WORLD TRADE  
ORGANIZATION  G/ADP/Q2/PER/4 
6 February 2007 
 (07-0494) 
Committee on Anti-Dumping Practices Original:   Spanish 
  
 
DEFINITIVE ANTI-DUMPING DUTY ON COTTON AND 
COTTON/POLYESTER FABRICS IMPORTED 
FROM BRAZIL  
 
Responses from PERU to Questions Posed by BRAZIL
1 
 
  The following communication, dated 26 January 2007, is being circulated at the request of the delegation of Peru.  
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  On 8 November 2004, the Peruvian investigating authority, i.e. the Anti-Dumping and Subsidies Commission of the National Institute for the Defence of Competition and the Protection of 
Intellectual Property ( Comisión de Dumping y Subsidios del Instituto Nacional de Defensa a la 
Competencia y de la Protección de la Propiedad Intelectual – CDS-INDECOPI, hereinafter 
'Comisión '), opened an anti-dumping investigation agai nst imports of cotton and cotton/polyester 
fabrics from Brazil (Resolution 094-2004/CDS-INDE COPI, published in the official gazette on 
13 November).  On 24 October 2005, the Comisión  imposed anti-dumping duties against Brazilian 
imports of the product (Resolution 150-2005/CD S-INDECOPI, published on 11 November 2005).  
On 4 August 2006, the Competition Defence Divisi on of the Court for the Defence of Competition 
and the Protection of Intellectual Property ( Sala de Defensa de la Competencia del Tribunal de 
Defensa de la Competencia y de la Propiedad Intelectual , hereinafter ' Sala') in response to appeals of 
both petitioners and defendants, published what amounts to an entirely new decision (Resolution 
1179-2006/TDC-INDECOPI), increasing the number of  Brazilian companies subject to definitive 
anti-dumping duties and the amount of duties charged. 
                                                     
 
1 G/ADP/Q2/PER/2. G/ADP/Q2/PER/4 
Page 2  
 
  Question 1 
 
 The product object of the investigation incl udes two different types:  dyed cotton fabric 
and non-dyed cotton fabric.  Despite being cons idered the same product, the two models have 
distinct physical characteristics and processes of production, which reflect differences on the 
costs of production and prices, as recognized by th e investigating authority.  It should be noted, 
additionally, that the mix of the products sold in the Brazilian market was not the same as the 
mix exported to Peru.   In the review, the ' Sala' disregarded the differences between the two types of the 
product and simply compared the average normal value with the average export price.  This 
decision was apparently based on the understanding  that there were no significant differences 
between the export prices of the two types of products exported by Brazil.   (a) Considering that there were important and recognized differences in the costs of 
production between the two models of the product in question, and that the 
product mix sold in the Brazilian market was significantly different from the mix exported to Peru, did the Peruvian authority make a fair comparison between the normal value and the export price, according to Article 2.4 of the Anti-Dumping Agreement?  
 Response
 
  In the resolution at issue, the Sala, pursuant to Article 2.4 of the Anti-Dumping Agreement, 
considered whether it was necessary to distinguish be tween the different varieties of the product under 
investigation.  It did so because the investigated  companies had claimed that there were differences 
between the production process for varieties of dyed fa brics and that for varieties of non-dyed fabrics, 
which allegedly affected the costs and hence the prices of the products, and that such differences 
should be taken into account in order to differentia te the product under investigation and calculate the 
margin of dumping according to each type of product. 
  In the case in question, however, no prici ng pattern emerged that justified making a 
distinction between the two varieties of fabric .  As indicated in Resolution No. 1179-2006/TDC-
INDECOPI, dyed fabrics were not always more highly priced than non-dyed fabrics.  The price trend analysis shows that the different forms a product ta kes as a result of fabric-finishing differences – as 
in the case under consideration – had no impact on th e price of either variety of fabric during the 
period under analysis.  Hence the decision of the Comisión  not to differentiate the products for the 
purposes of the export price/normal value comparison – a decision that was confirmed by the Sala – is 
consistent with Article 2.4 of the Anti-Dumping Agreement.  
 (b) Please explain why Peru considers it an adequate methodology to compare the 
export price of the two models of the subject product in order to evaluate whether the differences between the two typ es is significant, in the sense that it 
affects the price comparability. 
 
Response
 
  In their respective analyses, the Comisión  and then the Sala primarily addressed the issue of 
whether differences in the manufacturing pr ocess – which for these goods corresponded to the 
finished product – actually had price repercussions a nd therefore needed to be considered as relevant 
for the purposes of distinction between the varie ties and calculation of the margin of dumping by 
differentiating the products, according to the provisions of Article 2.4 of the Anti-Dumping  G/ADP/Q2/PER/4 
 Page 3 
 
 
  Agreement.  As noted above, the Sala recorded the price trend for each product variety over the 
period of analysis and f ound that the price differences were not significant. 
  The Sala deemed that the evaluation was conducted in  conformity with the criteria laid down 
in Article 2.4 of the Anti-Dumping Agreement, si nce the Article in question stipulates that due 
allowance is to be made in each case for particul ar circumstances which, depending on the findings 
made in the proceedings, are demonstrated to be of  such significance as to affect price comparability. 
 
Question 2 
 
 In the original investigation, the ' Comisión ' made allowance for the PIS (1.65%) and 
COFINS (7.6%) Brazilian Federal indirect taxes in the calculation of normal value of the like product sold in Brazil, correctly subtracting the value of the taxes from the sales price of the like product.  During the original investigat ion, the Brazilian exporters explained that the 
corresponding values for PIS and COFINS were no t specifically listed in the sales invoice, in 
contrast to the ICMS State indirect tax, but were nevertheless charged by the Brazilian Tax 
Authority.  As requested, the corresponding le gislation and supporting documentation was duly 
provided.   As a result of the review, the ' Sala' decided to reconsider the ' Comisión 's position 
regarding PIS and COFINS adjustments.  It stated that the existence of the taxes were not in 
doubt.  Nor did it question the payment of the PIS and COFINS by the Brazilian exporters.  It 
argued, nonetheless, that it was not possible to  verify that the value corresponding to the PIS 
and COFINS were reflected in the total val ue of the invoice of the like products. 
  Taking into account that the allowance pr escribed in Article 2.4 of the Anti-Dumping 
Agreement is mandatory, that the Brazilian petiti oners informed the Peruvian authorities that 
the PIS and COFINS taxes are charged on sales made in Brazil and that the necessary information regarding the legal basis for tho se taxes were duly submitted, including the 
corresponding method of calculation, pl ease explain how the decision by the ' Sala' not to make 
due allowance for the selling price of Brazilian exporters in their domestic market can be 
considered a fair comparison, according to Article 2.4 of the ADA. 
 
Response
 
  In the review, the Sala considered that the PIS and COFI NS adjustments requested by the 
Brazilian companies had not been duly substantiated,  since there was no evidence in the record, other 
than the existence of the taxes as established through the submission of Brazil's tax legislation, of the 
companies having paid the taxes in question.   Although Article 2.4 of the Anti-Dumping Ag reement specifies that the authorities are 
required to make due allowance for elements that af fect price comparability and to subtract the value 
thereof from the normal value, in the case at issue the Sala deemed that the Br azilian companies had 
not provided evidence that the taxes had indeed  been applied on their domestic transactions. 
 
Question 3 
 
 In the review, the injury conclusion was based on the growth of Brazilian and Chinese 
imports and their effect on prices, sales, pr oduction, inventories and market share of the 
domestic industry.  Nonetheless, there is no record that the ' Sala' evaluated the impact of 
dumped imports on the profits, productivity, return on investments, utilization of capacity, cash 
flow, employment, wages, ability to ra ise capital or investments, growth. 
 G/ADP/Q2/PER/4 
Page 4  
 
   In effect, it appears that the ' Sala' did not examine "all relevant economic factors and 
indices having a bearing on the state of the industry" listed in Article 3.4 of the Anti-Dumping Agreement.  Considering the conclusions of the Panels EC – Bed Linen  (WT/DS141/R) and 
Guatemala – Cement II  (WT/DS156/R), which state that the evaluation of all the factors by the 
investigating authorities must be apparent in the final determination, please explain how the 
final determination and the decision of the ' Sala' comply with Article 3.4 of ADA.  
 
Response
 
  In its injury review, the Sala evaluated the indicators and factors having a bearing on the state 
of the sector, such as the volume of imports into the market, domestic sales and producti on, profits 
and price trends, in accordance with Article 3.4 of the Anti-Dumping Agreement, and disregarded those relating to the applicant company's financial statements to the extent that the latter did not 
correctly reflect the economic situation regarding the product under investigation. 
 
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