WORLD TRADE  
ORGANIZATION  G/SG/N/8/ECU/2 
G/SG/N/10/ECU/3 
25 February 2004 
 
 (04-0807) 
Committee on Safeguards Original:   Spanish 
   
NOTIFICATION UNDER ARTICLE 12.1(B) OF THE AGREEMENT ON 
SAFEGUARDS ON FINDING A SERIOUS INJURY OR THREAT  
THEREOF CAUSED BY INCREASED IMPORTS 
 
NOTIFICATIONS PURSUANT TO ARTICLE 12.1(C) AND ARTICLE 9, 
FOOTNOTE 2, OF THE AGREEMENT ON SAFEGUARDS 
 
ECUADOR 
 
(Smooth Ceramics
) 
 
 
 The following communication, dated 18 February 2004, is being circulated at the request of 
the delegation of Ecuador.  
_______________ 
  
 Pursuant to the provisions of Article 12, pa ragraphs 1(b) and (c) of the WTO Agreement on 
Safeguards, I hereby notify to the Committee on Sa feguards the adoption of a definitive safeguard 
measure, consisting in the application of a specific du ty in addition to the current tariff on imports of 
smooth ceramics classified under NANDINA Nati onal Tariff subheadings 6908.90.00 and 
6907.90.00. 
  This notification is being made in accordan ce with the suggested format for notifications 
under the Agreement on Safeguards set out in document G/SG/W/1 of 28 February 1995. 
 1. Provide evidence of serious injury or threat thereof caused by increased imports 
 In 2001, imports of the products under subheadi ng 6908.90.00 grew by 310.65 per cent, rising 
from 7,688.29 metric tons (MT) in 2000 to 31,570.00 MT in 2001.  In subsequent years, imports continued to increase at a faster rate.  In 2002, th ey grew by 82.6 per cent in relation to 2001, and 
while their recorded level stood at 30,944.44 MT in  the first quarter of 2003, it was expected to 
exceed 60,000 MT by the end of the year, i.e. an  increase of 7.35 per cent, thus maintaining the 
upward trend observed since the beginning of the period investigated.  In the period 2000-2002, 
including the estimate for 2003, the imports under this subheading increased by 704.98 per cent.  That figure rises to 930 per cent, however, if imports for 1999 are included.   In respect of the products under subheading 6 907.90.00, the volume of imports increased by 
73.60 per cent in 2001 as compared to 2000.  The tre nd continued in 2002, which saw an increase of 
34.85 per cent over 2001.  In 2003, the volume of imports is expected to increase by 34.47 per cent over 2002.  Taking into account the period 200 0-2002 and including the estimate for 2003, the 
increase amounts to 214.79 per cent.   In contrast to the growth rate in imports,  domestic market sales have remained relatively 
stable, tending downwards if anything.   G/SG/N/8/ECU/2 
G/SG/N/10/ECU/3 Page 2 
 
   In 2000, the applicant companies placed a volume of 107,523 MT on the domestic market;  in 2001, their sales rose slightly to 108,634 MT, i.e. an  increase of 1.03 per cent.  However, this figure 
dropped to 105,522 MT in 2002 – a decrease of approximately 2.86 per cent.  For the first half of 
2003, sales stood at 54,361 MT. 
  Domestic production registered a slight in crease of approximately 9.08 per cent in 2001 as 
compared to 2000.  In 2002, however, it dropped by  6.09 per cent over 2001, a trend which continued 
into the first half of 2003, when an output of 63, 639.27 MT was recorded.  The tendency in domestic 
production was a downward one throughout the period investigated. 
  Although installed capacity registered a slight increase of approximately 9.89 per cent in 2001 
as compared to 2000, that level remained unchanged th roughout the rest of the period.  The utilization 
of capacity averaged about 54 per cent over the entire period. 
 
 The applicant companies have provided data showing a steady decrease in gross profit and 
operating profit.  Indeed, the 45 per cent gross profit registered in 2000 fell to 26, 24 and 27 per cent in 2001, 2002 and the first half of 2003, respectiv ely.  Operating profit fell from 34 per cent in 2000 to 
8 per cent in 2001, 3.7 per cent in 2002 and 6.42 per cent in the first half of 2003.  
 Employment data provided by the applicant companies show that the employment rate 
remains variable.  In 2000, the total number of employees stood at 742, rising to 794 in 2001.  In 2002, there were only 695 employees, while  2003 saw a slight increase, to 757. 
  The initial inventory of 1,536,879 m
2 recorded in 2000, rose gradually to 3,020,378 m2 in 
2003.  Similarly the final inventory of 1,955,285 m2 registered in 2000, rose to 2,779,261 m2 in 2001 
and 3,064,892 m2 in 2002, falling to 2,969,745 m2 in the first half of 2003. 
  Overall, the financial data analysed show that the economic situation of the companies 
forming the domestic industry has deteriorated.    
 The volume of imports to the Ecuadorian market  has increased significan tly and continues to 
cause injury and to threaten even more serious injury to the domestic industry.   Audited information from the applicant companie s shows that the massive increase in imports 
coincides with the decrease in th e variables analysed, such as the domestic market sales, output, 
productivity, installed capacity, profits and empl oyment of the companies concerned.  The 
investigating authority accordingl y concluded that there is a causal link between the increase in 
imports and the injury or threat of in jury alleged by the domestic producers. 
 
2. Provide information on whether there is an absolute increase in imports or an increase 
in imports relative to domestic production (please see also Article 2.1 for the context). 
 On the basis of the information referred to in the previous paragraph, it was determined that 
there has been a significant increase in imports of smooth ceramics both in absolute terms and in relation to domestic production:  imports of  the products under NANDINA subheading 6908.90.00 
recorded an overall increase of 704.98 per cent for the period 2000/2002 including the estimate for 
2003;  and that figure rises to 930 pe r cent if 1999 is taken into account. 
 
 Imports of the products under NANDINA s ubheading 6907.90.00 during the period 
2000/2002 including the estimate for 2003, increased by 214.79 per cent.   G/SG/N/8/ECU/2 
 G/SG/N/10/ECU/3 
 Page 3 
 
  Since, as indicated above, domestic producti on showed a downward trend throughout the 
period investigated,  the existence of an import-relate d drop in domestic produc tion is confirmed.  The 
share of domestic production in the domestic market  fell from the 93 per cent registered in 1999 and 
2000, to 77 per cent in 2001 and 65 per cent in 2002. 
 
3. Provide precise description of the product involved 
 The products subject to the safeguard measure are: "other glazed ceramic flags and paving, 
hearth or wall tiles", classified under NANDINA Na tional Tariff subheading 6908.90.00;  and "other 
unglazed ceramic flags and paving, hearth or wall tiles", classified under NANDINA National Tariff 
subheading 6907.90.00. 
 
4. Provide precise description of the proposed measure 
 It is a definitive safeguard measure which is to run for 18 calendar months and consists of a 
specific duty to be applied in addition to the current tariff on imports from any country of smooth 
ceramics classified under NANDINA National Tari ff subheadings 6908.90.00 and 6907.90.00, in 
accordance with the following timetable:   US$0.05 (FIVE CENTS) per kg. net until 30 June 2004; 
 US$0.04 (FOUR CENTS) per kg. net from 1 July 2004 to 31 October 2004;  and  US$0.03 (THREE CENTS) per kg. net from 1 November 2004 until 1 March 2005. 
 
5. Provide proposed date of introduction of the measure 
 The measure is to take effect from the day fo llowing its publication in the Official Register, 
i.e. from 14 February 2004.  6. Provide expected duration of the measure 
 The measure will apply for 18 calendar months. 
 
7. For a measure with a duration of more than 3 years, provide the proposed date for the 
review (under Article 7.4) to be held not later than the mid-term of the measure, if such 
a date for the review has already been scheduled 
The duration is not more than 3 years. 
 
8. If the expected duration is over one year, provide expected timetable for progressive 
liberalization of the measure 
 The timetable for the application of the specific duty takes account of the progressive 
reduction required by Article 7.4 of the WTO Agreement on Safeguards. 
 
9. If the measure is being extended, also provide: 
(i) evidence that the industry concerne d is adjusting and that the safeguard 
measure continues to be necessary to  prevent or remedy serious injury; 
(ii) reference to the WTO document that notified the initial application of the 
measure; G/SG/N/8/ECU/2 
G/SG/N/10/ECU/3 Page 4 
 
 
(iii) duration of the measure from initial application till the date at which it will be 
extended; and, 
(iv) precise description of the measure in pl ace prior to the date of extension (in this 
context, please note that the last senten ce of Article 7.4 states that: "A measure 
extended under paragraph 2 shall not be more restrictive than it was at the end 
of the initial period, and should continue to be liberalized."). 
 This is not the case here. 
  G/SG/N/8/ECU/2 
 G/SG/N/10/ECU/3 
 Page 5 
 
 
OFFICIAL REGISTER 
 
ORGAN OF THE GOVERNMENT OF ECUADOR 
 
Year I – Quito, Friday, 13 February 2004, No. 273 
 
EXTRACT 
__________________________________________________________________________________ 
 
EXECUTIVE FUNCTION 
 
AGREEMENTS: 
 
THE FOREIGN TRADE AND INVESTMENT COUNCIL 
 
232 A definitive safeguard measure shall run for a period of 18 calendar months, consisting in the 
application of a specific duty in  addition to the existing tariff on imports of smooth ceramics 
classified under NANDINA National Tariff subheadings 6908.90 .00 and 6907.90.00. 
 
No. 232  
 
THE FOREIGN TRADE AND INVESTMENT COUNCIL 
 
WHEREAS: 
 
 The WTO Agreement on Safeguards and Execu tive Decree No. 3497, published in Official 
Register No. 744 of 14 January 2003, establish the rules for the application of safeguard measures and thus constitute the legal basis for the procedures to be followed during safeguard investigations; 
  The above-mentioned rules allow developing co untries to restrict trade in the event of 
unforeseen developments, in order to facilitate th e strengthening of a domestic industry through the 
application of specific safeguard measures, provided th at imports are shown to have increased in such 
quantities and numbers and in such conditions as to cau se or threaten or to threaten to cause serious 
injury to domestic producers of like or directly competitive products;   In a communication sent to this Ministry on 27 May 2003, Mr Carlos Crespo Seminario, 
Mr Xavier Valdivieso and Mr Alfredo Peña Payró, representatives of the companies C.A. Ecuatoriana 
de Cerámica, Cerámicas Rialto S.A. and Cerámicas Graiman Cía. Ltda., respectively, requested the adoption of a safeguard measure under the rules of the WTO;   The companies C.A. Ecuatoriana de Cerámica, Cerámicas Rialto S.A. and Cerámicas Graiman Cía. Ltda. account for 80 per cent of th e domestic smooth ceramics industry and, so may 
properly apply for the safeguard measure;   
  By virtue of Resolution No. 03-08 of 18 June  2003, published in Official Register No. 117 of 
3 July 2003, the Under-Secretary for Foreign Trade and Integration initiated th e investigation process 
to determine whether the massive increase in imports  of glazed ceramics flags and paving, hearth or 
wall tiles classified under NANDINA National Tariff subheading 6908.90.00 is causing serious injury 
to the domestic industry;   By Resolution No. 03-044 of the Under-Secretary of Foreign Trade and Integration of the MICIP, published in Official Register No. 150 of 19 August 2003, Resolution No. 03-038 of 
18 June 2003, published in Official Register No. 11 7 of 3 July 2003 was extended, at the request of G/SG/N/8/ECU/2 
G/SG/N/10/ECU/3 Page 6 
 
 the applicant companies, to in clude in the investigation process the products classified under 
NANDINA National Tariff subheading 6907.90.00:  "oth er unglazed ceramic flags and paving, hearth 
or wall tiles";  
 Accordingly, the products subject to investig ation are "other glazed ceramic flags and paving, 
hearth or wall tiles", classified under NANDINA Na tional Tariff subheading 6908.90.00;  and "other 
unglazed ceramic flags and paving, hearth or wall tiles", classified under NANDINA National Tariff subheading 6907.90.00;  
 The products classified under subheading 6907. 90.00 are like products to those classified 
under subheading 6908.90.00 and may be substituted therefor; 
  The Foreign Trade and Investment Council,  COMEXI, in a meeting of 20 August 2003 
adopted Resolution No. 205, published in Official Register No. 159 of 1 September 2003, in which it 
decided to apply, for a period of  180 calendar days, a provisional saf eguard measure consisting of a 
15 per cent ad valorem  duty in addition to the current national tariff on imports from any country of 
smooth ceramics classified under NANDINA National Tariff subheading 6908.90.00; 
  The investigating authority pursued the inv estigation process, in the course of which a 
number of interested parties expressed their view s, including the following exporting companies:  
COLCERAMICA S.A., Asociación Española de Fabri cantes de Azulejos y Pavimentos Cerámicos, 
the Office of Economy and Trade of the Embassy of Spain in Quito, and the delegation of the European Commission to Colombia and Ecuador;   and the following importing companies:  
Ambientes Hogar 2000 Cía. Ltda., Preasociación de Importadores de Cerámica, Arquicons, Mundiferro, Ferridalgo S.A., Hernán Villarreal Vill acís, Comercial Carchi, Consorcio Ferretero and 
JABECO; 
  In 2001, imports of the products classified unde r subheading 6908.90.00 grew by 310.65 per 
cent, rising from 7,688.29 MT in 2000 to 31,572.00 MT in 2001.  In subsequent years, imports continued to increase at a faster rate:  in 2002 th ey grew by 82.6 per cent in relation to 2001, and 
while their recorded level stood at 30,944.44 MT in  the first quarter of 2003, it was expected to 
exceed 60,000 MT by the end of the year, i.e. an  increase of 7.35 per cent, thus maintaining the 
upward trend observed since the beginning of the pe riod investigated.  During the period 2000-2002, 
including the estimate for 2003, the increase in im ports under this subheading was 704.98 per cent.  
However, that figure rises to 93 0 per cent if 1999 is included; 
 
 In respect of the products under subheading 6 907.90.00, the volume of imports increased by 
73.60 per cent in 2001 as compared to 2000.  That trend continued in 2002, when an increase of 34.85 
was registered over 2001.  For 2003, it was expected that imports would grow in volume by 34.47 as 
compared to 2002.  If account is taken of the peri od 2000-2002 and the estimate for 2003 is included, 
the increase amounts to 214.79 per cent;  
 There is a significant increase in imports of smooth ceramics both in absolute terms and in 
relation to domestic production, and imports of the smooth ceramics classified under the subheadings 
NANDINA 6908.90.00 and 6907.90.00 have thus  been displacing domestic production on the 
domestic market;  
 The share of the imported products in the dom estic market shows an upward trend, whereas 
domestic production has remained stable;   Domestic market sales continued their downturn, falling from 107,523.00 MT in 2000 to 105,522.00 MT in 2002.  Over the first half of 2003, the volume of sales stood at 54,361.00 MT; 
  G/SG/N/8/ECU/2 
 G/SG/N/10/ECU/3 
 Page 7 
 
  Domestic output of identical, like or directly competitive products showed a slight increase of approximately 2.4 per cent over the three years from 2000 to 2002, compared with the 704.98 per cent increase in imports;  this trend continued into the first quarter of 2003.  The share of domestic output 
in the domestic market declined from the 93 per cen t registered in 1999 and 2000 to 77 per cent in 
2001 and 65 per cent in 2002; 
  In relation to 2000, installed capacity increased slightly, by approximately 9.89 per cent, in 2001, but remained at the same level for the rest of the period.  However, the average rate of 
utilization, roughly 54 per cent over the entire peri od, affects the productivity of companies that 
produce smooth ceramics.  Taking the three applicant companies together, utilization of capacity has 
declined in the last few years;   The applicant companies have provided data showing a steady decrease in gross profit and 
operating profit.  Indeed, the 45 per cent gross profit recorded in 2000 fell to 26, 24 and 27 per cent in 
2001, 2002 and the first half of 2003 respectively.  Operating profit fell from 34 per cent in 2000 to 8 
per cent in 2001, 3.75 per cent in 2002 and 6.42 per cen t in the first half of 2003;  which shows that 
the economic situation of these companies has deteriorated;   The employment rate in the applicant companies has fluctuated:  in 2000 they had 724 employees, comprising manual workers and plant personnel – a figure that rose to 794 in 2001;  the 
recorded number of employees in 2002 was only 695 , rising to 757 in the first half of 2003; 
  Inventories have steadily increased as a result of the loss of the local market caused by the 
increase in imports.  They rose from 1,955,285 m
2 in the final inventory of 2000 to 2,779,261 m2 in 
2001, 3,064,892 m2 in 2002 and 2,969,745 m2 in the first half of 2003; 
 
 The financial data analysed show an overa ll decline in the economic situation of the 
companies that form the domestic industry;   The analysis conducted has enabled the inves tigating authority to determine with greater 
accuracy the level of injury caused to the domes tic industry by imports of the ceramic products 
classified under the subheadings 6908.90.00 and 6907. 90.00, and to establish that those imports are 
causing serious injury to domestic production of like goods, which is reflected in  the behaviour of the 
variables analysed;   The audited information submitted by the app licant companies confirms that the massive 
increase in imports coincides with the decrease in the variables anal ysed, such as the domestic market 
sales, output, productivity, installed capacity, profits and employment of the companies concerned.  The investigating authority accord ingly deems that there is a causal link between the increase in 
imports and the alleged injury and threat  of injury to the domestic industry; 
  As the competent body, the Office of Under-Secr etary of Foreign Trade and Integration of the 
MICIP, through the Trade Directorate, has full author ity to conduct the investigation;  and the Foreign 
Trade and Investment Council, COMEXI, as the competent body, has the authority to impose 
safeguard measures;   At a meeting on 27 January 2004, the Forei gn Trade and Investment Council examined and 
approved the final report, No. 2004-14-DOC-MICIP, drawn up by the Office of the Under-Secretary 
of Foreign Trade and Integration of the MICIP, pe rtaining to the application submitted by the above-
mentioned domestic industry for the adoption of a safeguard measure under the rules of the World 
Trade Organization;  and   G/SG/N/8/ECU/2 
G/SG/N/10/ECU/3 Page 8 
 
  In exercise of the powers conferred by Artic le 11(i) of the Foreign Trade and Investment 
Law,   
Decides:  
 
 Article 1.  To apply a definitive safeguard measure for a period of 18 calendar months, consisting of a specific duty in addition to the cu rrent national tariff on imports from any country of 
smooth ceramics classified under NANDINA Nati onal Tariff subheadings 6908.90.00 and 
6907.90.00, in accordance with Article 3.1 and 5.1 of the WTO Agreement on Safeguards;  and 
Articles 312 and 326 of the Consolidated Legislativ e Text of the MICIP, in accordance with the 
following time table:   US$0.05 (FIVE CENTS) per kg. net until 30 June 2004. 
 
 US$0.04 (FOUR CENTS) per kg. net from 1 July 2004 to 31 October 2004. 
  US$0.03 (THREE CENTS) per kg. net from 1 November 2004 to 1 March 2005.   The above-mentioned levels give an averag e specific duty of approximately US$0.04 (FOUR 
CENTS) per kg. net of imported ceramics. 
 
 The above timetable is consistent with the pr ogressive liberalization required by Article 7.4 of 
the WTO Agreement on Safeguards.   Article 2.  The period of application of the provisional measure adopted by COMEXI in 
Resolution No. 205, published in Official Register  No. 159 of 1 September 2003, shall be counted as 
part of the period of application of the defi nitive measure, which shall accordingly run until 
1 March 2005.  On its entry into force, the defi nitive safeguard measure t hus replaces the provisional 
measure.   Article 3.  During the period of  application of the measure, th e applicant companies shall be 
required to show that they are making the necessary efforts to address the injury caused by the imports 
of the products concerned and to compete with th e imported products under free market conditions, in 
accordance with the Readjustment Plan to be assessed periodically by the investigating authority 
pursuant to the rules in force.  
 Article 4.  Pursuant to Article 12 of th e WTO Agreement on Safeguards and Articles 330 and 
331 of the Consolidated Legislative Text of the MI CIP, the investigating authority shall publish and 
notify relevant information to the WTO Comm ittee on Safeguards and the parties concerned. 
  Article 5.  In accordance with Article 9.1 of the WTO Agreement on Safeguards, the 
definitive safeguard measure shall not apply to de veloping countries whose imports account for less 
than three per cent of the total annual imports, provided that those countries account collectively for 
not more than nine per cent of the total imports .  The developing countries for which imports are 
currently registered and which meet the above-men tioned requirement are:  Venezuela, United Arab 
Emirates, Indonesia, South Korea, Hong Kong, Ma laysia, India, Chile, Argentina, Mexico and 
Viet Nam. 
 
 Article 6.  In order to prevent unjustified increases in domestic consumer prices for the product referred to in this resolution, the Nationa l Statistics and Census In stitute (INEC) shall be 
entrusted with carrying out a statistical study, the r esults of which, expressed in price indexes, shall be 
submitted to COMEXI.  If unjustifie d and/or higher than average increases in the consumer price  G/SG/N/8/ECU/2 
 G/SG/N/10/ECU/3 
 Page 9 
 
 index are recorded, COMEXI shall take cognizance of  the reasons for such increases and examine the 
applicability of the safeguard covered by this resolution.   Article 7.  This resolution shall be notified to the Ecuadorian Customs Corporation (CAE) and 
shall enter into force on the day following its publication in the Official Register. 
  This resolution was adopted by the Foreign Trade and Investment Council at is meeting of Tuesday, 27 January  2004.  
 Quito, 4 February 2004 
 (signed) Dumany Sánchez Neira, Under-Secretary of  Foreign Trade and Integration, Secretary of 
COMEXI.  
__________