. /.   WORLD TRADE  
ORGANIZATION  G/ADP/Q2/PER/2 
10 October 2006 
 (06-4865) 
Committee on Anti-Dumping Practices Original:   English 
  
 
 
DEFINITIVE ANTI-DUMPING DUTY ON COTTON AND 
COTTON/POLYESTER FABRIC S IMPORTED FROM BRAZIL  
 
Questions to PERU from BRAZIL
 
 
  The following communication, dated 9 October 2006, is being circulated at the request of the Delegation of Brazil.  
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  On 8 November 2004, the Peruvian investigating authority, Comisión de Dumping y 
Subsidios del Instituto Nacional de Defensa a la Conpetencia y de la Pr opiedad Intelectual CDS-
INDECOPI , opened an anti-dumping investigation against 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 the 
Brazilian imports of the said product. (Reso lution 150-2005/CDS-I NDECOPI, published on 
11 November 2005). On 4 August 2006, the Sala de Defensa de la Competencia del Tribunal de 
Defensa de la Competencia y de la Propiedad Intelectual , 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.  
Question 1 
  The product object of the investigation includes two different types: dyed cotton fabric and 
non-dyed cotton fabric. Despite being considered th e same product, the two models have distinct 
physical characteristics and processes of produc tion, which reflect differences on the costs of 
production and prices, as recognized by the investiga ting 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 we re no significant differe nces 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 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? 
 G/ADP/Q2/PER/2 
Page 2  
 
   (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 types is significan t, in the sense that it affects the 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 calcu lation of normal value of the like product sold in 
Brazil, correctly subtracting the value of the tax es from the sales price of the like product. During the 
original investigation, the Brazilian exporters explained that the corresponding values for PIS and 
COFINS were not specifically listed in the sales invoi ce, in contrast to the ICMS State indirect tax, 
but were nevertheless charged by the Brazilian Tax Authority. As requested, the corresponding 
legislation and supporting doc umentation 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 ex istence 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 correspondi ng to the PIS and COFINS were reflected in the 
total value of the invoice of the like products.  
 Taking into account that the allowance pre scribed in Article 2.4 of the Anti-Dumping 
Agreement is mandatory, that the Brazilian petitioners  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 those taxes were duly s ubmitted, including the corresponding method of 
calculation, please 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.  
Question 3 
 
 In the review, the injury conclusion was ba sed on the growth of Brazilian and Chinese 
imports and their effect on prices, sales, production, 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, utili zation of capacity, cash flow, employment, wages, 
ability to raise capital or investments, growth.   
 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 determin ation, please explain how the final determination and 
the decision of the ' Sala' comply with Article 3.4 of ADA. 
 
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