WORLD TRADE  
ORGANIZATION  G/SG/N/7/EEC/3 
G/SG/N/11/EEC/3 16 August 2004 
 
 
(04-3437) 
Committee on Safeguards Original:   English 
  
 
NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT 
ON SAFEGUARDS BEFORE TAKING A PROVISIONAL 
SAFEGUARD MEASURE REFERRED TO IN ARTICLE 6 
 
NOTIFICATION UNDER ARTICLE 9, FOOTNOTE 2 
OF THE AGREEMENT ON SAFEGUARDS 
 
EUROPEAN COMMUNITIES 
 
(Farmed (other than wild) Salmon, whether
 
or not filleted, fresh, chilled or frozen ) 
   The following communication, dated 12 August 2004,  is being circulated at the request of the 
European Commission.  
_______________ 
 
 A. N
OTIFICATION UNDER ARTICLE 12.4  BEFORE TAKING PROVISI ONAL SAFEGUARD MEASURES  
1. Specify the product subject to the proposed provisional safeguard measure 
The product in respect of which it is proposed  to apply provisional safeguard measures is 
farmed (other than wild) salmon, whether or not filleted, fresh, chilled or frozen, (hereinafter "the 
product concerned").  The product concerned is cu rrently classified within CN codes ex 0302 12 00, 
ex 0303 11 00, ex 0303 19 00, ex 0303 22 00, ex 0304 10 13 and ex 0304 20 13. 
2. Specify the proposed provisional safeguard measure 
The proposed provisional safeguard measures consis t in the establishment of temporary tariff 
quotas in respect of the product concerned, in excess of which an additional du ty will be required to 
be paid.  For the purposes of determining the level of additional duty payable, farmed salmons falling 
within CN codes ex 0302 12 00, ex 0303 11 00, ex 0303 19 00, ex 0303 22 00 (non fillets) fall within Group 1, whilst those falling within ex 0304 10 13 and ex 0304 20 13 (fillets) fall within Group 2.  
The quotas have been calculated on a whole fish e quivalent basis (WFE) and conversion ratios to 
fillets (Group 2) and non fillets (Group 1) actuall y imported are 1:0.65 and 1:0.9 respectively.  The 
proposed tariff quotas are as follows: G/SG/N/7/EEC/3 
G/SG/N/11/EEC/3 Page 2 
 
 
  
Additional duty 
€/tonne  CN code Group Origin 
(for groups 1 and 2) Tariff quota 
(for groups 1 and 2) in 
tonnes 
(WFE) Group 
1 Group 
2 
 
ex 0303 11 00, ex 0303 19 00, ex 0303 22 00, ex 0302 12 00, 
 
ex 0304 10 13, ex 0304 20 13  
1 1 1 1 
 
2 2 Norway 
Faeroes Other 163,997 
22,230 20,108 522 722 
 
3. Specify the proposed date of introduction of  the proposed provisional safeguard 
measure 
The proposed date of introduction of the provi sional safeguard measures is 15 August 2004. 
4. Specify the expected duration of the provisional safeguard measure 
The proposed provisional safeguard meas ures will apply until 6 February 2005. 
5. Provide the basis for:  
(i) making a preliminary determination, as provided for in Article 6, that increased 
imports have caused or are threate ning to cause serious injury; and 
UNFORESEEN DEVELOPMENTS 
 
Towards the end of 2002, Norwegian forecast s of their overall salmon production in 2003 
were around 446,000 tonnes.  By February 2003, Kont ali Analyse (an industry information provider) 
was forecasting harvesting of 475,000 tonnes.  This was 30,000 tonnes higher than Norwegian 
production in 2002, but it was expected that most of this increase would be directed to emerging markets such as Russia and Poland an d to markets in the Far East such as Japan, Hong Kong, Taiwan 
and China. Growth in the Far East had been negativ e since 2000, but Norway expected to reverse this 
decline in 2003 by opening up the Chinese market. 
In fact, actual Norwegian production in 2003 was 509,000 (around 63,000 tonnes higher than 
had been forecast by the Norwegian Government),  and harvesting was 6% higher than Kontali’s 
harvesting forecast.  Production was also 64,000 tonnes (or 14%) higher than Norwegian production 
in 2002.  At the same time, far from reversing the de cline in sales in the Far Ea st, the rate of decline 
actually accelerated to -6.0%. In addition, growth in emerging markets also declined - from 47% to 
32% in the case of Russia, and from 50% to 30 % in the case of European countries outside the 
Community.  Indeed, overall global consumption grew by only 6% compared to 9% in 2002 and 14% in 2001.  This, as it turned out, erroneous forecast of production, combined with the development of 
world consumption, was unforeseen.  G/SG/N/7/EEC/3 
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 In consequence, Norway experienced a serious  problem of over-production, a problem which 
it appeared to recognise.  Indeed, in August 2003,  in an effort to remove excess product from the 
market, certain Norwegian producers considered fre ezing 30,000 tonnes of farmed salmon.  However, 
this idea was later abandoned and the ma rket continued to be over-supplied. 
In addition, in December 2002 the Commission had announced its proposal to terminate anti-
dumping and anti-subsidy measures against Norway .  These were subsequently terminated in 
May 2003.  The measures had in large part taken th e form of MIPs, which in effect guaranteed a 
minimum price for exporting producers.  When the proposed withdrawal of the measures was 
announced, many Norwegian exporting producers eith er voluntarily gave up their undertakings or 
simply ceased to observe them.  Norwegian salmon pr oducers as a whole are heavily indebted to the 
Norwegian banks.  As prices slid, and in the absence of MIPs, the banks lending to Norwegian 
producers began to take steps to reduce their expos ure by demanding repayment.  This created a 
vicious circle which led to an increase in harves ting, further pressure on prices and increased pressure 
to export.  Although some temporar y and small adjustment of import prices was to be expected as a 
result of the termination of the measures against No rway, the extent of the fall in prices (exacerbated 
by the problem of overproduction) and the vicious circle which that created because of the operation 
of the banking system described above, were unforeseen. 
During 2003, the value of the Norwegian kroner fell by 13% relative to the euro, by 12% 
relative to the Danish krone and by 14% re lative to the Swedish krone.  Although currency 
movements are to be expected, these were relativel y large and sustained fluctuations and outside the 
normal range of currency fluctuati ons.  Although the euro also strengthened by comparison to the 
British pound, the British pound fell by only 6%  making farmed salmon produced in the 
United Kingdom more expensive in the euro-zone rela tive to Norwegian imports than it had been at 
the beginning of that year.  The principal importe rs of Norwegian farmed salmon in the Community 
are Denmark, Sweden, Germany and Poland.  However, much of these imports are directly 
transported within the Community to euro-zone count ries such as France and Spain.  In addition, over 
half of the farmed salmon imported to Denmark, a nd almost all of that imported to Poland and other 
new Member States, is re-sold in the euro-zone afte r processing. In consequence, the fall in the value 
of the Norwegian kroner relative to the euro had an  effect not only on Norwegian imports directly to 
the euro-zone, but also on imports to those c ountries such as Denmark and Poland which process 
farmed salmon to re-sell in the euro-zone.  The eff ect of these currency movements was to make the 
European Community market as a whole more attr active to Norwegian exporting producers, to some 
extent insulating them from the effect of a decrease in their prices in euro and krone, and helping them 
to maintain their export revenues in their domestic currency.  Nevertheless, unit prices fell even in 
Norwegian kroner.  At the same time, these currency movements made imported salmon cheaper in the European Community and made importing more attractive to importers and users such as the 
processing industry.  In consequence, much of th e overproduction in Norway was exported to the 
European Community. 
The preliminary analysis is that the unfor eseen development which caused the increase in 
imports was significant overproduction in Norway  (despite lower forecasts), exacerbated by the 
failure of the Norwegian industry to achieve fore cast growth in exports to markets outside the 
Community, the unexpected extent of the effects of the termination of trade defence measures against 
Norway and the operation of the Norwegian banking sy stem as described above, together with the rise 
in the value of the euro which made the Community  market as a whole a more attractive destination 
for Norwegian exports.  These developments and thei r effect will be investigated further at the 
definitive stage of this proceeding.  G/SG/N/7/EEC/3 
G/SG/N/11/EEC/3 Page 4 
 
 
 INCREASE IN IMPORTS 
 - Introduction
 
 
 A preliminary examination has been undertaken  based on data for the period 2000 to 2003, 
focussing on imports in the most recent period for wh ich data are available, to establish whether the 
product concerned is imported into the Community in such greatly increased quantities, absolute or 
relative to total Community productio n, and/or on such terms or conditi ons as to cause, or threaten to 
cause, serious injury to the Community producers.  One party claimed that the import increase was 
due to the fact that imports of wild salmon were included in the import data. Eurostat data does not 
distinguish between wild and farmed salmon.  Howe ver, the available information (US and Canadian 
export statistics) indicates that imports of wild sal mon to the Community are small and have, in any 
event, decreased over the period 2000 to 2003. One pa rty also claimed that 2000 was an inappropriate 
base year, claiming that salmon prices were unusually high in that year.  However, the analysis 
focuses on the key developments in the most recen t period, and changing the base year to 1999 or 
2001 would not change the outcome of that analysis. 
 The provisional findings set out below are thus based on the data from 2000 to 2003.  - Volume of imports 
 
 2000  2001  2002  2003  
Imports 372,789 379,764 396,772 455,948 
Year on year 
increase %  2% 4% 15% 
Total Community 
Production 146,664 161,854 168,374 180,593 
Imports/ 
Production 254% 235% 236% 252% 
 Source: Import figures provided by Eurostat. Community production calculated from 
government data for Ireland and the United Ki ngdom and industry data for France and Latvia. 
Imports increased from 372,789 tonnes in 2000 to 455,948 tonnes in 2003, an increase of 
22%. Between 2002 and 2003, imports increased by 15%.  
Relative to Community production, imports fell from 254% in 2000 to 235% in 2001, but 
have since increased again to 252% in 2003.  
Quarterly figures for the years 2002 and 2003 show that in 2003 quarterly imports were 
higher than in the same quarter in 2002, and that  the highest increases (up to 20.8%) occurred in the 
second half of 2003.  G/SG/N/7/EEC/3 
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 Q1 2002 Q2 2002 Q3 2002 Q4 2002 
Volume (t) 86,753 96,988 93,375 119,657 
     
 Q1 2003 Q2 2003 Q3 2003 Q4 2003 
Volume (t)  92,667 108,655 112,862 141,763 
Year on year 
increase % 6.8% 12.0% 20.8% 18.5% 
 Source: Eurostat 
- Conclusion  
 
 Based on the import data for the period from 2000 to 2003, it is concluded on a preliminary 
basis that that there is a recent, sudden, sharp and significant increase in imports, both absolute and 
relative to production.  - Prices of imports
 
 
The conditions under which imports have been made have also been considered by reference 
to Eurostat data. While the data includes a small quan tity of wild salmon, this is considered to have 
had no appreciable effect on prices.   
 In this regard, it should be noted that between September 1997 and May 2003, a significant 
proportion of imports of farmed salmon from No rway (which has around 55% of the Community 
market) were subject to an MIP. In the course of 200 2, violations of the MIP undertakings by certain 
Norwegian exporting producers began to undermine th e effectiveness of that instrument and caused 
price falls.  The proposed termination of the AD and CVD measures against imports from Norway was then announced in December 2002 and those m easures were terminated in May 2003.  Import 
prices during 2002 and the first half of 2003 fell partly  due to violation of, or voluntary withdrawal 
from, the MIP by some Norwegian exporters.  
 Import prices fell by 28.5% between 2000 and 2003 .  This is considered to be beyond the 
normal price fluctuation on the market because of th e extent of the decrease in absolute terms, and 
because exporting producers were not earning supern ormal profits in the year 2000 and the cost of 
production has not materially d ecreased between 2000 and 2003.  
 
 2000 2001 2002 2003 
Import price  3.55 2.99 2.87 2.54 
 Source: Eurostat 
 G/SG/N/7/EEC/3 
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  Recent price developments are more clearly i llustrated by quarterly data.  Having remained 
relatively stable at between €2.83 and €2.93 in 2002, import prices dropped fro m €2.87 in Q1 2003 to 
€2.24 in Q3 2003 before making a partial recovery to €2.48 in Q4 2003.  
 Q1 2002 Q2 2002 Q3 2002 Q4 2002 
Import price  2.83 2.93 2.86 2.85 
 Q1 2003 Q2 2003 Q3 2003 Q4 2003 
Import price  2.87 2.62 2.24 2.48 
 
 Source: Eurostat 
 
 Whilst wholly reliable Eurostat data is not yet available for Q1 2004, currently available information indicates that prices incr eased to average around €2.53/kg in  Q1 2004.  This is slightly 
below their average in 2003, and, the latest info rmation available indicates that prices are again 
following a downward trend and are very low.  While some claim that there will be price increases in 
the coming months, this was not substantiated and th e current very low prices are indeed confirmed 
by industry sources in exporting countries.  - Market share of imports
 
 
 The market share of imports fell from 73.5% in  2000 to 71.9% in 2001, and remained stable 
at about this level in 2002 (72%).  In 2003, impor ts increased their market  share from 72.0% in 2002 
to 75.0%, an increase of 3.0 percentage points a nd their highest level in the period considered.  
 
 2000 2001 2002 2003 
Imports 73.5% 71.9% 72.0% 75.0% 
 
SERIOUS INJURY  - Introduction
 
 
 In order to make a provisional determination of  serious injury to the Community producers of 
the like product, a preliminary evaluation of all releva nt factors of an objective and quantifiable nature 
having a bearing on their situation has been undertaken .  In particular, for the product concerned, an 
evaluation has been carried out of the development of global Community data for consumption, 
production capacity, production, capacity utilisati on, employment, productivity, overall sales and 
market share.  These global data are based on sta tistical information gathered by the United Kingdom 
and Ireland through comprehensive industry surveys.   As concerns company specific data, these are 
based upon data provided by the co-operating Co mmunity producers on cash flow, return on capital 
employed, stocks, price, undercutting and profitability for the years 2000 to 2003.  
 It should be noted at the outset that in th e Community salmon farming industry, as elsewhere, 
there is a long and relatively inflexible produc tion cycle leading to harvesting and that, once 
harvested, the farmed salmon must be sold immediatel y since they can only be stored for more than a 
few days if frozen.  Freezing is expensive, and in any event, there is limited freezing capacity in the 
Community.  In consequence, the level of production must be planned at least two years in advance  G/SG/N/7/EEC/3 
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 Page 7 
 
 
 and, once planned, cannot be altered except at th e margins.  Therefore, oversupply has a delayed 
effect on production, but an immediate and severe effect on prices.  - Analysis of the situation of the Community Producers
 
 
- Consumption 
 2000 2001 2002 2003
Consumption (t) 507,705 527,970 550,943 607,728
% year on year 
increase   4.0% 4.4% 10.3% 
 
Consumption of the product concerned in the Community was provisionally established on 
the basis of the total production by all producers in  the Community and total imports of the product 
concerned into the Community as reported by Eurostat, less European Community exports.  
Between 2000 and 2003, consumption in th e Community increased by 19.7% from 507,705 
tonnes to 607,728 tonnes. 
It should be noted that salmon has a relatively high level of price elasticity and the markedly 
higher increase in consumption in 2003 can therefore be at least partially explained by the fall in 
prices at wholesale level. 
- Production capacity an d capacity utilisation 
 2000 2001 2002 2003
Capacity (t)  340,029 340,294 339,359 347,671
Capacity Utilisation 
(%) 43% 48% 50% 52%
 
Farmed salmon production in the European Comm unity is effectively limited by government 
licences specifying the maximum amount of live fish which may be held in the water at any place at 
any point in time.  Capacity figures given are b ased on the total quantity licensed rather than the 
physical fish-holding capacity of the cages opera ted by the Community producers.  The cost of 
applying for and maintaining licences is relatively low and therefore the cost of maintaining excess 
capacity is also low. 
 Having remained stable between 2000 and 2002, the preliminary investigation showed that 
theoretical production capacity increased by 2.2% between 2000 and 2003. 
 
Capacity utilisation (i.e. the quantity of fish in the water compared to the quantity licensed) 
increased from 43% in 2000 to 48% in 2001 and then  increased steadily until 2003 when it reached 
52%.  This reflects the fact that production increased by 23% between 2000 and 2003 whilst the licensed capacity increased by only 2.2%.  
 
- Production 
 2000 2001 2002 2003
Production (t) 146,664 161,854 168,374 180,593 
 
Production (taken as fish harvested) grew by 23% from 146,664 tonnes in 2000 to 180,593 
tonnes in 2003, following a single year increase of 7%.  
 G/SG/N/7/EEC/3 
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 It should be noted that due to the long prod uction cycle, production is planned at least two 
years in advance and that, once the production cy cle is commenced, production levels cannot be 
adjusted except at the margins. 
 
- Employment 
 2000 2001 2002 2003
Employment 
(end of period) 1,269 1,162 1,195 1,193
 
 Employment in relation to the product concerned fell by 6% from 1,269 in 2000 to 1,193 in 
2003.  There was a reduction in employment in 2001, employment partially recovered in 2002 and remained stable in 2003.   
- Productivity 
 2000 2001 2002 2003
Productivity 
(tonnes/employee) 115 139 141 151
 
 Productivity has consistently increased thro ughout the period unde r consideration from 
115 tonnes in 2000 to 151 tonnes in 2003.  This reflects the increasing use of automated feed systems 
and other labour saving devices, and the strong pressu re to reduce costs in the face of mounting 
financial losses.  
- Sales volume 
2000 2001 2002 2003
Sales in the Community (t) 134,916 148,206 154,171 151,780 
 
 Between 2000 and 2002, the Community pro ducers’ sales of the like product increased by 
14.3% from 134,916 to 154,171 tonnes.  This incre ase occurred against a background of an increase 
in consumption over the same period of 8.5%.  Between 2002 and 2003, the Community producers’ 
sales decreased by 1.6% from 154,171 to 151,780 to nnes, notwithstanding an increase in consumption 
between 2002 and 2003 of 10.3%.  
 
- Market share 
 2000 2001 2002 2003
Market share  26.5% 28.1% 28.0% 25.0% 
 
 The Community producers’ mark et share increased from 26.5% in 2000 to 28.1% in 2001 and 
remained at about this level in 2002, but then fell by 3.0 percentage points to 25.0% in 2003, its 
lowest level in the period considered.  This reflects the fact that imports increased not only in absolute 
terms, but also relative to consumption, in 2003.   - Cash flow 
Financial year 2000 2001 2002 2003
Cash Flow (index) 100 -221 -384 -221
 
 Cash flow could only be examined at the leve l of the co-operating companies which produced 
the product concerned rather than in relation to onl y the product concerned itself.  This indicator was 
therefore seen as less meaningful than the other indi cators shown.  Nevertheless, it can be seen that 
there was strongly negative cash flow in 2001, 2002 and 2003.  
  G/SG/N/7/EEC/3 
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 - Return on capital employed (ROCE) 
Financial year 2000 2001 2002 2003
ROCE 34 -1 2 -20
 
 ROCE could also only be examined on the level of the co-operating companies which 
produced the product concerned rather than in rela tion to only the product concerned itself.  This 
indicator was therefore also seen as less meaningful th an the other indicators.  Nevertheless, it can be 
seen that ROCE fell from 34% in 20 00 to close to zero in 2001 and 2002 before falli ng to -20% in 
2003.  - Price of the like product  
2000 2001 2002 2003
Unit prices of Community sales 
(€1000/tonne)* 3.50 3.23 3.02 2.79 
 *Prices adjusted to ex Glasgow 
  The average price of the like product fell by 20.3% between 2000 and 2003, with a steady decline in prices over that period.  Prices reach ed their lowest point (€2.79/kg) in 2003.  
  In Q1 2004, the information available indicat es that the average unit price of the Community 
producers’ sales increased slightly, in line with th e slight increase in average import prices.  However, 
the latest information indicates that prices are again following a downward trend.  One party argued 
that (by reference to average annual exchange ra tes) price falls were less significant in pounds 
sterling.  Nevertheless, it is considered that th e Commission should not diverge from its consistent 
practice in trade defence cases in usi ng the euro as the unit of currency. 
 
- Costs 
 2000 2001 2002 2003
Average cost of production  per 
tonne (€/kilo) 3.1 3.2 3.0 3.1 
 
 In addition to price developmen t, the development of costs has also been considered.  Costs 
have fluctuated between €3.0 and €3.2/kg over the period 2000 to 2003. 
 
- Profitability 
2000 2001 2002 2003
Net profit/loss on 
Community sales (%) 7.3% -3.3% -2.5% -17.1%
 
 The profitability of the Community producer s’ sales in the Community fell from 7.3% in 2000 
to -3.3% in 2001.  Losses became less pronounced in 2002 (-2.5%) but  then increased to -17.1% in 
2003.  In 2003, as imports increased to their highest level and the average price of imports fell to its 
lowest level (€2.54/kg), the average price of the Community product also fell to its lowest level 
(€2.79/kg).  The Community producers’ fall in pr ofitability between 2000 and 2003 occurred at the 
same time as the price per kilo of the Community  producers’ product fell from €3.50 to €2.79.  
 
- Stocks 
 2000 2001 2002 2003
Closing stock (t) 36,332 39,048 53,178 43,024
 G/SG/N/7/EEC/3 
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  Stocks in this context refer to live fish in the water.  The Community producers, as all others, 
have negligible stocks of harvested fish as they ha ve to be sold immediately.  Therefore, a fall in 
closing stock levels indicates a decrease in the quan tity of live fish being on-grown for harvesting in 
the following two years.  Therefore, in this case, falling stock levels are an indicator of growing 
injury. 
 Stock levels increased from 36,332 tonnes in  2000 up to 53,178 tonnes in 2002 and then 
declined to 43,024 tonnes in 2003.  This represents a fall in stocks between 2002 and 2003 of 19.1%.  
- Conclusion 
 
It is recalled that the investig ation has shown that between 2000 and 2003, and in particular as 
between 2002 and 2003, imports of  the product concerned have taken place in increased quantities 
and high volumes onto the Community market.  
 As to the situation of the Community pro ducers, between 2000 and 2002, theoretical 
production capacity remained more or less stable , whilst production increased by 14.8%.  In 
consequence, capacity utilisation increased from 43% to 50% in this period.  Stocks of live fish in the 
water also increased.  There was some loss of  employment, whereas productivity increased mostly 
due to greater use of automation. 
 Sales volumes increased by 14.3% between 2000 and 2002 (compared to 8.5% growth in 
consumption), and the Community  producers’ market share increased from 26.5% to 28.0%.  
 However, even in this period prices fell by  13.7% between 2000 and 2002 , and despite a small 
decrease in costs in 2002 (partly due to higher ca pacity utilisation and better productivity), this 
appears to have led to a fall in profitability fro m 7.3% in 2000 to losses of -3.3% and -2.5% in 2001 
and 2002.  ROCE and cash flow also developed negatively in this period.  
 Between 2002 and 2003, the position of the Co mmunity producers worsened considerably.  
Although production capacity and production increased (by 7.3%) in line with previously developed 
production plans and this led to higher capacity  utilisation and improve d productivity, all other 
indicators developed negatively.  St ocks of fish in the water fell by 19.1%.  In the face of 10.3% 
growth in consumption, the Community producers’ sal es fell by 1.6% and they lost market share.  In 
addition, prices fell by a further 7.6%, whilst costs in creased to their average level for the four year 
period.  This led to a sharp drop in profitab ility and the Community producers incurred losses of 
17.1%.  These losses were reflected in an overall ROCE of -20%.  Whilst cash flow appeared to improve, this actually reflected reduction in stocks of  fish in the water and an inability to re-invest.  
 
Taking account of all of these factors the preliminary conclusion reached is that the 
Community producers have suffered serious injury in  terms of a significant overall impairment of the 
situation in the position of the Community producers.   CAUSATION 
  
As shown above, between 2000 and 2003, and in particular as between 2002 and 2003, imports 
of the product concerned have taken place in increased quantities and high volumes onto the 
Community market.  
Farmed salmon is essentially a commodity produc t, and the product concerned and the like 
product compete mainly on price.  It is generally accepted that imports, particularly from Norway, are  G/SG/N/7/EEC/3 
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 the market leader and price-setter.   In consequence, even low leve ls of undercutting result in price 
depression for the Community producers. 
In the current case, the most important injuri ous effect of increased imports was the large 
financial losses to the Community producers.  Due to the market and price leadership of imports, 
increased imports drove down prices throughout the Community.  Had imports increased to a lesser 
degree, this price pressure would also have been lower.  Had demand in the Community market been 
such as to sustain such an increas e in imports at substantially higher prices, albeit such an increase 
would have resulted in lower sales and market share for the Community producers, it is possible that 
the Community producers would not have suffered serious injury.  
Between 2000 and 2002, the price of imports fell by 19% and was closely followed by the 
Community producers’ prices.  Whilst the market share of the Community producers’ sales in the 
Community increased in this period, this reflected production decisions taken in earlier years and in both 2001 and 2002 the Community producers’ sales were made at a loss.  
Between 2002 and 2003, imports grew by 15%.  Th e market share of imports grew from 72% 
to 75%, whilst the market share of the Community  producers fell from 28% to 25%.  Over the same 
period imports grew from 236% to 252% of Communit y production.  Thus, im ports appear to have 
increased relative to both Community production and consumption at the expense of the Community 
producers.  
However, the most important aspect of the increas e in imports was its effect on the prices and 
profitability of the Community producers.  As no ted above, it is generally accepted that imports 
(particularly from Norway) are the price leader in  the Community market for farmed salmon.  The 
existence of undercutting has therefore been examin ed to establish whether indeed the low priced 
imports have tended to depress the prices  practised by the Community producers. 
In order to reach a preliminary determination as to the level of undercutting, price information 
was examined for comparable time periods, at th e same level of trade and for sales to similar 
customers.  Based on a comparison of average ex-Glasgow prices charged by the Community 
producers and by exporting producers to the Community importers (CIF European Community border including customs duty), domestic prices were underc ut in the three most recent years by between 
3.1% and 7.1%.  This appears to have resulte d in price depression for the Community producers 
because, due to their large market sh are, prices are set by imports.  In particular, it can be seen that the 
increase in imports at ever lower prices until Q3 2003 forced the Community producers to continually 
reduce their prices until Q3 2003 leading to th e losses sustained by them in that year.  
A direct comparison of import prices and the Community producers’ prices confirms this 
analysis. Import prices fell by 28.5% between 2000 and 2003, from €3.62 to €2.59/kg including duty.  
Over the same period, the average price of the lik e product fell by 20% from €3.50 to €2.79/kg, with a 
steady decline in prices over that period.  
Between 2002 and 2003, the average unit price of imports fell from €2.93 to €2.59/kg including 
duty.  As imports increased to their highest level and the average price of imports fell to its lowest 
level (€2.59/kg including duty), import prices led Community producers’ prices in a downward trend and the average price of the Community product fell to  its lowest level (€2.79/kg).  The average unit 
price of the Community product (adjusted ex-Glasgow ) fell from €3.02 to €2.79/kg, representing a fall 
of 8%.  
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 2000 2001 2002 2003
Unit prices of Community sales 
(€1000/tonne)* 3.50 3.23 3.02 2.79 
Unit prices of imports incl. 
customs duty (€1000/tonne)^ 3.62 3.05 2.93 2.59 
 *Prices adjusted to ex Glasgow. ^Import prices are CIF including import duty of 2% 
 
The fall in the Community producers’ prices appears to have been the main cause of a 
significant fall in their profitability.  In 2000, when  their costs per kilo were €3.1 and their sales price 
(adjusted ex Glasgow) was €3.50, the Community pr oducers made a profit of 7.3%. In 2001 and 2002, 
although their capacity utilisation, production, produc tivity, stocks of live fish, sales and market share 
all increased, they incurred financial losses, redu ced overall ROCE and negative overall cash flow as 
their sales prices (adjusted ex Glasgow) fell to €3. 23 and €3.02 respectively and costs first slightly 
increased and then fell to €3.2 in 2001 and €3.0 in 2002, respectively. Employment also fell. 
 In 2003, as prices (adjusted ex Glasgow) fell to  €2.79 under pressure from low priced imports, 
and with costs at their 2000 level of €3.1, the Co mmunity producers incurred a loss of 17.1%.  This 
was reflected in the negative overall ROCE and cash flow.  At the same time their sales volume dropped by 1.6% and their market share fell by 3.0 percentage points, as the volume and market share of imports increased.  Albeit capacity, capacity u tilisation and production, productivity increased and 
employment remained stable, the effect of the increase in low priced imports on capacity utilisation 
and production and employment is de layed.  That production can be e xpected to decrea se as a result 
of the increase in imports is shown by the decrease in stocks of live fish in 2003. 
 For the foregoing reasons, the preliminary conclusion  is that there is a correlation between the 
increase in imports and the serious injury suffered by  the Community producers, and that the increase 
in low priced imports has had injurious effects on the Community producers, particularly in terms of 
downward pressure on prices on the Community mark et resulting in large financial losses to the 
Community producers.  OTHER FACTORS  
- Effect of changes in consumption in the United Kingdom 
 
 One party argued that there had been an alle ged fall in consumption in the United Kingdom in 
2003 and that this had caused injury to the Co mmunity producers.  However, the United Kingdom 
market cannot be isolated from the overall Community market and European Community consumption increased by 19.7% between 2000 an d 2003, and by 10.3% be tween 2002 and 2003.  
Therefore, the reason for the Community producers’  substantial losses in 2003 appears to have been 
the low prices rather than an alleged fall in consumption.   
-  Effect of changes in export performance 
 
 2000 2001 2002 2003
Exports (in tonnes) 11,748 13,648 14,203 28,813
 
 The effect of variations in the level of expor ts has also been examined.  Exports increased 
throughout the period considered, and indeed doubled between 2002 and 2003 and it is therefore 
concluded, despite a claim by one party to the contra ry, that the changes in the level of exports were 
not a cause of the serious injury suffered by the Co mmunity producers.  In any event, data relating to 
profitability is based on data relating to Community sales only.  G/SG/N/7/EEC/3 
 G/SG/N/11/EEC/3 
 Page 13 
 
 
  
 
-  Effect of any excess capacity 
  Whether injurious effects may have resu lted from excess capacity amongst the Community 
producers has also been examined .  Theoretical capacity increased during the period of the 
investigation by 2.2% betw een 2000 and 2003 – by considerably less than production and 
consumption.  In addition, as previously noted, the th eoretical capacity is the total quantity of live fish 
for which government licences are held.  The cost of  applying for and maintaining licences is low.  
Indeed, the main cost drivers are the cost of smol ts (baby fish), feed and labour.  Therefore, the 
preliminary conclusion is that the increase in theore tical capacity did not cause injurious effects to the 
Community producers.  
- Effect of competition amongst the Community producers 
 
 Some exporters argued that the reason behind the fall in the price of salmon on the Community market was an oversupply by the Comm unity producers.  However, imports increased by 
15% in 2003 whereas the Community producers’ sales in  the Community decreased.  Further, imports 
are the price leader in this market, not the Comm unity producers.  Indeed, an examination of the 
pricing behaviour of all parties in 2002 and 2003 clear ly shows that imports were consistently sold at 
lower prices than those of the Community producer s, and that the Community producers’ prices 
followed those of imports in a downward trend.  The effect of competition amongst the Community 
producers balances itself amongst them - losses incurred  by one are offset by gains made by another 
ceteris paribus .  Therefore, the preliminary conclusion is that competition amongst the Community 
producers was not a cause of the serious injury observed.  
 
- Effect of increased mortality on production costs 
 
 One party argued that higher than normal fish  mortality rates in Ireland and disease outbreaks 
in the United Kingdom and Ireland in 2002 and 20 03 could have increased production costs and 
interrupted the normal production cycle for some pr oducers.  The information currently available 
suggests that these phenomena were limited to a sma ll number of farms.  Further, as the table below 
shows, the Community producers’ production costs fe ll in 2002 and were close to their four year 
average in 2003.  Therefore, the preliminary conclusi on is that higher than normal fish mortality rates 
were not the cause of material injurious effects.   Nevertheless, this ar gument will be further 
investigated in the course of the defi nitive stage of the investigation.  
 
 2000 2001 2002 2003
Average cost of production 
(€1000/tonne)  3.1 3.2 3.0 3.1 
 
-  Effect of higher production costs generally 
 One party argued that the Norwegian industry has lower production costs than the 
Community producers and that this is a reason for increased imports and serious injury.  The information currently available suggests that whilst Norway enjoys advantages in relation to certain 
costs, the Community producers enjo y advantages in relation to others.  Overall, it is noted that whilst 
the Community producers are incurring significant lo sses in the current market, so too are Norwegian 
producers.  As noted above, the Community produ cers made a loss of -2.5% in 2002.  Norwegian 
Government data indicate that in 2002 for a sa mple of 151 salmon and rainbow trout farms losses 
were -13%.  (No comparable data have yet been pub lished for 2003.)  In add ition, they were operating 
under a heavy burden of debt, representing a signifi cant proportion of their total costs.  Their total G/SG/N/7/EEC/3 
G/SG/N/11/EEC/3 Page 14 
 
 
 debt (excluding equity and prov isions) was 6.8 billion NOK compared to a total turnover of 
5.7 billion NOK
1.  This situation has in some cases led to the Norwegian banks effectively taking 
ownership of Norwegian producers.  Therefore, the preliminary conclusion is that Norwegian 
producers are not more efficient than the Community  producers, but this argument will be further 
investigated in the course of the de finitive stage of the investigation. 
- Higher transport costs in Scotland  
 One party argued that there is a less develope d infrastructure in remote areas of Scotland and 
that this increases costs and may cau se injury to Community producers.  In this regard, it is noted that 
fish farming in Norway, which is the Community market leader, is often undertaken in remote 
locations with relatively poor transport infrastructure.  
Transport costs are not a large part of the overall cost of production of farmed salmon and 
vary according to the origin of goods and the destina tion to which they are to be delivered.  Overall, 
there is not considered to be a si gnificant difference in the costs of transport to the Community market 
as between Norway, the United Kingdom and Ireland.  In addition, exporting producers (which by 
definition are located outside the European Community) are generally likely to have higher transport 
costs when selling to the Community market.  Theref ore, it is not considered that higher transport 
costs in Scotland have contributed to the injury to the Community producers. 
Further and in any event, no evidence was produc ed to the effect that transport costs in 
Scotland have increased in recent years, and theref ore, higher transport costs could not explain the 
recent increase in financial losses su ffered by the Community producers. 
- Other factors 
 
 No other causation factors of possible relevan ce were identified during the provisional stage 
of the investigation. 
 
- Attribution of injurious effects  
 The increase in imports had only a limited ne gative effect on the quantities sold by the 
Community producers, although their sales and mark et share dropped somewhat in 2003.  However, 
most importantly it appears that the considerable increase in imports had a devastating effect on the 
profitability of the Community producers, given the accompanying price drop.  Given that imports 
(with around 70-75% of the market) enjoy the position of price-leader , the downward spiral in import 
prices had a considerable depressing effect on Comm unity producers’ prices.  This resulted in 
considerable losses to the Community producers. No ot her factors which could ha ve contributed to the 
injury apart from the increase in low priced  imports were identified at this stage. 
 - Conclusion 
 
 Therefore, having determined that no material  injurious effects resulted from the other known 
factors, the preliminary conclusion is reached that  there is a genuine and substantial link between 
increased low priced imports and serious injury to the Community producers.  
                                                     
 
1 Norwegian Directorate of Fish eries Statistical Survey 2002.  G/SG/N/7/EEC/3 
 G/SG/N/11/EEC/3 
 Page 15 
 
 
 (ii) determining that there are critical circumstances where delay would cause 
damage which it would be difficult to repair 
 A preliminary determination has been made th at critical circumstances exist in which delay 
would cause damage to the Community producers whic h it would be difficult to repair.  They have 
suffered a serious decline, notably in live fish stoc ks, unit prices, profitability and ROCE as a result of 
increased low priced imports of the product concerned. 
The financial situation of the Community pro ducers is extremely precarious.  They have 
suffered substantial losses in 2003 (-17.1%).  In  consequence, a number of Community producers 
have already gone into bankruptcy or receivership, and many others are planning either to reduce their 
production or withdraw from the market altogeth er.  A number of the Community producers are 
trying to sell their businesses as going concerns.  Ho wever, given that they are making losses and the 
recent bankruptcies and receiverships there is little interest from potential purchasers.  Others are 
simply closing down their operations in order to stem their losses.  
In 2003 and the first months of 2004, five Community producers have gone into bankruptcy 
or receivership.  A further two have been take n over by feed companies (to whom they owed 
substantial debts) and are in the course of bei ng run down.  In addition, seven more Community 
producers have closed down or are in the course of closing down their operations. 
The substantial losses in 2003 have resulted in certain Community producers, particularly 
independent companies which are unable to rely on financial support from a larger group, relying on 
extended credit from feed companies and using overdra ft facilities as a source of medium to long term 
financing.  Some companies are being forced to sacrifice profitability in or der to secure sufficient 
cash flow to meet their financial commitments (for ex ample, by harvesting fish before they reach an 
optimum size).  Whilst this strategy may ensure thei r survival for a short period, it is further reducing 
their profitability and thus their medium and long term viability.  
Without an immediate and significant upturn in the outlook for salmon farming in the 
Community more Community producers will be forced into bankruptcy or receivership as feed 
companies and banks seek to limit their exposure to bad debts.  Some Community producers have already had their overdraft facilities terminated or reduced.  In the United Kingdom, the national 
authorities have held discussions with the banks to determine the reasons for withdrawal of support.  
However, the banks have stressed that they mu st operate according to commercial criteria. 
It can be anticipated that without the application of provisional safeguard measures to the 
European Community market, imports of the product concerned into the Community will continue at 
a high level, and, particularly as a result of the price depression which this will continue to cause, the 
Community producers will continue to sustain losses and more will be forced into bankruptcy.  Such 
damage would be difficult to repair given that businesses will have closed down, former employees 
will have been forced to relocate to find work and lenders will be cautious about providing finance to 
re-open failed ventures.  If this is to be avoide d, provisional safeguard measures must be taken. 
 Therefore, bearing in mind the precarious economic situation of the Community producers as 
a result of the large losses which they have sustained, and the continuing threat posed by exporting 
producers, it is considered that there exists a criti cal situation in which any delay in the adoption of 
provisional safeguard measures would cause damage wh ich it would be difficult to repair. It is 
therefore concluded that provisional safeguard  measures should be adopted without delay. 
 G/SG/N/7/EEC/3 
G/SG/N/11/EEC/3 Page 16 
 
 
 6. Offer of consultations under Article 12.4 
The European Communities offers consultations  on the provisional safeguard measures at any 
time after the measure is taken.   
7. Other information 
 A copy of the Commission Regulation which will appear in the Official Journal of the 
European Union will be submitted to the Committee.  This document will also be available in the 
WTO Secretariat for inspection by government representatives.   G/SG/N/7/EEC/3 
 G/SG/N/11/EEC/3 
 Page 17 
 
 
 B. NOTIFICATION UNDER ARTICLE 9, FOOTNOTE 2 UPON TAKING A DECISION NOT TO APPLY 
THOSE PROVISIONAL SAFEGUARD MEASURES TO  CERTAIN PRODUCTS ORIGINATING IN 
DEVELOPING COUNTRIES  
1. Specify the measure 
 The measures consist of temporary tariff quotas in  excess of which additional duty requires to 
be paid, described in the notif ication under Article 12.4 above. 
 
2. Specify the product subject to the measure 
 The measures apply to the products described  in paragraph 1 of the notification under 
Article 12.4 above. 
 
3. Specify the developing countries to which the measure is not applied under Article 9.1 of 
the Agreement on Safeguards, and the import  shares of these countries individually and 
collectively 
 
Imports of the products concerned originating in  any of the developing countries specified in 
Annex 1  shall not be subject to the provisional safe guard measures.  The individual and collective 
import shares of the developing countri es listed in Annex 1 are negligible. 
 
4. Not applicable 
 
  G/SG/N/7/EEC/3 
G/SG/N/11/EEC/3 Page 18 
 
 
 Annex 1 
 
 
  
List of Developing Countries  - excluded from the measures as they export less than 3% of imports to 
the Community:  United Arab Emirates, Afghanistan, Antigua and Barbuda, Angola, Argentina, American Samoa, 
Anguilla, Antartica, Aruba, Barbados, Bangladesh, Burkina Faso, Bahrain, Burundi, Benin, Brunei 
Darussalam, Bolivia, Brazil, Bahamas, Bhutan, Botswana, Belize, Bermuda , Bouvet Island, British 
Virgin Islands, British Indian Ocean Territory, Democratic Republic of Congo, Central African 
Republic, Congo, Côte d'Ivoire, Chile, Cameroon, Ch ad, Colombia, Costa Rica, Cuba, Cape Verde, 
Cayman Islands, Christmas Island, Cocos Islands  (or Keeling Islands), Cook Islands, Djibouti, 
Dominica, Dominican Republic, Algeria, Ecuador, Egyp t, Eritrea, Ethiopia, Fiji, Federated States of 
Micronesia, Falkland Islands, French Polynesia, Fren ch Southern Territories, Gabon, Grenada, Ghana, 
Gambia, Guinea, Equatorial Guinea, Guatemala, Guinea-Bissau, Guyana, Gibraltar, Guam, Honduras, 
Hong Kong, Haiti, Heard Island and Mc Donald Islands, Indonesia, Indi a, Iraq, Iran (Islamic Republic 
of), Jamaica, Jordan, Kenya, Cambodia, Kiribati, Comoros, St Kitts and Nevis, Kuwait, Lao People's 
Democratic Republic, Lebanon, St Lucia, Sri Lanka , Liberia, Lesotho, Libyan Arab Jamahiriya, 
Morocco, Madagascar, Marshall Islands, Mali, Myanma r, Mongolia, Mauritania, Mauritius, Maldives, 
Malawi, Mexico, Malaysia, Mozambique, Macao, Mayotte, Montserrat, Namibia, Niger, Nigeria, 
Nicaragua, Nepal, Nauru, Netherlands Antilles, New Caledonia and dependencies, Niue Island, 
Norfolk Island, Northern Mariana Islands, Om an, Panama, Peru, Papua New Guinea, People’s 
Republic of China, Philippines, Pakistan, Palau, Paraguay, Pitcairn, Qatar, Rwanda, Samoa, Saudi 
Arabia, Solomon Islands, Seychelles, Sudan, Sie rra Leone, Senegal, Soma lia, Suriname, Sao Tomé 
and Principe, El Salvador, Syrian Arab Repub lic, Swaziland, South Georgia and South Sandwich 
Islands, St Helena and de pendencies, St Pierre and Miquelon, Togo, Tunisia, Tonga, East Timor, 
Trinidad and Tobago, Tuvalu, Tanzania (United Republic of), Chinese Taipei, Tokelau, Turks and 
Caicos Islands, United States Minor outlying isla nds, Uganda, Uruguay, St Vincent and the Northern 
Grenadines, Venezuela, Viet Nam,  Vanuatu, Virgin Islands of US A, Wallis and Futuna Islands, 
Yemen, South Africa, Zambia and Zimbabwe. 
 
__________