United States: WTO Panel Rules Against Ukraine On Numerous Issues Regarding Its Safeguard Measure on Certain Passenger Cars

Keywords: WTO, Ukraine, passenger cars

On June 26, 2015, a World Trade Organization (WTO) dispute settlement panel circulated its decision in Ukraine – Definitive Safeguard Measures on Certain Passenger Cars (WT/DS468/R). Japan, the complainant, had challenged numerous aspects of Ukraine's safeguard measure on imports of certain passenger cars and the investigation that led to imposition of this measure. The panel upheld most of Japan's substantive claims, finding Ukraine in violation of its obligations under the relevant provisions of the WTO Agreement on Safeguards and the General Agreement on Tariffs and Trade 1994. Panels normally only recommend that a WTO Member ("Member") bring a measure into compliance with its WTO obligations. However, in "light of the nature and number of inconsistencies" with the Safeguards Agreement and GATT 1994 in this case, the panel suggested that Ukraine revoke its measure on passenger cars in its entirety.

GATT Article XIX sets out the general authority for Members to apply safeguard measures to counteract injurious increases in imports. The Safeguards Agreement establishes additional rules for the application of such measures. The panel in this case first upheld Japan's claim that the Ukrainian investigating authorities improperly identified the relative increase in imports as the "unforeseen development," contrary to the requirement of GATT Article XIX:1(a), rather than identifying and explaining any unforeseen developments that resulted in that relative increase in imports. The panel also found that, pursuant to Article XIX:1(a), a Member must demonstrate that the product has been imported in increased quantities as a result of the effect of GATT 1994 obligations of the Member concerned. According to the panel, Ukraine similarly failed to comply with this requirement.

The panel next examined Japan's claims against Ukraine's determination of increased imports. In particular, Article 2.1 of the Safeguards Agreement requires that, to support applying a safeguard measure, the product in question must have been imported into the Member's territory "in such increased quantities," either in absolute terms or relative to domestic production, as to cause or threaten to cause serious injury or threat thereof to the domestic industry. Japan did not contest Ukraine's finding of a 37.9 percent increase in imports relative to domestic production over the entire period of investigation (POI), 2008-2010.

However, according to the panel, the Ukrainian authorities did not satisfy the separate "in such increased quantities" requirement, under which a Member must conduct a proper qualitative analysis of the import data with regard to import trends. The panel found that Ukraine acted in a manner inconsistent with Article 2.1 by not explaining how intervening trends in imports relative to domestic production supported the determination of a relative increase in imports during the POI. Article 2.1 also requires, in accordance with previous Appellate Body decisions, that the relative increase in imports has been "sudden enough, sharp enough, and significant enough." Ukraine failed to provide any analysis of this requirement. Upon examining the record itself, the panel found that the evidence did not support a finding that the increase in imports was either "sharp", "sudden" or "significant" enough.

Article 2.1 next provides that a safeguard is appropriate only if a product "is being imported" in increased quantities. Thus, as the panel explained, the increase in imports must be "recent" enough to cause or threaten serious injury, both in relation to the date of the determination and the date of the decision to apply a safeguard measure. "This minimizes the potential of 'emergency action' being taken outside emergency situations by ensuring that any time gap between the determination and the application of a safeguard measure remains appropriately limited." The question of precisely where to draw the line between proper and improper time gaps must be addressed, according to the panel, on a case-by-case basis. Here, there was a 16-month gap between the end of the POI (2010) and the determination date (April 28, 2012), which the panel found was not long enough to call into question the finding of a "recent" increase in imports. By contrast, the panel found that the gap of more than two years between the end of the POI and the date of the decision to apply the safeguard measure (March 14, 2013) was such that the authorities could no longer maintain, based on data from 2008 to 2010 alone, (1) that passenger cars were "being imported" in increased quantities within the meaning of Article 2.1, and (2) that the determination of increased imports continued to rest on a sufficient factual basis.

The panel next examined Japan's claims related to the manner in which the Ukrainian authorities made their findings regarding serious injury or threat thereof, under Article 4.2(a) and numerous other provisions of the afeguards Agreement. The panel first determined that Ukraine had found a threat of serious injury, which, pursuant to Article 4.2(a), requires the authorities to establish (i) the clear imminence of (ii) significant overall impairment in the position of the domestic industry. The panel highlighted the "very high standard of injury embodied by the concept of serious injury." Moreover, while the concept of "threat of serious injury" implies a lower threshold for establishing the "right to apply a safeguard measure," the Safeguards Agreement does not make threat of serious injury easier to establish than actual serious injury. In both contexts, the Member must be able to demonstrate the same elements regarding serious injury. In the threat context, it must also be demonstrated that such injury is "clearly imminent," which requires showing that serious injury is highly likely in the very near future, unless protective action is taken.

The authorities must examine all relevant injury factors, with the data pertaining to the latter part of the POI being of particular relevance. Among the mandatory injury factors that authorities must evaluate are the share of the domestic market taken by increased imports and the rate and amount of the increase in imports in absolute and relative terms. While finding that domestic production in Ukraine decreased by 35 percent, the authorities failed to properly evaluate the likely development of the import market share and its likely effect on the condition of the domestic industry in the very near future. The panel then concluded that the rate and amount of an increase in imports during the POI may indicate a likelihood of increased importation in the very near future and so are relevant to an analysis of threat of serious injury. However, the Ukrainian authorities failed to properly evaluate the likely development of imports—either in absolute terms or relative to domestic production—or their likely effect on the domestic industry in the very near future. Similarly, the authorities failed to properly evaluate the likely increase in the very near future of exports to Ukraine, which are anticipated to rise as a result of exporting countries' current or imminent export capacity. Likewise, the authorities provided only a superficial evaluation of the factors relating directly to the situation of the domestic industry, including production volume, capacity utilization, sales, etc.; no projections as to likely developments in these factors in the very near future; and no analysis of intervening trends throughout the POI, including improvements in the condition of the domestic industry toward the end of the POI. Therefore, the panel found that Ukraine had failed to properly evaluate the likely condition of the domestic industry and the likely effect of these developments on the industry in the very near future.

The panel turned next to Japan's claims under Article 4.2(b) of the Safeguards Agreement, beginning with the requirement of a causal link between increased imports and serious injury or threat thereof. The panel agreed that upward movements in imports should normally occur at the same time as downward movements in injury factors. However, contrary to Ukraine's contention, this coincidence, by itself, is insufficient to establish a causal link. In addition, the panel concluded that the conditions under which increased imports occur is an element to be considered as part of the causation analysis, as are the conditions of competition. In this case, the panel found that the authorities did not undertake a proper analysis of the relationship between movements in imports and the injury factors, including whether there was a high degree of likelihood that a causal link would still exist in the very near future. Given the Ukrainian authorities' failure to demonstrate how a relative increase in imports contributed to bringing about a threat of serious injury, the panel concluded that Ukraine had acted inconsistently with its obligations under Article 4.2(b). Article 4.2(b) also precludes Members from attributing injury caused by factors other than increased imports to those imports. As the panel explained, the Safeguards Agreement does not establish the "method and approach" that Members must use to separate and distinguish the injurious effects of the increased imports from those of other factors causing injury at the same time. However, the authorities must do so explicitly and the "explanation must be clear and unambiguous." In cases involving a threat of serious injury, the authorities must also include a forward-looking assessment of whether other factors currently causing injury will continue to do so in the very near future. In this case, the Ukrainian authorities failed either to identify any other factors causing injury or the nature and extent of the injurious effects of those other factors, as distinguished from the effects of increased imports. The determination also did not explain the nature and extent of the injurious effects of any other factors or the particular method and process used to separate and distinguish other causal factors. Because the determination failed to meet any of these requirements, the panel found that Ukraine acted inconsistently with its obligations under Article 4.2(b).

Japan also made a number of claims under various articles relating to the application, duration and liberalization of the safeguard measure. For one, Japan argued that Ukraine had failed to progressively liberalize the safeguard measure, as required by Article 7.4 of the Safeguards Agreement for any measure with an expected duration of more than one year. The panel first held that, contrary to Japan's claim, Ukraine was not required to provide a timetable for the progressive liberalization before applying its three-year safeguard measure. The panel next explained that the required liberalization must take place "at regular intervals during the period of application." Article 7.4 does not establish any requirements or guidelines as to how long the regular intervals must be. Ukraine decided to progressively liberalize its measure at regular intervals of 12 months, which the panel found to be reasonable. The panel rejected a number of similar claims by Japan and exercised "judicial economy" by declining to consider certain other claims.

The panel also rejected or exercised judicial economy regarding several other procedural claims by Japan. The panel agreed with Japan, however, that Ukraine acted inconsistently with its obligations under Article 4.2(c) of the Safeguards Agreement. That provision requires that the authorities' report be published "promptly" once there has been a determination of serious injury or threat thereof caused by increased imports pursuant to Article 4.2(a). In this case, Ukraine's notice of its determination was the type of report that Ukraine was required to publish "promptly." The notice was published on March 14, 2013, after the determination was reached and the investigation concluded on April 28, 2012. The panel found that publishing the notice almost 11 months after the determination date was not "promptly," contrary to Ukraine's obligations under Article 4.2(c).

The panel went on to find that, by notifying the Committee on Safeguards of the initiation of the investigation 11 days after publication of the initiation notice, Ukraine failed to comply with the requirement of "immediate" notification pursuant to Article 12.1(a) of the Safeguards Agreement. The panel also found that Ukraine was required by Article 12.1(b) to notify the Committee on Safeguards "immediately" of its finding of threat of serious injury on April 28, 2012. However, Ukraine did not provide this notification until March 21, 2013. The panel found that, in view of this "substantial delay," Ukraine "did not proceed with the required degree of urgency and failed to keep the delay in notifying the Committee on Safeguards to a minimum." Ukraine thus violated Article 12.1(b).

Finally, Article 19.1 of the WTO Dispute Settlement Understanding (DSU) requires panels to "recommend" that Members bring their measures into conformity with any relevant agreements. Pursuant to Article 19.1, panels also "may suggest ways in which the Member concerned could implement" a panel's recommendations. Following such recommendations, Members in most cases revise their measures in an effort to comply. The panel here deviated from that precedent, however, in "light of the nature and number of inconsistencies" with the Safeguards Agreement and GATT 1994. The panel instead "suggest[ed] that Ukraine revoke its safeguard measure on passenger cars" altogether.

Originally published June 30, 2015

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2015. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.