WORLD TRADE  
ORGANIZATION  G/SG/N/9/ECU/1 
17 March 2004 
 
 (04-1189) 
Committee on Safeguards Original:   Spanish 
  
 
 
INFORMATION TO BE NOTIFIED TO THE COMMITTEE WHERE 
A SAFEGUARD INVESTIGATION IS TERMINATED 
WITH NO SAFEGUARD MEASURE IMPOSED 
 
ECUADOR 
 
(Pneumatic Tyres of Rubber
) 
  
The following communication, dated 5 March 2004, is being circulated at the request of the 
delegation of Ecuador.  
__________________ 
 
 
1. In accordance with the decision of the Comm ittee on Safeguards adopted during its meeting 
of 6 May 1996, Ecuador hereby notifies that its co mpetent authorities have terminated a safeguard 
investigation without adopting a safeguard measure in  respect of pneumatic tyres of rubber classified 
under NANDINA subheadings 40 11.10.00 and 4011.20.00. 
2. This notification is made in accordance with the suggested format for notifications under the 
Agreement on Safeguards, as set forth in document G/SG/2 of 1 July 1996. 
1. Specify the product subject to investigation. 
 
 The products subject to investigation we re pneumatic tyres of rubber under NANDINA 
subheadings 4011.10.00, of a kind used on motor ca rs (including station wa gons and racing cars) and 
4011.20.00, of a kind used on bu ses and lorries, as they appear in the national import tariff in 
accordance with the Harmonized System. 
 
2. Identify the WTO document containi ng the notification of initiation. 
 
 Document G/SG/N/6/ECU/7 of 17 December 2003. 
 
3. Specify the date on which the investigation was terminated. 
 
 27 January 2004. G/SG/N/9/ECU/1 
Page 2  
  
4. Identify the reason(s) for termination (e.g . petition withdrawn; negative determination 
 of injury; negative determination of causation, etc.). 
 
 The investigating authority was unable to estab lish clear evidence that foreign imports of like 
goods were causing serious injury or threat thereof to the domestic industry, i.e. there was no obvious 
causal link.  Thus, the investigating authority f ound no evidence to justify applying a safeguard 
measure to imports of pneumatic tyres of r ubber under subheadings 4011.10.00 and 4011.20.00. 
 
5. Provide the reference for the published notice of termination (name of notifying 
 Member's official journal, date and p age number at which notice appeared in the 
 journal).  
 Official Register No. 278 of 20 February 2004, pages 19 to 21.  
 
6. Provide any other information that the notifying Member may consider relevant.   
 
 A copy of the publication mentioned in the previous reply is attached.    G/SG/N/9/ECU/1 
 Page 3 
 
 No. 237 
 
THE FOREIGN TRADE AND INVESTMENT COUNCIL  
 
Whereas: 
  
 In a communication dated 4 August 2003, Mr Pa trick Cazals, as Executive President of the 
Compañía Ecuatoriana del Caucho S. A. (ERCO S.A.), domiciled at Panamericana Norte km. 2.8 in 
the town of Cuenca, Ecuador, requested the initiati on of an investigation with a view to imposing 
provisional safeguard measures, as provided for under WTO law, equivalent to the Common External 
Tariff, on imports of products classified under NANDINA 40.11, subheadings 4011.10.00, 
4011.20.00 and 4011.69.00, in the form of an ad valorem  tariff equivalent to 15 per cent, for a period 
of 200 days, and also requested the application of a definitive safeguard measure in the form of a 
specific customs duty of US$0.50/kg (50 cents per kilogram) on imports of products classified under 
NANDINA 40.11, subheadings 4011.10.00, 4011.20.00 and 4011.69.00, for a period of four (4) years; 
 
 By Resolution No. 03 053 published in Official Register No. 202 of 31 October 2003, the Office of the Under-Secretary for Foreign Trade and Integration of the Ministry of Foreign Trade, 
Industry, Fisheries and Competitiveness initiated the investigation to determine whether the massive 
increase in imports of pneumatic tyres of rubber, classified under NANDINA subheadings 4011.10.00, 4011.20.00, was causing serious injury to domestic production; 
 
 The investigation was carried out in accordan ce with the WTO Agreement on Safeguards, the 
Foreign Trade and Investment Law (LEXI), and the provisions of Executive Decree No. 3497 
published in Official Journal No. 744 of 14 January 2003, which codifies Ministry of Foreign Trade, 
Industry, Fisheries and Competitiveness legislation and contains rules and procedures for the 
application of measures designed to prevent and counteract the adverse effects of unfair trading 
practices or increased imports, under such conditions as  to cause or threaten to  cause serious injury to 
the domestic industry;   The period of investigation shall cover the y ears 2000, 2001, 2002, and the months of 2003 to 
date, in accordance with the fourth paragraph of Ar ticle 345 of the Consolidated Legislative Text of 
the Ministry of Foreign Trade, Industry, Fisheries and Competitiveness and as established by the 
Resolution No. 03 053 of 31 Octobe r 2003 Initiating the Investigation; 
  Article 163 of the Constitution of the Republic provides that once published in the Official 
Register, rules set out in international treaties a nd conventions shall become part of the domestic 
legislation of the country and, furthermore, shall take precedence over laws and rules of lower rank; 
  The General Agreement on Tariffs and Tr ade (GATT 1994) and the WTO Agreement on 
Safeguards were published in Official Regist er No. 977, Supplement of 28 June 1996, and 
consequently form part of Ec uador's domestic legislation; 
 
 The Office of the Under-Secretary for Forei gn Trade and Integration of the MICIP, through 
the Trade Directorate, is the competent body and hen ce has full authority to conduct the investigation; 
  The Compañía Ecuatoriana del Caucho, ERCO S. A., is the only domestic manufacturer of the 
product under investigation, pneumatic tyres of rubber, and as such represents 100 per cent of the 
domestic industry; 
  The imported products subject to this investig ation are like and/or directly competitive with 
domestic industry products; G/SG/N/9/ECU/1 
Page 4  
  Within the industry of pneumatic tyres of rubber, there are different kinds of tyres:  ordinary 
tyres and radial tyres.  The domestic industry, under subheading 4011.10.00 (covering tyres for motor 
cars and vans), produces ordinary tyres and does not produce the full range of dimensions of radial 
tyres required, nor does it produce radial tyres fa lling under subheading 4011. 20.00 (tyres for lorries 
and buses), but only ordinary tyres;  
 During the period of investigation, domestic  market demand was higher than domestic 
production, and it was necessary to resort to imports to satisfy that demand;   The volume of imports to the Ecuadorian mark et under subheading 4011.10.00 in the period 
of investigation rose by 14 per cent between 2000 and 2001, fell by 6 per cent between 2001 and 2002 
and remained unchanged between 2002 and 2003 .  The volume of imports under subheading 
4011.20.00 was irregular, growing at a rate of  26 per cent between 2000 and 2001, decreasing by 
21 per cent between 2001 and 2002 and growing again by 6 per cent between 2002 and 2003;   In order to satisfy domestic demand, the Ecua dorian industry also imports tyres that it does 
not produce, so that in volume, imports under su bheading 4011.10.00 represen ted 31 per cent of total 
imports in the domestic market in 2000, 27 per cent in 2001, and 5 per cent in 2002 and 2003 while 
imports under subheading 4011.20.00 re presented 13 per cent of total imports in 2000, 8 per cent in 
2001, 5 per cent in 2002 and 2 per cent in 2003;   During the first year under investigation ERCO S.A. was an importing company with high 
percentage share in the two tariff subheadings, which gradually decreased over the following two 
years under investigation, as confirmed by the compan y's annual reports.  This shows that the problem 
facing ERCO was largely competition between its own imports and imports of other natural or legal 
persons, but not necessarily from domestic production;  
 Exports under subheading 4011.10.00 gradually declined until a tota l average decrease of 
11 per cent was reached for the investigation period;   their performance was stable, with a downward 
trend towards the end of the period.  Meanwh ile, exports under subheadi ng 4011.20.00 increased on 
average by 15 per cent between 2000 and 2003, and their performance was irregular;   The performance of domestic production under subheading 4011.10. was regular, with an 
upward trend;  during the investigation period, th e average variation was 2 per cent.  In contrast, 
domestic production under subheading 4011.20.00 saw a gradual decrease, falling by 17 per cent 
between 2000 and 2003.  Under subheading 4011.10.00,  48 per cent of total domestic production was 
exported in 2000, 44 per cent in 2001, and 40 per cent in 2002, and an estimated 31 per cent in 2003.  
In other words, the share of domestic production destined for the domestic market stood at 52 per 
cent, 56 per cent, 60 per cent and 69 per cent during th e period of investigation.  Under subheading 
4011.20.00, 36 per cent of total production was expor ted in 2000, 27 per cent in 2001, 32 per cent in  
2002, with an estimated 82 per cent of domestic production exported in 2003, so that domestic 
production destined for the domestic market stood at  64 per cent, 73 per cent, 68 per cent and 18 per 
cent during the period of investigation;  
 Domestic production under both tariff subheadings accounts for a significant share of the 
Ecuadorian market and imports are showing a comp etitive trend in relation to the domestic market. 
This may be due to the fact that under subheading 4011.10.00, the domestic company produces ordinary tyres and some radial tyres, contrary to subheading 4011.20.00 where imports are gaining 
market share, a performance which may be explaine d by the fact that the domestic industry does not 
produce radial tyres but does produce ordinary tyres; 
  The volume of sales in the domestic market  under subheading 4011.10.00 decreased, falling 
by an average of 3 per cent during the period of in vestigation.  The volume of sales under subheading 
4011.20.00 also decreased, dropping by an average of 14 per cent during the same period;  G/SG/N/9/ECU/1 
 Page 5 
 
  
 Sales revenue for the company has fallen, by an average of 6 per cent between 2000 and 
2003.  The ERCO S.A. 2002 annual report argues that the decline in sales for that year was due to the 
fact that the sale of tyres imported by the company fe ll, so that the decline in revenue did not result 
from a decline in domestic production but rather from the fact that tyres imported by other companies 
were displacing those imported by ERCO; 
 
 This explains why inventories under both tariff subheadings grew;  thus, during the period of 
investigation, tariff subheading 4 011.10.00 posted an average inventory growth of 268 per cent, while 
the figure for tariff subheading 4011.20.00 was 249 per cent.  Inventories are recorded in terms of 
volume (weight - kilograms); 
 
 With regard to employment levels, the co mpany employed 627 people in 2000, 659 in 2001, 
653 in 2002, and 578 in the first seven months of 2003.  This indicates that the average level of 
employment has remained relatively stable;  how ever the decrease in the number of employees in 
2003 could reflect the decline in production under the two subheadings; 
 
 The number of hours worked between 2000 and 2002 also remained stable;  however for 2003 a significant reduction of some 40 per cent is expect ed, and for the period of investigation, a 13 per 
cent decline has been recorded;   In what can be considered to be a normal performance, wages increased by an average of 
13 per cent during the period of investigation; 
  The investigating authority has carried out a detailed analysis of the information and 
arguments submitted by the interested parties and has determined that the level of deterioration in the 
domestic industry may have been caused by the di fficult macroeconomic situation in Ecuador during 
the period of investigation and by the increased competition due to the price, quality and variety, of 
technologically superior imported products;   The situation of end users must be taken in to account, particularly that of heavy goods 
carriers who would be affected by the implementation of a safeguard measure as they would be unable to obtain radial tyres at competitive prices despite their not being produced in the country; 
 
The investigating authority has been unable to establish clear evidence that foreign imports of 
like goods were causing serious injury or threat th ereof to the domestic industry, i.e. there was no 
obvious causal link.  Thus, the investigating authority found no evidence to justify applying a safeguard measure to imports of pneumatic ty res of rubber under subh eadings 4011.10.00 and 
4011.20.00; 
 
The safeguard measures are exceptional trade remedies, authorized by the World Trade 
Organization only in extreme conditio ns and unforeseen circumstances, to be applied by members as a 
necessary but provisional defence against serious  and unforeseen disruptions caused by significant 
increases in the volume of imports of like or dir ectly competitive products to those produced locally; 
 
 At a meeting on 27 January 2004, the Fore ign Trade and Investment Council (COMEXI) 
examined and approved the final report, No. 2004- 001-DOC-MICIP, drawn up by the Office of the 
Under-Secretary for Foreign Trade and Integration through the Trade Directorate of the MICIP, 
pertaining to the application submitted by the Co mpañía Ecuatoriana del Caucho S.A., ERCO S.A., 
for the application of a safeguard measure; 
  In exercise of the powers conferred by Artic le 11(i) of the Foreign Trade and Investment 
Law,  G/SG/N/9/ECU/1 
Page 6  
 Decides:  
 
Article 1. – To reject the application subm itted by the Compañía Ecuatoriana del Caucho 
S.A., ERCO S.A. for the imposition of a safeguard measure concerning imports of pneumatic tyres of 
rubber under subheadings:  
 4011.10.00 – Of a kind used on motor cars (i ncluding station wagons and racing cars) and 
4011.20.00, of a kind used on buses and lorries, si nce no clear evidence has been found of serious 
injury or threat thereof to the domestic industry due to foreign imports of like goods.   Article 2. – Pursuant to the second subparagra ph Article 36 of Title XVIII of the Consolidated 
Legal Text of the MICIP, the investigating au thority will notify the WTO Committee on Safeguards 
of the accordingly.   This resolution was adopted by the Foreign Trade and Investment Council, COMEXI, at its 
meeting of Tuesday, 27 January 2004. 
 
 Cristian Espinosa Cañizares, Under-Secretary for Foreign Trade and Integration, Secretary of 
COMEXI.  
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