WORLD TRADE
ORGANIZATIONG/SG/N/8/VEN/2
14 September 2001
(01-4337)
Committee on Safeguards Original:  Spanish
NOTIFICATION UNDER ARTICLE 12.1(b) OF THE AGREEMENT ON
SAFEGUARDS CONCERNING A FINDING OF SERIOUS
INJURY OR THREAT THEREOF CAUSED BY
INCREASED IMPORTS
VENEZUELA
The following communication, dated 3 September 2001, has been received from the
Permanent Mission of Venezuela.
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I have the honour to enclose, pursuant to Article 12.1(b) and in keeping with Article 12.2 of
the Agreement on Safeguards, the technical report of the Technical Secretariat of the Anti-Dumping
and Subsidies Commission (CASS) of the Venezuelan Ministry of Production and Trade, determining
serious injury to domestic production of like or directly competitive products caused by imports ofnew rubber tyres of a kind used on motor cars.
The CASS Technical Secretariat recommended as a definitive safeguard measure a 20.45 per
cent ad valorem  surcharge for the first year of the measure, which will be progressively liberalized in
accordance with the details set out in the report.  The decision on the recommendation has been
submitted for consideration by the competent authorities.
Following a report by the Technical Secretariat of the Anti-Dumping and Subsidies
Commission of the Venezuelan Ministry of Production and Trade, on 20 December 2000, it was
found appropriate to apply definitive safeguard measures to imports of "new pneumatic tyres of
rubber, of a kind used on motor cars (including station wagons and racing cars)", listed in the
Venezuelan Customs Tariff under NANDINA tariff code 4011.10.00, after determining that suchimports increased in such quantities and under such conditions as to cause serious injury to domestic
production of like or directly competitive goods.
The definitive measure recommended consists of a 20.45 per cent ad valorem  increase in
import duty for the first year of the measure, which will be progressively liberalized as detailedbelow.  The current tariff in Venezuela for the imports affected is 15 per cent.  On application of the
definitive safeguard measure (20.45 per cent during the first year), the tariff applied to imports of such
products will be 35.45 per cent.
Under Venezuelan legislation on trade safeguards, once the investigating authority has
determined the applicability of safeguard measures, it is required to send the report making a finding
that imports of the product  have increased in such quantities and under such conditions as to have
caused serious injury to domestic production of like or directly competitive goods, to the Minister of
Production and Trade and the Minister of Finance, for them to assess the respective report and submit
their recommendations to the President of the Republic, who will decide on the adoption of safeguardmeasures.G/SG/N/8/VEN/2
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As specified in the Technical Secretariat's report and as will be set out below in the present
notification, the proposed safeguard measure would apply to particular sizes of tyres entering under
the above-mentioned tariff heading. Imports are excluded from the application of the proposed
safeguard measure if they are products from member countries of the Andean Community (Colombia,Peru, Ecuador and Bolivia) and the Free Trade Trea ty between Venezuela, Colombia and Mexico, by
virtue of trade and integration agreements signed with those countries.  It is emphasized in this
connection that both imports of tyres of sizes not included in the investigation and imports from the
above-mentioned countries were not taken into account in calculating the increase in imports, and
tyres of sizes not covered by the investigation were also excluded from the analysis of the economic
and financial variables of domestic production.
Determination of the increase in imports (see Table 1)
The imports investigated increased by 36.27 per cent from 1997 to 1998, followed by a
further increase between 1998 and 1999 of 136.16 per cent.  The consequence of this trend was a
221.81 per cent net increase in imports, in absolute terms, for the period under investigation.
As for the proportion of domestic production represented by the investigated imports, it rose
by 2.21 percentage points in the period 1997-1998 and by 3.96 percentage points for the period
1998-1999.  This pattern reflects the scale of such imports in relation to domestic production, since
they increased almost two-fold over the period 1997-1999.
With respect to the investigated imports as a percentage of apparent consumption, the
increase was 2.18 percentage points for the period 1997-1998 and 6.47 percentage points for the
period 1998-1999.  In this case, too, it was found that such imports more than doubled in relation to
consumption.
Determination of serious injury (see Table 2)
Domestic production fell by 8.93 per cent between 1997 and 1998, from 1,533,349 units to
1,396,369 units, then rose in 1992 by 44.84 per cent, to 2,022,561 units.  This shows a 31.9 per cent
net increase for the period of investigation, due largely to increased imports, as will be seen below.
The Technical Secretariat examined the domestic sales variable and found that such sales fell
by 8.17 per cent in 1998, but rose by 0.09 per cent in 1999.  In fact, the domestic industry's sales on
the domestic market amounted to 1,070,457 units, 982,980 units and 983,930 units in 1997, 1998 and
1999 respectively.  The net decline in this variable for the period of investigation was 8.08 per cent.
Exports fell from 372,651 units in 1997 to 300,642 units in 1998, a 19.32 per cent fall.  However, thebehaviour of this variable changed in 1997 and rose by 221.9 per cent, in a year in which 967,858
units were exported.  The net rate of growth from 1997 to 1999 was 159.7 per cent.
The behaviour of the variables analysed so far explains the evolution in inventories.  In 1998
inventories rose by 294.27 per cent, from 36,989 units to 145,835 units.  This increase was due to thefact that production, although it had fallen, was higher than total domestic sales plus export sales,
which also fell in that year.  In 1999, inventories rose anew because production was again higher than
total sales.  In 1999, inventories stood at 215,980 units, a 48.1 per cent  increase over the previous
year.  The rise in inventories in 1999 was the result of a major increase in production that year, which
was not absorbed by the combined effect of the increase in domestic sales and exports.  The rate ofgrowth in inventories from 1997 to 1999 was 483.9 per cent.
The domestic price was found to have increased by 10.69 per cent from 1997 to 1998, from
Bs 24,988 per unit to Bs 27,660 per unit, whereas it fell by 1.62 per cent in 1999 to Bs 27,213 per
unit.  This variable showed a net increase of 8.9 per cent between 1997 and 1999.G/SG/N/8/VEN/2
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Costs, for their part, consistently rose throughout the period of investigation.  They rose  by
6.55 per cent between 1997 and 1998, from Bs 19,585 per unit to Bs 20,868 per unit.  In 1999 there
was a further 8.6 per cent increase in this variable, to Bs 22,663 per unit.  For the whole of the period
of investigation, the growth in costs stood at 15.72 per cent.
The pattern observed in the operating margin of the domestic industry for like products during
the period of investigation is a result of the evolution in prices and costs.  In 1998, both variables
showed an increase.  Nevertheless, costs rose to a lesser extent, which meant a 3 percentage points
increase in the operating margin, from 21.6 per cent to 24.6 per cent between 1997 and 1998
respectively.  The situation was reversed in 1999, when prices fell and costs again rose, which led to a
7.9 percentage points drop in the operating margin, to a level of 16.7 per cent.  The net effect of thebehaviour of this variable resulted in a 4.9 percentage points decline for the period 1997-99, which
means that domestic manufacturers could not increase their prices at the same pace as the rise in their
costs during the period of investigation.
Similarly, the trend in operating profits for domestic manufacturers for like goods is a result
of the pattern in their operating margin.  In this re spect, it will be seen that, like the operating margin,
operating profits rose in 1998 from Bs 5,777 million in 1997 to Bs 6,688 million.  This involved a
growth rate of 15.76 per cent.  In 1999 there was a parallel trend in these two variables inasmuch as
both fell after the rise in the previous year.  Operating profits fell by 33.14 per cent to
Bs 4,471 million.  The net effect of the trend in this variable also resulted in a decrease for the period1997-1999, when there was a net decline of 22.6 per cent  in operating profits.
From a comparison of the import prices investigated and domestic prices it will be seen that
the former were below the latter in all the years of the period of investigation.  In 1997 the average
price of imported products was 11.05 per cent lower than the price of domestic products, since it stoodat Bs 22,228 per unit, compared with Bs 24,988 per unit.  In 1998 the average price of imported
products was Bs 23,410 per unit, whereas that of domestic products was Bs 27,660 per unit, a
difference which signifies a 15.36 per cent price undercutting for the imported product compared with
the domestic product.  In 1999, the average price of imported products was Bs 26,756 per unit,
whereas that of domestic products was Bs 27,213 per uni t, signifying a price undercutting of 1.67 per
cent for the imported product compared with the domestic product.
It was deemed appropriate to examine another variable, i.e. the trend in domestic prices in
real terms, which fell continuously throughout the period investigated.  It fell by 18.5 per cent and
20.4 per cent in 1998 and 1999 respectively, resulting in a 35.1 per cent net rate of decline for the
period under study.  This means that domestic producers were unable to raise their prices in line with
the trend in inflation.
The market share of domestic sales of the manufacturers' product decreased continuously
throughout the period investigated.  This variable fell by 6.5 percentage points between 1997 and
1998, from 87 per cent to 80.5 per cent in each of those years respectively.  In 1999 it fell again by
17.5 percentage points to 63 per cent.  The overall decrease in the market share from 1997 to 1999was 24 percentage points.
The utilization of capacity in the production of like goods fell from 1997 to 1998 by
2.5 percentage points, from 23.4 per cent to 20.9 per cent respectively. This was caused both by
decreased production and by increased installed capacity.  In 1999 this variable rose by 8.6 percentagepoints to 29.5 per cent.  The growth in the period under investigation was 6.1 percentage points.
The number of people employed rose by 0.8 per cent in 1998 and fell by 6.6 per cent in 1999,
a net decline of 5.9 per cent from 1997 to 1999.G/SG/N/8/VEN/2
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Productivity reflects the trend in the number of people employed, since it is measured as units
produced per person.  In 1998, when production fell and personnel increased, productivity fell by
9.6 per cent.  The opposite occurred in 1999, in other words, production rose substantially higher and
the number of personnel fell, which led to a 55.1 per cent increase in productivity in that year.
Productivity rose by 40.2 per cent in the period of investigation.
The return on investment showed a marked deterioration from 1997 to 1998, from 10.7 per
cent to -8.2 per cent (an 18.9 percentage points drop).  In 1999, there was a slight 1 percentage point
recovery in this variable over the previous year, when it reached  -7.2 per cent.  The net decrease in
the period of investigation was –17.9 per cent.
Products affected by the recommendation
As pointed out in the first part of this notification, the proposed safeguard measure would
apply to specific sizes of tyres entering under the Venezuelan Customs Tariff's NANDINA tariff code
4011.10.00:  "New pneumatic tyres, of rubber, of a kind used on motor cars (including station wagons
and racing cars)".  The tyres under investigation and to which the safeguard measure would apply arelisted below:
145/80-13 195/75-14 225/75-15 295/50-15
155/80-13 195/75R-14 225/75-16 30X9.50-15
155/80R-12 195-14 225/75R-14 30X9.50R-15
155-13 205/50R-15 225/75R-16 31X10.50-16
155R-12 205/55R-16 235/70-15 6.00-14
155R-15 205/60R-13 235/70R-14 6.50-14
165/65R-13 205/70-14 235/70R-16 6.50-16
165/70-13 205/75-14 235/75-15 6.70-15
165/70R-12 205/80-16 235/75-16 7.00-14
165/75-13 205-14 235/85-16 7.00-15
165/80-13 215/50-13 235-15 7.00-16
165-13 215/60R-14 235-16 7.10-15
175/65-13 215/60R-15 245/50-14 7.50-16
185/60-13 215/65-14 245/50R-16 8.00-14.5
185/60R-13 215/70-14 245/60-14 8.00-16.5
185/60R-14 215/75-14 245/60R-14 8.75-15.6
185/60R-15 215/75-15 245/65-15 8.75-16.5
185/75-14 215/75R-14 245/70R-16 9.50-16.5
185/80-14 215/80R-16 245/75R-16 G78-14
185-14 215/85-15 255/60-15 H78-15
195/50R-15 225/50R-15 255/60R-15 H78-16
195/60-13 225/60-14 255/65-15
195/60R-14 225/60R-15 265/75R-16
195/60R-15 225/70-14 275/60R-15
195/70-14 225/75-14 27X8.50R-14
Description of the proposed measure
The definitive measure recommended consists of a 20.45 per cent ad valorem  import duty in
the first year of the measure;  13.63 per cent ad valorem  during the second year;  and 6.82 per cent
ad valorem  during the third year.  Venezuela's current tariff for the imports affected is 15 per cent. By
implementing the definitive safeguard measure (20.45 per cent in the first year, 13.63 per cent in the
second year and 6.82 per cent in the third year), the tariff applied to imports of such products will be
35.45 per cent in the first year;  28.63 per cent in the second year and 21.82 per cent in the third year.G/SG/N/8/VEN/2
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Proposed date of introduction of the measure
Under Venezuelan law on safeguard measures, a definitive safeguard measure may not enter
into force until a competitive readjustment plan has been prepared by the domestic industry concerned
and duly established and approved by the Ministry of Production and Trade.  At the present time, nosuch competitive readjustment plan is available, for which reason there is no proposed date of
introduction of the measure.  Once a competitive readjustment plan is duly established and approved
by the Ministry of Production and Trade, the safeguard measure will enter into force on publication in
the Official Journal of the Republic of Venezuela or after the period established for that purpose in the
decision to apply the safeguard measure.
Expected duration of the measure
It is recommended that the measure should last for a period of three years as from the date on
which it enters into force.
Proposed date for the review, if the dur ation of the measure exceeds three years
Not applicable.
Progressive liberalization of the measure, if its duration exceeds one year
As stated above, the recommended definitive measure consists of a 20.45 per cent ad valorem
increase in import duty during the first year of applicability of the measure;  this would be reduced by
one third in the two subsequent years, with 13.63 per cent ad valorem  in the second year and 6.82 per
cent ad valorem  in the third year.
Table 1
Evolution of the Volume of Imports under Investigation 1997-1999
(Kilogrammes)
1997 1998 1999
Imports under the measures concerned, from all
countries except the Andean Community andMexico, effected by importers966,544 1,317,127 3,110,500
Domestic production 20,754,091 19,163,666 28,720,894
Apparent consumption 16,860,975 16,645,432 21,631,399
Imports/domestic production % 4.66 6.87 10.83
Imports/apparent consumption % 5.73 7.91 14.38
Source:  Our calculations.G/SG/N/8/VEN/2
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Table 2
Evolution of the Economic Variables of Domestic Production of Tyres 1997-1999
1997 1998 1999 VAR
97-98VAR
98-99VAR
97-99
Production (units) 1,533,349 1,396,369 2,022,561 -8.93% 44.84% 31.9%
Sales, domestic market (units) 1,070,457 982,980 983,930 -8.17% 0.09% -8.08%
Exports (units) 372,651 300,642 967,858 -19.32% 221.9% 159.7%
Inventories (units) 36,989 145,835 215,980 294.27% 48.1% 483.9%
Domestic ex works price
(Bs/unit)124.988 27.660 27.213 10.69% -1.62% 8.9%
Costs (Bs/unit)219.585 20.868 22.663 6.55% 8.6% 15.72%
Margin in transactions in
products investigated (%)321.6% 24.6% 16.7% 3.0 p.p. -7.9 p.p. -4.9 p.p.
Profit on transactions inproducts investigated (millions
Bs)
45,777 6,688 4,471 15.76% -33.14% -22.6%
Price imports cleared for homeuse (Bs/unit)
522,228 23,410 26,756 5.3% 14.3% 20.4%
Diff. domestic price versus
price of imports (%)611.05% 15.36% 1.67% 4.3 p.p. -13.7 p.p. -9.4 p.p.
Real domestic ex works price(Real Bs/Unit)
716,660 13,579 10,808 -18.5% -20.4% -35.1%
Manufacturers market share (%) 87.0% 80.5% 63.0% -6.5 p.p. -17.5 p.p. -24.0 p.p.
Installed capacity (unit/year) 6,542,508 6,659,922 6,860,216 1.8% 3.0% 4.9%
Utilization of capacity (%) 23.4% 20.9% 29.5% -2.5 p.p. 8.6 p.p. 6.1 p.p.
No. of people employed 2,717 2,739 2,558 0.8% -6.6% -5.9%
Productivity (unit/man) 564 510 791 -9.6% 55.1% 40.2%
Return on investment (%)910.7% -8.2% -7.2% -18.9 p.p 1 p.p. -17.9 p.p.
1 Price after deduction of freight from factory to customer.
2 Cost of sales plus operating costs.
3 Calculated as follows:  (Price-Cost)/Price.
4 Calculated as follows:  Price x Units sold on domestic market x margin in transactions in
products investigated.
5 Calculated as follows:  CIF Price + Import duties + Customs charge + Costs customs agent +
Other costs such as storage, return of containers, etc.
6 Calculated as follows:  (Price of domestic product - Price of imports cleared for home use) /
Price of domestic product.
7 The term "real Bs" means 1996 bolivares.  This variable was deflated by using the inflation
calculated on the basis of the CPI.
8 The return on investment was not evaluated since the general balance sheet in nominal terms
for all enterprises was not available.
9 Calculated as follows:  Profits before taxes/Value of assets.  The values shown are the
average returns for two of the applicant enterprises, since the Technical Secretariat did not have thegeneral balance in nominal terms for one of them.
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