[SAA for NAFTA Chapter 8]
NORTH AMERICAN FREE TRADE AGREEMENT, STATEMENT OF
ADMINISTRATIVE ACTION, CHAPTER EIGHT: EMERGENCY ACTION, H.R.
DOC. NO. 159, 103D CONG., 1ST SESS. 109-111 (NOVEMBER 4, 1993)
Chapter Eight sets out the procedures and remedies available to domestic
industries that have sustained, or are threatened by, serious economic injury due to
increased imports. Special safeguards provisions, which apply to textile and agricultural
products, are provided for elsewhere in the NAFTA.
The Administration does not anticipate that the NAFTA will result in injurious
increases in imports from either Mexico or Canada. Nevertheless, the safeguards
provisions of the NAFTA, which have been supplemented by a written understanding
between the three governments on “import surges,” will assure that relief is available
where needed.
Chapter Eight covers two different situations – actions that can be taken against
increased imports from a NAFTA country or countries due to injury caused by the phaseout of tariffs under the NAFTA (“bilateral” actions) and those that can be taken against
imports from all sources (“global” actions). In several respects, the chapter tracks the
emergency action provisions of Chapter Eleven of the CFTA [Canada–United States
Free Trade Agreement] for both bilateral and global actions, while adding Mexico to, and
making certain changes in, the CFTA rules.
Chapter Eight goes beyond the CFTA, however, in significant respects. The
Chapter establishes procedural rules similar to those in current U.S. law and practice that
each government will be required to follow in conducting investigations leading to
bilateral and global safeguard actions against goods from other NAFTA countries. These
rules require the publication of notice of an investigation and its scope, the holding of a
public hearing, and publication of findings and the basis for those findings.
Chapter Eight also permits the U.S. and Mexico to take bilateral safeguard actions
against each other’s imports when increased imports cause or threaten serious injury –
that is, before serious injury occurs. Under the CFTA bilateral safeguards rules, which
are carried forward into the NAFTA for U.S. – Canada trade, the U.S. and Canada may
take safeguards actions against imports from the other country only where there is a
finding of actual injury.
1.
Bilateral Actions
Article 801, together with Annex 801.1, permits each party to take bilateral
safeguard actions during specified “transition periods” – that is, during the period in
which duties on NAFTA – origin goods are being phased out. Article 801 applies solely
with respect to goods traded with Mexico; the bilateral safeguard provisions of the CFTA
are incorporated into the NAFTA through Annex 801.1 and thus will continue to apply
between the U.S. and Canada during the transition period for the phase-out of duties
between the U.S. and Canada.
More specifically, Article 801 permits the U.S. (or Mexico, in the case of
American goods) to take a bilateral action against goods from Mexico during the
transition period if, as a result of the reduction or elimination of a duty under the
Agreement, a good originating in Mexico is being imported into the U.S. in such
increased quantities, in absolute terms, and under such conditions as to constitute a
substantial cause of serious injury, or threat thereof, to a domestic industry. If injury or
threat is found, the U.S. may suspend any further reduction in duties on that good, or may
increase the rate of duty on the good to a level not to exceed the lesser of the current
most-favored-nation (MFN) rate of duty or the MFN-applied rate of duty in effect
immediately preceding the entry into force of the Agreement.
In addition to allowing for safeguards actions based on a “threat” of serious injury
in the case of imports from Mexico, Article 801 establishes a longer period of relief than
that under the CFTA. It permits an additional, fourth year of relief action in the case of
those import-sensitive goods from Mexico falling into the NAFTA “C+” tariff elimination
category. It also allows for greater flexibility in the phase-out of duties on goods subject
to a bilateral action during the portion of the transition period that remains after the action
is terminated.
As is the case under the CFTA, a government taking action under the NAFTA
bilateral safeguards mechanism may re-impose tariffs up to the MFN rate of duty for the
product in question. The NAFTA also continues the CFTA rule allowing a government
adversely affected by a safeguard action to impose offsetting tariff increases of its own in
the absence of agreement between the two governments on trade compensation.
2.
Global Safeguards
As is the case under the CFTA, the NAFTA global safeguards provision maintains
each country’s right to take remedial action against imports from all sources under the
GATT Article XIX escape clause, including those from free-trade partners. At the same
time, the NAFTA provides that imports from other NAFTA countries are to be excluded
when they are not a significant part of the problem. (GATT Article XIX allows a GATT
contracting party to take emergency action and “escape” from its obligations with respect
to a product when the party finds that a product is being imported into its territory in such
increased quantities and under such conditions as to cause or threaten serious injury to
domestic producers of a like or directly competitive product.)
Article 802 provides that where a NAFTA country takes a global safeguard action –
that is, an emergency action directed at goods from all countries – the country must
exclude goods from other NAFTA countries unless:
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imports from a NAFTA country, considered individually, account for a substantial
share of total imports, and
imports from a NAFTA country, considered individually or, in exceptional
circumstances, imports from NAFTA countries considered collectively, contribute
importantly to the serious injury or threat of such injury.
Article 802 provides guidance as to when imports from a NAFTA country account for a
“substantial share” of total imports and when imports from a NAFTA country or countries
“contribute importantly” to serious injury or the threat of such injury. Under Article
802(2)(a), a country “normally” will not be considered to account for a substantial share
of total imports if it was not among the top five suppliers of the subject good.
Similarly, under Article 802(2)(b), imports from a NAFTA country or countries
“normally” will not be deemed to contribute importantly to serious injury, or threat, if the
growth rate of imports from the country or countries during the period in which the
injurious increase in imports occurred is appreciably lower than the growth rate of total
imports from all sources over the same period. The use of the word “normally”
recognizes the need for some flexibility in exercising this rule. There may be instances
in which a country not meeting one of these guidelines should be included in the
safeguards action, or the reverse.
3.
Procedural Requirements
Article 803 and Annex 803.3 set forth obligations regarding the administration of
emergency action proceedings. Each country is required to maintain equitable, timely,
transparent and effective procedures for emergency action proceedings. These
obligations provide for a level of administrative transparency and fairness in bilateral and
global safeguard investigations similar to that under current U.S. law and practice. In
addition, a September 14, 1993 understanding between the three NAFTA governments
concerning emergency action establishes a Working Group on Emergency Action and
provides for additional consultative procedures.
Each NAFTA country must entrust determinations of serious injury or threat to a
“competent investigating authority.” In the case of the U.S., this body will continue to be
the U.S. International Trade Commission (ITC). The competent investigating authority
must give detailed notice of its investigation, hold a public hearing, and gather and
consider information relating to certain economic factors relevant to the question of
injury and causation. Once its investigation is completed, the authority must publish a
report setting forth its findings and conclusions on all pertinent issues of law and fact.
Entities filing petitions for relief must furnish specified information (or best
estimates) in their petitions.
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