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Dispute Settlement

U.S. Trade Remedy Law: The Canadian Experience

VI  United States Safeguard Investigations regarding Imports from Canada: Case Histories, 1982–1999

1 Certain Specialty Steel (Stainless Steel and Alloy Tool Steel)

On December 9, 1982, the ITC initiated a safeguard investigation under section 202 of the Trade Act of 1974, to determine whether specialty steel products were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing a like or directly competitive product.

In May 1983, the ITC determined that numerous categories of stainless steel and certain alloy tool steel products were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to industries producing like or directly competitive products. For purposes of comparison, domestic producers were divided into four separate industries: stainless steel sheet and strip; stainless steel plate; stainless steel bar and wire rod; and alloy tool steel.

In either actual or relative terms, the ITC found increases in all categories of imports, and dramatic increases for two particular products. During the period from 1978 to 1982, there were increasing imports as the market share of domestic production in each of the four stainless steel and alloy tool steel product groups fell. This finding satisfied the increasing imports requirement of section 201.

Next, the ITC went on to determine whether there was injury to U.S. producers. The ITC looked at various factors relevant to each of the four industry groups.

In the case of stainless steel sheet and strip, during the period of review (1978–1982) overall production had decreased significantly, from 694,000 to 507,000 short tons. Capacity had increased slightly during the period, but capacity utilization had fallen from 72.8% in 1978 to 46.2% in 1982. Shipments, employment and worker hours showed decreases. Financial indicators showed that many producers earned lower profits and that some were operating at losses by the end of the period under review.

For stainless steel plate, production showed increases in the first part of the period under review but sharp declines by the end of the period. This performance was mirrored by changes in capacity utilization, shipments, exports and employment. Profits increased from 1978 to 1979, but were replaced with losses by 1982. Similar trends were found for the remaining two products (stainless steel bar and wire rod, and alloy tool steel).

The President granted relief to the domestic industry through a combination of ad valorem tariffs and quantitative restrictions. An ad valorem tariff was imposed on stainless steel sheet and strip, and on stainless steel plate; quantitative restrictions were placed on stainless steel bar and wire rod, and on alloy tool steel.

Upon expiration of the first set of tariffs and quotas in 1987, the President extended the relief for a period of just over two years, until January 1989. In addition to the extension of relief, in June and July 1987 certain U.S. semi-finished specialty steel products were reclassified, with the result that some additional Canadian exports fell within the scope of the U.S. import quota.

1.1 Canadian Government Activity

When the President granted the relief, Canada in turn exercised its GATT Article XIX rights to increase tariffs on specialty steel imports from the United States. These tariffs were later withdrawn after the U.S. Congress eliminated certain “Buy American” restrictions on cement. When imposing the quantitative restriction, the U.S. administration offered to negotiate an orderly marketing agreement with Canada; a four-year agreement was concluded in October 1983. Part of the orderly marketing arrangement included a waiver by Canada of its right to compensation. Upon extension of relief, in 1987 Canada sought renegotiation of the orderly marketing agreement for another 18 months.

2 Carbon and Certain Alloy Steel Products

On January 24, 1984, pursuant to a petition filed on behalf of Bethlehem Steel Corp. and the United Steelworkers of America, the ITC initiated a safeguard investigation under section 202 of the Trade Act of 1974, to determine whether various carbon and alloy steel products were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing a like or directly competitive product.

On July 24, 1984, the ITC determined that imports of five of the nine categories of carbon and alloy steel products named in the petition179 were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to industries producing like or directly competitive products.

In each of the nine categories, the ITC found an increase in imports in either actual or relative terms. This finding satisfied the increasing imports requirement of section 201. Next, the ITC went on to determine whether there was injury to U.S. producers. Various factors relevant to industry performance were negative. During the period of review (1979–1984), the industry had experienced massive negative changes in market conditions. Overall production of carbon steel had decreased significantly from 1979 to 1982. Although later in the period of review there had been some recovery in production, it was still very low in 1984. Capacity utilization had declined drastically. Employment and worker hours showed decreases. Lastly, financial indicators were at record lows for most major producers, and bond ratings for a number of companies had fallen. All these factors were taken as clear indication of serious injury to the industry.

The ITC determined that intra-industry competition was the main cause of injury for the production of rods, bars, pipes and tubes, and that a decline in demand was a more important cause for injury for railway-type products. However, for the remaining products under investigation, no cause was found to be more important for injury than the increase in imports.

With respect to remedy, the ITC made recommendations to the President that included tariff rate quotas (TRQs), quotas or tariff rate increases on the various products. These recommendations included a five-year schedule of implementation. In September 1984, President Reagan rejected the ITC recommendation that protection be provided by quotas and/or tariffs. He announced that the U.S. administration would negotiate voluntary restraint agreements (VRAs) with countries considered to be trading unfairly through dumping and subsidization. Accordingly, agreements setting market penetration ceilings were negotiated with 28 steel-supplying countries. There would, however, continue to be open access to the U.S. market for countries considered to be trading fairly in steel and having markets open to U.S. steel suppliers.

The President’s Steel Program targeted a reduction in imported steel products to about 20.5% of apparent U.S. consumption. This became the benchmark against which the effectiveness of the program was measured by Congress and the U.S. industry. In 1984, imports accounted for 26.6% of the U.S. steel market; by 1989 they had declined to 17.9%.

2.1 Canadian Government Activity

Carbon and alloy steel products were imported into the United States from a number of countries. Canada was the 15th-largest producer of steel in the world and ranked as second in total imports to the United States, at 2.4 million tons in 1984. During the period under review, Canada’s steel production had declined steadily before rising again in 1983.

Throughout this investigation, the federal government and the Canadian steel industry presented their view that, as a fair trader, Canada should not face restrictions on its exports to the U.S. market. The Government of Canada had also engaged in discussions with the U.S. administration to attempt to influence the President’s decision. At the time of the announcement, there were indications that Canada’s share of the U.S. market, as established by U.S. steel producers, should be about 2.4% to 2.6%. Canada’s actual share in 1984 was 3.2%. Canada and Sweden were the only traditional major steel suppliers to the United States not subject to a voluntary restraint agreement. Canada was by far the largest unrestrained supplier.

Canada appreciated, however, that the United States would want some assurance that Canadian steel producers would not exploit a situation in which U.S. imports from other suppliers were restrained. Consequently, Canada indicated its willingness to cooperate and consult when Canada’s share of the U.S. market for specified steel products increased significantly. It was envisaged that such consultations would provide an opportunity to examine the underlying market forces leading to an increase in market share. At the request of the U.S. government, there were consultations on developments in the Canada–U.S. steel trade on 10 occasions between December 1984 and October 1988. Consultations were not pursued after the VRAs were extended in 1988.

Canadian primary producers did, however, indicate to U.S. authorities their willingness to exercise prudence in their shipments to the United States. This was an important element in efforts to defuse pressures in the United States for a VRA with Canada. In June 1987, a Canadian export monitoring system was established for steel. This, combined with the import monitoring system established the previous year, enabled the federal government to ensure that Canada was not being used as a “back door” for shipments of steel from third countries to the United States. In addition, it made possible the collection of more accurate statistics on exports to the United States. This too was an important element in efforts to respond to U.S. pressures with regard to rising Canadian exports.

In 1988, the VRAs were extended to March 1992. The levels negotiated with the most restrained countries were increased, and in a number of cases bilateral agreements were concluded on subsidy disciplines. These agreements formed the basis for U.S. attempts to negotiate a Multilateral Steel Agreement (MSA) that would limit government participation, especially the provision of subsidies in steel-producing countries. Discussions eventually ended after the failure of attempts to incorporate the MSA into the Uruguay Round negotiations.

3 Wood Shingles and Shakes

On September 25, 1985, following receipt of a petition filed on behalf of U.S. wood shingle and shake producers, the ITC initiated a safeguard investigation under section 202 of the Trade Act of 1974, to determine whether wood shingles and shakes were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing a like or directly competitive product.

On March 25, 1986, the ITC determined that wood shingles and shakes were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to industries producing like or directly competitive products. Four members of the ITC found an increase in imports in either actual or relative terms, with higher import volumes during the period under review leading to a decline in the market share supplied by U.S. producers. This finding satisfied the increasing imports requirement of section 201.

The ITC went on to determine whether there was injury to U.S. producers. The ITC looked at industry data for the period from 1978 to 1985, concentrating on the years 1983 to 1985. Within this period the market had improved and the industry experienced an upturn in the business cycle. However, the performance indicators of the domestic industry declined during the period under review. Production and employment fell significantly in the later parts of the period. Production capacity and the number of producing firms had also decreased significantly, and the decline was continuing. All these factors were taken as a clear indication of serious injury to the industry.

Next, the ITC had to determine whether the increased imports were both an important cause of serious injury and no less important then any other cause. It explored various other causes, including cyclical downturns, declining supply, increasing supply costs and other competitive products. It found that, although the demand for shakes and shingles was increasing, the performance of the domestic industry was worsening. Imports were able to undersell the domestic product by a significant amount.

As remedy, the ITC members made recommendations to the President that included tariff rate increases, adjustment assistance, and assistance to relocate and train displaced workers. The recommendations included a five-year schedule of implementation. On May 22, 1986, the President imposed a 35% ad valorem duty on imported shakes and shingles, effective June 6, 1986. The rate was later reduced to 20% in December 1988, 10% in December 1989, and 5% in December 1990. The action expired on June 7, 1991.

3.1 Canadian Government Activity

Wood shakes and shingles were imported into the United States from a number of countries. However, Canada was by far the largest exporter to the U.S. market in terms of both value and quantity. In response to the initial imposition of the tariff, the Canadian government prohibited exports of the raw materials used to produce cedar shakes and shingles (i.e. cedar logs, blocks, bolts, blanks and short boards). The export prohibitions remained in place for the duration of the U.S. import relief.

4 Steel Fork Arms

Following a petition filed on January 17, 1986, the ITC initiated an investigation under section 202 of the Trade Act of 1974 to determine whether steel fork arms were being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry. The petition was filed with the ITC on behalf of the Ad Hoc Committee of Steel Fork Arm Producers, composed of the only two U.S. producers of steel fork arms (used on forklift trucks and similar lifting equipment). On July 17, 1986, the ITC determined that steel fork arms were not being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic steel fork industry.

The ITC found that although the domestic industry had suffered economic difficulties, it was not seriously injured or threatened with serious injury. Although the recession of 1982–1983 had a significant negative impact on the domestic industry, the industry had regained its pre-recession position and, in most instances, had equalled or surpassed its 1981 performance. Domestic fork arm production, shipments and inventories showed improvement at the end of the period of investigation. Industry capacity had increased even though two domestic producers had ceased operations for reasons relating to the demand for forklifts rather than import competition. Employment had declined but worker productivity had almost doubled, and the industry appeared to have operated at a profit during the most recent two years. Because the ITC found that the domestic industry was not seriously injured or threatened with serious injury, the issues of causation and remedy were not addressed.

5 Certain Cameras

On March 29, 1990, Keystone Camera Company filed a petition under section 202 of the Trade Act of 1974, seeking relief from imports of “certain cameras.” On July 27, 1990, the ITC unanimously determined that “certain cameras” were not being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing articles like or directly competitive with the imported articles.

Although more than 25 parties appeared in the ITC investigation, none of the parties (other than the petitioner) publicly expressed support for the petition in briefs or hearing testimony. Furthermore, Kodak—the only domestic manufacturer of the subject goods other than the petitioner—opposed the petition and asserted that increased imports of “certain cameras” had not seriously injured or threatened serious injury to its domestic production facilities.

The ITC did find that the subject imports had increased and that Keystone was seriously injured or threatened with injury. However, the ITC did not find that the increased imports were a substantial cause of serious injury to the domestic industry. Instead, “poor management” was determined to be the primary cause of the injury to Keystone. Imports from Canada were minimal and would probably have been exempted under the Canada–U.S. Free Trade Agreement.

6 Corn Brooms

Following receipt of a petition filed on March 4, 1996, on behalf of the U.S. Corn Broom Task Force and its individual members, the ITC initiated an investigation, under section 202 of the Trade Act of 1974, into imports of corn brooms. The majority of the Commissioners determined that corn brooms were being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the domestic industry producing an article like or directly competitive with the imported article. The final ITC vote on provisional relief, however, was 3 to 3; in the absence of a majority, the ITC made a negative determination on that aspect of the petition.

Factors indicating serious injury included a significant idling of productive facilities in the domestic industry, and significant unemployment and underemployment. Total domestic shipments declined by 15.9% over the five-year period for which the ITC collected data. Inventories and productivity remained relatively unchanged. Most responding firms also reported other indications of financial difficulty, such as rejection of loan applications or difficulty in obtaining a loan, lowering of credit ratings, cancellation or rejection of expansion projects, and reduction in the size of capital investments.

Also contributing to the industry’s deteriorating financial condition was the inability of a significant number of firms to operate at a reasonable level of profit and recoup increased costs, along with falling prices in high-volume product lines,.

Pursuant to section 311 (a) of the North American Free Trade Agreement (NAFTA) Implementation Act, imports of corn brooms produced in Mexico were found to account for a substantial share of total imports of such brooms and to contribute significantly to the serious injury caused by imports. Imports from Mexico increased by over 50% in 1994, the first year of the NAFTA. Imports nearly doubled again in 1995 and in that year they accounted for 71% of the total volume of imports to the United States. However, imports of corn brooms from Canada were found to have been small or nil, and there were no reported imports in either 1992 or 1995. Accordingly, the ITC did not find that subject imports from Canada accounted for a substantial share of total imports or contributed significantly to the serious injury found.

Two groupings of Commissioners recommended differing remedies: (1) an increase in tariffs to 12% in the first year, declining to 3% in the fourth year; or (2) an increase in tariffs to 40% in the first year, declining to 12% by the fourth year.

On August 30, 1996, President Clinton determined not to implement the ITC’s recommendations and instead directed the U.S. Trade Representative to negotiate and conclude, within 90 days, agreements pursuant to the terms of section 203 of the Trade Act of 1974. However, negotiations did not result in satisfactory agreements.

On November 28, 1996, the President proclaimed a temporary increase in duties over three years for two of the four tariff sub-headings subject to the injury determination. Additional tariffs were imposed on brooms covered by two broom subheadings: under the tariff rate quota, tariffs were maintained at pre-safeguard levels up to a specified import level; imports above TRQ levels were subject to additional duties. TRQs were allocated individually to each substantial supplier, with a residual allocation for all other suppliers. Included in the safeguard was Mexico; excluded were Canada and developing countries holding less than a 3% market share.

On February 10, 1997, the Government of Mexico asked for the establishment of a Dispute Settlement Panel under NAFTA Chapter 20 to examine whether the ITC’s determination was consistent with the NAFTA. Mexico contended that the ITC had improperly excluded the U.S. plastic broom industry from its definition of the U.S. domestic industry.

On January 30, 1998, the NAFTA panel concluded that the safeguard measure constituted a violation of U.S. obligations under the NAFTA because it was based on an ITC determination that failed to provide “reasoned conclusions on all pertinent issues of law and fact.” The panel recommended that the United States bring its conduct into compliance with the NAFTA at the earliest possible time. Effective November 28, 1996, Mexico increased import duties on several U.S. products in retaliation for the U.S. safeguard measure on corn brooms, as permitted by NAFTA Article 802.6.

On December 3, 1998, President Clinton terminated the safeguard action against corn brooms after receiving reports from the U.S. Trade Representative and the ITC on developments in the corn broom industry and its progress in making a positive adjustment toward import competition. In this case, the President decided to terminate the safeguard action on the grounds that the industry had not undertaken adequate efforts to make a positive adjustment to import competition.

6.1 Canadian Government Activity

The Government of Canada filed a submission at the ITC hearing on May 30, 1996, to ensure that the ITC was aware of the minimal share of the U.S. import market held by Canadian corn brooms.

7 Tomatoes and Bell Peppers

Following receipt of a petition filed on March 11, 1996, on behalf of the Florida Fruit & Vegetable Association, the Florida Bell Pepper Growers Exchange, the Florida Commissioner of Agriculture, the Ad Hoc Group of Florida Tomato Growers and Packers, and individual Florida bell pepper growers, the ITC initiated an investigation, under section 202 of the Trade Act of 1974, into imports of fresh tomatoes and bell peppers.

On August 16, 1996, the ITC determined that even though imports of fresh tomatoes and bell peppers had increased, they were not being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing an article like or directly competitive with the imported article.

The ITC found that although a significant number of tomato and bell pepper growers and producers faced economic difficulties, acreage planted and harvested was steady; production was steady or rising; industry employment had risen; prices, while varying with the weather and supply/demand, showed no discernible trend; and there was no evidence that Mexico (the chief supplier of imported tomatoes) was about to expand tomato acreage, production or exports to the U.S. market.

7.1 Canadian Government Activity

The Government of Canada filed a submission at the ITC hearing held on May 30, 1996, to ensure that the ITC was aware of the minimal share of the U.S. import market held by Canadian exports of tomatoes and bell peppers.

8 Wheat Gluten

Following receipt of a petition filed on September 19, 1997, on behalf of the Wheat Gluten Industry Council, the ITC initiated an investigation under section 202 of the Trade Act of 1974 into imports of wheat gluten. On March 25, 1998, the ITC unanimously determined that wheat gluten was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing an article like or directly competitive with the imported article. Pursuant to the NAFTA Implementation Act, the ITC made a negative finding with respect to imports of wheat gluten from Canada and Mexico.

The ITC determined that virtually all the factors relevant to industry performance were negative. Industry capacity utilization had declined significantly, production and shipments had declined, and inventories had more than doubled. The industry had gone from being profitable to operating at a loss by the end of the period under review. At the same time, unit costs were rising, hourly wages were relatively flat, worker productivity had declined because of the reduction in capacity utilization, and unit labour costs had almost doubled. While there were minor improvements in several factors during the most recent year, these improvements were found to be isolated. The ITC found a direct correlation between the dramatic increase in wheat gluten imports and the significant decline in domestic wheat gluten industry performance in 1996 and 1997. Accordingly, the ITC found that the domestic wheat gluten industry was seriously injured and that increased imports were both an important cause of serious injury and a cause that was greater than any other cause.

With respect to remedy, the ITC unanimously recommended that the President impose a four-year quantitative restriction on imports of the subject merchandise, in the amount of 126 million pounds in the first year, to be increased by 6% in each subsequent year that the action would be in effect. Within the overall quantitative restriction, the ITC recommended that the President allocate separate quantitative restrictions for the European Union, Australia and “all other” nonexcluded countries, taking into account the disproportionate growth and impact of imports of wheat gluten from the European Union.

Having made negative findings with respect to imports of wheat gluten from Canada and Mexico under section 311 (a) of the NAFTA Implementation Act, the ITC recommended that such imports be excluded from the quantitative restriction.

8.1 Canadian Government Activity

On December 11, 1997, the Government of Canada submitted a brief to the ITC presenting Canada’s position: that, based on NAFTA and U.S. law, imports of wheat gluten from Canada should be excluded in the event that the ITC recommended import relief.

On May 30, 1998, the President proclaimed a three-year quantitative limitation on imports of the subject goods at an amount equal to 126.812 million pounds in the first year; this represented total average imports in the crop years from June 30, 1993, through June 30, 1995. The amount was to increase by 6% annually for the duration of the relief period. The quotas were allocated based on average import shares in the 1993–1995 period. Import shares of countries excluded from the quota were assigned on a prorated basis to countries subject to the quota. The President also proclaimed that pursuant to section 312 (b) of the NAFTA Implementation Act, the quantitative limitation would not apply to imports of wheat gluten from Canada or Mexico.

The President further directed the U.S. Trade Representative, with the assistance of the Secretary of Agriculture, to seek to initiate international negotiations in order to address the underlying cause of the increase in imports of the article, or otherwise to alleviate the injury found to exist.

On March 17, 1999, the European Communities requested consultation with the United States over this matter but the two parties never reached a satisfactory resolution.

Since the quota was put into place, it was discovered that wheat gluten imports from the European Communities had entered the United States in excess of the allotted quota. The Trade Act of 1974 allows the President to make an additional order under section 203 to eliminate any circumvention of any previous action taken under this section.180 This additional action took the form of a reduction in the European Communities’ 1999–2000 wheat gluten quota in the amount of the excess over the 1998 quota entering the United States.

On June 30, 1999, the European Communities requested a WTO panel to consider the safeguard measures imposed by the United States on imports of wheat gluten. It alleged that the U.S. action was in breach of several WTO obligations, including the Most Favoured Nation principle, the Agreement on Safeguards and the Agreement on Agriculture.

On December 22, 2000, the WTO Appellate Body released its findings. The Appellate Body upheld the panel’s finding that the United States had acted inconsistently with its obligations under the Agreement on Safeguards, by excluding imports from Canada and Mexico from the application of the safeguard measure after conducting an investigation including imports from all sources, including Canada and Mexico, to determine whether increased imports were causing or threatening to cause serious injury. For reasons of judicial economy, the Appellate Body declined to rule on whether the exclusion per se was inconsistent with U.S. obligations.

9 Lamb Meat

Following receipt of a petition filed on October 7, 1998, on behalf of nine sheep industry associations, the ITC initiated a safeguard investigation, under section 202 of the Trade Act of 1974, on imports of lamb meat.

On April 7, 1999, the ITC unanimously determined that fresh, chilled or frozen lamb meat was being imported into the United States in such increased quantities as to be a substantial cause or threat of serious injury to the domestic industry producing an article like or directly competitive with the imported article. Pursuant to the NAFTA Implementation Act, the ITC made a negative finding with respect to imports of lamb meat from Canada and Mexico.

The ITC determined that although the U.S. lamb industry was not currently experiencing serious injury, factors relevant to future industry performance were negative. During the period of review (1993–1998), the industry had experienced massive changes in market conditions. Demand for lamb meat was consistently low, subsidies for wool had recently been terminated, and major lamb exporters (e.g., Australia and New Zealand) were increasing their exports. The ITC found that imports had been increasing in both actual and relative terms. Actual imports had increased by 50% during the period under review. Demand had been declining since the 1940s but had stabilized to some degree during the period under review. However, economic indicators from 1996 onward showed a decline in domestic market share, production, number of lamb-growing establishments and prices. There were some mixed indicators as well. Capacity had declined early in the period but then rose near its end, and productivity remained relatively constant for feeders and growers. Lamb sales had both increased and decreased throughout the period, and industry-wide profits were very low. The ITC found that the industry’s financial performance had deteriorated mainly because of falling prices.

Lamb meat was imported into the United States from a number of countries. However, the primary sources were Australia and New Zealand, which accounted for 98.3% of total imports in both value and quantity. Canada was a minimal supplier of lamb meat imports during the most recent three-year period, accounting for an average of 0.3% of the subject imports. Consequently, the ITC found that imports from Canada did not account for a substantial share of total imports nor contribute significantly to the threat of serious injury caused by imports, as described in section 311 of the NAFTA Implementation Act. The ITC recommended that Canada be excluded from any relief action.

With respect to remedy, the ITC unanimously recommended that the President impose a four-year tariff rate quota system on imports of lamb meat. However, the President declared an imposition of a three-year tariff rate quota covering exports of lamb meat from July 22, 1999, through July 22, 2002. Individual country quotas were established for imports from Australia, New Zealand and an “other countries” category. Within the quotas the rates of duty established for imports were 9% ad valorum in the first year, 6% in the second year and 3% in the third year. However, once the established quotas were filled, the rates increased to 40% ad valorem in the first year, 32% in the second year and 24% in the third year. The President excluded imports from Canada from the safeguard measure.

10 Certain Steel Wire Rod (Wire Rod)

Following receipt of a petition filed on January 12, 1999, on behalf of nine steel producers and two labour groups, the ITC initiated a safeguard investigation, under section 202 of the Trade Act of 1974, to determine whether certain steel wire rod was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing a like or directly competitive product.

On July 13, 1999, Commissioners divided equally on the question of whether certain steel wire rod was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof. The Trade Act of 1974 stipulates that in such a case the ITC must report both determinations to the President,181 who may consider either of them.182 In safeguard actions, the President has complete discretion for choosing which course of action to consider.

Pursuant to the NAFTA Implementation Act, the ITC had to make a finding with respect to wire rod imports from Canada. Because the ITC was equally divided on whether there was serious injury, only three Commissioners made recommendations. Two of them made a negative finding with respect to imports of wire from Canada and Mexico. The other made a negative finding for Mexico only and recommended that wire rod imports from Canada be included.

The ITC determined that the U.S. wire rod industry was experiencing serious injury or threat thereof. After finding a significant increase in imports, both in actual and relative terms, the ITC went on to determine whether there was injury to U.S. producers. Various factors relevant to industry performance were negative. During the period of review (1994–1999), the industry had experienced massive changes in market conditions. Production of wire rod had climbed during the first part of the period and then declined. Capacity utilization had also declined and there was evidence of significant idling of productive capacity during the period. There was also evidence that a large number of domestic producers had been unable to operate profitably in 1998. The ITC made a positive injury finding because of the recent declines in production, capacity utilization, profits, employment and capital expenditures.

Next, the ITC had to determine whether the increased imports were both an important cause of serious injury and no less important than any other cause. It explored various other causes, including market prices of steel, raw material costs and start-up costs for increasing domestic capacity. However, none were found to be more important for injury than the increase in imports and the increase in domestic market share of imports.

With respect to remedy, the ITC issued two recommendations to the President. Both called for imposition of a four-year tariff rate quota system on imports of wire rod. The difference was that one recommendation did not include Canada in the relief action, while the other did.

On February 11, 2000, President Clinton accepted the ITC recommendation and announced import relief action, in the form of tariff rate quotas, for a three-year period. The tariff rate quotas, to be liberalized in successive years, were to remain in place for three years. Furthermore, President Clinton accepted the ITC recommendation that Canadian imports should be exempted from the tariffs. Imports would face an additional tariff of 10% during the first year after exceeding 1.58 million tons. In the second and third years of the action, the annual quantity of imports exempt from the tariff would increase by 2% and the level of additional tariff would decline by 2.5 percentage points per year.

10.1 Canadian Government Activity

Wire rod was imported into the United States from a number of countries. Canada was a significant supplier of wire rod imports during the period under review. During the last three years of the period under review, Canada accounted for 21.9% of total imports. However, imports from Canada had fallen relative to total imports into the United States during those three years. Two ITC Commissioners therefore found that imports from Canada were not contributing significantly to serious injury or threat thereof caused by imports, and they recommended that Canada should be excluded from any relief action. The other Commissioner decided that Canada’s wire rod imports did contribute significantly to serious injury or threat thereof, and that Canada should be included in any relief action. The Government of Canada had submitted both pre-hearing and post-hearing briefs to the ITC, arguing that imports from Canada did not contribute significantly to any injury suffered by the U.S. industry.

On August 22, 2001, the ITC made an affirmative determination in a precedentsetting investigation of whether previously excluded imports of steel wire rod from Canada were undermining the effectiveness of the safeguard action imposed on imports under section 201 of the Trade Act of 1974, as announced by President Clinton. In late November, President Bush declined to extend relief to Canada.

11 Circular Welded Carbon Quality Line Pipe (Line Pipe)

Following receipt of a petition filed on June 30, 1999, on behalf of seven industries and one labour representative, the ITC initiated a safeguard investigation, under section 202 of the Trade Act of 1974, to determine whether circular welded carbon quality line pipe was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing a like or directly competitive product.

In December 1999, the ITC determined that circular welded carbon quality line pipe was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or threat thereof to the domestic industry producing an article like or directly competitive with the imported article. However, pursuant to section 311(a) of the NAFTA Implementation Act, the ITC made a negative finding with respect to imports of line pipe from Canada and Mexico.

With line pipe imports increasing since 1995 and reaching their highest annual level in 1998, the ITC concluded that there were increased imports. It also found serious injury to the domestic industry. The factors supporting this finding were the declines in capacity utilization, domestic production, domestic sales and domestic market share. During the period of review (1994–1999), the industry had experienced some significant changes. Consumption by both volume and value increased in the 1994–1998 period before declining in 1998 and 1999.

The ITC recommended that the President impose a tariff rate quota for a fouryear period on imports of line pipe, with the quota amount set at 151,124 tons in the first year, to be increased by 10% in each subsequent year. Over-quota imports were to be subject to a duty of 30% ad valorem in addition to current tariffs. Aside from excluding imports from Canada and Mexico, the ITC recommended that the tariff rate quota not apply to imports of line pipe from Israel, or to any imports of line pipe that entered duty-free from beneficiary countries under the Caribbean Basin Economic Recovery Act or the Andean Trade Preference Act.

On February 11, 2000, President Clinton accepted the ITC recommendation and announced import relief action, in the form of tariff rate quotas, on U.S. imports of line pipe. The additional tariffs, to be gradually reduced in successive years, would remain in place for three years.

11.1 Canadian Government Activity

In its brief to the ITC, Canada argued that its share of imports did not account for “a substantial share of total imports” as it was not among the top five suppliers and did not “contribute importantly to the injury of the domestic market.” It based its arguments on the fact that its imports to the United States had declined and that Canadian prices had increased. With respect to NAFTA country findings, the ITC found that neither Canada nor Mexico contributed significantly to the serious injury or threat thereof to the domestic industry.

In a subsequent development, Korea requested the establishment of a WTO panel to challenge the measure. Korea objected to the ITC’s inclusion of Mexican and Canadian imports in determining the cause of injury, while not including them in the import relief.

In the WTO Report dated October 29, 2001, the Dispute Panel rejected Korea’s claims that “the United States violated Article 2 and 4 by exempting Mexico and Canada from the measure” and that “the United States violated Article I, XIII:1, and XIX by exempting Mexico and Canada from the measure.”

179 (Back)
Plates, sheets and strip, wire and wire products, structural shapes, ingots, blooms and billets, but not wire rods, railway-type products, bars, pipes, tubes or blanks.

180 (Back)
§ 204(b)(2).

181 (Back)
§ 300 (d) (3).

182 (Back)
§ 330 (d) (1).

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