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 38 The Panel will therefore proceed according to the attached Working Procedures and Timetable.  Finally, the Panel would like to remind parties that this communication, constituting part of the panel process, is confidential." VI. THE PANEL'S WORKING PROCEDURES 6.1 The working procedures adopted by the Panel for the present disputes are set out below: "1. In its proceedings the Panel shall follow the relevant provisions of the DSU. In addition, the following working procedures shall apply.
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

The Panel will therefore proceed according to the attached Working Procedures and
Timetable. Finally, the Panel would like to remind parties that this communication,
constituting part of the panel process, is confidential."
VI. THE PANEL'S WORKING PROCEDURES
6.1 The working procedures adopted by the Panel for the present disputes are set out below:
"1. In its proceedings the Panel shall follow the relevant provisions of the DSU.
In addition, the following working procedures shall apply.
2. The panel shall meet in closed session. The parties to the dispute, and
interested third parties, shall be present at the meetings only when invited by the
Panel to appear before it.
3. The deliberations of the Panel and the documents submitted to it shall be kept
confidential. Nothing in the DSU shall preclude a party to a dispute from disclosing
statements of its own positions to the public. Members shall treat as confidential
information submitted by another Member to the Panel which that Member has
designated as confidential. Where a party to a dispute submits a confidential version
of its written submissions to the Panel, it shall also, upon request of a Member,
provide a non-confidential summary of the information contained in its submissions
that could be disclosed to the public.
4. Before the first substantive meeting of the Panel with the parties, the parties
to the dispute shall transmit to the Panel written submissions in which they present
the facts of the case and their arguments. Third parties may transmit to the Panel
written submissions after the first written submissions of the parties have been
submitted.
5. Within seven days following the date for filing a submission, each of the
parties and third parties is invited to provide the Panel with an executive summary of
their submissions. The executive summaries will be used only for the purpose of
assisting the Panel in drafting a concise factual and arguments section of the Panel
report to the Members. They shall not in any way serve as a substitute for the
submissions of the parties in the Panel's examination of the case. The executive
summary to be provided by each party should not exceed 15 pages in length and shall
summarise the content of the written submissions. In relation to the executive
summaries to be provided by the United States, it is allowed an additional 15 pages to
address issues that have been raised in the submissions of one or more of the other
parties that are specific to those parties and which are not common to the other
parties. The summary to be provided by each third party shall summarize their
written submissions, as applicable, and should not exceed 5 pages in length.
6. At its first substantive meeting with the parties, the Panel shall ask the
Complaining Parties to present their cases. Subsequently, and still at the same
meeting, the United States will be asked to present its point of view. The parties will
then be allowed an opportunity for final statements, with the Complaining Parties
presenting their statements first.
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. All third parties which have notified thei r interest in the dispute to the Dispute
Settlement Body shall be invited in writing to present their views during a session of the
first substantive meeting of the Panel set aside for that purpose. All such third parties
may be present during the entirety of this session.
8. Formal rebuttals shall be made at a second substantive meeting of the Panel.
The United States shall have the right to ta ke the floor first, to be followed by the
Complaining Parties. The parties shall submit, prior to that meeting, written rebuttals
and executive summaries to the Panel.
9. The Panel may at any time put questions to the parties and to the third parties
and ask them for explanations either in the course of a meeting or in writing.
Answers to questions shall be submitted in writing by the date(s) specified by the
Panel. Answers to questions after the first meeting shall be submitted in writing, at a
date to be determined by the Panel.
10. A party shall submit any request for a preliminary ruling not later than its
first submission to the Panel. If the Complaining Parties request such a ruling, the
United States shall submit its response to the request in its first submission. If the
United States requests such a ruling, the Complaining Parties shall submit their
responses to the request prior to the first substantive meeting of the Panel, at a time to
be determined by the Panel in light of the request. Exceptions to this procedure will
be granted upon a showing of good cause.
11. Parties shall submit all factual evidence to the Panel no later than during the
first substantive meeting, except with respect to evidence necessary for purposes of
rebuttal submissions, or answers to questions or provided that good cause is shown.
In all cases, the other party(ies) shall be accorded a period of time for comment, as
appropriate.
12. The parties to the dispute have the righ t to determine the composition of their
own delegations. The parties shall have the responsibility for all members of their
delegations and shall ensure that all members of the delegation act in accordance with
the rules of the DSU and the Working Procedur es of this Panel, particularly in regard
to confidentiality of the proceedings.
13. The parties to the dispute and any third party invited to present its views shall
make available to the Panel and the parties to the dispute a written version of their
oral statements, preferably at the end of the meeting, and in any event not later than
the day following the meeting. Parties and third parties are encouraged to provide the
Panel and other participants in the meeting with a provisional written version of their
oral statements at the time the oral statement is presented.
14. In the interest of full transparency, the presentations, rebuttals and statements
shall be made in the presence of the parties. Moreover, each party's written
submissions, including responses to questions put by the Panel, shall be made
available to the other party or parties.
15. To facilitate the maintenance of the record of the dispute, and to maximize
the clarity of submissions, in particular the references to exhibits submitted by
parties, parties shall sequentially number their exhibits throughout the course of the
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

dispute. For example, exhibits submitted by the United States could be numbered
USA-1, USA-2, etc. If the last exhibit in connection with the first submission was
numbered USA-5, the first exhibit of the next submission thus would be numbered
USA-6.
16. Following issuance of the interim report, the parties shall have one week to
submit written requests to review precise aspects of the interim report – unless the
Panel decides otherwise at the second substantive meeting of the parties and/or to
request a further meeting with the Panel. The right to request such a meeting must be
exercised no later than at that time. Following receipt of any written requests for
review, if no further meeting with the Panel is requested, the parties shall have the
opportunity, within 2 weeks, to submit written comments on the other party's written
requests for review. Such comments shall be strictly limited to responding to the
other party's or parties' written request for review.
17. The following procedures regarding service of documents shall apply:
a. Each party shall serve its submissions directly on the other party. Each party
shall, in addition, serve its first written submission on third parties. Each third party
shall serve its submissions on the parties and other third parties. Parties and third
parties shall confirm, at the time a submission is provided to the Panel, that copies
have been served as required.
b. The parties and the third parties shall provide their written submissions to the
Dispute Settlement Registrar by 5:30 p.m. on the deadlines established by the Panel
and by 5:00 p.m. if the deadline falls on a Friday. If, due to exceptional
circumstances, it is not possible for submissions to be provided to the Registrar by the
times stipulated, parties should agree otherwise with the Secretary to the Panel,
Ms Dariel De Sousa. The parties and the third parties shall provide the Panel with
10 paper copies of their written submissions. All these copies must be filed with the
Dispute Settlement Registrar, Mr. Ferdinand Ferranco (Office 3154).
c. Ten copies of all submissions (oral and written), exhibits and other
documents relating to this dispute must be submitted to the Panel through the WTO
Secretariat when the original documents are filed with the Secretariat.
d. At the time they provide paper copies of their submissions, the parties and
third parties shall also provide the Panel with an electronic copy of the submissions
on a diskette or as an e-mail attachment, in a format compatible with the Secretariat's
software (e-mail to the Dispute Settlement Registrar at DSregistry@wto.org, with a
copy to the Secretary to the Panel, Dariel De Sousa at dariel.desousa@wto.org)."
VII. ARGUMENTS OF THE PARTIES
7.1 The following sections summarize the arguments made by the European Communities, Japan,
Korea, China, Switzerland, Norway, New Zealand, Brazil and the United States. These parties all
presented their arguments in different ways. In order to avoid repetition and for the convenience of the
Panel, the complainants, at the first and second substantive meetings, divided the oral presentation of
the different aspects of this case amongst themselves. Accordingly, some arguments are attributed to
the complainants generally while the detail of individual complainants' arguments is set out in their
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

submissions and answers to questions. Further, the list of complainants to which other arguments are
attributed is not necessarily exhaustive.
A. CONDITION OF THE US STEEL INDUSTRY
1. The complainants' assessment of the US domestic steel industry
(a) Main characteristics of the US steel industry
7.2 Brazil argues that the United States' steel industry is marked by contradictions and contrasts
in performance and prospects. Brazil notes that, in the year 2000, there were 78 steel producers in the
United States with raw steel capacity, as well as a lesser number of steel processors with no raw steel
making capacity of their own. 122 Japan, New Zealand and Brazil note that, in that same year, the
United States industry produced 112 million tons of raw steel, the industry's highest level over the
past 10 years and a 27% increase over 1991.123 Japan and Brazil further note that a 9% dip in capacity
between 1991 and 1994 was completely erased by over 20 million tons of new capacity brought on
line between 1994 and 2000, representing an increase of over 18%.124 Japan and New Zealand submit
that this increase made the United States the third-largest steel-producing nation in the world. 125
Brazil continues that imports of CCFRS products, including slab, hot-rolled, cold-rolled and coated
products, where the United States' industry capacity was most heavily invested, peaked in 1998 and
declined in 1999 and 2000.126
7.3 Brazil argues that, yet, the performance of the United States' steel industry declined, even
with the retreat of imports 127, revealing an industry that is weak, fragmented, and saddled with
substantial inefficient and/or antiquated capacity well in excess of demand. More importantly, a
closer look at industry data shows an industry split between two primary segments and nearing the
end of a fundamental shift in production technology and market power. These two industry segments
are best defined according to their production processes and input, i.e., the integrated segment and the
minimill segment.128 The complainants explain that integrated producers – of which there were 13 in
2000 – smelt iron ore using coke in a blast furnace to produce molten iron, which is subsequently
poured into either an open-hearth furnace or a basic oxygen furnace. The hot metal is processed into
steel when oxygen is blown into the metal bath. Minimill producers – of which there were 65 in 2000
– produce molten steel by melting scrap or scrap substitutes (e.g. direct-reduced iron, hot-briquetted
iron and iron carbide) in an electric arc furnace, thereby missing the initial smelting stage.129
(b) History of the US steel industry
7.4 According to the European Communities, to properly understand the current situation of the
United States integrated steel producers, one must return to the post-World War II period.130

122 Brazil's first written submission, para. 57.
123 Japan's first written submission, para. 54; New Zealand's first written submission, para.2.17;
Brazil's first written submission, para. 57.
124 Japan's first written submission, para. 54; Brazil's first written submission, para. 57.
125 Japan's first written submission, para. 54; New Zealand's first written submission, para. 2.17,
quoting USITC Report, Vol. II, OVERVIEW–25.
126 Brazil's first written submission, para. 57.
127 USITC Report, Vol. II at OVERVIEW 25 (Exhibit CC-6) at FLAT 16-21(Exhibit CC-6).
128 Brazil's first written submission, paras. 58-59.
129 USITC Report Vol. II at OVERVIEW 7-8, 9-10 (Exhibit CC-6).
130 European Communities' first written submission, para. 33.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.5 The European Communities submits that the United States' steel industry was one of the few,
if not the only, substantial steel industry left intact following World War II. In the post-war
construction boom, demand for steel rocketed and the industry expanded capacity. Rather than
convert to Basic Oxygen Furnaces (BOF) technology, the United States steel industry simply
expanded its relatively less efficient Open Hearth Furnaces, which had been in service since the late
19
th century. In the mid-to-late 1950s, the steel industries labour relations deteriorated. During this
period, the steel worker's unions threatened to strike unless major pay increases were agreed to. This
culminated in the 116 day strike in 1959 in which all steel capacity in the United States was closed,
and led to higher then inflation pay increases throughout the 1960's.131
7.6 The European Communities submits that the 1960s also saw the re-emergence of other
countries as major exporters. Japanese and European companies, using the most recent BOF
technology, started exporting to the United States, benefiting from their advanced technology to offer
better prices.132
7.7 According to the European Communities, the response of the integrated United States
producers was immediate and effective: import protection. Using the threat of the imposition of
quantitative restrictions, the United States Government negotiated VRAs with the major exporters to
the United States market. 133 These came into force in 1969, and remained in place until 1974. 134
Korea further submits that the United States historically protected its market through a variety of
mechanisms, including a myriad of anti-dumping and countervailing duty orders against various steel
products from numerous countries.
135 The European Communities submits that a pattern was born.
Rather than innovate and compete (made more difficult by difficult labour relations), the United
States steel industry sought import protection.136
7.8 Korea argues that by 2000, there were 138 anti-dumping and countervailing duty orders or
suspension agreements in place against various steel products from various countries.137 Finished steel
products subject to anti-dumping and countervailing duties orders, safeguard actions, or pending
investigations by the United States in year 2000 accounted for 39% of total imports of finished steel
from all countries.138
(c) Evolution of the US steel industry
7.9 According to the European Communities, in the 1970s and 1980s, integrated mills could take
comfort from the fact that technology constrained minimills to the low-quality product end of the
market.139 The first minimills began producing the least sophisticated kinds of long products (such as
concrete reinforcing bars) in the 1960s. In the 1970s, minimills diversified into more sophisticated
long products (wire rods and structural shapes), co ming to dominate the long products market by the

131 European Communities' first written submission, para. 33.
132 European Communities' first written submission, para. 34.
133 European Communities' first written submission, para. 35.
134 European Communities' first written submission, para. 35.
135 Korea's first written submission, para. 9.
136 European Communities' first written submission, para. 35.
137 USITC Report, Vol. II, Table OVERVIEW-1, p. OVERVIEW-3-6 (Exhibit CC-6).
138 Respondents' Joint Prehearing Framework Brief, Inv. No. TA-201-73 (11 September 2001)
("Respondents' Joint Framework Brief"), Exhibit 3 (Exhibit CC-50).
139 Tornell, "Rational Atrophy: the United States steel industry", p. 14, Exhibit CC-61.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

minimill share of United States' flat product production increasing from just 10% in 1995 to 26% by
2000.156 157
(d) Relative competitiveness of integrated producers and minimills
7.15 According to the European Communities and New Zealand, the USITC Report fails to
emphasize that differences in inputs and production methods have had a significant impact on the
competitiveness of minimills over integrated producers. New Zealand submits that in 1998, minimills
enjoyed an 18.4% cost advantage over integrated firms producing sheet steel. By 2000, this cost
advantage had increased to 21.8%. 158 Consequently, minimills were able to undercut integrated
producers in the market and gained in market share.159
7.16 Japan and Brazil add that although the respondent submissions painstakingly documented and
established the reasons for this fundamental shift and expansion in minimill production, they were
largely ignored by the USITC. Japan and Brazil also point out that in an article covering the
proliferation of thin-slab minimills published as early as 1996, the USITC reported findings by
industry experts that between 3 and 6 million tons of integrated capacity would have to close because
of the escalating costs of running such plants.
160 Japan and Brazil submit that, simply put, minimills
enjoyed and continue to enjoy substantial cost advantages over integrated mills for myriad
reasons.161 162 163
7.17 The European Communities and New Zealand submit that there are a number of differences
in production inputs that enable minimills to produce steel at lower cost. First, the price of scrap
tends to be cheaper than iron ore and coal. In 1998, a lowering of the domestic price of scrap due to a
falling off of exports from the United States meant that minimills' scrap costs fell by 40%.
164 165
7.18 The European Communities and New Zealand also submit that since minimills miss out the
stage where iron ore is smelted in a blast furnace, they are less labour intensive than integrated
production. On average, minimills use 0.44 hours per ton of steel produced whereas integrated

detailed analysis of on thin-slab casting in 1996 covering Nucor's commercial initiation of the technology in
1990, adoption by others, and the competitive effects of thin-slab technology.
156 Donald F. Barnett, "Double Ought-Naught", Presentation at World Steel Dynamics / American
Metal Market Steel Survival Strategies XV, June 19-21, 2000 at Table 3, cited in Joint Prehearing Brief of
Respondents: Product Group G01, Slab, September 11, 2001 at 18, Figure 1 (Exhibit CC-51).
157 Japan's first written submission, para. 58, Brazil's first written submission, para. 63.
158 Crandall, p. 2 (Exhibit CC-61).
159 European Communities' first written submission, para. 39; New Zealand's first written submission,
para. 2.20.
160 Charles Yost, "Thin-Slab Casting / Flat Rolling: New Technology To Benefit United States Steel
Industry", Industry Trade and Technology Review, USITC Pub. 3004 (October 1996) at 31, n. 16
(Exhibit CC-66).
161 Joint Prehearing Brief of Respondents: Product Group, G01, Slab Steel, Sept. 11, 2001 at 31-41
(Exhibit CC-51). Indeed, it was the testimony of executives from Nucor Steel, the largest minimill CCFRS
producer, that it was their duty to shareholders to exploit this advantage. Hearing Transcript (Injury) at 1014
(Exhibit CC-58).
162 Joint Prehearing Brief of Respondents: Product Group G01, Slab, Sept. 11, 2001 at 31-38
(Exhibit CC-51).
163 Japan's first written submission, para. 62; Brazil's first written submission, para. 65.
164 Barringer and Pierce, Executive Summary, p. 6 (Exhibit CC-61).
165 European Communities' first written submission, para. 40; New Zealand's first written submission,
para. 2.21
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 use 2.86 hours for each ton. 166 Nucor's first thin-slab minimill producing flat products had
labour productivity of more than four times that of the most efficient integrated plants.167 168
7.19 In addition, New Zealand submits that missing out the blast furnace stage means that
minimills also require less energy. This means that the profitability of minimills is less affected by
energy price rises.169
7.20 According to the European Communities and New Zealand, minimills tend to be smaller than
the plants of integrated producers allowing them to benefit from economies of scale. The basic
oxygen furnaces used by integrated producers must produce three million tons of steel per year to be
economically viable whereas minimills can be viable at less than one million tons per year. 170 Thus,
in periods of lower demand, minimills are more likely to continue to be profitable. Their smaller size
allows minimills to locate nearer to their markets and to scrap sources lowering transport costs for
both inputs and products.171 By contrast, integrated producers traditionally locate near sources of iron
ore and coal, or a deep-water port.172
7.21 New Zealand further submits that minimills can be built more cheaply and more quickly than
integrated mills. They require less capital than is needed for new integrated facilities, and can be
completed in two years or less.173 In fact, the cost of constructing a hot-rolling mill of US$4-5 billion
per integrated mill can be compared with the cost of US$400-500 million per minimill. 174 It is not
surprising therefore that no new integrated production facilities have been built in the United States
since the late 1970s.175
7.22 According to New Zealand, labour costs have also had an impact on the relative
competitiveness of minimills and integrated producers. In the post-war period, integrated producers
suffered from poor industrial relations, with strikes being threatened yearly. For many years, wages
were negotiated between the United Steelworkers of America and the major integrated steel producers
for the entire industry. This is reflected in the premium of the steelworkers wage relative to the
manufacturing average. Between 1997 and 2001 alone, total compensation rose 9% from US$34.78
to US$37.91 per hour. 176 By comparison, the manufacturing average was US$24.30 per hour. 177 By
contrast, minimills tend to have separate contracts with lower wages. 178 179 Japan and Brazil agree
that labour costs and productivity were superior among mills, with leading United States minimills
needing as little as 0.33 man hours to produce a ton of steel compared to 4.1 man hours or even more

166 Barringer and Pierce, p. 256 (Exhibit CC-61).
167 Tornell, p. 14 (Exhibit CC-61).
168 European Communities' first written submission, para. 41; New Zealand's first written submission,
para. 2.22.
169 New Zealand's first written submission, para. 2.22.
170 Tornell, p. 14 (Exhibit CC-61).
171 Tornell, p. 14 (Exhibit CC-61).
172 European Communities' first written submission, para. 42; New Zealand's first written submission,
para. 2.23.
173 Crandall, p. 11 (Exhibit CC-61).
174 Barringer and Pierce, p. 255 (Exhibit CC-61).
175 New Zealand's first written submission, para. 2.24.
176 Hufbauer and Goodrich, p. 1 (Exhibit CC-61).
177 Hufbauer and Goodrich, p. 1 (Exhibit CC-61).
178 Hall, Christopher "Steel Phoenix: The Fall and Rise of the United States Steel Industry" (New York,
1997), p. 46 (Exhibit CC-61).
179 European Communities' first written submission, para. 43; New Zealand's first written submission,
para. 2.25
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

at some integrated mills. Many United States integrated producers were also found to be operating
small, inefficient blast furnaces incapable of achi eving economies of scale in the current competitive
environment. Maintenance and repair costs for integrated producers dwarf those of minimills.
Finally, minimills enjoyed much lower market entry costs, equating to only US$200 per annual ton of
greenfield production capacity compared to US$1,000 per annual ton for integrated mills according to
the USITC's own findings.180 181
7.23 According to New Zealand, integrated producers also face "legacy costs". In the past,
accounting rules allowed integrated steel companies to provide generous retirement and health
benefits without having to deduct the future costs from current profits. In exchange for these benefits,
unions accepted smaller hourly raises. However, retired steelworkers began to outnumber employees.
Legacy costs in 2001 were estimated to be between US$30 and US$65 per ton of steel produced by
integrated mills and totalling across the industry between US$1.7 and US$3.6 billion.
182 183
7.24 However, Japan and Brazil note that not all integrated mills resigned themselves to these
severe competitive handicaps. At the opening of the USITC's period of investigation, some integrated
mills had already made or were in the process of making tough restructuring decisions in order to
compete more effectively. This led to the adoption of new business models to reduce production costs
and/or vacate markets dominated by minimill producers.
184
7.25 Japan and Brazil further posit that, ultimately, for a number of integrated mills, the only real
long term solution is consolidation leading to a rationalization of capacity. Industry executives
repeatedly cited the need for such consolidation during the remedy phase of the USITC's
investigation. Yet this approach also presents problems for the industry. Brazil reiterates that high
legacy costs, particularly post-employment health care and insurance benefits, discourage potential
merger and acquisition moves. The USITC itself noted the huge liabilities and uncertainty
involved.
185 No rational company would want to merge with or acquire an integrated mill with such
liabilities, if doing so meant assuming these liabilities.186
(e) Impact of competition between minimills and integrated producers
7.26 New Zealand argues that since modern minimill products are now of a quality similar to the
products made by integrated producers, purchasing decisions tend to be increasingly dominated by
price.187 Minimills are far more able to compete on price and remain profitable than are integrated
producers and, as a result, have been able to increase their market share.188
7.27 New Zealand submits that, in fact, minimills have entirely pushed integrated producers out of
the markets for lower-quality steel products such as concrete rebar, wire rod and H-beams. Between

180 See Joint Prehearing Brief of Respondents: Product Group G01, Slab, 11 September 2001, at 31-38
(Exhibit CC-51).
181 Japan's first written submission, para. 63; Brazil's first written submission, para. 66.
182 Hufbauer, Gary Clyde and Goodrich, Ben, "Steel: Big Problems, Better Solutions" (International
Economics Policy Briefs No. 01-9. July 2001, p. 12 ( http://www.iie.com/policy briefs/news01-9.htm) (Exhibit
CC-61).
183 European Communities' first written submission, para.44; New Zealand's first written submission,
para. 2.26.
184 Japan's first written submission, para 64; Brazil's first written submission, para. 67.
185 USITC Report Vol. II at Overview 34-35 (Exhibit CC-6).
186 Japan's first written submission, para. 67; Brazil's first written submission, para. 70.
187 USITC Report, Vol II, Table FLAT-64 at FLAT-56.
188 New Zealand's first written submission, para. 2.27.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

Chart 4: United States Imports of Flat Products205
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
1998 2000 1H2000 1H2001
TONS
Cold Rolled Hot Rolled Coated Plate
7.32 New Zealand notes that, by the close of 2000, the domestic industry price collapse was
exacerbated with substantial integrated capacity finally falling into bankruptcy. Some 11 million tons
of additional CCFRS steel capacity entered Chapter 11. 206 Freed from their debt burdens, these mills
plunged deeper into the pricing battle with mini mills in the pursuit of cash flow. New Zealand
submits that, again, with no decline in domestic capacity in sight, underselling increased and prices
fell.
207
7.33 New Zealand argues that a final respite for the domestic industry was not to be realized until
the major impediment retarding the industry's recovery was removed: inefficient domestic raw steel
capacity. In December 2001, LTV Steel finally ceased all operations after producing for a full year
under Chapter 11. With the closure of LTV's 8 million tons of capacity, the market immediately
responded. In 2002 prices for cold rolled steel, for example, improved from US$310 per ton in
January to US$320 in February and US$370 in March.
208 209 210
(f) Conclusions
7.34 The European Communities, Switzerland and New Zealand conclude that the state of the
United States' steel industry reflects the transition of the industry to modern, more efficient production
techniques. They submit that due to savings on inputs, energy, labour and transport costs, new
efficient minimills are able to undercut integrated producers on price while providing a product of
equal quality. The increase in capacity growth in the United States market is perhaps the most
significant factor that emerges, and far outs trips any increase in imports. The excess capacity

205 Ibid., at FLAT 9-11, 13 (Exhibit CC-6) and ANNEX A.
206 USITC Report, Vol. II at OVERVIEW 40-41.
207 New Zealand's first written submission, para. 2.31.
208 Purchasing Magazine, "Transaction Pricing Service", First Quarter 2002 (Cold Rolled Steel)
(Exhibit CC-65).
209 Jennifer Scott Cimperman, Rivals See Steel Sect or Better Off Minus LTV, The Plain Dealer (Feb.
15, 2002) (Exhibit CC-64).
210 New Zealand's first written submission, para. 2.32.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

exacerbates price depression caused by intra-industry competition and falling demand as a result of
the 2001 recession in the United States.211
7.35 Japan and Brazil also conclude that the United States industry is an industry in transition.
One part of the industry, the low-cost minimills, is rapidly increasing capacity and capturing market
share. In the face of this competition, some integrated mills have successfully adopted models which
allow them to remain competitive, including concentrating resources in higher value-added products
that minimills cannot produce. Other integrated mills, however, have maintained capacity and
attempted to compete with the minimills, often be cause of the high legacy costs associated with
shutting down facilities. This has fuelled intra- industry competition and put downward pressure on
prices.212
2. The United States' assessment of its domestic steel industry
7.36 In response to the complainants' assessment of the United States' steel industry, the United
States submits that, by the fall of 2001, the United States' steel industry was in a severe crisis caused
by record levels of low-priced imports that began in 1998.213
7.37 The United States submits that, from December 1997 through to October 2001, 25 steel
producers in the United States filed for protection under Chapter 11 of the United States bankruptcy
law. These firms accounted for 30% of United States' crude steelmaking capacity. 214 T h e s e
bankruptcies accelerated job losses in the industry and total employment in the sector fell to the
lowest levels in decades.215
7.38 The United States argues that even steel producers that avoided bankruptcy experienced
declining profits and other indicators of financial performance as they lost market share to low-priced
imports. Per unit costs for both integrated and minimill producers increased as overall production
volume and capacity utilization declined. The overall performance of the domestic industry
deteriorated to the extent that it was no longer able to meet existing financial obligations or fund the
investments that were necessary for it to compete with imports.
216
7.39 According to the United States, prior to the Asian crisis, the United States industry had
performed comparatively well and had been undergoing a continuous process of restructuring. In the
decade prior to 1998 the industry had invested billions of dollars in the upgrading of existing facilities
and the construction of new efficient capacity, while permanently closing inefficient facilities. As a
result of these investments, by 2000, more than 97% of steel produced in the United States used the
continuous-cast method of production, as opposed to only 76% in 1991. Labor productivity increased
as total employment in the steel industry declined by 18.5% between 1989 and 1999. 217 Overall, the
investments and restructuring efforts made during these years increased United States firms'
competitiveness by improving quality and productivity and lowering costs.218 219

211 European Communities' first written submission, para. 75; New Zealand's first written submission,
para. 2.36.
212 Japan's first written submission, para. 73; Brazil's first written submission, para. 77.
213 United States' first written submission, para. 16.
214 USITC Report pp. OVERVIEW-11 and OVERVIEW-25.
215 United States' first written submission, para. 17.
216 United States' first written submission, para. 18.
217 USITC Report, p. OVERVIEW-29.
218 USITC Report, p. OVERVIEW-20.
219 United States' first written submission, para. 19.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.40 The United States submits that the magnitude of the crisis can be seen by examining the
record of the investigation of the CCFRS indus try. In 1996 and 1997 the domestic CCFRS industry
earned reasonable operating profits and made substantial capital investments in a growing domestic
market. However, domestic prices began to fall markedly beginning in 1998, and were at much lower
levels in 1999 and 2000 than earlier in the period investigated by the USITC. At the same time,
domestic capacity utilization rates also fell significantly. As a result, industry profits turned to
substantial annual operating losses.220 221
7.41 The United States argues that the injury suffered by the domestic industries was
unquestionably serious. With respect to the CCFRS industry, for example, capacity utilization fell by
10 percentage points in the period of investigation
222; the AUV of commercial shipments fell almost
US$100 per short ton223; operating income dropped from 6.1% in 1997 to an operating loss of 11.5%
by the first half of 2001 224; and capital expenditures fell by 35% from 1996 to 2000. 225 Industry
giants like Bethlehem Steel Corporation declared bankruptcy, and LTV Corporation, one of the
largest steelmakers in the United States, was forced out of business altogether. Similarly, with respect
to the domestic industry producing hot-rolled bar, net commercial sales fell by 1.1 million per short
ton during the period of investigation
226; average unit sales values fell by over US$60 per short ton227;
operating income went from US$213.4 million in 1997 to a loss of US$89.0 million in the first half of
2001228; and three hot-rolled bar production facilities were completely shut down. Similar examples
could be repeated for every industry for which the USITC made an affirmative determination.229
7.42 The United States further contends that perhaps the most extraordinary fact about these
developments is that they occurred at a time of generally very strong demand. The USITC found, for
example, that "[b]y any measure, the period of investigation saw significant growth in United States
demand for certain carbon flat-rolled steel". 230 Similarly, "[t]he record indicates strong demand [for
hot-rolled bar] during the period examined, with apparent United States consumption of hot-rolled bar
increasing during every full year but one of the period".
231 To give yet another example, the USITC
found that United States' apparent consumption of rebar increased 48.1% from 1996 to 2000.232 Thus,
rather than suffering unprecedented injury, domestic steelmakers generally would have been expected
to perform well during the relevant period.233
7.43 The United States asserts that the fact that they did not is clearly attributable to imports. With
regard to CCFRS products, for example, imports increased 37.5% from 1996 to 1998, and remained at
historically high levels in 1999 and 2000 234; the AUV of these imports was consistently US$60 per
short ton to US$110 per short ton below that of the domestic like product 235; and import prices fell to

220 USITC Report, pp. C-2 to C-7.
221 United States' first written submission, para. 20.
222 Steel, Inv. No. TA-201-73, USITC Pub. 3479, p. 51 (December 2001) ("USITC Report").
223 USITC Report, p. 53.
224 USITC Report, p. 53.
225 USITC Report, p. 54.
226 USITC Report, p. 93.
227 USITC Report, p. 93.
228 USITC Report, p. 94.
229 United States' second written submission, para. 11.
230 USITC Report, p. 56.
231 USITC Report, p. 95.
232 USITC Report, p. 112.
233 United States' second written submission, para. 12.
234 USITC Report, p. 50.
235 USITC Report, p. 61.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

extraordinary lows after 1998 – i.e., during the exact period in which the domestic industry suffered
serious injury. In general, the years 1998 – 2000 saw the highest levels of steel imports in history –
imports which, for many products, were sold at prices that were literally unsustainable and that were
demonstrably ruinous to domestic industries.
236
B. LEGAL AND ANALYTICAL FRAMEWORK
1. Standard of interpretation
7.44 The European Communities, Korea, China, Switzerland and Norway recall the Appellate
Body's holding that "when construing the prereq uisites for taking [safeguard] actions, their
extraordinary nature must be taken into account". 237 The Appellate Body clarified that safeguard
measures may only be resorted to "in an extraordinary emergency situation".238 239
7.45 The United States submits that the interpretative approach of a panel in assessing claims
under the Agreement on Safeguards and Article XIX of the GATT 1994 is the same as in a dispute
arising under the other covered agreements. Accordin g to the United States, Article 3.2 of the DSU
requires the Panel to interpret the Agreement on Safeguards and Article XIX "in accordance with
customary rules of interpretation of public inte rnational law". Within this framework, the
"fundamental rule of treaty interpretation" is "that a treaty shall be interpreted in good faith in
accordance with the ordinary meaning of its terms, in their context and in light of the object and
purpose of the treaty".
240 As the Appellate Body has recognized, these standards apply even if a
provision is characterized as an "exception":241
"[M]erely characterizing a treaty provision as an 'exception' does not by itself justify
a 'stricter' or 'narrower' interpretation of that provision than would be warranted by
examination of the ordinary meaning of the actual treaty words, viewed in context
and in the light of the treaty's object and purpose, or, in other words, by applying the
normal rules of treaty interpretation."242
7.46 However, in the United States' view, the complainants propose that a special standard of
interpretation applies to the provisions of the Agreement on Safeguards that "when construing the
prerequisites for taking [safeguard] actions, their extraordinary nature must be taken into account". 243
The United States submits that, in some instances, they characterize this standard as requiring a
"strict" or "narrow" construction of the terms of the Agreement on Safeguards. 244 To support their
approach to construction of the Agreement, the complainants cite the Appellate Body's statement in
US – Line Pipe that:

236 United States' second written submission, para. 13.
237 Appellate Body Report, US – Line Pipe , para. 81. See also Appellate Body Report, Argentina –
Footwear (EC), para. 94.
238 Appellate Body Report, US – Line Pipe, para. 82.
239 European Communities' first written submission, paras. 197-198; Korea's first written submission,
para. 27; China's first written submission, paras. 148-149; Switzerland's first written submission,
paras. 183-184; Norway's first written submission, para. 188.
240 Appellate Body Report, US – Line Pipe, para. 244.
241 United States' first written submission, paras. 44-47.
242 Appellate Body Report, EC – Hormones, para. 104.
243 European Communities' first written submission, para. 86, quoting US – Line Pipe, para. 81.
244 Japan's first written submission, para. 84; China's first written submission, para. 47; Norway's first
written submission, para. 47.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

"[I]t is essential to keep in mind that a safeguard action is a 'fair' trade remedy. The
application of a safeguard measure does not depend upon 'unfair' trade actions, as is
the case with anti-dumping or countervailing measures. Thus, the import restrictions
that are imposed on products of exporting Members when a safeguard measures is
taken must be seen, as we have said, as extraordinary. And, when construing the
prerequisites for taking such actions, their extraordinary nature must be taken into
account."
245
7.47 The United States submits that, as an initial po int, the complainants' reading of this passage
ascribes to the US – Line Pipe report precisely the approach to treaty interpretation that the Appellate
Body condemned in EC – Hormones – basing the rigour of interpretation of a covered agreement on
whether it pertains to an "extraordinary" measure. The Appellate Body's report in US – Line Pipe
nowhere says that it is contradicting the approach correctly articulated in EC – Hormones and should
not be read as departing from that approach. Indeed, using the classifications of the Appellate Body, a
tariff would be an example of a measure that applies to "fair" trade, but there has never been any
indication that a tariff should be viewed as an "extraordinary" measure requiring a different
interpretative approach for those provisions dealing with tariffs. The United States submits that, in
addition, the complainants' interpretation is based on a provision taken out of context. They fail to
mention that after making the statements that complainants have cited, the Appellate Body went on to
recognize that there were counterbalancing considerations in interpreting the Agreement on
Safeguards:
"Nevertheless, part of the raison d'être of Article XIX of the GATT 1994 and the
Agreement on Safeguards is, unquestionably, that of giving a WTO Member the
possibility, as trade is liberalized, of resorting to an effective remedy in an
extraordinary emergency situation that, in the judgement of that Member makes it
necessary to protect a domestic industry temporarily.
There is, therefore, a natural tension between on the one hand, defining the
appropriate and legitimate scope of the right to apply safeguard measures and, on the
other hand, ensuring that safeguard measures are not applied against 'fair trade'
beyond what is necessary to provide extraordinary and temporary relief. . . . The
balance struck by the WTO Members in reconciling this natural tension relating to
safeguard measures is found in the provisions of the Agreement on Safeguards."
246
7.48 Thus, according to the United States, the Appellate Body recognized that the "extraordinary
nature" of the remedy is not the sole, or even the predominant consideration under the Agreement on
Safeguards. The object and purpose of the Agreement is to provide an effective remedy to a domestic
industry facing the situation described in the Agreement. 247 The United States submits that to the
extent that the "extraordinary nature" of the remedy is relevant, the procedural and substantive

245 Appellate Body Report, US – Line Pipe, para. 81.
246 Appellate Body Report, US – Line Pipe, paras. 82-83.
247 The Appellate Body has recognized this as the objective of the Agreement on Safeguards since its
earliest reports. For example, in Argentina – Footwear (EC), para. 94, it found:
The object and purpose of Article XIX is, quite simply, to allow a Member to readjust temporarily the
balance in the level of concessions between that Member and other exporting Members when it is faced
with "unexpected" and, thus, "unforeseen" circumstances which lead to the product "being imported" in
"such increased quantities and under such conditions as to cause or threaten serious injury to domestic
producers of like or directly competitive products.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

standard of the agreements already take all concerns into account. The United States submits that,
thus, the complainants are wrong and the Panel need not take special account of the "extraordinary
nature" of a safeguard remedy, as the text of the Agreement on Safeguards itself addresses that
issue.
248
7.49 The European Communities objects to the United States statement that "the panel need not
take special account of the 'extraordinary nature of the safeguard remedy' 249". This statement directly
contradicts the statement of the Appellate Body th at: "when construing the prerequisites for taking
such [safeguard] action, their extraordinary nature must be taken into account". 250 The fact that the
burden on the United States to justify its safeguard measures may appear to be very high, does not
justify an indulgent approach by the Panel. The United States has chosen to impose general safeguard
measures against a vast range of complex products in circumstances where the problems of the United
States domestic industries do not seem at all due to increased imports. It is hardly surprising that the
task of justifying such measures appears exceedingly difficult.
251
7.50 Korea responds that the United States' position in the instant case, including the
determinations of the USITC, is fundamentally based on an erroneous interpretation of the object and
purpose of the Agreement on Safeguards. Safeguard measures are extraordinary and temporary
measures permitted in emergency situations against fairly traded imports. The Agreement on
Safeguards explicitly provides that it is intended to re-establish multilateral control over safeguards.
Therefore, the purpose of the Agreement on Safeguards is to provide a framework within which
safeguard measures can be applied if extraordinary circumstances are demonstrated. Korea submits
that the Agreement certainly was not intended to give a free reign to protectionist impulses. The
substantive provisions of the Agreement on Safeguards employ wording which highlights the
exceptional nature of the safeguards measures such as "only if" (Article 2.1), "only following"
(Article 3.1), "shall not be made unless" (Artic le 4.2(b)), and "only to the extent necessary"
(Article 5.1). In US – Line Pipe, the Appellate Body quoted extensively from its previous analysis in
Argentina – Footwear (EC) concerning the "extraordinary nature" of safeguard measures and
emphasizing that "when construing the prerequisites for taking such actions, their extraordinary nature
must be taken into account".
252 It is only after re-affirming the extraordinary nature of the safeguard
measures that the Appellate Body acknowledges that if, in fact, such an emergency situation exists,
the Agreement on Safeguards provides the opportunity for Members to resort to effective remedies to
protect domestic industries. Korea submits that, thus, the selective quotation of the Appellate Body's
decision in US – Line Pipe
253 confirms that the United States has not grasped the "natural tension"
which is guiding the Appellate Body's reasoning in the multitude of findings against the United States
in safeguards investigations. The United States quotes the Appellate Body's language, " raison d'être
of Article XIX of the GATT 1994 and the Agreement on Safeguards…", from US – Line Pipe , when
the actual language of the Appellate Body was "part of raison d'être of Article XIX of the GATT
1994 and the Agreement on Safeguards …" Korea submits that the United States seems to have
deliberately omitted the phrase "part of" to wrongfully assert that the whole and only purpose of the
Agreement on Safeguards is to protect the domestic industry. Indeed, by quoting the Appellate Body
out of context, the United States ignores the "natural tension" between "defining the appropriate and
legitimate scope of the right to apply safeguard measures and ... ensuring that safeguard measures are

248 United States' first written submission, paras. 48-52.
249 United States' first written submission, para. 52.
250 Appellate Body Report, US – Lamb.
251 European Communities' second written submission, paras. 35-37.
252 Appellate Body Report, US – Line Pipe , para. 81, quoting Appellate Body Report, Argentina –
Footwear (EC), para. 94.
253 Appellate Body Report, US – Line Pipe, para. 83.
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 applied against 'fair trade' beyond what is necessary to provide extraordinary and temporary
relief".254 The means by which "the legitimate scope" of safeguard measures is defined and the means
by which "measures are not applied against 'fair trade' beyond what is necessary"255 is the same: strict
adherence to the provisions of the Agreement on Safeguards including those provisions which require
a finding of like product, increased imports, serious injury, and causation. It is apparent that an overly
broad definition of any of the terms of the Agreement on Safeguards, would lead directly to upsetting
that calculated balance of the Agreement. Kor ea submits that the United States is attempting to
interpret the provisions of the Agreement on Safeguards in a manner consistent with US law. Korea
argues that this is the reverse of the correct analysis. The USITC's reasoning regarding like product
had nothing to do with its interpretation of the purpose of the Agreement on Safeguards.
256
7.51 The United States responds that the complainants have advanced interpretations of the
Agreement on Safeguards and Article XIX of the GATT 1994 that would effectively render these
agreements unworkable. According to the United States, both are part of the carefully negotiated
balance of concessions that produced the WTO Agreement. The interpretations advanced by the
complainants would upset this balance. They would undermine Members' confidence in the WTO
rules-based system and could, consequently, make Members less willing to undertake new obligations
or grant new concessions. The United States submits that the Panel should decline the complainants'
invitation to write the Agreement on Safeguards ou t of existence, and instead interpret the text as
instructed in the DSU, giving the terms their ordina ry meaning, in their context and in light of the
object and purpose of the Agreement.
257
7.52 The United States submits that from the inception of the GATT in 1947, the availability of
safeguard relief (incorporated in Article XIX) was considered to be a critical component of the
international system of rules-based trade. One of the primary motives for the inclusion of a safeguard
provision was the conviction that the existence of a "safety valve" would facilitate trade
concessions.
258 The negotiating history of the Agreement on Safeguards shows that it was not
intended to change this objective. According to the United States, rather, the negotiators sought to
stop the proliferation of the so-called "grey area measures" and to encourage WTO Members to
instead employ open, transparent and established procedures in considering temporary import relief.
The United States argues that, thus, the Agreement on Safeguards reflects a carefully balanced
bargain – a bargain that the parties relied upon in establishing and becoming Members of the WTO.
The United States submits that the Agreement on Safeguards must be interpreted and applied based on
the ordinary meaning of its terms, in their contex t and in light of the object and purpose of the
Agreement, namely to permit temporary safeguard measures in appropriate circumstances, and to
encourage the use of this mechanism rather than the non-transparent measures that had previously
proliferated.
259
2. Standard of review
7.53 The European Communities, Norway and Switzerland submit260 that under the Agreement on
Safeguards, domestic authorities have a duty to demonstrate, at the time they take safeguard measures,

254 Appellate Body Report, US – Line Pipe, para. 83.
255 Appellate Body Report, US – Line Pipe, para. 83.
256 Korea's second written submission, paras. 1-9.
257 United States' second written submission, paras. 1-2.
258 K. Dam, The GATT: Law and International Economic Organization 99 (1970) (Exhibit US-87).
259 United States' second written submission, paras. 3-9.
260 The legal issues raised in this section are also addressed by the parties in several of the sections
related to specific claims.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

and through a reasoned and adequate explanation (that is, in their report or equivalent), that the legal
conditions for the adoption of such measures are met. They submit that domestic authorities are under
a duty to evaluate all facts before them or that should have been before them in accordance with the
WTO safeguards regime.
261 This broad obligation of the domestic authorities is paralleled by the
review that panels are called upon to exercise on safeguard measures. The Appellate Body held that a
panel reviewing safeguard measures shall verify whether the domestic authorities "had examined all
the relevant facts and had provided a reasoned explanation of how the facts supported their
determination".262 263
7.54 With regard to the proper method of analysis that the Panel should follow, Japan and New
Zealand recall that the Agreement on Safeguards is silent as to the appropriate standard of review.
However, the standard set forth in Article 11 of the DSU always applies. Article 11 provides that "a
panel should make an objective assessment of the matter before it, including an objective assessment
of the facts of the case and the applicability of and conformity with the relevant covered
agreements".264
7.55 The European Communities, Japan, Switzerland, Norway and New Zealand recall that,
although panels are not expected to carry out a de novo review of the evidence or to substitute their
own conclusions for those of the competent author ities, the Appellate Body emphasized that panels
may not simply accept the conclusions of that authority:
"[A] panel can assess whether the competent authorities' explanation for its
determination is reasoned and adequate only if the panel critically examines that
explanation, in depth, and in the light of the facts before the panel. Panels must,
therefore, review whether the competent authorities' explanation fully addresses the
nature, and, especially, the complexities, of the data, and responds to other plausible
interpretations of that data. A panel must find, in particular, that an explanation is not
reasoned, or is not adequate, if some alternative explanation of the facts is plausible,
and if the competent authorities' explanation does not seem adequate in the light of
that alternative explanation."
265 266
7.56 Japan submits that it is confident that the Panel will conduct all the appropriate enquiries and
evaluations to discharge its duty of making an "objective assessment of the facts" within the meaning
of Article 11 of the DSU. According to Japan, upon doing so, the Panel will discover myriad
violations of obligations covered by th e Agreement on Safeguards and GATT 1994. 267 New Zealand
asserts that it is the task of the Panel to examine that data and reasoning and the explanations offered
by the USITC. From that examination, New Zeala nd submits that it will be clear that the United
States has failed to comply with its obligations under GATT 1994 and the Agreement on
Safeguards.268 China states that it fully agrees with the arguments made by other co-complainants

261 Panel Report, Korea – Dairy, paras. 7.30-31, 7.54.
262 Appellate Body Report, Argentina – Footwear (EC), para. 121.
263 European Communities' first written submission, paras. 109-110; Norway's first written submission,
paras. 95-96; Switzerland's first written submission, paras. 97-98.
264 Japan's first written submission, para. 75; New Zealand's 's first written submission, para. 4.3.
265 Appellate Body Report, US – Lamb , para. 106. This was most recently confirmed in the Appellate
Body Report, US – Cotton Yarn, paras. 72-74.
266 European Communities' first written submission, para. 111; Japan's first written submission,
para. 76; Switzerland's first written submission, paras. 99; Norway's first written submission, para. 97; New
Zealand's first written submission, para. 4.4.
267 Japan's first written submission, para. 77.
268 New Zealand's first written submission, para. 4.5.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

with regard to the key aspects that panels are called upon to analyse in reviewing a safeguard
measure.269
7.57 In the light of the foregoing, the European Communities, Norway and Switzerland consider
that this Panel can find that the US determinations before it are inconsistent with the Agreement on
Safeguards (and that the US measures are without legal basis) 270 on the following fundamental
grounds:
(a) they are based on a methodology that does not comply with the standards set forth by
the Agreement on Safeguards.
(b) the facts relied upon to support the conclusions do not, in light of the complexities
inherent in the data, meet the substantive standards of the Agreement on Safeguards;
or, the competent authorities do not provide a reasoned and adequate explanation of
how they met those substantive standards. The latter flaw arises either because the
USITC's record does not provide all the information necessary to show that the
conditions for imposing the safeguards were met, or because the facts included in the
USITC Report simply do not justify the conclusions drawn by the USITC.
7.58 The United States argues that there is no special interpretive approach applicable to claims
arising under the Agreement on Safeguards. Just as in any other dispute, Article 11 of the DSU
instructs the Panel to "make an objective assessment of the matter before it, including an objective
assessment of the facts of the case and the applicabil ity of and conformity with the relevant covered
agreements ... ." The United States submits that the standard of review to be applied in safeguards
cases is well-established. In Korea – Dairy and Argentina – Footwear (EC) , the panels specifically
rejected the notion that panels may review de novo the determination made by the domestic
investigating authority.
271 Rather, as articulated by the panel in Argentina – Footwear (EC):272
"[O]ur review will be limited to an objective assessment, pursuant to Article 11 of the
DSU, of whether the domestic authority has considered all relevant facts, including
an examination of each factor listed in Article 4.2(a), of whether the published report
on the investigation contains adequate explanation of how the facts support the
determination made, and consequently of whether the determination made is
consistent with Argentina's obligations under the Safeguards Agreement."273
7.59 The United States asserts that the complainants' arguments reflect a misunderstanding of the
standard of review. A great deal of their argumentation simply presents another view of the facts,
rather than showing that the findings made by the USITC or the decision by the United States to apply
a safeguard measure was in any way inconsistent with the Agreement on Safeguards or Article XIX.
The United States submits that such argumentation improperly seeks to have the Panel make its own
de novo interpretation of the record.
274

269 China's first written submission, para. 81.
270 Appellate Body Report, US – Lamb, para. 73.
272 United States' first written submission, para. 44
273 Panel Report, Argentina – Footwear (EC), para. 8.124.
274 United States' first written submission, paras. 44-47.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

3. Burden of proof
7.60 New Zealand submits that the basic rule regarding burden of proof is that "the party who
asserts a fact, whether the claimant or the respondent, is responsible for providing proof thereof". 275
Thus, as the Panel pointed out in Korea – Dairy, "it is for the claimant to establish a prima facie case
of violation of the Agreement on Safeguards and then it is for the respondent to refute that case". 276
New Zealand accordingly believes that, in adopting safeguard measures against certain carbon flat-
rolled steel products, the United States failed to discharge its obligations under GATT 1994 and the
Agreement on Safeguards.
277
7.61 The United States contends that it fully complied with its obligations under the WTO
Agreement in applying the steel safeguard measures. The United States submits that under the WTO
Agreement, the complainants bear the burden of proof to demonstrate an inconsistency. Unless they
meet that burden with regard to a particular safeguard measure, there would be no basis for finding
that measure to be inconsistent with the WTO Agreement.278 According to the United States, none of
the complainants have met their burden to estab lish a prima facie case with respect to the claims
contained in its panel request. They each rely in large measure on unfounded assertions advanced
without supporting evidence or legal grounding. In US – Wool Shirts and Blouses, the Appellate
Body noted that "a party claiming a violation of a provision of the WTO Agreement by another
Member must assert and prove its claim". 279 Addressing the same question in the context of a
safeguard measure, the Korea – Dairy Panel found that "[a]s a matter of law the burden of proof rests
with the European Communities, as complainant, and does not shift during the panel process".280 The
Korea – Dairy Panel also noted that it fell to the Eur opean Communities, as the complainant, to
submit a prima facie case of violation of the Agreement on Safeguards. 281 That panel concluded
further that once the European Communities made its prima facie case, it was for Korea (the
responding party in that dispute) to present it s own evidence and arguments showing that it had
complied with the requirements of the Agreement on Safeguards at the time of its determination. 282
The Korea – Dairy Panel then concluded that "[a]t the end of this process, it is for the Panel to weigh
and assess the evidence and arguments submitted by both parties in order to reach conclusions on
whether the European Communities claims are well-founded".283 284
7.62 In response, the complainants state that they do not contest that they have the burden of
making a prima facie case that the United States' safeguard measures are inconsistent with the
standards of the Agreement on Safeguards. However, they argue that the real question is: what are
the requirements of the Agreement on Safeguards and what needs to be shown to establish that they

275 Appellate Body Report, US – Wool Shirts and Blouses, p. 14.
277 New Zealand's first written submission, paras. 4.1-4.2.
278 Panel Report, US – Cotton Yarn, para. 7.23, "In this line, we consider that Pakistan, the complaining
party, bears the burden of proof for establishing a prima facie case that the subject transitional safeguard
measure is in violation of Article 6."
279 US – Wool Shirts and Blouses, para. IV.
281 Panel Report, Korea – Dairy , para. 7.24. As the Appellate Body has noted, a prima facie case is
"one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to
rule in favour of the complaining party presenting the prima facie case." EC – Hormones, para. 104.
284 United States' first written submission, paras. 41-43.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

have not been respected?285 According to the European Commun ities, in discussing what it means to
make a prima facie case, it is necessary to take into account that the arguments of the complainants
can be distinguished into a number of categories that require different kinds of proof or
demonstration: first, there are methodological argu ments – that the United States did not follow an
approach compatible with the Agreement on Safeguards and thus could not have reached sound
conclusions; second, that a number of findings are mistaken; and third, that a number of findings are
not supported by a reasoned and adequate explanation.
286
7.63 In relation to the first category, the European Communities recalls that the complainants are
not attacking the methodologies used by the USITC per se but are simply pointing out that the
methods of analysis and reasoning used by the USITC in making its various findings and
determinations are in many cases not apt to ensure that the conditions of the Agreement on Safeguards
are satisfied. Accordingly, the corresponding findings and determinations are flawed or at least not
supported by a reasoned and adequate explanation. In these cases, it is not necessary to examine what
would be the outcome of an investigation that used a correct methodology. That would require
conducting a " de novo interpretation of the record". In relation to the second category of cases, the
European Communities submits that it is clear that a prima facie factual demonstration is required that
the finding is incorrect. This can be based on evidence in the USITC Report and other documents that
form part of the report or its supplements, or on information that the USITC should have obtained but
did not.
287 The third category of arguments, like the first, simply requires a logical demonstration that
the determinations do not satisfy the requirement of a reasoned and adequate explanation. The
European Communities submits that this may include invoking an alternative explanation that the
USITC has not considered or has wrongly rejected. Another means of demonstrating that the USITC
has not provided a reasoned and adequate explanation is to point out that the report does not contain
the information needed to support the findings that the USITC claimed to make. In this connection,
the European Communities also points out that the United States has sought in a number of instances
to refute the arguments of the complainants by relying on information that was not included in the
Report. The European Communities submits that si nce the obligation was to provide a reasoned and
adequate explanation in the report, the presentation of new evidence by the United States cannot be
accepted but, in fact, simply serves to demonstrate that the evidence was wrongly omitted from the
report.
288
4. Methodologies
7.64 The complainants submit that general methodological flaws permeate many parts of the
USITC Report throughout all product categories. The European Communities, Norway and
Switzerland state that they confine themselves to such methodological flaws while pointing to some
of the most glaring mistakes in the individual determinations relating to some of the products.289
7.65 The United States submits that the complainants have not demonstrated that any methodology
of the USITC is inconsistent with the Agreement on Safeguards. In reaching its determinations
regarding serious injury and threat of serious injury, the USITC applied a number of long-standing
methodologies for organizing and analysing the information before it. The USITC analysis of each of

285 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, para. 1.
286 European Communities' second written submission, para. 29.
287 Panel Report, Korea – Dairy, paras. 7.30, 7.31 and 7.54.
288 European Communities' second written submission, paras. 30-33.
289 European Communities' first written submission, paras. 112-113; Norway's first written submission,
paras. 98-99; Switzerland's first written submission, para. 100.
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 like products under investigation was neutral, unbiased, and not chosen to achieve a particular
result. In the context of these methodologies, the USITC made findings of fact and determinations
that satisfied both the domestic legal requirements and US obligations under the Agreement on
Safeguards and GATT 1994. The Panel in US – Line Pipe recognized that an examination of the
WTO consistency of methodologies used in reaching a serious injury determination will differ from
an examination of factual issues.
290 In that dispute, the panel evaluated both sets of issues in
upholding the USITC's conclusions as to increased imports. With regard to the methodologies, the
panel performed:
"[A]n objective assessment ... of whether the methodology selected is unbiased and
objective, such that its application permits an adequate, reasoned and reasonable
explanation of how the facts in the record before the USITC support the
determination made with respect to increased imports."291
7.66 The United States submits that, significantly, the Panel inquired whether the methodology
permitted results consistent with the terms of the Agreement on Safeguards, not whether it mandated
or invariably produced such results. The panel then upheld the USITC's practice of considering five
full calendar years of data and two comparable interim periods because:
"[F]irst, the Agreement contains no specific rules as to the length of the period of
investigation; second, the period selected by the USITC allows it to focus on the
recent imports; and third, the period selected by the USITC is sufficiently long to
allow conclusions to be drawn regarding the existence of increased imports."
292
7.67 The Panel then continued on "to review the USITC's findings on absolute and relative import
increases in light of that methodology".293 The United States submits that this approach reflects that a
methodology is one step in a competent authority's analytical process. A consistent methodology can
help the competent authorities to organize or analyse the facts of the case, and ensure that the results
are neutral and unbiased. However, use of a methodology is just one way of implementing the
obligations contained in the Agreement on Safeguards or domestic law, and one that is not required by
the Agreement. Thus, a Member is free to use methodologies as part of its analysis or to try to find
methodologies that will ensure compliance in every case.
294
7.68 In response to the United States' assertion that the complainants have not demonstrated that
any methodology of the USITC is inconsistent with the Agreement on Safeguards, China makes the
following clarification: rather than claimi ng that the USITC applied a methodology that is
inconsistent with the Agreement on Safeguards, China's claim is based on the fact that, in order to
make its different findings, the United States authorities applied methodologies that could not lead to
determinations consistent with the Agreement on Safeguards as well as other provisions of the WTO
Agreement. Therefore, the application of these methodologies led to determinations that were
necessarily flawed and could not meet the requirements of the Agreement on Safeguards.295
7.69 The United States finally submits that the complainants challenge several of the
methodologies employed by the USITC on the grounds that they do not "comply with" the standards

290 Panel Report, US – Line Pipe, para. 7.192.
291 Panel Report, US – Line Pipe, para. 7.194.
292 Panel Report, US – Line Pipe, para. 7.201 (emphasis added).
293 Panel Report, US – Line Pipe, para. 7.205 (emphasis in original).
294 United States' first written submission, paras. 53-56.
295 China's second written submission, paras. 4-5.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

set out in the Agreement on Safeguards or Article XIX of GATT 1994. 296 The United States submits
the methodologies, as such, do not bear the burden of complying with WTO obligations. The relevant
inquiry for purposes of the Agreement on Safeguards is whether the competent authorities have
conducted an investigation and made a determination that satisfies a Member's WTO obligations.
Methodologies are a tool that can assist in the investigation but, according to the United States,
complainants have not indicated any reference in the Agreement on Safeguards to methodologies nor
to obligations that apply specifically to methodologies. In this regard, past panels and the Appellate
Body considering United States' safeguard measures have consistently recognized that the findings of
the USITC can comply with the obligations unde r the Agreement even if the methodology, taken
alone, does not incorporate every single one of the relevant criteria.
297 The United States adds that the
Panel should disregard arguments by the complainants that certain practices and methodologies
applied by the USITC are, as a general rule, inconsistent with WTO rules. The United States submits
that the complainants have not challenged these practices – nor could they.298
7.70 The complainants agree with the United States that there is no special standard of review for
safeguard measures in the sense that Article 11 of the DSU applies. 299 However, despite this
statement, the United States is in fact arguing for a special standard of review. It does this in the first
instance by bandying in a misleading manner the emotive expression " de novo ". For the
complainants, it is clear that the Panel should not attempt to conduct a de novo investigation – that is
it should not seek to determine whether the application of safeguard measures for the benefit of the
United States' steel industry was warranted, as if it were itself an investigating authority. Rather, the
Panel should only examine whether the United States correctly applied the Agreement on Safeguards
when it imposed such measures. The basic obligation of the United States under the Agreement on
Safeguards was to conduct a proper investigation and to fully justify and explain what it had done. To
this end Article 3.1 of the Agreement on Safeguards requires that "the competent authorities shall
publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of
fact and law". The Appellate Body has clarified that domestic authorities have a duty to demonstrate,
at the time they take a safeguard measure, through a reasoned and adequate explanation, that the legal
conditions for the adoption of such measure are met. The Appellate Body held that a panel reviewing
a safeguard measure shall verify whether the domestic authorities had examined all the relevant facts
and had provided a reasoned and adequate explanation of how the facts established during the
investigation support the determinations that have been made.
300 This is a substantive obligation and
whether it has been respected or not has to be determined by a panel applying the standard review set
out in Article 11 of the DSU – that is an objective assessment of the matter before it, including an
objective assessment of the facts of the case. The United States, however, misuses the expression
"de novo" when it states that panels may not review " de novo" determinations301 and must not "make
its own de novo interpretation of the record". 302 It is a de novo investigation that the Panel must not
make. The Panel would, however, be failing in its obligation under Article 11 of the DSU if it did not
review (de novo or otherwise) whether the US had complied with the Agreement on Safeguards and in
particular whether the competent authority had carried out all necessary analyses, had set out
"reasoned conclusions reached on all pertinent issues of law and fact" and thus had provided a
reasoned and adequate explanation of how the facts of the investigation support its determinations.

296 European Communities' first written submission, paras. 112 and 464; Norway's first written
submission, paras. 98-99; Switzerland's first written submission, para. 100.
297 United States' first written submission, para. 57.
298 United States' first oral statement, para. 18.
299 See, on this point, the discussion in section VII.B.2 above.
300 Appellate Body Report, Argentina – Footwear (EC), para. 121.
301 United States' first written submission, para. 44.
302 United States' first written submission, para. 45
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

Since the Panel is not to conduct a de novo investigation, it can only examine, on the basis of the
investigation report it has before it, what the United States has investigated and how it has come to its
conclusions (or "determinations" as they are called). That is, it must review whether the competent
authority asked the right questions and carried out an appropriate analysis. That is, say the
complainants, what they mean when they sa y that the Panel should examine whether the
"methodologies" used by the United States were correct.
303
7.71 The complainants further submit that by arguing that the methodology used does not matter,
and that it needs to be proved that the conclusion of a safeguard investigation is incorrect, the United
States is in fact asking the Panel to examine what would be the outcome of the investigation if a
correct methodology and analysis had been applied. This would require the Panel to conduct a
de novo investigation, which is precisely what the complainants agree the Panel should not do. All
the Panel can do is review whether the investigating authority has examined all the facts and has
provided a reasoned and adequate explanation for its determinations (and that this explanation makes
sense). If the report explains that a wrong methodology has been applied – that is a methodology that
does not ensure that the conditions of the Agreement on Safeguards are satisfied – then there can be
no such reasoned and adequate explanation. T hus, a methodology that does not comply with the
Agreement on Safeguards (for example, that only some of the injury factors will be considered) will
be in violation of the Agreement on Safeguards. Equally, the application of an incompatible
methodology will lead to the measure at issue being incompatible with the Agreement on Safeguards.
The complainants submit that if it is determined that a correct methodology has been applied,
however, the Panel still needs to progress to the next step – examining whether the facts actually
support the determinations made.
304
7.72 The complainants, therefore, submit that the Panel is not asked to examine the accuracy of the
data included in the USITC Report. The essential is sues raised in this proceeding are that: (i) the
USITC Report is not complete, i.e., it does not contain all the information necessary to show that the
conditions for imposing the safeguard measures were met; and (ii) the facts included in the USITC
Report do not justify the conclusions drawn by the USITC.305
7.73 The United States recalls that the complainants in this dispute have challenged the application
of the United States' safeguards law with regard to ten specific steel products. No claim has been
made that any aspect of the United States' safeguards law or practice is on its face inconsistent with
WTO obligations. As the application of the United States' safeguards law took the form of ten
separate safeguards measures, each of these measures, therefore, must be considered separately by the
Panel to determine whether each was applied cons istently with WTO rules. Accordingly, the
complainants bear the burden of proof to establish a prima facie case that each of these ten measures
is inconsistent with the United States' WTO obligations. This requires a presentation of how, given
the unique set of facts pertaining to each of the ten products, the United States' safeguard measures
were in fact inconsistent with US WTO obligations. It is not enough for complainants to challenge
the general methodologies used by the USITC in investigating the impact of increased imports on
each of the ten domestic industries identified. Article 2.1 of the Agreement on Safeguards requires a
fact-based determination as to each of the conditions for imposing a safeguards measure.
Methodologies provide a framework for analysing the facts of a given case. They are not a substitute

303 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 3-10.
304 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 13-16.
305 European Communities' first oral statement "Standard and Scope of Review" on behalf of the
complainants, para. 27.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

for that analysis, and cannot by themselves guarantee compliance with WTO obligations. Thus,
regardless of the general methodologies employed, the complainants must demonstrate separately
with respect to each measure how the facts cited by the USITC with respect to that product and
industry do not satisfy the conditions set forth in Article 2.1.
306
7.74 Moreover, the United States submits that, to the extent the Panel finds it useful to explore the
particular methodologies employed by the USITC in each of the ten safeguards investigations at issue,
the proper inquiry is whether a methodology permits results consistent with the terms of the
Agreement on Safeguards. This is clear from the approach taken by the Panel in US – Line Pipe 307
and is directly at odds with the position taken by the European Communities that the critical question
was whether the methodologies employed by the US ITC "ensure that the conditions set out in the
Agreement on Safeguards and the GATT are satisfied".308 Thus, the US – Line Pipe Panel recognized
that, so long as a methodology permits an analysis of the facts consistent with the terms of the
Agreement on Safeguards, the methodology is permissible. Regardless of the conclusion as to the
methodology, a panel must then consider whether the complainant has demonstrated that the factual
findings resulting from the application of the me thodology are inconsistent with the obligations
provided for in the Agreement on Safeguards. Under the European Communities' approach a
methodology that allowed the competent authorities to comply with WTO rules, but could also be
applied in a manner that did not comply, would be a per se breach. Thus, even if an injury
determination complied fully with the Agreement on Safeguards, it would have to be rejected by a
panel simply because it employed methodologies that in a hypothetical case could produce a result
contrary to the Agreement. Thus, while the European Communities challenged the USITC
determinations and resulting safeguard measures, its arguments on methodology would require the
Panel to disregard what the USITC and the United St ates' Government actually did. In addition, the
European Communities standard would hold "methodologies" to a stricter standard of WTO
consistency than the legislation under which those methodologies are applied. Under the DSU,
legislation as such may be found inconsistent with WTO rules only if it mandates a Member to take
action inconsistent with those rules. In contrast, legislation that grants a Member discretion either to
comply or not comply with WTO rules is not as such WTO-inconsistent.
309 This would be an absurd
result, as it would allow Members to challenge the discretionary methodologies arising out of
discretionary legislation on their face when they are not permitted to so challenge the underlying
legislation. Therefore, it is incumbent upon the Panel to separately evaluate each unique set of facts
pertaining to each of the ten safeguard measures in question. For example, even if the Panel were to
determine that a methodology used by the USITC might permit a conclusion that is inconsistent with
a provision of the Agreement on Safeguards, the Panel would still have to determine whether each of
the USITC's determinations for each of the ten products that was based on that methodology was in
fact inconsistent with the Agreement on Safeguards. Anything less would be fundamentally unfair to
Members seeking to avail themselves of their rights under Article XIX.
310
7.75 According to the United States, the complainants only rarely deal with the facts of each of the
ten safeguard measures at issue, and instead complain that various methodologies used by the USITC
are inconsistent with the Agreement on Safeguards. A review of the arguments presented
demonstrates that the complainants have not met their burden of proof to establish that the

306 United States' second written submission, paras. 14-16.
307 Panel Report, US – Line Pipe, para. 7.194.
308 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, para. 12.
309 Appellate Body Report, US – 1916 Act , para. 88; Panel Report, US – Section 129(c)(1) URAA ,
paras. 6.22-6.33.
310 United States' second written submission, paras. 17-23.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

methodologies applied by the USITC did not permit a reasoned analysis, much less that they actually
resulted in factual determinations inconsistent with the Agreement on Safeguards.311
7.76 The complainants respond that the Appellate Body has confirmed recently in its report in
US – Countervailing Measures on Certain EC Products that it is possible for methodologies – or
methods as it prefers to call them – to be held to be per se or "as such" inconsistent with WTO
obligations.312 However, the complainants have not chosen in this case to request any findings
relating to United States' safeguards law or general practice. All parties agree that this dispute relates
to ten safeguard measures imposed by the United States on various bundles of steel products. That
the complainants are not attacking the methodologies of the USITC per se means that they are simply
attacking the methods of analysis actually used in this case – not necessarily the methodologies that
the USITC traditionally uses. The United States would have the Panel hold that it can apply whatever
method of analysis it pleases in a safeguard investigation and the burden is on the complainants to
"demonstrate separately with respect to each measure how the facts cited by the USITC with respect
to that product and industry do not satisfy the conditions set forth in Article 2.1". 313 This would
require the Panel itself to apply the Agreement on Safeguards to the various facts scattered about the
USITC Report in order to establish whether or not safeguard measures would be justified for each of
the products (or rather product bundles) on which the United States has imposed them. In other
words, the United States is asking the panel to conduct a de novo review. This is not the Panel's task,
on the contrary, if methods of analysis have been applied that do not ensure that the conditions set out
in the Agreement on Safeguards and the GATT are satisfied, it must hold the resulting safeguard
measures to be inconsistent with those agreements . The complainants disagree with the proposition
that "the proper enquiry is whether a methodology permits results consistent with the terms of the
safeguard agreement"
314 which means that a panel must accept the use of a methodology that may –
by accident – allow a finding to be made that could be considered to be that which would result from
a correct application of the Agreement on Safeguards. WTO Members may only impose safeguard
measures if all the conditions set out in the Agreement on Safeguards and the GATT 1994 are met and
competent authorities must conduct an adequate investigation to ensure – and demonstrate – that these
conditions are met. An investigation will only be adequate if the competent authority addresses the
right questions and examines the correct conditions. A panel reviewing a safeguard measure must
judge whether the determinations are correct by examining the explanation contained in the report.
Where this reveals that the competent authority has misunderstood the conditions for applying
safeguard measures or has not addressed the right questions , it will be impossible for the panel to be
sure that the conditions are satisfied. That is wh at the complainants mean when they say that the
methodology does not ensure a correct conclusion. In such a case, the complainants submit, a panel
must find a violation. Indeed, the very fact that it is not possible to be sure that the result is consistent
means that there is not a reasoned and adequate explanation. The support the United States seeks in
an analogy with the distinction between discretionary and mandatory measures – a theory according
to which a discretionary measure of a WTO Member cannot be held per se inconsistent with the WTO
Agreement if it also permits action consistent with WTO obligations – is misguided.
315 T h e
complainants are not making per se claims against United States' safeguards law or general practice.
It is indeed not clear that the USITC is required to apply the contested methodologies in all cases.
However, the methodologies have been applied in the present case and therefore the conclusions
drawn are either insufficient to satisfy the conditions of the Agreement on Safeguards or the

311 United States' second written submission, para. 24.
312 Appellate Body Report, US – Countervailing Measures on Certain EC Products, paras. 86 and 162.
313 United States' second written submission, para. 16.
314 United States' second written submission, para. 17.
315 United States' second written submission, para. 21.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

application of these methodologies means that there is no reasoned and adequate explanation as to
why the conditions of the Agreement on Safeguards are fulfilled.316
5. Duty to explain – substantive versus procedural obligations
7.77 The United States submits that Article 3.1, third sentence, and Article 4.2(c) of the Agreement
on Safeguards require a report reflecting the investigation by the competent authorities, and do not
impose an "open-ended and unlimited duty" to explain. Article 3.1, third sentence, and Article 4.2(c)
describe the obligation of the competent authorities to publish a report on the investigation. Together,
they require that the competent authorities provide "their findings and reasoned conclusions reached
on all pertinent issues of fact and law", along with "a detailed analysis of the case under investigation
as well as a demonstration of the relevance of the factors examined". These requirements focus on the
competent authorities and their investigation. Th e competent authorities must publish their findings
and reasoned conclusions – not those that the Panel or one of the complainants might have made. The
United States submits that the competent authorities must demonstrate the relevance of the factors
examined – not those that the Panel or the complain ants would have examined and that this analysis
must appear in the report. If the report, as in the case of the USITC Report, contains narrative views
and separate data tables, both must be considered in evaluating whether the report has satisfied the
obligations.
317
7.78 The United States notes that several of the complainants argue that the omission of a fact, a
citation, or an argument renders the USITC Report inconsistent with Article 3.1 or Article 4.2(c). 318
However, Articles 3.1 and 4.2(c) do not impose a burden of investigative or explanatory perfection
that no competent authority could meet. The United States argues that, for example, if an error or
omission does not cast doubt on a particular conclusion, that conclusion is still "reasoned" and, thus,
consistent with Article 3.1. Similarly, if the competent authorities are silent on a particular issue of
fact or law that is not pertinent, they have still complied with Article 3.1. The United States notes in
this regard that the Appellate Body has found that Article 3.1 requires a "reasoned and adequate
explanation".319 The Appellate Body reached a similar conclusion in US – Lamb, in which it recalled
its description of the proper causation analysis in US – Wheat Gluten and stated:
"[T]hese three steps simply describe a logical process for complying with the
obligations relating to causation set forth in Article 4.2(b). These steps are not legal
'tests' mandated by the text of the Agreement on Safeguards, nor is it imperative that
each step be the subject of a separate finding or a reasoned conclusion by the
competent authorities."
320
7.79 The United States points out that, in their submissions on specific legal claims, several of the
complainants argue that the USITC did not address alternative explanations of the facts.321 They point
to the Appellate Body's statement that:
"[A] panel must find, in particular, that an explanation is not reasoned, or is not
adequate, if some alternative explanation of the facts is plausible, and if the

316 European Communities' second oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 4-14.
317 United States' first written submission, paras. 58-62.
318 European Communities' first written submission, para. 256.
319 Appellate Body Report, US – Line Pipe, para. 216 (emphasis added).
320 Appellate Body Report, US – Lamb, para. 178.
321 European Communities' first written submission, para. 256.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

competent authorities' explanation does not seem adequate in the light of that
alternative explanation.322
However, according to the United States, they have disregarded that this consideration applies only if
there is an alternative explanation that is "plaus ible" and the competent authorities' explanation is
inadequate in light of that alternative view. As the party asserting the affirmative of a claim,
complainants bear the burden of proof to demonstrate that their particular alternative explanations are
both "plausible" and demonstrate that the USITC explanation is inadequate".323 324
7.80 The complainants disagree with the United States' contention that it cannot be expected to
have an "open-ended and unlimited" obligation to explain and cannot be expected to examine all
"plausible explanations". The complainants submit that the United States chose to open a safeguard
investigation into an enormous range of complex industrial products. The difficulty of the enterprise
on which it embarked cannot excuse a failure to comply with the Agreement on Safeguards. They
argue that in order to show that the United States has failed to consider all alternative plausible
explanations, the complainants have the burden of proving that these alternative plausible
explanations exist.
325 The complainants submit that they have done this. They argue that the fact that
the USITC may not have thought of them, and did not consider them, does not save the United States'
safeguard measures from being found inconsistent with its WTO obligations.326
7.81 The complainants also assert that the United States was under an obligation to publish a report
setting out its determinations and its reasoned and adequate explanation. Therefore, it cannot now
attempt to rely on information outside the USITC Re port to justify its measure. They argue that,
nonetheless, the United States seeks to do so on numerous occasions. The complainants submit that if
it needs to rely on information from outside of the USITC Report, then surely that proves that the
USITC Report did not contain a reasoned and adequate explanation. They argue that the fact that
some of this information may have been confidential does not excuse a failure to provide an adequate
and reasoned explanation. The complainants note that the Appellate Body has held that a competent
authority does not meet the substantive standards of Article 2.1 and 4.2(a) if it does not provide an
adequate and reasoned explanation of its findings. Article 3.1 obliges a competent authority to
publish a report. The reasoned and adequate explanation must, therefore, be public. The
complainants argue that it was possible to provide this explanation by indexing data or by using some
other non-confidential format and that the United Stat es is wrong to claim that it did not need to do
so.
327 328
7.82 The complainants submit further that the Appellate Body has made clear that competent
authorities are in fact under a duty to evaluate all facts before them or that should have been before
them in accordance with the Agreement on Safeguards. 329 Indeed, the Appellate Body has found that
because competent authorities "are themselves ob liged, in some circumstances, to go beyond the
arguments of the interested parties in reaching their own determinations, so too, we believe, panels are
not limited to the arguments submitted by the interested parties to the competent authorities in

322 Appellate Body Report, US – Lamb, para. 106.
323 Appellate Body Report, US – Wool Shirts and Blouses, p. 17.
324 United States' first written submission, paras. 58-62.
325 United States' first written submission, para. 62.
326 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 17-18.
327 United States' first written submission, para. 1325.
328 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 20-22.
329 Panel Report, Korea – Dairy, paras. 7.30, 7.31 and 7.54.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

reviewing those determinations".330 The complainants submit that the only limit is evidence that was
not in existence at the time the domestic authorities made their decision.331 332
7.83 According to the United States, the complainants confuse substantive and procedural
obligations imposed by the Agreement on Safeguards by improperly concluding that a failure to
explain a determination adequately is sufficient to establish a prima facie case of inconsistency with a
substantive obligation. For example, in response to a question posed by the United States, several
complainants assert that the failure to explain a like product determination adequately would establish
a prima facie case of inconsistency with Article 2.1. 333 This argument fundamentally misstates the
burden imposed on complainants under the DSU. Article 2.1 is a substantive provision. It establishes
the substantive conditions that must be met prior to the imposition of a safeguard measure: imports in
such increased quantities and under such conditions as to cause or threaten to cause serious injury to
the domestic industry that produces like or directly competitive products. Article 2.1 does not impose
an obligation to explain why one product is deemed to be like another. The obligation to explain the
competent authorities' determinations, including the obligation to explain the like product
determination, is set forth separately in Article 3.1. While a prima facie case that the competent
authorities have failed to explain some aspect of a safeguards determination adequately may support a
claimed inconsistency with Article 3.1, it would no t support a separate claimed inconsistency with
Article 2.1. A procedural violation does not auto matically establish a substantive violation. Each
claim must be separately proven on its own merits. Thus, to the extent that the complainants rely on a
prima facie case of a failure to explain a determination as the basis for their allegation of a substantive
violation under Article 2.1, the complainants cannot be considered to have met their burden of proof
with respect to the alleged substantive violation.
334
7.84 According to the complainants, the Appellate Body has made clear that a competent authority
must give reasoned and adequate explanations for all its findings and determinations. For the
complainants it is obvious that these findings must make sense – and not be counterintuitive.
335 The
United States is wrong to argue that the failure to provide a reasoned and adequate explanation cannot
be a basis for even a prima facie case of violation of Article 2.1.336 The Appellate Body has explained
in US – Lamb that:
"[A] panel's application of the appropriate standard of review of the competent
authorities' determination has two aspects. First, a panel must review whether the
competent authorities have, as a formal matter, evaluated all relevant factors and,
second, a panel must review whether those authorities have, as a substantive matter,
provided a reasoned and adequate explanation of how the facts support their
determinations."337
7.85 Although the Appellate Body wa s referring to Article 4.2 when it made that remark, the
complainants submit that the same principle applies to the conditions in Article 2 of the Agreement on

330 Appellate Body Report, US – Lamb, para. 114.
331 Appellate Body Report, US – Cotton Yarn, para. 77.
332 European Communities' first oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 20-22.
333 European Communities', Korea's and Norway's written reply to United States' question No. 1 at the
first substantive meeting.
334 United States' second written submission, paras. 33-35.
335 European Communities' second oral statement "Scope and Standard of Review" on behalf of the
complainants, para. 2.
336 United States' second written submission, paras. 33 to 35.
337 Appellate Body Report, US – Lamb, para. 141.
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, which sets out the basic conditions for the application of safeguard measures. The
requirements of Article 2.1, such as the identification of an imported product and increased imports,
are preconditions for the application of the requirements of Article 4.2 and so the former must,
therefore, also contain the substantive requirement of a reasoned and adequate explanation. This
conclusion is supported by the fact that the Appellate Body has held in US – Lamb that there is also an
obligation to demonstrate in the report of the competent authorities the existence of unforeseen
developments.
338 Just as a failure to establish unforeseen developments in the report would "sever the
'logical connection'" between this circumstance and the other conditions, so also will a failure
properly to identify the imported products in the report sever the "logical connection" with the
remaining requirements of the Agreement on Safeguards.
339 This result is also dictated by the object
and purpose of the Agreement on Safeguards, which is essentially to "clarify and reinforce the
disciplines of GATT 1994, and specifically those of its Article XIX "Emergency Action on Imports of
Particular Products", to re-establish multilateral control over safeguards". Multilateral control over
safeguard measures cannot be ensured on the basis of the "trust the competent authority" approach of
the United States. A panel cannot conduct a de novo investigation; all it can do is to assess whether
the measure is justified – that is, whether it is fully and adequately reasoned. If there is no obligation
to provide a reasoned and adequate explanation for each finding, there is no basis on which a panel
can make such a finding. Thus the obligation to provide a reasoned and adequate explanation is a
fundamental principle underlying the whole of the Agreement on Safeguards. If it is not provided in
the report of the competent authority, it must be provided in another way.
 340
7.86 The European Communities adds that there is both a procedural requirement for the
competent authorities to publish a report and a substantive obligation to provide a reasoned and
adequate explanation in the report demonstrating that the conditions for the imposition of a safeguard
measure are satisfied. It is not sufficient in meeting the substantive obligation to demonstrate that
these conditions are met before a dispute settlement panel.
341 The reasons are that, first, Article 2.1 of
the Agreement on Safeguards provides that "[a] Member may apply a safeguard measure to a product
only if that Member has determined, pursuant to the provisions set out below …" The "provisions set
out below" include of course Article 3.1 and this makes respect of this provision a substantive
obligation. Second, it is inherent in the notion of "determination" that there be full consideration of
all the facts and arguments and a reasoned and adequate explanation of how all the requirements for
imposing the measure have been met.342
7.87 Japan considers that if a reasoned and adequate explanation is missing, it would lead to both a
violation of Article 3.1 (procedural) and Article 2.1 (substantive). Providing such an explanation is
part of the Member's obligation in order to acquire the right to apply a safeguard measure. Article 2.1
of the Agreement on Safeguards provides that "[a] Member may apply a safeguards measure only if
that Member has determined, pursuant to the provisions set out below ," (emphasis added), and the
"provisions set out below" includes Article 3.1. A plain textual reading of the Agreement would
therefore not support the United States' contention. The Appellate Body supports this view. In
paragraph 236 of its report in US – Line Pipe , the Appellate Body stated: "[c]ompliance with
Article 3.1, 4.2(b), and 4.2(c) of the Agreement on Safeguards should have the incidental effect of
providing sufficient justification for a measure, and as we will explain, should also provide a
benchmark against which the permissible extent of the measures should be determined." The

338 Ibid., para. 75.
339 Ibid., para. 72.
340 European Communities' second oral statement "Scope and Standard of Review" on behalf of the
complainants, paras. 20-26.
341 Appellate Body Report, US – Lamb, para. 141.
342 European Communities' written reply to Panel question No. 1 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

Appellate Body has also suggested in the context of the parallelism issue that part of complying with
substantive provisions of the Agreement is the need to provide "a reasoned and adequate explanation
that establishes explicitly" that imports have "satisfied the conditions for the application of a
safeguard measure, as set out in Article 2.1 and elaborated in Article 4.2 of the Agreement on
Safeguards."343 344
7.88 Korea disagrees with the United States' artificial distinction that a failure to adequately
explain a determination has no relationship to a substantive violation. As the Appellate Body stated in
US – Lamb , the fulfilment of the three conditions for safeguard relief set out in Article 2.1 of the
Agreement on Safeguards (and Article XIX.1.a of the GATT 1994) must be published in the report of
the competent authorities as required by Article 3.1. 345 Failure to do so would result in a violation of
Article 3.1. In that same decision, the Appellate B ody treated the failure of the USITC to adequately
consider and explain how the facts supported its determination on pricing trends in its threat of injury
analysis as a substantive violation of Article 4.2(a). 346 Korea also disagrees with the United States'
suggestion that complainants "confuse" substantial and procedural obligations by basing their case
solely on the failure to explain the decision.
347 The failure of the United States to adequately explain
its reasoning follows from and is independent of the other substantive errors committed by the United
States (e.g., the lumping together of disparate flat-rolled and pipe products into single like products;
the failure to properly analyse the increased imports requirement; the failure to separate out other
causes of injury and attributing injury caused by those other factors to imports; and the failure to limit
the measure to the extent necessary).
348
7.89 Norway argues that the failure to explain a determination adequately is normally a clear sign
that the substantive obligation in the other relevant Articles has been violated. As such, the failure to
explain adequately under Article 3.1 confirms the establishment of a prima facie case of violation of
the other substantive obligation. With the associated failure to explain the determination adequately,
the United States must be considered to have failed to rebut the prima facie case established by the
complainants.
349 The United States would seem to be arguing that it can uphold its measures, even
though it violated Article 3.1, if it can convince the Panel that the requirements of Articles 2.1, 4
and 5 are nevertheless fulfilled. This is not the case. The publication of a report in accordance with
Article 3.1 is a sine qua non for the imposition of safeguards. Giving such explanations is part of a
Member's obligations that must be satisfied in order to acquire the right to apply a safeguard.
7.90 New Zealand also disagrees with the assertion made by the United States. Article 2.1 of the
Agreement on Safeguards contains the substantive obligation that a safeguard measure can only be
applied where a Member has "determined, pursuant to the provisions set out below" in the Agreement,
that the conditions justifying a safeguard measure have been met. The Appellate Body in US – Lamb
has said that in examining a claim under Article 4.2, for example, a panel must review whether the
competent authority has, "as a substantive matter, provided a reasoned and adequate explanation of
how the facts support their determinations".350

343 Appellate Body Report, US – Line Pipe, para 188.
344 Japan's written reply to Panel question No. 1 at the second substantive meeting.
345 Appellate Body Report, US – Lamb, paras. 72 and 76.
346 Appellate Body Report, US – Lamb, para. 141; see also para. 103 and paras. 60-61.
347 United States' second written submission, para. 33 and footnote. 41.
348 Korea's written reply to Panel question No. 1 at the second substantive meeting.
349 Norway's written reply to Panel question No. 1 at the second substantive meeting.
350 New Zealand's written reply to Panel question No. 1 at the second substantive meeting, citing
Appellate Body Report, US – Lamb, para. 141 (emphasis in the original). See also para. 103.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.91 According to Brazil, the only reason for the re quirement in Article 3.1 that the competent
authorities set forth their "findings and reasoned conclusions" is to enable Members and, in the case of
dispute settlement, panels and the Appellate Body to evaluate whether the Member imposing
safeguard measures has met its substantive obligations. As stated by the Appellate Body in Argentina
– Footwear (EC), the purpose of a panel is to determine whether "authorities … considered all of the
relevant facts and … adequately explained how the facts supported the determinations that were
made".
351 The authorities, in effect, must provide justification for the measure in the form of "a
reasoned and adequate explanation". The absence of a reasoned and adequate explanation in the form
of findings and reasoned conclusions constitutes a violation of Article 3.1. However, the imposition
of safeguard measures without adequately explaining how the facts supported the determinations
consistent with the requirements of the Agreement on Safeguards, is a substantive violation because
the competent authorities have imposed safeguard measures without adequately justifying the action.
The substantive violation can be based on the total absence of a justification, an inadequate
justification, or a justification not supported by objective evidence.
352
7.92 The United States responds that the text of Article 2.1 of the Agreement on Safeguards in no
way suggests the complainants' interpretation. Moreover, the Appellate Body standard on which they
rely was grounded in specific language in Article 4.2(a) that does not appear in Article 2.1.
Therefore, the complainants are wrong to assert that the absence of the "findings and reasoned
conclusions" required under Article 3.1 would also establish a prima facie inconsistency with the
substantive obligation that the product in question is being imported in such increased quantities and
under such conditions as to cause serious injury. Article 2 is entitled "Conditions." Its first paragraph
requires that the measure be taken "pursuant to the provisions set out below." It then lays out the
substantive requirements for application of a safeguard measure, while its second paragraph requires
application of such measures without regard to the source of the imports. None of these substantive
provisions requires a Member to provide an explanation of how the facts of the case satisfy these
obligations. The reference to "provisions set out below" merely reiterates the obligation to comply
with those provisions. It does not suggest that fa ilure to comply with them somehow constitutes a
breach of the other elements of Article 2.1. In the European Communities' view, the Article 4.2
"substantive" obligation to explain, which it seeks to import into Article 2.1, arises from the Appellate
Body's statement in US – Lamb quoted by the European Communities.
353 However, the European
Communities omitted from its quotation that the Appellate Body's statement starts: "[w]e have
already said that, in examining a claim under Article 4.2 of the Agreement on Safeguards, a panel's
application of the appropriate standard of review …". This emphasizes that the Appellate Body's
reasoning applies to a panel's analysis of compliance with Article 4.2. Nothing in the passage
suggests that it applies to other provisions of the Agreement. Second, the text of Article 4.2
demonstrates that the obligation to explain arises under subparagraph (c), which requires the
competent authorities to publish "a detailed analysis of the case under investigation as well as a
demonstration of the relevance of the factors examined." The term "factors" clearly refers back to the
"relevant factors of an objective and quantifiable nature having a bearing on the situation of that
industry" under Article 4.2(a). Thus, the Appe llate Body's conclusion as to the explanatory
requirements "under Article 4.2" as a whole reflects the explicit requirements of subparagraph (c). It
does not suggest that the substantive obligations under paragraph (a) somehow give rise to an
autonomous requirement to explain. Indeed, to interpret Article 2.1 or 4.2(a) by itself to impose such
a requirement would render Articles 3.1 and 4.2(c) redundant, in direct contravention of the principle
of effectiveness in treaty interpretation.
354 The terms of the Agreement on Safeguards themselves

351 Appellate Body Report, Argentina – Footwear (EC), para. 121.
352 Brazil's written reply to Panel question No. 1 at the second substantive meeting.
353 See paragraph 7.84 above.
354 Appellate Body Report, Argentina – Footwear (EC), para. 88, footnote 76.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

establish how Members achieve the goals in the preamble. In the last sentence of Article 3.1 and in
Article 4.2(c), these terms require the competent authorities to provide a report setting out their
findings and reasoned conclusions on all pertinent issues of fact and law, along with a detailed
analysis of the case. These provisions delineate a Member's obligations to explain its determination
regarding serious injury – there is no need to impute such an obligation into other provisions of the
Agreement.
355
7.93 The United States stresses that it has never disputed that the competent authorities must
provide a reasoned and adequate explanation of their findings. They must, and if they fail to do so, a
Member will have failed to comply with Article 3.1 or Article 4.2(c). However, such a failure to
explain does not automatically entail a conclusion that the resulting measure is itself inconsistent with
other provisions of the Agreement on Safeguards, including the substantive obligations under
Article 2.1. Indeed, a more robust explanation could well demonstrate the consistency of the measure
with WTO rules.
356 The Appellate Body Report in US – Countervailing Measures Concerning
Certain EC Products demonstrates the fallacy of the European Communities' view that a
methodology is inconsistent with the covered agreements if it is "not apt to ensure that the conditions
of the Agreement on Safeguards are satisfied." 357 The Appellate Body examined the "same person"
methodology to determine whether it " does not permit the investigating authority to satisfy all the
prerequisites stated in the SCM Agreement."358 Thus, the question was not whether the methodology
as such guaranteed consistency with WTO rules, but whether the framework of that methodology
allowed an outcome consistent with the Agreement. In this dispute, the United States has shown that
the methodologies employed by the USITC are not, as such, within the terms of reference of the
Panel. Moreover, should the Panel decide to evaluate methodologies "as such", the United States has
shown that each of the "contested methodologies" identified by complainants – the USITC's analyses
of like product, increased imports, and causation 359 – as a general matter facilitated, and at the very
least allowed , findings consistent with Article XIX and the Agreement on Safeguards. The
determinations and the supporting views of the Commissioners demonstrate that they did so with
regard to each of the ten imported steel products.360
6. Judicial economy
7.94 Korea submits that the Panel should reach all issues on which review is sought to assure a full
resolution of the dispute. As Article 3.3 of the DSU stipulates, the prompt settlement of disputes is
essential to the effective functioning of the WTO and the maintenance of a proper balance between
the rights and obligations of Members. For prompt settlement of the present dispute, it is essential for
the Panel to make a finding on all the claims made by Korea and other co-complainants in the present
proceedings. Korea argues that judicial economy, exercised loosely, woul d not lead to dispute

355 United States' written reply to Panel question No. 1 at the second substantive meeting.
356 Statements made by the Appellate Body in US – Wheat Gluten , support this view. The Appellate
Body stated that "a claim under Article 4.2(a) might not relate at the same time to both aspects of the review
envisaged here, but only to one of these aspects. For instance, the claim may be that, although the competent
authorities evaluated all relevant factors, their explanation is either not reasoned or not adequate." Appellate
Body Report, US – Wheat Gluten , para. 103, footnote 61. Thus, the Appellate Body recognized that a Member
might comply with a particular obligation even if it di d not provide a reasoned and adequate explanation of how
it did so.
357 European Communities' second written submission, para. 30.
358 Appellate Body Report, US – Countervailing Measures Concerning Certain EC Products , para. 147
(emphasis added).
359 European Communities' second oral statement "Scope and Standard of Review" on behalf of the
complainants, para. 15.
360 United States' written reply to Panel question No. 1 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

resolution but to dispute prolongation. The Appellate Body in US – Lamb reached all claims
regarding threat of serious injury despite finding a flaw in the like product determination of the United
States.361 Similarly, in US – Line Pipe , the panel reached the challenges to the safeguard measure
even though the serious injury investigation was found not to be in compliance with the Agreement on
Safeguards.362 Korea submits that, in particular, it is important for the Panel to make findings both for
the investigation conducted by the USITC and the safeguard measure imposed by the President of the
United States. As the Appellate Body held in US – Line Pipe , there are two separate and distinct
inquiries in a safeguard case: " first, is there a right to apply a safeguard measure? And, second, if
so, has that right been exercised … within the limits set out in the treaty?" 363 Korea notes that both are
being challenged in this Panel appeal.364
7.95 Japan notes that none of the claims it has pursued in this case are dependent on any other
claims. They all stand on their own. Nonetheless, if the Panel agrees with Japan that the grouping by
the United States of slab, plate, hot-rolled, cold rolled, and corrosion resistant into a single like
product is inconsistent with WTO obligations, then it is necessarily also true that each of the other
elements of the US decision to impose safeguards on these flat-rolled products is also inconsistent
with WTO obligations. That being said, Japan encourages the Panel to address each of the other
claims that have been made in this case, so as to prevent the United States from repeating in the future
the same methodological mistakes it made in this case (many of which have already been identified as
problematic by the Appellate Body in previous cases).
365
C. UNFORESEEN DEVELOPMENTS
1. Introduction
7.96 The European Communities, China, Switzerland, Norway and New Zealand claim that the
USITC Report was issued without examining the issue of unforeseen developments. 366 They submit
that the USITC's Second Supplementary Report, should it be acceptable, did not provide adequate
reasoning for a series of reasons. They claim that the United States' demonstration in support of its
safeguard measures suffers from a lack of adequate demonstration of "unforeseen developments".
More particularly, New Zealand, argues that the USITC has failed to demonstrate the existence of
unforeseen developments as a matter of fact; the developments that it relies on have not resulted in
increased imports into the United States or they are not related to the relevant tariff concession; no
reasoned conclusions were provided; and no opportunity was provided to third parties to present
evidence and their views on the issue of unforeseen developments.
367 For all of these reasons, they
claim that the United States has failed to comply with the provisions of both Article 3.1 of the
Agreement on Safeguards and Article XIX:1(a) of the GATT 1994.
7.97 In response, the United States claims that consistent with its obligations under GATT 1994
Article XIX and Article 3.1 of the Agreement on Safeguards, the USITC identified the unforeseen
developments that resulted in the ten steel products being imported in such increased quantities and
under such conditions as to cause serious injury or the threat thereof to the domestic industries

361 Appellate Body Report, US – Lamb, para. 121.
362 Panel Report, US – Line Pipe, paras. 7.15 and 8.1.
363 Appellate Body Report, US – Line Pipe, para. 84 (emphasis in original).
364 Korea's first written submission, paras. 16-18.
365 Japan's second written submission, para. 3.
366 European Communities' first written submission, paras. 122-123; China's first written submission,
para. 86; Norway's first written submission, paras. 110-111; New Zealand's first written submission, para. 4.11;
Switzerland's first written submission, paras. 109-110.
367 New Zealand's first written submission, para. 4.29.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

producing like products. 368 The USITC's demonstration of unforeseen developments showed the
sequential relationship implied by Article XIX between trade concessions, unforeseen developments,
and imports in such quantities and under such conditions as to cause serious injury. The conditions
which caused injury were a result of unforeseen developments.
369
7.98 For the United States, each of the events cited by the USITC is an unforeseen development
under Article XIX. The financial crises that engulfed South East Asia were unforeseen by economists
right up to the time the crises began. The financial crises that hit the countries which were republics
in the former USSR were also unforeseen. According to the United States, the crises had an
unforeseen, radical, and lasting effect on the level of exports from those countries. 370 The continued
strength of the US market at a time when most other markets were contracting, along with the
persistent appreciation of the US dollar, were also unforeseen developments which made the US
market an especially attractive one for imports displaced from other markets as a result of the
financial crises in South East Asia and the former USSR republics. 371 The United States submits that
each of these developments was unforeseen, as was the simultaneous occurrence or confluence of
such events.
372
2. The requirements of Article XIX:1(a) of GATT 1994 and Article 3.1 of the Agreement
on Safeguards
(a) Introduction
7.99 The complainants argue that safeguard measures constitute "emergency action" and are only
to be imposed when the alleged increase in imports arises out of unforeseen developments. 373 They
contend that safeguard measures must be justified by "unforeseen developments" and unforeseen
developments must be demonstrated as a matter of fact 374, before the safeguard measure is applied. 375
Otherwise, third parties will not have an opportunity to present evidence and their views, as required
by Article 3.1 of the Agreement on Safeguards. 376 They also argue that the demonstration of
unforeseen developments must be made in the same report of the competent authorities.377 Moreover,
unforeseen developments must have "led to" or be the "result of" a product being imported in such
increased quantities and under such conditions as to cause, or threaten to cause, serious injury to
domestic producers.378 The competent authorities, in this case the USITC, have a duty to demonstrate
through a reasoned and adequate explanation that these legal conditions for adoption of such measures

368 United States' first written submission, para. 925.
369 United States' first oral statement, para. 71.
370 United States' first oral statement, para. 72.
371 United States' first written submission, paras. 972-976.
372 United States' first oral statement, para. 72.
373 European Communities' first written submission, para. 116; Switzerland's first written submission,
Zealand's first written submission, para. 4.6.
374 Appellate Body Report, US – Lamb , para. 106; Appellate Body Report, US – Cotton Yarn ,
paras. 72-74.
375 Appellate Body Report, US – Lamb, para. 72.
376 Switzerland does not make a claim pursuant to Article 3.1 of the Agreement on Safeguards.
377 Switzerland's first oral statement on behalf of the complainants, para. 6; see also European
Communities', China's and Switzerland's written replies to Panel question No. 15 at the first substantive meeting
and Norway's second written submission, para. 21.
378 European Communities' first written submission, paras. 120 and 176-178; China's first written
submission, paras. 84 and 123-125; Norway's first written submission, paras. 108 and 164-166; New Zealand's
first written submission, para. 4.29; Switzerland's first written submission, paras. 106-108 and 163.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

are met. The European Communities, Norway and New Zealand add that the requirement of
"unforeseen developments" is coupled with another condition, namely, that the importation also be
due to "the effect of the obligations incurred by a contracting party under this Agreement".
379
7.100 In the United States' opinion, Article XIX requirements are different from the requirements
under Articles 2 and 4 of the Agreement on Safeguards. This was recognized by the Appellate Body,
which described unforeseen developments as a " circumstance which must be demonstrated as a
matter of fact", as opposed to the "independent conditions for the application of a safeguard measure".
According to the United States, the term "unfor eseen developments" covers any change that is
unexpected. The quantities of imports or the conditions must be "as a result of" unforeseen
developments, but need not be caused by these developments. Moreover, Article XIX indicates that
there should be a sequential relationship of trade concessions, followed by unforeseen developments
and then serious injury, but it does not require that the unforeseen developments be contemporaneous
with the imports, or immediately precede the imports.
380 Finally, the United States is of the opinion
that neither the Agreement on Safeguards nor Article XIX requires that unforeseen developments be
limited to, or even directly related to, the particular products or products under investigation.
381
(b) Legal standard
7.101 For all of the complainants, the legal standard that is used to determine what constitutes an
unforeseen development is, at least in part, subjective. In the opinion of the European Communities
and China, the standard is probably relatively subj ective in the sense that it need not be proven that
the unforeseen development was impossible to predict. However, expectations of States are the
expectations of those who govern them and their opinions and actions are public knowledge.
Accordingly, the unexpectedness of a development is something that can be demonstrated.382 Norway
agrees that the standard is not entirely objective, as it depends on the particularities of each case.
Norway adds, however, that it is not the subjective beliefs of the negotiators of the concession that is
relevant, rather that the situation demonstrates certain generally accepted elements of unexpectedness,
as seen from a "bonus pater familias". Therefore, the unexpectedness of a development is something
that can be demonstrated.
383 New Zealand points to the US – Fur Felt Hats case, which stated that
unforeseen developments are "developments occurring after the negotiations of the relevant tariff
concession which it would not be reasonable to expect that the negotiators of the country making the
concession could and should have foreseen at the time when the concession was negotiated". 384 I n
New Zealand's opinion, the standard can be seen as having a subjective element. At the same time, in
order to ensure that the requirement is not rendered inutile, it must be susceptible to demonstration on
an objective basis. This requires the investigatin g authority to explain (by way of an adequate and
reasoned conclusion) why a particular development was "unforeseen". Accordingly, a mere assertion
that a development was "unforeseen" will not be sufficient to meet the standard.
385 Finally,
Switzerland argues that there are no objective standards of what is unforeseen, and that it depends on
the particular case.
386

379 European Communities' first written submission, para. 121, Norway's first written submission,
paras. 109; New Zealand's first written submission, para. 4.22.
380 United States' first written submission, paras. 925, 926, 932 and 935.
381 United States' first oral statement, para. 70.
382 European Communities' and China's written reply to Panel question No. 13 at the first substantive
meeting.
383 Norway's written reply to Panel question No. 13 at the first substantive meeting.
385 New Zealand's written reply to Panel question No. 13 at the first substantive meeting.
386 Switzerland's written reply to Panel question No. 13 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

7.102 The United States argues that the Appellate Body has construed "unforeseen" as synonymous
with "unexpected" rather than with "unforeseeable".387 The Panel in US – Lamb found the distinction
drawn by the Appellate Body between unforeseen and unforeseeable to be important. For that panel,
the former term implies a lesser threshold than the latter one. The appropriate focus is on what was
actually "foreseen" rather than theoretically "foreseeable". 388 For the United States, the term
"unforeseen developments" covers any change that the negotiators of the Contracting Party did not
foresee when they undertook obligations or tariff concessions with regard to that product subject to
the measure.389
(c) What amounts to "unforeseen developments"?
7.103 According to the European Communities, China, Switzerland, and Norway the USITC's
explanation relies on the following chain of circumstances. The Asian and Russian crises led to
reduction of consumption in selected steel products in selected countries at certain times; the United
States economy and steel consumption remained robust, or increased; the United States dollar
appreciated against selected other currencies; so that as currency depreciations and economic
contractions disrupted other markets, the share of steel imports to the United States market allegedly
increased. The complainants contend that none of these events constituted unforeseen developments,
nor did any combination of them.
390
7.104 The United States argues that each of the events cited by the USITC is an unforeseen
development under Article XIX. According to the United States, the USITC found that the
unforeseen developments consisted not merely of continued growth in demand in the United States
market for steel products, but rather the continued growth in that market while other markets
contracted or stagnated, making the United States market an especially attractive one for steel
products displaced from other markets.
391 The USITC found that it was the confluence and unusual
persistence of these events, such as the continued growth in the United States economy while other
economies stagnated or contracted, and persistent, widespread currency appreciation, that made these
developments unforeseen.
392 The United States submits that the financial crises that engulfed South
East Asia and the depth and length of the financial crises of the former USSR republics were
unforeseen and had unforeseen, radical, and lasting effects on the level of steel exports from those
countries. The continued strength of the US ma rket at a time when most other markets were
contracting and the persistent appreciation of the US dollar, were also unforeseen developments
which made the US market especially attractive for imports displaced from other markets as a result
of the financial crises in South East Asia and the former USSR republics. Each of these developments
was unforeseen, as was simultaneous occurrence of such events.
393

387 United States' first written submission, para. 927, citing Appellate Body Report, Korea – Dairy ,
para. 84.
388 United States' written reply to Panel question No. 13 at the first substantive meeting, citing Panel
Report, US – Lamb, para. 7.22.
389 United States' first written submission, para. 926.
390 European Communities' first written submission, para. 142; Switzerland's second written
submission, paras. 26-37; Norway's first written submission, para. 130; China's first written submission,
para. 88, citing the USITC Second Supplementary Report, Attachment I, pp. 3 to 4 (Exhibit CC-11).
391 United States' first written submission, para. 971, citing USITC Second Supplementary Report, p.3.
392 United States' first written submission, paras. 972 and 976, citing USITC Second Supplementary
Report, p.1; USITC Report, Table OVERVIEW-16.
393 United States' first oral statement, para. 72.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

(i) The Russian and Asian crises
7.105 The complainants argue that the developments mentioned by the United States were not
"unforeseen" because they were not unexpected. 394 Unforeseen developments that result in increased
imports from a non-WTO member cannot satisfy the requirements of Article XIX. Where an
unforeseen development relates to a non-WTO country, any resulting increased imports from the
country cannot be said to have resulted from a tariff concession or other WTO obligation. 395 T h e
United States was free to restrict the exports of steel products from most of the steel-producing former
USSR republics into the United States, and indeed, the United States did take measures not regulated
by the WTO Agreement to deal with the problems caused by the Russian crisis.396
7.106 In the opinion of the European Communities and Norway, unforeseen developments must be
coupled with effects due to the obligations incurred by a contracting party under the GATT 1994.
This comes from the language of Article XIX:1(a), which provides that increased imports must be "a
result of unforeseen developments and of the effect of the obligations incurred by a contracting party
under this Agreement, including tariff concessions". 397 New Zealand adds that the concept of
"unforeseen developments" is devoid of any meaning if it is considered in isolation from the relevant
tariff concessions that in the absence of safeguard action would permit increased imports to enter at
bound rates.398
7.107 The complainants agree that if the Russian cris is had resulted in increased imports into the
United States from other WTO Members then there would indeed be "relevant tariff concessions" to
consider. However, the USITC did not proceed on this basis, nor did it make such a demonstration.
399
The USITC argues solely that decreased consumption in the former Soviet Union led to increased
imports into the United States from the former USSR republics, a premise that has no relevance under
GATT 1994 Article XIX:1(a).
400
7.108 The United States argues, on the other hand, that the Russian crisis is relevant because of both
the increase in direct imports from Russia and the displacement of third-country shipments into the
United States market. 401 According to the United States, the USITC's demonstration of unforeseen
developments showed the sequential relatio nship between trade concessions, unforeseen
developments and imports. In its opinion, there is no requirement that the finding of "unforeseen
developments" be "coupled with" the effect of the obligations, including tariff concessions, incurred
under GATT 1994. 402 WTO panels and the Appellate Body have interpreted "unforeseen
developments" without reference to the "effect of the obligations" provision. 403 Moreover,

394 Switzerland's first oral statement, delivered on behalf of all complainants, para. 15.
395 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 8 at the first substantive meeting.
396 Switzerland's first oral statement on behalf of the complainants, para. 18; European Communities'
written reply to Panel question 8 at the first substantive meeting.
397 European Communities' first written submission, para. 144; Norway's first written submission,
para. 132.
398 New Zealand's first written submission, para. 4.22.
399 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question 6 at the first substantive meeting.
400 New Zealand's first written submission, para. 4.24.
401 United States' written reply to Panel question No. 6 at the first substantive meeting.
402 United States' first oral statement, para. 70.
403 United States' first written submission, para. 946, citing Panel Report, US – Lamb paras. 7.4-7.45;
Appellate Body Report, US – Line Pipe , paras. 7.293-7.300; Appellate Body Report, Argentina – Footwear
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 XIX:1(a) imposes no requirement that an unforeseen development originate in the economy of
a WTO member, and factually, the USITC did not limit itself to an increase in imports from non-
WTO members.
404
7.109 Finally, the European Communities argues that even if the Asian and Russian crises had had
an effect on imports for some of the products concerned, this happened between 1997 and 1999. This
is seen in the first instance in the period covered by the data referred to in the Second Supplementary
Report of the USITC and secondly by the import peaks on which the USITC relies as "increased
imports", which also date from this period. Thus, even if the Asian and Russian crises did cause or
contribute to the import peaks around 1998, the effects of these alleged unforeseen developments had
disappeared by the time the safeguard investigation was conducted. The USITC Report nowhere
attempts to demonstrate that the alleged unforeseen developments of 1996 and 1997 were continuing
to have an effect in 2001 or indeed could be presumed to continue to have an effect during the period
of application of the safeguard measures. On the contrary the data on increased imports shows
marked peaks in 1997 to 1998 and return to normality thereafter and demonstrates that the alleged
unforeseen developments were not having any relevant effect on imports during the period of
investigation.
405
7.110 For the United States, it is not necessary that unforeseen developments continue to have an
effect up until the recent past. It adds that in the course of the steel investigation, producers and
exporters from various complainants admitted as much, stating that "[t]here can be a reasonable time
lag in between the unforeseen development and the increase in imports leading to serious injury ... the
time it takes for market participants to react to certain forces may be much longer. Beyond the simple
supply and demand forces at play, various business cycles may influence business decisions and either
exacerbate or dampen the change in trade flows".
406 In fact, there is no requirement that unforeseen
developments be "recent". As long as they occurred after the relevant tariff concession and resulted in
increased imports, that is sufficient to meet Article XIX requirements.
407
(ii) The Strength of the US economy and the appreciation of the US dollar
7.111 The European Communities, China, Switzerland and Norway submit that the "robustness" of
the United States market cannot be considered an "unforeseen development" by the United States,
because United States economic policy was likely conducted with this objective. 408 The European
Communities states that the argument that a successful economic development, in accordance with its
policy, is "unforeseen" is preposterous. 409 The complainants argue that, besides, the growth of the
United States' economy started in 1990, well befo re the Uruguay Round, so it must have been
foreseen.410 Most fundamentally as regards the US dollar appreciation, a change in the value of a
currency such as the US dollar cannot be accepted as an unforeseen development.411

404 United States' first written submission, paras. 941-942.
405 European Communities' second written submission, paras. 72-74.
406 Joint Respondents' Posthearing Brief: Flat-Rolled Products, Oct. 1, 2001, Vol. II at p.23
(Exhibit US-74).
407 United States' written reply to Panel question No. 14 at the first substantive meeting.
408 European Communities' first written submission, para. 150; Switzerland's first written submission,
409 European Communities' first written submission, para. 150.
410 Switzerland's first oral statement, delivered by on behalf of all complainants, para. 19.
411 European Communities' first written submission, para. 152; Switzerland's first written submission,
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.112 According to the European Communities, China and Norway, exchange-rate developments
are foreseeable in two main senses. First, it is foreseeable that the exchange rate between two
currencies that are not fixed will change over time. Second, it is foreseeable that the exchange rate of
a currency of a country with a robust economy and low inflation (such as the United States in the
1990s) will rise over time compared with the cu rrency of a country with a weak economy and high
inflation rate (such as Russia).
412 For them, the value of the dollar in relation to other currencies has
regularly changed by significant amounts since the collapse of the Bretton Woods system of fixed
exchange rates in 1971. Such changes can no longer be considered to be "unforeseen" but it must, on
the contrary, be considered to be quite expected that the dollar would not remain stable vis-à-vis other
currencies.
413
7.113 The United States responds that the robustness of the US dollar was a development which
combined with the other developments, namely, the currency crises in Asia and the former USSR and
the continued growth in steel demand in the United States market as other markets declined, to
produce the increased volume of imports. 414 In its opinion, nothing in Article XIX prevents the
continued strength of a market or the persistent appreciation of a currency while other markets
contracted or stagnated and currencies depreciated from constituting an unforeseen development. The
period under investigation saw persistent and widespread appreciation of the US dollar against
virtually all other major currencies. 415 The United States argues that the fact that exchange rates
change over time could be described as foreseeable, but not necessarily foreseen. Particular exchange
rate developments, such as an unusually rapid or severe change in rates, are not likely to have been
foreseen at the time of a particular concession. It argues that the complainants have presented no
evidence that the currency disruptions that occurred prior to the import surges were in fact foreseen by
anyone, much less that those events were foreseen by any negotiator from the United States during the
Uruguay Round.
416
7.114 In counter-response, the European Communities, Norway and Switzerland, challenge the
notion that such favourable developments are capable of being considered unforeseen developments
when this term is considered in its context of Article XIX. Unforeseen developments within the
meaning of Article XIX are unfavourable developments or shocks to the system that are susceptible to
lead to adverse consequences. They submit that such is not the case of the "robustness" of the United
States economy and the strength of the US dollar.417
7.115 The United States responds that in US – Fur Felt Hats , the unforeseen development was a
shift in fashion to a different sort of hat. That shift in fashion was presumably unfavourable to the
industries making the less-fashionable hats, but that shift could probably not be described as
"unfavourable" in any broader sense. US – Fur Felt Hats supports the conclusion that an unforeseen
development may be a development that could be described as neutral or even positive in general
terms, but which results in a change in trade patterns that proves injurious to a particular industry.418

412 European Communities', China's, and Norway's written replies to Panel question No. 10 at the first
substantive meeting.
413 Switzerland's first oral statement, delivered on behalf of all complainants, para. 19.
414 United States' written reply to Panel question No. 18 at the first substantive meeting.
415 United States' first written submission, para s. 972-973, citing USITC Second Supplementary
Report, p.1; USITC Report, Table OVERVIEW-16.
416 United States' written reply to Panel question No. 10 at the first substantive meeting.
417 European Communities' second written submission, para. 56; Norway's second written submission,
418 United States' second oral statement, para. 106.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

(iii) Macroeconomic events
7.116 The European Communities, China, Switzerland, and Norway also argue that since the
Russian and Asian crises were macroeconomic events, it is not evident that they specifically affected
the steel products on which safeguard measures were imposed. These events could just as much
constitute unforeseen developments to justify safeguard measures in almost any sector of the economy
in any Member of the WTO. 419 The European Communities, China, Switzerland, Norway, and New
Zealand do not exclude that a macroeconomic event could be relevant as an unforeseen development
but they submit that this in no way obviates the need for an investigating authority to demonstrate that
such events have resulted in increased imports. 420 Nevertheless, according to the European
Communities, China and Norway, the ups and downs of the economic cycle (which are often referred
to as crises) cannot be considered to be unexpected, even if the precise time at which they occur in a
given country cannot be predicted. 421 According to Switzerland and New Zealand, whether a crisis
was foreseen or not can only be determined on a case-by-case basis. 422 According to China,
macroeconomic events may only constitute unforeseen developments when it is demonstrated that
they have a direct relationship with the increasing level of importation of products in the country
concerned.
423
7.117 The United States believes that a macroeconomic event, like any other event, can constitute
an unforeseen development, which can justify the imposition of safeguards relief in response. 424 The
relevant test under Article XIX is not what is foreseeable but what is unforeseen, and while a class of
events may be foreseeable, a particular crisis could be unforeseen for purposes of Article XIX.
425
(d) "as a result of unforeseen developments"
(i) Logical connection to increased imports and conditions as to cause or threaten serious injury
7.118 The European Communities, China, Switzerland and Norway agree that there must be a
"causal link" between the unforeseen "developments" and the increase in imports that allegedly causes
or threatens to cause injury. For them, the term "as a result" clearly expresses this requirement.
426
They submit that according to the Appellate Body in US – Lamb, "the existence of unforeseen
developments is a prerequisite that must be demonstrated … in order for a safeguards measure to
apply".427
7.119 New Zealand recalls that in Argentina – Footwear (EC) , the Appellate Body stated that the
"as a result of" language in Article XIX:1(a) underlines the need for a "logical connection" between

419 European Communities' first written submission, para. 147; Switzerland's first written submission,
420 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 4 at the first substantive meeting.
421 Norway's, European Communities' and China's written replies to Panel question No. 9 at the first
substantive meeting.
422 Switzerland's and New Zealand's written replies to Panel question No. 9 at the first substantive
meeting.
423 China's second written submission, paras. 19.
424 United States' first written submission, para. 939.
425 United States' written reply to Panel questions Nos. 9 and 10 at the first substantive meeting.
426 See the written replies of the European Communities, China, and Norway to Panel question No. 2 at
the first substantive meeting.
427 Switzerland's first oral statement on behalf of the complainants, para. 13; Switzerland's second
written submission, para. 20.
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 developments and the increased imports which a Member is seeking to address through
safeguard action. It adds that it is important not to reduce the "unforeseen developments" requirement
to an inutility in that all an in vestigating authority would need to do would be to point to supposed
"unforeseen developments" without any attempt to relate these developments to the circumstances of
increased imports that they considered justified safeguard action. The term "unforeseen
developments" is effectively robbed of any meanin g if considered in isolation from the issue of
resulting "increased imports".
428 According to New Zealand, the demonstration of "unforeseen
developments" requires that the investigating authority explain how these developments are linked to
the "increased imports" it relies on for the imposition of a safeguard measure.429
7.120 In Norway's view, the reason why the Appellate Body made reference to a "logical
connection" instead of a direct causal link is because it may not always be feasible to establish a direct
correlation between the magnitude of the "unforeseen development" and the exact increase of imports
or seriousness of the other conditions. 430 Norway is of the view that a logical connection is needed
between unforeseen developments and all three conditions that need to be fulfilled for the imposition
of a safeguard measure.
431
7.121 The European Communities and China contend that the requirements for the imposition of
safeguard measures can be considered as being situated in a "logical continuum". This logical
continuum commences with a tariff concession (or the acceptance of another WTO obligation). The
first crucial step is the arrival of an unforeseen development. This unforeseen development must
result in the "such increased imports" and the "under such conditions" referred to in Article XIX of
the GATT 1994 and Article 2.1 of the Agreement on Safeguards. The increased imports must, in turn,
cause the serious injury in the sense of Article 4.1(a) of the Agreement on Safeguards – which are also
expressed in a continuum of factors starting with increased imports and loss of market share and
progressing through effects on sales, production and finally unemployment. They conclude that it is
correct that there must be a link between the unforeseen developments and the serious injury but this
is an indirect multi-stage link rather than a direct link of cause and effect.
432
7.122 According to the European Communities and China, there should be a logical continuum
between the unexpected events claimed to be the "unforeseen developments", their effects on
increased imports and the condition under which this increase has occurred, for each of the specific
products subject to the safeguard investigation. It might be the case that several distinct elements
might be invoked to form the "unforeseen developments" (such as the Asian crisis, the former USSR
crisis, the robustness of the United States economy and the strength of the US currency). In these
circumstances, there would be no specific requi rement to establish a link between the various
elements claimed to constitute the "unforeseen developments". They submit that, however, there
would be a requirement to establish a logical connection to demonstrate that each of these various
elements have resulted in increased imports with respect to each of the specific products under
investigation.
433 By way of example, China suggests that if a financial crisis occurs constituting an
unforeseen development, it will only allow the imposition of safeguard measures on certain products
A, B and C if these developments, separately and independently, result in increased imports for

428 New Zealand's written reply to Panel question No. 2 at the first substantive meeting.
429 New Zealand's written reply to Panel question No. 3 at the first substantive meeting.
430 Norway's written reply to Panel question No. 2 at the first substantive meeting.
431 Norway's written reply to Panel question No. 3 at the first substantive meeting.
432 European Communities' and China's written replies to Panel question No. 3 at the first substantive
meeting.
433 European Communities' and China's written replies to Panel question No. 143 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

product A, for product B and for product C. 434 Switzerland and Norway interpret the requirement as
necessitating a determination that each individual development resulted in increased imports
regarding each specific product.
435
7.123 The United States responds that if more than one unforeseen development has caused
increased imports, Article XIX does not require that there be any link between the various unforeseen
developments, only that each of the unforeseen developments "result in" increased imports under such
conditions as to cause injury to the domestic industry.436
7.124 As to the meaning of "as a result of", the Unit ed States argues that the ordinary meaning of
"result" is the "effect, consequence, issue, or outcome of some action, process, or design". 437 Thus,
the use of "as a result of" indicates that one thing is the "effect, consequence, issue, or outcome" of
another. In the case of Article XIX:1, these words indicate that importation of a product in such
quantities and under such conditions as to cause serious injury must be the effect, consequence, issue
or outcome of unforeseen developments. A showing that a product is being imported in such
quantities and under such conditions as to cause serious injury as a result of unforeseen developments
by itself establishes a logical connection between the first and second clauses of Article XIX:1 (a). In
other words, "as a result of" describes the link between unforeseen developments on the one hand and,
on the other hand, imports in such quantities and under such conditions as to cause serious injury.
There is no need for a further demonstration or explanation.
438
7.125 For the United States, this approach conforms more closely to the text of Article XIX:1 and
the reports of the Appellate Body than does the alternative view that "as a result of" indicates that
there must be a "causal link" between unforeseen developments and the increase in imports.
Article XIX:1 requires that serious injury be "caused" by imports in such increased quantities and
under such conditions, but that these conditions be "as a result of" of unforeseen developments. The
use of different terms for these relationships indicates that the drafters of the GATT 1994 intended
that the relationships be different. However, the European Communities' interpretation would treat
them as the same – "causal link" is the term used in Article 4.2(b) of the Agreement on Safeguards to
describe the relationship between increased imports and serious injury.
439
7.126 In addition, the United States argues that the A ppellate Body has recognized that the first and
second clauses of Article XIX:1 have different meanings. It characterized "as a result of unforeseen
developments" as a "circumstance" that must be "demonstrated". In contrast, it characterized the
requirement to establish that imports in such quantities and under such conditions as to cause serious
injury, as "contain[ing] the three conditions for the application of safeguard measures".
440 T h e
European Communities' view that there must be a "causal link" between unforeseen developments and
imports in such quantities and under such conditions as to cause serious injury disregards the
differences that the Appellate Body noted in the text.441
7.127 The United States is of the opinion that in this case, the "logical connection" between the
unforeseen developments identified by the USITC and the injury-causing increased imports is clear.

434 China's written reply to Panel question No. 2 at the second substantive meeting.
435 Switzerland's written reply to Panel question No. 143 at the first substantive meeting; Norway's and
Switzerland's written replies to Panel question No. 2 at the second substantive meeting.
436 United States' written reply to Panel question No. 143 at the first substantive meeting.
437 The New Shorter Oxford English Dictionary, p. 2570.
438 United States' written reply to Panel question No. 2 at the first substantive meeting.
439 United States' written reply to Panel question No. 2 at the first substantive meeting.
440 Appellate Body Report, Argentina – Footwear (EC), para. 92.
441 United States' written reply to Panel question No. 2 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

The USITC determined that, after the beginning of the Asian and Russian financial crises, unusually
large volumes of foreign steel production were displaced, and the US market – in which demand
remained strong – became the destination for a significant portion of the displaced foreign
production.
442
7.128 The United States suggests that the interpretation offered by the Panel in US – Lamb should
be followed:
"The phrase concerning 'unforeseen developments' in Article XIX:1 is grammatically
linked to both 'in such increased quantities' and 'under such conditions'. Rather than
implying a two-step causation, we view this structure as meaning that while
'unforeseen developments' are distinct from increases in imports per se , it may be
sufficient for a showing of the existence of this "factual circumstance" that
'unforeseen developments' have caused increased imports to enter "under such
conditions" and to such an extent as to cause serious injury or threat thereof."
443
7.129 This analysis recognizes that "in such increased quantities" and "under such conditions" are
independent conditions, either or both of which may be the result of unforeseen developments. Thus,
a competent authority could satisfy Article XIX by demonstrating that the unforeseen developments
resulted in the injurious conditions rather than the increase in imports per se. 444
7.130 In counter-response, New Zealand argues that although the United States has finally accepted
with reluctance that an "unforeseen developments" requirement exists, it seeks to interpret it in a way
that empties it of any meaning. 445 The United States oversimplifies the requirements of
Article XIX:1(a) when it argues that any "unexpected event" can qualify as an "unforeseen
development". Among other things, the Article requires that the unforeseen development, in
combination with the negotiated tariff concession, result in an increase in imports of the product
concerned.446 The United States may be correct that the words "cause" or "causation" in relation to
increased imports are not explicitly found in the first phrase of Article XIX:1(a), but its attempt to
equate "as a result" with "a sequential relationship" is simply an attempt to deny the necessary logical
connection that exists between unforeseen developments and the increase in imports. 447 F i n a l l y ,
New Zealand points out that even the USTR considered the term "as a result" to have substantive
content, since its request to the USITC for furthe r information asks it to identify the "unforeseen
developments that led to the relevant steel products being imported into the United States in such
increased quantities as to be a substantial cause of serious injury or threat thereof".448
7.131 Norway and Switzerland argue that the United States has misread the Panel's decision in US –
Lamb, since the Panel there did not reject the fundamental link between unforeseen developments and
the increased imports. In their opinion, the Panel merely rejected the argument that a demonstration
of "unforeseen developments" would also require that increased imports had caused serious injury. 449
The logical connection that exists between unforeseen developments and increased imports is a close
connection, as marked by the words "is being imported", in the present tense. Thus, the United States

442 United States' written reply to Panel question No. 2 at the first substantive meeting.
443 United States' first written submission, para. 933, citing Panel Report, US – Lamb, para. 7.16.
444 United States' first written submission, para. 933.
445 New Zealand's second written submission, para. 3.2.
446 New Zealand's second written submission, para. 3.6.
447 New Zealand's second written submission, para. 3.8.
448 New Zealand's second written submission, para. 3.9.
449 Norway's second written submission, para. 28; Switzerland's second written submission, para. 20.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

misinterprets Article XIX:1(a) when it states that there is no requirement that unforeseen
developments immediately precede the imports or that they be recent.450
7.132 Likewise, China finds it hard to understand how the United States can argue that quantities of
imports or the conditions must be "a result of" unforeseen developments, but need not be caused by
those developments. In China's opinion, the term "as a result" also refers to the notion of causality.
The grammatical distinction that the United States tries to make is totally artificial and does not find
any support in the terms of Article XIX or in the case law.451
7.133 The United States argues that the complainants continue to misunderstand the United States'
position on the degree of relation that must exist between unforeseen developments and increased
imports. In the opinion of the United States, the complainants' quarrel is more properly with the
drafters of Article XIX, who chose the phrase "as a result of", before proceeding to use "cause" to
describe the relationship between increased imports and serious injury. In this context, those different
words must have different meanings, and the United States' position is that the degree of relation
between unforeseen developments and increased imports must necessarily be something different, and
something less, than the "causal nexus" implied by the word "cause".
452
(ii) Logical connection to concession
7.134 The European Communities, Switzerland and Norway argue that the requirement of
"unforeseen developments" is coupled with another condition, namely, that the importation also be
due to "the effect of the obligations incurred by a contracting party under this Agreement". This
comes from the language of Article XIX:1(a), which provides that increased imports must be "a result
of unforeseen developments and of the effect of the obligations incurred by a contracting party under
this Agreement, including tariff concessions … ."
453 They, therefore, argue that unforeseen
developments and the relevant tariff concessions must result in increased imports.454
7.135 Likewise, New Zealand argues that there has to be a relationship between the increased
imports resulting from unforeseen developments and relevant tariff concessions. New Zealand cites
the Appellate Body in Argentina – Footwear (EC) , where it stated that the phrase "as a result of
unforeseen developments and of the obligations incurred by a Member" is linked grammatically to the
verb phrase "is being imported".455 Thus, according to New Zealand, the United States argument, that
as a result of the Russian crisis increased imports from Russia entered the United States, is irrelevant.
The United States has no GATT tariff or other obl igations that obliged it to permit imports from
Russia.456 It also points to the Appellate Body's Korea – Dairy decision, which acknowledged that the
specific purpose of the safeguard measure is to grant temporary relief in a situation where the
combined effect of a tariff concession and a development not foreseen when that concession was
granted is that serious injury is caused or threatened to the importing Member's domestic industry. As
the Appellate Body stated in that decision, "the object and purpose of Article XIX is to allow a
Member to re-adjust temporarily the balance in th e level of concessions between that Member and

450 Norway's second written submission, paras. 30 and 33.
451 China's second written submission, paras. 11-17.
452 United States' second oral statement, para. 107.
453 European Communities' first written submission, para. 144; Norway's first written submission,
454 European Communities' written reply to Panel question No. 3 at the second substantive meeting;
Norway's second written submission, para. 42; China argues that a logical connection must exist between the
unforeseen developments and the relevant tariff concession, see China's second written submission, paras. 23.
455 Appellate Body Report, Argentina – Footwear (EC), para 92
456 New Zealand's written reply to Panel question No. 3 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

other exporting Members".457 New Zealand concludes that for a Member to avail itself of a remedy
designed to address unexpected effects of a tariff concession, where there is no tariff concession, is an
abuse of that remedy. To accept that a Member may do so undermines the careful balance of rights
and obligations expressed in Article XIX.
458
7.136 In the opinion of the United States, there is no requirement that the finding of "unforeseen
developments" be "coupled with" the effect of the obligations, including tariff concessions, incurred
under GATT 1994. 459 It points out that WTO panels and the Appellate Body have interpreted
"unforeseen developments" without reference to the "effect of the obligations" provision. 460
Article XIX:1(a) imposes no requirement that an unforeseen development originate in the economy of
a WTO Member.461
7.137 The United States argues further that there is no linkage between consideration of the
unforeseen developments and "the effect of the relevant obligations incurred by a contracting party
under this Agreement, including tariff concessions".462 It claims that the logical connection called for
by the Appellate Body in Argentina – Footwear (EC) is not between tariff concessions and unforeseen
developments, but between unforeseen developments and increased imports. Therefore, if a Member
has shown that imports in such increased quantities and under such conditions as to cause serious
injury are the "result of" unforeseen developments, Article XIX:1(a) does not require a separate
finding of a "logical connection" between such im ports and the tariff concession identified for the
product.463 The USITC identified a particular tariff concession in its discussion of unforeseen
developments and identified the increase in imports expected at the time of the concession.464
7.138 For New Zealand, the United States' view that GATT 1994 Article XIX does not require that
the imports resulting from unforeseen developments be linked to tariff concessions is surprising in
view of what the United States itself has submitted: "The common-sense logic behind [GATT XIX]
was that, in the absence of such a provision, trade negotiators may decline to make reciprocal trade
concessions". The logic is that negotiators will be prepared to make trade concessions if they know
that if the unexpected happens, concessions can be temporarily withdrawn. What they have in mind
in such a reciprocal relationship is the possibility of the unexpected resulting in increased imports
from the countries to which such concessions have been made, not from a non-WTO Member with
whom they are free to deal as they wish. In shor t, it was not Russia that the WTO negotiators had in
mind when they considered temporary relief from import surges; rather it was other WTO Members to
whom tariff concessions were made.
465
7.139 The United States responds that a more persuasive interpretation exists to settle the issue of
whether Article XIX only covers imports from WTO Members. In its opinion, Article XIX certainly
does not explicitly limit "increased quantities" of imports to imports from Member countries only.

457 New Zealand's second written submission, para. 3.19, citing Appellate Body Report, Korea – Dairy,
paras. 86-87.
458 New Zealand's second written submission, para. 3.19.
459 United States' first oral statement, para. 70.
460 United States' first written submission, para. 946, citing Panel Report, US – Lamb, paras. 7.4-7.45;
Appellate Body Report, US – Line Pipe , paras. 7.293-7.300; Appellate Body Report, Argentina – Footwear
461 United States' first written submission, para. 941.
462 United States' second written submission, para. 177; United States' written reply to Panel question
No. 3 at the second substantive meeting.
463 United States' written reply to Panel question No. 3 at the second substantive meeting.
464 USITC Second Supplementary Report, pp. 1-2.
465 New Zealand's second oral statement, para. 6.
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 XIX:1(a) indicates that imports must have increased "as a result of unforeseen developments
and of the effect of the obligations incurred ... under this Agreement". In considering the phrase "of
the effect of the obligations incurred by a Member under this Agreement, including tariff
concessions" the Appellate Body found that "this phrase simply means that it must be demonstrated,
as a matter of fact, that the importing Member has incurred obligations under the GATT 1994,
including tariff concessions".
466 The Appellate Body went on to find that "unforeseen developments"
and "obligations incurred" are "certain circumstances which must be demonstrated as a matter of
fact". By describing "unforeseen developments" and "tariff concessions" as "circumstances", plural,
rather than a single "circumstance", the Appellate Body indicates that these are separate, independent
occurrences. The United States submits that despite the lengthy discussion of this provision, the
Appellate Body never indicated that any partic ular linkage had to exist between the unforeseen
developments and the tariff concessions. Nor did the Appellate Body indicate that each circumstance
had to have an equal effect, or indeed any effect, on all imports. The Appellate Body has thus
construed Article XIX:1(a) as requiring that both an unforeseen development and a trade concession
be demonstrated as a matter of fact. The United States argues that the USITC demonstrated both
unforeseen developments and tariff concessions; no more is required.
467
(e) The timing of unforeseen developments
7.140 The complainants contend that the relevant moment to judge whether an event was
unforeseen is when the concession was granted. 468 The tariff concessions at issue in this case are
those included in the United States' Uruguay Round Tariff Schedule. Therefore, only developments
occurring after the conclusion of the Uruguay Round qualify as unforeseen developments. 469 For the
complainants, the entirety of the unforeseen de velopment must normally have occurred after the
concession, in the sense of Article XIX of the GATT 1994, has been made. 470 If the unforeseen
development had started before the concession, it cannot be considered to be unforeseen. For them,
there will normally be a close temporal connection between the unforeseen developments and the
increased imports. Alleged delayed causal link would require a specific explanation.
471
7.141 For the European Communities, China, Switzerland and Norway, given this close temporal
connection requirement, the period of investigation must cover both the time of the unforeseen
development and the resulting increase in imports etc., to demonstrate the causal link.472 They submit
that the analysis in the USITC Reports relates to the past in general, and totally disregards the
temporal nexus that must exist between the "unforeseen developments" and the increase in imports.
There was no consideration by the USITC of whether these "unforeseen developments", which relate
to events taking place as far back as 1989-1991 (the break-down of the USSR) but also to events in
1997 (the advent of the Asian crisis), led to subsequent increases in imports of specific products

466 Appellate Body Report, Argentina – Footwear (EC), para. 91.
467 United States' second written submission, paras. 175-177.
469 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 5 at the first substantive meeting.
470 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 11 at the first substantive meeting.
471 European Communities' first written submission, para. 133; Norway's first written submission,
472 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 12 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

within the period of investigation (1996-2000) or will do so in the coming three years when the
United States' measures will be in force.473
7.142 For the United States an unforeseen development must occur "after" the "relevant tariff
concession" or, presumably, other obligation that was incurred by a Member under GATT 1994. It
argues that a Member may conclude that an obligation or concession from the Tokyo Round, or
before, is "relevant" to the analysis under the Agreement on Safeguards. In the Steel investigations,
the USITC found that US Uruguay Round tariff concessions were the relevant concessions for its
analysis of unforeseen developments and the developments identified by the USITC all occurred after
the conclusion of the Uruguay Round. The United States argues that the South East Asian and former
USSR crises were perhaps foreseeable in the general, hypothetical sense, but the timing extent, and
ongoing effect on global steel trade were not foreseen by the United States until well after the
conclusion of the Uruguay Round.
474 475
7.143 The complainants disagree with the United States' view that "unforeseen developments" can
occur before the concession was made as long as its effects was known only thereafter. 476 F o r
Norway, if the effects are only "long term" they will in any case not have the magnitude nor the
emergency character nor the causal link required by the Agreement. The European Communities,
China, Norway and New Zealand add that the basic requirement is that the increased imports (or at
the least the conditions under which they occur) must result from the unforeseen development . For
this to happen, there will normally be a close temporal connection between the unforeseen
developments and the increased imports. The absence of such a close temporal connection would
tend to raise questions as to whether the "in creased imports" resulted from the "unforeseen
developments" and an adequate explanation would need to be made to explain this.
477
7.144 New Zealand argues that the Russian crisis was not unforeseen because it commenced in
1991, predating the bindings on steel products in 1995. It argues that the USITC acknowledges this
and that the United States negotiators were fully aware when they agreed to tariff concessions on steel
of the economic consequences of the Russian crisis. The facts show that the decrease in consumption
and the increase in exports in respect of former Soviet countries was not new. They did not arise after
the conclusion of the Uruguay Round, but had existed since 1991.
478
7.145 The United States responds that Article XIX indicates that there should be a sequential
relationship of trade concessions, followed by unforeseen developments and then serious injury, but it
does not require that the unforeseen developments be contemporaneous with the imports, or
immediately precede the imports.
479
7.146 For the United States, Article XIX implies a sequencing of an obligation or tariff concession,
followed by an unforeseen devel opment, followed by imports in such increased quantities and under

473 European Communities' first written submission, para. 135; Switzerland's first written submission,
474 United States' first written submission, paras. 926-931.
475 United States' written reply to Panel question No. 5 at the first substantive meeting.
476 European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 12 at the first substantive meeting.
477 European Communities', China's, New Zealand's and Norway's written reply to Panel question No.
12 at the first substantive meeting.
478 New Zealand's first written submission, paras. 4.25-4.27, citing tables in USITC Report, Vol. II,
OVERVIEW-4 and OVERVIEW-5, and USITC Second Supplementary Report, Attachment I, p.3
(Exhibit CC-11).
479 United States' first written submission, para. 934.
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 conditions as to cause serious injury. 480 In the United States' opinion, the ordinary meaning of
"development" is "a result of developing; a change in a course of action or events or in conditions . . .
an addition, an elaboration".
481 Thus, a development is best understood as a change of some kind,
which is "unforeseen" if a Member's negotiators did not expect it to occur at the time they undertook
the relevant obligation or concession. 482 Since US – Fur Felt Hats indicates that the "development"
must occur after the obligation or concession, the United States concludes that the change in question
should begin after that time. The working party in US – Fur Felt Hats reached a similar conclusion,
finding that the "development" must occur after the relevant tariff concession (or, presumably, some
other obligation). The United States refers to the Appellate Body's statement that an unforeseen
development is one that was "unexpected"
483 and to the working party in US – Fur Felt Hats : "The
term 'unforeseen developments' should be interpreted to mean developments occurring after the
negotiation of the relevant tariff concession which it would not be reasonable to expect that the
negotiators of the country making the concession could and should have foreseen at the time when the
concession was negotiated".484
7.147 For the United States, the US – Fur Felt Hats report provides a good example of how this
analysis works. The US – Fur Felt Hats working party found that hat styles changed continually, and
that the likelihood of change was entirely foreseeable. However, it found that the negotiators did not
foresee the degree of a particular change or its effect on the competitive situation faced by the
domestic industry, and that these represented an unforeseen development. Thus, the existence of a
particular condition at the time of an obligation or tariff concession (the continual evolution of hat
styles) does not prevent a change in that condition (a large and sustained shift in style) from being
treated as an unforeseen development.
485
7.148 Therefore, for the United States, the reference period for assessing unforeseen developments
could be any period after the relevant tariff concession was made. In addition, Article XIX implies
that the unforeseen developments begin prior to the increase in imports. Thus, the time when injury
caused by increased imports occurred could begin after the period when the unforeseen developments
occurred. This does not necessarily mean that a longer period of investigation would be required for
the assessment of unforeseen developments than for injury, since the period examined in the
investigation of serious injury needs to be "sufficiently long to allow conclusions to be drawn".
486
Therefore, any reference period used for the determination of increased imports and serious injury
should include some period of time before the import surge began so that the increase in imports and
the effects of that increase could be determined.
487
7.149 According to the United States, in the cour se of the steel investigation, producers and
exporters from various complainants admitted that "[t]here can be a reasonable time lag in between
the unforeseen development and the increase in imports leading to serious injury... [T]he time it takes
for market participants to react to certain forces may be much longer. Beyond the simple supply and
demand forces at play, various business cycles may influence business decisions and either exacerbate

480 United States' first written submission, para. 934.
481 The New Shorter Oxford English Dictionary, p. 634.
482 Appellate Body Report, Argentina – Footwear (EC), para. 91.
483 Appellate Body Report, Korea – Dairy , para. 84; Appellate Body Report, Argentina – Footwear
(EC), para. 91.
484 United States' first written submission, para. 923, citing US – Fur Felt Hats, para. 9.
485 United States' written reply to Panel question No. 11 at the first substantive meeting.
486 Panel Report, US – Line Pipe, para. 7.200.
487 United States' written reply to Panel question No. 12 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

or dampen the change in trade flows". 488 The United States argues that there is no requirement that
unforeseen developments be "recent". As long as they occurred after the relevant tariff concession
and resulted in increased imports, that is sufficient to meet Article XIX requirements.
489
7.150 In the present case, the United States claims that all the unforeseen developments took place
after the Uruguay Round: the East Asian financial crisis began in mid-1997 490, and the particular
financial disruptions and currency fluctuations cited by the USITC began in 1997, also after the
Uruguay Round negotiations. 491 Thus, while the Soviet Union may have collapsed in 1989, with
resulting dislocations in the successor states, these are not the developments that the USITC found to
be unforeseen. Rather, the development in question was that those countries' condition changed after
1996 from the condition prevalent at the time of the Uruguay Round negotiations.
492
7.151 The United States cites evidence presented by the USITC indicating that the developments it
identified were in fact unforeseen. In its demonstration, the USITC cited evidence regarding the
expectations of the negotiators of the Uruguay Round relating to the likely effects of that Round on
imports of steel products. 493 The USITC also cited evidence indicating that the currency crises
surprised even professional forecasters, who considered the matter at a much later time, and had more
recent information available to them. 494 Thus, the USITC established that the developments were
unforeseen.495 496
7.152 The United States disagrees with the complainants' opinion that the unforeseen developments
and the increased imports must occur very close in time, and the unforeseen developments should
preferably still be occurring at the time injury occurs. It refers to the plain language of Article XIX,
according to which it argues that "As a result of" certainly implies that the unforeseen developments
occurred before the increase in imports, but im plies nothing about the duration of the unforeseen
developments.
497
(f) Demonstration of "unforeseen developments"
(i) Competent authority's report
7.153 The European Communities, China, Switzerland, Norway and New Zealand argue that the
Appellate Body has made clear in US – Line Pipe that unforeseen developments must be
demonstrated by the competent authorities (in their report) before safeguard measures are applied.
Moreover, according to the European Communities, China, Switzerland and Norway, the
demonstration of unforeseen developments must feature in the same report by the competent
authorities, as stipulated by the Appellate Body in US – Lamb.498 Switzerland notes in this regard that

488 Joint Respondents' Posthearing Brief: Flat-Rolled Products, Oct. 1, 2001, Vol. II at p.23
(Exhibit US-74).
489 United States' written reply to Panel question No. 14 at the first substantive meeting.
490 United States' first written submission, para. 961.
491 United States' first written submission, para. 968.
492 United States' written reply to Panel question No. 11 at the first substantive meeting.
493 USITC Second Supplementary Report, p. 2 and n.5.
494 USITC Second Supplementary Report, p. 2 nn. 6-8.
495 United States' second written submission, para. 170.
496 For the complainants' position on this point, see paras. 7.177-7.179.
497 United States' second oral statement, para. 108.
498 Switzerland's first oral statement on behalf of the complainants, para. 6; see also Norway's second
written submission, para. 21 and the written replies of the European Communities, China and Switzerland to the
Panel question No. 15 at the first substantive meeting, citing Appellate Body Report, US – Lamb, para. 72.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

this report is where the competent authorities came to the determination that a safeguard measure was
to be recommended. The USITC made its recommendations in the Report of December 2001. The
Second Supplementary Report was issued on 4 February 2002, after the USITC recommended that
safeguard measures be taken.
499
7.154 Norway argues that a "determination" for the purposes of Article 2 and 4 of the Agreement on
Safeguards, is the published conclusions of the investigations performed, whereby the competent
authority of a Member State establishes that certain facts exist and that certain conditions (legal
requirements) have been fulfilled that justify the imposition of the specific measure chosen under
Article 5. Norway submits that, in the present case, the USITC did not make certain determinations in
its original report, and subsequently issued tw o supplementary reports. In Norway's opinion,
Article 3.1 requires that there be "a report", not "many reports" at different intervals. Norway submits
that it, therefore, seems that the USITC's determinations with respect to Article 2, Article 4 and
"unforeseen developments" may have taken place at different times, or not at all.
500
7.155 Similarly, the European Communities, China, Norway, Switzerland and New Zealand suggest
that there is no consideration of "unforeseen developments" in the USITC Report itself. The only
mention of it is in a footnote in the separate report of one commissioner explaining that, although this
is required in WTO law, it is not required by United States law. 501 Although the complainants admit
that there is some discussion of the Asian and Russian crises in the USITC Report, no relation is made
to with the requirement of unforeseen developments.502
7.156 The United States responds that the complainants are wrong as a matter of law. In its view, the
only temporal requirement of Article XIX is that the findings of unforeseen developments must precede
the application of the safeguard measure. It cites the Appellate Body in US – Lamb to uphold its view
that Article XIX provides no express guidan ce on "when, where and how" a demonstration of
unforeseen developments must be made. Instead, the Appellate Body found that it contained an implied
requirement that the demonstration be made "before the safeguard measure is applied".503
7.157 According to the United States, the complainants are also wrong as a matter of fact. The
determination, or legal conclusion as to whether products were being imported in such increased
quantities and under such conditions as to cause serious injury, was made on 22 October 2001. 504
The USITC Report shows that the unforeseen developments discussed in the USITC Second
Supplementary Report influenced its injury de terminations. Prior to reaching its injury
determinations, the USITC specifically sought information on and investigated the conditions it later
identified as unforeseen developments and included information on those conditions in its report and
in its injury views.
505
7.158 The United States also responds that Articl e 3.1 of the Agreement on Safeguards contains
certain substantive and procedural obligations regarding the content of the report and its publication,
but it does not restrict the format of the report that contains the finding of unforeseen developments.
The choice of whether to issue the components of an Article 3.1 report at the same time, or over a

499 Switzerland's written reply to Panel question No. 15 at the first substantive meeting.
500 Norway's written reply to Panel question No. 15 at the first substantive meeting.
501 European Communities' first written submission, paras. 122-123; China's first written submission,
para. 86; China's second written submission, paras. 24-28; Norway's first written submission, paras. 110-111;
New Zealand's first written submission, para. 4.11; Switzerland's first written submission, paras. 109-110.
502 Switzerland's first oral statement on behalf of the complainants, para. 9.
503 United States' first written submission, paras. 949-953.
504 United States' written reply to Panel question No. 15 at the first substantive meeting.
505 United States' first written submission, paras. 953-955.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

period of time, is left to the discretion of individual Members. 506 The United States argues that the
complainants have provided no basis to conclude that presenting the report of the competent
authorities in stages is inconsistent with the Agreement on Safeguards.
507 Although Article 3.1
requires a certain content for the report and specifies that it be published promptly, it does not require
a specific format. According to the United States, the Chile – Price Band System508 Panel has already
accepted a multi-stage document as constituting a report of the competent authorities for the purposes
of Article 3.1. Thus, Members retain the discretion to decide whether to issue the report all at once or
in components. 509 The United States contends that its Second Supplementary Report is properly
considered part of the report required under Article 3.1.
7.159 According to the European Communities, Switzerland and Norway, the Chile – Price Band
System decision is not relevant, since the complaining party in that case did not raise the argument of
whether different minutes constituted the "same" report. Moreover, in that case, an attempt to
demonstrate unforeseen developments was made within the same minutes in which the
recommendation was made to take definitive safeguard measures. Switzerland adds that the situation
in Chile – Price Band System differs from the case at hand where the recommendation to take
definitive safeguard measures was made one and a half months before the Second Supplementary
Report was submitted, which contained the justification on the requirement of unforeseen
developments.
510 For China, the use of a multi-part document is not, in itself, an issue. Instead, the
issue of importance is the incompatibility of the idea that unforeseen developments were allegedly
discussed at length during the administrative meeting, but they were not the subject of comments in
the USITC Report, and it was necessary to wait for supplementary explanation in a later report.
511
7.160 The European Communities and Switzerland also point to the fact that the United States has
identified 22 October 2001 as the date of determination to argue that the Second Supplementary
Report does not form part of the USITC's determinations because it was not issued until February
2002. Second, the terms of the Second Supplementary Report also make clear that the USITC did not
reconsider its previous determinations or even purport to confirm them.
512 The European
Communities points out that the United States uses the word "finding" to describe the conclusions
drawn in the Second Supplementary Report. In the European Communities' opinion, there is a
significant difference between the terms "determination" and "finding". The term "determination"
refers to a decision that is more final and complete than a "finding" (which may be only one step on
the way to a determination). The term "determina tion" refers to the final settlement of the matter
before the adjudicator and to the reasoning relied on to reach that conclusion. Thus, an adjudicator
who has to take account of all pertinent information and consider whether a certain number of
circumstances and conditions are met before making a determination must do this before the
determination is made. In the view of the Europe an Communities, this demonstrates a fatal flaw in
the United States' position. The view that a "finding" on unforeseen developments can be made after
the determination that the conditions for the application of safeguard measures are met severs the
logical connection that the Appellate Body considered must exist.
513

506 United States' first written submission, para. 952.
507 United States' written reply to Panel question No. 15 at the first substantive meeting.
508 Panel Report, Chile – Price Band System, para. 7.131.
509 United States' written reply to Panel question No. 15 at the first substantive meeting.
510 Switzerland's second oral statement, paras. 5-9; The written replies of Switzerland, Norway and the
European Communities to Panel question No. 5 at the second substantive meeting.
511 China's written reply to Panel question No. 5 at the second substantive meeting
512 Switzerland's second written submission, paras. 8-12; European Communities' second written
submission, paras. 40-44.
513 European Communities' second written submission, paras. 45-47.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

7.161 The United States responds that the complainants seem much disturbed that the US has
described the USITC's demonstration of unforeseen developments as a "finding". In the United
States' opinion, the complainants' quarrel is with the Appellate Body, not the United States or the
USITC, since it was the Appellate Body that specifically found that competent authorities are to make
"findings" or "reasoned conclusions" regarding unforeseen developments.
514 The United States argues
that the European Communities continues to use the wrong terminology. In US – Lamb, the Appellate
Body directed a competent authority to make "findings" or "reasoned conclusions" about the existence
of unforeseen developments. The distinction between unforeseen developments, which are
circumstances to be demonstrated, and increased imports, injury, and causation, which are conditions,
was made by the Appellate Body. 515 Thus, there is no requirement to make a "determination" of a
relationship between increased imports and unforeseen developments or tariff concessions. The
United States submits that the USITC made the requisite findings related to unforeseen developments
and tariff concessions in its Second Supplementary Report.516
7.162 The United States repeats its allegation that the complainants do not address the findings in
Chile – Price Band System , in which the Panel accepted a multi-part document (minutes from
individual meetings of Chile's Competition Committee) as the report of the competent authorities for
the purposes of Article 3.1.517
(ii) The need for a reasoned and adequate explanation
Sufficiency and representativeness of data
7.163 The European Communities, Switzerland and Norway contend that the data on which the
USITC relies relate to changes of consumption of steel products globally in selected countries and
over selected periods and is unrepresentative and lacks objectivity. They submit that the USITC
makes a number of unfounded assumptions such as that reductions in steel production did not keep
pace with reductions in consumption and that, therefore, there was an increase in exports. 518 F o r
example, the apparent consumption in the former USSR countries increased in 1999 and 2000. By
1995, the decrease in consumption resulting from the dissolution of the Soviet Union was not only
foreseen; it had happened. 519 Had the United States demonstrated that the "Russian crisis" led to
increased imports into the United States from other WTO Members, the Russian crisis could be
relevant, but the USITC made no such demonstration.
7.164 According to the European Communities and Norway, the reference period for the increased
imports (1996-2000) is entirely independent of the period investigated for the subsequently alleged
unforeseen developments. There was no consideration by the USITC of whether the alleged
"unforeseen developments", which relate to events taking place as far back as 1991 (the break down
of the USSR), led to subsequent increases in imports of specific products within the period of

514 United States' second oral statement, para. 105, citing Appellate Body Report, US – Lamb, para. 76.
515 Appellate Body Report, US – Lamb , para. 72; Appellate Body Report, Argentina – Footwear (EC) ,
para. 91.
516 United States' written reply to Panel question No. 6 at the second substantive meeting.
517 United States' second written submission, para. 169, citing Panel Report, Chile – Price Band
System, para. 7.131.
518 European Communities' first written submission, paras. 154-155; Switzerland's first written
submission, paras. 140-141; Norway's first written submission, paras. 142-43.
519 European Communities' first written submission, paras. 157-162; Switzerland's first written
submission, paras. 144-148; Norway's first written submission, paras. 146-150; China's first written submission,
paras. 111-113.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

investigation (1996-2000) or will do so in the coming three years when the United States' measures
will be in force.520
7.165 China compares the statements of the United States with the official statistics contained on
the USITC website, which show that the relevant former USSR republics account for only 20% of the
total imports of the concerned steel products in the United States. In its opinion, this portion cannot
be regarded as representative in order to have an adequate reasoning to explain an alleged increase in
imports.521 All of the complainants also point out that exports from the former USSR republics
increased greatly before the Uruguay Round (625.7%) than after it (28.7%). 522 All of the
complainants point to the conclusion that the in crease in exports for the former USSR republics
between 1996 and 1999 was destined for countries other than the United States.523
7.166 The complainants also argue that the USITC provided no data on whether the exports of the
countries affected by the Asian crisis increased, still less whether these exports were directed to the
United States. The USITC seems to assume an increase in exports towards the United States from a
decrease in steel consumption in these countries. However, the USITC Report shows an increasing
trend in finished steel products consumption as of 1999. Thus, even on the basis of the United States'
assumptions, the Asian crisis cannot be considered an unforeseen development that is now leading to
increased imports into the United States.
524 New Zealand also points out that the International Iron
and Steel website shows that, by 1999, the fall in cons umption in steel in Indonesia, Korea, Malaysia,
the Philippines and Thailand had turned around. 525 Moreover, statistics from the USITC's own
website show that steel imports into the United States from the former USSR republics increased only
4.5%, not nearly the 22% claimed by the United States, over the period 1996 to 1999. Therefore, if
declining consumption led to an increase in export s of steel from the former USSR republics, 95.5%
of those exports must have gone elsewhere, and not to the United States.526
7.167 In the opinion of the United States, the USITC based its analysis on import data that firmly
supported its finding that the Asian financial crises disturbed the worldwide market for steel. Imports
of steel products from each of the Asian countries most seriously affected by the currency
depreciations of 1997 and 1998 surged after the currency crises began and remained at high levels
afterward. The data also demonstrates that the crises displaced steel production elsewhere, as
demonstrated by the unprecedented increase in imports from areas outside South East Asia.527
7.168 The United States responds that the complainants have presented no evidence that the
currency disruptions that occurred prior to the import surges were, in fact, foreseen by anyone, much
less that those events were foreseen by any negotiator from the United States during the Uruguay
Round. Information cited by the USITC indicated that these crises were, in fact, unforeseen, not only

520 European Communities' first written submission, paras. 132 and 135; Norway's second written
submission, paras. 120 and 123.
521 China's first written submission, paras. 102-106.
522 European Communities' first written submission, para. 163; Switzerland's first written submission,
Zealand's first written submission, para. 4.28.
523 European Communities' first written submission, para. 167; Switzerland's first written submission,
para. 154; Norway's first written submission, para. 156; China's first written submission, paras. 117.
524 European Communities' first written submission, paras. 169-172; Switzerland's first written
submission, paras. 156-159; Norway's first written submission, paras. 158-161; China's first written submission,
paras. 119-122; New Zealand's first written submission, paras. 4.14-4.15.
525 New Zealand's first written submission, para. 4.18.
526 New Zealand's second written submission, para. 3.11.
527 United States' first written submission, para. 963.
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 negotiators, but also by professional economic forecasters right up until the time they began, and
the severity of these crises was not fully appreciated even after events had begun to unfold. Economic
forecasts prepared as late as October 1997 still projected "robust growth trends in most of the
developing world", including most of Asia and Russia and other former USSR republics.
528
7.169 The United States submits that economic data from that time period indicates that there was
little reason to expect significant economic contraction in either South East Asia or the former USSR
republics. Prior to the onset of these currency crises, the economies of South East Asia had
experienced a period of consistent growth 529 and moderate inflation and had fairly disciplined
macroeconomic policies.530 Most of the former USSR republics had achieved positive growth rates in
1996 and in 1997. 531 Nonetheless, by late 1997, markets in these countries had been seriously
destabilized, growth had contracted sharply, grow th forecasts were downgraded, and steel production
was being displaced into other markets, notably the United States.532
7.170 The United States argues that the USITC did not cite the dissolution of the Soviet Union as an
unforeseen development, but rather the difficulties the former USSR republics encountered after
dissolution. The USITC's investigation provided abundant evidence that the financial disruptions in
the former USSR republics beginning in 1996 changed export and consumption patterns in the region.
Although the decrease in apparent domestic consumption of steel products and the increase in exports
began soon after the dissolution of the USSR, the severity of the imbalance between these trends
sharpened after 1996. In 1996, the ratio of apparent domestic consumption of steel to exports for
those countries was 1.37, meaning that for every ton of steel consumed, the countries exported 1.37
tons. By 1998, that ratio rose to 1.57 and in 1999 it remained high at 1.54. The region's reliance on
exports increased significantly.
533 Imports into the United States market of flat-rolled products from
Russia increased from 3.2 million short tons in 1997 to 5.1 million in 1998; from Kazakhstan, they
increased from 22,588 short tons in 1997 to 149,265 in 1998; from Lithuania, they increased from
1,560 short tons in 1997 to 62,930 short tons in 1998.
534 Steel imports to the US market from 10
former USSR republics increased by 67.3% between 1997 and 1998 alone. Steel imports from Russia
were subsequently limited by an agreement, but im ports from the nine other former USSR republics
remained high. Steel imports into the US market from those nine countries in 2000 were 145.4%
higher than in 1996.535
7.171 The United States does not agree that the only data provided by the USITC to link the Asian
and Russian crises with increased imports were consumption decreases in those regions. In its
opinion, the USITC cited consumption data for the most severely affected countries in South East
Asia, as well as production and consumption data for the former USSR republics. Elsewhere in the

528 United States' written reply to Panel question No. 10 at the first substantive meeting, citing Minimill
Coalition (Long Products) Prehearing Brief, Exhibit 19 (World Economic Outlook, Oct. 1997, p. 1) (Exhibit
US-74).
529 Minimill Coalition (Long Products) Prehearing Brief, Exh. 19 (World Economic Outlook, Oct.
1996, p. 26) (Exhibit US-74).
530 Minimill Coalition (Long Products) Prehearing Brief, Exh. 19 (World Economic Outlook, Dec.
1997, p. 3) (Exhibit US-74).
531 Minimill Coalition (Long Products) Prehearing Brief at Exh. 19 (World Economic Outlook, Oct.
1997, p. 27), Exhibit US-15.
532 United States' written reply to Panel question No. 10 at the first substantive meeting.
533 United States' first written submission, para. 968, citing USITC Report, OVERVIEW-19, Tables
OVERVIEW-4 and OVERVIEW-5.
534 United States' first written submission, para. 969, citing USITC Dataweb tables (US-49).
535 United States' first written submission, para. 972, citing USITC Dataweb tables (US-49) and INV-
Y-180 (US-40).
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

USITC Report, the USITC cited tables which showed imports by country by product for the entire
period of investigation. 536 All of these data support the USITC analysis. The United States claims
that the complainants take issue with the conclusions drawn by the USITC from that data, but have
brought forward no data to indicate that their alternative explanations – e.g., perhaps production
declined, perhaps imports to the US did not increase – are in fact plausible. In light of their failure to
put forward a plausible alternate explanation, complainants have failed to make a prima facie case that
the USITC's demonstration of unforeseen developments was inconsistent with the Agreement on
Safeguards.537
7.172 Regarding New Zealand's allegation that contraction in steel consumption was symptomatic
of the dislocations in the respective steel industries in South East Asia and the former USSR republics
as a result of the currency crises that beset those economies, the United States suggests that these
significant changes in consumption indicated both an increased pressure to export domestic
production that could not be consumed in the domestic market and foregone import consumption;
those foregone imports were also displaced into the world steel market. 538 Referring to data used by
the USITC in its Second Supplementary Report, the United States argues that the figures show that
the degree of dislocation experienced by these economies was severe. Although consumption
expanded somewhat after the sharp contraction experienced in 1998, consumption remained well
below 1995-1997 levels.539
7.173 The United States notes that the complainants have taken issue with this interpretation,
arguing that the steep declines in consumption might have been caused by disruptions in production,
leaving no excess, unconsumed steel production to be exported into other markets. However, the
complainants point to no evidence in the record indicating that any such disruptions occurred.
Furthermore, the complainants' argument overlooks the fact that imports into those countries also
were affected by the sharp contraction in consumption. Even if production in the affected countries
had declined, leaving no excess for export – and there is no evidence in the record to indicate that this
occurred – imports that otherwise would have been consumed in those countries still would have been
displaced out into the world market.
540 Imports of steel products from Indonesia, Korea, Malaysia,
the Philippines and Thailand jumped by 113.5% between 1997 and 1998 alone, and were still 132.8%
higher in 2000 than in 1996.541
7.174 The United States argues that there was an increasing discrepancy between production and
consumption in the former USSR republics. Th e domestic markets of the former USSR republics
were unable to absorb significant portions of local production. In 1994, steel production was
approximately 2.28 times greater than consumption; this ratio peaked in 1998, when steel production
was more than 2.58 times greater than consumption. This indicates that these industries were under
constant, and increasing, pressure to find export markets for this excess production. The pressure to
find additional export markets was exacerbated by the Asian financial crises that began in 1997,

536 USITC Report, pp. 65-66 (CCFRS), 99-100 (hot-rolled bar), 107-108 (cold-finished bar), 115-116
(rebar), 168-170 (certain welded pipe), 178-180 (FFTJ), 213-214 (stainless steel bar), 222-223 (stainless steel
rod), 259-260 (stainless steel wire, Commissioner Koplan), 303-305 (carbon flat products and stainless steel
wire and wire rope, Commissioner Bragg), 309-310 (tin mill, Commissioner Miller), 347 (stainless steel wire
and wire rope, Commissioner Delaney).
537 United States' written reply to Panel question No. 7 at the second substantive meeting, citing
Appellate Body Report, US – Lamb, para. 106.
538 United States' written reply to Panel question No. 16 at the first substantive meeting.
539 United States' written reply to Panel question No. 16 at the first substantive meeting, citing USITC
Report, Vol. II, OVERVIEW-7.
540 United States' written reply to Panel question No. 16 at the first substantive meeting.
541 United States' first written submission, para. 962.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

insofar as Asia had been an important export market for steel produced in the former USSR.
Furthermore, the Asian currency crises spilled over and placed greater pressure on the currencies of
the former USSR republics and curtailed growth there as well.
542
7.175 In counter-response, New Zealand argues that there is no onus on the complainants to
demonstrate that the relationship which the United States assumes to exist between the Asian and
Russian economic crises and the purported increase in steel imports does not, in fact, exist. Nor is it
for the USTR lawyers to attempt to prove that the assumptions were correct after the fact. Rather, it
was up to the USITC to demonstrate that this relationship existed, yet it provided no evidence in
support.543 Norway agrees that the displacement theory provided by the United States is nowhere
substantiated in the USITC Report. Although the United States presents some figures on their imports
from ex-USSR countries, it provides none on displacement and diversions via WTO Members.544
7.176 The European Communities also contests the United States' use of further data that is not on
the record to respond to the inadequacies of the USITC's analysis. This is not only unacceptable, but
the fact of having to rely on extraneous data demonstrates the inadequacy of the explanation provided
by the USITC.
545
The USITC's explanation
7.177 The European Communities and Switzerland argue that the USITC's analysis is based on
scattered and incomplete facts and results in vague suggestions and speculation. Both "primary"
unforeseen developments, severe currency dislocations in the former USSR and Asia, are assumed to
have led to massive increases of exports, or reductions in steel imports, in these countries, which
consequently increased amounts of steel on the world market and allegedly caused increased imports
into the United States. The alleged effect is rather indirect. Indirect effects, being more complex,
would require a fuller explanation. The USITC's e xplanation is, however, superficial in the extreme.
Most of the "evidence" for the alleged increase in exports from these countries comes from data
relating to the decline in consumption of steel products on these markets. However, a decline in
consumption does not mean there was an increase in exports. Switzerland and the European
Communities suggest that, just as domestic production of steel-consuming industries was disrupted,
so also could the production of steel producers have been disrupted
546, and the European Communities
notes that nowhere in the USITC's Second Supplementary Report are these alternative scenarios
considered.547
7.178 The European Communities and Switzerland also argue that the complex confluence of
events that allegedly resulted in increased imports of particular steel products was not self evident.
Yet, there is no hint of an explanation of how this occurred in the USITC Report and the explanation
of these alleged unforeseen developments in the Second Supplementary Report does not constitute a
reasoned and adequate explanation.548 The European Communities adds that the USITC expressed no

542 United States' written reply to Panel question No. 16 at the first substantive meeting, citing Minimill
Coalition (Long Products) Prehearing Brief, Exh. 19 (W orld Economic Outlook, Dec. 1997, pp. 20 and 30)
(Exhibit US-74).
543 New Zealand's second oral statement, para. 5.
544 Norway's second written submission, para. 44.
545 European Communities' second written submission, paras. 80-81.
546 Switzerland's second written submission, paras. 23-25; European Communities' second written
submission, paras. 67-68.
547 European Communities' second written submission, para. 69.
548 Switzerland's second written submission, para. 36; European Communities' second written
submission, para. 59.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

view on whether these developments were in fact "unforeseen developments", as demonstrated by the
way it threw the responsibility back to the USTR. The USITC expressly stated that an assessment of
the extent that WTO panel decisions have suggested that "unforeseen developments" relates to the
expectations of negotiators of the relevant tariff concessions is "in many respects outside the purview
of this agency, since multilateral trade negotiations are not within its mandate, but are the
responsibility of the USTR and relevant Executive Branch agencies". Yet, neither the USTR nor
other agencies made a determination either.
549
7.179 According to the European Communities, the USITC's explanations are far too vague to be
considered reasoned and adequate explanations. For example, the USITC explanation of the effect of
the Russian financial crisis is contained in only one paragraph of the USITC's letter. It refers in
footnotes to an account of less than a page and a half in the USITC Report that relates not to a
financial crisis in 1996 but to dislocation resulting from the dissolution of the former Soviet Union in
1991. There is no mention in the USITC Report of the financial crisis or "difficulties" in Russia or
the former Soviet Union referred to in the USITC' s Second Supplementary Report. The tables in the
USITC Report demonstrate severe disruption between 1991 and 1994 (a period on which we are told
the USITC did not rely) but nothing remarkable between 1996 to 1999. 550 The information
concerning the Asian financial crisis is not much more detailed or precise. There is less than a page
on the subject in the USITC Report and the data relates to steel consumption in five countries in
1998.551
7.180 The United States disagrees with the complainants that the USITC did not establish a link
between the unforeseen developments and the resu lting increase in imports. The USITC noted the
existence of export-oriented industries, currency crises, contraction in consumption in those countries
experiencing the currency crises, and the resulting disruption in world steel markets caused by those
contractions.552 The USITC further noted the counter-cyclical status of the US market when these
financial crises occurred, with US demand remaining strong while other markets contracted or
stagnated, and the persistent appreciation of the US dollar, which made the US market an especially
attractive one for displaced imports. 553 The United States submits that the complainants have yet to
point to any evidence on the record of the investig ation which contradicts the USITC's interpretation
of events, let alone demonstrates that the USITC's interpretation was not reasonable.554
7.181 In the opinion of the United States, at some point, the complainants must do more than just
claim the USITC's demonstration of unforeseen developments is unreasoned or inadequate; the
complainants must make some showing that the demonstration is unreasoned or inadequate. The
United States submits that the USITC identified a number of developments, showed that those events
were unforeseen, and demonstrated that those events resulted in increased quantities of imports. The
USITC's demonstration was both reasoned and adequate. The complainants have presented no
evidence or argument that would undermine the USITC's analysis.
555
7.182 The complainants also argue that although the United States imposed 11 different safeguard
measures on a large number of products, the USITC's explanation of unforeseen developments relates

549 European Communities' second written submission, paras. 60-61.
550 See Table OVERVIEW 4 on page OVERVIEW 19 of Volume II of the USITC Report.
551 European Communities' second written submission, paras.70-71, citing Figure OVERVIEW 7 on
page OVERVIEW 18 of Volume II of the USITC Report.
552 USITC Second Supplementary Report, pp. 2-3.
553 USITC Second Supplementary Report, pp. 3-4.
554 United States' second written submission, para. 171.
555 United States' second written submission, para. 178.
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 steel production in general and relies on selected statistics for only certain selected products in
certain selected countries over inconsistent periods. For them, a proper explanation of unforeseen
developments would have been based on an examination of, and led to determinations on, unforeseen
developments leading to increased imports in respect of each of the products, in accordance with
Article XIX:1(a) of the GATT 1994, which refers to "any product". For the complainants, no link has
been established between the unforeseen developments and each of the products on which safeguard
measures are imposed.
 556 New Zealand adds that the USITC's analysis with regard to the former
Soviet Union is based only on data relating to the production of "crude steel" 557, and the USITC fails
to explain the relationship of "crude steel" to the various product categories covered in its
investigation. Similarly, the data relating to the Asian financial crisis relied on by the USITC relates
to consumption of "finished steel products" only and can therefore not serve as a basis to impose
safeguard measures on raw or semi-finished products.
558
7.183 The complainants submit that there is no explanation the Asian crisis specifically affected the
steel products on which safeguard measures were imposed any more than any other product. For the
European Communities, the expression "such increased imports" as well as the general requirement
that safeguard measures be emergency measures implies that there must be some special or
extraordinary reason why the unforeseen development has an impact on the relevant sector or product.
The European Communities, China and Norway add that the effects of unforeseen developments must
be sufficiently specific to give rise to a sufficient causal link (or logical connection as it is sometimes
called) with increased imports.
559 For New Zealand, a "logical connection" or linkage needs to be
shown between the "unforeseen developments" and increased imports of the products to which the
safeguard measure is applied. Thus, this is the level of specificity required for unforeseen
development.560 For the European Communities, China, Switzerland, Norway, and New Zealand, a
specific effect on the product (or sector) concerned must be demonstrated and cannot simply be
presumed. The robustness of the United States economy, for example, will have effects on many
sectors of the economy and even cause increased imports of many products.
561 Nevertheless, the
United States made no attempt whatsoever to relate the supposed "unforeseen developments" to
increased imports of the specific products to which the measure applied.
7.184 The United States questions the complainants' reliance on the emergency nature of a
safeguards action without defining the relationship between this emergency nature and the
relationship that must exist between unforeseen developments and increased imports. It disagrees
with the European Communities' sweeping assertion that "there must be some special or extraordinary
reason why the unforeseen development has an impact on the relevant sector or product". In the
opinion of the United States, nothing in Article XIX, the Agreement on Safeguards, or any Appellate
Body or Panel report evaluating these texts indicates that the relationship between unforeseen
developments and increased imports must be "special or extraordinary". Neither "special" nor
"extraordinary" appears in the text of Article XIX or Article 2. Thus, Article XIX and the Agreement

556 European Communities' first written submission, paras. 136-139; Switzerland's first written
submission, para. 122-125; Norway's first written submission, paras. 124-127; China's first written submission,
paras. 94-96, New Zealand's first written submission, para. 4.20.
557 USITC Report, Vol II, Table OVERVIEW-3.
558 New Zealand's first written submission, para. 4.21.
559 The European Communities', China's and Norway's written replies to Panel question No. 7 at the
first substantive meeting.
560 New Zealand's written reply to Panel question No. 7 at the first substantive meeting.
561 The European Communities', China's, Switzerland's, New Zealand's and Norway's written replies to
Panel question No. 4 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

on Safeguards plainly do not require proof of a "special" or "extraordinary" relation between an
unforeseen development and the resulting increase in imports.562
7.185 Regarding the allegation that such unforeseen development had to be related specifically to
the steel industry or to steel products, the United States argues that the only requirement under
Article XIX:1(a) is that the imports in such increased quantities and under such conditions as to cause
serious injury must be "as a result of" increased imports. The text does not require any degree of
specificity. Thus, as long as the increased quantity of an imported product or the conditions under
which it is imported are the result of an unforeseen development, it is irrelevant whether that
development had other effects. 563 Article XIX does not require competent authorities to trace each
unforeseen development, such as a massive economic crisis, to each specific increase in imports of a
product or category. In this case, there was no need to trace the effects of each disturbance on each
individual steel product.564
7.186 For the United States, the unforeseen developments do not have to be developments that
affect only one economic sector. It argues that there is nothing in Article XIX that requires that
unforeseen developments solely or primarily affect a single sector. For the United States, the
implication of a rule – that unforeseen developments that affected multiple economic sectors might
not be sufficient to meet the Article XIX stan dard – would be that Members would have greater
flexibility to deal with narrow economic disruptions but limited or no authority to deal with truly
dramatic economic events, such as the Asian financial crisis. This cannot be the case.
565
7.187 The United States admits that, as a factual matter, the unforeseen developments identified by
the USITC did result in a wide variety of stee l products being imported into the US market in
increased quantities and under such conditions as to cause serious injury to the relevant domestic
industries. However, nothing in Article XIX requires that unforeseen developments only result in
increased imports of one particular product. By this line of reasoning, the change in fashion cited in
US – Fur Felt Hats might not have been an unforeseen event, since increased demand for a particular
style of hat might have also increased demand for a particular style of glove or a particular shade of
lipstick.
566
7.188 As for the complainants' argument relating to crude steel and finished steel, the United States
contends that complainants do not deny that all semi-finished and finished steel products begin as
crude steel products, nor do they pretend that finished steel products are fashioned from something
other than steel. According to the United States, their complaints also overlook the USITC's finding
that imports of virtually all steel products increased in the wake of these unforeseen developments,
even if the increases for some products were not deemed injurious. Moreover, the complainants also
disregard the portion of the USITC's Report in which it distinguished the effects of those unforeseen
developments on imports of certain products.567
7.189 In counter-response, Norway argues that the United States failed to substantiate the
determination that unforeseen developments actually led to increases in imports for each and every
product under investigation. The figures are not broken down in the USITC Reports (for each and
every one of even the 10 product groups the measures are directed against), and there is no indication

562 United States' second written submission, para. 173.
563 United States' written reply to Panel question No. 7 at the first substantive meeting.
564 United States' first written submission, para. 938.
565 United States' written reply to Panel question No. 7 at the first substantive meeting.
566 United States' written reply to Panel question No. 7 at the first substantive meeting.
567 United States' second oral statement, para. 111.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

anywhere in the reports or in the United States' submissions that e.g. the "Russian Crisis" led to
increased imports of "tin mill products". Norway submits that, indeed, the countries of the former
Soviet Union have only minimal exports of "tin mill products" to the United States – either directly or
indirectly – as their exports are at the crude end of the scale.
568
7.190 The European Communities argues that Article XIX of GATT 1994 requires that unforeseen
developments result in increased imports of the product on which a safeguard measures is to be
imposed and this applies to each of the ten (or arguably eleven) safeguard measures. Each safeguard
measure, therefore, requires a demonstration that the requirements of Article XIX of GATT 1994 and
the Agreement on Safeguards are satisfied for the product (or even product bundle) covered by the
relevant measure. The European Communities submits that, clearly, justifying that there are
unforeseen developments leading to increased imports of one product does not mean that this
requirement is met for all products.
569
7.191 The United States disagrees with the complainants' assertion that a competent authority must
demonstrate a specific effect from unforeseen developments on specific industries, a requirement that
allegedly arises from "the expression 'such increased imports'". According to the United States, that
phrase occurs in neither Article XIX nor Article 2 of the Agreement on Safeguards, so it is difficult to
discern how the phrase could be used to justify a burden not stated in Article XIX or the Agreement
on Safeguards.
570 As a practical matter, the United States points out that the USITC found that the
cited unforeseen developments did not affect the import levels of all steel products in uniform ways.
The USITC specifically noted that the surge in imports for some products occurred later in the period
of investigation and found that the disruptions in the Asian markets and the markets of the former
USSR republics might have played smaller roles in increasing imports of stainless and tool steel
products.
571
(iii) Opportunity for interested parties to present their views to the USITC
7.192 Since the discussion on unforeseen developments is located in a second or additional report,
the European Communities, China, Norway and New Zealand argue that concerned parties should
have been asked about it and should have been given the opportunity to comment on it. These
interested parties include importers, exporters and producers.572 Since this did not occur, third parties
were not provided with an opportunity to present their views on the issue of unforeseen
developments.573 According to the European Communitie s, China and Norway, Article 3.1 of the
Agreement on Safeguards contains a general obligation to allow interested parties to express their views
and comment on the views and evidence of other par ties concerning all pertinent issues of law and
fact.574
7.193 In the opinion of the United States, the USITC Report itself shows that the unforeseen
conditions demonstrated in the USITC Second Supplementary Report informed its injury

568 Norway's second written submission, para. 35.
569 European Communities' second written submission, paras. 50-51.
570 United States' second written submission, para. 172.
571 United States' second written submission, para. 174, citing USITC Second Supplementary Report,
p. 4 n. 24.
572 European Communities', China's and Norway's written replies to Panel question No. 1 at the first
substantive meeting and European Communities' first written submission, para. 178.
573 European Communities' first written submission, para. 178; China's first written submission,
574 European Communities', China's and Norway's written replies to Panel question No. 1 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

determinations. The USITC specifically sought information on unforeseen developments in the
course of its investigation, by including specific questions on its various questionnaires and directly
requesting parties to address the issue in written submissions.
575 The USITC investigated the
conditions, and the parties addressed them in briefs and in testimony at the USITC hearings. The
USITC Report's overview section addressed each of the conditions. 576 The turmoil in financial
markets was specifically noted as a condition affecting competition in the domestic market. 577
Accordingly, the allegation that third parties had no opportunity to present evidence and their views
on the issue of unforeseen developments, in violation of Article 3.1 of the Agreement on Safeguards,
is patently incorrect.578 The USITC gave public notice of its institution of the steel investigation and
it invited public comments and suggestions regardin g the content of its questionnaires. The USITC
accepted prehearing written submissions with no page limits, and several of those initial written
submissions discussed unforeseen developments. The USITC's prehearing Staff Report included
information on the Asian economic crisis, continuing post-dissolution difficulties in the former USSR
republics, and the appreciation of the United States dollar. The USITC held a series of public
hearings at which various Commissioners directly solicited comments from the parties on unforeseen
developments.
579
7.194 The European Communities questions the United States' assertion that it gave adequate
opportunity to interested parties to comment on unforeseen developments, in accordance with
Article 3.1 of the Agreement on Safeguards. According to the European Communities, the reference
by the United States to questionnaires and to staff reports which interested parties could comment
upon was not enough to substantiate this claim, since the United States could point only to a single
USITC staff paper, which, upon examination, could not be said to give interested parties an
opportunity to respond.
580
7.195 According to the United States, the European Communities' position is incorrect in its
apparent belief that Article 3.1 requires a competent authority to list explicitly the issues under
consideration and request the interested parties to present their views on each issue. There is no basis
for this claim in the text of the Agreement on Safeguards. According to the United States, indeed, the
Appellate Body has defined a competent authority's ob ligation as limited to giving interested parties
"an opportunity" to submit evidence and to comment on evidence presented by others. 581 The United
States reiterates that the USITC far exceeded this requirement by providing multiple opportunities for
parties to present evidence, argument, and comment, as well as actively seeking parties' input. It also
argues that the European Communities' suggestion that a competent authority has a responsibility to

575 United States' written reply to Panel question No. 1 at the first substantive meeting, citing
Purchasers' Questionnaire at Question I-6 (US-43); Importers' Questionnaire at Question I-6 (US-42); Domestic
Producers' Questionnaire at I-7 (US-41). Transcript, pp. 326-327 (Chairman Koplan) (US-44); 343
(Commissioner Hillman) (US-45); 1445 (Vice Chairman Okun) (US-46); and 2626 (Vice Chairman Okun)
(US-47).
576 USITC Report, pp. OVERVIEW-17-18 (Asian financial crisis), OVERVIEW-18-19 (former USSR
countries), OVERVIEW-57-60 (exchange rates), OVERVIE W-25-27 (U.S. steel market). Continued demand
growth was discussed in individual production sections.
577 USITC Report, pp. 56-58. The moderate-to-high degree of substitutability, which facilitated the
flow of steel imports from other markets into the United States market, was also discussed individual production
sections. USITC Report, pp. 58 (CCFRS), 308 (tin mill), 96 (hot-rolled bar), 105 (cold-finished bar), 112
(rebar), 158 (certain welded pipe), 171 (FFTJ), 210 (stainless steel bar), 219 (stainless steel rod).
578 United States' first written submission para. 954
579 United States' written reply to Panel question No. 1 at the first substantive meeting.
580 European Communities' second written submission, paras. 82-87.
581 Appellate Body Report, US – Wheat Gluten, para. 54.
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 draft of the authority's own views for comment by the interested parties, is an obligation that
cannot be extrapolated from Article XIX or the Agreement on Safeguards.582
(iv) The timing of the explanation of "unforeseen developments"
7.196 The complainants also argue that since unforeseen development must be demonstrated as a
fact before a safeguard measure is imposed, the published report of the competent authorities must
contain a "finding" or "reasoned conclusion" on the "unforeseen developments". The USITC Report
did not address "unforeseen developments". Instead, on 9 February 2002, the USITC submitted a
Second Supplementary Report, based on a USTR request that it identify the unforeseen developments
for each affirmative determination. 583 For the European Communities China, Switzerland, and
Norway, the USITC's explanation is ex post and unrelated to the increased imports during the
investigation period. In their view, the USITC's explanation of unforeseen developments is
subsequent to, and divorced from, the findings on increased imports and serious injury, contrary to the
requirements contained in Article XIX:1(a) of the GATT 1994.584
7.197 The United States argues, on the other hand, that the USITC's issuance of the Supplementary
Report after it finished its analysis of all imports does not make the Supplementary Report an "ex post
facto analysis". The USITC provided the response prior to the decision to apply the safeguard
measures, which meets the requirement under Article 2.1 of the Agreement on Safeguards to apply a
measure "only if that Member has determined" that increased imports of a product are causing serious
injury.585 The United States submits that the "determination" for purposes of Articles 2 and 4 of the
Agreement on Safeguards is the legal conclusion of the competent authorities as to whether a product
is being imported in such increased quantities and under such conditions as to cause serious injury.
The United States' determination in this sense was made on 22 October 2001.586
7.198 In counter-response, China points out that the issuing of a number reports over a period of
time raises certain concerns, where the original report serves as the basis for the determination of
serious injury and a supplementary report provides additional pertinent information particularly
regarding unforeseen developments. China asks whether the additional information could have been
taken into account by the USITC in its Report for the determination of injury? If so, how is this
compatible with the fact that there were no comments on unforeseen developments in the USITC
Report and that it was necessary to wait for the specific request of the USTR for identification of
unforeseen developments to receive explanations from the USITC? In China's opinion, the
Supplementary Report could not heal the defects found in the USITC Report.
587
7.199 The United States responds by pointing out that the complainants have not attempted to
explain why the format and structure of the Report is not the sort of internal detail specifically left to a
competent authority. 588 Moreover, the complainants ignore the fact that the USITC specifically
labelled the developments as unforeseen, cited evidence regarding the expectation of negotiators when

582 United States' second written submission, para. 168.
583 European Communities' first written submission paras. 124-125, citing USITC Second
Supplementary Report, Attachment I, pp. 1 to 4, Exhibit CC-7; Switzerland's first written submission,
paras. 110-112.
584 European Communities' first written submission, para. 131; China's first written submission,
585 United States' first written submission, para. 951.
586 United States' written reply to Panel question No. 15 at the first substantive meeting.
587 China's second written submission, para. 31.
588 United States' second written submission, para. 169, citing Appellate Body Report, US – Line Pipe ,
para. 158.
WT/DS248/R, WT/DS249/R,
WT/DS251/R, WT/DS252/R,
WT/DS253/R, WT/DS254/R,
WT/DS258/R, WT/DS259/R

undertaking the Uruguay Round, and added in the expectations of professional forecasters to
demonstrate the extent to which these events were unforeseen even as they were unfolding.589
D. "A PRODUCT"
1. Order of identification of the imported product and the domestic industry
7.200 The European Communities and China claim that USITC's approach of basing its
determinations on arbitrary and shifting groups of products without first identifying specific imported
products is fundamentally flawed and inconsistent with Article 2.1 of the Agreement on
Safeguards.590 The United States argues in its defence that there is no requirement in the Agreement
on Safeguards to first identify a specific imported product.591
7.201 The European Communities, Korea, China, Switzerland and Norway argue that the first
obligation in a safeguards investigation under Article 2.1 of the Agreement on Safeguards is to
identify a specific imported product. This exercise precedes the definition of the "domestic industry
producing like or directly competitive products". 592 New Zealand argues that the process for
determining the relevant "domestic industry" must focus at the outset on the product which it is
alleged is being imported in increased quantities. This requires an initial definition of that imported
product.
593
7.202 Korea argues that, in the absence of such an analysis, the petitioning domestic industry would
determine the scope of the like product, which clearly turns the legal requirements of the Agreement
on Safeguards on their head.594 Similarly, Norway submits that if the imported product is not properly
defined, then there cannot be a "like product", and thus no definition of the domestic industry. First
defining the domestic industry results in "turning everything up-side down" and is clearly not
permissible under the Agreement on Safeguards.595
7.203 For Japan, however, the order in which the imported product and like product are defined is
immaterial, as long as the scope of the domestic like product and, in turn, the domestic industry is
properly defined. Japan and Brazil submit that the debate over sequencing masks the real issue of
how products – like and imported – are properly divided, in order to ensure that there is a one-to-one
"likeness" relationship between the imported and domestic products in defining the domestic industry.
In Japan's view, the guidance on how to divide products exists in the context of like product, for
which there is a wealth of jurisprudence.
596
7.204 The United States contends that while the USITC begins with the universe of imports
identified in the request, the USITC is only required to define or identify the domestic product or
products like or directly competitive with the imported article or articles in the petition or request. It

589 United States' second oral statement, para. 110.
590 European Communities' first written submission, para. 181; China's first written submission,
para. 171.
591 United States' first written submission, paras. 97 and 101.
592 European Communities' first written submission, paras. 179, 185; China's written reply to Panel
question No. 35 at the first substantive meeting; Korea's first written submission, para. 19; Norway's first written
submission, paras. 168, 176; Switzerland's first written submission, paras. 164, 171.
593 New Zealand's first written submission, para. 4.32.
594 Korea's first written submission, para. 22.
595 Norway's second written submission, para. 52.
596 Japan's written reply to Panel question No. 17 at the second substantive meeting; Brazil'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

is not required to consider whether and how to subdivide (or combine) the imported article or articles
identified in the request into relevant sub-groupings prior to identifying the domestic like products.597
7.205 The United States submits that the complainants' arguments seem to be based on a notion that
definitions of the like product are made prior to the gathering of evidence. The USITC, however,
does not predetermine its definitions of like product. In the present case, the USITC appropriately
began its like product analysis with the imports subject to this particular investigation, which included
a range of steel products, and after considering the factors appropriate for the context and the facts of
this particular investigation, made its like product definitions. Contrary to the complainants'
allegations, the USITC was not required to begin with any predefined like products that had been
identified in different investigations pursuant to other statutory standards and based on the particular
records of the cases in which they were defined.
598
7.206 The United States also responds that it would be acceptable under the Agreement on
Safeguards for competent authorities to first identify the domestic industries (domestic product) that
have been injured and then secondly to identify th e specific imported products that are considered to
have caused the injury. Article 4.2(a) indicates what the competent authorities must do before
reaching a determination; it does not require them to perform these tasks in a particular order. The
United States submits that, in any event, the USITC did not identify the domestic industry first. It
first considered the merchandise subject to investigation, identified the identical domestically
produced steel, divided the domestic steel into discrete like products, and divided imports into the
same categories.
599 After defining its domestic like product(s), the USITC identified the subject
imports (i.e., "such product", or "specified imported product") that corresponded or matched up to
each of the like product definitions in order to conduct each of its analyses of increased imports,
serious injury, and causation.600
7.207 In response, the European Communities submits that the United States' approach can not be
reconciled with the text of Article 2.1 of the Agreement on Safeguards , which explicitly distinguishes
between "a product" or "such product" on the one hand and the "like or directly competitive products"
produced by the domestic industry on the other. The term imported "product" is used with reference
to each of the conditions specified in Article 2.1 ("a product" or "such product"). Contextually, the
difference between these two concepts is further corroborated by Article 4.1(c) of the Agreement on
Safeguards which elaborates on the definition of the "domestic industry" and clarifies that such
definition is only relevant "in determining injury or threat thereof". Article 4.2(a) of the Agreement
on Safeguards then assumes a determination of "increased imports" before it can be analysed whether
these have caused or are threatening to cause serious injury and Article 4.2(b) contains the term
"product concerned". Finally, Article 2.2 of the Agreement on Safeguards also refers to "a product
being imported" against which a measure can be imposed.
601
7.208 Korea submits that the absence of a specific requirement as to how the analysis of the
imported product must be done is not determinative. By its terms, the Agreement on Safeguards
makes very clear that it is "such imported product" or, in the case of Article XIX of the GATT 1994, a
"particular product or products" which must be identified. 602 Article 2.2 refers to "a product being
imported" against which a measure can be imposed. The Agreement makes clear that while there is

597 United States' first written submission, para. 95.
598 United States' first written submission, para. 105.
599 United States' written reply to Panel question No. 23 at the first substantive meeting.
600 United States' written reply to Panel question No. 145 at the first substantive meeting.
601 European Communities' second written submission, para. 113.
602 Korea's second written submission, para. 21.
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 limitation on the scope of the products that are subject to investigation, each "such product" in the
investigation must be identified and analysed, otherwise there would be no basis for imposing a
measure on that product.
603
7.209 The United States counter-argues that there appears to be some consensus that the order of
analysis employed in the USITC's general met hodology (i.e., whether the domestic like product or
specific imports are identified first) is not the issue but, rather, it is whether some product definitions
in this particular investigation were too broad. 604 The USITC's focus on the domestic product rather
than the imported product for its analysis of whether there is a single or multiple like products is fully
consistent with the object and purpose of the Agreement on Safeguards. The Agreement on
Safeguards provides for an analysis of the condition of the domestic industry (i.e., consideration of
whether the domestic producers of the like product are experiencing serious injury) in order to protect
it if necessary, albeit temporarily, from increased imports. Given the purpose of the Agreement,
examining the products domestically produced to ascertain the composition and scope of the pertinent
like products is eminently reasonable. After all, the United States argues, if the objective is a precise
identification of the domestic like product so as to be able to define the relevant domestic industry in
order "to ensure that only domestic producers suffering serious injury are given temporary breathing
room to facilitate adjustment"
605, logic dictates that the analysis start with consideration of the
domestic products, not the subject imports. The focus of the safeguard analysis is on the condition
and response to stimuli of the domestic industry. The nature of the exporting producer and industries
would not logically further this required analysis.
606
7.210 The United States further submits that any like product analysis must be based on an
evidentiary record. Subdividing imports into various groups prior to the collection of any evidence as
part of the investigation, as some complainants advocate, would call into question the very basis of
any resulting finding. In contrast, the USITC did not predetermine its like product definitions, but
rather first gathers evidence, and only then proceeds to an analysis using the factors appropriate to its
investigation, and a like product determination based on the facts of the particular case. This
approach ensures that, as with other pertinent issues of law and fact, the consideration of like product
definitions is consistent with Article 3.1.
607
7.211 According to the United States, requiring a competent authority to delineate the relevant like
product divisions based exclusively on the imported products set forth in a petition or request for
investigation raises a number of concerns, not the least of which is the fact that there is no basis for
such an obligation in the Agreement on Safeguards. The imposition of such a requirement could also
hamstring the competent authority in ways that would prove detrimental to its investigation and,
therefore, would likely also detract from the conclusions that the authority ultimately reaches. The
very global nature of a safeguards proceeding means that an investigation often will implicate
products from many countries and the products originating in each of those countries may vary
considerably. Therefore, for the competent authority to focus its inquiry on the imported products
rather than the domestic products is far less likely to produce information that will be useful for
defining the domestic like product or products, and the relevant domestic industry or industries.
608

603 Korea's second written submission, para. 22.
604 United States' second written submission, para. 44.
605 European Communities' written reply to Panel question No. 51 at the first substantive meeting.
606 United States' second written submission, para. 47.
607 United States' second written submission, para. 49.
608 United States' second written submission, para. 50.