WORLD TRADE  
ORGANIZATION  G/SG/Q2/PAN/2 
7 May 2007 
 
 (07-1883) 
Committee on Safeguards Original:   Spanish 
  
 
NOTIFICATION UNDER ARTICLE 12. 1(a) OF THE AGREEMENT ON 
SAFEGUARDS ON INITIATION OF AN INVESTIGATION 
AND THE REASONS FOR IT 
 
Questions Posed by COLOMBIA in Relation to the
 
Notification Submitted by PANAMA1 
   The following communication, dated 23 April 2007,  is being circulated at the request of the 
delegation of Colombia.  
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  We hereby submit the questions and comments by the Sub-Directorate of Trade Practices with regard to the provisional safeguards impos ed by Panama pursuant to Decree No. 7 of 
11 April 2007, published in Official Gazette No. 25769 of 12 April 2007.
2  These measures were 
imposed as a result of an investigation currently  being conducted by the Panamanian government, 
within the framework of the WTO Agreement on Sa feguards, into Panamanian imports of plastics 
sector products classified under tariff subheadi ngs 3920.20.90 and 3920.49 .00.  The provisional 
safeguards imposed for each subheading are equivale nt to a tariff surcharge of 59.9 per cent and 
79 per cent respectively. 
 
Question 1  
 
 What criteria did the Panamanian investigating authority use to determine the 
representativeness of the company CELLOPRINT S. A., the petitioner in the investigation? 
 
 Colombia notes that Panama established the re presentativeness of the applicant company in a 
manner inconsistent with the de terminations under Articles 2.1, 4.1(a) and 4.1(c) of the 
WTO Agreement on Safeguards.  
 The Panamanian investigating authority  accepted the legitimacy of the petitioner 
CELLOPRINT S.A. on the basis of the applicant's shar e of the value of domestic production of plastic 
bags, whereas the products under inve stigation are film, plates, sheets, foil and strip of polypropylene 
and printed PVC.  It should be noted that plastic bags are classified under tariff heading 3923, while 
the products under investigation come under subheadi ngs 3920.20.90 and 3920.49.00, that is to say, 
                                                     
 
1 G/SG/N/6/PAN/1. 
2 Following a positive recommendation for the adoption of provisional safeguard measures by the 
National Directorate for the Administration of International Trade Agreements in Resolution No. 002 of 
6 February 2007, as confirmed by the Ministry of Commerce and Industry in Resolution No. 33 of 9 April 2007, ruling on the appeals against Resolution No. 002. G/SG/Q2/PAN/2 
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  the representativeness of the applicant was not measur ed in relation to the domestic production of the 
products under investigation.   CELLOPRINT S.A. also produces polyethylene film (3920.20.90) by extrusion from imported inputs.  However, it has no production capac ity for PVC film (3920.49.00), which it imports 
and then prints (minor and low va lue-added activity) to subsequently  make flexible packaging which, 
in any case, does not take the form of plastic ba gs, but wrappers for sweets, lozenges and other 
confectionery.   Moreover, as the petitioner states, "It is important to highlight that the product under 
investigation is NOT the finished packaging … , but  film in rolls used by confectionery or food 
product manufacturers to make packaging as part  of the packaged product production process".
3  The 
representativeness of the applicant is, however, base d on production of the finished packaging "bag". 
  According to the estimates concerning the representativeness of the petitioner, figures which 
were accepted by the investigating authority w ithout having been certified by a competent body, it 
should be noted that the production of polyethylene  film by CELLOPRINT S.A. represents 30.2 per 
cent of bag production value (16 per cent in terms of  volume).  Moreover, this is argued to represent 
100 per cent of printed PVC film (3920.49.00) production.   Even if, for the sake of argument, these percen tages were considered to be accurate, it should 
be emphasized that although neither the Agreemen t on Safeguards nor Panamanian law establishes a 
specific threshold for determining the representa tiveness of the major proportion of the domestic 
industry, the case US - Lamb  (paragraph 7.218 of the Panel report) reaffirmed the need for 
investigating authorities to examine the relations hip between the expression "major proportion" and 
the representativeness of the domestic industry, give n that the fullest possible data coverage is 
required in order to maximize the accuracy of the investigation. 
 
Question 2
 
 
 What circumstances were evaluated by th e Panamanian investigating authority to 
determine that the increased imports were a resu lt of the "unforeseen developments" provided 
for in Article XIX:1(a) of the GATT 1994 and which are a key element in the adoption of 
safeguard measures? 
 
 According to the Panamanian investiga ting authority, the grounds for unforeseen 
developments is the termination of an ex clusive supply contract  between the petitioner 
(CELLOPRINT) and Productos Alimenticios Pascual S. A., which was one of its main customers.  
This contract was binding on the petitioner and its customer only until 2005.  At the end of this 
contract, Productos Alimenticios Pascual S.A. c onsidered the commercial relationship with 
CELLOPRINT S.A. to be over and sourced the produc ts under investigation from external suppliers 
on the basis of better offers in terms of price, quality and reliability of delivery. 
 
 We consider that this cannot be interpreted as "unforeseen developments";  quite the reverse.  
Given that the contract was to end on a specified date, its termination was not unforeseen, but scheduled.  Furthermore, there were no commitments or evidence to suggest that this contract, which 
was clearly in effect only until 2005, would be extended.  
 Neither does it seem evident, in order to demonstrate the existence of unforeseen 
developments, to refer to the rise in the price of  raw materials, such as unprinted film, inks and 
                                                     
 
3 Pages 17 and 18 of the Executive Summary.  G/SG/Q2/PAN/2 
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  adhesives, as a result of increased oil and natural gas prices.  The upward trend in the price of oil and 
its derivatives is not a fortuitous occurrence given that it has been appreciable since at least 2001 and 
its effects have been felt worldwide.   It has therefore not been demonstrated that the increased imports are a result of the 
"unforeseen developments" provided for in  Article XIX:1(a) of the GATT 1994. 
 
Question 3
 
 
 What factors were evaluated by the Panama nian investigating authority to determine 
that imports into Panamanian territory were under "such conditions" as to cause or threaten to 
cause serious injury to CELLOPRINT S.A.? 
 
 Attention should be drawn to the fact that  purchases of PVC film from Colombia were not 
under such conditions as to cause or threaten to caus e serious injury to CELLOPRINT, given that the 
export prices of this product to Panama showed an  increase from 2004 to 2006.  The analyses carried 
out by the Panamanian authority are therefore consid ered to be inconsistent with the provisions of 
Articles 2.1 and 4.2(a) of the Agreement on Safeguards.  
Question 4
 
 
 No guarantee of the right of defence. 
 
 The Colombian trade association ACOPLASTICO S S.A., as an interested party to these 
proceedings, filed an appeal against Resolution No. 002 of 6 February 20074 within the statutory time-
limit prescribed in Article 7 thereof.  Furthermore, the Ministry of Commerce, Industry and Tourism 
submitted both a letter of support for and comments on the appeal by the said association.5 
  More precisely, in whereas clauses 5 and 6 of Resolution No. 33 of 9 April 2007
6, the 
Panamanian Ministry of Commerce and Industry refers only to the appeals filed on 7 and 9 March 2007 by the companies Productos Alimentici os Pascual S.A. and Celloprint S.A., providing a 
summary of their arguments.  In whereas clause 10, the Ministry states that it will conduct a brief 
assessment of the arguments put forward by these companies. 
  In these circumstances, the right of the Colombian government and exporters, as recognized interested parties to the investig ation, to an assessment of their arguments and the evidence submitted 
with their appeal, as provided for in Resolution No. 002 of 6 February 2007, was not respected.  
Resolution No. 033 completely disregards the argumen ts in the appeal filed within the statutory time-
limit, which clearly constitutes a violation of the right of defence of Colombian producers and exporters of the products under investigation and provides grounds for reasonable doubt as to 
compliance with due process in this investigation.   Within the framework of the Agreement on Safe guards, the nature of the investigation means 
that interested parties must be afforded the oppor tunity to present evidence and their views to the 
competent authorities (Article 3.1).  Similarly, the Agreement establishes that it is the responsibility of 
                                                     
 
4 Whereby the National Directorate for the Administration of International Trade Agreements and 
Trade Protection issues a positive recommendation fo r the adoption of provisional safeguard measures. 
5 14 and 15 February 2007 respectively. 
6 Whereby the Panamanian Ministry of Commerce an d Industry rules on app eals by the interested 
parties and confirms the positive reco mmendation of provisional measures. G/SG/Q2/PAN/2 
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  the competent investigating authorities to evaluate  and publish the reasoned conclusions reached on 
all pertinent issues of fact and law.  
Question 5
 
 
 Has the Panamanian Ministry of Co mmerce and Industry assessed whether the 
petitioner has a viable adjustment plan in the event of definitive safeguard measures being imposed? 
 
 Article 5.1 of the WTO Agreement on Safegua rds provides that "A Member shall apply 
safeguard measures only to the extent  necessary to prevent or remedy serious injury and to facilitate 
adjustment".   In accordance with the inform ation in the Executive Summary of the "Study supporting the 
imposition of safeguard measures", the petitioner r ecognizes that it uses technology from the 1960s, 
1970s and 1980s and that lack of access to th e most efficient and up-to-date technology for 
manufacturing the products under investigation adve rsely affects its competitiveness in the face of 
products from other countries.  Likewise, Resolution No. 002 states that CELLOPRINT is unable to extrude polypropylene or PVC film owing to the high cost of the extruding machinery required.  The petitioner therefore has to import transparent film and then process it by means of labelling or printing, thereby rendering its product relatively more expensive. 
 
 If the petitioner's problem led to the loss of one  of its best customers (Productos Alimenticios 
Pascual S.A), questions should be raised as to why it failed to carry out a technological restructuring 
while the exclusivity contract with this customer wa s still in force, and on what basis it considers that 
it will manage to do so by means of a safeguard measure. 
 
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