WORLD TRADE  
ORGANIZATION  G/ADP/Q2/PER/3 
27 October 2006 
 
 (06-5166) 
Committee on Anti-Dumping Practices Original:   Spanish 
  
 
DEFINITIVE ANTI-DUMPING DUTY ON DENIM  
FABRICS IMPORTED FROM BRAZIL 
 
Responses from PERU to Questions Posed by BRAZIL
1 
 
 
 The following communication, dated 26 October 2006, is being circulated at the request of the delegation of Peru.  
_______________ 
 
 
Question 1
 
 
 In the administrative review, the "Sala" e xamined issues that were not raised by the 
Peruvian petitioners.  As a matter of fact, Peru  seems to have carried out a completely new 
"dumping and injury determination" in the review, where even the definition of "like 
products" was altered significantl y (the original investigation id entified two models of "denim 
fabrics", which were fused into one product during the review).  The final conclusion was based 
on new criteria for the calculation of normal val ue and export price.  Evidence previously 
submitted by the Brazilian exporters was disre garded and arguments presented in the original 
investigation were ignored. 
 
(a) Given that the Peruvian petitioners had no t questioned in the review the normal 
value, the export price and the margin of dumping obtained during the original anti-dumping investigation, please ex plain the legal basis and describe the 
methodology used by the "Sala" to undertake a review of these elements.  
 Response
 
  The methodology used by the "Sala" consists in verifying the criteria applied by the Commission in the light of the provisions of the Anti-Dumping Agreement (ADA) and the points 
challenged by the party that lodged the appeal. 
  In the case at issue in these consultations, since one of the points appealed was the 
Commission's definition of like product, the "Sala" re viewed and altered the de finition, which in turn 
required it to revise the Commission's calculations of the normal value, the export price and the 
margin of dumping. 
 
(b) Please explain how the decision of igno re the evidence presented by the Brazilian 
exporters complies with the paragraph 6 of Annex II of the ADA. 
 
                                                     
 
1 G/ADP/Q2/PER/1 G/ADP/Q2/PER/3 
Page 2  
 
  Response
 
  The "Sala" reviewed all the information availa ble on the record without dismissing any of the 
evidence presented by the Brazilian companies, so that there was no need to apply the procedure 
provided for in Article 6 of Annex II to the ADA. 
 
(c) Given that the "Sala" analyzed points that were not mentioned by the Peruvian 
petitioners, please explain how the review carried by the "Sala" is consistent 
with Article 13 of the ADA.   
 
Response
 
  Article 13 of the ADA regulates the obligati on of Members to establish a mechanism for 
judicial, arbitral or administrative review, through by a body independent of that which carried out the 
investigation. 
 
Question 2
 
 
 As mentioned above, the final determination contained in Resolution 0612-2006/TDC-
INDECOPI, dated 3 May 2006, was made public in th e official gazette on 19 June 2006, that is, 
ten months after the publication of request for the review and almost two years after the 
initiation of the anti-dumping investigation.  
  Is there a specific statutory time-limit for the duration of an administrative review in Peru?  Please explain how is the referred anti-dum ping investigation consistent with Article 11.1 
of the Anti-Dumping Agreement.  
 Response
 
  The second-instance procedure is independent of that conducted by the Commission, as required by Article 13 of the ADA.  The decision issu ed by the body of first instance is thus reviewed 
by the "Sala" upon the filing of an appeal, which is subject to the Regulations on anti-dumping and 
countervailing measures. 
  Peru's Anti-Dumping Regulations (Supreme Decree No. 006-2003-PCM) provide that the 
"Sala" has a six-month period in which to review the investigating authority's decisions, which may 
be extended for a further two months. 
 
 As regards the reference to Article 11.1 of th e ADA, we would ask Brazil to explain why it 
refers to this provision relating to the duration of definitive anti-dumping duties when the question 
concerns the time-limit for the authorities to conduc t the administrative review  of the investigation 
carried out by the investigating authority.  Question 3
 
  Despite the breadth and scope of the re view, tantamount to a completely new 
investigation procedure, Brazilian interested parti es did not have an opportunity to present new 
arguments and information pertinent to the case.   Furthermore, the authorities did not inform 
the essential facts under consideration that formed the basis for the decision to apply definitive 
measures.  The procedures adopted in the review raise some important concerns on "due legal 
process", "ample opportunity to the defence of a party's interest" and "transparency". 
  G/ADP/Q2/PER/3 
 Page 3 
 
 
   Taking into account that the "Sala" adopted a new definition of like product 
(Section III.2 in Resolution 0612-2006/TDC-INDECOPI) and undertook a new estimation of normal value, export price and margin of dumping, during the administrative review (Sections III.3.2, III.3.3 and III.3.4 in Reso lution 0612-2006/TDC-INDECOPI) please explain 
how the procedures adopted in the review are consis tent with Articles 6.1, 6.2, 6.4 and 6.9 of the 
Anti-Dumping Agreement.   
 
Response
 
  The procedural requirements laid down in  the ADA are mainly designed to secure 
transparency of the procedure, give the parties a full opportunity to defend their interests and ensure 
that the investigating authorities offer adequate expl anations concerning the determinations they have 
made.  Time-limits have therefore been set for th e completion of investigations and for mechanisms 
providing access to information by all interested parties, which are also afforded adequate 
opportunities to state their views and arguments. 
 
 Although the ADA does not expressly lay down a procedure for conducting administrative reviews referred to in Article 13, the appeal pr ocedure before the "Sala" includes mechanisms to 
guarantee that the parties have ample opportunity to defend their interests and that due process is respected, thus fulfilling the principal objective of the ADA.  
 During appeal proceedings, the "Sala" accordingl y ensures that the parties are informed of all 
written submissions made and evidence submitted, so that they can state their positions or make any 
comments deemed relevant to the defence of their in terests.  The parties may also present arguments, 
make allegations and adduce evidence up un til the "Sala" issues its final ruling. 
 Question 4
 
  In the original investigation, the Commissi on made allowance for the PIS (1.65 per cent) 
and COFINS (7.6 per cent) 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 invest igation, 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" deci ded to reconsider the Commission'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 th e PIS and COFINS by the Brazilian exporters 
(Page 12 and 13, Section III.2.3 in Resoluti on 0612-2006/TDC-INDECOPI).  It argued, 
nonetheless, that it was not po ssible to verify that the valu e corresponding to the PIS and 
COFINS were reflected in the total value of the invoice of the like products. It further 
mentioned that "...the investigated companies did not provide additional documentation or 
information that would verify the value of the corresponding tax payments with relation to the 
registered transactions during the period of investigation" (Page 12, Section III.2.3 in Resolution 0612-2006/TDC-INDECOPI).  
(a) Taking into account that the allowan ce of Article 2.4 of the Anti-Dumping 
Agreement is mandatory and that the Br azilian exporters not only informed to 
Peruvian Authorities that the PIS and COFINS, as indirect taxes, are charged on sales to the internal market, but also  submitted the necessary information on 
the legal basis of those taxes and their corresponding calculation, please explain G/ADP/Q2/PER/3 
Page 4  
 
  whether the decision of the "Sala" to  disregard those facts and refrain from 
making the allowance on the internal sa les price of Brazilian exporters was a fair 
comparison, consistent with the mentioned Article 2.4.  
 
Response
 
 
 In the review, the "Sala" considered that th e PIS and COFINS 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 ADA specifies that the authorities are required to make due allowance for elements that affect price comparab ility and to subtract the value thereof from the 
normal value, in the case at issue the "Sala" de emed that the Brazilian companies had not provided 
evidence that the taxes had indeed been  applied on their domestic transactions. 
 
(b) Please explain how the procedures adop ted by the "Sala" can be considered 
consistent with Article 6.1 of the Anti-Dumping Agreement.  It should be noted that the exporters provided to the Commissi on the requested information for the 
original investigation.  Furthermore , there are no records that the "Sala" 
requested additional documentation and information regarding PIS and 
COFINS – or any other matter – from the Brazilian interested parties. 
 
Response
 
  During the appeal proceedings, the "Sala" notif ied the parties of all written submissions made 
and evidence produced so that they could state thei r positions or make any comments deemed relevant 
to defend their interests.  Moreover, they were given the opportunity to present arguments, make 
allegations and introduce evidence in the course of the proceedings. 
 
Question 5
 
 
 In the original investigation, the Commissi on considered that there was insufficient basis 
to determine causal link between the dumped import s and the injury to the domestic industry.  
Given that the price of the imported denim from Brazil was above the price of the local product sold by the domestic producers, it concluded that  injury was not principa lly caused by imports 
from Brazil, rather it resulted from other cau ses, notably imports from third country origins 
(Resolution 112-2005/CDS-INDECOPI) that were in relevant volumes (higher than imports 
from Brazil on the last period of investigation) and prices at a lower level than Brazilian exports 
to Peru.   In the review, the "Sala" identified a co rrelation between the behaviour in the export 
price of the Brazilian denim fabric and the behaviour in the price of domestic product.  As a 
result, the "Sala" concluded that "... it can be inferred that the fall in prices of the domestic 
production is a result of the evolution of the prices of the investigated imports" (Page 31, 
Section III.4.2.1 in Resolution 0612-2006/TDC-INDECOPI).    It appears that the "Sala" reversed the co nclusions of the Commission on causality 
based, essentially, on a correlation between two independent variables and an inference about 
the evolution of prices.  It 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 Panel on EC - Bed Linen  (WT/DS141/R)  and similarly the Panel on Guatemala - 
Cement II  (WT/DS156/R), which stated that the evaluati on of all the factors by the investigating  G/ADP/Q2/PER/3 
 Page 5 
 
 
  authorities must be apparent in the final determination, please explain how the final 
determination and the decision of the "Sala" complied with Article 3.4 of ADA.    Please explain how is non-attribution analysis undertaken by the "Sala" consistent with Article 3.5 of the Anti-Dumping Agreement. 
 
Response
 
  In its Resolution, the "Sala" took into account the factors relevant for the determination of injury to the domestic industry, as stipulated in Article 3.4 of the ADA Agreement, dismissing those 
that did not correctly reflect the economic stat us regarding the product under investigation. 
  In its causation analysis, the "Sala" found that the Brazilian imports were the cause of injury 
to the domestic industry, because Brazil's import prices had affected domestic prices.  Moreover, in its non-attribution analysis the "Sala" did evaluate ot her factors that might have caused injury to the 
domestic industry besides the dumped Brazilian  imports, as required by Article 3.5 of the 
ADA Agreement.  
Question 6
 
  The Resolution 052-2004/CDS-INDECOPI, published on August of 2004, indicates that 
the Peruvian domestic producers that filed the application represented 25 per cent of the 
Peruvian production.  Nonetheless, there is no co mment related to the support of the remaining 
producers of the like product, as required on Article 5.4 of the ADA (standing test).  It must be recalled that there is no information about who were the remaining producers nor data 
concerning the degree of support for the application. 
 
 Please explain how Peru considers that it ha s complied with Article 5.4, since there was 
no mention on how the degree of support  to the application was quantified. 
 
Response
 
 
 Article 5.4 of the ADA Agreement provides that the authorities are to determine the 
applicant's degree of representativeness of the domestic industry.   As stated in Report 016-2004/CDS (endorsed by Resolution No. 052-2004/CDS-INDECOPI and forming an integral part thereof), the degr ee of representativeness was found, on analysis, to 
amount to 76.82 per cent of the domestic industry at  the time the application was filed, and so the 
Peruvian authorities did ascertain that the applican t was representative of the domestic industry prior 
to the initiation of the investigation.  
Question 7
 
 
 On the reformed decision of INDECOPI (INFORME Nº 017 – 2005/CDS), the "Sala" 
reached the conclusion that there was no pric e undercutting by Brazilian exports as compared 
with the price of the like product of Peru, nor di d it analyze whether Brazilian exports to Peru 
had the effect to depress prices or prevent price increases.  
 Please explain how the conclusion of the "Sala" was consistent with Article 3.2, since 
there was no price undercutting and no conclusion  indicating the existence of depression or 
price suppression.  
 G/ADP/Q2/PER/3 
Page 6  
 
  Response
 
  Section III.4.1.4 of Resoluti on 0612-2006/TDC-INDECOPI states that the "Sala" established 
that there was price undercutting by Brazilian im ports as compared with domestic prices, by 
examining the trends in both prices, in  accordance with Article 3.2 of the ADA. 
 
__________