G/SG/N/7/MDG/2  
G/SG/N/11/MDG/2  
 
8 January 2019  
(19-0095) Page: 1/6 
Committee on Safeguards  Original: French  
 
  
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  
MADAGASCAR  
(Blankets and Travelling Rugs)  
The following communication, dated 7 January 2019, is being circulated at the request of the 
delegation of Madagascar.  
 
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Madagascar is making this notification to the Commit tee on Safeguards under Article 12.4 of the 
Agreement on Safeguards, before taking a provisional safeguard mea sure, as referred to in Article  6 
of the Agreement, in respect of imports of  blankets and travelling rugs . Madagascar also wishes to 
notify the Co mmittee, under Article 9, footnote 2, of the Agreement on Safeguards, of its decision 
not to apply the proposed safeguard measure to imports from developing countries.  
A. NOTIFICATION UNDER ARTICLE 12.4 OF THE AGREEMENT ON SAFEGUARDS 
BEFORE TAKING A PROVIS IONAL SAFEGUARD  MEASURE REFERRED TO IN 
ARTICLE  6 
1. BACKGROUND  
On 20 September  2018, the National Trade Remedies Authority (ANMCC)  published 
Notice  No. 004-ANMCC/Av.18 on the initiation of a safeguard investigation  concerning blankets and 
travelling rugs  imported into Madagascar.  
2. PRODUCT CONCERNED  
The imported product s at issue  are blankets and travelling rugs of wool, animal h air, cotton, or 
man-made fibres , which are  classified under HS tariff heading 6301 . 
3. PROPOSED PROVISIONAL SAFEGUARD MEASURE  
The proposed  provisional safeguard measure consists  of an additional ad valorem  customs duty of 
41% (forty -one per cent) of the c.i .f. value.  
4. PROPOSED DATE OF INTRODUCTION OF THE SAFEGUARD MEASURE  
The provisional safeguard measure will enter into force 15  days after the date of publication of the 
notice concerning the application of the measure in two national  newspapers authorized to receive 
legal notices . 
5. EXPECTED DURATION OF THE PROVISIONAL SAFEGUARD MEASURE  
The provisional safeguard measure will be applied for 200 days from t he date of its entry into force . G/SG/N/7/MDG/2 • G/SG/N/11/MDG/2  
 
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  6. BASIS FOR APPLICATION OF THE PROVISIONAL SAFEGUARD MEASURE  
A preliminary determination, as provided for in Article 6 of the Agreement on Safeguards,  has been 
made that : 
- increased imports have caused serious injury; and  
- there are c ritical circumstances where delay would cause damage which it would be 
difficult to repair . 
I. INCREASE IN IMPORTS  
Between 2013 and 2017 , imports of blankets and travelling rugs  increased signi ficantly and in an 
unprecedented manner by 1,708%. The most notable increases occurred between 2013 and 2014 
and between 2015 and 2016. During  these two periods, imports rose sharply  by 185% and 236% 
respectively. This means that the volume of import s rose from 133 tonnes to 379 tonnes between 
2013 and 2014, and from 566 tonnes to 1,900 tonnes between 2015 and 2016. Imports  reach ed 
their highest level in 2017, amounting to 2,404 tonnes . 
The petitioner demonstrated that the share of imports of blankets and travelling rugs in relation to 
domestic production  had risen continuously and very sharply since 2013. In the five years 
corresponding to the period under analysis, 2013-2017, the share of imports in relation to domestic 
production rose from 39% to 998% . The annual rate at which they grew was quite remarkable and 
showed  no signs of slowing down . 
II. UNFORESEEN DEVELOPMENTS  
Following its strategic accession to the WTO in 2001, China experienced  a vast wave of reforms that 
resulted in it switching from a plan ned economy to a market economy . Since then , it has held a 
monopoly on not only the production, but also the international export,  of textile fibres, clothing , 
and blankets and travelling rugs, and boasts an impressive capacity . So much so that  in April 2012, 
more than 12,000 Chinese companies  were involved in the production  and import -export  of textile 
fibres, clothing , and blankets and travelling rugs. This has boosted China's production capacity in 
respect of textiles and, of course, blankets  and travelling rugs . 
The safeguard measure applied by Egypt since 2008 on imports of  blankets and travelling rugs has  
prompted  China to modify the structure of exports by channelling them to other markets, including, 
it would seem , the Madagascan market . 
These developments could not be foreseen when tariff concessions were being negotiated in the 
WTO framework, and occurred after Madagascar's accession to the Organization. They are 
undoubtedly responsible for the increase in imports of blankets and travell ing rugs to Madagascar, 
and reflect China's dominance in the textile sector . 
III. SERIOUS INJURY OR THREAT THEREOF  
The information in the petition, the replies to questionnaires, and data concerning imports have 
enabled the ANMCC to analyse the serious injury and threat thereof to the domestic industry on the 
basis of the following indicators . 
i. Rate of the increase in i mports  
During the period analysed,  blankets and travelling rugs were imported in greatly increased 
quantities, both in absolute terms and in relation  to domestic production . The increase was sudden, 
recent and sharp. According to the information in the rep lies to the questionnaire given  by the 
SOMACOU company, the increase has  had a negative effect on the performance of the domestic 
industry . 
ii. Market share taken by imports  
Table  1: Market share taken by imports  
 2013  2014  2015  2016  2017  
Market share of the industry  75% 41% 35% 14% 9% 
Market share taken by imports  25% 59% 65% 86% 91% G/SG/N/7/MDG/2 • G/SG/N/11/MDG/2  
 
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The domestic industry 's market share has continued to plummet from one year to the next . It fell 
from 75% in 2013 to only 9% in  2017. In contrast, t he market share of imports of blankets and 
travelling rugs rose in a spectacular fashion. Should this rate of growth continue , the market share 
of the domestic industry will be completely  absorbed by imports within a few years ' time. 
 
iii. Production of the domestic industry  
In 2014, t he domestic industry's production fell by 25% in relation to 2013. The slight improvement 
in 2014 and 2015 did not last long;  in 2017 , the volume of production reached its lowest level in the 
period under review . Between 2016 and 2017, domestic production of  blankets and travelling rugs 
dropped by  44%. A decline was also recorded in June 2018  when c ompared with the same period 
in 2017. 
iv. Change in level of sales and turnover  
Following an increase in 2015 and  2016, the domestic industry's turnover fell in 2017 and the first 
half of 2018. Sales followed more or less the same rate as the change in the volume of production . 
Since 2015, the volume of sales of blankets and tra velling rugs has decreased year -on-year. The 
lowest volume in the last five years was recorded  in 2017. A 21% dro p was recorded for the last 
two years. Sales fell once again in the period January -June 2018 in  relation to the same period 
in 2017. 
 
v. Production capacity utilization  rate 
Between 2013 and 2 017, the production capacity utilization rate of the domestic blanket and 
travelling rug industry fell by seven points, despite a slight improvement in 2016. The lowest level 
was that recorded for 2014, while the 2017 rate is now approaching this level. Production capacity 
utilization fell by around 34% for the period January -June 2018 in relation to January -June 2017 . 
 
vi. Employment  
The domestic industry's employment level has been falling since 2013, despite its efforts to prevent 
this decline and maintain  the quality of its workforce. According to SOMACOU, the current 
circumstances do not a llow it to maintain the size of its existing workforce, let alone bring back lost 
jobs. In this light, t he size of the workforce decreased even further  in the first h alf of 2018 in relation 
to the same period in 2017. 
 
vii. Productivity  
Productivity fell by 35% between 2013 and 2014, and increased slightly in 2016. A significant drop 
of 40% was recorded in 2017 in relation to 2016. Productivity stood at 2.04 tonnes in 2013 and fell 
to a mere 1.62 tonnes in 2017. This downward trend continued  throughout the period 
January -June 2018. The decline in productivity was caused by  the reduction in the volume of 
blankets and travelling rugs produced by the domestic industry . 
 
viii. Inventories  
As mentioned above , the domestic industry's annual production volume fell during the investigation 
period. Despite its low annual production volume, the domestic industry had difficulties selling its 
products on the market. The annual inventory volume is therefore very high. In 2017, it amounted 
to 115% of the domestic industry 's volume of production. The highest inventory levels are those of 
2016 and 2017. The inventory amounts in 2017 and the first half of 2018 even exceeded the 
domestic industry's sales volumes . 
 
ix. Profitability  
SOMACOU has continued to incur financial losses  since 2013. These losses vary according to the 
volume of production and sales. The highest losses were incurred  in 2016, when the production 
volume was at its highest. This is because the company accumulated  a financial loss on each unit 
produced. This def icit continued through to  June 2018 . 
 G/SG/N/7/MDG/2 • G/SG/N/11/MDG/2  
 
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  x. Selling prices  
While the  domestic industry has tried to adjust its selling prices since 2013, competition from imports 
has forced it to align itself with market prices , even though its level remains below its cost pric es on 
account of the constant increase in production co sts. 
 
xi. Changes in costs  
The production cost and cost price  followed an upward trend during the investigation period  because 
of the decre ase in the volume of production . Between 2013 and 2017,  the production cost  rose by 
39.18%.  The cost price also increased  by 39. 33%. By June 2018, these costs had risen  a further  8%. 
IV. CAUSAL LINK  
The ANMCC has examined the correlation between the increase in imports and the serious injury or 
threat thereof to th e domestic industry. The impact of factors other than the increase in imports that 
are likely to cause injury to the domestic industry has also been exami ned. 
 
i. Analysis of the impact of increased imports  
According to the investigation data , the volumes of imports of blankets and travelling rugs have 
steadily and significantly increased since 2013, both in absolute terms and in relation to domestic 
production. This notable increase in imports has led to a deterioration in the domestic  industry's 
economic ind icators and has had  an adverse impact  on its production, sales volume, production 
capacity utilization rate and market share. The decline in production and in the production capacity 
utilization rate has led to a wave of employee redundancies . The fall in the volume of sales 
accompanied by a significant increase in production costs has resulted in huge financial losses . 
 
ii. Analysis of the effects of other factors  
a. Export sales of the domestic industry  
Since SOMACOU has never exported  its products , we can straightaway conclude that the injury it 
has suffered cannot be attributed to poor export performance . 
b. Contraction in demand or changes in the pattern of consumption  
The analysis of the investigation data has shown  that the injury to the domestic industry in terms of 
turnover is not caused by a reduction in domestic demand or consumption. It is instead caused by  
the industry's  customers being drawn towards imported products sold at low prices. During the 
period covered by the investigation, the consumption of blankets and travelling rugs increased 
steadily, and yet the industry was unable to take advantage of this favourable situation . 
Indeed, its sales and production decreased substantially in 2014 and  2017. The slight improvement 
in sales recorded for 2015  and 2016 is not significant in the face of the changes in domestic demand 
and the increase in imports. This is the reason why SOMACOU has lost 65% of its market share since 
2013, while imported products have aggressively gained ground. It is therefore pos sible to conclude, 
without any hesitation, that the decline in sales and production has most certainly been caused  by 
increased  imports of blankets and travelling rugs . 
c. Change s in domestic prices and costs  
As explained above , the domestic industry's production costs have risen year -on-year since 2013. 
In light of  the increase in imports, SOMACOU emphasized that to deal with customers being drawn 
towards imported products and to remain on the market, its selling prices must be aligned with 
those of imp orted products, even if they are below the cost price. Despite  this effort, the company's 
market share has continued to fall steadily for several years  now. G/SG/N/7/MDG/2 • G/SG/N/11/MDG/2  
 
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  d. Competition between domestic producers  
Given that  SOMACOU is Madagascar's sole producer of blankets  and travelling rugs, competition 
between domestic producers does not exist and could never be a factor in the injury  suffered by the 
domestic industry . 
Having analysed all the causal link factors, the investigating authority concluded that there was a 
correlation between the imports in such increased quantities and the serious injury to the domestic 
industry. The analysis of other relevant factors was unable to demonstrate  that the injury to the 
domestic industry was caused principally by these other facto rs. The examination of the various  
factors above therefore enabled the  ANMCC to conclude , on a preliminary basis , that there was a 
causal link between the significant increase in imports of the product under investigation and the 
serious injury suffered by  the domestic blanket and travel ling rug industry . 
CONCLUSION  
Having analysed all the causal link factors, the investigating authority concluded that there was a 
correlation between the imports in such increased quantities and the serious injury to the dom estic 
industry. The analysis of other relevant factors was unable to demonstrate  that the injury to the 
domestic industry was caused principally by these other factors. The examination of the various  
factors above therefore enabled the ANMCC to conclude, o n a preliminary basis, that there was a 
causal link between the significant increase in imports of the product under investigation and the 
serious injury suffered by  the domestic blanket and travel ling rug industry . 
7. OFFER OF CONSULTATIONS UNDER ARTICLE 12.4 
In accordance with Article 12.4  of the Agreement on Safeguards , Madagascar is prepared to hold 
consultations on the provisional safeguard measure with those Members having a substantial interest 
as ex porters of the products concerned . 
8. FURTHER PROCE DURES  
The ANMCC will conduct a public hear ing with interested parties on 6  February 2019. Interested 
parties must express their interest in participating in the public hearing. In addition, they must 
present written submissions setting out their views no l ater than ten days before the public hearing . 
9. FURTHER INFORMATION  
Information on the decision to apply the provisional safeguard measure to the products concerned 
and the broadening of the scope of the investigation may be obtained from the websites of the 
ANMCC  (www.anmcc.mg ) and the Ministry of Trade and Consumption  (www.mcc.gov.mg ) or may 
be requested from : 
 
Monsieur Le Directeur Général de l'ANMCC  
Enceinte Ex conquête Antanimena BP: 7653  
Tel.: +261 34 05  441 41 - Email: dg.anmcc@gmail.com  
101-ANTANANARIVO – MADAGASCAR  
 
Any correspondence concerning this investigation mu st be sent to the above address . 
B. NOTIFICATION PURSUANT TO ARTICLE 9, FOOTNOTE 2, OF THE AGREEMENT ON 
SAFEGUARDS OF THE DECISION NOT TO APPLY THE SAFEGUARD  
Below is the list of developing countries excluded from the provisional safeguard measure because 
their exports represent less than 3% of Madagascar's total imports of blankets and travelling rugs  
and collectively account for not more than 9% (Article 9.1 of the Agreement on Safeguards).  
 
Afghanistan;  Albania; Angola; Antigua and Barbuda;  Argentina, Armenia;  Bahrain; Bangladesh; 
Barbados; Belize; Benin; Bolivia , Plurinational State of; Botswana; Brazil; Brunei Darussalam; 
Burkina Faso; Burundi; Cabo Verde; Cambodia; Cameroon; Central African Republic; Chad; Chile; 
Colombia; Congo; Costa Rica; Côte d'Ivoire; C uba; Democratic Republi c of the Congo; Djibouti; 
Dominica; Dominican Republic; Ecuador;  Egypt; El Salvador; Eswatini;  Fiji; Gabon; Gambia; 
Georgia; Ghana; Grenada; Guatemala; Guinea; Guinea -Bissau; Guyana; Haiti; Honduras;  India; 
Indonesia; Israel; Jamaica ; Jordan; Kazakhstan; Kenya; Kuwait; Kyrgyz Republic; G/SG/N/7/MDG/2 • G/SG/N/11/MDG/2  
 
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  Lao People's  Democratic Republic;  Lesotho; Liberia;  Malawi; Malaysia; Maldives; Mali; Mauritania; 
Mauritius;  Mexico; Moldova; Mongolia; Montenegro; Morocco;  Mozambique; Myanmar; Namibia; 
Nepal; Nicaragu a; Niger; Oman; Pakistan; Panama;  Papua New Guinea;  Paraguay; Peru; 
Philippines; Qatar;  Rwanda;  Saint Kitts and Nevis; Saint Lucia; Saint Vincent and the Grenadines; 
Samoa; Saudi  Arabia; Senegal; Seychelles; Sierra Leone; Solomon Islands; South Africa; Sri Lanka; 
Suriname; Tajikistan; Tanzania; Thailand; The former Yugoslav Republic of Macedonia;  Togo; 
Tonga; Trinidad and Tobago; Tunisia; Turkey; Uganda;  Ukraine; United Arab Emirates; Uruguay; 
Vanuatu; Venezuela, Bolivarian Republic of; Viet Nam; Yemen; Zambia;  Zimbabwe.  
 
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