US-Tires Panel Report

8/6/2019 US-Tires Panel Report

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UNITED STATES – MEASURES AFFECTING IMPORTS OF CERTAIN PASSENGER

VEHICLE AND LIGHT TRUCK TYRES FROM CHINA

Para VII B: WAS THE USITC ENTITLED TO FIND THAT IMPORTS WERE

“INCREASING RAPIDLY” IN ACCORDANCE WITH PARAGRAPH 16 OF THE

PROTOCOL

Introduction

Regarding to the findings of the United States on whether imports from China were

“increasing rapidly” China claims that the US failed to evaluate this properly in accordance

with Paragraph 16.4 of the Protocol of Accession to the WTO of China. China argues that the

most recent period which has to be evaluated is 2008 and the first quarter of 2009, where a

decline in the rate of increase can be found. Therefore imports from China were no longer

“increasing rapidly”.

Arguments of the Parties

China

1. China argues that due to the use of present continuing tense in Paragraph 16.1 and

16.4 of the protocol the term “increasing” refers to import increases in the most recent

time, as in a matter of grammar, present continuous tense requires a happening at the

very moment, near future or most recent past. According to China this makes a

distinction between imports which are “increasing rapidly” and imports which

“increased rapidly” necessary. China argues that this approach is consistent to that of the Appellate Body when considering Article 4.2 in the Safeguards Agreement in US

– Steel Safeguards.

2. According to Chinas first written submission, “rapidly” indicates a significant or steep

increase or a recent surge, in the case at hand in imports. The distinction to merely

increasing imports has according to China be made based on the rate at which the

increase is occurring. In this context China argues that “increasing rapidly” cannot

occur if the past increase was rapid while the present one is modest. China argues that

imports must accelerate or have to continue at a high rate in the light of the preceding

period.

3. China argues that in the most recent past (2007/2008) the imports only increased by

10.8 per cent in comparison to the previous two years with an increase of 53.7 per

cent. Therefore in the most recent past the imports did not increase rapidly anymore.

China emphasizes this through the following table:

Average Annual

Increase over 2004

– 2007 Period

Annual Increase in

2007 Compared to

2006

Annual Increase in

2008 Compared to

2007

Quantity of Tires

(million tires) 9.0 M 14.5 M 4.5 M

Rate of absolute

increase 42.1%

53.7% 10.8%



Increase in Market

Share (%pts) 3.1% pt

4.7% pt 2.7% pt

4. China argues that the 10.8 per cent increase in 2008 is not itself rapid and therefore is

not a matter under the term “increasing rapidly” in the Protocol.

5. China claims that the findings of the USITC are insufficient as it did not pay enough

attention to the data of 2008 but only considered changes over the full period of time.1

6. China points out that “relative data” under the protocol refers to market share, which

means that imports must be seen in the context of total consumption rather than

imports relative to domestic production. Even though under Article 2.1 and Article 4.2

(a) of the Safeguards Agreement the consideration of imports relative to domestic

production makes sense for global safeguards, however there is no elaboration of the

meaning of “relative” data in the protocol. China points out that the USITC findings

are based on imports relative to domestic production rather than market share evenwhen Paragraph 16 of the Protocol places the focus on the latter.

7. China argues that by investigating the two years together the facts get blurred. The

relevant growth on market share took place from 2006 to 2007 (39 per cent) while the

growth decreased between 2007 and 2008 (22per cent).

8. China claims that the end-point-to end-point analysis the United States rely on is given

to much importance. According to China it is inappropriate under Paragraph 16 of the

Protocol. An end-point-to end-point analysis misapplies the relevance of the longer

period of time that has only been investigated to give a context to the happenings in

the most recent period of time.2

9. China argues that the USITC should have included data for the first quarter of 2009 in

the investigation period as those would have shown a sharp decline in subject imports

from China.

10.China claims that the refusal of the USITC to collect or consider the available interim

data “stands in stark contrast to its well-established and consistent practice of

collecting interim data in other cases”3 and is inconsistent with the USITC practice in

other Section 421 safeguard cases. In answer to the U.S. argument of applying a case-

by-case analysis China accuses that this procedure gives space to inconsistency and is

therefore “quite dangerous”4

11. China also rejects the contention by the USITC that due to the lack of information on

the relative share of imports of China the data would have been insufficient as they

still would have given some issues which should be considered.

United States

12.The United States claims that China seeks the Panel to use an overly restrictive view

of how recent increases in imports should be defined in order to comply with the

1 Considering Argentina – Footwear (EC), neither the Panel nor the Appellate Bodyfound”increased imports” according to the Safeguards Agreement due to a decline of

imports in the end of the period of time considered.2 See Chinas Second Written Submission, para. 105.3 Chinas First Written Submission, para. 139.4 Original Panel Report WT/DS399/R, para. 7.55.



protocol. In the United States point of view China urges only to consider very recent

increases in imports based on a grammatical distinction.

13.The United States claims that there is no meaningful distinction between the language

chosen in the Safeguards Agreement and the Protocol which would indicate an

investigation of a more recent period of time under an investigation under the Protocolthan under the Safeguard Agreements.

14.According to the United States rapid means: “ progressing quickly, developed or

completed within a short time.” The United States therefore argues that under the

investigation of the USITC data, the reasonable conclusion would be that the growth

of Chinese imports had progressed quickly and had been developed within a short

period of time.

15.The United States argues that Paragraph 16 does not define the nature of a “rapid

increase” which has to be met. Therefore it supposes that China has to impose a higher

standard on the term “increasing rapidly” than is warranted by the text.

16.According to the United States the Protocol does not prelude a competent authority

from finding imports to be increasing rapidly only because the increase-rate of imports

lessens at the end of the investigated period. Additionally the Protocol does not

consider it necessary to find the highest growth rate in the end of the investigated

period.

17.The United States emphasize that the Appellate Body has explained in US – Lamb that

in context of the Safeguards Agreement the competent authorities should not consider

data from the most recent past in isolation from data pertaining to the entire period of

investigation.5

18.The United States claim that the Protocol requires the competent authority to find a

rapid increase in imports on an absolute or relative basis during the period of question.

19.China claims that imports of China were declining in 2008. According to the United

States this is a factually mistaken assertion, which it underlines with the following

chart:

5 See: Appellate Body Report US – Lamb paras. 137-138.



20.

21.

22.The United States points out that, Chinas arguments are based on the rate of increase

in volumes of Chinese imports rather than actual volumes or market shares of subjects

of import which is increasing parallel to the quantity of imports shown above.

23.According to the United States in 2008 the absolute volume of imports was 10.8 per

cent higher than 2007; 70 per cent higher than in 2006; 121 per cent higher than in

2005; and 215,5 per cent higher than in 2004. According to the United States this stilllines out a rapid increase of Chinese imports of subject tires.

24.The United States argues that both the market share of the subject imports and the

ratio of subject imports to U.S. production rose considerably throughout the

investigated period of time. Therefore the USITC had a reasonable basis for finding

that the increase 2008 continued to be large, rapid and significant.



25.The United States argues that this chart shows that the highest annual increase in the

ratio of subject imports to US production was in 2007, followed by the second highest

increase in 2008.

26.According to the United States its data shows that the value of subject imports rose

even more rapidly than the growth of market share, increasing by 295.5 per cent

between 2004 and 2008. The United States concludes therefore that the subject

imports increased, both absolutely and relatively throughout the period by significant

amounts in each year and they were at their highest levels in the end of the period in

2008.

27.The United States points out that the Protocol does not require the inclusion of the

most recently concluded data and the investigated time-period of the USITC of five

years ended less than four month before the beginning of the investigation satisfies the

standards set by the Protocol. The United States further explains that:

“…the ITC has an established practice in investigations under Section 421 of

collecting, at a minimum, five full years of data, plus for any interim period that can

reasonably be collected, when conducting its investigations. The ITC decides on a

case-by-case basis, whether to attempt to collect data for the “interim period”, which

is the most recently completed period of less than a full calendar year.6

28.The United States argues further that the USITC is less likely considering data for a

particular quarter if a relatively small amount of time has passed between the end of

the time-period in question and the beginning of investigations, explicitly if the data isunlikely to provide meaningful and exhaustive information. The United States argues

6 United States‘ First Written Submission para. 132.



that even in consideration of the interim data, the absent data to assess whether the

imports were increasing on a relative basis would not have been possible for the

USITC. Based on this, the United States argues that the necessary finding of whether

the imports “increased rapidly could not have been made.

29.The United States claims that whether the terms of increase from 2007 to 2008 alone

are considered or the increase in the last full two years, or the whole examined period,

the increases were large, rapid and continuing at the end of the period.

Evaluation by the Panel

30.The Panel will now begin its assessment of China’s and the United States’ arguments

regarding the interpretation of the phrase “increasing rapidly”, with an eye on the data

concerning the volume of subject and non-subject imports in absolute terms. Although

not required under the Protocol, we will continue with considering the situation in

relation to the relative data for the sake of completeness. This report also considersissues regarding: China’s argument that USITC improperly relied on an end-point-to-

end-point analysis of imports; China’s argument that the USITC improperly relied on

increases in value rather than increases in volume; China’s argument that the USITC

should have taken account of the fact that subject imports began from a low base; and

China’s argument that the USITC should have collected data for the first quarter of

2009.

(i) Review of import data

31. The following tables show a) the absolute increase in the volume of subject imports ineach year relevant for the present case; b) the percentage increase in subject imports

year on year between 2005 and 2008.

a)

Year 2004 2005 2006 2007 2008

Quantity of subject

imports (1,000 tyres)

14,575 20,790 27,005 41,503 45,975

b)

Year 2004 2005 2006 2007 2008

Increase in subject

imports (percentage

points)

- 42.7 29.9 53.7 10.8

32.The Panel notices absolute increases in subject imports in all years relevant for the

present case, which resulted in an overall increase of 31 million units, or 215.5 per cent, in subject imports from China at the end of 2008, which, together with 2007,

were also the years with the greatest increase.



33.The absolute increases in volume of subject imports from China over the relevant

period is also depicted in the graph provided at point 19 of this Report.

34.We thus see no reason to disagree, prima facie, with the USITC conclusions drawn

based on the above data, especially regarding the following:

Whether viewed in absolute or relative terms, and whether viewed in terms of the increase

from 2007 to 2008 alone or the increase in the last two full years (or even the last three

years), the increases were large, rapid, and continuing at the end of the period – and from an

increasingly large base.7

We will, nevertheless, proceed to an in-depth analysis of the meaning of the phrase

“increasing rapidly” in the light of China’s and United States’ arguments.

(ii) The meaning of the phrase “increasing rapidly”

35.As mentioned in point 1. of this Report, China maintains that the use of present

continuous tense in the phrasing of paragraphs 16.1 and 16.4 of the Protocol (“are

being imported”; “are increasing”) implies an obligation to focus on the most recent

past. In assessing this argument, the Panel will recall the case of Argentina – Footwear

(EC), where the Appellate Body dealt with a similar issue of interpretation of the use

of the present continuous tense and ruled that it only means the “increase in imports

must have been sudden and recent”. Therefore, extending the interpretation of the use

of present continuous tense for the most recent past would be excessive considering

the Panel’s previous findings, as the phrase in Paragraph 16.1 of the Protocol, “are

being imported” is essentially the same as the phrase “is being imported” in article 2.1of the Safeguards Agreement.

36.Similarly, in the US – Line Pipe case, the Panel defined the word “recent” (in relation

to “is being imported”) as “not long past; that happened, appeared, began to exist or

existed lately”. This definition does not imply any need to focus exclusively on the

most recent timeframe; rather, it provides for a need for the analysis of both

circumstances of the most recent past taken and those which preceded it. The term

“lately” does not limit the Panel in any way to focus its analysis on a certain period of

time; moreover, in doing so the Panel would act upon an excessive interpretation of

the Statute, as the previous case-law proves.

37. These findings point to the fact that the use of the present continuous tense in the

phrasing of Paragraphs 16.1 and 16.4 of the Protocol do not impose an obligation to

the Panel to focus on the most recent past as maintained in China’s arguments.

38.We would also like to clear the inconsistency pointed by China as to the usage of

different grammatical tenses in the text of Paragraph 16 of the Protocol (the difference

between imports “increasing rapidly” and which “increased rapidly” in Paragraphs

16.1 and 16.4). In reality, the phrase “increased rapidly” can only seen as past tense if

taken out of the context, as the initial text in Paragraph 16.1 says “are being

7 USITC Report, pages 11-12



imported… in such increased quantities”. Therefore, present continuous tense is used

for all relevant parts of the Paragraph in a consistent manner.

39.We will now look into the substance of “increasing rapidly” and what exactly is

implied by the word “rapid”. As stated before in point 19 and 31 of the present Report,

China’s imports in absolute terms have been growing constantly in the relevant period.

We would like to remind the parties that under the Protocol the rapid increase need

only be on an absolute or relative basis, therefore a rapid increase in absolute basis

will suffice to elucidate the question.

China maintains that a decrease in the rate of increase of imports must be treated as a

sign that imports are not increasing rapidly. The adverb “rapidly” is defined as “with

great speed, swiftly”8. As stated in point 3 of this Report, China maintains that in years

2007/2008 the increase of 10.8% does not justify an assessment as “rapid”, reported

to the previous year’s increase of 53.7%. However, the above definition sets no

requirements in terms of a minimal rate for the increase, neither that any fluctuations

in this rate should lead to the conclusion that the increase is no longer “rapid”.

Therefore, a raise of 10.8% in addition to the increases registered in the previous years

shows a clear pattern of rapidly increasing imports. Moreover, the Panel disagrees that

an increase of 10% does not constitute in itself a substantial increase, especially in the

light of the Global Financial Crisis and its effects on the parties.

The Panel thus agrees with the USITC findings that imports were “increasing rapidly”

during the period and continued to do so at the end of 2008.

(iii) Relative increase in imports

40.Although not formally required under the Protocol, and the existence of a rapid

increase has been already proven due to a increase of imports in absolute terms, the

Panel decided to nevertheless give an analysis of whether a relative increase in imports

in order to fully address the parties’ arguments.

41.The Panel considers China’s argument outlined in point 6 of this Report, namely the

missing definition for what is a “relative” increase, and the need to include the market

share as an indicator of such. We accept the suggestion and maintain that given thelack of definition in the Protocol to the “increasing rapidly… relatively”, both a)

market shares and b) subject imports as a percentage of domestic production can serve

as relevant indicators.

The following graphs shall summarize the data regarding the two indicators, as

follows:

a) Market share

US imports

from

2004 2005 2006 2007 2008

8 The Compact Edition of the Oxford English Dictionary, Volume I (Oxford University Press, 1971)



China (%) 4.7 6.8 9.3 14.0 16.7

All other

sources (%)

31.9 33.6 34.5 33.4 33.7

42.This graph points to the fact that from 2004 to 2008, the share of subject imports from

China has increased in a constant and rapid manner by 12%. Moreover, the increase

has been systemic, while the share of other sources has been relatively constant over

the relevant timeframe.

43. b) Subject imports as a percentage of domestic production

Year 2004 2005 2006 2007 2008

Subjectimports as %

of domestic

production

6.7 10.0 14.6 23.0 28.7

44. Similarly to the conclusions from table a), subject imports as a percentage of domestic

production have been constantly and rapidly increasing over the relevant period of

time. Table b) shows an increase of 22% from 2004 to 2008. Clearly, both in absolute

and relative terms the Panel must find that the subject imports from China have been

increasing rapidly from 2004 to 2008.

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