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WORLD TRADE
ORGANIZATION

WT/DS177/R
WT/DS178/R
21 December 2000

(00-5361)

  Original: English

UNITED STATES - SAFEGUARD MEASURES ON
IMPORTS OF FRESH, CHILLED OR FROZEN
LAMB MEAT FROM NEW ZEALAND AND AUSTRALIA


Report of the Panel


The report of the Panel on United States - Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 21 December 2000 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report. An appeal shall be limited to issues of law covered in the Panel report and legal interpretations developed by the Panel. There shall be no ex parte communications with the Panel or Appellate Body concerning matters under consideration by the Panel or Appellate Body.

Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.
 

TABLE OF CONTENTS

I. INTRODUCTION

A. COMPLAINT OF NEW ZEALAND 

B. COMPLAINT OF AUSTRALIA

C. ESTABLISHMENT AND COMPOSITION OF THE PANE
 
D. PANEL PROCEEDINGS

II. FACTUAL ASPECTS

III. FINDINGS REQUESTED BY THE PARTIES

A. AUSTRALIA 

B. NEW ZEALAND 

C. UNITED STATES

IV. ARGUMENTS OF THE PARTIES

V. PRELIMINARY ISSUES

A. PARTIES' REQUESTS FOR PRELIMINARY RULINGS BY THE PANEL

1. Australia 

2. New Zealand 

3. The United States 

B. ALLEGED INSUFFICIENCY OF PANEL REQUEST

1. Initial arguments of the parties

2. Written response and request for comments by the Panel 

3. Comments of the parties 

4. Ruling by the Panel 

5. Reasoning 

C. REQUEST FOR THE EXCLUSION OF THE US STATUTE FROM THE PANEL'S TERMS OF REFERENCE

1. Arguments of the parties 

2. Ruling at the first substantive meeting of the Panel with the parties 

3. Reasoning 

D. SUBMISSION AND PROTECTION OF CONFIDENTIAL INFORMATION

1. Arguments of the parties 

2. Ruling at the first substantive meeting of the Panel with the parties 

3. Reasoning 

VI. INTERIM REVIEW

A. AUSTRALIA'S REQUESTS FOR INTERIM REVIEW

B. NEW ZEALAND'S REQUESTS FOR INTERIM REVIEW

C. THE UNITED STATES' REQUESTS FOR INTERIM REVIEW

VII. SUBSTANTIVE ISSUES
 
A. STANDARD OF REVIEW

B. THE EXISTENCE OF "UNFORESEEN DEVELOPMENTS"
 
1. General interpretative analysis of Article XIX of GATT 1994 

2. Examination of "unforeseen developments" in this case 

C. DEFINITION OF THE DOMESTIC INDUSTRY

1. Introduction 

2. Background 

3. Arguments of the Parties 

4. Discussion by the Panel 

5. Findings on the definition of the domestic industry 

6. "Judicial economy" and the analysis of additional claims  

D. THREAT OF SERIOUS INJURY

1. The Safeguard Agreement's standard for analysing threat of serious injury

2. Whether the USITC evaluated in this investigation all injury factors listed in SG Article 4.2(a)

3. The USITC's analysis of threat of serious injury in this investigation 

4. Representativeness of data collected

5. Conclusions concerning the USITC's threat of serious injury determination in this case

E. CAUSATION STANDARD AND NON-ATTRIBUTION OF FACTORS OTHER THAN IMPORTS

1. Introduction 

2. General interpretative analysis of causation and non-attribution of "other factors" 

3. The USITC’s investigation of causation and non-attribution of "other factors" 

4. Conclusions on causation and non-attribution of "other factors" 

F. CLAIMS UNDER SG ARTICLES 2, 3, 5, 8, 11 AND 12, AND GATT 1994 ARTICLES I AND II 83

VIII. CONCLUSIONS AND RECOMMENDATIONS
 

ANNEX 1-1 FIRST SUBMISSION OF AUSTRALIA 

ANNEX 1-2 LETTER FROM AUSTRALIA 

ANNEX1-3 COMMENTS OF AUSTRALIA REGARDING THE REQUEST BY THE UNITED STATES
                 FOR PRELIMINARY RULINGS

ANNEX 1-4 ORAL STATEMENT OF AUSTRALIA CONCERNING USA'S REQUEST FOR
                  PRELIMINARY RULINGS

ANNEX 1-5 ORAL STATEMENT OF AUSTRALIA CONCERNING AUSTRALIA'S REQUEST
            FOR PRELIMINARY RULINGS

ANNEX 1-6 FIRST ORAL STATEMENT OF AUSTRALIA

ANNEX 1-7 ANSWERS BY AUSTRALIA TO QUESTIONS BY THE PANEL

ANNEX 1-8 SECOND SUBMISSION OF AUSTRALIA

ANNEX 1-9 OPENING STATEMENT BY AUSTRALIA AT THE SECOND SUBSTANTIVE MEETING

ANNEX 2-1 FIRST SUBMISSION OF NEW ZEALAND

ANNEX 2-2 LETTER FROM NEW ZEALAND

ANNEX 2-3 NEW ZEALAND'S RESPONSE TO UNITED STATES' REQUEST FOR PRELIMINARY RULINGS 

ANNEX 2-4 ORAL STATEMENT OF NEW ZEALAND CONCERNING REQUESTS FOR PRELIMINARY
                  RULINGS

ANNEX 2-5 FIRST ORAL STATEMENT OF NEW ZEALAND

ANNEX 2-6 ORAL RESPONSE OF NEW ZEALAND TO UNITED STATES' COMMENTS ON EXHIBIT NZ-13

ANNEX 2-7 CLOSING STATEMENT OF NEW ZEALAND

ANNEX 2-8 NEW ZEALAND'S RESPONSES TO QUESTIONS BY THE PANEL

ANNEX 2-9 SECOND SUBMISSION OF NEW ZEALAND

ANNEX 2-10 NEW ZEALAND'S ORAL STATEMENT AT SECOND PANEL HEARING

ANNEX 3-1 LETTER FROM THE UNITED STATRES REQUESTING PRELIMINARY RULINGS

ANNEX 3-2 FIRST WRITTEN SUBMISSION OF THE UNITED STATES

ANNEX 3-3 ORAL STATEMENT OF THE UNITED STATES CONCERNING PRELIMINARY ISSUES

ANNEX 3-4 FIRST ORAL STATEMENT OF THE UNITED STATES

ANNEX 3-5 CLOSING STATEMENT OF THE UNITED STATES AT THE FIRST MEETING OF THE PANEL

ANNEX 3-6 UNITED STATES' REPLIES TO QUESTIONS FROM AUSTRALIA

ANNEX 3-7 REPLIES BY THE UNITED STATES TO QUESTIONS FROM THE PANEL 

ANNEX 3-8 SECOND SUBMISSION OF THE UNITED STATES 

ANNEX 3-9 ORAL STATEMENT OF THE UNITED STATES AT THE SECOND MEETING OF THE PANEL

ANNEX 4-1 WRITTEN SUBMISSION OF CANADA 

ANNEX 4-2 WRITTEN SUBMISSION OF THE EUROPEAN COMMUNITIES 

ANNEX 4-3 ORAL STATEMENT OF CANADA

ANNEX 4-4 ORAL STATEMENT OF THE EUROPEAN COMMUNITIES

ANNEX 5-1 UNITED STATES - SAFEGUARD MEASURE ON IMPORTS OF FRESH, CHILLED OR FROZEN
                 LAMB FROM NEW ZEALAND

ANNEX 5-2 UNITED STATES - SAFEGUARD MEASURE ON IMPORTS OF LAMB MEAT FROM AUSTRALIA 


I. INTRODUCTION

A. COMPLAINT OF NEW ZEALAND

1.1 On 16 July 1999, New Zealand requested consultations with the United States pursuant to Article 4 of the Dispute Settlement Understanding ("the DSU"), Article XXII:1 of GATT 1994 and Article 14 of the Agreement on Safeguards ("the Safeguards Agreement", "SG") with regard to a definitive safeguard measure imposed by the United States on imports of lamb meat.1

1.2 On 26 August 1999, New Zealand and the United States held the requested consultations, but failed to resolve the dispute.

1.3 On 14 October 1999, New Zealand requested the establishment of a panel to examine the matter.2

B. COMPLAINT OF AUSTRALIA

1.4 On 23 July 1999, Australia requested consultations with the United States pursuant to DSU Article 4, GATT Article XXII:1 and SG Article 14 with regard to the definitive safeguard measure imposed by the United States on imports of lamb meat.3

1.5 On 26 August 1999, Australia and the United States held the requested consultations, but failed to resolve the dispute.

1.6 On 14 October 1999, Australia requested the establishment of a panel to examine the matter.4

C. ESTABLISHMENT AND COMPOSITION OF THE PANEL

1.7 At its meeting of 19 November 1999, in accordance with DSU Article 9 the Dispute Settlement Body ("the DSB") established a single Panel, pursuant to the requests made by New Zealand and Australia.

1.8 At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference, as follows:

"To examine, in the light of the relevant provisions of the covered agreements cited by New Zealand in document WT/DS177/4 and by Australia in document WT/DS178/5 and Corr. 1, the matter referred to the DSB by New Zealand and Australia in those documents, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements".

1.9 On 21 March 2000, the parties agreed to the following composition of the Panel:

Chairman:
Members:
Professor Tommy Koh
Professor Meinhard Hilf
Mr. Shishir Priyadarshi

1.10 Australia (in respect of New Zealand's complaint), Canada, the European Communities, Iceland, Japan and New Zealand (in respect of Australia's complaint), reserved their rights to participate in the panel proceedings as third parties.

D. PANEL PROCEEDINGS

1.11 The Panel met with the parties on 25-26 May 2000 and 26-27 July 2000. The Panel met with third parties on 25 May 2000.

1.12 On 24 October 2000, the Panel provided its interim report to the parties. See Section VI, infra.

II. FACTUAL ASPECTS

2.1 This dispute concerns the imposition of a definitive safeguard measure by the United States on imports of fresh, chilled and frozen lamb meat, imported under subheadings 0204.10.00, 0204.22.20, 0204.23.20, 0204.30.00, 0204.42.20 and 0204.43.20 of the Harmonized Tariff Schedule of the United States.

2.2 On 7 October 1998, a safeguard petition was filed with the United States International Trade Commission ("USITC") by the American Sheep Industry Association, Inc., Harper Livestock Company, National Lamb Feeders Association, Winters Ranch Partnership, Godby Sheep Company, Talbott Sheep Company, Iowa Lamb Corporation, Ranchers' Lamb of Texas, Inc., and Chicago Lamb and Veal Company. On 23 October 1998, the USITC published a notice of institution of a safeguards investigation on lamb meat. The United States notified the Committee on Safeguards of the initiation of the investigation in a communication dated 30 October 1998.5

2.3 On 9 February 1999, the USITC unanimously found that increased imports of lamb meat were a substantial cause of threat of serious injury to an industry in the United States. The United States notified this determination to the Committee on Safeguards in a communication dated 17 February 1999.6

2.4 The USITC forwarded its threat of injury determination and its remedy recommendations to the President of the United States on 5 April 1999. The USITC published its determination and recommendations in April 1999.7 In a communication dated 13 April 1999, the United States submitted a revised notification concerning its threat of injury determination, and describing the proposed safeguard measure.8

2.5 The United States held consultations pursuant to SG Article 12.3 with New Zealand on 28 April and 14 July 1999, and with Australia on 4 May and 14 July 1999. The United States notified the results of these consultations to the WTO Council for Trade in Goods on 21 July 1999.9

2.6 On 7 July 1999, the United States imposed a definitive safeguard measure, effective 22 July 1999, on imports of lamb meat.10 The United States notified the measure to the Committee on Safeguards in a communication dated 9 July 199911 and provided a supplemental notification concerning the measure in a communication dated 13 August 1999.12

2.7 The measure takes the form of a tariff-rate quota, as follows:

Country Allocations

Year

Tariff Rate Quota

Country Allocations

   

Australia

New Zealand

Other Countries

Year 1

31,851,151 kg

17,139,582 kg

14,481,603 kg

229,966 kg

Year 2

32,708,493 kg

17,600,931 kg

14,871,407 kg

236,155 kg

Year 3

33,565,835 kg

18,062,279 kg

15,261,210 kg

242,346 kg

Tariff Duties
 

Year

In‑Quota

Out of Quota

Year 1

9%

40%

Year 2

6%

32%

Year 3

3%

24%

2.8 The safeguard measure does not apply to imports from Canada, Mexico, Israel, beneficiary countries under the Caribbean Basin Economic Recovery Act or the Andean Trade Preference Act, or developing countries described in the US notification under SG Article 9, footnote 2.13

III. FINDINGS REQUESTED BY THE PARTIES

A. AUSTRALIA

3.1 In its first submission, Australia claims:

(1) that the United States acted inconsistently with GATT Article XIX and the Safeguards Agreement because the USITC Report failed to discuss and demonstrate that increased imports of lamb meat were threatening to cause serious injury to the "domestic industry" ". . . as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions . . . "14 as required by GATT Article XIX:1;

(2) that the United States acted inconsistently with the requirements of SG Article 5.1 for a determination that the measure is applied only to the extent "necessary to prevent or remedy serious injury and to facilitate adjustment";

(3) that the United States acted inconsistently with SG Article 3.1 by failing to publish a report justifying the measure imposed;

(4) that to the extent the United States carried out any investigation subsequent to the report of the USITC, it was in breach of the requirements of SG Article 3.1 and SG Article 12.2 and 12.6;

(5) that the USITC's determination of threat of serious injury being caused to the domestic industry was inconsistent with the provisions of SG Article 4 in a number of respects, principally that the USITC's determination of the relevant "domestic industry" was inconsistent with the provisions of SG Article 4.1(c) through the inclusion of enterprises that do not produce the like or directly competitive products, and that the United States did not demonstrate that increased imports were threatening to cause serious injury to the "domestic industry", in particular because

  • the data were inadequate and did not support the determination as required under SG Article 4.2;
  • the USITC did not meet the requirements of SG Article 4.1(b) that for a finding of threat of serious injury the serious injury must be imminent and "[a] determination of the existence of a threat of serious injury shall be based on facts and not merely on allegation, conjecture or remote possibility;
  • the determination of threat of serious injury, by attributing to increased imports injury caused by other factors, was contrary to SG Article 4.2(b); and

  • the USITC failed to consider all the factors in SG Article 4.2(a);
  • (6) that the United States acted inconsistently with its obligations under SG Article 8.1 and SG Article 12.3, which require a Member to endeavour to maintain a substantially equivalent level of concessions and other obligations and to enter into consultations in good faith to achieve that objective;

    (7) that the United States acted inconsistently with SG Article 2.2 to apply the measure to all imports irrespective of source. In particular, no WTO justification was given for the inclusion of Canada, Mexico, Israel and beneficiary countries under CBERA and ATPA in the injury investigation but their exclusion from the measure, which also was inconsistent with SG Article 4;

    (8) that the United States breached its obligations under SG Article 11.1(a) because the measure was not emergency action and did not conform to the provisions of GATT Article XIX and other provisions of the Safeguards Agreement;

    (9) that since the United States acted inconsistently with the other provisions of the Safeguards Agreement, in particular SG Article 4, it also is in breach of SG Article 2.1; and

    (10) that the United States is in breach of GATT Article II, since the measure is inconsistent with the United States' tariff bindings on lamb meat.

    According to Australia, these errors cannot be cured, and the United States can bring the measure into conformity with the Safeguards Agreement and GATT 1994 by revoking the measure without delay.

    3.2 Australia requests that the Panel therefore:

    (a) find that the measure is inconsistent with the Safeguards Agreement and GATT 1994  and that the US has acted inconsistently with its obligations under the Safeguards Agreement and under GATT 1994;

    (b) find that therefore the US is in violation of its obligations under the Safeguards Agreement and GATT 1994; and

    (c) recommend that the US bring the measure into conformity with the Safeguards Agreement and GATT 1994.

    B. NEW ZEALAND

    3.3 In its first submission, New Zealand requests the Panel to find that:

    (a) The United States measure is not a response to "unforeseen developments" within the meaning of GATT Article XIX and thus does not comply with SG Article 2.1 and SG Article 11.

    (b) The United States has failed to demonstrate that its "domestic industry that produces like or directly competitive products" has been threatened by "serious injury" as required by SG Article 2.1.

    (c) The United States has failed to demonstrate that any threat of serious injury to its domestic industry has been caused by increased imports as required by SG Article 2.1

    (d) The United States has applied a safeguards measure that is neither necessary to prevent serious injury nor necessary to facilitate adjustment, contrary to SG Article 5.1 , and has failed to publish its findings and reasoned conclusions on the necessity of its measure as required by SG Article 3.1 .

    (e) The United States has failed to apply a safeguard measure to all imports irrespective of source as required by SG Article 2.2 and GATT Article I .

    (f) The United States has applied a safeguard measure that places it in violation of its obligations under GATT Article II.

    3.4 Accordingly, New Zealand requests the Panel to recommend that the United States bring its treatment of imports of lamb meat from New Zealand into conformity with its obligations under the Safeguards Agreement and GATT 1994.

    C. UNITED STATES

    3.5 The United States requests the Panel to reject Australia's and New Zealand's claims.

    IV. ARGUMENTS OF THE PARTIES

    4.1 With the agreement of the parties, the Panel has decided that in lieu of the traditional descriptive part of the Panel report setting forth the arguments of the parties, the parties' submissions will be annexed in full to the Panel's report. Accordingly, the parties' written submissions concerning the requests for preliminary rulings by the Panel, the parties' first and second written submissions and oral statements, along with their written answers to questions, are attached at Annex 1 (Australia), Annex 2 (New Zealand), and Annex 3 (United States). The written submissions, oral statements and answers to questions of the third parties are attached at Annex 4. The full texts of Australia's and New Zealand's ("the complainants'") requests for the establishment of a panel also are attached respectively at Annex 5.

    V. PRELIMINARY ISSUES

    A. PARTIES' REQUESTS FOR PRELIMINARY RULINGS BY THE PANEL

    1. Australia

    5.1 In its first submission, Australia requests that the Panel request the United States to produce the following information for review by the Panel and Australia:15

    (a) all confidential information in the USITC Report on which its determination and recommendation were based; and

    (b) all information, including details of any deliberations and analysis, and documents taken into account by the US Administration or the US President in the course of the taking a decision to apply the measure in dispute.

    5.2 In Australia's view, this information is relevant to the Panel's responsibility to make an objective assessment of the matter before it under DSU Article 11.16

    2. New Zealand

    5.3 In its first submission, New Zealand addresses the problem of the use of confidential information, but does not request a preliminary ruling.17 New Zealand argues that once the complainants have established a prima facie case, the United States has to demonstrate that the safeguard determination and the measure actually imposed are based on reasoned conclusions to which the Panel must have access.

    3. The United States

    5.4 In a letter, dated 5 May 2000, the United States requests preliminary rulings on the following issues: (a) alleged insufficiency of the panel requests; (b) exclusion of the US [Safeguards] Statute from the Panel's terms of reference; (c) protection of Business Confidential Information (BCI).

    B. ALLEGED INSUFFICIENCY OF PANEL REQUEST

    1. Initial arguments of the parties

    5.5 The United States submits that the claims referred to by Australia and New Zealand in their respective requests for the establishment of a panel are insufficient to satisfy the requirements of DSU Article 6.2 . The United States alleges in particular:

    "Every legal provision cited in both Australia's and New Zealand's panel requests contains multiple obligations, yet neither request identifies the specific obligations at issue. Neither the listing of articles nor any other material in the panel requests clarifies which of the multiple obligations potentially at issue is actually implicated.18

    The United States does not assert substantial prejudice … with respect to the claims … under Articles I, II and XIX of GATT 1994 and Articles 5, 11 and 12 of the [Safeguards] Agreement, as it was possible for us to discern those sub-provisions that would be implicated on the basis of the context of this proceeding. However, the mere listing of Articles 2, 3 and 4 of the [Safeguards] Agreement, without any elucidation of the actual claims at issue, fails to meet the standards of DSU Article 6.2 and has substantially prejudiced the United States by compromising its ability to respond to the claims of the complaining parties.19
    … with respect to the obligations listed in Article 4 of the Safeguards Agreement, it was unclear whether Australia and/or New Zealand were stating a claim with respect to (1) [the definition of] threat of serious injury as that term is defined in Article 4.1(b); (2) domestic industry [producing like or directly competitive products] as that term is defined in Article 4.1(c); (3) any or all of the economic factors to be evaluated that are set out in Article 4.2(a); (4) causation (Article 4.2(b)); or (5) the published analysis of the case required by Article 4.2(c)".20
    Because of the inadequacy of the panel requests, it was not until Australia and New Zealand filed their first written submissions that the United States was able to know their actual legal claims.21
    The insufficiency of the Panel requests has seriously prejudiced the United States in the preparation of its defense. It prevented the United States from knowing the true nature of the claims being made against the U.S. measure and placed the United States in the position of merely guessing which of the many obligations in these several articles might be at issue in this review. This severely limited the ability of the United States to begin the task of preparing its defense. The dispute resolution process is intended to be a relatively speedy process. Central to such a speedy process is the requirement that claims be clearly stated at the required time. The failure of a complaining party to do so prejudices the responding party and undercuts the fairness of the entire process. It effectively stacks the deck against the responding party."22

    5.6 On this basis, the United States seeks a preliminary ruling from the Panel that dismisses this proceeding in its entirety because, lacking a legal basis in valid panel requests, the proceeding cannot go forward. In the alternative, the United States requests a preliminary ruling that the claims made by Australia and New Zealand under SG Articles 2, 3 and 4 fail to comply with DSU Article 6.2 and thus lack a legal basis and cannot be considered in a proceeding based upon the panel requests at issue.23 The United States argues that Australia and New Zealand could then decide whether to renew their complaints on the basis of new legally proper panel requests , or in the alternative, pursuing their complaints on the basis of the remaining claims.

    5.7 The United States further requests, in the event that the Panel decides to proceed and to consider the claims under SG Articles 2, 3 and/or 4, an extension of at least two weeks for filing its first written submission, to enable it to respond to the claims and arguments in the first written submissions of Australia and New Zealand so as to mitigate in part the prejudice to the United States resulting from the inadequate request.

    5.8 In letters dated 9 May 2000, New Zealand and Australia ask the Panel to dismiss all the US requests for preliminary rulings and not to extend the deadline for the first US written submission. Australia points out, inter alia, that the United States only chose to make these requests two weeks after receipt of the complainants' first submissions. Both complainants request the Panel to defer its consideration of the US requests for preliminary rulings until the first substantive meeting of the Panel with the parties.

    2. Written response and request for comments by the Panel

    5.9 In a letter, dated 10 May 2000, the Panel communicated to the parties the following:

    "The Panel has taken note of the 5 May 2000 request by the United States for preliminary rulings and for an extension of the deadline for its first submission, and the 9 May 2000 letters in response by New Zealand and Australia.

    The Panel has also taken note of Australia's request for a preliminary ruling in paragraph 15 of Australia's first submission of 20 April 2000 and of New Zealand's statements in paragraphs 7.22ff of New Zealand's first submission of 20 April 2000.

    In accordance with paragraph 13 of the Panel's working procedures, Australia and New Zealand are invited to submit their views on the request by the United States for preliminary rulings in written form by Wednesday, 17 May 2000. Also in accordance with that paragraph, the United States is invited to submit in its first submission any further views on the request by Australia.

    The parties to this dispute should be prepared to present their views on the substance of the points raised in the communications mentioned above on the first day of the Panel's first substantive meeting with the parties, i.e., 25 May 2000.

    In the meantime, and without prejudice to the Panel's decisions in respect of the preliminary issues, the Panel has decided to extend the deadline for the filing of the first submission by the United States [from Thursday, 11 May 2000] to Monday, 15 May 2000. For this reason, the deadline for third parties to make their written submissions also is extended, to Friday, 19 May 2000. Otherwise, the Panel's previously-announced timetable remains unchanged."

    3. Comments of the parties

    5.10 In their written responses of 17 May 2000 and in their oral statements at the first substantive meeting, Australia and New Zealand request the Panel to dismiss the US requests because their panel requests were sufficiently specific to meet the requirements of DSU Article 6.2 and the United States did not show that it suffered any prejudice in preparing its defence.

    5.11 The complainants stress that in Korea – Dairy the Appellate Body ruled that while the identification of the treaty provisions claimed to have been violated was always necessary, and while it might not always be enough to simply list the articles at issue, it also might suffice in the light of attendant circumstances and the particular background of each specific case. That is, the Appellate Body did not say that the mere listing of those provisions would in all cases not be enough. In addition, it was the claims of the complainant, not detailed arguments which must be set out with sufficient clarity.

    5.12 The complainants concede that SG Articles 2, 3 and 4 contain multiple obligations. But they emphasise that it would have been redundant for them to specify that they claim US breaches of all subparagraphs of these provisions, i.e., SG Articles 2.1, 2.2, 4.1(a), 4.1(b), 4.1(c), 4.2(a), 4.2(b) and 4.2(c). As to SG Article 3, the complainants argue that their claim obviously refers to the first paragraph, i.e., the obligation to publish a report setting forth the findings and reasoned conclusions reached on all pertinent issues of fact and law because the second paragraph deals with the treatment of confidential information in domestic proceedings. The complainants conclude that the reference in their panel requests to SG Articles 2, 3 and 4 in their entirety accords completely with their actual claims in this case. The Appellate Body's interpretation of DSU Article 6.2 did not require them to set out detailed arguments in their panel requests.24

    5.13 Australia and New Zealand allege that the United States failed to raise its objections to the panel requests at the appropriate time, i.e., when the request was filed or discussed in DSB meetings in October and November 1999, at the organizational meeting of the Panel, or at least briefly after receipt of the first written submissions by the Complainants, and instead raised this issue for the first time only one week before the first US submission was due. Australia noted that the case should not be dismissed on the basis of time-wasting, litigation techniques.

    5.14 In New Zealand's view, the United States has not offered sufficient "supporting particulars", as the Appellate Body put it in the Korea – Dairy dispute, of how it has suffered prejudice from the mere listing of articles in the panel request. Thus the US objections against the panel requests should be rejected on the same grounds as the Appellate Body had refused to sustain Korea's procedural objections in the Korea - Dairy case. The complainants argue that the ability of the United States to defend itself was not prejudiced given the actual course of the panel proceedings. Any prejudice suffered by the United States has been mitigated by the Panel's decision to extend the deadline for the first US submission.

    4. Ruling by the Panel

    5.15 At the first substantive meeting of the Panel with the parties on 25 May 2000, the Chairman gave the following preliminary ruling:

    "United States' Request for a Ruling on Alleged Insufficiency of the Panel Requests of Australia and New Zealand

    1. The Panel has carefully considered the written submissions, the oral statements and supplementary comments of the United States, Australia and New Zealand concerning the alleged insufficiency of the panel requests of Australia and New Zealand.

    2. The Panel has also considered the relevant aspects of the decisions of the Appellate Body in the Korea – Dairy Safeguards case and the United States – Foreign Sales Corporations case concerning Article 6.2 of the DSU.

    3. The Panel has also taken into account all the relevant attendant circumstances of this case.

    4. In the light of the above, the Panel has decided that it is unable to accept the request which the United States has submitted to it.

    5. A more detailed statement of the Panel's decision and reasoning will be provided to the parties in due course."

    5. Reasoning

    5.16 We have arrived at this ruling that Australia’s and New Zealand’s respective requests for the establishment of a panel25 are sufficient on the basis of a number of considerations, as set forth below.

    (a) Sufficient specificity of the panel requests

    5.17 We turn first to the text of DSU Article 6.2 which states the following:

    "The request for the establishment of a panel shall be made in writing. It shall indicate whether consultations were held, identify the specific measures at issue and provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly. …"

    We recall that in Korea – Dairy, the Appellate Body separated Article 6.2 into its constituent parts, i.e., that the request must:

    (i) be in writing;

    (ii) indicate whether consultations were held;

    (iii) identify the specific measures at issue; and

    (iv) provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly 26 (emphasis added).

    5.18 The only disagreement among the parties concerns element (iv), that the request "provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly", as the parties concur that elements (i)-(iii) of DSU Article 6.2 are satisfied. The parties agree that the requests (i) are in writing; (ii) indicate that consultations were held; and (iii) refer explicitly to the measures at issue, being "Proclamation 7208" and the "Memorandum of 7 July" that introduce a "definitive safeguard measure in the form of a tariff-rate quota on imports of lamb meat effective as of 22 July 1999".

    5.19 Australia’s request for the establishment of a panel reads in pertinent part as follows:

    "Australia considers that the measure, and associated actions and decisions taken by the USA, are inconsistent with the obligations of the USA under the Agreement on Safeguards and GATT 1994, in particular:

    Articles 2, 3, 4, 5, 8, 11 and 12 of the Agreement on Safeguards, and Articles I, II and XIX of GATT 1994."

    5.20 New Zealand’s request reads in pertinent part as follows:

    "New Zealand considers that this measure is inconsistent with the obligations of the USA under the following provisions:

    Articles 2, 3, 4, 5, 11 and 12 of the Agreement on Safeguards; and Articles I, II and XIX of the GATT 1994."

    5.21 We recall that the United States has asserted that the requests are insufficiently specific in respect of only three of the identified provisions, namely SG Articles 2, 3 and 4. Thus, we do not need to consider the question of the specificity of the requests in respect of the other provisions identified by the complaining parties, namely SG Articles 5, 8, 11 and 12 and GATT Articles I, II and XIX .

    5.22 As discussed above, in making its request for a preliminary ruling, the United States relies heavily on the decision of the Appellate Body in Korea – Dairy including its reference to several elements of the decision in EC – Bananas. The United States notes that, as in the Korea – Diary dispute, the Panel is confronted with a consideration of the sufficiency of a simple listing of the provisions alleged to have been violated without setting out detailed arguments as to which specific aspects of the measures at issue relate to which specific provisions of those agreements.

    5.23 We note in particular the finding by the Appellate Body in Korea – Dairy that a listing of the provisions alleged to be violated is a minimum prerequisite for the legal basis of a claim to be presented at all, and that:

    "[t]here may be situations where the simple listing of the articles of the agreement or agreements involved may, in the light of attendant circumstances, suffice to meet the standard of clarity  in the statement of the legal basis of the complaint. However, there may also be situations in which the circumstances are such that the mere listing of treaty articles would not satisfy the standard of Article 6.2. This may be the case, for instance, where the articles listed establish not one single, distinct obligation, but rather multiple obligations. In such a situation, the listing of articles of an agreement, in and of itself, may fall short of the standard of Article 6.2."27 (emphasis added).

    5.24 Drawing on this ruling, the United States asserts that the "mere listing of Articles 2, 3 and 4 of the Agreement … has substantially prejudiced the United States by compromising its ability to respond to the claims of the complaining parties"28 That is, the United States argues that it was unclear whether Australia and/or New Zealand were stating a claim with respect to the definition of threat of serious injury under SG Article 4.1(b); the domestic industry producing like or directly competitive products as defined in SG Article 4.1(c); any or all of the economic factors to be evaluated that are set out in SG Article 4.2(a); causation (SG Article 4.2(b)); or the published analysis of the case required by SG Article 4.2(c).29

    5.25 The United States continues that due to this inadequacy, it was not until Australia and New Zealand filed their first submissions that the United States was able to know their actual legal claims30 and this therefore "placed the United States in the position of merely guessing which of the many obligations in these several articles might be at issue in this review".31 The United States also submits that "neither the listing of articles nor any other material in the panel requests clarifies which of the multiple obligations potentially at issue is actually implicated" and that as a result, "these requests are insufficient under [DSU] Article 6.2".32

    5.26 In this context, the United States notes that in Korea – Dairy, the Appellate Body expressly dealt with an appeal by Korea regarding lack of specificity in a request for a panel based upon alleged violations of provisions almost identical to those at issue here, i.e., SG Articles 2, 4, 5 and 12 and GATT Article XIX.

    5.27 We note that the Appellate Body identified these provisions as an example of a situation in which the mere listing of articles, in and of itself, may fall short of the standard of DSU Article 6.2 (which seems to imply that it may suffice in other situations). The Appellate Body’s explanation was that the paragraphs and subparagraphs of the articles at issue involve not only one single obligation, but rather multiple obligations in a "complex multi-phased process [in which] every phase must meet with certain legal requirements and comply with the legal standards set out in the agreement".33

    5.28 Turning to the deficiencies of the panel requests alleged by the United States in this case, it is our view that given the nature and scope of the claims by New Zealand and Australia under SG Articles 2, 3 and 4 , the requests for a panel are sufficient in themselves to provide the requisite clarity and notice to the United States in respect of those claims, as required by DSU Article 6.2.

    5.29 As noted, a major element of the United States’ argument is that Australia’s and New Zealand’s requests raise nearly identical provisions of the Safeguards Agreement and in a nearly-identical manner, to the request for establishment of the panel in Korea – Dairy, and that Korea's appeal on this issue failed in Korea - Dairy only because in asserting that it had sustained prejudice, it did not offer any "supporting particulars" in its written or oral submissions. Thus, we understand the United States to argue that the requests for establishment in this dispute are essentially identical to that in Korea – Dairy, which in the US view must compel us to turn immediately to the question of prejudice, and "supporting particulars" in respect thereof.

    5.30 A careful comparison of the situation in Korea – Dairy with the situation before us, however, reveals that the two can be readily distinguished on the basis of the scope of the respective claims under the articles in question. We note in particular that in Korea – Dairy, while the EC’s panel request listed SG Articles 2 and 4 (inter alia) without elaboration, in its first submission the EC pursued only claims under paragraph 1 of SG Article 2 and under subparagraphs (a) and (b) of SG Article 4.2 . In contrast, in the case at hand, while Australia and New Zealand, like the EC in Korea - Dairy, simply listed SG Articles 2, 3 and 4 in their panel requests, in their first submissions they raised claims under effectively all of the subparagraphs thereof, i.e., SG Article 2.1, 2.2, 3.1, 4.1(a), 4.1(b), 4.1(c), 4.2(a), 4.2(b) and 4.2.(c).34 Thus, as New Zealand and Australia point out, it would have made little difference for the United States if they had listed all paragraphs and subparagraphs of SG Articles 2, 3 and 4, given that their claims and argumentation concerned essentially all of them.

    5.31 In our view, the fact that the scope of the claims raised by Australia and New Zealand under SG Articles 2, 3 and 4 effectively cover those articles in their entirety, supports the conclusion that the requests by Australia and New Zealand for the establishment of this Panel are sufficiently specific to meet the requirements of DSU Article 6.2. But as pointed out by the Appellate Body in Korea – Diary, in assessing whether the simple listing of articles in a panel request ensures sufficient clarity, the attendant circumstances of the particular case and the question whether the respondent suffered prejudice in the actual course of the proceedings, may also be relevant. In the following sections, we first address a number of attendant circumstances that confirm our above consideration, and second, we discuss whether the "supporting particulars" set forth by the United States would persuade us of the US argument that its ability to defend itself in this dispute had been prejudiced.

    (b) Attendant circumstances

    5.32 In our view, the attendant circumstances surrounding the panel requests confirm our above consideration that the panel requests were sufficient in this case. In particular, we find relevant in this respect the discussions in the Committee on Safeguards of the US investigation on lamb meat, the consultations that were held concerning the investigation and measure, the DSB's consideration of the requests for a panel and the establishment of the Panel, and the timing of the US request for a preliminary ruling under DSU Article 6.2.

    Discussion in the Committee on Safeguards

    5.33 Australia and New Zealand point out that the United States was on notice of their main concerns about the lamb safeguard investigation at issue even before the safeguard measure was finally imposed. In particular, at the meeting of the Safeguards Committee on 23 April 1999, the complainants expressed concerns relating to, inter alia, the determination of threat of serious injury, the broad definition of the domestic industry, the causation standard applied by the USITC,35 and the treatment of factors other than increased imports in the causation analysis.36 These concerns, which were raised with the United States in the Safeguards Committee before the measure was imposed and before the initiation of a formal dispute settlement proceeding, largely coincide with the complainants' allegations made in this case. It is more pertinent to consider whether consultations held between the parties prior to the establishment of the Panel clarified the claims, the measures and the legal basis of the complaint, so as to satisfy specificity requirements under the DSU.

    Consultations

    5.34 We would note as further pertinent attendant circumstances the two different types of consultations that were held between the complainants and the United States before the panel requests were filed. In the following, we address in turn consultations pursuant to SG Article 12.3, and those pursuant to DSU Article 4 .

    5.35 Consultations under Article 12.3 of the Safeguards Agreement: This provision requires that consultations be held before a safeguard measure is applied. The United States held consultations under SG Article 12.3 with New Zealand on 28 April 1999, and with Australia on 4 May 1999. The complainants state that on 14 July 1999 they submitted written lists of questions in connection with those consultations, which they have provided to the Panel as exhibits to certain submissions.37 New Zealand's questions related to the requirements of SG Article 2.1, the definition of the domestic industry in accordance with SG Article 4.1(c) and the US "substantial cause" test and the non-attribution of "other factors" under SG Article 4.2(b). Australia's questions also covered the broad definition of the domestic industry, "significant overall impairment" within the meaning of SG Article 4.1(a), and the evaluation of factors listed in SG Article 4.2(a) to determine threat of serious injury, along with alleged violations of notification and publication requirements. These questions, like the discussion in the Committee on Safeguards, largely coincide with the main elements of the complainants' claims.

    5.36 Consultations under Article 4 of the DSU: At consultations held between the parties on 26-27 August 1999 pursuant to DSU Article 4, the complainants submitted further written lists of questions specifying their concerns regarding the US safeguard measure on lamb meat.38 New Zealand's list of questions referred to the alleged inconsistency with SG Article 2.2 of the US exclusion from the safeguard measures of its free trade agreement partners, the United States' alleged failure to meet transparency requirements under SG Article 3.1 with regard to the actual measure, the question of the clear imminence of threat of serious injury under SG Article 4.1(b), and the alleged failure to publish a determination of the relevance of the factors examined in accordance with SG Article 4.2(b). Australia's questions also dealt with different aspects of SG Articles 2, 3 and 4, e.g., the industry definition as well as notification and publication requirements.

    5.37 We note that the questions contained in the above lists are quite detailed and thus provide considerable insight into complainants' allegations concerning specific obligations under specific paragraphs and subparagraphs of SG Articles 2, 3 and 4.

    5.38 Concerning the notice functions of consultation and panel requests for potential third parties, we recall that Canada attended consultations under DSU Article 4 because of its substantial interest in the treatment of US-FTA partners under US safeguards legislation. We also note that four Members reserved their third party rights in this dispute, and the complainants' argument that this should be taken as proof of the fact that the panel requests served their function of giving notice to other Members.39

    5.39 The United States has not expressly contested (nor confirmed) the authenticity of the lists of questions that the complainants claim to have submitted during the consultations under SG Article 12.3 and DSU Article 4. The United States does, however, seriously question the admissibility and the relevance to panel proceedings of information from bilateral, confidential consultations – for which usually no neutral witnesses or written records exist – when ascertaining whether the specificity requirements stipulated by DSU Article 6.2 for panel requests are met.

    5.40 We are conscious of the US argument that reliance in contentious panel proceedings on information from consultations could jeopardise their very purpose. Consultations are held with the intention of reaching a mutually agreed solution to a dispute. This purpose is not served if, in litigation before a panel, parties hold against one another concessions they have made or compromises they have achieved in the context of consultations. But we do not consider that the very purpose of consultations could be defeated if we were merely to take note of documentary evidence concerning the purely factual question of whether certain issues were raised during consultations. This is different from relying on arguments about the substance or the WTO-consistency of views expressed by parties during consultations. We believe that our approach is compatible with the requirement of DSU Article 6.2 that a panel request must indicate "whether consultations were held." In any event, such concerns are probably less pertinent to consultations held pursuant to SG Article 12.3 than to consultations held pursuant to DSU Article 4 , given the requirement in SG Article 12.5 that the results of the Article 12.3 consultations be notified to the Council for Trade in Goods (implying circulation thereof to all Members).

    Establishment of the Panel by the DSB

    5.41 We recall that the requests for the establishment of the panel which are the subject of these preliminary objections40 were submitted on 14 October 1999 and circulated to Members on 15 October 1999. The panel requests were discussed at the DSB meetings of 27 October and 3 November 1999. At its meeting on 19 November 1999, the DSB established a single panel pursuant to DSU Article 9.

    5.42 At the aforementioned DSB meetings, the complainants referred, inter alia, to the alleged US breach of the non-discrimination obligation of SG Article 2.2 due to the exclusion of US FTA-partner countries from the imposition of the safeguard measure at issue.41 We also note (see below) that according to the minutes of these DSB meetings, neither the United States nor any (potential) third party to this dispute raised any concerns about alleged insufficiencies of the complainants’ panel requests in the light of the requirements of DSU Article 6.2.42

    Timing of the US request for preliminary ruling concerning the specificity of the panel requests

    5.43 As a final attendant circumstance that in our view would support the conclusion that the panel requests were sufficiently specific, we note that these requests were dated 14 October 1999, and thus presumably any lack of specificity therein would have been apparent to the United States as of that time. In particular, it was clear at that point that consultations had failed to achieve a satisfactory resolution, and thus that the United States was likely be required to refute claims in the course of formal panel proceedings. We agree with the United States that, according to paragraph 13 of the panel working procedures,43 parties may request preliminary rulings on any issue until the first substantive meeting or even later upon a showing of good cause. But we also note that this paragraph does not preclude the raising of procedural objections against allegedly insufficient panel requests at an earlier point in time. On the contrary, one might expect that requests for preliminary rulings of a very important nature which could lead to the dismissal of an entire case would be raised soon after the filing of an allegedly insufficient panel request.

    5.44 In this respect, we consider it appropriate to recall the Appellate Body's statements in United States – Tax Treatment for Foreign Sales Corporations ("US – FSC") that:

    " responding Members [should] seasonably and promptly bring claimed procedural deficiencies to the attention of the complaining Member, and to the DSB or the Panel, so that corrections, if needed, can be made to resolve disputes. "44 (emphasis added)

    5.45 We note that the Appellate Body made the preceding statements in relation to the "statement of available evidence" as required by SCM Agreement Article 4.2 in the context of a request for consultations, not a request for a panel. But we nevertheless find the above statement of the Appellate Body to be relevant to our examination of "attendant circumstances" in this case in connection with the procedural issue before us. In this regard, we find particularly pertinent the following statement of the Appellate Body in US – FSC:

    "a year passed between the submission of the [EC] request for consultations … and the first mention of the objection by the United States – despite the fact that the United States had numerous opportunities during that time to raise its objections. It seems to us that, by engaging in consultations on three separate occasions, and not even raising its objections in the two DSB meetings at which the request for establishment of a panel was on the agenda, the United States acted as if it had accepted the establishment of the panel in this dispute, as well as the consultations preceding such establishment."45 (emphasis added).

    5.46 As in the US – FSC case, in the case before us there was a lengthy period following the requests for establishment, during which: (1) the DSB twice considered the requests and the panel was established at a third DSB meeting, (2) numerous meetings were held concerning the composition of the Panel, and (3) once the Panel was composed (on 21 March 2000) an organizational meeting was held with the Panel concerning the procedures that would be followed. On none of those occasions did the United States mention its procedural objections against the panel requests. In fact, it was only on 5 May 2000, i.e., fifteen days after it received the complainants' first submissions and five days before the date when its first submission was due, that the United States for the first time made known its procedural objection in respect of the requests for establishment.

    5.47 We recognize that at none of the various meetings held prior to that time could any of the bodies or individuals involved have been expected to resolve any procedural objections. This is so because in dispute settlement practice the DSB has proven ill-suited to rule on preliminary issues and there is no instance to substitute for the DSB in taking such decisions before a panel is in fact composed. The practical difficulties with obtaining a decision on such procedural issues would not, however, prevent a respondent party from making its procedural objections known to the complainants on those occasions.

    (c) Prejudice to due process rights

    5.48 Next we discuss whether the "supporting particulars" set forth by the United States would persuade us of the argument that its ability to defend itself in this dispute had been prejudiced. As set out below, it is our view that the United States has not submitted sufficient "supporting particulars" to demonstrate that it has suffered any such prejudice in preparing its defence in this case. This confirms our above consideration that the panel requests in this case were sufficiently specific to ensure that the due process rights of all parties have been respected in this dispute.

    5.49 We recall that the US allegation of prejudice is that the alleged lack of specificity of the panel requests placed it in the position, before the complainants' first submissions were filed, of merely guessing which of the obligations of the articles at issue were the subject of claims. According to the United States, this severely limited its ability to begin preparing its defense, in particular because it had only three weeks in which to submit its own first submission following the receipt of the complainants' submissions. Concerning the time available for preparing its first submission, the United States also complains that at the organizational meeting the complainants were given an additional six days to prepare their first submissions than had initially been proposed by the Panel, while the United States received only one additional day.

    5.50 Concerning the time available, we note in the first instance that at the organizational meeting, the parties all requested additional time for preparing their first submissions, beyond that set forth in the draft timetable that we proposed, and agreed that any such additional time be essentially evenly split between the complainants on the one hand and the United States on the other hand.46 Moreover, as mentioned above, in response to the US request in its request for preliminary rulings for an extension of time to file its first submission, we decided to extend the due date for that submission from 11 May to 15 May 2000. We invited the complainants to respond to the US allegations by 17 May 2000, and we reserved a separate session of the first substantive meeting to hear the parties' arguments on the preliminary issues raised.

    5.51 We further note that the US first written submission and its oral statement at the first substantive meeting contain detailed and comprehensive arguments rebutting the complainants' arguments on all claims related to paragraphs and subparagraphs of SG Articles 2, 3 and 4 . In particular, these submissions rebut in detail the arguments made by the complainants in their first submissions concerning the issues listed in the US request for preliminary rulings of 5 May 2000, i.e.,47 (1) the concept of threat of serious injury as that term is defined in SG Article 4.1(b); (2) the definition of the domestic industry producing like or directly competitive products set out in SG Article 4.1(c); (3) any or all of the economic factors to be evaluated according to SG Article 4.2(a); (4) causation within the meaning of SG Article 4.2(b); and (5) the published analysis of the case required by SG Article 4.2(c). In this context, we recall the Appellate Body's statements in EC – Bananas III and Korea – Dairy that "Article 6.2 of the DSU requires that the claims, and not the arguments, must all be specified sufficiently in the request for the establishment of a panel".48 Thus the complainants were not required under the DSU to develop their factual and legal arguments on all these issues before filing their first submissions to the panel.

    5.52 After the first substantive meeting with parties, we posed a significant number of detailed questions pertaining to the claims before us. To allow the parties to take into account in their rebuttal submissions one another's written answers to these questions, we extended the deadline for the rebuttal submissions. In its answers to questions and in its rebuttal submission, the United States again provided very detailed and comprehensive arguments on the claims before us.

    5.53 In light of the foregoing, therefore, we do not believe that the United States has submitted sufficient "supporting particulars" to persuade us of its assertion that it has been prejudiced in its ability to defend itself in the actual course of the proceedings in this dispute. As noted above, as a matter of fact, the US submissions have been very thorough and detailed. In addition, by extending the deadlines for both the first submission of the United States and all parties' rebuttal submissions, we have ensured that during the course of these proceedings the due process rights of all parties have been fully respected. Our conclusion that the United States has not submitted sufficient supporting particulars to establish that it suffered prejudice in its ability to defend itself in the actual course of this proceeding confirms our above consideration that the panel requests in this case were sufficiently specific to meet the requirements of DSU Article 6.2.

    C. REQUEST FOR THE EXCLUSION OF THE US STATUTE FROM THE PANEL'S TERMS OF REFERENCE

    1. Arguments of the parties

    5.54 In its letter dated 5 May 2000, the United States notes that in their respective panel requests, neither Australia nor New Zealand raises the claim that the US safeguards statute, on its face, is inconsistent with US obligations under the Safeguards Agreement. However, in the view of the United States, New Zealand makes that allegation in its first submission. The United States requests the Panel to rule that the US statute is not within its Panel's terms of reference.

    5.55 In their submissions of 17 May 2000, New Zealand and Australia clarify that they request no finding by the Panel on the consistency of the US statute with the Safeguards Agreement. The complainants specify that their claim is that the United States wrongfully applies a "substantial cause" test that is not found in the Safeguards Agreement. It is the application of this test in the safeguards investigation and determination at issue which the complainants are challenging in this dispute.

    2. Ruling at the first substantive meeting of the Panel with the parties

    5.56 At the first substantive meeting of the Panel with the parties, the Chairman gave the following ruling on this issue:

    "United States' Request for a Ruling on Exclusion of the US Safeguards Statute from the Panel's Terms of Reference

    1. The Panel has given careful consideration to the US request for a preliminary ruling that the consistency of the US safeguard statute with the Safeguards Agreement and WTO law is outside the terms of reference of this Panel.

    2. The panel agrees with the US that that issue is outside the Panel's terms of reference.

    3. However, the question of "causation" and the more specific question whether the application in this case of the criterion of "substantial cause" is consistent with the Safeguards Agreement and WTO law is clearly within this Panel's terms of reference."

    3. Reasoning

    5.57 It appears to us that the relevant paragraphs in New Zealand's first written submission allege that in determining whether a threat of serious injury has been caused by increased imports, the United States wrongfully applies a "substantial cause" test, based upon Section 202(b)(1)B of the US Trade Act. In other words, New Zealand has not claimed, in the portion of the first submission at issue, that the US Safeguard Statute is on its face inconsistent with WTO law. Rather, it claims that the causation test applied by the USITC in the lamb investigation and determination, pursuant to that legislation, is less stringent than and thus inconsistent with the Safeguards Agreement.

    5.58 Thus, in our preliminary rulings on 25 May 2000, we ruled that the consistency of the US safeguards statute with the Safeguards Agreement and WTO law was outside its terms of reference. However, as we also ruled, the question of "causation", and the more specific question of whether the application in this case of the criterion of "substantial cause" is consistent with the Safeguards Agreement, are clearly within our terms of reference.

    D. SUBMISSION AND PROTECTION OF CONFIDENTIAL INFORMATION

    1. Arguments of the parties

    5.59 In reaction to Australia’s request in its first written submission for the provision of certain confidential information from the USITC investigation, the United States notes in its first written submission that this information was submitted to the USITC by foreign and domestic producers under strict assurances of non-disclosure. In the US view, the private parties concerned would be unlikely to provide their consent to share such information with the Panel and the Complainants unless adequate procedures for their protection were adopted.

    5.60 Australia responded that it was prepared to enter into a "reasonable" undertaking on the treatment of confidential information. New Zealand took a similar view. Australia emphasised that if the United States was not ready to submit all pertinent information about the investigation and determination, the Panel should draw negative inferences within the meaning of the Appellate Body Report on Canada – Measures Affecting the Export of Civilian Aircraft.49

    5.61 At the first substantive meeting of the Panel with the parties, the United States stated that Australia’s request to the Panel for a ruling that the United States produce all confidential business information was not in truth a request for a preliminary ruling, as it was the Panel’s prerogative to request parties, in accordance with DSU Article 13, to submit information at any time in the proceeding.

    2. Ruling at the first substantive meeting of the Panel with the parties

    5.62 At the first substantive meeting with the parties, the Chairman of the Panel gave the following ruling in respect of this issue:

    "Australia's Requests Regarding Disclosure of Confidential Information by the US

    1. The panel has carefully considered the requests of Australia for preliminary rulings on the disclosure by the US of confidential information excluded from the USITC report and information covering the process after the USITC reported to the President.

    2. The Panel does not wish to make such preliminary rulings.

    3. Instead, the Panel will consider these issues in the context of particular requests or questions which the parties or the Panel may wish to submit to the United States."

    3. Reasoning

    5.63 In its questions to the parties of 31 May 2000, the Panel requested the United States to submit certain statistical information which had been redacted from the published version of the USITC's report on the investigation and determination to protect business confidential information.50

    5.64 In its replies to the Panel's questions of 22 June 2000, the United States submitted the requested information in indexed form, with the first number of each data series assigned a value of 100.0 and the ensuing numbers reflecting the percentage change from the starting number. In their rebuttal submissions of 29 June 2000, the complainants did not object to that course of action.

    5.65 Having carefully reviewed and analyzed the indexed information, we have found that it is adequate and sufficient for purposes of our review of the USITC's investigation and determination pursuant to our terms of reference. As the complaining parties raise no objection to the US decision to provide the requested data in indexed form, we consider that Australia's request for information is moot and does not need to be dealt with further.

    VI. INTERIM REVIEW

    6.1 We submitted our interim report to the parties on 24 October 2000. On 7 November 2000, the parties requested review, in accordance with DSU Article 15.3 , of precise aspects of the interim report. On 14 November 2000, the parties commented in writing on one anothers' requests for interim review, in accordance with paragraph 17 of the Working Procedures of this Panel. In response to these comments, we have made a number of drafting changes to the report, as summarized in the sections below. We also have introduced a number of technical and typographical corrections.

    A. AUSTRALIA'S REQUESTS FOR INTERIM REVIEW

    6.2 In response to Australia's interim review request, we have modified our descriptions of complainants' arguments in paragraph 7.14 and footnote159.

    B. NEW ZEALAND'S REQUESTS FOR INTERIM REVIEW

    6.3 New Zealand requests us to review certain aspects of our descriptions of New Zealand's argumentation as well as of our reasoning.

    6.4 Concerning its own arguments, New Zealand first requests that we clarify our description of its position in respect of a "two-step" causation test under GATT Article XIX. In particular, New Zealand states that its view is that there must be an indication of some developments that were unforeseen which led to products being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury, and that increased imports must "generally follow" from unforeseen developments, but need not be "caused" by them. We have in response to this comment modified our description of New Zealand's argument in paragraph 7.14 and footnote 58.

    6.5 New Zealand also requests that we clarify that it did not argue that there was no separate section in the USITC report concerning "unforeseen developments", but rather that the report simply did not address this issue. We have modified paragraph 7.25 accordingly.

    6.6 New Zealand confirms that it did not contest that imported lamb meat was "like" domestic lamb meat, but requests that we clarify that it did argue that imported lamb meat is not "like" domestic live lambs. We have accordingly modified our description of New Zealand's argument on this point in paragraphs 7.46 and 7.47, and have inserted footnote 76 citing to the relevant section of New Zealand's first written submission.

    6.7 Concerning the complainants' arguments in respect of threat of serious injury, New Zealand objects to a statement by the Panel, in paragraph 7.137 of the interim report, that there was "no basic disagreement" among the parties concerning the interpretation of the threat of serious injury standard in the Agreement on Safeguards. Accordingly, we have deleted that paragraph of the interim report.

    6.8 New Zealand also asks us to clarify in paragraph 7.190 that it does not question the relevance of any data from the past in a threat analysis, stating that its argument instead is that reliable assessments of what will happen in the future cannot be made on the basis of an analysis of short-term conditions. We have modified paragraph 7.190 accordingly.

    6.9 We have made two changes to paragraph 7.200 in response to New Zealand's comments. First, we have corrected a reference, by removing a characterization of testimony on projected price increases for 1999 as "ex post". Second, New Zealand requests that we modify our description of its views on the information on underselling in the USITC report. In this regard, we have added language to paragraph 7.200 to indicate that New Zealand questions the comparability of some of the products for which price comparisons were made by the USITC. We note, however, that at least in an argument in the alternative, New Zealand does appear to acknowledge that the USITC found some underselling. We have modified footnote 220 to this effect.

    6.10 Concerning the discussion of the representativeness of data in paragraphs 7.209 and 7.213,51 New Zealand requests that we change the drafting to make clear that the issue raised by complainants was not the representativeness of the data on a factor-by-factor basis, but rather in respect of the data on financial performance, on the one hand, and on the industry's production, capacity and capacity utilisation, etc., on the other. We have modified these paragraphs accordingly.

    6.11 Regarding the question of causation, New Zealand requests that we clarify its position in respect of the three-step causation test that we applied, set forth in paragraph 7.232. In particular, New Zealand recalls that it made arguments in respect of the second step, the USITC's consideration of conditions of competition, as well as in respect of the third step, the USITC's consideration of "other factors". We have modified paragraphs 7.232 and 7.256 to more fully reflect New Zealand's arguments as to the USITC's consideration of conditions of competition. We nevertheless continue to believe that the main focus of the causation arguments in this dispute is in respect of the questions of the US "substantial cause" standard and the non-attribution of injury caused by "other factors" to increased imports, and therefore have inserted a statement to that effect in paragraph 7.232.

    6.12 Concerning our reasoning, New Zealand requests that we change our reference to "statistics" in paragraph 7.42. New Zealand submits that what is being referred to is not limited to statistics, but rather concerns more generally the questions of change in the product mix of imports and increases in the cut size of imported lamb meat. In respect of the latter, New Zealand argues that the claim that the cut size of imported lamb meat increased does not withstand close analysis. We have not modified paragraph 7.42 because our reasoning already distinguishes between statistics and statements in the USITC report52.

    C. THE UNITED STATES' REQUESTS FOR INTERIM REVIEW

    6.13 The United States requested us to review certain aspects of our description of the USargumentation as well as of our reasoning.

    6.14 In connection with its request for preliminary rulings, concerning the time available to prepare its first submission, the United States comments in respect of paragraph 5.50 that at the Panel's organizational meeting it objected to the complainants' request for additional time and also requested more time for itself, since it was being asked to respond to two separate submissions in the time normally available for responding to one. New Zealand objects to this comment, stating that the United States did not make known any disagreement with the Panel's timetable once it was established. We have modified paragraph 5.50 and inserted footnote 46 to clarify the parties' positions at the organizational meeting concerning deadlines for their first submissions. In particular, we have inserted text to clarify that both sides proposed that all parties receive additional time, to be essentially evenly split between complainants and the United States, and accepted a schedule under which the complainants received six additional days and the United States seven additional days beyond the dates that we originally proposed for the preparation of the first submissions.

    6.15 The United States objects to our statement in paragraph 7.73 that it acknowledged that the term "producers as a whole of the like or directly competitive products" has to do at least in part with the respresentativeness of the data concerning the domestic industry at issue. New Zealand objects to the US comment, stating that our characterization accurately reflects the US arguments. To more fully reflect the US arguments on this point, we have added, in footnote 108, the full text of the US answer to our question concerning whether the term "producers as a whole…" has to do with the representativeness of data.

    6.16 The United States objects to the Panel's statement in paragraph 7.83 that no data are available for years other than those covered by the safeguard investigation concerning the percentage of live lamb production dedicated to the production of lamb meat. In this connection, the United States cites to a 1995 study by the USITC concerning competitive conditions for domestic and imported lamb meat, which, according to the United States, was before the USITC in the safeguard investigation and contains such information. We have modified paragraph 7.83 and have inserted footnote 122 to indicate that this study was neither before us in this dispute, nor were the statistics contained therein, to which the United States refers in its interim review comments, reproduced in the USITC report on the safeguard investigation. That report merely cites the title of this study. We also have noted New Zealand's responses to the US characterization of the statistics in question, and have as well reiterated our view that, in any case, economic interdependence between producers of input and final products is not relevant to the industry definition under the Safeguards Agreement.

    6.17 Concerning the representativeness of the data relied upon by the USITC, in response to comments by the parties we have clarified the description in paragraph 7.212 of the information before us on the coverage of the USITC questionnaire data. In particular, we note that we do not share the US view that, from the fact that four out of 16 known breakers responded to the USITC's questionnaire, it can be presumed that the four respondents account for 25 percent of total production by breakers. We also reiterated (as stated in paragraph 7.213) that the five responding packers and packer/breakers accounted for a sizeable majority, of the lambs slaughtered.

    6.18 In response to the US objection to our indication in paragraph 7.242 that the United States – Wheat Gluten panel report is part of past GATT/WTO dispute settlement practice, given that it is currently on appeal, we have modified this reference, to distinguish between this report and other, previous GATT/WTO panel and Appellate Body reports.

    6.19 Concerning our findings on the USITC's analysis of "other factors" in the context of causation, we have accepted the United States suggestion to expand, in paragraph 7.264, the quote from the USITC's determination concerning the termination of payments under the National Wool Act of 1954, to include passages identified by the United States in its interim review comments as relevant to understand the USITC's determination in its context. We also have inserted language to more fully reflect the US view that the USITC's statement that the effects of termination of Wool Act subsidies were expected to recede further with each passing month were essentially the same as a finding by the USITC that the termination made no appreciable contribution to the threat of serious injury. However, we see no need to modify our reasoning or conclusion on this point. We remain of the view that the USITC's determination that the loss of Wool Act payments was a less important cause of the threat of serious injury than imports of lamb meat is not equivalent to a determination that the termination of the Wool Act payments would not contribute to any appreciable extent to a likely worsening of the industry's situation.

    6.20 In response to the US comment that we should explain why the failure to develop an effective marketing programme can be an "other" factor within the scope of SG Article 4.2(b), we have added the contrary US view in footnote 269. In that footnote we also note, however, that SG Article 4.2(b) is open-ended as to what sorts of "other factors" might be relevant in a given case, and we clarify that in keeping with our standard of review, we have assessed the USITC's determination concerning this factor on its own terms, i.e., as a finding in respect of a possible "other factor" within the meaning of SG Article 4.2(b) as identified and investigated by the USITC. We also see no need to modify our reasoning or conclusion on this point because we remain of the view that the USITC's determination that the failure to develop an effective marketing programme was a less important cause of the threat of serious injury than imports of lamb meat is not equivalent to a determination that this failure to develop such a programme would not contribute to any appreciable extent to a likely worsening of the industry's situation.

    6.21 Concerning our interim findings in respect of remedy under SG Articles 3 and 5, the United States in its request for interim review argues that, contrary to our characterization in footnote 267 of the interim report, it did elaborate on the fourth step of its four-part approach for determining the consistency of a measure with SG Article 5.1, in its response to our question 19. The complainants object to this US comment and consider that our description of the US argumentation is accurate.

    6.22 The United States also requests a number of modifications to section VII.F.4 of the interim report, on the remedy imposed by the US President, generally with a view to clarifying (i) that the parties agreed that the quota quantities under the USITC plurality recommendation and under the measure applied by the US President were roughly equivalent (i.e., when the difference between carcass weight and meat weight is factored in) and that their disagreement was limited to the trade restrictiveness of the in-quota and out-of-quota tariff rates, (ii) that the plurality recommendation, while under US law constituting the recommendation of the USITC, nevertheless is not legally binding, and (iii) that the United States provided in the course of this panel proceeding certain explanations regarding why it believes the measure is consistent with SG Article 5.1, although acknowledging that it did not publish these explanations at the time when the determination was made. The complainants in their comments on the US interim review request argue, in essence, that the explanations of the measure provided by the United States during the course of the dispute were ex post justifications which in their view do not meet the requirements of SG Articles 3 and 5.

    6.23 We have considered the parties' comments, and upon reflection have decided that our interim findings on Article 3 and 5 are not necessary to ensure a positive resolution of this dispute. Therefore we have deleted section VII.F of the interim report, and have simply noted, in paragraph 7.280, our decision to exercise judicial economy for the following reasons. Given our findings in respect of the definition of the domestic industry, threat of serious injury and causation, there is no need for us to reach the remedy issue. This was made clear in footnote 271 of the interim report, in which it was noted that our findings under SG Articles 3.1 and 5.1 in any case were based on the assumption (arguendo) that the requirements of the Safeguards Agreement in respect of domestic industry, threat serious injury and causation had been met. Therefore, even without making findings under SG Articles 3.1 and 5.1, we believe that the findings that we have made in respect of other claims are sufficient to resolve this dispute.

    VII. SUBSTANTIVE ISSUES

    A. STANDAR OF REVIEW

    7.1 We recall that, to abide by our mandate in examining the claims in this case, we must adhere to the correct standard of review. We consider the panel and the Appellate Body findings in the Argentina – Footwear case particularly relevant for the issue of the appropriate standard of review in a safeguards dispute. The panel, in examining the Argentine authorities' finding that there had been, along with actual serious injury, a threat thereof, found that "any determination of threat must be supported by specific evidence and adequate analysis".53 On appeal, the Appellate Body found that the Panel was correct in reviewing the details of the safeguards determination and that the competent authorities had to adequately explain how the facts supported their determination. The Appellate Body stated that:

    "with respect to its application of the standard of review, we do not believe that the Panel conducted a de novo review of the evidence, or that it substituted its analysis and judgement for that of the Argentine authorities. Rather the Panel examined whether, as required by Article 4 of the Agreement on Safeguards, the Argentine authorities had considered all relevant facts and had adequately explained how the facts supported the determinations that were made. Indeed, far from departing from its responsibility, in our view, the Panel was simply fulfilling its responsibility under Article 11 of the DSU in taking the approach it did. To determine whether the safeguard investigation and the resulting safeguard measure applied by Argentina were consistent with Article 4 of the Agreement on Safeguards, the Panel was obliged, by the very terms of Article 4, to assess whether the Argentine authorities had examined all the relevant facts and had provided a reasoned explanation of how the facts supported their determination."54

    7.2 Along these lines, the Panel on Korea – Dairy emphasised that its task was to "examine the analysis performed by the national authorities at the time of the investigation on the basis of the various national authorities' determinations and the evidence it has collected."55

    7.3 Thus we conclude that the standard of review that applies in safeguard disputes, as set out above, requires us to refrain from a de novo review of the evidence reflected in the report published by the competent national authorities. Our task is limited to a review of the determination made by the USITC and to examining whether the published report provides an adequate explanation of how the facts as a whole support the USITC's threat determination.

    B. THE EXISTENCE OF "UNFORESEEN DEVELOPMENTS"

    1. General interpretative analysis of Article XIX of GATT 1994

    (a) Introduction

    7.4 Australia and New Zealand claim that the United States violates GATT Article  XIX because safeguard measures were imposed although increased imports were not a result of unforeseen developments. Rather, for the complainants, increases in imports were in large part a result of decreased US production as a consequence of the removal of subsidies under the Wool Act, which could and should have been foreseen by the United States.

    7.5 The United States contends that (i) the change in the product mix of imports from frozen meat to fresh/chilled meat and (ii) the increase in the size of imported lamb meat cuts were unforeseen developments within the meaning of GATT Article XIX.

    7.6 The complainants allege that there is no mention in the published USITC report of a separate consideration of "unforeseen developments" and that the references to changes in product mix and increasing cut size are contained in sections of that report dealing with different topics.

    7.7 The United States responds that neither GATT Article XIX nor SG Article 3.1 provides for a specific publication requirement with respect to the examination of the existence of unforeseen developments. For the United States it is thus sufficient to demonstrate the existence of unforeseen developments upon challenge before a WTO panel provided that the relevant factual circumstances were considered by competent national authorities at the time of the determination and that such consideration is discernible from the report published by the USITC.

    7.8 GATT Article XIX:1(a) on "Emergency Action on Imports of Particular Products" reads:

    "If, as a result of unforeseen developments and of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions, any product is being imported into the territory of that Member in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the Member shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession." (emphasis added).

    7.9 This Article thus provides for the criteria of (i) "unforeseen developments" and (ii) the "effect of obligations incurred by a Member under this Agreement, including tariff concessions" in addition to the conditions for the imposition of safeguard measures as defined in detail in the WTO Safeguards Agreement.

    (b) Relationship between GATT Article XIX and the Safeguards Agreement

    7.10 In the WTO disputes on Argentina – Footwear and Korea – Dairy, the Appellate Body ruled that the requirements of the WTO Safeguards Agreement and of GATT Article XIX apply on a cumulative basis:

    "Article 1 states that the purpose of the Agreement on Safeguards is to establish 'rules for the application of safeguard measures which shall be understood to mean those measures provided for in Article XIX of GATT 1994' (emphasis added). The ordinary meaning of the language in Article 11.1(a) – 'unless such action conforms with the provisions of that Article applied in accordance with this Agreement' – is that any safeguard action must conform with the provisions of Article XIX of the GATT 1994 as well as with the provisions of the Agreement on Safeguards. Thus, any safeguard measure56 imposed after the entry into force of the WTO Agreement must comply with the provisions of both the Agreement on Safeguards and Article XIX of the GATT 1994."57

    7.11 Thus the Appellate Body explicitly rejected the idea that those requirements of GATT Article XIX which are not reflected in the Safeguards Agreement could have been superseded by the requirements of the latter and stressed that all of the relevant provisions of the Safeguards Agreement and GATT Article XIX must be given meaning and effect.

    7.12 Concerning the criterion "as a result … of the effect of the obligations incurred by a Member under this Agreement, including tariff concessions", the Appellate Body was of the view that this phrase simply means that it must be demonstrated, as a matter of fact, that the importing Member has incurred obligations under the GATT 1994, including relevant tariff concessions on the particular product in question, i.e., in this case the concessions on lamb meat bound by the United States in its Uruguay Round tariff schedule. This issue is not in dispute between the parties in this case.

    (c) Does GATT Article XIX imply a "two-step" or "one-step" causation approach?

    7.13 The parties disagree, however, on whether increased imports were the result of unforeseen developments and threatened to cause serious injury to the relevant domestic industry.

    7.14 In our view, the complainants construe this requirement of GATT Article XIX.1(a) as implying a "two-step causation approach" in the sense that there need to exist (a) unforeseen developments that (b) lead to a surge in imports under such conditions as in turn to (c) cause (a threat of) serious injury58.

    7.15 The United States rejects such a two-step causation approach by contending that the term "unforeseen developments" in GATT Article XIX is grammatically linked not only to import increases "in such quantities", but also to "under such conditions".

    7.16 We do not find, in the ordinary meaning of GATT Article XIX, a textual basis for what we see as a "two-step causation approach" implied by the complainants' arguments. The phrase concerning "unforeseen developments" in Article XIX:1 is grammatically linked to both "in such increased quantities" and "under such conditions". Rather than implying a two-step causation, we view this structure as meaning that while "unforeseen developments" are distinct from increases in imports per se, it may be sufficient for a showing of the existence of this "factual circumstance" that "unforeseen developments" have caused increased imports to enter "under such conditions" and to such an extent as to cause serious injury or threat thereof.59 We note that the Appellate Body also referred to "developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers."60

    (d) What are "unforeseen developments"?

    7.17 The question of "unforeseen developments" under GATT Article XIX was first addressed in the Report on the Withdrawal by the United States of a Tariff Concession under Article XIX of GATT (1951)61 ("Hatters' Fur") under GATT 1947, and subsequently in two WTO disputes, i.e., on Argentina – Footwear and Korea – Dairy.

    7.18 As to the content of the obligation to examine the existence of "unforeseen developments", the Appellate Body in Korea – Dairy and Argentina – Footwear referred to this concept as a factual circumstance which has to be "demonstrated as a matter of fact":

    "The first clause in Article XIX.1(a) – 'as a result of unforeseen developments and of the obligations incurred by a Member under the Agreement, including tariff concessions …' is a dependent clause which, in our view, is linked grammatically to the verb phrase 'is being imported' in the second clause of that paragraph. Although we do not view the first clause of Article XIX.1(a) as establishing independent conditions for the application of a safeguard measure, additional to the conditions set forth in the second clause of that paragraph, we do believe that the first clause describes certain circumstances which must be demonstrated as a matter of fact in order for a safeguard measure to be applied consistently with the provisions of Article XIX."62

    7.19 The Appellate Body's statement does not elucidate the difference between an "independent condition" and a "factual circumstance". In our view, the latter term could be read to imply a lesser threshold than the former. In any case, the Appellate Body makes clear, and the parties do not dispute, that a demonstration of the existence of "unforeseen developments" is a legal requirement.

    7.20 We next turn to the questions of what such "unforeseen developments" could be and how in practice (and at what time) the Member applying safeguard measures has to demonstrate the existence of this factual circumstance.

    7.21 In Korea – Dairy, the Appellate Body addressed the question of what makes "developments" "unforeseen":

    "the dictionary definition of 'unforeseen', particularly as it relates to the word 'developments,' is synonymous with 'unexpected'. 'Unforeseeable', on the other hand, is defined in the dictionaries as meaning 'unpredictable' or 'incapable of being foreseen, foretold or anticipated'. Thus it seems to us that the ordinary meaning of the phrase 'unforeseen developments' requires that the developments which led to a product being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury to domestic producers must have been 'unexpected'". (footnotes omitted).63

    7.22 We find the distinction drawn by the Appellate Body between unforeseen and unforeseeable to be important. In our view, the former term implies a lesser threshold than the latter one. That is, what may be unforeseen, as a matter of fact, within the meaning of unexpected by a particular individual or entity and in a particular situation, may nonetheless be foreseeable or predictable in the theoretical sense of capable of being anticipated from a general, scientific perspective. We believe that a panel's review of a Member's safeguard determination must be specific to the factual circumstances of the particular case at hand, that is, we must consider what was and was not actually "foreseen", rather than what might or might not have been theoretically "foreseeable".

    7.23 As regards the type of facts or events that may be considered as "unforeseen developments", we deem relevant the report of the Working Party in Hatters' Fur. This case concerned a complaint by Czechoslovakia that the United States, in withdrawing a concession on women’s fur hats and hat bodies, had failed to fulfil the requirements of GATT Article XIX. The members of that Working Party (except the United States) agreed

    "that the term 'unforeseen developments' should be interpreted to mean developments occurring after the negotiation of the relevant tariff concession which it would not be reasonable to expect that the negotiators of the country making the concession could and should have foreseen at the time when the concession was negotiated."64

    The members also agreed "that the fact that hat styles had changed did not constitute an 'unforeseen development' within the meaning of Article XIX”,65 but that the effects of the special circumstances of this case, and “particularly the degree to which the change in fashion affected the competitive situation, could not reasonably be expected to have been foreseen by the United States authorities in 1947, and that the condition of Article XIX that the increase in imports must be due to unforeseen developments and to the effect of the tariff concessions can therefore be considered to have been fulfilled."66 (emphasis added).

    7.24 Thus, while the Working Party in Hatters' Fur did not view fashion changes over time per se as an "unforeseen development", it nevertheless accepted that the scale of the particular change in fashion and its duration as well as the degree of its impact on the competitive situation was unforeseen in that case. In other words, fashion changes in general are foreseeable ("change is the law of fashion"67), but the extent of the fashion change in the US market relating to women's fur felt hats (and hat bodies) was unforeseen.

    (e) Does the competent national authority have to reach a reasoned conclusion concerning the existence of "unforeseen developments"?

    7.25 In this dispute, it is a main allegation of New Zealand and Australia that the United States cannot have possibly complied with the requirements of GATT Article XIX because there is no explicit consideration of the question of "unforeseen developments" in the report published by the USITC.

    7.26 The United States contends that nothing in GATT Article XIX requires that a consideration of "unforeseen developments" be published at the time when the determination is made and that the publication requirements of SG Article 3 do not include an examination of "unforeseen developments". The United States argues that a demonstration of the existence of "unforeseen developments" upon challenge in a dispute settlement proceeding is sufficient. In this respect, the United States points to two factual elements which are reflected in the report which the USITC published at the time when the determination was made, i.e., (i) a change in product mix of imports from frozen to fresh/chilled meat and (ii) an increase in the size of the imported cuts of meat, both of which increased the similarity of the imported product to the domestic product, and thus, according to the United States, intensified the competition from the imported products in a way that profoundly changed the US market. In the US view, the changes in the product mix and size of imported products constitute developments which it did not and could not foresee. Thus it claims to have demonstrated the existence of unforeseen developments and satisfied the requirements of GATT Article XIX:1.

    7.27 We note at the outset that GATT Article XIX implies that the fulfilment of the three main conditions (which need to be met for the imposition of a safeguard measure to be permitted under the Agreement) have to be the "result" of, inter alia, "unforeseen developments". This semantic structure of GATT Article XIX suggests that a demonstration of the existence of the circumstance of "unforeseen developments" must be based on factual evidence which was before the competent authority at the time when the investigation was carried out and considered by that authority before the determination to apply a safeguard measure was made. The United States, while contesting a publication requirement, seems to accept that a demonstration of the existence of unforeseen developments upon challenge in a dispute settlement proceeding has to be based on evidence from the time when the safeguards determination was made.

    7.28 We further note that GATT Article XIX does not contain any explicit publication requirement with respect to the consideration of "unforeseen developments". In fact, in terms of provision of information, GATT Article XIX only requires a Member proposing to apply a safeguard measure to notify other Members with a substantial interest as exporters of the product concerned of the proposed measure. In any case, in our view, it is important to distinguish the lack of a requirement to publish an explicit consideration/finding on "unforeseen developments" as such from the requirement to examine information from the record of the safeguard investigation as evidence for the existence of circumstances that were considered by the competent authorities to constitute "unforeseen developments".

    7.29 Nonetheless we feel that GATT Article XIX's lack of a specific publication requirement concerning "unforeseen developments" has to be viewed in the context of the provisions of the Safeguards Agreement, including SG Article 3.1, which must be interpreted cumulatively with GATT Article XIX. In particular, Article 3.1 requires, inter alia, that:

    "... The competent authorities shall publish a report setting forth their findings and reasoned conclusions reached on all pertinent issues of fact and law." (emphasis added).

    Thus, the requirement in this provision is phrased in a very broad way. The competent authorities' "findings and reasoned conclusions" must be in respect of all pertinent issues of fact and law, not on some or selected issues of fact and law.68 Given that GATT Article XIX:1 makes clear that the question of unforeseen developments is intertwined with the basic conditions for the application of a safeguard measure, we conclude that GATT Article XIX:1 read in the context of SG Article 3.1 implies that it must be clear from the published report that the investigating authorities examined the existence of unforeseen developments and came to a reasoned conclusion in this regard.

    7.30 We note that our interpretation of GATT Article XIX:1, read in context with the Safeguards Agreement, is consistent with the findings of the Working Party report on Hatters' Fur. In that case, the records of the national investigation did not contain a separate finding on the existence of "unforeseen developments". Nonetheless, the Working Party accepted that the competent authority's discussion of the degree of the fashion change and its impact on the competitive situation as discernable from the authority's published determination was sufficient proof that the United States had considered that change as an unforeseen development. We note that in Korea - Dairy, the Appellate Body agreed with the interpretation of the Hatters' Fur Working Party of "unforeseen developments".

    7.31 On the basis of the foregoing considerations, we conclude (1) that "two-step" causation is not required under GATT Article XIX:1, i.e., that "unforeseen developments" may be unforeseen changes in the conditions of competition which result in the increased imports causing or threatening to cause serious injury; and (2) that GATT Article XIX:1 read in the context of SG Article 3.1 requires the competent national authority, in its determination, to reach a conclusion demonstrating the existence of "unforeseen developments" in the sense of GATT Article XIX:1. In our view, this substantive requirement of GATT Article XIX:1 could be fulfilled even if the conclusion in question did not use the precise terminology "unforeseen developments". Nevertheless, no matter how such a conclusion is presented in an authority's determination, there needs to be a conclusion that makes clear that changes that had not been anticipated had taken place in the market, and that these changes had resulted in a situation in which increased imports were causing or threatening to cause serious injury.

    2. Examination of "unforeseen developments" in this case

    7.32 In this dispute, the United States advances essentially two factual elements as "unforeseen developments" as a result of which lamb meat was being imported in such increased quantities and under such conditions as to threaten to cause serious injury to domestic producers of the like or directly competitive products: (i) the change in the product mix of imports from frozen lamb meat toward fresh/chilled lamb meat and (ii) the change in cut size of imported lamb meat.

    7.33 In light of our finding, above, that a competent authority should reach a conclusion as to the existence as a matter of fact of unforeseen developments, we need to examine first whether the United States has reached such a conclusion in respect of the change in product mix and/or the change in cut size, of imported lamb. In accordance with our standard of review, we confine our consideration of this issue to the USITC's determination and report.69

    7.34 The United States argues that a shift in the product mix of imports from frozen lamb meat to chilled/fresh lamb meat occurred towards the end of the investigation period, and that this change increased competition between domestic and imported lamb and constituted an "unforeseen development". Thus, the United States argues, it could impose the safeguard measure consistent with the requirements of GATT Article XIX:1 and the Safeguards Agreement. In the US view, in the terminology of SG Article 2.1 and GATT Article XIX:1, the shift in product mix indicated an unforeseen change in the "conditions" under which increased imports entered the United States.

    7.35 On the substance of the argument, the complainants do not contest that as a factual matter the product mix of imports shifted from frozen to chilled/fresh lamb meat over time. Rather, they argue first, that the increase in imports or the composition of those imports cannot itself be an unforeseen development because increased imports have to result from unforeseen developments. As noted above, we do not find such a two-step causation approach to be required, and thus we do not consider this issue any further.

    7.36 The second line of the complainants' arguments is that the shift in the product mix was not unforeseen for the United States (i) because it was a long-term development that already had started before the investigation period commenced in 1993 as well as before the relevant tariff concessions were made in 1994/95, and also (ii) because the share of chilled/fresh meat imports remained a minor proportion of total imports even in most recent years.

    7.37 We thus need to examine whether the USITC demonstrated, as a matter of fact, that the product-mix of imports constituted a development in the conditions under which the imports entered the United States that was unforeseen or unexpected by the United States within the meaning of GATT Article XIX:1.

    7.38 From the statistics in the USITC report it appears that imports of fresh/chilled lamb meat were relatively small in the first part of the investigation period. In particular, the report shows that much of the increase in imports between 1995-1997 was in fresh and chilled lamb (i.e., 101 per cent increase c.f. 11 per cent for frozen product), but that frozen lamb still accounted for 65 per cent of total lamb imports from Australia and new Zealand over the entire period of investigation. Thus we note that in 1997 and interim-1998, the share of fresh/chilled meat had risen to 35 per cent of total imports. In our view, this constitutes a significant proportion of total imports. Moreover, the composition of imports shifted rapidly during the latter part of the investigation period, i.e., after the relevant tariff concessions on lamb meat were made at the end of the Uruguay Round negotiations.

    7.39 However, the United States does not identify in the published USITC report any conclusion to the effect that the shift in product mix was a development that had a profound effect on the US market for lamb meat70 and was unforeseen. In fact, the USITC's determination addresses the product mix shift in the contexts of "like product" and "conditions of competition" and simply describes in factual terms that such a change had occurred. In the "like product" section, the determination states that:

    "We find the differences between imported and domestic lamb meat alleged by the respondents, to the extent that they exist, to be limited. While most domestic lamb meat traditionally has been sold as fresh or chilled and imported lamb meat was sold frozen, imported lamb meat increasingly enters as fresh or chilled. Thus, domestic and imported lamb are to a large extent sold in the same form. The majority of respondents (10 of 16) to the Commission's purchasers' questionnaire reported that the grades, cuts, and sizes enumerated in the survey were available from both importer and domestic sources. ..."71

    7.40 In the section on "conditions of competition", the question of the change in product mix is also addressed in a purely descriptive manner, and is not characterized as unforeseen or unexpected, or in any other way, and seems only to address the degree of substitutability of imported and domestic lamb meat:

    "We find that imported and domestic lamb are somewhat substitutable. Although respondents argued that imported lamb meat was distinguishable from domestic lamb meat in size, taste and consistency of quality and supply, the records shows that imported and domestic products in fact became more similar during the period of investigation. Traditionally, virtually all domestic lamb meat sold in the domestic market was fresh or chilled, and most imported lamb meat was frozen. However, much of the increase in imports between 1995 and 1997 was in fresh or chilled lamb meat, which increased by 101 per cent during that period, as compared to 11 per cent for imports of frozen lamb meat. Moreover, foreign exporters estimate that the major portion of their 1999 increase will be in fresh and chilled lamb meat."72

    7.41 Similarly, the second of the factual elements advanced by the United States as an unforeseen development, that is the increase in the cut size of imported meat during the investigation period is addressed in the section on "conditions of competition" of the USITC report which contains the statement:

    "In addition, there is evidence that imported cuts have become larger in size and more comparable to domestic cuts."73

    7.42 While the above statistics in the USITC report may suggest that the USITC viewed these changes as unforeseen developments, it is also obvious that the above quoted statements by the USITC on the degree of similarity and substitutability of domestic and imported products74 do not constitute a conclusion that the shift in the product mix or the increase in the cut size constituted an unanticipated change that created conditions in which increased imports were causing or threatening to cause serious injury. In our view therefore it would not normally be possible to conclude from the above statements that the USITC demonstrated as a matter of fact that the change in product mix or the increase in cut size, was an "unforeseen development" in the sense of GATT Article XIX:1.

    7.43 Therefore it is our view that these USITC statements concerning the change in product mix or the increase in cut size, on their face, are simple descriptive statements, and cannot be construed as a conclusion as to the existence of "unforeseen developments" in the sense of GATT Article XIX:1.

    (b) Finding on "unforeseen developments"

    7.44 In the light of the foregoing, we conclude that the USITC report does not contain a conclusion that either the change in product mix or the increase in cut size was an "unforeseen development" in the sense of GATT Article XIX:1. In view of this, we need not consider whether any such conclusion was "reasoned" in the sense of SG Article 3.1.

    7.45 We therefore find that the United States has failed to demonstrate as a matter of fact the existence of unforeseen developments as required by Article XIX:1(a) of GATT 1994.


    1 WT/DS/177/1.

    2 WT/DS/177/4.

    3 WT/DS/178/1 and Corr.1.

    4 WT/DS/178/5 and Corr.1.

    5 G/SG/N/6/USA/5 (Exh. US-3).

    6 G/SG/N/8/USA/3 + Corr.1 and Corr.2 (Exh. US-4)

    7 USITC Publication 3176, "Lamb Meat", Investigation TA-201-68, April 1999. ("USITC Report", Exh. US-1.)

    8 G/SG/N/8/USA/3/Rev.1 (Exh. US-5).

    9 G/L/313, G/SG/19 (Exh. US-8).

    10 Proclamation 7208 of 7 July 1999, "To facilitate positive adjustment to competition from imports of lamb meat".(Exh. US-2.)

    11 G/SG/N/10/USA/3 (Exh. US-6).

    12 G/SG/N/10/USA/3/Suppl.1 (Exh. US-7).

    13 G/SG/N/11/USA and G/SG/N/11/USA/3/Suppl. 1 (Exh. US-6 and –7).

    14 GATT 1994 Article XIX:1

    15 Australia's first submission, Annex 1-1, at paragraphs 15ff.

    16 Article 11 of the DSU: "… Accordingly, a panel should make an objective assessment of the matter before it, including an objective assessment of the facts of the case and the applicability of and conformity with the relevant covered agreements, and make such other findings as will assist the DSB in making the recommendations or in giving the rulings provided for in the covered agreements. …"

    17 New Zealand's first submission, Annex 2-1, at paragraphs 7.22ff.

    18 US request for preliminary rulings, 5 May 2000, Annex 3-1, at paragraph 5.

    19 Id. at paragraph 6.

    20 Id. at paragraph 7.

    21 Id. at paragraph 8.

    22 Id. at paragraph 9.

    23 Id. at paragraph 14.

    24 New Zealand also pointed out that the US practice with respect to the level of detail it provides in its panel requests was similar in the disputes concerning Canada – Measures Affecting the Importation of Milk and Exportation of Dairy Products (WT/DS103/R and WT/DS103/AB/R, panel and Appellate Body reports adopted on 27 October 1999, and Mexico – Antidumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, (WT/DS132/R), panel report adopted on 24 February 2000.

    25 The request made by New Zealand is contained in WTO Document WT/DS177/4, dated 15 October 1999 and the request by Australia is contained in WTO Documents WT/DS178/5 and WT/DS178/5/Corr.1, dated 15 and 29 October 1999. As noted, these requests are attached at Annex 5.

    26 Appellate Body Report on Korea – Definitive Safeguard Measures on Imports of Certain Dairy Products, (complaint by the European Communities), adopted on 12 January 2000, (WT/DS98/AB/R), paragraph 120.

    27 Id. at paragraph 124.

    28 US request for preliminary ruling, Annex 3-1, at paragraph 6.

    29 Id. at paragraph 7.

    30 Id. at paragraph 8.

    31 Id. at paragraph 9.

    32 Id. at paragraph 5.

    33 Appellate Body Report on Korea – Dairy, paragraph 129.

    34 We note in particular that the claims raised by Australia and New Zealand cover both subparagraphs of SG Article 2.1, and all of the relevant subparagraphs of SG Article 4. As to SG Article 3.2, the only subparagraph of the listed Articles that is not the subject of a claim, its lack of relevance to this dispute would be clear to the United States, as that provision concerns the treatment of confidential information during the course of a safeguard investigation, and thus any issue in respect of that provision would arise during the investigation at the national level.

    35 We also note that the issue of the "substantial cause" standard provided for in the US safeguards law was already raised in discussions of the WTO Committee on Safeguards in the course of the general review process of the national legislation of the United States in 1995 and 1996. (See questions in G/SG/W/39 and US replies to questions by Australia concerning the notification provided by the United States of laws and regulations under SG Article 12.6 , G/SG/W/160.)

    36 See Minutes of the Meeting of the WTO Committee on Safeguards on 23 April 1999, paragraph 60 of G/SG/M/13.

    37 Exhs. NZ-11, AUS-25 and AUS-35 .

    38 Exhs. NZ-12, AUS-27 and AUS-36.

    39 Appellate Body Report on Brazil – Measures Affecting Desiccated Coconut, (WT/DS22/AB/R), adopted on 20 March 1997, p. 22.

    40 WT/DS177/4 and WT/DS178/5 and Corr.1 (attached at Annex 5).

    41 Minutes of DSB meetings, WT/DSB/M/70, dated 15 December 1999, p. 8 and WT/DSB/M/71, dated 11 January 2000, p. 14.

    42 We recognize that there is, of course, no requirement under the DSU that allegations concerning the sufficiency of a panel request be brought to the attention of the DSB and other parties before or at the DSB meeting establishing a panel. We simply believe that the absence of any objection in the DSB to the specificity of the panel requests would constitute a further "attendant circumstance" that would be relevant.

    43 Paragraph 13: "A party shall submit any requests for preliminary rulings not later than in its first submission to the Panel. If the complaining party requests such a ruling, the respondent shall submit its response to the request in its first submission. If the respondent requests such a ruling, the complaining party shall submit its response to the request prior to the first substantive meeting of the Panel, at a time to be determined by the Panel in light of the request. Exceptions to this procedure will be granted upon a showing of good cause."

    44 WT/DS108/AB/R, paragraph 166.

    45 Id. at paragraph 165.

    46 Our initial proposal was that the complainants' first submissions be due on 13 April 2000, that the United States' first submission be due on 4 May 2000, and that the third party submissions be due on 11 May 2000. At the organizational meeting, New Zealand proposed that the complainants' submissions be due on 20 April, that the United States' submission be due on 11 May and that the third party submissions be due on 18 May. The United States proposed in response that the complainants' first submissions be due on 18 April, that the Unites States' first submission be due on 11 May, and that the third party submissions be due on 18 May. During the course of the discussion, the parties accepted the following dates, which we incorporated into the timetable, for filing their first submissions: complainants' first submissions to be due on 19 April, United States' first submission to be due on 11 May, and third party submissions to be due on 18 May.

    47 US Request for Preliminary Ruling, Annex 3-1, at paragraph 7.

    48 See Appellate Body Report on European Communities – Regime on the Importation, Sale and Distribution of Bananas (III), (WT/DS27/AB/R), paragraph 143 and Appellate Body Report on Korea – Dairy, paragraphs 123-125.

    49 Appellate Body Report on Canada – Measures Affecting the Export of Civilian Aircraft (WT/DS70/AB/R), adopted 20 August 1999, paragraphs 181-206.

    50 Question 24 by the Panel to the United States (Annex 3-7).

    51 The United States also requested a modification of paragraph 7.213.

    52 The United States, in its comments on New Zealand's request for interim review, objects to New Zealand's comment on this issue, stating that the Panel distinguished between statistics and statements in the USITC report.

    53 Panel Report on Argentina – Safeguard Measures on Imports of Footwear, (complaint by the European Communities), adopted on 12 January 2000, (WT/DS121/R), paragraph 8.285 (emphasis added).

    54 Appellate Body Report on Argentina – Footwear, WT/DS121/AB/R, adopted 12 January 2000, paragraph 121 (underline emphasis added; italic emphasis in original).

    55 Panel Report on Korea – Dairy, paragraph 7.55.

    56 Original footnote 38: “With the exception of special safeguard measures taken pursuant to Article 5 of the Agreement on Agriculture or Article 6 of the Agreement on Textiles and Clothing.

    57 Appellate Body Report on Korea – Dairy, paragraph 77.

    58 We note that New Zealand disagrees with a characterization of its position as "imposing a double causation test", in particular stating that it does not argue that unforeseen developments must cause increased imports which in turn cause serious injury or threat thereof. Rather, New Zealand states, its argument is that "in order to comply with the requirement that unforeseen developments be demonstrated, the United States must indicate some developments that were unforeseen that led to products being imported in such increased quantities and under such conditions as to cause or threaten to cause serious injury." (Second Written Submission of New Zealand, Annex 2-9, at paragraph 2.12.)

    59 We note in this context the Appellate Body's statement that "[t]he principle of in dubio mitius applies in interpreting treaties, in deference to the sovereignty of states." See Appellate Body Reports on EC – Hormones, at footnote 154 to paragraph 165.

    60 Appellate Body Report on Korea – Dairy, at paragraph 84 (emphasis added).

    61 GATT/CP/106, Working Party Report adopted on 22 October 1951, GATT/CP.6/SR.19.

    62 Appellate Body Report on Argentina – Footwear, at paragraph 92.

    63 Appellate Body Report on Korea – Dairy, at paragraph 84.

    64 GATT/CP/106, report adopted on 22 October 1951, GATT/CP/.6/SR.19, at paragraph 9.

    65 Id., at paragraph 11.

    66 Id., at paragraph 12.

    67 Id., at paragraph 10.

    68 We note in this context that no party disputes that the published report needs to contain findings concerning the main conditions for the lawful imposition of safeguard measures (i.e., (i) increased imports, (ii) serious injury or threat thereof, (iii) causal link between the two) and also concerning other issues (e.g., on the definition of the relevant like or directly competitive products and the pertinent domestic industry), although these conditions are not mentioned in express terms in SG Article 3.1.

    69 We note here that the United States has not argued that we should consider any other documents or evidence in considering this matter, nor has it offered any such documents or evidence.

    70 See, US Answer to Question 1(c) from the Panel (Annex 3-7): "The shift in the product mix of imports … deeply affected conditions in the U.S. market".

    71 USITC Report, Exh. US-1, at I-11.

    72 Id. at I-22-23.

    73 Id.

    74 We note that the remedy section of the USITC's report contains two additional references to the shift in imports toward fresh/chilled lamb meat. (USITC Report, Exh. US-1, at I-30 and I-31). Because these references are made in the context of remedy, which the USITC addressed in a separate hearing several weeks after having reached its injury and causation determination, they are not relevant to our consideration of whether the injury/causation determination contains a conclusion as to the existence of unforeseen developments.