Industry adjustment plan

Under Section 201 the domestic industry seeking relief is not required, but is strongly encouraged, to submit an industry adjustment plan detailing how the industry intends to adjust to import competition. While this suggests discretion, failure to submit a plan could compromise the effort and few would consider pursing Section 201 import relief without preparing some sort of adjustment proposal. Under the statute, a formal plan should be submitted to the Commission and the United States Trade Representative at the time of the petition filing, or at any time up to 120 days after the date of the filing of the petition. There is some opportunity for the industry to consult with the United States Trade Representative on its proposal, particularly as it relates to United States international obligations.

Whether or not the industry submits an adjustment plan, the Commission is likely to inquire about adjustment efforts through the questionnaire process. Moreover, if the Commission finds in the affirmative on the issue of serious injury, any entity representative of the industry may submit to the Commission commitments regarding actions such entities intend to take to facilitate positive adjustment to import competition. All of these proposals and commitments will be factored into the Commission's separate recommendations on an appropriate remedy and the President's decision to impose a remedy.

Commission proceedings, remedy recommendations

The Commission must submit a report to the President containing its findings on injury and recommendations on relief for the domestic industry no later than 180 days after the date on which the petition was filed. This gives the Commission 30-60 days to consider the issue of relief after making its injury determinations (depending on whether the Commission considered the case 'complex' and extended the injury decision deadline to 150 days). This means yet another hearing at the Commission, with submissions and testimony offered by parties in favour and in opposition to the action. The purpose of the proceeding is to arrive at recommendations for relief that provide 'greater economic and social benefits than costs'.

In crafting the Commission's remedy recommendations, only those Commissioners who voted in the affirmative on injury can propose recommendations. As a result, there is a strong incentive for Commissioners who would otherwise find no injury to find injury in cases where a final affirmative determination is assured (i.e. cases split 3-3 or better). This allows those Commissioners to play some role in the remedy phase. Commissioners are authorized to recommend a number of different relief actions, including: (1) an increase in, or the imposition of, any duty on the imported article; (2) a tariff rate quota on the article; (3) a modification or imposition of any quantitative restriction on the importation of the article into the United States; (4) one or more appropriate adjustment measures, including the provision of trade adjustment assistance (effectively domestic support subsidies for firms and employees); or (5) any combination of the first four actions described. In addition to these recommendations, the Commission may also recommend that the President initiate international negotiations to address the underlying cause of the increase in imports of the article or otherwise to alleviate the injury or threat. It may also recommend any other action otherwise authorized under law that is likely to facilitate positive adjustment to import competition. While Commissioners will vote on a final recommended remedy, there is no requirement that the recommendation receive unanimous or even majority support among the Commissioners before being sent to the President. Indeed, multiple recommendations, representing the views of different Commissioners, may be included in the final report sent to the President.

Presidential determination and remedy implementation

After receiving the Commission's report, the President is tasked with taking all appropriate actions within his power to facilitate the efforts of the domestic industry to make a positive adjustment to import competition. His powers are entirely discretionary, however, and it is at this point in the process that all the political pressures surrounding the issue come to the forefront. To the extent that parties with an interest in the investigation have invested time and resources in convincing political power bases within the United States Government of their positions (e.g. Congress or relevant Executive Branch agencies), these forces will play out in the remedy decision. Lawmakers will lobby the White House and an interagency body representing various interests within the Executive Branch, headed by the United States Trade Representative, will debate the merits of the case.

Ultimately, the President makes the final decision on relief. In doing so, he will take into account the positions of various lawmakers, the findings of his own interagency debate, and also the findings and recommendations of the Commission. Like the recommendations of the Commission, his decision is to be based upon implementing relief that provides greater economic and social benefits than costs, with a host of additional, related factors to be weighed. As specified by statute, these additional factors include: (1) the adjustment efforts made and to be implemented by the domestic industry; (2) the probable effectiveness of any import relief actions to facilitate positive industry adjustment; (3) other factors related to the national economic interest of the United States; (4) the extent to which there is a diversion of foreign exports to the United States marked by reason of foreign restraints; (5) the potential circumvention of any import action taken; and (6) the national security interests of the United States. All actions within the realm of recommendation by the Commission are at his disposal.

Under the statute, the President shall take action in response to an affirmative Commission report within 60 days of its receipt. Underscoring the depth of the President's discretion, however, the 60-day deadline has not proven to be a binding requirement. Notwithstanding the explicit direction of the statute, the President has delayed decisions in response to an affirmative Commission report for well beyond the 60-day period. For example, in a recent Section 201 action on carbon steel wire rod, the Clinton Administration received the report of the Commission in July 1999, yet the President did not act to impose import relief until February 2000. The timing of the action was as much political as it was anything else, intended to capitalize on prevailing political winds.

It is important to stress that it is of little or no use to challenge the President through United States courts on the issue of delay, as litigation might only antagonize rather than benefit the situation. The President must still issue his decision, and a court challenge is unlikely to create a more favourable result. Once a decision is made to take action, the President will publish his decision in the Federal Register. On the day that action is taken, the White House will also transmit to Congress a document describing the reasons for taking the action. If the President's action is different from the Commission recommendations, including a decision to take no action, the document shall set forth the reasons for the difference. Congress, in turn, may pass a joint resolution demanding implementation of the Commission-recommended relief within the 90-day period beginning on the date on which the document setting forth the reasons for the President's actions was transmitted to Congress.

Scope of relief and limitations

NAFTA exception

For purposes of its investigation, the Commission is bound by United States statute instituted as a result of the North American Free Trade Agreement (NAFTA) which requires a separate injury analysis with respect to articles imported from Mexico and Canada. Under this separate analysis, the Commission must determine whether imports from Mexico or Canada, by themselves, result in serious injury to the domestic industry. Only if the Commission investigation results in an affirmative serious injury finding (or threat of serious injury in the case of Mexico) on this point may a trade remedy be applied against imports from Mexico or Canada.

The provision is the source of great controversy as it allows the Commission to aggregate imports from Mexico and Canada with other imports as part of its overall analysis of serious injury to the domestic industry under Section 201, then carves out an exception with respect to the two countries. WTO has found the provision inconsistent with United States international obligations, and particularly the most favoured nation principle. Treatment under the provision is necessarily unequal. The Commission's most recent attempt to respond to the WTO finding was to qualify its injury analysis by determining whether increased imports, except for those imports from Mexico and Canada, are a source of serious injury or threat thereof. The Appellate Body determined, however, that without an examination of the injurious effects of imports from Mexico and Canada, such a finding would not satisfy the causation standard.

Other limitations on scope and duration of relief

Import relief under Section 201 is not without end, and there are a number of limitations placed on the scope and duration involved. With respect to scope, import relief should be available only to the extent necessary to prevent or remedy serious injury. This limitation ends up being a major point of debate during the remedy proceedings at the Commission and again once the Commission's report is in the hands of the President. Beyond this basic principle, no action may be taken which would increase a rate of duty to more than 50% ad valorem above the rate existing at the time the action is taken.

Finally, any quantitative restriction imposed shall permit the importation of a quantity or value of the article which is not less than the average quantity of such article imported into the United States in the most recent three years that are representative of imports of such article and for which data are available, unless the President finds that the importation of a different quantity or value is clearly justified in order to prevent or remedy the serious injury. Any relief effective for a period of more than one year is to be phased down at regular intervals during the period in which the action is in effect.

Regarding duration, no action taken by the President shall exceed four unless it is determined that the action continues to be necessary to prevent or remedy serious injury and there is evidence that the domestic industry is making a positive adjustment to import competition. Such a decision takes place within the context of an extension investigation conducted by the Commission (discussed later in this chapter). In the aggregate, however, the effective period of any action taken by the President under Section 201 may not last longer than eight years.

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