WASHINGTON - The Office of the United States Trade Representative announced today that the United States and Korea have resolved a two-year-old World Trade Organization (WTO) dispute over U.S. tariffs on circular line pipe imported from Korea.

The agreement, which allows Korea to increase in stages line pipe exports to the United States after Sept. 1, 2002, resolves Korea's WTO challenge over U.S. tariffs that were imposed in March 2000 under Section 201 of the Trade Act of 1974. WTO rules recognize a country's right to impose this type of trade remedy when increased imports threaten an industry.

Korea and the United States reached the agreement after the WTO Dispute Settlement Body issued a mixed ruling in March that upheld some provisions of the Section 201 tariff but found against the United States on other issues. Under the U.S.-Korea agreement, the Section 201 tariff will be applied only if line pipe imports from Korea exceed 17,500 tons per quarter. The tariff is scheduled to expire on March 1, 2003.

Background

On March 1, 2000, the United States imposed a safeguard action under Section 201 of the Trade Act of 1974 on circular welded steel line pipe, after the U.S. International Trade Commission ruled that an increase in imports from Korea was injuring the U.S. industry. The safeguard measure imposed a tariff, currently equal to 11 percent, on imports above certain levels over a three-year period.

Korea challenged the U.S. action before the WTO in September 2000, and asked that a dispute resolution panel rule on the validity of the U.S. safeguard measure. The dispute resolution panel issued a report that upheld many important aspects of the safeguard measure, but found against the United States on several issues. The Appellate Body upheld these findings on February 15, 2002, and the WTO Dispute Settlement Body adopted those findings on March 8, 2002. A summary of these findings is attached.

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Summary of WTO Appellate Body Report

• The Appellate Body upheld three aspects of the U.S. safeguard measure:

• The Appellate Body rejected the argument that the panel had created a rule that the causation standard under Section 201 was itself inconsistent with WTO rules.
  
• The Appellate Body rejected the argument that the International Trade Commission could make an affirmative determination only if a majority of commissioners agreed that there was serious injury as opposed to the threat of serious injury.
  
• The Appellate Body found that the United States is not required to explain, at the time of taking a safeguard measure, how that measure conforms with WTO rules.

• The Appellate Body found that the United States failed to provide sufficient time for consultations with other WTO members between the announcement of the Section 201 safeguard action and its effective date and, accordingly, did not endeavor to rebalance the level of concessions with other members.
  
• The Appellate Body found that the United States did not provide a sufficient guarantee that developing countries would receive preferential application of the safeguard action as required by WTO rules.
  
• The Appellate Body found that the United States did not establish the factual basis to exclude Canadian and Mexican line pipe from the safeguard action, as required under the North American Free Trade Agreement.
  
• The Appellate Body found that the ITC's causation findings did not satisfy WTO rules for establishing the existence of a causal link between increased imports and serious injury or threat of serious injury to domestic producers.
  
• The Appellate Body found that the United States failed to show that it applied the safeguard action only to the extent necessary to remedy the injury caused by increased imports, and not injury caused by other factors.