Source(s) of the information:

Lawyers, other representatives, expert(s), tribunal’s secretary

Report of the Panel

I. introduction

A. Complaint of Korea

1.1.
On 15 June 2000, Korea requested consultations with the United States pursuant to Article 4 of the Dispute Settlement Understanding (the "DSU"), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994") and Article 14 of the Agreement on Safeguards1 (also the "Safeguards Agreement", or "SA") with regard to a definitive safeguard measure imposed by the United States on imports of circular welded carbon quality line pipe (the "line pipe measure").2
1.2.
On 28 July 2000, Korea and the United States held the requested consultations, but failed to resolve the dispute.
1.3.
On 14 September 2000, Korea requested the establishment of a panel to examine the matter.3

B. establishment and composition of the panel

1.4.
At its meeting of 23 October 2000, the Dispute Settlement Body (the "DSB") established a Panel pursuant to the request made by Korea in document WT/DS202/4.4
1.5.
At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference, as follows:

"To examine, in the light of the relevant provisions of the covered agreements cited by Korea in document WT/DS202/4, the matter referred to the DSB by Korea in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements".

1.6.
On 12 January 2001, Korea requested the Director-General to determine the composition of the Panel, pursuant to Article 8.7 of the DSU. On 22 January 2001, the Director-General composed the Panel as follows:

Chairman:Mr. Dariusz Rosati

Members: Mr. Roberto Azevedo

Mr. Eduardo Bianchi

1.7.
Australia, Canada, the European Communities, Japan and Mexico, reserved their rights to participate in the panel proceedings as third parties.

II. FACTUAL ASPECTS

2.1.
This dispute concerns a measure imposed by the United States on imports of circular welded carbon quality line pipe ("line pipe"). This measure was imposed following an investigation conducted by the United States International Trade Commission ("ITC") in response to a petition filed on 30 June 1999 and amended on 2 July 1999, alleging that imports of line pipe were causing serious injury to the US manufacturers of line pipe.
2.2.
The ITC initiated the investigation on 4 August 1999.
2.3.
The ITC held a public "voice" vote on the issue of serious injury on 28 October 1999. Commissioner Crawford voted "no serious injury" and "no threat of serious injury" while Commissioners Bragg and Askey found "threat of serious injury", but no "present serious injury". Three Commissioners found "present serious injury." On this basis the ITC determined that line pipe was 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.
2.4.
On 8 December 1999, the ITC announced its remedy recommendation. Commissioner Crawford, who had voted that the industry was not seriously injured or threatened with serious injury by imports, recommended against the imposition of any remedy. Commissioner Askey and Commissioner Bragg recommended a four-year remedy with an ad valorem tariff of 12.5 per cent for the first year, 11 per cent for year two, 9.5 per cent for year three, and 8 per cent for year four. The remaining three Commissioners, Commissioners Miller, Koplan and Hillman, constituting the majority, recommended:

(1) That the President impose a tariff-rate quota for a 4-year period on imports of line pipe, with the in-quota amount set at 151,124 tons in the first year, and with that amount to be increased by 10 per cent in each of the second, third, and fourth years; with over-quota imports to be subject to a duty of 30 per cent ad valorem in addition to current US tariffs;

(2) That the President, if he determines to allocate the overall quota, recognize the disproportionate growth and impact of the imports from Korea;

(3) That the President initiate international negotiations with Korea to address the underlying cause of the import surge and the serious injury to the domestic industry;

(4) Having made negative findings with respect to imports of line pipe from Canada and Mexico under section 311(a) of the NAFTA Implementation Act, that such imports be excluded from the tariff-rate quota; and

(5) That the tariff-rate quota not apply to imports of line pipe from Israel, or to any imports of line pipe entered duty-free from beneficiary countries under the Caribbean Basin Economic Recovery Act or the Andean Trade Preference Act.

2.5.
The President announced the measure on 11 February 2000. The action would take the form of a duty increase for three years and one day. The first 9,000 short tons of imports from each country wereexcluded each year, with annual reductions in the rate of duty in the second and third years. In the first year, imports above 9,000 short tons would be subject to a 19 per cent duty. In the second year, the duty would be reduced to 15 per cent and in the third year the duty would be 11 per cent. Mexico and Canada were excluded from the remedy. The United States notified the WTO of its action on 23 February 2000.

III. parties' requests for findings and recommendations

3.1.
Korea requests the Panel to find that:

(1) The US measure does not comply with Article XIII or Article XIX of the GATT 1994 nor does it comply with the requirements of Article 5 of the Agreement on Safeguards;

(2) Regardless of the type of measure, the measure violates Article XIX:I of the GATT 1994 and Articles 5.1 and 7.1 of the Agreement on Safeguards because the measure was not limited to the extent and the time necessary to remedy the injury and allow adjustment;

(3) The United States violated Article 2 of the Agreement on Safeguards, as well as Article I, Article XIII:1 and Article XIX of the GATT 1994 by exempting Mexico and Canada from the measure;

(4) The US measure did not respect the provisions of Article 9.1 of the Agreement on Safeguards regarding the exclusion of developing countries;

(5) The US measure is inconsistent with Article XIX of the GATT 1994 and Article 2 of the Agreement on Safeguards because imports did not increase suddenly, sharply and recently;

(6) The United States failed to demonstrate that the US line pipe industry was suffering serious injury as required by Article XIX of the GATT 1994 and Articles 3.1 and 4 of the Agreement on Safeguards;

(7) The United States failed to demonstrate a causal relationship between increased imports and serious injury in violation of Article XIX of the GATT 1994 and Article 4 of the Agreement on Safeguards;

(8) The ITC’s threat of serious injury determination violated Articles 2 and 4 of the Agreement on Safeguards and Article XIX of the GATT 1994;

(9) The United States failed to demonstrate the unforeseen developments which led to the increased imports which caused serious injury;

(10) The US decision did not satisfy the requirements of emergency action of Article 11 of the Agreement on Safeguards or Article XIX of the GATT 1994;

(11) The United States violated the obligation in Article 12.3 of the Agreement on Safeguards to consult concerning the measure before the measure is imposed; and

(12) The United States violated the compensation provisions of Article 8.1 of the Agreement on Safeguards.

3.2.
Therefore Korea requests that the Panel find that the US safeguard measure should be lifted immediately and the ITC safeguard investigation on line pipe terminated.
3.3.
The United States requests the Panel to reject Korea's claims.

IV. ARGUMENTS OF THE PARTIES

4.1.
The main arguments, presented by the parties in their written submissions and oral statements, are summarized below.

A. First Written Submission of Korea

4.2.
The following is Korea's own executive summary of its first written submission:

1. Factual Background

4.3.
Carbon steel line pipe is a tubular product used primarily in the gathering and transmission of oil and gas. The oil and gas industry is typically a "boom-or-bust" industry that experiences wide swings in prices and production. Consequently, demand and pricing for line pipe as well as certain other pipe products such as oil country tubular goods ("OCTG") are also subject to wide cyclical swings.
4.4.
After mid-1998, oil prices declined and continued dropping precipitously through early 1999. Natural gas prices followed a similar but less volatile pattern. By April 1999, the number of active oil drilling rigs in the United States was at the lowest level ever recorded since tracking began in 1944. Predictably, the US line pipe industry’s performance declined dramatically over the same period. In fact, the performance of the US line pipe industry almost perfectly tracks the performance of the oil and gas industry: both rose through the first half of 1998 (as did import levels) and then both fell dramatically in the second half of 1998 (imports declined with domestic shipments). US line pipe performance declined further still in the first quarter of 1999 as the oil and gas crisis continued. Notably, imports continued to decline.
4.5.
Significantly, US line pipe industry performance began its recovery in the second quarter of 1999 (prior to the ITC’s determination in this case) as oil and gas prices as well as drilling activity rose. Imports, however, continued to fall in the first half of 1999, a decline that had commenced in July of 1998.
4.6.
At the time of the ITC’s determination in October of 1999, the industry was well on its way up the cycle. For this reason, the ITC majority recommended a tariff-rate quota of 151,124 short tons at the normal rate of duty, a level that approximates the average import level for the most recent three-year period. Nevertheless, the US President ignored this recommendation and imposed a remedy which dramatically reduced imports below the level recommended by the ITC. Each potential supplier was allocated 9,000 short tons (there were seven principal suppliers other than Mexico and Canada) and a duty level of 19 per cent was imposed for over-quota imports with a phase-down only of the tariff level over the three-years-and-one-day period for the measure. The 19 per cent duty level has acted as a virtual ceiling on out-of-quota imports. Import levels dropped to 63,932 short tons in the period of March to December 2000, from 165,652 short tons in 1999 for the same period (based on US Census data).
4.7.
Traditional trade patterns also were disrupted: Mexico and Canada were excluded from the safeguard measure and all other suppliers were given an identical quota of line pipe regardless of their historical trade to the US market.

2. Preliminary Legal Issues

(a) Confidential Information

4.8.
While Korea takes note of the indexed data provided by the United States in its letter of 16 February 2001, which contains absolute import trends, the US response was deficient under Article 13.1 of the DSU. Korea is of the view that it did not include information regarding the relative trends of imports and domestic production. The Panel’s need for this confidential data on relative import trends is confirmed by the indexed data provided for the absolute trends in imports; the 12‑month decline at the end of the period in absolute import volumes is not shown in the public data.
4.9.
Korea submits that the Panel should seek additional confidential information in order to conduct its Article 11 (DSU) review, including:

(1) generally, the full confidential record on which the ITC actually based its determination. The burden should be on the United States to demonstrate why the full deliberative record of the ITC should not be reviewed by the Panel; and

(2) specifically, information regarding pricing data (since declines in prices were a key element of the ITC majority’s causation determination); and information regarding certain producers whose financial data negatively affected industry profitability for reasons not related to line pipe; and

(3) the ITC’s Economic Analysis and Report to the President on the recommended remedy as well as any relevant deliberative documents by the Office of the President which bear directly on Korea’s claims regarding the WTO inconsistency of the safeguard measure under Articles XIII and XIX and Article 5.

4.10.
Such information can be protected within the Panel process in accordance with Articles 13.1 and 18.2 as well as Appendices 3.3 and 3.11 of the DSU. If the United States refuses to provide the data, the refusal would constitute a violation of the US obligation under Article 13.1 of the DSU and the Panel should use adverse inferences and/or should find that the United States has not met its burden of proof on the claims at issue.

(b) The Panel Should Avoid False Judicial Economy

4.11.
Korea requests that the Panel reach both of the independent claims against the United States – the inconsistency of the ITC’s investigation and the inconsistency of the US President’s safeguard measure. The exercise of judicial economy in this case would not lead to dispute resolution but rather dispute prolongation since Korea otherwise would be required to bring successive Panels to reach both independent claims.
4.12.
US law supports the conclusion that these are independent claims because the United States can implement an adverse Panel decision with respect to the investigation and still maintain the safeguard measure. Since the resolution of the WTO inconsistency of the investigation does not resolve the errors in the safeguard measure, full implementation by the United States of the Panel ruling can only be assured if both independent claims are addressed.
4.13.
Korea requests that, regardless of the Panel’s decision concerning the conformity of the ITC investigation with the WTO, the Panel should review the legal errors alleged with respect to the measure. An illegal measure should not be allowed to continue through the implementation process with the cost of the time and delay falling on Korea, the prevailing party.

3. The Safeguard Measure Is Inconsistent With the WTO

(a) Introduction

4.14.
Korea argues that the United States is in violation of the interrelated obligations imposed by Articles XIII and XIX and Articles 5 and 7, which cumulatively require that all measures be limited to the extent "necessary" and that quantitative restraints in the form of tariff-rate quotas be established in a manner to assure that traditional trade patterns are preserved, that overall quotas are fixed, and that historical shares of principal suppliers are respected. Korea states that the United States also violated the provisions of Articles I, XIII and XIX and Article 2 by discriminatorily excluding Mexico and Canada from the safeguard measure.

(b) The safeguard measure does not comply with Articles XIII or XIX nor does it comply with the requirements of Article 5

(i) The safeguard measure is a quantitative restraint in the form of a tariff-rate quota

4.15.
The plain meaning of a tariff-rate quota is that it consists of two elements – a quota and a tariff. The remedy ultimately imposed by the US President contained those two elements – a certain tariff-rate was imposed on in-quota imports of 9,000 short tons, and a higher tariff rate was imposed on out-quota imports above this in-quota amount. Thus, the Presidential measure is a quantitative restraint in the form of a tariff-rate quota.
4.16.
Quantitative restraints in the form of tariff-rate quotas must comply with the cumulative requirements of Articles XIII and XIX as well as Article 5.

(ii) The United States failed to set an overall quota in violation of Article XIII and Article 5.1

4.17.
As the first step to the proper administration of a tariff-rate quota, Article XIII:2(a) and Article 5.1 requires that the overall quota amounts be fixed. The establishment of this overall quota amount permits traditional suppliers to determine whether the imposing country has abided by the terms of Article XIII:2(d) and Article 5.2 regarding the proper country allocations of the overall quota. Since the United States did not fix an overall quota and no reliable basis exists to determine the overall quota, the measure is in violation of these provisions and the SA.

(iii) The United States did not base the total tariff-rate quota on a previous three year representative period

4.18.
The tariff-rate quota imposed by the President, unlike the tariff-rate quota recommended by the ITC, was not limited to the level of the "last three representative years". (While the ITC base period is confidential, it can be inferred from the public data and the ITC’s determination.) Therefore, the measure violated Article 5.1 because the baseline of the last three years was not applied and the "clear justification" required by Article 5.1 in cases of deviation from the baseline was not provided.

(iv) The United States failed to allocate the quotas among its Members on the basis of their proportional historical share in violation of Article XIII and Article XIX 1994, and Article 5.2

4.19.
In violation of the cumulative requirements of Articles XIII:2 and XIX and Article 5.2, the President did not negotiate the quotas with all Members having a substantial interest in line pipe trade and did not allocate the quotas based on the suppliers’ proportional market share during a representative period ("historical share").
4.20.
Korea constituted 55 per cent of the total imports (excluding Mexico and Canada and based on the public data) during the period of 1996-98, which was the apparent base period of the ITC recommended measure. Nevertheless, the President’s measure reduced Korea’s imports to the same 9,000 short ton quota level as the smallest or even non-existent suppliers. This failure to respect historical suppliers is precisely the situation prohibited by Articles XIII:2 and XIX and Article 5.2.

(c) Regardless of the Type of the Safeguard Measure, the Measure Violates Article XIX:1 and Articles 5.1 and 7.1 Because the Measure Was Not Limited to the Extent and the Time Necessary to Remedy the Injury and Allow Adjustment

4.21.
The US President, without any public explanation or justification, disregarded the safeguard remedy recommendation of the ITC and imposed a remedy which was far more severe than "necessary". While there is no way of determining exactly what overall import level is targeted by the President’s country allocations of 9,000 short tons, any reasonable calculation results in a total quota of significantly less than that recommended by the ITC – 151,124 short tons.
4.22.
Furthermore, the ITC’s economic analysis specifically rejected as "excessive" a limit of 105,000 short tons and that limit significantly exceeds the President’s measure. Since there was no independent analytical basis for the Presidential measure, there was no means or method for the United States to ensure that the measure was limited "only to the extent necessary". The finding by the ITC and the absence of any analytical support for the President’s measure constitute prima facie evidence that the measure was not "limited to the extent necessary" and consequently violates Article XIX:1 and Article 5.1.
4.23.
In addition, Article 7.1 provides that a measure can only be applied for such a period of time as may be "necessary to prevent or remedy serious injury and to facilitate adjustment". Significant evidence in the ITC record confirmed that the temporary downturn in the line pipe industry produced by the crisis in oil and gas prices had reversed by the time of the ITC’s determination in October of 1999. Therefore, no remedy, let alone a measure of three years, could be justified as necessary.

(d) The US Exemption of Mexico and Canada from the Safeguard Measure Violated the MFN Requirements Established in Articles I, XIII:1 and XIX and Article 2

4.24.
The MFN requirement is a cornerstone of the GATT/WTO system. It is reflected in all the relevant articles of the GATT, including Articles I and XIX and it is specifically incorporated in Article XIII:1 and Article 2.2. All of these provisions require that the safeguard measure and quantitative restrictions be applied to all suppliers. In this case, the United States did not respect this principle or these provisions because it excluded Mexico and Canada from the safeguard measure.
4.25.
The parallelism between Articles 2.1 and 2.2 also requires that the measure be applied to all suppliers since the United States could only conduct a legal safeguard investigation on the basis of all imports. Articles 2 and 4 as well as Article XIX speak only in terms of "imports" and, therefore, there is no legal basis for any exclusion of certain imports. Any other interpretation would not comport with the plain meaning of those provisions and could lead to a selective safeguard regime in which a WTO Member could exclude countries arbitrarily from the serious injury analysis so that they could be excluded from the safeguard measure imposed.
4.26.
The exemption of Mexico was particularly egregious in this case since Mexico was the second largest supplier to the US market during the ITC’s period of investigation. It was clear that Mexico would take market share from the restricted suppliers. In fact, Mexico and Canada together have significantly replaced historical suppliers such as Korea. Mexico is now the largest supplier to the US market and Canada is the number three supplier. Mexico and Canada’s imports almost equal the imports from all other suppliers. Their imports clearly have occurred at the expense of the other historical suppliers who are now discriminatorily restricted from the US market.

(e) The United States Failed to Respect the Rights of Developing Countries to be Excluded from the Safeguard Measure if their Individual Imports Were Less Than 3 per cent and Cumulatively Less Than 9 per cent in Violation of Article 9.1

4.27.
Article 9.1 provides a special preference for developing countries to allow them to be exempt from a safeguard measure when their imports are at the specified negligible level. In this case, the United States did not exempt the countries who qualified. The United States therefore failed to respect the developing country preference in Article 9.1.

4. The ITC Investigation Was Not in Compliance With WTO Requirements

(a) The US Measure Is Inconsistent with Article XIX and Article 2 Because Imports Did Not Increase Absolutely or Relative to Domestic Production

4.28.
With respect to the issue of increased imports, the ITC methodology was inconsistent with Article XIX and Articles 2 and 4. The ITC applied a legal standard that was rejected by the Appellate Body in Argentina – Footwear (AB) – i.e., "increased imports" requires only a "simple increase" over the most recent five full years. The Appellate Body in Argentina – Footwear (AB) held that imports must have increased during "the recent past" and that the increase had to be "sudden and sharp," in order to meet the requirements of Article XIX and Article 2.1.
4.29.
While the public data indicates that imports increased up until the end of 1998, the confidential data shows that, in fact, imports of subject merchandise began to decline in the second half of 1998 and continued to decline for the 12 months immediately preceding the ITC’s determination. Moreover, imports did not increase relative to production but rather declined during the first six months of 1999. The ITC’s determination does not address either of these fundamental facts because an erroneous legal standard was applied.
4.30.
The correct legal finding, as enunciated by the Appellate Body in Argentina – Footwear (AB) is that "not just any increased quantities of imports will suffice... [t]he increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause ‘serious injury’". Clearly, the ITC did not apply this standard, and just as clearly, the declining subject imports did not meet it.
4.31.
The US line pipe industry was not suffering serious injury within the meaning of Article XIX and Articles 2.1 and 4 nor did the ITC satisfy the requirements of Articles 3.1 and 4.2(c) regarding the required findings of fact and conclusions of law
4.32.
The case for serious injury was far from compelling – as half the Commissioners recognized. Only three out of the six ITC Commissioners determined that the industry was seriously injured. Two Commissioners determined that the industry had not been seriously injured, but it was threatened with serious injury. Finally, one Commissioner determined that the industry was neither seriously injured nor threatened with serious injury by imports.
4.33.
The ITC could not agree that the requirement for safeguard relief had been met and there was no attempt at a reconciliation of the divergent opinions. Therefore, the ITC’s findings and conclusions of fact and law fell short of the requirements of Articles 3.1 and 4.2(c), which require that the authorities set out in sufficient detail their findings and conclusions of law.
4.34.
Moreover, in this case, the Panel’s review of Korea’s Article 3.1 and 4.2(c) claims is hampered by the fact that the Panel does not have access to the actual factual record on which these divergent conclusions were reached. The adequacy and reasonableness of the conclusions reached depend upon the facts.
4.35.
These fundamental legal disagreements among Commissioners also make it clear that this is not a case of extraordinary circumstances which can justify emergency relief.
4.36.
The ITC record confirms that the US line pipe industry was not "significantly impaired". Industry indicators had declined temporarily for 12 months (between July 1998 and June 1999) and that decline followed a peak performance sustained over the preceding 18 months. In fact, the industry had recorded its best performance ever in 1997 and the first half of 1998. Moreover, even during the brief period of the downturn, capital expenditures by the US industry continued to increase at substantial levels and two new producers began operations.
4.37.
Even the declines in profitability in late 1998 and early 1999 were overstated because the ITC failed to isolate the effects on the line pipe industry caused by the collapse of the OCTG market. Although the problems with the industry data went beyond just certain producers, the profitability data was particularly affected by the circumstances of Lone Star Steel and Geneva Steel. Their problems were clearly due to causes other than imports of line pipe.
4.38.
The ITC also improperly ignored the fact that no present serious injury existed at the time of the ITC’s vote, if it ever had. The ITC explicitly noted that both domestic shipments and prices had recovered substantially at the end of the period when the ITC’s determination was made. Those facts should have resulted in a "no serious injury" finding.

(b) No Causal Nexus Existed Between Increased Imports and Serious Injury as Required by Article XIX and Article 4

4.39.
Article XIX and Article 4.2(b) mandates that an affirmative injury determination shall not be made, unless objective evidence demonstrates a "causal link between increased imports of the product concerned and serious injury". The Panel in Argentina – Footwear (Panel) (subsequently affirmed by the Appellate Body), enunciated an analytical framework for a causal analysis: (i) the coincidence of trends between imports and the performance of the domestic industry; (ii) the conditions of competition between imports and the domestic industry; and (iii) whether other factors were the cause of any injury.
4.40.
Assuming arguendo, that serious injury existed, the evidence in this case demonstrates that there was no coincidence of trends between imports and the performance of the domestic industry. In fact, the decline in industry performance coincided with a decline in imports, not an increase. The evidence also established that the conditions of competition between imports and the domestic industry, specifically price effects, were the result primarily of a decline in line pipe demand; there was no demonstration that imports led or caused the decline in US prices. Therefore, the ITC majority should have concluded that no causal relationship existed between increased imports and any serious injury suffered by the industry. At a minimum, the ITC majority had to explain how a causal nexus could still exist in spite of the lack of coincidence in trends between increased imports and serious injury.
4.41.
The ITC’s subsequent analysis of the other factors of serious injury – principally declines in demand for line pipe from the oil and gas industry – was also WTO inconsistent since the evidence established that "but for" the oil and gas crisis, the industry would not have been in a state of serious injury. The ITC’s evaluation of the additional "other factors," including low capacity utilization and significant domestic competition among US producers, also failed to meet the standard set out by the Appellate Body in US – Wheat Gluten (AB) . The United States failed to establish that it did not "attribute the injury caused by these other factors to increased imports" since the ITC only weighed each individual other factor against increased imports. The required "examination" and "distinguishing" of the other factors was not performed. Thus, the ITC did not establish that the increase in imports had a "genuine and substantial" linkage with serious injury.
4.42.
Finally, the US safeguard measure was designed to remedy, in part, serious injury from declining demand when the measure should only have addressed the serious injury caused by imports.

(c) There Was No Threat of Serious Injury from Imports in Accordance With The Requirements Of Article XIX nor Articles 2 and 4

4.43.
Two Commissioners determined that although the industry had not been seriously injured, it was threatened with serious injury from increased imports. These Commissioners failed to reconcile their finding of threat with the fact that subject imports had declined over the most recent 12-month period (there was only a "threat" of increased imports), and that decline had actually accelerated considerably over the final six months of the period. Finally, both domestic pricing and shipments had shown considerable improvement by mid-1999 with the recovery of the oil and gas sector. When the improvement in the industry is combined with the fact that imports continued to decline, it is clear that the affirmative threat determinations were based merely on "conjecture or remote probability," and not on injury that was clearly "imminent". Thus, the ITC’s threat of injury determination violated Article XIX and Articles 2 and 4.

(d) No Unforeseen Developments Led to Increased Imports

4.44.
Pursuant to the Appellate Body’s Interpretation of Article XIX in Korea – Dairy Safeguard (AB) and Argentina – Footwear (AB), there must be unforeseen circumstances that led to the increase in imports that cause serious injury. No such unforeseen circumstances were identified by the United States nor do any such circumstances exist in the record of this case.

(e) The US Decision Did Not Satisfy the Requirements of Emergency Action As Specified by Article 11 or Article XIX

4.45.
The US decision did not meet the fundamental conditions of safeguard relief. As the Appellate Body in Argentina – Footwear (AB) recognized, safeguard measures were intended to be measures "out of the ordinary, to be matters of urgency, to be, in short, ‘emergency actions’".
4.46.
Such an emergency situation did not exist here – a four-quarter decline in imports is hardly an "emergency" situation requiring "immediate relief". This is especially true when the decline in domestic industry performance coincides with a decline in imports and the industry is in the midst of an upswing when the ITC’s determination was made. Thus, the US determination on serious injury and causation cannot support this or any other safeguard measure because the strict standards of the SA have not been met.

5. Procedural Legal Arguments

(a) The United States Violated Article 12.3

4.47.
The United States did not disclose to Korea the measure the President intended to propose prior to or during the consultations as required under Article 12.3. Therefore, Korea was deprived of any meaningful consultations regarding the measure in violation of Article 12.3.

(b) The United States Violated the Compensation Provisions of Article 8.1

4.48.
Article 8.1 provides that a Member imposing a measure shall endeavour to maintain a substantially equivalent level of concessions including trade compensation. Articles 8.1 and 12.3 are explicitly linked and require that there be an opportunity for prior consultation with full knowledge of the proposed measure. As the United States did not disclose the measure to Korea prior to the consultations, those consultations could not meet the objectives set out in Article 8.1.

6. Conclusion

4.49.
The US safeguard measure as well as the ITC’s safeguard investigation were not in conformity with the WTO. Korea respectfully requests that the Panel find that the US safeguard measure should be lifted immediately and the ITC safeguard investigation on line pipe terminated.

B. First Written Submission of the United States

4.50.
The following is the United States' own executive summary of its first written submission:

1. Factual Background

4.51.
The ITC determined that line pipe was being imported into the United States in such increased quantities as to be a substantial cause of serious injury or the threat of serious injury. Three of the ITC’s six Commissioners found that the domestic industry was seriously injured, and two found that the domestic industry was threatened with serious injury. The votes of these five Commissioners constituted the determination of the ITC, which is the "competent authority" of the United States for purposes of the WTO Agreement on Safeguards. One Commissioner dissented from the determination. Under US law, that dissent does not form part of the determination of the ITC or the explanation of the basis of the determination.
4.52.
Contrary to Korea’s assertions, the ITC’s determination is fully consistent with Articles 3 and 4. Korea has presented no grounds for the Panel to conclude that confidential information is necessary to its review of the ITC’s findings and conclusions. Furthermore, the fact that the ITC Commissioners were not unanimous in their affirmative injury findings does not render that determination inconsistent with Articles 3.1 or 4.2(c). Articles 3 and 4 impose requirements on the "competent authorities of a Member." The Safeguards Agreement does not address the question of how the "competent authorities of a Member" reach their decisions. This is a matter left to the Member.

2. Substantive Argument

(a) Burdens of Proof

4.53.
The United States complied with all its obligations under the Marrakesh AgreementEstablishing the World Trade Organization ("WTO Agreement") when it applied the safeguard measure on line pipe. That measure is presumed to be consistent with the WTO Agreement unless Korea, as the complainant, meets its burden of proof to demonstrate otherwise. It has failed in this task, as its claims are based primarily on unfounded assertions without supporting evidence or legal grounding. Korea attempts to excuse these shortcomings by claiming that it needs large volumes of "confidential information" to advance its claims. However, most of the data underlying the ITC finding of serious injury appear in the ITC Report.5 Therefore, the deletion of confidential information from the published version of the report does not impair the Panel’s ability to examine Korea’s claims. Since Korea has failed to present a prima facie case on any of its claims, the Panel has no basis to request the United States to provide the confidential information.

(b) The Proper Application of the Standard of Review: Objective Assessment of Action by the Competent Authorities and Action by Members in Applying a Safeguard Measure

4.54.
The Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") and past interpretations of the DSU establish that a panel must make an objective assessment of the facts of the case and of the applicability and conformity with the relevant covered agreements. With regard to fact-finding, "the applicable standard is neither de novo review as such, nor ‘total deference.’"6 This inquiry may differ depending on the obligation under examination.
4.55.
With regard to the ITC’s findings, which address US obligations under Articles 2, 3, and 4 of the Safeguards Agreement, the Panel’s review is limited to an objective assessment

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... the Safeguards Agreement.7

4.56.
In contrast, a panel’s analysis of the Member’s application of a safeguard measure is not confined to evidence gathered in the investigation or findings made in the report of the competent authorities. The panel may also consider a Member’s ex post explanation of why the measure was permissible at the time of application. As the Appellate Body recognized in Korea – Dairy Safeguard, the recommendations or determinations in a safeguard proceeding need not justify the type or extent of the safeguard measure applied by the Member, except in the limited circumstance of a quantitative restriction that reduces the quantity of imports below the average of imports in the last three representative years.8

(c) Korea Has Not Established Any Basis for the Panel to Conclude That the ITC’s Determination of Increased Imports Is Inconsistent With Article 2

4.57.
Article 2.1 requires increased imports on either an absolute basis or relative to domestic production. In this case there was a recent, sudden, sharp, and significant increase in imports in the recent past, on both an absolute basis and relative to domestic consumption.
4.58.
In analyzing the import data, the ITC paid particular attention to the most recent part of the period of investigation, the full year 1998 and interim 1999. As the ITC found, after declining between 1994 and 1995, imports on an absolute basis increased each year thereafter, and rose sharply in 1998, the most recent calendar year of the period investigated. Imports rose from about 222,000 tons in 1997 to about 331,000 tons in 1998. Although absolute import levels in interim 1999 were slightly lower than those for interim 1998, they remained very high. Imports in interim 1999 exceeded in just six months the levels of full year 1995 and 1996 imports. Imports relative to domestic production rose each year after 1995. The ratio of imports to domestic production nearly doubled in 1998, and reached its highest level in interim 1999.
4.59.
Korea has failed to meet its burden of making a prima facie case that the increase in imports required by Article 2.1 did not occur. Korea attempts to refute the ITC’s finding of increased imports by asking the Panel to focus exclusively on a comparison of the last six months of 1998 and the first six months of 1999, to the exclusion of all other data, including the most recent full-year data for 1998. Even the import data for this 12-month period used by Korea does not support its argument that imports declined steadily over this period. Rather, monthly import data show that imports actually increased toward the end of interim 1999.
4.60.
The ITC customarily gathers and evaluates import data on a calendar year basis with additional data on interim periods, and not on the basis of arbitrarily defined snapshots of time. That the ITC followed its long-standing approach in examining increased imports demonstrates neutrality and lack of bias in its analysis. The use of interim-period-to-interim-period comparisons for 1998 and 1999 was consistent with its long-standing practice and, unlike Korea’s proposed alternative methodology, not chosen to achieve a particular result.
4.61.
Nothing in the Safeguards Agreement compels the use of any particular period, let alone the arbitrarily-defined period advocated by Korea. Under the applicable standard of review pursuant to Article 11 DSU, the Panel should not re-weigh the evidence before the ITC, and should not disturb the ITC’s findings so long as they are objective.

(d) The ITC’s Determination of Serious Injury Caused by Increased Imports Is Consistent With Article 4

4.62.
In determining that the domestic industry was seriously injured, the ITC evaluated all enumerated factors set out in Article 4.2(a) and "other" factors that it found to be relevant, including capacity, shipments, inventories, capital expenditures, research and development expenses, and prices. Virtually all of the factors demonstrated a significant overall impairment in the domestic industry’s condition beginning in 1998 and continuing into interim 1999. Korea’s submission completely disregards this overwhelming evidence of serious injury.
4.63.
The ITC’s methods of collecting and evaluating the injury data were reasonable. The ITC recognized that most of the producers of line pipe also made other types of pipe, including oil country tubular goods ("OCTG"). The ITC carefully evaluated company allocation methods in the course of tabulating questionnaire and other data, and it verified the allocations of two of the largest producers. Some allocation issues will always be present in a safeguards investigation involving a product that is made in productive facilities also used to produce other products. The fact that certain allocations are necessary does not mean that a Member has failed to evaluate industry-specific factors "of an objective and quantifiable nature," as required by Article 4.2(a).
4.64.
For the large majority of the factors considered by the ITC in its injury analysis, Korea has failed to provide any reason to believe that the production of other pipe products in the US producers’ facilities affected the data. The only flaws that Korea alleges go to capacity utilization and profitability.
4.65.
The ITC recognized that capacity utilization "may not be as certain a measure of injury in this industry as compared to others, given the ability of domestic producers to shift production among various pipe products." It concluded nevertheless, that "the sharp decline in capacity utilization is consistent with other indicators of poor domestic industry performance in 1998 and interim 1999 and supports an affirmative determination of serious injury."
4.66.
The ITC adequately addressed Korea’s arguments that declining OCTG sales distorted the profitability data for the line pipe industry because fixed costs were allocated by some domestic producers based on the relative levels of sales of different pipe products. The ITC concluded that increases in such costs, resulting from declines in the production of other pipe products such as OCTG, were not mistakenly or disproportionately attributed to line pipe.
4.67.
Korea’s argument rests entirely on the faulty premise that OCTG shipments declined much more severely than shipments of line pipe and other pipe products made by the US firms. Based on an examination of the objective evidence in the record, the ITC found that this was not the case. Line pipe shipments declined precipitously, at the same time and virtually to the same degree as OCTG shipments. There is no basis for Korea’s argument that a disproportionate share of fixed costs were allocated to line pipe, thereby distorting the financial results of the line pipe industry.
4.68.
Furthermore, Korea incorrectly assumes that the largest component of average unit costs consisted of fixed costs. The majority of average unit costs (raw material and direct labour) were, however, variable and therefore could not be directly influenced by changes in production volumes of different pipe products. Thus, even if there had been a disproportionately large decline in OCTG sales – and Korea has produced no record evidence of this – the effect that this could have had on average unit costs for line pipe was nominal.
4.69.
Data for the entire US line pipe industry showed that its financial condition deteriorated sharply in 1998 and interim 1999, notwithstanding Korea’s arguments concerning events at two firms. Article 4.2(a) requires an examination of the situation of the entire industry, and not of individual firms. Further, with respect to one of the firms singled out by Korea, the evidence of alleged problems presented by Korea rests on a distortion of the statements of the dissenting ITC Commissioner. With respect to the second firm, there was ample evidence in the record that the decline in its line pipe business played a major role in the difficulties that it faced.
4.70.
Korea’s argument that the industry was not seriously injured because capital expenditures increased is likewise unpersuasive. Virtually all other factors bearing on the state of the industry pointed decisively to serious injury. Also, there was evidence in the record that 1998 capital spending reflected analyses and decisions that preceded the surge in imports in 1998, and that some capital spending had been postponed or cancelled in 1998. Finally, the ITC noted that capital investment projects in the steel industry generally involve long lead times, suggesting that capital expenditure levels may not be a timely and accurate measure of industry conditions.
4.71.
Korea’s arguments that the domestic industry was not suffering serious injury because of an improvement at the end of the investigated period are also unpersuasive. Contrary to Korea’s assertion, imports had actually begun to increase again at the very end of interim 1999. Moreover, Korea relies on announcements of price increases that mostly occurred well after the ITC’s investigation was over.
4.72.
In assessing causation, the ITC first ascertained the effects of the increased imports to determine whether they were causing serious injury or threat thereof. It separately identified and evaluated the effects of the other factors which could be having an injurious effect. In determining the effects of both increased imports on the one hand and other factors, the ITC properly distinguished the effects of imports from the effects of other factors. The ITC thereby ensured that the effects of other factors were not attributed to the imports, and it established that there was a genuine and substantial relationship of cause and effect between the increased imports and the serious injury to the domestic industry. The ITC’s application of the causation standard was consistent with the requirements of the SA as explained by the Appellate Body in United States – Wheat Gluten.9
4.73.
The ITC found that increased imports of line pipe were "an important cause of serious injury." Imports had increased substantially every year since 1996, with the bulk of this increase occurring in 1997 and 1998. Imports’ market share rose significantly, especially during 1998 and interim 1999, at the same time that the domestic industry’s condition deteriorated. Based on its evaluation of the import levels and industry indicators, the ITC found that the surge in imports and consequent shift in market share from the domestic industry to imports occurred at the same time that the domestic industry went from healthy performance to a very poor performance.
4.74.
The ITC properly evaluated "relevant factors having a bearing on the situation of the domestic industry" and concluded that the sharp increase in imports in 1998 and interim 1999 led to losses in all key industry indicators. Through this analysis, the ITC found that increased imports were an important cause of serious injury and properly established the existence of the causal link between the increased imports and the serious injury, as required by Article 4.2(b).
4.75.
Contrary to Korea’s assertion, there is a coincidence of trends between imports and the performance of the domestic industry. The "negative correlation between import trends and the difficulties of the industry," which is the basis for so much of Korea’s argument on causation, simply does not exist.
4.76.
The ITC considered Korea’s argument that import levels were overstated because of dual stencilling of line pipe, but concluded that there was no evidence to support Korea’s claim that a substantial portion of Korean imports were dual-stencilled but actually sold as standard pipe.
4.77.
Korea’s assertion that the ITC failed properly to consider whether declining line pipe prices were caused by imports does not withstand scrutiny. The ITC relied on three different types of evidence in analyzing whether imports depressed domestic prices: average unit values of imports, pricing data that it had collected, and questionnaire responses from a wide range of industry participants. Declining average unit values of imports indicated price depression by imports. The pricing data that the ITC collected showed that underselling by imports was pervasive. Finally, most of the questionnaire responses from industry participants identified import competition as an important cause of price declines and injury to the domestic industry.
4.78.
The ITC examined six factors other than increased imports as possible other causes of serious injury. Korea focuses on two of these: a crisis in oil and gas exploration and development in 1998 and 1999, and competition within the domestic industry.
4.79.
The ITC distinguished any injurious effects caused by increased imports from the effects of declining demand due to the oil and gas crisis by finding that the decline in demand for line pipe could not explain: (i) the level of financial losses experienced by the domestic industry; (ii) the domestic producers’ loss of market share; or (iii) the across-the-board price declines affecting line pipe products not used in oil and gas gathering applications. The ITC also noted the consensus among industry participants that imports had played a major role in the decline of line pipe prices in 1998 and interim 1999. Therefore, the ITC did not improperly attribute to imports injury caused by the decline in oil and gas demand, and its findings demonstrated that the causal link between the increased imports and serious injury was undisturbed by any contribution to injury resulting from reduced oil and gas drilling and production activities.
4.80.
Korea’s argument with respect to the effects of reduced activity in the oil and gas industry rests in large part on its assertion that there was a coincidence in trends between declining demand due to the oil and gas crisis and the deteriorating condition of the domestic industry, and that there was no coincidence in trends between imports and the condition of the domestic industry. Korea is incorrect. Increased imports did coincide with the deteriorating condition of the domestic industry. Moreover, the ITC’s analysis of the conditions of competition confirmed the causal link between imports and the injured condition of the domestic industry. The fact that the oil and gas crisis also coincided with the worsening condition of the domestic industry does not prove that the ITC attributed the effects of the oil and gas crisis to imports. The ITC clearly and extensively distinguished the effects of increased imports from those of the oil and gas crisis.
4.81.
The ITC also considered competition among domestic producers but found that, since competition among domestic producers had always been a factor in the market, such competition did not explain the sudden and sharp declines in domestic prices and shipments in 1998 and interim 1999. The ITC found the modest increase in domestic capacity over the period investigated (which was indicative of intra-industry competition) was considerably less than the growth in line pipe consumption. Thus, contrary to Korea’s assertion, the ITC did not improperly attribute to increased imports injury caused by competition among domestic producers.
4.82.
In sum, the ITC properly distinguished the effects of other factors under Article 4.2(b), and properly established the causal link between increased imports and serious injury to the domestic industry, without attributing to imports injury caused by other factors.

(e) Korea Has Not Provided Any Basis for the Panel to Conclude That Chairman Bragg and Commissioners Askey’s Findings Are Inconsistent With Articles 2 and 4

4.83.
Contrary to Korea’s assertion, the two ITC Commissioners who determined that increased imports threatened serious injury found both an increase in imports that had already occurred, and that subject imports were likely to increase in the future. Both of these findings are supported by the evidence before the ITC. These Commissioners supported their findings regarding likely increased imports in the future with the evidence regarding available capacity in foreign facilities. They also properly relied on objective evidence to find that increased imports contributed to the decline in US producers’ prices for line pipe.
4.84.
Noting the relatively high substitutability between imported line pipe and the domestic product, as well as the importance of maximizing production in a capital-intensive industry, these Commissioners concluded that domestic line pipe producers were constrained to lower prices in response to the availability of lower-priced imports. They found that domestic prices for line pipe had declined to the point where the domestic industry was clearly threatened with serious injury, and if the low pricing was sustained, would quickly result in serious injury. The two Commissioners made appropriate findings regarding threat of serious injury based on facts and not mere allegation, conjecture or remote possibility.

(f) Korea Has Not Established Any Basis for the Panel to Conclude That the Safeguard Measure Applied by the United States Was Inconsistent With the Safeguards Agreement or GATT 1994

(i) Korea has not met its burden to establish that the line pipe safeguard was applied beyond the extent necessary to prevent or remedy serious injury and to facilitate adjustment

4.85.
Article 5.1, first sentence, requires that a safeguard measure be "commensurate" with the goals of remedying serious injury and facilitating adjustment.10 Thus, the relevant inquiry involves a comparison of the safeguard measure with the serious injury and the need for adjustment. Korea does not even address this question. Instead, it compares the US safeguard measure, as applied, with the ITC recommendation.
4.86.
In addition to being irrelevant, this comparison does not support Korea’s claim that the ITC recommended measure would have restricted imports or assisted the domestic producers less that the measure that the United States actually applied. Korea simply ignores that the line pipe safeguard’s three-year duration is a full year less than the ITC recommended. It provides no basis for contending that the 19 per cent duty under the line pipe safeguard would have "a similar effect" to the 30 per cent over-quota duty under the ITC’s recommended tariff-rate quota ("TRQ"). But most importantly, Korea’s analysis of the separate elements of the safeguard measure fails again to address the relevant question – whether the measure (and not its parts) is commensurate with the goals of Article 5.1, first sentence.

(ii) Korea has not met its burden of showing that Article 5.1, Second Sentence, Article 5.2(a), or Article XIII are applicable to the type of safeguard imposed on line pipe

4.87.
The United States and Korea differ over whether to characterize the line pipe safeguard as a supplemental duty or a TRQ. This disagreement is, however, of little consequence, since the measure complies with the relevant WTO obligations in either case.
4.88.
If the measure is labelled a supplemental duty, Korea’s arguments become irrelevant. The quota rules under Article 5 and Article XIII, which form the basis for Korea’s arguments, plainly do not apply to a duty increase.
4.89.
If the measure is labelled a TRQ, the analysis takes longer, but leads to the same result. First, Korea claims that the Article 5 prohibitions on the use of quotas and quantitative restrictions apply to the line pipe safeguard because a TRQ is a quota. It provides little support for this view other than to note that the "Q" in "TRQ" stands for "quota." However, panel reports under both GATT 1947 and the WTO Agreement confirm that a TRQ is not a "quota" or "quantitative restriction" for purposes of GATT 1947 and GATT 1994.11 The text supports this view. Article XIII establishes rules on quotas and quantitative restrictions, which it follows with a statement stating that the rules also apply to TRQs. The addition of this clarification shows that the drafters did not understand TRQs to be "quotas" by their nature. Therefore, Korea fails to present a prima facie case that the line pipe safeguard was inconsistent with Article 5.
4.90.
Second, Korea claims that Article XIII applies to the line pipe safeguard. However, the object and purpose of the Safeguards Agreement is to "clarify and reinforce the disciplines of GATT 1994, and specifically those of its Article XIX" by creating "a comprehensive agreement, applicable to all Members and based on the basic principles of GATT 1994."12 One vital aspect of this clarification was the integration of Article XIII principles into the comprehensive framework of the Safeguards Agreement. Some principles were strengthened, some remained the same, and some were removed. The application to a safeguard measure of Article XIII rules that the drafters of the Safeguards Agreement omitted would do violence to their stated objective that the agreement be "comprehensive."
4.91.
Moreover, it does not make sense to apply Article XIII rules to the line pipe safeguard. For example, if Article XIII:2(d) applied to safeguard measures, the identical language included in Article 5.2(a) would become superfluous, a result inconsistent with basic rules of treaty interpretation. The notice requirements under Article XIII:2(a) and XIII:3(b) are redundant of the notification requirements under the Safeguards Agreement. In any event, the Article XIII:2(a) requirement to establish an overall quota amount applies only were "practicable." As Korea itself notes, with an indeterminate number of parties subject to the 9000 ton exemption from the 19 per cent duty, it was not practicable to set an overall quantity of eligible imports.

(iii) Articles I and XIII:1 and Article 2 do not prohibit a member from excluding its free trade agreement partners from a safeguard measure

4.92.
Article XXIV creates an exception to the MFN principle for Members of a free trade agreement. Footnote 1 of the Safeguards Agreement establishes that no provision of the Safeguards Agreement will nullify the effect of Article XXIV on the interpretation of Article XIX. Therefore, Articles I and XIII:1 and Article 2 do not prohibit the United States from excluding Canada and Mexico, its partners in the North American Free Trade Agreement ("NAFTA"), from a safeguard measure. It is noteworthy that the list of measures that Article XXIV:8 specifically authorizes FTA parties to maintain against each other does not include safeguards measures applied under Article XIX. By implication then, safeguard measures either may or must be made part of the general elimination of "restrictive regulations of commerce" under any FTA.

(g) Miscellaneous Arguments Raised by Korea

4.93.
Korea’s first written submission contains several short arguments. All are invalid. (1) Korea’s claims against the ITC’s determination and the measure itself are plainly not independent of each other, which leaves the Panel the option of exercising judicial economy with respect to one if it finds the other to be inconsistent with the WTO Agreement. (2) The record establishes the existence of unforeseen developments, as required under Article XIX. (3) Article 11 does not impose a separate requirement to establish the existence of an "emergency situation." (4) The United States complied with Article 12.3 by giving Korea notice of the proposed safeguard measure and providing an adequate opportunity to consult.

3. Procedural Arguments

(a) Korea Provides No Basis for the Panel to Request Confidential Business Information from the United States.

4.94.
Korea asks the Panel to request immense quantities of confidential information from the United States. However, it has nowhere established that any of the information meets the Article 13.1 DSU requirement of being "necessary and appropriate" to the Panel’s evaluation of Korea’s claims. In fact, previous panels have recognized the need to avoid the use of confidential information, where possible. In this dispute, the non-confidential information on the Panel record is sufficient. If the Panel considers that it needs anything more, the United States is willing to meet the need with summaries or indexed data.
4.95.
Most importantly, Korea has failed to state a prima facie case on any of its claims. Therefore, any request for confidential information at this stage would put the United States in the position of proving its measure consistent with the WTO Agreement when Korea has not yet established the existence of an inconsistency. This would entirely reverse the established burden of proof.

(b) Request of the United States for a Preliminary Ruling That Evidence Not Submitted to the ITC or Addressing Events After the Decision to Take a Safeguard Measure Is Not Admissible in This Proceeding

4.96.
The United States requests that the Panel issue a preliminary ruling that certain information included in Korea’s first written submission is inadmissible. First, several pieces of information in Korea’s submission were not submitted to the ITC. If the Panel were to consider that information in its evaluation of the ITC determination, it would be conducting the sort of de novo review that the Appellate Body has consistently rejected. Second, Korea submitted and cited to information pertaining to the period after the United States took the decision to apply a safeguard measure. Under the Safeguards Agreement, both the determination of serious injury and the decision to apply a safeguard measure must be based on information available to the competent authorities or the Member at the time of the determination or decision. Therefore, that information is irrelevant to any evaluation of the line pipe safeguard measure.
4.97.
Accordingly, the United States requests that the Panel rule that the information described in the preceding paragraph is inadmissible, that it request the removal of that information and arguments based on that information from Korea’s first written submission, and that the Panel disregard that information and any arguments based on it.

C. First Oral Statement of Korea

4.98.
The following is the Korea's own executive summary first oral statement:

1. Factual Background

4.99.
The US line pipe industry, in the second half of 1998 and early 1999, faced a difficult situation. The industry had just enjoyed a peak demand period for 18 straight months; the industry built substantial new capacity to take advantage of that domestic increase in market demand; but demand plummeted when the oil and gas crisis hit. US line pipe industry performance began its recovery in the second quarter of 1999. Imports, however, continued to fall in the first half of 1999, a decline that had commenced in the second half of 1998.

2. Preliminary Issues

(a) Confidential Information

4.100.
The 16 February letter of the United States confirms that Korea was absolutely correct that the public data regarding absolute import trends does not accurately reflect the trends of the confidential data. This is the reason that the Panel also needs the other confidential data identified in Korea’s First Written Submission. The Panel is not obliged to frame its review and decision on the basis of the information the United States may choose to provide. The Panel should either apply adverse inferences to complete its review or find that the United States has failed to meet its burden of proof, depending on the issue.

(b) Judicial Economy

4.101.
Korea urges the Panel to reach the issues of the safeguard measure even after the Panel finds errors in the ITC investigation. Otherwise, it would lead to dispute prolongation rather than dispute resolution. This authority is within the Panel’s discretion.

3. Legal Arguments

(a) The Safeguard Measure

4.102.
For reasons never made publicly available, the US President completely ignored the ITC’s recommendations and imposed a remedy which was far more restrictive and in clear violation of many of the basic principles for safeguard remedies. The ITC had recommended a tariff-rate quota of 151,124 short tons with a 30 per cent tariff for over-quota imports. The President imposed a tariff-rate quota of 9,000 short tons per supplying country with a tariff of 19 per cent for over-quota entries. The President’s measure was excessive.
4.103.
The US measure, a tariff-rate quota, violates Articles XIII and XIX and Article 5. The US claim that Article XIII does not apply to a safeguard measure under the SA must be rejected. The WTO is a single treaty. As such, all provisions of the treaty must apply with full force and effect. Article II:2 of the WTO Agreement expresses the intention of the Uruguay Round negotiators that the provisions of the agreements included in Annexes 1, 2 and 3 must be read as a whole. The General Interpretative Note to Annex 1A of the WTO Agreement provides that "[i]n the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A to the Agreement, the provisions of the other agreement shall prevail to the extent of the conflict" (emphasis added). Certainly, no conflict exists between the SA and Articles XI and XIII.
4.104.
The United States maintains that only the provisions of Article XIII which are specifically incorporated in the SA continue in force and effect and cites for its conclusion that the SA is a "comprehensive" agreement. But "comprehensive" does not mean "exclusive." In Argentina – Footwear, the Appellate Body specifically rejected the argument that since the SA did not contain the "unforeseen development" language found in Article XIX, this was an "express omission" from the SA. The same reasoning applies here. The preamble of the SA states that the object and purpose of the SA is to "clarify and reinforce the disciplines of GATT 1994" (emphasis added). While Article XIX is specifically mentioned in the SA, it is not exclusively mentioned – all the disciplines of the GATT 1994 are referenced. The object and purpose of the SA, set forth in the preamble, is to "re-establish multilateral control over safeguards and eliminate measures that escape such control." Yet the United States maintains that the Article XIII requirements regarding tariff-rate quotas were eliminated. If we were to follow the US argument, only tariff-rate quotas have escaped multilateral disciplines.
4.105.
In any event, regardless of what form a safeguard measure takes, it must be "necessary to prevent or remedy serious injury and to facilitate adjustment" in accordance with Article 5.1 and Article XIX of the GATT 1994. In Korea – Dairy Safeguard, the Appellate Body upheld the Panel’s conclusion that the first sentence of Article 5.1 imposes such a very specific "obligation."
4.106.
The Majority of the ITC explicitly concluded that the Petitioners’ quota recommendation of 105,849 short tons "would exceed the amount necessary to prevent or remedy the serious injury.... Our economic analysis indicates that such restrictions would be excessive." The President’s safeguard remedy, under any reasonable calculation, is below that level of restriction and therefore, "excessive."
4.107.
The US position that they do not need to justify the measure before it is imposed nor can the import performance be evaluated after it is imposed, renders Article 5.1 meaningless.
4.108.
No document exists in the record of the ITC investigation or the establishment of the safeguard remedy, which demonstrates that the measure imposed by the US President was "necessary." To the contrary, the evidence is that the measure imposed is, in the words of the ITC Majority, "excessive." The United States still has not attempted to point to any evidence to the contrary.

(b) The United States Impermissibly Excluded Mexico and Canada From the Safeguard Measure

4.109.
Article 2.2 provides that safeguard measures "shall be applied to a product being imported irrespective of its source." Footnote 1, which addresses the term "Member," is a footnote to the text of Article 2.1. It is not a footnote to Article 2.2, which provides for MFN application of the measure. The Appellate Body in Argentina – Footwear concluded that, by its very terms, Footnote 1 only applies to (i) a "customs union" (ii) that is acting "as a single unit or on behalf of a Member state." Korea sees no basis for concluding that Footnote 1 can be read as two separate provisions. In fact, the only logical reading from the text and its context is that this is a self-contained provision, which applies to a customs union.

(c) The ITC Investigation of Increased Imports, Serious Injury and Causation

(i) Introduction

4.110.
Safeguard relief is an extraordinary remedy that must be justified by extraordinary circumstances. Another clear lesson from the jurisprudence is that the safeguard measure is an action against fairly traded imports. Therefore, only strict compliance with the requirements of each and every requirement of the SA can justify a safeguard measure. The emergency and extraordinary nature of the remedy must inform the proper analysis and interpretation of all the requirements of the SA and the GATT 1994. The US argument that the emergency nature is limited to the "measure" and does not apply to the situation investigated is inconsistent with the Appellate Body ruling in Argentina – Footwear.

(ii) Increased imports

4.111.
With respect to the increased import requirement in Article 2.1, the Appellate Body in Argentina – Footwear articulated that "not just any increased quantities of imports will suffice." The Appellate Body based its reasoning on the plain meaning of "is being imported," which, being in the present tense, requires that the increase in imports be "present," not "past." It follows directly from this language that the most recent period for which data is available must be examined.
4.112.
The United States does not argue that the import data of the last 12 months is not meaningful or that it is not available (after all, the confidential data summarized in the February 16 letter reveals almost a 20 per cent decline over two six-month periods). Rather, the US asserts that US practice is to look at "full years." Korea submits that US practice must be in accord with the SA, not vice versa. Article 4.2(a) provides that "authorities shall evaluate all relevant factors of an objective and quantifiable nature." Clearly, data concerning whether imports increased or declined over the last 12 months of the period is both relevant and quantifiable. Imports had decreased by almost 20 per cent in the most recent 12-month period prior to the ITC determination according to the United States letter of February 16. Relative import trends also declined during the first half of 1999.

(iii) Serious injury

4.113.
The fundamental inconsistencies and contradictions among the Commissioners, in the absence of an adequate explanation and reconciliation in the opinions, undermine the adequacy of the ITC Majority’s determination in terms of Articles 3 and 4.
4.114.
Those disagreements about data were so fundamental that only three Commissioners concluded that serious injury occurred by reason of imports. Three concluded otherwise. There must be an adequate explanation of why and how the Commissioners came to these contradictory conclusions. This is all the more true if the ITC relies on confidential data which the United States does not provide to the Panel.

(iv) Inclusion of data relating to other industries

4.115.
The United States argues that there is no evidence in the record that OCTG declines were more severe. While Korea agrees with the United States that both OCTG and line pipe demonstrate the same downward trends, because both are being pulled down by the decline in oil and gas rigs, OCTG dropped much more dramatically. Exhibit 48C tracks the per centage relationship between net shipments of OCTG and net shipments of line pipe. This graph confirms that in 1998 and 1999, OCTG’s share of total shipments (of line pipe plus OCTG) drops more dramatically relative to line pipe. This had a great impact on the profitability of the producers which the ITC did not properly separate and consider.
4.116.
The ITC’s own Staff Report recognizes there was a "collective operating leverage effect." The fact is that the effect does exist and it was documented by the ITC itself.

(v) The industry only experienced a one-year downturn

4.117.
This industry had a record industry performance in 1997, continuing into the first half of 1998. A temporary downturn from a peak performance period does not demonstrate that the industry is in a state of "significant overall impairment," particularly in an industry that experiences wide swings in demand and profitability. This industry also kept investing throughout 1998/1999 because it recognized the ebbs and flows of its business and was investing for the next upturn (which had already commenced).

(vi) The ITC should not have found that the industry is being seriously injured when the industry no longer was suffering injury at the end of the period

4.118.
What is most relevant is that the line pipe industry was fast recovering. As the Panel held in US – Wheat Gluten, "we consider it essential that current serious injury be found to exist, up to and including the very end of the period of investigation." Korea prepared Exhibit 48D which demonstrates, based on the observations and conclusions of the ITC, the US domestic industry, and industry experts, the strong condition of the US line pipe industry.

(vii) There was no causal relationship

(1) Coincidence of trends

4.119.
In Argentina – Footwear (AB) , the Appellate Body sustained the Panel’s analysis of the causation requirement under Article 4.2(b) "it is the relationship between the movements in imports... (volume and market share) and the movements in injury factors that must be central to a causation analysis and determination."
4.120.
The situation in line pipe presents a case of inconsistent trends – imports began to decline at the same time as domestic industry indicators declined. 1998 was composed of a very strong first half during which the domestic industry indicators maintained their peak performance, and a very weak second half during which indicators declined significantly: As all the Commissioners recognized, the industry’s poor health began "in the second half of 1998." This two-period analysis by all six Commissioners contradicts the statement by the United States that "the ITC did not compare data for the first half and second half of 1998."

(2) Other Factors

4.121.
The US causation decision did not comply with the standard set forth in the AB report on US – Wheat Gluten. The United States considered only each individual factor of injury because US law provides that the cumulative effect of all the "other" factors or causes of injury cannot be considered.
4.122.
This methodology obviously conflicts with Article 4.2(b) because the United States did not consider whether the sum of all the other causes of injury (inter alia (1) the oil and gas crisis which caused consumption to drop dramatically from its high in 1997; (2) the build up of significant excess capacity by the domestic industry (on an annualized basis, domestic capacity increased by 25 per cent in 1999 compared to 1998); and (3) the elimination of export markets and consequent ferocious domestic competition) was so great that the effect of imports was diminished to a level that imports had less than a "substantial" effect. Exhibit 48A illustrates the point.
4.123.
The United States improperly attributed injury caused by other factors to increased imports in the remedy recommendation as well. The ITC admits that it was the combined effects of both imports and the oil and gas crisis which caused serious injury and that the remedy recommended was also intended to address the effects of both. Therefore, the remedy is not confined to addressing only the injurious effect of imports.

(viii) Threat of injury

4.124.
The Commissioners who found only threat of injury erred principally because they assumed that imports would increase. Since imports had declined for 12 months, such a counterintuitive conclusion had to be substantiated by more than mere "conjecture or remote possibility."

(ix) The United States has not demonstrated "unforeseen developments"

4.125.
The ITC was under an obligation to demonstrate in its investigation that the increased imports in this case occurred "as a result of unforeseen developments "and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions...."
4.126.
The ITC Report contains no reference to a determination of the "unforeseen developments" which caused the surge in imports of line pipe. The United States cannot, in the course of a Panel proceeding, rehabilitate a finding that was never made.

D. First Oral Statement of the United States

4.127.
The following is the United States' own executive summary of first oral statement:

1. Increased imports

4.128.
There was an increase in imports in this case that was "sudden and recent." Imports of line pipe increased on both an absolute and a relative basis. On an absolute basis, imports of line pipe increased in each of the last three years of the period investigated. Imports declined somewhat in interim 1999 (the first six months of 1999), as compared with interim 1998 (the first six months of 1998), but only on an absolute basis. Moreover, imports remained at such high levels in interim 1999 that they exceeded whole-year imports in both 1995 and 1996.
4.129.
Imports relative to domestic production followed a similar pattern to absolute import levels, except that there was no decline over the interim periods. On a relative basis imports reached their highest level in interim 1999, when they accounted for 46 per cent of the US line pipe industry’s production.
4.130.
Korea tries to avoid this clear evidence of a sudden and recent increase in imports by devising its own limited period for measuring imports. By asking the Panel to focus only on the last six months of 1998 and the first six months of 1999, Korea would have the Panel examine a small portion of the import data in a certain way, and ignore the rest of it. Korea can only show a decline in imports in the last six months of 1998 and first six months of 1999 if it examines this period in six-month increments. If the import data for these 12 months are examined in different increments – for example, on a monthly basis – there is no steady decline in imports.
4.131.
The facts here are much different from those in Argentina- Footwear. The ITC’s decision is consistent with the approach of the Appellate Body in that case. The ITC clearly paid special attention to the most recent import levels and trends, those in 1997, 1998 and interim 1999.
4.132.
Korea has failed to meet its burden of making a prima facie case that the increase in imports required by Articles 2.1 and 4.2 did not occur.

2. Serious Injury

4.133.
The evidence of a significant overall impairment in the US line pipe industry’s condition beginning in 1998 was overwhelming. Serious injury to the industry was clear from an examination of: domestic production, capacity utilization, sales, market share, financial indicators, employment-related indicators, the ratio of inventories to domestic production, and research and development. Korea ignores most of these indicators of serious injury.
4.134.
Korea’s claims that the line pipe industry’s performance indicators were affected by declining OCTG sales does not hold up to scrutiny. Korea’s argument rests on two false assumptions: (1) that the largest component of average unit costs for line pipe consists of fixed costs; and (2) that these costs were disproportionately allocated to line pipe because OCTG sales fell to a much greater extent than line pipe sales. Both of these assumptions are unsupported by the evidence in the record before the ITC.
4.135.
Korea tries to evade the overwhelming evidence of serious injury by arguing that the US line pipe industry was improving at the end of the period examined. Korea is wrong as a factual matter. It mischaracterizes the import data by claiming that there was "a continuing decline in imports" at the very end of the period. This was not so. Imports in May and June 1999 had risen again to the very high monthly levels of 1998. Korea also relies on announcements of price increases that were mostly made in "late 1999 and early 2000" after the ITC injury investigation was finished, and which are not part of the record before the ITC or this Panel.
4.136.
The evidence of serious injury was extensive and Korea has failed to make a prima facie case that the US line pipe industry was not seriously injured.

3. Causation

4.137.
The ITC’s causation analysis was fully consistent with Art. 4.2 and the Appellate Body’s decision in Wheat Gluten. The ITC examined the effects of the increased imports, and the effects of other relevant factors, on the domestic industry. By examining and then weighing these effects separately, the ITC distinguished between the effects of increased imports and the effects of other factors, thus ensuring that the effects of other factors were not attributed to the imports.
4.138.
The ITC found that the surge in imports and consequent shift in market share from the domestic product to imports occurred at the same time that the domestic industry went from healthy performance to a very poor performance.
4.139.
The ITC found that increased imports, together with the import-led price declines, caused domestic producers to lose significant sales, market share, and revenue. This led to declines in other key indicators, such as production, shipments, employment, and operating income.
4.140.
Through this analysis, the ITC found that increased imports were an important cause of serious injury and properly established the existence of the causal link between the increased imports and the serious injury, as required by Art. 4.2.
4.141.
Korea is wrong in asserting that there was no coincidence in trends between imports and the downturn in the line pipe industry’s performance.
4.142.
The ITC found that the evidence developed in its investigation suggested that imports had significantly depressed domestic prices. The ITC had three different types of evidence for this: (i) average unit values of imports; (ii) quarterly pricing data which it collected, and (iii) questionnaire responses from a wide range of industry participants. All three of these categories of evidence pointed to the same result. Korea’s critique of this evidence of price depression is unpersuasive.
4.143.
The ITC examined the effects of six factors, other than increased imports, as possible other causes of serious injury. In examining these other causal factors, the ITC distinguished the injurious effects of increased imports from the effects caused by these other factors. It examined whether increased imports were a "substantial cause" of serious injury. A "substantial cause" under US law is "a cause which is important and not less than any other cause." This approach ensures consistency with the guidance on causation provided by the Appellate Body in Wheat Gluten. By examining all of the other factors in this way, the ITC identified the effects of these factors alone, therefore distinguishing those effects from the effects of imports, which were separately considered. Thus, the ITC ensured that it did not improperly attribute to imports any injurious effects caused by other causal factors. Through this process, the ITC also established that the causal link between the increased imports and the serious injury was genuine and substantial.

4. Threat

4.144.
Korea’s arguments challenging the determination of the two ITC Commissioners who found a threat of serious injury are based on a misstatement of the facts. The determination of the two Commissioners finding threat was based on facts in the record before the ITC, not on mere allegation or conjecture, as Korea claims.

5. Putting the Safeguard Measure in Context

4.145.
The United States has already described the domestic industry’s decline into uniformly poor financial performance. Some additional facts serve to put the line pipe safeguard into perspective. Korea accounted for 70 per cent of the total increase in imports in 1998. Imports from Korea also increased in the first half of 1999, as compared with the same period of 1998, in spite of declining demand in the US market. Korean line pipe was imported at exceptionally low prices – much lower than those charged by US producers and most other import sources.
4.146.
These facts demonstrate that the United States complied with Article 5 in that it did not apply the safeguard measure "beyond the extent necessary." It guaranteed imports a presence in the US market, since the 9000 ton exemption for each country would allow the import of a substantial quantity of line pipe with no supplemental duty. The 19 per cent supplemental duty was at a level commensurate with the decline in US producers’ prices in the first six months of 1999. Moreover, even with the addition of the duty, 1999 unit values for imports would not rise to pre-1999 levels.

6. Korea has Failed to Establish that the Measure was Applied Beyond the Extent Necessary

4.147.
Korea has not presented any evidence relevant to determining whether the line pipe safeguard is "commensurate" with the goals of Article 5.1 – remedying serious injury and facilitating adjustment. This text establishes that the condition of the domestic industry is the benchmark for the application of a safeguard measure. It is also significant that this limit affects the extent to which a Member may "apply safeguard measures." Since Article 5.1 applies to "measures," and not the separate components of a measure, consistency with Article 5.1 can only be analyzed with reference to the measure as a whole.
4.148.
Korea compares the line pipe safeguard chosen by the United States with a TRQ recommended by three ITC Commissioners. However, the fact that one potential safeguard measure falls within the Article 5.1 limit does not mean that changing one aspect of the measure would push it beyond the limit. For example, suppose a four-year tariff of 30 per cent was found to be commensurate with the goals of Article 5.1. A 40 per cent tariff might be able to achieve the same goal in three years. Both would be permissible under Article 5.1, first sentence.
4.149.
Finally, Korea simply ignores certain aspects of the line pipe safeguard, such as its duration and the size of the supplemental duty. In so doing, it has failed to demonstrate anything about the measure as a whole and, thus, provides no basis to even apply the relevant standard.

7. Korea has Failed to Justify Application of Quota Disciplines to the Line Pipe Safeguard

4.150.
The principles of Article XIII that are incorporated into the Safeguards Agreement are the only provisions that are applicable to safeguard measures. The object and purpose of the Safeguards Agreement is to create a "comprehensive agreement." In so doing, it incorporates principles – and even one entire block of text – from GATT Article XIII. It omits the provisions of Article XIII that Korea now relies upon. To conclude now that Article XIII applies to safeguard measures would be to reverse the Members’ decision to include only some of those provisions in the Safeguards Agreement. The Panel simply does not have the mandate to do this.

8. Exclusion of Canada and Mexico from the Line Pipe Safeguard

4.151.
Korea argues that footnote 1 of the Safeguards Agreement applies only to customs unions. If the drafters had intended this result, the footnote would have cited only to subparagraph 8(a) of Article XXIV. Paragraph 8, covers customs unions under subparagraph (a) and free trade agreements under subparagraph (b). Therefore, it is logical to conclude that the citation to Article XXIV:8 in the last sentence of footnote 1 means that provision applies to both customs unions and FTAs.
4.152.
Korea argues that the location of the sentence does not make sense if it applies to free trade areas. The United States disagrees. The first three sentences of footnote 1 deal with the basic question of the relationship between Article XXIV and the Safeguards Agreement, as applied to customs unions. When the drafters chose to address Article XXIV as it affects both customs unions and free trade areas, it made sense to put it with other provisions dealing with that topic.

9. Korea’s Request for Confidential Information

4.153.
Upon further review of Korea’s arguments, it is apparent to the United States that Korea has not shown any need for the Panel to examine additional pricing data to determine the consistency of the ITC’s determination with the Safeguards Agreement. To the extent that any comments in the United States’ first submission suggest otherwise, the United States wishes to correct the record as to the its view.
4.154.
Korea’s contention that the Panel needs to examine additional price information is mainly predicated on an isolated statement made in the dissenting views of Commissioner Crawford that underselling was not any more prevalent during 1998 and interim 1999 than in earlier periods. (ITC Report at I-71.) But, regarding the fact upon which the ITC actually relied with respect to prices – even Commissioner Crawford specifically acknowledged that there was persistent and widespread underselling. She simply placed less emphasis on that fact.
4.155.
A careful reading of the exact passages in Korea’s brief which form the basis for its request for additional pricing data shows that Korea is actually asking the Panel to draw different factual conclusions from those drawn by the ITC. Korea has no basis other than conjecture to assert that the Panel needs to conduct a review of information in the confidential record to ascertain whether Korea’s unsupported allegations possess any merit. The complete version of the US oral statement for the second session of the first panel meeting contains a point-by-point refutation of Korea’s basis for urging that pricing data from the confidential record is necessary.
4.156.
In a final effort to convince the Panel of the need to obtain confidential pricing data, Korea quotes a statement in the post-hearing brief it submitted to the ITC. The statement addresses a disagreement among the interested parties in the administrative proceeding as to whether the size of the margins by which imports undersold domestic products increased during 1998. Korea has not disputed the prevalence of underselling – the specific fact about prices that is relevant to the Commission’s findings. The Commission did not mention or rely on any increases in the size of underselling margins as a basis for its finding that imports depressed domestic prices. Thus, Korea has failed to show that the Panel needs to see confidential data to review Korea’s challenge to the Commission’s findings and conclusions relating to pricing.

E. Second Written Submission of Korea

4.157.
The following is Korea's own executive summary of its second written submission:

1. Preliminary Legal Issues

(a) Confidential Information.

4.158.
Korea and the Panel still lack fundamental information that has been withheld by the United States for reasons of confidentiality.
4.159.
The United States consistently has dismissed Korea’s requests as unnecessary. However, the fragmentary data actually produced by the United States has confirmed just the opposite:

(1) The non-confidential summary of imports in the ITC Determination does not accurately reflect the actual import levels in 1998 and 1999, as demonstrated by the US 16 February letter.

(2) The information provided by the United States concerning Geneva Steel is incomplete and thereby misleading.

(3) The information provided by the United States in its 23 April letter concerning Lone Star similarly confirms a far different situation than previously described by the United States.

4.160.
Finally, the pricing data provided by the United States in its 23 April letter remains fragmentary due to the confidentiality rules employed by the United States. Nonetheless, the data still confirm, that underselling was a market condition.
4.161.
The data available confirms the need for the following additional information:

(1) The confidential Economic Memoranda used to evaluate the remedy proposals and the impact of various alternatives on the US industry. (See below).

(2) The papers used in the deliberative process by the President in reaching the determination regarding the safeguard measure.

(3) The confidential version of the ITC Staff Report, providing fuller explanations for the condition of the industry.

(b) The Panel Should Reach the Issues Raised by Korea With Respect to Both the US Investigation as Well as the Safeguard Measure

4.162.
With respect to issue judicial economy, Korea urges the Panel to exercise its discretion to reach the issues raised regarding the safeguard measure even after finding errors in the ITC investigation, due to a considerable on-going impact of the US measure on trade.

(c) Standard of Review

4.163.
Korea is requesting that the Panel, pursuant to Article 11 of the DSU, and the Appellate Body decision in US – Lamb Meat, conduct an "objective assessment of the facts."

(d) The Panel Should Reject the US Objections to Extra-Record Information Based on the Decision of the Appellate Body in US – Lamb Meat

4.164.
Korea would like to supplement its earlier arguments on this issue with the recent holding of the Appellate Body in US – Lamb Meat, recognizing that a "WTO Member is not confined merely to rehearsing arguments that were made to the competent authorities...."

2. Legal Arguments

(a) The Safeguard Measure

(i) The US measure does not comply with Articles XIII or XIX nor does it comply with the requirements of Article 5

(1) The requirements of Article XIII and Article 5 must be read as a whole

4.165.
The proper interpretation of the Agreement on Safeguards and Article XIII must proceed from the fact that the WTO is a single treaty. As such, all of the provisions of the treaty must apply with full force and effect. Article II:2 of the WTO Agreement expressly manifests the intention of the Uruguay Round negotiators that the provisions of the WTO Agreements and the Multilateral Trade Agreements included in its Annexes 1, 2 and 3 must be read as a whole. Moreover, as the Appellate Body properly notes in Argentina – Footwear, the General Interpretative Note to Annex IA provides that "[i]n the event of conflict between a provision of the General Agreement on Tariffs and Trade 1994 and a provision of another agreement in Annex 1A... the provision of the other agreement shall prevail to the extent of the conflict." In this case, the United States has not alleged, nor does there exist, a conflict between any of the provisions of Article XIII, which regulates tariff-rate quotas ("TRQs"), and the provisions of Article 5. The Preamble to the SA states that the object and purpose of the SA is to "clarify and reinforce the disciplines of GATT 1994." While Article XIX is specifically mentioned, it is not exclusively mentionedall of the disciplines of GATT 1994 are incorporated.
4.166.
The United States seeks to make much of the fact that Article 5 does not include each concept contained in Article XIII and essentially argues that the "intent" of the negotiators was to "exclude" certain obligations and rights contained in Article XIII. Korea submits that, the determination of the "intent" of the negotiators is unknowable and equivocal except as to the extent that the negotiators did know, based on the Note to Annex 1A, that the GATT Agreements and GATT 1994 would be read together except in the case of a conflict.

(2) Article 5.1: TRQs are quantitative restrictions

4.167.
Korea observes that the US position has been to rely on one Article of the GATT 1994, Article XI, to define a quantitative restriction, and to dismiss another Article of the GATT 1994, Article XIII, on the grounds that Article XIII has, in essence, been superseded by Article 5. The United States, however, never clarifies why only one Article of the GATT 1994 was superseded, rather than both Articles or neither.

(3) The US measure is a TRQ: The overall limit should have been set in accordance with Article 5.1 and Article XIII

4.168.
It is absurd to suggest, as the United States does, that the determination of whether a measure is a TRQ depends upon whether it has been legally and properly constructed by a Member. This reasoning is circular and would allow a Member to evade all of the requirements of Article XIII by circumventing certain requirements of Article XIII. Moreover, not all TRQs must have a fixed overall amount. Article XIII.2(a) provides for fixing the overall amount of the quota "wherever practicable." For example, import licenses are contemplated as an alternative to an overall quota. The United States has not given an adequate justification of why the President concluded it was impracticable when the ITC Majority found it "practicable" to fix an overall limit of the quota element of the TRQ.

(4) Article 5.2(a): TRQs are "quotas" within the meaning of 5.2(a)

4.169.
The plain meaning of "quota" applies to both "straight" quotas and tariff quotas.
4.170.
When only tariffs are imposed, Article I requires that they be applied on an MFN basis, at the same level for all suppliers. However, when "quotas" are applied, Article XIII.2(d) requires that they be allocated in accordance with a Member’s proportional share during a representative period. In other words, the same quotas cannot be given to each supplier regardless of their historical share. The reason is that "discrimination" takes on a different meaning for quotas than it does for tariffs. For this reason, Article XIII.2 requires that historical trade patterns should not be disrupted.
4.171.
Similarly, a tariff combined with a quota does not have the same impact on trade as a straight tariff: the set quantity can enter at the bound rate, which impacts the degree to which trade will be affected by the tariff. There is an implicit cost preference for imports under the "quota" at the bound rates.

(ii) Regardless of the type of measure, the measure violates Article XIX:I and Articles 5.1 and 7.1 because the measure was not limited to the extent and the time necessary to remedy the injury and allow adjustment

(1) What the United States really means by ex post facto reasoning

4.172.
The United States maintains that the Appellate Body decision in Korea – Dairy Safeguard permits them to provide: "ex post justification of why the measure was permissible at the time of application." (Korea does not agree with this interpretation. Moreover, Korea submits that the United States has not even provided an "ex post" explanation of its remedy.) The absurdity of US speculation about what "might" have justified a 19 per cent TRQ highlights the dangers of a standard which allows Members to "make it up as they go along." A "requirement" which can be so easily sidestepped is no requirement at all and reads the prescriptions of Article 5.1 ("to the extent necessary"). As discussed below, the US argument hinges on an overly broad reading of Korea – Dairy Safeguard.

(2) The meaning of Korea – Dairy Safeguard and the obligations of Article 5.1

4.173.
Korea believes that the decision of the Appellate Body in Korea – Dairy Safeguard should be considered in its proper legal context. The issue before the Appellate Body was whether Article 5.1, by its terms, required a specific finding that the measure, in that case a quantitative restriction, was "necessary." While the Appellate Body rejected the broad language of the Panel with respect to the obligations of Article 5.1, the holding did not extend past the question presented: the extent of the obligation to justify a quantitative restriction if the relief imposed is consistent or inconsistent with the import average during the representative three years.
4.174.
Korea reiterates that the holding in Korea – Dairy Safeguard applies to this case because the US measure is a quantitative restriction in the form of a TRQ. Therefore, the United States must demonstrate either that the measure did not reduce imports below the last three representative years or should have demonstrated that such additional import restriction was "necessary."

(3) Article 5.1 imposes an obligation even if the measure is not a TRQ

4.175.
Significantly, the Appellate Body also observed that Article 5.1 imposed an obligation that applies regardless of the particular form of the safeguard measure.

(i) An explicit justification in the determination itself was required in this case

4.176.
When the competent authorities make explicit findings that certain levels of relief are "sufficient" and others are "excessive," the Member has an affirmative obligation to explain why a distinctly harsher measure is "necessary."

(ii) Korea’s prima facie case that the safeguard measure exceeded what was "necessary"

4.177.
Even if this obligation is read narrowly – not requiring a separate and explicit justificationthe justification nonetheless must be found in the decision-making. Korea sees none. Korea’s inferential evidence of the intended impact of the President’s measure is as follows:

(1) Total "in-quota" imports were projected to be approximately 63,000 short tons (based on seven significant suppliers). (Current data shows total "in-quota" imports of 64,067 tons.)

(2) Very limited "out-of-quota" imports could be expected at the 19 per cent tariff level:

(i) The duty imposed was 6 to 10 times the level of the bound rate.

(ii) Each supplying country could supply 9,000 short tons at bound rates.

(iii) Two very significant suppliers (Canada and Mexico) were not controlled.

(iv) Imported and domestic line pipe were highly substitutable.

(v) The US industry had substantial unused capacity and US capacity exceeded consumption.

(3) Total imports, excluding Canada and Mexico, equalled 78,671 tons from March 2000- February 2001. Of that total, only 14,604 tons entered at the 19 per cent duty rate. In-quota imports totaled 64,067 tons.

(4) The only economic analysis undertaken for the purpose of meeting obligations under Article 5.1 were the Economic Memoranda.

4.178.
All of these facts demonstrate that the very significant level of import restriction should have been anticipated and that the President’s measure exceeded what the ITC identified as "necessary."
4.179.
If the United States has confidential data to demonstrate that the President’s measure would not have reduced imports below the 151,124-ton level defined by the ITC as "necessary," the United States should provide it. Korea submits that in the absence of an affirmative demonstration by the United States of its "intended level," or a US denial accompanied by evidence that the restricted level was below that intended by the measure, the actual level of imports is the best evidence of the import target level of the measure.

(iii) Burden of proof on the issue of whether the measure was in conformity with the requirements of Article 5.1

4.180.
First, Korea believes that it is the obligation of the United States, in accordance with Article 5.1 and read together with Articles 3.1 and 4.2(c), to demonstrate, in its published report, that the measure was necessary. The US obligation in this respect is freestanding and the US failure to meet it is a violation in itself.
4.181.
Neither the Proclamation nor supporting memorandum provide any analysis or justification for the measure. Korea notes, however, that in its letter of 23 April, the United States has conceded that there are additional memoranda and documents of both a confidential and non-confidential nature, which accompanied the President’s decision. However, according to the United States, those documents are either "redundant" or can, at the whim of the United States, be withheld on the grounds that they are inconsistent with the President’s final decision.
4.182.
Based on the inferential evidence discussed above, Korea believes that it has met its burden establishing a primafacie case that the President’s measure was excessive and in violation of Article 5.1. The United States has not demonstrated (or even attempted to demonstrate) that the measure was necessary, or that the level of import restriction which resulted from the measure was the level intended.

(iv) Article 5.1 imposes a continuing obligation

4.183.
The obligation only to apply safeguard measures to the extent necessary is an ongoing obligation. This is confirmed by the language of Article 5.1: "shall apply." In this case, actual import data confirm that the measure as imposed is "excessive" since it is far below the level of 151,124 short tons found to be "necessary" by the ITC Majority. Given that the measure as applied exceeds "the extent necessary," it must be withdrawn or liberalized in accordance with Article 7.4. The United States is currently conducting a "mid-term" review in this case under Section 204 of the 1974 Trade Act, which allows the President to "reduce, modify, or terminate" the measure. Korea urges the Panel to provide guidance and instruction to the United States regarding necessary modification or termination.

(v) The obligations of Article 5.1 have to be read together with the obligations imposed by Articles 3.1 and 4.2(c)

4.184.
Article 3.1 imposes an independent obligation requiring that the investigation, findings, and conclusions of the competent authorities must demonstrate the legal and factual basis for the measure. Also, Article 5.1 is textually related to Article 4.2(c) since the "necessary" level must be to alleviate the serious injury contained in the "detailed analysis."

(vi) The United States violated Article 2 and provisions of Articles I, XIII:1 and XIX by exempting Canada and Mexico from the measure

(1) The proper interpretation of Footnote 1: The Appellate Body in Argentina – Footwear

4.185.
Korea’s position is that it is impossible to read the Appellate Body opinion as providing that the last sentence of Footnote 1 is separate from the rest of Footnote, as the United States appears to argue. Footnote 1 does not apply to actions by a single country, such as the United States, rather than a customs union.
4.186.
Korea does not understand the US argument to be that Article XXIV, standing alone, provides the United States with a "defense" to the violation of Article 2.2. In any event, this position is not supportable because the "defense" would be "invoked" only on a case-by-case basis under the structure of NAFTA. Moreover, the United States would have to overcome the hurdles to such a defense presented by the General Interpretive Note to Annex 1A of the GATT 1994: that Article 2.2 prevails over Article XXIV to the extent of any conflict.

(b) The ITC Investigation of Increased Imports, Serious Injury, and Causation

(i) The US measure is inconsistent with Article XIX and Article 2 because imports did not increase suddenly, sharply and recently

4.187.
The United States maintains that the two six-month periods (the last 12 months) analysis is "arbitrary," "crafted," and "contrived." Further, the United States argues that the ITC did not collect or assess data on a six-month basis in 1998. The US argument fails since the data was available for imports as well as for injury indicators and the legitimacy of such a "two-period" analysis has already been demonstrated by the ITC itself. The most recent data, by definition, are the most relevant data. The US position that "a one year period would hardly suffice" is incorrect and specifically contradicted by the Appellate Body admonition in Argentina – Footwear against the use of "any other period of several years." The "recent period" is the last one-year period of the investigation and a decline in the interim six-month period would constitute the most relevant evidence in the recent period.
4.188.
The need for such a precise legal standard was justified by the Appellate Body on the grounds that Article XIX is an extraordinary remedy dealing with fair trade: "when construing the prerequisites for taking such actions, their extraordinary nature must be taken into account." This is not to say that only one year of data should be collected. Rather, in analyzing the data received, the focus of the investigation for purposes of assessing whether imports of subject merchandise entered "in such increased quantities... and under such conditions as to cause or threaten to cause serious injury," must be the most recent one-year period.

(1) Absolute increase

4.189.
The United States can no longer dispute that absolute import trends showed a decline for 12 months beginning in the second half of 1998. The US 16 February Letter clearly demonstrates that the public data (which includes Arctic and alloy products) does not accurately represent the imports of subject merchandise in the first and second halves of 1998 and 1999.

(2) Relative increase

4.190.
The United States repeatedly asserts – incorrectly – that imports relative to production were at their highest in the first half of 1999. Having said this, the United States has not directly disputed that imports relative to production declined in the first half of 1999 relative to the second half of 1998. Indeed, this is an incontrovertible fact.

(ii) The United States failed to demonstrate that the US line pipe industry was suffering serious injury as required by Article XIX and Articles 3.1, 4.1 and 4.2

(1) The United States did not satisfy the requirements of Articles 3.1 and 4.2(c)

4.191.
The Appellate Body in Argentina – Footwear read Articles 3.1 and 4.2(c) to require that the authorities adequately explain how they came to the conclusions that they did and to specify the data relied on to reach those conclusions of fact and law. The Appellate Body in US – Lamb Meat confirmed this. Korea is not arguing that the decisions of the ITC must be unanimous, but rather that the data relied on and the conclusions reached were inconsistent and, therefore, had to be reconciled.
4.192.
In Korea’s view, the US position that the difference between "threat" and current injury is merely a question of "degree" and "timing" is surprising. The industry is either seriously injured and significantly impaired or it is not, as the Appellate Body recognized in US – Lamb Meat. The United States simply retorts that "the Commissioners did not reach contrary findings of fact." But the data relied on and the conclusions reached were inconsistent. As these contrary findings were not reconciled, the requirements of Articles 3.1, 4.1 and 4.2 are not met.

(2) The data is flawed since it includes data from other industries

(i) "The line pipe industry"

4.193.
Articles 2.1 and 4.1(c) provide that the industry should be defined as the producers of the like or directly competitive products. The ITC’s failure to ensure that the effects from the downturns in the OCTG market did not infect the data regarding line pipe made the relied on data unusable for purposes of Article 4.2(a) injury factors.

(ii) Geneva and Lone Star

4.194.
In Korea’s view, the US statement regarding Geneva is not responsive to the question posed by the Panel for the very reasons observed by Commissioner Crawford. Specifically:

(1) The reference used by the United States that "Geneva did not produce other products in the facilities where line pipe was made" is a reference to the Staff Report in which they are referring to production of other pipe products.

(2) The problem was that Geneva shut down one of its blast furnaces and attributed the shutdown to the line pipe market. That shutdown, however, was driven by circumstances in its principal markets: hot-rolled coil and plate.

4.195.
The ITC improperly accepted mere assertions by the domestic industry witnesses regarding Geneva. In the case of dual-stencilled line pipe from Korea, however, the ITC insisted that the precisequantity had to be established. The ITC considered that the less exact data was unusable. Such a difference in standards on two similar issues cannot be justified.
4.196.
Moreover, with respect to Lone Star, it turns out that Commissioner Crawford was correct: the result of Lone Star’s allocation of SG&A was to "substantially reduce" the operating income of both Lone Star and the industry as a whole.
4.197.
Finally, Korea notes that the United States essentially admits that the other Commissioners did not address Geneva or Lone Star issues.

(iii) The cost allocations artificially lowered the profitability of the line pipe industry

4.198.
The data for Lone Star confirms Korea’s position that the data, if properly analyzed for line pipe alone, reveals significantly different financial results for the industry. This issue was not sufficiently investigated and resolved as required by Article 3.1 and 4.2.
4.199.
With respect to the question of whether shipments of OCTG fell disproportionately to shipments of line pipe in the period from late-1998 to late-1999, Exhibit 48C presented by Korea at the First Substantive Meeting demonstrates that the US statement is incorrect. With respect to the US position that fixed costs, such as overhead and SG&A, are relatively insignificant, one adjustment by one producer aloneLone Starincreases industry profitability by as much as 33 per cent according to the United States. The potential impact of "over"-allocated SG&A and fixed overhead for every producer which produced OCTG and line pipe can safely be assumed to be significant.

(c) The Downturn in the Industry’s Condition Was Temporary and Improving at the End of the Period

4.200.
The United States insists that injury occurred in 1998 and interim 1999. However, Korea notes that the ITC Majority Opinion and Separate Views on Injury relied on the second half of 1998 and the first half of 1999 as the period of injury. Korea believes that the Panel should clarify this point with the United States. In addition, the United States has not responded to Korea’s point about the significance of the fact that two new producers entered the line pipe industry. Korea believes that this evidence, together with the evidence on overall industry capital expenditures, confirms that the US industry also understood that the "downturn" was isolated and temporary.
4.201.
The United States maintains that the improvement of the industry at the end of the period, does not prevent a finding of serious injury. Korea recalls the decision of the Panel in US – Wheat Gluten to the effect that the most relevant period is the end of the period because Article 2.1 requires that the industry must be suffering serious injury when the measure is imposed. The United States maintains that the evidence concerning the upturn in the industry is "only anecdotal." The United States ignores the fact that evidence of this upturn was specifically cited by the ITC Commissioners and formed the basis for the remedy recommendation of both the Majority Opinion and Separate Views on Injury.
4.202.
The United States also argues that the price increase data is "extra-record" information. Korea has demonstrated in its written submission in response to the US request to exclude certain data that this information was on the ITC record at the injury stage. The United States is also contradicted by record information with respect to the $25-$30 price increase. The price increase was not due to rising raw material prices. Finally, as noted in Korea’s First Written Submission, announced price increases totaled $80/ton by the time of the ITC decision (as noted by Respondents and Commissioner Crawford). This evidence indicates that the industry was no longer suffering injury as required by Articles 2.1 and 4.1(b).

(d) The United States Failed to Demonstrate a Causal Relationship Between Increased Imports and Serious Injury in Violation of Article XIX and Article 4

(i) There was no coincidence of trends between imports and the performance of the domestic industry

4.203.
The United States argues that a coincidence of trends is not required for a finding of causation. Yet, the Panel and the Appellate Body in Argentina – Footwear were quite clear on this point.
4.204.
The United States now argues to the Panel that the facts explain why the trends did not coincide, but they get the facts wrong:

(1) The information on lag-times contradicts the US position. In fact, most of the merchandise is sold before the merchandise enters the United States.

(2) The United States is incorrect that the ITC did not compare first half and second half 1998 data.

(3) The difference in trends between imports and the condition of the domestic industry is not minor.

(ii) Conditions of competition did not demonstrate that there was a causal relationship between increased imports and the performance of the industry

(1) Dual-stencilled line pipe

4.205.
The ITC did not properly consider the market effect of dual-stencilled line pipe: that such pipe was actually sold as standard pipe and thus did not compete with line pipe. The fact that there had been several years of litigation over the proper classification of such pipe strongly supported the conclusion that the effect might be very significant.

(2) Imports did not lead down prices

4.206.
The United States did not address Korea’s argument that the data confirms that declines in the line pipe industry’s profitability were caused principally by the increase in unit costs rather than a decline in prices for line pipe.
4.207.
The United States defence of the ITC’s finding relies on three levels of proof to demonstrate that imports drove down prices and thereby profitability:

(1) Statements in questionnaire responses. However, reliance on such statements cannot take the place of an analysis of the actual pricing data.

(2) Declines in average unit value ("AUV") data. Average unit import price data is not reliable because it is based on public data, which includes products other than the "like product" under investigation.

(3) The ITC’s pricing data. This data did not demonstrate that imports led down prices.

(iii) The pricing data submitted by the United States

4.208.
As the United States explained at the First Substantive Meeting, the ITC Majority did not evaluate the trends in underselling. The pricing data submitted by the United States confirms that imports did not lead down prices:

(1) Underselling was generally a condition of competition.

(2) In no case did the margin of underselling expand in the period of July 1998 through June 1999 compared to the strongest period of industry health (January 1997 through June 1998).

(3) In the case of Product 5, the data confirms that imports oversold domestic prices, while in the case of Product 6, domestic prices declined even in the absence of import competition.

(e) Other Factors Were the Cause of Any Injury

(i) The US methodology conflicts with Article 4.2(b)

4.209.
Korea’s view is that the focus and sequence of the US evaluation of "other factors" in this case is inconsistent with Article 4.2(b). The ITC begins with an analysis of the combined effects of other factors plus imports and determines whether, all together, they cause "injury." The ITC does not independently evaluate whether increased imports bear a "substantial and genuine" relationship to serious injury. The fact that imports may be a greater cause of injury than a single other factor cannot establish that increased imports caused serious injury.
4.210.
The ITC Majority principally relied on a two-period analysis to evaluate causation. They compared the period of 1994-1996 with the period of 1998 and the first half 1999. However, imports did not demonstrate greater growth. Also, the ITC improperly assumed that the effects of the oil and gas crisis could be measured in their totality by reference to the level of apparent consumption in 1999. This analysis ignored the very significant fact that there was a 30 per cent decline in apparent consumption from the first half of 1998 to the first half of 1999. Furthermore, that decline coincided with a 25 per cent increase in domestic capacity (on an annualized basis) due to significant new capacity coming onstream.
4.211.
Thus, the ITC failed to properly identify and isolate the effects of all other "differences" between those two periods, inter alia increased capacity, declining export markets, and decreasing domestic consumption.

(ii) The United States does not consider the cumulative effect of all other factors

4.212.
Korea notes that the US defense of its causation decision proceeds from a faulty premise: "the ITC ensures that injury caused by any, or all other factors together is not sufficient to sever the causal link." The United States, in fact, does not do this because it is statutorily prevented from doing so. The only means to assure that injury from other factors (individually or cumulatively) is not attributed to imports in accordance with Article 4.2(a) is to "cumulatively" consider all other factors. In this case, the overwhelming effect of the oil and gas crisis which caused consumption to drop dramatically from its high in 1997, and the build up of significant "over" capacity by the domestic industry with the addition of two new producers, the elimination of export markets, and consequent ferocious domestic competition were all factors that combined to "so dilute the effects" of imports that imports were no longer a substantial cause of injury.

(iii) The ITC should have investigated the shift from OCTG to line pipe as an "other factor"

4.213.
With respect to the shift from OCTG to line pipe, the United States has not properly investigated the issue in accordance with its obligations under Articles 3 and 4.2(a).

(iv) The safeguard measure was intended to remedy injury caused by other factors

4.214.
When several causes result in injury, each factor is only responsible for the actual injury caused. Therefore, injury must be apportioned between each of the causes to assure that the injury from other factors is not improperly "attributed" to imports in violation of Article 4.2. The United States improperly attributed injury caused by other factors to increased imports in the remedy recommendation.

(f) The ITC’s Threat of Injury Determination Violated Articles 2 and 4 and Article XIX

4.215.
Korea reiterates its argument from its First Written Submission.

(g) The United States Failed to Demonstrate the Unforeseen Developments Which Lead to the Increased Imports Which Caused Serious Injury

4.216.
There is no indication in the ITC’s determination that the ITC addressed the issue of unforeseen developments. Therefore, the ITC determination does not demonstrate unforeseen developments.

(h) The US Decision Did Not Satisfy the Requirements of Emergency Action of Article 11 or Article XIX

4.217.
The United States seeks to draw an impossible distinction between the legal basis for a remedy and the remedy itself. Obviously, emergency actions require emergency circumstances.

3. Procedural Legal Arguments

(a) The United States Violated the Obligation in Articles 8.1 and 12.3 to Consult Concerning the Measure Before the Measure Is Imposed

4.218.
The Press Release relied on by the United States as "notice" preceded the actual imposition of the measure by only a few days. The United States cannot seriously maintain that the Press Release provided Korea with "adequate opportunity" for prior consultation, as stipulated in Article 12.3 and interpreted by the Appellate Body. In Korea’s view, this is an absurd shifting of a US obligation.

4. Conclusion

4.219.
The Appellate Body on 1 May 2001 in US – Lamb Meat reaffirmed the central tenet of Argentina – Footwear: "import restrictions that are imposed on products of exporting Members when a safeguard action 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." The United States has not satisfied that standard in this case for the reasons that have been fully developed in this Panel proceeding.
4.220.
Moreover, given the breadth and scope of the errors in the ITC serious injury investigation (as well as the safeguard measure), Korea requests that the Panel "suggest[] ways in which the Member concerned could implement recommendations." Specifically, Korea requests that the Panel suggest that the United States comply with its WTO obligations by terminating its safeguard measure.

F. Second Written Submission of the United States

4.221.
The following is the United States' own executive summary of its second written submission:

1. Introduction

4.222.
It is well established that the complainant has the burden of presenting a prima facie case of noncompliance with the terms of a covered agreement. Korea has not met this burden with respect to either the ITC’s serious injury determination or the President of the United States’ decision to apply the line pipe safeguard measure.
4.223.
In challenging the ITC’s serious injury determination, Korea and the third parties disregard the standard of review applicable to disputes concerning competent authorities’ determinations under the Safeguards Agreement. In particular, they ignore the Appellate Body’s repeated statements that review of competent authorities’ determinations is not to be de novo and that panels are not to substitute an alternative view for that of the competent authorities.

2. The Increased Imports Requirements of Articles 2.1 and 4.2(a) Were Satisfied

4.224.
Neither the SA nor the panel and Appellate Body decisions in Argentina-Footwear specify the precise period that should be examined to determine whether there have been imports "in such increased quantities" as to cause or threaten serious injury. In Argentina-Footwear the AB did not view the examination of data for two to three years before imposition of the safeguard measure to be inconsistent with its admonition that the investigation period be "the recent past."
4.225.
The ITC’s examination of the sharp and significant increase in imports (on both absolute and relative levels) during the last two full years of the period investigated is entirely consistent with the Safeguards Agreement and with Appellate Body Reports in Argentina – Footwear and United States – Lamb Meat. Nothing in Korea’s arguments negates the fact that there was a recent, sudden, sharp, and significant increase in imports, both in absolute and relative terms. The only way that Korea can possibly claim a decline in imports is by manipulating the comparative time segments and then urging that the comparison most favorable to it is the only permissible approach. There is nothing in the Safeguards Agreement, however, that requires competent authorities to examine exclusively the comparative developments between the two halves of the last twelve months for which data were collected.
4.226.
Korea’s arguments that it was mandatory for the ITC to evaluate only developments in the June 1998- June 1999 period, to the exclusion of all other import data and time periods, is contradicted by, not consistent with, the Safeguards Agreement. The ITC followed its long-standing methodology of examining imports on a calendar year basis with additional data collected for interim periods (in this case the first six months of 1999 and, for comparison purposes, the first six months of 1998). By using the same neutral methodology it routinely uses in its investigations, the ITC ensured that its serious injury determination was based on an objective evaluation, as required by Article 4.2(a) of the Safeguards Agreement. Korea’s argument that the ITC should have prejudged the data and manipulated its methodology to reach the result Korea prefers would require the United States to act inconsistently with the objectivity requirement of Article 4.2.
4.227.
Examined on the objective basis routinely employed by the United States, imports increased, on an absolute basis, by 67 per cent from 1996 to1997, and by an additional 44 per cent from 1997 to 1998. Imports relative to US production showed the same sharp increase towards the end of the period of investigation, rising from more than 17.2 per cent in 1996, to more than 23.2 per cent in 1997, to more than 42 per cent in 1998. Relative import levels continued to rise over the interim periods, increasing from more than 36.1 per cent in interim 1998 to more than 43.5 per cent in interim 1999.

3. The ITC’s Serious Injury Finding Fully Complies with Articles 3 and 4 of the Safeguards Agreement

4.228.
Korea’s argument that the ITC determination fails to comply with Articles 3 and 4 because of "fundamental inconsistencies and contradictions" among the Commissioners misconstrues the requirements of the SA and exaggerates the extent of any disagreement among the ITC Commissioners. The Safeguards Agreement does not require unanimity when the determination of a competent authority is made by members of a Commission or other body. The views of a Commissioner who is not part of the competent authority for purposes of the relevant determination carry no evidentiary weight and certainly cannot be considered to bolster whatever argument Korea may otherwise make based on record data.
4.229.
Korea greatly exaggerates the extent of any disagreement between the three Commissioners who found serious injury and the two Commissioners who found a threat thereof. The views of a Commissioner who is not part of the competent authority for purposes of the relevant determination should be disregarded by the Panel not only because they are not part of that determination, but because they simply represent an alternative view of the evidence and, therefore, are not entitled to any evidentiary weight.
4.230.
Korea has failed to make a prima facie case that the ITC’s serious injury determination was in any way distorted by the inclusion of data relating to oil country tubular good ("OCTG") production. First, Korea’s contention that the decline in OCTG shipments in 1998 was much more severe than the decline in line pipe shipments is simply not correct. The shipment declines for the two types of pipe in 1998 were almost identical. Second, Korea incorrectly assumes that the largest share of average unit costs consists of fixed costs. Third, the data in the ITC record contradict Korea’s assertion that the line pipe industry’s performance was affected by disproportionate declines in the production and sale of OCTG in early 1999. Sales of both line pipe and OCTG were in fact flat or rising in this period.
4.231.
Korea has not demonstrated any inconsistency between the ITC’s finding of serious injury and the Safeguard Agreement’s definition of "serious injury" as a "significant overall impairment." Korea incorrectly states that the US line pipe industry experienced only a "one-year downturn." The evidence in the record before the ITC showed that the condition of the line pipe industry deteriorated greatly in 1998 and interim 1999. In addition, this "significant impairment" was widespread and comprehensive.
4.232.
There is no merit to Korea’s argument that the industry’s performance was improving at the end of the period of investigation. The objective and quantifiable data in the ITC record showed a significant deterioration in the condition of the industry from1997 through June 1999 as well as in interim 1999 as compared with interim 1998. Notwithstanding this, Korea presented a collection of fragmentary statements, often taken out of context, designed to show that the industry was improving at the end of the period of investigation, or at later points. In comparison with the actual "hard data" showing a significant overall impairment in the industry, the collection of self-serving fragmentary statements advanced by Korea is unpersuasive.
4.233.
In addition, Korea’s characterization of the evidence upon which it relies to argue that the industry was improving at the end of the period is flawed. For example, Korea claimed that imports were falling at the end of the period investigated, whereas they were actually increasing in May and June of 1999.
4.234.
The price increase announcements on which Korea relies also do not prove that the industry was no longer in a state of significant overall impairment, for several reasons. There is no evidence in the record that these anticipated price increases by a small number of firms in the industry were actually successful. Moreover, the ITC reasonably found that any such price increases were most likely attributable to an increase in raw material costs due to the imposition of antidumping measures on hot-rolled steel.

4. The ITC’s Causation Finding Fully Complied with Article 4 of the Safeguards Agreement

4.235.
Korea incorrectly asserts that there was no coincidence in trends of imports and domestic industry indicators. The SA does not require an exact and overlapping coincidence between imports trends and serious injury to the domestic industry. It is not necessary for increased imports and a deterioration in the industry’s condition to occur simultaneously; in fact, some lag between cause and effect is to be expected.
4.236.
Korea’s effort to show that there was no coincidence in trends depends on its result-oriented approach of dividing 1998 into six-month increments. Nothing in the SA compels or provides for examining data on imports and injury in half-yearly, quarter-yearly or any other increment of time. Instead, Article 4.2 requires that the competent authority reach its determination based on an evaluation of objective evidence. The ITC approach, of adhering to its longstanding practice of making year-to-year comparisons and comparing interim data for the unfinished year to comparable interim data for the previous year, comports with these objectivity requirements. Korea’s preferred approach, which would require the ITC to evaluate the evidence based on Korea’s results-oriented comparison does not meet these objectivity requirements.
4.237.
Korea’s contention would mean that competent authorities can stray, after they have received and examined the relevant data, from their usual procedures and practices to perform prejudged comparisons of part-year data. If that were so, the ITC could just as easily have divided 1998 into quarterly time periods. A comparison by quarters again shows that there is a coincidence between increased imports and the deterioration of the industry. Imports during the third quarter of 1998 were higher than in any other quarter in the entire five-and-a-half year period for which the ITC collected data.
4.238.
Korea is wrong in asserting that the Safeguards Agreement requires competent authorities to consider the impact of other causes in the aggregate. The Safeguards Agreement contains no such requirement, and the Appellate Body has recognized this. Korea’s contention that the ITC should have considered all other causes of injury in the aggregate is tantamount to the Wheat Gluten panel’s insistence that increased imports "alone" must be capable of causing serious injury. That is essentially the analysis of the panel that was rejected by the Appellate Body in its reports in both Wheat Gluten and Lamb Meat.
4.239.
Korea and the EC have not shown that the impact of "other factors" severed the causal link between increased imports and serious injury, or that the effects of these "other factors" -- insofar as they produced any injurious effects at all -- were attributed to imports.
4.240.
The ITC first found that imports were an important cause of serious injury. It did so by considering the size of the increase in imports (both in actual and relative terms), and the timing of this increase. It also considered the market share held by imports, and information on the pricing of imports and domestic line pipe. It identified imports as a cause of declining prices and concluded that the import-induced price declines resulted in a significant loss of sales, market share and revenues on the part of the domestic industry, as well as declines in other key indicators of industry health such as capacity utilization and employment. In sum, the ITC found that there was a direct, i.e., a "genuine and substantial," causal link between the significant increase in imports and the deterioration of the domestic industry’s condition.
4.241.
The ITC then analyzed each "other cause" of injury, both to assess its importance and to consider whether it detracted from the importance of increased imports as a cause of serious injury. By examining the "other causes" in this manner, the ITC ensured that it did not improperly attribute to imports injurious effects, if any, caused by the other causal factors. The ITC stated that it was not attributing injury caused by other factors to the imports.
4.242.
The ITC distinguished the injurious effects caused by increased imports from the effects of declining demand from the oil and gas sectors in several ways. First, the ITC noted that the domestic industry had operated at lower levels of demand in the past without experiencing the severe financial losses the industry experienced in 1998/1999. Second, the ITC distinguished the injurious effects caused by increased imports from the effects of declining demand from the oil and gas sectors by recognizing the dramatic shift in market share from domestic suppliers to imports. The ITC further distinguished the effects of increased imports from those of the oil and gas crisis by noting the across-the-board price declines in 1998 and interim 1999, even in line pipe grades not sensitive to demand related to the oil and gas industries. Finally, the ITC pointed to a consensus among producers, importers and purchasers that imports played a major role in the decline in US line pipe prices in 1998 and interim 1999. By separately identifying injurious effects of increased imports that were wholly unrelated to the oil and gas market, the ITC ensured that it was not attributing to imports injury caused by the decline in oil and gas demand.
4.243.
The ITC considered competition among domestic producers as another factor potentially causing injury, but found that, since competition among domestic producers had always been a factor in the market, such competition did not explain the sudden and sharp declines in domestic prices and shipments. The ITC also noted that two firms began production of line pipe in 1998. It acknowledged that industry capacity increased, but it found the increase in the 1994 -1998 period (less than 8 per cent) to have been considerably less than the growthin consumption (more than 22 per cent).
4.244.
Korea’s claim that there was a build up of "significant excess capacity" is both exaggerated and unconvincing. Korea focuses on the excess capacity in interim 1999, and claims that it was attributable to a build up in capacity. In fact, excess capacity in interim 1999 was largely due to a sharp drop in consumption, and not to any significant build up of new capacity. Thus, the ITC did not improperly attribute to increased imports injury caused by competition among domestic producers.
4.245.
The ITC found that, while there was some evidence of domestic producers shifting away from OCTG production to other types of pipe, it did not appear that they switched into line pipe production. Citing to the Appellate Body’s decision in Wheat Gluten, the EC argues in its third party submission that the ITC should have investigated this factor further, and that it could not have avoided attribution of the effects of this factor without quantifying its exact impact. The EC misconstrues the Appellate Body’s analysis in Wheat Gluten. While the AB ruled that competent authorities may not limit their examination of "‘other factors’ to those clearly raised before them as relevant by interested parties," it also rejected "the European Communities’ argument [in that case] that the competent authorities have an open-ended and unlimited duty to investigate all available facts that might possibly be relevant."
4.246.
All of the record evidence before the ITC indicated that there was no substantial switch from OCTG to line pipe production. The petitioners stated at the ITC injury hearing that any diversion of production would have been relatively small. They noted that line pipe production declined at the same time as OCTG production. There was no contrary evidence in the record. The ITC Report shows that production of line pipe declined substantially in 1998 and in interim 1999 (as compared with interim 1998), making it implausible that serious injury was caused by overproduction of line pipe resulting from any shift from OCTG production. Under these circumstances, the ITC properly evaluated this factor, and explained its reasonable conclusion that declines in OCTG production were not substantially responsible for the serious injury experienced by the line pipe industry.
4.247.
The ITC also considered allegations that declines in the domestic industry’s exports were a more important cause of serious injury than increased imports. It found that although this decline worsened the serious injury caused by the increased imports, the increase in imports was far larger than the decline in exports. Thus, although the modest declines in exports may have affected the producers’ bottom line, those effects were not attributed to imports because the impact of the increased imports dwarfed the decline in exports.
4.248.
Contrary to the EC’s assertions, the ITC did not "mis-attribute" injurious effects to imports of specialty products. During the ITC’s injury investigation, a German line pipe producer argued that there was no domestic production of high frequency induction ("HFI") line pipe over 6 inches in diameter, or any domestically-produced substitute for use of this product in deepwater applications, and asked that HFI line pipe be excluded from the scope of the investigation. The ITC recognized that there was some evidence of customers preferring HFI line pipe, but it was not persuaded that the HFI line pipe was sufficiently different from the domestic product to warrant its exclusion from the domestic like product.
4.249.
Once the ITC properly determined that HFI pipe was part of the domestic like product, imports of HFI pipe were reasonably included in the subject imports considered by the ITC in its analysis of the impact of increased imports on the condition of the domestic industry. Moreover, it should be noted that even if the ITC had excluded HFI imports from its analysis, the ultimate conclusion regarding the impact of increased imports on the US industry would have been no different. Imports from Germany did not represent a significant proportion of total imports, and there is no suggestion that all, or even most, German imports consisted of HFI line pipe.

5. The United States Applied the Safeguard Measure on Terms Consistent with Articles 5 and 9 of the Safeguards Agreement and Articles I, XIII, and XIX

(a) A TRQ is Not A Quantitative Restriction or Quota Within the Meaning of Article 5 of the Safeguards Agreement or Articles XI and XIII

4.250.
Every relevant authority supports the conclusion that tariff rate quotas ("TRQs") are not quantitative restrictions or quotas. The text of Article XI necessitates this conclusion. If TRQs were quantitative restrictions or quotas, they would be prohibited. They plainly are not. Many Members including Korea apply TRQs. The implementation of TRQs was for many Members the basis for complying with the commitment under Article 4.2 of the WTO Agreement on Agriculture to convert quantitative restrictions into "ordinary customs duties." In addition, Article XIII:5, which specifies that the Article XIII disciplines on quantitative restrictions and quotas apply to TRQs, would not make sense if TRQs were, by their nature, quantitative restrictions or quotas.
4.251.
The same conclusion holds true with regard to Article 5. Nothing in that provision gives its terms a meaning different than they have elsewhere in the WTO Agreement. Indeed, Article 5.2(a) duplicates the text of Article XIII:2(d), which indicates that the terms have the same meaning as used in both articles.

(b) The Line Pipe Safeguard Complied With All of the Requirements of Article 5

4.252.
Under Article 5.1, a Member may apply a safeguard measure only to the extent necessary to prevent or remedy serious injury and facilitate adjustment. The Appellate Body has interpreted this text to require that a safeguard measure be "commensurate" with the goals of Article 5.1. Both of these goals relate to the condition of the domestic industry, since the nature and magnitude of serious injury will determine both the need for adjustment and the extent to which it is necessary to apply a safeguard measure. In short, the condition of the domestic industry sets the benchmark for application of any safeguard measure.
4.253.
This standard applies regardless of whether the competent authorities characterize the domestic industry as subject to serious injury or the threat of serious injury. The factors listed in Article 4.2(a), which the competent authorities consider in evaluating the condition of the domestic industry, are the same for both serious injury and threat of serious injury. Since these factors delineate the condition of the domestic industry, which in turn forms the benchmark for application of a safeguard measure, the application of the safeguard measure will not depend on whether serious injury is current or threatened.
4.254.
Therefore, to ensure that a safeguard measure meets the requirements of Article 5.1, a Member will consider the competent authorities’ determination regarding serious injury, the industry’s plans and efforts to adjust to import competition, and other factors that it considers relevant.13
4.255.
The Safeguards Agreement contains no requirement that a Member explain or "justify" the application of a safeguard measure at the time of application, except in the case of a quantitative restriction described in the second sentence of Article 5.1.14 Since the US safeguard measure did not take such a form, the United States was under no obligation to justify the measure. Instead, the burden is on Korea to demonstrate that the US safeguard measure was not applied "only to the extent necessary to remedy or prevent serious injury and to facilitate adjustment." It has in no sense met this burden.
4.256.
However, if the Panel were to consider whether the line pipe safeguard complied with the requirements of Article 5, the considerations outlined above suggest a multiple step inquiry along the following lines:

(1) a review of the evidence of serious injury or threat of serious injury identified by the competent authorities;

(2) an examination of the nature of the safeguard measure, including its product coverage, form, duration, and level;

(3) an analysis of how the application of the measure addresses the serious injury or threat of serious injury identified by the competent authorities; and

(4) in light of the first three steps, an assessment of whether application of the measure, in its totality, goes beyond the extent necessary to prevent or remedy serious injury and to facilitate adjustment.

4.257.
The US analysis showed that the 19 per cent tariff would result, at most, in an increase of $62-64 per short ton in the average unit value of imported line pipe. If domestic producers increased their prices by the same amount, their operating profit margin would increase to $15 to 17 per short ton on average, for an operating income ratio of 3 to 4 per cent.15 That would represent between 3 and 4 per cent of total revenues, a level closer, but not equal to, the industry’s profitable years before the import surge.16 However, this scenario would likely leave domestic producers’ market share an important aspect of serious injury unchanged. Moreover, it is questionable whether the US producers could increase their prices by such an amount. Thus, it cannot be said that the United States applied the line pipe safeguard beyond the extent necessary as the measure alone would not be likely to reverse the volume and price effects of increased imports.

(c) Article XIII Obligations Regarding Quantitative Restrictions Do Not Apply to TRQs Imposed as Safeguard Measures

4.258.
In previous submissions, the United States demonstrated that, under customary rules for the interpretation of treaties, Article XIII cannot be interpreted as applicable to safeguard measures taken pursuant to the Safeguards Agreement and Article XIX. Korea has argued that this interpretation deprives Article XIII of its "full force and effect." However, it fails to recognize that it is the customary rules of treaty interpretation, which support the US interpretation, that determine the "full force and effect" of any treaty. As the United States has explained, it is precisely those rules that compel the conclusion that safeguard measures taken pursuant to the Safeguards Agreement and Article XIX need not satisfy the requirements of Article XIII.
4.259.
Finally, Korea claims that if Article XIII does not apply to safeguard measures, "tariff-rate quotas have escaped multilateral control." This is plainly untrue. The prerequisite that the competent authorities first make a determination of serious injury or threat of serious injury places a significant limitation on the availability of a safeguard TRQ. In addition, the first and last sentences of Article 5.1 apply to safeguard TRQs, as do Articles 7, 8, 9, 11, and 12.

(d) Nothing in the Safeguards Agreement Disturbs FTA Parties’ Authority Under Article XXIV to Exclude Each Other From the Application of Safeguard Measures

4.260.
Article XXIV allows FTA parties to decide whether to exclude each other from safeguard measures all of the time, some of the time, or not at all. Under Article XXIV:8, an FTA must eliminate restrictive regulations of commerce like safeguard measures on substantially all trade among the parties. Thus, the package of trade liberalizing measures that accompanies formation of an FTA need not eliminate all duties and restrictive regulations of trade. If FTA parties, while retaining some duties and restrictive regulations of commerce, can still achieve the Article XXIV:8 threshold (covering "substantially all trade"), they may retain those regulations. If the elimination of other restrictive regulations covers substantially all trade, the parties may also eliminate safeguard measures.
4.261.
Article 802 of the North American Free Trade Agreement ("NAFTA") requires the parties to exempt each other from safeguard measures under certain circumstances. The Panel asked whether the formation of the NAFTA would have been prevented if the NAFTA parties had not been allowed to introduce this safeguards exemption. It linked this question to the decision of the Appellate Body in Turkey – Textiles that "Article XXIV can justify the adoption of a measure which is inconsistent with certain other GATT provisions... only to the extent that the formation of the customs union would be prevented if the introduction of the measure were not allowed."17
4.262.
However, the Turkey – Textiles reasoning applied to a measure affecting external trade with non-Members of the customs union. Thus, it does not apply to the safeguard exemption, which affects internal trade among the parties to the NAFTA, and formed part of the package of trade liberalization that created the FTA.
4.263.
In any event, the Turkey – Textiles reasoning demonstrates that Article XXIV invalidates Korea’s claims that the NAFTA safeguard exemption was inconsistent with Articles I, XIII, and XIX. Compliance with Article XXIV:8(b) is determined with reference to the entire package of the duties and restrictive regulations of commerce that are eliminated. The safeguard exemption formed part of that package for the formation of the NAFTA. If the GATT 1994 were interpreted to prohibit the NAFTA parties from accepting that obligation, it would prevent adoption of the liberalization package necessary to form an FTA. Thus, by operation of Article XXIV, the safeguard exemption is not inconsistent with Articles I, XIII, and XIX.

G. Second Oral Statement of Korea

4.264.
The following is Korea's own executive summary of its second oral statement:

1. Introduction

(a) Appellate Body Precedents

4.265.
The Appellate Body in US – Lamb Meat reaffirmed the overriding principle that safeguard measures are extraordinary actions and strict adherence to each and every requirement of the SA is essential. Specifically, the Appellate Body reaffirmed the very high standard of injury imposed by the SA. It also reaffirmed the importance of a full and complete analysis of all other factors, as well as the importance of a reasoned and adequate explanation, to ensure that the serious injury attributed to imports was actually caused by imports.
4.266.
The US position on most of the issues raised by Korea in this proceeding is exactly the opposite of the body of jurisprudence established by the Appellate Body. The United States seeks to limit the review of the Panel and increase the discretion of the Members in applying safeguards. If the Panel does not address the issue of the measure, the US position will be sustained.

(b) General Objection to the US Failure to Address the Issue of Subject Imports in the US Second Written Submission

4.267.
The United States continues to rely on public import data for many of its arguments despite the fact that such data (1) does not match the like-product in this case and, (2) during the period of investigation, the public data trends do not accurately track the confidential data trends. All arguments based on such data should be rejected by this Panel as unrepresentative of the like-product.

(c) Burden of Proof

4.268.
The failure by the competent authorities to conduct a full investigation and publish a decision on all pertinent issues in violation of Articles 3.1 and 4.2(b) and 4.2(c) cannot become the basis for an objection by the Member in violation that the complaining party has insufficient record support for the claims and legal arguments made before the Panel. The Appellate Body appropriately gave no significance to these so-called "burden of proof" arguments by the United States in US – Lamb Meat.

2. The Safeguard Measure

(a) The Safeguard Measure Was Not Imposed Only to the "Extent Necessary"

(i) The US justification for the measure should have been contained in the findings and conclusions required by Article 3.1

4.269.
While the United States appears to be offering its new "ex post" theory about why the US measure was imposed "only to the extent necessary," the Appellate Body in US – Lamb Meat confirmed that such an explanation should have been made prior to the imposition of the measure. Thus, in the case of a quantitative restriction adopted as a safeguard measure, which reduced imports below the level of the last 3 representative years, the authorities must justify the level of the measure as necessary in accordance with the requirements of Articles 5.1 and 3.1 inasmuch as this is a "pertinent issue" which must be addressed.

(ii) The newest ex post reasoning by the United States should be rejected

4.270.
The latest ex post explanation for the measure by the United States that, if a 19 per cent tariff were fully translated into increases in the average unit price of line pipe, the impact on operating profits would be an increase that was close to but not equal to operating profit levels before the import surge has no more validity than its predecessors. This ex post justification ignores the combined improvements on the company’s operating leverage of both price and volume increases and the improving demand situation. Also, the United States ignores the fact that virtually no (14,000 tons) imports entered at the 19 per cent tariff in the first year of the TRQ. In the absence of reasoned and adequate economic analysis, the United States can make no claims as to the estimated impact of the US measure or whether or not they are less than or greater than the extent necessary.

(b) The Safeguard Measure Was Not Confined to Addressing Only the Serious Injury Caused by Imports

4.271.
The SA requires that a safeguard measure be confined to address the injurious effect of imports. In the ordinary interpretation of treaty language, "serious injury" in Article 4 and "serious injury" in Article 5 cannot mean two different things. The United States has offered no evidence that the measure was designed only to address the injurious effect of imports.

(c) Exemption of NAFTA Suppliers Was Improper

(i) Footnote 1 does not apply to the US safeguard action

4.272.
Footnote 1 to Article 2.1 does not apply to the US safeguard measure because the United States is not acting as a customs union but simply in its capacity as a FTA Member State applying national safeguards. In the absence of Footnote 1, Article 2.2 requires MFN treatment, and Article XXIV does not provide a defence for a violation of the SA.

(ii) Article XXIV does not provide a defence to the US violation of Article 2.2

4.273.
As the Appellate Body ruled in Turkey – Textiles, the Article XXIV defence is available only when the Member meets both the definition for an FTA and economic tests required under Article XXIV. Since NAFTA qualifies as an FTA even if safeguards were applied in some cases or even in all cases, the elimination of safeguard measures was not a prerequisite to the formation of NAFTA as an FTA. Moreover, the economic test in the instant case shows that the exemption of NAFTA members from the safeguard measure results in more restrictive regulations of commerce for non-members.
4.274.
Finally, the attempt by the United States to escape Panel’s review of its actions by subsuming the NAFTA exemption applied in this case within the overall obligations of the NAFTA should be rejected because the two conditions which must be met under Article XXIV should be examined with respect to the particular measure at issue, not the Agreement in its entirety. The Untied States has presented no evidence or even arguments that the NAFTA would have been prevented if the Untied States applied the measure on line pipe to Mexico and Canada.

3. The ITC Serious Injury Investigation

(a) The ITC’s Investigation and Analysis Failed to Satisfy the Obligations of Articles 3.1 and 4.2

4.275.
The ITC failed to satisfy the obligations of Articles 3.1 and 4.2 because it did not reconcile specific findings of the ITC which are in conflict among the ITC Commissioners, nor did it address the issues raised by parties in the ITC proceeding.

(b) No Increased Imports Were Demonstrated

(i) Imports declined

4.276.
The requirement for increased imports is definitive and requires authorities to look at the last year of the period since the SA uses the present tense – "is being imported" – and the Appellate Body prohibited the use of any period of several years. Moreover, in terms of "context," import trends followed developments in the demand of the oil and gas sector and the drilling activities. Thus, imports commenced their decline at the same time as domestic industry factors and would continue to decline until drilling activity recovered.

(ii) The ITC did not adequately examine these significant import declines in its investigation and determination

4.277.
The US failure to examine declining import trends for late 1998 and early 1999 violates the requirements of Articles 2.1 and 4.2(b). The internal practice of the United States cannot justify its failure to perform a treaty obligation.

(c) There Was No Serious Injury in the Line Pipe Industry

(i) Other Commissioners’ opinions provide alternative plausible explanations of the data

4.278.
Observations made in the dissenting views or separate views within the competent authorities are highly relevant and must be considered by the Panel because they call into question the "reasoned and adequate explanations" given by the authorities and present an alternative reading of the record data. The problems presented by the ITC Commissioners’ disagreements over certain fundamental issues in their decisions are significant and cannot be remedied by mere observations which basically constitute a "checklist" of the relevant factors.

(ii) Some of the data the ITC majority and separate views relied on was fatally flawed

4.279.
Contrary to the characterization made by the United States with respect to Exhibit KOR-48C as a manipulation, it correctly demonstrates that any allocation of costs based on relative sales value of line pipe to total domestic shipments will be distorted because OCTG declined more severely than line pipe in the months between 1998 and 1999. The ITC’s reference to the "collective operating leverage" confirmed this conclusion.
4.280.
As the Appellate Body observed in US – Lamb Meat, it would be a violation if a safeguard measure could be imposed based on data from domestic producers of products that are not like and directly competitive products in relation to the increased imports. The ITC did not sufficiently isolated the effects of these OCTG declines as well as the financial data for Lone-Star and Geneva Steel from the data before it evaluated injury to the line pipe industry.

(iii) The Industry Had a One-Year Downturn and Was Already Rebounding

4.281.
Both the ITC Majority "Findings" and the separate view of threat were premised on an analysis of the domestic industry’s downturn beginning in the second half of 1998. In that context, a one-year decline and subsequent recovery are significant evidence that the industry was not seriously injured since the industry must be in a state of serious injury when the decision of the authorities is made in accordance with Articles 2 and 4.2(b). Also, the one-year downturn in the industry had to be viewed in the context of a peak in 1997. Moreover, this was an industry that was accustomed to these wide swings in profitability and understood that their recovery would come with the recovery in oil and gas prices. Actually, the condition of the domestic industry was improving due to the improvement in oil and gas prices since early 1999, as was recognized in the ITC report.
4.282.
In addition, the US Industry continued to invest because it made economic sense to plan for the recovery of the market. However, the United States argues against the significance of increased capital expenditures on the ground that such decisions predated the industry’s difficulties. Without the confidential data on the industry as a whole, the Panel cannot conclude that the ITC sufficiently evaluated the industry as a whole or that the experience of the two producers selected by the Petitioners was representative of the industry as a whole.
4.283.
Furthermore, the announcements of price increases by prominent US producers indicated their assessment of the future market at the time the ITC took its decision. The United States arguments on the issues of the relevance of price increases are ex post reasoning which are not found in the ITC determinations. To conclude, the ITC’s analysis of injury factors failed to provide a reasoned and adequate explanation of how the facts as a whole support ITC’s serious injury determination.

(d) The US Causation Decision Neither Properly Analyzed the Effects of Imports nor Sufficiently Isolated the Effects of Other Factors

(i) There was no coincidence of trends

4.284.
The US causation decision fails because it ignores very significant inconsistencies between the trends of imports and the health of the US industry when half year 1998 and 1999 data are evaluated.

(ii) The ITC did not properly analyse the effects of imports

4.285.
The US assumptions about the effects of imports were incorrect: (1) the per centage increase in imports was not "significantly different" between 1997 and 1998 compared to 1996 and 1997; and (2) price declines were not caused by import.

(iii) The ITC’s analysis of "other factors" of injury was inadequate

4.286.
Instead of assessing the nature and extent of the injurious effects of all other factors, and separating such the injurious effects of these other factors in accordance with Article 4.2(b), the ITC simply compared the injurious effect of each individual factor and determined each was not more important than the increase in imports.
4.287.
Also, the ITC did not adequately investigate the other factors of injury in violation of Articles 4.2(a) and (b). As the Appellate Body admonished in US – Wheat Gluten, competent authorities have an independent duty of investigation and they cannot "remain passive in the face of possible short-comings in the evidence submitted, and views expressed, by the interested parties." Although the issues such as the shift from domestic production of OCTG to line pipe, the effects of dual-stencilled line pipe, or increased competition among domestic producers had been brought to the ITC’s attention from the beginning of the proceeding, the ITC did not investigate such factors.
4.288.
Finally, the United States should have cumulatively analyzed all the other factors of injury to determine that each factor, alone counting for some injury, would not cumulatively account for all injury and thus, demonstrate that increased imports did not bear a substantial and genuine relationship to serious injury. The United States cannot now assert that it is unnecessary to evaluate "all other factors together," when they have already asserted to this Panel – incorrectly – that they had indeed performed just such an analysis.

H. Second Oral Statement of the United States

4.289.
The following is the United States' own executive summary second oral statement:

1. Burden of Proof and Standard of Review

4.290.
There is no question that the burden of proof in a WTO dispute lies with the complaining party. This burden is part and parcel of the assumption that Members act in good faith to conform with their obligations under the WTO Agreement. Contrary to Korea’s arguments, the actions of the responding party do not lower that hurdle.
4.291.
The standard of review should also not be in doubt. Article 11 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") covers all obligations under the WTO Agreement, and requires an objective assessment of the matter before the Panel. In Lamb Meat, the Appellate Body enunciated a legal test for applying that standard to the obligations under Article 4. By its terms, this test applies only to Article 4 and not to other provisions of the Safeguards Agreement, such as Article 5. Any application of DSU Article 11 to claims under Article 5 must proceed in accordance with the terms of that Article.

2. Increased Imports

4.292.
There can be no question that the increased imports requirement was met in this investigation. Imports nearly tripled in the last two full years of the period of investigation. Korea claims erroneously that the Appellate Body in Argentina – Footwear established a legal standard requiring an examination of import data only for the last 12 months of the period of investigation. In fact, the Appellate Body’s decisions in Argentina – Footwear and United States – Lamb Meat make clear that there is no such rule.
4.293.
Korea attempts to justify its reliance on a comparison of the last six months of 1998 with the first six months of 1999 by claiming that "the ITC itself looked at 1998 as two six-month periods with very distinct trends for purposes of its injury determination." Korea’s characterization of the ITC’s analysis is simply untrue. The fact that the ITC collected and examined data on the basis of full years and comparable interim periods – and not for the first and second halves of 1998 – is clear from a review of the discussion of the serious injury factors in the ITC Report and of virtually every table with numerical data in the entire report. The ITC acted consistently with the "objectivity" requirement of Article 4.2 of the Safeguards Agreement by evaluating the data in this case in the same neutral and unbiased manner that it conducts all of its safeguards investigations.
4.294.
Even if the Safeguards Agreement required that the period for analyzing imports be limited to the last 12 months of the period investigated – and clearly it does not – Korea’s theory that imports declined does not hold up. There was a sharp increase in imports in May and June of 1999.

3. Serious Injury

4.295.
Commissioner Crawford’s views are not part of the determination of the ITC. The Safeguards Agreement does not require competent authorities to respond to the views of a particular Commissioner who is not a part of the competent authorities for purposes of the serious injury determination.
4.296.
Korea’s assertion that Geneva’s decision to close a blast furnace was entirely due to conditions in the hot-rolled sheet and plate markets, and had nothing to do with line pipe conditions, is clearly at odds with the evidence in the record that Geneva lost half of its line pipe volume, and that line pipe production was essential to running the second blast furnace.
4.297.
Korea builds its entire argument concerning Lone Star on an unfounded assumption that Lone Star "mis-allocated" part of a SG&A expense to line pipe operations. There is no evidence to support this assumption. ITC accountants conducted a verification of Lone Star’s data, which included the partial SG&A allocation to line pipe operations.
4.298.
The United States has shown that Korea’s theory that the financial performance of the line pipe industry was affected by declining OCTG production is unsupportable. Korea’s contention that the decline in OCTG shipments in 1998 was much more severe than for line pipe is simply not correct. In addition, the United States has shown that the effect that this could have had on average unit costs for line pipe would have been nominal because the majority of average unit costs were variable. The United States notes that Korea keeps shifting the time period when this alleged effect of declining OCTG sales occurred.
4.299.
None of Korea’s arguments concerning alleged financial improvements at the end of the period investigated detract from the hard evidence showing a significant overall impairment in the US line pipe industry in 1998 and interim 1999. The ITC recognized that capital investment projects in this industry have long lead times. Decisions by two firms to begin producing line pipe were likely to have been made years before the 1998 and interim 1999 downturn in the industry. Nor do the statements by ITC Commissioners in their views on remedy detract from the serious injury finding. The Commissioners simply noted, when writing these views in December 1999, that oil and gas prices had increased since early 1999. Announcements by three producers of intended price increases are of little probative value. As two of the three producers explicitly stated in their price increase announcements, these were due to increases in raw material costs.

4. Causation

4.300.
Korea’s attempts to discredit the evidence of adverse price effects by imports are unpersuasive. Korea is incorrect in claiming that the average import unit values on which the ITC relied are inaccurate because they are based on "public data." Korea’s argument that the quarterly pricing data do not prove that imports "led prices down" in the second half of 1998 and the first half of 1999 is irrelevant because the ITC did not make any finding that "imports led prices down" only in this period. Questionnaire responses from industry participants stated that imports played a "very important" or "important" role in causing price declines. There is no support for Korea’s suggestion that the observations of those with intimate knowledge of the industry are not objective.
4.301.
Korea argues that the "only" means to ensure that injury from other factors is not attributed to imports is to "cumulatively" consider all of the other factors. There is absolutely no such requirement in the Safeguards Agreement. The Appellate Body’s report in Lamb Meat contradicts Korea’s argument that the Safeguards Agreement requires a cumulative causation analysis. In that report the Appellate Body accepted the ITC’s separate identification of individual causal factors, but suggested that to meet the requirements of Article 4.2(b) the ITC should have explained the nature of the injurious effects of each of these other factors.
4.302.
Korea is also incorrect in asserting that the Agreement requires a finding that the domestic industry would still have suffered serious injury irrespective of the crisis in oil and gas. In Wheat Gluten, the Appellate Body stated that, under the Safeguards Agreement, competent authorities should determine whether the increase in imports, not alone, but in conjunction with the other relevant factors, causes serious injury. In its Lamb Meat report, the Appellate Body again confirmed that Article 4.2 of the Safeguards Agreement does not require that increased imports "alone", "in and of themselves" or "per se" must be capable of causing serious injury. Rather, the Agreement contemplates that other factors may be contributing at the same time to the situation in the domestic industry. Where there are several causal factors, the Agreement, as interpreted by the Appellate Body, requires competent authorities to identify and distinguish the effects of the different causal factors by whatever reasonable methodology the Member chooses.
4.303.
Distinguishing the effects of the various causal factors is not the same as finding that the imports by themselves would have caused serious injury irrespective of the presence of other causes. The question for the competent authorities is not whether the increased imports would have caused serious injury absent those other factors, but whether there is a "substantial and genuine" causal link between the increased imports and serious injury that occurs as a result of the entry of those imports into the market as it exists.
4.304.
In addressing whether each other alleged cause was a greater cause of injury to the domestic line pipe industry than the increased imports, the ITC provided the type of analysis outlined by the Appellate Body in Lamb Meat, and thus ensured that there was a "genuine and substantial relationship of cause and effect" between increased imports and serious injury. The ITC explained the injurious effects of all other causal factors.
4.305.
The ITC determined that there were mainly two circumstances responsible for the decline in the domestic industry – the increased imports and the decline in oil and natural gas prices. The ITC carefully identified, distinguished and explained the effects of each of those two causes. After distinguishing the effects of the oil and gas declines from those of the increased imports and then examining the effects of each of these two principal causes, the ITC found that the increased imports were the predominant cause of the declining condition of the domestic industry. The ITC then also examined the minor causes of injury, and found either that any injury caused by these other factors was too small to account for the injurious effects attributed to the increased imports, or that the nature of the other cause was such that it had always been a factor in the market in good times as well as bad, and therefore could not be linked to the declines attributed to the increased imports.

5. There is no Requirement to Explain how Application of a Safeguard Measure Satisfies the Requirements of Article 5.1

4.306.
Korea claims that the United States violated the Safeguards Agreement by failing to explain in 2000 how it complied with the Article 5.1 requirement to apply the line pipe safeguard only to the extent necessary to remedy serious injury and facilitate adjustment. However, the Appellate Body already considered exactly this argument and rejected it in Korea – Dairy Safeguard.18
4.307.
Korea contends that Articles 3.1 and 4.2(c) independently oblige a Member to explain at the time it takes a safeguard measure how that measure is consistent with Article 5.1. However, Articles 3.1 and 4.2(c) require the competent authorities to publish a report on "all pertinent issues of law and fact." In those same Articles, the competent authorities are charged solely with the investigation and determination of serious injury. Neither Articles 3.1 and 4.2(c) nor Article 5.1 give the competent authorities a role in the decision whether and to what extent to apply a safeguard measure. Thus, there is no basis to conclude that there report need explain how the measure complies with Article 5.1.
4.308.
Korea’s argument is also inconsistent with the framework established by the Safeguards Agreement. Under Article 2.1, a Member may apply a safeguard measure only after the determination of serious injury. Under Articles 3.1 and 4.2(a), the competent authorities make that determination only after conducting an investigation. They are also charged with issuing a report containing "findings and conclusions on all pertinent issues of fact and law" and "a detailed analysis of the case under investigation. Article 5 establishes the condition of the domestic industry, as revealed in that investigation, as the benchmark for a Member’s application of the safeguard measure. Since the investigation, determination, and report are a necessary precursor to a Member’s decision under Article 5 on the extent to which it applies a safeguard measure, they cannot themselves explain how the measure complies with Article 5.
4.309.
This approach does not prevent review by a panel. As with any other measure taken by a Member, another Member may claim in a dispute that application of a safeguard measure is inconsistent with the WTO Agreement. It then bears the burden of presenting a prima facie case of inconsistency. That is only appropriate since in a safeguard measure, as with any other measure, the imposing Member is presumed to have complied in good faith with its obligations.

6. Korea’s Claim that the Line Pipe Safeguard Itself Does not Comply with Article 5.1

4.310.
Throughout this dispute, Korea has based its claims of inconsistency with Article 5.1 on allegations that the US line pipe safeguard was somehow more restrictive than recommended measures that the ITC had identified. In its rebuttal submission, for the first time, it attempted to analyze whether the United States actually applied its safeguard measure beyond the extent necessary.
4.311.
Its analysis was deeply flawed. The record indicated that up to 19 customs territories would enjoy access at MFN rates, rather than just the seven identified by Korea. The ratio of the supplemental tariff to the MFN rate is irrelevant, and is high simply because the MFN rate is so low. Finally, data on actual line pipe imports does not demonstrate the "result of the measure." The panel has no information on market conditions after imposition of the line pipe safeguard, and the observed import patterns could result from a number of factors unrelated to the safeguard. Therefore, Korea has presented no basis for the Panel to conclude that the United States applied the line pipe safeguard beyond the extent necessary.
4.312.
Korea has also failed to identify any flaw in the US explanation of how the line pipe safeguard was consistent with Article 5.1. Korea assumes that US producers would be able to increase their prices by the full extent of the 19 per cent duty and increase their volume of sales at the same time. This is obviously impossible. If the relative price difference between domestic and imported line pipe remains unchanged, there is no reason to expect the volume of domestic products to increase. Korea also assumes that demand was improving rapidly, but the information before the ITC does not support this conclusion. Therefore, Korea provides no basis for the Panel to conclude that the line pipe safeguard was inconsistent with the requirements of Article 5.1.

V. ARGUMENTS OF THE THIRD PARTIES

5.1.
The arguments of the third parties, Canada, the European Community, Japan, and Mexico are set out in their submissions to the Panel, as attached to this Report in Annex A (see List of Annexes, page iv). Australia did not make a written submission or an oral statement.

VI. INTERIM REVIEW

6.1.
Our interim report was sent to the parties on 31 August 2001. On 14 September 2001, the parties requested review of precise aspects of the interim report, in accordance with DSU Article 15.3. On 21 September 2001, in accordance with paragraph 17 of the Working Procedures of this Panel, we received written comments from the United States on some sections of Korea's request for interim review. Korea did not submit any comments on the US request for interim review. The various issues raised by the parties are addressed below.

A. The United States' Requests for Interim Review

6.2.
The United States requested us to delete paragraphs 7.15 through 7.17 of the interim report. Since these paragraphs addressed a procedural issue of limited significance, we see no reason not to delete them.
6.3.
The United States requested the Panel to delete paragraph 7.59 of the interim report, in which some comments were made regarding the US position on Article XIII:2 as reflected in a "US General Counsel Memorandum" submitted by Korea. We have accepted the US request to delete that paragraph.
6.4.
The United States asked the Panel to delete footnote 217 of the interim report, on the basis that it took a US comment out of context. We have deleted the relevant footnote.
6.5.
The United States directed our attention to an error in paragraph 8.1 of the report, which we have corrected.

B. Korea's Requests for Interim Review

6.6.
Korea requests a technical correction to what is now paragraph 7,166 of the report, which we have made.
6.7.
Korea asks the Panel to delete the US argument set forth in what is now paragraph 7,167 of the report. Korea asserts that this argument was not made in writing by the United States, and therefore does not constitute part of the record of the dispute. To the extent that the United States made this argument orally, Korea asserts that no written version of that oral argument was provided, contrary to paragraph 9 of the Panel's Working Procedures. In addressing Korea's request, we note that the US argument at issue was made orally, in response to an oral question from the Panel. Paragraph 9 of the Panel Working Procedures provides in relevant part that "[T]he parties to the dispute shall make available to the Panel and the other party a written version of their oral statements not later than the day after the oral statement is presented". Paragraph 9 does not refer in any way to a party's oral answer to an oral question from the Panel. In our view, therefore, paragraph 9 does not require that a party's oral response to an oral question from the Panel can only form part of the record of the Panel proceedings if it has been reduced in writing. Accordingly, we reject Korea's request to delete the US argument set forth in paragraph 7,167 of the report.
6.8.
Korea asserts that the Panel's finding on parallelism (set forth in what is now paragraphs7,164 - 7,171– of the interim report) is flawed. Korea asserts that the Panel neglected its duty of making an objective assessment of facts and assessing the applicability of and conformity with the relevant covered agreements with respect to Korea’s claim. Korea also submits that the Panel imposed an exorbitant burden of proof on the party making the claim, while it completely ignored the fact that the other party did not make any efforts to refute the claim. According to Korea, it made sufficient arguments to establish a prima facie case in support of its parallelism claim, especially in light of the fact that the United States did not defend that claim.
6.9.
Korea focuses on the Panel's treatment of note 168 of the ITC report. Korea asserts that it "does not understand why the establishment of prima facie case can be done only through the refutation of the footnote 168, which is a conditional statement. Korea's confusion grows even deeper given the fact that Korea's assessment of the footnote, to the effect that it does not have legal significance, was not challenged by any party, including the Panel, throughout the whole proceedings. … In the absence of any refutation from the U.S. and in the absence of any related query from the Panel on the issue, in fact against total silence on the footnote 168 other than Korea's assessment that it does not have any legal significance, it is surprising for the Panel report to take one footnote out of the voluminous final report of the ITC and state that the Panel fails to see why the footnote has no legal significance."
6.10.
As Korea itself explains, its parallelism claim is based on the argument that "there is a gap in the scope of the investigation and the scope of the measure". In examining Korea's claim, we considered note 168 because it is relevant to the alleged "gap" identified by Korea. Indeed, it is arguably the only part of the ITC report that addresses this issue. During the proceedings, Korea asserted that note 168 "has no legal significance", without explaining why. At the interim review stage, Korea asserted that note 168 has no legal significance "because of the contents of the footnote", and because the first sentence of note 168 "begins with a conditional statement". In our view, however, it is precisely because of the contents of note 168 that it is relevant to the "gap" issue identified by Korea. We do not consider that note 168 is any less relevant in this regard simply because it is allegedly conditional in nature. Whether conditional or not, it addresses the "gap" issue at the heart of Korea's parallelism claim.19 We fail to see how Korea can establish a prima facie case that there is a "gap" between the scope of the ITC investigation and the scope of the line pipe measure without addressing the very part of the ITC report that addresses that issue.
6.11.
Regarding the alleged absence of any refutation by the United States of Korea's claim, we refer to paragraph 6.7 above. Regarding the fact that the Panel failed to "challenge[]" Korea's assessment of the footnote, we consider that it was Korea's burden as a complainant to establish a prima facie case of violation.20 We note that in the case of Japan – Measures Affecting Agricultural Products the Appellate Body further elaborated that:

Article 13 of the DSU and Article 11.2 of the SPS Agreement suggest that panels have a significant investigative authority. However, this authority cannot be used by a panel to rule in favour of a complaining party which has not established a prima facie case of inconsistency based on specific legal claims asserted by it. A panel is entitled to seek information and advice from experts and from any other relevant source it chooses, pursuant to Article 13 of the DSU and, in an SPS case, Article 11.2 of the SPS Agreement,to help it to understand and evaluate the evidence submitted and the arguments made by the parties, but not to make the case for a complaining party.21

Thus, the onus was clearly on Korea to make its own case in support of its parallelism claim. It would appear that Korea may have chosen not to do so because "it d[id] not consider that 'parallelism' resolves the issue in this case given the interpretation by the USITC in its implementation of US– Wheat Gluten, that it can exclude NAFTA members from the serious injury determination and then exclude them from the measure."22

6.12.
We therefore reject Korea's request to review our findings regarding its parallelism claim.
6.13.
Korea requests us to make a technical change to what is now paragraph 7,116 of the report, which we have done.
6.14.
Korea requests us to clarify what is now paragraph 7,124 of the report. In this regard, we would note that we do not refer to the Appellate Body report in Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland 23 in support of our statement that "there is no question of whether or not the legal basis of the claim, or the claim itself, was set forth with sufficient clarity in the Request for Establishment".
6.15.
Korea requests a minor change in the last sentence of what is now paragraph 7,136 of the report, in order to better reflect Korea's argument. We have made the change requested by Korea.
6.16.
Korea requests that the Panel identify the evidence referred to in the second sentence of what is now paragraph 7,145 of the report. We have included a cross-reference accordingly.
6.17.
Korea asks the Panel to clarify certain aspects of what is now paragraph 7,148 of the report. We confirm that this paragraph refers to the nature of the line pipe measure (compared to the nature of the measure at issue in Turkey – Textiles), and not the US justification for that measure.
6.18.
Korea argues that the Panel was incorrect to state in paragraph 7,157 of the interim report that in Argentina – Footwear Safeguard24 the Appellate Body "was not required to consider the last sentence of footnote" 1 of the Safeguards Agreement. As a result, we have amended the relevant part of what is now paragraph 7,153 of the report.
6.19.
Korea asserts that the Panel mischaracterized its arguments in what is now paragraph 7,202 of the report. We have changed the last sentence of paragraph 7,202 accordingly.
6.20.
Korea takes issue with the Panel’s observation in what are now footnotes 164 and 184 of the report that Korea failed to argue that the ITC could not properly have found that the increase in imports was sudden and sharp enough. In support Korea cites to paragraph 205 of its first submission. We believe that the paragraph cited by Korea confirms our view that the focus of Korea's argument is on the fact that there was no increase at all, and not on the sharpness or suddenness of the increase found by the ITC. We therefore make no changes to footnotes 164 and 184.
6.21.
Korea disagrees with the Panel's characterization of Korea's argument on the issue of cost allocation in what is now paragraph 7,228 of the report. In order to better present Korea's argument, we have made a minor amendment in the fourth sentence of that paragraph.
6.22.
Korea argues that, contrary to what is expressed by the Panel in what is now footnote 203 of the report, Commissioner Crawford did not rely on testimony by the Geneva Steel executive but rather refuted it. We believe that Korea is not correct in its view that Commissioner Crawford did not rely on testimony by the Geneva Steel executive. In our view, Commissioner Crawford clearly was citing to that testimony to substantiate her statement regarding Geneva Steel. We see no other reason why Commissioner Crawford would have referred to that testimony. We therefore leave footnote 203 unchanged.

VII. FINDINGS

A. Preliminary Issues

7.1.
In the course of our proceedings both parties raised certain preliminary issues and requested preliminary rulings by the Panel on those issues. The issues raised concerned:

(1) The release of confidential record information to the Panel;

(2) The admissibility of evidence not submitted to the ITC, or addressing events after the decision to take a safeguard measure; and

(3) Information submitted in footnotes to the written version of Korea's second oral statement and not read out loud during the meeting with the parties.

1. Release of confidential record information to the Panel

7.2.
On 30 January 2001 we received a letter from Korea requesting the Panel to seek from the United States certain confidential information.25 Korea claimed that this information was necessary in order for Korea to prepare its first written submission. Korea requested the Panel to seek the following information:

· The confidential version of the complete ITC decision;

· The Addendum to the dissenting views of Commissioners Crawford's opinion on injury;

· The data concerning imports of subject merchandise, as defined by the ITC, by each country supplier;

· The confidential economic memorandum on which the ITC based its remedy recommendation;

· Any other economic memoranda or other written analysis by the US President to support the President's remedy recommendation; and

· The record of the confidential proceeding before the ITC.

7.3.
The Panel provided the United States with an opportunity to respond to Korea's request. On 1 February 2001, we received a letter from the United States commenting on Korea's letter. In short, the US position is that it is neither necessary nor appropriate for the Panel to obtain the information requested by Korea.
7.4.
On 8 February 2001, we sent the following letter to the parties:

We are mindful that, in order to make an objective assessment of the matter before us, we may need to view certain confidential information not in the public record of the ITC. However, we are equally aware that the protection of confidential information is an important systemic consideration recognised by Article 3.2 of the Safeguards Agreement. Given these considerations, we consider that a panel should show appropriate restraint in the exercise of its authority under Article 13.1 of the DSU to seek confidential information from a party.

In our view, Korea's request that we seek from the United States the full confidential record of the investigation is unduly broad and could encompass confidential information that is without relevance to the claims advanced by Korea in this dispute and which is not necessary in order for us to perform an objective assessment of the matter before us. Thus, we decline Korea's request in this regard. For the same reasons, we decline to seek from the United States the confidential version of the complete ITC decision.

Regarding Korea's requests that we seek (a) the confidential economic memoranda on which the ITC based its remedy recommendation and (b) any economic memoranda or other written analysis by the US President to support the President's remedy recommendation, we are not in a position at this time to assess the need for access to this information. Accordingly, we will give further consideration to this request at the first meeting of the Panel.

We do, however, grant Korea's request that we seek from the United States (a) the Addendum to the dissenting views of Commissioner Crawford's opinion on injury; and (b) data concerning imports of subject merchandise, as defined by the ITC, by each country supplier. Korea has established to our satisfaction that these more targeted requests involve information which is relevant to the claims advanced by Korea and which may prove necessary in order for us to perform an objective assessment of the matter. We request that the United States provide this information to the Panel and to Korea not later than close of business on 16 February.

Our ruling is without prejudice to any further specific requests from Korea that we seek confidential information from the United States. Any such requests should be supported by an explanation as to why the information sought is relevant to Korea's claims and is necessary in order for the Panel to perform an objective assessment of the matter. Moreover, this ruling is also without prejudice to the Panel's establishment of the facts which will be relied upon for purposes of its findings.

7.5.
In a letter dated 16 February 2001, the United States responded to our ruling and request for information. In that letter the United States provided us with a table containing indexed figures for the Addendum to Commissioner's Crawford dissenting opinion. It also provided the Panel with indexed data regarding imports of subject merchandise from Japan.26
7.6.
In its first written submission Korea reiterated its request for certain confidential information, including:

· The confidential staff report;

· Information regarding the relative import trends;

· Price data trends between imports and domestic prices for each quarter;

· Financial information on a per producer basis;

· The ITC’s recommendation on remedy, the supporting economic memorandum, and the confidential report sent to the President;

· All papers used in the deliberative process by the President regarding the safeguard measure imposed; and

· Other confidential information which may bear on arguments subsequently raised by the United States.

7.7.
The United States responded to Korea's further request for information in its first written submission. In its submission the United States agreed that additional data on prices of imported and domestic line pipe may be necessary and appropriate to the Panel's consideration of the dispute. Therefore, the United States offered to explore ways in which such data could be summarized for use by the Panel.
7.8.
At the first meeting of the Panel with the parties, we consulted extensively with Korea and the United States on which information was still considered necessary for a proper evaluation of the issues before us, and ways in which this information could be provided. In a letter dated 19 April 2001, we requested further information as follows:

In order to assist the Panel in making an objective assessment of the matter before it, the Panel considers that it is necessary and appropriate for the United States to provide aggregate weighted average price data for all imports and domestic products covered by the ITC's Line Pipe investigation. This data must be broken down product-by-product, and quarter-by-quarter. The Panel is not requesting confidential data at this stage. Thus, the United States may use asterisks when there was only one supplying company for a given product in a given quarter. The information requested should be made available to the Panel by close of business Monday, 23 April 2001. In order to assist the Panel in determining whether it is necessary and appropriate to request additional data from the United States, the Panel asks that the United States also reply to questions 6, 7 and 8 from the Panel by close of business on Monday, 23 April 2001.

Furthermore, at the first substantive meeting of the Panel with the parties, the United States tentatively proposed that it provide the Panel with two outputs of a computerized model used by the ITC to evaluate the impact of imports on the domestic industry. One output would include imports from Japan, while the other output would exclude imports from Japan. The United States indicated that these outputs would demonstrate that there is very little difference in results, whether imports from Japan are included or not. The Panel looks forward to receiving these outputs by close of business on Monday, 23 April 2001.

The United States also tentatively proposed that it provide the Panel with an output of the aforementioned computerized model based on the measure implemented by the President (using the data before the ITC). The Panel looks forward to receiving this additional output by close of business on Monday, 23 April 2001.