WORLD TRADE  
ORGANIZATION  WT/DS341/R 
4 September 2008 
 
 (08-4082) 
 Original:   English 
  
 
     
 
    
 
  
MEXICO – DEFINITIVE COUNTERV AILING  
MEASURES ON OLIVE OIL FROM THE 
EUROPEAN COMMUNITIES  
  
Report of the Panel 
 
 
 
  WT/DS341/R 
 Page i 
 
 
TABLE OF CONTENTS 
Page  
 
I. INTRODUCTION ................................................................................................................... .1 
A. COMPLAINT OF THE EUROPEAN COMMUNITIES ...........................................................................1  
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL ...................................................................1  
II. FACTUAL ASPECTS ..............................................................................................................2  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.........................3  
A. THE EUROPEAN COMMUNITIES ....................................................................................................3  
B. MEXICO ............................................................................................................................... .........4  
IV. ARGUMENTS OF THE PARTIES ........................................................................................6  
V. ARGUMENTS OF THE THIRD PARTIES ..........................................................................6  
VI. INTERIM REVIEW................................................................................................................. 6 
A. TECHNICAL CORRECTIONS AND ADJUSTMENTS ...........................................................................6  
B. REQUESTS FROM THE EUROPEAN COMMUNITIES .........................................................................6  
VII. FINDINGS....................................................................................................................... ........13  
A. GENERAL ISSUES .......................................................................................................................13  
1. Standard of Review............................................................................................................. ....13  
2. Burden of Proof................................................................................................................ .......15  
3. Treaty Interpretation.......................................................................................................... ....16  
B. ARTICLE 13.1  OF THE SCM AGREEMENT ......................................................................................17  
1. Arguments of the Parties....................................................................................................... .18 
2. Reasoning of the Panel......................................................................................................... ...18 
(a) Did Economía Send the Invitation to Consultations After Initiation ........................................19  
(i) "Initiation" Within the Meaning of the SCM Agreement ..........................................................19  
(ii) The Date on Which Economía Initiated the Olive Oil Investigation ........................................21  
(b) The nature of the obligations in Article 13.1 ............................................................................22  
C. ARTICLE 13(B)(I) OF THE AGREEMENT ON AGRICULTURE ...........................................................24  
1. Arguments of the Parties....................................................................................................... .24 
2. Reasoning of the Panel......................................................................................................... ...26 
(a) Applicability of the Provision................................................................................................. ..26 
(b) Article 13(b)(i) of the Agreement on Agriculture .....................................................................27  
(i) Domestic Support Measures wh ich Fully Conform with Article 6 of the Agreement on 
Agriculture.................................................................................................................... ............27  
(ii) Exempt from Imposition of Countervailing Duties Unless a Determination of Injury 
or Threat Thereof is Made ...................................................................................................... ..28 
(iii) Due Restraint Shall be Shown in Initiati ng Any Countervailing Duty Investigation................29  
D. ARTICLE 12.4.1  OF THE SCM AGREEMENT ...................................................................................32  WT/DS341/R 
Page ii  
 
1.
 Arguments of the Parties....................................................................................................... .32 
2. Reasoning of the Panel......................................................................................................... ...32 
E. ARTICLE 12.8  OF THE SCM AGREEMENT ......................................................................................36  
1. Arguments of the Parties....................................................................................................... .36 
2. Reasoning of the Panel......................................................................................................... ...37 
F. ARTICLE 11.11  OF THE SCM AGREEMENT ....................................................................................40  
1. Arguments of the Parties....................................................................................................... .40 
2. Reasoning of the Panel......................................................................................................... ...40 
G. ARTICLES 1 AND 14 OF THE SCM AGREEMENT ............................................................................41  
1. Arguments of the parties....................................................................................................... .41 
2. Reasoning of the Panel......................................................................................................... ...43 
(a) "Pass-through" of S ubsidy Benefits..........................................................................................43  
(i) "Pass-through" Analysis in WTO Law......................................................................................43  
(ii) Claim of the European Communities pursuant to Article 1.1 of the SCM Agreement..............47  
(iii) Claim of the European Communities pursuant to Article 14 of the SCM Agreement...............50  
(b) Article 14 – Other Calculation Issues .......................................................................................55  
H. DEFINITION OF "DOMESTIC INDUSTRY ".....................................................................................57  
1. Arguments of the Parties....................................................................................................... .58 
2. Reasoning of the Panel......................................................................................................... ...59 
(a) Introduction................................................................................................................... ............59  
(b) Definition of "domestic industry".............................................................................................6 0 
(c) Was Fortuny a "Producer" Within the Meaning of Article 16.1 of the SCM Agreement .........66  
I. ARTICLE 11.4  OF THE SCM AGREEMENT ......................................................................................69  
1. Arguments of the Parties....................................................................................................... .69 
2. Reasoning of the Panel......................................................................................................... ...70 
J. ARTICLE I 6.1 OF THE SCM AGREEMENT AND ARTICLE VI :6(a)  OF THE GATT 1994 ......................74  
1. Arguments of the Parties....................................................................................................... .74 
2. Reasoning of the Panel......................................................................................................... ...75 
K. ARTICLES 15.1  AND 15.4  OF THE SCM AGREEMENT AND ARTICLE VI :6(a)  OF THE GATT 
1994 ............................................................................................................................... ...........80  
1. Arguments of the Parties....................................................................................................... .80 
2. Reasoning of the Panel......................................................................................................... ...82 
(a) Article 15 of the SCM Agreement .............................................................................................82  
(b) Facts Regarding Economía's Injury Investigation and Determination......................................84  
(c) Application of Articles 15.1 and 15.4 to the Facts of this Case................................................86  
(i) The April – December Periods of Analysis for Injury ..............................................................86  
(ii) Other claims and arguments..................................................................................................... 89  WT/DS341/R 
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L. ARTICLE 15.5  OF THE SCM AGREEMENT ......................................................................................89  
1. Arguments of the Parties....................................................................................................... .89 
2. Reasoning of the Panel......................................................................................................... ...90 
VIII.  CONCLUSIONS AND RECOMMENDATIONS................................................................96  
 WT/DS341/R 
Page iv  
 
LIST OF ANNEXES 
 
ANNEX A 
 
First Written Submissions by the Parties  
 
Contents Page 
Annex A-1 Executive Summary of the First Written Submission of the 
European Communities A-2 
Annex A-2 Executive Summary of the First Written Submission of Mexico A-13 
 
ANNEX B 
 
Third Party Submissions 
 
Contents Page 
Annex B-1 Executive Summary of the Third Party Submission of Canada B-2 
Annex B-2 Executive Summary of the Third Party Submission of China B-6 
Annex B-3 Executive Summary of the Third Party Submission of Japan B-8 
Annex B-4 Executive Summary of the Third Party Submission of Norway B-13 
Annex B-5 Executive Summary of the Third Party Submission of the 
United States B-18 
Annex B-6 Third Party Oral Statement of Canada B-24 
Annex B-7 Third Party Oral Statement of the United States B-25 
 
ANNEX C 
 
Second Submissions by the Parties 
 
Contents Page 
Annex C-1 Executive Summary of the Second Written Submission of the 
European Communities C-2 
Annex C-2 Executive Summary of the Second Written Submission of Mexico C-10 
 
ANNEX D 
 
Oral Statements, First and Second Panel meetings 
 
Contents Page 
Annex D-1 Executive Summary of the Oral Statement of the European 
Communities – First Meeting D-2 
Annex D-2 Executive Summary of the Oral Statement of Mexico – First 
Meeting D-8 
Annex D-3 Executive Summary of the Oral Statement of the European 
Communities – Second Meeting  D-14 
Annex D-4 Executive Summary of the Closing Statement of the European 
Communities – Second Meeting D-20 
Annex D-5 Oral Statement of Mexico – Second Meeting D-22 
  WT/DS341/R 
 Page v 
 
 
ANNEX E 
 
Request for the Establishment of a Panel 
 
Contents Page 
Annex E-1 Request for the Establishment of a Panel by the 
European Communities E-2 
 
 WT/DS341/R 
Page vi  
 
 
TABLE OF CASES CITED IN THIS REPORT 
 
 
Short Title Full Case Title and Citation 
Argentina – Ceramic Tiles  Panel Report, Argentina – Definitive Anti-Dumping Measures on Imports of 
Ceramic Floor Tiles from Italy , WT/DS189/R, adopted 5 November 2001, 
DSR 2001:XII, 6241 
Argentina – Footwear (EC)  Appellate Body Report, Argentina – Safeguard Measures on Imports of 
Footwear , WT/DS121/AB/R, adopted 12 January 2000, DSR 2000:I, 515 
Argentina – Poultry Anti-
Dumping Duties Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from 
Brazil , WT/DS241/R, adopted 19 May 2003, DSR 2003:V, 1727 
Brazil – Desiccated Coconut  Appellate Body Report, Brazil – Measures Affe cting Desiccated Coconut , 
WT/DS22/AB/R, adopted 20 March 1997, DSR 1997:I, 167 
Brazil – Desiccated Coconut  Panel Report, Brazil – Measures Affecting Desiccated Coconut , WT/DS22/R, 
adopted 20 March 1997, upheld by Appellate Body Report, WT/DS22/AB/R, 
DSR 1997:I, 189 
Canada – Aircraft  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R, adopted 20 August 1999, DSR 1999:III, 1377 
Canada – Aircraft  Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft , 
WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report, 
WT/DS70/AB/R, DSR 1999:IV, 1443 
Canada – Dairy  (Article 21.5 – New Zealand 
and US II)
  Appellate Body Report, Canada – Measures Affecting the Importation of Milk 
and the Exportation of Dairy Products – Second Recourse to Article 21.5 of the 
DSU by New Zealand and the United States , WT/DS103/AB/RW2, 
WT/DS113/AB/RW2, adopted 17 January 2003, DSR 2003:I, 213 
EC – Bed Linen  Panel Report, European Communities – Anti-Dumping Duties on Imports of 
Cotton-Type Bed Linen from India , WT/DS141/R, adopted 12 March 2001, as 
modified by Appellate Body Report, WT/DS141/AB/R, DSR 2001:VI, 2077 
EC – Bed Linen  (Article 21.5 – India)
  Panel Report, European Communities – Anti-Dumping Duties on Imports of 
Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU  by 
India , WT/DS141/RW, adopted 24 April 2003, as modified by Appellate Body 
Report, WT/DS141/AB/RW, DSR 2003:IV, 1269  
EC – Countervailing 
Measures on DRAM Chips Panel Report, European Communities – Countervailing Measures on Dynamic 
Random Access Memory Chips from Korea , WT/DS299/R, adopted 3 August 
2005, DSR 2005:XVIII, 8671 
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, 
DSR 1998:I, 135 
EC – Trademarks and 
Geographical Indications 
(US) Panel Report,  European Communities – Protection of Trademarks and 
Geographical Indications for Agricultural Products and Foodstuffs, Complaint 
by the United States , WT/DS174/R, adopted 20 April 2005, DSR 2005:VIII-IX, 
3499 
EC – Tube or Pipe Fittings Appellate Body Report, European Communities – Anti-Dumping Duties on 
Malleable Cast Iron Tube or Pipe Fittings from Brazil , WT/DS219/AB/R, 
adopted 18 August 2003, DSR 2003:VI, 2613 
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast 
Iron Tube or Pipe Fittings from Brazil , WT/DS219/R, adopted 18 August 2003, 
as modified by Appellate Body Report, WT/DS219/AB/R, DSR 2003:VII, 2701  WT/DS341/R 
 Page vii 
 
 
Short Title Full Case Title and Citation 
Egypt – Steel Rebar  Panel Report, Egypt – Definitive Anti-Dumping Measures on Steel Rebar from 
Turkey , WT/DS211/R, adopted 1 October 2002, DSR 2002:VII, 2667 
Guatemala – Cement II  Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland 
Cement from Mexico , WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 
5295 
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical and 
Agricultural Chemical Products , WT/DS50/AB/R, adopted 16 January 1998, 
DSR 1998:I, 9 
India – Quantitative 
Restrictions  Appellate Body Report, India – Quantitative Restrictions on Imports of 
Agricultural, Textile and Industrial Products , WT/DS90/AB/R, adopted 
22 September 1999, DSR 1999:IV, 1763 
India – Quantitative 
Restrictions  Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile 
and Industrial Products , WT/DS90/R, adopted 22 September 1999, upheld by 
Appellate Body Report, WT/DS90/AB/R, DSR 1999:V, 1799 
Japan – Apples  Appellate Body Report, Japan - Measures Affecting the Importation of Apples , 
WT/DS245/AB/R, adopted 10 December 2003, DSR 2003:IX, 4391 
Japan – DRAMs (Korea) Panel Report, Japan – Counterva iling Duties on Dynam ic Random Access 
Memories from Korea , WT/DS336/R, adopted 17 D ecember 2007, as modified 
by Appellate Body Report, WT/DS336/AB/R 
Korea – Dairy  Appellate Body Report, Korea – Definitive Safeguard Measure on Imports  
of Certain Dairy Products , WT/DS98/AB/R, adopted 12 January 2000, 
DSR 2000:I, 3 
Korea – Resins  GATT Panel Report, Panel on Korea – Anti-Dumping Duties on Imports of 
Polyacetal Resins from the United States , ADP/92 and Corr.1, adopted 
27 April 1993, BISD 40S/205 
Mexico – Anti-Dumping 
Measures on Rice Appellate Body Report, Mexico – Definitive Anti-Dump ing Measures on Beef 
and Rice, Complaint with Respect to Rice , WT/DS295/AB/R, adopted 
20 December 2005, DSR 2005:XXII, 10853 
Mexico – Anti-Dumping 
Measures on Rice Panel Report, Mexico – Definitive Anti-Dumping Me asures on Beef and Rice, 
Complaint with Respect to Rice , WT/DS295/R, adopted 20 December 2005,  
as modified by Appellate Body Report, WT/DS295/AB/R, DSR 2005:XXIII, 11007 
Mexico – Corn Syrup  Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup 
(HFCS) from the United States , WT/DS132/R, adopted 24 February 2000, and 
Corr.1, DSR 2000:III, 1345 
Mexico – Corn Syrup  (Article 21.5 – US)
  Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU  
by the United States , WT/DS132/AB/RW, adopted 21 November 2001, 
DSR 2001:XIII, 6675 
Mexico – Steel Pipes and Tubes Panel Report, Mexico – Anti-Dumping Duties on Steel Pipes and Tubes from 
Guatemala , WT/DS331/R, adopted 24 July 2007 
Thailand – H-Beams  Appellate Body Report, Thailand – Anti-Dumping Duties on Angles, Shapes and 
Sections of Iron or Non-Alloy Steel and H-Beams from Poland , 
WT/DS122/AB/R, adopted 5 April 2001, DSR 2001:VII, 2701 
Thailand – H-Beams  Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections 
 of Iron or Non-Alloy Steel and H-Beams from Poland , WT/DS122/R, adopted 
5 April 2001, as modified by Appellate Body Report, WT/DS122/AB/R, 
DSR 2001:VII, 2741 WT/DS341/R 
Page viii  
 
Short Title Full Case Title and Citation 
US – 1916 Act (EC)  Panel Report, United States – Anti-Dumping Act of 1916, Complaint by the 
European Communities , WT/DS136/R and Corr.1, adopted 26 September 2000, 
upheld by Appellate Body Report, WT/DS136/AB/R, WT/DS162/AB/R, 
DSR 2000:X, 4593 
US – Canadian Pork GATT Panel Report, United States – Countervailing Duties on Fresh, Chilled 
and Frozen Pork from Canada , DS7/R, adopted 11 July 1991, BISD 38S/30 
US – Cotton Yarn  Appellate Body Report, United States – Transitional Safeguard Measure on 
Combed Cotton Yarn from Pakistan , WT/DS192/AB/R, adopted 
5 November 2001, DSR 2001:XII, 6027 
US – Countervailing Duty Investigation on DRAMS Appellate Body Report, United States – Countervailing Duty Investigation on 
Dynamic Random Access Memory Semiconductors (DRAMS) from Korea , 
WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, 8131 
US – Countervailing Duty 
Investigation on DRAMS Panel Report, United States – Countervailing Duty Investigation on Dynamic 
Random Access Memory Semiconductors (DRAMS) from Korea , WT/DS296/R, 
adopted 20 July 2005, as modified by Appellate Body Report, 
WT/DS296/AB/R, DSR 2005:XVII, 8243 
US – Countervailing Measures 
on Certain EC Products  Appellate Body Report, United States – Countervailing Measures Concerning 
Certain Products from the European Communities , WT/DS212/AB/R, adopted 
8 January 2003, DSR 2003:I, 5 
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border 
Supply of Gambling and Betting Services , WT/DS285/AB/R, adopted 20 April 
2005, DSR 2005:XII, 5663, and Corr.1 
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 
US – Hot-Rolled Steel  Appellate Body Report, United States – Anti-Dumping Measures on Certain  
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R, adopted 23 August 
2001, DSR 2001:X, 4697 
US – Lamb  Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, 
Chilled or Frozen Lamb Meat from New Zealand and Australia , 
WT/DS177/AB/R, WT/DS178/AB/R, adopted 16 May 2001, DSR 2001:IX, 4051 
US – Lead and Bismuth II  Appellate Body Report, United States – Imposition of Countervailing Duties on 
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the 
United Kingdom , WT/DS138/AB/R, adopted 7 June 2000, DSR 2000:V, 2595 
US – Lead and Bismuth II  Panel Report, United States – Imposition of Countervailing Duties on Certain 
Hot-Rolled Lead and Bismuth Carbon Steel Products Originating in the United Kingdom , WT/DS138/R and Corr.2, adopted 7 June 2000, upheld by Appellate 
Body Report, WT/DS138/AB/R, DSR 2000:VI, 2623 
US – Norwegian Salmon AD GATT Panel Report, Imposition of Anti-Dumping Duties on Imports of Fresh 
and Chilled Atlantic Salmon from Norway , ADP/87, adopted 27 April 1994, 
BISD 41S/229 
US – Oil Country Tubular 
Goods Sunset Reviews  
(Article 21.5 – Argentina) Panel Report, United States – Sunset Reviews of Anti-Dumping Measures on Oil 
Country Tubular Goods from Argentina – Re course to Article 21.5 of the DSU by 
Argentina , WT/DS268/RW, adopted 11 May 2007, as modified by Appellate 
Body Report, WT/DS268/AB/RW  WT/DS341/R 
 Page ix 
 
 
Short Title Full Case Title and Citation 
US – Shrimp  Appellate Body Report, United States – Import Prohibition of Certain Shrimp and 
Shrimp Products , WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 
2755 
US – Softwood Lumber III  Panel Report, United States – Preliminary Determinations with Respect to Certain 
Softwood Lumber from Canada , WT/DS236/R, adopted 1 November 2002, 
DSR 2002:IX, 3597 
US – Softwood Lumber IV  Appellate Body Report, United States – Final Countervailing Duty Determination 
with Respect to Certain Softwood Lumber from Canada , WT/DS257/AB/R, 
adopted 17 February 2004, DSR 2004:II, 571 
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with 
Respect to Certain Softwood Lumber from Canada , WT/DS257/R and Corr.1, 
adopted 17 February 2004, as modified by Appellate Body Report, 
WT/DS257/AB/R, DSR 2004:II, 641  
US – Softwood Lumber VI  Panel Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada , WT/DS277/R, adopted 26 April 
2004, DSR 2004:VI, 2485 
US – Softwood Lumber VI 
(Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada , WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1 
US – Steel Safeguards Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Certain Steel Products , WT/DS248/AB/R, WT/DS249/AB/R, 
WT/DS251/AB/R, WT/DS252/AB/R, WT /DS253/AB/R, WT/DS254/AB/R, 
WT/DS258/AB/R, WT/DS259/AB/R , adopted 10 December 2003, 
DSR 2003:VII, 3117  
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton , WT/DS267/R, and 
Add.1-Add.3, and Corr.1, adopted 21 March 2005, as modified by Appellate 
Body Report, WT/DS267/AB/R, DSR 2005:II-VI, 299 
US – Wheat Gluten  Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Wheat Gluten from the European Communities , WT/DS166/AB/R, 
adopted 19 January 2001, DSR 2001:II, 717 
US – Wool Shirts and Blouses  Appellate Body Report, United States – Measure Affecting Imports of Woven 
Wool Shirts and Blouses from India , WT/DS33/AB/R, adopted 23 May 1997, and 
Corr.1, DSR 1997:I, 323     WT/DS341/R 
   Page 1  
 
  I. INTRODUCTION 
A. 
COMPLAINT OF THE EUROPEAN COMMUNITIES  
1.1 On 31 March 2006, the European Communities (" the EC") requested consultations with 
Mexico pursuant to Article 4 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  (the " DSU "), Article XXIII of the General Agreement on Tariffs and Trade 
1994  ("GATT 1994 "), Article 30 of the Agreement on Subsidies and Countervailing Measures  ("SCM 
Agreement ") and Article 19 of the Agreement on Agriculture .  The consultations concerned the 
definitive countervailing measures imposed by Mexi co on imports of olive oil from the European 
Communities by the "Final Resolution in the investig ation of price subsidization of imports of olive 
oil" published in the Official Journal of the United Mexican States ("Official Journal") on 
1 August 2005.1  The European Communities and Mexico he ld consultations on 5 May 2006.  These 
consultations failed to resolve the dispute. 
1.2 On 7 December 2006, the European Communitie s requested the establishment of a panel 
pursuant to Articles 4.7 and 6.2 of the DSU , Article XXIII of the GATT 1994 , Articles 4 and 30 of the 
SCM Agreement , and Article 19 of the Agreement on Agriculture .2   
B. ESTABLISHMENT AND COMPOSITION OF THE PANEL  
1.3 At its meeting on 23 January 2007, the Di spute Settlement Body ("DSB") established the 
Panel pursuant to the request of the European Communities in document WT /DS341/2, in accordance 
with Article 6 of the DSU .  At that meeting, the parties to the dispute also agreed that the Panel should 
have standard terms of reference.  The term s of reference are, therefore, the following: 
To examine, in the light of the relevant pr ovisions of the covered agreements cited by 
the European Communities in document WT/DS341/2, the matter referred to the DSB 
by the European Communities in that docum ent, and to make such findings as will 
assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.  
1.4 On 13 February 2007, the European Commun ities requested the Director-General to 
determine the composition of the Panel, pursuant to  paragraph 7 of Article 8 of the DSU.  On 
21 February 2007, the Director-General  composed the Panel as follows:  
Chair:  Ms Debra Steger 
Members: Mr. Jan Heukelman   Ms Gloria Peña   
1.5 Canada, China, Japan, Norway, and the United Stat es have reserved their rights to participate 
in the Panel proceedings as third parties. 
3 
1.6 The Panel met with the parties on 26-27 June 2 007 and 3-4 October 2007, and with the third 
parties on 26 June 2007. 
                                                      
1 WT/DS341/1. 
2 WT/DS341/2. 
3 WT/DS341/3. WT/DS341/R 
Page 2  
 
  II. FACTUAL ASPECTS 
2.1 This dispute concerns the imposition by Mexico  of countervailing duties on imports of olive 
oil from the European Communities. 
2.2 On 12 March 2003, the Mexican company Fortuny de México, SA de CV ("Fortuny"), filed 
an application for the imposition of countervailing du ties on olive oil originating in the European 
Communities (mainly from Spain and Italy).  Fortun y's application alleged that during the period 
April-December 2002, subsidized imports of virg in and refined olive oil from the European 
Communities materially retarded the establishmen t of a domestic industry producing identical or 
similar products.
4  
2.3 On 2 July 2003, the Minister of Economy si gned a resolution accepting the application and 
initiating the investigation. 
2.4 On 4 July 2003, Mexico invited the Europ ean Communities to consultations pursuant to 
Article 13.1 of the SCM Agreement .5  On 11 July 2003, the Eur opean Communities sent a letter 
accepting the invitation.6  The consultations took place in Mexico City on 17 July 2003.7 
2.5 The Initiation Resolution was published in th e Official Journal on 16 July 2003.8  T h e  
investigation covered virgin olive oil, including the categories of extra virgin, fine virgin and ordinary 
virgin;  refined, including first-class refined and second-class refined;  and blended oil, including first-
class blends and second-class blends.  These goods were classified in tariff sub-headings 1509.10.01, 
1509.10.99, 1509.90.01, 1509.90.02 and 1509.90.99 of the Mexican Tariff Schedule.9 
2.6 The investigation covered the period April-December 200210 ("Period of Investigation" or 
"POI").  The examination of "trends" in the context of the injury analysis covered the periods 1 April-
31 December of 2000, 2001 and 2002 11 ("Injury Investigation Period" or "Injury POI"). 
2.7 During the course of the investigation, there were numerous communications and exchanges, 
including questionnaires, comments and submissions between the Mexican investigating authority, 
the Ministry of Economy ("Economía") and the parties to the investigation:  Fortuny, the European 
Commission, the governments of the exporting EC Me mber States, importers, and exporters.  Mexico 
and the European Communities also held consultations on 17 November 2003 and 
2 December 2004.12 
2.8 On 10 June 2004, Economía published the Prelimin ary Resolution in the Official Journal.  
The Resolution continued the investigation and imposed provisional countervailing duties on a per 
kilogram basis.  To determine the specific amount payable on each shipment, the maximum duty 
                                                      
4 Exhibit EC-13, para. 2. 
5 Exhibit EC-22, para. 22. 
6 Exhibit EC-14. 
7 Exhibit EC-22, para. 23. 
8 Exhibit EC-13. 
9 The Initiation Resolution (Exhibit EC-13) refers to tariff sub-headings 1509.10.99 and 1509.90.02.  
Subheadings 1509.10.01, 1509.90.01 and 1509.99.00 were added in the Preliminary Resolution (Exhibit EC-22, 
paras. 6-20) and maintained in the Final Resolution (Exhibit EC-1, paras. 15-24). 
10 Exhibit EC-1, para. 3. 
11 Ibid. 
12 Ibid., para. 65.  WT/DS341/R 
 Page 3 
 
 
  payable in respect of the individual exporter, calculated on an ad valorem  basis, was added to the 
customs value of the shipment, up to a maximum per kilogram reference price.13  
2.9 On 1 August 2005, Mexico published the Final R esolution in the Official Journal, which 
imposed definitive countervailing duties.  Individua l rates of countervailing duties were imposed on 
imports from eight Spanish and Italian olive oil ex porters and on "all other imports" from the EC.  
The per exporter duty amounts, calculated on a per k ilogram basis, were added to the customs value 
of the imports, up to a maximum per kilogram reference price.14  
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS  
A. THE EUROPEAN COMMUNITIES  
3.1 The European Communities request s the Panel to find that the initiation and conduct of the 
investigation by Economía, as well as the impositi on of the definitive countervailing measures are 
inconsistent with Mexi co's obligations under, inter alia , Article VI of the GATT 1994, Articles 1, 11, 
12, 13, 14, 15, 16 and 22 of the SCM Agreement and Articles 13 and 21 of the Agreement on 
Agriculture .  In particular, the European Communities in  its request for establishment of the panel 
requests the Panel find that Mexico violated:15     
1. Articles 11.4 and 16 of the SCM Agreement  by initiating the investigation in the absence a 
determination that the application was made by or on behalf of the domestic industry;   
 
2. Article 11.11 of the SCM Agreement  by failing to conclude the investigation within one year, 
and in no case more than 18 months, after its initiation;  
 
3. Article 12.4.1 of the SCM Agreement  by failing to require intere sted parties to provide non-
confidential summaries of confidential informati on in sufficient detail to permit a reasonable 
understanding of the substance of the information; 
 
4. Articles 12.8, 22.3, and 22.516 of the SCM Agreement  by failing to properly inform the 
interested parties and to a provide reasonable and adequate explanati on of the existence of 
subsidisation, notably as regard s pass-through of any benefit; 
 
5. Article 13.1 of the SCM Agreement  by failing to grant an oppor tunity for consultations 
before the initiation of the investigation with th e aim of clarifying the situation as to matters 
referred to in Article 11.2 of the SCM Agreement  and arriving at a mutually agreed solution;   
 
6. Articles 1.1 and 14 of the SCM Agreement  by failing to calculate the benefit conferred on the 
recipient pursuant to Article 1.1 of the SCM Agreement  and to apply the method used to each 
particular case in a transparent way which is adequately explained as required by Article 14 
of the SCM Agreement ; 
 
7. Article VI:6 of the GATT 1994  and Articles 15.4, 15.5 and 16 of the SCM Agreement  by 
failing to correctly define the domestic industry; 
 
                                                      
13 Exhibit EC-22, paras. 346-360. 
14 Exhibit EC-1, paras. 446-454. 
15 WT/DS341/2. 
16 In its First Written Submission, the European Communities alleges a violation only of Article 12.8, 
and not Articles 22.3 or 22.5, of the SCM Agreement .  WT/DS341/R 
Page 4  
 
  8. Article VI:6 of the GATT 1994  and Articles 15.1 and 15.4 of the SCM Agreement  by failing 
to make a determination of injury based on pos itive evidence involving an examination of all 
relevant economic factors and indices having a bearing on the state of the industry and to provide reasoned and adequate explanation;  
 
9. Article 15.5 of the SCM Agreement  by failing to examine any known factors other than the 
allegedly subsidized imports which were cau sing injury to the domestic industry; and  
 
10. Articles 13(b)(i) and 21.1 of the Agreement on Agriculture  by initiating a countervailing duty 
investigation on imports of an agricultural product (olive oil) outside the circumstances 
contemplated in Article 13(b)(i) of the Agreement on Agriculture  and in violation of 
Article 21.1
17 of the Agreement on Agriculture . 
 
3.2 The European Communities requests that the Pa nel, in accordance with Article 19.1 of the 
DSU  and WTO practice, recommend the Dispute Settlements Body to request that Mexico bring its 
measure into conformity with the cited Agreements ; and, in the light of its authority pursuant to 
Article 19.1 of the DSU, that the Panel accompany this recomme ndation with a suggestion to Mexico 
that a complete repeal of the measure against EC  olive oil would be the most appropriate and/or 
effective way of bringing the measure into conformity.18   
B. MEXICO  
3.3 Mexico requests the Panel to reject all of the claims and arguments raised by the European 
Communities in the proceeding.  In particul ar, Mexico requests that the Panel find: 
1. with regard to initiation, that Mexico acted in a manner consistent with Articles 11.4 and 
16.1 of the SCM Agreement  because Economía properly determined, based on sufficient facts 
in the application, that Fortuny was the sole  domestic producer and was representative of the 
Mexican domestic industry19; 
 
2. with regard to the duration of the investigati on, that Mexico acted consistently with the 
provisions of Article 11.11 of the SCM Agreement  because although the investigation lasted 
more than 18 months, there were "exceptiona l circumstances":  the delays resulted from 
Economía's acceptance of requests for extensions  by interested exporters, so the rights of 
interested parties were not adversely affected20;  
 
3. with regard to the non-confidential summaries of  confidential information, that Mexico acted 
in a manner consistent with Article 12.4.1 of the SCM Agreement  because there were 
sufficiently detailed public summaries of a ll confidential information, and because of 
Mexico's regime for access to the confidential information on the record21; 
 
4. with regard to the disclosure of the essential f acts that served as a basis for the decision to 
apply definitive measures, that Mexico acted in  a manner consistent with Article 12.8 of the 
SCM Agreement  because interested parties may be informed of the essential facts in a 
number of ways.  The essential facts were discl osed in the Preliminary Resolution, which 
                                                      
17 In its First Written Submission, the European Communities alleges a violation only of 
Article 13(b)(i), and not Article 21.1, of the Agreement on Agriculture .   
18 European Communities - First Writte n Submission, paras. 229-230. 
19 Mexico - First Written Submission, paras. 19, 34 and 43-44. 
20 Ibid., paras. 99, 105-106. 
21 Ibid., paras. 80-90.  WT/DS341/R 
 Page 5 
 
 
  described in detail the treatment of informa tion, arguments and evidence furnished by the 
parties, and the reasons for information having been taken into account or rejected22; 
 
5. with regard to the invitation fo r consultations prior to initiation of the investigation, that 
Mexico acted consistently with Article 13.1 of the SCM Agreement  because Economía 
invited the European Communities for consu ltations prior to the date of initiation23; 
 6. with regard to the alleged failure to calculate  the benefit conferred on the recipient pursuant 
to Article 1.1 of the SCM Agreement  and to apply the method used to each particular case in 
a transparent way which is adequately expl ained, in violation of Article 14 of the SCM 
Agreement , that: (a) there is no provision in the SCM Agreement  to indicate that a "pass-
through" analysis is required, (b) as Econom ía correctly found that the subsidy was 
contingent on the production of olive oil, ther e was no need to analyze the transfer of the 
subsidy from olive growers to the producers of  the olive oil; and (c) the methodology to 
calculate the subsidy margin used by Economía was correct
24; 
 
7. with regard to Economía's definition of the domest ic industry, that Mexico acted consistently 
with Article 16 of the SCM Agreement  and did not violate Article VI:6 of the GATT 1994 , 
because the European Communities failed to present a prima facie  case of violation; and that, 
in any case, Economía made an exhaustive examin ation of all matters that might have been 
relevant to the evaluation of injury to the domestic industry and all the evidence reviewed 
pointed to the conclusion that the domestic industry was composed of Fortuny25; 
 8. with regard to Economía's dete rmination of injury, that Ec onomía undertook its analysis of 
injury consistently with Article 15.1 and 15.4 of the SCM Agreement , and did not violate 
Article VI:6 of the GATT 1994 , because Economía complied with  Article 15.1 and 15.2 of 
the SCM Agreement  by undertaking an objective examination based on positive evidence of 
the effect of the subsidized imports on prices,  and Economía did examine all of the relevant 
factors listed in Article 15.4 of the SCM Agreement  in its examination of the impact of the 
subsidized imports on the domestic industry
26; 
 9. with regard to Economía's consideration of  "other known factors", that the European 
Communities has failed to present a prima facie  case and that, in any event, Economía 
properly considered, as required by Article 15.5 of the SCM Agreement , any known factors, 
other than the allegedly subsidized imports , which were causing injury to the domestic 
industry
27; and 
 
10. with regard to the investigation on imports of an agricultural product outside the 
circumstances contemplated in Article 13(b)(i) of the Agreement on Agriculture , that the 
European Communities has not presented a prima facie  case and, in any event, that 
Economía exercised due restraint in the initiation of the investigation; that the obligation to 
show "due restraint" did not apply to any acti on in the investigation other than the initiation, 
and that the obligations contained in Article 13(b)(i) only applied to the initiation and not to 
any other aspects of the investigation on olive oil given that the Article expired on 
31 December 2003 and thus was not applicable  after the initiation of the investigation.28 
                                                      
22 Ibid., paras. 93 and 94. 
23 Ibid., paras. 2-12. 
24 Ibid., paras. 116,120-123 and 130. 
25 Ibid., paras. 157-158, 203-204. 
26 Ibid., paras. 249-276. 
27 Ibid., paras. 281 and 295. 
28 Ibid., paras. 48-49, 60-62 and 66, 74. WT/DS341/R 
Page 6  
 
   
IV. ARGUMENTS OF THE PARTIES 
4.1 The arguments of the parties, as set forth in the executive summaries of their submissions 
provided to the Panel, are attached to this Repor t in Annexes A, C and D (see List of Annexes, 
pages iv-v).  
 
V. ARGUMENTS OF THE THIRD PARTIES 
5.1 The arguments of the third parties – Canada , China, Japan, Norway, and the United States – 
as set forth in the executive summaries of their submissions provided to the Panel, are attached to this 
Report in Annex B (see List of Annexes, pages iv-v).  
 
VI. INTERIM REVIEW 
6.1 Pursuant to Article 15.3 of the DSU, the findi ngs of the final panel report shall include a 
discussion of the arguments made by the parties at the interim review stage.  This section of the Panel 
report provides such a discussion.  As is clear from Article 15.3, this Section is part of the Panel's 
findings. 
6.2 The European Communities requested that we make a number of technical and substantive 
changes to the interim report.  These are described in Section B, infra .  Mexico informed us that it had 
no comments on the interim report.  Mexico's react ions to the requests of the European Communities 
are described in section B, infra .
29   
6.3 The Panel issued its final report to the par ties on a confidential basis on 26 August 2008. 
A. TECHNICAL CORRECTIONS AND ADJUSTMENTS  
6.4 We have made certain technical corrections and adjustments, including on the basis of 
requests from the European Commun ities as referred to in section B, infra . 
B. REQUESTS FROM THE EUROPEAN COMMUNITIES  
6.5 With regard to paragraph 3.1, point 1, the Eu ropean Communities requests that we adjust the 
drafting to better reflect the wording of this claim as set forth in the Request for Establishment of a 
Panel.  Mexico makes no comment on this request.   We have made the requested adjustment. 
6.6 With regard to paragraphs 4.1 and 5.1, the European Communities requests that we attach in 
full all answers to questions from the Panel, and comments thereon, on the basis that these answers 
and comments contain arguments that are importa nt to understand the case.  Mexico makes no 
comment on this request.  We have not acceded to the request of the European Communities because 
we consider it unnecessary given that we have quoted in extenso  in the body of the report those 
answers to which we refer in our findings.  Our decision not to annex the full questions and answers 
also is in the interest of conserving resources.   As noted by the European Communities, these 
questions and answers are part of the record of th e Panel proceeding and continue to be so regardless 
of whether they are annexed to the report of the Panel.    
                                                      
29 We note that in their comments the European Co mmunities and Mexico referred to the paragraph and 
footnote numbers as they existed in the Interim Report.  However, some of these numbers have changed as a 
result to edits we have made in response to the interim comments.  To assist in understanding the Interim Review as well as the Findings we have used the paragraph and footnote numbers as they currently exist in 
referring to the European Communities’ an d Mexico’s comments on the Interim Report.  WT/DS341/R 
 Page 7 
 
 
  6.7 The European Communities request s that in paragraph 7.17 we add a new second sentence 
including the dates it received the invitation for consultations and the timing of the fixing of the date for consultations to more fully reflect its argument s as they were submitted to the Panel.  Mexico 
makes no comment on this request.  We have not made the requested additions.  We note that the 
European Communities did provide additional chr onological information in response to Panel 
question 101, however, the European Communities di d not provide any legal arguments with respect 
to these dates in its written submissions or oral statements before us.   
6.8 In respect of paragraph 7.31, second sentence,  the European Communities requests that we 
change our factual finding regarding the date of in itiation of the investigation from 17 July 2003, to 
16 July 2003, on the basis that Mexico acknowledges th is date in certain of its submissions.  Mexico 
disagrees with this comment, stating that 17 July 2003 is the correct date of initiation, as referred to in 
the interim report, and as indicated in Mexico's Second written submission.   We have not made the 
requested change, as our finding is based on our read ing of the relevant legi slation of Mexico.  We 
note as well that the European Communities, in subm issions before us, identified 17 July 2003 as the 
date on which the initiation resolution came into effect.  ( See, e.g., European Communities – First oral 
statement, para. 17; Second oral statement, para. 5.)  Finally, as noted, in its reactions to the interim 
review request of the European Co mmunities, Mexico confirms the date of 17 July 2003 as the correct 
date.   
6.9 The European Communities requests that we replace "a bona fide  one" in the penultimate 
sentence of paragraph 7.35 with "a bona fides  one" or "made in bona fide" .  Mexico submits no 
comment on this request.  We have changed the reference to refer to "bona fides" . 
6.10 The European Communities requests that we de lete paragraphs 7.37  and 7.38, because its 
arguments "are not limited to the aim (obj ect and purpose) of Article 13.1 of the SCM Agreement ", 
arguing that it also submitted arguments relating to th e context of that provision.  Mexico submits no 
comment regarding this request.   We have not accepted this request, as we consider that the report 
makes clear that we understood the European Comm unities to be making a textual argument based on 
the language pertaining to the "aim" of the cons ultations, not only an argument based on the "aim" 
(object and purpose) of Article 13.1.  Additio nally, we address the European Communities other 
arguments in the subsequent paragraphs.  We ha ve introduced certain drafting changes to these 
paragraphs to further clarify this point.   
6.11 The European Communities further submits that pa ragraph 7.38 contains a denial of implicit 
obligations under the WTO agreements as well as a denial of the concept of implicit obligations per 
se.  Mexico disagrees with this request, as in its view the paragraph in question does not deny the 
existence of implicit obligations as such, but rather states that in the specific case it is not possible to 
conclude that Article 13.1 of the Agreement contains the specific implicit obligation to hold 
consultations asserted by the European Communities.  We have introduced certain drafting changes to 
this paragraph to clarify this point.   
6.12 The European Communities requests that in para graph 7.42, last sentence, we replace the 
term "4 July, the date of the invitation to consu ltations" with "8 July, the date of reception by the 
European Communities of the invitation by Mexico  to hold consultations, which was issued by 
Mexico on 4 July", as "nobody is really invited be fore receiving the invitation".  Mexico disagrees, 
stating that even if one cannot consider oneself invi ted until an invitation is received, the obligation on 
the importing Member cannot go to such an extrem e, as this would imply that Mexico had the 
obligation to ensure that the specific office of the European Communities in charge of this matter in 
fact received the invitation.  Mexico also submits that the issue under dispute is whether the obligation 
is to invite for consultations or  to invite and hold consultations.  We have not made the change 
requested by the European Communities.  We consid er that this does not reflect the arguments as 
presented by the European Communities, which consis tently refer to the date on which the invitation WT/DS341/R 
Page 8  
 
  to consultations was sent (4 July 2003) ( see, e.g., European Communities – First written submission, 
para. 87), and which focus on whether Mexico was oblig ed to hold consultations, or at least issue the 
invitation in time that consultations  could be held, before initiation.  
6.13 Also concerning paragraph 7.42, the European Communities requests that in the last sentence 
we change the reference from "17 July 2003" to "16 July 2003".  Mexico disagrees, for the reasons as 
outline in paragraph 6.8, supra , and we have declined to make the requested change for the same 
reasons.   
6.14 In respect of paragraph 7.58, the European Communities requests that we delete the term 
"specifically", on the grounds that Mexico neve r disputed the conformity of the European 
Communities domestic support measures with Article 6 of the Agreement on Agriculture .  Mexico 
submits no comment on this request.  We have no t made the requested change, we believe the 
language adequately reflects Mexico 's representations to the Panel with respect to this issue.  
However, in light of the European Communities' request that we delete the term "apparent" in 
paragraph 7.59, we have made certain drafting cha nges in that paragraph which we believe further 
clarify the position Mexico took on the applicability of Article 13(b)(i) of the Agreement on 
Agriculture  during the conduct of the olive oil investigation.    
6.15 With respect to paragraph 7.59, the European Communities also requests that we delete the 
last sentence of this paragraph because it is redundant  with what is already stated in paragraph 7.56.  
Mexico submits no comment on this request.  We ha ve not made the requested deletion, because we 
consider that the reference in paragraph 7.59, whic h concludes a sub-section of our reasoning, is more 
specific than the earlier reference which summarized the three steps that woul d be analyzed in the 
following sub-sections, and is necessary for our reasoning in the sub-section to be complete. 
6.16 Regarding paragraphs 7.61 through 7.64, the European Communities requests that we change 
our findings and conclusions in respect of the Eu ropean Communities' claim under Article 13(b)(i) of 
the Agreement on Agriculture .  First, the European Communities argues, the language of the Peace 
Clause refers to "injury or threat th ereof", and because footnote 45 of the SCM Agreement does not 
foresee threat of material retardation, the reference to "injury" in the Peace Clause must refer only to 
material injury (i.e., not to all the forms of injury referred to in footnote 45 of the SCM Agreement ).  
Second, according to the European Communities, if the obligation not to apply duties in the case of 
material retardation does not extend to initiation, the result would be "absurd", in that an investigating 
authority would be entitled to initiate on the basis of a form of injury in respect of which a duty could 
not be imposed.  Third, the European Commun ities submits, the Panel's remark that Economía 
initiated the investigation on the basis of "injury" in the broad sense, would allow any investigating 
authority to circumvent the application of the first clause of Article 13(b)(i) of the Agreement on 
Agriculture,  which runs counter to the principle of effective treaty interpretation.  Fourth, the 
European Communities considers that Economía's imposition of provisional and final measures on the 
basis of material injury is irrelevant for the ai m of assessing the validity of the initiation.  Mexico 
disagrees with this request, because it does not believe that there is a problem in initiating on the basis 
of injury in the general sense,  especially where as in the present case the form of injury was not 
completely clear at the outset.  Mexico argues that to presume that the investigating authority has to 
know before the investigation is initiated which form of injury h as to be investigated would be 
equivalent to asking it to have evidence of the quant ity and quality sufficient for issuing a preliminary 
or final determination.  We have not accepted th e request from the European Communities to change 
our findings in respect of this claim.  We be lieve that the reasoning in the Report sufficiently 
addresses the arguments of the European Communities.   
6.17 Also in respect of paragraph 7.64, the Eur opean Communities requests, in case we do not 
agree with its request described in the preceding paragraph, that we rephrase our finding to say that "the EC has not established that Mexico acted inconsis tently with the first clause of Article 13(b)(i) of  WT/DS341/R 
 Page 9 
 
 
  the Agreement on Agriculture ", i.e., the same wording as in our conclusions in Section VIII of the 
report.  Mexico submits no comment on this request .  We have changed the wording in paragraph 
7.64 to reflect the wording in our conclusions in Section VIII. 
6.18 Concerning paragraphs 7.72 to 7.80, the Europ ean Communities considers that our finding is 
that in order to comply with the Peace Clause in the Agreement on Agriculture , it is enough to abide 
by the legal requirements of the relevant provisions in the SCM Agreement , which interpretation gives 
no added value to the Peace Clause and therefore is  contrary to the principle of effective treaty 
interpretation.  The European Communities asks us, accordingly, to redraft our arguments and find 
that Mexico acted inconsistently with Article 13(b)(i) of the Agreement on Agriculture .  Mexico 
submits no comment on this request.  We disagree with the European Comm unities' characterization 
of our finding.  As set forth in paragraph 7.72, having ruled against the claim of the European 
Communities under Article 13.1 of the SCM Agreement  regarding the timing of the invitation to 
consultations, we do not find that that same timing constitutes evidence  of "haste" in the sense of 
Article 13(b)(i) of the Agreement on Agriculture such that it would support a conclusion that Mexico 
acted without due restraint in its initiation of the olive oil investigation.   
6.19 Regarding footnote 112, the European Communitie s requests that we check the reference to 
Mexico's exhibit cited in that footnote.  Mexi co submits no comment on this request.  We have 
corrected the reference.   
6.20 At the suggestion of the European Communiti es, we have corrected the punctuation in 
paragraph 7.75. 
6.21 Regarding paragraph 7.115, the European Communities contests the accuracy of our 
statement that it was only in response to a dir ect question from the Panel that the European 
Communities identified specific "essential facts".  In  this regard, the European Communities cites its 
arguments in paragraphs 34 to 37 of its Second written submission.  Mexico disagrees with this 
request as in its view the European Communiti es has not identified any essential fact that was 
dismissed by the investigating authority in its analys is, but rather has only made general statements in 
which it indicated that it was difficult to imagine th at in certain procedural steps no essential fact had 
been obtained.   We note that paragraphs 34 to 37 of  the European Communities Second written 
submission were quoted in paragraph 7.111 (previ ously part of paragraph 7.110) and cited in 
footnote 141 to that paragraph.  We have adde d additional citations to more fully reflect the 
arguments made by the European Communities in t hose paragraphs of its second written submission.  
We have also modified  paragraph 7.115 to clarif y our presentation of the arguments of the European 
Communities. 
6.22 In respect of footnote 175, the European Comm unities requests that we add to the description 
of the Appellate Body finding in Softwood Lumber IV that that finding was limited to aggregated 
investigations, and that a pass-through analysis  might be required in determining individual 
countervailing duty rates through a review procedure.  Mexico makes no comment on this request.  
We have not modified the drafting of our report, a nd note in this regard that paragraph 7.168 of the 
report addresses the question of input products as it arose in the olive oil investigation.   
6.23 Concerning paragraphs 7.145 th rough 7.154, the European Communities requests that we 
merge sections VII.G.2(a)(ii) and (iii), because in its view we inappropriately analyzed its claims 
under Articles 1 and 14 as separately claims.  The European Communities asserts that it "never 
presented two separate claims", but rather that its  claim was that Economía violated both articles, 
taken together, and that it had explained during th e proceedings that the question was whether the 
olive oil imported into Mexico was a subsidized im port, and for that purpose, it was necessary for the 
investigating authority to establish and explain ad equately a connection between the original subsidy 
and the imported product, and that such a determinat ion has to be evaluated by applying both articles WT/DS341/R 
Page 10  
 
  at the same time.  Mexico disagrees that the inte rim report specifies that there were two distinct 
claims, and considers that the differentiation w as made only for purposes of the Panel's analysis, 
noting that paragraph 7.148 of the report recognizes that there is a single argument:  "The European 
Communities declined to elaborate further its legal arguments regarding how, precisely, Articles 1 and 
14 in themselves require a pass-through analysis, in spite of our specific invitations at both the first 
and second meetings with the Panel to do so."  We have not made the requested change as we 
disagree with the European Commun ities' characterization of our findings.  First, as Mexico points 
out, we considered jointly the European Commun ities' arguments regarding the alleged obligation 
under Articles 1 and 14 to conduct a pass-through analys is, in paragraphs 7.14 7 and 7.148.  Second, 
however, we note that the European Communities itsel f in presenting its arguments referred to distinct 
obligations in Articles 1 and 14 of the SCM Agreement, starting with its Request for Establishment of 
a Panel which reads, in relevant part: 
"the failure to calculate the be nefit conferred on the recipient 
pursuant to paragraph 1 of Article 1 of the SCM Agreement and to 
apply the method used to each partic ular case in a transparent way 
which is adequately explained, in  violation of Article 14 of the 
SCM Agreement; " 
Furthermore, we asked specific questions to the European Communities as to the nature of its claim 
under Article 14, and have described this exchan ge in paragraph 7.168 and footnote 196.  The 
European Communities made no objection to our questi on on the grounds that it imperfectly reflected 
the nature of its claim.  Finally, as a practical matter, in order to assess the merits of this claim, we had 
no choice but to analyze the provisions separately to see whether either one contains an obligation to 
conduct a pass-through analysis.    6.24 Also concerning paragraph 7.145, the Europ ean Communities requests that we delete the 
phrase "For reasons not clear to us, and" from the beginning of the first sentence, as it considers that it 
has submitted and explained to the Panel the lega l reasons why it decided to base its claim on 
Articles 1 and 14 of the SCM Agreement .  Mexico submits no comment on this request.   We have not 
accepted this request, as the language in question is a statement of the perspective of the Panel. 
6.25 The European Communities objects to our refere nce in footnote 203 to a lack of factual 
evidence, and refers to its reply to Panel question 45 in this respect.  Mexico considers that the fact 
that the European Communities "lis ted" its evidence in this regard does not imply that it presented 
factual evidence, and notes that the Panel referred to this when it signalled that only arguments and 
not evidence were submitted.  We have not accep ted the request of the European Communities.  
Footnote 203 indicates that the replies provided by certain interested parties to information requests 
from Economía consisted of argumenta tion, rather than factual information.  We have introduced 
certain drafting clarifications to this footnote.   
6.26 Regarding paragraph 7.171, the European Communities objects to our finding nothing 
"unclear" about the explanation provided by Economía  regarding the issue raised in the investigation 
that certain olive oil exported from the European Communities to Mexico  was not of European origin.  
The European Communities states that it never alleged a lack of clarity.  It also argues that we did not 
take into account the fact that during the investig ation, the  European Commission submitted certain 
evidence related to this point, referred to in paragr aph 41(a) of the Final Resolution.  Mexico submits 
no comment on this request.   We have introduced certain drafting ch anges into this paragraph to more 
fully reflect the arguments of the European Communities.   
6.27
 The European Communities argues that paragraphs  7.193 to 7.196 should be deleted.  The 
European Communities considers that US – Lamb is not relevant precedent for this case, given that 
the issues were distinct from those before us, a nd further that because that was a safeguards case,  WT/DS341/R 
 Page 11 
 
 
  there was no issue as to the subsidy POI, but rather  a single period for injury and imports.  Mexico 
submits no comment on this request.   We have not made the requested change, as we consider that our 
findings are clear in explaining our reasons for look ing at the reasoning in that case, while recognizing 
the differences in the nature of the two disputes and the fact that they concern two different 
Agreements.   
6.28 The European Communities suggests deleting footno te 237, or at least its first three lines, 
because it addresses Article 15.2, while the statemen ts and submissions of the European Communities 
that are referenced do not concern that provision.  The European Communities also considers that this 
footnote conflicts with our exercise of judicial economy in respect of its claims under Articles 15.1 
and 15.4.  Mexico disagrees with this request, comme nting that the drafting in the interim report is 
fully clear and adequate, and that the points refe rred to by the European Communities are related to 
one another, such that the Panel's statement appears pertinent   We have introduced some drafting 
changes to clarify that the references to Article 15. 2 are by way of context in interpreting the term 
"domestic industry", rather than on the basis of a claim or argument of th e European Communities.  
With respect to our findings under Articles 15.1 a nd 15.4, we have made some drafting changes in 
footnote 375.   
6.29 Concerning paragraph 7.202, second sentence, th e European Communities considers that the 
report misrepresents its arguments, because it did not  argue that output is cumulatively required both 
at the time of initiation and during the subsidy PO I.  The European Communities requests that this 
paragraph and paragraph 7. 181 be amended to take this into account.  Mexico disagrees with this 
request, stating that the distinction drawn by th e European Communities has no meaning.  Mexico 
recalls the reply of the European  Communities to Panel question 102,  which refers to data for a 
particular period of time, as well as to "having curr ent output ... at all stages of the procedure, 
including at initiation".  We note that the European  Communities' written submissions, particularly its 
answers to Panel Questions 13,102, and 143 and its  comment on Mexico's answer to 105 support our 
conclusion that the European Communities is making an argument about output being required at the 
time of application.  Additionally, in its argume nts on Article VI and 16 the European Communities 
refers to a necessity for production during the subs idy period of investigation.  The European 
Communities never stated that it was making these ar guments in the alternative.  Therefore, we 
concluded that these were "cumulative" arguments , i.e., that the European Communities was arguing 
that production is required both at (o r near) the time of application and during the subsidy POI .  We 
have. however, modified the drafting of these paragrap hs to clarify how the two issues were raised in 
the submissions of the European Communities.   
6.30 Also concerning paragraph 7.202, the European  Communities states that it "considers that 
seasonal industries will produce by definition 'at some  point' within one year and the subsidy POI 
shall cover that period in order to allow the estab lishment of causal link.  Similar arguments may be 
used for industries producing goods on a 'just in time' or made-to-order basis or shutting down for 
maintenance or upgrading."  The European Comm unities therefore requests us to delete any 
references to industries of this kind as examples of  industries that would be disqualified under the EC 
interpretation from being counted as domestic indus tries in countervailing duty investigations.  
Mexico submits no comment on this request.   We have not made the requested change.  First, the 
European Communities did not present this argument to us during the dispute.  Second, the statement, 
to which the European Communities objects, reflects our interpretation and re asoning concerning the 
implications of the argument that a producer must have  "output" at certain times in an investigation in 
order to be considered a “domestic industry”  within the meaning of Article 16.1 of the SCM 
Agreement .  
6.31 The European Communities request s that we correct the reference in footnotes 238 and 247 
from "Panel question 14" to "Panel question 13".  Mexico disagrees, indicatin g that the reference to WT/DS341/R 
Page 12  
 
  Panel question 14 is correct.  We have reviewed the responses in question and made the requested 
correction. 
6.32 Also regarding footnote 238, the European Co mmunities requests that we insert at the end of 
the footnote the phrase:  ", because the Panel is not  faced with a borderline issue, [because] Fortuny 
has ceased production a whole year before its app lication was initiated, [and] it was clearly not 
producing", to reflect its reply to Panel question 13 and its comments on Mexico's reply to Panel 
question 105.  Mexico submits no comment on this  request.  We have introduced certain drafting 
changes to this footnote inter alia to more fully reflect these argument s of the European Communities.   
6.33 The European Communities considers that paragr aph 7.203, first sentence misrepresents its 
arguments when it states that "an industry may be so badly injured by subsidised imports as to be 
forced to cease production for some period, but under the European Communities' interpretation, it 
would be disqualified from obtaini ng the very remedy aimed at addressing such injury."  The 
European Communities maintains that all through these proceedings it has explained that the 
complainant must have been producing at least at some point during the period preceding the lodging 
of an application (arguably, the subsidy POI), re ferring here to its reply to Panel question 102.  
Mexico submits no comment on this request.  We  have introduced certain drafting changes to 
footnote 221 to more fully reflect the arguments of the European Communities.  We also have 
modified the drafting in paragraph 7.203 to clarify that the statement to which the European Communities objects is our view as to the implications of its arguments.  
6.34 The European Communities requests that we dele te the last sentence of footnote 247 because 
it does not correspond to its arguments as presented in reply to Panel question 13.  The European 
Communities also considers that the statement in the footnote that the European Communities did not 
provide any specific elaboration as to what constitu tes a "borderline" situation clashes with the case-
by-case approach followed by the panel in paragraph 7.206. Mexico considers that what is referred to 
in this footnote corresponds to the answer of th e European Communities to Panel question 14, rather 
than 13.  We have clarified that we were refe rring to the European Communities' answer to Panel 
question 13 and have made the requested deletion. 
6.35 The European Communities requests that we correct footnote 2 54 to refer to its second oral 
statement, paragraph 12.  Mexico submits no comment  on this request.  We have made the requested 
correction. 
6.36 Regarding paragraph 7.233 the European Commun ities requests that we insert the dates of the 
two letters from the Government of the State of Baja  California, in order to clearly place them in the 
chronology of the investigation.  Regarding para graph 7.234, the European Communities requests that 
we insert the date of the Claridades article, which it identifies as June 2001, to place it in the 
chronology of the investigation.  Mexico objects to the date of the Claridades article referred to by the 
European Communities, stating that the correct da te of publication was June 2002, such that this 
source was one year more recent than indicated by th e European Communities.  We have verified that 
the date of the article was June 2001, and have introdu ced this date into the text of paragraph 7.230.  
We also have inserted into the text of the same pa ragraph the dates of the le tters from the Government 
of the State of Baja California. 
6.37 Regarding paragraph 7.236, the European Comm unities requests that we insert footnotes to 
identify where, in the 
Claridades article the references to production and marketing of olive oil by 
Ybarra, to the experimental artisanal production, and the Ybarra (Fortuny) brand can be found.  
Mexico does not comment on this request.  We ha ve introduced the requested references, in new 
footnote 269.    WT/DS341/R 
 Page 13 
 
 
  6.38 Concerning paragraph 7.238, the European Communities suggests modifying the drafting to 
read, as in the Panel's conclusions, "we find that the European Communities has not established that 
Mexico acted inconsistently with its obligations..." .  Mexico does not comment on this request.  We 
have made the requested change.   
6.39 Concerning paragraph 7.245, the European Comm unities requests that we insert the dates of 
all of the correspondence referred to in  subparagraphs (a) to (j), to clea rly identify those letters in the 
chronology of the investigation.  Mexico does not comment on this request.  We have inserted the 
dates as requested.   
6.40 In paragraph 7.245, at the request of the European Communities, we have corrected the 
spelling of Bufete Químico.   
6.41 In footnote 395, the European Communities request s that we insert a reference to its first 
written submission, paragraph 222, and correct the re ference to its second oral statement.  Mexico 
states that this footnote is not related to what is  signalled by the European Communities.  We have 
adjusted the drafting of the footnote to properly re flect where the comments re ferenced in the main 
text are found in the European Communities' submissions.   
6.42 In footnotes 398 and 399, the European Commun ities requests that we insert a reference to 
the Final Resolution (Exhibit EC-1), paragraph 437.  Mexico does not comment on this request.  We 
have made the requested additions.   
6.43 In paragraph 7.321, at the suggestion of th e European Communities, upon which Mexico did 
not comment, we have changed the drafting to read "we find that the European Communities has not established that Mexico acted inconsis tently with its obligations..."    
6.44 The European Communities reiterates the request, made in its first written submission and its 
closing statement at the second meeting of the Pane l with the parties, that the Panel accompany its 
recommendations with a suggestion to Mexico, pursuant to Article 19.1 of the DSU , that a complete 
repeal of the measure challenged would be the most  appropriate and/or effective way of bringing the 
measure into conformity with its WTO obligations.  In the view of the European Communities this 
suggestion would help clarify Mexico's obligations  in this respect and thus would contribute to 
securing a positive solution to this dispute.  Mexico does not comment on this request.   We have 
introduced new paragraph 8.6 referring to this request.  
VII. FINDINGS 
A. 
GENERAL ISSUES  
1. Standard of Review  
7.1 The dispute before us is concerned with the conf ormity of an investigating authority's actions 
in a countervailing duty investigati on with certain provisions of the GATT 1994 the SCM Agreement 
and the Agreement on Agriculture .  We are aware that, as a reviewer of those actions, we must apply 
the correct standard of review.   
7.2 We recall that Article 11 of the DSU  sets out the applicable standard of review in proceedings 
under the SCM Agreement, the Agreement on Agriculture , and the GATT 1994 .  Article 11 of the DSU  
states, in relevant part, that: WT/DS341/R 
Page 14  
 
  [A] panel should make an objective assessment of the matter before it, including an 
objective assessment of the facts of the cas e and the applicability of and conformity 
with the relevant covered ag reements...  (emphasis added) 
7.3 The Appellate Body has summarized the standard of review that panels are to apply under 
Article 11 of the DSU in assessing whether the comp etent authorities complied with their obligations 
in making their determinations as follows:  panels must examine whether the competent authority has 
evaluated all relevant factors;  they must assess whether the competent authority has examined all the 
pertinent facts and assess whether an adequate expl anation has been provided as to how those facts 
support the determination;  and they must also consider whether the competent authority's explanation addresses fully the nature and complexities of the data  and responds to other plausible interpretations 
of the data.  However, panels must not conduct a  de novo  review of the evidence nor substitute their 
judgement for that of the competent authority.
30  On this last point, the Appellate Body has 
emphasized that a "panel may not re ject an agency's conclusions simply because the panel would have 
arrived at a different outcome if it were making the determination itself."31  Furthermore, specifically 
with respect to disputes involving subsidy determ inations in countervailing duty investigations, the 
Appellate Body recalled that a panel reviewing such a determination:   
should bear in mind its role as reviewer  of agency action, rather than as initial trier of 
fact.  Thus, a panel examining the evidentia ry basis for a subsidy determination 
should, on the basis of the record eviden ce before the panel, inquire whether the 
evidence and explanation relied on by the i nvestigating authority reasonably supports 
its conclusions. ...(footnotes omitted) 32 
7.4 In US – Softwood Lumber VI (Article 21.5 – Canada) the Appellate Body reiterated that "it is 
well established that a panel must neither conduct a de novo  review nor simply defer to the 
conclusions of the national authority."33  With respect to review of the factual components  of the 
findings made by investigating authorities the Appe llate Body has addressed the issue in numerous 
cases.34  In US – Softwood Lumber VI (Article 21.5 – Canada)  the Appellate Body explained that in a 
panel's evaluation of factual findings: 
A panel's examination of those conclusions must be critical and searching, and be 
based on the information contained in the r ecord and the explanations given by the 
authority in its published report. A panel must examine whether, in the light of the evidence on the record, the conclusions r eached by the investigating authority are 
reasoned and adequate.  What is 'adequate ' will inevitably depend on the facts and 
circumstances of the case and the particular claims made, but several general lines of 
inquiry are likely to be relevant.  The panel's scrutiny should test whether the reasoning of the authority is coherent and internally consistent.  The panel must 
undertake an in-depth examination of whet her the explanations given disclose how 
the investigating authority treated the fact s and evidence in the record and whether 
there was positive evidence before it to s upport the inferences made and conclusions 
reached by it.  The panel must examine whether the explanations provided 
                                                     
 
30 See, e.g., Appellate Body Report, US – Cotton Yarn , para. 74.   
31 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 187. 
32 Ibid., para. 188.   
33 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada ), para 93.  
34 Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada ); Appellate Body Report, 
Argentina – Footwear (EC) , paras. 119-121;  Appellate Body Report, US – Cotton Yarn , paras. 74-78;  
Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , paras. 183, and 186-188;  
Appellate Body Report, US – Hot-Rolled Steel , para. 55;  Appellate Body Report, US – Lamb , paras. 101 and 
105-108;  Appellate Body Report, US – Steel Safeguards , para. 299;  and Appellate Body Report, US – Wheat 
Gluten , paras. 160-161.    WT/DS341/R 
 Page 15 
 
 
  demonstrate that the investigating authority  took proper account of the complexities 
of the data before it, and that it explaine d why it rejected or discounted alternative 
explanations and interpretations of the reco rd evidence.  A panel must be open to the 
possibility that the explanations given by th e authority are not reasoned or adequate in 
the light of other plausible alternative expl anations, and must take care not to assume 
itself the role of initial trier of facts, nor to be passive by 'simply accept[ing]  the 
conclusions of the competent authorities'.35 
7.5 We will conduct our assessment of the determina tions of Economía with these statements of 
the Appellate Body in mind.  In particular, in evaluating the claims of the European Communities 
regarding the determinations made  by Economía, we will consider whether, in the light of the 
evidence on the record, the conclusions reached are reasoned and adequate.   
2. Burden of Proof  
7.6 We recall the general principles applicable to burden of proof in WTO dispute settlement, i.e., 
that a party claiming a violation of a provision of a covered agreement by another Member must assert 
and prove its claim.36  In US – Wool Shirts and Blouses the Appellate Body stated that: 
the party who asserts a fact, whether the claima nt or the respondent, is responsible for 
providing proof thereof. Also, it is a generally-accepted canon of evidence in civil law, common law, and, in fact, in most jurisdictions, that the burden of proof rests upon the party, whether complaining or defending, who asserts the affirmative of a particular claim or defence. If that party adduces evidence suffi cient to raise a presumption that what is 
claimed is true, the burden then shifts to  the other party, who will fail unless it adduces 
sufficient evidence to rebut the presump tion. (original footnote omitted).
37 
 7.7 Furthermore, in Canada – Dairy (Article 21.5 New Zealand and US II)  the Appellate Body 
stated explicitly that: 
as a general matter, the burden of proof rests upon the complaining Member. That 
Member must make out a prima facie  case by presenting sufficient evidence to raise a 
presumption in favour of its claim. If the complaining Member succeeds, the 
responding Member may then seek to rebut this presumption. Therefore, under the usual allocation of the burden of proof,  a responding Member's measure will be 
treated as WTO- consistent , until sufficient evidence is presented to prove the 
contrary .
38 
7.8 Moreover, the Appellate Body has stated that  "[i]t is also well to remember that a prima facie  
case is one which, in the absence of effective refu tation by the defending party, requires a panel, as a 
matter of law, to rule in favour of the complaining party presenting the prima facie  case."39  T h e  
Appellate Body also has said that "[a] prima facie case must be based on 'evidence and legal 
argument' put forward by the complaining party in relation to each  of the elements of the claim.  A 
complaining party may not simply submit evidence a nd expect the panel to divine from it a claim of 
                                                      
35 [footnote original] Appellate Body Report, US – Lamb , para. 106. (original emphasis) 
36 Appellate Body Report, US – Wool Shirts and Blouses , p. 16. 
37 Appellate Body Report, US – Wool Shirts and Blouses , p. 14 
38 Appellate Body Report on Canada – Dairy (Article 21.5 New Zealand and US II) , para. 66. 
39 Appellate Body Report on EC – Hormones, para. 104. WT/DS341/R 
Page 16  
 
  WTO-inconsistency.  Nor may a complaining party si mply allege facts without relating them to its 
legal arguments."
40   
7.9 The Appellate Body has also explained that "[i]n the context of the GATT 1994  and the WTO 
Agreement , precisely how much and precisely what kind of evidence will be required to establish such 
a presumption will necessarily vary from measure to measure, provision to provision, and case to 
case."41 
7.10 In addition, the Appellate Body in EC – Hormones established that  "when that prima facie  
case is made, the burden of proof moves to the defendi ng party, which must in turn counter or refute 
the claimed inconsistency."42  As the Appellate Body explained in Japan – Apples , the complaining 
party is not responsible for providing proof of all f acts raised in relation to the issue of determining 
whether a measure is consistent with a given provision of a covered agreement.  Although the 
complaining party bears the burden of proving its case, the responding party must prove the case it seeks to make in response.
43 
7.11 In this dispute, the European Communiti es, which has claimed that Mexico acted 
inconsistently with provisions of the SCM Agreement,  the Agreement on Agriculture , and the GATT 
1994 , thus bears the burden of demonstrating that Me xico acted inconsistently with the relevant 
provisions of those agreements.   
3. Treaty Interpretation 
7.12 Article 3.2 of the DSU  directs panels to clarify the existing provisions of the covered 
agreements "in accordance with customary rules of in terpretation of public international law".  It is 
well settled in WTO case law that the principles codified in Articles 31, 32 and 33 of the Vienna 
Convention on the Law of Treaties ("Vienna Convention")  are such customary rules.44  These 
provisions read as follows: 
Article 31:  General rule of interpretation 
 
1. A treaty shall be interpreted in goo d faith in accordance with the ordinary 
meaning to be given to the terms of the trea ty in their context and in the light of its 
object and purpose.  2. The context for the purpose of the inte rpretation of a treaty shall comprise, in 
addition to the text, including its preamble and annexes:  
(a)  any agreement relating to the tr eaty which was made between all the 
parties in connection with the conclusion of the treaty; 
(b)  any instrument which was made by one or more parties in connection 
with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. 
 
3. There shall be taken into account, together with the context:  
                                                     
 
40 Appellate Body Report on US – Gambling , para. 140. 
41 Appellate Body Report on US – Wool Shirts and Blouses , p. 14 . 
42 Appellate Body Report on EC – Hormones , para. 98. 
43 Appellate Body Report on Japan – Apples , para. 154. 
44 See, inter alia , Appellate Body Report on US – Gasoline , p. 17;  Appellate Body Report on India – 
Patents (US) , para. 45;  and Appellate Body Report on US – Shrimp , para. 114.  WT/DS341/R 
 Page 17 
 
 
  (a)  any subsequent agreement between the parties regarding the 
interpretation of the treaty or the application of its provisions; 
(b)  any subsequent practice in the application of the treaty which 
establishes the agreement of the parties regarding its interpretation; 
(c)  any relevant rules of internati onal law applicable in the relations 
between the parties. 
 4. A special meaning shall be given to a te rm if it is established that the parties 
so intended. 
 
Article 32:  Supplementary means of interpretation 
 
Recourse may be had to supplementary me ans of interpretation, including the 
preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the 
meaning when the interpretation according to article 31: 
 
(a)  leaves the meaning ambiguous or obscure;  or (b)  leads to a result which is ma nifestly absurd or unreasonable. 
 
Article 33:  Interpretation of treaties authenticated in two or more languages 
 
1. When a treaty has been authenticated in two or more languages, the text is 
equally authoritative in each language, unless the treaty provides or the parties agree 
that, in case of divergence, a particular text shall prevail. 
 
2. A version of the treaty in a language other than one of those in which the text was authenticated shall be considered an au thentic text only if the treaty so provides 
or the parties so agree. 
 
3. The terms of the treaty are presumed to have the same meaning in each authentic text.  4. Except where a particular text prevails  in accordance with paragraph 1, when 
a comparison of the authentic texts discloses a difference of meaning which the 
application of articles 31 and 32 does not remove, the meaning which best reconciles 
the texts, having regard to the object and purpose of the treaty, shall be adopted.  
7.13 We shall apply these principles in interpreti ng the relevant provisions of the covered 
agreements. 
B. 
ARTICLE 13.1  OF THE SCM AGREEMENT  
7.14 The European Communities claims that Mexico failed to invite the European Communities to 
consultations and failed to hold consultations, or failed at least to provide a sufficient time interval for 
consultations to take place, before the initiation of th e olive oil investigation, contrary to Article 13.1 
of the SCM Agreement.  WT/DS341/R 
Page 18  
 
  1. Arguments of the Parties 
7.15 The European Communities asserts  that Economía initiated its investigation on 2 July 2003
45, 
that Mexico only invited the European Communities for consultations on 4 July 2003, and that the 
first consultations were held onl y on 17 July 2003.  According to the European Communities, because 
of its failure to hold consultations before the initiation, Mexico is "in outright breach of its obligations 
under Article 13.1".46 
7.16 Mexico argues that the date of initiation was not 2 July 2003, but 16 July 2003, as this was the 
date on which the Initiation Resolution w as published in its Official Journal.47  Mexico states that 
under Mexican law, the Initiation Resolution had no le gal effect until the day after its publication in 
the Official Journal, and that the administrative timeli nes relevant in the investigation were set relative 
to that date.48  On this basis, Mexico maintains that it  complied with its obligations under Article 13.1 
because it issued the invitation for consultations prior  to the date of initiation.49   
7.17 The European Communities also argues that ev en if Mexico's argument were accepted that 
the date of initiation was 16 July 2003, Mexico s till violated Article 13.1 because the invitation for 
consultations was not issued sufficiently before the initiation of the investigation to allow for a 
meaningful opportunity for consultati ons to be held prior to initiation.50  The European Communities 
relies upon Articles 13.2 and 13.3 and footnote 37 to Article 10 as contextual support for its 
interpretation of Article 13.1.  In particular, the European Communities ar gues that there is an implicit 
requirement that, whether or not the consultations actually take place before  initiation, the invitation 
must be issued sufficiently prior to initiation that consultations could  be held before initiation, i.e., 
"more broadly" that investigating authorities should "make themselves available for consultations at a 
stage when those consultations could influence the d ecision to initiate the inv estigation", i.e., before 
initiation.51  If this were not the case, the European Communities argues, the consultations would be 
pointless, given that their "aim" according to Article 13.1, is to "clarify[ ] the situation as to matters 
referred to in paragraph 2 of Artic le 11 [the content of the application] and arriv[e] at a mutually 
agreed solution."52   
7.18 In Mexico's view, the obligation in Article 13.1 is  to issue the invitation to consultations prior 
to initiation, rather than to hold the consultations prior to initiation.53  Furthermore, Mexico argues 
that there is no requirement that the invitation to  consultations be issued in sufficient time that 
consultations could be held prior to initiation.54  
2. Reasoning of the Panel 
7.19 The claim of the Eur opean Communities under Article 13.1 of the SCM Agreement has two 
parts.  First, the European Communities alleges that Economía did not send the invitation to 
consultations prior to initiation as required by Article 13.1 of the SCM Agreement.  This part of the 
European Communities' claim presents issues of both law and fact.  As a matter of law, we must 
decide what action constitutes "initia tion" within the meaning of the SCM Agreement.  As a matter of 
                                                      
45 The date on which the Minister signed the Initiation Resolution. 
46 European Communities - First written submission, para. 88. 
47 Mexico – First written submission, para. 3. 
48 Ibid., paras. 4-10;  Mexico – S econd written submission, paras. 5-6. 
49 Mexico – First written submission, paras. 11-12. 
50 European Communities - Second written submission, paras. 8-11.   
51 European Communities - Response to Panel question 99;  European Communities – Second written 
submission, para. 10.   
52 European Communities - Second written submission, para. 9. 
53 Mexico – Second written submission, para. 14;  Mexico – Response to Panel question 98. 
54 Mexico – Response to Panel question 98.  WT/DS341/R 
 Page 19 
 
 
  fact, we must then decide on the date Economía initiated the countervailing duty investigation into 
olive oil from the European Communities.   
7.20 Second, the European Communities' claim raises que stions about the nature of the obligations 
in Article 13.1.  Specifically, the issues are:  (1 ) whether Article 13.1 contains an obligation to hold 
consultations prior to initiation, and, (2) whether this provision requires that a sufficient amount of 
time be allowed, between the inv itation for consultations and the in itiation, for consultations to be 
held.   
(a) Did Economía Send the Invitation to Consultations After Initiation 
7.21 The parties disagree on the actual date of initiatio n of the olive oil investigation, and thus on 
whether the invitation to consultations was issued  by Mexico prior to that date as required by 
Article 13.1.55  The European Communities contends that the investigation was initiated on 
2 July 2003, the date on which the Minister si gned the Initiation Resolution, and that Mexico only 
issued the invitation to consultations thereafter, on 4 July 2003, thereby breaching Article 13.1 of the  
SCM Agreement .56  Mexico counters that the investigati on was initiated on 16 July 2003, the day the 
Initiation Resolution was published in the Official Journal of Mexico.57  This disagreement raises two 
questions.  First, what does the term "initiation" mean for the purposes of the SCM Agreement ?  
Second, applying the definition of "initiation" in the SCM Agreement, what is the date on which 
Economía initiated the counterva iling duty investigation into olive oil from the European 
Communities?  Once both questions are resolved, we can examine whether Economía's 4 July 2003 
invitation to consultations occurre d prior to or after initiation. 
(i) "Initiation" Within the Meaning of the SCM Agreement   
7.22 The term "initiated" is defined in  footnote 37 to Article 10 of the SCM Agreement , which 
reads:   
The term 'initiated' as used hereinafter means procedural action by which a Member 
formally commences an investiga tion as provided in Article 11.   
7.23 According to the European Communities, the signature by the Minister of the Initiation 
Resolution was the "procedural action" that "formally"  commenced the investigation, as referred to in 
this definition, because signature of a resolution is  a formal act, and the focus of the particular 
resolution in question was the commencement of the investigation, the publi cation of which followed 
automatically after the Minister had signed.58  Mexico counters that the SCM Agreement leaves to 
individual Members how, procedurally, to initiate an investigation.  Mexico states that under Mexican 
law, it is publication in the Official Journal  that constitutes initiation, as it is this publication that 
gives legal effect to initiation resolutions.  In pa rticular, Mexico argues, a resolution signed by a 
Minister, but never published in the Official Journal,  would be entirely without legal effect in 
Mexico.  Thus, while signature by the Minister is  necessary, a resolution only enters legally into 
force, and the deadlines in the investigation only st art running, when the resolution is published.  For 
this reason, according to Mexico, the date of  initiation is the date of publication in the Official 
Journal .59 
                                                      
55 See, e.g., European Communities – First oral statement, para. 14. 
56 European Communities – First written submission, para. 88. 
57 Mexico – First written submission, para. 3. 
58 European Communities – First oral statement, paras. 15-29.   
59 Mexico – Second written submission, paras. 5-6. WT/DS341/R 
Page 20  
 
  7.24 We begin by examining the definition of  "initiated" in footnote 37 of the SCM Agreement .  It 
is important to note that the definition describes a "procedural action by which a Member  formally 
commences an investigation" [emphasis added], w ithout specifying any particular action, or any 
particular procedure, that a Member must undert ake in this regard.  The European Communities 
admits that "the particular steps to be taken [in re gard to initiation] are largely left to Members", and 
that while "[i]t can be inferred from Footnote 37 that the process will involve one element of 
formality ... precisely what this should consist of is not specified".
60   
7.25 The heart of this dispute is not over what constitutes a "procedural action" as many steps 
within an investigation may qualify as such, but  rather which procedural action "formally 
commences" an investigation.  Th e Shorter Oxford English Dicti onary defines "formally" as "In 
prescribed or customary form; with the formalities required to make an act ion valid or definite."61  
The Shorter Oxford English Dictionary also defin es "commence" as "make a start or beginning; come 
into operation."62  As footnote 37 states, we are concer ned with "a Member's" initiation of an 
investigation.  Because the SCM Agreement does not contain any specific standards for determining 
the validity of an action meant to start a counter vailing duty investigation, the date of "formal 
commencement" must be in reference to the in ternal regime of the importing Member.    
7.26 Other articles of the SCM Agreement that refer to initiation provide context for interpreting 
the term "initiated" in footnote 37.  For example, Article 11 of the SCM Agreement  contains a number 
of substantive requirements that must be satis fied before an importing Member may initiate a 
countervailing duty investigation.   Article 11 demonstrates that when the drafters intended to 
prescribe that Members satisfy particular standards, they were perfectly able to do so.63  Additionally, 
Article 22.2 requires investigating authorities to give public notice of the initiation.  Article 22.2 (ii) 
requires that the investigating authority include in the published notice the "date of initiation".  In our 
view, this confirms a reading of footnote 37 that leaves it up to the investigating authority to determine on what date it "formally commenced" an investigation and to then make the public aware 
of that date through the notice.
64 
7.27 Finally, in terms of the object and purpose of the SCM Agreement , we note that the deadline 
for completing an investigation in Article 11.11; the requirement to rele ase the application to 
interested exporters in Article 12.1.3; and th e timeframes for imposing provisional measures in 
Article 17.3 all flow from the date of initiation.  We  view a reading whereby the date of initiation is 
based on the internal law of the importing Member as  ensuring predictability for the interested parties 
in the investigation under the domestic system of each Member.  If WTO dispute settlement 
proceedings taking place considerably after the term ination of an investigation could revisit these 
procedural steps in the absence of  any specific requirements in the SCM Agreement , this predictability 
would be substantially reduced.   
7.28 Based on the foregoing analysis, we find that wh at constitutes "initiation" within the meaning 
of the SCM Agreement will vary based on the procedural acti ons defined in each Member's individual 
regime.  Therefore, to determine the date on wh ich Economía initiated the investigation and whether 
                                                      
60 European Communities – First oral statement, para. 22.   
61 Shorter Oxford English Dictionary Fifth Edition, p. 1015. 
62 Ibid., p. 458. 
63 We also note that other provisions in the SCM Agreement  leave considerable discretion to Members 
to define their own procedures; e.g. Articles 12, 14 and 23.  This leads us to believe that, in general, unless a 
specific procedure is set forth in the Agreement  the precise procedures for how investigating authorities will 
implement those obligations are left to the Members to decide. 
64 We note that in response to Panel question 2 the European Communities, indicated that under its 
system "initiation" takes place when a Notice of Initiation is published.  "The Notice of Initiation published in the Official Journal clearly indicates that the inves tigation is 'hereby initiated', i.e., the initiation of the 
proceeding takes place with the publica tion of the notice of initiation (Article 10.4 of the EC CVD Regulation)".    WT/DS341/R 
 Page 21 
 
 
  Mexico sent the invitation to consultations prior to initiation, as required by Article 13.1 of the SCM 
Agreement,  we must examine what constitutes the pro cedural act by which an investigation is 
formally commenced in the Mexican system. 
(ii) The Date on Which Economía Initiated the Olive Oil Investigation 
7.29 As noted above, we see the issue of what date  Economía initiated the olive oil investigation as 
one of municipal law, which is a matter of fact.  Mexico provided information indicating that, by 
virtue of the interaction between Article 85 of the Mexican Foreign Trade Law and Article 7 of the 
Mexican Federal Tax Code, the Initiation Resolution "will enter into effect on the day following its 
publication".65  This same language is repeated at the end of the Initiation Resolution itself.66  
Furthermore, as noted above, Mexico indicated th at the time limits imposed upon the interested 
parties and on Economía in respect of the investigati on ran from the date of publication, and this also 
is reflected in the Resolution.67   
7.30 We therefore find, as a matter of fact, that under Mexican law, the procedural act by which an 
investigation is formally commenced in the Me xican system is the publication of the Initiation 
Resolution, which takes legal effect the following day.  
7.31 The Initiation Resolution was published on 16 July  2003.  Therefore, on the basis of the 
evidence provided by Mexico on its domestic law, we find, as a matter of fact, that the date of initiation of the olive oil investigation, in the sense of the SCM Agreement , was 17 July 2003, the day 
after the Initiation Resolution was published, and not 2 July, the date of the Minister's signature, as 
argued by the European Communities.  Given this  finding, there is no basis for the European 
Communities' allegation that the invitati on to consultations was only issued after initiation, contrary 
to Mexico's obligations under Article 13.1 of the SCM Agreement . 
                                                     
 
65 Mexico first written submission at paras. 6-10.  In particular Mexico quotes Article 85 of the 
Mexican Foreign Trade Law (FTL ), and Article 7 of  the Mexican Federal Tax Code (FTC) as follows: 
"Article 85 [FTL].- In the ab sence of an express provision in this Law concerning the 
administrative proceedings relating to unfair international trade practices and safeguard 
measures, the Federal Tax Code shall be alternatively applied, insofar as consistent with the 
nature of these proceedings. This provision sh all not apply to notifications and verification 
visits. "Article 7 [FTC]. - Tax laws, their regulati ons and general administrative provisions shall 
enter into force throughout the Republic on the day following their publication in the Diario 
Oficial de la Federación  [Official Journal], unless a later date is stipulated therein."  
 
66 Exhibit EC-13, para. 130.  "This Resolution shall enter into force on the day following its publication 
in the Official Journal of the Federation."  In this regard, we specifically reject the European Communities' 
argument that because para. 122 of th e Initiation Resolution stated that "t he Ministry accepts the request from 
Fortuny de Mexico, S.A. de C.V. and declares the initiation of  an investigation. . ." the Minister's signing of that 
document constitutes the "formal commencement" of the olive oil investigation.  (see European Communities – First oral statement, paras. 27-29).  The Minister signed a document which included specific language delaying 
its effectiveness until after its publi cation.  Therefore, the European Communities cannot demonstrate that by 
signing the Initiation Resolution the Minister was "commencing" the investigation. 
67 See in particular paragraphs 124-129 of the Initiation Resolution (Exhibit EC-13) establishing 
deadlines and procedural requirements pertaining to the investigation, including, in paragraph 124, a 30-
working-day deadline, running from the date of publication of the Resolution, for importers, exporters and foreign legal entities or any other persons that considered that they had an interest in the outcome of the 
investigation to present themselves to Economía.    WT/DS341/R 
Page 22  
 
  (b) The nature of the obligations in Article 13.1 
7.32 The European Communities makes an additional argument that even if Economía sent the 
invitation to consultations prior to the initiation as re quired by Article 13.1, Mexico nevertheless acted 
inconsistently with Article 13.1, because it did not hold consultations, or provide sufficient time to 
hold the consultations, between the date it sent the inv itation and the date of initiation.  This argument 
focuses on the nature of the obligatio n contained in Article 13.1 of the SCM Agreement . 
7.33 We start our analysis with the ordinary meani ng of the terms of Article 13.1 which read as 
follows: 
13.1 As soon as possible after an applica tion under Article 11 is accepted, and in 
any event before the initiation of any inv estigation, Members the products of which 
may be subject to such investigation shall be  invited for consultations with the aim of 
clarifying the situation as to the matters re ferred to in paragraph 2 of Article 11 and 
arriving at a mutually agreed solution.   
7.34 Beginning with the action that is the subject of this provision, namely that the Member the 
products of which may be subject to the investigation "shall be invited
 for consultations", we note that 
the provision makes no explicit refere nce to consultations be ing held, referring instead to an invitation 
to consult.  The dictionary definition of the word  "invite" confirms that to invite someone to do 
something is simply to ask that person to do so if he or she wishes.  For example, the New Shorter 
Oxford Dictionary  defines "invite" as to "ask (a person) to come with one's permission to or into a 
place or to an event."68  Thus, the ordinary meaning of the obligation on the importing Member that is 
considering initiating a countervailing duty investigation is to ask th e Member, the products of which 
may be subject to that investigati on (the exporting Member), to consulta tions.  It then falls to the latter 
Member to decide whether or not to accept the invitation.   
7.35 We do not see a requirement in the text of Article 13.1 that the Members involved must 
actually hold the referenced consultations.  Indeed, if  under Article 13.1, the Member considering 
whether to initiate an investigation were obligated to hold consultations with the exporting Member 
before it could initiate an investigation, the exporting Member could effectively block initiation 
simply by declining to consult.  We find relevant contextual support in the language of Article 13.3 of 
the SCM Agreement, which reads:  "...these provisions regard ing consultations are not intended to 
prevent the authorities of a Member from proceeding  expeditiously with regard to initiating the 
investigation..."  This passage supports the view that Article 13.1 requires the Member considering 
whether to initiate to "invite" the exporting Member for consultations, but does not require that those 
consultations be held.  We emphasize, however, that the invitation must be a bona fides one.  That is, 
assuming that the exporting Member accepts the inv itation, the Member considering whether to 
initiate an investigation cannot then refuse  to participate in the consultations.   
7.36 We now turn to the second, related line of  argument by the European Communities, 
concerning the timing of the invitation to consultatio ns.  We start by recalling that the obligation in 
Article 13.1 that forms the basis of the claim of the European Communities is that the invitation be 
issued " in any event before the initiation of an investigation " (emphasis added).  The claim of the 
European Communities is that Article 13.1 requires that the invitation to consultations be issued 
sufficiently  "before" initiation that consultations could meaningfully be held prior to initiation.   
7.37 We note that in respect of this claim, the European Communities argues that the obligation 
that it asserts is not explicit, but is " implicit ", flowing from the stated "aim" of the consultations in the 
text of Article 13.1, i.e., clarifying the situation as to the contents of the application and arriving at a 
                                                      
68 The New Shorter Oxford Dictionary , 1993.    WT/DS341/R 
 Page 23 
 
 
  mutually agreed solution.  The argument of the European Communities is that this "aim" and the 
consultations themselves would be deprived of " effet utile " if the referenced consultations only took 
place after initiation.69   
7.38 Before considering the merits of this argument, we wish to emphasize that we are not 
convinced by the European Comm unities' theory that there is an "implicit" obligation in the SCM 
Agreement to hold consultations.  We recall that pursuant to Articles 3.2 and 19.2 of the DSU , panels 
and the Appellate Body cannot add to or diminish  the rights and obligations of Members.  The 
obligations on Members, therefore, are those negotia ted by Members and identified in the treaty text 
through the application of the appropriate prin ciples of treaty interpretation, as discussed in 
section VII.A.3, supra .  This is the standard to which we must adhere. 
7.39 Returning now to the language of Article 13.1 that is at issue in this claim, we see no 
requirement that a sufficient interval must be a llowed after issuance of the invitation and before 
initiation that consultations could be  held.  Rather, the requirement in that provision is that the 
invitation must be issued "in any event before" initiation, with no indication of any specific time 
interval.  Nor does the remaining language of Article 13.1 lead to a different conclusion.  First, while 
the opening clause of Article 13.1 – "[a]s soon as po ssible after an application under Article 11 is 
accepted and in any event before the initiation of an y investigation" – establishes a window of time 
for the issuance of the invitation to consultations, this window is expressed not in absolute terms but 
in relation to the system of the individual Member , and thus falls short of establishing any minimum 
timeframes for the holding of such consultations.70  In particular, we do not see in the phrase "as soon 
as possible after an application ... is accepted", either  by itself, or in conjunction with the requirement 
to issue the invitation to consultations "in any ev ent before the initiation", an obligation to allow 
sufficient time prior to initiation for consultations to  be held.  Second, the last clause of Article 13.1 
defines the "aim" of the consultations – "clarifyin g the situation as to the matters referred to in 
paragraph 2 of Article 11 [the conten ts of the application] and arrivi ng at a mutually agreed solution" 
– and says nothing about the timing of such consultations.   
7.40 Other provisions of Article 13 provide further support for our view that there is no 
requirement in Article 13.1 to allow sufficient time for consultations to be held before initiation.  
First, as noted above, Article 13.3 states explicitly th at the provisions on consultation – which include 
Article 13.1 – "are not intended to prevent the auth orities of a Member from proceeding expeditiously 
with regard to initiating...".  Not only does this  language not indicate that some minimum time 
interval must be allowed prior to initiatio n, in fact, it makes explicit that the SCM Agreement  strikes a 
balance between an exporting Member's need to be  consulted, on the one hand, and an importing 
Member's need to proceed exped itiously, on the other hand.  Nor does the obligation, referred to in 
Articles 13.2 and 13.3, to "afford reasonable opport unity for consultation" provide a requirement to 
allow a sufficient time interval that consultations coul d be held before initiation.   Rather, we view this 
rather generally worded requirement to mean th at the importing Member considering initiation or 
conducting an investigation has an ongoing obligation to be available for consultations.  In this regard, 
we consider footnote 44 to be of particular releva nce.  This footnote reads:  "It is particularly 
important ... that no affirmativ e determination whether prelimin ary or final be made without 
                                                      
69 We note that the European Communities does not id entify any specific amount of  time that should be 
allowed for pre-initiation consultations, and instead refers to a list of considerations that should be taken into 
account by an investigating authority  in setting this timeframe.  See, e.g., European Communities - Second 
written submission, paras. 8-12, and response to Panel question 99.   
70 We note that the claim of the European Communities under Article 13.1 is based exclusively on the 
argument that Article 13.1 requires sufficient time before  initiation that consultations could be held.  The 
European Communities has presented no evidence or argumentation concerning  the requirement in the first 
clause of Article 13.1 that the invitation to consultatio ns is to be extended "as soon as possible after an 
application ... is accepted".  This issue therefore is  not before us, and we do not address it further. WT/DS341/R 
Page 24  
 
  reasonable opportunity for consultations having been given ".  In this footnote, the SCM Agreement 
puts particular emphasis on the importance of the prior opportunity for consultations in relation to two 
specific stages of an investigation, namely before issuance of affirmative preliminary or final 
determinations.  The fact that footnote 44 omits en tirely any mention of the pre-initiation stage further 
confirms our view that the SCM Agreement  does not require a sufficient time interval before initiation 
that consultations could be held.   
7.41 Turning, finally, to the object and purpose of the SCM Agreement , we first recall that 
according to Article 13.1, the aim of the consultations  referred to is "clarifying the situation as to the 
matters referred in para graph 2 of Article 11 [the contents of  the application] and arriving at a 
mutually agreed solution".  While we consider that , given their aims, consultations, as referred to in 
Article 13.1, would have the greatest potential to in fluence the initiation decision if they were held 
before initiation, we do not consider that such c onsultations would be wholly devoid of purpose, as 
argued by the European Communities, if they did not  occur until after an investigation was initiated.  
In particular, if, during consultations held after initia tion, it became clear that the factual basis of the 
initiation decision was erroneous (because, for exampl e, the alleged subsidy programmes either were 
not subsidies or were not specific), th en pursuant to Article 11.9 of the SCM Agreement , the 
investigating authority would be obligated to termin ate the investigation immediately.  We note that 
the European Communities acknowledges this, stating th at "a solution can be reached at any stage of 
the investigation (as Article 13.2 makes clear)".
71  Indeed, this is in keeping with the object and 
purpose of the countervailing duty provisions of the SCM Agreement , namely to provide the legal 
framework for Members to take countervailing action where subsidized imports are causing injury to 
domestic producers.  While the consultation provi sions create a mechanism that can be used to 
facilitate an agreed solution, they explicitly "are  not intended to prevent" Members from "proceeding 
expeditiously" with their investigations  and the application of measures.   
7.42 For the foregoing reasons, we find that Article  13.1 does not require a Member considering 
whether to initiate an investigation to allow a sufficient time interval after its invitation to 
consultations is issued and before initiation, so th at consultations could be held.  Given our finding, 
we do not further consider the argument of the European Communities that , even accepting Mexico's 
contention as to the date of initiation, Mexico still acted in breach of Article 13.1, as there was not 
sufficient time between 4 July, the date of the i nvitation to consultations, and 17 July, the date of 
initiation, for consultations to have been held.  
7.43 Therefore, we find that the European Commun ities has not established that Mexico acted 
inconsistently with its obliga tions under Article 13.1 of the SCM Agreement . 
C. ARTICLE 13(b)(i)  OF THE AGREEMENT ON AGRICULTURE  
7.44 The European Communities claims that Me xico violated Article 13(b)(i) of the Agreement on 
Agriculture  by initiating a countervailing duty investiga tion on imports of an agricultural product 
(olive oil) inconsistently with the pr ovisions of Article 13(b)(i) of the Agreement on Agriculture.  
1. Arguments of the Parties 
7.45 The European Communities asserts that the pro duction aids provided to olive growers by the 
European Communities that are the basis for Mexi co's imposition of countervailing duties constitute 
"domestic support measures that conform fully to the provisions of Article 6 of the Agreement."72  
The European Communities argues that Article 13(b)(i) imposes a double restriction on countervailing duty actions.  First, duties must not  be imposed unless there is a determination of 
                                                     
 
71 European Communities - Second written submission, para. 12.   
72 European Communities – First written submission, para. 97.  WT/DS341/R 
 Page 25 
 
 
  "injury or threat thereof."  In the European Comm unities' view, this means that "no action could be 
taken in respect of claims based on ‘material retardation'".73  Second, the Mexican authorities were 
required to exercise "due restraint" in the initiation of the investigation on olive oil.  The European 
Communities alleges that Mexico failed to  comply with both of these requirements.74     
7.46 The European Communities argues th at Mexico failed to comply with the first restriction by 
initiating the investigation and impos ing countervailing duties even thou gh  the appli cant's claim was 
based on "material retardation".75  Specifically, the European Comm unities argues that Mexico should 
not have initiated an investigation based on an a pplication alleging "materia l retardation" and should 
have rejected Fortuny's application.76   
7.47 The European Communities also argues that Mexi co failed to exercise due restraint in the 
initiation of the countervailing duty investigation on olive oil.  Specifically, the European 
Communities argues that contrary to any notion of due restraint, Mexico embarked on the 
investigation with exceptional haste,77  in that it did not hold consultations prior to initiation, it did not 
spend adequate time investigating the full extent  of the domestic industry, and it "converted" an 
application based on "material retardation" into one of "material injury".78   
7.48 The European Communities contends moreover that the obligation to exercise "due restraint" 
must mean something more than the normal initiation standard in the SCM Agreement , because 
otherwise, Article 13(b)(i) of the Agreement on Agriculture  would have no meaning.79  There must be 
some circumstances in which "due restraint" could have  the effect of preventing an investigation that 
might otherwise have been initiated.80   
7.49 Mexico argues with respect to the obligati on to show "due restraint" in initiating a 
countervailing duty investigation on an agricultural product, that "due restraint" should not be 
interpreted as a prohibition on initiation, but rather as adopting an appropriate and reasonable standard 
for allowing an investigation to be initiated.81 Mexico also argues that the obligation to exercise due 
restraint contained in Article 13(b)(i) of the Agreement on Agriculture  relates only to the period 
preceding the initiation of the investigation, and that thus to the extent that the European Communities 
is arguing  that the due restraint provisions were violated by imposing countervailing duties, such an 
argument would  has no merit.82 
7.50 With respect to the European Communities' argu ment that Article 13(b)(i) prohibited Mexico 
from imposing countervailing duties in response to an  application based on material retardation, 
Mexico notes that there is no provision in the SCM Agreement  that requires an investigating authority 
                                                      
73 Ibid., para. 99. 
74 Ibid., para. 100. 
75 Ibid., para. 99. 
76 European Communities – First oral statement, para. 48. 
77 European Communities – First written submission, para. 101. 
78 Id.; European Communities – first oral statement, para. 52.  The Panel notes that in its response to 
Panel question 101 the European Communities stated that: 
"In speaking of 'exceptional haste' the EC was referring not to the whole length of Economía's consideration of the application but to the fina l phase between the internal finalisation of the 
notice of initiation and its publication on 16 July.  As the EC has explained in regard to its 
claim under Article 13, this haste was such as to deny the EC its right to consultations." 
79 European Communities – Second written submission, para. 24. 
80 European Communities – Second oral statement, para. 24. 
81 Mexico – First written submission, paras. 48, 52; Me xico – First oral statement, para. 9; Mexico – 
Response to Panel Question 22; Mexico – Second written submission, para. 55. 
82 Mexico – First written submission, paras. 46-49. WT/DS341/R 
Page 26  
 
  to accept all of the conclusions in an application.
83  Mexico points out that the investigation was 
initiated on the basis of "injury" in the broad sense of that term.84  Additionally, Mexico notes that, in 
any case, the duties were imposed after the inves tigating authority had ma de a determination of 
"material injury," not "material retardation" .85 
2. Reasoning of the Panel 
7.51 Article 13(b)(i) of the Agreement on Agriculture  reads as follows: 
 Due Restraint  
 
During the implementation period, notwithstanding the provisions of GATT 1994 and the Agreement on Subsidies and Countervailing Measu res (referred to in this Article as the 
"Subsidies Agreement"): 
 (b) domestic support measures that conform fully to the provisions of Article 6 of this Agreement including direct payments that conform to the requirements of paragraph 5 thereof, as reflected in each Member's Schedule, as well as domestic 
support within de minimis  levels and in conformity w ith paragraph 2 of Article 6, 
shall be: 
(i) exempt from the imposition of countervailing duties unless a 
determination of injury or threat thereof is made in accordance with 
Article VI of GATT 1994 and Part V of the Subsidies Agreement, and due restraint shall be shown in initiating any countervailing duty 
investigations; . . . 
(a) Applicability of the Provision 
7.52 The first issue we must address is whether Article 13(b)(i) of the Agreement on Agriculture  
applies to the Mexican measures in this case.  By its own terms, Article 13 of the Agreement on 
Agriculture  applied only "[d]uring the implementation peri od," which is defined in  Article 1(f) of that 
Agreement as follows: 
. . . the six-year period commencing in the year 1995, except that, for the purposes of 
Article 13, it means the nine-year period commencing in 1995; 
7.53 Both parties agree that the "implementati on period" ran at least until the end of 2003.
86  The 
European Communities indicated, in response to a question from the Panel, that depending on 
whether 'years' are defined as financial or marketing years, the date of expiry of the implementation 
period might have been some point during 2004.87   
7.54 Although the parties do not agree on the actua l date on which the implementation period 
expired, the claims raised by the Eu ropean Communities relate to Mexico's initiation  of the olive oil 
                                                      
83 Mexico – First written submission, paras. 55-56. 
84 Ibid., para. 56. 
85 Mexico – First written submission, para. 61. 
86 European Communities – First written submission, para. 47; Mexico – First written submission, 
para. 49.   
87 European Communities – Response to Panel question 20.  WT/DS341/R 
 Page 27 
 
 
  investigation.88  As we have found in paragraph 7.31 above, the investigation was initiated on 
17 July 2003.  This date was well within the impl ementation period and before  Article 13 expired.  
Therefore, we do not need to decide, for the purpo ses of this case, precisely when Article 13 expired.  
It is clear that Article 13 was in force and appli cable at the time Economía  initiated the countervailing 
duty investigation on olive oil imports from the European Communities.89  Therefore, we hold that 
Article 13 applies to the initiation of the counterva iling duty investigation by Mexico in this case. 
(b) Article 13(b)(i) of the Agreement on Agriculture  
7.55 There are three legal elements in Article 13(b )(i).  First, the chapeau of  paragraph (b) 
provides that the obligations and exemptions set fo rth in the succeeding subparagraphs only apply to 
"domestic support measures" which conform fully to the provisions of Article 6 of the Agreement on 
Agriculture .  Second, subparagraph (i) exempts such products from the imposi tion of countervailing 
duties, unless a determination of injury or threat thereof is made in accordance with Part V of the 
SCM Agreement .  Third, subparagraph (i) also requires that  "due restraint shall be shown in initiating 
any countervailing duty inv estigations" in relation to those measures.  
7.56 The European Communities, as the complainant, bears the burden of proving that the 
provisions of Article 13(b)(i) are applicable to the measures at issue and that Mexico has acted 
inconsistently with its oblig ations under those provisions.90  Therefore, the European Communities 
must first demonstrate that its domestic support me asures satisfy the requirement in the chapeau of 
paragraph (b), namely that they conform fully to Article 6 of the Agreement on Agriculture .  Then, the 
European Communities must demonstrate that Me xico has not complied with the provisions of 
subparagraph (i) of paragraph (b). 
(i) Domestic Support Measures which Fully Conf orm with Article 6 of the Agreement on 
Agriculture  
7.57 In its first written submission, the European  Communities asserts that the production aid 
provided to olive growers by the European Commun ities, which are the basis for the imposition of 
countervailing duties, conform fully to Article 6 of the Agreement on Agriculture .91  
7.58 Mexico did not specifically dispute this asser tion and, in fact, c onducted its countervailing 
duty investigation as if the European Communities'  domestic support measures were in conformity 
with Article 6 of the Agreement on Agriculture .92   
7.59 As Mexico conducted the olive oil investigation as if Article 13(b) of the Agreement on 
Agriculture applied to that investigation, we will pr oceed on the basis of the same assumption, 
arguendo , for the purposes of this dispute.93  We note, however, that had this issue been contested 
between the parties, it would have been incumb ent upon the European Communities in the first 
instance to demonstrate that the provision was applicable.   
                                                      
88 European Communities – First written submission, paras. 99, 100; European Communities – First 
oral statement, paras. 48-49;  European Communities – Response to Panel question 20; European Communities 
– Second oral statement, para. 19. 
89 Panel Report, US – Upland Cotton , para.7.345 and footnote 469. 
90 See Appellate Body Report, US – Wool Shirts and Blouses , p. 14: Panel Report, US – Upland 
Cotton , para. 7.285. 
91 European Communities – First written submission, para. 97. 
92 Mexico - Response to Panel question 111 
93 Preliminary Resolution (Exhibit EC-22), para. 74 where Economía explained how it exercised due 
restraint in initiating the countervailing duty investigation. WT/DS341/R 
Page 28  
 
  (ii) Exempt from Imposition of Countervailing Duties Unless a Determination of Injury or Threat 
Thereof is Made 
7.60 The European Communities argues that Mexico acted inconsistently with Article 13(b)(i) 
because it accepted an application on the basis of an allegation of material re tardation, which is not 
referred to in that provision, rather than an allegati on of injury or threat thereof, which are referred to 
therein.
94  In particular, the first part of subparagr aph (i) provides that products covered by the 
chapeau of paragraph (b) are "exempt from the imposition of countervailing duties unless a determination of injury or threat thereof is ma de in accordance with Article VI of GATT 1994 and 
Part V of the Subsidies Agreement."   
7.61 We note that the first clause of Article 13(b)(i) refers inter alia to "injury or threat thereof… 
in accordance with …Part V of the Subsidies Agreement ."  The paragraph does not refer to "material 
injury", but rather to "injury".  "Injury", in turn, is defined in footnote 45 of the SCM Agreement  as 
"material injury to a domestic industry, threat of material injury to a domestic industry or material 
retardation  of the establishment of such an industry" (em phasis added.)  In other words, the definition 
of the term "injury" for purposes of the SCM Agreement encompasses the concept of material 
retardation.  We therefore do not find that the fi rst clause of subparagraph (i) prohibits the imposition 
of duties on the basis of a determination of mate rial retardation as opposed to determinations of 
material injury or threat of material injury.   
7.62 Furthermore, and in any case, we note that th e claim of the European Communities focuses on 
the basis of Economía's initiation of the olive oil investigation, an d not on the basis for the imposition 
of the measures.  In particular, the argument of the European Communities is that no investigation 
should have been initiated on the basis of a form of injury (material retardation) that was not 
permitted as a basis for the imposition of measures.  Even assuming arguendo that the European 
Communities were correct that the first clause of Ar ticle 13(b)(i) excluded determinations of material 
retardation, we disagree that this clause is relevant to initiation.  Instead, the plain language at issue is 
expressly limited to the "imposition of countervailing duties".  Here, we are mindful of the guidance 
of the Appellate Body not to impute into a treaty wo rds that are not there or to import concepts that 
were not intended.
95  We also recognize that our duty is to interpret the words actually used in the 
agreement under examination, not the words the inte rpreter (or one of the parties) may feel should 
have been used.96   
7.63 Finally, even if the Europ ean Communities were correct bot h that the first clause of 
Article 13(b)(i) is relevant to initiation, and that it precludes initiation based on claims of material 
retardation, we note as a factual matter that Economía  initiated the olive oil in vestigation on the basis 
of "injury", in the broad sense of the term as defined in footnote 45 of the SCM Agreement , and that it 
imposed provisional and final countervailing duties on the basis of "material injury"97, not material 
retardation. 
7.64 For these reasons, assuming arguendo that Article 13(b)(i) of the Agreement on Agriculture 
applied to the olive oil investigation, we find that  the European Communities has not established that 
Mexico failed to comply with the re quirement in Article 13(b)(i) of the Agreement on Agriculture  to 
exempt olive oil from imposition of countervailing duti es “unless a determination of injury or threat 
                                                      
94 European Communities – First written submission, para. 99.  We note that the European 
Communities has provided no argumentation based on the text , context, or object and purpose of Article 13(b)(i) 
to support its contention. 
95 Appellate Body Report, India – Patents (US) , paras. 45-46; See also Appellate Body Report, India – 
Quantitative Restrictions , footnote 23, para. 94. 
96 Appellate Body Report, EC – Hormones , para. 181. 
97 Preliminary Resolution (Exhibit EC-22), para.  34 3; Final Resolution (Exhibit EC-1), para. 438.  WT/DS341/R 
 Page 29 
 
 
  thereof is made in accordance with Article VI of GATT 1994 and Part V of the Subsidies 
Agreement.”  
(iii) Due Restraint Shall be Shown in Initiat ing Any Countervailing Duty Investigation 
7.65 The European Communities argues th at Mexico acted inconsistently with Article 13(b)(i) by 
failing to show "due restraint" in initiating the countervailing duty investigation on imports of olive 
oil from the European Communities.  The European Communities defines the verb "to restrain" as to 
"hold back or prevent from some course of action" or "restrict, limit."98   
7.66 Mexico argues that "due restraint" simply means adopting an appr opriate and reasonable 
standard for allowing an investigation to be in itiated, and that it does not involve doing anything 
differently in cases of agricultural, as compared with non-agricultural, products.99  
7.67 The term "due restraint" has not been interprete d by panels or the Appella te Body to date.  To 
assist in determining the ordinary meaning of th e terms "due" and "restraint", we look first to 
dictionary definitions.  Black's Law Dictionary  defines "due" as "just, proper, regular, and 
reasonable."100  The definition in Webster's New Encyclope dic Dictionary is similar, referring to 
"appropriate", "adequa te" and "regular".101 The New Shorter Oxford English Dictionary defines 
"restraint" as "(self-) control; the ability to restrain oneself; reserve; absence of excess or 
extravagance." 102 The review of the French and Spanis h texts, which are equally authentic,103 suggests 
similar interpretations. In the French version the relevant term to be interpreted is the word 
"modération". The dictionary Le Grand Robert de la langue française104 defines "modération" as 
"circonspection, pondération, reser ve" and "retenue", which shows that all of these words express 
reserve, caution and balancing. Regarding th e Spanish terms "debida moderación", the Diccionario de 
la lengua española105 provides for the word "debida" the definition "como corresponde o es lícito" 
and "a causa de, en virtud de".106 "Moderación" is defined as "cordura, sensatez, templanza en las 
palabras o acciones"107 Therefore, considered on the basi s of all three authentic texts of 
Article 13(b)(i) the ordinary meaning of "due re straint" is "a proper, regular, and reasonable 
demonstration of self-control, caution, prudence and reserve".   
7.68 We consider this definition to be consistent with the context of Article 13 as a whole, as well 
as with the object and purpose of the provision, which is to provide a "peace clause", during the 
implementation period, for Members taking actions permitted under the SCM Agreement  against 
subsidies that are provided consiste nt with the provisions of the Agreement on Agriculture .  
                                                      
98 European Communities – Second oral statement, para. 23 citing  The New Shorter Oxford English 
Dictionary, volume 2, N-Z, p. 2569.  Clarendon Press, Oxford 1993.  Exhibit EC-39. 
99 Mexico – First written submission, paras. 48, 52;  Mexico – First oral statement, para. 9; Mexico 
response to Panel question 22; Mexico – Second written submission, para. 55. 
100 Black's Law Dictionary, 7th Edition, abridged. (2000), p. 405. 
101 Webster's New Encyclopedic Dictionary, 2000, p. 310. 
102 The New Shorter OED.  
103 See the final clause of the WTO Agr eement.  See also the Panel Report on EC – Trademarks and 
Geographical Indications (US) , para. 7.607. 
104 Le Grand Robert de la langue française (2000), p. 1595. 
105 Diccionario de la lengua española (segunda edición, 2001). 
106 Diccionario de la lengua española (segunda edición, 2001), p. 493. 
107 Diccionario de la lengua española (segunda edición, 2001), p. 1030. According to the Collins 
Spanish Dictionary  (1985) these terms can be translated in En glish with "prudence, wisdom" ("cordura") or 
"good sense, sensibleness" ("sensatez") or "restraint, moderation" ("templanza"). WT/DS341/R 
Page 30  
 
  7.69 Having determined what the obligation to show "due restraint" requires, we now apply that 
standard to the facts of this case to determine whether the European Communities has demonstrated 
that Mexico did not comply with this obligation in  initiating the countervailing duty investigation.  
7.70 The European Communities provides three reas ons why, in its view, Economía failed to 
exercise "due restraint" within the meaning of Article 13(b)(i).
108  These are that: (1) Economía did 
not wait to hold consultations with the European Co mmunities prior to initiation, but plunged into the 
investigation at the first possible moment109; (2)  Economía did not spend adequate time investigating, 
prior to initiation, whether there were domestic produ cers other than Fortuny, but paused only to take 
account of Fortuny's position; and (3) Economía accep ted an application which was clearly based on 
"material retardation" and converted it into one of "material injury."110 
7.71 We will examine each of these specific circ umstances to determine whether Economía's 
actions in the olive oil investigation evince such a lack  of restraint as to fall short of the "due restraint" 
obligation of Article 13(b)(i) of the Agreement on Agriculture  as interpreted above, again assuming 
arguendo  that that obligation applied to the investigation. 
7.72 With respect to Economía 's initiating the c ountervailing duty investigation prior to holding 
consultations, we note that Article 13(b)(i) of the Agreement on Agriculture  requires investigating 
authorities to show "due restraint" in initiating  any countervailing duty i nvestigation on products 
covered by the chapeau of paragraph (b).  As noted in our findings relating to the European 
Communities' claim under Article 13.1 of the SCM Agreement , a Member is not required to hold  the 
consultations referred to in that provision prior to initiation.  Therefore, we do not see how the failure 
to take an action that is not required for initiation can  be considered evidence of a lack of due restraint 
in initiating  the countervailing duty investigation.  We also  note that we have found that Mexico did 
not infringe its obligations under Article 13.1 of the SCM Agreement  to invite the European 
Communities to consultations prior to initiation ( see, para. 7.42, supra ).  Having made this finding, 
we do not see how the timing of this invitation is evidence of "haste" or of a lack of self-control or reserve, as alleged by the European Communities.  
7.73 With respect to the lack of investigation into other possible domestic producers besides 
Fortuny we note, as described in Section VII.I, that in its application Fortuny asserted that it 
accounted for 100 per cent of the olive oil production on the commercial market in Mexico and that 
there were no other domestic producers other than  those operating on a "local" or "experimental" 
basis.
111  Fortuny also provided a table of monthly production for 2000, 2001, and 2002.112  Economía 
sent a "prevención" or supplemental questionnaire to Fortuny asking for, inter alia,  additional data on 
injury indicators, annual capacity and capacity utilization as well as information on any government 
support programmes that may have been affected by the increase of subsidized imports, information 
on the world olive oil market, including European  production and exports, and audited financial 
statements for 2000, for the 2001 separation of Formex-Ybarra, and for 2002 for Fortuny and an 
                                                      
108 European Communities – First written submission, para. 101; European Communities – First oral 
statement, para 52; European Communities – Second written submission, para. 24.  European Communities - 
Response to Panel question 22. 
109 The European Communities clarified in response to Panel question 108 that its reference to 
"exceptional haste" in paragraph 101 of its first wr itten submission was only referring to the "final phase 
between the internal finalisation of the notice of initia tion and its publication on 16 July.  As the EC has 
explained in regard to its claim under Article 13, this was such as to deny the EC its right to consultations." 
110 Cf. European Communities – Second oral statement,  para. 20 (arguing that Mexico "must therefore 
be taken to have initiated the investigation on what ever basis it was requested, which in this case [ sic] material 
retardation."). 
111 Exhibit MEX-41A, Fortuny's response to question 17. 
112 Exhibit MEX-51A, Annex 5.  WT/DS341/R 
 Page 31 
 
 
  income statement for the like product for 2000-2002.113  Fortuny responded with additional data, some 
based on simple worksheets that were in its possession rather than audited financial records that were 
in the possession of Distribuidora Ybarra.114  
7.74 Economía compared the data provided by Fortuny to information from other sources, namely 
the government of Baja Californi a and the article published in Claridades Agropecuarias  about the 
olive oil industry in Mexico, which were also provided in the application.  Economía found that these 
other sources corroborated Fortuny's statement that it comprised the entire domestic industry.   
7.75 The evidence before us shows that Economía  received an application from Fortuny.  
Economía, seeking to ensure that it had all the necessary information for initiation, sent additional 
questions to Fortuny and awaited a reply.  Economía also checked the assertions of Fortuny against 
information from independent sources, the govern ment of Baja California and the magazine 
Claridades Agropecuarias , which were provided by Fortuny as attachments to its application.  
Through this process, which took approximately fo ur months, Economía satisfied itself that it had 
information sufficient to meet the requirements fo r initiating a countervailing duty investigation.   
7.76 We find nothing in this behaviour that exhibits a lack of self-control or reserve.  Therefore, 
we find that Economía did not fail to exercise due r estraint by neglecting to investigate the extent of 
the domestic industry prior to initiation.  
7.77 The European Communities also a lleges that Economía's "conversion" of an application based 
on material retardation into one of material injury  evinces a lack of due restraint within the meaning 
of Article 13(b)(i) of the Agreement on Agriculture . 
7.78 In this regard, Mexico argues that Econom ía, upon reviewing Fortuny's application, 
concluded that it was not possible in principle to init iate an investigation for material retardation in 
respect of an enterprise that had be en producing olive oil since the 1940s.115  Because of this, 
Economía sent additional questions to  Fortuny with respect to the history of olive oil production in 
Mexico and the production history of Form ex-Ybarra (Fortuny's predecessor company).116  Economía 
concluded that it would be best to initiate an inves tigation in respect of injury in general and then, 
during the course of the investigation, determine the specific nature of an y injury caused to the 
domestic industry by subsidized imports.117  Consequently, Economía initiated the investigation on 
the basis of "injury" in the broad sense of the term within the meaning of footnote 45 of the SCM 
Agreement .118  
7.79 We consider Economía's decision to delay initiatio n in order to gather more information from 
the applicant and to avoid initiating on a basis not s upported by the evidence in the application to be 
indicative of self-control and reserve rather than th e lack thereof.  Therefore, we find that the 
European Communities has not established that Economía failed to exercise due restraint by 
"converting" Fortuny's application from one of materi al retardation into an investigation of injury. 
7.80 In sum, we find that none of the reasons  presented by the European Communities 
demonstrates a lack of due restraint on the pa rt of Economía.  To the contrary, based on our 
examination of the facts before us, Economía app ears to have proceeded with prudence and caution, 
indicating self-restraint rather than a lack thereof.   Therefore, we conclude that the European 
                                                      
113 Exhibit MEX-45. 
114 Exhibit MEX-46. 
115 Mexico – First written submission, paras. 58-60. 
116 Exhibit MEX-45. 
117 Mexico – First written submission, paras. 58-60. 
118 Mexico – First written submission, paras. 59-60; see also Initiation Resolution (Exhibit EC-13), 
para. 54. WT/DS341/R 
Page 32  
 
  Communities has not established as a factual matter th at Economía failed to show due restraint in 
initiating the countervailing duty investigation on olive oil. 
7.81 Assuming arguendo that Article 13(b)(i) of the Agreement on Agriculture  was applicable to 
the olive oil investigation, we find that the Eur opean Communities has not demonstrated that Mexico 
failed to comply with the requirement in that provision to exempt olive oil from imposition of 
countervailing duties "unless a determination of injury  or threat thereof is made in accordance with 
Article VI of GATT 1994 and Part V of the S ubsidies Agreement".  Nor has the European 
Communities demonstrated that Mexico failed to show due restraint in initiating the countervailing 
duty investigation on olive oil.  Therefore, we find that the European Communities has not established 
that Mexico acted inconsistently with Article 13(b)(i) of the Agreement on Agriculture . 
D. 
ARTICLE 12.4.1  OF THE SCM AGREEMENT  
7.82 The European Communities asserts that Mexico fa iled to require interested parties to provide 
non-confidential summaries of confidential information and that Mexico therefore acted inconsistently with its obliga tions under Article 12.4.1 of the SCM Agreement . 
1. Arguments of the Parties 
7.83 The European Communities asserts that Mexico fa iled to require interested parties to provide 
non-confidential summaries of the confidential inform ation that they submitted to Economía and that 
such interested parties did not justify their failu re to provide non-confidential summaries by invoking 
"exceptional circumstances" within the meaning of Article 12.4.1 of the SCM Agreement . 
7.84 Mexico asserts that the interested parti es did furnish non-confidential summaries of 
confidential information in compliance with Article 12.4.1.  It also argues that the Mexican legal 
system allows representatives of interested parties to access confidential information, so that even if 
the investigation file did not contain public summaries of information provided by an interested party, 
the obligations and objectives in Article 12.4.1 of the SCM Agreement  would have been met. 
2. Reasoning of the Panel 
7.85 Article 12.4.1 of the SCM Agreement  reads as follows: 
12.4.1 The authorities shall require interested  Members or interested parties providing 
confidential information to furnish non-c onfidential summaries thereof.  These 
summaries shall be in sufficient detail to permit a reasonable understanding of the 
substance of the information submitted in confidence.  In exceptional circumstances, 
such Members or parties may indicate that  such information is not susceptible of 
summary.  In such exceptional circumst ances, a statement of the reasons why 
summarization is not possible must be provided. 
7.86 Article 12.4.1 provides that an investigating au thority shall require interested Members or 
interested parties submitting confidential informa tion also to supply non-confidential summaries of 
that information for the reco rd.  These summaries shall be "in sufficient detail to permit a reasonable 
understanding  of the substance of the inform ation submitted in confidence".   
7.87 Where confidentiality is claimed with respect to  a specific document, we consider that the 
provision of a public version of that document, from which confidential information has simply been removed, may not necessarily satisfy the requirements of Ar ticle 12.4.1.  This is because what is 
required to be summarized pursuant to Article 12.4.1 is the confidential information.  The remaining 
non-confidential parts of the document may not, by th emselves, be sufficient to convey a "reasonable  WT/DS341/R 
 Page 33 
 
 
  understanding" of the substance of the confidentia l information that has been removed so as to 
constitute an adequate summarization of that information. 
7.88 There may be circumstances in which the information remaining in the public version of a 
document may be sufficient, in itself, to pr ovide the required summary of the confidential 
information.  In such circumstances, no additiona l summary would be required.  Such circumstances 
are likely to be limited, however, given that what the SCM Agreement  requires is that the summary 
conveys a reasonable understanding of the substance of  the confidential information.  In any event, 
the sufficiency of a public version of a docum ent from which confidentia l information has been 
removed as a "summary" of the removed information clearly must be determined on a case-by-case basis. 
7.89 Article 12.4.1 recognises that there may be "e xceptional circumstances" in which certain 
information may not be "susceptible of summary".  In such "exceptional circumstances", a statement 
of the reasons why summarization "is not possible must  be provided" (emphasis added).  While this 
provision imposes an obligation on the interested pa rty claiming confidentiality, in our view it also 
imposes an obligation on the investigating authority to require that such a statement be provided.  This 
is consistent with the findings of  various panels that have consider ed the equivalent provision in the 
Anti-dumping Agreement (Article 6.5.1).
119  We find the reasoning applied in respect of Article 6.5.1 
of that Agreemen t persuasive and applicable to Article 12.4.1 of the SCM Agreement .120   
7.90 We also note that, pursuant to Article 12.4.1, such a statement of reasons can substitute for a 
non-confidential summary only in "exceptional" circum stances.  The use of the word "exceptional" 
signifies that the drafters considered that confiden tial information should usua lly be capable of being 
summarized.  In fact, summarization of confidential information is expected to be the norm, as it is 
only in "exceptional circumstances" that summariza tion of the confidential information will not be 
possible.  In such circumstanc es, the interested Member or party concerned must provide an 
explanation of why the summarization is not possible. 
7.91 The panel in Mexico – Steel Pipes and Tubes  considered the obligations of an investigating 
authority in assessing an assertion that summarization is not possible in the context of the equivalent 
                                                      
119 The panel in Guatemala – Cement II  said: 
 
"Although Article 6.5.1 does not explicitly prov ide that "the authorities shall require" 
interested parties to provide a statement of th e reasons why summarizati on is not possible, any 
meaningful interpretation of Article 6.5.1 must impose such an obligation on the investigating 
authorities.  It is certainly not possible to conclude that the obligation concerning the need to provide a statement of reasons is an obligation imposed exclusively on the interested party 
submitting the information, and not the investigating authority, since the Anti-Dumping 
Agreement  is not addressed at interested parties.  The Anti-Dumping Agreement  imposes 
obligations on WTO Members and their investiga ting authorities.  Accordingly, in our view 
Article 6.5.1 imposes an obligation on investigating authorities to require parties that indicate 
that information is not susceptible of summary to provide a statement of the reasons why summarization is not possible." 
 
Panel Report, Guatemala – Cement II , para. 8.213.  See also Panel Report, Mexico – Steel Pipes and 
Tubes  at para. 7.379 and Panel Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – 
Argentina) , para. 7.135. 
120 Consistent with previous panels (Panel Report, US – Countervailing Duty Investigation on DRAMs , 
para.7.351) as well as the Ministerial Decl aration on Dispute Settlement Pursuant to the Agreement on 
Implementation of Article VI of the Gene ral Agreement on Tariffs and Trade 1994  or Part V of the Agreement 
on Subsidies and Countervailing Measures , we will be guided by the Appellate Body and panel jurisprudence 
on the obligations in Article 6.5.1 of the Anti-dumping Agreement , which is identical to Article 12.4.1 of the 
SCM Agreement .  WT/DS341/R 
Page 34  
 
  provision of the Anti-dumping Agreement (i.e. Article 6.5.1 of the Anti-dumping Agreement ).  There, 
the panel concluded: 
There is no express provision regulating what should occur in the circumstance where 
an investigating authority considers that a request for confidentiality is warranted, 
beyond the obligation to treat such information as confidential.  Nor does the text of 
the Article 6.5 or 6.5.1 contain any express obligation relating to how an investigating 
authority should decide in respect of a party's assertion that summarization of 
confidential information is not possible, nor how an investigating authority should or 
must communicate any decision on this matter.
121 (footnotes omitted) (emphasis in 
original) 
7.92 We differ with the above reasoning in that, while Article 12.4.1 does not set out any specific 
mechanism by which an investigating authority shal l evaluate an assertion that summarization is not 
possible, the text of Article 12.4.1 nonetheless pr ovides a clear indication of the basis of this 
evaluation:    the investigating authority should examine the reasons given for not summarizing the 
confidential information and determine whether,  indeed, these reasons constitute "exceptional" 
circumstances.  By considering the extent to which an interested Member or party has shown 
exceptional circumstances, an investigating authorit y can determine whether the interested Member or 
party has substantiated that summarization is not possible.  
7.93 Before turning to the facts of this case, we brie fly consider Mexico's argument that its system, 
by providing certain representatives of interested  parties with access to confidential information, 
means that even if no public summaries were provi ded the "obligation and objective established in 
Article 12 of the SCM Agreement  would in any case be complied with".122    
7.94 The panel in Mexico – Steel Pipes and Tubes  rejected a similar argument that Mexico's 
limited disclosure system excuses it from complyin g with the obligation in Article 6.5 of the Anti-
dumping Agreement to require summaries of confidential information.123  We agree with that panel 
and find no textual support in Article 12.4.1 of the SCM Agreement for the proposition advanced by 
Mexico.  We therefore adopt the following statement of the panel in Mexico – Steel Pipes and Tubes : 
Notwithstanding the foregoing, while such a system of limited disclosure is certainly 
envisaged by Article [12.4.1 of the  SCM Agreement ], and may certainly act as a 
supplement to a Member's fulfilment of its  obligations under Article [12.4.1 of the 
SCM Agreement ], we find no textual basis in Article [12.4.1 of the SCM Agreement ] 
that would indicate to us that permitting limited access to the entire confidential 
record to individuals fulfilling certain conditions, provides a derogation from, or 
replaces, the obligations of an investigati ng authority under Artic le  [12.4.1 of the 
SCM Agreement ] to require justification for treatment of information as confidential 
and, if such treatment is justified, to  require non-confidential summaries of the 
confidential information, or, alternativel y, to require justification for the non-
summarization of certain information.  (footnotes omitted)124 
7.95 In its submissions befo re us, Mexico argued that the panel report in Mexico – Steel Pipes and 
Tubes  supports its position that Mexico's access regi me fulfils its obligations in Article 12.4.1.125  On 
                                                      
121 Panel Report, Mexico – Steel Pipes and Tubes , para. 7.382. 
122 Mexico – First written submission, para. 86. 
123 Again, in the context of an examination of the equivalent provision of the Anti-dumping Agreement .   
124 Panel Report, Mexico – Steel Pipes and Tubes , para. 7.398. 
125 For example at paragraph 81(a) of its Second written submission Mexico says: 
  WT/DS341/R 
 Page 35 
 
 
  the basis of the above cited passage, we disagree with Mexico's characterization of that panel's 
conclusions.  While that panel ultimately found that Mexico had not acted inconsistently with 
Article 6.5.1 of the Anti-dumping Agreement , it did not rely on Mexico's arguments relating to its 
access regime. 
7.96 We now consider whether, in this case, Me xico required non-confidential summaries 
satisfying the requirements of Article 12.4.1 of the SCM Agreement .  Although the entire 
administrative record was not before us, we asked Mexico to provide us with certain documents, 
which the European Communities specifically alle ged did not contain non-confidential summaries of 
confidential information in the administrative record.126  Mexico provided us and the European 
Communities with the requested documents.127  We find, in respect of the documents that we have 
examined, that there is a "public version" of each submitted document that contained confidential 
information.  The public versions of all of these documents consist of the original documents from 
which all of the confidential information was simply  removed.  None of these documents contains any 
summary of the deleted confidential information. 
7.97 We recall that Article 12.4.1 requires, in the fi rst instance, that the submitting party provide a 
summary of the information that is claimed to be confidential.  This summary must be sufficient to 
permit a reasonable understanding of the substance of that information.  Mexico does not dispute that 
no stand-alone summaries of the confidential informati on were provided.  Rather, its argument is that 
the "public" versions of the documents in themse lves are the non-confidential summaries satisfying 
the requirements of Article 12.4.1.  In this regard, Mexico states: 
[The] only thing missing is the content between  square brackets, which is confined to 
figures and a few words or sentences, so th at even if these figures and words cannot 
be seen, the non-confidential summaries are in sufficient detail to permit a reasonable 
understanding of the information submitted in confidence.128 
7.98 We do not accept Mexico's characterisation of th e public versions in question.  While in 
certain instances it may be possible to glean a reaso nable understanding of the deleted information by 
considering the non-confidential information surrounding it, this is often not the case.  For example, 
in responding to a request for additional information129, Fortuny removed significant information 
regarding: Fortuny's operations (including details in respect of equipment, purchasing and sourcing of 
raw materials, yields, and distribution); the virgin  olive oil production pro cess; the nature of the 
alleged injury; and plans and attempts to restart production.  No summaries were provided in respect 
of the deleted information, and we do not find it possible to obtain a reasonable understanding of the 
deleted information  by reading the public version of the document.130  Given the extensive deletions 
                                                                                                                                                                     
"We repeat that, as indicated in the final panel report in Mexico – Steel Pipes and Tubes , even 
if the summaries had not been in sufficient detail, there would not have been any violation on 
Mexico's part because the system of access to confidential information perfectly supplements 
the fulfilment of Mexico's obligations under Article 12.4 of the SCM Agreement ." 
 
126 European Communities – First written submission, paras. 105-106. 
127 Fortuny Application  (Public Version)(Exhibit MEX-41A); Questionnaire Response and Annex to 
Fortuny Application (Public Version)(Exhibit MEX-41B); Letter from Fortuny dated 9 November 2004 (Public 
Version)(Exhibit MEX-42A); Appendix 2 of Letter from Fortuny  (Public Version) (Exhibit MEX-42B); 
Submission of Distribuidora Ybarra (Public Versio n) (Exhibit MEX-43A); Notification of Initiation and 
Sending of Application to European Communities (Exhibit MEX-44). 
128 Mexico – Second written submission, para. 81(a). 
129 Exhibit MEX-42 A. 
130 Similar wholesale deletions without summarization are evident in other documents. including the 
Fortuny Application (Public Version) Exhibit MEX-41A (see, for example, redactions to paragraphs 86 and 93) WT/DS341/R 
Page 36  
 
  from certain documents and the lack of specific summar ies of any of the deleted information, we find 
that the investigating authority did not require th e interested Members and interested parties to 
provide non-confidential summaries in sufficient deta il to permit "a reasona ble understanding of the 
substance of the information submitted in c onfidence" consistent with Article 12.4.1. 
7.99 We next consider whether any party submitting non-confidential documents from which 
confidential information was deleted invoked "e xceptional circumstances" and provided an 
explanation as to why summarization was not possible,  as contemplated in the last sentence of Article 
12.4.1.  The European Communities' position in these proceedings is that no interested party invoked 
"exceptional circumstances".  However, our review of  the documents on the record reveals that certain 
interested parties, namely Fortuny and Ybarra, in  cover letters accompanyi ng information submissions 
to Economía asserted that the information for wh ich confidentiality was claimed could not be 
summarized. 
7.100  For example, the cover letter to Fortuny's application contains the following statement: 
It is necessary to clarify that it is not possible to prepare public summaries of the 
information and documents that we classifi ed as confidential because of the nature of 
such information and documents.  Also, it is necessary to emphasize that consultation 
of the public version of the presented documents gives a reasonable and integral understanding of what is submitted.
131 
7.101  We consider that general statements of this  sort are not sufficient as they constitute an 
unsupported assertion rather than a statement of reasons  as required by Article 12.4.1.  In this case, 
none of the documents provided to us containing bl anket requests for confidential treatment make any 
attempt to explain the existence of exceptional circumstances that made it impossible to summarize 
the specific and varied information for which co nfidentiality was claimed.  Consequently, these 
documents contain no basis on which Economía could ha ve reached a conclusion as to whether or not 
"exceptional circumstances" in fact existed.   
7.102  Based on our reasoning above, we conclude that Mexico has acted inconsistently with its 
obligations in Artic le 12.4.1 of the SCM Agreement . 
E. ARTICLE 12.8  OF THE SCM AGREEMENT  
7.103  The European Communities claims that Mexico failed to comply with its obligations in 
Article 12.8 of the SCM Agreement  because Economía failed to inform  the interested Members and 
interested parties of the "essential facts under cons ideration which form the basis for the decision 
whether to apply definitive measures"   as required by this provision. 
1. Arguments of the Parties 
7.104  The European Communities claims that Economía did not provide any written 
communication  to the interested Members and interested  parties informing them of the "essential 
facts under consideration which form the basis for the decision whether to apply definitive measures" 
                                                                                                                                                                     
and Questionnaire Response and Annex to Fortuny Application (Public Version) where information contained in 
paragraphs 19-26 is removed without summarization.  
131 Fortuny Application (Public Version), Exhibit MEX-41A.  Similar statements are made by Fortuny 
in Fortuny's answer to the Prevencíon (Public Versio n), Exhibit MEX-46A and by Ybarra in Submission of 
Distribuidora Ybarra (Public Version) , Exhibit MEX-43 A and Distribuidora Ybarra's response to Information 
Request, Exhibit MEX-52C.  WT/DS341/R 
 Page 37 
 
 
  as required by Article 12.8 of the SCM Agreement, and that Mexico therefore has acted inconsistently 
with its obligations under that provision.132   
7.105  Mexico disagrees that no disclosure was made, and argues that Economía made the required 
disclosure via the Preliminary Resolution.133  Mexico maintains that no further disclosure was 
necessary because no new essential facts were gathered  between the issuance of the Preliminary and 
Final Resolutions, the latter of which form ed the basis for th e definitive measures.134  In this context, 
Mexico states that Economía conducted a verificati on of Fortuny after the Preliminary Resolution was 
issued, and that this verification only confir med the information that Fortuny had submitted 
previously, for which reason the verification did not generate any new essential facts.  Mexico argues 
that the panel report in Argentina – Ceramic Tiles supports its position, as that panel found that the 
requirements of Article 12.8 can be met in a variety of ways depending upon the facts of the case, 
including through the issuance of a preliminary determination.135   
7.106  In response to Mexico's argument that Econom ía's Preliminary Resolution constituted the 
disclosure of "essential facts" the European Commun ities argues that that Resolution was inadequate 
for that purpose, inter alia,  because it was not identified as performing that function.136   
2. Reasoning of the Panel 
7.107  Article 12.8 of the SCM Agreement  provides as follows: 
The authorities shall, before a final determ ination is made, inform all interested 
Members and interested parties of the essen tial facts under consideration which form 
the basis for the decision whether to appl y definitive measures.  Such disclosure 
should take place in sufficient time for the parties to defend their interests. 
7.108  We recall that, as the party making the claim, the European Communities bears the burden of 
establishing a prima facie  case of the alleged inconsistency.  From this standpoint, we note that the 
main disagreement between the parties is factual,  namely whether Economía's Preliminary Resolution 
satisfied the requirement in Article 12.8 to disclose "essential facts".  In particular, Mexico does not assert that Economía provided the interested Members a nd interested parties with a specially prepared 
"essential facts" document, but instead points to th e Preliminary Resolution as the means by which it 
complied with its obligations unde r Article 12.8.  The European Communities, for its part, does not 
argue that there was no Preliminary Resolution, or that Article 12.8 imposes an obligation to produce 
a separate "essential facts document".  Instead the European Communities maintains that the 
Preliminary Resolution did not satisfy the requireme nts of Article 12.8, in part because it was not 
identified as performing this function, and in part  because factual evidence was gathered after the 
issuance of that Resolution, some of whic h must have constituted new "essential facts".
137   
7.109  The European Communities argues that a prel iminary determination could "hardly ever" 
provide adequate disclosure of essential facts, inter alia  because confidential company-specific 
information cannot be revealed in such a public document, and because a preliminary determination 
provides the justification for provisional measures a nd there could be further factual investigations 
following the preliminary determination that could produce "new or changed essential facts".138  The 
                                                      
132 European Communities – First written submission, paras. 108-109. 
133 Mexico – First written submission, paras. 92-94. 
134 Mexico – Response to Panel question 35; Mexi co – Second written submission, para. 93 citing 
Mexico – Response to Panel question 32. 
135 Mexico – Response to Panel questions 32 and 35. 
136 European Communities – First oral statement, para. 64. 
137 Ibid., paras. 64-68; European Communities – Response to Panel question 33.. 
138 European Communities – Response to Panel question 33.   WT/DS341/R 
Page 38  
 
  European Communities does not assert that a preliminary determination can never , as a legal matter, 
satisfy the disclosure requirement in Article 12.8, but it argues that in the olive oil investigation, 
Economía committed a legal error by not informing the parties that the Preliminary Resolution was 
serving this purpose, thereby denying them the opport unity to "defend their interests" as required by 
Article 12.8.
139  Mexico argues that previous panels, particularly the panel in Argentina – Ceramic 
Tiles , have made clear that Article 12.8 disclosure ca n be made via prelimin ary determinations, and 
that in the olive oil investigation this was su fficient because none of the essential facts changed 
between the preliminary and final determinations.  Thus, the precise question raised by this claim is 
whether the European Communities has established th at the Preliminary Resolution in the olive oil 
investigation did not satisfy the discl osure obligation in Article 12.8.   
7.110  We start our analysis by considering the ordina ry meaning of the term "essential facts" in 
Article 12.8, and in this regard , we agree with the panel in Guatemala – Cement II that the "essential 
facts" are not just any facts of record.140  Rather, as the plain language of Article 12.8 makes clear, the 
"essential facts" are the particular facts that "f orm the basis for the decision whether to apply 
definitive measures".  In other wo rds, these are the specific facts that underlie the investigating 
authority's final findings and conclusions in respect  of the three essential elements – subsidization, 
injury and causation – that must be present for a pplication of definitive measures.  Thus, while we 
note the findings of the panel in Argentina – Ceramic Tiles that a preliminary determination is one 
possible means of making the required disclosure, this  will not necessarily be so in every case.  In 
particular, if new "essential facts", i.e., facts that  bring about a change in the authority's findings 
relating to subsidization, injury or causation, are in corporated into the record  after the issuance of the 
preliminary determination, then that determinati on by definition could not satisfy the disclosure 
obligation in Article 12.8.   
7.111  The allegation of the European Communiti es is along the same lines.  The European 
Communities does not challenge the possibility as such of making disclosure under Article 12.8 via a preliminary determination, but rather argues that in the olive oil investigation, the preliminary 
determination was not sufficient for this purpose based  on the facts, namely that Economía obtained a 
large volume of factual material after issuing the Preliminary Resolution, including at the verification 
of Fortuny.  Specifically, the European Commun ities references three documents, Exhibits MEX-42A, 
51D, and 51E1, which it asserts were submitted after the Preliminary Resolution and include 
substantial data regarding Fortuny.
141  However, the European Commun ities maintains that it is "not 
in a position to state definitivel y whether these constituted essential fact s because in the versions of 
the documents that Mexico has provided the c onfidential information has been blanked out"142. The 
European Communities, states, nevert heless,  that "it can hardly be imagined" that among these "there 
was not some information that would not qualify as 'essential facts'"143, and further that the interested 
parties were not informed that the Preliminary Resolution was performing the Article 12.8 disclosure 
function. 
                                                      
139 European Communities – Second written submission, para. 33. 
140 Panel Report, Guatemala – Cement II , para. 8.229.  The Cement panel ruled on the counterpart 
provision, Article 6.9, of the Anti-dumping Agreement .  Given that that provision is worded identically to 
Article 12.8 of the SCM Agreement , we consider that the Cement panel's reasoning is fully applicable to the 
issue before us.  The panel highlighted that the provision is concerned with the identification of the facts on the 
record that are "important" to the authority's determination.  The panel stated that "[a]n interested party will not 
know whether a particular fact is 'important' or not un less the investigating authority has explicitly identified it 
as one of the 'essential facts' which form the basis of the authority's decision whether to impose definitive 
measures."  Id. at para. 8.229.   
141 European Communities – Second written submission, paras. 34-37. 
142 Ibid., para. 35. 
143 Ibid., para. 37.  WT/DS341/R 
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  7.112  Concerning this latter argument of the European  Communities, that pursuant to Article 12.8 
Economía should have informed the interested part ies that the Preliminary Resolution was performing 
the Article 12.8 disclosure function, the European  Communities identifies the problem as one of due 
process.  In particular, the European Communities ass erts that because the interested parties did not 
know that the Preliminary Resolution was performing th is function, they did not have the opportunity 
to "defend their interests" in respect of  the "essential facts" contained therein.144  The record of the 
investigation does not support this assertion, however.  To the contrary, the Final Resolution identifies 
a number of steps in the investigation following th e issuance of the preliminary determination during 
which the parties had the opportunity to present their views, including specifically in respect of the Preliminary Resolution.  These steps, which ar e summarized at paragraphs 29-69 of the Final 
Resolution, included technical meetings between Ec onomía and certain interested parties, a call by 
Economía for written submissions of arguments a nd evidence in respect of the Preliminary 
Resolution, consultations between the government s of the European Communities and Mexico, a 
public hearing, and an opportunity following th e hearing to make further written submissions 
concerning any aspect of the proceedings.   
7.113  Indeed, the assertion of the European Communities is not that the interested parties had no 
opportunity to present their views in respect of the Pr eliminary Resolution as such, but rather that they 
did not have the opportunity to present their views in respect of that Resolution in the guise of a document disclosing the "essential facts" pursuant to  Article 12.8.  Given that the Preliminary 
Resolution indicated that the facts stated therein we re the basis of the preliminary determinations of 
subsidization, injury, and causa tion and given the numerous opportun ities provided to the interested 
parties following the issuance of the Preliminary Re solution to provide such evidence and arguments 
as they wished, we do not consider that the Europ ean Communities has establishe d that the interested 
parties were denied the opportunity to defend th eir interests in respect of the "essential facts".
145   
7.114  We now turn to the factual aspect of this claim,  i.e., that new "essential facts" almost certainly 
were obtained by Economía following its preliminar y determination but were not disclosed.  Given 
that the European Communities is the party asserti ng the claim it bears the burden of identifying any 
particular facts of record in the olive oil case that  were not disclosed in the Preliminary Resolution but 
were nevertheless "essential facts" relied upon by Economía in making its final determinations in 
respect of subsidization, injury, and/or causation.   Any such undisclosed "essential facts" relied upon 
by Economía should be evident in the Final Resolution.   
7.115  In this regard, we note that in its sec ond written submission, the European Communities 
identified several exhibits that were submitted to Economía after the Preliminary Resolution, which it 
argued must have contained essential facts.  Howeve r, the European Communities did not identify any 
specific determination in the Final Resolution that relied upon the information in those exhibits.  In 
response to a direct question from the Panel aski ng the European Communitie s to identify specific 
"essential facts" that were not included in the Prelim inary Resolution, but formed part of the basis of 
the determination in the Final Resolution, the Eu ropean Communities' response, however, consists 
only of brief and generally-worded assertions refe rring to large documents without referring to any 
specific fact of record, nor does the European Co mmunities attempt to demonstrate that new facts 
changed the basis for Economía's de terminations with respect to th e key elements – subsidization, 
injury and/or causation – in the Final Resoluti on as compared with the Preliminary Resolution.146  As 
                                                      
144 Ibid., para. 33. 
145 We recall here that the basic questions addresse d by preliminary determinations are the same as 
those addressed by final determinations, namely subsidization, injury and causation.   
146 Panel Question 120 reads:  "Please indicate which specific 'essential facts', were not included in the 
Preliminary Resolution, but formed part of the basis of the determinations in the Final Resolution." WT/DS341/R 
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  such, we do not find that the Eur opean Communities has established a prima facie  case that Economía 
failed to disclose the "essential facts" as required by Article 12.8 of the SCM Agreement .   
7.116  For the foregoing reasons, we find that the European Communities h as not established that 
Mexico acted inconsistently with its obligations under Article 12.8 of the SCM Agreement . 
F. 
ARTICLE 11.11  OF THE SCM AGREEMENT  
7.117  The European Communities asserts that Mexico failed to conclude its investigation within 
one year, and in no case more that 18 months after its  initiation of the investigation in violation of 
Article 11.11 of the SCM Agreement . 
1. Arguments of the Parties 
7.118  The European Communities asserts that Mexico h as acted inconsistently with its obligations 
in Article 11.11 of the SCM Agreement , because the investigation lasted more than 24 months.  In 
particular, the European Communities argues that  the investigation was initiated on 2 July 2003147 and 
was concluded on 1 August 2005.  It is the position of the European Communities that Article 11.11 
contains an absolute limit (18 months) on the length of an investigation, an d that Mexico exceeded 
this limit.148   
7.119  Mexico does not deny that its investigation last ed more than 18 months.  It argues that the 
purpose of Article 11.11 is "to protect the interest ed parties from any unjustified delay or inaction" 
and that delays were caused by requests for extens ions from the interested parties and requests that 
Economía  consider additional inform ation at late stages in the investigation. Consequently, any delay 
in the investigation did not subvert the purpose of Article 11.11.149   
2. Reasoning of the Panel 
7.120  Article 11.11 reads as follows: 
Investigations shall, except in special circ umstances, be concluded within one year, 
and in no case  more than 18 months, after their initiation. (emphasis added) 
7.121  We consider that the requirement set out in Article 11.11 is clear and unequivocal.  This 
provision starts with a general rule – that investig ations must be concluded within one year — and 
then provides for a limited, conditional exception.  In particular, in "special circumstances" an 
                                                                                                                                                                     
The European Communities response states that "[b]y its nature, the preliminary resolution cannot 
constitute disclosure of essential facts that had indeed arisen after the preliminary resolution, inter alia , on the 
following issues: 
- the basis for the changes after the Preliminary Resolution in the level and form of the duties and in the 
methodology followed for the calculation of the subs idy margins and injury margins, as well as the 
methodology for the establishment of the level of the duty; - the results of the on-spot-investigations, in partic ular to the EC exporter Borges, which was found to 
be not-integrated and which furthe r substantiated the EC request of a pass-through analysis, and to 
Fortuny, which was not adequately investigated, and  - Distribuidora's comments on Fo rtuny's prices and costs."   
147 We note our earlier finding in paragraph 7.31 that  the investigation was initiated on 17 July 2003.  
However, regardless of whether the date of initiation was 2 or 17 July 2003, the investigation still lasted longer than 18 months, so this earlier finding has no substantive effect on the European Communities' substantive 
claim under Article 11.11 of the SCM Agreement . 
148 European Communities – First written submission, para. 113; European Communities – First oral 
statement, para. 74. 
149 Mexico – First written submission, paras. 101-106.    WT/DS341/R 
 Page 41 
 
 
  investigation may be prolonged, but "in no case" may the total period of investigation exceed 
18 months.  We see no basis in this provision (nor authority in any other part of the SCM Agreement ) 
to prolong an investigation beyond 18 months for any reason, including requests from interested 
parties.   
7.122  Concerning the facts of the case, while Mexi co disagrees with the European Communities 
about the exact date of initiation (see section VII.B, supra ), it does not deny that the olive oil 
investigation lasted longer than the 18-month maxi mum provided for in Article 11.11.  We recall our 
finding, above, that the date of initiation was 17  July 2003.  As such, the total length of the 
investigation was more than 24 months, i.e., well in excess of the 18-month absolute maximum.   
7.123  We find that Mexico's investigation in this case was concluded more than 18 months after the 
date of its initiation, and that Article 11. 11 does not permit such prolongation under any 
circumstances.  For that reason, we conclude that Mexico has acted inconsistently with its obligation 
under Article 11.11 of the SCM Agreement . 
G. ARTICLES 1 AND 14 OF THE SCM AGREEMENT  
7.124  The European Communities claims that Mexico has acted inconsistently with Articles 1 and 
14 of the SCM Agreement by failing "to calculate the benefit conferred on the recipient pursuant to 
paragraph 1 of Article 1 of the SCM Agreement  and to apply the method used to each particular case 
in a transparent way which is adequately e xplained, in violation of Article 14 of the SCM Agreement ." 
1. Arguments of the parties 
7.125  The European Communities claims that Mexico has acted inconsistently with Articles 1 and 
14 of the SCM Agreement by failing "to calculate the benefit conferred on the recipient pursuant to 
paragraph 1 of Article 1 of the SCM Agreement  and to apply the method used to each particular case 
in a transparent way which is adequately e xplained, in violation of Article 14 of the SCM 
Agreement ."150  In its submissions before us in suppor t of this claim, the European Communities 
argues that Mexico acted inconsistently with Ar ticles 1 and 14 because Economía failed to conduct a 
"pass-through" analysis to determine the extent to  which any benefits received by olive growers for 
the production of olive oil were transmitted to  the exporters of olive oil to Mexico.151  In particular, 
the European Communities argues th at a "pass-through" analysis was required because: (1) the oil 
obtained by simple crushing of the olives was an input into the product finally exported; and (2) the persons upon whom the counterva iling measures were imposed (identified by the European 
Communities as the exporters) were not related to th e initial recipients of the subsidy, the olive 
growers, and the product had been the subject of  arms' length transactions while moving between 
them.
152  According to the European Co mmunities, olives are an input into the production of olive oil, 
and the olive oil obtained from extraction is an inpu t into the olive oil exported to Mexico, because 
the extracted oil had to undergo further processing (refining, blending, bottling, packaging) before it 
was exported.153  In response to questioning from us, the European Communities clarified that, in its 
view, a "pass-through" analysis is required even when only the second of the two conditions is met, 
i.e., when the exporters of olive oil are not rela ted to the olive growers who receive the subsidies.154 
                                                      
150 WT/DS341/2, at tiret 6. 
151 See, e.g., European Communities - First written submission, paras. 121, 128, and 135;  Response to 
Panel question 43.   
152 European Communities - Response to Panel question 43. 
153 Ibid.  
154 European Communities - Response to Panel question 121. WT/DS341/R 
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  7.126  Concerning its allegation of incons istency with Article 1.1 of the SCM Agreement , the 
European Communities argues that th e crucial issue is whether the olive oil imported into Mexico 
from the European Communities is "subsidized" in the sense of the SCM Agreement .  According to 
the European Communities, although the SCM Agreement  says little about the relationship between 
the subsidy and the product in relation to countervail, Article VI:3 of the GATT 1994  makes clear that 
countervailing duties may only be imposed where ther e is a "'bounty or subsidy ... on the manufacture, 
production or export of [an imported] product'", such that "the subsidy must be linked to some activity 
concerning the product".
155  We note here, however, that the European Communities brings no claim  
under Article VI:3 of the GATT 1994  in relation to the "pass-through" issue.  As regards Articles 1 
and 14, the European Communities argues that "the Agreement  does have a lot to say about [...] the 
notion of benefit", first, in Article 1 which exp licitly makes benefit an element of "the notion of 
subsidy"156; and, second, in Article 14, which "addresses the 'calculation of the amount of a subsidy in 
terms of the benefit to the recipient'."157  The European Communities then states that what is to be 
"offset" in the sense of Article VI:3 of the GATT 1994  is the benefit conferred by the subsidy.158  The 
European Communities elaborates that "ben efit is addressed by Article 1.1 of the Agreement , which 
defines it as one of the basic constitu ents of the concept of subsidy"159, and that "[b]enefit is also 
addressed by Article 14" which, in "lay[ing] down e xplicit rules for the methods by which benefit is 
to be calculated, does nothing to detract from the notion of pass through as elaborated by the EC".160  
The European Communities also ar gues that "Article 14 puts beyond doubt the principle that the 
calculation of subsidy is one that is based absolute ly on commercial realities, and ... that it is on these 
realities that the notion of pass-through is founded."161   
7.127  The European Communities argues that because the subsidy was given to the olive producers, 
while other persons exported the product, olive oil, to the Member applying the countervailing 
measure, the investigating authorities needed to est ablish that the subsidy was passed through to the 
other persons.162  The European Communities cites the panel report in US – Canadian Pork  which 
arose under the GATT 1947 , as indicating that the existence of pass-through of the subsidy from live 
swine to pork producers would need to be determined  by examining the degree to which the prices of 
the subsidized input product (live swine) were belo w market levels when the input was sold to the 
producers of the investigated processed product ( pork).  The European Communities further argues 
that the criterion of arms'-length sales has been estab lished by the Appellate Body in the context of 
privatization of subsidized state-owned companies.  In that context, according to the EC, "the criterion 
of arm's-length sale was coupled with th at of sale for 'fair market value'".163   
7.128  Mexico argues that no pass-through analysis was necessary in the olive oil investigation.  
According to Mexico, the subsidy programme at i ssue was a direct subsidy on the production of the 
imported product, olive oil, and had been notified as such by the European Communities to the WTO Committee on Agriculture.
164  Mexico asserts that since the investigation was not related to an input 
product (olives) but to olive oil, which was the sa me product exported to Mexico, the investigating 
authority was not bound to conduct a pass-through analysis.165  Mexico submits that the product that 
                                                      
155 European Communities - First written submission, paras. 123-124. 
156 Ibid., para. 125. 
157 Ibid. 
158 Ibid., para. 127.  
159 European Communities - Response to Panel question 46. 
160 Ibid. 
161 Ibid. 
162 European Communities - First written submission, para. 128. 
163 Ibid. paras. 130-131, citing Panel report in US – Canadian Pork and Appellate Body report in US  – 
Countervailing Measures on Certain EC Products .   
164 Mexico - First written submission, paras. 119 et. seq .; Mexico - Second written submission, 
paras. 105 et seq .   
165 Mexico - Response to Panel question 43.  WT/DS341/R 
 Page 43 
 
 
  was subject to the investigation was olive oil in all its forms, from first crushed to blended and 
refined.166  Mexico argues that the EC Regulation est ablishing the programme, and the amendments 
thereto, make clear that the programme concer ned a subsidy for olive oil and not for olives.167  
Mexico argues that for these reasons, th e jurisprudence on pass-through in the US – Canadian Pork 
and US – Softwood Lumber IV disputes is not applicable in this case.168   
7.129  Concerning the provisions of the SCM Agreement cited by the European Communities, 
Mexico argues that neither Article 1 nor Article 14 contains obligations to conduct a pass-through 
analysis as claimed by the European Communities.  Re garding Article 1, Mexico submits that its text 
contains no requirement to provide a reasoned explana tion of the existence of a subsidy or the need to 
undertake a pass-through analysis of the benefit.  Ra ther, Article 1 only establishes, in a conceptual 
way, which elements must be present in order to determine that a subsidy exists.169  Mexico recalls 
that the European Communities is not arguing before  the Panel that the aid scheme for olive oil was 
not a subsidy.170  Regarding Article 14, Mexico argues th at this provision neither contains nor 
envisages any obligation to conduct a pass-through analys is of the benefit of a subsidy, and instead 
only provides guidelines applicable to the calculation of a benefit.171   
2. Reasoning of the Panel 
(a) "Pass-through" of Subsidy Benefits 
(i) "Pass-through" Analysis in WTO Law   
7.130  We start our analysis by examining the basis in WTO law for the obligation to conduct a pass-
through analysis in a countervailing duty investigation.  This issue h as been addressed specifically in 
two prior disputes, notably in US – Canadian Pork , a case under the GATT 1947 , and more recently 
by the Appellate Body in US – Softwood Lumber IV .172  Both of these disputes have established that 
Article VI:3 of the GATT  requires an investigating authority in  a countervailing duty investigation to 
conduct a pass-through analysis in certain circumstances, and in Softwood Lumber IV , the panel and 
the Appellate Body found the same requirement in footnote 36 of Article 10 of the SCM Agreement . 
7.131  US – Canadian Pork was brought by Canada, under Article VI of the GATT 1947 .  In that 
case, the United States had applied countervailing measures on imports from Canada of fresh, chilled 
and frozen pork, while the subsidies that were the s ubject of the investigation had been provided to 
Canadian producers of live swine.  The United Stat es had effectively concluded that 100 per cent of 
the subsidies to swine producers had "passed through"  to the producers of pork, although the subsidies 
were provided to the swine producers, not the por k producers, and the swine and pork producers were 
not vertically integrated, but rather were two separ ate industries composed of unrelated firms.  Under 
US law at the time, subsidies provided to the pro ducers of a raw agricultural product were deemed to 
be provided in respect of production of processed pr oducts made from the raw products if the demand 
for the raw product was "substantially dependent" on the demand for the processed product and the 
processing operation added only limited value to the raw product.   
                                                      
166 Mexico - Response to Panel questions 122 and 123.   
167 Ibid. 
168 Mexico - Response to Panel question 57. 
169 Mexico - Second written submission, para. 120.   
170 Ibid., citing the response of the European Communities to Panel question 47. 
171 Mexico - Second written submission, para. 121.   
172 Panel Report, US - Softwood Lumber III (not appealed) , which concerned the United States' 
preliminary countervailing duty determinations, came to esse ntially the same conclusion in respect of the pass-
through analysis. WT/DS341/R 
Page 44  
 
  7.132  Canada complained that the US measures were  inconsistent with Article VI:3 of the GATT 
1947  because the approach under US law did not correc tly establish the amount of subsidization in 
respect of the imported product, pork.  Canada's ar gument was that the US approach did not ensure 
that the countervailing measures were not applied "in excess" of the amount of subsidization of the 
product, contrary to the provisions of Article VI:3 of the GATT 1947  requiring that: 
No countervailing duty shall be levied on an y product of the territory of a Member 
imported into the territory of another Me mber in excess of an amount equal to the 
estimated bounty or subsidy determined to have  been granted, directly or indirectly, 
on the manufacture, production or export of such product in the country of origin or exportation….. 
7.133  The panel in US-Canadian Pork noted that Article VI:3 of the GATT 1947 limited the amount 
of countervailing duties to the amount of the subsid y "granted directly or indirectly on the production 
of 'such product'"
173, (i.e., the imported product), and found that the United States could apply 
countervailing measures on imports of pork only if a s ubsidy had been determined  to be bestowed on 
the production of pork.  In this regard, the panel f ound that application of the two-part test under US 
law did not result in such a "determination", because it did not take into account "all facts necessary to 
meet the requirements of Article VI:3".  The reasoning of the panel was that the pork and swine industries were separate, and operate d at arms' length, such that th e subsidies granted to the swine 
producers could only be considered to have been  "bestowed on the production" of pork (as required 
by Article VI:3 of the GATT 1947 ) if they had led to a decrease in the level of prices that pork 
producers paid for live swine to below the level th ey would have had to pay for swine from other 
commercially available sources.  Because the US two-part test did not address this issue, the panel 
found that it did not meet the requirements of Article VI:3 of the GATT 1947 .
174   
7.134  The dispute in US -  Softwood Lumber IV  addressed a similar issue.  In that case, the 
United States applied countervailing duties on imports  of softwood lumber, including remanufactured 
lumber, from Canada on the basis of subsidies to th e harvesting of timber, i.e., the production of raw 
logs, the input into the production of primary lumber .  In particular, the subsidies arose from the fact 
that timber harvesters paid "less than adequate  remuneration" for a gove rnment-provided good, 
standing timber.  When the timber was harvested, some  of the raw logs were converted to lumber by 
sawmills, and some of that lumber was then furt her processed into remanufactured lumber.  The 
United States applied countervailing measures on the imported lumber, including remanufactured lumber, to offset the stumpage subsidies.   
7.135  Canada claimed that the United States had improperly assumed, rather than analyzing and 
determining, that the stumpage subsidies had passed through to producers of the primary and 
remanufactured lumber products that were subject  to the countervailing measures, and that the 
United States thus had acted inconsiste ntly with Articles 10, 19 and 32 of the SCM Agreement and 
Article VI:3 of the GATT 1994 .   
7.136  The panel found in favour of Canada's claims under Article 10, and con sequentially Article 32 
of the SCM Agreement , as well as Article VI:3 of the GATT 1994 , in respect of the situations in which 
producers of logs were unrelated to the sawmills th at processed the logs into primary lumber and in 
which producers of remanufactured lumber were un related to the lumber manufacturers (sawmills) 
from which the remanufacturers obtained their lumber  inputs.  The panel found that no pass-through 
analysis was required where the producer of the input s was related to the lumber producer (i.e., where 
the production was vertically integrated).  The panel exercised judicial economy in respect of 
Canada's Article 19 claim.   
                                                     
 
173 Panel Report, US – Canadian Pork , para. 4.6 
174 Panel Report, US – Canadian Pork , paras. 4.8-4.10.  WT/DS341/R 
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  7.137  The Appellate Body upheld the panel's findings that Article 10 of the SCM Agreement and 
Article VI:3 of the GATT 1994  require a pass-through analysis in circumstances in which a subsidy is 
received by a producer of an input product, a nd the imported product subject to the countervailing 
duty investigation is a different, downstream produc t produced by an unrelated producer using the 
subsidized input.     
7.138  The Appellate Body began its analysis with Artic le VI:3, noting that this provision "prohibits 
levying countervailing duties on an imported product 'in excess  of an amount equal to the estimated ... 
subsidy determined to have been granted, directly or indirectly , on the manufacture, production or 
export  of any merchandise' ".175  On this basis, the Appellate Body held that it would not be possible to 
determine whether countervailing duties were imposed  in excess of the amount of the total subsidy 
accruing to a processed product without establishing whether, and in what amount, the subsidies 
bestowed on the input product flowed through to the downstream, imported product.  The Appellate 
Body noted that this interpretation was supported by the definition of a "countervailing duty" in 
footnote 36 to Article 10 of the SCM Agreement , that is, that a countervailing duty is a special duty 
levied for the purpose of "offsetting" a subsidy best owed directly or indirectly upon the manufacture, 
production or export of any merchandise. 176 
7.139  More specifically, the Appellate Body found that  if a subsidy is conferred on the production 
of an input product used to produce the imported product, and the producer of the input product is 
unrelated to the producer of the imported product, it would not be possible to establish that the countervailing duties on the imported pr oduct were not in excess of the amount of the subsidy if no 
analysis was performed to determine the extent  to which the subsidy on the input product was 
transferred to the imported product.  In the absen ce of a pass-through analysis, the Appellate Body 
emphasized, "it cannot be shown that the essential el ements of the subsidy de finition in Article 1 are 
present in respect of the processed product ", such that "the right to impose a countervailing duty on 
the processed product for the purpose of offsetting an input subsidy [...] would not have been 
established in accordance with Article VI:3 of the GATT 1994 , and, consequently, would also not 
have been in accordance with Articles 10 and 32.1 of the SCM Agreement. "
177  Here, the Appellate 
Body quoted the panel's finding in US – Canadian Pork that the United States could apply 
countervailing measures on imports of  pork "only if a subsidy had b een determined to have been 
bestowed on the production of pork", and the Appellate Body's ruling in United States – 
Countervailing Measures on Certain EC Products that Article VI:3 of the GATT 1994 , in conjunction 
with Article 10 of the SCM Agreement , require that "investigating authorities, before imposing 
countervailing duties, must ascertain the precise am ount of a subsidy attributed to the imported 
products under investigation."178 
7.140  In US - Softwood Lumber IV , The Appellate Body emphasized that not every situation in 
which a subsidy  provided on the production of an input product gives rise to an obligation to conduct 
a pass-through analysis.  This also depends on th e relationship between the producer of the input 
product and the producer of the imported, processed product.  In that case, the panel's finding that 
where the input producer (the timber harvester) its elf also was a lumber producer (i.e., owned a 
sawmill), no pass-through analysis was required.  Regarding the situation in which the timber 
harvester either did not own its own sawmill, or sold  some of its raw logs to unrelated sawmills, the 
Appellate Body upheld the panel's finding that a pass-through analysis was required to establish the 
amount, if any, of the stumpage subsidies that ha d flowed through to the further processed product, 
i.e., lumber.179  Finally, the Appellate Body overturned the panel's finding that a pass-through analysis 
                                                      
175 Appellate Body Report, US - Softwood Lumber IV , para. 141. 
176 Ibid. 
177 Ibid., para. 143 .  
178 Ibid., para. 145. 
179 Ibid., paras. 140-147; 156-159. WT/DS341/R 
Page 46  
 
  was required where inputs in the form of lumber  were sold by sawmills  to unrelated lumber 
remanufacturers, because both the lumber inputs and the remanufactured lumber products were 
imported products covered by the co untervailing duty investigation.  Thus, the fact that the sawmills 
and the remanufacturers were unrelated was not, in th e Appellate Body's view, sufficient in itself to 
require a pass-through analysis.  Because the lumber, produced by the sawmills, and the 
remanufactured lumber, produced by the remanufac turers, were both importe d products covered by 
the countervailing duty investigation, the Appellate Body found that a pass-through analysis was not 
required.
180 
7.141  The disputes in US – Lead and Bismuth II and US  – Countervailing Measures on Certain EC 
Products addressed a different question concerning tr ansmission of subsidy benefits between 
unrelated parties, based on entirely different fact situations  those in US – Canadian Pork and US – 
Softwood Lumber IV .181  The issue in those cases related to th e effect of the privatization of state-
owned firms on the continued existence  of benefits from non-recurring subsidies that those firms had 
received in the past.  In both of  those cases, inconsistencies were found with Articles 10, 19.1, and 
19.4 of the SCM Agreement , as well as, in the case of US-Lead and Bismuth II , Article 21.2 of the 
SCM Agreement  and Article VI:3 of the GATT 1994 , and in the case of US  – Countervailing 
Measures on Certain EC Products , with Article 14 of the SCM Agreement .  All of these provisions 
were found to have been violated because the i nvestigating authorities had presumed, instead of 
analyzing and determining, that the benefits from the past non-recurring subsidies continued to exist 
and had been fully transferred to the firms' new ow ners after the privatizations had taken place, in 
spite of the fact that the new owners had paid fair  market value for the firms.  The United States was 
found therefore to have improperly continued to ap ply countervailing duties to imports produced by 
the privatized firms, without having established whether any subsidies continued to exist.   
7.142  To summarize, the US - Softwood Lumber IV  and US – Canadian Pork cases have  established 
that a pass-through analysis is required in circumstances in which both of the following conditions are 
present:  (1) a subsidy is provided in respect of a product that is an input into the processed, imported 
product that is the subject of the countervail investigation; and (2) the producer of the input product 
and the producer of the imported product subject to the countervail investigation are unrelated.  This 
obligation to conduct a pass-through analys is arises under Article VI:3 of the GATT  and Article 10 of 
the SCM Agreement .  As the Appellate Body stated in US - Softwood Lumber IV , "because 
Article VI:3 permits offsetting , through countervailing duties, no more than the 'subsidy determined to 
have been granted ... on the manufacture [or] production ... of such product ', it follows that Members 
must not impose duties to offset an amount of the input subsidy that has not passed through to the 
countervailed processed products."182  There is also jurisprudence that in cases in which non-recurring 
subsidies were provided to state-owned enterprises that were later privatized at fair market values, the 
investigating authorities must conduct examinations to  determine whether any of those past subsidies 
continued to exist following the privatization.  We do  not find this latter jurisprudence to be relevant 
in the case before us, and therefore we will focus on the cases relating to subsidies provided on input 
products. 
7.143  The US - Softwood Lumber IV and US – Canadian Pork jurisprudence does not support the 
European Communities' argument that whenever there is any arms'-length transaction between 
unrelated companies in the chain of the production of an imported product subject to a countervail investigation, a pass-through analysis must be c onducted.  To the contrary, as discussed above, in US 
                                                     
 
180 Ibid., para. 163.  We recall that the situation in that investigation, as in the one that is the subject of 
the present dispute, was that the per unit subsidy amount was established on an aggregate, country-wide basis.   
181 While the basic question in those cases has someti mes been referred to as "pass-through", it has to 
do with the continued existence of benefits from past certain subsidies, and thus is legally and factually distinct 
from the situation in US – Canadian Pork and US – Softwood Lumber IV .   
182 Appellate Body Report, US - Softwood Lumber IV , para. 141.  WT/DS341/R 
 Page 47 
 
 
  – Softwood Lumber IV,  the Appellate Body found that wh ere an input product and a further 
manufactured product both are covered by the definition of the product subject to the countervailing 
duty investigation, a p ass-through analysis is not required even if the producers of the respective 
products are unrelated  and operating at arms' length.183  If this is the case for certain arms'-length sales 
of inputs  between unrelated firms, then a fortiori  the mere existence of an arms'-length transaction 
between firms involving the product under investig ation somewhere between the receipt of the 
subsidy and the export of the merchandise should not, by itself, give rise to an obligation to conduct a pass-through analysis under Article VI:3 of the GATT 1994  and Article 10 of the SCM Agreement .   
7.144  In this respect, we recall that the SCM Agreement  and Article VI:3 of the GATT 1994  both 
explicitly permit the application of countervailing measures to "offset" subsidies "bestowed upon [...] 
the manufacture, production or export " of a product (emphasis a dded).  Taking the simplest 
hypothetical example, where a subsidy is provided directly to a producer of a product coming within 
the scope of a countervailing duty investigation, we  do not see how that company's eventual sale of 
the product to an unrelated firm (e.g., a distributor) would have a bearing on the fact that a subsidy has been bestowed in respect of th e "production" of that product.  Ta ken to its logical conclusion, the 
argument by the European Communities, that a pass- through analysis must be conducted in every case 
in which there are transactions between unrelated  firms relating to the product under investigation, 
would mean that a pass-through analysis would be re quired in almost every countervail investigation, 
even when the subsidy was provided directly on the investigated product.  We now turn to examine the claims of the European Communities in relation to this issue. 
(ii) Claim of the European Communities pursuant to Article 1.1 of the SCM Agreement 
7.145  For reasons not clear to us, and in spite of the fact that the legal bases for a "pass-through" 
obligation in the past jurisprudence were found in Article VI:3 of the GATT 1994  and Article 10 of 
the SCM Agreement , the European Communities has based its  "pass-through" claims in this case 
solely on the basis of Articles 1 and 14 of the SCM Agreement .  The Request for Establishment of a 
Panel makes no reference in this cont ext to either Article VI:3 of the GATT 1994 or to Article 10 of 
the SCM Agreement .  In its written submissions and in res ponse to questions from the Panel, the EC 
based its "pass-through" claims on Articles 1 and 14 of the SCM Agreement .  We are therefore obliged 
to consider the European Communities' "pass-thr ough" claims exclusively under the provisions it has 
cited.
184  This requires us to consider an entirely nove l legal argument:  that an  obligation to conduct a 
                                                      
183 Ibid., para. 163. 
184 We recall here various rulings of the Appellate Body concerning the duty of panels not to exceed 
their terms of reference by ruling on claims not before them.  See, e.g., Appellate Body Report, Mexico – Corn 
Syrup (Article 21.5 – US) , para. 36 (finding that a failure to scrutinize the request for establishment of a panel 
for consistency with Article 6.2 of the DSU could result in  the panel exceeding its terms of reference as set forth 
under Article 7.1 of the DSU  and ultimately result in the panel failing to carry out its functions in accordance 
with Article 11 of the DSU) ; Appellate Body Report, Korea – Dairy , para. 123-24 (confirming that the 
identification of the treaty provisions claimed to have been violated by the respondent is "a minimum  
prerequisite if the legal basis of the complaint is to  be presented at all."); and Appellate Body Report, India – 
Patents (US) , para. 89 (holding that "a claim must be included in the request for establishment of a panel in 
order to come within a panel's terms of reference in a given case").  Concerning pass-through, the European 
Communities' Request for Establishment of a Panel ma kes no reference to either Article VI:3 of the GATT 1994  
or Article 10 of the SCM Agreement .  Paragraph 6 of that Request refers to  "the failure to calculate the benefit 
conferred on the recipient pursuant to paragraph 1 of Article 1 of the SCM Agreement and to apply the method 
used to each particular case in a transparent way which is adequately explained, in violation of Article 14 of the SCM Agreement ".  In its arguments before us, the European Communities pursues this claim based on the issue 
of pass-through.  Paragraph 4 of that Request alleges "the  failure of the Mexican authorities to properly inform 
the interested parties and to provide reasonable and adequate explanation on the existence of subsidisation, notably as regards pass-through of any benefit, in violation of Articles 12.8, 22.3 and 22.5 of the 
SCM Agreement .  Before us, however, the European Communities did not pursue the claims in paragraph 4 as WT/DS341/R 
Page 48  
 
  "pass-through" analysis in a countervail inves tigation exists in Articles 1 and 14 of the SCM 
Agreement .
185   
7.146  Turning first to the Europ ean Communities' claim pursuan t to Article 1.1 of the SCM 
Agreement , it is well established that the definition of "subs idy" set forth in that provision applies to 
the entire SCM Agreement186 as well as to the relevant provisions of Article VI of the GATT 1994 .  
This definition provides, in relevant part:   
Article 1 
 
Definition of a Subsidy 
 
1.1 For the purpose of this Ag reement, a subsidy shall be 
deemed to exist if: 
 (a)(1) there is a financial contribution by a government or 
any public body within the territory of a Member (referred to in this Agreement as "government") ... 
and 
 (b) a benefit is thereby conferred. 
7.147  The European Communities' "pass-through" claim appears to be based on the definition of a 
subsidy in Article 1.1 and, in particular, on the element of "benefit" in subparagraph (b) of that 
provision.  The European Communities' argument is that Mexico did not conduct a pass-through 
analysis, that it should have done so in the circumst ances of this investigation, and that this failure 
was inconsistent with the "benefit" requirement of Article 1.1, because "the element of the definition 
of subsidy with which the notion of pass through is most closely linked is that of 'benefit'".
187  The 
European Communities also cites Article 14 in the c ontext of "benefit", stating that this provision 
addresses the calculation of benefit in terms of bene fit to the recipient, an d establishes that such 
calculation must be based on "commercial realitie s", which are the basis for the notion of pass-
through.188   
7.148  The European Communities declined to elaborat e further its legal arguments regarding how, 
precisely, Articles 1 and 14 in themselves require a pass-through analysis, in spite of our specific 
invitations at both the first and second meetings with the Panel to do so.189  In particular, we asked the 
European Communities to provide a legal analysis of  the provisions it cited and to explain its legal 
arguments in detail, on the basis of the texts of t hose provisions, the Vienna Convention, and past case 
law, as to precisely how the obligation to conduct a pass-through analysis lies in Articles 1 and 14.  
                                                                                                                                                                     
regards pass-through.  See section VII.E, supra  for our discussion of the Eu ropean Communities' claim under 
Article 12.8 (essential facts) as raised in its submissions before us.   
185 We questioned the European Communities concerning why it had not cited the provisions in which, 
in past disputes, the requirement to conduct a pass-through analysis had been found.  As described at 
paragraph 7.147, infra , the essence of the European Communities' answers was that the provisions it cites refer 
to the concept of "benefit". 
186 See, for example, the Panel report in US – Softwood Lumber IV , para. 7.104:  "The chapeau of 
Article 1.1 SCM Agreement  explicitly states that the concept and definition of what constitutes a 'subsidy', as set 
forth in that Article, applies to the entire Agreement.  T hus, it is clear that this most basic definition of the 
Agreement informs every other reference to 'subsid y' in the Agreement."  (footnote omitted.)   
187 European Communities - Response to Panel question 46. 
188 Ibid.   
189 European Communities - Responses to Panel questions 46 and 126.   WT/DS341/R 
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  The European Communities responded that the requirement is implicit, not explicit, and that the 
Vienna Convention is of limited use in respect of implicit requirements.190  Concerning past cases, the 
European Communities stated that the claims in the US - Softwood Lumber IV dispute were based on 
other provisions than Articles 1 and 14 because that was how the complaining party chose to frame its 
claims in that case, and that the claim in US- Canadian Pork was necessarily based on the GATT 1947  
(given that the case predated the SCM Agreement ).  The European Communities cited US  – 
Countervailing Measures on Certain EC Products , acknowledging that it concerned a different fact 
situation, but stating that it was relevant nevert heless because it stands for the proposition that the 
benefit must be conferred on the producer of the product concerned, and a violation of Article 14 was 
found in that case.191   
7.149  Turning to the analysis of Article 1.1 specifically, we note that as a general rule under the 
SCM Agreement , if a measure under investigation in a c ountervailing duty investigation involves a 
financial contribution in the sense of Article 1.1(a)(1 ), but no benefit is conferred thereby in the sense 
of Article 1.1(b), then no subsidy exists, and no countervailing duty can be applied in respect of that 
measure.  In such a circumstance, the investig ated measure would not constitute a subsidy, and 
application of a countervailing duty would be  inconsistent with Article 1.1 of the SCM Agreement .192   
7.150  However, in this case, th e European Communities is not arguing that a benefit was not 
provided, and that therefore a subsidy did not exist w ithin the meaning of Article 1.1.  Indeed, in its 
submissions before us, the European Communiti es maintains that this is not its argument.193  Rather, 
its allegation is that Mexico did not properly calculate the amount  of the benefit from the subsidy that 
was directly attached to the exporters  of olive oil.   
7.151  As Article 1.1 contains a definition of th e term "subsidy" for the purposes of the SCM 
Agreement, the issue in the cases interpreting that provision has been whether or not a "benefit" 
existed , and therefore whether or not there was a subsidy.  We do not see in Article 1.1 any language 
specifically relating to how the amount of the be nefit is to be calculated in a countervail 
investigation.194 
7.152  We find, therefore, that Article 1.1(b) in itself does not establish a requirement to calculate 
precisely the amount of the benefit accruing to a particular recipient in a countervail investigation.  We find support for our view in the findings of the Appellate Body in US  – Countervailing Measures 
on Certain EC Products that under Article 1.1(b), a benefit might be received by different recipients, 
that the recipient of the benefit might be different from the recipient of the financial contribution, and 
that a subsidy can be bestowed directly or indirectly, and in respect of production, manufacture or 
export of a product.
195  In other words, it is not necessary to  identify the particular recipient or 
recipients of the benefit and the particular manne r in which a subsidy is bestowed in order to 
                                                      
190 European Communities - Response to Panel question 126. 
191 Ibid. 
192 Panel Report, EC – Countervailing Measures on DRAM Chips , para. 7.186 inter alia . 
193 European Communities – Response to Panel question 47; European Communities – First written 
submission, para. 77. 
194 We recall here the Appellate Body's ruling in Canada – Aircraft that to determine whether a benefit 
exists for the purpose of Article 1.1(b), the question to be answered is whether the recipient has received the 
government financial contribution on terms more favourable than those available to the recipient on the market, 
and that Article 14 provides contextual guidance for making this determination.  We note, for example, that to 
determine whether a government-provided loan confers a benefit, and thus whether a subsidy exists, it will be 
necessary to evaluate whether the terms on which the government loan is provided are better than the terms on 
which the recipient could obtain the same loan from a commercial lender.  If yes, then a benefit exists.  It is not 
necessary to know the precise amount of the benefit, if any, to answer this question.   
195 Appellate Body Report, United States – Countervailing Measures on Certain EC Products , 
paras. 110-113. WT/DS341/R 
Page 50  
 
  determine that a benefit has been conferred, and that  therefore a subsidy exists, within the meaning of 
Article 1.1(b).   
7.153  On the basis of the foregoing analysis, we conclude that Article 1.1 of the SCM Agreement  
does not contain a requirement as to how the am ount of the benefit must be calculated for the 
purposes of imposing countervailing duties.  We therefore find that the European Communities has 
not established that Mexico acted inconsistently with its obligations under Article 1.1 of the SCM 
Agreement by failing to conduct a pass-through analysis in the olive oil investigation.   
(iii) Claim of the European Communities pursuant to Article 14 of the SCM Agreement 
7.154  We now turn to the European Communities' claim under Article 14 of the SCM Agreement .  
This claim, as set forth in the Request for Establishm ent of a Panel, is that Economía "fail[ed] to apply 
the method used [to calculate the benefit conferre d on the recipient] to each particular case in a 
transparent way which is adequately explai ned, in violation of Article 14 of the SCM Agreement. "  
During the course of the dispute, th e European Communities elaborated on the basis for this claim.  In 
respect of the issue of pass-throug h, the European Communities states, inter alia , that the claim is that 
"Economía failed to explain how it calculated the bene fit conferred on the recipient, contrary to the 
obligation in Article 14", but that "in accordance with the practice of WTO dispute bodies where an 
allegation of substantive infringeme nt is coupled with one of failing to explain or publicize the point 
in question , the EC has concentrated on the substantive infringement, which is the failure to examine 
the issue of pass-through when calculating the amount  (if any) by which the imported olive oil is 
subsidized."
196  From this we understand that the Europ ean Communities' argument is that because 
Economía failed to conduct a pass-through analysis wh ere one was required, its explanation of how it 
calculated the amount of subsidization of the inves tigated product was not reasoned and adequate.   
7.155  Article 14 reads, in relevant part:  
Article 14  
Calculation of the Amount of a Subsidy in Terms  
of the Benefit to the Recipient  
 
For the purpose of Part V, any method used by  the investigating authority to calculate 
the benefit to the recipient conferred pursu ant to paragraph 1 of Article 1 shall be 
provided for in the national legislation or  implementing regulations of the Member 
                                                      
196 WT/DS341/2, tiret 6.  See also, European Communities – First written submission, para. 157 which 
states:  "[T]he Mexican authorities acted inconsistently with Articles 1 and 14 of the SCM Agreement  by failing 
to give a reasoned and adequate explanation of  ... why they concluded that the benefit of the subsidy was passed 
through to the exporters of olive oil...".   
 
To ensure that we fully understood the nature of this claim, we asked the European Communities 
(Panel question 53) to clarify whether the basis for its claim under Article 14 was that Mexico's application of its method in this case was not transparent or adequa tely explained.  The Euro pean Communities answered 
affirmatively, stating that its claim was that Mexico "failed to provide a transparent and adequate explanation
 of 
the method used to calculate the amount of subsidy in this particular case" (emphasis in original).  The European Communities also addressed this issue at the second substa ntive meeting of the Panel (at paragraph 42 of its oral 
statement), stating that "[s]ince Mexi co appears to have doubts on the matter let us make it clear that, as stated 
in tiret 6 of its Panel Request, the EC claims that Economía failed to explain how it calculated the benefit conferred on the recipient, contrary to  the obligation in Article 14.  However, in accordance with the practice of 
WTO dispute bodies where an allegation of substantive infr ingement is coupled with one of failing to explain or 
publicize the point in question, the EC has concentrated on the substantive infringement, which is the failure to examine the issue of pass-through when calculating the amount (if any) by which the imported olive oil is 
subsidized."    WT/DS341/R 
 Page 51 
 
 
  concerned and its application to each pa rticular case shall be transparent and 
adequately explained.  Furthermore, any such method shall be consistent with the 
following guidelines… 
7.156  By its own terms, Article 14 concerns the "method" to be used in a countervailing duty 
investigation to calculate  the amount  of benefit to a recipient, and sets forth three basic requirements 
in this regard.  The first has to do with the legislative framework, the second has to do with the 
application of the law to particular cases, and th e third has to do with the general guidelines for how 
to determine the benefit to the recipient from four basic forms of government financial contributions:  
equity infusions, loans, loan guarantees, and government provision of goods or services or 
government purchase of goods.   
7.157  The first requirement, that any method used to calculate  the "benefit to the recipient" must be 
set forth in the importing Member's national legisla tion or implementing regulations, is not cited in 
the European Communities' claim.  We thus do not consider it further.   
7.158  The third requirement, that any method used to calculate  "benefit to the recipient" must be 
consistent with certain specified guidelines relates only to the four types of financial contribution 
listed in that provision.  We find that this requirement is not rele vant in this dispute because the 
financial contribution of the measure at issue was in  the form of recurring grants, in respect of which 
Article 14 contains no provision.  We also note that the European Communities did not cite this 
requirement as one it alleges Mexico violated.  Fo r both of the above reasons, therefore, we do not 
need to consider this requirement further.   
7.159  The second requirement, which is cited by the European Commun ities, is that the application 
of the method for calculating the benefit to the reci pient in particular cases "shall be transparent and 
adequately explained".  We see nothing in this pr ovision that requires a Member to conduct a pass-
through analysis.  As noted above, we understand th e allegation of the European Communities to be 
that the failure by Economía to conduct a pass- through analysis when one was required necessarily 
meant that its application of th e calculation methodology in the oliv e oil case was not transparent or 
adequately explained.   
7.160  In support of this claim, the European Commun ities refers to certain passages concerning the 
economic effects of the investigated subsidies on prices and supply in the market, in particular vis-à-
vis exporters, in paragra phs 117-118 of Economía's Final Resoluti on, which appear at the end of a 
section entitled "Pass-through Mechanism".  As th ese are the only specific parts of the Final 
Resolution referred to by the European Communities in  the context of this transparency claim, the 
implication of the European Communities is that th ese passages constitute th e entirety of Economía's 
analysis and examination of the pass-through issue in  the olive oil investigation.  According to the 
European Communities, these passages fail to expl ain, transparently and adequately, the benefit 
calculation methodology in respect of the issue of  pass-through, as they are "mere assertions", and 
even if they were true, they could not explai n how a subsidy could have passed through to the 
exporters.197 
7.161  We begin our analysis of this claim by noting that the Final Resolution contains considerably 
more information as to the nature of the inves tigated subsidy programme and Economía's analysis 
thereof than the few passages cited by the Europ ean Communities.  We will consider these issues in 
detail, with a view to determining whether, as  claimed by the Europ ean Communities, Economía 
failed to explain, transparently and adequately, its calculation of benef it to the recipient in respect of 
the pass-through issue raised by inter ested parties in the investigation. 
                                                      
197 European Communities - First written submission, paras. 132-148.   WT/DS341/R 
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  7.162  We start by reviewing the portions of the Fi nal Resolution which address the nature of the 
subsidy programme at issue in this case.  Accord ing to the Final Resolution, the subsidy programme 
was provided under Regulation 136/66/EEC of Se ptember 1966 of the Council of the European 
Economic Community, establishing a common market in the oils and fats sector and describing the 
programme of aid to olive oil, which regu lation had been amended on numerous occasions.
198   
7.163  The Final Resolution also describes the operati on of the subsidy programme as presented to 
Economía by interested parties in the investigation.199  According to that description, in each 
marketing year, the grower presented to the na tional administrators of the programme a crop 
declaration specifying data concerning the farm and the number of olive trees.  The olives were 
harvested and taken to mills for crushing into oil during the period November through March.  The oil 
mill provided the grower with a certificate attesting to the amount of oil obtained from that grower's 
olives, which the grower transmitted along with its aid application to the national programme 
administration.  The national administration then cal culated the national total quantity of olive oil for 
which the aid was requested, and transmitted this request to the EC Commission.  The total per 
country aid amount was then divided by the number of kilograms of oil produced to determine the per 
kilogram amount of aid to be paid.  The EC Commission, published these figures.   
7.164  The Final Resolution presents the factual findi ngs of Economía concerning the olive oil aid 
programme, in paragraphs 100-104, as follows:   
"100. In this stage of the investigation, the Ministry confirms its preliminary 
determination that the subsidy provided by  the European Community is olive oil and 
only a small proportion is destined to olives.  From a reading of Regulation 
136/66/EEC the purpose and the benefited pr oduct are clear.  We cite the following 
paragraphs (the underlining is ours):   
'Whereas olive growing and the production of olive oil  are 
particularly important to the economies of certain regions of the Community ... that for many consumers, olive oil
 is the most 
important source of oils and fats ... it is necessary to support this 
productions through appropriate actions.   
'Whereas, to this end, the marketing of the crops must assure fair 
remuneration to Community producers, the level of which can be defined by a production target price for olive oil
 ...  
Title II 
Olive Oil  
Article 4. 1.  A production target price shall be set for the Community. This price shall be fixed at the wholesale marketing stage for 
ordinary virgin olive oil 
with a free fatty acid content expressed as 
oleic acid of 3.3g / 100g. 
                                                      
198 Final Resolution (Exhibit EC-1), para. 85. 
199 Ibid., para. 84, referring to representations on this issue made by the trade associations ASOLIVA 
and ASSITOL, the exporters, and the EC Commission.    WT/DS341/R 
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  2.  For the 1998/99 to 2003/04 marketing years, the target production 
prices referred to in part 1 sha ll be fixed at 383.77 ecus/100 kg.   
3.  Except as otherwise decided by the Council by qualified majority 
pursuant to a proposal by the Commission, the marketing year for olive oil
 shall run from 1 November to 31 October of the following 
year.   
Article 5 1.  Aid for the production of olive oil
 shall be established.  This aid is 
designed to contribute to the establis hment of a fair income for the 
producers.   
The aid shall be provided to th e oil growers on the basis of the 
quantity of olive oil they actually produce .   
... 7.  With a view to establishing guidance for checks on the 
determination of the quantity of oil eligible
 for the aid, yields will be 
established for olives and oil per homogeneous production zones.   
... 9.  A percentage of the production aid provided to all or a part of the 
producers in each producing Member State shall be used to finance regional measures to improve the qua lity of the production of olive 
oil and table olives, and their environmental impact.   
... 
20.  When olive oil  is exported to third countries and the world prices 
are higher than the Community price, a regulatory levy may be collected to compensate fo r these price differences.'   
101.  The cited regulation establishes, in Artic le 1, that the aid is to be applied to 
certain products including olive oil classified  in code NC 1509 which refers to olive 
oil and its fractions, whether or not refine d, but without chemical modification, and 
code NC 1510 00 for the other oils obtained exclusively from olives, and their fractions, including refined oils, but without chemical modification, and blends of those oils or fractions of heading 1509. 
102.  Furthermore, the EC has notified th e Committee on Agriculture of the WTO of 
its internal aid programme for different products.  It should be emphasized that 
among the listed products, olive oil is  identified as a "designated product". 
103.  As mentioned in the Preliminary Resolution, the Ministry is of the opinion that 
if a producer of olives brings its product to a mill to obtain olive oil, and in the 
extreme case obtains nothing, it is clear that  this producer would not benefit under the 
aid programme.  That is, the only way in which an olive producer would have access 
to the subsidy would be on the basis of th e olive oil actually produced, which is the 
product referred to in Regulation 136/66/EEC.   WT/DS341/R 
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  104.  On the basis of what is  stated in paragraphs 100 to 103 of this Resolution, the 
Ministry considers that it is unquestionable that the subsidy provided by the European Community is to olive oil, that is, to the product that is subject to the investigation, 
and that this is not an incorrect interpretati on or a problem of translation.  At the same 
time, the Ministry accepts that, as menti oned in Regulation 136/66/EEC, there is a 
part of the aid that can be applied to s upport table olives, which are not part of the 
present investigation." 
7.165  The Final Resolution then, in the section en titled "Pass-Through Mechanism" (from which the 
excerpts presented by the European Communities were taken), discusses the arguments of the 
interested parties and the findings of Economía in relation to the precise question of whether a pass-
through analysis was required under the facts of the case.  This discussion is found at paragraphs 105-
118 of the Final Resolution.  Economía's conclusion,  as set forth in that sec tion, was that no pass-
through analysis of the type required in US-Softwood Lumber IV was necessary because, unlike in that 
case, the olive oil investigation did not involve a su bsidy to an input into the final processed product 
exported to Mexico:  
… this is not an investigation of a subsidy to  an input (olives) but rather to olive oil, 
which is itself the product exported to Me xico, for which reason the investigating 
authority is not obligated to conduct a p ass-through analysis of the subsidy because, 
as provided for in point 100 of the present Resolution, it is unquestionable that Regulation 136/66/EEC and its amendments establish that the aid programme is for 
olive oil.
200 
7.166  Finally, the Final Resolution sets forth, at paragraphs 119-180, the procedural and analytical 
steps undertaken by Economía in calculating the per unit subsidy amounts.  In this context, the representations of the interested parties and the related conclusions of Economía are described.   
7.167  We recall that the claim of th e European Communities is that  Economía failed to fulfil the 
transparency requirement in the chapeau of Article  14, i.e., that the method used by Economía to 
calculate the benefit to the recipient was not transp arent and was not adequately explained.  We do not 
agree with the European Commun ities' characterization of the relevant portions of the Final 
Resolution.  To the contrary, we consider that th e Final Resolution contains  detailed descriptions of 
the nature and operation of the subsidy programme , the representations of the interested parties 
regarding the subsidy programme and the pass- through question, and Economía's reasons for 
concluding that a pass-through analysis was not re quired, as well as the calculations performed.  We 
fail to see how the Final Resolution either lacks tran sparency as to the method  used to calculate the 
benefit to the recipient or fails to adequately explain that method.   
7.168  We further recall that we see no obligation in r espect of pass-through analysis in the cited 
language of Article 14.  Even if there were such an obligation, moreover, we would find no basis on 
which to conclude that Economía ha d acted inconsistently with it.  In particular, bearing in mind the 
standard of review, we have considered carefully th e evidence on the record made available to us as to 
the nature and operation of the subsidy progra mme, and have examined the conclusions that 
Economía drew on the basis of that evidence as presented in the Final Resolution.  We consider that 
Economía's conclusion that the subsid y programme under investigation in  this case consisted of aid to 
olive growers for the production of olive oil was one  that could be reasonably reached on the basis of 
the record evidence.  In this regard, we note, first, the language of the Regulation itself, which 
stipulates that the olive grower receives aid only to th e extent that it can prove that it has converted its 
olives into olive oil
201, and is paid only for the actual kilograms of olive oil that its olives produce.  
                                                      
200 Final Resolution (Exhibit EC-1), para. 116.   
201 Except for the small fraction provided for as aid to the production of table olives.  WT/DS341/R 
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  The Final Resolution makes clear that the respondent interested parties in the investigation described 
the operation of the programme in the same way.202  We also take note of the reference in the Final 
Resolution to the fact that the European Co mmunities' notifications to the WTO refer to olive oil  as a 
"designated product" for the purposes of its domestic  support measures.  In addition, the Final 
Resolution indicates that the respondent parties argue d that the subsidized product was olives, not 
olive oil, but provides no indication that those parti es submitted any factual evidence in support of this 
assertion.203  In fact, it appears from the Final Resolution that the principal argument of the respondent 
parties in respect of the pass-through issue w as that the transactions and processing operations 
intervening between the production of olive oil (b y crushing olives) and its exportation to Mexico 
were what purportedly "disconnected" the subsidy benefits from the product as exported, giving rise 
to the alleged need for a pass-through analysis.204  As discussed above, there is no support in the 
jurisprudence for this legal argument.  On the basi s of the foregoing, we co nsider that the record 
evidence supports Economía's finding that the subsidi zed product was olive oil.  Because the evidence 
indicates that the only basis on which the subsidy could be obtained was the conversion by the 
growers of olives into olive oil, we consider that the evidence on the record reasonably supports 
Economía's conclusion that the programme provided a subsidy to the production of olive oil.  
Furthermore, olive oil in all its forms, from firs t-crushed to refined and blended oil, was the product 
covered by the investigation.  Therefore, the evidence before Economía reasonably supported its 
conclusion that the subsidy was not provided on an input product, but rather was provided on the 
product that was the subject of the investigation,  and that as such, no pass-through analysis was 
necessary.205   
7.169  For these reasons, we find that the European  Communities has not demonstrated that, 
concerning the question of pass-through,  Mexico failed to comply with the requirement in Article 14 
to provide a transparent and adequate explanation of  its method to calculate benefit in respect of the 
subsidy programme in this case.   
(b) Article 14 – Other Calculation Issues 
7.170  The European Communities raises three additiona l claims under Article 14, as alternatives to 
its Article 14 claim addressed above related to pass- through.  These claims have to do with certain 
aspects of Economía's calculation of subsidy benefits.206  The first of these claims is that Economía 
"refused, without giving a reasoned and adequate explanation, to make any adjustment for the fact 
                                                      
202 Final Resolution (Exhibit EC-1), paras. 84 et seq.  
203 Ibid., paras. 93-104.  In this context, we note that Economía sent a number of requests for 
information related to the structure of the olive oil industry to the respondent parties ( see Mexico's response to 
Panel question 60, and the documents referred to therein).  We have reviewed the replies to those information 
requests, and find that they contain only argumentation, and not factual information.  Indeed, these documents 
suggest that Economía conduct certain investigations an d gather certain information and samples, rather than 
offering any concrete evidence themselves.  In its submissions to the Panel the European Communities points 
exclusively to these documents, and to no other r ecord evidence in the context of this argument.  See European 
Communities response to Panel question 45, which refers to the same documents as Mexico's reply to Panel question 60.   
204 Ibid., paras. 106-108. 
205 We recall here the point made by Economía in the Final Resolution (Exhibit EC-1, para. 116) that 
this was the key difference between the situation in the olive oil investigation and that in the Softwood Lumber 
dispute.  See our discussion of this legal issue at section VII.G.2(a)(i), supra .   
206 The European Communities also alleges inconsistencies with Article 1.1(b) of the SCM Agreement 
in respect of these calculation issues.  None of these allegations goes to the existence of the benefit as such, 
however.  We thus consider that our finding, above, that Article 1.1 contains no requirement as to how the 
amount of the benefit must be calculated in a counterv ailing duty investigation, resolves these claims of 
inconsistency.  We therefore restrict our analysis in this  section to the claims of in consistency with the chapeau 
of Article 14 of the SCM Agreement .   WT/DS341/R 
Page 56  
 
  that a proportion of the exports from the EC to Mexico  consisted of oil that had not been in any way 
subject to the EC aid scheme."
207  According to the European Comm unities, the respondent interested 
parties presented arguments that certain olive oil exported from the European Communities to Mexico 
originated in non-EC countries (e.g., Tunisia), and was brought into the European Communities under 
an inward processing scheme and then re-exported,  some to Mexico.  The European Communities 
argues that the subsidy amount should have been  adjusted downward to take these non-EC-origin 
imports into account.  According to the European  Communities, although the respondent interested 
parties presented certain information related to  this point, Economía did not make the necessary 
adjustments and failed to provide a reasoned and adequate explanation for its decision.208 
7.171  Mexico takes issue with the Article 14 claim as referred to by the European Communities, 
namely as the failure of Mexico to provide a transp arent and adequate explanation of the method used 
to calculate the amount of the subsidy .  Mexico argues that the obligation in Article 14 is to explain 
the method used to calculate the amount of benefit  conferred by the subsidy.209  In addition, Mexico 
points to passages in the Preliminary and Final Resolutions which indicate that the respondent 
interested parties that raised this  issue failed to provide factual evid ence to enable a calculation of the 
level of the adjustments they sought, and that  for that reason, Economía did not make the 
adjustments.210  The European Communities has pointed to no specific aspect s in which this 
explanation is either non-transparent or inadequate (e.g., incomplete, unclear, etc.), and we find none.  
Furthermore, on the substance, we consider th at it was not unreasonable for Economía to have 
declined to make the requested adjustments given that  the interested parties that requested them failed 
to provide any supporting factual evidence in spite of  Economía's specific requests for such evidence.   
7.172  A second issue raised by the European Communitie s relates to adjustments for certain costs 
incurred by exporting companies.  The European Communities' complaint is  that although Economía 
made requested adjustments for companies that pr ovided it with the necessary data, it did not make 
them for companies that did not, and it unjustifia bly requested the former companies to provide 
information relating to the latter.  The European Communities argues that by thus failing to exercise 
properly its responsibilities to investigate the effect of costs on the level of benefit, Economía also 
failed to give a reasoned and adequate  explanation for its determination.211  
7.173  Mexico's response, quoting the Final Resolution,  is that Economía received no response to its 
request, made to the companies that provided cost data on their own operations, to suggest alternative 
methodologies that Economía could use to estimat e the adjustments for th e other companies.  
Nevertheless, the Final Resolution indicates th at Economía made an adjustment for the non-
responding companies by averaging the adjust ments for those that had provided data. 212  We fail to 
understand the specific nature of the European Communitie s' complaint with respect to this issue.  As 
is evident in the Final Resolution, certain interest ed parties requested, and obtained, an adjustment 
from Economía, and Economía made a comparable ad justment for non-respondent companies.  We 
can find no factual basis to support the European Communities' argument on th is point, and thus can 
find no basis on which to conclude that Economía committed a substantive error under Article 14.  
Nor do we see anything unclear about the explana tion presented in the Final Resolution.  Thus, we 
find that the European Communities has failed to estab lish that Mexico acted inconsistently with its 
Article 14 obligations in its treatment of the adjustments for exporters' costs.   
                                                      
207 European Communities - First written submission, para. 150.   
208 European Communities - First written submission, paras. 150.-151.   
209 Ibid., paras. 122-123.   
210 Mexico - First written submission, paras. 131-136, citing relevant excerpts from the Resolutions.  
(Preliminary Resolution (Exhibit EC-22), paras. 120-121;  Final Resolution (Exhibit EC-1), paras. 131-134). 
211 European Communities - First written submission, paras. 154-156. 
212 Mexico - First written submission, paras. 147-15 2, quoting the Final Resolution (Exhibit EC-1) at 
paras. 138-141.    WT/DS341/R 
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  7.174  Finally, the European Commun ities claims that Economía's calculation of the margin of 
subsidy was artificially high due to the fact that it was calculated by comparing the amount of the 
subsidy with the exporter's sales pr ices adjusted to an ex-factory level.  The European Communities 
argues specifically that because duties were imposed on the basis of the CIF price, it is on this basis 
that the margin of subsidy should have been dete rmined.  According to the European Communities, 
by comparing the subsidy to the ex-factory pri ce (necessarily a lower figure than the CIF price), 
Mexico has produced inflated figures.213   
7.175  Mexico responds that because the subsidies were calculated as specific per kilogram amounts, 
rather than on an ad valorem  basis, the fact that the calculations were performed at the ex-factory, 
rather than the CIF, level made no difference to the calculation of the subsidy margins.  Mexico 
provides a numerical example to illustrate its argument.214   
7.176  We have reviewed the Final Resolution, as we ll as the explanation provided by Mexico, and 
we find, as a matter of fact, that the European Communities has not established that the subsidy 
margins were artificially inflated by having been calcu lated at the ex-factory level.  In particular, the 
European Communities has not explained specifically how inflation of the figures allegedly occurred, 
and we find this difficult to envisage given that th e margins were, as Mexico points out, calculated on 
a per kilogram rather than on an ad valorem  basis.  Nor has the Europ ean Communities indicated how 
the explanation in the Final Resolution lacked clarity.  We therefore find that the European 
Communities has failed to establish that Economía's  calculation of the subsidy margins on an ex-
factory basis was inconsistent with Mexi co's obligations under Article 14 of the SCM Agreement .   
H. DEFINITION OF "DOMESTIC INDUSTRY "  
7.177  The European Communities clai ms that Mexico improperly imposed countervailing duties 
because it initiated: 
an investigation in the absence of a determ ination by the Mexican authorities that the 
application was made by or on behalf of the domestic industry, in violation of 
Articles 11.4 and 16 of the SCM Agreement215 
7.178  The European Communities also alleges that Ec onomía's injury determination is invalid 
because Fortuny did not constitute a domestic produ cer, and thus the domestic industry, within the 
meaning of Article 16.1 of the SCM Agreement.  The European Communities further argues that even 
if Fortuny could be considered the domestic industr y, Economía failed to adequately investigate the 
possibility that domestic producers of the like product s other than Fortuny existed, and that therefore 
any consideration of the injury suffered by  that industry would be purely speculative.216  As a result of 
this alleged failure, the European Communities clai ms that Mexico "failed to give a reasoned and 
adequate explanation of its findings and was th erefore inconsistent with Article 16 of the SCM 
Agreement .  As a consequence, the findings rega rding injury were in breach of the [ sic] Article VI:6 
of GATT 1994 ."217   
7.179  This claim thus has two elements, one based on the interpretation of the term "domestic 
industry" in Article 16.1 of the SCM Agreement , and the other based on the alleged inadequacy of 
Economía's efforts to determine whether there we re Mexican producers of olive oil other than 
Fortuny.  We will address these two elements separately.   
                                                      
213 European Communities - First written submission, para. 152. 
214 Mexico – First written submission, paras. 137-146. 
215 WT/DS341/2, tiret 1. 
216 European Communities – First written submission, para. 188. 
217 Ibid., para.189. WT/DS341/R 
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  7.180  Before turning to the specific issues raised , however, we note that in its Request for 
Establishment of a Panel, the European Communities also referred to allege d inconsistencies with 
Articles 15.4 and 15.5 of the SCM Agreement  in the context of this claim.  However, it did not provide 
any argumentation in its written or oral submissions w ith respect to these provisions in relation to this 
claim.  Instead, in its first written submission, the European Communities explicitly referred to these 
provisions only as context for its interpretation of Article 16.1 of the SCM Agreement .
218  As a result 
of questioning from the Panel regarding the article s on which the European Communities was alleging 
an inconsistency, it became apparent that the Eu ropean Communities was not pursuing specific claims 
of inconsistency with Articles 15.4 or 15.5 with respect to the definition of the domestic industry.219  
Therefore, we will not make any findings on Articles 15.4 or 15.5 with respect to this claim.220. 
1. Arguments of the Parties 
7.181  The European Communities  argues that in order to constitute a "producer" for the purposes 
of the SCM Agreement , and thus to constitute part of the domestic industry or the entire domestic 
industry, as defined in Article 16.1 of that Agreement , an enterprise must actually produce "output" of 
the domestic like product at two specified times:  at th e time of presentation of the application for the 
purpose of initiation, and during the subsidy POI for the purpose of the injury investigation.  With 
respect to initiation, the European Communities argues that if an applicant is not producing output at 
the time it presents its application, it is not a "produ cer" and thus cannot form part of or constitute the 
"domestic industry" within the meaning of Article 16. 1.  As a result, the requirements of Article 11.4 
of the SCM Agreement will not be met, as that provision requir es that applications be made "by or on 
behalf of the domestic industry".221   
                                                      
218 European Communities – First written submission, para. 177. 
219 European Communities – Response to Panel question 63.  
Question 63 from the Panel asked: 
In paragraph 158 of your First Written Submission, you claim that Mexico acted 
inconsistently with Article VI:6 of the GATT 1994 and Articles 15.4, 15.5, and 16 of the SCM Agreement.  However, in paragraph 173 of the same submission, you reference Article 15.1 of 
the SCM Agreement and claim that Article VI:6 of GATT 1994 has been infringed.  
Furthermore, in paragraph 189 of that same submission, you conclude that Mexico has acted inconsistently with Article 16 of the SCM Agreement and as a consequence is in breach of 
Article VI:6 of the GATT 1994.  Could you please clarify under which provisions your claims 
are based? 
 
The European Communities responded: 
The European Communities has identified in Article VI:6(a) of GATT 1994 the clearest 
expression of the obligation  imposed on Members in respect of injury findings in anti-
dumping and countervailing duty proceedings. Infringements of this obligation can arise from behaviour by national investigating authorities th at is inconsistent with individual provisions 
of the SCM Agreement .  
 In its contentions in support of its claim under this heading the EC has sought to identify 
particular provisions in Articles 15 and 16 with which the actions of Economía was 
inconsistent. In each case where the EC has alleged inconsistency it has identified the 
particular provision in Article 15 or 16 where th at inconsistency arises. The EC believes that it 
has also made clear that the inconsistencies are linked to the obligation in Article VI:6. 
Usually this link is stated explicitly, as refl ected in the terms of the Panel’s Question.  
220 We do note that the European Communities makes other specific claims with  respect to Mexico's 
consistency with Articles 15.4 and 15.5.  These clai ms will be addressed in sections VII.K and VII.L 
221 European Communities – First written submission, pa ras. 90-91; and response to Panel question 13.  
In particular, the European Communities argues that that "p roduction is relevant only if it is taking place at the 
time of the application".  The Euro pean Communities goes on to say that it does not mean that no account could  WT/DS341/R 
 Page 59 
 
 
  7.182  With respect to the injury determination, the European Communities' argues that "if there is 
no production, there is no industry, and if there is no industry there can be no material injury".222  The 
European Communities focuses on the subsidy POI becau se, in its view, "the only verified evidence 
of subsidization available to the investigating aut hority will be that from the investigation period and 
unless the domestic companies concerned have output in that period, no injury can be 
demonstrated."223  Accordingly, to the Eur opean Communities, Economía's alleged failure to comply 
with the definition of "domestic industry" in Article 16.1 of the SCM Agreement also gives rise to a 
violation of Article VI:6(a) of the GATT 1994 .   
7.183  Mexico  disagrees with this analysis, which it recalls was raised during the course of the 
investigation and addressed by Economía in the Fi nal Resolution.  Mexico points to Economía's 
reasoning at paragraph 218 of that Resolution, that  if the European Commun ities' interpretation were 
correct, the concept of material retardation of th e establishment of an industry would not make sense; 
cases in which production was suspended due to  planned or unforeseen reasons would be 
inadmissible; it would be impossible to prove produc tion and material injury in the case of producers 
of agricultural goods, which by definition produ ce according to natural cycles; and countervailing 
duties would be unavailable to industries that had been forced  to suspend production due to 
competition from subsidized imports.224   
2. Reasoning of the Panel 
(a) Introduction 
7.184  The European Communities claims that by defini ng the domestic industry inconsistently with 
Article 16.1 of the SCM Agreement , Mexico acted inconsistently with that provision as well as, 
consequentially, with Article 11.4 of the SCM Agreement  and Article VI:6(a) of the GATT 1994 .  
Specifically, the European Commun ities argues that if an investigating authority does not properly 
identify the correct domestic industry consistent w ith Article 16.1, and impos es countervailing duties, 
it also acts inconsistently with Article VI:6(a) of the GATT 1994 , which permits the imposition of 
countervailing duties only in the event that an in vestigating authority makes a determination of 
material injury or threat ther eof to an established domestic indus try.  Likewise, the European 
Communities argues that because Fortuny was not the "domestic industry" as defined by Article 16.1, 
its application was not made "by or on behalf of  the domestic industry" as required by Article 11.4.225   
7.185  In particular, the European Communities advanc es an interpretation of Article 16.1 that, 
because Fortuny was not producing output of olive oil e ither at the time it presented its application or 
during the period analyzed to determine the existen ce of subsidization (the "subsidy POI"), it could 
not be considered a "producer" in the sense of  Article 16.1, and as a consequence it could not 
constitute the "domestic industry" within  the meaning of Article 16.1 of the SCM Agreement .  As a 
result, the European Communities claims, Economía' s decision to initiate the investigation and its 
injury determination were fundamentally flawed .  The European Communities argues that these 
                                                                                                                                                                     
be taken of producers that operate on a seasonal basis or are for some other reason not producing regularly, and 
also states (in its response to Panel question 102) that it was not suggesting that the issue should depend on whether domestic companies were producing on the particular day that the complaint was lodged.  Nevertheless, 
it argues that "the general requirement of having current output applies at all stages of the procedure, including 
at initiation".   
222 European Communities – First written submission, para. 213. 
223 European Communities – First oral statement, para. 57. 
224 Mexico, First written submission, para. 209;  Mexico – Second written submission, para. 167; see 
also Japan – Third party submission, paras. 23-24.  
225 WT/DS341/2, tiret 1. WT/DS341/R 
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  alleged inconsistencies with Article 16.1 of the SCM Agreement  also give rise to violations of 
Article VI:6(a)
226 of the GATT 1994 and Article 11.4 of the SCM Agreement .   
7.186  As noted above, the claims under Article VI:6(a) of the GATT 1994  and Article 11.4 of the 
SCM Agreement  both rest upon the central premise that Mexi co acted inconsistent ly with Article 16.1 
of the SCM Agreement  because the applicant in the olive o il investigation, Fortuny, could not 
constitute the "domestic industry" within the meaning of that provision.  We view these claims as 
consequential to the claim under Article 16.1 of the SCM Agreement , because they require us, first, to 
accept the European Communities' interpretation of Article 16.1 of the SCM Agreement as a pre-
condition for finding that Mexico acted inc onsistently with Article VI:6(a) of the GATT 1994  and 
Article 11.4 of the SCM Agreement .  Therefore, we turn first to the interpretation of Article 16.1 of 
the SCM Agreement  before examining whether as a consequence  of any inconsistency with that 
provision Mexico also acted inconsistently with Article VI:6(a) of the GATT 1994  and Article 11.4 of 
the SCM Agreement .      
7.187  We note that the European Communities also ma kes additional claims, in the context of both 
the initiation of the investigation and the determinat ion of injury, that Economía has not provided a 
reasoned and adequate explanation of its determin ation that Fortuny represented the entire domestic 
industry.  In this respect, the European Comm unities challenges the factual basis of Economía's 
determination that Fortuny was the sole Mexican producer of olive oil, thus constituting the entire 
Mexican domestic industry producing olive oil.  These allegations are addressed in sections VII.I and 
VII.J, infra .   
(b) Definition of "domestic industry"  
7.188  The basic interpretive issue we must consider is  whether the definition of "domestic industry" 
in Article 16.1 of the SCM Agreement  requires an enterprise or a group of enterprises to be producing 
actual output of the like product at the points in time referred to by the European Communities in 
order to be considered "producers" for the purpose of that provision.  Put another way, the legal question is whether an enterprise or group of en terprises may not be considered to constitute a 
domestic industry if, at the time of application is f iled and/or during the subsidy POI, it or they were 
not actually producing output.  
7.189  Article 16.1 reads as follows: 
                                                     
 
226 We note that there was some confusion during these proceedings as to whether the European 
Communities was alleging that Mexico's in consistency with Article VI:6(a) of the GATT 1994  arose from an 
inconsistency with Article 16.1 or with Article 15.1 of the SCM Agreement .  Specifically, in paragraph 173 of its 
First written submission, in the section that deals with the claims under tiret 7 of its Request for Establishment 
of a Panel, the European Communities asserts that Economía 's alleged failure to properly investigate the extent 
of the domestic industry also meant that Economía "could not possibly comply with the requirement in Article 15.1 [of the SCM Agreement ] that a determination of injury for the purposes of Article VI of GATT 1994 
must involve an objective examination of the impact of the subsidized imports on the domestic producers of the 
product".  The Panel asked the European Communities to clarify the meaning of this statement.  In its response to Panel question 64, the European Communities stated  that "this reference was made to illustrate the 
consequences of the non-existence of the domestic industry, rather than as an attempt to claim an inadequate 
inquiry into the extent  of the domestic industry."  Given this clarif ication by the European Communities, we do 
not consider that the European Communities has made a sp ecific claim of inconsistency with Article 15.1 of the 
SCM Agreement in relation to Economía's findings on the domes tic industry in this ca se.  We will consider 
Article 15.1 in the context of the claim concerning the injury investigation in tiret 8 of the Request for Establishment of a Panel, which specifically refers to Artic le 15.1.  This additional injury claim is addressed in 
section VII.K, infra .  WT/DS341/R 
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  16.1 For the purposes of this Agreement, th e term 'domestic industry' shall, except 
as provided in paragraph 2, be interprete d as referring to the domestic producers as a 
whole of the like products or to those of them whose collective output of the products constitutes a major proportion of the tota l domestic production of those products, 
except that when producers are related to th e exporters or importers or are themselves 
importers of the allegedly subsidized pr oduct or a like product from other countries, 
the term 'domestic industry' may be interpreted as referring to the rest of the producers.  (footnote omitted)
  
7.190  By its own terms, Article 16.1 provides a defin ition of the term "domestic industry" "for the 
purposes of this Agreement", i.e., th e definition applies to the entire SCM Agreement .227  As such, this 
term must be given a consistent meaning throughout the SCM Agreement  including for the purposes 
of the term "domestic industr y" as used in Article 11.4.228  With respect to Article VI:6(a) of the 
GATT 1994 , the Appellate Body and prior panels have found that the SCM Agreement  provides 
context for the interpretation of Article VI of the GATT 1994,229  Indeed, the panel in Brazil – 
Desiccated Coconut emphasized that "the meaning of Article VI of GATT 1994  cannot be established 
without reference to the provisions of the SCM Agreement."230  The definition in Article 16.1, therefore 
also informs the meaning of the term "domestic  industry" as used in Article VI:6(a) of the GATT 
1994, and an enterprise or group of enterprises that qualifies as a "domestic industry" within the 
meaning of Article 16.1 of the SCM Agreement  will also constitute the domestic industry for the 
purposes of Article VI:6(a) of the GATT 1994 .      
7.191  Turning to the specific language of Article 16. 1, "domestic industry" is defined as referring 
either to "the domestic producers  as a whole of the like products" (emphasis added) or "to those of 
them whose collective output of the products c onstitutes a major proportion of the total domestic 
production of those products…".   The first part of the definition, "domestic producers as a whole", 
we take to mean all of the domestic producers .  The second part, "those of them", clearly refers to a 
subset of all of the domestic producers.  The word "producers" is obviously central to the definition of 
"domestic industry".  In particular, the question we must ask ourselves is whether an enterprise is a 
"producer", and therefore whether it constitutes all or  part of the domestic industry, if it is not 
producing "output" of the like product at the time of  submission of the application and/or during the 
subsidy POI.   
7.192  Consistent with the requirements of Article 31 of the Vienna Convention, we begin our 
analysis of the term "producer" by considering its ordinary meaning.  The New Shorter Oxford 
English Dictionary defines the term, "producer", inter alia as "a person who or thing which produces 
something or someone", and the term, "produce", as "bring (a thing) into existence, bring about, .... make."
231  Other established dictionaries contain similar definitions.232  We consider that the central 
                                                      
 227 Although Mexico has not raised the issue before us, we recall that the panel in Argentina – Poultry 
Anti-Dumping Duties addressed the legal question whether it was possible to violate the counterpart provision in 
the Anti-dumping Agreement  (Article 4.1) because it is  a definition.  The panel co ncluded that a violation was 
possible, because the language of the definition itself contains an express obligation on Members:  "...the term 'domestic industry' shall be interpreted ..." (emphasis added).  (Panel Report, Argentina – Poultry Anti-Dumping 
Duties , para. 7.338.)  We agree with this conclusion, and proceed here on the same basis in our analysis of 
Article 16.1 of the SCM Agreement .   
228 We note that any interpretation of domestic industry under Article 16.1 would also be relevant to the 
provisions governing the injury determination set forth in Article 15 of the SCM Agreement . 
229 Appellate Body Report, Brazil – Desiccated Coconut, p. 15; Panel Report, India – Quantitative 
Restrictions , paras. 5.18-5.19; Panel Report, US – 1916 Act (EC) , para. 6.195. 
 230 Panel Report, Brazil – Desiccated Coconut , para. 238. 
231 New Shorter Oxford English Dictionary, 1993 edition.  
232 For example, the Merriam-Webster dictionary (online edition) defines "producer" as, inter alia , "one 
that produces; especially : one that grows agricultural products or manufactures crude materials into articles of WT/DS341/R 
Page 62  
 
  element in these definitions is their focus on the nature  of the activity undertaken – the bringing into 
existence or making of something.  There is no s uggestion in any of these definitions that being a 
producer is something that changes from one moment to the next depending on whether or not there is 
actual production of output at that moment.  Rather, the definitions indicate to us that the essence of being a "producer" of something is to have, as an activ ity or a business, the bringing into existence or 
making of a thing.   
7.193  The interpretive question before us in this case  is novel and has not been examined previously 
in cases under the SCM Agreement , the Anti-dumping Agreement, or the GATT.   We recall that the 
panel and the Appellate Body in US-Lamb  considered similar language  in Article 4.1 of the 
Agreement on Safeguards , namely that:   
'domestic industry' shall be understood to mean the producers as a whole of the like 
or directly competitive products operating with in the territory of a Member, or those 
whose collective output of the like or di rectly competitive products constitutes a 
major proportion of the total domestic production of those products.
233   
While the legal question and the agreement  at issue in that case were different from those before us, 
and thus are not directly applicable to the present dispute, the language in the Agreement on 
Safeguards nevertheless is sufficiently similar to the language in the SCM Agreement that we consider 
the reasoning in US – Lamb to be useful to our inquiry into the meaning of the word "producer" in 
Article 16.1 of the SCM Agreement.    
7.194  The panel in US – Lamb , in interpreting the term "producer" referred to dictionary definitions 
noting that:   
a "producer " is variously defined as "a person or  a thing which produces something", 
or "one that produces, especially one that grows agricultural products or 
manufactures articles".  To "produce " means to "bring a thing into existence, bring 
about, effect or cause an action or result", or "to give being, form or shape to, make, or manufacture". ...  
The Appellate Body, in reviewing the panel's interp retation, approved of the use of these definitions, 
stating that "[a]s the Panel indicated, 'producers'  are those who grow or manufacture an article; 
'producers' are those who bring a thing into existence."
234      
7.195  The specific legal issue in US-Lamb  was whether enterprises whose activities or businesses  
did not include the production  of the like product itself (in that case, they produced inputs into the like 
product) could be considered "producers" of the lik e product.  The panel and the Appellate Body ruled 
in the negative, focusing on the nature of the r espective business activities of the input producers (the 
growers of live lambs) and the producers of the like product (the packers and br eakers of lamb meat).  
In particular, the conclusions of the panel and the Appellate Body were that because the growers of 
live lambs did not themselves engage in the processi ng of live lambs into lamb meat, and because the 
like product was lamb meat only (and did not include live lambs), the producers of live lambs could 
not be considered to be producers of the like produc t, and thus did not form part of the "domestic 
industry" producing lamb meat.   
                                                                                                                                                                     
use".  This dictionary defines "produce" as "to cause to have existence or to happen :  bring about; to give being, 
form, or shape to :  make; especially  : manufacture". 
233 Article 4.1(c) of the Agreement on Safeguards .   
234 We recognize that the Appellate Body in US – Lamb was interpreting somewhat different language 
in a different agreement from that before us.  Nevertheless,  we consider informative th e discussion of dictionary 
definitions in that case of the same terms as appear in the SCM Agreement .     WT/DS341/R 
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  7.196  The temporal question underlying the claim of the European Communities in the present 
dispute did not arise in US – Lamb .  Nevertheless, we agree with, and consider relevant to the dispute 
before us, the approach taken in US – Lamb , i.e., the focus on the essential nature of the business 
activities of a given enterprise as determinative of  whether that enterprise could be considered a 
producer of the like product and thus be included in the domestic industry for that product.  We 
further consider that the temporal approach adva nced by the European Communities, of excluding 
enterprises as domestic "producers" of the like product solely on the basis that they lack actual output 
at particular, defined moments, and regardless of the essential nature of thei r business activities, is 
fundamentally incompatible with what we believe to be the correct, substantive approach taken in US 
– Lamb .   
7.197  A number of provisions of the SCM Agreement , including Article 15, which sets forth how 
investigating authorities should conduc t investigations into whether a do mestic industry is injured as a 
result of subsidized imports, provide relevant context for interpreting the word "producer" in 
Article 16.1.  First, Article 15.1 pr ovides that the overarching obligations235 pertaining to the 
determination of injury to a "domestic industry"236 involve (a) an examination of the volume of the 
subsidized imports and their impact on prices in the domestic market for like products, and (b) an 
examination of the impact the subsidized imports on the "domestic producers" of those products.  We 
note here that Article 15.1 refers to "domestic pr oducers" without mentioning the existence of output 
at any specified points in time.  Articles 15.2 or 15.4 which respectively provide the obligations for 
the examinations of the volume of the subsidized imports and their impact on domestic prices, and of 
the impact of the subsidized imports on the domest ic producers, referred to in Article 15.1 provide 
further context for our interpretation of the term s "domestic industry" and "producer" as used in 
Article 16.1 of the SCM Agreement .   
7.198  Article 15.2 requires an examination of the volume of the subsidized impor ts and of the effect 
of those imports on domestic prices for the like pro duct.  Concerning the volume of the subsidized 
imports, the specific obligation on the investigating aut hority is to consider "whether there has been a 
significant increase" in the imports "either in absolute terms or relative to production or  
consumption".  Notable here is that this provi sion stipulates that a valid determination of a relative  
increase in imports can be made in relation to either  production or consumption.  In particular, given 
that the text of Article 15.2 permits a relative incr ease in imports to be established on the basis of a 
comparison with consumption, we do not see any basis on which to conclude that the absence of 
production of actual output at certain specific points in time, such as during the subsidy POI would, 
by itself, mean that there were no producers, thus  no industry, and no valid basis on which to perform 
the injury analysis required by Articles 15.1 and 15.2.   
                                                      
235 See, Appellate Body report, Thailand – H-beams , para. 106, referring to the identical counterpart 
provision, Article 3.1, of the Anti-dumping Agreement .  The Appellate Body stated that:   
 
Article 3.1 is an overarching pr ovision that sets forth a Memb er's fundamental, substantive 
obligation in [respect of the determination of injury].  Article 3.1 informs the more detailed 
obligations in succeeding paragraphs.  These obligations concern the determination of the 
volume of dumped imports, and their effect on prices (Article 3.2), investigations of imports from more than one country (Article 3.3), the impact of dumped imports on the domestic 
industry (Article 3.4), causality between dumped imports and injury (Article 3.5), the 
assessment of the domestic production of the lik e product (Article 3.6), and the determination 
of the threat of material injury (Articles 3.7 and 3.8)... 
 
236 In particular, Article 15.1 establishes the examinations that must be carried out as the basis for "a 
determination of injury", and footnote 45 indicates that "inj ury" consists of material injury or threat of material 
injury to, or material retardation of the establishment of, a "domestic industry".   WT/DS341/R 
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  7.199  Concerning the examination of the effect of the subsidized imports on domestic prices for the 
like product (also required by Article 15.1 and ela borated in Article 15.2), we note first that 
Article 15.2 provides for a variety of bases for this  examination:  whether there has been significant 
price undercutting by the subsidized imports in rela tion to the price of the like product, whether those 
imports have depressed the price of the like product,  or whether those imports have prevented to a 
significant degree price increases that otherwise woul d have occurred.  Nothi ng in the description of 
the required analysis of the price effects of the s ubsidized imports implies that actual output must be 
occurring at certain specific points in time, such as dur ing the subsidy POI, in order for the results of 
the price analysis to be valid.
237  Indeed, price analysis is undertaken on the basis of sales data, not 
production data, and it is apparent to us that the tw o may be entirely de-linked in time.  That is, a 
producer could produce, for a certain period, invent ory all of the resulting production, and then later 
sell from that inventory, with potentially no overlap  of the periods of production and sales.  In our 
view, nothing in Article 15.2 indicates that such  a factual situation would render the domestic 
enterprise in question ineligible to be considered a "producer" of the like product, and thus part of or 
the entire "domestic industry" during the period when it was only selling, and not producing.   
7.200  Article 15.4 of the SCM Agreement , governing the examination of the impact of the 
subsidized imports on the domestic industry, provi des additional context for the appropriate definition 
of "producer".  In particular, the long and varied list of factors in Article 15.4 demonstrates that a 
variety of factors in addition to production are re levant in an examination of the condition of the 
domestic industry.  Article 15.4 envisions a multifacet ed approach to examining the condition of the 
enterprises involved, requiring the consideration of actual  and potential  declines in output, sales, 
market share, profits productivity, return on invest ments, or utilization of capacity; factors affecting 
domestic prices; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments; and in the case of agricultural products, an increased 
burden on government support programmes.   
7.201  The factors in this list describe the types of ac tivities that "producers" could be engaged in.  
Indeed, while the list includes actual and potential dec lines in output, this is only one element in the 
long list of mandatory factors that must be examined in every case.  Artic le 15.4 states explicitly that 
no one or several of the listed factors can necess arily give "decisive guidance".  In our view, the 
inclusion of output as one among many factors, which must be considered in an investigation of the 
condition of the industry, demonstrates that bei ng a "producer" means more than simply producing 
output at the time of filing the application and during th e subsidy POI.  In particular, we consider that 
the non-prescriptive way in which Article 15.4 is drafted is aimed precisely at accommodating a wide 
range of potential factual situations that can pres ent themselves in countervailing duty investigations.  
Indeed, we can conceive of several examples of industries which might not be producing output at the time of filing the application and/or during the subs idy POI due to the seasonal nature of the product, 
technological innovations, distribution cycles, force majeure , and other reasons.    
7.202  We also consider that the interpretation adva nced by the European Communities runs counter 
to the object and purpose of the countervail provisions of the SCM Agreement , which is to provide for 
application of trade remedies where subsidized import s cause material injury or  threat thereof to an 
established domestic industry or the material retarda tion of the establishment of a domestic industry.  
                                                     
 
237 The European Communities maintains, however, that  if there is no output during the subsidy POI 
"no injury can be demonstrated" (see European Communities  – Second oral statement, para. 57; also European 
Communities – Response to Panel question 135).  We are not convinced.  Considering Article 15.2 as context, we note that in addition to its plain language, previous panels have found that this provision contains no 
"specific rule as to the time periods to be covered by the injury or dumping investigations, nor any relationship 
between or overlap of those time periods." (Panel Report, EC – Tube or Pipe Fittings , para. 7.320; and Panel 
Report Egypt – Steel Rebar , para. 7.130 on the identical provision in the Anti-Dumping Agreement ; see also US 
– Countervailing Duty Investigation on DRAMS , para. 7.245.)  WT/DS341/R 
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  If the terms "producer", and by extension "domestic i ndustry", were defined in such a way that, for the 
purposes of initiation, output was always required at or  very near the date of the application, and for 
the purposes of the injury investigation, output was always required during the subsidy POI, this could 
have the effect of per se excluding certain kinds of industries from being able to seek countervailing 
measures, and we see no indication in the text of the Agreement of any such intention on the part of 
the drafters.  For example, many agricultural and f ood industries, such as the olive oil industry, are 
seasonal in nature and only produce output at certain times of the year.  Firms in these industries may 
be involved in planting, equipment maintenanc e, harvesting, processing, selling, maintaining 
inventory, marketing and distribution at different  times of the year.  Also, some industries produce 
goods on a "just in time" or made-to-order basis.  In other industries, production facilities may be shut 
down during certain periods for maintenance or upgrading.  We consider that the European 
Communities' interpretation woul d exclude these industries from obt aining countervailing remedies 
during such periods because they, by their very natu re, do not produce output at all relevant times in a 
countervail investigation.238   
7.203  Most importantly, in our view, the European Communities' interpretation could lead to the 
result that an industry may be so  badly injured by subsidized imports as to be forced to cease 
production for some period, but would be disqua lified from obtaining the very remedy aimed at 
addressing such injury.239  We believe that this outcome would be  absurd and contrary to the intention 
of the drafters of the SCM Agreement.  In this context, we are not persuaded by the European 
Communities' argument that the provisions on ex officio initiation in Article 11.6 address this 
problem.240  In particular, we do not see how this form  of initiation could resolve the substantive 
question at issue, as Article 11.6 itself indicates that ex officio  initiations require the same evidentiary 
basis as application-based initiations.241  Thus, if the European Communities is correct that, for the 
purposes of initiation, an applicant must have act ual output at or near the time it presents an 
application, Article 11.6 would likewise indicate that "output" would be required at the time of 
initiation even if it was undertaken ex officio .  In addition, as the European Communities 
recognizes242, all investigations require the same eviden tiary basis, whatever  the basis of their 
initiations.  Thus, we fail to see how, if we were to follow the European Co mmunities' interpretation 
of Article 16.1, initia ting an investigation ex officio  could provide a solution for an industry that had 
been forced to cease production – and thus was not producing at or near the time of initiation or during the subsidy POI – due to competition from s ubsidized imports.  We see no indication in the 
                                                     
 
238 The European Communities, in response to Panel question 13, stated that this principle should not 
be applied rigidly and that there were borderline situations, but that, in its view, Fortuny did not present such a 
situation because it had ceased production one year before its application was filed and 16 months before the 
investigation was initiated.   
239 We recall in this context that, due to this situation, the application was presented on the basis of 
material retardation, but that in the light of Fortuny's long history as a producer of olive oil, Economía 
concluded that this would not be appropriate, and instead initiated the investigation on the basis of "injury".   
240 European Communities - Response to Panel question 16:  "During the First Substantive Meeting the 
European Communities made reference to the possibility of an ex officio  initiation for situations in which there 
is no domestic production.  The reason is that an in itiation upon a written application does require the existence 
of an industry that, accordin g to the EC's interpretation, also require s production.  Indeed, Article 11.1 of the 
SCM Agreement, refers to a written applica tion "by or on behalf of the domestic industry", and Article 11.4 lays 
down that an investigation based upon a request by th e domestic industry shall not be initiated unless there is 
sufficient support of the domestic industry.  On the other hand, Article 11.6 does not make a direct reference to the existence of a domestic industry. However, even in that case, during the investigation the investigating 
authority must adhere to the definitions of injury and domestic industry provided in Articles 15 and 16 of the 
SCM Agreement , which require the existence of actual production."  See also , European Communities – Second 
oral statement, paras. 16-17. 
241 Article 11.6 provides in relevant part that in respect of initiations ex officio , the authorities "shall 
proceed only if they have sufficient evidence of the existence of a subsidy, injury  and causal link, as described 
in paragraph 2, to justify the initiation of an investigation."  
242 European Communities - Response to Panel question 16.   WT/DS341/R 
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  SCM Agreement that its drafters intended to preclude su ch situations from the application of 
countervailing measures. 
7.204  With respect to the object and purpose of the SCM Agreement , Mexico has argued that the 
material retardation provisions of the SCM Agreement  and Article VI:6(a) of the GATT 1994  would be 
rendered inutile if the European Communities' interpretation of Article 16.1 were adopted.
243  The 
European Communities responds that some producti on would be required even in the case of the 
"establishment of a domestic industry."244   The European Commun ities bases its argument on a 
dictionary definition of the term English term "establish" which it argues means to "set up on a 
permanent or secure basis", and asserts that this definition indicates that "the term [establishment] 
does not refer to the point of starting up a business,  but to the achievement of a level of maturity" .245 
However, the European Communities provides only an excerpt of the cited definition. We note that 
the complete definition does, in fact, refer explicitl y to starting up a business.  The definition reads in 
full:  "Set up on a permanent or secure basis; br ing into being, found (a  government, institution, 
business, etc.)." (Emphasis added.)  This view is further confirmed by the corresponding provisions in the Spanish and French texts of the SCM Agreement , which are equally authentic, in which the term 
"establishment" appears as "creación" and "création" , respectively.  The definitions of these Spanish 
and French terms also refer to the f ounding or starting up of a business.
246   This broader definition 
supports the view that the ordinary meaning of the term "establishment" in the context of material 
retardation includes the starting up, or bringing into  being or founding, of an industry, which means 
that an applicant in such a situation may not yet be a domestic industry.  Based on our understanding 
of the term "establishment of a domestic industry" we are not certain of the exact relevance of the 
definition in Article 16.1 to a materi al retardation case.  Given that th is case does not involve injury in 
the form of material retardation, we will not address this argument further.  
7.205  Based on the ordinary meaning of Article 16.1 read in light of its context and object and 
purpose, we find that Article 16.1 does not require that an enterprise or group of enterprises seeking 
countervail remedies must actually produce output ar ound the date of filing of an application or 
during the subsidy POI to be considered a "producer" or "producers" and therefore part of or the entire 
"domestic industry" within the meaning of that Article.   
(c) Was Fortuny a "Producer" Within the Meaning of Article 16.1 of the SCM Agreement  
7.206  The determination of whether an enterprise or group of enterprises constitutes a domestic 
industry must be made on a case-by-case basis, de pending upon the particularities and peculiarities of 
the enterprise or group of enterprises being considered.247  The question before us is whether a real 
                                                      
243 Mexico - First written submission, para. 209;  Mexico – Second written submission, para. 167; see 
also Japan – Third party submission, paras. 23-24.  
244 European Communities – First oral statement, para. 33.   
245 European Communities – Response to Panel question 14 citing New Shorter Oxford English 
Dictionary (Emphasis added.)   
246 For example, the Dictionary of the Real Academia Español (online version) provides the following 
definition for "crear" (create) as:  "establecer, fundar, introducir por v ez primera algo; hacerlo nacer o darle 
vida, en sentido figurado.  Crear una industria, un género literario, un sistema filosófico…"  ("Establish, found, 
introduce something for the first time; cause to be born or give life to, in the figurative sense.  Create an 
industry, a literary genre, a philosophical system…").  The Dictionary of the Académie Française (online 
version) defines "création" as, inter alia , "3.  Action de fonder, d'instituer  officiellement... La création d'une 
entreprise industrielle, ..."  ("Action of founding, officially instituting...The creation of an industrial 
enterprise..."). 
247 In response to a specific question from the Panel, the European Communities stated that it "does not 
mean to imply that no account could be taken of producer s that operate on a seasonal basis or are for some other 
reason not producing regularly.  The principle should not be applied rigidly, and no doubt in applying it 
problems could arise because of borderline situations."   European Communities - Response to Panel question  WT/DS341/R 
 Page 67 
 
 
  applicant, Fortuny in this countervailing duty investig ation, could be consider ed a "producer" and thus 
constitutes the "domestic producers as a whole" within the meaning of Article 16.1 of the SCM 
Agreement .  Therefore, we now turn to examining wh ether Economía made a reasoned and adequate 
determination that Fortuny itself constituted a produ cer within the meaning of Article 16.1 of the SCM 
Agreement .   
7.207  The European Communities contends that Fortuny248 had ceased production for the entirety of 
the investigation period and for that reason "n o reasonable investigating authority could have 
determined that it was an existing industry".249     
7.208  Mexico argues that Economía relied upon extens ive information in reaching its conclusion 
that Fortuny was a producer of olive oil, incl uding that Fortuny was the legal and business successor 
of Formex Ybarra, which had produced olive oil uni nterruptedly since the 1940s; that Fortuny had the 
necessary installations and personnel to produce oliv e oil; that Fortuny did produce the like product to 
the investigated imported olive oil during the period of investigation for injury; and that Fortuny was 
an ongoing business that had never been involved in any liquidation or insolvency proceedings.250   
7.209  The record of the investigation demonstrat es that during the investigation, Economía 
examined the questions of whether Fortuny could be  considered a producer in spite of having ceased 
production in March 2002 a nd whether it had resumed production.  As discussed in detail below, 
starting with Fortuny's application and response to  the pre-initiation prevención, Economía obtained 
information concerning Fortuny's (and its predecessor’s)  history of olive oil pr oduction, monthly data 
for a number of economic indicators (capacity, production, sales, employment, etc.) for the three prior calendar years, information about the state of its production facilities, and information about its 
business plan for resuming operations.  During the course of the investigation, Economía received 
additional information from Fortuny, including that  it had resumed olive oil production after the 
imposition of provisional measures.  The record of the investigation also indicates that Economía 
conducted a verification visit to Fortuny's premises,  which confirmed the information that had been 
submitted by Fortuny relating to its plans for r esuming operations and its actual resumption of 
operations.   
7.210  Turning in more detail to Economía's examina tion, we note that the question of whether 
Fortuny was a "producer" is addressed in the Final Resolution inter alia  at paragraphs 5 and 58, 
describing Fortuny's arguments and the information it submitted in this regard ; at paragraphs 224, 
226, 227 and 400, relating to Fortuny's physical cap ability to produce olive oil and its resumption of 
these activities in late 2004; at paragraphs 328-367,  concerning the indicators of Fortuny's condition 
and performance during the period 2000-2002; at paragraphs 368-414, in  terms of Economía's 
assessment of the viability of Fortuny's business plan  for restarting operations; and at paragraph 330, 
in terms of the verification of the information that Fortuny had submitted.    
7.211  Paragraph 5 of the Final Resolution describes the information submitted by Fortuny with the 
application "proving the existence of the applican t's production plant, its production capacity and the 
availability of raw materials to begin production a nd the technical feasibility of that production".  
Paragraph 58 refers to submissi ons made by Fortuny detailing, inter alia , the condition and 
                                                                                                                                                                    
 
13.  However, the European Communities declines to provide any specific elaboration as to what constitutes a 
"borderline" situation or how such situations should or could be differentiated from the one in which Fortuny 
found itself.    
248 We will assume, for the purposes of this section,  that Fortuny was the sole domestic producer of 
olive oil in Mexico, in which case it would have constituted the entire domestic industry for purposes of 
Article 16.1 of the SCM Agreement .  We examine the question of whethe r, in fact, Fortuny was the sole 
producer in section VII.J.2 infra . 
249 European Communities - Response to Panel question 143. 
250 Mexico - First written submission, paras. 25-28 and 213.   WT/DS341/R 
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  availability of the company's production facilities, the resumption of production, the feasibility of 
olive oil production, the supply of olives, financi ng for the purchase of raw materials, activities for 
marketing and distributing olive oil, volumes and pr ices of sales, as well as production and financial 
data for 2004 (i.e., after production was resumed) .  Paragraph 224 indicates that the information 
contained in the administrative file showed not only that under certain circumstances it would be 
viable for Fortuny to resume production, but also that in fact Fortuny did resume production after the 
provisional countervailing measures were imposed.  Paragraphs 226 and 227 indicate that from the 
outset, Economía had considered Fortuny to have the necessary legal standing to bring the case, 
because the company was incorporated under the laws  of Mexico, and its main activities were the 
production and transformation of the products of the o live tree, including olive oil.  In this regard, 
Fortuny had submitted documents from Mexican government agencies containing evidence of the 
existence of its production plant, its production capac ity, and the availability of raw materials to start 
production, and the technical feasibility of that pr oduction.  Paragraph 400 indicates that during the 
verification visit, Economía confir med the nature and condition of Fo rtuny's production equipment as 
well as the fact that production was taking place at that time.  Paragraphs 328-368 contain a detailed 
discussion of Economía's analysis of the effects of  the investigated imports on Fortuny's condition 
during the period 2000-2002, i.e., prior to its ceasi ng operations.  Finally, pa ragraph 330 indicates that 
as a result of the verification visit, only adjust ments of "minor importance" were made to the 
information submitted by Fortuny.   
7.212  Concerning Economía's assessment of th e viability of Fortuny's business plan, 
paragraphs 368-414 of the Final Resolution indicate that Economía questioned and tested a number of 
the assumptions that Fortuny had presented, and that it also tested the viability of the plan against 
various arguments and objections raised by the res pondent interested parties.  These paragraphs also 
indicate that in respect of a number of variables, Economía substituted more conservative estimates than had been presented by Fortuny, and that dur ing the verification visit to Fortuny, Economía 
confirmed and adjusted, as necessa ry, the information that had been submitted by Fortuny.  
Economía's conclusion at paragraph 414, which was based on its own simulations of various scenarios 
under Fortuny's business plan, was that "the project to resume production would be financially viable 
if countervailing duties were imposed on the subsidi zed imports and financially non-viable if they 
were not." 
7.213  We note that the record of the investigation sh ows that the olive oil business is, by its nature, 
a seasonal one.  This point was not contested, either in the investigati on or in the present dispute.  In 
the case of Fortuny, the record indicates that the picking of olives and the production of olive oil 
normally took place between December and April (with some variability depending on weather 
conditions).
251  Given that Fortuny halted production in March 2002, it had only missed one 
production season at the time it filed its application, a nd it produced olive oil in two of the three years 
under analysis for the determination of injury.  Additionally, during the time it was not producing 
output of olive oil, Fortuny had maintained its  olive groves and production facilities, as well as 
developed a business plan for resuming operations, creat ed a new brand name and label, and prepared 
its application for countervailing duties.  We, theref ore, consider that the evidence relied upon and the 
explanation supplied by Economía reasonably and adequately supports the conclusion that Fortuny 
was a "producer" during the period of investigation for injury, i.e., that the essential nature of its 
business, despite a cessation of production for one season, was still the production, distribution, and 
sale of olive oil.   
7.214  We have examined the facts surrounding Fortuny' s particular circumstances and have found 
that Economía reached a reasoned a nd adequate determination, based  on the evidence before it on the 
                                                      
251 Exhibit MEX48A (showing a production season of January – June in 1999, January – April in 2000, 
January – June in 2001, and January – March in 2002); see also Mexico – Response to Panel question 17; Final 
Resolution (Exhibit EC-1), para. 9.  WT/DS341/R 
 Page 69 
 
 
  record, and consistent with Article 16.1 of the SCM Agreement , that Fortuny was in fact a producer of 
the domestic like product. 
7.215  Given these conclusions, we find that the Eu ropean Communities has not established that 
solely because Fortuny, which had been continuous ly producing olive oil for many years, was not 
producing output of olive oil at the time it presente d its application or during the subsidy POI, it was 
not a "domestic producer" within the meaning of Article 16.1 of the SCM Agreement .   
7.216  For the same reasons, we also find that th e European Communities has not established its 
consequential claims under Article 11.4 of the SCM Agreement and Article VI:6(a) of the GATT 1994 , 
respectively,252 that because Fortuny was not a producer, a nd thus could not constitute the domestic 
industry, both Economía's decision to initiate and its  injury determination we re inconsistent with 
Mexico's obligations  
7.217  We recall that the European Communities' claims under these provisions relating to the 
definition of the domestic industry do not end here , but have a second major component, to which we 
now turn.  In particular, the European Communities a lleges that even if Fortuny could be considered a 
producer of the like product, Economía's explanation of  its determination that Fortuny constituted the 
sole producer of the like product, such that Fortun y by itself constituted the entire Mexican domestic 
industry producing olive oil, could not possibly be  reasoned and adequate because Economía had an 
insufficient factual basis for that determination both at the initiation stage and in the injury 
investigation.  We will address this claim of the European Communities in respect of the initiation of 
the investigation, under Article 11.4 of the SCM Agreement , in section VII.I, below; and we will 
address this claim in respect of the injury investigation, under Article VI:6(a) of the GATT 1994  in 
section VII.J below.  In this context, the Europ ean Communities cites statements by the Appellate 
Body that the review by panels of the "factual components" of findings by investigating authorities 
should focus on whether, in the light of the evid ence on the record, the conclusions are "reasoned and 
adequate".253  
I. ARTICLE 11.4  OF THE SCM AGREEMENT  
7.218  As noted, in addition to the above-discussed claims based on the legal interpretation of 
Article 16.1 of the SCM Agreement , the European Communities argues that even if Fortuny could 
have been considered a producer of the like product, Mexico nevertheless acted inconsistently with its 
obligations under Article 11.4 of the SCM Agreement because Economía initiated the investigation 
without a proper examination of whether there were other Mexican producers of olive oil than Fortuny, and thus without a proper examination of the degree of support for the application. For this 
reason, the European Communities argues, Economía's determination that the application by Fortuny 
was made "by or on behalf of the domestic indus try" was inconsistent with Article 11.4 of the SCM 
Agreement .   
1. Arguments of the Parties 
7.219  The European Communities asserts that Economía failed to properly determine that Fortuny 
had filed the application "by or on behalf of the domestic industr y" because it did not adequately 
investigate the possible existence of domestic producer s other than Fortuny prior to the initiation; i.e., 
that Economía's examination of the degree of support for the application was inadequate and that the 
initiation therefore was inconsistent with Article 11.4 of the SCM Agreement .  According to the 
European Communities, "the investigating authority cannot solely rely on information provided in the 
                                                     
 
252 See, para. 7.184, supra . 
253 European Communities – First written submission, paras. 75 et seq. WT/DS341/R 
Page 70  
 
  application of the domestic industry".
254  In addition, the European Communities argues that as a 
factual matter, the material provided by Fortuny e ither does not support the conclusion that there were 
no other producers or amounts to mere assertion rather than evidence.255     
7.220  Mexico argues that Fortuny was, at the time of its application, the sole domestic producer of 
olive oil.  With respect to the possible existence of olive oil producers other than Fortuny, Mexico 
argues that the evidence examined by Economía at the time of initiation supports the conclusion that 
there were no other domestic producers of olive oil.256  
2. Reasoning of the Panel 
7.221  Article 11.4 reads as follows: 
11.4 An investigation shall not be in itiated pursuant to paragraph 1 unless the 
authorities have determined, on the basis of  an examination of the degree of support 
for, or opposition to, the application expressed by domestic producers of the like product, that the application has been made by or on behalf of the domestic industry.  
The application shall be considered to ha ve been made "by or on behalf of the 
domestic industry" if it is supported by those domestic producers whose collective 
output constitutes more than 50 per cent of  the total production of the like product 
produced by that portion of the domestic industry expressing either support for or opposition to the application.  However, no investigation shall be initiated when 
domestic producers expressly supporting th e application account for less than 25 per 
cent of total production of the like product produced by the domestic industry. 
7.222  We note, first, that Article 11.4 is a standing provision designed to ensure that applicants for 
countervailing duty investigations are sufficiently  representative of the domestic industry producing 
the like product.  As such, this provision requires an  investigating authority to make a determination 
as to whether "the application has been made by or on behalf of the domestic industry."  This 
determination is to be undertaken "on the basis of  an examination of the degree of support for, or 
opposition to, the application expressed by domestic producers of the like product".   
7.223  As noted above, Article 16.1 provides for two distinct bases on which to identify the domestic 
industry: the domestic producers as a whole of the like products or those of them whose collective output of those products constitutes a major propor tion of the total domestic production of those 
products.  In circumstances in whic h, as in the case before us, an a pplicant claims to constitute the 
entire domestic industry, two questions are raised for the investigating authority:  (1) whether the 
applicant is a domestic "producer" of the like produc ts; and (2) assuming that the answer to the first 
question is "yes", whether it constitutes the domestic  producers as a whole, in which case it would 
constitute the entire domestic industry.  Where an investigating authority has reached the conclusion 
that an applicant constitutes the entire domestic indus try producing the like product, that authority will 
not, in practice, need to undertake the measureme nt and weighing exercise contemplated by the 
second and third sentences of Article 11.4.  Rather, in such a situati on, the criteria in those sentences 
necessarily will be satisfied.  Factually, this is  what occurred in the case before us:  Economía 
concluded on the basis of the evidence before it th at Fortuny constituted the domestic producers as a 
                                                     
 
254 European Communities - Second oral statement, para 12. 
255 Ibid., paras 37-45;  European Communities - Second written submission, paras. 17-22. 
256 Mexico – First written submission, paras. 38-44.   WT/DS341/R 
 Page 71 
 
 
  whole of the like products and, as a result, did not engage in further measurement of the degree of 
support for the application.257 
7.224  The questions underlying this claim of the Eu ropean Communities relate to the quality and 
reliability of the evidence on which Economía relie d.  The European Communities makes essentially 
two arguments:  first, that as a legal matter, i nvestigating authorities are precluded from basing their 
standing determinations pursuant to Article 11.4 of the SCM Agreement solely on the information 
provided in the application; and second, that the fa ctual information provided by Fortuny in the olive 
oil investigation was an insufficient basis for th e conclusion that Fortuny was the sole Mexican 
producer of olive oil.   
7.225  Concerning the first of these arguments, we see no language in Article 11.4, or in the SCM 
Agreement generally, prohibiting an investigating author ity from basing its determination that an 
application has been made "by or on behalf of th e domestic industry" solely on evidence provided by 
the applicant.  In fact, there is no reference at all in Article 11.4, or elsewhere in the SCM Agreement, 
to particular sources of information that must or must  not be used as the basis for this determination.  
The only stipulations concerning the quality of the evidence provided in an application are the general 
requirements in Articles 11.2 and 11.3 of the SCM Agreement  (neither of which the European 
Communities has cited in its claims),  that "simple assertions, unsubstantiated by relevant evidence, 
cannot be considered sufficient" for purposes of an application, and that the authority must "review 
the accuracy and adequacy of the evidence provide d in the application".  The focus of these 
provisions is on the quality and credibility of the evidence, rather than on its exact source.   
7.226  Concerning the quality of the evidence to be used  for standing determinations generally, we 
recognize that depending upon the specific nature of th e information provided by an applicant in a 
particular case, an investigating authority mi ght need to obtain additional supplementary or 
corroborating information in order to have a suffici ent basis for its determination.  If, however, the 
application itself contains factual evidence that co rroborates the assertions of the applicant, no further 
information may be required.  We consider pertin ent the findings in past disputes that while an 
applicant need only provide in an application such information as is "reasonably available" to it, and 
such information need not be of the quantity and qu ality that would be required in order to make a 
preliminary or final determination, the informati on nevertheless may not constitute sufficient evidence 
to justify initiation, and an investigating authority, may, but is not required to , seek additional 
information to supplement that contained in the application.258   
7.227  In this context, we disagree with the Europ ean Communities that the evidentiary standard 
applicable to a determination of standing is higher than the standards applicable to determinations of 
subsidization, injury and cau sation for the purposes of initiation.259  In particular, we see no textual 
basis for such a distinction, and consider that all of the information in an application, which pursuant 
                                                      
257 In its application Fortuny stated that "Fortuny  constitutes 100 per cent of the domestic industry" 
Exhibit MEX-41A (proprietary version Exhibit MEX-51A ) and Economía, in the Initiation Resolution (Exhibit 
EC-13), accepted this assertion.  In par ticular, the Initiation Resolution contains two statements to this effect.  In 
paragraph 22 under the heading "Standing" (" Legitimación "), the Resolution states "On the basis of written 
communications from the Department of Agriculture of th e Government of the Free and Sovereign State of Baja 
California, Fortuny represents 100 per cent of the domestic industry, because it is the only company with the necessary economic and financial conditions and investments needed to establish a domestic industry in the 
United Mexican States in the product investigated, thus fulfilling the conditions in Article 11.4 and 16.1 of the 
SCM Agreement , Articles 40 and 50 of the Foreign Trade Law, and Articles 60 and 75 of the Foreign Trade 
Regulation."  At paragraph 48, under the heading "Domestic Market", the Initiation Resolution states: 
"Therefore, in terms of capacity and facilities for producing the product most closely resembling or similar 
(virtually identical) to the one imported, Fortuny constitutes 100 per cent of the domestic industry". 
258 See, e.g., Panel report in Mexico – Corn Syrup , para. 7.74.   
259 European Communities - First oral statement, para. 36.   WT/DS341/R 
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  to Article 11.2(i) of the SCM Agreement  includes information specifically pertaining to the standing 
determination of Article 11.4, is subject to the sam e qualitative "sufficiency" standard referred to in 
Article 11.3 of the SCM Agreement .   
7.228  For these reasons, we consider that whether or not an investigating au thority needs to obtain 
information beyond that contained in the application regarding the standing of an applicant is a matter 
to be decided on a case-by-case basis.  Moreover, we  see nothing in Article 11.4, the only provision 
cited by the European Communities, which requires an investigating authority in every case to seek 
additional information over and above  the information provided by the applicant pertaining to its 
standing to request the investigation.   
7.229  Moving to the second argument of the Europ ean Communities, concerning the evidence relied 
upon by Economía, Mexico confirmed to us that Economía relied solely on information provided by 
Fortuny in reaching its determination for the purpo ses of initiation that Fortuny was the only Mexican 
producer of olive oil.
260  What Economía considered, in partic ular, was the information provided in, 
and attached to, Fortuny's application of 12 Marc h 2003 and the additional information provided by 
Fortuny on 9 May 2003 in res ponse to Economía's pre-initiation prevención .   
7.230  Mexico identified the information provided by  Fortuny, and examined by Economía, as the 
following:  
(a)  statements made by Fortuny concerning the state of the domestic industry;  (b)  letters dated 3 October 2002, and 27 a nd 28 January 2003,  from the state of Baja 
California in respect of Fortuny's produc tive capacity (these were attached to the 
application); and 
(c)  information contained in the article "El Olivo, Eco del Mediterraneo" in the journal 
Claridades Agropecuarias  ("Claridades  article"), published June 2001 by the 
Government Agency the "Agricultu ral Marketing Support and Services" 
("ASERCA") of the Federal Ministry of Agriculture, Livestock, Rural Development 
and Food (this article was also attached to the application). 
The statements of Fortuny, the lette rs from Baja California, and the Claridades  article are all referred 
to in the Initiation Resolution.
261   
7.231  We note, and consider significant, that a lthough all of this information was provided by 
Fortuny, much of it was from sources other than Fortuny, in particular, from government sources.  
The substance of this evidence is discussed below.   
7.232  In its application, Fortuny stated that it cons tituted 100 per cent of the domestic industry.  In 
making this statement Fortuny acknowledged that th ere was a "small cottage industry consisting of 
estates that produce hand pressed oil".262  It did not, however, consider that those estates constituted 
part of the domestic olive oil industry as Fortuny w as "the only firm in Mexico able to market its 
products through the same channels as the products under investigation".263  In its reply to Economía's 
prevención , Fortuny supplied information in respect of production and installed capacity both for 
Fortuny and for Mexican producers as a whole.  That  information indicated that Fortuny's historic 
production and current installed capacity were the same as national production and installed capacity 
                                                      
260 Mexico – Response to  Panel question 103. 
261 Initiation Resolution (Exhibit EC-13), paras. 4, 19.   
262 Exhibit MEX – 41A (proprietary version at Exhibit MEX – 51A), para. 30.  
263 Ibid.   WT/DS341/R 
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  (i.e., that there were no other domestic producers of olive oil, such that Fo rtuny constituted the entire 
domestic industry in respect of both production and installed capacity).264  No source is indicated in 
respect of this information, and we assume that it was based on Fortuny's records of its production and 
knowledge of its own capacity.    
7.233  Fortuny attached to its application two letters  from the Government of the State of Baja 
California.265  While the letters do not state that there we re no other olive oil producers in Mexico or 
Baja California, they also do not mention or imply the existence of any producers other than Fortuny.  
The letters indicate that Fortuny maintained a pr oduction facility in good repair and that olives were 
available in the region to supply that facility should  Fortuny make a decision to re-start production.   
7.234  The Claridades  article was published by the ASERCA  programme of Mexico's Federal 
Ministry of Agriculture, Livestock, Rural Developm ent and Food.  Mexico submits that this is an 
authoritative body, and the European Communities does not contest this.   
7.235  In submissions made before us, there was considerable discussion by the parties as to the 
meaning of a sentence at page 12 of the Claridades article which, reads as follows: 
The main companies established in Me xico that process olives for [table 
consumption] are Ybarra and Bufalo and for oil only the former.266 
Mexico considers that this statement indicates that  there were two main companies in Mexico that 
processed olives for table consumption, but only on e company that processed olives for oil, namely 
Ybarra (predecessor to Fortuny).267  The European Communities' position is that the adjective "main" 
refers both to the companies producing table olives and the companies producing oil (i.e., that Ybarra 
and Bufalo were the main  companies producing table olives while Ybarra was the main  company 
producing olive oil).  For the European Communities,  the use of the term "main" as applied to the 
production of olive oil implies that there were other entities producing olive oil, and it argues that on this basis Mexico was obliged to conduct furthe r investigations to id entify such entities and, 
presumably, to consider their production volume  and support for the application in addressing 
standing pursuant to Article 11.4 of the SCM Agreement .
268 
7.236  Considered in isolation, it is unclear to us whether the term "main" in the quoted passage is 
intended to apply to the production of olive oil or only to the production of table olives.  We note, however, that while elsewhere in the Claridades  article there are references to production and 
marketing of olive oil by Ybarra (predecessor to Fort uny), there are no references to the production of 
olive oil by any other entity (with the limited ex ception of experimental artisanal production).  
Furthermore, in respect of brands of olive oil mark eted in Mexico, the Ybarra (Fortuny) brand is the 
only domestic brand identified in the Claridades  article.
269  We consider that the Claridades  article 
taken as a whole supports the proposition that Fortun y was the only producer of olive oil operating in 
Mexico. 
7.237  We thus find, as a matter of fact, that there was no concrete evidence, in any of the 
information that was before Economía at the time it took the decision to initiate, that there were 
                                                      
264 Exhibit MEX – 45 (proprietary version at Exhibit MEX – 51B1).  
265 Exhibit MEX- 39 . 
266 Claridades Agropecuarias  (Exhibit EC – 30), p.12.  The Spanish version of the text refers to olives 
for "aderezo" which the European Communities explained to the Panel in response to Panel question 132 is "the process to transform olives harvested fr om the olive tree into table olives." 
267 Mexico – First written submission, paras. 39-40. 
268 European Communities – First oral statement, para. 40. 
269 Claridades Agropecuarias, p. 14, 15, and  p.19 (where, in the table comparing prices of olive oil by 
brand name, Ybarra is the only Mexican company listed, all others are from Spain and Italy) (Exhibit EC-30) WT/DS341/R 
Page 74  
 
  producers of olive oil other than Fortuny (except fo r small artisanal producers) operating in Mexico.  
Furthermore, we consider that the information was cr edible.  In particular, although all of the material 
was provided by Fortuny, it included documents from external, government sources, in particular a government publication dedicated to an examination of the Mexican olive and olive oil industry.  Upon examining the totality of the evidence that was before Economía at the time of initiation
270, we 
find that Economía reasonably and adequately coul d have concluded, for purposes of the standing 
determination, that there were no other domestic producers of olive oil and that Fortuny thus constituted the entire domestic industry.   
7.238  For the above reasons, we find that the Eu ropean Communities has not established that 
Mexico acted inconsistently with its obligations under Article 11.4 of the SCM Agreement  when it 
determined that the application was made "by or on behalf of" the domestic industry.    
J. 
ARTICLE I 6.1 OF THE SCM AGREEMENT AND ARTICLE VI :6(a)  OF THE GATT 1994   
7.239  In addition to its claim that Fortuny was not a producer within the meaning of Article 16.1 of 
the SCM Agreement , the European Communities also cha llenges, assuming that Fortuny was a 
producer, the factual basis of Economía's conclusions  that there were no Mexican producers of olive 
oil other than Fortuny, thus constituting the entire domestic industry.  In particular, the European 
Communities asserts that Economía's  investigation into the possible existence of other olive oil 
producers was inadequate and that, as a consequen ce, Economía's conclusions concerning the extent 
of the domestic industry were not reasoned a nd adequate.  For these reasons, the European 
Communities maintains Mexico's injury analysis was purely speculative and that Economía did not 
provide a reasoned and adequate expl anation of its findings, and was th erefore in contravention of its 
obligations under Article 16.1 of the SCM Agreement , as a consequence of which its injury findings 
also were in breach of Article VI:6(a) of the GATT 1994 .271   
1. Arguments of the Parties 
7.240  On the question of whether there were Mexican producers of olive oil other than Fortuny, the 
European Communities  argues that the investigative record  contained evidence (including the 
Claridades article discussed above, as well as inform ation and arguments presented by respondent 
interested parties in the investiga tion) demonstrating that other producers existed.  According to the 
European Communities, Economía's efforts to pursue this issue were inadequate, and the evidence on 
the record did not support the conclusion that ther e were no olive oil producers other than Fortuny.  
We understand the European Communities' argument to  be that because of these alleged flaws in the 
factual basis underlying Economía's conclusion that Fortuny constituted the entire domestic industry, 
that conclusion was not reasoned and adequate, a nd thus Economía's injury  determination was not 
made with respect to "the domestic indus try" as required by Article 16.1 of the SCM Agreement and 
was therefore also inconsistent with Article VI:6(a) of the GATT 1994 .   
7.241  Mexico disputes the European Communities' char acterization of Economía's analysis of the 
possible existence of producers other than Fortuny, arguing that the European Communities has relied 
                                                      
270 We consider that the relevant question facing Economía was not whether any individual document 
or statement was a sufficient basis for a conclusion that Fortuny was the sole domestic producer but, rather, whether upon examining the evidence in its totality Econom ía could reasonably reach that conclusion.  This is 
consistent with the decision of the Panel in Mexico – Steel Pipes and Tubes  (at para. 7.24) in respect of the 
obligation of an investigating authority to consider the accuracy and adequacy of in formation provided in an 
application pursuant to Article 5.3 of the Anti-Dumping Agreement (the counterpart to Article 11.3).  There the 
panel noted: "... a piece of evidence that on its own mi ght appear to be of little  or no probative value could , 
when placed beside other evidence of the same nature, form part of a body of evidence that, in totality, was 'sufficient'."  
271 European Communities – First written submission, paras. 188-189.  WT/DS341/R 
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  on isolated sentences and paragraphs in the Final Resolution which can in no way be regarded as a 
valid basis for its arguments, and has ignored other relevant facts with respect to the investigating 
authority's enquiries into the possible existence of other producers.272  Mexico also maintains that the 
European Communities has not satisfied its burden to present a prima facie case.  Mexico argues that 
"even though the EC has indicated some other possible additional enquiries, these do not suffice to 
disregard the authority's evaluation of the extent of the domestic industry."273  Mexico contends 
furthermore that the replies from other government  agencies, while not unequivocal, indicated that 
their records contained no indications that any other domestic producers existed.274  Mexico also 
maintains that the European Co mmunities advances an unreasonable and unacceptable standard that 
would require an investigating authority to undertake enquiries ad infinitum  even when it had 
collected sufficient information to conc lude that there were no other producers.275   
2. Reasoning of the Panel 
7.242  We consider that this claim of the European Communities raises two questions:  first, whether 
the efforts undertaken by Economía were ade quate and reasonable, and second, whether the 
information before Economía in its  investigation concerning the extent of the domestic olive oil 
industry reasonably supported its conclusion that th ere were no olive oil producers in Mexico other 
than Fortuny.  We examine these on the basis of th e relevant facts from the investigation as reflected 
in the Preliminary and Final Resolutions and other in formation contained in the investigative record.  
In doing so, we are mindful that acco rding to the applicable standard of review, our task is to consider 
whether the evidence relied upon, and explanati on provided by, Economía reasonably supports its 
conclusion that Fortuny was the only domestic producer of olive oil.276   
7.243  We start our analysis by considering Economía 's efforts to determine whether there were 
domestic olive oil producers other than Fortuny.  The European Communities' characterizes those 
efforts as follows:   
First, Economía contacted a Mexican firm, Ma prinsa, alleged by the exporters to be 
producing olive oil.  Economía reported that Ma prinsa explained that it was engaged solely in 
bottling and packaging olive oil, and not in pro ducing it.  However, the Ministry apparently 
made no attempt to discover from Maprinsa whethe r the oil that it bought was of Mexican or 
foreign origin.   Second, Economía showed a simila r lack of initiative when investigating two other firms that 
were revealed to be engaged in bottling only, an d in regard to yet two more firms that were 
named as possible producers, Economía either relied on a third party's view or did nothing at 
all to determine the nature of their activities.
277  In addition, Economía simply dismissed 
artisanal production as irrelevant because it was not distributed through the same channels as 
imports.  
Third, Economía contacted a national association of oil and edible fat industries, but this 
association merely confirmed that Fortuny was the only olive oil producer registered with it and that it had no registrations of any domestic producer other than Fortuny.  This carefully 
                                                     
 
272 Mexico – First written submission, para. 157-204, citing Final Resolution (Exhibit EC-1), paras. 212 
– 255. 
273Mexico – Second written submission, para. 136. 
274 Ibid., para. 151. 
275 Ibid., para. 154.  
276 Appellate Body Report, US – Countervailing Duty Investigation on DRAMS , para. 188. 
277 (footnote original) Final Resolution (Exhibit EC-1), para. 241. WT/DS341/R 
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  worded response, by avoiding the larger issu e of whether the association knew of any other 
producers, does not inspire confidence.  Fourth, Economía contacted several governme nt organisations, but these proved unable to 
provide relevant information.  Despite this fa ilure, Economía made no further efforts to gain 
information from government sources.
278 
 
7.244  The European Communities asserts that these e nquiries were "limited" and argues that they 
"produced answers that any serious body w ould regard as demanding follow up questions."279  
Additionally, the European Communities alleges that  "in its enquiry about other national producers, 
[Economía] never wrote to the authorities of the States of Baja California and Sonora, which are 
regions where the Final Resolution declares that olive tree cultivation plays an important economic 
role."280   
7.245  We have reviewed the Preliminary and Final Resolutions, as well as the actual 
correspondence from the record provided to us by Me xico, relating to Economía's enquiries as to the 
possible existence of other domestic producers.  We find that, as matters of fact, in response to 
representations of respondent interested parties on this issue, Economía undertook the following steps 
in conducting its examination of this question: 
(a) Economía sent a letter to Maprinsa on 15 December 2003, asking inter alia  whether it 
knew of any other domestic producers of oliv e oil and whether the olives it used were 
of Mexican origin and who its suppliers were.281  Maprinsa's reply of 5 January 2004 
indicated that it knew of three other domestic olive oil manufacturers (Olivos de 
California, Olivarera Tulyehualco, and Conser vas Vermex).  It also indicated that it 
did not buy olives, but olive oil which it bottled.  Maprinsa also provided the trade 
names under which it sold its olive oil (San Lucas and El Olivo).282 
 
(b) In response to assertions by Fortuny that  Maprinsa's product was not olive oil, 
Economía contacted on 8 December 2003 a la boratory company, Bufete Químico, 
which had been provided a sample of Mapr insa's oil by Fortuny.  Economía asked for 
a copy of the laboratory report as well as assurances that the sample bore Maprinsa's trade name and had not been tampered with.
283  Bufete Químico confirmed on _17 
December 2003 that it had received a properly closed bottle with a label bearing 
Maprinsa's trade name "San Lucas, Aceite de Oliva, Gourmet" which it determined 
was not olive oil, but rather canola (rapeseed) oil.284 
(c) Economía on 8 December 2003 sent a request  to the Mexican Industrial Property 
Institute ("IMPI") seeking information on Maprinsa's brand names and whether 
IMPI's database indicated if Maprinsa's products were manufactured in Mexico or 
only packaged there.  Economía also request ed information on the number of olive oil 
brands registered with IMPI and if  their nationality could be discerned.285  I M P I  
responded on 19 January 2004 that San Lucas w as registered to Maprinsa and that El 
Olivo was registered in the name of C. Lu is Fernando Peniche Gallareta.  IMPI also 
noted that there were 13,915 marks in inte rnational class 29, which includes edible 
                                                      
278 European Communities – First written submission, paras. 168-171.  
279 European Communities - First written submission, para. 172. 
280 Ibid., para. 105.   
281 Exhibit MEX-9 
282 Exhibit MEX-10.  See also, Preliminary Resolution (Exhibit EC-22), paras. 193-194. 
283 Exhibit MEX-11. 
284 Exhibit MEX-12. 
285 Exhibit MEX-13  WT/DS341/R 
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  oils and fats as well as meat, fish, birds, meat extracts, preserved fruits and 
vegetables, gelatines, marmalades, com potes, eggs, milk and milk products.286 
(d) Economía also sent letters to Conservas Verm ex and Olivarera Tulyehualco, dated 15 
October 2004, asking them to explain their products, whether they produced olive oil 
or imported and bottled it or both.  Economía also asked them to explain their brands 
and distribution channels and to explain th e inputs utilized in the production of olive 
oil and whether these inputs were of nationa l origin or imported.  Economía also 
asked them to indicate from where they acquired the inputs.287  Both companies, in 
replies dated 21 October 2004 and 1 November 2004 respectively, stated that they did 
not produce olive oil, but only bottled it.288  Conservas Vermex explicitly stated that it 
imported its olive oil from Spain and other Mediterranean countries which it 
purchased in bulk at the port of Veracruz.289  Olivarera Tulyehualco indicated that it 
only bottled olive oil which it purchased from a supplier in Baja California Norte.  
Additionally, Olivarera Tulyehualco provided labels for its oil products.  One referred 
to "Aceite Vegetal" the other to "Aceite Puro  de Oliva".  Both labels indicated that 
the product was bottled by Olivarera Tuly ehualco which was a registered import 
export company.  There was no reference to the origin of the oil on either label.290   
(e) Economía sent a letter on 8 December 2003 to  the National Association of Oil and 
Edible Fat Industries ("ANIAME") asking for information on domestic companies 
that produced olive oil: their number, names, and addresses as well as the brands 
under which they distributed.  Economía also  asked for information on the volume of 
domestic production in the years 1998-2003 and whether ANIAME had information 
on the current state of the olive oil industry. 291  ANIAME replied on 8 January 2004 
that Fortuny was the sole olive oil pr oducer registered with the association.292 
(f) Economía sent a letter on 8 December 2003 to  the National Association of Self-
Service and Department Stores ("ANTAD" ), a group of some of the major self-
service and commercial distribution stores in  Mexico, requesting information on any 
domestic olive oil producer known to them.293  The ANTAD transmitted the request 
to two of its associates, Grupo Gigante and Comercial Mexicana.294  Grupo Gigante 
did not respond, but Comercial Mexican a responded on 17 December 2003 that it 
imported its olive oil from Italy and Spain and that it had not received any offers to 
market oil from any Mexican company.295  Economía also sent independent letters to 
those two companies, on 4 October 2004.296   
(g) Economía on 4 October 2004 sent requests for information to major self-service and 
department stores who were not members of ANTAD.  These included Nueva Wal Mart, Grupo Corvi, Servicio Comerc ial Garis and La Europea Mexico.
297  La Europea 
responded on 15 October 2004 that it purchased  imported olive oil and that it had 
received offers from Maprinsa.298  Grupo Corvi replied on 11 October 2004 that it had 
                                                      
286 Exhibit MEX-40. 
287 Exhibits MEX-14, 15. 
288 Exhibit MEX-16, 17.  
289 Exhibit MEX-16. 
290 Exhibit MEX-17. 
291 Exhibit MEX-18. 
292 Exhibit MEX-19. 
293 Exhibit MEX-22. 
294 Exhibit MEX-23. 
295 Exhibit MEX-26. 
296 Exhibits MEX-24, MEX-25 
297 Exhibits MEX-27, 28, 29, and 30. 
298 Exhibit MEX-31. WT/DS341/R 
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  not purchased Spanish or Italian olive oil and that it had received an offer from a 
Mexican company which was marketing "C arbonell" olive oil, a Spanish brand.
299  
Servicio Comercial Garis replied on 14 October 2004 that it had purchased Spanish 
olive oil and had not received any offe rs for domestically-produced olive oil.300 
(h) Economía sent letters to the government of the state of Baja California Norte, to 
SAGARPA (the federal authority for the agriculture and livestock sector), and to 
ASERCA a sub-division of SAGARPA, on 8 December 2003301  These letters asked 
for information (1) about the harvest of olive trees in the years 2000 through 2003 as 
well as the volume of table olives obtained and those destined for olive oil (as well as 
the conversion factor of olives necessary to produce one litre of olive oil); (2) 
information on olive tree plantations in Mexico; and (3) information, if possible 
statistical, bibliographic and/or hemerographic explaining the situation of the national productive industry for olive oil.
302  ASERCA responded to Economía on 19 January 
2004 by indicating that the National System  of Information for Rural Sustainable 
Development would have any relevant sta tistics and geographic information of the 
agriculture and fisheries sector.303  
(i) Based on its request mentioned in para graph (h) above, Ec onomía engaged in 
correspondence with the government of Baja California Norte.  The Government of 
Baja California responded on 15 December 2003 to the initial request with a letter 
explaining the total available hectares in th e Coastal Zone as well as the percentage of 
the hectarage (40 per cent) that was destin ed for oil production.  It also annexed a 
table listing plantations in Baja by hectare, variety and capacity.304  Fortuny is listed 
in the table as having a plantation, but so are a variety of other companies.  Economía 
then sent an additional request on 18 Dece mber 2003 to the Government of Baja 
California asking it about its specific knowledge of Fortuny as well as to indicate the addresses of the companies listed in the table and which ones other than Fortuny were 
then producing, had produced, or would produce olive oil.
305  The Government of 
Baja California responded on 9 January 2004 with more information about Fortuny 
and again attached the same table fro m its earlier letter, which was now titled 
"Agroindustries of Olive Trees in Baja, CA".  The third column, entitled "capacity" now had indicators for specific companies separating "olives" and "oil".
306   
(j) Economía on 8 December 2003 also requested information from the Office of the 
Federal Attorney-General for Consumer Affairs and the Directorate General of 
Standards.307  The Directorate General of Standards on 29 January 2004 provided a 
copy of the Official Journal entry for the norm NMX-F-109-1982 Foods-Olive Oil, which set quality specifications for olive o il, and noted that compliance with these 
specifications was voluntary.
308 
                                                      
299 Exhibit MEX-32. 
300 Exhibit MEX-33. 
301 Exhibits MEX-49A, 49B, and 49C 
302 Ibid. 
303 Exhibit MEX-49G. 
304 Exhibit MEX-49D. 
305 Exhibit MEX-49E. 
306 Exhibit MEX-49F. 
307 Exhibits MEX-20, 21.  See also Preliminary Resolution (Exhibit EC-22), paras. 193-195; Final 
Resolution (Exhibit EC-1), paras. 231-232.  
308 Exhibit MEX-49H  WT/DS341/R 
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  (k) Economía consulted the magazine Claridades Agropecuarias , which is published by 
SAGARPA, for information about the company Llanos de San Francisco as well as the possibility of olive oil production in the state of Sonora.
309 
(l) The European Communities, on 9 January 20 04 submitted a letter, containing a table 
comparing purported figures for Mexican olive oil production from the International 
Olive Oil Council ("IOOC") and from the United Nations Food and Agriculture 
Organization ("FAO").  The data from the IOOC listed Mexican production of olive oil in 1999/2000 as 1,000 tons; 2000/2001 as 1,500 tons; and 2001/2002 as 2,000 tons.  The figures from the FAO listed  domestic production in all three years as 
200 tons.  This was consistent with Fortun y's production data set forth in Table 9 of 
the Preliminary Resolution.
310  
(m) Economía described the arguments and ev idence submitted by the parties to the 
investigation in respect of this question, the efforts that it undertook and the evidence 
it obtained thereby in pursuing this issue,  and its reasoning and conclusions with 
respect to the non-existence of other produ cers, at paragraphs 212-255 of the Final 
Resolution.  
7.246  In addition to the above-described steps undert aken by Economía, we note that during the 
proceedings, no other Mexican company came fo rward presenting itself as a domestic producer, in 
spite of the calls in the Initiation and Preliminary Resolutions to any such co mpanies that might have 
an interest in the proceedings, and therefore that no producer objected to the investigation.311   
7.247  We have carefully considered both the above -cited steps and the underlying evidence on the 
record provided to us, as well as the descriptions in  the Final Resolution of Economía's efforts, the 
evidence it obtained, and the reasoning underlying its conclusion that there were no Mexican olive oil producers other than Fortuny.  We disagree with the European Communities' characterization that 
Economía's efforts were cursory or superficial.  To  the contrary, the record indicates that Economía 
went to considerable lengths to determine whether there were domestic producers other than Fortuny, 
that Economía was responsive to representations made  by respondent interested parties on this issue 
during the investigation, and that it pursued this is sue with considerable vigour.  We also do not see 
any evidence in the investigative record demonstrating that there we re producers other than Fortuny.  
To the contrary, there is no concrete indication in th e record evidence that we have reviewed or in the 
Preliminary and Final Resolutions that there were  any domestic producers other than Fortuny and, 
none came forward during the course of the investig ation.  We thus consider that the European 
Communities has not established either that Economía's efforts to pursue this issue were inadequate or 
that the relevant record eviden ce was insufficient to support a finding that there were no olive oil 
producers other than Fortuny in Mexico.  For tho se reasons, we find that the evidence relied upon and 
the explanation provided by Economía reasonably support its conclusion that there were no domestic 
olive oil producers other than Fortuny during the injury period of investigation.     
7.248  On the basis of the foregoing, we find that  Economía provided a reasoned and adequate 
explanation in the Final Resolution on the basis of  the evidence on the record  as to why it determined 
that Fortuny was the only domestic producer, of  olive oil, and thus constituted the "domestic 
producers as a whole" of the like product within the meaning of Article 16.1 of the SCM Agreement .  
We also find that the European Communities has not demonstrated that the factual basis underlying 
Economía's conclusion that Fortuny was the only Me xican producer of olive oil was insufficient and 
                                                     
 
309 Mexico – First written submission, para. 180; Mexico – Response to Panel question 73. 
310 Exhibit MEX-36 and Exhibit EC-28.  Neither study was actually provided by the European 
Communities in its submissions to Economía during the investigation.  Mexico notes that the IOOC data 
presented by ASOLIVA and ASSITOL did not list Mexico as a producer of olive oil.  See Exhibits MEX-34 and MEX-35. 
311 Final Resolution (Exhibit EC-1), para. 254. WT/DS341/R 
Page 80  
 
  inadequate, and therefore has not demonstrated that Mexico acted inconsistently with its obligations 
under Article 16.1 of the SCM Agreement  and consequently with Article VI:6(a) of the GATT 1994 on 
this basis.   
K. 
ARTICLES 15.1  AND 15.4  OF THE SCM AGREEMENT AND ARTICLE VI :6(a)  OF THE GATT 1994  
7.249  The European Communities claims that Mexico failed to make a determination of injury 
based on positive evidence involving an examination of all relevant economic factors and indices 
having a bearing on the state of the industry and to provide a reasoned and adequate explanation of its 
injury determination, and thus h as acted inconsistently with its obl igations under Article VI:6 of the 
GATT 1994 and Articles 15.1 and 15.4 of the SCM Agreement . 
1. Arguments of the Parties 
7.250  The European Communities makes a variety of ar guments with respect to the consistency of 
Mexico's injury determination with Article VI:6 of the GATT 1994  and Articles 15.1 and 15.4 of the 
SCM Agreement .   
7.251  First, the European Communiti es argues that there was confusion as to whether Economía's 
injury determination was based on a finding of mate rial retardation or material injury and that a 
simultaneous finding of both types of inju ry was inconsistent with Article VI:6.312   
7.252  Second, the European Communities argues that  Mexico has acted inconsistently with 
Article 15.1(a) in its analysis of the volume of s ubsidized imports and the effect of the subsidized 
imports on prices in the domestic market for the like product.313  In particular, the European 
Communities claims that the lack of "actual" pric e data for 2002, the period of investigation for 
subsidy, meant that Economía's determination of price undercutti ng was inconsistent with the 
obligation in Article 15.1 to make a determina tion based on positive evidence and pursuant to an 
objective examination.314  The European Communities argues that th e period of time when the injury 
and subsidy investigations  overlap is crucial.  In the Europ ean Communities' view, "unless there is 
output (allowing for temporary interruptions) duri ng that overlapping period no finding of the 
existence of injury or dom estic industry can be made." 315   
7.253  Third, the European Communities raises various  criticisms of the time frames used in 
Economía's examination of the impact of the s ubsidized imports on the domestic industry.  The 
European Communities maintains that Economía's an alysis was "confused" and that the time frame 
was repeatedly moved, sometimes focusing on wh at happened during the investigation period and 
earlier, and sometimes on the future.316  In particular, the European Communities takes issue with the 
lack of production by Fortuny from April – Decemb er 2002, the period of investigation for subsidy, 
which it claims is the "central and irrepl aceable element of the concept of industry."317   
7.254  Fourth, the European Communities argues th at Economía failed to properly identify a 
domestic industry that suffered material injury, in th at, "if there is no production there is no industry, 
                                                      
312 European Communities – First written submi ssion, para. 194-200 citing, Panel Report, Korea – 
Resins , para. 222. 
313 European Communities – First written submission, paras. 201-207; European Communities – First 
oral statement, para. 112. 
314 European Communities – First written submission, paras. 204-207; European Communities – First 
oral statement, para. 112;  European Communities – Response to Panel question 82; European Communities – 
Second written submission, paras. 55, 59. 
315 European Communities – Second written submission, para. 59. 
316 European Communities – First written submission, para. 211. 
317 Ibid., para. 211-213.  WT/DS341/R 
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  and if there is no industry there can be no ma terial injury, as that term is used in the SCM 
Agreement ."318   
7.255  Finally, the European Communities also alle ges that the use of successive nine-month 
investigation periods constantly undermines the injury  analysis, and that "the use of 9-month periods 
for collecting data, overlapping with some data ex tending over 12 months, added a major element of 
unreliability while at the same time introducing needless complexity."319  The European Communities 
maintains that the data from the three months excluded from each year could have significantly 
affected the results of the investigation.320  The European Communities ar gues that Economía's use of 
the nine-month periods is inconsistent with the obl igation to conduct an "objective examination" in 
Article 15.1 which governs all aspects of the injury determination including the analysis of relevant 
economic factors having a bearing on the stat e of the industry pursuant to Article 15.4.321  T h e  
European Communities also notes that in two recent disputes, the same practice by Mexico was found 
not to provide an accurate and unbiased picture of what was being examined.322 
7.256  Mexico argues that its final determination was based on a finding of "material injury" to the 
domestic industry, not material retardation.323  With respect to the determination of the effect of 
subsidized imports on prices of the domestic like product, Mexico argues that it made its price 
undercutting analysis properly and that the data it used for Fortuny's prices during the time it was not 
producing were consistent with the concep t of "positive evidence" in Article 15.1.324 
7.257  Concerning the argument that Economía failed to properly identify a domestic industry that 
suffered material injury because Fortuny lacked production during the subsid y POI, and thus could 
not constitute the domestic industry, Mexico disagrees, for the reasons set forth at para. 7.183, supra .   
7.258  With respect to its obligations under Article  15.4, Mexico asserts that Economía properly 
examined all relevant economic factors and that  the evidence weighed in favour of making an 
affirmative determination of material injury to  Fortuny from subsidized imports from Spain and 
Italy.325  Mexico argues that the European Comm unities is wrong that because there was no 
production during the period of investigation, it was not possible to determine material injury, and 
refers the Panel to Economía 's analysis in the Final Resolution.326  Mexico also notes that Economía 
found "material injury" on the basis that Fo rtuny was prevented from resuming operations.327   
7.259  Finally, regarding the use of the successive nine-month periods for the injury analysis, 
Mexico makes several arguments.  First, Mexico states that Economía's analysis of trends and 
performance relating to the relevant factors was not limited to comparable periods for the three years 
(April-December 2000, 2001 an d 2002), but also took into account monthly or annual data with the 
objective of gaining a more precise picture of the situation.328  Second, Mexico argues that the 
                                                      
318 European Communities – Second oral statement, para. 63.   
319 European Communities – Second written submission, para. 53. 
320 European Communities – First oral statement, paras. 115 – 117; European Communities – Second 
written submission, para. 53. 
321 European Communities – First oral statement, para. 117 citing Appellate Body Report, US – Hot 
Rolled Steel , para. 193. 
322 Ibid., citing Appellate Body Report, Mexico – Rice , para. 180; Panel Report, Mexico – Steel Pipes 
and Tubes , para. 7.252. 
323 Mexico – First written submission, para. 219-223 citing  Preliminary Resolution (Exhibit EC-22), 
para. 219 and Final Resolution (Exhibit EC-1), para. 279. 
324 Mexico – First written submission, paras. 236-237. 
325 Mexico – First written submission, paras. 248-277. 
326 Ibid., at para. 260. 
327 Ibid., at para. 261. 
328 Ibid., para. 253. WT/DS341/R 
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  European Communities' statement that the nine-m onth period undermined the objectivity of the 
examination of injury is a mere assertion.  Mexico also notes that the SCM Agreement  does not lay 
down any guidelines concerning the period of time th at should be considered in carrying out the 
injury analysis, and that therefore it did not act inconsistently with the SCM Agreement .
329 
2. Reasoning of the Panel 
7.260  The European Communities claims that Economía's "failure to ma ke a determination of injury 
based on positive evidence involving an examination of all relevant economic factors and indices 
having a bearing on the state of the industry and to  provide reasoned and adequate explanation" is 
inconsistent with Mexico's oblig ations under Article VI:6 of the GATT 1994 and Articles 15.1 and 
15.4 of the SCM Agreement.330  The European Communities' claims raise issues of both law and fact.  
We first consider the nature of the legal obligations under Articles 15.1 and 15.4 of the SCM 
Agreement , and we then consider whether Economía's acti ons in the olive oil investigation were, as 
alleged by the European Communities, in consistent with those obligations.   
7.261  Before turning to these arguments, we recall that the European Co mmunities claims that 
Economía's injury determination failed because the domes tic industry did not exist.  In this regard, we 
note our discussion on Article 16.1 of the SCM Agreement  in section VII.H.2(c), supra and our 
conclusion at paragraph 7.213 that the explanati on supplied by Economía reasonably and adequately 
supported the conclusion that Fortuny was a "producer" during the period of investigation for injury.  
We therefore see no need to address this argument further. 
(a) Article 15 of the SCM Agreement  
7.262  Article 15.1 reads as follows: 
A determination of injury for purposes of Article VI of GATT 1994 shall be based on 
positive evidence and an objective examinati on of (a) the volume of the subsidized 
imports and the effect of the subsidized imports on prices in the domestic market for like products and (b) the consequent im pact of these imports on the domestic 
producers of such products. 
7.263  Article 15.1 is an overarching provision that sets forth a Member's fundamental, substantive 
obligation with respect to the determination of injury.  Moreover, paragraph 1 informs the more 
specific obligations in the succeeding paragraphs of Article 15. 
331 
7.264  With respect to the obligation to base a dete rmination of injury on "positive evidence", in US 
– Hot-Rolled Steel,  the Appellate Body explained that the term relates to the quality of the evidence 
that investigating authorities must rely upon in making a determination.332  In that case, the Appellate 
Body clarified that the use of the word "positive" me ans that the evidence must be "of an affirmative, 
objective and verifiable character, and that it must be credible."333   
7.265  Also in that case, the Appellate Body examin ed the term "objective examination" and 
emphasized that it is not concerned with the specific facts underpinning the injury determination, but rather with the investigative process itself.
334  Specifically, the Appellate Body found that the word 
"examination" relates to the way in which the evid ence is gathered, inquired into, and subsequently 
                                                      
329 Mexico – First oral statement (executive summary), para. 37. 
330 European Communities – Request for establishment of a panel (WT/DS341/2). 
331 Appellate Body Report, Thailand – H-Beams , para. 106. 
332 Appellate Body Report, US – Hot-Rolled Steel , para. 192. 
333 Ibid. 
334 Appellate Body Report, US – Hot-Rolled Steel , para 193 .  WT/DS341/R 
 Page 83 
 
 
  evaluated.335  The Appellate Body has also interpreted the word "objective," which qualifies the word 
"examination", to indicate that the examination process must conform to the dictates of the basic principles of good faith and fundamental fairness.
336  The panel in Mexico – Steel Pipes and Tubes 
recalled the Appellate Body's reasoning as follows:   
…the term 'objective examination' is concer ned with the investigative process itself.  
An 'objective examination' requires that the domestic industry, and the effects of 
dumped imports, be investigated in an unbiased manner, without favouring the 
interests of any interested party, or group of interested parties, in the investigation.  
The duty of the investigating authorities to conduct an 'objective examination' recognizes that the determination will be influenced by the objectivity, or any lack 
thereof, of the investigative process.  Ther efore, the identification, investigation and 
evaluation of the relevant factors must be 'even-handed'. 
337  
7.266  The panel in Mexico – Anti-dumping Measures on Rice held that the requirements to base a 
determination of injury on positive evidence and pur suant to an objective examination impose certain 
obligations on investigating author ities with regard to the completen ess of the data used as the basis 
for their determinations.338  We agree with that panel that an ex amination can only be "objective" if it 
is based on data "which provide an accurate and unbiased picture of what it is that one is examining."
339  
7.267  In our view, the selection by an investigating authority of the period of investigation is a 
critical element in the countervailing duty investigative process.  It determines the data that will form 
the basis for the assessment of subsidization, inju ry and the causal relationship between subsidized 
imports and the injury to the domestic industry.  Although the SCM Agreement  does not set forth an 
express requirement regarding the selection of th e period of investigation for the purpose of 
conducting an injury analysis, this does not mean that  an investigating authority's discretion in this 
respect is unlimited.  In our view, the requirements in Article 15.1 to base a determination of injury on 
positive evidence and pursuant to an objective ex amination impose certain constraints on an 
investigating authority's discretion in selecting th e period of investigation necessary to ensure the 
comprehensiveness and reliability of the data used  as the basis for an injury determination.340      
7.268  As noted above, Article 15.1 is an overa rching provision which requires an objective 
examination, based on positive evidence, of the volume of subsidized imports, their effect on 
domestic prices, and their impact on the domestic indus try.  The specific obligations with respect to 
the conduct of the examination of the impact of the subsidized imports on the domestic industry are 
contained in Article 15.4.   
7.269  Article 15.4 of the SCM Agreement  reads as follows: 
The examination of the impact of the subsidized imports on the domestic industry 
shall include an evaluation of all rele vant economic factors and indices having a 
bearing on the state of the industry, including actual and potential decline in output, 
sales, market share, profits, productivity, return on investments, or utilization of 
capacity; factors affecting domestic prices; actual and potential negative effects on 
                                                      
335 Ibid. 
336 Ibid. 
337 Panel Report, Mexico – Steel Pipes and Tubes , para. 7.214. 
338 Panel Report, Mexico – Anti-Dumping Measures on Rice, para. 7.77. 
339 Ibid., para. 7.79 upheld by Appellate Body Report, Mexico – Anti-Dumping Measures on Rice , 
para. 180. 
340 Panel Report, Mexico – Steel Pipes and Tubes , para. 7.249. WT/DS341/R 
Page 84  
 
  cash flow, inventories, employment, wages, growth, ability to raise capital or 
investments and, in the case of agricultu re, whether there has been an increased 
burden on government support programmes. Th is list is not exhaustive, nor can one 
or several of these factors necessarily give decisive guidance. 
7.270  In conducting the analysis, an investigating authority must ex amine all of the listed factors 
and must also evaluate any other relevant econom ic factors affecting the condition of the industry.
341  
However, an investigating authority may conclude th at a particular factor is not probative in the 
circumstances of the domestic industry in a particular  case, and therefore is not relevant in the actual 
determination.342  Additionally, there is no requirement that  each and every injury factor, individually, 
must be indicative of injury.343  Furthermore, as noted by the Appellate Body, an investigating 
authority conducting the examination required in Artic le 15.4 is obligated to do so objectively, and to 
base its determinations on positive evidence, as set forth in Article 15.1.344   
(b) Facts Regarding Economía's Injury  Investigation and Determination 
7.271  We now turn to factual aspects of Economía's injury investigation and determination that 
pertain to the claims raised by th e European Communities.  In this regard, we rely on the account of 
those facts that appears in the Final Resolution,  the accuracy of which is not contested by the 
European Communities.   
7.272  In paragraph 3 of the Final Resolution, Economía  sets forth the following as its description of 
the period investigated: 
On the basis of articles 65, 76 and 77 of the Reglamento de la Ley de Comercio 
Exterior [Regulations on the Foreign Trade Act], hereinafter referred to as the RLCE, 
the period for investigation as proposed by the applicant was defined as the period 
from April to December 2002.  For the pur poses of evaluating in jury, comparable 
periods of three years, including the period investigated were used, i.e. April to 
December 2000, 2001 and 2002, though the evaluation was not confined solely to these periods.  However, monthly data re lating to domestic production figures from 
January 1999 to March 2002 (production w as suspended after that month) were 
analysed and, in the case of imports, figur es up to December 2002.  Likewise, due to 
the particular characteristics of the investig ation, projections were also carried out 
and data was presented for the first three years of the investment project.    
7.273  In its first written submission, Mexico clarifies that "the analysis of injury was conducted by 
comparing the periods April to December in 2002,  2001, and 2000 and that the indices for April to 
December for one year were thus compared with t hose for April to December in the other two years 
and not with those for January to March each year, irrespective of whether during each nine-month period the situation was worse or better th an in the half-year January to June.
345   
7.274  The analysis of the effects of subsidized impor ts on prices is contained in paragraphs 294 - 
327 of the Final Resolution.  First, Economía analy zed the prices of imports and then compared them 
to domestic prices to determine whether there was price and cost undercutting.  For both of these 
                                                      
341 Appellate Body Report, Thailand – H-Beams , paras. 121-128; Panel Report, EC – Bed Linen , 
paras. 6.154-6.159.  See also Panel Report, Mexico – Corn Syrup , para. 7.128;  Panel Report, Egypt – Steel 
Rebar , para. 7.36.   
342 Panel Report, Mexico – Corn Syrup , para. 7.128. 
343 Panel Report, EC – Bed Linen (Article 21.5 – India) , paras. 6.163, 6.213.  
344 Appellate Body Report, US – Hot-Rolled Steel , para. 193. 
345 Mexico – First written submission, para. 271.  WT/DS341/R 
 Page 85 
 
 
  analyses, Economía used data from April – December 2000, 2001, and 2002.346  With respect to 
import prices, Economía examined monthly data from January 2000 through November 2003, as well 
as monthly data showing the percentage price differences compared with the same month of the previous year.
347  With respect to domestic prices, Economía  calculated a margin of price undercutting 
using domestic prices from the period from Apr il – December 2000 as well as the same period in 
2001, the results of which were displayed in Table 6 of the Final Resolution as follows: 
Table 6.  Undercutting 
 
Undercutting/ 
price April-Dec. 
2000 April-Dec. 
2001 April-Dec. 
2002 
European Union -40.1% -61.9% n.a. 
Undercutting/ cost    
European Union -24.0% -37.8% n.a. 
 
 Source: SIC-FP and Fortuny. 
7.275  Additionally, Economía compared the prices of im ports observed in the period investigated – 
both with and without adding the cal culated subsidy margin – to Fortuny's prices and costs projected 
over the three-year duration of Fortuny's business plan for restarting operations.348  Economía 
explained that:   
[t]he data was in the form of projecti ons because, during the period from April to 
December 2002, the domestic industry was prevented from carrying out operations and consequently did not record any real figur es for costs or prices.  It may be pointed 
out that the projected costs included the following items:  olive oil production costs, 
cardboard boxes, cans and tape, labour, indirect manufacturing costs and 
depreciation, plus freight and insurance cost s.  In other words, the total production 
cost was taken into account.
349 
7.276  The analysis of the effects on the state of the domestic industry was contained in 
paragraphs 328 – 414 of the Final Resolution.  As th e injury alleged was the prevention of Fortuny's 
resumption of production, Economía also analyzed, in  addition to data for the periods from April – 
December in the years 2000, 2001, and 2002, the projections for production, sales, and other 
indicators contained in Fortuny's Business Plan.350   
7.277  Economía found that the data contained in the administrative record "shows a clear downward 
trend throughout the period under analysis in the production and sales volumes for the domestic 
industry until they reach zero."351  Economía found that Fortuny's market share decreased by nine 
points, during the period investigated, until Fortu ny disappeared from the market completely, when 
the subsidized imports increased their share.  Economí a also found that in the periods investigated, the 
domestic market was supplied almost entirely by subsidized imports (between 85 per cent - 94 per 
cent).352  Economía discussed a variety of financial fa ctors relating to income from sales, operating 
                                                      
346 Final Resolution (Exhibit EC-1), paras. 305-306; 313 – 315. 
347 Ibid., paras. 307-310. 
348 Ibid., para. 324. 
349 Ibid. 
350 Ibid., paras. 335, 368-414. 
351 Ibid., para. 333. 
352 Ibid., paras. 339 -340. WT/DS341/R 
Page 86  
 
  expenses, and sales cost.
353  Specifically, Economía found that Fortuny experienced significant 
operating losses, which ultimately resulted in  an operating loss of 53 per cent in 2002.354  Economía 
found, with respect to Fortuny's productivity, that operating costs fell by 32 per cent in 2001 and the operating margin recovered by 19 percentage points, rising from minus 15 per cent in 2000 to plus 
4 per cent in 2001.  However, in 2002 production was suspended.
355  With respect to return on 
investment, Economía found that for 2000, it was minus 11 per cent; whereas for 2001, it was minus 
0.5 per cent; and in 2002, it fell to minus 21 per cent.356  With respect to Fortuny's utilization of 
capacity, Economía found that the figures for use of installed capacity showed a close correlation 
between the large share of the domestic market held by imports at subsidized prices and the 
significant levels of underutilization of installe d capacity to the point where, according to the 
applicant, it led to the closure of production.  Ec onomía also found that utilization of capacity would 
increase with the imposition of countervailing duties.357 
7.278  Based on the analysis and findings in the Preliminary and Final Resolutions, as well as 
Mexico's clarifications in its submissions358, we find, as a matter of fact, that the period of 
investigation for subsidy was April to December 2002,  and that the period of investigation for injury 
was the months from April to December in 2000, 2001, and 2002. 
7.279  Before turning to the legal analysis of the cl aims raised by the European Communities, we 
recall the European Communities' argument that there was "confusion" as to whether Economía's 
injury determination was based on material retardation or material injury.  In this regard, we find, as a 
matter of fact, that the injury determinations in both the Preliminary and Final Resolutions are clearly 
based on a finding of material injury, not on material retardation.  In the Preliminary Resolution, 
Economía "decided that there were sufficient elements  providing evidence that the subsidized imports 
of olive oil from the European Un ion were causing material injury to the domestic industry."359  
Likewise, in the Final Resolution, Economía affirmed that "sufficient evidence existed to prove that 
subsidized olive oil imports originating from the European Union caused material injury to the 
domestic industry."360  Therefore, we find no "confusion", as alleged by the European Communities, 
regarding the basis of the injury finding. That fi nding was clearly based on material injury to the 
domestic industry.  We therefore see no need to consider this issue further.   
(c) Application of Articles 15.1 and 15.4 to the Facts of this Case 
7.280  The European Communities has made a number of arguments with respect to how, in its 
view, Economía's analysis of the effect of subsidi zed imports on prices in the domestic market for like 
products, and its examination of the consequent im pact of the subsidized imports on the domestic 
producers of such products, were inconsistent with  Mexico's obligations under Articles 15.1 and 15.4 
of the SCM Agreement .   
(i) The April – December Periods of Analysis for Injury 
7.281  One argument made by the European Communities has broad implications for the entire 
injury analysis conducted by Economía, precisely because it calls into question whether Economía has 
made an objective examination, based on positive evid ence, of the effects of subsidized imports on 
                                                      
353 We note that it is not clear from the Final Resolution whether the periods referred to in the 
discussion of financial indicators are calendar years or  the April-December periods of the referenced years. 
354 Final Resolution (Exhibit EC-1), paras. 345 – 360. 
355 Ibid., para. 354. 
356 Ibid., para 352 
357 Ibid., paras. 341-342. 
358 Mexico – First written submission, para. 271-2 73;  Mexico – Response to Panel question 84. 
359 Preliminary Resolution (Exhibit EC-22), para. 343. 
360 Final Resolution (Exhibit EC-1), para. 438.  WT/DS341/R 
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  domestic prices and on the state of the domestic in dustry.  Specifically, the European Communities' 
claim that the injury analysis was "constantly undermined" by Economía's decision to use data from 
nine month periods in successive years presents a fundamental challenge to the validity of the entire  
injury determination and should therefore be addressed  before any of the other claims relating to the 
injury determination in this case.   
7.282  In the Final Resolution, Economía indicated that "for the purposes of evaluating injury, 
comparable periods of three years, including the period investigated were used, i.e., April to 
December 2000, 2001, and 2002, though the evalua tion was not confined solely to these periods."361  
We recall our factual finding made in  paragraph 7.278 that the periods of investigation for injury were 
the periods of April to December for the years 2000, 2001, and 2002. 
7.283  The European Communities has alleged that the use of these April-December periods, rather 
than the whole years, undermined the credibility of the injury determination.362  We therefore consider 
whether Economía's use of subset s of data temporally limited to the periods April to December for 
2000, 2001 and 2002 was capable of yielding an accura te and representative picture that would enable 
Economía to make an objective examination, based on positive evidence, in reaching its affirmative 
injury determination.   
7.284  As a preliminary matter, we recall our conc lusion in paragraph 7.266 above, that an 
examination or investigation can only be "objective"  if it is based on data which provide an accurate 
and unbiased picture of what it is that one is examining.363  The requirement in Article 15.1 to base a 
determination of injury on positive evidence and pur suant to an objective examination imposes certain 
limitations on an investigating authority's discret ion with regard to the comprehensiveness and 
reliability of the data used as the basis for an injury determination.364      
7.285  As a factual matter, we recall that Economía found that the harvesting of black olives for the 
extraction of oil typically begins in the autumn of a given year and continues into the first trimester of 
the following year.365  This was confirmed by the Government of the State of Baja California in its 
responses to Economía's questions regardi ng the olive oil industry in that State.366  We further recall 
that the article in Claridades Agropecuarias  indicates that olives have to be pressed within 24 hours 
after harvesting.367  Finally, the production data that Fortuny provided on the administrative record of 
the investigation confirm our understanding that, although maintenance of the olive groves and the 
production facilities continues throughout the year, the pressing of olive oil from olives takes place 
over the several month autumn-winter harvest period,  typically ending not later than March of each 
year, with the exact timing in a given ye ar depending on relevant  weather conditions.368  Based on this 
analysis, the April-December periods of investiga tion chosen by Economía for the years 2000, 2001, 
and 2002 therefore omitted some key months in which Fortuny was actually producing olive oil 
during the years examined.   
7.286  As noted by the panel in Mexico – Steel Pipes and Tubes , to justify a truncated analysis based 
on discontinuous partial-year periods, an investig ating authority needs to provide a sufficient 
                                                      
361 Ibid., para. 3. 
362 European Communities – First oral statement, para. 115. 
363 Panel Report, Mexico – Anti-Dumping Measures on Rice , para. 7.79 upheld by Appellate Body 
Report, Mexico – Anti-Dumping Measures on Rice , para. 180. 
364 Panel Report, Mexico – Steel Pipes and Tubes , para. 7.249. 
365 See, e.g., Final Resolution (Exhibit - EC 1), para. 9.   
366 Exhibit – MEX 49D. 
367 Exhibit – EC 30.  
368 Exhibit – MEX 48A (showing a production season of January – June in 1999, January – April in 
2000, January – June in 2001, and January – March in 2002); see also Mexico – Response to Panel question 17; 
Final Resolution (Exhibit EC-1), para. 9. WT/DS341/R 
Page 88  
 
  explanation that takes into consideration whethe r the developments within the temporal subsets 
examined reflect developments throughout the entir ety of the multi-year period, and whether and why 
those subsets are justified and not anomalous in the particular case at issue.
 369  Although Economía 
did consider some data outside the April-Decemb er periods to "ensure that it had sufficient 
information to reflect objective trends allowing an evaluation of the situation of both imports and the 
domestic industry,"370 it did not provide any substantive justifi cation in either the Preliminary or Final 
Resolutions for Economía having limited its injury analysis to the three nine-month periods.   
7.287  Before us, Mexico explained that the period of  investigation for subsidization of April – 
December 2002 (which formed the basis for the period  examined for purposes of the injury analysis), 
was chosen because this was the period that Fort uny originally proposed in its application, and 
Economía accepted this period as reasonable for determining the existence of subsidization.371  
Mexico also maintained that once the period of investigation for subsidization was chosen, the 
investigating authority looked, for purposes of the injury analysis, at that same period and the 
equivalent periods in the preceding two years b ecause they are "structurally the same" thereby 
avoiding bias or fluctuations and eliminati ng any distortions that otherwise might occur. 372    
7.288  It is not clear to us how the use of data re lating to the whole three-year period 2000-2002, as 
opposed to the three nine-month periods within those years, would have caused "bias or fluctuations" 
or "distortions" in the assessment of either the e ffect of subsidized imports on domestic prices or on 
the state of the domestic industry.  In general, ex amining data relating to entire years normally would 
yield a more accurate picture of the "state of the domestic industry" than an examination of limited, 
partial and discontinuous periods.373  In the instant case, it seems to us, distortions were especially 
likely to arise because the discontinuous nine-month periods of injury analysis excluded some of the 
key months in each year in which this seasonal, agricultural domestic industry actually produced the 
like product.    
7.289  We find that with respect to Economía's inv estigation into imports of olive oil, an 
examination of data relating to the entirety of the years analyzed would have produced a more 
accurate and representative picture of the effect of the subsidized imports on domestic prices and the 
consequent impact on the domestic producers of the like product than the temporally limited examination conducted by Economía.  Wh ile we do not believe that it would be impossible, as a legal 
matter, to justify a truncated injury analysis period under any circumstances
374, in this case, given the 
particular circumstances of the domestic olive oil industry, it is evident that Economía would have 
had more reliable data and a fuller picture of the state of the industry if it had not excluded from its 
analysis the periods in time when the industry was actually producing the product under investigation.  
We note, in particular, that Mexico did not provi de any substantive rationale for having chosen to 
limit its examination to the three nine-month periods, and instead simply indicated that April-December 2002 was the period of investigation for subsidy proposed by the applicant, and that 
Economía had analyzed the same periods in the injury analysis years to maintain structural symmetry.  
We thus find that Mexico has not provided a su fficient justification for Economía's use of the 
successive nine-month periods for its in jury investigation in this case.   
7.290  For the above reasons, we concl ude that Economía's limitation of its injury analysis to the 
April-December periods of 2000, 2001 and 2002 is inconsistent with Mexico's obligations under 
                                                     
 
369 Panel Report, Mexico – Steel Pipes and Tubes , para. 7.252. 
370 Mexico – Response to Panel question 78 (footnote 8);  Final Resolution (Exhibit EC-1), paras. 307-
310. 
371 Mexico – Response to Panel question 85.   
372 Mexico – First written submission, paras. 272-273. 
373 Appellate Body Report, Mexico – Anti-Dumping Measures on Rice, para. 183. 
374 We note that in some instances "seasonal" periods of investigation may indeed have utility.  WT/DS341/R 
 Page 89 
 
 
  Article 15.1 of the SCM Agreement to base its injury determination on positive evidence and pursuant 
to an objective examination.   
(ii) Other claims and arguments 
7.291  Having found that Mexico acted inconsistently with its obligations under Article 15.1 of the 
SCM Agreement , we see no reason to examine the European Communities' other claims relating to 
Articles 15.1 and 15.4 of the SCM Agreement .375  We therefore exercise judicial economy with respect 
to those other claims. 
L. ARTICLE 15.5  OF THE SCM AGREEMENT  
7.292  The European Communities claims that Mexico  has failed to properly examine any known 
factors other than the alleged subsidized imports which were causing injury to the domestic industry, 
inconsistent with its obliga tions under Article 15.5 of the SCM Agreement . 
1. Arguments of the Parties 
7.293  The European Communities maintains that Mexico  failed to comply with its obligations in 
Article 15.5 of the SCM Agreement , in particular, the obligation to  examine any known factors other 
than the subsidized imports which at the same ti me are injuring the domestic industry and to ensure 
that the injuries caused by these other factors ar e not attributed to the subsidized imports.376   
7.294  The European Communities argues that Mexi co failed to properly identify a domestic 
industry that suffered material injury with the consequence that Economía's  conclusions regarding 
causation, in general, and the effect of ‘other fact ors', in particular, were made in a vacuum and had 
no significance.377  The European Communities also main tains that Economía's examination was 
marked by failures that were sufficient in them selves to render its causation analysis ineffective.378  
Specifically, the European Communitie s alleges that there were six factors known to Economía that 
either were not adequately examined or not examin ed at all.  These are: (1) Fortuny's loss of its 
previous distribution network; (2) Fortuny's loss of the ability to use a leading Spanish brand name on its olive oil; (3) the loss of the guaranty of supply th at the market demanded; (4) the lack of a guaranty 
of a product of the quality demanded by its purchasers; (5) the status, prior to 2002, of the relationship 
between Fortuny's predecessor and its distribut or which was importing increasing amounts from the 
European Communities; and (6) the high level of Fortuny's costs.
379 
7.295  Mexico  does not dispute the European Communities'  interpretation of the requirements of 
Article 15.5, but asserts that it fully complied with those requirements.380  With respect to the specific 
"other known factors" that the Eu ropean Communities cites in its first written submission, Mexico 
                                                      
375 Although we do not reach the substance of that the European Communities other claims under 
Article 15.1 and 15.4, we note that if Economía had in cluded in its analysis the January-March 2002 period, it 
would not have even been open to such criticisms.  
376 European Communities - First written submission, para. 215; European Communities - Second oral 
statement, para. 40:  European Communities - Commen ts on Mexico's Response to Panel question 149. 
377 European Communities - First written submission, para. 216. 
378 Ibid., para. 217. 
379 European Communities - First written submission, para. 221; European Communities - Response to 
Panel question 90. 
380 Mexico – First written submission, paras. 282-283. WT/DS341/R 
Page 90  
 
  maintains that Economía in fact examined those fact ors and provided an analysis with respect to each 
of them in its Preliminary and Final Resolutions.
381   
2. Reasoning of the Panel 
7.296  Article 15.5 of the SCM Agreement  states: 
It must be demonstrated that the subsid ized imports are, through the effects of 
subsidies, causing injury within the meani ng of this Agreement.  The demonstration 
of a causal relationship between the subsidized  imports and the injury to the domestic 
industry shall be based on an examination of all relevant evidence before the authorities.  The authorities shall also ex amine any known factors other than the 
subsidized imports which at the same time  are injuring the domestic industry, and the 
injuries caused by these other factors must not  be attributed to the subsidized imports .  
Factors which may be relevant in this respect include, inter alia , the volumes and 
prices of non-subsidized imports of the pr oduct in questions, contraction in demand 
or changes in the patterns of consumption,  trade restrictive practices of competition 
between the foreign and domestic producers,  developments in technology and the 
export performance and productivity of the domestic industry. (emphasis added) 
7.297  Article 15.5 requires that an investigating au thority conduct an examination in order to 
demonstrate a "causal relationship" between the s ubsidized imports and the injury to the domestic 
industry. In the course of demonstrating this cau sal relationship, investigating authorities are not 
permitted to attribute to subsidized imports injuries caused by other factors.  Critical to the effective 
operation of the non-attribution obl igation, and indeed to the entire causality analysis, is the 
requirement in Article 15.5 to "exa mine any known factors other than the subsidized imports which at 
the same time are injuring the domestic industry", for it is the "injuries" caused by those "known 
factors" that must not be attributed to subsidized imports.382  The European Communities' claim 
focuses on this requirement.  
7.298  While this provision of the SCM Agreement  has not previously been subject to dispute 
settlement, the identical counterpart provision in the Anti-dumping Agreement (Article 3.5) has been 
interpreted by the Appellate Body and a number of pa nels, and we consider those prior rulings to be 
directly relevant to the claim before us under Article 15.5 of the SCM Agreement .   
7.299  First, concerning the situations in which the no n-attribution language of Article 3.5 of the 
Anti-dumping Agreement  is to be applied, we recall that the Appellate Body in US – Hot-Rolled Steel  
specified that this language applies "solely [to]  situations where dumpe d imports and other known 
factors are causing injury to the domestic industry at the same time ".383 
7.300  On the issue of what are "known factors" other than the dumped imports, the panel in 
Thailand – H-Beams , in a finding not reviewed by the Appellate Body, held that: 
other 'known' factors would include those causa l factors that are cl early raised before 
the investigating authorities by interested par ties in the course of an AD investigation.  
We are of the view that there is no express requirement in Article 3.5 AD that 
investigating authorities seek out and examine in each case on their own initiative  the 
                                                      
381 Mexico – First written submission, paras. 284-295; Mexico – First oral statement, paras. 39-43;  
Mexico - response to Panel question 96; Mexico – Sec ond written submission, paras. 92-96; Mexico - Response 
to Panel questions 148 and 149.  
382 Appellate Body Report, EC – Tube or Pipe Fittings , para. 175. 
383 Appellate Body Report, US – Hot-Rolled Steel , para. 223.  WT/DS341/R 
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  effects of all possible factors other than imports that may be causing injury to the 
domestic industry under investigation.384  …  We note that there may be cases where, 
at the time of the investigation, a certain factor may be 'known' to the investigating 
authorities without being known to the interest ed parties.  In such a case, an issue 
might arise as to whether the authorities would be compelled to examine such a 
known factor that is affecting the state of the domestic industry.  However, it has not 
been argued that such factors are present in this case.385 
7.301  Concerning the nature of the required examinati on of the "other known factors", the Appellate 
Body in US – Hot Rolled Steel held that: 
… to comply with the non-attribution language in that provision, investigating 
authorities must make an appropriate assessme nt of the injury caused to the domestic 
industry by the other known factors, and they must separate and distinguish the injurious effects of the dumped imports from the injurious effects of those other factors.  This requires a satisfactory expl anation of the nature and extent of the 
injurious effects of the other factors, as di stinguished from the injurious effects of the 
dumped imports.
386   
7.302  In that case, the Appellate Body also explaine d that an investigating authority should not 
dismiss the other factors on the basis of qualitative assertions.387  The Appellate Body acknowledged 
in this context the practical difficu lty of separating and distinguishing the injurious effects of different 
causal factors, but indicated that "although this pr ocess may not be easy, this is precisely what is 
envisaged by the non-attribution language.  If the injurious effects of th e dumped imports and the 
other known factors remain lumped together and i ndistinguishable, there is simply no means of 
knowing whether injury ascribed to dumped imports  was, in reality, caused by other factors." 388  
Non-attribution therefore requires the effects of othe r causal factors to be separated and distinguished 
from those of the dumped imports so that injuries caused by the dumped imports and those caused by 
other factors are not "lumped together" and made "indistinguishable".389 
7.303  In EC – Tube or Pipe Fittings, the Appellate Body explained that the non-attribution 
obligation does not require investigating authorities to use any particular methodology.  Specifically, the Appellate Body found that as long as an inves tigating authority does not attribute the injuries from 
other known causal factors to the dumped imports, it is free to choose the methodology it will use in 
examining the causal relationship between the dum ped imports and the injury to the domestic 
industry.
390   
7.304  In the same appeal, the Appellate Body also considered whether the non-attribution provision 
requires, in every case, an assessment of the collective  effects of other causal factors.  The Appellate 
Body noted, in this regard, that there was no re quirement in every case to make such a collective 
assessment, but that "there may be cases where beca use of the specific factual circumstances therein 
                                                      
384 (footnote original)  The panel in US – Norwegian Salmon AD , para. 550 stated:  "there is no express 
requirement that investigating authorities examine in each case on their own initiative the effects of all other 
possible factors other than imports under investigation." That panel was examining Article 3.4 of the Tokyo 
Round Anti-Dumping Code, which contained different language than Article 3.5 of the WTO AD Agreement . 
385 Panel Report, Thailand – H-Beams , para. 7.273.  
386 Appellate Body Report, US – Hot-Rolled Steel , para. 226; followed by Panel Report, EC – 
Countervailing Measures on DRAM Chips , paras. 7.404-7.405. 
387 Appellate Body Report, US – Hot-Rolled Steel , paras. 223 et seq; See also Panel Report, US – 
Softwood Lumber VI, para. 7.129. 
388 Appellate Body Report, US – Hot-Rolled Steel , para. 228. 
389 Appellate Body Report, EC – Tube or Pipe Fittings , para. 188. 
390 Ibid., para. 189. WT/DS341/R 
Page 92  
 
  the failure to undertake an examination of the collect ive impact of other causal factors would result in 
the investigating authority improperly attributi ng the effects of other causal factors to dumped 
imports"
391  In that regard, the Appellate Body concurre d with the statement of the panel that there 
might be "multiple 'insignificant factors'" that coll ectively were sufficiently significant as to break the 
link between the dumped imports under investigation and the injury.392  The Appellate Body did not 
ultimately find that such an analysis was require d on the facts of that case, because there were a 
number of factors that had made only an insignifican t contribution to the injury, and the complaining 
party had not adduced any evidence demonstrating th at a collective analysis of those factors was 
necessary.393  As a result, it did not elaborate further on the types of circumstances that might give rise 
to such a requirement.  We recall that in the dispute before us, the European Communities has not 
made any allegation in relation to collective vers us individual consideration by Economía of the 
"other known factors" that are the subject of this claim. 
7.305  We find that the obligation in the th ird sentence of Article 15.5 in the SCM Agreement  can be 
synthesized into two basic components.  First, Economía was required to consider other factors 
known to it either as a result of its own investigatio n or because they were raised by the interested 
parties.  Second, Economía was required to analyze each of these factors separately and to explain the 
nature and extent of the injurious effects of th ese other factors, separating and distinguishing them 
from the injurious effects of the subsidized imports .  If the facts of the case so warranted, Economía 
might also have needed to consider the coll ective impact of the "other known factors".   
7.306  With respect to the European Communities' cl aim that Economía's analysis under Article 15.5 
suffered insuperable difficulties that negated its causation analysis because the domestic industry did 
not exist, we refer to our finding in section VII.H. 2(c) that Economía made a reasoned and adequate 
determination that Fortuny constitu ted the domestic industry within th e meaning of Article 16.1 of the 
SCM Agreement .  Given our finding on that issue, we do not need to consider it further here.  
However, the European Communities also argues th at Economía failed to adequately analyze other 
known factors causing injury, contrary to the requirements of Article 15.5 of the SCM Agreement .  
We will examine Economía's treatment of each of these alleged "other factors" in turn.     
7.307  The six specific 'other factors' raised by the European Commun ities  are: (1) the loss of the 
previous distribution network; (2) the loss of the ability to use a leading Spanish brand name on its 
olive oil; (3) the loss of the guaranty of supply that the market demanded; (4) the lack of a guaranty of 
a product of the quality demanded by purchasers of o live oil; (5) the status, prior to 2002, of the 
relationship between Fortuny's predecessor and its distributor which was importing increasing 
amounts from the European Communities; and (6) the high level of Fortuny's costs.394 
7.308  Economía addressed each of these factors in its Preliminary Resolution and Final Resolution, 
and concluded that there were no injurious effects from any of them, as distinguished from the effects of the subsidized imports.  The European Commun ities argues that Economía's analysis and findings 
were inadequate, with the r esult that the determination of causation infringed Article 15.5.
395  Because 
the European Communities'  claim focuses on the adequacy  of Economía's causation analysis, we will 
first examine, factually, the actual nature of that  analysis.  Second, we will determine whether 
Economía 's analysis was cons istent with the requirements of Article 15.5, of the SCM Agreement.  
                                                      
391 Ibid., para. 192. 
392 Ibid., fn. 232 citing  Panel Report, EC – Tube or Pipe Fittings , para. 7.369. 
393 Ibid., paras. 193-194.   
394 European Communities - First written submission, para. 221; European Communities – Response to 
Panel question 90. 
395 European Communities – First written submission, paras. 215-227; European Communities - 
Second oral statement, para. 67.  WT/DS341/R 
 Page 93 
 
 
  7.309  Economía devoted specific sections in its Prelim inary and Final Resolutions to the discussion 
of other injury factors (paragraphs 319 through 342 of the Preliminary Resolution and paragraphs 415 
through 437 of the Final Resolution).  In additi on, Economía noted, in paragraph 415 of the Final 
Resolution, that "it is important to point out that an assessment of the possible effect of factors other 
than those imports on the domestic industry's pe rformance has been carried out throughout this 
Resolution, so that those factors may not necessarily be repeated in this section or else they may be 
described in more detail."396  In response to a specific questi on from the Panel, Mexico identified 
other paragraphs in the Preliminary and Final Reso lutions that referred to the other injury factors 
identified by the European Communities.  Mexico provided the following table397: 
Issue Preliminary 
Resolution (relevant 
paragraphs) Final Resolution 
(relevant 
paragraphs) Some of the documentary 
evidence 
Distribution 
channels, and loss of 
mark ¶57, ¶178 to ¶180, 
¶189, ¶216, ¶323 to 
327, ¶344(J).¶ ¶197 to ¶199, ¶213, 
¶294 to ¶327, ¶427, 
¶434, ¶435, ¶437 
(which refers to ¶323 
to ¶327 of the 
Preliminary Resolution). In the reply to the request for 
information (MEX-55), Fortuny 
stated that the distribution 
network is a group of 
independent companies that 
handle various brands in the corresponding St ates and are 
dedicated to stocking, managing 
and representing the brand or brands with which they work. 
The information on new Spanish 
and Italian brands can be found in Appendix 30 Consumer prices 
VC to the investigation 
application. 
The market survey was 
submitted by various importers, 
including Bodega La Negrita, in MEX-47. 
Supply of olives ¶54, ¶302, ¶318, ¶339 
to ¶341. ¶42, ¶44, ¶58, ¶370 to 
¶385, ¶391, ¶411, 
¶427, ¶432 Reply of Government of Baja 
California. 
The information for calculating 
the possibilities of producing 
olives and oil was taken from the 
tables on page 10 of Claridades 
Agropecuarias  on Harvested 
Area (ha.)  and Olive Yield 
(tons/ha) . 
Buyers' guarantee of 
quality, and quality 
demanded by the market. ¶54(L), ¶57, ¶178 to 
¶180, ¶323, ¶324, 
¶329.  (Paras on the quality 
of the oil:  ¶182 to 
190);  ¶197 to ¶199, ¶202, ¶434¶. Reply to request for information 
(page 7 of MEX- 51C). 
Table:  Prices of Olive Oil on 
Retail Markets  in Claridades 
Agropecuarias , page 19. 
                                                      
396 Final Resolution (Exhibit EC-1), para. 415. 
397 Mexico – Response to Panel question 149. WT/DS341/R 
Page 94  
 
  Issue Preliminary 
Resolution (relevant 
paragraphs) Final Resolution 
(relevant 
paragraphs) Some of the documentary 
evidence 
Fortuny's production 
costs. ¶213, ¶241, ¶242, 
¶243, ¶244, ¶250, 
¶252, ¶269, ¶275 to 
¶278, ¶281, ¶287, 
¶307, ¶308, ¶313, ¶314, ¶36, ¶317, 
¶344(E). ¶58(D), ¶218( E), 
¶244, ¶273, ¶275, 
¶276, ¶302, ¶311, 
¶313 to ¶316, ¶324, 
¶325 to ¶327, ¶331, ¶345 to ¶351, ¶353, 
¶354, ¶356, ¶362, 
¶363, ¶389, ¶407, ¶408, ¶409, ¶411, 
¶437, ¶439(D), ¶441, 
¶442. Prices of imports calculated from 
information taken from SIC-VR:  
Olive Oil Base 1993-2005. 
The cost information was taken 
from the applicant: Appendix 34 Costs, sales, profits VC.  Cost of 
goods sold.  Domestic prices 
were calculated on the basis of sales information (value and 
volume) from the applicant plus 
freight charges for sales (MEX-48A). 
 
7.310  We have reviewed the paragraphs identified by  Mexico in its response to our questions.  
These passages of the Preliminary and Final Resolu tions indicate that Economía asked questions of 
Fortuny, other interested parties, and independe nt sources on all of the points identified by the 
European Communities as "other fact ors" causing injury.  We also reca ll that the nature of the injury 
that Economía found to exist was Fortuny's inability  to resume operations.  As described in the 
paragraphs below, the cited passages indicate that  Economía provided analys is of its reasons for 
reaching the conclusions that it did.   
7.311  First, with respect to the evidence presented by  the exporters regarding the loss of the Ybarra 
brand, Economía reviewed the market study that was submitted to it, and concluded, as a matter of 
fact, that the study did not say that a significant portion of Mexican consumers preferred  the Ybarra 
brand, but rather that they were aware of the Ybarra brand.  Economía also noted that other unknown 
brands had been successful in penetrating the Me xican market.  For those reasons, Economía did not 
accept the argument by the exporters that Fortuny' s inability to use the Ybarra brand was causing it 
injury398 in the sense of preventing Fortuny from resu ming operations.  In other words, Economía 
found that this factor made no contribution to the injury experienced by Fortuny.   
7.312  With respect to the loss of the distribution network of Distribuidora Ybarra, Economía noted 
that Fortuny had indicated that it had access to a di stribution network, which it planned to use when it 
resumed operations.399  Economía asked further qu estions of Fortuny with respect to this issue, and 
verified the information on its visit to Fortuny.400  Additionally, Economía took into account the 
freight and transportation costs of Fortuny when it calculated the price at which Fortuny's olive oil 
could compete against the Spanish and Italian imports if Fortuny were to resume production.401  
Economía concluded that the loss of the distribut ion network was not contributing to Fortuny's 
inability to resume operations, and, thus, was not cont ributing to the injury experienced by Fortuny.   
7.313  The exporters also argued that Fortuny would not be able to obtain a sufficient supply of 
olives in order to restart production as planned, b ecause most olive growers had begun to devote their 
crops to table olives.  Economía examined the info rmation from the Government of the State of Baja 
California with respect to the quantities of olives that  were available to Fortuny.  Economía relied on 
information from the State of Baja California ab out available hectares as well as the article in 
                                                      
398 Preliminary Resolution (Exhibit EC-22), para. 327; Final Resolution (Exhibit EC-1), para. 437. 
399 Preliminary Resolution (Exhibit EC-22),para. 325; Final Resolution (Exhibit EC-1), para. 437. 
400 Final Resolution (Exhibit EC-1) para. 67. 
401 Final Resolution (Exhibit EC-1), para. 324.  WT/DS341/R 
 Page 95 
 
 
  Claridades Agropecuarias  to determine that a reasonable assumption would be that 40 per cent of the 
hectares of planted olive trees could be dedicated to olive oil production.402  Economía therefore 
reasonably found that Fortuny did not face a problem of insufficient olive supply, and concluded that 
this was not a factor standing in the way of Fortuny resuming operations.   
7.314  With respect to the issue of quality, Economía asked Fortuny specific questions about any 
quality differences between the Mexican olive oil marketed under the Ybarra brand and the imported 
olive oil marketed under the same brand.  Fortun y responded that it was unlikely that the Spanish 
holder of the mark would have let Formex-Ybarra market olive oil under the Ybarra brand if there 
were significant differences in quality between th e Spanish and Mexican products.  Economía also 
asked ANTAD and some of its members if they we re aware of any segmentation in the olive oil 
market based on quality.  ASOLIVA and ASITOL c onfirmed that while various types of olive oil 
were sold for different purposes, there was no clear segmentation in the market according to the type 
of olive oil.  Economía concluded that there were no objective data on which it could reasonably 
conclude that there were any significant quality pr oblems with olive oil manufactured domestically 
compared to imported oil of the Ybarra brand, a nd that, in fact, both had been marketed under the 
same brand.403  Thus, Economía reasonably found that this factor also did not contribute to Fortuny's 
inability to restart its operations.   
7.315  Regarding Fortuny's relationship with Distribuidora Ybarra prior to 2002, Economía analyzed 
the effects of the changes in that relationship on domestic production, including effects in the years 
2000 and 2001, in paragraphs 328 -- 367 of the Final Resolution.  Economía utilized data for 2000 
and 2001 that it had received from Distribuidora Ybarra  with respect to inventories, sales, operating 
costs, etc.  It observed from those data that Dist ribuidora Ybarra had steadily decreased the volume of 
its purchases from Fortuny over the course of 200 1 and 2002, while nearly doubling its purchases 
from foreign suppliers.  Economía recognized that the relationship between Distribuidora Ybarra and 
Fortuny was significant, and that the decision by  Distribuidora Ybarra to replace purchases of olive 
oil from Fortuny with purchases of imported oliv e oil caused considerable injury to Fortuny.404  
However, Economía reached the conclusion that this meant that the subsidized imported olive oil, the 
product competing against Fortuny's olive oil for sa les, was causing injury to Fortuny.  That is, 
Economía's conclusion was that the change in the relationship of Distribuidora Ybarra and Fortuny 
was not an "other factor", but, in fact, was a de monstration of how the subsidized imports were 
injuring Fortuny.   
7.316  Economía addressed Fortuny's production costs ex tensively throughout the Preliminary and 
Final Resolutions.  It concluded that, according to the premises established in Fortuny's business plan, 
the project to resume production would be financia lly viable if countervailing duties were imposed on 
the subsidised imports and financia lly non-viable if they were not.405  That is, the business plan's 
viability was not dependent on Fortuny's production costs, as these were already taken into account in 
the plan.  Thus, Fortuny's cost of production was found not to be a factor contributing to the injury it 
was experiencing.   
7.317  In sum, Economía made determinations based on an evaluation of the evidence before it that 
none of the other known factors were causing injury, in fact, to Fortuny.  Economía did not dismiss 
these factors with qualitative assertions.  Rather it car efully examined, separated and distinguished the 
effects of each factor from the effects of the subs idized imports, and reasonably concluded that these 
factors were not contributing to the injury suffered by Fortuny.     
                                                      
402 Preliminary Resolution (Exhibit EC-22), paras. 338-342; Final Resolution (Exhibit EC-1), 
paras. 370-385. 
403 Final Resolution (Exhibit EC-1), paras. 200-202. 
404 Ibid., para. 360. 
405 Ibid., para. 414. WT/DS341/R 
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  7.318  Concerning any possible obligation on Economía also  to examine the collective impact of the 
factors identified by the European Communities in th is claim, we recall that the Appellate Body has 
ruled that such a collective examination is not obligat ory in every case, but that there might be factual 
circumstances in which this could be necessary in order to satisfy the non-attribution obligation of 
Article 15.5.  While the Appellate Body has not sp ecified what such circumstances might be, we note 
that in the dispute on EC – Tube or Pipe Fittings, where this issue was first raised, the Appellate Body 
found that the European Communities had not er red by not conducting an examination of the 
collective impact of the "other known factors" that  it examined.  We recall that, in that case, the 
European Communities had found that the other known factors had contributed to the injury, but that 
their individual contributions were "insignificant", or  in one case "not so much as to break the causal 
link" between the dumped imports and the injury .  In the present case, by contrast, Economía 
reasonably concluded that none of the alleged "other  factors" made any contribution to the injury 
experienced by Fortuny.  In such circumstances, we do not consider that a collective examination of 
those factors could have led to any different conclu sion in respect of their impact.  Thus, we do not 
find that the facts in the olive o il investigation by Economía were such as to necessitate an assessment 
of the collective impact of the "other factors" referre d to by the European Commu nities in this claim.   
7.319  We recall that our task is not to conduct a de novo  review of the evidence on the record of the 
investigation and reach our own c onclusions, or to substitute our judgment for Economía's.  Instead, 
pursuant to Article 11 of the DSU, our task is to examine whether Economía provided a reasoned and 
adequate explanation as to how the evidence on the record supported its factual findings, and how 
those factual findings supported its determination.
406   
7.320  Based upon our review of the information on the record before Economía as well as its 
examination of that evidence and its explanation of its conclusions in the Preliminary and Final 
Resolutions, we find, that Economía provided reasone d and adequate explanati ons of its conclusions 
with respect to causation, in particular that th e evidence relied upon and explanations provided by 
Economía reasonably and adequately  support its conclusions that the other known factors did not 
contribute to injury ex perienced by Fortuny.407   
7.321  On the basis of the foregoing, we find that Ec onomía considered the other known factors that 
could be causing injury to the domestic industry, separated and distinguished each of these factors 
from the effects of the subsidized imports, and determ ined that none of them was causing injury.  It 
also provided reasoned and adequate explanations of its conclusions.  For these reasons, we find that 
the European Communities has not established that Me xico acted inconsistently with its obligations 
under Article 15.5 of the SCM Agreement . 
VIII.  CONCLUSIONS AND RECOMMENDATIONS 
8.1 For the reasons set out above, we conclude th at Mexico's definitive countervailing measures 
on olive oil from the European Communities are inconsistent with the requirements of the SCM 
Agreement , in that: 
(a) Mexico acted inconsistently with Article 11.11 of the SCM Agreement because 
Economía's investigation in this case was c oncluded more than 18 months after the 
date of its initiation, and Article 11.11 does not permit such prolongation under any 
circumstances;  
(b) Mexico acted inconsistently with Article 12.4.1 of the SCM Agreement  because 
Economía failed to require non-confidential summaries of confidential information in 
                                                      
406 Appellate Body Report , US – Countervailing Duty Investigation on DRAMS , para. 186 - 187. 
407 Ibid., para. 188.    WT/DS341/R 
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  sufficient detail to permit a reasonable unders tanding of the information submitted in 
confidence, in the absence of sufficient expl anations of the existence of exceptional 
circumstances and of the reasons why summarization was not possible; and   
(c) Mexico acted inconsistently with the obligation in Article 15.1 of the SCM Agreement  
to base the injury determination on pos itive evidence and pursuan t to an objective 
examination because Economía limited its injury analysis to the periods from April to 
December of 2000, 2001 and 2002.   
8.2 For the reasons set out above, we further conclude that: 
 (a) the European Communities did not establish that Mexico acted inconsistently with its 
obligations in Article 13.1 of the SCM Agreement  by failing to invite the European 
Communities for consultations before th e initiation of the investigation;  
  (b) The European Communities did not establis h that Mexico failed to comply with the 
requirement in Article 13(b)(i) of the Agreement on Agriculture to exempt olive oil 
from imposition of counterva iling duties "unless a determination of injury or threat 
thereof is made in accordance with Article VI of GATT 1994 and Part V of the 
Subsidies Agreement", and did not estab lish that Economía failed to show due 
restraint in initiating the countervailing duty investigation on olive oil;   
  (c) the European Communities did not establish that Mexico acted inconsistently with its 
obligations under Article 12.8 of the  SCM Agreement by failing to inform the 
interested Members and interested parties of the essential facts under consideration 
which formed the basis for the deci sion to apply definitive measures; 
  (d) the European Communities did not establish that Mexico acted inconsistently with its 
obligations under Articles 1 and 14 of the SCM Agreement  by failing to calculate the 
benefit conferred on the recipient pursuan t to paragraph 1 of Article 1 of the SCM 
Agreement and to apply the method used to each pa rticular case in a transparent way 
which is adequately explained as required by Article 14 of the SCM Agreement ;  
  (e) the European Communities did not establish that Mexico acted inconsistently with its 
obligation under Article 16.1 of the SCM Agreement  by failing to properly define the 
domestic industry during the countervailing duty investigation consequently the 
European Communities also failed to establish that:  
   (1) Mexico acted inconsistently with the obligation in Article VI:6(a) of the 
GATT 1994  to not impose countervailing duties on a product unless a determination 
had been made that there was material in jury or threat thereof to an established 
domestic industry;  
    (2) Mexico acted inconsistently with its  obligations in Article 11.4 of the SCM 
Agreement by failing to properly examine whether the application by Fortuny was 
made "by or on behalf of the domestic industry";  and 
 
  (3) Because there was no existing domestic industry the injury analysis 
conducted pursuant to the obligations in Ar ticles 15.1, 15.4 and 15.5 was inconsistent 
with the requirements of those provisions. 
 
 (f) the European Communities did not establish th at Mexico acted inconsistently with its  
obligations under Article 15.5 of the SCM Agreement  by failing to properly examine WT/DS341/R 
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  any known factors other than the alleged s ubsidized imports that were causing injury 
to the domestic industry.    
 8.3 In the light of our fi ndings, it was not necessary for us to address, and we have exercised 
judicial economy in respect of, the European Comm unities' claims under Articles 15.1 and 15.4 of the 
SCM Agreement in respect of Economía's analysis of the vol ume of subsidized imports and the impact 
of these imports on prices in the domestic market for the like product and on the domestic industry.   
8.4 Under Article 3.8 of the DSU , in cases where there is infringement of the obligations assumed 
under a covered agreement, the action is considered prima facie  to constitute a case of nullification or 
impairment of benefits under that agreement.  A ccordingly, we conclude that to the extent that 
Mexico has acted inconsistently with certain provisions of the SCM Agreement , it has nullified or 
impaired benefits accruing to the European Communities under that Agreement .  
8.5 Article 19.1 of the DSU  reads: 
Where a panel or the Appellate Body conclud es that a measure is inconsistent with a 
covered agreement, it shall recommend that the Member concerned bring the measure 
into conformity with that agreement.  In  addition to its recommendations, the panel or 
Appellate Body may suggest ways in which the Member concerned could implement the recommendations. 
8.6 The European Communities has requested that  we accompany our recommendation in this 
case with a suggestion, pursuant to th e second sentence of Article 19.1 of the DSU , that a complete 
repeal would be the most appropriate means of br inging the measures into conformity with Mexico's 
WTO obligations.  We decline to make a suggesti on as to how Mexico should bring its measures into 
conformity with its obligations.  
8.7 Pursuant to Article 19.1 of the DSU , having found that Mexico has acted inconsistently with 
provisions of the SCM Agreement  as set out above, we recommend th at Mexico bring its measures 
into conformity with that Agreement.    
 
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