The World Trade Organization Appellate Body upheld an earlier Panel decision handing the United States a complete victory over China in its appeal of the United States’s imposition of safeguard duties on imports of certain passenger vehicle and light truck tires from China under Section 421 of the Trade Act of 1974. The Appellate Body confirmed that the duties imposed for a three-year period are a WTO-consistent remedy for U.S. tire manufactures.

As explained in our January 2011 edition, Section 421 is the statutory provision that allows the President, after a determination by the U.S. International Trade Commission (“ITC”) of market disruption by Chinese imports, to impose special safeguard duties on imports of products subject to the investigation. The provision incorporates into U.S. law those terms of China’s WTO accession that permit the use of such special safeguards until December 11, 2013.

China’s claims to the Appellate Body were similar to its claims to the Panel. Specifically, China challenged the Panel’s determination that the United States properly found Chinese imports to be “increasing rapidly” and “a significant cause” of material injury to the domestic industry within the meaning of Paragraphs 16.1 and 16.4 of China's Accession Protocol. China also claimed that the Panel acted inconsistently with its duty to conduct an objective assessment of the application of the term “a significant cause” as required under Article 11 of the Dispute Settlement Understanding.

The Appellate Body found no error in the Panel’s endorsement of the U.S. conclusion that subject imports increased rapidly, both absolutely and relatively, throughout the period by significant amounts. It also found that the United States properly attributed the cause of injury to the subject imports. Finally, Appellate Body rejected China’s argument that the Panel did not conduct an objective assessment of the term “a significant cause.”

The Appellate Body Report, handing the United States a wholesale victory, demonstrates that Section 421 can be an effective, WTO-consistent remedy for U.S. manufacturers experiencing market disruption due to rapidly increasing imports from China. The U.S. tire industry will continue to receive the benefits from the ITC’s determination until September 2012.