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DISPUTE SETTLEMENT: DISPUTE DS202

United States — Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

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See also: One-page summary of key findings of this dispute

Appellate Body and Panel Reports Adopted

Complaint by Korea.

On 13 June 2000, Korea requested consultations with the United States in respect of concerns the definitive safeguard measure imposed by the United States on imports of circular welded carbon quality line pipe (line pipe). Korea noted that on 18 February 2000 the United States proclaimed a definitive safeguard measure on imports of line pipe (subheadings 7306.10.10 and 7306.10.50 of the Harmonized Tariff Schedule of the United States). In that proclamation, the United States announced that the proposed date of introduction of the measure was 1 March 2000 and that the measure was expected to remain in effect for 3 years and 1 day. Korea considered that the US procedures and determinations that led to the imposition of the safeguard measure as well as the measure itself contravened various provisions contained in the Safeguards Agreement and the GATT 1994. In particular, Korea considers that the measure is inconsistent with the United States’ obligations under Articles 2, 3, 4, 5, 11 and 12 of the Safeguards Agreement; and Articles I, XIII and XIX of the GATT 1994.

Further to Korea’s request, the DSB established a panel at its meeting of 23 October 2000. Australia, Canada, EC, Japan and Mexico reserved their third-party rights. On 12 January 2001, Korea requested the Director-General to determine the composition of the Panel. On 22 January 2001, the Panel was composed.

On 29 October 2001, the Panel circulated its report to the Members. The Panel concluded that the US line pipe measure was imposed inconsistently with certain provisions of GATT 1994 and/or the Safeguards Agreement, in particular:

• the line pipe measure is not consistent with the general rule contained in the chapeau of Article XIII:2 because it has been applied without respecting traditional trade patterns;
   
• the line pipe measure is not consistent with Article XIII2:(a) because it has been applied without fixing the total amount of imports permitted at the lower tariff rate;
   
• the US acted inconsistently with Articles 3.1 and 4.2(c) by failing to include in its published report a finding or reasoned conclusion either (i) that increased imports have caused serious injury, or (ii) that increased imports are threatening to cause serious injury;
   
• the US acted inconsistently with Article 4.2(b) by failing to establish a causal link between the increased imports and the serious injury, or threat thereof;
   
• the US has not complied with its obligations under Article 9.1 by applying the measure to developing countries whose imports do not exceed the individual and collective thresholds in that provision;
   
• the US acted inconsistently with its obligations under Article XIX by failing to demonstrate the existence of unforeseen developments prior to the application of the line pipe measure;
   
• the US has acted inconsistently with its obligations under Article 12.3 by failing to provide an adequate opportunity for prior consultations with Members having a substantial interest as exporters of line pipe;
   
• the US has acted inconsistently with its obligations under Article 8.1 to endeavour to maintain a substantially equivalent level of concessions and other obligations;

All other claims by Korea were rejected by the Panel. The Panel also declined Korea’s request for the Panel to find that the US safeguard measure should be lifted immediately and the ITC safeguard investigation on line pipe terminated.

On 6 November 2001, the US notified its decision to appeal certain findings of law and legal interpretations contained in the Panel Report. However, on 13 November 2001, it withdrew its notice of appeal. Later, on 19 November 2001, the US notified its decision to re-file its appeal to the Appellate Body. On 18 January 2002, the Appellate Body informed the DSB that there would be a delay in the circulation of the report. Accordingly, the Appellate Body informed that the report would be circulated to the Members no later than 15 February 2002. On 15 February 2002, the Appellate Body circulated its report to the Members. The Appellate Body:

• upheld, albeit for different reasons, the Panel’s finding, in paragraph 8.1(7) of the Panel Report, that the United States acted inconsistently with its obligation under Article 12.3 of the Agreement on Safeguards by failing to provide an adequate opportunity for prior consultations with Korea, a Member having a substantial interest in exports of line pipe;
   
• upheld the Panel’s finding, in paragraph 8.1(8) of the Panel Report, that the United States acted inconsistently with its obligation under Article 8.1 of the Agreement on Safeguards to endeavour to maintain a substantially equivalent level of concessions and other obligations;
   
• upheld the Panel’s finding, in paragraph 8.1(5) of the Panel Report, that the United States did not comply with its obligation under Article 9.1 of the Agreement on Safeguards that safeguard measures shall not be applied against a product originating in a developing country Member as long as its imports do not exceed the individual and collective thresholds in that provision;
   
• reversed the Panel’s finding, in paragraph 8.1(3) of the Panel Report, that the United States acted inconsistently with its obligations under Articles 3.1 and 4.2(c) of the Agreement on Safeguards by failing to include in its published report a finding or reasoned conclusion either (1) that increased imports have caused serious injury, or (2) that increased imports are threatening to cause serious injury;
   
• reversed the Panel’s finding, in paragraph 8.2(9) of the Panel Report, that the United States did not violate its obligations under Articles 2 and 4 of the Agreement on Safeguards by exempting Canada and Mexico from the line pipe measure;
   
• modified the Panel’s finding, in paragraph 8.2(1)) of the Panel Report, that the United States did not violate its obligations under Articles I, XIII:1 and XIX of GATT 1994 by exempting Canada and Mexico from the line pipe measures, declaring it moot and as having no legal effect;
   
• upheld the Panel’s finding, in paragraph 8.1(4) of the Panel Report, that the United States acted inconsistently with its obligation under Article 4.2(b) of the Agreement on Safeguards by failing to establish a causal link between the increased imports and the serious injury or threat thereof;
   
• upheld the Panel’s finding, in paragraph 7.81 of the Panel Report, that the United States was not required by Article 5.1, first sentence, of the Agreement on Safeguards to demonstrate, at the time of imposition, that the line pipe measure was necessary to prevent or remedy serious injury and to facilitate adjustment;
   
• reversed the Panel’s finding, in paragraph 8.2(2) of the Panel Report, that Korea failed to make a prima facie case that the United States violated its obligation under Article 5.1, first sentence, of the Agreement on Safeguards, by imposing a measure that exceeds what is “necessary to prevent or remedy serious injury and to facilitate adjustment”, and finds that the United States applied the line pipe measure beyond the “extent necessary to prevent or remedy serious injury and to facilitate adjustment”.

On 8 March 2002, the DSB adopted the Appellate Body Report and the Panel Report, as modified by the Appellate Body Report.

Implementation Status of Adopted Reports

At the DSB meeting on 5 April 2002, the US expressed its intention to implement the DSB’s recommendations and indicated that it would enter into consultations with Korea to determine a reasonable period of time for implementation. At the DSB meeting on 17 April 2002, Korea expressed concern about the lack of any proposal from the US regarding a reasonable period of time for compliance. The US stated that they would be proposing a reasonable period of time as soon as possible. On 29 April 2002, Korea requested the DSB that the “reasonable period of time” be determined by binding arbitration pursuant to Article 21.3(c) of the DSU. On 13 May 2002, Korea requested the Director-General to appoint an arbitrator. On 23 May 2002, the Director-General appointed an arbitrator. The issuance of the award was scheduled for 12 July 2002. By joint letter of 12 July 2002, the parties requested the Arbitrator to delay the issuance of the award until 22 July 2002 in order to allow time for additional bilateral negotiations between the parties. The arbitrator acceded to the request. Additional joint requests for delay were received on 19 and 22 July 2002, wherein the parties requested that the award, pursuant to Article 21.3(c) of the DSU, be delayed until 24 July 2002 and 26 July 2002, respectively. The Arbitrator agreed also to these additional requests. By letters dated 24 July 2002, the parties informed the Arbitrator that they had reached agreement on the reasonable period of time for compliance in this matter. Accordingly, the Arbitrator did not issue his award and, instead, issued a Report setting out the procedural history of this arbitration.

At the DSB meeting on 18 March 2003, the US informed that its safeguard measure on line pipe from Korea had been terminated on 1 March 2003.

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