5.136 Regarding India's statement on the US shift to the HTS, the United States stated that it did develop statistical breakdowns to identify wool garments that prior to the HTS were based on a chief value determination. When the wool clothing category system was created, it was determined that imported clothing of fibres other than wool but containing greater than 17 per cent by value wool actually competed in the same market as domestically produced wool clothing, which for production data purposes had always been defined as 51 per cent or greater of wool by weight. When the United States adopted the Harmonized Tariff Schedule (HTS) in January 1989, this definition was retained in shifting from a chief value to a chief weight system by altering the definition for imported wool clothing to those containing 36 per cent or greater wool by weight. The 36 per cent determination was done for all wool clothing categories, not just woven wool shirts and blouses. The fibre content that prevailed in tailored clothing had the dominant influence on the conversion from the chief value concept to the chief weight concept. For the reasons outlined above, it was not valid to compare data across time periods containing these breaks in the continuity of the reported data, even with the caveats that India proclaimed.

G. Attribution to India

5.137 The United States argued that, having properly established both (a) the existence of serious damage or actual threat thereof, and (b) the causal relationship between such damage or threat by reason of total imports, the next step was for CITA to determine to which Member or Members the cause of serious damage or actual threat thereof could be attributed. There was no requirement under Article 6.4 of the ATC for the US to make a determination that India was the sole cause of the serious damage or actual threat thereof. Indeed, that finding would already have been established under Article 6.2 of the ATC before it would be possible to proceed to the analysis under Article 6.4. Rather, the United States was required to determine to which of various Members' imports to attribute the damage or threat. The United States rejected any interpretation that would suggest that the test in Article 6.2 of the ATC was integral to or folded into the test in Article 6.4 of the ATC. That would not be a legitimate reading of the text in accordance with principles of international law found in Article 31 of the Vienna Convention on the Law of Treaties.

5.138 The United States further argued that it had followed the requirements under Article 6.4 of the ATC in attributing the serious damage or actual threat thereof to India.²⁰ Article 6.4 of the ATC provided that, after a Member had determined that serious damage or actual threat thereof existed, the Member must attribute that damage or threat to a Member or Members, on the basis of a sharp and substantial increase in imports from the Member, actual or imminent, and other factors. It was clear here that the phrase "actual or imminent" accompanied Article 6.4 of the ATC reference to "sharp and substantial" increases of imports from a Member or Members - not the "serious damage, or actual threat thereof" examination required under Article 6.2 and 6.3 of the ATC as offered by India.

5.139 The United States noted that imports from India, by any relevant benchmark, had increased sharply and substantially. India was the largest supplier of woven wool shirts and blouses (category 440), to the United States during the year ending January 1995, with 54 per cent of total US imports. Imports from India had reached 76,698 dozen for the year ending January 1995, five times the 14,914 dozen imported in the year ending January 1994. In addition, imports from India for the year ending January 1995 had exceeded the quota levels the United States had in place with three other suppliers. Further, the United States had examined the levels of imports from India compared to imports of woven wool shirts and blouses from other sources, market share and import and domestic prices at a comparable stage of commercial transaction. The data had shown that imports from India for the year ending January 1995 were equal to total US production of woven wool shirts and blouses in the year ending September 1994. In 1993, imports from India in category 440 had been 20 per cent of total 1993 US imports of category 440 and was 18 per cent of US production in 1993. This information, coupled with the persistent decline in production up to that point and reports from the industry that production had continued to fall, reinforced the perception that further damage to the industry was imminent. As described in the Market Statement, the US had found that US imports of woven wool shirts and blouses from India in category 440 during 1994 had entered at an average landed duty-paid value of $133.85 per dozen, 75 per cent below the US producers' average price for woven wool shirts and blouses. The US' examination of such factors had fully supported its determination that serious damage or actual threat thereof was attributed to India's exports to the United States. Other relevant information provided to the TMB, some of which was provided as a result of inquiries from India during bilateral consultations, further buttressed the case for attribution. By the time the United States had presented its case to the TMB more up­to­date data showed that imports from India were 49 per cent of total US imports; 33 per cent of the total market in 1994; and 96 per cent of US domestic production in 1994 (this share increased to 98 per cent of US domestic production in the year ending June 1995). Therefore, the trend and current status described in the Market Statement was fully supported by the time of the TMB review.

TMB Review of the United States Action

5.140 The United States pointed out that it had presented its case to the TMB as provided in Article 6.10 of the ATC and had fully responded to all requests by the TMB for information. Furthermore, as expressly set out in Article 6.10 of the ATC, the US had provided the TMB with other relevant data on the industry's condition. The TMB had held hearings over a period of days at which the matter was addressed in considerable detail. India had presented extensive arguments and at the end of its proceedings, the TMB had determined that "actual threat could be attributed to the sharp and substantial increase in imports from India".

5.141 The United States considered that the TMB finding upholding the US determination and rejecting India's challenge was consistent with Article 6 of the ATC. If the consultations provided for in Article 6.7 of the ATC did not result in a mutual solution, the importing Member must exercise its option to take action to limit the relevant imports within 30 days after the 60 day time­frame noted in Article 6.10 of the ATC. Once that action was taken, Article 6 of the ATC required automatic review by the TMB. The TMB must review the case, determine whether the safeguard action was justified and make appropriate recommendations to the Members concerned. In addition to the data supplied in accordance with Article 6.7 of the ATC, Article 6.10 of the ATC also provided that the TMB "shall have available to it any other relevant information provided by the Members concerned". Importing Members must notify the Chairman of the TMB with relevant factual data at the same time the request for consultations was made. Subsequent and additional data supplied to the TMB supported the original determination and were entirely appropriate under the ATC.

5.142 In the view of India, the TMB had not upheld the US action; rather, the US action had been based on a situation of "serious damage" and the TMB did not find that a situation of "serious damage" was demonstrated by the data presented by the US Government.

H. Status of Other Relevant Information

5.143 In the view of India, the TMB had made a serious error in permitting the United States to submit information in August 1995 designed to justify its claim before the TMB that its safeguard action was based on "actual threat of serious damage" though "actual threat of serious damage" had not formed the basis for the consultations held with India. Article 6.7 of the ATC required the importing Member seeking consultations to supply to the exporting Member "specific and relevant" information pertaining to the reference period in regard to factors on which it had based its determination of serious damage or actual threat. Once the 60-day consultation period was over, any new information could only be introduced by cancelling the request for consultations and submitting a new request for consultations on the basis of the new information; otherwise, the requirement to supply specific and relevant information during the consultation period would be meaningless.

5.144 India pointed out that, according to Article 6.10 of the ATC, the TMB, when reviewing the safeguard action after the expiry of the 60-day consultation period, shall have before it not only the information supplied by the Member seeking consultations in accordance with Article 6:7 but also "any other relevant information provided by the Members concerned". This "other relevant information" could, for instance, be a narrative report by the importing Member relating to the restraint imposed but could not be new data introduced to justify the determination on which the consultations had been sought. This possibility could not be construed to permit the Member initiating the action additional time after its action to develop further data. If certain information or data had either not been available to CITA or had not been considered by CITA at the time of its determination of serious damage, such information or data could not be introduced by CITA at a later stage as "other relevant information" to justify ex post, the application of a safeguard action.

5.145 The United States, in response to India's allegation that information not available to CITA or not considered by CITA at the time of its determination of serious damage could not be introduced by CITA at a later stage to justify the application of a safeguard action, stated that it had provided a submission of "other relevant information", as permitted in Article 6.10 of the ATC, in order to provide updated data to reflect the most current conditions in the domestic market and as regards imports, and also to respond specifically to concerns raised in bilateral consultations and not to "justify" the decision. The United States directed the Panel to Article 6.10 of the ATC which provided that the TMB shall have available to it not only the data submitted at the time of the request, but in addition, "any other relevant information". Further, there was no definition of that phrase.

5.146 India considered that, if the TMB were to give the importing Member the right to introduce new data at the time of the review by the TMB, it would effectively deny the exporting Member the right to challenge that information in prior bilateral consultations and would accord the importing Member the right to skip an important step in the procedures that had to be followed under Article 6 of the ATC before a safeguard action may be taken. Thus, by allowing the introduction of new data at the time of its review, the TMB would effectively be waiving the importing Member's obligations. The TMB, however, did not have the authority to accord Members the right to derogate from the ATC. As the TMB did not give any reasons for its decisions on the safeguard actions, it was not known why it endorsed a safeguard action based on alleged "actual threat" of serious damage on which no prior consultations had been held, and to consider information that was not the subject of consultations. India considered that this decision deprived it of the right to hold consultations with the United States, based on relevant and specific facts, on the specific safeguard action endorsed by the TMB.

5.147 India repeated that the data submitted to TMB on 28 August 1995 was entirely new in some of the elements such as the number of establishments, employment, wages, etc. for the woven wool shirts and blouse segment of the woven shirt and blouse industry. The United States' Market Statement furnished in April 1995 did not include any data on exports. In its August 1995 submission to the TMB, the United States provided data on the dollar value of exported woven wool shirts and blouses. In other factors many of the figures were revisions to what had earlier been supplied to the Indian delegation. Therefore, the fresh data presented before the TMB did not amount to "other relevant information" as defined in Article 6.10 of the ATC.

5.148 The United States disagreed with this view and pointed out that the "other relevant information" was provided in direct response to issues raised in bilateral consultations, and as petitioned by the TMB. No data on the number of establishments was made available in the submission of "other relevant information".

5.149 In a response to the Panel, the United States argued that Article 6.10 of the ATC expressly provided that the TMB "shall have available to it the factual data provided to the Chairman of the TMB, referred to in paragraph 7 [Article 6.7 of the ATC], as well as any other relevant information provided by the Members concerned". There was no definition of "other relevant information" and no limitation on how much or what kind of information could be supplied to the TMB. The only stipulation was that the information be "relevant". Therefore, the United States interpreted the ATC to allow new or additional data to confirm the data available at the time of the determination.

5.150 In response to the preceding, India argued that revisions to the data which formed the basis for the determination would require a re­examination of the basis for the determination and result in either the withdrawal of the action, or the initiation of a new action. The new data submitted by the US had not been used by it in making its initial determination, nor could it be characterized as data which clarified or confirmed the data used by the US to determine and demonstrate that its actions were consistent with Article 6 of the ATC. Article 6.7 of the ATC was very clear in requiring that the Member seeking consultations shall, at the time of requesting consultations, "communicate to the Chairman of the TMB the request for consultations, including all the relevant factual data outlined in paragraphs 3 and 4, together with the proposed restraint level". The submission of "other relevant information" could not be used to justify the absence of "all the relevant factual data" required to be submitted at the time of the request for consultations, nor could it be substituted in the review to determine if the situation of serious damage, or actual threat thereof, had been demonstrated in accordance with the criteria of Article 6 of the ATC.

5.151 India pointed out that with the exception of import data, there appeared to be no reliable published official sources indicating any of the data regarding a woven wool shirt and blouse industry in the United States. India further argued that even if the supplementary information submitted by the United States after the consultations was taken into account, the United States could not be deemed to have met the requirements of Article 6 of the ATC. It was the position of India that the TMB review of the United States' safeguard action should have been conducted only on the basis of the documentation provided to India in April 1995 at the time of the consultation request. The information submitted to the TMB was, therefore, irrelevant for the proceedings of the Panel. However, even if this information was taken into account, the United States could not be deemed to have fulfilled the requirements set out in Article 6.2 and 6.3 of the ATC.

5.152 The United States reiterated that, following the issuance of the Market Statement, there were consultations, questions were asked during consultations and during the TMB review. At the end of this extended process in July, there were additional data that CITA did not have access to in April 1995; some of the employment and employment­related data reflected in the Market Statement was not focused on the woven wool shirt and blouse industry. Some of the evidence obtained after consultations and for the TMB process was different, some of the data were more focused on the domestic industry producing woven wool shirts and blouses, but all of the data pointed in the same direction as the data originally outlined in the Market Statement (i.e. that the domestic industry was seriously damaged or actually threatened thereof as a result of total imports and that imports from India were contributing to the condition). Where there were data that clearly did not meet the test of reliability, such as exports, it was not used by CITA in reaching its determination. Even the factors that were more indicative of trends or the situation at the time, according to Article 6.3 of the ATC, did not have to be alone or together determinative for CITA. CITA had followed its normal practice and procedures in using and deriving information from reliable published official sources. CITA had also followed its normal practice by consulting with the key producers, representing a substantial percentage of domestic production, on a business confidential basis, to verify certain information.

5.153 India argued that it followed from the above that a Panel reviewing whether a safeguard action met the requirements of the ATC could also rely only on the information made available by the importing Member to the exporting Member during the consultations, that is, the Market Statement. If the Panel were to proceed otherwise, it would effectively deny the exporting Member the right to hold meaningful consultations on the basis of the information that had formed the basis of the determination and this would create a serious moral hazard as the importing Member would then no longer have an incentive to submit to the exporting Member all the information available to it at the time of the consultations. Moreover, it would enable importing Members to initiate a safeguard action merely on the basis of conjecture and then maintain it if subsequent information were to confirm the facts. India cited the two following instances where the US had attempted to introduce information in August 1995 that was not presented at the time the initial action was taken.

Employment in "Other Relevant Information"

5.154 India noted that in the first instance, the US data for employment (Table III of the Market Statement) included employment data for all production workers producing woven shirts and blouses. In August 1995, the US had presented an "updated Table III" which purported to identify those production workers producing woven shirts and blouses that were primarily engaged in producing woven wool shirts and blouses. These "newly identified" workers constituting the "woven wool shirt and blouse industry" represented 0.6 per cent of all production workers engaged in the woven shirt and blouse industry. These new data were derived from the 1992 Census of Manufacturers, Apparel Current Industrial Reports, Bureau of Labour Statistics, and industry survey. As these data were not publicly available in the Census publications, or from the Bureau of Labour Statistics, it was presumed that these data came from an industry survey that was not prescribed and possibly was not available when the determination to request consultations was made in April.

5.155 In response to the points on employment in the preceding paragraph, the United States explained that the processes used by CITA demonstrated the fallacy of India's argument. As a general policy, after a request was made, the efforts to collect data and other relevant information were not discontinued. CITA was satisfied that it had sufficient information at the time of the request to take action based on the existence of serious damage or actual threat thereof to the domestic woven wool shirt and blouse industry. However, during and after the consultation period, additional enquiries and analysis had been conducted to refine the existing information and to furnish more data pertaining to the case, especially after it appeared that the adequacy of CITA's information was being challenged. Unlike other regimes, there was no bar or requirement under the ATC concerning this action by CITA. By providing more information, CITA was not trying to justify its action after the fact, but rather to make this information available in response to questions from India during consultations and in an effort to reach a mutually satisfactory agreement in this case. The United States also was later informed that the TMB felt it needed employment­related data on a more specific category level basis in considering the matter.

5.156 The United States further explained that, regarding the US employment data made available in this case, at the time CITA requested consultations it had data on the number of workers in the woven shirt and blouse industry and information from consultations with industry sources indicating that the declining trend of employment at the broader industry level was reflective and representative of the situation in the more narrowly defined woven wool shirt and blouse industry. After further analysis and more discussions on a business confidential basis with the two major manufacturers of woven wool shirts and blouses, an employment number was computed indicating the number of employees specifically producing woven wool shirts and blouses and these data were presented as part of the other relevant information at the TMB session in August 1995.

Establishments in "Other Relevant Information"

5.157 The second instance cited by India involved the location of the establishments producing woven wool shirts and blouses. In the Market Statement, the "Industry Profile" stated that the establishments producing woven wool shirts and blouses were located mainly in Oregon, Washington, Nebraska, and Iowa. Nonetheless, the new data provided by the United States in its August Market Statement included, for the first time, a listing of workers certified for trade adjustment assistance in the "woven wool shirt and blouse" area. Of the 200 or so production workers that constituted a presumed "woven wool shirt and blouse industry", the United States presented data that indicated 220 workers had been certified for trade adjustment assistance between 25 April 1993 and 15 April 1995. Of interest in the US presentation was the fact that these workers were from Tennessee, Utah, Pennsylvania, and South Carolina. These States were almost a full continent removed from where the establishments producing these woven wool shirts and blouses were located. This raised significant questions as to whether or not the data reviewed by the United States in April 1995 was accurate and/or relevant in light of this new data presented in August 1995.

5.158 In regard to India's views on the location of the establishment, the United States noted that the two major producers of woven wool shirts and blouses, accounting for more than 60 per cent of domestic production, had wool clothing manufacturing facilities in Oregon, Washington, Nebraska, Iowa and Pennsylvania. These two manufacturers also contracted out the production of woven wool shirts and blouses. One of these producers of woven wool shirts and blouses had to end all outside contracting production due to the impact of imports. This was reported to be the equivalent of closing four plants. This reduction in contract work could account for the Workers Adjustment Assistance certification for workers at the production facilities in Tennessee, Utah and South Carolina. The other major producer of woven wool shirts and blouses had production operations in Pennsylvania, which would account for the Workers Adjustment Assistance certification for workers at the production facility in Pennsylvania.

5.159 The United States referred to India's arguments in this section and noted that data available to CITA in April 1995 had shown, among other things, very high levels of increased imports and declining US production and the subsequent and additional data supplied by the United States to the TMB had confirmed the validity of the original determination and constituted "relevant" data that were expressly allowed for TMB review under Article 6.10 of the ATC - which was clear after the 60-day consultation period.

I. Consultations and Endorsement of Actions by TMB: Additional Procedural Requirements

5.160 India argued that the safeguard action on which the United States had held consultations had not been endorsed by the TMB and the safeguard action which had received the endorsement of the TMB had not been the subject of consultations. Therefore, the safeguard action did not meet the procedural requirements in Article 6 of the ATC, which were that the safeguard action must have been the subject of bilateral consultations and have been endorsed by the TMB. As the TMB had not endorsed the safeguard action, the United States should have withdrawn it. This requirement of an endorsement by the TMB of the safeguard action ensured a multilateral examination of the conformity of the safeguard action with the provisions of the ATC; both the right to consultations and the right to a multilateral examination were extremely important shields against abuse of the ATC safeguard provisions.

5.161 India based its argument in this regard on the nature and purpose of the ATC and the circumstances of its conclusion. India essentially invited the Panel to interpret Article 6 in such a manner as to give effect to the pivotal role of that provision in preserving the balance of rights and obligations under the ATC. A contextual­ and purpose­oriented interpretation of Article 6 of the ATC must lead the Panel to the conclusion that the creation of a right to discriminatory safeguard action without any offsetting right to compensation or retaliation nor any multilateral endorsement would put exporting Members into a legal position under the ATC worse than what they had under the MFA and would consequently be contrary to the basic objectives of the ATC. India did not believe that these arguments could be dismissed merely on the ground that the ATC referred to "recommendations" and not to "decisions" when it required the TMB to act. Further, if, notwithstanding the fact that the ATC obliged WTO Members to submit all their safeguard actions to the TMB and that the TMB clearly had the obligation to examine the ATC­conformity of all safeguard actions and to make recommendations on all of them, the Panel were to rule that a failure to make a recommendation had no legal consequence, the Panel would fundamentally upset the balance of rights and obligations under the ATC. The TMB would become the only body of the WTO whose decision whether or not to make a recommendation was legally irrelevant.

5.162 The United States referred to India's arguments on TMB endorsement and expressed its view that CITA's determination had been based on a showing of "serious damage, or actual threat thereof", and there was no requirement that the TMB "endorse" a measure for it to be maintained. The TMB had reached consensus that the finding of actual threat of serious damage attributable to India in this case was justified. It made no finding for or against "serious damage" per se and the TMB was only required under the ATC to make "appropriate" recommendations after examining serious damage or actual threat thereof. Whatever a TMB finding or recommendation was, Members were only required under Article 8.9 of the ATC to "endeavour to accept in full the recommendations of the TMB." There was no further obligation concerning the maintenance of a safeguard in the ATC on that matter. For a Member to maintain a transitional safeguard, TMB approval was not required.

5.163 The United States also referred to India's assertion that there was no difference between "recommendations" of the TMB and this Panel, the DSB and the Appellate Body. The texts of the ATC and DSU clearly demonstrated the error of this argument. The report of this Panel or an Appellate Body Report adopted by the DSB required action on the part of a complaining party receiving a recommendation to bring its measures into conformity with its obligations. The DSU in Articles 21 and 22 specified those actions and the consequences of inaction. As already pointed out, Article 8.9 of the ATC only required with respect to TMB recommendations, that Members "endeavour to accept in full". There was no requirement in the ATC concerning TMB findings and observations. Moreover, pursuant to Article 8.10 of the ATC, Members then had recourse to GATT Article XXIII and DSU procedures.

5.164 Also concerning the need for TMB endorsement of a determination, India noted that under Article 1.6 of the MFA, all rights of the contracting parties under GATT 1947 had been fully reserved and, notwithstanding the existence of the MFA, they had not been legally entitled to take safeguard actions inconsistent with Article XIX of GATT 1947. If an exporting country did not agree with the determination of an importing country, it could invoke its rights under GATT 1947 and thereby force that country to take non-discriminatory action under Article XIX of GATT 1947. That possibility, though hardly made use of, was part of the checks and balances under the MFA. Given that legal situation, the TSB could only perform conciliatory functions. Under the ATC, however, the exporting Member's rights under GATT 1994 were legally curtailed. Importing Members were now legally entitled to take discriminatory safeguard action without having to compensate the exporting Member concerned. The textiles exporting Members could no longer invoke their right to non-discriminatory treatment and to compensation under Articles XIII and XIX of GATT 1994 if they disagreed with the determinations on which the importing Member had based its safeguard action. This significant loss of GATT rights had been compensated by the requirement of a formal review and endorsement by the TMB of all invocations of the ATC's safeguard provisions as well as an explicit reference in Article 8.10 of the ATC to the right of a Member to bring the matter before the DSB and invoke Article XXIII:2 in case the matter remained unresolved even after completion of the TMB process. This requirement did not take away from the importing Members any of the rights they had under the GATT or under the MFA. If the importing Member did not obtain the TMB's approval, it could exercise its right to integrate the product concerned into GATT 1994 and invoke Article XIX to protect its industry. The requirement of a TMB approval, therefore, did not mean that importing Members could take safeguard action only with multilateral approval; it meant that they needed multilateral approval if they wished to do so on a discriminatory basis and without offering any trade compensation to the exporting Member.

5.165 In response, the United States disputed India's claims that the US characterization of the MFA was wrong. India had claimed that the MFA was not an exception to the GATT and Article 1.6 of the MFA, saying that the MFA would not affect the rights and obligations of participating countries under the GATT. India, however, neglected to mention paragraph 7 of that same Article, which provided "[t]he participating countries recognize that, since measures taken under this Arrangement are intended to deal with the special problems of textile products, such measures should be considered as exceptional, and not lending themselves to application in other fields." It was this paragraph that the United States had in mind when it stated earlier that the MFA was established as an exception to the GATT rules regarding application of quantitative restrictions.

5.166 India further emphasized that the safeguard mechanism in the ATC was a compromise reached during negotiations with a stipulation that it should be applied as sparingly as possible and with disciplines which would reduce the risk of misuse. The "two-tier approach" with regard to determination as well as the requirement for review by the TMB, contained in Article 6 of the ATC, was meant to reduce the risk of misuse of the transitional safeguard mechanism. According to Article 6.9 to 11, all safeguard actions must be submitted to the TMB for examination and may be introduced or maintained by the importing Member only if they had been endorsed by the TMB. The required examination by the TMB would be meaningless and the purposes of Article 6.10 of the ATC could not be achieved if unilateral safeguard action could be taken or continued without the endorsement of the TMB. The ATC incorporated the necessary balance in Article 6 of the ATC by giving importing Members the possibility to resort to safeguard action during the transitional period and by giving the exporting Members the protection of a review of the safeguard action by the TMB, and if necessary, by a panel. This balance would be lost if the Panel were to find that the United States was entitled to take the safeguard action notwithstanding the lack of endorsement by the TMB of the specific action it proposed to take when it requested India to consult.

5.167 India further pointed out that, in order to be consistent with the ATC, a safeguard action must meet the procedural requirements of Article 6 of the ATC. For actions other than agreed restraints, these requirements were essentially the following:

(i) "The Member proposing to take safeguard action shall seek consultations" (Article 6.7).


(ii) This request "shall be accompanied by specific and factual information" (Article 6.7).


(iii) If the consultations fail and an action is taken, the TMB "shall promptly conduct an examination" (Article 6.10).


(iv) Following that examination, the TMB "shall ... make appropriate recommendations to the Members concerned" (Article 6.10).

By using the term "shall" in all of the above-cited provisions, the text of Article 6 of the ATC made clear that a safeguard action would be consistent with the ATC only if all of the above requirements, including the requirement that the TMB make a recommendation on the safeguard action, were fulfilled. In the case before the Panel, the TMB had made no recommendation on the safeguard action on which the United States had made a determination and on which it had consulted with India and the procedural requirements listed above had, therefore, not been met.

5.168 The United States argued that although the TMB had an important role in reviewing safeguard actions and Members were required to endeavour to comply with its recommendations, there was no requirement that the TMB "endorse" a measure for it to be maintained. Furthermore, there was no requirement that the TMB make a finding on both serious damage and actual threat. Article 6.10 of the ATC provided that the TMB "conduct an examination of the matter, including the determination of serious damage, or actual threat thereof, and its causes, and make appropriate recommendations ...". Contrary to India's claim, there was no requirement that the TMB produce a consensus finding on the US' complete determination of "serious damage, or actual threat thereof". The TMB had not made any comment on the existence of serious damage with respect to category 440, but instead had noted that there had been a consensus in the TMB on the existence of actual threat and that such actual threat could be attributed to the sharp and substantial increase in imports from India (G/TMB/2 and G/TMB/R/3). Therefore, it was not appropriate to assume that there was any finding or conclusion by the TMB concerning serious damage one way or the other. The United States referred to India's claim that the ATC had specifically assigned to the TMB legal functions that had not been assigned to the TSB. The US, however, was of the view that Article 6.9 and 6.10 of the ATC virtually mirrored, to the extent of TSB responsibility, Article 3.4 and 3.5 of the MFA, respectively. Therefore, India's contention that the drafters of the ATC had given the TMB powers beyond those accorded to the TSB was without merit.

5.169 India pointed out that the ATC was not the only WTO agreement that attached legal consequences to the existence or non-existence of a recommendation of a WTO body. The General Council may adopt a budget only if the Committee on Budget Finance and Administration submitted a "recommendation" to it (Article VII of the WTO Agreement). The Ministerial Conference may adopt an interpretation of the GATT only on the basis of a "recommendation" by the Council for Trade in Goods (Article IX of the WTO Agreement). A WTO Member may suspend concessions under Article 22 of the DSU only if the "recommendations" of a panel or the Appellate Body were not implemented within a reasonable period of time. India concluded from this that the argumentation of the United States invited the Panel to take an extraordinary step, namely, to declare the TMB to be the only WTO body whose decision to make or not to make a recommendation would not have any legal consequence and this in spite of the fact that the ATC had specifically assigned an important legal task to this body.

5.170 India rejected the characterization of the TMB by the United States as a "special board and conciliation type body" similar to the TSB and the United States' contention that a safeguard action may be taken under the ATC even if the TMB failed to make a recommendation on it. India pointed out that, according to Article 8 of the ATC, the TMB was to

"... supervise the implementation of this Agreement, to examine all measures taken under this Agreement and their conformity therewith, and to take the actions specifically required of it by this Agreement ..."

while the corresponding provision of the MFA, (Article 11) stated that the task of the TSB was to "... supervise the implementation of this Arrangement".

5.171 According to India, there was no reference in the above provision for a TSB examination of the MFA-consistency of all safeguard actions. Moreover, the TSB merely had the task to review, "... at the request of any participating country, ... promptly any particular measure or arrangements which that country considered to be detrimental to its interests ...". The complaints submitted to the TSB could, therefore, be complaints of a non-legal, economic nature. It clearly followed from the above that the TMB had a legal function because its central task was to examine the ATC-conformity of all safeguard actions, while the TSB had merely a conciliatory function because it was to become active only if countries requested it to consider measures detrimental to their interests. By declaring that the TMB had functions equivalent to those of the TSB, the United States had simply ignored the fact that the mandates of the TMB and the TSB were defined in completely different ways in the legal instruments establishing them.

5.172 India indicated, while fully reserving its position on the question of endorsement, that in the case before the Panel the question of whether the TMB must approve the safeguard action need not necessarily be answered. Given the absence of any decision of the TMB on the safeguard action on which the United States had consulted with India, it would be sufficient for the Panel to rule that a safeguard action under the ATC may only be taken if the TMB had made a recommendation and to leave aside the question of whether approval was required. This would enable the Panel to rely exclusively on the explicit wording of Article 6.10 of the ATC ("The TMB shall ... make appropriate recommendations") rather than on the contextual and purpose­oriented interpretation of that provision that India considers to be the appropriate one. Therefore, in case the Panel were to conclude that a TMB endorsement was not required or if it were to conclude that the case did not require a ruling on this point, India subsidiarily requested the Panel to find that the safeguard action of the United States was inconsistent with its obligations under the ATC because the TMB, contrary to the explicit requirement set out in Article 6.10 of the ATC, had not made any recommendation on the action on which the United States had consulted with India.

5.173 The United States questioned whether India could post hoc amend its pleadings in this case as it had done in the preceding paragraph. There, India has made a subsidiary request of the Panel not found in its original request. This was inconsistent with the DSU and WTO and GATT practice as seen in the Appellate Body Report on Reformulated Gasoline. In that dispute, the Appellate Body had refused to address issues that Venezuela did not raise in a request for appeal.

J. Date of the Safeguard action

5.174 India argued that the United States' retroactive application of the safeguard action violated Article XIII of GATT 1994 and was not justified by Article 6.10 of the ATC. On 14 July 1995, India was informed by the United States that a restraint would be applied on imports from India, inter alia, in category 440, during the period beginning on 18 April 1995 and extending through 17 April 1998. The United States, therefore, had decided that the period of restraint would begin on the date of its request for consultations with India under Article 6 of the ATC. This meant that, in determining the amount of permitted imports during the period of restraint, the imports that took place during the period of consultations were to be deducted to the detriment of Indian exporters.

5.175 In the view of India, Article 1.6 of the ATC specifically reserved the rights of the WTO Members under GATT 1994 "unless otherwise provided in this Agreement" (ATC). The restraint imposed by the United States was inconsistent with Article XIII of GATT 1994 and was consequently justified only if, and to the extent, permitted under the ATC. Article XIII:3(b) did not permit a retroactive application of import restraints. The GATT panel on EEC - Restrictions on Imports of Dessert Apples -Complaint by Chile therefore considered that "backdated quotas, that is, quotas declared to have already been filled at the time of their announcement, did not conform to the requirements of Article XIII:3(b) ...".²¹ The ATC did not provide for an exception to that principle. Its Article 6.10 merely provided that "the Member which proposed to take safeguard action may apply the restraint by date of import or date of export" if, "after the expiry of the period of 60 days from the date on which the request for consultations has been received", no agreement has been reached. There was nowhere in the ATC any indication that the restraints may be back-dated.

5.176 The United States referred to India's rationale as to why the Dessert Apples case was comparable to what the US had done in this matter and found it illogical. There was a distinct difference between declaring a quota to be totally filled and one partially filled. Thus, it did not comprehend India's reasoning in this matter. The US case was not the same or similar to the one in Dessert Apples. Therefore, the case was not even persuasive here.

5.177 India replied that it was true that this panel had examined an extreme case, namely a case of backdating with the effect that the total quota declared to be available for future trade had already been totally filled at the time of the announcement. However, the reasoning of the panel also applied in the case in which a quota declared to be available at the time of its announcement would be already partially filled.

5.178 The United States also argued that the application of the transitional safeguard from the date of the request for consultations was consistent with the ATC. The US had applied the safeguard restraint on woven wool shirts and blouses from India from the date the request for consultations was made. The ATC did not bar such a choice. Even the TMB had noted that "with respect to the introduction of a safeguard action, the [ATC] does not provide any indication with respect to the effective date of implementation of that measure."²² Thus, in the absence of any provision to the contrary, the United States was not prohibited from applying the safeguard action from the date of the request. Indeed, application as from the request date was a practical necessity as such a request would trigger speculative trade. If traders believed that imports before completion of the consultation process would not be counted against a prospective restraint, speculative imports would aggravate the damage or bankrupt the remaining industry. Although imports in many instances continued to increase following the notification of a request, traders were informed by the US Federal Register notice that any unilateral quota established would be applied to cover exports since the date of the request. The US maintained that even though the request for consultations was officially published after the date of the request itself, the United States did not "enforce" the restraint until well after publication, albeit applying to shipments from the time of the request. Entry of those shipments would not be affected until after the restraint was enforced (after publication) and the quota for India would not be deducted until later, or after publication.

5.179 The United States stressed that it did not accept India's interpretation of Article 6.10 of the ATC and Articles XIII and X:2 of GATT 1994 on the issue of the effective date of a safeguard. It added to the points in the preceding paragraph made above that with respect to Article X:2 it believed that it was questionable if an ATC transitional safeguard fell under the "general application" requirement. As both parties agreed, ATC textiles safeguards were applied on a Member­by­Member basis and were not subject to the non­discriminatory application of quantitative restrictions under GATT 1994. Even so, the United States maintained that it had not "enforced" the safeguard within the meaning of GATT 1994 Article X:2 until after publication. As such, Article X:2 of GATT 1994 was likely not applicable.

5.180 India noted that the MFA specifically determined the beginning of the 12­month restraint period to remove any uncertainty during consultations following a request for consultations and there was no option provided in the MFA for the country to apply the restraint from any other date than the date specified in the MFA. The ATC, unlike the MFA, allowed for a restraint to be applied for three years and explicitly stated that the application of that restraint must occur at a time, to be determined by the importing country, during the 30 days following the 60­day consultation period. It was factually incorrect for the United States to present the ATC as allowing Members the option of selecting the date upon which the 12­month restraint period would become effective.

5.181 The United States reiterated that in some cases, as in the case of woollen products, seasonality of shipments indicated less imports, not an unwillingness to ship when a request was announced. Nevertheless, if shipments exported after the request were not counted against the quota that would almost guarantee a surge in the trade for months immediately following the request with no subsequent price to be paid for causing additional damage to the domestic industry. If the Panel prohibited this practice, which was not prohibited by the ATC, the Panel would be signalling to traders that they could flood the market with imports before consultations were completed.

5.182 In sum, India argued that the United States had submitted no evidence that "speculative exports" would occur following a request for consultations. There may, or may not, be a real or imagined incentive to ship products quickly in order to export goods prior to the start of a quota, but no evidence was given demonstrating that this was, in fact, the case. The US data on shipment time was considered to be, in this instance, meaningless. In the view of India, it only indicated that transit time between India and the United States was somewhere between 48 hours and 50 days. A more meaningful examination would review the time between the placing of an order or opening an irrevocable letter of credit, receiving the appropriate export documentation, actual date of export, and date of import. None of these were indicated to have been reviewed by the United States in order to discern "actual shipping patterns" of goods prior to the start of a quota, or after the start of a quota.

Article XIII:3(b) of GATT 1994

5.183 India argued that the TMB had correctly noted that "with respect to the introduction of a safeguard action, the [ATC] does not provide any indication with respect to the effective date of implementation of that measure."²³ However, it would be completely erroneous to conclude from that fact that the importing Members had the right to apply their restraints retroactively. Exactly the opposite was true in the opinion of India. Because there was no explicit authorization in the ATC's transitional safeguard clause to impose the additional burden of retroactive application, the general prohibition of retroactive import restraints set out in Article XIII:3(b) of GATT 1994 applied and importing Members were therefore not entitled to impose that burden. The perception that appeared to be implicit in the TMB's statement was that everything that was not prohibited by Article 6 of the ATC was permitted. That perception turned the relationship between the general principles of GATT 1994 and the highly exceptional provisions of Article 6 on its head. The lack of a provision in the ATC permitting retroactivity had not been an oversight. Article 3.5(i) of the MFA explicitly stated that, if, after a period of 60 days from the date on which the request for consultations had been received, no agreement had been reached, the importing country could impose restraints at a specified level "for the twelve-month period beginning on the day when the request was received by the participating country". All the negotiators of the ATC were familiar with the MFA and nevertheless it was decided not to include a corresponding provision in the ATC.

TO CONTINUE WITH USA - MEASURE AFFECTING IMPORTS OF WOVEN WOOL SHIRTS AND BLOUSES FROM INDIA

²⁰ An attribution of serious damage or actual threat thereof was also made against Hong Kong in respect of this produced category.

²¹ BISD 36S/93

²² G/TMB/R/2

²³ G/TMB/R/2