Safeguard Investigation on Imports of
Milk Powder: An Analysis of the
Requirements of Egyptian law and the WTO rules for
imposition of a safeguard measure
Protection Measures: Pro-free trade or pro-domestic
The Powdered Milk
The beginning of the battle
1. Locally produced milk
2. Imported powdered milk
Determination and investigation of serious injury
Decreasing revenues and prices
Effects on market share
Decision of investigating authority concerning serious
Effects on Stakeholders
2. Egyptian Association of Milk Producers
Milk Industry Development Association
2. Exporting countries
The “Milk Truce” between pro-camp and against-camp
Final recommendations and decisions
In April 2001, the Anti-Dumping/Subsidy
Department, in the Foreign Trade Sector of the Egyptian Ministry of
Economy and Foreign Trade faced a decision on whether to impose a tariff
on imports of milk powder as a safeguard measure designed to give the
Egyptian milk farmers a breathing space to adjust to greater
international competition. The Department also needed to decide how much
of a tariff to impose if it decided that the imposition of a safeguard
measure was warranted by Eyptian trade laws and international trade
In early August 2000, milk producers in
had requested the Ministry of Economy and Foreign Trade to impose
restrictions on imports of powdered milk. In response to the petition,
the government decided in September 2000 to impose a provisional duty of
45% and to open a formal investigation into the possible imposition of a
safeguard measure. The government based its decision on a large increase
in dry milk imports in 1999 and 2000. Under Egyptian trade legislation
and the rules of the World Trade Organization (WTO), the government can
impose temporary import restrictions when a significant increase in
imports threatens to create serious injury to domestic producers.
This case study covers the period between
September 2000 when the International Trade Policies Department imposed
the provisional safeguard measure and April 2001, when the Department
had to make a decision on whether to impose import restraints on a
longer term basis and whether such restraints should be lower or higher
than the provisional duty of 45%.
The case analyzes the facts presented by
supporters and opponents of the measure. The local milk industry argued
that increased imports had resulted in a major reduction in the domestic
market price of milk products and their revenues, resulting in losses
for th industry in 1999 and the first half of 2000. However, there were
other stakeholders involved. The manufactures of processed dairy
products, for example, complained that government action to reduce
imports of milk powder would increase their production cost and the
prices paid by consumers.
Facts : The Product
Locally Produced Milk
Fresh local milk is produced by cows,
buffaloes, goats or sheep milked either manually or mechanically. It
contains water, fat, protein, sugar, mineral salts and vitamins. Water
constitutes 85% of the milk while fat is 3-4% of cow’s milk and 5.5%
of buffaloes’ milk. Milk production takes place in both small farms
and large commercial farms. In addition, buffaloes’ milk may be
produced by free roaming cattle outside the borders of big cities.
In small farms the number of cattle is less
than 50 and fresh milk produced is consumed internally. Some of the milk
is drunk fresh while the rest is made into butter and cheese. Surpluses
of milk are delivered by middlemen to milk wholesalers who, in turn,
deliver it to dairy processing manufacturers. Large commercial farms,
however, keep herds of cows and buffaloes and deliver most of their
production of milk to dairy processing and food stuffs manufacturers.
Fresh milk is used in manufacturing of yogurt, Rayeb, labneh, cheese,
ice-creams, biscuits, chocolates, pasta and baked foods.
Milk Powder is created by dehydrating fresh
full cream, half skimmed or fully skimmed milk through industrial
processes. When powdered milk is restored to a liquid form, it continues
to maintain its distinguished smell and taste and is fully dissolved in
There are two kinds of imported milk: full
cream instant milk powder (3% fat) which is delivered in small packages,
and consequently, can be used by consumers directly and full milk powder
that can be used for industrial purposes. Powdered milk can be
reconstituted and then pasteurized (O.H.T) before it can be used for
drinking purposes. It can be used to produce products such as: yogurt
(100%), feta cheese (20%), children’s food stuffs (10%), chocolate
(20%), etc. through fermentation. It can also be used in the production
of ice-creams, chocolate, biscuits and processed meat.
Powdered milk is manufactured by being
exposed to heat during dehydration which can be through Spry-Drying
(dehydration through warm air) or through Drying-Drum (dehydration by
passing warm air through cylindrical surfaces). The quality of milk
produced depends on the way and duration of the dehydration process.
Milk that is heated at low temperatures to kill any dangerous bacteria
maintains its nutritional contents of vitamins and proteins which makes
its price higher than all others. On the other hand, milk that is
handled at high temperature is bound to lose its nutritional value which
makes its price the lowest. In between is milk treated with medium heat
imports milk powder from several countries, including the US, France,
New Zealand, Denmark, Poland, Australia, Sweden, Germany, Holland, the
UK, Belgium, Ireland, Spain, Finland, the Czech Republic, China, Togo,
Turkey and Bulgaria. The US has the highest market share of total
imports of 26%, and is followed by France 11%, and New Zealand 9%.
major companies exporting milk powder to Egypt are Bailie Foods Ltd,
Nestle World Trade Corporation and the New Zealand Dairy Board.
Facts :The Domestic Industry
The domestic dairy industry is made up of
the dairy farmers, who are represented by the Egyptian Association of
Milk Producers and the industrial producers of dairy products, who are
represented by the Milk Industry Development Association.
Egyptian Association of Milk Producers
The Egyptian Association of Milk Producers
represents all the owners of dairy herds. 90% of all the milk producing
animals are owned by small farmers who have an average of three or four
animals per farm. 65% of all
dairy products sold to consumers is produced and processed by dairy
farmers. Producing milk products is a very labor intensive business, and
the number of dairy farmers is quite large, which translates into
considerable lobbying power.
Milk Industry Development Association
Industrial producers of dairy products are represented by the Milk
Industry Development Association. The
main companies are Misr Dairy, Nestle (whose main dairy products are
yoghurt, milk powder, cream, and canned concentrated milk), Domty (which
is the largest producer of mozzarella in the Middle East, New Zealand
Milk Products (Egypt) (the major importer of bulk butter whose chief
domestically produced dairy product is processed cheese), Juhayna,
Milkiland, and El Misreen. Industrial production of dairy products is
capital intensive and accounts for 35% of Egypt’s dairy production.
Facts : Domestic Production and Trade
In Imports of milk powder increased by 10%
in 1997, 21% in 1998, and 89% in 1999. The domestic production of fresh
milk also increased during this period, though not at the same rate as
imports. Compared to 1996, the percentage increase was 10%, 17% and 24%
in 1997,1998 and 1999 respectively.
Even though the volume of fresh milk sold by
domestic producers continued to increase from 1996 through the first
half of 2000, local milk revenues declined during the same period as the
prices received by farmers fell faster than the increase in sales.
Domestic sales of fresh milk in terms of volume rose by 10% in
1997, 17% in 1998 and 24% in 1999,.Prices fell by 15% in 1997 and 38% in
1999, and sales revenues fell by 18% from 1996 to 1998, and by 23% from
1996 to 1999
The market share of domestically produced
milk fell in 1999 and the first half of 2000. Market share of local
sales of milk was 93% throughout the years 1996 to 1998. It then
decreased in 1999 and 2000 to 90%.
The market share lost by domestic producers of fresh milk was at the
same time gained by imports of milk powder .
The profits of domestic milk farmers before
taxes turned to losses in during the period from 1996 to the first half
of 2000, which coincided with the substantial increase in imports of
milk powder. Producers started incurring net losses in 1997, and the
losses increased in subsequent years. They reached 143.7 L.E/.
ROI went down by 51% in 1997, and by 178% in
Background Facts : Legal Requirements for Imposition of Safeguard
Law on Safeguard Measure
Under Egyptian trade legislation, (Article
79 of Law 161/1998) the government can impose temporary import
restrictions when a significant increase in imports threatens to create
serious injury to domestic producers. Article 80 defines “serious
injury” as a significant overall impairment in the position of a
domestic industry. Article 81 requires a causal link between the
increased imports and serious injury. Article 82 permits the imposition
of a provisional safeguard measure if the investigating authority finds
a clear evidence that increased imports have caused or are threatening
to cause serious injury that cannot be easily remedied if the measure is
delayed. Article 83 provides that the provisional safeguard measure
should take the form of a tariff for a duration not to exceed 200 days,
which has to be refunded if the full investigation does not conform that
the increased imports caused the serious injury to the industry. See
Appendix for details.
WTO Rules on Safeguard Measures
Since Egypt joined the World Trade
Organization (WTO) in 1995, any measures Egypt takes also has to be
consistent with the requirements of Article 19 of the GATT, the
so-called safeguard measure. Under Article 19, a member of the WTO, may
apply a safeguard measure to a product only if it is determined that
such a product is being imported into its territory in increased
quantities, whether absolute or relative to domestic production, such
that it causes or threatens to cause serious injury to the domestic
industry which produces similar or directly competitive products.
Safeguard measures have to be imposed without taking account of its
origin. See Appendix for details.
Serious injury is an overall impairment of
the position of the domestic industry. In this respect, “Domestic
Industry” means the domestic producers of like or directly competitive
products, whose total output constitute a large proportion of the total
domestic production of those products. The investigating authority has
to determine the existence of a threat of serious injury based on facts
presented, not on mere possibilities.
Causal Relationship Between the
Increased Imports and the Injury to Domestic Industries
In determining serious injury to the
domestic industry, the investigating authority has to evaluate all
factors relevant to that particular industry. Such factors include the
rate and increase in imports of the product concerned in both absolute
and relative terms, the share of the domestic market taken by increased
imports and fluctuations in sales levels production, capacity
utilization, profitability levels, and employment. The authority then
must examine the causal link between increased imports of the product
concerned and serious injury.
First Phase of the Milk Powder Battle
The milk battle started in early August 2000
when the Egyptian Association for Milk Producers (AMPA) lodged a
complaint to the Anti-Dumping/Subsidy and Safeguards Department of the
Foreign Trade Sector in the Ministry of Economy and Foreign Trade. The
AMPA asserted that an increase in imports of powdered milk was causing
serious injury to national producers of fresh milk.
AMPA Request for Protection
The AMPA presented the following facts to in
support of their assertion that a sharp increase in imports had
seriously injured local producers of fresh milk :
Local milk prices fell by 38% during 1999 and the first
half of 2000, from 120 P.T./KG to 80 P.T./Kg.
Prices of milk delivered by small farmers fell from 80 P.T./Kg
to 45 P.T./Kg.
Egyptian dairy manufacturers refused to accept delivery of
locally produced milk, since they preferred importing powdered milk at a
Great losses were incurred by large farms, since milk
prices fell relative to
production and growth of live stock.
Owners of large farms were unable to pay their bank debts.
These farms, as a result, went bankrupt and were forced to lay off their
Investigation of Serious Injury
In order to reach a
decision on the imposition of provisional safeguard measures and the
initiation of a full-fledged investigation leading to the imposition of
a longer term measure, the Anti-Dumping/Subsidy and Safeguards
Department had to make determinations concerning the increase in
imports, injury to the industry, whether fresh milk and milk powder were
directly competitive products and whether there was a causal link
between the increase in imports and the serious injury.
Ministry officials determined
that the 89% increase in imports of milk powder in 1999 constituted an
unjustifiable increase in imports, as stipulated by Article 79 of Law
Ministry officials determined
that the 38% decline in domestic prices between 1996 and 1999, and the
consequent 23% decline in sales revenues and losses reaching 143.7
Egyptian Pounds per ton in 1999.
Ministry officials determined that imported
milk powder and locally produced fresh milk are competitive products,
since they serve the same needs and purposes.
Ministry officials determined that a causal
link existed between the increased imports and the injury to the
industry by virtue of the fact that fresh milk and powdered milk were
directly competitive products, and the fall in prices and revenues of
domestic milk producers coincided with the increase in imports of milk
The Decision on the Provisional
Application of Safeguard Measures
Having determined on the basis of its
investigation that the domestic milk industry had experienced serious
injury as a result of an unjustifiable increase in imports, the
Anti-Dumping/Subsidy and Safeguards Department on September 25, 2000
announced the imposition of a provisional 45% tariff on imported milk
powder starting in September 26, 2000, for a period of 200 days (Decree
577, 2000, and the initiation of a formal safeguard investigation. These
provisional tariffs were to be refunded to importers if the subsequent
investigation did not determine that increased imports caused or
threatened to cause serious injury to the domestic industry.
The Ministry published the action in the
Official Egyptian Gazette and sent faxes and mail notices to different
stakeholders, inviting them to participate in the investigation.
Concerned parties comprised the domestic industry, the Egyptian milk
producers, importers and exporters, the governments of exporting
countries and the WTO. The Anti-Dumping/Subsidy and Safeguards Office
also issued a report explaining its action
Second Phase of the Milk Battle
Verification of the Facts
As part of the full investigation, Ministry
officials conducted on-the-spot verification visits inside and outside
the country to get the data required for the investigation. For example,
Ms Dorreya Kamel, a
supervisor in the Anti-Dumping/Subsidy and Safeguards Department verified
data presented by the Egyptian Association of Milk Producers with the
Ministry of Agriculture, the Customs Department, the Import/Export
Control Authority and the Central Agency for Public Mobilization and Statistics (CAPMAS).”
Proposed Actions by Milk Producers to
Adjust to Greater International Competition
Under the international trade rules, a
safeguard measure can normally be applied for only four years, a period
which can be extended by another four years if the measure continues to
be necessary despite the fact that the industry has made real efforts to
adjust to the increased international competition. Article 7 of the WTO
Safeguard Agreement also requires that the country imposing the measure
progressively liberalize the measure at regular intervals during the
period of application. These measures are designed to encourage the
industry being protected to make a continuing effort to improve its
competitiveness during the time that the safeguard measure is in effect.
A government that is considering a safeguard
action therefore needs to consider whether the industry has developed an
adequate program for making itself more competitive over the period the
safeguard action is in effect. Therefore,
the Anti-Dumping /Subsidy and Safeguard department requested the
Egyptian Association for Milk Producers to submit details on its
strategies and procedures for improving its productivity during the
period in which final safeguard measures are applied. In response, the
Association presented a plan under which the domestic cost of producing
milk would be reduced by:
domestic herds with cows capable of a higher milk yield.
small farmers to use artificial impregnation methods to produce cows
of higher milk yield.
small farmers to use modern equipment in order to increase
production and reduce costs.
medical publications issued by pharmaceutical companies in attempts
to prevent or reduce disease.
cattle breeders to use fodder of high nutritional value in order to
increase milk yields and at the same time reduce costs.
training sessions for employees of dairy farms to introduce the
latest feeding process as well as ensuring their medical health.
The Association also planned to take the
following additional industry wide steps to increase revenues and to
reduce costs. These were:
of existing support systems
of policies related to disease control.
of a network for manufactured
of a better system for recording production of domestic milk.
of an information base of experts in this field.
of a cattle insurance system.
of a market information network.
of an improved feeding
of new feeding systems adapted to the requirements of different
of a program for tracking and improving inherited traits that prove
to be of economic advantage.
of a system for the retail distribution of milk.
supervision and control of milk production:
systems for milking and cooling operations.
better tools for treating milk and facilitating its transportation.
Policy Objectives of the Government
The Egyptian government in recent
years has pursued a policy in support of an expansion of trade and
economic reforms consistent with an outward looking trade policy.
The government was concerned, however, about the current capacity
of domestic dairy farmers to compete with foreign products in their
domestic market. Imposition of a safeguard measure could give the
farmers the breathing space they need to become more competitive. As a
member of the WTO, the government was committed to adhere to the rules
of the organization, and any safeguard action had to be consistent with
the WTO Safeguard Agreement.
of Milk Industry Development Association
The Milk Industry Development Association,
representing industrial processors of dairy products, expressed their
concern to the government that the 45% import duty on powdered milk,
would have the following adverse effects:
World wide prices of imported powdered milk increased
from L.E.5,278 /Ton in February 2000 to L.E.10,000/Ton in March 2001
following the removal of European subsidies on exports, from 90 to
40 Euros/Kg of skimmed milk, as required by commitments WTO
regulations. As a result, industrial producers of dairy products had
to pay L.E.14,500/Ton after increased import duties and the
increasing price of the dollar, all of which eventually increased
their production costs by 5-25%. Locally processed dairy products
also faced competition from imports of processed dairy product,
which were not subject to the 45% tariff. Also, after the increase
in the cost of powdered milk and the dollar’s exchange rate, the
prices of local fresh milk was lower than the price of milk
reconstituted from imported milk powder.
The imports of a variety of cheese would not have been
reduced, from 30,000 tons in 1995 to only 1000 tons in 1999, had
industrial producers encountered problems in importing powdered milk
to cover the shortfalls in the supply of locally produced milk.
Dina is the only domestic farm able to produce
powdered milk with a maximum amount of 2700 tons/year.
Increased import duties on milk is adversely affecting
the ability of the Egyptian industrial dairy processing industry to
export processed dairy products, especially cooked and white cheese,
to Arab countries. For example, in 1999-2000 Gulf countries imported
15,000 tons of processed cheese and 5,000 tons of white cheese from
Dairy processing companies were unable to pay their
bank debts. Some even started laying off their employees as they
couldn’t pay their salaries. This, in effect, impeded new
Dairy processing companies were forced to increase
their prices by 25-50% for products for which powdered milk is an
important component. This reduced per capita consumption levels of
dairy products from 40.7 kg in 1992 to 36.6 kg in 2000. These levels
are very low when compared to the minimum needs of individuals set
by the World Health Organization which are 90kg/person/year.
In Egypt, average milk production per animal is very
low at only 440 liters/year. This low productivity is attributed to
large seasonal fluctuations in feeding of life stock, with cows
getting fed poorly during summer but fed well during winter.
Consequently, total production of milk in Egypt (which is 3.5
million tons) is not sufficient to satisfy recommended consumption
levels during the 5 month summer season, and imports are therefore
required to cover 40% of actual market needs.
duties allows unlicensed factories of dairy products to emerge. It
also permits products that are not in compliance with international
quality standards and environmental responsibility to invade the
dairy products market.
facilities of the most modern industrial processors were designed to
operate using powdered milk. Using fresh milk is not possible
because of the following difficulties:
Lack of machinery and
product lines suitable for receiving, cooling and compressing raw
milk. Adding these facilities , on the other hand, would require
large investments, space and suitable vehicles equipped for raw milk
chocolate and cake factories will face several technical,
technological and health problems if they use raw milk in
production. Specifically, the bacterial content of milk increases
during summer because these factories use pasteurization rather than
As required with global trade rules, the
Egyptian government initiated consultations with exporting country
governments, including the USA, France, New Zealand, Poland, Denmark,
Australia, Sweden, Germany, Holland, the UK, Belgium, Ireland, Spain,
Finland, Czech Republic, China, Togo, Turkey and Bulgaria. The
parties concerned were given 37 days from the date of receiving
notification to provide their input.
However, because of the mutual foreign trade
relationship between Egypt and these countries, especially the US which
is the market share leader of powdered milk in Egypt, these countries
were eventually convinced of Egypt’s right to impose safeguard
measures in order to prevent its domestic production from serious
injury. This acknowledgment was made with the stipulation that such
action would only be until Egypt restructures its local production of
Industrial production of dairy products is
capital intensive. Therefore, though the value added of these factories
is greater, their lobbying power is less than that of local milk
producers. The number of dairy farmers is greater than 1 million, and
they are an important constituency throughout the country, and this
gives them considerable political influence.
“Milk Truce” Between Pro-Camp and Against-Camp
In its efforts to arrive at a negotiated
solution, the government engineered a “milk truce” between Egyptian
dairy producers and manufacturers of dairy products. The key element of
the plan was the establishment of a milk board, with representatives
from both parties. The objectives of the milk board would be to
establish an agreed milk price that would take into account market
changes, prices of imported milk and variations in the dollar’s
exchange rate. The government proposed that the price should initially
be fixed at 103 PT/kg in winter and 105PT/kg in summer. The plan would
also include development of a program to support livestock development.
In return for the
adoption of this proposal, the Egyptian Association for Milk Producers
was expected to withdraw the complaint lodged to the Anti-Dumping/Subsidy and Safeguard
In the end, the proposal by the government to create a joint milk board
in place of the import restraints fell apart because of the withdrawal
of one of the companies.
by the Egyptian Association for Milk Producers
The Egyptian Association for Milk Producers
requested a final safeguard measures on imported powdered milk in the
form of a custom duty of 120%. The association requested the application
of the duty during the first year and demanded the safeguard measure
remain in effect for four years starting from the date of publishing the
notice. After the four years, they asked for a new investigation or
review of measures depending on their past effectiveness.
the Decision – A Simulation for Students
If you were responsible for making a
decision in this case, what action would you take?
you grant relief, and why?
much relief would you provide? Less or more than the provisional
parallel domestic actions by the government would you recommend in
order to facilitate adjustment?
actions would you require by the industry if you decide to grant
Explain the commercial, macro
economic, political, legal and policy considerations that went into your
How seriously do you believe the industry was injured by
imports, and why did you think it was important to remedy the injury
through import protection or other government actions? How crucial is
the industry to the Egyptian economy? What is the long term economic
viability of the industry and will the recommended import protection
help the industry to survive after the protection expires?
How were your decisions influenced by the overall economic
impact on the Egyptian economy, as against the impact on the milk
Do you believe such action would meet the requirements
laid out in the Egyptian legislation and in the WTO provisions? Justify
your recommendation on the basis of the legal requirement.
How were your decision influenced by the relative
political influence of the different stakeholders?
would you present the decision to the public? Prepare a draft press
release explaining your decision.
Recommendations and Decision
On April 12, 2001, after an investigation of
7 months and 20 days, the Anti-Dumping/Subsidy and Safeguards department
decided upon final protection measures for three years applicable to all
exporting countries without discrimination. The imposed tariff of CIF
amount of imports of powdered milk was determined to be 15% in the first
year, 7% in the second year and 3% in the third year.
The government reduced the tariff charged on
powdered milk in such manner. However, this was mainly due to increases
in worldwide prices of the product, devaluation of the Egyptian pound,
changes in foreign exchange prices and an attempt at compromise between
the interests of milk producers and dairy processing firms. In fact, the
newly imposed duties protect local producers of milk and at the same
time reduce production costs of manufacturers of dairy products.
Egyptian dairy producers filed a lawsuit
against the Ministry of Foreign Affairs protesting against the reduction
of the protection fee from the previously established 45% to the newly
imposed, cascading levies. In addition, Egyptian dairy manufacturers
also filed a law suit against the ministry which demanded refunds for
the difference between the new tariff rates and the old tariff rates
imposed. They argued that the 45% protection fee was enforced without
enough investigation which in effect harmed their firms.
Eventually the Minister of Foreign Trade, Dr
Youssef Botros Ghali, solved the problem of importers of powdered milk
when he authorized the refund of the difference between the tariff
rates. “Importers can present a written statement, through the General
Union of Chambers of Commerce, requesting settlement of disputes with
the Ministry of Foreign Trade provided that they attach to such request
all documents which prove their payment of levied protection duties,”
declared Mr. Khaled Abou Ismail, Head of the General Union of Chambers
Law on Safeguard Measures (Law 161/1998)
Article 79 Safeguard
measures against the unjustifiable increases in imports
Safeguard measures against unjustifiable increases of imports are
those applied against products (other than dumped or subsidized)
imported into Egypt in such increased quantities, absolute or relative
to domestic production, and such conditions as to cause or threaten to
cause serious injury to the domestic industry that produces like or
directly competitive products.
Determination of serious injury or threat
“Serious Injury” shall be understood to mean a significant
overall impairment in the position of a domestic industry. “Threat of
serious injury” shall be understood to mean serious injury that is
clearly imminent and would cause impairment in the position of the
Article 81 Determination
of serious injury or threat
The investigating authority shall determine the serious injury
caused to the domestic industry on the basis of facts and the existence
of a causal link between the increased imports of the product concerned
and the serious injury or threat thereof. The investigating authority
shall verify the following:
An increase in
imports of the product under investigation either absolute or relative
to production in Egypt.
The impact of
increased imports on the situation of the domestic industry including
sales, production, productivity, utilization of capacity, profits and
losses, employment and market share.
Provisional safeguard measures against unjustifiable increase of imports
may be imposed if the investigating authority finds a clear evidence
that increased imports have caused or are threatening to cause serious
injury that cannot be easily remedied or would be difficult to remedy
should the imposition of these measures be delayed.
Provisional safeguard measures shall take the form of tariff
increases, taking into consideration the following:
The duration of the provisional measure shall not exceed
Should such measures take the form of tariff increases,
they shall be promptly refunded if the investigation does not determine
that increased imports have caused or threatened to cause serious injury
to the domestic industry.
GATT Safeguard Agreement
Members may apply a safeguard measure to a product only if that
member has determined, pursuant to the provisions set out below, that
such product is being imported into its territory in such increased
quantities, absolute or relative to domestic production, and under such
conditions as to cause or threaten to cause serious injury to the
domestic industry that produces like or directly competitive products.
2) Safeguard measures shall
be applied to a product being imported irrespective of its source.
1) A member may apply a
safeguard measure only following an investigation by the competent
authorities of that member pursuant to procedures previously established
and made public in consonance with Article X of GATT 1994. This
investigation shall include reasonable public notice to all interested
parties and public hearing or other appropriate means in which imports,
exports and other interested parties, could present evidence and their
views, including the opportunity to respond to the presentations of
other parties and to submit their views, inter alia, as to
whether or not the application of a safeguard measure would be in the
public interest. The competent authorities shall publish a report
setting forth their findings and reasoned conclusions reached on all
pertinent issues of fact and law.
2) Any information which is
by nature confidential or which is provided on a confidential basis
shall, upon cause being shown, be treated as such by the competent
authorities. Such information shall not be disclosed without permission
of the party submitting it. Parties providing confidential information
may be requested to furnish non-confidential summaries thereof or, if
such parties indicate that such information cannot find that a request
for confidentiality is not warranted and if the party concerned is
either unwilling to make the information public or to authorize its
disclosure in generalized or summary form, the authorities may disregard
such information unless it can be demonstrated to their satisfaction
from appropriate sources that the information is correct.
Determination of serious injury or threat thereof
1) For the purposes of this
a) “Serious Injury”
shall be understood to mean a significant overall impairment in the
position of a domestic industry.
b) “Threat of Serious
Injury” shall be understood to mean serious injury that is clearly
imminent in accordance with the provisions of paragraph 2. A
determination of the existence of a threat of serious injury shall be
based on facts and not merely on allegation conjecture or remote
c) In determining injury or
threat thereof, a domestic industry shall be understood to mean the
producers as a whole of the like or directly competitive products
operating within the territory of a member, or those whose collective
output of the like or directly competitive products constitutes a major
proportion of the total domestic production of those products.
2) (a) In the investigation
to determine whether increased imports have caused or are threatening to
cause serious injury to a domestic industry under the terms of this
agreement, the competent authorities shall evaluate all relevant factors
of an objective and quantifiable nature having a bearing on the
situation of that industry, in particular, the rate and amount of the
increase in imports of the product concerned in absolute and relative
terms, the share of the domestic market taken by increased imports,
changes in the level of sales, production, capacity utilization, profits
and losses and employment.
(b) The determination referred to in subparagraph (a) shall not be made
unless this investigation demonstrates, on the basis of objective
evidence, the existence of the causal link between increased imports of
the product concerned and serious injury or threat thereof when factors
other than increased imports are causing injury to the domestic industry
at the same time, such injury shall not be attributed to increased
(c) The competent authorities shall publish promptly, in accordance with
the provisions of Article 3, a detailed analysis of the case under
investigation as well as demonstration of the relevance of the factors
Application of safeguard measures
1) A member shall apply safeguard measures only to the extent necessary
to prevent or remedy serious injury and to facilitate adjustment. If a
quantitative restriction is used, such a measure shall not reduce the
quantity of imports below the level of a recent period which shall be
the average of imports in the last three representative years for which
statistics are available, unless clear justification is given that a
different level is necessary to prevent or remedy serious injury.
Members should chose measures most suitable for the achievement of these
2) (a) In cases in which a
quota is allocated among supplying countries, the member applying the
restrictions may seek agreement with respect to the allocation of shares
in the quota with all other members having a substantial interest in
supplying the product concerned. In cases in which this method is not
reasonable practicable, the member concerned shall allot to members
having a substantial interest in supplying the product shares based upon
the proportions, supplied by such members during a previous
representative period, of the total quantity or value of imports of the
product, due account being taken of any special factors which may have
affected or may be affecting the trade in the product.
(b) A member may depart from
the provision in subparagraph (a) provided that consultations under
paragraph 3 of Article 12 are conducted under the auspices of the
committee on safeguards provided for in paragraph 1 of Article 13 and
that clear demonstration is provided to the committee that (i) imports
from certain members have increased in disproportionate percentage in
relation to the total increase of imports of the product concerned in
representative period (ii) the reasons for the departure from the
provisions in subparagraph (a) are justified, and (iii) the conditions
of such departure are equitable to all suppliers of the product
concerned. The duration of any such measure shall not be extended beyond
the initial period under paragraph I of Article 7. The departure
referred to above shall not be permitted in the case of threat of
Provisional safeguard measures
In critical circumstances where delay would cause damage, which
would be difficult to repair, a member may take a provisional safeguard
measure pursuant to a preliminary determination that is clear evidence
that increased imports have caused or are threatening to cause serious
injury. The duration of the provisional measure shall not exceed 200
days, during which period the pertinent requirements of Articles 2
through 7 and 12 shall be met. Such measures should take the form of
tariff increases to be promptly refunded if the subsequent investigation
referred to in paragraph 2 of Article 4 does not determine that
increased imports have caused or threatened to cause serious injury to a
domestic industry. The duration of any such provisional measure shall be
counted as a part of the initial period and any extension referred to in
paragraphs 1, 2, and 3 of Article 7.
Article 7 Duration
and review of safeguard measures
1) A member shall apply
safeguard measures only for such period of time as may be necessary to
prevent or remedy serious injury and to facilitate adjustment. The
period shall not exceed four years, unless it is extended under
2) The period mentioned in
paragraph 1 may be extended provided that the competent authorities of
the importing member have determined in conformity with the procedures
set out in Articles 2, 3, 4, and 5 that the safeguard measure continues
to be necessary to prevent or remedy serious injury and that there is
evidence that the industry is adjusting and provided that the pertinent
provisions of Articles 8 and 12 are observed.
3) The total period of
application of a safeguard measure, including the period of application
of any provisional measure, the period of initial application and any
extension thereof, shall not exceed eight years.
4) In order to facilitate
adjustment in a situation where the expected duration of a safeguard
measure as notified under the provisions of paragraph 1 of Article 12 is
over one year, the member applying the measure shall progressively
liberalize it at regular intervals during the period of application. If
the duration of the measure exceeds three years, the member applying
such a measure shall review the situation not later than the mid-term of
the measure and, if appropriate, withdraw it or increase the pace of
5) No safeguard measure
shall be applied again to the import of a product which has been subject
to such a measure, taken after the date of entry into force of the WTO
agreement, for a period of time equal to that during which such measure
had been previously applied, provided that the period of non-application
is at least two years.
6) Notwithstanding the
provisions of paragraph 5, a safeguard measure with a duration of 180
days or less may be applied again to the import of a product if:
a) at least one year has
elapsed since the date of introduction of a safeguard measure on the
import of that product or
b) such a safeguard measure
has not been applied on the same product more than twice in the
five-year period immediately preceding the date of introduction of the
Notification and Consultation
1) A member shall immediately notify the committee on safeguards upon:
a) Initiating an investigation process relating to serious injury or
threat thereof and the reasons for it.
b) Making a finding of
serious injury or threat thereof caused by increased imports.
c) Taking decision to apply
or extend a safeguard measure.
2) In making the
notifications referred to in paragraph 1(b) and 1(c) the member
proposing to apply or extend a safeguard measure shall provide the
committee on safeguards with all pertinent information, which shall
include evidence of serious injury or threat thereof caused by increased
imports, precise description of the product involved and the proposed
measure, proposed date of introduction, expected duration and timetable
for progressive liberalization. In the case of an extension of a measure
evidence that the industry concerned is adjusting shall also be
provided. The council for trade in goods or the committee on safeguards
may request such additional information as they may consider necessary
from the member proposing to apply or extend the measure.
3) A member proposing to
apply or extend a safeguard measure shall provide adequate opportunity
for prior consultations with those members having a substantial interest
as exporters of the product concerned, with a view to, inter alia,
review the information provided under paragraph 2, exchange views on the
measure and reach an understanding on ways to achieve the objective set
out in paragraph 1 of Article 8.
4) A member shall make a
notification to the committee on safeguards before taking a provisional
safeguard measure referred to in Article 6. Consultations shall be
initiated immediately after the measure is taken.
5) The result of the
consultations referred to in this Article (as well as the results of
midterm reviews referred to in paragraph 4 of Article 7, the form of
compensation referred to in paragraph 1 of Article 8, and the proposed
suspensions of concessions and other obligations referred to in
paragraph 2 of Article 8) shall be notified immediately to the Council
for Trade in Goods by the members concerned.
6) Members shall notify
promptly the committee on safeguards of their laws, regulations and
administrative procedures relating to safeguard measures as well as any
modifications made to them.
7) Members maintaining
measures described in Article 10 and paragraph 1 of Article 11 which
exist on the date of entry into force of the WTO Agreement shall notify
such measures to the committee on safeguards no later than 60 days after
the date of entry into force of the WTO Agreement.
8) Any member may notify the
committee on safeguards of all laws, regulations, administrative
procedures and any measures or actions dealt with in this agreement that
have not been notified by other members that are required by this
agreement to make such notification.
9) Any member may notify the
committee on safeguards of any non-governmental measures referred to in
paragraph 3 of Article 11.
10) All notification to the
Council for Trade in Goods referred to in this agreement shall normally
be made through the committee on safeguards.
11) The provisions on
notification in this agreement shall not require any member to disclose
confidential information, the disclosure of which would impede law
enforcement or otherwise be contrary to the public interest or would
prejudice the legitimate commercial interests of particular enterprises,
public or private.