WORLD TRADE  
ORGANIZATION  G/SG/Q2/ECU/10 
5 February 2004  
 
(04-0407) 
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 
 
Replies to the Follow-Up Questions  Posed by the EUROPEAN COMMUNITIES
1 
Regarding the Notification from ECUADOR2 
 
(Glazed Ceramic Flags and Paving, Hearth or Wall Tiles (Smooth Ceramics)) 
 
  The following communication, dated 26 January 2004, is circulated at the request of the 
Delegation of the European Commission. 
 
_______________ 
 
 
 On 3 July 2003, the Foreign Trade and Investment Council of Ecuador (COMEXI) 
decided to initiate a safeguard investigation on  glazed ceramic flags and paving, hearth or wall 
tiles.  On 1 September 2003, a provisional measu re was imposed for a 180-day period, consisting 
of an extra duty of 15 per cent ad valorem .  This measure was notified to the WTO Committee 
on Safeguards on 24 September 2003 (G/SG/N/7/ ECU/2).  The measure was adopted on the 
basis of Ecuadorian safeguard le gislation, Decree No. 3497/2003. 
 
1. It appears that Ecuador has not yet no tified to the WTO Committee on Safeguards 
Decree No. 3497/2003 (published in Official Journal No. 744 of 14 January 2003).  Can Ecuador explain the reasons why it has not made this no tification promptly, as mandated by Article 12.6 
of the Safeguards Agreement (SA), and when it  intends to make the relevant notification?  
Would Ecuador agree that a WTO Member shou ld not apply measures based on safeguard 
legislation it has not yet notified to, and which has not yet been reviewed by, the WTO 
Committee on Safeguards? 
 
Reply
 
 
 The rules laid down in the WTO Agreement on Safeguards were incorporated into Ecuadorian 
legislation by means of Foreign Trade and Inv estment Council (COMEXI) Resolution No. 052, which 
sets out the "Rules and Procedures for Preventing a nd Counteracting Unfair Tr ade Practices and for 
the Application of Safeguards".  These rules are al so set out in Executive Decree No. 3497, published 
in the Ecuadorian Official Register on 14 January 20 03, and the sole purpose of which is to codify all 
areas of Ministry of Foreign Trade, Industria lization, Fisheries and Competitiveness (MICIP) 
legislation.  Executive Decree No. 3497 therefor e includes the full text of COMEXI Resolution 
No. 052, which was duly notified to the World Trade Organization and circulated as WTO document G/ADP/N/1/ECU/2.  
                                                     
 
1 G/SG/Q2/ECU/9. 
2 G/SG/N/7/ECU/2. G/SG/Q2/ECU/10 
Page 2  
 
2. Ecuador notified the provisional measur es to the WTO Committee on Safeguards 
23 days after their imposition.  Does Ecuador cons ider that it has complied with Article 12.4 of 
the SA, which requires that provisional measures be notified before they are taken? 
 
Reply
 
 
 Pursuant to the procedure established by dome stic legislation, Ecuador's Foreign Trade and 
Investment Council (COMEXI) is responsible for ta king corrective measures after studying the report 
of the MICIP (Ministry of Foreign Trade, I ndustrialization, Fisheries and Competitiveness) 
Investigating Authority.  A notification is therefor e issued once COMEXI decides to take a safeguard 
measure (if applicable) and subsequent to the co rresponding publication in the Ecuadorian Official 
Register.  In this particular case, the provisiona l safeguard measure was notified to the WTO through 
the Ecuadorian Permanent Mission as soon as these formalities were completed.  
3. Has Ecuador made any preliminary findi ngs on unforeseen developments, as mandated 
by GATT Article XIX, in the context of its d ecision on provisional measures?  Can Ecuador 
explain where these findings can be found in its no tifications and/or decisions on provisional 
measures?  
Reply
 
 
 The report submitted to the COMEXI and the R esolution adopted by this body describe the 
unforeseen developments on the basis of which the Investigating Authority recommended the 
adoption of the provisional measure.  These documen ts contain probative evidence of an unforeseen 
increase in imports and this, together with the in formation concerning serious injury, constitutes the 
underlying critical circumstances which justifie d the adoption of the safeguard measure. 
 
4. Ecuador's notification of provisional measures under Article 12.4 contains some 
evidence on evolution of domestic sales (stable over the last three and half years), domestic 
production (declining, according to Ecuador,  yet with no supporting evidence), capacity 
utilization (declining from 56 per cent to 52 per cent  over the period), gross profit and operating 
profit (declining, but still positive at the end of the period), employment (stable over the period) 
and inventories (increasing by approximately 100 per cent).  
(a) Can Ecuador explain how inventories co uld double when production was allegedly 
declining and sales remained stable?  
 Reply
 
  The in situ  findings of the Investigating Authority w ith regard to the ne gative performance of 
the factors under analysis confirmed that inventor ies had indeed increased.  They also confirmed the 
stagnation of the "porcellanato" production project, which would have resulted in an even greater 
increase in inventories.  
 
(b) Can Ecuador explain how the above data can constitute a preliminary determination 
that there is "clear evidence" of an "overall impairment in the position of a domestic industry" (Articles 6 and 4(1)(a) of the SA)? 
 Reply
 
  These findings provided the Investigating Author ity with clear preliminary evidence of the 
negative performance of the variables under analysis.   G/SG/Q2/ECU/10 
 Page 3 
 
 
(c) Can Ecuador explain how the above data can constitute a preliminary determination 
that there is "clear evidence" that the alle ged problems of the domestic industry are 
caused by imports and not by any other fa ctors (Articles 6 and 4(2)(b) of the SA)? 
 
Reply  
 
 The report prepared by the Investigating Au thority includes information which proves how 
imports of the products under inv estigation have been displacing domestic production from the local 
market.  It uses audited company information as we ll as Investigating Authority findings from its 
company visits to show the repercussions of this  increase in imports on the level of sales, production, 
productivity, capacity utilization, economic perf ormance and employment of the companies 
representing domestic production.  
(d) Can Ecuador explain how the above data can constitute "critical circumstances where 
delay would cause damage which it would be di fficult to repair" (Article 6 of the SA)?  
Has Ecuador evaluated the damage that wo uld be caused by delayed action?  Can 
details be provided? 
 
Reply
 
   The information in the Investigating Authorit y report provides evidence of the existence of 
critical circumstances arising from the sharp increase in imports of the products at issue.  To this must 
be added the previously mentione d stagnation of the "porcellanato " production project, which already 
entailed injury that would be difficult to repa ir given the financial cost represented by its 
implementation.  
__________