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WTO ANALYTICAL INDEX: DISPUTE SETTLEMENT UNDERSTANDING Agreement on Safeguards |
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> Preamble |
Article 3: Investigation 1. A Member may apply a safeguard measure only following an investigation by the competent authorities of that Member pursuant to procedures previously established and made public in consonance with Article X of GATT 1994. This investigation shall include reasonable public notice to all interested parties and public hearings or other appropriate means in which importers, exporters and other interested parties could present evidence and their views, including the opportunity to respond to the presentations of other parties and to submit their views, inter alia, as to whether or not the application of a safeguard measure would be in the public interest. The competent authorities shall publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law.
2. Any information which is by nature confidential or which is provided on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities. Such information shall not be disclosed without permission of the party submitting it. Parties providing confidential information may be requested to furnish non-confidential summaries thereof or, if such parties indicate that such information cannot be summarized, the reasons why a summary cannot be provided. However, if the competent authorities find that a request for confidentiality is not warranted and if the party concerned is either unwilling to make the information public or to authorize its disclosure in generalized or summary form, the authorities may disregard such information unless it can be demonstrated to their satisfaction from appropriate sources that the information is correct.
(i) Duty of national authorities 68. In US - Wheat Gluten, the Appellate Body referred to Article 3.1 as part of the context for the interpretation of the requirement of Article 4.2(a) to evaluate "all relevant factors". The Appellate Body addressed the question whether, and to what extent, national authorities must, in their investigation, seek out pertinent information on possible injury factors other than those explicitly raised as relevant by the parties to the national investigation. The Appellate Body first stressed the "central role" of the interested parties in the investigation: "The ordinary meaning of the word 'investigation' suggests that the competent authorities should carry out a 'systematic inquiry' or a 'careful study' into the matter before them.(101) The word, therefore, suggests a proper degree of activity on the part of the competent authorities because authorities charged with conducting an inquiry or a study ... must actively seek out pertinent information.
The nature of the 'investigation' required by the Agreement on Safeguards is elaborated further in the remainder of Article 3.1, which sets forth certain investigative steps that the competent authorities 'shall include' in order to seek out pertinent information. ...The focus of the investigative steps mentioned in Article 3.1 is on 'interested parties', who must be notified of the investigation, and who must be given an opportunity to submit 'evidence', as well as their 'views', to the competent authorities. The interested parties are also to be given an opportunity to 'respond to the presentations of other parties'. The Agreement on Safeguards, therefore, envisages that the interested parties play a central role in the investigation and that they will be a primary source of information for the competent authorities."(102) 69. Subsequently, however, the Appellate Body reversed the Panel on US - Wheat Gluten, which had held that national authorities need only consider other factors that are "clearly raised before them as relevant by the interested parties in the domestic investigation"(103) and held that national authorities may not limit their investigation to information submitted and claims raised by the parties. "However, in our view, that does not mean that the competent authorities may limit their evaluation of 'all relevant factors', under Article 4.2(a) of the Agreement on Safeguards, to the factors which the interested parties have raised as relevant. The competent authorities must, in every case, carry out a full investigation to enable them to conduct a proper evaluation of all of the relevant factors expressly mentioned in Article 4.2(a) of the Agreement on Safeguards. Moreover, Article 4.2(a) requires the competent authorities - and not the interested parties - to evaluate fully the relevance, if any, of 'other factors'. If the competent authorities consider that a particular 'other factor' may be relevant to the situation of the domestic industry, under Article 4.2(a), their duties of investigation and evaluation preclude them from remaining passive in the face of possible short-comings in the evidence submitted, and views expressed, by the interested parties. ... In that respect, we note that the competent authorities' 'investigation' under Article 3.1 is not limited to the investigative steps mentioned in that provision, but must simply 'include' these steps. Therefore, the competent authorities must undertake additional investigative steps, when the circumstances so require, in order to fulfill their obligation to evaluate all relevant factors."(104) 70. The Appellate Body in US - Wheat Gluten nevertheless limited this duty of the national authorities to undertake additional investigative steps: "However, ... we also reject the ... argument that the competent authorities have an open-ended and unlimited duty to investigate all available facts that might possibly be relevant."(105) 71. The Panel on Argentina - Footwear (EC) considered the question "which document or documents constitute the published report(s) referred to in Article 3.1 and 4.2": "[W]e recall that annexed to its first submission, Argentina submitted among other documents both Act 338 and the 'Technical Report Prior to the Final Determination' ('Technical Report') of the investigation prepared by the CNCE. We further recall that we sought clarification from Argentina, in a written question, concerning which of the documents submitted to the Panel constituted the published report referred to in Article 3.1 of the Agreement. Argentina replied that Act 338 is the published report of the CNCE's findings regarding serious injury, and that it incorporates by reference the Technical Report. According to Argentina, the Technical Report provides a detailed summary of all of the factual data gathered during the investigation. Argentina further stated that all interested parties had access to the complete record of the investigation except the information therein designated as confidential, and were provided with additional information in connection with the hearings held during the investigation. Argentina also stated in response to a question from the Panel that Act 338 addresses the relevance of each factor considered (as required under Article 4.2(c)), on the basis of the detailed information contained in the Technical Report.
We conclude from the foregoing that Act 338 constitutes both the published report 'setting forth [the] findings and reasoned conclusions reached on all pertinent issues of fact and law' referred to in Article 3.1 of the Safeguards Agreement, and the published document containing the 'detailed analysis of the case under investigation' and the 'demonstration of the relevance of the factors examined' referred to in Article 4.2(c). Thus, we will base our review in the first instance on Act 338. We note, however, that Act 338 is based on and summarises information that is set forth in more detail in the Technical Report. Thus, while Act 338 is the most relevant document, the Technical Report also forms an integral part of the record of the investigation and is closely related to Act 338."(106) 72. In Chile - Price Band System, in the context of similar obligations under the SCM and Anti-Dumping Agreements, the Panel distinguished between "to publish" and "to make publicly available", and ruled, in a finding not reviewed by the Appellate Body, that the Article 3.1 requirement to "publish" must be interpreted as meaning, "to make generally available through an appropriate medium" as contrasted with making publicly available": "[W]e note that the Minutes of the relevant CDC sessions have not been 'published' through any official medium. Rather, they were transmitted to the interested parties and placed at the disposal of 'whoever wishes to consult them at the library of the Central Bank of Chile'. In order to determine whether it is sufficient under Article 3.1 of the Agreement on Safeguards to make the investigating authorities' report 'available to the public' in such a manner, we first refer to the dictionary meaning of 'to publish'. The term can mean 'to make generally known', 'to make generally accessible', or 'to make generally available through [a] medium'. We therefore turn to the context of Article 3.1 provided by similar publication requirements in the AD and SCM Agreements. We note that both Article 22 of the SCM Agreement ('public notice and explanation of determinations') and Article 12 of the AD Agreement ('public notice and explanation of determination') distinguish between giving 'public notice' and 'making otherwise available through a separate report', which must be 'readily available to the public'. In addition, we also note that various 'transparency' provisions in the covered agreements, such as Article III of the GATS, Article 63.1 of the TRIPS Agreement, and Article 2.11 of the TBT Agreement all distinguish between 'to publish' and 'to make publicly available'. In the light of these considerations, we find that the verb 'to publish' in Article 3.1 of the Agreement on Safeguards must be interpreted as meaning 'to make generally available through an appropriate medium', rather than simply 'making publicly available'. As regards the minutes of the relevant CDC sessions, we therefore find that they have not been generally made available through an appropriate medium so as to constitute a 'published' report within the meaning of Article 3.1 of the Agreement on Safeguards."(107) (c) "on all pertinent issues of law and fact" 73. In US - Lamb, the Appellate Body stated that a published report within the meaning of Article 3.1. must also contain a finding on the existence of "unforeseen developments" within the meaning of Article XIX:1(a) of GATT 1994: "Article 3.1 requires competent authorities to set forth findings and reasoned conclusions on 'all pertinent issues of fact and law' in their published report. As Article XIX:1(a) of the GATT 1994 requires that 'unforeseen developments' must be demonstrated, as a matter of fact, for a safeguard measure to be applied, the existence of 'unforeseen developments' is, in our view, a 'pertinent issue[] of fact and law', under Article 3.1, for the application of a safeguard measure, and it follows that the published report of the competent authorities, under that Article, must contain a 'finding' or 'reasoned conclusion' on 'unforeseen developments'."(108) (d) Relationship with other Articles 74. The Panel on US - Lamb, after making findings of inconsistency with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards (and with Article XIX:1(a) of GATT 1994), exercised judicial economy with respect to claims raised under Article 3.1 (and Articles 2.2, 5.1, 8, 11 and 12) of the Agreement on Safeguards.(109) (e) Relationship with other WTO Agreements 75. The Panel on US - Lamb, after making findings of inconsistency with Article XIX:1(a) of GATT 1994 (and with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards), exercised judicial economy with respect to claims raised under Article 3.1 (and Articles 2.2, 5.1, 8, 11 and 12) of the Agreement on Safeguards.(110) 76. In examining a claim concerning the omission from the published report of a safeguards investigation of certain information considered to be confidential by the investigating authorities, the Panel on US - Wheat Gluten interpreted the requirements of Article 3.2 concerning the treatment to be accorded to such confidential information: "Article 3.2 [of the Agreement on Safeguards ("SA")] places an obligation upon domestic investigating authorities not to disclose - including in their published report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law and demonstrating the relevance of the factors examined - information which is 'by nature confidential or which is provided on a confidential basis' without permission of the party submitting it. Article 3.2 SA does not define the term 'confidential' nor does it contain any examples of the type of information that might qualify as 'by nature confidential' or 'information that is submitted on a confidential basis'.
Article 3.2 SA requires that information that is by nature confidential or which is submitted on a confidential basis shall, upon cause being shown, be treated as such by the competent authorities. In the absence of a detailed elaboration or definition of the types of information that must be treated as confidential, we consider that the investigating authorities enjoy a certain amount of discretion in determining whether or not information is to be treated as 'confidential'. While Article 3.2 does not specifically address the nature of any policies pertaining to the treatment of such 'confidential' information which a Member's investigating authority may or must adopt, that provision does specify that such 'information shall not be disclosed without permission of the party submitting it'. The provision is specific and mandatory in this regard. This furnishes an assurance that the confidentiality of qualifying information will be preserved in the course of a domestic safeguards investigation, and encourages the fullest possible disclosure of relevant information by interested parties."(111) 77. The Panel subsequently addressed the argument that certain aggregate data could not be considered to be "confidential" within the meaning of Article 3.2, and that, even if it was confidential, it could have been presented in percentages and indexes: "While the United States has described the USITC's efforts to characterize as much confidential information as possible in its Report without compromising the confidential nature of that information, the USITC might ideally have been more creative in trying to provide the essence of the confidential information in its findings in the published USITC Report. We draw attention to the provision in Article 3.2 SA that parties providing confidential information in a domestic safeguard investigation 'may be requested to furnish non-confidential summaries thereof or, if such parties indicate that such information cannot be summarized, the reasons why a summary cannot be provided...' The language of this provision is hortatory. However, this is one vehicle envisaged by the Agreement on Safeguards that may provide a greater degree of transparency while respecting the confidentiality of qualifying information.
Nevertheless, given the small number of firms comprising the United States domestic industry (and the non-US producers and exporters) in this case; the fundamental importance of maintaining the confidentiality of sensitive business information in order to ensure the effectiveness of domestic safeguards investigations; the discretion implied in Article 3.2 SA for the investigating authorities to determine whether or not 'cause' has been shown for information to be treated as 'confidential'; and the specific and mandatory prohibition in that provision against disclosure by them of such information without permission of the party submitting it, we cannot find that the United States has violated its obligations under Articles 2.1 and 4 SA, nor specifically under Article 4.2(c), by not disclosing, in the published report of the USITC, information qualifying under the USITC policy as information 'which is by nature confidential or which is provided on a confidential basis', including aggregate data."(112) (a) Absence of a claim under Article 3 78. The Panel on Korea - Dairy observed that the absence of a claim under Article 3 concerning the requirement to publish a report on a safeguard investigation did not preclude the possibility of claims relating to other aspects of an injury determination or safeguard measure. (The Appellate Body did not address this Panel finding in its report): "[T]he absence of a claim under Article 3 of the Agreement on Safeguards means at most that the European Communities agrees that the report is WTO compatible for the purpose of Article 3.1 of the Agreement on Safeguards. The European Communities has the right to raise more specific claims under Article 4 of the Agreement on Safeguards and has done so. We consider that if a Member wants to challenge the WTO compatibility of the manner in which an 'injury' determination was performed, or the choice of an appropriate measure to be imposed, this Member does not have to challenge the publication of the final report as such."(113) (b) Relationship with other WTO Agreements 79. The Panel on US - Wheat Gluten noted that it had taken certain steps to have access to certain information that had not been included in the published report of the investigation at issue on account of its confidential nature, and that the parties were unable to reach agreement on the procedures proposed by the Panel for viewing this information.(114) In light of this disagreement between the parties, the Panel had decided not to adopt these procedures. The report then comments as follows on the relationship between Article 3.2 of the Agreement on Safeguards and Article 13 of the DSU: "In our view, the protracted exchange of communications between the parties about the circumstances under which the Panel should view the requested information demonstrates the existence of a serious systemic issue as to the relationship between, on the one hand, the confidentiality obligations under Article 3.2 SA of a Member's investigating authorities with respect to confidential information obtained in the course of a domestic safeguards investigation and, on the other hand, the duties of Members when faced with a panel request for such confidential information under Article 13 DSU. The Panel's efforts to develop a consensual approach to the conditions under which the Panel might view the requested information were ultimately unsuccessful."(115) 80. Although in US - Wheat Gluten, the Panel ultimately concluded that the record before it, without the confidential information, provided a sufficient basis for an objective assessment of the facts as required by Article 11 of the DSU, it cautioned that: "[T]he WTO dispute settlement system cannot function optimally if relevant information is withheld from a panel."(116) 81. The Appellate Body in US - Wheat Gluten endorsed this finding: "[We agree] with the panel that a 'serious systemic issue' is raised by the question of the procedures which should govern the protection of information requested by a panel under Article 13.1 of the DSU and which is alleged by a Member to be 'confidential'. We believe that these issues need to be addressed."(117) 82. The Appellate Body in US - Wheat Gluten also shared the concerns expressed by the Panel related to the proper functioning of the WTO dispute settlement system: "[T]he refusal by a Member to provide information requested of it undermines seriously the ability of a panel to make an objective assessment of the facts and the matter, as required by Article 11 of the DSU. Such a refusal also undermines the ability of other Members of the WTO to seek the 'prompt' and 'satisfactory' resolution of disputes under the procedures 'for which they bargained in concluding the DSU'."(118)
V. Article 4 back to top Article 4: Determination of Serious Injury or Threat Thereof 1. For the purposes of this Agreement:
(a) "serious injury" shall be understood to mean a significant overall impairment in the position of a domestic industry;
(b) "threat of serious injury" shall be understood to mean serious injury that is clearly imminent, in accordance with the provisions of paragraph 2. A determination of the existence of a threat of serious injury shall be based on facts and not merely on allegation, conjecture or remote possibility; and
(c) in determining injury or threat thereof, a "domestic industry" shall be understood to mean the producers as a whole of the like or directly competitive products operating within the territory of a Member, or those whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products.
2. (a) In the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry under the terms of this Agreement, the competent authorities shall evaluate all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the product concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilization, profits and losses, and employment.
(b) The determination referred to in subparagraph (a) shall not be made unless this investigation demonstrates, on the basis of objective evidence, the existence of the causal link between increased imports of the product concerned and serious injury or threat thereof. When factors other than increased imports are causing injury to the domestic industry at the same time, such injury shall not be attributed to increased imports.
(c) The competent authorities shall publish promptly, in accordance with the provisions of Article 3, a detailed analysis of the case under investigation as well as a demonstration of the relevance of the factors examined.
(a) "serious injury" as "significant overall impairment" 83. The Appellate Body in US - Lamb described "serious injury" as a "very high standard of injury": "[I]n making a determination on ... the existence of 'serious injury' ... panels must always be mindful of the very high standard of injury implied by these terms."(119) 84. Similarly, in US - Wheat Gluten, the Appellate Body held that "serious injury" should be determined on the basis of all relevant factors: "The term 'serious injury' is defined as 'a significant overall impairment in the position of a domestic industry'. (emphasis added) The breadth of this term also suggests that all factors relevant to the overall situation of the industry should be included in the competent authorities' determination."(120) 85. Further, the Appellate Body in US - Lamb emphasized the ordinary meaning of the word "serious": "The standard of 'serious injury' set forth in Article 4.1(a) is, on its face, very high. Indeed, in United States - Wheat Gluten Safeguard, we referred to this standard as 'exacting'. Further, in this respect, we note that the word 'injury' is qualified by the adjective 'serious', which, in our view, underscores the extent and degree of 'significant overall impairment' that the domestic industry must be suffering, or must be about to suffer, for the standard to be met."(121) 86. Moreover, the Appellate Body, also in US - Lamb, juxtaposed the concept of "serious injury" in the Agreement on Safeguards and the concept of "material injury" contained in the Anti-Dumping Agreement and the SCM Agreement: "We are fortified in our view that the standard of 'serious injury' in the Agreement on Safeguards is a very high one when we contrast this standard with the standard of 'material injury' envisaged under the Anti-Dumping Agreement, the Agreement on Subsidies and Countervailing Measures (the 'SCM Agreement') and the GATT 1994. We believe that the word 'serious' connotes a much higher standard of injury than the word 'material'.(122) Moreover, we submit that it accords with the object and purpose of the Agreement on Safeguards that the injury standard for the application of a safeguard measure should be higher than the injury standard for anti-dumping or countervailing measures, since, as we have observed previously:
'[t]he application of a safeguard measure does not depend upon 'unfair' trade actions, as is the case with anti-dumping or countervailing measures. Thus, the import restrictions that are imposed on products of exporting Members when a safeguard 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.'(123) "(124) 87. In Argentina - Footwear (EC), the Appellate Body discussed the relationship between the definition of "serious injury" in Article 4.1(a) and the requirement of an evaluation of "all relevant factors" in Article 4.2(a): "[I]t is only when the overall position of the domestic industry is evaluated, in light of all the relevant factors having a bearing on a situation of that industry, that it can be determined whether there is 'a significant overall impairment' in the position of that industry. Although Article 4.2(a) technically requires that certain listed factors must be evaluated, and that all other relevant factors must be evaluated, that provision does not specify what such an evaluation must demonstrate. Obviously, any such evaluation will be different for different industries in different cases, depending on the facts of the particular case and the situation of the industry concerned. An evaluation of each listed factor will not necessarily have to show that each such factor is 'declining'. In one case, for example, there may be significant declines in sales, employment and productivity that will show 'significant overall impairment' in the position of the industry, and therefore will justify a finding of serious injury. In another case, a certain factor may not be declining, but the overall picture may nevertheless demonstrate "significant overall impairment" of the industry. Thus, in addition to a technical examination of whether the competent authorities in a particular case have evaluated all the listed factors and any other relevant factors, we believe that it is essential for a panel to take the definition of 'serious injury' in Article 4.1(a) of the Agreement on Safeguards into account in its review of any determination of 'serious injury'."(125) 88. Panels have elaborated in more detail on the meaning of the term "serious injury". Their findings have met with approval by the Appellate Body. For instance, the Panel on US - Wheat Gluten stated: "[A] determination as to the existence of such 'significant overall impairment' can be made only on the basis of an evaluation of the overall position of the domestic industry, in light of all the relevant factors having a bearing on the situation of that industry. ... [W]e do not consider that a negative trend in every single factor examined is necessary in order for an industry to be in a position of significant overall impairment. Rather, it is the totality of the trends, and their interaction, which must be taken into account in a serious injury determination. Thus, such upturns in a number of factors would not necessarily preclude a determination of serious injury. It is for the investigating authorities to assess and weigh the evidence before them, and to give an adequate, reasoned and reasonable explanation of how the facts support the determination made."(126) 89. In reviewing a determination of the existence of a threat of serious injury, the Panel on US - Lamb found that not each of the listed injury factors in Article 4.2 (a) need show a declining tendency. Rather, a determination of serious injury within the meaning of Article 4.1(b) requires an assessment of all injury factors "as a whole": "[W]e do not exclude that in the particular circumstances of a case, e.g., prices remaining at a depressed level for a longer period may be sufficient for a determination on the whole that an industry is threatened with serious injury even if a given injury factor does not show a recent, sharp and sudden decline. Also, a threat finding does not require that, e.g., financial performance of each individual firm operating in the industry show a decline. A competent national authority may arrive at a threat determination even if the majority of firms within the relevant industry is not facing declining profitability, provided that an evaluation of the injury factors as a whole indicates threat of serious injury. ... ... Article 4.1(b) and 4.2(a) do not require the competent national authority to show that each listed injury factor is declining, i.e., point in the direction of serious injury or threat thereof. The competent national authority is required to make its determination in the light of the developments of injury factors on the whole in order to determine whether the relevant industry's condition is facing 'significant overall impairment' in the industry's condition is imminent."(127) 90. The Panel on US - Wheat Gluten considered that, as the investigation of increased imports should focus on recent imports, serious injury should also be found to exist within the recent past. (the Appellate Body did not specifically address this finding): "[A]ny determination of serious injury must pertain to the recent past. This flows from the wording of the text of Article XIX:1(a) of the GATT 1994 and Article 2.1 SA, which requires an examination as to whether a product 'is being imported' 'in such increased quantities ... and under such conditions as to cause or threaten serious injury...'. The use of the present tense of the verb in the phrase 'is being imported' in that provision indicates that it is necessary for the competent authorities to examine recent imports. It seems to us logical that if the increase in imports that the investigating authorities must examine must be recent, so also must be any basis for a determination by the authorities as to the situation of the domestic industry. Given that a safeguard measure will necessarily be based upon a determination of serious injury concerning a previous period, we consider it essential that current serious injury be found to exist, up to and including the very end of the period of investigation.(128)"(129) (a) Serious injury "that is clearly imminent"; determination of a threat of serious injury "based on facts and not merely on allegation, conjecture or remote possibility" 91. The Panel on US - Lamb interpreted Article 4.1(b) to signify that an industry's overall impairment "needs to be 'ready to take place'(130) or 'be impending, soon to happen ... event, especially danger or disaster'."(131) Next, the Panel stated that a determination of a threat of serious injury has to be based on facts and not on allegation, conjecture, or remote possibility. The Panel concluded (i) that a threat determination needs to be based on an analysis which takes objective and verifiable data from the recent past (i.e. the latter part of an investigation period) as a starting-point so as to avoid basing a determination on allegation, conjecture or remote possibility; (ii) that factual information from the recent past, complemented by fact-based projections concerning developments in the industry's condition, and concerning imports, in the imminent future needs to be taken into account in order to ensure an analysis of whether a significant overall impairment of the relevant industry's position is imminent in the near future; (iii) that the analysis needs to determine whether injury of a serious degree will actually occur in the near future unless safeguard action is taken.(132) The Appellate Body's approach largely coincided with the Panel's: "[W]e note that th[e] term ['threat of serious injury'] is concerned with 'serious injury' which has not yet occurred, but remains a future event whose actual materialization cannot, in fact, be assured with certainty. We note, too, that Article 4.1(b) builds on the definition of 'serious injury' by providing that, in order to constitute a 'threat', the serious injury must be 'clearly imminent'. The word 'imminent' relates to the moment in time when the 'threat' is likely to materialize. The use of this word implies that the anticipated 'serious injury' must be on the very verge of occurring. Moreover, we see the word 'clearly', which qualifies the word 'imminent', as an indication that there must be a high degree of likelihood that the anticipated serious injury will materialize in the very near future. We also note that Article 4.1(b) provides that any determination of a threat of serious injury 'shall be based on facts and not merely on allegation, conjecture or remote possibility.' (emphasis added) To us, the word 'clearly' relates also to the factual demonstration of the existence of the 'threat'. Thus, the phrase 'clearly imminent' indicates that, as a matter of fact, it must be manifest that the domestic industry is on the brink of suffering serious injury."(133) 92. In US - Lamb, the Appellate Body also reiterated the strict standard of "serious injury" in the context of the "threat of serious injury": "We recall that, in Argentina - Footwear Safeguard, we stated that 'it is essential for a panel to take the definition of 'serious injury' in Article 4.1(a) of the Agreement on Safeguards into account in its review of any determination of 'serious injury'.'(134) The same is equally true for the definition of 'threat of serious injury' in Article 4.1(b) of that Agreement. Thus, in making a determination on either the existence of 'serious injury', or on a 'threat' thereof, panels must always be mindful of the very high standard of injury implied by these terms."(135) 93. The Panel on US - Lamb considered that a focus on the recent data available pertaining to the end of an investigation period was logical in view of the future-oriented nature of a threat of serious injury analysis: "In our view, due to the future-oriented nature of a threat analysis, it would seem logical that occurrences at the beginning of an investigation period are less relevant than those at the end of that period. While the SG Agreement does not specify the appropriate duration of the time-period to be considered in an investigation, the Panel and Appellate Body in Argentina - Footwear both considered this issue to some extent. Both concluded that (for an actual serious injury finding) the most recent data were clearly the most relevant. In particular, the Appellate Body stated that 'the relevant investigation period should not only end in the very recent past, the investigation period should be the recent past'.
Given that a threat of serious injury pertains to imminent significant overall impairment, i.e., an event to take place in the immediate future, the same principle should hold true a fortiori for threat determinations compared with present serious injury determinations. This supports the view that the USITC was correct to focus on the most recent data available from the end of the investigation period. We also consider that data from 1997 and interim-1998 cover an adequate and reasonable time-period if complemented by projections extrapolating existing trends into the imminent future so as to ensure the prospective analysis which a threat determination requires.
Therefore, we consider that, by basing its determination on events at the end of the investigation period (i.e., one year and nine months) rather than over the course of the entire investigation period, the USITC analysed sufficiently recent data for making a valid evaluation of whether significant overall impairment was "imminent" in the near future. By the same token, we also consider that, by basing its determination at all on data about events from the recent past, rather than relying exclusively on projections for the various industry indicators into the future, the USITC made its threat determination on the basis of objective and quantifiable facts, and 'not merely on allegation, conjecture or remote possibility'."(136) (b) Increased imports as a prerequisite for a determination of threat of serious injury 94. The Panel on Argentina - Footwear (EC) considered that a mere threat of increased imports is insufficient for the purposes of a determination of threat of serious injury (the Appellate Body did not explicitly address this issue): "[I]f only a threat of increased imports is present, rather than actual increased imports, this is not sufficient. Article 2.1 requires an actual increase in imports as a basic prerequisite for a finding of either threat of serious injury or serious injury. A determination of the existence of a threat of serious injury due to a threat of increased imports would amount to a determination based on allegation or conjecture rather than one supported by facts as required by Article 4.1(b)."(137) 95. The Panel on US - Lamb, in a finding subsequently not reviewed by the Appellate Body, addressed the question whether, once imports have increased to already cause already some degree of injury, there is a requirement of additional increased imports in order to legitimately determine the existence of a threat of serious injury: "The complainants further claim that the US reference to projections of future increases in imports in defending its threat analysis amounts to equating a 'threat of increased imports' with a 'threat of serious injury', which the Argentina - Footwear panel found not to be permissible. ... We agree in general with the complainants' argument that a threat of increased imports as such cannot be equated with threat of serious injury. However, in our view, this is not what the USITC has done in this case. Moreover, we also deem it possible that imports continuing on an elevated level for a longer period without further increasing at the end of the investigation period may, if unchecked, go on to cause serious injury (i.e., may threaten to cause serious injury). That is, if increased imports at a certain point in time cause less than serious injury, it is not necessarily true that a threat of serious injury can only be caused by a further increase, i.e., additional increased imports. In our view, in the particular circumstances of a case, a continuation of imports at an already recently increased level may suffice to cause such threat."(138) (c) Relationship between a determination of the existence of serious injury and a determination of the existence of a threat of serious injury 96. The Panel on Argentina - Footwear (EC) observed that in the dispute before it, it was not necessary "to rule on the question of whether it is possible to make simultaneously findings of serious injury and threat of serious injury."(139) (d) Relationship with other Articles 97. In US - Lamb, the Panel held that the definition of domestic industry by the United States authorities was inconsistent with Article 4.1(c) of the Agreement on Safeguards. The Panel then explained its decision not to exercise judicial economy, but rather to proceed to examine other claims, including those pertaining to Article 4.1(b): "A finding that the industry definition used by the USITC is inconsistent with SG Article 4.1(c) would appear to compromise the investigation and determination overall. ... [T]he Appellate Body focuses on the need for panels to address all claims and/or measures necessary to secure a positive solution to a dispute and adds that providing only a partial resolution of the matter at issue would be false judicial economy. It is in the spirit of the Appellate Body's statements in Australia - Salmon that we continue with an analysis of other claims in the alternative, assuming arguendo either (1) that the USITC's industry definition were consistent with the Safeguards Agreement or (2) that, as the United States argues in the alternative, the USITC would have made a finding of threat of serious injury even if the industry definition had been limited to packers and breakers."(140) (a) " domestic industry"-"producers as a whole...of the like or directly competitive products" 98. In US - Lamb the Appellate Body concurred with the finding of the Panel in that dispute that in the context of an investigation in which the relevant like product was defined as lamb meat, the term "domestic industry" could not be interpreted as including growers and feeders of live lambs. The Appellate Body began by identifying the analytical approach towards defining "domestic industry": "Accordingly, the first step in determining the scope of the domestic industry is the identification of the products which are 'like or directly competitive' with the imported product. Only when those products have been identified is it possible then to identify the 'producers' of those products."(141) 99. The Appellate Body first considered the definition of "domestic industry" with reference to products: "[A] safeguard measure is imposed on a specific 'product', namely, the imported product. The measure may only be imposed if that specific product ('such product') is having the stated effects upon the 'domestic industry that produces like or directly competitive products'. (emphasis added) The conditions in Article 2.1, therefore, relate in several important respects to specific products. In particular, according to Article 2.1, the legal basis for imposing a safeguard measure exists only when imports of a specific product have prejudicial effects on domestic producers of products that are 'like or directly competitive' with that imported product. In our view, it would be a clear departure from the text of Article 2.1 if a safeguard measure could be imposed because of the prejudicial effects that an imported product has on domestic producers of products that are not 'like or directly competitive products' in relation to the imported product."(142) 100. After addressing the definition of "domestic industry" with respect to products, the Appellate Body in US - Lamb then proceeded to consider the issue of producers: "As the Panel indicated, 'producers' are those who grow or manufacture an article; 'producers' are those who bring a thing into existence. This meaning of 'producers' is, however, qualified by the second element in the definition of 'domestic industry'. This element identifies the particular products that must be produced by the domestic 'producers' in order to qualify for inclusion in the 'domestic industry'. According to the clear and express wording of the text of Article 4.1(c), the term 'domestic industry' extends solely to the 'producers ... of the like or directly competitive products'. (emphasis added) The definition, therefore, focuses exclusively on the producers of a very specific group of products. Producers of products that are not 'like or directly competitive products' do not, according to the text of the treaty, form part of the domestic industry."(143) 101. In US - Lamb, the Appellate Body upheld the findings of the Panel and also concluded that the definition of "domestic industry" by the United States authorities was too broad: "There is no dispute that in this case the 'like product' is 'lamb meat', which is the imported product with which the safeguard investigation was concerned. The USITC considered that the 'domestic industry' producing the 'like product', lamb meat, includes the growers and feeders of live lambs. The term 'directly competitive products' is not, however, at issue in this dispute as the USITC did not find that there were any such products in this case.(144)
"In this respect, we are not persuaded that the words 'as a whole' in Article 4.1(c), appearing in the phrase 'producers as a whole', offer support to the United States position. These words do not alter the requirement that the 'domestic industry' extends only to producers of 'like or directly competitive products'. The words 'as a whole' apply to 'producers' and, when read together with the terms 'collective output' and 'major proportion' which follow, clearly address the number and the representative nature of producers making up the domestic industry. The words 'as a whole' do not imply that producers of other products, which are not like or directly competitive with the imported product, can be included in the definition of domestic industry. Like the Panel, we see the words 'as a whole' as no more than 'a quantitative benchmark for the proportion of producers ... which a safeguards investigation has to cover.'"(145) 102. The Appellate Body in US - Lamb expressed scepticism that the degree of integration of production processes within an industry should have any bearing on the determination of the "domestic industry". "Although we do not disagree with the Panel's analysis of the USITC Report, nor with the conclusions it drew from that analysis, we have reservations about the role of an examination of the degree of integration of production processes for the products at issue. As we have indicated, under the Agreement on Safeguards, the determination of the "domestic industry" is based on the 'producers ... of the like or directly competitive products'. The focus must, therefore, be on the identification of the products, and their 'like or directly competitive' relationship, and not on the processes by which those products are produced.(146)"(147) (b) "those whose collective output...constitutes a major proportion" 103. The Panel Report in US - Wheat Gluten addressed the link between the phrase "major proportion" and the question of data coverage: "[T]he Agreement expressly envisages that, in certain circumstances, the 'domestic industry' may consist of those domestic producers 'whose collective output of the like or directly competitive products constitutes a major proportion of the total domestic production of those products'. This implies that complete data coverage may not always be possible and is not required. While the fullest possible data coverage is required in order to maximize the accuracy of the investigation, there may be circumstances in a particular case which do not allow an investigating authority to obtain such coverage. In this case, the fact that the USITC record included full period data for only two domestic producers was partially a result of the fact that Heartland became part of the domestic industry only in 1996. Furthermore, the profitability data provided by ADM did not pertain specifically to the domestic industry under investigation and was therefore excluded.
Moreover, the USITC found that ''[p]rofitability reflected the trends in average unit value prices, which initially rose and then fell.' The USITC had before it data pertaining to unit value from all producers, including ADM. The concurrence in trends between these two factors supports the view that the profitability data used by the USITC was representative of the domestic industry's situation.
On the basis of the information contained, or referred to, in the sections of the USITC Report relating to profits and losses and the statement by the USITC that the three domestic producers that provided usable financial data on wheat gluten 'accounted for the substantial majority of domestic production of wheat gluten', we find that the United States did not act inconsistently with Article 4.2(a) in terms of the coverage of the 'profits and losses' data."(148) 104. In contrast to the Panel's findings in US - Wheat Gluten, the Panel on US - Lamb held that the data gathered by the investigating authorities in the specific case were not sufficiently representative of those producers whose collective output constitutes a major proportion of the products in question: "[T]he crucial problem with the data used by the USITC relates to the representativeness of the questionnaire data where they were used (e.g., employment, financial indicators), and not with the use of USDA data where available. In particular the low data coverage for growers and feeders (approximately six per cent), the lack of financial data for interim 1997 and 1998 for grower/feeders, and the uneven data coverage for packers and breakers (especially in the financial data as outlined above) raises serious doubts as to whether the data represent a "major proportion" of the domestic industry, in the sense of SG Article 4.1(c)."(149) 105. The Panel also pointed out that an incorrect determination of what constitutes the "domestic industry" will likely vitiate also the representativeness of data related to such incorrectly determined domestic industry: "This lack of representativeness is likely compounded by the fact that the USITC defined the domestic industry broadly as including growers and feeders, as the conclusions drawn from the data pertaining to only a small proportion of US growers and feeders are central to the USITC's overall finding of threat of serious injury."(150) 106. The Panel made clear that a national authority is not under an obligation to collect information from all domestic producers so as to ensure the representativeness of the data used for its final determination. Nevertheless, the Panel invoked, among other things, the need for a "statistically valid sample": "We agree with the United States that the Safeguards Agreement does not specify any particular methodology to ensure the representativeness of data collected in an investigation. But we also note that the USITC itself concedes that the questionnaire responses do not constitute a statistically valid sample of the producers which, in the USITC's view, form an essential part of the domestic industry. While, again accepting arguendo the USITC's industry definition,(151) we recognize that in practical terms it would have been impossible for the USITC to collect data from all of the more than 70,000 growers, we nevertheless believe that the USITC could have obtained data from a larger percentage of the growers than it did or from a statistically valid sample, so as to ensure that the data collected were representative of growers as a whole. In any case, petitioners requesting the initiation of an investigation could not automatically be taken to represent a major proportion of the domestic industry.
In the light of the foregoing, we conclude that on the basis of the information made available by the United States in this dispute (and absent more detailed information on the exact coverage of the questionnaire responses), by industry segment and by injury factor, we are not persuaded that the data used as a basis for the USITC's determination in this case was sufficiently representative of 'those producers whose collective output ... constitutes a major proportion of the total domestic production of those products' within the meaning of SG Article 4.1(c)."(152) (c) Relationship with other Articles 107. The Panel on US - Lamb, after making findings of inconsistency with Article XIX:1(a) of GATT 1994 and with Articles 2.1, 4.1(c), and 4.2(b) of the Agreement on Safeguards, exercised judicial economy with respect to claims raised under Articles 2.2, 3.1, 5.1, 8, 11 and 12 of the Agreement on Safeguards.(153) 108. With respect to the relationship with Article 4.1(b), see paragraph 97 above. (a) "shall evaluate all relevant factors" (i) Relationship between the requirement to evaluate all relevant factors and the definition of serious injury in Article 4.1(a) 109. With respect to the relationship between the requirement to evaluate all relevant factors and the definition of serious injury in Article 4.1(a), see paragraphs 87-89 above (ii) "All" relevant factors - factors relating to imports and factors relating to the domestic industry 110. In the context of reversing the interpretation by the Panel on US - Wheat Gluten of the requisite causal link between increased imports and serious injury, the Appellate Body held that a national authority should consider all the factors listed in Article 4.2(a), regardless of whether they relate to imports specifically or to the domestic industry more generally. The Appellate Body did not consider that Article 4.2(a) attached any special significance to any one of these factors in particular: "The use of the word 'all' in the phrase 'all relevant factors' in Article 4.2(a) indicates that the effects of any factor may be relevant to the competent authorities' determination, irrespective of whether the particular factor relates to imports specifically or to the domestic industry more generally. This conclusion is borne out by the list of factors which Article 4.2(a) stipulates are, 'in particular', relevant to the determination. This list includes factors that relate both to imports specifically and to the overall situation of the domestic industry more generally. The language of the provision does not distinguish between, or attach special importance or preference to, any of the listed factors. In our view, therefore, Article 4.2(a) of the Agreement on Safeguards suggests that all these factors are to be included in the determination and that the contribution of each relevant factor is to be counted in the determination of serious injury according to its 'bearing' or effect on the situation of the domestic industry. Thus, we consider that Article 4.2(a) does not support the Panel's conclusion that some of the 'relevant factors' - those related exclusively to increased imports - should be counted towards an affirmative determination of serious injury, while others - those not related to increased imports - should be excluded from that determination."(154) 111. In the same case, after finding that the phrase "all relevant factors" under Article 4.2(a) refers to factors relating both to imports and to the domestic industry, the Appellate Body further held that the determination of "causality" under Article 4.2(b) must give the phrase "all relevant factors" the same meaning as under Article 4.2(a). The Appellate Body noted that Article 4.2(a) imposes an obligation to evaluate (and by implication to include) the effect of all the relevant factors on the domestic industry and went on to state that this obligation under Article 4.2(a) would be violated if the very same effects, caused by those same factors, were - with the exception of increased imports - to be excluded from consideration under Article 4.2(b).(155) (iii) Requirement to consider all factors listed in Article 4.2(a) 112. The Panel on Korea - Dairy found, with respect to the list of factors contained in Article 4.2(a), that the national investigating authority was under an obligation to evaluate all of these factors: "This provision sets out the general principle regarding the economic factors which need to be considered in a serious injury investigation, and provides a list of factors that are a priori considered to be especially relevant and informative of the situation of the domestic industry. The use of the wording 'in particular' makes it clear to us that, among 'all relevant factors' that the investigating authorities 'shall evaluate', the consideration of the factors listed is always relevant and therefore required, even though the authority may later dismiss some of them as not having a bearing on the situation of that industry."(156) 113. In the context of its discussion of the applicable standard of review, the Panel on Argentina - Footwear (EC) addressed the argument that the requirement to evaluate "all relevant factors of an objective and quantifiable nature having a bearing on the industry" implies an obligation to evaluate factors only to the extent that they are relevant but not an obligation to examine each and every factor.(157) The Panel, whose finding was subsequently upheld by the Appellate Body, responded to this argument as follows: "We note, first, that the text of Article 4.2(a) of the Safeguards Agreement explicitly requires the evaluation of 'all relevant factors', in particular those listed in that article. Second, Article 6.4 of the ATC contains no such express requirement and recognises that 'none of these factors ... can necessarily give decisive guidance. Nonetheless, the panels on United States - Underwear and United States - Shirts and Blouses ruled that each and every injury factor mentioned in Article 6.4 of the ATC has to be considered by the national authority. With regard to the obligation to evaluate 'all relevant factors' we consider these past panel reports relevant. Consequently, in accordance with the text of the Safeguards Agreement and past practice, we consider that an evaluation of all factors listed in Article 4.2(a) is required. ... ... we must consider, first, whether all injury factors listed in the Agreement were considered by Argentina as the text of Article 4.2(a) of the Agreement ('all relevant factors....including ...changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment') is unambiguous that at a minimum each of the factors listed, in addition to all other factors that are 'relevant', must be considered."(158) 114. The Appellate Body agreed "with the Panel's interpretation that Article 4.2(a) of the Agreement on Safeguards requires a demonstration that the competent authorities evaluated, at a minimum, each of the factors listed in Article 4.2(a) as well as all other factors that are relevant to the situation of the industry concerned."(159) 115. The Panel Report in US - Wheat Gluten reiterates this standard: "[T]he language in this provision is mandatory ('shall...'). Furthermore, this list is preceded by the term 'in particular...'. On the basis of the text of the provision, we therefore concur with the shared view of the parties that all of the factors listed in Article 4.2(a) must be evaluated. Of course, an examination of any one of those factors in a given case may lead the investigating authority to conclude that a particular factor is not probative in the circumstances of a particular industry or a particular case, and therefore is not relevant to the actual determination."(160) 116. In Argentina - Footwear (EC), the Appellate Body reiterated its statement in EC - Hormones, and upheld the findings by the Panel that the Agreement on Safeguards is silent as to the appropriate standard of review. Therefore, the "objective assessment" requirement under Article 11 of the DSU sets forth the appropriate standard of review for examining the WTO-consistency of a safeguard measure. With respect to the application of the standard of review, the Appellate Body ruled that a panel is obliged to assess whether the importing authorities "had examined all the relevant facts and had provided a reasoned explanation of how the facts supported their determination". In addition to "an objective assessment of the facts ", the Appellate Body in Argentina - Footwear (EC) held that a panel shall examine "the applicability of and conformity with the relevant covered agreements". Specifically, the Appellate Body found that Article 11 of the DSU requires a panel to correctly interpret and apply the substantive provisions of Articles 2 and 4 of the Agreement on Safeguards, in particular, those relating to the requirements of imports "in such increased quantities", "serious injury" to the domestic industry, and causation: "Although that case dealt with the panel's assessment of the facts, and this case deals with the Panel's assessment of the matter, more generally, the same reasoning applies here. The Agreement on Safeguards, like the Agreement on the Application of Sanitary and Phytosanitary Measures, is silent as to the appropriate standard of review. Therefore, Article 11 of the DSU, and, in particular, its requirement that ,... a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements,, sets forth the appropriate standard of review for examining the consistency of a safeguard measure with the provisions of the Agreement on Safeguards.
Based on our review of the Panel's reasoning, we find that the Panel correctly stated the appropriate standard of review, as set forth in Article 11 of the DSU. And, with respect to its application of the standard of review, we do not believe that the Panel conducted a de novo review of the evidence, or that it substituted its analysis and judgement for that of the Argentine authorities. Rather, the Panel examined whether, as required by Article 4 of the Agreement on Safeguards, the Argentine authorities had considered all the relevant facts and had adequately explained how the facts supported the determinations that were made. Indeed, far from departing from its responsibility, in our view, the Panel was simply fulfilling its responsibility under Article 11 of the DSU in taking the approach it did. To determine whether the safeguard investigation and the resulting safeguard measure applied by Argentina were consistent with Article 4 of the Agreement on Safeguards, the Panel was obliged, by the very terms of Article 4, to assess whether the Argentine authorities had examined all the relevant facts and had provided a reasoned explanation of how the facts supported their determination.
In addition to 'an objective assessment of the facts', we note, too, that part of the 'objective assessment of the matter' required of a panel by Article 11 of the DSU is an assessment of 'the applicability of and conformity with the relevant covered agreements'. Consequently, we must also examine whether the Panel correctly interpreted and applied the substantive provisions of Articles 2 and 4 of the Agreement on Safeguards, in particular, those relating to the requirements of imports 'in such increased quantities', 'serious injury' to the domestic industry, and causation."(161) 117. In US - Lamb, the Appellate Body articulated the standard of review for a national authority's determination of serious injury or threat thereof: "[I]n examining a claim under Article 4.2 of the Agreement on Safeguards, a panel's application of the appropriate standard of review of the competent authorities' determination has two aspects. First, a panel must review whether the competent authorities have, as a formal matter, evaluated all relevant factors and, second, a panel must review whether those authorities have, as a substantive matter, provided a reasoned and adequate explanation of how the facts support their determinations."(162) 118. The Appellate Body's application of its standard of review toward a national authority's determination of serious injury or threat thereof is illustrated by its findings in US - Lamb. Here, after criticising the United States authorities determination of threat of serious injury, the Appellate Body stated: "We wish to emphasize again that our remarks about the price data are not intended to suggest that the domestic industry was not threatened with serious injury. Rather, our conclusion is simply that the USITC has not adequately explained how the facts relating to prices support its determination, under Article 4.2(a), that the domestic industry was threatened with such injury."(163) 119. Although in US - Lamb the Appellate Body agreed with the Panel's articulation of the appropriate standard of review, it held that the Panel had not applied this standard correctly in that case. The Appellate Body took issue with the fact that the Panel had considered the evaluation of certain factors to be 'a sufficient basis' for the national authorities' determination, but did not engage in any substantive review of these factors. The Appellate Body found that the Panel had not applied the required standards of review because: "[B]y failing to review the USITC's determination in light of these detailed substantive arguments, [it] failed to examine critically whether the USITC had, indeed, provided a reasoned and adequate explanation of how the facts supported its determination that there existed a 'threat of serious injury'."(164) 120. The Appellate Body in US - Cotton Yarn, in the context of examination of a transitional textile safeguard under Article 6 of the ATC, found that a panel "must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority", and summarized the standard of review for past safeguard disputes as follows: "Our Reports in these disputes under the Agreement on Safeguards spell out key elements of a panel's standard of review under Article 11 of the DSU in assessing whether the competent authorities complied with their obligations in making their determinations. This standard may be summarized as follows: panels must examine whether the competent authority has evaluated all relevant factors; they must assess whether the competent authority has examined all the pertinent facts and assessed whether an adequate explanation has been provided as to how those facts support the determination; and they must also consider whether the competent authority's explanation addresses fully the nature and complexities of the data and responds to other plausible interpretations of the data. However, panels must not conduct a de novo review of the evidence nor substitute their judgement for that of the competent authority."(165) (v) "of an objective and quantifiable nature" (a.1) General 121. In its determination of what would constitute "factors of an objective and quantifiable nature" within the meaning of Article 4.2(a), the Appellate Body in US - Lamb opined that the requirement of objectivity and quantifiability applies, not to factors, but to data, the evaluation of which would "enable the measurement and quantification of these factors". The Appellate Body then specified that for data to be "objective and quantifiable", such data would have to be both sufficient and representative of the domestic industry: "We note that no provision of the Agreement on Safeguards specifically addresses the question of the extent of data collection, and in particular, whether competent authorities must have before them data that is representative of the domestic industry. However ... competent authorities are obliged to 'evaluate' all relevant factors of an 'objective and quantifiable' nature ... We recognize that the clause 'of an objective and quantifiable nature' refers expressly to 'factors', but not expressly to data. We are, however, convinced that factors can only be 'of an objective and quantifiable nature' if they allow a determination to be made, as required by Article 4.2(b) of the Agreement on Safeguards, on the basis of 'objective evidence'. Such evidence is, in principle, objective data. The words 'factors of an objective and quantifiable nature' imply, therefore, an evaluation of objective data which enables the measurement and quantification of these factors.
[T]he requirement for competent authorities to evaluate the 'bearing' that the relevant factors have on the 'domestic industry' and, subsequently, to make a determination concerning the overall 'situation of that industry', means that competent authorities must have a sufficient factual basis to allow them to draw reasoned and adequate conclusions concerning the situation of the 'domestic industry'. The need for such a sufficient factual basis, in turn, implies that the data examined, concerning the relevant factors, must be representative of the 'domestic industry'. Indeed, a determination made on the basis of insufficient data would not be a determination about the state of the 'domestic industry', as defined in the Agreement, but would, in reality, be a determination pertaining to producers of something less than 'a major proportion of the total domestic production' of the products at issue. Accordingly, we agree with the Panel that the data evaluated by the competent authorities must be sufficiently representative of the 'domestic industry' to allow determinations to be made about that industry."(166) 122. The Appellate Body in US - Lamb nevertheless stressed that data could fulfil the requirement of being representative even if they did not cover all domestic producers whose production constitutes a major proportion of the domestic industry: "We do not wish to suggest that competent authorities must, in every case, actually have before them data pertaining to all those domestic producers whose production, taken together, constitutes a major proportion of the domestic industry. In some instances, no doubt, such a requirement would be both impractical and unrealistic. Rather, the data before the competent authorities must be sufficiently representative to give a true picture of the 'domestic industry'. What is sufficient in any given case will depend on the particularities of the 'domestic industry' at issue."(167) (a.2) Nature and temporal focus of data in a threat analysis 123. In US - Lamb, the Appellate Body addressed what it calls the "tension between a future-oriented 'threat' analysis" on the one hand, and the "need for a fact-based determination of serious injury" on the other: "[W]e agree with the Panel that a threat determination is 'future-oriented'. However, Article 4.1(b) requires that a "threat" determination be based on "facts" and not on 'conjecture'. As facts, by their very nature, pertain to the present and the past, the occurrence of future events can never be definitively proven by facts. There is, therefore, a tension between a future-oriented 'threat' analysis, which, ultimately, calls for a degree of 'conjecture' about the likelihood of a future event, and the need for a fact-based determination. Unavoidably, this tension must be resolved through the use of facts from the present and the past to justify the conclusion about the future, namely that serious injury is 'clearly imminent'. Thus, a fact-based evaluation, under Article 4.2(a) of the Agreement on Safeguards, must provide the basis for a projection that there is a high degree of likelihood of serious injury to the domestic industry in the very near future.(168)"(169) 124. With respect to the temporal focus of data used in a threat analysis, the Appellate Body held: "[W]e note that the Agreement on Safeguards provides no particular methodology to be followed in making determinations of serious injury or threat thereof. However, whatever methodology is chosen, we believe that data relating to the most recent past will provide competent authorities with an essential, and, usually, the most reliable, basis for a determination of a threat of serious injury. The likely state of the domestic industry in the very near future can best be gauged from data from the most recent past ... [I]n principle, within the period of investigation as a whole, evidence from the most recent past will provide the strongest indication of the likely future state of the domestic industry."(170) 125. The Appellate Body, also in US - Lamb, nevertheless cautioned against the use of recent data in isolation from data pertaining to the entire period of investigation: "However, we believe that, although data from the most recent past has special importance, competent authorities should not consider such data in isolation from the data pertaining to the entire period of investigation. The real significance of the short-term trends in the most recent data, evident at the end of the period of investigation, may only emerge when those short-term trends are assessed in the light of the longer-term trends in the data for the whole period of investigation. If the most recent data is evaluated in isolation, the resulting picture of the domestic industry may be quite misleading. For instance, although the most recent data may indicate a decline in the domestic industry, that decline may well be a part of the normal cycle of the domestic industry rather than a precursor to clearly imminent serious injury. Likewise, a recent decline in economic performance could simply indicate that the domestic industry is returning to its normal situation after an unusually favourable period, rather than that the industry is on the verge of a precipitous decline into serious injury. Thus, we believe that, in conducting their evaluation under Article 4.2(a), competent authorities cannot rely exclusively on data from the most recent past, but must assess that data in the context of the data for the entire investigative period.(171)"(172) (vi) "Rate and amount" of the increase; "changes" in the level of sales 126. The Panel Report in Argentina - Footwear (EC), subsequently upheld on this point by the Appellate Body, read the requirement under Article 4.2(a) to evaluate the rate and amount of the increase in imports to mean a requirement to analyse the trends of imports over the period of investigation: "[W]e recall Article 4.2(a)'s requirement that 'the rate and amount of the increase in imports' be evaluated.(173) In our view this constitutes a requirement that the intervening trends of imports over the period of investigation be analysed. We note that the term 'rate' connotes both speed and direction, and thus intervening trends (up or down) must be fully taken into consideration. Where these trends are mixed over a period of investigation, this may be decisive in determining whether an increase in imports in the sense of Article 2.1 has occurred. In practical terms, we consider that the best way to assess the significance of any such mixed trends in imports is by evaluating whether any downturn in imports is simply temporary, or instead reflects a longer-term change."(174) 127. The Appellate Body affirmed this interpretation of the words "rate and amount" in Article 4.2(a) by agreeing: "[W]ith the Panel that the specific provisions of Article 4.2(a) require that 'the rate and amount of the increase in imports ... in absolute and relative terms' ...must be evaluated. Thus, we do not dispute the Panel's view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a)."(175) 128. In US - Line Pipe, the Panel found, in a statement not reviewed by the Appellate Body, that "there is no need for a determination that imports are presently still increasing. Rather, imports could have "increased" in the recent past, but not necessarily be increasing up to the end of the period of investigation or immediately preceding the determination".(176) The Panel thus ruled that "a determination of either an absolute or relative increased in imports causing serious injury is sufficient to authorize a Member to adopt safeguard measures, even if it found the absolute increased imports determination by importing Member was incorrect".(177) For a detailed discussion, see paragraph 35 above. 129. With respect to the coincidence between trends in injury factors and import trends, see paragraphs 146-148 below. 130. The Panel Report in US - Wheat Gluten held that the term "productivity" may refer to the overall productivity of an industry and encompasses productivity of both labour and capital (the Appellate Body did not address this particular finding): "[T]he Agreement on Safeguards provides no precise definition of the term 'productivity' that appears in Article 4.2(a) SA. The context of this term includes the rest of the text of Article 4.2(a) - and in particular, the phrase 'all relevant factors of an objective and quantifiable nature having a bearing on the situation of that industry' ... We consider that this term, read in its context, may refer to the overall productivity of the industry.
It is apparent to us from the USITC Report that the USITC gathered and analysed data on capital investment in the industry as well as data pertaining to worker productivity. In these Panel proceedings, the United States asserts that 'fit is simple mathematics that if production declines (as it did in 1996-1997 from 1995 levels), while the amount of capital in the industry increases (as it did from the capital projects adding capacity), the productivity of capital will correspondingly decline.' We would have preferred a more integrated examination in the USITC Report of 'productivity' that explicitly encompassed overall industry productivity - particularly in light of the acknowledgement by the USITC that 'production of wheat gluten is extremely capital intensive and requires very few production workers'. Nevertheless, we consider that the data and statements pertaining to worker productivity, in conjunction with those on capital investments, in the overall context of the USITC Report, indicate that the USITC considered industry productivity as required by Article 4.2(a)."(178) (viii) Factors not listed in Article 4.2(a) 131. In US - Wheat Gluten, the Appellate Body disagreed with the interpretation by the Panel in that dispute that, with regard to factors not enumerated in Article 4.2(a), competent authorities are obliged only to evaluate factors "clearly raised" as relevant by interested parties in a domestic investigation.(179) The Appellate Body first established a link between the requirement, under Article 4.2(a) to evaluate "all relevant factors" and the obligation, under Article 3.1, to conduct an investigation: "The word 'all' has a broad meaning which, if read alone, would suggest that the scope of the obligation on the competent authorities to evaluate 'relevant factors' is without limits or exceptions.(180) However, the word cannot, of course, be read in isolation. ... the text of Article 4.2(a) itself imposes certain explicit qualifications on the obligation to evaluate 'all relevant factors' as it states that competent authorities need only evaluate factors which are 'objective and quantifiable' and which '[have] a bearing on the situation of that industry'.
The obligation to evaluate 'relevant factors' must also be interpreted in light of the duty of the competent authorities to conduct an "investigation" under the Agreement on Safeguards. The competent authorities must base their evaluation of the relevance, if any, of a factor on evidence that is 'objective and quantifiable'. The competent authorities will, in principle, obtain this evidence during the investigation they must conduct, under Article 3.1, into the situation of the domestic industry. The scope of the obligation to evaluate 'all relevant factors' is, therefore, related to the scope of the obligation of competent authorities to conduct an investigation.
We turn, therefore, for context, to Article 3.1 of Agreement on Safeguards, which is entitled 'Investigation'."(181) 132. The Appellate Body in US - Wheat Gluten then reversed the Panel's finding that the competent authorities are obliged only to evaluate factors "clearly raised" as relevant by interested parties in a domestic investigation. Rather, the Appellate Body held that the investigating authorities must, where necessary, "undertake additional investigative steps ... in order to fulfill their obligation to evaluate all relevant factors": "The competent authorities must, in every case, carry out a full investigation to enable them to conduct a proper evaluation of all of the relevant factors expressly mentioned in Article 4.2(a) of the Agreement on Safeguards. Moreover, Article 4.2(a) requires the competent authorities - and not the interested parties - to evaluate fully the relevance, if any, of "other factors". If the competent authorities consider that a particular 'other factor' may be relevant to the situation of the domestic industry, under Article 4.2(a), their duties of investigation and evaluation preclude them from remaining passive in the face of possible short-comings in the evidence submitted, and views expressed, by the interested parties. In such cases, where the competent authorities do not have sufficient information before them to evaluate the possible relevance of such an 'other factor', they must investigate fully that 'other factor', so that they can fulfill their obligations of evaluation under Article 4.2(a). In that respect, we note that the competent authorities' 'investigation' under Article 3.1 is not limited to the investigative steps mentioned in that provision, but must simply 'include' these steps. Therefore, the competent authorities must undertake additional investigative steps, when the circumstances so require, in order to fulfill their obligation to evaluate all relevant factors.
Thus, we disagree with the Panel's finding that the competent authorities need only examine 'other factors' which were 'clearly raised before them as relevant by the interested parties in the domestic investigation.' (emphasis added) ... However, as is clear from the preceding paragraph of this Report, we also reject the European Communities' argument that the competent authorities have an open-ended and unlimited duty to investigate all available facts that might possibly be relevant."(182) (ix) Consideration of "all relevant factors" in the case of a segmented domestic industry 133. The Panel Report in Korea - Dairy held that while it is permissible to analyse distinct market segments in order to make a finding of serious injury to the whole domestic industry, the investigating authorities must nevertheless comply with certain requirements in this respect: "[T]he definition of the domestic industry in this case as comprising two different segments of the dairy products market has consequences for the evaluation of the situation of the industry. In assessing the serious injury to the whole domestic industry, we find that it is acceptable to analyse distinct market segments but, as stated above, all factors listed in Article 4.2 must be addressed. In considering each of the factors listed in Article 4.2, and any others found to be relevant by the authority, the investigating authority has two options: for each factor, the investigating authority can consider it either for all segments, or if it decides to examine it for only one or some segment(s), it must provide an explanation of how the segment(s) chosen is (are) objectively representative of the whole industry....Our point here is that an analysis of only a segment of the domestic industry, without any explanation of its significance for the whole industry, will not satisfy the requirements of the Agreement on Safeguards."(183) 134. In Argentina - Footwear (EC), the Panel addressed the argument that, since the investigation had been conducted on the basis of a division of the product under investigation into five product groups, the investigating authorities were required to prove serious injury in all segments in which safeguard measures were to be imposed: "We disagree with the European Communities that Argentina was required to conduct its injury and causation analysis on a disaggregated basis. In our view, since in this case the definition of the like or directly competitive product is not challenged, it is this definition that controls the definition of the 'domestic industry' in the sense of Article 4.1(c) as well as the manner in which the data must be analysed in an investigation. While Argentina could have considered the data on a disaggregated basis (and in fact did so in some instances), in our view, it was not required to do so. Rather, given the undisputed definition of the like or directly competitive product as all footwear, Argentina was required at a minimum to consider each injury factor with respect to all footwear.(184) By the same token the European Communities, having accepted Argentina's aggregate like product definition, has no basis to insist on a disaggregated analysis in which injury and causation must be proven with respect to each individual product segment.(185) Thus, in our review of the injury finding, we will consider the analysis and conclusions pertaining to the footwear industry in its entirety."(186) 135. The Panel on US - Lamb found that an investigation of the injury factors with respect to particular industry segments is sufficient, provided an adequate explanation of certain issues is furnished: "An initial issue before us is whether, accepting arguendo the USITC's industry definition, all factors need to be investigated in detail for all identified industry segments (i.e., growers, feeders, packers and breakers) or whether an investigation of certain injury factors with respect to particular segments only would be sufficient to meet the requirements of SG Article 4.2(a). In the light of the general standard of review, as it applies to contingent trade remedy cases, we consider the latter as sufficient if there is an adequate explanation in the report published by the USITC, of (i) why conclusive inferences from the data concerning one industry segment can be drawn for another industry segment, or (ii) why the factual constellation in particular industry segment in the given case does not permit data collection (i.e., not a 'factor of a objective and quantifiable nature'), or (iii) renders a certain injury factor not probative in the circumstances of a particular industry segment (i.e., not a factor 'having a bearing on the situation of that industry' within the meaning of SG Article 4.2(a)."(187) 136. The Panel on US - Lamb then noted with respect to the investigation at issue: "[W]here the USITC did not collect data concerning a particular injury factor with respect to all industry segments, the USITC report provides an adequate explanation for that. Either the USITC report explains how inferences can be drawn from the data collected with regard to one segment for another segment for which data were not collected, or it explains why, in the circumstances of the particular industry segment at issue, the collection of data of an objective and quantifiable nature was not possible, or it explains why a specific injury factor is not probative for that segment."(188) 137. The Panel on Argentina - Footwear (EC) considered as inconsistent with the requirement of an evaluation of "all relevant factors" what it characterized as "the investigation's almos |
