WORLD TRADE
ORGANIZATIONG/SG/N/8/VEN/1
2 April 2001
(01-1651)
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 23 March 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-Dumpingand 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 of
new rubber tyres of a kind used on motor cars.
The CASS Technical Secretariat recommended as a definitive safeguard measure a 16.16 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 beensubmitted 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 ofrubber, 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 such
imports 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 16.16 per cent ad valorem  increase in
import duty for the first year of the measure, which will be progressively liberalized as detailed
below.  The current tariff in Venezuela for the imports affected is 15 per cent.  On application of the
definitive safeguard measure (16.16 per cent during the first year), the tariff applied to imports of such
products will be 31.16 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 submitG/SG/N/8/VEN/1
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their recommendations to the President of the Republic, who will decide on the adoption of safeguard
measures.
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 underthe 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 economicand financial variables of domestic production.
Determination of the increase in imports (see Table 1)
The imports investigated increased by 33.05 per cent from 1997 to 1998, followed by a
further increase between 1998 and 1999 of 136.4 per cent.  The consequence of this trend was a
214.5 per cent net increase in imports, in absolute terms, for the period under investigation.
As for the proportion that the investigated imports represented of domestic production, it rose
by 2.1 percentage points in the period 1997-1998 and by 4.27 percentage points for the period1998-1999.  This pattern shows that the amount of such imports in relation to domestic production
increased by more than twice over the period 1997-1999.
With respect to the investigated imports as a percentage of apparent consumption, the
increase was 1.92 percentage points for the period 1997-1998 and 6.69 percentage points for theperiod 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 8.6 per cent between 1997 and 1998, from 1,563,658 units to
1,429,858 units, then rose in 1992 by 42.6 per cent, to 2,038,309 units.  This shows a 30.4 per cent netincrease 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
consecutively in 1998 and 1999 by 7 per cent and 1.3 per cent respectively.  In fact, the domestic
industry's sales on the domestic market were 1,089,981 units, 1,014,043 units and 1,000,450 units in1997, 1998 and 1999 respectively.  The net decline in this variable for the period of investigation was
8.2 per cent.  Exports fell from 375,511 units in 1997 to 302,005 units in 1998, a 19.6 per cent fall.
However, the behaviour of this variable changed in 1997 and rose by 220.6 per cent, in a year in
which 968,168 units were exported.  The net rate of growth from 1997 to 1999 was 157.8 per cent.
The behaviour of the variables analysed so far explains the evolution in inventories.  In 1998
inventories rose by 297.1 per cent, from 36,989 units to 146,898 units.  This increase was due to the
fact 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 215,961 units, a 47 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 an increase in total sales.  Actually, in 1999 domestic sales again fell and the increase
in exports did not offset the combined result of th e increase in production and the decline in domestic
sales.  The rate of growth in inventories from 1997 to 1999 was 483.9 per cent.G/SG/N/8/VEN/1
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The domestic price was found to have increased by 10.9 per cent from 1997 to 1998, from
Bs 25,034 per unit to Bs 27,768 per unit, whereas it fell by 1.7 per cent in 1999 to Bs 27,298 per unit.
This variable showed a net increase of 9 per cent between 1997 and 1999.
Costs, for their part, consistently rose throughout the period of investigation.  They rose  by
6.6 per cent between 1997 and 1998, from Bs 19,611 per unit to Bs 20,904 per unit.  In 1999 there
was a further 8.5 per cent increase in this variable, to Bs 22,681 per unit.  For the whole of the period
of investigation, the growth in costs stood at 15.7 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 variablesshowed an increase.  Nevertheless, costs rose to a lesser extent, which meant a 3 percentage points
increase in the operating margin, from 21.7 per cent to 24.7 per cent between 1997 and 1998
respectively.  The situation was reversed in 1999, when prices fell and costs again rose, which led to a
7.8 percentage points drop in the operating margin, to a level of 16.9 per cent.  The net effect of the
behaviour of this variable resulted in a 4.8 percentage points decline for the period 1997-99, whichmeans 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 5,921 million in 1997 to Bs 6,955 million.  This involved a
growth rate of 17.5 per cent.  In 1999 there was a pa rallel trend in these two variables inasmuch as
both fell after the rise in the previous year.  Operating profits fell by 33.6 per cent to Bs 4,615 million.
The net effect of the trend in this variable also resulted in a decrease for the period 1997-1999, when
there was a net decline of 22.1 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 the years 1997 and 1998.  In 1997 the average price of imported
products was 8.5 per cent lower than the price of domestic products, since it stood at Bs 22,896 per
unit, compared with Bs 25,034 per unit.  In 1998 the average price of imported products was
Bs 24,062 per unit, whereas that of domestic products was Bs 27,768 per unit, a difference which
signifies a 13.3 per cent price undercutting for the imported product compared with the domesticproduct.  In 1999, the situation was reversed, since the price of imported products – Bs 27,905 per
unit – was 2.2 per cent higher than the domestic price, namely Bs 27,298 per unit.
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 18.3 per cent and20.5 per cent  in 1998 and 1999 respectively, resulting in a 35 per cent net rate of decline for the
period under study.  This means that domestic producers were unable to raise their prices along 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 86.5 per cent  to 80 per cent  in each of those years respectively.  In 1999 it fell again by
17.6 percentage points to 62.4 per cent.  The overall decrease in the market share from 1997 to 1999
was 24.1 percentage points.
The utilization of capacity in the production of like goods fell from 1997 to 1998 by
2.4 percentage points, from 23.9 per cent  to 21.5 per cent respectively. This was caused both by
decreased production and by increased installed capacity.  In 1999 this variable rose by 8.2 percentage
points to 29.7 per cent.  The growth in the period under investigation was 5.8 percentage points.G/SG/N/8/VEN/1
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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.
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
9.3 per cent.  The opposite occurred in 1999, in other words, production rose substantially higher and
the number of personnel fell, which led to a 52.6 per cent increase in productivity in that year.
Productivity rose by 38.5 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 pointrecovery 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 are
listed 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 7.50R-16
185/60R-13 215/70-14 245/60-14 8.00-14.5
185/60R-14 215/75-14 245/60R-14 8.00-16.5
185/60R-15 215/75-15 245/65-15 8.75-15.6
185/75-14 215/75R-14 245/70R-16 8.75-16.5
185/80-14 215/80R-16 245/75R-16 9.50-16.5
185-14 215/85-15 255/60-15 G78-14
195/50R-15 225/50R-15 255/60R-15 H78-15
195/60-13 225/60-14 255/65-15 H78-16
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-14G/SG/N/8/VEN/1
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Description of the proposed measure
The definitive measure recommended consists of a 16.16 per cent ad valorem  import duty in
the first year of the measure;  10.77 per cent ad valorem  during the second year;  and 5.39 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 (16.16 per cent in the first year, 10.77 per cent in the
second year and 5.39 per cent in the third year), the tariff applied to imports of such products will be
31.16 per cent in the first year;  25.77 per cent in the second year and 20.39 per cent in the third year.
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, no
such 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 inthe 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 16.16 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 10.77 per cent ad valorem  in the second year and 5.39 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 and
Mexico, effected by importers1,035,977 1,378,324 3,258,330
Domestic production 21,348,981 19,820,971 29,029,988
Apparent consumption 17,394,450 17,499,334 22,360,520
Imports/domestic production % 4.85 6.95 11.22
Imports/apparent consumption % 5.96 7.88 14.57
Source:  Our calculations.G/SG/N/8/VEN/1
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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) 1,563,658 1,429,858 2,038,309 -8.6% 42.6% 30.4%
Sales, domestic market (units) 1,089,981 1,014,043 1,000,450 -7.0% -1.3% -8.2%
Exports (units) 375,511 302,005 968,168 -19.6% 220.6% 157.8%
Inventories (units) 36,989 146,898 215,961 297.1% 47.0% 483.9%
Domestic ex works price
(Bs/unit)125.034 27.768 27.298 10.9% -1.7% 9.0%
Costs (Bs/unit)219.611 20.904 22.681 6.6% 8.5% 15.7%
Margin in transactions in
products investigated (%)321.7% 24.7% 16.9% 3.0 p.p. -7.8 p.p. -4.8 p.p.
Profit on transactions inproducts investigated (millions
Bs)
45,921 6,955 4,615 17.5% -33.6% -22.1%
Price imports cleared for homeuse (Bs/unit)
522,896 24,062 27,905 5.1% 16.0% 21.9%
Diff. domestic price versus
price of imports (%)68.5% 13.3% -2.2% 4.8 p.p. -15.6 p.p. -10.8 p.p.
Real domestic ex works price(Real Bs/Unit)
716,690 13,632 10,842 -18.3% -20.5% -35.0%
Manufacturers market share (%) 86.5% 80.0% 62.4% -6.5 p.p. -17.6 p.p. -24.1 p.p.
Installed capacity (unit/year) 6,542,508 6,659,922 6,860,216 1.8% 3.0% 4.9%
Utilization of capacity (%) 23.9% 21.5% 29.7% -24. p.p. 8.2 p.p. 5.8 p.p.
No. of people employed 2,717 2,739 2,558 0.8% -6.6% -5.9%
Productivity (unit/man) 576 522 797 -9.3% 52.6% 38.5%
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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