Schedule and procedural matters

Normally, the Commission must make its injury determination within 120 days of receipt of a petition or request. If the Commission determines that an investigation is extraordinarily complicated, however, it may extend the deadline up to 30 additional days.

At the beginning of this period, the Commission drafts questionnaires to issue to relevant parties, whether they are domestic producers, foreign producers, exporters, importers or purchasers of the like or directly competitive article at issue. The process is not unlike that seen in AD and CVD investigations, including the opportunity for interested parties to comment on the draft questionnaires before they are distributed. Questionnaire responses often form the core of the Commission's analysis, along with the submissions and testimony of the parties involved in the proceeding.

Upon initiation, the Commission will schedule a hearing for interested parties to present testimony, typically within three months of initiation. Again, the process is not unlike that involved in AD and CVD cases. Questionnaire responses are due before the hearing date and the Commission staff will issue a pre-hearing staff report covering the data collected and research conducted by the staff. The Commission will receive pre-hearing submissions from the interested parties and the Commissioners and Commission staff will appear at the hearing to hear testimony and ask questions of the parties appearing before them. Post-hearing submissions are also made.

All submissions made to the Commission, including the original petition, are eligible for confidential treatment under an administrative protective order (APO).

A final point of similarity is that, as in AD and CVD investigations, a tie vote among the Commissioners on the issue of injury is the same as an affirmative finding of injury.

Analytical framework and criteria for determining serious injury or threat thereof

As outlined earlier, Section 201 directs the Commission to conduct an investigation to determine whether an article is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to the domestic industry producing an article like or directly competitive with the imported article. Each term in this provision has a distinct meaning under United States statute, with important ties to and potential implications under Article XIX and the WTO Safeguards Agreement.

Increased imports

The first prerequisite under Section 201 is the existence of increased imports. This same requirement is found in Article XIX and is repeated again in the WTO Safeguards Agreement. Under the United States statute or international rules, the increase in imports may be either in absolute terms or relative to domestic production. Less defined is the period over which increased imports are found to exist and the amount of increase required to meet the standard. A five-year window has been the traditional period of investigation for the Commission, although it has made clear that it has the discretion to consider longer or shorter periods as it deems appropriate. Moreover, it has taken the position that no minimum quantity of increase is required. A simple increase is sufficient. WTO has begun to step in to help better define 'increased imports', particularly with respect to the kind of trends analysis that is acceptable for showing an increase.

Domestic industry and like product

The Commission has to set the scope of its investigation, which is shaped by the nature of the product produced by the allegedly injured domestic industry. Section 201 defines 'domestic industry' as that industry making articles that are 'like' or 'directly competitive' with the imported article. The language is consistent with Article XIX and the WTO Safeguards Agreement, which have identical definitions. The concept of 'like' products is borrowed from AD and CVD practice and essentially means identical articles, but the term 'directly competitive' is unique to safeguards legislation and suggests a more flexible definition. The Commission has used a definition of 'substantially equivalent for commercial purposes', meaning 'adapted to the same uses' and 'essentially interchangeable'. However, United States statutory language also defines 'directly competitive' to potentially encompass products at different stages of processing. This is an important consideration since it theoretically allows the Commission to cobble together an 'industry' from unrelated segments of a production chain.

To illustrate, a producer of semifinished steel might be considered part of the industry producing finished steel in an action against imports of a finished steel product. In reaching such a finding, the Commission could substantially alter the analysis and outcome of a Section 201 investigation depending upon the circumstances.

Serious injury

'Serious injury' is defined by Section 201 and the WTO Safeguards Agreement as a significant overall impairment in the position of the domestic industry. This is considered to be higher than the 'material injury' standard under United States AD and CVD law. It is noteworthy that in recent years, however, the Commission appears to have recalculated the standard depending on the political climate and the make-up of the Commission. For example, in the 1990s the United States carbon steel wire rod industry filed successive AD and CVD petitions only to be turned away by the Commission, which found no material injury or threat thereof by reason of imports. Nonetheless, in a somewhat remarkable turnaround, the Commission found serious injury by reason of imports in the context of a Section 201 case following the AD and CVD actions. At a minimum, the wire rod cases illustrate that the calculus of serious injury (and also causation) is not always very precise.

There are two prongs to the injury analysis, one focused on current serious injury and the other focused on threat of serious injury (i.e. injury which is 'clearly imminent'). A finding under either prong is sufficient for purposes of an action. In making its determinations, the Commission will consider all economic factors that it deems relevant. With respect to current injury, the Commission is directed to consider the following, non-exclusive set of factors: (1) the significant idling of productive facilities in the domestic industry; (2) the inability of a significant number of firms to carry out domestic production operations at a reasonable level of profit; and (3) significant unemployment or underemployment.

Regarding threat of serious injury, another non-exclusive set of factors is considered, including: (1) a decline in sales or market share, a higher and growing inventory (whether maintained by domestic producers, importers, wholesalers or retailers), and a downward trend in production, profits, wages, productivity, or employment (or increasing underemployment) in the domestic industry; (2) the extent to which firms in the domestic industry are unable to generate adequate capital to finance the modernization of their domestic plants and equipment, or are unable to maintain existing levels of expenditures for research and development; and (3) the extent to which the United States market is the focal point for the diversion of exports of the article concerned by reason of restraints on exports of such article to, or on imports of such article into, third country markets.

Causation

For an industry to achieve import relief under Section 201, imports have to be a 'substantial cause' of the industry's serious injury or threat thereof. United States statute defines 'substantial cause' as one that is important and not less than any other cause. The interplay between this language and the provisions of Article XIX and the WTO Safeguards Agreement is a source of some controversy and confusion. Article XIX and the Agreement merely state that imports must cause or threaten to cause serious injury. In recent dispute settlement cases, WTO panels and the Appellate Body have interpreted the Agreement language to require the demonstration of 'a genuine and substantial relationship of cause and effect' between imports and the injury suffered by the industry. This somewhat nebulous standard has been used to strike down Commission causation methodology and the 'substantial cause' standard.

The WTO rulings are based primarily on a requirement of non-attribution. That is, the competent authorities administering safeguard actions must ensure that other causes of injury are isolated and do not infect the analysis of injury caused by imports. According to the WTO Appellate Body, the 'substantial cause' standard, by weighing the relative causal importance of each factor of injury, does not meet the 'genuine and substantial relationship' standard. The Appellate Body has specified that the Commission must illuminate the process by which it has separated causes, examined each causal factor individually, and ensured that independent causes do not infect the injury cased by imports. Part of this process includes examining all relevant factors of injury raised during the course of the investigation. The battle over causation is probably far from over and the Commission as well as other national authorities have had a difficult time meeting the causation standard, particularly the non-attribution requirement.

Unforeseen developments

The issue of unforeseen developments is not addressed under Section 201, but is an important element of Article XIX and the WTO Safeguards Agreement. The WTO Appellate Body has also reaffirmed the requirement that competent authorities administering safeguard actions must demonstrate, as a matter of fact, that serious injury to a domestic industry by reason of imports was the result of unforeseen developments. Failure to do so compromises the action, and at least one United States action has been declared invalid as a result. Under the circumstances, industries in long-term decline through periods of lower and higher imports, for example, may not be eligible for an action.

Limitations on investigations

Except for good cause shown, the Commission will decline to conduct an investigation under Section 201 with respect to the same subject matter as a previous investigation, unless one year has elapsed since the time of the last investigation. Moreover, no investigation will be conducted where the domestic industry in question received import relief as the result of a prior action under Section 201; the moratorium on future investigations is measured roughly by the duration of the previous action.

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures