WTO DISPUTE SETTLEMENT- DS 399:
US-MEASURES AFFECTING IMPORTS
OF CERTAIN PASSENGER VEHICLE
AND LIGHT TRUCK TYRES FROM
CHINA
BY: Yue Lang, Kristin Isabelli and
Marko Lukic
International Trade Relations-March 6, 2013
History/Context
• The U.S. imposed additional duties on imports of
passenger vehicles, light truck tyres for three years in
September 2009-tyre and light truck industry had been
affected by the volume of Chinese imports into the US
• A petition was filed by the United Steel, Paper, Forestry,
Rubber, Manufacturing, Energy, Allied Industrial and
Service Workers International Union on April 20, 2009.
• Increased Rate-Union alleged imports were disrupted
market to domestic producers of like or competing
products
History/Context
• The petition was filed under section 421 of the Trade Act
of 1974, as amended (19 U.S.C. § 2451) Section 421
implemented transitional safeguard measures contained
in Section 16 of China’s Protocol of Accession to the WTO
• The US ITC started investigation in April 2009 and found
market disruption was because of the rapid increase of
imports-causing major injury to domestic industry
History/Context
ITC Investigatory Findings:
• The US ITC looked data from 2004-2008
• The US ITC compared earlier rates to 2008 data to
determine stress added to the industry
• ITC found that in OEM market in 2004 Chinese imports increased
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5.0-8% from 2004-2008
Domestic Industry lost significant market share from 2004-2008
USITC found that Chinese tyre imports played a major role in the
closing of Bridgestone Continental, Goodyear plants in 2006 and
2008
Closed Bridgestone and Goodyear tire facilities resulted in a loss of
30.1 million tyres in 2006
US ITC found that because of increasing imports caused
production capacity, net sales, wages, hours worked decreased
every year from 2004-2008
History/Context
• Prompted US to impose safeguard measures on imports
subject tyres citing Article 19.1 of the GATT 1994 and the
Agreement on Safeguard Measures
• The US imposed additional import duties on Chinese
imports for three years (Tyres Measure):
• First year: 35 % ad valorem
• Second year: 30% ad valorem
• Three year: 25% ad valorem
• The measure went into affect on September 26, 2009
Prior Proceedings
• 14 September 2009, China (Complainant) requested consultations with
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the United States (Respondent) regarding tariffs on certain vehicle and
light truck tyres from China –Third Party EU, Japan, Chinese Taipei,
Turkey and Vietnam
On 19 January 2010, The DSB established a panel at the request from
China
On 2 March 2010, the Director General created the panel
On 8 November 2010, the panel circulated its final report
On 13 December 2010, the panel report was circulated to Members
On 27 January 2011,China and the US requested the DSB to adopt a
draft decision extending the 60 day time frame citing Article 16.4 of the
DSU extending the time to 24 May 2011
On 24 May 2011, China notified the DSB of it’s intention to appeal the
decision to the Appellate Body
On 24 July 2011, the AB informed the DSU they would be unable to
circulate the report within 60 days and estimated the report be circulated
in September 2011
On 5 September 2011, the Final AB report was circulated to Members
Business and Political Context
• Financial Crisis in the US-In 2009, President Obama signs the
$787 billion stimulus package which will create 3.5 million jobs
for Americans within 2 years
• Chrysler and GM file for bankruptcy. GM closes 14 plants and
Chrysler joins with Fiat creating a partnership agreement
• According to The Department of Labor, 2.6 million jobs were
lost in 2008
• In Jan 2008 Unemployment rate: 5.0% (Seasonally adjusted)
• In December 2008 Unemployment rate: 7.3% (Seasonally
Adjusted)
• In Jan 2009 Unemployment rate: 7.8% (Seasonally Adjusted)
• In Dec 2009 Unemployment rate: 9.9& (Seasonally Adjusted)
• China retaliated by imposing duties on Chicken, nylon and
auto parts as part of an investigation on antidumping and
subsidies (US later asked for WTO panel to investigate)
WTO Agreement and Provisions Involved
• Agreement on Safeguard Measures
• Article 11 of the DSU: Function of the panel is DSB in discharging responsibilities to
assist the Function of Panels: assist the DSB in discharging its responsibilities. This
means the 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, and make such other findings as will
assist the DSB in making the recommendations or in giving the rulings provided for in
the covered agreements. Panels should consult regularly with the parties to the dispute
and give them adequate opportunity to develop a mutually satisfactory solution.
• Section 421 of the US Trade Act of 1974 (19 U.S.C. § 2451): Under Section 421 of
the US Trade Act of 1974, the Commission determines whether imports of a product
from China are being imported into the United States in such increased quantities or
under such conditions as to cause or threaten to cause market disruption to the
domestic producers of like or directly competitive products. If the Commission makes
an affirmative determination, it proposes a remedy. The Commission sends its report to
the President and the U.S. Trade Representative. The President makes the final
remedy decision.
WTO Agreement and Provisions Involved
GATT1994
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Article I:1- the transitional safeguard measure
was inconsistent as the United States did not
accord the same treatment that it grants to
passenger vehicle and light truck tyres originating
in other countries to like products originating in
China;
Article II- the transitional safeguard measure was
inconsistent as the tariffs consist of unjustified
modifications of US concessions on passenger
vehicle and light truck tyres under the GATT1994;
Article XIX and the Agreement on SafeguardsThe higher tariffs have not been properly justified
WTO Agreement and Provisions Involved
China’s Accession Protocol
• Article16.1&16.4-if imports are “in such increased
quantities” and were “increasing rapidly”, if imports is a
“significant cause” of material injury or threat thereof, and
if the domestic subjects are experiencing “market
disruption” or “material injury”;
• Article16.3-if the restrictions are being imposed beyond
the “extent necessary to prevent or remedy” any alleged
market disruption;
• Article16.6-if the restrictions are being imposed for a
period of time longer than “necessary to prevent or
remedy” any alleged market disruption.
Positions of the Main Parties China
• China appeals Panel’s findings
1. Imports were not “increasing rapidly”
2. Thus, was not a “significant cause” of material injury”
3. Paragraphs 16.1 and 16.4 of China’s Protocol
• Panel acted inconsistently within its duty to conduct an
objective assessment of the matter as required under
Article 11 of the DSU.
• Therefore, China requested that the AB reverse its
findings
Positions of the Main Parties-China
continued
• USITC assessment of import increases were conducted
between 2004-2008
• 2004-2008: 34% increase
• 2008: 10.8% increase
• Therefore, China believes that the USITC did not provide
a legitimate explanation of whether import increases were
“large, rapid and continuing”
Positions of the Main Parties-China
continued
• Causation
• Panel erred in interpreting the causation standard in Paragraph
16.4 of China’s Protocol.
• USITC failed to properly evaluate conditions of competition in the
U.S. market
• Other factors must have attributed to market injury
• No direct correlation between import increases and market injury
Positions of the Main Parties-China
continued
• Other possible causes of injury
1. The domestic industry’s business strategy to shift to higher-value
products
2. Decline in demand within the market
3. Non-subject imports
Positions of the Main Parties-United
States
• The Panel did not err in upholding the
USITC’s findings
• The panel did not act inconsistently with its
duty to conduct an objective assessment of
the matter.
Positions of the Main Parties-US
continued
• The U.S. argues that the USITC was not required to focus
its analysis on the most recent import increases
• Paragraph 16.4 of Protocol does not provide that an authority must
focus on import data for the “most recent” period.
• USITC and the Panel found that 2008 import data
indicates that import increases were “large, continuing
and rapid”.
• Panel did not err in finding that the USITC was not
required to focus its analysis on the rates of increase in
subject imports.
Positions of the Main Parties-US
continued
• Panel did not err in failing to require the USITC to assess
the rates of increase in imports in 2008 relative to rates of
increase in earlier periods.
• The protocol does not contain language suggesting that
the transitional safeguard mechanism was intended as an
“emergency action”, or that import increases must be the
result of “unforeseen developments”.
Positions of the Main Parties-US
continued
• Causation
• USITC properly established that rapidly increasing imports were “a
significant cause” of material injury
• Panel did not err in its interpretation of the term “a significant
cause”
• USITC properly assessed the conditions of competition in the U.S.
market.
• USITC was entitled to rely on the overall correlation between
import increases and injury factors
• USITC was properly ensured that injury caused by other factors
was not attributed to the injury caused by imports from China
Decision and Implementation
1.) Were imports “increasing rapidly? The Panel and AB upheld the
panel’s findings that the US ITC had correctly determined that imports of
Chinese tyres were increasing at a rapid pace and had met that “threshold”
as outlined in paragraph 16.1 and 16.4 of China’s Accession protocol.
2.) Was the US definition of “Contributes significantly” at odds with
the meaning as stipulated in Article 16.4 of China’s Accession
Protocol? The AB found that the US did define the term properly. The AB
found that the investigating authority can determine whether imports are a
“significant cause” of material injury if the body ensures no other factors
are to blame.
3.) Did the US fail to properly demonstrate that subject imports were a
“significant cause” of market disruption?
The AB and Panel determined that significant increases in imports must
occur in a short amount of time and must cause significant injury to the
domestic industry. The AB and Panel determined that the USITC was able
to prove this
Decision and Implementation
4.) Did the Panel error in reviewing the USITC’s causation
analysis? The AB agreed with the Panel’s review and that the
USITC did not error in its findings of analysis competition in US
tyre market. The AB also upheld the panel’s findings that the
USITC’s connection between rapidly increasing imports and
domestic industry injury were correct and China’s imports were
to blame for the material injury to the domestic market.
5.) Did the USITC incorrectly attribute injury to the domestic
industry? The AB upheld the panels decision that the USITC
had correctly attributed Chinese imports as the reason for injury
to the domestic industry not from other factors. The AB found
that the Panel had correctly analyzed the US industry’s business
strategy and the reasons for certain US plant closures. The AB
also upheld that the Panel correctly found China’s imports did
affect changes in demand.
Decision and Implementation
• The Panel and AB found that China failed to prove the
measure exceeded the ability to help the market
disruption caused by rapidly increasing imports contrary
to paragraph 16.3 and (ii) the measure exceeded the
period of time necessary to help fix the market disruption
under paragraph 16.6 of China’s Accession Protocol
Decision and Implementation
6.) Did the Panel act inconsistently within with its
duties under Article 11 of the DSU?
• The AB found that the panel did not act inconsistently
under Article 11 of the DSU when reviewing the USITC’s
data analysis as China had accused the Panel of doing:
• 1.) Totality of Evidence
• 2.) Balanced Assessment of Evidence
• 3.) Rationale and Reasoning in the US ITC Determination
• 4.) Consideration of Certain Arguments made by China
Decision and Implementation
• DSU: The Panel and Appellate Body found that the US’s
actions were not inconsistent with its WTO obligations in
implementing safeguard measures on light passenger
trucks and Chinese tyres for a period of three years
• Implementation: The Appellate Body had no
recommendations under Art 19.1 and the adoption of this
case occurred 5 October 2011-No other actions were
taken
Questions, Comments, Concerns
Do you think the decision was correct?