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April 2016

Monitoring of steel imports in USA – Consistency under WTO Laws

by Aman


The United States maintains a licensing mechanism known as the Steel Import Monitoring and Analysis (hereinafter referred to as the ‘SIMA’) System. As per the system, any business importing steel mill products covered under the licensing program is required to procure a license. This includes importers, importing agents or brokers. The aggregate data in relation to volume and prices collected from the licenses are made available to the public following review by the relevant authorities. The purpose of the SIMA system is to provide steel producers, steel consumers, importers and the general public with future trends in the volume and prices of steel imports expected to enter the american steel market.

It must also be noted that the monitoring of steel imports is not unique. A similar system for monitoring steel exists in Canada and Mexico as well.  The SIMA system was introduced by the United States Department of Commerce (hereinafter refffered to as ‘US DOC’) and has been in force since December 9, 2003. The SIMA System was specifically introduced at the persistence of the domestic steel industry in the United States which was going through a rough patch then. The measure was introduced in conjunction with the Section 201 case initiated in early 2002 [see end note 1]. The domestic steel industry’s stated purpose was to have the government develop a system that would allow them to have an early warning system for imports so that they could file trade cases faster. As discussed later, the Bush Administration made it clear that while they wanted to develop a system, it had to be automatic, with no cost and not an impediment to trade.

This Article discusses the SIMA System and discusses the consistency of the measure under WTO law.

 

Key Features of SIMA

The list of steel mill products that require steel import licenses are maintained by the Enforcement and Compliance division of the International Trade Administration [see end note 2]. The details required for the license include:

  1. Name of importer, exporter and manufacturer
  2. Country of origin and exportation
  3. Expected port of entry
  4. Expected date of export
  5. Date of import
  6. HTS number of product
  7. Product description
  8. Volume of imports of particular product
  9. Value of imports

The license is permitted to be obtained up to 60 days prior to the date of importation and is valid for 75 days. In particular, the license would have to be procured prior to completing the necessary import documentation as the license number would need to be provided in the relevant import documentation. Upto 10 products can be imported on one license if the importer, exporter, manufacturer and country of origin and exportation of the product is the same. More than 10 products would require an additional license. In addition, if any of the aforesaid categories differ, then a different license would be required. As mentioned above, there is no application fee charged for the license and the license is provided immediately on submitting the information, if complete.

As discussed above, the purpose of the SIMA System is to provide the public statistical data on steel imports entering the United States. Such publication takes place seven weeks earlier than it would otherwise be available to the public. On the basis of the information compiled from the licenses, a series of aggregate tables and graphs on imports of steel mill products by country and type of steel product is prepared. The information, prior to being published, is also analyzed against the census data. The statistics on the basis of the information in the licenses is updated on a weekly basis. Import statistics published are provided up to the 6 digit level. However, it does not provide aggregate port of entry data because of the possibility of inadvertent release of proprietary information.

 

WTO Consistency of SIMA

It must be noted that the SIMA System has been designed to overcome the problems highlighted by the Panel and the Appellate Body in Argentina — Measures Affecting the Importation of Goods (DS 445) with respect to the Argentinian monitoring mechanism called the Advance Sworn Import Declaration (hereinafter referred to as ‘DJAI’). The DJAI was held to be WTO-inconsistent (in particular Article XI:1 of the Safeguards Agreement which is discussed in detail below) as the license was not automatic and the period between application and providing license was delayed.  As mentioned above, the US administration made it clear that while they wanted to introduce SIMA it had to be automatic, with no cost and not an impediment to trade.

The SIMA System, however, is still open to challenge under the WTO Agreement on Safeguards (hereinafter referred to as the ‘Safeguards Agreement’).  Certain provisions under the Safeguards Agreement prohibit Members from taking or maintaining, inter alia, import-price monitoring schemes or import surveillance which afford protection. In particular, Article 11:1(b) of the Safeguards Agreement provides that:
 

Further, a Member shall not seek, take or maintain any voluntary export restraints, orderly marketing arrangements or any other similar measures on the export or the import side. 3 4 These include actions by a single Member as well as actions under agreements, arrangements and understandings entered into by two or more Members. Any such measure in effect on the date of entry into force of the WTO Agreement shall be brought into conformity with this Agreement or phase out in accordance with paragraph 2.
_____________________________
3 An import quota applied as a safeguard measure in conformity with the relevant provisions of GATT 1994 and this Agreement may, by mutual agreement, be administered by the exporting Member.
4 Examples of similar measures include export moderation, export-price or import-price monitoring systems, export or import surveillance, compulsory import cartels and discretionary export or import licensing schemes, any of which afford protection.’
(Emphasis added)

 
A measure on the import side such as an import-price monitoring system or import surveillance that affords protection will be considered inconsistent with the requirements of Article 11:1(b) of the Agreement on Safeguards. In particular, as the proposed mechanism does monitor the price of imports of certain steel products, and may even be regarded as a form of import surveillance, it would be considered inconsistent if it is found to afford protection. Therefore, the WTO consistency of the proposed mechanism would hinge upon on whether it is found to ‘afford protection’.  It may be argued that the proposed mechanism affords protection to the domestic industry by alerting them to the prices and volumes of imported steel products in advance of such imports entering the US market and allowing them to adjust their own prices, production and sales strategies accordingly.

It may be counter-argued however that the import statistics are available to all interested parties, namely domestic producers, importers and exporters.  As all other interested parties have equal access to the information, the monitoring mechanism cannot be considered as providing protection to any one particular party.  Even importers or exporters may devise their sales strategies based on statistics provided. Therefore, in providing data access to all parties, the proposed mechanism places all parties at a level playing field.   Furthermore, the above import data is published only for tariff lines on a 6-digit level. More disaggregated data beyond the 6 digit level is not made public for reasons of confidentiality and to protect proprietary information.

 [The author is an Associate, International Trade Practice,  Lakshmikumaran & Sridharan, Delhi]


End Notes:

  1. On March 5, 2002 the President of the United States had signed a proclamation imposing, effective March 20, 2002, increased tariffs on imports of certain steel products. The President’s action was taken pursuant to Section 201 of the Trade Act of 1974. The duties are referred to as ‘safeguard measures’. In particular, duties were increased on certain flat steel, hot-rolled bar, cold-finished bar, rebar, certain welded tubular products, carbon and alloy fittings, stainless steel bar, stainless steel rod, tin mill products and stainless steel wire.  A tariff rate quota was also applied to steel slabs.
  2. See <http://enforcement.trade.gov/steel/license/SMP_byHTS.pdf> as of January 1, 2016

 

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