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Legal Update

WTO Appellate Body Upholds Special Safeguard Measure Imposed by the United States on Certain Chinese Tires

12 September 2011
Mayer Brown Legal Update

On September 5, 2011, the Appellate Body of the World Trade Organization (WTO) published its report on United States – Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China (DS399). The Appellate Body affirmed an earlier ruling by a WTO dispute settlement panel that the United States did not act inconsistently with its WTO obligations when it imposed a tariff (also known as a “safeguard” measure) on imports of certain passenger vehicle and light truck tires from China. This is the first case to address a provision in China’s WTO Accession Protocol that allows other WTO Members to impose product-specific restrictions on Chinese imports when the imports enter a Member country in such significant numbers so as to cause material harm to its domestic industry.

China brought the case to the WTO after President Obama signed an order in September 2009 imposing a safeguard measure on imports of Chinese tires in the form of additional import tariffs for a three-year period. The investigation that led to the President’s decision was initiated by the United Steelworkers union when it filed a petition in April 2009 with the US International Trade Commission (USITC) alleging that certain passenger vehicle and light truck tires produced in China were being imported into the US in such increased quantities or under such conditions as to cause or threaten to cause market disruption to domestic producers of like or directly competitive products. The USITC determined that there was market disruption due to the rapidly increasing imports of the particular tires from China that were a significant cause of material injury to the US domestic tire industry.

In December 2010, a WTO panel found that the US had not violated its obligations under Section 16 of China’s Accession Protocol when it imposed the tires safeguard measure. Under Section 16 of the Protocol, WTO Members have the right to impose safeguard measures on imports from China when such imports are “increasing rapidly” so as to be “a significant cause” of material injury to the domestic industry. China immediately appealed the panel’s decision, which the Appellate Body has now upheld. In particular, the Appellate Body affirmed the panel’s finding that the USITC had properly evaluated whether China’s imports were “increasing rapidly” and were “a significant cause” of material injury to the US domestic industry under Paragraph 16.4 of the Protocol.

US Trade Representative Kirk has hailed the Appellate Body’s decision as a “tremendous victory” for US workers and manufacturers. The US, he added, “will use our trade laws to stand up for our workers and address harm to them.” However, the ability of the US to impose safeguard measures on other imports from China in the future is limited. Safeguards can be put in place for a three-year period. Section 16 of China’s Accession Protocol, which allows for safeguards, expires at the end of 2013. Although it is unclear whether this means new safeguard measures cannot be put in place after 2013 or whether existing safeguards cannot continue after this date, the approaching expiration date seems to have deterred other US industry groups from seeking safeguard measures. No safeguard petitions have been filed since the Chinese tires safeguard order was issued in 2009.

For more information about the matters raised in this Legal Update, please contact at +1 202 263 3811, at +32 2 551 5950, or at +1 202 263 3881.

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