first written submission, para. 398.
1985 European Communities' first written submission, para. 401.
1986 European Communities' first written submission, para. 399.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.775 In response, the United States asserts that it does not dispute the general proposition that
Articles 4.1(a), 4.1(c), and 4.2(a) of the Agreemen t on Safeguards require that an authority's finding
of serious injury pertain to the entire domestic industry. It also acknowledges jurisprudence that an
investigating authority cannot consider the factors referred to in Article 4.2(a) for only one segment of
the industry without explaining how the factor is significant for the industry as a whole. 1987 T h e
United States argues that the USITC's analysis focused on each industry as a whole consistent with
United States law and the mentioned jurisprudence. With one exception, the USITC did not engage in
a segmented analysis for any of the domestic industries it examined. In the case of the exception, the
United States contends that the USITC used its analysis of the various segments to support its
conclusions concerning serious injury to the industry as a whole.
1988
7.776 With respect to the reference by the European Communities to the Appellate Body decision in
US – Hot-Rolled Steel , the United States argues that, in that case, the Appellate Body addressed the
consistency with the AD Agreement of a provisi on of US anti-dumping and countervailing duty law
directing the USITC to focus primarily on merchant market sales in certain circumstances. 1989 Th e
United States argues that that particular provision of US law is not applicable to safeguards
investigations and was never invoked by the USITC in the present case. The United States asserts
that the portions of the USITC Report that discussed serious injury did not refer to "merchant market"
or "captive consumption" segments but, rather, were computed on the basis of the entire industry.1990
7.777 The European Communities asserts that the United States contents itself with claiming that,
because it was not possible to generate consistent data for internal production, it satisfied its
obligations under the Agreement on Safeguards . The United States defends itself legally by arguing
that the report of the Appellate Body in US – Hot-Rolled Steel, which concerned the identical situation
in the anti-dumping context, did not concern both a US statutory provision regulating captive
production and its application, but only concerned the statutory provision.1991 However, the European
Communities asserts that the briefest examination of the Appellate Body's report in US – Hot-Rolled
Steel shows that the Appellate Body considered that the lack of analysis of financial performance on
internal consumption when an analysis had been made of commercial sales vitiated the USITC's
determination irrespective of the statutory provision at issue. This shows both that the United States'
legal defence fails to deal satisfactorily with the basic thrust of the Appellate Body's decision, and that
the United States' explanation that it could not derive consistent data for internal consumption is
wholly inadequate.1992
7.778 The European Communities states that in order to better understand the import of the
Appellate Body's findings, it is useful to examine the nature of the investigation which the Appellate
Body was asked to consider. The Appellate Body set out the situation as follows:
"[W]e observe that the USITC Report contains data for, firstly, the merchant market
and, secondly, for the overall market. […] In particular, in its examination of market
share and of each of the financial performance indicators, the USITC mentioned data
pertaining to the merchant market and the overall market. However, while the USITC
Report includes frequent reference to data for the merchant market, it does not
contain, describe, or otherwise refer to, data for the captive market. […] According to

1987 United States' first written submission, para. 327.
1988 United States' first written submission, para. 328.
1989 United States' first written submission, para. 329.
1990 United States' first written submission, para. 330.
1991 European Communities' second written submission, para. 294.
1992 European Communities' second written submission, para. 295.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

the United States, the examination of the data for the captive market is subsumed
within the examination of the domestic market as a whole, even though the merchant
market is the subject of separate and express examination.
It is true [...] that the aggregate data for the industry as a whole includes data for
every part of the industry. However, without further analysis to disaggregate this
data, the data relating to the captive market remains unknown. Moreover, the mere
fact that the aggregate data for the industry as a whole include data for every part of
the industry does not overcome the fact that the USITC Report discloses no analysis
of the significance of the data for the captive market. Thus, there is no explanation by
the USITC of the state of the part of the domestic industry that is shielded from direct
competition with imports, nor any explanation of the significance of that shielding for
the domestic industry as a whole. […] Yet, in the examination provided of the
merchant market, there is an explanation of the poor state of that part of the domestic
industry which is not shielded from the effects of imports.
As we have already explained, in the absence of a satisfactory explanation,
Article 3.1 of the Anti-Dumping Agreement does not entitle investigating authorities
to conduct an selective examination of one part of a domestic industry. Rather, where
one part of an industry is the subject of separate examination, the other parts should
also be examined in like manner. Here, we find that the USITC examined the
merchant market, without also examining the captive market in like or comparable
manner, and the USITC provided no explanation for its failure to do so."
1993
(footnotes omitted, emphasis in original)1994
7.779 The European Communities submits that, in other words, the Appellate Body found an
examination of financial performance which was divided into an examination of performance on the
merchant market (i.e. on commercial sales) and for all production, was inconsistent with the
AD Agreement because there was no comparable focus on performance on captive consumption or no
reasonable explanation why this was not necessary. In the present case, as is undisputed, the USITC
analysed the industry's financial performance only on commercial sales, and not for all productive
activities nor specifically for internal consumption.
1995 According to the European Communities, the
United States seeks to deny that US – Hot-Rolled Steel is relevant. The European Communities
submits that, evidently it is relevant – it sets out a principle that the United States has failed to respect.
Indeed, the United States has acted inconsistently with its obligations in two senses – it has failed to
examine all activities of the industry, and by examining only one part it has failed to examine all parts
equally or explain why this was not necessary.
1996
7.780 The European Communities argues that where captive activities are excluded from the
analysis, a competent authority will not have made an objective assessment nor provided a reasoned
and adequate explanation of its conclusions. More over, such an incomplete analysis will bring into
question the objectivity and representativeness of the competent authority's investigation under
Article 4.2.
1997 The European Communities argues that this, in turn, takes away the basis for
concluding that there is serious injury suffered by the domestic industry. 1998 It states that this is

1993 Appellate Body Report, US – Hot-Rolled Steel, paras. 212-214.
1994 European Communities' second written submission, para. 296.
1995 European Communities' second written submission, para. 297.
1996 European Communities' second written submission, para. 298.
1997 European Communities' first written submission, para. 402.
1998 European Communities' first written submission, para. 392.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

confirmed by Article 4.2(a) of the Agreement on Safeguards, which contains a non-exhaustive list of
injury indicators which an investigating authority must examine. 1999 It argues that the scope of the
provision is not qualified by reference to the use made of the products in question. Consequently,
according to the European Communities, a competen t authority must examine the state of all the
productive activities of the domestic industry. A competent authority cannot simply examine "profit
and losses" made on non-internally consumed production and conclude that there is sufficient
evidence of significant overall impairment in the position of a domestic industry. 2000 In this regard,
the European Communities points out that an integrated producer may forego profits on upstream
input products in order to maximise profit-taking on sales of more valuable downstream finished and
highly specialised products and may simply sell surplus production of the input product. Therefore, an
analysis of whether losses are made on sales of the upstream input product will only provide an
incomplete picture of the state of such an industry.
2001
7.781 The European Communities further argues that the USITC's examination is not objective,
because it does not examine all areas of activities, including those in which the domestic industry may
be performing well. "Serious injury" is defined in Article 4.1(a) as a "significant overall impairment
in the position of a domestic industry". Article 4.2(a) requires an evaluation of "all relevant factors"
"having a bearing on the situation" of the industry. The performance of an industry with respect to
production for internal consumption must be a factor which may have a bearing on that industry and
which therefore must be evaluated and cannot be ignored. The European Communities argues that
consequently, the United States has not evaluated all relevant factors, and has not, therefore,
undertaken a proper serious injury examination. The total absence of any information on its treatment
of production for internal consumption also raises serious questions as to how costs were allocated
between production for commercial sale and that for internal consumption. If costs were
disproportionately allocated to commercial sales, this would evidently decrease the profitability of
such sales. Since the United States admits that it did not ensure consistent treatment of internal
transfers (and therefore that profits and losses were not artificially shifted between products), it has
failed to conduct a proper investigation.
2002 The European Communities argues that this
methodological flaw applies to all of the products concerned. For each product, at least some of the
production is internally consumed and financial performance on these products was, therefore, not
analysed. Consequently, all findings are not based on an assessment of the situation of the domestic
industry as a whole.2003
7.782 In response, the United States contends that the information concerning operating
performance and profit margins included in th e USITC's report was intended to represent the
performance of each industry as a whole, not merely a particular segment of that industry. 2004 Th e
United States acknowledges that the data on operating income that appeared in the USITC Report
were based on the value of commercial sales. However, the United States explains that there were
several reasons why the USITC used this measure. First, the USITC obtained financial performance
data principally through the questionnaires it issued. According to the United States, by requesting
that producers, for purposes of providing financial information, limited their reporting to revenues
actually received for commercial sales, and costs re lating to those sales, the USITC assured that the
financial data it received would be computed on a basis that was both consistent among different

1999 European Communities' first written submission, para. 393.
2000 European Communities' first written submission, para. 394.
2001 European Communities' first written submission, para. 395.
2002 European Communities' first written submission, paras. 423-452; European Communities' written
reply to Panel question No. 71 at the first substantive meeting.
2003 European Communities' first written submission, para. 424.
2004 United States' first written submission, para. 331.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

producers for each particular product on which it collected data and consistent for a particular
producer across several products it produced. Therefore, according to the United States, the USITC
assured that the financial data it received was "objective" and consistent with United States generally
accepted accounting principles.
2005 In contrast, presenting financial data based on many different
schemes for computing transfer values for internal transfers of product could have seriously
compromised the objectivity of the data reported. 2006 The United States argues that, moreover, had
the USITC instructed the producers to attempt to determine values for internal transfers of product,
this presumably would have required producers to construct transfer values on the basis of
commercial sales values. Therefore, there would have been no difference or only minimal difference
between those constructed transfer values and the reported concerning merchant sales values,
particularly for the numerous domestic industries where internal transfers constituted a very small
percentage of overall production.
2007
7.783 The European Communities submits that, inevitably, if data for commercial sales is all that is
analysed, questions arise as to how costs are allocated between production for internal consumption
and production for commercial sales. An improper analysis of costs would undermine both the
analysis of serious injury and the analysis of causation. This issue has already exercised the panel and
Appellate Body in US – Wheat Gluten .
2008 In that dispute, similarly to the instant dispute, three
products, one of which was wheat gluten, were produced from the same raw material on the same
production line. Indeed, in the present dispute, the product is in fact the same (stainless steel rod for
internal consumption is identical to stainless steel rod for commercial sale), only the immediate use is
different – either commercial sale or internal consumption. In US – Wheat Gluten the European
Communities raised a concern as to how the allocation of profits between the different products was
carried out. The Appellate Body reversed the panel's finding that the USITC had provided a reasoned
and adequate explanation of the allocation methodologies applied to allocate profit among the three
different products, because the panel relied on statements made by the United States which were not
contained in the USITC Report.
2009 2010
7.784 The European Communities states that, in the present case, the European Communities asked
the United States to identify where in the USITC Report it had explained how it ensured that
allocations of costs to commercial sales were consistent and objective. In its response to this
question, the United States explained that USITC staff checked data reported by US producers against
audited annual financial statements, referring to page 7 of the overview of the USITC Report.2011 The
USITC explained in page 7 of its overview, after describing how it distributed questionnaires:
"[A] careful review of the data submitted by questionnaire respondents was
undertaken by the Commission staff. Certain basic analytical procedures were
conducted on data in questionnaires from all sources, including US producers, foreign
producers, US purchasers, and US importers. Each firm's unit values for major items
such as shipments, prices, sales values, and costs were scrutinized and compared to
public source data and to the aggregate unit values for all firms. Comments regarding

2005 United States' first written submission, para. 332; United States' second written submission,
para. 110.
2006 United States' first written submission, para. 332.
2007 United States' first written submission, para. 333.
2008 Panel Report, US – Wheat Gluten , paras. 8.57 to 8.66 and, reversing the Panel's conclusions,
Appellate Body Report, US – Wheat Gluten, paras. 156-163.
2009 Appellate Body Report, US – Wheat Gluten, para. 163.
2010 European Communities' second written submission, para. 301.
2011 United States' written reply to European Communities' question No. 5, paras. 11 and 12.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

discrepancies from all parties in the investigation were considered and material
problems with data submissions were resolved.
Additional procedures and reviews focused on US producer companies. Their
reported data on sales, operating income, and capacity were reconciled with each
firm's financial statements to the fullest extent possible, and reported sales values
were compared with reported commercial sales values. A limited-scope verification
was also conducted on one of the largest US steel producers, Nucor Corp., wherein its
questionnaire data were reconciled with its corporate records."2012
7.785 According to the European Communities, on its face, the USITC Report does not explain how
the USITC ensured the correct allocation of costs. Indeed, the latter paragraph on domestic producers
does not refer to costs at all. There is no explanation of how the USITC ensured that the allocation of
costs was consistent across different companies. Reconciling data with annual financial accounts for
a company as a whole, based on income generated on all the products sold by the company, takes for
granted certain allocations of operating income and hence costs, which may be done by different
companies on a different basis. Moreover, acco rding to the European Communities, there is no
explanation whatsoever as to how the USITC verified the accuracy of any data for interim 2001 since
the data for these periods could not logically be checked against annual audited accounts. Nor can it
be determined how the USITC verified the accuracy of the data for interim 2000 because no
explanation is provided of how the respondents allocated data within the year 2000.
2013
7.786 The European Communities notes that, in US – Wheat Gluten , the USITC had explicitly
discussed the issue of allocation of profits. The USITC concluded:
"Based on a careful review of the allocation methodologies used by domestic wheat
gluten producers in responding to the Co mmission's questionnaire, we find those
allocations to be appropriate."2014
7.787 According to the European Communities, the Appellate Body concluded that this statement
did not provide a reasoned and adequate explanati on of the USITC's treatment of the allocation of
profits. It found the panel's determination that the above-quoted statement did constitute a reasoned
and adequate explanation on the basis of information provided during the panel proceedings to be
inconsistent with the standard of review the panel was required to apply, and consequently reversed
the Panel's findings.2015
7.788 The European Communities asserts that in the present case, the USITC did not even discuss
the allocation methodologies applied, did not explain whether it considered the allocation
methodologies were consistent between different producers and did not even claim that the allocations
were "appropriate". In the light of the Appella te Body's examination of this similar issue in US –
Wheat Gluten , the European Communities requests that th e Panel find that the USITC failed to

2012 USITC Report, Vol. III., p. OVERVIEW-7, cited in European Communities' second written
submission, para. 302.
2013 European Communities' second written submission, para. 303.
2014 USITC Report on imports of Wheat Gluten quoted in Appellate Body Report, US – Wheat Gluten,
2015 Appellate Body Report, US – Wheat Gluten, paras. 162-163, cited in European Communities'
second written submission, para. 305.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

provide a reasoned and adequate explanation of how it ensured that costs were properly allocated
between production for commercial sale and for internal consumption.2016
7.789 In response, the United States submits that to the extent that there are "serious questions as to
how costs were allocated between production for comme rcial sale and that for internal transfer", as
the European Communities asserts 2017, it has fully responded to them and allayed any possible
concerns about the USITC's cost allocation methodology. The United States reiterates that USITC
accounting staff reconciled the financial data United States producers reported in their questionnaire
responses with those producers' audited financial statements to ensure that cost data in its report were
allocated to commercial sales in a manner consistent with United States generally accepted accounting
principles. Indeed, because the audited financial statements contain information about commercial
sales only, and do not encompass internal transfers, the USITC could not have performed an
analogous reconciliation process had it attempted to use data concerning such transfers for its
financial analysis.
2018 The United States submits that the nature of the reconciliation process ensured
that the financial data on which the USITC relied were objective. By contrast, a financial analysis
based on data relating to internal transfers, as the European Communities advocates, would have
raised many difficulties with respect to double coun ting of product, particularly with respect to the
CCFRS like product.
2019
7.790 The European Communities states that it is not in a position to assess the effect in this
particular case of the fact that internal consumption has not been taken into account. It submits that it
is not for the European Communities, which does not have access to the same information which the
United States authorities had, or should have had, to establish what would have been the difference in
this case had captive consumption been properly considered. However, the European Communities
considers that it has made a prima facie case that the methodology used by the United States does not
permit an evaluation of the existence of serious injury consistent with the Agreement on Safeguards.
It is not in a position to apply the correct methodology, and consequently determine the difference a
proper examination would have made to the serious in jury determination. Needless to say, while the
USITC neglected to examine profits and losses on internal consumption for all product bundles, for
those product bundles with substantial proportion of in ternal consumption the effect of this exclusion
may well be significant.
2020 In any event, the United States was obliged to explain why it did not
examine such production, even where only a small proportion of production was internally consumed,
and why only examining the free market sales still allo wed, in its view, to have a reliable basis for a
WTO consistent serious injury determination. Such a conclusion must be demonstrated by the
competent authorities in their report and not ex post facto before the Panel.
7.791 The United States submits that the European Communities has failed to establish that there is
some objective manner of measuring financial "performance" with respect to what is not an arm's-
length commercial transaction, but merely a single producer's internal transfer. The United States
further argues that the European Communities has failed to rebut statements made by the United

2016 European Communities' second written submission, para. 306.
2017 European Communities' written replies to Panel questions Nos. 71 and 151 at the first substantive
meeting.
2018 United States' second written submission, para. 112.
2019 United States' second written submission, para. 113.
2020 European Communities' first written submission, para. 424, Figure 30 and common annex B –
tables 1-15.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

States about the lack of objective data pertaining to financial performance concerning internal
transfers.2021
7.792 The European Communities concludes that it is clear that the USITC has, by failing to
examine performance on production for internal consumption, failed both to ensure an examination of
the performance of the industry as a whole and to examine, where it has examined only a segment,
other segments in an equivalent manner. The European Communities submits, therefore, that the
USITC's findings are not reasoned and adequate and should not be upheld. In addition, the USITC
failed to explain, in a reasoned and adequate manner, how it ensured that the allocation of costs
between production for commercial sales and intern al consumption was verified and ensured to be
consistent across the various producers which responded. As a result of these two failings, the
USITC's injury determination is inconsistent with Articles 2.1, 4.2(a), 3.1 and 4.2(c) of the Agreement
on Safeguards.2022
(ii) Confidential information
7.793 The European Communities argues that, despite the numerous injunctions of the Appellate
Body, the USITC failed to provide a reasoned and adequate explanation of the basis for its findings
because it did not provide substantial data elements. 2023 More particularly, the European
Communities argues that the findings in the USITC Report fail to provide a reasoned and adequate
explanation of the determination because it kept confidential, or fails to provide, significant swathes
of information which were necessary to properly assess the correctness of the USITC's findings with
respect to the existence of serious injury and that this also affected the determination of the existence
of a causal link.
2024 The European Communities argues that th is failing is particularly relevant with
respect to the product groups of CCFRS, stainless steel rod, stainless steel wire and stainless steel
bar.2025 The European Communities argues that this v itiates both the USITC's injury finding and the
causation finding given that causation is established by relating and comparing the trends between the
injury indicators and increased imports.
2026
7.794 With regard to CCFRS, the European Commun ities argues that the overall tables for flat
products, that is, the tables in which the USITC had aggregated slab, plate, hot-rolled, cold-rolled,
coated, grain oriented electrical steel and tin mill were regarded as confidential by the USITC. 2027
With respect to stainless steel rod, the USITC did not provide any data with respect to "trade and
employment" (i.e. capacity, production, shipments, inventories and employment), "financial
indicators" (i.e. results of operations) and price comp arisons. Similarly, with regard to stainless steel
bar and stainless steel wire, no data was provided on the financial performance of the industry. The
European Communities argues that none of these determinations are, therefore, consistent with
Articles 4.2(a) and 4.2(b) of the Agreement on Safeguards.
2028 The European Communities also
argues that no or only partial data was provided with respect to undercutting or underselling for slabs;
coated; cold-finished bar; certain pipe products; carbon and alloy fittings and flanges; stainless steel
bar; and stainless steel rod.
2029

2021 United States' second written submission, para. 111.
2022 European Communities' second written submission, para. 307.
2023 European Communities' first written submission, para. 378.
2024 European Communities' first written submission, paras. 407-408.
2025 European Communities' first written submission, para. 409.
2026 European Communities' first written submission, paras. 378-379.
2027 European Communities' first written submission, para. 413.
2028 European Communities' first written submission, para. 416.
2029 European Communities' first written submission, para. 417.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.795 According to the United States, other than to make a general claim that the United States
acted inconsistently with its obligations by not publishing the confidential data, the European
Communities does not ask for the tables either in their confidential form or in an indexed form. Nor
does the European Communities assert that any of the redacted information is necessary or
appropriate to the Panel's evaluation of its claims, or ask the Panel to invoke Article 13.1 of the
DSU.
2030 The United States notes that the European Communities in particular claims that the USITC
violated Article 3.1 by failing to publish certain "aggregated data" regarding domestic flat-rolled steel
producers.2031 In this regard, the United States points out that in its report, the USITC published data
regarding the "results of operations of US producers", and "U.S. producers' capacity, production,
shipments, inventories, and employment" for each fl at-rolled product (i.e., slabs, plate, hot-rolled,
cold-rolled, coated, and tin) except GOES. The reason data were not published for GOES was that,
because there are only two domestic producers, such publication might reveal confidential company-
specific information. The USITC could not publish aggregate flat-rolled data because to do so would
enable readers to determine GOES information simply by subtracting data for each of the other flat-
products.
2032
7.796 The United States argues that the assertion by the European Communities that the USITC
should, at the very least, have published "aggregated data" to maintain confidentiality, while
complying with the publication requirements of Article 3.1, was rejected by the US – Wheat Gluten
panel.2033 The United States submits that the panel in US – Wheat Gluten concluded that in view of:
"[T]he fundamental importance of maintaining the confidentiality of sensitive
business information in order to ensure the effectiveness of domestic safeguards
investigations; the discretion implied in Article 3.2 SA for the investigating
authorities to determine whether or not " cause" has been shown for information to be
treated as "confidential"; and the specific and mandatory prohibition in that provision
against disclosure by them of such information without permission of the party
submitting it, we cannot find that the United States has violated its obligations under
Articles 2.1 and 4 SA, nor specifically under Article 4.2(c), by not disclosing, in the
published report of the USITC, information qualifying under the USITC policy as
information 'which is by nature confidential or which is provided on a confidential
basis,' including aggregate data."
2034
7.797 The United States continues by stating that most recently, the Panel in US – Line Pipe
confirmed that the publication requirements of Article 3.1 must be construed so as not to impair the
confidentiality requirements of Article 3.2. In particular, the panel stated that:
"In respect of Korea's claim that a failure to include relevant confidential information
in a published determination constitutes a violation of Articles 3.1 and 4.2(c), we note
that the panel in US – Wheat Gluten found that the requirement in Article 4.2(c) to
publish a 'detailed analysis of the case under investigation' and 'demonstration of the
relevance of the factors examined' cannot entail the publication of 'information which

2030 United States' first written submission, para. 1330.
2031 United States' first written submission, para. 1331.
2032 United States' first written submission, para. 1332.
2033 United States' first written submission, para. 1336.
2034 United States' first written submission, para. 1337.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

is by nature confidential or which is provided on a confidential basis' within the
meaning of Article 3.2."2035
7.798 According to the United States, there is no reason why the Panel should not to be guided by
the US – Wheat Gluten Panel's finding in respect of the European Communities' Article 4.2(c) claim.
Similarly, and given the express reference in Article 4.2(c) to Article 3, the United States notes that it
fails to see how the Article 3.1 (last sentence) requirement to "publish a report setting forth their
findings and reasoned conclusions reached on all pertinent issues of fact and law" could entail the
publication of "information which is by nature confidential or which is provided on a confidential
basis" within the meaning of Article 3.2. The United States submits that, accordingly, it encourages
the Panel to reject the European Communities' clai m that failure to include relevant confidential
information in a published determination is per se a violation of Articles 3.1 and 4.2(c). In the view
of the United States, there was, therefore, no requirement that the United States publish confidential
information, even in an "aggregated" format.
2036
7.799 The European Communities argues that Article 11 of the DSU directs panels to, inter alia,
make an objective assessment of the facts. The European Communities also relies upon the Appellate
Body decision in US – Wheat Gluten where, according to the Euro pean Communities, the Appellate
Body found that the Panel had failed in its duty under Article 11 when, in evaluating the soundness of
the USITC's analysis, it relied upon explanations furnished by the United States during the cause of
proceedings which were not present in the USITC's Report. On the basis of that decision, the
European Communities argues that a Member applying a safeguard measure must provide all data and
explanations sufficient to justify the measure in the report it is required to provide. According to the
European Communities, this does not oblige a Member to divulge data which are confidential, release
of which would harm individual enterprises. However, according to the European Communities, it
does require that the Member provide aggregate data in which the data on individual enterprises are
not identifiable, or provide indexed data which illustrates the trends in the data. The European
Communities submits that such a requirement is, in some senses, the concomitant obligation to that
imposed on individual enterprises to provide a non-confidential summary of the data, set out in
Article 3.2.
2037
7.800 The European Communities argues that data may legitimately be kept confidential where only
one company has provided a competent authority with the data which has been used to justify a
safeguard measure. In this respect, the European Communities notes that Article 4.1(c) of the
Agreement on Safeguards defines the "domestic industry" as "producers as a whole", or "those whose
collective output of the like or directly competitive product constitutes a major proportion of total
domestic production". The European Communities argues that given that serious injury must be
shown, at the very least, to a "major proportion" of production, it must be questioned whether the data
can be considered to prove that a "major proportion" of the domestic industry has suffered serious
injury if only one producer provides data.
2038
7.801 The European Communities argues that while it is understood that the USITC was under
certain confidentiality obligations under domestic law, this does not excuse the United States from its
WTO obligations to provide an adequate and reasoned explanation of its factual findings and the legal
conclusions drawn therefrom. In the European Communities' view, where two or more companies
had provided data, the aggregated data would have been sufficient to ensure that confidential

2035 United States' first written submission, para. 1338.
2036 United States' first written submission, para. 1340.
2037 European Communities' first written submission, para. 384.
2038 European Communities' first written submission, para. 387.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

company-specific information would not come into the public domain. It argues, further, that even
where data had been provided by only one company, such data could have been indexed in a manner
which would be sufficient to demonstrate, in a reasoned and adequate manner, that the safeguard
action taken was justifiable.
2039
7.802 The United States notes that the European Communities is the only complainant in this
proceeding to raise a claim concerning confidential information. The United States asserts that,
therefore, all other complainants found the public USITC Report either to be adequate in this regard,
or, at least, not a subject to be addressed by them in this dispute.2040
7.803 The United States notes that the European Communities acknowledges that the United States
has certain confidentiality obligations under domestic law and does not ask the United States to
violate those obligations or for the United States to provide the confidential versions of the relevant
data tables. The United States notes that, indeed, the protections afforded to confidential information
under United States law are consistent with similar protections accorded by Article 3.2 of the
Agreement on Safeguards. 2041 The United States also notes that the European Communities claims
that the United States "could have" indexed such information in its report, but it apparently now does
not seek indexed information either. The European Communities states that it is too late for the
United States "to cure its insufficient report by providing now the information". 2042 In response, the
United States argues that whether the United States "could have" developed a non-confidential
summary of the confidential data does not translate into a requirement that it must have done so. The
Agreement on Safeguards does not require that a Member publish indexed information or other public
summaries as parts of its report, and the European Communities cites no provision in the Agreement
or panel or Appellate Body findings in support of it s inference that it does. Under Article 3.1 of the
Agreement, it is sufficient that "competent authorities shall publish a report setting forth their findings
and reasoned conclusions reached on all pertinent issues of fact and law".
2043
7.804 The United States notes that the USITC published two versions of its report, a confidential
version and a public version. The confidential version was sent to the President and to authorized
persons under the USITC's administrative protective order (including attorneys representing most of
the major EU steel producers). A redacted version was made available to the general public.
Nothing in Articles 3.1 and 4.2(c) of the Agreement on Safeguards requires the competent authorities
to publish, in a public report, the confidential information that supports their findings and conclusions.
Indeed, paragraph 2 of Article 3, the second paragraph of the very same article that requires the
competent authorities to publish a report, acknowledges that the competent authorities are likely to
have received confidential information in the course of their investigation, and very unambiguously
states that "Such information shall not be disclosed without permission of the party submitting it".
2044
7.805 The United States also asserts that it is not only domestic law which precludes the
Commission from disclosing confidential informa tion. Article 3.2 of the Agreement on Safeguards
itself requires that such confidentiality be maintained. The United States refers to the panel in US –
Wheat Gluten which found that:

2039 European Communities' first written submission, para. 418.
2040 United States' first written submission, para. 1323.
2041 United States' first written submission, para. 1324.
2042 United States' first written submission, para. 1325.
2043 United States' first written submission, para. 1326.
2044 United States' first written submission, para. 1327.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

"Article 3.2 SA places an obligation upon domestic investigating authorities not to
disclose – including in their published report setting forth their findings and reasoned
conclusions reached on all pertinent issues of fact and law and demonstrating the
relevance of the factors examined – information which is "by nature confidential or
which is provided on a confidential basis" without permission of the party submitting
it."
2045
7.806 According to the United States, given that the very terms of Article 4.2(c) expressly
incorporate the provisions of Article 3, and given the specific and mandatory language of Article 3.2
dealing with the required treatment of information th at is by nature confidential or is submitted on a
confidential basis, the requirement in Article 4.2(c) to publish a "detailed analysis of the case under
investigation" and "demonstration of the relevance of the factors examined" cannot entail the required
publication of "information which is by nature confidential or which is provided on a confidential
basis" within the meaning of Article 3.2 of the Agreement on Safeguards.2046
7.807 The European Communities argues in counter-response that the USITC, as an investigating
authority, was obliged to treat some of the inform ation it received as confidential. This meant that
those data could not be disclosed in its public report. The European Communities does not dispute
that the United States may refuse to provide specific data when confidential treatment is warranted.
However, that the United States may withhold specific data does not excuse it from its obligation to
provide a reasoned and adequate explanation. Without such a reasoned and adequate explanation, the
Panel cannot make an objective assessment of the matter before it and, with interested WTO
Members, cannot ensure that the conditions necessary for the application of safeguard measures have
been satisfied.
2047
7.808 The European Communities further argues that much of the United States' argumentation on
this issue has been that it is not required to disclose confidential data. 2048 According to the European
Communities, this is besides the point. The Eu ropean Communities has argued that the USITC was
under an obligation to provide a reasoned and adequate explanation, and that this could be done in the
form of the provision of, for example, indexed da ta, or aggregated data. The United States rejected
this, arguing that:
"[W]hether the United States "could have" developed a non-confidential summary of
the confidential data does not translate into a requirement that it must have done
so."2049
7.809 According to the European Communities2050, in so doing, it appeared to deny the obligation to
provide a reasoned and adequate explanation of its findings. However, in response to a question from
the Panel as to the relationship between the possibility to protect confidential information and the
obligation to provide a reasoned and adequate explanation the United States opined:
"When an investigation involves substantial amounts of confidential information,
there are several means by which the authority can satisfy both its Article 3.1

2045 Panel Report, US – Wheat Gluten , para. 8.19 cited in United States' first written submission,
para. 1334.
2046 United States' first written submission, para. 1335.
2047 European Communities' second written submission, para. 308.
2048 United States' first written submission, paras. 1322-1340.
2049 European Communities' second written submission, para. 309.
2050 European Communities' second written submission, para. 310.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

obligation to provide findings and reasoned conclusions, and its Article 3.2 obligation
not to disclose confidential information."2051
7.810 The European Communities states that while it would not formulate the applicable law in
quite the same manner, the European Communities does welcome the fact that the United States
agrees that the claimed right not to disclose conf idential information coexists with the obligation to
provide a reasoned and adequate explanation to meet the "serious injury" test in Article 4 of the
Agreement on Safeguards. The issue then becomes what is required of an investigating authority in
the light of the obligation to provide a reasoned and adequate explanation with respect to data that is
entitled to confidential treatment ?2052
7.811 The European Communities notes that in an effort to settle this dispute, the European
Communities requested the United States to provide information that had been withheld in the public
version of the USITC Report. The European Communities states that the United States never
responded to that request. It further argues that the United States cannot attempt to cure its
insufficient report by now providing the information which, in order to respect Articles 2.1, 4.2, and
3.1 of the Agreement on Safeguards, should have appeared in the report.
2053
7.812 In response, the United States asserts that after meeting with the European Communities
representatives, USTR informally asked the USITC to review the public version of its report to
determine whether any of the redacted data in the tables was improperly designated as confidential
and should be disclosed. The USITC found that none of the data had been improperly designated as
confidential. Accordingly, there was nothing for the United States to report. The United States
comments that the Panel should be aware that the USITC Report contained nearly 400 tables, the
overwhelming percentage of which were made available in their entirety in the public version of the
USITC Report. According to the United States, the European Communities is taking issue with data
redacted from only 14 of those tables.
2054
7.813 In response to a question posed by the Panel, the United States argues that it does not believe
that the Article 3.1 requirement to provide a reasoned and adequate explanation and the Article 3.2
requirement to protect confidential information are in conflict. An authority's obligation to protect
confidential information under Article 3.2 is not conditioned in any way. The first sentence of
Article 3.2 states that confidential information "shall, upon cause being shown, be treated as such by
competent authorities". Article 3.2 does not state that the authority may release such information if it
is particularly central to its decision, or if its disclosure would aid in understanding the reasons for its
findings and conclusions. Instead, the authority's obligation not to disclose confidential information is
absolute. The United States argues that, consequently, the findings and reasoned conclusions that an
authority provides under Article 3.1 must be findings and conclusions that do not disclose confidential
information. Indeed, because maintaining confidentiality is an obligation, a Panel cannot take an
adverse inference against a Member because the Member's competent authority did not disclose
confidential information. Instead, the Panel must judge the adequacy of the authority's explanation on
the basis of the information the authority could properly disclose.
2055
7.814 The United States also argues that when an investigation involves substantial amounts of
confidential information, there are several means by which the authority can satisfy both its

2051 United States' written reply to Panel question No. 77 at the first substantive meeting.
2052 European Communities' second written submission, para. 311.
2053 European Communities' first written submission, para. 419.
2054 United States' first written submission, para. 1329.
2055 United States' written reply to Panel question No. 77 at the first substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

Article 3.1 obligation to provide findings and reasoned conclusions and its Article 3.2 obligation not
to disclose confidential information. One is to provide a non-confidential narrative discussion of the
confidential information. The United States subm its that this is an approach the USITC repeatedly
took in its report. For example, in the discussion of price declines for cold-finished bar, the USITC
had to redact certain numbers quantifying price declines that appear on page 105 of its report.
Instead, it characterized the declines as "dramatic". Consequently, the nature of its discussion is
clearly discernible. Even for stainless steel rod, where virtually all data concerning the domestic
industry was confidential, the USITC still was able to discuss trends in the industry data in general,
but descriptive, terms that enable the Panel to discern the reasons for the USITC's conclusions. In this
manner the USITC provided findings and conclusions that did not disclose confidential
information.
2056
7.815 In response, the European Communities states that the question is not whether the trend is
"discernible" as a result of the use of the word dr amatic. The issue is whether, in the words of the
Appellate Body, a competent authority has provided a "reasoned and adequate explanation of how the
facts support its determination". 2057 The use of the word "dramatic" says nothing about whether the
facts support the determination that the price decline was "dramatic". The European Communities
states that it is not suggesting that the United States disclose information which is confidential.
Indexing pricing developments would be one way of allowing a Panel to determine whether a decline
in prices was in fact "dramatic". Indeed, quoting the finding for which the United States considers
that the use of the word "dramatic" is sufficient illustrates that the notion of the "non-confidential
narrative discussion" of confidential information does not permit a competent authority to provide a
reasoned and adequate explanation of its findings:
"[A]verage unit values of the imports trended downward from 1996 to 1998, and the
decline accelerated in 1999. [...] Additional evidence that import prices declined
dramatically in 1999 is provided by data for one-inch round C12L14, the cold-
finished bar product for which the Commission obtained significant pricing data
concerning imports. Between the fourth quarter of 1998 and the first quarter of 1999,
import prices for this product declined by *** percent. They fell an addition ***
percent between the first and second quarters of 1999, the largest quarterly decline to
that point in the period examined."
2058
7.816 According to the European Communities, there is no indication of how the facts support the
USITC's determination that the decline in imports prices was "dramatic". Had the data on import
pricing been indexed, the investigating authority, without providing the specific figures, could have
shown that the decline in prices was of a sufficient magnitude to be qualified as "dramatic". Thus,
providing a "non-confidential narrative discussion" is not sufficient to provide a reasoned and
adequate explanation of how the facts support the determination.2059
7.817 With reference to the alleged failure to provide any data (other than import data) for stainless
steel rod and the failure to provide financial data for stainless steel bar and stainless steel rod, the
European Communities notes that for all three products, the European Communities has argued, and
the USITC acknowledged, that cost developments (m ostly related to nickel), in addition to energy

2056 United States' written reply to Panel question No. 77 at the first substantive meeting.
2057 Appellate Body Report, US – Lamb, para. 103.
2058 USITC Report, Vol. I, p. 105-106, referred to in United States' written reply to Panel question
No. 77 at the first substantive meeting, and cited in European Communities' second written submission,
para. 313.
2059 European Communities' second written submission, para. 313.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

costs, had a substantial effect on the industry's performance. The European Communities notes that
with respect to stainless steel bar, the USITC found that:
"While the average unit value of the industry's net commercial sales increased in
2000 and 2001, the industry's cost of goods sold rose from *** percent of its net sales
revenues to *** percent of its net commercial values in 1999, *** percent of net
commercial sales in 2000, and *** percent in interim 2001. As a result of these
decreasing margins between the industry's cost of goods sold and its net sales values,
the industry's operating income levels declined from a profit of *** percent in 1998 to
a loss of *** percent in 1999, recovered only slightly to a minimal profit of ***
percent in 2000, and then fell to a loss of *** percent in interim 2001."
2060
7.818 According to the European Communities, increas ing costs may, in certain circumstances be
an alternative cause of injury. Thus their analysis may be vital. However, because costs for these
products have not been provided on an indexed basis, there is no means to determine whether the facts
which the USITC found supported its determination. The same issue was dealt with in the same
manner for stainless steel rod
2061 and for stainless steel wire.2062 The European Communities submits
that perhaps the most striking use of redaction is with respect to arguments of interested parties that
certain problems affecting one of the very few domestic producers impacted the overall situation of
the domestic industry. For stainless steel rod and bar the USITC noted:
"[I]n addition, we also have considered respondent's argument that the industry's
condition during the period was affected significantly by the poor operations of the
domestic producer AL Tech/Empire. However, ***."2063
7.819 The European Communities asserts that having accepted, therefore, that a Member must
provide a reasoned and adequate explanation, even when certain data cannot be disclosed for reasons
of confidentiality, there can be no doubt that providing only a "non-confidential narrative discussion"
is insufficient to provide a reasoned and adequate explanation of how the facts support a
determination of the existence of serious injury and a causal link. According to the European
Communities, the United States proved that it was perfectly capable of providing data in another
format which protected the confidentiality of the underlying data, and could potentially provide a
reasoned and adequate explanation, in its discussion of the proportionality of the measure on Stainless
Steel Rod.
2064 The United States, has, therefore, for stainless steel rod, stainless steel bar and stainless
steel wire acted inconsistently with Articles 2.1, 4.2(a), 3.1 and 4.2(c) of the Agreement on
Safeguards.
2065
(iii) Recent data
7.820 The European Communities argues that a Memb er must take account of all information
available to it before taking a measure. It asserts that this is an essential element of the provision of
an adequate and reasoned explanation, especially in relation to determinations of threat of serious
injury, which depend on extrapolations of trends. The European Communities argues that if recent

2060 USITC Report, Vol. I, pp. 211-212 (footnotes omitted), cited in European Communities' second
written submission, para. 315.
2061 USITC Report, Vol. I, pp. 220-221.
2062 USITC Report, Vol. I, p. 259.
2063 USITC Report, Vol. I, p. 221, and for Stainless Steel Bar p. 212 where the USITC states, "We note,
however, that ***", cited in European Communities' second written submission, para. 316.
2064 United States' first written submission, paras. 1160-1161.
2065 European Communities' second written submission, para. 317.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

data that is available before the competent authority decides to impose safeguard measures would
bring a determination of threat of serious injury into doubt, the competent authority must justify its
determination of threat of serious injury in light of those recent developments. According to the
European Communities, failing to do so means that the determination is not reasoned and adequate
and, further, a conclusion by the competent authority that a measure is justified would be inconsistent
with Articles 2.1 and 4.2 of the Agreement on Safeguards.2066
(iv) Analysis of trends
7.821 The European Communities asserts that the USITC based a number of its determinations (on,
for example, capacity utilization, average unit values, cost of raw materials and productivity) on an
end-to-end comparison (i.e. 1996 against 2000). In so doing, it provided no data that would have
indicated the trends of the injury indicators over the period of investigation and would have
consequently permitted a proper causation analysis. The European Communities argues that the
absence of data showing the trends shows that bo th the injury and causation analysis had not been
adequately reasoned or explained by the USITC.
2067
(c) Aggregation of data
(i) CCFRS
7.822 The European Communities argues that, as concerns CCFRS, the USITC Report failed to
provide a reasoned and adequate explanation of the determination. In particular, the European
Communities argues that while separate data sets existed for each of the products which the USITC
collapses into the single CCFRS group (that is, for slabs, plate, hot-rolled, cold-rolled and coated),
there were no tables that contained data for the five products as grouped together by the USITC.
Thus, the injury findings for the single product group of CCFRS were based on aggregated data from
the five individual products. The European Communities argues that there were no means to
determine how the data for CCFRS as a whole had been calculated and, consequently, whether the
conclusions reached by the USITC are justified.
2068
7.823 Further, the European Communities argues that aggregation involved substantial double-
counting issues which, it says, must be accommodated in order to avoid that the aggregated data
become unreliable.2069 The European Communities submits that double counting arose as a result of
the fact, inter alia, that capacity for some products was also used to produce other products, and that a
substantial proportion of products were consumed in the production of downstream products. The
European Communities asserts that the USITC was, therefore, aware of these issues as it conducted its
investigation. However, it never provided, in the USITC Report (or elsewhere), a table showing and
explaining its adjustment of the data to take account of such double-counting.
2070
7.824 The European Communities submits that the United States cannot, at the same time, pretend
to rely on an aggregated group CCFRS and fail to provide correct data for this artificial group which it
itself created. According to the European Co mmunities, without such a demonstration, the
determination is not reasoned and adequately explained.2071 The European Communities notes in this

2066 European Communities' first written submission, para. 388.
2067 European Communities' first written submission, para. 412.
2068 European Communities' first written submission, para. 410.
2069 European Communities' first written submission, para. 411.
2070 European Communities' written reply to Panel question No. 72 at the first substantive meeting.
2071 European Communities' first written submission, para. 411.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

regard that the overall tables for flat products were regarded as confidential by the USITC. 2072 The
European Communities states that, in any event, these tables would not have provided a fully accurate
picture of the group of CCFRS because they also included data for GOES and tin mill products.
2073
7.825 In response, the United States submits that in conducting its investigation, the USITC
recognized that the internal consumption of ty pes of CCFRS to produce other such downstream
products could lead to double-counting problems if the data for some injury factors (such as
production and capacity) were merely aggregated for the five types of CCFRS. It sought the advice of
the parties to the investigation as to how these double-counting issues could be minimized. 2074 I n
making its determinations, the USITC generally relied on combined data for the five types of CCFRS.
However, to account for the double-counting problem, it also examined data for the separate types of
CCFRS and considered a variety of different ways of measuring these factors, in accordance with
arguments made by representatives of domestic and foreign producers. It found that, in most cases,
these separate data showed trends that were sim ilar to the aggregated data for the industry as a
whole.
2075 2076
(ii) Tin mill products
7.826 Norway submits that an unspecified number of tin mill producers also produce a variety of
other types of CCFRS, including slab and also hot-end production (slabs). There is no evidence that
the operating results from these parts of the firms have been separated out when establishing which
firms are the "producers of the like product".2077 Norway submits that when this has not been done, an
incorrect assessment of injury to the tin mill industry results, given that the alleged injury may be
caused to other parts of the operations of these firms.2078
7.827 In response, the United States submits that Norway is mistaken. Its argument appears to
assume that, if a United States producer produced several different types of steel, it would report its
data to the USITC on the basis of all the products it produced. In fact, the USITC's questionnaire
instructions required each domestic producer to report all data, including financial data, separately for
each of the 33 categories of steel.
2079 Since tin mill was a distinct category for data collection, a
producer that produced both tin mill and other types of steel covered by the investigation would have
reported its tin mill data separately from data on other categories. Furthermore, the USITC staff
examined all domestic producer questionnaire responses to ascertain whether they contained data
discrepancies on reported information on factors including shipments, sales, and capacity.2080 2081
(d) Decision-making processes in the context of the USITC's injury determinations
7.828 China argues that because of the tie-vote situation in relation to stainless steel wire, the
investigation with respect to this product was not completed until the President decided, in his
Proclamation, which determination he was in favour of. China notes that at Article 4 of the
Presidential Proclamation, the President decided to "consider the determination of the groups of

2072 European Communities' first written submission, para. 413.
2073 European Communities' first written submission, para. 413.
2074 USITC Report, p. FLAT-15 n. 11, p. FLAT-30 footnote 13, and FLAT-44 footnote 14.
2075 USITC Report, p. 51 footnote 193, and p. 56 footnote 232.
2076 United States' written reply to Panel question No. 24 at the second substantive meeting.
2077 Norway's first written submission, para. 236.
2078 Norway's second written submission, para. 73.
2079 Exhibit US-22 (questionnaire instructions); United States' first written submission, para. 319.
2080 USITC Report, p. OVERVIEW-7.
2081 United States' written reply to Panel question No. 25 at the second substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

commissioners voting in the affirmative" with regard to stainless steel wire. China asserts, however,
that the Commissioners voting in the affirmative did not agree upon a single and common
determination and the President did not state precisely according to which views he decided to vote in
favour of a safeguard measure. China argues that, accordingly, the decision of the President was not
supported by clear explanations of why he found that the stainless steel wire industry was suffering
injury or threat of serious injury. On the basis of the foregoing, China submits that it is very difficult
to determine whether injury factors were properly examined and whether sufficient and sound
explanations were given for the Presidential determination.
2082
7.829 In response to a question posed by the Panel, the United States notes that Chairman Koplan
found threat of serious injury based on a like product of stainless steel wire, Commissioner Bragg
found threat of serious injury based on a like product of "stainless steel wire products" (including both
stainless steel wire and stainless steel wire rope ), Commissioner Devaney found serious injury based
on a like product of stainless steel wire produc ts, and the other three USITC Commissioners made
negative determinations with respect to stainless steel wire. The United States argues that for
purposes of determining whether increased imports are causing serious injury to a domestic industry,
the "determination of the competent authorities" is a matter of the Member's domestic law. There is a
well-established practice under United States law that when USITC Commissioners disagree with
respect to the like product definition, the USITC determination is based on the overlap of the
determinations of the individual Commissioners. The United States submits that, here, the six
Commissioners produced three affirmative and three negative individual determinations concerning
stainless steel wire. Under United States domestic law, the President may treat the USITC's equally
divided determination as an affirmative determination. An overlap of decisions is acceptable as long
as each decision-maker addressed the goods in question and found that the increased imports caused
serious injury or threat of serious injury.
 2083
7.830 The United States notes that there is also the separate question of whether the competent
authority has presented the "findings and reasoned conclusions reached on all pertinent issues of fact
and law" for its determination required by Article 3.1. The United States submits that United States
law differentiates between the determination, which is the USITC's conclusion, and the explanation of
the determination. When an authority such as the USITC has multiple members and these members
do not issue a collective opinion in support of their determination, the Panel should refer to the
opinion for each individual member of the authority whose vote was necessary for the authority to
reach its determination. The United States argues that the Article 3.1 requirement is satisfied when
each member has provided findings and reasoned conclusions that support the ultimate conclusion he
or she reached with respect to the goods in question.
2084
H. CAUSATION
1. Definition and establishment of "causal link"
7.831 Norway, Brazil and other complainants argue that Articles 2.1 and 4.2(b) of the Agreement on
Safeguards mean that Members must demonstrate an explicit "causal link" between the increase in
imports and any serious injury suffered by the domestic industry.2085

2082 China's first written submission, para. 348.
2083 United States' written reply to Panel question No. 78 at the first substantive meeting.
2084 United States' written reply to Panel question No. 78 at the first substantive meeting.
2085 Norway's first written submission, para. 285; Brazil's first written submission, para. 147.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.832 China and New Zealand submit that, on the basis of Appellate Body jurisprudence, a
competent authority's task in determining whethe r the causal link between increased imports and
serious injury exists "involves a genuine and substantial relationship of cause and effect".2086 In doing
this, the competent authority must establish the coincidence between increased imports and serious
injury, it must not attribute to increased imports injury caused by other factors, and it must establish
non-attribution explicitly and expressly through a reasoned, clear, unambiguous and straightforward
explanation.2087 Switzerland and Norway consider that the determination of the existence of a genuine
and substantial relationship of cause and effect usually involves two elements: first, there is typically
a coincidence in trends between serious injury and increased imports and second, the transmission of
serious injury by increased imports must be shown, in the light of the coincidence (or lack of)
between trends.
2088
7.833 New Zealand adds that Articles 4.2(a) and (b) in combination underline the importance of
ensuring that the competent authorities substantia te their determination that increased imports have
caused, or threaten to cause serious injury through a proper and objective assessment of all relevant
factors bearing on the industry. In New Zealand's view, only in this way can the requisite "causal
link", as specifically referred to in Article 4.2(b), be demonstrated.
2089
7.834 The United States notes that the Appellate Body has described the basic requirements
applicable to a causation analysis under the Agreement on Safeguards on several occasions. 2090 As a
general matter, the Appellate Body has stated that Article 4.2(b) of the Agreement on Safeguards
contains "two distinct legal requirements" that must be satisfied for a safeguard action to comply with
the Agreement. First, as indicated in the first sentence of Article 4.2(b), the authority must
demonstrate the "'existence of the causal link between increased imports of the product concerned and
serious injury or threat thereof.'" Second, as set forth in the second sentence of Article 4.2(b), the
competent authority must ensure that the "injury caused by factors other than the increased imports
[is] … not … attributed to increased imports."
2091
2. Correlation
7.835 The European Communities, Japan, Korea, Switzerland, Norway, New Zealand and Brazil
argue that the Appellate Body in Argentina – Footwear (EC) stated that if causation is present,
increased imports "normally should coincide" w ith a decline in the relevant injury factors. 2092 New
Zealand further argues that a coincidence between increased imports and injury factors will provide
an important initial indication of a causal link 2093 and that a competent authority should demonstrate
such coincidence. 2094 According to the European Co mmunities and Brazil, the facts must

2086 China's first written submission, para. 352; New Zealand's first written submission, para. 4.111.
2087 New Zealand's first written submission, para. 4.111; China's first written submission, para. 352.
2088 Switzerland's first written submission, para. 292; Norway's first written submission, para. 293.
2089 New Zealand's first written submission, para. 4.110.
2090 The United States cites the Appellate Body Reports, US – Line Pipe , paras. 200-222; US – Lamb
Meat, paras. 162-188; US – Wheat Gluten, paras. 60-92; Argentina – Footwear (EC), paras. 140-47.
2091 United States' first written submission, para. 401.
2092 European Communities' written reply to Panel question No. 81 at the first substantive meeting;
Japan's written reply to Panel question No. 81 at the first substantive meeting; Japan's second written
submission, para. 113; Korea's first written submission, para. 103; Switzerland's written reply to Panel question
No. 81 at the first substantive meeting; Norway's first written submission, para. 283; New Zealand's written
reply Panel question No. 81 at the first substantive meeting; Brazil's second written submission, para. 63;
Brazil's written reply to Panel question No. 81 at the first substantive meeting.
2093 New Zealand's first written submission, para. 4.113.
2094 New Zealand's first written submission, para. 4.112.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

demonstrate, at a minimum, a correlation in time between the increased imports and the decline in
industry performance.2095
7.836 New Zealand notes that the Appellate Body has not set out abstract mathematical parameters
for how close a degree of coincidence is required. 2096 Similarly, the European Communities and
Norway argue that there is no mathematical formula which dictates the applicable time-frame for
establishing causal link. 2097 Likewise, Japan and Brazil argue that it is impossible to put forward a
precise standard.2098 Nevertheless, the European Communities, Switzerland and Norway argue that
the degree of coincidence between the increased imports and the serious injury suffered should be
significant.2099
7.837 Japan, Switzerland and Brazil submit that the term "coincide" implies a very tight correlation
between increased imports and injury within a narr ow period of time. Indeed, the Oxford English
Dictionary defines "coincide" as, to "[o]ccupy the same portion of space ... [o]ccur at or during the
same time".2100 Korea argues that the relevance of the coincidence of time between increased imports
and materialization of injury is that there logically should be a close connection.2101
7.838 The European Communities and Brazil argue that absent this correlation, the increase in
imports cannot be said to have caused the serious injury. 2102 More particularly, Brazil submits that in
the absence of a correlation between increased imports and serious injury, there can be no causal link,
and no measure applied. 2103 Similarly, Norway argues that if there is no correlation between the
increase in imports and the serious injury suffered, it is highly doubtful that a causal link exists.2104
7.839 The European Communities, Japan and Brazil argue that if there is no coincidence, it is still
possible that there is a causal link, but a competent authority must provide a "very compelling
analysis" of this causal link. 2105 Switzerland and Norway also submit that in the absence of
coincidence, a "compelling analysis" is needed that establishes the existence of a genuine and
substantial relationship of cause and effect between increased imports and the serious injury allegedly
suffered, in the light of the coincidence of trends, and the means by which such injury is transmitted

2095 European Communities first written submission, para. 438; Brazil's first written submission,
para. 149.
2096 New Zealand's written reply to Panel question No. 81 at the first substantive meeting.
2097 European Communities' written reply to Panel question No. 81at the first substantive meeting;
Norway's written reply to Panel question No. 86 at the first substantive meeting.
2098 Japan's written reply to Panel question No. 81 at the first substantive meeting; Brazil's written
reply to Panel question No. 81 at the first substantive meeting.
2099 European Communities' first written submission, para. 451; Switzerland's first written submission,
2100 Japan's written reply to Panel question No. 81 at the first substantive meeting; Japan's second
written submission, para. 113; Switzerland's written reply to Panel question No. 81 at the first substantive
meeting; Brazil's second written submission, para. 63; Brazil's written reply to Panel question No. 81 at the
first substantive meeting.
2101 Korea's written reply to Panel question No. 81 at the first substantive meeting
2102 European Communities' first written submission, para. 438; Brazil's first written submission,
para. 149.
2103 Brazil's second written submission, para. 62.
2104 Norway's first written submission, para. 283.
2105 European Communities first written submission, paras. 450 and 453; Japan's second written
submission, para. 114; Brazil's written reply to Panel question No. 81 at the first substantive meeting; Japan's
written reply Panel question No. 81 at the first substantive meeting. Reference is made in this regard to
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

by increased imports. 2106 Japan and Brazil say that, at a minimum, some level of demonstrable,
relevant and "very compelling" correlation between increased imports and serious injury must
exist.
2107
7.840 The United States argues that the Appellate Body has consistently stated that the "primary
objective" of a Member when conducting a safeguards investigation is to "determine whether there is
'a genuine and substantial relationship of cause and effect' between increased imports and serious
injury and threat thereof." Accordingly, the Unit ed States asserts that, when interpreting Article
4.2(a) and 4.2(b), first sentence, of the Agreement, the Appellate Body has stated that the "central"
consideration in a causation analysis is assessing whether there is a "relationship between the
movements in imports (volume and market share) and the movement in injury factors." The United
States adds that, the Appellate Body has indicated that, even in the absence of a "coincidence between
an increase in imports and a decline in the rele vant injury factors," a competent authority is not
precluded from finding that there is the requisite causal link between increased imports and serious
injury; instead, the competent authority may still find the causal link needed to justify a safeguard
action if the authority provides a "compelling analysis of why causation is still present."
2108
7.841 The United States adds that, for the ten steel products for which the President imposed a
safeguard remedy, the USITC considered all of the record evidence and concluded that there was a
clear correlation between the volume and price trends of imports and declines in the overall condition
of the industry. Moreover, for each product, the USITC also conducted a detailed and well-reasoned
discussion of the ample record evidence showing that there was a genuine and substantial correlation
between increased imports and serious injury.
2109
7.842 The United States argues that although th e complainants correctly recognize that the
Appellate Body has indicated that there should "n ormally" be a "relationship between the movements
in imports (volume and market share) and the movement in injury factors", their arguments in this
regard generally focus almost exclusively on an analysis of correlations in import and industry trends
within the same calendar year. This approach fails to appreciate that the full impact of an increase in
import volumes or a decline in import prices in one calendar year may not be fully reflected in the
condition of the industry until the next calendar year, or even the year after.
2110 The United States
also argues that, in many instances, the complainants improperly focus solely on year-to-year
correlations between changes in import volumes and changes in industry injury indicia without
recognizing that changes in an industry's condition can be the result of both volume and price-based
import competition.
2111 The United States argues that the sort of analysis urged by the complainants –
that is, an examination only of the correlations between trends in import volume and industry
profitability levels – would reflect an imprecise and demonstrably incomplete assessment of whether
increased imports, and their pricing patterns, had seriously injured the domestic industry.2112
7.843 Korea argues that a lag or disconnect between the increased imports and the serious injury
shows the high likelihood that the impact identified is caused by other external factors and not the
increased imports. Furthermore, in such a case, the competent authorities should provide an

2106 Switzerland's first written submission, para. 294; Norway's first written submission, para. 296.
2107 Japan's second written submission, para. 114; Japan's written reply to Panel question No. 81 at the
first substantive meeting; Brazil's written reply to Panel question No. 81 at the first substantive meeting.
2108 United States' first written submission, paras. 402-403.
2109 United States' first written submission, para. 425; United States' second oral statement, para. 63.
2110 United States' first written submission, para. 446.
2111 United States' first written submission, para. 448.
2112 United States' first written submission, para. 449.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

explanation why and how they still found a causation between the increased imports and the serious
injury despite a lack of coincidence.2113 Similarly, Japan and Brazil concede that it might be possible
to find a correlation between increased imports and injury in situations where the effect is lagged.
However, they argue that it would be for the "com pelling analysis" to explain why such a lag exists
and how it operates. In this respect, they assert that the existence of a causal lag is industry and
market specific.2114 The European Communities, Japan, Korea, New Zealand and Brazil argue that
the more attenuated the occurrence of serious injury is from the increase in imports (that is, the greater
the lapse of time) the more likely that the injury found is due to factors other than the increased
imports.2115 The authorities, therefore, have a higher burden to establish by compelling evidence that
the relationship nonetheless exists in such circumstances.2116
7.844 In response, the United States argues that these complainants appear to agree with the United
States that imports can have a direct, albeit lagged, impact on certain indicia of an industry's
condition. In response to questions from the Panel, the United States notes that the complainants have
conceded the Agreement on Safeguards does not require increased imports to have a direct and
immediate impact on all indicia of an industry's condition in the same year when an import surge
occurs. As recognized by the European Communities, under the Agreement on Safeguards, "there is
no mathematical formula which dictates the applicable time frame for establishing [a] causal link"
between imports and declines in the condition of the industry during the period of investigation.
Similarly, Japan agrees that there is "no test for determining when the effect of increased imports on
the domestic industry must materialize." In other words, like several other complainants, Japan and
the European Communities clearly recognize that the nature of the temporal "correlation" between
import increases and changes in an industry's condition is dependant upon the performance factors
being examined and the manner in which imports affect those factors.
2117
7.845 As a result, the United States argues that the complainants are mistaken when they argue that
a competent authority must provide a "more compelling" causation analysis if there is a time lag
between an increase in imports and declines in certain performance factors of the industry. According
to the United States, it is simply not the case that a temporal lag between import increases and
declines in industry performance factors indicates a lack of "correlation" or coincidence between the
import increase and the performance declines. Natural business cycles or other external factors may
cause imports to have a direct but delayed impact on one or more of an industry's performance
indicia.2118
7.846 The United States argues that an import increase can have an immediate and direct impact on
many performance factors for an industry, such as market share, production levels, or shipment

2113 Korea's written reply to Panel question No. 81 at the first substantive meeting; Korea's second
written submission, para. 135; New Zealand's written reply to Panel question No. 81 at the first substantive
meeting.
2114 Japan's written reply to Panel question No. 81 at the first substantive meeting; Brazil's written reply
to Panel question No. 81 at the first substantive meeting.
2115 European Communities' written reply to Panel question No. 81 at the first substantive meeting;
Japan's written reply to Panel question No. 86 at the first substantive meeting; Korea's written reply to Panel
question No. 86 at the first substantive meeting; Korea's second written submission, para. 140; New Zealand's
written reply to Panel question No.86 at the first substantive meeting; Brazil's written reply to Panel question
No. 86 at the first substantive meeting.
2116 Korea's written reply to Panel question No. 86 at the first substantive meeting; Norway's written
reply to Panel question No. 86 at the first substantive meeting.
2117 United States' second written submission at paras. 117-18.
2118 United States' second written submission, para. 125.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

levels.2119 Notwithstanding this, an increase in imports can also have a direct but delayed impact on
certain performance factors for an industry, such as the industry's employment levels, capital
investment levels, or its research and development expenses. For example, a company affected by a
substantial surge of imports in one year will not necessarily immediately go into bankruptcy.
2120 On
the contrary, most companies will take every action possible to avoid entering bankruptcy because
entering bankruptcy will have a substantial negative impact on their commercial reputation and their
access to capital. Accordingly, companies may delay entering bankruptcy for a number of years, even
after their business has been seriously harmed by a major event such as a sudden and serious surge in
imports.2121 The United States submits that similarly, a company may not immediately cut its
workforce when imports first surge into a market. Instead, the company might reasonably take some
time to assess whether import increases appeared to reduce its shipment or pricing levels over an
extended period, which might indicate that a long-term reduction in the company's work force was
necessary to reduce its costs. 2122 Indeed, it is possible that an increase in imports can have both an
immediate and a delayed impact on one of the industry's performance factors.2123
7.847 In response to this particular argument, Japan argues that the United States offers the
simplistic argument that bankruptcies and labour reductions are inherently delayed reactions to
market-driven events. Japan argues that, however, this argument misses the point. The question is
what caused the bankruptcies and labor reductions. The answer is a decline in sales revenue and
profits, which was caused by a decline in prices, as the domestic industry argued and the USITC
found.
2124 The USITC considered this as evidence of the industry's injury, but failed to correlate the
declining domestic prices to increased imports, which, in fact, stopped increasing in 1998. The
question that should have been asked, therefore, is what caused domestic prices to decline. As
argued, price effects are far more immediate than ba nkruptcies and labour reductions, assuming there
is no inventory overhang. As there was no inventory overhang in this case, the lack of correlation
between import increases and domestic price declines shows that something other than the two-year-
old increase in imports was affecting the industry. In proceedings before the USITC, respondents
demonstrated the effects of other causes, with which there was a clear correlation with industry
performance, but the USITC ignored these proven effects.
2125
7.848 The United States notes that in the anti-dumping context, an adopted panel report has
specifically found that there need not be an immediate temporal link between import trends and
declines in an industry's condition to establish a causal link between imports and those declines. 2126
In Egypt – Steel Rebar , the Panel rejected Turkey's contention that there must be a strict temporal
connection between the dumped imports and any injury being suffered by the industry, noting that this
argument:
"… rest[ed] on the artificial assumption that the market instantly absorbs, and reacts
to, imports the moment they enter the territory of the importing country. Such an
assumption implicitly rests on the existence of so-called "perfect information" in the

2119 United States' second written submission, para. 119.
2121 United States' second written submission, para. 120.
2122 United States' second written submission, para. 121.
2123 United States' second written submission, para. 122; See also United States' written reply to Panel
question No. 28 at the second substantive meeting
2124 USITC Report at 62 and 63.
2125 Japan's written reply to Panel question No. 28 at the second substantive meeting.
2126 United States' second written submission, para. 123.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

market (i.e., that all actors in the market are instantly aware of all market
signals.)" 2127
7.849 According to the United States, in other wo rds, the Panel concluded that a competent
authority need not be expected to find that there is a direct and immediate causal link between imports
and downward trends in an industry's condition, as the complainants consistently urge.
7.850 Accordingly, the United States contends, the complainants are mistaken when they argue that
a competent authority must provide a "more compelling" causation analysis if there is a time lag
between an increase in imports and declines in certain performance factors of the industry. It is
simply not the case – as the complainants assume – that a temporal lag between import increases and
declines in industry performance factors indicates a lack of "correlation" or coincidence between the
import increase and the performance declines. Natural business cycles or other external factors may
cause imports to have a direct but delayed impact on one or more of an industry's performance
indicia.
2128
7.851 In light of the foregoing, the United States submits that the Panel need not apply a heightened
standard of scrutiny to the USITC's analysis simply because there is a temporal lag between an import
increase and declines in certain of the performance factors for an industry. Instead, the sole inquiry
for the Panel should be whether the USITC's explanation of the causal link between imports and the
declines in the industry's condition is "reasoned", "adequate", and "clear" as established in US Line –
Pipe.2129
7.852 Japan and Brazil also submit that in the case of the steel industry, there are active spot
markets. In other words, they submit that sales are made on a "spot" basis rather than a contract basis.
They argue that this is particularly true for CCFRS products. Thus, if imports themselves are having
an effect on domestic prices, that effect will be seen quickly in changes in domestic industry spot
market prices. For the same reason, volume effects also can be seen quickly. Japan and Brazil argue
that while inventory is an important consideration, the inventory levels in this case do not suggest
extended lingering effects. The inventory levels were approximately one month or less. Thus,
according to the European Communities, Japan, Korea, New Zealand and Brazil, the United States
argument that imports in 1998 could have lingerin g adverse effects at the end of 1999 is extremely
remote and was certainly not proven by the USITC.
2130 Brazil argues that the data relied upon and
arguments made by the United States, whether based on volume or price, do not support the "lingering
effects" theory, and certainly not in a "compelling" way. Brazil submits that this is clear from a brief
review of the volume and pricing information that was before the USITC and from the simplistic
assumptions made by the USITC that are never substantiated.
2131
7.853 The United States submits that while there is a substantial volume of spot sales in the CCFRS
market, the market is characterised by a more substantial volume of sales. The United States submits

2127 Panel Report, Egypt – Steel Rebar, para. 7.129.
2128 United States' second written submission, para. 124.
2129 United States' second written submission, para. 125.
2130 European Communities' written reply to Panel question No. 28 at the second substantive meeting;
Japan's written reply to Panel question No. 86 at the first substantive meeting referring to USITC Report Vol. II
at Table FLAT-49; Japan's written reply to Panel question No. 28 at the second substantive meeting; Korea's
written reply to Panel question No. 28 at the second substantive meeting; New Zealand's written reply to Panel
question No. 28 at the second substantive meeting; Brazil's written reply to Panel question No. 86 at the first
substantive meeting; Brazil's written reply to Panel question No. 28 at the second substantive meeting
2131 Japan's second written submission, para. 12; Brazil's second written submission, para. 69; Brazil's
written reply to Panel question No. 27 at the second substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

that, more specifically, of the 233 purchasers who reported making all or nearly all of their purchases
on a spot or contract basis, 128 (or 54%) reported making all or nearly all of their purchases on a
contract basis. Moreover, of the 73 purchasers who reported making substantial amounts of both
contract and spot purchases, more than twice as many purchasers reported making the larger
percentage of their purchases on a contract basis.
2132 In other words, the carbon flat-rolled market
cannot be described as merely a spot market; indeed, the majority of purchase decisions in the market
are made on a contract basis. Moreover, given the importance of contract sales in the market, it is
incorrect for Brazil to suggest that spot prices are the main determinant of pricing levels in the market.
Quite clearly, contractual pricing had an important role in market pricing as well.2133
7.854 Brazil further submits that the United States seemingly understands and appreciates the
significance of the need to find a causal link between increased imports and serious injury to the
domestic industry before a measure may be imposed. 2134 However, according to Brazil, the United
States never meets its burden of showing how the USITC actually demonstrated a causal link in this
case, nor does the attempt by the United States at rehabilitation of the USITC's "analysis" suffice.
Brazil submits that increased imports did not "coincide" with a decline in the relevant injury factors of
the domestic industry, and the USITC did not provide a "very compelling analysis" of why causation
was still present (i.e., some correlation between increased imports and serious injury).
2135
7.855 In addition, Japan, Switzerland and Brazil argue, that as a matter of law, there is a limit on
any time-frame given the threshold requirement under Article 2.1 and Article XIX of the GATT 1947
that increased imports be recent.
2136 Japan, Korea and Brazil argue that a two-year lag, which they
contend existed in this case, fails this requirement. 2137 Korea, Norway and Brazil submit that there
was no compelling analysis supporting a lag effect and that, rather, the facts support the opposite
conclusion. Similarly, Norway argues that the lag effect that has been put forward by the United
States is not substantiated – product by product – by the "compelling analysis of why causation is still
present" required by the Appellate Body.
2138 Brazil submits further that the United States authorities
have provided what, at most, is only a theoretically possible explanation and that that explanation
ignores other crucial evidence. 2139 Similarly, Korea argues that the United States has not
demonstrated the "vehicle" or means by which the mu ch earlier increase in imports resulted in the
serious injury that occurred much later and the USITC certainly did not document that causal link. 2140
Korea adds that the required "compelling analysis" must be found in the USITC Report itself and
cannot be offered by the United States via ex post facto justifications.
2141
7.856 The United States also argues that the complainants routinely present causation arguments
that are based primarily on comparisons of imports trends with a limited number of selectively chosen

2132 USITC Report, Vol. II, p. FLAT-61.
2133 United States' written reply to Panel question No. 27 at the second substantive meeting.
2134 Brazil's second written submission, para. 62.
2135 Brazil's second written submission, para. 62.
2136 Japan's written reply to Panel question No. 86 at the first substantive meeting; Switzerland's
written reply to Panel question No. 86 at the first substantive meeting; Brazil's written reply to Panel question
No. 86 at the first substantive meeting.
2137 Japan's written reply to Panel question No. 86 at the first substantive meeting; Japan's second
written submission, para. 115; Korea's second written submission, para. 141; Brazil's written reply to Panel
question No. 86 at the first substantive meeting.
2138 Korea's second written submission, para. 141; Norway's second written submission, para. 134;
Brazil's written reply to Panel question No. 81 at the first substantive meeting.
2139 Brazil's written reply to Panel question No. 86 at the first substantive meeting.
2140 Korea's written reply to Panel question No. 86 at the first substantive meeting.
2141 Korea's second written submission, para. 142.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

industry performance factors. The United States submits that these arguments are flawed because the
Agreement on Safeguards requires not a focus on one or two selected criteria but on all of the relevant
criteria bearing on the condition of the industry. The United States submits that, in fact, the failures of
these arguments become even more evident when one recognizes that the complainants routinely
change the indicia used in their causation arguments from product to product. For example, the
United States submits that although the European Communities bases its "causal link" argument for
CCFRS on an analysis of such injury factors as the industry's capacity, production, scrap costs, and
profitability levels, it bases its "causal link" argument for tin mill products almost exclusively on a
comparison of the AUV of imports and domestic merchandise. The United States submits that under
the Agreement on Safeguards, it is the totality of industry trends, and their interaction, that must be
taken into account when a competent authority performs its analysis in a safeguards action.
2142
7.857 In counter-response, Brazil argues that for all of the complaints from the United States about
the complaining party's use of too narrow a time frame or misleading "selected data" to refute the
existence of a causal link, Brazil and the other parties have merely de-constructed the USITC's own
analysis. Brazil and Korea submit that they have, in fact, examined the entire period of investigation
in making their arguments. It was the USITC that focused on selective data and a narrow period.
Brazil argues that, moreover, despite its talk about the need for a broader assessment of the industry
and imports, the defence by the United States of the USITC Report focuses on the same few factors as
the USITC Report itself: import volume, import price, and domestic industry profits.
2143 Similarly,
New Zealand argues that the USITC itself focused on the effect of increased import volumes on
domestic prices to the exclusion of other factors. Accordingly, it was this analysis which New
Zealand took issue with.2144
(a) CCFRS
(i) Coincidence in time
7.858 According to Brazil, the USITC's finding of a "causal link" was inconsistent with the facts
and, therefore, violated the requirements of Article 4.2(b) first sentence. Brazil argues that the trends
in imports and the industry's performance do not provide the correlation demanded by Article 4.2.2145
7.859 Brazil and Japan argue that while the USITC alleges that the increase in imports and the
decline in the domestic CCFRS industry performance occurred at the same time, the facts show that
any injury by the domestic industry occurred only after imports already began to decline. 2146 More
particularly, Brazil and Japan argue that the USITC's crucial assertion that in 1998 a surge in imports
caused injury to the domestic industry is unsupported by its own data. According to Japan, Korea and
Brazil, the evidence shows that when imports were increasing early in the period, the United States
industry was not injured; later in the period, when the United States industry arguably was injured,
imports were decreasing.
2147 Japan and Brazil argue that, therefore, there was a complete absence of
any correlation in time between the increased imports and injury to the domestic industry. According

2142 United States' first written submission, para. 450.
2143 Brazil's second written submission, para. 68; Korea's second written submission, para. 133.
2144 New Zealand's second written submission, para. 3.100.
2145 Brazil's first written submission, para. 174.
2146 Brazil's first written submission, para. 161: Japan's first written submission, para. 231.
2147 Japan's first written submission, para. 232; Korea's first written submission, paras. 105-108;
Brazil's first written submission, para. 162;
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

to the Appellate Body's jurisprudence, this fails the minimum requirement for establishing a causal
link.2148
7.860 The European Communities, Korea and New Zealand argue that the USITC Report does not
demonstrate in any plausible way, a coincidence of trends between increased imports and serious
injury2149 and that this calls into question whether there was a substantial relationship between serious
injury and imports. 2150 The European Communities asserts that in the absence of a coincidence of
trends, the Appellate Body has required "very compelling" evidence to demonstrate the existence of a
causal link. The European Communities and New Zealand argue that the USITC has provided no
such compelling evidence.2151 In Korea's view, a proper analysis of trends would have revealed that
imports declined for more than two and a half years, a decline that accelerated during the most recent
18-month period.2152
7.861 New Zealand argues that contrary to the Appellate Body's decision in Argentina – Footwear
(EC), which recognized that trends in both the injury factors and imports matter as much as absolute
levels, and that it is the relationship between the movements in imports (volume and market share)
and the movements in injury factors that are central to a causation analysis and determination, the
USITC did not make any serious comparison between the alleged serious injury factor of the inability
of domestic production operations to function at a reasonable level of profit and trends in either
volume or market share of imports. According to New Zealand, a proper comparison of these factors
with the domestic operating margin shows no rela tionship between them. Indeed, according to New
Zealand, they prove the opposite of what the USITC assumed.
2153
7.862 New Zealand asserts in this regard that there is no relationship between import volumes and
any injury resulting from declines in domestic ope rating margins. New Zealand submits that a 5%
rise in import volume of CCFRS, from 1996-1997, coincided with a nearly 2% increase in
domestic operating margin in 1997, a 31% rise in imports between 1997 and 1998 coincided with a
4% operating margin in 1998, and an 18% fall in imports between 1998 and 1999, which then stayed
at the 1999 level through 2000, coincided with a decline, not an improvement, in the operating margin
for 1999 and 2000.
2154 According to New Zealand, the interim (first half year) figures for 2000 and
2001 should have indicated to the USITC a trend showing the same lack of coincidence at the end of
the period of investigation – a 40% decrease in imports between interim 2000 and interim 2001
coincided with a decline in operating margin to – 11.5% for the first half of 2001. The same trend
indicated that the final 2001 import volume total would be over 30% lower than the 1996 total, when
the domestic industry enjoyed an operating margin of 4.3%.
2155 According to New Zealand, an
analysis of each individual product within the CC FRS category would produce essentially the same
result. Thus, according to New Zealand, the USITC claim that increases in imports were linked to
declines in domestic operating margins simply cannot be supported.2156

2148 Brazil's first written submission, para. 161: Japan's first written submission, para. 231.
2149 European Communities' first written submission, para. 471; Korea's first written submission,
para. 104; New Zealand's first written submission, para. 4.123; New Zealand's written reply to Panel question
No. 81 at the first substantive meeting.
2150 Korea's first written submission, para. 104.
2151 European Communities' first written submission, para. 471; New Zealand's first written
submission, para. 4.123.
2152 Korea's first written submission, para. 105.
2153 New Zealand' first written submission, para. 4.125.
2154 New Zealand's first written submission, para. 4.126.
2155 New Zealand's first written submission, para. 4.127.
2156 New Zealand's first written submission, para. 4.128.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.863 Similarly, Brazil argues that imports of CC FRS increased from 10.0% of production in 1996
to only 13.2% of production in 1998, before dropping back to 10.5% of production in 2000, and
declining even further in interim 2001. The same trend appears when imports are measured either as
a percentage of the open market or as a percentage of apparent domestic consumption. Moreover, the
USITC itself characterized 1996 operating income of 4.3% as "reasonable operating profits".
Operating income in 1998 was virtually the same at 4.0%. Under the circumstances, it would be
difficult to conclude that 1998 performance somehow constituted unreasonable operating profits, let
alone serious injury. Perhaps appreciating the point, Brazil submits that the USITC sought to
maximize its "sharp decline" theory by focusing on 1997 operating income, which was modestly
better than 1996 or 1998 and constituted a record peak performance for the industry.
2157 Other indicia
of industry performance can also be used to make the point. Moreover, the import and industry
performance trends for the distinct CCFRS products – hot-rolled, plate, cold-rolled, and corrosion
resistant – all share the same basic relationship.2158
7.864 New Zealand adds that the USITC's analysis of movements in import market share of
domestic consumption is limited and misleadingly selective in that it highlights certain periodic
increases rather than the overall decreasing trend in import market share. It also fails to examine any
coincidence between movements in import market share and alleged injury factors.2159
7.865 The United States argues that the USITC established that there was a clear correlation
between import trends and declines in the industry's condition. The United States notes that the
USITC explicitly took into account factors that affected the competitiveness of domestic and imported
merchandise in the US market, the trends in import volumes and market share during the period, the
pricing effects of imports, and correlations between these trends and changes in the various indicia of
the industry's condition.
2160 After conducting this examination, the USITC correctly found that there
was a clear correlation between increases in low-priced imports and the substantial declines in the
industry's condition during the period. In particular, after noting that the volume levels of imports
remained essentially stable in 1996 and 1997
2161, the USITC found that a "dramatic increase in the
volume of imports in 1998 – at the midpoint of th e period examined – coincided with sharp declines
in the domestic industry's performance and condition, which occurred despite growing US demand."
Moreover, the USITC noted that this surge of imports in 1998 entered the market at prices that were
"generally significantly lower-priced" than during the first two years of the period and that imports
were priced significantly below domestic merchandise, thus leading to declines in domestic prices.2162
7.866 The United States argues that, as the USITC correctly noted in its analysis, the record showed
that there was a direct correlation between changes in both the volumes and pricing patterns of
imports during 1998, 1999 and 2000 and declines in the industry's operating margins in those
years.2163 According to the United States, the 1998 surg e in import volume did indeed have a clear
and adverse impact on the overall condition of the industry. In 1998 when import volumes increased
by 31.3% and import sales values dropped by 8.4% the industry's share of the overall market fell by
2.5 percentage points, its share of the commercial market fell by more than 5 percentage points, its
aggregate net sales value dropped by 3.0% (despite an increase in its overall net sales quantity of
0.5%), its average unit sales prices fell by 3.1%, its aggregate gross profits fell by 19.8%, its

2157 USITC Report, Vol. I, p. 62.
2158 Brazil's second written submission, para. 65.
2159 New Zealand's first written submission, para. 4.129.
2160 USITC Report, pp. 60-62.
2161 USITC Report, pp. 59-60.
2162 United States' first written submission, paras. 459-63.
2163 United States' first written submission, paras. 449, 461-464.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

aggregate operating income levels dropped by 36.9%, and its operating income margins fell by 2.1
percentage points from the previous year's level. These declines, argues the United States, occurred in
a market in which demand grew by 3.2%.
2164 The United States argues that, moreover, there was a
distinct correlation between the volume and price trends of imports and the continuing declines in the
industry's condition that occurred in 1999 and 2000. In this regard, even though import volumes
"slackened somewhat" in 1999 and 2000 from their 1998 surge level, import volumes in both years
remained substantially above 1996 and 1997 levels. Indeed, in the year 2000, import volumes were
13.7% higher than in 1996. Moreover, these elevated levels of imports continued to be sold at prices
that were substantially lower than domestic prices, and were, in fact, lower than their 1996 and 1997
levels. As a result of this continued and substantial underselling, imports depressed and suppressed
domestic prices in both 1999 and 2000, and caused continued declines in the industry's net unit sales
values, gross profits, operating income, and operating income margins.
2165 The United States submits
that the USITC record supported these findings. The record showed and the USITC correctly found
that there was a direct coincidence between the surge in low-priced imports and declines in the
industry's condition in 1998.
2166
7.867 In counter-response, the European Communities submits that the argument by the United
States that it is sufficient to show "a direct correlation between changes in both the volume and
pricing patterns of imports during 1998, 1999 and 2000 and declines in the industry's operating
margins in those years" implies that it cannot establ ish increased imports for those years and thus has
to rely on pricing patterns. 2167 The European Communities submits that it is quite clear in the
Agreement on Safeguards that a competent authority is obliged to establish the existence of a genuine
and causal link between increased imports and serious injury. 2168 According to the European
Communities, pricing levels may be one of the mechanisms by which such increased imports transmit
or cause injury. However, those pricing levels must be linked to increased imports which satisfy the
requirements of the Agreement on Safeguards. Pricing levels existing two years after imports have
peaked cannot be considered as being linked to the import peak.
2169
7.868 New Zealand further argues that the United States' argument that the required coincidence can
be established between the import increase from 1997-1998 and injury can be easily disposed of. The
Agreement on Safeguards requires there to be a coincidence between increased imports and serious
injury, not between increased imports and a decline in the industry's condition. There was no
evidence of injury in 1998, only a slight drop in operating margins to a still healthy 4%. 2170 Finally,
New Zealand argues that the argument that injurious effects from that increase in imports (i.e.
between 1997 and 1998) was still occurring in 1999 and some years after that (if accepted as a valid
basis for a finding of causation under the Agreement on Safeguards) would denude the coincidence in
time requirement of any content. This coincidence did not exist, so the USITC was required to
provide a "very compelling analysis" of why causation was still present. It could not and did not, and

2164 United States' first written submission, para. 470; United States' second written submission,
para. 126.
2165 United States' first written submission, para. 271; United States' second written submission,
para. 127.
2166 United States' first written submission, para. 462.
2167 European Communities' second written submission, para. 370.
2168 Article 2.1 refers to imports "in such increased quantities" as to "cause or threaten to cause serious
injury" while Article 4.2(a) refers to "increased impor ts" which have "caused or threatened to cause serious
injury" and Article 4.2(b) refers to "the existence of a causal link between increased imports of the product
concerned and serious injury or threat thereof".
2169 European Communities' second written submission, para. 371.
2170 New Zealand's second written submission, para. 3.98.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

indeed provided no evidence whatsoever either of delayed ongoing price effects or of the alleged
injury this supposedly led to.2171
7.869 The United States illustrates its arguments regarding lag effects in paragraph 7.840 by stating
that a number of CCFRS companies entered bankruptcy in 2000 and 2001 2172 even though imports
first surged into the market in 1998. 2173 Similarly, the United States argues that the CCFRS industry
did not immediately reduce the size of its work fo rce in 1998, when CCFRS imports first surged into
the United States market, even though the surge caused substantial market share losses, reduced
prices, and reduced profits for the industry. 2174 Instead, the industry first substantially reduced the
size of its work-force in 1999, when it became clear that imports would remain at elevated levels in
the market and would continue to cause price declines in the market.
2175 2176
7.870 Brazil notes2177 that the USITC stated that:
"After the initial import surges in 1998, as noted, the volume of imports slackened
somewhat but remained above the levels seen in 1996-1997. One way in which the
impact of the massive import volume continued to reverberate beyond 1998 was
through increased inventories. End-of-period inventories held by importers increased
substantially in 1998, as did inventories held by service centers."
2178
7.871 In light of the foregoing, Korea argues that the USITC's analysis that increased imports in
1998 had lingering effects hinges on the finding, inter alia , that importers maintained increased
inventories.2179 Korea argues that the data cited with respect to inventories does not support the
USITC's conclusion. Inventory levels turned over rapidly. By way of example, Korea submits that
the USITC Report shows inventory levels for all CCFRS inventories held by importers at year-end to
range from 7% to 15% of total shipments between 1996 and 20002180 – between 0.6 and 1.2 months of
inventory over the period. (For many individua l CCFRSproducts, inventory levels never exceeded
one month.) Thus, according to Korea, in less than three months, the volume effects of imports from
the previous or ending quarter would have been depleted. Korea submits that since import volumes
after 1998 declined
2181, those import volumes could not have lingering effects at the end of 1999,
much less in 2000 or 2001 as suggested by the United States.2182
7.872 Similarly, Brazil notes that in 1999, with domestic shipments of CCFRS remaining basically
stable compared to 1998, in virtually every product category the mills increased their shipments to

2171 New Zealand's second written submission, para. 3.99.
2172 USITC Report, Table OVERVIEW-11.
2173 INV-Y-209, Table FLAT-ALT7 (US-33).
2174 INV-Y-209, Table FLAT-ALT7 (US-33).
2175 The industry reduced its work force by 4.2% (a total of approximately 4.5 thousand workers) in
1999. INV-Y-209, Table FLAT-ALT7 (US-33). The industry kept its work force at essentially this level in
2000. Ibid.
2176 United States' second written submission, para. 121.
2177 Brazil's written reply to Panel question No. 28 at the second substantive meeting.
2178 Views of the Commission – USITC Report, Vol. I at 60.
2179 Korea's second written submission, para. 142; see also Japan's second written submission,
para. 116.
2180 USITC Report, Vol. II, Table FLAT-49 at FLAT -43 (Exhibit CC-6).
2181 Ibid., The bulk, in absolute terms, of the CCFRS inventories held by importers are composed of
slab, and slab inventories experienced the greatest growth after 1998 when other flat product inventories
declined or stabilized. The "importers" of slab are domestic producers of other flat-rolled products.
2182 Korea's second written submission, para. 143.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

distributors both absolutely and relative to total shipments, indicating that the distributors were not
carrying excess inventory as a result of the 1998 surge in imports and liquidating that inventory rather
than buying from United States' mills. In addition, the mills themselves were not carrying
aberrational levels of inventories as a result of the effect of the import surge in 1998 on the market.
As a ratio to shipments, mill inventories of hot-rolled and cold-rolled products at the end of 1999 were
below 1997 levels, inventories of slab were almost identical to pre-surge levels both absolutely and
relative to shipments, imports of plate were up half a percentage point relative to shipments (because
of a decline in consumption), and inventories of coated (corrosion resistant) CCFRS products were up
slightly relative to shipments primarily because the industry increased production by over 3.3 million
tons while shipments increased only 3.1 million tons. In short, according to Brazil, there is no
evidence from distributors that the 1998 surge in CCFRS imports created an inventory problem either
at the mills or at those customers that would be mo st affected by high inventory levels and decrease
purchases as a result. In discussing inventories, the USITC also failed to note that the end of period
inventories of the domestic CCFRS producers ac tually declined between 1998 and 1999, going from
10.5 million tons to 9.8 million tons.
2183 2184
7.873 Brazil also notes that the importer inventory data which appears in the USITC Report does
not support a finding that the 1998 surge in CCFRS imports created a build-up of inventory at the
importer level which hung over the market into 1999, 2000 and interim 2001. First, the CCFRS
inventory levels of importers at the end of 1998 had only increased from 27 days to 32 days of
shipments. By the end of 1999, the inventory leve ls of finished CCFRS products held by importers
was only slightly above the level of 1997 and comparable relative to shipments to 1997 levels. The
only apparent lingering inventory problem was a significant increase in inventories of slabs held by
importers.
2185 Brazil submits that the only inventory information in the USITC Report or the Views of
the Commission on Injury relating to a lingering effect of the 1998 import surge does not support the
conclusion that the 1998 surge in imports led to inventory levels that continued to adversely affect the
market into 1999 and beyond. While the United States may attempt in response to this question to
rehabilitate the lack of facts and reasoning behind the USITC's claim, there is nothing in the record
which supports the claim. There is a dearth of information on distributor inventory levels and, as
indicated above, what there is does not support the USITC theory. The same is true for producer
inventories. As for importer inventories, it is difficult to see how a five day increase in importer
inventory levels in the aggregate could continue to have effects into 1999, 2000 and 2001.
Furthermore, given that the inventory levels for finished CCFRS products had returned to 1997 levels
by the end of 1999, the only possible lingering inventory effect could be from continued high levels of
slab inventories. However, the United States has nowhere explained how slab imported and used
exclusively to benefit United States producers of CCFRS products could injure those producers
importing slabs, much less explained how increased inventories of slabs could adversely affect
producers of CCFRS as a whole. Thus, in order to "buy into" the USITC lingering effects theory, the
Panel would have to accept that a meager five day increase in inventories reverberated through the
market for 30 months and caused serious injury, or that inventories of imported slabs used by the very
industry that is claiming to be injured reverberated through the market for 30 months and caused
serious injury.
2186
7.874 The United States argues that the record clearly showed there was, in fact, a substantial
increase in the inventory levels of importers during the period. Importer inventories of CCFRS grew
from 788 thousand tons in 1997 to 1.322 million tons in 1998, for an increase of nearly 67.7% in that

2183 Brazil's first written submission, Common Annex B.
2184 Brazil's written reply to Panel question No. 28 at the second substantive meeting.
2185 USITC Report, Vol. II at Table FLAT-49.
2186 Brazil's written reply to Panel question No. 29 at the second substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

one year. Similarly, in 1999, importer inventories increased by an additional 8.5% (to 1.434 million
tons) from their 1998 levels, and then by an additional 19.2% in 2000 (to 1.709 million tons).
Inventory levels increased between interim 2000 and interim 2001 as well. Moreover, the ratio of
importers' inventories to their shipment levels also increased significantly during this period.
Between 1997 and interim 2001, the ratio of importer inventories of CCFRS to importer shipments
increased from 7.3% to 17.5%, more than doubling during this period.
2187 Indeed, the ratio increased
during each year of this period, growing from 7.3% in 1997 to 8.6% in 1998, 11.0% in 1999, 15.1% in
2000, and 17.5 percent in 2001. In other words, the United States argues, the level of importers'
inventories grew considerably, both on an absolu te and a relative level, between 1998 and 2001,
thereby placing substantial pressure on importers to reduce their pricing levels to move this
merchandise out of inventory.2188
7.875 The United States also notes that the USITC did not rely upon importer inventories as a
critical aspect of its causation analysis. Although the USITC did clearly note that the increased levels
of inventories during the last three years of the period were an indication that imports were having
substantial negative effects in the market during the last half of the period of investigation, the USITC
did not rely on this fact as the sole, or even the most critical aspect, of its causation analysis for
CCFRS products. Second, aside from ignoring completely the service center inventory data cited by
the USITC, Brazil has also performed a series of calculations to support its arguments that result in a
significant manipulation of the inventory data. Fo r example, Brazil has removed slab inventory data
from its calculations – something wholly without basis given that slab was an integral part of the
CCFRS product and industry. When these numbers are included, the number of days on hand of
inventory held by importers more than doubles from 1997 through 2000, from 27 days on hand to 55
days on hand. In other words, Brazil has reduced the number of days on hand for importer inventories
by taking out that part of the inventory data that most directly contributed to the increase in importer
inventories during the period, thus resulting in a calculation that would obviously and clearly reduce
the number of days on hand. Third, Brazil's arguments only reference the importer inventory data
from the USITC's report. The United States argues that Brazil completely ignores the fact that the
USITC also relied upon the substantial increase in inventories of CCFRS at service centers in its
causation discussion. In this regard, the USITC co rrectly recognized that inventories at service
centers showed steady and significant increases throughout the period, going from 2.7 months of
supply on hand in 1996, to 3.0 months in 1997, to 3.2 months in 1998 and 1999, to 3.7 months in
2000, to 3.8 months in interim 2001. In absolute terms, these inventories increased by 50 percent over
the period of investigation, as shown in the following table:
2189
Service center inventories of CCFRS (net tons)
1996 1997 1998 1999 2000
2.6 million 3.0 million 3.3 million 3.4 million 3.9 million

2187 USITC Report, Vol. II, Table FLAT-49 (p. FLAT-43). For ease of reference, the United States is
relying on the percentages set forth for importer inventories for all carbon flat-rolled products during these
periods, which include small volumes of GOES and tin mill products. As can be seen, these percentages would
not change more than minimally if the inventories of tin mill and GOES products were excluded.
2188 United States' written reply to Panel question No. 71 at the second substantive meeting.
2189 United States' written reply to Panel question No. 71 at the second substantive meeting.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.876 Brazil and Japan argue that the USITC's difficulty with the timing of events also permeates its
discussion of bankruptcies. According to Brazil and Japan, the data shows that the problems facing
the domestic steel industry occurred much later in the period when imports were already declining,
not during 1998. In particular, according to Brazil and Japan, a causation analysis demands
assessment of when the relevant companies declared bankruptcy. Japan and Brazil assert that eight of
the ten CCFRS producers declared bankruptcy afte r 1998. Most declared bankruptcy in 2000 and
2001, including the companies that were the larger of those producers that declared bankruptcy. On a
tonnage basis, the firms declaring bankruptcy in 2000 and 2001 constituted nearly 83% of total
tonnage of all the CCFRS mills declaring bankruptcy over the period.
2190
7.877 The United States argues in response that companies who begin experiencing financial
difficulties as a result, for example, of lost market share and lowered prices due to import competition
would not be expected to immediately seek bankruptcy protection in the first year in which those
difficulties occurred. Instead, due to the negative ramifications associated with bankruptcy (e.g.,
inability to obtain credit, imposition of higher credit costs, reluctance of suppliers to provide
materials, and inability to attract other forms of capital), most companies spend several years
struggling to regain their compe titive footing before eventually entering the bankruptcy process.
Indeed, because of the lag between initial declines in financial performance and a company's entry
into bankruptcy, the fact that eight of ten companies entered bankruptcy in 2000 and 2001, rather than
1998, shows that there was, indeed, a likely correlation between the surge in low-priced imports that
occurred in 1998 and thereafter and these bankruptcies.
2191
7.878 In illustrating its argument in paragraph 7.846 that an increase in imports can have both an
immediate and a delayed impact on one of the industry's performance factors contained , the United
States submits that, as the USITC noted in its report, the massive surge in CCFRS imports in
1998 directly caused significant declines in the price of domestic and imported merchandise in that
year, with AUV of imports falling by 8.4% and those of domestic commercial sales falling by
3.2%.
2192 Although there was a clear and direct impact of this surge on prices in 1998, the surge also
had a lagged negative effect on domestic pricing levels in 1999 and 2000, in that elevated levels of
low-priced imports were able to continue depressi ng prices from their already depressed 1998 levels.
In this regard, the 1998 imports surge permitted elevated levels of imports in 1999 and 2000 to drive
prices down to lower levels than would have occurred in the absence of the 1998 surge.2193
(ii) Relevance of volume and price effects of imports
7.879 New Zealand notes that central to the USITC's finding of causation is the claim that increased
volumes of imports entered the market "at prices that undercut and depressed and suppressed
domestic prices". This allegedly caused serious injury. 2194 Brazil further submits that the USITC
used underselling, in part, as a proxy for the pr oposition that imports led pricing downward in the
United States market.2195 According to New Zealand, the USITC concluded that as a result of the fall
in domestic prices from 1998, industry profits turned to losses in 1999, 2000 and the first six months
of 2001.2196 However, New Zealand asserts that the chain of causation is simply not there. Similarly,

2190 Japan's first written submission, para. 237; Brazil's first written submission, para. 168; see also
para. 7.847 , which provides Japan's written reply to Panel question No. 28 at the second substantive meeting.
2191 United States' first written submission, para. 447.
2192 INV-Y-209, Table FLAT-ALT7 (US-33) and USITC Report, p. 61.
2193 United States' second written submission, para. 122.
2194 New Zealand's first written submission, para. 4.132.
2195 Brazil's second written submission, para. 72.
2196 New Zealand's first written submission, para. 4.132.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

the European Communities submits that an examination of the data suggests this assertion is barely
credible.2197
7.880 According to New Zealand, in order to establish that imports drove down domestic prices, it
would be necessary to show that imports led dome stic prices down and that domestic products lost
market share. However, New Zealand submits that neither of these things happened. In fact, what the
data shows is that during the relevant period there was an increase in domestic product market share
as domestic product prices decreased more sharply than import prices. 2198 New Zealand argues that
close attention to the relationship between movements in market share, operating margins, and prices
of a kind not found in the USITC's brief analysis – reveals that from interim 2000 – interim 2001,
CCFRS domestic prices decreased more sharply than import prices in both percentage terms and
absolute terms. New Zealand argues that the same trend is true for the period investigated as a
whole.
2199
7.881 In response, the United States argues that the above argument is premised on a mistaken
reading of the record. During the period of in vestigation, imports of CCFRS undersold domestic
merchandise by substantial margins in a substantial majority of possible price comparisons, even
during the last year and a half of the period of investigation. More specifically, the public versions of
the USITC's quarterly price comparisons for the slab, plate, hot-rolled and one cold-rolled price
comparison products all show imports underselling domestic merchandise by substantial margins on
the large majority of price comparisons through 2000. Moreover, on one of the two cold-rolled price
comparison products, imports routinely undersold the domestic product through the first quarter of
2001. While the domestic product did undersell imports on these products in a majority of instances
in interim 2001, this underselling only occurred after the domestic merchandise had pursued the
imports downward on prices through the three years prior to that time.
2200 The United States
acknowledges that for the remaining cold-rolled price comparison product, the industry undersold
imports during 2000 and in interim 2001, usually by small margins. However, it argues that the
record also shows that imports of this cold-rolled product nonetheless consistently undersold the
domestic industry by substantial margins during 1998 and 1999, when the industry experienced
substantial declines in its profitability levels.
2201
7.882 Moreover, the United States argues that there was a clear correlation between the persistent
underselling by imports and declines in the prices and profitability levels of the domestic industry. 2202
The United States argues that the record established that (1) the elasticity of substitution between
imports and domestic merchandise was moderate to high; (2) imports routinely undersold the
domestic merchandise throughout the period of investigation; (3) import prices fell substantially as
imports surged in 1998 in response to the Asian crisis and the acceleration in the financial
deterioration of the former republics of the Soviet Union, and generally continued to decline
throughout the remainder of the period; (4) even though there was an improvement in import and
domestic prices in 2000, imports continued to undersell domestic merchandise by substantial margins
on most price comparisons during 2000; (5) domestic price declines followed decreases in import
prices during the period; and (6) the moderate to high level of substitutability between imports and

2197 European Communities' first written submission, para. 472.
2198 New Zealand's first written submission, para. 4.133; See also Brazil's first written submission,
paras. 74, 210-211.
2199 New Zealand's first written submission, para. 4.134.
2200 United States' first written submission, para. 475.
2201 United States' first written submission, para. 476.
2202 European Communities' first written submission, paras. 472 & 475; New Zealand's first written
submission, para. 4.133.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

domestic merchandise showed that domestic price declines were due, to a significant degree, to
aggressive import underselling. As a result, the industry's revenues and profitability levels declined
substantially from 1998 to 2000.
2203
7.883 With respect to the argument that domestic prices were falling more quickly than import
prices during the latter half of the period, the United States argues that this ignores the conditions of
competition in the marketplace. According to th e United States, it should not be surprising that
domestic prices were falling faster than import prices, during a period when domestic producers were
attempting to maintain market share by eliminatin g the substantial price undercutting that imports
were engaged in throughout the period of investigation. In such a situation, the United States argues,
domestic producers will be forced to cut their prices at a more rapid rate than imports to avoid a loss
of additional market share. Given that domestic prices were routinely higher than imports throughout
the period, such a decline does not indicate that it was domestic producers who were leading prices
downward.
2204
7.884 With respect to New Zealand's argument that the USITC's price suppression and depression
findings are flawed because, "[t]o establish that imports drove down domestic prices, it would be
necessary to show that imports led down domestic prices and the domestic product lost market share",
the United States argues that that argument ignores basic economic reality. Although it is true that a
combination of import and domestic price declines and a loss of domestic market share might be a
good indication that imports have suppressed or depressed domestic prices, it is not the case that
price-suppression or depression will necessarily be accompanied by market share losses. Instead,
according to the United States, significant price-suppression or depression can occur without market
share losses if the domestic producers choose to compete closely on price with imports rather than
lose market share. In this situation, the domestic producers may maintain a relatively stable market
share in the face of aggressive import pricing competition but experience significant pricing and
profitability declines. Indeed, this is exactly what occurred in the CCFRS market in 1999 and 2000,
after domestic producers realized that they had lost substantial market share in 1998 due to a massive
influx of lower-priced imports. By lowering their prices in response to import price declines, the
industry was able to limit their loss of market share.
2205
7.885 In counter-response, New Zealand argues that what the relevant data reveals is domestic
producers wresting market share from imports at the same time as domestic prices decreased more
sharply than import prices. 2206 The United States' attempt at rebuttal conveniently ignores the facts.
For example, by interim 2001 – the most recent period – domestic producers had increased their
market share by a full 2.9% compared with interim 2000 2207 – a period when domestic prices fell by
13% as contrasted with 4% for imports. Put another way, by interim 2001 imports held a mere 6.9%
of the market, compared with 9.3% in 1997 an d 11.8% in 1998 – when no-one is claiming serious
injury existed. Also, this interim 2000 – interim 2001 2.9% gain in domestic market share coincided
with a sharp (14.9%) decline in domestic demand and a precipitous (40%) fall in imports. According
to New Zealand, all of this points to price pressure coming from domestic producers, not imports.
2208

2203 United States' first written submission, para. 472.
2204 United States' first written submission, para. 477.
2205 United States' first written submission, para. 479.
2206 New Zealand first written submission, paras. 4.132-4.136.
2207 The United States cannot rationally discount the significance of a decrease of this magnitude in
import market share while constantly stressing the significance of the 2.5% increase in market share from 1997
to 1998.
2208 New Zealand's second written submission, para. 3.104.