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)
- 1.1 Canadian Government Activity
- 2 Carbon and Certain Alloy Steel Products
- 2.1 Canadian Government Activity
- 3 Wood Shingles and Shakes
- 3.1 Canadian Government Activity
- 4 Steel Fork Arms
- 5 Certain Cameras
- 6 Corn Brooms
- 6.1 Canadian Government Activity
- 7 Tomatoes and Bell Peppers
- 7.1 Canadian Government Activity
- 8 Wheat Gluten
- 8.1 Canadian Government Activity
- 9 Lamb Meat
- 10 Certain Steel Wire Rod (Wire Rod)
- 10.1 Canadian Government Activity
- 11 Circular Welded Carbon Quality Line Pipe
(Line Pipe)
- 11.1 Canadian Government Activity
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.
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.
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%.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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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