WORLD TRADE
ORGANIZATIONG/SG/N/7/ECU/2
10 October 2003
(03-5374)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT ON
SAFEGUARDS BEFORE TAKING A PROVISIONAL SAFEGUARD
MEASURE REFERRED TO IN ARTICLE 6
ECUADOR
The following communication, dated 24 September 2003, has been received from the
Permanent Mission of Ecuador.
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1. Pursuant to Article 12.4 of the WTO Agreement on Safeguards, I hereby notify the
Committee on Safeguards of the adoption of a provisional safeguard measure, consisting of an
additional duty of 15 per cent ad valorem  on imports of glazed ceramic flags and paving, hearth or
wall tiles (smooth ceramics), cla ssified under NANDINA subheading 6908.90.00.
2. This notification is being made in accordance with the suggested format for notifications
under the Agreement on Safeguards set out in document G/SG/W/1 of 28 February 1995.
3. Notification to the Committee on Safeguards before taking a provisional safeguard measure
referred to in Article 6.
1. Specify the product subject to the proposed provisional safeguard measure
Glazed ceramic flags and paving, hearth or wall tiles, classified under NANDINA national
tariff subheading 6908.90.00.
2. Specify the proposed provisional safeguard measure
The measure consists of a 15 per cent ad valorem duty additional to the current national tariff
of 15 per cent, making a total of 30 per cent.
3. Specify the proposed date of introduction of the provisional safeguard measure
2 September 2003.
4. Specify the expected duration of the provisional safeguard measure, if any decision on
the duration of the measure has been made
The measure will remain in effect for 180 days.G/SG/N/7/ECU/2
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5. Provide the basis for:
(i) making a preliminary determination, as provided for in Article 6, that increased
imports have caused or are threatening to cause serious injury
In 2001,  imports grew by 310.65 per cent, rising from 7,688.29 metric tonnes (MT) in
2000 to 31,572.00 MT in 2001.  In subsequent years, imports continued to increase at a faster
rate.  In 2002, they grew by 82.60 per cent in relation to 2001, and while their recorded level
stood at 30,944.44 MT in the first quarter of 2003, it is expected to exceed 60,000 MT by the
end of the year, thus maintaining the upward trend observed since the beginning of the period
investigated.
(ii) determining that there are critical ci rcumstances where delay would cause damage
which it would be difficult to repair
In contrast to the growth rate in imports , domestic market sales have remained
relatively stable, tending downwards if anythi ng.  In 2000, the applicant companies placed a
volume of 107,523 MT on the domestic market; in 2001 their sales rose slightly to108,634 MT - 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.
There has been a decline in domestic production as a result of the increase in imports.
Despite an increase of approximately 9.08 per cent in 2001 in relation to 2000, production in
2002 fell by 6.09 per cent in relation to 2001, a trend which continued into the first quarter of
2003.
Utilization of installed capacity was recorded at levels of 56 per cent in 2000,
55 per cent in 2001, 52 per cent in 2002, and 52 per cent in the first half of 2003.
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 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 cent in the
first half of 2003.
The employment rate also remains variable.  The total number of employees in 2000
was 742, and this figure rose to 794 in 2001.  In 2002, there were 695 employees, rising to
757 in 2003.
As regards inventories, the reported figures show that the initial inventory of
1,536,879 m² 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.
An analysis of the above-mentioned financial data reveals that the economic situation
of the applicant companies has deteriorated, as in the case of the Graiman company, whose
profit ratio remained negative over the period of investigation, suggesting the existence of
critical circumstances that would cause injury to the domestic production of the product
concerned which it would be difficult to repair.G/SG/N/7/ECU/2
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OFFICIAL REGISTER No. 159 – MONDAY, 1 SEPTEMBER 2003
No. 205
THE FOREIGN TRADE AND INVESTMENT COUNCIL
Whereas:
The WTO Agreement on Safeguards and Executive 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, such
measures being provided for in Article XIX of the GATT 1994;
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
replacement of the safeguard measure approved by the General Secretariat of the Andean Community,
by virtue of Resolution 690, published in Official Gazette No. 882 of 15 January 2003;
By virtue of Resolution No. 03-038 of 18 June  2003, published in Official Register No. 117
of 3 July 2003, the Under-Secretary for Foreign Trade and Integration initiated the investigative
process, in order to determine whether the massive increase in imports of glazed ceramic flags and
paving, hearth or wall tiles under NANDINA tariff  subheading 6908.90.00 is causing serious injury to
the domestic industry;
The product under investigation is "other glazed ceramic flags and paving, hearth or wall
tiles", classified under NANDINA national ta riff subheading 6908.90.00.  The companies C.A.
Ecuatoriana de Cerámica, Cerámicas Rialto S.A.  and Cerámicas Graiman Cía. Ltda. account for
80 per cent of the domestic production of smooth ceramics;
According to the figures published by the Central Bank of Ecuador, the volume of imports of
the products classified under NANDINA subheading 6908.90.00 increased by 649.83 per cent over
the period 2000-2002, rising from 7,688.29 MT (metric tonnes) in 2000 to 57,649.74 MT in 2002.
The growth rate of these imports continues to accelerate;  while their recorded level stood at
30,944.44 metric tonnes in the first quarter of 2003, it is expected to exceed 60,000 metric tonnes bythe end of the year, thus maintaining the upward trend observed since the beginning of the period
investigated.
The domestic market share of the imported products is therefore rising, whereas domestic
output remains more or less stable;
Domestic market sales continue their downturn, falling from 107,523 MT in 2000 to
105,522 MT in 2002. Over the first half of 2003, the volume of sales stood at 54.361 MT;
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 649.83 per cent
increase in imports;  this trend continued into the first quarter of 2003;
In relation to 2000, installed capacity increased 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, roughly54 cent over the entire period, affects the productivity of companies that produce smooth ceramics;
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 inG/SG/N/7/ECU/2
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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 cent in the first half of 2003;  this shows that the
economic situation of these companies has deteriorated, as is the case for the Graiman company,
whose profit ratio remained negative over the period investigated;
The employment rate in the applicant companies has fluctuated:  in 2000, they had
742 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 m² 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;
On the basis of the information available, imports of "other glazed ceramic flags and paving,
hearth or wall tiles", classified under  NANDINA national tari ff subheading 6908.90.00, are
considered to be causing serious injury to domestic producers of like products, inasmuch as the
massive increase in imports coincides with the steady decrease in the variables analysed, and domesticproducers of smooth ceramics are found to be facing critical circumstances;
At a meeting on 20 August 2003, the Foreign Trade and Investment Council examined and
approved preliminary report No. 2003 – 91 DOC – MICIP submitted by the Ministry of Foreign
Trade, Industrialization, Fisheries and Competitiveness, in connection with the application, made bythe above-mentioned domestic producers for the opening of an investigation and the adoption of a
provisional safeguard measure in accordance with WTO regulations;  and,
In exercise of the powers conferred by Article 11 (i) of the Foreign Trade and Investment
Law,
Decides:
Article 1.-  To apply a provisional safeguard measure, consisting of a 15 per cent ad valorem
duty in addition to the current national tariff of 15 per cent, making a total of 30 per cent, on imports
from any country of smooth ceramics classifi ed under NANDINA national tariff subheading
6908.90.00, in accordance with Article 6 of the WTO Agreement on Safeguards and Article 322 ofthe Consolidated Legislative Text of the Ministry of Foreign Trade, Industrialization, Fisheries and
Competitiveness (MICIP).
Article 2.-  The aforementioned measure shall remain in force for a period of 180 calendar
days, during which time the domestic producers of smooth ceramics shall be required to demonstratethat they are making the necessary efforts to compete with the imported product under free market
conditions, in conformity with the Readjustment Plan to be submitted in accordance with the
regulations in force, so as to enable the invest igating authority to carry out the relevant periodic
assessments.
Article 3.-  During the period of application of the measure, the investigating authority shall
continue the investigative process until it decides whether or not to impose a definitive measure.
Article 4.-  Pursuant to Article 12 of the WTO Agreement on Safeguards and Articles 330 and
331 of the Consolidated Legislative Text of the MICIP, the investigating authority shall publish andnotify relevant information to the WTO Committee on Safeguards and the parties concerned.
Article 5.-  Developing country Members of the World Trade Organization shall be exempt
from the measure, in accordance with Article 9.1 of the WTO Agreement on Safeguards.G/SG/N/7/ECU/2
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Article 6.-  In order to prevent unjustified increases in domestic consumer prices for the
product referred to in this resolution, the National Statistics and Census Institute (INEC) shall be
entrusted with carrying out a statistical study, the results of which, expressed in price indexes, shall be
submitted to the Foreign Trade and Investment Council (COMEXI).  If unjustified and/or higher thanaverage increases in the consumer price index are recorded, COMEXI shall take cognisance 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 as from the day following its publication in the Official Register.
I certify that this resolution was adopted by the Foreign Trade and Investment Council at its
meeting held on Wednesday, 20 August 2003.
(signed) Cristian Espinosa, Secretary of COMEXI
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