WORLD TRADE
ORGANIZATIONG/C/22
G/SG/N/13/BRA/2
3 October 2002
(02-5309)
Committee on Safeguards Original:  English
NOTIFICATION UNDER ARTICLE 12.5 OF THE
AGREEMENT ON SAFEGUARDS OF THE RESULTS
OF A MID-TERM REVIEW REFERRED TO IN ARTICLE 7.4
BRAZIL
The following communication, dated 25 September 2002, has been received from the
Permanent Mission of Brazil.
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The Permanent Mission of Brazil to the United Nations Office and other International
Organizations in Geneva presents its compliments to  the WTO Secretariat and, in its capacity as pro-
tempore coordinator of MERCOSUR, has the honour to  notify the Council for Trade in Goods of the
results of the mid-term review incidental to the extension of the safeguard measure applied to
imported toys.  The measure has effect in the customs territory of Brazil.  This notification is
submitted in compliance with the “Regulation on the Application of Safeguard Measures to Importsfrom Non-Members Countries of MERCOSUR” a nd pursuant to Articles 12.5 and 7.4 of the
Agreement on Safeguards.G/C/22
G/SG/N/13/BRA/2
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This notification is made pursuant to paragraph 5 of Article 12, which provides that mid-term
reviews, conducted in accordance with paragraph 4 of article 7, shall be notified to the Council for
Trade in Goods. It follows the pattern set by document G/SG/W/1 of the Committee on Safeguards.
1. Specify the measure and the product subject to the measure for which the mid-term
review was conducted, and provide reference to the WTO document that notified the
safeguard measure subject to the review
The mid-term review in question regards the extension of the safeguard measure applied to
imported toys, which relate to the following tariff items in the Common Nomenclature of
MERCOSUR: 9501.00.00/9502.10.10/9502.10.90/ 9502.91.00/9502.99.00/9503.10.00/9503.20.00/
9503.30.00/9503.41.00/9503.49.00/9503.50.00/950 3.60.00/9503.70.00/9503.80.10/9503.80.90/
9503.90.10/9503.90.90/9504.10.10/9504.10.91/9504.10.99
The extension of the safeguard measure was established as an “ad valorem” import duty
additional to the Common External Tariff, according to the following schedule:
PERIOD ADDITIONAL AD VALOREM DUTY01/01/2000 A 31/12/2000 14%
01/01/2001 A 31/12/2001 13%01/01/2002 A 21/12/2002 12%
01/01/2003 A 31/12/2003 11%
The extension of the safeguard measure was notified to the WTO in documents
G/SG/N/8/BRA/2, as of 2 December 1999.
2. Provide the dates of initiation  and conclusion of the review:
The review started in March 2002 and ended in August of the same year.
3. Describe the results of the review, providin g some detail on the basis for reaching those
results
In order to review the situation of the domestic industry after the extension of the safeguard
measure, the analysis conducted by the competent authorities focused on data related to the period
between January 1999 and December 2001.
The analysis revealed that in 2001, compared to 1999, there was an increase of imports in
quantity and a decrease in value, (which demonstrates that goods of lesser unitary value were bought);
an increase of exports, both in quantity and value; a decrease of the ratio between imports and
production; a decrease of stocks; an increase of the net operational revenue; an increase of the net
profit; and increase of the net and operational margins.
On the other hand, there was also a decrease of production, both in quantity and value; an
increase of domestic sales in quantity and a decrease in value; a decrease of the number of employees
(in absolute numbers and those linked to production); a decrease of gross and operational margins
excluding financial results; a decrease of the current liquidity rate; a decrease of the average pricepracticed by the domestic industry in the domestic market.
During the period analysed - from 1999 to 2001 – the figures related to the domestic industry
were the following:G/C/22
G/SG/N/13/BRA/2
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a decrease of 12,6% in the ratio between the value of imports (excluding  imports originated from
other MERCOSUR countries) and the value of domestic production;
an increase of 9,9% in the quantity sold in the domestic market by the domestic industry;
a decrease of 28,6% in the profits of the domestic industry in the domestic market;a decrease of 6,3%  in the share of the domestic industry in the apparent consumption;a decrease of 8,1% in the production of the domestic industry in quantity and of 40% in value.an increase of 6,3% in the exported volume, and of 15,4% in value.a decrease of 25,1% in the stock level.
a decrease of 5,8% in the total number of employees and of 7% in the number of  employees directly
linked to production.
a decrease of the average price practiced by the domestic industry in the domestic market.
an increase of  25,7% in the net operational revenue.
an increase of 238,3% in the net profit.an increase of the operational (3,0%) and net margins (8,8%).a decrease of the gross (10,6%) and operational margins (1,6%) excluding financial results.a decrease of 10,5% in the current liquidity rate.the rate of overall indebtedness of the industry remained constant (roughly 0,81%).  As to the
characteristics of the indebtedness, it increased 9,5% in the short run and decreased 10,5% in the longrun.
As to the apparent consumption, it should be noted that the decrease of 17,8% of the share of
the domestic industry was caused by the increase of 19,7% of the share of domestic producers not
originally considered as the domestic industry, which demonstrates that the safeguard measure is notonly key to prevent the increase of imports (which have actually decreased in value), but also to foster
growth of other enterprises in the sector.
Another relevant aspect to be mentioned is the trend in prices as practiced by the domestic
industry.  The average price tends to decrease in the domestic market, according to the IPB/FIPEindex (price index of the toy industry of the Funda ção Instituto de Pesquisas Econômicas) as indicated
by the domestic industry.
The monitoring of the adjustment plan of the industry shows that it is being well
implemented, especially with regards to investment  in the productive capacity, the launching of new
products, the training of employees and the marketing campaigns, which are key to success in
competition.G/C/22
G/SG/N/13/BRA/2
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Conclusions:
The analysis of the trend in imports and the situation of the domestic industry, as described
above, reveals that:
Despite the signs of recovery of the domestic industry and its successful efforts to fulfill the
compromise, the safeguard measure is still necessary to allow further recovery of the sector;
In light of the results of the mid-term review, the pace of liberalization of the safeguard
measure will not be increased."
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