WORLD TRADE
ORGANIZATIONG/SG/N/10/ECU/2
26 February 2003
(03-1164)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1(C) OF
THE AGREEMENT ON SAFEGUARDS
ECUADOR
The following communication, dated 20 February 2003, has been received from the
Permanent Mission of Ecuador.
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1. Pursuant to paragraphs 1(c) and 2 of Article 12 of the Agreement on Safeguards, the
Permanent Mission of Ecuador hereby notifies the Committee on Safeguards of the adoption by
Ecuador of a provisional safeguard measure on imports of medium density fibreboard (MDF),
classified under NANDINA heading 4411.
2. This notification refers to Note No. 4-7-34/2003 dated 10 February 2003 from the Permanent
Mission of Ecuador, which notified the initiation of an investigation process relating to serious injury
or threat thereof and the reasons for it, concerning the product referred to in the preceding paragraph.
3. This notification is made in accordance with the suggested format for notifications under the
Agreement on Safeguards, as set forth in document G/SG/W/1 of 28 February 1995.
1. Provide evidence of serious injury or th reat thereof caused by increased imports.
The threat of serious injury stems from a sustained and significant growth of imports of
medium density fibreboard (MDF) which is gradually causing a shift away from domestic production
in the local market.  Moreover, imports increased by some 327 per cent from 1999 to 2001, which will
make it more difficult for the domestic industry concerned to recover the investment it has made.  A
flagship branch of Ecuador's timber industry, it operates with state-of-the-art technology and leads the
way in using clean, environmentally-friendly manufacturing processes.  All of this has required majorinvestments in both technology and forestry;  the la tter by their very nature yield slow returns, and
these are jeopardized by massive imports.  The figures below show the extent of these imports:
Volume of Imports (MT)
YEAR IMPORTS GROWTH %
1999 1402.26
2000 2703.89 92.8
2001 5990.74 121.5
2002* 9766.41 63.03
Source: Central Bank of Ecuador
* (Up to November)G/SG/N/10/ECU/2
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The domestic industry has also experienced a downward trend in sales or market share.  The
size of the MDF market (i.e. the sum of domes tic production, minus exports, and imports) over the
last three years, is as follows:
Size of the MDF Market
YEAR MARKET (MT)
1999 9998.7
2000 10103.0
2001 16299.0
Equivalence: 1 m³ = 0.65 MT
The share of imports in the domestic market increased by 161 per cent from 1999 to 2001.
There has also been a growing build-up of inventories over the last three years, as shown below:
Build-up of Inventories
YEAR INVENTORIES (USD) GROWTH %
1999 2332406
2000 3515601 50.72001 4179850 18.8
In terms of profits and losses, the domestic industry has recorded the following negative
results over the last three years:
Profits and Losses
YEAR PROFITS (USD)
1999 - 16692
2000 - 1893867
2001 - 9141
Finally, employment has remained stable over the last three years, fluctuating between 172
and 192 direct jobs related exclusively to MDF production.  However, a total of 850 direct jobs are
reliant on the industry, including 350 in production, 150 in distribution, and 350 in forestry.
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).
There was an absolute increase in imports of 327 per cent from 1999 to 2001.  Domestic
production of identical, like or directly competitive products also registered 34 per cent growth – a
figure significantly lower, however, than that reco rded for imports, as shown in the following table:
Domestic Output (MT)
YEAR DOMESTIC OUTPUT GROWTH %
1999 25182.04
2000 27304.75 1
2001 33876.21 24G/SG/N/10/ECU/2
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In other words, while imports increased by 92 and 121 per cent per year, domestic production
registered 1 and 24 per cent growth over the same period.  The high, sustained and unusual increase in
imports of products classified under tariff heading 4411, compared to the moderate growth in
domestic output of the same products, and the impact of imports on the market and on the domesticindustry's economic and production performance, clearly demonstrate a threat of injury.  Import
trends compared to domestic output are reflected in the table below:
Domestic Output/Imports
YEAR DOMESTIC
OUTPUTIMPORTS SHARE %
1999 25182.04 1402.26 5.56
2000 27304.75 2703.89 9.90
2001 33876.21 5990.74 17.68
2002 9766.41
Source:  Central Bank of Ecuador
* (Up to November)
3. Provide a precise description of the product involved.
The product involved is described as:  "Fibreboard of wood or other ligneous materials,
whether or not bonded with resins or with other or ganic binders, which may be formed into profiles,
curved, corrugated, perforated, cut or formed into shapes other than square or rectangular or otherwise
worked, also referred to as medium density fibreboard (MDF)".  It is classified under NANDINAimport tariff heading 4411.
4. Provide a precise description of the proposed measure.
It is a provisional safeguard measure, consisting of an additional duty of 15 per cent ad
valorem , applicable to imports of medium density fibreboard (MDF), classified under NANDINA
heading 4411, for a duration of 180 days.
5. Provide the proposed date of introduction of the measure.
The provisional measure came into effect on 9 January 2003.
6. Provide the expected duration of the measure.
The measure will remain in effect for 180 days.
7. For a measure with a duration of more than three 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.
Not applicable, since this is a provisional measure.
8. If the expected duration is over one year, pr ovide the expected timetable for progressive
liberalization of the measure.
As above.G/SG/N/10/ECU/2
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9. If the measure is being extended, also provide:
(i) Evidence that the industry concerned  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;
(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 place 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.")
As above.
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