WORLD TRADE
ORGANIZATIONG/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
8 October 2003
(03-5316)
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
NOTIFICATION PURSUANT TO ARTICLE 12.1(c) AND ARTICLE 9,
 FOOTNOTE 2, OF THE AGREEMENT ON SAFEGUARDS
Ecuador
The following communication, dated 25 July 2003, has been received from the Permanent
Mission of Ecuador.
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Pursuant to the provisions of Article 12, para graphs 1(b) and 1(c) of the WTO Agreement on
Safeguards, the Permanent Mission of Ecuador hereby notifies the Committee on Safeguards of the
adoption by Ecuador of a definitive safeguard measure on imports of medium density fibreboard
(MDF), classified under NANDINA s ubheading 4411 of the National Tariff.
This notification is 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.
1. Provide evidence of serious injury or th reat thereof caused by increased imports
It was found that imports during the period 1999-2001 recorded a 327.2 per cent increase,
which was maintained up to 2002, with an increase of 63.03 per cent.  However, the total increaserecorded for the period between 1999 and January-November 2002 was 596.48 per cent.
The share of imported products in the domestic market for MDF in 1999 was 13 per cent;  it
rose to 22 per cent in 2000 and 27 per cent in 2001, and this trend was maintained in 2002.
Although domestic output grew by an averag e of 10.31 per cent in 1999-2001, the growth of
imports during the same period was 327.2 per cent;  in other words, domestic output grew at a
substantially lower rate than imports.
It was also found that imports account for a significant percentage of apparent consumption.
In 1999, 86.72 per cent of apparent consumption was covered by imports;  while in 2000 and 2001
that figure fell gradually to 67.38 and 30.98 per cent, respectively, and during the period
January-November 2002, it rose to 120.01 per cent.
Total sales effected by the company Aglomerados Cotopaxi S.A., ACOSA, amounted to
5,700 metric tonnes (MT) in 1999, 7,138 MT in 2000, 9,388 MT in 2001 and 10,567 MT in 2002,
reflecting an average increase over the period 2000-2002 of the order of 23.1 per cent.G/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
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The investigating authority carried out an inspection at ACOSA's plant, during which
evidence was found that the productivity levels achieved in the past by the company had been affected
by imports of medium density fibreboard entering the Ecuadorian market.  Indeed, the productivityincrease achieved by ACOSA is based essentially on the incorporation of new technology in its
productive processes, and although this trend continues at the present time, supplemented by a
programme of permanent training of the workforce and product users, it has not intensified owing to
the fact that various machines have been put out of action.  However, the criteria of quality,
management, modernization, systematization and collective effort have been maintained, thereby
enabling it to maintain a leading position on the local and international market.
It was also found that the installed capacity of Aglomerados Cotopaxi S.A., had increasingly
been left idle, given the failure to use the production line for veneer wood, the line for drying veneer
panels, the wood sawing line, the finger joint and veneer assembly line and the finger joint press.
Earnings have shown a downward trend since the enterprise has had negative results over the
last three years.
Over the same period, employment in the domestic industry has remained stable, fluctuating
between 172 and 192 direct jobs related exclusiv ely to MDF production.  However, ACOSA points
out that a total of 850 direct jobs depend on the industry, including 350 in production, 150 indistribution and 350 in forestry.
Over the period covered by the investigation, the company increased its inventories from
1,463.97 MT in 1999 to 638.48 MT in 2000, 1,927.18 MT in 2001 and 2,283.36 MT in the period
January-November to 2002, with an average increase of 54.64 per cent for the entire period.
The investigating authority determ ined the level of injury caused to the domestic industry by
imports of medium density fibreboard, and found that they were causing a threat of serious injury to
domestic production of like goods, which is reflected in the behaviour of the variables analysed.
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).
Imports were found to have increased in absolute terms.  During the periods 1999-2001 and
January-November 2002, imports grew by 327.2 per cent, reflecting a sustained increase that was
maintained into 2002, with a growth rate of 63.03 pe r cent.  The total increase for the period between
1999 and January-November 2002 was 596.48 per cent.
Output also showed an upturn of the order of 8.43 per cent in 2000, compared with 1999,
24.06 per cent in 2001 compared with the year before and (-) 1.55 per cent during the period January-
November 2002.  Thus, during the period investigat ed, output increased by 10.31 per cent on average.
3. Provide a precise description of the product involved
The product investigated is described as "Fibreboard of wood or other ligneous materials,
whether or not bonded with resins or other organic substances, which may be formed into profiles,
curved, corrugated, perforated, cut or formed into shapes other than square or rectangular or otherwise
worked", classified under NANDINA import tariff heading 4411, which covers the following eight
subheadings:G/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
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• 4411.11.00 and 4411.19.00:  fibreboard of a density exceeding 0.8 g/cm3;.
• 4411.21.00 and 4411.29.00:  fibreboard of a density exceeding 0.5 g/cm3 but not
exceeding 0.8 g/cm3;
• 4411.31.00 and 4411.39.00:  fibreboard of a density exceeding 0.35 g/cm3 but not
exceeding 0.5 g/cm3;  and
• 4411.91.00 and 4411.99.00:  other products.
4. Provide a precise description of the proposed measure
It is a definitive safeguard measure, in the form of a quantitative restriction, consisting of an
import quota equivalent to 5,401 MT per year.  For determination of the import quota, account wastaken of the average level of imports effected over the last three representative years for which
statistics are available, in accordance with Article 5.1 of the WTO Agreement on Safeguards.
5. Provide the proposed date of introduction of the measure
The measure came into effect on 16 July 2003, the date of publication of the relevant
resolution in the Official Journal.
6. Provide the expected duration of the measure.
The measure will remain in effect for two years.
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 adate for the review has already been scheduled.
The duration does not exceed three years.
8. If the expected duration is over one year, pr ovide the expected timetable for progressive
liberalization of the measure.
The safeguard measure is to be made subject to progressive liberalization after the first year
of its application, in accordance with the following timetable:  25 per cent increase in the quota in the
first quarter following the first year of application;  an additional 25 per cent in the second and third
quarters;  and at the end of the second year of application of the measure, the import quota is to be
completely eliminated.
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 until the date at which it will be
extended;  andG/SG/N/8/ECU/1
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(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.").
Not applicable in this case.G/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
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No. 193
THE COUNCIL FOR FOREIGN TRADE AND INVESTMENT
Whereas:
The Agreement on Safeguards of the World Trade Organization (WTO) and Title XVII of
Executive Decree 3497, published in Official Journal No. 744 of 14 January 2003, which contains the
consolidated legislative text of the Ministry of Foreign Trade, Industrialization and Fisheries (MICIP),
lay down the rules for the application of safeguard measures, and thus constitute the legal basis for the
procedures to be followed in the conduct of safeguard investigations, such measures being providedfor in Article XIX of the GATT 1994;
In a communication of 6 November 2002, Mr Diego Ponce Castro, general manager and legal
representative of AGLOMERADOS COTOPAXI S. A. (ACOSA), Av. Naciones Unidas 1014 and
Av. Amazonas, edificio Banco La Previsora, Torre A, piso 8, Quito, Ecuador, requested the openingof an investigation for the imposition of a safeguard measure on imports of medium density
fibreboard classified under NANDINA heading 4411, in the form of a "quantitative restriction"
equivalent to the average level of imports over the last three years, i.e. the quantity of 3,365.63 MT
per year, over a period of four (4) years;
The MICIP Under-Secretary for Foreign Trade and Integration, by virtue of Resolution 02-26
published in Official Journal No. 719 of 5 December 2002, initiated the investigation process
requested by Aglomerados Cotopaxi S.A. ;
The Council for Foreign Trade and Investment (COMEXI), at a meeting held on
18 December 2002, adopted Resolution No. 175, published in Official Journal No. 740 of
8 January 2003, whereby it decided to apply a provisional safeguard measure consisting of an
additional duty of 15 per cent ad valorem  on imports of medium density fibreboard (MDF), classified
under NANDINA heading 4411 of the national tariff;
Article 3 of the above-mentioned Resolution No. 175 provides that, during the period of
validity of the provisional safeguard measure, the investigating authority shall continue theinvestigation process until it has determined whether or not a definitive measure should be adopted.
Pursuant to this mandate, the investigating authority continued the investigation process, in the course
of which it received information and documentation supplied by various interested parties;
The product under investigation is medium density fibreboard, classified under NANDINA
import tariff heading 4411, which covers subheadings 4411.11.00, 4411.19.00, 4411.21.00,
4411.29.00, 4411.31.00, 4411.39.00, 4411.91.00 and 4411.99.00;
According to data from the Central Bank of Ecuador, during the period 1999-2001 and
January-November 2002, imports increased by 327.2 per cent, reflecting a sustained increase in suchimports during the period concerned, which was maintained until 2002, with an increase of 63.03 per
cent, so that the total increase for the period between 1999 and January-November 2002 was
596.48 per cent;
During the period 1999-2001, although domestic output increased by 10.31 per cent on
average, the recorded increase in imports over the same period was 327.2 per cent;  in other words,
domestic output grew at a much lower rate than imports;G/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
Page 6
The figures supplied by the Central Bank of Ecuador show that the apparent consumption of
medium density fibreboard was 1,617 tonnes in 1999, 4,012.77 tonnes in 2000, 19,335.51 tonnes in
2001 and 8,137.95 tonnes for the period January-November 2002.  Imports accounted for a substantial
proportion of apparent consumption:  86.72 per cent  in 1999, 67.38 per cent in 2000, 30.98 per cent in
2001 and 120.01 per cent for the period January-November 2002;
The share of imports in the domestic market rose from 13 per cent in 1999 to 22 per cent in
2000 and 27 per cent in 2001;
The applicant company had sales of 5,700 MT in 1999, 7,138 MT in 2000, 9,388 MT in 2001
and 10,567 MT in 2002, reflecting an average increase of the order of 23.1 per cent for the period2000-2002;
Output also recorded an increase of the order of 8.43 per cent in 2000 compared with 1999,
24.06 per cent in 2001 compared with the preceeding year, and (-) 1.55 per cent during the period
January-November 2002, so that the average increase for this variable during the period underinvestigation stood at 10.31 per cent;
The inspection carried out by the investigating authority on the industrial premises of
Aglomerados Cotopaxi S.A. revealed that the productivity levels achieved by the company in the past
had apparently been affected by fibreboard imports, particularly medium density fibreboard (MDF)entering the Ecuadorian market.  The productivity increase achieved by the company is based
essentially on the incorporation of new technology in its productive processes, and although this trend
continues at the present time, supplemented by a programme of permanent training for the workforce
and for product users, it has not intensified owing to the fact that various machines have been put out
of action;  however, the criteria of quality,  management, modernization, systematization and
collective effort have been maintained, thereby enab ling it to maintain a leading position on the local
and international market;
During the same inspection at the plant of the company requesting the safeguard measure, it
was found that the installed capacity of Aglomerados Cotopaxi S.A. had increasingly been left idle,
given the failure to use the production line for veneer wood, the line for drying veneer panels, the
wood sawing line, the finger joint and veneer assembly line and the finger joint press;
An analysis of the financial statements submitted by Aglomerados Cotopaxi S.A. reveal a
downward trend in earnings since the firm posted negative results for the period under consideration;
Over the last three years, employment in the domestic industry has remained stable,
fluctuating between 172 and 192 direct jobs rela ted exclusively to MDF production.  However,
Aglomerados Cotopaxi S.A. points out that a total of 850 direct jobs are reliant on the industry,
including 350 in production, 150 in distribution and 350 in forestry;
As a result of the dollarization of the Ecuadorian economy, the average wage paid by the
company Aglomerados Cotopaxi S.A. has increased substantially, due to the increase in the cost of
labour and other services, which is considered to be affecting the competitiveness of the domestic
industry;
During the period covered by the investigation, the firm built up its inventories from
1,463.97 MT in 1999 to 638.48 MT in 2000, 1,927.18 MT in 2001 and 2,283.36 MT in the period
January-November 2002, recording an average increase of 54.64 per cent over the entire period;G/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
Page 7
The investigation was carried out in accordance with the provisions of the Agreement on
Safeguards of the World Trade Organization and Decree 3497, published in Official Journal No. 744
of 14 January 2003, containing rules and procedures for the application of measures designed to
prevent and counteract the adverse effects of unfair trading practices or increased imports, under suchconditions as to cause or threaten to cause serious injury to the domestic industry, which state that a
safeguard measure may be applied to a specific product, provided that imports are shown to have
increased in such quantities and under such conditions as to cause or threaten to cause serious injury
to domestic producers of like or directly competitive products;
In the course of the investigation, the different variables were calculated in accordance with
the relevant procedures laid down by the World Trade Organization and COMEXI in their respective
regulations;
From the variables analysed, the investigating authority was able to perceive a clear threat of
injury which could well result in increased losses fo r the company;  it was determined that the level of
injury caused to the domestic industry by imports of medium density fibreboard constituted a threat ofserious injury to domestic production of the like good, which is reflected in the behaviour of the
variables analysed;
The Council for Foreign Trade and Investment, at its meeting on 3 July 2003, noted and
approved final report N. 2003-014 DOC-MICIP, submitted by the Ministry of Foreign Trade,Industrialization, Fisheries and Competitiveness, in connection with the application submitted by the
above-mentioned domestic industry;  and,
In the exercise of the powers granted under Article 11(i) of the Law on foreign trade and
investment,
Resolves:
Article 1.   To apply a definitive safeguard measure, in the form of a quantitative restriction,
consisting of an import quota equivalent to 5,401 MT per year, calculated on the basis of average
imports over the last three representative years for which statistics are available, in accordance with
Article 5.1 of the WTO Agreement on Safeguards, to  imports of medium density fibreboard (MDF),
classified under NANDINA heading 4411 of the National Tariff.
Article 2.   The above-mentioned measure shall have a maximum duration of two years,
during which the applicant company must demonstrate that it is making the necessary efforts to
confront the threat of serious injury and to compete on free market conditions with the importedproduct, in conformity with a readjustment plan submitted in accordance with the prevailing
regulations to enable the investigating authority to carry out the relevant periodic assessments.
Article 3.   The Council for Foreign Trade and Investment (COMEXI) shall be responsible for
administering and allocating import quotas among supplier countries, in accordance with theprovisions of Article 5.2(a) of the WTO Agreement on Safeguards.
Article 4.   In accordance with Article 12.2 of the WTO Agreement on Safeguards and
Article 335 of Executive Decree 3497, the safeguard measure shall be made subject to progressive
liberalization after the first year of its application, in accordance with the following timetable:  a25 per cent increase in the quota in the first quarter following the first year of application;  an
additional 25 per cent in the second and third quarters;  and total elimination of the import quota at the
end of the second year of application of the measure.G/SG/N/8/ECU/1
G/SG/N/10/ECU/2/Suppl.1
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Article 5.   Pursuant to Article 12 of the WTO Agreement on Safeguards and Articles 330 and
331 of Executive Decree 3497, the investigating authority shall issue the necessary publications and
notifications.
Article 6.   The measure shall not apply to developing country Members of the World Trade
Organization, in accordance with the provisions of Article 9.1 of the WTO Agreement on Safeguards;
nor shall it apply to Member States of the Andean Community, in accordance with the decision by the
Secretary-General of that organization, contained in Resolution No. 705 published in the Official
Gazette of the Cartagena Agreement (No. 907 of 18 March 2003).
Article 7.   In order to prevent unjustified increases in domestic consumer prices for the
product covered by this Resolution, the National Statistical and Census Institute (INEC) shall be
entrusted with carrying out the necessary statistical investigation, the results of which, expressed in
price indices, shall be submitted to COMEXI.  If unjustified and/or higher than average increases in
the consumer price index are recorded, COMEXI shall take note of the reasons for such increases and
analyse the applicability of the safeguard covered by this resolution.
Article 8.   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 Journal.
I certify that this resolution was adopted by the Council for Foreign Trade and Investment at
its meeting on Thursday, 3 July 2003.
(signed)
Cristián Espinosa, Under-Secretary for Foreign Trade and Integration of the MICIP, Secretary
of COMEXI.
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