Title I - Safeguard Amendments

Sec. 101. Amendments to Chapter 1 of Title II of the Trade Act of 1974

Create Stronger, More Effective Safeguard Relief. Section 101 of the bill contains seven key amendments to strengthen sections 201-204 of the Trade Act of 1974, as amended (the "1974 Act") (19 U.S.C. §§ 2251-2254). Sections 201-204 (collectively, "Section 201") allow U.S. industries to obtain relief from serious injury caused by imports – including in the form of higher tariffs and import quotas – even when unfair trade practices such as dumping are not present. The amendments in the bill provide a coherent package of changes that will: remove the current, unnecessarily high standard for demonstrating a causal link between imports and injury to the U.S. industry; restructure Section 201 standards to ensure that import surges can be addressed more quickly and effectively; expand the availability of early and meaningful provisional relief; extend application of a captive production provision to Section 201, and clarify that provision to ensure its effective application; and improve injury analysis by adding common sense factors to the injury analysis the U.S. International Trade Commission (ITC) is required to conduct.

Remove Unduly High Causation Standard. Under current law, increased imports must be a "substantial cause of serious injury, or threat thereof" for the ITC to make an affirmative determination under Section 201. The "substantial cause" standard establishes a significant and unnecessary obstacle to obtaining relief under the statute, because it requires that increased imports be "not less than any other cause" of injury, typically the primary or leading cause of injury. Moreover, this standard is higher than that allowed under the WTO Agreement on Safeguards, which requires only that increased imports "cause serious injury, or threat thereof."

Section 101 of the bill amends the Section 201 causation standard to comport with the causation standard established in the WTO Safeguards Agreement. As amended, U.S. law will require that increased imports would have to cause, or threaten to cause, serious injury for the ITC to issue an affirmative determination. Imports will no longer have to be a cause of injury that is important and not less than any other cause. Rather, imports will have to be found to contribute significantly and need not be equal to or greater than any other causes, or even more important than any other cause.

The ITC will continue to follow past practice in applying section 202(c)(2)(B) – which provides that the ITC "examine factors other than imports which may be a cause of serious injury, or threat of serious injury to the domestic industry," but not weigh factors – thereby ensuring that U.S. decisions are fully compliant with the WTO Safeguards Agreement, including article 4.2(b).

To assist the ITC in applying this causation standard, the bill directs the ITC to focus its analysis on the rate and amount of the increase in imports, the import share of the domestic market, and the timing and volume of imports (see section on import surges, below).

Address Import Surges More Quickly and Effectively. A substantial shortcoming in existing U.S. law is its failure to recognize expressly that import surges occurring in a short period of time, such as the import surge that occurred over 1997-1998 in steel, can cause or threaten to cause serious injury. In particular, the ITC's practice of examining injury, typically over a five-year period, has led to the perception that injury must ripen or mature over a number of years in order to meet the standards in the statute. Section 101 of the bill corrects this problem by requiring the ITC to consider in its causation analysis the timing and volume of imports, specifically including whether there has been a substantial increase in imports over a short period of time. The bill makes clear that an import surge is not in any way required in order to establish causation – in other words, this change is intended to supplement existing practice not replace it.

Create Greater Likelihood that President Will Implement 201 Remedy. If the ITC makes an affirmative finding, then it forwards recommendations for relief to the President. Under section 203 of the 1974 Act (19 U.S.C. § 2253), the President may deny relief, in whole or part, if the President determines that the economic and social costs outweigh the benefits. Section 101 of the bill would make it more difficult for the President to deny a remedy, unless there was a strong and clear justification for doing so. For example, upon an affirmative determination, the President would be required to provide appropriate and feasible relief which will facilitate a positive adjustment to import competition unless doing so would have an adverse impact on the United States clearly greater than the benefits of such relief.

Improve Effectiveness of Section 201 by Including Common-Sense Factors for Injury Determinations. Section 101 of the bill also clarifies the factors that the ITC is required to consider in determining whether the U.S. industry is experiencing or is threatened with serious injury. With respect to serious injury, section 101 of the bill requires the ITC to consider, in addition to the factors currently enumerated in the statute, the change in the levels of sales, production, productivity, capacity utilization, profits and losses, and employment. These indicia, which are provided for in the WTO Agreement on Safeguards, should assist the ITC in focusing its analysis on current industry conditions, in addition to any historical trends in the domestic industry that may be relevant.

Section 101 of the bill also makes the Section 201 provisions governing threat of serious injury more effective. (19 U.S.C. § 2252(c)(1)(B)). For example, section 101 requires the ITC to consider conditions in foreign industries that point to the possibility of further increases in exports to the U.S. market. These factors include foreign production capacity, foreign inventories, the level of demand in third country markets, and the availability or foreclosure of other export markets. These modifications will ensure that the ITC conducts a more comprehensive threat analysis as it requires the ITC not only to consider the state of the U.S. industry, but also conditions in foreign industries and markets. The threat standard is particularly important, because it can be used to provide relief before workers and firms suffer full-blown injury, if the evidence indicates that such injury is imminent. Proper and effective use of the threat standard can save jobs and avoid injury to firms.

Section 101 provides, as well, that the ITC may reduce the weight accorded to data from the period after a petition for an investigation has been filed or a request for an investigation has been made. Often, imports of a product will decline in response to the filing of a petition. Section 101 directs the ITC to consider whether any change in the volume of imports that has occurred since a petition was filed, or a request for an investigation was made, is related to the pendency of the investigation, and if so, provides that the Commission may reduce the weight accorded to the data for the period after the petition was filed or the request was made in making its determination of serious injury, or the threat thereof.

Expand Availability of Early, Provisional Relief. Existing U.S. law authorizes imposition of provisional measures after 90 days, if circumstances warrant this relief (19 U.S.C. § 2251(d)). The bill strengthens these provisions in two ways.

First, the bill directs the ITC to consider whether there is or has been an import surge in determining whether provisional relief should be provided. By requiring the ITC to look at import surges, the bill makes clear that import surges can be an important indicator that critical circumstances exist, and that provisional relief should be provided.

Second, under current law, the ITC is allowed to make a critical circumstances finding and recommend provisional relief only if the investigation resulted from a petition by a domestic industry (19 U.S.C. § 2252(d)). Current law does not allow for the possibility of provisional relief in the case of Section 201 investigations begun at the request of USTR, the Committee on Ways and Means or the Committee on Finance, or in the case of investigations self-initiated by the ITC.

The steel import crisis that began in 1997-1998, and which is continuing, made clear that expeditious provisional measures often are crucial in preventing irreparable harm to a domestic industry adversely affected by increased imports. As a consequence, section 101 of the bill changes U.S. law to allow the President and respective Committees to assert critical circumstances, and to request provisional relief in situations where they have requested initiation of a Section 201 investigation.

Extend and Improve Application of the Captive Production Provisions of U.S. Antidumping and Countervailng Duty Laws. Section 101 of the bill would extend to Section 201 the "captive production" provision of U.S. antidumping (AD) and countervailing duty (CVD) law, and improve the application of that provision (in parallel with clarifications and improvements made in the AD/CVD area by the Trade Law Reform Act of 2001, see description of section 201 of the bill, below). The captive production provision, originally enacted as part of the Uruguay Round Agreements Act, is intended to ensure that the ITC, in conducting an injury analysis, focuses primarily on the production of the domestic like product that competes with the subject imports in the merchant market, rather than the production which is transferred internally or to affiliated parties for processing into a downstream product.

Title II - Amendments to Title VII of the Tariff Act of 1930

Sec. 201. Captive Production

Ensure Application of Provision In Cases Involving Transfers for Production of Downstream Products. Section 201 of this bill revises, in two respects, the existing captive production provision in the U.S. AD/CVD law, section 771(7)(C)(iv) of the Tariff Act of 1930 (the 1930 Act), as amended (19 U.S.C. § 1677(7)(C)(iv)). First, section 201 removes subsections (I), (II) and (III) of existing section 771(7)(C)(iv) of the 1930 Act (19 U.S.C. § 1677(7)(C)(iv)). These provisions, originally intended by Congress to clarify congressional intent with respect to application of this provision, have often been applied by the ITC instead to raise unintended and unrelated issues that have, on a number of occasions, led to nonapplication of the provision in cases in which it should have been applied.

The second change is to make clear that transfers, including to affiliated persons, are covered by the provision.

The purpose of these amendments is to ensure that the ITC, in conducting an injury analysis, focuses primarily on the production of the domestic like product that competes with the subject imports in the merchant market, rather than the production which is transferred internally or to affiliated parties for processing into a downstream product. The purpose of the changes, taken together, is to ensure that this provision is applied in the manner originally intended by Congress when it enacted section 222(b)(2)(iv) of the URAA (codified at section 771(7)(C)(iv) of the 1930 Act (19 U.S.C. § 1677(7)(C)(iv)).

Sec. 202. Price

Address Cases Involving Primarily Ongoing Price Suppression by Imports. Section 202 amends section 771(7)(C)(ii) of the 1930 Act of 1930 (19 U.S.C. § 1677(7)(C)(ii)) by adding a new clause that provides that the ITC not conclude that imports of the subject merchandise do not have a significant effect on prices merely because of the magnitude of the volume of imports of the subject merchandise. Section 771(7)(C)(ii) of the 1930 Act, as currently written, provides two factors for the ITC to consider in examining the effects of subject imports on prices for the domestic like product: (1) whether there is significant price underselling of the domestic like product by the subject imports; and (2) whether the subject imports have significant price-suppressing or price-depressing effects on the domestic like product. The amendment does not change these factors. Instead, it emphasizes that the ITC should not conclude or presume that there have not been significant price effects merely because subject import volumes have been small or merely because these volumes have been stable during the entire period the ITC has examined in its injury analysis.

As Congress has previously stated, in some industries even small absolute volumes of subject imports may be sufficient to have effects on prices for the domestic like product and cause adverse impact on the domestic industry. This has been reiterated in several court decisions. See Companhia Paulista de Ferro-Ligas v. United States, 20 CIT 473, 478 (1996); USX Corp. v. United States, 655 F. Supp. 487 (1987). In light of this, that the ITC should find subject import volume to be small should not cause it to conclude or presume that the imports are not having significant effects on prices for the domestic like product. See Negev Phosphates Ltd. v. Department of Commerce, 699 F. Supp. 938, 946-47 (Ct. Int'l Trade 1988) (upholding ITC affirmative determination in investigation where subject import market penetration never exceeded 2.5 percent). Consequently, the amendment emphasizes that the ITC should independently analyze the significance of underselling and price-depression or -suppression, even in the case of a small or stable volume of subject imports (so long as they are not negligible under section 771(24) of the 1930 Act). The amendment makes clear that the ITC should not conclude that there are not significant price effects merely because subject import volume is small or stable. For example, even with a stable volume of imports, there may be significant price effects if there is increasing frequency and margins of underselling during a period of investigation.

Current law (19 U.S.C. § 1677(7)(C)(ii)(II)), among other things, directs the ITC to consider whether an effect of imports under investigation is to prevent price increases that otherwise would have occurred, to a significant degree. This language is intended to include circumstances in which domestic prices have already been found to have been adversely affected by unfairly traded imports recently placed under AD/CVD orders. Subject imports from additional countries currently under investigation may prevent, to a significant degree, domestic prices from rising from levels previously found to be suppressed or depressed, and this may provide adequate support for a finding of significant adverse price effects. See, e.g., City Lumber Co. v. United States, 290 F. Supp. 385, 392-94 (Cust. Ct. 1968), aff'd, 311 F.Supp. 340 (Cust. Ct. 1970), aff'd, 457 F.2nd 991 (Ct. Cust. Pat. App. 1972). It is also worth noting that the ITC has previously expressly noted that an affirmative determination may be based on price suppressing effects of subject imports that do not undersell or undercut domestic prices. See, e.g., Aspherical Opthalmoscopy Lenses from Japan, Inv. No. 731-TA-518 (Final), USITC Pub. 2498 (April 1992).

Sec. 203. Condition of Domestic Industry

Ensure Evaluation of Domestic Industry's Vulnerability to Effects of Imports. Section 203 of the bill amends section 771(7)(C)(iii) of the 1930 Act (19 U.S.C. § 1677(7)(C)(iii)), by clarifying that, in considering the condition of the industry, the ITC will be required to evaluate whether the industry is vulnerable to the effects of imports of the subject merchandise.

The amendment makes clear Congress' strong and growing concern that successive waves of unfairly traded imports of the same like product can leave a domestic industry in a weakened state. Over the last decade, and particularly in recent years, it has become apparent that the number of supplier countries for particular products has grown. Where successive waves of unfairly traded imports enter the United States, the pertinent industry filing an additional group of AD/CVD petitions may not yet have recovered from the adverse effects of the unfairly traded imports only recently placed under AD/CVD orders, rendering the industry vulnerable to the unfairly traded imports from the subsequent country or countries subject to investigation. See, e.g., City Lumber Co. v. United States, 290 F. Supp. 385, 392-394 (Cust. Ct. 1968), aff'd 311 F. Supp. 340 (Cust. Ct. 1970), aff'd 457 F. 2d 991 (Ct. Cust Pat App. 1972).

Sec. 204. Causal Relationship Between Imports and Injury

Ensure Appropriate Application of the AD/CVD Causation Standard. There has been a long-recognized standard under U.S. AD/CVD law that imports need only be a contributing cause of material injury and that the ITC is not required to weigh the injury caused by unfair imports against other factors in reaching its injury determination. A decision by the Court of Appeals for the Federal Circuit (CAFC) has raised questions about the continued application of this standard, however. Section 204 corrects the erroneous decision of the CAFC and confirms the previously-established standard for determining causation of material injury by clarifying that the ITC need not determine the significance of imports relative to other economic factors.

Sec. 205. Prevention of Circumvention

Improve the Rules to Prevent Circumvention of Antidumping and Countervailing Duty Orders. The increased speed and flexibility of international trade flows has allowed foreign producers to circumvent AD/CVD relief by making minor alterations to their products such that the products are technically excluded from the AD/CVD duties. Section 205 clarifies that the merchandise covered by an AD/CVD order may include merchandise that has been altered in minor respects (regardless of whether the merchandise description used in the investigation or order would otherwise exclude the altered article), provided that the inclusion of the article is not inconsistent with the affirmative determination of the ITC on which the order or finding is based. This provision will give the Department of Commerce the flexibility it needs to respond to attempts to circumvent AD/CVD relief.

Sec. 206. Perishable Agricultural Products

Respond to the Special Circumstances of Perishable Agricultural Industries. Current law provisions defining the affected "industry" and "material injury" do not adequately address the special circumstances applicable to perishable agricultural products. Section 206 corrects these deficiencies, which have made it unnecessarily difficult for producers of perishable agricultural products to obtain AD/CVD relief. In particular, section 206 amends the statutory definition of "domestic industry" to clarify that, for a perishable agricultural product with a short shelf life, the term can be interpreted to mean producers making the product during a defined period or season. The section also amends the current "material injury" test to enable the ITC, in cases involving perishable agricultural products, to consider the various injury and causation factors on a seasonal basis.

Sec. 207. Full Recognition of Subsidy Conferred Through Provision of Goods and Services and Purchase of Goods

Ensure Appropriate Subsidy Determinations in Markets Distorted by Government Intervention. One way in which foreign governments extend subsidies to their producers is by providing those producers with goods or services for less than market value, or by purchasing goods at prices exceeding market value. In these circumstances, the Department of Commerce determines the amount of the subsidy by comparing the prices offered or paid by the government to a benchmark market price. The amendment clarifies how Commerce addresses instances in which the foreign government, purposefully or not, dominates or distorts domestic sales of the input item that might potentially be used for benchmark prices. If prices from those sales were used, the subsidy might be greatly underestimated. The amendment will ensure that, in such cases, Commerce would use for benchmark prices from comparable sales elsewhere in the world.

Title III - Steel Import Monitoring, Notification and Early Release of Import Data

Sec. 301. Steel Import Notification and Monitoring Program

Establish Mechanism for Accurately Monitoring Steel Imports. Section 301 will establish an import notification system for steel products similar to that already in effect in Canada, Mexico, the European Union and certain other countries. The steel import monitoring system will give advance notification of import surges, help track the practices of key U.S. trading partners, and ensure that timely and accurate data are available to policymakers and the U.S. industry.

Sec. 302. Amendments to Section 332 of the Tariff Act of 1930 Allow Private Parties to Request Import Monitoring. To promote early detection of import surges and other potentially damaging trade flows, section 302 of the bill creates a mechanism for domestic industries to request import monitoring of particular products. Under existing section 332 of the 1930 Act, the President, the House Committee on Ways and Means and the Senate Committee on Finance each may request the ITC to monitor and investigate imports and conditions of competition between U.S. and foreign industries, including the collection of data that may be used in making a safeguards or AD/CVD determination. Section 302 of the bill amends section 332 to establish a statutory procedure that will enable domestic industries or representatives of domestic industries to request that the President consider whether import monitoring is appropriate, and if so, to request such monitoring and data collection by the ITC.

Sec. 303. Early Release of Import Data

Enable Early Release of Import Data. Current regulations of the Office of Management and Budget (OMB) authorize the Census Bureau to release preliminary steel import data to the public in extraordinary situations, prior to the release of overall trade data. To improve monitoring and permit an earlier response to potential imports surges, the bill expands and codifies this practice for early release of data. Under section 303 of the bill, OMB may release preliminary trade data whenever it detects an import surge in a product category, subject to congressional notification. This provision will improve the ability of U.S. workers and firms to detect import surges more quickly and take actions to respond to such surges effectively.

Title IV - Miscellaneous Provisions

Sec. 401. Construction

Prevent Incorrect Interpretations of Existing Law. On occasion, courts and administrative bodies have inferred from the fact that Congress amends a law that the previously existing language in the law must have been inconsistent with the amendments. Many of the provisions in the Trade Law Reform Act of 2001 are simply clarifications, re-affirming the original congressional intent. Section 401 will ensure that courts and administrative bodies do not draw incorrect inferences as to the proper interpretation of existing law from the proposal or enactment of the Trade Law Reform Act of 2001.

Sec. 402. Application to Goods from Canada and Mexico

Ensure Application to Canada and Mexico. Article 1902 of The North American Free Trade Agreement provides that changes to a party's AD/CVD laws do not apply to goods from other parties unless the amendment states so specifically. Section 402 provides this specific statement to ensure the amendments to the antidumping and countervailing duty laws in the Trade Law Reform Act of 2001 are applied to goods from Canada and Mexico.